The Big Fight (re-posted)

first published April 2010

The Concern:
It is said that a country '[c]annot prevent and prepare for war at the same time'[i]. From this then, the foreign policy actions of the Obama administration vis a vis Iran are positioning the nation on a trajectory either towards or away from conflict.


The case for Obama to delay a military conflict with Iran can be seen as purely temporal; the dearth of remaining hard power capability and the national debt load are unbearable U.S. foreign policy constraints. Another front in the Middle East not feasible, the president will have to manage (desperately) to use his assets, allies and power not only to contain Iran, but Israel, diplomatically.


Broader Challenges:
The more fascinating way to dismantle the conflict is from deep within: the structural perspective. To begin, there is the question of Obama’s statist agenda and how it is fed. Is it more conducive to conflict than one might at first suppose? The reason for this, cuts to how American capitalism and the state historically interact[ii]; and the Alinsky style domestic social shift that the president wills to complete during his term(s).


From Heilbroner’s The Nature and Logic of Capitalism: 

"Rather, it is the nature of the regime of capital that it exists in a condition of mixed from and dependence on the older regime of state power, perhaps marked by swings of centralized hegemony and rivalry…The full powers of the state, above all its ability to mobilize the unconscious in support of its parental persona, remain largely in the background, save for periods of overt internal disruption or external war, so that the forces of capital exert the preponderant active influence in normal times. During these periods, the state advances the interests of capital as a natural response to the appeals of capital, as well as in a calculating fashion to promote its own peacetime strength.”

President Obama’s administration has an unparalleled focus in re-weighting the system away from capital and towards the state, through the levers of Keynesian fuelled growth and the domestic economy. “The prospect of domination of the nation's scholars by Federal employment, project allocations, and the power of money is ever present,”[iii] and seems to be occurring at an unprecedented rate under Obama's presidency.


But to pay for this mandate, Americans simply have to make more income abroad and save more at home. This is the job of the Department of Commerce. The goal of the United States of America is to double exports within five years.[iv] This goal must rely on a set of macroeconomic conditions a) protracted weak dollar policy, b) moderate-low Federal Funds Rate and c) open and wide foreign markets to absorb U.S. products and capital.


Here we have the classic case against ongoing conflict and volatility, especially in a petroleum supplying region. Yes, the liberal economic order requires open markets. And, yes, occasionally these markets are jarred open through hard power, but this is not the preferred method. American primacy is based on the idea of peace through strength, and there is little evidence to suggest that Barack Obama can afford to be at structural odds with this tactic.


The Present:
The Obama administration's new national strategy for nuclear weapons under the Nuclear Posture Review, is diplomacy only the mainstream media could find compelling. The U.S. for the ‘first time’ is pledging not to use nuclear weapons against non-nuclear states that are in compliance with the Nuclear Non-Proliferation Treaty. In other words U.S allies are not to be nuked. Even more predictably, the policy leaves open the possibility of a U.S. nuclear strike against Iran and North Korea or any other nation accused of non-compliance.


By extension of this, the nuclear disarmament treaty between the United States and Russia (START[v]) achieves significance not in what the treaty does, but what it will force others to do. If history is a good precursor for the future on the nuclear issue, START III is really about remaining more than sufficiently armed, with the additional internationally sanctioned disclaimer that disallows opponents the same right. "Can our efforts to bring the new START Treaty into force help persuade other nations to support serious sanctions against Iran? I believe they could,"[vi] remarked Hillary Clinton last week.


START III will not realistically hit the floor for ratification until at least 2011, under what's expected to be more conservative Senate. In order to get 67 votes in the Senate, Republicans will want to see a comprehensive plan for upgrading U.S. nuclear laboratories and for modernizing the U.S. nuclear arsenal before the Senate debates the treaty. The most serious point of contention comes with U.S. missile defense plans; bitterly opposed by Russia,


With oil prices likely to surpass OPEC’s stated price range of $75.00-$85.00/barrel, the relationship between volatility, consumer headline inflation, debt and the macroeconomic slowdown will be the chief concern for the G20.



It’s the economy, stupid.


A Hidden or Unexpected Clue:
China reported its first trade deficit in six years for March as imports surged by 66 per cent year on year to $U.S.119.3 billion. Despite the surprise in the trade numbers, the speculation that Beijing is poised to loosen the peg on its currency is persistent.[vii].The issue is more so whether a yuan movement will be acceptable to the Obama administration, and conducive to the “macroeconomic rebalancing” of the global importing-exporting nations, something the president has called for as part of the National Export Initiative.


Here the nuclear issue regionally, comes most directly into play. China, as a major consumer of Iranian oil[viii], has been unwilling to accommodate the U.S. on the U.N. process to date. In fact, had there been a modicum of Chinese cooperation on previous U.N. sanction rounds, the Iran issue might have been a foreign policy adventure for a much later Obama successor.


If President Barack Obama can squeeze President Hu Jintao on the possibility of a serious round of U.N. sanctions it will do something very crucial to the psychology of the conflict. Iran will no longer have the Chinese trump card to play. It would be prudent to watch for phrases like “currency manipulator” to drop from Secretary Geithner’s lexicon, when he reports to Capitol Hill[ix] on exchange rate policy, to get a sense of whether there could be a shift in the status quo later this year.


The Near Future:

President Obama and Secretary Clinton, will deploy all diplomatic levers to pressure Iran through the IGO/UN mechanism. The natural European allies on the Permanent Council (France and the U.K.) can counter the murkier interests of Russia and China, but only to an extent. The intricacies of competing domestic agendas, and how they play into the broader concerns of global economy can oddly get reduced into a single issue: just how far will Russia and China go?


The next round of talks is likely to produce sanctions with more bark than bite. However, psychologically, any progress on the matter could help to placate Israel and temper Iran. The immediate goal for the Obama administration is probably not loftier than purchasing time until Afghanistan and Iraq are further settled and the economy is on track.


The Most Likely Outcome:
Napoleon Bonaparte always aware: “I am sometimes a fox and sometimes a lion. The whole secret of government lies in knowing when to be the one or the other.”[x] If there is a military strike, it will not be initiated through the U.S. military apparatus.[XI] It would involve a direct, but surprise, Israeli air attack on Iranian targets. Should Iran retaliate with Shehab missile launches against Tel Aviv, the Netanyahu government would find it hard not to escalate. Israel would require, U.S. military enlistment against Iran, or the world would have to quickly engineer a truce.


This is precisely the messy, zero-sum scenario President Obama is trying to avoid. The key variable in this equation is that a military attack of this nature will ONLY occur when and if Israel perceives its national survival is materially threatened (Iran is on the verge of nuclear arms). It is at this point which Israel will break from the current U.S. policy of containment and pursue self-interest.


Given China’s inability to decouple economically from the United States, Russia’s orientation westward, and the simmering distaste for the autocratic regime in Iran, there is a delicate balance, of sorts, for Obama to capitalize on. And if not, perhaps the president has already calculated what an increase in high value weapons exports to Israel might do for the Balance of Payments accounts and his National Export Initiative. Just a thought.


My final call: rhetoric rises, but parties recalibrate and wait for foreign exchange and oil trends to materialize this summer. A fragile détente.

________________________________________
[i] Albert Einstein.
[ii] See Robert L. Heilbroner, The Nature and Logic of Capitalism NYC, 1986. Specifically of interest in this book is “The Role of the State,” pp.94-96, and his conclusions in the final chapter “The Limits of Social Analysis” pp. 203-206. This is a brilliant treatise on the emergence and functioning of the capitalist system in the West, although I disagree with Heilbroner that classical liberalism i.e. political economy, which becomes the field of economics, fails to adequately account for some of the inherent social dichotomy that exists under capitalism, and the morality of a profit- driven social system.
[iii] President Eisenhower “Military Industrial Complex Speech,” Public Papers of the Presidents, Dwight D. Eisenhower, 1960, p. 1035- 1040
[iv] The National Export Initiative http://www.whitehouse.gov/the-press-office/executive-order-national-export-initiative
[v] Strategic Arms Reduction Treaty
[vi]http://news.yahoo.com/s/afp/20100409/pl_afp/irannuclearpoliticsusrussiachina_20100409234337
[vii] The Chinese are expected to allow the Remnimbi to appreciate in a slow measured fashion. A stronger yuan would boost Chinese consumer spending power, easing reliance on exports. It also narrows China's politically volatile trade surplus, making capital flows more manageable and predictable.
[viii] China gets about 11% of its oil from Iranian supply. However with high levels of Saudi spare capacity and Iraqi production capacity possibility ranging as high as 8 mb/d, China could diversify petroleum suppliers. In addition, Chinese holdings of American treasuries are vast. The Chinese government might not find it prudent to compromise U.S-Chinese relations for Iranian relations. A nuclear capable Iran would translate into volatility for the USD and thus for the pegged yuan.
[ix] U.S. Treasury Secretary Timothy Geithner made an impromptu visit to Beijing last Thursday, which delayed his April 15th report to Congress on FX policy.
[x] Napoleon was a gifted tactician but also cuttingly gifted at aphorism.
[xi] Much of the work on Iran will be accomplished through the intelligence community. This task could be made easier through a weak link in Tehran's enrichment chain: its expert personell, especially nuclear scientists. In January, Massoud Ali Mohammadi, a scientist was killed by a remote controlled bomb near his home. Iran has blamed the attack on the CIA or the Mossad. Another Iranian physicist, Shahram Amiri, disappeared in June last year. U.S. reports that he willingly defected to the CIA. Iran claims he was kidnapped.

Find someone who's turning, and we will come around...

An unpublished essay...from March 2010

In Response to @DanielleSavoy "In the Shadow of our Sovereignty"

How do we define the “soma” of today?

Perhaps it is most necessary for us to understand where the current variants of mainstream political thought center around us. Primarily because we need to know where we are in relation to it as conservatives. John Adams: “Our Constitution was made only for a moral and religious people. It is wholly inadequate to govern any other.”  

We are fortunate, in that the sources of our philosophic vitality are well defined; for all movements in thought there is a core and periphery that emerges; A certain fluidity of thought that develops over time. The originators are, precisely because of their originality, forced to articulate and defend their positions on each merit, until they are firmly established. For those of us coming later, we are gifted in the theoretical sense, propitious inheritors of a position with a soul. But our soul is housed within a domain, and this domain has become enervated.

It could be that we pay a high price for sticking to our constitutional idiom. As the leftist fads of statism come and go, this time wrapped in the 'high ideals' of civic cosmopolitanism, the modern environmental movement and the cult of personality, we hold steady. Truthfully, it is conservatives who are defined by the capacity for hope, and not a pedestrian newspeak constantly recycled. Our position is of hope in the original, foundational sense.  Almost a naive belief structure, in its simplicity: the primacy of the individual, the enduring and integral link between economic and individual freedom, a facile, responsive, and narrow government. We seek a broad, but not limitless set of rights and liberties.

In contrast, there are the values that accompany the present shift towards soft despotism and state-run, quasi-capitalism. Today's liberalism.  An employment market filled with bureaucrats: we are becoming a society where government controls most everything.  Not only how much families make, but exactly who makes what, at what rate. The extended mission creep of federal and regulatory measures in every key area of the economy is evident today: banking, commerce, trade, energy, student loans. Translated,  this devolves into what one can drive, eat, how much energy one can consume, and with whom one associates. These are direct violations of the Constitution, especially the Bill of Rights.  


Will it matter whether there is ever an awakening from our collective ‘soma’? To remain there is the point of the socialist state. This is not unique in history. It is no wonder Dostoevsky lamented for his people, when he correctly prognosticated Russia’s fall into statism: “And mark this, dear friend: he who loses his people and his nationality loses also the faith of his fathers and his God.”

A return en mass to the values demarcated in the Constitution, and the acceptance of this document as the authentic and supreme foundational framework of the United States government is the only way to recover the lost faith of our Fathers.

The Oil Blundercrats: President Obama and the IEA

The Oil Blundercrats: President Obama and the IEA

see full comments on BigGovernment.com
by Katrina Rose Dunkley

[bluhn-der-krat]
-noun
1.  An official, who in attempting to appease the left works without exercising intelligent judgment, thereby harming or jeopardizing national interest through the implementation of  a series of self-serving policies that ultimately result in gross, stupid, and careless political mistakes .

A great man once declared that “[t]ruth will rise above falsehood as oil above water,” this maxim held for a long time and even penetrated Capitol Hill and Pennsylvania Avenue. But the people wanted ‘change’ simply for the sake of change.  And now the declaration reads: “truth will be mixed with falsehood, as oil with ethanol.”

President Obama’s decision to release 30 million barrels of Strategic Petroleum Reserve (SPR) this month qualifies him as one of the great energy blundercrats in modern American history.  The administration’s justification for the release of these critical barrels of crude, which are in reserve for emergency and war purposes only, seems simple but is really insidious.  According to the administration, the ‘market’ is desperate for the light sweet crude that Libya would have exported. Which market, to be clear? Well, not the United States, because Libyan crude is exported almost exclusively to Europe.  But nevertheless, more world crude supply should translate to lower product prices. Unless of course it does not. As one Senior Administration official said, not to worry, because our price-meddling heroes will just tap SPR again:

“At the end of the first 30 days of action by the IEA member, we will review the results…the U.S. stands ready to do more if necessary to address this issue.”

The president now considers himself a one-man market maker armed with 727 million barrels of taxpayer oil and he is not afraid to use them in an election cycle. On a dip, he can draw his bureaucratic paw and say “see what I did to control the price at the pump, p.s. available for hire in 2012”. This of course is supposed to be music to the ears of the uninformed and the unemployed. Gasoline prices had already declined ten percent from the start of the driving season, but only because the economy is a disaster.

Putting aside the moral issue of the president trashing administrative and market precedent like a stack of leftover ribs, it is better to go through the (de)merits of this policy at an economic and geopolitical level. It is likely much worse than you first imagined.
The world requires 88 million barrels of oil each day to function. Approximately 60 million barrels of this demand is for gasoline, diesel, and jet fuel – anything related to transportation. In essence what the total IEA SPR release of 60 million barrels comes down to for the world’s refineries is the equivalent of one day of global transportation demand. Not very prudent.
The rationale given by the IEA is that the MENA disruption has caused a supply shortage that can be made whole by this release. If that were true, then someone at the IEA doesn’t own a calculator. Libya had a total production on average of 1.5 million barrels per day. Libyan production has been off-line since February. This would put the world at a deficit (through May) of 132 million barrels. If the OECD refineries were experiencing serious supply tightness, we would expect stock draws of close to that much. Yet OECD crude and product draws are down only 8.3 million barrels during that timeframe, and are sitting about on par with the five year average. In this Libyan instance of supply disruption, the price mechanism has worked as the regulator. In any case, Libyan supply isn’t coming back anytime soon, to continue to offer to fill this deficit with SPR is not do-able in the long-run.
There’s so much more to be annoyed about. The details of the SPR sale can be pieced together from the “Apparently Successful Offers Report“, released by the Department of Energy (DOE) on June 23^rd. Valero came out as the largest single winner at 6.1 million barrels of crude, which for them amounts to less that one week of throughput.  Most importantly, it appears that 25 of the 30.6 million barrels of offers are going to be delivered by vessel rather than by pipeline. Translation: the vast majority of the 25 million barrels of SPR crude are probably not going to be refined into gasoline at home, but shipped overseas as price would naturally dictate. Chinese SPR, anyone?
However, deciphering the SPR purchase price is like playing the ‘Price is Right’ for oil nerds. The SPR report lists prices paid, but they are not quite accurate and must be masterfully rearranged. The deal was that oil was to be sold on a differential basis to a Light Louisiana Sweet (LLS) price, and that price was to be established during a five-day window around the time of delivery. The reason the price of SPR oil is based on LLS and not West Texas Intermediate (WTI) is two-fold. Most of the country’s refining is located in PADD III (Gulf Coast). Refiners work with the LLS price and this price ultimately determines product prices and crack spreads. Secondly, it would have been the LLS-Brent spread that determined the demand from bidders at the sale.
The weighted average price reported by the SPR office was $107.20/bbl, about $1.30/bbl less the closing price of LLS on June 30^th.  The five-day average price between June 15th and June 21st (weekends excluded) was $112.78/bbl. The price in the “Apparently Successful Offers Report” is the successful differential, applied to this base price of $112.78/bbl. The weighted average differential versus LLS to be paid for SPR crude is thus $107.20 – $112.78/bbl or -$5.58/bbl. This means the lowest winning bid was $7.80/bbl under LLS, and the highest bid was $3.02/bbl under LLS. To put it simply, if all the oil moved versus the June 30^th LLS price of $108.50/bbl, the weighted average purchase price across all barrels sold would be $102.92/bbl, not the inflated DOE price of $107.20/bbl. By now it should be clear that neither can the IEA or the DOE do math but that they sold 30 million barrels of emergency crude at an average discount of $US5.58/bbl.
Discounted premium crude is the binary opposite result of what one would expect of a market suffering from a drastic emergency. The fact that both the Brent and WTI forward curves are in contango at the front end, only further prove the point.
Furthermore, the timing of this release could not have  been more ill-conceived.  In theory the IEA effort was supposed to go along side with the Saudi’s planned increase of 1 million barrels a day. The Saudi’s made this decision in the wake of a cantankerous OPEC meeting that resulted in a formal decision to leave production quotas unchanged. As an astute observer of Saudi calculus, this much of a production hike seems unlikely now. Given the IEA’s new found propensity to use taxpayer oil to replenish market deficits, why would the Saudi’s ramp up production to the highest level in over two decades? Not only could this lower total Saudi net revenues but it would also surely ruffle OPEC feathers.  The president brilliantly agreed to offer up SPR right before the Saudi’s were about to relieve the market potentially long-term production.
Lastly, it would be interesting to know what the president and DOE economists think will happen to crude and gasoline prices when the government has to buy back the SPR?  There was another declaration also written in the 17^th century: “to every action there is always an equal and opposite reaction.”
Blundercrats.

10,000 Kids Charity Event at Sirocco Golf Course

Pal(ad)in Politics: A retrospective

An oldie, but a goodie (too controversial for even Biggovernment.com!) Reworked....

In late 2008, Gloria Steinem described then vice-presidential candidate Sarah Palin “[a]s Phyllis Schlafly only younger.” Steinem charged Palin with “divisive” speech, concluding that “Palin shares nothing but a chromosome with Hillary Clinton.”

Ms. Steinem turned out to be right.

While Mrs. Clinton was aided by the rarefied eye of Mr. Clinton and her team of advisors in analyzing every conceivable political scenario through 2016, Palin emerged as a genuine fire-brand politico. Palin single handedly led what Steinem dubbed “the anti-feminist right wing.” To many, she was the highlight of the GOP ticket, juggling the needs of her family, taking little or no time to rest during the campaign.

It is the chasm between the new Palin feminists and the calcified liberal feminists that can be drilled down to one essential element: the unwillingness of conservatives to elevate the female experience above the human experience. This break with liberal dogma, which requires victimization in perpetuity, has caused the apostate status of conservative feminists. And while there exists variations of elitist feminism (liberal, existential, radical, deconstructionist) the core narrative provides little substantive difference to choose from for many women who identify more with Palin than Steinem.

Palin, alternatively has tossed the feminine mystique on its head. She is an atavism; a remarriage of Reaganomics and classic American conservatism. She does not get her oxygen from the women’s movement alone. She has filled a void on the right that was only exposed upon her arrival to the national scene in 2008.

Palin openly champions a worldview that is anathema to the increasingly statist agenda forwarded by the national liberal headliners: Steinem, Pelosi, the Clintons, and Gore. These liberal elites, who have made careers maximizing, “morals for the masses, exceptions for the exceptional,” stand in binary opposition to Palin on every conceivable point: climate change, energy policy, taxes, women’s issues, and the deficit. In predictable fashion Steinem lamented:

“I don't doubt her sincerity. As a lifetime member of the National Rifle Assn., she doesn't just support killing animals from helicopters, she does it herself. She doesn't just talk about increasing the use of fossil fuels but puts a coal-burning power plant in her own small town. She doesn't just echo McCain's pledge to criminalize abortion by overturning Roe vs. Wade, she says that if one of her daughters were impregnated by rape or incest, she should bear the child. She not only opposes reproductive freedom as a human right but implies that it dictates abortion, without saying that it also protects the right to have a child.”

Although Steinem’s hysteria at having to open the floor to conservative feminists is laughable, the socio-economic and moral dialogue that Palin forced on liberals has re-established the discourse at the national level. Palin as a singular political entity has pushed liberal feminists into an uncomfortable structural discussion for the first time in many years. Her presence has gentrified conservative feminist thought. 

While Steinem lauded Mrs. Clinton for overcoming years of “misogyny” to win 18 million votes in the Democratic primary in 2008. She failed to credit Palin, the first woman ever to be elected Governor of Alaska, and the youngest woman to be elected to this post nationally, for reigning as the nation’s most popular governor during her term. Ann Coulter, who has a far more cutting gift for political analysis, gets Palin: “[s]he’s too big to be stuck in a governor's office up in Alaska."


Beyond her role as feminist, Palin’s core politics are based on American exceptionalism and a healthy distaste for nihilism - the sinister first step to all modern socialist movements. Nietzsche: "If God …the goal of all reality is dead… then nothing more remains to which man can cling and by which he can orient himself." Here, Palin stands in stark contrast to Obama who is for everything and nothing at once. The president's (mis)statement in April of 2008 embodies his view on as many as 40 percent of constituents who “get bitter… cling to guns or religion or antipathy… as a way to explain their frustrations.”

It is this division between the Obama statists, who would displace the Judeo-Christian moral foundation of the country or rather the ‘roots of American order’ and Palin conservatives, which has emerged as a central front in American politics.

This fastidious blend of spiritualism and politics, even at the expense of conventional political codes, has bolstered Palin’s image as a values-led politician. Her status as a national political figure and a woman of power, with an increasingly defined agenda is at its core - attractive. Not unlike Benazir Bhutto was, she is both religious and fiercely competitive.

Palin understands how to capitalize on her God-given qualities. She interacts using her image, social media and traditional campaigning. Despite the tremendous popularity of her “rogue” political style, she is dismissed by the left and often marginalized by the establishment on the right. While the left is mystified by her ability to maintain political clout nationally, her own party has been tremendously weary of making a full investment in her. However, here, neither side has identified a strategy capable of reorienting her base.

Laura Ingraham, who tends to favor Palin, was chided in October 2009 by Newt Gingrich for supporting Palin’s first-hand picked candidate of the last mid-term election cycle, Doug Hoffman. Seemingly fed up with both Palin and Igraham’s inveterate conviction, the former speaker proposed the GOP strategy for 2010 go heavy on Reagan style pragmatism and light on Reagan style ideology. Yet, Reagan was able to retain the necessary political capital to dominate closed door politics precisely because his actions were ordered on a set of sublime ideas. As Ingraham pointed out the following week to Pat Buchanan, it was Reagan’s rhetorical inspiration that eventually swung the political pendulum. Conservatives have always benefited by elevating the message not by obfuscating it.

The promise to hold steadfast to doctrine, even during low political tides, is a key characteristic of Sarah Palin’s. Palin’s advisors appear cognizant of contemporary American political history. If she can master the fine art of politics, Palin has a shot at writing her own ticket, should that be her plan. Perhaps it will be the female proclivity to stay the ideological course that the GOP will be thankful for in the upcoming election cycle.

Palin’s brand will ultimately define her political equation. As the need for a definitive conservative GOP ideology grows, Palin will continue to serve as a gut check for the Party. For liberals she exemplifies the enduring notion of patriarchal servitude; she is the proverbial Queen, brandishing a double edged sword.

Avon's campaign against the oil sands: all form, no substance.

http://biggovernment.com/krdunkley/2010/12/29/avons-campaign-against-the-oil-sands-all-form-no-substance/

Avon Products recent announcement that the firm wants to avoid using ‘high-carbon, high-impact fuels’ derived from the oil sands is yet another hit and run on America’s safest and most secure oil supplier. It is a disingenuous publicity stunt that misleads the public with false promises under false premises.

Avon’s latest so-called “environmental” campaign boils down to asking its transportation contractors to eliminate higher-carbon fuels with a special focus on Canada’s oil sands. Given Avon’s sudden distaste for petroleum products one might set the same standard in return for Avon.  To speak tangentially, when the dictionary definition of hypocrisy immediately springs to mind there may be a credibility problem; ‘feigning to be what one is not; especially the false assumption of an appearance of virtue or religion’.  Yes, we have a credibility problem.
This is a company that nets huge corporate profits from the sales of millions of reps who idle, drive and willingly gas-guzzle their way from neighborhood to neighborhood hocking petroleum based products. Perhaps when Avon rethinks one of their core business models, we can stop laughing in Alberta.
This rash of anti-oilsands actions (we aren’t officially allowed to use the term boycott at present)  rely on a set of specious arguments.  To begin there are the technicalities that Avon and these nouveaux-environmentally sensitive companies like Gap Inc., Timberland, Levi-Strauss, Lush (operating with the aide of misinformants such as ForestEthics) hope the unwitting public will miss or at least misunderstand.
There is no real or practical way for transporters to avoid using fuel from a refinery from any one particular source of crude oil.

This is because transport fuels (retail gasoline or diesel for large trucks) are not purchased directly from a refinery.  Transporters for the most part, purchase fuel like you and me – from gas stations. Crude oil and its products once refined are fungible, tradeable commodities.  Once crude is in the pipe, it is very difficult to know which portion of the supply was produced conventionally or unconventionally.
The only sure bet for Avon shippers to avoid oil sands derived products would be to not use petroleum products in transport at all, not to gas up from any company involved in oil sands (almost any oil major) or to not gas up in regions where oil sands products are refined. The latter would translate into Avon bowing out of markets in the Pacific, the Rockies, the Midwest, the East Coast and the Gulf Coast.
The argument that the oil sands are higher-carbon content is another red herring that the environmental lobby loves to overplay. It would be prudent, or at a minimum rational for Avon et al. to think about crude oil suppliers in the global context in which they operate. Behind Canada, the leading oil exporters to the USA are Mexico, Venezuela, Saudi Arabia and Nigeria. None of these producers have greenhouse gas (GHG) emission standards comparable to Alberta’s.  Oilsands producers have reduced GHG intensity by almost 40% since 1990. Hugo Chavez cannot make the same claim, nor would I surmise, does he care to.
Anti-oil sands movements fail to acknowledge that the crude oil slate into refineries is continually changing.  As the supply mix changes the carbon intensity of the fuel mix also changes. As lighter crude oil from the Middle East becomes scarcer, the imported oil to the United States will become heavier.  In addition, as conventional oil fields mature each additional barrel produced becomes more energy intensive.  When analyzed on a wells to wheels basis (i.e. full life cycle) the argument that oil sands derived fuels are higher-impact falls apart.
Finally, the notion that oil sands products are somehow less ethically appealing than crude oil from other regions is perhaps the most puzzling inference.  Given as true, then the question would become in what way are the social values of other oil producers more in line with Avon’s corporate values?  Does Avon support the robust state of democracy in Venezuela? How about Goodluck Jonathan's idea of wealth redistribution in Nigeria? Perhaps the feminist movement in Saudi Arabia has gained a lot of traction of late. I must have been too busy snowshoeing and missed the progression of the movement.  Let’s get real. There is no other oil importing region to the United States with a more advanced system of civil liberties than Canada. We are the equivalent of whipping the dodge ball at the portly kid from closerange. We continually take it with the strained smile of an unwanted friend.
Avon and their counterparts concoct self-satisfying public relations spin in order to lull their customers into a false sense of social-consciousness.  Saying a lot and doing little is good for profits. This form over substance shtick is a common trick that easily fools the liberal. But while some companies prefer to launch meaningless campaigns others prefer to operate in a dimension called reality. To actually reduce environmental strain and simultaneously create these very often dismissed necessities called – jobs.
Unlike Avon the arguments on our side don’t require any ‘makeup’ to sound right.

Commodity prices rise, squeezing companies and nations

Dec 21, 2010

1 inShare

http://www.danielstrading.com/resources/news/Futures-Market-News/Commodity-prices-rise--squeezing-companies-and-nations_800304989/

The rising price of key inputs is putting pressure on major entities in both the private and public sector, forcing regulators, officials, logistics managers and company executives to confront the fact that as the world returns to economic health, demand is once again outpacing supply. Important commodities like cotton, wheat, silver and oil have all gained significantly in the past year, and some appear to be gathering momentum for further gains in 2011.

The agricultural giant ConAgra Foods, Inc. said Tuesday that inflation caused by factors like rising grain futures and shortfalls in some harvests would force it to raise prices. In fact, the company is counting on price increases to maintain and grow its profits next year.

"Very importantly, we are increasing net pricing on a number of our products given the ongoing acceleration of cost inflation," ConAgra chief executive officer Gary Rodkin said in the latest earnings report. "Some price increases have recently been implemented, and more are under way. We are confident that the net effect of these pricing increases will be positive, despite some potential modest volume decline."

ConAgra also suffered from a potato crop that was unusually weak and low-quality, raising the overall cost of goods like french fries.

"In aggregate, it was a challenging quarter," according to Rodkin.

Those challenges extend to national governments seeking to maintain as much food price stability as possible, in the interests of social justice and stability. In Canada, for instance, lower-income households are being squeezed by the rising cost of sustenance - particularly in the area of healthier foods. A report from the Institute for Competitiveness and Prosperity in Toronto found that "the percentage of income needed to purchase a healthy basket of food for a single person on social assistance rose by 10 percentage points between 2005 and 2009 alone, highlighting the mounting pressure faced by social assistance recipients to afford a nutritious diet."

On the other side of the world - and the per-capita income scale - China is struggling to deal with the impacts of rising food inflation. The China Reserves Grain Corporation, which helps maintain grain price stability, recently sold 1.5 million metric tons of wheat to China's largest flour supplier, taking no profit. Grain imports may increase by as much as 35 percent in the next year.

"The Chinese wheat sales are a sign of shortage and desperation to control inflation," Jim Gerlach, the president of A/C Trading Inc, told Bloomberg/BusinessWeek. "The fear of food shortage will lead the China government to import more grains to rebuild stocks."

Though Chinese incomes have grown strongly over the past decade, much of the country is still trapped in grinding poverty. Even mild increases in the price of staples like wheat noodles and rice can strongly impact tight household budgets. In addition, the growing Chinese middle class is adopting tastes from around the world that are more resource-intensive, buying family cars and larger quantities of meat.

As emerging markets like Brazil, India and China come into their own, the growing needs of both the poor and the middle class will put pressure on global food suppliers to increase production of wheat, corn, soy and other vital products. Energy futures will also rise, with oil production either at or past its peak and a renewables revolution still on the horizon.

The next decades may well be characterized by another surge in commodity price inflation.

My take: long EM food suppliers, long wheat, corn, soy, oil futures Cal 11 -14, exchange USD into Yen 2011-2015

What James Cameron Can't Tell You About the Oil Sands

(my article on BigGovernment.com)
by Katrina Rose Dunkley

When movie director James Cameron descended upon the Athabasca oil sands a while back, Albertans were subjected to the predictable but nonetheless aggravating media blitz of misinformation that occurs when a mega-star chooses a cause to elevate.

The elevation came in the form of a supercilious warning to put the brakes on the world’s second largest proved oil reserve. It could, he feared, become a curse if not properly managed. This revelation came upon reflection via a government sponsored helicopter tour and a token chat with a group of not-so disenfranchised First Nations peoples in the area. (In 2009, oil sands companies contracted more than $890 million for goods and services from Aboriginal owned businesses and employed 1600 Aboriginals in permanent jobs).

And with that, Mr. Cameron and the media were able to close the case on the oil sands, as Mr. Cameron purportedly had to jet. It’s not Mr. Cameron’s fault, completely. The oil complex is just that – complex. It’s not the kind of business one just picks up as a hobby horse. Sure, Cameron can regurgitate the technical terminology if he likes. It would be difficult for a techno-geek of titanic proportions to resist a sexy term like steam gravity assisted drainage (SAGD).

Here is where I suggest “putting the brakes on.” Perhaps a moratorium on incendiary statements by celebutantes or politicians a-la-Pelosi who are not able to, because of their lack of training, do the type of deep comprehensive assessment required for these matters.

There are a few facts that cannot be disputed and you will get those out of Mr. Cameron, the enviro-statist and their press sycophants. In this case it can be narrowed down to just two: the area containing the deposit and the size of the estimated reserves in Alberta. Then it’s down the rabbit hole we go.

The oil sands deposit covers an area that would equate to the size of England (54,132 square miles). For Americans without passports, that is the size of the state of New York. Of the total 170.4 billion barrels of remaining established reserves, about 80% is considered recoverable through in-situ (no tailings ponds and contrary to what is stated results in significantly lower GHG and energy intensity) the remaining 20% will be mined. Total estimated reserves are actually 1.7 trillion barrels but at this stage only 10% are recoverable at current technologies and prices.

To put these numbers to reality, to date only 0.3% of the total oil sands area has been disturbed, roughly equal to a small to medium sized city. Even more crucial to understand is that as only 3% of the total surface area could ever be mined (the deposits lie deeper than 75 meters) which leaves 97% of the surface area with some, but not much, industry impact. Mathematically this scales the land disturbance of oil sands development back to about 0.5% the size of England, and all area that are mined need to have a reclamation plan laid out by producers. In respect to Alberta’s boreal forest, in 40 years of oil sands activity, a mere 0.02% of the boreal forest has been disturbed.

In 2007 Alberta became the first jurisdiction in North America to legislate GHG reductions for large emitters. However, industry had already vastly mitigated its footprint and has every incentive to do so. Less energy in for every barrel of oil out means increased cash flows. Strong show of cash flows increases marketability to shareholders and helps shield a company from the inherit volatility of commodity prices. At current rates of production, 2.6 MMbbls/d, about half bitumen (WCS) and half synthetic light (SCO), the oil sands are responsible for 0.1 percent of total world emissions and that number is doubtful to increase much even if production ramps up to 4MMbbls/d as projected by the Canadian Association of Petroleum Producers.

As far as climate change is concerned, the oil sands are not really Alberta’s dirty secret at all. Environmentalists may still choose to call this resource “tar sands” like the brat at school who won’t let a nickname die, but they would be better served to make their mockumentaries where GHG is unregulated such as Saudi Arabia, Nigeria, or Venezuela where Hugo Chavez may believe he can bend time and space. And of course there’s no place like home; the GHG from the oil sands equates to only 1% of the emissions of the U.S. power sector where coal happens to be the “King of the World.”

Just like little bit of meat will never do for a vegan, neither will a little bit of oil development for an environmentalist. Therefore there will always be an entire portion of the story that the enviro-statists will obfuscate. This is the basic social cost/benefit analysis that economists are required to do.

As the leading exporter of crude and petroleum products to the United States, Canada is not only the safest, most secure supplier, but an economic partner. The North American energy complex is one of the most valuable business chains in the world precisely because every aspect from Main Street to Wall Street is linked and integrated. Hundreds of thousands of jobs will depend on the oil sands both directly and indirectly in the coming decades. The input goods, materials, and services for oil sands and in the U.S. oil shale – tires, trucks, gauges, pumps, steel, are produced across North America. It is this understanding of the political economy of North American oil, and how it positively impacts the average person, which the enviro-statist circumvents every time.

As one final example I will let Mr. Cameron’s own words to MSNBC hit the nail on the head. “[T]here’s an opportunity for all of North America to be weaned to some extent off of OPEC oil so that’s why it makes me very nervous… we need more science… we have the capacity for ecological disaster here on an unprecedented scale…”

As standards of living and GDP per capita increases worldwide and millions of individuals are lifted out of poverty, the global demand for energy is expected to increase by as much as 40% over the next two decades. Given even the most ambitious outlook for alternatives, biomass, hydro, and nuclear, unconventional oil remains the integral component of non-OPEC supply. There would be no realistic manner to supplant unconventional production other than increasing the call-on OPEC crude.

In reality, the disaster has been averted. Thankfully, enough people understand the inextricable link between North America’s oil (and gas) resources and economic growth and prosperity for all.

For full article with links by Katrina Rose Dunkley

http://biggovernment.com/krdunkley/2010/11/25/what-james-cameron-cant-tell-you-about-the-oil-sands/

Dislocation Nation

The Problem with Free Money
The primary reason the country will continue to experience unemployment figures between 9-10%[1] can be traced to the fundamentals of the president’s economic policies.  The obsessive focus on regulatory at the expense of an economic plan conducive to pro-growth business regeneration, and a lack of meaningful tax incentives for the middle class, has cost job creation.

The Past
When that which is relied upon proves, shallow and unstable, an intervention seems necessary. As the most acute recession in six decades fractured the United States at the close of 2007, Congress reacted, frenetically:

The Economic Stimulus of 2008 coupled with The Emergency Economic Stabilization Act of 2008 led to the infamous Trouble Assets Relief Program. These bailout packages re-acquainted Americans to the idea of state-run capitalism. As the Federal Government became the Grand Daddy to auto companies, the commercial and investment banks, the insurance industry, and a host of other private actors, the idea that only the government could act rationally in times of market chaos, prevailed.

President Obama’s $787 billion American Recovery and Reinvestment Act of 2009 (ARRA), would, 

“[p]reserve and create jobs and promote economic recovery.”[i]  By November 2009, the Bureau of Economic Analysis, reported two consecutive quarters of previous of GDP growth.[ii]  Much of this growth, which has since been revised down, was actually the result of increases in labor productivity, and higher exports due to a weaker USD. 

The main story lies beyond the phoniness of GDP; it's about the nation as a collection of economic actors: individuals, small, medium and large firms, together create the comprehensive value chain. There is scarce evidence that the prodigious rescue and liquidity packages have positively impacted the individual, the small and mid-size firms that form the basis of growth. The emphasis was lost on grass roots, organic growth. The stimulus was sucked entirely into fixing broken balance sheets.  

This is why in 2009 White House economists, affirmed what critics of the stimulus had feared; there was unlikely to be further significant job growth as a result of the ARRA. This is why joblessness will persist in many states. The mechanics of job growth were not the priority of the ARRA or the Federal Rescue efforts in reality.

How to View the ARRA

The ARRA, should be characterized as a political opportunity seized by Congress and the administration to rectify state budgetary shortfalls and classic mission creep. The government used the funding to save cities and municipalities that were liable to go bankrupt, because of falling receipts and revenue streams. The package also funded a host of long-term “priorities”: bad energy policy, medical research, education, science and technology, some military spending.

The ARRA, was desperately low in the elements that would fund or create the conditions for maximizing job growth quickly. In the decision for large-scale government intervention, the direction should have been effective tax cuts for business, infrastructure projects from the get-go, and effective aide to the manufacturing sector. Most importantly, the explicit guarantee to small business that they would receive adequate capital to generate growth did not happen. The Recovery Act fell short on the most important aspect of the bill: recovery. To conceive of the ARRA, as a pro-growth, pro-business, shovel-ready package is as likely as to have been hit on the head with one. Biden.   

The Job-less Recovery

The basis of today’s jobless recovery is failure not just of the ARRA, but of all the federal rescue efforts[2]. They were not the financial buttress for the citizenry, but for the corporation.  Obama’s economic team subsequently used the corporate bailout to insert his ideological footprint on the U.S. corporate system, especially banking, in order to rearrange the game.   It is just part of the growing movement toward state-guided capitalism - a totally useless policy for the under and unemployed, unless your goal is to expand those who are in that exact category.

While the Keynesian-Krugman types may posit this brand of medicine is necessary in today's zero interest-rate world.  The truth, is, that the emergence of state-directed capitalism is a disastrous choke-hold, on the chronically unemployed, and also on the entrepreneur. The mid-size firm and the little guy eventually need big business and big government just to survive.

A government is one that should mitigate the low economic tides without compromising the long-term flow and independence of the capitalist system. Ralph Waldo Emerson was right, in his analysis: “[m]oney often costs too much." I would add, "[free] money, is what costs too much."

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[1] http://www.dol.gov/

[2] For a detailed accounting of total federally invested and allocated funds:Troubled Assets Relief Program, the Federal Reserve Rescue Efforts, the Federal Stimulus Programs, AIG, FDIC Bank Take Over, Other Financial Initiatives, Housing Initiatives http://money.cnn.com/news/storysupplement/economy/bailouttracker/index.html

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[i] ARRA-Statement of Purpose (SEC. 3.1 PURPOSES AND PRINCIPLES)

[ii] This is the standard definition of economic recovery.

The Perfect Storm: Cocktails, Katrina, Danielle and Capitol Hill.

Resisting statism on the Hill in our own unique way. Be back soon.