From Lost into the River

The Seventh Seal - Bergman

David Seaton's News Links
The Spanish expression, "de perdidos al río" (from lost into the river) means that a situation bad enough on its own count, (being lost) is further aggravated (by falling into the river). It means, of course, "from bad to worse", but I think you'll agree with me that it's a whole lot juicier.

Those were the words that leaped into my mind on reading this article from The Wall Street Journal, de perdidos al río. With the oil supply tightening terminally... what a time for the USA to get its butt royally kicked in the Middle East. DS

IEA Warns of Impending Crunch in Gas Supply - Wall Street Journal
Abstract: In a dire forecast, the Paris-based International Energy Agency is warning of an impending crunch in the supply of oil and natural gas needed to power world economic growth in coming years. The IEA is the energy watchdog of the world's 26 most-advanced economies, and its pessimistic assessment is contained in its latest annual medium-term forecast to 2012, which was released Monday. The agency expects oil supply to be tighter in coming years than it had previously forecast, with little prospect of relief except a possible easing should world economic growth falter.(...) The IEA now forecasts that the Organization of Petroleum Exporting Countries will have precious little spare capacity left to pump extra oil by 2012. It also expects supply increases from non-OPEC oil producers and biofuel producers to start flagging after 2009. Natural-gas markets will also be tight because of inadequate supply increases, limiting the ability of consumers to switch between oil and natural gas. Still, demand for oil and gas is expected to grow at a brisk pace in the years to 2012.(...) OPEC spare capacity, the safety cushion in the world system, is expected to remain constrained until 2010, then shrink to minimal levels by 2012, when the exporters collectively will only be able to pump a paltry extra amount -- the equivalent of 1.6% of world demand. While the IEA didn't say so, the shrinking of OPEC's spare capacity in the past decade has made the oil market skittish about any development that could conceivably threaten supply, resulting in volatile markets and prices.
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Dollar and Oil - the price of failure

David Seaton's News Links

One of the seed ideas left over from the 1990s that is keeping us from seeing our own era clearly is the idea that business trumps politics. Everything then was free trade and 'bottom line'. 9-11 didn't "change everything": failing in Iraq has. We have moved quickly into an era where, as Churchill said about the Balkans, we produce "more history than we can digest." The article from the Financial Times looks at the present fall of the dollar from the point of view of fundamentals, but it would be unwise to neglect the political/symbolic angle. All our system runs on oil, the main source of oil is the Middle East, in Iraq, the United States has shown that it cannot control the Middle East. The dollar is the symbol of American power.... As the FT says, "Currency switches are likely to be progressive, subtle and discreet, as untoward attention could hit the dollar, lowering the value of depositors’ remaining dollar-denominated assets." Whistling and shuffling their feet with their eyes on the door. DS
Oil producers shun dollar - Financial Times
Abstract: Oil producing countries have reduced their exposure to the dollar to the lowest level in two years and shifted oil income into euros, yen and sterling, according to new data from the Bank for International Settlements. The revelation in the latest BIS quarterly review, published on Monday, confirms market speculation about a move out of dollars and could put new pressure on the ailing US currency. Market liquidity is traditionally low in December, and many traders have locked in profits, potentially reinforcing volatility. Russia and the members of the Organisation of the Petroleum Exporting Countries, the oil cartel, cut their dollar holdings from 67 per cent in the first quarter to 65 per cent in the second. Meanwhile, they increased their holdings of euros from 20 to 22 per cent, the BIS said. The speed of the shift may help to explain the weakness of the dollar, which recently fell to a 20-month low against the euro and a 14-year low against sterling.(...) Such shifts may be modest compared with the total assets held, but they provide a crucial indication on future thinking. Currency switches are likely to be progressive, subtle and discreet, as untoward attention could hit the dollar, lowering the value of depositors’ remaining dollar-denominated assets.(...) The dollar has suffered weakness because of concerns about global imbalances and the future course of the Federal Reserve’s interest rate policy. READ IT ALL