Merkel: Euro In In Serious Trouble (subscription might be required) is a great article in today's Wall Street Journal. Accompanying the article is a 18 minute video on the economic challenges in Spain. I highly encourage you to read the article and view the video.
For those of you tuning in by RSS or by email, you likely need to visit my blog to view the video enclosed below.
Happy New Year 2010!
I wish everyone much happiness, health, and prosperity. Many people found last year, 2009, difficult and challenging. So I hope that 2010 is a much better year, one filled with more joy and optimism.
I further wish our NATO troops well and hope we can make substantial progress toward resolving conflicts. Too many people are suffering.
On Thursday, 10 September 2009, I photographed Calgary model Anya near Bow Falls in Banff National Park. If you click on my Flickr profile link, you will be taken to Flickr where you can see more of my pictures.
On 4 October 2009, The Wall Street Journal ran an article World Need for Oil Expected to Ease (subscription might be required), where the author, Spencer Swartz, wrote:
The International Energy Agency next week will make a "substantial" downward revision to its long-term forecast for global oil demand, a person familiar with the matter said, marking the second year running the group has slashed its view of the world's thirst for oil.
...
If demand pessimists are correct, future increases in the price of crude could be damped as weaker consumption stretches world oil supply by billions of barrels. Various analyst estimates maintain that the roughly 2% a year average growth rate in world oil consumption seen earlier this decade -- the biggest reason for crude prices hitting a record $147 a barrel last year -- may turn out to be an anomaly and that annual growth in the neighborhood of 0.5% to 1% is more the norm.
The reality is that no one knows what the long term future holds. The IEA itself struggles with the Bull versus Bear oil outlook. Ask yourself, how many pundits foresaw the mess we are in now and anticipated the dramatic easing of oil demand?
Sure, one can gather relevant information and make a reasonable guess as to oil demand next year and the year after that. But after five years, the potential paths of demand growth become unwieldy. How will economic growth be sustained over the next five years? Will the OECD countries lag emerging countries? Will China and the rest of Asia power ahead and create substantial demand? If Asian countries do power ahead and create many millions of middle class citizens, will they demand their own vehicles and tickets on jet planes to see the world? Will Brazil and other South American countries enjoy strong economic growth? Will the Middle East be stable over this period? Will Iraq resume its full production capabilities? As you see, one can begin asking any number of questions that are impossible to answer with an accuracy or certainty and that might have a major bearing on demand or supply or both.
What do we know? We know that for a long time, oil prices were usually within $20-$30 real per barrel. Now those prices are laughable. No reasonable person expects the world to return to those prices any time soon. Many major oil fields around the world are in decline. Oil companies are searching in more remote and sometimes more unfriendly regions of the world to develop further existing fields and to discover new fields. And, the rise of oil prices has given new prominence to some national oil companies. A sample list, though incomplete, of companies include: Gazprom OAO (OGZPY.PK), Petróleos de Venezuela, S.A., and Petróleo Brasileiro S.A. - Petrobras (PBR).
If we were to accept the 1% annual growth of oil demand mentioned in the WSJ quote for a long duration, what would that mean or imply? A child born tomorrow will see by her seventieth a doubling of daily world oil production from about 85 million barrels per day to 170 million barrels per day. Moreover, during her seventy years, the world will have produced more during that time than the total cumulative amount prior to her birth. Call me a skeptic, but I am unable to see where we would find that much additional oil to produce at such high rates for such a sustained period.
To be clear, neither the article nor the IEA is suggesting that we endure a 1% growth forever. Rather, I wanted to use this seemingly small innocuous number of only 1% growth to draw attention to its implication. If the long term growth were 2%, then in 35 years the daily world oil production would double to 170 million barrels per day and the oil produced during those 35 years would exceed the prior total cumulative amount of oil produced.
Two excellent sources of information to learn more about oil, oil demand, oil prices and various policy initiatives, I recommend two sources:
Both documents are extremely helpful. I find the BP document provides concise information and historical context. The IEA document provides the agency's latest thinking and forecasts.
As the world struggles to find new sources of oil, there will be dramatic changes. I have already discussed some questions we should ask ourselves as we contemplate future oil demand growth. Of course, many more questions need to be considered. And I have indicated that some national oil companies have gained strength and prominence with higher oil demand and prices. As investors, we should also think about what long term oil demand growth means for oil sands companies such as Suncor Energy, Inc. (SU) and Canadian Oil Sands Trust (COS-UN.TO), and for large multinationals such as ConocoPhillips Company (COP), Chevron Corporation (CVX), and Exxon Mobil Corporation (XOM).
As demand continues to rise, I am curious what will happen. Will scientific breakthroughs help? How will the world cope with the environmental consequences? How will people adapt to possibly much higher prices? How will countries and regions change because of either having or lacking domestic oil supplies? If the world does experience higher prices, what are the implications for global world trade? And do higher prices imply that people will travel less and have less of an understanding of other regions? These questions are just a small sample of what investors should begin considering.
A few years ago, Professor Bartlett gave a compelling lecture, captured in a series of YouTube videos, to some students at the University of Colorado. In his lecture, he discussed oil demand growth. The lecture starts a bit slow; however, when you reach the latter part of the third video, you'll see how the prior information is relevant to his discussion on oil. In other words, because they are important, don't skip the initial video segments and jump to the third. I urge you to watch the complete video series.
And after you've watched the videos, ask yourself, "What time is it?" This question will make sense once you've seen the videos.
When I initially saw the WSJ article, I was drawn by the long term forecasts. My personal bias is that most longer term things in life are difficult, if not impossible, to forecast with any reasonable degree of accuracy. Then as I read the article, I saw the 1% growth number, which by itself seems very innocuous. But if you think about what 1% growth means over a long and sustained period, you quickly realize there are going to be changes. Moreover, the world has already witnessed a significant shift in oil prices over the last decade. We are no longer in our prior historical norm of $20-$30 per barrel. Some might argue that we are now in unchartered territory. As part of that possible unchartered territory, I wanted you to think about some larger questions. The questions mentioned in this article are just off the top of my head without much thought. I am sure you can think of many more. And last, I wanted to draw your attention to Professor Bartlett's excellent lecture. His lecture will make you think about oil demand (and others) growth differently. I hope this article causes you to further your own research.
On Sunday, 18 July 2009, I photographed Fish Creek in Fish Creek Provincial Park, which is located within Calgary. And, if you click on my Flickr profile link, you will be taken to Flickr where you can see more of my pictures.
Disclosure: I am long shares in Canadian Oil Sands Trust, Suncor Energy, and Exxon Mobil as well as long and short puts in Exxon Mobil.
I finished reading Benazir Bhutto's Reconciliation: Islam, Democracy, and the West
I was initially attracted to Reconciliation for two reasons. First, I wanted to learn about Pakistan and Islam. Pakistan and Islam are playing important roles in international affairs, especially as NATO countries are involved in neighboring Afghanistan. And second, I was intrigued and inspired by a person who believed so passionately in her causes and beliefs that she should would risk—and succumb to—an assassination.
The challenge I had in reading her book is that my understanding of history and religion is weak. Throughout much of the book, Bhutto discusses history and religion and their affects upon Pakistan. I realize that every political figure uses all media sources to promote a message. As a reader, you should have sufficient background to be able to judge the reasonableness of that message. Unfortunately, my depth of knowledge did not afford that opportunity. As a consequence, I took everything she wrote at face value, realizing that there are those who would disagree with her.
Aside from the historical and religious references, I found two important themes that resonated with me: knowledge and information as well as hope.
On page 295:
Targeted economic development can help reduce poverty and violence in Muslim-majority states. Alleviating poverty is a fundamental responsibility of all Muslims, wherever they live, as part of the basic principles of Islam. It would be far more Islamic in its true sense to declare a jihad on poverty, illiteracy, hunger, and poor governance. That is exactly what I am proposing.
Islam's first generations produced knowledge and wealth that empowered the Muslim empires to rule much of the world. But now almost half the world's Muslims are illiterate. The combined GDP of the member states of the Organization of the Islamic Conference (OIC) is about the same size as that of France, a single European country. More books are translated annually from other languages into Spanish than have been translated into Arabic over the past one hundred years. The 15 million citizens of Greece buy more books annually than do all Arabs put together.
The World Bank comparison of average incomes demonstrates a disquieting pattern. In the United States, the average per capita income is almost $36,000; in Israel it is almost $20,000. Pakistan, on the other hand, has an annual per capita income that barely crosses the $2,000 mark. No Muslim nation that is a non–oil producer has an annual per capita income near or above the world average. I find this pattern, these statistics, unacceptable.
On page 271:
Technology and communication have changed our world and are influencing a global culture. The more one knows of people, the more comfortable one is with them. I believe that, even if Professor Huntington doesn’t. Chatting on the Internet with strangers all over the world builds relationships and friendships and understanding. The ability to “Google” information from anywhere in the world puts technology into the hands of even the most isolated rural communities in the developing world. The more people learn, the more they want to learn. The more they interact, the less likely they will be to fear the unknown. Just as democracy and educational exchange promote peace, the free flow of modern technology and communication promote peace.
Everything we learn about sustained trade between nations tells us that it promotes understanding between cultures and civilizations. Globalization may be the most fundamental element of conflict resolution that has developed. The more nations trade with one another, the more they have to lose by engaging in conflict with one another. And we know that as individuals are exposed to more options in consumerism, in products they can purchase and use and share, the more they want options in other elements of their life.
On page 264:
Contrary to the pontifications of many who are unashamedly contemptuous of Muslims around the world, democracy and Islam are congruent. The basic tenets of democratic governance are specifically and directly cited in Muslim teachings and are basic to religion of Islam. As I have discussed, history shows that democracies do not make war against other democracies. And democracies are not state sponsors of terrorism. Therefore, I conclude (and challenge others to give any evidence to the contrary) that if democracies can be nurtured and sustained in the Islamic world, the possibility of conflict between Islamic democratic states and Western democratic states, and the possibility of democratic state-sponsored terrorism by democratic Islamic states against Western targets, would be all but eliminated.
Given her strong determination and sense of purpose and passion, I am terribly saddened by the loss of Benazir Bhutto. I believe that she had much to offer the world, and especially Pakistan. I hope that her book continues to shed light and optimism and that we—all of us—learn more about one another so that further bloodshed can be one day eliminated.
I highly recommend Reconciliation: Islam, Democracy, and the West
My photograph of the Lake Louise in Banff National Park is hosted at Flickr. This picture was taken on 8 November 2008, an usually warm November day with the temperature near the freezing mark. If you click on the picture, you will be taken to my Flickr account where you can see more pictures.
Addendum
I received an email from the Boston Review, which might be of interest to those who read the above article.
BostonReview.net now features a forum on “Democracy and Muslim Minorities” with essays by three religion and Islam scholars. Martha Nussbaum, noted American philosopher, examines the fate of Islamic liberalism, finding hope in Jamia Millia Islamia, a secular university inspired by classical Muslim values. She acknowledges liberalism’s tenuous future, and describes the pleas of secular Muslims in India: “You say you are a liberal, and that proves you are a radical Islamist.” John Bowen, author of Why the French Don’t Like Headscarves, discusses the spread of sharia law in England, and poses a critical question: “Do the tribunals provide a useful model for legally recognizing the equal standing of an immigrant community? Or do they threaten the integrity of law and democracy, and promise the unequal treatment of women in that community?” Finally David Mikhail, Research Associate with the Project on Middle East Democracy, details the detention of Shakir Baloch, a Muslim moderate detained after 9/11. Noting the “violent and enduring” effect imprisonment had on Baloch, Mikhail lays out the repercussions that such policy will have on American foreign policy in the Muslim world.
If this interests you, you can read more at Boston Review with the forum Boston Review — Democracy and Muslim Minorities.
Today is Remembrance Day (or Veterans Day in the United States) where we celebrate our freedom. The red poppies are to commemorate the sacrifices of those who served in the First World War. A Wikipedia article provides more background.
This past weekend while driving to Lake Louise, I came across this statue of a Ukrainian internee at a Ukrainian internment camp near Castle Mountain in Banff National Park.
The plaque on the ground reads as follows:The plaque on the statue reads as follows:During Canada's first national internment operations in World War One, thousands of immigrants from the Austro-Hungarian Empire, the majority of Ukrainian origin, some citizens of Canada, were imprisoned as "enemy aliens". Internment operations lasted from 1914 to 1920. This plaque is in memory of those held as Castle Mountain camp from 14 July 1915 to 15 July 1917.
Why?
Ukrainian internee at Castle Mountain
by John Boxtel
For those wanting to know more about Ukrainian Canadian Internment camps, you can read this Wikipedia article and another specific article on Castle Mountain Internment Camp.
My photograph of a Ukrainian internee statue located at the Ukrainian Canadian Internment Camp near Castle Mountain in Banff National Park is hosted at Flickr. If you click on the picture, you will be taken to my Flickr account where you can see more pictures.
