The Oil Card with Jim Norman

 “Energy costs are 40 or 50 percent of the cost of manufacturing in the United States.” ~Jim Norman                                                                                                                         By Catherine Austin Fitts

The power politics of energy are in the air.

A high oil price checkmates China but puts money in Putin’s coffers. Fracking has repositioned America’s industrial base –- but not without controversy and concern about precious water supplies. Will Europe follow suit? Increased domestic supplies in North America and Europe will shift oil diplomacy in the Middle East.

Adoption of renewable energy is growing. The campaign is on in the U.S. to persuade university endowments to divest the securities of fossil fuel companies. In the face of growing concern about Fukishima, numerous countries have moved to phase out or reduce their reliance on nuclear energy.

To add to the uncertainty, the possibilities of breakthrough energy technologies continue to be considered.

This Thursday, veteran reporter and author Jim Norman will help us make sense of the shifting landscape and numerous controversies in the world of energy.

Jim is a veteran business journalist and energy reporter. He currently writes for McGraw-Hill’s Platts Oilgram News, has been a senior editor at Forbes and was the Houston bureau chief for BusinessWeek. Jim has authored my favorite book on the energy markets, The Oil Card.

In Money & Markets this week, I’ll discuss the latest trends in financial and commodities markets.

In Let’s Go to the Movies, I will review two documentaries that address the financial coup d’etat and bailouts:

  • Hank: Five Years From the Brink, which documents Secretary of the Treasury Hank Paulson’s story of the Bush Administration bailouts; and
  • The Warning, a PBS documentary about the efforts of Brooksley Born (as Chairman of the Commodities Future Trading Commission) to regulate derivatives during the Clinton Administration.

 




Talk to you Thursday!

4 Comments

  1. I’m basically good with the free market and I agree that what we have now is not a free market.

    However, what bothers me about the conversation with Jim Norman is he seems to operate in a fairness free zone. Is it fair for Exxon-Mobil to have all that cash, but not have to pay the people whose livelihoods they permanently ruined in Alaska? (I realize that the courts ruled in E-M’s favor.) Then, there is BP in the gulf of Mexico; are they making the people whole there?

    As far as fracking goes, no one would be making movies about it if it worked as it is supposed to. But, the companies doing the fracking are trying to keep their costs down and thus, they cut corners resulting in catastrophes for individuals and families. The true costs of restoring the landscape, the water supply, etc. are not factored into the costs for the companies.

    Even if the well casing doesn’t ruin the water supply until 500 years from now, isn’t that still a problem? Isn’t it unfair to the people who will be living then (if any)?

    So, if Jim Norman’s wife gets upset with him, that could be why. He doesn’t seem to care whether energy extraction has any other costs besides the ones the companies are incurring as the drilling is done. I think he should read some Derrick Jensen and get a little balance in his perspective.

    Maybe, he already has this perspective, but it would be nice if it was allowed to show through occasionally.

  2. Wow… Cynthia’s comment is harsh as it clearly calls out for balance. Catherine your going to have to referee this. Less zombie coverage in 2014 (shucks :>) I did not have Catherine around to tell me I needed multiple income sources instead of one good job back in the 70’s when I got a Solar Engineering degree. Did we ever get any signifcant comment from James about oil subsidies?
    An old Wall Street type told my dad at the time..without tax subsidies the oil industry would not have had its growth trajectory either (back to the first wells in PA.) What was the last thing James Norman had to say about the oil depletion allowance? Are the complete economics on fossil fuels lost in the economics as warfare thesis? Generators to expensive to replace…there is something wrong with that story. Same with birds killed by wind machines. Same with new ice age vs global warming (a Coast to Coast AM theme.) Turns out we were not running out of oil in the “oil shock” 70’s. I might find out what is true before I die, I might not but I do know my subscription to Solari Report will remain current and the Solar Engineering degree never paid for itself.

  3. Cynthia:

    This is my 2 cents. I’ll invite Jim to do the same.

    Exxon-Mobil is operating as a bureaucracy that governs, manages and operates energy resources. It does not operate like a for profit. If you read Jim’s book, it manages to an oil and gas price that is at times significantly above or below what would appear to be a market price. Have you read Jim’s book? I think it will help you look at this from the point of view he was trying to describe.

    So currently, the oil price is being held significantly about the market price as a matter of national security to manage China. As a result oil company profits are high. My guess is that as the cash flows in, the powers behind the scenes are having something to say about where it gets reinvested, as the profits result from national or syndicate policy as opposed to private profits. (A big chuck of their cash goes to dividends, with a big chuck of that going to pension funds.) This was the way the system typically worked or proprietaries – companies that generated their profits from government subsidy, such as the HUD property management companies.

    While this system generates a higher price for the consumer, it also protects and defends the role of the dollar as the reserve currency, which ultimately benefits the consumer household through the other side of their balance sheet. Net, net, American households are probably better off financially as a result of the policy of an artificially high oil price from what would happen otherwise. (This does not assume what would happen if we changed the model.)

    Meantime, the system Exxon is operating as part of is unfair. They are part of a model – running the planet on fossil fuel and the central banking warfare model. The two are two sides of the same coin right now. And that system has a goal of centralizing economic and political power. Those decisions and policies are set above and beyond the Exxon board level. Which is why I keep asking the question, who and what is in control and why are they behaving the way they are behaving.

    Exxon experiences a spill in Valdez. Instead of making things right, they drag things out, go to the Supreme Court and win. (Bet you a nickel that it required more than a few control files to get that done.) Valdez and the people of Alaska assume Exxon’s liabilities. Is it right? No.

    Companies come in and frack. Where there is a serious problem, there is a record of not accepting responsibility and getting it fixed. Is it the companies or the states fault or both? I don’t know. But it seems to me that the industry and regulators have a serious problem by not creating the capacity to address problems when they occur. Jim feels it is more the states responsibility. My feeling is that it does not matter. The industry as a whole has a responsibility to address responsible practices and make sure they happen.

    However the things that go wrong (there are always things that go wrong) is a different issue from what Jim was speaking to. Jim was addressing how things operate in the energy markets, why they operate that way and what the fundamental economics are – he is trying to help people see the world as it is – including seeing it from the point of view of the people who run Exxon. That is very useful and IMO no one does it better.

    The folks who run the energy companies are in a double bind. The pressure on them to create domestic self sufficiency and surplus, including large gas deposits is significant – and the higher prices make the pressure worse. So the financial world is pushing. Local communities and households do not like the face of that push. However, they are assuming that they can stop that push and their dollars will continue to be of value. Bad assumption. And they continue to dump the stocks of companies that step up and take financial responsibility for their mistakes.

    Meantime, if more of us can see the connections within the financial and environmental ecosystems, we can start to appreciate the double binds and shift towards real breakout solutions.

    One other comment. There is a genre in American of websites and radio shows all designed to talk about how unfair things are. Frankly, life is unfair. I am much more interested in helping subscribers see the system as it is, navigate it, and hopefully navigate it in a way that changes it to one that creates more total wealth for everyone. I am not looking to make life fair. I am looking to help us collectively optimize, subject to a standard of respect for basic individual human rights and for life.

    An example. I used to work with AT&T Bell Laboratories. For many years, they optimized airline scheduling of flight crews. After many years they backtested to see what the price of rules was. Turned out that senior pilots could get better schedules if they relinquished their seniority. The class system so suboptimized the entire results that the top members were worse off.

    I would argue the same thing is happening now in North America, which is why I would like to know why the hysteria for control.

    I don’t want to waste your time or Jim’s time talking about the unfairness inherent in the system. You and all of my subscribers already understand and appreciate it. What I am hoping to do is help you get inside the system and see the logic in the operating system as it currently is.

    Anyway, hope that helps.

  4. Catherine,

    Thank you for all your time in writing your answer. It’s meaty (as is all your stuff) and I have read it several times. Yes, I really do know life isn’t fair. 🙂

    And I also agree with Richard Stein that I would never let my subscription lapse.

    Cindy

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