The End of Easy Street

The End of Easy Street

Few people seem to have noticed that 2005 was a land mark year.  No, it wasn't something that Bush did.  It was the first time since oil became a major fuel that we did not discover more oil than we used.  Many believe that we are at the peak of world production of oil.  Most believe everyone is pumping all they have.  Oil production from a well follows a bell-shaped curve.  Sum all the curves for each well together and you have the world production also following a bell shaped curve (with a few bumps). 

But, guess what? It may be happening in other commodities.  Copper for instance.  Prices are at the $2/lb level, double the ten year average.  Ore quality is dropping and new projects are coming on slowly and are of general poorer quality than existing mines.  Yea, there are still some places like Zambia and Zaire that have it good deposits that are not being exploited.  But there are places like the Garfield Smelter in Utah where they are spending hundreds of millions to just get another ten years of life out of the mine. 

Add China to the equation.  If they keep growing like they have for the last ten years then there isn't enough oil and copper in the known Universe to make it happen.  So, what gives.  Couple that with the U.S. government and people borrowing money to feed their addictions, i.e., consumerism and the Chinese loosing control on their currency (albeit gradually) and diversifying to other currencies in their reserves .... duu?  Not enough hints?  Where is the U.S. dollar going?   The only thing keeping it a float at the moment is that it is the world currency. So, if it loses value everyone in the known Universe loses.  But, at some point, Bush and Congress will spend enough that even the Chinese will not be able to prop it up and simultaneously buy energy and copper, etc.

Where is all this leading.  The end of cheap energy and commodities will impact those that consume more than their share.... the U.S. with 5% of the world population consumes 25% of the world energy.  It is not a done deal that the U.S. can't respond, but we are at the back of the pack and twenty horses are rounding the final turn in front of us.  Seabiscuit would have had trouble coming back.  Yes, weare not in front anymore.  I ramble.

If any economy and any people in the world can  rally and change the outcome it's us.... greedy Americans.  But, at the moment we are diverted on killing children in Pakistan to get a terrorist and a million other worthless and even wrong endeavors while we are being blind sided by some serious changes in the world economy.  It may very well be that the U.S. life style has peaked, the lifestyle based on cheap energy and unlimited resources.