Dollar vs. Euro vs. Oil

December 18, 2008

I’m interested in the value of the dollar lately and how that relates to energy costs. I have believed that oil prices are incredibly difficult to predict and explain, but that currency values might be the greatest contributor to the price fluctuation we’ve seen in the past few years. This link explains the latest news:

Dollar falls sharply in wake of Fed move

It has been hard to ignore the fact that the recently oil prices have been so closely related to the value of the dollar. The article shows a series of very informative graphs to illustrate that point and then discusses today’s marked drops in the stock market, the value of the dollar, and (oddly) oil.

I would be careful, however, in making statements such as, “that relationship is now completely over.”

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Obama vs. WSJ and the Supermajors

August 17, 2008

Probably a little better than my recent post on the topic:

What is a ‘Windfall’ Profit?


Obama and the Big Awl Biness

August 10, 2008

Due to a lull in the campaign action, I’m here to rifle off some thoughts on these energy policies.

First of all, Paris Hilton has a balanced and generally agreeable plan. I think both candidates would admit some support for it.

Obama is being absurd

An energy rebate for families paid for using windfall oil profits? Is he going to tax the profits of the Saudi royal family?

People in the media continue to point fingers at the supermajor oil companies for price gouging. They cite their “record profits,” which are, of course, in the billions. Numbers like that…just…sound so large! Sometimes you’ll even hear a politician refer to their record “profit margins.” Of course, profit margins can be expressed as either a percentage of revenue or as an absolute number. Which do you think is their favorite?

Let’s do a quick financial check on Exxon-Mobil, as of today.

profit margin: 10.17%

operating margin: 15.72%

Pfizer has numbers of 18.52% and 31.15%, respectively. Why aren’t drug companies being attacked? (Because it would be counter-productive to attack them also, would be my answer). Is it because they sell something that is “good?” For what it’s worth, Altria makes 21.38% and 35.99%, respectively.

The average profit margin for many large cap companies is somewhere around 8-9%. The oil sector has generally been achieving 9-10%.

NEWS FLASH: The price of OIL is going up. Oil is the major component of gasoline. Therefore, the price of gasoline is going up. Oil companies are paying more for oil and they are charging more for gasoline. Does this not make sense? When these politicians and talking heads quote oil profits they use absolute numbers. They have record profits, revenues, and costs. The dollar value has simply gone up (as the dollar itself withers).

Another fact: 0.05% of Exxon-Mobil is held by insiders. That’s incredible! Meanwhile, 53% of this company’s shares are held by institutions (typical Americans). When Exxon-Mobil makes a profit, so do a ton of retired Americans and anyone else saving for retirement.

Over 13% of Microsoft is held by insiders. Over 36% of Lee Enterprises is held by insiders.

McCain is Being Absurd

But selling tire gauges is at least an attempt at being funny. I don’t find this energy rebate to be entertaining.


Sovereign Wealth Funds and Their Sub-prime Cash Infusions

March 26, 2008

I’ve been meaning to comment on this for some time and, while delaying, the topic has fallen out of the news quite a bit. Recent Coverage.

Across the winter of 2007-2008 we’ve been hearing about the sudden rise of sovereign wealth funds and their cash advances to victims of this “sub-prime” fiasco.

If you were to listen to CNN or Fox News, perhaps, you might hear some discussion (and fear) of the foreign influence on our economy. If you were to listen to CNBC rather, you might well have heard some very positive opinions. One interview I saw included two panelists who both agreed…entirely.

There are a number of safeguards concerning foreign control of American corporations. The fear that our economy is going to be stolen from us is an exaggeration. However, the positive opinions on this topic seemed to be summarized as: “well, these firms need the cash, so…it’s a good thing.”

Well, my self-centered media friends, that’s not what I’d call a good thing. These firms should be ready to suffer the consequences. Their executives have been given the ax and their boards are shaken. Though many pension funds and individual Americans were counting on these firms, this is the situation we have before us. We need better corporate governance and risk-incentive controls; that would be a “good thing.” Unfortunately, we can only punish these supremely wealthy but now retired executives so much. Yeah…

If there’s a reason that this is a good thing it’s because we are growing closer and more diversified ties with parts of the world that have very non-diversified economies and unpredictable societies. To give an overly simple analogy: we cooperate well with Britain and Japan, for example, because we have many mutual interests and we value the stability of the international economy. This, perhaps, is why we haven’t come toe-to-toe with China and found ourselves in a more adversarial relationship, despite our political and competitive differences.

If the UAE, Singapore, and Kuwait pour state-controlled funds into our American corporations they have a legitimate interest in our economic welfare. We can leverage this relationship and tie it to support for any number of our national interests, not least of which are security and anti-terrorism efforts. This, I submit, might be the “good thing” to come out of this international financing debacle. A world with more to gain from stability and capital flow than from a distributive vision of competition is less inclined toward conflict. Game theory saves the day and the Sudetenland is safe.

Of course, we’ve lost any sense of our own stability in this ridiculous process. Our currency is falling like a rock; much of it is over-seas due to our increasingly costly oil spending; sensibly, the sovereign wealth funds, with their rapidly depreciating stockpiles of American dollars, have decided to buy our financial firms while they’re on sale. Meanwhile, our homes are losing value as if they’re on fire. So as we’ve done many times before, here we are taking one for the team.

Well, at least they’re speaking French in Alsace-Lorraine.


First International Biofuel Flight

February 24, 2008

The BBC reports on the recent biofuel flight from London to Amsterdam.

This is very interesting concept, but as the article notes, the event is easily criticized. Although it isn’t entirely clear, the article seems to imply that the aircraft was entirely powered by its one biofuel engine.

  1. There were no passengers and no luggage weight aboard.
  2. It’s the dead of winter, ideal for combustion and for takeoff.
  3. London to Amsterdam is a short flight, requiring less fuel weight aboard, and less time for fuel gelling.

The media can likely attack on all of those points, at least to make the “stunt” accusation.

One thing we SHOULD have been told is that coconut fuel is rather efficient, both in terms of volume and a per-pound basis. Coconut oil’s energy yield per acre is also rather good.

Here’s a very random abstract on the use of coconut oil to raise the energy density of food given to low birthweight babies.

As for the food supply, Greenpeace’s typical accusation that food prices will be negatively impacted seems to be misplaced. Virgin Atlantic counters by saying that coconut farmland is not used to produce staple food crops. It is worth wondering, however, precisely what land that is.

Biofuel is not an feasible solution to the world’s energy worries. For aviation, however, I have to wonder if it might be useful. The engines powering a jetliner will almost certainly have to be internal combustion; we won’t likely be seeing hybrids either. Although the “hydrogen economy” may be a distant hope, aviation may find itself more interested than Detroit in the prospect of hydrogen fuel. What else is there?

Dirigeable

And you thought Chernobyl was bad

February 23, 2008

well, Chernobyl was bad…

The Danish secret police have done what they can to keep this video suppressed, but now the world will know the dangers of a poorly moderated wind turbine. The effects have been noticed as far away as central Djursland.

…and that’s probably the extent of it. Nuclear power is efficient and clean, but I doubt the American public will tolerate even one small scare.

Much of the discussion on this topic seems to inflate the possibility of a meltdown, given the design of modern American reactors. Even so, a leak or a terrorist threat would be devastating. It would undermine many years and billions of dollars of investment. Maybe we’d change our minds after electricity hits $1.00 per kWh.

Yet the opportunity for wind power seems immense, especially given the wind resources in the United States. Why there isn’t more discussion over this is cause for question, given the rapid growth of that industry.