2014.12.01 a flock of black swans

If you are not familiar with the idea of the phrase “Black Swan” as some people have come to use it, I’ll leave you to do a little web sniffing and read up. In the meantime, the idea of a black swan event is certainly becoming more and more relevant, something popping up that has quite a large and significant effect on things, coupled with the general characteristic of people greeting the news with “oh… I didn’t see that coming” and something along the lines of “oh… that wasn’t supposed to happen, was it?“.

An obvious part of the problems, or potential problems anyway, in anything that might be reasonably considered to be a black swan kind of event, is the likelihood of it being misunderstood, or not even noticed as being involved.

 

Anybody watching the “market news” knows that the benchmark crude oil prices of WTI and Brent have been diving. What effects and repercussions this has, and might have, is quite a complex topic, and one handled at length on a regular basis by people much better able to address it, with lots of their time devoted to the subject, such as Gail Tverberg, Richard Heinberg, and many others.

The decline of crude prices definitely qualifies as a black swan, and already people focused on all this are talking about what sort of complex and interactive effects it can have, including, for a start, the effects of market phenomena, in all the Wall Street trading games that involve this as well as other commodities and all the phantasms of finance and paper wealth (or, as it might be better labeled, fake wealth).

Along with that, of course, is the effects it will have on the actual activities of oil extraction, given the increasing costs and complexity and diminishing returns in things like the tight oil shale realm that so many people are convinced represent some “energy independence” miracle boom. It has been a fairly regular theme among people who know what’s what in this domain that crude oil selling prices below somewhere around $80, maybe a little more, maybe a little less, represents a threshold where the “miracle” of tight oil deposits (often under the misnomer of “shale oil”, which is actually a term for synthetic oil derived from processing kerogen) become a break-even or money losing business proposition.

It should be clear, but evidently is not, to many people, what this suggests for what might be ahead in oil extraction flow rates, contrary to all the wishful thinking hype about the Bakken “boom” and “shale oil” cornucopia of plenty. What looks like a real black swan surprise for people is what all this might mean in all the market trading and financial gaming in a time when what people call “the financialization of everything” turns damned near everything into revolving around fake wealth houses of cards concocted and conducted by people whose whole business and activity revolves around contrivances of fake wealth and taking large slices for themselves as a reward as intermediaries.

All this wound together, the geology, the human activities and endeavors of extracting and using oil, and all the economic factors that are wound through all of it, starts to get together in what certainly is a complex subject, that fits under the subject heading of “peak oil”. The economic phenomena are part of it, part of the diminishing returns phase of Hubbert’s curve, but, that gets us to a repeating item I’ve pointed out so many times. That, sadly, is the whole mass of public confusion and misdirection resulting from endless barrages of nonsense from people telling their audiences that the term “peak oil” doesn’t mean what it actually does mean, but, rather, represents some sort of conspiracy theory crackpot tinfoil hat nutball doomsday prophecy that, supposedly, consists of claiming that all the oil is about to “run out”, almost gone, “tapped out”, or whatever, and this will bring the world as we know it crashing back to the Stone Age. Which is complete bullshit.

That isn’t what it means at all, of course, but given all the nonsense grabbing all the public attention, coupled with happy hype about “shale oil miracles” and all that, here we are in a situation where an awful lot of people are probably going to be finding lots of big surprises, of all sorts, with the extra twist being that some of the repercussions of the oil situation will have their effects, while people have no idea of what catalyzed events and set things going.

All this stacks up to the potential for complex problems made worse because people have no fucking clue what is happening.

None of this is intended to be some sort of wailing lament of “we’re doomed!”, but in some many things, people go banging off the walls in all kinds of absurd and irrational ways that obscure everything, getting attention even more diverted away from sensible thinking and figuring out changes needing to be made. For examples, we have the matters of events hinting at us in the energy realm that, in simplest form, the plan needs to be to knock off all kinds of waste, like, for example, correcting the results of the decades long American project of suburban sprawl and building everything 15 miles from everything else.

Lots of events and confusion swirl and distract and confuse people. The black swans that might come bursting through the scene in finance and the Wall Street casino games, hallucinations, and frauds seem likely to have all kinds of interesting effects, which might at least have the positive effect of snapping people back to reality of a real economy, of things of value, work getting done, and people paying for value, and a lot less of something for nothing games of skimming wealth or dealing with essentially imaginary fake wealth pretenses. Again, how the drop in oil prices affects the casino games in finance and banking and securities trading remains to be seen, as I said already, but it probably will be quite a drama. Plus, again, to repeat the point, I suspect that lots of people won’t understand why.

It has been pointed out by quite a few attentive and sensible and intelligent people, brighter minds than I, that among what passes for people of leadership and insight, in business and government, that honest and accurate assessment of what has happened and is happening, in just about anything, is scarce. The difficulties we have on hand in the general subject of energy, in resources, our use, our squandering, and everything else under that umbrella, just get more confused by people spewing raw (or sometimes refined) bullshit, whether by dishonesty for whatever reason, or genuine cluelessness and even severe delusion.

The whole subject of “the economy” is a gigantic epic tale of this sort, probably requiring whole lengthy and complex books to sort out even in selected chunks. There is still no sign at all that the vast, just plain incomprehensible, messes of the world of finance and banking, all the fake wealth frauds and contrivances treating debt, imagined into being, as “wealth”, and so on, are being cleared up, or that anyone in any kind of authority or positions of control have any intention of even trying. I don’t know how things are going to go in this realm as people start finding that the problems of the financialization of everything come popping up all over, this time related to the financial and trading games related to oil, rather than several years ago, when it revolved around real estate mortgages.

In positions of power and influence, the pretense or delusions (or both) are not just about the physical and practical realities of energy, and the bizarre farces of finance actually being destructive to positive useful business and getting work done and people getting paid. There is also the increasingly bizarre and ugly farce of people determined to hang on to megalomaniac delusions of world domination, of empire. I’m including a batch of links to important reading, but I would recommend to go spend the time (about 50 minutes) to go listen to the webcast recording of an interview with Dmitry Orlov, who addresses a batch of things, in a conversation with Chris Martenson, as an actual sane and rational human operating in the realm of reality, basically talking about people who are not.

He knows both the area of the world where the “Ukrainian Crisis” has been happening and the United States, as a Russian-American. If you’ve been reading here and following the many news links about the events and situations over in eastern Europe, and the surrounding lying and lunacy surrounding it, you already know that virtually everything we’re fed by officialdom and the increasingly useless and dishonest “news media” here in the US about the story is just completely wrong. That ugly saga is just one facet of the neocon lunacy in Washington, and it’s hard to say exactly how those delusions of grandeur are going to crash.

 

oftwominds-Charles Hugh Smith: The Oil-Drenched Black Swan, Part 1

oftwominds-Charles Hugh Smith: The Oil-Drenched Black Swan, Part 2: The Financialization of Oil

Banks begin to face heavy losses as oil price falls. : Jeremy Leggett’s Triple Crunch Log

Low Oil Prices: Sign of a Debt Bubble Collapse, Leading to the End of Oil Supply? | Our Finite World

Oil Price Slide – No Good Way Out | Our Finite World

Did Peak Oil Arrive in 2014?

Wells That Fizzle Are a ‘Potential Show Stopper’ for the Shale Boom – Bloomberg

Dmitry Orlov: Russia’s Patience Is Wearing Thin (podcast interview definitely worth the time to listen)

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