Peak Oil Has Changed Everything

How a tiny $0.70 company can turn your $10,000 investment into $1.07 Mil

They've found a vast cache of a metal so valuable that if they mined only 10% of it, their stocks will soar 10,709%.

Meanwhile, demand for this metal has reached 575,000 tons annually and is escalating rapidly – with new deposit discoveries simply not developing.

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Calculated Chaos?

About the time of the invasion, I read a report by the Rand Corporation. The analysts who published the report argued that the likely outcome of the invasion would not be a thriving democracy . . . not even a democracy by Middle Eastern standards. The likely outcome, they argued, was civil war between the Sunnis and the Shiites.

This had to be one of the possible scenarios in the neoconservatives' calculus.

In fact, I've maintained for the past year that the invasion of Iraq was either a gross miscalculation, or else the chaos that has ensued was the intention all along.

I believe it was the latter, because I believe Peak Oil is now the rationale behind our foreign policy.

I mean, think about it. Iraq controls the third-largest oil reserves on earth. If you go in and upset the apple cart and it remains a mess, you have created a pretext to stay in that oil-rich country. And Bush just enunciated that very fact on national television.

And as long as Iraq sits on an estimated 115 billion barrels of proven oil reserves, it will remain America's 52nd State.

But it wasn't Bush who was the first in the Administration to explain the precepts of America's current foreign policy.

A year before Cheney became Vice President, while he was still CEO of Haliburton, he gave this speech regarding the Herculean task the world faced over finding new oil supplies. Here's what he said:

"From the standpoint of the oil industry obviously-and I'll talk a little later on about gas-for over a hundred years we as an industry have had to deal with the pesky problem that once you find oil and pump it out of the ground you've got to turn around and find more or go out of business. Producing oil is obviously a self-depleting activity. Every year you've got to find and develop reserves equal to your output just to stand still, just to stay even. This is as true for companies as well in the broader economic sense it is for the world.

"A new merged company like Exxon-Mobil will have to secure over a billion and a half barrels of new oil equivalent reserves every year just to replace existing production. It's like making one hundred per cent interest; discovering another major field of some five hundred million barrels equivalent every four months or finding two Hibernias a year.

"For the world as a whole, oil companies are expected to keep finding and developing enough oil to offset our seventy one million plus barrel a day of oil depletion, but also to meet new demand. By some estimates there will be an average of two per cent annual growth in global oil demand over the years ahead along with conservatively a three per cent natural decline in production from existing reserves.

"That means by 2010 we will need on the order of an additional fifty million barrels a day. So where is the oil going to come from? Governments and the national oil companies are obviously in control of about ninety per cent of the assets. Oil remains fundamentally a government business.

"While many regions of the world offer great oil opportunities, the Middle East with two thirds of the world's oil and the lowest cost, is still where the prize ultimately lies, even though companies are anxious for greater access there, progress continues to be slow."

Fifty million barrels per day is the equivalent of nearly six Saudi Arabias.

But even that might be optimistic. You see, I doubt anybody foresaw the massive economic juggernaut of the Chinese economy, and how quickly it would begin consuming oil.

Check this out . . .

The China Factor

China's automobile sales are expected to reach 6.8 million to 7 million this year, making up one tenth of the world's total.

The figure will climb to 10 million in the year 2010 and 20 million in 2020, overtaking the United States to become the world's top firsthand automobile market.

These forecast come as more middle-income Chinese families will be able to afford a car in the coming years, thanks to rising incomes and falling car prices.

China will replace Japan as Asia-Pacific's largest auto producer by 2013, when it is set to make over 11 million vehicles a year, auto experts JD Power-ARA Automotive said.

China produced 6.42 million vehicles last year, compared with Japan's 11.02 million units. But Japan's output is projected to fall below 11 million units in 2007 as key manufacturers move their production overseas in an effort to cut costs and establish export centers abroad, the auto consultancy said.

Meanwhile, China will continue to expand its auto manufacturing capacity, and is expected to add no fewer than one million units to its production each year to meet fast-growing demand, the same report announced.

Since China joined the World Trade Organization five years ago, Chinese consumers' demand for sedans has grown an average of 37.5 percent annually.

This year, the sale of sedans is expected to hit 4 million, compared with 800,000 units in 2001.

China's automobile sales stood at 3.24 million units in 2002, ranking fourth in the world. The position rose to third in 2004.

But even these dramatic statistics don't tell the whole story. Here's where the China situation gets scary.

Only eight out of every 1,000 people in China own a vehicle today. Contrast that with the global average of 120, and over 800 in the United States.

The Chinese have the same dreams and aspirations as Americans. They want a piece of the industrialized pie. And they want cars. Lots of 'em.

If China had the same car ownership ratio as the US, it would be home to some 960 million cars

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