Goldman’s Currie Says Oil Drives Dollar Down, Not Vice Versa

[phantom power]

This would be Goldman "bubble machine" Sachs. But interesting in an "inverted POV" sort of way.

(Bloomberg) -- Crude oil, which has risen 80 percent this year, is causing the U.S. dollar to weaken, driving metals and other commodities higher, according to Jeffrey Currie, head of commodity research at Goldman Sachs Group Inc.

While oil has risen, the U.S. currency has weakened, leading to speculation that the dollar’s depreciation is driving investors to buy oil as an inflation hedge, thereby pushing up the price of crude.

“I would argue the other way,” Currie said in an interview yesterday in London. “I would argue that higher oil prices drive the dollar down and then the weaker dollar drives the metals and soft commodities up.”

...“Oil represents 40 to 50 percent of the U.S. current account deficit, so a higher oil price represents an outflow of dollars that pushes the currency lower,” Currie said in the interview, after attending a Chatham House conference on food security.

http://www.bloomberg.com/apps/news?pid=20601072&sid=avrYQSOvNsUw

[Terry in Austin]

1. Gotta print more dollars, after all

Interesting.

It's true we're always printing more and more dollars to buy what we need/want, and a good chunk of what we want is oil. Oversupply of dollars pushes down their value, so yeah, his argument may not be so far-fetched. Maybe even near-fetched...

[excess_3]

2. the electric car is coming,

to the whole world,
not just the US

[happyslug]

3. If you really look at the number, electric cars can NOT replace the Gasoline car

And neither can the Natural Gas, Diesel or even Hydrogen cars. What is needed is a Reconstruction of society, people living within walking distance of their jobs and where their shop. This will be a multi-step process, just like the process our society went through as it went from a society where people lived within walking distance of where their work and shopped to today's society where you live miles away from where you work and shop.


http://en.wikipedia.org/wiki/Energy_in_the_United_States

The first problem with electric vehicles is the weight of the batteries (Something that does NOT exist if the electric vehicle is directly connected to the grid, such as in old fashioned Streetcars or modern LRVs, through you do have an increase loss over line as the electric lines get further from the power source, but this loss is way less then the loss of carrying batteries).

The Second Problem (and in many ways the worse problem) is the cost of converting some energy source to electric power. The loss is this transformation is high, over 50% energy loss (and according to some reports 75-90% loss). Now, electric drive itself is extremely efficient, the problem is producing the electricity NOT using the electricity. The gasoline engine is NOT as efficient as an electric engine BUT if we view the energy cost from point of production the situation changes, oil losses some energy as it moves from the pump to the refinery to your local gasoline station to your car. At that point the oil is used very inefficiently if you are looking at the engine alone. On the other hand some sort of energy (Wind, Coal, oil, hydro, nuclear etc) is used to produce the electricity, at a very inefficient rate. It is then transferred to the vehicle over the power lines relatively efficiently. At that point it is either used directly (as in an LRV) OR suffer a further loss of power as it is used to charge a battery and then used efficiently by the electric motors in the car.

Note the gasoline car has only one area of huge power loss, the engine itself, while the electric Car has two huge power losses, the generation of the electricity AND the charging of the batteries (I should note charging of batteries is improving given Lithium technology but that does NOT affect the huge loss do to generation of the electricity in the first place).

Now, renewable are viewed as a source of electric power, but most are still 20-30 years away (One recent proposal was to build generation plants underneath the Mississippi River using new technology that can generate electric power with even a slow flow of water, i.e. no dam is needed, but this is 20-30 years away at best). Solar and wind are still minor compared to hydro electric and all three produces no more then 3% of PRESENT electric usage. To replace oil with electric cars we have to double electric output (and triple energy input to produce electricity given the above loss in just producing electricity) just to replace the energy presently used in cars in the form of gasoline. No one is even proposing such a massive buildup of electric generation (and electric usage OUTSIDE of transportation is expected to double over the next 20 years, i.e. we may have electric blackouts do to lack of electric generation within 20 years even WITHOUT electric cars). Now, people advocate "off-peak" charging of electric cars and that will ease some of this pressure, but not enough to make electric cars one to one replacements of today's gasoline cars.

Now, electric cars will be part of the mix of transportation of the future, but most people will not own one (Taxis, ambulances, fire trucks etc will still exist and the cost tied in with electric drive will be way less then the need for these services). We will slowly return to living closer to where we work (and the stores will move closer to where people work to be near where people live). Our society will have to change including most people's outlook on how they get around. Out car center society has to die and electric cars, as most people envision them today, is an attempt to keep this car centered society alive in a people of high prices (do to low supply) of oil.

[excess_3]

4. you forgot about coal, and we have plenty .nt

[happyslug]

5. Depends on how you look at coal

First, we have 300 years supply if usage stays at the rate it is at the present time.

BUT, if we instead assume the rate of INCREASE of coal production will continue at the rate it has over the last 50-100 years then peak production occurs in about 30 years.

The reason for the difference is energy use increases on a pattern that is best viewed as doubling of usage every so many years. At first this is not much, but as you use more and more the effect is best shown in terms of squaring of a base number i.e. 2x2=4 then 4x4=16, then 16x16=256 then 256x256=65565 etc. Notice the problem, the doubling starts slowly but as it get further and further up the chain its increase is just outrageous. One of the reason Gasoline is staying so high is that we seem to have peaked in world wide production BUT the doubling affect is still going on in regards to China, India and most of the third world (US oil usage has dropped over the last two years (barely in 2007, by almost 5% in 2008), but the doubling in those countries have more then compensated for the drop in US consumption.

Please note the above calculation as to coal is based on usage of electricity as electricity is used today i.e. NO AUTOMOTIVE USE. Thus by the time we get the coal fired generators on line to produce the power needed for everything else other then transportation, world wide coal production should start to drop.

Please note I am ignoring the carbon content of Coal and its affect on Global Warming, not because I do NOT believe that Global Warming is occurring (I do believe global warming is occurring) BUT even ignoring the efforts to reduce coal use to keep carbon levels low (which will reduce electric production from coal) you still do not have enough coal to solve the above problem of what is needed in electric production. The numbers are not there. It is an unpleasant fact but it is a fact (I will not give citations, you can look them up yourself). The best way to meet out future energy needs is to reduce our need for energy, that is the most productive way to achieve "energy independence" but it requires a massive restructuring of out society and I suspect we will do everything else first (including going to war) before we accept the sad fact that modern suburbia must die, rural America has to accept the fact it will become more isolated and Urban America not only more divest (i.e. more High income families with children in urban areas as oppose to most such families in rich suburbs) but more concentrated in terms of population.