Owner: JeffVail.net - Rhizome URL:http://www.jeffvail.net/ Join Date: Fri, 01 Feb 2008 19:01:23 -0600 Rating:0 Site Description: Weekly notes on the emergent system, energy, geopolitics & philosophy by Jeff Vail, author of "A Theory of Power" Site statistics:Click here
It's Still the Demand Inelasticity 2008-03-04 09:24:00 Oil hits $103.95. Yawn. It seems rather obvious to me that the recent run up in oil prices has come primarily from a declining dollar and fears that inflation will errode the value of conventional (read: fictional) financial instruments. But when CNN runs an article suggesting that, but for all this insane "speculation" in oil, it would be trading at $60/barrel, I need to pull out my broken record player.It's still the demand inelasticity.I get the impression that most financial pundits cluttering the news these days have only recently even thought about commodities, and have spent most of their careers thinking about equities. Why is this relevant? Because, with equities, speculation can dramatically over-inflate the price beyond any immediate underlying value. There is no check whe
Implementing Rhizome at the Personal Level 2008-03-03 01:09:00 This fourth essay in a five-part series, The Problem of Growth, examines practical steps to implement rhizome at the personal level. In the last installment, I argued for the theoretical requirements of rhizome. Rhizome begins at the personal level, with a conscious attempt to understand anthropological processes, to build minimal self-sufficiency, and to engage in “small-worlds” networks. This installment will outline my ideas for implementing this theory at the personal level in an incremental and practicable way. This is by no means intended to be an exhaustive list of ideas, but rather a starting point for discussion: Water In the 21st Century, I think it will become clear that water is our most critical resource. We’ll move past our reliance on oil and fossil fuels— Read more:Personal
Building an Alternative to Hierarchy: Rhizome Theory 2008-02-25 01:07:00 This third essay in a five-part series, The Problem of Growth, looks at the theoretical requirements for a sustainable alternative to hierarchy. In the first two installments (1 2), I argued that competition between hierarchal entities selects for those entities that most efficiently grow and intensify, resulting in a requirement for perpetual growth, and that ongoing human dependency on participation in this system is the lifeblood of this process. At the most basic level, then, an alternative to hierarchy and a solution to the problem of growth must address this issue of dependency. My proposed alternative—what I call “rhizome”—begins at exactly this point. Achieving Minimal Self-Sufficiency The first principle of rhizome is that individual nodes—whether that is family Read more:Building
, Alternative
, Hierarchy
, Theory
Hierarchy is the Result of Dependency 2008-02-18 01:05:00 This second essay in a five-part series, The Problem of Growth, attempts to identify what causes and sustains hierarchies. Humanity has long been trapped in a cycle of treating the symptoms of hierarchy—here we will attempt to discern its cause in order to treat it directly. The first installment in this series identified the reason why hierarchal human structures must grow: surplus production equals power, and entities across all scales must compete for this power—must grow—or they will be pushed aside by those who do. But why can’t human settlements simply exist as stable, sustainable entities? Why can’t a single family or a community simply decide to opt out of this system? The answer: because they are dependent on others to meet their basic needs, and must participate Read more:Hierarchy
, Result
Hierarchy must grow, and is therefore unsustainable 2008-02-11 03:00:00 This first essay in a five-part series, The Problem of Growth, looks at hierarchal human systems and explains why their structures fundamentally demand continuous growth. The second installment will investigate what causes and sustains hierarchy. The third, fourth, and fifth installments will formulate an alternative to hierarchy that addresses its cause, not merely its symptoms, along with proposals to apply this alternative at both the personal and societal levels. Why must hierarchy continually grow and intensify? Within the context of hierarchy in human civilization, there seem to be three separate categories of forces that force growth. I will address them in the order (roughly) that they arose in the development of human civilization: Human Psychology Drives Growth Huma Read more:Hierarchy
The Tata Nano Strikes Back--Does Jevons' Paradox Apply to Productivity, Too? 2008-02-04 02:30:00 Can improvements in energy efficiency “save” modern civilization as we face declines in world oil production? While the efficiency revolution may let us drive on half the gas, the productivity revolution may make it affordable to twice as many--or more...One argument against the efficacy of improving energy efficiency is called Jevons’ Paradox
. This suggests that, when we improve our energy efficiency, we also reduce our demand for energy from that same use. That decreased demand in relation to supply makes energy cheaper, which in turn makes us use more of it. It has been suggested that this “rebound effect” only accounts for 5-20% of efficiency gains, but I have written previously about the potential for a “shadow” rebound effect that potentially accounts for nearly the ent Read more:Strikes
, Productivity
New Statistic Suggests Fed is Lying about Inflation 2008-01-31 09:00:00 Yesterday the US Federal Reserve cut interest rates again, noting that inflationary pressures seem to be receding. Not so fast. How would we know whether or not there is monetary inflation, since the Fed ceased reporting the vital M3 statistic in March of 2006 (it's like.... they saw this coming). I've written about the importance of this move to stop reporting M3 in "Running on M3" and "A Peak Behind the Curtain." Common sense would suggest that repeated rate cuts, not to mention the arguably more significant Fed Open Market Committee subsidized bond auctions for tens of billions of dollars every few weeks, would lead to inflation. It also seems evident that, in light of our entitlement/Ponzi-scheme system and our economy's need for at least apparent growth, we will choose inflation Read more:Statistic
, Lying
, Inflation
Will Peak Oil Drive Relocalization? 2008-01-28 08:24:00 Over the past week, Stuart Staniford and Sharon Astyk have written thought-provoking essays at The Oil Drum on the nexus of Peak Oil and relocalization, with Staniford suggesting that peak oil will not result in relocalization of agriculture because the industrialization of agriculture is a more efficient use of energy and is not practicably reversible, and Astyk rebutting that idea. I think that both essays make important points, but I would like to offer a third perspective: that we have insufficient information to reach a conclusion about when energy scarcity will result in relocalization of agriculture, but that we will likely cross this threshold in the not-too-distant future and should prepare accordingly. Astyk’s main critique of Staniford’s essay is, while important, focused pr
What is Rhizome? 2008-01-28 02:51:00 Rhizome takes it name from plants such as bamboo, aspen, or ginger that spread via a connected underground root system. As metaphor, Gilles Deleuze and Felix Guattari used rhizome to refer to a non-hierarchal form of organization. I have extended this metaphor, refering to rhizome as an alternative mode of human organization consisting of a network of minimally self-sufficient nodes that leverage non-hierarchal coordination of economic activity. The two keys concepts in my formulation of rhizome are 1) minimal self-sufficiency, which eliminates the dependencies that accrete hierarchy, and 2) loose and dynamic networking that uses the "small worlds" theory of network information processing to allow rhizome to overcome information processing burdens that normally overburden hierarchies.Rh
Back to Rhizome for a moment... 2008-01-06 12:20:00 I haven't said much on the topic of rhizome for some time (though I've certainly been thinking about it). This link to a piece at Brainsturbator isn't new, but it's well worth reading. See my rhizome link page (as well as, of course, A Theory of Power) for my writing on the topic...
2008: Pause 2007-12-31 10:27:00 Time, once again, to engage in my annual predictions and prognostication. This year The Economist has unofficially endorsed my brand of futurology--relatively short term and thematically focused. But first, as usual, a review of how my 2007 predictions panned out:I didn't get Iraq right--I predicted that the draw-down would begin, whereas in reality there was a "surge." I guess I'm still able to underestimate the incompetence of the Democratic Party. Mental note not to make that mistake again. I won't discuss my thoughts on the surge (e.g. the arming of the Sunni tribes for the future clash with the Shi'a establishment over oil revenues after the inevitable US withdrawal) now, but suffice to say I didn't get it right in '07. For what it's worth, I did get the "no war" call on Iran ri Read more:Pause
Observations on a Germany Road Trip 2007-12-30 16:35:00 Just back from a trip to Germany
, so here are a few observations in the areas of energy, environment, and society. These thoughts compare Germany with America, as well as Germany with itself--at least from the perspective of an American who has visited on average one or two weeks a year for the past 30 years, sometimes as a tourist, sometimes as a student, sometimes spending Summers with my Grandparents in Berlin when I was younger (which probably distorts my view with a fair amount of fantasy).Over the last two weeks, we drove about 1600 kilometers through Bavaria, in southern Germany. While most of Europe, and Germany in particular, is known for its efficient and high-speed rail service, there was no shortage of trucks on the road. Even with diesel fuel at $7.25/gallon, the freeways w
Narrative Fallacy 2007-11-14 15:45:00 CNN reports that oil surges nearly $3 as Thanksgiving weekend is expected to spur demand.Is CNN suggesting that oil traders woke up this morning and said "Hey, look at this on the calendar--Thanksgiving! People might drive, and stuff, to, like, go places to eat Turkey. I totally didn't expect this major driving holiday to just pop up out of nowhere!"This is a great example of the Narrative Fallacy--after the fact, it seems easy to explain why something happened. Before the fact it isn't quite so easy. I could have told you yesterday that people may drive places for Thanksgiving--I could have even told you when Thanksgiving would appear on the calendar--but I didn't have CNN's crystal ball to realize that this would be the reason oil is up today.I wasn't around at the time, but I'm tol
On Odalisques and Obelisks (e.g. Bartiromo & Yergin) 2007-11-06 22:29:00 Alternate Title: It’s the Demand Inelasticity, Stupid. Oil prices again. Tapis (Malaysian Crude) just broke $100 a barrel and West Texas Intermediate breached $98 briefly in after hours trading. I can already hear tomorrow’s cries from the pundits and purveyors of financial “news” that the fundamentals don’t support these prices. Huh?Let me back up and explain what’s happening here. We have a generation of financiers who were trained in a very specific methodology to analyze stocks. They are now applying that reality tunnel of how stocks behave to deliverable commodities, and in the process are making a huge error. This error culminates in their thinking that speculators and geopolitical threats are artificially inflating the price of oil beyond what the “fundam
Do exchange traded futures matter when there are also swaps and forwards? 2007-10-31 14:24:00 In a word: yes. I wanted to post a follow up to a comment to my recent post “2015 Futures.” That comment argued, contrary to my own position, that the availability of crude oil futures
out to 2015 didn’t substantially improve the ability of oil producers to ensure profitability of “expensive” oil ventures. Here it is: Producers could fix their revenues out 5 yrs well before this listing. 1st, most large hedgers are likely to use calendar averaging swaps, not futures (which impose onerous variance margins, ie ongoing cashflow swings .) Swaps are cash settled against an index (typically NYMEX but often Platts) and are secured by an ISDA agreement and the balance sheets of the contarcting parties. Margin isn't assessed day to day so often it amounts to a long term loan.The int Read more:matter
2015 Futures 2007-10-25 12:18:00 I don't remember seeing any press release on this, but for several months now it has been possible to buy December 2015 futures on NYMEX. That's a full 8 years out. Prior to this it was only possible to buy futures 5 years out (CLZ12). Why is that significant? Conventional wisdom is that it takes about 5 years from discovery to commercial production in an oil development, so when you could only accurately price and fix your revenue five years out, you really couldn't hedge against a price drop. Even with oil at $90 a barrel, it was still risky (essentially a peak oil bet) to produce oil that would cost you $50, $60 or more a barrel. Now that it is possible to sell futures 8 years out (currently the CLZ15 is trading at $77/barrel), it becomes a much more conservative financial move to
Thoughts on Oil 2007-10-15 13:32:00 Oil hits $86. I was discussing the reasoning behind invading Iraq with a friend. I suggested that there seems to have been a mix of reasons, but that preserving the petrodollar system and some naive notions that there actually was a terrorist threat from Iraq that we would somehow neutralize by removing the government of Iraq from power were probably two core reasons. He suggested that lots of the pressure came from the oil companies. This is really a no brainer, but I thought his rationale was interesting, and certainly not the standard oil-rothschild-skull and bones-conspiracy stuff. He pointed out that, for the second half of the 20th Century, the western oil majors had a simple business model: discover reserves and produce them. With the onset of the peak oil plateau, this model
The Iranian Gambit Opening 2007-10-12 10:22:00 Chess analogies are overdone, but chess is a good way to explain the narrative fallacy--the tendency of humans to be able to explain things in hindsight much better than understand them as they unfold. So I'll explain in hindsight how two current events led to our bombing Iran:Trying to invade and hold Iran is a fool's errand. OK, so was bombing Iran, but it seems that the we didn't understand that at the time. Rather, we opted for a strategy of bombing key sites, and holding and occupying a few other key areas (Khuzestan, Bandar-e-Abbas, etc.), without attempting to occupy the entire country. In order to do that, we needed to address a force problem: all of our ground forces were tied up on the ground in Iraq. Specifically, the US Marines, the force most capable of larger expedition Read more:Iranian
Future Planning: Hedging the Solution Space 2007-10-05 13:50:00 NOTICE: The following is not financial advice, and is solely my opinion. If you follow the plan laid out below you will probably lose money. In fact, by following this plan, I hope to lose money. By the end of this post, hopefully, you will understand why.______________________________I tend to think that we are on the verge of a global economic and societal collapse driven by diminishing marginal returns on civilization’s investment in complexity—especially by the declining availability of surplus energy. I don’t think that this will result in a single, catastrophic collapse event, but rather in a slow, grinding decline that is masked by epiphenomena and the confusion of symptoms and causes, effectively negating our ability, as a society, to muster the will to take effective mi Read more:Space
, Future
, Hedging
, Solution
Visions of a Biofuel Future 2007-10-03 21:13:00 Indentured servitude, a workforce confined to the borders of the plantation by armed guards, being "paid" by being allowed to live in unlit huts and drink water from the pig trough. Violations punished by summary execution and burial in an unmarked pit. This sounds like a historical account of life on a colonial plantation of the 18th century, but is actually the description of the sugar industry, today, in the Dominican Republic. The new film "The Price of Sugar," about the abuses of Hatian migrant workers on a Dominican sugar plantation, tells the story of a Catholic priest trying to organize the workers. (IMDB, NPR story)Of course, the larger issue here is that biofuel production is dependent on exactly this industry. As long as biofuels are an over-subsidized boondoggle, then indus Read more:Future
, Visions
Why Oil Will Hit $100/Barrel 2007-08-07 14:31:00 Following the recent slide in oil prices, CNN is already jumping on the bandwagon with their story "Why oil won't hit $100." From the article:"If this market can continue going lower without OPEC disrupting it, it's very possible that by 2010 we could be substantially lower than anyone is imagining," said Peter Beutel, an oil analyst at the consultancy Cameron Hanover. "Four to 8 years from now, we could come down and break $20 a barrel."Beutel bases his prediction on the fact that oil is historically a cyclical commodity. In the early 1980s it hit $38 a barrel, far higher than today's price when adjusted for inflation, only to fall to $10 a barrel by the late 1990s.. . .EIA says by 2010 the amount of oil OPEC can pump should increase by 2 million barrels per day, largely driven by Saudi Read more:Barrel
Losing Our Balance? 2007-07-30 09:27:00 Interesting times, indeed. Oil (WTI) closed within one penny of the all-time record closing price of $77.03 last Friday. The markets seem shaken, and suddenly people are realizing that the recent explosion of derivatives may have created as much hidden rigidity as resiliency in our financial markets (as I wrote about here).Mexico continues to reveal how deep its problems run. After my article on Mexico Collapse sparked quite a conversation on this topic, the meme of Mexico collapse spread quickly (though I don't take credit for that--the situation speaks for itself). One little gem was PEMEX's announcement late Friday that they will probably be out of oil in seven years--out of oil, not just beginning to decline. Notice how this came out on Friday afternoon. This is when you issue a Read more:Balance
Mexico Collapse? 2007-07-12 09:35:00 My article on the Decline of the Mexican Nation-State is now up at The Oil Drum. This comes, as promised, as an update to my New Years prediction that 2007 would see the collapse of the Mexican economy. This article comes on the heels of a very significant--and largely ignored by the MSM--event: a string of rebel attacks on oil infrastructure in Mexico
. Significantly, these attacks shut down production at several "just-in-time" production facilities of major international companies such as Honda, Kellogg's, Hershey's, and Nissan. It is not yet clear whether this was the goal of a highly advanced, effects-based targeting plan by these guerrillas, or just luck on their part. However, as the effects from these shut-downs ripple through the logistics chains of these multinationals, the ultimat
Updates 2007-07-02 15:18:00 This summer has been unusually busy for me, but my work issues certainly haven't slowed the flow of oil-driven geopolitics. For just one recent example, see my recent article at The Oil Drum on the strike in Nigeria. Bottom line: news of a strike makes headlines, but the real news is still the inequality-driven infrastructure disruption. The fact that the Nigerian government caved to the unions (modest) demands has had no effect on this underlying problem.One other situation that I'm following closely, and that I hope to post on shortly, is Mexico. I made the (I thought) bold prediction that Mexico may collapse into a failed state in 2007 at the beginning of this year. Lots of interesting events related to Mexico lately: classic "export-land" declines in their oil sector; mass deser
Geopolitical Vocabulary: Cabinda 2007-05-12 15:03:00 Energy Intelligence Note: 12 May, 2007A recent trend at Energy Intelligence has been assessing the geopolitical impacts of Peak Oil. While it is easy to discern these impacts today in places like Nigeria and Iraq, it may not be long before we must add a new term to our collective geopolitical vocabulary: Cabinda.Cabinda is a small ethnic exclave of Angola. It is where most of Angola's oil is produced, and where most of Angola's future production increases will come from. It is also the only Angolan province with an active insurgency and independence movement. In my opinion, Cabinda--and Angola's oil production along with it--may be the next geopolitical casualty of Peak Oil. There haven't been any attacks on the oil infrastructure yet (unless Thursday's "suspicious fire" at a Total Read more:Geopolitical
, Vocabulary
Gas Prices & Demand Destruction 2008-03-12 16:25:00 Let's talk about oil.Provided that there continues to be enough to talk about, this may become a regular Wednesday feature. And with oil hitting $110/barrel today, there should be a lot to talk about.Just one quick point of discussion for today: gas prices.I paid $3.09 this morning (Denver area). How much does $110/barrel work out to? Well, there are 42 gallons in a barrel. It can't all be refined into gasoline, but that's still a good divisor because the other products produced in addition to gasoline have value as well, roughly the same as gasoline when taken as a whole. So $110/42 is $2.62/gallon. Add in roughly $1 for refining margin, distribution, retail markup, and you get gas at $3.62/gallon. Using the same math, oil at $200/barrel works out to $5.76/gallon, and oil at $300 Read more:Prices
, Destruction
, Gas Prices
The Problem of Growth 2008-03-10 09:34:00 The fifth and final essay in "The Problem
of Growth
" is published (see links to all five essays below). This summary post is intended to place the series within the context of the problem it addresses, and will serve as an introduction to those who are getting to the party a bit late:"The Problem of Growth" addresses what I see as the critical problem facing humanity: the structure of our civilization, its inherent need to grow (and therefore its unsustainability), and how we can fix the problem realistically. My proposed solution is, by definition, quite radical, because it rejects the prevalent problem-solving mechanism of modern technology: that we can use technology to continually mitigate the symptoms, rather than take the difficult (but, as I will argue, necessary) step of actual
Implementing Rhizome at the Community Level 2008-03-10 01:11:00 This final essay in this five-part series, The Problem of Growth, looks at implementing rhizome at a community level. Rhizome does not reject community structures in favor of a “bunker mentality,” but rather requires community structures that embrace and facilitate the principles of rhizome at both the personal and community level. Ultimately a rhizome community is composed of rhizome individual or family nodes—participants who do not depend on the community for their basic survival, nor participants who expect to benefit from the community without contribution. Rather, both the individual and the community choose to participate with each other as equals in a non-zero-sum fashion. The results-based focus of the community is essentially the same as the individual, because the co
The New Colonialists? 2008-03-17 02:24:00 My copy of The Economist arrived yesterday, with a headline proclaiming “The New Colonialists: A 14-Page Special Report on China’s Thirst for Resources.” The Economist’s argument that developing countries like China’s “no-strings attached” style of neo-colonialism is fundamentally flawed. In reality, what the Economist can only recognize as something akin to what was colonialism is actually driven by two related phenomena: a new mercantilism and the constitutional failure of “free-trade” ideology.A new mercantilism is gripping the globe, and it is not driven by China, but rather by the scarcity of the very resources that fuel economies like China. There is a critical difference between the Economist’s assertion that China’s resource ventures are “no-strings att
Food for Oil Program 2008-03-20 10:25:00 This would be pretty funny if it wasn't so likely to happen. Read more:Program
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