Bite Size Bad News 3--Oil

The benchmark price of crude oil, which was well below $70 a barrel a year ago, is now flirting with $120.

Think it’s a speculative bubble? Check out the announcement by Petrobras that it has discovered two large new offshore oil fields it hopes will make Brazil one of the world’s largest oil exporters.

There are only few problems, starting with the fact that new technology will have to be developed to deal with a couple of small technical difficulties:

• Much of the oil is 32,000 feet below the ocean’s surface (the world’s current deepest well is about 9,000 feet).
• That means pressures of 18,000 pounds per square inch, enough to crush a pickup truck into an unrecognizable hunk of scrap.
  
• And temperatures of 500 degrees Fahrenheit, hot enough to melt some metals traditionally used in energy production.
• Oh, yeah, layers of salt on top of the oil, a mile or more thick, absorb seismic waves and make pinpointing where to drill much harder than usual.

Get the feeling that if Brazil does get this oil out, it won’t be cheap?

That doesn’t mean that prices will never fall from current levels, especially as the incipient global recession deepens. But upward pressures are growing too—the effort to slow the growth of petroleum consumption in the US, Europe and Brazil by mixing in agricultural ethanol into gas and diesel have been the largest contributing factor in the sudden appearance of an international food crisis, characterized by shortages and spiking prices of staple grains. That looks more like a whipsaw than twin bubbles to me.

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Two Red Blogs, Revived!

A big fat FotM "Welcome back!" to two revered figures from the Red blogosphere. In truth, it's not that they were absent, exactly, but behind the scenes in other guises, working on other projects.

So hit that bookmarks folder and links list, y'all and add these to your favorites:

HegemoniK--Daniel Tasripin joins the trend toward real names on the internet--with a new blog and a fetching photo to boot. Back in the old days (2006-7) he was thought to be Modern Pitung at All Out For The Fight (and in comment columns far and wide). Without asking Daniel, I suspect doing a lot of work for the new SDS via FaceBook over the last year or so made this a logical step.

And I have to say HegemoniK is Right On Time, as we used to say. Though the blog will doubtless be returning to its declared SDS focus, in the last week Daniel has been all over the Sean Bell verdict with a series of angry, pointed posts. Check 'em out!

celticfire--Celticfire was an early fixture on the scene and morphed around New Year's '07 into a site called Portland Maoist, which vanished not long thereafter. Well, he's back, celticfire again, at a new url with no fanfare whatsoever and only two new posts (along with worthy earlier material).

And I don't have to guess at the reason for the more subdued approach. Under the "About" heading he makes a telling point:

I believe blogging is only an expression of radical and revolutionary activism - it is not a replacement for genuine mass work.

Something I'd better try and keep in mind as well.

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James McMurtry Is On Fire

In January I posted a video of James McMurtry doing a great live version of his song "We Can't Make It Here." As anyone who's spent any time on this blog knows I generally prefer live versions of stuff (even lame ones taken with cell-phones) to lip-synching and music videos. But no way am I gonna to wait for somebody to slap up a decent live version of McMurtry's recently released "Cheney's Toy" to spread the word. The heart of the song is a critique of the idea of finding manhood by joining the US military.



You're the man
Show 'em what you're made of
You're no longer daddy's boy
You're the man
That they're all afraid of
But you're only Cheney's toy

It may not be as nuanced as, say, Stan Goff's critiques of gender and the military, but McMurtry's aim is sharp and he hits hard.

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Bite Size Bad News 2--Auto

[This is one in a projected series of short posts focused on one or another aspect of the economic situation and designed as a corrective to the "out of sight, out of mind" approach of the mainstream media to the deepening meltdown.]

The prospect of $4 a gallon gas, falling real incomes and the growing recession are obviously hitting the US auto industry hard. Other recent developments suggest things are going to get appreciably worse for Ford, GM et al, fast.

For one thing, the runup in commodity prices is sinking its teeth in. Netherlands-based AcelorMittal, the world's largest steel company, has announced a $250-a-ton "surcharge" on steel it has contracted to sell its US customers. Other steelmakers, hit hard by higher raw material and fuel prices, are expected to follow. The spot market price of steel is up 40-50% from last year. (Hot-rolled sheet steel now runs about $1000 per metric ton at spot, to give you a comparison point). Supplies have tightened further as countries like Egypt, China and Brazil cut exports to ensure their domestic supply. (Need I mention that Hugo Chávez is renationalizing Sidor, Venezuela's largest steelmaker?)

As the Wall Street Journal delicately puts it:

Until now, contract prices were nearly sacrosanct, and customers could count on paying that negotiated amount for the length of the contract. For most steelmakers, the majority of steel is sold under one-year or multiyear contracts.

The car companies are making noises about reducing the amount of steel in cars, but that's a long term project. Right now, with supplies so short, they have to suck up the surcharge and figure whether they can afford to eat it or have to try and pass it on to already cautious potential new car buyers.

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Bite Size Bad News 1--First Mortgages

[I've been reading the business press, including blogs, a lot lately. It's like watching a train wreck in slo-mo. That's where I got the oil strike story I posted yesterday. Since I lack both time and theoretical chops to write much in the way of long analyses of the unfolding economic crisis. I'm trying a new thing--occasional short pieces highlighting one or another tidbit that has caught my attention.]

The weekend edition of the Wall Street Journal provides one more reason the housing crisis isn't going anyplace soon. It's not just that the supply of houses for sale is up (to 2.3 million according to Bloomberg News), what with falling sales, foreclosures, overproduction of new units and rising fuel costs making the exurbs look much less attractive. The banks are acting snakebit:

Lenders are demanding higher credit scores, mandating private-mortgage insurance on many more loans, and requiring larger down payments. Fewer first-timers qualify for the house they want, or they're paying a larger monthly amount to own it.

In an interview with an 89-year-old financial historian (on the same page) we get a sense of what this exercise of caution on the part of banks and other mortgage lenders may really represent on a much larger scale:

When you think about how all of this will work out in the long run, we are going to have an extremely risk-averse economy for a long time. The lesson has painfully been learned. That's part of the problem going forward. You don't have a high-growth exit from this, as you've had from other kinds of crises. We won't have a powerful start, where the business cycle looks like a V. Here, the shape of the business cycle is like an L, where it goes down and doesn't turn up.

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