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June 14, 2006

The Oil That Greases The Squeaky Wheel of Peak Oil
by Rob Kirby

Of the earth's 57.4 million square miles of land mass, roughly 20 million square miles [about one third] of this land mass is located in the southern hemisphere.

The World's Top Ten [Known] Oil Resources:

I've taken the liberty of adding the U.S. [former reserves], Mexico, Alaska and Norway [North Sea]:

World's Oil

The World's Gold Resources:

Now, if we take a look at the way that the world's gold production is distributed circa 1985, 1995 & 2004:

Now let's take a look at where the world's significant gold reserves happen to be located on the world map along side the world's oil reserves [here, I've taken the liberty of including Mexico - historically known as a gold producing nation]:

World's Oil and World's Gold

Note how the geographic distribution of the world's gold is "relatively dispersed" while the world's oil seems to be exclusively located in the northern hemisphere unless one seriously considers the known reserves of such small players as Ecuador or Bolivia, where it has been duly noted,

"..where there is oil there is an excess of politics. Currently Bolivia's oil is controlled by foreign powers and revenues pour out of the country."

Strange eh?

Stranger yet, or perhaps not, when one stops and looks at the CIA's assessment of the "resource potential" in the Pacific Ocean [which occupies a huge swath of the total area of the southern hemisphere] - they list it as being naturally endowed in the following:

"oil and gas fields, poly-metallic nodules, sand and gravel aggregates, placer deposits, fish."

From this, should one expect to see at least one globally significant identifiable oil resource located somewhere in the southern hemisphere?

The blue dots -representing gold - in the southern hemisphere on the map above certainly attest to the widely dispersed presence of "poly-metallic nodules" [ie. precious metals]. It's a well known fact that more than 40,000 tons of gold have been mined from South Africa alone [representing roughly one third of all gold ever mined in the world]. Oil must be different?

Now, it's been long held that hydro carbons are formed within the crust of the earth. Scientists think that the bodies of prehistoric sea animals and plants became trapped in sediments. After millions of years, heat and pressure changed them into crude oil and natural gas. Crude oil and natural gas are usually found together in the crust of the earth.

Perhaps plants and prehistoric sea animals and the like did not live in the southern hemisphere?

So, it would appear that an investigation of exactly where these prehistoric sea animals and plants were situated is now in order. As a proxy for pre-historic life form, let's consider for a moment when the dinosaurs lived:

Dinosaurs lived throughout the Mesozoic Era, which began 245 million years ago and lasted for 180 million years. It is sometimes called the Age of the Reptiles. The era is divided into three periods.

TRIASSIC

245 to 208 million years ago

• During the Triassic period, all land on Earth existed as one enormous mass. It was called Pangaea. The super-continent slowly began to break up during the Triassic Period.
• Some reptiles, frogs, turtles and crocodiles existed earlier, but dinosaurs didn't appear until late in the Triassic period.
• The period marked the rise of small, lightly built dinosaurs.
• The first mammals evolved during the Triassic period.
• Most of the plants that existed were evergreens.
• The period ended with a mass extinction that wiped out most animals and reptiles. An entire order of plants or animals dies out in a mass extinction. The dinosaurs that survived flourished in the next period, the Jurassic.

Pangaea

So clearly, fossil evidence supports the contention that prehistoric life did exist in at least Africa and South America - and I'm going to go out on a limb and bet it did too in Australia.

Now, if you've read this far - are you too beginning to ask questions like; why is the worlds gold relatively evenly geographically distributed while the world's oil is empirically only found above the equator - or viewing planet earth as a ball - "exclusively in the top half of the ball"? What would you suppose the real odds are of this occurring? What if we "flip" the word like this?

Where is all the oil now? Does this look natural? Seem plausible?

Twilight In the Desert or Dawn In the Southern Hemisphere?

The empirical realities outlined above have given me cause to view things differently. The notion that the world's southern hemisphere contains "virtually no oil" is, in my mind, implausible if not impossible. At the same time, I have no doubt and do not deny that known oil reserves in the northern hemisphere are factually depleting. The real question becomes this; Why are NEW RESERVES that undoubtedly exist, not being tapped in the southern hemisphere? Better yet, would anyone be surprised if the answer to this perplexing question involved money - perhaps even the very foundation of FIAT money. Remember folks, gold has been around for approximately 6,000 years - oil for only the past 100. Let me explain.

As I have often stated in papers I've written, INFLATION IS INDEED THE LIFEBLOOD OF ANY FIAT MONEY SYSTEM. Understanding the true meaning of this statement is vital and key to understanding so much of what we empirically experience in day to day life.

In a nutshell, in a fiat money system all "new money" is loaned into existence. Therefore, a continuously expanding monetary base is, in fact, REQUIRED to service the accumulating debt.

I've written about this before:

MZM Exponential Growth vs. Fed Funds Rate

The light blue vertical lines are just to point out the relationship between rates and MZM...

Rates rise and MZM contracts...Rates are lowered and MZM expands...

Debt backed by debt fractional reserve banking, to be sustained from this point means that MZM growth must grow faster and faster exponentially like it has been since the early 60's...

Can rates be dropped past zero faster and faster exponentially faster and faster?

The answer is NO...that is impossible...

But to sustain the current reality MZM must begin moving straight up...forever...

1776 to 1991 MZM growth 2 Trillion in 215 years
1991 to 2000 MZM growth 2 Trillion in 9 years
2000 to 2003 MZM growth 2 Trillion in 3 years

So from now until the end of 2004 MZM must grow by 2 Trillion and after that it must grow by 2 Trillion in 3 months then 1 month then 1 week then 3 days then 1 day then 8 hours then 2 hours then less than an hour and so on and so forth until we are down to nanoseconds and beyond...

Or the System will collapse...the end

While interest rates have empirically risen at the short end of the curve [in the face of impossible-to-cloak rising inflation] - the liquidity pump [via repos, monetization of the debt etc.] has only accelerated. The upward sloping MZM line in the graph above IS THE CRITICAL COMPONENT. Let's review how this manifests itself in the real world:

We experienced a miraculous "Technology Boom" in the late 1990's. Higher equity prices, the associated leverage and multiple expansions served as life blood embellishing the monetary base.

The Fed recently discontinued its reporting of M3 money supply aggregates. This lends support as to why the Fed and its partners [The Bank of England et al] are printing their own fiat currencies to enable them to buy ever increasing amounts of U.S. debt. New money [debt] MUST CONSTANTLY BE CREATED OR THE CURRENT DOLLAR CENTRIC MONETARY SYSTEM FAILS.

This also answers another one of the world's most perplexing conundrums; namely, why Western capital was deployed to "seed" the great industrialization miracle now underway in China. What has occurred in China has resulted from money expansion [debt] in the West - which was exported from the U.S. so as to neutralize its deleterious inflationary effects in the domestic market. It worked for a while too.

But alas, the money supply - as outlined above - still requires additional near-geometric growth - so oil prices were "SELECTED" to rise, because oil transactions settle in U.S dollars, thus DEFACTO increasing or heavily priming the monetary base for still more growth. You see folks; the story that we are imminently going to run out of arguably finite fossil fuels is just a backdrop against which the monetary base is expanded. The story is as believable as the notion that two aircraft brought down the World Trade Centre in that you can readily find "experts" that would swear both are impossibilities.

To achieve the intended end - armies have been deployed [justification for yet more debt creation] to oil producing regions to inject a risk premium to existing oil stocks. Consider the money that would not be spent if armies stayed home or if new reserves of oil were being "DISCOVERED OR BROUGHT ON LINE" all over the world? Not only would military deployments and the associated spending on the military industrial complex cease - oil prices would not rise - in fact, they might decline. This is why we've been given the hard sell of "Peak Oil" - that the world's oil supplies are 'running out'. This assertion is so believable because it has 'strands of truth' to it but has been artfully deployed as cover since traditional "known" supplies - namely oil located in the northern hemisphere - are indeed running out.

The suggestion that oil resources located in the southern hemisphere would actually be withheld from the market by "BIG OIL" would, of course, necessarily suggest a conspiracy or partnership between big business and big government.

There are precedents, however, for exactly this type of working relationship.

Is it a coincidence that chief Peak Oil proponent/point-man, Matthew Simmons is a member of the Council On Foreign Relations [CFR]? Is it also a coincidence that the mantra of the CFR has long been One-World Government?

The notion that multinational oil companies [largely Anglo American] would be compelled to bring new petroleum resources on line due to high oil prices and profits holds as much weight as the manner in which J.P. Morgan, Goldman Sachs et al sell precious metal. They do so by backing-up-the-truck [especially in thin markets], selling increasing tonnage of gold [to insatiable buyers like China, Russia, Iran etc.] in a market that has been rising for 7 years. More often than not, these sales are conducted in a manner which is completely inconsistent with maximizing profit?

Not to be outdone, Western Central Banks pre announce gold sales and even go as far as making public pronouncements that they "might sell gold"? The effect of this publicity serves to "mark down" the value of their existing [sovereign?] vaulted stocks. How much clearer can it get that some players/participants in the game of geopolitical financial affairs are not playing for profit as we know it [ie. maximizing revenue]?

The painful side effects of what is occurring right under everyone's noses has been economic dislocations and asset bubbles, punishment of prudent behavior [saving] and the deteriorating purchasing power of the currency unit we all refer to as the DOLLAR. Tell tales that this is all occurring has historically been signified by a rising gold price. This is why the price of gold has been so vehemently suppressed.

Masking these ill effects has also required the sheer explosion and exponential growth of derivatives - in the realm of the unregulated - at the behest of the Fed. With institutions such as J.P. Morgan Chase now sporting an UTTERLY OBSCENE derivatives book in excess of 48 trillion in notional value [pg. 20 of 27], it begs the question; where does it all end?

One only need examine material already written and published [circa 1976] to ascertain the direct linear relationship between the Fed, The Bank of England and J.P. Morgan Chase to get a "sniff" or a sense of the scope of the complicity between these players:

"Chart 1 reveals the linear connection between the Rothschilds and the Bank of England, and the London banking houses which ultimately control the Federal Reserve Banks through their stockholdings of bank stock and their subsidiary firms in New York. The two principal Rothschild representatives in New York, J. P. Morgan Co., and Kuhn, Loeb & Co. were the firms which set up the Jekyll Island Conference at which the Federal Reserve Act was drafted, who directed the subsequent successful campaign to have the plan enacted into law by Congress, and who purchased the controlling amounts of stock in the Federal Reserve Bank of New York in 1914. These firms had their principal officers appointed to the Federal Reserve Board of Governors and the Federal Advisory Council in 1914......"

Let's not forget that as a public company, if [any of?] J.P. Morgan Chase's lines of business are determined to be in the "National Interest"

"The President just delegated authority to John Negroponte that allows him to exempt any publicly traded corporation that is working on national defense issues or national security issues from the reporting and accounting requirements under the 1934 Securities and Exchange Act. It's basically the rules and regulations that require companies to keep accurate records, accurate books, accurate accounting . . . and then disclose those projects and that information to investors......"

We've been 'strung' the hollow line that this colossus provides necessary "flexibility". Better stated, it provides a huge black curtain, behind which the biggest financial fraud ever perpetrated on mankind is being plied. Behind this black curtain, strategic commodities like oil, gas and precious metals are manipulated through the use of futures and options and an interest rate swap edifice has been concocted which serves to hold interest rates and the bond market in check.

Make no mistake; everything mentioned above only underscores how utterly toxic ANY PETRO TRADE in any currency other than dollars is to the existing world U.S. dollar centric monetary order.

History is replete with examples of how all pure fiat money systems succumb to hyperinflationary induced failure. Make no mistake; this is the Dollar's fate.

Rob Kirby
Kirby Analytics

Copyright © 2004 - 2006 Rob Kirby

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