6 Minutes Past Mid-Night
My title is somewhat abstract so I will make things clearer here. The symobolism is as follows:
Midnight, in this case, is a metaphor for Peak of Oil production. From that point in time onwards the capitalist dream is in unknown territory because to justify lending money a bank needs to have confidence in the business plan or at least the ability of the borrower to pay back the loan with some interest. Given that peak oil affects every business in the developed world you can see that there will be head winds now preventing most new businesses in succeeding (with the obvious exception of oil exploration companies). Take for example the field of logistics, to be more precise the haulage of goods. If you are planning to move goods around a country your biggest expense after you have purchased trucks is fuel. In order to mitigate the high risk of rising fuel prices the businessman will need to allow for a rising price of the consumable product vital to the day- to-day operations. Instantly my business is uncompetitive because my rival operators will have already signed long term contracts with their customers meaning I will need to find new customers (none of which will want to pay me more than the market rate) or cut my profits to the bone and hope that the price of fuel drops. Knowing that the price of fuel is not going to drop significantly in the coming years the bank wont accept a low profit high risk strategy and they will say No Thanks and send the businessman on his way. The existing haulage companies will be able to honour their contracts in the short term but only by drawing on any surplus funds in their bank accounts or cutting staff wages and maintenance costs. To back this up the evidence is all around us but one particular sign of the times can be seen in the Chinese haulage industry where truck drivers have been protesting the lack of profit for the average operator. Public disorder like the protests this April is punishable in China so the situation must be serious style='language:EN-GB;mso-ansi-language:EN-GB'>
If bank lending seizes up what happens to the average person? We will see a rise in shares, probably not bonds as much as company shares. Not weak companies as they are at risk in this environment but those companies with a great deal of resilience and longevity. Expect to see shares in the oil producers, agricultural and pharmaceutical companies rise. There will be high inflation as the USA devalues the dollar by printing money and flirting with default. In turn expect to see a rise in the price of gold and silver. Finally we will continue to witness a shocking rise in the price of oil which translates into high fuel costs for you, the airlines and me.
Since 1970 the USA has been exerting influence around the world to ensure oil companies can get permits to explore for oil and gas in foreign countries. The USA has used its muscle and money to propel sympathetic leaders into positions of power, not always the position of President but into a central role somewhere within the government. This has not been a difficult relationship to understand when we look at the countries for whom oil is the biggest national product because America is an reliable market for that product. However, the people sympathetic to America are not always as fond of their own people and because the USA keeps those trusted leaders in power for so long the relationship between unelected official and the people he represents wears thin as the years pass by and the people see their leaders getting richer. Unfortunately, as the clock ticks on past peak oil time, the price of everything has begun to rise. This is being aided by the growth in demand from China, India and Brazil to name just few of the emerging economies. The poorest people in the world which includes low earners in Egypt, Libya and Nigeria are the worst affected and feelings of having been let down by their leaders are now boiling over. This is in turn putting more pressure on the price of oil because of the disruption to the supply from Libya but bear in mind Nigeria is the biggest producer in Africa supplying 2.2million barrels per day.
If you ever had any doubts that the war in Iraq was motivated, in part at least, by a desire to take control of the oil producing facilities of that country take a look at the current situation. There are currently three countries experiencing major unrest in Africa and the Middle East (Yemen, Syria and Libya) at the time of writing this yet NATO has only taken an interest in helping the rebels in Libya the one country out of the three producing a decent amount of oil.
Oil production by country to the nearest 100,000 barrels:-
There are protests in Iraq too where democracy has been achieved a great cost.
Below the references is a map showing the countries currently producing more than 100,000 barrels per day.
Noam Chomsky's paper Is the World too Big to Fail?
The Oil Age is Over - By Matt Savinar
The End Of Oil - By Paul Roberts
World Geography Blog - Special thanks to Ryan for the map
CIA World Factbook