Monday, December 22, 2008

Published Nov 11 2008 by Energy Bulletin
Archived Nov 11 2008
The Five Stages of Collapse
by Dmitry Orlov

Hello, everyone! The talk you are about to hear is the result of a lengthy process on my part. My specialty is in thinking about and, unfortunately, predicting collapse. My method is based on comparison: I watched the Soviet Union collapse, and, since I am also familiar with the details of the situation in the United States, I can make comparisons between these two failed superpowers.

I was born and grew up in Russia, and I traveled back to Russia repeatedly between the late 80s and mid-90s. This allowed me to gain a solid understanding of the dynamics of the collapse process as it unfolded there. By the mid-90s it was quite clear to me that the US was headed in the same general direction. But I couldn't yet tell how long the process would take, so I sat back and watched.

I am an engineer, and so I naturally tended to look for physical explanations for this process, as opposed to economic, political, or cultural ones. It turns out that one could come up with a very good explanation for the Soviet collapse by following energy flows. What happened in the late 80s is that Russian oil production hit an all-time peak. This coincided with new oil provinces coming on stream in the West - the North Sea in the UK and Norway, and Prudhoe Bay in Alaska - and this suddenly made oil very cheap on the world markets. Soviet revenues plummeted, but their appetite for imported goods remained unchanged, and so they sank deeper and deeper into debt. What doomed them in the end was not even so much the level of debt, but their inability to take on further debt even faster. Once international lenders balked at making further loans, it was game over.

What is happening to the United States now is broadly similar, with certain polarities reversed. The US is an oil importer, burning up 25% of the world's production, and importing over two-thirds of that. Back in mid-90s, when I first started trying to guess the timing of the US collapse, the arrival of the global peak in oil production was scheduled for around the turn of the century. It turned out that the estimate was off by almost a decade, but that is actually fairly accurate as far as such big predictions go. So here it is the high price of oil that is putting the brakes on further debt expansion. As higher oil prices trigger a recession, the economy starts shrinking, and a shrinking economy cannot sustain an ever-expanding level of debt. At some point the ability to finance oil imports will be lost, and that will be the tipping point, after which nothing will ever be the same.

This is not to say that I am a believer in some sort of energy determinism. If the US were to cut its energy consumption by an order of magnitude, it would still be consuming a staggeringly huge amount, but an energy crisis would be averted. But then this country, as we are used to thinking of it, would no longer exist. Oil is what powers this economy. In turn, it is this oil-based economy that makes it possible to maintain and expand an extravagant level of debt. So, a drastic cut in oil consumption would cause a financial collapse (as opposed to the other way around). A few more stages of collapse would follow, which we will discuss next. So, you could see this outlandish appetite for imported oil as a cultural failing, but it is not one that can be undone without causing a great deal of damage. If you like, you can call it "ontological determinism": it has to be what it is, until it is no more.

I don't mean to imply that every part of the country will suddenly undergo a spontaneous existence failure, reverting to an uninhabited wilderness. I agree with John-Michael Greer that the myth of the Apocalypse is not the least bit helpful in coming to terms with the situation. The Soviet experience is very helpful here, because it shows us not only that life goes on, but exactly how it goes on. But I am quite certain that no amount of cultural transformation will help us save various key aspects of this culture: car society, suburban living, big box stores, corporate-run government, global empire, or runaway finance.

On the other hand, I am quite convinced that nothing short of a profound cultural transformation will allow any significant number of us to keep roofs over our heads, and food on our tables. I also believe that the sooner we start letting go of our maladaptive cultural baggage, the more of a chance we will stand. A few years ago, my attitude was to just keep watching events unfold, and keep this collapse thing as some sort of macabre hobby. But the course of events is certainly speeding up, and now my feeling is that the worst we can do is pretend that everything will be fine and simply run out the clock on our current living arrangement, with nothing to replace it once it all starts shutting down.

Now, getting back to my own personal progress in working through these questions, in 2005 I wrote an article called "Post-Soviet Lessons for a Post-American Century". Initially, I wanted to publish it on a web site run by Dale Alan Pfeiffer, but, to my surprise, it ended up on From The Wilderness, a much more popular site run by Michael Ruppert, and, to my further astonishment, Mike even paid me for it.

And ever since then, I've been asked the same question, repeatedly: "When? When is the collapse going to occur?" Being a little bit clever, I always decline to give a specific answer, because, you see, as soon as you get one specific prediction wrong, there goes your entire reputation. One reasonable way of thinking about the timing is to say that collapse can occur at different times for different people. You may never quite know that collapse has happened, but you will know that it has happened to you personally, or to your family, or to your town. The big picture may not come together until much later, thanks to the efforts of historians. Individually, we may never know what hit us, and, as a group, we may never agree on any one answer. Look at the collapse of the USSR: some people are still arguing over why exactly it happened.

But sometimes the picture is clearer than we would like. In January of 2008, I published an article on "The Five Stages of Collapse," in which I defined the five stages, and then bravely stated that we are in the midst of a financial collapse. And ten months later it doesn't seem that I went too far out on a limb this time. If the US government has to lend banks over 200 billion dollars a day just to keep the whole system from imploding, then the term "crisis" probably doesn't do justice to the situation. To keep this game going, the US government has to be able to sell the debt it is taking on, and what do you think the chances are that the world at large will be snapping up trillions of dollars of new debt, knowing that it is being used to prop up a shrinking economy? And if the debt can't be sold, then it has to be monetized, by printing money. And that will trigger hyperinflation. So, let's not quibble, and let us call what's happening what it looks like: "financial collapse".

So here are the five stages as I defined them almost a year ago. The little check-mark next to "financial collapse" is there to remind us that we are not here to quibble or equivocate, because Stage 1 is pretty far along. Stages 2 and 3 - commercial and political collapse, are driven by financial collapse, and will overlap each other. Right now, it is unclear which one is farther along. On the one hand, there are signs that global shipping is grinding to a halt, and that big box retailers are in for a very bad time, with many stores likely to close following a disastrous Christmas season. On the other hand, states are already experiencing massive budget shortfalls, laying off state workers, cutting back on programs, and are starting to beg the federal government for bail-out money.

Even though the various stages of collapse drive each other in a variety of ways, I think that it makes sense to keep them apart conceptually. This is because their effects on our daily life are quite different. Whatever constructive ways we may find of dodging these effects are also going to be different. Lastly, some stages of collapse seem unavoidable, while others may be avoided if we put up enough of a fight.

Financial collapse seems to be particularly painful if you happen to have a lot of money. On the other hand, I run across people all the time, who feel that "Nothing's happened yet." These are mostly younger, relatively successful people, who have little or no savings, and still have good paying jobs, or unemployment insurance that hasn't run out yet. Their daily lives aren't much affected by the turmoil on the financial markets, and they don't believe that anything different is happening beyond the usual economic ups and downs.

Commercial collapse is much more obvious, and observing it doesn't entail opening envelopes and examining columns of figures. It is painful to most people, and life-threatening to some. When store shelves are stripped bare of necessities and remain that way for weeks at a time, panic sets in. In most places, this requires some sort of emergency response, to make sure that people are not deprived of food, shelter, medicine, and that some measure of security and public order is maintained. People who know what's coming can prepare to sit out the worst of it.

Political collapse is more painful yet, because it is directly life-threatening to many people. The breakdown of public order would be particularly dangerous in the US, because of the large number of social problems that have been swept under the carpet over the years. Americans, more than most other people, need to be defended from each other at all times. I think that I would prefer martial law over complete and utter mayhem and lawlessness, though I admit that both are very poor choices.

Social and cultural collapse seem to have already occurred in many parts of the country to a large extent. What social activity remains seems to be anchored to transitory activities like work, shopping, and sports. Religion is perhaps the largest exception, and many communities are organized around churches. But in places where society and culture remain intact, I believe that social and cultural collapse is avoidable, and that this is where we must really dig in our heels. Also, I think it is very important that we learn to see our surroundings for what they have become. In many places, it feels as if there just isn't that much left that's worth trying to save. If all the culture we see is commercial culture, and all the society we see is consumer society, then the best we can do is walk away from it, and look for other people who are ready to do the same.

There is nothing particularly deep or magical about the five stages I chose, except that they seem convenient. They correspond to the commonly distinguished aspects of everyday reality. Each stage of collapse also corresponds to a certain set of beliefs in the status quo, that is about to go by the wayside.

It is always an impressive thing to observe when reality shifts. One moment, a certain idea is seen as preposterous, and the next moment it's being treated as conventional wisdom. There seems to be a psychological mechanism involved, where nobody wants to be seen as the last fool to finally get the picture. Everybody starts pretending that they've thought that way all along, or at least for a little while, for fear of appearing foolish. It is always awkward to ask people what caused them to suddenly change their minds, because with the fear of looking foolish comes a certain loss of dignity.

The most compelling example of lots of minds suddenly going "snap" is, to my mind, the sudden demise of the USSR. It happened with Boris Yeltsin standing atop a tank, and being asked the question: "But what will become of the Soviet Union?" And his answer, pronounced with maximum gravitas was: "Henceforth I shall only refer to it as the FORMER Soviet Union." And that was that. After that, whoever still believed in the Soviet Union appeared as not just foolish, but actually crazy. For a while, there were a lot of crazy old people parading around with portraits of Lenin and Stalin. Their minds were too old to go "snap".

Here in the US, we are yet to experience any of the really major, earth-shattering realizations, the ones that look preposterous immediately before and completely obvious immediately after they occur. We have had minor tremors, mostly relating to financial assumptions. Is real estate a good investment. Will private retirement allow you to retire? Will the government bail us all out? All the major realizations are yet to come, or, as my die-hard Yuppie friends keep telling me, "Nothing's happened yet."

But by the time something does happen, it will have been too late for us to start planning for it happening. It doesn't seem all that worthwhile for us to sit around waiting for the happy event of everybody else feeling foolish all at the same time. Arrogant though that may seem, we may be better off accepting their foolishness before they do, and keeping a safe distance ahead of the prevailing opinion.

Because if we do that, we may yet succeed in finding ways to cope. We may learn to dodge financial collapse by learning to live without needing much money. We may create alternative living arrangements and informal production and distribution networks for all the necessities before commercial collapse occurs. We may organize into self-governing communities that can provide for their own security during political collapse. And all of these steps put together may put us in a position to safeguard society and culture.

Or we can just wait until everyone starts agreeing with us, because we wouldn't want them to look foolish.

The important dynamic, when it comes to financial collapse, is obvious by now. It's the collapse of credit pyramids, "the whole house of cards" as President Bush put it. The technical term is "deleveraging," and the response is the bailout. The federal government will be bailing out the banks and the insurance companies, the auto companies, and state governments. Call it the bail-out treadmill: we are borrowing faster and faster just to keep from falling down. The treadmill is actually a good metaphor. Imagine what would happen if you went to a gym, got on a treadmill machine, and just kept punching up the speed, as high as it will go. What happens is you trip and fall, and find yourself flying backwards.

It is instructive to ask the question, Who are we borrowing this bail-out money from? People will tell you that we are borrowing it from "the taxpayer." But it's not as if federal tax receipts have automatically shot up by a few trillion over the past couple of months, and so this begs the question, Who is "the taxpayer" going to borrow this money from in the meantime? From other Americans? No, because our savings rate has been abysmally low for quite some time now, and what little we have saved is in housing equity, which is dwindling, and in stocks and bonds, through mutual funds and 401ks and such, which are down by a third or so. The value of these investments is crashing, and if we dumped these investments to raise the cash to fund this new debt, that would just make them crash even faster. In effect, we'd only be moving money from one pocket to another. So, really, the bailouts have to be financed by foreigners. And what if these foreigners decide not to trust us with any more of their savings? Then our only recourse is to "monetize" the debt: to print money.

And so the next question is, how much money would we have to print? The purpose of the bailouts is to provide liquidity to insolvent companies, to avoid deleveraging. To understand what that means, we have to understand that for every actual dollar within the economy, in the sense of it not being borrowed, there are over 13 dollars of borrowed money, which only exists while the debt can be rolled over. If our credit is maxed out while the economy is growing, that's bad enough, but the US economy is shrinking because of the recent oil shock. A smaller economy cannot carry as much debt, and this is part of the reason why we have deleveraging. Once the process of debt going sour gets started, it is hard to stop, and if deleveraging were to run its course, we would be down over 1300%. To monetize that much debt would require over 1300% inflation. And once that gets started, it becomes very hard to stop.

And, that, believe it or not, is actually the good news. Because most of our debt is denominated in our own currency - the US dollar - the US will not have to declare sovereign default, like Russia was forced to do in the 1990s. Instead, we can inflate our way out of national bankruptcy, by printing a lot of dollars. We will repay our national debt, but we will do so in worthless paper money, bankrupting our international creditors in the process. There is sure to be plenty of pain for everyone, especially everyone who is used to having plenty of money, because their money will no longer make the world go around. Once the US has to start earning foreign currency in order to pay for imports, you can be sure that imports will become quite scarce.

Here are before and after snapshots of the most salient characteristics of financial collapse, as they will affect the vast majority of the population. Here, I am assuming that commercial and political collapse are slower in arriving, and that government is still there to step in with emergency aid of various sorts, and that a market economy of some sort continues to function. It could come down to everyone walking around with their little food stamps debit cards, and the only place they can use them that's within walking distance is McDonalds, but I am assuming some semi-stable period during which other adjustments can occur before other stages run their course.

The adjustments would have to do with major aspects of the living arrangement, from where we live to how we grow food to how we relate to each other. With money scarce and not particularly potent, other ways of winning the cooperation of others would need to be evolved in a hurry. The financial realm can be seen as a complex system of fences: your bank account is fenced off from my bank account. This arrangement allows you and me to not worry too much about each other, provided each of us has enough to live on. Though this is largely a fiction, we can fancy ourselves to be independent economic players on a level playing field. But once these conceptual fences become irrelevant, because there is nothing behind them, we become each others' burden, in an immediate sort of way, that would come as a shock to most people. The indignity of such physical interdependence would be psychologically devastating to many people, raising the human toll from financial collapse beyond what you'd expect from a problem that really only exists on paper. This is going to be particularly hard for a nation brought up on the myth of rugged individualism.

Commercial collapse, when it arrives, will again cause much more of a psychological crack-up than you'd expect from a purely organizational problem. The quantities of immediately available goods and services right before and right after the collapse would remain about the same, but because market psychology is so ingrained in the population, no other ways of coping would be considered. Hoarding would become widespread, with looting as the obvious antidote. There would be an instant, huge black market for all sorts of necessities, from shampoo to vials of insulin.

The market mechanism works well in some cases, but it doesn't work at all when key commodities become scarce. It leads to profiteering, hoarding, looting, and other pernicious effects. There is usually a knee-jerk reaction to regulate the markets, by imposing price controls, or by introducing rationing. I found it quite funny that the recent clamoring for re-regulating the financial markets was greeted with cries of "Socialists!" Failing at capitalism doesn't make you a socialist, any more than getting a divorce automatically make you gay.

If by the time commercial collapse is upon us, there is still enough of the political system left intact to implement rationing and price controls and emergency distribution schemes, then we should count these among our blessings. Such heavy-handed governance is certainly not a crowd-pleaser during times of plenty, when it's also unnecessary, but it can be quite a life-saver during times of scarcity. The Soviet food distribution system, which was plagued with chronic underperformance during normal times, proved to be paradoxically resilient during collapse, allowing people to survive the transition.

If prior to commercial collapse the challenge is finding enough money to afford the necessities, afterward the challenge is getting people to accept money as payment for these same necessities. Many of the would-be sellers will prefer to be paid in something more valuable than mere cash. Customer service comes to mean that customers must provide a service. Given that most people won't have much to offer, other than their now worthless money, should they still have any, most purveyors of goods and services decide to take a holiday.

With the disappearance of the free and open market, even the items that still are available for sale come to be offered in a way that is neither free nor open, but only at certain times and to certain people. Whatever wealth still exists is hidden, because flaunting it or exposing it just increases the security risk, and the amount of effort required to guard it.

In an economy where the vast majority of manufactured items is imported, and designed with planned obsolescence in mind, it will be difficult to keep things running as imports dry up, especially imports of spare parts for foreign-made machinery. The pool of available equipment will shrink over time, as more and more pieces of equipment become used as "organ donors." In an effort to keep things running, entire cottage industries devoted to refurbishing old stuff might suddenly come together.

It is sometimes hard to discern political collapse, because politicians tend to be quite good at maintaining the pretense of power and authority even as it dwindles. But there are some telltale signs of political collapse. One is when politicians start moonlighting because their day job is no longer sufficiently gainful. Another is when regional politicians start to openly defy orders from the political center. Russia experienced plenty of each of these symptoms.

One thing that makes political collapse particularly hard to spot is that the worse things get, the more noise the politicians emit. The substance to noise ratio in political discourse is pretty low even in good times, making it hard to spot the transition when it actually drops to zero. The variable that's easier to monitor is the level of political embarrassment. For instance, when Mr. Nazdratenko, the governor of the far-east Russian region of Primorye, stole large amounts of coal, made strides in the direction of establishing an independent foreign policy toward China, and yet Moscow could do nothing to reign him in, you could be sure that Russia's political system was pretty much defunct.

Another telltale sign of political collapse is actual disintegration, where regions declare independence. In Russia, that was the case with Chechnya, and it led to a prolonged bloody conflict. Here, we might have a "Reconquista" where former Mexican territories become ever more Mexican, the South might rise again. New England, California, and the Pacific Northwest might decide to go their separate ways. Once the interstate highway system is no longer viable and the remaining domestic airlines are extinct, there is not much to keep the two coasts together. What once united the country was the construction of the continental railroad, but railroads have been too neglected to hold it together now. A country consisting of two halves tied together via Panama Canal is de facto at least two countries.

Yet another thing to watch for is foreign incursions into domestic politics. When foreign political consultants start stage-managing elections, as happened with Yeltsin's reelection campaign, you can be sure that the country is no longer in charge of its own political system. In the US, there is a gradual surrender of sovereignty, as sovereign wealth funds buy up more and more US assets. That sort of thing used to be considered akin to an act of war, but these are desperate times, and they are allowed to do so without so much as a nasty comment. Eventually, they may start making political demands, to extract the most value out of their investments. For instance, they could start vetting candidates for public office, to make sure that we remain friendly to their interests.

Lastly, the power vacuum created by the collapse of legitimate authority tends to be more or less automatically filled by criminal syndicates. These often try to commandeer the political establishment by getting their heads elected or appointed to political offices. Examples include Russian oligarchs, such as Boris Berezovsky, who got himself elected to Duma, the Russian parliament, and Mikhail Khodorkovsky, who thought he could use his oil wealth to buy his way into the political establishment. Luckily for Russia, Berezovsky is in exile in England, and Khodorkovsky is in jail.

A great many people in the US insist that they do not need government help, and that they would do just fine if only the government would leave them alone. But this is really just a pose; there is a great deal that that government does to make their lives possible. In the United States, the federal government keeps many people alive through programs such as Medicaid, Social Security, and food stamps. Local governments provide for trash removal and water and sewer line maintenance, road and bridge repair, and so on. Police departments try to defend people from each other.

When all of that starts to unravel, it is likely to do so from the bottom, not from the top. Local officials are more accessible than remote Washington bureaucrats, and so they will be the first to be overwhelmed by the anger and confusion of their constituents, while Washington remains unresponsive. One likely exception may have to do with the use of federal troops. It seems almost a given that troops repatriated from the more than 1000 foreign military bases will see action right here at home. They will be reassigned to domestic peacekeeping duties.

Aside from the big government programs, there is little available in the US to help those in need. Again, Americans make a big show of their philanthropy, but, compared to other developed countries, they are in fact quite stingy when it comes to helping those in need. There is even a streak of political sadism, which, for example, shows up in people's attitudes toward welfare recipients. This sadism can be seen in the so-called welfare reform, which has forced single mothers to work jobs that barely cover the cost of daycare, which is often substandard.

Aside from the government, there are charities, many of which are church-based, and so they have the ulterior motive of recruiting people to their cause. But even when a charity does not make any specific demands, its real purpose is to reinforce the superiority of those who are charitable, at the expense of those who are the recipients. There is a flow of forced gratitude from the beneficiary to the benefactor. The greater the need, the more humiliating is the transaction to the beneficiary, and the more satisfying it is to the benefactor. There is no motivation for the benefactor to provide more charity in response to greater need, except in special circumstances, such as immediately following a natural disaster. Where the need is large, constant, and growing, we should expect charities to matter very little when it comes to satisfying it.

Since neither government largesse nor charity is likely to provide for those who cannot provide for themselves, we should look for other options. One promising direction is a revival of mutual help societies, which take membership contributions and then use them to help those in need. At least in theory, such organizations are vastly better than either government aid or charities. Those who are helped by them do not have to surrender their dignity, and can survive difficult times without being stigmatized.

To make it intact through times of great need, the only reasonable approach, it seems to me, is to form communities that are strong and cohesive enough to provide for the well-being of all of their members, that are large enough to be resourceful, yet small enough so that people can relate to each other directly, and to take direct responsibility for each other's well-being.

If this effort fails, then the outlook becomes dire indeed. I would like to emphasize, once again, that we must do all we can to avoid this stage of collapse. We can allow the financial system, and the commercial sector, and most of the government institutions to collapse, but not this.

What makes this particularly challenging is that the existence of finance and credit, of consumer society, and of government-imposed law and order has allowed society, in the sense of direct, mutual help and of freely accepting responsibility for each others' welfare, to atrophy. This process of social decay may be less advanced in groups that have survived recent adversity: immigrant and minority groups, or people who served together in the armed forces. The instincts that underlie this behavior are strong, and they are what helped us survive as a species, but they need to be reactivated in time to create groups that are cohesive enough to be viable.

Culture can mean a great many things to people, but what I mean here is a specific very important element of culture: how people relate to each other face to face. Take honesty, for instance: do people demand it of themselves and others, or do they feel that it is acceptable to lie to get what you want? Do they take pride in how much they have or in how much they can give? I took this list of virtues from Colin Turnbull, who wrote a book about a tribe in which most of these virtues were almost entirely missing. Turnbull's point was that these personal virtues are also all but destroyed in Western society, but that for the time being their absence is being masked by the impersonal institutions of finance, commerce, and government.

I believe that Turnbull has a point. Ours is a cold world, in which the citizens are theoretically expected to fend for themselves, but in reality can only survive thanks to the impersonal services of finance, commerce, and government. It only allows us to practice these warm virtues among family and friends. But that is a start, and from there we can expand this circle of warmth to encompass more and more of the people who matter to us and we to them.

In his amazing book about the legacy of European colonialism, Exterminate all the Brutes, Sven Lindqvist makes the stunning observation that violence renders one unrecognizable. The aggressor, whether active or passive, becomes a stranger.

The violence does not have to be physical. One subtle type of mental violence that abounds in our world is the act of refusing to acknowledge someone's existence. We may believe that it makes us safer to walk past people without making eye contact. That is certainly true if our look is blank and indifferent, and it is then better to avert one's gaze than to look, and in effect to say: "I do not recognize you." That definitely does not make you any safer. But if your look says "I see you, you are OK," or even "I recognize you," then the effect is quite the opposite. Dogs understand this principle perfectly well, and so should people.

When I was doing a radio tour to promote my book, a lot of the AM radio motor-mouths who interviewed me would sum up the interview with something like "So this is all doom and gloom, isn't it." And then I would have maybe 15 seconds for a rebuttal. So here is my standard 15 second rebuttal: "No, my message is actually quite hopeful. I want to let people know that they can find ways to lead happy, fulfilling lives even as this doomed system crumbles all around them." Here, I can give you a longer answer.

I believe that the financial pyramid scheme and globalized consumerism are done. But I think that having no government at all is not an option. Forget entitlements, forget military bases on foreign soil, forget the three-ring circus that passes for representative democracy here, but we will still need agencies to print passports, to control the nuclear stockpile, as well as many other mundane but essential services that only a central government can provide. For most other needs, local self-government may be the best we can do, but that may not be bad at all.

Commercial collapse need not be final. It is quite possible that a new economy will arise spontaneously, one without all the frills and the waste, but able to provide for most of the basic needs. In the places that are socially and culturally intact, this is almost inevitable, as people take charge and start doing what's necessary without waiting for official sanction.

As far as social and cultural collapse, as I already mentioned, to some extent they have already happened, but this is being masked, for the time being, by the availability of finance, commerce, and government. But they can be undone, not everywhere, of course, but in quite a few places, because the instincts are there, and a dire common predicament can be the catalyst that changes society, bringing it closer to the human norm.

Knowing what to expect can provide us with peace of mind, even in the midst of collapse. Wallowing in nostalgia over the good old days, or denying that sweeping changes are before us -- these responses are definitely unhealthy.

If we know what's coming, we can start ignoring the things that we will not be able to rely on. If we do enough of this, we may find ourselves in a different world, quite possibly a better one, rather quickly. Here is a personal example. Some years ago, I decided to give up the car, finding it quite impractical, and started bicycling instead. It wasn't that easy at first, but once I got used to it, a strange thing happened to my perception: I started seeing cars quite differently. On the way to work in the morning, I would ride along a stretch of highway, which was always packed with cars. When you are driver, you see it as normal, because you are part of this herd of mechanized insects. But what I saw was sheet metal boxes with people imprisoned inside them, strapped down to a chair inside a tiny padded cell, and most of these poor crazies were just pictures of misery: an angry, desperate, lonely mob, condemned to move about in circles. And then I would happily pedal away, through a park and around a pond, and leave that horrible, dying world behind.

And so it is with a great many things. We can wait until the lifestyle that is killing the planet and is making us crazy and sick is no longer physically possible, or we can opt out of it ahead of time. And what we replace it with can be difficult at first, but quite a lot better for us in the end.

So let us summarize our findings. Financial collapse is already quite far along, and is guaranteed to run its course. Bailouts can make insolvent institutions look solvent for a time by providing liquidity, but one thing they cannot provide is solvency. For instance, no matter how much we bail out the auto companies, making any more cars will still be a bad idea. Similarly, no matter how much money we give to banks, their loan portfolios, loaded down with houses built in places that are inaccessible except by car, will still end up being worthless. By continuously nationalizing bad debt, the country will make itself into a bad credit risk, and foreign lenders will walk away. Hyperinflation and loss of imports will follow.

Commercial collapse is likewise guaranteed to happen. One key import is oil, and here the loss of imports will cause much of the economy to shut down, because in this country nothing moves without oil. But it should be possible to come up with new, far less energy-intensive ways to provide for the basic needs.

Political collapse is guaranteed as well. As tax receipts dwindle, municipalities and states will no longer be able to meet the minimal maintenance requirements for existing infrastructure: roads, bridges, water and sewer mains, and so forth. Municipal services, including police, fire departments, snow removal and garbage collection, will also be curtailed or eliminated. The better-organized communities may be able to find ways to compensate, but many communities will become impassable and uninhabitable, generating a flood of internal refugees.

Currently, the political class couldn't be farther from understanding what is about to happen. I listened in on one of the recent presidential debates (I don't have a television set, but I caught a chunk of it on NPR). It struck me that the two candidates spent most of the time arguing over ways of spending money that they don't have. For me, listening to them was a waste of time that I didn't have. I suspect that my book, would sell better if McCain got elected; nevertheless, I choose to remain selflessly apolitical. National politics is a distraction and a waste of time.

Actually, I should be gratified. A while ago I proposed a whimsical Collapse Party. The Collapse Party platform featured planks such as the freeing of prisoners to whittle down the prison population before a general amnesty becomes necessary due to lack of funds, a jubilee - forgiveness of all debts - to wipe the slate clean of all these bad loans, and a few others. Elsewhere, I proposed that it is a good idea to stop making new cars - just run down the ones we already have, and we'll run out of cars just as we run out of gas. I am happy to report that this has been banner year for the Collapse Party. Without fielding a single candidate, we managed to push through much of our agenda: many states are releasing prisoners due to the fiscal crisis, the federal government is now involved in avoiding foreclosures, a huge credit card debt write-off is in the works (not quite a jubilee, but still...) and now automakers are ready to consolidate or declare bankruptcy. Next year, perhaps we will repatriate troops and shut down overseas military bases, also in line with the Collapse Party platform.

Continuing with our recap, I see social collapse as avoidable, but not in all places. In many places, the task is to reconstitute society before the first three stages run their course, and it may already be too late. But this is where we need to make a stand, if only to be remembered for something more than the sum total of our mistakes.

Lastly, cultural collapse is something that's almost too horrible to contemplate, except that in some places it seems to have already happened, and is being masked by the various institutions that still exist, for the time being. But I believe that a lot of people will come around and remember their humanity, the better parts of their natures, when dire circumstances force them to rise to the occasion.

Also, there are some intact pockets of culture here and there that can be used as a sort of cultural seed stock. These are communities and groups that have seen some adversity in recent times, and have some social cohesion left over from the experience. They may also be those who made certain conscious decisions, to simplify their living arrangements in order to lead saner, more fulfilling lives. We must do all we can to avert this final stage of collapse, because what is at stake is nothing less than our humanity.

I hope that, if you have been following along, by this point this slide is self-explanatory. Collapse is not one monolithic thing. Each kind of collapse requires a response, be it jumping clear ahead of time, sitting it out, or opposing it with all you got. At this point, if anyone in this room got up and tried to tell us what to do to avoid financial collapse, we would probably find that quite funny. On the other hand, if we stand by and let social and cultural collapse unfold, then what's the point of any of this?

That's all. Thank you for listening.

~~~~~~~~~~~~~~~ Editorial Notes ~~~~~~~~~~~~~~~~~~~
This article is a talk that was originally given by Dmitry Orlov at the Community Solutions Conference in Michigan in November 2008.

Thanks to SO and KS for the formatting. This was an especially difficult job

Monday, November 17, 2008

Published on Sunday, November 16, 2008 by
GM Must Re-Make the Mass Transit System it Murdered
by Harvey Wasserman

Bail out General Motors? The people who murdered our mass transit system?

First let them remake what they destroyed.

GM responded to the 1970s gas crisis by handing over the American market to energy-efficient Toyota and Honda.

GM met the rise of the hybrids with "light trucks."

GM built a small electric car, leased a pilot fleet to consumers who loved it, and then forcibly confiscated and trashed them all.

GM now wants to market a $40,000 electric Volt that looks like a cross between a Hummer and a Cadillac and will do nothing to meet the Solartopian needs of a green-powered Earth.

For this alone, GM's managers should never be allowed to make another car, let alone take our tax money to stay in business.

But there is also a trillion-dollar skeleton in GM's closet.

This is the company that murdered our mass transit system.

The assertion comes from Bradford Snell, a government researcher whose definitive report damning GM has been a vehicular lightening rod since its 1974 debut. Its attackers and defenders are legion. But some facts are irrefutable:

In a 1922 memo that will live in infamy, GM President Alfred P. Sloan established a unit aimed at dumping electrified mass transit in favor of gas-burning cars, trucks and buses.

Just one American family in 10 then owned an automobile. Instead, we loved our 44,000 miles of passenger rail routes managed by 1,200 companies employing 300,000 Americans who ran 15 billion annual trips generating an income of $1 billion. According to Snell, "virtually every city and town in America of more than 2,500 people had its own electric rail system."

But GM lost $65 million in 1921. So Sloan enlisted Standard Oil (now Exxon), Philips Petroleum, glass and rubber companies and an army of financiers and politicians to kill mass transit.

The campaigns varied, as did the economic and technical health of many of the systems themselves. Some now argue that buses would have transcended many of the rail lines anyway. More likely, they would have hybridized and complemented each other.

But with a varied arsenal of political and financial subterfuges, GM helped gut the core of America's train and trolley systems. It was the murder of our rail systems that made our "love affair" with the car a tragedy of necessity.

In 1949 a complex federal prosecution for related crimes resulted in an anti-trust fine against GM of a whopping $5000. For years thereafter GM continued to bury electric rail systems by "bustituting" gas-fired vehicles.

Then came the interstates. After driving his Allied forces into Berlin on Hitler's Autobahn, Dwight Eisenhower brought home a passion for America's biggest public works project. Some 40,000 miles of vital eco-systems were eventually paved under.

In habitat destruction, oil addiction, global warming, outright traffic deaths (some 40,000/year and more), ancillary ailments and wars for oil, the automobile embodies the worst ecological catastrophe in human history.

Should current General Motors management be made to pay for the ancient sins of Alfred Sloan?

Since the 1880s, American corporations have claimed human rights under the law. Tasking one now with human responsibilities could set a great precedent.

GM has certainly proved itself unable to make cars that can compete while healing a global-warmed planet.

So let's convert the company's infrastructure to churn out trolley cars, monorails, passenger trains, truly green buses.

FDR forced Detroit to manufacture the tanks, planes and guns that won World War 2 (try buying a 1944 Chevrolet!). Now let a reinvented GM make the "weapons" to win the climate war and energy independence.

It demands re-tooling and re-training. But GM's special role in history must now evolve into using its infrastructure to restore the mass transit system---and ecological balance---it has helped destroy.

Harvey Wasserman is co-author, with Bob Fitrakis, of four books on election protection which are available at, where this article first appeared. His HARVEY WASSERMAN's HISTORY OF THE US is at along with SOLARTOPIA! OUR GREEN-POWERED EARTH, A.D. 2030.

Monday, September 15, 2008

'Enjoy life while you can'

Climate science maverick James Lovelock believes catastrophe is inevitable, carbon offsetting is a joke and ethical living a scam. So what would he do?

By Decca Aitkenhead
The Guardian, Saturday March 1 2008

In 1965 executives at Shell wanted to know what the world would look like in the year 2000. They consulted a range of experts, who speculated about fusion-powered hovercrafts and "all sorts of fanciful technological stuff". When the oil company asked the scientist James Lovelock, he predicted that the main problem in 2000 would be the environment. "It will be worsening then to such an extent that it will seriously affect their business," he said.

"And of course," Lovelock says, with a smile 43 years later, "that's almost exactly what's happened."

Lovelock has been dispensing predictions from his one-man laboratory in an old mill in Cornwall since the mid-1960s, the consistent accuracy of which have earned him a reputation as one of Britain's most respected - if maverick - independent scientists. Working alone since the age of 40, he invented a device that detected CFCs, which helped detect the growing hole in the ozone layer, and introduced the Gaia hypothesis, a revolutionary theory that the Earth is a self-regulating super-organism. Initially ridiculed by many scientists as new age nonsense, today that theory forms the basis of almost all climate science.

For decades, his advocacy of nuclear power appalled fellow environmentalists - but recently increasing numbers of them have come around to his way of thinking. His latest book, The Revenge of Gaia, predicts that by 2020 extreme weather will be the norm, causing global devastation; that by 2040 much of Europe will be Saharan; and parts of London will be underwater. The most recent Intergovernmental Panel on Climate Change (IPCC) report deploys less dramatic language - but its calculations aren't a million miles away from his.

As with most people, my panic about climate change is equalled only by my confusion over what I ought to do about it. A meeting with Lovelock therefore feels a little like an audience with a prophet. Buried down a winding track through wild woodland, in an office full of books and papers and contraptions involving dials and wires, the 88-year-old presents his thoughts with a quiet, unshakable conviction that can be unnerving. More alarming even than his apocalyptic climate predictions is his utter certainty that almost everything we're trying to do about it is wrong.

On the day we meet, the Daily Mail has launched a campaign to rid Britain of plastic shopping bags. The initiative sits comfortably within the current canon of eco ideas, next to ethical consumption, carbon offsetting, recycling and so on - all of which are premised on the calculation that individual lifestyle adjustments can still save the planet. This is, Lovelock says, a deluded fantasy. Most of the things we have been told to do might make us feel better, but they won't make any difference. Global warming has passed the tipping point, and catastrophe is unstoppable.

"It's just too late for it," he says. "Perhaps if we'd gone along routes like that in 1967, it might have helped. But we don't have time. All these standard green things, like sustainable development, I think these are just words that mean nothing. I get an awful lot of people coming to me saying you can't say that, because it gives us nothing to do. I say on the contrary, it gives us an immense amount to do. Just not the kinds of things you want to do."

He dismisses eco ideas briskly, one by one. "Carbon offsetting? I wouldn't dream of it. It's just a joke. To pay money to plant trees, to think you're offsetting the carbon? You're probably making matters worse. You're far better off giving to the charity Cool Earth, which gives the money to the native peoples to not take down their forests."

Do he and his wife try to limit the number of flights they take? "No we don't. Because we can't." And recycling, he adds, is "almost certainly a waste of time and energy", while having a "green lifestyle" amounts to little more than "ostentatious grand gestures". He distrusts the notion of ethical consumption. "Because always, in the end, it turns out to be a scam ... or if it wasn't one in the beginning, it becomes one."

Somewhat unexpectedly, Lovelock concedes that the Mail's plastic bag campaign seems, "on the face of it, a good thing". But it transpires that this is largely a tactical response; he regards it as merely more rearrangement of Titanic deckchairs, "but I've learnt there's no point in causing a quarrel over everything". He saves his thunder for what he considers the emptiest false promise of all - renewable energy.

"You're never going to get enough energy from wind to run a society such as ours," he says. "Windmills! Oh no. No way of doing it. You can cover the whole country with the blasted things, millions of them. Waste of time."

This is all delivered with an air of benign wonder at the intractable stupidity of people. "I see it with everybody. People just want to go on doing what they're doing. They want business as usual. They say, 'Oh yes, there's going to be a problem up ahead,' but they don't want to change anything."

Lovelock believes global warming is now irreversible, and that nothing can prevent large parts of the planet becoming too hot to inhabit, or sinking underwater, resulting in mass migration, famine and epidemics. Britain is going to become a lifeboat for refugees from mainland Europe, so instead of wasting our time on wind turbines we need to start planning how to survive. To Lovelock, the logic is clear. The sustainability brigade are insane to think we can save ourselves by going back to nature; our only chance of survival will come not from less technology, but more.

Nuclear power, he argues, can solve our energy problem - the bigger challenge will be food. "Maybe they'll synthesise food. I don't know. Synthesising food is not some mad visionary idea; you can buy it in Tesco's, in the form of Quorn. It's not that good, but people buy it. You can live on it." But he fears we won't invent the necessary technologies in time, and expects "about 80%" of the world's population to be wiped out by 2100. Prophets have been foretelling Armageddon since time began, he says. "But this is the real thing."

Faced with two versions of the future - Kyoto's preventative action and Lovelock's apocalypse - who are we to believe? Some critics have suggested Lovelock's readiness to concede the fight against climate change owes more to old age than science: "People who say that about me haven't reached my age," he says laughing.

But when I ask if he attributes the conflicting predictions to differences in scientific understanding or personality, he says: "Personality."

There's more than a hint of the controversialist in his work, and it seems an unlikely coincidence that Lovelock became convinced of the irreversibility of climate change in 2004, at the very point when the international consensus was coming round to the need for urgent action. Aren't his theories at least partly driven by a fondness for heresy?

"Not a bit! Not a bit! All I want is a quiet life! But I can't help noticing when things happen, when you go out and find something. People don't like it because it upsets their ideas."

But the suspicion seems confirmed when I ask if he's found it rewarding to see many of his climate change warnings endorsed by the IPCC. "Oh no! In fact, I'm writing another book now, I'm about a third of the way into it, to try and take the next steps ahead."

Interviewers often remark upon the discrepancy between Lovelock's predictions of doom, and his good humour. "Well I'm cheerful!" he says, smiling. "I'm an optimist. It's going to happen."

Humanity is in a period exactly like 1938-9, he explains, when "we all knew something terrible was going to happen, but didn't know what to do about it". But once the second world war was under way, "everyone got excited, they loved the things they could do, it was one long holiday ... so when I think of the impending crisis now, I think in those terms. A sense of purpose - that's what people want."

At moments I wonder about Lovelock's credentials as a prophet. Sometimes he seems less clear-eyed with scientific vision than disposed to see the version of the future his prejudices are looking for. A socialist as a young man, he now favours market forces, and it's not clear whether his politics are the child or the father of his science. His hostility to renewable energy, for example, gets expressed in strikingly Eurosceptic terms of irritation with subsidies and bureaucrats. But then, when he talks about the Earth - or Gaia - it is in the purest scientific terms all.

"There have been seven disasters since humans came on the earth, very similar to the one that's just about to happen. I think these events keep separating the wheat from the chaff. And eventually we'll have a human on the planet that really does understand it and can live with it properly. That's the source of my optimism."

What would Lovelock do now, I ask, if he were me? He smiles and says: "Enjoy life while you can. Because if you're lucky it's going to be 20 years before it hits the fan."

Sunday, August 24, 2008

Oceans On The Precipice Of Mass Extinctions And Rise Of Slime

During a recent research expedition to Kiritimati, or Christmas Island, Jeremy Jackson and other researchers documented a coral reef overtaken by algae, featuring murky waters and few fish. The researchers say pollution, overfishing, warming waters or some combination of the three are to blame.

by Staff Writers
San Diego CA (SPX) Aug 15, 2008

Human activities are cumulatively driving the health of the world's oceans down a rapid spiral, and only prompt and wholesale changes will slow or perhaps ultimately reverse the catastrophic problems they are facing.

Such is the prognosis of Jeremy Jackson, a professor of oceanography at Scripps Institution of Oceanography at UC San Diego, in a bold new assessment of the oceans and their ecological health.

Publishing his study in the online early edition of the Proceedings of the National Academy of Sciences (PNAS), Jackson believes that human impacts are laying the groundwork for mass extinctions in the oceans on par with vast ecological upheavals of the past.

He cites the synergistic effects of habitat destruction, overfishing, ocean warming, increased acidification and massive nutrient runoff as culprits in a grand transformation of once complex ocean ecosystems. Areas that had featured intricate marine food webs with large animals are being converted into simplistic ecosystems dominated by microbes, toxic algal blooms, jellyfish and disease.

Jackson, director of the Scripps Center for Marine Biodiversity and Conservation, has tagged the ongoing transformation as "the rise of slime." The new paper, "Ecological extinction and evolution in the brave new ocean," is a result of Jackson's presentation last December at a biodiversity and extinction colloquium convened by the National Academy of Sciences.

"The purpose of the talk and the paper is to make clear just how dire the situation is and how rapidly things are getting worse," said Jackson.

"It's a lot like the issue of climate change that we had ignored for so long. If anything, the situation in the oceans could be worse because we are so close to the precipice in many ways."

In the assessment, Jackson reviews and synthesizes a range of research studies on marine ecosystem health, and in particular key studies conducted since a seminal 2001 study he led analyzing the impacts of historical overfishing.

The new study includes overfishing, but expands to include threats from areas such as nutrient runoff that lead to so-called "dead zones" of low oxygen. He also incorporates increases in ocean warming and acidification resulting from greenhouse gas emissions.

Jackson describes the potently destructive effects when forces combine to degrade ocean health. For example, climate change can exacerbate stresses on the marine environment already brought by overfishing and pollution.

"All of the different kinds of data and methods of analysis point in the same direction of drastic and increasingly rapid degradation of marine ecosystems," Jackson writes in the paper.

Jackson furthers his analysis by constructing a chart of marine ecosystems and their "endangered" status.

Coral reefs, Jackson's primary area of research, are "critically endangered" and among the most threatened ecosystems; also critically endangered are estuaries and coastal seas, threatened by overfishing and runoff; continental shelves are "endangered" due to, among other things, losses of fishes and sharks; and the open ocean ecosystem is listed as "threatened" mainly through losses at the hands of overfishing.

"Just as we say that leatherback turtles are critically endangered, I looked at entire ecosystems as if they were a species," said Jackson. "The reality is that if we want to have coral reefs in the future, we're going to have to behave that way and recognize the magnitude of the response that's necessary to achieve it."

To stop the degradation of the oceans, Jackson identifies overexploitation, pollution and climate change as the three main "drivers" that must be addressed.

"The challenges of bringing these threats under control are enormously complex and will require fundamental changes in fisheries, agricultural practices and the ways we obtain energy for everything we do," he writes.

"So it's not a happy picture and the only way to deal with it is in segments; the only way to keep one's sanity and try to achieve real success is to carve out sectors of the problem that can be addressed in effective terms and get on it as quickly as possible."

The research described in the paper was supported by the William E. and Mary B. Ritter Chair of Scripps Institution of Oceanography.

Friday, August 15, 2008

Energy Resources and Our Future" - Speech by Admiral Hyman Rickover in 1957
Posted by Gail the Actuary on August 10, 2008 - 10:00am

M. King Hubbert made his views about peak oil known in 1956, at a meeting of the American Petroleum Institute. Many people don't know that only a year later, in 1957, Admiral Hyman Rickover started trying to publicize the fact that fossil fuels are finite, and were likely to peak in the first half of the 21st century. Many of the things he said then are words we wish people had listened to years ago:

Fossil fuels resemble capital in the bank. A prudent and responsible parent will use his capital sparingly in order to pass on to his children as much as possible of his inheritance. A selfish and irresponsible parent will squander it in riotous living and care not one whit how his offspring will fare.

Today the automobile is the most uneconomical user of energy. Its efficiency is 5% compared with 23% for the Diesel-electric railway. It is the most ravenous devourer of fossil fuels, accounting for over half of the total oil consumption in this country.

I suggest that this is a good time to think soberly about our responsibilities to our descendants--those who will ring out the Fossil Fuel Age.

On May 14, 1957, Admiral Hyman Rickover gave a speech to the Minnesota State Medical Association called "Energy Resources and our Future." This speech was posted in December 2006 on the Energy Bulletin, and also appeared on The Oil Drum. This speech was made available by the work of two people: Theodore Rockwell, author of The Rickover Effect: How One Man Made a Difference, who had this article in his files, and Rick Lakin, who sought out the article and converted it to digital form. Since the speach is one many will want to read, we are repeating it again.

Energy Resources and our Future

I am honored to be here tonight, though it is no easy thing, I assure you, for a layman to face up to an audience of physicians. A single one of you, sitting behind his desk, can be quite formidable.

My speech has no medical connotations. This may be a relief to you after the solid professional fare you have been absorbing. I should like to discuss a matter which will, I hope, be of interest to you as responsible citizens: the significance of energy resources in the shaping of our future.

We live in what historians may some day call the Fossil Fuel Age. Today coal, oil, and natural gas supply 93% of the world's energy; water power accounts for only 1%; and the labor of men and domestic animals the remaining 6%. This is a startling reversal of corresponding figures for 1850 - only a century ago. Then fossil fuels supplied 5% of the world's energy, and men and animals 94%. Five sixths of all the coal, oil, and gas consumed since the beginning of the Fossil Fuel Age has been burned up in the last 55 years.

These fuels have been known to man for more than 3,000 years. In parts of China, coal was used for domestic heating and cooking, and natural gas for lighting as early as 1000 B.C. The Babylonians burned asphalt a thousand years earlier. But these early uses were sporadic and of no economic significance. Fossil fuels did not become a major source of energy until machines running on coal, gas, or oil were invented. Wood, for example, was the most important fuel until 1880 when it was replaced by coal; coal, in turn, has only recently been surpassed by oil in this country.

Once in full swing, fossil fuel consumption has accelerated at phenomenal rates. All the fossil fuels used before 1900 would not last five years at today's rates of consumption.

Nowhere are these rates higher and growing faster than in the United States. Our country, with only 6% of the world's population, uses one third of the world's total energy input; this proportion would be even greater except that we use energy more efficiently than other countries. Each American has at his disposal, each year, energy equivalent to that obtainable from eight tons of coal. This is six times the world's per capita energy consumption. Though not quite so spectacular, corresponding figures for other highly industrialized countries also show above average consumption figures. The United Kingdom, for example, uses more than three times as much energy as the world average.

With high energy consumption goes a high standard of living. Thus the enormous fossil energy which we in this country control feeds machines which make each of us master of an army of mechanical slaves. Man's muscle power is rated at 35 watts continuously, or one-twentieth horsepower. Machines therefore furnish every American industrial worker with energy equivalent to that of 244 men, while at least 2,000 men push his automobile along the road, and his family is supplied with 33 faithful household helpers. Each locomotive engineer controls energy equivalent to that of 100,000 men; each jet pilot of 700,000 men. Truly, the humblest American enjoys the services of more slaves than were once owned by the richest nobles, and lives better than most ancient kings. In retrospect, and despite wars, revolutions, and disasters, the hundred years just gone by may well seem like a Golden Age.

Whether this Golden Age will continue depends entirely upon our ability to keep energy supplies in balance with the needs of our growing population. Before I go into this question, let me review briefly the role of energy resources in the rise and fall of civilizations.

Possession of surplus energy is, of course, a requisite for any kind of civilization, for if man possesses merely the energy of his own muscles, he must expend all his strength - mental and physical - to obtain the bare necessities of life.

Surplus energy provides the material foundation for civilized living - a comfortable and tasteful home instead of a bare shelter; attractive clothing instead of mere covering to keep warm; appetizing food instead of anything that suffices to appease hunger. It provides the freedom from toil without which there can be no art, music, literature, or learning. There is no need to belabor the point. What lifted man - one of the weaker mammals - above the animal world was that he could devise, with his brain, ways to increase the energy at his disposal, and use the leisure so gained to cultivate his mind and spirit. Where man must rely solely on the energy of his own body, he can sustain only the most meager existence.

Man's first step on the ladder of civilization dates from his discovery of fire and his domestication of animals. With these energy resources he was able to build a pastoral culture. To move upward to an agricultural civilization he needed more energy. In the past this was found in the labor of dependent members of large patriarchal families, augmented by slaves obtained through purchase or as war booty. There are some backward communities which to this day depend on this type of energy.

Slave labor was necessary for the city-states and the empires of antiquity; they frequently had slave populations larger than their free citizenry. As long as slaves were abundant and no moral censure attached to their ownership, incentives to search for alternative sources of energy were lacking; this may well have been the single most important reason why engineering advanced very little in ancient times.

A reduction of per capita energy consumption has always in the past led to a decline in civilization and a reversion to a more primitive way of life. For example, exhaustion of wood fuel is believed to have been the primary reason for the fall of the Mayan Civilization on this continent and of the decline of once flourishing civilizations in Asia. India and China once had large forests, as did much of the Middle East. Deforestation not only lessened the energy base but had a further disastrous effect: lacking plant cover, soil washed away, and with soil erosion the nutritional base was reduced as well.

Another cause of declining civilization comes with pressure of population on available land. A point is reached where the land can no longer support both the people and their domestic animals. Horses and mules disappear first. Finally even the versatile water buffalo is displaced by man who is two and one half times as efficient an energy converter as are draft animals. It must always be remembered that while domestic animals and agricultural machines increase productivity per man, maximum productivity per acre is achieved only by intensive manual cultivation.

It is a sobering thought that the impoverished people of Asia, who today seldom go to sleep with their hunger completely satisfied, were once far more civilized and lived much better than the people of the West. And not so very long ago, either. It was the stories brought back by Marco Polo of the marvelous civilization in China which turned Europe's eyes to the riches of the East, and induced adventurous sailors to brave the high seas in their small vessels searching for a direct route to the fabulous Orient. The "wealth of the Indies" is a phrase still used, but whatever wealth may be there it certainly is not evident in the life of the people today.

Asia failed to keep technological pace with the needs of her growing populations and sank into such poverty that in many places man has become again the primary source of energy, since other energy converters have become too expensive. This must be obvious to the most casual observer. What this means is quite simply a reversion to a more primitive stage of civilization with all that it implies for human dignity and happiness.

Anyone who has watched a sweating Chinese farm worker strain at his heavily laden wheelbarrow, creaking along a cobblestone road, or who has flinched as he drives past an endless procession of human beasts of burden moving to market in Java - the slender women bent under mountainous loads heaped on their heads - anyone who has seen statistics translated into flesh and bone, realizes the degradation of man's stature when his muscle power becomes the only energy source he can afford. Civilization must wither when human beings are so degraded.

Where slavery represented a major source of energy, its abolition had the immediate effect of reducing energy consumption. Thus when this time-honored institution came under moral censure by Christianity, civilization declined until other sources of energy could be found. Slavery is incompatible with Christian belief in the worth of the humblest individual as a child of God. As Christianity spread through the Roman Empire and masters freed their slaves - in obedience to the teaching of the Church - the energy base of Roman civilization crumbled. This, some historians believe, may have been a major factor in the decline of Rome and the temporary reversion to a more primitive way of life during the Dark Ages. Slavery gradually disappeared throughout the Western world, except in its milder form of serfdom. That it was revived a thousand years later merely shows man's ability to stifle his conscience - at least for a while - when his economic needs are great. Eventually, even the needs of overseas plantation economies did not suffice to keep alive a practice so deeply repugnant to Western man's deepest convictions.

It may well be that it was unwillingness to depend on slave labor for their energy needs which turned the minds of medieval Europeans to search for alternate sources of energy, thus sparking the Power Revolution of the Middle Ages which, in turn, paved the way for the Industrial Revolution of the 19th Century. When slavery disappeared in the West engineering advanced. Men began to harness the power of nature by utilizing water and wind as energy sources. The sailing ship, in particular, which replaced the slave-driven galley of antiquity, was vastly improved by medieval shipbuilders and became the first machine enabling man to control large amounts of inanimate energy.

The next important high-energy converter used by Europeans was gunpowder - an energy source far superior to the muscular strength of the strongest bowman or lancer. With ships that could navigate the high seas and arms that could outfire any hand weapon, Europe was now powerful enough to preempt for herself the vast empty areas of the Western Hemisphere into which she poured her surplus populations to build new nations of European stock. With these ships and arms she also gained political control over populous areas in Africa and Asia from which she drew the raw materials needed to speed her industrialization, thus complementing her naval and military dominance with economic and commercial supremacy.

When a low-energy society comes in contact with a high-energy society, the advantage always lies with the latter. The Europeans not only achieved standards of living vastly higher than those of the rest of the world, but they did this while their population was growing at rates far surpassing those of other peoples. In fact, they doubled their share of total world population in the short span of three centuries. From one sixth in 1650, the people of European stock increased to almost one third of total world population by 1950.

Meanwhile much of the rest of the world did not even keep energy sources in balance with population growth. Per capita energy consumption actually diminished in large areas. It is this difference in energy consumption which has resulted in an ever-widening gap between the one-third minority who live in high-energy countries and the two-thirds majority who live in low-energy areas.

These so-called underdeveloped countries are now finding it far more difficult to catch up with the fortunate minority than it was for Europe to initiate transition from low-energy to high-energy consumption. For one thing, their ratio of land to people is much less favorable; for another, they have no outlet for surplus populations to ease the transition since all the empty spaces have already been taken over by people of European stock.

Almost all of today's low-energy countries have a population density so great that it perpetuates dependence on intensive manual agriculture which alone can yield barely enough food for their people. They do not have enough acreage, per capita, to justify using domestic animals or farm machinery, although better seeds, better soil management, and better hand tools could bring some improvement. A very large part of their working population must nevertheless remain on the land, and this limits the amount of surplus energy that can be produced. Most of these countries must choose between using this small energy surplus to raise their very low standard of living or postpone present rewards for the sake of future gain by investing the surplus in new industries. The choice is difficult because there is no guarantee that today's denial may not prove to have been in vain. This is so because of the rapidity with which public health measures have reduced mortality rates, resulting in population growth as high or even higher than that of the high-energy nations. Theirs is a bitter choice; it accounts for much of their anti-Western feeling and may well portend a prolonged period of world instability.

How closely energy consumption is related to standards of living may be illustrated by the example of India. Despite intelligent and sustained efforts made since independence, India's per capita income is still only 20 cents daily; her infant mortality is four times ours; and the life expectance of her people is less than one half that of the industrialized countries of the West. These are ultimate consequences of India's very low energy consumption: one-fourteenth of world average; one-eightieth of ours.

Ominous, too, is the fact that while world food production increased 9% in the six years from 1945-51, world population increased by 12%. Not only is world population increasing faster than world food production, but unfortunately, increases in food production tend to occur in the already well-fed, high-energy countries rather than in the undernourished, low-energy countries where food is most lacking.

I think no further elaboration is needed to demonstrate the significance of energy resources for our own future. Our civilization rests upon a technological base which requires enormous quantities of fossil fuels. What assurance do we then have that our energy needs will continue to be supplied by fossil fuels: The answer is - in the long run - none.

The earth is finite. Fossil fuels are not renewable. In this respect our energy base differs from that of all earlier civilizations. They could have maintained their energy supply by careful cultivation. We cannot. Fuel that has been burned is gone forever. Fuel is even more evanescent than metals. Metals, too, are non-renewable resources threatened with ultimate extinction, but something can be salvaged from scrap. Fuel leaves no scrap and there is nothing man can do to rebuild exhausted fossil fuel reserves. They were created by solar energy 500 million years ago and took eons to grow to their present volume.

In the face of the basic fact that fossil fuel reserves are finite, the exact length of time these reserves will last is important in only one respect: the longer they last, the more time do we have, to invent ways of living off renewable or substitute energy sources and to adjust our economy to the vast changes which we can expect from such a shift.

Fossil fuels resemble capital in the bank. A prudent and responsible parent will use his capital sparingly in order to pass on to his children as much as possible of his inheritance. A selfish and irresponsible parent will squander it in riotous living and care not one whit how his offspring will fare.

Engineers whose work familiarizes them with energy statistics; far-seeing industrialists who know that energy is the principal factor which must enter into all planning for the future; responsible governments who realize that the well-being of their citizens and the political power of their countries depend on adequate energy supplies - all these have begun to be concerned about energy resources. In this country, especially, many studies have been made in the last few years, seeking to discover accurate information on fossil-fuel reserves and foreseeable fuel needs.

Statistics involving the human factor are, of course, never exact. The size of usable reserves depends on the ability of engineers to improve the efficiency of fuel extraction and use. It also depends on discovery of new methods to obtain energy from inferior resources at costs which can be borne without unduly depressing the standard of living. Estimates of future needs, in turn, rely heavily on population figures which must always allow for a large element of uncertainty, particularly as man reaches a point where he is more and more able to control his own way of life.

Current estimates of fossil fuel reserves vary to an astonishing degree. In part this is because the results differ greatly if cost of extraction is disregarded or if in calculating how long reserves will last, population growth is not taken into consideration; or, equally important, not enough weight is given to increased fuel consumption required to process inferior or substitute metals. We are rapidly approaching the time when exhaustion of better grade metals will force us to turn to poorer grades requiring in most cases greater expenditure of energy per unit of metal.

But the most significant distinction between optimistic and pessimistic fuel reserve statistics is that the optimists generally speak of the immediate future - the next twenty-five years or so - while the pessimists think in terms of a century from now. A century or even two is a short span in the history of a great people. It seems sensible to me to take a long view, even if this involves facing unpleasant facts.

For it is an unpleasant fact that according to our best estimates, total fossil fuel reserves recoverable at not over twice today's unit cost, are likely to run out at some time between the years 2000 and 2050, if present standards of living and population growth rates are taken into account. Oil and natural gas will disappear first, coal last. There will be coal left in the earth, of course. But it will be so difficult to mine that energy costs would rise to economically intolerable heights, so that it would then become necessary either to discover new energy sources or to lower standards of living drastically.

For more than one hundred years we have stoked ever growing numbers of machines with coal; for fifty years we have pumped gas and oil into our factories, cars, trucks, tractors, ships, planes, and homes without giving a thought to the future. Occasionally the voice of a Cassandra has been raised only to be quickly silenced when a lucky discovery revised estimates of our oil reserves upward, or a new coalfield was found in some remote spot. Fewer such lucky discoveries can be expected in the future, especially in industrialized countries where extensive mapping of resources has been done. Yet the popularizers of scientific news would have us believe that there is no cause for anxiety, that reserves will last thousands of years, and that before they run out science will have produced miracles. Our past history and security have given us the sentimental belief that the things we fear will never really happen - that everything turns out right in the end. But, prudent men will reject these tranquilizers and prefer to face the facts so that they can plan intelligently for the needs of their posterity.

Looking into the future, from the mid-20th Century, we cannot feel overly confident that present high standards of living will of a certainty continue through the next century and beyond. Fossil fuel costs will soon definitely begin to rise as the best and most accessible reserves are exhausted, and more effort will be required to obtain the same energy from remaining reserves. It is likely also that liquid fuel synthesized from coal will be more expensive. Can we feel certain that when economically recoverable fossil fuels are gone science will have learned how to maintain a high standard of living on renewable energy sources?

I believe it would be wise to assume that the principal renewable fuel sources which we can expect to tap before fossil reserves run out will supply only 7 to 15% of future energy needs. The five most important of these renewable sources are wood fuel, farm wastes, wind, water power, and solar heat.

Wood fuel and farm wastes are dubious as substitutes because of growing food requirements to be anticipated. Land is more likely to be used for food production than for tree crops; farm wastes may be more urgently needed to fertilize the soil than to fuel machines.

Wind and water power can furnish only a very small percentage of our energy needs. Moreover, as with solar energy, expensive structures would be required, making use of land and metals which will also be in short supply. Nor would anything we know today justify putting too much reliance on solar energy though it will probably prove feasible for home heating in favorable localities and for cooking in hot countries which lack wood, such as India.

More promising is the outlook for nuclear fuels. These are not, properly speaking, renewable energy sources, at least not in the present state of technology, but their capacity to "breed" and the very high energy output from small quantities of fissionable material, as well as the fact that such materials are relatively abundant, do seem to put nuclear fuels into a separate category from exhaustible fossil fuels. The disposal of radioactive wastes from nuclear power plants is, however, a problem which must be solved before there can be any widespread use of nuclear power.

Another limit in the use of nuclear power is that we do not know today how to employ it otherwise than in large units to produce electricity or to supply heating. Because of its inherent characteristics, nuclear fuel cannot be used directly in small machines, such as cars, trucks, or tractors. It is doubtful that it could in the foreseeable future furnish economical fuel for civilian airplanes or ships, except very large ones. Rather than nuclear locomotives, it might prove advantageous to move trains by electricity produced in nuclear central stations. We are only at the beginning of nuclear technology, so it is difficult to predict what we may expect.

Transportation - the lifeblood of all technically advanced civilizations - seems to be assured, once we have borne the initial high cost of electrifying railroads and replacing buses with streetcars or interurban electric trains. But, unless science can perform the miracle of synthesizing automobile fuel from some energy source as yet unknown or unless trolley wires power electric automobiles on all streets and highways, it will be wise to face up to the possibility of the ultimate disappearance of automobiles, trucks, buses, and tractors. Before all the oil is gone and hydrogenation of coal for synthetic liquid fuels has come to an end, the cost of automotive fuel may have risen to a point where private cars will be too expensive to run and public transportation again becomes a profitable business.

Today the automobile is the most uneconomical user of energy. Its efficiency is 5% compared with 23% for the Diesel-electric railway. It is the most ravenous devourer of fossil fuels, accounting for over half of the total oil consumption in this country. And the oil we use in the United States in one year took nature about 14 million years to create. Curiously, the automobile, which is the greatest single cause of the rapid exhaustion of oil reserves, may eventually be the first fuel consumer to suffer. Reduction in automotive use would necessitate an extraordinarily costly reorganization of the pattern of living in industrialized nations, particularly in the United States. It would seem prudent to bear this in mind in future planning of cities and industrial locations.

Our present known reserves of fissionable materials are many times as large as our net economically recoverable reserves of coal. A point will be reached before this century is over when fossil fuel costs will have risen high enough to make nuclear fuels economically competitive. Before that time comes we shall have to make great efforts to raise our entire body of engineering and scientific knowledge to a higher plateau. We must also induce many more young Americans to become metallurgical and nuclear engineers. Else we shall not have the knowledge or the people to build and run the nuclear power plants which ultimately may have to furnish the major part of our energy needs. If we start to plan now, we may be able to achieve the requisite level of scientific and engineering knowledge before our fossil fuel reserves give out, but the margin of safety is not large. This is also based on the assumption that atomic war can be avoided and that population growth will not exceed that now calculated by demographic experts.

War, of course, cancels all man's expectations. Even growing world tension just short of war could have far-reaching effects. In this country it might, on the one hand, lead to greater conservation of domestic fuels, to increased oil imports, and to an acceleration in scientific research which might turn up unexpected new energy sources. On the other hand, the resulting armaments race would deplete metal reserves more rapidly, hastening the day when inferior metals must be utilized with consequent greater expenditure of energy. Underdeveloped nations with fossil fuel deposits might be coerced into withholding them from the free world or may themselves decide to retain them for their own future use. The effect on Europe, which depends on coal and oil imports, would be disastrous and we would have to share our own supplies or lose our allies.

Barring atomic war or unexpected changes in the population curve, we can count on an increase in world population from two and one half billion today to four billion in the year 2000; six to eight billion by 2050. The United States is expected to quadruple its population during the 20th Century - from 75 million in 1900 to 300 million in 2000 - and to reach at least 375 million in 2050. This would almost exactly equal India's present population which she supports on just a little under half of our land area.

It is an awesome thing to contemplate a graph of world population growth from prehistoric times - tens of thousands of years ago - to the day after tomorrow - let us say the year 2000 A.D. If we visualize the population curve as a road which starts at sea level and rises in proportion as world population increases, we should see it stretching endlessly, almost level, for 99% of the time that man has inhabited the earth. In 6000 B.C., when recorded history begins, the road is running at a height of about 70 feet above sea level, which corresponds to a population of 10 million. Seven thousand years later - in 1000 A.D. - the road has reached an elevation of 1,600 feet; the gradation now becomes steeper, and 600 years later the road is 2,900 feet high. During the short span of the next 400 years - from 1600 to 2000 - it suddenly turns sharply upward at an almost perpendicular inclination and goes straight up to an elevation of 29,000 feet - the height of Mt. Everest, the world's tallest mountain.

In the 8,000 years from the beginning of history to the year 2000 A.D. world population will have grown from 10 million to 4 billion, with 90% of that growth taking place during the last 5% of that period, in 400 years. It took the first 3,000 years of recorded history to accomplish the first doubling of population, 100 years for the last doubling, but the next doubling will require only 50 years. Calculations give us the astonishing estimate that one out of every 20 human beings born into this world is alive today.

The rapidity of population growth has not given us enough time to readjust our thinking. Not much more than a century ago our country - the very spot on which I now stand was a wilderness in which a pioneer could find complete freedom from men and from government. If things became too crowded - if he saw his neighbor's chimney smoke - he could, and often did, pack up and move west. We began life in 1776 as a nation of less than four million people - spread over a vast continent - with seemingly inexhaustible riches of nature all about. We conserved what was scarce - human labor - and squandered what seemed abundant - natural resources - and we are still doing the same today.

Much of the wilderness which nurtured what is most dynamic in the American character has now been buried under cities, factories and suburban developments where each picture window looks out on nothing more inspiring than the neighbor's back yard with the smoke of his fire in the wire basket clearly visible.

Life in crowded communities cannot be the same as life on the frontier. We are no longer free, as was the pioneer - to work for our own immediate needs regardless of the future. We are no longer as independent of men and of government as were Americans two or three generations ago. An ever larger share of what we earn must go to solve problems caused by crowded living - bigger governments; bigger city, state, and federal budgets to pay for more public services. Merely to supply us with enough water and to carry away our waste products becomes more difficult and expansive daily. More laws and law enforcement agencies are needed to regulate human relations in urban industrial communities and on crowded highways than in the America of Thomas Jefferson.

Certainly no one likes taxes, but we must become reconciled to larger taxes in the larger America of tomorrow.

I suggest that this is a good time to think soberly about our responsibilities to our descendants - those who will ring out the Fossil Fuel Age. Our greatest responsibility, as parents and as citizens, is to give America's youngsters the best possible education. We need the best teachers and enough of them to prepare our young people for a future immeasurably more complex than the present, and calling for ever larger numbers of competent and highly trained men and women. This means that we must not delay building more schools, colleges, and playgrounds. It means that we must reconcile ourselves to continuing higher taxes to build up and maintain at decent salaries a greatly enlarged corps of much better trained teachers, even at the cost of denying ourselves such momentary pleasures as buying a bigger new car, or a TV set, or household gadget. We should find - I believe - that these small self-denials would be far more than offset by the benefits they would buy for tomorrow's America. We might even - if we wanted - give a break to these youngsters by cutting fuel and metal consumption a little here and there so as to provide a safer margin for the necessary adjustments which eventually must be made in a world without fossil fuels.

One final thought I should like to leave with you. High-energy consumption has always been a prerequisite of political power. The tendency is for political power to be concentrated in an ever-smaller number of countries. Ultimately, the nation which controls the largest energy resources will become dominant. If we give thought to the problem of energy resources, if we act wisely and in time to conserve what we have and prepare well for necessary future changes, we shall insure this dominant position for our own country.

Edit: For those wanting further evidence that this speech was actually given, this is a link to a scanned in version of a Christian Science Monitor article dated June 5, 1957, reporting on the speech.

Monday, July 07, 2008

What George Bush was told behind closed doors
Discover the biggest lie of the last 30 years...

Dear Reader,

Those Saudi Arabians, you've gotta love 'em. First, 15 out of 19 hijackers on Sept. 11 were Saudis, but Saudi Arabia had NOTHING to do with it, or so we're told. They love us!

Now Saudi Arabia is about to drop another bombshell on us, and this one will make Sept. 11 look like small potatoes.

I never thought I'd say anything could make Sept. 11 look like small potatoes. But this does, at least when it comes to the economy.

Sept. 11 shut the markets down for a few days. When the next crisis hits, you'll wish the markets would shut down so you wouldn't have to watch the carnage.

What Bush learned behind closed doors

If some well-informed experts are right, Saudi Arabia's oil reserves are a fraction of what they've been telling us.

Why does it matter? Because everyone has believed for decades that Saudi Arabia's oil supply is virtually unlimited. That's what the Saudis have said over and over again for more than 30 years.

If an oil shortage threatens to cause a recession or a market crash, we can count on the Saudis to come through. So people think.

But in a private briefing, one of America's top oil experts told President George Bush exactly what I'm telling you. In fact, this same man was a consultant to the secretive task force that drew up Vice President Dick Cheney's energy plan in 2001.

In other words, the guy is a heavy hitter who knows the energy business.

He warned Bush that the Saudis don't have anything near the oil reserves they claim. They already pump less oil than most "experts" think, and here's the real kicker...

Saudi oil production is about to drop sharply. And it will keep going down for good.

Other experts have analyzed the numbers and come to the same conclusions. If the charges are true -- and I believe they are -- we could be facing...

Oil at $150 per barrel and gasoline at $8 a gallon

The oil is running out. It's as simple as that.

But that's not what you hear from so-called experts. If you ask government officials, our intelligence agencies and even powerful Wall Street financiers, they tell you the opposite.

They say the Saudis could quickly double their oil production from the current level if they wanted to. And given a few years, they think the Saudis could produce four times as much oil as they do now.

This is like the Iraqi WMDs all over again

The intelligence agencies and the conventional "experts" are dead wrong. The oil isn't there.

Why should you pay attention to what I think? Let me give you a good reason, and then you decide. My name is Byron King, and I'm the co-editor of Outstanding Investments.

My publication had the best track record over a five-year period of any investment newsletter in the country in 2005 and again in 2006. You can check it out at MarketWatch and its independent rating service, the Hulbert Financial Digest.

Readers who followed Outstanding Investments are up 43% so far in 2008 and averaged 79% last year. What's more, we did it all with stocks, not options, and I recommended very few trades. So it's worth your time to spend a few minutes and let me tell you...

Why 2007 was a year of crisis

The oil and gas shortages we've seen lately are nothing compared with what's on the way.

When the truth comes out, it will send shock waves through the world economy. Everyone will find out too late -- when gasoline soars to $5 or $6 per gallon. I'm writing today to give you a heads-up.

The next few pages show you how to protect yourself and get rich off energy sources and technologies the world will scramble to buy at any price.

Don't be surprised if certain commodities and resource stocks soar three, five or even 10 times over.

Here are a few things you'll discover in the next
few minutes...

The most important fact -- not an opinion, but a fact -- that should guide your whole investment strategy.

A "minor" sector of the energy market is set to grow 17 times over. I give you the best ways to play it.

A "little" oil company owns reserves the size of Alaska's Prudhoe Bay. It's not even on your radar screen, yet the stock is already up 1,000%, and readers who listened to me are currently up about half that gain -- 740%. Even bigger gains are on the way.

The coal revolution is here. It's always been cheap and plentiful. Now it's going to be clean, and soon it will even be liquid. It's also going to cause a massive shift in world power. Two American companies will profit big time.

What car will you drive in 2015? Keep reading to discover a "secret play" on the winning car technology of the future. Hint: It may run on coal. MORE: Why the Prius will be a loser. And another surprise: The car makers are NOT the ones who will reap big profits from the super-car.

Discover the fastest-growing energy source in the world. Also the cleanest and safest. America may miss out, but you can still profit.

A natural gas company offers more income than CDs do. It will probably give you a 100% capital gain to boot. But you have to know about a hidden pitfall. Keep reading...

Three wild cards could send oil well over $150 in one day. One of these events may have happened by the time you read this.

I urge you to keep reading and at least consider the steps I recommend to protect yourself. Because you need to ask...

Will Americans have to read by candlelight and bike to work?

We will if the country dodges crucial energy choices -- and time is running out. It may be too late to avoid a deep recession. It's definitely too late to avoid $100 oil, thanks to...

Saudi Secrets and Funny Math

The cupboard is bare and nobody knows it

Americans used to run Aramco, the huge oil company that manages the Saudi fields. But in 1979, the Saudis booted us out and took over.

And then a funny thing happened...

The Saudis started keeping everything a secret.

No one knows for sure how much oil they've got in the ground, or how much they produce each year or how much they could produce if they wanted to push it to the max.

It's all secret. Experts try to figure out how much oil the Saudis sell by monitoring tanker traffic in and out of the world's ports. That's how little we know for sure.

But wait, it gets worse!

After the Saudis took over, an even funnier thing happened...

Their figures for proven reserves kept going up and up and up -- even though they didn't find any major new oil fields!

In 1979, the Saudis adjusted proven reserves upward by 50 billion barrels. Then eight years after that, their proven reserves magically grew by another 100 billion barrels.

Their estimated reserves increased by 150% in nine years -- to a total of 260 billion barrels. And they didn't find a single major new oil field!

And here's the funniest thing of all...

For the last 17 years, they've claimed they own 260 billion barrels of proven oil in the ground. The figure never goes down, even though they pumped out 46 billion barrels during that period.

Let me see...260 minus 46 equals 260. Saudi math!

Based on these bogus figures, the Saudis claim they can produce as much oil as the world wants for the next 50 years. As recently as 2004, they claimed their reserve estimates are actually conservative.

That's why most of the world's governments and intelligence services believe the Saudis could pump 20 million barrels of oil a day if they wanted to. Trouble is, we've got no proof except their say-so.

If it were true, we wouldn't have a thing to worry about. But it's not.

It's horse hockey

Before Aramco's American owners were shown the door in 1979, they told Congress that Saudi Arabia had proven reserves of 110 billion barrels. There have been no major new discoveries, so 110 billion barrels was probably about right. And since then, about half of that has been used up.

So why do the Saudis insist everything is just fine and they have 260 billion barrels of reserves?

One reason is they wanted to discourage non-OPEC nations from looking for more oil or switching to alternatives.

It was a devious plan, and it worked perfectly.

But that wasn't the only reason the Saudis lied about their reserves. They did it because everyone does it! Everyone in OPEC, that is.

The Biggest Lie of All: OPEC's Imaginary Oil

In the 1980s, OPEC's claim of total reserves magically leaped from 353 to 643 billion barrels without a single major discovery. Industry experts call it the quota war.

You see, OPEC had to limit how much oil each member could sell, because prices were too low. The quotas were based on... each member's oil reserves!

That's right: The amount of oil OPEC would let a member pump depended on how much that member had in the ground. So it paid for OPEC members to claim the biggest reserves they could. And that's what they did.

The Saudis alone jacked up their estimate by about 100 billion. Kuwait added 50% to its reserves in one year, 1985. Venezuela doubled its reserves in 1987. Iraq and Iran doubled their estimates, too.

What's more, OPEC members did like the Saudis and kept their reserve estimates the same year after year, as if no oil were being pumped out and sold.

Everyone claimed to have a bottomless well.

Now, if you're like me, you prefer to base your financial decisions on the real world, not on a fantasy.

Let's look at how much oil there really is...

In the 1970s, when Western managers were still in charge, they believed for a time that Saudi output could reach 20 million barrels a day. But by the time the Americans lost control in 1979, they figured the peak would be 12 million.

They also predicted that peak production would last only 15–20 years. 1979 plus 20 is 1999. We're past the peak, if these men were right. But we already know they were too optimistic.

The truth is that Saudi production never got to 12 million. "In all probability, output peaked in 1981 at an unsustainable level of about 10.5 million barrels per day," according to Matthew R. Simmons, a leading oil industry authority.

And yet the lies go on...

In 2004, Saudi officials claimed they boosted production to 9.5 million barrels per day and maintained that level for five months.

It's almost sure they were lying. The International Energy Agency is the group that keeps an eye on these things for the developed, oil-importing countries. The IEA could find no sign the Saudis were selling more oil.

As far as anyone can tell, they pump only around 5 million barrels a day, and that's all they've pumped for years.

It's déjà vu all over again

In spite of being lied to at least once, the IEA, the U.S. Department of Energy and other forecasters believe the Saudi claims. ALL their projections of our energy future ALWAYS assume the Saudis could produce 15–20 million barrels a day.

The lies have worked. Not only do Western politicians believe them, but so do many oil industry experts and investors with huge amounts of money at stake. They've been had.

You'll get the full story in a FREE special investment report called Crude Awakening: How to Survive the Total Global Energy Crunch. It's just one of four free special reports with my 10 best recommendations.

The three specific picks in Crude Awakening are already moving up. In fact, one recommendation is up 64% since I recommended it. I'm telling readers to hang onto all three of them, because the profits have just begun.

We went through three recessions from 1973–1983.
Care for a repeat?

Our whole economy is at risk. Your investments are at risk. Your retirement plans are at risk.

America has been so prosperous the last couple of decades, a lot of people forget what the energy crisis of the '70s was like. Let me remind you: The price of a barrel of oil shot up 400%. Long lines formed at gas stations practically overnight.

Folks had to pay four times as much for a gallon of gas, and there came a week when one out of every five gas stations in the United States had no gas to sell at any price.

The U.S. had three major recessions within 10 years after the first oil crisis in 1973. And those recessions were deep, with double-digit unemployment, double-digit interest rates and double-digit inflation.

Think 10–12% unemployment.

Think 15–18% mortgage rates.

Got the picture? That was the '70s. Not fun. My take is that a similar crisis will rock the nation before we solve our problem with clean coal, liquefied natural gas, oil from tar sands, high-mileage cars and safe nuclear plants. More than likely, the politicians will quarrel for years before they do what has to be done.

My picks are already way up, even though our energy problems so far are nothing compared with what's on the way. At the risk of looking kind of cynical, the worse the crisis gets, the higher my recommended stocks will climb.

So I urge you to send for the four free special investment reports, including Crude Awakening: How to Survive the Total Global Energy Crunch. Then buy the recommended stocks and hang onto them, because...

Most of the rest of your investments will tank...

You may lose your job...

Gasoline could race past $8 a gallon...

Houses, including yours, will lose value. It could be a paradise for bargain hunters, but not if you're broke...

Groceries and everything else you buy may cost a fortune...

What's more, you might need to buy a gun to protect yourself.
The 10 energy investments you'll get in Crude Awakening and three other free Special Investment Reports are the best insurance I've been able to come up with. I can't guarantee you'll make money. No responsible investment analyst will do that. But my newsletter had the best documented track record in the United States over a five-year period.

In fact, we were one of the first newsletters to realize that the long-awaited promise of oil sands was becoming a reality. Since the late 1960s, geologists and scientists had searched for an economical way to separate usable oil from a giant pool of sand, water and clay in Canada. Some oil forecasters had been predicting giant profits from the project for almost as long.

Outstanding Investments, however, didn't see any compelling reason to jump in until just a few years ago. That's when a scientific breakthrough sent processing costs plummeting... just as conventional oil prices were skyrocketing. It was clear to us that oil sands' time had finally arrived...

Not long after, the U.S. Department of Energy agreed, and for the first time it calculated Canada's oil sands as reserves -- putting it just behind Saudi Arabia.

Since then, we've watched our pick go from a mere $12.69 to as high as $104.04. Add in the dividends we've racked up, and that's an incredible 731% gain! But you're not too late; the fun has just begun. Join Outstanding Investments today, and you'll see this one still listed as a buy.

And inside the FREE reports you'll receive, you'll discover another hot buy:

Operations in All the Right Places

A Brand-New Oil & Gas Operation With Some Old Successful Faces

Investors have already figured out most of the oil story. While there are few precious gems left, most of the best companies have already been discovered and overbought.

However, in typical Wall Street fashion, some great secondary plays are still completely overlooked.

Consider the case of natural gas. For over a decade, its price has moved more or less in tandem with oil. Just a few years back, in fact, investors used that fact to secure some pretty hefty gains. The memory didn't seem to stick, however... because natural gas is ready to move again. Take a look at the chart below.

To my eye, natural gas is undervalued... and that's why I'm so excited about the relatively new stock I've uncovered...

20% by Next Year -- Just for Starters!

Once part of an energy giant, this company went off on its own late last year. But it took a pretty hefty chunk of real estate with it.

This company now controls some of the most important natural gas pipelines in North America, able to send natural gas from Houston, Texas, all the way to Halifax, Nova Scotia. It has mining operations, transfer terminals and even storage facilities in all the right places.

In short, it has the kind of infrastructure that would be nearly impossible for another company to create.

As if that weren't enough reason to love this gas play... just take a look at the numbers this company has racked up -- even as natural gas prices have declined.

The Numbers Speak for Themselves

With a market cap of less than $20 billion, this company sports a profit margin of 12.4% -- nearly unheard of in the gas industry. Several major institutions are predicting a steady influx of cash, too. In fact, one major analyst expects 9% earnings growth for the years to come.

We think that might be a tad conservative. For one thing, gas prices are on the verge of breaking out. More importantly, this company has big plans for branching out. It's already a pretty big player in Canada, and could benefit nicely from oil sands growth... not to mention any appreciation in the Canadian dollar.

Obviously a play this fantastic won't be overlooked for long. Once the mainstream catches on to what they're missing, we could easily see results matching that oil sands play that has gone up nearly 7 times already.

I'd hate for you to miss out. So send for your FREE copy of Crude Awakening: How to Survive the Total Global Energy Crunch. And here's a recommendation you'll find in another one of your free reports, Tailpipe Riches: The Race to Build the Car of the Future...

A Secret Way to Invest in the Car of the Future

The hybrid engine isn't it. And the hydrogen car isn't, either

The race is on to design the car of the future. Every player in the industry is scrambling for the prize, and the winner will dominate the world car market for decades.

The three big contenders are the hydrogen fuel cell, the electric hybrid vehicle and the diesel. You're going to be surprised when I tell you the most likely winner.

What's more, I've identified a "secret play" on the winning technology, ready for your portfolio right now. Let's take a look at the three cars in this race...

The hydrogen fuel cell gets the most hype

Detroit put all its chips on fuel cell technology, and it's been telling us since the late 1990s that a breakthrough was just around the corner.

In 1997, German-owned DaimlerChrysler actually predicted 100,000 fuel cell engines on the road by 2005. In 2001, General Motors projected about the same timeline.

Even George Bush got into the act, declaring in his 2003 State of the Union message that "America can lead the world in developing clean, hydrogen-powered automobiles."

It didn't happen and it probably won't

The short explanation for Detroit's failure is that the engineering problems were bigger than it thought. On top of that, the fuel cell engine costs 10 times as much as a conventional engine.

Worse yet, there's also the problem of building a national network of fuel stations where you can fill the tank with hydrogen. Hydrogen isn't found in nature in a usable form, and it's very expensive to produce. A national hydrogen rollout could cost $100 billion.

There's still hope that hydrogen will come through in the end, but the National Academy of Sciences believes the "hydrogen economy" is decades away.

Meanwhile, electric hybrids roar ahead

When Toyota announced a heavy investment in electric hybrids a few years back, Detroit snickered. To Detroit, it just seemed like a halfway solution on the way to the fuel cell car.


I don't need to tell you that the electric hybrid Prius is a sensation, and Detroit is now rushing to play catch-up. It'll come out with a number of hybrid models in the next few years, many of them using technology licensed from Toyota.

What's more, the electric hybrid is not just an underpowered small car. Toyota now offers a high-end SUV hybrid with better acceleration than the standard model!

So hybrids are where it's at, right? Wrong again.

The Prius has problems.

First off, the gas mileage on the Prius is not all it's cracked up to be. Consumers have noticed, and some aren't happy.

What happened is that the EPA tests vehicles under ideal conditions on a flat surface. In the real world, it looks like Prius' mileage is not so hot. Also, most of the hybrid's big mileage gains occur in stop-and-start city traffic. On an open road, the conventional engine actually gets better gas mileage.

When you look at the Prius' true mileage, there are plenty of conventional vehicles that do as well or better.

Add in the high extra cost of the hybrid engine, and some say you have to drive the car a hundred thousand miles to recoup the extra money you pay for the fancy technology.

There's a third alternative, a "sleeper" technology that's going to surprise everyone...

And the winner is...

The humble old diesel engine -- the third and final competitor for car of the future.

How can that be? Diesels are loud, dirty and smelly. A pollution nightmare.

You can hear a diesel truck from a mile away, see the soot from halfway down the block and smell the exhaust as it rolls by.

Except -- surprise! -- those diesels you hear and smell are antiques. Thanks to new technology, diesels aren't so dirty anymore, and the gas mileage is better than ever!

Here's what happened: Europeans have to pay heavy gasoline taxes and they worry about global warming, so they invested in the diesel engine as a stopgap, just in case the hydrogen car hit a snag.

As you know, hydrogen DID hit a snag. Now the stopgap looks like the winner in the great auto race.

You see, diesel gets about 30% more miles to the gallon than gasoline, and those savings are real, in any kind of driving conditions. What's more, people who worry about global warming prefer diesel because it emits up to 20% less carbon dioxide. But wait, it gets even better...

Diesels have a huge, surprise advantage

Diesels now rival traditional gasoline engines for quiet, and European refineries have removed most of the pollutants from the fuel. The engines cost more, but the gas savings almost make up the difference. I'll tell you a sleeper stock -- it's not a car company -- that's the best way to play the diesel revolution.

But meanwhile, there's an even better way to invest than the hardware under the hood. Diesel's biggest edge is something you'd never expect...

You don't need crude oil to make diesel fuel

You can make it from coal, plant matter or even cooking oil. (No kidding! A restaurant can invest in a cooking oil converter kit that lets you fry a batch of potatoes and later reuse the oil in your delivery truck.)

In a few pages, I explain how liquefied coal is one of the big technologies of the future no matter what, whether the diesel engine wins or not. But if diesel wins the auto race, coal will be the biggest thing since folks traded in their horses for cars. King Crude may be dead, once and for all.

How bad does the world need these new technologies? REAL bad. My readers have already profited, with one energy pick up 731% as this is written, and two others up 544% and 289%.

We reaped those gains because, whatever the future holds, the oil crisis right now is bad enough...

In India they make fuel from cow dung

Every year and, indeed, every month the world will grow more desperate for the alternative fuels and technologies I'm talking about.

India imports more than 75% of its crude oil. It's so desperate for alternatives, it recently promoted cow dung as an important energy source. A new use for sacred cows!

The problem is Asians these days are buying cars like... well, like Americans.

The Chinese would have to buy 650 million vehicles to reach American levels of car ownership. That's not likely. But a fraction of that figure will create an oil and pollution crisis big enough to finish us off.

In the vast markets of India and China, a vehicle that runs without crude oil will be irresistible. But there's still more to the diesel story...

A hybrid diesel engine is the next step

A combination of hybrid and diesel technology will take the fuel savings up a notch. Make that two notches. And it will happen soon.

An MIT study predicts the diesel hybrid could outperform a hydrogen fuel cell engine on both gasoline mileage and carbon emissions -- within 10 years.

In other words, the hydrogen fuel cell car may never get to market. It's dead in the cradle thanks to breakthroughs elsewhere.

Is there a catch? And how can you make money?

There is indeed a catch to all this, but the catch is where you'll find the profit opportunity.

The obvious play is to buy the big automakers like Toyota that own the leading hybrid or diesel technologies.

Obvious, but wrong. The auto industry is on its way to becoming a replay of the airline industry. The competition is already cutthroat, with razor-thin margins. Now we're going to see General Motors and Ford file for bankruptcy.

When that happens, they'll walk away from the pension and health care obligations that are killing them. Their plants are in political battleground states so the politicians will help them stay afloat. They're "too big to fail."

Once they're operating under Chapter 11, like the airlines, the automakers will launch profit-killing price wars that may last for decades.

Emissions are the key to profits

No, the way to profit from the diesel revolution is to buy the company that's going to remove the last obstacle that stands in the way of diesel: pollutants.

You see, the Europeans still haven't been able to remove the last bit of filth from diesel exhaust. They've just put up with it for the sake of fuel economy and lower carbon emissions.

Whoever comes up with the best diesel tailpipe solution stands to make a killing. And a high-tech American company has done exactly that. It's come up with a diesel filter that's far superior to what the Europeans now have.

A very surprising angle will make you money

Diesel tailpipes will be a billion-dollar market within two years -- an increase of more than 80-fold from the year 2000. As the oil shortage deepens and the world scrambles for fuel mileage, the company I'm telling you about will be on every front page in the country.

This company is a technology leader that created one of the most important inventions of the '90s telecom boom -- but I'm not talking about Microsoft or Intel or any of the obvious choices. The company I have in mind keeps a lower profile.

Now it's come up with ANOTHER breakthrough technology that few investors know about.

My crystal ball says its technology is going to wind up in 200 million vehicles. I'll tell you all about the stock in a FREE special investment report called Tailpipe Riches: The Race to Build the Car of the Future. It's one of four free reports you get when you subscribe.

Subscribe now and get your free copy. You'll want to snap up this breakthrough technology before it's too late.

But meanwhile, you can also make a bundle off the liquefied coal story...

The Great Coal Rush

It's clean, cheap and soon will be liquid

While the oil runs out, there's still plenty of coal. The world has enough coal to last for 300 years at current rates. Coal already accounts for more than half of our electricity.

But coal is dirty, right? And there's no way it can power cars, right?

Wrong, and wrong again. Coal can be cleaned up AND it can power your SUV. However, it's not cheap to do. It's only worthwhile when a barrel of oil costs more than $30.

Which means you're in luck if you own stock in a coal company, as my readers do, because oil is way more than $30 a barrel, and it's going to stay that way. Forever.

As I write this, my readers sport an 173% gain on my coal recommendation.

Coal is set to replace oil almost everywhere

You're now one of a handful of people who know about clean coal, and you're going to make a fortune off it. I want to send you all the details in another FREE special investment report called Turning on the Juice: Power Plays for the Electricity Crisis Ahead. It's one of four reports I send to all new subscribers.

Let's look at how big the opportunity really is...

The U.S. and China both have a growing problem with the price of oil and with the unstable countries they have to buy it from. Meanwhile, the U.S. and China both have HUGE reserves of coal.

Add in Australia and Canada and you've got four countries that you could call the OPEC of coal. They own just about all the coal there is.

The U.S. alone has 254 billion tons of proven coal reserves, or about 25% of the world total. Compare that to Saudi Arabia, with 24% of the world's oil (if you believe it).

Meanwhile, the Chinese economy is doubling every 10 years and has a lion's appetite for electricity. The Chinese will have to give up that growth rate or build hundreds of new power plants, one or the other. They have no choice.

China is starved for electricity...and we're not doing so well ourselves!

Electricity could be China's biggest roadblock to growth. Already, blackouts and brownouts happen every day all over the country. Factories by the thousand are forced to shut down from time to time. Many are allowed to operate only during off-peak hours. Children in some cities do their homework by candlelight.

With an economy that grows 8% or 9% every year, and electric usage soaring at the same rate, the Chinese have no choice but to build hundreds of new power plants. And most of those plants are going to run on coal.

In the United States, we have a power crisis of our own. We're at the limit of our generating capacity. We have our own brownouts during peak-demand times. We, too, need to build hundreds of new power plants. Yet the public still doesn't want nuclear power.

A coal boom is inevitable

You do the math: We face a crude oil shortage... nuclear power gives people the willies...we've got plenty of coal in the ground...we've got a choice between more power plants or deep recession and unemployment.

Everything points to coal.

As this goes to press, my readers have gained 173% on my favorite coal investment. You'll get details on the company in the free special investment report called Turning on the Juice: Power Plays for the Electricity Crisis Ahead.

The gains have just begun. We can thank ever-increasing demand for coal and ever-higher prices. All that's left is to solve the pollution problem. And as you'll see in the next few pages, that's about to happen. I've got a way you can play the clean coal technology.

A safe, conservative way to play the Great Coal Rush

The safest way to profit is to own some coal and wait for the price to go up. It will.

I've found a great, long-term stock that came on the market in 2004, as a spin-off from another company. Already, this new kid on the block is one of the five largest coal companies in the United States, with 13 mines in our richest coal regions, plus 100 electric power plants in 29 different states.

This outfit has a staggering 1.8 billion tons of proven and probable coal reserves. That's enough to last 28 years at current rates of production.

The top execs have an average of 26 years of experience apiece. They employ the most advanced technology and achieve some of the highest levels of efficiency of any coal producer on the market.

With an abundant, cheap replacement for oil, these guys just about can't go wrong. Their coal is going to look better and better with oil at $100 and even $150 per barrel. You'll receive all the details in Turning on the Juice: Power Plays for the Electricity Crisis Ahead.

A Coal Company That's Proven To Sizzle

Now, lets talk about a company that's ready to skyrocket with increased demand for coal. One that's based in the U.S. but stands to benefit from a worldwide demand in coal.

In case you missed the memo, China is a huge player in the energy market. This includes the demand and need for energy sources to fire up their many coal-fired power plants.

With new plants coming online almost every day China has been single handedly spurring the demand for coal. Prices are starting to rise, and the companies that own the coal in the ground stand to benefit. The company that I've told my readers about is just that...

173% Gains So Far!

So far this company has shown my readers 173% in gains. That's nothing to sniff at. This huge player in the market is ready to keep spiking up higher and here's why...

Simply put this is the largest private owner of coal east of the Mississippi. They have deep roots in the U.S., along with deep seeded logistics that help get their product through the rails, waterways, and roadways of America.

As you can see, this is no fly-by-night coal company.

And their long lasting logistics network has created competition amongst transport companies. This coal behemoth is large enough to make smaller companies scramble to give it better transport prices.

But that's not all this company has going for it...

A Confident Company Poised For Growth

This company is currently in the middle of a huge stock buyout of another energy player -- something you like to see from a well managed company.

Combine that with a 42% increase in their dividend in late 2007 and you can see that this company's share price is poised for solid growth in the coming years.

Now is still the time to buy -- I'm looking at it as a long-term core holding that will pay for a big chunk of your retirement. But you'll still want to act quickly, this stock has already shot up 173% and there is no sign of it slowing down.

You'll find all of the information, including this lucrative coal company's name, in your special report Turning on the Juice: Power Plays for the Electricity Crisis Ahead.

You can receive this report FREE, plus...

Riding the Natural Gas Boom to Triple Your Money

Tailpipe Riches: The Race to Build the Car of the Future, and

Crude Awakening: How to Survive the Total Global Energy Crunch.

In fact, subscribe for two years -- with a full refund guarantee -- and you receive six special investment reports free.

You'll discover everything you need to know in the free special investment reports. You see, with the help of these special reports, you can...

Profit from something few investors know

The Chinese are turning their country into an open-air lab to develop new energy technologies. The new technologies that come out of their efforts will be exported all over the world. Later in this letter, I'll tell you about their breakthrough in nuclear technology.

The American company that's helping China liquefy coal is doing the same thing in India, another giant country with almost no oil. It's also got a stake in a big Philippine deal.

In other words, this company is the technology leader in a fast-growing industry most investors don't even know about.

And if diesels powered by liquefied coal become the car of the future, there's no telling how high my coal picks can go!

While most investors wait for the price of oil to come down and for things to return to "normal," you can position yourself to profit from the new, long-term energy crisis.

Keep reading and discover...

The fastest-growing energy source in the world. Also the cleanest and safest. But America may be sidelined. I tell you more in a few pages, and everything you need to know in one of your free reports, Turning on the Juice: Power Plays for the Electricity Crisis Ahead.

Goodbye global warming! A Chinese breakthrough may create cheap, safe, clean electric power for the whole world. I've got a safe angle to profit from China's massive investment in electric-generating plants.

A true alternative energy superstar! This dividend-paying company has a market cap of just $1.5 billion. Yet it provides essential components for one of the most popular types of alternative energy. It's order backlog is a jaw-dropping $186.3 million -- and growing by the day. The stock is already up 34% as I write this.

A "minor" sector of the energy market is set to grow 17 times over. I'll give you my best pick.
But please act now. The crisis could hit overnight...

Wild Cards

How oil could go to $150 in 24 hours

If you want to bury your head in the sand and pretend Saudi Arabia has plenty of oil, be my guest. But Outstanding Investments is for investors who want to face reality and be prepared.

Every shred of evidence points to no Saudi buffer for world oil markets. And that's a real problem because oil consumption soared from 52 million barrels a day to 82 million in the last 19 years, and it's expected to grow to 120 million in the next 20...

If the oil can be found. Very doubtful.

High-priced oil is here to stay

There are three ways oil could race past $150 a barrel: It may get there gradually...or on a faster pace of a year or two...or overnight, literally within 24 hours.

Pick any one of the three. No matter how you look at it, it's a sure thing the days of cheap oil are over. We're never going to see $30 oil again, and we may never even see $70 oil. Oil in the $100s may very well be here to stay.

"You never really run out of oil," says a Houston energy consultant named Henry Groppe. "But many years ago we ran out of $2 a barrel oil, then we ran out of $25 oil, and now we're running out of $40 oil."

That's for sure. And that means you need to readjust your holdings. Outstanding Investments has a strategy that will profit handsomely from this inevitable trend. But our strategy could profit even more because...

The disaster could hit very fast

Saudi production could fall over a cliff almost overnight. There could be a deep, sharp reduction in Saudi oil production literally any day.

It's guesswork, but energy expert Matthew Simmons says, "It will take energy forecasters and policymakers by total surprise. Not a single serious energy plan devised in the past three decades has envisioned such a scenario."

He's told interviewers that Saudi output could drop 30?40% from the already low level of just 5 million barrels. Simmons doesn't claim to know for sure, but I believe he's right.

In the big oil crisis of 1973, oil went to $100 in current 2005 dollars.

Back then, the problem was just political. Angered by U.S. support for Israel, the Arab oil producers cut our supply. After things calmed down, there was plenty of oil. This time the problem is real and there's no quick fix.

There's a sword hanging over our heads, and most people don't even know. Just consider this...

Three quick disasters could send oil over $150 in 24 hours

I've spotted three trends to watch that could crash markets and cause a recession.

You already know that the 2005 hurricane season was the worst on record, and the one before that was almost as bad. In 2005, there were 27 tropical storms. Weather experts could hardly believe it, but the last one formed in December, a month after the "end" of the hurricane season.

It's not as weird as a blizzard in July. But it's close.

Worse, the storms are more powerful than ever before. It seems that a tropical storm is more likely now to become a deadly Category 4 or Category 5 hurricane.

Two reasons for the monster storms

The first reason is there's a normal cycle of low hurricane activity followed by a period of high hurricane activity. Each phase can last for several decades.

Clearly, we're in the high phase, and it will probably go on for years. That's bad enough, but it's normal. But now you have to add...

Wild card No. 1:

The danger of climate change

Bear in mind that climate change can be caused by either human activity or natural causes. And either way, the jury is still out. Despite what you may hear from the mainstream media, the case for global warming is far from closed.

But global warming believers are already blaming the monster hurricanes on climate change.

They may be right.

The level of hurricane activity we're seeing has no precedent in the hundred years or so that scientists have been counting and categorizing storms. Meanwhile, a big chunk of our energy industry is located in the worst possible place.

Not in my backyard, and soon, nowhere at all

Americans have largely banned oil and gas drilling and liquefied natural gas ports from the Atlantic and Pacific coasts. They don't like oil refineries, either. Plus, it's well known that the Gulf of Mexico is energy rich.

So America ended up with a huge part of its energy infrastructure located on the Gulf Coast.

A lot of it was knocked out by Katrina and Rita. As I write this, the Gulf coast energy industry is still not back to normal. Gasoline, fuel oil and natural gas prices still remain at record levels.

Just in time for the next hurricane season

If there is a hurricane season like 2005, it could be the end of some 20% of America's oil and gas industry. And it could all happen in 24 hours.

It's hard to picture that oil companies are going to keep on investing in a region where they get knocked out every year. And the onshore plants can't be moved to Boston and San Francisco, where they're not wanted anyway.

We may be staring at a permanent loss of a large part of our energy industry.

Wild Card No. 2:

War and revolution at the chokepoints

World oil supplies are so tight the price could go through the roof if we lose just a couple of million barrels of daily production out of the world total of 82 million.

Production is running full tilt and consumers snap up every barrel that comes out of the ground. There's no buffer (despite what the Saudis claim).

A sudden leap to $150 a barrel, not to mention $150+, could tip us over the edge ? and into a deeper recession. The immediate cause could be war or revolution in an oil-producing country.

Toss in another bad hurricane season at the same time and it could be the end of our way of life.

Saudi Arabia itself is a prime candidate for revolution. You might think al-Qaida's main target is the United States, but in fact the main target all along has been control of Saudi Arabia.

The World Trade Center was just a stop on the road to Riyadh, as al-Qaida sees it.

But my own pick for disaster is Nigeria. This African country is the world's No. 12 oil producer, and a big supplier to the United States.

The Nigerian wild card

The country is seething with revolution. The government — if you want to call it a government — admits that thieves steal as much as 200,000 barrels of oil a day and sell it on the black market. Off the record, experts put the bootleg oil as high as 650,000 barrels a day.

That kind of oil generates huge sums of cash, and a lot of the money is plowed into arms for the rebels. There's no shortage of poor, hopeless young men willing to use the weapons. Three Nigerians out of five live in poverty.

Caught in the middle of all this are big oil companies like Shell and Chevron. In some parts of the country their facilities have been shut down and they've been kicked out. If you want to get punched in Nigeria, just tell a native you work for Shell.

Wild Card No. 3:


You won't be surprised to learn terrorism is the third wild card that could create an instant crisis. In fact, a former CIA director recently joined some former oil executives and government experts in a risk-analysis exercise.

They forecast three very likely events that could bring the roof down on our heads.

One of them was civil war in Nigeria.

The other two were both terror incidents.

Intelligence agencies know the terrorists have especially targeted oil facilities and infrastructure. It's an international game of cat and mouse in which the terrorists are looking for a weak point day and night, high and low, while we try to find them and stop them in time.

It's only a matter of time until they succeed. It's like a thief checking every door in the neighborhood every night. One night, he'll find a door that's not locked.

Are you getting the picture? The good scenario is that the oil price will gradually climb to $150 over the next few years.

The worst scenario is that it will go there next week, or next month or next year.

Either way, you can gain anywhere from 100?1,000% on the investments I recommend. The only question is HOW MUCH MONEY YOU'LL MAKE and HOW FAST YOU'LL MAKE IT.

The investments I reveal in your four FREE special reports are your ticket to survival, and even wealth, in the midst of recession and chaos. You receive full details on all 10 recommendations as soon as you subscribe to Outstanding Investments.

The Natural Gas Bottleneck

A market set to multiply 17 times, according to
government figures

When oil started getting pricey during the 1970s, America switched to natural gas in a big way. Natural gas now supplies about 24% of our total energy needs, including a big chunk of our electricity.

The move made sense. We had plenty of natural gas, and what's more, it's a clean-burning fuel that cuts down on pollution. But like any kind of fossil fuel, there's only so much of it. Now we're running out.

After the big hurricanes of 2005, everyone can see the U.S. is vulnerable. We didn't have the gas supplies we needed when we needed them. That was a cold, expensive winter for a lot of Americans.

The gas shortage will be hard to solve

America has placed vast areas off limits to drilling. Not only millions of acres of federal lands, but also most of the offshore areas on the Atlantic and
Pacific coasts.

These gas-rich regions are off-limits even though natural gas doesn't create spills. If there's an accident, it just escapes into the air. And drilling rigs are mostly out of sight of the resort properties on the beach.

The regulations have left only the Gulf of Mexico, aka hurricane alley, for offshore drilling and natural gas production. But we've painted ourselves into a corner...

The rest of the world burns up natural gas to get rid of it!

If you saw your heating bills shoot up this winter, you'll be frustrated to learn there's plenty of gas worldwide. It's a byproduct of oil wells, and if an oil field isn't close to a big population center or a pipeline, the gas is just flared off.

The rest of the world burns off as much as 2.5 trillion cubic feet of what is called "stranded" natural gas. That's equivalent to 1.7 billion barrels of oil totally wasted every year!

The problem is that gas, unlike oil, is hard to transport. You can't build pipelines across oceans. And big oceans separate North America from the cheap gas that's now going to waste. This energy bottleneck is your chance to multiply your money up to 17 times.

Because of the bottleneck problem, the price of natural gas is much higher in North America than in the countries that are swimming in the stuff. It's a huge opportunity, and I've prepared a free special investment report to help you profit. I call it Riding the Natural Gas Boom to Triple Your Money.

Take a look at the free report's best play on natural gas...

An easy answer to the gas shortage, with a 45-year
safety record

There's an easy solution to our natural gas shortage, and it's been around for years. It's called liquefied natural gas, or LNG.

If you turn natural gas into a liquid by supercooling it, you can transport 600 times as much gas in the same space. One LNG tanker can carry as much as 600 ships hauling natural gas in vapor form.

And despite what you may have heard, LNG is safe. With 40,000 LNG tanker voyages spanning the last 45 years and crossing 60 million miles of ocean, there hasn't been a single major accident. Not one.

No explosions, no fireballs, no gruesome casualties. Sorry, Hollywood.

You'll learn everything you need to know in Riding the Natural Gas Boom to Triple Your Money, devoted just to this topic. I'll rush you a free copy when you try my newsletter, Outstanding Investments.

A market set to multiply up to 17 times

As things stand now, the U.S. gets only 1% of its natural gas in the form of LNG, but with the energy crunch, things are going to change.

The government's Energy Information Agency believes LNG will provide from 14?17% of our total gas supply by 2025. That means a 14- to 17-fold increase in LNG.

Better yet, that's going to be a higher percentage of a bigger market, too. The EIA projects total gas consumption — LNG and vapor combined — will boom 30% in the next 10 years. And meanwhile, a fierce bidding war has broken out among Europe, Asia and the U.S. for every available ounce of LNG.

Would you to like to sprint from a 1% market share to a 17% market share in a growth industry? I would!

Destined to dominate

The boom was actually under way before the current energy crunch hit. LNG trade soared 55% in the 10 years ending in 2004. This little market is growing like crazy.

Some analysts even predict LNG will surpass King Crude to dominate the world's energy markets. The CEO of Shell says within 10 years, gas will be a bigger part of the company's business than oil.

Please join me and the happy, increasingly rich readers of Outstanding Investments. As I write these words, we're up 65% on my first pick...

The Best Play on Natural Gas

Finding the right investment in the booming natural gas market is not as easy as it sounds. For example Exxon Mobil is so large that buying it as a play on natural gas would be like buying a ranch to own a steer.

We need a pure natural gas producer that can grow 200%, 300%, or even more. And I found it! Readers have already had the chance to make 65%, and I think we may see this stock double, and then double again.

Make Several Times Your Money in Natural Gas

My top pick sports a $21 billion market cap. It's one of the top 3 independent natural gas producers, but in the energy business it qualifies as a small, nimble player.

This company is a natural gas powerhouse based in the U.S.

It owes its success to active property acquisition and consistent drilling. This isn't a new strategy, but this company is doing it on a large scale in the right market. This company is a master in every facet of the natural gas business.

I'm not the only one who thinks this company is about to skyrocket...

What's one indicator that great investors have always used to predict upward movements in a stock price? Insider buying.

Who knows the business better than the management of a company? No one. If company execs are putting large chunks of their hard earned dollars
into the stock, you know that they believe the price will go up.

This company's CEO has been stocking up on shares. For the past couple years the CEO has been filing SEC form-4's — the forms you have to fill out if you are an insider buying your own company's shares.

Do you think this CEO would be sinking his hard earned money into something that he didn't believe in? No way. He knows what I know about natural gas. And right now it's at a great time to buy.

The Worldwide Natural Gas Boom

This company is in a great position to profit, but they are in an even better market. Natural gas is quickly becoming the energy of choice internationally.

As oil prices increase, natural gas demand will also become a cheaper and more viable energy source. And this company will stand to make money. And here is the kicker...

Alone this natural gas producer is a strong candidate for growth, but it may be an even stronger candidate for a buyout. With a company this well positioned it may just be a matter of time before one of the big guys buys them out...

You'll learn all about it in your free special investment report, Riding the Natural Gas Boom to Triple Your Money. You receive this report and three more to boot when you subscribe to my newsletter. Meanwhile, here's another way to profit...

Earn a 6% Dividend and Double Your Capital, Too!

LNG is a possible grand slam homer in natural gas. But you can also profit from North American companies that don't need to ship their gas across an ocean.

And if you're fed up with the pitiful interest rates you get on bank accounts and CDs, I've got the best news you've heard this year.

Your free copy of Riding the Natural Gas Boom to Triple Your Money recommends a Canadian gas company that pays a 6% dividend as I write these words.

The company is an energy trust, also known as a royalty or resource trust. The idea is that a group of investors pool their resources to buy a cash-generating asset that provides long-term income.

You're probably familiar with the income trust idea from REITs (real estate investment trusts). Same basic concept: A REIT receives and distributes income from a portfolio of real estate properties, while an energy trust pays income from a collection of oil or gas properties. If the assets appreciate, you can also reap a handsome capital gain.

But you have to watch out for this deadly pitfall

All of this comes with a warning: There's a difference between a real estate trust and a gas trust. Real estate doesn't get used up. Gas does.

That means it's unwise to invest in any old energy income trust. Some of them are just selling off their treasure trove of natural gas and distributing the profits. Eventually, the gas will run out, and your share of the deal may become worthless.

If you look into it, you'll find Canadian energy trusts that pay dividends of 10% or even 12%. Sounds great, until you realize they're paying out all the cash and the business will eventually die.

Buy a gas trust that's in it for the long term

Riding the Natural Gas Boom to Triple Your Money reveals a trust that solves the problem. At about 6%, its dividend is a bit lower, but it retains cash and extends the life of the trust through acquisitions and exploration.

It pays out only about half its cash flow. This trust invests the rest in finding new, long-life, high-quality gas projects. What's more, it's darn good at it.

It's been finding $4 worth of new gas for every $1 it invests

That means you can enjoy the best of both worlds — income and capital appreciation. What's more, the potential for long-term gains is eye-popping.

Just with its current reserves, this trust can keep paying out dividends for another 20 years, compared with 10 years for its competitors. But given its success in finding new gas, and with prices headed up, there's a good chance the dividend will increase and the reserves will too!

You'll be collecting the dividend AND building your assets. The more you learn, the better this company gets.

Best of all, the insiders have been consistent, long-term buyers of the stock. When directors and senior officers put their own money on the line, it's a very good sign they believe in the company.

You'll learn more about this dynamite investment in your free copy of Riding the Natural Gas Boom to Triple Your Money. Read it and reap!

Profit From a Nuclear Breakthrough

Keep reading if you'd like to discover a new technology that sounds like a miracle, even though every word is true.

What's more, this breakthrough can fatten your personal bank account.

If things play out the way I expect, fossil fuel power plants will join wood-burning stoves on history's dustheap. You'll learn all the details in one of your free reports, Turning on the Juice: Power Plays for the Electricity Crisis Ahead. It's the No. 1 way to profit from...

The worldwide boom in nuclear power

After a couple of freak accidents several decades ago, Americans decided they wanted nothing to do with nuclear power ever, anywhere. The accidents at Chernobyl and Three Mile Island killed nuclear power in the United States.

We're just about the only people with that attitude.

The rest of the world took a look at the safety problems, solved them and forged ahead. France now gets 77% of its electric power from nuclear plants. Japan and South Korea get 39% — and the two of them have more than 20 new plants on the way.

Belgium, Sweden, Finland...they've all gone nuclear. It seems like everyone but us is building nukes. China plans to boost its nuclear power capacity by 500%.

In fact, for the past 40 years, nuclear has been the fastest-growing power source in the world. And now it's really taking off.

What's more, all the hundreds of plants worldwide have logged thousands of reactor years without a single accident. You see, Asians and Europeans have discovered something Americans refuse to see: Nuclear power beats fossil fuels hands down.

Nuclear is safer, cheaper and cleaner.

In Turning on the Juice: Power Plays for the Electricity Crisis Ahead, you'll find out how the worldwide boom in nuclear power has sent the price of uranium through the roof. Uranium doubled in the last three years, and it will probably double again in the next two.

Turning on the Juice reveals my best pick among the uranium stocks. The company has huge uranium reserves, plus ready access to China and its massive nuclear program. Best of all, this company controls a production bottleneck the U.S. nuclear industry can't do without.

But exciting as that is, it's nothing compared with my best play on the worldwide nuclear power boom...

Nuclear power plants will roll off an assembly line

The Chinese are charging ahead with a new type of nuclear power plant. I predict utilities will build hundreds, and maybe thousands, of these new plants all over the globe. Electricity will become super-cheap. And eventually we'll see an economic boom worldwide like we've never seen before:

The new plants will be walk-away safe. A meltdown is not just unlikely, it's impossible

There's no danger of radioactivity venting into air or water
There's no chain reaction involved
No need for huge cooling towers or water. No billion-dollar pressure dome
Almost no waste, and what waste there is can be stored safely on the premises
No need to fear a terrorist attack.

You'll learn all the details in your free special investment report, Turning on the Juice: Power Plays for the Electricity Crisis Ahead. The technology uses an alternative way to harvest the energy of the atom — a way that Americans discovered and then rejected decades ago.

The Chinese plan to mass-produce the reactors. The plants will be modular and factory made, built to last 40 years, ready to ship anywhere in the world and assembled like Legos.

A Chinese scientist boasts, "Eventually these new reactors will compete strategically, and in the end, they will win. When that happens, it will leave traditional nuclear power in ruins."

The man has reason to be cocky. They've already tested the prototype by turning off the coolant and letting the plant cool down by itself. That would be totally unthinkable with a conventional reactor.

The ultimate solution to global warming

These plants will get built by the hundreds because the world needs cheap, clean energy. But they'll get built by the thousands if the world decides to get serious about global warming. Selected stocks will take off into the stratosphere.

I think the Chinese will pull it off, and we're going to see a new industrial revolution.

You need to move soon, because the Chinese are plunging full speed ahead. Subscribe now and get your free copy of Turning on the Juice: Power Plays for the Electricity Crisis Ahead.

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Every person who subscribes to my newsletter, Outstanding Investments, receives all four of the free special investment reports I've described...

Special Investment Report #1:
Crude Awakening: How to Survive the Total Global Energy Crunch

Special Investment Report #2:
Tailpipe Riches: The Race to Build the Car of the Future

Special Investment Report #3:
Turning on the Juice: Power Plays for the Electricity Crisis Ahead

Special Investment Report #4:
Riding the Natural Gas Boom to Triple Your Money

These four reports reveal all the details on ten specific investments I recommend. You'll learn about the revolutionary nuclear plant the Chinese are developing...

The brand-new gas company with a massive infrastructure other companies can't hope to match! When natural gas prices take off, this one will almost certainly be along for the ride

Why the car of the future will probably be a diesel hybrid — and the high-tech American leader with the breakthrough diesel filter

The uranium company with millions of pounds of undervalued reserves — an almost sure double — even if you forget it owns one of the only 2 reprocessing mills in America

Why most "alternative energy" is not what it's cracked up to be. Plus, one of the few solid players in this increasingly crowded industry. This one is already up 20% in three months — with plenty of growing left to enjoy!

The American coal company that's poised to jump way above the 57% my readers have seen. Maybe it'll dethrone King Crude once and
for all!

Two natural gas plays positioned at one of America's most vulnerable energy chokepoints. The first is up 55%, and the other pays a cash dividend that wallops any CD.
Plus, you will discover even more opportunities if you subscribe to Outstanding Investments for two years.

Two-year subscribers save me the cost of sending them renewal notices. That's why I give them...


Special Investment Report #5:
Two if by Sea: Shipping Stocks That'll Sail on the Oil Boom

If the price of oil is headed up, the obvious play is to buy oil stocks. Problem is, everyone knows that. I've got a better idea. Often the best way to play a boom is by investing in supporting players most people never think about.

When it comes to crude oil, tanker companies are a great way to multiply your profits. While the price of a barrel doubled, the cost of shipping the oil went up nearly four times! Revenues for shippers soared a 1,000% in 2004, and all 1,500 oil tankers worldwide are booked solid.

Let me show you how to profit in Two if by Sea: Shipping Stocks That'll Sail on the Oil Boom. Yours free with a two-year subscription.

Special Investment Report #6:
The Trader's Code: A Secret Technique for Bigger Resource Riches

The special investment reports I've told you about so far are like a master's degree in resource investing. The sixth and last report will make you the equivalent of a Ph.D.

You'll be primed for it, too, after you've seen the money you can make just buying the stocks straight-up, without fancy leverage. My sixth report, The Trader's Code, takes you to a whole new level:

It's a trading strategy that's capable of doubling your money every three months.

Doubling your money every three months is good enough to turn a $5,000 investment into as much as $2.5 million in only three years. Can you imagine?

This system gave readers 17 winning plays in a row. And I don't play games with this sort of thing. Everything I say is vetted by our legal team. They won't let me say anything I can't prove in a court of law.

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Professional forecasting vs. crystal-ball gazing

My surprising and often disturbing predictions are more than just talk. This is serious information for serious readers.

I publish this analysis in my newsletter. People act on it. Real people. And when they do, they make money. Real money. Dow Jones, Reuters, The Wall Street Journal and others take me seriously. In 2005 and again in 2006, an independent tracking and rating service, Hulbert Financial Digest, says Outstanding Investments was the top-performing newsletter over a five-year period.

The situation with world oil supplies is so critical you must act now to protect yourself!

You can do it with my top 10 energy recommendations. I send these top picks to ALL subscribers in the first four special investment reports.

You're going to need them. Short term, nothing can cushion the U.S. economy against the coming oil shock. Not the president, not the Prius. It's simply too late... for the nation as a whole. But not for you as an individual.

Eventually, the amazing new technologies I've described will take the place of crude oil. But meanwhile, difficult times lie dead ahead, like the iceberg in front of the Titanic. And like the Titanic, the American economy is too big to turn on a dime.

So head for the lifeboats — the 10 recommendations in the four reports I send to all subscribers. And if you want, you can get more valuable investment ideas in the two extra reports for two-year subscribers.

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You take absolutely no risk when you subscribe. My publisher assumes the entire risk. And we're not worried you'll cancel, because by the end of two years, most of the forecasts I've made in this book will be in the mainstream news outlets. And of course, they'll claim they knew all along.

But they won't have the profits from the recommendations. YOU will.

Byron King

Editor, Outstanding Investments
April 2008