Monthly Archives: October 2008

OPEC’s plan to cut oil output to keep prices from falling emphasizes the urgency for the western world to get independent from the cartel

Crude oil price chart

Crude oil price chart

PDF:what-matters-crude-oil-price-chart

A global economic cooldown is more and more likely with the United States and many countries of the European Union already in or close to a recession. The global financial crisis sparked by the burst of the housing bubble in America spreads hysteria, fear and confusion around the world. Stock markets around the world have gone crazy. We saw tremendous losses and short-term record gains on stock markets in recent weeks. Many large financial institutions have collapsed or needed to be bailed out by governments with tax payer money. Fears that the deeply routed problems in the financial as well as in the private sector could bring down the whole system, prompted governments around the globe to take action. In the meantime, trillions of dollars are used to stabilize the financial system. This unprecedented government intervention has, however, not yet restored confidence. Shares plummeted, trillions of dollars in share value have been lost. Markets almost imploded during the last few weeks. Unemployment in the U.S. has risen to a relatively high level. The situation is bad and its widely expected that we haven’t seen the bottom yet.

One consequence is that energy demand from industrialized nations has fallen which reduces demand for oil decisively. Consequently, we watched the price of oil falling by more than 50% since July’s record high at $147 a barrel. Crude oil is trading close to $70 per barrel right now. Though oil is still expensive in comparison with oil prices below $16 a barrel like in the late 1990s. But the plunge in oil prices is apparently causing fear in many oil exporting countries. Especially OPEC countries have become used to extremely high revenues from oil exports and populist leaders like in Iran and Venezuela increased government spending exorbitantly. Hugo Chavez of Venezuela uses most of the country’s oil revenues to build up socialism in Venezuela. This is how he managed to be an elected and legitimatized leader. But the annoying thing for these countries is that they depend on oil prices above $80 a barrel to balance their budget. If oil prices don’t recover, Iran, Venezuela as well as Iraq could see a budget deficit. Even Saudi Arabia has an interest in keeping oil prices high, as it needs $65 a barrel to pay its bills. Some countries like Iraq already revised budget projections downward and cut spending, but other countries, especially those who are lead by populists, are afraid that less generous public spending wouldn’t go down well with the people and threaten their power. That’s why OPEC will hold an emergency meeting on Friday at its headquarters in Vienna. They’re expected to decide on considerable output cuts in order to “stabilize prices”. In other words, they can’t get enough money and they don’t care about whether their customers actually could bear the burden at the moment. In the late 1990s, the situation was similar when oil-exporting countries saw urgent need for higher prices during the price slump caused by the Asian crisis. At that point in time, oil prices were approaching the $10 line. Now, the cut in oil production should shore up prices at a level that is much higher than back in the 90s. Nevertheless, it’s not certain whether an output cut can reverse the trend in oil prices immediately. However, there can be no doubt that oil prices will soar even above $150 a gallon in the medium-term, as oil production will peak inevitably within  the next decade. Global oil reserves are limited, and most of the oil that is easily accessible has already been pumped out of the wells. Fortunately, the current crisis gives us some extra time to prepare for a transition away from oil. The more time we have to come up with alternatives, the less brutal this transition will be. But we obviously have to hurry, though, as we do not anymore want to rely on OPEC’s good will beside from the enormous amount of money that is daily transferred to the Middle East. Energy independence is vital for national security, economic stability and growth. When we start to tap into energy sources that are accessible at home using technologies that are developed at home, millions of new jobs will be created and tax revenues will remain within the borders. In addition, we can reduce our carbon dioxide emissions and combat global warming.

As reducing the power of the oil cartel and shifting to alternatives is in our and the planet’s best interest, there’s no reason to hesitate!

http://www.usatoday.com/money/industries/energy/2008-10-19-oil-opec-pressure_N.htm

What we can do:

This car is hot! – Tesla Motors’ electric sportscar

The electric car revolution is about to happen

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How I gained 16.6% in three days while stock markets crashed

Markets are extremely volatile at the moment. In recent days, stock markets all around the world plunged. We’re seeing the worst market since the Great Depression.  The Japanese Nikkei index lost a quarter of its value within 3 days (and didn’t yet recover because today is a public holiday in Japan and therefore, the Tokyo Stock Exchange was closed while stocks were soaring today), many stock exchanges suspended trading for several hours and even for days like it was the case in Moscow, Jakarta, Vienna, Sao Paulo…. Last week, the Dow had its worst week ever, European stock markets faced double digit losses and even after the $700 billion bailout had passed Congress and was signed into law, panic spread even more quickly and the consequences were massive selloffs. Energy prices have also nosedived due to an expected global cool down and the risk of a recession in the United States which would mean shrinking demand from industrial nations for oil & gas. Many investors seem to prefer staying out of the market and stash their money under their beds.

Obviously, the safest move would have been to stay out of the market, however, I invested on European stock markets convinced that money can be made in any market. And I managed to gain 16.6% in three days. On Thursday, I bought shares of the troubled German property lender Hypo Real Estate, which needed a €50 billion bailout by the German government to survive; of Centrotherm Photovoltaics, a manufacturer of photovoltaic cells and of Munich Re, the reinsurance giant.

Now let me explain why I chose those three: The shares of Centrotherm Photovoltaics fell steeply early last week, though the company won an order from an Asian customer to produce solar silicon and has on overall good performance. Next to Asia, they are also successful in America where they started cell production in early October. The company does not only provide the technology and equipment, it also offers plant engineering service and support. Given the strong decline in value since the beginning of this month, I was convinced that their shares were actually a bargain. And this investment turned out to be a good choice: A 34% increase in value within three days in a bear market. 

The reason why I bought shares of Hypo Real Estate despite they were downgraded to “reduce” by all major banks, is that I expected the potential of a huge short-term gain as the shares are still incredibly cheap, though very risky.

My decision to buy shares of Munich Re didn’t turn out to be wise, but I avoided major losses. Munich Re’s shares are down by about 5 percent since Thursday. Nevertheless, I gained 16.6% in three turbulent days. However, I sold most of my Hypo Real Estate shares this evening. Nobody know whether today’s unexpected rally is a clue that markets hit rock-bottom on Friday and will recover now. Government intervention around the world brought back confidence to stock markets, at least for today. The German government approved a 500 billion euro rescue package to restore confidence and to stabilize markets. This is part of a joined European approach: Six European countries (France, Italy, the Netherlands, Spain, Germany and Austria) offer 1.5 trillion euros in guarantees and fresh capital. Investors who are seeing the steep price falls of last week as a buying opportunity are starting again to put money back into stock markets. There’s no other way to explain why stocks surged today. The Dow made its biggest one-day advance on a point basis ever. Nevertheless, economists don’t see the end of the meltdown as the credit squeeze continues and further risks could be unveiled. Unless confidence returns and the bailout and rescue packages work, things could get worse.

Credit card debt poses a threat to the U.S. economy as it’s been increasing for decades and with many consumers being unable to pay their credit card bills due to unemployment for instance as well as increased interest rates, a consumer credit crisis cannot be ruled out.

But we shouldn’t forget that the approaching presidential elections in the USA are likely to influence the economic development and the financial situation decisively as it has already been the case after elections in the past.

Even though the current crisis is painful for people all around the globe – be it laid-off investment bankers on Wallstreet or workers who lost their jobs in the automotive industry, be it retirees who see their savings shrink or entrepreneurs who struggle to get credit – there’s still something positive about the global economic downturn. Oil consumption in the United States and elsewhere is falling which could give us one or two years more time until we reach Peak Oil. Time to develop alternatives.

Read also: Our prosperity hangs by a thread as it is based on a limited resource – oil

http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/3191459/Europe-stuns-with-1.5bn-bank-rescue-as-France-plays-role-of-saviour.html

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Can things get worse despite the € 1 trillion guarantee?

The economic outlook not only for the United States, but also for Europe and the rest of the world has become bleaker recently. During the last few weeks, things have changed dramatically. The era of investment banks is over with Goldman Sachs and Morgan Stanley having changed their status voluntarily. We saw some banks fail, others being taken over. Though the $700 billion bailout passed Congress successfully and was signed into law by George W. Bush, nobody feels like being out of the mess. There is nobody making a profit due to the rescue package. This short-term fix is just aimed at preventing things from getting worse. Though this enormous government intervention doesn’t go down well with everybody, the financial rescue plan seems to be the best way the administration could respond to the tightening credit market, spreading panic and a weakening economy.

In Europe, even governments that were convinced that the credit crisis couldn’t affect their country seriously are now getting nervous. Several European economies have fallen into recession. Amongst them, Ireland, Italy and France. The European Commission expects the UK, Spain and Germany to fall into recession this year. After the leaders of France, Britain, Italy and Germany met in Paris last weekend, they all stated their willingness to take action, but as this being Europe, they had no clue how to make a joined approach to counteract the spreading anxiety and tightening credit markets. Instead, each nation is trying to find a fix itself and a pan-European solution is out of reach. We could see nationalizations of banks, smaller bailouts and guarantees. Especially Germany’s government which had ruled out the possibility of a recession for the last few months, was forced to act when the Hypo Real Estate financial group, a major property lending and banking company, needed a €50 billion bailout this weekend. On Sunday, the German chancellor announced a federal guarantee for private savings deposits. The value of the guarantee could surpass one trillion euros. This unprecedented guarantee should keep citizens from withdrawing their money from banks and contributing to the lack of liquidity. Despite the bailout of Hypo Real Estate and the guarantee, stock markets nosedived on Monday. This unexpected step rather confirmed the anxiety of investors.

Unimpressed by fear in America and Europe about the volatile financial markets and a significant global slowdown, China is stabilizing the global economy a bit with strong growth rates. Rather than the financial crisis, it’s the scandals of the country’s dairy industry that are making headlines.

Meanwhile, oil prices have hit an 8-month low due to an expected shrinking demand from crisis-torn Europe. Oil prices fell below the $90 per barrel mark. This being no excuse for being less concerned about oil dependence gets obvious when following Iran’s concern that oil prices are dropping too low. The country wants OPEC to counteract and stabilize oil prices at a high level. Undoubtedly, such a stupid policy would be the death-blow for the global economy.

http://www.bloomberg.com/apps/news?pid=20601100&sid=ayQUgBTLYJEc&refer=germany

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This car is hot! – Tesla Motors’ electric sportscar

updated version on my new blog:

http://www.whatmattersweblog.com/2009/03/29/this-car-is-hot-tesla-motors-electric-sportscar/

Nowadays, almost everybody is talking somehow about energy issues. Be it the majority of drivers squeezed at the gas pump or environmentalists worrying about the consequences of our exuberant energy consumption: greenhouse gas emissions and global warming. Others worry about the threat our dependence on oil imports poses to our security. With the United States and all other major economies being addicted to oil, what President Bush publicly admitted in his 2006 State of the Union address: “Keeping America competitive requires affordable energy. And here we have a serious problem: America is addicted to oil, which is often imported from unstable parts of the world.” There’s not only reason to be concerned of the security of our oil supplies but also about the hefty fluctuations we’ve seen recently.

Fortunately , there are some creative minds that want to break our addiction, or at least reduce it. Unfortunately, these creative minds cannot be found anywhere in Washington D.C., nor in the automotive capital Detroit. But that’s not surprising. We will experience some kind of revolution in the not too distant future. Energy technology will become a crucial industry. And when looking back, we see that the giants of the last revolution, big companies like  Google and eBay and many others started out as small Silicon Valley start-ups. What can we expect now with Silicon valley having started to build cars? Will we see cars becoming twice as fast and twice as cheap every year just as computers?

Wait and see! The now 48-year old Martin Eberhard founded Silicon Valley’s first carmaker – Tesla Motors – in 2003. Eberhard named his company after the famous physicist and inventor of the electric motor. Eberhard, showing great concern for the environment and becoming aware of the advantage and potential of the electric motor, decided to build the car of the future. He was thinking of a car that was friendly to the environment, this means with zero tailpipe emissions AND fun to drive. Totally convinced of his idea and highly motivated, he started looking for investors. Next to venture capitalists, former eBay President Jeff Skoll and Google founders Larry Page and Sergey Brin, the entrepreneur, multimillionaire and PayPal co-founder Elon Musk invested millions of dollars. Today, Tesla Motors has its headquarters in San Carlos, California. Besides, Tesla Motors has an assembly plant in England, motor production in Taiwan and a research and development facility in Michigan which is close to Motor Town Detroit where they can get experienced automotive experts from struggling competitors.

                https://i1.wp.com/upload.wikimedia.org/wikipedia/en/4/4e/Teslalogo.PNG

Tesla Motors’ most outstanding model is the Tesla Roadster, an all-electric sportscar with a top speed of 125 mph (201 km/h) accelerating from 0 mph to 60 mph (97 km/h) in just 3.9 seconds. The driving range of the car is 244 miles (393 kilometers) on a single charge including the energy need for air conditioning, seat heating and other accessories. The battery pack is composed of about 6800 laptop lithium-ion batteries which have a high energy density and weigh 450 kilograms. Recharging the batteries takes about three and a half hours and costs about $3. What a bargain! Though its maintenance costs are extremely low and running it is almost for free with the Roadster’s incredible efficiency of 105 mpg (2.4 liters/100km), this very desirable car might not be affordable for everyone. The purchase price is about $100,000.
Nevertheless, demand is huge for these stylish breakthrough cars. Google co-founder Sergey Brin also ordered one Roadster. So did George Clooney who already received his electric powered sportscar in 2007. The sales numbers must be a bit below 1,000, but I didn’t find exact numbers.
Tesla Motors also has several other models in the pipeline:
The production of the high performance electric sedan Tesla Model S, whose price will be about $50,000, will start by the end of 2010 at an assembly plant which will be built in San Jose, California.
Until now, Tesla’s cars are high performance, high quality cars and they’re essential for branding. After having established Tesla as an innovative and quality car brand, a much cheaper plug-in electric car, currently being codenamed “BlueStar”, should be produced and hit the market in 2012 according to Wikipedia. The price could be in the $20,000 to $30,000 range. Tesla Motor’s sales expectations are beyond 10,000 units. With Tesla’s chairman Elon Musk owning a company providing solar power systems, some models could be topped with photovoltaic panels and generate the power to run the car for 50 miles on solar power.
Silicon Valley is known for its ideas that can quickly change the world. Eberhard is convinced that clean-tech will be the next big business. Generally, we are very likely to see energy technology rise to a 21st century key industry. Eberhard was not thinking of a car that was the most technologically advanced, but he was thinking of an intelligent way to realize an alternative to gasoline-driven cars as soon as possible at an affordable price.
Electric cars are in fact nothing new. In 1895, an electric car participated the Paris-Bordeaux car race.
Nevertheless, gasoline seemed to be the better way to power cars for more than a century.
In 1990, California’s Zero Emission Mandate, aimed at reducing air pollution, forced car makers to bring zero emissions vehicles to the market. But unfortunately, this promising mandate was first weakened and finally eliminated by the big car makers. Lobbyists succeeded in changing the bill so that sufficient demand was necessary to force car makers to provide these cars. Allegedly, big car makers like GM had advertisements aimed at keeping demand down. (according to the documentary Who killed the electric car?) A few thousand of General Motor’s EV1s were disposed of by the automotive giant afterwards. Next to bad advertising, the reasons why demand for these early electric vehicles was low were probably the small driving range and cheap gasoline. In addition, the car industry, backed by the Bush administration, filed a lawsuit against the State of California. They succeeded and California had to drop this wise mandate. Just imagine how technologically advanced and how much more affordable electric cars could be today given all the experience and development that could have been going on in the last ten years. Detroit’s automakers would probably not be in such a deep and threatening crisis and they would not lack behind Toyota and other rivals in technology leadership. The United States were less dependent on foreign oil, mobility were more affordable and greenhouse gas emissions would be lower. GM ceased its production of the EV1 in 2000, shortly after acquiring the Hummer brand. Today, the once largest car maker in the world is struggling to survive and its survival is based on the success of an electric car, the Chevrolet Volt. How ironic!
The German maker of luxury cars, Mercedes-Benz was also developing an electric car model which is now known as the A Class, a rather unsuccessful compact car running on gasoline. Daimler Chrysler stopped its electric experiment when the California zero emission mandate was weakened. Daimler Chrysler was betting on hydrogen fuel cells, which is still decades away and extremely expensive, as the fuel of the future.
This time, however, conditions appear to be much better for electric vehicles as they’re a solution to several of our problems. With their price coming down gradually and gasoline prices rising in the medium and long-term,  they’re becoming more and more competitive with conventional cars. With the increased awareness for the environment and the threats of climate change, electric cars with zero tailpipe emissions are a mighty tool to combat global warming. Besides, electric cars can be fast and save energy at the same time – gasoline-powered cars can’t. Furthermore, the electric motor doesn’t need energy when standing in a traffic jam, there is no gearbox, no clutch, no plugs, no tailpipe, no oil, not many parts that require maintenance.
Finally, Tesla Motors even plans to take on Toyota whose hybrids are enormously popular nowadays.
Ian Wright, a former partner of Eberhard, now a competitor also wants to produce electric and hybrid cars on a large scale, but his company, Wrightspeed has a different philosophy. They plan to produce high performance electric supercars outperforming anything else in their class where they see the greatest saving potential. Mr. Wright is right that halving the gasoline consumption of a S.U.V. truck has a bigger effect than replacing a subcompact car with an electric one. It’s probably also easier to introduce this still expensive technology to vehicles in the upper segment.

It will still take a couple of years until convenient, stylish and powerful all-electric cars are available in large numbers. But we already know that electric cars can be as cool, as fast and as convenient as any other car. When thinking of electric cars, people will no longer imagine the small so-called neighborhood electric vehicles (NEVs) in which you probably feel quite uncomfortable when standing next to a pickup truck in heavy traffic. The new electric car models will be snazzy, safe and competitive with gasoline-powered cars. Advancing battery technology is making them more and more viable, they’ve finally reached technical maturity. The next step is building up a recharging infrastructure which would not be too expensive. Charging points could be found in a couple of years at all shopping mall parking lots, at fast-food restaurants as well as in front of office buildings. To solve the infrastructure mess, the California-based startup Project Better Place will build an infrastructure of battery swapping stations in Israel, Denmark and Portugal.

Read also these posts for more information on the global energy crisis and electric cars:

Our prosperity hangs by a thread as it is based on a limited resource – oil

The Air Car could revolutionize transportation – an electric car without an electric motor

http://www.teslamotors.com/media/image_library.php

http://www.teslamotors.com/learn_more/foreign_oil.php

http://www.teslafounders.com/

http://online.wsj.com/article/SB122157636340443277.html?mod=googlenews_wsj

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