"Do you see how this works... ??? I hope I've been able to explain it properly."

Being self-taught in the field of economics my mind is open, especially to the terminology. Thanks Ingo.

@ dave jr

Hello Dave,

DAVE: "It is impossible to know the level of manipulation."

BISCHOFF: I agree with your opinion to the extent that the nature of the manipulation changes all the time. This is not necessarily due to the conspiracy of humans, as it is caused by the constant change of nature itself.

The problem in your reasoning lies by confusing "price" with "value". Value of a good exists to the extent that "work" (human exertion) was expended to produce it. The value of a good has both a "use value" and an "exchange value", meaning that work is expended to produce a good for consumption, and then the value it takes on in an exchange transaction.

The exchange value of a good is at least equal to or greater than the use value otherwise the good and commodity would not be produced. The exchange value of goods can be determined by barter, in which case there is no price, but only a direct, two-party transaction, or it can be determined through arbitrage (discovery of prices) made possible by the use of money.

Gold is Money, and gold is the measuring standard of value. Therefore, gold has no price. However, the exchange value of all other goods and commodities is expressed in the "price" which is the standard created by using aliquot parts of gold to express the exchange value of any other good or commodity besides gold.

You must understand that value of gold can change when technological progress reduces the human exertion required to mine and refine it. To the extent that the same technological process reduces the "work" required to produce other goods and commodities, the value ratio between them and gold is maintained. To the extent it does not, the value ratio adjusts. Therefore, value can change. However what doesn't change is "price". Price as the aliquot parts of gold remains constant.

Do you see how this works... ??? I hope I've been able to explain it properly.

Yes, I see the problem when there is no stated standard for the FRN. Since value is determined by the market (the percieved and actual usefulness of commodities), and "price" must operate in the margin between value and cost (profit), there is only so much room to manuever. The now floating FRN relies on market driven, unlimited artificial definitions for its' value. In effect, "prices" are set instead of discovered and all else has to adjust. Prices become arbitrary but margins between value and cost remain real. This top down (supply side) market approach sets the stage for greater manipulation.

As the cost (to bring to market, see my previous post)) of energy is increasing, its margin is decreasing. But when the price for oil is set higher the price for everything increases since everything else has a component of oil in its price. Bad news for the manipulators.

In attempt to compensate, maintain control, market segments that have spare margin (gold), prices are manipulated downward. Also any tricks to manipulate the cost of labor downward are also being deployed.

But all of this is caused by the decreasing energy yields of oil in energy units, not monetary units. It is not about depletion or running out, rather a tightening of what the modern economy pivots on. Dependency on oil will be more and more costly in standard of living terms, no matter what currency system is used. In the current system, the relative standard of living created by increasing margins of energy from oil, will no longer increase. This is the concept of "peak" due to oil.

But as I said, it is impossible to know the level of manipulation.

@ Dave Jr.

Hi Dave,

DAVE: "When you say, "crude oil is a universal commodity whose value is determined by the Saudis as the lowest cost producers", you are speaking of value in terms of the dollar?"

BISCHOFF: You hit upon the problem of "value" standard. Let's take a look at the definition of "value" as an economic term. The "value" of a good or commodity is derived from human exertion or "work" applied on or to "land" (natural resource) which results in the production of the good or commodity.

The "work" performed in the delivery of a service is a derivative "value".
In other words, without the production of wealth (goods and commodities) as primary activity, payment for service activities is impossible.

The question, however is how to measure value. The U.S. Dollar before 1935 measured the "value" of any good or commodity by measuring it against the standard set by the amount of "work" (human exertion in joules or calories) required to mine and refine 1/20 of an ounce of gold.

After the NBA of 1935, the "value measurement" of "domestic U.S. Dollars" no longer rested with the "gold standard". Instead, its value was derived by the FED setting the interest rate to competete with the interest rate garnered by the "international U.S. Dollar", which later became known as the "Euro Dollar".

When after 1935, the U.S. Treasury Department committed to foreigners to purchase and sell gold at the fixed "price" of $35 USD per ounce, the "international bullion standard" was created. The international bullion standard was reaffirmed by the U.S. government in agreement with 47 other nations at Bretton Woods, NH in 1944.

On August 15, 1971 the U.S. government abandoned the international bullion standard when President Nixon refused to have the U.S. Treasury henceforth buy or sell gold at the fixed price. At that point, U.S. currency in the form of "irredeemable" Federal Reserve Notes became a totally "managed" currency by letting it float against all other currencies. Immediately, interest rates went sky high, meaning the "value" of the irredeemable FRN in terms of gold dropped by several thousand percent.

By trading gold as any other commodity for the first time in world history starting September 1, 1971 with the Toronto Metals Exchange, the public was fooled into accepting the irredeemable FRN as the standard of value.

Of course the Saudis, who at that time were the least cost producers of crude oil, were not fooled by that maneuver. In the Jamaica Accords of 1979, the Saudis agreed to only quote crude in USD/FRN in return for the U.S. Treasury Department and the FED agreeing to recycle all "Petro Dollars" by supplying the Saudi's with future contracts for gold in arrangement with bullion banks.

This maneuver in essence let the Saudis determine "value" of the USD/FRN by deciding the energy equivalent of crude to be the measurement standard for the energy expended by humans performing work.

As the FED goes on with QEs, the measurement standard represented by the USD/FRN will become less and less stable as the Saudis and OPEC are less and less willing to hold to the "price" of crude.

The depletion ratio of the Saudi fields, the games OPEC plays with production quotas, the game non-OPEC producers play in publicizing reserves, the influence U.S. Majors exercise, etc., etc., all are factors which influence the world price fix of crude. Since most invoices in world trade are issued in USD/FRN, the "crude price fix" is the fix of the value of the USD/FRN. The true value standard still lies with the gold standard, but as I said, gold does not truly float against irredeemable currencies.

Am I speaking of the "value" in terms of the U.S. Dollar? No, I am speaking of the value of crude as mirrowing the value of the FRN in terms of the value of gold. Yet, it is difficult to obtain the value of the FRN in terms of gold, as the only clue which is available comes from the precious metals market, and those markets are greatly manipulated by trading "naked" or future contracts which are not covered by physical gold.

According to this non-MSM article, The Forces That Will Push Silver Over $100
Click to view link
peak oil is considered to be a factor pushing silver up.

Nice charts with some uncommon facts.

Without peak oil, $65 Dollar silver, then?

Hi Ingo,

When you say, "crude oil is a universal commodity whose value is determined by the Saudis as the lowest cost producers", you are speaking of value in terms of the dollar?

The energy "profit" I am referring to is the empirical value, BTUs, you like Joules, or Calories, or whichever unit of measure. It is required to expend energy to harvest the resource storing the energy. The net or profit is what is brought to market.

The Saudis are currently pumping massive amounts of seawater to pressurize the dying giant Ghawar field. I understand they have huge reserves of sour crude, but because it contains less energy, takes more energy to pump, transport and refine, the energy profit is much lower. It won't matter what the 'price' of oil is, when the ratio hits 1/1 it's all over and we would be better off walking. Not that we should worry about running out, but that the low hanging fruit, so to speak, has been picked. And that wouldn't even be a problem except so many have come to a lifestyle living on the edge, dependent on previous levels of energy 'profit' that manifests into cheap energy.

But you are right, even the value of the dollar depends on this energy profit, and the value of the dollar is also highly distorted.

I think Obama is hostile toward anything capitalistic or anything that survives without his blessing.

@ dave jr

DAVE: "It is all about "energy in" vs. "energy out". Compare the yield of 1860 Titusville (100/1) to Athabaska today (3/2). True or not?"

BISCHOFF: True. However, crude oil is a universal commodity whose value is determined by the Saudis as the lowest cost producers. As marginal cost producers, the Saudis are able to fix the world price for crude oil in conjunction with OPEC, as long as the U.S. military guarantees uninhibited transportation of crude throughout the world.

The Saudi price fix establishes the standard by which "energy profits" are measured. There are multiple factors considered by the Saudis and OPRC before settling on the "price fix" for world crude. In this price fixing process, the "major" U.S. oil companies are not without influence.

Could that explain the obvious hostility Barack Obama displays toward the U.S. "Majors"... ??? I wonder... ..

There isn't any doubt in my mind that 'peak oil' is real. What I don't know is if it is a natural or man-made issue. So many opinions, so little proof.

The thought of oil majors sitting on lakes of crude, holding back for control reasons is truly conspiracy theory. I'd prefer conspiracy fact.

Then I ask why are wells going deeper and deeper, in more and more inhospitable places? Why are they messing around with such low yielding sources like tar sands and shale? How long will a fracked well last? Why such an increase in energy investment for increasingly low yields? I hope it is just a massive deception.

It doesn't matter if there are trillions of barrels 20,000 feet down. How do you get it to the surface? Is the head pressure of 20,000 feet of crude even fathomable? It doesn't matter how much energy is 'down there', it matters how much energy is net after getting it 'up here'. It seems an investment oriented group such as DB and company could see that.

It is all about energy in vs. energy out, energy profit that is available for use, the energy profit that our modern economy is built on. Compare the yield of 1860 Titusville (100/1) to Athabaska today (3/2). True or not?

@ Dan Haggerty

DAN: "The abiotic theory says oil is produced naturally under the earth by heat and pressure."

BISCHOFF: There is more to the abiotic process which creates crude oil deposits than heat and pressure. It involves the hydrogen molecule and the energy of the sun.

I disagree with this article as well. The points Peak Oilers are trying to make are:
1. Government cannot and will not help you if the infrastructure comes apart.
2. Therefore, you need to take care of yourself by learning basic skills like food production to maintain your independence and survival.
3. It is prudent not to squander the earth's resources, since the cost of "getting to the last drop" may be higher than you want to pay, financially and in incresed destruction of Nature.

None of these ideas strike me as hysterical or loony.

Reply from The Daily Bell

This doesn't strike you as a bit extreme ...


"Among the admirers of Richard Duncan and his "back to the jungle" theory, Britain's Prince Charles and the USA's Bill Clinton have surely consumed a lot of jetfuel kerosene as well as motor gasoline in their lives, to date, and kept away from hunter gathering, as shown by their ability to avoid paperazzi and photo opportunity hunters.

"They also kept Duncan's gory theory of mass human die off and backward evolution to hunting-gathering, due to Peak Oil and fossil energy depletion, out of nearly all of their speeches. As we know, certainly in recent years, the elite fear of peak oil has been replaced by global warming fear - as the best excuse to impose "world government", unelected of course."

@ Danny B

DANNY: "Should all this be true, it means that matter is in short supply compared to energy."

BISCHOFF: Thank heaven for that, and thanks for rediscovering Einstein's
E = mc^2

The peak oil theory is bsed on the biotic theory of oil, that it came from dinosaurs and vegetation. The abiotic theory says oil is produced naturally under the earth by heat and pressure. That's why we keep finding new oil and at depths below the strata where biotic material existed.
Read "The Great Oil Conspiracy" by Jerome Corsi.

@ DB

DB: "We believed that new ways of drilling for oil would be developed and that quite possibly oil was abiotic, created by geological processes rather than biological processes (or perhaps both)."

BISCHOFF: There is scientific proof for the abiotic, geological process which produces crude oil.

Furthermore, instead of experiencing the scarcities predicted by the "peak-oil" crowd, there is in fact a worldwide oil glut. The world price of crude oil is not a "market" phenomenon. The price is set by the Saudi's as leader of OPEC, and it is quoted in USD. Whatever value the USD carries is reflected in the decision by the Saudi's to fix the world price of crude.

Personally I disagree with this article (Although I do agree with the fundamental beliefs of Daily Bell that world government is the target of the Parasites that be). I think peak oil is real and if anything I think many of 'The Parasites That Be' want us to think oil is plentiful so we won't all start panicking and buying gold or something.

Chris Martenson has loads of great information about the exponential growth of oil consumption, human population etc is worth checking out.

A good source for info on carbon is the Oil Drum.
Click to view link
Click to view link
Reportedly, America has 26% of the world's technically recoverable oil. The first part of the report is in Mandarin. Second part is English.
Click to view link

All the new discoveries in the "oil kitchen" haven't even come close to production.
Click to view link
When Hubbert came up with his theories, oil was believed to be biotic and would therefore be found only in shallow pools.
Oil is abiotic and found in lots of places where nobody believed it could occur.

Future energy will come from ZPE. It's everywhere.
Nobel Laureate Richard Feynman and one of Einstein?s protégés, John Wheeler, calculated "that there is more than enough energy in the volume of a coffee cup to evaporate all the world's oceans"
Even more difficult is this finding;
"Today we know that one cubic centimeter of pure vacuum contains enough energy to condense into 10-80 --- 10-120 grams of matter!"
This is more matter than exists in the entire universe.
Click to view link

Should all this be true, it means that matter is in short supply compared to energy.
Living things are immersed in, but separate from incalculable energy. We exist only because we are on a slightly different "plane" than ZPE energy. Someday, we'll tap it.

It's no accident that there is a vicious campaign of disinformation being waged against hydraulic fracturing or "fracking." This is a key technology in the revival of petroleum and natural gas production in the USA; in order to restore the illusion of scarcity, therefore, fracking must be suppressed, just as nuclear and coal-based power production must be suppressed to create a scarcity of electricity.

I've mentioned this before: I agree with virtually every insightful article and point-of-view here at The Daily Bell. The one exception is: Peak Oil. It is real,all these shale oil and gas plays hardly produce anything and are unprofitable in any case under $80 barrel. The 'wells' (which they are not) are depleted in no time.

Having said that, my point-of-view for the 'western countries' (U.S. and Europe) is that as long as the elites keep destroying the western economies (demand destruction) we won't actually experience peak oil. Since the financial crisis began consumption in the west has gone down 6%, which conveniently matches the 6% growth in the east. Nice shift there. Nice... er... happenstance. With or without the new sources of energy in the U.S. we just will never have enough demand again to overcome the supply.

The carbon tax is totally phony and just a tool to put through Agenda 21 and world fascist government. Remember that all the alternative fuels--whether successful or available or not--are NOT compact and portable like gasoline. There just is no substitute for gas/oil. Of course, if Tesla's processes using the electric fields of the universe could be brought into commercial production then, of course, we could all have our electric cars and keep the lights on all night--if we have any jobs or money to buy cars or have a house to turn the lights on in.

Of course, Peak Oilers will tell you the reason that everything is falling apart is the result of the end of cheap oil. But we'll never know since the elites made their pre-emptive attack on the world's economy. And, yes, it was and is a definite theme of the Peakers that a return to savagery is coming soon. About a year and a half ago Mike Ruppert on his radio program spent an entire program talking about which guns to buy, where to buy them etc. He also went to a survivalist camp. He also talked about how to teach your kids to shoot and that they should also go to survival camp, as well as getting out of Dodge now rather than later and so on. Lots of people would say such training will come in handy for other events...

Such as those events Joel Skousen expects to happen... or any number of people who are preparing for collapse... they may not agree on the causes, but they agree on the general result.

Reply from The Daily Bell

OK, many good points, Erik. We'll simply "agree to disagree" on the rest ...

In the begining of '80-th in the official "Soviet Union" revue, the geologists of USSR and many other East European country presented the results of their decenia long time works. This informations are the backbone of the Brezinski&co actual politics in the world.
Only in inside of Eur-Asia teritory of USSR the gas reserves were estimated to be sufficient for 5000 years use of all humanity. About the oil reserves it was pretty much the same. Coal too!
Therefore I can not understand where Duncan came from with his Olduvai theory.
It is beyound any doubt that the PTB and theoir pppets scientists are a big obviouse scam. At any time !
Guilt feelings, Ignorancy, and Fear, the more then enough pillar of any POWER.
Therefore thank you DB that you infirmed the big ignorant massa and told them not to be affraid and there is not any reason to feel guilty. That means to be free.

The Malthusian "peak oil" theory is as ridiculous as the "evolution" theory... there's more oil within our planet than could ever be used... it's the ultimate "sustainable" commodity...

And oil is not derived from the skeletons of dinosaurs, another ridiculous scam promoted by the PTB to serve the dual purpose of promoting evolution and a billions of year old earth and to appeal to children...

I am fascinated by this article. The world we find ourselves in right now is exactly what was predicted for this time by the peak oil theory, as is the current flurry of effort to find alternate supplies like shale oil.

Anyone who looks at the actual production date from shale oil and shale gas drilling can see that they form part of the what the peak oil theory calls The Maximum Effort Peak, which occured in the lower 48 states right after the peak in the early 70's and also occured in the FSU.

What we are seeing right now is the global maximum effort peak. The actual production data shows quite clearly that convention oil exported from all exporting nations has declined steady and by a total of over 2 million barrels per day since 2005, pretty much exactly as predicted by the peak oil theory.

It is fascinating that the theory can be so accurate and bang on and yet still otherwise well informed people can't see it.

I would be interested in a debate with you if one could be organized.

Love the site.

Reply from The Daily Bell

Thanks, why don't you provide a series of bullet points supporting your perspective and we'll respond ...

That's what a thread is for.