Oil & Gas Cartels and American Inertia on Energy Issues : Major Culprits for the Current Economic Situation in the World?


Nothing is as it seems in this world, not even a “barrel” of oil. Look at this 55-gallon steel drum used to transport oil. Is it a “barrel of oil?” Find out below.

Everyone talks about the economy, but no one does anything about it. To get the world back on the road to economic recovery, we have to know something about how the world economy works. For example, ENERGY, and especially oil is a big issue.

Everyone talks about energy, but who knows even the most BASIC facts about it?

YOU do?

Let’s try some simple questions about OIL. You will find the answers further below.

Questions about Oil

1. About how many barrels of oil are used up daily in the world? How many are consumed in the USA? What percentage of total oil consumption in the USA is accounted for by gasoline? Try to guess approximate figures if you do not know them.

2. How many U.S. gallons, or liters (litres), or British imperial gallons are found in ONE barrel of crude oil.

3) How does the price of a “barrel of oil” relate to the steel drum in which oil is actually transported? Explain.

4) In what year did U.S. oil production hit its peak?

5) What political consequences followed? – that are still with us today.

Answers about Oil

1. 80 to 90 million barrels of oil are consumed worldwide per day. U.S. consumption is calculated at 20 to 25% of world oil production, and about half of all U.S. oil consumption is gasoline. WAY TOO HIGH. Oil in the U.S. has to be increasingly imported since the USA relies almost 60% (!) on imports. Does that have some impact on the “economic freedom” of Americans? You bet it does.

2. The price of a barrel of oil is based on a barrel of 42 gallons, equivalent to 158.9873 liters (litres) or 34.9723 Imperial (UK) gallons, but those volumes are for calculation purposes only. Years ago, oil was transported in 42 gallon barrels, but not any more.

3. Oil is now transported in steel drums of 55 U.S.gallons. Music freaks will enjoy knowing that the 55-gallon steel drum has also become the de facto standard sized steelpan. In the early days of the oil business, Standard Oil used the 42 gallon barrel, which became the standard, only to be replaced as far as transport is concerned by the 55-gallon steel drum, a consequence of U.S. military shipping requirements during World War II. But the 42 gallon barrel was retained as a calculation basis.

4. US oil production peaked in 1970. U.S. oil production at that time was 25% or 1/4th of the world market, whereas the U.S. currently produces only ca. 12.5% or 1/8th of the world market.

5. Oil prices rise whenever demand exceeds supply, a situation which the oil-producing cartels try to control by cutting or stagnating production arbitrarily as they wish, which leads to oil price increases.

From the years 1948 to 1972, the price of oil remained steady at about $3 per barrel.

Although the use of oil as an instrument of political control in the world began organizationally with the formation of OPEC in 1960, the defining point was hit in 1970’s when United States oil production started to drop as a percentage of world oil production.

The USA had put itself in the unenviable position of being reliant upon the oil cartels. As written at WTRG Economics by James L. Williams, this became politically clear in 1972:

“[W]hen the price of crude oil was about $3.00 per barrel and by the end of 1974 the price of oil had quadrupled to over $12.00. The Yom Kippur War started with an attack on Israel by Syria and Egypt on October 5, 1973. The United States and many countries in the western world showed support for Israel. As a result of this support several Arab exporting nations imposed an embargo on the countries supporting Israel.”

Oil has remained a political football since that period. As more and more oil had to be imported by the United States and as U.S. policies ran counter to the oil cartel countries, the price of oil has sky-rocketed, and this has been followed by comparable price increases in consumer goods that are produced using petroleum products or oil-based energy (just about everything). The current economic recession is just the logical end result of a price push policy by the oil cartels, which has led to prices for consumer goods such as homes that are far removed from the normal economic realities.

But not just the oil cartels, but also America itself is greatly to blame for the current economic situation. Nothing had been able in the last 40 years to move Americans to change their greatly exaggerated over-consumption of energy.

American automobile manufacturers continued to produce technically outdated gas-guzzling cars, while at the same time, car manufacturers and drivers in Europe, for example, moved toward smaller vehicles with lower gasoline (petrol) consumption. Furthermore, U.S. federal and state governments failed to increase taxes on gasoline to European levels, thus providing people in the United States with no incentive to adopt sensible energy consumption habits.

America’s energy woes are thus in large part its own doing. This pattern continued until 2008, when the price of oil rose to an extraterrestrial high, 50 TIMES the price of oil in 1972, topping out at $147 a barrel on July 11, 2008. The price of gasoline (petrol) topped $4 per gallon, and finally, it appears, America had gotten the message. It had an ENERGY PROBLEM. It was a SHOCK.

People started to change their thinking, AND their behavior. They started to take vacations closer to home. They drove their cars less. They thought no longer about buying gigantic gas-guzzling SUVs but started looking at more economical vehicles, or considered not buying a new car at all. Rather than opting for gradual and intelligent change, America had opted for the “now or never” sudden flash, and they got it and are now in the middle of a forced restructuring of an economy that should have been renovated slowly already during the last 40 years, but was not.

The inevitable change in consumer behavior, more than any subprime catastrophe or bank failure itself, is at the heart of the current economic recession in the United States. Consumers have not only stopped spending like there was no tomorrow. They have stopped spending, period. The major culprits for this change of heart are the oil and energy cartels and American energy inertia, which has irresponsibly permitted the price of oil to reach levels that put fear and a lack of trust into the hearts of consumers around the world. And once such fear has been established, it is very difficult to replace it with anything else.

Nor have events in other energy spheres other than oil helped the situation. When energy giants such as Russia cut off gas supplies to European countries in the middle of winter because of a contract dispute with the Ukraine, as happened less than two months ago, you know you have a serious world political problem involving a lack of sovereignty because of energy dependence. It has put people on the alert. Trust in governments and institutions is at a low ebb. Fear and anger are the pervading emotions.

Even the oil cartels are suffering. Due to the outrageously high price of oil in 2008, demand for oil fell in 2008 for the first time in 25 years and is expected to fall even further in 2009. The foundations of the world economy have been badly shaken and every country that does not want to exist at the whim of the oil cartels is looking for alternative solutions.

In the meantime, here in Germany, the construction of windmills as alternative sources of energy and the production of biofuels to replace oil, gas and gasoline (petrol) is proceeding at an accelerated pace. The writing is on the wall. The oil cartels have nearly killed the golden goose. Only when fear is eradicated and trust is reestablished will things improve, and that is going to take a while. Right now the world is in a panic that will take strong measures to reverse.

Economic Recovery : Are You a Part of the Solution, or Are You a Part of the Problem? Latham & Watkins as a Negative Example of Recovery Policy

As can be read in numerous news sources (we refer here to the AmLaw Daily), Latham & Watkins is to lay off 190 associates and 250 non-legal staff – while “Latham’s 550 strong partnership will be unaffected by the cuts“, apparently under the motto that it is the other guy who should make the sacrifices necessary to cope with the current economic situation.

This is not the first time that the Latham firm has done this kind of thing. It also laid off people in the 1990’s.

Perhaps it is time that society began to put severe financial and tax penalties on these kinds of irresponsible employment policies. If companies viz. law firms are not responsible for their employees, who is? Well, if it is the government, then very high mandatory company and law firm payments for unemployment insurance for their employees should be imposed.

According to the Global 100 law firms (see Law.com), Latham & Watkins ranked 19th in the world among law firms in terms of profits per equity partner at $2,270,000 per partner based on gross revenues of $2,005,500,000. Due to the current economic situation, profits per equity partner and gross revenues, according to the AmLaw Daily, dropped as follows in 2008:

Profits per equity partner dropped 21 percent from $2.27 million to $1.8 million while revenues fell 4 percent from just over $2 billion to $1.9 billion.

The AmLaw Daily calls this loss “dramatic“. By our calculations, the drop in profits would have dropped Latham & Watkins from 19th to 28th place on the Global 100 profits per equity partner list – hardly a “dramatic” drop (28th and not 29th because position 19 would then be vacated).

If we assume that the 190 associates to be laid off earn on average let us say $200,000 a year and the 250 non-legal staff earn $68,000 a year, that results in an annual payroll savings of $38,000,000 for legal staff and $17,000,000 for non-legal staff or about $55,000,000 per year. Those figures are hypothetical since an outsider can not know the actual salaries of the people affected, but the numbers should be somewhere in the ball park.

Question: For the above hypothetical numbers, how much of an annual profit cut would the 550 partners at Latham each have to take to RETAIN all of these people in their jobs? What sacrifice would the law partners at Latham have to make to not throw their colleagues out on the streets, where YOU, as a taxpayer, ultimately have to take care of them and be their bailout – if they do not find other work, and they may not for quite some time, in a current economy marked by legal layoffs.
ANSWER: We just divide the $55 million by 550 = $100,000 per partner.

In other words, rather than each of the 550 partners at Latham & Watkins taking a $100,000 pay cut out of their own profit of $1.8 million per equity partner, dropping their individual profit to $1.7 million and thus doing their share of sacrifice for economic recovery, 440 people and their families – with far fewer resources at their disposal – are being thrown to the wolves.

Are Latham & Watkins part of the solution? NO. They are part of the problem.

World Economic Situation Emphasizes Unique Leadership Role of the United States of America : Friedman at the New York Times Pages Uncle Sam

Thomas L. Friedman has it right in quoting a “senior” South Korean official concerning the current world situation:

“No other country can substitute for the U.S.,” a senior Korean official remarked to me. “The U.S. is still No. 1 in military, No. 1 in economy, No. 1 in promoting human rights and No. 1 in idealism. Only the U.S. can lead the world. No other country can. China can’t. The E.U. is too divided, and Europe is militarily far behind the U.S. So it is only the United States … We have never had a more unipolar world than we have today.”

As Friedman writes:

Somewhere in the back of their minds, a lot of people seem to be realizing that the alternative to a U.S.-dominated world is not a world dominated by someone else or someone better. It is a leaderless world….

“There is no one who can replace America. Without American leadership, there is no leadership,” said Lee Hong-koo, South Korea’s former ambassador to Washington. “That puts a tremendous burden on the American people to do something positive. You can’t be tempted by the usual nationalism. When things don’t go well, most people become nationalistic. And in the economic world, that is protectionism … We are pleased to see President Obama is not doing that. Americans, as a people, should realize how many hopes and expectations other people are putting on their shoulders.”

Read the rest of this very intelligent article from Friedman.

Hat tip to CaryGEE.

SlideShare is a Nifty Website for Uploading and Sharing Presentations such as Power Point or Photographs, with Audio & Video Integration Offered

LawPundit Graphic Interface Updated and Modernized including a Veritable Widget Panoply and Special Features Installed

Update: The Wikipedia Widget that we had previously selected was not working as we liked so we replaced it with a WidgetBox Widget of Law Pundit (lower left column).

In the course of updating and modernizing the LawPundit blog,
we now have the following widgets, gadgets and special features installed. We are not sure we will keep all of these new installations, but most of them for sure:

London by Night, From the Air : Fantastic Aerial Photography by Jason Hawkes

Jason Hawkes was the photographer for the memorable publication Prehistoric Britain from the Air, by Janet & Colin Bord, one of the most prized books in my personal library, which was instrumental in my writing of Stars Stones and Scholars, the cover of which is found in the right column of this LawPundit blog.

Hawkes recently outdid himself, creating a series of stunning aerial night photographs of London, England, UK.

These photographs have been reproduced at boston.com, the website of The Boston Globe, and are also found at the website of Jason Hawkes.

Hat tip to clipmarks
and the clipper benben1.

Other citations to Jason Hawkes and his photographic art are:

– slide show of the London photographs

BBC – Jason Hawkes’ Photography – see the slide show of the London photos

CR Blog – with a link to a site showing a photo of the Eurocopter Twin Squirrel helicopter type used to get the photographer where he needed to be for the photography

The blog Aerial Photographs by Jason Hawkes – where Hawkes talks about how he got into this line of work, and also about helicopters, the strictly enforced heli-routes in London and the technical requirements for the camera and gyroscopes which can be used for this kind of shooting

Flickr – Jason Hawkes

Books by and involving Jason Hawkes photography

World Best Cities in terms of Quality of Life : Business Week presents Mercer Consulting list of Best Places to Live : The Top Ten

Globally seen, what are the best places in the world to live? And if it is good to live there, these places might well be worth a visit when you are planning your next vacation. We show the top 10 here.

Business Week carries an article by Carl Winfield at The World’s Best Places to Live 2008, presenting the annual Mercer Consulting list of global cities having the best quality of life (see the Mercer Quality of Living Reports). The ranking is an objectively-based subjective judgment which of course depends on the parameters used for evaluation, but the results are nevertheless of great interest for understanding social and economic trends worldwide.

In compiling their list, Mercer Consulting uses a base figure of 100 for the Big Apple (New York City) and ranks all other cities above or below that, with Zurich in Switzerland ranked at the top at 108 and Baghdad ranked at the bottom at 13.5.

We present the top 10 of the Business Week list of the top cities below, using where possible an official photograph at the official city or tourism website of each city, with our own commentary to that list, plus some of our own photos of selected cities, taken from our own experience or from a variety of sources (see for example Visit European Cities), i.e. we are not confined to the Business Week article or the Mercer Consulting Report. If you have not been to all of these places, then you still have a few places to go…. Enjoy.

1. Zurich (Zürich), SwitzerlandMercer Score 108 points

Photograph at the Official Site of Zürich Tourism
Zurich has a scenic location second to none in the world, with a magnificent view of Lake Zürich and the snowcapped Alps, as shown by the Zürich Tourism photograph of Zürich above. This location makes Zurich an outdoor recreation paradise. The predominant language in Zurich is German, a dialect called Schweizerdeutsch (Swiss German). French and Italian are also spoken, and, of course, English. Most people in Switzerland are multilingual. Albert Einstein studied at the ETH Zürich. (Check out our blog at Einstein’s Voice.) Zürich’s main pedestrian street – the Bahnhofstrasse – is one of the most famous of the world’s shopping streets, offering exquisite (and costly) products from nearly every well-known luxury store of significance. Perhaps equally famous is the newly renovated (by Norman Foster) Dolder Grand, one of The Leading Hotels of the World, and part of the Dolder Resort, picked by Tatler as the Smartest Escape in its list of the current 101 Best Spas. Even if you can not afford (or do not wish) to stay there, it is worth going to “the Dolder” just to have a cup of coffee and be King or Queen for a day. It is a singular location with a superb atmosphere.

Photograph of the Grand Dolder at the Dolder Grand website
2. & 3. Vienna, Austria and Geneva, SwitzerlandMercer Score 107.9 points (tie)

Photograph at the official website of the Vienna Tourist Board
European savoir faire guarantees that neither Vienna nor Geneva will likely complain about their 2nd & 3rd place ranking on the list, though inhabitants of either city will probably tell you that they are the true Number One.

Vienna has a storied history of immense political importance for the contiguity of modern Europe. During the Hapbsburg Dynasty as well as during the reign of Maria Theresa, Vienna became an important economic and cultural center. The Viennese Waltz and its composers Josef Lanner, Johann Strauss I and son, Johann Strauss II, immortalized the city in music, for which Vienna remains famous, for example, through its annual Vienna Opera Ball (February 19 this year – a Dress Circle Box ticket costs 17000 Euros). Not to be forgotten for the gourmets is the world’s most famous chocolate cake, the Sacher-Torte of the Hotel Sacher in Vienna, a Leading Hotel of the World.

Photograph of the Sacher-Torte from the Hotel Sacher website
An absolute must for us is the annual New Year’s Concert of the Vienna Philharmonic Orchestra, broadcast throughout the world to close to 50 billion people. It is so popular that tickets are available only by drawing lots.

Photograph at the Official Geneva Tourism Website
Geneva is a beautiful city, as witnessed by the above photograph (actually a panoramic photo collage). Geneva is synonymous with the concept of global diplomacy, being the location of many United Nations organizations and the International Red Cross.

Photograph at the United Nations Office at Geneva (UNOG)
The Global Financial Centres Index 4, published by the City of London, ranks Geneva sixth, after London, New York City, Singapore, Hong Kong and Zürich, but ahead of Tokyo, Chicago, Frankfurt and Sydney.

4. Vancouver, CanadaMercer Score 107.6 points

Photograph at the official City of Vancouver Website
Vancouver will host the 2010 Olympic Winter Games.

As written by Dave Caldwell at the New York Times: “Although it is only 35 miles north of the border, Vancouver looks and feels different from any city in the United States or, for that matter, Canada. With its glass-and-steel towers crowding a sweeping harbor, it could be in Asia…. With nearly 16 hours of daylight in summer, Vancouver is an ideal place to play golf at one of the city’s 12 courses, or to go boating in the bays and inlets. Three mountains loom over Vancouver, close enough for skiing after school or work. Local residents say it is possible to golf, sail and ski in the same day.

5. Auckland, New ZealandMercer Score 107.3

Wikimedia Commons Photograph of Auckland, New Zealand by Arjan Hoogendorn
Auckland is known as the “City of Sails because the harbour is often dotted with hundreds of yachts and has more per capita than any other city in the world, with around 135,000 yachts and launches estimated.” Greater Auckland is inhabited by over 30% of the entire population of New Zealand, and has the largest Polynesian populaton of any world city. As written at Wikipedia: “Auckland lies on a portage between the Hauraki Gulf of the Pacific Ocean to the east, the low Hunua Ranges to the south-east, the Manukau Harbour to the south-west, and the Waitakere Ranges and smaller ranges to the west and north-west. The central part of the urban area occupies a narrow isthmus between the Manukau Harbour on the Tasman Sea and the Waitemata Harbour on the Pacific Ocean. It is one of the few cities in the world to have harbours on two separate major bodies of water.

6. Düsseldorf, GermanyMercer Score 107.2

Photograph from the Wikimedia Commons of the Düsseldorf Media Harbour
(the crooked walls are intended by architectural design)

A walk along the prosperous “see and be seen” boulevard Königsallee, known to insiders as the ““, is a must in Düsseldorf. A great number of German millionaires live in Düsseldorf and the neighboring Meerbusch, and Düsseldorf has the largest Japanese community in Europe. Düsseldorf is the capital of North-Rhine Westphalia and has a penchant for art, with 18 museums and over 100 art galleries, many clustered in the Old Town. The famed Düsseldorf Media Harbor or “Art and Media Center Rhine Haven”, also known as the Gehry Buildings, “was completed in the place of the old customs building in 1999. The American architect Frank O. Gehry … made a name for himself worldwide with his deconstructivist architecture … [e.g.] … the Guggenheim museum in Bilbao, the Disney concert hall in Los Angeles and the dancing house in Prague….” The Deutsche Oper am Rhein is somewhat unique in that it performs both at the newly renovated Opernhaus Düsseldorf (Düsseldorf Opera House) as well as at the Theater Duisburg. The city recently won a gold medal in the European floral competition Entente Florale.

7. & 8. Munich, Germany and Frankfurt, Germany – Mercer Score 107.0

The capital of Bavaria, Munich, or as the Germans call it, München, is probably best known outside of Germany for its annual Oktoberfest.

Photograph of Oktoberfest at the Hacker-Pschorr Tent
Hacker-Pschorr explains the origin of Oktoberfest as follows: “In 1810, Munich Oktoberfestbier was served for the first time. According to Bavarian brewing regulations dating back to 1539, brewing was only allowed between the Feast of St. Michael (‘Michaeli’) on September 29th and the Feast of Saint George (‘Georg’) on April 23th.” That made October a special “beer month”.

Photograph of Frankfurt by night at Wikipedia Commons
Money, money, money. Frankfurt is Germany’s financial center and also home to the European Central Bank. This is where the famed Rothschild fortunes began. Indeed, the LawPundit was born veritably next door to the Villa Rothschild in Königstein im Taunus, one of the middle mountain suburbs outside of flatland Frankfurt, where the greatest number of millionaires per capita are said to reside (about 100 of the total population of 18000). Mayor Petra Roth welcomes you to Frankfurt as follows: “Welcome to the most international city in Germany, the largest financial centre on the continent, the historical city of coronations, the city of Goethe and the Frankfurt School…

9. Bern, SwitzerlandMercer Score 106.5

Photograph of Bern at Wikipedia Commons
Bern (also spelled Berne) is located in the German-speaking part of Switzerland. As written at Wikipedia: “The city was originally built on a hilly peninsully surrounded by the river Aar but outgrew these natural boundaries in the 19th century. A number of bridges were built to allow the city to grow beyond the Aar…. Berne’s city center is largely medieval and has been recognised by UNESCO as a Cultural World Heritage Site. Perhaps its most famous sight is the Zytglogge, an elaborate medieval clock tower with moving puppets. It also has an impressive 15th century Gothic cathedral, the Münster, and a 15th century town hall. Thanks to 6 kilometers of arcades, the old town boasts one of the longest covered shopping promenades in Europe.”

10. Sydney, AustraliaMercer Score 106.3

There is such a great photo of Sydney online that we just link you here simply to the Wikipedia. Click that photo of Sydney (top of the right column and then go the highest resolution on the next page). It is a fantastic photo of the city which calls itself the business gateway to Australia.