U.S. employers axed payrolls by a shocking 533,000 in November for the weakest performance in 34 years, government data showed.

“You can’t get much uglier than this,” said Richard Yamarone, chief economist at Argus Research in New York. “The economy has just collapsed and has gone into a free fall.” U.S. crude plunged as low as $41.77 and by 1547 GMT was trading at $41.86, down $1.81. London’s Brent crude was off $1.58 at $40.70.

Many dealers and analysts expect oil to test the psychologically important $40 a barrel level fairly soon as evidence mounts of a significant decline in oil demand in all the major developed economies.

U.S. and European companies announced further job cuts on Thursday, with U.S. phone company AT&T Inc saying it would eliminate 12,000 jobs, while chemical maker DuPont Co planned to drop 2,500.

Leading U.S. retailers also reported dismal November sales on Thursday. Totting up the results, the International Council of Shopping Centers said sales fell by a record 2.7 percent compared to the same period last year.

To try and bolster their feeble economies, European central banks cut interest rates on Thursday.

Sweden’s central bank cut by a record 175 basis points, the European Central Bank cut by 75 points and the Bank of England cut by 100 points.

The price fall to nearly four-year lows has prompted OPEC members to call for increasingly strong action when the Organization of the Petroleum Exporting Countries meets next, on Dec. 17 in Algeria.

OPEC President Chakib Khelil told Algerian state television on Thursday that the oil-producing group should cut oil output by a significant amount at the meeting if prices remain at their current level.

But analysts say another OPEC cut, the third since September, would need to be drastic to provoke a price reaction.

“Cumulatively, OPEC is behind the curve by 4-5 million barrels per day (bpd), Edward Meir, commodities analyst at MF Global said.

“They really need to cut by 2.5 to 3 million barrels to have any impact on prices at the next meeting. Less than 1.5 million will mean another sell off.”

Christopher Johnson
LONDON, Dec 5 (Reuters)

In fact, the decline in U.S. oil consumption will be quite painful for pretty much every American. Prices for fuel will rise, and you will wish that was the only problem. Spot shortages will turn into large scale “dry outs.”

You should anticipate that every level of government will do things to discourage using liquid fuel, from charging user fees and “congestion pricing” to higher taxes. Heck, the government might even appeal to your patriotism to drive less. And don’t be surprised to see rationing in one form or another, even with expensive fuel and costly fees and taxes.

But this is not a book review of James Howard Kunstler’s 2005 volume The Long Emergency, or his recently released (and exceedingly well-written) World Made By Hand. The point is that oil use will fall in the years to come, because world oil output is falling. You cannot use what is not there in the first place.

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Setting the Stage for CTL

So this sets the stage to explain why Coal to Liquid (CTL) is about to simply take off in the U.S. The U.S. will adopt CTL, because it has to do so. There are few other large-scale industrial alternatives. Windmills, biofuels, conservation and every other energy-saving and energy-extending idea will help. But the world we live in is built to run on oil, and nothing else will cut it for some things when it comes to running a fast-transforming economy. So stand by for CTL.

According to a 2006 estimate by the National Coal Council, a robust CTL industry could produce about 2.6 million barrels per day of oil-equivalent fuel by 2025. This is about 12.5% of current U.S. daily demand. But it is tricky to draw comparisons over time frames of nearly 20 years. Certainly, a lot of things will change between now and 2025 in the realms of both demand and supply.

And a large-scale CTL program will dramatically increase the demand for coal. Can U.S. mines deliver? There are issues here, to be sure. The U.S. is supposed to have that mythical “250 years of coal reserves, at present rates of consumption.” But that estimate is 35 years old. And much U.S. coal is buried deep, in thin seams, and thus hard to mine. Plus, some 40% of U.S. coal resources are in Alaska — much of it north of the Arctic Circle. So even with coal, the U.S. needs to be wary of believing its own press releases.

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Potential 250% Gain This Year — If You Get in By July 12

The U.S. Department of Energy says it could be the key to unlocking an oil deposit in the Rocky Mountains that’s three times the size of Saudi Arabia’s reserves.

I say it could make you $65,500 inside of a year.

Let me tell you why that’s such a big deal.

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Still, CTL can serve as a liquid fuel supplement for at least several decades. And CTL technology is pretty well developed, based on many decades of operational success by Sasol in South Africa. The Air Force believes that the CTL plants of the future can even be relatively “green,” based on evolving technology for removing pollutants from the coal and sequestering carbon dioxide. It will also be possible to reduce the volumes of coal in the blend by adding some types of plant-derived materials.

Thus, it is not a question of if the U.S. will adopt CTL. It is a question of when. And looking ahead, every month is precious. As I said above, we are running out of time. So it will matter greatly how much will we as a nation fool around with our national obsession of navel-gazing over ancillary issues before we get around to making a decision to bend steel.

One way or another, CTL is coming. And one way or another, we at Penny Sleuth are going to find a way to invest in the companies that will build it out.

Until we meet again…
Byron W. King

P.S.: My colleague, Greg Guenthner, is working on an amazing energy play that trades for just a few dollars. If he pulls the trigger, only his elite Penny Stock Fortunes’ readers will gain access to it. To be among these lucky few, click here…

Source: Stand By for CTL

So states a recent article in the Hundustan Times, another “go to” source for news about what is REALLY happening in the energy industry.

The Kremlin has invested heavily in Russia’s image as an energy superpower. During the recent Russian Victory Day celebrations on May 9, many commentators referred to Russia’s energy sector as one of the key elements of Russian power. Energy took a top billing, right along with Russia’s traditional military might and still-potent nuclear capabilities.

Russian leaders have pledged to continue increasing the country’s output to meet rising demand, especially in Asia. The first foreign trip by incoming Russian president Dimitri Medvedev was to China, where he made numerous announcements about energy cooperation between Russia and the Middle Kingdom.

But many experts have long pointed out that Russia’s petroleum industry is working under serious constraints:

Most Russian oil fields were discovered in the 1950s, 1960s and 1970s. During those energy-rich times, the then-Soviet developers skipped over all but the largest deposits. Later on, the smaller fields were developed, but these fields cannot make up for the fading giants of the past. New discoveries of any size are quite rare, even in the vastness of Russia.

Much of the equipment and technology in the Russian oil patch is outdated. In recent years, Russia has imported large amounts of Western equipment. Russia has also brought in Western personnel to help maintain oil output. Western oil service firms like Schlumberger and Baker Hughes have a large presence in Russia.

The private parties who acquired many energy Russian assets after the collapse of the Soviet Union made little in the way of long term investment. All along, there was serious doubt about the sanctity or security of the property rights these tycoons acquired in the wake of the collapse of the Soviet state. Hence there was a “boom” mentality that led to rapid exploitation of the easiest resources, with little thought for the long term.

The Russian government imposes confiscatory levels of taxation on the oil industry, with some marginal rates approaching 90%. Thus the high world prices for oil benefit the Russian treasury, but leave little in the hands of oil developers for new investment.

Despite all of this, Russian oil output has been growing at impressive rates for the past ten years or so — in the nature of 5% to 10% per year in some years. But in 2008 that growth has stopped abruptly. Output figures have actually reversed. In absolute erms, Russian oil output is down in the first four months of 2008. Russia may have reached its own “Peak Oil” point, much as the US did in 1970. This has grave implications for the growth of the Russian energy sector, and the larger Russian economy.

If Russian oil output has peaked, we can expect new kinds of both rhetoric and behavior from Russia in its domestic policies, as well as in its dealings with other nations. In all cases, you can expect to see Russia pursue its own security and national interests with a strong hand, if not with a vengeance.

Until we meet again,

Byron King

Note: Byron King is a frequent contributor to the free e-letter Whiskey & Gunpowder. To receive daily insights into energy, oil, commodities and other natural resources sign up here!

Source: Russian Oil, Under Serious Constraints

Considering the lack of volume, Monday’s open interest numbers were a little larger than either I (or Ted Butler) expected. Gold o.i. was up 4,143 contracts and silver was up 1,193. There were probably a lot of spread trades buried in those numbers.

If you remember a couple of stories on the huge price increases in rice and other cereal grains that I’d posted in my remarks over the last couple of days, I said that things would get much worse before they got any better. Well, we’ve had our first casualty. According to an Ambrose Evans-Pritchard piece in London’s Financial Times, Haiti’s government fell over the weekend following rice and bean riots. Five died. It has begun.

I have a couple of stories today. Since it’s Wednesday, I have silver analyst Ted Butler’s regular contribution. In Saturday’s commentary, you may remember me waxing philosophic about the huge concentrated short positions in both gold and silver in the Commercial category of the COT. I said the following…”The ‘8 or less’ traders (bullion banks) completely control the prices in the both the gold and silver markets…that’s all there is to it.” Ted’s latest deals with exactly this issue. The essay is entitled “Super Concentration” and is linked here.

The other story is about oil…Russian oil. The VP of Russia’s Lukoil pretty much says that “the top is in” for Russia’s oil output. There aren’t too many shades of grey in this story which is from the Financial Times in London…and is entitled “Fears Emerge Over Russia’s Oil Output.” It’s linked here.

Once again, yesterday’s news was wall-to-wall bad. PPI up 1.1%. Home foreclosures jump 57%. Oil above $113, gasoline at a record… and auction-rate bond market “will cease to exist” says Citigroup. That must have meant that the Dow and the US$ were both up yesterday. They were.

Take the blue pill this morning…and I’ll meet you and Alice down the proverbial rabbit hole tomorrow morning…same time, same place.

Casey Research correspondent-at-large Ed Steer is a keen observer of the financial scene and a board member of GATA.org.

The price of a gallon of gas, which according to a recent New York Times/CBS News poll caused Americans most concern when it came to the economy, has risen five cents since March 21.

Higher prices at the pump are due to the rising cost of crude oil and ethanol, according to the Lundberg Survey quoted on CNNMoney.

“If you think the price of gas is bad, think for a moment what the picture will look like twenty years from now,” says Peak Oil expert Byron King.

“By 2025, US daily oil output will be a fraction of its current level (probably down to about 2-3 million barrels per day, down from 5 million barrels per day), even with an aggressive program of drilling offshore and in Alaska — which is not happening, in any case.

“And by 2025 the rest of the oil-producing world will simply lack the product to export. This will be due to reasons of depletion on a global scale, and fast-growing internal demand in oil-producing nations. Gasoline consumption in places as diverse as Russia, Iran, Venezuela and Saudi Arabia is just soaring, so there is less net oil available for export.”

ETF expert Mike Burnick is bullish on the price of oil’s poorer cousin natural gas.
“Natural gas is way undervalued crude oil. With easy-to-trade ETFs, it’s now possible to effortlessly go long natural gas (UNG) while shorting crude oil (USO) without ever trading a single futures contract.

“In such a trade, it doesn’t really matter where the overall market goes. As long as the spread narrows between natural gas and oil, you’ll make money.”