Saturday, July 05, 2008

Oil Money Works in Dubai

Dubai is making good use of Oil Money - unlike some countries - like IRAN.

Well, THEY have the oil and are willing to DRILL for it. Their overall game plan is to create a sustainable economy once they are out of oil. So the primary purpose of the whole enterprise there is to become a world financial and entertainment center ... sort of a combination of NYC-Times Square/Wallstree and Orlando.
IF they cannot lock in their game plan for survival over the next 20 years - what follows --- the end of the oil age -- will not be nice to them. So - I think they are looking ahead at this point and that is a good thing. Dubai IS an Islamic country - but obviously not run by any fanatics or radicals.
A lot of the cost of oil is not driven by the demand/supply picture as it is the unfortunate events of 9-11-01 that pushed the USA money policies to devalue the dollar (making oil more expensive over time) and the worldwide growth bandaid (from easy money) that was all a necessary step to prevent world collapse following the RADICAL muslim terrorist attacks on "THE WORLD".
Once in play - the easy money and growth policies and the cheap dollar policies were HARD to reverse without somebody in some sector crying "foul" - so nothing happened. UNTIL - the thing began to break and Al-Queda finally got what it wanted - financial collapses around the world. Took awhile, but the chickens are now coming home to roost. Housing mess, Financial markets a mess, inflation, cheap dollar -- PLUS the Chinese Commies and Indian Socialists finally discovered capitalism and are adding to the demand side for oil. It is like a "perfect storm" and Oil has benefitted for 7 years running.
Now ... in the case of IRAN -- they are spending THEIR money on weapons and economic disruption for everyone else. At least Dubai has a positive forward plan.
For our short term - 10-20 year solution in USA -- we need to DRILL for more oil. PLUS at the same time we need energy policies that encourage fossile fuel conservation and nuclear power plants ( for the next push in electric cars and the electricity needed to produce hydrogen for hydrogen powered cars ) and solar, wind and wave power generation. There is no easy solution. Windfall taxes on an industry that averages 9 pct gross profit (Oil) as opposed to say - and industry that averages 40 pct gross profit (software) is a stupid solution. Oil in the USA needs incentives to find MORE and drill MORE - not disincetives for domestic production !! ENERGY is what is behind all the world's economic potential. How we get at it will have to change.
PS - Obama does not have a clue
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