Military conflicts combine with climate constraints to impede navigation across the globe

Since early March a previously obscure waterway between Iran and Oman that very few people could name has become the subject of daily reporting around the world after Iran closed it as a response to the attack on Iran by the United States and Israel. The Strait of Hormuz, which remains closed to most ships, is now known around the world as the transit point for 20 percent of the world's oil and high percentages of key materials including fertilizers such as ammonia (23 percent), urea (34 percent) and phosphate (20 percent), helium (30 percent), and sulfur (24 percent), all of which are derived from or are co-products of oil or natural gas except phosphate.

On the other side of the Arabian peninsula, a long-festering conflict between Ansar Allah (which controls part of Yemen) and Saudi Arabia has escalated. Not surprisingly, Ansar Allah, also known as the Houthis, have resorted to a tactic used previously in the conflict. They have closed the Bab el-Mandeb Strait near their the territory to Saudi vessels.

The strait connects Red Sea shippers with ocean-going routes to Asia. This includes ships coming through the Suez Canal on the northern end of the Red Sea. The Houthis say that commercial shippers not serving Saudi Arabia may continue using the strait, but many have chosen to avoid it as the Houthis attack Saudi ships. In practice this means primarily a prohibition on Saudi oil tankers which carry Saudi Arabia's main export. For now, the Saudi ships are taking a trip around Africa to reach Asia despite the added costs. But the Houthis have shown they can hit Saudi ports on the Red Sea and could escalate to shut down even this traffic.

As U.S. oil and refined product exports soar, will the Trump administration impose an export ban?

The U.S. oil industry got a scare last week. News reports say that the Trump administration may be considering an export ban on crude oil and refined petroleum products such as gasoline and diesel in order to bring those prices down—prices which have been elevated considerably by the reduction of oil supplies worldwide in the wake of the Iran war. But, a Trump administration spokesperson said the administration has no plans to ban exports of oil or natural gas products.

It's important to note that there is an old adage in Washington, D.C.: "Nothing is true until it is officially denied." The administration has probably discussed such a ban. Whether it will implement one is the question. With exports of distillate fuels (which include diesel and fuel oil) hitting the highest on record and gasoline exports bouncing between about 750,000 and 1 million barrels per day, American consumers may be wondering why the administration doesn't act now.

The answer is complex as I detailed in my piece in May entitled "Will the U. S. curtail oil exports as fuel prices rise?" But the short version is two-fold:

The Iran war is a monkey trap for the United States

A monkey trap offers a reward such as food that when grasped makes the hand too large to withdraw from the hole in the trap giving access to that food. Unless the monkey lets go, the animal is stuck. Now, the obvious choice when danger arrives is to simply let go and run. But, supposedly, monkeys won't let go even as human hunters approach and then club them to death.

The war with Iran has become the Trump administration's monkey trap; potential victory over Iran is the prize in the trap. Strangely, the only prize now available is something that was already available before the war started: freedom of transit through the Strait of Hormuz. But now that Iran has seized control of the strait and effectively closed it to unfriendly traffic, that seizure has become the most important leverage Iran has over the United States and its allies.

As long as the war continues, Iran says there will be no shipments of oil, natural gas, petrochemicals, helium, fertilizers and other key commodities except for its own and a few select shipments from friends of the regime. Since these shipments make up substantial fractions of the world's supplies, closure of the strait has sent prices of these products skyward with shortages already appearing in many places across the globe.

Does Elon Musk think AI is socialist?

Our tech overlords tell us that artificial intelligence (AI) will soon create a world of abundance while solving our major problems such as climate change. Just so you know who I'm talking about, I have previously defined our tech overlords as "a grab bag technology companies, technology scientists and inventors, and technology investors and journalists who have bewitched the modern world through inventions that speed up our daily lives without necessarily making them better."

In a recent interview with The Economist magazine, tech overlord-in-chief Elon Musk explained that "[i]f you have vast numbers of robots with vast amounts of digital intelligence, you have a sort of a quasi-infinite economy." In such an economy, "anyone can have anything they think of." He added that "money won't matter in 2036" because everyone will have a high income without working. This is a Star Trek version of the future, he explained.

Musk's views exemplify the tech industry fantasy of a push-button, voice-activated future world of abundance portrayed in the many Star Trek television series and movies. Any serious viewer of the series and movies knows that in the Star Trek future, poverty has been eliminated, people do not need money and in fact, everything you want or need is available to you.

Taking a break - no post this week

I am taking a break this week and plan to post again on Sunday, July 26.

Plankton decline, 'Soylent Green' and the future of civilization

Last week I watched the 1973 dystopian film thriller "Soylent Green" for the first time in probably 30 years. The film depicts a society in which climate change has put most of the world into a hellish, near perpetual heat wave (at least during the summer), dramatically increased the inequality of wealth (with the fortunate few living in luxury apartments with air-conditioning), and caused a scarcity of food such that most people are reduced to eating what is called "soylent," a processed wafer-like food that supplies essential nutrients (the production of which is monopolized by one huge corporation called the Soylent Corporation).

You don't have to stretch your mind all that much to see that a lot of what is depicted in "Soylent Green" is already coming true. I found one part of the plot particularly prescient in predicting the decline of plankton in the oceans. You see, in the film plankton form the basis for one type of soylent, namely soylent green. (Soylent red and yellow are also available but less desirable.)

Ostensibly a crime drama, the film follows a police detective played by Charlton Heston who is trying to solve the murder of one of the members of the board of directors of the Soylent Corporation. Ultimately, the detective stumbles onto a forbidden secret: The plankton in the oceans are dying thus threatening the worldwide food supply. As the investigation continues, the detective penetrates a production facility for soylent green where he discovers (spoiler alert!) that soylent green is now being made from recycled bodies of the dead, a sort of civilization-wide cannibalism.

Something's gotta give: The American West and the dwindling Colorado River

Depending on whom you talk to the Colorado River serves either 35 million or 40 million people, all of whom are having to reconsider how much water they use and how they use it in the wake of an ongoing megadrought that arrived at the beginning of this century. The changes are no longer in the "let's-discuss-this" phase as the federal government threatens to impose up to a 40 percent cut in river water allocations over the next 10 years if the seven western states—Colorado, New Mexico, Wyoming, Utah, Arizona, Nevada, and California—and the 30 recognized tribal jurisdictions with water rights don't agree among themselves about how to divvy up the dwindling Colorado River.

There isn't as much water as there used to be and that means that not everything people are using water for now will get its previous allotment. No doubt the volume of water representing the 52 percent of the total river withdrawals currently taken for agriculture could be reduced through conservation and efficiency measures. But it turns out that "conservation" in some instances might mean simply leaving fields unplanted for lack of water. And, it's not as if efficiency measures haven't already been implemented as irrigated agriculture in the Colorado basin has been transitioning to the much more efficient drip irrigation away from traditional surface irrigation. I could not find any statistics for this, however. So, it's not clear how much more water savings could be achieved through the installation of additional drip irrigation in place of surface irrigation.

Then, there is the 18 percent of the water withdrawals currently going to municipal water systems. The people in those cities have taken seriously the need to reduce water use. Even though those systems now serve 24 percent more residents today than in the year 2000, those systems use 18 percent LESS water. How much further could these cities reduce water consumption? It's almost certain that the easiest forms of reduction have already taken place. The next leg down in water consumption will be harder.

Taking a break - no post this week

I am taking a break this week and plan to post again on Sunday, July 5.

Why the U.S.-Iran MOU (probably) won't prevent the approaching energy cliff

The outline of conditions and topics for a negotiated settlement of the U.S.-Iran conflict called a Memorandum of Understanding (MOU) and signed by both sides last week in all probability won't prevent the approaching energy cliff. That cliff will be the result of fast-depleting commercial and strategic inventories of oil and oil products around the world that have acted as buffers in the wake of the suspension of almost all tanker traffic through the Strait of Hormuz during the conflict—tankers believed to carry about 20 percent of the world's daily needs of oil.

As I explained in a previous piece, the world is fast approaching "tank bottoms," that is, the depletion of usable oil and oil products inventory. When that inventory effectively runs out, there will be a bidding war for oil and oil products to replace the millions of barrels per day that will still be needed but unavailable from inventories as the drama in the Persian Gulf continues.

As of this writing, the Strait of Hormuz has been closed by Iran in response to continuing attacks by Israeli armed forces in Lebanon. The first provision of the MOU is that hostilities are to cease immediately everywhere including Lebanon as a pre-condition to further negotiations. Just as important as whether the strait is open are what each side means by the word "open" and how shipping companies and the insurance firms who insure their tankers understand the risk of transiting the strait.

Here's comes the AI bailout: Why government stakes in AI companies are a sucker's bet

When Bernie Sanders and Donald Trump agree on something, that agreement deserves examination. Both are touting the idea that the federal government should have an ownership stake in major artificial intelligence (AI) companies. For Sanders this would be a way for the American people to share in the wealth generated by AI companies that those companies accumulated through the theft of other people's writing, art works, photos, videos and recordings. And it would give government a seat at the table as a representative of the public in deciding how AI companies will operate in the future. Just how Trump views the purpose of government ownership of a share of AI companies is not yet clear.

Problem is, AI companies are not really generating any wealth. Right now they are simply burning through billions of investor dollars that are heavily subsidizing users with no clear path to profitability. And no, the AI industry is not following the path of previous technologies such as the internet and the smartphone in which costs will rapidly fall as the technology matures and greater numbers of people adopt AI. Years into the AI boom the cost of providing its promised outputs is going up, again with no clear path to bringing the cost down. Adding users does not bring down unit costs because more users require more resources. It's the opposite of the software model where the cost of distributing a piece of already written software to the next customer is close to zero.

I warned last November that artificial intelligence (AI) companies were setting the stage for a bailout, one that will be the result of their deeply flawed AI models that won't remotely deliver what they are promising. AI critic Ed Zitron said in a recent interview that when he asks AI industry boosters to tell him what AI can actually do without using the word "will," they have little to offer. Zitron agreed that while search engines are using AI to provide more sophisticated outputs, those outputs have become more unreliable. "You have to check every single bloody thing. You can't rely on anything," he said.