Month: March 2008

Return on our Iraq Investment

As the fifth anniversary of the start of the Iraq war comes and goes, the Bush administration touts the success of the “surge” in American force levels begun last year, while those opposed to the war point to a litany of failures to denounce the entire enterprise. Both the administration and presidential hopeful John McCain contend that success in Iraq will pay huge dividends for future generations. Which side is right, and how can we measure the true cost (and benefits) of our Iraq engagement?

An estimate of the Iraq War’s return on investment can measured by weighing estimates of its total cost against its current and projected future benefits. On the cost front, the most conservative measure of the cost of the war is $600 Billion, roughly the amount directly spent on the war over its first five years. The benefits of the war can be measured in terms of its effects on US national security, US political relations, US energy security, and potential social and economic benefits for Iraq.
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Doesn’t Everyone Want Financial Independence?

When something aggravates you at work, wouldn’t you like to be able to walk into your boss’s office and quit with no ramifications? That is the dream of financial independence – when a person has saved enough that he can meet all the needs of daily living through investment income alone. A whole industry has sprung up around the idea, with authors, talk-show hosts, and the like extolling the virtues of living on invested money. But is this really an achievable goal for most people?
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Why are Oil Prices so High? An Energy Primer

10/21/2008 Update:Supply and Demand have now driven prices down significantly, as fears of a global depression, and reduced driving worldwide, have led to decreased use of oil. How significant was speculation in the runup to $147 oil? Certainly it played a part, just as speculation played a part in the dot com boom and the housing bubble. But oil is still up 700% from its lows around the turn of the century, and that’s due to the fundamentals explained further below.

05/22/2008 Update: As this article has become far and away my most-read, and since oil is now cruising towards $140 a barrel, I thought an update was deserved. For those without the time to explore the links below, oil is rising for a simple reason: oil production has not risen significantly since 2005, while demand for oil worldwide continues to rise rapidly. The simple law of supply and demand is moving oil prices up, and no number of Congressional hearings will change that.

With news of crude oil prices topping $110/barrel today, it’s no surprise that the price of gasoline and oil are once again on people’s minds. As an introduction, here are a few links on the global transportation energy (oil) situation today, and on various risks that we might face in the future.

What is Peak Oil? – This Wikipedia article on peak oil outlines the notion that oil production must someday hit a peak, since oil is a finite resource drawn from Earth’s crust.

Export Land Model – Jeffrey Brown, an independent oil geologist, and others at The Oil Drum provide insight into the effects of a simultaneous plateau or drop in oil production coupled with rapidly rising oil consumption in oil exporting countries. The ELM is a simple model that graphically illustrates some of the forces driving energy prices rapidly higher.
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