[OwnerOfCalifornia]

Actually, one of the years in my house in Texas I ended up taking the standard deduction because I could not get my total itemized deductions to exceed $5000. This was my first year, so I was only in the house for 7 months and property taxes weren’t due until the following year (in retrospect I should have paid the property taxes in December). The starting mortgage balance was $125,000.

Certainly this would never happen in CA given how much higher prices are; you’d definitely be paying tremedous amounts of interest here. But it was a real eye-opener for me at the time; I couldn’t believe what I was seeing after everything I had been told about the supposed “tax-advantage”. Even the following year, my itemized deductions weren’t significantly more than $5000.

[OwnerOfCalifornia]

Thanks everyone for your comments. Much appreciated.

[OwnerOfCalifornia]

SD Realtor, where is the original post? I’d like to watch the original report on this guy. Thanks in advance.

[OwnerOfCalifornia]

Voting for a third party is the only way to NOT waste your vote. You throw away your vote by voting for either of the two lame-on commercialized candidates.

Just because you didn’t pick the “winner” means that you wasted your vote. Watch how the Republocrats react in the event that a Libertarian or a Green captures 5% of the popular vote for a high-profile race. Historically, third parties have been catalyst for change in either of the two major parties (one, really).

I’m far more interested in using my vote to send a message for change, rather than having it get lost in the abyss of the status quo.

[OwnerOfCalifornia]

Vote Libertarian.

I stopped voting for Republocrats years ago.

[OwnerOfCalifornia]

Austin has plenty of employment prospects; it is a high-tech capital like San Jose and Boston. It has a reputation as a liberal/progressive city, but as another poster pointed out, Austin’s politics are incredibly diverse so you’ll feel at home no matter what your political leanings are.

If you can tolerate the heat, the weather is won’t be a problem since the winters are mild. Personally I prefer SOME rain and Austin gets it, not like the desert climate we have here.

Homes can get rather expensive, especially in the west of the city where the terrain is much like San Diego’s (with plenty of trees, unlike here). $400-$600K for a McMansion in the west and southwest, or $150-$300K for one in the east.

[OwnerOfCalifornia]

flinger, why do you like Austin, Albuquerque, and Ft. Collins? Why are you anxious to leave San Diego?

The first and most obvious reason is why we all read this blog in the first place: housing is too expensive. It costs too much to either rent or own, but ownership is not an attainable goal for me in SoCal. Even if the severe declines in home prices happen, I really don’t ever expect to ‘catch’ the market since I earn relatively little (~$90K/year currently).

Those places I listed above are all less expensive at the moment. My home town of Austin in particular is really nice: better scenery, better weather, better personality, better people (in my opinion :). I am an outdoor person so I prefer the hill country and all the activities central Texas has to offer.

[OwnerOfCalifornia]

I lived in Austin for 9 years and I love it there; much better than SoCal IMO. I made the mistake of selling a nice house in a nice neighborhood to come out here and rent. I cannot wait to move back.

My honorable mentions include Albuquerque and Ft. Collins.

[OwnerOfCalifornia]

When I shopped for my previous house, I never looked at a newspaper. I did all my initial research on the internet, and developed a list of homes to go see in person. The “interactive tours” were nice, but at least one photo was needed.

The videos are ok, but I think today any internet presence is the single most important bit of marketing. As long as property is on the MLS that should be sufficient to get it listed at places like realtor.com, etc. right?

[OwnerOfCalifornia]

carlislematthew, I also hope that eventually we’ll get over our nuclear phobia and start building oodles of nuclear plants. This is one of many actions we need to assist the transition in the coming years.

Beyond that, of course we’ll never run out of oil, but the rate of production could be insufficient before we are ready to transition to something else. There are no alternative technologies today that are inexpensive and scalable, and this problem transcends economics 101. I think many people confuse “technology” of the electronics and semiconductor industries with oil-field technology. We have made amazing strides in electronics and computers in the last 20-30 years, but there is a reason all of these alternative energies are still undeveloped, despite several oil shocks and assurance that once oil hits $30, $40, $50, $60, $70/barrel they will ‘finally’ come online. Or to put it another way, there is a reason we don’t have colonies on the moon yet; some physical realities trump economics

I read the Economist article you spoke of and frankly, it was rather shoddy and biased journalism. There were several factual inacurracies. To cite one example: the author claimed the North Sea production basin was only now peaking when it has actually been in a precipitous decline for years. The British side of the basin has fallen from 6.1 million barrels per day in 1999 to only 3.6 million barrels per day now. Adittionally, no one really knows how much oil in left in the middle east. We take their stated reserve numbers as fact, when we really have no way of auditing them. Matt Simmons makes a disturbingly convincing case in his book Twilight in the Desert that Saudi Arabia’s fields could be ripe for severe declines and that ‘abundant middle-eastern oil’ may be one of the greatest myths of the last 70 years.

The title of this thread is $100 oil. I don’t know where the price is headed over the next few years, but if it goes back to $20, that implies a severe economic or geopolitical malfunction.

[OwnerOfCalifornia]

I had previously recommended A Thousand Barrels a Second as an excellent and insigtful single book to read in order to get a grasp on what is happening in the world of oil. In it, the author develops an ‘oil intensity’ index defined as the amount of increased oil consumpsion needed to grow national GDP. A value of 100 corresponds to a 1% increase in oil consumption to grow GDP by 1%. To cite a few examples off the top of my head (don’t have the book with me but I’ll confirm tonight):

USA = 40
China = 90
South Korea = 15 (was 90 until the Asian financial crisis of 1997-98)
Japan = 0

These numbers are suprisingly stable over intermediate timeframes (20-30 years) but show dramatic inflections over the course of 3-5 years. The US index was 90 until the mid 70’s – 80’s when we obsoleted oil-fired electrical generation, but we still must consume more to grow the economy. Interestingly, Japan and some European contries use no more oil today than they used in the 1970’s, so if we were to live like they do (highly utilized mass transit, very dense living), we could stop growing our oil consumption, but could we actually decrease it? I have my doubts.

Refinery capacity is definitely a problem, but if I have oil and no refineries capable of buying it, why should I expect the price of my oil to rise?

As much as I would love alternative energy sources to really take flight, there are no silver-bullet solutions to high oil prices. There is no technology today that can cheaply or easily replace our massive fossil fuel energy infastructure. There is a reason many alternatives have been on the table for 30 years or longer but remain undeveloped.

Canadian tar sands and even the Green River oil shale deposits in Colorado and Wyoming will help very little, if not make matters worse. The essence of the problem is production rate, not total reserves. Even though there is still over 1 trillion barrels of conventional and unconventional reserves, we probably cannot produce them quickly enough to meet forecasted demand. Tar sands production is a terribly slow, tremedously energy intensive process that requires large amounts of scarce fresh water and natural gas. The wasting of these resources to upgrade extremely low grade oil into marketable oil has caused Matt Simmons to remark that the process is akin to “turning gold into lead”.

I think I’m rambling at this point, so I’ll stop. I’ll say it again, I see very little long-term downside risk to the price of light-sweet crude oil.

[OwnerOfCalifornia]

Agreed. If I was buying, I would use the low number as the real asking price, and then bid lower than that.

Price ranges seem to be a SoCal phenomenom. I moved from Texas a couple years ago, and there are no price ranges on any properties in Texas (that I know of).

[OwnerOfCalifornia]

I think you are talking about Jim Puplava, and the broadcast in question may have been yesterday’s guest:

http://www.netcastdaily.com/fsnewshour.htm

For those who don’t know about the financial sense website, here it is:

http://www.financialsense.com/

Jim Puplava is local to San Diego, but his netcasts and show topics are national and international. Very good ‘alternative’ reading on that site, and the weekly broacasts are always interesting.

[OwnerOfCalifornia]

PS, oil producers must reinvest some of their oil to produce more oil. As long as they are producing multiple barrels for every barrel invested, the production process will remain profitable for them. This is called EROEI by some authors (energy returned over energy invested) and perhaps energy producers are not using their output product to produce more energy, but they must be able to extract more energy than they invest in any form for the production to be profitable. As I recall, in the early days of US production (until 1950) this ratio was as high as 100:1, but lately it has dropped to as low as 5:1 for offshore deepwater drilling. I will look for a hard source on that but I can’t back up those numbers yet. Simply put, oil companies will profit as long as they sell a lot more than they use. How many seeds are in a single apple, and how many apples will grow on the tree that those seeds produce? Certianly more than one.

I have read both of Stephen Leeb’s books, and Simmons’ Twilight in the Desert. Not sure which book you mean by ‘Peak Oil’ as that describes a lot that deal with the subject :). But I have read most of them. Twilight is an excellent book, but is technical and not for a beginner in the subject. The book I recommended, A Thousand Barrels a Second, strikes an excellent balance between the “we’re all gonna die now” crowd and the “we should do nothing because everything is OK and there is tons of oil” crowd. It explains the real problems and challenges we face going forward, and does so in layman’s terms.

I wholeheartedly agree that the US government should not subsidize offshore drilling and exploration. Corporate welfare is absolutely not a free-market policy. The subsidies were put in place to encourage domestic exploration and production in the face of inexpensive foreign oil, and US oil companies certainly don’t need the help anymore, if they ever did.

I currently own Chevron and Exxon-Mobil, and while I believe oil may hit $200, that could still be several years away. I certainly think there is little downside risk.

[OwnerOfCalifornia]

All great replies. Regarding what consumers can do…bob007 mentioned many alternatives already. These are the ‘fundamental lifestyle changes’ I am referring to. Yes, surging demand from developing countries promises to keep oil prices high for the indefinite future, especially in the face of limited supply. Personally, I drive less than 5000 miles per year, I live close to work, and commute by bicycle 2-3 days per week. I keep the thermostat at 68 degrees in the winter and raraly run the AC in the summer (since it is San Diego after all, and the weather is perfect so everyone wants to live here and therefore home prices will never decline har har har). Remember that slightly less than 1 billion of our planet’s 6+ billion people can even drive, so have some perspective when you question what ‘alternatives’ we consumers have.

OPEC does not actually set the price of crude oil. Rather, they attempt to control production to maintain a price band that is “fair” to both buyers and sellers. They raise production in the event of high prices and lower production in the event of lower prices. The official price band was $22-$28 per barrel, but of course prices have gone haywire in the last few years and no amount of heroic production increases have had an effect. Some people wonder whether OPEC should even exist anymore, as they and the rest of the world seem unable to increase production at this point (perhaps you are familar with the ‘peak oil’ debate, but that’s an entirely new thread).

Yes, oil companies do charge market rates for oil and many people find that unnerving. But what would happen doofrat tried to be realy nice and sell his refined gasoline at a lower price? I would step in and buy it, then immediately turn around and sell it for it’s true market value and retire a tremedously rich young man. This is why any act of charity on OPEC or the oil companies’ part would not work–people will always step in and arbitrage it for it’s true market value.

I better stop soon because I could go on for pages, but a final thought on alternative energies. Very few are scalable, and there are no silver bullets, but certianly some technologies will have a limited role in the future. We need to be smarter about how we use energy going forward, and we need to have rational and educated discourse on the subject instead of pointing fingers or praying for miracle technologies. After all, it’s a new paradigm (seriously, it is 🙂

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