The term “black swan,” as coined by Nassim Taleb, refers to an unusual event that nobody was expecting because such an event had never happened before. Until a black swan has been seen, they simply don’t exist; their probability is zero.
We are now in the midst of exactly what we might predict would happen when a world accustomed to sufficient net energy to drive its processes runs short of that surplus. This is our ultimate black swan.
Trained and raised in a world of ethereal numbers and ideas, today’s economists simply lack the proper framework to understand that all of the ‘rules’ they learned about monetary theory, interest rates, debt accumulation and all the rest, were not actually rules, they were temporary conditions permitted by abundant net free energy.
Brent crude oil at $124/bbl is telling us something. While the unrest in the MENA region is certainly driving some of the price gain, it is important to note that the price of Brent crude has been climbing more or less steadily since July of 2010, when it was at ~$80/bbl.
Saudi Arabia has said many times that it has lots of spare capacity and can easily fill the gap left by Libya’s temporary (or perhaps prolonged) departure. There are two problems with this view.
The first is that Libya produces a particularly desirable grade of oil, very light and sweet, whereas the spare capacity that Saudi Arabia has is very much on the heavy and sour end of things. One cannot simply ship heavy/sour to a refinery that processes light/sweet.
The second is that the data does not yet support the idea that Saudi Arabia has significant spare capacity of any sort, sour or otherwise.
At the start of the Libyan crisis, Saudi Arabia said that they had raised oil production significantly to help supply the world [note the Feb date]:
Saudi Arabia raises oil production on Libya unrest
Feb 28, 2011 12:25pm GMT
(Reuters) – Saudi Arabia has increased its oil production to more than 9 million bpd to compensate for disruption to Libyan output, an industry source familiar with the kingdom’s production told Reuters on Friday.
by joemanc 
