From the, “Can you pass that joint” department:

Super-Cycle Leaves No Economy Behind Before Davos Summit

Simon Kennedy – Bloomberg

For only the third time since the Industrial Revolution, the world may be entering a long-term growth cycle that will lift all economies simultaneously, driving bond yields and commodity prices higher.

The depth and scope of the expansion will be a focus for discussion at this week’s annual meeting of the World Economic Forum in Davos, Switzerland. Evidence of a broadening global recovery will enable U.S. Treasury Secretary Timothy F. Geithner, investor George Soros and 2,500 political, business and academic leaders to shift their emphasis away from crisis- fighting.

With the economic and investment outlooks “much better” than in recent years, “people are talking about how to get back to business as normal and what comes next,” said Jitesh Gadhia, a delegate to the conference and the London-based senior managing director at Blackstone Group LP, which runs the world’s largest buyout fund.

Goldman Sachs Group Inc., PricewaterhouseCoopers LLP and London’s Standard Chartered Bank are among the financial companies sending executives to the meeting. Their economists predict a growth spurt in coming decades led by emerging nations that will be strong enough to boost developed countries.

Global gross domestic product will swell to $143 trillion by 2030, allowing for inflation and market-exchange rates, from $62 trillion in 2010, with China and other emerging markets accounting for about two thirds of the rise, estimates Gerard Lyons, chief economist and group head of global research in London for Standard Chartered, which generates most of its earnings from Asia.

This is what the stoners at the pinnacle of the money Establishment are mumbling about between lung- drenching hits. Keep in mind these ‘economics gurus’ all have jobs, they can afford ‘the good stuff’. Here’s another one:

World needs $100 trillion more credit, says World Economic Forum

Emma Rowley – Telegraph

The world’s expected economic growth will have to be supported by an extra $100 trillion (£63 trillion) in credit over the next decade, according to the World Economic Forum. The global credit stock has already doubled in recent years, from $57 trillion to $109 trillion between 2000 and 2009.

This doubling of existing credit levels could be achieved without increasing the risk of a major crisis, said the report from the WEF ahead of its high-profile annual meeting in Davos.

But researchers warned that leaders must be wary of new credit “hotspots”, where too much lending takes place, as the world emerges from a financial catastrophe blamed in large part “to the failure of the financial system to detect and constrain” these areas of unsustainable debt.

“Pockets of credit grew rapidly to excess – and brought the entire financial system to the brink of collapse,” said the report, written in conjunction with consulting firm McKinsey. “Yet, credit is the lifeblood of the economy, and much more of it will be needed to sustain the recovery and enable the developing world to achieve its growth potential.”

You have to love the ‘Crisis, what crisis?’ disconnect from reality! Ten years of sufficient economic growth to create an organic doubling- demand for credit would need a parallel doubling of the world’s energy supply.

Somebody needs to break it to the WEF geniuses: crude oil, not credit, is the lifeblood of the economy.

Not one of the WEF ‘experts’ mentions energy. It’s like the Pope giving a long service and not mentioning Jesus.

Meanwhile, Steve Keen and Mike Shedlock pillory the WEF on the disconnect between credit and Underlying GDP growth. Question: how does anyone obtain GDP growth without cheap fuel?

As I pointed out a few days ago, the world’s output of crude oil is not expanding at anywhere near the rates required to support the kind of growth that the pot smokers in Davos are muttering about as they stuff their faces with all the chocolate chip cookies and dry dog food they can get their hands on:

$95 crude is presumed to be safe to enrich oil traders and ‘friends’ in the Middle East and elsewhere with no harm to the rest of the world’s economies. This is a fantasy. $97 was the average price of crude during 2008 when the US and the developed world was overflowing with credit. This price level was unsupportable and the economies unraveled. According to the EIA the average price for crude last year was almost $78 per barrel. The average for the last four months of 2010 was $81.60. The noose is tightening. The 2 million barrel per day increase in consumption is not matched by an equal increase in production or an equivalent increase in discoveries.

Oil prices may spike higher to the $97 annual price limit or the economy could turn down from this point forward following a fuel price decline. Current price levels are unaffordably high for a system built upon an assumption of $25 per barrel fuel inputs.

It’s not just the coat- and- tie potheads @ Davos who are huffing that weed. Here’s a chart from BP’s latest Energy Outlook which also peers out to 2030:

Nobody @ BP is suggesting where all these new energy sources are going to come from or if they can be available at a price that anyone can afford. It’s the same magical thinking by the WEF economists who suggest with munchie- smeared faces that there will be twice as much business in this limited world creating twice as much credit/money!

Here’s more from the International Energy Agency:

The ‘Blue Triangle of Death’ is the 20 million barrels of crude oil production that is going to magically appear beginning in 2015 from oil fields that are yet to be discovered. The IEA knows better: an oil field discovered today will not be producing oil for a decade or more. New fields being discovered aren’t the driller- friendly super- giant fields uncorked in the 1950s and 60s such as Ghawar in Saudi Arabia. They are smaller, more difficult to produce from and have uncertain flows over time. The bottom line on these new fields are not likely to offset declines in mature fields in the rest of the world. This is what the sober- as- a- Supreme Court Justice José Sergio Gabrielli de Azevedo, the CEO of Petrobras was talking about last February:

Gabrielli is clearly concerned about declining future world oil production. His statements are now in alignment with those of other oil company executives including Sadad al-Husseini, former Aramco executive, who states that world oil production is on a peak plateau, and Total’s CEO, Christophe de Margerie who doesn’t see global oil production ever exceeding 89 million barrels per day (mbd). World oil production in December 2009 was only slightly lower at 86 mbd.

Gabrielli shows world oil capacity peaking in 2010 as shown in the translated version of his chart below. He shows historical world oil production to 2008. Next, he applies a decline rate of 5% per year to existing production represented by the lower light blue area. He then forecasts capacity additions from sanctioned projects estimated from Wood MacKenzie’s Global Oil Supply Tool. These oil capacity additions are in four categories: OPEC new projects, OPEC expansion projects, non-OPEC new projects and non-OPEC expansion projects. In 2010 the biggest contributor is OPEC expansion projects which includes about 1.3 mbd from Khurais and 0.8 mbd from Khursaniyah. These additions include both crude oil and natural gas liquids and are sourced from Saudi Arabia’s official statements which lack independent verification.

He also shows three demand scenarios ranging from low demand to high demand. For the BAU scenario, the required new capacity, in addition to sanctioned project capacities, is about 29 mbd in 2020. Unsanctioned projects from Brazil and Iraq should be able to provide some of this capacity but other capacity additions will be needed to meet demand. Biofuels can also help but there will probably not be enough new oil capacity additions to meet demand in 2020.

It is important to note that Gabrielli’s capacity additions exclude additions from unsanctioned projects and from oil yet to be discovered. Thus many Iraq projects and Brazilian Santos basin projects would be excluded. Iraq might produce another 8 mbd by 2020 according to recent estimates by BP’s CEO. Brazil’s production is forecast by Petrobras to increase by about 2 mbd by 2020. Thus, additions from non sanctioned projects from Iraq and Brazil might add another 10 mbd capacity by 2020. However, this still leaves a required lower capacity addition of 19 to 24 mbd in 2020 to come from other sources. This capacity addition is equivalent to production from about two Saudi Arabias which is an enormous challenge.

Gabrielli’s observed decline rate appears to be about 5% per year and he applies it to the entire liquids production in 2008. Part of the liquids production, such as ethanol and Canada oil sands, is increasing rather than declining. The use of separate decline rates for each component of liquids production would be better, but the peak oil capacity year of 2010 would probably not change. Instead, the forecast production curve decline profile would be slightly different.

One of classical economics’ sacred cows is that price increases for goods creates incentives that bring more goods to market. Since 2004 in the crude market, this miraculous effect is not taking place. Instead, high prices constrain demand, bringing this into line with available supply at price that constrained demand is able to afford.

The divergence between reality and wishful thinking has never been clearer. Growth is supposed to bloom in the same countries wracked with inflation and food riots. Fuel price increases are leaking into the greater economy pricing everything from pensions to government bonds out of reach …

but that Acapulco Gold is certainly beguiling. Pass that joint!

ADDENDUM: The New York Times published an article by Andrew Ross Sorkin illustrating the extraordinary cost of attending the Davos World Economic Forum, which for a CEO including travel and lodging runs into the hundreds of thousands of euros. This is pimped as a benefit:

In fairness, it is worth pointing out that membership at all levels doesn’t just get you access to the meeting in Davos, but also to at least a half-dozen other meetings held around the world. Membership also gives you access to the forum’s various research projects as well.

The hotshots are paying extra for the hallucinations.

Here’s another bit:

But all this spending may soon be going out of vogue. As one attendee, the author David Rothkopf, recently wrote on his blog, “The entire endeavor is fading for several reasons, all associated with the inadequacy of Davos as a networking forum.”

He explained, “As Steve Case, founder of AOL, once told me while standing at the bar in the middle of the hubbub of the main conference center: ‘You always feel like you are in the wrong place in Davos, like there is some better meeting going on somewhere in one of the hotels that you really ought to be at. Like the real Davos is happening in secret somewhere.’”

Just like living in New York City …