The Rude Awakening
Laguna Beach, California
Monday, March 5, 2007 ------------------------------ - The prospect of a $200 per barrel of oil incentive,
- Trading film rigs for oil rigs,
- Drug dealers, prostitutes, Lizard Kings and plenty more…
------------------------------ Eric Fry, returning from a trip to the oil fields of Venice, CA, reports… There's still a lot of crude oil lying around, but probably not a lot of easy-to-access, $60 crude oil. Most of the world's remaining oil inheritance lies beneath distant, hostile lands….or beneath nearby, hostile lands…like Los Angeles. The world's major oil companies have learned how to operate an oil platform atop violent seas, and how to extract oil from Siberian landscapes, and how to negotiate with capricious, foreign regimes. But these same oil companies would have no idea how to install a single oil rig on the sands of Malibu Beach. Indeed, they would have no idea how to install a single oil rig anywhere near Malibu Beach. The hostile, NIMBY forces of California are simply too formidable. Your editor does not blame California's coastal NIMBYs for their opposition to nearby oil drilling (no matter how often they might drive their Hummers to the market to buy tofu). He would not welcome oil drilling in his backyard either. The memory of what can go wrong along the California coast (not to mention the Alaska coast) is still too fresh to permit a reasoned, dispassionate debate. The 1969 oil spill in Santa Barbara, for example, killed thousands of animals and soiled the region's beaches for many years. While the unfettered oil drilling in Venice Beach in the 1930s soiled the town's appeal for many decades. At $100 a barrel, the California coast will remain an oil-free zone. But at $200 a barrel, who knows? Eventually, we Americans might need to push aside a few of L.A.'s many film-production rigs in order to erect a few oil-production rigs…unless we can find viable alternatives in the meantime. ----- Only 4 Days Remain ----- You have just four days left to get in on the next big gold rush. Hulbert Financial's Number 1 investment newsletter of the last five years makes this bold prediction: "I'm so sure gold will soar higher, I'll even make you a guarantee…plus I'll give you 5 entirely new ways to play the trend…" "Including one way to own gold that comes with ' zero-downside' risk…" Again, you have to jump on this before April 17, 2007 …or the doors on this could slam shut to you forever… Read the full report right here ---------------------------------- Oil of L.A., Part II
By Eric J. Fry Your editor's mother was born in Venice, CA in 1923, back when the seaside resort still featured canals, imported gondolas and movie stars. But shortly after his mother entered the first grade at the Florence Nightingale Elementary School, the Ohio Oil Co. struck oil on the Venice Peninsula (now called the Marina Peninsula). Venice, California would never be the same. Two months after the stock market crash of 1929, the Ohio Oil Co.'s wildcat well struck oil next to the Grand Canal, just two blocks from the ocean. Within nine months, 50 oil wells were pumping away on the peninsula. As the oil wells arrived, the gondolas and the canals and the movie stars disappeared…along with the town's pristine, unpolluted beachfront. "The fashionable and promising residential district had turned into a noisy, smelly, ugly and dangerous area," historian Jeffrey Stanton relates. "Oil waste was constantly being dumped into the canal and lagoon…" [Eric's Note: Jeffrey Stanton is author of Venice of America: 'Coney Island of thePacific,' Donahue Publishing: Los Angeles, CA, 1987.] Even so, the oil boom continued within the southern end of Venice. (The neighbors to the north - Ocean Park, Santa Monica and Pacific Palisades - had all banned oil drilling within their borders.) By 1931, 340 wells were extracting almost 50,000 barrels of oil per day from the Venice Field, making it the fourth most prolific field in the state of California, according to Stanton. 1931 was also the year that your editor's grandfather, Dr. Joseph Saylin, assumed the presidency of the Venice Chamber of Commerce. From this modest seat of power, he did not merely preside over the oil boom, he participated in it. During the height of the mania, Dr. Saylin invested in a local oil well…while not neglecting to move his family up to the manicured lawns of Brentwood - several miles upwind of the scummy oil fields. The rest, as they say, is history - but not the sort of history that your editor would have chosen. His grandfather's family name, Saylin, did not join the ranks of early 20th century oil tycoons like Rockefeller or Getty. Indeed, "Saylin" did not even join the junior ranks of California oil tycoons like Doheny or Hancock. Instead, the oil boom went bust the very next year. Two years of furious, unrestrained drilling had all-but-exhausted the Venice Oil Field. Dr. Saylin's well managed to pull enough oil out of the ground to cover the cost of drilling it, but not much more. Even though oil production in Venice Beach peaked in 1932, a few wells in and around the original field continued to produce small quantities of oil until the early 1970s. All totaled, the Venice Field produced about 50 million barrels of oil. But the drilling also produced a wasteland that became known as the "Slum by the Sea." The Venice Beach of the 1960s, for example, was a neighborhood of drug dealers and prostitutes…along with a few hippies, neo-bohemians and aspiring Lizard Kings. (During the mid-1960s, Jim Morrison penned a few of the early Doors songs from various locations in Venice). And as one historian remarked during the early 1970s, "Venice, intended to be the most stylish of the [beaches along the Santa Monica bay], was overrun by oil drilling and is now a long uncertain strip of frame houses of varying ages, vacant lots, oil-pumps, and sad gravel scrub. It has the charm of decay…" But decay holds very little charm for any creatures other than vultures…and frugal 20-somethings. In 1985, when your then-20-something editor called Venice Beach "home," the prostitutes and drug dealers still maintained a visible presence…along with a few neo-hippies and aspiring screenwriters who would later write for the Rude Awakening. In other words, one half-century after the Venice oil boom kicked off the town's slide into non-prosperity, it remained a "sketchy" place. Oil drilling, alone, did not cause the decay of Venice, but neither did it cause anything that resembled prosperity. Instead, the post-oil history of Venice Beach was a bit like the history of Bedford Falls…as Pottersville. (Fans of Frank Capra's "It's a Wonderful Life" will understand the reference). Venice Beach was the kind of place that never had a George Bailey (Jimmy Stewart) to save it from degradation. Instead, it was the kind of place that attracted plenty of "Mr. Potters," eager to make a buck at the town's expense.But once the oil bucks were made, only the grimy shell of the former resort remained. Over the ensuing decades, Venice became a kind of poster child for the ravages of oil exploration. A convenient and tangible testimony to the one-dimensional thought that "Oil is bad." 
Oil wells on the Grand Canal south of Washington Street - 1932 
Venice has become a fairly nice place again, more or less. As the photos your editor snapped yesterday attest, beautiful houses now line MOST of the same canal where the oil derricks once stood. But along the same canal, just south of Washington Blvd. the vistas are somewhat less picturesque. 
The revival of Venice Beach has required several decades…and counting. Luckily for Venice, its idiosyncratic "grunge" has become an international tourist attraction. Very few grungy towns are so fortunate. Venice Beach is not all grunge, of course. Charming homes line the town's few remaining canals, while gorgeous cottages and condos gaze across the sands of the peninsula toward the Pacific. But by and large, Venice property values carry a steep discount to similar properties to the north. And by and large, very few property owners in nearby coastal towns would envy Venice Beach. Clearly, the sands beneath the multi-million dollar homes of Santa Monica, Pacific Palisades, Malibu and, yes, Venice Beach, still contain significant quantities of crude oil. But clearly, this oil will continue to rest in peace…unless and until the price of crude soars well above $100 a barrel…or perhaps $200 a barrel. "Drilling for oil in the pricey coastal neighborhoods of L.A. seems utterly unthinkable today, but not as unthinkable as it seemed last December, before Congress ended a 25-year ban on drilling in the waters 125 miles south of Florida's Panhandle," we observed in yesterday's edition of the Rude Awakening. "House Republicans had attempted to open nearly all U.S. Atlantic and Pacific coastal waters more than 100 miles offshore. But they could not muster the votes. "It's true that 100 miles offshore is not the same thing as right next door, but the winds of change are stirring…and they might reach gale force, as global supplies of easy-to-access crude oil become increasingly scarce." As oil production, or the prospect of oil production, encroaches upon America's coastlines, investors may gain a sense of our national desperation and hence, the likely trend of oil prices. The more heated the standoff between oil producers and NIMBYs, the more likely that oil prices are heading higher still. Keep an eye on this unfolding epic debate. Even NIMBYs need oil. Joel's Note: You need a backyard to be a NIMBY…but you don't need to be a NIMBYto have an opinion…or something like that. If you would like to write in with anythoughts (in written or photographic form) about today's column, please send them to us at aussiejoel@the-rude-awakening.com . ----- Venice Home Prices to Take Tsunami Hit ----- WARNING! Brace Yourself and Your Wealth for a Whole New "Second Wave" of Housing Hurt About to CRASH DOWN on Wall Street, the U.S. Economy, and the American Homeowner… The "Second Wave" HOUSING TSUNAMI of 2007-2011 Just when you were hoping we were "done" with plunging property prices… think again… and then BATTEN DOWN THE HATCHES for what history will remember as the worst property-led recession of the last 76 years! Wall Street…Main Street…nobody's money is safe. However, I can give you three very simple, solid ways to "hedge" your retirement and property savings against this coming mega-bust… All included in the new Emergency Financial Survival Toolkit I'd like to send you FREE, with your permission. -------------------------------------------------------------- | 
