Back in October, I participated in the 2^nd International Biophysical Economics Conference at SUNY-ESF in Syracuse, New York. Charlie Hall had written to me, inviting me to come and give a talk. Specifically, he wanted me to go back to my post from January 2008 called Peak Oil and the Financial Markets: A Forecast for 2008 and explain why my forecasts had turned out pretty close to correct, while many others widely missed the mark. The title he suggested for the talk was Delusions of Finance.

My financial forecast really has implications for beyond 2008, so I added some more forecasting thoughts as well. In this post, I would like to share this presentation with you. A download of the presentation, plus an audio recording, are available at the Biophysical Economics Conference Proceedings website under Gail Tverberg.

Obama renews call for oil taxes in 2011 budget

"For our members—the small businessmen and women of our nation's oil and gas industry—this is a knockout blow," Somerlyn Cothran, executive director of the National Stripper Well Association in Tulsa, said on Feb. 2. "Implementation of this budget proposal would mean a significant loss of jobs and a dramatic loss of tax revenues for each of the 35 states where our members are productive, contributing businesses. Plus, the resulting decrease in oil production will serve only to make America even more dependent upon foreign oil."

Cothran noted that while a marginal, or stripper, well produces 15 b/d or less of oil, US stripper wells collectively produce 20% of the country's oil or 1.2 million b/d—as much as the US imports from Saudi Arabia.

"There is a shocking difference between the 'big oil' companies and the little guys, who are Rotary Club and PTA members in their respective hometowns," Cothran emphasized. "There should absolutely be a structural and financial difference in relation to tax subsidies between the large-scale, international oil companies and small, independent operators. This is the only way to ensure the survival of our industry's small businesses."

For a while, when I was a student, I had an attic bedroom that was heated by a small coal fire, with a relatively short chimney up to the roof. I learned, fairly early on, that in starting the fire you needed a fairly high velocity air flow across the coals, and underlying firewood strips. And to get this I would rest a shovel over the front of the fireplace, and try and seal off the sides. I kept a small bellows beside the fire to help when this wasn’t particularly successful. When you are starting a fire underground the provision of air is critical, but when you are trying to burn the residual coke that is left, after the heat has cracked the rest of the oil and caused it to flow away, keeping that air flowing at a high enough rate to sustain the high-temperature burn becomes somewhat critical to most efficient operation, particularly if the air has to get through a sand layer to reach the fire.

This is the post on THAI – Toe to Heel Air Injection for the recovery of heavy oils, which is part of the ongoing technical post (tech talk) series that I write on Sundays. It is a subject that has been described several times in the past at The Oil Drum. I first mentioned it back in 2006 when the first underground test was underway at White Sands.

Below the fold is a guest essay from a friend of mine who is an internal medicine M.D. practicing in East-central Minnesota. (He posts on The Oil Drum as 'Rock climber'). The post is a shortened version of a longer essay on the interrelationships between health care, human health, human happiness and resource use. As the healthcare sector makes up fully 17% of the GDP of the USA and therefore represents a significant fraction of our resource throughput, this is a very important topic in discussions of more sustainable systems. If medical care is as inefficient as Rock climber thinks, healthcare policies focusing on basics might save considerable energy and other resources.

Racking up miles? Maybe not.

Within a few years, a driver who pulls up to the gas pump may pay two bills with a single swipe of the credit card: one for the gas and the other for each mile driven since the last fill-up. That may be the result of what many transportation experts see as an inevitable revolution in the way Americans pay for their highways.

The flow of the gas tax pipeline that has poured cash into one of the world's premier highway systems has slowed as some people drive less and others choose more fuel-efficient vehicles. Maintaining that aging network and tackling the rush-hour congestion afflicting most cities will require billions of dollars.

Major auto companies are now close to bringing their first electric vehicles onto the market. But in many cases these new vehicles are as big and heavy as their gasoline powered brethren, and consequently burn just as much energy even though they take it from batteries rather than a fuel tank. In the greater scheme of things, I’m not convinced that helps us very much.

I believe there is instead a bright future for a spectrum of 'micro' electric vehicles, from battery powered bicycles up to compact size cars, including this new concept car named Trev (Two-seater Renewable Energy Vehicle).

OIL FUTURES: Oil Drops Steeply, Breaking Key Support Level

Crude oil futures fell sharply for the second day in a row Friday after breaking through a key support level that traders had been watching for a sign of whether the energy markets would continue to trend lower. The drop in crude prices spurred losses for other commodities, which worsened as the U.S. dollar gained strength.

Crude futures, which had been little changed throughout the morning after the release of anxiously awaited U.S. jobs data, fell below their January low of $72.43, which triggered further selling that pushed the benchmark March contract below $70 for the first time since mid December. Light, sweet crude for March delivery settled down 2.7% at $71.19 on the New York Mercantile Exchange. Brent crude on the ICE futures exchange closed down 3.8% at $69.36 a barrel.

"Instead of the news making the price, it's the price making the news," said Tim Evans, an analyst at Citi Futures Perspective in New York. Evans said it was clear that crude's drop to a session low of $69.50 was triggered by a glut of pre-programmed orders to sell oil if it broke significantly below the January low support level.

When oil or any other financial asset marks a particular low price repeatedly, traders refer to it as a "support level," because it indicates that there are lots of buyers willing to buy at that level, often using pre-programmed trading strategies. But when an asset falls through a key support level - as oil did Friday - it indicates many buyers are no longer interested in buying at that price, triggering a sharp drop to the next support level down. For oil, this is around $70 a barrel.

This is a guest post by George Mobus, who is an Associate Professor of Computing and Software Systems at the University of Washington Tacoma.

Civilizations grow in complexity given the right circumstances. And all too often they end up collapsing. History is replete with examples. Joseph Tainter, among others, has examined collapse from the standpoint of decreasing marginal return on investment in increasing complexity, which he posits is the most common factor in collapsed societies. The key question one must ask is: What critical circumstance (if there is one factor above all others) enables a society to grow in complexity in the first place? If we find an answer to that question we may also find what causes the decrease in marginal returns as complexity increases. This is certainly a growing concern for our modern civilizations. I advance a systems theoretical and principled thesis, below, that puts the increased flow of energy as the key enabler of increases in complexity. And I examine what we might expect from declines in that flow rate when sources are depleted.

WORLD FOREX: Euro Sinks As Oil Plunges On Drop In Risk Demand

The euro fell against the dollar midday Friday in New York as a slump in oil prices further erased demand for riskier assets at a time of growing investor anxiety over deteriorating finances of some European countries.

The dollar index, which tracks the greenback against a trade-weighted basket of currencies, jumped to its highest level since July, while the euro sank to a fresh eight-month low against the dollar, with the common currency dipping briefly below $1.36.

The sharp decline in oil prices is feeding additional pressure on the currency markets, said Marc Chandler, global head of foreign exchange at Brown Brothers Harriman in New York. "It's a vicious cycle that hasn't been broken."

Oil fell nearly 4%, while silver and gold prices also dropped.

Mr. Gabrielli, the CEO of Petrobras, gave a presentation in December 2009 in which he shows world oil capacity, including biofuels, peaking in 2010 due to oil capacity additions from new projects being unable to offset world oil decline rates.

Gabrielli states in his presentation that the world needs oil volumes the equivalent of one Saudi Arabia every two years to offset future world oil decline rates.

This is a stronger statement than the one he gave in January 2009 in an interview with Business Week when he said the following.

According to the company's projections, production from existing fields will fall from a little over 80 million barrels a day to maybe half of that even if new techniques are used to slow their rate of decline. So just keeping global production flat is going to require lots of new fields and requires the world to replace one Saudi Arabia per three years.

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.