The Saints will, however, win the Superbowl :-))

Best Hopes,

Alan

However, that might fly out the window if Jeffrey Brown (Westexas), Ron Patterson (Darwinian), and others are right about Saudi Arabia being in decline right now, with no prospect of various Saudi field developments arresting that decline.

Again, note that the question has shifted--from will Saudi production decline to why is Saudi production declining.

OPEC sources put Saudi production in 12/06 at "somewhere below 9.0 mbpd." Assuming 8.9, Saudi (C+C) production is down 7% from 12/05 to 12/06, and I estimate that net exports are down about 13% over the same time frame.

The HL method shows Saudi Arabia to be 60% depleted at the end of 2006.

Number of large producing regions (60 Gb or more) showing sustained higher production past the 60% of Qt mark?

Insofar as I know, zero.

This is why I voted Richard Heinberg's (Ghawar is producing about three mbpd) story as the most significant of 2006.

But won't technology save us? Well, the very best state of the art technology, in the North Sea, has produced a post-50% of Qt decline rate that is about three times higher than the Lower 48 decline rate.

Well, do I need to go back to describing the conclusions in the following article as our conclusions and not "my" conclusions? No guts, no glory!

Of course, I am wrong most of the time in the exploration bidness.

http://www.energybulletin.net/16459.html

In summary, based on the HL method and based on our historical models, we believe that Saudi Arabia and the world are now on the verge of irreversible declines in conventional oil production. While there will be massive efforts directed toward unconventional sources of oil, we predict that unconventional sources of oil will only serve to slow and not reverse the decline in total world oil production.

Hi all!

First post. I agree with Khebab that 2007 probably will be a transition year. From 2008 on we´ll see higher prices and even ethanol additions (!) can´t make up for the difference in supply and demand ;)

Happy New Year
and greetings from Stockholm

Yeah, I was being a little facetious about the reinvention :). But I do think we will see more merging of the two concepts.

BTW on ethanol, I haven't seen it mentioned here that the latest Scientific American really rakes ethanol over the coals. Unfortunately the article is not available online, but it could almost have been written by Robert Rapier. The author even complains that ethanol is presented as a "bridge to the future" but it is more like a "bridge to nowhere". SciAm is read by a lot of policy makers so this may have more influence than some online critiques.

Cellulosic ethanol? Dream on.

There's a very good reason that "Sustainability" proposed putting cellulose through charcoal formation and using the CO2 in the off-gas to grow algae:  algae make fats and carbohydrates, not cellulose!  Getting rid of all the enzymes and C5 fermenters seemed like the path of least resistance.  If you can get useful energy through a simple, cheap process instead of a complex, costly one (especially if you can get more), that's the thing to do.

Agreed!

Regarding NO, please note that none of the supply-side measures you cite would even keep pace with a significant annual decrease in oil production (and if gas supplies collapse you can kiss tar sands goodbye until bitumen gasifiers are built and brought on line).

On the other hand, the US has immense room to improve fuel economy even before it gets to European or Japanese levels; we do not reach limits until well past there.  The demand side is where it's at.

Alan, wind turbines are not all they are cracked up to be. Their installation is dividing communities ( my own included ). This report published in Nov 06 is definitely worth reading.
Wind Energy: Fact or Fiction by JA Halkema
http://www.countryguardian.net/halkema-windenergyfactfiction.pdf

I have been lurking on TOD for some time and have been most impressed with the quality and depth of the posts.

i hope you are right about cnr but i sort of lost enthusiasm for cnr when they announced they were spinning off their kazak assets

goinggreen, reply to point 4 as you requested, sorry about it not being a bit shorter, but it is from some work I have been doing for some others, and I didn't want to try to edit down....
-------------
The picture we normally get is that household borrowing has went no where but up recently. This is born out by the statistics. However, the perception many get is that before the recent run up, credit market borrowing as a percent of disposable income was low, and marched upward in a steady progression. Nothing could be further from the truth.
To give a picture of the volatile history of credit market borrowing, and to show the most recent trend, which is very interesting as it bodes for the future, I have enclosed a very useful link. This link is informative for the charts if nothing else, even if you do not concur with Mr. Paul Kasriel’s outlook.

Link 1
http://usmarket.seekingalpha.com/article/22912

Below is a link showing the decline in personal savings rate:
Link 2
Persona savings rate
http://www.mises.org/images3/shostak/02-05-2005/7.gif

Tables showing the history of consumer and auto loan credit, including interest rate information:
Link 3, Link 4
http://www.federalreserve.gov/releases/g19/current/default.htm
http://www.federalreserve.gov/releases/g19/hist/cc_hist_tc.txt

Now, these are very macroeconomic statistics, so needless to say, rather small changes can be billions of dollars in change in the economy.

Link 1, by Kasriel, Listed in the link as chart 2: It is interesting to look back at some milestones, for example the first time credit marketing borrowing exceed 7.5% as a percent of disposable income (around 1957, and then not again until 1973) exceeded 10% of disposable income (1978. not matched again until 1983 and then not matched again until 2001 {!!) and then the first time over 12.5% recently, in about 2002-03 (!}) Does this seem interesting, that as interest rates declined, or more accurately collapsed for a time after 9/11, credit market borrowing shot through the roof? The other links give a longer view of interest rates, and show that even with the recent rate increases, we are still at historically low interest rates as a nation.

But the interesting part is the most recent trends shown in Chart 2,3,4 show a MAJOR drop in consumer borrowing since the post 9/11 run up. This is seen as indicative of an upcoming recession, as showin in the grey strips on chart 2, as historically, when borrowing drops, the economy slows. But look just how much the borrowing has decreased! A fantastic number, and here’s the interesting part: historically, after the recession post such a drop, the economy bounces back roughly comparable to the drop in borrowing experienced previously. If this pattern holds, we would see a rather stiff downturn, followed by a very nice upturn (it’s the old “pull in the horns” and then return to purchasing as the household begins the “replacement cycle for cars, appliences etc.) In other words, upward movement in borrowing is NOT a one way ride (or at least, it never has been).

But, we are in interesting times: What was all this money borrowed for? Well, of course, we know....look at chart 8. This is mortgage debt and mortgage equity withdrawal. But is this, in the larger picture, such a bad thing? With the purchase or building of a house, comes the purchase of new appliences, furniture, lawn care equipment, etc. But, once these items are purchased, there is a window of time in which replacements will not be needed. Due to the housing boom, it is safe to assume (I have seen stats, but don’t have them handy) that the average age of household goods owned by Americans at this time is about as new as they have ever been. This means that discretionary spending can be just that, at the discretion of the consumer (luxury goods, dining out, travel, vacations, clothing) and can be spending borrowing can be moved about quite quickly. As Kasriel points out, the most illiquid of assets is a home, as it is not easily sold, and most folks do not want to sell and move frequently. Barring a major catastrophe (and energy is the one we most concern ourselves with here at TOD) these neighborhoods should prove to be surprisingly stable, and the recent wave of spending should ease up.
This will surely be recessionary to some extent, but we must consider that more of the consumer debt is at average lower interest, and there is still some room for an increase in consumer saving due to the retirement of older debt. We are just past the 5 year mark since 9/11. Most of even the longer term consumer debt would have been no longer that that, as even car loans do not like to go over 5 to 6 years. This would have been for items that could not easily been refinanced, (as homes can be) because they depreciate faster than the debt can be paid (cars, boats, jet ski’s, furnishing and electronics, etc.) so the consumer was, for about 5 years, married to this debt. We are just now entering the real “post 9/11 period”, and the recent drop in consumer borrowing is indicative of (a) the normal cycle, “pulling in the horns”, and the fact that if people have freed up money, they do not need to borrow. But, they will still want to live well. I still think that that the U.S. economy, in the larger sense, is very stable, at least as much so as any other world economy. The energy problem is real. Energy costs may go up substantially. But if that occurs, it will be at least as painful to the Europeans and Asians as to us.

One more thing: I have not even touched on the recent recovery of the equity markets. This is another source of income to those boomers at or near retirement, which cannot be easily dismissed. Five years of growth in investment capital was lost, but they still have the prior years capital from the greatest bull market in history, and most companies, on a P/E basis are not badly valued when compared to the idiocy of the “tech market” days of the late 1990’s. All in all, most households are in about as good shape as they have been historically. Only one area is really troublesome: The savings rate. The Americans have never been great savers, and we are even worse at it today. If anything would assure the American stability, it would be an increase in savings rate, and I have long felt that it should be invested in our own nations debt, if we are truly patriotic about our current “go it alone” war effort. TIPS, or inflation protected bonds would not be a bad investment for many of America’s middle class. But, they are boring, and as I said, the Americans have never been great savers.

Roger Conner known to you as ThatsItImout

Nick, you asked,
Roger, could you give more info on the idea that Iraq is becoming a proxy war?

I want to stress, giving your remarks just past that question, that when I say a "proxy war" I do not intend to mean the other major powers, such as China or Russia. They may indeed be pulling strings, but I have no evidence of that, and am much more concerned about the regional "proxy war" between Sunni nations (allies of ours, supposedly, and major oil producers) and Iranian Shiite backed groups ( and the loyalties of Shiite minorities throughout the region: Read on:

A very interesting article:
http://www.washingtonpost.com/wp-dyn/content/article/2006/11/28/AR200611...

The two sides:
“Just a few months ago it was unthinkable that President Bush would prematurely withdraw a significant number of American troops from Iraq. But it seems possible today, and therefore the Saudi leadership is preparing to substantially revise its Iraq policy. Options now include providing Sunni military leaders (primarily ex-Baathist members of the former Iraqi officer corps, who make up the backbone of the insurgency) with the same types of assistance -- funding, arms and logistical support -- that Iran has been giving to Shiite armed groups for years.”

“What's clear is that the Iraqi government won't be able to protect the Sunnis from Iranian-backed militias if American troops leave. Its army and police cannot be relied on to do so, as tens of thousands of Shiite militiamen have infiltrated their ranks. Worse, Iraq's prime minister, Nouri al-Maliki, cannot do anything about this, because he depends on the backing of two major leaders of Shiite forces.”

The closing line:
“To be sure, Saudi engagement in Iraq carries great risks -- it could spark a regional war. So be it: The consequences of inaction are far worse.”

The private Saudi money flow is already there:
http://www.csmonitor.com/2006/1208/dailyUpdate.html
And apparently, Saudi fighters are already there:
“Last month, The Associated Press reported that Saudi Interior Minister Prince Naif said Iraq had become a threat to the entire region, and that it was the main base for terrorism.

The minister also said Saudi youth were being lured to fight in Iraq. US and Iraqi officials have long complained about Saudi extremists crossing into Iraq to join the battle against American and coalition forces. US officials announced last April that Saudis were one of the top five nationalities among foreign fighters captured by coalition forces in Iraq.
{makes you wonder who the other “five nationalities among foreign fighters” are, don’t it?”
One more:
http://www.cbsnews.com/stories/2006/12/08/world/main2240138.shtml
“Iraqi Officials, U.S. Panel Says Saudis Sending 'Boxes Of Cash' To Sunni Militants”

Saudia vs. Iran proxy influence in Lebanon:
http://www.guardian.co.uk/Columnists/Column/0,,1964092,00.html

How concerned is Saudia Arabia about Shiite terror and cross border incursion? How about a Pat Buchanan style fence?
http://www.washingtonpost.com/wp-dyn/content/article/2006/09/27/AR200609...
“The Saudis are especially sensitive to the possibility of unrest among the country's Shiite minority because it is centered in the oil-producing east of the country.”

http://www.atimes.com/atimes/Middle_East/GI30Ak01.html
“25% of Kuwaiti’s are Shiite”
“Seventy-five percent of the population of the Persian Gulf - concentrated in the eastern borders of Saudi Arabia and the emirates - is Shi'ite, overwhelmingly members of a rural or urban proletariat. Hasa, in Saudi Arabia, stretching from the Kuwaiti border to the Qatar border, has been populated by Shi'ites since the 10th century. That's where the oil is. Seventy percent of the workforce in the oilfields is Shi'ite. The potential for them to be integrated in a Shi'ite crescent is certainly there.
“And then there's Bahrain. Sixty-five percent of Bahrain is Shi'ite.”
“There are only 6% of Shi'ites in the wealthy United Arab Emirates. But they can compound a problem as acute as in Kuwait or Qatar because of the enormous trade and business Iranian influence in Dubai. “
“Azerbaijan - where 75% of the population is Shi'ite”

Of great interest to America must be the loyalty of the Shiites of Qatar:
“Shiites are estimated to make up five to 10 percent of Qatar's 225,000 citizens and an unknown percentage of the 640,000 foreign residents in the country. They organize traditional Shiite ceremonies and perform rites such as self-flagellation in their own mosques. They are permitted to build and decorate Shiite mosques without restrictions.

Shiites are also well represented in the bureaucracy and business community, according to the report.”

The stability of Qatar, and it's "insulation" from terrorism and social unrest is ABSOLUTELY crucial to the United States. Few in the U.S. seem to realize the importance of that tiny nation. It is the most staunch Arab nation in it's support of U.S. policy, the headquarter nation for CentCom, the military base for our operations in Iraq and throughout the Persian Gulf, and the has the worlds third largest reserves of natural gas. This is BIG. The U.S. is counting on Qatar for LNG and GTL fuels very soon, and major American firms have billions invested there (in the recent Exxon update showing that they in fact increased their reserve to production balance, every bit of the increase was reclassified Qatari natural gas). A 10% Shiite minority could do great damage to the U.S. and Qatar if they proved to be loyal to Iranian influences. And in a major war, Qatar and the CentCom operation based there would surely be first targets.

The proxy fight that is brewing is a proxy war for power between what was once called the "two pillars" of power in the Persian Gulf, Sunni Saudia Arabia and Shiite Iran, and it is already well underway. If the Americans show weakness and an unwillingness to stand up with it's Sunni allies, fear will spread rapidly throughout the Persian Gulf nations that they must face the Shiites alone. Most of the rich and powerful Sunni royals would look at the options, look at their odds, pack the 747's with jewels and money and be out of that bloodbath, leaving their people to fend for themselves. There is a real possibility of a complete meltdown, and the Saudi's saw it coming when we invaded.

I don't know how else to put this: The role of the West in the Middle East is on the chopping block here, and the U.S. is about where Britian was just before the blitz.....we are really in some jeopardy of a major catastrophic defeat if we misplay this one. The Democrats coming into power are facing a challenge about as great as they did when FDR came to power.

Roger Conner known to you as ThatsItImout