DrumBeat: February 1, 2007

U.S. Cautions Europeans to Avoid Oil, Gas Deals With Iran

The Bush administration is warning European oil and gas companies against investing in Iran, trying to head off a push by Tehran to attract new investment by international petroleum giants.

In the past two weeks, the administration has met with European oil company executives about the Middle East, and during one session a senior State Department official cautioned that the situation with Iran was "hot and is going to get hotter," one executive said.

It's the people, stupid

For the first time since the dawn of the nuclear age, scientists came up with an “end of the world” scenario in the 1980s that had nothing to do with the U.S. or Soviets pressing a button. The doomsday delivery method, they feared, was overpopulation.

Twenty years later, symptoms of overpopulation’s strain on the system are headline news: thinning ozone, global warming, over-fishing, water shortages, peak oil….

Saudi Aramco expanding seawater plant

Once completed, the Qurayyah plant is expected to be the world's largest seawater treatment plant that will be used for oil recovery, with a capacity of 14 million barrels per day.

Little-known Russian company reportedly discovers massive Siberian gas field

The field, known as Angaro-Lenskoye, holds some 1.22 trillion cubic meters of gas according to Russian C2 reserve classifications, and 61.79 million tons of gas condensate according to C2 classifications.

Oil May Fall as Production Rises, Demand Growth Slows, RBS Says

Oil, which has dropped 27 percent from the record reached in July, may fall to $45 a barrel by 2011 as output increases and demand growth slows, said Royal Bank of Scotland Plc, the U.K's second-largest lender.

Exxon, Shell, BP May Say Profit Fell as Gas, Oil Rally Ended

Exxon Mobil Corp., Royal Dutch Shell Plc and BP Plc may report fourth-quarter earnings fell, the first time the world's three largest oil companies all reported a decline since mid-2002.

Global warming means millions of climate refugees

A decade or so ago, greens coined the term "climate refugees" to describe the future victims of global warming.

Today, experts say such refugees may already number in the millions and could reach 200 million by century's end, stoking tensions and potential for conflict.

Russian Government Okays Rules on Strategic Assets

The Russian government gave initial approval Wednesday to long-awaited draft legislation restricting foreign companies' access to Russia's natural resource wealth and select Russian industries, Russian news agencies reported.

Indonesian gas potential burns dimly

A series of contractual production-sharing and long-term-supply spats pitting the Indonesian government against multinational energy companies and big natural-gas importers in Japan has recently tarnished Indonesia's reputation as a reliable business partner. It has also undermined the gas sector's overall earning potential - crucially at a time when global prices have surged to near-record highs.

Dry Down Under

"These are ugly decisions, but you either drink water or you die. There's no choice. It's liquid gold, it's a matter of life and death," said Peter Beattie, premier of the northeastern state of Queensland.

Warming linked to stronger hurricanes

Global warming has made stronger hurricanes, including those in the Atlantic such as Katrina, an authoritative panel on climate change has concluded for the first time, participants in the deliberations said Thursday.

Young professionals and peak oil

Young Professionals are vulnerable to the shocks that Peak Oil will bring to our society, but we are also well equipped to tackle energy descent, perhaps more realistically than others who simplistically advocate alternative fuels and vague technological fixes.

The best method of carbon sequestration

Now that the Bush administration has admitted something every thinking person already knows--that the world is warming--and now that the administration is fully behind the search for alternative fuels, we can expect more talk about the benefits of carbon sequestration.

EU too Confident on Carbon Capture, Germans Say

German energy bosses and government officials question European Commission calls for mandatory use of carbon capture when burning coal after 2020, saying Brussels is too confident about the technology's future.

Tom Whipple - The Peak Oil Crisis: The Age of the Electric Car

It is time for some good news. In recent weeks there has been a spate of announcements about plans to develop electric cars and much better batteries to power them. Although few new models will be ready for sale in a couple of years, by the end of 2007 there should be many technology-proving prototypes driving around. This in turn should give us better insight into how soon electric vehicle technologies might become available and whether there will be limitations such as prohibitively high cost, inadequate performance, or shortages of specialized raw materials that might prevent their widespread adoption.

Marlboro College Launches MBA In Managing For Sustainability

Responding to the need to educate business leaders who understand the value of people and planet as well as profits, the Marlboro College Graduate Center is now accepting applications for its new MBA in Managing for Sustainability.

Nigeria: Government Creates 3 Energy Research Centres

Amidst rising energy crisis in the country, the Federal Government yesterday approved the establishment of three new national energy research centres that would ensure greater efficiency of the energy sector.

India should achieve energy independence by 2030

President A.P.J. Abdul Kalam Thursday said India should achieve energy independence by 2030 through hydel capacity, nuclear power and non-conventional energy sources like solar and wind power besides thermal power.

Biofuels 'superpower' Angola soon to be self-sufficient in food production - FAO

Decades of gruesome civil war, landmines, blood diamonds, hundreds of thousands of refugees, the total destruction of infrastructures, near state collapse... these are some of the common images that come to mind when we hear about Angola. But things are changing rapidly in the former Portuguese colony. The fragile peace struck between the ruling MPLA (formerly backed by the Soviets) and the UNITA (backed by the US), was strengthened by the death in 2002 of Unita leader Jonas Savimbi. Since then, the country has stabilized and has attracted foreign investors interested in tapping the country's large oil resources.

European fuel cell bus trials 'successful'

European trials of fuel cell-powered buses, currently taking place in nine European cities including London, have been hailed a success by the project's operators.

Building America’s Zero Energy Homes

Canada: Environment trumps economy, poll suggests

Pollster Allan Gregg said Canadians would be unlikely to tolerate a major downturn in the economy because of environmental policy, but people do seem ready to make some personal sacrifice.

Shell Oil president says energy abounds

The challenge in meeting increasing demand for energy isn't coming up with new sources of supply, Shell Oil President John Hofmeister believes.

"There's plenty of energy to be had," Hofmeister told a Greater Seattle Chamber of Commerce luncheon at the Washington Athletic Club Wednesday. That energy will come from current and emerging-technology options ranging from offshore oil and gas deposits to Canadian oil sands, Western U.S. oil shale, coal-derived synthetic gas, biofuels, hydrogen fuel cells, wind and solar, he said.

But Hofmeister warned, "The obstacles to getting it are man-made."

Oil: It's Back To Supply And Demand

The speculators who bid up the market last year are in retreat. So much for the new reality.

Turkey sends warships to Cyprus amid row over oil deals

Turkey has sent warships to international waters off Cyprus amid a growing row over oil and gas exploration deals the island's internationally recognised government signed with Egypt and Lebanon, the NTV news channel reported.

Japan Asks China to Halt Gas Output in Disputed Field

Japan asked China to halt any new production of gas from a field in the East China Sea claimed by both countries, Chief Cabinet Secretary Yasuhisa Shiozaki said.

Aramco CEO Predicts Energy Use Rise

The chief of the world’s largest oil company predicted an increasing dependence on fossil fuels despite the emergence of alternative energy sources in a talk yesterday sponsored by the Harvard University Center for the Environment.

Gasoline prices have likely hit bottom, feds say

U.S. retail gasoline prices appear to have bottomed out now that crude oil costs are rising again, and pump prices are expected to start climbing, the government’s top energy forecasting agency said on Wednesday.

Al Gore nominated for Nobel Peace Prize

Former Vice President Al Gore was nominated for the 2007 Nobel Peace Prize for his wide-reaching efforts to draw the world's attention to the dangers of global warming, a Norwegian lawmaker said Thursday.

U.N. panel to link warming to humans

The U.N. climate panel is set to issue its strongest warning yet on Friday that human activities are causing a damaging global warming likely to bring more heatwaves, droughts and rising seas.

Has the White House interfered on global warming reports?

More than 120 scientists across seven federal agencies say they have been pressured to remove references to "climate change" and "global warming" from a range of documents, including press releases and communications with Congress. Roughly the same number say appointees altered the meaning of scientific findings on climate contained in communications related to their research.

John Michael Greer: Technological Triage

Technological triage requires more complex judgments than the battlefield variety, however. Not all technologies are of equal value for human survival; it won’t do us any good to preserve video game technology, let’s say, if by doing so we lose the ability to grow food. Some technologies necessarily depend on other technologies—firearms, for example, presuppose a certain level of metalworking ability. Finally, technological triage involves four categories, not three. Alongside technologies that can’t be saved no matter what we do, technologies that are certain to be saved even if we do nothing, and technologies that will be saved if we act and lost if we do not, there are technologies that have gone out of existence but could be brought back and put into use if action is taken now.

A bit of history

There seems to be some confusion about when Saudi started injecting water into their wells to keep up the pressure. Aramco started re-injecting gas into Abqaq in 1954 and in Ghawar in 1959. Then finding better uses for the gas they decided to try water injection.

The first Middle East experiment with water injection was in the northern end of Abqaiq in 1956. From Simmons, page 39:

By the end of 1956, 40,000 barrels of water per day was being injected into Abqaiq through three water injection wells. By the early 1960’s Aramco’s technicians decided to begin a similar water injection program at Ghawar.

The quantities of water injected into Abqaiq and Ghawar steadily grew through the 1960’s and early 1970s. By 1998, this injected water totaled approximately 12 million barrels a day, according to Aramco’s own published reports.

Ron Patterson

I assume you are referring to Leanan's link "Saudi Aramco expanding seawater plant".
Anyone care to infer what KSA's water cut is now?

Conrad, actually no, I posted the above in response to elwoodelmore's post on yesterday's Drumbeat, early this morning:

the field pressure may have been supported for a significant part of its life by water influx from a huge aquifer. after decades of oil production the aquifer probably could no longer keep up so at some point the saudi's decided to use sea water injection for "pressure maintenance"

I only wished to point out, but without putting down elwoodelmore, that this was simply incorrect. Saudi has been using water injection for half a century. This is not unusual. Water injection is now in common use around the world to keep the pressure on reservoirs.

The increasing water to oil ratio indicates that the field is in decline. When Saudi starts increasing the water injection you can be sure they have a very good reason for doing so. This is all part of their effort to improve the decline rate of their giant fields from an average of 8% to 2%. And of course this will probably work....for awhile. But sooner or later that 2% will catch up with the 8%. That means that a field will likely go into catastrophic decline at some point.

One more interesting point that I just thought of. Abqaiq was the first Saudi field to receive water injection. Abqaiq is now completely watered out and Saudi is now trying to milk pockets in Abqaiq to get the very last drops of oil form her.

Ghawar was the second Saudi field to receive water injection.

Ron Patterson

yes, thank you for the clarification. the point i was trying to make was regarding the sea water volume being in addition to the produced water which (presumably) is also reinjected. is this the case?
or are we refering to salt water (produced) and sea water (make-up volume) as one and the same ? it appears from the available publications on the field that this may be the case.

2006 Supply up 0.7-mbd over 2005

December - 85.45-mbd

Russia: new record 9.84-mbd (up 40kbd over November)
Saudi Arabia: 8.52-mbd (down 100kbd)
Mexico: 3.59-mbd (up 40kbd)
Canada: 3.42-mbd (up 60kbd)

december iea stats

What would this look like using Energy Information Administration (EIA) stats instead of using IEA stats?

Thanks in advance,

This is all liquids, which the IEA defines as --

In order to achieve a mass balance in the world oil supply and demand table (Table 1), supply includes not only crude oil and NGLs, but also various types of heavy oil-like hydrocarbons and natural gas-based, coal-based and renewable-based (biofuel) sources which are used as oil product equivalents and are included in our definition of demand. These non-conventional oils include other hydrocarbons and alcohols (including Brazilian alcohol fuel and those used in gasoline blending elsewhere), biodiesel, Canadian synthetic oil production, Venezuelan Orimulsion, oil shales, coalbased and natural gas-based oil substitutes and methane-based blending components such as MTBE. Total supply of these products is estimated at around 1.7 mb/d in 2005. Since March 2006, Venezuelan heavy Orinoco crude has been included in the conventional crude oil category. Refinery processing gains are also shown as a source of oil supply in Table 1. Care needs to be taken in reading the text and tables to distinguish between crude oil and total oil supply. Thus, in Tables 1 and 3, total oil supply is shown (excluding OPEC crude for the forecast period).
They forgot to throw in the kitchen sink. Anyway, everyone at TOD should be familiar with the IEA definition.

So, am I supposed to be impressed that the world grew the "oil" supply by 0.7 mbd in 2006 over 2005?

I'll wait for the future revision. Jesus wept.

Yes, and here is a key quote from the definition that possibly constitutes the basis for a significant degree of misleading inflation in the all-important "crude plus condensate" category that has been the object of such heated debate lately on TOD:

"Since March 2006, Venezuelan heavy Orinoco crude has been included in the conventional crude oil category."

Does anyone know just how much liquid this statistical sleight-of-hand entails?


However, this shouldn't change the "all liquids" numbers if I read it right, just the categorization.

So, while really not off by more than around 1% (esp considering the 2005 hurricane impact), the EIA and IEA give slighly different impressions of the trend, possibly just error. I have still never seen a good justification for weighing one over the other. My preference would be to average them the way Stuart used to do. My bottom line is things are close enough that the unknowns greatly exceed any apparent trends and no conclusions can yet be based on production data. As long as supply is not an issue (inventories in US grew last week) we can't distinguish production capacity/voluntary cutbacks/production decline factors.

Dave, Thanks for the "clarification".
I have lots of "potatoes" in my house; Potatoes from my garden, imported potatoes from safeway, potatoe chips, instant mashed potatoes, tater tots, and hash browns. I would like to include into the "starch catagory" Bulk rice, Rice-a-roni, bread, and pasta.
See I have lots of starches...my family will have starches to eat.

Besides, the addition of different liquids on a volumetric basis can be very misleading because they have different BTU content per barrel. For instance, you need 1.22 barrels of NGPL to match the BTU content of one barrel of crude oil. Volumes are increasing but the energy quality/density is decreasing.

Khebab: I was going to ask if you would repost your plots that showed the BTU content plots in one of the recent drumbeats. This observation is extraordinarily important and a serious answer to those arguing that supply is growing. You cannot argue against good physics.

Question for you and others. Is there any sense of how the EROI will decrease going forward? At 1% energy cost of output it isn't a big deal. At 8:1, we are talking 12% cost and as the return on energy decreases, this really starts to become a significant component. EROI combined with the degrading BTU content could make the depletion problem significantly worse than what people have thought or have plotted to date. It could even make the CERA forecast look bad. Thoughts?

You and Khebab are clearly emphasing a critically important point.

I would just note that EROI doesn't have to be "combined with a degrading BTU content" since the latter is integral to the former.

Ah yes, of course, you are correct.

Does anyone have an EROI historical curve for Texas as it went through peak and depletion?

Here we go:

And in the mean time Yukon Freddie will search fervently for any data that supports his position rather than taking a position that is based on data. Saudi Arabia increasing its sea water injection capacity by 14 million barrels a day sure looks like peak production has set in at Ghawar, especially with their "voluntary" cuts in production.


Wild Ass Guess?

And to further reinforce the fact that economies can grow despite declining oil use...


I can hardly believe that NO ONE brought this up. I'm shocked, yes SHOCKED that this data has been ignored, especially after the rash of 'housing market doom and gloom' and 'the economy will collapse in Q3 and Q4'. I simply can not believe that the members of TOD would ignore such impressive data for the 4th quarter, despite supposedly crashing global oil supplies and the die-off which is scheduled to begin in ernest next year. :laughs:

As I correctly predicted about Q3 GDP 'http://www.theoildrum.com/story/2006/10/30/23013/590', and emphasized heavily about Q4 GDP, the Economy grew by 3.5% in Q4! Whats more is that the housing market seems to be getting back on solid ground and the worst really DOES seem to be over. Can it be true? The economy can GROW when experiencing declining oil production!? Say it ain't so!

Surely there are others out there that are as SHOCKED as I am! :laughs:

Being an agnostic on peak oil (fact, don't know when), I shall only touch on the things we DO know about 4Q2006 GDP and the economy for the past 3 years..

It was up 3.50%, alright (we will get revisions in 1 mo) but 3.05% of that or 87% of the growth, came strictly from consumer spending. Unfortunately, personal incomes grew less than spending once again - for the 7th quarter in a row - and so Americans are simply spending more than they make, by liquidating savings and borrowing. This hasn't happened since the Great Depression. Debt is already at 327% of GDP (another record) and get this: for every more dollar we "grow" we borrow 4.1 dollars. Our "growth" is just a junkie's high, induced by ever increasing doses of debt smack. Goldilocks is a dope addict heading for an overdose.

If you are not SHOCKED, you are just reading the headlines.

Fossil Savings + Fossil Fuels = GDP

I'm SHOCKED that you could not detect my obvious sarcasm. Its SHOCKING that such sarcasm seems to be beyond the vast majority of TOD posters. I'm also equally SHOCKED that you would dare suggest someone at TOD look only at headlines and not the underline cause!

BTW, debt is not at 327% GDP. If you believe some shadowy lunatic that is ignored by the rest of the world, more power to you, but the debt ratio is not as high as he purports. The savings rate is troubling. I myself am a penny pusher, only buying things when I need them and very rarely going on a spending splurge. I will point out one thing, however: the savings rate is heavily skewed by increased spending of the very wealthy: they just wont be outdone by their peers!.

That being said: dozens of people predicted the imminent collapse of the US economy in Q3 and Q4 of 2006, and of course Darwinian states that it will now occur this year. I guess doom is the real abiotic oil source as it seems to power most posters these days with an unlimited cynical outlook.


Total global debt issuance jumped 14.1 percent from 2005 to a record $US 6.948 TRILLION in 2006. Leading the way once again was the U.S. with total debt issuance in 2006 increasing by 10.1 percent to $US 4.085 TRILLION. With the US economy at about 20% of the global GDP, it has issued debt almost three times its own relative global economic size. The U.S. now has total debt of 3.7 times GDP, a level never seen before.

At some point debt becomes deflationary because there is too much of it and the debt has been used to create even more overcapacity. We are starting to see in the U.S. signs, like sub-prime lending losses and higher home foreclosures, that income cannot support the amount of debt. Has anyone lately driven by a new commercial complex that is half empty while they are building a brand new one right next to it? As a result, new debt begins to have less and less effect on creating growth: in 1980 it took $1 of new debt to create $1 of GDP; in 2000 it took $4 and today it takes $7. We seem to be pushing on a string.

Now STF up and find another blog you troll.

From the Bureau of Economic Analyais

GDP growth (using total for 1970 and total for 1980, for example):

1970--1980 3.19% GDP growth per year
1980--1990 3.26% GDP growth per year
1990--2000 3.28% GDP growth per year
2000--2006 2.56% GDP growth per year

Personal Savings Rate (annual average):

1980 10.0%
1990 7.0%
2000 2.3%
2006 -1.0% (today's announcement?)

USA used to grow at 3%+ and save 10%, now it's 3% and save zero. I think we're already at the point, peak oil or no, where USA cannot grow and save at the same time.

Hothgor wrote:

That being said: dozens of people predicted the imminent collapse of the US economy in Q3 and Q4 of 2006, and of course Darwinian states that it will now occur this year. I guess doom is the real abiotic oil source as it seems to power most posters these days with an unlimited cynical outlook.

Hothgor, that is an absolute lie. I have never said the US economy will collapse this year. In fact I never discuss the economy except as it relates to the consequences of peak oil. I have speculated on what will happen to the stock market when peak oil becomes an accepted fact by the investing public. But I have no idea when that will happen. It may be a decade off. And in fact it may be this year but I do not expect it this year. It takes a long while for such a concept to sink in, at least a year or two even when the rest of the world realizes the truth.

When people realize that the economy must shrink forever instead of grow, then I expect the mother of all stock market crashes. People do invest for growth and not shrinkage you know. But I have no crystal ball. I have no idea when this knowledge will sink into the investing public. But I would be shocked if the consequences of peak oil become common knowledge to investors within the next five years.

I suspect what you are confused about here is I said I expect the collapse of Saudi oil production, probably this year. But it may be next year but it is my opinion that we are already seeing the first stages of the collapse of Saudi oil production. I have never said that the US economy will collapse this year. You are just a damn liar.

Ron Patterson

Hothgar is right. And Ron is right. Any search engine or Yahoo search will show dozens of posts by Ron Pattterson wrt his declaration of the impending "mother of all Depressions" and a complete and utter stock market collapse. Where Hothgar got it wrong and allowed Ron the wiggle room for his protestations was that he got the year wrong. It was the Spring of 2004.

Methix he doth protesteth too much:

Ron Patterson 10:28am - "I have never said that the US economy will collapse this year. You are just a damn liar."

Ron Patterson (June 11 2003): "It has nothing to do with your data but I hate the Continental term “bourse”. What’s wrong with the good old American term “Stock Market”? Bourse is a French word meaning “purse” and somehow the connection just does not seem appropriate. Anyway, I agree with you that we are due for a stock market crash, perhaps as early as this month. But I would not be so bold as to predict it that soon. I would guess it would happen before next summer however, likely sooner than that."

As u can see in his own words, this was not predicated on any vast knowledge of PEAK OIL by the americans. He was clear in dozens of posts that we were on the cusp of a a world wide event. There are many more describing the Depression and our new lifestyle: Think "amish".

I have not noticed Ron Patterson get back on the Recession/Depression band wagon since this faux pas over which i took glee in reminding him many times...

It may be my recent posts on Ron's record in calling for the Depression, stock market crash and the escape of control of SARS by the WHO that led Hothgar astray. I am sorry if i contributed to that. Ron's only calls that are ongoing are the 2017 die-off and Peak Oil in 2004, 2005, 2006 & 2007.

Freddy, everyond on this list knows you are a habitial liar. I have always said that I expect a crash when everyone realizes that all industry must shrink because of the shrinking energy supply.

I have not predicted that the economy will go bust in 2007. Now you try to cover Hothgor's lies with lies of your own.

Ron Patterson

The only one here that is 'lying' is yourself, Ron. How many times must you be quoted predicting doom and gloom in the future for you to finally fess up that you were at least 'shooting' from the hip and your comments were the typical spur-of-the-moment band wagoner tactics.

Please, don't make me quote you when you predicted the imminent collapse of the stock market in Q4 of last year, and your subsequent comment towards me pointing out that it did not happen.

I believe your response was something along the lines of 'Listen here you little shit'.

Does that ring a bell?

Frauddy and Hothgort; The Mutt and Jeff tag team.

f*ck off

Please, don't make me quote you when you predicted the imminent collapse of the stock market in Q4 of last year, and your subsequent comment towards me pointing out that it did not happen.

I am making you quote you damn liar. I made no such prediction.
You are a liar and should be banned from this list!

Ron Patterson

Oh my...are you calling the Fed "a shadowy lunatic that is ignored by the rest of the world", then?

Try their Z.1 statistical release "Flow of Funds Accounts of the US", Dec. 7, 2006 page 66. Total debt outstanding $43.47 trillion as of the third quarter 2006...nominal GDP at that time can be found on the same document, p. 20, $13.33 trillion. Ratio = 326%. You are right,it is NOT as high as 327%. Silly me. :)

This, however, does not include the special issue treasury bonds (ie more debt) held by the Social Security, abt. another 4 trillion. Brings the whole thing to 356% of GDP. Highest ever on record. Previous all time high was around 270% in 1930-32. Not a good comparison, what with Great Depression and all...

But, like many people, you may be confusing "debt" with "national" debt, i.e. that which is owed by the govt. alone. This is only a part of the total. Look up the data in the Fed release.

Hi Hothgor,

Thanks for bringing this up.
"Its SHOCKING that such sarcasm seems to be beyond the vast majority of TOD posters."

I'm not at all sure about anyone else. For myself, though, I find it difficult to understand sarcasm, so I'm wondering if you could perhaps also indicate when you decide to use it?

Something I've observed, is that sarcasm often is a sign of strong emotions, and also, it is best understood by people who already have some common framework of emotional understanding. Often online and writing compounds the difficulty of understanding others' frameworks.

Another option would be to try to translate it (into "feeling words") - (www.cnvc.org) - in addition to whatever you express via sarcasm.

Anyhow, for me, I'd appreciate it. I value the exchange of ideas here, and this would help make the conversations more clear to me.

You have made my day!


I'm a doomer, but at least I don't use the bogus stats and idiotic rationals you use.

I'm sure you believe that Saddam had weapons of mass destruction as well.

GDP measures how many dollars flowed through the economy. When those dollars are flowing in a meaningful compensatory countercurrent to a flow of goods, then GDP is a good measure of the flow of real 'stuff' through the economy. If, however, the economy has managed to produce a great flow of billions of dollars by selling mortgage-backed securities and copies of windows vista and spice girls videos, those numbers don't reflect so well the flow of actual material objects. The word intangible has long been used to describe the distinction between actual things, on which the economy ultimately is founded, and fantasies in which people agree to participate (for a variety of reasons) which do not necessarily have any grounding in reality. GDP growth does not always equate to economic growth. Intangibles might look great on the balance sheet, and are certainly much easier for politicians and economists and the cheerleaders on wall street to use to pump up the impression of an economic miracle, but you can't eat them or live in them.

In addition, since GDP measures the flow of dollars, if we all start repricing the same economy in larger numbers of dollars (a.k.a. price inflation) we can certainly call the result of it GDP growth, but it would not be very honest to claim that this implied actual growth of the economy. Of course, heading down this path one begins to question a whole host of officially promulgated statistics and one wonders how honest or dishonest things like CPI and unemployment figures really are. Remember, there are lies, damn lies, and statistics.

If, however, the economy has managed to produce a great flow of billions of dollars by selling mortgage-backed securities and copies of windows vista and spice girls videos, those numbers don't reflect so well the flow of actual material objects. The word intangible has long been used to describe the distinction between actual things, on which the economy ultimately is founded, and fantasies in which people agree to participate (for a variety of reasons) which do not necessarily have any grounding in reality.

And I would add that "tangibility" in no way guarantees any real benefit to society of the delivered "goods and services." A co-worker stopped by my desk today to vent. He had just returned from a trip home (China) and was disgusted at the behavior of some of his "nouveau riche" chums from the old neighborhood. Seems they routinely go out to a fine restaurant and blow what would amount to a half-year's salary for the average Chinese, on such things as "duck skin" or "duck tongue." He couldn't make heads or tails of it and was eager to ask me what I thought about it.

And, of course, the US economy overflows with this sort of nonsense -- video games, breast implants, aroma-therapy potpourris, "collectibles", tanning-booth sessions, tattoo and piercing parlors, boutique vinegars... you could go on and on. My office-mate concluded his rant by telling me that when he argued with his friends that they were being foolish and squandering resources that might be put to better use, they ridiculed him and told him that it was their money and they would do with it what they damned well pleased! Can't argue with that, can you?

and you won't be very popular.

[deleted, duplicate post]

Dante at PO.com says Matthew Simmons was on Bloomberg TV yesterday:

"We have hit peak oil," Matt Simmons said January 31 on Bloomberg television. The fall in production at Cantarell, the North Sea, and other places – totaling up to 1 million barrels - will not be made up by new production coming on line during 2007.

He goes on to say that oil is vastly under priced and that oil has a value of $300 per barrel – although that is not exactly a prediction. He did not make specific predictions as to the price of oil.

Simmons says there is potential to find oil way off shore and other previously unexplored places, but such exploration will be expensive.

Simmons concludes that within two years, the problem of Peak Oil will become so well known that it will be more widely discussed than global warming.

No link, unfortunately. At least, not yet.

""We have hit peak oil," Matt Simmons said January 31 on Bloomberg television."

Wow. This is a very dramatic statement from Mr. Simmons and unless I've missed it elsewhere, the first time he has said publically we have in fact hit the peak in production already.

Simmons seems to be one of the more cautious and reasonable public voices on the subject so it's interesting to hear that he has publically committed himself - I wonder if he fears for his credibility? We'll see if a "link"shows up to substantiate this.

Simmons also said, as he has repeatedly, that the rig situation restricts the possibility that new sources can be found fast enough to compensate for the projected decline. Rigs have aged considerably and are average 25? 28? years old.

Can someone point to a place that discusses how/where rigs are manufactured? Any data on what it takes to make and implement new rigs would be gladly appreciated.

Can someone point to a place that discusses how/where rigs are manufactured? Any data on what it takes to make and implement new rigs would be gladly appreciated.

The where is easy. Any modern shipyard is capable of building a rig or MODU. We built one in St John, New Brunswick at a yard that had no prior experience with semi-subs. Had to build it in two halves then float it out and weld it together but that was not a problem. Stavanger, Norway is a yard with considerable rig experience, and yards in Korea and Japan (Mitsubushi) have built rigs. Marystown NFLD was a greenfield yard that built the Hibernia development platform. This was not a "rig" as I understand you to be asking about but it gives an idea of the potential to transfer technical knowledge to a yard with no prior rig experience.

On what it takes to make?

Steel, a large technically knowledgeable labour force (can be trained), lots of money. In the 1980's we were pumping out Aker H-3s for roughly $250 million USD CAPEX and you could just double that figure to get a rough estimate of current costs.

Key constraints are not with yards or labour but availability of specialized hardware such as draw works, BOP and drill string. Your string is a critical factor as not many places can produce the quality of steel required and bad string results in lots of fishing which is very expensive.

Second set of constraints is associated services such as logistics (helo and supply VL) and all the other 1,000 and one things you need to establish and supply a remote community on a steel island. Since we are in a competitive environment the price of all these goods and services will escalate and that ramps ups E&P costs very quickly.

A critical constraint is the availability of specialized labour required to operate the rig. These skills are rare and you must remember that you may have a half- billion dollar floating investment and those sunk costs can really and truly sink within about 45 minutes, just disappear with no problem at all. And since even the lowest roustabout can trigger the catastrophe you need to have a very capable crew. Other folks built the steel; I built the people and that was the best job ever. Despite what some posters claim about oil field personnel, I assert that these were the best bunch of folks you would ever want to meet. The politicians are another breed of polecat entirely.

If you are asking how quickly we could ramp up production of the steel islands the answer is "show me the money." If you are asking how quickly we can replace a workforce approaching retirement age my answer is "huh?" I was always safer offshore than I was on the beach in my own office (helo transport is the exception to this - crashed twice) but I would hesitate to make this claim with regard to the present environment.


There is even a place that makes rigs in Vicksburg Mississippi (US). They float them down the Mississippi to the gulf when they are done. There was a show on DC's 'Extreme Engineering' that showed it.

I wrote a report on the battle at Vicksburg during the Civil War. Turned out to be the precursor to the final battle that ultimately ended the war. I remember reading about this city being spared burning because it was too beautiful.

The company is called LeTourneau in Vicksburg and they developed the first Jack-Up rig for Zapata Drilling, I think back in the 1960's. This was George H.W. Bush's drilling company and is a little known fact. Until then platforms were built in place for exploratory drilling-and then dismantled if there were dry holes. Jackups were some of the first movible platforms. I think the old man is in the offshore hall of fame for their development.

Vicksburg was actually pretty much destroyed during the Civil War with the exception of the courthouse which is still standing. Port Gibson was the town that was "Too beautiful to burn" but locally is known as "Too soggy to light!" The union troops didn't have time to burn it as they were moving too fast. They had a mission to accomplish without supply lines and they didnt have time to mess with burning and looting at the time. They did that after Vicksburg fell as they moved east on a more leisurely pace. Even a southerner can appreciate Grants genius in that campaign however.

I think the best Simmons quote was
"It may turn out that Kunstler was an optimist".

He made that quote on a dual radio interview with the both of them.

WT provided it one time.



This is the link, you must watch it today:


The video doesn't work for me.

So, we all believe Simmons but not the Royal Bank of Scotland because the end is nigh? Seems to me the conversation on this blog tilts more towards DOOM all the time.

I guess I'm a troll for trying to insert balance and reality. Sorry guys, I didn't mean to trespass on your private space.

Look back at the production projections made by the RBS over the previous 7-8 years, compare to reality and come back with your answer. I think you will find this tilt has some logic. You should do the research before making such assertions.

Why? All I read is conjectures by a group who seem intent on proving that we are all DOOMed because of an impending oil shortage. However, none of them is doing any adding up of current and future oil production, since those figures will be unavaiable until the future.

It seems that corporations believe that oil is not going to be a problem for several years probably because they have done the sums. But the small group of outside-the-loop 'experts' on this site know better. Well, let them present hard facts rather than conjectures.

By the way is Ron Patterson who posts here in any way associated with MMV Financial Inc?

However, none of them is doing any adding up of current and future oil production, since those figures will be unavaiable until the future.

Not true. Some peak oilers do "bottom up" estimates. Like Chris Skrebowski. IMO, those tend to be overly optimistic. Projects are much more likely to be delayed than they are to be unexpectedly sped up. (Labor troubles, political turmoil, a hurricane, a lost rig, etc., delay projects, but they never speed them up.) There's also the question of decline rates. The decline rates are often too optimistic, for a variety of reasons. I'll just point to Cantarell as an example. Production appears to be declining twice as fast as Skrewbowski asssumed.

It seems that corporations believe that oil is not going to be a problem for several years probably because they have done the sums.

Possibly. More likely, they just assume that higher prices will lead to more investment in technology and alternate energy, and we'll continue on as we always have. The business world tends to be rather short-sighted. Witness the housing industry, where many still cannot believe that real estate will not keep inflating in value forever.

Leanan does not understand the studies of bottom-up students. Not a single one that has entered this process has come back with a pre-2010 Peak Date. If they did, they have revised it upward on subsequent versions; along with their Peak Rates.

In other words, those who crunch the numbers know that Leanan and her cheerleaders are full of sh*t. Similar to the Climate Change discussion, TOD has been hijacked by a vocal, rude and dismissive group that uses rhetoric, anecdotal tales, handwaving and ad nausum repetition to dominate the discussion with baseless claims.

The work of the bottom-up modelers is dismissed. The science of the IPCC Working Group 1 is dismissed albeit most of it was publicly available prior to today.

Instead of scientists, this cancerous group relies on book merchants and broker analysts with vested interests. Smoke and mirrors. This group are self-proclaimed experts on oil and climate change, yet know less than 10% of its vocabulary and wouldn't know a poster from a doormat. And everyone that challenges them is a liar. Fortunately the archives will forever show these pretenders for what they truly are. Cancers in our midst.

As I said, in my original post, Leanan, there's a lot of conjecture suggesting a major problem. At least when someone does the additions and subtractions with real world numbers, the result is much better as a model than the usual 'hope for doom' that's so prevalent here.

Disagree. Bottom-up has not shown it is any better than HL or other models.

As for hoping for doom...given the proclivities of mammals in general and humans in particular...we are more likely to be overly optimistic than overly pessimistic. It may be that even the doomers are being too optimistic.

Nicely summarized.
The video is still on bloomberg.com

If this has been posted before, 'scusi, a search gave nothing.

Sugar in the gas tank? It might run your car someday

Science has long understood how ethanol is made by adding sugar to yeast. But now using the same basic biological processes, scientists can re-program the microbes to make something closer to gasoline. It's cutting-edge technology commonly known as "synthetic biology" and it will change the way we fuel any vehicle that now relies on oil .......

I wouldn't have thought it would work, but what the heck. I can go down to the Hummer dealership down the street and add some sugar to the gas tanks and we can see what happens :-).

we can see what happens

Indeed. And if they have internet connections in prison you can even update us. I for one will look forward to it. ;-)

I wasn't able to get a sense of what they expected to use as a feedstock -- the source of this "sugary solution" -- but, it is worth remembering that the absolute limiting factor in any biofuels process is going to be the earth's Net Primary Productivity (NPP). One study (PDF) estimated that:

the fossil fuels used by humans in 1997 were generated from ancient organic matter that contained approximately 44 × 1018g C, which is more than 400 times the current global NPP.

Biofuels articles in the popular press always leave this little detail out.

This is a bit misleading, as it omits the fact that the efficiency of conversion of biomass to fossil fuels is somewhere around 1%.

Wikipedia has global NPP at around 170 bln.tonnes of C. Since humanity burns ~7 bln.tonnes of carbon annually, theoretically we can replace all fossil fuels by burning 4.1% of the world biomass NPP.
However 4% is still a huge number - for comparison the whole cultivated land is producing 9.1 bln. tonnes or 5.3% of NPP. To put it another way - the energy we get from fossil fuels is roughly equal to all the sunlight energy captured by all cultivated crops worldwide.

This is a bit misleading, as it omits the fact that the efficiency of conversion of biomass to fossil fuels is somewhere around 1%.

LevinK, thanks for pointing this out. Certainly, 4% sounds a lot more achievable (though it would still require effectively doubling the amount of land humans have under cultivation).

IMO, the value of numbers like these is what they say about the vast quantities of energy that we do consume. As we look for alternatives to C-based fossil fuels, we need to keep these in mind.

Oh, great. If the same problems crop up with these engineered yeast as have occurred with GM seed, there goes our beer. This is not good. :-)

Hello ImSceptical,

On the bright side, we could always very carefully ignite a loaf of Wonderbread by the sequential burning of each slice to heat the house, and a Twinkie or two could easily cook a complete Thanksgiving Dinner.


Bob Shaw in Phx,Az Are Humans Smarter than Yeast?

Tom Whipple's latest report on advances in battery technology, high-energy capacitors being secretly developed, etc., has a definite "too good to be true" feel to it. One has the impression that this normally sober-minded observer of the Peak Oil scene is being seduced somewhat by wishful thinking.

Or is it just me? I am more than willing to be corrected in my impressions by those more knowledgeable about the relevant technical details than I am.

Personally I am not sure, but these kinds of developments I just note with interest, but I don't go around talking as if it is going to change the game or anything.

I do understand how it is easy to be seduced by these types of developments, but a healthy dose of skepticism is always warranted.

It is only once they have reached the point where they are being manufactured for sale and people have a chance to evaluate performance in the real world that I will feel like it makes sense to re-evaluate what it all means for all of us.

Finally we have the ultra capacitor, which a secretive little company down in Texas claims to have developed and will soon release to the world.

EEStor is located in Cedar Park, Texas which is a northern suburb of Austin, about 15 miles from me. When they have an open house, I'll take a look at their demonstration. The principles have deep experience in computer disk drive thin film technology and manufacturing and have applied that to an improved electric capacitor. They have a contract to supply units to an existing electric car manufacturer in Canada. I speculate that in addition to facilitating the adoption of electric and PHEV vechicles, the EEStor or similar technology might be used to temporarily store excess power from wind turbines thus making them more cost-efficient.

A press release and picture of the ZENN electric car is linked here:

A technical report on the electric grid contains a summary of the EEStor technolgy: http://www.sandiego.edu/EPIC/news/documents/Bradshaw.pdf

Here is the relevant bit:

It is a parallel plate capacitor with barium titanate as the dielectric
It claims that it can make a battery at half the cost per kilowatt-hour and one-tenth the weight of lead-acid batteries
As of last year selling price would start at $3,200 and fall to $2,100 in high-volume production
The product weighs 400 pounds and delivers 52 kilowatt-hours
The batteries fully charge in minutes as opposed to hours
The EEStor technology has been tested up to a million cycles with no material degradation compared to lead acid batteries that optimistically have 500 to 700 recharge cycles
Because it's a solid state battery rather than a chemical battery, such being the case for lithium ion technology, there would be no overheating and thus safety concerns with using it in a vehicle
With volume manufacturing it's expected to be cost-competitive with lead-acid technology
As of last year, EEStor planned to build its own assembly line to prove the battery can work and then license the technology to manufacturers for volume production

The popular Toyota Prius currently has NiCAD batteries because of safety issues with the otherwise superior Lithium Ion current battery technology. Here is another, less secretive company, that is making progress with Lithium Ion batteries suitable for electric vehicles.

The was an article posted in drumbeat on the EEStor system recently (the past week?) that included some potential pitfalls by at least one skeptic. But time will tell...

I see a very difficult to resolve safety issue with capacitor EVs.

In an auto accident, the structure can be deformed and all the power can be discharged in a milli-second (give or take, depending upon speed of deformation). 50 kWh discharged that quickly can easily be fatal for everyone involved (hypothectically bystanders as well). Think the power of a lightning bolt !#

Also, what voltage will the batteries discharge at ? 50 & above volts require stricter standards, but 48 V is really not that safe. Auto mechanic safety will be an issue (Toyota & Honda did a nationwide tow truck safety program for their hybrids AFAIK), but capacitor EVs is an order of magnitude or two greater problem.

Best Hopes,


# Anyone have data on the energy range in lightning bolts ?

From wikipedia:

An average bolt of negative lightning carries a current of 30-to-50 kiloamperes (kA), although some bolts can be up to 120kA, and transfers a charge of 5 coulombs and 500 megajoules

This means that a Lightning Bolt transfers 473,037 BTU.
So 3 of these capacitors would be necessary to make a lightning bolt.

On further thought, if a foreign object was to penetrate a fully charged capacitor, not much of the dielectric material would have to be penetrated to allow a charge to pass between the plates. How far would a steel nail have to penetrate before a charge great enough to vaporize the nail is developed? Sort of a defence mechanism. Of course, if this heat vaporises the dielectric material as well...:(

And if you had a field of these capacitors wired to bare poles in an area known for lightning strikes would you have the conceptual basis for a renewable power scheme?

Let's not exaggerate any perceived safety issues that may not be true. I'm sure that if this device becomes available, their will no shortage of companies with a conflict of interest that will try to play up the safety issues to instill fear into naive consumers.

Here's a quote from the Technology Review article:

Safety is another concern. What happens if a vehicle packed with a 3,500-volt energy system crashes?

Weir says the voltage will be stepped down with a bi-directional converter, and the whole system will be secured in a grounded metal box. It won't have a problem getting an Underwriters Laboratories safety certification, he adds. "If you drive a stake through it, we have ways of fusing this thing where all the energy is sitting there but it won't arc … It will be the safest battery the world has ever seen."

Is the above perhaps a biased source? Yes. Is it possibly the truth? Also, yes. It would be naive to think that the engineers and scientists who have developed this have not thought ahead to account for safety issues.

Also, don't forget that a ground-breaking energy storage device has many uses outside cars (i.e. storage of intermittent energy supplies)

Besides, 50kWh discharged in about 150 milliseconds would provide 1.21 Gigawatts of power, and we could go "Back to the Future" and tell everyone to stop buggering up our oil supplies.

And what happens if the 15 gallon fuel tank of a typical car bursts into flame in a crash? That would be a pretty big problem, too. Nothing is risk free. We have to ask if the risk of the capacitor discharging is significantly worse than the risk of fuel tanks exploding that we now take completely for granted.

I worked several years on an inpatient burn unit serving 5 states. I can attest to the fact that gasoline is not benign.

When is the last time you saw a fuel tank explode? Heard of a fuel tank exploding?

How would an accident cause fuel to be vaporised in such a way that a fuel air mixture between the UEL and LEL would be created in any significant quantity anyway?

The risk of a capacitor exploding IS significantly worse than the risk of a tank of fuel exploding.

That could be a problem for that technology in the large US market which has high safety standards. In some other countries (Iran, India...) it is quite common for folks to load an LPG (liquified petroleum gas) cylinder in the trunk, modify the carburetor system and motor away on gas which is cheaper at retail / Joule than Petrol. Therefore in many places the threat of rapid capacitor discharge in an accident is not going to stop folks from using them. It may result in reduced Liquid FF consumption in those areas and leave more for us to burn.

So what happens when a nail is punched through the plates and shorts the plates together? 177,500 BTU is quite a lot for a confined space. This is the equivalent of 44.73 kilograms of TNT. A battery is much more limited in how fast it can react, I would much rather be in a car accident with a battery than with one of these.

This hardly qualifies as "there would be no overheating and thus safety concerns with using it in a vehicle".
I'm not concerned with the temperature, but with the exploding!

(kWh -> BTU -> gram TNT conversion factors from wikipedia)

>The product weighs 400 pounds and delivers 52 kilowatt-hours
>The batteries fully charge in minutes as opposed to hours

So, to charge a 52 KWH battery in, say, ten minutes would
require 612 kilowatts over those ten minutes. Out of a 240V residential
power feed, that is drawing something on the order of 2600 amps. Never mind the typical 100A power supply (which would necessitate a slower-charging second battery
from which to quick-charge this one, swapping a 400lb battery isn't in the cards for
a soccer mom), even assuming every house had a serious industrial 3-phase feed,
that is one hell of a large transformer and power supply for charging that battery.
The charger would be the size of a refrigerator, be liquid cooled, have fans and radiators on it the size of several large washing machines, and hum like a substation.
To think of the current running through the battery terminals to charge it
that quickly, even at several hundred volts DC (most medium sized industrial battery installations use a 300VDC power backplane) that still means 2000-plus
amps. The cable alone would weigh 20 pounds a foot! And don't accidentally get shocked! Hard to imagine a home charging unit or a self-service station anywhere with those kind of specs (and hard to imagine anyone spending more than ten minutes 'filling up' and being happy about it)

It's not easy to beat the energy density, safety, and ease of handling of gasoline or diesel. A lot of the talk from the electric vehicle camp is highly unrealistic. ICE/electric hybrids are a lot more realistic (and no surprise, weve actually been using them for 50 years and change).

Why would I want to go to a "filling station" to fuel up a car when I could do it at home? The vast majority of the time we would not need to fill up more than once per day. The capacitor could be charged in minutes, but it could also be charged in hours while the car is not being used. Flexibility is an asset not a problem. It would be a simple routine for those parking a car in a garage to plug it in to a custom 240V powered charger.

With regard to those that can't charge at home, the fast charge is still an option. Why limit yourself to several hundred volts and the requirement for high gauge conductors? Stations could be set up to safely handle much high voltages. Getting shocked would be as likely as spilling gas on your self while filling up and then igniting the gas. But I'm sure there will be plenty of people that will be afraid of this technology, just because they don't understand it. Meanwhile, they likely already use capacitors of this voltage every time they use their microwave.

All of these personal transportation alternatives to the current automobile are likely to hit the market at some point, but are not likely to reach the scale of use of the current car culture with it's 2.5 cars, boat, snowmobile and jet ski families.

As peakoil tarzan said above about the sugar-coated details of biofuels, "...the popular press always leave... little detail(s) out."

There are many "little details" that will likely limit the use of electric or biofuel vehicles to all but a small minority of the current first-world population.

Technical and material resouce limits (especially for "sugar" biofuels) are two hurdles, but the loss of individual financial sovereignty is likely to be the most important.

As net-energy declines and economies contract, few "consumers" will be able to afford to buy and/or fuel these vehicles. And without a mass market, the industry may not see much growth.

Like the dozens of electric vehicle manufactures in the US a century ago, most if not all of the current alternative vehicle hopefuls will likely fall by the wayside of history.

California: the new Atlantis?

CNN ran a story about rising sea levels and climate change this morning. It featured maps showing large areas of California underwater. San Franscisco is predicted to be the new Venice. There were interviews with scientists, talking about whether it would happen gradually, or suddenly.

One guy said we should start budgeting for billions of dollars in seawalls and levies, because we simply will not let such valuable real estate be lost to the waves.

I don't think I'd bet the farm (or San Francisco) on that one...

What no beach volleyball? Oh man I hate global warming!

Of course there will be beach volleyball. The beach may be in Sacramento, but there will be beach volleyball. ;-)

You may wish to take a gander at this proposal for a new cultural center to be built in Abu Dhabi. The design is based on a ship and I estimate no more then 2 to 3 feet of freeboard bsed on the photorealistic rendering:

Not sure if that link will work as it appears to incorporate some login information.

If we do see acceleraing sea level rise it looks like the oil producers will be right on the front lines building dikes.

I don't quite get it---San Francisco is very hilly, even if sea levels rose a whole meter, it wouldn't take out *ALL* of san francisco, maybe just some buildings on the edge.


That's why he wanted seawalls and levies. According to CNN's maps, a good part of downtown SF, and the entire airport, would be underwater with a 3 ft. rise in sea level.

Of course, if Al Gore (20 ft. rise) or Jim Hansen (80 ft. rise) is correct, seawalls won't help.

Sad day. Leanan has joined the tod camp of idiots. I guarantee the AR4 (available in a few hours) will not predict 2100AD sea levels of any greater than 41-cm ... and likely a lot less!

Geez, dude, that's harsh. Really. Why not relax on the polemics?

Indeed. I am a huge booster of the small camp of contrarians because I think you need both sides to have a balanced discussion. Without them TOD risks becoming a cult.

I often think Freddy and Hothgar get much too much grief and have tried to argue with Leanan that the reason people are opposed to them is they disagree with the content, not the style of posting. I guess I'll have to give up that line of argument.

We are now one step closer to a rating system, which is going push TOD in a doomer direction.

Freddy, you do yourself more damage with your hostile posts than your opponents do tring to rebut them. Please stop shooting yourself in the foot.

I'll admit I can be an asshole at times to various people. Sometimes I'm simply in a bad mood, others I'm tired of arguing. Mostly however I reserve my ire for the most close minded and utterly uninformed band wagoners. That being said, I get FAR more flak and name calling and personal attacks in one week then I have ever dealt out in the past 5 months. It's sad that we seem so focused on snubbing out the dissenting opinion and ignoring basic etiquette and decency towards each other.


Don't forget to save a little freeboard for the storm surge.

Leanan sees more press releases in a day than most TOD folks do in a month. She sees the same articles that i do. She has her agenda and more power to her.

But in meantime, BBC has just announced the magic number: 35-cm by 2100. Eat your heart out, doomers...

Hey, AR5 is only five years away. Maybe next time, eh...

edit- Our preferred Scenario is A1B (pop'n peak in 2050; medium fossil fuel culture)
- would mean temp 0.8C higher in 2025 and 2.8C higher in 2095AD (from y2k levels); sealevels will likely rise another 55cm by 2300 just from thermal expansion. Add another 50cm for good measure* (*my input)

More prec in DJF; drier in JJA.

If temp exeeds, 3.3C, we lose Greenland; sealevels rise 7m in 1000 years.
Scenario A1FI is fossil fuel intensive for worst case scenario stats.
see bbc short summary & graphs: http://news.bbc.co.uk/2/shared/bsp/hi/pdfs/02_02_07_climatereport.pdf

So we'll just rename it San Francisco Island. Might have to raise those bridges a little, though...

San Francisco will always remain at the northern point of a penninsula--UNTIL the San Andreas Fault cuts it in two. Sea level rise will eat away at the perifery. For California, the greatest problem related to sea level rise will be in the Delta. I grew up in Davis, which was all of 16' above sea level. Most of the "islands" in the delta are artificial and protected by levees that will easily be breeched. The state government is aware of the ramifications of sea level rise; why do you think the Governator is suddenly a green? The state PTB are VERY concerned because the basis of their wealth--land and irrigation--come under direct assault by Climate Chaos.

Anyone in for a game of Spot the Differences? C'mon, it'll be fun...

Ok, here's a hint: the negative savings numbers do not include Mortage Equity Withdrawal, which was responsable for most, if not all, GDP growth in the last few years. In other words, we spent MUCH more than the article implies.

Told you it would be fun. Tell you what: read only the first piece. leave the negative stuff alone.

We're doing fine, don't worry.

Strong U.S. economy defies skeptics

Stocks hit highs as Fed cheers investors; recession fears recede amid optimism

US personal savings drop to 74-year low

People once again spent everything they made and then some last year, pushing the personal savings rate to the lowest level since the Great Depression more than seven decades ago.

Ok, here's a hint: the negative savings numbers do not include Mortage Equity Withdrawal, which was responsable for most, if not all, GDP growth in the last few years.


MEW= mortgage Equity Withdrawal

Wow!! That is a very scary graph. Thanks Khebab.

GDP is a measure of output, not a measure of wealth. When people borrow against their houses, their net financial wealth goes down, but nothing happens to GDP, because nothing is being produced.

When the money that is borrowed is spent on consumption or investment or taxes (government spending) then it IS counted in GDP.

Thus there is no sleight of hand or undercounting going on.

GDP is a flow concept. Wealth is a stock concept. Confusion between these two is very common among noneconomists and nonaccountants.

What are you trying to say, Don?
I see no mention of undercounting here, nor any confusion.

People withdraw money from their homes and spend it, making it influence GDP. Just as the graph indicates. Wealth becomes output, so to speak.

Here are +10 value points for you.
Don gets dingged for -10 points.

All this "econo-framed" talk makes one's head swell.
A guy wakes up one morning and looks at his house.
The roof is falling apart.
The basement is flooded.
The outside needs a paint job badly.

He goes inside & turns the TV on.
The Talking Pundi-heads say the "Real Estate" Market is booming.
He goes to the bank and repeats: "The 'Real Estate Market' is booming."
He signs a paper that has a couple of vowels (not a, e or y) and the guy at the bank gives him cash.

With the cash he goes to Las Vegas and invests in rollover options. After a high flying time and after having made his contribution to the GDP (and making America a so much better place to live in), he goes back to his broken down house with empty pockets and the momentary wisdom that "What goes to Vegas, generally stays in Vegas".

Economically speaking though, we are all getting wealthier by the minute thanks to all this "economic" activity and "GDP Growth".

In accounting terms, the income statement looks great but the balance sheet has gone to s**t. In the business world, this might not be bad if the balance sheet shows an improving trend, i.e. the income is gradually paying off debts and improving the overall balance situation (think Amazon.com in its earlier days). However, need I say, the financial trends for the US economy are very much in the opposite direction with little to no prospect of this trend reversing, especially considering the approaching baby-boom retirement draw on the treasury.

The stock of household equity has been reduced and transformed into a flow of consumption which is reported as GDP.

The graph does not disclose the current account balance which is negative. Khebab's graph demonstrates a negative savings rate and the contribution it has made to current GDP. America's past savings have subsidized current consumption; in addition the countries of origin for America's imports have also acted to subsidize American consumption by re-investing their earnings in US debt, and the holders of US dollar assets have helped subsidize American consumption by assisting the maintenance of the purchasing power f the US dollar.

Don, can you venture a forecast of what will occur when these sources of subsidy are curtailed or withdrawn?

Couple these financial issues with the theatre of the absurd that is US foreign policy and one has to wonder what will happen when reality finally reasserts itself, when the stars align with Jupiter and equus stables Mars.

The financial implications of excess consumer debt are not good. In addition, corporations and the U.S. government are heavily--too heavily in my opinion--into borrowing. Now the sixty-four trillion dollar question is how all of this excess will unwind.

I do not know. Nobody can know. However, having said that, the ever reliable Helicopter Ben has stated that debt deflation will not happen because the Fed has the power and the will to keep it from happening. IMO Ben is correct.

Thus I think the odds are very much against a debt deflation such as the one that caused the Great Depression. At some point--and I do not know when or exactly how or how fast or how much--I expect a return of double digit inflation.

Depending on how fast the decline from Peak Oil happens, we could have hyperinflation--or something milder. But there is only one relatively "painless" way out of grossly excessive debt burdens, and that is unexpected and abrupt and significant inflation.

I'm keeping most of my investment funds in TIPs, Treasury Inflation Protected Securities.

My favorite GDP factoid is that the money spent on the Iraq War adds to the GDP. So I guess if we poured the entire economy into the wars we'd all be rich!

That can't be right. The U.S. GDP is about 13 trillion dollars. Perhaps you meant the money spent on the war is close to the annual budget deficit?

All of it? What about money spent (poured into the sand) in Iraq? Does money spend by the centurions at the bases all over the empire count in the GDP tally?


I presume so. After all, the money allocated to the war mostly ends up in the hands of defense contractors. They pay their employees with it, and the employees buy food and Hummers with the money. So that all adds to the GDP.
The article I got this info from was in the Boston Herald, our local version of the NY Post, so I was surprised at that. He explained the GDP this way: if I give you five dollars, that adds to the GDP. If you give me the five dollars back, that adds to the GDP. So we've added $10 to the GDP, but of course nothing has really happened, has it?
Looks like just more gov't propaganda to me. Not an attempt to give an accurate picture of economic prosperity. Kinda like "unemployment figures". ;-)

Such accounting applies only if you both produced something in exchange of those five dollars and you have reflected this as some service in the your reports to the govt. Here is how it works: a doctor charges a lawyer $10,000 for treatment. The lawyer then sues the doctor for improper treatment and gets the $10,000 back. Nothing is really done, but in the end the GDP is ahead with $20,000.

I think the Iraqi war is also counted in GDP as the military personel working there is producing "services" which you can name under the item of "security". Other expenses as supplies, ammunitions weaponary will affect GDP indirectly if they are supplied by US companies.

When thinking about GDP one has to get money out of his head. Money is just the measure of what exactly is produced. The real lying is what is counted as production and what is not... here one can find a whole bunch of weird things contributing to GDP.

Alright, already, wanna raise the GDP?

Get in our cars, all of you, and ram into each other.

Between repair bills, insurance expenditures, new car sales, and most of all hospital bills you'll make a much appreciated contribution to raising your government's favorite statistic.

Know what, maybe some therapy for the shock is your thing.

Yes, that's the sound of the cash register in the background.

Some of the funds count as GDP; some do not. If something was manufactured in the U.S., then it counts as U.S. GDP, no matter where it was consumed. On the other hand, when the U.S. ran short of 5.56 ammunition for assault rifles, the U.S. bought this caliber of ammunition from the UK and Israel; this spending would not go into U.S. GDP but rather into the GDPs of the countries where it was manufactured.

Money spent by the U.S. on goods produced in Iraq (fuel, for example) do not count in U.S. GDP but rather become part of Iraqi GDP.

Recall the importance of "Domestic" in Gross Domestic Product, in case you are wondering what spending counts in which country's GDP.

Until my World Politics courses this semester, I didnt think anyone in acedemia stil used GNP as I haven't seen it for almost a decade including high school where the focus is on GDP.

Hello Don Sailorman,

Forgive me, but I am not a professional economist. Is there any chance of the members of your profession creating econometrics for what I call 'Gross Natural Product' that could be used to track Biosolar Growth?

If we are at Peak as the Deffeyes Group [Simmons, WT, Darwinian, et al] suggests, I think it will be vitally important for economists to track positive biosolar feedback forces besides the negative detritus decline blowback forces that will be asserted postPeak.

I gratefully concede to your greater expertise, but hope you can later receive a Nobel Prize in Economics for jumpstarting this new tracking of metrics. Some of my Biosolar suggestions:

1. Miles of Spiderwebriding/capita on a local, state, and national basis. Penetration ratios of railbikes and railPHEVs to personal ICE vehicles on asphalt.

2. Bicycles/capita, wheelbarrows/capita, PV wattage/capita, Heavy-duty delivery truck PHEVs/capita, Zero-energy Eco-Tech housing/capita.

3. Urban and suburburan asphalt acreage converted to relocalized organic permaculture on a local, state, and nationwide basis. Tracking of families ripping out their lawns and other landscaping to grow Victory Gardens. Sales ratio of hand tools to power tools.

4. Acquifers shut-in to allow restoration, labor force shift %'s to precision manual agricultural watering, reduction in gals/bushel harvested, ratio of organic agri-acres to FF agri-acres.

5. Miles transported/calorie consumed, # of families doubling, tripling up to save on energy costs, household #'s converting to Humanure and other recycling measures such as thrift store/new store purchasing amounts, junk mail and paper tonnages recycled for relocalized toilet paper & medical bandage mfg, etc.

6. Avg $ cost for court trials: postPeak this will have to have a directed decline so that some measure of justice is affordable to all thus delaying as much as possible the onset of impromptu neighborhood necktie parties.

7. Careful tracking of biosolar legislation to monitor energy saved such as drive-thrus outlawed, schoolbus reductions, billboard illumination reduction, streetlamps turned off, growth of RRs & mass-transit, mandatory car-pooling so fuel rationing is averted, etc.

8. Constant polling of public to determine the Peakoil Outreach penetration rate and understanding to insure adequate education funding for elementary schools to post-graduate studies.

9. # of gas-stations that have pedal pumps installed to provide supply during blackouts, coleman stoves/capita to prevent wood burning, solar ovens/capita for baking or slow-cooking.

Some suggestions for my Detritus Decline econometrics from the inevitable blowbacks:

1. Careful tracking of water & sewage breakdowns to avert Zimbabwe Syndrome, conversion rate of roads reduced to dirt paths again, bridge collapses from maintenance failures.

2. Rates of urban deforestation in response to increasing foul weather blackouts and decaying infrastructure. Recall that many formally electrified urbanites in Africa now cook and heat water in their yards.

3. Protection success ratios of abandoned buildings and vehicles so that proper recycling can be achieved versus vandalism, thievery, and arson predominating.

4. Monitoring of gunstore sales, martial arts training, gangs into militia growth, etc to predetermine sufficient funding for police suppression.

5. Tracking of the super-wealthy to determine if they are investing in the paradigm shift like Richard Rainwater [therefore worthy of protection by his neighbors] or if they are investing in the blowback forces that make the situation worse [building warlord castles & mercs vs funding relocalized permaculture, etc].

6. Careful ecologic monitoring so that Earthmarines can arise to protect habitats & biota before GW-induced migrations decimate the landscape [no sense imitating Haiti, Easter Island if possible]; i.e the prevention of eating the last raspberry, carrot, poodle, deer, burning the last sequoia, sagebrush, mesquite, etc. Recall my much earlier posting of the two brother Somali clans fighting to the death over a small stand of trees: one clan for firewood now, the other for much more firewood later. Or the Sri Lankans starting a war over control of a mere water sluicegate.

That is just a start, hopefully other TODers can suggest other metrics to optimize our decline and hopeful paradigm shift. It seems that this should be easier to do than to get KSA to allow a full oilfield audit!

Bob Shaw in Phx,Az Are Humans Smarter than Yeast?


I respect your opinion here greatly, but I have read a GREAT deal on this deflation/inflation argument and I have only one point to make. The most important argument I have heard FOR deflation that cannot stand inflationary scrutiny, is that you can't force people to spend. Ok, give them money and what do they do with it? Buy gold and silver in a deflationary environment. I wouldnt be holding cash as it's inflating, do you think a majority of people would in an environment like this? It simply doesn't make sense if we're in an inflationary environment. The most telling sign for deflation is the $7 it takes in debt to create $1 in output as measured by GDP. At some point the debt becomes a bit too burdensome to service and bankruptcy is the option...thus deflation in the credit money supply.



Originally Posted by Mike Shedlock, Mish's Global Economic Trend Analysis
Banks can print but they cannot force consumers to either borrow or spend. If bankruptcies expand faster than borrowing, the net of money supply and credit will contract. That is deflation.
Yes, the US is different than Japan. We are far worse off and much deeper in debt. That adds to the deflationist case. Wage fundamentals are much worse now especially with outsourcing and the internet. That adds to the deflationist case. Ultimately it comes down to the question of "will the banks destroy themselves and their wealth" to bail out consumers deep in debt.

The answer to that question is "Of course not. Why would they?"
If housing is the bubble of last resort, what would happen if the Fed turned on the pumps? I suspect money would go into gold and silver, but no jobs would be produced, certainly nothing like the housing boom produced. That last sentence should explain why many deflationists like gold. That answer is also why it would be game set and match for the Fed. Yes the Fed could in theory drop money out of helicopters, but only if they wanted to destroy themselves. There is theory and there is practice. If consumers are finally at the end of their ropes as I suspect, inflationists are in for one rude shock.

You are correct that banks cannot force consumers or businesses to borrow. However, this borrowing is not necessary, because if the government runs sufficiently huge deficits (in the trillions, say), then the banks lend money to the government when they buy treasury securities.

The deficit spending by government stimulates the economy with a multiplier effect.

Fiscal and monetary policy must be coordinated, but if they are then the "liquidity trap" is not something to worry about.

In bad times, the tendency is for government to borrow and to spend just as the tendency of water is to run downhill. The debt deflation of the Great Depression was a special case--now well understood--in which thousands of bank failures were allowed because the Fed did nothing to stop the financial catastrophe. The chances that the Fed will make the same or a similar mistake in this century are approximately nil.

The Fed can always force consumers to spend by expanding the money supply, thereby devaluing the currency and forcing them to buy "things" that hold value. During the hyperinflation of the Wiemar Republic, workers were paid twice a day so that they could quickly spend their paychecks before the money lost value. Inflation also cures the debt problem by "inflating it away", .i.e., the burden of the debt is reduced because the nominal dollar amount of debt equates to smaller real value. Japan is not the U.S. Given a choice between deflation and inflation, the Fed will expand the money supply and choose inflation. In deflation, debtors default. In inflation, debtors pay off the debts with devalued dollars. In either scenario, gold and silver should be a safe haven.

Given a choice between deflation and inflation, the Fed will expand the money supply and choose inflation. In deflation, debtors default. In inflation, debtors pay off the debts with devalued dollars.

Given what we know of the behaviour of US consumers it would appear that they are all betting on inflation to bail them out of unsustainable debt positions. It also appears that the only option for the Fed is to expand the money supply to a greater degree then it is already doing. This pair of outcomes appears as inevitable as Peak Oil; the only question is when.

The option of increasing rates in order to protect the dollar does not appear to be an option. The question then becomes why are all those folks around the world holding dollars? And how do you stop a massive rush for the exits in the face of the awareness of needing a wheelbarrow full of DM greenbacks to buy a loaf of bread?

The question then becomes why are all those folks around the world holding dollars? And how do you stop a massive rush for the exits in the face of the awareness of needing a wheelbarrow full of DM greenbacks to buy a loaf of bread?

We rely on inflows of $2 billion per day. The biggest holder of U.S. dollars is China. They have been buying dollars to encourage us to keep buying their goods, so that they can build up their manufacturing base. If/when they decide they don't need to keep funding the U.S. trade deficit, they might slow their purchases of U.S. Treasuries, or even start selling them, and then we're in quite a pickle. The Fed would have to print dollars to make up the difference, leading to a crash in the value of the dollar, otherwise we'll experience one hell of a depression as liquidity vanishes and U.S. markets and economic activity crash.

OK Khebab. let's do some graphs, a picture, a thousand words and a story.

Man, does this economy boom, or what?

PS yours is courtesy of CalculatedRisk, mine of ContraryInvestor

Gotta rememeber that all that withdrawn equity is being stuffed under mattresses. This is the reason Americans sleep so soundly.

Actually, your graph would look a lot better if you could simply invert it :-)

About the graph....

Great article. I read and forwarded it this morning.

Were Swimming In Liquidity, Aren't We?

Click on the image for details (then hit refresh, blogger.com has problems today).

Khebab - Blogger does not allow remote linking. You can probably see the image, because you viewed it previously at the Blogger site and it's in your cache. The rest of us can't. You need to post a link to an HTML page if an image is hosted on Blogger.

I can see it. Or, maybe I just think I can...

Oops. Looking at the page source, the image doesn't appear to be hosted at Blogger. I just assumed it was, because of the comment. Not sure where it is hosted, though...

Thanks Leanan, you're probably right. The new "Blogger", or should I say the new "Bugger" is supposed to enable direct publishing from Google Doc&spreadsheet but I guess images are not really published :). Besides, the service is very slow and the anti-spam word verification does not work!

Household debt service payments and financial obligations

This comment is an attempt to kill the run away center tag in Khebab's post.

Well, Khebab, here's the zinger.

A graph is one thing, a graph with a trendline is better.

Disputing a 40-year trendline is like saying it's a brand new world, and gravity is gone.

What do we think the average US home will lose in value soon? Not all together now!!!

Courtesy of ContraryInvestor

Leanan, Blogger does have (extra) problems today, with archived items.
I could see the graph fine, maybe a Google account perk?

The scary part (IMO) is not so much that the "aggregate consumer" is pulling consumption forward via home equity extraction per se, but that the aggregate consumer does not have anywhere near enough income to meet both current consumption AND current principal & interest payments. Therefore, income must rise significantly and/or consumption fall if the home equity extraction game is to end (or once it ends for other reasons). Alternatively, many of the "parts" of the aggregate consumer will simply file bankruptcy to "solve" the problem between reducing consumption and making their monthly P&I payments: another outcome not good for long-term economic growth.

It is based on facts of this type that many believe the US economy needs low interest rates like an addict needs his/her fix: high rates would end the equity extraction game and result in significantly reduced consumption (i.e., recession). Moreover, many believe that the US real estate market is what is setting yields on the 10-yr Treasury: mortgages & refis may indeed be the marginal trades that are setting the price. If this is indeed the case, flat and inverted yield curves may be the norm for many years. It's possible even that the 10-yr point will in effect drag the short-end down with over time i.e., the FED will trail the market on down as the economy slows over time under the weight of the ever increasing debt load. Conundrums are interesting economic beasts.

Anyway, interested readers can go to www.piscataquaresearch.com for more details. It's all free once one registers.

- Sonic

Yeilds on CD's are still inverted! I looked this AM.
Question I have is...How do we borrow $ on the world market while they (US tres.) are increasing the money supply without paying higher interest rates?
IMHO this is a hugh problem without a painless answer.

How about a graph that also deducts trade imbalances and federal deficit spending. IIRC The trade imbalance for 2006 was around $810 billion. The fed was probably in the $425-$500 billion range (if the SS surplus is deducted).

Hello, is Mortgage Equity withdrawal money once spent not counted on the spending side and thus (too) leading to a negative savings rate?

According to this June, 2005 article bond yields have not risen because corporate savings have in part replaced private savings. Indeed, is there a world wide savings glut?

Interesting article. It squares with the trend toward increased corporate profits coupled with flat worker earnings, also with the merger and acquisition trend for corporations. The wealth is moving upward and outward.

The wealth is moving upward and outward.

Your observation would support the hypothesis of the creation of a trans-national elite, a set of economic actors able to create economic conditions satisfactory to themselves while engaged in activity that results in the impoverishment of home state nationals.

In practical terms this suggests that there are fewer "islands" of human activity demonstrating an alternate set of solutions. I am thinking here of the role of the American Revolution in inspiring all peoples of the world with ideas in establishing new relations between the governed and the governing.

This also suggests that once this trans-national fabric starts to unravel it will unravel at multiple sites at the same time and the resulting set of issues will have global impact.

Good free WSJ article on rising ethanol imports into the US. US producers asking why they should trade a foreign oil dependency for a foreign ethanol dependency. At least a 12 step program exists for ethanol.


"why they should trade a foreign oil dependency for a foreign ethanol dependency"

Because it costs less to police this hemisphere (lower logistical costs of invading Brazil in 2020 than Africa, Asia or ME)?

Senate Energy & Natural Resources Committee on Biofuels

LIVE WEBCAST (left hand margin): http://tinyurl.com/2gtltf

Panel 1: Energy Future Coalition - Natural Commission on Energy Policy - RFA - SAFE - World Resources Institute

Panel 2: American Corn Growers Assoc. - American Trucking Assoc. - GEC - Monsanto - NCGA - NM Sorghum Producers

Panel 3: Abengoa - Amyris - DuPont - Iogen - KLJ Solutions - American Forest & Paper Assoc.

Panel 4: Coalition E85 Retailers - Renewable Energy ConocoPhillips - Ford - Imperium Renewables - Magellan Midstream - National Petroleum & Refiners Assoc.

Panel 5: Chevron - Earth Biofuels - Virginia Mayor Hitch - Director S.C. Energy Studies - VeraSun

Panel 6: Auburn University - MIT - NREL - PNNL - Sandia National Laboratory

Cheaper than college and likely a much more useful education for the future

Plus a world-class cadre of instructors.



Individual Energy Independence is essential for the future. The less you depend on foreign sources (i.e. 1000 miles of your personal locale) and on Big Brother/Mommy government, the better.

But remember, while the know-how might remain, due to growing demand, limited resources and worth-less currencies, the availability of all alternative energy systems may not be universal in the future...

on the subject of Fiat Currency and Ass-wipe... (from Penniless Billionaires, by Max Shapiro)

In autumn 1923, Lotte Hendlich, a German widow in her fifties, returned to her native Frankfurt after an absence of more than four years in Switzerland (she broke her hip and remained there through her convalescence...)... Her much longed-for homecoming soon became a nightmare.

In the stack of accumulated mail she found three letters from her bank; they delineated her ruin.

The first - written in 1920 by a minor bank officer who had befriended her - advised her to "invest most of the funds in her rather substantial bank account" (amounting to over 600,000 marks in 1919)...

The next letter, dated in September 1922 said, "It is no longer profitable for us to service such a small account as yours. Will you kindly withdraw your funds at the earliest opportunity?"

The third letter, dated several weeks before her return from Switzerland, announced, "Not having heard from your since our last communication, we have closed out your account. Since we no longer have on hand any small-denomination bank notes, herein we enclose a note for one million marks."

With gathering panic Frau Hendlich looked at the envelope that contained the letter... affixed to it there was a canceled postage stamp of one million marks.

Her bank account - which four years before seemed large enough to provide her with a serene existance to the end of her days - ... could no longer pay for an ordinary postage stamp...

Of course, such a scenario could never happen to the dollar... or euro... or any other of the many forms of gubermint fiat currencies. Right?

Question and a comment. If Frau Hendlich owned her home wouldn't the
increased cost (value?) due to hyperinflation save her financially? If
a postage stamp cost a million marks wouldn't her house be worth, for
example, a trillion marks?
In the late seventies and early eighties I knew people who borrowed their way to wealth in real estate here in Texas. So what if the interest on the mortgage is 14%, the property will be worth 20% more next year. Borrow a couple of million, hang on for a couple years and cash out. Instant wealth. Sadly many hung on too long (til the 80s oil bust) and therefore borrowed their way to bankruptcy.

I knew people who borrowed their way to wealth in real estate here in Texas. So what if the interest on the mortgage is 14%, the property will be worth 20% more next year. Borrow a couple of million, hang on for a couple years and cash out.

What you are describing is exactly the psychology that has generated the current real estate bubble. Problem is that those who are "still hanging on" may now be owners of a highly over-valued asset; they simply have not yet realized this fact just yet.

Yes, I agree with you this is exactly what has caused the present real
estate bubble. I am in no way advocating borrowing your way to wealth in leveraged real estate. Given that, I have always heard that hard assests such as commodities and real estate do well in periods of hyperinflation. Financial assets (bondholders, mortgage holders and cash) do poorly. People who have owned their homes for a period of time, or those who own them outright have done well even with the present pullback. For example, if you bought your house fifteen years ago for $60,000 and it was worth $180,000 last year and $160,000 this year you are still in good shape.

It has occurred to me that there is a "storehouse" of value that has limited downside potential and will retain value in almost every negative post-Peak Oil economic scenario from mild to extreme. Bicycle parts (and bicycles especially of the Urban Commuter type that can carry loads).

Most are imported (declining US$ raises value of imported goods from nations w/stronger currencies), one can, I suppose, buy in bulk at a discount today and the value density is "OK". ($100,000 should fit is a garage or spare room with ease).

Would a 1920s German Farmer trade 40 kg of potatoes for a new bicycle chain ? Probably not, but haggling might get 10 or 15 kg.

Just a thought,


I recall a story (probably fiction) of two brothers who inherited a sizeable fortune in Germany in the 1910's. One bought german govt. bonds and the other one proceeded to drink up his inheritance. The one who bought govt. bonds went broke in the hyperinflation of the 1920's but the other one sold all of the empty champagne bottles he had stored in the basement over the years for a tidy profit.
Well, probably bogus but I hope good for a chuckle.

Here's a more recent version of that story, from the Tech Wreck of 2000:

Nortel Stock vs. Beer

On July 26, 2000, two friends, Jim and John, each got a $1000 bonus at work. (They both work for Nortel Networks, where in the summer of 2000, there was LOTS of money around for bonuses).

Jim, being an intelligent, financially concientious person, put the whole $1000 into Nortel Networks stock. With his $1000, and the transaction cost of $35, he was able to purchase 7 shares at $123 each. Having watched the Nortel stock climb and climb, he felt very good about this investment, happy that he is preparing for the future.

John, being a more care-free sort, did something slightly different with his $1000. John borrowed a friend's truck, and proceeded to the Beer Store, where he purchased 33 cases of beer. John also felt very good about his investment: 33 cases x 24 = is 792 bottles of beer! John, also being an intelligent guy, although perhaps not as forward-thinking as Jim, calculated that he could drink about 15 bottles per week, and he wouldn't have to buy beer for a whole year.

Jim, of course, was appalled by John's purchase, and berated him constantly about it. As months went by, Jim excitedly watched the stock prices, and saw it start to dwindle. "It'll go back up", he'd say to John.

John, who has been reaping the benefits of his investment on a daily basis, would reply, "Ya, it will. Hang in there buddy".

Months went by, and the value of the stock continued to fall, and there was the beginnings of a noticeable dent in the beer pile.

Midwinter came, Jim's stock had fallen to about half of it's original value, and John's beer was about half gone. Jim, being sure that the stock had hit rock-bottom, still was berating John for his frivolous purchase, telling him "Your beer will be gone in six months! Who knows what my stock will be worth!!".

Well, summer has come, and hard times at Nortel continue.
Bad news: Both John and Jim have been affected by the layoffs.

Finally, in order to raise some cash to help through the rough time, Jim sold his 7 shares, at that day's value of $12, and got $84, then after paying the $35 transaction fee, he only had $49. Jim stopped by John's house later that day (everyone needs their friend's during rough times), and as luck would have it, there were two bottles of John's beer left. John, being a good, compassionate friend, offered to share his last two bottles of beer with his friend. Jim appreciated the gesture, and enjoyed the cold beer on the hot summer's day, but he felt a bit guilty. "At least I got fifty bucks back out of it - you have nothing now.", he said.

"That's ok.", replied John. "Perhaps you can help me, I need to return all these empties.", he added as his other friend with the truck pulled in. So, they loaded up the truck, and proceeded off to the beer store.

Upon arrival at the beer store, they unloaded the empties, feeling a little grim. John went to the counter, and collected his refund for the bottles. "33 cases x 24 bottles, at 10 cents per bottle, that comes to $79.20", the friendly Beer Store clerk said to John as he handed him the money.

Jim was speechless. Poor guy. Can you imagine how you would feel if you just discovered that over the course of the last year, your $1000 stock investment left you with $50, and taking same 1000, buying beer, and drinking it, would leave you with $80.

This was a very popular story among those of us who lived through those days...

hard assests such as commodities and real estate do well in periods of hyperinflation.

This is also the route to oil at $300 a bbl. It may be worth only $45 in 2007 constant dollars but we will be paying the higher amount.

With regards to the house price example the key issue is the purchasing power parity of the dollar. The house may have tripled in value in 15 years. However, if the price of all other inputs required to support your life have quadrupled in price then you may be worse off then you were 15 years ago. The impact on income levels would be similar. The Mexicans may end up building a border barrier to keep the gringos out :-)

Quotes for today error-free!:

June 2007 6026
December 2007 6290
December 2008 6360
December 2009 6320
December 2010 6310
December 2011 6298
December 2012 6250

History "is boring," but instructive. The following book might be of great interest to the graphically-inclined at TOD.... (A graph is worth 10,000 words and a couple of pictures too).

The Great Wave: price Revolutions and the rhythm of history, by David Hackett Fischer.

First Wave: Medieval Price Revolution
a. the Crisis of the 14th century
b. the Equilibrium of the Renaissance

Second Wave: Price Revolution of the 16th Century (a. crisis..., b. equilibrium)

Third Wave: Price Revolution of the 18th Century (a. crisis..., b. equilibrium)

Fourth Wave: Price Revolution of the 20th Century...

Measures of Wealth and Income Distribution

Price revolutions and Inequality

Price revolutions and Family disintigration

Price revolutions and Personal Violence

75,000 protest tortilla prices in Mexico

Some 75,000 unionists, farmers and leftists marched to protest price increases in basic foodstuffs like tortillas, a direct challenge to the new president's market-oriented economic policies blamed by some for widening the gulf between rich and poor.

You can bet that had the other guy been elected, this would be happening as well.


The current batch of leaders are not to blame for the situation we find ourselves in at this TimesUp.

All the current kings, their horses-asses and menz, will not save this global Humpty Dumpty again.

The other guy was elected...

Price revolutions and Personal Violence

They aint seen nothin' yet. Wait until the government has to make up the budget shortfall from Pemex over the next few years: massive tax raises, budget cuts, high interest rates.


You hit on one of the reasons I recently passed on buying a beachfront condo in Mexico. Mexico just narrowly missed going over the Hugo Chavez, "dark-side" of the Americas. I fear that we may not be so lucky in the next set of Mexican elections.

There is a saying in Mexico that roughly goes, "If you are paying taxes, you have the wrong accountant."

Mexico has serious compliance problems with their current coroprate & personal income tax code: I think they collect only 13% of GDP in the form of taxes and this is not due to low marginal rates. Mexico needs to restructure its tax system to one that increases compliance if they wish to replace the lost revenuw from PEMEX, such as VAT/comsumption taxes over income taxes. Otherwise, they will soon be in "deep kimchi" to borrow a Korean War era phrase.

But if they were to increase compliance would the result not be capital flight with no net benefit to the Mexican treasury?

And how do you see their prospects of attracting foreign capital? How high would rates need to climb to assure investor safety in a region unable to afford a tortilla, or much else?

To rephrase the above: How repressive a regime would be required to reassure the international investor class?

I'm just guessing here, but perhaps Mexico can take a page out of Milton Freidman's handbook: lower, flatter taxes, fewer deductions, less government corruption, and increased enforcement. Lower tax rates reduce the incentive to cheat, and some of the new money paid in taxes gets offset from the savings of employing fewer lawyers and accountants to find ways around paying taxes.

The newly unemployed tax accountants and lawyers can then be deployed elsewhere in the Mexican economy -- presumably to jobs that actually ADD value. It's possible that the net effect could be roughly neutral. All this said, I don't see those with the capacity to pay income tax in Mexico as the ones likely to be heading north across the border. My upper income Mexican relatives are already heading north (to the US and Europe), but to go shopping at our outlet stores!

Starving the Mexican Federal Government of revenue for a time might also force them to address issues they've been neglecting for a long time: corruption in police force at all levels (from being onthe payroll of the drug lords to the occassional shakedowns of motorists with bogus driving violations), "extortion" from the teacher unions, the incredible slowness of how money moves in Mexico, the foot dragging of just about every local official you encounter, the lack of competition in many, many, many industries, etc. Addressing these problems should attract new investment capital.

NOTE: The USA also has significant compliance problems, just nowhere near the magnitude of Mexico. It is quite common for, say, a restaurant to run two registers: one that gets reported and one that does not. It is also common for waiters & waitresses to not report cash tip income. I also highly doubt that any of the workers (construction, lawn care, etc.) I see being paid in cash fully report it. Now, do I really want the FEDs hounding these folks at the lower end of the economic scale? Not really, but the problem exists in the US and elsewhere. When we lived in London, plumbers & electricians routinely gave one a 20+% discount for paying in cash. I wonder why? Sales/VAT taxes tend to capture more of this unreported income than do standard income taxes: in effect, the corporate employee (many reading this forum) pays too much to offset the cheats elsewhere.

Just my $0.02 (or about 22 centavos at the moment).

I've heard that saying about tax accountants a few times only the comtext was USA.

Shell shakedown

Word that control of the world's largest integrated oil and gas project had been wrested from Royal Dutch Shell trickled down to the company's staff on Russia's Sakhalin Island in December the same way it reached everyone else: via the newswires.

Outside Shell's six-story steel-and-glass compound in Yuzhno-Sakhalinsk, a town of 175,000, snow swirled in subzero wind past drab rows of communist-era cinderblock apartments. Inside, Jim Niven, the company's gregarious head of external affairs, was halfway through an upbeat presentation on the vast potential held in this claw-shaped island dangling from the Siberian Arctic - an estimated 45 billion barrels of oil and gas - when he was interrupted by a nervous colleague, paper in hand.

The news was stunning, even if rumors had been flying: Shell was halving its ownership in the $22 billion project, cutting its stake from 55% to 27.5%, and Gazprom, the Russian gas giant, was stepping in, buying Shell's share plus half the stakes owned by Japanese partners Mitsui and Mitsubishi, for just $7.5 billion - the equivalent, says a Shell spokesman, of "paying to enter on the ground floor, as if they were a shareholder at the beginning."

U.S. Cautions Europeans to Avoid Oil, Gas Deals With Iran

... a senior State Department official cautioned that the situation with Iran was "hot and is going to get hotter," ne executive said.

Israel Massacres Lebanese by Poisonous Balloons

TEHRAN (Fars News Agency)- Genocide by poisonous balloons is the new method employed by the Israeli army for killing people in southern Lebanon...

Invasion of Iran Unjustified Strategically, Tactically

TEHRAN (Fars News Agency)- Commander-in-chief of the Islamic Revolution's Guards Corps (IRGC) Major General Seyed Yahya Rahim Safavi said that there exists no specific strategic or tactical reason or indication for a military invasion of Iran...

Iran Celebrates Revolution Vowing N. Advance

TEHRAN (Fars News Agency)- Iran kicks off 10 days of celebrations marking the anniversary of the 1979 Islamic revolution, with officials promising the unveiling of a major advance in its nuclear drive.


Weekly Natural Gas storage data is out: http://tonto.eia.doe.gov/oog/info/ngs/ngs.html

Lower 48 states storage dropped last week 186 Bcf to 2571 Bcf. This is still 6% higher than this time last year and 21% higher than the five year average. As cold weather continues at least into next week, expect this number to drop a good deal more. U.S. Natural gas storage levels usually bottom out at the end of March, then rise again until November. Barring a remarkable weather event, storage is sufficient to ensure adequate supplies this year.

As of last week, the natural gas rig count was at an all time high. Rig counts have been continually increasing, while overall production is flat - we're basically running faster and faster to stay in the same place.

Montana sues Wyoming over water rights

Montana sued Wyoming in the U.S. Supreme Court on Thursday over water rights in two shared rivers, which Montana claims are running dry due to Wyoming's overuse.

The lawsuit over the Tongue and Powder rivers, which flow from northeastern Wyoming into southeastern Montana, marks a sharp escalation in the water fight between the states.

The lawsuit alleges Wyoming is ignoring Montana's "senior" water rights by taking more water from the rivers than allowed under the 1950 Yellowstone River Compact. That includes water diverted and stored for irrigation and ground water pumped from beneath the surface during coal-bed methane production.

"We're running out of water," said Montana Gov. Brian Schweitzer. "It's getting worse every year as Wyoming is using more and more water. ... Our farmers and ranchers who depend on this water for irrigation are having difficulty raising their crops."

Hello Leanan,

Just two states fighting each other in court? That is nothing compared to the mounting GW & Overshoot water problems of all the states in the Colorado River Basin plus Mexico's delta and fishery collapse. It will be ugly. =(

Bob Shaw in Phx,Az Are Humans Smarter than Yeast?

The best method of carbon sequestration is this:

Do not dig up any coal.



Coal is stable, geologically sequestered carbon. Leave it be.

Hello TODers,

Even Zimbabwe Parliament water taps run dry:


Zimbabwe is very close to marching to Olduvai Gorge:


Bob Shaw in Phx,Az Are Humans Smarter than Yeast?

Hello TODers,

Haitian cities enjoying the splendor of Olduvai Gorge:


Bob Shaw in Phx,Az Are Humans Smarter than Yeast?

The Java mud volcano is back in the news. This story goes back to last fall, when an Indonesian exploration company drilled into a pressurised mud field. The mud keeps flowing and flowing.

In yesterday's story, a team of Indonesian geophysicists is proposing to reduce the flow by dropping concrete balls, joined together by chain links, into the hole.

Russian oil output hits new high in Jan

MOSCOW, Feb 2 (Reuters) - Russian oil output rose to a new post-Soviet high of 9.85 million barrels per day (bpd) in January as unusually warm weather supported production, Energy Ministry data showed on Friday.

January production rose 0.6 percent versus December and 4.5 percent against January 2006, when harsh weather slashed oil output to 9.43 million bpd, the lowest level of the year.

Remember guys, Russia, KSA and all others must be declining. Surely this is one last heroic gasp of rising oil production from Russia, its all down hill from here!