DrumBeat: February 27, 2007

Scientists to U.N.: "Tens of billions" needed to combat global warming

UNITED NATIONS — To head off the worst of climate change, governments must pour tens of billions of dollars more than they are into clean-energy research and enforce sharp rollbacks in fossil-fuel emissions, an expert scientific panel reported to the United Nations on Tuesday.

The U.N. itself must better prepare to help tens of millions of "environmental refugees," the group said, and authorities everywhere should discourage new building on land less than one meter — 39 inches — above sea level.

The article includes some interesting Flash graphics.

Peak Oil: An Update

After two decades of almost continuous growth, global oil production has been stagnant around 84 million barrels a day for the past two years. This, of course, is exactly consistent with the peak oil hypothesis, which predicts that supply constraints will force up prices, destroying growth in demand.

It will be some years before we can tell for certain, but it is entirely possible that we're in the middle of peak oil right now. That's certainly consistent with the predictions of Kenneth Deffeyes, Colin Campbell, Matthew Simmons, and other geologists and oil industry analysts.

Smoke and mirrors

Each year in the July issue of the Monthly Oil Report, the International Energy Agency in Paris (IEA) publishes their first forecast for next year’s supply and demand. The geographic area where the IEA should have the best chance of making accurate predictions must be non-Opec ex FSU. In this area there is limited civil upheaval and political interference with the oil industry.

Since their forecast made in 2002, it turns out they have increasingly overestimated production growth each consecutive year.

Nuclear Energy for the Developing World

New reactor technologies offer poorer nations cheap, safe, efficient power. Sanctions designed to prevent the proliferation of weapons impede their use. What would a better policy look like?

Macro Musings

Here are a few excerpts from Putin's forceful remarks:

"Today we are witnessing an almost uncontained hyper use of force - military force - in international relations . . . We are seeing a greater and greater disdain for the basic principles of international law . . . The United States has overstepped its national borders in every way . . . and of course this is extremely dangerous. It results in the fact that no one feels safe."

This is more than just the pot calling the kettle black. This is the soot-covered black cat hiding in a coal bin in a dark corner of the basement calling the kettle black.

How global warming goes against the grain

The place where most of the world's people could first begin to feel the consequences of global warming may come as a surprise: in the stomach, via the supper plate.

That's the view of a small but influential group of agricultural experts who are increasingly worried that global warming will trigger food shortages long before it causes better known but more distant threats, such as rising sea levels that flood coastal cities.

Zero Degrees of US Dollar Seperation

The USDollar will be defended with gold levers, with oil levers, and with military levers as the American Empire fades anything but quietly. Natural forces oppose all three devices abused as tools. One should not regard it as unpatriotic to notice what occurs, since usage of the brain is an inalienable human right. The gold levers are opposed by Asian central banks, principally China and Russia, the outspoken rebel with nuclear capability, tremendous ambition, and willingness to use energy as a formidable weapon. The oil levers are opposed by Mother Nature, who is never to be denied for long. The latest public natural victim has been the Mexican Cantarell giant oil field in rapid 15% annual decline. The military (called in true Orwellian style “defense”) levers are opposed by those who wish not to be invaded on their own turf, a defense mechanism as old as the caveman. The USDollar depends therefore upon Eastern central bankers not to act too rebelliously, upon market mechanisms disobeying Mother Nature, and upon guerrilla fighters not prevailing. One can comfortably count on lost ground on all three fronts, over time. One should always remain aware that gold, oil, and the military are connected by zero degrees of separation.

Two Emerging-Market Oil Giants

I remain bullish about the prospects of the oil patch for several reasons. There is continued demand growth from developing nations such as India, China, and Brazil, and OPEC estimates that global oil consumption will increase 1.6% in 2007. In addition, there's a global scarcity of spare refining capacity, declining production rates in key regions such as the North Sea, Alaska, and Mexico's Cantarell field, and the uncertain political environment in many oil-producing nations such as Nigeria, Venezuela, Iraq, and Iran.

US's Iraq oil grab is a done deal

US President George W Bush and Vice President Dick Cheney might as well declare the Iraq war over and out. As far as they - and the humongous energy interests they defend - are concerned, only now is the mission really accomplished. More than half a trillion dollars spent and perhaps half a million Iraqis killed have come down to this.

Japan and Russia Agree To Increase Energy Relations

Japan and Russia have pledged to strengthen reciprocal relations in oil and natural gas development and increase trade at a ministerial meeting in Tokyo.

A Practical Use for Waste Methane

A direct method of converting methane into useful chemical compounds could reduce the release of the potent greenhouse gas at isolated oil fields.

TXU's emissions U-turn shocks power industry

TXU Corp.'s decision to whittle down plans to build 11 carbon-spewing, coal-fired power plants as part of its buyout deal with private-equity firms sent a chill Monday through both Wall Street and Washington, signaling that utilities can no longer afford to ignore climate change.

Big Ideas for a Greener World

Alternative energy companies are vying for investor dollars with some audacious approaches to providing cheap, clean energy.

Wishful thinking is no magical energy elixir

The U.S. Energy Information Administration believes the practical limit for domestic ethanol production is about 700,000 barrels per day -- in 2030. In 23 years, that will translate into about 6 percent of the U.S. transportation fuels market.

Quantum Awarded Contract to Expand Hydrogen Hybrid Vehicle and Refueling Infrastructure Programs for U.S. Army

Ontario may wait weeks for gas shortage relief

A gasoline shortage that started with Imperial Oil's Esso stations in southern Ontario is spreading to competing companies as efforts to restablish fuel supplies are hampered by weather.

A winter storm on Monday delayed repairs to Imperial Oil's Nanticoke refinery, which was hit by a fire two weeks ago. That incident cut production at the plant in half.

The problem, which was made worse by the recent CN Rail strike and a December fire at another Imperial Oil refinery in Sarnia, Ont., has started to force other companies to ration gasoline at the pumps. In some instances, pumps are being shut off because they have no fuel to sell.

Kenya: China Selling Off Oil Rights It Got for Free

There was outrage among European oil exploration companies interested in Kenya when it emerged last week that the state-owned National Oil Corporation of China - CNOOC - has quietly put out notices offering to farm out to third parties some of the oil exploration blocks granted to it by President Mwai Kibaki in April last year.

Saudis Say Terrorism Possible in French Attack; 4th Man Dies

Saudi Arabian authorities don't rule out terrorism in the killing of four Frenchmen, including two Schneider Electric SA employees, in the kingdom, holder of the world's largest oil reserves.

Relocalisation - acting locally on global issues

Peak oil is one of those ideas that have spun into mainstream thinking from society’s innovative fringe. What is interesting is how readily the idea has been accepted and how influential and knowledgeable people, some having an association with the oil industry, support it.

Backward and forward - Board looks at future of energy, financial history of county fair

A decreased supply and increased costs will impact all areas of life as we know it, including food production and distribution (the average food in the U.S. travels 1,200 miles from farm to table), transportation, housing, medicine and plastics as well as all government services such as police, fire, emergency, health care, housing, education and planning.

Need For A Balancing Act: Reducing Oil Dependence Without Triggering A Global Crisis

Three facts underscore the importance of the debate about the future of oil: oil is a finite resource; oil is one of the major anthropogenic sources of carbon dioxide; and the world economy is heavily dependent on oil, especially in the transportation sector. The most important questions are: How do we balance depletion, the environment, and economic growth – remembering that “we” includes human beings in oil-exporting countries as well as those in oil-consuming countries? Will the transition to new energy sources be seamless and easy, for oil-exporters as well as for oil-importers? How will oil-producing countries react to the non-market based efforts of oil-consuming countries to reduce their dependence on oil? Should oil-producing and oil-consuming countries cooperate to make the transition to new energy sources as painless as possible for all parties? Will these efforts at cooperation succeed in the long run if they are not market-based efforts?

Greatest Expectations

With the advent of Peak Oil, dreams of a world free of nuclear energy are fading. But, just like nuclear weapons, nuclear disarmament looms over us like a specter. They both wreak havoc with our peace of mind -- the first a threat to our existence, the second to our consciences.

Kunstler critiques urban planning, oil shortage

Humanities Symposium keynote speaker James Howard Kunstler spoke critically about the nation's energy sources, and the plan for the future to a packed audience in McManus Theater last Tuesday.

Tech giants join to cut industry's power needs

For Advanced Micro Devices' Bruce Shaw, combating the technology sector's impending energy crisis ``is the biggest problem facing the industry today.''

Costa Rica to cooperate with Dominicans in abating energy crisis

Zambia: Bio-Fuel - Experts Call for Caution

Bio-energy can succeed in Zambia if energy crops do not impact on food security but provide opportunities to benefit small-scale farmers who may be engaged in growing Jatropha.

Biofuels can replace oil

A comprehensive look shows that for every one unit of energy you put into growing the soy bean to crushing the oil to converting it to biodiesel, you get 2.2 back out. Ethanol has a lower return of about 1.2, but it is still a positive return. This article will take a closer look at these biofuels and offer solutions that are in the works.

Pakistan: Oil and gas production declined by 4.8% in H1

The total oil and gas production decreased by 4.8 percent during the first half of current financial year compared with the corresponding period of last year due to a decline in output by some major fields.

Venezuela to seize foreign oil projects

President Hugo Chavez ordered by decree on Monday the takeover of oil projects run by foreign oil companies in Venezuela's Orinoco River region.

Global warming a hot spot for investors

Droughts. Hurricanes. Rising temperatures. Melting glaciers. In a world abuzz with talk about global warming, climate change is elbowing aside tech and biotech as the major investment theme of the future.

Wall Street's savviest analysts are devising ways to cash in on crazy weather, just as they did in response to the profound changes brought on by the dawn of the digital age, globalization and the graying of America.

Price of gasoline continues to climb

Hydro may be striking more oil

Norwegian industrial concern Norsk Hydro reportedly has made a promising new oil and gas discovery in the Barents Sea, but it's also causing serious environmental concerns.

Oil exploration hits fishermen in Indonesia's Aceh

Oil exploration has cost fishermen in Indonesia's Aceh province more than two million dollars in income by damaging their nets and fish traps, a regional community leader said Tuesday.

The Oil Depletion Protocol: An Interview with Richard Heinberg

London mayor to announce climate change strategy

According to The Guardian, the mayor's office will set aside 47 million pounds in next year's budget to jump-start plans to cut carbon emissions in London by 60 percent by 2025.

Scientists wary of Lake Superior warming

Austin, a Duluth professor and a researcher with the University of Minnesota-Duluth's Large Lakes Observatory, has studied decades of data. What he found was water temperatures rising almost twice as fast as air temperatures — more than 4 degrees for the average surface temperature.

The increase is having dramatic effects.

Western states united to bypass Bush on climate

Five Western U.S. states have formed the latest regional pact to bypass the Bush administration to cut emissions linked to global warming through market mechanisms.

Dung power at U.S. ethanol plant

Sweden restarts nuclear reactors

Two of three Swedish nuclear reactors shut down this month following minor incidents were restarted this week, the Nuclear Power Inspectorate (SKI) said on Friday.

Enron prosecutor takes on Navajo uranium cleanup

The Southern California lawyer who successfully prosecuted top Enron executives has been hired by the Navajo tribal government to seek a full cleanup of the old uranium mines contaminating the country's largest reservation.

Nuclear station's challenges laid out

Count Silverio Garcia, a former supervisor and long-time worker at Palo Verde Nuclear Generating Station, was the least surprised person last week when the Nuclear Regulatory Commission downgraded the plant to being the most monitored in the country.

Garcia has been on a mission for more than a decade, pointing out to federal regulators all the wrongs he says he has seen.

The Feb 13 Oil Market Report from the IEA is now released for free, they show KSA at 8.42 mbpd for dec and jan.

Richlev, I am having trouble finding that figure of 8.42 mb/d. On both pages 13 and 14 I am getting the figure of 8.8 mb/d for December and no figures for January. Am I looking in the right place? Or am I using the wrong URL?


Ron Patterson

Ron, see Table 3 on Page 46 of


If you search for "Saudi" in that document, you will also see references to 8.7 mbd for December 2006 and January 2007. Go Figure.

Calorie, thanks a million. This clears it up. I was accessing the archives copy. That copy is dated Feb 13, and apparently there have been some changes since then.

As for the different figures in different places, I think the lower figure is crude oil only and the higher figure is all liquids.

Thanks again

Ron Patterson

I'm sorry to repost that, but I think it may interest somebody.

This is the hypothetical Saudi decline, following a 8% decline rate since 9/05:

9/05 (0% decline): 9,5 mbpd
11/06 (9,34%): 8,6127
2/07 (11,34%): 8,4227
3/07 (12%): 8,36
4/07 (12,67%): 8,29635
5/07 (13,34%): 8,2327
6/07 (14%): 8,17
7/07-(14,67%): 8,10635
8/07-(15,34%): 8,0427
9/07-(16%): 7,98

I'm sorry to repost that, but I think it may interest somebody.

This is the hypothetical Saudi decline, following a 8% decline rate since 9/05:

9,5 mbpd (0% decline)
11/06 8,6127 (9,34%)
2/07 8,4227 (11,34%)
3/07 8,36 (12%)
4/07 8,29635 (12,67%)
5/07 8,2327 (13,34%)
6/07 8,17 (14%)
7/07 8,10635 (14,67%)
8/07 8,0427 (15,34%)
9/07 7,98 (16%)

Manmax, I do not think anyone expects Saudi to continue to decline at 8%. I think their existing giant fields are indeed declining at a rate of 8% but they are bringing some new oil on line. But the argument is, at least my argument is, this new oil will not make up for the decline in their old giant fields. They will decline, in my opinion, every year for many years, but not necessarly by 8%.

Ron Patterson

I understand, it was just a guideline to follow the numbers of the Saudi production, in order to know how far they are from a 8% decline.

Looks like all world markets are in for some adjustments today:

U.S. Stock-Index Futures Fall; Newmont Drops After China Plunge


Dow drops over 100 points in the first half-hour. I think the "Plunge Protection Team" will get some OT today...

Markets don't come with safety nets. If the bubble in China is bursting, which is possible since their stocks just had the biggest fall in a decade, then the idea that a small group of people could prevent the effects being felt here is not credible. In 1929 people thought a group of wealthy bankers would step in and prevent a crash, but it wasn't possible then and it isn't possible now.

Stoneleigh, I agree. The myth of the “Plunge Protection Team” started with an article in The Washington Post in 1997:

And it is even listed in “Wikipedia”.

Founded in 1988 after the 1987 stock market crash, it theoretically ensures the stability of the financial markets, prevents liquidity problems, and ensures that stock market hiccups do not cause bank runs. Some Wall Street bears believe that it buys stock index futures or uses other methods to help keep the American stock markets afloat.

In theory and rumor, it prevents stock market crashes and bank runs. In reality it does not exist. Well, a group really does exist:

It includes the Secretary of the Treasury, the Chairman of the Federal Reserve, the Chairman of the Securities and Exchange Commission and the chairman of the Commodity Futures Trading Commission.

And what can these guys do to prevent a stock market crash. Absolutely nothing!

Ron Patterson

All comments are accurate, but we should make a distinction in what the PPT can do in an already up market. If you look at the sell off in May followed by the rally the rest of the year, I can buy some of the argument that a PPT was keeping it going so to speak. Without a correction and everyone buying already, a PPT can increase the bids and push it higher than most bears thought possible. However that only works in a low VIX world, but now it's popped over 20% today alone!

Markets are more about perception than reality and behavioral finance will explode in popularity as people seek to understand why it was they we all lost our asses.

Without a correction and everyone buying already, a PPT can increase the bids and push it higher than most bears thought possible.

Tate, I do not understand your reasoning here. “Everyone buying already?” If everyone is buying already then there is no need for a Plunge Protection Team because the market is going up, not down. But that being said, how can they increase the bids? Remember we are talking about the Secretary of the Treasury, the Chairman of the Federal Reserve, the Chairman of the Securities and Exchange Commission and the chairman of the Commodity Futures Trading Commission. These guys do not buy stock. They have absolutely no power to increase any bid. No one in the government is allowed to buy stock with government money!

Ron Patterson

I don't know what Hank Paulsen did today. He didn't tell me. Duh. One thing I don't believe he did was sit around feeling or being powerless. I don't believe he was busy being a disinterested hapless observer.

Not that you are not entirely correct (in a formal way), but as the distinction between government and private blurs these days, it gives me pause.

Mind commenting on the Sprott study I posted below? I would appreciate your opinion.

Sam, the study has very serious flaws which leads me to believe that it is mostly fiction. From page 2:

The Plunge Protection team is not merely concerned with the stability of the stock market. Speaking in 2001 as a correspondent for ABC’s “Good Morning America,” Stephanopoulous also revealed that at the time the Long Term Capital Management crisis in 1998, the Federal Reserve directed large banks to prop up the currency markets.

A couple of problems here; the Federal Reserve does not have the power to tell banks how to invest their money. Buying currency in order to try to prop up the currency would involve enormous risk. And unless the Fed would be held liable for those risk, no bank in their right mind would go along with it. And it would be illegal for the Fed to accept responsibility for any losses.

And the second thing wrong with that statement is that such an endeavor would be useless anyway. Since the initiation of the FOREX, no bank has enough money to prop up any major currency, especially the US dollar, for more than thirty minutes.


Daily volume in the currency markets is around $1.5 trillion. By comparison, the NYSE daily volume averages $25 billion a day.

Daily volume on the FOREX market is sixty times the daily volume, in dollars, of the NYSE. 1.5 trillion is a lot of change. No bank has enough money, especially enough risk money, to even attempt to intervene and sway such a market.

To put it mildly, I simply do not believe it.

Ron Patterson


If you play with real money it is not necessary to put up trillions to sway the currency markets. Central banks prop up currencies every day as a normal matter of business. Always have.

True, but like some others have pointed out, are you really going to live in an insulated world to think it's not possible? I'm simply a bit more cynical in my short years. I read too much. I know my parents fu*cked this up and now this bull$hit is about to hit the fan.

Hey Ron I read Policy Pete who talks periodically about the PPT and he points to this site

Here is a reference to a study on surreptitious US Govt intervention in the US markets. Move Over Adam Smith: The Invisible Hand of Uncle Sam(.pdf) or this summary.

Why that report comes from Sprott Asset Management!! Aren't they a buncha hipies? Conspiracy theorists? Rumor mongers? Fags? Commies? Don't believe a word of it I tell you. All tables are fair, we deal from the top of the deck, no dice loaded.

Dow down 500 points. Needless to say, that triggered trading curbs to limit the decline...

What caused it to turn around and reverse 150 points before again heading downwards? Very curious.

Prototypical market bounce.


Then why did CNBC say that the traders on the floor had never seen anything like it? There was incredible downward momentum when it turned around.

Check out these...



Note this did not start with China like they are claiming now. I have been watching MBS' particularly sub prime for two weeks really hard. IN the last eight days the lower credit was being BLOWN out. I mean up to yesterday they were down 40%. No one was buying. I MEAN NO ONE JUST LIKE TODAY! The sellers were in a classic liquidty trap and bids were non existant.

Now the tranches of sub prime im talking about are BBB- and it started working its way UP the credit spreads. Before you knew it the spreadh blew up 100 bps in a two day period last week. I said to a co worker yesterday NO BS, I think in the next two weeks, this unwinding starts. I didnt anticipate this, but my portfolio F#ucking performed! One port had 6% gains for the DAY! I wish it were all real money!

Anyway tomorrow wont be easier. THere is rumors that derivatives positions have been CRUSHED. Tomorrow is the last day of the month and new positions for next month will be adjusted for the new fear. BTW....VIX went up 60% TODAY ALONE. Sellers to buying voulume hit 50:1 at one point. THat was EARLY and i didnt see what it finished at. I know according to this chart...https://image.minyanville.com/assets/FCK/File/Reamer227a.JPG

Down volume hit a NEW record at 77.6 (not on this graph tho) against the old record 55.8 in FEB 2000. Folks the SHTF in econ terms anyway.

CNBC reported that there are huge amounts of unexecuted sell orders out there.

I remember a real estate pro a few weeks ago--who was bearish--commenting that he was seeing people buying houses on 100% financing that he would not rent one of his houses to.


the market will not crash from a lack of liquidity. Today's move just erases the last three month's gains... China is already bouncing back. i see this as just an overdue correction.

You keep seeing it that way and lets talk again this summer. This is barely the beginning. No one wants to talk about derivative losses. We've NEVER dealt with derivatives to the tune of $240 TRILLION notional value. That's 10X the world market! It's insane and the more imporant point is this. In April Japan raised rates on the Yen and in May look what happened. Japan recently raised rates again and with a little help from China yesterday morning we can see what the Yen carry trade has undone thus far.

All I asked for is volatility and it's finally back. Up 64% yesterday on a SMALL 3% drop. And you think this is a simple correction? Ok, lets agree to discuss this again in three full months.

CNN reported that there were computer glitches that caused a long delay (like, an hour) in the price reporting. So when they finally got it fixed, it looked like the Dow fell off a cliff. It didn't, really, but the "missing time" made it look like it did.

I watched it on youtube later and it was amazing to watch in under 5 mins.

my question is this.... when stocks go down, people move their money to bonds and gold right?.. gold markets open at 8am.. nyse at 9:30. If you were paying attention earlier in the morning, everyone was calling for a big drop; wsj ran a headline saying something to that effect before 9am, but if you look at the 1-day gold prices, they plunged right before the nyse bell, then fought back to even, and seesawed all day.
bonds did something similar it seems.

I am no economist, but my take on it is that "they" have kinda trapped people into the market. What would they do with their money if they pull it out?, gold is (was) down, bonds are down, and real estate? ( it would be better to get it in large bills and burn it for heat..). leave it in cash? (see previous). I think a small manipulation in the gold and bonds market can completely control the stock market.

Kalpa asks:

What caused it to turn around and reverse 150 points before again heading downwards?

Ron's mythical PPT.

I suggest that Ron go back and read the financial papers published after the LTD problem in 1998; there were several storiesa about Greenspan convening a meeting of bankers with the purpose of limiting the negative effects of such. So it is clear that the Fed chairman does have some ability to affect the market directly.

there were several storiesa about Greenspan convening a meeting of bankers with the purpose of limiting the negative effects of such. So it is clear that the Fed chairman does have some ability to affect the market directly.

Sceptical, you must explain that one. Stories about Greenspan meeting with Bankers to limit the effects of what? A plunge in the stock market? And just what could the bankers do, buy stock? Do you actually think the Federal Reserve banks, or other banks actually bought into the market today in order to stop the plunge?

Banks are in business to make money. They would not buy into a falling market unless they thought they could make a buck by doing it. And there are banking regulations that limit the amount of money a bank can invest in equities. After all, it is not their money, it belongs to the depositors.

Ron Patterson

Ron, after the LTCM blowup hit the news, the market plunged. Greenspan called a meeting of bankers who were creditors of LTCM among others and forced them to bail out the markets; exactly what that entailed is unknown to me. However, this information was published in the MSM on the day of the meetings and thereafter. If you have any MSM publications, eg., the Economist, for that week, you can simply get it out of storage and look it up.

By the way, saying 'banks are in business to make money' doesn't mean that they cannot be persuaded to act otherwise; that's how the stock market crash of 1929 was halted - at least according to the history that I've read - the New York bankers led by J.P. Morgan went into the market and started buying.

As to whom the money in a bank belongs, well that depends on the type of bank. An investment bank is often using its own money, or that of it's directors rather than depositors.

Another feature of banking that most people don't realize is that bankers can do anything they like, as long as the books are clean at audit time. They do not usually deal in cash for major loans; these are just bookkeeping entries, and can be made with no corrsponding cash in the safe as long as their word is good, the cheques will be accepted.

If more people would boil complex issues down to some roots like the money supply, most matters would be easily understood. We take for granted how trivial money IS, but money is the basis for all transactions. When a private bank controls this it creates a moral hazard since the motivations of this org do not jive with the numbers. When a group plain lies about why they stopped telling us how out of control the credit money supply aka M3 is, why would anyone believe a word they utter.

People are self interested even when they aren't. If I volunteer to help someone I am still self interested since I derive SOME pleasure from helping others. They still are seeking something and people generally ALWAYS seek whats in their self interest. An organization such as the FED is no different and I swear the LTCM deal is MSM stuff. Everyone knows in the media how that was handled and it included iBanks basically paying to stop the bleeding all around.

Basic stuff like this helps understand...

Tate what sites/trends do you look at? I bailed last friday - purely lucky timing for me.

Prudent Bear
Urban Survival

Check out my blog for my list:



Who needs the PPT when you have very good friends running large hedge fund operations? Since these entities are severely under-regulated, who knows what is going on behind the scenes?

Regarding Heinberg's comments on coal limitations, I have noticed that coal mines and railroad lines seem inseparable. The Rocky Mountain Escarpment exposed a coal seam that was exploited only in the vicinity of the rail lines which followed the passes. Of course.

To consider that these deposits only exist as 'reserves' in these railside locations is pretty stupid. However, until these areas become economically hard enough to work to justify moving over to the next opportunity, we wont. The easily recoverable amount of coal exposed by this cordillera is vast enough to make any GW activist cry. At maybe $40 a ton - a figure I find hard to believe - it works out to maybe $6 a BOE. Someone please correct my figures or put a finer point on them. Regardless, it's laughably cheap and will remain so in North America.

Strangely, South America is reported to have little coal yet similar geology. Cheap and easy oil slowed the growth of coalmining, not any shortage of mining opportunities. Open pit tarmining [oilsands] isn't really competitive with coal on a $/btu basis, but versus CTL it probably is. Lotsa carbon to go, unfortunately. Not so much atmosphere, also unfortunately.

It is also likely that the recoverable reserves of heavy and stinky oil far surpass the light and sweet that is now becoming scarce. Granted, it flows slower, but given demand and no competition from the better varieties it will be exploited. So, while peak oil Flow may be upon us, combustible carbon supply is not and unless we voluntarily limit carbon combustion we will hit the atmospheric limit first. Al Gore seems to have correctly identified the project for a New World Century.

I'm sure many of you caught this...but just in case..


Down under posted this to yesterday's DrumBeat:

For the past three years petrol has been frozen at US$0.09 cents per litre in Iran and the word is rationing by the end of April.

(And no, Down under is not a crank. He's in the business, he knows stuff, and his posts are always worth reading.)

A few days ago Down Under posted a comment saying that Ghawar's original 1300 foot oil column had shrunk to 100 feet in some places. That was a startling statement, if true. Is there any documentation on that?

There's this page, which has charts and links to sources:


got to be quicker, leanan: wt beat you by a full 2 minutes!!

Wouldn't it be a blow to the world if it was discovered that Iran was covering up large declines and they really did need nuclear power to cover future domestic energy needs.

Cid, Iran has already stated this is the reason they want nuclear power. I heard John Bolton, former US Secretary to the United Nations, on CNN two or three months ago. He stated:

Iran says it needs nuclear power because they are running out of gas and oil. According to our figures Iran will run out of Gas and Oil in about 300 years.

Ron Patterson

They (the USA) did not say it like that when the Shah wanted nuclear power in the 1970s.

Ive read the oil flow will decrease substanitally by 2012 which is why they are in such a push now.

from what i have seen and read, this is /exactly/ the reason why they want nuclear power. true it's trading one sinking ship for another one that has not sunk as far yet.
but it will keep the lights on a little longer for their populace and them happy.

A receding economy, like a receding tide, reveals what was previously hidden. A Freddie Mac guy was on CNBC this morning, talking about tightening lending standards. A little bit late, I think. I think that Matt Simmons was right. Jim Kunstler is an optimist.

All I can say is that I have tried--repetitively and almost constantly--to warn you of what is coming, and I have encouraged you to downsize, while you can still do it voluntarily.

A question I keep asking is whether anyone who has voluntarily downsized has had cause to regret it. So far, I haven't seen any expressions of regret.

From the EB:


The second Great Depression
Mike Whitney, Online Journal

The ripple effects of the housing crash will be felt throughout the overall economy; shrinking GDP, slowing consumer spending and putting more workers in the growing unemployment lines.

Congress is now looking into the shabby lending practices that shoehorned millions of people into homes that they clearly cannot afford. But their efforts will have no affect on the loans that are already in place. One trillion dollars in ARMs (adjustable rate mortgages) are due to reset in 2007, which guarantees that millions of over-leveraged homeowners will default on their mortgages putting pressure on the banks and sending the economy into a tailspin. We are at the beginning of a major shake-up and there’s going to be a lot more blood on the tracks before things settle down.

The banks and mortgage lenders are scrambling for creative ways to keep people in their homes, but the subprime market is already teetering and foreclosures are on the rise.

There’s no doubt now, that former Federal Reserve Chairman Alan Greenspan’s plan to pump zillions of dollars into the system via “low interest rates” has created the biggest monster-bubble of all time and set the stage for a deep economic retrenchment.
(22 Feb 2007)

Is it just me, or is the news especially ominous today?

TThe:Consumer confidence highest in 5.5 years. Existing home sales up in Jan.

I don't know why consumers are so confident. There are lots of weakening signs. Perhaps they are just not aware of some of the issues.

Yes, existing home sales are up, but house prices are down. There is a lot for sale out there.

Sales are temporarily up only thanks to further drop in prices, and as for "consumer confidence": if they knew what they were doing we wouldn't have gotten to where we are, uh?

Actually they are not up. They are down year over year however for some unknown reason the MSM reported the sales increase vs. last month. For as long as I can remember the sales increases were reported as a year of year number. Watch out for that spin.


Total existing-home sales – including single-family, townhomes, condominiums and co-ops – increased 3.0 percent to a seasonally adjusted annual rate1 of 6.46 million units in January from an upwardly revised pace of 6.27 million in December. Sales were 4.3 percent below the 6.75 million-unit level in January 2006.

Very warm weather in the early winter might have been a contributing factor.

I also wonder if we will see in the housing market an equivalent to what westexas is predicting in his export land model. There, he is predicting a cycle of spiking prices causing demand destruction causing moderation of prices.

As the real estate bubble unwinds perhaps we can expect cycles of prices dropping, sales going up as people buy those homes at lower prices, then sagging sales until a new round of price drops.

As the real estate bubble unwinds perhaps we can expect cycles of prices dropping, sales going up as people buy those homes at lower prices, then sagging sales until a new round of price drops.

This somewhat implies people working and having money to buy.

If we stop our descrectionary spending, you are
putting everyone else out of work.

How's 30-40 million out of work for a nightmare?

Some people will have money to buy property.
Banksters. See my post yesterday about Doug Nolands
quote about the Fed, Greenspan and "The In Crowd"

A bumber sticker you might see(if such things

"Eat the Rich"

it should read 'eat the dumb rich' because the smart rich would of hightailed it out by then.

Yahoo adds: Median home prices, however, fell for a sixth straight month.

It could be that some smart people are selling their house at a lower price to get out of debt. This is what I would actually do.

Hi BrianT.

"Consumer confidence"? What's that?

Whatever it is, it sounds insubstantial, and easily cooked.

That's becuase people bought 10% less stuff last month according to durable goods orders. :)

Spoke last night with a couple of real estate agents I know and both told me they have been pushing potential buyers hard. They are hitting them with the idea that prices have bottomed, or are very nearly at bottom, lenders are getting ready to tighten loan eligibility requirements and the latest inflation data could mean interest rate increases. Their spin is "buy now, while you can still qualify and rates are still low".

My wife browses real estate websites and has found homes in small Iowa towns for as little as $4500. Properties over $200k have been on the market for years and have dropped the asking prices roughly 20% since 2005. What we are seeing runs counter to reports of rising land prices in Iowa. Perhaps these price increases are limited to very particular locations like next door to the next ethanol or biodiesel plant.

OilLearner: it sounds like fraud to me.

Whitney is one of the few people who call the animal by its proper name. Stoneleigh and Darwinian discuss upthread that the Fed and others cannot prevent a crash. But that is just one concept, and a pretty naive one.

The other is that they produce the crash. Willingly. Intentionally. It's very hard to get people to even consider that option, and I wonder why. Too dark? Get real, wake up!

This is a bunch of guys that run a private enterprise and has had absolute control of the world's biggest economy for 94 years, with the power to print credit and withdraw it, whenever they please. Who financed China's economic rise? Ever wondered?

What do we think Greenspan has done in the past 20 years? Make sure YOU are happy?

What makes us think these people are trying to save our economy? Ask yourself: why should they? Your blue eyes?

Any idea of how much profit there is in sinking the economy? In driving the country into perpetual warfare?

They have given up America for dead quite a while ago, and peak oil is a vital part of that view. It's over, and they've known for much longer than you.

The first people who understood Hubbert's message? Exactly.

Why else would you enact policies that drive a vast majority of Americans into insurmountable debt, while at the same time all the jobs move abroad? Why do we read every day how great the economy is doing, and then see the numbers for extreme poverty go through the roof?

Are some of us a bit naive? Have we ever contemplated how much power there is in a printing press?

Whitney a while back:


"Did the Federal Reserve double the money supply in the last seven years?
Did they know what they were doing?
Did they know that printing more money creates inflationary pressures and reduces the value of money already in circulation?
Did they realize that the money was going directly into the real estate market where it was creating an unsustainable equity bubble that would eventually crash and destroy the lives of hundreds of thousands of Americans whose greatest asset is their home?

Of course, because it's the Federal Reserve which produces all the relevant facts and figures, charts and graphs, about increases (and trends) in the housing market. How could they NOT know?

In other words, they doubled the money supply and then sat back and watched while $4.5 trillion went directly into the real estate market via mortgage loans to people who were under-qualified, knowing that these same people would eventually fail to meet their payments and adversely effect the entire market.

The Federal Reserve knew all of this. In fact, they knew where every dime was going, but decided to persist in their swindle to the bitter end."

They are NOT trying to prevent a crash, they are masterminding it.

The idea that the world economy is too big for any one party to control is comforting, I know, but it's utterly false. Wiliam Paterson started at the Bank of England in 1698, and it took till 1913 to grasp the US.

Printing presses have a limit in how much money can be doled out. The digital age has solved that little problem. Japan's interest rate has been at 0.5% for ten years, the US Fed made it 1%. Every billion$ that the Fed "allows" the government to borrow, tuns into $100 billion overnight though fractional banking. The US money supply has doubled since 2000. In Japan, who knows? Much more than that, that's for sure.

And all the worker ants sucked on that honey.

Now, any day now, no more honey, honey.

See you in the deserts of Iran, or alternatively, in a Halliburton camp back home.

He: I can't agree with all your points, but it is amusing that a large percentage of the population has an almost religious belief that the Fed (a private bank) exists for the sole purpose of helping the "USA economy".

Brian, the Fed is not a private bank. In fact "The Fed" is not a bank at all. What we call “The Fed” is the Board of Governors of the Federal Reserve System. This is an independent federal government agency. People often confuse “The Fed” with “The Federal Reserve System”. The Fed is the Board of Governors and The Federal Reserve System is the member banks and of course the Board of Governors.


Ron Patterson

HAHAHA...that like a crack dealer claiming they dont sell crack. First lesson in Econ Moeny banking theory - FED IS A PRIVATE BANK OWNED THROUGH SHARES BOUGHT BY REGIONAL MEMBER BANKS!

Technically perhaps you are right in the vein that the fed as we know it doesnt exist, but lets get real Ron, the NY FED runs the trading DESK for the Open market operations. So should we say the NY FED to appease you?

The Federal Reserve Banks are nominally "owned" by private "member banks" (in that each member bank owns nonnegotiable shares of stock in its regional Federal Reserve Bank; see below). In Lewis v. United States,[5], the United States Court of Appeals for the Ninth Circuit stated that "the Reserve Banks are not federal instrumentalities for purposes of the FTCA [the Federal Tort Claims Act], but are independent, privately owned and locally controlled corporations."

I'll stick with the jugde on this one since it's precedent.


Whitney is one of the few people who call the animal by its proper name. Stoneleigh and Darwinian discuss upthread that the Fed and others cannot prevent a crash. But that is just one concept, and a pretty naive one.

Fly, no one doubts that the Fed Chairman can raise or lower interest rates and affect the market. That is not the subject under discussion here. We are talking about sudden plunges, crashes in other words.

Suppose Greenspan had gone on the air, midday on the day the market crashed in 1987, ans said someting like; "Hey folks, we, the Fed, are going to lower interest rates, so please buy, buy, buy! Do you actually believe that this would have made any difference? It would have likely had the opposite effect. People would have thought that if the Fed Chairman is panacking perhaps the situation is worse than they thought and they would probably sell, sell, sell.

Methinks it is extremely naive to believe that the fed chairman can prevent a sudden market plunge.

This is a bunch of guys that run a private enterprise and has had absolute control of the world's biggest economy for 94 years, with the power to print credit and withdraw it, whenever they please. Who financed China's economic rise? Ever wondered?

Talk about being naive! The Fed did not finance China's economic rise. The President and his economic team decides to run up the debt. To do this the US Tresuary Department issues bonds. China accepts these bonds in payment for products made in China and shipped to the US. And yes, this has helped boost China's economy. But the Fed did not do this! The Fed sets interest rates to try to keep inlfation under control and keep the economy on an even keel. If there were no Fed, the US could and would still issue bonds. Bonds are issued by the US Tresuary Department, not the Fed!

The Fed is not the villian many people try to make it out to be. The villian, in this case, is the President of the US who has run up the debt and has the US budget so far in the red that the consequences may be catastrophic. If we had a balanced budget, there would be no need to issue bonds and China and other nations would not have us by the balls as they currently do. For God's sake, that is not the fault of the Fed!

And the Fed does not have absolute of the control over the world's largest economy as you state. The Fed does not set the tax rate, the Fed does not control spending, the Fed does not issue bonds, and the Fed does not write, approve or disapprove the budget. The President and Congress do these things. Get a grip on reality here!

Ron Patterson

Better question...who financed Hitler?

I chose not to go there, Tate, nor Woodrow Wilson's role in the whole thing, nor where Trotsky's money came from.

But I would urge people to wonder what/who/why financed Chnia's economic miracle.

These things don't grow on trees. I checked. They don't.

SoFly, you are evading the issue here. What are you implying with your question “Who financed China’s economic miracle?” Why don’t you tell us. To ask that question implies that you have an answer. If so, then by all means give it to us.

I can tell you who it wasn’t. It sure as hell was the Fed. That is, it was not the Federal Reserve Board of Governors, nor was it The Federal Reserve banks. If you ask me you have it the wrong way around. We did not finance anything in China but China, buy buying our bonds may indeed be financing the war in Iraq. Remember when they buy our bonds they are lending us money, not the other way around.

The only way we are financing anything in China is they are making money by selling us stuff. And the Fed sure as hell is not responsible for that.

Ron Patterson

I am telling you that the power of the Fed system, and you would do well to forget all the distinctions between Fed and governors and banks, there is just one system and one only, has made the China economic miracle happen.

Nothing in China could have started without the Fed credit, and nothing surely, which perhaps is an easier-to-understand point, could have survived if the Fed system would have tried to break it down.

The strength of unlimited credit supply in the by far biggest economy in the world, coupled with the fact that its currency is the one and only used in international trade, is limitless. Literally limitless.

There is nothing in world economics that happened in the past 50 years that the system could not have prevented, or has not indeed initiated.

If you have trouble understanding this, refer back to Sun Tzu.

You don't have this kind of power, you are inclined to think in terms of reacting to events. They cannot afford that. Nor do they have to.

We will not react to peak oil. We will pre-empt peak oil. And we'll do it in such a way that peak oil becomes a non-issue. Today, it seems important, like here at TOD, because everybody drives to work and so on.

The easiest way to solve this is demand destruction. The flipside of that is income destruction. So how do you replace the lost income?

It's too simple when you think it over: you go to war.

SoFly wrote:

Nothing in China could have started without the Fed credit, and nothing surely, which perhaps is an easier-to-understand point, could have survived if the Fed system would have tried to break it down.

The Fed does not loan money. The Fed does not give credit. The Fed sets interest rates and tries to control the US money flow. The Fed is "The Federal Reserve Board of Governors". Though independent after they are approved by congress, they are a branch of the federal government and their saleries are set by Congress.

What are the salaries of the Board members?
Congress sets the salaries of the Board members. Salary information may be found on the Board's public website at www.federalreserve.gov/generalinfo/faq/faqbog


Again, the Fed does not and has never granted any credit to any Chinese or the Chinese government. On the other hand the Chinese do own many government bonds. They give us credit. You have it backwards SoFly.

Ron Patterson

ron, are you trying to be funny? there are children watching!!

you ignore 90% of what I say, and keep hammering on the same long-dead snail. why?

congress has zero power over the fed. it gave it away 94 years ago.

it sets the salaries of a board of governors of an institution that is its only source of revenue: it can't put one foot before the other without asking the fed to purchase government bonds, so congress can pay its bills.

the US congress can't issue money ron, not a penny. it has to go ask the fed if they will please buy some more bonds. if the fed says no, there is crisis.

what is not understood here?

Sure Congress authorizes the issuance of money. for example, in 2005 here was the money issued in the United States.
American Eagle Mintage

1 ounce Gold 356,555
½ ounce Gold 80,023
¼ ounce Gold 72,015
1/10 ounce Gold 300,043

1 ounce Silver 8,891,025

Other than this, there was no money issued in the United States in 2005. Everything else was bullshit federal reserve notes and parking meter tokens (pennies, nickels, dimes, etc.).

SoFly wrote;

it can't put one foot before the other without asking the fed to purchase government bonds, so congress can pay its bills.

Wrong! The Fed does not purchase bonds at all. The Fed is the Federal Reserve Board of Governors. They do not buy bonds. The member banks can buy bonds if they wish but the Fed does not have the power to order them to buy bonds. Bonds are auctioned by the Treasury Department.

Most of the securities (bonds, bills and notes) are bought by primary dealers which are large securities dealers; a small amount is purchased by individual investors.

Bonds go to the highest bidder.

the US congress can't issue money ron, not a penny. it has to go ask the fed if they will please buy some more bonds. if the fed says no, there is crisis.

Wrong again. The Treasury Department prints money on order from the banks. This money is usually to replace destroyed currency that has worn out. But banks can order greenbacks but they must pay the Treasury for this money. The Treasury cannot simply print money.

The US Treasury does get money from taxes and bonds. The bonds are debt. They are auctioned off and no the Fed does not buy these bonds. Remember the Fed is the Federal Reserve Board of Governors, they are not a bank. The member banks and the board of governors make up the Federal Reserve System. But the board does not work for the banks and the banks do not work for the board. The board does direct the banks in government matters but not in ordinary banking matters. The Fed cannot order the member banks to buy bonds. The member banks of course do buy bonds, a lot of bonds, but not at the direction of the Federal Reserve Board of Governors.

The banks buy bonds either to resell or to hold excess cash in. Brokerage houses do the same thing. Banks take in deposits and that cash is then loaned back out. But banks are not allowed to loan 100 percent of deposits. They must keep a certain percentage of all deposits in either cash or US Government Bonds. Obviously it would be more profitable to hold that money in bonds rather than cash. That is one of the main reasons banks buy bonds.

Banks and Brokerage Houses and other dealers buy as many bonds as they need and no more. No one orders them to buy bonds.

Again, the Fed does not buy bonds.

what is not understood here?

Plenty, you understand absolutely nothing about the Federal Reserve System.

Ron Patterson

What happened to you? You've deluded into childlike rants about distinctions between some people and who those people supervise.

What is not understood here? You do not understand that you have strayed from the TOD homepage. You are now on the TOD page of ronpatterson.blogspot.com. You have just stepped into the Twilight Zone.

You sound like one of those people back in the 60's who were convinced that aliens built the pyramids; people who couldn't accept the idea that the Egyptians of antiquity were perfectly capable of the task.

Capital has flowed to China, and capital generated in China has been reinvested in China, because China has an educated and disciplined workforce, a vibrant entrepeneurial class and an accomodating political leadership, who together are reaping the productivity gains that follow from the unleashing of market forces. This may not be a good thing for the future of civilisation and countless species of flora and fauna, but it sure is a money making machine with magnetic qualities.

I think it was in 'The Gang that couldn't shoot straight', that, or 'Prizzi's Honor'..

"You're in organized crime?"
"Yah, but to tell you the truth, it really isn't that organized."

Or to go a little more pop than that..


You're absolutely right. Yes, you're right. Hiring
Nedry was a mistake, that's obvious. We're over dependent on automation, I can see that now. But that's all correctable for the next time around.

John, John. John, you're still building onto that Flea Circus, that illusion. And now you're adding onto it by what you're doing here. That's the illusion.

(When) Once we have control again we - -

Control?! You never had control! I was overwhelmed by the power of this place. So I made a mistake too. I didn't have enough respect for that power, and it's out now. You're sitting here trying to pick up the pieces. John, there's nothing worth picking up. The only thing that matters now are the people we love. Alan, Lex, and Tim. And John, they're out there where people are dying - - people are dying, you know?

There is a long pause. Hammond avoids her gaze. Ellie reaches out and takes a spoon out of one of the buckets of ice cream, and licks it.

The other is that they produce the crash. Willingly. Intentionally. It's very hard to get people to even consider that option, and I wonder why. Too dark? Get real, wake up!

Great post.

Doug Noland under scored it this week.
I posted it yesterday. But it bears repeating.

Worse yet, I am convinced that Mr. Greenspan promoted variable-rate mortgages to the masses as part of a strategy to extricate potentially catastrophic interest-rate risk associated with normalizing rates after an extended period of ultra-accommodation (especially for the highly-exposed GSEs and derivatives markets!). The sophisticated were certainly forewarned and well positioned to profit immensely from Fed (telegraphed) policies, while so many less fortunate destroyed themselves financially at the grimy hands of housing Bubbles and “teaser-rate”, “option-ARM”, negative amortization and zero-down mortgages.


The other is that they produce the crash. Willingly. Intentionally.

Sometime watch the movie "Pay Back" with Mel Gibson.

There's a scene where Mel gets in a car and puts
the seat belt on real good, puts in Gum protectors
and then drives down this alley at 50 and hits
this car ON Purpose head on. He hops out(in pain)
goes up and the other guys are dead, and he takes
the bag of money.

HE was ready for the crash. It was on purpose.

If you know that we have hit the wall because of
food supplies, land, water, energy etc,
And knew it had to crash sometime, You would
do everything you could to make it crash at the
best time for you, where you were on the board,
and you would "Try" to control the decline as
much as you could.

Read the history of the Fed.

Read about Rhodes and Africa and his school.
and on.


Most Americans have no emergency savings, a new survey shows. The findings are consistent with a host of other surveys and government data that chronicle Americans' abysmal savings rate and, more important, our lack of preparedness for life's unexpected events.

I guess on the bright side, we'll be glad we spent it if hyperinflation ensues...

I guess on the bright side, we'll be glad we spent it if hyperinflation ensues...


The age-old adage is "Put 5 to 10% of your assets in gold and hope it goes down."

Good advice, IMO. But don't overdo it with the gold.

Back in the '70s, the oil shocks produced some nasty inflation. But nothing remotely like hyperinflation. And, of course, the Great Depression produced substantial deflation because policy erred too much on the side of monetary stability.

In my view hyperinflation is only possible if the monied elites of the US more or less commit mass suicide. i.e. If the left wing of the Democratic Party got a hammerlock on the reins of power.

The last American experience of hyper-inflation was in the Confederate States of American which completely bankrupted itself in a desperate attempt to physically survive.

The last American experience of hyper-inflation was in the Confederate States of American which completely bankrupted itself in a desperate attempt to physically survive.


Deflation vs. inflation is one of those neverending issues here at TOD. FWIW, I think there might be hyperinflation, but it will be brief. Helicopter Ben won't be able to throw enough money from enough helicopters to keep up if the spit really hits the fan.

Helicopter Ben won't be able to throw enough money from enough helicopters to keep up if the spit really hits the fan.

But if a government really wants inflation, they can have it. There is nothing to prevent them. (except the need to rewrite a few regulations) ie. All they have to do is start paying their employees, soldiers, defence contracters etc in newly minted money.

Oh, I know that. And it will be a serious temptation. Like Rome debasing the currency so they could still pay the soldiers and the civil servants.

But I don't think China, OPEC, etc. will put up with it. As John McFarland has pointed out, China has warned us that they won't be left holding the bag. If it means the collapse of their new middle class, so be it.

So, the leash on inflation isn't Ben's lack of helicopters, it's his fear of China and OPEC? :-)

My read on the Chinese is that their greatest fear -- and it has been this way for millenia -- is domestic tumult. Regardless of what they say publically, domestic stability is priority number one, even at the cost holding some depreciating assets like the good little boys they are. I expect OPEC will decide to "eat it", too.

Just my take. I'm no expert.

John has lived in China. His read on it is that China would definitely prefer not to use the "nuclear option" - dollar dumping - but they will if they have to.

My read on it: certainly, they do not want civil unrest. But they feel capable of containing it if it arises. The middle class is still pretty small in China. If it takes another Tiananmen Square, or 50 of them, they'll do it.

I don't doubt that they are prepared to use enormous force against their populace. That's always been their way. That fact they think in those terms shows the underlying weakness. ie. It's fundamental error to think that a entity is strong because it will contemplate horrendous acts.

In addition, if your middle class is severely damaged, you don't have a functioning modern economy. What makes the thing tick is that those folks spend their lives trying to get ahead. They pursue their 'futures'.

I haven't been to China. But I do know that enormous effort is spent on trying to project strength and unity on the local and national level. People actually name their kids things like "Unite the army" and "Everybody pull together". But if you actually are united, you don't spend effort on it.

If China dumps their US debt, the market would swoon. But it would also give others a chance to buy up that dept at rock bottom prices. Say you discover your mortage trading at 20 cents on dollar on the market. There's a decent chance you could borrow the money from your friends to buy it back and have enough left over to throw a party.

How much of that Chinese-owned US debt could hedge funds soak up if push came to shove? Do not forget, the Chinese would be dumping it to make good on a threat, not because Uncle Sam wasn't paying his bills.

When dealing with fiat currencies, it's the lender (not the borrower) that has the greatest stake in monetary stability.

That said, it wouldn't be any picnic for the US either, of course.

I've been to China. It's an amazing country.

The thing is...if the U.S. is printing money in order to inflate away its debt, the Chinese middle class is going to take the hit anyway. I don't think we or they will expect all our creditors to follow us all the way down. Eventually, there will be a stampede for the exits - and no one will want to be last one out.

Agreed. But the likelihood is that inflation wouldn't occur because the US tried to unabashedly inflate away its debt. More likely, it seems to me, is that it would result from attempts to stimulate a sagging economy (fiscal or monetary stimulus) or through an unwillingness to raise rates in a stagflation situation (provoked by high oil prices) because of its affect on homeowners and businesses.

In such a case, the Chinese would find -- not that their US paper was about to become worthless -- but that it was just not going to be worth what they paid. They would be getting a haircut.

Punitive selling just wouldn't make sense. Diversifying out in an orderly fashion, demanding higher rates on new paper: yes.

I don't think we or they will expect all our creditors to follow us all the way down.

Sure. But one *big* reason for both OPEC and China accumulating such huge reserves in the first place is that they don't let their currencies float. Their wares are artificially cheap. The Chinese middle class are really getting a government sponsered boost now because sales are so juiced by the low yuan.

If it wasn't for the fact that they are likely to see some savings erosion due to inflation/falling dollar, they would be getting a free lunch.

It's a sell now, get paid later program to some extent. And if the selling turns out to be pre-peak and the 'getting paid' part is post peak (when they access savings), there is no way they can avoid holding the bag.

Beijing selling dollars would make US exports more competitive and imports more expensive. Main street would do just fine.

If they are willing to also let the Yuan rise then exporters under Bejing's control would have to accept fewer Yuan for their goods - or Americans would have to pay more dollars. It would slow the US economy but would not be catastrophic.

IMO - The warning signs have been there for a long, long time. Consumer debt., housing bubble, housing equity ATM, inverted yield curve, negative savings rate, and the Feds .0025%(?) "recession rate rescue". Add PO and what do you get...
Now just what are they going to do?

I highly doubt they will let their new middle class evaporate. They are depending on these people to work and forget about the BS political system. It works here so well, why not? They need those people to keep entering the workforce in the cities to contain any dissent. Now that will run its course at some point too, but right they need those people to keep finding jobs to keep them busy!

In that interview
with Marc Faber and Daniel Yergin from CERA (who showed his true lack of intellectual acumin) posted on a previous drumbeat, Mark Faber makes a great comparisson between the US economic growth from 1810-1910 and China's emerging growth today. The US saw astounding growth but went though 6 (or something) major financial crises and a civil war. In China, there will be upheavals that shake the system. When China crashes, the new economic elites will take over the government, and a new era will be born. It's upward growth trend will resume. Because of peak resources, China will be playing a different game entirely, but the analogy is still prescient.

If the value of my house (which I don't intend to sell) goes down, and the price of food and fuel (which I have to buy) goes up, then it's inflation as far as I am personally concerned. If we get inflation only as "nasty" as in the late 1970's - early 1980's, that's significant!

It's definitely significant and -- ouch -- painful. But if you had savings back in the high inflation era, it wasn't very hard to protect them. For instance, 30-year Treasuries yielded 15% in the early '80s. Anybody with the cojones to buy those babies raked it in for the rest of their lives.

But, more realistically, the short end of credit markets did respond to offer inflation protection for the less endowed. i.e. if you stuck with 6-month treasuries, you kept the inflation wolf at bay.

Keep in mind that anybody today with a new 30 year fixed rate mortgage has essentially sold a 30 year bond (at a very decent interest rate) and stands to gain a lot from high inflation.

I agree that anybody with a fixed-rate mortgage is far better off, and when it comes to "get out of debt" I still think that a reasonable amount of this specific kind of debt (say half the current house value) is OK. (But be sure to keep some cash on hand, despite inflation, to pay the mortgage for a while if income fails.)

But "stand to gain a lot"? That depends. If incomes rise with inflation, then the future mortgage payments get easier. But what if incomes don't rise with (the true) inflation? Another way to "gain" is by selling the house later, that's only a gain if the house value kept up with inflation, and that too is in doubt once the "growth economy" unravels.

Agreed. If incomes stagnate, the guy with the 30-year fixed is only better off relative to his neighbour with the ARM. And if his house value is falling, he's not whistling a happy tune. But, at least his situation is not overly precarious assuming he stays employed.

Obviously if house values fall 50% not many people are gonna be happy, but you have to live somewhere.

If there's a big recession and the feds drop interest rates again it will stimulate refinancing. I'm hoping to see the 4.25 or 4.5% fixed 15 year mortgage rates once again. We'll see.


Hey...at least my property taxes will be much lower if my property value decreases...yea!!!

Don't count on it. I think property tax rates will simply increase to make up for loss of revenue via depreciation. Or we'll have additional taxes to compensate. Someone's got to pay for that expensive asphalt!
Tom A-B

I have a financial question as it relates to the peaking of oil and subsequent changes in the world economies, particularly USA as that is where I live. Advice I've heard on this site and others is to downsize and pay off debts. I completely agree with downsizing. As for the paying off of debts - under what circumstances would that be prudent and vice versa?

Pay off high interest debts first. If you have a fixed rate mortgage and in the future you observe rates rise quite a bit due to inflation etc, don't be in any hurry to pay it off faster than you have to. Once in while, the little guy draws a good hand.

"We are at the beginning of a major shake-up and there’s going to be a lot more blood on the tracks before things settle down."

"more blood on the tracks"? Um, maybe. Maybe not. Nothing quite like hyperbole (or is it simply shallow-end-of-the-gene-pool stupidity?). Always keep in mind that "journalists" never know much about the topic on which they write. If they did, they'd be called, "experts".

Yes, consumer spending has been greatly boosted by home equity extraction. Yes, income growth will likely not increase fast enough to offset the drop from a complete end to the equity extraction game. Of course, the Fed and the bond market will likely not allow a complete end to this game, but rather a less aggressive approach going forward. Yes, in the long-run, consumer spending must be tied to consumer income, but in the short-run, asset sales/monetization can force deviations from the long-run relationship.

With the Fed hell-bent on squashing volatility, look for the Fed (and the bond market) to both limit the magnitude of changes -- up or down -- in overall housing prices for years to come. Stagflation is as much a risk as any type of housing crash.

Recall, that the consumer is only 2/3rds of GDP. Business is the other 1/3rd. Business investment has been good as of late. Thus, the current outlook is mixed, not a disaster. It may become a disaster, but I'm guessing Mr. Mike Whitney at Online Journal doesn't have a huge financial bet on the outcome one way or the other -- those with big money on the line are generally more responsible in their comments.

For those who expect an impending economic "bust", the sales of existing homes is perhaps a better barometer to watch. These sales generate cash: cash that can bail people out of a wide variety of financial problems. By the way, today's home sales number was better than expected. So much for any immediate "blood on the tracks". In 6-12 months, there may indeed be a few drops of blood around, just not much today.

NOTE: The FED can still lower rates again to re-inflate any asset bubbles they wish. It is this line of thinking that has lead people like Bill Gross (PIMCO) to forecast a downward trend in the yield curve i.e., continued shots of stimulus for what appears to be a financially driven economy. Accordingly, Gross has talked publically that the yield on the 10-yr treasury may have a 3% handle some time in the next couple of years. If Gross' characterization of the US economy is correct, then the 10-yr yield should LEAD the Fed and short-rates downward in the years to come. In addition, the consequences of any "correction" would be MUCH larger than if it were to happen in 2007.

- Sonic

the sales of existing homes is perhaps a better barometer to watch. These sales generate cash...

- only if they can sell for more than they owe, and enough more so as to pay for another house, at least as rent.

At the "aggregate consumer" level, this is not really an issue, or rather an issue better addressed by watching foreclosures & defaults. Those I am somewhat personally familar with who did default simply moved into smaller, less costly rental units (typically apartments, but not in all cases).

The aggregate consumer has a cash flow problem: he/she spends far more than his/her current income. In a statement of cash flows for the aggregate consumer, home sales are a source of cash as are cash-out refinancings along with income of course.

Spending will slow when the cash to spend no longer is available. With home equity extraction slowing coonsiderably for several reasons, existing home sales have become (perhaps) the single best statistic to track for a heads-up on what is happening to cash-flow at the macro level. A serious drop in home sales will result in a serious cash crunch at the aggregate consumer level.

Should a cash-crunch eventually happen, then businesses will have a tough choice: cut prices and profits to generate sales or live with lower sales. I'm guessing that the Chinese export machine would rather take lower prices than lower sales, but that's just a wild guess. Either way, US stock prices would likely suffer. I expect that earnings multiples would expand from what would likely be a much lower interest rate environment to cushion the blow. While multiple expansion can offset lower profits, it cannot turn losses into profit.

With interest rates dropping, where do you see the dollar going? And what would be your level of concern?

New home sales were up for Jan, but that's now. Look a little father ahead and there is inventory PILING UP! This is deflationary across the board. Existing homes are flat/declining and MORE AND MORE new homes/condos are being built. There will be an oversupply that will take years to work through. Home price appreication over the last five years is like 6 std dev from mean. Six sigma's up, where do you think they can go from there? it's not going to STOP at the mean, as we all should know, markets are irrational all the way up and all the way down on the flip side. We have to scrape far lower before homes bottom. This economy is in serious trouble.

Recall, that the consumer is only 2/3rds of GDP.

I guess the consumer is just the little 2/3, not the big 2/3 :-)

The current credit bubble and associated asset bubbles will unwind with our without the Fed. Once losses start mounting investors will conserve cash and start waiting to buy assets at pennies on the dollar. You cannot make a wise investor lose money. So expect liquidity to dry up quickly.

I was right in the middle of the dot com crash and saw tons of companies that had a good chance of making it go down simply because funding dried up on general principal.

Smart/Big money flees a downturn and causes the bottom they don't invest on the way down. The Fed cannot stop this.

Considering the size of the credit bubble expect a hell of a ride on the way down.

"The FED can still lower rates again to re-inflate any asset bubbles they wish."

It is not at all a given that the Fed can re-inflate any asset bubble by again lowering rates. There is investor sentiment to deal with. My sense is that the fastest growing group among investors are those who think that the gig is up. Otherwise uncertainty is the trend.

It is entirely possible that lowering interest rates would only serve to accelerate the decline of the greenback, inflating the price of imports. And then consumer sentiment would follow investor sentiment. A bad situation made worse.

"Recall, that the consumer is only 2/3rds of GDP. Business is the other 1/3rd. Business investment has been good as of late."

Where does government spending fit into your idea of GDP? When you say business investment has been good, I can only assume you are referring to quantity of investment. We will see soon enough if the quality of investment has been "good".

"It is not at all a given that the Fed can re-inflate any asset bubble by again lowering rates."

Are you saying that If the Fed once again takes overnight rates to 1% that we would not see any asset bubbles anywhere? The easy money policy of the last few years lead to increases in real estate prices and to some extent equity prices. I think that is broadly accepted.

If the Fed were to say we're going to 1% and staying there for as long as possible, I feel comfortable predicting a second round of real estate price inflation. I am not advocating such an approach, but the Fed has been clear that they do everything they can to prevent deflation. It is an open question how far they would go to offset any serious housing price declines.

I would completely agree that one cannot force people to borrow. This leads to the old saying that goes something like, "Tight money always works, but easy money doesn't". To this extent, I refine my earlier claim.

Yes, I was referring to the quantity of business investment. One needs to only remember the dot.com bust to observe a case of an aggregate amount of "bad" investment.

The DJIA is now down 4% on the day. I LOVE volatility!!!

Are you saying that If the Fed once again takes overnight rates to 1% that we would not see any asset bubbles anywhere?

Yes certainly, the most recent example is Japan where for the whole of the 90s Bank of Japan was basically giving money away and failed to reignite the economy. At certain times monetary policy is effective as pushing on string.

As one who went through personal bankruptcy in 05 and foreclosure in 06 does this personal financial disaster actually put me ahead of the curve? By moving to a county with 1% of the population density of the one I left my rent is $200 less than my mortgage payment was and car insurance is $150/mo less. I now have zero debt and essentially zero assets. If deflation hits my pension becomes more valuable while my Social Security payments may drop. Under inflation, which the government deliberately under calculates, my pension becomes less valuable along with my Social Security.
The primary mission of the Federal Reserve is to protect the value of the Dollar. How that effects 99% of Americans is not their problem.

Sorry to hear about your financial turmoil. I hope that '07 and beyond will treat you better and allow you to pile up savings over time.

I was once unemployed with a large mortgage and a family to clothe & feed. Not a fun time. Much as the Great Depression affected the financial habits of a generation, this experience has affected mine. Thankfully, I sold my home and moved long before bankruptcy or default.

I wish the Fed's primary objective was a stable dollar.

The method the government uses to compute inflation is, in my view, quite dishonest. I think the trimmed mean number (3.7% ?) is more accurate. I am also no fan of the entire imputed rents stuff.

Perhaps you should take a broader, more accurate reflection of the reality we live in called any and all increases in the MS IS defined as INFLATION. If more money has been added then the MS has been inflated....looking at where the extra money winds up does nothing to help understand the basic point. With that said M3 is running at 12%. I think that's a more accurate numbner if you pull out some bank records for purchases made a year or so ago.

No regrets from us for running away from the US and the happy motoring world and living the ELP life.

We left the US 2 1/2 years ago. Being an expat was always in the back of my mind but the Iraq war, the rise of W, and peak oil awareness forced it to the forefront, and we finally acted. We were typical lower middle class cube drones; spouse was a mechanical engineer for a NASA subcontractor, and I was a tech writer for a software company. We just quit, sold off everything for pennies on the dollar, liquidated all our assets, and moved, never looking back.

One of the benefits to this is our two daughters (7th and 11th grades) are already fully bilingual because we put them in the public schools. Another benefit is that we were at home for them, and we got to spend these critical years with them. We also have a wonderful bus system here so we have not needed or used a car for all that time.

We will be opening a small vegetarian restaurant next week. It is based in our house, a typical 1000 square foot home on a small lot. We are buying everything we can locally, from people we know. We get 8L of fresh milk delivered three times a week for about $3.50, we pasteurize it ourselves and make simple cheeses (mozzarella, ricotta, cottage, and queso blanco), yogurt, butter, and drink the rest. The guy across the street has organic eggs (and chickens). We buy fruits and vegetables from several sources. Some delivered to the house, some are organic, and all are fresh. Coffee is organically grown from a local source. None of our produce comes from further than 50 miles away. We even have a source for organically grown cocoa and dark chocolates.

The biggest things we can't get locally are flour and soy beans (though they are grown here somewhere). I make my own tofu and tempeh so we need to find a local source for beans, and we will be baking a lot for the restaurant. We make bagels, English muffins, breads, cookies, desserts, etc., already for some customers.

We grow most of our herbs as well as some of the vegies that are hard to find here like hot peppers and tomatillos. So we make our own salsas and things like Italian sauces.

When we make lasagna, we buy the noodles. Everything else, except for the sprinkle of parmesean, is fresh and homemade, so y'all come down, that's our Friday special.

FYI: When I make tofu, I take five cups of beans that I buy for about $1.60. My yield is about four pounds of very firm tofu. I use the okara, the pulp left after straining the soy milk, to make vegie burgers, soysage (fake sausage), and fake meat balls. So for $1.60, I get:

4-5 lbs firm tofu
24-36 vegie burgers
3-4 lbs of soysage
60 meatballs

Any unused okara, I give to our milkman for his cows.

The same amount of beans makes about 5-6 pounds of tempeh.

The place we live is in a valley but at 1051 meters. The temps stay between the 60s and 80s, so we have to do no heating or cooling. Electricity here is 90% green, mostly wind and hydro. Water is plentiful and clean where we are. We have a year round growing season, and we are surrounded by coffee, small scale vegetable farmers, and fruit orchards. We are 4-5 hrs by bus from either coast.

We are a family of four currently living on about $1000/month, and that includes complete health care. That's care, not insurance, and I am an insulin dependent diabetic. I feel good about our choices, and I don't know how we could have a much smaller carbon footprint.

Johns in Orosi, Costa Rica

My background story:

I'd like to ask a couple questions via
email, if you're willing.

Thank you for sharing your experience...it give those of us still stuck in the Empire hope and inspiration.

I've voluntarily downsized by riding my bicycle to work.

In 2006, I rode 3276 miles to work.

As a result, I gave myself a $3000.00 raise!

No regrets whatsoever.

You can watch Asian stock market coverage at www.cnbc.com

As expected, down so far.

Re the London Mayor story, the official site describes a target to move a quarter of London’s energy supply off the National Grid and on to more efficient, local energy systems by 2025. Is it just me, or is this more like a PO mitigation strategy than a climate change one? I know the two are linked, but it does seem to be what you'd expect if you wanted to start powering down your city.

With both oil and natural gas declining in the near future as a result of peak oil and gas, people will want to shift to electric, since the technology is available. For example, they may want to replace their heating system and hot water with electric, if they currently have natural gas or oil. There is also considerable work being done on plug-in hybrid automobiles.

All of this shift to electric is likely to put tremendous pressure on the grid. Off-grid electric supply as is being planned in London may provide some benefit. Even with this additional supply of electricity, I wonder whether we will be headed for troubles with respect to the electric grid, rather quickly after peak oil/peak gas hit.

Pretty impressive. China has its biggest market crash in 10 years and crude oil rises 30 cents.

Pretty impressive, there is a crash in China and obviously all markets worldwide descend as well. As well the US-markets...

,,,China has become more powerful over the last years. Maybe this is today's message.

Some people might just be shifting funds from the Chinese Exchange to the oil markets.

MEES posted some January OPEC production figures on their front page, but not on their Energy Tables page which hasn't been updated since last December. Iraq at 1.68 mbpd. Nigeria has .6 mbpd of shut-in output due to political violence.

FOr two years avg opec production was around 29.8Mb/d, now down 1.3Mb/d... voluntary or not, who says they are not meeting their cut levels?

CL M07 6364 6421 6206 6375 + 30
CL Z07 6640 6702 6500 6648 + 17
CL Z08 6660 6800 6660 6800 + 37
CL Z09 6650 6799 6614 6799 + 61
CL Z10 6715 6725 6715 6725 + 47
CL Z11 6669 6669 6669 6669 + 41
CL Z12 6480 6600 6480 6600 + 2

THe smoke and mirrors headline is a great article that thoroughly debunks cera and, to a lesser extent, iea. Well worth a read.

It seems that the economic indicators cannot be hidden anymore
and the economy is tanking. Not that this has not been going on since this summer.


To bad Freddy is banned now that its becoming obvious.

It will be important to watch how oil prices move on the next several months as the economy slows down.

If prices stay above 50 as the economy weakens I consider that a signal of peak oil. I think we will see a summer spike as the American consumer tries for one last driving season. This may be enough to force KSA's hand and see if they can pump a lot more than they are now. The economic issues will cloud matters. Next we have a good chance for a strong hurricane season later this summer. What I think is important is the state of OECD stocks as we enter September I consider low stocks and lackluster performance by OPEC during the summer spike another indicator of peak oil.

Finally of course the main prediction is a new peak in the fall as stocks are replenished and maybe SPR draws payed back.

External factors that will have a big influence. Rising gasoline prices this summer will hit recent home buyers hard
becoming the straw that broke the camels back for many.

The auto market will be dismal and Ford will be dead by the end of the year. Expect it to sell off performing assets and take huge losses before finally filing bankruptcy. It may take a while to die but the combination of a weakened economy and high fuel prices this summer is enough to kill it.

The death of Ford will give some breathing room to GM and Chrysler before they to follow it could take years though.
When the dust settles I actually expect a much smaller GM to survive.

Needless to say the fall of Ford will have a major impact on America as the loss reverberates through the economy.

For California in particular which is the major entry point for a lot of Chinese imports including car parts expect a weakened economy to hit the import/export business hard.
Also of course California is still a fairly large manufacture.

This coupled with a tanking housing market in CA will start a real death spiral in CA and foreclosures lead to lower home prices leading to more foreclosures. High gasoline prices will of course have a bigger impact on CA with its long distance commuters.

So expect the US and then the World economy to execute what I call a shock and drop style death spiral. Shocks will be caused by various factors resulting in drops in the stock market. Also it looks like the US dollar based world currency is at a end to be replaced with a basket currency and eventually probably a world currency. Expect the unexpected from the US as they leverage printing dollars before it reverts to a local currency.

The question is with all this crap going on can we even see peak oil ?

I'm beginning to think that peak oil itself is going to be a non-event the effect will be more that prices will be consistently high with spikes if demand increases the general pattern is three highs a year.

What I think will happen is the economy will spiral downwards over the next 2-3 years without 200 bbl oil happening. Only when oil supply starts hitting inelastic demand will we see real peak oil effects. Normally economic contractions are fairly short lived today as losses are written off and the winners restart the economy. I think this time we will see any attempts at growth forestalled by spikes in oil prices.

The intrinsic problem is that in a downward moving economy the effect of rising oil prices is simply to wipe out weaker consumers and business causing a drop in demand. Thus demand destruction is in a sense stronger in a falling economy.
For us to get a clear signal of peak oil peak and the first few years post peak would have had to hit a economy that was still growing strongly.

Instead because of outside factors I think we will see a world economy that simply spirals downward with the fact we are post peak becoming obvious.

In retrospect given the complexity of the global economy a slow painful death is to be expected. Peak oil or more high oil prices and spikes will ensure the economy never rises again but it won't be obvious until well past the peak when production has decreased say 10-15% world wide or more.

What does this rambling post mean ?

It means that we need to start considering what I the call intrinsic demand for oil. This means in a economy that is contracting we still have a base demand or the economy unravels. For example even in the poorest countries their is a intrinsic demand for grain or you have starvation. In the wealthier countries you have a intrinsic demand for oil.
Do we know what this number is per capita ?

We need to determine it with reasonable accuracy and graph when oil supply becomes lower than intrinsic demand. This is the point that peak oil or oil supply will become the primary cause of economic contraction. My guess is that intrinsic demand will meet supply within 2-3 years assuming we peaked in 2005-2006. My assumption is that intrinsic demand today is the same as demand in 2002.

In any case as oil supply has not increased for several years despite high prices we need to begin to focus on the demand side of the supply/demand equation to determine when oil will become the primary factor in economic growth or actually the lack of growth. I have yet to see this classic graph on The Oil Drum. We know reasonably well the per-capita oil consumption of various regions we can consider graphing reductions of say 3-10% caused by conservation and reduced economic activity but anything greater than 10% would I say represent the point that supply is driving prices since the reduction of intrinsic demand requires the destruction of economies.

The big question is when does this happen ???

It seems that the economic indicators cannot be hidden anymore
and the economy is tanking.....To bad Freddy is banned now that its becoming obvious.

1st off - yesterdays sell off MAY be the 'beginning of the economic end' or it may not. Like oil production peak, we will know 'the truth' in the rear view mirror.

2nd-ly - Most people don't admit what they argued in the past was a wrong position. Be it ocean waters rising, turning anything/everything into carbon to make carbon-zinc batteries, everything will be just fine because humans are clever apes, et la.

If it turns out your analysis is correct, Freddy would have walked away from here because of the many posters who would have went though all of freddy's old posts and said 'on this day you made this claim'. If he had not walked away, his shrill-ness would have increased to the point of booting.


I've seen the ETF USO mentioned many times here, and it seems like a good idea, with one small catch.

It is supposed to track the price of WTI light sweet, but it seems to be lagging 10 dollars below the actual price, which is quite a large percentage. As I am an engineering type and don't do any investing, if someone could explain why this is happening, I would appreciate it.

Hopefully this isn't too off-topic.

It isn't because of the way the ETF is structured. Let me know if this link works:


otherwise, go to cbsmarketwatch and search for "Jaffe USO"

The resurgence of tidal power

Twice a day, in accordance with nature's clock, the Atlantic Ocean pours through the Bay of Fundy with a controlled fury that is unmatched anywhere in the world.

...Nearly a quarter century ago, Nova Scotia Power, the provincial utility, began a modest tidal power pilot project in the bay.

It is still operating, producing 20 megawatts of electricity every day, and is considered one of only three professionally-run tidal power operations in the world.

But time and tides wait for no man. New technologies such as turbines mounted to the floor of the seabed — like "little wind machines on steroids," in the words of one proponent — have come along and so has the need for more non-polluting energy.

A Bay of Fundy tidal power plant was used as a standard project at my college for a class called EMAD (Engineering Modeling and Design). Mandatory for engineering students. Said students quickly learned that all the projects had been previously researched by actual engineers, and the key to getting a good grade was to dig up the old research and recycle it.

Bay of Fundy tidal power plants were originally proposed in the 1930s, as part of the Great Depression-inspired jobs programs. They never built any, though; it was deemed too large, too expensive, and generally not feasible. But in-stream generators (underwater turbines) sound a lot more practical than the dam system originally envisioned.

The Wikipedia page on tidal has it as NonRenewable because the friction slows down the moon. Is that an accurate statement...I understand the concept, but does the friction of a blade of seagrass or the irregularity of the oyster shoal not do the same thing? And at what amount of tidal utilization would we harm the tides? I don't buy it....gotta be millions of years into the future.


Wow. That sounds a bit far-fetched to me.

I guess if you look at the really big picture, nothing is renewable. Friction must apply to wind turbines, too. And the sun ain't gonna last forever.

Darn 2nd law of thermodynamics...

Speaking of friction, and on the Pacific coast, from the Queen Charlotte Islands through the multitude of islands to Campbell River on the B.C. coast there is tons of ebb and flow friction...and also lots of room for those underwater turbines. There is some tentative turbine testing going on right now around Quadra Island. Further there is wind Electric transmission co (SBX Can. Venture Exchange) that is running a transmission line from that end of Vancouver island. that line has recieved Can. permits and is waiting for U.S. Permits. (I am not a disinterested party here so be warned)

Anyway you know where to go if there is a sudden hitting of the fan by objects unmentionable... just grab your socks, shoes and that handy dandy portable underwater turbine you have so cunningly hid under the bed...

Oilrig Medic, yes that is correct but the greatest effect is not the slowing down of the Moon but the slowing down of the rotational speed of the earth. But the effect is so infinitesimal that it would take thousands of years before it would make much difference. Tides and winds slow the earths rotational speed down every day, just by such a tiny amount that it is difficult to measure even with the most advanced equipment.

Yet over millions of years, it makes a tremendous difference. When the earth was young its rotation took only a few hours. Less than half a billion years ago, the rotational speed of the earth was less than 20 hours. About 19 hours if I remember right but I cannot find the reference right now. But I did find this:

Tidal friction, caused by the movement of the tidal bulge around the Earth, takes energy out of the Earth and puts it into the Moon's orbit, making the Moon's orbit bigger (but, a bit pardoxically, the Moon actually moves slower!).

The Earth's rotation is slowing down because of this. One hundred years from now, the day will be 2 milliseconds longer than it is now.


Two milliseconds in one hundred years is not very much. But a billion years ago, the moon was much closer and the slowing effect much more pronounced.

Ron Patterson

gotta love the idiot's on wiki-pedia.
earth and our moon are considered a binary system. the moon is slowly moving away from us at about a inch a year. this is due to our fast rate of spin. though as this happens the moon slows it down and until at some point several million years from now a day would be about 50 hours long.

I suppose technically they're right on the renewability, but maybe it's not an important kind of right. According to Wikipedia's slightly oversimplified calculation, the rotational energy is 2.6 times 1029 joules. If we extract 10TW, which I suspect is a lot more than it will ever be practical to extract, that's about 3 times 1020 joules per year. So at that improbable rate of consumption, we'd have just shy of a billion years. Without some sort of terraforming or megamirror project by then, the oceans will long since have evaporated due simply to a runaway water-vapor greenhouse effect triggered by the steady increase in sunlight as the sun ages. So I think it would be very silly to lose any sleep over it. (The same may be true about losing sleep over definitions of sustainability that effectively insist on living off of nothing but plant photosynthesis, but that's for another day. Very little in this universe accords well with a certain style of philosophically idealized academic model.)

Edit: oh, and absolutely nothing in this universe is truly renewable, according to current understanding of physics. But don't bother losing sleep over that either.

The limit of energy capture in a free flowing stream is 10% (from presetnation by guys working on NYC East River project). Hydroelectric dams with penstocks, etc. almost always get 94% of the potential energy into the wire.

That's okay. I think Homer-Dixon is right: efficiency = loss of resilience.

China National Petroleum Corp. (CNPC.YY) said Tuesday that crude oil and natural gas production at its flagship Daqing oilfield may slump by more than 50% in five decades.

Five decades, eh? That might be a bit optimistic...

Crude output at Daqing, which is located in northeastern China's Heilongjiang province, fell 3.5% last year after falling 3% in 2005

Someone posted a note about Daqing to the effect that production is shifting more toward gas, which I assume means that the field has a cap, but I don't have any detailed information on the field.

In any case, note that the crude production decline rate is increasing. At 3.5% per year, they would drop by 50% in about 20 years, but I anticipate that this decline will continue to increase, since the field reportedly has about a 90% water cut.

As I have pointed out several times, Ghawar is the last man standing--the only one of the fields that is or was producing one mbpd, where the operator has not confirmed a decline/crash.


US Dollar - Unwinding of Leveraged Bets Triggers Collapse in Financial Markets

DailyFX Fundamentals 02-27-07

By Kathy Lien, Chief Strategist of DailyFX.com

The 9 percent drop in the Chinese stock market is being quoted as the initial trigger for the drop, but the broadness of the liquidation suggests that we have just seen a major shift in investor risk appetite.

The moves today represent concerns about US growth. Durable goods orders dropped 7.8 percent in the month of January, which is the largest decline in 3 years. Excluding the volatile transportation component, orders fell by 3.1 percent. As we mentioned in yesterday's Daily Fundamentals, the market's reaction tends to be very volatile because of the underlying information provided by the ex transportation component. However by the end of the day, the headline number left a longer lasting reaction in the EUR/US - and this was exactly what we saw today. Even though consumer confidence hit a 5 year high and existing home sales increased by the largest amount in 2 years, the drop in durable goods orders was what mattered. As a component of GDP and a forward looking indicator for consumer consumption, the weak demand for big ticket items could trigger some concerns about the sustainability of the US recovery.

The combination of low inflation, softer growth and problems in the sub-prime lending market will make it difficult for the Federal Reserve to raise interest rates again this year. Both the Financial Times and the Wall Street Journal have extensive coverage about the problems in the sub prime mortgage market today. According to the WSJ, banks are holding the lowest level of reserves to cover bad loans since 1990. With approximately $600 billion more adjustable rate mortgages to be reset to a higher market rate this year, two thirds of which are sub-prime, the risks for delinquencies and foreclosures are substantial. The market's risk aversion is so high right not that even if tomorrow's GDP, Chicago PMI or new home sales figures surprise to the upside, it may only have limited impact on the dollar.


For Manufacturing, a Recession Has Arrived


Published: February 28, 2007

The nation’s manufacturing sector managed to slip into a recession with almost nobody seeming to notice. Well, until yesterday.

Wall Street was caught off guard when the Commerce Department reported yesterday morning that orders for durable goods — big items like home computers and factory machines — plunged almost 8 percent last month. That’s a big number, but it really shouldn’t have come as too much of a surprise. In two of the last three months, the manufacturing sector has shrunk, according to surveys by the Institute for Supply Management that have been out for weeks.


Al Gore’s Personal Energy Use Is His Own “Inconvenient Truth”
Gore’s home uses more than 20 times the national average

gore lives on a multi-building estate, so you'd expect him to consume more electricity than the average joe ... but 18,400 kWh per month on average???

that is just insane.

i saw that olbermann was defending gore tonight on countdown, saying this was an attack from the right bla bla blah. i like keith, but that is a pretty tough figure to try to defend

There's some discussion of this in yesterday's DrumBeat.

Gore's office issued a statement saying the high energy use is partly because they are renovating, hoping to reduce energy use in the long term. And that the Gores buy all their power from "green" sources.

I do think this points out the difference between the GW and PO agendas, though. The GW crowd does not necessarily believe you must use less energy. Many of them think you can continue driving that SUV, as long as it's powered by hydrogen or ethanol or what have you.

Question: So what could top off today's world market correction?

Answer: Tomorrow's EIA Weekly Petroleum Report.

It will be interesting to see what happens if there are some big drawdowns tomorrow. Couple that with a correction continuation in the US. Already overnight, there is a continued fall in the Asian markets.

I don't think this is a one day blip everyone.

I don't think this is a one day blip everyone.


Who knows...

Quote of the day:
"It was sort of one of those days where somebody snaps their fingers, and the market’s hypnotic trance is over," said Stuart Hoffman, chief economist of PNC Financial.

We are only going to get X number of little warning shots across our bow before a MAJOR correction occurs.

If you haven't gotten the ducks in a row, better start lining them up. If you've been thinking of ways to implement ELP, it's probably a good time to start taking action. And, like WT says, if you jump on the ELP bandwagon, what's it going to hurt if the sh*t misses the fan...this time.

On an anectdotal note, I had to drive my son to one of his events tonight and filled up my RAV4 at 2.19 a gallon down at the local station.

When I went to picked him back up an hour later, the same station was showing 2.29 a gallon. It has gone up about 0.30 cents in about what...three weeks.

Guess I lucked out on the timing...until my next fill up.

Read across as 2/23/07, 2/26/07, 2/23/06

Total Stocks (Excl SPR) (7) 1,000.4 1,009.3 1,038.3 -0.9 -3.7
Crude Oil in SPR (11) 688.6 688.6 684.5 0.0 0.6
Total Stocks (Incl SPR) (7) 1,689.0 1,697.9 1,722.8 -0.5 -2.0

Oil Market declines on another drop of approx. 9 million barrels in stocks a decline in imports of 220,000 bpd. and inventories that are 3.7% below a year ago. How can this continued erosion in inventories be bearish? We should be building stocks and we are reducing but the market continues to believe in cheaper prices?