DrumBeat: March 4, 2007

Bill Clinton: Five questions for the 21st Century

Matthew Simmons, a distinguished petroleum investor who is no liberal Democrat tree-hugger like me, he is one of the Bush family's close friends. He's a conservative Republican. He says we have 35 years of recoverable oil left. The Saudis and Exxon say no, no we've probably got 100 years. Now the oldest city in civilization according to carbon dating that we know about today is Jericho in the Middle East, 10,000 years old. That means that the real happy talk people are saying we have a hundred years out of 10,000, one percent of the whole history of civilization, left to burn oil.

Canceling plans for coal plants leaves Texas in a jam

Texas officials now face the task of figuring out how to replace TXU's formerly planned addition of more than 6,000 megawatts of generation to the grid, equivalent to about 10 percent of the state's current installed capacity. This comes as the state's population is expected to grow by 20 percent to nearly 30 million people over the next decade because of an expanding economy and immigration.

Deep-water crude on tap

Petróleos Mexicanos expanded a technology agreement with Brazil´s Petroleo Brasileiro SA to help Mexico´s state-owned oil company drill in deep water and manage heavy-crude fields, President Felipe Calderón said.

...Pemex is betting crude oil in Gulf waters at depths of more than 500 meters will compensate in the long-term for the decline in Cantarell, its largest oil field.

The Ethanol Scam

In the 18th and 19th centuries, the U.S. economy was primarily based on carbohydrates. For most people, horses were the main mode of transportation. They were also a primary work source for plowing and planting. Aside from coal, which was used by the railroads and in some factories, the U.S. economy depended largely on the ability of draft animals to turn grass and forage into usable toil. America's farmers were solely focused on producing food and fiber. And while the U.S. was moderately prosperous, it was not a world leader.

Oil changed all that. After the discovery of vast quantities of oil in Texas, Oklahoma, and other locales, America was able to create a modern transportation system, with cars, buses, and airplanes. That oil helped the U.S. become a dominant military power. Humans were freed from the limitations of the carbohydrate economy, which was constrained by the amount of arable land.

There's change in the air

Europe's biggest producer of coal-fired power is out to prove that it can clean up its act.

The Carbon Folly

Policymakers have settled on 'emissions trading' as their favorite global-warming fix. But it isn't working.

My Dot-Green Future Is Finally Arriving: the New Eco-Capitalism

I was standing among a crowd of radical Serbs in front of the U.S. Embassy in Belgrade last week when it dawned on me: As a futurist, things are really going my way! It's 2007, and the old world has backfired so comprehensively that a new era is truly at hand. I actually knew this would happen. I guess, for a prophet, this is what victory feels like!

No magic bullet for energy crisis

We live in a truly magical time. With the flick of a finger, the power of 10 horses flows from a small wire in the wall of our homes to clean our carpets. We go to the local market under the pull of hundreds of horses and fly across our continent with tens of thousands of them. Our homes are warm in the winter, cool in the summer and lit at night. We have the technology and the economic possibility to elevate the living conditions of much of humanity to heights well beyond the dreams of Roman emperors. We never had it so good.

Enjoying life as energy users has been made possible by our increasing ability to exploit abundant sources of energy. The worldwide consumption of energy has nearly doubled between 1970 and 2001. By 2025, it is expected to triple. The extraction of oil, our most precious energy source, is predicted to peak sometime in 10 to 30 years, and most of it will be gone by the end of this century. What took hundreds of millions of years for nature to make will have been consumed in 200 years.

Layton zeroes in on oilsands

NDP leader Jack Layton slammed the generous tax breaks given to Alberta's oilsands industry and called Saturday for more restrictions on the industry's development.

Ontario takes rap for high pump prices

Blame Ontario for the latest spike in gasoline prices, say industry analysts.

Ontario's recent gas shortage - sparked by a fire two weeks ago at the Imperial Oil refinery in Nanticoke - appears to be having a ripple effect across the country, said Andre Plourde, department of economics chair at the University of Alberta.

Investors eye renewable energy

Despite government mandates and improved technology, renewable energy provides roughly the same percentage of electrons to the nation’s electric grids today as it did in 1978 — though global warming fears, energy security and the shrinking costs of producing “green power” could soon change all that.

Hunters in the Wind

We want forms of alternative energy that do not pollute our planet and foster our dependence on foreign oil. But what choices are we given? The only one available is wind power. All of the others are on the back burner waiting for the funding and recognition that the wind lobbyists have usurped.

In order for us to get on the band wagon for this new industry we are made to feel un-American and un-Environmental if we even question it, much less don't buy into it.

But, these whitewashed green monsters kill wildlife and wildlife habitat. And whether we know it or not killing them, will kill us. When you kill the king, you kill the kingdom. When you save the king, you save the kingdom.

‘We’ve got to have more corn,’ expert says

With the expanded use of ethanol, cars and sows are now competing for the same corn crop. The increased demand is profitable for Missouri corn farmers, but other sectors of the economy are feeling the burden of higher prices.

“We’ve got to have more corn,” said Peter Zimmel of the MU Department of Agricultural Economics.

Oil independence: Activist hopes Missoula can break free from petroleum's yoke

Peggy Miller is using her energy these days in a grass-roots effort to wean Missoula and 11 other cities across the country off their dependence on oil. “It's a year at a time,” says Miller.

Chevron head: plenty of untapped oil reserves left

All the talk of when the world will run out of oil could be rendered irrelevant because of geopolitical issues that block access to untapped reserves, the head of international exploration and production for Chevron Corp. said Wednesday.

John Watson told energy executives and analysts that the so-called peak oil debate focuses on the level of resources below the ground. He joined the prevailing view of speakers at the Cambridge Energy Research Associates' annual conference in Houston that the planet won't run out of oil anytime soon despite opposing theories that a peak and subsequent drop-off in production is imminent or even ongoing.

"Every time we say we're about to be tapped out, we find new ways to squeeze more out of reservoirs," he said.

Envoy warns Chavez about oil takeover

A top U.S. diplomat warned Friday that Venezuela cannot afford to drive away the major oil companies affected by President Hugo Chavez's decision to takeover the nation's most promising oil-producing operations.

..."Venezuela opened its energy section in the 1990s because it didn't have the capital or the technology to exploit its deep wells and its heavy oil, especially in the Orinoco," said Thomas A. Shannon, assistant secretary of state for Western Hemisphere Affairs. "If it's the intention of Venezuela to have a top of the line industry, then maintaining partnership with these companies is going to be essential."

Hijazi: Palestinian People Suffer Lack of Energy Resources

Hijazi revealed that Palestinians have attempted to reach some level of self-reliance in the electricity field but their sincere efforts were harshly shot down. "A modest power plant in the Gaza Strip was constructed, which could provide only 43 percent of Gazans with their power needs while the rest of the electricity supply had to be bought from Israel." He said.

But, he adds, this power plant was targeted by the Israeli occupation's full military might, plunging 700,000 Palestinians in darkness for months.

Turkey: Energy producers ponder moving plants abroad

As electricity generation costs grow higher in parallel to natural gas price increases, gas being the main input for most generators, energy producers in Turkey have started to seriously contemplate moving their plants to countries where natural gas is cheaper.

In search of a moral solution to our energy problem

There should be a cool place in hell for those who burn nutritious food to push around a sports utility vehicle. And a warmer place for politicians who treat our energy crisis as an economic or geo-political problem. Energy policy, with its resulting climate change, is a moral issue.

Fuel efficiency Geneva Motor Show theme

Fuel efficiency through new technology and hybrid vehicles will be a top theme at this year's Geneva Motor Show, with DaimlerChrysler displaying a lower-emission diesel engine and Toyota unveiling its Hybrid X concept marrying an electric motor with a gas engine.

Tibetans carry on as glaciers fall victim to global warming

The forecasts are of great concern to the world as Tibet is the source of most of Asia's greatest rivers, including the Ganges, Brahmaputra, Indus, Yangtze, Yellow and Mekong.

Up to three billion people who live along or near these rivers could eventually be threatened directly or indirectly by water shortages.

India's 'wet desert' hit by global climate change: scientists

Rainfall in the unique "wet desert" of India's northeast has become unpredictable and the dry season longer in a disturbing sign of major changes in global weather patterns, scientists say.

Lehman analysis says oil will rise, deflates ‘bubble’ theory

Crude oil will average $60 a barrel in the first quarter of this year and is poised to rise through 2008 on higher demand in the US and China, Lehman Brothers Holdings Inc said.

World oil consumption will rise by at least 1.7mn bpd this year, led by China, according to Edward Morse, Lehman’s New York-based chief energy economist. Signs of an economic slowdown in the US, the world’s largest energy consumer, haven’t trimmed “robust” use of fuel, he said.

Paper details Brazil-Japan ethanol deal

A partnership to help supply Brazilian ethanol to the Japanese market could cost $8 billion, Brazil's largest newspaper reported Saturday.

The money would be used to buy minority stakes in 40 ethanol distilleries across Brazil, ensuring Japan a stable supply as it prepares to mandate an obligatory mix of ethanol in gasoline, the Folha de S. Paulo newspaper said.

Indian oil majors now aim for Norway

In the quest for energy security and to be relevant in the great hydrocarbons game, Indian exploration majors could be headed for Norway next. Oil ministry mandarins confirmed that Indian exploration majors have been asked to examine opportunities in the Scandinavian country.

Raymond J. Learsy: Size Begets Arrogance, ExxonMobil Calling

[ExxonMobil's CEO] predicted that hydrocarbons would continue to dominate the worlds transportation sector. "The scale advantages of oil and natural gas across a broad array of applications provide economic value unmatched by any alternative." No mention of the environmental costs, the foreign policy costs in lives and billions(scratch that) trillions of dollars nor the national security costs inherent in that "unmatched economic value". Please remember this is Exxon talking, and even though these "items" pop up on our bottom line, it doesn't on theirs. He continued predicting that energy demand would grow by 40 percent by 2030. Plugging his product he instructed us that there is no significant alternative to oil in the coming decades.

We live in a truly magical time. With the flick of a finger, the power of 10 horses flows from a small wire in the wall of our homes to clean our carpets.

That must be one magical amount of suck, when you have a 7440 watt carpet cleaner.

And a magical carpet that can withstand the force of a 10 Hp cleaner.

Vacuuming aside, the level of disconnect and cluelessness in a US professor of physics is astounding.

To see someone on that level state that peak oil might happen in 30 years, while world energy consumption is set to triple in 18 years, what can you say to that?

If the best-educated, let's not use the term intelligent here, among us see this as reality, what can you expect his students and their families and friends and neighbors to understand?

It's not CERA that's the problem, it's an entire blindfolded nation.

His students, their families, friends and neighbors ubderstand that peak oil cultists are morbidly depressed tin foil hat wearers.

When they feel it in their wallets, they will get religion. Hallelujah brothers!


Physics professors don't get out much, I doubt he has ever read anything on the "oil supplies" subject. For engineers and scientists, renewable energy may be considered more of a technical issue than socio-economic. If a tech miracle happens, then it may change the global energy picture overnight. Ripping up the whole world and changing it isn't going to happen, at least not volentarily. To think otherwise is silly. Noone is blindfolded or clueless, most just can't change it so why worry? All CERA may want to prevent a panic (1929?) since they obviously know the truth.

Personally I would prefer the world change slowly so we can adjust. When/if the barbarians are at the gates, there will be plenty of change for all of us.

It may be better to be a live jackal than a dead lion, but it is better still to be a live lion. And usually easier. - Heinlein
To Ride, Shoot Straight and Speak the Truth - Col Cooper

The barbarians are already at the gates. They're building them.

Good thing no-one is clueless.

Otherwise, who knows what might happen?

"Noone is blindfolded or clueless, most just can't change it so why worry?

Bullshit. Flyboy is exactly right. Don't be fooled by the very small audience here at TOD that is aware and awake. The vast majority of the Herd of Saps are without a clue and are blindfolded foolZ.

Very few people know anything at all about Peak Oil and Gas. Virtually no one understands energy - it is something we've taken for granted all of our lives the past couple of generations.

Our assinine leaders still think they are in control and that "the market" will save us. "The Market" is Mother Nature and she is going to eat us alive. One by one.

Even the very small fraction of our First World that is awake worries about childishly naive things like "food or ethanol for our car-cars and trucks"... just wait a few years until half the northern hemisphere cannot heat their homes and then we will see if they are still worried about their fucking cars.


Just came back from spreading some compost around - for around 10 years in this part of Germany, you can either compost your 'bio' (organic/food/otherwise compostable) waste, or have it picked up once every 2 weeks for a fee by the city - quite honestly, I'm not sure how expensive it is. Though it is very likely that most if not all bio waste is burnt as fuel for electricity, the idea of having people compost their own waste for use in their own gardens seems to be a fairly simple one. (Town compost, for example from all the trimmed trees and flower beds, is spread over local farm fields at times, however - nothing like keeping things local to keep them local - something routine here in many things.)

Now consider this - of all the housing built in American suburbs over the last 20 years, how many have home owner associations which explicitly forbid composting? Or drying the wash outside, which we also did today, though that is still technically not allowed around here, as today is a day of rest. A fantastically warm, sunny, perfect for clothes drying day - sometimes, you just risk the wrath of heaven, and enjoy the fresh scent of clean bed sheets.

It isn't a blindfold around American eyes, really, it is something much, much harder to encompass. A willful inability to even grasp reality seems to be a part of it. Without any excuse of tradition, as the charming (or sinister, depending on whether you focus on cathedrals or witch burning) aspect of middle age religosity explains the legally mandated social custom of not hanging laundry out on official church reserved days (and yes, I actually know someone who did received official notification about 7 years ago that she shouldn't do that on Sundays).

If America lived differently, many of it problems would no longer exist, but it seems as if for many Americans, living differently would be un-American.

But the Swiss are already planning for the future - I listened to a good 5 minute report on the radio while driving to work - the Swiss are already planning on how many people are going to need to be moved, as the glaciers recede from mountain sides, causing massive changes in the local geography, for example.

And in America? It's all good, or some such, right?

If America lived differently, many of it problems would no longer exist, but it seems as if for many Americans, living differently would be un-American.

Don't forget, our wonderful leaders, including Darth, say that "The American way of life is not negotiable." And most Americans WANT to believe that. The do not want to believe that life could be radically different and/or more physically uncomfortable.

Most Americans spend their free time being entertained, rather than doing something creative. Under that scenario, it's hard to envision the bulk of the public accepting a different reality. That's why I'm somewhat pessimistic about the future. I think things MAY have to get pretty bad before they get better.


Just about every masterplanned community in the United States prohibits clotheslines (solar dryers) as well as solar water heaters and PV panels. Other solar appurtenances to the house, like awnings, are also on the forbidden list. All in the name of protecting property values.

Has there ever been a society that is more disconnected from nature than ours?

Below is an excerpt from a column I wrote in December.

The rewards of a well-used solar dryer are by no means limited to the energy and dollar savings reported on the monthly utility bill. The best part of the package is the time spent outside. There you can take the pulse of the day from the sunlight, clouds, air temperature, wind and humidity that make up this continuous flux of energy that we call the weather. Relying on solar energy in this way makes a person more attuned to the ebb and flow of weather conditions. Yes, forsaking the fossil-fueled dryer for the great outdoors does take more time and effort, but it’s a small price to pay for eliminating the drudgery that comes with doing the laundry on autopilot.

Amazingly enough, community prohibition of clotheslines is not uncommon in the United States. Ironically, this inane belief that the sight of gym trunks and sweat socks hanging in a yard will drive property values lower is strongest in the Sun Belt, a region where solar drying—and water heating--should be the norm and not the exception. What can you say about a mindset that thinks nothing of wasting a precious fossil fuel on doing the laundry just to keep up appearances? Given how prevalent this silly and self-destructive behavior is in our land, is the imminent arrival of the oil peak and terminally declining natural gas stocks necessarily a bad thing?

Fortunately CCRs against PV systems are illegal in California.

We need a national override.

Well the may have something in a HOA bylaws that say I can't dry my clothes outside but seriously what are they gonna do put a notice on my front door?? It would cost them more than what it is worth to stop me from drying my clothes outside. HOA's can't do anything. Even if they tried I could drive around my neighboorhood and find a crapload of violations which they have not acted on causing all sorts of problems in regards to enforcement.

I could drive around my neighboorhood

Perhaps you could WALK around your neighborhood and see even more ?

All too often, walking is not even considered, too many are conditioned to drive regardless of circumstances.

Best Hopes for short lived shoe leather and long life tires,


Good catch. I do walk around my neighboorhood every evening with my family however I also drive home everyday unfortunately. I tend to notice the negative things when I drive though. When I walk it is much more rewarding and positive.

Badger any predictions for this week and next week withdrawals in NG? DD are more this week according to NOAA.

As far as I can tell, in my neck of the woods, Americans use Sundays for more shopping (after Saturday, I mean). After church, and the obligatory midday repast (a large amount of grain-fed protein, usually) it's off to the stores to "shop til you drop." Riding my bike through traffic (huge pickup trucks and SUVs) and then actually driving in it this weekend was a real Matrix-style eye-opener for me, having just read Stuart's post on SA...

Given that 200 Amp panels appear to be a common size for households, the good professor may be on the low side for potential peak loads, given that Watts = Voltage x Amps :

From US Inspect: Items of Inspection

120-volt appliances and equipment:

* Refrigerator – depends on size and model – approx. 4 amps
* Microwave – depends on size and model – approx. 10 amps
* Hair dryer – 1500 watts – 12.5 amps
* Curling iron – 1200 watts – 10 amps
* Toaster – 1000 watts – 8.3 amps
* Lighting – approx. 1200 watts – 10 amps
* TV – 21 to 30 inches – approx. 150 watts – 1.25 amps
* Portable heater – 1500 watts – 12.5 amps
* Washing machine – approx. 1000 watts – 8.3 amps
* Furnace blower – approx. 400 watts – 3.3 amps
* Miscellaneous items – stereo, exhaust fans, blender, disposal, iron, additional TVs, etc.– 1500 to 4000 watts – 25 amps

Total of the 120-volt circuits = 130.15 amps

240 volt appliances and equipment:

* AC – 36,000 BTU – approx. 19 amps
* Range/oven – approx. 10,000 watts – approx. 41.66 amps
* Dryer – 4800 watts – 20 amps
* Water heater – 4500 watts – 18.75 amps

Total of the 240-volt circuits = 99.41 amps

You could convert the power draw for each type of appliance into the number of solar panels required. If the standard PV panel puts out 160 watts peak you might need 30 of them to run a 4.5 kw air conditioner.

Think of this way, driving down the street. Bling bling! a house with 30 roof panels. Hmmn, they must have AC.

Although I am on the gird, I have a large PV system. I also know a number of people in the area who are totally off the gird (I live in the boondocks.). The reality is that you live within the confines of your power. In other words, you select what you want to do and then modify your power usage as necessary.

For example, I can choose to run my 2hp well pump or the water heater but I can't run both at the same time. What I do is to be sure the pressue tank for household water is pumped up; then I'll turn on the water heater. Or, I can run our small AC but not the stove. I've had the system for years so I'm very attuned to what I can cannot run at the same time.

The people in my area who are off the grid rely upon propane for many of the appliances with big draws such as stoves and water heaters. As far as I know, they all have some kind of generator as a back-up for cloudy days to recharge their batteries or for loads beyond their system's capability.

It's a diffferent way to live but not that big a deal.


Good post. Do you and your neighbors have plans for when propane is not available? It sounds like you are real close to self-sufficiency. You will be better prepared for this than 99% of the population.


Actually, the response will vary by individual. I'm in a different position than most others. First, I'm on the grid but have the PV system. Second, I'm all electric except for heating which is wood. Third, I have two choices for back-up generators: an 8kW gas and a 23kW diesel. If the grid goes down I'll convert the gas generator to wood gas. FWIW, I also have a 6 burner wood cook stove in addition to our electric range and a small (7 gallon) water heater that I'll use to bypass the 40 gallon tank - at least we'd have some hot water even on cloudy days. I also have a solar hot water preheater system and a heat exchanger in the wood heater.

The folks using propane really have only one option were it not available and that is wood gas or biogas/methane. The reality is that very few look this far ahead. One has started to plant olives for biodiesel but he isn't stocking methanol and NaOH so it's mostly talk. Essentailly no one is interested in wood gas except me. And, for a variety of reasons biogas/methane won't work for the majority of the people due to a lack of feed stock.


I agree with that general approach. I live an hour out of a city (Hobart) but the mainly hydro grid has just recently been linked to coal generation via a HVDC cable. I don't want nuthin' to do with it so for the last 6 weeks or so every meal has been microwaved or cooked on a woodstove. The electric range is just to warm quiche for soft city slickers who visit.

I thought I had the water pumping problem solved with a standalone solar battery + 12 volt pump system. However drought has dropped the water levels so I need a more powerful pump. I'm bidding for such a pump on eBay so who knows. The need to adapt never stops.

Libya: The future seems to be unfolding as many on TOD have predicted.

How fast is Saudi oil production declining?

Aramco Senior Vice President Abdullah Saif, as reported in Petroleum Intelligence Weekly and the International Oil Daily, stated that their fields sustain a 5 to 12 percent decline rate. Stuart Stainford, in a thread of two days ago, stated that Saudi is declining at a rate of 8 percent. Captain America, (Freddy I think), stated that Saudi declined 4 percent, 2006 verses 2005.

Well everyone is correct. Average 2005 production verses average 2006, the decline was 4.15 percent. But what is the current decline rate? From September 2005 to December 2006, according to the EIA, C+C, Saudi declined by a total amount of 850 thousand barrels per day. (And all but 50 thousand barrels of that decline was before the OPEC cuts went into effect.) That is a rate of 8.85 percent over 15 months, or 1.25 years. That gives an annualized decline rate of just over 7 percent. That is the true decline rate that also includes new oil coming on line.

Remember Stuart’s 300k barrel bump? That was caused by Haradh III, the last tip of Ghawar that was finally brought on line. So without that blip, what is the decline rate of existing fields? Well, without Haradh III the decline over that 15 month period was 1,100 kb/d. That was a decline of existing production, before Haradh III, of 11.98 percent, or an annualized rate of 9.51 percent excluding new projects.

So currently we can say that Saudi fields are declining at a rate of 9.5 percent. By December of 2010, if they continue to decline at this rate, they will need over 2.9 million barrels per day of new production just to stay even. I just don’t think that is possible.

But in the meantime we can watch for continuing decline, and continuing “bumps” as new projects come on line. I am going out on a limb and predicting that long before 2010, the decline of Saudi production will be accepted by almost everyone. (There will always be a few irrational hold outs however, after all there are still a few young earth creationists.)

Ron Patterson

This makes sense. THanks for the insight.

But isn't the Saudi rig count extremely low relative to their proven reserves? And isn't that true even if one uses some of the more conservative estimates for reserves. Might this be a situation where the Saudis spent too many years twiddling their thumbs rather than upgrading their infrastructure.

By way of comparison, look what Russia is producing with, what?... maybe 74 Gb of proven reserves?

My guess is that the KSA isn't going to be the monkey wrench in global petroleum production. I believe that with investment they can maintain high production flows. I'm guessing the more immediate problem will be Russia. Russian production seems extremely high relative to their reserves and when the decline hits, it will hit hard.

Byron, first Saudi's proven reserves is a matter of great dispute. Your tone seems to indicate that you buy into the “260+ billion barrel line”. Let me state that if that is the case then Saudi is definitely not in decline. But I believe that Saudi reserves are closer to 75 billion barrels, about the same as Russia. Saudi’s reserves are anything but proven and I am astonished that a member of TOD would believe they are.

Saudi Arabia, as of January 2007, had 74 rigs, 24 looking for gas and 54 drilling for oil. The U.S., in January, had about 1700 rigs with about 260 of them drilling for oil. The vast majority of U.S. rigs are looking for gas. So the disparity is not that great when you consider the oil producing area of Saudi Arabia, including their section of the Persian Gulf, measures about 400 miles north to south and about 250 miles east to west. That is 100,000 square miles. The U.S. oil bearing strata, including the North Slope and the Gulf of Mexico, would be at least twenty times that area.

And when you consider that the average US oil well produces less than 20 barrels per day, compared to over 3,000 for the average Saudi well, the US by comparison is way underrepresented as far as oil drilling rigs go. (I am posting from memory here. I looked up the actual numbers a while back and posted them on TOD, but I cannot locate them at this moment.)

Ron Patterson


Actually I didn't say that I believed that the Saudis have > 260 Gb or actually imply that. I did refer to some of the more conservative estimates, some of which have been in the 140 to 190 Gb range. I think that your estimate of 75 billion barrels seems like the other extreme.

Certainly this year will be likely to reveal what the Saudis are capable of (or not).

I really don't have a position on their reserves because I have no idea. I only know what I've read here and elsewhere. I just wish that the Saudis would fess up and become more transparent. As it is, we need to plan for the worse case scenario and... oh, excuse me... we did. That would be Gulf War II, which before the end of this year might morph into GW III.

But even though I'm strickly a lay person, to give you a better feel for my personal position on all this, in my desk at work I still have a copy of the Scientific American article from the late 90's on the end of (cheap) oil. As I recall it came out shortly before the (in)famous Economist cover story on the world being awash in oil where they even speculated that oil might drop from $10 to $5 bucks a barrel.

Man, those were the good old days.

The Saudi's have 2 1/2 times the number of oil rigs they had in 2003 but are producing less oil.

It makes much more sense to assume KSA is lying about their reserves.

Remember Stuart’s 300k barrel bump? That was caused by Haradh III, the last tip of Ghawar that was finally brought on line.

Ron, I have been looking into this. That bump came several months after Haradh III came online. The plant was finished in January, commissioned in March, but the bump doesn't come until June-July. In fact, when Haradh came online, there was no inflection point at all on the curve. And before someone says "Yeah, but maybe it took them a while to get rates up." That's what commissioning is all about- getting the plant up and demonstrating rates. They were getting rates up between the time the plant was finished in January and the March commissioning. So I don't think Haradh III explains that bump.

However, the bump did correspond to the beginning of high demand season in the U.S. It also looks just like the bump that interrupted the 2001 decline, which also came right at the beginning of high demand season in the U.S.

So, count me among those who still don't think Saudi has peaked. If fact, I think you will see their decline stop by summer, and if demand picks up you will see their production head back up. If that happens, I suspect a lot of people around here are suddenly going to develop amnesia regarding all the predictions that have been made.


I'm a lay person that frequents this sight for obvious reasons. But that said, this will likely be the summer that proves one way or the other if the Saudis can walk the walk...

BTW, considering your current location, I hope that you have an appreciation for one of Scotland's finest products. And that would be their supernatural single malts.

Is it possible that there is a time lag of 2-3 months between production and data? I could se the bump in the data from http://www.eia.doe.gov/ipm/ and they state that they get data from "Monthly Oil Market Report from OPEC".

That is supposed to represent production for that specific month. And unless the numbers have changed since I last downloaded the file, there is no 300,000 barrel bump in the EIA data. There is a 100,000 barrel bump in January, followed by a gradual decline until June, and then a bump up of 200,000 barrels in July.

I tell you this just does not match up with when Haradh came online. Superficially, it looks like a compelling case. Dig a little deeper and you start to see things that don't add up.

Shouldn't there be a bump in MARCH when Haradh came online?

You would think so, wouldn't you? Unless they are managing their production rate such that they took Haradh into account and adjusted other production accordingly. I can't think of any other explanation. Which tells me that the bump up in the summer was probably demand related. But then prices began to fall.....

Is there any good, detailed data on what Haradh produced each month post commissioning? Or are we all just kind of guessing based on pre-completion estimates?

So, is it your position that haradh produced no oil? Or that they fed the oil into their tank farm for a while, then sold it later?
IMO the simplest is most likely... haradh came on line slowly, as do many fields.

Robert or anyone else, I have never heard you comment on the information that Down Under has provided to us several times here at TOD.

Who knows more about this person and the information he/she provides, because this person seems to have inside information that is shocking.

I have never seen ANYONE try to refute that data he/she presents.

Down under is a "he." He works in the oil industry, and yeah, he seems to have connections.

No I don't. I just do some research and talk to people who have information and sometimes go back to old articles and re read them to find out what I've missed.

The two Nemesis articles that were produced in ASPO newsletters in OCT and Mar 2004 predicted all the Saudi figures that are coming true.

Anyway, if as the A.A.P.G site says Ghawar had produced 79322 billion barrels by early 2004 and had 17776 remaining, why should anyone be surprised? If you produce oil from a field for 56 years for much of the time at maximum production why wouldn't you expected to be depleted?

Se most post to your last article for references

That last sentence should be " See my post to ...."

Why is that most people don't think that the Saudi oil information wouldn't be known? There have been a lot of highly experienced American oil men work there for over 60 years both for oil companies and service companies.
The Bush administration would in my opinion know exactly what the current reserves and production information was as well as for Iraq and Iran. I read the other day where one geologist alone did over 45,000' of core sampling tests on Kirkuk alone in one period in the early 1950's
They know exactly what the strata layer is and what period each oil field and level came from and where they are across that whole fault line in Arabia. If anyone reads my links below and notices where they quote 900 mboe URR for the whole Arabian plate, that was done about 14 years ago and included gas fields. Take South Pars alone out of that as well as all the other big gas fields and you would have to agree with Ron that Saudi probably do only have about 75 billion left.

you would have to agree with Ron that Saudi probably do only have about 75 billion left.

This is of course also consistent with Khebab's HL plot.

While almost anything is possible, insofar as I know we have never seen a large producing province (60 Gb or more) show a sustained increase in production past the 60% of Qt mark. Regarding 60% of Qt, the assumption is that the P/Q intercept is between 5% and 10%.

So people arguing that Saudi Arabia will produce more than 9.6 mbpd (C+C) are arguing for what we have never seen in any large producing province, even as Saudi Arabia is in fact declining as predicted by the HL model.

BTW, I couldn't find the links you were referencing. Are they on this thread?

About a third of the way down on her post yesterday on Mexican Oil

Further to the above, Ghawar was being water injected with about 4 million barrels per day in 1981 ( I have a link for this) and last year it was 9.5 million. The Nemesis report quoted 15650 barrels per well for Saudi production in 1974, Ron says it is now 3,000. These two figures plus the reserves quoted above show the field must be crashing.

The experts referred to for some of the above links had done detailed work on all the 950 odd giant oil fields from 1865 to 2003. Why wouldn't they know what they are talking about

Glen Morton, a petroleum reservoir engineer mentioned that at the Offshore Technology Conference in 2004, there was talk then by engineers of a water cut of 55% for Ghawar.
Forget all the HL stuff and everything else, the fuel flow and fuel guage tell what's happening

I have previously suggested that the key difference between Saudi Aramco and Pemex is that Pemex, unlike Saudi Aramco, has admitted to the decline of its largest oil field.

I just realized I'm wrong there, that's indeed what HL does

This is my first time posting to The Oil Drum. Thanks for all the good work that so many of you do.

Further to the above, Ghawar was being water injected with about 4 million barrels per day in 1981 ( I have a link for this) and last year it was 9.5 million. The Nemesis report quoted 15650 barrels per well for Saudi production in 1974, Ron says it is now 3,000. These two figures plus the reserves quoted above show the field must be crashing.

So average well productivity is now about 1/5 what it was in 1974.

Here's an even starker comparison, which I've never seen commented upon:

Dr. N. Saleri, one of the top Saudi Aramco technical officials, sent to Washington in February 2004 to counter Matt Simmons, stated that 1980s type (i.e. vertical) wells in the Shaybah field would have only produced 300 barrels a day (a statement he repeated twice for emphasis). Of course his reason for presenting this information was to stress the ability of current maximum-reservoir-contact wells to produce from Shaybah at far higher rates (up to 12,000 bpd). As all regular TOD readers know, Shaybah is Saudi Arabia's newest giant field, which came on line in 1998 though it was discovered 30 years earlier.

Now consider the 1978 GAO report, which is cited by Simmons (Twilight, p. 72) as finding that at the time Aramco was producing 9.2 mbpd from fewer than 800 (at the time, exclusively vertical) producing wells - i.e. an average well production of over 11,500 bpd.

The implication of this is that a typical vertical well in Arabia's _average_ field 30 years ago was more than 35 times as productive as the same well would be in the country's _best_ new prospect today.

(The Saleri comment occurs during the Q&A period at the CSIS forum on the future of Saudi oil production in February 2004, as featured on the _Matt Simmons: Energy Banker_ DVD from the Post Carbon Institute. Audio of the meeting is also available at the CSIS website.)

A very good piece of deductive reasoning and detective work. It is amazing what you find when you go back to check on things. These Saudis eventually trip themselves up with these statments because past SPE papers such as Simmons has relied on tell the real story.

It is a pity I can't get the Nemesis links back as ASPO newsletters for 2005 back are not available. I will contact Colin Campbell to see if I can get them as they are worth reprinting.



The first gives a realistic view of middle east reserves and the second is a forecast which is proving remarkably accurate. 8.7 for end of 2006 and 8.0 for 2007 for Saudi daily production.

First link should have anothe 39 in it

Hello Down Under,

Thxs for the info. From the ASPO newsletter [full credit to Nemesis --anonymous ASPO contributor from the heart of the oil industry]:
A year later with no new capacity added it will be down to 9 Mb/d. The next capacity increment comes in July 2006 but capacity will have already fallen to 8.7 Mb/d. The 300 kb/d of new production from Haradh Increment III will then restore capacity to 9 Mb/d. But even if decline is held at current rates, Saudi capacity will be back to 8.7 Mb/d by the end of 2006 falling to just over 8 Mb/d by the end of 2007.

How can I claim that Saudi is about to go into irreversible decline when even on the ASPO reduced recoverable reserves the 50% depletion point will not have been reached? The answer is that Saudi has at various times put nineteen fields into production. Of these eight are “Stars”, being highly productive fields that produce around 90% of the country’s production. All the others are “Dogs” that have never worked well and probably never will. Recovery rates of up to 50% may be appropriate for the Stars. For the Dogs 10%, 15% or 20% would be more appropriate. Make this adjustment and Saudi has depleted more than 50% of its realistically recoverable reserves. So my conclusion remains -- Saudi’s final production peak will be in the last quarter of 2004.

Nemesis was only six months off--2004Q4 to 2005Q2, but his decline rate appears pretty damn accurate as Down Under suggests.

Okay Khebab, SS, and other TOD data-freaks--can we find any data to possibly make some individual HL-charts of these "Stars" and "Dogs", then roll them up into a unified whole?

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

Hello TODers,

From ASPO Newsletter64, sec 691 [more from Nemesis]:

Perhaps when President Bush announced that US imports from the Middle East would fall by 75% by 2025 he was describing what would actually happen rather than stating a policy.

Sounds unbelievable? Remember a 6% decline rate halves production in 11.7 years, a 7% decline rate in 10 years and an 8% decline rate in 8.75 years. And we’re seeing those decline rates already.
So, who can do the ELM depletion reverse-math?: US imports of 2005Q2 C+C Peak needs to drop 75% by 2025--does that match the depletion rate we are seeing now from OPEC + Angola?

Heinberg, is Nemesis your 'inside source' too?

EDIT: added info below for clarification for newbies

[4AUG'06] Even worse news, potentially, comes from Saudi Arabia, where oil flows have shrunk by some 400,000 barrels per day over the past few months, despite astronomic prices. No one knows for sure what is going on.

What happens next? It depends on the real condition of Ghawar. Perhaps a heroic drilling campaign could result in a temporary bloom in production, lasting perhaps three years, followed by a swift, terminal collapse. On the other hand, it is possible that the field has been so thoroughly exploited already that we are seeing the irreversible, rapid decline.

At the ASPO conference a well-connected industry insider who wishes not to be directly quoted told me that his own sources inside Saudi Arabia insist that production from Ghawar is now down to less than three million barrels per day, and that the Saudis are maintaining total production at only slowly dwindling levels by producing other fields at maximum rates. This, if true, would be a bombshell: most estimates give production from Ghawar at 5.5 Mb/d.
Bob Shaw in Phx,Az Are Humans Smarter than Yeast?

Hi Down Under,

Thanks for the Saudi forecast which is proving to be highly accurate!

The link states "Saudi capacity will be back to 8.7 Mb/d by the end of 2006 falling to just over 8 Mb/d by the end of 2007."

Should I assume that the scheduled Khursaniyah project of 500,000 b/d starting later this year is a dog? Is the Shaybah expansion of 250,000 b/d for early 2008 also a dog?

Matt Simmons says from his book Twilight in the Desert that "There is nothing either simple or inexpensive about Shaybah. Given the large gas cap, it seems likely that at some point the incremental oil recovery will become incidental compared to the value of the gas field"

For Khursaniyah (including Abu Hadriya & Fadhili), he says it peaked at 208,000 b/d in 1979 and declined to 107,000 b/d in 1982. "Its (Khursaniyah's) productive zones lacked the exceptional permeability and porosity of Saudi Arabia's best fields".

He states further "As noted, Khursaniyah did achieve a peak oil output of over 200,000 b/d...while Abu Hadriya and Fadhili peaked in 1977 at 130,000 and 59,000 b/d, respectively. That these three old, small fields could suddenly anchor the growth of Saudi Arabia's oil supply presses optimism right to the edge of fantasy and invites a reality check."

I guess that means that Matt Simmons thinks these fields are dogs.

Hello Ace,

ASPO/AUS member says Khursaniyah basically too late for 2007, might help in 2008. I think we need more info on drilling and infrastructure programs in this field to see if projected timelines are on-track. [Nemesis, are you out there? Care to somehow comment--email Prof Goose?]

In Saudi Arabia, despite bringing Haradh III onstream in the second quarter with a capacity of 300kb/d, annual production fell 400kb/d (see further analysis at http://www.theoildrum.com/node/2325). The Khursaniyah group of fields, claimed to add 750kb/d of oil and natural gas liquids capacity, is not expected on stream until the end of 2007. If Saudi Aramco are in fact pumping close to flat out and battling depletion, production will continue to fall steadily this year. That claim may either be refuted or supported if the world makes a call on Saudi 'spare capacity' at any stage this year, which seems probable. I expect we will see another large fall in 2007 but Khursaniyah will temporarily reduce the impact of declines in 2008.
Bob Shaw in Phx,Az Are Humans Smarter than Yeast?

I know who the person is or what he does, but not his name and it would not be likely he would respond. Do read the March report on the Middle East flow rates and reserves as per the link further up. Remember this was 2004. Nothing has changed.

Everything Stuart has said is in effect backed up.

Robert Rapier...I would really like to get your reaction to Down under's statements and historical data he has highlighted for us. What is your take on all this? Does it sway you or not? If not, please explain.

hi down under

only saw this commentary today. i looked at this press release on the SaudiAramco website. They claim end of the year for Khursaniyah, but reading between the lines suggests even that may be a challenge:


you can contact me via www.philhart.com/contact


I will in a day or so

Further to the above, Ghawar was being water injected with about 4 million barrels per day in 1981 ( I have a link for this) and last year it was 9.5 million. The Nemesis report quoted 15650 barrels per well for Saudi production in 1974, Ron says it is now 3,000. These two figures plus the reserves quoted above show the field must be crashing.

I was quoting the 3,000 barrels per well from memory and it turns out my memory was not that good. I found that Saudi produced 10,200 barrels per well per day in 1979. But this was in 1979. Since then Saudi has drilled a lot more wells but are producing less oil than they did in 1979. 9,532 kb/d in 1979 verses 8,750 kb/d in December of 2006.


But my memory for the US was quite good, they get 17 barrels per well per day. I cannot find a page that gives Saudi production per well today so I will not venture a guess but only to say that it is quite a lot less than 10,000 barrels per day.

Ron Patterson

Simmons (Twilight, p. 102, notes that reports on the actual number of producing wells in Saudi Arabia in recent years have ranged from less than 2000 to 8700. I think Simmons used the figure of 5000 in his CSIS talk of February 2004. Besides being officially state secrets, conceptual confusion further muddles the issue. It depends whether only producing wells are counted or also “observation wells” – formerly producing wells that continue to be used to monitor what is happening at specific locations, and whether the recent generation of wells with eight to ten branches are counted as single wells or not. But the number is almost certainly considerably higher than the 1978 GAO reported figure of 800 wells – all of them simple, vertical wells, which produced a somewhat greater total volume of oil than the greater number of complex wells producing today.

From the number Ron cites, 8,750 kbpd, the 2000 to 8700 range would set the average well productivity at between 1000 and 4375 bd. So his figure of 3000 bpd was certainly a decent ballpark figure.

To reprise what we've learned so far,
in 1974 average Saudi well productivity was 15,650 bpd
around 1977 it was 11,500 bpd.
in 1979 it was 10,200 bpd (source?)
and now it is probably less than 3000 pbd

And had vertical wells not become mostly obsolete, the daily well productivity would have been far, far lower by now.

Down Under, I do hope you can get those links back.

While we're on the topic of sources it would be nice to be able to read, it would nice if someone could put up the 1978 and 1979 GAO and Senate reports that Simmons cites.

And thanks for the great links you posted yesterday. I haven't digested them yet, but it was great to see some critical and field-by-field information on Iraqi reserves - putting them at about 37 billion barrels. In an interesting coincidence, Dr. Bakhtiari cited a figure of 37 billion barrels for Iran in 2003, giving Dr. Ali Muhammad Saidi, "one of the most prominent experts on Iranian reservoirs" as his source. ("Debate over peak-oil issue boiling over, with major implications for industry, society" Bob Williams. Oil & Gas Journal. Tulsa: Jul 14, 2003.Vol.101, Iss. 27; pg. 18; no link handy.)
Perhaps some TODers may be interested in my own tentative assessment of the evidence on Iraq, alas without links:

Iraq: the wild card. It does have an inventory of discovered but undeveloped fields, at least two of which have quoted reserves similar in size to Alaska's Prudhoe Bay (though one of the two, West Qurna, has in fact been in production for quite a while). Iraq's remaining reserves (including yet-to-find) are put at 105 billion barrels by ASPO, which is conservative in comparison with other estimates. But large oil-bearing structures can be vastly different in terms of the amounts and rates actually producible. It should be born in mind that the claimed "proved" reserves were a mere 47 billion barrels in 1987 before they were inexplicably raised to 100 billion the following year, and that the country has produced about 17 billion barrels since then, and that by all accounts its producing fields were badly damaged by production practices during the period of war and sanctions, likely reducing the amounts ultimately recoverable from these fields (I think it was Greg Palast who cited a $40 billion price tag for rehabillitation projects, hardly "cheap.") It's key producing fields at Kirkuk and Rumailla, both very old, must be nearing the end of their productive lives. Aside from the liklihood that occupation-bred civil war will cause a collapse of Iraq's (personnel- and capital-intensive) oil industry, as can be seen from the foregoing, the underlying potential is also very questionable.

From: http://altnews.com.au/drop/node/view/1700#comment

Great post Steve, thanks.

in 1979 it was 10,200 bpd (source?)

Source? All you had to do Steve was click on the link I posted. It also gives the average per well production for several other Middle Eastern countries:


Their source:
(Sources: Exxon Corp. Background Series, September 1980; Fadhil Chalabi; US Department of Energy)

Ron Patterson

I did find them. They are further up the post. The March one is a great expose` of the real reserve situation in the M.E.

I just noticed a correction is needed. Billion should be million in the above

Robert or anyone else, I have never heard you comment on the information that Down Under has provided to us several times here at TOD.

I have been offline quite a bit since coming to Scotland. In fact, after having a good connection most of the day, it is on the fritz again and I am about to give up for the day.

Was there something in specific? If it is data of a public nature I can address it. If it is inside information, I doubt that I can, any more than someone can address my inside information. It is inside information for a reason, and that makes it difficult to verify or comment on. Usually, the best you can say is "If that is true...."

Cheers, and now I am offline again.

well, I think it was asked for the threads just above your text, the 30 lines, which were written before your post?
They are comparisons from publicly available texts and citations, which do put one more nail in the coffin of SA production.

Unrelated to inventories levels... hmm.

I suspect a lot of people around here are suddenly going to develop amnesia regarding all the predictions that have been made.


If we don't show a world C+C production increase by May, world production will have been down for two years, while we have seen the highest sustained (nominal) crude oil prices in history. There are not a whole lot of ways to spin a combination of higher crude oil prices and lower crude oil production.

Furthermore, as we have discussed what for seems like a thousand times, the world and Saudi Arabia are declining in accordance with predictions based on the HL models, while the only question regarding the current super giants oil fields is whether 13 out of 14 or 14 out of 14 fields that are or were producing one mbpd or more are in decline.

Hubbert, in effect, made two "If, then" statements in 1956.

If the Lower 48 URR is 150 Gb, then the peak will be in 1966.

If the Lower 48 URR is 200 Gb, then the peak will be in 1971.

The whole argument about 2005 versus 2010 is about as relevant as arguing which of Hubbert's two predictions for the peak were more accurate, and I am frankly puzzled by your obsession with whether the peak was in 2005, or whether it will be around 2010.

In any case, we are basically halfway between 2005 and 2010.

You and I AGREE that we are EITHER (1) past peak OR (2) close to the peak.

Why continue to obsess over who made the accurate prediction?

As I have said before, it increasingly reminds me of a couple of engineers debating how long it will take for the Titanic to sink.

There are not a whole lot of ways to spin a combination of higher crude oil prices and lower crude oil production.

Except that the lower production accompanied the highest crude inventories we have ever seen, and they were still rising when the cuts began. Yet they have remained high despite the cuts, and price has fallen from its highs. That tells me that the market is adequately supplied, which I suspect was the reason for the cuts. Imagine the supply situation if the cuts hadn't taken place. Alternatively, we have to believe that KSA coincidentally went into decline just as the market no longer needed the oil. That's quite lucky timing for them, no?

Furthermore, as we have discussed what for seems like a thousand times, the world and Saudi Arabia are declining in accordance with predictions based on the HL models, while the only question regarding the current super giants oil fields is whether 13 out of 14 or 14 out of 14 fields that are or were producing one mbpd or more are in decline.

Of course that 13 out of 14 argument has been shot to pieces, because decline of the first 9 out of 14 - twice the production of Ghawar - accompanied a 20 million barrel per day increase in world production. So that argument really holds no water at all. We know that production can increase despite the decline of super giants. It has been done.

The whole argument about 2005 versus 2010 is about as relevant as arguing which of Hubbert's two predictions for the peak were more accurate, and I am frankly puzzled by your obsession with whether the peak was in 2005, or whether it will be around 2010.

That's neither my argument nor my obsession. I have never said that oil will peak in 2010. I said the view from here is that it might. But there is some plus/minus to those estimates, and it becomes hard to forecast out very far. Peak may come in 2013. And if it does, those who have called for peak now will lose all credibility and they won't be able to influence anyone. Those who argue for action will be ridiculed by the CERAs of the world who point out yet another failed prediction. If production turns back up, they will have some really good material here on this site for painting Peak Oilers as crackpots. All caution has been thrown to the wind lately, and that is unfortunate.

And that is my argument. I think the case for peak now is weak, and if production turns upward you guys are finished prognosticating. And we need all the voices we can muster calling for action.

So, Robert Rapier,

Your argument seems to be, "Don't change anything, or advocate anything until peak oil is in the rear view mirror. We don't want to seem like fools and start fixing the problem now while the oil is cheap."

You say that we will all be viewed as crackpots if the peak comes later. In other words, when the people of the planet start asking the really smart people, like you, why the hell didn't you people start advocating we do something when the oil was cheap, you will say, "Hey, I didn't want to seem like a crackpot."

Yeah. Guess it is FAR more important that you maintain your sense of decorum than try to manage this problem while the managing is easy.


Your argument seems to be, "Don't change anything, or advocate anything until peak oil is in the rear view mirror. We don't want to seem like fools and start fixing the problem now while the oil is cheap."

Have you never read anything I have written? Lord I get tired of answering this again and again. Of course I advocate that we do something. Right now. Today. That's why I support WT's ELP suggestions. I have advocated and advocated that we do something now, and written much on what we need to do. It would be sort of hard for a person to miss that, unless they were really trying to.

But, we may have a bit more time to work with, and those who advocate peak now are going to lose their voice if production rises this summer. Is that really all that difficult to understand?

No further straw men will be addressed.

RR: I don't agree with your logic. Even if peak oil was in 2013 as you say, that would mean that today's production is definitely within 5% of the all time maximum output. If the general public understood that today's production is defintely within 5% of the all time maximum they would not be upset with the "crackpots" that had missed the call by 5%, they would be upset with the MSM and the government (IMHO).

You can see my logic play out in real time right now. Many people denigrate the very idea of a near term peak by pointing at failed predictions and suggesting that these people are incompetent. I wish to avoid giving them further ammunition. Doesn't mean I don't advocate action, but the advocacy wouldn't be very effective if one has called a false peak. If you tell people we have 5 years and we need to prepare, someone is going to say "Yeah, but didn't you say we already peaked in 2005? Why should we believe you?"

That's it from me for today. My Internet connection is wigging out again and I am back to leeching of my neighbor's unsecure wireless connection. So I am giving up for today.

FWIW, I see the difference between Westexas and RR as the difference between an entrepreneur and a middle manager. The entrepreneur looks at strategic trends over the long-term and tends to be less risk-averse, while the mid-level manager tends to be more career oriented doing tactical planning.

It seems to me, (though I've never met either gentleman), that RR hopes to be rewarded "by the system," while Westexas hopes to be rewarded "despite the system."

Personally, I believe the moneyed interests will look after the moneyed interests and society as a whole will move in ways none of us suspect or hope.

It seems to me, (though I've never met either gentleman), that RR hopes to be rewarded "by the system," while Westexas hopes to be rewarded "despite the system."

I won't even pretend to act like I know what that is supposed to mean. Cherenkov's comments were out in left field. Totally off the mark. But then again, if I recall correctly he is the person who (from his computer!) decries modern technology, as well as any attempts to solve the problem we find ourselves in.

I don't know how much of these guys you have read, but I think boiling it down to 'seeking rewards' is already missing the mark. I don't get the feeling that this is really part of either of their campaigns.. I think they are both saying a crisis is on us (or all but upon us), and we need to prepare, now, brace up for it, work on supply, demand, social and political factors. The implication that RR is looking for approval/acceptance from the fellow insiders sounds like nothing I've heard from his posts, I only hear that from those who think his employment proves some kind of hypocrisy or ulterior motive. I don't buy it.

Though I appreciate WT's information and his dedication, I have to agree with RR's point that it can hurt the argument to be making definite assertions before the numbers are really in. It's good and smart to watch how things are moving, and who's doing what, but that magic pinnacle will really only resolve clearly in hindsight. There will have to be other ways to make the issue come alive to the public.. which is what I'd imagine WT wants to conclude this point for, to have something to point to and say "This is it! Let's get started, People!" The important conclusion seems to be agreed on already.. 'There's not enough lifeboats, not by half!' We have to get busy, and do it now. ELP, Develop Transportation alternatives, Make some responsible lifestyle adjustments, Build Alternative Energy Sources, and Identify the ones that we can see are going to be a drain, when we can not afford any wasted efforts..

I don't know what's up with Cherenkov, but a great many of his posts might as well be done in all caps. He's just hollering out accusations and negative assumptions.. What can I say? He's probably scared, like most of us.. just that his means of communicating it does nothing to take on what we are afraid of.

Good Luck, Brothers.

Thanks for the comments. It is comments like those made by Cherenkov and Ric that have me constantly questioning whether I want to continue to subject myself to these debates. It is comments like yours that let me know that people do understand what I am all about. I took Ric’s comments to imply that I am hoping to be rewarded for the status quo. I WANT TO CHANGE THE STATUS QUO!!! I don’t know how to make that any clearer.

I have gone to great efforts to reduce my own carbon footprint, and to try setting an example by walking the talk. I detail my personal efforts at that link. Anyone who knows me, or has read much of what I have written, should know that I firmly believe that the crisis is on top of us, and we should have already been implementing a plan of action. So, my challenges to the “peak is now” argument have nothing to do with suggesting that we need to delay action.

For everyone else, I know that there are a number of questions/comments outstanding that I need to address. However, I again lost my Internet connection last night. It is supposed to be turned on permanently on March 7 (according to my provider, they have no idea why I have even limited access right now). At the moment I am at work, and I do not wish to have any exchanges on company time. This post is my only exception. Hopefully I will be back online on the 7th (my provider did warn that it could be as late as the 10th) and we can pick some of this stuff back up.

Until then.


Interesting point about the market being adequately supplied - and demand is likely to contract if severe economic problems arise in the world's largest and most reliable oil consumer.

On the other hand, production remains essentially flat - and that with seemingly full rig utilization, which would seem a bit contradictory - drilling for more oil, in generally less hospitable spots, with clearly smaller size fields, would lead to increased costs, while demand is slumping, leading to lower prices.

Puzzle pieces, but there are a few constants - decline in oil production is inevitable, unless balanced by new production. And that wave of future production keeps receding into the future - meaning that this future production will be set against a larger decline - I am very unaware of any delayed project over the past year that is set to increase its initial production rate to make up for its lack in current projections.

My perspective is very neutral - if the American/world economy returns to the sort of conditions seen in either the 1970s or 1930s, oil production will remain flat or declining due to market conditions alone.

What would be really ironic is if the idea of 'productive capacity' becomes a dominant metaphor, as oil production clearly falls in the face of economic conditions, leaving the infrastructure in place to open the taps when times are looking better in 7 years - and then the truth will be unavoidable, with another wasted 7 years, at least in the U.S., as Lord Jevon's cynical observation will allow the U.S. to 'outbid' others for a product/lifestyle with no future.


Well, it seems like I'm too late to put a question to Robert, because of his computer problems.

Maybe somebody else can help.

Robert says: "Except that the lower production accompanied the highest crude inventories we have ever seen, and they were still rising when the cuts began. Yet they have remained high despite the cuts, and price has fallen from its highs. That tells me that the market is adequately supplied, which I suspect was the reason for the cuts."

So, it appears that Robert is saying that high crude oil stocks motivated Saudi Arabia to reduce its oil production. I know Robert places great emphasis on working from facts, but I'd like to have a look at these facts. Can anyone post a link to the best data regarding crude oil inventory levels?

Actually, I am still hanging in there. I normally get disconnected on a regular basis when stealing my neighbor's signal, but I have remained connected for longer than normal. I expect to lose it at any time, though. Besides, it is starting to get late in Scotland, and I will turn in soon anyway.

Regarding your question, I documented it in the essay I wrote in my debate with Jeffrey. I showed the inventory situation when the Saudi cuts began. Not only were inventories high, they were also rising. And then shortly after the cuts began, the price started falling. And what does falling price signal? Falling demand.

I don't want to steal his thunder, but Euan is working on a post on the same topic. I have been sneaking peaks at it in the queue, and I think it will also shed some light on the situation.

Robert: I left this on Yesterdays drumbeat for you.
If you are correct about product imports what I want to see is Gas & Distl imports increase substantially this week. There has been sufficient time for product suppliers to respond to the draw down in gasoline stocks.
Also a question for you, production of Gas plus imports are about 400KBrl’s/day greater than demand, so why are stocks being drawn down? What in that process do I not understand?

Thanks for the link, but it appears to lead to US data only. Since Saudi Arabia sells into a world market, I was hoping to find world inventory levels to see if they back Robert's claim. I did find inventory numbers for the OECD countries at the EIA, but not for the world.

I notice that from 2000 through 2005, that the OECD only accounts for 24% of the increased demand for oil. The rest of the world accounted for 76%, which raised the non-OECD countries to 41% of world demand from 37.5% five years earlier.

I'm certainly not the first to note that the growth in non-OECD demand is very significant. Surely the Saudi's, with a long history as traders, have observed the significant growth in non-OECD demand. Would they make decisions based on a reading of inventory levels without some idea of the inventory trends in the non-OECD countries?

I can't believe they would, so assuming inventory levels have determined their production, there must be some more inventory data. I'm not much good at digging up old posts at TOD, so if Robert or someone could point me to the world inventory data, I would be much obliged.

I've used the old joke about the drunk looking for his lost keys late at night under a streetlight. He lost his keys down the street, but the light was better under the streetlight.

We have pretty good inventory data for the US, but we have the strongest gross national income in the world (there is the little problem of gargantuan debt), so we are hardly representative of what is going on in the world.

I think that the decline in crude oil production combined with about a two-thirds increase in average monthly spot crude oil prices after 5/05 tells us a lot more about what is going on worldwide.

I did start referencing the declining US petroleum imports last year, but only in the context of rising oil prices. If demand was so low, why were oil prices so high? My conclusion then, as now, was that we had to bid the price up to keep the total petroleum imports coming. And why are oil prices still about two-thirds higher than the $38 average in the 20 months prior to 5/05?

As we have discussed several times, the WSJ wrote about forced conservation last year--in regions like Africa. But of course, forced conservation is moving up the food chain.

This is the most convincing counter argument to Stuart's post so far. The identical decline rates on either side of the bump are, however, highly suspicious. Hopefully we'll have a nice increase in demand this summer to flesh this out.

The identical decline rates on either side of the bump are, however, highly suspicious.

We had exactly the same situation in 2001. Look at Chris Vernon's graph in Stuart's thread. There was a constant decline rate, then a bump up, and then the decline continued along the same slope. So this situation is not without precedent, and I don't think based on the commission date that the bump can be attributed to the new field.

I saw that. 2001 was 2001 though. Evidence for Stuart's hypothesis has compounded since then. The evidence is far from conclusive, but I'd assign a higher probability to KSA being in decline now than I would have in 2001. That said, both conclusions are plausible to me. I wouldn't be particularly surprised if KSA increases production this summer as you suggest, but I wouldn't be surprised if their production decreases with increasing demand/decreasing inventories either.

I saw that. 2001 was 2001 though. Evidence for Stuart's hypothesis has compounded since then. The evidence is far from conclusive, but I'd assign a higher probability to KSA being in decline now than I would have in 2001.

It is not the 2001 decline that should strike you as interesting. What many people found convincing about Stuart's argument over the 2006 data was that production jumped up, and then continued along the same slope as before. This was taken to be evidence that they threw Haradh at the problem and the decline immediately started again along that same natural decline rate. But that is exactly the same scenario we saw in 2001 - decline, jump up in production (at about the same time of year) followed by a decline along the same slope. The improbable 2006 graph has been seen before.

It is not the 2001 decline that should strike you as interesting.

It doesn't. I noted the similarity between 2001 and 2006. From those plots alone, it would be invalid to conclude 2006 was substantially different from 2001. However, in conjunction with other evidence (rig count, WT's HL arguments) the plot is more compelling. Again, I'm not saying one can definitively conclude KSA is in decline (far from it given your counter arguments), however, I do find it plausible.

What many people found convincing about Stuart's argument over the 2006 data was that production jumped up, and then continued along the same slope as before. This was taken to be evidence that they threw Haradh at the problem and the decline immediately started again along that same natural decline rate. But that is exactly the same scenario we saw in 2001 - decline, jump up in production (at about the same time of year) followed by a decline along the same slope.

That similar declines occurred before does not invalidate his analysis. It provides part of a convincing alternative explanation, but his conclusion is still consistent with the data. That the decline occurred at a time inventories were increasing weakens, but does not contradict Stuart's argument. It would be a coincidence if KSA started decline around the time inventories started increasing. However, it wouldn't be that much of a coincidence. They have to start decline sometime.

As I said in my first post above, yours is the most convincing counter argument to Stuart's post, perhaps more convincing than Stuart's argument. However, you have not refuted him. You seem more certain of your position than is warranted.

I see merit in both interpretations. The fact is we will only know for sure come a substantial and meaningful surge in demand that forces the price of oil up past $70. That may be as early as May.

Then again if the debt implosion really does go the way Roubini says it will we will not be in any better position to decide as by summer the US economy (and demand) may well be contracting.

On a personal level the argument means little to me - I started the ELP routine several years ago and am pretty much where I reckon I need to be. However as Robert suggests on a broader level in terms of the PO cause the argument is important in terms of how the outcome reflects on communities such as ours.

A couple of observations on two of the statistics that keep coming up in these arguments:
1. The price band of crude, or what is considered a 'high' price. It seems obvious that the 'normal' price band has risen and that your assumption that ~$60/bbl, or wherever crude was when KSA began production cuts, was not considered 'high' because of the general trend in prices, inflation, what the market would bear, etc.
2. The band of what is considered 'normal' inventory levels. Another poster alluded to this, and I think it is an important issue in considering how well the market is supplied. As I understand, the 'days forward supply' has been dropping for quite a while so that even though inventories are within, or even above the heretofore considered 'normal' band, because of generally rising consumption, this 'normal' band should be gradually adjusted upward in such a way that 'days forward' of supply should remain more or less the same.

So, by the price band statistic, I can see your argument, but not by the inventories statistic as far as determining how well the markets are supplied. Inventories being within the 'normal' band is not as safe as it used to be and I think oil traders are beginning to be savvy to this, hence higher prices than some pundits think are justified.

As I understand, the 'days forward supply' has been dropping for quite a while...

I will say it before, and I will say it again. The days forward supply argument is completely meaningless. It doesn't matter if you only have 1 day's supply on hand; if the tanks are full they are full and you are going to slow down your purchases. Refiners are loathe to add tankage. I know; I have seen it firsthand. It used to be a joke where I used to work. I would hear "we need more tanks" on a daily basis.

Think of it this way. You have a refrigerator that holds a certain amount of food. You start having kids, and so your days forward supply of food keeps dropping. Do you buy a new refrigerator? Probably not. You just live with a lower days forward supply.

If you go on a diet (your demand drops), do you keep buying cold food even though you have no place to put it? Or do you slow down on your purchases? Fact: If your refrigerator is filling up, you will slow down on your purchases even though your days forward supply may be lower than it used to be.

Bottom line: If your tanks are rising, it does not matter how many days forward supply you have, nor that it is dropping from previous years. If the tanks are rising, you slow down your purchases. And those who ignore the inventory argument do so at their own peril, because it explains a good deal.

Yes but your argument falls apart because it REQUIRES the assumption that the tanks are full and that days forward has declined because of more mouths to feed. THE TANKS ARE NOT FULL. I notice at the bottom of your post you change your position to the tanks are rising(actually they are falling) which makes your example meaningless and not representative of your argument.

When I say "full", I obviously don't mean "completely full." You don't fill a tank completely up, ever, unless you did it accidentally.

And my argument did not change to "the tanks were rising." I have been making that argument for a long time. It is very easy to see that this was the case when the Saudi cuts began. Look at the graph I posted in my reply to Jeffrey where I showed the record high and rising inventories that preceded the Saudi cuts.

And no, inventories are not falling. Crude inventories - the inventories that will dictate the need for crude purchases - have been rising for weeks. They fell off some in December after reaching a level of 40 million barrels higher than the normal range. But they are again on the rise. You can see the inventories here:


Hover over gas, oil, or distillates and it will update the graphs. What you will see is that it is the gasoline and distillate yields that have been drawn down, but given that the refineries are the bottlenecks these inventories do not directly dictate the crude purchases. Besides that, even though those inventories have been drawn down, you will see that they are still above normal.

Let's speculate. The refinerys are in maintenance mode with the switch over to summer blend. Since Gasoline production has been reduced, backside supplies should increase. But enough to cause the Saudi's to curtail production by 8%? Since crude prices are going up(shouldn't they be going down?), wouldn't you want to top off your reserves? I don't buy it. There is no surplus capacity. Every barrel is already sold and everyone is taking delivery immediately.

I will say it before, and I will say it again. The days forward supply argument is completely meaningless. It doesn't matter if you only have 1 day's supply on hand; if the tanks are full they are full and you are going to slow down your purchases. Refiners are loathe to add tankage. I know; I have seen it firsthand. It used to be a joke where I used to work. I would hear "we need more tanks" on a daily basis.

Then the argument is simply that there need to be more tanks. If refiners are loathe to add more tankage, the days forward will continue to drop, assuming rising demand over long term, and the days forward supply will drop to almost nothing as prices become correspondingly more volotile. Saying that refiners don't want to add tankage is not at all an argument against the point I'm making. And I don't think days forward is meaningless at all. The issue is how long inventories will last, not how large they are. If we have exactly the same amount of inventory and 1 year's forward supply you can bet the price will be lower than the exact same inventory and 1 day's supply. I would, in fact, put it the other way around, inventory is meaningless, only days forward supply is meaningful.

Think of it this way. You have a refrigerator that holds a certain amount of food. You start having kids, and so your days forward supply of food keeps dropping. Do you buy a new refrigerator? Probably not. You just live with a lower days forward supply.

Yes, but I would go to the store much more often. I don't think it's a good analogy at all, but to carry it further...if inflation was at Weimar levels, yes I would buy another refrigerator and stock up.

If there was enough tankage to keep days forward the same AND inventory remained well supplied AND prices remained in the 'acceptable' (?) band of $50-$60/bbl then I could see your argument.

I think the suggestion that refiners have not adjusted storage capacity in the face of years of rising demand (and prices) for finished product is a bit shakey. I would ASSUME that in the course of time there would be a relationship between refinery feed-stock storage capacity and the amount of product to be produced. It would seem to me to be the only sensible way to run the business.
In the context of your refrigerator analogy, it may be more efficient to buy a new fridge and increase stocks rather than having to increase your number of trips to the grocery store. There is a cost/benefit analysis that occurs w/ that decision (i.e. am I willing to make more trips to the store vs. paying for a new fridge), but in the aggregate, some families will buy another fridge and increase overall "fridge capacity" in the neighborhood (ok...enough with the food comparison..makes me hungry). I dont really buy your anecdote about refiners being loathe to add 'tankage'. They may be loathe to do it but its probably the right business decision for many of them.
If there is a distinct relationship between refinery storage capacity and demand for finished product then ARAMCO (and probably many crude exporters) know this. They must factor this into the decision of how much crude to supply to markets. Does that mean that they keep production higher to keep inventories higher? I dunno.

Im sure someone on TOD has posted something about trends in crude oil storage capacity in OECD over the last few years.

i was just wondering, how does the storage capacity of all the tankers in transit fit into these rising, falling or days forward inventories ? if sa sells 8.5 million barrels per day and the average transit time is 2 weeks, that is ..........lessee.......um...... a hell of a lot of oil !

refrigerator...inventory argument...

Perhaps this is just a "Katrina" effect -- i.e. it's so painful to run out of food that you keep the fridge as full as possible. And you keep the fridge full even though prices are high historically. If the hedgers are paying you to keep it full then you keep it full.

This would separate the inventory variable from the other three variables (price, production, rig count).

Ron: No one can argue with your numbers- they appear quite accurate. Nonetheless, I will go out on a limb and predict that in 2010, almost no one (a very small % of American citizens, as an example) will understand or accept that KSA oil production is in decline.

If KSA is experiencing an involuntary 8% production decline, then by 2010 everyone in the world will understand it because oil will be well over $100 a barrel. Something would have to give with respect to the supply/demand picture if they continued to decline at 8%.

The 8%, or 9.5%, according to my figures, is before new projects come on line. New projects will reduce that figure considerably. But I expect Saudi prodution in 2010 to be well under 8.5 mb/d. Probably closer to 7.5 mb/d. But Robert is correct everyone, or just about everyone, will by then accept that Saudi Arabis is in permanent decline.

Ron Patterson

RR: Don't know why you are convinced of this. When oil hit $78-80, a tiny % of the public was even interested in the subject of oil depletion. $100 might sound magical in 2007, but look at the history: in 1998, the cornucopian view (as exemplified by Business Week) was long term prices at $5. In 2007, the cornucopian view is long term prices at $30. Following this trend, in 2010, the cornucopian/MSM story will be long term prices at $54 (which will be considered a steal by the general public). Another example: Bill Clinton was a great leader, but look at his speech above: when someone hears "Simmons says we have 35 years of oil", the uninformed listener interpets that statement to mean that the current economic setup re oil usage will continue for approx 35 years (which is exactly what it does NOT mean). I personally do not think keeping the public asleep at $100 will be difficult at all. RR you certainly are aware that the general public in the USA has already forgotten that glorious period of absurdly low gasoline prices just prior to the Nov election. This was only 4 months ago (more than long enough for the sheeple to go back to grazing).

Brian T: You are quite right that it will take much a much higher oil price than $100/barrel to cause enough pain (or a "market signal," if you prefer) to get the American public's attention. Oh, they'll bitch loudly, and politicians will talk, but nothing will get done. Realizing the scope of the problem will come much later, IMO.

Hi Brian,

re: Clinton: ""Simmons says we have 35 years of oil", the uninformed listener..."

In fact, this seemed so misleading to me (the way it was stated and not explained), I wondered if Clinton himself understood it.

If you liked that one, Aniya, you'll love this one in this morning's Times:

It is a weasel piece of journalism and there is NO EXCUSE for it. If they wonder why folks (like me) have cancelled our subscriptions after years of readership... they need only look at stories like this one.

Hi Seadragon,

Thanks for the link. (It's too much for me to absorb right now - you're right. It looks like (deliberate) disinformation, as far as I've read.)

For what it's worth, I think it's semi-voluntary. They are experiencing real decline, but they're throttling back more than necessary, so that they can "swing" during summer months.

I think the Saudis want to show everyone they can still ramp up, and they can do this by either:

1. Finding more oil and increasing capacity
2. Decreasing current production so that they can increase it

I think we'll see the Saudis (barely) meet demand this summer.

An interesting development in the middle east occurred the last couple of days.

The Saudi and Iranian heads of state meet, evidently to try and defuse the clouds of war.

The really interesting thing is how the MSM reported the situation. I remember prior to the meeting that Iranian President Mahmoud Ahmadinejad was supposed to stay overnight in Saudi Arabia. He didn't! Evidently he left in the middle of the night.

The MSM has left out this critical little fact or down played it. The only one who seems to be talking about it is the The Jerusalem Post (A source I consider having as little credibility as Fox News.) But my own memory seems to reinforce what they are saying.

I'm getting a really bad feeling about war with Iran. Saudi Refineries are large easy targets, susceptible to conventionally tipped missile attacks.

Here is the Jerusalem Post link:

The New York time did report the fact that Ahmadinejad left early but chose not to emphasize or explain that event. The last sentence in their report was:

“Mr. Ahmadinejad departed late Saturday night, the Saudi Press Agency reported, after about eight hours on the ground, despite initial plans for him to leave on Sunday.”


"Bill Windbag Clinton: Five questions for the 21st Century"

"Pay no attention to national politicians/celebrity wannabees. They are a colossal distraction."

Dmitry Orlov.

Clinton is a good Poster Child for the human waste we called our "leaderz." He and Greenspan were happy to collect accolades fromt he Saps of their timez but will live in infamy for helping to push us over the edge of the Energy Cliff.

My god, I think I'm starting to sound like D. Mathews here -lol.

SOP...I read the entire article and thought it was pretty amazing myself. At least the guy is speaking sense now, no matter what he did in the past.

For Christ's sake, he's got solar panels on this library.

Oh great for Bill, first elected in the middle of the first oil crisis in the 70s and for 30 years did absolutely nothing about it, now he's talking about it because it's unavoidable. But if you think at some point when it became a clear choice to either do something about it or hold onto some sort of power, that the Clintons would do anything but hold onto power, you don't understand anything about the Clintons.

Clinton (probably driven by Gore) did try to get a carbon tax-like regime in to deal with our oil dependence and global warming.

They over-complicated it, and it failed spectacularly in Congress.  But they tried.  If we're going to do this, somebody's got to keep trying.

those solar panels are more about image then anything.

I guess I like that image better than Reagan taking down the solar panels that Jimmy Carter had put up.

'more about image than anything.'
just as they should be..

He is at least aware that he can set an example, and a good one, and a disproportionate number of people will take note of it.

You can snark that it's just PR, but good leadership is essentially the marketing of good ideas. Parading around on an aircraft carrier like a 'real soldier' is a better example of something that's all about image, with truly Nothing behind it.

Besides, assuming they're actually hooked up, these solar panels ARE actually offsetting carbon emissions and using a clean source of energy. That's real, and not just the 'symbolic' (and economic) advantages of buying Greentags or Carbon Credits.

I don't know dragonfly, I tend to agree with brutus and TrueKaiser on this one. I think Clinton is fraud and his wife a clueless, finger-to-the-wind power-hungry politician/menace to society.

I think it will be interesting a few years from now when the US starts to resemble Lebanon and Gaza -when "we the people" are the "terrorists" sabotoging the ethanol plants taking our food and converting it into fuel for the Clintons and Bushes.

We are all comfortable, fat, happy and complacent yet - even 99% of us here reading TOD. We have not yet felt the powerless desperation that drives people to strike out (irrationally or not) like the "misguided danish rioters."

This quaint little "academic excersize" we all engage in from a very safe distance (through time or geography) will not help calm the "anarchists" in our very near future. I doubt marshall law will be very effective either.

I wonder if Bush saved a spot for Greenspan and Dannyboy "Jerkin'" Yergin in his escape pod. I'd hate to see them drawn and quartered in the streets by the angry masses a few years from now.

You Clinton Bashers(I can't believe you still exist) need to know something. People are beginning to look at the Clinton years as "The good old days". It makes you sound like an idiot. I guess if you had 2 brain cells to rub together, you would have figured this out by now. I guess I need to take my own advice. Don't waste your time on the stupid ones, they'll be the first to go when TSHTF.

Cid: It is only a portion of the American public that is "starting to regard the Clinton years as the good old days". The vast majority of the planet located outside the USA regarded the Clinton years as the good old days from the moment Chimpy was elected.

He does have that lower primate look about him. Those elections were stolen. We never elected this guy. Unfortunately, the American people are a bunch of sheep who wouldn't rise up if they saw they were being led to the slaughter house.(Heck, there would be a number of sheep telling you it wasn't happening and to go back to sleep.)

Oh its really easy Cid and not based on getting fellatio, but just the opposite, how he use to bend over in the Oval Office and take it from so many others.

It's good to be president when the price of gasoline is at historic lows, no problem here. Boy, it even allows you to watch petroleum consumption grow 15% while you're in office and everyone is just happy happy.

Just to make sure everyone knows it's our oil, you continue to spend trillions on the military, be a good trustee of the Iraq War, whose start you supported, by bombing for 8 years. 6 months in they lose their military virginity, attacking based on trumped up charges, killing at least 8 civilians and the official Clinton spin, “Aides told reporters that the President, having made his address and received early damage-assessment reports, watched a movie with his wife, Hillary, and then got a solid eight hours of sleep. The President was said to be 'relaxed and calm'.”

In 1998, on the day the House takes up your impeachment you bomb Baghdad, and then when your wife becomes Senator, she votes to let your successor occupy, and best states, “I believe the authority to use force to enforce that mandate is inherent in the original 1991 UN resolution, as President Clinton recognized when he launched Operation Desert Fox in 1998,” forget about the UN. Then she repeats the Clinton/Bush line we now all know to be false, "Over eleven years have passed since the UN called on Saddam Hussein to rid himself of weapons of mass destruction as a condition of returning to the world community. Time and time again he has frustrated and denied these conditions.” In fact all the weapons were gone by 92.

Happy Days are here again! Its all W's fault! Lets just bring back the right honorable Clintons and we'll all be able to party like it's 1999!

Refer to the post you just responded to.

Your easily fooled Cid, remind me never to take you used-car shopping.

killing at least 8 civilians...

FAR better than starting a civil war that will eventually kill over 1 million.

It is not that Bill Clinton is faultless; he was, however, competent. A virtue that his successor has no claim to.

But enough of Bush bashing; I used to be a Republican (age 19 to age 52; W reformed me) and even voted for him once (my mistake).

Best Hopes for just 22 more months,


No, he was incompetent in keeping the war going for 8 years to place it in even more incompetent hands. The Iraq war's not a failure of Bush alone, its a failure of five decades of American policy. We can get out of the idiocy of how great each one of increasing incompetent presidents is, and the meaninglessness of the Dem/Rep Lib/Con straight jacket we've put ourselves in and have some real discussion about what to do, or we can keep plunging forward to the abyss.

GEEZ, Bush-Clinton-Bush-Clinton, I don't know how that wouldn't make any American puke.

Yeah only 8 people, how many died in sanctions?

I guess Alan the question, how can you say he was competent, when final ISG report comes out and says that Iraq had ended all their weapons programs by 92. The whole Clinton administration policy was based on Iraq not living up to UN resolutions, when in fact they had. So who was incompetent, the weapons inspectors, the administration? Or something else was going on in which official American policy, codified by Clinton in 98, was nothing would happen until Saddam was removed. So incompetence or deception.

I have absolutely no love for W, but much of our political establishment is culpable and complicit, and its important we acknowledge it.


Hi Brutus,

re: "...real discussion about what to do..."


Oh really!! Bill Clinton competent. I don't live in the US and wouldn't normally comment on stuff like this but you don't know what you are talking about. A PRESIDENT that lost the nuclear codes and had two opportunities at getting Osama Bin Lada but couldn't make a decision as golf was too important.

Try reading " Dereliction of Duty " by Col. Robert Patterson who was recruited into the position of military aide for the Presidency and flew combat missions for the US. He personally liked Clinton but was appalled by what he saw. This idiot lost the nuclear codes that every President since probably Truman carried and they think they went to the dry cleaners in his suit and were never found.

He states that the Clintons hated the US military and did every thing they could to downgrade and denigrate them. This from their Commander in Chief. If you haven't read the book, get it, you might change your opinion of this chameleon.


My last comment. Bill Clinton was competent on the issues that mattered, that were most important (at least to him & me). Domestic issues. I will agree that he was better tactically (solving the problem of the moment) than strategically (deep thinking on our long range issues). Perhaps the mirror image of Jimmy Carter in that regard.

On the significant multi-lateral international issues, the US hit an apex in influence. The US position was where the debate revolved around, and was, BY FAR, the most important voice. IMHO, the US will never return to that strong a position. We certainly do not have it now.

Clinton was less interested in maintaining & strengthening the American Empire, and we need the military for that (at significant cost to our domestic life. Think British Empire; major costs to the public @ large, including providing soldiers/cannon fodder as well as taxes but private firms profit). A much smaller military is one of the proper responses to post-Peak Oil. And like the British retreat from "East of Suez", we will be forced into this path sooner or later.

Osama was not important until he got off one VERY lucky shot. And since I live in a city that was destroyed by the malfeasance of the US Army, 1,000+ civilians killed & 80% destroyed & heavily damaged, I have "signed off" from the so-called "War on Terror". I basically just do not care.

And keeping track of the nuke codes is a triviality that historians will rightfully forget. Who the heck was going to execute a first strike that requires a 5 to 15 minute response ?

Well Said Alan.

I have said on a previous post the Conservatives (I am an R) were on a witch hunt and should have never asked the Monica question and if Bush had a Monica, relieving his anxiety, instead of a Condi, the US may not be in this mess.

Another version of Iraq misery, more trapped people:


thats nothing new, religions have been doing that for century's.

Perhaps I am a bit paranoid, but after last week's market developments and information posed at TOD, I made some major changes to my 401K portfolio. I have moved out of anything moderately risky and gone to a mix of 60% ultra conservative and 40% moderate/conservative. I jumped out of anything that had financial institutions in the majority of the fund mix.

Just wanted to relay this to you all, not so that you take any advice from me, but now may be the time to act. I will not lose here, just not grow as fast if I'm reading things incorrect.

I have a very bad feeling in my gut about near future market development.

You are not the only one. Visits to The Oil Drum doubled on Friday.(over 20,000 I believe) The US is already sabre rattling over the coming nationalization of Venezuela's Oil industry.(Set to occur May 1) I'm am sure the Oil Companies that stand to lose big time are wanting some type of military intervention. What are the chances the Bush Administration will ignore their wishes? Not very likely. I am sure we will be bringing Democracy to South America soon.




Interesting that the story about Chavez possibly booting the US Envoy has been pulled from CNN like it never happened

Also, would Exxon-Mobil walk away from a $2 billion investment unless they already knew they would get it back?



Me too, against the advice of my 401k manager. But I have a very uneasy feeling about a tipping point coming soon as we see housing continue to tank and the debt defaults climb. There's no way I'm riding this b*tch down.

My Dad who is 75 has been a real estate investor for many yrs. He says he is totally out(except for a couple deals in their final stages about to go through). He says there are NO buyers out there. He says the sellers still want more than they will ever get and anybody buying can already smell the blood in the air and will wait.

DF: I have contemplated a similar move, but wonder how much a difference going to such a conservative investment strategy will really matter? My 401K advisor humors me but I think he wonders at times. I write this not to encourage the more extreme doomers at this site, rather I'm trying to get a handle on concrete steps middle class folks like me can reasonably take.

BTW, my solar hot water heater is up and running fine - sunny today and almost 60F here in NW Oregon!

LO...of course you are correct. In the end, the 401K may tank no matter what I do. So, I could try to take out what I have now and pay a penalty or play around with the mix to try to squeeze out some gains while there is still time.

The best strategy right now may be to cash out of everything and buy what you will need for the future. I have not cashed out, but bought things along the way in the last 2 years that will help in tough times. I don't think it is quite time to liquidate the whole nine yards, but the thought is starting to simmering somewhat.

Thankfully, I have other funds besides my 401K, however, if the FDIC stops insuring up to ?? then cash flow will be a problem.

It is just amazing to see my 401K, which did quite well last year, start slipping down the red slope so quickly. I also imagine the millions of other folks in the US (world?) doing the EXACT same thing as me. Looking at the abyss and scrambling to think of a way to prevent the retirement nest egg from slipping down into it.

Next week will be very, very interesting.

I felt the same Fri/Sat. I made a post that I think we hit an inflection point on Fri/Sat. I think we are in for a quick slide.

Inflection Point? - Banks and Bubbles IV: Sudden Junk

About: No magic bullet for energy crisis By Steve Chu. link

quote: There appear to be no magic bullets to solve the energy problem.

A brief article focussed on ‘energy’ which swerves between difficulties and hopes, very mainstream, not original, no good facts... We get the groovy inspired scientists and the ‘personal’ plug in the last paragraph.

What all such articles or people ignore or set aside is that practically since forever it is *often* humans who have provided energy, in the shape of conversion from food into concerted, planned, efficient, organized, action. Other animals (horses, cattle, donkeys etc.) are good value yet act under human supervision.

Human labor, dependent on 1200 or 2000 or more per day calories of food, built pyramids in the past, and even railroads!, or today, produce TVs, sexy bras, etc. in slave labor conditions.

And one magic bullet to ‘solve’ the energy problem is to better exploit that human labor. The ‘rich’ - be they individuals, occult groups, heads of corporations, or nation states in the OECD - have understood this. Of course arguments about globalization can go one way or the other, it can be seen as positive for the poor; it is so that conditions for many have improved, through medecines, better Gvmt., technological innovation, maybe even partly international aid, the now past Green Revolution, etc. For others, principally Africans, the sum total is desperately negative, the entire continent may become a playground for extractors of one type or another.

If the tractor killed the slave in the US (that is, saw to it that slaves were more cumbersome and expensive than machines run on oil), the death of the tractor means that slaves will have a comeback. That is is part of what is going on today, and has been going on for a while now.

'Energy' is not just something one puts into the gas tank of a car.

Hi Noisette,

re: "And one magic bullet to ‘solve’ the energy problem is to better exploit that human labor."

I've heard a similar thought stated in ways that gave me the impression the speakers/(promoters) didn't count the role of various forms of slavery, (including contemporary), nor understood the real amount of work done by machines, for that matter. Your sentence here seems a little different, implying cultural change (or else I may be reading too much into it.) In any case, I wonder if there is any positive outcome possible along these lines.

That's why we need the illegal immigrants. They are accustomed to both manual labor and oppression. Try putting suit and tie types in the field and you'll get squat. Most Americans are totally unsuited to manual labor and will perish.

Well I was thinking of cultural change, in a vague way. As you point out, though, for it to occur it would have to rest, at least in part, on an understanding of how the physical world works along energy lines. Scientists and educators should have tackled that long ago. In the sense that, for example, there is no world wide unique easy-to-understand measure of energy. A measure of energy should be as familiar as hours and minutes and dollars and cents. Standardised (even if various conversions posed problems.)

Of course that is not done because the myth or precept of ‘economic development’ (which includes technological, scientific, and even cultural development) rests on a measures of exchanges and investment (money, GDP, etc.) which has energy embedded in it in an invisible, unacknowledged way. The result is that nobody ever really knows what they are talking about - I mean in the classroom, on the tee-vee, and in respected newspapers. Or rather, the discourse is ideological... We are all to believe that our human constructions and society are somehow built on a perpetual free lunch, that we are the masters, and so on. Destroying that quasi-religious belief is going to take some hard work...Not impossible, of course. One could say it will happen anyway! But exploiting other humans is the sure and true method of closing an ‘energy gap.’

One example. In switzerland we are now trying to ‘save’ electricity. One proposal, resting on very vague calculations, is to limit the size of TV screens, the new flat screen ones. Apparently, this won’t be possible because of WTO rules (CH would be attacked ‘in the courts’); because it would ‘limit consumer choice’, meaning that CH would look more like Soviet Russia or Brunei than a developed country and so would suffer very badly very quickly - what of large screens at conferences, tourists, visitors, and the rich who like to settle here? Impossible. Limiting energy use in this way would send a lot of residents into poverty, and that is literally true; taxes would thus rise for the others, etc. etc.

To keep up, to survive, or to get more, you have to consume more..

New York Times (Select):


Gretchen Morgenson
Mortgages May Be Messier Than You Think
Published: March 4, 2007

But last Thursday, the annual report from Countrywide Financial, a major lender, told a different story. While it confirmed fears about subprime loans — 19 percent of those in its portfolio were more than 30 days delinquent at the end of last year, up from 15 percent in 2005 — Countrywide also indicated that the percentage of prime borrowers encountering difficulties is rising. Delinquencies in the company’s prime home equity loan portfolio totaled 2.93 percent, almost double last year’s 1.57 percent.

And consider the disclosure last Thursday of American Home Mortgage Investment, a home mortgage originator and investor that specializes in loans to those with middle-tier, not weak, credit histories. As of year-end, the company said, 8.13 percent of its loans held for sale (not investment) were non-accruing. During the same period in 2005, that figure was just 0.43 percent.

“The problems are far broader than subprime,” said Josh Rosner, a managing director at Graham-Fisher in New York and an expert on mortgage securities. Mr. Rosner says he believes that, absent a huge jump in home prices, investors will soon recognize that credit quality problems have also begun to seep into “the upper tranches” of the loan market.

The biggest hit this week was not Countrywide Financial, it was New Century, the country's no 2 lender, which faces a criminal probe and saw its stock plunge.

(The criminal side of the housing bubble hasn't gotten a lot of attention yet, but it will. This may get that particular ball rolling. There's a few nerves rattling in boardrooms right now)

New Century Financial Corp. said late Friday that it's facing a federal criminal probe and will likely breach a major lending covenant with its financial backers, bringing into question the survival of the second-largest U.S. subprime-mortgage lender.

The U.S. Attorney's Office for the Central District of California is conducting a federal criminal inquiry into trading in New Century securities as well as accounting errors, the company wrote in a regulatory filing late Friday.

The Securities and Exchange Commission also is looking into the company, as is the regulatory arm of the New York Stock Exchange, New Century disclosed. The company added that it is complying with all three inquiries.

"Subprime lenders without deposits depend on their warehouse lines," said Zack Gast, a financial sector analyst at the Center for Financial Research and Analysis, a research firm. "If New Century's lenders do not grant the requested waivers, the company is likely to be forced to sell or shut down."

And Roubini hints that the problem is far more widespread than reported, and he can explain it too:

Where did the Mortgage Bankers Association (MBA) get the “sub-prime is only 6%” figure that it is spinning around in every possible media? Their trick is to consider all homeowners, even the 35% of homeowners who do not have any mortgage and then argue that only 6% of homeowners are sub-prime borrowers. Why is this spin and why is the actual figure for “garbage” mortgages actually closer to 50% of the flow of new mortgages in 2005-2006 rather than the “6%” being spinned around? Several reasons.

Let me elaborate:

• Sub-prime are now 13% of the stock of mortgages, not 6%.
• Sub-prime mortgages were at least 20% of mortgage originations in 2005 and 2006.
• The same “monster” lending practices used for subprime mortgages were also used for most “near-prime” and “prime” mortgages.
• Many pseudo “near-prime” mortgages (such as Alt-A) are undistinguishable from sub-prime ones and have now sharply rising default rates
• What is defined as sub-prime is subject to highly cosmetic accounting by banks: the rule that FICO scores of 660 or below are sub-prime is often diluted down to 630 or even 620 to exclude many mortgages from a sub-prime classification.
• Counting all of the categories above, subprime-like mortgages accounted for almost 50% of all originations in 2005 and 2006 not the 6% figure spinned by the industry lobbies.

To complete the picture: Fremont, another top-5 lender, is outta here:

Troubled subprime lender Fremont General (NYSE:FMT) said late Friday it will exit subprime residential lending, citing mounting pressure from loan repurchases and likely regulatory action. The company had first hinted at problems on February 28, when it said it would delay its fourth quarter and full year earnings.

The company said its decision to exit was prompted primarily by the receipt of a Proposed Cease and Desist Order from the FDIC on February 27.

The MI-Implode meter stands at 31 dead lenders since Dec 2006, and has shifted to a higher gear recently.

Wow, the Implode O Meter was sitting at 28 when I checked it this past Thursday!

The NYT article noted that a lot of lenders are doing almost anything to keep people in homes, frequently just tacking missed payments on to the loan. Of course, in many cases this is just postponing the inevitable. It's possible that if lenders used previous foreclosure standards, the foreclosure rate would be much higher than it already is.

In Texas, starting in 1986, real estate in many areas crashed after oil prices crashed. Of course, most of the country never noticed. When oil went to $10 per barrel in 1986, the pain was very concentrated, while the benefits were widespread, but again most people barely noticed that gasoline was cheaper.

What we are now seeing is highly concentrated benefits--in the food and especially energy sectors--and widespread pain.

If Matt Simmons is right about oil prices, a new 5 million barrel oil field will generate gross cash flows of a billion dollars to the royalty and working interest owners. Everything will be peachy for the energy producers--until the angry soccer moms start rioting at the gates of the mansions of the energy producers.

One of the things I have always wondered about is Jay Hanson's choice of Hawaii as a place to ride out the post-peak environment. I wonder if he views civil unrest as a bigger short term threat than food shortages.

At least I tried--repeatedly--to warn you.

The NYT article noted that a lot of lenders are doing almost anything to keep people in homes, frequently just tacking missed payments on to the loan.

It's worse than that WT. In the case of the Neg Amort loan you speak of Not only is the missing amount tacked on at the end, but the Mort. Companies have been reporting THE WHOLE monthly amount(even the part unpaid) as INCOME !!!

I owe $1500 per month, I pay $500, $1000 goes on to the end and the Mort. Co. reports $1500 income for the month.

We are toast boys and girls.

WORSE PART YET as I see it is the lineage.

J6P buys a house he can't afford. Bank sells it as a security to some hedge fund. The hedge fund is then bought by the PENSION fund where J6P works.

J6P defaults(en-mass) and they domino goes all the way back to who holding the bag??????

J6P Has NO PENSION. Hedge Fund makes zillions, The elite owners of the money trail take their off the table,
and J6P's across America's Pension and 401k are the final owner of all that bad paper.

Poetic Justice I guess...



After the release of his eagerly anticipated annual shareholder letter, Warren Buffett told CNBC’s Liz Claman that he’s deeply concerned about U.S. trade problems and predicts more weakness for the dollar.

“Mr. Buffett told me last night that the longer this goes on, the more severe the moment of truth will be, he also says you don’t know when that moment of truth is coming,” Claman said.

Investors are paying particular attention to this warning from Buffett: “Per capita wealth will increase, but our citizens will also be forced every year to ship a significant portion of their current production abroad merely to service the cost of our huge debtor position.

"It won’t be pleasant to work part of each day to pay for the overconsumption of your ancestors, I believe that at some point in the U.S. the future of the U.S. workers and voters will find this annual “tribute” so onerous there will be a severe political backlash. How that will play out in markets is impossible to predict, but to expect a soft landing seems like wishful thinking.

Oh hell that is just damn scary. Warren's been right too many times.

"But worldwide oil production could still lag behind demand if politics get in the way of access, Watson said. "The truth is we could still run short of oil, above ground where access and politics come into play," Watson said."

I spend too much of my free time trying to make sense of world political events in light of peak oil. The war with Iraq, CERA’s constant debunking of peak oil, the tension with Iran and Venezuela, Putin’s rise etc, etc. And then it dawned on me today that I just might have figured it out. It all has to do with hope and controlled demolition.

I have to make one key assumption - the elites running the government and the economy have come to the conclusion that peak oil is valid and it came a lot sooner than expected. They understand that that the economy will begin to unravel and our once non-negotiable lifestyle will change will change significantly for the worse.

There are two paths to take. path 1 is to let the situation progress naturally. Energy prices skyrocket over a time period of just a couple of years, the economy slips first to recession then depression, the masses finally learn of peak oil and its ramifications for the modern way of life. These people will lose hope in the system. Many will opt out entirely and begin growing their own food, setting up complex bartering economies and losing a sense of national identity and embracing a more local identity.

Path 2 is to control the situation. Something I think any American President would like to do. Priority 1 for the elites is to ensure that the masses don’t lose hope and opt out of the system. After all, it is the system that made these people into the elites they are. To maintain hope you must disguise the drop in petroleum production.

What better way to disguise the unrelenting drop in petroleum production that by waging a long war in the main oil producing region. If we caused a war with Iran we could blame them for blocking the Straights of Hormuz and or bombing Saudi and Iraqi oil infrastructure. Even if Iran didn’t do those things we could always cause the events and blame Iran for them.

By waging such a war the average American would not lose hope. We can win a war and the elites will tell us as soon as we do we will rebuild and the oil will start flowing again and we will return to our old lifestyles. The masses continue to participate in the system even though there is great hardship at home. The masses have hope and we all know hope springs eternal. The key with this path is that it buys time and the elites have some, perhaps not total, but some control over the situation.

Let’s assume that the war is over and we claim victory. The home front situation is bleak with high unemployment and crime. We begin the rebuilding phase but the elites know that they can’t return us back to life in 2005. During the war there has been a great deal of demand destruction for energy. The years during the war has forced Americans to adapt to a lifestyle of lower energy use. Some ingenious Americans will come up with some ways to make the situation more bearable further ensuring that the masses continue to believe and participate in the system.

Finally as the rebuilding continues we only rebuild to the level that Americans are becoming accustomed to. We never get back to 2005 where, as WT would say, I drive my SUV from my overly mortgaged home to my far away job, all the while sucking down frothy cappuccinos . No, we only can rebuild to a much lower energy intensive way of life but the politicians can still run on the promise to bring back the old American way of life.

This all leads me to the above quote from the head of Chevron. Notice how the talk from CERA and the oil majors is about “above ground factors” limiting oil supplies not “below ground factors.” Are they beginning to set up the American people for the next act in the peak oil play - a war with Iran?

I do not believe for one minute that the US will attack Iran. There isn’t the support domestically for that kind of action. Israel will do the attacking and Iran will retaliate not only against Iran but the US as well. And then you will see support by the populous for engaging Iran in a war. We don’t like being attacked and we will support the war that will usher in the next phase of human civilization - one living on the down slope of the Hubbert curve.

Toonsmith: OTOH, the American public has very little patience or stamina for losing wars. The Iraq adventure was popular until the USA started to lose- most predictions of Israel/USA attacking Iran start with the assumption of victory (easy or otherwise). Maybe, maybe not- handling a bunch of primitives in Iraq seems to be a gigantic challenge that the USA is failing at.

By that time, the opinion of the American public will mean little. All the government will need to do is impose a form of martial law, implement the Military Commissions Act domestically and round up the dissenters. They will threaten to shut down Congress and the game is up. Let’s hope that Robert is right (unlikely) and that the system keeps going for the foreseeable future. Let’s hope that we have enough lag time and good leadership to take us in a different direction than the path to fascism we seem to be on at the present.

There is no way the US alone can occupy Iran, especially when the Iragi Shias are attacking US targets there. And what will bombing alone achieve? If Israel, the only nuclear power in the Middle-East, attacks a Muslim state then its nuclear monopoly will certainly be over with long term consequences that are unpredictable. The whole idea seems so utterly stupid that I suppose it is mainstream in the USA.

This is the optimistic version, right?.....

This is the optimistic version, right?.....

Yea, the other version is 7/8 of the planet dies from starvation, disease and war.

the elites running the government and the economy have come to the conclusion that peak oil is valid and it came a lot sooner than expected

I don't even think that is certain. For sure some like Cheney know about it, but I don't think all the "elites" do. Some of them just are not that sharp.

cfm in Gray, ME

Is it you or Wimbi that has the Sterling Engine?

I've been meaning to ask if you (if it's you) have a website or some info you're willing to share. Don't know when I'd aim at that project, I have a slew of notions taking form already.. but I wouldn't mind having some info in the archive.

I know there's a lot online, but I'm looking for some practical, first-hand experience. There's just Too much Sterling stuff out there to know what's real or not.

Bob in Portland

It's Wimbi.  And it's Stirling.

I've been looking for a bit more info on some of the things Wimbi mentioned about Stirlings, such as a multi-cylinder engine running at different temperatures.  This would be good for e.g. pulling the maximum usable energy out of a heat stream from a burner.  I must not have the right search terms.

Regarding Saudi Arabia's oil production - decline or not- plus their investments in energy:
A couple days ago Stuart's report indicated that KSA has decreased production by 8% and this an involuntary change. A Cap'n America commented that the Saudi's are investing in building refineries, acquiring supertankers, contracting for more drilling rigs thus they are not declining in oil output. His reasoning was that they would not put money into a "twilight business".

Within the last year or two I have seen several reports in WSJ online and Business Week online that indicate Saudi Arabia's oil industry will expand to become a fully integrated supplier of petroleum. They will produce the oil, refine it, convert the by products into feedstocks for the chemical industry, and transport the oil/refined products to the customer. Obviously if KSA is to maintain their cash flow they will have to get into ancillary business to the production of oil from the ground. I don't recall the source, but I remember reading about the Saudis interest in renewables, while explaining that most of the world would still rely on oil for energy for the next several decades.

The leaders of KSA are following a typical American business model for survival when one's core product is declining. Witness the railroad industry in the late 1960's through the early 1980's. When their freight and passenger businesses declined they began to diversify into related industries. RR's were forming trucking divisions, air freight companies, buying or expanding into pipelines, and developing energy companies that exploited their land were the norm rather than the exception. This helped the railroads survive a period when competition from the government subsidised airlines and trucking cos. nearly drove them out of business and many RRs that did not change went bancrupt.

Another somewhat related case is my customer & freind in the oil distributing business. He has many truck stops and convenience store/gas stations located in a couple of states that border Canada. He is investing in biodiesel and now runs most of his company office & service vehicles on the product after building a processing plant at his headquarters. He also was the largest ethanol distributor in his area of the country until it got too big for him to handle with his trucking fleet (refineries now have their own fleets of RR cars to handle it). He see a future in more biodiesel as oil prices rise and supplies become limited and he plans to invest in that renwewable resource. So he traded one profit center for another as the market and supply picture changed.

KSA is working to maintain cash flow by changing to fit a future where they will be producing less oil.

Like that will ever happen.

We still drill wells. We still explore. And we have done so since we peaked 35 years ago. Just because the Saudis drill and diversify it does not mean that peak oil is not happening in SA. In fact, I would offer that it is proof that they are peaking.

Why change the old paradigm if it still works?

Don't forget that all these refining and other operations produce CO2, which is a much better option for injection into oil fields than water.  KSA might be looking at their prospects from the technical end.

Yes, technically CO2 injection would be better than salt water to keep pressure up in Ghawar and other oil fields. But the amount of CO2 required for such a large production area would be huge compared to the CO2 released from using CH4 as a hydrogen booster or heat source in a refinery process. KSA right now could use CO2 from some of its power plants to do the same thing and reduce GHG emmisions, but they choose not to.
The articles I have read on KSA getting into other energy processing explained their wanting to diversify and control more of the energy stream from source to customer.

Those powerplants produce CO2 at atmospheric pressure, diluted with nitrogen; extracting this in useful form is expensive in both energy and equipment.  A refinery process which produces syngas with oxygen (say, for hydrogen cracking or hydrodesulfurization of heavy/sour crude, or for chemical production) will yield CO2 with little or no dilution and at high pressure.  This is ideal for cycling back through the reservoirs of light/sweet to extract more of the stuff from the pores in the rock.

I am curious how this affects the WestTexas export model. The KSA is going to be vastly increasing its consumption of crude. However, most of this will still be exported, just as finished liquids and petrochemicals.

Re: "The Ethanol Scam" and world hunger.

The article is a gross oversimplification and shows a lack of understanding of the world food situation. Until recently the USA has had massive surplus grain supplies and very, very low grain prices which were compensated for by farm subsidies. During these surplus years, it was nearly impossible to export the low priced grain without export subsidies also. Yet people were starving in many poor countries. Why? One reason was they could not afford to buy the exports even at very low prices. Sometimes the government actually gave the grain away to very poor countries to get rid of the surplus. The effect on these poor countries was devastating. While starvation was temporarily postponed, the free grain bankrupted the local farm economy in the poor country. The result was that they either became dependent on free grain or starved anyway. Poor countries must deal with their food requirements locally. There is no other solution.

Secondly, as a diabetic I can tell you that the over consumption of carbohydrates in the USA is a plague on our country. Nothing could be better for our health IMO than reducing sugar and starch intake and increasing fruit, vegetable and meat or fish intake. Atkins is right.

How do you think we feed the cattle? This is no "change in what's on the shelves" kind of thing. This is a "nothing on the shelves" kind of thing. The business in Russia after the collapse of the Soviet Union where there was absolutely nothing on the shelves and people stood in line for hours for a loaf of bread is a good example of what is to come.

Atkins is dead (literally).

Is (or was...) there a grain surplus? Yes. But one must consider the magnitude of said surplus relative to to total grain harvest. It is fairly small, meaning that relatively small changes in harvest (used for food) can change said surplus into a deficit.

Next, one need only consider the amount of grain which will be consumed by ethanol plants recently built as well as the amount of grain needed to make any substantial difference in the energy supply relative to the current surplus. Like magic, the surplus goes away and Iowa starts importing corn to feed the EtOH plants. Then, more corn acres get planted, meaning fewer soybean and wheat (and more stress on the land due to reduced crop rotation). Add to that the soybean harvest consumed by biodiesel and, as a result, grain prices will most assuredly rise.

Overconsumption of everything is the problem. Perhaps rich countries should deal with their energy requirements locally. But then, we can't even make a dent with grain-sourced biofuels.

as long as there is grain, there is beer. remember the ingredients: grain , barley, hops, water.
hail to the German Beer laws: Reinheitsgebot


River Garden, an alternative future for America ?

I ran out of eggs and just walked 7 blocks to my neighborhood Walmart (Zara's is closed on Sunday, and they do not carry the high Omega-3 eggs). Half that distance is through the new development "River Garden".

Being built on the site of the St. Thomas housing project (as was WalMart), visiting friends have said that it is as fine an example of "New Urbanism" as exists in the US.

Not as good as the original it copies (Lower Garden District) it none-the-less "works" as is developing into just what we need in New Orleans; a working class/middle class largely black neighborhood with a lot of kids.

Slightly enlarged copies of several classic New Orleans architecture types on somewhat larger lots and streets (32' wide instead of 28'; one way with on street parking on both sides; one off-street spot/home). Mostly doubles (rent starts at $750/month; 2 bed room homes, 1080 sq ft are $200K to buy; up from $150K). 100 unit condo yet to be built.

The developer has been lobbying for a new streetcar line before he sold out to K&B after Katrina.

Not perfect, but workable. 1 to 2 miles to most major employers in New Orleans. A couple of half block pocket parks and a larger 3 square block park seperating River Gardens from WalMart. High density by Americna standards' moderate density by New Orleans standards.



Some links.




Best Hopes,


Thanks for the link. I've added it to the Town Paper list.

I have not visited River Garden in person. Judging from the plan and photos it looks decent, but I wouldn't call it one of the finest examples of new urbanism -- in no small part because of its utterly conventional Wal-Mart. There are some Wal-Marts that are reasonably urban and pedestrian oriented, but not the River Garden Wal-Mart. It looks like the best you can say about it from that perspective is the brick-paved access lane at the store entrance.

The local neighborhood fought WalMart tooth & nail; something I advised against. I argued that it was better to accept the inevitable & strive to get a "better" WalMart (2 story, dual entrances, one facing towards walk-up traffic with side parking, etc.) and accept the limited good that it brought (sales taxes in Orleans Parish, half way decent paying jobs, lower cost laundry detergent etc. for the those w/o cars). WalMart will do this if it saves them the hassle of over-riding local opposition.

The "finest examples of New Urbanism" comes from the way it works and lives and intergrates with the Lower Garden District, not from an abstract plan. That is something one has to see (say at next Jazz Fest ? I am hosting the "Father of Baltimore's Light Rail" for the first weekend, but the second weekend is open).

As we both know, the Lower Garden District of New Orleans is one of the ancient templates for New Urbanism.

Best Hopes,


strive to get a "better" WalMart (2 story, dual entrances, one facing towards walk-up traffic with side parking, etc.)

Some other techniques are: liner stores to activate the pedestrian frontage, selling goods that aren't carried by Wal-Mart. Outparcel development around the parking lot, so that your porch doesn't overlook a 5-acre parking pad. Mixed use in the outparcels to better match the neighborhood context and pedestrian activity.

Wal-Mart has executed the outparcel technique in certain locations, and has expressed an interest in the other techniques.

Magazine Street is one block away on the other side of River Garden. 5 miles of small "mom & pop" speciality shops :-)

The old warehouse on the other side of the WalMart parking has some plans like that, but I do not know (or care) about the details. Keeping Magazine going is FAR more important !

Best Hopes,


Has anyone done a Hubbert Linearization (of future world production) including 2006 data yet?

Stuart´s linearization from january 2006 included only 2005 data, I guess.

Does it change the peak date? (Stuart last time got May 2007 as peak month)

Had to reply to the link posted above by Leanan,

Chevron head: plenty of untapped oil reserves left

John Watson, head of international exploration and production for Chevron says:

”worldwide oil production could still lag behind demand if politics get in the way of access.”

”The truth is we could still run short of oil, above ground where access and politics come into play.”

”other above-ground risks include gaining access when national oil companies control about 80 percent of the world's reserves.”

”other above-ground risks include higher costs of finding oil that could chill production and the lack of enough engineers and other professionals to replace the industry's aging work force.”

”Above-ground peak oil will trump below-ground peak oil every time.”

It’s clear to me now – CERA, ExxonMobil, Chevron disagree with peak oil theory because peak oil theory really means “below ground” peak oil theory to them. To facilitate communication, peak oil production needs to be changed to “above ground” peak oil production so that CERA, ExxonMobil, Chevron can understand and might even agree!

Is John Watson setting the stage to blame above ground risks for future declining “above ground” oil production which will lag behind demand? I say yes, unless Watson can find some “below ground” oil production.

Being serious, who actually thought of this term “above ground peak oil”? Is that the best that Chevron can do to find an excuse for declining production? Peak oil production is not “above ground” or “below ground”, it is simply peak oil production subject to risks from above and below ground!

I think that John Watson would agree with oil production lagging demand starting as soon as July 2007. The chart below shows the supply demand gap tightening in July 2007 and increasing in October 2007.

The chart has been updated for the latest reports from the EIA and the IEA. The total liquids decline rate of -0.1%/yr has been derived from forecast “above ground” production using Chris Skrebowski’s most recent megaprojects database from Petroleum Review Feb 2007. Forecast C&C decline rate -0.5%/yr; NGL/GTL, increase rate 3.7%/yr.

Other “above ground” risks could include rusting production platforms and rusting pipelines.

2007 Hurricane Season

The supply demand gap could be further increased this summer if oil supply is reduced to a very active hurricane season. This is good for Watson as hurricanes are an “above ground” risk.

Evelyn Garris, Editor, Browning Newsletter, forecasts that the USA hurricane season could be very active.

Colorado State University also anticipates an above-average probability of United States major hurricane landfall.

What about “below ground” risks?

Some “below ground” risks might include:

Higher than expected field decline rates due to extensive use of horizontal production wells.

Inability to extract “below ground” Canada tar sands due to "below ground" water and natural gas shortages.

Unaudited “below ground” reserves of many countries.

Does Saudi Arabia’s surplus production capacity really exist?

As the supply demand gap increases, the world will know by the end of this year if Saudi Arabia really does have surplus production capacity.

In Stuart Saniford’s well researched recent story on Saudi oil decline
He said that "It (Haradh III) lifted the plummeting production curve up by 300kbpd, but did nothing to change the gradient of the plummet. That suggests that the Saudis had nothing else to throw at the problem.”

Maybe Saudi needed the Haradh oil to blend with heavy oil so that it could be saleable to customers. Saudi may have spare capacity of 2 million barrels/day of heavy sour oil. Only problem is that their customers' refineries can’t use it.

The Blame Game

Watson will blame “above ground” risks for future oil shortages.

The Saudis will blame refineries being unable to use Saudi’s surplus capacity of heavy sour crude for high oil prices. The Saudis will say there is no oil shortage – we have surplus heavy sour crude but no buyers. That sounds familiar.

Who will the US Government blame for high oil prices?

All the talk of "above ground" risks is one way to frame the issue of peak oil away from the basic geology of the situation...IMO. They are trying to steer the discussion away from the plan, simple fact of declining oil fields...if they can blame "other" reasons for shortfalls, then it seems temporary.

ace said,
"Being serious, who actually thought of this term “above ground peak oil”? Is that the best that Chevron can do to find an excuse for declining production? Peak oil production is not “above ground” or “below ground”, it is simply peak oil production subject to risks from above and below ground!"

While Dragonfly41 said,
"All the talk of "above ground" risks is one way to frame the issue of peak oil away from the basic geology of the situation...IMO. They are trying to steer the discussion away from the plan, simple fact of declining oil fields...if they can blame "other" reasons for shortfalls, then it seems temporary."

Folks, this is what I have been saying since I got here over a year ago, what we have all known since the 1970's: Logistical peak (so called "above ground" peak) and geological peak (so called "below ground" peak) are two completely and totally different things, and have little to do with each other. It is imperative for people to be on their guard against the danger of both types of peak....if the peak is geological, the game is up, the gig is over, human history becomes for now and for ever strapped for oil. There will be no 1982 again.

But, and this IS SO BIG, if it is a logistical peak, as it was in the 1970's, then the risk of a 1982 repeat is very high. That would mean that just at the moment companies were making the hard effort on conservation and alternatives, that car companies were making the switch to more fuel efficient cars, that builders were building conservation houses and apartment buildings, just at the moment that the nation was realigning to low fuel use, the flood hits, 1982 all over again, the world is awash in oil (at least for a while). All those who had invested in the alternative energy stocks, wiped out. All those who had invested in expensive deep ocean drilling, and arctic exploration, wiped out.

And for the aging boomers, the 1980's all over again. As old men and women, they will want comfortable cars, big comfy apartments designed for easy mobility for the aging and disabled, and they would HAVE IT!

That is one of the things that has always astounded me about the consensus of opinion at TOD, and I have never been able to understand it: The absolute faith based belief that we could not be in a logistically created false alarm.
This does not mean that peak isn't coming, and I mean real geological peak. But if we cry at the top of our lungs that this is IT, the IT, and that there is NO POSSIBILITY of another glut period, possibly a 20 year plus one, and it does happen, then "Peak Oil" awareness will have the credibility of flying saucer awareness.

Completey basing the need to conserve and move to alternatives on the assured destruction of geological peak is very dangerous.

But, that seems to be the way folks here want to play it. Only time will tell if it is a gamble they win, but please everyone, think about the difference, the huge difference between the two types of peak....Westexas describes geological peak, the REAL Hubbert style peak, when he talks about Texas and the lower 48 in 1970. Logistical Peak is what we saw worldwide in 1978 to 1982, a massive collapse in production, followed by a massive rise in price, followed just as surely by a massive rise in production, and then a total collapse in price, and the return of big car, SUV, huge home luxury living. That is "above ground" peak....a deadly mirage.

Roger Conner Jr.
Remember, we are only one cubic mile from freedom

Hi Roger,
re: "...there is NO POSSIBILITY of another glut period, possibly a 20 year plus one, and it does happen, then..."

I'm just looking at this again.

It seems like there must be a way to narrow this down a bit - ?

1) Did Robert R have a "maximum" date for estimate of "peak"? (Given some assumptions of production rates, so that dates serve as well as amounts.)
2) And we have the other "+-" estimates - yes? Plus the new info (above) all in one place (confess I skimmed it or I'd restate.)

Which is all to say...don't we have a fairly well-evidenced argument here at TOD (all in all)(plus ASPO) for a date range? Yes? No?

In other words, a possible new high...It seems to me the answer is yes, if we leave out Steve's info. above or wait for Robert's response to it.

"A glut, even a 20 year one"?

What would have to be the case for this to happen? Could you approach it that way? In other words, let's see...major new finds? HL doesn't work? The Skrebowski approach doesn't work? (Am I making sense?)

Yes buzz words that sound vaguely professional, some ‘insider language’ that ppl can latch onto and adopt. Creating a false division, an extra topic that ppl can argue about. It is obfuscation. And certainly quite deliberate if only semi-thought out.

Chevron has quite an ad spread going in glossy news weeklies.
The quote below is from a 2 page spread(no link):

" So if energy independence is an unrealistic goal, how does everyone get the fuel they need, especially in a world of rising demand, supply disruptions, natural disasters, and unstable regimes?"

All "aboveground factors"-no mention of geology.

Same ad implies "the few energy producing nations that won the geological lottery" are KSA, Russia, Norway, UAE, and Nigeria in that order.

No mention that North America has burnt up its lottery share.

Hi ace
interesting graph but maybe I cant see it all - is there an indication of what the green and violet lines represent?

Re: the hurricanes - yes I have seen other reports saying that hurricane season will be an actie one, particularly if an el nina develops (it was an el nin event which apparently kyboshed last years sesaon). Unfortunately my faith in these longer term predictions is not great as I think this time last year there were predictions of an above average season, yet it was damp squib.

On an unrelated note, the Far Eastern markets are down again, The Nikkei by 2% plus, looks like the debt bubble/carry trade plunge will continue this week.....

Nikkei down...yep...that's why I moved my ass(ets) out of all risky investments this weekend. Gonna ride the storm out as safely as possible.

Well...this is getting interesting in a "bring me a puke bag" sort of way. Leanan, que up some related headlines for tomorrow morning:

Taiwan stock market plunges over Chen's call for independence


Taipei - The Taiwan stock market plunged more than 2 per cent on Monday over President Chen Shui-bian's call for Taiwan's independence on Sunday.

Shortly after the Taiwan stock market opened at 9 a.m., the weighted index TAIEX fell nearly 100 points. At 11 a.m., the TAIEX plunged 141 points, or 2.16 per cent, to 7,488.37 points.

Shares of China-related industries, such as tourism, aviation and shipping, dropped sharply.

On Sunday evening, President Chen announced a new 'four yes, one no' policy saying Taiwan must seek independence, must change its name, must have a new constitution and must seek development. Chen added that the 'one no' referred to there being no problem of left or right in Taiwan, but there would only be a problem if Taiwan should reunite with China or go independent.

China sees Taiwan as its breakaway province and has warned that it will use force to recover Taiwan if the island seeks independence.

I know this tit for tat goes on all the time between Taiwan and China, but now is not the time to escalate things guys!!!

Hi andyh,

You can try widening your browser window or saving the graph as a picture and reopening the picture. The green and violet lines are the oil prices in SDR and USD. These prices are forecast using short and long run demand elasticities using the demand supply gap as one of the inputs.

About $US1-3trillion in carry trade volume.

Japan real money supply growth rate (M2+CD) only about 2%/year according to The Conference Board release "Japan Leading Economic Indicators".

Strong reversal of the carry trade could cause the yen to appreciate and Japan money supply to contract. The threat of deflation could cause the Bank of Japan to drop interest rates. The financial turbulence could be great.

Japanese statistics released March 2 shows Jan 2007 inflation at 0.0 percent. Deflation next?

Thanks ace, I have it now.

If the Japs dropped rates back down again wouldnt that give a second wind to the carry trade?

Nikkei now down 500 points plus

andyh, if the Bank of Japan drop interest rates this might give a second wind - I think it depends upon the attractiveness of the investments.

An example of the yen carry trade is here

and the carry trade is usually currency unhedged

If BoJ interest rates fall back to 0% then an investor can borrow Yen at 0%(assume no margin for simplicity), and exchange for $US, UK pound or Euro. Next government treasuries can be purchased which might yield 5%. However, if interest rates also start to fall in US, UK or Euro Zone, then the Yen could appreciate faster than any of these three currencies.

When the investor buys the Yen back, the excess interest rate return of 5% might be offset by a 5% appreciation in the Yen giving a 0% return.

It is believed that the Yen is currently undervalued and the Yen carry trade which involves selling the Yen puts extra downward pressure on the Yen. There is a huge risk that when the Yen appreciates the Yen carry trade could reverse causing the Yen to become overvalued.

A possible catalyst for a Yen carry trade reversal is continued market volatility which started early last week.

From Monday's New York Times:

Oil Innovations Pump New Life Into Old Wells

BAKERSFIELD, Calif. — The Kern River oil field, discovered in 1899, was revived when Chevron engineers here started injecting high-pressured steam to pump out more oil. The field, whose production had slumped to 10,000 barrels a day in the 1960s, now has a daily output of 85,000 barrels.
There is still a minority view, held largely by a small band of retired petroleum geologists and some members of Congress, that oil production has peaked, but the theory has been fading.

Also in the International Herald Tribune.

Yeah, I was so relieved to read that peak oil is fading. Whew! And to find out that the KSA has a trillion barrels under the sand? Yippee! Now I can get that massive SUV after all! Probably they'll try that trick with the millions of gallons of high-pressure steam in the North Sea too. Mmmm. Where did you say they get all that steam again? Nevermind. Party hardy!

Talk about disinformation. This is outright lying. They are trying to make sure the sheep don't get out the gate before they've been fleeced. It's downright unethical.

Are Jad Mouawad and his editors at the New York Times lazy?
Perhaps, they are simply a few cards shy of a full deck.

They appear to confused by the difference between funds (oil in the ground) and flows (oil production rate).

The article finishes with this line: "“That’s why peak oil is a moving target,” Mr. Hatlen said. “Oil is always a function of price and technology.”"

Mouawad cites the Kern River field in California and a project in Indonesia to provide evidence of the power of technology.

It took me five minutes to establish that the Kern River field saw its production peak in 1985, about 20 years after steam injection was introduced. Production peaked in 1985 at 141,000 b/d. It has since declined by 40%, or just under 2% per year. California's production peaked in 1983. It dropped by 23% from 1996 to 2005. Isn't technology wonderful?

In another five minutes, I discovered that Indonesian oil production peaked in 1977 and is now down over 37%, and continues to fall, despite all the tricks of the oil companies.

All the real issues around peak oil are missed in the article. It is a piece that might have been lobbied onto the pages of the New York Times during dinner at the club. It certainly is the type of propaganda that oil corporations seeking to keep government away from the economic (quasi) rent would approve.

This, editor-approved, Jad Mouawad article should be framed and hung in a gallery alongside artifacts of the period of Soviet Realism and Nazi Heroic Realism.

I especially like the bit about hundreds of billions of barrels of oil yet to come from Saudi Arabia. It's kinda like the big tits on the heroic blonde Russian worker: something to go to sleep with.



A friend just emailed me that article and I banged off a quick reply:


Steam injection into a depleted oil field is considered a method of last resort and usually limited to the heavier grades of petroleum. It is extremely energy intensive. It has been used for years in the Athabascan oil sands projects and has issues with the large energy inputs. Natural gas is usually used to heat the water which is also required in huge volumes. The runoff is highly toxic and the production flows of petroleum (or synthetic crude in Alberta) are modest.

Gas and water injection have been used for several decades now. Nitrogen and carbon dioxide are both used. All three methods have been used world-wide. United States production went into decline in 1970 and in spite of these pressurization methods, has continued to decline. Even with these methods, recovery from a field rarely exceeds 35% of the original oil in place.

The prediction that "more oil can be found that ever before" is pure rubbish. Since 1980 and for every year thereafter the world has used more oil than it has found. The last giant field was found in the Gulf of Mexico (Cantarell) back in, I believe, 1974. This field is presently declining at about 40% a year... and that's in spite of massive nitrogen injection projects. Presently the only areas that may hold significant new sources of oil are either the North or South Pole and various deep water projects (so far none of which have resulted in much success). That the petro geologists have literally moved to the extremes of the earth are a sure indicator that the cupboard is bare.

And then there's Daniel Yergin of Cambridge Energy Research Associates... I think that I'll let Yergin speak for himself (May 2005):

Daniel Yergin, chairman of Cambridge Energy Research Associates, believes oil prices will fall sharply in the next two years, settling in at a $30 price floor.

In a May 27 interview with CNBC, Yergin said current high prices should lead to an increase in global oil production, which in turn will cool the market, Dow Jones Newswires reported, noting that Saudi Arabia alone has said it will boost its oil production by 1.5 million barrels a day by the end of the decade.

“I think two years from now, we’ll look more with $30 as a floor than what we’re looking at today,” he said in the interview.

And it is now two years later.

Would you believe that orginizations actually pay many thousands of dollars for CERA's state of the art energy forcasting? Strange but true.

And then there's CERA's guesstimate that we have about 3700 billion barrels (Gb) of oil left. CERA counts oil sands, tar sands, oil shale, Hugo's extra-gooey tar in the Venezuelan Orinoco region, and probably the sludge in your crankcase.

Yeah, the stuff is there but can you really generate the kind of production flows that keep us from killing each other to fill up our pickup trucks?

And another good read is the Energy Information Administration's energy outlook publications. A year or so ago I downloaded the 2000 outlook and noted that they predicted rising production from the UK, even though the British government themselves had fessed up that they were post peak. They have been overly optimistic... or should I just say "wrong" for the US, Norway, Mexico, Canada, Saudi Arabia, Kuwait, Iraq, Iran... do we have a pattern here?

BTW, the Government Accountability Office is supposed to release a report that counters the EIA and CERA crap... if the powers that be will allow it out.

As a lay person, I hope that I wasn't too far off the mark in my response to his message. If I am, just shoot me.


Asian Markets continue to Plunge on Monday.


Hello TODers,

"Pemex's figures have been particularly murky lately," said Jaime Brito, an analyst with PFC Energy in Washington, D.C.

I'm bushed---time for shuteye.

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