DrumBeat: March 14, 2007

Crude Addiction - an interview with Samsam Bakhtiari [PDF]

If you believe a number of growing voices on the subject, our industrialised, oil based global economy teeters precariously on the verge of a spectacular crisis. If you believe the peak oil theorists, 2006 marks the year of peak oil, the global peak of crude oil production.

For the peak oil set, the theory is simple. For six generations, the world has gorged on a ready supply of cheap oil. This fundamental commodity has proven to be in abundant supply – augmented in times of high demand by the seemingly endless supply of sweet light crude pumped effortlessly from the mega oil fields like the Saudi Arabian Ghawar field. Those days are gone, the theory contests. A new era with a different set of rules means there will be nothing like business as usual.

Such views belong to a small but growing league of global oil experts like the Tehran based Dr Ali Morteza Samsam Bakhtiari.

World population may reach 9.2 billion by 2050

The world’s population will likely reach 9.2 billion in 2050, with virtually all new growth occurring in the developing world, a U.N. report said Tuesday.

According to the U.N. Population Division’s 2006 estimate, the world’s population will likely increase by 2.5 billion people over the next 43 years from the current 6.7 billion — a rise equivalent to the number of people in the world in 1950.

Forecast: Partly Cloudy

What happens when the world population hits 7 billion? How about 8 billion? Or 9 billion, as the United Nations is predicting? Hospitals without life-support machines. Grocery stores without refrigerators. Shopping malls, office towers, and neon gone dark. Printers and fax machines that don't hum. Trains that don't run, phones that don't ring, computers that don't blip or announce new e-mail. . . . because there is no e-mail; there is no Internet. The global grid is down. And where it's still up and running, it's pockmarked with dead zones that have made the whole network slow to a crawl. Even the electronic stock tickers on Wall Street have flickered out.

Is OPEC Set To Pump Again?

OPEC's campaign to boost oil prices by constraining supply has worked. As oil ministers meet this week, signs are mounting that the group will soon have to begin pumping more crude.

Foreign Energy Firms Pay Bolivia $30M 'Under Protest'

Brazil's state-owned Petrobras, Spain's Repsol YPF and French oil major Total paid Bolivia some $30 million in accord with La Paz's so-called nationalization of its natural gas reserves, but the companies said they were forking over the money "under protest."

Shell Eyes Developing Iraqi Gas Fields - Iraqi Official

Royal Dutch Shell PLC (RDSA) has expressed its willingness to the Iraqi government to invest in Iraq's gas fields and to set up a pipeline that would connect these gas fields to Europe via Turkey, a senior Iraqi oil official said Tuesday.

Chevron reviews possible expansions at refineries

Chevron Corp. said Tuesday that it was considering expansions at several refineries, including two in California, but was abandoning plans to build a natural gas import facility off the coast of Baja California.

The nation's second-largest oil company also said it expected to spend $19.6 billion on infrastructure and development projects this year, with three-quarters of the money going toward oil and natural gas exploration and production in places such as the Gulf of Mexico, northwest Australia and the deep waters off West Africa.

The end of garbage

Can you imagine a world of zero waste? Cities and towns across the world - and a surprising number of companies - have adopted that goal.

'Green fuel' from seaweed could help solve energy crisis

The new technology unveiled by the firm at an international conference on marine biotechnology that opened on Sunday in Eilat, allows the industrial cultivation of seaweed through the use of carbon dioxide emissions from power plants.

Capitalism Put on Trial, Buffett Eats: New Nonfiction

Deep Economy: The Wealth of Communities and the Durable Future by Bill McKibben (Times, $25). In a vein similar to Barber's, McKibben offers a clear-eyed reassessment of the meaning of growth, arguing that it's no longer making the world wealthier but instead is "generating inequality and insecurity" and "bumping against physical limits, like climate change and peak oil, so profound that continuing to expand may be impossible or even dangerous."

OPEC likely to keep output levels steady

OPEC is unlikely to change output levels when oil ministers of the 12-nation organization meet Thursday, senior Kuwaiti and Libyan oil officials suggested Wednesday — comments that reflect producer satisfaction with present prices.

Constructive engagement with NY Times?

Overall, the thrust of the article is much of what we have come to expect from a lot of the mainstream media: don't worry, we have plenty of oil left, and we will use technology to recover a great deal of what has heretofore been regarded as unrecoverable, especially now that high oil prices make enhanced recovery more attractive. The phrase or paraphrase "running out of oil" is used in a couple of different places, one a quote from Yergin at CERA. This tends to perpetuate the seemingly purposeful and continuing obfuscation of the critical significance of getting just half way to running out - the Peak Oil phenomenon.

Selective reporting does not disprove peak oil

It is simply amazing how often journalists and editors can dutifully report the facts as told to them by their sources without bothering to try and understand the larger picture. Specific data, cited as “proof” for a particular theory could in fact be evidence for the complete opposite conclusion if the entire data set was examined.

Peak oil: What the media don’t want you to know

For each isolated example they provide for a production increase in an old field, it’s easy to list multiple examples of fields that have had more dramatic decreases in production. As an example, the Prudhoe Bay field has declined ~1,250,000 b/d in less than half the time it took the Kern River field to increase ~75,000 b/d. While it took the Duri field ~20 years for production to increase ~135,000 b/d, production from the Cantarell complex (Mexico) is likely to decline ~1,700,000 b/d in an 11 year period (2004-2015).

If the examples provided in the NYTimes article are so dramatic, one has to ask the following questions: Why has California’s oil production declined ~500,000 b/d since 1985 in spite of the Kern River field exhibiting its dramatic increase? Why has Indonesia’s oil production declined ~600,000 b/d since the early 1980s if Duri is such a miracle? Why has Texas’ oil production declined ~2,500,000 b/d since 1972 even as the estimated ultimate recovery for the Means field doubled?

Britain aims for CO2-limit target dates

The British government proposed bold new environmental legislation Tuesday that would set legally binding, long-term limits on carbon emissions — a move it hopes will prompt the United States, China and India to follow suit.

Survey: Climate change seen as threat

A survey on climate change conducted in more than a dozen countries found that a majority of people in nations including South Korea, Australia, Iran and Mexico — but not the United States — view global warming as a critical threat.

Hydrogen Is Already Having An Impact On The Automotive Market

Despite commercial deployment being at least two decades away, hydrogen powered vehicles are already having an impact on today’s automobile market. This is one of the conclusions of a report published this week by Cambridge, UK based analysts CarbonFree. The report highlights examples of automobile manufacturers and energy companies experimenting with hydrogen powered automobiles to add a shade of green to their existing brands. However, CarbonFree warns it would be difficult for incumbent players to commercialise these next generation vehicles without cannibalising revenue from existing products.

Idaho’s Bounty: Linking regional farmers and buyers

Spurred by concerns about "peak oil," dissatisfaction with industrialized farming methods, and a growing demand for local produce, about 40 organic farmers and ranchers, entrepreneurs and community leaders met in Hagerman in late February to establish the "Idaho's Bounty" food cooperative. The co-op organizers plan to link regional growers and food producers from the Magic Valley and Hagerman with Internet-based food shoppers in the Wood River Valley.

Oil and Gas Industry Prefers Personal HPC Capacity, Says Microsoft

But the most interesting part of the day, perhaps, was a report that Microsoft commissioned by Gelb Consulting Group that indicated that companies in the oil and gas industry believed that their ability to discover oil and gas reserves and thereby help their companies increase production was being hampered by limitations on access to high performance computing resources.

UPI Energy Watch: Putin calls for setting up state-controlled shipping firm, Gazprom, Egypt to strengthen gas cooperation, Iran mulls India's request to boost gas supplies

Nausea - Kunstler

I went around some neighboring towns here in upstate New York to look at the real estate yesterday. I was impressed by how uniformly crummy everything was... In the old houses priced above $300-K, the rotting sills and delaminating surfaces are plain to see. Of course, the buildings are worth something, but my guess is less than a third of the asking price by any realistic valuation. But at least these things were made of materials generally found in nature. The new houses were all glue and vinyl, and of course they were mostly built in places dissociated from any town itself, meaning the hapless owners will have to own multiple cars to live there and make multiple trips per day — not a good prospect for the years ahead.

On the NYT article and the responses:

Part of the genius of Craig Bond Hatfield's articles in the 90s (duly ignored by the media and TPTB) is his emphasis on "oil production rate." One of his titles alone is brilliant: How Long Can Oil Supply Grow?

Not that it ever made a difference in how people listen...

With the stock market tanking today... the BBC has this today.

"European stocks have joined a global sell-off, after concerns about the US economy and mortgage industry hurt markets in Asia and dented Wall Street."

Isn't that exactly what we were talking about on this blog yesterday.

It's likely not the truth, but sometimes I swear this blog is haunted by very powerful people who are starting to take cues from the overiding sentiment.

Perhaps it's more a case of this blog reflect wider sentiment about the economy and such, and that is now creeping into investors in the equity markets.

Like someone said here yesterday, it definitely appears as though the equity markets are signaling a major downturn in the economy. We'll see if that causes some demand destruction, because if it doesn't and SA doesn't respond, then it could be a very tough 2008.

More from the mortage front: "The Fading American Dream"

Scary math: More homes, fewer buyers

...Financing is drying up for those with less-than-perfect credit and that spells fewer home buyers.

And foreclosed properties will add supply to a housing market that already has too much.

"It's going to be a really big deal," says Dean Baker, co-director of the Center for Economic and Policy Research.

"[National] inventory is 20 percent higher than last year, vacancy rates have soared and prices are down about 3 percent," he says. "Now, with the tightening of credit, I don't see how prices don't fall another 5, 6 or 7 percent."

Record foreclosures in fourth quarter

A record high number of homeowners faced a serious threat of foreclosure during the fourth quarter of 2006, according to a survey released Tuesday by the Mortgage Bankers Association.

Aaachooo! Markets are catching subprime flu.


Lets see you are the Fed what are you going to do?
1) Drop rates to stimulated more debt? (Is this even an option at this point).
2) Increase rates because the Chinese are looking for a higher return on thier money than they are getting from US treasuries?
3) Print more $, get helicopter Ben into his flight jacket.


If there is a recession/depression, demand will plummet, which should counteract the inflation we've been seeing. The feds will then be able to drop interest rates and try to juice the system.

At least that's what I'm hoping. I'd love to be able to refinance down to a 15 year mortgage at 4.5%.

We'll see if the feds have a surprise rate cut this meeting.


Not this meeting, but the next maybe...if these proceeds with speed, then yes this year, but the FED is hung up on inflation at least in their comments.

Inflation won't be counteracted because by lowering rates, they make money cheaper which causes inflation. Econ 101 - Rates go down, MS goes up. Money supply increases by definition are inflationary.


Creating new money makes money cheaper, and they do it by creating debt via fractional reserve banking and by printing new money. Everything else is a side effect of that.

The feds don't give a damn about inflation....they just want you to think they do. They are fearful of foreigners bailing out of US debt instruments --- which is essentially everything: US Bonds and Treasuries and the US Dollar. What they haven't been telling you is that foreigners have already been bailing from our bonds in record numbers and many countries have announced diversification out of the US$.

The worst of the inflation will hit food/energy/medical. I expect deflation to hit everywhere else. The fed has created this financial pickle and they won't be able to fix it. I expect they will continue to create massive amounts of new money to try and stimulate the economy while holding interest rates higher for longer than anyone expects to try and keep the foreigners invested in the bubble.

Because of peak oil, I expect this will be the last boom/bust cycle that the fed creates in the US for a very long time. And guess what, the boom part is now over.

And the Tresury Dept. has just accused North Korea of counterfeiting U.S. Currency identical to the real thing.
A Cover for our own flooding the market?

You mean the Super Bill? Those have been talked about for at least a decade now. Nothing new really.


This bit is fairly new:

On January 7, 2007, the Sunday edition of the German Frankfurter Allgemeine Zeitung (FAZ) challenged the official American statement and the accusations on North Korea. Their research suggested that the real source of the superdollars is a secret printing facility close to Washington D.C. and owned by the CIA. According to the FAZ, the forged dollars are used to finance international secret CIA operations by evading Congress control. The accusations are allegedly backed by anonymous U.S. government sources. Presently, there has not been an official response by the U.S. government to these accusations.

According to the FAZ, the forged dollars are used to finance international secret CIA operations...

Like these, maybe?

The source is interesting - the FAZ is roughly (very roughly) the German version of the Wall Street Journal, and is proably the most pro-American major media outlet (not that many Americans are likely to understand that - the FAZ doesn't feel the need to hide reality to spare the feelings of torturers and kidnappers, for example). It is also the hometown newspaper, so to speak, of the European Central Bank and the Bundesbank.

With such stories, you never know where the hall of mirrors leads - as the FAZ, like any major newspaper, is one player in never-ending games.

But still, if there was a German newspaper you would expect to dismiss such a story if printed in any other German source, it is the FAZ, which makes the sourcing alone notable.

Thanks for the perspective. I had been inclined to dismiss this since I didn't have a clue about the reliability of the source. I'll be interested to see where this leads. If the story has legs, you would expect others to pick it up.

I guess they started feeling bad about all those drugs making it into the country so they started printing money instead....oh wait...they still are. Must be making some nice coin. I take it this is used to pay warlords and such, but where do the bills show up when they are detected? I mean these are those notes that make it past all but the best scanners, right?


Go back to econ classes because fractional reserve banking does not make money cheaper it increases the velocity of the money and how many times it spent. Money is a commodity and it has a price just like everything else and that price is called a discount rate or interest rate.

I agree fractionally reserve banking is egregious, however let's get the facts right.


Yes, it increases the velocity of money. But it also increases the money supply. Increasing the money supply decreases the value of the money in circulation, hence the devaluation of the dollar. That's what I meant by making money cheaper. I just used the wrong term --- it should have been dollar devaluation.

"If there is a recession/depression, demand will plummet, which should counteract the inflation
we've been seeing."

There's no fundamental law that says we can't have both depression and inflation, although as someone down the threat notes, inflation won't be uniform. Wages and salaries won't inflate nearly as much, for example.

And another one...

As rates soar, 2.2 million Americans risk losing homes this year

In the heady days of the US real estate boom, it seemed like a safe bet to use her house as collateral for a loan. Today, Sharon Edwardsen risks losing her Staten Island, New York home, trapped by spiraling payments.

Edwardsen, a 47-year-old assistant optician, was tempted to take out a special high-risk loan targeted at people with low credit ratings. Today her monthly repayments have soared to 2,800 dollars, yet she only takes home 1,600 dollars.

..."I'm panicking every day. I'm not sleeping because I'm worrying. This house has been in my family forever and I don't want to lose it. But I can't make the payments they are asking me for," she told AFP.

Yes, she should have known better, but the mortgage brokers bear some responsibility, too.

During the boom years, when the repayments got too high, home owners could even refinance their loans borrowing against the increased value of their house.

That's exactly what Edwardsen did, remortgaging her home three times between 2002 and 2006.

Each time she got into difficulties, her mortgage broker would offer a new deal. From an original loan of 103,000 dollars, she now owes the credit company some 285,000 dollars even though her monthly income has remained the same.

"They took advantage of the fact that I was so desperate that I needed it. I told her (the broker) I had trouble with it. So she said in three months 'we're going to do this again. We're going refinance you again and the money you take out, you going to use it for your mortgage payments,'" Edwardsen said.

"It's likely not the truth, but sometimes I swear this blog is haunted by very powerful people who are starting to take cues from the overiding sentiment."

I would say that this blog is frequented by a lot of really smart people who haven't drunk the kool-aid. Most of the problems happening have been there, plain as day, for years. The amazing thing is that so few people see them or think they'll be affected. The US *will* inflate its way out of its debt problems, there *will* be recession (maybe at the same time), oil prices *will* rise until demand is reduced, demand *will* be reduced, the US way of life *will* be renegotiated.

The only questions are how bad the problems will be, how soon, and whether people will go quietly. It looks like we'll get some important clues this year. Frankly, I think the recent stock market dips, the current state of oil inventories, and the malaise in the housing markets are all preliminary answers, with the one caveat that everyone forgets - the way inflation is calculated, increasing rents mean higher inflation. Since many people losing their houses will become renters, housing market collapse is not as deflationary as many people think. The 70s started with the housing market tanking, moved to a recession with inflation, then had even higher inflation. Welcome back.

Not that I want to get to deep into this. But the US is a huge debtor nation now with no savings this was not true in the 1970. A inflationary monetary policy under the current conditions could easily trigger hyper-inflation.
We have already been in a very inflationary time with low interest rates and loose lending. Japan's attempts at hyperinflation to counteract their own deflation is one of the reasons we are here today. Throwing more fuel on the fire so to speak will just make us crash harder. The global economy needs to deflate and become more efficient and most of all balanced.

We need to take the red pill and get it over with.

But we won't.

That's why the fed quit reporting M3 last year. A few intrepid analysts have been calculating M3 using all of the tools the fed used. They calc that the fed has been creating new money at a rate of around 10% per year -- approximately the same as it has been since 2001. But the past few months has not only seen that rate increase, but the rate of increase is also increasing. They have no intention of halting the money parade.

The clincher is that not only will they continue, they will do so exponentially. That's the only way to keep the wheels from coming off.

And then after a while the engine will blow up. But you still have the wheels.

But those wheels will be wobbly when there isn't enough fuel to propel them....

They'll be utterly useless without an engine.

But rather than admit the engine failed, they will find a scapegoat. And rather than accept cold, hard facts, the public will accept the emotional release provided by persecuting said scapegoat.

Ghawar Is Dying
The greatest shortcoming of the human race is our inability to understand the exponential function. - Dr. Albert Bartlett

The scapegoat will likely be China, since that is who they've been trying to blame for a while,,,

Here is a site which recalculates the US M3


The M3 rate of change has dropped from just above 12%/year in Jan 2007 to about 11.5% in the first week of Mar 2007. As the M3 rate drops, the Fed will cut interest rates probably before June 2007.

and another site which keeps track of the bad home mortgage lenders - total today is 38


And John Williams of Shadow Government Stats calculates M3 is going the other way....up.

Thanks for that info!

Here is the John Williams' link:


John Williams is showing a small drop in his M3 rate in 2007 so far. You're right that M3 rate has been going up from early 2006 to late 2006.

I also agree with his alternate CPI which measures the GDP annual growth rate as negative which means that the USA has been in a recession since 2005.

The US Gov't measures CPI in its own way to reduce benefit payments and give the illusion that the US economy is not in a recession.

Helicopter money drop is starting....


U.S. lawmakers will have to consider providing aid to about 2.2 million subprime mortgage borrowers who are at risk of defaulting and losing their homes, Senate Banking Committee Chairman Christopher Dodd said today.

"The impact of losing 2.2 million homes I suspect will be in a lot of areas of our cities and towns that are already pretty hard hit, so we clearly want to look at that and legislate," Dodd, a Democrat from Connecticut, told reporters in Washington after a speech to the National League of Cities.

So If you were a f#ckin idiot and bought a McMansion and some Bimmers, WE THE TAX PAYING PEOPLE will take care of you. Does this not REAK of socialism?

Disinflation will be the name of the game. Peak oil is going to be a harbinger in this volatile market. Why dont we elect people who can use common sense? My bad we don't elect people, we are witnessing the reincarnated political machine. It never left, it merely starting hiding better.


So Tate,

All I have to do is default on my mortgage and the government will pay it off? What happens if I continue to pay my mortgage off?

The people who didn't have the brains to know they couldn't afford their mortgage payments are getting bailed out while I'm dishing out my hard-earned money to Countrywide! WTF?!

Tom A-B

I can't believe it. I really can't. And how are you going to distinguish one sad story from the rest? This is nonsense. If you're politician supports bailing people out from our money, please get rid of them! Find anyone who has some common sense. I though these guys have economists in their pockets. I know any economists worth a damn will tell you bailing out banks only serves to increase the problems...we just got out of this mess not 15 yrs ago!!!!!!!!

STOP BAILING THEM OUT AND LET THEM FAIL....BETTER MANAGED BANKS will step up. And you know what....I dont give a damn about anyone who got into the mess. People need to start taking some G'damn responsibility in this world and stop finding someone else to blame.

True story- During highschool my daughter got on a rant at the dinner table.
"I've decided what I want to do...."
"Oh really what is that?"
"I want to be a stupid person!"
"NO SERIOUSLY stupid people don't have to get good grades or do thier homework...because they are stupid and that is what stupid people do. Stupid people are let off the hook all the time. Like DUH! They are stupid what do you expect from them - nothing! because they are stupid.
"However, if you are smart and the teacher knows it, then you don't get any slack and you better get your homework done because they know you can do it."
"So I want to be a stupid person too...because its easier"

Just WTF do you say to that ?...?....?(She is right you know) I'm sure I turned a shade of purple while my meter pegged.

She is in college now - studing to be a math major - should have went into finance to loan money...
sounds like it's much easier....:(

Del: IMHO, intellectual prowess means very little in the 2007 financial economy (with the exception of investing ones own capital without inside info). Salesmanship and cunning is all she needs (probably that's what she meant by stupid).

I think she was frustrated because we held them to a higher standard, we consider B's to be low grades. School came first. Everything else is second- sports, phone calls, etc.
I think her frustration was that kids didn't try and were not expected to, while still graduating. This seemed unfair to her at the time. She felt that the other kids could do better...

Salesmanship and cunning are very important I agree. Looks help too!

This serves as more confirmation on what has happened to public schools since they have homegenized learning and reduced gifted programs. I was fortunate enough to be in I guess one of the last groups of people in those clases. I stuck with them until middle school because I didnt want to be ostercized anymore.

Way better results....then I was in the tops of regular classes and that made me popular. I moved and it all vanished. Looking back on it, at least I had the early formation because now I could give a rat's ass what anyone really thinks when it comes to judging etc and I still kick ass at school.


It's a good story, D;
She sounds smart, actually. Just noticing an ancient, American disconnect. We have some huge issues in this country conflicting people about 'being smart', knowing you're smart, doing the smart or the 'right' thing. You're not only expected to 'keep it up' by those parents and teachers who identify you as a smart kid, but you're also targeted in any number of ways by your peers, who carry on this culture-wide low self-esteem about their own intelligence, and so anyone who dares to hold theirs up and be smart is in some ways, not all, ostracized by it. You're a brain, you're full of yourself, you're a ween, Geek, Teachers Pet, you're showing off, you're trying to make the rest of us look bad, you're insulting 'your people' by going yuppie, forgetting how to 'be real'.. It can be really insidious, and can be masked with a sort of backhanded set of compliments.

There was a PSA some years ago talking about schools, with tight shots of a little kid running down a hurdling course, his jumps tying in with the narration about our kids doing well at school. Then the camera gives you a wide enough shot to show that this, I guess 8 year-old is being asked to hop over hurdles that are about 6 inches high.

American. Stubbornly Ignorant, and Proud! Like a Rock!

"You're not only expected to 'keep it up' by those parents and teachers who identify you as a smart kid.."

.. Of course this is as it should be. I just was appreciating that both this pressure, plus the great suction 'from below', are there pressing the kid to not try and 'be all that'..


I would congratulate her on her excellent insight into how the real world works. However, when the proverbial SHTF, it's best to know something that you can leverage into positive cash flow.


I often use a deliberately overly simplistic characterization of our children's future: one must choose between two social groups: the productive, educated members of society or the group I term "human shields" (i.e., the enlisted boots in the Army & Marines periodically sacrified to maintain our security and lifestyle). I also see a 3rd group -- manual laborers -- but that group appears to be filled by low-wage earning illegal immigrants in most parts of the country and is not much of an option for "draftable" citizens.

Glad to hear your daughter is working toward a future among the educated. One can pursue many different career paths with a solid math background -- preferably something more stable than being in the boom-bust and occassionaly slimy mortgage lending industry.

NOTE: I am related to several members of the US military (sargeants & colonels in the Army & the Marine Corp and my dad was a flight instructor in the old Army Air Corp) and I do not mean anything negative by using the term "human shield". However, I find that this term provides a more accurate "word picture" of our possible future and the price that many may pay at the orders of our political leaders to maintain or secure our lifestyle.

- Sonic

This was entirely predictable. Wall St. Journal Reports devoted an episode to the effect of high fuel prices on investing, I think it was way back in 2005. There was one guy on their panel who was a peak oil believer. He didn't come right out and say it, but he expected gas prices to rise and keep rising, due to scarcity.

He advised people to invest in urban real estate, warning that suburban real estate would tank. He also said to expect the government to pour aid on those hapless suburban McMansion owners, because they're middle class, they vote, and there's a lot of them. He predicted a federal mortgage bailout. But he also said it wouldn't be enough.

Can we officially declare this country inside the Twilight Zone?


And yet...how is it different from FEMA's national flood insurance program, that pays people to rebuild their homes in harm's way?

Hurricane Fran destroyed neighborhoods on the Outer Banks that were not supposed to be rebuilt at taxpayers' expense. But the devastation was so great, they made an exception, and paid anyway. Which caused real estate prices to boom. So now there are a bunch of 2 million dollar mansions where there used to be 1 million dollar ones...

I was typing a post to disagree with you slightly and I couldn't. I can't defend that decision either. I think it's retarded as hell especially when we've got climatologist saying the shores will be a bit farther inland in a few decades. I mean c'mon! I get the regional imporant and all, but MOVE the city somewhere. I had thought they should adopt the Holland model and create large scale dam features but we would screw it up.

I mean there is a story that the pumps were installed without working simply to meet a mandate by Bush that they be installed prior to last years Hurricane season and now they are being pulled out and reserviced. WTF? It's all just another chink in the armor of the US. Too bad too.


I think this is a sign of societal breakdown, sort of a cultural entropy. At some point the energy available for productive activities decreases (due to depletion or disspation) to the point where drastic simplification of society is likely to occur. That's the theme of The Upside of Down authored by Thomas Homer-Dixon, Director of the Trudeau Centre for the Study of Peace and Conflict at the University of Toronto. A current book and well worth a read.

Stoneleigh did a great review here.

It's interesting how FEMA seems to work for some people and not for other classes of people. In this bank case, I wonder if it's the homeowners that are going to be bailed out or the bank owners. [A quick check of Dodd's campaign contributor list will answer that.] My guess is that if the homeowners were failing and the banks were not, this would not be proposed; the bank owners would merely take over the properties because that's "how the invisible hand works" to weed out inefficiency and failure. Sucks to be homeless, but don't take your personal failure personally, that sort of thing.

It will take a longish post to connect the dots to Exley's article at In These Times Preaching Revolution - maybe tonight. [ The interim step is the failure of the liberal agenda - rising tide lifts all boats kind of thing. That doesn't work where population is beyond bounds and natural resources are limited. ]

We're going to keep throwing good money after bad - bailing out this subsidized class or that, homeowners, bank owners, road builders, the suckered troops ($2.5T says Stiglitz). There is not enough money there. Like the Roman empire, we have to conquer to feed ourselves, we have to take it from others to support ourselves. But in a highly interpendent and hierarchical economy - one chainsaw can take down the grid - toast.

A little physical change and then a cultural change and we're toast. What makes a good investment? Stock? Gold? Guns? That Nigeria article from Vail was very scary; it suggests how a whole society might move across threshold conditions almost overnight.

cfm in Gray, ME

So based on that and the fact that we generally agree it's going to really suck here, are you also crazy to stay? I mean think about it. The smart educated people or those with two bits worth of common sense are going to pay dearly for our neighboors f#ck up. To maximize your own self interest then why on god's earth does anyone stay? To bail out all your friends? Have you thought that through? How much would/does that drain you?

I'm too young to stay here and see what happens. I plan to get some experience at a decent american company and transfer out. Tom Friedman scared the crap into me and I've realize the tremors that are taking place now are only the earliest changes. The American machine is stumbling and the rest of the world sees it. No one is that impressed by America anymore. Perception is always more imporant than reality and that's true whenever dealing with people. People are not rational, they are selfish and mostly a bunch of idiots looking for instant gratification.

The growth that's left isn't going to be in America, it's going to be outside this country. Be prepared to be worldly mobile to make it. I keep reminding people that the US is NOT China's largest importer, the EU is the largest Chinese goods importer. They took that title last year, quietly.



Other countries have their problems too. We're headed for a global Kondratieff Winter.


Live cheap. Save money (diversify to protect yourself). And wait for the desperation to set in. Assets will be available for 20 or 30% of what they cost now.

If inflation really runs rampant a 30 year fixed mortgage holder might make out ok, as long as he can keep making the payments in the short term.


You will pay dearly for all of your neighbors fu____ups no matter where you go unless you are willing to give up your US citizenship. They've covered that base already...

Can you please explain? I'm not familiar with the way in which they've (the government) covered that base.

Tom A-B

Simple. You are still responsible for paying US Federal taxes on you income no matter where you live. There are a few tricks to get out of some of it by investing in businesses in other countries and such, but generally speaking you still have to pay your US federal taxes. The only way to get out of it is to give up your US citizenship.

The fact that you still owe taxes no matter where you go is what I meant by still being responsible for your neighbors. If they, meaning the US government, tax the citizens to pay for bail outs then you will pay for it even if you go live in a foreign land. And almost every country on the planet has agreements in place to cooperate with US taxing authorities. There are a few exceptions, but not a lot.

And if you give up your citizenship but have more than $50,000 in assets (IIRC), the IRS will deem this to be for tax reasons and you'll have to pay taxes for the next ten years...

Yep, like I said, they've covered that base. The revenuers intend to get you no matter what. And to think we fought England not just over "freedom," but freedom from taxation too. Didn't last long before the new bunch took up where the old bunch left off.

Speaking of which, I've read some articles on expats living in Europe and they having been rescinding their citizenship in record numbers. I dont know how to verify that, but basically people are making decisions based on simple money. IMPO, I think it's almost stupid to indentify who you are by a flag. I wouldn't hesitate to give up a legalese term to make my life easier.


We were in a financial twilight zone back in the 1980s with the S&L scandal. Bill Seidman was in charge of the bailout and convinced Congress to compensate depositors for 100% of their losses not just for the $100,000 insured limit. That gift to the richest Americans accounted for about half of what were record deficits at that time. That one of the President's sons was responsible for the failure of one of the largest S&Ls was conveniently ignored by regulators and Congress. Will things be different this time around. S&Ls failed because of criminal activity so widespread that the statute of limitations ran out before prosecutors good even indict most of them.
The current mortgage default problem does not at this time appear to involve any violations of law. If a mortgage is FHA or VA insured then the taxpayers are legally exposed to the risks involved along with the lenders. Original lenders bundle 100s of mortgages together and sell them to investors. We will know a mortgage crisis is upon us when Wall St stops buying those bundles.


Where have you been? They have stopped. There have been like 36 lenders go bust and if you dig into the details it's down to basic margin calls. MS, GS and other Prime banks are forcing buybacks and Lenders don't have BILLIONS sitting in their bank accounts. Do you really think this isn't big, like S&L only on steroids? Or did I misread what you're trying to say?

I dont want to take the time to point out how this is the tip of the iceberg if you already knew that and all. What MSM and other folkds forget is the 340TR in derivates and a lot is tied to homes. CDO's the credit behind the MBS's is nearly gone....


March 13 (Bloomberg) -- Bond investors rattled by mounting losses in subprime U.S. mortgages say trouble is brewing in collateralized debt obligations, the same securities that fueled the boom in leveraged buyouts and cut-rate finance.

Sales of CDOs, which package loans, bonds and derivatives into new securities, rose by almost half to $918 billion last year, according to data compiled by JPMorgan Chase & Co. Demand for investments to use in CDOs has helped push risk premiums lower for everything from home loans to high-yield, high-risk bonds, forcing managers to borrow ever more money to maintain returns and stand out from the competition.

``There will ultimately be a shakeout,'' said Oliver Wriedt, a partner at New York-based GoldenTree Asset Management LP, which oversees about $8 billion and manages CDOs and was founded in 2000. ``Many'' new managers ``lack the pedigree, or at a minimum the track record. Many have not managed'' in a downturn, he said.

Managers of CDOs backed by speculative-grade loans are borrowing as much as 13 times the amount they raise in equity from investors, up from nine to 10 times as recently as late 2005, according to Wriedt. Forty-one percent of the 142 CDOs backed by corporate loans and rated by Moody's Investors Service last year were set up by first-time issuers.

You read that right, $918BILLION last year and only in CDO's!!! Last years 06 refi's are so much worse quality than even 2005. Gee wonder why...those in 2006 were ARMS from 2 yrs starting this game. They quickly sank and the ship will sink. Fannie Mae will be toast on paper when this works out.


So If you were a f#ckin idiot and bought a McMansion and some Bimmers, WE THE TAX PAYING PEOPLE will take care of you. Does this not REAK of socialism?

You will see the same in the ethanol business shortly. Capacity is being way overbuilt, and with corn prices high, margins will be squeezed on both ends. The corn farmers will continue to do well, but the ethanol producer is going to struggle. They will lobby for more mandates, and if they don't get them they will start going under. The government will come to the rescue with an S&L type bailout.

On a different topic, I was asked about my prediction for today's inventory report. I posted my prediction at the bottom of yesterday's Drumbeat. I won't run through all the logic again, but based on the fact that we are in refinery turnaround season, I predict:

Gas - down
Distillates - down
Crude oil - up

Summary of Weekly Petroleum Data for the Week Ending March 9, 2007

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 1.1 million barrels compared to the previous week. At 325.3 million barrels, U.S. crude oil inventories are above the upper end of the average range for this time of year. Total motor gasoline inventories dropped by 2.5 million barrels last week, and are in the upper half of the average range. Distillate fuel inventories declined by 2.8 million barrels, and are also in the upper half of the average range for this time of year. Most of the decline was in high-sulfur distillate fuel (heating oil) inventories, while diesel fuel inventories (the sum of ultra-low-sulfur and low-sulfur) also declined, but by a much smaller amount. Propane/propylene inventories fell by 1.0 million barrels last week. Total commercial petroleum inventories decreased by 2.6 million barrels last week, and are in the upper end of the average range for this time of year.

Nice. Three for three. The world again makes sense.

Yet all the comments in here would make you think that the stock market was down today, wouldn't it?

The DOW bounced hard repeatedly against the 12,000 barrier, wstephens. That the DOW managed a last minute upward bounce is not necessarily a sign of anything yet. We've got a solid week of downward movements here with clear danger of cracking 12,000 on the downslope. What's the next checkpoint? 11,750? 11,900? Or is it lower?

And the subprime mess is not going to go away. It's about to get uglier as investors start to see just which companies are leveraged up their backsides into this mess. They will all be trying to bail on whatever they think is bad stock in search of safe investments.

We're not done with this little episode by a longshot, not when subprime lending dollar values amounted to over $600 billion last year alone. And no one has any clear idea yet how badly those mortgage "securities" (ha! a laughable term here) are leveraged against other financial instruments, such as the Yen carry trade, although I think some of the banks that are caught up in these derivatives are starting to wake up and smell the coffee.

Ghawar Is Dying
The greatest shortcoming of the human race is our inability to understand the exponential function. - Dr. Albert Bartlett

Who doesn't know about this? Practically nobody, so it should already be largely "in" the market. Here's some stuff that I've read:

* "Recent research suggests that as many as 20% of these mortgages sold in 2005/2006 are going to default. The CDOs assume less than 1% will default. Who bought these CDOs? -- sources say primarliy Asian and European institutions" (Mauldin) -- Yankees 1, Shmucks 0
* At least 28 sub-prime lenders have already gone bankrupt --6 of the top 25. (lenderimplode.com) -- yesterday's news
* Bear Stearns's stake in non-investment-grade retained mortgage securities represents about 13% of the firm's "tangible" equity (CreditSights). For Lehman, it's 11%. Goldman, Morgan Stanley, and Merrill ... their exposure is in "the low to mid teens," CreditSights said. --knock them down 20%, big deal
* At the height of the bubble the top 50 stocks of the SP500 traded at a 170% premium to the next 450 stocks. At the beginning of 2006 the top 50 stocks were trading at a 5% discount to the next 450 stocks. (Chris Davis) -- I wouldn't worry about the DOW

Its interesting you mention this since my take on corn ethanol was that if production costs were kept on the farm using small fermentation systems and local heat sources say bio-gas or brush chopped into pellets the EROI is much better. In this case as you note centralization puts the squeeze on the distiller.

The basis for this claim is simple this is how the moonshiners operated at a profit growing corn on marginal land.

Yes the capitol costs are higher but the yield from a small distillation rig coupled with the ready use of renewable heat sources from organic waste on the farm compensates well for this.

I'd suspect the mash could simply be run through a bacterial biogas system to generate the methane for distillation.
The final output would then be used as fertilizer for the fields. The key is to retain the inorganic trace minerals.

I'm not sure about the whole system but the addition of chickens to the mix adds plenty of fixed nitrogen from their wastes. So done correctly you can come up with a closed system that uses corn you just have to conserve and reintroduce the resources that corn removes from the field.

Sugar cane is better in some sense but if you have a basically closed system the EROI seems pretty good regardless of the crops/animals needed to close the loop so your just extracting reduced carbon.

You do have to consider that the consumption and the Price per Gallon of Moonshine swing in opposite directions next to those of Fuel Ethanol, affecting the big question, scalability.

"Behind the hill
There's a busy little still
Where your pappy's workin' in the moonlight

Your lovin' pa
Isn't quite within the law
So he's hidin' there behind the hill

Bye bye, baby
Stop your yawnin'
Don't cry, baby
Day will be dawnin'

And when it does
From the mountain where he was
He'll be comin' with a jug of moonshine

So count your sheep
Mama's singin' you to sleep
With a moonshine lullaby

Dream of pappy
Very happy
With his jug of mountain rye

So count your sheep
Mama's singin' you to sleep
With a moonshine lullaby

Irving Berlin - From Annie Get Your Gun

Good points Memmel.

The production path you highlight is already being put to use by many producers such as Panda, E3 and others.

Robert asserts that corn farmers will continue to fare well but that etoh producers won't, however, the interesting segue of this scenario resides in the fact that <50% of all corn ethanol plants are owned/operated by farmers and farmer co-ops.

Large agro-industrials i.e. Cargil OTOH, face a rise in feedstock prices for both etoh and meat production without the $ offsets that farmers will enjoy from higher corn and land values, not to mention higher etoh values once Peak Decline sets in.

Keep in mind that the strength of any NA biofuel strategy must be based on decentralized production.

50% of all corn ethanol plants are owned/operated by farmers and farmer co-ops.

I would bet that most farmers with interest in these plants are leveraged and that they need a good return to service that debt. Do you have any data on plant capacity WRT ownership? I would guess that the large volume plants are owned by conglomerates.

It should be an interesting crop season.

One can check the RFA website for a complete breakdown: http://www.ethanolrfa.org/

Come on guys, don't disappoint me like this. Read between the lines, don't focus on the the way the media phrases it.

The government isn't going to bail out the borrowers, but the lenders. Yet, if they would say it that way, that would not be politically profitable, no-one wants to give money away to banks. It's actually quite smart to turn it around and say you're giving it to your voters. Politics at its best, double whammy. They will give money away to banks AND benefit politically.

Goldman Sachs yesterday announced record figures, and shares still tanked 2%. Others, Lehman Bros and Bear Stearns were specifically mentioned, lost as much as 5%. These guys all had lines of credit with New Century, to a total tune of $17.4 billion. They all owned shares in it, too, which sank some 95%. They're nervous. And Washington is not going to let them suffocate or die, no more than Ford or GM.

There may be senators clueless enough to think that if they give a few billion away to the worst hit area, subprime, they can save the day. But looking over Alt-A numbers these days very rapidly points out that the mess has already spread much farther and deeper.

It's not the New Century's of the world anymore that cause the deepest worries, they've been taken off life-support. No, it's their financiers.

The biggest problem of all will be that the Fed has to print the cash for the bail out operation. The total "value' of US residential real estate is over $20 trillion. If it would fall back into established trendlines, prior to 2002, that "value" could go down by $10 trillion or more. You need BIG printing presses for that kind of deal.

And that's just housing. they have to keep GM and Ford alive too. And, as Robert just said, soon the ethanol industry. And and and.

To put it another way: A bailout doesn't really do anything for those with no assets. If you have nothing to lose, you don't lose much in foreclosure. The finance industry, on the other hand, has a lot to lose.

This week has been a little scary.

In an interesting side note, Bloomberg reports on GM's profits, but most of the article is about mortgage losses and credit-default swaps

GM Nets $950 Million, Misses Estimates on Mortgages

General Motors Corp. reported a $950 million fourth-quarter profit, its second quarterly profit in two years, on increased auto sales and reduced labor costs.

Subprime loan losses at the GMAC finance unit caused operating earnings to miss analysts' estimates.
GMAC said yesterday that its home mortgage unit lost $651 million in the fourth quarter.

``The residential mortgage market has been a tough area over the last three, four, six months for GMAC,'' Wagoner said in an interview. `
The perceived risk of owning GM's bonds rose today, according to credit-default swap traders, as concerns about losses from the subprime mortgages pushed bond risk higher across the market.

Credit-default swaps based on $10 million of GM's bonds jumped $40,000 to $455,000, according to London-based CMA Datavision. The contracts, used to speculate on the company's ability to repay its debt, have risen more than $78,000 in the past two days, CMA prices show

GM is a sick joke...and a perfect parody of the US.

They have so many debts that the annual INTEREST is over $20 BILLION -- more than they make in profit each year. So on an interest basis alone they are bankrupt.

The truth is, they have debts of over $300 BILLION. They are so far beyond bankrupt it is amazing, but you won't hear the mainstream press talk about GM's debt. It is just astounding.

Where goes GM, there also goes the US economy.

You never hear the media talk much about corporate debt at all, though the corporate bond market is leviathan. That might be because all the corporate media is in debt up to their eyes. Ever since the Reagan revolution its basically been free money if your big enough, history shows at some point that stops - place your bets - but I bet a financial reckoning will do wonders for stretching the oil supply.

Trust me the first thing I thought of was the fact that the money makes it to the top. If you've read any of my posts in the past...I always follow the money. However my ultimate point was still based on people and their inability to make good choices. Could we take this a step further and talk about the quality of the gene pool? I mean WTF? We've got more idiots than we have cognizant while recognizing WTF is up! Maybe I'll go into behavioral finance....

All your points add to my post above to TOM, there will be LOTS of inflation but it's a few more years away I think. We've got to suffer through some deflation first...remember disinflationary. Not talked about a lot but it's not inflation or deflation and its not stagflation. All these 'flations is enough to work your nerves.


Yes this is corporate welfare. Governments work for their friends not the people.

The US cannot afford a bail out this time, unless everyone figures this is game over and are just going to crash the currency, crash the economy take what they can grab and run.


Given how much debt the US government has, inflating one's way out no doubt has a significant attraction for solving the both the government's problem and the problem with defaulting homeowners. If the government does not directly guarantee homeowners' loans, I expect it will provide a guarantee in some other way -- propping up the lenders, for example. The result will likely be inflation.

The devils in the details I suppose. I knew we would get inflated out of this and I still feel that way. However the method to accomplish it has startled me.



I think it will end up more like the goverment will take over the loan and define it as a 30 year fixed at 5% or something.

But it more likely be a bailout of the lenders. Nothing done to the big guys who made the dough. Nothing to be done about the appraisal industry...

You know where it's going.

Read this new one by Jim Willie.
(he also goes into some of the ShadowStatistics.com stuff.)

I think Greenspan and the rest of the banksters should be given the rewards they deserve.


Here's a good read by Caroline Baker.

A Return to Serfdom?

Early this morning, on electronic trading, Brent was trading $2.90 above WTI Cushing. Traditionally Brent trades a dollar or two lower than WTI. In the past, any time Brent has traded above WTI the gap has closed and reversed in a few days. A man could make a mint playing a spread this wide because it will close.

The spread, as I write, has closed to $2.69.

Ron Patterson

That is in April future contracts (expiring within the week), the arb in May futures is only about 90 cents Brent premium, so not so great.

Over recent months the front month contango has been deeper in WTI than in Brent, thusm making "long WTI/short Brent" a "negative roll yield trade" (ie you have to pay over time to hold the trade).

Over the last six months (since Sept 06), WTI front month has spent most of the time at a discount to Brent front month than it has at a premium. I would say Brent front has averaged about 50 cents premium to WTI over that time.

Edit: according to my charting tool, 6 month average has been 17 cents premium to Brent, last year average 8 cents premium to Brent. the last three months, however, have seen WTI at 5 cents premium to Brent.

I really don't think much of this means anything since West Texas Intermediate delivered at Cushing (ie the basis of the NYMEX crude contract) is pretty much an almost non-existant crude delivered at a geographically-constrained chokepoint in the pipeline system. LLS (Louisiance Light Sweet) delivered on the Gulf Coast trades at an approximate $3 per barrel premium to WTI, thus in line with front line Brent values.

Okay, but it jumps a lot more than that week to week. I can only look at spot prices, for Brent, with my tools. But 2/16/2007 WTI spot was at a $2.60 premium to Brent, a week later it was at a $.10 discount and this morning it hit $2.90 discount. That's a $5.50 swing in less than a month. Perhaps you could not have gotton that kind of spread on the futures contract but nevertheless a swing that big must mean something, but I know not what.


Ron Patterson

Brent tends to follow Bonny(Nigeria).A outage of 187m bl/da since Mar4/07 has made Bonny scarce.So,Brent has gone up more than WTI.Natives won't allow RD do repairs.They stole their booms and crane barges!

$3.25 now.

I agree it must mean something, and I think it's this....

WTI stocks in Cushing are constrained by the ownership of the pieplines leading from the Gulf Coast to PADD2. The PADD2 refiners own these pipes and will not let crude flow south, because that would weaken the contango in the futures market that pays them handsomely to store oil.

LLS is trading at greater than $4 premium in the cash markets to WTI. So Brent is actually trading at a discount to "real" crude in the USA.

The contango structure works to American benefit as it attracts physical barrels to be stored in the US, to the detriment of non-contango markets elsewhere. This means commercial stocks will be higher in the US than elsewhere, however it will also give the illusion of plentiful supply.. Thus, in theory, the WTI market will be the last to give the price signal of contracting supply (ie futures backwardation) because of the artificial constraints imposed on its structure by delivery point location

Interesting.Heavy-light spreads are also narrowing.Products leading crude.Crack spreads very profitable!I think this is the end result the refiners want!In any event,things seem to be getting tighter.As you said,WTI spot may be the last to go.

I agree it must mean something, and I think it's this....

WTI stocks in Cushing are constrained by the ownership of the pieplines leading from the Gulf Coast to PADD2. The PADD2 refiners own these pipes and will not let crude flow south, because that would weaken the contango in the futures market that pays them handsomely to store oil.

Buny, that sounds good but it cannot be true. The reason is that, except for the first three days after a contract closes, the spot price of WTI Cushing is adjusted to whatever the NYMEX is trading out.

Yes, I denied it for years but I finally had to admit that this is one case where the tail wags the dog. That is, the futures market drives the spot price rather than vice versa, as it does in virtually all other commodity markets.

So whatever the reason that Brent spot is trading at such a high premium to WTIC, it has nothing to do with pipeline constraints that actually deliver WTIC crude. WTIC is basically just a symbolWTIC "spot" is adjusted up or down to whatever price the NYMEX closes at. Check it out, it always happens except for three trading days a month at the beginning of a new contract.

The traders on the NYMEX look at the weather, they look at inventories, they try to figure out what OPEC is doing and they look at the pipeline in Alaska or anything that they think will affect the supply of oil anywhere in the world.

Hey, you were the one who pointed out that very little WTIC is traded. You are correct, it is basically a "symbol" for oil prices and nothing more. The same can be said for Brent. People look at what the NYMEX is trading at, and/or what Brent is trading at in order to set the world price for oil. What little crude dribbles out of Cushing, Oklahoma is of little significance.

In today's complex global markets, the price of crude oil is set by movements on the three major international petroleum exchanges, all of which have their own Web sites featuring information about oil prices. They are the New York Mercantile Exchange (NYMEX, http://www.nymex.com), the International Petroleum Exchange in London (IPE, http://www.ipe.uk.com) and the Singapore International Monetary Exchange (SIMEX, http://www.simex.com.sg).


Ron, I agree with you on the outright price of crude. What I am talking about is the structure of the WTI market (contango) being strngly influenced by the constrained stocks in Cushing. I think this also impacts on the Brent/WTI "arbitrage". Why else would LLS trade at such a premium to WTI?


You should look at the difference in the Tapis to WTI. I was alerted to it it by a friend of mine. Have mentioned it to Robert. Its weird. This is using weekly EIA numbers.

1997-2005 difference was plus or minus $1

2006 $3.98

Jan 05, 2007 5.71
Jan 12, 2007 4.79
Jan 19, 2007 5.28
Jan 26, 2007 4.69
Feb 02, 2007 3.70
Feb 09, 2007 4.86
Feb 16, 2007 5.13
Feb 23, 2007 3.30
Mar 02, 2007 4.73
Mar 09, 2007 6.29

2007 Average is now 4.85

Tapis is the benchmark crude for Asia.

Obviously oil is still in hot demand in Asia Pacific region.


The increasing Tapis premium is due to the location of physical WTI stocks in Cushing. In theory, you can buy WTI futures and take delivery of physical oil, the problem is that there is no other place to sell it than the local refineries. They also own the pipelines to the bigger market place in the Gulf of Mexico and will not reverse the flow of crude on these pipelines to move product south. This means they have a large stockpile of heavily discounted light sweet crude available to them which is essentially useless to any other buyer.

Thus anyone taking delivery of WTI from the futures market would have to then redeliver it if they could not sell it to a local refiner. Either that or pay to store it in the local tank farms (guess who owns them??). Since the cost of tank capacity rental is so high, the immediate 9and only) solution is to redeliver to the futures market.

This limits the number of physical buyers of this crude and the volume they can take in any given month, thus depressing the value of the front month future contract and causing the contango. Other physical light sweet crudes (LLS, Tapis, etc) are trading at increasing premia to WTI becuase of this (ie WTI is undervalued due to its locational constraints). By the same token, the discount to WTI of heavier and more sour crudes has eroded over the same timeframe you outlined above.

Thanks it is certainly something I had not thought about.

The "Iron Triangle" Launches Preemptive Attack on Peak Oil

IMO, many of the major oil companies, major oil exporters and energy analysts--examples of the foregoing are ExxonMobil, Saudi Arabia and CERA--have been launching renewed attacks on Peak Oil, especially on the quantitative methods, because they know that they are going to have to explain declining oil production versus continued strong to sharply rising oil prices.

Anyone else getting sort of a constant sick feeling in the pit of your stomach? It's one thing to theorize about Peak Oil, Peak Food, Peak Debt, Recession/Depression, but it's quite another thing to actually watch it start to unfold.

If Saudi Arabia is 60% to 73% depleted, and if Russia starts declining this year or next year, I expect net oil exports by the current top 10 net oil exporters to fall by 50% in five years or less. In other words, like Jim Kunstler, I may have been an optimist.


I'm getting that same feeling. When the DOW plunged 550 points last week I whimpered like a little girl (or boy). Reading about the Great Depression is one thing but experiencing it is downright scary.

Like many have said here before -- It feels good to be right about these prognostications, but at the same time it feels really bad.

Tom A-B

For a step back in time, check to see if your local library has Riding the Rails on DVD. It was originally produced for The American Experience and describes what it was like for some 250,000 teenage "hobos" during the height of the Great Depression.

To get another intimate portrait of life during the Depression, I also recommended Jimmy Carter's An Hour Before Daylight on unabridged CD format.

The most striking thing I've found in these types of portrayals of that era is how polite and well-mannered most people were in the early 20th century, even the most destitute. When the TSHTF this time around we will be plagued with much more violence and crime - the most terrifying aspect of collapse, IMHO.

I've read countless anecdotes of people feeding homeless persons from their kitchens during the Great Depression. Of course that was before the advent of "slasher" films and "the 6 o'clock news" -- what I like to think of as the Stephen King/Jeffrey Dahmer collaboration.

Polls tell us that most Americans believe in God (92%) and that most identify themselves as Christians (77%). I see that being put to the test here, shortly.

Bah, this is nothing so far. Wake me when the roller coaster dives below the 8000 mark. ;) Or if you want a real depression era scenario, yell when we drop below 3000. That's what the Great Depression was like when it started. The rest of it played out over the following decade and a half.

Ghawar Is Dying
The greatest shortcoming of the human race is our inability to understand the exponential function. - Dr. Albert Bartlett



You provided a nice segway into my story that serves ONLY to provide ammunition to the iron triangle which I believe is there even if it's not as organized as say, the mafia.


U.S. advertising spending rose a disappointing 4.1 percent last year, hurt by cutbacks by carmakers General Motors Corp. (GM.N: Quote, Profile , Research) and DaimlerChrysler (DCXGn.DE: Quote, Profile , Research) (DCX.N: Quote, Profile , Research), tracking firm TNS Media Intelligence said on Tuesday.

For 2007, a year without big cyclical contributions from elections and the Olympics, TNS Media maintained its forecast for a 2.6 percent rise in spending, though that will largely depend on the plans of automakers.

The downturn in spending by the troubled U.S. auto industry is putting even more pressure on advertising than previously thought, taking a particular toll on expenditures at consumer magazines and local magazines.


WT...I hate to even drag this up, but do you think Robert is playing this role...attacking methodologies? You kinda imply it.

Two arguments against Robert being a member of the Iron Triangle: (1) He does think we will peak plus or minus 2012 and (2) He endorses an energy consumption tax.

And he has already admitted that what happens with spring demand may convince him that we are at/past peak....

And he has already admitted that what happens with spring demand/supply may convince him that we are at/past peak....

Sorry about the double post. My link went down and....

IMHO Robert is trying to stimulate professional debate...
(is he a closet believer? ;-)

IMHO, Robert simply likes facts. As a real scientist, I suspect he holds his conclusions somewhat provisionally - what in my own thinking I call "my current working model" (to distinguish it from "facts that I know to be eternally true :-)". To that end, trying to stimulate professional debate is the only way to go.

I doubt he "believes" much, per se. He seems to really want to see those "t's" crossed and "i's" dotted.

I don't know him at all other than his writings here, but that's what I sense going on...

You're reminding me of an Einstein line I heard in the Nick Roeg movie, INSIGNIFIGANCE. (Which I recommend highly.. the night Marilyn Monroe spends with Einstein, when she's in town filming 7 Year Itch, and he's speaking to HUAC on being a commie. Gary Busey shows up as Mr. Monroe, where did you go, Joe DiMaggio?

.. Oh yeah, the quote - it was something like.. 'I refuse to say I KNOW anything, because then I'll stop THINKing about it'..

I looked up a Quote site, to see if I could find the original.. but see the movie!
Here are some I have to toss in..

"As far as the laws of mathematics refer to reality, they are not certain, and as far as they are certain, they do not refer to reality. "

"I am enough of an artist to draw freely upon my imagination. Imagination is more important than knowledge. Knowledge is limited. Imagination encircles the world. "

"I am not only a pacifist but a militant pacifist. I am willing to fight for peace. Nothing will end war unless the people themselves refuse to go to war. "

"Intellectuals solve problems, geniuses prevent them."

"Most people say that is it is the intellect which makes a great scientist. They are wrong: it is character. "

"The attempt to combine wisdom and power has only rarely been successful and then only for a short while."

"The unleashed power of the atom has changed everything save our modes of thinking and we thus drift toward unparalleled catastrophe. "

alright.. didn't see the one I wanted.. hope this wasn't excessive. Bob

IMHO, Robert simply likes facts. As a real scientist, I suspect he holds his conclusions somewhat provisionally - what in my own thinking I call "my current working model" (to distinguish it from "facts that I know to be eternally true :-)". To that end, trying to stimulate professional debate is the only way to go.

That's my sense as well, in part because that's what I do (to a much less active extent than RR, of course).

It appears that the overwhelming sentiment on TOD is that peak oil is either now or within the next two years; accordingly, it follows that most of the flawed arguments appearing on TOD will reflect that sentiment. Hence, someone who points out flawed arguments in a truly unbiased fashion will nevertheless attack many more peak-is-now arguments than peak-is-later arguments, and so could be - incorrectly - perceived to be biased.

That is, I suspect, some of what motivates attacks on posters like RR - an incorrect attribution of bias. Given the reality of the situation - that such posters typically have repeatedly mentioned (a) peak oil is likely to cause significant disruptions and (b) it is likely to happen soon enough that mitigation efforts are important to start now, such bias attribution becomes merely another flawed argument to point out.

I probably fit in this category to some extent. Since I think peak oil is now. I agree the evidence is not 100% but I also think it futile i.e we can only confirm peak oil with certainty not predict it.

I don't agree that peak oil will cause significant disruptions unless it political. We have enough waste in our societies that we can maintain for some time after peak oil.

Mitigation should have started in the 70's and continue regardless of the price of oil simply because of the political instability in the middle east once we realized the US had peaked.

I am very concerned that later say 10-15 years after peak we will face a EROI crisis maybe sooner as we have to use lower EROI energy sources to replace our infrastructure. Needless to say I don't think we can maintain the infrastructure we have today with any viable oil replacements. And you have to consider we need to invest in new infrastructure thats better suited to a world without oil. So I am concerned about peak EROI.

Finally when peak oil occurs now or in the near future the chances for a political crisis is very very high as nuclear armed entities jockey for the remaining resources so I'm not so much scared of peak oil as I am concerned that we won't make it through without crap happening for political reasons. We have a president right now itching to bomb Iran and if peak has happened the decline has barely started God knows what this idiot will do in 2008.
I lived through enough of the cold war to recognize we are damned lucky to have made it and luckier still that GWB was not president during that time period.

If you check out my blog the point I am hoping to get at (when I get some real time) is that you have to understand how a person reacts and then aggregate that all the way up and see what you get.

Personally, I think RR is a person who wants to know WTF is going on. He can't deny he has a personal interest that oil companies (his in particular) do well, long enough for him to get out or at least benefit in SOME way. He benefits from oil, but I don't think that makes him completely biased. If I remember correctly he is a Petro Engineer or as close to a oil scientist as you are going to get around here. A few questions that would need to be answered to provide a better insight include: Do his bosses know he posts here? He says he checks during work, so the IT guys probably know. But does his boss know?

Personal time and company times are comingling to the point what you say on your own time affects your job. For that reason, I can see a self inflicted (by RR) brake on what he says and doesnt say for fear of his personal benefit. I find nothing wrong with that if in fact that is true.

However in that same vein, he is a part of the iron triangle in a technical fashion. I wouldn consider RR a mouthpiece, but healthy intellectual capital that has an eye on the inside. He knows PO is reality, he's just arguing over the time. Most all this is speculation and my opinion though.


Personally, I think RR is a person who wants to know WTF is going on.

I will respond here, but several others nailed it as well. This exactly what I want. That's why I came here in the first place. I wanted to hear the arguments, filter them through what I personally know and see, and try to make sense of it. I have a family, and they are my highest priority in the world. I want to make sure that the decisions I am making are the best for the family. I don't want my kids to inherit a world where all the worst scenarios that have been discussed here are playing out. That is what drives me to lose sleep doing this.

He can't deny he has a personal interest that oil companies (his in particular) do well, long enough for him to get out or at least benefit in SOME way.

I want to see my particular company do well, but I would like to see the world move away from fossil fuels ASAP. I support policies that encourage that. I would hope my company would see the handwriting on the wall and evolve to supply more sustainable solutions. If not, I have only gotten around 50 job offers in the past year from alternative energy options. So, it isn't like I am married to my current situation. I enjoy what I do, but I would give it up in an instant for a sustainable world.

For that reason, I can see a self inflicted (by RR) brake on what he says and doesnt say for fear of his personal benefit.

It is true, and the TOD staff certainly know this, that there are certain things that I can't/won't discuss. An example is tar sands, which my company is deeply involved in. I have my own personal opinions on this which I have am careful about sharing. There are other situations like that. There is obviously proprietary information that I can't share. But all in all, I think I have a pretty wide berth in which my company leaves me alone and lets me do my thing. I don't represent them in what I do, and I try to always make it clear that my opinions are my own. I take many positions that they would not support.

He can't deny he has a personal interest that oil companies (his in particular) do well, long enough for him to get out or at least benefit in SOME way.

I want to see my particular company do well, but I would like to see the world move away from fossil fuels ASAP. I support policies that encourage that. I would hope my company would see the handwriting on the wall and evolve to supply more sustainable solutions. If not, I have only gotten around 50 job offers in the past year from alternative energy options. So, it isn't like I am married to my current situation. I enjoy what I do, but I would give it up in an instant for a sustainable world.

These don't jive RR. I can't for a second believe these two agree with each other. You say you want to move away from fossil fuels asap. OK, then how do you justify helping a company get more fossil fuels that you want to end in spite of being offered the chance to precipitate change? What I mean, is how can you really say you want to get away from fossil fuels and then be offered the chance to join the green revolution and say no? You would give it up for a sustainable world - So how does joining a company who wants to affect that change and help create a sustainable world not qualify? If it boils down to cash flow, it's a different ball game.


You say you want to move away from fossil fuels asap. OK, then how do you justify helping a company get more fossil fuels that you want to end in spite of being offered the chance to precipitate change?

The situation right now is that we are very dependent upon fossil fuels. If we just stopped producing them, people would die. There would be no fuel. Your grocery store would run out of food. The cars and planes would stop. We have a society that can't go cold turkey on fossil fuels. As oil production declines, we are going to need a lot of smart people working on this problem as we attempt a difficult transition. I would also add that it isn't like my company is not involved in alternative energy efforts. hint, hint

But, read what I wrote that tate objected to: “I enjoy what I do, but I would give it up in an instant for a sustainable world.” If I leave my job for an alternative energy start-up, is that going to give us a sustainable world? If it would, I would do it. But most of those biofuels start-ups won't make it. I would transplant my family go and work for a company with very little stability - and no guarantee that I could have the same impact I have now. And we simply don't know which, if any, pathway is going to lead to success.

But I don’t have to do that in order to influence the changes I would like to see happen. You have no idea how much free (solicited) advice I have provided people involved in transitioning away from fossil fuels (including E3 Biofuels). I have responded to over a thousand e-mails on this topic in the past 12 months. I have spent hundreds of hours doing gratis engineering work for one venture or another. I am going to spend money out of my pocket in the next couple of weeks to go visit a biomass gasification facility, and try to provide some useful input. I have advised politicians on biofuels efforts - and I have seen some of this advice put into place. I have promoted policies that encourage a move away from fossil fuels. In none of the essays that I have ever written here have I ever suggested or implied that the status quo is desirable. But that doesn’t mean that the status quo isn’t buying us time while we work on Plan B.

For the work that I do, I have never asked for a dime in return. I stay up late at night and get up early - to work on these problems for which my reward is the hope of providing a better world for my children. Often, these are problems in which someone else will realize a financial return. But I am not doing this for money. I am doing it because I think it will help usher in the changes that I want to see happen.

I get e-mails every day - someone asking for advice, input, sanity checks, etc. So, I am doing what I can, and making sure my family is provided for at the same time. I believe that in a post-peak world, my current job is very stable and I will have taken care of priority #1 - my family. Personally, I feel like I have struck the right balance. There will always be those who disagree. But next time you wonder why someone would continue to help provide fossil fuels to the world, ask yourself what would happen if we all decided not to.

Great points! I like you even more now! Who do you piss off then?

Who do you piss off then?

Usually people who aren't listening to what I am saying. Those who stop listening at "I work for an oil company...." I have had some ethanol producers send me e-mails that just curse me out. I have had some Khosla sycophants do the same. On the other hand, I have had ethanol producers write and ask "How can I make my plant better?" I talk to those people.

WT...I hate to even drag this up, but do you think Robert is playing this role...attacking methodologies? You kinda imply it.

Nooooooo! I've been sniffed out. Why oh why didn't I think to post anonymously instead of being up front about who I am and what I do? :-)

Haa...to be honest here Robert. I didn't say that I thought this of you, I was just asking WT if that was what he was implying further up.

Congrats on being the Babe Ruth of Weekly EIA figures!

I believe you are a cautious bloke when it comes to the stats and that is fine. It is why I say when you finally post here that you are 100% CONVINCED the world has gone past peak, we can all truly be sh*t-faced, pee in our pants scared.

Haa...to be honest here Robert. I didn't say that I thought this of you, I was just asking WT if that was what he was implying further up.

Which I kind of thought was the case, which was the reason for my smilie. :-)

Funny I said the something similar a while back.

When WT calls peak I put my house in order.

When Robert calls peak I put my life in order.

Well...it's never too early to get either in order...peak or no peak.

This is a nonsensical suggestion. Robert is simply very devoted to rigorous debate. He wants to be absolutely certain about peak before peak is called. I admire this approach but it may be too conservative. Westexas, on the other hand, has good arguments but they are not absolutely conclusive (nor can any argument about peak be conclusive given the poor data quality plus the deliberate hiding of data until well after peak has passed).

It is my personal belief that in order to meet Robert's criteria of being able to fully call peak, we will have to wait for 5-8 years post-peak to be able to make such a call. However, this then enters the speculative domain of whether you believe we can afford to wait 5-8 years post-peak to validate peak before people really get motivated to deal with this issue.

My suspicion is that while Robert's intentions are good, his exact same arguments will be used by the iron triangle to delay response to peak as long as possible. The consequences of this delay will be catastrophic.

Sometimes, like a weatherman facing a tornado or a hurricane, you have to make the best call you can with the data you have or you end up making a disaster even larger. It is my personal belief that Robert's position will ultimately make the catastrophe of peak oil even worse. His excuse that he is urging change now is honest, but it will have no impact because people will not believe it is necessary.

Robert's counter to my position (and that of several others) is that if we cause economic harm to people before peak, they will be less likely to consider the peak oil message when it does arrive (if now is not actually the peak). This is also a valid perspective.

So it would appear to me that as a civilization, we are damned if we do and damned if we don't.

Are you beginning to understand why some of us are "doomers"? ;)

Ghawar Is Dying
The greatest shortcoming of the human race is our inability to understand the exponential function. - Dr. Albert Bartlett

"..it will have no impact because people will not believe it is necessary."

The question, once again, turns out to be "What will get people to prepare, to act?"

Even if the American tradition is not to start with a $100 sprinkler-system design, but a $10,000 all-out bucket-brigade to save what's left.. do you shout Fire! just in case, or find some other way to make the crowded theater safe?

RR is just saying don't 'Cry Wolf' if you're going to have to recant, and then try to cry it out again tomorrow. It might get a bit of a reaction today, almost like it did yesterday, but VERY soon, nobody will listen to you any more.

Hate to say it, but like our recently departed Flamers.. we just wanted to hit the 'ignore' button and be done with them. Let's not play that part.

How do you get your people building Sprinklers? Lots of sprinklers.. cause if a 'Wolf!' or 'Fire!' call really got out there, timed perfectly or early or late, you'd get the Who concert in Cincinatti, right? People crushed at the doors, with exits that were locked or undersized.. We have to be careful what we wish for, and be careful how to play this out, if we're right.. including having some contingency in mind for 'if we're wrong'..

Bob Fiske

GZ...see my reponse to Robert above this post. I was merely asking if WT thought Robert was acting on behalf of the Iron Triangle by attacking HL methods.

Read this and that ought to put your theory thought to rest. From RR's article:

Jeffrey and I agree on many things. We agree that some sort of revenue-neutral fossil fuel tax is needed to reign in our energy usage and encourage alternatives with low fossil-fuel inputs. We agree that transportation electrification should be a priority. We agree that once Peak Oil does occur, there will be an export crisis. We agree that regardless of whether the date of Peak Oil is today, or 5 years from now, we should have already gotten started on a major effort at moving away from fossil fuels.


So, when claims like "the net export crisis is upon us" are made, we need to ask some tough questions. We need to do some peer review. If we don't, and the argument turns out to be wrong, we will lose some credibility as a group. We will have cried wolf. We can't afford to cry wolf, because then we will have more trouble convincing people that the wolf is really coming.

I agree with Robert. And I feel that predicting peak even as we are seeing evidence that it might have already happened is difficult. But once it becomes clear to us we have peaked then we can be confident and get the word out. Any work we do towards showing peak oil will be valuable in supporting the fact we have peaked. This is the argument we can make to the world.

In general we should focus on what criteria and evidence do we need to show the world has peaked since I think no matter what we do until the event is behind us no action will be taken.

But once we know we can show the world has past peak then we should present the evidence as quickly and clearly as possible.

You said it WT. I put off all notions of a vacation this year since I want my solar pv in before the really long lines form. I too feel kind of sick as I was hoping we had a bit more of a buffer before TSHTF.

if Russia starts declining this year or next year

It may be worth noting that Russia's HL graph has shown a nice, steady linear trend (R^2 > 0.9) since the resurgence of its oil industry in 1998, but that that trend has been up.

Hubbert Linearization, at least, does not suggest an imminent peak in Russia. (Of course, the reliability of HL is suspect, to say the least.)

IMO, many of the major oil companies, major oil exporters and energy analysts--examples of the foregoing are ExxonMobil, Saudi Arabia and CERA--have been launching renewed attacks on Peak Oil, especially on the quantitative methods, because they know that they are going to have to explain declining oil production versus continued strong to sharply rising oil prices.

Or perhaps they simply disagree with your view of the current situation.

Reasonable people can often look at the same data and come to different conclusions, and surely you must agree that Saudi Arabia, if not reasonable, at least has access to substantially different data than we do.

The last thing you want to do is give press time to something you want people to believe doesn't exist. Since they are now giving lots of press to debunking peak oil, drawing MSM attention to it, things must have gotten desperate and the cats just about out of the bag. Since we are coming to peak crisis in so many sectors simultaneously, it appears to be end game. The've kept everything propped as long as possible, have grabbed as much as they could, and the collapse of EVERYTHING is imminent. Like an old house totally consumed by termites, a strong wind and it all turns to dust.

WT I stated this somewhat above in another post. I think their is a good chance that 150GB is to high for KSA. My analysis indicates its between 100-150 tending towards the lower number. And Ghawar should crash at the same time that Mexico does.

In addition we are not taking into account the peaking and decline of the minor fields produced since the late 70's-80's deterioration of equipment and infrastructure massive rig shortages etc. Political issues. The closet is slam full of skeletons.

In total my personal analysis leads me to believe we could lose up to 6-8 mbd or more in production over the next two years. Worst case was 10-15 mbpd from political issues and hurricanes. I know two years is a weird way to put it but I I found that using 24 month numbers was better. Your free to figure out why its pretty obvious :)

With this in hand I wondered what to do. If I'm right I can't see that anything constructive could be done so I called my dad who has a paid for house and 20 acres of land in Arkansas and plenty of room to garden and explained peak oil to him and the implications and asked if it got bad if I could move back home he said no problem.

With that said I hope I'm wrong and don't advocate running off into the woods and hiding. People that understand conservation and peak oil will be important soon. But
on the same had I feel its important to consider a prudent plan of action until we know for sure how things will play out.

Since in general this means paying of debts saving and conservation including moving close to work etc. Most people will come out better off if peak oil plays out benignly.
So its a win win if you don't do something stupid like running off in the woods without a way to support yourself or running up monster debt because the world is coming to a end.

A lot of Jews made it safely out of Germany before and during WWII many did not, but if the situation is unstable you have to keep alert and be willing to walk with nothing if thats the right thing to do. For a host of reasons Peak Oil is just one I think during the next ten years its wise to pay attention and be prudent.

I figured now it might be worthwhile to mention this.
Filtering/External factors with reasonable assumptions can easily show that production post peak may drop more than the business as usual HL method indicates.

On the bright side I think this is the worst case scenario Outside of a revolution in KSA and simultaneous Iran war I'm simply not going to consider that one.
Okay I admit it I did. Its like 18-25 mbpd lost directly with another 2-3mpd from depletion hurricanes etc.

So the absolutely worst case is a 28mpd drop in two years.
This is actually still not too bad if you consider that 60mpd was about where we were in the 80's so even with this we could still limp along without TSHTF.

IMO we will hold the plateau for at least this year, maybe next. If you assume ghawar is going down 18%/y, and the rest at 6%, and that planned projects come on line as scheduled, (maybe optimistic but maybe not), then they will go do 7.5Mb/d end 07 and stay there for at least four years.

I think 18% is optimistic I'm figuring 30% annual decline rate now serious decline started in Ghawar in late 2004 early 2005 at about 18%.

Assuming its started at 5mpd end of 2004.

5*.18 = 0.9 = 4.1mbpd 2005
4.1*.23 = 0.94 = 3.15 2006
3.15*.30 = .94 = 2.21 2007
2.21*.30 = 0.66 = 1.54 2008

And some time in 2008 it should actually stabilize depending on the water handling abilities at about a 90% water cut.
I don't know what this actually will be its low less than 2mpd.

I figure also that the 8% is optimistic its probably close to 10.

I figure they do stabilize but its not at 7.5 more like 5-6 mpbd and then decline at a much lower rate. Once Ghawar is out of the picture or more correctly stabilized at a 90% water cut KSA should plateau for the most part like your saying but I feel lower. It really depends more on water processing. I think we are not as far apart as it looks at first glance.

Someone posted this in Roberts thread I hope they post again but basically infrastructure can be used to determine oil production esp predicted production. So we can see what KSA thinks it will be doing by analyzing the projects they have.

All indication is that they are gearing up to pump a lot of water not oil.

The main reason I'm more pessimistic is KSA has been water driving their fields and using advanced extraction for a long time sooner or later they will pay for this with some unprecedented declines.

Also note that I'm claiming they produced Ghawar at 5mbpd in 2004 not the 4.5 claimed so I'm saying they overproduced the field to make money in 2004 and it backfired by 2005 causing problems. They did not back down until forced sometime in 2005 but I believe they seriously mucked up the field.

Hello m,

Is there any chance you could gather up all your thoughts/posts along these lines and put them in one location (for me to ponder)? (and pass along?) (Maybe add a couple of links.) (And possibly an introductory sentence...?)

If nothing else, perhaps we could add a section to "The Book" called "Summaries and Predictions"..."by particular persons"...?

If you click on my name you will get a listing of all my posts.

It seems to have some technical problems right now. But I think in many cases the context of the other posts is important. I try to weave together posts buy lots of others into a consistent story. I'm glad people are interested in what I write and it seems to make people think about issues.

I guess I should give a bio.

I work for Motorola building the next next generation software for mobile phones.
I'm also a contributor to open source projects
such as DirectFB Gtk WebKit and others before this I did embedded and thin client linux java systems including the graphics stack for a java mobile phone by a defunct company called SavaJe. My expertise is in advanced graphics for embedded systems but I do everything from kernels to compilers. Motorola is my first big company before that I worked for and started a long string of startup companies.
Before that I was a chemist then a biochemist and finally did four years of graduate work in theoretical chemistry
studying non-linear semi-classical chaotic dynamics.
My really warped sense of physics comes I think from thinking way to long about chaos and its lack of existence in quantum. Its one of those embarrassing areas where our physics fails. I got talked into working on this thing called the World Wide Web for a lot of money and left graduate school. One claim to fame is I did the original website for http://www.forrent.com/default.asp in perl.
Dealing with a very high volume website this early was a experience.

Generally in my job I have to guess where the software market will be in five years and convince people to spend millions on my proposals. Being Peak Oil aware I've been looking into on developing rich software for low energy computers that can run of PV or other renewable also networking that could work in these environments.

I have guessed wrong and seen it all fall apart. Once I had to layoff seventy people that sucked. But I think your ten times the person once you overcome failures like I've experienced.

Sometimes failure is funny.
Once I went in to try to raise money for a.com from a casino owner who was worth hundreds of millions. We had basically defaulted on five million from him and were trying to restart a business. He looked at me and my partner and said you two have taken me for more money than anyone else has ever in my life so get the hell out.
Made me confident I'm a pretty good salesman still wish I could have gotten more money :)

The wild ride I've had in high tech is not a lot different from the oil business.

I think playing this long term high stakes game has allowed me to transfer some of the methods or insight into the oil business. I'm starting to get a feel for it I hope.

Hopefully this little bio can give you insight into my posts. Robert and WT have shared a bit about themselves it helps me understand their posts.

In any case figuring out KSA is a lot more fun than watching CSI. I hope they fix the glitches I found out I've been posting for just over a year and I'd like to see my first posts during my newbie days. Others have been working on peak oil for many years.

Mornin' Everybody,

I'm writing a paper in a "sustainable economics" class on the need for a mass evolution to decentralized small scale RE through aggressive feed laws, based mostly on Hermann Scheer (the architect of Germany's feed laws).

Here's the thing: I'm moving in two weeks and won't be able to finish this graduate degree program, and think just about everything the class was based on (though well intentioned) is a crock. Also, I think the paper was due Monday. So, I got nothing to lose and am thinking about going out guns blazing and blasting the UN, the US, the IEA, ethanol, "energy independence", Iraq, portfolio standards, cap & trade, tax credits, and the whole shebang.

Who's with me??? Give me some ammo over here.

T, if I read you correctly, you've surmised that the game's about up and you are contemplating some sort of "Slim Pickens" gesture.

If you are looking for Doomer Porn, the place to go is dieoff.org. and this David Price article is as good a place to start as any.

Not so much. My point is that none of these institutions or policies will ever work and are all based on the paradigm that we NEED conventional fossil fuels. Setting portfolio standards or carbon caps legitmizes the "allowed" percentage of dirty and finite fuels. It also establishes the standard as a psycological maximum for clean energy.
Ultimately, yes, doom and gloom, but not if we base our energy future on decentralizing production with no limits and truly attempted to level the playing field with locked in rates for small scale RE.

IMO - the disconnect for me in economics and I think economics as a whole is the growth issue. I guess it's more to capitalism, but economics is most understood through capitalistic lenses. My point is that Science is the bedrock of knowledge that is testable. Economics is a natural byproduct of people exchaning goods and attempting to gain something. However this whole growth crap HAS to eventually hit against a brick wall since we will run out of resources or at least they will become FAR more scarce. The end point is known for sure under a growth paradigm, the time is not. This is BASIC LOGIC - THE GREEKS better understood that than those in power today.


Im a finance/econ freak...what help do you want?


Don't burn all your bridges. Grad schools are mostly lax on letting you complete on some schedule that's possible.
If you really think TSHTF starting today and your degree makes no diff, blaze away.

I think I'm with Old Hippie here, for slightly different reasons.

I don't think you should pull your punches, but I would have to ask whether you'll be doing your best thinking if you're approaching it as a feeding frenzy. Most of those targets you mentioned are pretty broad, and at best deserve to be parsed into the 'Useful' and 'Not so useful' segments. The UN gets used for so much target practise already, when it, as much as any of our democratic governments, is simply a collection of its members. The collection gets the beating, and the member states act like it's not their problem to fix.

I would like to see you post some of this to us, actually. Mainly the kinds of policy directions that might let the US emulate what Germany is doing with housebuilding PV minimums, and PV payback rate guarantees. Since a lot of action seems to be starting or trying to start at the State level here, would some form of this model function at a state level, if Congress/Prez isn't ready to try it out?

With demand for PV and Wind so high, would you want to think about economic policies to attract the development/ownership of new solar PV, Polysilicon or wind manufacturing to open in the US, since Germany likes buying up many of the ones we've already started (Evergreen, in Mass for one)..

Good Luck!

Bob Fiske

After many hours of my own analysis, I thought I was close to showing the benefit of Khebab's HL criteria of making predictions only when production has fallen below 5% of cumulative: P<0.05Q (with thanks to Khebab and Westexas for their replies to my emails). I thought this would help answer Robert's question of how we would know when the HL is stable enough for us to believe the result. Because Saudi was below the criteria, I thought we could have confidence in their URR estimate. Many charts and spreadsheets later, I found out I was wrong. Here's what I found..

Looking at the Texas production profile that Khebab posted (from Laherrere), we can see that production was effectively flat-out before 1958 and after 1972. In between was the period of rationing where production was intentionally reduced.

If you look at the HL plot (below), you can see that the data points for the few years before 1958 (Q=20Gb) and all those after 1972 lie pretty close to the best linearization estimate. From 1958-1960, when production is being willingly reduced, the points on the HL plot fall below the red line. Once production started increasing again from 1963, the points head back up and even slightly over the red line (as Westexas has observed), before eventually settling on the right trend.

(click for larger size)

Westexas yesterday suggested that the period 1958-1965 points to the correct URR of around 60Gb. I now think this particular point is coincidence (but still appreciate Westexas' arguments). Looking closely in Laherreres chart at 1960-1963, we can see that production was perfectly flat in those three years. The effect on the HL plot is a line pointing down to a URR of around 45Gb, 25% below current estimate. If the arbitrarily determined production in the next two years had remained flat, that line would have been reinforced. Instead, production was raised slightly and the average of the points for the five years happens to point to the correct URR. If the bureaucracy in charge of rationing had decided that production over the period should have been slightly increased year-on-year for five years, then the URR estimate from the same dots would have been much higher.

The critical observation is that when you start withholding production, your data points will fall below the linearization estimate (they will temporarily point to a low URR). When you ramp up again the points will head back up, and for a short while they will point to a very high URR. At some point during that transition between the two, a few bits of data must point to the right URR, but you won't know which ones until many years later.

The same observation is true for the period 1991-1999 on the Saudi Arabia plot. They maintained a remarkably flat production level for that decade. The result is a nice smooth decline in the first eight blue points on the HL plot (since the same production value is being divided by an increasing cumulative). But it is completely arbitrary. Over that period, if external factors had been different, Saudi Arabia clearly had the potential to increase production (or it could have gone up and down like other periods). A steady increase of just a couple of percent each year over that period would have resulted in a similarly smooth linear region pointing to a much higher URR.

Depending on the line you choose, it is already possible from the current Saudi HL plot to estimate a URR anywhere from 150Gb to over 200Gb. I now believe that the noticeable smoothness of the line in the 90's is arbitrary and does not specifically constitute strong evidence for the URR being at the low end of that range. Just three or four years of maximum possible production will give us a better estimate than nine years of 'managed' production. The real URR could be quite a bit higher, or lower.

Given that they have already produced 120Gb, any reasonable URR estimate says that Saudi's ability to expand production is already fairly heavily constrained. I don't believe the HL plot tells us much more than that. Texas acted as a swing producer for less than fifteen years, and was getting close to maximum possible production when they started 'swinging'. That left us plenty of good data to linearize. Saudi has been a swing producer for close to thirty years, leaving us less useful data. We may have to wait more than a decade before we can predict the Saudi URR to within 10%.


The only real difference of opinion I have is your fit of the 1958 to 1966 Texas data (inclusive). I think that a best fit of these data points does give us a Qt of around 60 Gb.

What we are really trying to do is to extract the signal from the noise. I think that the 1958 to 1966 data set is the pre-peak signal.

As I noted yesterday, if we apply this model, i.e. discount the "dogleg," to Saudi Arabia, it puts the estimated URR in the vicinity of 150 Gb.

thanks for the reply.

I was intentionally fitting a line just to 1960-1963 data, when production was maintained at the same level. My point being that if production had been held at the same level for a few more years, the clear fit to a longer period would have been to substantially less than 60Gb.

The fact that the best fit for the period 1958-1966 happens to point to the right URR is coincidence. It is the result of arbitrary decisions about what level of production was allowed each year. If the bureacrats had decided that production needed to be reduced five years in a row, it would have pointed to a very low and incorrect URR.

So my theory/observation is that data from a period of strong swing production does not reflect the underlying URR. Prior to 1958 and after 1972 was not rationed, so it reflects the real URR. In between could have gone anywhere. It just happened to have a few nice years parallel to the true linearization.

Similarly, I understand your reasoning for discounting the 'dogleg' in the Saudi chart and held a similar view until now. Having looked at the relationship between production changes and how they appear on the HL chart, I now believe we have to discount not just the 'dogleg' but also the nice linear region in the nineties, leaving us nothing to work with.

Through the nineties, Saudi Arabia could have easily steadily increased production, rather than choosing to keep it flat. The resulting HL plot would be just as smooth but would point to a much higher URR than it currently does. (Equally they could have reduced production pointing to an even lower URR).

EDIT - In terms of signal to noise, I think the smooth linear region in the nineties is a false signal.

I think it's a fascinating, if somewhat morbid discussion. :-)


way past bedtime in Melbourne, so I'll be off till much later..


Texas production, except for the Second World War, and two Arab/Israeli Wars, was constrained below 100% of allowable from about 1935 to 1972.

So, I have a problem with ignoring what a strong linear pattern is showing us, based on assumptions about how sharply production was curtailed.

As I have outlined before, I think the question we should be asking is: What portion of the pre-1973 Texas data set fits the Probable URR?

Contrary to Robert's recent post, I think that Texas actually strongly supports the HL method. And in turn that suggests that it is "Later than we think."

BTW, I should point out that Halfin specifically noted the 150 Gb Qt estimate on Robert's post, before I did.


Prior to 1972 the RRC rules were, if memory serves, that an operator got a "Discovery Allowable," where he could produce a well at 100% of allowable for 18 months. After that, he was limited to producing 8 days out of the month, or 8/30ths of 100% of allowable. The specific numbers may have changed, but this was pretty much how production was handled throughout the Sixties (except for the 1967 War).

In regard to the linear pattern, note that the post-50% of Qt cumulative production for both the Lower 48 and Russia has basically been 100% of what the HL models predicted, using only data through the 50% marks to generate the models--and Saudi Arabia, Mexico and the world are showing declining crude oil production, as predicted by people using the HL method, while the North Sea continues to precisely fit the HL model.

In summary, insofar as I know, I'm not aware of any major producing regions that don't fit within the predicted HL parameters.

Texas production, except for the Second World War, and two Arab/Israeli Wars, was constrained below 100% of allowable from about 1935 to 1972.

So, I have a problem with ignoring what a strong linear pattern is showing us, based on assumptions about how sharply production was curtailed.

As I have outlined before, I think the question we should be asking is: What portion of the pre-1973 Texas data set fits the Probable URR?

This is utter nonsense. In any period where production was voluntarily reduced from full levels, it cannot be assumed to follow the Hubbert model. It doesn't matter how linear it is, or if its intercept seems to point where you would like. But as long as you are fishing for data, it only takes two points to define a straight line, right?

This is utter nonsense. In any period where production was voluntarily reduced from full levels, it cannot be assumed to follow the Hubbert model.

I guess that explains Hubbert's failure to predict the Lower 48 decline, inclusive of Texas, and my failure to predict (based on work by Hubbert/Deffeyes/Khebab) the Saudi decline.

Everything is clearer now. Thanks.

Since you've obviously spent too much time staring at the KSA HL plot, perhaps you should clear your head with another look at real data:

Out of all the years of SA production data, you choose to focus on a decade where production was nearly constant. Why? Because it's linear in an HL plot? Here's a little hint: after Q gets big enough, constant production will look like a straight line in an HL analysis. But it sure looks like they were restraining their production to me. So show me in the logistics expression where the variable for "an arbitrary amount of restrained production" is.

There's not a lot of information content in a horizontal line on a graph. But if you want to use it as your personal divining rod, go ahead. You would get tossed out of a scientific meeting with data analysis such as this. Hubbert predicted the US48 peak, but he didn't do it by cherry-picking a few choice data points and drawing a line.

He was objective.

HL requires you to cherry pick the data that fits the model.

Semi-constrained production might result in a slightly lower URR value but understand that at the same time they are using advanced extraction methods that would inflate the URR.
In short its a wash.

For HL to work you need a steady region of production over a number of years preferably unconstrained. No one has demonstrated that for two regions which have the same URR one unconstrained and the other constrained that the URR/Peak changes significantly.

I question this magical effect of constrained production.
Why simple if I had a oil field in Texas and production was curtailed I'd go find another field and get it into production. So at least for Texas all this meant was more fields were brought online sooner than would have happened if they had not tried to be a swing producer.

Looking at KSA you notice that most of the recent work was redevelopment efforts so KSA also brought most of their fields online even though they constrained production.

Its not clear since we have only two swing producers too work with but I don't think that the end result is any measurable delay in peak production with the quality of data we have at best it may delay peak by 5 years and more like 1-2. Next certainly in Texas the fields where overproduced leading to damage on of the main reasons for production controls in the first place. For KSA periods of overproduction leading to field damage may have happen during the time the fields were developed by American companies and later such as during the first Iraq war.

I see nothing wrong with the analysis. Show definitive proof that the vaulted state of being a swing producer means anything.

I'm sorry for being a bit rude but people have been blasting HL and not really supporting their claims. If you can't counter my argument above and prove its completely bogus then the HL analysis stands. To do good HL you have to filter accept that then lets debate the filtering.

I urged Robert to do the HL study he did because I too noticed the instabilities in HL but at the same time I felt it gave good numbers he work made be realize that I was filtering the results and so where the people doing the HL analysis this simply means filtering is a requirement.

Both the North Sea and Russia show dual peaks with regions
suitable for filtered HL analysis. What we need to do is look at these and other regions and apply filters based on other information and do error analysis and see if the results are real.

And finally for texas buried in Robers post is the following.

My response here stating that the damage done too the fields prior to 1935 could have resulted in 2Gb of oil unproduced or lost from field damage makes sense.


With it the HL plot points to a peak in 71 and 7GB of oil produced before 1935. Dropping the early data results in the same basic answer which lends merit to the hypothesis.

If we have good OIP estimates this lost oil could be verified. In my opinion the fact we have been successful in recovering some of the oil with advanced methods used later on and shown increasing URR later points to a significant amount of unproduced oil that became accessible later with technical advances.

HL requires you to cherry pick the data that fits the model.

And why is that? It's because oil production--particularly in the early stages--doesn't follow the model. Ignoring recent data is quite another story.

No one has demonstrated that for two regions which have the same URR one unconstrained and the other constrained that the URR/Peak changes significantly.

First, find me a pair of regions to test. Second, are you arguing that the Saudi (or Russian) peak wasn't shifted forward by the decrease in production in the 80s (or 90s)?

I'm sorry for being a bit rude but people have been blasting HL and not really supporting their claims. If you can't counter my argument above and prove its completely bogus then the HL analysis stands. To do good HL you have to filter accept that then lets debate the filtering.

The analysis stands for who? Are you the HL Sheriff? What is "good HL"?
HL analysis can be useful. I'm just objecting to how it is being done and what is being concluded from it. With KSA, there are to many unique things which render HL much less useful. It's a simple model and mathematical treatment, but it's not magic.

If filtering is a requirement, (and in the case of KSA, a whole lot of very selective filtering), then it is up to the perpetrators to better justify why data is being included or excluded. With all the hand waving, it's time to invest more in wind energy.

I'll answer one of your questions about Russia and KSA getting their peaks shifted. I'm asserting that we will find that the overall production during the time period was the same. For every factor that caused production to be constrained another caused production to increase either leading to over production and damage to the fields or via using advanced extraction methods and producing more oil up front and a steeper peak.

So yes I am saying that it does not matter and does not change the production over the range of years the same number of barrels of oil are produced over the same number of years.

Thats why HL analysis for the data that fits its preconditions works if you can get enough points even if the data is convoluted.

We will know in a few years. Once they are both obviously post peak integrate the curves and the area under them will equal the logistic prediction for the same time period.

I guess the way to say it is the decline begins at the same time regardless of how the oil is produced. So you would have produced the same amount of oil in the same number of years and the decline in production will start at the same time as if you had have a perfect logistic curve.

And I don't have to prove anything we can simply wait maybe less than a year and we will see.

Mexico or the North sea could be offered as proof right now.

Take the area under the complex curves and see if it matches the HL production post peak. At worst HL give to low a decline rate post peak.

Replying to myself.

I have to agree with WT if you have a good HL plot and know URR then the region will face production decline at between 50-60% QT.

And the reason I added this post I'm not convinced we have a good HL for Russia yet.

I'd like to see it revisited and some filter concepts applied.

Your curve shows sa production this century above 10Mb/d. WHere did this data come from?
It also shows net exports growing fast. This is also news... imo they are shrinking.
Perhaps your conclusions would be different if you looked at a curve of actual production, showing declining numbers for both.

That data (from EIA) is all liquids (including Natural Gas Liquids), so is higher that C+C. I just grabbed something to show the overall trends. Here is recent C+C data:

Joules, were they really constrained? I thought they added massive "reserves" so they could pump "thier quota". It looks like phoney restriction a best IMHO.

This is utter nonsense. In any period where production was voluntarily reduced from full levels, it cannot be assumed to follow the Hubbert model. It doesn't matter how linear it is, or if its intercept seems to point where you would like. But as long as you are fishing for data, it only takes two points to define a straight line, right?

Joules, except for 1999, 2001 and 2002, Saudi Arabia has produced flat out since 1991. These three blips are clearly visable on the Saudi HL chart and do not change the general trend at all.

Because Saudi has produced flat out for one and one half decades, it is the perfect cantidate for the HL method.

Ron Patterson

except for 1999, 2001 and 2002, Saudi Arabia has produced flat out since 1991

First of all, how do you know this? And second of all, if that was the case, how do you explain their ability to produce more oil this decade as compared to the 90s--despite the fact that it has 3 years to go? Are they now producing REALLY flat out?

First of all, how do you know this?

Of course I cannot know this for sure. But I do have good sources. And then there is the evidence, loads of evidence. Rig counts have doubled, they are looking deep in the Rub al-Khali and finding a small patch of oil, and they are going to great expense to pipe this tiny bit of oil, (tiny compared to their other fields) back to the pipeline at Ghawar. And there is much more evidence which we have chronicled over the months. Were you not paying attention?
How do you know that the latest cuts were volutnary?

And second of all, if that was the case, how do you explain their ability to produce more oil this decade as compared to the 90s--despite the fact that it has 3 years to go?

Gad! Your math is atrocious! In the decade of the 90s they produced a total of 29.296 billion barrels of oil. During the seven years of this decade they produced 22.151 billion barrels of oil.

Are they now producing REALLY flat out?

Well hell, that’s what the argument is all about isn’t it? I say yes, you say no. I have the evidence stated above, plus all the other evidence that has been produced, on this list, over the last year or so.

But you, and a few others choose to ignore all the obvious signs that Saudi Arabia is getting panicky. They are increasing rigs, they are opening all their old mothballed fields that were mothballed because of troubled and low production. They dramatically increasing water injection. And at at least one ASPO meeting we had an insider say Saudi was trying desperately to keep Ghawar at above 3 mb/d.

The overwhelming evidence keeps mounting, but some people will just close their eyes and put their hands over their ears. They will hear none of it.

Ron Patterson

Ron, I don't believe the recent cuts are voluntary either. I was talking about production in the 90s. I also think their actions are suspicious--paying big bucks from offshore drilling equipment when plenty of oil is to be had on land makes no sense, and Ghawar's days are numbered. I just disagree that HL tells us anything useful here at all (from a scientific standpoint), and certainly not the most recent revisitation by Westexas. Yes, they might have peaked, but there is nothing in the HL that adds anything to what you can surmise just looking at the production data.

Not true its the combination that makes this time different from all others. Without HL I would not be able to call peak oil in KSA now. Thats why many scoff even though they have the same information. KSA has gone up in down in the past. They have given a reason for decreasing production now without HL it would be difficult for me to assume this time its them crying wolf.

Agian HL is a useful tool until someone presents a simple model thats better I see no reason to throw it away.

And I might add simple is important since systematic errors in the other models that have been proposed are difficult to weed out with the data we have. I'm not saying that they are not better models I'm saying we cannot prove they are better thus KISS.

What HL analysis is precise enough (or accurate enough) to tell you that the 2005 peak is any different than the peaks in 1998, 2001, and 2003 (see graph above) each of which was followed by a steeper year-long decline than the most recent one? And remember that we are supposedly not using the data over these years in our HL because...well, I forget now.

Joules, the HL analysis doesn't predict anything until production settles out into a linear and straight line. Earlier HL charts of Saudi predicted absolutely nothing because the data points were too scattered out. Just look at the Saudi HL chart. Isn’t it obvious? Then you just carry the line to zero, and half way back, where half the predicted URR has been consumed, is the peak.

Ron Patterson

I was talking about production in the 90s.

And that was exactly what I was talking about. Saudi produced 29.296 billion barrels of oil during the ten years of the 90s and during the seven years of the double zeros, they produced 22.151 billion barrels of oil. Perhaps you were talking about "barrels per day". Yes, they produced more barrels of oil per day at the peak. That's why they call it "the peak."

But if that was not what you were talking about then I haven't a clue.

Ron Patterson

Good analysis.

I think we all know what's behind door Number 3, which leaves only the qestion:

Will that door be opened before, or after the commercial break?

If you do the extrapolation for texas from 1958 to 1972 you will get something very different. Saudi Arabia produced flat out in 2005 i think Texas began producing flat out in the early seventies.

The low URR estimate is real and important its the URR of easy oil. The total URR includes a massive drilling campaign etc and most of this oil is pumped after peak at a much lower production rate its not important actually for why we use HL.
We only need to see with HL the URR to the point the region is say 10-15% past peak. After that I think other methods are better suited for analyzing a region.

I have not actually made my own analysis known. But according to my take on the matters KSA will only has a URR of between 100-150GB heavily waited to the low end because of Ghawar of oil production at rates close to peak. The Ghawar effect basically causes KSA to be close to crashing. Mexico is indeed a good proxy for KSA they will behave the same way.

Thus my own self consistent filtering of KSA's production scared the piss out of me. The is the curse of the super-giants.

For what its worth.

Shop 'Til You Drop: $63,169 to Dress for Success on Wall Street

By Cotten Timberlake

March 14 (Bloomberg) --

Dressing for success on Wall Street can get expensive.

Consider Christiana Stamoulis, a former investment banker at Goldman Sachs Group Inc., who said in court papers she spent more than $63,169 on designer shoes and clothes in 2002. Her spending, on earnings of $114,819 that year, came to light last week when the U.S. Tax Court disallowed most of the deduction she claimed for donating the clothes to charity.

Sixty-three thousand-plus dollars to make yourself presentable to colleagues and clients?

Barely enough, according to luxury analyst Jim Hurley. While Stamoulis wouldn't discuss her shopping habits, Hurley said it's easy to see how the cost can add up, for men as well as women. To prove it, he led a reporter on a shopping trip to Manhattan's Bergdorf Goodman.

``We're going to economize,'' said Hurley, who does regular weekly luxury-store checks as part of his research at Telsey Advisory Group in New York. ``We're going to be looking for value.''


That left the items few high-powered women can be without: drop-dead shoes and handbags. Hurley selected 10 pairs of shoes at $465-$895 a pair. His choices included five pairs from Christian Louboutin.

``He's the new Manolo Blahnik,'' Hurley said.


Total ``cost'' of the one-hour visit: $63,170.

``Even at this amount, we still don't have fully realized wardrobes, especially for the woman,'' Hurley said.


Leanan, I think you need new shoes. I found this a great counterpoint to the stock market jitters also on Bloomberg.

I hear you can make a mean pot of soup with some kitchen scraps and a pair of Manolo Blahniks.

Thank you Tarzan... Post of the week!

Hydrogen cars? Brought to you by the same disfunctional companies that haven't been exactly stellar in making a gasoline job. These outfits are on death's door as it is; check out Chrysler's current and ongoing debacle.

According to Bloomberg, both the housing industry and associated finance , and the car industry and associated finance are in deep shit. If it were just a problem of products OR profitability, one could see a solution for the autos, but much of the problems they have are component related. No matter how you change the moniker or restyle the tin, underneath are the same crappy motors and transmissions that were problematic a decade or two ago. Anyone who suffered the notorious Chryco electronic automatic will not want to repeat the experience even if the thing has been replaced. It hasn't.

These industrially challenged monsters are hitting the wall at the same time as a big shakeout - potentially vast and long lasting - hits their source of customer silly money. Add peak oil and a $60 floor for oil??? and it is hard to see what will pull the economy out of the ditch this time.

And this cast of clowns is expected to bring us the hydrogen car? Technically, they are about where the Japanese industry was in 1990 - minus the taste and subtlety and refinement. A look at the most recent Chryco product, the Dodge Nitro, will reveal a problem with the steering column/pedal arrangement probably due to not redesigning the firewall when they 'jacked up' the interior. I've heard it described as a 'tight footwell' but I'd call it an accident in the making when you have to do the watusi to get from the gas to the brake.

To be honest, I didn't spend enough time to find if there were a compromise position that would make it driveable for my size medium 5'9" body. What does it take to get the basic seat/wheel /pedal combo right? Even Kia and Hyundai get that right. Hydrogen. Hah!

What I'm really afraid of is Peak Stupidity. That hits the whole works, not just the energy side. Panic, unfortunately, does not always concentrate the mind. Fear does, but that should have happened already, so now we'll see how well the ensuing panic shakes out. So much for the 'Goldilocks' economy.

As I recall, Ford's IPO of the early fifties was at $5 a share. If you had bought and held you'd have a capital gain all right - at about $7 something today. That's about ten cents on the inflated dollar. At the millenium it was in the high twenties. ROI. The Hot Air Economy.

You are ten minutes slower than Leanan.

Check the prediction that I gave you last night:



Damn, you're good! What is it going to be next week? Same prediction?

The trend this time of year is pretty much like that: Refinery products down and crude up. There are things that can screw that up, so you kind of have to watch those on a weekly basis. For instance, I didn't really study the gasoline import numbers today, but I expect them to start coming up to take advantage of the high prices. That can stop the falling gasoline inventories. Also, if the week is unusually warm, that could stop fuel oil purchases and stop the distillate inventories from falling.

To predict next week, I would look at the refinery utilization numbers to see how they have been trending (I would imagine they are still trending down, as I don't believe maintenance is at a peak) and the gasoline import trend. That should be going up. If the weather isn't too unusual, that should give you a reasonable chance at calling the inventory numbers correctly. If I had to guess today, without having looked at the rest of the data, I would make the same forecast for next week.

Great info. Thank you!!!!

Actually, he wrote the EIA report. Sorry RR, you've been outed. Scotland. Yeah, right.

Farewell Message

Tomorrow, I shall be listed as Emeritus at The Oil Drum. I was happy to have the opportunity to write here and I'm grateful to the editors for giving me the chance. I am not retiring from writing about "peak oil". I have never stopped doing research, which involves examining data, interpreting it, and following the worrisome trends in the global oil industry.

My own goal is to get sound arguments about valid concerns about the oil supply into the media and before policy-makers. I am currently working with a number of people in the world-wide "peak oil" community to accomplish that goal. The recent, deplorable article in the NY Times, Oil Innovations Pump New Life Into Old Wells by Jad Mouawad, reminds us that the public is getting a distorted message about the oil supply. The Times article reads like a public relations piece for the oil industry. In fact, the Kern River "miracle" cited there actually makes the "peak oil" case.

Click to Enlarge

It is important to note that the Kern River is a large "heavy" oil field — see KERN RIVER CELEBRATES 100 YEAR ANNIVERSARY Celebration Marks the Discovery of the Fifth Largest Oil Producing Field in the United States.

The field encompasses nearly 9,600 acres of land, has approximately 10,000 producing wells and has produced more than 1.6 billion barrels of oil.
However, the Times story (see the graphic) clearly shows that, after using an old recovery technique — steam injection — for such oil, a production rate of only 140 kbd was achieved after almost 20 years. Contrast that with another large field, Dalia in the deepwater offshore Nigeria, where a field estimated to hold 1 billion recoverable barrels of light oil will yield a peak flow of about 240 kbd. Needless to say, Kern River is now in irreversible decline. Similar remarks apply to the Duri field in Indonesia, which the Times also mentioned.

This is an opportune time to tell you again that "peak oil" is about the conversion rate dQ/dt of recoverable reserves into flows, where Q is the cumulative production and t is time. I have seen the constant arguing about the Hubbert model at The Oil Drum. I no longer pay any attention. My view is that flows matter, and bell curves or global reserves estimates as derived within the model do not. I prefer a "real-world" approach, and do not trust a mathematical, not physical, definition of dQ/dt that sometimes fails empirically for various reasons. I could write a book about this, so I do not have time to expand on my remarks here.

Hence, I suggest that if you want to predict the near-term future oil supply, then look at a schedule of the near-term oil supply, as described, for example, at the latest Megaprojects update (pdf) by Chris Skrebowski. Of course, there's more to it than that. One must consider the all-important implied decline rate. For example, Skrebowski's schedule indicates large contributions from Brazil in 2007. However, close examination reveals that Petrobras only projects that they will increase their output there by 141 kbd this year. See Brazil Petrobras Plans to Bring 2 New Platforms On Stream in May

"We establish our goals as a challenge, always eying the maximum output we could reach," Barbassa said. "But the most important thing is that our output is continuously growing."

Petrobras said it expects to produce an average of 1.919 million b/d of oil from its Brazilian fields in 2007, up from an average output of 1.778 million b/d in 2006.

Obviously, their output will not be "continuously growing" at some point in the future. Such growth is ultimately unsustainable. This is the Red Queen problem.

I will also add this: given my goal to get the peak oil argument out into the mainstream media and before policy-makers, I think that trotting out Hubbert's model will convince no one. Real arguments about real oil fields (delays, technological challenges, economics — EROEI, oil price & other CAPEX cost overruns — etc.) will do better.

I do not mean to be overly critical. This is just my view of things. I will also say, with some trepidation, that I would caution against a dogmatic approach to the "peak oil" question. Such an approach leads to isolation and marginalization. I have found that an eclectic approach is more useful and may be heard by more people. It is wise to try to speak to people in terms they can understand. All roads lead to the same conclusions about a near-term peak in the world oil supply.

I hope I have not burned my bridges at The Oil Drum, which is often a great place for stimulating discussion. I've learned plenty here, and I hope I also imparted some knowledge which people will find useful going forward.

My very best to everyone, including the editors, contributors and many of those who make insightful comments. Good luck to all — we're going to need it.

— Dave

great sentiments.

Through the Association for the Study of Peak Oil and other more commercial arrangements, I've presented on peak oil to investment banks, corporate boardrooms, the local branch of the society of petroleum engineers and several community events. The only time I've ever mentioned Hubbert curves was to the petroleum engineers. Generally my messages are much simpler and easier to swallow.

It's just good to debate some of the more theoretical aspects on a site like the oil drum. Good luck.


Hello Phil,
Will you be doing any presentations around Melbourne that are open to the public any time soon? Thanks, Solon

hi solon

probably too late for you to see this.

send me an email via my website:


we can add you to the ASPO mailing list. we're trying to convince local councils to arrange peak oil evenings but not much luck at the moment.


Don't be a stranger, Dave, and break some legs.

Go Dave! What you layed out is critical, I wish you the very best, its very important.

Erratum: Should read "offshore Angola".

Dave, I'm sorry to see you go, I love your writing and analysis.
I also agree with you about Hubbert's Peak. Few people really care about a mathematical model except engineers and mathematicians-the public cares about deliverability and price of fuel. And the real data are camoflaged and confused by WT's Iron Triangle because its grim.
For the last year and a half I've been working on the Barnett Shale, the prime example of the Red Queen conumdrum that you identified in natural gas. The darn wells cost a couple of million to drill and complete and will not return a profit at less than $5 natural gas, and only about 150% at the current $7 price, far too little to justify the risk. And that's the biggest play in the United States! So, this proves conclusively I'm a prostitute!
Good luck!

Dave, when I see you on Russert's panel I'll know to request burying me with my ice skates so I can play some hockey with the devil!

"Have a good time stormin' the castle!" ;-)

I know you're very busy, Dave, but it would be helpful to hear more of your critique. There's no question that we all could be more effective. Perhaps a list of 5-10 suggestions -- something to get the rest of us thinking.

FWIW, here are some of my thoughts:

  1. Be careful about spending too much time in a discussion board. Aim to communicate with a wider public, rather than an in-group.

  • Improve the quality of the writing. Strive to make it accessible to a wide audience. Encourage pride in one's writing and an openness to suggestions and editing.
  • Write about what you know or have experienced, rather than general comments about the downfall of civilization, etc. For example, how are energy constraints going to affect your profession or community?
  • Detailed technical discussions are only of interest to a small percentage of the population. However, the implications of these discussions are important: what do they mean and how will they affect us?
  • Make it a habit to think in terms of actions and solutions. If Kunstler can take the time to write an agenda for action, so can we. Doomerism and uninformed talk of collapse is a waste of time and self-indulgent.
  • What's often missing in talk of peak oil and climate change is a sense of history, of how social movements actually take place. Also, from history, we learn how people lived perfectly satisfying lives on a fraction of the energy that we now use. If they could do it, we can too.


  • Bart,

    I agree with all your points #1 through #6. However, if I were to further elucidate my "critique", I fear that some will take such remarks as criticism around here — and that is not my intention.

    Therefore, I'll leave my remarks as they are. I think we can agree public outreach is a good thing. Concerning history and social movements, I'm glad you brought that up. We're all trying to do things for the first time — no one has ever been in this position before — and we're all bound to make a few mistakes.

    Good luck. And I hope you can consider my new message that its not the time of peak oil that matters but showing the world once we have peaked that it has happened.

    We may have already peaked or we may be close but the argument is not about peak but showing how we can never recover once production has peaked without significant new finds the can be developed in time.

    People need to understand what happens after oil production peaks the timing of the peak is secondary. We have good reason to believe its not 30 years away but even if it was its time to consider life after peak oil.

    Evidence that indicates peak now or in the near future simply lends urgency to addressing the issue and if taken seriously it could help us pick the right solution to mitigate the effects of peak oil.

    My very best to everyone, including the editors, contributors and many of those who make insightful comments. Good luck to all — we're going to need it.

    Dave, I know we have had our differences from time to time, as everyone does. But I think you are one hell of a great writer. I give you credit for motivating me while writing a lot of my essays, because I was always comparing them to yours. Often, I would say "That's not good enough", because I knew it wasn't "Dave quality."

    Ultimately, I know that we have the same goals in mind, and that is to bring knowledge to bear on this subject, and to stimulate action. I believe in my heart that we are making some difference. And if in the end we can motivate even a handful of people to make changes that will position them for the changes to come, it will have been worth every minute we have spent doing this.


    About my writing, that's very kind of you to say, Robert.

    As far as differences go, I've forgotten them and I've said a lot of things in the "heat of the moment" that I regret, not just to you but to others as well. I do get overwrought about things, sometimes. I'll probably never get over it at my age — I turned 54 yesterday — so perhaps a weblog is not the best place for me!

    I've enjoyed your work here. Keep it up. I know you don't confine yourself to the downstream refining issues you know so well, but they are important in a world where the oil supply is getting heavier, more sour and, sometimes, more acidic. Meanwhile, I'm still waiting for Vinod Khosla to save the world.

    Looks like Jesus?

    best —

    Naw, its that dude from mission impossible....

    All the best, Dave. I've enjoyed your writing. Good luck in whatever you do.

    Hello Dave Cohen,

    You will be greatly missed by me, but I sincerely wish you all the best. I hope you have great success towards meeting your goals. Thxs for all your terrific posts.

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

    You're great, Bob.

    I weakly, barely audibly, croaked back the info, while I helplessly listened to the furious background battlesound of keyboard entry summoning up the massive FORCE OF EMPIRE by database inclusion. But I was totally floored when the Dark Lord asked me what topic I wished to talk about.

    Fortunately, in a desperate last-gasp measure to save myself, I suddenly realized a means to rescue myself. By summoning my last bit of strength to hit my keyboard's spacebar: the overwhelming darkness of my Microsoft Olduvai streaming starlight screensaver magically transformed my desktop light saber into full power TOD-website illumination. My strength restored, I proudly answered back, "I wish to speak about Peakoil".

    "Wazzat? Never heard of it, but I will send out the forms."

    Wishing to safely withdraw back into seclusion to battle yet another day, I thanked him for his efforts. He didn't thank me for mine, but just hung up.

    Re: Are Humans Smarter than Yeast?

    No, but there are always a few exceptions.  

    — stay well

    Indeed. That was a terrific post by Bob. I wasn't sure whether to roar with laughter or cry in pain.

    Best of everything to you. I'm another who has enjoyed your posts immensely. Take care and know that many of us at TOD are 100% behind your mission.

    Hi Dave, and (for lack of wanting to say "bye")...Alohas,

    Thanks for letting us know what you're up to. I especially appreciate your cautions...and I'd love to hear more detail, which, honestly, I think would not be interpreted as criticism, (at least by me).

    re: NYT article. I'm really glad you respond to this with specific detail, because I was surprised at the effectiveness of this article. Some people I rarely hear from wrote just to tell me about it, and, despite their general awareness of the problem of "peak", and despite several previous exchanges (complete w. links, etc. on my part)...they drew the conclusion that "peak" presents no immediate problem. (Based on this article.)

    re: "My own goal is to get sound arguments about valid concerns about the oil supply into the media and before policy-makers. I am currently working with a number of people in the world-wide "peak oil" community to accomplish that goal."

    I totally support your goal and efforts.

    Qs: Is there any possibility of becoming part of this community (in any way), and, if so, how? (I'd very much like to contribute to this. I've done a couple of things, including a theater piece, and I'd like to talk more specifically with other people). I'm really interested, as I've given the whole "how to organize and educate" some thought.)

    Is there any chance - (hope so!) - you'll post your work here?

    Best wishes.

    Re: Is there any chance - (hope so!) - you'll post your work here?

    Sorry, Aniya, there's no chance anymore. As you can see, the response to my farewell message has been — ahhh... — less than overwhelming. Hi, Guys!

    If you don't mind, I will indulge myself one last time —

    And, the beloved & esteemed Ali Al-Naimi
    announces that the lucky winner is....
    Stuart Staniford!!!!!

    God bless...

    Hi Dave,

    I meant *links* to your work, elsewhere! Just the *links*! You know...so we can figure out where it is!

    And, as far as underwhelming...well, shoot. (No, wait.) I mean...I don't get to read as much as I like, at all...I only lucked out to be able to read drumbeat last night or I would have missed this news altogether. I personally know people who read every third day...so, perhaps they have missed it?

    And, share these goals. If you can give a hint as to how to join in w. others (such as yourself) on this effort...most welcome.

    Best of luck to you, Dave, and thanks for all of your hard work. Your brilliant writing, wisdom, and wonderful wit will be sorely missed by TOD readers.

    It may be a Hollywood cliche now, but it is still true that we often forget that the destination is not nearly as important as the journey itself. Thanks for helping all of us stay on the right path and bring others along.

    From today's New York Times. I saw this on the front page of the print edition as well as it being online:

    Start-Up Fervor Shifts to Energy in Silicon Valley

    SAN FRANCISCO, March 13 — Silicon Valley’s dot-com era may be giving way to the watt-com era.

    Out of the ashes of the Internet bust, many technology veterans have regrouped and found a new mission in alternative energy: developing wind power, solar panels, ethanol plants and hydrogen-powered cars.


    The best and the brightest from leading business schools are pelting energy start-ups with résumés. And, of course, there are entrepreneurs from all backgrounds — but especially former dot-commers — who express a sense of wonder and purpose at the thought of transforming the $1 trillion domestic energy market while saving the planet.

    Out of the ashes of the Internet bust, many technology veterans have regrouped and found a new mission in alternative energy: developing wind power, solar panels, ethanol plants and hydrogen-powered cars.

    The startup companies from Silicon Valley are invited to compete with all the companies from Europe and Japan, which already have been working on this field for a couples of years.

    However, IMHO it will be difficult for the companies to reach the same technological level, European and Japanese companies already have. There, this industry is already a multi-billion business growing about 30% each year.

    Here's where we find out if that old, Yankee 'Can-do' Moxie Gumption Motor hasn't gotten too rusted out by Desperate Housewives, Cops and Star Search.. (The Nylon Triangle??)

    I like it

    M'bishi Heavy to get $5 bln TXU nuclear order
    Mitsubishi Heavy Industries Ltd is set to receive a $5.2 billion order to build two nuclear reactors for U.S. power plant operator TXU Corp., the Nikkei business daily reported on Wednesday.

    TXU said in August 2006 that it planned to file construction and operating license applications in 2008 to build two to six gigawatts of new nuclear capacity at one to three sites in Texas. The company expects the new reactors to enter service between 2015 and 2020.

    TXU last month suspended plans to build eight coal-fired units in Texas after it agreed to be acquired by a group led by private equity firms Kohlberg Kravis Roberts and Co. and Texas Pacific Group for $31.8 billion.


    The two reactors will be of the APWR model, which at 1700 MW each will be the biggest in the world. But as the plants will be built in Texas, anything else would be a disgrace. ;)

    Most interestingly, the cost is only $1500 per kW, radically lower than the "conventional wisdom" of $2000 per kW.

    And hey, the US-APWR will have the highest thermal efficiency of any LWR at 39 %, beating even the EPR at 37 % and pretty much matching super-critical coal fired plants.

    I have to wonder just how much energy will be expended building these nuke plants. How long will they have to run to get back to breaking even before they actually start producing net energy for the world? And how much of the energy spent to build these plants will come from further depleting our fossil fuel reserves???

    I guess if we ignore these factors then they don't exist.

    Energy payback time is supposedly 3-6 months for a generic plant. 2-4 TWh for a 1000 MW plant. 125.000-250.000 barrels of oil equivalent.

    That kind of energy is rather trivial in the big picture. Let's have the oil free day once a year and it'll be enough for 80-160 GW of new reactors per year, in the US alone.

    So your worry is completely unfounded.

    The above is of course a very rough calculation.

    The Australian public broadcaster ABC TV interviewed climatologist James Hansen:

    Scientist predicts disastrous sea level rise

    .....If we get warming of two or three degrees Celsius, then I would expect that both West Antarctica and parts of Greenland would end up in the ocean, and the last time we had an ice sheet disintegrate, sea level went up at a rate of 5 metres in a century, or one metre every 20 years. That is a real disaster, and that's what we have to avoid....

    KERRY O'BRIEN: You said just a couple of weeks ago that there should be a moratorium on building coal fired power plants until the technology to capture and sequester carbon dioxide emissions is available. But you must know that that's politically unacceptable in many countries China, America, Australia for that matter, because of coal ndustry jobs and impact on the economy.

    JAMES HANSEN: Well, it's going to be realised within the next 10 years or so that we have no choice. We're going to have to bulldoze the old style coal fired power plants. We can burn coal, provided we capture the CO2 and sequester it, and we're working on technology that would allow us to do that and we should have been working a little harder but, nevertheless, we will have, within five to 10 years, we will have that technology. In the meantime, we should be emphasising energy efficiency so that we don't need new old style coal fired power plants. We're just not doing that.

    Mom's solution to cramped living

    A Russian woman paid a former convict to kill her 17-year-old son because she was fed up with sharing her small one-room apartment with him, the newspaper Izvestia reported on Wednesday.

    ...Chronic housing shortages have dogged Russia for decades. The problem has eased slightly since the collapse of the Soviet Union, but many families of several generations still share cramped apartments.

    I guess this explains why suburbia is exploding around Moscow...

    Well, that's one way to get the kids out of the house.

    If she had a jury of 12 parents of teenagers she be easily aquited.

    I hate conspiracy theories as much as the next thinking person (they seem to appeal to the "magical thinkers" who can't understand complexity).

    Having said that, I think WT's "Iron Triangle" is more real than not. Below is an essay from Joe Bageant that fills in the void between "magic manipulators" and real-time self-preservation as mechanisms for building and maintaining the "Iron Triangle" (thanks to those who have posted Joe's rants here before - what an entertaining read!).

    "The Iron Triangle"

    Somewhere a Banker Smiles

    In our saner moments we can also see that it does not take dark super-centralized plotting to pull off what appears to have been accomplished.

    Even without working in overt concert, a few thousands of dedicated individual corporate and financial interests can constitute a unified pathogenic whole, much the same as individual cells create a viable dominant colony of malignant organisms -- malignant simply by their anti-human, anti-societal nature.

    We don't see GM, Halliburton, Burger King and CitiBank lobbying the state for universal health or clean rivers, do we?

    But mention unions or living wages, and the financial colony within our national Petri dish shape shifts into a Gila monster and squirts venom on the idea and shits money all over Capitol Hill.

    I looked at all this as coincidence for years until the proposition finally strained credulity so much that I threw in the towel and said, "Fuck it. There is only so much coincidence to go around in this world."...

    Joes a fun writer. He is even more colorful if you email him and discuss things. Although now he has finally relocated completely to Belize, so he is a bit slower to respond. He's got to be laughing sipping his Mai Tai.


    To accept the Iron Triangle theory, one does not need to assume it is a "conspiracy". Much of it is a confluence of economic interests, shared ideologies, shared anxieties, disliking the same people and groups, etc. Some of it gets coordinated through think tanks putting out emails--very important.

    BTW, I don't hate conspiracy theories as much as the next guy. Sometimes people and groups conspire. Denigrating conspiracies per se only prevents getting to the truth.

    Rememer Adam Smith:

    “men of the same trade seldom meet together, even for the purposes of amusement, but the conversation turns into a conspiracy against the public”

    It's just a question of establishing who's encompassed in the 'same trade'.

    "Same Trade": That triggers another thought. We often deride the MSM for carrying water for the rich and powerful as if they were to remember what their job was they would be transformed into "tellers of the truth." But if their trade is to practice the skill of reading the mind of the CEO and the board without ever having to be told.... Well, therein lies the Iron Triangle.

    It's a loose affilation of mutual interest by mutual parties. Golf Games, Marriages, Business Relationships.

    I have posted a few of Joe's Here. Like the NASCAR set Kuntlser. I personally like his writting style, and I love all the obscure references. A down home have a beer and a shot with you type guy. But well read. From Peak Oil, to Richard Duncan's Gorge and Sees the class struggle. But unlike Kunstler he knows there is no difference between the two political parties.

    If you want to get a bit of background, I would offer two.

    I warn you, it's not a 50 word summary. But if you read this set of 18 you will KNOW to a great degree why things work like Joe describes. Read how every goverment program will NOT have the desired effects.

    It seems the truth is something one has to search for.

    Mis-direction is offered freely and often almost intravenously.

    The First is Kathrine Austin Fitts.


    Just follow the continue button on the bottom or here are the direct links.

    Names and Dates.


    But if you want to understand how the American Currency and Debt system works, Read this one. It's long. It'
    s a book. but you WILL learn every person and parties involved in the creation of the Fed.

    Large PDF alert. BUT IT is worth it. Download and print and read at your leasure.

    Secrets of the Federal Reserve by Eustace Mullins -

    Russia says Iran delays hurt nuke plant

    The Russian state-run company building a nuclear plant in Iran warned Wednesday that Iranian payment delays may cause "irreversible" damage to the project — another strong signal of Moscow's annoyance with Tehran.

    The statement angered Iranian officials, who denied any payment delays and accused Moscow of caving in to Western pressure to take a tougher line on Iran.

    What the hell is all that about?

    Some domestic Iranian fight or the Russians being pressured by the Americans, or what?

    My initial inclination is to take it at face value - Russia says Iran is behind on their payments so Russia is halting work til payment is received. In my opinion, it is a huge stretch to assume that the US (and particularly George Bush) has that much influence with Putin and Moscow.

    Ghawar Is Dying
    The greatest shortcoming of the human race is our inability to understand the exponential function. - Dr. Albert Bartlett

    But why is Iran behind on their payments?

    Are they not serious about wanting a nuclear power plant? Are they actually short of cash, despite their oil wealth?

    They are having trouble affording their gasoline and diesel imports as well. (ref: previously posted fuel rationing in Iran).

    They are running an essentially socialist government (ok, that might be a simplification), and they are post peak...so less money rolling in to pay larger needs (even at $60/barrel.)

    Can't afford to import fuel, but we must have nuclear weapons...how much does 3000 centrifuges cost?

    It's all about population!

    Coming in very late to this discussion...

    I seem to recall the issue being framed as the contract specifying payment in US dollars, and the Iranians wanting to use Euros instead. Due to sanctions, the Iranians are having trouble legally exchanging currencies.

    If the Russians were really interested in moving forward with the plant, they could simply accept the Euros and exchange them themselves, or hold them instead of an equivalent number of dollars.

    Part of this work stoppage is that the fuel for the plant (80 tonnes???? don't quote me on that amount) will not be delivered this month as previously agreed.

    My hypothesis:

    The Russians remember Chernobyl. They know the Americans/ Israelis are going to bomb the crap out of that plant any day now, and they don't want to provide the nuclear material for a nation-sized dirty bomb.

    Also, they don't expect to get any further payment once the facility is a smoking hole in the ground. So they want the Iranians to be paid-up before any more work happens.

    I wouldn't be at all surprised if the Russians have pulled their technicians out of Iran.

    A thought occurred to me a couple days ago. I did some research and wasn't able to pin down any hard facts, but the thought itself is interesting:

    Throughout the ages there has been an upper class and a low class. Prosperous times brings on the middle class. No matter how difficult the future will be for mankind, the upper class will stay upper class, and it will be the middle class that slowly erodes. But the approximately %1 upper class stays the %1, no matter what times we are living in, or what population declines we go through. Comments?


    One word: Power

    Life really is simple when you boil things down.


    Yes, and that ties in perfectly with my post the other day regarding ones views of the future post peak. Your vision will be guided by your current environment. If you are surrounded by the "upper crust" you think things will be fine--there may be an adjustment but it will be okay for the most part. But if you are surrounded by the middle class on down, you likely have a much more fatalistic vision.

    There is a great documentary by Jaime Johnson of J&J titled Born Rich or something. He asks his dad's business advisor on camera, why do we have tax shelters for people who don't exist? I think it's called born rich, just look for Jamie Johnson as director. He was on Oprah too I understand and this is where he started getting known.

    Tell that to the french upper class in the revolution. Or the russian for that matter.

    When people realise what they had is gone, and they have nothing left to lose - someone in power tends to lose their head.

    "Rich Dad, Poor Dad: What the Rich Teach Their Kids About Money--That the Poor and Middle Class Do Not!"


    From the Haaretz piece above:

    "But it appears that whoever wrote that does not know how to grow seaweed."


    The Israelis are quicking cornering the technologies around both algae to biofuels and now seaweed to biofuels.

    Each production path focuses on the growing of renewable feedstocks from the sequestration of carbon dioxide - carbon dioxide derived from coal-fired power plants and other industrial facilities.

    The is a fantastic production path for a number of reasons, however, as far as CDM trade goes, if the IL scientists can prove that the seaweed eats other Kyoto listed pollutants i.e. HFC-23, 43-10 while maintaining high yields of alternate LTFs with low PIR and high EROI...

    Can someone say... KaCHING!

    A Trojan horse in sheep's clothing?

    Wolfowitz calls on US to remove ethanol tariffs

    The US should lower or remove its tariffs against ethanol from Brazil, the president of the World Bank said yesterday.

    Paul Wolfowitz’s call, at a conference in London on financing low-carbon energy, will increase the pressure on President George W. Bush, who discussed co-operation on biofuels during his visit to Brazil last week but rejected calls for tariff removal.

    Mr Wolfowitz, a former influential member of the Bush administration, also called for “a global framework” on cutting greenhouse gas emissions.

    In a departure from his prepared text on encouraging investment in cutting carbon, Mr Wolfowitz said: “Barriers to the international trade in ethanol need to be examined.”

    Asked by the Financial Times afterwards whether this meant the US should lower or remove its import tariff of 54 cents per gallon on ethanol from Brazil, he said: “That’s what I said. Weren’t you listening?”

    Right. Here's the solution to flushing our topsoil down the Mississippi. We'll flush it down the Amazon instead.

    It seems that The Great Mogambo has been reading TOD in the last few days...

    And it is not just the Mexicans that seemed to be gripped by the looming terrors of Peak Oil Syndrome, as "Kuwait's giant Burgan field has also peaked. Iran's energy use is rising so fast that its oil exports are being crimped badly. And despite the fact that the Saudis are supposed to be sitting on a thousand years of oil, their oil production declined 8% last year", although "The Saudis will say they made their cuts to 'stabilize' the market."

    His musings always put a horrified smile on my face...more here

    It's all about population!

    PS: How do you put the dotted line around the quote (blockquote didn't seem to work)?

    blockquote should work.

    [blockquote]your text[/blockquote]

    With pointy brackets in place of the square ones.

    If I'm reading the Rigzone article right, the world has been consuming more oil that it's producing for the last 5 months, to the tune of a million barrels a day :

    Last month, the IEA reported that commercial stockpiles in its 26 member countries in North America, Europe and Asia fell by 93 million barrels in the fourth quarter, to 2.674 billion barrels at the end of December.

    And this is about the amount that Opec is alleged to have taken off the market to support prices :

    Analysts generally estimate that OPEC actually has taken one million barrels a day or so of supply off the market.

    So, help me here : if OPEC really has this reserve capacity of a million barrels, they will just barely be able to take up the slack... as long as there is no increase in demand!

    This is oversimplified... OPEC is not the only game in town, but

    At the same time, many analysts are lowering expectations of growth in oil supply coming from countries that don't belong to OPEC

    Truly we live in interesting times!

    Hello TODers,

    Is the petro-fix a done deal for the nascent petroleum industry in Sri Lanka? Future energy security for whom? Will Thermo/Gene geo-strategic realities decide the future course?

    For your consideration:
    Mar 14, Colombo: United States Trade and Development Agency (USTDA) today awarded a grant worth 51 million rupees to develop Sri Lanka’s oil and gas sector.

    Promoting the energy security in Sri Lanka the grant will fund technical assistance to the Ministry of Petroleum and Petroleum Resources Development in support of its efforts to develop a comprehensive oil and gas regulatory system and establish an organizational structure for the regulatory authority, a U.S. Embassy release said.

    In a awarding ceremony at the Finance Ministry in Colombo U.S. Ambassador to Sri Lanka Robert Blake signed the grant on behalf of the U.S while Dr. P.B. Jayasundera, Secretary for the Ministry of Finance and Planning, represented the Sri Lankan government. The statement noted that Sri Lanka has no oil or gas production of its own and imports approximately 80,000 barrels per day and the establishment of a sound regulatory regime will contribute to Sri Lanka’s nascent petroleum industry and reduce the nation’s dependence on imports.

    U.S. Ambassador Blake expressed the necessity of a well-developed regulatory structure to attract and keep high-quality investors in the oil sector. “We hope our assistance will help Sri Lanka establish an open and transparent regulatory system that both protects Sri Lanka's interests and gives investors confidence that they can earn a worthwhile return on their investment."

    "Development of the offshore oil and gas sector could be an important opportunity for Sri Lanka to reduce energy imports, generate revenue and create jobs. The United States wants to help Sri Lanka maximize its potential gain from oil and gas exploration,” said Ambassador Blake.

    Mar 14, Colombo: The trade unions of Sri Lanka's government owned petroleum refiner and retailer Ceylon Petroleum Corporation (CPC) points out that its only oil refinery in Sapugaskanda is in danger of closing as the government constantly rejects proposals to renovate it.

    The Ministry of Petroleum Resources Development has submitted two proposals costing Rs. 350 million and Rs. 1500 million respectively for the renovation. But the government has informed the Ministry that it cannot allocate that amount. The CPC sources say that it is not in a position to obtain a massive loan from the open financial market due to its strained budget.

    Meanwhile trade unions point out that the CPC refinery in Sapugaskanda is in danger of shutting down by the time a new privately owned refinery is opened in Hambanthota within two years.

    Meanwhile, the local Demand Destruction continues:
    UNHCR estimates some 465,000 people are displaced by the conflict in Sri Lanka, including 223,000 people who have fled their homes since the violence flared in April last year after a long ceasefire. Last December, more than 20,000 civilians fled the coastal strip of Vaharai and sought refuge in government-controlled areas of Batticaloa district.

    From the CIA Factbook:
    Environment - current issues:
    deforestation; soil erosion; wildlife populations threatened by poaching and urbanization; coastal degradation from mining activities and increased pollution; freshwater resources being polluted by industrial wastes and sewage runoff; waste disposal; air pollution in Colombo

    Population: 20.2 million
    note: since the outbreak of hostilities between the government and armed Tamil separatists in the mid-1980s, several hundred thousand Tamil civilians have fled the island and more than 200,000 Tamils have sought refuge in the West (July 2006 est.) Additionally, about 800,000 Sri Lankans work abroad, 90% in the Middle East.

    Consider the strategic location of Sri Lanka to India and its location halfway between the Straits of Malacca and Hormuz:
    News Feature: Another U.S. base in the Indian Ocean?

    For all the sophistry and spin by the Americans, the ACSA is a military deal and, on the face of it, is loaded in Washington's favour. For the U.S., it is as good as acquiring a base in the Indian Ocean and at little or no cost. In the immediate context, the ACSA suits the Mahinda Rajapaksa Government as an advertisement of its influence with the superpower in general and in its fight against the Liberation Tigers of Tamil Eelam in particular.

    Don't forget India & China are eyeballing Sri Lanka too:
    A New Balance of Power Game in The Indian Ocean

    Given China's known interest in developing bases around the Indian Ocean littoral, a Chinese base in Maldives would not be surprising. Although China claims that its bases are only for securing energy supplies to feed its growing economy, Indian experts perceive the Chinese base in Maldives as motivated by Beijing's determination to contain and encircle India, and thereby limit the growing influence of the Indian Navy in the region.

    China is inching closer to Sri Lanka as well. Recently, Sri Lanka allocated an exploration block in the Mannar Basin to China for exploration of petroleum resources. This allocation would imply Chinese presence just a few kilometres from India's southern tip, thus causing strategic discomfort. In economic terms, it would also mean the end of the monopoly held by Indian oil companies in this realm, putting them into direct and stiff competition from wealthy Chinese oil companies. It should be noted that the Chinese are already present at Hambantota on the southern coast of Sri Lanka, where Beijing is building bunkering facilities and an oil tank farm. This infrastructure will help service hundreds of ships that traverse the sea-lanes of commerce off Sri Lanka. The Chinese presence in Hambantota would thus be another vital element in its strategic circle already enhanced through its projects in Pakistan, Myanmar and Bangladesh.

    In addition to economic gains, it is Sri Lanka's strategic location that has prompted Beijing to aim for a strategic relationship with Colombo. Beijing is much concerned about the growing US presence in the region as well as about increasing Indo-US naval co-operation in the Indian Ocean. Besides exploring options to cushion the impact of Indo-US strategic co-operation in the region, China looks at using the partnership with Sri Lanka to enhance its influence over strategic sea lanes of communication from Europe to East Asia and oil tanker routes from the Middle East to the Malacca Straits.

    Sri Lanka may strike oil and gas in 2009
    Oil exploration - probability high, challenges greater

    [March 4,2007] Director General of the PRDS Dr. Niel de Silva told the Sunday Observer that according to the recent seismic surveys there is a high probability of having oil and gas in Sri Lanka. However, commercial production of oil and gas is not simple and there are many challenges ahead of us, he said

    Who knows? IMO, this could get much uglier as we go postPeak.

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

    Jeffrey Brown's blogpost on the Graphoilogy Site recieved mention today on the WSJ Energy Blog.

    March 14, 2007, 4:11 pm
    Blog Roll: Saudis 70% Depleted?
    Posted by WSJ.com Staff

    Writing at the blog GraphOilogy, petroleum geologist Jeffrey J. Brown runs a “Hubbert Linearization” — which he describes as a method for predicting future conventional oil production for a region — for Saudi Arabia and arrives at “some troubling conclusions,” suggesting that “Saudi Arabia is now over 70% depleted, with about 40 billion barrels in remaining recoverable reserves.”


    Blogs We’re Reading:

    * GraphOilogy
    * The Cost of Energy
    * The Cost of Energy
    * 321 Energy
    * GristMill

    – Mark Gongloff
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    New York Times: Clinton Says Some G.I.’s in Iraq Would Stay if She Took Office

    Senator Hillary Rodham Clinton foresees a “remaining military as well as political mission” in Iraq, and says that if elected president, she would keep a reduced military force there to fight Al Qaeda, deter Iranian aggression, protect the Kurds and possibly support the Iraqi military.

    She said in the interview that there were “remaining vital national security interests in Iraq” that would require a continuing deployment of American troops.

    I've thought for some time now that it is unlikely the US will leave any time soon. Seems a near certainty now that the Dems' leading candidate is talking about long-term deployments.

    And, if oil is at or near peak, it makes sense regardless of the political fallout.

    The U.S. army will be long destroyed before these guys will let go of all that oil.

    They are hypnotized by the golden ring of POWER.


    With Saudi Arabia strong arming Angola to keep oil production down, while Angolan children starve and the Angolans live like dogs, the IEA warning of dropping world oil and gas stocks, and war still hanging over Iraq and threatening Iran, the traders are fighting hold to hold oil prices at $58 or better, with oil threatening drops into the $57 or lower range, this coming into the spring demand driving season.

    At these low prices, it is becoming obvious that bio fuel firms are beginning to struggle, with the largest U.K. BioDiesel facing crisis"

    "Biofuels Corporation, Britain's biggest maker of biodiesel, saw its share price plunge yesterday after it warned full-year figures would be well below expectations.

    “The company blamed lower mineral oil costs used in conventional diesel and increased input costs, including higher prices for the vegetable oils, like soy, rape and palm oils, used in the production of biodiesel.”

    “Production has been cut to around 25% of capacity at its Teesside plant while manufacturing costs have risen as a result of a number of previously announced technical issues which are now the subject of a claim against Biofuels' technology provider.”

    “Chief executive Sean Sutcliffe said the position would improve once the government's renewable transport fuel obligation (RTFO), under which diesel sold at the pumps will have to contain 2.5% biodiesel - rising to 5% - comes into effect from April 2008. That would mean a UK requirement for biodiesel of 500,000 tonnes, rising to one million tonnes by 2010, according to Mr Sutcliffe, compared with Biofuels' capacity of some 250,000 tonnes.”

    With bioDiesel unable to compete at oil prices of even $58 per barrel, vegetable oil prices already climbing, and technical problems increasing just as demand for the product was set to rise.....can anyone imagine the complete meltdown of the bio fuels industry if Saudi Arabia was increasing oil production instead of holding it down (voluntarily or involuntarily doesn't matter to oil's competitors, does it?)

    Does anyone believe that ethanol is fairing any better than bio Diesel?

    The biofuels investors and entrepreneurs have to be praying that Saudi Peak is here and it is permanent. Otherwise, there're finished.

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

    This is probably old news about Saudi Arabia & Angola

    Angola warned on oil expansion 14Mar07

    Saudi Arabia will significantly increase the value of their remaining oil reserves by warning Angola not to assume that it can produce more than 2 million barrels/day. This also sends a clear message to ExxonMobil, BP and other companies that OPEC is increasing its grasp over the world's oil production/reserves.

    Limiting Angola's production could help extend the peak oil production plateau by a few years which gives the world more time to find viable alternatives. However, in the short term, this extension of the peak oil production plateau comes at a higher oil price because oil prices would be lower if Angola was allowed to produce at the maximum rates.

    Angola joining OPEC might be very favourable to Saudi Arabia and other OPEC members. Who will join OPEC next? Sudan?

    According to this link:
    "Up to five non-OPEC countries are to attend the Vienna meeting, Egypt, Oman, Mexico, Syria and Sudan."

    Perhaps some of these non-OPEC countries will join OPEC.

    Another link about Saudi Arabia warning Angola

    OPEC’s Saudi Arabia Warns Angola on Oil Expansion(15/03/2007)

    Saudia Arabia, the most powerful member of the Organization of the Petroleum Exporting Countries, has told Angola, its newest entrant, not to assume it will be able to expand production past 2 million barrels a day, The Financial Times reports Wednesday, without citing sources.

    This is a blow to the world's biggest oil companies, which have already paid Angola billions of dollars for the right to explore and produce its oil.

    Angola joined the oil cartel in January and should reach the 2 million barrel a day threshold at the start of next year. It had a target of producing 2.5 million barrels a day by 2012, a target which has now been thrown into doubt.

    I think there could be something in this. Is $60 to $70 a barrel the backstop price that oilcos think will keep customers hooked? If they can hold this price despite supply and demand fundamentals it will kill off biofuels after which petrofuel prices can keep increasing. I note Germany won't cut the fuel tax on BTL 'Sundiesel' which costs around $70 per barrel of finished product. I'm also hearing oilcos are withdrawing from sales of methanol an ingredient in biodiesel.

    If this is true $70 could be a kind of lid on the cooking pot until it eventually boils over when the competition is out of the way.

    Leanan, not sure if the story below has been featured, if not you may want to run it in the next Drumbeat, it is interesting:



    Gas is set to power Qatar Airways jets
    Published: Thursday, 15 March, 2007, 08:56 AM Doha Time

    By Tom Bergin and Dan Bases

    Akbar al-Baker… talking with Royal Dutch Shell
    LONDON: Qatar Airways plans to become the first airline in the world to fuel its aircraft with natural gas, the company’s chief executive said in an interview yesterday.

    Akbar al-Baker said the airline was talking to oil giant Royal Dutch Shell and engine manufacturers about using a form of diesel made from natural gas, known as GTL, or Gas-to-Liquids fuel, in its planes.... (see link)