DrumBeat: March 19, 2007

Ethanol's Growing List of Enemies

The ethanol movement is sprouting a vocal crop of critics. While politicians including President George W. Bush and farmers across the Midwest hope that the U.S. can win its energy independence by turning corn into fuel, Hitch and an unlikely assortment of allies are raising their voices in opposition. The effort is uniting ranchers and environmentalists, hog farmers and hippies, solar-power idealists and free-market pragmatists.

They have different reasons for opposing ethanol. But their common contentions are that the focus on corn-based ethanol has been too hasty, and the government's active involvement—through subsidies for ethanol refiners and high tariffs to keep out alternatives like ethanol made from sugar—is likely to lead to chaos in other sectors of the economy.

Energy Interdependence

A frightening number was released by the labor department on March 15. February prices for “crude foodstuffs and feedstuffs” were 22.73% higher than a year ago. Wholesale consumer food prices were 6.8% above last year, too. Even more frightening, the February number was 29.25% higher than it was in May, its lowest point of 2006. It has all the potential of being worse and longer lasting than the consistent double digit increases we saw from mid-2003 to mid-2004.

Most of the increase we saw in February is the price we’re paying for trying to buy energy independence with our corn crop. It’s a double whammy, a perfect storm of a too-quick demand on American agricultural resources to pay for decades of unbridled energy consumption and a need by elected officials to prove they’re doing something to end our dependence on tenuous Middle Eastern sources of oil.

Science shows ethanol good for America

Vinod Khosla, an Internet pioneer and the founder of Sun Microsytems, has finally gathered some honest rebuttals to the naysayers of ethanol.

Here is a short commentary of what he has found: Scientists are rapidly forming factual information relative to the value of ethanol against gasoline. They have come up with an energy balance equation on how ethanol can be an advantage over gasoline.

Russians plan more nuclear power reactors

Government officials said Friday that Russia will build two nuclear reactors annually through 2015, and increase to four a year by 2020 in an effort to sharply increase atomic power generation, according to Russian news agencies.

Anti-nuclear rallies fill French cities

Tens of thousands of people filled the streets of five French cities Saturday to protest plans to build the next generation of nuclear reactors.

Iceberg Dead Ahead Captain

“Iceburg Dead Ahead, Captain!” — Saudi’s 8% Oil Decline is the Iceberg in the Titanic Disaster

U.S. decries key points at climate talks

...the U.S. spoke out against a global carbon emissions trading plan and recognizing reforestation programs in developing nations as part of the fight against global warming, he said.

A Blue-Chip Alternative Energy Portfolio

...Growing awareness of Global Warming, Peak Oil, Gas, and Uranium, and energy security worries are leading to broad interest in alternative energy among people who do not fit the typical aggressive speculator profile of people who can shrug off a 50% loss in a single holding over a short period of time.

Taking Stock of Green Energy Options

Pure-play alternative-energy stocks can be dicey. A smarter bet: The companies that will supply the infrastructure for the sector's growth.

Propane dealers learn from supply disruptions

Some of the lessons are obvious.

"Those suppliers who are 100 percent rail will probably diversify their supply," said Jamie Py of the Maine Oil Dealers Association. "Smaller- and medium-sized dealers are looking to put in storage to prevent these situations."

Uganda: Diesel Shortage Hits City

Most of the city's Caltex fuel stations had ran out of diesel by Friday. Luzira, Bweyogerere, Ntinda, Kampala Road and Wampewo Avenue fuel stations had no diesel by yesterday.

Total gas station in Kireka ran out of diesel mid-morning yesterday, while Kobil Bugolobi had neither petrol nor diesel.

Kampala to close diesel plant and switch to cheaper heavy fuel

In a bid to curb escalating power tariffs, the Uganda government is expected to close down one of its automotive diesel oil plants in nine months and replace it with a 50 Megawatt heavy fuel oil plant, to be built at Namanve, outside Kampala, The EastAfrican has learnt.

Saudi Aramco awards contract to NPCC

According to Aramco officials, the contract includes the fabrication, transportation and offshore installation of two tie-in platforms, including two bridges, pipe spools and other associated work, and three scraper decks, all in the Zuluf and Marjan fields, offshore Saudi Arabia.

Armenia-Iran gas pipeline to open

Iranian President Mahmoud Ahmadinejad and his Armenian counterpart will formally open the first stretch of a natural gas pipeline Monday in Armenia, a landlocked country that relies on Russia for most of its gas.

Useless Eaters, Now and When

The industrial revolution has created a wasteful, resource-hungry society that needs to be rectified without killing off half of the world’s population.

China’s Energy Governance: Perception and Reality

As China's economic growth begins to transform the global energy industry, getting U.S. policy toward China "right" has never been more important.

Russia: Troubleshooting Starts As Energy Loses Steam

Oil and gas exports, the bread and butter of the national economy, look to have gone a bit stale.

The reasons are threefold: a strong ruble, a suffocating tax regime, and an oil price driven down by plenty of global supplies, analysts said.

Pemex CEO: Company is in critical condition

Mexico´s state oil monopoly is in "critical condition" and needs to boost exploration and seek outside expertise to replenish oil reserves that are currently set to last less than a decade, energy officials said Sunday.

Cartel in the Cards

Kommersant has learned that last week some of the world's leading natural gas exporters reached a final agreement on the creation of a so-called "gas OPEC." The consortium of gas-rich countries, which at the moment includes Russia, Iran, Qatar, Venezuela, and Algeria, is due to be formally organized in the Qatari capital of Doha on April 9. The appearance of such a powerful player in the energy arena will undoubtedly meet with an extremely negative reaction from the United States and the European Union.

Shale gas plays beginning to develop as new ones crop up

The shale gas plays that have fueled natural gas exploration in the last several years show little sign of abating.

Paying the Price for Biofuels

Biofuels may still prove advantageous in some local applications, such as farmers using crop wastes to fuel their farms, and running cars on waste oil that is otherwise thrown away by restaurants, but as a solution to long-term energy needs on a national or international scale, the costs appear to far outweigh the benefits.

Peak Oil? Turkish Diesel is close to $300 a barrel

In Turkey, there is a popular protest against high oil prices. Some drivers stick print outs like: “Warning! This car uses the most expensive gasoline on earth”. It is not a fantasy or exaggerated protest. Turkish unleaded gasoline is around 328 USD per barrel.

Gazprom Needs $13 Bln for Power Energy Assets

Gazprom’s board of directors is going to consider the company’s new power energy strategy this week. The Russian gas monopolist plans to buy controlling stakes in two wholesale power generation companies as well as smaller stakes in three territorial power firms. Gazprom will need $13.3 billion for these purchases, according to analysts.

Can dirty old king coal manage to clean up its act?

Global warming has fuelled changes, but the industry remains Public Enemy No. 1.

The five-way contest for oil sources in Asia and Africa

The quest for energy security has become the primary and most immediate strategic concern of Asia’s two rising giants, India and China. The Middle East will soon feel the full force of this growing competition.

China to move away from energy-intensive growth

With China using 15 percent of the energy consumed in the world to produce 5.5 percent of the global GDP, it's imperative the country move from a high energy-consuming economy to one that provides for more sustainable development, said Ma Kai, head of the National Development and Reform Commission on Sunday.

Sustainable Living: Scientists have plan to fight warming

What if I told you that we already have everything we need to resolve the crisis of global warming, except action? Would you believe me? How about believing two Princeton University economists?

Climate-change cures may be worse than the disease

Kevin Trenberth, climate analysis chief at the National Center for Atmospheric Research, said mankind already has harmed Earth's climate inadvertently, so it's foolish to think that people can now fix it with a few drastic measures.

The April issue of Discover has an interesting article about terra preta: Black Gold of the Amazon

Fertile, charred soil created by pre-Columbian peoples sustained surprisingly large settlements in the rain forest. Secrets of that ancient "dark earth" could help solve the Amazon's ecological problems today.

And speaking of Discover, they have opened up their entire archives to the public. You no longer need to be a subscriber. Anyone can read articles like this one, from 1999: Why We'll Never Run Out of Oil.

I picked up a copy of Bill McKibben's "Deep Economy" this weekend and highly recommend it. It's an attempt to lay the groundwork for post-peak localization, especially for agriculture, and will probably make you much more hopeful for the future after reading it.

Thanks for the tip. I just ordered it from my local library.


Here's an article by McKibben from Mother Jones:

Reversal of Fortune

In 1712, a British inventor named Thomas Newcomen created the first practical steam engine. Over the centuries that followed, fossil fuels helped create everything we consider normal and obvious about the modern world, from electricity to steel to fertilizer; now, a 100 percent jump in the standard of living could suddenly be accomplished in a few decades, not a few millennia.

All the info will be old news to TOD posters, but IMO this site is an easy to read and pretty comprehensive overview of the global oil situation. One stat that jumps out at you- of the top 7 oil producing countries circa 2004, 4 (USA, Mexico,Norway and China)don't have any estimated reserves to speak of. I would think this would be an eye opener even for peak oil debunkers. http://www.gravmag.com/oil.html

Re the China article, the CIA Factbook has (on a purchasing power parity basis) China at 15% of global GDP. USA at 20%, Europe 20%.

What to make of the brief, sharp spikes of $3-5/barrel on the NYM?

Thats what Im wondering! Ive been seeing that alot the last few days...

I've been watching those spikes too and have the same question. I was wondering if these were timed automated buys at a fixed price, or if someone is trying to bump up the trade price by "pinging" the system with a step change in price. Is there any way to find out who is making these purchases? I'm not very knowledgeable about futures trading...

My data souce shows no spikes. High 57.55.

Science shows ethanol good for America

It is amazing that such drivel gets published. From the essay:

Suddenly in America, a multitude of so-called experts have become vocal in their attacks on renewable fuels - fuels that just might break the stranglehold that oil-producing countries have on us.

What’s the difference between a “so-called expert” and an actual expert? Well, that seems to depend on your perspective. If you are an ethanol promoter like this guy, the “so-called experts” are those who are suggesting that ethanol is not a panacea. Your “true experts” are those like Vinod Khosla who made their name in the computer industry, therefore know all about ethanol.

More drivel from the article:

Using a weighted balance of 1, ethanol has an energy balance of 1.3 to 1.8 while gasoline has an energy balance of .8. The same rules were applied to both sources by comparing transportation, refinery costs and handling.

Complete nonsense. The same rules were not applied. That’s why you got the answer you did, and why you should be careful of which experts you listen to.

With the wise use and advancement of ethanol production, a 90 percent reduction in the use of gasoline is possible.

This guy has no earthly idea what he is talking about. None.

Therefore, the cost of extracting a gallon of ethanol is significantly lower than extracting a gallon of gasoline from crude oil.

Yes, that must be why the spot price of ethanol has been higher than that for gasoline for over 25 years in a row.

Somebody needs to dispel the myth that there won't be enough land to produce this source of alternate fuel.

Maybe you should just state that it is true. Won’t that make it true?

I shudder to think that people are reading stuff like that and being influenced by it.

ethanol good for America

Wasn't there that saying "What is good for General Motors is good for America"? Reminds me of that one ..

My father always used a saying that applies to Khosla. " Figures don't lie, but liars figure."

Other sources of energy were also compared, among which was electricity, which was four times more energy intense than gasoline to create. Anyone giving up electricity soon?

Apparently it takes four times as much corn to generate electricity.
It isn't even wrong. Who was it that used to say that? Some early 20th century German physicist I think...

And you are a "so-called expert", Robert. That would be anyone whose opinion differs from the "experts" working for Mr. Khosla. I was about to post a "what orifice did they pull those figures from" rant, but I see that you already have, thanks.

Wolfgang Pauli wrote: "This isn't right. It's not even wrong" on a student's paper.

Re; the weighted balance remark:

What's he talking about ?
RR: "The same rules were not applied."

Where's a source document ?

Re; the weighted balance remark:

What's he talking about ?

You noticed that, too? I think if you asked him, he would defer to someone else. It is quite clear that he is just parroting things he heard. The weighted balance remark is nonsensical.

RR: "The same rules were not applied."

Where's a source document ?

I have written about this a number of times. I have gone back to the original source documents, and even challenged Michael Wang, the originator of this claim, on them. What they are doing is comparing a true EROEI for ethanol to an efficiency for gasoline. The efficiency can't actually be over 100%, but the EROEI can be over 1.0. That's how they get 0.8 for gasoline and 1.3 for ethanol. The EROEI of gasoline is actually 5 or 6, versus 1.3 for ethanol (when you throw in the animal feed products as BTUs).

I have addressed this claim in more detail here:

Energy Balance For Ethanol Better Than For Gasoline?

I think that will clear things up.

Thanks RR,
your link(s) me helped a lot.

Khosla is a total charlatan. "Science" also used to say tobacco is good for you and some "science" still says that global warming is not a problem. As long as so called "science" is behind an allegation, no further thought is required of the casual reader. Yes, there is plenty of land for ethanol. Unfortunately, we won't be able to eat once we have used up all that land for ethanol. Or, perhaps, they are talking about another planet.

If we could just reduce our liquid fuels consumption by 90%, then ethanol could provide all our needs. Further, given the alleged EROEI of gasoline, it clearly makes no sense to produce any more gasoline. Just think of all the oil that will save.

(GOD) Shows Ethanol Good for America

Vinod, appeals to the modern peasant's diety in hopes of winning the PR battle...

I wonder if he has a ranch in paraguay too ?

hehehehehe...LOL :-)

Re: Science shows ethanol good for America

Where do you even start with a fact-free essay like that? What kind of "expert" is the author of this piece from Aberdeen, South Dakota? The Aberdeen American News says the author is a "retired educator, coach, commercial pilot and farmer," but he apparently still believes half the middle east is mad at Americans because they're not prosperous.

Speaking of Vinod, did you all see the news that's he's putting up cash for ethanol in Brazil?

From "Paying the Price for Biofuels", in Leanan's selection today, after you get past Kosla and Gates:

This paper, published in the July 25, 2006 edition of the Proceedings of the National Academy of Sciences, concluded that ethanol production and use offers a modest net energy gain of 25 percent over oil, resulting in 12 percent less greenhouse gases than an equivalent amount of gasoline.

We are saved!

cfm in Gray, ME

However, the other study concludes that every domestic biofuel source -- those currently in use as well as those under development -- produces less energy than the amount consumed in growing and processing the crops.

Published in July 2005 in the journal Natural Resources Research, this study found that, on balance, making ethanol from corn requires 29 percent more fossil fuel than the net energy produced, and biodiesel from soy results in a net energy loss of 27 percent. Other crops (switchgrass, wood biomass, and sunflowers, for example), promoted as solutions to the apparent inefficiency of current methods, offer even worse results.

If you're a hillbilly distilling a mess of rotten apples (over a wood fire you would have burned anyway), it's energy positive. If you have to run tractors and spray chemicals and operate a large distillery, maybe not.

That and the fact that our entire corn crop could never replace more than a smallish percentage of our liquid fuel usage, makes ethanol biofuel an idea that only a politician could love.

Hi Robert,

It is clear to me that ethanol won't reverse the tide of peak oil. It is also clear to me that we have waited altogether too long to address the problems posed by peak oil. It is reasonable to try to save the oil resources as much as possible through conservation, industry, and transportation changes. But these will not be enough. If peakoil is upon us within 5 years, then people are going to die, and probably a lot of them. I understand that corn is probably the worst source of ethanol, and I won't rehash old arguments. I know you believe in some form(s) of ethanol production but are against corn ethanol.

Aren't your efforts better spent promoting those form(s) of ethanol you believe in rather than poopooing the entire industry. I believe (calm down Pit the Elder) the coming hard times will be devastating. I want to hold them off as long as possible. I can only guess that you don't have children.

Regards, Ben

From the cattlenetwork.com article above:

Energy Interdependence


Probably the biggest pain in consumers’ wallets will be caused by the higher price of high fructose corn syrup, the principal sweetener for almost every sweet thing we eat or drink from Coke to Twinkies to chewing gum. Coca Cola, one of the largest buyers of HFCS, is already looking around for a cheaper substitute. Wrigley’s, makers of Spearmint, Doublemint, Big Red and Hubba Bubba chewing gum, just announced the price of a pack is going up by 10%.

High fructose corn syrup is going to be the bane of our society. The article is correct in that this sweetener is in almost everything you buy and it is probably the main reason for high obesity and diabetes rates in this country (USA). As a parent of young kids, I make every effort to buy things that either lack high fructose corn syrup or do not have it as #1 ingredient on the list. I have done this for health reasons in the past, but now since cost is going up, it adds another reason to stay away.

Amen to this. I am in the same boat with my kids.

I am in research in an area that deals with petfoods. I glean a lot of articles on how food impacts health, for companion animals and humans. There are lots of clues that high fructose corn syrup is contributing to diabetes and obesity. There are equal number of clue's that a lack of Omega-3 oils (from fish, flax, algae, fresh greens)in the diet is causing problems.

I would love to see a long term study (say 6-12 months) of soft drink consumption where the identicle formula is made with sucrose vs fructose and track metabolism markers and for pre-diabetes.

Coke, Pepsi, RC cola etc have been around for almost a century but high fructose corn syrup has been in them only since the 1970's (the last energy crisis time). We should grow more sugar beets in the U.S. and send the corn syrup to the distillery to make ethanol.

Same problem with hydrogenated vegetable oils. A little bit is okay but when that is the only fat source going in, maybe it's a problem. We blame health problems on sodas and snacks. Maybe it is what has been substituted into the sodas and snacks over time as much as the volume consumed.

Good thoughts.

The movie "Supersize Me" reported that (at the time) there were only 6 items on the McDonalds menu that did not have sugar (mainly fructose) in the ingredient list. We need to ask why a hamburger bun need 6 grams of sugar added to it? The cost of adding a little fructose to your bread, cracker, even to coat your french fries has historically been fractions of a penny.

Of course, increased fructose prices (due to PO and/or the misguided push toward ethanol) may acutally cause an improvement in the western diet.

"I would love to see a long term study (say 6-12 months) of soft drink consumption where the identicle formula is made with sucrose vs fructose and track metabolism markers and for pre-diabetes."

This would make a great study, though it would probably take more than a year. The rising rate of obesity and diabetes (especially type II in children) in America is alarming.

The exact impact of increasing the percenetage of fructose in the western diet is not fully known yet, but it's clearly not a good thing. Sucrose is, of course, 1 glucose and 1 fructose molecule connected via a C-O-C bond. Fructose enters carbohydrate metabolic pathways at a slightly more downstream point than glucose, and glucose has traditionally been thought of as the main sugar responsible for feedback on insulin. However, fructose's role in insulin stimulation and insulin resistance/diabetes is an area of active scientific research, and it seems clear that high levels of fructose are probably at least as dangerous as high levels of other simple sugars in inducing insulin resistance. One can, for example, induce diabetes in rats by feeding them large quantities of fructose.



This reminds me of a story I heard a long time ago about the restricted diet of Germans in the aftermath of WW2. The children were healthier than at any previous time because of their simpler diets; less sugar mostly.

My mother as child was heavily undernourished and therefore sent to friends in Switzerland. As much as I know, the first two winters after WW II must have been really difficult with supply of food.

The sugar-rich produced food, as far as I can tell, emerged one or two decades later in Europe....

The sad thing is, I find the products made with corn syrup I enjoy, when made with real sugar, often taste better.

Case in point, I am a Dr Pepper fiend. Absolutely love the stuff, but one day in college I was introduced to Dr Pepper made from a special bottling plant in Central Texas that only uses Imperial Cane Sugar. It is and remains the best Dr Pepper I've ever had. It has a cleaner crisper and lighter taste to it, and is in fact far more refreshing on a hot day than regular Dr Pepper.

Recently, my wife on a trip to Central Texas bought me 24 cans of the stuff and I save them for when I've had an especially bad day.

Yes, soda pop in the Carribean is still made with cane sugar since it is readily available there and the flavor is much better.

I personally have switched to the Simply... line of fruit drinks around the house. Simply Lemonade, Simply Limeade, Simply Orange Juice are all better than their competing products and are made with real sugar. My wife notes that the Simply... line of products literally flies off the shelves but they do not stock more, nor do any of the other manufacturers move to produce more sugar based drinks instead of HFCS.

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

We drink a lot of Juicey-Juice at home because it's 100% fruit juice.

If Americans could kick the soda habitat, it would go a long ways towards improved health. That would of course bankrupt some major companies in this country so MSM stays away from promoting the idea.

Juicey-Juice may make you feel better or superior to folks who give their kids soda, but the body doesn't; care... it's still main-lining sugar. Fructose, fruit juice, or cane sugar... you're still drinking the same junk that leads to obesity and diabetes.

Fructose is easier for the body to break down than more complex sugars, so I don't think what you say is absolutely true. I will try to research it more tomorrow and give you some citations.

What I do is mix Juicy-Juice with about twice as much water. I'm probably getting sugar, but I'm not getting HFCS, or all the other stuff in soda.

Our house is horribly puritanical: Water or milk. The kids never really got into juice much, and we've never introduced soda except as a treat with pizza, or on a road trip...Mom & dad don't care for soda much either...

Global peak: 2007 - 2010
Global decline rate, Post peak: 2%
Economic response: Severe global recession, ~5 years, then slow recovery

1. Water
2. Beer (Mich Ultra)
3. Wine (Merlot or Cab)
4. Juice (Tomato or Veg, no OJ)
5. Ethanol (Vodka)

In that order...

"Fructose is easier for the body to break down than more complex sugars, so I don't think what you say is absolutely true"

You are correct; however, sucrose (table or cane sugar) is not considered complex, it's a fructose bonded to a glucose with only one extra bond to break over fructose alone. The full effects of a high fructose diet vs. high sucrose diet are not fully known. Consider the complexity of this graph:


which looks only at carbohydrate catabolism and doesn't look at all at the tissues that take up carbohydrates (mainly liver, muscle and brain) or insulin and other homronal factors.

It is probably best to avoid simple carbs as much as possible whether they be sucrose, glucose or fructose. The problem may be somewhat which type of sugar we eatbut in general, the western diet's main problem with carbs is just the large quantity of simple sugars, regardless of which type.

"I will try to research it more tomorrow and give you some citations."

I, for one, will be interested in what you learn.

Phineas Gage, MD

Well...Wikipedia is as good a place as any...and Phineas, MD...you are correct...it's better to avoid carbs and sugars in excess. I think just giving the kids pure juice fructose is better than HFCS (fructose + glucose). It may be psychological, but I always prefer getting diet from natural sources rather than manufactured. This does not mean I don't succumb to my weakness (Dr. Pepper) as a reward sometimes, but I always feel like I need to go work out afterwards.

As Julia Childs always used to say, "Everything in moderation, including moderation."


High fructose corn syrup (HFCS) refers to a group of corn syrups which have undergone enzymatic processing in order to increase their fructose content and are then mixed with pure corn syrup (100% glucose) to reach their final form. The typical types of HFCS are: HFCS 90 (most commonly used in baked goods) which is approximately 90% fructose and 10% glucose; HFCS 55 (most commonly used in soft drinks) which is approximately 55% fructose and 45% glucose; and HFCS 42 (most commonly used in sports drinks) which is approximately 42% fructose and 58% glucose.

The process by which HFCS is produced was first developed by Richard O. Marshall and Earl R. KooI in 1957 (Marshall et al., Enzymatic Conversion of d-Glucose to d-Fructose, Science, 1957, 125 (3249), p. 648) and refined by Japanese researchers in the 1970s. HFCS was rapidly introduced in many processed foods and soda drinks in the US over the period of about 1975–1985.

HFCS 55 is comparable to table sugar (sucrose) in sweetness. This makes it useful to manufacturers as a possible substitute for sugar in soft drinks and other processed foods. HFCS 90 is sweeter than table sugar as fructose is sweeter than glucose, while HFCS 42 is not as sweet as table sugar.

There is much more good data in this link including:

Sweetener consumption patterns

Interesting, didn't realize there were different types of HFCS. I've never seen the type of HFCS listed on an ingredient label.
I must confess we buy only juicy juice or other brands of 100% juice for our kids but try to limit the amount. They drink mostly water and soy milk.

The larger unanswered question that worries me is whether HFCS is worse than the more traditional sucrose for human health. Feedback mechanisms in the human body (regarding insulin, appetite mechanisms are geared around glucose) so surely heavy amounts of fructose are not something our bodies have evolved for, but what are the ultimate effects of this? Is HFCS in large part responsible for the epidemic of childhood diabetes? Does fructose feedback on our hypothalamus and pancreas the way glucose does to tell us we are sated, or is fructose taken in without registering properly? What happens to children who grow up consuming large amounts of HFCS? That's why I said I was interested in seeing what you find out, but I don't want to encourage you to spend too much time on this question bc/ I think you'll find it has not yet been answered. The early evidence suggests HFCS is bad, but we just don't know how bad yet. For now we'll just have to try to steer our children away from HFCS, which is much easier said than done since our industrial food system adds it to nearly everything we eat.

This whole HFCS/ sucrose discussion may seem off-off-topic to some, but then again HFCS and obesity are by-products of the cheap oil/ energy paradigm.

And this also ties back to ethanol production and the increased price of corn...therefore increased price of HFCS. Wondered why those cans of pop and candy bars were getting more expensive?

It is the USA's equivalent of higher tortilla prices in Mexico.

We decided to avoid the HFCS because we heard that it interferes with leptins telling your body it has had enough to eat.

Feel like a dittohead. You can consume a lot of corn syrup and sugar by eating 'casually'. Some say it's subsidized obesity.


We even switched to birch sugar a couple of years ago.


Hah, the American sugar industry is not so unlike the oil industry. It's basically been controlled by 7 or 8 families for the past century and used the government to keep out competition, but a funny thing happened under the "free-marketeer" Reagan administration. Price of sugar got so high, that Coke and Pepsi turned to the subsidized corn industry and took out the sugar and replaced it with fructose.

So now we'll get rid of the gasoline with corn, we just won't have to worry about eating. Nothing trumps our right to drive!

One area that really surprised me was bread. I started buying only 'whole wheat' and 'whole grain' breads, thinking they would be better. First was the 'whole wheat white' bread. The ingredients were enriched, bleached flour, HFCS, then some whole grain wheat flour. Basically white bread plus a little whole grain flour.

So I started reading labels more closely. Several of the 'wheat' or 'whole grain' breads had the same issues with the enriched, bleached flour but what really surprised me was the HFCS. Nearly every loaf of bread on the shelf had HCFS. I managed to find two types of bread from one company that have no HFCS and use light brown sugar instead.

Just like the soda industry, the bread industry had nearly completly switched to HFCS - including the 'healthy' breads.

As a family we have been trying to eliminate HFCS and trans fats from our diet (along with other things). The trans fats were easy, but HFCS is everywhere. It has really limited most of our boxed items from the store - which is probably a good thing. It is amazing just how few products don't have HFCS.

The best nutrition advice I've ever heard came from a book called something like "The Save-Your-Life High Fiber Diet". The only thing I remember from the book was to never eat anything unless people have been eating it for at least 1000 years.

Thank god that includes beer.

About the only bread we have found that tastes any good and has no enriched flour, HFCS, etc. is Sara Lee. You can occasionally find a "clean" loaf of Arnold or Pepperidge Farms but most their "healthy" stuff has HFCS. We've found only one peanut butter, Crazy Richards, and three brands of jam, Hero, Trappist and Bonne Maman, with no HFCS.

In Randy Udall's comments to the National Petroleum Council, he says

Indicators of peak oil. ... suggestions that Burghan and Ghawar have peaked, the latter confirmed by CERA

This is the first I have read that CERA is confirming that Ghawar has peaked. Is this a simple mistake, i.e. should he have said "the former confirmed by CERA" to refer to Burghan, or is there something new here?

Randy sent me a graph from one of CERA's own publications showing a gradual decline in production at Ghawar. Of course, several of us strongly suspect that the decline is not "gradual."

Reply to Roger Connor from early this morning on yesterday’s thread.

Roger, I will not write a short book as you did but reply to some of the most important points.

(a) Dates: I won't argue exact dates, I was roughly going from eyeballing ASPO charts (which always show the peak before the 1980 line) and my memory (I actually was involved in the gasoline business as a retailer at the time) I will yield a bit here and there, I didn't actually look up all production dates as I wasted time doing the last time we had this discussion, simply because I spend too much time on TOD arguing about things that don't matter already.

I will not argue dates either Roger, I just post them exactly as they were. It only takes a few minutes to check them on the web. There is no need to eyeball them on a chart as this often leads to an error of several years, as it did in your case. I never guess when I can simply check the exact data here:

The rest of your assertions seem to try to explain the difference between then and now being because, to use you bold letter phrase "There was a blood war in the Middle East!"
Gee, aren't we glad there isn't one now....

Let us not get ree—diculous. The war right now is affecting one country Iraq. Iraq in 1989, the last year before hostilities, produced 2.9 mb/d. In 2006 they produced 2.0 mb/d. So this war has taken .9 mb/d off Iraqi production, the only nation affected. Middle East hostilities in 1985 took 9.4 mb/d off OPEC production and 6.5 mb/d off Saudi production in particular. And this was at a time when oil prices were at an all time high. For instance in 85 oil prices were still three times as they were in 73 even after adjusted for inflation.

"The tanker war". Of all the excuses for the 1980's problems involving oil, I have always found this one the absolutely most easy to dismiss and actually ridicule if I were that type of person. I'm not, but I beg in this case that you look at the charts of world oil production in that period and since, and the declines in production around the world, and try to actually attribute a world decline in production in the '80's or at any other time to the tanker wars.

Again Roger, looking at the charts this time has made you make a terrible mistake. You are simply dead wrong about “declines in production around the world.”

Non-OPEC production, C+C in kb/d.
1978 30,694
1979 32,093
1980 32,952
1981 33,569
1982 34,676
1983 35,760
1984 37,057
1985 37,785
1986 37,924
1987 38,110
1988 38,368

As you can see, around the world production just kept right on trucking upward during the Middle East wars. (Non-OPEC production was calculated by simply subtracting OPEC production from World production from the link above.)

And yes, Saudi and OPEC throttled back in 1999, 2001 and 2002. But they announced to the world that this was exactly what they were doing. They made the same announcement of cutbacks beginning in November of 2006. But Saudi decline began a full year prior to that. The cutbacks in 99, 01 and 02 caused slight dips in world oil production. There was another dip in world oil production in the early 90s caused by the collapse of the Soviet Union.

My point: Every other decline in world oil production, up until the current plateau and decline that began in 2005, can be explained by world events. This is the first plateau and decline in history that has happened while everyone was producing flat out. Exceptions noted in the case of Iraq and Nigeria.

THE POINT IS we KNOW why oil came off the market in 1975, we KNOW why oil came off the market in the early 80s, we KNOW why oil came off the market in the early 90s and we KNOW why oil came off the market in 99, 01 and 02. And likewise we know that in November of 06 OPEC began to take oil off the market. But the peak of C+C was in May of 05 and Saudi production began to drop in October of 05. There were NO OPEC cuts in effect in 05. True they have always had a quota but everyone was either producing over their quota or unable to reach it. They were all producing flat out.

That is the point Roger. And I still maintain that it is disingenuous to bring up the early 80s and say “Looky here, this may be the same thing that is happening now. And until we get production declines in excess of this five year drop, we cannot say we are at peak or even plateaued.”

Ron Patterson

This is an excellent rebuttal. Thanks for taking the time to share this!



The article above Troubleshooting Starts as Energy Loses Steam states:

Under tax laws introduced in 2004, oil firms give the state 90 percent of their marginal revenues for all the oil sold above $25 per barrel.

How much impact is this having on Russian oil production? Is it affecting new projects after 2004 more than "old" projects? Is it having any effect on Russian Caspian production?

Hi Gail,

I guess I would wonder if this actually occurs in practice.

A Proposed Peak Oil Denial Case History

I suggest that we monitor how long it will take for Robert and Euan to admit that the Saudi crude oil production decline--and thus the world crude oil decline--is involuntary.

(Or, if you prefer, how long it will take for people like yours truly and Ron to admit that the Saudi crude oil production decline was voluntary.)

We have two oil company professionals, Robert and Euan, who profess to believe that Peak Oil will occur some time in the next decade, but they are both adamantly opposed to any suggestion that World and Saudi crude oil production declines are involuntary.

If, as I believe, the World and Saudi crude oil production declines are involuntary, I think that it will be interesting to see how long it takes for Robert and Euan to admit to it. We can then use the response of two Peak Oil aware oil and gas professionals as an indication of how long it will take for the general population, and especially people like Yergin, et al, to admit that the decline is involuntary.

I do think that Robert is somewhat closer to acceptance than Euan. Robert seems to be in the Denial stage, edging closer to the Bargaining stage, i.e., The Saudi production decline may have been involuntary, but by God it was a coincidence that Jeffrey warned about an impending Saudi production decline.

Following is my edited version of Robert’s comment from yesterday. I changed “cuts” to ”Production Decline.” Otherwise, it’s the same.

Brown’s Version of Rapier’s Comment:
So many people just don't get it. There is no shortage? Even OPEC couldn't cause a shortage? The next thing he will be telling me is about the car that runs off water that the oil companies are keeping off the market.

Yes, there is speculation. Yes, it increases volatility. But there is also a very tight supply/demand balance, especially with the OPEC production decline. In fact, if you look at inventories, the market has been undersupplied for months. That can't go on too much longer without causing some havoc.


I think we are all aware of the disparity in views between yourself, Stuart, Ron and others on one hand, and Robert, Euan and others on the other hand.

If you are right, then the crude oil markets are going to go nuts later this year, as the US/OECD tries to rebuild stocks ahead of hurricane season and winter.

In the absence of increases from Saudi Arabia in this environment, I would strongly lean towards your view that Saudi cuts are not voluntary. If they do increase production, I will lean towards Robert/Euan.

In the meantime, I think we all understand everyone's position, and it serves little purpose continuously to rehash the same argument as to who is right. The simple answer is nobody knows at this juncture, though opinions are strongly held on both sides. Please, therefore can we desist from the "who is right and why" argument for the few months that it will take for the market to give a pretty strong indication one way or the other?

Please, therefore can we desist from the "who is right and why" argument for the few months that it will take for the market to give a pretty strong indication one way or the other?

Well, take it up with the editors.

Euan just launched another salvo in the ongoing debate over whether the Titanic sinks in two hours or four hours.

And Robert is working on his latest version of: "Saudi Arabia may be in decline, but Hubbert Linearization could not have predicted it."


Personally, I don't care if it is voluntary or not. I don't think we will ever find out. If it is not voluntary...they (and the MSM) will find a way to explain it away - and most people will quickly believe it. It it is voluntary, it still impacts the situation (inventories going down, etc.).

I still struggle with the demand from China and India increasing faster than supply can increase...if supply can increase at all. Either way, it spells trouble.

Plus, I like your point of 2 hours vs 4 hours.

Even if the peak is not until 2012, we MUST be planning for it now.

Personally, I think that the peak for C&C is in the past. But, then I also don't really think that an increase from 74,151,000 on May 2005 to 76,000,000 some day will make very much of a difference either. The increase in demand is relentless unless the world changes or a recession/depression occurs.


I think most of us here like and respect a great deal the "combatants" on both sides of this discussion, so we all feel a little discomfort with the intensity and the personal aspects of some posts. But that's life.

I hope all parties continue to argue publically as they review the two hypotheses. If there is new data, good, if it is simply another take on old data ("rehash"), good.

Keep up the good work. The more you guys argue the details, the more the rest of us learn (even as we occasionally squirm ;).

((note to WT - I have a hard time seeing Jerkin' Yergin ever publically admitting CERA's pRoJEctIonz are "Garbage" and an even harder time believing "the general public" will ever understand peak oil and what it means for their cute little 'civilized'-ations. As in the past, the 'general public' will likely never know what hit them)).

Please keep up the very good work - all of you.

With all due respect...debating whether or not Saudi production cuts are voluntary or not is one thing. Posting about Robert and Euan being in denial, and speculating about when they'll give up and admit they are wrong is something else. The former is always of interest. The latter...not so much.

Well, they started it.

But seriously, I think that we are seeing this almost frantic, compulsive effort to attack the near term Peak Oil view--even as the production data continue to support a near term peak. IMO, the ongoing attacks on the near term Peak Oil view are beginning to verge on the outright bizarre, e.g., claims that we can have increasing production even if 14 out of 14 of the fields that are or were producing one mbpd or more are in decline or crashing.

Speaking of crashing super giants. . .

Mexico's crude oil exports are down about 23% from 1/06 to 1/07. Pemex is now claiming continued "climatological" problems for January, which is what they also claimed for December, and the dog really did eat my homework in the fifth grade.

And the "debate" goes on as the water is lapping at our feet. . . .

claims that we can have increasing production even if 14 out of 14 of the fields that are or were producing one mbpd or more are in decline or crashing.

I, for one, appreciate WT's passion, because he looks logically at the Big Picture (and rightly finds it terrifying), while others seem to be cooly weighing individual data points, and only reluctantly admitting piece by piece that what goes UP must come DOWN. I have missed seeing any logical rebuttal to the fact that all the really major oil fields are freaking crapping out! World population grows and grows while total energy available is starting to decline.

"Mexico's crude oil exports are down about 23%"
You'd think what's going on in mexico would wake some people up from their delusions, but alas, the talking monkey only changes behavior when pain stimulus is felt. That's why I fear it's time to "buckle up."

Human psychology + diminishing resources +global scorching (positive feedback loops) = Long Emergency

But seriously, I think that we are seeing this almost frantic, compulsive effort to attack the near term Peak Oil view--even as the production data continue to support a near term peak.

Paranoia is not credibility-enhancing.

IMO, the ongoing attacks on the near term Peak Oil view are beginning to verge on the outright bizarre, e.g., claims that we can have increasing production even if 14 out of 14 of the fields that are or were producing one mbpd or more are in decline or crashing.

In fact, you have never addressed the fact that decline of the first 9 of the 14 was accompanied by a 20 million bpd increase in production. It would be outright bizarre, if it weren't actually true.

HL as a predictive tool is done with my next essay. Finished. Take it to the bank. Whether Saudi has or is peaking, I say with utmost confidence that the HL is not precise enough to pin down a peak within a 10 year margin of error. I think you know that as well, but you have staked out a position and are sticking to your story.


As I predicted, you are moving toward the following position: "Saudi Arabia--and therefore the world--may be in decline, but by God the Hubbert Linearization method could not predict the decline (notwithstanding the fact the World, Saudi Arabia and Mexico are declining as predicted)."

In any case, as you noted, things are moving very fast. A lot of questions will be answered very soon.


Oil prices close in on 61 dollars in London

"Plunging temperatures and slower than expected growth in non-OPEC output have depleted stocks and left crude oil in short supply," CGES (Centre for Global Energy Studies) added.

Just one suggestion. Instead of constantly dodging the Lower 48, North Sea and World case histories, why don't you examine the stability of these HL plots?

Just one suggestion. Instead of constantly dodging the Lower 48, North Sea and World case histories, why don't you examine the stability of these HL plots?

Define stability according to you. I will take a look.

Here is what really sewed up the matter for me. Tell me this isn't a problem. I have plotted a case in which I incremented the oil production up every year by a constant amount. At the 20 year point, I stopped and plotted the graph. The stability appears to be great; the line of the last 15 or 20 points appears to be very straight. Now, despite the fact that oil production in this case has done nothing but increase every single year, the HL is saying we are past the 50% Qt mark and therefore in the vicinity of peaking. The slope of the line is negative, and it is predicting a URR. Of course as I carry it out further, the URR keeps moving. But the stability at any stopping point looks great.

That isn't the only problem case I have plotted, but that is probably the most damning one. Imagine I plot this case out to 1,000 points. Any time I stop, it is going to say we are near peak. Yet it would be wrong every single time.

The key point to keep in mind is that we are trying to estimate the area under a production rate versus time curve.

Why not work with real data?

Lower 48 and North Sea, for example. We have great data, rock solid HL plots, we know where they peaked, and they are both in so far terminal declines.

Usually when one wants to objectively analyze the strengths and weakness of (and perhaps improve upon) a particular model, one studies cases where it works less well. Science is done by refuting the predicted, not confirming the expected.

Here's a quote that everyone involved in the examination of the HL method should take some time to ponder:

". . . every geological phenomenon is determined by an almost immeasurable number of variables, horrifying in their complexity and in the number of their interrelations. Every formula that uses a limited number of variables is therefore but an extreme simplification." -- Martin Gerard Rutten, 1955



Why not work with real data?

Texas isn't real data? How about Saudi? Real data? Those are cases I am working with, or have worked with.

But JB is right as well. You try to determine why the model breaks down by feeding it hypothetical situations. So I am feeding it both.

Hold on a second. HL model can only work where you have free market greed going full force up against geological constraints. If you take the above ground greed out of the equation then all bets are off. It makes no sense to "test" the model with hypothetical human behavior. Oil does not come out of the ground on its own volition. It flows due to the human greed and need factors.

OK, accept this challenge. Show many any situation, real or hypothetical, in which the HL works as advertized (or would have worked as advertized) in real time.

The thing about hypotheticals is that we can actually define our rate of increase, rate of decline, and URR. If the HL can't handle that idealized case, it can't handle anything. You will see this in my next essay.

But you are focusing, so far, on the noisiest of the HL plots of large producing regions. Why not look at the whole picture?

Patience. You will soon have all that you desire. Probably tomorrow.

It sounds interesting.
We look forward to your usually erudite analysis.

(Of course all the models in the world won't help us if Ghawar suddenly crashes.)

"There is no spoon"

None of us can change the reality of the peak oil dynamics through our opinions - we can only observe and analyze the data that is available to try to arrive at the truth. Every conclusion we come to must be up for revision each time we collect additional information, because none of us are omniscient.

The "enemy" here is geology, and societal inertia, not each other.

Global peak: 2007 - 2010
Global decline rate, Post peak: 2%
Economic response: Severe global recession, ~5 years, then slow recovery

"But seriously, I think that we are seeing this almost frantic, compulsive effort to attack the near term Peak Oil view--even as the production data continue to support a near term peak."

WT, I agree with this observation. Clearly, there's been a significant change of tone about HL discussion, and near-term Peak Oil. Tension has increased, on all sides. Like you, I suspect that concern over the current oil production situation has something to do with it. However, I'm not sure if there isn't also a degree of burn-out on the subject going on, too. Maybe all you guys need to take a six-month break from TOD. Breathe. All of ya!

We'll have to set up a TOD Recovery Clinic (TRC), perhaps on some luxurious tropical island where you can ponder the big questions in a less demanding environment. ;o)



Where do I sign up?

Looks like Cantarell is crashing:
"....production at the Cantarell oil field, the country´s biggest, fell by 11.9 percent last year."

'Pemex CEO: Company is in critical condition'

Thanks, Leanan, for making my point far more succintly and eloquently than I was able to.

I second the comment that the ongoing debate is educational for TOD readers because of the obvious expertise of the debaters. It is a really enlightening exercise for us non-experts to puzzle through these posts and exchanges and try to understand the many nuances brought out in them. I personally am learning a great deal and am very grateful to the unpaid posters for sharing their work and expertise.

I also agree with the view that we will soon know the underlying reality, at least to some extent. Meanwhile, we are becoming better prepared to grasp the reality as it emerges.

Agree. I think we all acknowledge that once all the movers and shakers here settle on the C+C peak-is-in-the-rear-view-mirror ...it will be. Today it is not settled. We have a bit of discord for the moment b/c sincere (and very intellegent) people do not agree.

But let's look forward to when they all do agree, not because it'll be wonderful but because the underlying fact is intensely significant for our little planet.

In the meantime the positive aspect I see is that we are not all a bunch zealots reciting some litany, but some dedicated folks trying to help map out good contingencies.

I'm not as troubled by the disagreement as I would be if we all believed the same thing and got it wrong. As long as we can talk together about the implications of this PO trainwreck and provide the best response ideas availiable, we will have helped.

Yes, I agree...you've really hit on the crux of the recent debates. I really don't think anyone here is put out false data or analysis to put forward their agenda. I just think we are coming at the elephant from different directions and with different handicaps.

Like the elephant analogy :) It's big and varied and we are fairly blind when it comes to the real nature of the beast.

We are indeed fortunate to be endowed here with not one or two but many good 'hands on' folks who give us a glimpse into it's boundries and characteristics.

Imagine the oil dependant world's shock when the thing WT, RR, SS, Khebab, Euan, Alan, Simmons, and all have been forewarning finally manifests. OMG there IS an ELEPHANT in the room!

You bet...and right now we have our hands on a tusk and perhaps a tail...not sure if it's a warthog or a pachyderm.


This "denial" thing is unfair.

I don't doubt his sincerity, although Euan's latest posts strike me as grasping at straws.

RR, OTOH, is raising substantial questions on the methodology of determining PO. He's not arguing that his PO date is more accurate.

Since Saudi Arabia's decline appears that it's going to be more like falling off a ledge, It's gonna be pretty hard to argue against it.

WSJ's energy blog is pointing to a short WSJ article titled Late Chill Could Heat Up Natural Gas

"The late-winter withdrawals really eroded the gas inventory surplus," said Jason Schenker, an economist with Wachovia Corp. in Charlotte, N.C. "That kind of erosion is going to make traders nervous across the board."
The U.S. burned through a record 750 billion cubic feet of gas in February, says the Energy Information Administration.
"If you're below the five-year average [by the end of March], this market would start paying attention to it," said Ed Kennedy, managing director for Commercial Brokerage in Miami.

Heating season ends on March 31st, so we will soon find out where we stand. The EIA is predicting stocks 18% above the five-year average.

Despite the world having had the warmest December-February on record, the U.S. had the coldest February in 30 years, accounting for the late winter inventory drawdowns.

Re Heating energy costs.
Maybe we should pay more green taxes for energy, as it benefits the economy, contrary to traditional economical thinking, a new EUropean study shows, (ENDS-daily).
See graphics in Danish environmental research institute newsletter http://www.endseuropedaily.com/docs/70316b.pdf

Citation: "Environmental taxation can make a clear contribution to economic growth while also reducing emissions of carbon dioxide (CO2), delegates at a European commission conference on taxation for sustainable development will hear on Monday. The case will be made by an international group of scientists presenting the findings of EU-funded research into 17 years of energy and CO2 emissions taxation in six European countries: Germany,
Sweden, Denmark, Finland, Slovenia and the UK.
The effects are particularly clear where governments introduce a green tax shift from labour to environmental taxes."
Follow-up: European commission


Re: Ethanol

What has been the impact on the ultimate food consumers? In any event, where is the rage about these higher food prices? I guess the only thing that gets people's attention is higher gas prices, and then, only for a little awhile.

As some of these articles, we didn't really think this shit through. But like Iraq, the proponents can't say no one warned them. As I recall, we were told not to worry, be happy, the impact on food prices will be minimal.

Of course people are concerned about the higher food prices. It just isn't discussed in the msm, giving the illusion that nobody cares.
This does work both ways, though - people may not start really worrying about about this, and other things, until they are TOLD to worry BY the msm.

gov't = corporations = media = gov't = media = corporations, etc,etc,etc,etc... round we go, wheeeeeee...

It looks like Leanan is moonlighting:


Of course he is slamming ethanol.

(Though I have to give credit when it is due--you tried to be balanced on this site today.)

Unless I am mistaken, Leanan is a she. Perhaps Leanan can comment and clarify?

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

SHE has posted articles not only on both sides of the fence, but ones on the fence as well.

Not sure what the issue is. I was a news editor at PeakOil.com before they asked me to do the same here. That has never been a secret. Yes, some of the stories that are posted at PO.com are also posted here. I don't see how that's a problem.

I don't actually write any of the stories myself, if that's the question. I just post links to them.

Interesting article that did not make it into Leanan's morning cut...

Oil prices seen rising over summer as OPEC leaves supply cuts in place - CGES


LONDON (AFX) - Oil prices are set to rise further over the summer in the wake of OPEC's decision to leave output unchanged, keeping in place cuts agreed at the end of last year, the Centre for Global Energy Studies said. "By failing to increase oil supply, OPEC has set the scene for another upward spiral in oil prices over the summer," CGES said in the March edition of its monthly oil report. "Having cut output at the start of the winter, OPEC always risked taking too much oil off the market at a time when demand for its exports was strong, and that is exactly what has happened," it added

Crude is in short supply ahead of the US summer driving season with stocks eroded over recent months by falling temperatures and lower-than-anticipated supply from non-OPEC countries, the CGES said. US gasoline stocks have started to fall several weeks earlier than usual, and are now 5 pct lower than a year ago, it said

Meanwhile crack spreads have risen sharply, suggesting another tight gasoline market over the coming months unless stocks recover in the second quarter, it said

"Refiners will need to boost runs rapidly and to do so they will need more crude than is currently available," it said. The CGES estimates that oil production by the eleven members of OPEC excluding Angola has fallen by 1.4 mln bpd since its recent peak in August 2006, and is likely to drop a further 0.8 mln bpd between 2006 and 2007 if OPEC does not ease supply restrictions.

Talking about oil prices..... Greg Palast has this to say:

It’s STILL The Oil:
Secret Condi Meeting on Oil Before Invasion

The war has kept Iraq’s oil production to 2.1 million barrels a day from pre-war, pre-embargo production of over 4 million barrels. In the oil game, that’s a lot to lose. In fact, the loss of Iraq’s 2 million barrels a day is equal to the entire planet’s reserve production capacity.

In other words, the war has caused a hell of a supply squeeze — and Big Oil just loves it. Oil today is $57 a barrel versus the $18 a barrel price under Bill “Love-Not-War” Clinton.

Since the launch of Operation Iraqi Liberation, Halliburton stock has tripled to $64 a share — not, as some believe, because of those Iraq reconstruction contracts — peanuts for Halliburton. Cheney’s former company’s main business is “oil services.” And, as one oilman complained to me, Cheney’s former company has captured a big hunk of the rise in oil prices by jacking up the charges for Halliburton drilling and piping equipment.

But before we shed tears for Big Oil’s having to hand Halliburton its slice, let me note that the value of the reserves of the five biggest oil companies more than doubled during the war to $2.36 trillion.

And that was the plan: putting a new floor under the price of oil. I have that in writing. In 2005, after a two-year battle with the State and Defense Departments, they released to my team at BBC Newsnight the “Options for a Sustainable Iraqi Oil Industry.” Now, you might think our government shouldn’t be writing a plan for another nation’s oil. Well, our government didn’t write it, despite the State Department seal on the cover. In fact, we discovered that the 323-page plan was drafted in Houston by oil industry executives and consultants.

The US and Uganda have some things in common...

What happens to coal production in Wyoming or elsewhere, agriculture production and interstate trucking in general, when short-term diesel shortages become long-term diesel shortages?

(from Leanan's Links above)

Diesel shortage hits city

THERE is a shortage of diesel and other petroleum products in the country

...Shell... has not been able to provide its big clients with a consistent supply of fuel over the last one week...

“When we get it, we supply them but when we have little, we can only give the ordinary clients who pay cash,” said David Mugamba, the deputy manager of the station.

From last year...

Truckers face diesel rationing in Wyoming

...Sinclair also provides diesel for earth movers working the coal mines in the Powder River Basin. He said Sinclair has maintained delivery to its mining customers, but some of the mines have had to seek additional volumes elsewhere...

"This action is intended to respond to the diesel shortage and make it possible for both the agricultural community as well as the transportation community to continue to do their jobs notwithstanding the delays in receiving fuel," Freudenthal said in a prepared statement.

And ...

Farmers, truckers fear a shortage of diesel fuel

...The corn, bean and sugar beet harvest runs from September through November, at the same time wheat farmers are planting their next round of crops.

With the majority of work performed by diesel-fueled machines, producers fear yet another hit during a year of devastation caused by severe drought.

Top investor sees U.S. property crash

Commodities investment guru Jim Rogers stepped into the U.S. subprime fray on Wednesday, predicting a real estate crash that would trigger defaults and spread contagion to emerging markets.

"You can't believe how bad it's going to get before it gets any better," the prominent U.S. fund manager told Reuters by telephone from New York.

"It's going to be a disaster for many people who don't have a clue about what happens when a real estate bubble pops.

"It is going to be a huge mess," said Rogers, who has put his $15 million belle epoque mansion on Manhattan's Upper West Side on the market and is planning to move to Asia.

..."This is the end of the liquidity party," said Rogers. "Some emerging markets will go down 80 percent, some will go down 50 percent. Some will most probably collapse."

If you're interested in more on this topic, you can read today's Round-Up at The Oil Drum:Canada.

Posted that last week.

In the same vein of investors speaking their minds:

Jim Cramer Explains Massive Insider Manipulation


Thanks for posting that Cramer video link.

I always thought the markets were a Casino, now I know they are. Its all a game.

Simply unbelievable.

CNBC had a guy on today on the mortgage meltdown. In round numbers, I think that he said that about 3% of mortgages written in 1990 had 10% or lower down payments, versus 38% in 2006.

He also said that the next 60 day period would be the spike for ARM adjustments--I think three years after March, 2004. He said that ARM borrowers in this group were looking at a 100% increase in interest if they go with a fixed interest rate and a 60% increase if they go with another ARM.

Interesting that Jim would spout off like that before his $15M home is sold. As his real estate agent might say, "the seller is motivated".

Sounds like it'll be a race between the real estate crash destroying demand and the Saudi oil production crash destroying supply. Be kind of ironic if they both happen at once...

Leanan: Just to add- Rogers is convinced that the future belongs to Asia (economically speaking)-he is rather negative on the economic prospects of the USA (real estate bubble or no real estate bubble).

What is with the spikes on the Crude oil price graph today?

It's all about population!

Ugh. Wholesale gasoline is up over a nickel so far today. And the TeeVee keeps blaming it on the switch to summer fuels. Which happens every year. Oh yeah, I remember the price of gas going up 50 cents a gallon every spring in the 90s. (note: that's sarcasm!)

61 die in Siberian coal mine explosion

MOSCOW - A methane gas explosion ripped through a Siberian coal mine Monday, killing at least 61 miners among nearly 200 working underground in one of the deadliest mining accidents in Russia in the past decade.

...Emergency Situations Ministry spokeswoman Alina Avyazova said rescue workers were in contact with surviving miners underground. It was not clear whether they were in immediate danger.

Brent closed at $60.70 a barrel today, up 56 cents. WTI closed at $56.59, down 52 cents. The gap is no $4.11. I cannot explain it but I would bet one of them is about to change directions, and it will probably be WTI, about Wednesday.

Traditionally Brent has sold at about a $2.00 discount to WTI so there is a six dollar disparity there. Something is causing it but no one to my knowledge has ever explained it.

Ron Patterson

Yes Ron, its very odd. Here in NZ (as in Australia) we reply on Tapis spot to set our oil/petrol prices - that has hovered resolutely in the $65-67 range for the past week or so (a $9 premium). Hence our petrol prices are heading back up. Meanwhile the idiots on TVNZ keep reporting the Nymex price causing folk here to get all enraged as to why petrol is going up yet 'the oil price' is falling. I sent an e-mail into the TVNZ people saying why dont they use the Tapis price as its far more relevant to what happens in Oceania. Needless to say I was ignored.

Ron, I have explained in detail in the past few days why WTI is discounted to Brent.

The issue is the landlocked and physically-constrained nature of the WTI delivery point at Cushing. WTI is dependent on pipeline flows and local demand, Brent is waterborne and has no constrints on demand.

All physical crude diffs have appreciated against WTi in the last few days: Tapis, LLS, Mars, Brent, you name it....

I made this post on March 16:

West Texas Intermediate (aka WTI) or equivalent light sweet crudes are delivered via pipeline to the landlocked NYMEX deliver point in Cushing Oklahoma. Cushing sits at the convergence point of six different pipelines:

Spearhead: from Canada. Used to flow from south to north, but reversed flow in 2006 delivering Canadian syncrude to Cushing. Canadian imports into PADDs 2 and 4 amount to about 1.50 million barrels/day (bpd).
Jayhawk: delivers mid-continent crude to Cushing, about 800 thousand bpd
BP Amoco and Basin pipelines: link Midland TX to Cushing
Seaway: from Freeport TX to Cushing
Sun: from port Arthur TX to Cushing (total for these last four about 1.5 million bpd)

Crude flows ONLY into Cushing. Because of the reversal of the Spearhead line, and with no concurrent reversal of any of the other lines allowing crude to flow south, crude stocks at Cushing have increased due to limited refinery capacity. Refinery capacity expansions in 2007 will create incremental demand of about 105,000 bpd of crude at Cushing.

High prices for crude on the Gulf Coast (Louisiana Light Sweet is trading up to $4 per barrel premium to WTI) should also result in lower flows from the coast.

The Brent forward market is the underlying physical product of the IPE Brent contract. Brent blend is similar quality to WTI but trades as a waterborne crude in the North Sea (ie delivered in a tanker). This gives it more flexibility from a destination point of view - the tanker can theoretically go anywhere in the world after delivery. It is not subjected to any physical pipeline constraints. Brent therefore is probably a better reflection of real world valuation for light sweet crudes.

I asked Dante at PO.com about the price differential. This was his explanation:

Mostly because the next month futures contract (May right now) is trading more than $3.10 over the current month. So this situation probably is temporary. The other part of the difference is due to subdued US demand due to refinery problems, and somewhat of a problem of having the wrong oil in the wrong place.

A film that is a "must see" (for those who haven't seen it yet) is a movie that premiered last year at the SXSW film festival called OilCrash! Our peak oil awareness group in Austin helped with the premier. The film has won numerous awards at film festivals around the world.

It is already showing in commercial theaters in Canada and will soon be available via Netflix and other rental services in the USA.

It has also been picked up by the Sundance Channel and will launch the Sundance Channels' new prime time environmental programming series known as "The Green" next month (April, 2007). The film's producers have renamed the film A Crude Awakening - The Oil Crash. I believe it is scheduled to be premiered on the Sundance Channel on April 17th at 9:00pm ET/PT, 8:00pm CT.

See the trailer: http://www.youtube.com/watch?v=O68MX-86hOk
See the film's website: http://www.oilcrashmovie.com/film.html
See the Sundance Channel's website on "The Green": http://www.sundancechannel.org/thegreen/

If any TOD[Canada] members have seen the film in the theaters there, would you care to provide a review?

I haven't seen it, but I'll check out the local movie listings and get back to you.

This is a grim forecast for mexico, though no surprise to TOD:

Global peak: 2007 - 2010
Global decline rate, Post peak: 2%
Economic response: Severe global recession, ~5 years, then slow recovery

The key number is the 23% drop in oil exports, from 1/06 to 1/07. I expect this decline rate to accelerate.

Probably the closest analogue to Mexico is the UK, which went from exporting one mbpd in 1999 to being a net importer in 2005. This was probably close to a 40% annual decline rate in net oil exports.

RE: Ethanol’s Growing List of Enemies

“But he worries that they'll face mounting pressures in the industry, particularly because of the soaring price for corn, which the business depends on to feed the livestock”

- 1998 Meat Glut http://tinyurl.com/37n9rj
- 2002 Meat Glut http://tinyurl.com/39fljl
- 2006 Meat Glut http://tinyurl.com/2s3gqd

“While politicians including President George W. Bush and farmers across the Midwest hope that the U.S. can win its energy independence by turning corn into fuel,”

- Straw man argument. Energy Independence from ‘corn’ is not advocated nor is it policy.

“The effort is uniting ranchers and environmentalists, hog farmers and hippies, solar-power idealists and free-market pragmatists”

- Environmentalists… Really?!?. I challenge any environmentalist to prove that genetically modified corn converted to ethanol is worse for the environment than that which is coverted to factory farmed meat.

“and the government's active involvement—through subsidies for ethanol refiners and high tariffs to keep out alternatives like ethanol made from sugar—is likely to lead to chaos in other sectors of the economy.”

- Here we have a situation where the price of corn has raised to a level that actually supports growing the crop i.e. the true market value of the commodity in question and yet economists fear the chaos that will ensue. The irony is mind-boggling.

"The government thinks it can pick a winner, but they should allow consumers to pick their own," says Demian Moore, senior analyst for the nonprofit Taxpayers for Common Sense. "Corn ethanol has failed to prove itself as a reliable alternative that can exist without huge subsidies."”

- I have discussed this countless times. The onset of Peak Oil will not send the appropriate market signals needed for alternative LTF production in the timeframe allotted us.

“the NCBA, the National Chicken Council, the National Turkey Federation, and the National Pork Producers' Council testified before Congress, calling for the end of corn ethanol subsidies”

- An industry sustained by the unsustainable. See Meat Glut above or read ‘Who’s Really Afraid of the High Price of Corn” IATP http://tinyurl.com/ypa2cm

“In this year's State of the Union, Bush proposed quintupling that figure”

Fallacious statement. President Bush called for a quintupling of alternative fuels not ethanol.

“"The amount of subsidies provided for ethanol could easily be used to switch this country to plug-in hybrid vehicles, and ultimately have a much greater impact on reducing oil dependency," says Jigar Shah, CEO of SunEdison”

- This statement is laughable on its face.

RE: Paying the Price for Biofuels

I did not have time to post my response to this 'superb' article. Rest assured it contains the usual nonsense.

Syntec said,

"Here we have a situation where the price of corn has raised to a level that actually supports growing the crop i.e. the true market value of the commodity in question and yet economists fear the chaos that will ensue. The irony is mind-boggling."

Irony is the right word. When the consumer finally figures out that, (a)the food bill is going through the roof, (b) the natural gas and electric bill is going through the roof due to the consumption of nat gas in the ethanol industry (c) despite earlier promises, the fuel bill for transportation is going through the roof due to the higher cost of ethanol and the fact that they have given up a 10th of so of the heat content compared to gasoline, and oh, one more little item, the interest rate and or taxes are under pressure to go up to pay for the ethanol subsidy which after the rising natural gas cost and the rising raw material cost of corn is now costing an ever increasing fortune.
Did I miss anything....oh yeah, the balance of trade, which as we are forced to import tons of fertilizer to grow corn is also going to helll in a hand basket.

Already caught between the vice grip of high natural gas price (a commodity that is nothing short of a catastrophic sin to waste on this boondoggle), and rising corn prices, if anybody has to praying for a Saudi Peak, and NOW, it has to be the ethanol growers, because if the price of crude does happen to hold steady or heaven forbid go down...
Can you spell "CRASH" boys and girls?

Google bio-butanol.

Remember, we are only one cubic mile from freedom,

a) prove it - prove that the price of food is 'going through the roof' due to ethanol usage.

b) fallacious statement - do you really expect people to believe that the price of both natural gas AND electricity are 'going through the roof' because of ethanol production??!? Give me a break.

c) another fallacious statement - there is more than adequate supply of ethanol for blending requirements which would correspond to a drop in gasoline prices if gas supplies weren't already low or going through summer blending or repair work.

CBOT has ethanol futures out to $2 a gallon or less for 07 while the American Petroleum Institute itself confirms that gas prices should be lower this year due to ethanol: http://www.newsone.ca/ottawarecorder/ViewArticle.aspx?id=46339&source=2

Read what he actually said. He said that prices could be lower because ethanol capacity is being overbuilt and could lead to softening of prices.

True - for 07'.

However, for 06', the API states:

"Part of the reason you saw the sharp decline in gasoline prices post-August into the beginning of November was the decline in ethanol prices," said the association‘s chief economist, John Felmy.

If there's a better source than the API to confirm that ethanol usage has dropped gasoline prices...

You are reading into this what you want to see. Ethanol prices had a major run-up in the summer. That really helped spike gasoline prices, since ethanol was mandated. Of course that drove up gasoline prices. So it wasn't the ethanol usage that dropped gasoline prices, it was the fact that ethanol prices finally came down.

Major oil reserves discovered in Bohai


They won't give us the exact reserve numbers, but my guess is the article is exaggerated.

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Hello TODers,

More violence likely in thirstier world

"Severe, prolonged droughts are the strongest indicator of high-intensity conflicts," said Marc Levy of the Centre for International Earth Science Information Network at Columbia University's Earth Institute in New York.

Areas with a high risk of conflict this year due to extremely dry conditions last year, according to his model, are Côte d'Ivoire, Sudan, Bangladesh, Haiti, and Nagaland and Manipur in India.
Bob Shaw in Phx,Az Are Humans Smarter than Yeast?

Hello TODers,

Houses cheaper than cars in Detroit

DETROIT (Reuters) - With bidding stalled on some of the least desirable residences in Detroit's collapsing housing market, even the fast-talking auctioneer was feeling the stress.

"Folks, the ground underneath the house goes with it. You do know that, right?" he offered.

After selling house after house in the Motor City for less than the $29,000 it costs to buy the average new car, the auctioneer tried a new line: "The lumber in the house is worth more than that!"
Bob Shaw in Phx,Az Are Humans Smarter than Yeast?