DrumBeat: April 1, 2007

RBS chief economist on peak oil

After the peak, according to this theory, there will be a steep decline in production; crude oil prices will rise sharply, and there will be a shortfall of oil, which will wreak havoc on the global economy.

But this theory, like many Mel Gibson movies, is pretty implausible stuff - to an economist, at least. That's because it neglects to take into account the importance of technological progress and the adaptability of the market.

Food, Climate Change and the Coming Energy Crises

Across the water, the easy complacency which surrounds the supplyof food was severely tested in September of 2000 when after just a few days of a nation-wide truckers’ strike, many parts of the UK found themselves facing what has become unthinkable in modern times: a shortage of food. Once the deliveries stopped arriving, it was only a matter of days before the shelves were emptied. Since little food was produced locally, it quickly became apparent that there really was no other source of food available. Modern farming and globalised systems of trade have created a situation in which we are perilously vulnerable to political and environmental factors quite beyond our control. Unless we start taking this issue seriously and make dramatic changes to the way we think about and produce food, we are facing the increasing likelihood of food shortages and yes, famines, even in the most developed and ‘modern’ parts of the world.

Marseille oil port workers vote to end 18-day strike

Workers at France's Fos-Lavera oil hub in Marseille voted yesterday to end their strike on its 18th day as it threatened to shut down refineries and cause a regional fuel shortage, a trade union official said.

April Uranium Price Outlook: US$110/Pound

Nuclear energy provides about 16 percent of global electricity needs and about 20 percent of electricity needs in the United States. The scarcity of available uranium inventory has caused prices to soar over the past six years by more than 1100 percent. The spot uranium price has more than doubled over the past year and continues to rise strongly in 2007. According to industry watchers, the uranium supply shortage could soon reach a ‘crisis’ stage.

Ethanol makers slam report

A group representing biofuel manufacturers disputes a report that suggests the federal government’s massive investments in ethanol won’t dramatically reduce greenhouse gas emissions.

Energy-South-Africa: Fuel in the Car at the Expense of Food on the Table?

...Sugrue wrote in a paper titled 'Towards A Southern African NGO Position On Biofuels': "In Southern Africa maize could be a major feedstock for biofuels, yet it is the staple diet of more than 80 percent of the population and all of the poorest citizens."

Climate change ‘could create 200m refugees’

EQUATORIAL lands that are home to hundreds of millions of people will become uninhabitable as food and water run out due to climate change, scientists will warn this week.

Firms fail to adapt to climate change

Companies and public bodies in Britain face expensive repair bills, penalties and even litigation because they are not adapting infrastructure and business plans to the threat of climate change, the government's UK Climate Impacts Programme (UKCIP) has warned.

Poor Nations to Bear Brunt as World Warms

The world’s richest countries, which have contributed by far the most to the atmospheric changes linked to global warming, are already spending billions of dollars to limit their own risks from its worst consequences, like drought and rising seas.

But despite longstanding treaty commitments to help poor countries deal with warming, these industrial powers are spending just tens of millions of dollars on ways to limit climate and coastal hazards in the world’s most vulnerable regions — most of them close to the equator and overwhelmingly poor.

U.S. Churches Go ‘Green’ for Palm Sunday

Slightly more expensive than the average palm, eco-palms are the rage in churches across the United States because of the social and environmental benefits they represent. They are collected in a way that helps preserve the forest, and more of the sale price ends up in the pockets of the people who cut them.

Soaring costs threaten TransNet

Soaring construction costs already are threatening the completion of San Diego County's $14 billion, 40-year road-building program one year before it starts receiving cash from a countywide sales tax, transportation officials say.

Since 2002, construction costs have nearly doubled and they are rising three times as fast as sales tax revenues, said Richard Chavez, principal transportation engineer for the San Diego Association of Governments, a regional planning agency, last week.

Jack Boda, the association's director of mobility management, said in the same interview that the escalation reflects fast-rising prices worldwide for steel, asphalt and cement - the main building blocks of freeways, railroads and bridges.

Americana in Montreal

For instance, two delegates from Saudi Arabia gave a presentation about "sustainable development" in their country. They spoke of the explosive growth rates of 3-6% a year in their cities. And they spoke of the huge economic opportunities available to foreign investors to meet the demands of this growth. At the end of their talk I asked where all the water would come from to feed these cities, and they admitted to the audience that Saudi Arabia is facing extreme challenges due to their underground aquifers emptying at alarming rates. They said this is not a problem though, because water will be supplied by desalination plants, plants that do not exist yet and that would be fuelled by natural gas. This is in no way "sustainable development," not by my definition (which is "capable of continuing indefinitely").

Farmers market or super-mega-grocer? Your decision could change our world

To say it plainly: Deep Economy should be required reading for every economist and economics student in the developed world; for every elected official on the local, state and federal levels; and for everyone else as well. The book articulates the profound environmental and human costs caused by dominant and rutted economic behaviors while counterbalancing these sober realities with real-world examples of sane and successful "economies that are more local in scale."

Judge advances global warming lawsuit

A federal judge has advanced a lawsuit against the government over its funding of overseas projects that environmental groups claim contribute to climate change.

The lawsuit, filed by environmental groups and four U.S. cities, claims that the overseas projects will harm the U.S. environment because the effects of global warming will be felt at home, and seeks to require the same environmental reviews that are required for domestic projects.

Climate draft charts extinctions

A key element of the second major report on climate change being released Friday in Belgium is a chart that maps out the effects of global warming, most of them bad, with every degree of temperature rise.

Exxon: 12-yr wait on China energy project to pay off

ExxonMobil said a 12-year wait to start a $5bn refining and chemicals venture in China will pay off because the Communist government will free the world’s fastest-growing gasoline market and ensure profits.

Russian company to build Saudi pipeline

A subsidiary of Russia's national energy company has signed a $100 million contract for construction of an oil pipeline in Saudi Arabia.

Campaigns save energy with hybrid cars

This year's presidential candidates are trying to get good mileage out of getting good mileage. The candidates, who do a lot of talking about the need for greater energy efficiency, are not just asking who walks the walk but also, who drives the hybrid?

Global warming could bring hunger, melt Himalayas

Global warming could cause more hunger in Africa and melt most Himalayan glaciers by the 2030s, according to a draft U.N. report due on Friday which also warns that the poorest nations are likely to suffer most.

Sydney's blackout hailed a success

Organisers behind a campaign that saw Sydney impose a one-hour blackout to focus attention to global warming hailed it as a success for taking the equivalent of nearly 50,000 cars off the road.

Malaysia's Petronas to search for oil off Myanmar

Malaysia's state energy firm Petronas will launch an oil exploration survey off the southern coast of Myanmar, state media said Saturday, amid growing foreign demand for the country's vast resources.

Brazil's Lula Doesn't Get What He Wanted from Bush: End to Subsidies and Tariffs

The Camp David meeting, this Saturday, March 31, between American President George W. Bush and his Brazilian counterpart Luiz Inácio Lula da Silva produced optimistic statements and vague promises, but no concrete results for Brazil, which wanted an end to the tariff charged Brazilian ethanol in the US market. Neither there was any hint that the United States will reduce soon its farm subsidies.

Worries over global warming to boost ‘shift to renewables’

Three decades after former US President Jimmy Carter experimented with solar panels on the White House roof, grim UN warnings about climate change may kick-start wider global use of renewable energy.

Just two cents:

I'm glad to see discussions that are devoid of tempests in teapots and advanced trollery.

It's been a pleasure to peruse TOD recently.

(In spite of overall developments world wide...)

Yes...Bendeasy..its nice to read without the trolls but I suspect from several posts that one of the reknown banned ones has his camel's nose back under the tent flap and with a new ID. At least he has dropped the part about pleading for a mass dieoff and how we all deserve it. I could be wrong but its extremely hard for a hard core troller to change his stripes completely.

Still as you say...very pleasant.

Russia predicts lower oil prices for 2007-2009. Wonder why.

Russia cuts oil export duty to $156.4 per ton from April 1

Russia has cut the oil export duty by $23.3 to $156.4 per metric ton from April 1.

A decline in oil prices that began late last year and has continued into 2007 has prompted the government to adjust crude price and economic growth forecasts and cut oil export duties.

The oil export duty is adjusted every two months and is based on Russian Urals oil blend prices on world markets.

The previous crude export duty set February 1 stood at $179.7 per metric ton.

The Finance Ministry earlier said the oil price forecast for 2007 had been reduced from $61 to $55 per barrel, and the forecasts would also be reduced from $56 to $53 per barrel in 2008, and from $52 to $50 in 2009.

>Russia predicts lower oil prices for 2007-2009. Wonder why.
Simple: oil companies want more money and less taxes.


They have not been successful steering the Putin administration up to now (e.g. Yukos) so why are they all of the sudden able to set the agenda? The more plausible explanation is that, just like in the west, the cornucopian analysts set the agenda.

My guess is that the Russian governmnet now own most of the industry and then it matters little if they get the money thru taxes or profit. But the non government and foreign owned oil companies need lower taxes to invest in new production to get at new hard to develop oilfields.

I put something together that you TOD people may like. Here it is:


Hope you like it.

Are you a "gold bug?"

I found the article interesting but a bit disjointed.

The notion of cutting back consumption is a good one.

Your illustration of heating the house in Maine is a bit thin, though. Lots of pain can be involved in the economic dislocations caused by changes in petroleum prices.

You seem to also assume a certain faith in the "Markets" that all do not share....?

I think that this faith has become the key unexamined premise of "economists" in our world today.

It may very well be that we have perpetrated the greatest market failure of all time because of unexamined premises.

I like reading John Gray ("Straw Dogs" and "False Dawn") to counter current economic thought.

Just some thoughts in response.

Are you a "gold bug?"

One doesn't have to be a 'gold bug' to look at the present money system and claim flaws. The 'gold bugs' have many more years of "working" systems to draw conclusions from is all.

Any system has flaws.

Yes Sir: The cost of extracting resources rises in tandem vis a vis some set bench mark. The bench mark is not some notional value such as the dollar or the euro. The real bench mark is the societial cost which includes labor, energy, pollution and many other factors. If the societial cost rises to extract oil, the effort will detract from extracting other resources causing a decline in supply of those resources thus a rise in price. Your charts give a nice simplified picture of this. I think what a lot of folks forget is that economics is a study of a vast system not just a single item.

a couple thoughts on your article:

Your concluding paragraph about using 10 times less to heat a house is a great message. This is what must eventually happen on a grand scale.

About that first chart: Oil measured in "real money" is a meaningless gimmick that may be fun to stare at, but has little real value. Oil and gold are both real assets and alternative stores of value compared to our paper dollar. However, comparing the two as if there is some fundamental linkage that must always be maintained is ridiculous.

Of course both will rise together as the value of paper dollars fall. There is no causal relationship between the two. One is energy, necessary for life, economy, and industry. The other is a curiosity with little practical use, aside from storing some value. Oil is used, and destroyed, and must be replaced. Gold is mined and accumulated. They are only similar in that they are part of a large family of non-dollar assets that will definitely rise as the world loses confidence in the worthless paper money the US keeps printing.

All of your other conclusions and graphs are well presented and form a good coherent message about oil prices. The link to gold is just a distraction.

> "real money" is a meaningless gimmick

I generally agree that gold is a "barbarous relic" as a monetary standard -- liquidity governed by mining output? geez.

That being said, there may be some merit to the idea that the world's savers (Asia and other exporters) will gravitate to gold (or other precious metals) at some point for lack of a better place to hide. It's been suggested that those savers have sought US/Western investments because local investments have not traditionally had the desired levels of investor protection. What a weird world we live in.

Most of the real gold bugs in the US are old and discredited, but what about Asia? Are there "gold-money" newsletters out there in languages that I don't understand? That I believe is an interesting question.

During the 19th century, on the gold standard, we had no inflation. During the 20th century, using fiat currency, the dollar lost 95%+ of its value to inflation. WHich one do you prefer?

The "liquidity by mining output" statement makes no sense to anyone that understands how a gold standard works. Professor Antal Fekete has written numerous papers on real bills and self-liquidating credit under a gold standard. (See www.financialsense.com). There is absolutely no problem financing production under a gold standard. (Which is what I assume you meant by liquidity).

Over the last 100 years the Fed has gone to a lot of trouble to discredit the gold standard, since it is the natural enemy of a fiat currency. FIat currencies allow governments to spend without any voter restraint (other than worrying about creating excessive inflation). The gold standard on the other hand limits government spending to what can be raised by taxes and borrowed against future tax income.

Why would anyone therefore (other than a banker that is) NOT support a gold standard? In today's world, you could use electronic debit cards linked to your gold account just as easily as cards linked to your fiat dollar account, and you could spend .001 oz of gold on a cup of coffee as easily as you would $2.50. The difference is that under the gold standard you can sleep at night not worrying about the bankers printing additional money and devaluing the notes in your pocket.

The general misunderstanding and ignorance of how a gold standard works/has worked in the past is beyond belief.


When someone deflates the value of paper money by, for instance, the CPI without inflating the amount of paper money by the T-Bill rate then they haven't been completely honest about the value of paper money. This mistake is repeated ad nauseum by gold bugs. Paper money has NOT lost 95% of its value to inflation. The gold standard is self-discrediting. The gold bugs are "beyond belief".

Francois? You still concious?

I found the April 1 article to be very thought provoking; it also seemed well organized to me. I'm going to contemplate what you wrote and read some of your other pieces.

Bush 41 Offical admits Peak Oil Possible and Rail Needed

However, I would observe that railroads do have a trump card. Unlike their partners in trucking and aviation, if at some point in the future permanent oil shortages are a serious threat, rail can convert to electricity generated from an alternate source. The rail mode already carries its freight and passengers nine times farther per gallon of fuel than do the highway modes.

pdf warning

Best Hopes,


OK Alan, is the line about Bush 41 an April fool's joke?

Alan -- the PDF was quite good. Thanks!

The elder Bush appointed better quality people than his son does. It shows in the results.

True. I wondered if there was a specific comment from Bush 41, but I guess the author of the PDF was a Bush 41 appointee....?

Yes, head of the Federal Railroad Adminstration.

The elder Bush appointed better quality people than his son does. It shows in the results.

Don't think you can say that:

1)They started this idiotic war and stationed American troops across the Gulf.

2)Most Bush II people served in Bush I.

2)Their insistence that Saddam had to go, not UN backed, destroyed the country with sanctions carried out by the hapless Clintons, and left it ripe for his ne'er-do-well son to stumble into.

3)Neither Bush I, Bush II, the Clintons or any of the rest of the DC establishment did fuck-all about oil for 3 decades except spend over $10 trillion on a now completely clear to all failed military policy trying to secure the remaining world oil supplies.

I think it would be helpful for us all to admit the complete failure of our entire political class on this issue and ask instead how we change it.

“I think it would be helpful for us all to admit the complete failure of our entire political class on this issue and ask instead how we change it.”

That assumes we have a say. We never had a say.

The entire political class failed because the voters failed to elect good people. The voters failed to keep themselves informed so the candidates with the most corporate money to spend on commercials won elections. Carter caved in to the Commitee for the Present Danger (Cheney, Wolfowitz, Perl, et al.) Reagan never considered any solution other than the military. Clinton completely failed to address the dismantling of the Cold War Military-Industrial Complex. This was all the result of people selling their votes to the highest bidder.

Now I try to vote with my money –it works for the top 1%.

voting is over-rated. hire a lobbyist.

Not the voters problem. This is the way the machine is designed to operate and it is operating fine.

Has anyone else read Alf Hornborg's "The Power of the Machine"? It applies a thermodynamic analysis to the global economy. Makes sense out of Vail's article on Nigeria and my wondering why we seem to suck so much out of "the periphery" that the states fail into banditry. How it is that the periphery exports low entropy to the center in exchange for high entropy "waste", subsidizing the core at an effectively astronomical interest rate [think Africa and IMF policies].

The Wal-Mart trucks bringing trash into Maine are little different than the Casella Waste trucks hauling trash from out of state to Maine's incinerators. The low entropy export from Maine is electricity and Nestle's bottled water.

Oil - and the energy that runs our social machine - is central to his arguments.

cfm in Gray, ME

Hey Alan, I read that a Midwest company is looking into compressed gas storage for wind turbine leveling.

Any details or links ?

I went the link and got a blank screen. I went through Energy section of site and found nothing at first glance. More details ??


you can try www.isepa.com

(about the stored energy park)

What elwood said. I like the concept (aside from the fact that I used to work in the gas industry) because there is an awful lot of used compression equipment that could be converted in a crash program.

Regarding the article on hybrid cars the candidates are or are not driving:

I note that Edwards said in his last campaign that he and his wife were buying a Honda Insight. Guess that didn't happen. Kudos for buying a hybrid Ford Escape this time, but did he just buy that recently?

Richardson apparently made a feeble attempt to go hybrid but now has a monster SUV to drive him around.

Forget Giuliani, who drives a Cadillac Escalade.

McCain drives a Cadillac CTS. Screw that.

Romney has a Ford Escape hybrid.

Obama is into the E85 solution, but drives a monster SUV and admits he often can't get E85, anyway. I would write him off as clueless, for now. Of course, the ethanol enthusiasts here will strongly disagree.

Clinton seems to be trying, since she and Bill got the secret service to get them a hybrid Escape.

No one seems to drive a Prius or a Honda civic hybrid. The Prius is about as roomy as an Escape, so I find the decision to get an Escape a little lame. Guess it's a made in America thing.

Gore isn't running for now, but I still am having trouble understanding how he can be using so much electricity in his mansion in Nashville. Yes, I get it that he has greater needs than us average schmucks, but it still doesn't seem to compute.

I have been an Edwards supporter going back to the last election. Finding out about his new digs which will have a 10,000 square foot main house and a 17,000 square foot "recreation" center, gave me pause. Unfortunately, I don't see much to choose from if one is considering the lifestyles of the various politicians who are running and have a chance.

I guess I am left with figuring out who is likely to do the most with respect to energy security and global warming regardless of their personal lifestyle choices. I guess this pretty much makes me a one or two issue candidate. C'est la vie, but I think these two issues will make or break our nation and the planet for the next century and beyond.

Politicians in big SUVs are still appealing to the masses who also -- still -- drive and adore big SUvs.

I think that there is a security thing going on here as well.

Maybe they will choose armored troop carriers soon.

Gore isn't running for now, but I still am having trouble understanding how he can be using so much electricity in his mansion in Nashville. Yes, I get it that he has greater needs than us average schmucks, but it still doesn't seem to compute.

I would like to know how much energy Gore is using as well. Is he using the electricity for heating, instead of natural gas? I wonder how drafty and volume-efficient his mansion is. And how does he control the energy that the secret service agents that live there use?
And the other thing that is confusing is whether this is his energy bill or actual use of energy. Apparently, the "green" energy he uses costs much more, so his use may be exaggerated.

It is really hard to find good info on this with all the propaganda floating around.

Right, Gore is using too much electricty so let's swift boat the sonofabitch and elect Dick Cheney in 2008!

Ron Patterson

Bleeve me: I feel your pain.

If Americans want to take their fate back into their own hands then it is time they should let go that pacifier called the MSM. Election time propaganda stunts would have no effect if people bothered to inform themselves.

No one is suggesting that, besides the fact that Cheney is not running.

If I was a multimillionaire, like those presidential candidates you mentioned, I sure as hell wouldn't be riding around in a friggin' hybrid. And if I was a multimillionaire presidential candidate, where would I put my staff and bodyguards? Big fat bulletproof SUVs have replaced the big fat bulletproof limousines of yore.

But your point illustrates a bigger problem -- American politics is unable to produce policy to mitigate peak oil. One of the reasons is that peak oil isn't a popular issue amongst the populace. When the s**t hits the fan and it becomes popular (in terms of public awareness), I fully expect the government to panic and write outrageously bad law. You're on your own.

Clinton seems to be trying, since she and Bill got the secret service to get them a hybrid Escape.

Based on a conversation with a young lady who was part of a wedding where Chelsea Clinton was in attendance, she has a prius.

On a different note - Someone was rantin'n about the expense of SS guard for X presidents and how the Bushes were quite the drain. I told the ranter he was smoking cheap crack....but given the "I have this pet peeve, and to keep it fed I've put up this web site" nature of the internet - has anyone tracked the cost of Ex Presidents SS guard'n costs?

American politicians have to appear in American cars. Kinda limits the options.

It looks like the world may adapt without hardship to the realities of peak oil thanks to Yankee ingenuity from folks like Rufus Thornburt. Maybe we should all go home now. Thornburt is on the vanguard of new energy research and his ideas deserve the same respect that people like Vinod Khosla, Daniel Yergin, and Amory Lovins get. (And that last phrase is no April fools joke.)

Read about it here: http://meltingclocktimes.com/beercanpower.htm

Do they still make Pabst Blue Ribbon?

They sure do. Though I prefer bottles to cans.


Do they still make Pabst Blue Ribbon?

Who is 'they' and what is PBR?

They - the original makers are dead. The city of Milwaukee no longer has the PRB brewing 'tradition' as PRB is gone and Miller is owned by south Africans.

PBR used to be from grain. These days, most 'beer' has rice-based starch converted into sugar into ethyl alcohol.

The past ain't what we 'member.

The Hurricanes Are Gone, but the Cars May Remain

A cow pasture near Gulfport, Miss., was used to store 30,000 cars damaged by Hurricane Katrina. Most were auctioned.

An analysis of motor vehicle records from September 2005 to August 2006 by Experian Automotive, which also provides vehicle histories, showed that 15,000 vehicles damaged by the hurricanes were retitled in other states, with 45 percent, or 7,000, getting clean titles.

“A number of these cars are unsafe and shouldn’t be on the roads,” Senator Trent Lott, Republican of Mississippi, said in a news release in February when he introduced a bill that would make it harder to sell such vehicles. “And folks are overpaying for vehicles they believe are mechanically sound. To the untrained eye, they appear to be in good shape.”

Cars for candidates!

Get you campaign cars in Gulfport, Mississippi!

and the company doing a lot of lobbying to defeat that bill - your GOOD neighbor (state farm)


Bob Brinker has a remarkable track record as an investment advisor. He advised everyone to get out of equities in 2000 and to get back in, in the spring of 2003.

He has had a constant stream of guests on his radio show addressing Peak Oil and energy issues. Among them are Charlie Maxwell, Deffeyes, Kunstler and most recently Richard Heinberg.

Bob Brinker's newletter says to invest in real estate now. Not exactly in line with your forecasts is it?

Re: RBS chief economist on peak oil

Every time I hear about "the importance of technological progress" I always ask the same question: Why hasn't the oil industry been able to reverse the long term declines in Lower 48 and North Sea oil production?

Neither region had any material restrictions on drilling (minor but not material, IMO, restrictions in the Lower 48), and both regions were developed by private companies.

Both regions showed strong linear patterns, prior to their peaks, on their respective HL plots, and both regions peaked right at their respective 50% of Qt marks.

If private oil companies couldn't reverse the long term declines in Lower 48 and North Sea production, why will we be able to reverse the decline in conventional crude oil production worldwide?

Because there are two or three Ghawar's hidden under the Antartic ice. Just melt it off, problem solved :-)

Best Hopes,


Well, WT, we simply have not had the economic motivation to develop such technology until now.

We also have not had the nationalistic "security" motivation.

So that explains everything, does it not?


I do think some folks would truly buy these ideas.

The supreme belief in human ingenuity linked to infinite growth/economics is the patented perpetual motion machine we've all been dying for. Just wait, you'll see.

Edited to add: This RBS Chief Economist is part of the mop and bucket cleverness brigade.

What's that you ask? It's from a story about an eighteen-century protopsychiatrist who developed an infallible method of distinguishing the sane from the insane. Those to be diagnosed he locked in a room with water taps on one side and a supply of mops and buckets on the other. He then turned on the taps and watched: Those he considered mad ran for the mops and buckets; the sane walked over and turned off the taps.

Hence, I consider all infinite growth economists who blithely assume our cleverness will overcome PO as mop and bucket cleverness junkies. Yet, when the EROEI for oil extraction equals 1 to 1 it will be quite a day to see how bonkers they'll go trying to get around that one!

What part of finite resources lasting forever do you not understand? :-)

Technological progress will go a long ways to solve the problem... Just not in the way that most economists are imagining. On the back side of the production curve, $300 oil will drive all sorts of innovations to our daily life.

Such as: bike lanes, thin-film solar, clothe lines:)

And most of all ...

Going to the movies to watch fictional stories about what our lives should be like so that we can get temporary relief from reality.

Make it so Scottie:

Yikes...going to have to pull a citizens geek arrest on you here. "Make it so Scottie" - ?! Obviously "Make it so" is the command that Jean Luc Picard gives to execute and order in ST:TNG, whereas "Scottie" or Mr.Scott is the engineer from the original Star Trek - and you have a picture of the Jetsons! Such blatent mixing of shows! For shame! ;)

Why hasn't the oil industry been able to reverse the long term declines in Lower 48 and North Sea oil production?

The answer is simple and can be found on any school yard.
It's the same answer as to the following questions:
1. Why didn't you get an A+ on your test?
2. Why didn't you finish your homework?

A: I could have. I just didn't feel like it right now.

A#2: There were justa couple of knowable unknowables in my way. But once I convert the the knowable unknowables into unknowable knowables, everything will be cake walk.

Let's cut to the chase. The issue is not what particular crop is used to make Ethanol. The issue is the conversion of food producing ACREAGE to ethanol producing acreage. Less food producing acreage = higher food prices. Higher food prices lead to demand destruction. Where food is concerned, demand destruction = starvation. Anyone promoting conversion of food producing acreage to ethanol producing acreage is promoting malnutrition and starvation among the poorest segments of our population who will be 'priced out of the market' for food. That won't just be a problem for the poor. Malnutrition among a growing segment of the population can lead to pandemics the will affect the population as a whole. Politically, Look to the Russian Revolution and the French Revolution. Both were the result of economic decisions made that resulted in reduced food supply. Next time you put Ethanol in your tank, think of the child who is going hungry so you can do that. Next time you make a profit on ethanol, think of the people who are going hungry for you to make that profit. Ethanol profits are blood money.

Ethanol crops is better at preserving farmland then paving it over with suburban housing...

no it isn't as one person put it here it's the same as taking topsoil and burning it directly to fuel your car.

Cant you do anything right on the other side of the atlantic? :-)

More serious:
Do you have a lot of fields that cant be farmed in a sustainable way? I dont get why growing corn must destroy topsoil.

Can't you do anything right on the other side of the atlantic? :-)

American Idol is *M*U*C*H* better than that Eurosong competition that y'all have !!

Best Hopes,


"American Idol" was invented and is produced by Brits. Try another one ;-)

Hello AlanfromBigEasy,

You already know that I fully support your ideas for RRs & mass-transit, but what if it turns out that my Phx area has nearly zero mitigation time [we are at the extreme ends of the TX & CA pipelines]?

Do you think my energy emergency idea of small, narrow gauge railroads quickly bolted down to the Phx sidewalks has any merit [see near the bottom of yesterday's Drumbeat]? I would appreciate your expert feedback posted in this Drumbeat. Thxs!

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

Yes, I meant to respond yesterday. I was in PHX a week ago but did not have ANY spare time to call on you (taking care of my mom).

Sidewalks are for walking; an innovation lost in Phoenix where EVERYONE drives to the health club to exercise on a treadmill (am I the only walker to note this irony ?!). Post-Peak Oil walking may be discovered in PHX !

Phoenix is largely laid out on a grid with a major street every 8 blocks and a minor through street in between (Major @ 48th, minor @ 52nd, major @ 56th, minor @ 60th). 1 mile = about 8 streets.

There are fewer walls facing the minor through streets and the streets are extra wide.

A low profile rail built in pre-fsb sections with slopes on either side could be laid on the centerline of these minor through streets for single track service. Service could go in either direction (reversible) or be dedicated to one direction. (Walk East 3/4 mile to the North bound track or West 1/4 mile to the South bound track).

I have googled for an innovative design (I thought called LR 50 profile) for low profile rail but did not find it. Invented by English professor of Engineering. Basically cut a 6 inch deep x 10 inch wide cross-section out of the pavement (dimensions may be wrong), position & suspend a low profile rail inside and inject elastomer around it. Quick, cheap, durable. electrically insulated.

A VERY good option for streetcars.

Best Hopes,


It was LR 55 track !


Best Hopes,


Hello AlanfromBigEasy,

Thxs for responding--that LR 55 invention was damn clever--must greatly reduce railbed costs. Hope they make smaller, narrow gauge railtrack too.

I like your idea of running the railbed down the center of our less used streets, but there might be a major maintenance drawback, but I am no expert. Based on where I spot manhole covers--I believe the water, electric, and sewage pipes would be directly underneath this railbed-- big problems when these underground spiderwebs need replacement-- another reason why I suggested the quick-install of mini-trains on the sidewalk.

We also could string the rail electricity from the streetlamp posts that are directly above the sidewalks to cut costs. Pedestrians and bicyclists could use the asphalt next to the sidewalk--it will take them a long time to wear this out-- safely separated from ever-decreasing traffic by installing a barrier planting strip between them and the vehicles. Having the mini-trains on the sidewalk also gets them up above the street runoff water when we have our summer monsoon flashfloods.

IF the Asphalt Wonderland could agree on a standard narrow gauge, then they could start by building minitrains along our canals. You are already familiar with how wide the canal banks are, and their popularity with joggers and bicyclists free from vehicular traffic. I think these would also be popular tourist attractions until TSHTF. I know that some of these canals already have underpasses or overpasses of some major streets, maybe the minitrains would traverse these grades [or could have a cog-gear PTO assist].

As the fuel costs continue to skyrocket, I would expect these canals to become delivery routes. The minitrains running alongside the banks could also be used to pull canal boats, and track offshoots could take the goods from the canal mini-barges down to the other local markets. I would expect a lot of postPeak development to cluster alongside these canals for this reason, and cute little trains would add to the convenience and desireabilty.


Canal System
SRP operates several important canals that run in a network through much of the southern half of the Phoenix metro area, helping distribute water from the Salt River system. Major canals operated by SRP are:

Arizona Canal, 38.62 miles (62.15 km) long
Grand Canal, 22.43 miles (36.10 km)long
Consolidated Canal, 18.95 miles (30.50 km) long
Eastern Canal, 14.73 miles (23.71 km) long
Western Canal, 13.61 miles (21.90 km) long
South Canal, 9.91 miles (15.95 km) long
Tempe Canal, 9.76 miles (15.71 km) long
New Crosscut Canal, 3.4 miles (5.5 km) long
SRP also operates a number of flood control canals throughout the Phoenix area.

336 miles long and wide canal [please see photos] Imagine minitrains pulling barges along this route when I-10 is abandoned! This canal runs through the Valley of the Sun then down towards Tucson.

Lots of assumptions, of course. Like Phx even getting enough water in the future to use the canals.

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

I went to


The map (click on it to enlarge) shows several pipelines, tunnels and lift/pump stations. All are obstacles to barge use. A massive project could build speciality rail lines (done in 1800s !) to lift barges.

Food would be a potential cargo. Little else would originate there (gravel ?) for transfer to PHX.

BUT is that a priority ? Why not just move the people to the food (assume irrigation still works). Or just rail in food at a slightly higher energy cost ?

I can see a mass exodus from Phoenix. But even if 75% leave, that leaves 1 million people.

Best Hopes,


People move to phx to enjoy the sun, the heat, and the economy. They do these things from the air-conditioned luxury of their homes, offices and cars.

Will peak oil mean "peak air-conditioning" in phx? What happens then? The Hohokam people built canals in phx, but they left. Why did they leave?

Hello Consume More,

Civano Phase (AD 1300-1400/1450): Between A.D. 1350 and 1450, the Hohokam tradition loses coherence and many settlements are abandoned. It appears nature robbed them of their ability to produce enough food and other resources to preserve large communities. Access to dependable irrigation water became ever more difficult. Several years of major river flooding were followed by longer periods of low water. Canals were restructured further upstream to capture a greater percentage of the rivers flow. These communal efforts required increasing levels of centralization and political control. Around AD 1355, more episodes of catastrophic flooding occurred, apparently leading to the collapse of centralized authority.
Between 1355 and 1450, the Hohokam abandoned large central settlements and centralized water systems. It appears that small groups moved into the desert or traveled to more dependable streams in the wider region. Those that remained along the Gila River founded much smaller villages. These villages were inhabited by Piman-speaking tribes when the Spanish entered the region at the end of the seventeenth century.
I think people can adapt to no air-conditioning, but we cannot adapt to insufficient water. Some scientists think the Southwest is headed into an extreme long-lasting drought period.

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

Hello AlanfromBigEasy,

Yep--we would have to do a lot of work if we wanted to make our canal systems the 'root infrastructure' with minitrains the next local transport spiderweb postPeak, then bicycles for the remaining movement. One of my basic assumptions is that rebuilding standard gauge RRs will become a national frenzy soon as fuel costs rise, but we won't have the time or energy to build then everywhere in the quantity desired--we Phoenicians need other silver BBs to help fill the gap.

As mentioned before: we need RRs to form the basic 'spine' to keep goods and people moving, the 'ribs and limbs' can be best determined locally. IMO, the major port cities will get the lion's share of the last taxdollars for RR's and mass-transit; for example: San Francisco is more important to a functioning continent than Phx or Las Vegas.

I expect 90% plus of Phx to leave or Dieoff by some method--this will possibly give the remaining few a shot at sustainability, but who knows. The desert is brutally unforgiving of bad choices. Phx will be an inverse New Orleans; instead of too much water, it will be too little water for most people to want to live here. But if we can somehow start the local transformation sooner, rather than later, then maybe the aggregate violence levels will be much less because people can see the long-term benefits.

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


Sounds like you and Kunstler are on the same page. Those that do the food shopping are starting to notice that "things are happening". I have.

His Monday rant is out early for those who follow, complete with F-bombs and all. Gotta like Jimbo.


Jim Kunstler tried to warn us.

I finished up my 1,700 word essay on ELP and sent it to Khebab for posting on Graphoilogy. The final portion reads as follows, emphasis added:

The Responses Thus Far (to ELP)

Two responses, from recent years, are illustrative.

First, the West Texan. After outlining my plan, a friend of mine from West Texas thought about it for a moment and then said, “But if we stop borrowing and spending, what will happen to the economy?”

Second, the Dallas socialite. Again after outlining my plan, this lady said, “You’re not from Dallas, are you?” I replied that I was not. To which she said, “No one raised in Dallas would ever talk about living below their means.”

So, living below one’s means, at least in years past, was somehow considered vaguely un-American and socially unacceptable.

However, recently people who have followed some version of ELP, either because of my recommendations, or based on their own evaluation of the present environment, have had considerable reasons to be glad that they voluntarily downsized. So far, I have not heard any regrets from anyone who downsized.

Or, turn it around. Does anyone now wish that they had bought a large SUV and large suburban McMansion--all with 100% financing--on January 1, 2006?

Finally, if we are wrong about Peak Oil, and if you followed the ELP plan, you will have less--or no--debt, more money in the bank, and a lower stress way of life.

Please note that the next essay in this series probably won’t be posted until the week of April 16th. I will be doing ELP research, checking out post-Peak Oil locales.

NO DEBT is wonderful. This is the first time in my life I've ever been in the spot where my only debts are the new ones I generate and pay off each month. It's fun deciding what the major spending project of the month will be rather than how to juggle the bills. I still use my credit cards for convenience, but pay them off every month (as I've always done). AmEx has the best points program and we always use them towards Home Depot gift certificates.

When we first got here, we spent thousands on prepping the area for food production. That was number one. After Gary chopped down the dead/dying mac nut trees (still have about 50), we hired a guy with a backhoe to knock over the stumps and dig a few extra holes in the lava for more fruit trees. We planted more than 50 fruit trees, some of which are already bearing fruit and have barely been in the ground a year. We spent a lot of money on the trees, cinder, and soil -- soil is really expensive and scarce on a lava mountain. For those who live elsewhere, plan on your fruit trees taking anywhere from 3-7 years to bear fruit, so plant them now.

Our next major projects will be replacing the wall-to-wall carpeting and starting the first of 3 stages for a solar PV system. We already installed solar hot water right after we moved in. In addition to a lot of problems we are having to fix related to the floors, I want to have floors that can be cleaned without electricity. The floors must be sweep-able and mop-able, with a few densely woven wool area rugs for comfort. If the rugs are densely woven, they can be swept and even taken outdoors to get some sunlight for "disinfection" and a good beating. I'm really tired of having to use electricity every time the floor needs cleaning.

After that, the next project will be the windows. They are a real mess even though the house is only 13 years old. They are a mishmash and are metal-framed (TERRIBLE in this climate). Some are dual-paned, some aren't. The ones that are dual-paned are all leaking and filled with moisture, and the crappy frames make them almost impossible to open and close.

If we were not debt free, we wouldn't be able to consider any of these expensive projects. And it's nice to know that each one will be paid off as it is being done--no long term debts or HELOC.

Last night, Gary brought in the biggest Chinese cabbage I have ever seen in my life. It was several feet long, and about 1 1/2 - 2 feet in diameter, and that was after he had pulled off the outer bug-eaten leaves. It literally covered the whole sink counter and I thought I was hallucinating. The other night we had home-grown beets that were like nothing I've ever eaten before. Delicious!

I've been doing some reading on green homes and read that "positive pressurization" will help keep you home clean. Can anyone on TOD point me to a GOOD place to learn more about this technique?

EDIT: The whole point of this post is that we couldn't have done any of this if we had been mortgaged to the teeth or heavily in debt. That would have stopped us cold turkey. Debts are the chains that tie you to your current paradigm. Not being in debt opens up a world of possibilities that you would never have considered otherwise.

When I initially realized that my scrimping, saving, and hard work was not going to result in the retirement that I wanted -- travel, reading, walking down beautiful beaches -- I was bitter and angry and went through a period of depression and rage, and at times didn't much care if I lived or died. I felt old, tired, and too beat up to start a new life, especially one that involved that much physical labor.

At times, my rage still gets me, and you've probably noticed that I direct it towards our politicians. I will likely never get over my anger that they let it go this far with no efforts at mitigation -- in fact they did the exact opposite. No one will ever convince me that they don't know. Even now that it is reaching the tipping point, there is barely any public discourse except for a few souls willing to venture into that territory.

A few years back, I went on a letter writing campaign to our politicians. The responses I got did not address any of my questions, instead they were typical political obfuscation of "I'm working for you---trust me." The last letter I sent was downright angry, and it received the most honest response of all, but was still a non-response. The sum total of the response was that "if you think the government is corrupt, you need to stay very involved."

Sorry, but it's hard to stay involved when you can't get a simple answer that is relevant to the question.

The best thing everyone can do for themselves (unless they are independently wealthy), is to start withdrawing the best they can from the ponzi scheme -- before it takes them down with it. And always, plant some fruit trees NOW. Fruit trees are relatively easy even for the brown-thumbed, but they do take time to produce.

I tripped over TOD after the 05 hurricanes and will be eternally thankful. I started building my family lifeboat last year. My wife and kids are not buying into the ELP plan(that’s a surprise). They assume the invisible hand will provide and Dad(me). When I said that I was going to turn the swimming pool into a bluegill pond and dig up all the landscaping around the house and plant berry bushes, that didn’t go over to good. My neighbors look at me like I have gone crazy, as I process my chickens and turkeys that I started last year. I also installed a outdoor wood boiler for heat. I live on a 5 acre wooded lot in a county with 200k people in upstate NY. We have started several garden beds (enjoy all the gardening posts on TOD lately) and planted fruit trees. I have a supply of gold and silver in the cupboard and have moved all my investments to reflect the coming Peak.

I own a small retail store and have worked with the public for over 32 yrs. I enjoy reading all the comments on TOD about how this thing may or may not unwind(society). I can only say from my personal experience, that only a small portion of the public are level headed and can make good decisions under pressure(financial, family, work, etc..). I also know that 4 or 5 dollar gas is going to be a major hardship for many families. Yes, we will have to pay what ever the price will be for heat and gas, but I fear that a lot of retail business will grind to a halt. With all the problems staying in business today, 100 dollar barrel oil will just about be the last nail in the coffin of small business IMO. Lots of stores are going to lay people off and the cycle begins. Unemployment pressures with increasing living costs are going to be something to watch in our communities.

I was a elected town councilman in my town for 10 years, and came away with the observation that I am not ever surprised at the terrible decision making that goes on in government. I realize that the ELP plan and building your own family life boat is the only way any of us can be PO survivors, if that is even possible. My kids are the ones I worry about.

You might have the family read the following article, about what happened in Africa as Brent oil prices averaged about $62 per barrel after May, 2005. And then ask a question. What will happen in the US if oil prices reach multiples of $62? Forced energy conservation is moving up the food chain.

Last year I started suggesting that people assume that their income drops by 50%. Note that a lot of Circuit City employees are not having to imagine it. Many of the higher paid hourly employees have been fired and then told that they can apply for their old jobs--at about a 50% pay cut. (I don't recall any reports of executives being given 50% pay cuts.)

Good luck with your efforts. BTW, I strongly recommend that parents of high school students think long and hard about what kind of education that their children should get, and especially about how much and how you should pay for that education.


Published on 18 Nov 2006 by Wall St Journal. Archived on 23 Nov 2006.
As Fuel Prices Soar, A Country Unravels

by Chip Cummins

The impact of today's energy crunch on the poor is plain in rich nations such as America: Expensive gasoline and soaring heating bills make a hard life harder. In impoverished countries such as Guinea, where per capita income is just $370 a year and surging gasoline prices have helped spark bloody riots, the energy shock has become a matter of life and death.

"Forced energy conservation is moving up the food chain."

- Yes it is. Sadly, only "forced" conservation seems to work on a large scale.

"Last year I started suggesting that people assume that their income drops by 50%."

- I've been doing that for a few years now. The result: the mortgage should be gone by New Year's, I'm part of the way toward fully defeasing the college expenses of my kids, AND I've got ~2 years worth of expenses sitting in money market accounts. Less consumption = more savings/less debt. No debt = financial freedom/less stress. I wholeheartedly endorse a frugal, wise, & fiscally conservative approach to one's finances.

In another post you mention "phantom income". The wind down of the home equity extraction game to a more "normal" pace will take a big bite out of economic growth. Moreover, many consumers are headed toward a cash crunch as the ARMs being to reset. Unless, of course, the FED rides to the rescue and cuts short rates in the not too distant future. The Bernancke FED may soften the blow, but I don't think this FED chairman wants the "Greenspan Put" to become the "Bernancke Put". Just my $0.02.

WT, I strongly recommend reading the consumer crunch papers at www.piscataquaresearch.com. Registration is free. The papers are a quick, easy read. Go back to, say, mid-2005 and work your forward to the latest update.

What a great story, priest"hole"(?).

If you keep working and enjoy doing it, maybe the wife and kids will catch on a start helping.

Of course, a collapse would have the same effect....

I have a supply of gold and silver in the cupboard and have moved all my investments to reflect the coming Peak.

Dude, get a safe!

Thanks again, Cheryl, for your personal experience and perspective...I always enjoy reading about those who are now "walking the walk" of sustainability. One day, soon, hopefully, it'll be me.

Thanks, CK;
Good to hear the particulars of what people are doing.

We're in the process of buying some woodland in Western Maine, tho' not immediately regarded as our Primary Residence.. We live in Portland, and our 2 add'l apartments pay the mortgage, so I don't feel buried by house debt as do SingleFamily Homeowners. Aside from that, we are Debt free, and hoping fate doesn't yank that from us.

As far as 'positive pressure' ideas, this reminds me of something I worked on long ago, and hope to revive. I've mentioned before that as a teenager, my folks and sibs built a passive-solar house in the White Mts that used an almost unheard-of Heating/Cooling/FreshAir system called a 'cool tube', which consisted of 4" perforated drainpipe that surrounded the foundation well below the local frostline (about 50"), and had an extension out away from the building that turned up and came out of the ground as an air inlet, with another spur at the other end of the line entering the house at a low-point, and near to the plumbing, which we wanted to protect from freezing, if possible. This is a super-simple Geothermal system, which brings relatively warm (and fresh) air into the home in the winter, ie, about 40-45 fahrenheit instead of the 0-10degrees that would be whooshing in every crack and opened door.. and then relatively cool air in the summertime, avoiding most or all of your A/C needs. With the natural convection up through the house, you could count on a natural thermosiphon to draw some of this desirable air into the building, or you could 'promote' it with a fairly minor fan at the Output, and really control the level of positive pressure you were creating. In either case, this was said to
1) reduce the infiltration of outside and seasonally tempered air through other building leaks,
2) provide a source of clean outdoor air to offset the effects of offgassing in the myriad synthetic products around us, and
3) refresh the O2 in homes that had combustion taking place for heating, cooking, candles, etc..

The few references I've found on the Web (without looking TOO extensively) mentioned this kind of system as a sidebar to the more intensive geothermal systems people install now, and did mention that there CAN be a challenge in the Summer with condensation in the pipes pooling into a source for molds. I think drainage shouldn't be that difficult an issue to design around, if you are aware it is an issue, and otherwise, this seems like the most obvious thing in the world to include in a home, if you can do it. Even WITH a Geothermal Pumped system, I'd think this would be beneficial..

In our home intown, I am going to try to install a 'retrofit CoolTube', using a ductwork built around the perimeter of the basement walls as the Earth-heatsink, before the outdoor air is introduced to the household.. Will share the results when I get that project going..

Bob Fiske

A frig on the cheap. Needs no electricity. The ancient Egyptians used a system to cool palaces that used a tunnel under the desert I think it needed to be about ten foot deep. It ran to a hole in the palace. The draft is the most important. It had to be high and configured to draw the air up thru the chimney. Here is a way if needed you can make a Frig and keep food fresh. From a blog:

To the surprise of many, the world's cheapest refrigerator costs
less than $2 dollars to make, uses minimal resources to produce and
runs completely without electricity. It's called a zeer pot, or the
pot-in-pot and was developed by Mohammed Bah Abba, who realized that
he could put the second law of thermodynamics and transpiration to
work for him. The zeer pot, is actually two earthenware pots (I'm
assuming they are both unglazed), one pot smaller than the other.
The smaller pot is put inside the bigger pot, and the space in-
between them is filled with sand. The sand is made wet with water
(twice a day) and a wet towel is put on top of the two pots to keep
warm air from entering the interior. As water in the sand evaporates
through the surface of the outer pot, it carries heat, drawing it
away from the inner core, thus cooling the inside of the inner pot
which can be filled with soft-drinks, water, fresh fruit, vegetables
or even meat. A damp cloth placed on top keeps the inside pot away
from hot air. In this way, fresh produce can be kept for long
periods of time without the need for electricity, or camping coolers
made high embodied energy. Tomatoes and peppers will last for up to
three weeks, and African spinach, or rocket, which normally would
spoil after just a day in the intense African heat, can and will
remain edible for up to twelve days. Eggplants will keep for up to
27 days instead of three. It can even be used for storing sorghum
and millets for a long time since it protects from humidity, thus
preventing fungi from developing. The zeer will keep water (and
other liquid beverages) at about 15 degrees Celsius, and even meat
can be kept fresh for long periods.

The new technology is now being used by farmers at the market. Fresh
produce is kept inside, with just a couple fresh items displayed on
the damp towel resting on top. In this way, most of the produce is
kept hidden away from both warm air and insects. In the past, all
produce was displayed in the open air, attracting flies resulting in
stomach disease such as dysentery. Now food can be kept fresh for
longer and kept away from flies...even miles away from electricity
or ice.

Quid Clarius Astris
Ubi Bene ibi patria

I've done it. Quit job, got a bike and 4 cylinder car (in Australia no option) eat local, slow food etc
But a lot of people don't like it, even more people don't understand (you were doing so well) and it doesn't exactly "help with the ladies", I'm now divorced.
It's hard to explain to new people without coming across as a doomer.

My only problem with ELP is what I call the blacksmith problem. In the past even up to the 70's we had plenty of people that could fix or even replace most of the goods we used. This is no longer the case we now depend on a fast web of generally cheap unrepairable manufactured goods.

For example I recently broke the head of a cheap plastic sprayer no way to fix it. I happened to have bought two of them and given on to my kids as a toy. They had broken different bits so I was able to make one functional sprayer.

If it had been made out of brass or even if the plastic was repairable I could have fixed it. But this is not the case with a lot of goods. Rebuilding this infrastructure and worse getting repairable long lasting goods into production will take some time.

I'd have to guess that about 99% of the things I own are no longer repairable or I don't have access to the people that could repair them. I'm not sure how to create a alternative to the throw away society. The intrinsic problem is no one believes you will be around to repair a good.

One point that is obvious in retrospect about the mortgage meltdown, but that I hadn't been paying much attention to, was the "phantom income" effect of people refinancing from fixed rate into variable rate mortgages, as Greenspan lowered short term interest rates. This freed up massive amounts of money to be spent on other things, plus the "cash out" refinancings.

This is of course all in addition to the stories of people who are only able to afford gigantic mortgages, because of variable rate loans, when short term interest rates were very low.

Having been through strong deflationary periods, and having seen my income drop by 75% from January, 1986 to January, 1989, I took advantage of the lower interest rates to refinance from a 30 year fixed rate to a 15 year fixed rate, on our relatively small mortgage. It looks like we may have been the exception to the rule, but we are all going to be paying the price for the Mortgage Meltdown.

Now of course, short term interest rates are much higher, and many people can't refinance because the market value of their house is below the debt load. The Housing Bubble Blog has a story about a Florida townhouse that sold for about $65,000 in 2000, but is now on the auction block, in foreclosure proceedings, with a mortgage balance of $188,000.

Two issues, possibly nitpicks. Kunster refers to the General Accounting Office; the new name for some time has been the General Accountability Office. He also said it's the first good thing coming out of the executive branch. The GAO is part of the legislative branch. Maybe this doesn't detract from the overall article, but he should do a bit of fact checking before he fires away.

It's actually called the Government Accountability Office.

Everything works accordng to plan...

Huge corn crop to support high U.S. diesel prices

Expectations of a bumper U.S. corn crop will keep diesel prices high this year as farmers rev up tractors and harvesters to meet rising demand for grain-based ethanol.

Diesel prices have surged ahead of planting season, which the U.S. government said Friday will see the largest amount of land allocated to corn in 63 years as the world's top oil consumer ramps up use of the gasoline additive.

Industry experts say the rising agricultural demand, combined with truck and rail shipping, should keep cash diesel prices at high premium to heating oil futures on the New York Mercantile Exchange.

"I think diesel is already in extremely tight supply and the agricultural bubble that occurs in the spring and in the fall is going to be exacerbated by intense farm demand," said Lewis Adam of Kansas City-based ADMO Energy, LLC.

Ethanol demand has jumped over the past year as the United States looks to phase out the use of gasoline active MTBE, reduce oil imports and increase use of renewable fuels.

"There has been strong diesel basis throughout the whole Midwest," said John Gretzinger, energy risk manager for FC Stone. "It takes more diesel to plant corn than anything."

The push has spurred farmers to boost corn planting and supported price differentials for diesel. The fuel has been trading at a strong 38 cent premium to the NYMEX contract this week after hitting 43 cents over last week, Adam said.

In other news... diesel is now less expensive than low-octane gasoline here in California.

Great! Just add some earth-friendly, American grown biodiesel and really make it green.

Except that biodiesel in the heartland comes from soybeans.

And soybean acres are being planted in corn.

For the ethanol.

Oh well.

Futureless Options?

Per advice from much wiser folks, I've begun studying up on oil futures and call options; an interesting subject I'll be continuing my due diligence on.

One of the things which occurs in the back of my mind, though: at what oil price will the infrastructure which makes "options" and "futures" trade liquidly break down?

Certainly, oil couldn't go to - say - 500 bucks per barrel for long without causing all sorts of havoc. Market crashes, government revaluation of the currency, freezing of the liquidity of private accounts, or other stuff which would alter 'business as usual' enough that options and futures owned by individuals might become worthless.

OK, 500 bucks is just an example, but it kinda begs the question of what price WOULD cause the interconnected and leveraged global financial system to start melting down. $300? $200? $150?

Any thoughts from the crowd about what may be unwarranted assumptions about the robustness of business as usual?


I dunno, but one would think that Europe is better prepared than we are, since their total energy consumption per capita is about half of what it is in the US.

Matt Simmons pointed out that in many areas on the continent, retail petroleum prices, inclusive of taxes, are on the order of $300 per barrel.

Current price of gasoline down the corner from me: $112 per barrel ($2.67 per gallon).

In years past, Matt also talked about a trip to Africa in 2005. He noted that poor quality gasoline was going for the equivalent of about $210 per barrel ($5 per gallon), but the roads were choked with traffic.

IMO, what we are beginning to see is the US price of oil being bid up because of demand in Asia and the EU--as declining oil exports are auctioned off to the highest bidders.

This is a little out of my area, but my expectation is that it is as much the quickness of the change as the overall amount of the change that makes a difference.

It would seem like an unexpected increase of $50 in a day could cause a problem, as would a 30% drop in the price of oil in a single day.

The biggest risk might be a sudden drop in the value of the dollar. If this should happen, this would disrupt multiple markets at once, including the options/futures markets.

Most models seem to assume normal distributions and continuous functions. The real world is quite different from this. For example, read Benoit Mandelbrot's "The (Mis) Behaviors of Markets: A Fractal View of Risk, Ruin, and Reward". When the world hits a bit of choppiness, all bets are off on how well the futures and options markets will hold up.


Thought alot about that topic, and obviously, there is no answer. You can only imagine, if your money became worthless, that things would not be vey cordial. Normally rational people, faced with starvation, will be irrational.

In my opinion, we are just starting to see the effects of high energy costs rippling through the economy. The economy is slowing and costs are rising.

There are those that believe we face hyperinflation or deflation. I think it will be a long period of stagflation - a slowing economy with rising costs of virtually everything, except housing.

With the USA being nearly 9 Trillion in debt, and much more including entitlement programs, it is poorly prepared to deal with mass investments for energy alternatives.

Catabolic collapse is the most realistic forecast (imo) of what is to come.

I firmly believe in WT's ELP program. I have structured my finances (if money still works in the future) for the sole purpose of buying food.

My conclusion is that I do not fear the unavailability of motor fuel, but rather an economic implosion.

It's hard to know, isn't it? Of course, it may be the case that options will last as long as the stock market will, in which case they may be no more risky than stocks.

Indeed, gas is a lot more expensive at the retail level in European nations in general. Still, if the price of oil doubled or tripled, one would think that they would face a few problems too. It isn't that easy to get rid of an evolved system of taxation quickly; and there would be consequences from it. I'm thinking that from the global financial point of view, much-higher oil prices will impact all nations. Where the advantage will be for Europeans may be in the layout of their cities, their public transportation, etc which is a result of intelligent energy taxation. Certainly the USA will be comparitively hosed as a practical matter, but here I'm just looking at finance markets, and what the odds are of options contracts being literally worthless if oil goes up TOO much.

Seems like very few people even try to computer the 'risk penalty' of the game crashing, even though it obviously will at some point.

I think Gail has a point, and look forward to finding that Mandelbrot article. So much of any planning we do has unexamined assumptions of linearity and continuity; getting oneself out of that mindset may be one of the biggest things to strive for. And Mandelbrot might say that the question I pose here is unanswerable even in principle. Still, it's valid to ask.

And I do think catabolic collapse will occur eventually. When and how fast become big questions when it comes to personal prep. For people in some situations, there's a limit to what they can do with their available land, and a limit to how many supplies they can store. After accomplishing that, trying to play games with investments is worth doing, even if it may come to nothing.

So I may buy a few options, but only after I've gotten all else I can think of. What other 'out of the box' needs would there be? Buying "protection" from the emergent local mafia, as in the collapsed former USSR? There will be things and things...

By the way, Mandelbrot's "The (Mis) Behavior of Markets: A Fractal View of Risk, Ruin, and Reward" is a book. It is not terribly well written, but he is a mathematician, and the concepts are right.


In my earlier response, I was talking about sudden changes being a risk to the options and derivatives markets. I also think that it would take relatively little decline in the quantity of available world oil to stop the growth paradigm everyone seems to take as gospel. Without growth, I expect there will be a lot of defaults on debts of every type - perhaps starting slowly at first, then building. So there are quite a few ways we can get to a very bad outcome.

Without growth, the system dies very rapidly, nothing slow about it. At present, it's in a lethal and terminal state of half-coma, without a chance of recovery.

So far in the 21st century it's been kept alive with massive infusions of ever stronger antibiotics from japan and China, as well as huge amounts of painkillers obtained from the Federal Reserve (with interest). Painkillers are known to ease pain as well as shorten life span.

The patient looks ailve, almost normal even at times, but her internal rottting processes are in advanced stages. The shell is empty.

There seems to be rough consensus here that growth is a fundamental requirement for the survival of our economy. And yet, growth can not last forever and should have been stopped decades ago. Growth from this point and even from an earlier point is unsustainable. So, we have a paradox. The system crashes without growth, according to most people, but the system also crashes with growth as, within it, it has its own seeds of destruction.

So we have many people here trying to prepare for the inevitable crash based upon the belief that there is nothing that can be done without continuous growth. Isnt't there a third way? It was recognized by Herman Daly decades ago that we must pursue a concept called steady state economics as the only viable way forward. If anything, I think the events of the past few decades have just confirmed the wisdom of this approach.

If we all believe that diaster will occur without growth, we are just part of the same problem that drives the main stream political parties, economists, financial types, , and politicians. We buy into a paradigm that ensures our total destruction because of the widespread panic that will ensue when the growth gravy train comes to a halt.

While one can take individual actions to prepare; if everything is going to hell in a handbasket, the coming flood of chaos will have serious negative impacts on even the best prepared.

Our mutual survival depends upon figuring out a way to move forward in a way that preserves a reasonable standard of living without continuous growth or permanent depressions. I don't know if this is even possible, but I think we have to try to figure this out or even the well prepared will eventually go down the tubes. How long can one hold off the eventual invasion of the rapers and pillagers, the new barbarians if you will.

Another view, of course, would be that no system lasts forever. This modern, growth dependent economy is no exception. Accept the deluge. Do as best as one can given the worst, or near worst case scenario. But I would like to think that some our great minds, here and elsewhere, can come up with a viable alternative.

I couldn't agree more. The new wave of greenish politicians is telling us that we must have changes in our industrial practices and even lifestyles, but that we can have still have "sustainable growth". In fact, we need economic shrinkage, not growth. And we will get it --the only question is will it be in a controlled planned way, or just chaotic economic collapse.

People don't need elaborate toys anywhere nearly as much as the advertisers have convinced us we do. What we need is economic security. Under the current market-oriented system we can't have that security without an expansionary economy that cranks out ever more goods and services for the sheer sake of cranking them out. This of course cannot continue.

Thus, we need fundamental reform in the way our rulers approach economic problems. Will we get it? At the moment, that looks highly unlikely. But I'm not totally pessimistic. When TPTB decide it is time for sweeping changes, they implement those changes, even if the masses protest (as they will). As yet, they are happy with the current setup. When that shows unmistakable signs of collapse, they will look to "other arrangements"

"Our mutual survival depends upon figuring out a way to move forward in a way that preserves a reasonable standard of living without continuous growth or permanent depressions."

Exactly what I've been trying to 'negotiate'. Thanks. (Checking out Herman Daly)

Door #1 Growth=Unsustainable as of now.
Door #2 Lifeboats=Untenable long term with too much collapse.

So "Let's Make a Deal" on that Door #3 cause I don't believe Jay is coming down the aisle this time....

Daly, wise man that he is, didn't invent steady state economics, though perhaps the term.

There is no question of belief here, and using the word suggests you don't understand the problem.

Our present economic system depends on perpetual growth, and it's useless to try to deny that. That doesn't mean there are no other systems possible. The first and arguably main issue that you have to address if you want to make a transition, or a change, is dissolving the banking system.

Our banks live off the interest they charge on loans. For people to pay that interest, the economy has to grow. Simple as that. You can't pay back both principal and interest with just the principal in your hands, the extra 5% will have to come from somewhere. If it doesn't come from growth, it will have to be borrowed, but that requires more interest to be paid at a later date. The perpetuity of the system also necessarily leads to the seeming contradiction that while the system grows, the citizens get poorer, and the environment is destroyed.

If we would ban charging interest on loans, a feasible and historically proven system, all present banks would have to close their doors tomorrow morning. They would have no reason to exist. However, they are privately owned institutions that hold most of the nation's capital. Can you legally force them to hand it over?

Or should you issue an entirely new currency, and declare the former one illegal and obsolete? Would a politician, or anyone for that matter, who suggests these things, have long to live? (S)he would be suggesting taking the world's largest fortunes away from its most powerful people. There's another little matter: banks are internatinal corporations, absolving them would need to be effected across borders and legislatures.

Once you solve these questions, you can come back and discuss steady state economics.

Interest can be charged in a steady state economy.

Even if your income does not grow over time due to higher skills, etc; you can interest by less consumption tommorrow.

Save, buy a house with 25% down. Pay for it with savings on rent plus lower other consumption for 15 or 30 years.


I have the feeling you're moving into theoretical constructions just to justify some sort of interest. It gets tricky, of course, when your starting point has to be that people have more income than they need for years to come, just to be able to live somewhere.

Perhaps the best question is: why would you want interest in a system in the first place?

Much of the Swiss economy is low growth, very low inflation. Still a stable & happy society !

I have noted some differences with US economy. Hydroelectric utilities (as sustainable as it gets) are low yield stocks with minimal growth (branching out into fiber optics etc.)

One can go from the modern Swiss economy to a no growth economy without major changes or disruptions IMHO.


Perhaps the best question is: why would you want interest in a system in the first place?

To give people a reason to lend money. And history shows us that the ability to borrow money is tremendously important for a smoothly-functioning economy.

It's fairly obvious why, too. If a man's car breaks and he doesn't have the cash for repairs, he takes out a loan to cover it. He wins - he keeps working and earning - his creditor wins - earns interest - and everyone benefits.

If he couldn't take out a loan, he wouldn't be able to get to work, and then he would suffer (no job) and his employer would suffer (no worker), so everyone would lose.

Frankly, this whole thread of "economies must collapse without growth!" is incredibly naive. Most post-peak scenarios I've seen here stem from little more than personal pessimism, and it shows.

Isn't the problem more as follows...

I may well be way off the mark, but it seems that the main problem with debt in PO is not so much interest (although that is a problem), but fractional reserve banking. A bank only requires a fraction of deposits compared to what it loans out. Therefore, if the size of an economy allows a bank to hold $1 billion in deposits, the bank will make loans of approx $10 billion, comfortable with the ability of the economy to pay that $10 billion off at a later date... by which time it will have made larger loans based on those repayments increasing its fiat equity (so to speak).

And there is the catch: the amount loaned increases as repayments are made, and so the economy gets mired in ever increasing debt. You require an expanding economy to cover that debt... A 1:10 ratio of deposits:loans is unlikey to be covered by less consumption/greater savings.

Banks (and other businesses) will have a hard time in a steady or shrinking economy... or else there will be a lot of people in debtor's prison/forced labour.

"You can never solve a problem on the level on which it was created."
Albert Einstein

And there is the catch: the amount loaned increases as repayments are made, and so the economy gets mired in ever increasing debt.

Flawed assumption: all interest earned is added to the reserve for fractional reserve banking, and the maximum loanable amount is always outstanding.

A bank could operate just fine with a constant sum of outstanding loans, and just siphon off the interest for expenses and profit. No growth required.

"Flawed assumption: all interest earned is added to the reserve for fractional reserve banking, and the maximum loanable amount is always outstanding."

That wasn't my assumption at all and I didn't say that anywhere in my post.

I do not see interest as the real problem, and I agree that lenders could live off interest only, but fractional reserve banking is what WILL be a problem in a shrinking/stagnant economy. The fact that banks require loans to be repaid (plus interest) that are around 10 times their total deposits is the core problem.

They are not just loaning out the money that is invested with them, but approx.10 times that amount. For that growth IS required. Period.

"You can never solve a problem on the level on which it was created."
Albert Einstein

If our current monetary system looks like it is headed for problems, one approach might be to start now, developing an alternative system.

We can theoretically go back to barter. I'll help you with your garden, if you will give me some of the produce, etc, but this method clearly has drawbacks.

Some alternative monetary systems convert goods to hours of labor. The problem I see with this is that not everyone's hours of labor are equivalent. This may still be a good method, however, if there is an appropriate conversion table.

Has anyone done any work on alternative monetary systems? What could be done in advance, to have something in place, in case things start to unwind? There is an article in Wikipedia on Local Currencies. What are the major groups working in this area?


Read these two by Dmitry Orlov

What Can Young Professionals and Aging Baby Boomers do to Prepare for America's Collapse?


Thriving in the Age of Collapse, Part I

He writes from the experience of living thru the Soviet Collapse. He has some insights as to how things "Evolve"

Here's one snippet from the first one talking to "Chris" the young professional and giving advice.

But there will be plenty of new niches opening up for Chris to choose among. Currently, the cash economy mostly involves services and products that cannot be obtained legally. In the future, it will expand to encompass necessities that are no longer available or affordable through official channels. The list will eventually grow to include transportation, food, security, shelter, and medicine. Thus, in trying to think about business trends of the future, Chris should first expand his definition of business. Conversely, in thinking about the future legal climate, he should reason from the point of view of what will be enforceable, and, if so, to whose financial benefit, because unenforceable or unprofitable legal strictures will be eagerly overlooked, as the entire legal framework falls into disuse.

From the link about the San Diego TransNet:

"The question is, what are we going to be building in 2030?" Bonelli said.

I suspect Alan might have an opinion....

San Diego County is IMO an prime candidate for a couple of standard gauge rail lines, one connecting Temecula with the the downtown (basically the I15 corridor), the other running by the coast then cutting east/ south east. Intersect those two high speed lines with a dozen or so light rails (basically a major expansion of the Trolley system) and voila, San Diego becomes a highly liveable area without needing a car.

But will they do it? The promise is for one trolley line only, and that one was already in the queue but was not implemented because they ran out of money earlier.

I realize that some people (perhaps SS?) do not think that pushing rail is a viable alternative, but my experience has taught me that one can adapt to a new way of life. One can only hope that when gasoline stations are selling gas for $5+ (if they have it) that enough people will create the political will to change their local communities.

San Diego has the beginning on a nice system.


The solid grey line in the Northeast is a commuter rail line that goes north to Oceanside and is working today. The outline grey is a light rail extension that they still hope to build along the same ROW, but not as far (just to Balboa).

They once had plans for another extension going east (along I-10 ??) but the reality of funding today hit them and they cut that plan. They sprawling out of office space/jobs also hurt them.

There are several abandoned ROWs (and some active ones) where more light rail could be added at reasonable cost.

San Diego built the first of the new US Light Rail Lines in the early 1980s as a single track line to save money. It was Ed Tennyson's next to last major job (DC Metro/WMATA planning was his last and electrifying Harrisburg to Philly in the 1930s was his first).

Sad to see a pioneer like SD pull in it's horns. Every new light rail line or spur adds ridership to ALL of the older existing lines. Perhaps after they build to Balboa the itch for a new line will reappear.

The FTA lets each city do just one line at a time. NOT good for Los Angeles !

Best Hopes,


Today Australian PM John Howard visits the mine
at Olympic Dam, the Ghawar of uranium deposits
In order to expand the mine needs a coastal desalination plant and more electricity. It would be bizarre if more fossil fuel was used to supply these inputs when a consortium is willing to build a nuclear power and desalination plant on the coast nearby. It seems NIMBYs like to fool around but don't go all the way.

There are lots of great stuff in the comments for the RBS article at top.

Theoretical reserves (they are all theoretical, even proven reserves) are a poor indicator of future production. For instance, UK reserves have remained constant yet production is half what it was in 1999.

How have the reserves of other declining areas fared (Mexico, Norway, etc.)?

One of Saudi Arabia’s top banks apparently does not expect any increase in oil production in 2007. They are predicting an average production rate of 8.44 mbpd for 2007, versus a 9.12 mbpd production rate in 2006, and 9.55 mbpd for 2005. This is a 7.5% year over year decline rate in average annual production, which if continued, suggests a 50% decline in average annual production in 10 years. However, net oil exports are falling much faster.

Note that the year over year decline in Saudi crude oil production from 2005 to 2006, was only 4.2%.

To summarize, one of the largest Saudi banks is predicting that the year over year decline in average annual Saudi crude oil production will increase from 4.2% in 2006 to 7.5% in 2007. Note that year over year declines, on a month to month basis, are usually larger than year over year declines in average annual production.

Also note the continued “Export Land” effect of a continued rapid increase in GDP (as oil prices remain high, or go higher, even as oil production falls).


Published: 01/04/2007 12:00 AM (UAE)
Government spending to boost Saudi Arabia GDP

Riyadh: Economic growth in Saudi Arabia, the largest Gulf Arab economy, could accelerate this year on the back of a projected rise in government spending, Riyadh Bank said in a research report.

The kingdom's fifth largest bank by market value expects gross domestic product to grow 4.3 per cent in 2007 compared to 4.2 per cent in 2006.

"Government budget spending has been on a roll ... Our forecast for 2007 is $116 billion, up around 11.5 per cent from the previous year," the bank said in the report received yesterday.


Inflation, as measured by the cost of living index, is projected to rise to 2 per cent against 1.8 per cent in 2006, the bank said.

Saudi oil production is expected to fall from an average 9.12 million barrels per day in 2006 to 8.44 million bpd in 2007. "For 2007 ... we forecast oil prices to rise/fall by $3 per barrel," it said.

Government revenues are expected to reach $157 billion, against $107 billion projected by the government and $175 billion posted in 2006, it added. This would result in a budget surplus of $41 billion in 2007, against $71 billion in 2006.

Non-oil private sector growth would drop slightly in 2007 to 6 per cent in real terms against 6.3 per cent in 2006, the bank said.

4.3%: Gross domestic product to grow in 2007

2%: Projected rise in inflation

8.44m: Projected oil output in 2007 (in bpd)

The Decline of Saudi Arabia: Updated Forecast and Field by Field Analysis Report

Hi Westexas,

That’s a great article that you’ve found – Riyadh bank predicts that Saudi oil production is expected to fall…to 8.44 million bpd in 2007.

My current forecast is showing Saudi oil production to be about the same at 8.43 million bpd in 2007.

Figure 1 – Saudi Arabia Production Forecast

Given that it is becoming more likely that Saudi has no surplus capacity the importance of the near term big projects Shaybah and AFK (Khursaniyah) becomes critical.

This Nov 2006 CSIS presentation by Obaid makes the following statements:

Khursaniyah (AFK) was ”originally scheduled for December 2007” but in Nov 2006, Obaid says that it will be earlier: ”by June 2007 to reach 500,000 b/d”.

Shaybah expansion was ”originally scheduled for January 2009” but again Obaid states an earlier date: ”by April/May 2008: 250,000 b/d will come on stream”.

On Mar 4, 2007, Phil Hart said that ”Khursaniyah group of fields..is not expected on stream until the end of 2007.”
I’ve assumed Khursaniyah (AFK) first oil is Feb 2008.

The desperation to deliver first oil earlier from AFK and Shaybah together with Riyadh’s downgraded oil forecast shows that Saudi Aramco is struggling to increase production rates. The forecast in Figure 1 from 2008 to 2011 may be too optimistic.

The following presentation by Hans Jud from Switzerland performs a field by field analysis for Saudi Arabia:

Figure 2 – Small Saudi Fields show “Great Future”?

The figure above is partly based on information also from Obaid’s CSIS presentation. The figure shows that there is justified scepticism over Aramco’s promise to suddenly produce huge amounts of oil from old small fields. Look at Manifa and Khurais – huge production rate jumps!!

Figure 3 – HL for Saudi Giant Fields

The figure shows a cumulative HL plot for the giant fields of Ghawar, Abqaiq, Berri, Safinaya, Zuluf and Marjan. The URR is 125 Gb. Jud also does HLs for each of these fields in his presentation.

Figure 4 – HL for Saudi Arabia – all fields

The figure above shows a URR of about 165 Gb.

Figure 5 – Two cycle HL

For this chart, Jud optimistically assumes that Saudi Arabia has an additional 40 Gb of secret oil to produce. This gives the dashed blue line. This is added to the dashed red line (URR 165 Gb) to give the dashed green line as a forecast for Saudi production.

In the last few years, note also in the figure above the production drop in the 6 giant fields while total production is increasing. Are the MRC wells in the giant fields starting to show accelerated decline rates due to increased water cut?

Figure 6 – Where are the missing fields?

This last figure shows that Jud’s optimistic assumption of an additional 40 Gb is most likely false. This means that Saudi’s URR is about 165Gb. Fig 5 shows the dashed red line for the URR 165 Gb which might be the best HL fit for Saudi.

The forecast in Fig 1 assumes that old small fields such as Khursaniyah (AFK), Khurais and Manifa can deliver huge increases in production. Fig 5 shows these forecasts to be overoptimistic (Matt Simmons would probably agree).

It is highly unlikely that Saudi Arabia will ever produce more than 8.5 million bpd (C&C). This means that if any supply disruption or sudden demand increase occurs, do not assume that Saudi Arabia can be “called” upon to supply extra oil. Assume that price shocks are likely to occur starting the middle of this year.


Another great post. Thanks.

This could have been an article own its own.

"This could have been an article own its own."

Yes, it actually should have been. It is a better field by field analysis than I expected far down in a drumbeat, and gives much to ponder. Being so far down in an already aging thread, I will not comment much, except to say that once more we are pinning on all bets "this summer". of course, last spring, we pinned all bets on "that summer". However, we do have to now take into consideration the problems in Mexico, Venesuala, and the North Sea decline, all of which are major suppliers to the U.S. At some point you start running out of wiggle room

At some point, it will have to start showing up in the price. Frankly, if the Saudi situation is seen to be this dire, world crude prices should break $80 soon, at least for a time, sending a "psychological" signal, and at least flattening demand. At any price below $75, the waste continues without great concern on the part of the driving public. If at a price of $80 plus, Saudi Arabia cannot open the taps for an indefinite period, she will become a much more marginal player in terms of being the "swing producer".

Only time will tell, but it would be best for each person to start trying to work towared a "plan B" in providing for their own transportation, just in case.

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


How can you justify, out of the blue, an $80 price for a barrel of oil? How do you know that $70 or $90 is not the "right" price? How about $65? Do you have DATA that suggests this or was this pulled from thin air?

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

Leanan, HELP! Can't get right side of these graphs on my screen. Changing text size doesn't help.

I've made the charts 800 pixels wide - if they are narrower then some of the detail is lost.

Have you tried widening your web browser window?

Otherwise you can save each chart as a picture by right clicking and read the charts separately.


Good work. BTW, I agree with the 165 Gb estimate.


Nice post. I recall that Stuart edited one of your posts a week or so ago to use the width="100%" attribute in the img tag to solve the problem of the images being cut off on the right. I tried it locally and it seems to work well. There may be side effects but I am unaware of any.

Hello TODers,

We all know that Pemex is going broke and has $60 billion in unfunded pension liabilities. I sure would hate to be the executive that tells the retired petroworkers that the checks are shrinking and/or stopped, much less laying off thousands of excess Pemex workers in an effort to staunch the monetary outflows.

This 29 year career American natgas worker sabotaged pipeline infrastructure because he wasn't happy with his severance and retirement package:


If this former employee behavior repeats in postPeak Mexico it will be pretty ugly trying to maintain the ever-depleting Mex. extraction and refining processes. Time will tell.

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

Pemex wouldn't be going broke if nearly all of their annual profits weren't siphoned off each year by the Mexican gov't.

I don't know about the Pemex workers, they have a strong union, but the people of Mexico will be the ones pissed off, and left out in the cold. Oil revenues are about to about to be re-routed towards drilling and exploration, which was neglected for decades, and the gov't budget will suffer. What little public services they had enjoyed, I fear will be gone soon.

Hello Cheapseats,

Thxs for responding. Yep, I fear Mexico = Our North American Zimbabwe, with USA & Canada = North American South Africa.

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

Hello TODers,

Hurricane forecasts: Florida in bullseye?


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

Hi Leanan,

Could you please put this link on the next DrumBeat?

Saudi Arabia field-by-field Analysis
Hans G. Jud
I thought it was a very good analysis!

Here is Hans Jud's conclusion (bold font is mine - in the introduction he apologizes for his imperfect English)


If there is a “new cycle” we are in decline anyway. Even 80Gb could not reverse but slowing the downward trend. Comparing these speculative 80Gb with the whole Northsea-Area of 60Gb I think, this would really be much… but not sufficient. And it does NOT change the general picture of depletion, if we find another “Northsea” elsewhere…

As we are in the more likely scenario of “only 40Gb” “unknown rest” we can be sure, that we are in decline NOW and we remain in decline. The longer the plateau will be, the steeper the decline will be also. Most modern technology leads to the highest decline-rates we experience… today in the north-sea and Mexico and and and…! Decline-rates in the two-digits-area for Saudi-Arabia… this will hurt all of us!

The claimed reserves of Saudi-Arabia of 260Gb and even much more are first NOT “remaining reserves” and second, even for “EUR” rather “paper-barrels” and more a PR-exercise for the public. As long as the Saudis do not allow any public release of more valid data and give them free for examining by international experts, we should be cautious and apply the much uncomfortable scenario of immediate decline.

Even it was a challenge to analyse field-by-field-data for Saudi Arabia, it was also a pleasure, leaving only very few space for further speculation on Saudi Reserves.

Thank you Mr. Baqi, Mr. Saleri, Mr. Obaid and many others, giving us the opportunity to “read between the lines”. This even shy truthfulness after many years of fulfilled unlimited Saudi supply-promises will help to take pressure from the energy-markets and open the way to sustainability. Saudi Arabia kept his promises over the past. We got your message and we understood it; it’s now our turn to act. Every day waiting in action from government-side in our highly oil-dependent countries in the whole world is a crime to our economies and to the human mankind.

I am deeply affected and totally unhappy, that a few stupid presidents in that beautiful world drove their countries in destructive wars with weapons of mass destruction and manipulated religions who destroyed all and everything: Life, infrastructures, resources, credibility, humanity and even hope, letting back terrorism, thousands of dead innocent people, violated international laws and outmanoeuvred international organisations, oppressed nations and so many broken soul. This only for economic egoism, manipulated believing and rapacity. I am so sorry for all those concerned human beings.

We have missed the time to change our structures to sustainable structures in time, even we have could it know… It’s a shame, we did it NOT; I’m sorry, now it is late, very late, may be too late.

But we have no other choice, only the way in real sustainability

Hans Jud

Saudi Arabia may not admit that their fields are in decline rather they are more likely to state that "we have billions of barrels of oil in the ground but due to shortages in equipment and qualified people, we cannot extract the oil quickly enough to meet demand".

The world needs to begin plans for drastic conservation now as shown by increasing demand supply gap in the chart below.

We are in the middle of the amber zone now and the red zone is approaching.

Green Zone:
Supply was able to meet demand. Sufficient surplus capacity existed. Prices showed only moderate volatility. This zone ended on about May 2005 which coincidentally is the peak for crude oil & lease condensate production.

Amber Zone:
Saudi Arabia has become supply constrained. Prices show more volatility. Price shocks occur in 2007Q4 and 2008Q4. Surplus capacity is going to zero. Supply is struggling to meet demand. Increased production from natural gas liquids and ethanol delays the total liquids peak to July 2009, which is the end of this zone. The desperate attempt to use subsidised ethanol has doubled corn prices and is now indirectly increasing other food prices. Nationalisation of hydrocarbon reserves continues. Refineries need to be modified to accept the heavier and increasingly sour crude stream. Horizontal MRC wells have become common practice but have steeper decline rates. Old infrastructure needs replacing. A shortage of skilled people exists. CONSERVATION PLANS NEED TO START NOW.

Red Zone:
Starts just after the total liquids peak in mid 2009. There is no more surplus capacity. Supply falls far short of demand leading to drastic demand destruction. The name of the last basin is called “conservation” – world must use less oil. Saudi Arabia announces further “voluntary cuts” in production. Oil prices increase at a faster rate than during the amber zone. World economic growth rates become lower. The IEA emergency sharing system may be invoked and rationing occurs......

Very sobering posts, ace, both this and the one prior.

What we are seeing then is, if this scenario is true, the world is post-peak on crude oil itself and alternatives are temporarily filling the gap and slightly growing the production output. They can keep this up for a while but not at rates matching decline rates over time which leads to your all liquids peak in 2009.

Basically, your graph shows 2 years til serious trouble with possible serious trouble even before that. Let's hope that we are all very, very wrong.

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