DrumBeat: May 4, 2007

Big oil discoveries

...The news from Bohai Bay should reopen the debate on whether the world is running out of oil and gas – the fear that underlies Beijing's grab for natural resources. High oil and gas prices and project difficulties have bolstered the position of those who predict production is within years of peaking.

In certain respects, peak-oil theorists have a lot of data on their side. Giant fields – defined as holding at least 500m boe of recoverable reserves – are believed to account for between 40 and 50 per cent of the world's total reserves. And giant fields are becoming smaller as time goes by. Recent analysis by geologist Myron Horn shows 220 giant fields were discovered in the 1970s, compared with 72 so far this decade. Meanwhile, the Centre for Global Energy Studies, a London-based consultancy, calculates that average output from giant oil fields discovered in the 1990s is about half that of 1970s fields.

A straight reading of the numbers, however, misses several important underlying issues. Politics is a bigger barrier to oil discoveries than any rock formation. Large areas of the globe remain underexplored, such as deepwater offshore Mexico and, as demonstrated on Thursday evening, offshore China. Oil and gas are finite resources, but the energy industry has repeatedly overcome the challenge of "peak oil" in the past, usually through unexpected technological breakthroughs.

Failing the Energy IQ Test

America is failing its energy IQ test and its time we start hitting the books, argue the co-founders of ASPO USA.

Peak Oil Passnotes: Empires That Never Die

When the Chinese National Oil Company (CNOOC)outbid an American company Chevron, in an attempt to purchase the mainly Asian focussed Unocal the U.S. political elite wasted no time in branding this a threat to national security. As if somehow China might invade the U.S. via a network of oil storage depots. After all we know the story of Troy do we not?

Gasoline prices hit $3 as refiners strain

U.S. gasoline prices shot above $3.00 per gallon on Friday, within striking distance of record highs, as the creaking domestic refinery system strained to keep up with rising demand.

..."The problem this year is our continuing and increasing inability to refine enough gasoline to meet growing demand," said Geoff Sundstrom of AAA. "I think it is very possible that we will set a new record high price this month."

Senate panel proposes fuel economy hike

A key Senate panel on Friday proposed raising fuel efficiency requirements on all vehicles, including tractor trailers and large trucks, in an attempt to respond to concerns about energy security without crippling the domestic auto industry.

Chavez mortgaging Venezuela's future

Nationalizing the country's oil reserves has been a linchpin of Chavez's rise to power. Outside companies such as Exxon Mobil, BP, Chevron and ConocoPhillips continue to haggle with Chavez over terms that would allow them to remain minority partners in the fields in the Orinoco River Basin.

Now that Chavez has his oil, how does he plan to sustain it?

Old king coal hard to dethrone

Dirty and dangerous, coal is a notorious source of climate damage yet is destined to remain a key energy source for decades to come.

Indonesia aims to sign Japan pact this year

Indonesia hopes to sign a free trade pact with Japan -- Japan's first to include energy -- by midyear, Indonesian Trade Minister Mari Pangestu said on Thursday.

The Indonesia Japan Economic Partnership Agreement will eventually end import taxes on more than 90 percent of trade between the two nations and require Indonesia to commit its liquefied natural gas (LNG) to contractual supply, Japanese trade officials have said.

Internal investigation called for BP firings

An internal BP investigation, detailed for the first time Thursday, recommended that four executives be fired for management shortcomings in a "culture of risk taking" leading up to the 2005 explosion that killed 15 people at BP's Texas City refinery.

Roadshow: Reaction to rising cost of gas: everything, except indifference

Gary, when was the last time you actually promoted some kind of strike regarding these outrageous gas prices? Never, never, not once. I've never heard you say how people can take matters into their own hands and make a difference on lower prices.

Gas zooms past $3 a gallon; record prices blamed on refinery outages, inventory

Sticker shock at Toledo-area gasoline pumps put another hit on motorists yesterday as prices shot up to about $3.20 a gallon for regular-grade fuel at many outlets, a 20-cent increase on top of recent jumps that had put prices on the verge of $3.

Deep-sea quakes raising eyebrows

The deepest waters of the Gulf of Mexico already hold plenty of challenges for the oil and gas industry — extreme temperatures and pressures, fierce weather and currents, and even thousands of unexploded bombs dumped there after World War II.

It may be time to add one more hazard: earthquakes.

Solar Energy Coming of Age

Vertical integration is next phase for manufacturers and operators.

Green beer (No, not the St. Patrick's Day kind)

The brew kettles at New Belgium use 65 percent less energy than a standard brew kettle, spent grain goes to a local cattle farmer, and, perhaps most surprising, the brewery turns waste water into energy.

Oil Refiners' Production Lows, Profit Highs

Fires. Explosions. Lightning strikes. This is the new state of affairs for U.S. oil refiners, hobbled in recent months by an unprecedented plague of bad luck and operational setbacks from California to Delaware. Facilities of all sizes and age have been struck, leading to supply bottlenecks in various regions.

On May 2 the Energy Dept. reported that refineries are operating at only 88.3% of capacity, barely above the 20-year low notched last week. Not surprisingly, gasoline inventories dropped for the 12th week in a row--the first such three-month stretch since 1993. All that has set gasoline prices on a dramatic bull run, with refiners' stocks setting all-time highs and U.S. consumers facing average pump prices of $2.98.

Uganda: Diesel shortage slows Bugiri road repairs

THE 84km Jinja-Bugiri road construction has been hampered by the diesel shortages. The contractors have written to the Government notifying it of the setback.

: “Last week we were at a standstill for five days. We got some litres today and have resumed work,” Thomas Grave Hansen, the project manager, Reynold Construction Company, said on Wednesday.

Woqod denies shortage of super petrol

WOQOD, Qatar’s sole fuel distributor, said yesterday that there was no shortage of super petrol, or gasoline super (Octane 97), anywhere in Doha.

The company was responding to queries regarding complaints of ‘severe shortage’ of super petrol at various outlets in Doha in the past two days.

Nepal Oil Corporation heavily indebted

According to the report, NOC is incurring monthly losses of nearly 3 million dollars due to lower selling prices of petroleum products. The corporation sells LP gas at a price lower by 3.70 dollars per cylinder. Likewise, it has losses of 75 dollars in every kilo-liter of petrol, 60 dollars in diesel, and 10.5 dollars in kerosene. However, it earns 278 dollars profit in sale of every kilo-liter of aviation fuel.

The report also showed that NOC maintains very low stock of petroleum products, heightening risks of shortage once supply is disrupted. The current stock cannot last for more than three days of demand in the capital. The storage of petrol is sufficient only for a day in Pokhara, the major tourist city some 140 km from Kathmandu.

Pakistan - Markets to close after sunset: Steps to contain loadshedding

Conceding for the first time that the country faces an energy crisis, the government on Thursday confirmed a power shortage of 980-1500MW and announced a number of administrative and persuasive load-management measures to contain loadshedding at below 980MW in peak summer.

The measures include closure of marketing centres and businesses after sunset, diversion of some industrial activity and use of tube-wells away from peak hours and staggering of weekly holidays in the industrial sector. The government rejected a reduction in street-lightening time for security reasons.

The Philippines: Ready or not

Ready or not the Philippines will be shifting to the use of bio-fuels from petrofuels in less than a week’s time.

Yet Another Report on Balkan Energy Crisis after Bulgaria’s Npp Closure

Serbia is in danger of electricity shortage because of the closure of units three and four of Bulgaria’s Kozloduy nuclear power plant (NPP).

...An energy collapse is expected as meteorologists predict that summer 2007 will be the hottest one within a century, Politika said. Electricity consumption in winter and summer is almost equal due to the air conditioning usage.

Brazil considering nuclear option for energy shortage

Brazil will increase the use of nuclear energy if it cannot build enough hydroelectric plants, President Luiz Inacio Lula da Silva said on Thursday.

Bangladesh: Exploration of new energy sources must

Speakers at a roundtable here on Thursday underscored the need for exploration new sources of energy including offshore mining as the country's demand for power has been increasing rapidly.

A national committee should be formed to monitor the activities in energy sector and steps must be taken to reduce the use of natural gas by exploiting other resources including coal, they said.

Gas price surge leaves customers scratching heads

"I just find it unbelievable, inconceivable that gas prices can rise that quickly and apparently for no good reason. ... I don't see any good explanation for it."

How high can gasoline prices go?

IT SEEMS THAT WHENEVER the price of gasoline goes up, the oil industry has a new explanation.

Model Coal-To-Gas Plant Gets Its Day

Once considered a white elephant and waste of taxpayers' money, the Great Plains Synfuels Plant here is now hailed as pioneer of clean-coal technology. And it's making money to boot.

Expected freeway traffic horrors don't develop - Fewer vehicles on road; BART posts ridership record

The nightmare commute scenario that many feared after Sunday's East Bay freeway inferno still had not materialized by Wednesday, with many motorists opting to take public transit rather than drive.

Traffic congestion was down Monday and Tuesday. The amount of time drivers were stuck in traffic moving slower than 60 mph was down 8 percent around the entire Bay Area, according to Caltrans data. Congestion on Oakland freeways, meanwhile, was down by more than 50 percent, the data showed.

IEA gives warning of global gas shortage

The world's leading energy watchdog has warned of a looming global gas shortage unless more money is poured into investment.

Canada: Gas Pains: Why prices rise and (sometimes) fall

Drops of liquid gold were being sold at gas stations Tuesday morning; at least that's how drivers felt after an overnight jump pushed pump prices up right across the country.

OPEC's Dilemma

Calls for energy independence and talk of electric-drive cars is sending a chill through OPEC.

Michael T. Klare: Where is the USS Nimitz?

In the latest flurry of media coverage on U.S.-Iranian standoff, the mainstream media has neglected to mention that the United States is massing warships in the Persian Gulf. Why?

Three politicos take a stand on oil profits

There are a few US politicians talking solutions to oil profits, oil shortages, and global climate change. A couple of bills now before Congress would tone down the subsidies for big oil, and one presidential candidate suggests an oil dividend. These are steps toward geonomics, the policy that rewards people for efficient use of Mother Earth.

Repsol-YPF Joins the Fray in Gulf

The deepwater Gulf of Mexico continues to attract a bevy of international oil companies due to its relatively low tax and royalty rates, stable political regime, abundant infrastructure and remaining untapped oil deposits. Companies compete against each other in government auctions to snap up new acreage. Using seismic data to see a prospective pocket of oil that others have missed could provide a critical leg up for oil explorers. Repsol-YPF hopes the new 3DGeo technology will give it a unique advantage.

Nuclear power no sure cure for climate ills

The Council on Foreign Relations, a Washington think tank, says it is almost impossible to build enough nuclear power plants to arrest the rise in earth temperatures. It would be hard for the nuclear industry to procure large amounts of reactor-grade construction materials and hire enough trained workers, the report said.

"Given the current U.S. energy sources and patterns of use, nuclear energy alone does not provide a solution for at least the next few decades for significantly reducing the U.S. contribution to global warming," wrote Charles Ferguson, the council's science and technology fellow.

Intel analysts to study climate change

Among questions that some are asking: Will drought and weather changes create mass migrations that could threaten governments? Will U.S. military bases be affected by rising sea levels?

U.N.: Beating global warming need not cost the earth

Humans need to make sweeping cuts in greenhouse gas emissions over the next 50 years to keep global warming in check, but it need only cost a tiny fraction of world economic output, a major U.N. climate report said on Friday.

Nigeria's MEND Frees Hostages from Offshore Attack

"The vessel was meant to have been destroyed. We have no need for more hostages just yet."

PNG now has four separate LNG proponents

The current spate of activity revolving around proposed LNG or liquefied natural gas projects is nothing short of amazing and could not have been foreseen even two or three years ago.

The crucial factor for PNG’s gas suddenly coming of age – the largest proven gas field at Hides was discovered exactly 20 years ago – has been the upsurge in oil and gas prices and widespread concern that the day of ‘peak oil’ may be coming.

International Oil Cos' Niche Lies In Finance, Project Mgmt

Despite energy-producing countries' rising dominance over global hydrocarbons reserves, multinational companies likely will maintain a niche as financiers and project managers of major developments.

Making Millions from Peak Oil

Lately I've found myself discussing peak oil with a variety of individuals. And last night was no exception. I used to think the only people interested in peak oil were geologists and oil execs.

I was wrong.

It turns out that the smoky environment of a bar was better than Exxon's boardroom.

Venezuela Min: No Plans for Cash Payment for Orinoco Projects

Venezuela is not considering a cash payment to compensate foreign oil companies for their nationalized assets, the oil minister said early Thursday.

The oil price just keeps on rising

The primary trend, i.e. the development beyond short-term or seasonal fluctuations, continues to point north. While crude oil demand will rise strongly, the supply bottlenecks are becoming increasingly visible. Peak oil, i.e. the global zenith of crude oil production, is getting closer.

Weekly Offshore Rig Review: Day Rate Divergence

For this week's rig review, we set out to examine the relationship between contract lengths and the day rates for those contracts. Specifically, the goal was to determine if longer contracts generally carried lower day rates.

What is the Timing on Peak Oil Production?

Amongst the many concerns that surround oil production one of the biggest is when the world will reach the point of peak oil production. Some researchers feel that this may be within the next year or two. But a recent paper written in Sweden says that it will more likely not be before 2018. What this means it that the oil production will continue to go along the way it has, though in some places it will increase, until it hits its peak and begins to slowly decline. Obviously it is the declining supply that people are worried about.

Of things to come

Is price gouging being carried out by the big oil and gas companies? Of course. Is there anything to be gained by consumers from the high prices? Probably. As gas prices soar in the past few days, so does the chorus from consumers who believe they are being hosed at the pumps. Washington State is launching an investigation into gasoline prices and the NDP energy critic is calling on the B.C. and Canadian governments to do the same.

Richard Heinberg's Museletter #181: Talking Ourselves to Extinction

In the last couple of centuries, the magical thinking associated with religion, under assault from science, has found a new home in political and economic ideologies. Economics, which masquerades as a science, began as a branch of moral philosophy—which it still is in fact. For free-market ideologues, the market is God and profit is the ultimate good. We have used language to talk ourselves into the myth of progress—the belief that growth is always beneficial, and that there are no practical limits to the size of the human population or to the useable extent of renewable or even non-renewable natural resources. This particular myth was an easy sell: it is an inherently welcome message (a version of “you can eat your cake and have it too”) and it seemed to be confirmed by experience during a multi-generational period of unprecedented expansion based on the one-time-only consumption of Earth’s hydrocarbon stores.

Filling the SPR, how to Pay ?

Bush wants to expand the SPR from the current 691 million barrels to 1.5 billion and has selected Richton, MS as the next storage site to get to 1 billion barrels (plus expansions at the two sites in Texas and one midway between New Orleans and Baton Rouge).



But the Dept. of Energy cannot even buy back 4 of the 11 million barrels that it sold after Katrina !

The new 800 million barrels will be filled by 2027 and "In 2008 and beyond, as we work our way to 1.5 billion barrels, the Department will determine future fill rates based on information and market conditions available at that time.”

Given that the US cannot afford 4 million barrels, how to buy 800 million barrels ?

May I suggest a percentage tariff on oil or a percentage tax on gasoline and diesel used. A 1.5% tariff on imported oil and oil products would buy 800 million barrels in just over a decade, regardless of the market price of oil.

Storage for 723 million barrels cost about $5 billion well over a decade ago. Part of the tax would go towards building more storage, including refined products as well crude oil.

IMHO, a 1.5% tariff could add 800 million barrels to the US SPR in fifteen years, even with demand destruction.

Best Hopes,


Note the new tax plus increased demand (good demand IMHO, no GHG) will raise oil prices to users and induce modest conservation.

Why not drill ANWAR to fill it??

THat way you keep it out of the greedy oil company hands.

Give Bechtel a DOE contract to develop it... they will probably get it done for a $100/barrel or so development cost.

But in all honesty, it may be a way to get ANWAR drilled and get the oil where it is needed in the event of an emergency.


As we all know, that pipeline is not going to be there forever.


Hi FF,

I'm glad to see your comments.

re: "...where it is needed in the event of an emergency."

What "emergency"?

What happens when the "emergency" outlasts the supply?

re: "...pipeline is not going to be there forever."

Now, this seems to be a better argument. (Get it while the gettin's good.) And store it.

I had ideas along these lines, too. Not just for ANWR - the argument could apply regardless of source (doesn't it?) In fact, it seems this is one idea that might be "sold" to the public - it offers people some tangible ability to save for the future. I think people would like this. (A conservation measure with concrete results.) Unlike money, you could see the oil sitting there.

But I couldn't figure out how to get around the ability of someone(s) (fed?) w. force to negate any agreements and/or conditions set upon the use.

I'd be interested in pursuing this line of thinking.

You think Uncle Sam getting into the oil buisness is a good idea?

That's just a step away from nationalizing the whole shebang isn't it?

Why not? Everyone else that still has some oil left seems to be doing it! :-P (JJ)

That was my thought as well and I bet there is a plan to do just that if need be. It's kinda like a game of musical chairs. Everyone is scrambling and dancing around and try to get what they can before the music stops. Then we will have a bunch of national-based entities controlling the petroleum in each country...unwilling to sell it or invite anyone else in to develop it and take it out of their borders.

...and Robert, I do apologize because it will not be fair to the oil companies that get kicked around in this situation, but I do believe this will be the future of the business. The existing companies will become "National" companies and work for their respective countries.

Robert, I found this concerning Scottish independence and "Scottish" oil. It is from the "World Without Oil" journal (fictional oil crisis supportted with factual info). I guess it's not only Chavez that wants to keep his own oil under his control.

"It's Scotland's oil"


In Scotland the Scottish National Party have been making lots of noises about pledging a referendum on independence on 2010 if they get control of the assembly, though the last I heard there's only about a quarter of Scots (and less than half of SNP voters) who actually want full independence - mostly they just want a better deal for Scotland. Can't blame 'em, if I were Scottish then I'd vote for 'em. However, that was before the oil crisis. In the 1970s the SNP came to people's attention with a very effective little three-word phrase - "It's Scotland's Oil". They've based their party on that ever since and the notion that an independent Scotland would be able to keep much more of its oil revenue than under the current thinking.


Some inconvenient facts:

Scotland last made a positive cash contribution to the UK Exchequer in 1905.

Scotlands oil is currently providing 11 billion sterling a year to the UK Exchequer.

The UK provides 30 billion sterling to Scotland each year.

The Barnet formula ensures that for every pound sterling of government money spent in England, £1.25 is spent in Scotland.

Last time I looked: 11-30 = -19 billion sterling per year.

Scotlands oil will fall from its peak production in 1999 to at least half that by 2015, and probably less than 1 million bbls / day by 2018.

25% of the working population in Scotland are employed at tax payer largesse. Many in ludicrous and overpaid and pension protected jobs

Less than half the total population are actually in paid employment contributing taxes to the exchequer. About 48%
And this figure includes the public employee tit-babies

Prior to the discovery of North Sea Oil, Scotland was rapidly depopulating. Especially in the North East.

Incomers have stabilised the population decline. Which is good. Because by 2025 we will need lots of overtaxed low wage immigrants to wipe our arses while we whinge and whine in old folks homes. I am sure they will flock in to do it.

By 2025, Scotland will be an old peoples home, with the North Sea kaput, and public employees demanding impossible protections and entitlements from an ever reducing and ageing work force.

And all of the above is without Global Peak Oil or GW.

Aye. Today was a sea change in Scottish politics. But the new Masters dont even recognise Peak Oil and have sold a line about oil lasting another 30 years and the creation of a Norwegian Style Oil Endowment Fund.

The new man in charge is an Economist by the way...

So, by 2010 the new boy wants a referendum on independence and he has also said that (and this IS true) If Scotland does not like independence, we can always go and re-join the Union.

One last important little factlet:

Scotland was not forced to join the Union 300 years ago. It joined after the Darien Fiasco (Scotlands attempt at raising overseas colonies). When Scotland Joined the Union it was Bankrupt and had been suffering under a severe Christian Regime very similar to the Taliban (''why dont Scots have sex standing up? - Because somebody may think they are dancing''.)

The Union heralded Access to Capital, Access to markets, And the truly amazing and world changing Scottish enlightenment.
Scotland lost interest in the Union about the same time Britain's Empire went into decline.

I dont see today as a good day for Scotland or the UK.

As for rejoining the Union at a later date, well, 55 million English may have something to say about that.

If Scotland is lucky, it may be in a position to sell water to the English as the climate dries England out.

Ha...thanks for the "insider's" scoop on the situation. I was just using the Scottish example to illustrate that it is not only Chavez that wants to keep his resources for his own country. We will probably here many more "local" stories about the "natives" doing what they have to to keep the resource in their hands. Heck, Africa has almost daily stories along this line.

'In Saudi Arabia gasoline costs about 45 cents a gallon. In Iran it's 33 cents. Venezuelans pay less than a quarter.

These absurdly low prices are a direct result of massive government subsidies.

While these numbers are not adjusted for cost of living, it's fair to say that drivers in those countries are getting a good deal.

But it's straining government budgets. More importantly, it's not allowing the free market to do its job. Higher prices on the open market are not leading to a drop in demand, which is keeping the cost of oil high for everyone else.'


Especially note the 'not allowing the free market to do its job' - if Saudi Arabia or Iran or Venezuela decide to sell themselves their own oil at their own price (so to speak), this is unfair to Americans, as it stops the free market from working.

I believe the Iraqis, however, have made major strides in allowing the magic of the free market to work for them. Strangely, the article didn't note this success in lowering demand by raising prices in an oil producing country.

I may add, the article provides some basis to see the export land model in operation - not that it actually mentions this point, except to more or less suggest that an oil producing country should not be allowed to escape the demands of the free market by increasing their own consumption - after all, merely because it theirs doesn't mean they should be allowed to keep it selfishly for themselves. After all, Iraq doesn't.

As a Scot I am not happy with this blatant misrepresentation of my country...would the editors please remove this?

As an American of Scottish decent I would prefer the editors to leave it. I feel a more appropriate response with
a broader positive result would be for you to engage with dialog.

Where IS that 'Theory of Everything' ?
Here it is !

Who's to say it's "misrepresentation"?  The Darien fiasco is historical fact, and Scottish demographic trends are public record.  Besides, there is no value in free speech unless it includes speech you don't like.

I don't need lectures about free speech thanks. Responsible free speech is required, not a diatribe. Don't you lot usually deal with trolls quietly? If you think Mudlogger's analysis is sound then that shows two closed minds not one. I think the current state of Scotland is more nuanced than ML would allow. If Scotland is such a basket case then I wonder if that had anything to do with deindustrialisation or the use of much of our land for aristocratic 'sports'. Being tied to a neighbour so much bigger and so arrogant with it does not help. If you are English ML why don't you and your countrymen set us free and watch us drown. We don't mind. We could do with having your foot taken off our heads as we try to surface though...
As for ML's analysis, if you really think it is so transparently obvious, I should be humble and listen reverently, and then I must re-contact all those academics I used to hang out with and tell them to get down to McDonalds pronto, I hear you can always get a job there...

At least the English do not deny the Scots right to exist, as many Americans have on this forum and elsewhere to New Orleans.

Best Hopes,


I have kicked around the possibility of the U.S. nationalizing the oil industry. Understand, that's not my issue. I have no problem with countries nationalizing industries. What I have a problem with is theft, which is what Chavez has done. If the U.S. ever nationalized the oil industry, I will bet that the shareholders are compensated and the U.S. doesn't just seize companies.

I think there is a fair probability that as resources deplete and the oil companies are making higher and higher profits, that the government will step in at some point, declare company business a matter of national security, and work to nationalize the assets.

Robert a good question to ask is "How much profit has the Majors made over the last 50 years?" The oil companies with help from the ruling families of Venezeula have plundered the country for years. The population of Venezuela has seen very little benifit from it's vast natural resources. My guess is from the perspective of Chavez, the oil companies have been paid very well for their investments.

The oil companies with help from the ruling families of Venezeula have plundered the country for years.

I am interested in this line of argumentation. Maybe you are correct. Do you have any numbers to support the argument? Do you have numbers for tax revenue that oil companies have paid to the Venezeulan government? I suspect your assertion is wrong, and an emotional appeal, but I would be very interested to see the numbers.

Robert I do not have numbers to support this assertion. However I worked and spent a fair amount of time in Venezuela. A subject often discussed was "why is Venezuela third world, with it's fabulous wealth of natural resources?" Also I believe up until Chavez, the Majors paid a very small pecentage of revenue in tax. I will do a little research and see if I can locate "numbers"

Here's a place to start.


Rigzone has anhttp://www.rigzone.com/news/article.asp?a_id=43731 article and some of the percentages paid in Venezuela.

The article you linked to - Oil Companies May See An Ebb In Profit Gusher - summarizes both sides of this debate. Here are some excerpts:

In the 1990s, capital-poor Venezuela lured Western oil companies into the country with generous terms -- a 34% tax on income and a 1% royalty on oil production. As crude-oil prices soared, the companies' investments in Venezuela turned into gushers of cash.

So, Venezuela did not have the money to develop their resources, and they offered attractive terms for foreign investors to come in and develop the reserves. And they invested billions to do this.

"The Venezuelan production, when you compare it to the rest of the operations of these companies, is significantly more profitable," says Fadel Gheit, senior energy analyst at Oppenheimer & Co. He estimates that ConocoPhillips was clearing a profit of $22 on each barrel produced, more than 50% higher than its per-barrel profit in the Gulf of Mexico.

To grab more of that profit for itself, the Venezuela government broke existing contracts.

So, the companies risked billions, the risk paid off, and Chavez tore up the contracts.

Mr. Gheit, the Oppenheimer analyst, says Venezuela's response to the oil companies' windfall profits wasn't unreasonable from Mr. Chavez's point of view. "This is like drafting a kid to the major league and he's making $100,000 a year. All of a sudden, he is hitting 50 home runs. Guess what, he wants to renegotiate his contract and under the circumstances, one can understand the way Chavez feels."

Except that you haven’t invested billions in the kid only to have him demand to renegotiate. That’s what people can’t seem to understand. Chavez has the right to nationalize. But projects were done based on the terms offered. What he should do is compensate companies for the investments they made, and he is refusing to do that. And this isn’t just an issue with U.S. companies. He is doing it to other countries as well. So, if I am China I am very reluctant to trust a guy who has no qualms about tearing up existing contracts.

Personally, I hope my company gets the heck out of Venezuela and never returns. Chavez can't get away with this act for too long without that influx of foreign investment. And if oil prices unexpectedly plunge (something I certainly don't expect) he is going to be in financial trouble. As it is, he is fostering expectations of support that can't be continued if he chases out the foreign capital.

Robert, you seem to forget that this is round No. 2 of nationalization in Venezuela. They kicked the oil companies out in the 70s, invited them back in the 90s, and the majors jumped right back in. I am quite sure that the corporations were pretty sure that they could easily get kicked out again, and set up contracts to ensure that they made lots of money real fast in anticipation of just this event.

I am also sure that if Venezuela privitizes again in 10 years, the foreign investors will be more than happy to jump right back in. They always are.

I find it interesting that they are also nationalizing Sidor, the steel company. I was involved in the privitization 10 years ago.

Hi Robert,

Thanks for the discussion.

Re: "So, if I am China I am very reluctant to trust a guy who has no qualms about tearing up existing contracts."

This would make sense, in a certain framework. I'm not sure China sees it that way, though. Perhaps the opposite, in fact.



"...the rebels have attacked oil installations, seeking to deprive the Sudan government of the wherewithal to pursue a civil war that has killed more than 2 million people and displaced 4 million from their homes over the past two decades. But the Chinese laborers are protected: They work under the vigilant gaze of Sudanese government troops armed largely with Chinese-made weapons -- a partnership of the world's fastest-growing oil consumer with a pariah state accused of fostering genocide in its western Darfur region."

When prices are stable, contracts are stable. When prces rise, nationals feel foreigners are taking too large a share of the national treasure. Perfectly natural, happens all the time, im sure the majors expect it because it has happened many times in many places.

In the current situation majors have a simple choice - take their contracts to world court, probably win something for their assets and the something might be collectable against veneauelan us assets, eg their refinereies (which are debt free), or give up and remain in country under a new contract. The fact that all are choosing to remain implies that the new contract is better than what they might eventually collect in court. IMO, the fact that venezuela's orinocco belt holds a major share of the worlds useful reserves is influencing the majors' decisions.

Agreed, if prices fall chavez will have to change the terms, but most here are agreed that this is not likely to happen. It is hard to see how an impartial observer could possibly see chavez' actions as anything except very favorable for the venezuelan people, his grandstanding giveaways notwithstanding. There is little wonder that he is very popular, probably becoming more so even as the country drifts towards the usual totalarian form of marxism.

The steel company is something else again, imo it will not be nationalized. The banks, too, are in a better position.

Something like that might be difficult to quantify. I mean, where is the dividing line between plundering and fair compensation? I have to wonder though, has the US gov. or companies manipulated Venezuela over the years to the detriment of Venezuela? Was Venezuela taken advantage of because the US was negotiating from a stronger position? I think a lot of people, including myself, feel that this is what has been happening. I don't know how to prove it of course, but don't you think the US takes advantage of poorer countries when it's in its interests? I think that's why some people might excuse Chavez for taking over the oil industry.

Just like in Nigeria, the problem is much of the plunder is within the country, in corrupt government officals, certain local officials and wealthy corrupt business people. Oil cos could have paid 3 times the taxes and it would still primarily go to the rich. Look at PEMEX. There is no limit to the point that the powerful will enrich themselves and allow astonishing poverty for everyone else.

A bigger question is how much do the oil companies collude or enable these behaviors for their own enrichment, how much are they directly involved in. How often do they willingly turn a blind eye to local destruction, exploitation and abuse of the poor in pursuit of their aims. Bribes and kickbacks, directed contracts, etc when done with authorities who consider themselves to be the law are sometime legally gray, but in the big picture are clearly corrupt, expolitive and harmful to people and society. It's generally pay to play, and companies will pay.

Few companies will turn their back on a big profit on the basis of ethics if it can be accomplished with a veneer of legitimacy. Again, Nigeria, Sao Tome and many other examples can be brought forward. This doesn't mean the lower level employees are bad people, but often the whole mess just stinks.

Hi peak,

I like your questions, and would encourage you to pursue them.

re: "...This doesn't mean the lower level employees are bad people..."

In fact, we could generalize and say "nobody's bad". People are attempting to meet their needs, with the strategies they have at their disposal. (Learned, invented, "set up" in some cases...)

The question, it seems to me, is how to get into a conversation about those needs, so that people might see the wisdom in pursuing alternate strategies, and also, perhaps, learning new ones.

What I have a problem with is theft, which is what Chavez has done. If the U.S. ever nationalized the oil industry, I will bet that the shareholders are compensated and the U.S. doesn't just seize companies.

That's part of the risk in working in a country that isn't the same as your home country. When you operate in another country, you play by their rules, no matter what their rules are. If you're in a country that isn't on friendly terms with your base country, you have no leverage to help you if things go sour. The oil companies knew that nationalization was a possibility.

Venezuela nationalized its oil in 1976. It wasn't just a possibility, it was an actuality.

Your point about leverage is not correct. US companies operating overseas have been counting on the availability of US military force as a source of leverage for over a century now. In fact, the provision of such leverage is the principal reason for the existence of the US military on such a colossal scale. The idea of "force projection" is in fact all about providing US business interests just such leverage.

FWIW, I don't think it could ever happen. But only suggesting that you see the trend globally.

I have kicked around the possibility of the U.S. nationalizing the oil industry. Understand, that's not my issue. I have no problem with countries nationalizing industries. What I have a problem with is theft, which is what Chavez has done. If the U.S. ever nationalized the oil industry, I will bet that the shareholders are compensated and the U.S. doesn't just seize companies.

I think there is a fair probability that as resources deplete and the oil companies are making higher and higher profits, that the government will step in at some point, declare company business a matter of national security, and work to nationalize the assets.

I think a distinction should be made between exploration/production on the other hand and distribution/storage/retail of end products on the other. The latter really should be viewed more like a utility, kindred to NG and electricity. I would like to see all energy utilities (including liquid fuel distribution) nationalized but run as a public trust with directly elected trustees rather than government appointed ones. I believe that such an arrangements would go far toward avoiding the worst aspects of state socialism, for reasons I explain on another post today.

Exploration and production, on the other hand, are so entrepreneurial that I can't see any government doing a very good job of it - and certainly not OUR government!

The sane thing to do would be nationalize it and leave it in the ground

There's a certain Sisyphean quality to pumping it up one place in order to pump it back underground someplace else. A reserve by any other name...

Hi greenish,

re: "...leave it in the ground."

Now, this does make sense.

I think the argument might be that the means to get it out might not exist in the future. (Bad future, in that case.)

What I'm wondering...how to use the oil we have now wisely?

Conversion to solar and wind? (While we can?)

Use less in a controlled fashion so as to prolong the arrival of "peak"?

What does a "no-growth" economy look like and how does it function?

How to get other countries and regions on board - so one is not left open to invasion?

If you leave too much in the ground (leave it all at once) - how do you deal with the resulting collapse?

What do you do with people whose incomes are, to some real degree, an artifact (or, more accurately "side-effect") of this ever-increasing flow?

I think the argument might be that the means to get it out might not exist in the future. (Bad future, in that case.)

Probably true. But IF that's the case, it's not much of an argument for mining it and burning it now. If we're going to collapse back to a lesser stage of industrialism, human misery and environmental damage will be minimized by sequestering as much of it as possible away from the detritovores. (that would be us)

If you leave too much in the ground (leave it all at once) - how do you deal with the resulting collapse?

The concept of leaving too much in the ground strikes me as humorous for some reason. Only makes sense if we have some sort of yeastlike manifest destiny, some duty to entropy.

Given the system we have, the longer you draw it out and "flare it" under the current paradigm, the worse the collapse will likely be.

What do you do with people whose incomes are, to some real degree, an artifact (or, more accurately "side-effect") of this ever-increasing flow?

They're hosed by definition on a finite planet. However, they will be less hosed if there's a bit left.

Hi Greenish,

Thanks for your response. I'm thinking my word choice didn't convey my intent.

I was speaking tongue-in-cheek about "leaving too much in the ground".

What I meant was - an abrupt cessation of the flow of oil and natural gas into the industrial world as it exists as of today, would have extreme catastrophic effects. (I presume. Please correct me in detail if you see it differently.)

Thus, the issues becomes, it seems to me, several. On the analytical side, we can try to ask questions like "What percentages of decrease will have what effects?" This relates to the discussion of what different decline rate scenarios are, and what the effects would be upon the economies of the world as they exist today. Example, a 2% decline rate, 10%, etc.

On the side of attempting to look at what we might do faced with this reality, with the little bit (way too little) lead time provided by our favorites analysts here and elsewhere - we need to get busy.

Yes, I agree - to continue on without change means we use up our only means to construct different infrastructure and different extraction technologies, for example, wind and solar (construction of same).

I am in favor of immediate and massive change in order to produce the "best case" scenario and/or to support positive mitigation paths.

To me, the goals and actions of this change seem somewhat obvious.

I'd be happy to discuss further.

...the U.S. doesn't just seize companies.

You are right once more RR, it seizes whole fucking countries.

Here's something else tasty for the right wing at heart:


Hi Crystal,

You know, the *&(#@ aside (it's easier for me), my guess is Robert will not be able to relate to what you're trying to say, unless you provide some extensive references. And a couple of examples, in some detail.

Could you, possibly?

Hi Aniya,

Sorry about the *&(#@ and I guess you may be right. Here is one linc, and unless you dig holocaust images, use the second link.

http://deoxy.org/wc/warcrime.htm (no this is not a practice underwater escape from a helicopter)

When Saddam Hussein requested U.S. Ambassador April Glaspie to explain State Department testimony in Congress about lraq's threats against Kuwait, she assured him the U.S. considered the dispute a regional concern, and it would not intervene. By these acts, the U.S. intended to lead Iraq into a provocation justifying war.


I think everyone knows that there were no WMD found in Iraq for the second go around and as well that the 'evidence' had been fabricated. I believe it was established in the Nuremberg War trials that an aggressive war was a war crime of the first order. I believe the only legitimate justification for war allowed by international law is in response to a direct attack by an aggressor.

And then there is Grenada...more along the line of a Marx bros 'Duck Soup' comedy: (Noam Chomsky)

The Russians were going to build an airbase in the nutmeg capital of the world, Grenada, if they could find it on a map, and they were going to bomb us.

after the brave cowboy barely saved us from destruction from the Grenadians by sending thousands of forces who were able to overcome a couple of middle aged construction workers http://www.democracynow.org/article.pl?sid=03/10/22/1450216

Here is Noam's site for anyone who wishes to understand, from a non-MSM viewpoint, US politics by other means.


Or just go get googled by it all.

Thanks Aniya for the opportunity of a bit of spleen venting, about how our western leaders lead, now I gotta go see how the new SA oil reserves are coming along.

Anything with a LaRouche connection is untrustworthy and probably not worth reading.

Not questioning your statement about the quality of this publication as I am not familiar with LaRouche. I will take a look see and if you can elaborate it would be appreciated.

But, the idea I found interesting is that of a global fiat currency which would further the aims of corporate globalization, it does seem so plausible. Nafta(ism) is bad enough, the thought of a global currency gives me the collywobbles.

Oh dear Engineer-Poet, I thought you meant the first link to La-Roche, but did you mean the photograph of the dead incinerated person? I too would say "say it isn't so" and I do when it comes to my countries actions in Afghanistan, but it is so and if I deny it, I doubt that I am better than a Holocaust denier.

I saw the lines of fleeing Iraqi troops on television during the first episode, of These Days of Knightly Combat: Bush Part I, being strafed and bombed as if they were mere cockroaches and with about the same ability to protect themselves or fight back, it was disgusting to watch.

If you are concerned with the way our governments are acting I would go from your ... probably not worth reading to bringing something you consider worth reading here to the forum.

Lyndon LaRouche has a very specific agenda, and slants most everything in his publications to fit that agenda.

This is not to say that everything he publishes is untrue — quite the opposite.  But sifting the facts out of the agenda (and dealing with the selective omissions) isn't something you ought to ask of others; if the facts are non-trivial they will be available from other sources minus the slant, so don't reference LaRouche.

I will have to read more of LaRouche; I don't know how realistic the actualization of a world currency or even three major currencies would be, but in my opinion it would be something to be wary of.

I only became aware of LaRoche with the above article, the links to war crimes were a response to Aniya asking me to substantiate my position about the US Government seizing whole countries, this for RR's intellectual benefit. For me that is hardly a question that needs much more substantiation than is commonly available and I'm afraid I just googled and linked the first thing that came to hand that fit the bill, and that by luck of the draw turned out to be LaRoche (pretty lazy of me).

With the links and comments re Noam Chomsky, with whom I am quite familiar, I wonder why you do not include him as having an agenda, which he does and an agenda I see no reason to disagree with.

I am sorry; possibly we are defining agenda differently, but I am having a hard time imagining where I will find any news or article that does not have what could be considered an agenda. MSM, Co-op Radio, NPR, Internet Blogs, even the Sermon on the Mount had an agenda. Would you have taken me to task if I linked to that, and asked me to sift facts and deal with omissions?

Several problems.

It is a decade to get production from DC decision to tanker. We need to start filling the SPR well before then.

Drilling ANWR will do nothing to encourage conservation (not that 2% or so higher prices will have much impact).

There may not be 800 million barrels in ANWR.

And I am opposed to starting the decade long clock until it has been 6 months since I have seen either a 1) Hummer or 2) Escalade or an 3) Expedition. Once super sized SUVs are as rare as seeing a Chevy Vega, *THEN* start the ten year count down to production. We should need, as opposed to want, the oil by then.

Best Hopes,


Once super sized SUVs are as rare as seeing a Chevy Vega, *THEN* start the ten year count down to production. We should need, as opposed to want, the oil by then.


My Dad had an orange Chevy Vega when I was a kid. It looked exactly like this.
That was a cool car...

Tom A-B

That was a cool car...

That must be a new use of the word "cool" with which I am not familiar :P

Hi Alan,

Yes, I also meant to add this to my comments, as well. Linking conservation and a real policy to any extraction.

maybe the 1.5 billion barrels is an illusion. with the object being to manipulate the market with illusionary barrels, not unlike the illusionary dollars used to fininace the debt. just a thought.

bush's daddy had the good sense to buy oil for the spr when the price was low (he also had the good sense to not occupy iraq).

comparisons with bush's daddy are not intended as an endorsement of bush1 but only as a comparison.

If you want to tax imports at 1.5%, why not simply take 15 barrels out every 1000 barrels of imports?

A cheaper way would simply be to buy proven reserves in exisitng fields in the Lower 48. No need to build more costly storage tanks, simply keep the oil in the reservoir until required. Furthermore, buying reserves is a lot cheaper than buying produced barrels.

Production capacity may be a problem with the above idea - 800 million barrels of stored oil is not much good if it can only be delivered at a very slow daily rate. However the US government could spend the time between buying the reserves and needing to use them by injecting CO2 into these fields thereby ncreasing reservoir pressure and potential production rates.

This is all seems far too sensible - cheaper oil with an environmentally beneficial policy to increase delivery rates....

Hi bunyon,

Sounds sensible. Have you encountered any arguments to what you say here?

And re: "800 million barrels of stored oil is not much good if it can only be delivered at a very slow daily rate."

Well, perhaps better than not having it. Aside from war/defense, in some ways the slow rate may not matter.

They really shouldn't complain about the price.

1) They can just print more money to buy it.

2) The rapidly inflating currency in circulation will only make the oil become more expensive the longer they wait.

3) ....NM....they don't seem to get Peak Oil.

But hey, printing your own FIAT money to by resources is pretty cool...can I do it?

printing your own FIAT money to by resources is pretty cool...can I do it?

The OTHER job of the Secret Service is to prevent people like you from doing just that.

Best Hopes for harder solutions,


I know the Secret Service has long arms...but I am not a US citizen nor on US soil. That's the US Military's Job.

I think I will stick with barter, anyways, I don't want to increase the chance of the US invading Canada.

Best hopes for actually filling the SPR with ANY MORE OIL!

IPCC mitigation report is out. Here is one link:


In a quick skim I didn't see anything acknowledging peak oil or an awareness that oil consumption is going to have to decline in any case. The big conclusion (a no-brainer, really) seems to be that energy conservation & efficiency is the #1 priority.

They (this IPCC report) are in la-la land. That they even play with scenarios ("categories" A1, A2) that show that emissions should already have peaked is silly... emissions will go up as long as there is fuel available. The writers just won't acknowledge that few people will really listen to them - no one likes to think of themselves as irrelevant.

If the bottoms-up PO analysts (e.g., ASPO) are close to reality, then the IPCC Category C seems like a much more likely scenario.

Future generations will just have to adapt to a warmer earth.

"Honey, I ravaged the planet!"

Future generations will just have to adapt to a warmer earth.

You tell them.

Well, obviously either future generations haven't invented time machines or climate change won't be such a problem after all, since future generations haven't come back to kick our butts yet. That's the problem with the future, they can't come back and beat the crap out of you for making stupid decisions today.

And what would be the point of me or my kids beating up baby boomers a decade or two from now for the damage they caused to the climate? The damage has already been done at this point. The best we can do is reduce the extent of the damage and mitigate.

Believe me, if there was a legal way for me on my bike and with my small, well-insulated house to stick it to my fellow-citizen energy guzzlers today, I'd get in line to do it. In the mean time, I have the unpleasant task of telling my two young children about the lousy climate future they've been born into. They, at least, appreciate the fact that I bike to work.

I guess the good news is that global warming may convince some people that are unconviced about peak oil to get serious about energy conservation & efficiency, while peak oil may convince those that are unconvinced about global warming to do the same. Either way, and under all circumstances, energy conservation & efficiency has got to happen, big time, starting now.

Re: Rigzone article

It's the CONTANGO of Rig day rates. Haha...someone has been reading/listening to Simmons.

In almost every case, longer term contracts have more expensive day rates, and by double digit percentages.

These guys know how valuable they are now and in the long term.

Huh? Here's the conclusion of the article...

In addition, those new, shorter contracts are paying less than last year's contract awards. In fact, for contracts less than one year in length, average day rates are about 10% less than last year's awards across all jackups. Part of the reason for the decline in day rates is a lessening in demand, which has seen the number of jackup contract awards drop almost 50% from the same period last year and more than 65% from the same period in 2005.

So, times are changing. The market for jackups appears to be on the brink of a change from a "seller's market" that favors rig managers and drives higher day rates to a "buyer's market" that favors operators. If that is truly the case, we could see the economics of rig contracts begin to swing back in line with our initial expectations whereby longer contracts do entail lower day rates.

That's for jackups, which can only work in relatively shallow water.  If the remaining undersea prospects are too deep for jack-ups, that's consistent with the peak model.

The Ferguson report published by the Council on Foreign Relations came to some interesting conclusions about the potential for nuclear power (emphasis added):

Because almost all of the current reactor fleet would require replacement by mid-century, the [relatively modest] Princeton and MIT growth scenarios would require about two new reactors to come online every month over the next forty years. ...

In the foreseeable future, nuclear energy is not a major part of the solution to further countering global warming or energy insecurity. Expanding nuclear energy use to make a relatively modest contribution to combating climate change would require constructing nuclear plants at a rate so rapid as to create shortages in building materials, trained personnel, and safety controls.

Ever read Shadows of Power?

I did a quick scan of their report. It really didn't seem to address another, very important consideration wrt nukes: siting. You can't just plop them down anywhere. The only way that there is ever going to be any prayer of a chance of resuming new nuclear power plant construction in the US is if siting decisions go through a very rigorous safety and environmental screen. (For example, not upstream or upwind of major population centers, not near an active fault line, etc., etc.) Applying a rigorous screen would probably result in a fairly limited number of potential sites. Even if we could somehow come up with the money and materials and manpower to build them, I am not sure we could come up with enough locations to build enough to come anything close to closing the gap.

Given the current U.S. energy sources and patterns of use, nuclear energy alone does not provide a solution for at least the next few decades for significantly reducing the U.S. contribution to global warming," wrote Charles Ferguson, the council's science and technology fellow.

..as if that drives the nail in the coffin. Let's reject any technology which does not provide a total single point solution or has any drawbacks whatsoever.

Personally I stopped worrying about global warming when I realised it was possible to take carbon out of the atmosphere after you put it in. Chop down forest. Make wood products (timber beams, panels,floors,furniture). Grow forest again. Repeat cycle for a century or two. Eventually you recycle all your spent fossil fuels into housing. It started out as timber, after all.
If you saturate the market for lumber, turn it to charcoal and plow it in.


I know, it's not a perfect overnight solution all by itself. But what is?

If we are to believe in things we cannot see or touch, how do we tell the true belief from the false belief?

Ferguson isn't talking about nuclear as a single point solution. The Princeton growth scenario is the "wedges" strategy in which nuclear is only one solution of fifteen. Even that "relatively modest" scenario would require the construction of two reactors per month for the next 40 years. Ferguson says that pace is not going to happen because of labor, materials and economic issues.

I doubt that anticipates the kind of World War II scale mitigation effort that Matt Simmons is advocating. I think that if we threw about half of national income into it for 20 years (for nuclear and other alternative technologies) we could build them faster than that.

I think that if we threw about half of national income into it for 20 years (for nuclear and other alternative technologies) we could build them faster than that.

I think any sudden rush to build even a hundred new nuclear plants will be a sure-fire recipe for an irrevocable disaster. Brilliant!

And we still haven't actually solved how and where to safely dispose of the piled up radioactive wastes as is. No problem, we will so hold on while we hurry up and build more nuclear. Brilliant!

How about we just get on with learning to live with less energy consumption for all the extravagant creation destroying lifesytle crap we don't need to actually preserve the miracle of life. Nah, that's crazy!

So it goes in Disneyland.

Carbon sequestration has always seemed a borderline hoax to me. First you drag the carbon out of the ground, then you burn it, and then you pump the result back down again. Sounds good, but you have added a couple of Os to each C, as in dioxide, basically tripling the tonnage to put back down. Then there's the volume to consider. As whatever reservoir we are filling increases in back pressure, the pumping losses go exponential. If we were to return the end result back to solid form, it wouldn't fit; besides which, the energy required to compress it that far would be probably greater than what it produced to begin with. Initial figures that show a reasonable return of energy must go down as things progress.

Yes, the great Smoke Landfill concept. Perhaps I'm missing something, but the only really good investment is in solar. That's why we will see vast subsidies to everything else except solar. If the government is subsidizing it, it's probably a long term loser. Of course these subsidies merely serve to delay the true competitive marketplace from deploying capital as it should.

Thus, we cap emissions instead of fuel production. Excuse me, but if we didn't produce plastic we wouldn't have to dispose of plastic or recycle it. Plastic wasn't a problem before we started making it; oil wasn't a problem before we started drilling for it. Commuting wasn't a necessity before we moved away from our jobs. These are self inflicted wounds for which the consumer cries out for sympathy. In response the government will chase its tail, and the votes, by running around in circles rather than determining where we will need to be and getting immediately on with it.

Building stopgap boondoggles in an ever accelerating energy crisis isn't an efficient use of our time and effort. It's a bit like hyperinsulating your house just before you tear it down to bulld a solar one. But, if there is a subsidy for insulating your house...

All Kyoto really had to do was cap fossil fuel production - but that was too simple. Besides, it might have worked.

Carbon sequestration has always seemed a borderline hoax to me. First you drag the carbon out of the ground, then you burn it, and then you pump the result back down again. Sounds good, but you have added a couple of Os to each C, as in dioxide, basically tripling the tonnage to put back down.

Which makes me wonder if, within a century of implementing large scale CCS schemes, our descendants will be faced with a "Global Oxygen Depletion Crisis"?

The fact is that the deep geological burial of biomass in the form of fossil fuels is the most elegantly efficient method of carbon sequestration possible. Nothing we can invent comes close to matching it.

Charcoal could be made from crop residues on or near the farm. Slow pyrolysis releases as gas which can be used to power the process, a liquid fuel that can be used by farm diesel equipment, and charcoal which can be returned to the soil which reduces the need for other fertilizers.

Or you could just mix the crop residues with livestock manure, put it all in a digester to produce methane (which coudl be fed into the NG grid), and then work the remaining muck back into the soil. It would provide much more fertility than charcoal (plenty of N/P/K + trace elements), and the addition of organic matter will improve the capacity of the soil to hold moisture better than would the addition of charcoal (important as precipitation patterns change due to GW). Farmstead methane digester technology is available and working right now around the world. It is low tech, inexpensive, and should have a very good EROEI. It also has the advantage of largely eliminating the agricultural emission of methane, a GHG much more potent than CO2.

We need to do the same thing with human excrement from municipal sewage plants, with the post-digester sludge going to amend soils for dedicated biodiesel crop fields (sunflowers or rapeseed, mostly), eliminating any possible public health hazards.

“We need to do the same thing with human excrement from municipal sewage plants”

This is done in my hometown, Gothenburg Sweden. The biogas is used for buses and cars. A new plant is being planned using forest “waste” to give an additional 60 GWh annually (1600 Nm3/h). Not much, I know, if you look at it this way:

If each car uses about 5-8 Nm3 per 100 km it's between 1800 and 3200 km of car driving produced on an hourly basis. With an average speed of 60 km/h that's like 300-530 cars running on biogas all the time. It's a $250 million investment.

‘A lot of screaming for very little wool’ said the old lady, cutting the pig. Freely translated...

The local sewage treatment facility here has two anaerobic digesters, but they don't use them. Turns out that it's more economic for them to burn the solid waste (i.e. using fuel) than it is to turn it into fuel.

The whole idea that we can take the crop residues and turn then into charcoal sound like a plan to raise oneself up by ones own boot strings. This will produce CO2, amking the charcoal, The end product will only be a good fertilizer if one adds ammonia (which has to come from somewhere), otherwise it degrades the soil.

No one seems to had down the simple sums. How much energy will you need to get the residue to the pyrolysis plant, how much to capture CO2 from the output of the power plants, and how much to get the charcoal back to the land and spread it out.

The whole idea is, IMHO, just stupid.

You are quite wrong on all the specifics; search for "terra preta" for just one example of exactly HOW wrong.

Fires. Explosions. Lightning strikes. This is the new state of affairs for U.S. oil refiners, hobbled in recent months by an unprecedented plague of bad luck and operational setbacks from California to Delaware.

Hardly bad luck. More likely cheesy maintenance.

This letter in today's WSJ makes a good point:

That Long, Green Fuel-Efficient Road Leads to Unexpected Problems
May 4, 2007; Page A13

So, the eco-friendly Oregonians have come up with a complex high-tech scheme to change the basis of the gasoline tax from quantity of fuel used to mileage traveled ("Fuel-Efficient Cars Dent States' Road Budgets," Marketplace, April 25). Mileage charges by themselves don't improve tax revenue, though they do have an utterly counterproductive effect on greenhouse-gas reduction. Gas-guzzling, pollution-spewing vehicles would be, in effect, given a subsidy, while energy-efficient, low-emission vehicles would be penalized with much higher increases in equivalent tax-per-gallon rates. This is preposterous.

If tax revenues don't support the essential highway program, then raise the tax rates. Yes, gasoline taxes are reputedly the third rail of American politics, but we pay tribute far greater than gas taxes to OPEC, and the prospect of ever-increasing gas taxes would motivate owners of gas guzzlers to replace them with fuel-efficient vehicles. Forget schemes to obfuscate the tax hike. They fool no one and worsen greenhouse gases.

John B. Walsh

Yes, the mileage tax is insance, especially from a state that purports to be concerned about fuel consumption and global warming.

But attack the production side as well. Don't build any more roads. Convert the rest to toll roads. Provide bar coding or ability to read license plates for all vehicles which is tied into a database with the associated mpg. Start with a near zero rate for those vehicles meeting or exceeding 50mpg. Raise the rates in an accelerated fashion as the mpg goes down. Also, throw in another charge that is at least proportional to the weights of the vehicles for good measure to take care of road damage.

Link from Drumbeat above--

Expected freeway traffic horrors don't develop
Fewer vehicles on road; BART posts ridership record

Patrick Hoge, Erin McCormick, Chronicle Staff Writers

Thursday, May 3, 2007


I suppose that this proves the obvious-- to mitigate road congestion, the proper strategy is not to build more roads, it is to destroy existing roads!

This comes from a natural extension of Parkinson's Law ("work expands to fill the time available for its completion") and is a useful reminder of how little the future is dependent upon the present.

Stop 50% of car traffic -- people will still get to work. Cut out 50% of electricity supply-- people will not freeze to death in the winter or suffocate in the summer. People are enormously adaptable and creative.

I rather imagine that a reduced-oil world could be quite a lot nicer than what we have now.

I ride BART every day. The problems on public transportation push more people to use the roads than the other way around. :)

I agree with your main point though; people are adaptable and creative.

Does anyone know of a free market system that administers the "public" transportation? I realize it's an oxymoron, but there has to be a freerer system not administered by a govt entity that works very well.

Does anyone know of a free market system that administers the "public" transportation? I realize it's an oxymoron, but there has to be a freerer system not administered by a govt entity that works very well.

There is an alternative which to my knowledge has hardly been tried anywhere, but should be. Instead of having a government-owned system or a corporate-owned system, why not a public-owned system? What I mean by a public-owned system is this: a system that is nationalized (or local equivalent), but run by a board of trustees that is elected directly by the voting public rather than appointed by the government.

The problem with all forms of state socialism is that there is an inherent conflict of interest between the role of government in regulating the economy to protect innocent bystanders and correct market failures on the one hand, and on the other hand the role of management to maximize the efficient operation of the enterprise. When the government wears both hats, one or the other or both roles inevitably get compromised. The result is an inevitable mess.

The scheme I have suggested above, however, leaves government in its regulatory role but without any role in managing the enterprise. Trustees directly selected by and accountable to the people have the management responsibility. By having the management elected by the public, an interesting dynamic is introduced into the system. On the one hand, there will be those that will want to see the service kept as inexpensive as possible, even if service quality suffers. On the other hand, there will be those that prefer better service quality and are willing to pay for it. I would anticipate that trustee elections would revolve around striking a balance between these two opposing interest groups. Voting for the management thus establishes a direct feedback loop that serves to self-correct a system from either becoming too cheap (and too poor quality) or too high quality (and too expensive).

Off course, free markets provide such a feedback loop as well -- but only when there are many suppliers as well as many consumers, and only for private goods. Urban mass transit systems are not a private good, they are a toll good. It is common to see market failures whenever a toll good is privatized and run as if it were a private good, just as there are policy failures when a toll good is nationalized and run as if it were a public good, for the reasons explained above.

You will need a set of providers that can compete with each other because the system has a natural tendency to move to provider duopoly – meaning that two large groups take over all supplier / provider options. Then they act like a governmental service.

I have gone over all of this – trap doors everywhere.

The system you are describing sounds very similar to our public school system.

And that’s not bad per say ... as long as charter schools (or excepted public trans)have legal status and the public contracting is done transparently

Its all about the contracting – that the reason energy de regulation failed in California

The system you are describing sounds very similar to our public school system.

With one hugely important difference: public schools are financed mainly by local property taxes, while urban mass transit systems are (or should be) financed through user fees. The problem with public schools is that most of the people paying most of the funding are largely different from the people who are actually using the schools.

Were public schools to be financed by user fees (i.e., tuition) (and probably with some sort of voucher system financed by some level of government to help families that otherwise couldn't afford the tuition), I believe that you would see a completely different dynamic at work.

Way back in the 1930s Grand Rapids, Michigan gave a franchise to a private company to provide public transit. This was about the same time GM bought out the street car companies and threw a big party where the streetcars were put in a big bonfire. Finacially the private bus company did pretty well until 1957. There was a bus drivers strike that lasted a couple months. This didn't bother the owner much because he also owned the biggest taxi service in town. It was also the peak year for car sales in Grand Rapids. Anyone who could afford a car got one. In 1958 the city started subsidizing the bus company and it never again made a profit. It is cars themselves not just the fuel that needs to become much more expensive for public transit to become self sufficient again.

Let's have a freer system where all military power is privatized. Let's have a freer system where all municipal water supplies are privatized. Let's have a freer system where all garbage and sewerage are privatized. Let's privatize all roads, i.e. universal toll roads. With GPS and some software you could do that. Let's privatize all beaches. Let's privatize health car (oops! That's the USA) Etc. etc.
Why is there any continuing interest in this free market muck?

Because Americans are too indifferent to history to bother studying why our ancestors socialized some public goods in the first place. In case that doesn't work, free-market apologists use several angles to trick us into turning back the clock:

1. Technology has solved the cause of the past failure.

2. It wasn't really a failure, that's all pinko propaganda, no one really suffered.

3. Modern businessmen wouldn't dare abuse their control of public utilities like their Victorian counterparts did because that's BAD FOR BUSINESS.

Ken Lay is laughing in Hell.

What I'd like to know, out of concern for where we're headed, is how much the apologists are relying on something else, something I've rarely heard stated openly: that the people who suffer due to market failures are sub-humans from mud races and deserve to be weeded out of the gene pool. Because that was in fact the argument used more openly by the Victorians themselves. Ugly radio and internet hate speech after Hurricane Katrina began to expose this attitude, like a coffin floating out of flooded ground. If we see it expressed openly more often, it's a sign that we're preparing to throw each other out of the lifeboat as things get worse.

What I'd like to know, out of concern for where we're headed, is how much the apologists are relying on something else, something I've rarely heard stated openly: that the people who suffer due to market failures are sub-humans from mud races and deserve to be weeded out of the gene pool. Because that was in fact the argument used more openly by the Victorians themselves. Ugly radio and internet hate speech after Hurricane Katrina began to expose this attitude, like a coffin floating out of flooded ground. If we see it expressed openly more often, it's a sign that we're preparing to throw each other out of the lifeboat as things get worse.

In some of my darker moments, I've wondered if the elites have come to the conclusion that continuing advances in robotics and artificial intelligence will soon render the lower 80% or so of the population to be superfluous and dispensible? Might they actually, secretly, be welcoming a mass dieoff? Might this explain the seeming indifference of TPTB to peak oil, global warming, and their implications?

As I said, these are dark thoughts. I don't yet really believe them. But they are disturbing.

Thanks for the response. It's a good one.
I think you're right. Crass Darwinism is more and more out in the open. Those who fail to thrive under our perverse economy deserve whatever fate deals them. Economic elites in this country are moving sharply towards straight thuggery.
Economic analysis nine times out of ten is just class prejudice in a suit.

Economists ditinguish between four categories of goods: Private goods, Public goods, Toll goods, and Common-pool goods. Stuff you buy in a store is the classic example of a private good; police & fire service is the classic example of a public good; a toll road is the classic example of a toll good; and a deep sea fishery is the classic example of a common-pool good.

Clearly, when there are a large number of buyers and sellers, the workings of the law of supply and demand in a free market is a wonderfully elegant method of optimizing the efficient production and allocation of private goods. The expansion of state socialism into the private goods sector is bound to perform poorly in comparison.

Just as clearly, the free rider problem inevitably dooms any attempt to privatize the public goods sector. It may occasionally may make sense for governments to subcontract to private producers the actual production and delivery of some public goods, but that is different from relinquishing ultimate responsibility for the delivery of the public good.

The problem comes with the two other categories, toll goods and common-pool goods. When Marx and his followers came along, there was a push to expand the public sector and to gobble up toll and common-pool goods, converting them into public goods. Thus was born the disaster that state socialism has consistently proven to be, over and over.

In reaction, free market ideologues push to expand the private sector to gobble up toll and common-pool goods, converting them into private goods. This is the trend that has been on the ascendant for the past quarter century or more, especially (but not exclusively) in the USA.

However, privatizing toll and common-pool goods has just as many problems with it as has nationalizing them under state socialism. With common-pool goods, you invariably lead to over-utilization, excessive depletion, and permanent degradation of the resource (B. Commoner's "Tragedy of the Commons"). With toll goods, privatization leads to a concentration on premium service to wealthier cutomers, and a degradation or abandonment of service for the poor. These are just two examples of several market failures that result for privatization of toll and common-pool goods. Externalities of one type or another become especially rife.

There actually is a third way, which has been largely been untried. I believe that toll goods and common-pool goods should be publicly-owned, but not government-run. Their management should be a board of trustees that is directly elected by the public, not appointed by the government. There should also be no form of government subsidy; all toll good enterprises will have to charge user fees that fully cover their operating and capital costs; trustees managing common-pool goods will have to set policies that assure that the resource is harvested for maximum sustainable yield (in the case of renewable resources), or at a level of depletion that is in the best long-term interest of the public (in the case of depletable resources). Epecially in the case of toll goods, I anticipate that the direct election of trustees by the users will set up a political process that will balance the desire for low user fees on the one hand and higher quality service on the other; given the likely market failure of a privatized system to strike the right balance, such a political process becomes the most elegant and efficient method of achieving it.

"Why is there any continuing interest in this free market muck?" Because neither free market or state socialist ideologues want anyone to know that there actually is an alternative to both that actually promises to work better. Would that to become common knowledge, the game would be up for both of them.

khaos, please email me your phone number once more. I'd like to invite you to a party here at my place.

Also, when I tried to "reply" to your email last month, it kept bouncing.

mikeb "at" foxhill "dot" com

Fewer vehicles on road; BART posts ridership record

As I said right after the crash, they should not rebuild the overpass. Just as more or expanded freeways leads to more congestion, the reverse appears to be true. Save the money required to rebuild the overpass and put it into more mass transit.

It worked before when a freeway collapsed in Oakland during an earthquake.

Best Hopes for fewer freeways,


Amazing that one unfortunate little highway accident could accomplish more to promote the shift from automotive to urban mass transit commuting than any amount of talking and pleading.

So the solution is a bunch of gasoline tankers at our disposal... lol. Please note, I'm VERY MUCH joking.

We realize you have to put that disclaimer in because of who might be monitoring this site...and your IP address, I suppose.

More monitoring is done than you could imagine. Better believe your posts are subject to pigeonholing and meta-analysis and wild misreadings far beyond what visible trolls commit.

Here's an article from a local newspaper complaining about the high gas prices. It's illustrative of the general cluelessness of how gasoline is priced. The local convenience store operator which is as close to an expert as the reporter could find says that there's "hearsay" that inventories might be low, as if the inventory status were not a matter of public record that he or the reporter or anyone else could verify. Anyway, there's also a classic photo of the gas station prices with the article. Can anyone detect irony in the picutre? I'd post the pic directly but don't know how, here's the link to the article:


Good catch. Gatorade. Ha Ha Ha Turn that gatorade into ethanol.

Well I knocked off a note to the Reporters, to whit;

'Rumors of Gas Inventory Shortages'

Michael and David;
Your article was linked to at TheOilDrum.com today, a high-caliber energy and peak-oil blogsite. In case other posters from the Oil Drum haven't already told you so, the weekly US gas inventory was just posted yesterday (or Weds?) in decline for it's eleventh consecutive week. For a graph of recent Gas Stocks, this link ( http://www.theoildrum.com/node/2517#more ) will put that into some perspective. It was pointed out that this public information, thanks to the EIA ( http://tonto.eia.doe.gov/oog/info/twip/twip_gasoline.html ) is readily available, and would have put that Gas Station owners comment about Gas Prices in a clearer light.

There is a great deal of confusion about gas pricing and where our energy situation is going, and while I am not an economist, a refiner or insider, I can tell you that as energy issues continue to grow, you could do worse than check in at The Oil Drum for a great vantage point on the issues that are really at hand.

Many thanks for your efforts,

Bob Fiske
Portland, Maine

~ Thanks for the link, Sgage

Thanks I should have done that myself.

Phineas Gage (not to be confused with Sgage)

Sorry about the ID mixup.. writing/posting too fast. Wife is about to set a timer on the computer..

Bob Fiske

QATAR gasoline shortages at stations! WTH?

I can only speculate what this all means...but the international gasoline picture is pretty off at the moment.

Maybe its all a grand plan, not to increase refining capacity, so demand destruction will precede the full peak oil wavefront. PEAK GASOLINE production!

Unfortunately, I don't really believe in grand plans, most politicians I know can barely spell 'petroleum'.

Other ideas...?

If nothing else, it sure seems to support that Gasoline IMPORTS are going to be hard to find. Net exports crisis - Gas V1.0

Elasticity of Supply - Urban Rail

Strategic Rail Reserve

It is interesting to note that BART increases transportation supply and kept severe traffic problems from developing after a "critical" freeway interchange in the SF Bay Area was destroyed.

I would like to build a "Strategic Rail Reserve" plus associated infrastructure in existing Urban Rail lines to allow them to surge in an emergency. +50% to +100% increases in pax capacity are possible in most systems at relatively low costs.

This Elasticity of Supply is a unique attribute of electrified rail systems AFAIK.

Best Hopes for Elasticity of Supply when TSHTF,


I would like to build a "Strategic Rail Reserve" plus associated infrastructure in existing Urban Rail lines to allow them to surge in an emergency.

Heck, I'd be happy if there were just more rail built, period. With associated human-scaled communities.

The STB is a mere shadow of the former ICC, and since there is no real private passenger rail now the STB's emergency powers (http://www.stb.dot.gov/stb/rail/emergency_response.html) are irrelevant to cities' needs for moving people. However, I could conceive of a time when the STB is given more authority to address emergency transportation situations.

I'm still crying out for private passenger rail though... I want to imagine a day when my fellow Americans can envision paying a local rail company to haul themselves safely, quickly and comfortably to the department store and back, rather than handing over their hard earned money to the likes of various nefarious foriegn dictators and kings.

Just imagine what the Bay Area would have been like this week if there had been NO urban mass transit system.

Leanan, as promised a while back.

Matt Simmons on UCTV 56 minutes

And an interesting Bloomberg 8 min. bit from the Land of Oz

80 dollar oil in June, Fat Prophets, and the China find

Thanks! I copied it over to today's "media" thread.

cool :)

I've noticed this week that the relationship between retail gasoline and diesel prices have flip-flopped back to gasoline being more expensive than diesel. At least that's the case for Iowa. For at least a year diesel has been going for about a dime more than gasoline but now diesel can be had for 17 cents less than gasoline.

I bought 10.3 gallons of diesel yesterday (last fill-up March 14th) @ $2.69/9. Unleaded regular gasoline was $2.93/9 at the same station. It has been several years since I have seen such a spread favoring diesel :-)

Last fill-up (same station) was $2.49/9.

Best Hopes for "conservation inducing" prices,


Here you go, a photo I took on 03 May 2007 at a Shell station on the TV highway in Beaverton, OR:

That's a $0.42 spread between regular and diesel! In fact, even as gasoline has been climbing rapidly lately, diesel hasn't budged much at all.



Edit: I just checked some photos I took during the surge in prices last year. Diesel, though still less expensive, followed the price of gasoline more closely--like a spread of just a few cents!--during the 2006 price escalation. At least around here.

I live in a refining hub, with excellent access to crude oil supplies. Two refineries within ten miles, perhaps 20% of US refining capacity within 100 miles.

Thus my spread is more likely typical of the national market without any local factors affecting it. Although spring planting this year DID drive up the price of diesel (corn uses more diesel I was told) in the Mississippi Valley.

Next time I top up my tank (I keep it close to full during hurricane season) I will note the spread again.

Best Hopes for a wide gasoline-diesel spread >:-)


This is quite supportative to the theory that the pending gasoline shortage has a lot to do with the increasing amounts of heavy&sour crude vs light&sweet.

AFAIK light sweet crude is the best stuff to produce gasoline from, while it is much easier to produce diesel from the heavier stuff. Unfortunately EIA does not give the proportion between the oil grades in the petroleum status report, and the "total crude oil" may well mimic what is happening below the surface.

Personally I'm considering buying a new car (unfortunately walking or public transit are not an option here)... Maybe diesel will turn to be a much better choice than hybrid in the end. Not many choices on the market though.

Ya...well...Robert shot that theory out of the sky by saying he is not seeing any difference in crude quality inputs to refineries for the last 10 years or so.

Did he give and alternative reason ?
email me the link if you read this this I might not see your response.

I tried to pin him down on this one and he didn't give me a reason. This is unusual no?

I guess I don't understand the "pin him down" comment. Every time someone has asked about this, I have linked them to the EIA data showing that gravity and sulfur have been constant for several years. Once more, here is the link and you can go back and explore several years worth of crude quality data:


Robert, I guess I didn't understand your answer, or more likely I didn't ask the right question(s). This price spread is very unusual imo. Is the spread because of supply/demand imbalance or is it because gasoline is more expensive to make for some reason that isn't obvious to me?
I had originally figured it must have to do with storage issues of some sort, such as there being a backlog of diesel and a shortage of gas, but that doesn't sound correct. It appears refiners can and do adjust alot quicker than I thought they did. So I too figured that the price spread is because of diferent types of crude quality on the input side. Now that doesn't sound right either.
I guess I just don't understand why there is such a spread. I have never witnessed a spread like this that I can remember and diesel doesn't change daily like gas it just sits there. I'm not complaining, I just bought a diesel car and my trucks/tractors are diesel so this is fine with me.
Diesels are more fuel efficient so I welcome a price incentive to switch. I just don't undertand why the spread exists at the level it does. Is this just here on the west coast or is it nation wide?

Is the spread because of supply/demand imbalance or is it because gasoline is more expensive to make for some reason that isn't obvious to me?

Gasoline is more expensive to make, but the spread is due to supply/demand factors. If it was just based on how much it cost ot produce diesel versus gasoline, then diesel would always be cheaper. On the other hand, if the price was based on energy content, diesel would always be more expensive.

Yes, individual refiners can respond fairly quickly to local supply/demand imbalances. The entire refinery system, on the other hand, can't respond nearly as quickly because everyone is not responding in the same way, or necessarily in the same direction.

Hope that helps.

Yes, thank you!

Robert, given that a quarter of the US gasoline comes from imports you need to track the global level of the crude quality to get a hold of the picture. Besides there is a clear long-term trend for lowering crude quality (mostly the sulfur content) starting way in the middle of the nineties. My hypothesys would be that US refiners have been coping with that by upgrading their equipment to produce more gasoline. But maybe we are reaching the time when this upgrading is reaching its limits to cope with the rising gasoline demand, and hence we are seeing a problem which has been on the books for years now.

There is no reason that we both could be right, but for different reasons.

Imports are running well above their 5-year average, though. Last year's spike was quite an anomaly. The biggest factors on the gasoline draw down are increased demand along with some lingering maintenance issues. It has absolutely zero to do with crude quality. And you are right, refiners have been upgrading equipment to deal with lowering quality, and the upgrades also increase the demand from lower crude quality. But as you can see, that quality has been pretty constant for several years.


There is one simple explanation. Those parts of the American economy which use diesel - such as the freight industry - are using considerably less fuel, as the U.S. economy collapses in the background.

My imprecise understanding of refining is that you always produce a mix of diesel and gasoline (along with other products). This is also one reason Europe can export gasoline - the Europeans have been following a long term goal of producing diesel fuelled vehicles through fuel tax policy, which means that they end up with 'excess' gasoline - which they then sell for profit, which reduces the cost of their oil imports.

It is possible to see this in a number of ways, but the easiest thing to keep in mind is that while crude may be the foundation of the oil business, crude itself is not really useful. Singapore comes to mind as an example of this fact.

I welcome a price incentive to switch or conserve on the retail level. I do think that there should be a tax paid to rebuild rail.
If I were an oil exec, I would follow Buffets lead and start investing in rail. Big Oil has the capital available and this gives them a business to run long term with. Might work better with PR as well. If WT is right and I think he is it is a waste of $ to build more refineries if oil is on the down slope.
A few more rounds of record profits and big bonuses with sharpening pain at the pump will not look good no matter what they say about finnally make some money IMHO.

Went to an interesting seminar yesterday: "Investing Capital in a Globally Integrated Energy Market" by Scott Nyquist of McKinsey, at MIT's management school. He believes that there's a lot of energy available, it's a question of businesses making the investment decisions to put infrastructure into place to bring it to market. And that decision hinges on their price expectations. He didn't give a specific price forecast for oil, but said that lots of alternatives (EtOH, NGL, oil sands, CTL, shale) become competitive in the $35-$60 range. So I think he sees that as the long-term range, but he acknowledged that some of McKinsey's clients are forecasting $80-$100. And he expects big growth in EtOH (40% of increase in total liquids, becoming 10% of total liquids by 2020; assuming cellulosic booms and lots of sugar cane in India/SE asia). Recognizes a coming gap between supply and demand of NG in N America, especially if coal plants are stymied by environmental concerns. Coal will set the baseline price for power generation, and renewables and new nuclear won't be competitive unless a price is added to carbon emissions.


The problem with his argument, is that he seems to forget that higher oil prices will push up the cost of making the alternatives.
Lets say oil is $20 and the alternative becomes profitable at $40. Oil goes up to $40 but now the alternative is profitable at $60. Oil goes to $60 and the alternative becomes profitable at $80, and so on and so forth.

Another thing is that the alternatives are stupid (tar sands; using NG to make crude, aka. tuning gold into lead), harmful (ethanol; soil erosion, aquifier depletion, food inflation), will not scale (shale), or are just not going to materialise (LNG).

You're numbers suggest that a barrel of alternative costs $20 + 1 barrel of oil, i.e. an EROEI of 1. If you assume a positive EROEI, say 2, then $20 oil = $40 alternative and $60 oil = $60 alternative. He did say that start-up costs are high now (his numbers for profitability were what he expects in a long-term equilibrium situation), but that's because a lot of companies are expanding right now, driving up the cost of materials (steel) and skilled labor.

Personally I think he's too optimistic on some fronts (cellulosic is still problematic, and he didn't explain how that NG gap was supposed to be closed; my personal guess is that $60 is the new floor, not the ceiling, and $100 wouldn't surprise me). But he does make the point, that I think is too often dismissed around here, that prices drive investment in increased supply. You hear the phrase "demand destruction" a lot. Why not "supply creation" as well?


Why not "supply creation" as well?

Because all the supplies have been researched any NOTHING on this planet can replace petroleum and the next best alternatives are at best replacing 15% of what oil manages now. Keep in mind the fact that we will need more than one alternative should make it clear that many industries may not mesh well once oil is removed. Airlines will use something different than trains, etc....not that they don't now, but it could be entirely different sources unlike now.

The calculation would be correct if we're talking linear functions, I suspect we're not. I believe the ERoEI of any given alternative to oil will get worse the more you produce.

Of course that's true for any energy resource, including oil itself. The easiest stuff is gotten first, and as it gets used up you go after the harder stuff.

Hi lilnev,

Thanks for reporting from an interesting place.

re: "...that prices drive investment in increased supply."

When you say "...dismissed around here..." in relation to your point, are you saying people do not believe "prices drive investment"?

Or, is it that people believe even if/when "prices drive investment", the problem requires much more in the way of solution?

Can the supply increase and the net energy gain still decrease?


And then we have the cliff, with its edge. (After the NG, after the coal...)

There does not seem to be anyone that cares about the real reason why Gasoline prices are high, they just want to blaim the companies for the profits they are making. When they should be looking at themselves too.

" Gee mom your car is bright and shiny."

" No son, it is an SUV, not a car. Cars are bad, they get hurt in wrecks and you can die in them. SUVs are better they survive accidents."

" But mom you aren't supposed to drive 60 in the 30 mph zone. And Uncle Henry says that his little car gets 45 miles to the gallon."

" I know son, but your dad has a better job than Uncle Henry, we can afford to pay for the gas at $1.25 a gallon."

AND so it went on and on, till now the Demand for more gasoline, fueled by the need to fill 25 gallon tanks that get 12 miles to the gallon, has sent the nations fuel demand through the roof. I am not sure when the disconnect all started. Used to be the parking lots were full of cars, now there are these massive things called SUVs driven by people that don't ever use the things for what they were first designed to do, Off-road-heavy-work. Mom and son from the above scene never thought that gas would get priced so high that dad could not pay for it. And Uncle Henry? He reads TOD, he knows why things are the way they are.

I do not feel sorry for anyone that has an SUV and the fueling of said vehicle hurts them everytime they do it. But they are likely to make things worse or fuss and fume till the Gov't helps them get to the bottom of it all. CERA and Big Oil have not helped in this. Keep telling people the lie that OIL is Forever going to be good and plenty and then watch as it dries up, you will likely get hung out to dry for your rosy pictures.

On a side note, If Mr. Klare is right and the Iranians get shot at anytime in the future, watch what people will be complaining about then. Lack of Gas at the pumps.

CERA and Big Oil have not helped in this. Keep telling people the lie that OIL is Forever going to be good and plenty and then watch as it dries up, you will likely get hung out to dry for your rosy pictures.

I have frequently described CERA and ExxonMobil as the two biggest threats to the US oil and gas industry. By promising that we have trillions and trillions of barrels of remaining oil they are giving credence to the demagogues who claim that high oil and gasoline prices are the result of a conspiracy. And prospective bankruptcy cases in the suburbs are not going to be happy campers as their SUV's are repossessed and as their McMansions are foreclosed upon.

BTW, I assume most people on this board have seen "End of Suburbia: Oil Depletion and the Collapse of the American Dream." Remember how they said that Americans would first notice the effects of Peak Oil?

I watched "End of Suburbia" as a guest in the home of George Tyson "Father of Baltimore's Light Rail". We were well into a bottle of wine by then and my memory fails me.

Could you refresh my memory ?

I will read upon my return from JazzFest.

Happy JazzFest,


Could you refresh my memory ?

American consumers would first notice the effects of Peak Oil when gasoline prices started rising at the pump, and Colin Campbell predicted that Americans would blame a conspiracy for rising gasoline prices.

Clearly the refinery situation in the US is making matter worse, but a key point to remember is that relative to May, 2005, there is probably over a million barrels per day less refined petroleum product on world markets.

WT, seems like the price surge in the US will affect the worldwide retail market as well. As we 'demand' more finished imports. I think
memmel was on to this yesterday. Our guzzlers a hated symbol everywhere?

weekly European retail gasoline

Even if we have ample crude supplies if our 'refined' demand unduly pressures ,say, Brent it's still a crude demand, right? A transfer of the finished product moves from a high tax environment to tax 'lite'. I wouldn't be surprised to see protests around gasoline tankers headed for the US further downslope.

But interestingly, the ratio between European/U.S. gasoline prices has changed from roughly 4/1 - 3/1 to the current 2/1.

Obviously, this ratio has a lot of external factors - currency and taxes, for example - but it is striking to see.

There are 3 trillion barrels of bitumen/heavy oil in place in the world.

There are trillions more in oil shales.

There are trillions more barrels of oil equivalent BTU's in natural gas and coal.

I suppose it is too expensive for most people to afford large amounts of energy and too much work to produce the lower margin deposits.

Switching to ethanol/biofuels is going to create some pain at the supermarket register as the cost of beef spikes up.

It costs 100 calories to walk a mile. There are 420 calories in a quarter pound hamburger with bun.

There are 7.5 million calories of energy in a liter of gasoline.

Overpopulation might make any size energy project -- not enough. There has never been enough food to fill every one's appetite, nor will there ever be enough fuel for all the people currently wanting autos or to heat/cool larger homes.

ExxonMobil's defense is that nationalization and inaccessible resources are the culprits. And many will believe them, particularly some in Congress and the Oval Office.

The flaw in ExxonMobil's case is the North Sea and the Lower 48, which were developed by private companies and which peaked right at their respective 50% of Qt marks (which was obvious on the data prior to the peak).

The world is now where the Lower 48 and North Sea are--on the downslope of conventional crude oil production.

ExxonMobil's defense is that nationalization and inaccessible resources are the culprits. And many will believe them, particularly some in Congress and the Oval Office.

Ah, and now we come to the real heart of the matter.

Most individual oil wells and oil fields are managed in a more or less competent manner, with an objective of maximizing the owner's profits. Thus you end up with a production curve that is bell shaped a la Hubbert.

The problem is that at the global level, there is no unitary manager. The oil resources in different countries are managed in different ways. Not everything is done with maximum economic efficiency in mind, some national governments have political priorities that trump economic efficiency. Then on top of this you have geopolitical messes like Iraq.

The bottom line is that global oil production will never reach the theoretical maximum that it might have reached if everything was managed for maximum efficiency.

It is sounding like Exxon-Mobil is looking at global petroleum production as if Exxon-Mobil (or companies just like them) were in charge of all global petroleum production, and thus projects that the peak is still over two decades away. This is their world on paper.

However, they are not in charge, nobody is in charge, in the real world things are extremely messy and suboptimal. The peak of global oil production will thus occur much earlier than it might were a theoretical optimum had been achieved. There is still some debate as to when that peak will be - some say a couple of years ago, some say now, some say maybe not until the middle of the next decade. (I personally think that we're on a peak plateau, but that it will take until the middle of the next decade until there is close to a uniform consensus that we are indeed past peak.) No matter, if TPTB at Exxon-Mobil looked up from their paper theories and looked at the real world, they would discover to their shock that the peak will not occur when they think it theoretically should, it is happening right around now.

The good news is that by peaking sooner & sub-optimally, there is actually more oil left in the ground than there might be under an absolutely optimal scenario. Thus, the right hand side of the curve may stretch out a bit and the plunge may not be quite so steep and quick. All those nationalizations and inaccessible oil might turn out to actually be a huge blessing for human civilization.

The good news is that by peaking sooner & sub-optimally, there is actually more oil left in the ground than there might be under an absolutely optimal scenario. Thus, the right hand side of the curve may stretch out a bit and the plunge may not be quite so steep and quick. All those nationalizations and inaccessible oil might turn out to actually be a huge blessing for human civilization.

I have a different take on the outlook. What drives the peak and decline is the rise and fall of the giant and super giant oil fields. In the Lower 48 and the North Sea, the function of oil companies has been to slow the rate of decline of production.

The world crude oil peak appears to be about where Deffeyes predicted, but I suspect that the decline in world production will actually be steeper than the Lower 48, because not enough money is being invested by National Oil Companies in bringing smaller fields on line. This would have the effect of prolonging world oil production, at the expense of short term production rates.

Maybe the model for other nations will look like the U.S., with smaller fields being developed by local companies and used for local consumption. Small guys that do not require the ROI that the NOCs or IOCs do.

I should have added that a projected steeper than expected decline in conventional production will be offset, to some degree, by increasing nonconventional production.

Hi Joules,

Well, "believe" they may...or, some may know better.


The VEEP understands many things...

It is the basic, fundamental building block of the world’s economy. It is unlike any other commodity.

But I don't think he understands the root problem. He's definitely more bullish on gas than oil, although he acknowledges that on-shore NA gas will be harder to find. Overall, he just wants to keep the train moving in the same direction (except without the actual train).

I can't agree more. Between CERA and Exxon I'm surprized they are not trying to import and elect Chavez for president of the US.
I think OPEC is doing a similiar thing by claiming they have alot of oil but don't want to produce it for various reasons. All it would take is some war eager president with a country on it's knee's with cars abandoned on the interstates and people walking home to cold houses, for some nasty problems.
I think it is much better to start a program of rail and quickly before we run out of more of the stuff. Gee where have we heard this before, not on TV!

Here is NASA climatologist James Hansen on peak oil and global warming:

Implications of "peak oil" for atmospheric CO2 and climate
P.A. Kharecha, J.E. Hansen (NASA GISS and Columbia Univ. Earth Institute)
(Submitted on 20 Apr 2007)


It's a draft paper open for comments

How very interesting that this paper came out just a few days (Apr 20) before today's IPCC mitigation report. The IPCC didn't mention peak oil at all, and appears to be oblivious to the fact that oil consumption (and thus emissions from oil use) must decline -- it it doesn't exist, it can't be consumed.

I have been wondering when IPCC will catch up with PO, and include some realistic emission scenarios. If Kharecha and Hansen are right, future emissions depend crucially on not using coal or only using coal with CCS, neither of which seem very likely. Without CCS, they put carbon emissions at the very low end of IPCC scenarios (580 ppm), which is still above the proposed safe limit (450 ppm).

It's worth noting that Kharecha & Hansen use EIA figures for coal reserves, I'm not sure how much the EIA can be relied on for realistic estimates. I know its a lot of work, but it would be great to see TOD put together a combined projection of oil, gas, coal production and plug that into a CO2 emission model.

Now that Chavez has his oil, how does he plan to sustain it?

More sour grapes. In a world where everyone has peaked, and prices are continually going up, why could or should Venezuela sustain its production?

What sort of response would you expect from The Houston Chronicle, a well considered and rational one full of historical fact? This guy isn't Bill Moyers.

In a world where everyone has peaked, and prices are continually going up, why could or should Venezuela sustain its production?

They have the reserves, but those heavy oils are hard to process. In the long run, what Chavez is doing will lose him more tax revenues than the arrangement that he had. He is the guy killing the goose to get the golden eggs out. What he will see is that without the food that was sustaining that goose, she doesn't put out much.

He is the guy killing the goose to get the golden eggs out.

That is not all he is doing:


CARACAS, Venezuela, May 3 -- President Hugo Chávez on Thursday threatened to nationalize the country's banks and largest steel producer, accusing them of unscrupulous practices.

"Private banks have to give priority to financing the industrial sectors of Venezuela at low cost," Chávez said. "If banks don't agree with this, it's better that they go, that they turn over the banks to me, that we nationalize them and get all the banks to work for the development of the country and not to speculate and produce huge profits."

Chávez also warned that the government could take over steel producer Sidor, which is controlled by Luxembourg-based Ternium. Shares of Ternium fell 3.9 percent to $26.15 in U.S. trading after Chávez's comments.

Sidor "has created a monopoly" and sold most of its production overseas, forcing local producers to import tubes and other products from China and elsewhere, Chávez said.

If Sidor "does not immediately agree to change this process, they will obligate me to nationalize it," Chávez said. "I prefer not to."
Chávez began a nationalization drive in January that is bringing the country's largest telephone company CANTV and the electricity sector under state control.

[emphasis added]

So he is not only going after the goose, but the vault, the chicken shed, the bare light bulb warming the shed,....

I suspect he's just taking a lesson from Saudi Arabia and China. Effectively nationalizing everything isn't slowing their economies down.

And it certainly made Mexico prosperous as well.

Mexico does make you think. If they had delayed their peak by 5 years or so by reducing their production earlier they would be making out like bandits now that the price has gone up.

Yes, invest much LESS money into nitrogen injection and invest it a decade later. Have the secondary peak of Canterall at 1.5 million b/day in, say, 2009 ? With a much longer tail after that.

Best Hopes for investment shortfalls and L-O-N-G rails on depletion curves.

Delayed JazzFest till rain stopped, now to go :-)


Hmmm... not sure I follow your thinking here. Facts on the ground:

China: under a centrally contolled communist economy - perpetual poverty. Then, well after Mao was gone and a diversity of leadership started to arise, the traditionally entrepreneurial Chinese not only loosened central control but finally encouraged private ownership and independent companies. Today the economy is a mix of private companies and state owned companies, as well as private companies with the state as minority partner. I don't know a single Chinese who would embrace socialism. (Don't confuse Chinese nationalism for socialist idealism.)

Saudi Arabia - a Kingdom, where the ruling family has always owned the most and best and controlled the state as a whole. Other than the royal family and their friends, the rest of the country struggles. Oil has made the King and the Princes very wealthy. The rest of the population lives a notch better than the Bangledeshis or North Koreans, but in a society that is hardly a vision of paradisiacal virtue (unless 72 virgins is your thing.)

Neither Mao's China or the KSA would seem to me to be desirable candidates for emulation.

China: under a centrally contolled communist economy - perpetual poverty. Then, well after Mao was gone and a diversity of leadership started to arise, the traditionally entrepreneurial Chinese not only loosened central control but finally encouraged private ownership and independent companies. Today the economy is a mix of private companies and state owned companies, as well as private companies with the state as minority partner. I don't know a single Chinese who would embrace socialism. (Don't confuse Chinese nationalism for socialist idealism.)

Your post is a prime candidate for winner in the category of 'Why the Drumbeat Is an Objectionable Waste of Time'. It may have somehow escaped your notice, but most people in China are still poor - indeed, most are worse off than before in terms of the precariousness of their living. That is why the number of protests associated with labour unrest has skyrocketed. It is also why so many peasant girls from China can be found in the brothels of Macau and Hong Kong (not to mention, of course, in China itself).

As for not knowing any Chinese that would embrace socialism - perhaps you should hang out in Zhengzhou and take a poll. You would be surprised at the result.

Really, what is this board nowadays? Venezuala, China ... people just mouth off about countries they know nothing about, chucking in a bit of cod pro-free market philosophy for good measure. Then a few other know-nothing saps with various prejudices and axes to grind jump in with 'hear, hear!' Quality dialogue at its best! Ha.

Hi Franz,

I agree with yr. observations about poverty in China and precariousness of daily life, though talking "better" and "worse" is a little tricky. Depends on what time period you're referring to, doesn't it? I'm not sure the relative measures are even the best way to look at it.

And, of course, cannot possibly agree w. "Really, what is this board nowadays?" - simply out of fondness and loyalty. (:) and the fact we're here.

Still, my Q WRT "Really, what is this board nowadays?" -

What would you like to talk about?

And, do you have experiences of Zhengzhou (or elsewhere) you'd like to share?

Still, my Q WRT "Really, what is this board nowadays?" -

What would you like to talk about?

I myself don't want to talk about anything, which I why I very seldom post nowadays. I come here to listen to the heavyweights who know what they are talking about - Peak Oil. I want to know what Peak Oil might mean and when it is likely to be. That gives a very narrow range of discussion, and leaves me (and most of the people here - sorry) as listeners, not disputants. I don't want to see people post their nth-hand opinions about Mao or socialism, cribbed from the pages of the Asian Wall Street Journal. ('Socialism, bad. Uggh, uggh!') Nowadays, I try very hard to do people on this site the courtesy of keeping my opinions on peripheral issues to myself. The overwhelming majority of you ought to do the same. As you have pointed out, whether or not China is better off since Deng (whom Mao should have killed when he had the chance, IMO) is a very involved question far beyond a few throwaway comments on a site like this. This site isn't called 'Mao and the virtues of capitalism'. It's called 'The Oil Drum'. So please, all of you ... try to keep to the f*ing subject. Nobody cares about your opinion about Maoist China. Anyone who genuinely does care about it can check out the specialist literature, and if they have the courage of their convictions then they can duke it out with people who know something about it. Otherwise, STFU! Please.

I now respectfully hand the site back to the people it by right of intellect and experience belongs to - Euan, Stuart, FF, Robert Rapier, Roger Connor (great for a balanced long-term perspective), and Expat, the only person here who refutes the Anglo 'conventional wisdom' from everyday experience in another land. There may be some others... forgive me if I have missed you out. The rest of you (us) ... SHUT UP!

Hi Franz,

Thanks for your response (if you're still reading.) - I'm glad to understand a little more.

Re: "...I want to know what Peak Oil might mean..." It seems to me this is where the discussion gets rather broad - yes?

Also, there's a second question, (?), (or, I might say, inter-related question) namely, in view of what it means if nothing changes, (i.e., BAU) - is there *any* change that may have a positive effect? And what might we do to help facilitate this? (If anything)?

On this, there's lots of room for people's thoughts, ideas and action (and organizing, even here, it seems to me.) Does a specialist necessarily bring something more to the discussion than does anyone else? And, if so, specialist - in what? Oil and gas extraction? Not necessarily, it seems.

So, I hope you will share any ideas you might have, or experience, or actions taken, etc. in regard to "...what Peak Oil might mean..."

(I.e, What does it mean to you?)

how 'bout bush's amerika ? is that a candidate for emulation ?

As I wrote in another thread:

It won't take too long before everything is nationalized, and he has no more coffers to plunder and then must count on the revenue from the industries he has already plundered. Then, to his chagrin he finds that they aren't producing like they used to, because he hasn't invested in the infrastructure. But some people have this fairy-tale vision where he is just looking after the poor. That wouldn't even be possible if not for the investments the oil companies have already made. And with his threat today to nationalize the banks, I think companies are going to be very cautious about investing money in Venezuela.

Mr, Rapier,

You've been in the oil industry - in your experience how would the fatcats of Venezuela treat their people if Chavez didn't exist? I've lived in the Philippines, and from every other former Spanish colony I can think of I hear the same thing: the ruling elites of the Latin world really, truly, utterly despise their fellow citizens. Any investment controlled by those elites from any source will be used to increase the gap between them and the rest of the citizens, will be used to silence the poor, will be used to buy death squads to exterminate anyone who speaks out. We saw it in Mexico last year with the use of soldiers to crush popular resistance to truly awful politicians.

I recall Edgar Snow's expose of the awful conditions of Chinese peasant life under a similar economic system in the 1930s - a right-wing dictator and landlords running a feudal system with the support of outside capitalists. After his long catalogue of horrors, he concluded that in fact the province he wrote of was lucky. Its land was relatively poor, thus the landlords had not been able to amass the vast power of their counterparts in provinces with better farmland, where peasants had to routinely sell their daughters into slavery to survive. When an elite reaches the point where any growth in national prosperity flows entirely to them to be used entirely to the detriment of everyone else, how can the people not turn to revolution, regardless of the consequences that you point out?

Which reminds me, what do our elites really think of us?

They have the reserves, but those heavy oils are hard to process.

They may be hard to process, but 20 years from now they may be just about worth their weight in gold. Given the tenure in power of his chum Fidel, I think that it is quite likely that Chavez is thinking at least 20 years into the future.

The American media like to present Chavez as if he were some sort of clown. He actually strikes me as being far more clever and shrewd than any President the US has had for a very long time.


And it's not like he particularly desperately needs the oil companies.

But why should pumping as much oil as possible be a good thing? The UK has pumped as fast as they could, and all it's gotten them is that they managed to sell the bulk of their oil while prices were low, and now have to import at a time of high prices.

Chavez won't be around forever. Maybe venezuelans 30 years from now will be gratefull he killed the goose, because of that they'll have oil for a longer period of time.

I don't know if that is the game Chavez is playing or not, but I have no doubt that there are some players on the world scene playing exactly that sort of game.

"Ultimately, the Venezuelans are mortgaging their future," said Amy Jaffe, head of Rice University's Baker Institute for Public Policy. "They're like someone who's gotten a credit card and is going out and spending to the max."

Oh, the irony.

A Question of Liability

The gasoline tanker that crashed, exploded and burned caused considerable direct damage to State of California property and indirectly damaged 1 million or so people by reducing access to their highways (or forcing regular BART commuters to stand when they might normally get a seat :-)

Quite a bill for bad driving !

Will this cost be paid by the oil company ? And will insurance pay it, and then raise rates, increasing the cost of delivering gasoline ?

Or will a small company go bankrupt and stick the public with the bill; and keep the "price at the pump" artifically low ?


Best Hopes for Full Costing Gasoline,

Off to a rainy JazzFest :-)


Perhaps all gasoline delivery tankers should carry $5 billion liability policies.

I'm sure they do have some liability coverage. Probably not enough to cover this much damage.

The way it usually works around here: the driver is sent a bill for the damage he caused. He pays it, or his insurance company does, up to the liability limit. If the driver or his employer can't pay, they declare bankruptcy and the taxpayers pick up the tab.

Actually, I think we ought to give the guy a reward, for "The Most Effective Method of Instantly Increasing Ridership on Urban Mass Transit.

Perhaps they will prosecute him for ecoterrorism.

The state approved 20 million for repairs with +- 200K/day bonus/penalty at 50 days.

As for the company, well, they only owned 8 trucks. There are 8 million people around here so I think the Hummer's should be okay.

I would be curious to see a 5 billion dollar accident. I don't usually look at accidents, but I suspect for 5 billion worth of burned out cars I would feel compelled. That would be a 100,000 Hummer pile-up. I would definitely stare at that. Would probably giggle as well.

Indirect costs could push destruction of a major intersection that high,


There is a new guest post by GliderGuider at TOD Canada.

Mama said there'd be days like this....

Bridge in NASA train accident was under repair
Rail workers clear shipment to proceed, then watch accident happen

Workers had just finished repairs on a railroad bridge and were watching as the track collapsed under a train hauling pieces of space shuttle rockets, officials said Thursday.

2 nd rail accident to the same booster assemblies. Now they will not use the components and maybe it prevents a launch disaster due to undetected damage from the prior Kansas incident. Which "did not damage the boosters".

Just what is with US rails? They can't even ship hi-value freight without an accident, when the Europeans can operate IC trains all day at very high speeds.

It is kind of an irony, when you think about it: world-class high-tech space transportation system, cannot be shipped without damage on third-world-class low-tech rail system.


In discussing problems with rail going forward I mentioned to Alan that a real problem was going to be the lack of qualified rail workers. All departments. Its like the oil business perhaps. Closed group, aging employees from the heyday, training and number of employees shrinking.

Yea, but think how those guys felt when it happened. Who knows what really happened. They may have repaired it correctly but structural failure may have happened with a piece bought at lowest bid by the bean counters, Perhaps the steel or iron was some crap from China that claimed a spec, but quality control in China. hmm where would that evidence for or against be. Seems the food manufactures aren't too concerned.

Quid Clarius Astris
Ubi Bene ibi patria

Hey I had an idea the other day, for a national response to the coming energy crisis. We could have a national speed limit of 50 or 55 mph, enforced by speed governing devices. The devices would be mandatory on all new vehicles, and retrofitted to existing ones. They would have an override switch for emergency use - possibly using the same key as the ignition, possibly located on the exterior. The trick is that once the governor is switched into override, an odometer would count down 100 miles then the vehicle will not operate until it is reset. At the same time an RF transmitter would broadcast a distress signal that can be intercepted by law enforcement. These two actions would pretty much assure compliance but still allow emergency speeding.
Here are some (obvious) benefits:
1. Fuel efficiency
2. Reduced Aggressive driving
3. Enhanced sense of community - everyone is equal on the road
4. No incentive to buy a big engine unless it is needed for loads
5. Longer road & tire wear
6. Scofflaws who succeed in defeating the system would be obvious in the flowing crowd - unlike now, where the entire flow is scofflaws

Of course there would be lots of whining about curtailed speeding liberty. But the alternative is suddenly curtailed transportation for all but the very rich. This would provide a psychological transition so that everybody together can adjust to the idea of smaller vehicles and public transit without going cold turkey.

Of course there would be lots of whining about curtailed speeding liberty.

That was certainly the response I got:

I Can Drive 55

Check out the comments following the post.

Robert Schwartz said...
Your idea suposes that gasoline is worth more than my time.

what an arrogant (and ignorant) dink.

What Robert Schwartz said may sound arrogant, but I think saying he is ignorant in this case is a misnomer....because for most people, it's true.

If you make anything over $10 per hour, that means that it takes one hour of work will buy you 3 gallons of gas $3.33 (higher than it is priced in most of the country. Thus, anything that costs you one third of an hour should save you a full gallon of gasoline for that amount of time. It is very hard to come up with ways to slow down enough to save that much gasoline.

If my commute takes one half hour at 55, and I cut my speed in half, it will take twice as long or about an hour, but will I save over one and a half gallons of fuel? Probably not. This is an interesting thing for me to compare to my first working years in high school in the 1970's when I made a bit over over $1 per hour, and gasoline was over a dollar a gallon! It took me one full hour to make enough to pay for one gallon of gasoline (!)
If that were true today, fuel (in my case Diesel fuel) would have to be over $12.00 per gallon (double !!) I won't say how much over....
It just proves what Matthew Simmons keeps saying, oil is still very cheap....

Of course, some of us have to do 55MPH most of the time due to what we drive...

If I go much over 55, I can't hear the radio....:-)

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

You are of course correct, if dollars were the only thing worth being measured. But I'm in favor of strictly enforcing a 55 mph speed limit not because of economy, nor ecology, but civility. What good is having the freedom to drive 80 mph if that triggers the inevitable rush hour accident that clogs up the interstates for hours at a time?

At this point I'm ready for them to start yanking licenses for 6-12 months at a time to get the situation under control. Of course this will never happen, as no politician who advocates limits on cars will ever see public office again. Still, it's a nice thought.

That's why I suggested speed governors as mandatory. Then there is no self-control issue, no urge to floor it. Just set the cruise control & resign yourself to roll with the queue. Depending on voluntary compliance to go from 85mph to 55mph will NEVER succeed

I think government mandated speed governors on cars would go down about as well as government mandated vasectomies - it ain't gonna happen. We use our cars as an expression of virility, and how would it look to your date if your brand new Carrera couldn't pass a rattling '72 Pinto?

Don't get me wrong - on an intellectual level I agree with you completely, but on an emotional level I find the idea loathsome. It is that second reaction that most frightens me about the peaking of oil. I know the facts, I believe the evidence I've seen, and can't even convince myself to do the right thing.

Roger, I hear what you are saying but as Simmons points out, the market price of a gallon of gasoline is absurdly low. When you can slap a label on a plastic bottle of filtered tap water, put on that label a trendy European-sounding name, and charge people more for it than you can for a gallon of gasoline or diesel, something is seriously out of whack.

We won't know the true value of a gallon of gasoline until we've burned it all up. Then, the Robert Schwartzes of the world will learn that their "time" is of little consequence in the grand scheme of things.

Anyway, we're all ignorant. If we weren't, we wouldn't get out of bed in the morning.

If you make anything over $10 per hour, that means that it takes one hour of work will buy you 3 gallons of gas $3.33 (higher than it is priced in most of the country. Thus, anything that costs you one third of an hour should save you a full gallon of gasoline for that amount of time. It is very hard to come up with ways to slow down enough to save that much gasoline.

Actually, unless you are on the job and that is reimburseable mileage, then you need to factor in taxes. Assuming 25% top FIT bracket, 5% SIT, and 7.65% FICA, that means a total marginal tax rate of 37.65%. Thus, your $10 gross only works out to $6.235 after tax, which will only buy around 2 gallons +/-. Pretty soon it might buy less than that.

Wait till you see what happened when some young drivers in Atlanta tried to 'enforce' a 55 mile per hour speed limit. They call it an 'extraordinary act of obedience'--pretty creative group.


I can't believe there are still people who use this stunt as proof that speed limits are bad. They set up a rolling road block! The traffic problems they created had little to do with the speed and everything to do with them creating a wall across the road. If they were going different speeds in the different lanes, even if all of those speeds were 55 mph or lower, then there would have been no problem because faster moving traffic would have been able to move through the pockets. A rolling road block would have been a problem even if they had been going seventy. Cars unable to pass would have collected in greater and greater numbers behind the road block, with each layer losing some speed.

Most limited access roads have both a minimum and maximum speed. As long as the vehicles on the road have some variance in their speeds in that range (or actually just about any speed range), traffic flow will depend mostly on the number of vehicles. On the flip side, if vehicles are placed side by side to create a wall, no matter what speed that wall is moving at, it is going to create a traffic block.

I can't believe there are still people who use this stunt as proof that speed limits are bad.

huh? I posted this to show how people chafe at 55 mph speed limits since they are used to going faster.

The point is moot here in the SF bay area; nobody can go faster than 40 mph on any highway here during rush hour anyway.

Yup. Some states make it illegal to do this, by making it illegal to ride in the passing lane. It's supposed to be for passing only.

And the responses were appropriate.

Everybody hates math, but let's do the math.

Suppose we need to make a 550 mile drive out on the plains - just to start with round numbers. At 55, that's 10 hours and 18.3 gallons at the 30mpg shown on the graph over there. Now let's do it at 75. That's 7.3 hours and 24 gallons at the 23mpg shown, 5.7 gallons more and 2.7 hours less. At the $3.10/gallon this morning that's $17.67 for 2.7 hours, or $6.55 per hour.

So the savings from creeping along amount to a whole whopping $6.55/hour. Golly. That’s less than the minimum wage in some US localities and many of the European countries that have one. It’s more than an order of magnitude less than the hourly charges of tradespeople and businesses (never mind lawyers). So, contrary to the tone of some comments here and over there, the breakeven point on Robert Schwartz's time is risibly low. With more mpg - the charted mpg is unimpressive - the big savings would be even more meager. Add a couple more hours to the trip, and the savings get eaten up several times over - either by a motel bill, or else by the (likely externalized) cost of risk-taking by an exhausted driver.

And that's for a single-occupancy car. Gee, if I go on a sales trip with someone, the two of us earn a whole $3.27/hour each.

Surely it's blindingly easy to see why 55 was never popular except maybe in densely populated places (like New Jersey) where no one cared, since nothing moved anyway, and they were too cheap to do anything about it.

[Note - I recall European guests, time and time again, laughing at the folly of 55, given the huge distances here. They were right to do so.]

That's 7.3 hours and 24 gallons at the 23mpg shown, 5.7 gallons more and 2.7 hours less.

I don't like 55 either, but part of the problem is that all of us value productivity and the value of our time over the fate of civilization. Even those of us aware of the problem value short term gain over the long term consequences. It's also our birthright to travel this great land of ours -- it's no big deal for many of us to travel thousands of miles for a family vacation.

Multiply your 5.7 gallons by the 17,000 vehicles that drive on Interstate 80 between Chicago and Omaha every day and that's almost 100,000 gallons of gasoline saved in a single day. Sure, that's only 3/100ths of daily U.S. daily gasoline consumption, but multiply that by all the cross-country routes and things add up.

Of course, there is another aspect to this whole discussion on "paying more for more gas to drive faster to save my valuable time". How much productive work are you getting done while you are behind the wheel? How much more productive work might you get done if instead you were seated on a high speed (or at least reasonably fast) passenger train?

I would argue that by having a transportation system that pretty much forces just about everybody to drive in cars instead of taking the train, we are making hugely unproductive use of massively amounts of time for large numbers of our population.

The other problem with the blanket speed limit is that people have little incentive to buy a more economical vehicle.  Mine gets 35 MPG @ 75 MPH, 38 @ 70 and 40+ @ 65 MPH.  Assuming 42 MPG @ 65, slowing from 75 to 65 saves a whole .0048 gallons/mile, or 2.6 gallons over 550 miles.  I could cover the 550 miles in 1.5 hours less than the 55 MPH, 30 MPG vehicle and burn 5.2 gallons less doing it.

But who's going to buy the 40+ MPG diesel when gas is relatively cheap?

WE NEED A STIFF GAS TAX.  We can achieve far more savings by getting people to choose different things to drive (or not driving at all) than how they drive it.

The govt here in the UK wants road pricing based on GPS transmitters fitted in each car
It hopes to:
1. Remove a flat-rate tax on car ownership with a variable one based on where & when you drive
2. Reduce congestion by applying progressive pricing for usage at peak times and locations
3. Issue speed fines based on average speed between points
4. Track all car movements
5. Discourage car theft and similar deviant behaviour
6. Spot people using more than their petrol ration

Of course, 3 to 6 will just be feature creep once the things are in place, and 6 will have to wait until we actually have petrol rationing again.

Yes, with millions of cameras scattered everywhere, and the total trashing of civil liberties, what the UK really needs is even more Big Brother. Maybe the US and the UK can run a race to see who gets to the bottom first.

Shipping containers find new life as homes

Used to import almost everything we use and wear, shipping containers are now a new concept in affordable housing.

The containers are claimed to be hurricane-proof, fire-resistant, and there's not a termite to be found.

With America exporting so little, shipping companies face the dilemma of what to do with these 32,000-pound containers. Increasingly too expensive to ship back overseas empty, these steel boxes — which can be as large as 20-by-48-feet — are stacked high, sitting in ports around the country. There are as many as 300,000 containers, by some estimates. And they're cheap — ranging from $500 to $2,000 for an unused container.

I thought the best gas milage was at about 35mph...


Maybe some day we will drive 35

With America exporting so little, shipping companies face the dilemma of what to do with these 32,000-pound containers. Increasingly too expensive to ship back overseas empty, these steel boxes — which can be as large as 20-by-48-feet — are stacked high, sitting in ports around the country.

So it has gotten so bad that there is nothing left that we can fill the empty containers with to send back?

Instead of stacking them out of sight at ports, they should be stacked on the Mall in Washington DC, ever piling higher and higher, until the politicians can't help noticing.

Or maybe just keep piling them up around the US Capitol building and WHite house until both are totally buried. I'm trying hard to think of a downside. . .

Sounds pretty slick, as long as the container wasn't used to ship something atrocious. Plus, you still have to insulate the bloody thing.

The price of Steel as scrap is I think around $200 / ton or $1600 for the 32,000 lbs sea box mentioned.

In other words it seems as if they have no value above that as scrap!

So we are going to scrap these things send them back to china as scrap and they are going to build more? These huge manufactured containers are the equivilent of the worlds wooden pallet? Amazing!

Further signs of persistent inability to find buyers for Saudi crude:

Published: 04/05/2007 12:00 AM (UAE)
Saudi Arabia to raise Asia prices for third month in a row in June

Singapore: Saudi Arabia is expected to raise the price of its heavier grades to Asian buyers for the third month in a row in June as refinery maintenance in Asia drives margins above $10 a barrel, a Reuters survey found.

Report: Climate change plan affordable


James Connaughton, chairman of the White House Council on Environmental Quality, raised concerns about reaching the lowest emission targets proposed in the report, saying "it would cause a global recession."

"Our goal is reducing emissions and growing the economy," he said.

Regarding the story on New Belgium, the "green" brewery in Colorado. Also, I might add, they have great beer.

Talk about an exclusive "club." A reporter for a major paper asked me for a list of economists who support a higher gasoline/energy tax.

He also asked for a list of blogs that have discussed higher energy/gasoline taxes. Following is my response. Any other suggestions?

Economists are of course a problem, since, as a group, they believe that if the demand is there, the energy will magically appear from somewhere.

However, James Hamilton is a Peak Oil Aware economist, who started the following website, and he apparently endorses higher energy taxes. I think that the website has e-mail links:


Two discussions of energy taxes:



Discussion of poll results regarding gas tax:


As you probably know, both Boone Pickens and Al Gore have endorsed higher gasoline taxes, offset by cutting the Payroll Tax.

Robert Rapier is a major oil company insider, who has a blog, and who has endorsed higher energy taxes.


IMO, we need an energy consumption tax, offset by cutting or eliminating the Payroll Tax, and a crash wind/nuclear power program, with a crash Electrification of Transportation Program:

Electrification of transportation as a response to peaking of world oil production

Let me know if I can be of further help.

I also sent these two TOD links:


Repost: Gas Tax Increases Revisited
Posted by Prof. Goose on August 18, 2005

Robert Rapier (2/07):

The problem, I would explain, is that fossil fuels are simply too cheap. We use them too casually. We must stop doing this. We have to stop and really think about our fossil fuel usage. So, starting today, the tax on fossil fuels will be increased by $3/(barrel of oil equivalent) each month for at least the next 3 years, at which time this tax will be reviewed. The tax will apply to crude oil, natural gas, coal, tar sands, shale oil, etc. All fossil fuels. This tax increase is only $0.0714 per gallon per month (with an additional increment of $0.0714 per gallon each month), and a tax credit will be initially be provided for those making less than $50,000 a year (because I am a benevolent dictator). The tax credit in the early years will be high enough to offset the impact on the average consumer’s life. However, given that you know prices are going to be increasing, there is a tremendous incentive to begin conserving. Our ultimate objective is sustainability.

The money raised from this tax will be funneled into public transportation, alternative fuel research, conservation incentives, and the development of walkable communities. Proposals will be reviewed by a panel of scientists and engineers from the appropriate disciplines in academia and industry. Suggestions from the public are welcome, and will be considered based on technical merit. (No cars that run on water, though).

So, that would be the cornerstone of my energy policy. What are your suggestions? What are some alternatives to this? Or do you believe the market will provide, and such steps are unnecessary?

The Carbon Tax Center has a list of economists, scholars, politicians, journalists, activists and others who support a carbon tax. Their blog has additional info.

A reporter covering this subject should probably have heard of Lester C Thurow, who has been on the gas tax thing for a very long time. He doesn't seem to be on the carbontax.org list. (A lot of his stuff is behind paywalls, so if he's changed his mind recently, I could have missed it.)

I own a farm with a lot of forested pasture, so I take a lot more CO2 out of the atmosphere each year than I put into the atmosphere each year.
I want to know how I can tax all of you that are putting more CO2 into the atmosphere each year than you take out to pay me for my work in taking some of your CO2 out of the atmosphere.
Any suggestions?

You can sell your carbon capture. Below is a private eMail from the Ass't Director of Skogur; the Icelandic Forest Service.

Dear Alan
The timing must be right. I just wrote a press release about the fact that the Iceland Forest Service only needs about 60 hectares of its forests to be carbon-neutral and indicating that the C-sequestration in the rest of the roughly 4000 hectares of planted forest that we own is for sale to the highest bidder. I added that if we were really serious about creating carbon credits through afforestation, we could do it with poplars on fertile land and sequester as much as 23 tons of CO2/ha/yr rather than the average 4.4 tons. At that rate, it would only require 12 hectares for the Forest Service to be carbon neutral. I expect that we will put this on our website on Monday.

Have a good weekend

Get certified by a carbon offset provider as a reforestation project.


N. Gregory Mankiw, Professor of Economics at Harvard and Bush's Chairman of Economic Advisors from 2003 to 2005, called for a gas tax in a WSJ op-ed piece on October 20, 2006. Since then, he has started the Pigou Club, "an elite group of economists and pundits with the good sense to have publicly advocated higher Pigovian Taxes."

Also, none other than our friend Peter Huber called for a flat energy tax in a recent Forbes column.

Thanks for all of the links. I'll forward them on.

I know it's late. But I read this above and just wanted to scream, but a belch came out instead:

Politics is a bigger barrier to oil discoveries than any rock formation. Large areas of the globe remain underexplored, such as deepwater offshore Mexico and, as demonstrated on Thursday evening, offshore China. Oil and gas are finite resources, but the energy industry has repeatedly overcome the challenge of "peak oil" in the past, usually through unexpected technological breakthroughs.

1. It's a shame to hear that "politics" have been the "barrier" to oil discoveries here in the rocky state of Maine.

2. The mid-Atlantic ridge is also far, far "underexplored."

3. "[T]he energy industry has repeatedly overcome the challenge of peak oil".......when?

yes, this article caught my attention, but it was posted late. I was hoping there would be some comments on it as it is particularly egregious. Despite its mendacious nature, it is written well enough that the writer could easily be confused with someone who knows what the heck they're talking about. Maybe it can be discussed in the drumbeat tomorrow. Perhaps the writer will put down a few hundred thousand dollars to drill a hole in Maine and prove you wrong ;-)

A group called the "Taxpayers league of Minnesota" has a position paper on gas prices, contradicting the fears that world oil production is in danger, and using as evidence the "world reserve graph" which shows continual increase over time.

It mostly is defending profits for the oil companies and their lack of control over prices, and that market forces will solve our problems, encouraging new development, and encouraging efficiency.

Maybe "peak oil" is a side-issue to them, but it still seems worthy to fight simplified/false arguments that reserves keep increasing since it breeds false complacency, whatever action is best. (I wonder what they U.S. reserve graph looked like from 1900-1970... perhaps very similar upward curve!)

It seems like WE need "position pages" ourselves, dedicated to countering specific arguments that reject peak oil.

WELL, even better, it would be great to influence public groups who put forth arguments. I don't greatly agree with the taxpayers league's positions, except that government spending is unsustainable.

Is there any good/best online page on the "increasing reserves" point?


Tom Ruen

The nightmare commute scenario that many feared after Sunday's East Bay freeway inferno still had not materialized by Wednesday, with many motorists opting to take public transit rather than drive.

For years I've been telling people that you can solve traffic problems by eliminating road surface. I always get the same response: "You're completely irrational".

Hey everybody,

I've been lurking almost every day since the first week of the site. Firstly thanks to everyone for the gems that appear in the bottom of the pan. (with great regularly on the oil drum, i'd be tempted to make the trip to a get togeather if I knew i could realisticly offset the carbon...). When I first came to this site I was working in advertising, selling stuff I didn't believe in to people I didn't really understand, nor care about. It's a whole different gig now. Was featured on our national television yesterday striking another blow for the planet.


I have to thank the community of the oil drum, for it's part in my new direction and the great information that has helped shape my decisions.

Have a fantastic weekend everyone.

Good on ya Ben! (I'm assuming that's you, and not the bald anchorman?)

As an ex Aucklander, trying to live right in France (but driving too much), I salute you!

Does GTL have a future?

The GTL economic model relies on cheap stranded gas as feedstock. As gas prices rise the GTL business model becomes uneconomic.

In Feb 2007 ExxonMobil and Qatar scrapped a GTL project.

Now, Algeria has dropped their 36,000 b/d GTL plant. Sasol/Chevron are still trying to keep the project going.



"Algeria has decided to ditch its planned $2.5 billion gas-to-liquids project because increasing costs have made the project uneconomic"

The GTL economic model relies on cheap stranded gas as feedstock. As gas prices rise the GTL business model becomes uneconomic.

Rising costs make the GTL projects less viable, but it doesn't have anything to do with the value of the stranded gas. Remember, the gas is stranded. Its value is largely unaffected by the market, because it can't get to market. That's one thing I learned early on when working on GTL. Stranded natural gas contracts can be had for a fraction of the cost of the market price.

Hey I want a carbon credit for speed reading 200 comments when I could have drove to the store instead to get a newspaper to read. Maybe a double credit since a tree was saved from being made into paper.

NZ & nuke plants; unlikely since nuclear ships (esp. US Navy) can't dock there.

Speed limiters; why not acceleration limiters? Say 0-100kph/60mph in 30 seconds minimum. People on side entrances will just have to wait longer to cut into the main traffic flow.