DrumBeat: May 22, 2007

Why food costs more

Since the rise in agriculture started gaining altitude last spring, hedge funds have been pouring money into commodity exchanges, driving up prices and transforming backwater grain bourses like the Kansas City Board of Trade and the Winnipeg Commodity Exchange into highstakes casinos. Since 2005, corn has nearly doubled. Wheat is up 50% in the same period, while canola, one of the biggest crops on the Canadian prairie, has climbed 34%.

But the biggest effect of all the new hedge fund cash sloshing through the system is a major increase in volatility. Prices are on the rise but the upward trend has been anything but smooth.

"We are unaccustomed to this," said Mr. Gary, who adds that he hasn't seen this level of volatility since the 1970s when a group of big speculators briefly "muscled the markets around." But what's happening now is different, far more treacherous for traditional players.

Like many experts, Mr. Gary believes the markets have become disconnected from the fundamentals as prices rocket through peaks and valleys that have little to do with supply and demand.

Many of the hedge funds are trend players, who make bets based on the technical details around the direction they think prices are heading, moving in and out of the market with lightening speed. For them, volatility is an opportunity to make money.

Biofuels Producers See Big Barriers To Targets Set By Bush

Leading producers of ethanol and biodiesel Friday said their industries faced serious barriers to meeting the 2017 growth targets outlined this week by President George W. Bush to reduce dependency on gasoline.

"The current solutions won't get you there," Jeff Trucksess, executive vice president of Green Earth Fuels LLC, a biodiesel developer, told an industry gathering here Friday morning.

Following up on prior pledges on energy policy, Bush Monday outlined additional measures to boost alternative energy development, limit gasoline consumption and comply with a recent Supreme Court ruling on global warming. Bush's plan included a goal to produce 35 billion gallons of renewable and alternative fuel by 2017, many times above current levels.

A Bush administration official Friday defended the viability of the president's goals, but the discussion at the Houston event underscores the magnitude of the challenge facing the U.S. as it struggles to feed its growing energy needs in an increasingly carbon-limited world.

Corn-based ethanol: a domino of instability (pdf warning)

The price of corn has doubled: as corn has become more scare, livestock producers have switched to wheat. The price of wheat has skyrocketed. Wheat is in extremely short supply as production worldwide has declined for 6 years in a row and demand has continued to grow. There is no extra wheat in storage or in the fields to meet the extra demand as livestock producers switch to wheat.

Corn-based ethanol: The Dominos Begin to Fall (scroll down)

Well the numbers are really becoming quite clear as it relates to corn. THEY ARE VERY UGLY. There is no room for a poor crop, but we are already at a poor crop because of the late planting. People and livestock require food. The crop is not going to be the size that was intended or required to meet all these demands of the competing groups of consumers: people, livestock and ethanol. Corn stocks in China, Mexico, the former Soviet Union, the EU and India are low as well. Food protests are emerging in many of these places. World corn consumption has exceeded production for 7 out of the last 8 years.

Brazilian biofuels can meet world's total gasoline needs - expert

Currently, Brazil uses only 0.8% of its entire territory (8.5 million square kilometres) for the production of biofuels - an insignificant patch of land, so to speak. But if it were to cultivate energy crops for biofuels on a quarter of its territory (around 212 million hectares), the country could supply the entire world's current gasoline needs (which stand at around 24 million barrels per day).

This projection is based on the idea that second and third generation biofuels become viable. Such biofuels, based on the use of entire crops the lignocellulose of which is transformed via biochemical and/or thermochemical conversion techniques, would double the output per hectare of land for sugarcane. There are some indications that second generation biofuels may enter the market sooner than expected: Dedini SA, Brazil's main ethanol plant manufacturer recently announced a breakthrough in cellulosic ethanol production, which increased the output of a hectare of sugarcane by 30%. A doubling of the output is expected in the coming years (earlier post). Moreover, such a scenario would also entail the introduction of new, high yielding energy crops designed specifically for particular environments, as well as new forms of livestock production (no grazing on pastures).

Peak Oil Now? New Data Leads to Speculation

New data from the U.S. government shows something disturbing. An analysis of the data suggests that we may be looking at the peak of oil production, right now.

More oil firms move into costly oil sands

More oil firms are joining the rush to tap oil from sands in Canada's Alberta province, a costly process that may secure future output but needs higher oil prices to make money.

Norway's Statoil last month agreed to buy a privately held Canadian oil sands venture for nearly $2 billion, following deals by the likes of France's Total and China's Sinopec.

The moves into oil sands offer access to oil reserves that rival those of Saudi Arabia and lie outside the volatile Middle East. But Statoil's deal looks expensive and the rewards lie far in the future, analysts say.

Move over Fort Mac, a new boomtown is born

Grande Prairie is the unknown Fort McMurray, an Alberta energy capital that's riding a wave of booming growth - yet remains well below the radar of even most Albertans.

The city's population has risen 50 per cent in the past decade, cementing its place as the urban hub for a sprawling region of 250,000 people that includes northeastern British Columbia, the Yukon and the southern Northwest Territories.

While the Grande Prairie area is rich in forests and agriculture - its glacier silts and long hours of summer sunshine make for ideal growing conditions - oil and natural gas are what have brought the city its new boomtown status. In the nearby Foothills of the Rocky Mountains, gas exploration is everywhere, and to the north of the city, the hunt for oil has also taken off, with junior Galleon Energy Inc. discovering an oil field recently that shows potential to produce more than 10,000 barrels a day.

And then there's the "other" oil sands - deposits in the Peace River area north of Grande Prairie, where Royal Dutch Shell PLC is pursuing a 100,000-barrel-a-day project.

Coal is on the comeback

Brace yourself for another industrial revolution. Coal is back. The highly combustible, carbon-rich mineral deposit that was formed over millions of years from decayed plant matter fuelled the first industrial revolution. More than an economic development, it is etched in the psyche of nations where coal mining meant lives lost, labour strife and the genesis of enduring political movements.

Today, thanks to rapidly developing clean coal technologies, coal is stoking the next industrial revolution. This is good news because despite centuries of accumulated noxious emissions, coal remains embedded in the deepest reaches of the world's economies, where it is the largest single source of electricity and produces over 70 per cent of the world's steel. According to Natural Resources Canada, coal mining, coal transportation and coal-fired electricity generation (25 stations in six provinces) together account for 73,000 jobs and $5.8 billion (1 per cent) of Canada's GDP.

Biochar turns a negative positive

Dozens of scientists who gathered in Australia three weeks ago for the first annual International Agrichar Initiative conference say that making "char" and burying it in soil – a process called "sequestration" – could prove a valuable approach to managing climate change.

It seems an odd suggestion, but early research shows that "agrichar" or "biochar" sequestration not only keeps carbon dioxide from reaching the atmosphere, it can actually extract it and contribute to the goal of reducing atmospheric concentrations. Instead of being "carbon neutral," the storage of biochar in soil is being dubbed as "carbon negative."

"Our calculations suggest that emissions reductions can be 12 to 84 per cent greater if biochar is put back into the soil instead of being burned to offset fossil-fuel use," Johannes Lehmann, an associate professor of crops and soil sciences at Cornell University, wrote in the latest issue of the scientific journal Nature.

Derivative Disaster: Deriving the Truth

For anyone who adheres to logic or reason - the chart above clearly shows that to incur losses trading Natural Gas from the 'long side' of the magnitude that BMO is now reporting [680 million at last count] - one would NECESSARILY have been "LONG NATURAL GAS" through one or both of the circled steep price declines depicted on the chart above [A and/or B].

What this means is that the BMO incurred their losses BEFORE their year end. So now, shouldn't we really be asking the question, Why weren't these losses reported in Q4 when they were incurred - and in all likelihood - were still much greater than they are being admitted to now?

Because derivatives are classified as "off-balance sheet items", institutions like the BMO, Amaranth, Enron et al have the ability to play "shell games" with their unrealized profits/losses and effectively prolong [or time, perhaps?] the exact time when they assimilate/admit [mark-to-market] their impact back into the balance sheet.

Mackenzie pipeline partners pursue Ottawa's purse

Partners in the $16.2-billion Mackenzie Gas Project, who were previously opposed to allowing Ottawa to join the project as a partner, are now pursuing the federal government to take an equity stake, possibly even a majority position.

Proponents, led by Imperial Oil Ltd., are to meet today with the federal government to discuss the massive project's fiscal terms. The talks will include an equity partnership with Ottawa that was recently "thrown on the table," said Randy Meades, executive director of the federal project co-ordination secretariat at the Department of Indian Affairs and Northern Development.

Ottawa denies possible buyout of Mackenzie Valley pipeline

Indian and Northern Affairs Minister Jim Prentice denied reports that said the federal government is eyeing a stake in the massive Mackenzie Valley natural gas pipeline project.

"No, it's erroneous, that is not happening," Prentice told CBC News on Friday.

"It's not an option that I am looking at as minister. Plan A or Plan B or any plan has to be a free enterprise-based model for the Mackenzie Valley pipeline."

Scouring Scum and Tar from the Bottom of the Pit

Very recent developments reinforce and amplify all these facts. Multinational corporations, including majority players such as ExxonMobil, ConocoPhillips and Shell, who also happen to be the promoters of the Mackenzie Valley and/or Alaska arctic natural-gas pipelines, have confirmed a grand-total planned investment of $100 billion into the tar sands in the next decade. This makes it the largest mega-project complex in the world, growing to an astounding total of at least $160 billion when all the required arctic natural-gas supplies from the Mackenzie Valley and Alaska pipelines are added - which requires coining a whole new word: "gigaproject."

Brokers like Raymond James Ltd. and the Canadian Imperial Bank of Commerce are advising investors about the realities of "peak oil" and counseling them to invest in the tar sands, which they describe as the planet's last new significant oil-supply addition with total production forecasts whose total output will rival Saudi Arabia by 2030.

Russia draws Europe into its orbit

To be sure, Putin's visit to Kazakhstan and Turkmenistan last week heralded a profound shift in the co-relation of forces in the Caspian and Central Asia. This shift is discernible from many angles.

First and foremost, it is becoming clear that with the transition of power in Ashgabat, Turkmenistan, its policy of "positive neutrality" under the late president Saparmurat Niyazov is giving way to one of rejoining the Central Asian fold. That means Putin's 2002 proposal for a "gas exporters' alliance" comprising Russia, Turkmenistan, Kazakhstan and Uzbekistan may be taking a giant leap forward.

Thus Russia's transit monopoly through the so-called Central Asia-Center Pipeline, known officially as the Single Export Channel, will remain firmly in place for the foreseeable future. Thereby, Central Asian states' gas reserves are, in effect, amalgamated with Russia's into a single pool that will be marketed under Russia's physical and commercial control.

Turkmenistan, which has a potential capability of exporting 100bcm of gas annually, was crucial to the realization of Moscow's idea of the "gas exporters' alliance" - which was why the "Great Game" over Turkmen energy policies in the post-Niyazov era became so absorbing in recent months.

NASA Finds Vast Regions Of West Antarctica Melted In Recent Past

A team of NASA and university scientists has found clear evidence that extensive areas of snow melted in west Antarctica in January 2005 in response to warm temperatures. This was the first widespread Antarctic melting ever detected with NASA's QuikScat satellite and the most significant melt observed using satellites during the past three decades. Combined, the affected regions encompassed an area as big as California.

Harper-Bush alliance feared threat to G-8 environment pact

Prime Minister Stephen Harper is poised to join President George W. Bush in scuttling or watering down any statement on climate change from the G-8 summit in Germany next month.

While European countries are pushing for their counterparts to recognize that a future climate change treaty must be designed to prevent average global temperatures from rising by more than 2 C - a dangerous threshold identified by leading climate experts - Canadian government officials, along with the Bush administration appear to be resisting.

After meeting with federal negotiators at a United Nations conference in Germany, environmental groups fear that the Harper government's position could prevent the implementation of an effective international climate change agreement at the end of the Kyoto protocol in 2012.

Wide-ranging accord with U.S., Mexico could dwarf NAFTA, MPs hear

Cliff Sosnow, of the Chamber of Commerce, said implementing SPP initiatives "can better position Canada in the U.S. market and enhance North American competitiveness generally vis-a-vis other established and emerging economic forces."

But MPs heard a cautionary message from the left-leaning Canadian Centre for Policy Alternatives.

Its executive director, Bruce Campbell, described the SPP as "the umbrella for a vast array of security and economic initiatives under way to further integrate the North American market. It's a NAFTA-plus or deep integration initiative.

"The cumulative effect of the SPP over time could be profound - even more significant than NAFTA - depending on how far or fast it goes."

See No Evil, Report No Evil: Why the media isn't telling you about deep integration

In March, it will be two years since the leaders of Canada, the U.S. and Mexico launched the Security and Prosperity Partnership in Waco, Texas. By now, if the media had done its job, the SPP would be a household name like NAFTA and the WTO. Yet most Canadians remain blissfully unaware of this powerful new agreement.

So, you may ask, why has such a contentious issue drawn so little media attention? And what does this say about the state of the Canadian news industry?

Business visionary predicted North American union in '93

Drucker authored some 39 books before his death in November 2005 at the age of 95. Born in Austria, he moved to the U.S. in 1937. He became a citizen in 1943. He taught management at New York University from 1950 through 1971. He regularly contributed to the Wall Street Journal, Harvard Business Review, Atlantic Monthly and the Economist.

Most of those denying the drive toward integration, or for a North American Union, point out that it has not been debated in Congress that no legislation has been introduced for actual merger. But Drucker pointed out 14 years ago that political and economic inertia was already so strong, the formalities of legislation would not be necessary to achieve the goals.

Fears over looming energy crisis in UK

This is not the postapocalyptic vision of some film-maker, but a realistic scenario as Britain grapples with a looming energy crisis. The statistics are frightening. In only eight years, demand for energy could outstrip supply by 23% at peak times, according to a study by the consultant Logica CMG. The loss to the economy could be £108 billion each year.

“The idea of the lights going out is not a fantasy. People seem to accept that security of energy supply is a right. It is not. The industry will have to work hard to maintain supply and for that we need a clear framework,” said Simon Skillings, director of strategy and energy policy at Eon UK, Britain’s largest integrated energy company.

Drought puts pressure on electricity

The water shortage across eastern Australia is now so acute it has begun to affect power supplies, and the country is at risk of electricity shortages next year.

"I think we are in denial, and are going to have brownouts in NSW if we don't get snow this winter," a source within the electricity market said.

Coal and hydro power generation require very large amounts of water, and the Snowy scheme depends on it for 86 per cent of its generation capacity.

"Last year we had the lowest snowfall ever recorded. If this happens again we are in trouble," the source said. He declined to be named because electricity pricing and supply is a politically charged subject.

Prices are already tipped to double in South Australia.

Petroleum Resources Of The Western Desert of Iraq

On 18 April 2007, the US energy consultancy IHS issued a press release stating that up to 100bn barrels of oil resources remained to be discovered in the Western Desert of Iraq (www.ihs.com). The following day this release was quoted on the front-page of London’s Financial Times and the following week in many other newspapers and magazines (for example: Dubai’s Gulf News, 23 April; Time Magazine, 24 April; and MEES, 30 April).

This conclusion stands in stark contrast to the 2004 study by the US Geological Survey (USGS) and GeoDesign (a consultancy that specializes in Iraq’s petroleum geology) that estimated the undiscovered oil resources of Iraq’s Western Desert to total only 0.5bn barrels at the 95% level of probability, and 1.6bn barrels at the 50% level of probability (Verma, Ahlbrandt and Al-Gailani, 2004).

U.S. Embassy in Iraq to Be Biggest Ever

The new U.S. Embassy in Baghdad will be the world's largest and most expensive foreign mission, though it may not be large enough or secure enough to cope with the chaos in Iraq.

The Bush administration designed the 104-acre compound _ set to open in September in what today is a war zone _ to be an ultra-secure enclave. Yet it also hoped that downtown Baghdad would cease being a battleground when diplomats moved in.

Over the long term, depending on which way the seesaw of sectarian division and grinding warfare teeters, the massive city-within-a-city could prove too enormous for the job of managing diminished U.S. interests in Iraq.

The $592 million embassy occupies a chunk of prime real estate two-thirds the size of Washington's National Mall, with desk space for about 1,000 people behind high, blast-resistant walls. The compound is a symbol both of how much the United States has invested in Iraq and how the circumstances of its involvement are changing.

Electricity Crisis Hobbles an India Eager to Ascend

Look up at the tops of buildings, and on any given day, you are likely to find three, four or six smokestacks poking out of each, blowing gray-black plumes into the clouds. If the smokestacks are being used, it means the power is off and the building whether bright new mall, condominium or office is probably being powered by diesel-fed generators.

This being India, a country of more than one billion people, the scale is staggering. In just one case, Tata Consultancy Services, a technology company, maintains five giant generators, along with a nearly 5,300-gallon tank of diesel fuel underground, as if it were a gasoline station.

The reserve fuel can power the lights, computers and air-conditioners for up to 15 days to keep Tatas six-story building humming during these hot, dry summer months, when temperatures routinely soar above 100 degrees and power cuts can average eight hours a day.

The Gurgaon skyline is studded with hundreds of buildings like this. In Gurgaon alone, the state power authority estimates that the gap between demand and supply hovers around 20 percent, and that is probably a conservative estimate.

China's rural millions left behind

In China, if they can, people try not to think about the countryside at all.

When they do, it is not of a rural idyll, but a grim, dirty place where people are poor and life is harsh.

In Britain the countryside is somewhere to escape to. In China it is somewhere to escape from.

Casino Royale: China and the Ghosts of 1929

Every one there had their own story, but they all had one common theme, BUY STOCKS! The regular bank lobbies were mob scenes of people rushing to withdraw their savings. Every bank had long lines. They are selling their homes, hocking the jewelry, anything to get liquid. Rich and poor alike are withdrawing their money and throwing it at the market. And throwing it is the right metaphor to use: Taxi cab drivers, shoeshine boys, restaurant employees, public employees, you name it, they WANT IN. They are selling their homes, jewelry, or whatever to invest.

The Chinese are prodigious savers (typically 50% of their incomes are saved), knowing from close personal experience that the government is good for nothing, and if they fail to provide for themselves there will be no one who will. But outside the stock brokerages bicycles are piled up, (my wife commented on the poor condition of them, a sure tip off they are poor) these poor, unqualified persons are all trying to get rich quick, and just like what happened in the NASDAQ and housing frenzies in the US. People bemoan the slow emergence of the Chinese consumer, well this emergence has undergone a detour, as instead of consumers they are emerging as the Chinese investor instead. Rushing like lemmings headed over a cliff, a waterfall of investors hurling themselves over the edge. Mass investors hysteria is a worldwide phenomenon seen many times in history, whether it be the original tulip mania, south seas bubbles right up to today’s economies. It is front and center in China today.

US Blames China As It Leads The World Into The Next Depression

When the US economy contracted after the collapse of the 1929 stock market bubble, the US Congress acted. And as it often happens in history, the action backfired. Instead of protecting the US economy and US markets, the Smoot-Hawley Tariff Act of 1930 plunged the US and the world into the Great Depression of the 1930s.

The road to hell is paved with good intentions. That was true in 1930 and is true today in 2007. The US Congress, looking for someone to blame for America’s mounting economic problems—increasing trade deficits, loss of jobs, declining competitiveness, etc.—is now blaming China. And, once again, instead of protecting America’s economy, the US Congress is about to pull the lynchpin on the global economy.

Ignoring the lessons of 1929

The economic and financial landscape of 2007 bears striking similarities to 1929. Back then, there were large, unregulated pool operators and other insiders constantly muscling the tape in whatever direction they chose. The public, too, was involved, thinking the country was experiencing a new era. Meanwhile, business began deteriorating in the spring of 1929, though the partying in stocks lasted until the fall.

To give you a flavor of those times, I'd like to quote from Frederick Lewis Allen's "Only Yesterday," which is one of my favorite books about 1929: "Mergers of industrial corporations and of banks were taking place with greater frequency than ever before, prompted not merely by the desire to reduce overhead expenses and avoid the rigors of cut-throat competition, but often by sheer corporate megalomania. And every rumor of a merger or a split-up or an issue of rights was the automatic signal for a leap in the prices of the stocks affected -- until it became altogether too tempting to the managers of many a concern to arrange a split-up or a merger or an issue rights not without a canny eye to their own speculative fortunes."

Eau de Liquidity

Some of the dangers emanating from the vast expansion in securitized lending derive from the incentives inherent to the current structure. Unlike with traditional financing arrangements, where profits accrue over the life of a loan, lenders nowadays expect to garner the bulk of their profits up front, in the form of fees and net proceeds from the sale of the obligations.

This has spurred a widespread emphasis on short-term profits at the expense of longer-term stability. Naturally, banks and other lenders focus on quantity rather than quality — that is, the volume of loans they can originate and the amount of money they can realize up front, rather than borrowers’ willingness and ability to repay the debt, long-term potential, or the broad banking relationship.

Distorted incentives have also promulgated “moral hazard," especially during a time of easy money. Strong demand from yield-hungry investors and an aggressive push by bankers to come up with the goods has caused standards to fall sharply. Together with the fact that risk is quickly passed along to others, the modern approach to lending has boosted bad credit-granting decisions to an unprecedented degree.

Consequently, when the credit cycle turns negative and the economy rolls over into recession — if it hasn’t done so already — a far greater portion of outstanding loans will turn sour at a much faster pace than in the past, kick-starting a swirling snowball of defaults that will have a devastating knock-on effect throughout the economy and the financial system.

Securitization has also fostered moral hazard in other ways. Cheap financing, seemingly unlimited opportunities to garner high fees and short-term profits, a significant increase in global trading and arbitrage, and the complacency that normally accompanies periods of unusual stability have all helped to nurture the illusion that there will always be a market for any sort of tradable instrument.

That, in turn, has encouraged investors and speculators to buy and sell with near reckless abandon, concentrating in areas that seem to offer the juiciest returns, and following the herd into ever riskier investments — with little regard for the downside. Believing that they will always have an “out,” money managers have become entranced by securitization alchemy, buying any sort of rubbish as long as it has been sprayed with “eau de liquidity.”

Scientists Foresee Extinction Domino Effect

Birds, animals, insects and even plants are on the move around the Earth, trying to flee new and increasingly inhospitable local weather conditions. For some, including alpine species and polar bears, there is nowhere to go. And many others, like plants, lack the mobility to stay ahead of changing climatic conditions.

"We're already seeing species moving, but they're not moving fast enough to avoid potential extinction," says Jeremy Kerr, an ecologist at the University of Ottawa in Canada.

Scientists link world's big dams to methane and global warming

Brazilian scientists say they have found evidence that the planet's large dams emit nearly 115 million tons of methane every year, a figure that would put the water-control structures among the top contributors of human-caused greenhouse gases.

In a study released earlier this month, the scientists claim the world's 52,000 dams contribute more than 4 percent of the warming impact linked to human activities. The study even suggests that dams and reservoirs are the single largest source of human-cased methane, a gas that traps heat in the atmosphere.

Environmental groups have rallied against dams for years, arguing that they destroy rivers and riparian habitat and wastewater through evaporation. The claim that the structures also cause global warming is new and is certain to be disputed by the hydropower industry as well as water supply managers.

A river gasps for life

In the years to come the northern plains, heavily dependent on the Ganga, are likely to face severe water scarcity. Together with the onslaught of industrial and sewage pollutants, the rivers fate stands more or less sealed.

"Among the categories dead, dying and threatened, I would put the Ganga in the dying category," says WWF Programme Director Sejal Worah.

The other heavyweight to join in the list from the Indian subcontinent is the mighty Indus. The Indus, too, has been the victim of climate change, water extraction and infrastructure development. "In all, poor planning and inadequate protection of natural means have ensured that the world population can no longer assume that water is going to flow forever," WWF says, adding that the worlds water supplier rivers on every continent are dying, threatening severe water shortage in the future.

The other rivers of the world are at the mercy of over-extraction, climate change, pollution, dams and over-fishing are the Yangtze, the Mekong-Lancang, the Salween-Nu, the Danube, the La Plata, the Rio Grande, the Nile and the Murray-Darling. The bottomline, therefore, is that rivers are no longer assured of reaching the sea unhindered.

[Note: Here are a few that I picked up this morning. RR]

Why US petrol prices are hitting record levels

Part of the reason that US gasoline (petrol) prices are so high is because refinery capacity is running at near-historic lows. Ironically, this is partly because vital maintenance was put off in the months following Hurricane Katrina, as a large chunk (nearly a third) of refinery capacity was knocked out by the storms. Those delays are catching up now - maintenance can only be put off for so long.

Peak Oil and the Inflation Lie

Given the fact that 1) daily existence in modern life demands various forms of hydrocarbon energy, 2) a vast array of basic material is derived from hydrocarbons (such as plastic), and 3) food and food production depend on hydrocarbons (fertilizers, irrigation and pesticides, energy needed to run machinery, etc.), the exclusion of food and energy costs in the measure of inflation is, therefore, a lie.

Peak Oil Passnotes: The American Driver Pays Up

Nigeria is queuing up to be an even bigger problem. Militant groups in the Niger Delta seem to be acquiring a better use of explosives, something that should worry all the major oil companies. A disused wellhead was blown up belonging to the French company Total, which may or may not be a practise run. We shall see.

Weaning off oil is the key

While this current hike may be temporary, it is a sign of things to come. The term “peak oil” is one which is becoming more common throughout the world during discussions of the world supply of oil and gas. Peak oil means that world oil production can no longer grow, not that the supply is running out. Although the belief is not universally accepted, most people accept that oil is not as accessible as it once was.

Bubbles are everywhere

Look first at the US. Here the economy is a mess. On the face of it consumption (the main driver of economic growth) looks fine, but peer behind the headline numbers and you’ll see how the spending is being financed – and it isn’t very encouraging.

Consumer credit rose sharply in March by $13.5 billion (£6.8 billion) suggesting, said Christopher Wood of CLSA, a broker, that with house prices no longer rising and “the home credit equity line cut off”, American consumers are turning to their credit cards.

Mastercard saw the number of transactions using its cards rise by nearly 20% in the first quarter of 2007. That’s clearly not sustainable. Even with the growth in card use, consumer spending rose at its slowest pace for five months in March. Economic growth fell to a miserable 1.3% in the first quarter, a four-year low, and there could easily be a further – and entirely justified – growth scare ahead.

Indeed, if the housing market continues to suffer – note that existing home sales fell 8.4% in March, the biggest drop in 18 years – it is possible the economy might stop growing altogether.

Yet even against this background the Dow Jones index has been rising steadily almost every day since the hiccup of late February. Most forecasts have it continuing to do so and a can’t-lose mentality appears to have taken hold of markets. By the end of March the amount of debt taken on by investors specifically to buy shares totalled £318 billion. That’s more than in March 2000 – the peak of the tech bubble.

Cat rescued from tree, DOW surges 100 points :-)

Any excuse will do as markets continue to move on the expectation that global central banks don't have the cojones to withdraw liquidity, that is, to increase the cost of debt in our highly leveraged global financial system, so the flow of money to finance deals will continue unabated. Like the IPO mania of 1999, this disease has infected not a few hundred board rooms of dot coms and telco companies, which industries represent a few percent of the US economy, but thousands of board rooms, representing just about every public company in every market and a significant share of the US economy. We have yet to speak to a CEO or senior exec of a public company that won't confide the giddy hope, bordering on conviction, that their company is next in line to receive a proposal for marriage from a larger company, an LBO from a private equity firm or hedge fund, or some other source of capital that will result in a personal financial windfall. These expectations have infected DOW and S&P investors as well. With so many betting that the company whose stock they own is likely to be over-bid in a take-over, why sell?

The typical U.S citizen is a sponge.

Americans consume on average 96 gallons of fresh water per day — the most of any country. The frugal French use just 39 gallons daily; in Israel, it’s even less — 26 gallons.

Even as we continue to be a worldwide leader in water consumption, our thirst continues to grow, as we build larger homes, bigger lawns and more and more golf courses.

Where the new water will come from is a problem that is causing water wars across the country, and Maryland is no exception.

“The water wars have already started,” said Jesse Richardson, an associate professor of Urban Affairs and Planning at Virginia Tech. “I foresee more and more of those conflicts. In the East we already have had Maryland and Virginia fighting over the Potomac.”


Americans consume on average 96 gallons of fresh water per day

Given that a gallon of water weighs ~8 pounds ("a pint is a pound, the world around") this means that a typical American family of 3 uses over a ton of water a day.

I received my water bill a few weeks ago. Here in Pennsylvania, I paid $40 for 15 thousand gallons of water for my family of four for 6 months. This doesn't include the sewer bill ($300 yearly, paid separately) but it's a ridiculously small amount of money to pay for that much water. It's no wonder we all use so much.

Hmm, in Altoona, we were paying $45 per month for water and sewer. And last I heard, the city was trying to sell off the Water Authority.

I'm in a township outside Allentown. The township gets the sewer payment yearly. The Lehigh County Water Authority gets the water bill every 6 months. $380/12 is $31.67 so not far off from what you pay.

Something that occured to me that I thought I'd toss out there.

Some people have shown graphs of big oil co's investment, specifically Exxon, showing that they are decreasing capital investment and increasing share buy backs. This is being cited as evidence of the Oil Co's knowing that there is no need to make capital investments as there will not be the oil to serve them.

People are also making a big noise about the lack of rigs, experienced staff, raw materials and other related factors being a major bottle neck in the development of new projects as there simply isn't enough infrastructure to meet demand.

Joining the dots, is it not possibly that the mass stock buy backs are simply an artifact of the Oil Co's having masses of money lying around they they can't invest in capital spending because there simply isn't anything to invest in that they aren't already pouring money into?

As I understand things it is generally considered a 'bad' think in the business world to hold on to cash unless you have nothing else to do with it. So unable to invest in capital projects the Oil Co's are doing the only other thing they can think of and returning the money to investors via stock buy backs?

Holding cash is only bad for business when you answer to shareholders who demand it back as a dividend/buyback etc. I remember years ago when MFST had tens of billions in the bank and wasn't doing anything with it. Shareholders began demanding it be returned to them and eventually most of it was. They still have plenty of cash on the balance sheet, but it's incredible for a company to have so much cash it doesn't know what to do with it.

I question that stock buy backs return money to the investors. In order to get that money, I have to sell the stock.
However, if you are a CEO or a member of the Board a large part of your money is in stock options, and raising the value of the stock artificially raises your bonus.
A much more effective way of raising stock prices is to increase dividends, but since dividends aren't paid on options, the CEO, Board and high management don't get overpaid.
I think stock buybacks should be an illegal form of stock manipulation, but I don't see any relief coming from the present administration.

But what if I am CEO, know that my business prospects are excellent, and estimate that the market is undervaluing my company by 30%? In that case, I think buybacks are a great investment. I don't see a thing wrong with that.

Absolutely correct.

First duty of any Board of Directors is to the shareholders.

If the BoD estimate that:

Selling out in a merger
Buying back shares and giving shareholders capital plus equity back is better than continuing

Then there is a fiscal responsibility to say :

' Here. Take your original money plus more that we made for you. We have done all we can. Take your increased money and re-invest it.'

Mercantillist, Adventurist Capitalism 101 since the first Amsterdam Bourse.

That is how it started off. That is how it works.

And once the BoD have a majority share in control, then they can:

Buy up others.
Award remuneration packages that reflect 'the GMR for execs...'
Close it down

This is just the way it works since the first, returning spice ships were sighted off the Hook van Holland.

Back then they didn't quite have the hedge funds buying up real assets with printed toilet paper.

Seems to me that buying back large amounts of shares that can be voted gives some protection. Large cash reserves are a open invitation to a hostile takeover by the thieves.

Exactly right. There are longer term flexibility issues at stake as well--higher dividend payouts might have to be cut in future down years, and nobody likes that. If buying back stock gives a competitive return on capital, that's what management is supposed to do.

In Australia an off market buyback can be great of shareholders..

I have a share which I brought four months ago for just under AUD $10. The company are offering to buy some or my shares for 14% less than the market price.

This sounds like a looser, but for someone in my situation, I will get a tax rebate from the government so that actually get about $1.50 more than the market price. All 100% legal and well known. The rebate is because the company has paid tax and the shareholders get a credit for this tax.

Not being a dummy, I will offer all my shares - and then will buy them back on market. I will be lucky if the accept 10% of them,

Better control of management by the shareholders would prove more beneficial, albeit not as easy.

The big advantage to shareholders of stock buy-backs is a lower tax rate. Capital gains get taxed at a lower rate than do dividends. It's true that you have to sell stock to enjoy the benefit... I guess there's a brokerage commission as an extra tax, versus just depositing a dividend check. But the tax advantage outweighs that very quickly.

it's true though that stock buy-backs do profit holders of options disproportionately. If the buy-backs just balance the extra shares generated by the holders of the options... maybe that is better for shareholders than just paying big bonuses to the execs. At least it motivates the execs to keep the price up. It does have the downside though of being a temptation to manipulate the price.

The main point is really to understand how the overall level of executive compensation is set. Does the typical board of directors do a good job of oversight and of representing the interest of the shareholders?

JimK, Bullcorn, anytime somebody mentions tax advantages before return on investment I keep my money.

The plain fact is I know my own needs and desires and can get them with money. And since stock prices are at least occasionaly based on real returns, high dividends and special dividends make the price go up, but it benefits stockholders as much as options holders.

Of course the talking heads on the financial news programs favor buybacks-they're hired and paid by the primary beneficiaries of the stock watering called options. As I said above, this should be illegal.

Currently in the U.S. both Capital Gains and Dividends are taxed at 15% unless the dreaded AMT gets her hands in your knickers. Who knows what will happen after these investor friendly rules sunset in the U.S. in 2010.
As for me I say give me the dividends I hate stock buybacks they are only good for the management at the top of the food chain. Studies show high dividend payers are the most disciplined users of capital and provide the greatest returns to investor. Besides I can reinvest the cash flow as I see fit either in more of their stock or other.

Subject: Kentucky Homestyle Drip Irrigation System

I believe that on the other side of PO is a burning requirement to sustain life, or at least sustain long enough until our society resurrects itself into something different and more lasting. Perhaps a bartering community ,town square type of society with a large portion of a sustainable agriculture component.

To that end there will be a period(or maybe forever)of an absolute need to provide sustenance for oneself and others via using the soil to bring forth food.

That out of the way, I have thought about methods of gardening and with water perhaps soon to be in short supply or with the grid down and no well pumps, that growing with sufficient moisture is essential to many plants such that additional sources of moisture than rainfall are required.
GW as well could perhaps throw a severe monkey wrench into those efforts. To be sure agriculture is ALL ABOUT the weather. Bad weather,bad crops UNLESS you are able to overcome or deal with such events on a local closein basis.

Here then is a technique that I am using currently that works fairly well for plants that require more than rainfall can produce or a result of what I call 'spiky weather'.

Obtain a 5 gallon plastic feedbucket. These are usually available for free if you can scrounge around.These are the type that drywall compound comes in as well as paint,etc.

Place one or more very small holes in the area just above the bottom and on the side. About the size of a piece of angel hair pasta. Or maybe the very small end of a toothpick. Fill it with water and place near the plants , like tomatoes and cucumbers that need a good and constant supply of moisture in the soil. You want it to just barely drip out of the hole/s. A very slow drip.

In my case I plant my tomatoes and cucumbers in a square three sided cage made of old rusted pasture fencing wire supported by three driven steel fence posts at each corner. I tie the fence up with binder twine as well as use the binder twine(or baling string) to tie up the vines as needed. In the middle I pile up a slight dirt mound and then cover it all with straw mulch. I sit the 5 gal bucket on this mound with four holes (or 3). I can also do this on my asparagus beds, and my berry patches. It doesn't work too well on long row crops but using some small pvc pipe I think I could engineer something that would in combination.

This method saves on water by putting it exactly where needed and not wasting it by using a sprinker(the worst) or a soaker hose(also wasteful). No hoses if you must carry water from a spring or draw it from a well or catch it in a big barrel off your roof,which I used to do in Lexington,Ky.

In the future if water must be carried by hand then having a goodly supply of these 5 gallon plastic buckets would be worthwhile. I intend to go buy some old fashioned galvanized metal buckets as well as a stainless steel one if possible. This is for the possibility of hand milking a cow. Buckets are going to be as needed as badly as Bob Shaws wheelbarrows. IMO.

There are thousands of ideas on how to better grow food by gardening. It would be a folly to try to make this site the repository of all such ideas and techniques.

I put this one out just to jog people into the realization that they must start to become inventive and plan for the future if that future is not going to be the famous soft crash landing many are hoping for.

After my auction and the on the run up to the future I will be resurrecting my old website and placing some of my past experiences with farming and growing there. That is if we still have breathing room for a bit.

I am also wondering how many here are currently or past amateur radio operators like myself? I am going to shortly order the Harbor Freight 45 watt panels. Maybe 2 or 3 of them and adapt them to powering my current radios and my future HF rig. I can polish up on my code and throw a long wire over some trees and use a back end tuner to match the impedance before loading the finals. No linears in this mix and with a likely huge silence out on the frequencies then 100w outputs should be sufficient.

If it goes as I suspect it will then 'hams' will be among the few who will have communications abilities.

Airdale-hoping for the best but preparing for the worst

PS. BTW is there some rule of remaining ON TOPIC on Drumbeats? It says'And now a word from our members'.

PPS. Granted religion ,acid rock, and hot monkey love would be rather off topic but I believe that sustainability and associated topics are not really that far OFF TOPIC.
In fact some TOPIC POSTS are in this general area as regards the future events(Francois Celliar's recent topic post).
Politics seems to be a hot topic as well. How much more important then is life giving FOOD?

PPPS. What I would like to see is a website operating on the same principles as TOD but devoted to sustainability. Perhaps titled : THEFOODDRUM
Granted there may be and likely are sites where this is already done BUT the TOD community is already up and active. Spreading out into disparate sites would leave behind a lot of well worn and very valuable sense of community and endeavor. I have been to other sites. Most are chaos and not well structured. A lot of monkeyfunk goes on that is hard to endure on many sites. Slashdot for instance.

PPPPS. When I created this comment there were no MSM posts about the water situations. I did it before there were any posts. So water is going to become extremely important. This was on my mind yesterday as I worked in my garden in the cool of the evening.

Drip system- I use milk jugs the same way. I find them to be more readily avaiable and have fewer after market uses than 5 gallon buckets. Add liquid fertilizer if you want.

Milk jugs won't last. Lay one out in the sun and before too long it shatters into pieces. Also too small to hold enough.
Also not sturdy enough. You can almost crush it with one hand. Flimsy is the word.

If you wish a gallon container I find antifreeze containers and fruit juice containers to be less fragile and able to last longer.

Where ever drywallers are at work you might find 5 gal containers in their onsite dumpsters.

I have brought good sealable 5 gallon plastic food grade buckets to hold my wheat and corn(shelled) in the basement. If sufficiently low moisture they will not deteriorate nor hatch weevils. Some is still fine after two or three years of storage.

Instead of liquid fertilizer,which I find a waste of time and money(Miracle Grow like), I use cow dung and compost. A 50 lb bag of ammonia nitrate sits in the barn for the ocassional handful I toss on the corn as a side dressing.Costs right now about $11 for a 50 lb. bag.

All my kitchen refuse goes on the compost heap. Hey I read Ruth Stout way way way back.Maybe 70's era and heeded well what she wrote.

Aside: This year I am running into far more snakes around than ever before. Dumping out some mortar there was a black snake on the pile. The dogs worried it until it crawled in a hole. Yesterday walking up the lane from barn to house a huge 7 ft. chicken snake lay right across the lane. The dogs had at it and getting within 6 inches of its coils it still refused to strike. Finally crawled under the pine straw.
I never kill snakes. Only once found a copperhead on the place but lots of king snakes and black racers and chicken snakes..some who live in the barn and under the door is a beautiful king snake who has a nice hole by the water spigot.


Airdale, perhaps you would know. Corn/corn flour - Do you let the corn ripen until it gets that mealy/starchy texture or do you pick it while sweet and air dry?


Well let me put it this way. I have four rows of sweet corn. Two are silver queen and two are golden queen. I pick them for eating immediately and parboil some then cut the corn off the cob and freeze for eating later. If you want cream style corn(from the sweet corn) then you slice the kernels off 1/2 way down and scrape out the cream into the plastic bags and then freeze as well.

I also raise 4 rows of 'open pollen' corn. Which we used to use as field corn but also once ate as well. This is NOT hybrid and will reproduce true to form. This I let dry on the stalk. Pick when dried and shuck. Leaving them on the cobs then is ok until needed but you can at that time(if sufficiently dried--the kernel's shell will be quite hard and the interior as well..you want them with about 10% moisture so they will keep well)store them in trash barrels but they take up more space than needed in that form. If you have a manual corn sheller then and if dry enough you can shell them. Keep the cobs for fire starters and to make stoppers. The dried corn can be spread on concrete to further dry if needed. Its a call as to how dry is dry. For this I tend to leave them on the cob until I am sure but DO NOT leave the shuck on as they can cause various problems. Outside but undercover they will pick up moisture if in the shuck.

Ok. I have two varieties of open pollen. One is White Hickory and the other is Truckers Favorite(a yellow corn).

Later I can grind either with my steel burr mill. The more finer you grind the more you proceed from grits to cornmeal to flour. If you like cornbread then sift out some of the husk(bran) or leave it in for roughage, and I believe that part is healthful for that reason but to refine it more you just keep sifting a few times til no more husk(the kernel's shell) is left.

To make hominy you put it in a caustic lime or lye solution til it swells and pops off the shell. This is whole hominy.

If you let that hominy dry and then grind it you have hominy GRITS. Very healthy for its large amount of niacin and other beneficial ingredients. I prefer white hominy grits myself and now they are almost impossible to find at any store. A few mills around the country do sell them over the net.

Thats the way I do my corn. I have tried to grind #2 yellow dent field corn, what most farmers grow for the market, but it was not very good. Didn't make good cornbread IMO but was edible.

Corn is a very good staple for sustainability. You can feed it to hogs or chickens or draft animals or milk cows. You can eat it yourself. It has a very high protein I understand.

The indians I believe lived on corn(maize),squash and beans. As well as wild game.

A few 5 gallon buckets of good open pollen white corn can give one a sense of at least having something set by.

In a pinch you can bake corn pones in a fireplace ashes. This is how the pioneers did it as I read. Ash pones they were called.

A mix of boiled tomatoes and corn is called succotash. I add some left over biscuits to this mixture. Also very good.

With corn and wheat you can eat biscuits and cornbread. This is what I grew up on as a youngster. No white bread at that time.


PS. If you have large animals to feed corn to then its best to keep that part on the cob. Easier to store and feed and no need to shell it. Shelling corn by hand is rather tiring.
The cobs seem to help it stay viable if stored in say like a corn crib. Some used to store it in large screened cribs with a top cover only. Course the rats and mice had a field day with it unless you had some snakes around to control them. Like the huge chicken snake that hangs around my back porch. 7 feet long at least. Harmless as could be.

Great info, airdale! I have never done anything with corn except growing sweet corn - I might have to try my hand with something a bit more storable.

I grow lots of stuff, but other than some pickling and tomato sauce canning, mostly I freeze what I can't eat fresh. I want to become less reliant on freezing. I have good luck with dried beans (pinto and black, mostly).

"Like the huge chicken snake that hangs around my back porch. 7 feet long at least. Harmless as could be."

Unless, of course, you're a rat ;-)

Its my understanding that most , if not all, sweet corn is hybrid. Therefore not able to save seed.

I tried boiling and eating some of my White Hickory but it was very tough and the kernels were not that easy to chew. Therefore the best use of it is ground up into meal or grits. Or perhaps hominy.

Dehydrating is a very good method of preservation as it making fermented foods like kraut.


Thanks for the input... I plan to try varieties of corn suitable for drying/grinding/hominy-making. Really trying to figure out how to put stuff by, by many techniques.

I've done a bit of dehydrating. My mother used to make awesome sauerkraut. I'm growing cabbages this year for the first time in years...

As Alan might put it... Best hopes for being able to eat when hungry...

- Steve


Yours are some of my favorite post on this board. I have seen a few posters diss you in the past but I like my farmers like my bread, CRUSTY! Also very envious of your 60+" of Kentucky rain. We are lucky to get 15" here in West Texas in a "wet" year.

Mose in Midland

I think the only place in the US (sans mountains) that averages 60+ inches of rain per year is the Gulf Coast, from about Lake Charles, LA to Panama City, FL. Southern KY averages in the low 50's.

New Orleans only averages 57 inches (a dozen years ago we got 100 inches though). Most of Kentucky is in the 40 to 50 inches of rainfall belt and the southern third of KY is in the 50 to 60 inch belt. (The same map shows New Orleans in the 60 to 70 in belt)

New Orleans data is below. I copied and stored the US rainfall map, but did not bookmark it.


Local tomatoes are a spring only event in New Orleans. Disease gets them before we are well into summer.

Summer weather is not our strong point,

Best Hopes for only mild summer breezes,



Did you get my email?

bjj at mchsi . com

Local tomatoes are a spring only event in New Orleans. Disease gets them before we are well into summer.

Have you tried growing the little cherry tomatoes in a large pot filled with potting soil? They grow & ripen pretty quick, & thus might get you a crop before disease gets them. If you start a succession of new plants every month or so, you might be able to get a continuous supply of fresh tomatoes all summer. You might also try dusting with sulfur if fungus is a problem (which probably is your #1 problem given your high humidity). Placing the pots where they get good sun and good air circulation will help quite a bit. Be sure to select a tomato variety with VFN disease resistance, that will make a big difference too.

Such succession planting is also the way to keep yourself in lettuce all summer.

Interesting concept !

We grow Creole tomatoes here, VERY quick ripening and flavorful.

I may try that.

As far as lettuce, I have my doubts (I know someone that planted in November, we had a mild winter and they harvested till March or so).

Otoh, peppers grow like weeds.

Best Hopes,


Tomatoes and peppers (and eggplants) are close relatives and are tropical plants, so you should be able to grow both there.

Lettuce likes shade & plenty of moisture in the summer, heat is a problem but starting the seeds indoors in a cool spot and then transplanting will help. You need to select loose leaf varieties that mature fast, and harvest them fast before they bolt. Growing lettuce in containers under a shady tree might be worth a try, especially if you can rig up some type of drip irrigation to keep them watered.

From the Western Regional Climate Center's Climate Summaries, annual average precipitation:

Hoquiam, WA: 69.69" (1953-2006)
Shelton, WA: 66.19" (1948-2002)

Lowland stations, but nearby mountains (namely the Olympics) may have some effect on these fairly high totals. Most lowland stations in western Washington and Oregon receive about 35 to 50 inches annually.



How careful do you have to be when you're drying or storing the field corn? When I lived in Kenya, it was common to see stories in the paper about poisonings from improperly stored corn. There is a mold that grows on the corn and produces a toxin, called aflatoxin I believe.

Could have been aflatoxin. This is a bluish mold as I recall. There was a lot of talk about it several years ago.

Caused by high moisture. I had some ear corn I left on the patio with the shucks on and it got rained on. Later it had blue mold all over some of the ears which I then saved only for seed and not to eat. The rest I pitched.

How careful? I think 10 % moisture is fine. It gets pretty dry hanging on the stalk but don't want to wait too long before picking. Then shuck it and let it dry a bit more on the cob. Its gets real brittle when its dry and rattles when shelled. I sometimes use a moisture meter that they carry on the combine to check mine. Now I sorta tell by experience. There are very small insect eggs on grain. If you let some moisture get on it then sometimes moths or weevils will infest it. If dry enough then your safe from weevils.

I have had store brought meal get slighty damp on the kitchen counter and later in the pantry moths were coming out of it. Of course cooking easily destroys all these on your home grown grain. They appear to always be there but unless the moisture is high then you have no problems. Weevils will tunnel inside a wheat berry and hollow it out totally.

I would never eat corn that had any evidence of mold or off color. Check with a farm agent in your county. They should know all about this. Otherwise I much prefer the home grown grain.


As a child, 'succotash' was a mixture of lima beans and corn - about 50/50.

Thank you for that excellent information. Could you recommend a brand of burr mill? I can look all I want but have never used one so don't know what to look for.
Thanks in advance

My grain mill is according to the booklet "Country Living Grain Mill".

It comes with a large wheel for manual labor and has a smaller pulley for setup with an electric motor(not supplied). Many elect to tie the pulley up with a bike frame and provide leg power to grind grain.

It grinds more than grain. Beans,etc. Just so they are dry.

I got it via the internet but don't have the site URL since that was long ago.

With a electric motor I can easily grind a few pounds of corn meal in about 1/2 hour. Never tried wheat as yet.

The burrs are adjustable from coarse to fine. I am pleased with mine. I plan to order a few more of the steel burrs cause in the event of a failed ag system I am sure that I can trade grinding for many other items. Like eggs,milk,etc.

Perhaps a PV hookup with a DC motor would be wise too.



How about a Simple Blog for your insights? Much Easier than browsing through a lengthly list of posts.


I have brought good sealable 5 gallon plastic food grade buckets to hold my wheat and corn(shelled) in the basement. If sufficiently low moisture they will not deteriorate nor hatch weevils. Some is still fine after two or three years of storage.

I remember reading (a long time ago) that you can put a piece of dry ice in the bucket on top of the grain, place the lid on (unsealed) until the ice evaporates, then seal the lid (without uncovering the bucket). The idea is that the CO2 replaces the oxygen, killing any pests and preventing the oxidation that spoils the food. Should keep for years if it works as advertised. I've never tried it myself--should probably test it now while there's still time (I hope!)

I know that the dried food in a lifeboat was preserved in airtight cupboards by putting a candle inside and shutting the door. Apart from using up oxygen [probably not as much as you would like], I guess you get carbon monoxide and probably soot and smoke, so that might kill a few beasties too.

Hey I read Ruth Stout way way way back.Maybe 70's era and heeded well what she wrote.

For those who haven't heard of Ms Stout:

running into far more snakes

Yeah, I was piddling in the garden in my central texas McBurb and found a couple of little brown snakes. Don't know the species, I think they were grass snakes. I turned them out into a brush pile in the greenbelt so the dogs wouldn't kill 'em.

I haven't seen but one other snake in the 8 years I've lived here, so it must be a good year for them.

The problem will solve itself.
But not in a nice way.

Here's how to avoid manual lifting of water...use one or more 45w panels in parallel to charge a deep cycle lead acid battery with voltage regulator. Connect via timer to a 12 volt pump either to supply the drip system either directly or to a high mounted tank with the valve set to slow trickle.

A compressed air wind powered bubble pump could be used to lift water from a shallow well or dugout. A bubble pump works by gas bubbles providing lift up through a narrow hose lifting water between the air bubbles. A coffee percolator is an example.

"Here's how to avoid manual lifting of water..."

Yeah That, or have kids!


Bob Fiske

Yeah That, or have kids!

I was just reading the posts above and thinking that I should really grow more garden. I grew up on a farm with both a mom and grandmother that had a few acres of kitchen garden and all I have are memories of pulling weeds and picking vegetables and berries. My mom still plants way more than sensible for 2 people in their 70's. I like landscaping and yardwork, but I only have a bit of tomatoes and peppers, because I am scarred for life by child labor.

Thanks Grandma! :-)

I don't hear people talking about root cellars for storage. My parents still have one and you can keep potatoes pretty solid until way into the next spring.

One of the most unique Ideas I have seen for a pump for a well was:

Bicycle frame with pedals, rear wheel (without tire) (no front wheel necessary)

A rope is the output mechanism.

A heavy pulley on one end with the rope around it is lowered into the well. The weight of this tightens the same rope (which is a circle) is around the rear tire holder.

When a person peddles the rope passes thru the water. Water tension helps hold the water to the rope as it rises. At the receiving end a device to "wipe" the water from the rope into a bucket.

from the article the Aide worker said it brought up a good deal of water, several gallons per hour depending on effort.

Quid Clarius Astris
Ubi Bene ibi patria

A Simple, Durable Drip System
I've used this system on many crops for years. It isn't free and requires some water pressure to work: Lay out a length of 1/2" black plastic pipe where your crops are planted. Take an ice pick and punch a hole right through the pipe where each plant is (sometimes, like with tomatoes, it's good to put a hole on either side of the plant about 1 1/2' apart), or if it is something like corn every foot or so (You want at least a foot between the end of the sleves - see below). Now take a hatchet and whack 6" lengths of 3/4" black plastic pipe. Slide these pieces onto the 1/2" pipe so they cover the holes. Put a plug in the exit end of the 1/2" pipe (you don't usually need a clamp), put a male adapter on the entrance end with a pipe to hose fitting and attach the hose. That's it. For corn, we use three pipes spaced about 6-8" apart. Our longest runs are about 120'.

This system beats the heck out of something like T tape for home growers.

Todd; a Realist

Unlike Airdale, I like soluble fertilizers. FWIW, I described my growing method(Todd's Black Gold Method) here: http://www.theoildrum.com/node/2410#comment-173726 It is a combo of mulching and terra preta. Anyway, I fertigate using soluble 20-20-20 plus trace elements. My farm supply stocks Grow More brand and it contains B, Cu, Fe, Mn, Mo and Zn (all chelated). I like fertigating since I have to irrigate just about every day anyway. The advantage is that I am putting down a miniscule amount of chemical fertilizer so I haven't seen any disruption of the rhizosphere as one might get with a slug of dry chemical fertilizer. Further, the amount added is somewhat proportional to plant size thereby minimizing excess fertilizer.

I also really like having trace minerals being added since most soils are deficient in them. Although I do add glacial rock dust, it's really hard to assure adequate amounts are available without soil testing.

Sustainable food production is a good topic. But for those without the land, energy or skill to grow a significant portion of their own food, may I suggest that people at least learn how to cook. So many people anymore eat primarily prepared or highly processed food and don't know how to make a dish from scratch.

As inflation in food prices increases, the simplest, most effective response is to go to more basic ingredients. Peasant cookery, developed over the centuries, is relatively well-balanced nutritionally, tasty, and cheap.

Actually, peasant cookery is very much oriented on starches to deliver the calories. My parents always told me when eating fish, meat, whatever: "eat some bread with it!" There not really a nutritional reason to do that. People don't need starchy grains as a major part of their diet. They eat it because they grow it, and they grow it because it's easily taxable and transportable, even with simple technology.

I'm going to get myself a used above ground swimming pool (I see them all the time in the local free advertising fliers) and fill it with my well and rainwater run-off from the house and pole barn. Using the pool as a reservoir I can irrigate my plants during dry periods. Airdale, I'm an avid reader of your posts and I value your insights gained from real life experience. My perception from the many posts on this and other sites, especially the ones critical of farmers, is that many in the peak oil community think that once it hit’s the fan they’ll be able to immediately take up gardening and continue on their merry way. We’ll see. I’m looking forward to your website coming back. Please post its’ address when it is up

Bruce on my ten acres in Cumberland County Illinois

I'm going to get myself a used above ground swimming pool (I see them all the time in the local free advertising fliers)

Bruce, you may want to consider grabbing all of those free above ground pools that you can find. If you use them for water storage, great. But beyond that, the aluminum in them is worth a lot of money. I have a friend who dismantled a neighbors pool and brought the metal to the scrap dealer. He pocketed $350.

But that was probably a best case scenario, since he said this pool had a big aluminum deck on it. Still, it could be worth your while.

Airdale, have you tried the fora on Matt Savinar's site? Many of the small homesteaders who post there seem to know what they're talking about, and the signal-to-noise ratio isn't bad.

I agree that those ubiquitous white plastic buckets are one of the many benefits of the Oil Age that will be sorely missed. Since they are stackable, watertight, airtight, and almost completely verming proof, they are great for caching anything that will fit inside.

At the school where I work the custodians throw out many non-toxic water emulsion floor wax buckets with the watertight lids still on. I rinse them out really well, dry them, and they're ready to go. I recommend to everyone getting to know the Head Custodian at a school near you and use this free resource while it lasts.

Errol in Miami

Hey Airdale;
Go ahead and give us some posts on Hot Monkey Love.. as I hear it, the best of them use all sorts of petroleum products, but the PO-aware ones are now experimenting with Dairy! (To a soundtrack of Acidophilus Rock)

I've got a set of the Harbor Freight Panels. Every few months (if ever again!!) they drop the price from $250 to $199, for a very decent price per watt! I have them as 'stocks' against future energy woes, but have not managed to get the roof hardware, or rig the grounding wire and battery-areas to get the system up and running. For now, they are my 'security blanket' for knowing I CAN keep some lights, radios and tools running, in a pinch. (Along with other brands, I have about 230w of PV available) Not without the requisite irony, these are Chinese products, oh ye, informed and conscious conoodsumers!

I copied your Drip System for my wife, who has asked me to research the subject for her. Now do I tell her that, 'Yes, I WAS on the Oil Drum today, BUT I got the info you wanted.. see how great TOD is, Honey!?', or do I just say, "Honey, I got the info you wanted..."

Food is hardly off-topic. Oat Mash and Honey is going to be one of our Liquid Transp Fuels again, I'm willing to bet!

Bob Fiske

Oh, PPS, or more appropriately, PKT..

I am not a HAM user, yet. But I am very interested in Packet Radio and 'Mobile Ad-Hoc Networks', using a 'simple' Modem/Radio combination to keep our ability to independently link our computers, in the unlikely event of a Telephony/Cable/Satellite-related Internet failure.


Have any of you had experience with this?

Bob Fiske

I've got the same set of $200 solar panels. I would recommend ordering a $25-30 7amp 12v solar panel charger conroller from Northern Tools or Harbor Freight. The control box that comes with the $200 set of panels from H.F. does not prevent flow-back into the panels at night NOR does it prevent overcharging of the battery.

You can still have it rigged up to that control box so you may use the included 2x 12v CFL bulbs that come with the set. (Very cool, those usually run $12-$15 each if bought seperately.)

If you don't want to mount them to your roof, you can do something similar to what I did, which was put them on my back deck that we never use. Sadly, my house mate moved my bicycle from where it was safely standing to in front of my solar panels, then when the next storm came around, it blew my bicycle into the panels, cracking the front of one of them. So far the damaged panel still works, but I don't anticipate that will last after the leads begin to corrode due to exposure.

I use my deep cycle battery that is charged by the panels for things like charging my laptop, cellphone, etc. I also use it for power when camping, I'll haul it into my Subaru along with one of the three panels, and a 1500W (3000W peak) Xantrax modified sinewave inverter that my bro picked off of eBay for $100. I've used it during storm-induced power outages, and it works just fine. That's even using one of those cheap Walmart Everstart batteries. I've had the setup for 2 years now. I'm anxious to see just how many years I can squeeze out of this cheap battery.

Thanks for the heads up on that Controller-distrib box. I was wondering what kind of electronics they put in there.

I do have a 'Morningstar Sunguard 4.5' Charge controller that I got from Arizona Wind and Sun for about $35. I don't think it has MPPT features, but is small and light and from a reputable company.. in case you or Airdale want to check them out. It's fully sealed/potted, and I found it recommended online by a kayaker who built it into a small boat-worthy charging system for his trips.

Bob Fiske

Best of all, Hot Monkey Love is a renewable resource!

Great idea airdale! Going to try it in the garden and look for more buckets. This is the kind of info we need and your idea for a food forum is a good one. We have an established community here that could serve as a basis for such things.

Goodness. Today is a sheer avalanche of peak oil news.

Sometime I get lost in the details of a problem and have to step back and remember what the problem really is.

I have to think about how the problem can be fixed and everyone gets to keep "move'in on up " like the Jeffersons (1975-85 tv show)

The real problem, I think, is ENERGY. As expressed in BTU.

How you get it, store it, transport it and use it are the details I get lost in and I forget the real problem.

This week as been a hard one on my energy needs. I live 100% off the grid using Solar PV's, Wind and a Gasoline Generator. My base electrical power needs each day is 6826 BTU and I use in total about 10239 BTU each day. Normally the Sun/Wind will take care of all my electrical needs down here in my little piece of the Bahamas. But this week there's been no Sun or Wind to speak of, so I've had to run the Genset each day.

back to the problem at hand, see how easy it is to get sidetracked.

According to the EIA the world used (in Quadrillion BTU)

---year--- ---World--- ----USA----
1996 375.057 94.23
1998 381.9 95.20
2000 399.090 98.98
2002 409.726 97.97
2004 446.442 100.41
2005 No data 99.89

1 Quadrillion Btu = 1,724,137,931 Barrels of Crude Oil (I think? can someone check my math)

As long as we can get more Btu each year the party will go on. When this starts dropping the party is over. I think??????

Crude oil peaked in May 2005 at 74,151,000 barrels per day.(EIA data)

Something is out of whack...

Are you over by a factor of 10 on the number of barrels = 1 Qd BTU?

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

This time, it is Professor Jacobson taking exception to Mr. Khosla's version of events:

Mark Jacobson Responds to Vinod Khosla

In my entire career, I have never been at a professional seminar where the speaker used such demeaning language. There were over a hundred people in the audience as witnesses who can corroborate these events.

At the second talk, which was similar to the first, I asked him a similar question about the health effects of gasoline versus ethanol. This time, he hurled a personal insult at me, calling me an "idiot" in front of a large crowd in an effort to avoid answering the question.

The "Why Food Cost More" article on commodity speculation is amusing. Last Friday on RR's blog under Gouging is an Idiotic Explanation RR posted a comment regarding the increase food prices due to ethanol and I made this remark:

In 1972, corn was $3/bu, Canadian Hard Red Spring Wheat was $4.50/bu., Diesel was $0.20/L, urea $100/tonne. Corn is now $4/bu, CHRS Wheat $5/bu and Diesel $0.85/L, urea $550/tonne.

Corn has to go to $15/bu to just adjust for inflation. The corn price spike isn't real, it's commodity speculation... Do you think they actually got enough ethanol production online in the last 8 months to really use up all the surplus corn in the US?

I then went off saying that an increase in US corn price is good for Canadian grain and mixed farming and that ethanol production wasn't going to be a long term food problem because the ethanol plants aren't feasible on $5/bu corn and will shut down...
(the rest is here): Gouging is an Idiotic Explanation

edit: Thinking about this a bit more, judging by the NH3 usage/price that unless there is a major corn crop failure there probably will be more corn surplus regardless of ethanol usage due to higher acres and higher fertilizer input. In whatever case, there are less soybeans.

BP shuts 100,000 bpd at Prudhoe due leak-US lawmaker

WASHINGTON, May 22 (Reuters) - BP Plc. (BP.L: Quote, Profile , Research) shut down 100,000 barrels per day of output from its Prudhoe Bay field in Alaska on Monday because of a leaking water line, a U.S. lawmaker said.

BP had to shut down about a quarter of production from the Prudhoe Bay field "for an undetermined amount of time" due to a leak at its gathering center 2 produced water line, U.S. Rep. Bart Stupak, Michigan Democrat, said in a statement issued late Monday.

Ron Patterson

What is Prudhoe bays' oil/water cut?

I found it. As of 10/8/06 is was 66% water cut.

I was looking into the Olduvia theory (OT) recently. I was playing around with the numbers and thought maybe someone else would be interested in it.

I started by grabbing the BP data for world energy use in oil barrels equivalent and population data from the UN.

I first plotted boe per capita from 1965 to 2005 and saw pretty much what Heading Out saw in his post on OT. For fun I decided to extrapolate out into the future to see what it'll take to get to 37% of the peak energy use per capita (and hence the end of industrial civilization according to OT).

So I started with assuming a 3% energy decline starting next year. I also assumed a 1% population growth till 2040 (which got me pretty much inline with the United States Census Bureau projections).
You can see the results below.

It only takes until 2031 to reach 37% of the peak (1995 11.85boe per capita). Right in line with a 100 year span of industrial civilization starting in 1930.

So next I wondered what would happen if the decline in energy wasn't quite so bad. So I plotted 2%. Same result 2031. 5% decline got us there in 2031 as well. Then I tried a 0% decline in energy though 2040 and that only stretched it out to 2038. These were all done with a population increase of 1% annual.

Unless I really screwed this up the results are pretty startling. It doesn't really matter what the decline rate will be post peak. Even a modest exponential increase in population will seal the fate of the industrial world in about 25 years.

So I started with assuming a 3% energy decline starting next year. I also assumed a 1% population growth till 2040 (which got me pretty much inline with the United States Census Bureau projections).

If every nation produced every barrel possible in the near future then a 3% decline is way too high. For the next three or four years, the decline rate will likely be less than 1%, if that. Then as more nations peak, the decline rate will increase to 2% and so on.

However that is assuming business as usual even after the world becomes aware that world oil production has peaked. It is highly unlikely that anything will be business as usual after the world becomes aware of peak oil. Some nations will start to hoard oil, either keeping it for themselves or waiting for a higher price later on.

The investing public will become aware that industry will probably shrink, right along with the energy supply. This will cause a stock market collapse and all the repercussions this will bring.

And as far as population projections are concerned, every projection will be altered dramatically when the consequences of peak oil begin to take effect. And that will happen long before 2040.

Ron Patterson

Compared to the consequences of Peak Oil, all other events in human history shrink to insignificance.

I screwed up my second graph.

Here's the correct one.

Light Blue is the 0% energy decline.
Dark Blue is the 2% decline
Pink is the 3% decline.
Yellow is 5% decline.

So the rate of decline post peak does make a difference. But it seems to me we are still headed into the gorge.

I agree population growth will stop (die off?) at some point before the 37% mark.

And then we have the Export Land Model, e.g., a single digit decline in Mexican crude oil production = a double digit decline in oil exports.

The top 10 net oil exporters showed a 3.25% decline in net oil exports, annual average from 2005 to 2006 (EIA, Total Liquids). From 12/05 to 12/06, the decline in net exports is sharper than 3.25%.

Where do you get these numbers? According to the shipping industry, tonne/miles increased in 2006 and are up 11% since 2002. The crude-oil tanker business is also doing very well. There are currently over 150 newbuild VLCC tankers on order through 2011, expanding the current fleet of 460 by a third. It is hard to square these facts with a situation in which exports are shrinking, unless somehow much less oil is traveling via pipelines.

Not if 2000 tankers over the next few years are being decommisioned:


This would be from a pool of tankers including all clean-product and chemical carriers most of which are much smaller and don't carry crude. The fleet of Panamax/Aframax/Suezmax/VLCC class crude-carriers is probably around 2000 vessels to start with. The scrapping issue is about a mandated double-hull policy, not expected crude cargos. Most large fleets of VLCCs are already double hulled. I think 4 VLCCs were scrapped last year. Newbuilds on order far outumber planned scrappings. 5-year old second-hand double -hulled VLCCs are selling for $120 million. Companies can charge a higher day rate($50,000-$150,000/day) for the DHs.

Not to argue the facts - just to add a perspective.

1. Did they indicate how many ships are being retired?

2. Due to changing suppliers, and destination ports, some of the new oil is coming from very far away. Which means more ships are required per route to service the fields.

ie. if the transit time is 20 days and you require 1MMBPD, that is 1 VLCC every 2 days, which means that you need approx. 20 carriers, just to service that 1MMBPD. It adds up quick to service long routes, and some routes are even longer.

Most VLCCs are used on either the 38-day round-trip, Persian Gulf/Middle East to South Korea/Japan/China route or the 64-day Middle East to US route.

From Frontline’s 4th quarter press release:

According to Fearnleys, the VLCC fleet totalled 479 vessels at the end of the fourth quarter with five deliveries and no vessels scrapped during the last three months of the year. The total orderbook amounted to 161 vessels at the end of the fourth quarter, up from 155 vessels after the third quarter of 2006. There are 30 deliveries expected in 2007 and 39 in 2008. Current orderbook represent 33.6 percent of the VLCC fleet with a total of 11 VLCCs ordered during the quarter.

The Suezmax fleet totalled 346 vessels at the end of the quarter, a 1.1 percent increase from 342 vessels after the third quarter of 2006. No Suezmaxes were scrapped during the quarter whilst four were delivered. The total orderbook at the end of the quarter was at 123, an increase of 20 from the end of the third quarter. There are 25 deliveries expected in 2007 and 22 in 2008. Current orderbook represent 35.5 percent of the current Suezmax fleet.

…The overall orderbook for tankers has now approached 35 percent, and gives some reasons for concern. However, the fact that the orderbook is stretched over five years and that 28 percent of the fleet is non double hull reduces this concern.

Teekay’s annual report says non-double hulled tankers account for 25% of fleet. I’m not sure what they are considering the fleet. In addition to 479 VLCCs(2mb) 346 Suezmaxes(1mb), I think there are 600+ each Aframaxes (600k barrels) and Panamaxes(500k). That would seem to indicate 25% of about 2000 before 2010. I don’t know if that is going to happen. I’m pretty sure there are waivers available to use these old tankers past 2010. I’d count on the newbuilds being manufactured. If anything there is greater demand than shipyard capacity presently. Contracts are being resold rather than cancelled.

These companies are doing very well. Check out Tsakos’ stock price today(it is having a very good day):

Tsakos Energy Navigation Ltd., which owns and operates a fleet of crude oil tankers, said Tuesday its first-quarter profit rose 4 percent as it sailed more vessels to overcome softer charter rates…
The company said its average charter rates in the quarter fell 4.5 percent to $31,649 from $33,128 during the same period a year ago. But Tsakos also sailed an average of 37.7 vessels during the period, compared with an average of 27.1 vessels a year ago.

Or Frontline’s 20%+ Dividend yield over the last couple of years.

Reading the annual reports of these companies one gets the impression that the managers read the IEA’s forecast about demand and supply and that they aren’t put off by the fact that actual production the last few years hasn’t exactly met expectations. A huge amount of money is being wagered on billions of dollars worth of new tankers. You would think that being in the oil business those investing the money would have looked at the pros and cons of peak oil. Apparently they aren’t convinced that a rapid drop in exports is imminent.

As far as changing oil-delivery patterns creating longer distances that oil travels, the industry confirms this. My point isn’t that exports are increasing, just that there isn’t confirmable proof that they are decreasing.

From Teekay’s annual report

We operate the world’s largest fleet of medium size (Aframax and Suezmax) crude oil tankers,engaged mostly in the spot tanker market…

We see the overall tanker market remaining finely balanced during 2007. Net tanker supply growth is expected to be largely offset by rising transportation demand, driven by high oil demand, changes in oil movement patterns and growing discrimination against non double-hull tankers, which still account for approximately 25 percent of the world fleet. We therefore expect average rates for 2007 to continue inline with the historically firm levels seen in thelast couple of years.

As a possible scenario, look at where the US gets its oil from. If the US starts to get less oil from Venezuela, Canada and Mexico and starts getting it From West Africa, then net tonne/miles would increase. But if the supply lost was from the Middle East and you still replaced it with Angolan, Chadian, and Guinean oil, tonne/miles would decrease. But if the imports were not replaced there would be no “tonnes” and tonne/miles would decrease a lot. Mexican exports to the US have been decreasing the last two years. But not at a pace that can outstrip replacement from Angola, Libya, Algeria, etc.

From Tsakos’ annual report:

The total world tanker fleet grew by some 6% to 384m dwt in 2006. Further heavy ordering of new tankers meant that 136m dwt was on order to be delivered at the start of 2007, equivalent to 35% of the existing fleet. However, there was still 104m dwt of non double hulled tonnage that will become ineligible to trade in oil cargoes under the IMO phase out.

Since only a quarter of the non double hull fleet is due to be phased out under MARPOL Annex 1 prior to 2010, whereas some 85% of the orderbook is due to be delivered before the end of 2009, relatively strong fleet growth is expected to continue from 2007 to 2009 even though some vessels will be removed from the fleet in advance of the mandatory phase out date for special projects such as FPSO conversion. The orderbook is skewed towards 2009, with just over 1/3rd of the orderbook at the end of 2006 scheduled for delivery in 2009, compared to about 25% each in 2007 and 2008 with the remainder in 2010 and beyond.

The age profile of the VLCC and Suezmax fleets mean that there are very few vessels that appear to be likely candidates for demolition in 2007 but a number of non double hulled vessels have been reported as being sold for various conversion projects that will result in them leaving the trading fleet in the next couple of years.

Agree...the current state of the fleet doesn't prove that exports are decreasing.

And the distances/turnarounds are only going to increase as the close cheap oil gets rare.

As noted above, the net export data for the top 10 came from the EIA. The Mexican data are from Pemex.

Saudi exports alone are down more than one mbpd.

I guess I was asking which table or tables from the EIA you were using. I thought they didn't release detailed yearly consumption data until June. Are you using that table of the top 15 exporters that is rounded to one decimal point? I'd be careful with that. You might want to double check it with data from BP or the IEA.

As regards Mexico, comparing the last 12 months (May 06 thru April 07) to the 12 months previous to those yields an 8% decline. Is there some reason you chose to only use the first 4 months of each year? I like comparing full 12 month periods when determining yearly decline rates because it produces smoother fluctuations and irons out any seasonal or temporary variations or anomalies. Mexico's export decline has accelerated over the last few months from basically flat to 8% and could very well hit 13%. It just hasn't yet. The other problem with the 13% rate you quote is that it probably overstates internal Mexican consumption growth. Using this same method I think I got a 4% decline in total Mexican production and 15% for Cantarell.

Let's see.

Production down. Check

Domestic consumption up. Check

What would happen to net exports? Anyone? Anyone?

Does anyone doubt that Saudi exports are down by more than one mbpd?

Russia admitted to a year over year decline in net oil exports from 2005 to 2006.

And Norway is in a terminal decline.

Not to worry. These are just the top three net oil exporters in the world. Continue with your business. Nothing to worry about.

I think that the original poster was wondering that

"if net exports are down so much"
"(1) why are is there an increase in the tanker fleet
(2) why are the tankers booked
(3) why are tanker shipping rates holding / going up"

The poster cites TK and Tsaskos annual reports.

Even as exports decline, importing countries still need the oil and refined products. Perhaps the ships aren't totally full?

Its possible. We clearly have a supply issue in the US and in some very poor countries - (for different reasons: insatiable demand US, inability to pay - v. poor countries)

Maybe the routes of travel are longer!

Maybe because of contango (or other logistical reasons) they are being used as floating storage?


If you read almost all shipping has adopted a pass through charge for bunker fuel. You can read the stories from the previous year. Unless you break out the pass through for bunker fuel you don't get the real shipping rates. If bunker fuel is up and shipping rates are constant then they have gone down in real terms. Bunker fuel costs are alone can be like 60% of shipment costs so its important.




In regard to Mexico, their peak exports were in January, 2006. As of April, 2007, they are showing a 16% annual decline rate in oil exports (month to month). This would result in a 50% decline in 4.5 years. Oddly enough, this is exactly what I showed in my Export Land model (Khebab's graph): http://static.flickr.com/97/240076673_494160e1a0_o.png

However, I expect this export decline rate to increase to 20% plus as Cantarell crashes.

But, WT, despite these declines, US and European oil inventory levels are both at comfortable (relative to 5 year average) levels.

Oh, and Mexico's output bottomed in December, but rebounded In Jan, feb, mar to November levels - check out Rembrandt's Oil Monthly on the front page.

I'm no cornucopian, but I do think that we may not be at peak yet.

OECD crude oil inventories are dropping steeply, and the IEA has started warning of problems ahead if we don't see a boost in crude oil production.

Mexico is the poster child for Peak Oil. It started declining in the vicinity of the 50% mark on Khebab's HL plot. Since its June, 2005 peak, Mexican crude oil production, through April, 2007, is declining at an annual rate of about 4%.

Mexico is also the poster child for the Export Land model, where a single digit decline in production, plus increasing consumption, will frequently result in a double digit decline in net exports (16% in the case of Mexico, 1/06 to 4/07).

David Shields, who has extensively studied Pemex and the Cantarell Field, is predicting that the initial Cantarell decline will be on the order of 500,000 bpd per year, as the oil column of about 825' (in 2005) thins at the rate of about 300' per year.

Please read PEMEX's own footnotes regarding their Dec 2006 numbers.

Right. And this is part of what I'm trying to figure out. Why are you choosing January 2006? If you chose September 2005 or June 2006, you'd get a much different result. I understand January 2006 is the peak in exports, exports are different from production, however, because they are a combination of two factors. I don't think you can just take the peak, determine a rate, and extrapolate from there.

Mexico has averaged a 1% annual growth in consumption over the last 6 years. Using this and assuming a 4% annual decline in production you get a 50% drop in 6 years, not 4.5. This may seem like splitting hairs, but we're just guessing about consumption to start with. While production may definitely drop 4% a year from here on out, Mexico could go into recession and consumption could drop, causing exports to stay flat. Consumption dropped 3.3% in 2002. Anybody remember what the cause was?

I understand what you are saying, I just think there are different ways of measuring things. Peak production occurred in Mexico and in Cantarell in 2004, two years before peak exports. So Cantarell was crashing, production was falling, but exports were rising for a year and a half? Not really. January 2006 was just a banner month for exports. It probably says more about how the numbers were tabulated that month or some anomalie in Mexican consumption thanabout exports. That's why I'm hesitant to use it as a benchmark.

If you want a more accurate measure of the decline rate as of a given month, the most accurate measurement is the month to month measurement. Annual averages will produce a lower (annual average) decline rate.

We measure from the peak, and since Mexican exports peaked in January, 2006, they have shown an annual decline rate of 16% per year as of April, 2007. Rule of 72: 72/16 = 4.5 years. However, as I said, I expect this decline rate to accelerate to more than 20% per year (month to month rate), which implies a 50% plus reduction in exports by July, 2009.

BTW, Saudi crude oil exports, from 2/06 to 2/07, showed about a 14% annual decline rate.

Well said

Well I think its crucial we do not cherry pick data. There are enough drongos out there keen to rubbish PO that if we start quoting selectively to bolster particular scenarios we will make it all too easy for them to shoot us down. The data is the data and since its all we have, we have to digest its meaning in an even handed manner.

A case in point is recent Mexican production - when it became clear last year that Cantarell was in dire trouble it seemed by extension that Mexican production would tumble in one long downslope. In fact in the first 4 months of 2007 the Mexicans seem to have very effectively made up some of the ground from the Cantarell fall, and are pretty much now pumping at the same rate as the last quarter of 2006. They have, however temporarily, arrested the decline in their total production (which surprised me). Who knows they may all prove us wrong and actually go on to increase production in the next 6 months. Imagine the catcalls if, despite Cantarell crashing, Mexico ends production at a higher level than it started 2007? We will see - but we must not, at all costs, ignore data that doesn't fit.

Replied on the wrong comment, which made me look like I was agreeing with khebab (which, this time, I'm not)

Andyh, this is exactly right - evidence has got to trump expectation every time

If every nation produced every barrel possible in the near future then a 3% decline is way too high. For the next three or four years, the decline rate will likely be less than 1%, if that. Then as more nations peak, the decline rate will increase to 2% and so on.

Ok, I updated the graph with a new decline rate. It starts off slow and speeds up.
2007-2011 1% decline
2012-2016 2% decline
2017-2021 3% decline
2022-2026 4% decline
2027-2031 5% decline
and so forth

Also this time I got a proper population projection from the UN data here.

The result is pretty much the same. We cross the 37% of peak boe per capita in 2031.

The end of industrialized civilization is in 25 years (if it even makes it that far).


On second thought the above decline rates are probably still too aggressive. After all oil is only one source of energy. So overall energy production probably won't start falling 1% next year. So I regraphed it with a more generous decline slope. I assumed an energy plateau for the next five years and then started off on the 1% decline

2006-2011 0% decline
2012-2016 1% decline
2017-2021 2% decline
2022-2026 3% decline
2027-2031 4% decline
and so forth

That gives us till 2035 till we cross the 37% of peak energy use per capita.


Still the end of industrialized civilization within my lifetime

That is about when i statistically are supposed to die. How great, i will be historical. The civilization dies with me.

Industrial civilization won't end; it will shrink. It's more like a game of musical chairs: to keep the energy per capita ratio high enough, they will kick people/regions/nations out of the privileged group.

I'm still thinking about that.

I agree that early on it'll shrink.

But it'll work its way up the food chain until there are three chairs left, then two, then one...

The UK is predicting energy shortages in 2015. The rich nations aren't immune.

Nor do the rich nations exist indepenently of the rest of the world. What happens to the US when Mexico goes under? Or China goes under?

And this is assuming a nice gentle decline like I modeled above. I really don't expect mankind to go quietly. No, we'll go kicking and screaming. It won't be a nice gentle slope on the way down. It'll be a cliff as "above ground" factors kick in.

Hi Ron,

Thanks and a couple qs.

re: "The investing public will become aware that industry will probably shrink, right along with the energy supply. This will cause a stock market collapse and all the repercussions this will bring."

1) Could you please post again your blog info where you say you talk about "best case" mitigation paths?

2) You know, the more and more I deal with people, especially the only investors I know...well, it may be the messenger (hard to say), but I just don't know that many people are either capable (or whatever) of really "getting it". So, I'm no longer so certain about the role of knowledge/awareness of energy issues (esp. "peak") in the way events unfold.

I mean, really, we could make the case, that anyone who "gets it" might also make moves we approve of. For example, look at Jeffrey's discussion of investments such as farmland.

Be that as it may...

3) Why would it not be the case that there would not be a move to direct funds toward solar/wind (or whatever one considers the "best pick" of energy technologies to be)?

Awareness>>a move to put money where it might pay off>>?

Opps, I did screw it up. I had an error in my spreadsheet. The second chart was wrong. Sorry.


Light Blue is the 0% energy decline. As you can see it makes a big difference.
Dark Blue is the 2% decline
Pink is the 3% decline.
Yellow is 5% decline.

These are all assuming a 1% annual population growth.

Hi Rethin,

Thanks. I appreciate your taking yet another look.

Now, some qs for a kind of "devil's" or perhaps in this case "angel's" advocate point of view.

Could you (or do you know anyone else who's done this...) work on what the shortfall is in terms that we can translate to alternative 1) sources 2) design 3) policies?

In other words, any combinations that can help fill these downslopes?

If you don't mind my asking.

Also, would enjoy hearing how your transition is going; well, I hope.


Check it out. Since Henry paulson took office and got them PPT members working together, the market has done this....


Dear Mr. (Hugh) Gilmore:

Director, Disclosure Services

U.S. Treasury

I write to protest the failure by the Department of Treasury to process Mr. Crudele's request for documents relating to the Working Group on Financial Markets.

As you would be aware, under the Freedom of Information Act, the Department is required to process such requests within 20 working days: See 5 U.S.C. S. 552 (a).

Mr. Crudele lodged his request for documents almost 10 months ago. Yet he has yet to receive any document from the Department of Treasury or any explanation for the Department's failure to produce documents.

Rep. Ron Paul (R., Texas.) last year questioned Fed Chairman Ben Bernanke - who was under oath - about the Plunge Protection Team.

All the Fed chief would say is that the Team met "irregularly," was mostly advisory and prepares reports.

Irregularly: Like when the stock market needs a boost?

Advisory: Like answering the question, how can we get stock prices up?

But I'm not so sure that the meetings are spaced that widely apart.

There have been stories in the press lately that the Team is now having frequent meetings under Treasury Secretary Hank Paulson, who took over that position last summer after being the chairman of Goldman Sachs.

And Hiro doesn't even have to drive.

Toronto/GTA launched a new carpool scheme today called "Hoverport"!?

So, I hear more on this on the radio, a guy is interviewed and he says:

"$250 per year, wouldn't it be easier just to lower the gas prices"

I nearly had to stop the car I was laughing so hard...most people really have no clue. This is really sad.

This long weekend (in Canada), I saw two types of events in my community - lots of gardening(mostly flowers), and many people washing cars. Car worship is really going to be a problem.

The news this weekend made me think - a new gas pain benchmark could be established by monitoring the media for the word "gouging". Google had 502 current NEWS hits at time of this post.

The news this weekend made me think - a new gas pain benchmark could be established by monitoring the media for the word "gouging". Google had 502 current NEWS hits at time of this post.

LOL! Funny story. So, I decide to check out some of these stories, so I Googled "gouging". In the web section, the top story is a Wikipedia article on Price Gouging, so I decided to read it first:


So, I get to the bottom, and am looking through External Links, and guess what I see?

Gas Gouging Rebuttal: A Defense of Gasoline Price Gouging by Robert Rapier

That's freaking priceless. That essay wasn't a defense of price gouging. It was an essay challenging a claim of price gouging. Yet you look at that title, and it looks like I am saying "it's just fine to price gouge." Heck, I don't know if it is or not, because nobody can ever define it in anything but nebulous terms.

You should ask Wikipedia's staff to change it, or you can open an account and change it yourself. Or you can just leave it and we can all get a good laugh out of it every once in awhile. =D

I think I will just leave it. People might be incensed by the title, but if they click on the link they will find that the essay is a bit different than advertised.

Hi Robert,

Thanks and my suggestion is to change the title to what you think most accurately describes your work. There's something to be said for hanging on to as much truth as possible. (my view).

Anyway, it's great you words got in there.

def- "Price Gouging" - That price where people start to think about how much it costs to drive.
Thinking = pain, pain = whining, whining = TV coverage.
Now Robert, what part don't you get?
It's only going to get worse, you know that.
I'm waiting for the first big "Oil Exec. Bonus's" with Geraldo Raveris. Look at the bright side, Chavez could be President....

Gas Gouging Rebuttal: A Defense of Gasoline Price Gouging by Robert Rapier
That's freaking priceless.

I changed it to:
"It's Not Gouging if I Have Shares In an Oil Company and they Sign My Paycheck!!" by Robert Rapier


It reads:
Gas Gouging Rebuttal: An Essay Challenging the Claim of Price Gouging

I know this was discussed a bit yesterday, but considering the fact that we just passed the real — not nominal — high for gasoline prices, I am astonished at how quiet it is here at TOD and elsewhere regarding this news.

I was on the phone with Tom Whipple yesterday, and it was all we could talk about! This is a serious situation we're in. Stocks are dangerously low, shortages are possible as soon as this Memorial Day weekend, etc.

Yet, everybody seems to be taking this in stride as though it's all business as usual.



Just a refinery problem folks and those greedy oil companies. Move along now, Nothing to see here. !!!

Memmel's post late on yesterday's drumbeat is a succinct statement of how geological Peak Oil will be expressed above the ground as "logistics". And not only the logistics of fuel. It ties into the questions I was asking on the API conference call last week. [Robert will be posting a summary of that soon. My summary: Shortages Don't Compute.]

Kunstler, of course, puts it even more pithily: when the truck delivering the fixings for the 1500 mile caesar salad breaks its axle, industrial agriculture is done. And all my cucumbers - 8 inches tall - simply collapsed overnight; warm enough, but it looks like the last week of rain rotted the stems. At 1/4 inch diameter, I'd thought they were well past the damp rot stage. As a farmer, I will starve.

Everything that breaks - it's going to be a long series of isolated "one time events" and logistical failures - like the branch falling on the power line in Ohio. That's why the "Enduring Constitutional Government". Just like "Healthy Forests", "Clear Skies".

Humpty Dumpty won't go back together again. It's going to look like "Peak Everything" because energy underlies everything.

What's happening with gun futures?

cfm in Gray, ME

Robert will be posting a summary of that soon.

It is in the queue now. So, probably a couple of days from being posted.

How exactly does that queue work?

Writers submit essays, and they are usually posted on a first come, first served basis. If I look in the queue right now, there are 3 stories that are complete, and at least 20 draft stories (some of which will never be completed).

Is there a limit to how many stories are posted from the queue a day?

Are they posted automatically or by hand?

They are posted by hand. One of the editors - usually PG - will work out the queue, and usually post in some kind of order. Typically one key post per day. If the queue starts to pile up, they will post 2, and if it gets bare they may recycle one.


Down here in Texas cucumbers do better if you raise them on small hills, and train 'em up a chain link fence or a little hogwire. If they are on the ground, put a little straw or pineneedles under the vine like strawberries or yellow squash. Air cuts down on mold/mildew problems.

They are a very good investment but you want to have physical possession.

Reloading equipment and supplies fall into the same category.

People might just not deliver on the futures when you most need them.


Yeah, I know what you mean, Marco. I'm an old-timer. When those hurricanes hit in 2005 and the price went over $3/gallon, the joint was jumping!

Now, everybody yawns and says "whatever". As some boomer once famously said, "the times they are a changing."

We get jaded. Everything fades in time.

It happened here in the UK with the refinery blockades in dec 2000 when the haulier companies (back by public opinion) protested the price of petrol. Now the price is way higher and I hardly ever hear anyone complain about the price!


Ditto. I'm hoarse. Sore throat.

I've largely moved beyond warning people to taking care of self and family. Lunacy like Congress passing a law letting the government sue OPEC demonstrates exactly how futile it is trying to change the circus in Washington.

Good luck tilting at windmills, Dave. In my opinion, it's just too late.

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

On CNBC this morning they reported that refiners and importers have more gas than the Colonial pipeline can transport. So I suppose that's why the price is down 6 cents at the moment.

If the Colonial is going to run at max would that end up solving the shortage before long?

Nahh...haven't you checked the spot price gasoline today? It's been fixed now...down $0.08...we are all safe.

Continue to drive, use your credit card, etc...nothing to worry your poor little consuming head over.

Just another of a long series of steps that we will see.

I am more concerned about the implications of the Saudi Aramco cuts in production than I am today's gas prices. I see the current prices as a very good thing, a popgun warning shot across the bow.

No big deal unless we have another major supply disruption (Cat 3+ hurricane right up Houston Ship Channel would have an impact).

My GUESS, gas prices (w/o major problems) national average $3.65/gallon, peak in early July. Below $3 mid-September/October. Ho hum.

Best Hopes for SOME useful response,


Since we already seeing spot shortages, for example here in Dallas this past weekend, I think that we are just barely above the Minimum Operating Level (MOL) for gasoline stocks.

If we use 185 mb as the nationwide MOL, we have little more than one day's supply above MOL, probably a little better on the West Coast, a little worse outside the West Coast.

Our assumption is that we can continue to increase our Total Petroleum (crude + product) imports at about 5% per year. The quickly developing new reality is, IMO, exponentially declining export capacity.

West Coast - "We pay out the ass so we get the gas!" Just outbid $3.33 and you can have more too!

I guess I just didn't realize that your bidding war would include seperate regions of the US. Makes sense when you think about it.

Actually, that's why we had spot shortages in Dallas. Wholesalers are shipping tanker truck loads of gasoline up to Chicago, where prices are higher.

Driving today city to suburbs & back. Up 10 cents morning to evening. $3.54 to $3.75 for unleaded regular around Chicago this evening.

Checking around the country for (big city) prices posted in the last 8 hours your's is tops.
BTW we love Chicago. Hope fuel price doesn't squeeze the City of Broad Shoulders too hard.

Going to track the L ridership through this

That's a big 10 cents, Hippie! Has the dime doubled now, too?

Couple things.
Some of us are waiting to see if there is a significant build in the weekly data tomorrow.

Then the Midwest situation will be interesting. Three weeks ago it was the West. We got slammmed with price and it finally slowed the demand and we got a build at around $3.50 retail.

The Midwest was the one PADD that was on the ragged edge of the minimum operating level this past few weeks. So now that they got hit with a big price hike we get to see if they got above their 47 million barrel stock level.

CaliSoca had mentioned that pipeline prices out of Tulsa (Williams going north)had soared and I saw $2.90 FOB Tulsa a few days ago. If they catch up that could level, if not it's off to the races. A lot of the average price increase came from the Midwest region. So we'll probably be watching that pretty close.

Tommorrow with EIA, FTX will have his chart up (which is always great) and we can have a look. I know many of us are aware of the situation and I believe agree with WT, Robert and Simmons that it all has to run perfect for there not to be some form of runout or rationing down the road this summer. For me it's not lack of reaction, it's waiting with baited breath.

My theory is that WT's bidding war is playing out in the U.S. now between pipeline companies. In Iowa, Williams pipeline controls most of the distribution of gas. They essentially ran out a few weeks ago.

My theory is that they put the word out that they were willing to pay more for gas if it could be shipped to Iowa/Midwest. They also probably said they would pay a premium to maintain volume through some time period. Lets say 6 weeks as example.

So now the Midwest immediately experiences a price increase. We are 10 cents higher than everyone else when a month ago we were 5 cents lower. So now that the Midwest has locked in supply, at high price, who got outbid?

My guess is somebody in Texas didn't pay enough and got shorted last week. I am sure they fixed that problem but I predict prices will (or did) rise significantly this week in that area and will not lag the rest of the country.

So how long can we keep this up? As long as spot shortages do not occur frequently in the same region I don't think the rest of the country will pick up on it. So we only need to move the shortage around for 20 weeks or so to get to the fall and the problem goes away until next spring.

I am watching to see if this plays out over the next month or so. But you really have to glean the news to hear about gas shortages. It is not on the front page (or nightly news) unless your town was out.

So we only need to move the shortage around for 20 weeks or so to get to the fall and the problem goes away until next spring.

And there may be some issues related to access. Farther away from a refinery with a bigger market will probably mean much higher prices. So far Dallas for instance is still getting a big break from Chicago. Perhaps the assumption is that they can send north temporarily as they are easier to resupply.

(BTW, I'm not sure if the upper Midwest has waived all their emissions blending requirements yet but I know that affects their price too)This plus transportation costs would augment the pipeline price bidding war.

It's interesting that you note how Iowa was essentially on empty. From the bit of checking I have done the Midwest runs on a minimum operating level of about 47 mil. barrels (they've been just under that for 2 weeks), the West 27, The East 48 or 49, the South 55, and 5 mil. barrels for the Rockies.

This gives a MOL for the nation of something like 180 to 185Mb to keep everything reasonably functional. 'Moving the shortage around' with price seems like pretty much what is going on and it's happened before esp. 2000 for the Midwest. This year we seem to be playing lots closer to the wire. It's all fun and games until somebody gets shorted while avoiding a hurricane.(Alan)

You've described the shell game nicely. I'd be great if more of that got through the MSM. Folks could cut back and be a little better prepared if/when there's a problem.

Right this fits nicely with the general model I've come up with post peak I expand the model slightly in this post.

Its a double game of musical chairs and Russian Roulette.
The looser of the game of musical chairs gets higher prices and "almost shortages or small shortages" At each stage the looser also gets to play one round of Russian Roulette.

So right now the US is playing musical chairs and so far we have no losers in the second more serious game of Russian Roulette.

But in time someone will lose at Russian roulette and a chair and for say one round of musical chairs no chair is removed. This represents demand destruction breathing room.
The next round a chair is removed and we start over.

I think this is probably a fairly good model for post peak oil. Its done as sort of a game theory but it seems to fit nicely with how things are unfolding. It can be seen as an expansion of WT bidding war concept. Whats cool is the only way out of the game is ELP.

The important outcome over WT's model is that this model indicates that one major economy will blow up soon.
Looking around the world the candidates are countries that subsidize oil and don't have any meaningful oil production and have significant consumption.

I've picked the Philippines as and prime example of a early at risk economy others are in South America and the rest of South East Asia. Of course you will get collapse in Africa and other very poor countries but the problem is their demand is so low they cannot change the game. So your looking for a country that say has 300kbd or better of oil imports and in general they will be forced to either eliminate subsidies or go bankrupt or both then have their economy crushed regardless. This concept of a tear term loser of the Russian Roulette part of the game is the key new concept over WT's bidding war. I'd expect us to see this blow up happen in 2008 at the latest maybe later this year.
The key problem of course is yes you can crush the poorest countries but they simply don't have enough consumption to appease world demand so we should see problems quickly move up to fairly wealthy countries until one is literally destroyed.

Memmel, as usual excellent analysis from you.

In case of India, domestic production is 400,000 barrels per day and consumption is 2.5 million barrels per day. The Indian oil companies (public sector) will lose US $1.2 billion this year because they are forced to sell petrol, diesel, kerosene and cooking gas below their cost price. So far they have managed by selling bonds to cover the deficit. India's oil import bill this year will be around US $60 billion and the foreign exchange reserves are around US $200 billion. So my guess is that India has at least 2 more years before things start going bad. What do you think?

Almost right but you have to consider that the model is implicitly predicting price spikes so the cash reserves will be drained much faster than a simple analysis would indicate.
So India does not have two years. I don't think they will be the first to go down but this means that I doubt they will make it through round two. Given your above analysis after they survive the first bidding round they will be basically mortally wounded. However they should make it through the first round of bidding.

Politics and the ability to drop subsidies is also a critical factor these countries have to choose between a boa constrictor or cobra style collapse. Collapse must happen but they can choose how they want to demand destruct.

The region is basically the Southern Hemisphere outside of Australia with Pakistan to the Philippines as the highest risk region followed by South America. Africa is of course toast but as I said they don't have enough consumption to really effect the game.

Bangladesh Burma etc are also probably gone but again these can be considered civilian casualties.

My top contenders are:
Indonesia (political weighting)
Thailand (political)

But you have the right idea and I hope vigilant peak oil readers can follow various countries so we can spot the one thats the first to collapse early. Its important to understand the details and the signals.

Not their is no requirement that the music for the musical chairs portion remain at the same speed it can and will speed up.
If I'm right I expect a major economy to collapse before the end of 2008.

How would you fit the following criteria into your "game theory" (which to me on the surface makes sense)

The US continues to alienate people around the world at a increasing pace. There already seems to be an approach as far as power blocks, ie Russia-China-Iran-India, Russia-EU, Venezuela-Mercosur, Chinese acquisition of assets in Africa, etc

It seems to me that at some point the world is going to say enough and they may just make the music stop when the US is standing.

At least it has to be considered as a possibility.

The US may have the biggest war machine, but war machines have to be driven by a working economy.

As far as alternate ways of things playing out, consider this scenario


It also goes into a possible scenario for the Mexico-US border towns to resemble Iraq in the near future.

Just to add a little to the concern, the NOAA today released its 2007 Hurricane Outlook.

"For the 2007 Atlantic hurricane season, NOAA scientists predict 13 to 17 named storms, with seven to 10 becoming hurricanes, of which three to five could become major hurricanes of Category 3 strength or higher," said retired Navy Vice Adm. Conrad C. Lautenbacher, Ph.D., undersecretary of commerce for oceans and atmosphere and NOAA administrator. An average Atlantic hurricane season brings 11 named storms, with six becoming hurricanes, including two major hurricanes.

Similar forecasts were made earlier this year, but the track record for predictions before the end of May is lousy, whereas the accuracy of forecasts around this time is much better.

The big number in the Weekly Report tomorrow IMO isn't imports or utilization but the demand one. Surely these prices are flattening consumption aren't they? Over the past few weeks demand growth has slowed and the y-o-y four week average last week was +1.0%. A gasoline demand figure less than c. 9.325 mb/d in tomorrow's report will continue that downward trend, although the way things are going with continued refinery outages it's looking as though demand needs to be choked off even faster now.

If the demand figure turns out to be 9.4 mb/d or above...well, you've just got to figure that even higher prices (and maybe much higher prices) are going to be needed.

I put a couple of comments on Robert's Senate hearings post showing how the effects of U.S. gasoline tightness are spreading globally. If this issue is going to be solved by sucking in gasoline imports from around the world then it's clear that some pain is going to felt overseas.

As a final thought - and I hope I'm not indulging in drama - I'm beginning to wonder whether we have already seen the all-time absolute high in U.S. gasoline consumption. The weekly record is w/e July 1st 2005 at 9.721 mb/d and the monthly one is August 2006 at 9.585 mb/d.

Can either of those numbers be topped this year - or ever again?

I put a couple of comments on Robert's Senate hearings post showing how the effects of U.S. gasoline tightness are spreading globally.

I also mentioned that in this week's version of TWIP, that I just now posted:

This Week in Petroleum 5-23-07

I think we see another build this week, and strong imports at these prices. I also still say we will be in record low territory on Memorial Day.

I guess am resigned to the fact that we are just one bad day away from a gasoline nightmare.

Maybe others are as well.

I tell everyone I know, we're one hurricane away from $5 gas.

The absurdity makes it feel like a time warp.

Global energy use seen rising 57 pct through 2030

World energy consumption is expected to climb by 57 percent between 2004 and 2030, largely on surging demand in parts of swiftly developing Asia, the US government reported Monday.

The Energy Information Administration (EIA) said in its energy outlook projection for 2007 that energy demand would experience its most rapid growth in nations outside the Organization for Economic Cooperation and Development (OECD).

Demand would be particularly high in non-OECD Asia, where strong projected economic growth drives the increase in energy use, the EIA said in its report "International Energy Outlook 2007."

Despite high world oil and natural gas prices, demand will keep growing. But rising oil prices were seen as restraining growth in demand for petroleum and other liquids fuels after 2015.

Their share of overall energy use is expected to fall from 38 percent in 2004 to a projected 34 percent in 2030.

Liquids consumption was still expected to grow strongly, however, reaching 118 million barrels per day in 2030.

The United States, the world's biggest energy consumer, and the booming economies of China and India account for nearly half of the projected growth in world liquids use, the report said.

To meet demand, the supply in 2030 is projected to be 35 million barrels of oil equivalent per day higher than the 2004 level of 83 million barrels per day.

A projected 21 million barrels per day increase in production by members of the Organization of the Petroleum Exporting Countries (OPEC) and a six million barrels per day increase in non-OPEC countries would be needed to satisfy demand.

There is only one possible answer to this ..

EIA is held to ransom by the Wall street.

joke aside , QUESTION :

- is EIAs mission to predict "real and possible scenarioes regarding energy ... as in peer reviewed calculated projections"

OR -just project "wishful thinking ...as in this is what we hope for ... " ?

my guess is for the last assumption -let's all pray

HOUSTON - Marathon Oil Corp. said Tuesday a subsidiary participated in a deepwater discovery off Angola's coast.

The company said the discovery is about 99 miles off the Angolan coast in 7,573 feet of water.

Subsidiary Marathon International Petroleum Angola Block 31 Ltd. and its partners drilled a well to a total depth of 13,337 feet.

The company and its partners are evaluating the results of the well, which was flow tested at an operationally restricted rate of 2,063 barrels of oil per day.

Marathon Oil said it is the 24th discovery in its deepwater exploration program on blocks 31 and 32, which began in 2001.

src: http://www.cnbc.com/id/18802078/for/cnbc/

Now, look here Khebab ..

This very find was quoted in the most regarded norwegian financial paper today - as Statoil is holding 13,33% share in this filed.

The quote in the paper went along the lines of :

"good business for Statoil ,in Angola " ... hheeeee ?!?!

GOOD business ? - this is adding a mere 275 barrels/day .. to Statiols portifolio.

Then you all understand the standards of reporting in the former No.3 exporter of crude oil in the world. -period-

I just found this about gasoline shortages in the VA/DC area:


I think googling the news tab for "gasoline shortages" is becoming good sport. IMO, seeing too many "no gas" signs in front of gas stations will be the two-by-four in the face of the sleepy American public.
I also find it interesting that there is no mention in the MSM about gas shortages. Interesting, not surprising...

Why the mainstream media is unresponsive.


art imitating reality?

Quid Clarius Astris
Ubi Bene ibi patria

Shortages......hmmmmmmm . I suspect you can buy as much gasoline as you want anywhere in the country if you are prepared to pay $10.00 a gallon for it.

I notice this is one reason given:

"But the shortages have not been caused by any lack of supply. Instead, fuel distributors say they are experiencing logistical challenges as terminal owners drain their tanks of MTBE-laced gasoline in preparation for the switch to ethanol blends. As a result, some retailers have had to wait longer than usual for deliveries and pumps have run dry in the interim — an outcome one distributor referred to as “ethanol hell.”"

Will this excuse be used if the shortages continue throughout the US summer?

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

The switch to none MTBE gasoline was last October I believe so i dont think there is much milage in that argument (no pun intended). I have no doubt there are supply problems due to logistics etc...but when North Texas or Virginia are paying the same prices as Chicago there will be no shortages, just the market at work I guess.

So PNM needs, as part of its gas IRP, to explain energy realities to

to architect Polyzoides. Especially about future natural gas supply.

May 17, 2007 Bank of Montreal disclosed Thursday that trading losses due to bad bets on its natural gas trading portfolio have surged to $680 million from its initial report of $450 million.

I forget where, but a site a frequent went one step further. BOM had a VaR (value at risk) of something like a 5. JP Morgan Chase has one at 82 or something. Multiply the numbers and this would be a loss of something like $10Billion had JP Morgan's portfolio imploded. One bank takes it all down.

Polyzoides is familiar with the necessities of peak oil, having known Jim Kunstler for 15 years. He, his wife and their firm have been leaders in green urbanism. That's why they have designed compact, walkable communities with transit, solar energy and other green features.

China Acquires United States in LBO/Private Equity Deal
(Rooters, Update 2)
Secretary Henry Paulson announced at the White House today a deal that will solve the U.S. current account deficit problem. China will acquire the United States in the world's biggest private equity deal. The value of deal was not disclosed, but BlackRock will receive Arkansas as a fee for arranging the incredible debt plus equity buyout. Arkansans will be moved to Oklahoma at the completion of the transaction. Paulson said during the press conference "I had no idea there was so much liquidity out there". The U.S. will adopt the Yuan as its national currency.

W: Not as far-fetched as one might think. Today the head of the Bank of Canada (David Dodge) gave a speech promoting the proposed Amero currency (which would be used by Mexico, USA and Canada) as an important competitor to the Euro. He mentioned that the main irritating "stumbling block" to economic integration and "efficiency" was the lack of total free movement of labour between the three countries! Might be a good time to brush up on the Spanish language training (if just to shoot the breeze with your next door neighbour).

Surely, considering the state of the dollar you should call your new currency the CanaMex? :-(

That aside, this is quite interesting. All occuring at the same time:

A hard Rouble (prior to trading in Euros)
A unified Gulf State currency (prior to trading in Euros)
An ASPAC idea of a regional currency based on the Yen or Yuan
Kuwait unhooking from the USD (prior to trading in Euros)
The now established Euro.

Why Euros?
Kuwaiti Princesses get more shoes per Euro than with a dollar...

Mmm... beneath all the froth of PO , GW, Mass death, the money men are working in concert.

Can your new man Burntcake print enough greenbacks?

It looks like someone isn't reading The Oil Drum. Don't they know all efforts are futile, and we are all doomed?! How dare they use 'technology'. A pox on them.

Coal-to-Liquids Plant is Considered

Sounds good, Keithster. We can just put a big ol' trash bag over the end of the tailpipe, capture that CO2 and take the whole shebang to the landfill!

Carbon sequestration on the cheap!

PeakOil Tarzan,
(certified genius)

Luckily for the planet I'm the only person on TOD who doesn't give a rip about CO2 piling up in the atmosphere if it means avoiding primativism.

Au contraire, Half. Go have a look at Chris Vernon's post on TOD:Europe today. It will warm your heart (if not your planet).

From my understanding, the whole 'coal is more limited than everbody thinks' idea that has been floating around the PO-aware web this year is based on the idea that lower quality (e.g., too high of sulfur or mining too difficult, etc.) coal won't be used...

However, the CTL report to which Keith linked is about using Illini coal... and that Illinois coal was one example used by the coal naysayers as probably not being used much in the future.

Which brings up the question of EROEI... if the energy return on dirty (and otherwise environmentally undesirable) coal via CTL or coal gasification is better than that of corn (or other non-cellulosic) ethanol, why would we expect that all the lower-quality coal won't be used?

I'd suggest that indeed the need for energy will drive the use of otherwise undesirable coal, through one means or another.

.. avoiding primativism..

You're trying to not be a monkey?

I know,
I'm a man.
But I can change,
If I have to,
I guess.

The problem will solve itself.
But not in a nice way.

Is that some sort of oddly constructed Haiku?


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

You could start with literacy.

Silly us. We forgot that the coal supply is infinite. Guess I can get that Hummer after all.

'It looks like the Nazis have discovered Tanis...

'There's talk of Fischer-Tropf leveling mountains, laying waste to entire regions.. An army that had CTL ahead of it would be.. unstoppable!'

'.. Marcus, I'm talking about a find of incredible economic value, and you're talking about the Environmentalists Boogeyman!'

I suppose I could have said 'The Nazis have discovered Tennesee', but that may have been construed as inappropriate..

Ha Ha.

The Fischer Tropsche Process had one energy input that is (not currently ) available to us:

Slave Labour.

Though it would seem the POTUS and VP are working on this (minor) oversight.

Best hopes for the continuation of the Constitution

(as Alan might say)

Dorme Bien.


This is billed as peak oil fiction.

It was originally posted at another website, where the author made some interesting comments, has now been moved to Blogger.

West Texas (El Paso), New Orleans setting. I think Alvarado Alvarez is supposed to be Bush. ???

Good for a laugh. Chapter Two was up at the other site before it was taken down, "for modifications, and because of a dispute with webmaster," according to author.

That is where the peak oil and debt issues begin to come into play in the story (I think the snow is supposed to be debt).

Great site! Been lurking for awhile, thought I would post this.

A Man in the Street

The reporter knew by now that he was talking about oil and refined product with someone who knows something about the business. He paused and thought for a moment. Then he asked, “So why is the price of gas rising?”

“The price of gas is rising,” said the Peak Oil correspondent, “because there are more people buying it than there are selling it."

"And there will be, for the rest of your life.”

Thus ended a random interview with a man in the street.

Until we meet again…
Byron W. King

I like Byron King's writings. Good stuff. I would guess that he reads TOD, because there were some pretty familiar themes that he covered during that interview. For instance:

U.S. refinery output is at its highest level in history. There has never been a time, since John D. Rockefeller first started buying up refineries in Cleveland back in the 1860s, when the U.S. refining industry made more product than in the past couple of months. Plus, the U.S. is importing unprecedented levels of refined product into the country, something over 10% of total demand. So the refiners are running flat out, we are importing tanker loads of fuel, and the demand trends are still rising. So there is where you get your rising price.


So the net effect is that in the past decade, refinery upgrades and expansions in the U.S. have added the equivalent of 10 ‘new’ refineries to the total base, and there is something like the equivalent of eight more refineries being ‘built’ via upgrades to existing facilities. This is why U.S. refinery output is at a record high.

Byron used to work in the oil industry before he bacame a lawyer, and his level of knowledge is such that he doesn't seem to need TOD. He might well be a reader here, of course.

Still, yes, I was thinking about your views, Robert, when reading his explanation in the "interview" of refinery related issues.

I only quoted the last paragraph because of its brilliant simplicity:

"...there are more people buying it than there are selling it.

And there will be, for the rest of your life.”

That's one to let sink in.

Yeah I thought that last comment was a classic.

I have to confess that I have no idea who Byron King is (I'm gonna google right now) but I thought the whole interview was non-stop genius

Interesting, but in some ways unfortunate. This means we will not have trouble consuming at least up to the current level of refinery capacity. We need to be on a downward path that will create overcapacity.

On the other hand, this pretty much puts to rest the usual canard that environmentalists are the problem.

Hello TODers,

Southwest Forecast: Expect 90 Years of Drought

Conditions in the southwestern states and portions of northern Mexico will be similar to those seen during a severe multiyear drought in the southwest during the 1950s and the drought that turned the Great Plains into the Dust Bowl in the 1930s.

Is Cascadia and other Northern Areas ready for an influx of 50 million people? Or will Earthmarines arise to protect their habitats from supermassive Overshoot? How will this dynamic resolve itself?

The lethal combo of quick-acting heat exhaustion and dehydration can diminish populations at incredible decline rates-- it is, by far, Nature's Supreme Grim Reaper. People will do anything to avoid this fate, but it is a time-tested tool for those scapegoating others.

Unfortunately, Death Marches have a very long and tragic history:


Peakoil Outreach and early mitigation is a far better choice to optimize the squeeze through the Bottleneck, IMO.

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

You will not have to wait for the drought in Phoenix.

It may just look like Iraq before you run out of water.

Scroll down to the "Mexico" section. :-)


Hello Musashi,

Thxs for responding. Yep, I have posted many earlier scenarios that echo the writings in your provided link. Even some highly speculative scenarios that are much worse.

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

On the positive side, Americans have stored up a lot of body fat in advance of peak oil.

Although that may turn out to be a negative...

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

Received this little gem in my e-mail today:

$4.00 per gallon?!

Dear MoveOn member,

As of yesterday, gas prices are the highest in U.S. history—we just passed the 1981 record, even adjusted for inflation.1 Prices could reach $4.00 per gallon in parts of the country, just in time to crimp summer vacation plans. As consumers suffer, the oil industry continues to reap the windfall—breaking profit records on an almost quarterly basis. It's outrageous!

Enough is enough. Hearings start today on H.R. 1252, a House bill that would make gas price gouging a federal crime, punishable by 10 years in prison. Speaker Pelosi has said she'll move the bill to a vote this week—if there's the two-thirds majority required to fast track the bill through the process.2

Oil company lobbyists are frantically trying to stop the bill. Your representative needs to hear from you today. Will you sign our petition asking Congress to pass the price-gouging bill—and then send it to your friends?

"Gasoline price gouging should be made a federal crime before the summer price increases hurt more American families."

Rep Bart Stupak (D-MI), sponsor of the House bill said this of his motivation to introduce the legislation:

"In April ... crude oil was $7 a barrel cheaper than last year (but) gas prices were almost 50 cents a gallon higher. Clearly there's more at play than simply the world crude oil market."3

In April, more than two-thirds of Americans reported that their gas bills were causing financial crunches, with a full third saying it was having a "serious" impact on their families.4

That same month, the top two US companies, Exxon-Mobil and Chevron-Texaco, announced a combined $14 billion in first quarter profits.5

It seems like even the oil industry has gone too far this time, and it's time to balance the scales. The Senate passed a price-gouging measure out of committee last week, and the House bill now has over 100 co-sponsors from both sides of the aisle.

The oil industry is nervous. They've sent their lobbyists to the Hill in full force to stop—or at least weaken—these bills, and they're pulling out all the stops. The American Petroleum Institute, an industry front group of more than 400 oil and gas companies, even threatened that new laws could increase gas prices more.6

Enough is enough. This summer, we can stop Big Oil from profiting at the expense of American families. Can you sign the petition to ask your representative to make gasoline a price gouging a federal crime now?

Don't forget to pass it on to your friends—this week is an historic opportunity to send Big Oil a message that we've had enough.

Thanks for all you do.

–Ilyse, Natalie, Eli, Tom, and the MoveOn.org Political Action Team
Tuesday, May 22nd, 2007


1. "U.S. gas prices jump more than 11 cents," Atlanta Journal-Constitution, May 21, 2007

2. "Debate on [H.R. 1252], offered by Energy and Commerce Oversight and Investigations Subcommittee Chairman Bart Stupak, D-Mich., will kick off Tuesday with a hearing in Stupak's subcommittee. It is possible that an Energy and Commerce markup will follow. But Democratic leaders might opt to bring the bill up to the floor under suspension of House rules by Wednesday."
Excerpted from National Journal's Congress Daily, Monday, May 21, 2007

3. "Lawmaker Links Gas Prices to Investments," Houston Chronicle, May 16, 2007 http://www.chron.com/disp/story.mpl/ap/fn/4810598.html

4. "As Gas Prices Rise Again, Democrats Blame Big Oil," Washington Post, May 11, 2007 http://www.moveon.org/r?r=2591&id=10386-2885429-uaw4Tv&t=6

5. "Lawmaker Links Gas Prices to Investments," Houston Chronicle, May 16, 2007 http://www.chron.com/disp/story.mpl/ap/fn/4810598.html

6. "Lawmakers' blood pressure rises with prices at the pump," TheHill.com, May 17, 2007 http://www.moveon.org/r?r=2586&id=10386-2885429-uaw4Tv&t=7

Boys and Girls can you say "Windfall Campaign Cash".
I bet they are falling over backwards with pockets full of contibutions....But how in the world do you spin this(seriously) -
I can't see anything they can say other than we will invest 100% of our profits into increased refining and not doing it (probably a bad idea) OR invest in commuter rail. I thinks its time for these guys to pick a direction imho. Better to invest than loose it. Better you invest it than they waste it.

I got one of these too. I signed up as "Dawn Davenport" and gave them SUCH a tongue-lashing in the comments section.

Yes, well, I also went to the trouble of trying to send them some reasoning and links. Hope they listen, as they claim to.

Notwithstanding the refinery problems in the US, IMO the decline in world crude oil production since 5/05 is having a negative impact on the availability of refined products worldwide--plus the far more important Export Land effect on refined product supplies.

Since ExxonMobil and CERA have promised "trillions and trillions" of barrels of oil, the outrage at rising gasoline prices is actually semi-justified, based on pronouncements of energy abundance from the "experts." If we don't have to worry about Peak Oil for decades, the decline in crude oil production must be the result of a "conspiracy."

I think that the failure of the oil industry to embrace the Peak Oil concept and its failure to push hard for measures to reduce energy consumption (like an energy consumption tax, offset by cutting the US Payroll Tax) will go down in history as an epic mistake.

And yet I still don't get the original post. Once MoveOn has their way - and I think they will get something like it, as 2008 is an election year - severe physical shortages will develop as other parts of the world outbid what will have become the price-controlled USA. So right now, they still have it easy - they drive as much as ever even as they whine and grumble along the way. But just how do these morons expect to get to work when they have succeeded at replacing "expensive gas" with "No Gas"? Take the bus? What bus?

As to the industry's epic mistake, the alternative would be to paint a bullseye on themselves for every demagogue Congresscritter to shoot at now, rather than later. I see no particular incentive to make the, er, target date earlier. No matter what they do, they lose. (And there may well be trillions and trillions of barrels...but who's saying at what quantity of $ and joules, per barrel/day?)

Hello TODers,

Posted below is a copy of my recent email to the Professional Golfers Association [PGA] at this contact address: 2007seniorpga@pgahq.com

To the PGA: Request for PGA Public Relations Leadership

Thank you in advance for considering this message.

I have been deeply concerned about the depletion of fossil fuels, other vital resources, overpopulation, and global warming for a long time. As you are probably well aware: mainstream media sources are reporting on these topics with increasing frequency.

I respectfully request for the PGA to take a prominent public relations leadership position promoting thoughtful mitigation to ease and optimize the challenges ahead. To assist your organization in education, please study the following websites:

TheOilDrum.com, EnergyBulletin.net, LifeAfterTheOilCrash.net, Peakoil.net, and Dieoff.org.

There are now many books, fact-based video documentaries, accomplished speakers, and numerous other blogs and websites available to further bootstrap PGA member education.

Sometime ago, I emailed the websites of Tiger Woods and Phil Mickelsen: asking them to become major media stars leading the charge to convert golf courses to urban and suburban community vegetable gardens. Unfortunately, I have yet to receive a reply.

If the PGA was to undertake the very minor sacrifice of plowing up only Augusta National: the entire world would instantly become aware of the seriousness of our present global trends. I believe that this final tournament could be media publicized as a 'PGA MasterStroke for Change'.

This generous, but transformational act by the PGA could potentially save millions of childrens lives in the generations to come. I am sure the professional golfers love their children just as much as any other parent; they too want nothing less than a peaceful, healthy, and thriving planet Earth for their offspring.

Unfortunately, many scientific experts believe time may be soon running short; that timely mitigation is becoming a critical need. Please study the world-class writings of James Hansen and Robert Hirsch.

I am a blog participant of TheOilDrum. I will post a copy of this letter there for further discussion by our thousands of worldwide members. We will be anxiously awaiting your official PGA reply to be posted there soon. Thanks again for your thoughtful consideration of what lies ahead for all of us.

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

Master Stroke (sic) for greener greens.

How about lining the fairways with thousands of those white eggplants? That would surely make the game more interesting whenever a ball lands in the rough!


HI Bob,

Well...some thoughts. (BTW, I support your efforts and glad you share them.)

My 2 cents: I'd say, just about everyone is aware that children are starving in the world. My guess is, these folks don't have much clue about how to prevent it, and further, if they start to think about it, then immediately wonder how saving some starving children can prevent new ones from taking their place(s).

So, I'm not sure that just adding one more reason to give up their wealth will spark their interest.

Also, my guess is that these folks already contribute some fraction of their wealth to charity, and thus feel their duty fulfilled.

My guess is, they'd have to be led by the hand through a scenario of their personal consumption, say, food consumption. (As explained in Pollen's books, Heinberg's essay on farmers, etc.) In other words, "Do you know where your food comes from? What will you personally do when the grocery shelves are only half-full?"

In addition, they would need a suggestion about how to make money. Right now, they either play the game, or profit in some way from the players.

How could they possibly make this much money otherwise?

In fact, I'd say, your appeal to their own children's welfare makes them want to keep on golfin'.

It's not exactly about the dots. It's about connecting them.

I don't know where we go from here. I just thought I'd share this much.
--------------- Okay, well...

Perhaps some suggestions about converting to solar; about donating some fraction of proceeds to farmland conversion to organic; some changes in the game, that perhaps incorporate some more "sustainable" practices in how it's set up...or, "Carpool to the tournament and win a free pass". Bicycle-powered carts? (More golf, less war in the Gulf?)

Robin West, chairman of the energy consulting firm, PFC Energy, makes recent statements in relation to "above ground" peak oil.

May 10, 2007 Financial Times, "The concern is not that the world is running out of oil, but rather it is running out of oil production capacity".

Another warning, in relation to potential underinvestment, May 14, 2007 Newsweek, "The world is not running out of oil, but it will run out of production capacity if the national companies, the new rule makers in this business, don't invest."

click picture to play Robin West OPEC Sept 2006 Interview "Energy is not infinite" - 2 minutes

Does anyone know where I can get energy consumption statistics for pre 1965? The BP numbers don't go back any further than that.


ORNL.gov has a time series by nation (some back to 1800s) for carbon emissions. Fuel by solid, liquid & gas. Tonnes of carbon vs. fuel, but this can be adjusted for (use ratios in 1965 and compute back).

Had bookmark on now sick computer.

Hopes, this helps,



I'll parse the data in the morow...

front page here in NC

New Home Sales Prices Rise 14%

The number of new homes sold is up 4.6%. Median existing home prices up 6.25% and number of homes sold up 3.2%.

W: The RE market is also red hot here in Toronto.