DrumBeat: July 17, 2007

Coffeyville refinery shut to Sept, debt rating cut

Independent U.S. refiner Coffeyville Resources' debt ratings were cut on Monday as an industry source said the company's flooded Kansas refinery was unlikely to restart until early September.

Moody's Investors Service pushed Coffeyville's corporate family rating deeper into speculative territory, cutting it from B2 to B3 amid uncertainty over the losses Coffeyville faces from the shutdown of the refinery and an associated oil spill.

In The Petri Dish: The Plight of our Energy-Sucking Species

When the energy runs dry, all of the systems we have so carelessly created to gulp that energy down will be worthless. We can build tiny houses (less than 100 square feet), rip up our lawns for edible estates, drive a Prius, sell carbon credits on the Chicago climate exchange, or refocus our energy policy on biofuels and ethanol, but as Wes Jackson from the Land Institute argues, “We aren’t going to invent or grow our way out of this thing.” No amount of human innovation can stop the ensuing ecological destruction. To even begin to do that, humans will need to cut their energy use in half, in just ten years.

Japan nuke plant reports slew of problems - Thousands evacuate quake zone day after radioactive water spills into sea

A nuclear power plant near the epicenter of a powerful earthquake suffered a slew of problems, including spilled waste drums, leaked radioactive water, fires and burst pipes, the reactor’s operator said Tuesday — more than 24 hours after the tremors struck northern Japan.

The problems at the Kashiwazaki power plant and the delays in acknowledging them are likely to feed concerns about the safety of Japan’s 55 nuclear reactors, which supply 30 percent of the quake-prone country’s electricity and have suffered a long string of accidents and cover-ups.

Big Oil's impact on research is debated

The oil industry has committed more than $700 million to alternative energy research at three Northern California universities, prompting debate over how commercial interests might shape the direction and results of scientific advances.

Lawmakers fail to act on NYC traffic plan

State lawmakers failed to adopt a measure yesterday to allow New York City to charge fees to cars and trucks that drive into the Manhattan business district during business hours.

Kenyan fury at threat to organic trade

Poor farmers could lose their livelihoods if the UK approves a ban on air-freighted imports.

New Process Promises To Reduce Costs Of A Clean-coal Technology

Scientists in China are reporting an advance in clean-coal technology that could substantially reduce the cost of producing clean-burning fuels from underground deposits of coal.

The Sins of Affluence

Two prominent liberal thinkers offer impassioned critiques of modern capitalism — and solutions that are the policy equivalents of bake sales.

Venezuela: Idea of 'energy security' in U.S. is fantasy

Energy security is one of the major policy issues facing the United States. The debate in this country, however, has been framed solely in terms of whether the United States has adequate supplies of reliable and affordable energy to meet its substantial needs. While certainly a component of energy security in its narrowest sense, it really misstates the issue, making it difficult, if not impossible, for the achievement of real energy security. Unfortunately, the United States is missing the opportunity of gaining a more integrated, robust and durable energy security not only for itself, but also the entire hemisphere, and, more generally, the world as a whole.

The Richest of the Rich, Proud of a New Gilded Age

Only twice before over the last century has 5 percent of the national income gone to families in the upper one-one-hundredth of a percent of the income distribution — currently, the almost 15,000 families with incomes of $9.5 million or more a year, according to an analysis of tax returns by the economists Emmanuel Saez at the University of California, Berkeley and Thomas Piketty at the Paris School of Economics.

Such concentration at the very top occurred in 1915 and 1916, as the Gilded Age was ending, and again briefly in the late 1920s, before the stock market crash. Now it is back, and Mr. Weill is prominent among the new titans. His net worth exceeds $1 billion, not counting the $500 million he says he has already given away, in the open-handed style of Andrew Carnegie and the other great philanthropists of the earlier age.

Decline in light oil forces rethink

LIGHT oil production is already in decline, except in the reserve-rich Middle East, forcing consumer nations to utilise unconventional resources such as heavy oil, sour crudes and natural gas liquids.

Geological constraints, although not the only reason, seem to have affected production levels in most of the main basins outside Opec, providing little comfort to those who hope a supply crunch can be averted.

Analysts at Barclays believe that mature basins outside Opec will be the biggest cause of a supply crunch:

“One of the key dynamics of non-Opec supply in recent years has been its ability to massively disappoint,” Barclays says.

“We believe that the main culprit is the dynamics of mature production, and this year it has been most evident in Mexico and Norway.”

US Petroleum Industry Draft Sees Energy Demand Soaring

Houston investment banker Matthew Simmons takes a pessimistic view. He believes the world should be preparing for sharply lower oil production. He points out the NPC study didn't squarely address one important issue raised by Mr. Bodman in requesting the study: the point at which global oil production will plateau and then begin to decline, often referred to by the shorthand term "peak oil."

"We should be preparing for a time when, in 10, 15 or 20 years, oil production is likely to be 40 million barrels a day to 60 million barrels a day, not 120 million," he said.

Iraq Parliament May Take Months to OK Oil Law - Minister

The Iraqi parliament could take months, not weeks, to approve a controversial hydrocarbon law sent by the central government in Baghdad to the legislature on July 3, an Iraqi cabinet minister said Monday.

Mexico must improve rebel sleuthing - Calderon

President Felipe Calderon urged lawmakers on Monday to beef up Mexico's police intelligence, warning that security forces have no way of predicting further rebel bomb attacks on fuel pipelines.

Gulf investor unveils China energy plan

A Bahrain-based developer announced a US$5 billion (euro3.6 billion) plan Tuesday to build a business center for the oil industry in suburban Beijing, highlighting China's growing ties to the Middle East and its booming energy market.

Will the USA Invade Canada?

Canada is now considered an unimportant good neighbor by the superpower to its south. A recent effort to create a “North American Union” (NAU) with Canada, the USA, and Mexico is a semi-secret effort by industrialists in these three nations. The goal is similar to the “European Union” in that it would allow low-cost Mexican labor and abundant Canadian energy reserves to fuel the huge industrial machine of the USA and create the world’s greatest economic power. The 1994 North American Free Trade Agreement (NAFTA) is the cornerstone of this union.

Few Americans know that Canada is the leading source of imported energy to the USA. They are the biggest source of foreign oil, natural gas, uranium, and even electricity. As energy costs recently doubled, Canada is becoming wealthy, at the expense of its southern neighbor. This has weakened Canadian support for a NAU. The obnoxious foreign policy of President George Bush has nearly derailed it.

South Africa: Protesters arrested for causing disorder in township

SEVEN people have been arrested in KwaNokuthula outside Plettenberg Bay after about 80 protesters ran amok, burning down the transformer at an electricity sub- station in the area.

Argentina: New Energy Policies?

The Industrial Union of Argentina (UIA) said last month that the country's current energy crisis has hurt some 5,000 businesses through restrictions on the supply of gas and government orders to reduce electricity consumption. Will the toll of the energy crisis on Argentine industry be the catalyst for new policy initiatives to attract investment and boost energy supplies? What steps will President Nestor Kirchner take to address the crisis?

Pakistan: Nepra divided over wind power tariff increase

A rare opposition from the National Electric Power Regulatory Authority (Nepra) to an increase in tariff allowed to a wind power project has triggered a debate whether all the demands of investors are being accepted in finalisation of new energy contracts amid acute energy shortages.

Stalling on fixing the price of gasoline

High fuel prices take a toll on our daily lives in so many ways, and Congress has the responsibility to do something about it, rather than just wax poetic. Instead of helping consumers by expanding our refining capacity or increasing our available energy supply, Congress has yet to enact meaningful legislation that will result in lower energy prices.

Report: Demand to outpace crude supplies

Conventional crude oil supplies won't keep up with growing global demand in the next 25 years and other fuels from ethanol to liquefied coal and oil from tar sands will be needed to close the gap, says a draft oil industry report.

The draft report by the National Petroleum Council, an advisory group to the federal government, is unusual in its emphasis on the need for a broad range of supplemental fuels and conservation to meet future petroleum needs.

The End of Cheap Oil?

The resurgence of resource nationalism bears a good bit of the responsibility for the glum oil supply projections-what I've previously called "political peak oil." Seventy-seven percent of world oil reserves are owned by national oil companies. Unfortunately, national oil companies are located in technologically backward countries without access to world-class production expertise and adequate supplies of capital. As the IEA diplomatically puts it, "Often political and social spending needs grow to the point where oil exploration and development investment is compromised, in turn reducing oil and gas exports." And this is happening. Major oil producers such as Venezuela, Mexico, Russia, and Iran are using oil revenues to bribe their people and not investing enough to maintain future oil production.

Group calls for action on energy

Daniel Yergin, chairman of Cambridge Energy Research Associates and one of the leaders of the study, expects when people read the report "there will be some surprises" and predicted the study will "shift the framework of the policy debate in the United States."

Deron Lovaas, an energy analyst with the environmental group Natural Resources Defense Council who worked on the study, said the report reveals real tension, with some portions containing "impressive ways to break our carbon and oil addiction," while others recommended "the same old, same old ... a search for more drilling and higher pollution alternatives."

Matthew Simmons, chairman of Houston-based Simmons & Company International, has long voiced concerns that the world oil and natural gas production will not so easily keep up with demand.

Simmons called the report, with its assurances that there will be enough energy resources, a "codification of energy conventional wisdom."

Oil Supply Crunch Stems From Unexpected Side, North Sea Under Pressure

Unexpected troubles seem to be hitting the global oil market and pushing up crude oil prices; however, not from news surrounding the Middle East but from one of the minor supply regions, the North Sea. Norway’s crude oil production has been at one of the lowest levels since 1994, another major setback to production in the North-West European region.

Raymond J. Learsy: The Energy Solution That Dare Not Speak Its Name

The level of self satisfaction among the oil industry players was palatable as if to say "We got the oil, we are going to get ever higher prices for it, and we even have a good story to go along with our bubbly good fortune. And to top it off everybody thinks we're good guys." As Phillip Verleger, the noted oil economist put it in an Aspen Idea's seminar, that oil prices are on the march to triple digits and not with a "1" as the first number, and all that within five years. The oil folks at the session could hardly contain their ear to ear smiles.

U.S. official calls Japan's nuke spill minor

The U.S. nuclear agency says a fire and spill of radioactive water at a Japanese nuclear power plant triggered Monday by a deadly earthquake posed minor problems and did not amount to a significant atomic incident.
(Interesting comments. I don't know what's sadder, the anger over the high electricity prices we Americans supposedly pay, or the shock at the suggestion we cut back.)

Somali PM says he is 'not aware' of oil deal with China

Somalia's interim prime minister said in an interview published Tuesday that he was not aware of a deal struck between Chinese energy companies and his government allotting them oil exploration rights.

Ali Mohamed Gedi's comments were interpreted by the Financial Times as signalling a potential internal power struggle within the Somali government, reporting that it had seen a document signed by Somalia's president granting two officials power of attorney to sign a production-sharing agreemeent with the Chinese state companies.

Copper Thieves Die Trying

Most copper thefts are nuisances, such as a recent rash at a Maryland youth baseball park that has left Little Leaguers without lights for night games.

But increasingly, thieves are turning to the highest-quality sources of copper -- power substations, utility poles and electrical boxes -- and turning over the easy-to-recycle wiring to scrap dealers.

OPEC countries ignore West's agenda

American drivers wince as they pull up at the pump to pay $3 and more for a gallon of gasoline.

Our leaders respond by asking OPEC to produce more oil. Congress passes a ludicrous bill making it illegal for oil-producing countries to manipulate prices by withholding "our oil" from the market.

Washington apparently didn't note the recent statement of Saudi oil executive Sadad Al-Husseini: "There has been a paradigm shift in the energy world whereby oil producers are no longer inclined to rapidly exhaust their resource for the sake of accelerating the misuse of a precious and finite commodity.

This sentiment prevails inside and outside of OPEC countries, but has yet to be appreciated among the major energy-consuming countries of the world."

An ill-equipped military raises doubts about future

In retrospect, of course, it seems obvious that free market individualism would triumph and because of this we tend to forget some other vital props that helped the US on its way.

Perhaps the most vital of these were the raw materials of the American continent particularly oil. It's easy to forget that easy access to the gushing geysers of a viscous, oozing black liquid were vital in propelling the US to its current position in global hegemony. Unfortunately, over the past decade, that flow has begun to slow. Although there is still quite a bit in the Gulf, and in Alaska, it is increasingly more difficult to get at and it is getting scarcer. Regardless of where you stand on concepts like "peak oil" (the idea that oil is a finite resource and already running out), no one can argue that the US is becoming increasingly reliant on the flow of oil from other parts of the world producer states like Iraq.

On the Precipice: Energy Security and Economic Stability on the Edge

Just under the radar of general public visibility a campaign has been waged for the past five or six years by geologists, scientists, economists, and former oil company executives to educate and inform all who would listen concerning serious supply issues related to the world’s primary energy source: crude oil. Like most people, I had never heard of the term “peak oil” before 2003, and had not given any thought to the possibility of what might happen if the supply of oil were to plateau and subsequently decline. After reading literally hundreds of sources on the subject and interviewing some of the key figures in the field, my eyes were indeed opened.

Kremlin finds renewed power from oil

Flush with oil and gas wealth, Russia has acquired the economic might to inflict punishing wounds on British interests - if it so wishes.

UN head: US should be at climate meeting

Secretary-General Ban Ki-moon said he will ask President Bush on Tuesday to have a top U.S. official attend a high-level U.N. meeting on climate change in September because "American participation is crucially important."

A new Round-Up has been posted at TOD:Canada.

North American integration is making the news again on both sides of the border, and on the other side of the Atlantic. Meanwhile, another large Canadian company - Alcan - becomes the subject of a takeover some describe as a symptom of Canadian economic suicide. The natural gas drilling crash affects Baker Hughes, the Chinese feel unwelcome in the Alberta oil patch and concerns are raised over the safety of LNG terminals in Québec.

In the US the subprime credit market problems are beginning to snowball, while the folly of relying on sophisticated risk analysis models based on the 'data' from 'liar's loans' becomes apparent. Wall Street's ability to value assets is called into question, the lawyers begin to get in on the act and the US tries to sell mortgaged-backed securities to China.

Oil futures market in backwardation

While listening to CNBC this morning, the NYMEX floor reporter was commenting on the recent run up in the price of crude oil. She stated that the oil market was in “backwardation”, and this meant that this was a ”demand driven market”.

This shocked me because only about a month ago I did an Excel chart of the current and all future contracts and the market was purely a contagion market all the way out. Prices of the further out markets ran up gradually, hitting a peak about a couple of years out then gradually declining, but never down to the current price of the closest contract.

So I ran a chart of the current market and sure enough, it is now completely in backwardation. Only the September contract is higher than the August contract, which expires this week. All other contracts are lower with the lowest contract, December 2014, at $72.25.

I find this very significant. The current price is up around the world because a shortage of supply is driving the market. The current price is what buyers are having to pay to get oil. The futures price is what traders expect the price to be at in the future. They could be very, very wrong in that assessment, and I believe they are. But the point is, the current price represents actual demand and because it is worldwide, not just local, that cannot be denied.

One more important point. Last year, and the year before for that matter, the price of oil had about a $20 terror premium built in, (more or less). But any terror premium is reflected far more in the futures contracts, six months to a year out, than in the spot price or the price of the near term contract. That is, traders expect something might happen in the future to push up the price of oil. Now traders are far more relaxed about the future, expecting prices to drop. Therefore I conclude that the current price of oil is far more reflective of the current availability of supply than it has been in recent years.

Edit: One point I forgot to add. OPEC meets in September and it is likely traders expect them to increase production then. And when the don't??? Look out, the preverbal excrement will then hit the fan.

Ron Patterson

The traders may be anticipating demand destruction due to the the upheaval in the credit markets.

If that were so then that same expectation would be reflected in the equities market. It quite obviously is not because the market is currently at an all time high.

The stock market reflects what traders expect in the future. They obviously expect all smiles and sunshine for the economy in spite of what is happening in the credit or housing market. They expect oil prices to fall and they expect the economy to continue to boom.

Ron Patterson

Expectations for stocks and bonds don't have to coincide. Investors may be pushing stocks to a new high as they try to get out of the debt markets - out of the frying pan, into the fire (this autumn IMO). They may still be anticipating that credit tightening could reduce the speculative gloss on oil. IMO the oil price will tank, along with most other asset classes across the board, when the markets finally fall.

Expectations for stocks and bonds don't have to coincide.

Gad, how could you possibly be more wrong? Expectations of the stock market and bonds always coincide. People move into the credit market when they expect equities to fall and vice versa. That is the way it always has been and until the market dissolves into chaos, that is the way it always will be.

That is, if investors expect a greater return from bonds than from stocks, the money will move their investments into debt instruments, both of the government and industrial variety. This always happens when people expect the stock market to fall. But if they expect the equities market to keep on booming, they will move from bonds to stocks, causing interest rates to rise as debt instruments must compete with equities for the investment dollar.

That is exactly what is happening right now. Interest rates are rising as they try to compete with the stock market. You might note that existing debt instruments are falling in price. This is because the price of an existing debt instrument must reflect the current interest rate regardless of the interest rate the instrument was issued at. That is if a $1000 bond pays 4%, then that bond must drop in price until that 4% is really 5% if 5% is the current going interest rate. Of course other things must also be considered like the amount of time until redemption date, at which time the bond will be worth exactly $1000, no more, no less. Your local broker will give you the formula for this and I am sure it can be found on line.

All this is covered in Economics 101.

Ron Patterson

Why is the word "investor" used when it's very clear the proper word is "speculator"?

Karlof1, traders in commodities as well as day traders and short term traders in stocks and bonds are usually referred to as speculators. However, by a wide margin, most equities as well as bonds, the buyers and sellers are usually investors. If you have a mutual fund then you are an investor. If you hold a stock or bond for over six months then you are referred to as an investor.

Clearly it is a matter of semantics but by a very large margin, most equities are held by investors and institutions owned by investors. Of course it probably would be better to say "investors and speculators" but if one chooses to use only one word, concerning equities, then investors is the better word.

Ron Patterson

institutions may be long term investors, but shorter term price trends have increasingly been set by hedge funds and (per Bill Cara) HB&B- humongous banks and brokers, i.e., the goldman sachs of the "investment" world. stock margin is at an all time high on the NYSE, yen carry trade is enormous, derivatives growth is exponential, etc, etc, this is the engine of speculation. currently there are so many exponential blowoff stock charts it boggles the mind! the rational mind that inhabits TOD would probably agree that financial markets are and have been in a speculative frenzy. further, if inflation is running around 5% which even the Economist asserted, then longer term u.s. treasuries hold no value currently, particularly given the public statements of weimar ben.


karlof - I guess that taking money from under the mattress is speculating!

karlof, i "get" your post. given the current stock market bubble, it would appear that these "investors" are mostly of the greater fool variety.


Although I thoroughly enjoy reading your contributions to the threads, I do not believe that your bond vs stock assessment is entirely correct.

There are times when stocks and bonds rally together, as in a time of 'soft landing scenario' expectations (Jun '06- Nov '06). There are times when bonds sell off and stocks rally ('99, '87- through Sept, '07). Here are two graphs, sorry i don't have better examples:


I also believe that the future of bonds is venturing more into uncharted water as it is in the best interests of our largest trading partners (China, Japan, etc) to recycle dollars back into the 'system' to enable their trade surpluses to continue. I believe that to be the lynchpin in the fragile balance as opposed to the theoretical 'investor' who switches between stocks and bonds.

Also, the market is ruled by funds who largely do not switch between stocks and bonds until the 'investor' redeems, and my experience has been that investors switch to bonds After stocks decline/begin declining.

dVincent, what you say is often true but it is the exception rather than the rule. That is, the market will often move up despite rising interest rates. When this happens there is usually something else, something very bullish moving stocks.

Traders watch interest rates like rabbits watching a hawk. Witness the market everytime the Fed raises or lowers interest rates. When the announcement is made, sudden spikes usually mark his decision.

The stock market just loves low interest rates. This means credit is very easy to get meaning people will be buying houses, cars and all kinds of stuff. But if money gets tight, the housing market drops off, profits drop off and the market will plunge.

But of course all these things take time. In the short run, anything might happen. But in the long run, stocks and interest rates move in opposite directions.

Again, the market can move up in the face of rising interest rates but it does this despite the rising rates and not because of them. And if interest rates continue to rise this will eventually have a devestating effect on the market.

Ron Patteson


Well, for every 100 people there are 100 theories. Mine is: If there is no cost for money, i.e., a zero interest rate, you will eventually get deflation. This is because it costs a business zero to borrow and expand. So, overcapacity of all material things occurs. See, e.g., Japan for the last 15 years.

I agree, and am afraid rates will continue to rise despite all MSM market gurus that expect rates to fall. We are in the early innings of a structural shift away from high investment flows into financial assets and little into hard assets (rig construction, mine expansion, etc.) The cycle historically continues for over a decade and is accompanied with higher interest rates. This time it is likely to be the end game.

Regarding your comment on the next OPEC meeting (Sept) ... the call has gone out for more crude (IEA) and the backwardation of the oil curve expecting more crude from OPEC, what a meeting that will be!

I was about to post a question to the board and this seems like a reasonable place to put it. I'd like to get peoples opinions on the apparent disconnect between oil prices and the stock market. The DOW just hit 14k, and at the same time oil is up .70 this morning to almost $75. It seems to me that cost has to be absorbed somewhere, either with the consumer or the companies bottom line. So why is the DOW hitting new records with oil so high? Thanks in advance.

Shawnott: Both the Dow and the price of oil will rise in resonse to increased liquidity (M3) and a fall in the value of the US dollar. If the US dollar had kept its strength against the Cdn dollar reached in 2002, oil would be priced at $47. Needless to say, the Dow hasn't set any records when priced in Cdn dollars (or many other currencies).

This yet another piece of the puzzle (big picture) why I think that there will be an large jump/switch in oil pricing sometime soon(=next couple years outside).

Followed by many other ugly things...petro-currency switching, military muscle flexing or worse, recession(s).

The M3/monetary inflation can only do so much before other countries begin to bail. Like Russia and Iran, others will have to follow eventually.

And so the new Rome falls. (Nostradamus anyone)

I think people seem to be forgetting that almost every developing and industrialized country in the world is inflating their money supply. Its not just the US!

Sure enough. And they will all likely pop too.

But the US is a world leader...not to let us all down, they will likely POP first!


Does this illustrate your point BrianT?

It's kind of hard to see but the blue line is the Canadian Dollar in relation to the US dollar and the red line is the Dow. The Dow returned 2.36% in dividends during this time and a daily interest Canadian bank account did about 3%. So I guess for foreign investors it would have been good to sock your money away in a sleep easy ING account.

Piggly: Nice chart. Interesting that the Dow is exactly where it was 5 years ago (in Cdn dollars).

Brian, I agree.

Ever since Nixon did the "Bretton Woods" thing back in 1974 and got us off the gold standard, we have been able to print however much currency it takes to make everybody's "earnings" numbers look good and keep everyone happy.

What miffs me off quite a bit is that the government considers any numerical increase of my retirement savings to be "income", while failing to recognize the dilution of value of my held dollar due to dilution of its value as a loss.

Here's a quickie chart from Seeking Alpha ...

I guess many may be surprised to find even the Mighty US Dollar is also simple fiat currency, printed at will, to cover obligations.

Unlike oil, there is an infinite supply of dollars. We can print as many as we can spend.

Shawnott, I just heard this explanation of this apparent contradiction on CNBC. As previously oil and stocks moved in opposite directions because of shocks to the supply like Katrena and other things. People feared this would cause shocks to production and delivery of goods. This time it is entirely different. Oil prices are rising because of very strong global demand, caused by very strong global economic growth. Again that is not my explanation but the one I just heard on CNBC.

At any rate the stock market reflects expectations! It does not reflect the current situation except to the extent that the current situation influences future expectations. The price of oil is currently influencing the economy but not to any dramatic extent. People expect oil prices will fall, but not by very much. They obviously expect the stock market to continue to rise. And as noted above, the oil market is in backwardation meaning traders expect oil prices to fall in the future.

Expectations do not necessarily reflect future reality however.

Ron Patterson

Think of the stock market as the floor drain in a slaughterhouse. The blood comes from an ever increasing supply of cattle (money). The fed has quit posting the M3, the primary indicator of money supply, because they are printing money as fast as they can. This money has to go somewhere. I can tell you that is no longer going to the housing bubble. It has never gone to the people who actually need it, the poor and lower middle class or even the middle class. It goes to the rich. The rich are already rich, but they are greedy monkeys and they will never turn down practically free cash. So, they park their money in the stock market.

Meanwhile, the plunge protection team, using Uncle Sam's printing presses buys up the market whenever it looks like it is about to tank. For a prime example, look at GM. It is essentially bankrupt, yet its stock continues to hold and even rise. This constant infusion of cash into the hands of the rich is exactly what is levitating the markets.

We essentially have a Zombie Market. It is the undead market. How long can this last? As long as people continue to believe that the US government gives a rat's ass about the people. As long as the rest of the world will let the US get away with it. (there are signs that the rest of the world has had it with supporting the US's free ride. Once the oil producing countries decide to quit accepting the dollar, you will see the value of the dollar collapse.) When this happens, all the funny money in the stock market will flee en masse to countries with stable currencies (if there are any). Of course, these countries will demand far more dollars than they would yen or other currencies to buy equivalent stocks, bonds and currencies. It will be pretty much like Weimar Germany's hyperinflation with dirt poor millionaires buying loaves of bread with wheel barrows filled with cash.

If we had not shipped most of our major industry overseas in a fit of greed and stupidity, we might be able to recover in a relatively short time. But, we cannot time travel and kill off the moronic, greed-head traitors who saw fit to gut the heart of America. We are stuck with their evil works. When we can no longer afford to buy our cheap crap, haute couture, common tools, shoes, medical equipment and everything else necessary for life from China, we will find ourselves scrounging for clothes, food, shoes, shelter, and clean water. We will end up like so many people living on the fringes of capitalist society, like people in Manila and Guatemala City. We will be digging through our garbage heaps looking for a pair of shoes, for clothing, for anything still viable and we will starve.

So, to continue the image from above. The blood swirling down the drain is the life's blood of our country. It is your future, your children's future and their children's children's children's future. It will mean the effective destruction of the US.

There are rough times ahead. The neocons on the site will pop a vein about what I've just said because they are the cause of this coming misery and they are just beginning to realize it at a basic level. Some of those cretins will do the right thing and grab their right to bear arms luger and blow their brains out. Others will see it as an opportunity to profit from our destruction. And the vast majority of them will continue to believe their own BS because they had to be awfully stupid to believe the claptrap to begin with. And they will fight to the death to preserve the right of the rich to ruin our country, rape our environment, and enrich themselves at the expense of the hoi polloi.

The blood swirls counter-clockwise and we keep standing knee deep in our own blood.

And why do you believe, that only USA is going to tank? Why should For example Europe manage it so much better?

You may want to notice my parenthetical remark about stable currencies. (if there are any)

Yes, there could be global meltdown. I can hardly see that as a good thing or even a different thing as far as the US's collapse is concerned.

I suspect that the US will be the first to fall. If others fall as well, ho hum. Welcome to the club.

Or, as Vonnegut says, so it goes.

The US first? I'm not so sure. The dollar is not available for carrying at 0.5%. If Japan would raise its interest rates, which it will have to at some point, the Yen would be dead in the water, the carry traders would be forced to jumo ship real fast. That's a mighty fine conundrum in Tokyo. Dead if you do, deceasad if you don't.

I'm guessing the blast will start in Asia. Could be Japan, or Shanghai, or even somewhere smaller like Thailand, rippling through to bigger markets.

Will Japan Destroy The Yen To Save The Dollar?

As rising prices become impossible to ignore, perhaps the Japanese will borrow a page from the U.S. playbook and recalculate their CPI to hide the grim reality. However, with the carry trade kicking into high gear, such propaganda efforts will likely not succeed.

The Japanese are pursuing this reckless monetary policy with the deliberate goal of creating inflation, and they are in danger of succeeding beyond their wildest dreams. Despite the tendency of central bankers to argue that consumers are better served by rising prices rather than falling prices, "deflation" was never a real threat to Japan. On the contrary, falling consumer prices are one of the natural rewards that people enjoy in market economies. The fact that this benefit has been denied to most people in modern times as a result of government created inflation is one of the great tragedies of our time. To spare its citizens from suffering the "scourge" of being able to buy products at lower prices, the Japanese are close to destroying one of the greatest savings hordes in history. The question is why are they doing it?

The only logical answer I can offer is that the Japanese realize that if they stop the flow of global liquidity they will destroy the dollar and the U.S. economy. To survive, the U.S. must be able to both limitlessly exchange the dollars it prints for the goods the rest of the world makes and then pay low rates of interest on its IOU's that foreigners accumulate as a result. Were the Japanese to turn off the monetary spigot and raise interest rates to normal levels, Americans would not be able to do either.

There is a huge speculative bubble in China at the moment too.

But as for Japan, why would they do this? If they destroy the yen then the dollar falls anyway if this theory is correct because once the yen collapses there will be no global flow of liquidity anyway.

Ghawar Is Dying as we slide Into the Grey Zone
"The greatest shortcoming of the human race is our inability to understand the exponential function.

Your argument correctly implies that it is Japan and China that have the option to make the call as they hold enormous U$S reserves. This is the relevant point.

The US has no option.

Well it has the option to do the right thing and massively raise interest rates, but there isn't anyone with the ballz to do it. The medicine is too bitter.

I suspect that China will attempt to maintain BAU until after next year's Olympic Games in Beijing. The games are of huge financial, cultural and "prestige" importance to the Chinese authorities, and are likely to be the last "Great Games" of the modern Olympiad. London in 2012 might not even get to the starting blocks. Although it might well be better for China to pull the plug now on the US bankruptcy, I believe they will try "save face" for another year, and then let the crash happen. Just one more "above ground" situation to add to the mix.

I am not at all convinced that China wants to "pull the plug" on the US. Like a dealer, China has no incentive to stop supplying his addict. He just has to make sure that he doesn't hold the paper from the addict too long. And more to the point, China has found an outlet for dollars - Africa, used to buy real physical resources and access to resources. It's the foolish tinpot dictators of Africa who think they are getting rich (and they are at the moment). Of course even a few of them are not stupid and are reinvesting those dollars in military hardware or other physical goods. But the vast bulk of Africanized dollars end up in Swiss bank accounts where they will eventually be worthless. And that's good for the US too. While the US tries to keep the velocity of money high amongst consumers, there could be an argument made that a certain subset of the dollars of the world are better off at rest because then they represent no threat to anyone.

My point is that human greed is incredibly inventive and that the existing financial system is more likely to mutate and survive than automatically collapse right away. I don't think the existing financial system will survive ultimately but it's going to take a few decades to take it all apart, barring anything short of a full scale thermonuclear war.

Like I've said before, while many of you are looking for the dollar collapse, I think there is still a reasonable probability of at least one more credit bubble. And I personally believe the next one is in carbon credits because they are so poorly understood, because the market is so new, both of which mean the carbon credit market will be wide open to abuse and manipulation.

Ghawar Is Dying as we slide Into the Grey Zone
"The greatest shortcoming of the human race is our inability to understand the exponential function.

Hi Grey,

I like your reasoning here - about the "resting dollars".

1) re: "Of course even a few of them are not stupid and are reinvesting those dollars in military hardware or other physical goods."

I just have to add "ouch" on the military hardware. I see it as something that doesn't rise to the level of the word "investment", let alone "not stupid".

2) "But the vast bulk of Africanized dollars end up in Swiss bank accounts where they will eventually be worthless. And that's good for the US too. While the US tries to keep the velocity of money high amongst consumers, there could be an argument made that a certain subset of the dollars of the world are better off at rest because then they represent no threat to anyone."

"Better" - yes. (A welcome smile.) May they rest long, esp. if they can't be used for organic agriculture conversion, putting in place the legal rights of women and children, etc.

3) Which brings to mind a funny (odd) thing. It's tragic, really, the different kinds of "threat" and how they interact with each other.

Where something threatens someone's self-image, and the defense against that threat - which is essentially a non-material threat to an intangible construct - ends up having the result of the injury or death of another, for example.

Pride hurt, pick up the gun kind of thing.

Because here in Europe we have what are called politicians.
They are people who have not starred in movies, or have IQ's lower than 50 and generally don't believe in god:-)

Right,. let's see here.

Blair, Chirac, Prodi, Merkel, Berlusconi, Schröder, Sarkozy, Balkenende, you'd trust them all to babysit your first-born, and not sell her off to the highest bidder.

Huh! Eh! I don´t know what to say. Better lieve it without any more comments.

Yep. you win.!

But...I would trust Alex Salmond . Come on the Scots!!! SNP have even got a bit about peak oil on their webiste (well, used to). We talk a mean game and we've fire in our kilts. (Hey i'm scots Italian!)

Our UK politicians can debate we'll. Black is white. I've seen it first hand. These guys are too prude/classy for any hollwood showman shit.

What am I talking about?

Oh yes Oil. Norht sea. Oh bugger.


And don't dare forget our kinsmen George Galloway and Tommy Sherradin. These guys have made our court's witch hunters look like absolute fools. I would love to see a debate between these guys and Bush.

Bush"hey guys who runs Scotland these days"
Tommy:"The McDonalds ye fuc**n'i ejit"
Bush: "Great burgers"
Galloway:"Fascist imperiast pigs that company. But..The've started running thier fleet on the oil from the chip pans. Oil for food"
Tommy: " Aye, Galloway. Oil for food. That rings a bell.
Bush:"Say Galloway, you sure made our court jesters look good in that oil for food trial thing.
George Galloway:"I was tryting to rebuid Iraq and look what you did"
Bush: "Yeah our embassy is 110 acres. "
Tommy: "Ye'll drown in yer own blood nazi B***stard."

if your (european) politicians dont believe in god, they are a whole lot smarter than typical american politicians.

bush draws a majority of his support from neocon jews, uncle tom blacks and hispanics, toothless rednecks and clueless bible believers.

This is a good discussion and basically, I think other powerhouse countries (Russia, China, India, even Western Europe) are playing chicken with the US. "If you guys are going to print more money, then so will we." To keep the system running, all players have to play along and create credit and wealth out of thin air. This could go on a long time until someone flinches and calls in the cards to see what hand is being held by the other players.

If everyone plays nice and keeps the game going, then we may see no economic collapse of the big guns even in the face of very high crude prices. The smaller players will suffer and already are, but they are outliers when analyzing the wealth of the world (in the eyes of the big players...not me).

So far, I think BushCo has convinced the likes of Russia, China, and India to stay in the game, but we have seen some cracks in the loyalty of the players to the game under BushCo rules. You can bet alternative plans have been mapped out under the radar on how to move away from US economic dominance. I believe these alternative plans will materialize way before massive crude production declines become widely apparent outside our little community.

DragonFly41, I think Warren Buffet summed it up well...'When the tide goes out we will find out who has been swimming naked.'

Once the oil producing countries decide to quit accepting the dollar, you will see the value of the dollar collapse.) When this happens, all the funny money in the stock market will flee en masse to countries with stable currencies (if there are any).

the trouble is ... there will be no other currency to trust or lean on after the $-collapse - THAT will be the paradigm shift itself - and the financial-world already knows this.
I have a hunch - this is actually what it is all about today .... pushing this crude reality to the very end of the line .

The US will never - ever be able to payback its debt - THAT NUMBER IS IMPOSSIBLE (!) ... every american new-born is born with the cost(debt) of a norwegian-apartement atop of its narrow shoulders ... poore little thing...

The question is - Will there be a reverse Marshall plan ? , I guess not and probably we will all be part of the stew - but one should never quit hoping...

BTW- and on behalf of Norwegian citizens - cheers to the US for this graceful Marshall-endowment "beamed upon us", in the aftermath of WW2 :) - it is not forgotten even as Im from the 1960's and after WW2.
AND reality is the Iraqi youths will never ever forget the fact thet the US went to Iraq for some reason eigther - thats another story though ...

Hi Paal,

Well, to your astute observations, may I add a bit of wishful/idealistic thinking,

re: "The US will never - ever be able to payback its debt..."

1) Immediate conservation - enforcement of the speed limit, no new roads, etc.

2) Rail.

3) Massive investment in solar and wind, research.

4) Investment in women's legal rights, education and access to health care.

5) Immediate project to implement Alan's national non-GHG grid, and add to this, switch to strictly renewable for water transport and storage.

6) Conversion of ag to organic.

7) Someone else has to address the finance transition.

All as examples of a "plan" to address "peak".

And export these things at low cost? These things being...
honesty about "peak" ("peak everything"), free sharing of plans and developments...

Oh yes, and out of Iraq, (big etc.). To be replaced w...(?)

Hi Cherenkov,

This is an interesting discussion (as it continues below).

1) re: "If we had not shipped most of our major industry overseas in a fit of greed and stupidity, we might be able to recover in a relatively short time."

This is still possible, in theory, is it not?

If new manufacturing was established in the US, as opposed to any more US (consumer targeted, so to speak) plants in China.

It would be interesting to actually look at what percentages and types of manufacturing went from say, US to Mexico, then shut down in Mexico and gone to China. (Someone, somewhere must know this - ?)

In any case, something short of a complete reversal could still comprise a reversal of trend. (?)

2) "As long as people continue to believe that the US government gives a rat's ass about the people."

OK. Could we get more specific here?

Let's assume *most* people in "gov" are "just doing their jobs" and don't see the big picture. Let's also assume they care, in the sense that people do care. They donate money, they do favors for friends, they care and act when they can.

Who *exactly* has to *stop believing* exactly *what*?

Then, once "they" do, exactly *what* do you want them to do?

I'm serious.

The futures price is what traders expect the price to be at in the future.

That statement is way too simplistic, it takes a least 2 pages to describe the implications of backwardation vs contango in the oil market. It might be true to say that one component of futures prices is the expected future price, but there are a dozen other factors.

e.g One reason current price may be regarded as too high is because of a record high number of long positions by investment funds.

Short term moves in the market leading to temporary backwardation is pretty meaningless. What is much more significant is the fact that the future prices are much flatter around $70 and are much higher now than was expected by the market say 5 years ago. The market is saying that it expects higher prices.

The market is saying that it expects higher prices.

Yet all futures prices except for the September contract is lower than the current spot price. In that light the above statement makes absolutely no sense whatsoever. No, if traders (the market) really expected prices to be higher next December, or the December following that, then they buy the contract, driving prices up.

For instance, the August 2008 contract is just about $1.00 below the current August contract. If they expected prices to rise, or just hold steady, they could buy that contract, for 4,050 in margin money. That would give them a 25% return on their money in just one year. ($1,000 profit on an investment of $4,050.) If prices rose by as little as $3.00 then traders would double their investment in only one year buy buying that contract. Quite obviously traders do not expect that to happen.

A backwardation in any market always means that traders expect the price of that given commodity to fall.

Yes, it is that simple!

Note: “Traders” and “The Market” are one and the same thing. Floor traders, hedge fund managers, commodity funds and the general public, or those that dabble in commodities, are all “traders” who make up “the market”.

Five years ago, the August 07 contract was somewhere around thirty bucks. Obviously traders did not expect prices to be this high then. As I never tier of saying, expectations of the future seldom match future reality.

Ron Patterson

' A backwardation in any market 'always' means that traders expect the price of that given commodity to fall '

I wish you where a trader mate..I could retire !!!!!

Lets say.. today the prompt market is $74 and $73 next december with a ratable backwardated curve.....

Lets say tomorrow the prompt rallies the $75 and next december is $73.50 with the same ratable curve...

See backwardation is still there, even increased, but the back hasnt 'fallen'

I wrote: ' A backwardation in any market 'always' means that traders expect? the price of that given commodity to fall '

Fletch replied:

I wish you where a trader mate..I could retire !!!!!

And I wish you could read mate, then I would not have to answer such a foolish post.

Question: What, on this thread, have I stressed over and over? It is the fact that expectations of the futures market does not necessarly represent what the market will actually do?

Let me say it again so even those who have trouble reading can understand. The futures market reflects what traders expect that particular commodity to do in the future. If September Corn, or September Crude Oil is higher for the Sep. 07 contract than for the Sep. 08 contract, then traders, on average are expecting Corn, or Crude oil if that is the commodity trading, to be lower next September than this September.

That is just plain down in the dirt common sense. The fact that traders may be entirely wrong in their expectations is another story. After all, they usually are wrong. A commodity very seldom trades, one year later, at the exact price that the futures contract traded at one year earlier.

Ron Patterson


Ron - Backwardation does NOT reflect what traders think about the future. When current demand exceeds current supply, people will bid up the current price to entice people to take oil out of storage. [I live in a $200,000 house, and I am not willing to part with it under any circumstances. Okay, I will give you $400,000. SOLD]

In a normal Contango market, people who store the oil want to receive Cost of Money (Interest) + Storage costs. [Your used car is worth $4,000. Okay, I will pay you $4,000, but I will pay you the money in 4 years, and you have to store it and keep it in the same condition. What - now you do not want to sell to me!] So, what does it mean when a market goes into steep contango - traders think that the price is going way up?? NO! It means that the current market is so well supplied that no one wants the oil. Further, although you could make over 20% annualized by storing it, you cannot. Why? Because all of the storage that is available is full. So, do you want to build more storage? Probably not. So you put it into the current market, along with everyone else who does not have storage and take the lower price.

Darwinian is right 100%.

Futures indicate the price in the future (as their name imply) and nothing else. Anybody can jump into the futures markets and buy or sell contracts. So this means that the price for December delivery is the price that market believes will be there in December. If you think that's it's incorrect (say you believe that price will be higher) you can jump in and make a lot of money.

Storage costs that you mention is a way to arbitrage in case of contango. I am pretty sure that contango is not a normal/typical condition. Backwardation would be just as normal. If contago was normal (usual condition) it would make market non efficient. I would gladly help to make markets more efficient by skimming few billions a month.

Going forward, contago might become a norm but only when oil peak comes. In that case contago would indicate that markets anticipates less oil available for sale and thus higher prices.

If there is a contago and if the spread is more then the cost of storing the crude, then it's profitable to store it. But it does not have to be profitable to store crude. There are no companies in the business of storing the crude becasue there is no money to be made (only lose) and that is because contago is not a typical condition.

Jbunt, all you say is perfectly resonable and makes perfect sense. There is just one thing wrong with it. Your theory assumes that people who trade oil futures contracts actually trade oil. Well, perhaps one half of one percent of them do, but that is about all. Some exchanges, like the TOCOM in Tokyo, is cash settlement only. They do not even allow actual delivery of oil.

Today, on just the NYMEX, a total of 563,139 contracts changed hands. That represents a total of 563,139,000 barrels of oil or almost eight times as much oil as was actually produced in all the world. And that does not include the other exchanges around the world. Over all the world well over ten times as much oil is traded as is actually produced.

But of those 563,139 contracts, only a very tiny fraction of them will result in any oil changing hands. Traders go long or short, based not on the cost of storage or delivery but only on the expectation of making a buck. Traders don't really give a damn as to whether storage tanks are full or not unless it affects the price of oil. Then if they do expect it to affect the price of oil, then they will trade according to what they expect that effect to be.

Oil companies, who often hedge, do watch this of course. And they make a tidy profit because the actions of the futures trader often presents a great opportunity for them. However they represent only a tiny fraction of the overall futures market.

I do not deny that storage costs are figured into all this. If it is cheaper to buy future oil than to store it now, this will definitely affect what the hedger does. But the speculator takes all this into account and prices the futures contract accordingly. The speculators, who make up the lions share of all traders, is interested in only one thing...profit! So the price of the futures contract, say one year out, represents what the speculators, taken as a whole, expect the price to be one year out.

It cannot possibly be otherwise. Because if the speculators thought, for whatever reason, that the price of oil would be higher or lower one year hense, then they would buy or sell, in mass, until the price equaled what they expected the price of oil to be one year from now. The speculators do not actually ever buy or sell any oil so they are not concerned with storage costs although they do take into the account that to hedgers this may be of great concern.

One thousand barrels of oil can be bought or sold for $4,010 in margin money, or $3,300 if you are a member of the exchange, as are all floor traders. One dollar movement, in either direction would be a 25% gain or loss. This far outweighs any concern for storage costs in the mind of the speculator. They all are just guessing of course and storage costs figure into their guesswork. But the actual price of the contract represents what the average trader thinks the price of that contract will likely be upon experation.

Ron Patterson


Traders (speculaters) provide liquidity to the market. The resulting prices are generally in line with the true market participants - the true hedgers (people who need the product - e.g., Airlines) and the producers. A contango market is the normal state of affairs, because of the discounting mechanism, i.e., interest rates coupled with the storage costs. Producers will "sell" futures on future production when they perceive it to be a reasonable & profitable price, so I will sell it now and produce it later, or when they MUST ensure that they can pay off their obligations, i.e., borrowed money, despite thinking that the price will be higher [because if they are wrong, they are bankrupt - the business equivalent of the death penalty. (I am sure the USC will beat the University of Maine, but will I bet my life on it?)] If you think that oil will be $1,000 bbl in the future, you will buy it now, and build storage. And there is a big difference between saying that you "think" that the price will be something in the future and actually putting your money where your mouth is.

There are a lot of people on this site who are either going to be very, very rich (WTSHTF it will be TEOTWAWKI - so take all of your assets and short the markets) and so the ELP will have no meaning for them, or they are just, in the end, a bunch of windbags along with 99% of the population.

A contango market is the normal state of affairs, because of the discounting mechanism, i.e., interest rates coupled with the storage costs.

No it can't be. We know that oil prices do not constantly rise month to month. If there was a constant contango then you could always sell future oil. In some cases prices would indeed rise in the next month, thus no profit (or small loss). But very often price would be lower next month (or stay constant) so you could make a big profit. So it can't be in contago constantly. Interest rates would only play a small role here. Future contracts are settled daily so there is relatively little credit risk and one can leverage heavily. If you use 100x leverage, then interest rate can be as low as 5%/100=.05% per year. Trade commissions will probably be larger then interest rate.

I am also not sure that producers need to sell their oil using future contracts. It makes little sense as nobody is trying to control oil price on day-to-day or hour-to-hour level. In other words if say Saudis can't find any buyers for their oil at 80$ per barrel in December, they are not going to cut production to increase the price. Since they will sell at market price anyway there is no reason to see December oil now and not in December. It's not like the price for December oil is necessarily higher then it will be in December. Saudis can sell December oil today if they feel that price for December oil will be lower then market believes it will be, but it will be a pure speculation. Any other country can do the same.

So the price of the futures contract, say one year out, represents what the speculators, taken as a whole, expect the price to be one year out.

Uh not quite.

It means that the number/market power of people who prefer:

Get money $X today, obtain oil sometime between now and one year from now, pay storage costs, make money on investments on $X, and deliver that oil away at some point in the future

is balanced with

Pay money $X today, lose access and interest for such money, obtain oil in one year.

The term structure of futures in nominal dollars must, at minimum, include interest rate expectations during that time.

Higher interest rates of course mean that money owned now (i.e. seller of contract now obtains that money right away) is more valuable than money in the future.

The commercial players in the futures markets do in fact take or provide physical delivery if they can make an extra profit doing so. Unlike stocks, there is a clearer relation to the actual commodity with futures.

In practice NYMEX West Texas is less relevant and deliverable (a pipeline at Cushing Oklahoma) than Brent crude, which I believe is considered deliverable by tanker worldwide.

There was recent pipeline and refinery problems in the regions near the WTI delivery point so that it became less representative of the usual overall oil market. Perhaps these have been fixed and maybe there is additional anomalous demand there now.

Anyway, Brent (worldwide) crude oil was rising well as WTI didn't. Perhaps now the WTI has just caught up?

Global output of low-sulfur crude is down about 1 million barrels a day from a year ago.
 7/17/2007 8:23:00 AM
ENERGY MATTERS: Real Crude Prices Higher Than Nymex Suggests

NEW YORK (Dow Jones)--A quick look shows U.S. crude oil futures prices are lagging record year-ago levels by 5% while crude oil inventories are brimming at their highest early-July level in 14 years.
That snapshot might suggest that prices, which have held above $70 a barrel for the past two weeks, may be in for a steep slide.
But the regional issues surrounding the price of U.S. benchmark West Texas Intermediate crude oil for delivery at Cushing, Okla., mask a broader, far more bullish reality: Many refiners are paying record-high prices for increasingly tight supplies of sweet crude oil and even higher prices may lie ahead. . .
. . . Plagued by civil unrest in Nigeria and heavy field maintenance and operational problems in the North Sea, global output of low-sulfur crude is down about 1 million barrels a day from a year ago. The shortfall is especially acute as the so-called sweet grade is especially desired during the peak U.S. summer driving season, because of its high gasoline yield.
Surging demand for the premium quality crude has pushed spot-market prices for prompt supplies to record levels well above $80 a barrel and, analysts say, they're likely to go even higher.
The cash-market value of Light Louisiana Sweet crude on Friday was $80.72 a barrel, topping the previous record of $80.19 set Aug. 7, 2006, and 2.4% above the same day a year ago. On Monday, Nigeria's Bonny Light crude hit a record near $82.65, up 8% from a year ago. . .
Goldman Eyes $95 Crude
Analysts at Goldman Sachs (GS) on Monday projected that oil prices will spike above $90 a barrel this autumn, unless key OPEC producers Saudi Arabia, Kuwait and the UAE increase output by the end of the summer.
If members of the Organization of Petroleum Exporting Countries don't increase output, and "assuming normal weather conditions this winter, total petroleum inventories would fall by over 150 million barrels, or 6.5%, by the end of the year, which would push prices to $95/bbl without a demand response," Goldman analysts said in their report.

First off...I love that the CattleNetwork prints such astute articles about petroleum. I've found many good articles from those guys and for some reason, it just cracks me up. The Supply Chain industry rags also have some good stuff on petroleum analysis. These guys are the industry end users and I feel they are on the front lines and acutely sensitive to what is happening with deliverable petroleum products.

Secondly, this article supports my theory that our US refinery issues and the increase in crude/gasoline is directly related to what the amounts and qualities of crude going into the refinery system. Now Robert has brought out the data showing nothing has changed in this regard, but then I see things like this that say otherwise.

Something is missing in the data we are looking at to analyze what is being run through the refineries and how much of each quality is being run.

Call it my acute intuition or "Spidey Sense", but something has changed in the last year or so in the US refining industry.

Re: The Export Land Model, someone asked the other day about when to start shorting the stocks of companies that own oil tankers. .

Associated Press
Sector Glance: Oil Tanker Stocks Fall
Associated Press 07.16.07, 4:25 PM E

Stocks of companies that own and operate crude oil tankers finished lower Monday after rates for the vessels plunged more than 20 percent on supply concerns.

In a client note, Jefferies & Co. analyst Douglas J. Mavrinac said rates for crude oil tankers took a hit last week when OPEC said crude exports would not increase in August as expected, and maintenance in some Asian refineries lowered demand and led to a tanker surplus.

VLCC Tanker Rates to Japan Fall About 50% From Last Summer
No collapse forecast as tanker rates fall near year lows
Published: July 04, 2007, 00:00

"We wouldn't speak of it as a freight collapse...but it does seem to have moved into a softer summer trading market that we've had in previous years," said Clare Grierson, an analyst with Simpson, Spence & Young in London.

E.A. Gibson shipbrokers said VLCC voyage rates to Japan were trading at WS105 or $67,200 a day in June 2006 compared with WS59 or $34,750 on Monday.

A July 9th Morgan Stanley report called "Global Economics: Oil: revisiting $80/bbl?" has the following quote:

According to Norwegian Energy, the total oil in transit for the four weeks ending July 21 is down 12.5 million barrels (bbls) from one year ago, which suggests possible difficulties for the peak summer demand season in the US.

I looked on the Norwegian Energy web site and there appears to be no free information, so i can't get any more details about this quote.

This is the oil that did not leave the the Persian Gulf due to Gonu. Nice to finally see a figure.

Assuming that is true it represents about one day of exports from the Persian gulf.

Saudi Arabia is exporting ~1 mbpd less than last year. The missing oil in transit could be two weeks worth of crude oil that Saudi Arabia can't find customers for.

Something is missing...

The middle man is hoarding, trying to keep all his buffers filled. But his buffers are very small compared to throughput so they fail to dampen ups and downs. It's exactly the same as the "branch falling on the wire" in Ohio; no systems resiliency. The result of absent public policy and the maximization of profit.

Hmmmm, in thinking about it and using the electrical grid for analog (electricity on the grid is common-sense fungible) one might expect to hear some advocating for regional energy allocations - the equivalent of cutting the grid.

There would be an energy market separate and discrete for New England vs Mid Atlantic etc....

This world is just not going to hang together.

cfm in Gray, ME

I read it exactly as you wrote it... it was bollocks then and its bollocks now.

The back end of a curve can rise in backwardated market so how are traders 'expecting' the market to fall.. Whether they are right or wrong in hindsight is irrelevant.

Contango and backwardation describes the shape of the curve and the relative strength of the prompt to the deferred.

Because if the speculators thought, for whatever reason, that the price of oil would be higher or lower one year hense, then they would buy or sell, in mass, until the price equaled what they expected the price of oil to be one year from now. The speculators do not actually ever buy or sell any oil so they are not concerned with storage costs although they do take into the account that to hedgers this may be of great concern

Not quite. You're ignoring one very significant additional factor - one that affects my (very low level) speculative trades significantly...

'What will the rest of the market do'?

As well as what I think the price of crude will be in Dec 2010 [my preferrred contract currently], my other major concern is what the bulk of other traders think the price of crude will be in 2010 every day between now and then because I don't want a margin call that will force me to sell my home etc etc.

But even more than that, what do other traders think other traders think the Dec 2010 contract will be tomorrow.

As far as I can tell, this matters lots, but only up-close. I can't see ANYTHING that explains the 2010 contract dropping over $1.20/bbl today, can you?

And the thing is, it's quite possible that most, or at least many, folk who sold 2010 today, actually thought the price of crude in 2010 would be much heigher that the ~$72 that it's currently priced at...

But that in no way means that they thought tomorrow it wouldn't be lower, simply because they saw a trend away from contango - simple positive feedback - and so opportunities for more profit somewhere else tomorrow and the next day.

But all of this is short-term, day-to-day, and highly driven (AFAICT) by what's going on around the front few months - If the contract 6 months forward is going down relative to the front month, so will the one 7 months forward. So any speculator holding a contract 8 months out might sell and buy one 2 months out instead.

NOTHING to do with what the price will be in 8 months, all about maximising profit tomorrow.

In the really long term, of course, it all works itself out.

Just like a governor on a steam engine - I can't work that one out in my head either - I mean, it obvious and simple, and it works for obvious and simple reasons - but get up close, try to understand all the self-feedback from instant to instant, ...

[a device I thought my head totally understood until I read Lovelock's 'Revenge of Gaia'


Jay: If 1. I actually thought that a realization of peak oil would rattle the financial markets big time and 2. I was in charge of the PPT, I would be allocating a large portion of my gigantic available funds to hammering the far out future crude prices. Seems like the best bang for the buck-definitely reassures the sheeple.

There's nothing like a little backwardation to wring out excess barrels in storage, all users not needing crude immediately will buy the futures instead of spot. The change, which I too did not notice, strongly implies falling spot as buyers adjust their buying. As the change is recent, it is not clear that current spot prices properly reflect demand, and in fact we can expect buying to be less than consumption as stocks drain down, and meanwhile oecd stocks are in good shape (the market is amply supplied).

OTOH, IEA, anticipating higher demand, says we need more opec oil right now... imo the future remains murky.

Why were there stock piles of gold? Why stock piles of gem diamonds? Gem diamonds were about useless. If you crush a diamond into fine powder it can be burned in a candle flame. Coal is cheaper.

If high prices cause decrease in oil demand that might cause a slowdown in orders. With a down trend in oil prices there might be a desire to liquidate inventory until the low inventories cause a need for people to order more oil. If there is evidence of widespread shortages people will want to hold oil and sell at a higher price.

Look at real estate. People held it while it was going up in value. Now that it keeps going down in value, they cannot get rid of it fast enough. More houses for sale this month than six months ago, in some areas. The average asking price is lower as lowering prices is one way to sell a house. Offering a free microwave oven is not incentive enough.

Oil futures market in backwardation

There has been the theory put forth that the currently high crude inventories are due at least in part to the contango in the crude market. Crude buyers stock up on the stuff when they expect a higher future price.

If this theory is true, we might see a drop in inventories if crude buyers expect lower prices in the future.

Stay tuned.....

The Summer Highs in the price of Oil--which conform to a seasonal pattern going back over 20 years--have, in the last 2 Summers, converted the Contango along the length of the curve, to Backwardation. And then, in early Winter, as the front part of the curve has weakened, the curve has moved back into Contango.

As the term structure of the crude oil futures curve is at least as discussion-worthy as that of interest rates, there are no doubt myriad things one can say about all of this. Given that, I will just share how I see this phenomenon in our current period in simple terms: the back end of the curve is less volatile, does indeed attempt now to price in depletion, but, tends to be a source of funds for short-term speculation in the front end of the curve. Basically, my view is that currently the front end is seasonal, and the back end is a longer-term structural view.

Per seasonality, the present Backwardation should reach its zenith sometime towards the end of September. Of course, all the traders know this, so, why wait? We may see the high very soon. I would then expect a process to unfold over 3-6 months, where the Contango is restored, at least by the typical seasonal low in February.

Finally, whenever one attempts to say something about the Crude Oil futures curve, usually important commentary gets excluded. The curve is both a reflection of, but also an inducement to, behavior.

Here is a 23 year seasonal chart of the price of oil:



Nota Bene: for readers new to this subject, the seasonal pattern in the price of oil, and, the crude oil futures curve going out 8 years are two very different things. The above chart is the seasonal price, only. If someone has a bloomberg terminal, perhaps they could throw up today's WTIC or Brent curves for all to see.

Hi Gregor
thanks very much for posting that graph of oil price seasonality. Do you know if the average price of oil stocks also reflects this seasonality? One would assume it would? Is there a graph around which analyses this? Thanks andy

I'm missing something...

Shouldn't a graph of seasonality end with the line leaving the right-hand end of the graph leading into the line on the left side of the graph?


Hi Ron.

Isn't it true that futures markets don't in fact predict future prices if there is a "carry forward" mechanism available. In the oil markets this would be simple storage.

The formula is future price = spot price + cost of carry.

If the futures price differs from this I can arbitrage the difference and make a profit. The comment "a demand driven market" makes sense in this context.


Tim, no one, to my knowledge anyway, really believes that the futures market predicts anything except traders expectations.

But see my answer to Jbunt and hifisoftware's reply to him also...above.

The true formula for the price of a futures contract=Scratch your ass, purse your lips, and guess. Actually there is no formula, not one that actually works anyway. The price of a futures contract reflects what traders, on average, taken as a whole, expect the price to be in the future.

But I think I already said that didn't I? ;-)

Ron Patterson

I'm encouraged by the National Petroleum Council Report. It appears there are a few cracks in the cornucopian dam. Its an acceptance of RR's theory of "peak lite".

People seldom admit that their former opinion was wrong. Instead, they change their opinions by gradually adopting a changed viewpoint, but try to change the language so nobody can say they were wrong. Bob Ebersole

Hi Bob, some psychologists stipulate that the process of an individual 'changing his/her opinion' is complicated. First, the individual must rearrange his/her memory of their former opinion before they can change to a new opinion. This has to do with sheltering the ego.

Watching CNN, Fox, etc, I sometimes hear the phrase 'he/she waffled on ____.' Politicians are really taken to task for being wafflers. I find this attitude by people and the press about politicians changing their minds to be strange. As individuals we are all constantly being bombarded by new information, or info that we were not previously aware of, and we should be expected to sift through the incoming info, reevaluate the situation with the new info, and act on what is pertinent to a situation, even if it means changing an opinion...just my current opionion, you understand, I might change my mind in a few minutes.

River: IMO, Americans in general will always follow and support a self confident moron rather than an intelligent "waffler". The lack of certainty frightens the sheeple. Guys like Carter, Gore are the exception- Americans by and large are searching for the next Reagan or Shrub to follow, IMO.

"The whole problem with the world is that fools and fanatics are always so certain of themselves, but wiser people so full of doubts."

- Bertrand Russell

Watching CNN, Fox, etc, I sometimes hear the phrase 'he/she waffled on ____.' Politicians are really taken to task for being wafflers. I find this attitude by people and the press about politicians changing their minds to be strange.

That is typical Fox News. The right-wingers in general see waffling as a cardinal sin. Hence they followed Kerry around waving pairs of flip-flops. And they hated Clinton, because he was so willing to compromise.

But that's not typical of all Americans. Most Americans liked Clinton, compromises and all.

Demographer Neil Howe says that it's baby-boomers who hate compromise. It's because they are the most idealistic generation. He also says their type of generation rarely accomplishes much politically, because of that unwillingness to compromise.

He points out that even though Clinton is a boomer, he was least popular among his fellow boomers. All the other generations supported Clinton; the boomers did not.

Amusing historical note - while governor of Texas Bush was often chided by other Republicans for his willingness to work with and compromise with Democrats.

Ghawar Is Dying as we slide Into the Grey Zone
"The greatest shortcoming of the human race is our inability to understand the exponential function.

Yeah, that's what a lot of people thought we'd be getting by electing Bush. They didn't realize a Texas Democrat is a rightwing nutjob in many other states. ;-)

Should be interesting to see if the "flipflop" charge sticks this time around. I think a lot of voters - even a lot of right-leaning voters - are fed up with Bush's unwillingness to admit his mistakes and change course.

I also think Cheney/Rove has something to do with it.

I just had lunch with a World War II veteran--knows Bush 41 (first Bush president).

He was livid about the Iraq War; he said the soldiers were dying and being wounded in a senseless conflict. Said he voted for Bush 43 both times. If he had it to do over again, he would have voted Democratic.

Too little too late. I'm not inclined to forgive folks who should have known better from the start. 7 years ago was a foolish vote but 3 years ago was a criminal one in my opinion.

Yeah, like what's he going to do now? Vote for Clinton?






I wonder, will Castro still be alive after that? Time for a change, eh?

cfm in Gray, ME

Hi Jeffrey,

I'm glad you're doing "outreach" (even if this was tangential to your visit).

WWII vets are increasingly hard to come by.

What is his idea of what to do now? Does he favor impeachment?

Or, to put it another way, how does he plan to act on his frustration?

Does he see himself as having a role to play?

Hmmm, was Clinton's willingness to compromise what led him to such compromising positions?

I certainly agree that an opinion change involves the ego. The less threatening to the person's self image that we seem, the more likely that we are to help them change.

That's why I don't think we should get in arguements about how many barrels are left of oil, the definition of oil (cornucopians consider tar deposits to be oil) or even the time to the peak. What we should do is get agreement that the cost of energy is going up exponentially, and that we need to address the problems very quickly for economic and environmental reasons.

I think this NPC report plus the IEA midterm report are very important milestones. But if we descend into "I told you so" or anything that makes them feel guilty or at fault, or even suggests that we've been on the wrong course too long, we'll loose that advantage.
Bob Ebersole

Bob, I believe you are right not to put too fine a point on exactly how much oil is left in the ground. No sense throwing a scare into the people publishing the monthly numbers and causing them to dig in their heels. I know that I dont have a clue about oil reserves. I have read a lot about the subject of oil but that doesnt mean that I know anything about the oil biz. But, when I see oil companies investing a lot of money in off shore rigs to drill very deep explatory wells I begin to suspect that the 'low hanging fruit' is about gone.

One of my biggest concerns now is the problems facing Mexico. Their political situation is shaky. Many voters down there think they were screwed in the last election and that might make them more sympathetic to the people with the C4. I think that the majority of the voters wanted to move to the left and Calderon was not their choice. I believe that major civil unrest in Mexico would drastically reduce their oil production, as if it isnt declining already. I suppose I see Mexico as a potential broken link that could lead to cascading failures in manufacturing, oil, and economies. Just a 'gut feeling' as Chertof would say.lol

BTW, have you been fishing lately?

Hi Bob,

Very nice.

re: "What we should do is get agreement that the cost of energy is going up exponentially, and that we need to address the problems very quickly for economic and environmental reasons."

Your top five (or ten) "To Dos"?


I think we should look for points of agreement. The ones that I see everybody has are:

!. crude oil is going to peak. They think it won't happen for another 25 years, while some of us think it already has peaked. But, when doesn't matter-we still need some plans.

2. The inexpensive oil is being used up rapidly-energy is going to cost a lot more in the future.

3. oil is an essential commodity in the world

4.A cutoff threatens our national security.

5. a cutoff threatens our economic security, as do
any shortages

6. we all want clean air and coal doesn't cut it

7 problems are only going to get worse as world population increases to 9 billion people

8. Conservation is going to help with prices and vulnerability. Its going to make companies more profitable because it lowers expense

That's not too hard for any rational person to agree to. If they start into a political diatribe, point out its geology and common sense, not a liberal or conservative thing. Once a discussion gets that far, everybody looses.

Hi Bob,

Thanks for the list.

I'm not so sure about #8

re: "Its going to make companies more profitable because it lowers expense"

Isn't the main problem that conservation, in total, ends up shrinking the economy? Aren't we really looking at "forced contraction" v. "voluntary contraction"? (I mean "forced" when the total energy input slows. Voluntary being the effort to slow it for two reasons: 1) to buy time 2) to use available current supplies to build mitigation measures, renewables, retrofits, etc.)

I'm not sure how you'd approach 8. Short-term, more expensive (eg. installation, of solar, or insulation or...?), longer term - alternative is in place.

What I was more trying to get at is - what would be your ideal US energy policy?

I'm also interested in hearing more about point 8 - how it works.

What It Would Take to Put the Brakes on Global Warming
By Steven Mufson
Washington Post Staff Writer
Sunday, July 15, 2007; Page A09

If the majority of climate scientists are right, the sheer immensity of the global warming problem can make mortal measures look hopelessly tiny.

That's what one Bush administration official seemed to be saying in a speech to a 2004 conference. Energy Secretary Spencer Abraham said it would take a technological breakthrough on par with the discovery of electricity to slow climate change.

That galled a member of the audience, Princeton University professor Robert Socolow, who thought there were things people were capable of doing -- and must be doing -- now.

So Socolow and fellow Princeton professor Stephen Pacala came up with a game, with multicolor wedges, to make the global warming problem look solvable, albeit still difficult. (See http://www.princeton.edu/~cmi/resources/stabwedge.htm.)


In a class exercise, the professors give students 15 wedges with different colors, each representing a way to achieve a billion tons of carbon savings, and had the students mix and match them to come up with a plausible strategy for keeping the 2050 emissions level equal to today's. Coming up with seven politically feasible wedges is no simple matter. Here are some of the choices:

Triple nuclear electricity production by building 700 new, 1,000-megawatt nuclear plants. Boost wind production 30-fold by building nearly 2 million 1-megawatt wind turbines. Halt deforestation and plant 300 million hectares of unforested land. Cover an area the size of New Jersey with photovoltaic cells. Double the fuel efficiency of cars and light trucks. Replace every incandescent light bulb in the world with a compact fluorescent bulb and change building codes, including in the developing world, where the most commercial building is occurring.

The impact of the wedges has been huge. Since the Princeton pair wrote their article in late 2004, each has given about 100 talks, prodding scientists, policymakers and companies to attack global warming in concrete ways.


I read that wedge article in Scientific American (Sept 06). Some of the wedges included:

Drive cars on ethanol using 1/6 of world-wide cropland.
Increase windpower 80-fold to make hydrogen for cars.
Replace 1400 coal fired plants with gas fired plants.

It also looks as though they were predicting 2 billion cars to be on the road by 2056... which I find strains reality given PO and economic uncertainty.

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

The wedges think is a useful educational tool. When you have people saying that they don't want this and don't want that, and then see that there is still a big gap and a lot of wedges left on the table, then the thinking shift occurs and they start to realize that they actually are going to have to make some untasteful tradeoffs.

As a policymaking tool, I can't even begin to list all the shortfalls.

I'm looking out the window this morning and instead of urban alley I see rural corn field. This life change was directly driven by concerns raised by this site. I'd love to hang around but I have to go Google for information about long term seed storage techniques.

Please post them once you have found some good links. Either on here, or elsewhere. :) (hint, hint)
~Durandal (http://www.wtdwtshtf.com/)

I'm looking out my office window and I see a large group of hourly manufacturing and warehouse employees going about their daily business,,and I am quite sure none of them realize they are absolutely screwed.

When I look due south, I see an airport. When I look southeast, I see a cellulosic ethanol test plant. When I look north, I see a very exclusive golf course. West, a gas station built on a river bank. Running east-west, a very busy arterial road. When I look around the office, I see a bunch of people, including myself, doing work that accelerates the trip into the brick wall (improving aviation).

But when I look out the window directly down, I see a bunch of bicycles, one of them mine. I suspect that is the one thing I can rely on to see for quite a while.

When I look due south, I see forest. When I look southeast, I see forest. When I look north, I see (wait for it...) forest. When I look west, I see my vegetable garden, and beyond that, my barn and paddock, where my draft horse is waiting to go to work after lunch to pull in some logs from all that forest, so I can make firewood.

Message deleted.

There was a good discussion of this at PeakOil.com in the past week. In general, this is a better site for high-level discussion and top-notch news and analysis, and PeakOil.com is a better site for discussion of mitigation measures.

Just heard a crazy story on NPR:

Recycling glass into sand to save Florida beaches.

This relates to something I've been pondering. When is the ENERGY cost of recycling too high to continue?

When I see the time, labor and energy of our current system of hauling glass and paper to and fro, I assume right now that it's a net energy loser, but nevertheless OK because it saves a few trees and some sand somewhere.

As an energy crunch develops, will we continue to drive big trucks around in circles for such low grade and low cost materials? This will end up being a very complicated question to answer.

Producing new material will become more expensive, while recycling will be seen as very energy intensive as well.

Hopefully... we'll learn to live with a lot less of all the crap people mindlessly consume and toss out on the curb.

In Florida, coastal development combined with frequent hurricanes have led to a sand shortage. Call in the engineers! In a closed system, taking all that extra glass and making sand out of it is a fine idea. In the real world (a larger, open system) it strikes me as insane and a fine example of peak stupidity, or at least a sign that we've gone way too far overdeveloping/overconsuming/overbreeding and have become overly endeared with our own abilities (hubris).

This is not a new concept. I have been leaving beer bottles on my local Florida beaches for years. Since many vehicles drive up and down the beach they crush the bottles and, voila, new sand is made. Of course, it takes a while to get it to the consistency the beach management people desire, in the meantime people are advised to wear flip flops on the beach.

The whole thing seems a little bit like "a little to late". The best way to get sand is to grind stone to a small round size and just dump it on the beach. To run stone catchments out into the surf at certain angles that reduce wave action to pulling the sand out of the area. Increase shore plants and decrease human activities in the area.

If anyone out there wears snadals can back me up on this, wearing any form of sandal is not a way to protect the bottom on your feet. I am always stopping and knocking a bit of rock, or stick out from between my soul and the foot bed of the sandal. It will not protect me from glass in the street.

What people want and what nature does by it's very common everyday actions are usually two diferent things. I have Done digital mapping of the world's coastlines for over 5 years. The Coast of the USA on the eastern seaboard and the Gulf coast changes so fast that you have to do total map revisions every 3 years and then pray your updates in between gets most of the other smaller changes so that there are no major wrecks or hazzards.

The only coastline that is changing faster than Our coastline is Japans. They have been building theirs from the soft and sharp egdes to the manmade edges and the changes happen every 6 months to their maps.

In a few years we aren't going to have to worry much, the Outer banks and the Intercoastal waterway is going to be toast as the sea levels rise and they become little more than bottom features and hazard zones.

North Little Rock gor 7.5 inches of rain in July 2007 so far and the world is changing just to fast for most of us.

North Little Rock, eh? Are you in the LR/NLR Arkansas area too?
~Durandal (http://www.wtdwtshtf.com/)

You have e.mailed me before.

Laughs, short memory or busy life.

I have long memory busy life.

it is tuesday I am taking a down time needed day, that and walking with my bum knee has been it's own form of torture.

Aah, I suppose I have emailed you before. Silly me. Yes, I have both a short memory and a busy life.

I may have some down-time soon myself. Put in notice @ work, so my last day is the 27th. I don't have a new job lined up yet, so I might have a few weeks of unemployment. Until then, it's doing my work and surfing the net at work. haha. I should do something fun tonight like go to Vino's.. hmm.
~Durandal (http://www.wtdwtshtf.com/)

There will be outer banks again, but they will migrate inland. Wave & wind action will pile that underwater sand back up into barrier islands again in short order. Maybe this next time around whoever is still alive will have the sense to keep people from building on them houses destined to become toothpicks.

Some things are a lot more worthwhile in recycling than others. The energy saved for aluminum in recycling is 95%, while paper may not be worth it... A quick Google search provided the following link:

Typically, recycling metal is always worth it.
~Durandal (http://www.wtdwtshtf.com/)

So What is the reason why Gasoline prices are spiking again? I have been out of the loop for a while, don't have time to read all about it, and still get all my things done for today. Anyone want to send me mail, or post a response here.

My handle at yahoo.com for the mail to me folks.

Thanks, Charles.

Gasoline prices are going up again because crude oil is going up. The two cannot possibly move in opposite directions for very long.

So the question to ask is why are oil prices are going up? And that is what we have been discussing for days not.

Ron Patterson

I can plainly see some of it. just by scanning. WesTexas theories seem to be coming to the forefront and being felt. and then there is OPEC saying they don't need to pump more. Flooding in the areas that produce gasoline seems to be an issue, as well as massive heat waves in other parts of the country.

Just wondering if a major new event had croped up in the news while I was not looking.

Ron, do you think that possibility of war with Iran has something to do with the price of crude? It seems that if a war were in the plans we would expect exactly what we are seeing now...Full storage tanks, crude prices up, gas prices up, lower refinery output to save the crude till it might be really needed.

River, no I do not believe that at all. I know Bush is one stupid man, but not that stupid. If he dared start a war with Iran the nation would revolt and demand both he and Cheney be impeached.

No, there will not be a war with Iran and the price of oil does not reflect any expectation of a war with Iran.

But again that is only my opinion. Others may have a different opinion.

Ron Patterson

If he dared start a war with Iran the nation would revolt and demand both he and Cheney be impeached.

I see it slightly differently. If the rest of the world decided to declare the US Dollar was "not any good" (IE the US dollar could not buy any imported goods) as a reaction the US Citizen would toss 'em not only outta office but the bounce would be to a world court for a show trial then conviction as war criminals in a reaction to be accepted back into the world trade market.

For the sake of your fellow US citizens, find a religion then pray to a sky God that the world does not decide to go cold turkey on the US Dollar as a reaction.

I think most of the nation would want to hear more about whether or not Paris Hilton had lesbian prison sex...

...NPR listeners would get breathless and indignant on call in shows...

...the political class would do nothing

...and the media would tell us to shut up cos there's a war on...

...oh and nothing would happen to Bush and Cheney (except the possible scrapping of the 2008 election and an extra term each for good behaviour).

now, IF there is a war with Iran, if you'd like I'll put a 100 bucks that my end result is close than either of yours or the parent poster (sorry in the edit window so temporarily forget who posted the impeached comment)
When no-one around you understands
start your own revolution
and cut out the middle man

now, IF there is a war with Iran, if you'd like I'll put a 100 bucks that my end result is close than either of yours or the parent poster

1st off, for the US of A to have a 'war' with Iran - I believe Congress would have to draw up a declaration of war.

And I'm not seeing that happen.

The rhetorical blow back will go something like this:

Attacker is just trying to keep us down. Attacker has fission power and the sites attacked were just support for fission power.

From a rhetorical standpoint it matters not if the claim is true or false...the MSM shows us how little truth matters on a regular basis.

And the blowback moment:

ergo is OK for you to attack their fission plants

More rhetorical ammunition to be used to justify action. The larger the pool of 'mad as hell and not gonna take it', the more likely that set includes people who will be physically and mentally able to take more non-positive action.

Now if we moved to wind power, any attack to the power infrastructure would be tilting at windmills. *rim shot*

Anyone wanna remind me how this all ends well again?

The problems at the Kashiwazaki power plant and the delays in acknowledging them are likely to feed concerns about the safety of Japan’s 55 nuclear reactors, which supply 30 percent of the quake-prone country’s electricity and have suffered a long string of accidents and cover-ups.

If the failure modes are not an issue, why the cover-ups?


Touted as the largest nuclear plant in the world. And, they took 24 hours to assess the damage and make a report. This is intolerable. I mean, it can take 24 hours to test your well water, or the acidity of your soil or to get the results from a blood test. BUT, MY GOD!!! HOW CAN IT TAKE 24 HOURS TO MERELY ASSESS AND REPORT THE DAMAGE FROM TWO EARTHQUAKES OVER 6.0 THAT OCCUR IN ONE DAY TO THE WORLD'S LARGEST PLANT. THIS NUCLEAR INCOMPETENCE CLEARLY MEANS - NO NUKES EVER.

Heck, I watch Jack Bauer in "24 Hours" on Fox and they could construct a nuclear plant in 24 hours. So, no SOB ever should talk to me about nuclear energy.

PS I would bet money that the first stupid jerk that invented fire was stoned to death, because there was no fire fighting equipment to put out a fire. Therefore, such a dangerous idea could not be tolerated.

People invented fire? Did they invent the stones they used to kill the guy that invented fire? I wish no one had ever invented oxidation, I'd prefer it my lettuce stayed fresh and my truck never rusted. They should have stoned that guy to death too.

Man, once surrendering his reason, has no remaining guard against the absurdities the most monstrous, and like a ship without rudder, is the sport of every wind. -- Thomas Jefferson

The point being made in the article, which you apparently completely missed, was that the entire Japanese nuclear industry has a history of both safety problems and cover ups. The quoted statement says nothing specific about yesterday, just that this past history exists and should be remembered when looking at safety statements from those same officials.

Sometimes we read things too fast or don't even read them completely then jump to conclusions. I've been guilty of that before and try harder to not make the same mistake. It appears that you have done the same thing. You might try reading the entire article before posting a pile of flamebait.

Ghawar Is Dying as we slide Into the Grey Zone
"The greatest shortcoming of the human race is our inability to understand the exponential function.

What major industry in the world doesn't have a history of safety problems and cover ups?

Less than 10 lives have ever been lost due to nuclear power plant accidents in Japan. I'm willing to bet it's just as high if not higher for workers involved in coal-fired power there (for a start, 458 coal miners were killed in the 1963 Miike incident).

If you are purely talking about deaths at work - 6000 coal miners die a year in China (that's the offical figure - unofficial ones are much higher).

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

I initially included that figure in my post because I couldn't find any numbers for Japan. Even allowing for the fact that coal is responsible for 3 or 4 times as much power generation as nuclear, worldwide, it's responsible for hundreds of times as many deaths - and that's not taking the long term consequences of global warming, or possible economic/social consequences of "peak coal" into account.

FWIW, I always used to think I was so fortunate living in Australia without the ever-hovering demon of nuclear power plants in our backyard. Now I wish we had built nuclear plants 10 or 20 years ago. I'm borderline as to whether building them today makes sense, given the available alternatives (esp. geothermal).

fact that coal is responsible

Don't forget that coal burning, in normal operation, releases more radiation than a functioning to spec fission reactor.

And the heavy metals bio-absorbed all those years ago back into the biosphere.

If you are going to consider mining then you might research uranium mining too, both past and present.

Ghawar Is Dying as we slide Into the Grey Zone
"The greatest shortcoming of the human race is our inability to understand the exponential function.

No doubt. It's hard to find verifiable figures for deaths due to uranium mining, which might in itself be suggestive of the likelihood that it's significantly less than 7000+ a year caused by coal mining worldwide (80% of which are in China). One factor that makes it hard to measure is that radiation leakage from uranium mining operations can potentially cause civilian deaths long after the fact. Some extreme estimates have put this as high as "hundreds of deaths per day of mining", by extending the danger thousands of years into the future, but I've yet to see convincing proof, and doesn't appear to allow for the possibility that we could contain/clean-up that radiation in the future. The degree to which radiation-induced cancers and on-the-spot fatalities can be compared is also debatable, as the former cases are potentially treatable, especially as our understanding of cancer improves. You could also potentially argue that radiation sickness is more likely to be fatal to the elderly, hence less likely to leave families parent-less and rob fewer years of healty life, but you'd be on some rather flaky moral ground.

You really cannot find useful data? Try the US Center for Disease Control. There is more out there than you think and uranium mining is pretty nasty business, even today after many improvements have been made. Historically it is horrid.

Ghawar Is Dying as we slide Into the Grey Zone
"The greatest shortcoming of the human race is our inability to understand the exponential function.

Almost all mining is "nasty business" - it has traditionally always been the sector with the highest fatality rates.

Uranium mining appears to be looked upon somewhat differently because it can case death and suffering to civilians uninvolved in the actual mining operation, even many many years after the operation is closed down. Which is true...but again, also true of other forms of mining. For a given MW/H of electricity produced, uranium mining causes far less ecological and other damage than coal mining, which can lead to severe flooding due to vegetation removal, contamination of water supplies with mining wastewater, accumulation of various toxins, especially mercury etc. etc., all of which result in civilian deaths, on top of miner deaths due to falls, explosions, mine collapses etc.

I would much rather we didn't use coal or nuclear power, but in parts of the world where it just isn't feasible to supply alternative forms of energy, nuclear has got to be the better bet, safety/health wise.


A more thorough and up to date account of the struggle of the Navajos to obtain some measure of relief from the problems caused by uranium mining is contained in the book "If You Poison Us: Uranium and Native Americans" by Peter H. Eichstaedt, published in 1994 by Red Crane Books, 2008 Rosina Street, Suite B, Santa Fe, New Mexico, 87505. The book is illustrated with numerous photographs of the people involved, as well as pictures of the abandoned mine sites in the area. Many of the surviving Navajo miners are interviewed. There is a discussion of some shortcomings of the 1990 Radiation Exposure Compensation Act, and an account of efforts at mine reclamation.
From the introduction: "This book is the story of how uranium mining began on Indian lands in the American West, how it was conducted, and how its deadly legacy still lingers in the lives of the men, women, and children whose harmony and homelands have been destroyed."

Good PR =

1) Exaggerate all the positives.
2) Admit a couple negatives, but promise to limit them.
3) Hide the rest.
4) Label anyone who says otherwise as a scaremongerer.

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

RE: "Stalling on fixing the price of gasoline",
and: "The Energy Solution That Dare Not Speak It's Name"

Here we see the problem we face in the stark contrast between these two comments. The first, from a member of the U.S. House Renewable Energy and Energy Efficiency Caucus, claims that it is possible to reduce the price of gasoline, i.e., transport fuel, to the public. Rep. Adrian Smith's goal is said to be "promoting energy policies which can boost the use of clean, renewable energy, while reducing America's dependence on foreign oil". The rhetoric sounds great, but, exactly how is this result to be achieved? Well, they will just pass another batch of laws, I suppose.

The other comment discusses gas rationing, after noting that the energy industry doesn't want to talk about this as a course of action. Perhaps that's the result of the conventional wisdom that there's more oil to be had and that in any event, there are other energy sources available. However, once the peak in world oil is (has) past, prices will (are) going to rise steeply, as the time required to make the switch to other energy sources means there are no short term alternatives to oil. Then, these prices will (are) going to cause inflation to impact the cost of providing those alternatives, thus keeping the prices of the alternatives high as well. Just recently, there was a story about the cost of new electric power plants increasing rapidly. No big surprise there.


The implication is that the members of Congress don't have a clue. Although gasoline is the largest chunk of those products, there is an ability to shift the product mix, and thus demand reduction in gasoline would lead to an increase in demand for the other fractions. It would be desirable to switch to diesel transport, but not desirable for more people to use air travel instead of automobiles, as air travel uses more fuel for the same seat miles per gallon. It's obvious to me that air travel must take a hit along with gasoline powered automobiles. Then, there's oil for home heating, which in my area is the least expensive FF available, as there's no NG supply.

I submit that after Peak Oil hits, the first thing we need to do would be ration ALL oil products, not just gasoline. That way, at the very least, everybody would get the message that it's time to change how we live our lives.

E. Swanson

Black Dog,
High prices are the only kind of politicaly acceptable rationing in the US with the current climate and representation

The NY Times article above is very interesting. It appears that the costs of nuclear plants are now so high as to make residential solar competitive-the article says $2 to $3 a watt.
Bob Ebersole

Here in Sweden gasoline prices has go´n down recently. Although we have a gasolineprice like 7 USD/gallon, its cheap, and a swedish enviromental official proposed a doubling of that price, to get down gasoline use and its impact on CO2 emissions.

So you have dirt cheap gasoline in USA.

I wouldn´t mind a gasolineprice in the vicinity of 25 USD/gallon= about 40 krona/litre. It would still be cheap when you consider the energy from that litre, and then we would price out the gas guzzlers, and we could have gasoline a couple of years moore, until the new generation of BEV:s and PHEV:s hits the market.

Best hopes for electrical vehicles(Hope you don´t mind ALAN from Big Easy for lending your slogan)

During WWII, Sweden was cut off from oil/petrol supplies. They developed a whole industry of portable wood gassifiers that they used to run the internal combustion engines of autos and trucks. After the end of the war, the Swedish gov't documented the industry, technology, and lessons learned.
I have a copy of the report. I've read a lot of it and it is not very high-tech stuff. It could easily be repeated, only instead of wood, which is plentiful in Sweden, maybe consider using switchgrass, ground up corn stalks, etc. -- any thing that has high carbon content and burns. Down side of wood gassifier is, as I remember, serious safety problem with carbon monoxide, and rather faster engine wear from particulate matter in cylinders.
While biomass gassifier technology is building out into the economy, people will also be working of ways to process raw biomass into a more engine friendly form (and also innovating in re. CO poison problem).

Yes, and there are some enthusiasts operating such cars in Sweden today. It is allowed for older cars.

Unfortunately, I believe that in this climate, rationing in the USA will be a means exclusively for the most politically connected Republican-oriented corporations and cronies to profit immensely and extraordinarily unfairly.

Would they dare do it? In a nanosecond.

Without rationing, it would jsut be the usual capitalist big, little and small oil.

Think about fair bids for military contracts versus cronyist insider connections.

The article New Process Promises To Reduce Costs of a Clean-coal Technology is an important one, if it is true.

The article relates to underground coal gasification. China has been one of the leaders in researching this, because this technique could multiply the percentage of its coal in place that it is actually able to use.

All of the talk about reduced coal reserves is premised on the idea that we will dig out the coal and transport it to a new location. This process becomes uneconomic pretty quickly, hence the reduced recoverable coal reserves.

If it is possible to convert coal in place to a gas similar to natural gas, it is possible to use a much higher percentage of the coal. (Not good for global warming, although some carbon capture may be possible.) Pages 33 and following of Coal of the Future talks about underground coal gasification.


The article doesn't give any information other than a buzzword. My immediate thought when reading your post was of all the unextinguishable underground coal fires China has burning already.

If they can't seal the existing fires from air, how they intend to make this process go is unkmown to me. Not a mining engineer, but "pushing it through" seems to be asking for more fires they can't control when a cracked area of a seam is hit.

Centralia Pa has been converting underground coal to gas since 1962. This is not new technology. This technology has the added benefit of reducing population.

Centralia is a borough in Columbia County, Pennsylvania, United States. Its population has dwindled from over 1,000 residents in 1981 to 12 in 2005[1], and 9 in 2007 [2], as a result of a 40-year-old mine fire burning beneath the borough. Centralia is now the least-populous municipality in Pennsylvania, with four fewer residents than the borough of S.N.P.J..


There was something about this on CSPAN's Book TV just last weekend.

The original gas lights in London in the 1850's were coal gas. Its not new technology.

"""When the energy runs dry, all of the systems we have so carelessly created to gulp that energy down will be worthless. We can build tiny houses (less than 100 square feet), rip up our lawns for edible estates"""

I thought of several homes I have looked at that are for sale in a richer but older section of town.

I have seen swimming pools filled with rain water. Yards growing figs, Kiwis, grapes, elderberrys, blackberrys, lamb's quarters, and many other edible while few people are taking care of the places, they are all forsale.

One place I saw is 6,000 sq ft. 5 baths, that's room for 5 families, and with some care from city officals in vacant lots, gardening plots enough to feed about 25% of the food they need.

But that is just my dreams running wild, most people will starve to death when Wally-world shelves run dry.

Pity we can't slice a few big houses into 100 sq ft condos.

do bears or raccoons go after curing garlic?

I don't know what is curing garlic. But I had a racoon eat the contents of a jar of garlic powder when I was camping one time. I wonder if the other racoons let him back into the burrow that night.

Speaking of which, a raccoon took a bite out of a jalapeño plant in my garden early on. He never came back. I wonder why? ;)

Ghawar Is Dying as we slide Into the Grey Zone
"The greatest shortcoming of the human race is our inability to understand the exponential function.

I think raccoons go after pretty much anything. :)


was not expecting that! lol

Hmmm...would you call the result a Ragle?

Can someone explain the diffrence (in use?)between "Crude and Lease Condensate" and NGL's? Are they interchangeable, or only partly so? My question is, is there a difference to the refinery between Crude, C&C, and NGL's?

Ckm3, Crude oil is crude oil pure and simple. Lease condensate is a light oil that condenses out of natural gas wells. It is a liquid at ambient temperatures and pressures. I have heard that it can be poured directly into one's gas tank and it will run, with lots of knocking however. It is normally, (I think anyway), just dumped in with the crude oil and refined with it.

NGLs are an entirely different story. NGLs are bottled gas, basically propane and butane. Technically ethane and lease condensate are also NGLs. However I have never heard of bottled ethane. Perhaps someone else has?

NGL’s are either distilled with crude oil in refineries, blended with refined petroleum products or used directly depending on their characteristics.

Ron Patterson


When oil is produced, it often has natural gas in solution, sort of like the CO2 in a carbonated drink. Its under pressure in the reservoir. Likewise, natural gas is under pressure, in deep gas wells as much as 10,000 lbs. per square inch.And, the formations are sometimes quite hot-as much as 300 degrees.

When the natural gas is put in a pipeline, fluids drop out because the pipeline is at a lower pressure and the gas is cooled by expansion. These fluids are condensate, or distillate or natural gasoline.

Also, some gas sands produce gas with a higher BTU value, which is stripped out as Butane, Propane and other substances that are fluid at room temperature. These are natural gas liquids. Since they are produced from sands that are not associated with oil, they are natural gas liquids.

All these fluids have different viscosity, or gravity. Some can be sold immediately as a finished product, but all of it is a lot thinner, or lighter than oil. Some refineries will blend the fluids with their oil stream to make a stream that is consistent in gravity, in other words lighten heavy oil. Some of the fluids are used to make plastics by petrochemical plants.
Bob Ebersole

The Estonian government announced July 12 it plans to challenge the European Commission over its carbon dioxide cap.

Approximately 60 percent of Estonia's energy is produced through combustible oil shale, which is widely available in Estonia, with the remaining 40 percent coming from Russian natural gas and oil. But burning oil shale has one major drawback: It puts out a lot of carbon emissions.

The small Baltic nation has asked the European Union to increase its quotas to almost twice the current level, to 24 million tons. Such a large increase would allow Estonia to cut its dependence on Russian natural gas in favor of oil shale and remain largely self-sufficient.

Estonia has said the European Union's strict cap oversteps the union's authority and would force Estonia to remain reliant on Russia.

Thats not a bug, its a feature.

Oh Joy.


"BLOG Warriors"

Trolls n sock puppets for hire!

Yet another thing the system admins will have to watch for and write code to share sources of comments so they can figure out if they are 'getting their zone flooded'. (Damn, I feel for the admins - more crap to deal with in your otherwise mostly thankless job. I haven't said "Thanks" in some time so adTHANKSvance to the TOD staff/writers and even most of you posters.)

Yes, Dear Editors, Contributors and "even most" of "us",

Thank you.

From the Rigzone story on the NPC Report:

"The NPC study noted that total global endowment of fossil fuels appears to be huge, but only a fraction of those estimated volumes can be produced because of technical constraints. It said the Earth's underground stores of oil were estimated at 13 trillion barrels to 15 trillion barrels."

Did they actually say 13 to 15 trillion? :-O
Did they mean good ole' fashioned oil? (!)
Or do they mean "fossil fuels in general?

To repeat, did they actually say 13 to 15 trillion barrels? (!!)

Remember, we are only one cubic mile from freedom


Lets see:

conventional light sweet crude............ 1 trillion barrels
economicially recoverable Venezuelan tar... 1 trillion barrels
Canadian economicly recoverable tar...... 1 trillion barrels
already produced oil....................... 1 trillion barrels
oil left in place after production......... 2 trillion barrels
oil shale in Colorado.......................4 trillion barrels
tar sands too deep in Canada 3 trillion barrels

See, 13 trillion barrels isn't too difficult if you're willing to pay no attention to economics and global warming, or wish to rely on technology that hasn't been invented.

That's why we can't argue reserves with cornucopians, price and delivery rates are our opening.

These are just my guesses as to what the actual NPC report says, but I'm fairly certain I won't be off by an order of magnitude.

Bah! 13 trillion is nothing - what about all those lovely Methyl Hydrates?


I realize you're being facetious, but in all seriousness, what about the methyl hydrates? I realize by definition they are deep and highly pressurized, which makes them problematic. But if we have climate change problems now, think how ugly those problems would become if a sizeable fraction of all that methane were to surface and escape into the atmosphere (such as might happen near an undersea volcano, for example). Is it perhaps worthwhile to invest in tapping methyl hydrate as a form of insurance policy? Someone educate me, I'm lazy about looking stuff up :)

"Let us wrestle with the ineffable and see if we may not, in fact, eff it after all."
-Dirk Gently, character of the late great Douglas Adams.

We dont have to wait for the methane hydrates to combust because as we sit here vast amounts of methane are escaping into our atmosphere from melting permafrost. One more feedback loop that was not anticipated...till it started happening.

three words.
'Permian extinction redux'

RC I am assuming this was reported from the article in yesterdays WSJ and I about browned my drawers because that's exactly what the article said in the last paragraph. I read it multiple times to make sure they weren't talking about total Fossil Fuels.

WSJ 7/16/2007 page A2

"The NPC study noted that total global endowment of FF appears to be huge, but only a fraction of those estimated volumes can be produced because of technical constraints. It said the Earth's physical sotre of OIL under the the grownd were estimated at 13 trillion barrels to 15 trillion barrels."

That was the end of the article and I guess that means we are only going to be able to recover 13%-20% of the worlds oil endowment assuming a total URR of 2-3 trillion barrels. Seems a bit low but I don't fully know the assumption methodology set they used to arrive at these nums.


You raise EXACTLY THE ISSUE that bothered me. I had seen some cornucopians attempt to make a case for maybe 8 trillion barrels on the high side, in opposition to the Hubbert/Deffeyes count of us being about half through total quantity recoverable, rough guess being 2 trillion gone, two trillion to go, and the second half harder to get than the first. A count of 8 trillion would leave the boomers able to drive into their dotage in a damm nice sport ute, so there was no need to go over the top and claim something like 13 to 15 billion barrels. But lo and behold, that's the number the NPC seems to be putting out there. If history is any indication, reserve growth, improved technology leading to better extraction and all that, we would be talking about a URR of 6 to 10 trillion all told. Is that the case they are now making?

If so, it would explain why the Shell answer man Hoffmeister or the head of the API, ExxonMobil, the USGS and OPEC all see no danger of peak until past 2040, 2060 or "never" for all practical effects. I can't accept that for one moment and would have to see ABSOLUTE PROOF.

So why does this fascinate me? Because the distance between those who accept oil depletion in the near view mirror (my phrase for past, or soon), and say "120 million barrels a day, never" and those who see "no peak in sight" continues to increase, past the point of all reason. It means that the credibility of all numbers is destroyed, and the credibility of knowledgeable people in and near the oil industry becomes essentially worthless.

We need to go back to the very fundamentals and start over, from day one: Each and every field must be re-evaluated, legally if possible and through espionage and spying if need be. Areas off limits to drilling in the U.S. must be at least temporally opened for precision and advanced exploratory drilling, with costs shared by the U.S. in exchange for open access to the information concerning what is there. We simply have to find some way to know where we stand. NO other industry operates completely in the blind and completely without science. Petroleum exploration and resource estimation cannot be allowed to either. It is among the most important industries in industrial era history.

Here's my view in a nutshell. If this whole thing turns out to be a "cry wolf", there will be no second chance. The real wolf will have our azz for lunch.

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

Russia plans big nuclear expansion

Leading the globe in construction of new plants, it also hopes to export as many as 60 plants in the next two decades.

Before the Chernobyl accident threw everything atomic into disrepute, Soviet economic planners dreamed of mobile nuclear power stations that would light up remote Arctic towns.

Public antipathy and economic woes shelved those dreams for two decades. But now, under direct orders from the Kremlin, ambitious Soviet-era expansion plans are being dusted off and rapidly implemented – including the first-ever floating atomic power station, set to begin operations in the frigid White Sea by 2010.

In a sweeping revival of Russia's nuclear industry, President Vladimir Putin has signed off on the construction of 26 major new nuclear stations, which will almost double the share of atomic power in Russia's electrical grid. In addition, the country's main atomic agency says it hopes to export as many as 60 nuclear power plants in the next two decades.

Critics say those export plans – particularly for floating stations, which use uranium enriched nearly to weapons-grade level – pose a proliferation risk, and warn that the largely Soviet-era technology could have dire ecological consequences. But advocates say the expansion wave is unstoppable, due to a partial shift in public attitude, the exigencies of global warming, and increasing economic pressures.

'Including the first ever floating atomic power station' Has no one in the Kremlin the guts to tell Putin that lots of ships and subs powered by nuclear reactors have been constructed, including many by his own country? Come to think of it, I wouldnt break the news to him.

Here's mad props for the article:
On the Precipice: Energy Security and Economic Stability on the Edge

Most of the raw information is old hat to the TOD crowd, but it was structured clearly and succinctly, and Mr. Davis' evisceration of the CERA estimates is a thing to behold.

Everyone profit taking at the end of the day. Bet we will see a close over 14,000 sometime this week and then everybody gets out. Strange these psychological numbers, but the masses buy into the run up to the number. Kudlow makes me ill. Rah, Rah. America's great. Capitalism wins. Heading for 20,000. Yeah, right.

I hope the strange psychology holds just long enough for someone to gleefully buy my adorable, but unsustainable, house.

I'd like some recommendations on the history of oil use, discovery, and production. If you know of a NOVA or National Geographic type of documentary that would be great. Books are fine too, but I would like ones that have good diagrams and discuss things in lay terms.

I'm particularly interested in the technical parts that many of you take for granted, not political history. I have just finished reading Twilight in the Desert where my ignorance of oil production was plainly revealed to me.

I've Googled around for the last hour or so and can't seem to find much that's exclusively geared toward technological and scientific history.

Thanks for any help!

Piggly: You should start with the report Joseph Palmer linked. Very well written and sums everything up nicely.


Thanks this looks interesting. I'm still looking for something about the discovery of oil, how it was first found and the technologies used to extract and refine it and how that developed over time sans the political and social ramifications of use and dependency.

I don't want to own up to my level of ignorance of geology too much as that would publicly embarrass me, but let's say when I saw a peak oil documentary a while back and it said the oil came from dead plankton that was news to me (I thought it was from other biomass like dead trees and big animals). And when Simmons said oil seeped into the wells through perforations, I realized I knew next to nothing. I thought oil was like a big swimming pool trapped between rocks, not mixed in with rocks. OK I owned up to my ignorance publicly!

Since then I've learned about bubble points and other things by referencing the Schlumberger glossary and Wikipedia, but I'd like to read or watch something that could put this altogether.

I suggest a look at the Doctoral Thesis of Robelius, Fredrik:
Publications from Uppsala University

Thanks very much Joseph, this looks great.

If you read Robelius' thesis and understand the numbers, you will likely end up being a complete doomer. Of particular importance, pay attention to the disproportionate share of both reserves and production that comes from giant and super giant fields. Then look at the proportion of production and reserves associated with the other 99% of all fields. I think you will be shocked. And shocked more when you find out that the vast majority of those giant and super giant fields are in decline meaning that for every giant or super giant field, dozens or hundreds of smaller fields must be found to replace its reserves and production.

If reading Robelius doesn't make you laugh at the absurdity of our Red Queen problem, then you probably need to get out more. ;)

Ghawar Is Dying as we slide Into the Grey Zone
"The greatest shortcoming of the human race is our inability to understand the exponential function.

Yeah, you're not alone. When I tried to explain the basics of peak oil to my wife it got difficult when she told me she didn't know how oil gets made or where it comes from. When I said we were going to run out of it fairly soon she said, 'well can't they make more of it?'


Unusual, normally wife and husband are in the same intellectual level. Likes seeks likes.

Google Schlumberger


By the way, Ron and anyone else who cares, you can be a true participant in the futures market, without taking physical delivery at, e.g., Cushing, OK for crude or gasoline in the New York harbor. You do an "EFP" (Exchange of Future for Physical) transaction with a willing participant and take delivery away from the exchange at any point. For example, Houston for any product, and the economics are the same - but, buy a book on futures trading if you want a complete explanation. We did it all of the time. And you can do the same thing without doing the formal EFP by working with a willing participant. The real beauty of a futures market is that when you do these things, the seller can sell into the market when he perceives that he has an adequate price and the ultimate buyer can buy whenever they perceive that they have a good purchase price and they each (seller & buyer) have their economics, but their prices do not match, because of the traders in-between. Trust me, read a book.

Jbunt, I returned from Saudi Arabia in 1985 and decided to make my fortune in the stock market. Flushed with cash, I had been studying the market since 1980.

So I decided to become a stock broker and really get rich. I took a course, sponsered by a penny stock broker, and early in 1986 took a six hour test in Atlanta and got my brokers license. Went to work for the penny stock broker for awhile but could not lie good enough to sell any of the crap they were peddling.

Then I returned to Huntsville Alabama and got a job with Thompson McKinnon, a long standing stock and commodities broker. (They have been since bought out.) I then studied the commodities market, went to Birmingham and took the commodities broker test, and passed. I was a stock and commodities broker, (account executive), for about six months. It eventually became clear to me that the word "stockbroker" was just a fancy word for "salesman". I just could not pick up that phone and cold call someone and try to sell them something that I really hadn't a clue whether it would increase or decrease in value. I was a failure as a stock and commodities broker because I was not a convincing liar.

My reason for telling you this is that I know how the stock, bond and commodities markets work. I do not need to read any damn book, I have read dozens of them.

So you trust me and take your suggestion that I read a book and stick it.

Ron Patterson


Nobody tells people that a stockbroker is a telemarketer thats forced to wear a tie at the office. I've never done it, but I'm a good telephone solicitor. The nice thing about telephone sales is that it cuts your time between sales calls, and if you actually have a product that you believe in, it can be gratifying. Its one of the things I had to do when the oil business was in the pits.


Well, Ron, you first said "Your theory assumes that people who trade oil futures contracts actually trade oil." At the time I wrote my comment to which you were commenting on, I beleive that I was aware that traders trade and that you cannot go by the numerical trades to exactly figure out who is doing what (true participants).

As for being a convincing liar, if a broker today were trying to get customers to go "long" energy futures, based upon the current weight of the fundamental evidence (as they saw it), I would not view them as liar if prices went down. That is just investing. If there were no risk in an investment, the return would be zero.

Hello TODers,

Poached from Matt's LATOC:

An oldie from 1997, but a goodie from the Army War College:

Constant Conflict

There will be no peace. At any given moment for the rest of our lifetimes, there will be multiple conflicts in mutating forms around the globe. Violent conflict will dominate the headlines, but cultural and economic struggles will be steadier and ultimately more decisive. The de facto role of the US armed forces will be to keep the world safe for our economy and open to our cultural assault. To those ends, we will do a fair amount of killing.
By the way, Mexico is not having a good day:

Demonstrators set fire to buses and threw rocks as they tried to march to a stadium due to stage a major cultural festival from next week.

Dozens of people were reported to have been injured in the fighting.
I sure hope people come to their senses soon and then realize that burning buses means they will all have to walk everywhere sooner. We must have an instinctive desire for maximum blowback--Hans Selye's GAS, IMO-- anyone doubt the accuracy of Jay Hanson's Thermo/Gene Collision?


I beginning to think that even Jay is too optimistic in his projected timeline to total anarchy. Time will tell.

EDIT: A little more food for thought on blowback. Consider two males wolves contending for the Alpha position: they just go at it tooth and claw, not also burning the forest around them--minimum ecologic blowback. Carnivores are much smarter than us Detritovores.

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

Thanks for keeping up with the situation in Oaxaca! Its my favorite city and state in Mexico, but the Mexican domestic problems are huge there. Its very poor and very indian.

Bob, guess you missed my question @ Mexico up page? About 20-25 years ago my buddies and I would ride our bikes down to Oaxaca. Best food I have ever eaten. With a nod to Alan, a good NO shrimp etouffe is hard to beat. Wonderful Mole with anything.

BTW, have you been doing any fishing?

River, its been pretty nasty water lately because of too much rain, but it cleared today, so no fishing. But you've inspired me about mole', I'm gonna head to the taqueria about 10 blocks from me-its pretty good, although not in the same class with genuine Oaxaquena mole. Pretty waitresses, though-I wish I didn't seem grandfatherly to them.
Bob Ebersole

Hello TODers,

I am beginning to think the real Mideast problem will soon be Pakistan, not Iran. Pakistan does have nukes and missile-delivery systems, Iran is still considered by the IAEC to be years away from this capability. Perhaps, Iran is just the magician's visible hand, the real juggling is going on with the invisible hand in Pakistan.

It makes sense if you think about it for awhile. It may be possible for Bush/Cheney to cause an Iranian civil war or internal coup [notice that I am not in favor of it]--thus no breakdown into a total war throughout the Gulf region, and the oil and gas keeps flowing. But if Pakistan Jihadi suicide-bombers get hold of the warheads, then the world enters a drastically different set of problems.

From an Indian website [hopefully this is truthful]:

Pakistan's nuclear jewels safe: report

Islamabad, July 17: A Pakistani nuclear safety expert has claimed that the country’s ''nuclear crown jewels'' are safe in the hands of the army and cannot fall under the control of extremists or terrorists.

Meanwhile, this just came in:

A suicide bomber has killed 13 people outside a court in the Pakistani capital Islamabad where the country's suspended chief justice was to speak.

I am in favor of universal Peakoil Outreach to minimize the insanity and optimize the decline, but it appears nobody in charge is listening. Oh well.

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

I'm with you, Bob. Pakistan has a number of very worrisome factors: overpopulation, destruction of resources, fundamentalism, nuclear carelessness, etc.

Hello TODers,

AIDS crisis feared as migrants return to Mexico

AIDS is spreading quickly in rural Mexican states with the highest migration rates to the U.S., researchers say. The greatest risk of contracting AIDS faced by rural Mexican women is from their migrant husbands, a new study found, a problem compounded by the women's inability to insist that their husbands use condoms.
Amazing, isn't it? The more humans act stupid, the busier the Grim Reaper gets adjusting our Overshoot headcount to a new equilibrium. Expect the same here in the US when we cannot afford the retroviral drugs and condoms anymore. 50 million American orphans?

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

Did anyone happen to notice this today?

Former Reagan Official Paul Craig Roberts Says Bush May Stage False Flag Events To Reinstate Draft and Start War Against Iran

This is supported by recent comments from Zbigniew Brzezinski, former National Security Advisor to Jimmy Carter and perennial master of Realpolitik:

Brzezinski Suggests False Flag Event Could Kick-Start Iran War

There is also "indirect" support for this sort of possibility from the Council of Foreign Relations:

A war with Iran pretty much takes 20 mbpd off the market for at least a few months, thus most likely inducing a global slowdown and who knows what kind of political changes in the U.S. In any case, it's likely that we will never have that moment of vindication for us, that incontestable sign of geologic peak, whether due to "above-ground factors", or gradual media co-optation of peak oil awareness (as we are seeing with climate change), or maybe some other unforeseen "above-ground factor." How that will affect our society's political response to declining oil production, I don't know, but I suspect that the "switch-to-alternatives" crowd will have less influence if the illusory carrot of increased-oil-production-through-overcoming-above-ground-factors continues to be dangled in front of people. In any case, get ready for some difficult times, because, regardless of the visible REASON for decreasing oil production, we know it's coming, and we know that we have fallen waaaaaay short as a society in preparing for it.

Couldn't agree more...artificial "above ground events" will cloud the PO and GW issues.

In any case, it's likely that we will never have that moment of vindication for us, that incontestable sign of geologic peak, whether due to "above-ground factors", or gradual media co-optation of peak oil awareness (as we are seeing with climate change), or maybe some other unforeseen "above-ground factor."

You read it the other way...we will NEVER see more production than Dec. 2005 and July 2006....EVER.

So, we saw Peak, but no one will care with fallout drifting down from the sky or stock market :P

Actually Israel built a dam blocking the flow of water from the Golan Heights that "feeds the Yarmouk river and Wihada reservoir, shared by both Jordan and Syria. The two countries use the reservoir for generating some 18,000 megawatts of electricity." This has incited Syria to demand control of the Golan Heights by August or else. Syria has threatened to send commando teams into the Golan to deal with the problem and are prepared to repel Israeli retaliation. This has got China to make a statement in support of Syria, Russian ships heading for a Syrian Port, and Iran pointing missiles at Israel. US is sending the Enterprise Carrier Group. Soon as the Syrians blow up the dam, Boom. We get to attack Syria and Iran and take what we want. Remember this when people want to know how WWIII started.

Ron Paul has also spoken on the floor of the House of Representatives about the possibility of a false flag event.

Late night news cruising over at Bloomberg (the next president?):

Bear Stearns is setting up tomorrow's market mood to be a bit sour...

Dollar Slumps to Record Low Versus Euro on Bear Stearns Losses


The dollar fell to a record low against the euro and dropped versus the yen after Bear Stearns Cos. reported hedge fund losses, fueling speculation investors will spurn U.S. assets as the economy slows.

Bear Stearns Warns Hedge Fund Investors of Total Loss


Bear Stearns Cos. told investors in one of its hedge funds that they won't get any money back after creditors forced it to sell assets at depressed prices, according to a letter sent by the firm.


The situation underscores the severity of the shakeout in collateralized debt obligations, securities that the funds used to bet on subprime mortgage loans. Bear Stearns said in the letter that the funds faced ``unprecedented declines'' in bonds that were rated AAA or AA, the two top investment grades.

``That has implications for credit weakness in the next several days and weeks,'' said Peter Plaut, an analyst at New York-based hedge fund Sanno Point Capital Management. ``There's going to be more risk aversion.''

U.S. Treasuries Rise; Bear Stearns Loss Feeds Demand for Safety


U.S. Treasury notes rose as losses at hedge funds run by Bear Stearns Cos. fueled speculation mortgage defaults will sap demand for riskier assets and curtail economic growth.


``The subprime meltdown is spreading to higher asset classes and that's leading to a flight to quality in Treasuries,'' said Yutaka Grivel, a trader at Barclays Capital Japan Ltd. in Tokyo. ``We're bears on the U.S. economy for the second half of the year.''

Now...care to take any guesses on the Weekly Petroleum report? If it's not a good one, tomorrow's market could be very nasty.

Hello TODers,

The nuclear industry must be going crazy as the Japanese earthquake revelations keep pouring in. This electric company needs to be instantly truthful, and exceedingly careful in every future move and announcement.

From the article linked below, they might have been very lucky to escape a major disaster. Some earthquake experts are now saying that the plant might have been built right on top of a faultline--Yikes! Other newslinks had photos showing ground cracks and subsidence around the plant.

Speaking in Malaysia, IAEA chief Mohamed ElBaradei said a thorough review was key and offered to have his Vienna-based agency pull together global experts.

"It doesn't mean that the reactor structure or system has been damaged," ElBaradei said. "I would hope and I trust that Japan would be fully transparent in its investigation of that accident. The agency would be ready to join Japan through an international team in reviewing that accident and drawing the necessary lessons."

Meanwhile, TEPCO spokesman Hiroshi Itagaki said that information accumulated by studying aftershocks shows that a fault line stretches under the ocean near the coast, which is not far away from the plant. He declined to say how close to the plant the fault might come, but the company is planning to further study the issue.

Osamu Kamigaichi, an official at Japan's Meteorological Agency, which monitors earthquakes, said it was possible the fault line stretched in the direction of the nuclear facility and may reach underneath its grounds.
Don't forget the earlier news that the ground shaking and acceleration rates were twice the anticipated amount.

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