DrumBeat: November 16, 2007

High Oil Prices Confound OPEC

As oil prices hover around $95 a barrel, OPEC should be in a celebratory mood: its members are reaping record revenue, demand for their product keeps rising and the world economy seems capable of sustaining oil prices that would have seemed suicidal just a few years ago.

But the oil-producing group faces an increasingly uncertain environment. There are fears of a global economic slowdown, an endlessly depreciating dollar and growing concerns about the effect that burning fossil fuels has on the planet’s climate.

As leaders of the Organization of the Petroleum Exporting Countries meet in the capital of Saudi Arabia for a rare high-level summit this weekend, there are signs that high oil prices are a mixed blessing for producers.

Gas prices slip, oil futures climb

December crude had lost 66 cents in the previous session after the Energy Department's Energy Information Administration reported an unexpected 2.8 million barrel increase in inventories last week. But much of that supply build occurred on the West Coast, where the energy infrastructure is largely isolated from the rest of the country, analysts said.

"I think the market may have realized overnight that that EIA report wasn't that bearish," said Jim Ritterbusch, president of Ritterbusch & Associates in Galena, Ill.

Qatar says dollar slide eroding purchasing power

Qatar, which pegs its riyal to dollar, is concerned that the US currency's slide on global markets is eroding the country's purchasing power, the oil and gas exporter's deputy prime minister said.

OPEC to discuss creation of currency basket to price crude

Leaders of the Organization of Petroleum Exporting Countries meeting this weekend in the Saudi capital are likely to discuss the possibility of creating a currency basket to price their crude, Venezuela's oil minister said yesterday. Rafael Ramirez, the minister, said the issue will come up at a closed session in the two-day OPEC summit, Dow Jones Newswires reported.

OPEC Looks to the Future, Its Clients to the Present

The OPEC ministerial conference slated for Dec. 5 in Abu Dhabi may also fail to decide on measures aimed at moderating prices, which are closing in on 100 dollars a barrel.

"The thing is, for now OPEC can increase prices, but it can't bring them down," Elie Habalián, a retired professor and former representative of Venezuela at OPEC, told IPS.

Big day looms for Venezuela

In two weeks, Venezuela could be starting an extraordinary experiment in centralized socialism fueled by oil. By law, the workday would be cut to six hours. Street vendors, housewives and maids would have state-mandated pensions. And President Hugo Chávez would have significantly enhanced powers and be eligible for re-election for the rest of his life.

Pipelines helps Greece and Turkey forget old rivalry

A decade ago Greece and Turkey were nearly at war over an uninhabited island, now a shared gas pipeline to be officially inaugurated Sunday symbolises a new spirit of cooperation between the rivals.

OPEC to put carbon capture at heart of new green agenda

OPEC leaders are set to make carbon capture and storage the centerpiece of their new-found green agenda by urging greater use of the emerging technique to curb carbon emissions, Algeria's energy minister said Friday.

Chakib Khelil, reading from a draft declaration expected to be approved at the end of an OPEC summit, said point three would be "energy and environment: carbon storage could reduce the impact of fossil fuels on climate change and developed countries have the technology on this."

OPEC Communique Shouldn't Mention Dollar - Saudi Minister

Saudi Arabia Foreign Minister Prince Saud al-Faisal Friday advised ministers from the Organization of Petroleum Exporting Countries not to mention the dollar in their final communique, saying it could further weaken the already-battered currency.

In comments broadcast on a live television feed from a closed-session meeting of foreign, oil and finance ministers from OPEC countries, al-Faisal said: "We shouldn't mention the dollar because that would only endanger it more and aid its collapse."

Also: Blunder lets media eavesdrop on ministers' meeting

OPEC promises expensive oil

On the eve of the summit, OPEC has been subjected to a massive attack led by oil consumers, who demand that it should immediately increase oil production. The price of oil may surpass the record of $100 per barrel any day, but it is already clear that the oil cartel is not going to make any concessions to oil buyers this weekend.

OPEC experts call for expansion of oil supply to consumer countries

Experts on OPEC affairs called on Friday on member countries to expand supplies to consumer countries in a bid to maintain the group's share in the world oil market.

The call was made by experts participating in the second part of activities held on the sidelines of Third OPEC summit which is to commence in Riyadh on Saturday and run through Sunday.

Gazprom Warns EU of Fallout From Unbundling Proposal

Gazprom, the Russian-owned world leader in international gas supply, has warned the EU that moves to unbundle its utilities could damage future supplies to member nations.

India LNG deal is dead: Iran

Iran’s new oil minister Gholamhossein Nozari has blamed a "misunderstanding" for the fall of the $22-billion deal to export five million tons of liquefied natural gas (LNG) to India.

Though the Iranian minister did not say that the deal was dead, one of his aides said that Tehran was considering the deal closed. "If you (India) want LNG, it has to be on a new contract on new terms (price)," the aide said.

Deal signed by a mid-sized Oklahoma City oil company may signal broader Libyan investment

An Oklahoma City drilling company's first international foray will be in Moammar Gadhafi's Libya, another sign that U.S. investment is broadening in a nation once considered a pariah by the United States.

Australians named as world's worst polluters

Australians are the world's worst individual greenhouse gas polluters if emissions are calculated from the output of the country's power stations, according to new analysis.

Each Australian produces nearly 11 tonnes of CO2 power sector emissions, the United States follows on nine tonnes per person, while Britain is ranked ninth at 3.5 tonnes and China - heavily criticised by the international community for its rapid development of coal-fired power stations - produces only two tonnes a year per person. Indians emit about half a tonne of CO2 per person.

Energy crisis is on horizon, expert says

When you fill up your car to go to work or to grandma's house for Thanksgiving, consider an expert's grim warnings about the world's supply of oil and other energy sources.

The world has passed its peak production of oil, and people must come to grips with approaching shortages and an urgent need for conservation, said Matthew Simmons, an energy investment banker in Houston. He delivered a lecture at the University of Kentucky last night and spoke with the news media beforehand.

Peak Oil And Silence

The fact that the world’s oil supply is going to run out has been known for a long time: M. King Hubbert was spreading the word in the 1950s, and there are persistent rumors that many oil engineers in those days had a good idea of what was going on, but they were afraid to speak because they might risk losing their jobs. But that was fifty years ago. Why is there still such a remarkable silence?

Key test in Iraq: Is the power on?

It is the Cadillac of electrical plants, new and sophisticated and reflected in the pride of the local security guards hired to protect it. When it's turned on, providing enough power to run roughly the equivalent of 400,000 Iraqi homes, the Musayyib gas power plant will provide a large boost in the US military's campaign to restore basic services to Baghdad and, it hopes, quell the insurgency there.

But in Iraq, it seems, nothing is simple. Lack of fuel and parts, and poor Iraqi governance, have kept the Musayyib plant's 10 jet-engine-sized turbines off-line. It is emblematic of the large challenges facing the military's most important noncombat counterinsurgency tool: the provision of clean water, working sewage systems, and electric power to a population hungry for them.

High Oil prices and global economic boom

Are we witnessing the arrival of "Peak Oil" or just a speculative surge in energy & gold prices...? The vast majority of Americans don't usually follow the trends of the crude oil futures market. But the global "Oil Shock" has now finally caught their attention after gasoline prices suddenly jumped 15% at the pump this month.

Oil prices to remain 'crazy'

Oil prices will remain "crazy" for the next few months, or even years, as consuming countries demand more supplies, while the Organization of Petroleum Producing Countries (OPEC) wants security of demand to increase output.

Lack of energy supply restrains South Asian growth

Lack of adequate and reliable energy in South Asia is emerging as a key constraint to sustaining recent strong economic growth, warns a new World Bank report.

Canada says it has ample energy supplies

Canada has ample supplies of energy to meet expected rises in demand, and will be able to increase its exports of oil and electricity, government agency the National Energy Board (NEB) said Thursday.

"Energy demand in Canada will continue to grow for the next 30 years," said the NEB in a report, with population and economic growth seen as the main driver. "[But] Canada will have enough energy supplies in the forecasted future."

Canada Regulator Says Oil Sands Rush May Slow

Rising costs will temper production growth from Canada's vast oil sands, the country's national energy regulator forecast on Thursday, as it detailed its expectations for Canadian energy production over the next two decades.

All this and oil too: God may indeed be Brazilian after all

WHEN Francisco Suares, a Portuguese explorer, wrote home to his brother in Lisbon about Brazil's natural bounty in 1596, he declared himself “ashamed to write it, fearing that I shall not be believed.” And so it remains today. Brazil's forests are bigger than anywhere else's. Its soil is so fertile that some trees grow to full maturity quicker than people do. Beneath the soil lie huge mineral deposits that are raw material for China's double-digit growth. Brazil is already on its way to becoming an alternative-energy superpower. And as if to prove a popular saying that “God is Brazilian”, it now seems that there are billions more barrels of oil than previously thought lying beneath deep waters off the country's coastline.

Maine to announce energy emergency plan

Record high oil prices and a desire to be prepared for any potential fuel shortage during the winter is prompting Maine state government to develop an energy emergency management plan.

Chávez: 'Peaceful' nuclear energy in future

Venezuelan President Hugo Chávez on Thursday said his country will start to develop nuclear energy with peaceful goals with a program similar to those in Brazil and Argentina.

Food Vs. Fuel

The world's poor spend twice what they did on food just seven years ago, yet still starve in greater numbers. An eight-year-long drought in Australia, the lengthiest in 200 years, has helped keep global supplies of wheat and corn tight. Concern about climate change has led to biofuels subsidies that pit hungry mouths and empty gas tanks against each other.

Biofuels bonanza facing 'crash'

The biofuels bonanza will crash unless producers can guarantee their crops have been produced responsibly, the UN's environment agency chief has said.

US, China working on biofuels pact

The United States and China are working on a pact to promote use of ethanol and other biofuels to reduce greenhouse gas emissions and could announce an agreement as early as next month, an American official said Friday.

Clean technology investment soars

This year will be another record-breaking year for venture capital investment in "clean" technologies, according to a new analysis of the market.

China set to exceed renewables target

If China's commitment to diversifying its energy supply persists, renewable energy could provide more than 30 per cent of the nation's energy by 2050.

In new take on carbon-trading, Indonesia may get paid to save trees

For decades, conservationists have sought to halt the wholesale clearance of Indonesia's tropical rainforests by loggers and plantation companies. But repeated calls for sustainable forestry practices to safeguard biodiversity haven't succeeded in stopping the chain saws.

Now, help may be arriving in the shape of a carbon-trading program that would effectively pay Indonesia and other forest-rich countries not to chop down their trees. Behind the initiative is the potential monetary value – as yet unrealized – of tropical forests as vast stocks of carbon that the industrialized world can offset against greenhouse-gas emissions.

Ringing alarm of peak oil

World oil production may have reached its peak and will affect everything from cheap airfares, grocery lists and the auto industry, according to a new report released yesterday.

Momentum in global oil production is slowing with aging oil fields and fewer discoveries, since the world has been "seismically searched and picked over," the report from the Earth Policy Institute, an environmental think tank, claims.

"Whenever peak oil comes, it's going to be a seismic event," president Lester R. Brown said from Washington, D.C.

"I think future historians looking back will probably use the terms BPO, Before Peak Oil, and APO, After Peak Oil, because this could be one of the great fault lines in economic history."

OPEC to discuss soaring oil prices

OPEC ministers are in Riyadh, Saudi Arabia this weekend to discuss the soaring price of oil on the world market.

So far, there has been only the most subtle of hints that the world's leading oil producing nations will raise output to meet the voracious global thirst for crude.

Singapore Yards Enjoy Full Order Books But Currency, Execution are Risks

Singapore shipyards are being kept busy with a dizzying schedule of orders for oil exploration rigs and other support vessels for the oil and gas industry that stretches through 2011.

It should be a major boon for their earnings and share prices.

But last month, the market learned that winning huge orders is not without risk when two major shipyards said they had racked up a combined foreign exchange loss of over 360 million US dollars.

MEND Claims Responsibility for Nigeria Pipeline Attack

"A small commando unit of the Movement for the Emancipation of the Niger Delta (MEND) sabotaged a major pipeline feeding the Shell Forcados export terminal," spokesman Jomo Gbomo, said in an e-mail. "The extent of damage could not be ascertained after the operation. However, our strategy is to nibble continuously on the oil industry until they are crippled."

The pipeline, which delivers crude from the South Bank flow station to the Forcados terminal, was attacked and ruptured in the early hours of Nov. 15, Shell confirmed earlier Thursday.

Go with the flow? Opec examines the benefits of boosting capacity

Shaybah's expansion is part of an $80bn (£39bn, €55bn) programme to increase Saudi Arabia's oil production from the current 11.3m b/d to 12.5m b/d by 2009. That will allow the kingdom to respond better to unexpected jumps in demand.

Saudi Arabia is not alone in this drive. The oil producers' cartel has committed close to $120bn (£59bn, €82bn) in different expansion projects, according to Abdulla El-Badri, the group's secretary-general. Mr El-Badri says the projects will ultimately boost the organisation's collective production capacity by some 5m b/d to almost 40m b/d.

Analysis: Saudi oil booms in empty desert

If you're counting heads, Saudi Arabia's Empty Quarter is aptly titled. But barrel for barrel, there's more oil below the red sand dunes of Shaybah than in all of Mexico or Canada -- the two biggest oil suppliers to the United States -- or each of the four smallest members of OPEC.

Desert brought to economic life by Canadian technology

Relatively small by Saudi standards, Shaybah contains 19 billion barrels of ultra-light 42-degree crude along with 30 trillion cubic feet of natural gas.

Considered to be uneconomic when it was discovered in 1968, field development began in earnest with the advent of horizontal drilling -- a technology first developed in Canada. Individual wells produce more than 5,000 barrels a day, rates more comparable to offshore wells.

The field is presently producing 500,000 barrels per day with plans to add another 250,000 barrels per day by the end of the decade. Contracts were signed in 2006 with the Calgary office of Montreal-based SNC-Lavalin, whose other notable projects include the North West upgrader near Edmonton.

Officials of Aramco, the Saudi state-owned oil company, said the field could easily produce one million barrels a day if given additional infrastructure.

Current Price of Oil is Only the Precursor of Peak Oil

Remember when most professional investors griped that US$40 per barrel crude was “overpriced,” and then that US$60 crude was “unsustainable,” and then that US$80 crude would “never happen.” But here we sit with the price of oil soaring past US$90 and looking like it wants to take out US$100.

We think crude oil will take out US$100, and then continue higher from there. Sure, crude may decline in the short term, but the destination is clear: much higher prices for oil.

Riyadh is boom town as Saudis enjoy oil bonanza

The malls are full, the cars are fast, the fashions are sharp -- conspicuous consumption is king as Saudis enjoy the benefits of oil at almost $100 a barrel.

Kingdom Ready to Invest in CO2-Reducing Technology

Minister of Petroleum and Mineral Resources Ali Al-Naimi joined other delegates at the OPEC Ministerial Council meeting yesterday in calling for greater efforts to reduce CO2 emissions and invest in new technology to curb environmental pollution.

How Dry We Are: A Question No One Wants to Raise About Drought

Let's face it, with water, you're down to the basics. And if, as some say, we've passed the point not of "peak oil," but of "peak water" (and cheap water) on significant parts of the planet... well, what then?

Oil prices rise above $94 a barrel

Oil prices rose Friday amid expectations that global crude supplies will remain tight despite a U.S. oil inventory report that showed a surprising increase in domestic crude stockpiles.

..."The outlook for pricing remains strong based on tight supply-demand fundamentals," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore. "Because of growth in developing countries, global oil demand growth is going to continue at a good pace."

..."What's really supportive of strong pricing is that global demand growth is still exceeding supply growth, and that has eaten into the commercial inventories of consuming nations," Shum said.

Saudi builds security force of 35,000 to guard oil

The kingdom started recruiting and training the industrial security force a year ago, after a failed al Qaeda attack on the world's largest oil processing plant at Abqaiq in February 2006.

...Al Qaeda's Saudi-born leader, Osama bin Laden, has called for it to take aim specifically at oil.

"There is a new threat to oil installations from terrorists that has to be confronted," Interior Ministry spokesman General Mansour al-Turki told Reuters.

Shell says some Nigeria oil output shut-in after pipeline attack

Royal Dutch Shell PLC said it has shut-in some crude oil production following an attack on a major oil pipeline which feeds its Nigeria Forcados export terminal.

..."Some production from the area has been shut in to prevent further environmental damage as a result," said Shell spokesman Rainer Winzenrie, who wouldn't specify how much production was shut-in.

Oil prices to stay at current levels: Algeria

Algerian Energy Minister Chakib Khelil said Friday that oil prices would remain at current levels until the end of the first quarter of next year, but would not breach 100 dollars a barrel.

"I doubt prices will go beyond 100 dollars because there is plenty of supplies and fears of recession," he told reporters here.

Chavez sees Ecuador as ally within OPEC

Venezuelan President Hugo Chavez has found an ally in Ecuador as he seeks to expand his influence within OPEC at a time when analysts say his country is struggling to maintain oil production.

Brazil ponders OPEC membership on find

Brazil would consider joining OPEC based on the size of the newly discovered Tupi oil field off its eastern shores, the country's ambassador to Saudi Arabia said Friday.

Isnard Penha Brasil said he was attending the Organization of Petroleum Exporting Countries summit to talk with OPEC officials and that "a membership decision will come after we know what our export capacity will be and we think this will be good."

BP selling US convenience stores

BP America Inc. said Thursday it will sell all of its more than 700 company-owned and -operated U.S. convenience stores over the next two years, eliminating nearly 10,000 jobs.

The politics of ethanol outshine its costs

Ethanol's popularity comes despite charges from environmentalists, livestock farmers, and opponents of subsidies that the move won't meet energy goals and may damage the environment as food prices soar. Energy-security experts say the measure also falls short on a key goal: weaning America off foreign oil.

A Nasty Spill

When a South Korean-owned cargo ship struck a tower supporting the San Francisco Bay Bridge last Wednesday, ripping a large gash in its hull, the United States Coast Guard first estimated that 140 gallons of fuel had leaked into San Francisco Bay. More than 12 hours later, the Coast Guard announced that in fact 58,000 gallons of a thick, gummy product known as "bunker oil" had gushed into the bay, making the collision of the Cosco Busan the worst oil spill in the region in more than a decade.

Alaska Debates Its Dependency on Oil Industry (audio)

As the price of oil escalates, Alaskan politicians are in special session in Juneau, mired in a debate over raising the windfall profit tax on oil companies from 22 percent to 25 percent.

It's all taking place against a backdrop of lobbying scandals, with four state legislators recently indicted on corruption charges for taking money from the oil industry.

Alaska Senate Approves Governor's Proposal to Raise Oil Tax

Alaska is poised to raise taxes for oil producers such as BP Plc and ConocoPhillips for the second time in two years after the state's Senate voted to approve an increase proposed by Governor Sarah Palin.

"This is a compromise bill but it is a fair bill, and it will go a long way for us to get our fair share" of tax revenue, state Senator Bill Wielechowski said during the vote late Thursday.

Climate change report to warn of potentially 'irreversible' impacts

Less than three weeks before a crucial conference on climate change, UN experts agreed Friday on a draft report that warns global warming may have far-reaching and irreversible consequences.

The report by the Intergovernmental Panel on Climate Change (IPCC) encapsulates a massive overview of the global-warming problem, with the goal of guiding policymakers for the next five years.

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

As Warren Buffet said, when the tide goes out, we find out who has been skinny dipping. It is becoming increasingly evident that a lot of the financial sector has been a virtual nudist colony.

My forecast for the indefinite future: deflationary trends in the auto/housing/finance sector, with inflationary trends in food & energy prices.

I would guess that we disagree on our respective definitions of inflation/deflation. To me these are monetary phenomena and cannot occur simultaneously, but I interpret you to mean rising or falling prices as inflation or deflation respectively. In that sense, one can have both trends simultaneously in different sectors, but IMO calling it inflation/deflation is misleading.

I would agree with you that food and energy will become less affordable in the future. In other words, I expect their prices to go up in real terms, although they would probably fall in nominal terms during a monetary deflation.

Hi Stoneleigh - what do you call price changes then?

Price changes are simply price changes, and are often the result of underlying changes in the money supply. For instance, if the money supply doubled with nothing else changing, you would expect nominal prices eventually to double as well (keeping prices the same in real terms).

However, nominal prices can fall as the money supply expands, as has been the case with cheap goods from China due to globalization. A larger money supply did not ignite a wage-price spiral as downward pressure was maintained on wages by foreign competition willing to work for less. Cheap labour, cheap energy and foreign competition has meant cheap goods. When prices fall in nominal terms while the money supply expands, then prices are falling very steeply in real terms.

Prices tend to fall in a deflation as the money supply contracts rapidly, but one can envisage circumstances where that would not be the case, or would be the case only temporarily. For instance, the price of oil should fall in nominal terms, at least temporarily, in a deflation, but the resulting disruption could then reduce supply by as much as deflation had reduced demand, or more so. In that case, oil could rise in nominal terms even while the money supply was falling, which would mean oil going through the roof in real terms. This is in fact what I'm expecting to happen over the next few years, in other words except for the terminology I agree with Westexas.

I have often wondered about how a strict money supply based definition of inflation/price increases handles the normally accepted law of supply and demand - that is, price changes to reflect supply and demand.

In other words, I don't think the price of grain is rising merely because of money supply issues - I think even if the money supply had remained completely static, the price of grain would have risen as the amount available on the world market declined - Ukraine's forbidding exports, for example, or Australian drought, or lowest stockpiles for several decades, or increasing imports from nations such as China and India.

I think 'inflation' as a money based concept is an attempt to hide reality, and not reality itself.

I think 'inflation' as a money based concept is an attempt to hide reality, and not reality itself.

Inflation as a money concept is far older than the present 'problems'. The Austrian school of economics and how the US used to run things before the 1970's, if my memory is correct.

I would guess that we disagree on our respective definitions of inflation/deflation. To me these are monetary phenomena and cannot occur simultaneously, but I interpret you to mean rising or falling prices as inflation or deflation respectively.

I believe West Texas assumptions will be proven correct. Its is possible to an asymetric form of inflation/deflation. As the dollar weakens, prices for imports will rise which caused decreased consumption resulting in higher unemployment and declining asset prices. It seems very likely that dollar will continue to decline for a very long period and and assets such asautos, real estate will decline as the credit cycle for american consumers tightens. Its likely that as the US will continue to weak as foriegnors look away from the US for investment growth and perhaps the Fed drives rates lower in order to drive growth.

I think as long as Oil and other strategic commodities and goods are priced in dollars, countries with large dollar reserves will purchase them with their reserves. An example would be China and Japan trading US dollar reserves for oil & gas. As these dollar holding are released into the market it will weaken the dollar. However, since these dollar won't end up in american consumers hands, americans will face deflationary forces.

Consider the collapse of the Argentina dollar a few years ago. Imports became very expensive for Argentinians, as their currency became nearly worthless. During this period the Argentinians suffer deflationary forces, as unemployment soared, and they could not afford maintain their lifestyles.

If the Oil and other strategic commodites are no longer priced in dollars, it likely means the US is officially bankrupt. It seems likely that more exporters will shift away from the dollar. Some are already accepting payments in other currencies. At some point some might refuse payment in US dollars starting a trend which removes the US dollar as the worlds reserve currency. I think the US would have a very rough time if the dollar is no longer the worlds reserve currency.

If the Oil and other strategic commodites are no longer priced in dollars, it likely means the US is officially bankrupt. It seems likely that more exporters will shift away from the dollar. Some are already accepting payments in other currencies. At some point some might refuse payment in US dollars starting a trend which removes the US dollar as the worlds reserve currency. I think the US would have a very rough time if the dollar is no longer the worlds reserve currency.

And thus the real problem with "peak oil" which will bite quite hard.

Stagflation ??

Stoneleigh, thanks for providing this forum and the interesting posts. The following is from ATOL and is an interesting analysis (imo) of what Bernanke said to the CATO Institute last Wednesday. It appears that Ben wants to steer the Fed away from the Greenspan tradition of proping up securities markets by interest rate cuts...But at what costs to Ben and equities values? Why do I have the feeling that Ben left out more than he said? Perhaps Bernanke has figured out a way to pawn off the worthless sub-prime mortgage bundles to the elderly on pensions and Social Security, in lieu of cost of living increases? At this point nothing would surprise me.


...snip...'The first major change elucidated by Bernanke refers to a new emphasis on what is called “overall” inflation, in the place of a previously greater focus on what is called “ core” inflation.

The distinction between core and overall inflation is simple to understand. Overall inflation is a measure of price increases in that place economists are rarely concerned about, the real world. It’s what you feel when you get a haircut, go out to dinner, and especially these days, fill your car with gas.

But, traditionally, overall inflation has not been the preferred inflation gauge for economists. In its stead, they have favored looking at something called “core” inflation, defined as price changes for retail goods excluding food and energy.'...snip...

'But the drawback of core inflation is that, in times such as these, with food and energy prices rising rapidly, the Fed loses credibility when it says that core inflation only rose 0.2% in October, and consumers then compare what they hear from their leaders with what they see on their supermarket check out tape and on the price signboards of gasoline stations, which are currently now America’s real inflation index.

Therefore, Bernanke is now saying that the Fed is going to tip the scales a bit back towards reality.

"Ultimately, households and businesses care about the overall, or 'headline' rate of inflation; therefore, the FOMC [Federal Open Market Committee] should refer to an overall inflation rate when evaluating whether the committee has met its mandated objectives over the long run. For that reason, the committee has decided to publish projections for overall inflation as well as core inflation. In its policy statements and elsewhere, the committee makes frequent reference to core inflation because, in light of the volatility of food and energy prices, core inflation can be a useful short-run indicator of the underlying trend in inflation. However, at longer horizons, where monetary policy has the greatest control over inflation, the overall inflation rate is the appropriate gauge of whether inflation is at a rate consistent with the dual mandate.”'...snip...

BenDover and his masters are never going to do the right thing unless forced.

I thought the top article funny. A technical malfunction that allowed the media to hear of the intent of the Saudi's to defend the U$S and immediately after they find the problem.

We see what comes out of the OPEC meeting, eh?
Maybe the week when everyone is on vacation is good to crash the market? Maybe the stock market is open on friday when everyone is gone on purpose?

News at 11.

A black hole - to be or not to be?


'The mortgage black hole is, I think, worse than anyone saw,' said Tony James, president of Blackstone, the big private equity firm. 'Deeper, darker, scarier. [The banks] are now looking at new reserves and my sense…is they don't have a clear picture of how this will play out and confidence is low.'"


The subprime market, parts of it will get worse before it gets better," he said. This reflects the fact that some of the most lax underwriting for mortgages occurred in 2005 and 2006, and many of these loans are still operating under low introductory rates, he said. As they reset, more defaults are likely.

Still, Paulson said the mortgage problems aren't a "black hole" and the U.S. economy will weather the turbulence and continue to grow.

Yep. No one foresaw this (with the notable exception of the hundreds of investment sites/newsletters on the Net).

I've been posting about the risk here on TOD for 2 years - in fact it's what I originally joined to say.

IMO, Paulson has even less credibility than the Bush administration in general. His job is to keep the economy from collapsing, and the only tool he has at his disposal is his jawbone.

Sampson may have found the jawbone of an ass to be useful, but I'm skeptical about Paulson's.

His real job is to make a profit for Goldman. No one ever really leaves there, they go on TDY.

Head on into the liquidity trap.

And so few see it coming.

The Economist ponders the odds of a US recession: America's vulnerable economy.


Hydrogen brewing gets an electrical boost

A new microbe-powered device can extract up to 99% of the available hydrogen from biological compounds that have stumped previous attempts to ferment fuel from plant waste. The secret is to give the bugs a helping hand with a kick of electric charge. In tests, the system produced hydrogen that, if fed into a hydrogen fuel cell that was 50% efficient, could generate between 1.2 and 3.4 times as much electricity as was fed into the system. By comparison, hydrogen extracted from water can only pay back about 25 to 30% of the energy used to extract it.

one can only hope...

Actually, I hope not. I don't think we should be wasting our time with hydrogen as a storage medium for energy to be used in vehicles. This paradigm of thinking that we MUST go to a refuelling station in order to fuel our vehicles is outdated and ties us to the energy companies. Instead, with electric drive via stored energy in the form of batteries and capacitors, electricity can be generated at home, bypassing being tied to any one provider. You can generate at home, you can buy from the electric company, or you can recharge somewhere else. Refuelling station? Any outlet!
~Durandal (http://www.wtdwtshtf.com/)

Very interesting, and the full paper is accessible.

However, the authors commit the same fallacy that is erroneously used, for example, in comparing efficiency of ethanol and gasoline production -- it's the apples and oranges problem. The authors are only counting the electricity used in bioelectrohydrogenesis vs. simple hydrolysis of water, and neglecting the energy contained in the hydrocarbon fuel supplied (simple acids such as acetic acid in their work) -- not to mention the effort required to get that fuel (i.e. growing plants and then breaking them down). A better comparison would have been between hydrogen production using this approach vs. direct gasification (pyrolysis) of the same quantity of biomass.

And then we have to consider the usual problems with fuel cells, including contamination of electrodes and exchange membranes. Any real feedstock derived from fermented biomass will either cause problems of have to be cleaned up at a cost of energy.

For a different approach which uses light instead of an applied voltage as the extra boost for the bugs, see:


Next up: an approach combining photons, electrons, and bugs.

Biologically generated hydrogen looks like a very interesting concept, but I think it needs a lot more work before it can be taken even half seriously.

Then we have to consider the question of scale. The article states that this process can generate 1.23 volumes of hydrogen per day per volume of reactor.

It takes roughly 400 cubic feet of hydrogen to provide the same amount of heat energy as a gallon of gasoline. Thus to produce the energy equivalent of just one gallon of gasoline per day would require a 325-cubic foot reactor, or one that might measure 7 feet in diameter by 9 feet high. This would be an enclosed reactor with a stirring mechanism, the electrical components described in the article, plus miscellaneous appurtenances. Not cheap. And that is just to make a single gallon of gasoline per day.

So, it should be quite obvious that to produce any significant amount of net energy using this process will require an enormous amount of reactor volume and hence an enormous (and probably prohibitive) capital investment.

I think that some of these high-rate processes for producing bio-diesel from algae can be shown to suffer from the same sort of scale-up problems.

Thank you for this interesting information.

Now don't go providing them thar liberalllly biased facts.

We are saved 'cuz the geologist says we are!

Geez Eric relax. Obviously this isn't ready for the prime time yet, it's a one of many possible small steps towards moving towards a sustainable future. I get the feeling you would be extremely disappointed one day if your apocalypse doesn't come, which to me seems kind of sick.

Hey antidoomer, I've got a friend in the Bay area who became a dealer of Chinese electric cars about a year ago. He's selling a lot of them. There's decent support for electric cars in places like Berkeley, where public parking garages often have plug-ins for recharging electric cars.

He's been driving one of the cars himself, and so have some other friends. They like them. They say they've got a 50-mile range. They said the cars are like the old 1960s Volkswagons, only "a lot more stripped down."

I'm supposed to go and look at one.

Cool, would love to hear your report on what you find. Plug in space in a parking garage is very forward thinking of berkley. See if you can find the price on this car, i'm curious.


One of those would probably do for me the same thing my little motorcycle does, with the added benefits of more storage and not getting wet in the rain. Town, where Town means Prescott, is about the farthest the bike is used for. And that's 50 miles round trip.

The little cars probably cost more than my bike, which was $2500 (and I only paid that much because it's REALLY nice) I'm guessing maybe the $6000 range?

I'd like to see the same kind of thing made here in the US though. It's going to be profitable to make our own stuff again, soon.

fleam, you live in a beautiful area.

He told me the price, but I've forgotten. I'll have the info soon and get back to you all.

Many post peak theorists seem to live in Santa Barbara, or places very much like it. This is not the sort of weather in which one rides a two wheeler. I went out, excavated the one in the middle and went off to work ...

Springtime in Nebraska

And lets keep in mind the places on Bob Shaw's future American Statelets list all have this for part of the year.

How do they do TOD in places where the white stuff gets waist deep? And how do we do things in rural areas where food is grown?

As I told a neighbor, of course the motorcycle is not the thing to take when it's snowing, raining, etc. I'd grab something with 4 wheels, if that was not an option and I really needed to get to town, I'd take the mountain bike. Hell it's not that bad a walk, really, only a couple of miles.

Where did you get all of that confetti ?

Best Hopes from New Orleans,


Hint: Don't grow anything when you have 3 feet of snow.

Rural farmers used to go to town every Friday or every other Friday IF THE WEATHER WAS GOOD. It was not unusual to be stuck inside for a month at a time in the winter. Often children were sent to town for the winter (town maybe 500 people).

During winter everyone should live in town at the Y and have a 5-month long chess tournament (or bridge, poker, co-ed naked twister, whatever floats your boat).

My folks both boarded in town once they got to high school in southern Missouri.

Jimmy Carter was boarded with a family while he went to high school, he says in his bio that they often fed him possum, which was considered low-grade food.

At the risk of invoking Godwin's Law, Hitler stayed in Steyr while going to high school there, and only came home on weekends.

Long-ass commutes regardless of weather and fuel cost are a very recent thing.

We have year-round cyclists in Portland Maine, and if you've got a couple of weeks of being Snowed in, there are buses (with bikeracks), the bike-paths work great for XC Skis and Snowshoes, too. Of course, TOD implies that if you can, you live in walking distance to many if not all of your necessities. I've got plans for a pedal-powered snow-remover.. but it's not high on the TO-DO list yet.

Trolleys (with bikeracks) would be a great addition to this somewhat Hilly town, and our outlying neighborhoods and farms. We seem to love snow up until Christmas around here, and then dislike and then despise it increasingly through March or April..


Shut up Joekuhl, Amurrikans can't imagine riding a bike ANYWHERE much less year-round in Maine.

Actually in keeping with PO I'm a couple of miles in to town, if by town you mean Chino Valley where Town is Prescott. It's walkable, and even enjoyably so if I were Anti-American and getting out and walking. I'm avoiding that if at all possible, but I still find myself losing my All-American Fat Rolls so I may say screw it and walk places anyway.

Walking's great - it can be in the 20s outside and you'll be warm. You get to see stuff. And you can kind of put your mind in neutral and just "ride" on your legs and you'll get there.

Hard to carry much in arms while walking, and a backpack is a bit better but not super, but a "human cart" like a dog cart but scaled up a bit, would make a lot of load-carrying possible. I forecast a large market for things like this, sure gas will have to be $10 a gallon and rich Ameri-cant's will be trying to pay the poor to push 'em along in their SUVs but once the social stigma wears off people will realize how handy something like that could be.

You might need the "fat rolls" this winter up there.

1Q08 is going to be the bottle neck.

That's alright. They probably couldn't find us on a Map, either.

re: backpacks, I still keep a couple Open-Pack frames, which I'd tie various big cases onto when lugging things around NYC. Funny.. I guess that was part of my 'Subway/City' kit. Haven't used it since I got up here (and we got a car..) But maybe I'll just hang onto it, just in case.

Meantime, I have scavenged some bikewheels from the sidewalks on bulktrash weeks, and have built trailers for my Bike, Wheelbarrows for my work-loads, etc.. Built with a sort of 'Legos/Erectorset' approach, so I can bolt together components into whatever little vehicle I need for the day.. If you've ever built stuff with 'Speedrail', the hardware that links pipe into handrails, you'll see that it didn't have to end with Erector Sets and Lincoln Logs.


Consider Moscow - subways, buses, and walking with thick furry hats.

If you went to the dictionary to look up "stripped down" there
would be a picture of 1960's VW. If I remember correctly, the interior was nearly all metal except for the glass over the speedometer and a few plastic knobs.
Maybe these chinese cars have lawn chairs for seats!

lol--remember the "heater"?

I think for the Chinese cars the lawn chairs may not be far off. He was kind of trying to warn me.

Remember the ice scraper you kept to use inside the windshield? I also carried a couple of quilts to wrap up in when I lived in Ohio.

Ha!Ha! yea, "windshield", it was more like "porthole".What a car though, I bought a motor for one for $5 that was in three
corrugated boxes. I put it back together with pliers, a screwdriver, and two crescent wrenches. The damn thing ran for
two years.

Hell yes I remember! I was a VW beetle man for many years, and many many miles. I remember one night driving home from somewhere in a freezing rain situation - couldn't see a thing as the windshield was totally glazed. So I cranked down the window to stick my head out for some clue as to where I was going. Of course, my glasses instantly iced up! Whoops!

In winter, when the windshield got all salted up, I would periodically pull over and scrub it clean with handfuls of snow. Those were the days?

So that is the best you've got as a response?

When the volume of material and management needed to create a gallon of gasoline substitute is pointed out - "it obviously is not ready" is the response? Do you bother to think of these things before posting?

I get the feeling you would be extremely disappointed one day if your apocalypse doesn't come, which to me seems kind of sick.

So you are projecting? Making stuff up?

Here's an idea, instead of starting fights with people, if you disagree with something just say "hey in IMO this won't work here's why for A, B, and C." Can't we just have civilized discussion.

Can't we just have civilized discussion.

You can start by answering questions when asked. Actually HAVING a discussion. Your history has been 'make the post, run away' - and only in the past few days have you been responding more than making the initial 1st post.

That would go a long way to you showing that you are here for a discussion VS whatever you are attempting.

Hopefully each and every person who asks you a question and does not get an answer will link back to you asking for a discussion.

Hey what can I say, i'm busy, and today I had some more spare time than usual to respond. :)

That's a cheap answer. You're a cheap date? :)

Another idea might be go back through the course of a year or two (or however long you've been wired to exciting technofix articles) to see how many of them have gone anywhere beyond initial web URL announcement.

I've thought about doing that on a local list I'm on but methinks the onus of proof should fall on the people who believe at all costs, just for the sake of believing.

Course they're too busy reading about the latest chance to throw mylar into space attached to kites with keys in the jar on the ground where they plan to collect tomorrow's energy today. Neo "con" Ben Franklins indeed.

I for one like the optimism of your articles.

Of course some of the technofixes won't work well (or at all), but eventually even seemingly bad ideas could lead to workable solutions. This is what science and progress is all about - combining different, sometimes wild ideas in all kinds of fields in competitive environment which eventually produces breakthroughs - most often from unexpected locations. Pretty much like the evolution is functioning too.

Of course the role of the moderators (critics) is also essential, but it is even more important criticism not to be overdone.

Thanks you, keep it up.

No - science is about testing a hypothesis and seeing if it stands up to observation. Wild ideas are a good idea however, and I doubt there are enough of them these days, but rehashing the same idea under a different guise is little more than distracting and often misleading... real innovation seems to be sadly lacking, frankly. Where are our modern day Edisons, Teslas, Einsteins, da Vincis and Fullers?

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

Where are our modern day Edisons, Teslas, Einsteins, da Vincis and Fullers?

I've wondered about the Mozarts and Beethovens, myself, but probably those I wonder about and those you wonder about are all writing code somewhere.

Or else watching Jay Leno right about now.

We have had a declining return on time invested by innovators for several generations now - call it "peak problems" in the sense that problems are like crude oil for the inventor, something which gets progressively harder to drill(solve) for as the easy ones tend to fall first. The Wright brothers cobbled a plane out of bicycle parts, but two generations later no one cobbled the first supersonic plane; further innovation required corporate resources.

The scope of tools needed to solve problems have expanded. Recall the story of the fellow who dipped oil out of a hand dug well in his yard for beer money? Today you need at a minimum a rig that costs what a house does. The same goes for the inventor - corporate sized resources are required to address interesting problems and most everything now depends on the work of others rather than simple, raw creativity - the compounding of intellectual property at work. This is good in that we can do things now that were unimaginable a generation ago, but bad in that the size of container needed to hold the knowledge is no longer a single human skull, no matter how capable the gray matter inside might be.

We have positive distractions for inventors now in the form of the internet and all the wonders it brings and many other outlets along this line where someone might build or do something within a framework, a thing that is not possible individually. We also have negative distractions, such as financial shenanigans, which draw a certain sort of innovative mind, and there is the persistent leech of our perverted legal system, which does rob and assault the creative far more often than shielding them and their creations. The invisible corporate hand has twisted the laws of men into the laws of "entities", them having grown up into containers for the accumulate knowledge and skills of many, which is far beyond their start as a simple source of capital.

Corporatocracy and complexity are to blame. Bureaucrats seek security and control; the bureaucratic organization the same. Organizations typically don't innovate unless they face certain death without it. Anyone who has worked for a publicly held company can attest to the mind numbing ass covering that is the rule. As time and distance shrink in the face of our technology complexity grows exponentially. I have before me, in the tab just to the left of this one in which I compose this message, an interface that will bring me a tidal wave of information on any subject you'd care to name. I am helped by this in many ways, but vexed by the distraction it provides. What have I genuinely done today? All of my "work" was intangible and I know far more about major rivers of the world than I did this morning ... not that anyone will pay me for that latter part, but the acquiring and knowing these things pleases me.

You ask "Where are the inventors?" Do you read Dilbert? Recall the garbage man who occasionally examines Dilbert's papers and corrects his misconceptions on complex problems. This is, with just a little bit of perspective, the famous Mr. Galt, who cares not if the motor of the world should grind to a halt. If the price of being innovative and insightful is that paid by Hubbert - financial harm and ostracism - then what fool would engage in such harmful endeavors?

I have started from scratch two wireless internet providers, both of which were stolen away by those who present better than I do, never mind the flood of civil and criminal charges that followed them both after my exit. Another company stands with thirty employees and a million dollars a month in sales (30% gross margin?) which would not exist had I not pressed my shoulder to the wheel to get it moving. That one benefits me in small ways, but I will admit great jealousy towards those who (again) present better than I do and are handsomely rewarded for it. My most recent effort, RIP as of 10/1/2007, lived four and a half years, took in perhaps half a million dollars over that time, very carefully engaging in neither the taking on of partners(pilferers) nor the accumulation of property associated with generating revenue. The final clean up has come down to one dirtbag I should have avoided who persists in trying to engage me in a civil dispute, despite massive liabilities on his side while mine are very limited. I'm three for three with big ticket(for me) civil disputes, perhaps $80k ahead of the game, and I feel no shame as I do not initiate such things. I may have the pleasure of teaching one final, painful lesson to a fraud artist before the end of the oil age.

Where are the inventors, the innovators, and the builders? The experiences I describe briefly above are the rule, rather than the exception. Who would pour their time and money into something more than what is needed to service the minimum in these degenerate times? I received a consulting gig today that pays most all of my bills for a month. A fool would have plunged into the tasks at once and sought more besides, seeking to "enrich" himself. I am a wise man and already rich in every way that matters, and thusly I made wise use of a sunny November afternoon ...

Damp Dock #2

Who would pour their time and money into something more than what is needed to service the minimum in these degenerate times?

I would venture to say the people who couldn't stop themselves because their minds wouldn't allow for it to be any way else. Curiosity mixed with passion would trump everything else.

I think your description of the situation sums up a whole lot of social and cultural overlay of a system that now thwarts such passion, that rewards mediocrity. The need to somehow profit (which equates to "exist" in the state of the rat race) becomes the box that's hard if not impossible to escape.

I would venture to say the people who couldn't stop themselves because their minds wouldn't allow for it to be any way else. Curiosity mixed with passion would trump everything else.

This, to me, is nonsense. Not trying to insult Dennis, not trying to sell any more Ayn Rand novels, but Nancy Reagan was right: Just Say No.

One can always find another outlet that doesn't feed the beast ... its just a state of mind.


We are all feeding the beast right now. We can work ourselves into tizzies of rationalization or denial by saying we are trying to find solutions to our energy problems, changing climate, dying ecosystem, collapsing society, broken planet, but ...

Winston Churchill (or some other famous person) was once talking to a beautiful woman at some state function. "Miss," he asked, "I hope you don't consider this inappropriate, but I was wondering if I gave you a million pounds, would you sleep with me?"

She thought about it for a moment, and said, "Yes, I probably would."

"Would you sleep with me for twenty pounds?"

"Goodness, no! What kind of a woman do you think I am?!"

"That, dear madam, has already been established. We are now just haggling on the price."

So despite the good work done here and elsewhere on the Net in an attempt to pull us back from the abyss, we are all not just feeding the beast, but washing it with our own blood, sweat, and tears, suffering its wastes, and fellating it.

The only difference between us individual posters and energy sinkholes like Al Gore is a matter of scale. We are all still whores, selling ourselves to a system that functionally only wants to use us and throw us away.

Nancy Reagan was so very, very wrong, and the proof is in the pudding. If it really were that easy and simple, it would have already been done. Obviously, the problem has been defined incorrectly, because the solution doesn't work for everyone in the real world, and the core problems still exist.

If Just Say No works for you, then godspeed. But it obviously doesn't work for everyone, and in the last two decades, it's pretty much been heard by everyone.

And also obviously ignored, because how did we replace recreational, mind-expanding, uncontrolled drug use? Pacifying, dulling, controlled drug use in the form of anti-depressants. If one thinks that the pacification of Zoloft is somehow morally superior to the experience of cannabis, that idea is not only wrong, but it's also helping destroy the planet.

Just say no (then go ahead do it anyway), was the real motto.

On the flip side, some people have brains that won't shut up and who are driven by passion to find solutions, but they are a small minority, and are usually saddled with other problems from being lifelong outsiders.

These days, I'm really into "Just say maybe not."

Hi, SCT by Estherville,

Maybe it is nonsense, or maybe I just wrote it too flowery at a late night hour after way too much coffee.

Applying what I was trying to say to me, I know there have been times the lure of whatever it is I'm doing (some would say obsessed with, maybe that is a better term than "passion" with its many definitions and inferences) has offset any of the financial reasons for doing it, or even acceptance by the herd.

About 15 years ago when I was writing music (most people didn't like), it got to the point it was coming into my head at night as I tried to go to sleep, sometimes even after I was asleep. Very odd, not even necessarily pleasant, and fortunately not a permanent state of affairs, but certainly an experience when the brain wasn't working the way it normally did in my day job or in the time periods before or after I was doing it.

This may still not explain it very well. Does this make any better sense?

So you're saying you chewed the blotter acid, but you didn't swallow?

:-) :-) :-)

I happened to cough about when I was going to spit it out so it hit my lungs instead of gut, I think.

Talking to another friend of mine today he describes such compulsive behavior, with only the thought of figuring it out or doing it for the sake of the challenge, as potentially a form of autism.

Now I'm getting too many diagnoses. My own fault.

I think the first part of SCT's answer is correct. Declining marginal returns applies to science and technology as much as to drilling for oil. The low-hanging fruit is picked first. The easiest and most useful ideas have already been discovered. A monk watching peas growing in his garden discovered the foundations of genetics. But today, to add the science of genetics, you need years of expensive education, access to equipment that costs more money than Mendel saw in his lifetime, and a large base of other people's labor to support you and your work.

It's become harder and harder to make a contribution, prompting some scientists to complain that dissertations have become "islands of trivia in a sea of minutiae," and even to suggest that the requirement for original research be dropped.

And peak oil is not going to help. Tainter predicts that innovation will drop as resources get scarce. We won't be able to afford it any more, and innovation is often the last thing a government facing collapse wants to see...or fund.

Information becomes fragmented. Knowledge does not. What causes this fragmentation is scholasticism. - Rumi

There are certain ones of us who think that if 95% of the population of America, at great cost and suffering, have to completely overturn our way of life to attain "sustainability" while our current tiny elite goes on as though nothing has changed, still led by the Bush/Clinton dynasties, still brainwashing us with CNN/Fox, still ripping us off both with big government and privatization, still dividing us with racism, and still sending our troops and their toxic weapons off to enslave the world, then we are little better than slaves, and sustainability means perpetual bondage. Now don't you think an apocalypse might be kind of attractive to a slave - like the early Christians for whom the biblical Apocalypse was fabricated as vengeance porn?

Under these circumstances, an optimist looks an awful lot like a house slave, whose optimism is just a way to control the field slaves while he informs on the troublemakers to his master. The term I'm beginning to hear a lot for so-called liberals who try to stomp out any genuine radical or revolutionary thought: "Gatekeeper." Gatekeeper favorites: Hillary Clinton and the hydrogen economy. Gatekeeper no-nos: powerdown and 9/11.

I think gatekeepers are worse than sick.

In reference to the "BP selling US convenience stores" story...I started seeing local BPs closing early last spring and wondered what the heck was going on.

It's becoming more and more obvious that it's not highly profitable to be a gas station / convenience store owner any more. The little guy's profit from gas sales are becoming more and more slim and big companies are eliminating "unnecessary" markets for cost-cutting reasons. This is just my opinion based on ground-truthing and random signals in the media, but I think it's close to reality.

We may have to drive further than down the block for our gasoline going forward.

In places in Eastern Oregon it is now almost more than a tank of gas from one filling station to another

Do you still have the 'Last Gas' signs in the west? I remember planning desert stretches based on the locations of these 'Oases' .. we squeaked over the continental divide on fumes once (Colorado?, 1978, good year to run out of gas), got a nice downhill ride till we found a station.

Yes, there are still many places with those signs.

Lots of signs like "Next Services 40 miles" etc.

When traveling X-country it makes sense to stop at all the rest stops, drink some water, do some jumping jacks or have a walk around, and often the rest stops have interesting plants and wildlife to see. One of my favorites is great for viewing hawks, you're often looking DOWN on the soaring hawks, it's great.

You were probably squeaking by on fumes because you didn't realize that as the altitude goes way up, your mpg goes way down. That was quite an eye opener the first time that happened to me in Colorado, too.

Back in the 70's, I drove over the Rockies a couple of times. With a carburetor, there was no altitude compensation. the air-fuel mixture was very rich at high altitude, so I acquired two sets of leaner jets, one for running at around 5,000 feet and another for higher elevations. It worked great. I wonder whether your comment was the result of similar experience, only, without the benefit of such "altitude compensation"?

Of course, the air is less dense up there too...

E. Swanson

I did a lot of coast-to-coast road trips in the 70's myself, mostly in VW Beetles. I would get to a certain elevation in the Rockies, pull over, and adjust the timing for the elevation - quite easy to do on an old vee-dub. Had it down to a science.

Yes, that was mid 1980s, with a late 1970s car, so it was old technology. It was mostly as one got up to around 10K or above in elevation that you would really notice the decline in fuel efficiency. When one is driving across the country, you don't usually mess with the carburator just for a short leg of the trip over the mountains. If one is living up there full time, of course you adjust your engine accordingly.

By the way...Valero might be next...I've seen two Valero stations close on my route to work in the last six months.

This kind of surprises me since Valero has refineries that are set up to run lower grade crude, but in this cost-cutting world, who knows.

Speaking of cost-cutting:

Bloomberg: FedEx Cuts Profit Outlook on Fuel, Slowing Freight

I found that report chilling, didn't you?

Yes...especially since FedEx cuts across so many types of businesses...retail, residential, manufacturing, etc.

That's part of what killed Ebay selling and essentially has put me out of work. The USPS had to almost double rates, and that's one of the things that's really killed the business. Going back local is the new thing now, because it makes no sense to pay $10 for an item plus $10 shipping.

That's rough, fleam. Sorry to hear it.

I wonder how that is affecting amazon.com?

Actually, I am working on a low-cost Ebay for local offers - no postage. I am hoping to make it so cheap to run that selling anything other than cars/boats/property would be entirely free even for small shops.

Here you have it. Official from the top dogs. 2T out of the credit markets.
This is really all one needs to know.


just highlighting your link...

Goldman Sees Subprime Cutting $2 Trillion in Lending (Update5)

Nov. 16 (Bloomberg) -- The slump in global credit markets may force banks, brokerages and hedge funds to cut lending by $2 trillion and trigger a ``substantial recession'' in the U.S., according to Goldman Sachs Group Inc.

Deutsche Bank AG, Germany's biggest bank, also said in a report this week that credit losses may be $400 billion. That's equivalent to ``one bad day in the stock market,'' or 2.5 percent of the value of U.S. equities, Hatzius wrote.

``No serious analyst would argue that a 2.5 percent equity market decline will make an important difference to the economic outlook,'' Hatzius wrote. ``So what's different about the mortgage credit losses? In a word, leverage.''

Hence the $2T in lending reduction.

Innovative Dutch Pumped Storage

The Netherlands are flat. Simply no place to put a pumped storage unit to help balance wind. But these are the Dutch !


Best Hopes for Offshore Pumped Storage,


Yeah, I read about this a week or 2 ago in my newspaper (www.nrc.nl). Those are actually old plans (but improved with present day tech), which used to be too expensive. No more!

Note: The highest point in the Netherlands is St. Pieters mountain, 300 meters above sealevel.

I live here:

At last, a more sensible suggestion (just maybe, if it's cost effective.)

I suspect there are quite a few abandoned mines that could be used in this way. We need some sort of battery to even out intermittent supply from various alternatives , and we know pumped storage works in practice not just theory.


we know pumped storage works in practice not just theory


Yes, it does work in practice. I have been given a 1 on 1 tour of this one.


The English major writing this piece did overdo the "uniqueness".

Bath County Pumped Storage recently increased their cycle efficiency from 80% to 81%.

Best Hopes for Pumped Storage,


It is very sensible. But if you click the link I provide, you se we will have a major problem when sealevel rises significantly. Note that during last weeks' storm surge the water was about 4 meters higher then in the picture, and waves of several meters added to that.

Thinking about it ... maybe resources in new mines could be produced in such a way that a useful pumped storage system is there, ready to run, when the extraction is finished ... instead of the usual useless mess we end up with.


Abandoned mines might not respond well to repeated flooding. OTOH, maybe compressing the air in a mine might be practical way to store energy and recover it.

Modern mining seems more about open-cast big holes in the ground. Maybe they could be dug in such a way that there was a high and a low pit and then move water between the two to create a battery when the extraction is over?


He jongen!

I thought these were the highest points in the Netherlands:


tot straks!

Today is my wedding day so I take the wife for diner; no pub visit today :-)

I guess you've been in Den Helder?

Whats the elevation where the Guy is walking on the crest?

By law the minimum is 12 meters for seaside dikes. This one is a bit higher, approximately 14 meters. The houses in the front right top off at 9 meters.

Off topic: BTW, I call the sea behind our dike my "backyard". Last spring a humback whale showed up!

Edit: I am waiting for someone to coment on all the spectators on their BIKES.

I noted that you use the toe of the dike and we use the top of the levee for bike paths. Just did not comment. I assume wind has something to do with the delta.

And yours are MUCH better built than what the US Army builds :-(

Best Hopes for Subcontracting to the Dutch all new levee work,


Dutch dikes are very well built and maintained, with all kinds of tricks - from the embedded stones which I assume dissipate wave energy to the sheep that keep the grass trimmed and fertilized - grass being an important part of the structure, actually.

The dikes/levees near Karlsuhe are something else, though they share the grass part, since the challenges posed by the Rhine are considered more short term than not - and for the past decade or so, the plan to deal with flooding has been to allow large areas of land to be flooded by opening parts of the landscape - this is considered not merely practical in terms of handling large amounts of water, but also practical in the sense of restoring part of the natural rhythm to this stretch of the Rhine Valley. It is, of course, behind schedule, but the technical details (in care of flooding, break dam here) are pretty much implemented.

When your city depends on good construction, then of course you build dikes well, or you come up with other concepts. That is, if you want the city to last for your children, too.

I'm sure the practical Dutch know what they're doing, but I find it hard seeing how pumped storage can be very attractive if you have to essentially build
your own mountain in order to get the water reservoir at a sufficiently high elevation. Even a modest pumped storage system requires a very large elevated reservoir, and that means moving one hell of lot of soil. Not cheap!

While pumped storage may be feasible in naturally hilly places like West Virginia or parts of Pennsylvania, I really don't think it makes all that much sense for place with a flat topography.

All the above comments pertain to a pumped storage system involving pumping water uphill and then recovering that potential energy by letting it flow back downhill through a turbine. Pumping compressed air into an underground formation is a whole other matter, and your southern Louisiana area, with all of its salt domes and the like, might be ideal for such a system.

Wouldn't there need to be pumping continuously to keep the lower level dry of seeping groundwater? If so, this would reduce the energy return since pumping would have to continue with low wind situations. Otherwise, it looks like a good approach to pumped storage.

Is the futures market responsible for any part the high price of oil?

I really don't think so. One oil futures contract on the NYMEX is for 1000 barrels of West Texas Intermediate grade oil FOB Cushing, Oklahoma. And every contract has two sides, a long side and a short side, with two different parties each taking one side or the other and these parties are called commodity futures traders. Commodity futures traders come in two basic types, hedgers and speculators.

Hedgers are either producers or large consumers. For instance a gas company, in order to guarantee a given price to its customers over the winter will hedge their position buy buying gas futures at a given price. This is the price they promise to their customers and a price they know they can keep.

Producers of any commodity will often sell their product on the futures market in order to guarantee themselves a profit. Otherwise they could reap a windfall profit or they could go bankrupt. They would rather have a guaranteed profit than take a chance on either. So they hedge, they sell their product ahead of time at a price they know will guarantee them a profit.

The term Hedge Fund is a misnomer and is a historical carry over from the days when hedge funds actually reduced risk. To “hedge” means to reduce risk. Today commodity funds do not hedge, they are high risk funds and the actual hedgers are not funds but producers and corporate consumers.

Taking the opposite side of the hedgers are the speculators and (this may shock you) the funds. That’s right, the vast majority of funds are pure speculative funds. They have fund managers who, just like the average Joe Speculator, try to guess the fair price of a commodity. They take the opposite side of the hedgers. But some hedgers are long while others are short. The funds and individual speculators simply guess, or use weather reports to try to guess whether this will be a good year or a bad year for cattle, wheat, or whatever. And some of them use very complicated computerized models to assist them in their guesses.

Speculators often take opposite sides with each other. For instance some speculators think the price of oil is too high and sell, or go short while other speculators think the price is to low and they buy, or go long. And all along the hedgers just want a fair price. So while producing hedgers are usually always short, selling at a guaranteed price, consuming hedgers, like gas companies, are usually long or buying at a guaranteed price. So hedgers are often opposite other hedgers and speculators are often opposite other speculators. It seems complicated but it is really quite simple. But it is seldom, if ever, a one to one ratio. Often there are far more hedgers on one side than the other.

And that is where the speculators perform a very important function. They guarantee that the hedgers can always sell or buy their product at a price that will guarantee them a profit.

Hedgers only want a fair price for their product. And here is the most important point: Speculators have absolutely no interest in driving the price of any commodity either up or down. They are interested in one thing and one thing only: Making a profit. If Speculators think the price of wheat, pork belles or oil is too high they will sell or go short and thereby drive the price down, down to the fair price. If they think the price of the commodity is too low they will buy or go long, driving the price back up to, what they believe is a fair price.

Speculators watch every indicator, trying to determine whether there is a shortage or a glut of the commodity they are playing. Speculators guarantee that every commodity will be fairly priced, or as nearly fair priced as they can determine.

There the idea that either hedgers or funds or speculators are responsible for the high price of oil is an idea born out of sheer ignorance. The futures market does fluctuate wildly, but the average price is always the fair price. And when it is not, when it is too high or too low, then a lot of speculators will lose a lot of money until the price comes back in line with supply and demand.

Note: Speculators are often responsible for wild and very short term swings in the market. News may come out that causes a lot of speculators to think the price is headed up. Many of them then rush in and buy. This causes many shorts to get margin calls, calls which many cannot meet. Their positions are then automatically closed out. When a short is closed out by the brokerage house, a corresponding buy must be issued to close out the short. That is, the contract must be “bought back.” This forces the price up even higher. But such a spike can never last because it has no fundamental support. Other speculators quickly realize what has happened and they rush in and sell, or go short when the market is at its top. This brings the price back down to a fair price, a price that the market can sustain, a price more in line with spot prices, for that grade, around the world.

Speculators are really the good guys, they wear white hats. They are the good guys because they guarantee that the hedgers can always get a fair price, or pay a fair price, for the actual commodity they are either buying or selling.

Ron Patterson

Check out this guy at Grist.

...oil should be between $40-$60 a barrel, but because of speculation and fear the price has been driven up much higher. The peak oil people love to say "I told you so" when the price goes up. What are they going to say when the price goes down? I expect crickets.

The price will go down again. And then up again. And then down, and then up, etc., etc. All commodities do that in a free market.

However, over the long haul, the ups will be more than the downs, and the ups will be more up than the downs will be down.

Actually, Deffeyes predicted this volatility. He said it's typical when a commodity is scarce. He feared that it would disguise the peak. Prices fluctuate, but the highs get ever higher...and so do the lows.

I agree with your description as far as it goes.

I do think that one can in addition postulate the presence in the market of a "manipulator" who does not have a profit motive, but instead aims to control the price of oil up or down even if it costs him a lot of money. (The government may be such a manipulator, since it has very deep unlimited pockets).

Such a manipulator would sell naked future contracts to drive the price down, and then close them out prior to delivery. The other side of these contracts would be taken by "real" oil users (such as refineries), as well as speculators thinking the price will go up, and who intends to sell the contracts prior to delivery. This latter group is the easiest to deal with, because they will settle for cash, and no actual oil needs to be delivered.

For the "real" buyers of oil, when our manipulator tries to close his contracts, he would in effect be a buyer of oil, potentially cancelling out the effect of his selling in the first place. My hunch is that he will succeed as long as he sells a substantial number in a short time (i.e. a sharp drop in prices) and buys them back slowly.

If in addition, such a manipulator feeds BS into the media and financial announcements, this helps to set investor expectations.

As (circumstantial) evidence for this kind of behavior I offer the sudden drops in oil prices from time to time, the often contradictory statements by Goldman Sachs and government officials, and the more than 6 TRILLION dollars in oil contracts held by the central banks, who have NO BUSINESS being in the oil markets.


Another tactic a manipulator could use, over a longer period, is to initially buy a lot of delivery contracts for oil out over (say) 10 years. THis would have the effect of creating artificial demand, and will cause oil prices to rise. (Look again at the 6 trillion in central bank oil contracts).

With this stash, the manipulator is then free to sell his contracts whenver he wants to drive the price down. If he had bought these contracts in 2004, knowing that peak oil is coming, he would even be making a huge profit as he intervenes.


Look again at the 6 trillion in central bank oil contracts)

Can you provide some references for this please? Ta.

Jaymax (cornucomer-doomopian)

Yeah, that's what I was going to say. Wha????

Here's a reference...not 6 trillion, though:

If you look at the BIS it has trillions set aside for affecting markets, and plenty of that goes towards oil, too.

Linked previously.

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

Another tactic a manipulator could use, over a longer period, is to initially buy a lot of delivery contracts for oil out over (say) 10 years. THis would have the effect of creating artificial demand, and will cause oil prices to rise. (Look again at the 6 trillion in central bank oil contracts).

There are no contracts 10 years out. December of 2015, or 8 years out, is as far as they go. Buying December 2015 contracts would produce no demand on the front month contract whatsoever. That is, it would have absolutely no effect on the front month contract or spot prices.

The open interest for the December 2015 contract is just over 7 thousand contracts, and under two thousand contracts for the December 2014 contract. One could hold a contract for 8 years in hopes of causing a sudden price spike, or drop, 8 years down the road. But that would be rather foolish, tying up that much money for that long, risking an enermous loss over that period of time, in hopes of making a few bucks in 8 years. And 7 thousand contracts would have little effect anyway, when well over 300 thousand contracts normally trade on the front month contract. (Contracts today are split between the December and January contract because the December contract expires today.)

That being said, there a lot of people and commodity funds buying the far out contracts. But they are doing so purely for the hope of making money as the price rises over time. They are not so foolish as to believe they can manipulate the market with so few contracts bought so far out.

Ron Patterson

Francois, your government conspiracy theory is interesting but I don't think it can stand rational examination. First, for the government to buy or sell oil futures, it would have to have set up a phoney company to do the trading and supply it with money not reported on any budget. This would be highly illegal and any government employee caught in the scheme would go to jail for a very long time.

I am sure you are aware of the fact that the government is not allowed to invest in either equities or commodieits.

Second, a point almost everyone forgets, is that every open contract must eventually be closed. Closing a contract has the exact opposite effect as opeaning it. If the government, through a phoney company, sells contracts they must eventually buy them back. Buying them back would drive the price right back up.

Contracts always expire! Many contracts are closed, by the NYMEX clearing house, at expiration. Contrary to popular belief, no one is ever forced to either take delivery on a long contract or make delivery on a short contract. If a contract expires unexercised, and is not held by a hedger who actually wishes to make or take delivery, then the contract is closed for cash.

Bottom line, it would be awfually difficult to deliberately manipulate the price of oil by buying or selling contracts. Also you must remember that either buying or selling a contract can affect the price only at the moment of the transaction! Simply holding a contract, being either long or short, has absolutely no effect on the price whatsoever. It has an effect at the moment it is opeaned, then no effect at all until the moment it is closed, when it has the opposite effect.

more than 6 TRILLION dollars in oil contracts held by the central banks, who have NO BUSINESS being in the oil markets.

Hey, I am going to need varification for this. A URL would be nice. I just did a quick addition of all the open interest, on all contracts combined on the NYMEX:
And the total came to 1,289,012 contracts. Each contract is for 1000 barrels so there are contracts for 1,289,012,000 barrels of oil. Six trillion dollars, at $95 a barrel, would buy 63,157,894,737 barrels of oil, or about 50 times the total number of open contracts on the NYMEX.

So I hope you are not offended when I ask for varification of that central banks are holding $6 trillion in oil contracts.

Ron Patterson

Stand by on the BIS link - I am trying to find the right report. As far as the futures contracts - we are of course talking about all exchanges, not just the Nymex. The ICE probably trades many more contracts than Nymex.

Here is a link describing the efforts of the BIS in the gold market. Although you may argue gold is not oil, they are traded in similar markets and the same interventional mechanisms can be used in both. The link makes the case for central bank intervention in the markets.


I am still looking for similar data on the oil markets.


Here is data from the BIS site showing total derivative positions in oil (It is in the "other" category)

As of Dec 2006 the notional value was 6.3 Trillion, with a market value of $603 billion. (This is presumably since the price of a contract is about 10 times less than the market value of the underlying oil).


In summary: I am suggesting that there are mechanisms whereby a manipulator can use the futures market to manipulate the price of the underlying commodity, in particular when many of the contracts dont stand for delivery, but are settled for cash. As circumstantial evidence I present the sudden swings in prices in the absence of real events, indicating a determined buyer or seller being present, and the huge notional value of outstanding derivatives.

There are two issues: (a) Can it be done, and (b) is it being done?

I am satified that it can be done. As to whether it is being done, you can make up your own mind.


What leads you to believe those are held by central banks - as far as I can tell, the website describes those stats as:

The objective of the Semiannual Over-The-Counter (OTC) Derivatives Markets Statistics is to obtain comprehensive and internationally consistent information on the size and structure of derivatives markets in the G10 countries and Switzerland. They provide data on notional amounts outstanding and gross market values and permit the evolution of particular market segments to be monitored.

ie: they're about national economies, which you would I'm sure agree is an appropriate area for central bank interest. Anything else we should look at before writing off this particular (appears-to-be-conspiracy) theory?

Jaymax (cornucomer-doomopian)

You have a point. I may be wrong about who actually owns these derivatives. But the fact that they are there, and the amount, clearly shows that derivates (and not the spot market) are the "elephant in the room" when it comes to affecting the futures market and through arbitrage, the spot market.

So we have motive (want control of prices), opportunity (can use derivatives), weapon (derivatives have been used) and a suspect. All we lack is a body (i.e. the proof that prices are manipulated instead of being set in a free market).

BTW - I hate the word conspiracist. I am putting forward a hypotheses, and you guys are shooting holes in it as you should. If I am wrong, I am wrong.


"All we lack is a body"

Francois, you should join the Bureau of Future Crime ;)

Same thing Goldman is doing while representing Treasury and Fed, knowing of every move in advance. This is why nothing seems to respond to the underlying fundamentals. Once you halfway figure what these mo fo's are doing and become their "doppelgänger" it's free lunch.

As far as the futures contracts - we are of course talking about all exchanges, not just the Nymex. The ICE probably trades many more contracts than Nymex.

Not even close. The NYMEX trades, by far, more contracts than any other exchange. In fact I would wager that the NYMEX probably trades more contracts than all other exchanges combined. The ICE set a new record November 7th of 186,124 contracts. The NYMEX traded a total of 632,000 WTI contracts yesterday and that did not include overnight electronic trading. (Total volume of all contracts in the above NYMEX link.)

ATLANTA, Nov. 7 …The ICE Gas Oil futures contract set a new high of 186,124 contracts, surpassing by 7% the previous record established on September 6, 2007 of 173,843 contracts.

Here is data from the BIS site showing total derivative positions in oil (It is in the "other" category)
As of Dec 2006 the notional value was 6.3 Trillion, with a market value of $603 billion. (This is presumably since the price of a contract is about 10 times less than the market value of the underlying oil).

Francois, you are more than a little confused. The BIS is the Bank for International Settlements, a clearing house for other banks. The 603 billion is “gross market value” not margin costs, which I think you were referring to when you said 10 times less than the market value of the underlying oil. And there is absolutely nothing to indicate what commodity they are referring to. It is the total of all commodities other than precious metals, as they indicate.

Also the piece is a little ambitious. It says “Amounts outstanding of OTC equity-linked and commodity derivatives”. It nowhere says, or even implies, that these derivatives are held by the banks. More likely the banks are acting as brokerage houses, or clearing houses for the holders of these derivatives. And OTC means “Over The Counter”. This means derivatives not traded on any exchange. This makes sense. On derivatives traded on exchanges, the exchange acts as a clearing house. On OTC trades banks must act as the clearing house. This is simply the amount of all outstanding commodity trades where banks must act as the clearing house.

Basically the 603 billion is the gross market value of all open interest of all OTC traded commodities other than precious metals.

Ron Patterson

Gives some idea of oil positions (PDF warning)

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

Here is a little example.

I may not have all the terminology right, but this is what I think:

Ron is rich, and cares more about (say) driving oil lower than making money. We assume the spot price and one month out price is roughtly the same. Ron sells 1000 contracts one month out, and manages to get the one month out contract lower by $5.00 per barrel.

The spot market reacts to this arbitrage opportunity, because holders of oil now has the opportunity to sell their oil on the spot market, and buy it back at $5.00 profit, as long as they can live without it for a few weeks. So more oil hits the spot market, driving that price down.

WHen Ron sold his contracts, he sold them all at once without limit, causing a spike down in price. To get rid of his obligation, he starts to buy them back slowly. As the contracts gets close to expiration, many of his counterparties will want to sell (they dont actually want the oil), and Ron buys these, probably at a loss to himself, since prices are slowly rising because of his buying. Ron does not care about the loss, because effectively he dropped the spot price of oil, and that is what he set out to do.

Now expand this scheme to where Ron does this many times a day, and in particular, he also forces down the other "out" months and years. Be keeping the oil market in backwardation (http://www.oio.com/resources/getquote.asp?sym=CLZ7&page=quote ) he ensures that oil producers try to maximize their current production to take advantage of the higher immediate prices.

THe moment Ron allows the market to go into contango, he has lost, since oil produces will start to hoard and prices will rise.


Francois, there has been (still is) manipulation of some commodity markets where the trading is thin. The silver market is notorious for it, and I can give you other examples. But not oil.

Let me pull up some real-life examples and get back to you, unless someone else has time first.

Okay, this is about the Hunt brothers' manipulation of the silver market (http://query.nytimes.com/gst/fullpage.html?res=940DE7D91039F936A15751C0A...):

At their height, the Hunts held silver investments totaling more than $15 billion and representing almost 400 million ounces, Mr. Cymrot said in his opening statement...

In addition to the Hunts, the suit names as co-conspirators two Saudi Arabian sheiks - Ali bin-Mussallam and Mohammad Aboud al-Amoudi -as well as Mahmoud Fustok, a Saudi businessman; Naji Nahas, a Lebanese citizen who lives in Brazil, and the International Metals Investment Company, a Bermuda partnership.

Mr. Cymrot said that the Hunts had acted with the other defendants to purchase and deliver as much silver as possible to corner the market and ''squeeze out all competitors.''

The Hunts started buying at $9, and the price got up to $50.
But the price didn't rise that much just from the buying of futures contracts. The only way to get the price that high was to insist on delivery of the actual silver. The people taking the other side of the Hunts' contracts could provide endless silver on paper, but they couldn't provide the actual silver when the Hunts and associates demanded delivery. If all the people with long contracts started demanding delivery of all the underlying oil, the price would soar. But that's not going to happen because, for one thing, there'd be no place to put it.

Here is another case of genuine manipulation of a commodity: http://findarticles.com/p/articles/mi_qn4176/is_20060223/ai_n16175632. To summarize:

"between June 1998 and October 2002, traders at WPCs East and West natural gas trading desks submitted knowingly inaccurate trade data -- including fictitious trades, incorrect volumes and/or prices, and incomplete trade reports -- to industry publications in order to manipulate prices to benefit WPC"

But again, they couldn't manipulate the price by buying futures contracts--they had to manipulate data to get other people to make bad trading decisions.


I looked at this link. Could you please direct me to a site that explains each of the categories in the headers of those columns? Perhaps an in-depth post on how to read the contract information for futures and options would interest you? Or has that already been done on TOD?

Thank you.

Mr. Downing, I suppose you are referring to the NYMEX crude oil link:

I think each column is self explanatory, but I will give it a try. The first column is “Month” and means the contract month. And everything to the right refers to that contract month and no other. Open, High, Low and Last (last trade) means the open price today, the high so far today, the low today and last trade. Time means time of the last trade. In some cases it was yesterday. In contracts with no trades today or yesterday, it is the time when the NYMEX set the closing price. A closing price must be set each day, whether there is a trade on that contract that day or not.

“Sett” means the settling price. That will be set a few minutes after the close and is the average price of all contracts traded “at the close”. “Chg” is the amount of change from yesterday’s close. “Vol” is the total number of contracts traded yesterday. Today, after the last contract is traded and a settlement price is set, it will reflect today’s volume.

Under the Pr. Day heading we get the price the contract settled at yesterday and the Open Interest. Open interest is simply the number of contracts, for that month, which are still open. The December contract expires today. As you can see, the open interest dropped dramatically yesterday and will drop to zero at the close today.

Options: Hell, that would take a book to explain. I studied options for months and still get confused sometimes. You will have to learn them on your own, if you are interested.

Ron Patterson


This explanation clears up some important questions that I've had. Thank you.

Yes, I'm glad to see that others also have some difficulty learning how to read options. One last request, where would you suggest going to, to learn about options?


One thing that still puzzles me:

Does the Open Interest reflect both LONG and SHORT bets on the contract? If it's BOTH, then how do you back-out the SHORTS? If it's only LONG, where do you go to find the number of SHORT bets?

There is the Black Budget portion of US government spending which runs in tens of billions of dollars. This is used by intelligence agencies and the Pentagon for who knows what. The Congress just takes it on faith that it is used in the national interest. Some of it may be used as campaign contributions in order to effect who stays in office and who gets replaced. Some of it is likely to be used for businesses abroad as bases for foreign operations. Unlikely it would be used in the futures market but these folks would have inside information and could take advantage of it while being able to hold the SEC off.

Add to that Rumsfeld's missing trillion. I recall he said that the money had been spent on services which he could not confirm had been performed. Now combine that with the Duke Cunningham scandal, which revealed that in fact many defense software firms had been set up by GOP operatives, many of those ex-CIA, easily won military contracts and apparently did nothing with the money but buy yachts and make GOP campaign contributions. Who is to say what the profit margins are on a software contract?

So there is a large enough sum of money siphoned off by defense contractors that could pay for many forms of mischief. It might not be enough to rig the markets, but it is certainly enough to affect elections.

Good post, Ron. Well done.

Here is some support for what you're saying. First, this academic study from the Oxford Institute for Energy Studies reports on the impact of speculators on prices: http://www.oxfordenergy.org/pdfs/WPM32.pdf

To summarize, it says:

"...it is possible to make three broad generalizations. First, prices appear to be less volatile than speculative positions. Second, there is no common trend between prices and speculation. In other words, there is no persistent pickup in net long non-commercial positions coinciding with oil prices trending upward."

Here is a graph from the study that tracks speculative net long positions against oil prices. As you can see, there is no correlation between spec net longs and higher oil prices:


I wish people could get it into their heads that it isn't speculative positions that govern oil prices. Alan Greenspan mistakenly suggested that as a factor in 2004, and he has been thoroughly refuted. Robert Rapier was still making that mistake in his article on Thursday.

There is this mistaken notion that commodity speculative positions are "weak hands" that can be blown out of the market on the weakest puff of wind. That idea seems to come from the stock market, where a long bull run tends to pull in every shoeshine boy, leaving no one left to buy and a rapidly collapsing market as the shoeshine boys flee falling prices in a herd.

But the large spec players are people like Richard Dennis and T. Boone Pickens and the hedge funds Ron talks about. These aren't shoeshine boys.

In August we saw the price of oil drop about $8 very rapidly because of the big drop in the stock market. Margin calls were making some hedge funds sell liquid investments to cover margin calls on illiquid investments. But as Ron points out, that kind of thing never lasts. Look at where the price is now.

And, as Leanan pointed out yesterday, the Chinese are back buying after taking a break in October.

I wish people could get it into their heads that it isn't speculative positions that govern oil prices. Alan Greenspan mistakenly suggested that as a factor in 2004, and he has been thoroughly refuted. Robert Rapier was still making that mistake in his article on Thursday.

You really should read more carefully. Here's what I wrote:

First, speculators are a part of the reason for the price rise. They aren't the whole reason, but those who say they have nothing to do with it are also wrong.

To suggest that isn't a factor at all isn't credible. But your implication above that I suggested that this is governing the price also isn't correct. There are many aspects to price. Fear and uncertainty are a part, being driven by a draw in inventories. But to suggest that speculators in the market - many of them amateurs who are new to speculating and much less likely to consider fundamentals - have not helped boost the price is ludicrous. The only question in my mind is how much impact they actually have. Zero isn't the correct answer.

I remember having essentially this same conversation with someone in 2000 about the company Aspen Technology. I used their products every day, and I argued that the stock was way overvalued at $50. I got all kinds of justifications and explanations for why it should be at $50. It wasn't too long afterward that it was trading at $10. Did the fundamentals change that much? No, it had just been driven up on hype and speculation. And it has never reached that level again. (Not that I think oil is that overvalued, nor that it is going to fall and stay down).

That's my one post for today.

The one piece of this puzzle that I'm missing is the mechanism by which the WTI CUSHING SPOT market settles each day at the same price as the NYMEX LIGHT SWEET CRUDE Front Month contract. (except, as someone pointed out [apologies for forgetting who] for a couple of days after termination, when they seem to decouple)

Sure, speculators drive up-and-down the prices of Oil Futures contracts to an extent. Their impact is presumably quite high for a 2015 contract, and reduces towards the front-month contract, while the spot-market impact on futures prices increases the closer to front month.

Sure, speculators might push up the cost of futures, causing refiners to buy off the spot market instead, and sell off some of their futures, causing the spot market to go up and the futures market to come back into balance.

I dunno, acknowledging the gap in my understanding at top, I don't see any mechanism by which futures speculation can have any effect on spot prices that doesn't quickly arbitrage itself out of existence. ie: in the spot market, where actual oil rather than virtual paper is bought and sold, what logical explanation is there that futures impact on price has been reduced right down to absolutely nothing.

I'm not saying your wrong about: "how much impact they actually have. Zero isn't the correct answer." But I do think you need to describe some mechanism for it to be non-zero that holds up to scrutiny - 'cos theres quite a few of us who just can't see it.

Jaymax (cornucomer-doomopian)

Jaymax, it was I who pointed this out. The NYMEX closing price for WTIC always matches the spot price for WTI at Cushing. Always except for the three trading days following the close of the previous months contract. Three days always, no more no less.

This coming Monday, Tuesday and Wednesday, the closing price on the NYMEX will be decoupled from the spot price at Cushing. Friday, the day after Thanksgiving, they will be exactly the same again, until the day after the next expiration.

This is the case for no other commodity traded anywhere, that I know of anyway.

For over three years now I have tried to figure out why this is the case. I have Googled every possible word combination trying to find something on the net. I have read everything the NYMEX has published, that I can locate, and still have not figured out why this is.

Does the NYMEX adjust to the Cushing spot or does the Cushing spot adjust to the NYMEX closing price? I haven't a clue and it has confused me for three years, ever since I first noticed this phenomenon. So if anyone can shed any light on this please post. But I am not holding my breath because I have asked the same question many times before and got no answer.

Check it out:

Ron Patterson

Ron, is this what you're looking for?

From Culp, C.L. The Art of Risk Management. NY: John Wiley & Sons, 2002. pp. 263-294.

The principle, as explained by Culp: As a futures contract approaches its last day of trading, there is little difference between it and the cash (spot) price. The futures and cash prices will get closer and closer, a process known as convergence, as any premium the futures have had disappears over time. A futures contract nearing expiration becomes, in effect, a spot contract.

To tell you the truth, I'd never actually noticed the effect you're talking about. But if there was going to be a consistent decoupling of the closing spot price and futures price the first three days after expiration, and if the futures price is consistently higher than the spot price on those three days, it would probably be due to the futures premium, which would be highest at that point because you've got the most time left until the next expiration.

Moe, no that is not what I am looking for. We all know that the contract price must equal the spot price at expiration of the contract! But the NYMEX crude oil WTIC contract equals the spot price at Cushing at the close of every day's trading except the three days following expiration of the previous month's contract.

That is the case in no other commodities contract! We are talking about something that is specific to the NYMEX WTIC contract and no other.

What Mr Culp is saying is that the premium disappears over time for all commodities. But the WTIC premium, if any, disappears every day at the close of trading except for the three trading days following expiration of the previous month's contract.

And, they are absolutely consistant. It is decoupled for exactly three days, no more, no less. The other eighteen days, give or take a day or two depending on the number of trading days in the month, the spot price and the closing near month NYMEX price, are exactly the same.

The NYMEX Henry Hub natural gas contract for instance, is never the same except at the very close of the near month contract. And that is how every other commodity contract works. The spot price and the contract price must meet at expiration and, not necessarily, at any other time during the life of the contract.

That is strange! The NYMEX WTIC contract I mean. That is so strange and I have never heard any explination as to why this is or which tail wags which dog.

By the way the price quoted on Bloomberg tonight is the January contract, not the December contract. The December contract closed out today at $95.10, up $1.67, same as the spot price. The January contract closed at 93.84, up $1.77.

Ron Patterson

Ron, I don't know about the three days where the prices decouple, and I don't know about if the following mechanism provides the full explantion, but here is what I believe occurs.

Identical closing prices for spot WTI and the WTI front month contract result from the quest for the perfect hedge [via a long and a short across the spot and futures markets or vice versa]. Spot WTI is extremely liquid [no pun intended] for the commercials. The front month NYMEX contract is extremely liquid. Any price difference would represent a risk free arbitrage opportunity at a miniscule carrying cost with a know commercial objective and would therefore exist only long enough for computer driven trading schemes or a couple of good old boys on the phone to cause the two prices to converge.

If I wanted to maintain my ownership of physical WTI [maybe to feed to my refinery] while having no further price risk from overnight events, I would sell the NYMEX front month contract.

More importantly if I was in the gathering business [e.g. Sunoco or Tepco in my particular situation] and had purchased crude from producers based on a small discout to yesterdays closing prices [ignoring bonuses or other adjustments my "posted price"], I could sell that crude even if it had not yet made it all the way to Cushing [and in fact might headed in elsewhere in North Texas Oklahoma or where ever] and lock in the spread between my bid [the "posted price"] and the WTI closing price.

I suspect that the futures market sets the price rather than the other way around as the crude gatherers adjust posted prices paid to independent producers after the futures market closes and logically based on the prices they obtained on the close.

This could also happen with warehouse receipts and futures contracts for gold and silver, but the price of at least gold and silver are set in what is basically a twenty four hour market that I do not believe can decouple the way the price of WTI versus other standardized crude blends have in the past [e.g. Brent is normally at a small discount to WTI but has sold at a premium at various times this year.] Once again and more importantly for gold and silver, you also would not see the relative volume flow into the warehouse / tank farms from gatherers / intermediate buyer with a spread that can be locked in [maybe refiners are the closest analogy for the metals.]

A WTI contract other than a NYMEX contract would be seen as thin and subject to manipulation so whether these contracts exist elsewhere may not matter to those wishing to eliminate that aspect of risk. This brings us back to buy / sell on the close and peg that spot price to the front month future.

Sorry if this got a little convoluted or if this was not the part of the mystery to which you were seeking an explanation.


RW, thanks for the reply. Your explination sounds as good as any I have heard so far. I just wonder why it is so regimented. Three days of uncoupling then the rest of the month coupled exactly?

A side note if it means anything. Gold is in strong contango. June 2012 gold closed at $948.70. Is this saying they expect the price of gold to rise or the dollar to fall?

Ron Patterson

Regarding gold, it's a big differential in dollars, but expressed as a percentage the difference is circa 20 percent. Storage and insurance is something like 1 percent per year. June 2012 is roughly four and half years out. Not that high of an implicit interest rate for carrying the gold even with no expectations of cheaper dollars. If a speculator believed the dollar is going down either in foreign exchange terms or a 1970s style inflation, gold at that price in 2012 doesn't look expensive.

Regarding the three day uncoupling, I made another attempt at explaining that to myself. No joy. Notice day is the second day after the close of trading. [Notice day would seems to eliminate some uncertainty, but it is the second day not the third.]

The third business day is the day that buyers taking delivery must post margin at 100 percent with the clearing member. That was the only reference I saw in the online handbook to the third day and as near as I can tell, this activity would not impact the price of the new front month.


thanks for that - I found that Bloomberg page after you mentioned it before, thinking you must've been confused about something [sorry] and then watched exactly what you described happening!

after which, I also spent many hours going through the Nymex rulebooks etc trying to get my head around it. As with you, found nothing. EFP sounded credible until I understood that I thought enough to realise it was irrelevant (afaict).

I only have one months data to go on, so not enough to be meaningful, but the gap seemed the widest the first day, and then closed from there - is that normal?

Thanks again,

I've noticed you always announce your one post for the day so you can avoid dealing with evidence that your post is wrong.

Amateurs who are new to speculating play so little a part in the market that they're barely worth mentioning. You can find them listed in the COT report (http://www.cftc.gov/dea/futures/deanymesf.htm) as "Nonreportable Positions." In the last COT report, they were net short, not long.

You are just wrong when you say "To suggest that isn't a factor at all isn't credible" and if you would actually read the academic study I provided, and look at the chart, you would see you are wrong. Net speculative longs isn't any more of a factor than the commercial net shorts, which are equally likely to be "improperly" depressing the price. If something causes the price to go up, the commercial net shorts will cause a price spike by suddenly closing out their short contracts, as they did two weeks ago. Everything works both ways.

Right now, net speculative positions might not be long enough to properly reflect fundamentals. You don't know.

Again, look at the academic study, the studies cited by that study, and the chart I provided. Large spec positions, whether short or long, have no correlation with oil prices.

Speculation in the stock market is very different from speculation in the commodities market for a market like oil. In a bull run in the stockmarket, you eventually get every shoeshine boy and busboy buying up stocks. The market for oil is nothing like that.

Moe, one thing you will notice with people who assert that speculators have a long term effect on the price of oil can never explain exactly why this is so. They seem to say, like Robert, that this is just the case and they don't need to explain anything.

I was a member of another list in 2005 where Mike Lynch was also an active member. Mike kept saying that when the "funds" got out of the market the price of oil would go down. He blamed the funds for running up the price of oil. But he never understood that even if the funds did run up the price of oil by buying futures, simply holding their positions could never keep the price up. He never understood, like a lot of other people, that simply holding an open position in crude oil has absolutely no effect on the price of oil whatsoever.

If you place a market order to buy, and there is no corresponding order to sell, your order will be bumped up until it hits a limit order to sell that was placed above the current price. That will cause a bump up in the price of that contract. It has an effect at that instant only. And it will have absolutely no effect until the moment you sell. If the funds were mostly long, if they held a thousand long contracts, that would make absolutely no difference. The only effect those thousand contracts would have would be at the moment they were opeaned and again at the moment they were sold. Simply being long has absolutely no effect whatsoever.

Speculators are in and out of the market every day. They can bump the price up one tick when they buy or bump it down one tick when they sell. But speculators are on both sides of the market. Except for very brief times of panic or exebuerance they have absolutely no effect on the market price of oil.

Robert, Mike Lynch and others may claim that speculators, or "the funds," affect the long term price of oil but they can never explain exactly how this works. This should tell us all something.

Ron Patterson

Ron, yes, I had noticed.

By the way, did you see the COT report this week? (http://www.cftc.gov/dea/futures/deanymesf.htm) As the price dropped to $90, the commerical traders unloaded 46,366 short contracts, thus driving the price back up.

"Simply being long has absolutely no effect whatsoever."

I disagree because open interest is published and widely watched. If I hear that large speculators with the resources to do extensive research on the oil market are taking long positions, I'm going to try to coat-tail them. The open interest stats give me a good hint as to which contracts they are piling into. My buying will drive the price higher for somebody -- a non-speculator-- wanting to buy in order to take physical delivery in the future.

I would add that you also find this situation (even more pronounced) in the options market. If somebody takes a large out of the money position in the options market, it sticks out like a sore thumb and is widely noticed and commented on for days, even weeks after the transaction.

I disagree because open interest is published and widely watched. If I hear that large speculators with the resources to do extensive research on the oil market are taking long positions, I'm going to try to coat-tail them.

Analyze First, did you not analyze first the chart posted by Moe Gamble?
Which showed absolutely no connection between speculative long positions and the price of oil?

Or the extensive study by the Oxford Institute of Energy Studies showing exactly the same thing? (Actually the above graph is contained within this study.)

I never tire of quoting Matt Simmons: "Data trumps all theories". You have a theory but the data says there is no connection between speculative open interest and the price of oil.

Robert Rapier said a study was done by someone that "according to reports" speculators added $20 to the price of oil. But you noticed there was no link, nor any details to that study. Studies, by someone, that "according to reports" give this conclusion or that conclusion, is nothing but hearsay. The Oxford Institute for Energy Studies study gives you the study not hearsay! It gives you every detail of the study and gives you the results. Argue with the graph Robert and Analyze!
One very important conclusion of the study:

They interpret these findings as evidence that trading improves the depth and liquidity of the underlying market.

If (speculative) trading improves the depth and liquidity of the underlying market, that means it helps hedgers and actual oil traders get a fair price. A fair price.

Ron Patterson

Au contraire. Study the graph and read the relative parts of the study again. The author notes at several points that the data shows correlation between speculative interest and price movements.

He does not believe that this implies causation but does concedes that there is a likely effect:

if speculators have superior information that enable them to respond fast to the arrival of new information, then they may even improve the functioning of the market by speeding
the price adjustment process. (page 32)

If you are a non-speculator wanting to get long, the "speeding of the adjustment process" is working against you in a rising market and the author are saying speculators can play a part in that.

My point is not that speculators are bad, it's that they have an effect on price. Whether it's good or bad is a value judgment I decline to make.

I would point out that many commodity markets have mechanisms (limit move rules) that are designed specifically to slow down the adjustment process.

The problem is that speculators, who hope to profit from intellectual property such as knowing how the market works and knowing detailed information about suppliers or consumers get lumped in with manipulators who are by definition doing something illegal/unethical in an attempt to control the market.

I worked a bit as a speculator in the telecom equipment aftermarket. I knew what to pay, how much to sell for, and how liquid equipment was by type. I added value by cleaning, testing, and warrantying product, and then further added value by knowing how to configure things.

Those handling oil are a little different, as they're all about price and availability, but as I understand it (perhaps faulty) they hold product pending a future sale - creating liquidity for oil that would otherwise not exist.

Of course, we are now about to experience the joy of sovereign default and someone must be responsible, and that someone isn't us ... hence the focus on "speculators".

Analize, the part you posted makes my case exactly. The sepculators are responding to the fundamentals. Some news, some superior information, has arrived that tells the speculators that the market is not fairly priced. And the speculators respond by buying, or selling, moving the market to whatever price the fundamentals say is a fair price.

Understand the argument that Robert, and others like Mike Lynch, was making was that the speculators, or funds, were moving the market beyond what the fundamentals would dictate! The article, particularly the part of the article you quoted, disputes this. The fundamentals are what dictates the fair price. The speculators respond and try to get a piece of the action before the commodity reaches that fair price, hoping to make a buck in the process.

And the market mechanisms you are referring to must the daily limits that are placed on some, but not all, commodities. When a commodity hits these limits it is said to be "limit up" or "limit down". This happens when sudden news hits the market causing people who hold open contracts to suddenly wish to close them. Like a freeze hitting the orange groves. These limits have nothing to do with speculators but with fundamentals that cause dramatic moves, up or down, of a given commodity.

Anyway, thanks for helping me make my case that, in the long run, and sometimes in the very short run, the fundamentals are what moves the commodities market, not specualtors. The speculators hope to get a jump on other speculators when news hits and hopefully make a buck.

Ron Patterson

If speculation or market fraud are not the driving forces behind oil prices, then what is? The fundamentals don't match up with the market price, and actually, they are way off. The documented cost of getting a barrel of oil out of the ground is approximately $9.00/USD. Shipping adds an extra $6.00 to $7.00 USD. There is a HUGE disconnect. Even allowing for a 100% profit for the producers, or $32/bbl, oil should not be trading at $95/bbl. It is obvious that we are being taken advantage of by the "free" market (NYMEX).
So, again, show me proof that speculation and fraud are not the reasons for current prices.

It's supply and DEMAND.

Prove to me that demand is not the reason for the current price.

I've noticed you always announce your one post for the day so you can avoid dealing with evidence that your post is wrong.

I actually announced that because I was headed out the door in a few minutes to a function that just ended around midnight in Scotland. But feel free to fabricate any explanation you wish. I have noticed your tendancy to do that.

You are just wrong when you say "To suggest that isn't a factor at all isn't credible" and if you would actually read the academic study I provided, and look at the chart, you would see you are wrong.

Yet other studies show just the opposite. I guess you can choose which study you want to believe (see particularly the references):

How Do Speculator’s Drive Prices

The Times of London went even further noting how speculators have been able to do what OPEC could not do, fix prices :

“Traders can hold the world economy to ransom because short-term demand and supply are inflexible, but also because they dominate dealings on oil markets… The tail wags the dog in many commodity markets, wildly exaggerating the ups and downs of demand and supply. In oil markets, the tail wags an elephant.”

Global Investment Banker Morgan Stanley concurs that, “Financial speculation is the key driver of oil prices”, as do governments, oil executives at major oil companies and even OPEC itself.

How about this bit?

“Mike Rothman, senior managing director of broker dealer and research firm International Strategy Institute and head of the firm's integrated oil research practice, authored a study last year that concluded that speculative trading may have added as much as $20 per barrel to the price of oil during a period in 2004, according to reports.”

It's a study, therefore it must be true.

Note that I never said - as you implied above but never retracted - that this was the primary driver. But when there is a net speculative long position - that is the speculators are betting on higher prices - it is just not believable that their purchases won't help drive those prices. But I don't expect a speculator to acknowledge that his speculation on higher prices is helping drive prices higher.

Now, that is my last post of the night, as it is late here. Again, feel free to fabricate your own reasoning for that.

>I've noticed you always announce your one post for the day so you can avoid dealing with evidence that your post is wrong.<

I was beginning to think maybe I was the only one who noticed that.

Hello R-squared,

Your post brings up a very interesting question on what is the true fundamental, human-exosomatic value of biosolar mission-critical stocks such as Potash of Saskatchewan [POT] or First Solar [FSLR].

Standard Disclaimer: I am not an investment expert!

This is just a thought exercise on exosomatic/somatic values--make of it what you will. I am sure some TopTODer could do a much better analysis than me.

Consider that a natural predator is constantly making instinctive investment decision algorithms using DNA-optimized somatic analysis as it spots, then starts to sneak up, then finally sprints for its intended prey [see Battle of Kruger video on Youtube]. The profit is expressed in the resulting somatic harvest, or somatic loss if the prey escapes.

As we go postPeak: will lots more PEAK AWARE investing humans do concious mental calculations on somatic/exosomatic cost/benefit ratios to prey upon, then harvest the exosomatic items to remain somatically profitable = being alive?

Consider the following brief exosomatic/somatic analysis of two biosolar stocks:

POT's price/earnings ratio is currently around 40, with an EPS ratio of approx. 2.8, but if one considers FF/NPK latency effects --> shouldn't the fundamental PE be much exosomatic/somatic higher to help prevent Liebig Minimums and resulting food shortages?

I am just guessing that the average crop takes 100 days to grow, then harvest. So the initial 'exosomatic sunk cost' of FF for land preparation, irrigation pumping, plus NPK [organic or FF-synthetic] cannot generate a real-value somatic return until the photosynthesis-cycle completes.

Does this inherent latency suggest that POT's PE should be closer to the 100 day seed-to-harvest cycle? Recall my earlier postings on legislation calling for stockpiling of fertilizers to help prevent the shortages and high prices of NPK that we are seeing now in the news.

The EPS of 2.8, if considered as the energetically FF/NPK latency equivalent to 2.8 days without food: does this suggest that food reserves are dangerously low? Recall that global grain reserves are currently around fifty days-- JIT to be roughly correlated to the 850 million that are not getting enough to eat each day?

Consider a counter example: if everyone on the planet owned one real-value biosolar share of all the combined NPK companies, wouldn't you expect the PE = photosynthesis cycle, and EPS ratio to be much less than 1 day without food if the globe was at a rough Eco-technic or biosolar sustainability? Does this fairly express the best attainable exosomatic/somatic ratio?

How about FSLR, a maker of PV-panels? Their PE is currently around 150, and EPS of approx. 1.4 --> I would think their stock would exosomatic/somatic ratio rise to be more energetically priced as we go postPeak; i.e., fundamentally biosolar mission-critical priced if one considers the PE to Olduvai darkness. In short: the choice of somatically pedaling a generator for 150 days vs exosomatically letting a PV panel do the work for you year round means a real-value PE of '365 days' is the better expression of FSLR true biosolar value as we go postPeak, and lots of people seek to avoid the currently perceived risk premium EPS of '1.4 days' of exosomatic darkness.

Okay, as mentioned up top: this is a real crude and brief look at a possible operating exosomatic/somatic market fear-investing phenomena that is not currently recognized, and my PE and EPS metrics may not be applicable at all to this examination as #'s of shares and other financial minutiae distort these figures. But I certainly hope it is thought provoking for those considering where to invest their money! =)

My hope is that some true genius will read my posting, then create truly usable 'fear-investing metrics' before we go postPeak. Never forget that POT wouldn't even exist unless people feared their topsoil was depleting, and FSLR would never exist unless people feared their electro-juice would stop flowing.

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

I remember having essentially this same conversation with someone in 2000 about the company Aspen Technology. I used their products every day, and I argued that the stock was way overvalued at $50. I got all kinds of justifications and explanations for why it should be at $50. It wasn't too long afterward that it was trading at $10. Did the fundamentals change that much? No, it had just been driven up on hype and speculation. And it has never reached that level again.

There is a big difference between stocks and oil. People buy stocks with the intention of reselling them in the future at a(hopefully)higher price. Refineries buy oil to convert it into fuel so people can burn it in their vehicles. Unlike stocks, oil gets consumed. Also, unlike stocks - whose quantity is not limited by nature - oil is finite. Thus the price of stocks is mostly a function of emotion (optimism or pessimism) whereas the price of a commodity which gets consumed is a function of supply and demand.

Thanks for posting this---This is what I've been trying to tell everybody around me who points their fingers at speculators. A common rebuttal said as proof that speculators influence the market is the change in price of crude days before a hurricane runs through the gulf. What is not being grasped is that it's not the speculators that is causing a price change but the fundamentals. Fundamentally, a gas company, or perhaps a refinery may want to stock up quickly on the commodity in case there is a major disruption in imports. If there is no disruption, the price goes back down again. The basic supply/demand equation exists here.
Philip Arnason

4.5 billion USD in revenue is a lot of cash for 660,000 people state and the federal subsidies are among the highest anywhere as lots of military and universities (most people in government work of some sort). but the average guy only thinks of oil revenue in terms of one number up there:

Permanent Fund Dividend:


$1654.00 for 2007 for each resident.

A nice piece of change. Might pay the heating costs.

“Without a video the people perish”-Is. 13:24

This reminds me of a naive question that burns in the back of my mind: USA is the 3rd largest producer of oil. Prices are up dramatically over the last 3 years. Why are we (as a nation) so screwed financially? Is it:
A. All our "bonus" oil revenue money goes to fund the military
B. All oil revenue is privatized (while the cost of dealing with consequences is apparently the public domain)
C. Our books are so poorly managed that even with a load of new oil revenue we are just keeping up
D. We import so much more than we produce that we have to run to stand still


We are only #3 because of refinery gains. Based on the HL graph, US conventional crude oil reserves are about 85% depleted.

Hey westexas and/or other oil guys, I have a possibly dumb question for you about Permian Basin Royalty Trust.

I need a solid investment for my retired mother. You've recommended this in various posts, and I've checked it out. It looks good--sort of the closest possible thing to owning a "used" oil well without actually owning one.

They have proved reserves of 6,578,000 barrels of oil and 24,130,000 Mcf natural gas.

Their recent decline rate has been 3%.

Here's my question: They are producing with water flooding. Is that decline rate likely to stay at 3% for a good long time, or are we likely to have a fall off a cliff (the type memmel is calling for in U.S. production)?

I once owned shares in a similar royalty trust. The one I bought had a operating expense which was deducted from the income before the dividends were distributed to the share holders. The operating fee was fixed per barrel and increased for each year the trust operated. Before the recent run up in oil prices, the operating fee was a large fraction of the price of a barrel of oil, thus the dividends dropped and the market price of the stock went down as well. However, now that the price of oil is high, the dividends have taken off and the stock price has become quite high, IMHO.

A deal like this puts the buyer in a difficult position in that today's price may be temporary, especially if those of us on TOD are wrong and there really is lots of extra production out there or demand drops below the available supply. In either case, as the price of oil drops, the dividends and the stock price of the royalty trust can be expected to drop as well. As a percentage, the drop in return from the trust would be greater than the drop in price of oil.

In short, I wouldn't bet the farm on one like that. Of course, if we ARE AT PEAK OIL, it might play out very well.

E. Swanson

"is the decline rate likely to stay at 3% .......... "
that is impossible to say without a thourough analysis of the individual properties involved. decline curve analysis is a generally accepted means of projecting oil rates but there is always the disclaimer attatched ...... something to the effect that past performance is no guarantee of future returns.

and in general, imo a royalty trust is a good choice of investments for a small portion of your retired mother's portfolio.


Over on Bloomberg they're saying that OPEC has admitted to losing control over prices, but the quote only shows the guy from Venezuela: http://www.bloomberg.com/apps/news?pid=20602099&sid=aEuSwzj4J.qg&refer=e...

Nov. 16 (Bloomberg) -- Crude oil rose more than $1 a barrel as ministers from the Organization of Petroleum Exporting Countries said the group has lost control of prices.

"OPEC can't do anything about the price,'' Venezuela's oil minister Rafael Ramirez said today in Riyadh, Saudi Arabia, where OPEC is holding a heads-of-state summit this weekend. Oil prices could reach $100 a barrel soon," he said. The December futures contract in New York expires today.

"The OPEC meeting is interesting only because of the expressions of exasperation we hear about their inability to control prices,'' said John Kilduff, vice president of risk management at MF Global Ltd. in New York. "The expiration of the December contract is adding a lot of volatility to the market. Open interest is plunging so there's a lack of liquidity."

Gentlemen! You can't fight in here, this is the war room!

The American Petroleum Institute has a new study out called

Economic Impacts of Congress' Proposed Energy Legislation on the US Economy

The report finds that the proposed energy legislation would have significant adverse impacts on the U.S. economy.

The study takes a combination of house and senate proposals, models the expected financial outcome on a combined basis, and compares the results with a base scenario which does not reflect peak oil. This is an approach someone who believes business as usual will continue indefinitely might endorse, but doesn't make sense if a person believes in peak oil in the near term.

The results illustrate why energy legislation such as CAFE standards will have difficulty passing, if one assumes that there is no underlying need for them. An economic calculation will show higher costs of automobiles with little benefit to the consumer.

Thanks for that link, Gail.

The report could be considered as a kind of economic impact statement of peak oil, assuming i.a. "oil use cuts of 10 mb/d by 2031" (page 17, chapter 3.3.1). Substitute "additional tax" with "higher oil production cost"

This is an excerpt from the summary:

• Additional taxes on the oil and natural gas industry combined with additional restrictions on drilling could result in an estimated average decline in domestic oil production of roughly 4% over the 2010–2020 period, and an estimated average decline in domestic natural gas production of 2% relative to baseline levels.
• The proposed legislation is projected to result in significantly higher costs across a wide array of goods and services, especially for transportation fuels. As a result, the demand for petroleum products is estimated to decline by roughly 18 percent in 2020 and by one-third in 2030 relative to baseline levels. Overall, U.S. transportation fuel consumption is projected to decline due to significantly higher costs faced by end-users.
• By 2030, the proposed legislation is projected to cause a net loss of roughly 4.9 million total jobs from baseline levels. While all regions of the country would be adversely impacted, the Southeast, areas around the Great Lakes, and Texas-Oklahoma regions would be disproportionately affected.
• By that year, the proposed legislation is estimated to diminish the average American household’s annual purchasing power by approximately $1,700.
• Aggregate investment is projected to fall by 3.4% from baseline levels by 2030. As with the employment losses, the impact would be uneven both across industries and among regions. The pattern resembles that of estimated employment losses.
• By 2020, GDP, a commonly used measure of total economic activity, is estimated to be roughly 1.7% below the baseline and by 2030 is estimated to drop to approximately 4.0% below baseline levels. Petroleum refining, commercial transportation services, motor vehicles, electric generation and energy intensive manufacturing would be among the disproportionately affected sectors.

This means, for example, one would have to find alternative employment for those 4.9 million, e.g. in the renewable energy industry.

I don't know who first mentioned the possibility of Saudi Arabia using global warming as an excuse for lower crude oil production, but they nailed it.

Yergin was just on CNBC, from Saudi Arabia, reporting on OPEC's efforts to "go green" because of global warming.

I was just looking on Bloomberg for currencies, maybe some of the OPEC discussion will be around this as well.



Hello Westexas,

Are you aware of a source of information indicating the energy industry's (industries') consumption of hydrocarbons? I am wondering about the effect of this consumption on the ELM.

I don't have any specific information, but I'm sure it's a big factor in Saudi Arabia as they try to build up industries such as petrochemicals.

I don't know who first mentioned the possibility of Saudi Arabia using global warming as an excuse for lower crude oil production, but they nailed it.

It sure wasn't me. Of all the excuses I expected them to come up with, this wasn't one of them. This comes as a total shocker to me.

Ron Patterson

Actually, I would thing that they would welcome global climate change. Those extra degrees of temperature probably won't make things that much worse for their climate, relatively speaking, and maybe there would be a huge rainfall shift. Allah be praised.

Those extra degrees of temperature probably won't make things that much worse

You haven't understood a thing about what global warming means. The "extra degrees" will, for example, reduce the thermal efficiency of their power plants.

But that's nothing. 2-3 degrees warming will bring us back to the Earth's climate 3 million years ago when sea levels were 25 m higher.

During meltwater pulse 1A
at the beginning of our current warm period, sea levels rose 1 m every 20 years. Those palm islands http://www.waltopia.com/palm.html off Dubai will all be flooded.

Image courtesy Carlos Martinez

I am not a GW skeptic, but two things are being confused there. It's true that sea level has been 25m in the past, and that 1A had a very rapid rise in sea-level - truly a global mega-flood - these did not coincide. A rise of 5m per century is 10 times that predicted by the IPCC, I don't believe they are that wrong and I haven't seen anyone seriously suggesting they are.

All sorts of things could happen, but most probably won't. This sort of Al Gore twisting of facts leads directly to accusations of alarmism. Alarmism has been proven to be counterproductive, and should be resisted.

...but two things are being confused there..... these [25 m higher sea levels 3 million years ago and MWP 1A ] did not coincide

I mentioned that MWP 1A was at the beginning of our current warm period.

All sorts of things could happen, but most probably won't

Will you take responsibility for your guess? Have you studied the atmosphere of planets for 30 years like James Hansen did? I gave that link:

KERRY O'BRIEN [ABC TV-Oz]: What is the most recent evidence of what's really going on with the ice caps, the Arctic and the Antarctic?

JAMES HANSEN: There are two things that are cause of concern. First of all, if we look at the history of the Earth, we know that at the warmest interglacial periods, which were probably less than 1 degree Celsius warmer than today, it was still basically the same planet. Sea level was perhaps a few metres higher. But if we go back to the time when the Earth was two or three degrees Celsius warmer, that's about three million years ago, sea level was about 25 metres higher, so that tells us we had better keep additional warming less than about one degree. And the other piece of evidence is not from the history of the Earth but from looking at the ice sheets themselves, and what we see is that the disintegration of ice sheets is a wet process and it can proceed quite rapidly. We see that the ice streams have doubled in their speed on Greenland in the last few years and even more concern is west Antarctica because it's now losing mass at about the same rate as Greenland, and west Antarctica, the ice sheet is sitting on rock that is below sea level. So it is potentially much more in danger of collapsing and so we have both the evidence on the ice sheets and from the history of the Earth and it tells us that we're pretty close to a tipping point, so we've got to be very concerned about the ice sheets.


I recommend you read James Hansen's answers to questions asked during the Iowa coal case inquiry:

Testimony submitted re coal-fired power plant in Iowa:

A rise of 5m per century is 10 times that predicted by the IPCC, I don't believe they are that wrong and I haven't seen anyone seriously suggesting they are.

The IPCC's sea level estimates do not include ice sheet disintegration. But even their sea level calculation without this catastrophic event is not up-to-date. Read here, from Prof. Rahmstorf, Potsdam Institute for Climate Impact Research, that sea levels just on current trends could be up to 1.4 m higher by 2100:

"A semi-empirical approach to projecting sea level rise"
http://www.pik-potsdam.de/~stefan/Publications/Nature/rahmstorf_science_... (Science, 315, 368-370.)

The "scientific correctnes" of the IPCC (exclude everything which is not 90% certain) is the exact opposite of an engineering approach which aims at assuming the worst case scenario when designing structures. For example, the safety factor for retaining walls tipping over is 3 (THREE). What should be the safety factor for our climate?

I asked this yesterday - and I think it was Memmel (sp?)

totally amazing that Saudi is claiming this as their "new" excuse for not increasing production

"hey guys, we're just doing our part to save the planet - what are ya, Earth-haters?"

Hello WT,

I think it would be interesting if we could somehow track the techno-cornucopian versus the realist ratio in the MSM.

For example: TV minutes for Yergin & Lynch vs. Simmons & Pickens to roughly determine the MSM's overall mindset on presenting Peak Outreach to the huddled masses.

I applaud the increasing news-coverage of the Peak Issues facing the planet--it is quite a remarkable shift from just a few years ago. Now we just need the MSM to really get more honest and accurate in its reporting with greater consistency of uniform terms, definitions, and descriptions.

IMO, Jeff Rubin from CIBC presenting his version of your ELM was another recent MSM breakthrough. If memory serves: I believe he called it 'Exporter Resource Cannabalism'. I still remember the talking heads' quiet pregnant pauses from the sudden realization of what ELM means.

Has he publicly credited you & Khebab & Graphoilogy & TOD where [I assume] he originally read about decreasing FF-exports?

I wish he would do this soon on TV--it could provide another viewership growth spurt to TOD and the other Peak Websites/Blogs.

My hope now is that MSM coverage is vastly increased on Tainter's System Complexity; of how Peak[FFs, water, and fertilizers & other minerals] are inextricably intertwined and poised to drive decline rates and other cascading blowbacks.

For example: consider Leanan's Drumbeat toplink on the ongoing global droughts and rising water competitions:

How Dry We Are
A Question No One Wants to Raise About Drought
I would really like to see Bart Andersen get on TV to talk about this sad trend in combination with the recent EB articles on: Peak Phosphorus, Peak Minerals, and Peak Mining.

I think the talking heads would be totally speechless once the probable impact of these Overshoot trends finally enters their comprehension.

I wonder how many more years will go by before one of the following: Bryan Williams, Wolf Blitzer, Catie Couric, or Bill O'Reilly, get the newsscoop of telling their viewers to read & study Dieoff.com. My guess is that Google needs to put the 'unlucky button' on its homepage first before one of the main talking heads will broach this Overshoot/Dieoff subject. Time will tell.

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

I think it would be interesting if we could somehow track the techno-cornucopian versus the realist ratio in the MSM.

I think that's a good idea. Peak Oil seems to come up quite a lot now, even if only to wheel on an "expert" to dismiss it. That suggests that the MSM are at least giving the idea some credence, if they thought it was complete nonsense they wouldn't mention it. High oil prices are a topic that can't be ignored.

At least the topic is being aired, I don't see how Joe Public would otherwise hear about it.

People watch television to see buff has-been celebrities dance around a stage and beg for popularity, and to see Homer Simpson squash cartoon cans on his head and eat pixelated d'ohnuts. And the networks make money on showing people what they want to see.

Telling people they are doomed will not make them any money.


Best comment I have read today.

Hello Cedar,

Thxs for responding. Please see my 'wild & crazy' upthread posting on biosolar mission-critical investing. If I can can get lots of people aware of this trend thru Peak Outreach efforts, then just imagine every oil company, car manufacturer, and airline tv commercial we are currently assaulted by being replaced with commercial ads for fertilizers, wheelbarrows & bicycles, solar panels, solar water-heaters, wood-stove mfgs, Nike-brand gardening tools endorsed by Tiger Woods, home-sewing and clothing repair kits, electric scooters, DIY water purification equipment, etc, etc.

In short, until the machete' moshpit arrives from severe fuel shortages and Olduvai blackouts: the networks will have no problem selling advertising airtime if there is a huge and sustained rush into vital biosolar companies and their products.

Don't invest in companies making worthless crap like suntanning booths.

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

I don't think this would be a surprise to Daniel Yergin.

In his book, The Prize, he tells about how the Shah of Iran used to lecture the US on social and environmental issues as in, "it is up to us to encourage you to get your priorities right". Loose paraphrase. :)

Hot air and bombast mostly. But Richard Nixon did not take it well! :)

Yergin claims it hardened the US toward him and was remembered when things were bad for the Shah.

"OPEC's efforts to "go green"" - would that be why they have built an indoor ski resort?

I was - and at least in one case, someone argued with my 'position,' saying that biofuels were worse for the environment, so Saudi Arabia shouldn't cut back, they should pump more, to help save the planet.

Unfortunately, there won't be much humor in OPEC going green, just a lot of people again blaming the Greens for more expensive energy.

Now, help may be arriving in the shape of a carbon-trading program that would effectively pay Indonesia and other forest-rich countries not to chop down their trees.

Like Indonesia, one of the most corrupted countries in the world, would be able to safeguard the forests on its 13000+ islands. Carbon trading? Yeah, sure. They'll collect the money and then the forests will be slashed and burned anyway.

If this isn't blackmail it seems to be a new legal principle - paying someone (eg a bank robber) not do something. The Indos seem untroubled about all the forests and peat swamps they've already burned. This won't absorb any more CO2 it's just paying for what used to be free.

The correct response is for other nations to
get their own forestry and carbon emissions right then embargo products (timber, palm oil) from these forests.

Do-gooders can become the worst cheats

Morally upstanding people are the do-gooders of society, right? Actually, a new study finds that a sense of moral superiority can lead to unethical acts, such as cheating. In fact, some of the best do-gooders can become the worst cheats.

..."The principle we uncovered is that when faced with a moral decision, those with a strong moral identity choose their fate (for good or for bad) and then the moral identity drives them to pursue that fate to the extreme," said researcher Scott Reynolds of the University of Washington Business School in Seattle. "So it makes sense that this principle would help explain what makes the greatest of saints and the foulest of hypocrites."

Well, I guess that explains a lot...

Actually I think a deep sense of moral superiority or superiority in general is one of the key aspects of the personality of a sociopath. Time and time again this personality trait has been discovered in serial killers, for example.

And politicians.

Is there a difference :)

A key reason that humility and "we are all sinners' is stressed in Christianity (TV preachers excepted).


Old joke....

Rev. Ted Haggard & Rev. Jim Bakker collaborate on a book titled - 'Preachers Do More Than Lay People'

Brings to mind the degree to which America's 'public persona' seems so allergic to humility and compromise (no less to 'economizing or moderating consumption'). The implication is that being anything besides #1 means accepting the title of Loser.. or just becoming vulnerable to being seen that way.


This is as old as life. I have a lot more respect for the person standing in front of me and telling me that they are going to try and stab me in the heart, then for the whining bullshitters that always stab you in the back, preferably while you are sleeping.


The person who tells you before-hand that they're gonna try and kill you isn't exactly a rational person. I respect rationality - I'd far rather my murderer be rational than stupid. Being murdered by a stupid person would be sooo embarrassing.

Jaymax (cornucomer-doomopian)

A question regarding Just-In-Time freight transportation:

Is there anyone out there who can point to some quality research on the impact of the adoption of the 'just-in-time' transportation model (warehousing on wheels) on urban form? I'm thinking of JIT as a whole -- not only the oil industry component.

Links to studies relating just-in-time to energy consumption trends in the road building/transportation/warehousing sector would also be greatly appreciated.

I'm trying to put together some information (on a volunteer basis) for several peak oil aware local policians in Canada and the USA.

Thanks in advance.

I do not know what in the hell "urban form" is!! But, I do know that JIT massively increases profits.

When gas shortages turn widespread,,,then,,,most people will know the days of going to the store for a loaf of bread are foever gone,,,,no job no mony no food,,,i'm so bummed out,,,,,,,just a doomer,,,,,,

Just an OT question - I've noticed other posters on other boards who use those strings of commas. What's with that?

Sticky comma key.

It's like those signs on cars that say "idiot on board".

Signs that say "loose" for lose, Teh, apostrophe S for plural, the ever popular 3 for e, ALL CAPS, and so on.

Has there been any discussion today on traders' movements out of the DEC07 contract and into the Jan08 contract? I did a quick search and didn't see anything.

There's been some mention of it.

Bloomberg has been blaming the expiring contract for the jump in oil prices today.

How does that work Leanan? Wouldn't there be a lot of selling pressure today, given the amount of Open Interest that was/is in this contract? What am I missing here,...anyone?

Robert Rapier and several others had a pretty long discussion about this the other day. Robert thought the pressure would be to be sell, but others more experienced in commodities trading thought the opposite.


It appears Bunyonhead, Darwinian, and the other trader-types were correct.

Leanan have I mentioned lately that you rock?

I've gotta come up with another word to slather-you-in, that one is starting to get tired...

Robert Rapier and several others had a pretty long discussion about this the other day. Robert thought the pressure would be to be sell, but others more experienced in commodities trading thought the opposite.

What I said on Monday was: 1). There would be a lot of volatility this week, which there was; 2). Oil would not reach $100 this week, even though some analysts were suggesting it might get to $105 on Tuesday; 3). That this week was going to be hard to gauge because of multiple abnormal events; 4). I expected oil to fall. When I wrote that oil was $94.94, it fell the next day to less than $91, and then climbed back to close the week at $95.10, $0.16 higher than it was on Monday. So, for all the ups and downs, it closed about where it was when I wrote that on Monday.

On Tuesday, many analysts had expected a pop up past $100. Instead oil fell. I expected oil to fall toward the end of the week, and it rose.


I too was expecting oil to close over $100. (But forgot about futures expirations) yet I was expecting oil to drop off (as the days went by) from 100 while the US economy takes it in the rear from gasoline prices at the pump. If, and a big If, the sheeple perceive this to be a trend of oil price going back down, then the sheeple psychology will be to continue to spend/drive. possibly resulting in Xmas sales increase. (time will tell) We all know big business started the Xmas season before normal times this year, normally its right after Thanksgiving.

Since gasoline prices always lagging behind oil price increases I think we will see demand destruction going in very slow motion, I figured we would see oil creep well over the psychological # of 100 and start heading a little higher.

like one of those dreams we all have, everything goes in slow motion and despite all the screaming it keeps getting closer!

Essentially, if you bet wrong on what the price would be on expiration day, you now have to scramble. This article explains how it worked on a day when the oil price went down:


Interesting article about "peak gold" on GATA.org:

A perfect storm for gold as mines left empty

The era of "peak gold" has arrived.

Try as they might, miners cannot find enough ore at viable costs to replace their fast-depleting reserves, even if they dig miles into the centre of the earth.

"There's not much gold out there," said Gregory Wilkins, chief executive of top producer Barrick Gold.

"Global mine supply is going to decrease at a much faster rate than people generally believe. Many of the new mines that people are anticipating will never come into production," he told the RBC Capital Markets gold conference in London.

Too lazy, and maybe not smart enough, to do the math, but I think that perhaps ALL of the gold on earth would not fill up a 100' cube, (maybe not even a 50' cube).

Let me try some html....

This is from the Financial Times in the UK.

Welcome to a world of runaway energy demand

Some excerpts....

“The increase in China’s energy demand between 2002 and 2005 was equivalent to Japan’s current annual energy use.”


Neoclassical economics analysed economic growth in terms of capital, labour and technical progress. But, I now think, it is more enlightening to view the fundamental drivers as energy and ideas. Institutions and incentives provide the framework within which the development and application of useful knowledge transforms the fossilised sunlight on which we depend into the stream of goods and services we enjoy.


Concerns over energy security also come from the potential for competition for supplies among the big consumers. The sensible approach is to rely on the market. But that may be hard when prices shoot up. At some point, American politicians may ask why the US expends blood and treasure in order to achieve security in the Middle East for the benefit of China. True imperialism – the attempt to seize energy resources for one’s own benefit – would be a ghastly error. But to err is all too human.

Bad link?

This works better for me FT

It's not a bad link. It's FT.com, which does weird things with cookies. That's why I hate to post links to their articles, even though they are often quite good. If possible, I look for mirrors at MSNBC, Yahoo, etc.

Near as I can tell, FT.com lets you look at an article once. (Or maybe it's their site once. Or once a day. Not exactly sure.) It places a cookie on your hard drive, and if you try to come back, it will show you only the first couple of paragraphs, unless you're a subscriber.

Very annoying.

To Leanan and Bob Cousins...

I apologize for not knowing how to fix it either.

Most of the column summarizes the recent report by the International Energy Agency.

But the writer goes beyond. Energy-centric instead of economics. But he doesn't mention depletion.

I should add that the journalist emphasizes climate change risks which is rare for financial people.

NPR had a couple of good stories about oil on All Things Considered yesterday evening. The stories are available for listening to online.

Black Gold Finances the Dreams for Abu Dhabi

Alaska Debates Its Dependency on Oil Industry

I don't know if it has already been post, sorry for the french:


A Londres, devant un parterre de grands patrons du pétrole, réunis à l'occasion de la Oil & Money Conference, rendez-vous majeur de l'industrie pétrolière mondiale, Sadad Al-Husseini a lancé trois affirmations lourdes de conséquences : la production mondiale de pétrole et de gaz liquéfié va stagner jusqu'aux alentours de 2020, avant de décliner inexorablement ; les chiffres officiels "exagèrent" les réserves planétaires de 300 millards de barils, soit un quart du total encore exploitable ; cette stagnation implique une augmentation minimale du prix du baril de 12 dollars chaque année, à mesure que se creusera l'écart entre une offre stagnante et une demande toujours plus forte.

Al-Husseini speaking in London.

1. world oil & gas production will stagnate till 2020 then delcine afterwards
2. world oil reserves are overstated of 300gb
3. each time the gab between supply and demand increase by 1 mb/j, it is 12 $ more a barrel.

First time I see that kind of article in Le Monde, one big newspaper in France.

Now that's a find!

There's an excellent sidebar entitled, "An Independent Expert?".

There's a link in the article to a pdf of his presentation, but I time out when I try to retrieve it. Anyone else have any luck?

The pdf next to the article is from a conference in London on 30 Oct 07, it is in English.

Opens fine from here, but may not be the same thing you were looking at


Excellent presentation material at that link. So, earlier last week lots of discussion at TOD of al-Huseini's opinions, following posting of an interview of him by David Strahan, with the eyebrow-raising title

Oil has peaked, prices to soar - Sadad al-Huseini

The subsequent speech by al-Huseini (which LeMonde describes?) is discussed by Strahan here http://www.davidstrahan.com/blog/?p=68

A new Bullroarer has been posted at TOD Australia/New Zealand:

The Bullroarer - Saturday 17th November 2007

And of course we're keen to receive new posts from the region, especially some stories from our TOD friends New Zealand.


Hello TODers,

Latest US drought map:


I would have thought that with all the rain that Texas got earlier in the year that none of Texas would be yellow-pixels, especially near the GoM. Is this because of the general soil makeup that the area loses moisture quickly or is some other explanation a better reason? Thxs for any reply.

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

I've learned from my Permaculture classes that central Texas is on the edge of "desert" much like Egypt. So, with a lot of rain, we green right up and without rain or after some dry days, we turn straw-like yellow until the next rain.

"The Great American Desert", they used to call the Great Plains -- and may again, soon.

Yep, much of TX is on the margin (or, in the case of parts of West Texas--the location, not the person--the region is a desert). Given the state's southern position, with much fairly direct sunshine when the clouds are away, think high evaporation rates. Inches of rain may fall at a time, but that moisture can go away in a hurry, too, especially if dry air from the deserts of MX and the SW US streams into the area.


graywulffe in CVO, OR

My thxs to all TODers that replied.

Hello TODers,

Speaking of Drought: cascading blowbacks from the Dead Pool?

Atlanta may have to drink the dregs

With drought tightening its grip on the Southeast, the Atlanta area's reservoirs are almost down to the dregs — the dirtier, more bacteria-laden water close to the bottom — and it's going to require more aggressive and more expensive purification.

The problem is that the water levels on Lakes Lanier and Allatoona, the main sources of water for metropolitan Atlanta's 5 million residents, have descended almost to the "dead zone," a layer low in oxygen and high in organic material — that is, dead and decaying plants and animals.

Even with standard treatment, the water at that level can have a strong odor, taste and color. State officials consider the water "suspect" at best.
Yikes, I hope the SE gets a lot of rain soon. My earlier posting on FEMA moving the people to rehabbed cities near the Great Lakes is starting to make more sense, especially if the rehab projects take maximum advantage of relocalized permaculture and transit oriented design.

I would rather live in an old, tiny, rundown house or trailer with plenty of clean, clear water than trying to live in a posh Southern McMansion that has no water.

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

We took a good wallop in New Orleans two years ago, San Diego just went up in smoke, and now Atlanta is going to take a beating ... and can't forget New York, which had much to do with the drought in Afghanistan.

I don't know Atlanta's rainfall patterns but I'd guess that failure of that one desperately needed tropical depression this season is the death blow for the new construction real estate. I saw an article indicating the landscaping companies all went up in smoke as soon as the water restrictions started. That will just lubricate the area's slide, much like (ironically) water getting under a glacier.

What do we do when a serious but not urgent disaster overtakes a major metropolitan area? Manhattan, New Orleans, and San Diego all got theirs in what amounts to an instant, while what Atlanta faces is likely to grind on for some period of time. This could be our first Long Emergency experience at a national level.

I keep thinking it is such a practice run. It's even more definable to everybody than "peak oil." Water is more "evident."

I'm wishing they'd get rain, but if they don't, watch carefully and learn lessons.

Hello Dennis Brumm,

Let's hope Atlanta's drought doesn't get as bad as Zimbabwe:

HARARE'S water and sewerage reticulation system is fast crumbling as the Zimbabwe National Water Authority (Zinwa) fails to turn around the deteriorating situation across the country.

A survey by the Zimbabwe Independent showed that the capital's infrastructure is in a free-fall characterised by unavailability of water and raw sewage flowing in the streets posing a threat of disease outbreaks in overcrowded townships.

Swarms of flies and mosquitoes hover over raw effluent which has become a common sight in most high density areas.
IF the US SE continues to get worse: the brain-drain migration will be faster than the drain of Lake Lanier, and the resulting corruption will be worse than the sewage eruptions. My feeble two cents.

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


Lack of clean water will led to the spread of disease, moreso in crowded areas. Open raw sewage and effluent will lead to increases of disease vectors, like flies and mosquitoes.

A disease vector is something that carry infection, viruses or bacteria, from human to human. Birds, pigs, insects, rodents, and other humans (ala Typhoid Mary) can all carry disease from human to human.

The increase in open human wastes leads to an increase in the bacteria and insects that feed on human waste. Insects, like flies and mosquitoes, can then carry bacteria and viruses from the wastes to the people.

Southeast Asia is currently being watched carefully for an outbreak of a new H5N1 flu that could start a worldwide pandemic.

But as more places start collapsing like Zimbabwe and losing access to the necessities of life, like human waste disposal, those places will all become pandemic risks, and not just for flu.

Your comments reminded me of a thought that's occurred to me recently: Drought seems like a real good metaphor for Peak Oil. They're both about a dearth, and they both require the passage of much time to "see". One can't tell a drought has begun at the beginning... Nor is Peak Oil so evident at the beginning. Peak Oil is sort of like an oil drought.

Anyway, I may have seen this metaphor used before, but I think it's an interesting enough relationship to post again.


graywulffe in CVO, OR

Hi, Bob, yes, I love your "feeble two cents." My bad analogy might be: Out of two cents often comes many dollars, if we can believe those investment pundits, right?

Greywulffe, I think rather than this being a metaphor, they're so closely related as to be a kissing cousins' issue. Metaphorically speaking, of course. :)

I know people on TOD are mostly aware of what's happening there, but when I bring up the subject to my friend in suburban Atlanta, he says it's bad, but apparently he's sure something will happen, so he talks about next year's tomato crop he plans to put in because I've got him all stirred up about peak oil and local food and that sort of stuff.

I mentioned the drought tonight to some relatives back east in the Midwest when they called, they just say "Oh yeah, I've heard about that." I asked my cousin if she's ready to house refugees from the South if there is no rain. She changed the subject. Maybe I planted a seed anyway.

I don't watch enough TV to know, but they are covering this off and on on MSM aren't they? I mean, even though it might not be good for xmess season and all...

Leanan, thanks for making the "new" tags a cheerful bright blue.

I just upgraded my Safari browser and the way it does searches is ... WEIRD.

It's easier to just page down and look for blue :-)







Comparisons are now being drawn between the Chinese stock market boom and the 2000 U.S. Nasdaq bubble.

But the Chinese problem is much deeper than that. The world is becoming very distrustful of Chinese goods. Only the U.S. and some third world companies new welcome Chinese items, food, and consumer goods. The third world has no choice. The reason for the U.S acceptance of tainted, unclean and defective goods is harder to explain.

What does this have to do with energy and commodities? Simply this: The recent massive increase in commodity and energy prices is based in large part on projected and massive Chinese growth in consumption into the foreseeable future. There are billions of U.S. dollars invested in this continuing bubble, by hedge funds, corporations, and individuals, involving pension fund money, municipal investment funds, university endowments, and a wide mix of other investment vehicles. Companies as divergent as GM, GE, P&G and Avon are projected much of their future income stream on Chinese growth.
This growth is now in serious question. The projected massive need for energy is based in large part on Chinese growth. This projected energy need likewise is now in serious question.

The distrust of Chinese goods is having a real market effect at street level.
I have friends who are now home prepping pet food to avoid possibly tainted pet foods, and are not buying ground beef, sausage, and other ground meats because they can't be sure what is in it. Many who can afford it are trying to buy local meats, "free range" organic meats, and locally produced produce.

If the government will not protect Americans from tainted products, they are attempting to protect themselves.

Charities in my local area who normally give toys to low income children are in crisis. Having had to empty one third of their shelves of tainted toys, they are now extremely short of toys to give to underprivilaged children. It is a very sad situation, as many poor children and their parents rely on these toys to have a holiday for their children.

I am alerting my friends, especially those I know in the financial services industry, to be careful. Be very cautious about putting people's retirement and college fund money into the Chinese market. It is now to be viewed as very speculative.

Also, there is the possibility that energy and commodities may be at or nearing the top of their price range. If there is a meltdown of the Chinese bubble, prices could drop very fast, and without warning. We have seen this before.

The belief that the Chinese are somehow super human, and can dodge the normal laws of economics is a mistaken one. Even without the growing distrust of Chinese consumer items and food products, the Chinese bubble was already getting long in the tooth. To expect double digit growth into infinity in the Chinese economy begs logic.

Please, be very careful. You can thank me later.....:-)

Roger Conner Jr.

The United States has massive imports from China. The United States economy is tanking. Who believed the Chinese would continue to grow at 9% per annum when their biggest customer is about to shrink dramatically and presumably relocalize? And lets not forget large amounts of their "wealth" are ... SIV nuclear waste foisted upon them by our clever financial market. These things were true even if they produced wonderful products. They do not.

There are three hundred million underemployed Chinese peasants in rural areas who've been gravitating towards cities as their economy glowed red hot. Knock out their employment possibilities with peak oil, knock out their farming possibilities with peak (s)oil, and then watch the Asian powers as they enter and fully exercise a jumbo economy sized Monbiot Fabric Feline Combat Containment System.

Where did you think those four billion "excess" humans were going to come from over the next century? A quarter of them are living in mainland China right now ...

The reason for the U.S acceptance of tainted, unclean and defective goods is harder to explain.

The answer you seek is PRICE!

the bottom line, walmart sells more goods from China, at a very low price. the money made from the USA allows China to purchase companies in the USA as well as property.

The answer you seek is PRICE!

At last. I understand economics now.

I'll just use Mattel as an example...recent share price...

Yeah, that "price" thing really worked to their advantage didn't it....
and you ain't seen nothing yet....

The FT had an article recently Hands scolds bankers as ‘whimpering dogs’ that says all one needs to really know about the state of the credit markets.

Guy Hands, the enfant terrible of European private equity, on Wednesday described bankers such as those who funded his recent €10bn (£7.1bn) spending spree as a pack of “whimpering dogs”, warning they would refuse to bankroll “mega buy-outs” for years.

Mr Hands, a former banker at Goldman Sachs and Nomura, said bankers were happy “in a pack” and liked “to smell easy prey and push each other out of the way for food”. But, he went on, “like any loyal dogs, when they get hit, they whimper”.

His comments at the Super Investor conference in Paris surprised some people as banks financed three of his biggest ever buy-outs in the last year and Citigroup stuck by its commitment to fund his £3.2bn buy-out of EMI, the music group, even after getting cold feet on the deal.