DrumBeat: February 1, 2008

The Oil Paradox

A worldwide slowdown won't end the oil price boom anytime soon.

...Oil is also not a normal commodity. A big part of today's high prices—and why they are still nearly double the level of a year ago, despite dark economic news—is that oil beats to backward economics. When the price of soybeans or steel rises reliably, farmers and steel millers boost output, and prices abate. When the price of oil rises, many suppliers do the opposite. This bizarre response comes not from the Organization of Petroleum Exporting Countries (OPEC), which is always in the news, but from the pernicious ways that oil wealth ripples through the societies that have most of the oil.

The most visible and worrisome effect of oil riches is the "resource curse." In poorly governed countries, oil wealth (and any other booty that is easily seized) actually impedes economic development because all politics is a struggle to loot the resource rather than to make long-term invests to improve human welfare. Governments that get easy money from natural resources don't need to rely so much on human productivity, which makes them less accountable to their populations. These factors explain why Venezuela, for example, is in perennial economic trouble despite having some of the world's greatest oil resources on its books. The current run-up in oil prices has allowed Hugo Chavez to bankroll a reckless foreign policy and has taken direct control over the country's oil fields. Having undercut Venezuela's oil company and scared away many of the most competent foreign investors, Venezuela's oil output is actually declining even though today's high oil prices would, in theory, make Venezuela's newest heavy-oil fields much more economically viable.

Exxon profit builds on oil-patch blueprint

The world's biggest oil company has stayed ahead of the pack by focusing on the oil patch, successfully placing big bets on finding reserves in corners of the world that carry huge risks - politically, as well as economically and geographically.

Ecuador softens tone in oil deals renegotiation

QUITO (Reuters) - Ecuador is willing to temporarily maintain current deals with foreign oil firms to reach agreements in renegotiation talks aimed at increasing the state's participation in contracts, top officials said on Friday.

That signals a softer approach to talks from President Rafael Correa who has said firms should immediately switch from deals that allow them to keep part of the oil they extract to contracts permitting the state to keep that crude and pay them a service fee.

Former oil company exec takes on global warming

ANN ARBOR -- For the first 10 years or so that Steve Percy traveled around the country talking about climate change issues, his message was simple: It's happening.

Now, the former CEO of the oil company BP America has a slightly different message: Those people and companies who aren't working to combat climate change will be left behind.

Adapting employment to fit a warming world

Global warming may be the topic on everyone's lips, but the silence about the future of work in a warming world is deafening. The social flow-on from global warming will shake up the nature of work and the availability of employment for people in every country. In an era of uneven globalization, the impact of global warming is affecting every region, but it is not affecting all regions in the same way.

IEA criticises OPEC decision not to hike output

PARIS (Thomson Financial) - The International Energy Agency tacitly accused OPEC Friday of increasing pressure on a vulnerable world economy by its refusal to pump more oil to help bring down crude prices.

'While the Organisation of Petroleum Exporting Countries has decided to leave output unchanged, crude oil supplies remain very tight, as the IEA has noted for the past six months,' the Paris-based agency said in a statement.

'Very high oil prices may be adding additional pressures to currently significant economic risks,' the statement said. The IEA represents the interests of oil consuming countries.

How oily is your candidate?

If I didn't know better, I'd say "so much for the pulling power of oil money". Reports suggested that it played a big role in George W Bush's two terms in office, but according to this stunning online interactive graphic, it was powerless to save Rudolph Giuliani in the 2008 primaries.

OilChange International is hosting the graphic, which shows just how connected each of the US candidates are to the oil industry – monetarily, of course.

Not only does it look good, the detail is stunning. You can click on a company and see a table of how much it has given to whom, down to the nearest dollar (or click on the candidate's mugshot to see how much they have received from all companies).

Ukraine president aims to end domestic gas subsidy

KIEV (Reuters) - Ukrainian President Viktor Yushchenko on Friday demanded an end to subsidised domestic gas prices to ensure that Naftogaz, the national gas and oil company, becomes solvent.

"The government is free to pursue any policy it wishes but things must be paid for," Yushchenko told a meeting of the National Security and Defence Council.

Propane leak, fire reported at Wynnewood refinery

WYNNEWOOD, Okla. (AP) - Officials at the Wynnewood refinery are trying to determine the cause of a propane leak that authorities say caused a brief fire this morning at the central-Oklahoma facility.

IEA refutes 'peak oil', points to lack of investment

Insufficient investment, political instability and blocked access to key oil and gas reserves have distorted the global fossil fuel market and driven up prices, according to the International Energy Agency, which has downplayed concerns about imminent oil shortages.

Nozari: OPEC March delivery slump likely

Iran's Oil Minister Gholam-Hossein Nozari said here Friday that the OPEC output cut in March is likely.

"Past years have shown that in an era such as the present time decrease in production can be necessary," Nozari told IRNA.

Iraq has halted oil supplies to OMV

VIENNA, Feb 1 (Reuters) - Iraq has halted oil supplies to Austria's OMV AG due to its oil exploration deal with the Kurdish regional government (KRG) in northern Iraq, Iraqi Oil Minister Hussain al-Shahristani said on Friday.

"The action has been taken from the first of January, everything has been stopped," the minister told reporters.

An industry source said the oil supplied was around 10,000 barrels per day of Basra Light crude.

Eni CEO sees 2008 output close to 2 mln bpd

"Eni will grow more than other (oil) majors: in 2000 output was lower than 1 million barrels, while in 2008 it will be close to 2 million," Scaroni told university students at a lecture.

Chevron finishes 1st solar project phase

SAN PABLO, Calif.—Chevron Corp. said Thursday it completed the first phase of a $35.2 million solar-power project installation at the Contra Costa Community College District in California.

The overall project includes a 3.2 megawatt solar-power generation system, energy-management systems, electrical system replacements and high-efficiency lighting, heating, ventilation and air-conditioning equipment. The first phase of installation was for 2.65 megawatts worth of power generation, with the rest to be added this year.

Big Oil has trouble finding new fields

These should be the best of times for Big Oil.

Petroleum prices have tripled in five years, and gasoline prices reached record heights last summer. International oil companies are making the kind of money most capitalists can only dream of.

...And yet, for an industry awash in income, Big Oil faces serious long-term threats. Its profit and its very future are under pressure, both at home and abroad.

China snow leaves millions in cold and dark

GUANGZHOU, China (Reuters) - Millions of Chinese faced a humanitarian crisis on Friday, as petrol and food reserves dwindled and yet more bad weather was forecast for a country paralyzed by record-breaking cold and snow.

More than 160 counties and cities in central China were suffering blackouts and water shortages, Xinhua news agency said, including Chenzhou, in Hunan province, a city of 4 million that has been without power and water for more than a week.

Coal prices could double again (audio)

All of a sudden coal, so long the Cinderella of fossil fuels, is not just in demand but in desperately short supply. A chance combination of crises in big producing and exporting countries has pushed the price of European imports to almost $140 per tonne – double the level of a year ago. But according to Gerard McCloskey, publisher of McCloskey's Coal Report, there is no quick fix to the coal crunch, and prices may still have a long way to go.

For weeks South Africa has suffered rolling blackouts caused in part by a shortage of coal, prompting the government to threaten to commandeer coal exports to solve the domestic crisis. Gripped by unusually bitter snowstorms, China has recently banned coal exports for the next two months. And in Australia, the world's largest exporter, torrential rains have hit production.

Pakistan: Gas supply shortage causes uncertainty

ISLAMABAD: CNG stations witnessed an unprecedented rush on Thursday with vehicles waiting for their turn in long queues to get fuel due to the uncertain supply of gas.

Cashing in on the opportunity, public transporters increased the fares and the district administration and the government were left at the mercy of public transporters.

Nepal: Transporters call indefinite strike

Demanding regular supply of fuel and maintaining its quality, the transport entrepreneurs today announced an indefinite transport strike in the Valley beginning February 3.

Oil giant's £14bn profits fuel anger

Union leaders called the £13.9 billion profit – the equivalent to £1.5 million an hour – "obscene", at a time when motorists, pensioners and businesses are struggling to pay higher energy costs, with some suggesting the government levy a windfall tax on the major oil concerns.

'Perhaps electricity doesn't lend itself to the free market'

Richard Fox, executive director with the Senate Environmental Resource and Energy Committee, represents Sen. Raphael Musto. He says that the state legislature was led to understand the expiration of electric generation rate caps would be a "good thing," and that competition will drive down prices.

Now, the legislature fears crippling price spikes.

"There is deep concern in the legislation about this, and the legislators are tuned in to a great deal of testimony and the many ideas that are out there," says Fox. "We've had exhaustive research, hearings and testimony from many different sources. Perhaps, electricity doesn't lend itself to being a free-market commodity."

Healthy alternative: Take mass transit

ATLANTA — Want to lose weight and look better? Improve your heart rate, circulation and overall health? Then get out of your car and hop on the bus or train.

New 'Green' Energy from Dirty Sources

LOS ANGELES - Wall Street has piled billions into solar panels, wind farms, and other alternatives to oil and gas, but many investors also see big opportunities in making better use of older, dirtier energy sources.

"Very few people will tell you that efficiency is a really green form of energy, but it's the greenest of all," said Kevin Landis, chief investment officer of San Jose, California-based Firsthand Funds, which owns several energy efficiency stocks.

UK: Flight tax to hit long-haul and heavy planes

Airlines that fly long-distance routes and own the heaviest aircraft will be the biggest losers under aviation tax proposals announced by the Treasury yesterday.

Legislators will hear from oil expert

With oil prices around $100 per barrel and some predictions gasoline soon will cost $4 a gallon, an expert will appear before a joint legislative committee to share his opinions on peak oil demands.

Matthew R. Simmons, who served as an energy advisor to President Bush, is a prominent oil-industry figure and one of the world's leading experts on the topic of peak oil.

Simmons is scheduled to appear at a joint Minnesota House and Senate Energy Committee meeting February 4 at the State Office Building in St. Paul.

Australia: ACCC to investigate fertiliser prices

The Federal Government has asked the Australian Competition and Consumer Commission (ACCC) to investigate fertiliser prices, as part of the wider look into the cost of groceries.

Fertiliser is now so expensive and in such short supply that it will be out of reach of many farmers this season.

Fuel shortage hits Rift Valley, Western and Nyanza

A biting fuel shortage has hit Western, Rift Valley and Nyanza Provinces following the recent skirmishes experienced in the regions.

Energy PS Partrick Nyoike and KPC Managing director George Okungu said Kenya Pipeline Company too has been affected forcing them to provide security to its officers working in the company's offices in the regions and provide military escort to trucks transporting fuel.

Nyoike decried the fuel crisis in Western Kenya saying fuel tankers were finding it difficult to deliver fuel due to the illegal roadblocks in the region

Uganda: Kampala Oil Dealers Begin Rationing Fuel

SOME oil dealers have been forced to ration fuel at their filling stations as stocks continue to dwindle following the escalating violence in Kenya, Uganda's main oil supplier.

Cut power exports to solve crisis - DA, union

Cape Town - South Africa supplies about 6 percent of its energy to southern African states at about a quarter of the price of the local residential rate amid a power crisis.

The Democratic Alliance and the trade union Solidarity have proposed that South Africa consider ending power supplies to the region as the local shortfall was roughly the same as the amount exported.

Winter Weather Wreaks New Havoc in China

Trains began running again in the Chinese city of Guangzhou, but the number of people stranded in train stations and highways, or otherwise affected by the country's severe winter weather, is in the tens of millions. New snowfalls were reported in Central China Friday, and parts of the country are reported to be down to only a few days' worth of coal to fuel power plants.

China Storms Cause $7.5b in Damages

BEIJING (AP) — Three weeks of crippling snow storms across China have inflicted $7.5 billion in damages, the government said Friday, as it announced a $700 million relief fund for farmers.

The freakish weather — the country's worst in five decades — has paralyzed China's densely populated central and eastern regions just as tens of millions of travelers were seeking to board trains and buses to return home for this month's Lunar New Year.

The storms have killed at least 60 people, closed roads, disabled the rail system, destroyed crops and exacerbated a coal shortage, forcing power plants to shut down and factories to cut production.

Vietnam: Flight shortage affecting Tet travelers

Air tickets are running out because the demand has exceeded the supply. The demand for traveling increases by 30-40% in the months before Tet and airlines can only provide 10% more flights.

In fact, airlines dare not offer more flights, because the more flights airlines provide, the bigger losses they incur. The fuel price has increase by three times, while the ceiling airfare remains unchanged. The world’s oil price has reached the record level of $100 per barrel, while the ceiling airfare has been capped at VND1.5mil since 2001.

Mexican Senator: PEMEX Needs Foreign $

Mexico (Prensa Latina) Manlio Fabio Beltrones, Senate coordinator of Mexico's PRI (Revolutionary Institutional Party), said it is impossible to consider that state oil company Petroleos Mexicanos (PEMEX) is doing fine.

"Modernization of PEMEX should have one fundamental axis: not to change the constitutional article on the sovereignty of fuels. The oil belongs to the people of Mexico, and PEMEX is not for sale," he told press Thursday.

Everyone who uses Iowa's roads should help pay for construction, repairs

One of the major reasons there is a “shortfall” is that recent administrations have convinced the driving public to use less fuel by economizing and to purchase more fuel-efficient vehicles. By following these policies the public drives fewer miles in more efficient vehicles and therefore purchases less fuel, resulting in fewer tax dollars for road construction.

...If an increase is necessary, raise the tax on ethanol to the same as regular fuel. Taxpayers are already subsidizing the ethanol industry.

Spare me your fuel sob stories

I am tired of people complaining about how much gasoline costs here and how little elsewhere. If you like the prices better elsewhere, go there and buy your fuel.

Better yet, if you don’t like the prices here, do something about it. Travel as little as possible. Sell your gas-guzzling tanks and drive sensible vehicles.

The Petrodollar Bubble Pump

Why did the prices of oil and other commodities rise so much? The reason is simple--hedge funds funded indirectly by commodity producers pumped huge amounts of cash into commodities.

We do not disagree that oil demand has been rising and oil supply is relatively constrained. But an oil industry expert we have known for years argues that if top oil industry insiders believed oil prices would exceed $60 per barrel for at least several years, tremendous amounts of new supply would come online not only from greatly enhanced drilling but from nontraditional sources such as oil shale and tar sands.

We believe oil prices of $100 per barrel are due solely to inflows into hedge funds that use some of their new money to buy commodities. Funds of hedge funds typically allocate a portion of their new money to commodities. Where do hedge funds get a good deal of their new money? We think much of it comes from commodity producers. In other words, commodity producers were using some of the additional cash generated from higher commodity prices to invest in commodities, which in turn drove commodity prices higher still.

Economist sees US better withstanding high oil prices - Peak oil

As the price of oil doubled over the last year, it may have looked like 1973 all over again to some observers. But research by MIT macroeconomist Olivier Blanchard shows that a return to 1970s-style gas lines and stagflation-the grim mix of inflation and stagnant growth-isn't in the cards.

Nigeria Seeks Joint Security Force In Gulf Of Guinea

ABUJA, Nigeria (AFP)--Nigerian President Umaru Yar'Adua has called for a joint security force in the oil-rich Gulf of Guinea due to an upsurge in violence in the Niger Delta, a presidential statement said Friday.

"The establishment of the Gulf of Guinea Guard Force will address emerging security concerns at the region", the statement quoted Yar'Adua as saying during talks with Equatorial Guinean President Obiang Nguema Mbasogo in Addis Ababa.

South Africa: Eskom asks DME to speed up mining rights process to ease coal supply gap

State-owned utility Eskom has identified the long-term growth in supply of coal as a significant challenge for future generation capacity.

Speaking at the McCloskey South African Coal Exports Conference in Cape Town, on Friday, Eskom GM for Primary Energy Generation Rob Lines said that the projected demand for coal for existing and new power stations, which would average at 4% a year, far outstripped the projected production and supply of the commodity over the next decade.

Eskom shocks for the South African apparel industry

The load-shedding measures implemented by Eskom* described as a national emergency by Cabinet members constitute a severe impediment for growth in South Africa's apparel sector.

Oil fields of plenty?

Despite making £93m a day, Royal Dutch Shell has not impressed the markets, concerned by resource nationalism and rising extraction costs.

UK: Petrol companies aren’t ripping you off - the government is

So near enough 70% of the price you pay at the pump goes into the government's coffers. And that's not the only benefit that the government gets out of $100 oil. There's also the tax on North Sea oil producers, which was raised in both 2002 and 2005, so that oil companies pay 50% corporation tax on their earnings from the North Sea.

New York: Westchester faces energy crisis, study shows

White Plains – Westchester County faces an energy crisis, and state and local officials must act quickly to avoid the prospect of power shortages, blackouts and skyrocketing electricity bills that will hurt the county’s quality of life and undermine economic growth. These are some of the warnings issued Thursday by a coalition of major regional business groups.

UK: EG Music News

SCHOOL OF SAMBA will soundtrack The Art Organisation's Smarter Than Yeast on Sunday - a day of free environmental workshops, that also includes eco-poetry and acoustic music. The event, which runs 2-10.30pm at the Station Street venue, aims to raise awareness of peak oil and climate change and bring together groups and individuals in Nottingham who are interested in environmental issues. The day will involve talks on peak oil, climate change and Transition Nottingham as well as workshops on wind turbines and permaculture. There will be a free shop open all day and the Everybody's Talking About Climate Change campaign bus will be there all day with solar panels, wind turbines, energy efficiency advice and pledges. For more details visit www.theartorganisation.co.uk

FOSS to electric cars: not such a big leap

It may sound somewhat strange to be talking about peak oil at Australia's national Linux conference - but Keech could find a parallel between a change from proprietary to FOSS software and moving away from petrol.

"Look at it this way: it's just that once again the status quo is not good enough for me. I was prepared to be a little different in choosing to use free and open source software and now I'm once again prepared to be different by using an electric car."

Electricity storage: Ne plus ultra

A new version of an old idea is threatening the battery industry.

Michael T. Klare: How oil burst the American bubble

The economic bubble that lifted the stock market to dizzying heights was sustained as much by cheap oil as by cheap (often fraudulent) mortgages. Likewise, the collapse of the bubble was caused as much by costly (often imported) oil as by record defaults on those improvident mortgages. Oil, in fact, has played a critical, if little commented on, role in America's current economic enfeeblement - and it will continue to drain the economy of wealth and vigor for years to come.

OPEC freezes oil output, says supplies sufficient

VIENNA (AFP) - OPEC left its oil production ceiling unchanged on Friday, snubbing US demands for an increase as the cartel focused on supporting prices which have fallen 10 percent since the start of the year.

Explaining its decision, the Organisation of Petroleum Exporting Countries said stockpiles of crude were likely to increase in the first half of 2008.

"I don't think the world should be concerned about a lack of oil; it should be more concerned about the financial crisis we are witnessing and its impact on world growth," OPEC conference president and Algerian oil minister, Chekib Khelil, told a press conference after the decision.

Conoco, Statoil Shut North Sea Oil Fields on Storms

(Bloomberg) -- ConocoPhillips started shutting production at three North Sea oil and gas fields and two platforms as storms brought high winds and waves to the region. StatoilHydro ASA shut two fields.

ConocoPhillips began closing the Eldfisk Alpha, Eldfisk Bravo and Embla fields and the Ekofisk Alpha and Ekofisk Bravo platforms at 8:30 a.m. local time today, ConocoPhillips spokesman Ingvar Solberg said in a telephone interview. The shut-in is expected to last 24 hours, Solberg said.

Groups challenge Alaska petro lease sale

ANCHORAGE, Alaska - Groups of conservationists and Alaska Natives sued the federal government Thursday to stop a petroleum lease sale of a large area of the sea off Alaska.

The plaintiffs claim the environmental review by the Minerals Management Service did not fairly evaluate the potential effects if offshore petroleum fields were developed in the lease area, just smaller than Pennsylvania.

Exxon shatters all-time profit record

NEW YORK (CNNMoney.com) -- Exxon Mobil made history on Friday by reporting the highest quarterly and annual profits ever for a U.S. company.

Chevron 4th-Quarter Profit Rises on Record Oil Prices

(Bloomberg) -- Chevron Corp., the second-largest U.S. oil company, said fourth-quarter profit rose 29 percent as crude prices climbed to a record on their way to topping $100 a barrel last month.

Mexican farmers protest NAFTA

MEXICO CITY, Mexico (CNN) -- Hundreds of thousands of farmers clogged central Mexico City Thursday with their slow-moving tractors, protesting the entry of cheap imported corn from the United States and Canada.

Hundreds of profs hold green 'teach-in'

PORTLAND, Ore. - Global warming issues took over lecture halls in colleges across the country Thursday, with more than 1,500 universities participating in what was billed as the nation's largest-ever "teach-in."

Australia experiences hottest ever January: weather bureau

SYDNEY (AFP) - Australia experienced its hottest January on record this year, with the dry continent heating up as part of the global warming process, the bureau of meteorology said Friday.

'Doomsday' seeds arrive in Norway

The first consignment of seeds bound for the "doomsday vault" on Svalbard has arrived in Norway.

Twenty-one boxes containing 7,000 seed samples from 36 African nations were sent by the Nigeria-based International Institute of Tropical Agriculture.

The final leg of the journey will take the seeds to the remote Arctic Island.

The vault is intended to act as insurance so that food production can be restarted anywhere on Earth after a regional or global catastrophe.

Built deep inside a mountain, the structure will eventually house a vast collection of seeds; safeguarding world crops against possible future disasters including nuclear wars and dangerous climate change.

No targets reached at climate conference

HONOLULU - A meeting of delegates from the nations that emit the most pollutants ended without concrete targets for slashing greenhouse gas emissions, but participants praised what they saw as a new willingness by the United States to discuss possible solutions.

Climate 'could devastate crops'

Climate change could cause severe crop losses in South Asia and southern Africa over the next 20 years, a study in the journal Science says.

The findings suggest southern Africa could lose more than 30% of its main crop, maize, by 2030.

In South Asia losses of many regional staples, such as rice, millet and maize could top 10%, the report says.

The effects in these two regions could be catastrophic without effective measures to adapt to climate change.

Telecom partially resumes in snow-hit areas

In a related development, storage of coal used for electricity generating has declined to 21.29 million tons, less than half of the normal amount, according to the State Electricity Regulatory Commission.

China's 17 provincial-level regions adopted power-rationing measures as coal shortages cut power generation. Continuous freezing and snowy weather across large areas of China sharply raised electricity demand, but also hindered coal transportation, which exacerbated power shortages.

Power plants that produced seven percent of the country's thermal power were shut down because of a lack of coal, the latest figures from the State Electricity Regulatory Commission showed.

There was previous discussion about the coal situation here

We do not disagree that oil demand has been rising and oil supply is relatively constrained. But an oil industry expert we have known for years argues that if top oil industry insiders believed oil prices would exceed $60 per barrel for at least several years, tremendous amounts of new supply would come online not only from greatly enhanced drilling but from nontraditional sources such as oil shale and tar sands.

"So let me get this straight... You *know* a *guy*."
Terry Benedict, Ocean's 11

Sorry, couldn't resist...

Life must be so placid and calm on Planet Forbes.

Ah, good old neoclassical economics. "Higher prices lead to higher supply... what... higher prices haven't led to higher supply? Um... well... interest rates.... hedge funds? I dunno. Somethin'. Supply will jump! Honest! Hey, look at this beautiful bridge, you know that's for sale? Just one dollar, I tell ya."

You forget,under this administration life has been very very good for the "Forbes" crowd.My guess is ,with the Monoline crisis,and other financial woes,things will be changing soon,and not for the better.

Hell hath no fury like a bunch of FWOs beating the Guayan country side in search of the likes of the fleeing 'Forbes Crowd'. Their biggest problem is that they are stuck on this planet, which they devestated, with us...No amount of dollars will solve that little problem.

FBI Director guarantees securitized mortgage fraud prosecution

FBI Director Robert Mueller on Thursday said the agency was committed to investigating and prosecuting companies involved in mortgage fraud and other violations in connection with home loans made to risky borrowers.

The bureau on Tuesday disclosed it was working with the Securities and Exchange Commission to investigate 14 unidentified companies, from mortgage lenders to investment banks, for possible accounting fraud, insider trading or other issues connected to subprime mortgage lending.

The FBI allocated substantial manpower and resources to address the Saving and Loan crisis in the early 1990s and corporate fraud earlier this decade and Mueller said he was prepared to do the same to address fraudulent lenders.

The FBI is looking into the practices of so-called subprime lenders, as well as potential accounting fraud committed by financial firms that hold these loans on their books or securitize them and sell them to other investors.


. . . "an oil industry expert we have known for years". . .

He who shall not be named?

Daniel Yergin Day: July 13, 2006

In any case, in a column in Forbes Magazine, published on 11/1/04, Daniel Yergin, in response to a question about the future direction of oil prices, dismissed concerns about oil supplies and asserted that oil prices on 11/1/05 would be at $38 per barrel. Note that oil prices exceeded $60 in the summer of 2005, prior to the hurricanes.

In my opinion, Mr. Yergin serves as an excellent symbol of the major oil company/major oil exporter/energy analyst group. And since oil prices are now trading at close to $76 per barrel--twice Mr. Yergin's prediction--I hereby designate July 13, 2006 as "Daniel Yergin Day," in honor of Mr. Yergin's continued efforts to, in effect, persuade Americans to continue driving large debt financed vehicles, on long commutes to and from large mortgages.

That's what I'm calling Yergin from now on. "He who shall not be named."

lol, good one. You guys are a tonic.

dont they keep recycling the same lines ? above ground factors,political upheaval,not enough investment,and last but not least those damn tree huggers.

Ah, didn't you mean 'he whose name should not be spoken?' Now you're in for it, WestTexas. Dementors and Sidhe will both come a knockin.

As a less known author of fantasy (and oil science fiction), I couldn't resist.

Best wishes to all!


Published on 8 Nov 2007 by Energy Bulletin. Archived on 8 Nov 2007.
Young Daniel Yergin as peak oil activist (book review)

by Eugene Duran

I first learned about Peak Oil several years ago and have spent much time investigating the accuracy of our energy problems. The more you learn the worse it gets. I came across a book at a flea market entitled Energy Future: Report of the Energy Project at the Harvard Business School, edited by Robert Stobaugh and Daniel Yergin. At first I put it back due to Daniel Yergin’s position on Peak Oil. About a year later I returned and found the book still there. I bought it for 50 cents.

While I have not read every page I feel it is important to review this book now that we are where we are with regards to energy.

Energy Future is an astounding book. The following is a list of the chapters.

1. The End of Easy Oil
2. After the Peak: The Threat of Imported Oil
3. Natural Gas: How to Slice A Shrinking Pie
4. Coal: Constrained Abundance
5. The Nuclear Stalemate
6. Conservation: The Key Energy Source
7. Solar America
8. Conclusion: Towards a Balance Energy Program
9. Appendix: Limits to models

Yergin, it seems, was NOT naive. He has been well-paid for his services and has had a good life.

Hi stiv,

Interesting find. Scary to contemplate.

Right, it's those damn hedge funds again. (Referring to the above link: The Petrodollar Bubble Pump.)

Why did the prices of oil and other commodities rise so much? The reason is simple--hedge funds funded indirectly by commodity producers pumped huge amounts of cash into commodities.

The price of oil is up because of hedge funds. The price of corn is up because of hedge funds. Ditto for wheat and every other commodity that is up. But sooner or later all those hedge funds must unload their positions. After all, it is the front month contract that sets the pace. And that contract in oil expires every month. If hedge funds are causing the problem by buying up oil futures contracts, then they must unload those contracts, or roll them over, at or near expiration. Either way that would have the opposite effect. The expiring contract would, on expiration day, plunge.

It is a zero sum game. If buying huge numbers of contracts would cause the price to rise, then selling huge numbers of contracts would cause the price to drop. And it does not matter if you roll them over. That would cause the expiring contract to plunge while causing the next months contract to spike. We have seen no such plunge and and rise in contracts at or near expiration.

Remember, the buying or selling can only have an effect on the price at the moment of transaction. Simply holding a long or short contract has no effect on the market whatsoever.

All this being said, it defies all economic principles as we were taught in economics 101. If commodity prices are driven up artificially then we should see a flood of those commodities hit the market, driving prices right back down. That has not happened. Agricultural prices keep rising despite rising.

This article says we planted more corn last year than any year since WW2 and predicts prices to plummet as a result. Guess what, corn prices are now at an all time high. Prices did drop during the summer but then shot right back up setting new records in December and another record in January.

U.S. farmers plan to grow corn on 90.5 million acres, up 15 percent from 2006, according to an Agriculture Department report issued Friday. That's the most acreage planted with corn since 1944, the last full year of World War II, when 95.5 million acres of corn were planted.

And because each acre produced so much more corn than it did in 1944, we produced last year, by far, more corn than ever before. And still prices kept rising. Damn hedge funds. ;-)

Ron Patterson

Ron, always a pleasure to read someone like-minded. I guess you won't be safely death.

If Hedge funds have so much power, the stock market should be just going up indefinitely. Same thing applies to housing. Should have thought of that. Then we could avoid all this sturm and drang over the coming recession.

I'm sick to death of all the hedge fund propaganda. What is this, the result of Saudi public relations dollars? The hedge funds wouldn't be hedging if there wasn't a reason to hedge. In other words, why buy oil if the supply situation wouldn't otherwise make it a good bet that oil prices would rise.

Cart before horse...

So, the producers have been driving up prices by buying their own oil at an ever-increasing prices?

Brilliant idea! I wonder why no one has thought of it before.

lol, well put

You can always count on Forbes for laughs.

Forbes, from November, 2004:

Digital Rules
Capitalism's Amazing Resilience
Rich Karlgaard, 11.01.04, 12:00 AM ET


. . . where will oil prices be a year from now--$75 a barrel? $100?

Wrong numbers, says Daniel Yergin. Wrong direction, too. Try $38. Yergin knows oil.. . .

. . . Yergin's prediction of cheaper oil prices is noteworthy because he doesn't dispute any of the alarming facts cited in my opening paragraph. Not that he would. The facts came straight from Yergin's own mouth at the recent Forbes Global CEO Conference in Hong Kong. I jotted down Yergin's comments while listening to him speak at a dinner. Then he gave a formal speech the next morning and, fueled this time by highly caffeinated tea, I again took notes, just to be sure. Yergin is pretty clear about his predictions. He says oil demand will rise, yet prices will drop. How can this be?

Answer: capitalism's amazing resiliency. Oil prices rise--oilmen become innovative. They work, they invest, they put their heads to the task, they apply technology, and pretty soon they'll discover how to extract oil profitably from oil sand. Or open wells in deeper water. Or scour the planet for new sources using scanners thousands of miles in space. As Yergin reminds us, oil output is 60% higher today than it was in the 1970s. Not many sages from the 1970s would have bet their reputations on this development. The opposite sentiment prevailed back then; experts said the planet was running out of oil. Wrong.

Yergin says he's always asked when oil will run out for good. He shrugs. He's willing to say the world will need 40% more oil in 2025. Hard work and technology probably will find a way to meet the demand. . .

That is why the excuse is now that NOCs are responsible for high oil prices. They interfere with the capitalist utopia that we are all striving for and rescue Yergin from looking like a complete idiot. Humanity will go down fighting ideological battles instead of dealing with reality.

Yeah.. I was channelling two cartoons as I read this one..

One is a couple rocks, deep underground, with a few drops of oil still clinging to them, comparing daytrading advice, where their conclusion is not to fess up any more of their oil until the price is better.

The other one... 'Imagine you had a nickel for every time you imagined the NOC's had a can-opener..' explains why most of my bumper-stickers are dismal failures. My wife is a very patient woman.


Since OPEC isn't going to raise production, it looks like it will be up to the folks on the Left Coast to fix things. Best hopes for high energy prices until they get rolling.

A Green Energy Industry Takes Root in California

E. Swanson

From the featured article "Economist sees US better withstanding high oil prices":

In the 1970s, there were two sharp recessions and sharply higher inflation. This time around, the economy has remained strong, and inflation has barely bulged.

MIT macroeconomist Olivier Blanchard impresses me as one of GWB's last state of the union contributors. Never mind the 4th quarter's 0.6% GDP growth and 2.7% PCE deflator

Mr. Blanchard is just visiting this planet...and, he has done a great deal to diminish my high regard for MIT professors. Blanchard seems delighted by the fact that American workers no longer have the leverage to increase their wages as prices increase. He is just another economist that has mentally decoupled voodoo economics from what constitutes America...We the people. One can only hope Blanchard gets stuck in a very long line of waiting vehicles when attempting to refuel his space ship.

'Q: Do oil prices still affect wages, as they did in the 1970s?

A: Oil doesn't have the impact it did because workers don't have the bargaining power they did. In the 1970s, oil price increases led workers to try to maintain their purchasing power by seeking higher wages, which they often won through union contracts. This increase in wages led in turn to an increase in the price of all goods, which led to a further increase in wages and so on.

In the 1970s, wage increases were also made easier by the fact that, in many countries, wages were indexed to inflation, so they automatically went up. To fight inflation, central banks tightened monetary policy, leading in turn to declines in output.

Things are very different now: Indexation clauses are largely gone. And workers' bargaining position is much weaker than in the 1970s. Thus, for the most part, wages have not gone up with the price of oil, and inflation has remained low. There has been no need-so far-for tighter monetary policy.'

Yes, we have no bananas, we have no bananas today!...and they have not increased in price since we have none to price.

..seems to delight in the fact that American Workers no longer have the leverage to increase there wages as prices rise...'

Some may call it globalisation. Others may call it treason:


God quit you in his mercy! Hear your sentence.
You have conspired against our royal person,
Join'd with an enemy proclaim'd and from his coffers
Received the golden earnest of our death;
Wherein you would have sold your king to slaughter,
His princes and his peers to servitude,
His subjects to oppression and contempt
And his whole kingdom into desolation.
Touching our person seek we no revenge;
But we our kingdom's safety must so tender,
Whose ruin you have sought, that to her laws
We do deliver you. Get you therefore hence,
Poor miserable wretches, to your death:
The taste whereof, God of his mercy give
You patience to endure, and true repentance
Of all your dear offences! Bear them hence.

It is only "treason" if you take a U.S.-centric position. These folks are "globalized" and have no loyalty to any people or place. The fact that many of them started in U.S. corporations is essentially irrelevant to our current world.

However, the thing that ties that world together is oil -- so we will see a different landscape in the future. Not that it is likely to be any better for "we the people" or the laboring classes of America.

I am not from the USA. What good then is government and corporations if they do not put their own 'common weal' first?

I have no problem at all with any government putting its own citizens first. I would expect all governments to do the same, and all corporations. If all behaved with this level of real-politik, then diplomacy would be so easy. Mostly compromise and civilised discussion.

I cannot fathom a corporation that does not put its own country first.
Earl Halliburton must be spinning in his grave. By all accounts he hated government but was loyal to those he worked with.

For corporations to offshore a workforce, breaking its own nations spirit, pocket book and spending power goes against the reason.

Another quote from HV: The Dauphain: 'Self love is a lesser sin than self neglect'.

Now some may say that nations are a disease rather than a cure, but if globalised corporations with governments as hired lackeys are the cure then all can look forward to going into the blender and being re-constituted as robotic worker-slaves, toiling for a class of manager-slaves who in turn pay homage to a remote and permanent elite.

The excerpt from HV ScII, refers to four knights who tried to sell out Englands plans for gold and favours.

What then is the difference between those knights and those who would move plant to another country for a better percentage?

Been reading Matt Savinar's site (horrible html and all, it only crashes my browser sometimes!) and Tickerforums, and the US economy is really in the position of "pushing a rope".

We're at the end state, where wealth polarization is extreme. Traditionally there have been only two cures: A Biblical-type Jubilee, or something like the French Revolution. Literally killing off the rich. The 2nd one is of course what we're heading for in reality, there's no way the aristocracy in France were going to let up and have a Jubilee, and there's no way our rich will even think of it either. So things will just get worse and worse until it explodes.

The next question, then: who will be deemed "the rich"? The OECD?

Us rich. That's why I'm not looking forward to it. Sucks to be Robespierre in the French Revolution.

So be Danton. Or Marat. Or Wordsworth.
We shall be lucky indeed if we are freed to adopt roles such as Robespierre's

Maybe someone should go ahead and reserve "MadamDefarge.com"

Just checked. It's taken

Well, corporations are chartered by governments, and so they should be accountable to them, if not loyal. It doesn't seem to work that way, though -- modern corporations seem to be essentially stateless, accountable only to their upper management, and arguably, the shareholders. It is banditry, not business.

The four knights in Henry V were embedded in a totally different environment. At least what I know of history suggests that the feudal bonds were quite real, and were enforceable by death to the malefactor. The best anyone gets now from major corporations that trespass is a fine, which is simply cranked back into the corporation as a business expense.

Imagine if heads of the corporations that decide to "outsource" their whole plant were subject to be hanged for treason -- you can't imagine it. It doesn't work in the "global economy."

Ken Lay died for our sins.

(Ken Lay was CEO of Enron Corp.)

Corporations are just institutionalized greed. The best corps are employee owned and operated. Check your history. Corps started out as Privateers -- read pirates sanctioned by the Crown under corporate charter. The very same people who, years and year later, invented 'human resources.'

How do you like being reduced to a resource?

Globalized corporations spend a lot to influence governments so that the governments do not put their people first.

Also, people in governments put their own interests first to some extent.

I've posted here before about the single biggest disappointment in my MIT education: the economics courses required when I was an undergrad. They poisoned an entire generation of students, maybe two - the same students that would go on to start new ventures in every developing field. The only analogy I can think of is what the University of Chicago did to Chile.

A total disaster because of the disproportional influence of MIT.

cfm, MIT 78

Madmen and idiots are the lifeblood of corporate imperialism. They give life its color and pizzazz with their belief in infinite growth in a finite world, a doctrine they share with a cancer cell.
Corporatists differ from primitives only in that corporatists mistake a blind momentum driven by ego, greed and stupidity for destiny.
Human sacrifice is more popular today than at any time in history. Only now, the priests wear suits instead of robes
The battlefields of the world are littered with the corpses of those who thought they were fighting ignorant savages
Let’s talk about the mainstay of American ascendancy, Feral Corporatism. I know folks like to talk about a feral capitalism, but they are missing the point. This is why so many of your critics are shooting blanks. Corporatism stomped capitalism into the ground decades ago. Though the public tends to conflate the two, there is a crucial difference between them: In capitalism, the owners call the shots; in Corporatism, overpaid employees call the shots.
dogma of “free markets” is sanitized by calling the disasters “structural adjustments.” This is like calling Hiroshima a home renovation project.
Feral Corporatism is the harbinger of freedom. The path to freedom leads through the swamp of impoverishment. The best way to teach a man about free enterprise is to starve him. The starving man is motivated to steal bread and sell the surplus to his neighbors for a tidy profit. In this way, he improves his station by screwing his fellows.
All commerce is grounded in crime. A man achieves success when he is powerful enough to legalize the crimes that brought him to power.
one basic rule of world domination: The only way to defeat a rogue state is to become one; the only way to crush the Axis of Evil is to embrace evil.

from...Dear George from his ardent admirer Belacqua Jones

Here's the link


I just now started reading some of these, after looking for the ref. (I'd never seen the quote by Robert McNamara before. Unbelievable.)

Note the irony of one of the ad popups on the Forbes piece "The Petrodollar Bubble Pump" - It is an ad for the 2008 Lexus LX 570.

From Consumer Guide:

The 2008 Lexus LX 570 replaces the LX 470 as the largest, costliest SUV at Toyota's luxury brand. It shares the basic redesign of the 2008 Toyota Land Cruiser. Both have three-row seating for up to eight passengers. A 383-horsepower 5.7-liter V8 engine and 6-speed automatic transmission supplant a 268-horsepower 4.7 V8 and 5-speed automatic.

MSRP: $73,800

Class: Premium Large Sport-utility Vehicle

Jevon's Paraodox?

And based on the "Petrodollar Bubble Pump" rationale, the $73,800 Lexus is priced so high because Toyota is using some of the additional cash generated from higher Lexus prices to invest in SUVs, which in turn drove Lexus SUV prices higher still.
Forbes, spot on!

Toyota is selling a gas-guzzling SUV for one and only one reason:

Because people buy them!

Not necessarily. The bigger vehicles in many cases are "sold" rather than "bought". If a customer walks into the auto dealer; the salesman has a huge incentive to upsell the customer to the biggest car possible. Bigger cars have bigger prices, and bigger margins. Many customers dont care about the total price since they are financing.
The typical TOD reader thinks logically and wants the most economical vehicle that will carry what we need to carry. The typical American doesnt think this way. They want the biggest car the financing company will let them walk away with.

Mike Klare almost nails it, when he talks about "unfortunately, the US "wasted" the oil in gas guzzling SUV's and the like."

substitute "Economic stimulus was" for "wasted".

Suddendebt-a contributor here (I have to guess what he goes by) does:

"The money supply of the United States shall be indexed to the production of renewable energy and the "dollar" shall be renamed the "Greenback".

"Our world is facing two fundamental and interlinked challenges: fossil fuel depletion and global climate change caused by greenhouse gases. These are monster issues and lurk behind each and every major political, economic and strategic decision, from revamping transportation infrastructure to overhauling pension systems and making war.

(*) This is a proposal I made some time ago in a comment to The Oil Drum. It was in response to calls for the re-instatement of the gold monetary standard, which I regard as ill-suited to an era of resource depletion and climate change.

Posted by Hellasious


Mac, I read the articles by Klare and Blanchard and was stunned by the contrast. I have read one of Klares books and a lot of his columns but had never heard of Blanchard, who sounds like someone trying for a job at the US Fed Reserve.

'Blanchard, the Class of 1941 Professor of Economics, is a former MIT economics department head and widely published author whose articles on economics appear regularly in U.S. and French media. He discussed his research on oil shocks during a recent interview with the MIT News Office.'

It is difficult for me to believe that Blanchard is well received in the 'French media'...but, he might be well connected with the 'new, more conservative French Governemnt.'

But the dollar was already renamed. It's now called Green Confetti.


The business issues that resonated across multiple industry sectors and could have a dramatic impact this year include:
Environmental Sustainability
Rising Energy & Health Care Costs
Technology Use & Integration
The 2008 Presidential Election
Talent Management

(What? Energy is not in such a list?)

(18 billion in roads to help the economy)


a total of 2,203,295 foreclosure filings — default notices, auction sale notices and bank repossessions — were reported on 1,285,873 properties nationwide during the year, up 75 percent from 2006.


Below is a chart comparing what he said in his State of the Union address with what he did last year in his 2008 Budget request.


Undercover Investigation Reveals Rampant Animal Cruelty at California Slaughter Plant – A Major Beef Supplier to America’s School Lunch Program

(Ewe will think of the kids)


“The next Enron could occur within government,” said ERC President Patricia Harned, Ph.D. “Almost one quarter of public sector employees identify their work environments as conducive to misconduct


The number of lobbyists raising money for the 2008 presidential candidates already has eclipsed the total for the entire 2004 campaign, according to a Public Citizen study released Tuesday.


It finds that, during the third quarter the approximately 54 thousand loan modifications done and 183 thousand repayment plans put into place exceeded the number of foreclosures started


Elsewhere the odds of a recession have varied between 30 and 50%. Housing continues to be a significant drag on the economy

And fun:
http://www.clemson.edu/foodscience/PDF Downloads/Double-Dipping Does Transfer Bacteria.pdf

The inspiration of the experiment was a popular television episode of Seinfeld, written by Peter Mehlman, in which the character George Costanza is scolded for double-dipping.

Forget Darfur.

The war just moved to Kenya.

And after Kenya goes, I don't think we'll be hearing from ME Africa for a while.

"Tamoil to Dominate Kenya's Oil Industry with New Refinery and Pipeline Deal
Tamoil East Africa Ltd has secured a deal to upgrade Mombasa's refinery that will see the Libyan company dominate Kenya's oil sector.

Global Insight Perspective


Libya's Tamoil will invest US$300 million in upgrading Mombasa's refinery.


The deal came about because of Tamoil's involvement in the Eldoret-Kampala pipeline deal. The massive investment is needed, but the negotiations have been conducted behind closed doors and there have been allegations of corruption.


The agreement will see the Libyan company dominate Kenya's oil sector, with international oil companies playing a much reduced role."

In October last year, ExxonMobil sold its assets in Kenya, which included 70 service stations and the associated supply and distribution facilities, to Tamoil. The sale came during an upsurge in anti-"Big Oil" rhetoric against international oil companies by senior government officials, led by Finance Minister AMOS KIMUNYA, who had previously accused oil-marketing companies of "cartel-like behaviour" after they increased their prices when global crude prices increased, but failed to reduce them in line with the subsequent dip."


Guess who's the power behind the Kibaki throne.

Reuters AlertNet - Kibaki announces half new cabinet amid crisis
Jan 11, 2008 ... Jan 8 (Reuters) - Kenyan President Mwai Kibaki on Tuesday announced part of his new cabinet, including Amos Kimunya as finance minister, ...
www.alertnet.org/thenews/newsdesk/L08166444.htm - 31k - Cached - Similar pages

Finance Minister Kimunya concedes that Raila Odinga/ODM is Forming ...
The Finance Minister and Kibaki's right handman Hon. Amos Kimunya in a pre...ss briefing on December 11th 2007, conceded that Raila Odinga ... all » will ...
video.aol.com/.../3829524981 - 76k


Job shock - 17,000 lost in January

NEW YORK (CNNMoney.com) -- Employers trimmed jobs from their payrolls in January, according to a government jobs report Friday that showed the first decline in employment in four years. That raised new concerns about the risk of recession for the weakening U.S. economy.

Jim Rogers: 'It's going to be much worse'

"I'm extremely worried," he says. "I have been for a while, but I just see things getting much worse this time around than I expected." To Rogers, a longtime Fed critic, Bernanke's decision to ride to the market's rescue with a 75-basis-point cut in the Fed's benchmark rate only a week before its scheduled meeting (at which time they cut it another 50 basis points) is the latest sign that the central bank isn't willing to provide the fiscal discipline that he thinks the economy desperately needs.

"Conceivably we could have just had recession, hard times, sliding dollar, inflation, etc., but I'm afraid it's going to be much worse," he says. "Bernanke is printing huge amounts of money. He's out of control and the Fed is out of control. We are probably going to have one of the worst recessions we've had since the Second World War. It's not a good scene."

Option ARMs, next chapter in U.S. housing crisis

Mortgage bankers, industry experts and nonprofit officials say that the impact of one particularly nasty kind of ARM -- called the Option ARM -- involving hundreds of billions of dollars of loans has yet to be felt. And, they say, it will hit prime borrowers and subprime borrowers alike.

...With an Option ARM, borrowers can make a minimum monthly payment like a credit card, but if they do the principal increases.

Obviously I don't know the guy, but with a $16000 annual income and $3800 monthly mortgage, is one to believe these people were unwitting dupes?

When presented with a scenario where hundreds of thousands of dollars could be 'made', I think these peoples eyes glazed over, their brains shut down, and they had rich fantasies of how all that money would be spent. Call it an aspect of 'human nature'.

Not using ones rational mind, if at least for 2 minutes, should not be grounds for bailout and legal procedings.

And over 90% of the people with these deals are in arrears...

It was a $1200 monthly mortgage. Still a lot, given his income, but in Boston, even renting a one-bedroom apartment costs more than that per month.

I think a lot of older people are very vulnerable. It used to be that mortgages were pretty straightforward, and the banker was on your side. It's not like that any more, and a lot of people who bought their homes a long time ago are out of their depth when it comes to buying a new one or refinancing.

But can one reasonably expect to pay $1200 a month on a $400,000+ loan? I don't know the math off the top of my head but I bet it doesn't add up - and that's my point exactly - suspending reasoned thought for cheery best-case scenario fantasies. A state-employee approaching retirement can't honestly expect to suddenly be able to afford this. I think Kunstler's been making this point for years - believing in the make-believe.

As a culture we are all magical thinking and buffalo dancing.

"As a culture we are all magical thinking and buffalo dancing."

yes, we are the first and only nation in the world to have a housing bubble. btw, the increase in mortgage payments absolutely swamp any increase in energy payments.

And yes, housing is really expensive. That's a result of unequal wealth distribution - really rich people bidding up the price of housing for everyone, as well as people pretending they were rich (thinking they were about to become rich...)

So in that sense maybe we should litigate. We're all suffering (renters and would-be buyers anyways), who should we sue? The people who pretended they could compete and made it more expensive for us, or the people who put the papers in front of them that they signed...?

The Two-Income Trap argues that the people "bidding up" the price of housing are doing it with the best of intentions: they want to live in a neighborhood with good schools, for their kids.

That's a very good book, and old enough that your library or used book store should have it. Like "Your Money Or Your Life" and "Radical Simplicity" it's a keeper.

Lets not forget that much of the 'bidding up' of housing prices was the result of 'flippers', small or big time operators buying homes prior to their completion in hopes of reselling them for a substantial profit upon completion. Flippers never intended to actually live in the homes they were buying...and, they have no compunction about walking away from what has become a money losing 'investment'. Flippers did not care about the mortgage papers they were signing, in many cases they made no down payment, lied about their income, and they never intended to make any payments and did not intend to own the home when an ARM or ACTION ARM kicked in.

Lots of 'flipping' took place in Florida and now there are lots of homes that have been completed for years but have never had an occupant. Even more so with condos.

I became interested in the flippers and what they were doing when my wife pointed out to me that there were tv shows entitled 'flip this house' and the like. It reminded me of the stories of 1929 when everyone was buying stocks on very thin margin and even the shoe-shine boys were offering tips on hot stocks. What a hoot. When a hot tip is relayed to one by a shoe-shine boy one should realize that it is already to late to bail out...No offense intended to shoe-shine boys...they are making a days pay for a days work...more than many 'working' on Wall St can claim.

I recently spoke to someone who has an employee with a twenty four year old daughter. She and her boyfriend got married their last year in college, bought a house they intended to keep and another they intended to flip, with the idea that the flip profit would make the mortgage on the first one manageable before the ARM changed. Now there are two empty houses in Minneapolis and no buyers to be found :-(

Leanan, after reading what you posted above, and perusing the worsening daily economic news, I am wondering if you continue to believe that the US economy is going to 'muddle along for some more years'?
Personally I feel we are on the backside of a downslope and the angle is becoming steeper by the day...Similar to PO. I wish I had an anchor with rope tied to my butt for I would certainly use it. Little to do but watch...It is more interesting than changing the air in the tires. Meanwhile, Floridas Governor plans to make up the budget shortfall by increasing the number and frenquency of Lotto games. We have a really sharp governer...Cracker Jack Charlie Crist.

Thanks once again for all your hard work and interesting links.

Leanan, after reading what you posted above, and perusing the worsening daily economic news, I am wondering if you continue to believe that the US economy is going to 'muddle along for some more years'?

I think it's very possible. I think we're probably headed for a recession. But it may not be "the big one" (yet), and even if it is, it may not be recognized as such for years, even decades.

Um, er, uhh..... Sigh. Here's the link, basically FDIC protection is now a myth.


Good discussion going on there. Very good. With the original docs at the beginning.

Basically, get your money out of the bank, and keep it in a coffee can, "for reals"!

FDIC protection has always been a myth, IMO.

But as long as everyone believes, no problem.

No, FDIC is real. If worst comes to worst, everyone will get their money back, up to $100K (or whatever it is now). What they don't tell you, though, is that if it is worst comes to worst, $100K would hardly pay for a cup of coffee.

I know it's real. I've benefited. My bank went belly-up last fall.

What I meant is that it's never been tested in a real crisis. Plus, it was designed for a world that no longer exists. Banks have been de-regulated, which means what used to be small, local institutions that weren't allowed to operate across state lines are now national, even international, behemoths.

The "myth" is not the existence of the FDIC, but the idea that it will work as advertised. We outgrew our insurance long ago.

I feel sure that the Dollar will continue to drop in value, relative to overseas, so it will be a while, but eventually
"$100K would hardly pay for a cup of coffee." overseas.

It will not be as obvious in this country, but at some point, people going overseas, will begin to see the difference.

All those retirement savings plans will keep dropping in value, and as long as it is not a rapid drop, few people will realize that it is actually happening as bad as it is.

I would say to not leave too much cash in the coffee can, and buy something that is tradeable, durable, and will rise in value.

Hi doc,

re: "buy something that is tradeable, durable, and will rise in value."


Fleam, some time ago I posted that I was going the gold/silver and coffe can route (actually a bit more sophisticated than coffee cans). Many replied that I would be losing interest on money held in coffee cans. Yeah, they are right, but the interest paid is nowhere near the the real rate of inflation plus...there is no way to put a price on sleeping well at night and not wondering if the banks will be closed tomorrow for an indefinite period. I remember well the stories that my grandmother told me about the banks closing and that there was simply NO MONEY to be had for anything.
All governments lie...that is a given...but our current bunch is beyond anything in my 60+ years of experience. I would not believe shrub if he told me the sun was going to rise tomorrow.

Just a thought but I wonder just how many people have taken my course and pulled their money out of banks? Could be some of the liquidity problems facing local banks is being caused by lots of people doing what I did...but, I am so fed up with these lying sobs that I just dont care anymore. If the house of cards fall, so be it.

Trouble is, we are way past Peak Coffee Cans. They've all gone to those vacuum-packed plastic bags.

[River said] Just a thought but I wonder just how many people have taken my course and pulled their money out of banks? Could be some of the liquidity problems facing local banks is being caused by lots of people doing what I did...

I have persuaded the missuss that we should keep a wad of cash about, but also buy anything long term now if you have the storage space. We can't avoid being paid via a bank so I can only keep using or drawing it out.
Useful things would be a good rucksack, top walking boots and a few spare soles, bike parts [I now have a lifetimes worth], clothing while chinese socks/shirts are still cheap. I would buy a lifetimes worth of Hi-Tech Silver Shadow trainers [good for old knees, not just running] if I could get a discount? I have a fair stash of tinned goodies, but nothing too extreme. Housing space is limited [I'm in England].

I dont know if you can hedge with a lifetimes worth of some stuff, a tricky one. I cant think of much except tinned beans, whiskey and toilet rolls that I would trust after 10+ years...

That is my current strategy too. I keep a fairly large amount of cash at hand, and the rest in FDIC insured CDs at locally owned banks. I am also buying anything I think I will need in the next several years before the price goes up or they become unavailable.

I don't want to veer too far off topic into finance and monetary theory BUT the new Fed H.3 was released yesterday, and non-borrowed reserves of FDIC member banks now stands at NEGATIVE 8b. And that is after the TAFs (treasury auction facility) of 120b in the month of January. Interestingly the TAF numbers in the H.3 far exceed the TAF numbers announced by the Fed following the auctions themselves. I still haven't heard an explanation for this discrepancy. Only last fall non-borrowed reserves stood at their historic levels.

Simply put the Fed is in an absolute panic, and rightfully so, regarding the very real possibility of a liquidity trap that could seize up the US financial system. The banks are out of money, plain and simple, the worst of the bond and derivative overhangs still aren't accounted for, and the Fed is doing EVERYTHING in its power to inflate this mess away. Deflation? Inflation? Either way it's gonna get ugly.



I've been pondering this drop in non-borrowed funds a bit here lately. Of course the simple explanation is that the banks lack non-borrowed capital due to the mortgage problems--basically there are some insolvent banks out there.

Alternatively, I've wondered about the following possibility. We know tht the Fed will likely make its auction facility permenant, the stigma of borrowing from the Fed is gone, the Fed is accepting lackluster collateral for these loans, and you can borrow from the discount window and the Fed for really low rates.

Have the banks decided that they can just borrow all of their reserves and invest their non-borrowed capital into higher yielding investments (i.e. loan it all out) and make money on the spread? In other words, reserve requirements are in reality actually 0% or negative since now all your reserves can actually be borrowed from the Fed?

I'm no financial expert, just my musing--I'm probably missing something, and anybody please feel free to shoot this theory out of the water.

Yep .. The FED just became the new 'carry trade'

Triff ..

You think our economy is going to muddle along for some more years, or you hope that it does? If it is the former, what are you seeing that makes you think so?

I too hope it's our economy doesn't come apart at the seams for some more years. But in light of worsening headlines (specifically, the daily economic news and the oil export news), I have a couple questions.

First, it concerns me that some of the financial guru's, like Nouriel Roubini, do not appear to be factoring the export land model predictions into their already dire economic forecasts. If 2008 turns out to be the year that the U.S. falls off the "export plateau," will it even be possible to lift the economy out of a recession?

Also, the credit situation seems to get more grim with each passing day. If this continues, can future "bubbles" even form? Maybe they can, I really don't know.

You think our economy is going to muddle along for some more years, or you hope that it does?

What I hope doesn't enter into it. And frankly, I don't know what to hope. I think catabolic collapse is the likeliest option. It is probably the very worst option as far the the future of humanity and the health of the planet goes. But it would probably be the best option for those us who are alive now, and who are rich enough to be able to afford a computer and Internet access.

If it is the former, what are you seeing that makes you think so?

The past. As pointed out in Stumbling Upon Happiness, humans are lousy at predicting the future. Even in areas where they are supposed experts, even when it is something they have experienced before, they are lousy at prediction. Turns out, the best way to predict the future is to look at the past. That has its pitfalls, and certainly, every once in awhile a black swan comes along. But for the most part, looking at the past is the best way to predict the future (imperfect as it is).

And in the past, we've weathered these financial storms. The Great Depression, the S&L crisis, LTCM. Some people lost money, some people jumped off buildings, but the economy did muddle on.

... humans are lousy at predicting the future. Even in areas where they are supposed experts, even when it is something they have experienced before, they are lousy at prediction.

Ok, I agree. But wouldn't you say that the vast majority of political, economic, financial, and energy experts are indeed predicting, "a little bump here, a bruise there, maybe even a touch of catabolic unraveling, but nothing to worry about -- what's that? An unrecoverable economic crash?! That's just crazy!"

A relatively small minority of peak oil "experts" expect a "big one." I could probably count them using my fingers (Savinar, Hanson, maybe Jan Lundberg, etc.). Most seem to think we're facing a sort of uncomfortable catabolic collapse. So I guess let's hope that the experts are NOT making a lousy prediction.

Turns out, the best way to predict the future is to look at the past. That has its pitfalls, and certainly, every once in awhile a black swan comes along. But for the most part, looking at the past is the best way to predict the future

Again, I agree with you (a good book too, btw). But to what degree do past economies mirror today's digitalized financial world and the global trade networks?

Many commentators have noted that our current dilemma is truly unprecedented. It seems to me as though our current situation will soon be unprecedented in at least two ways: first, our planet is chock full of people and we will soon have a globally declining energy supply; second, in the complexity of our economic (& financial) institutions, networks, and instruments.

If we only faced the first item, I would probably tend to agree with you that we'd see a protracted, catabolic collapse (over a period of 25+ years(?) - perhaps analogous to Easter Island.

However, I think the real kicker is the second item. The economy of pre-collapse Rome, as well as the interdependent economies of Mangareva, Pitcairn & Henderson Islands, were simple and straightforward compared to our current mess.

No, I see something similar to the happenings delineated in the (eerie) short film, The Trigger Effect. I don't see any reason why our highly complex system won't reach a point of criticality, at which time it begins to uncontrollably unravel like any other highly complex system. And things wouldn't have to avalanche very far before they reached the point that we would call "the big one."

A final reason I don't see the the economy "muddling along" until 2030 is that the list of potential "triggers" is daunting: Oil shortages, geopolitical conflict, electricity outages, any one of the host of problems associated with climate change, and the list goes on and on! It's been said before, but 100 years from now, people may look back and say that the "catabolic collapse" began in 1970. Only after 40 years did "a big one" come along..

As I've said in other posts, I believe that the best approach is to start in the future and work backwards.

Given that we are starting to enter into a period of inexorable and irreversible decline in FF and all non-renewable resources, then if human civilization is to continue to exist at all, it will eventually have to transform itself into a sustainable economy built entirely upon a renewable resource base. Even if we hope for the best -- which to me means in part a hope that global populations will decline in a gentle and not brutal manner -- I see no way that such a sustainable economy can operate at the present global average GDP per capita of $9,480. I certainly don't see how the USA can operate at a per capita GDP of $41,640. Based upon various back-of the envelope calcuations I have done, it seems more likely that the US will have to decline to a per capita GDP of more like $5-10K - and this is still going to place us in the upper tier relative to the rest of the world.

Thus, I am operating under the planning assumption that a long-term economic decline with an eventual "soft-landing" to a sustainable level is the BEST CASE that we might reasonably hope for. Forget about growth, forget about even holding steady.

Of course, it could all turn out worse - much worse. Maybe it will. I'd rather hope not. I seriously doubt whether we really can hope for anything much better. Many will, of course, but I suspect that they will be very surprised and disappointed.

But wouldn't you say that the vast majority of political, economic, financial, and energy experts are indeed predicting, "a little bump here, a bruise there, maybe even a touch of catabolic unraveling, but nothing to worry about -- what's that? An unrecoverable economic crash?! That's just crazy!"

No. It's running the gamut, from "What recession?" to "The return of the Great Depression."

A final reason I don't see the the economy "muddling along" until 2030

I don't know if the economy will be muddling along by 2030 (though it might be). We're talking about something far more rapid. Suggesting that someone take all their money out of the bank now means a crisis, like, tomorrow. Not in 2030.

I do think we're eventually heading for the "Greater Depression." The question is timing. Many peak oilers were predicting a financial crash by January. After Christmas, when the bills come due. But it's February now, and no financial crash.

Doesn't mean there won't be one eventually. But I think it's more likely that it will happen in slow motion, rather than suddenly.

A critical issue is whether or not paradigms are shifting. If a society or economy is not undergoing a major paradigm shift, then the past is indeed a good guide to the future. On the other hand, if paradigms are shifting, then looking at what happened in the past will certainly mislead you.

The peaking and permanent decline of fossil fuels (and indeed of all non-renewable resources) represents a paradigm shift at least as profound in its implications as beginnings of the fossil fuel age were. We can speculate all we want about what this will mean for the future (and indeed have been at length); the one thing for certain is that none of us will get it exactly right. However, one other thing that is also nearly certain is that things in the future will not work out as they might have done in the past, that past performance is no guarantee of future results. And finally, one thing that is also certain is that that the changes will be profound, far-reaching, and unanticipated.

I think catabolic collapse is the likeliest option.

That's what history suggests - I think there have been at least 26 major civilisations that have flourished and disappeared since the end of the last ice age - I see no reason to believe ours will be any different. Often, in the past, it seems they were finished off by changes in local weather patterns.

Now we have a global economy - but we also have global climate change! Not necessarily a good omen!

Who knows what the future will bring?

Hope for the best, enjoy your life (you only get one go at it), and have a 'plan B' to get you through something a bit worse but not catastrophic.

Hope for the best, enjoy your life (you only get one go at it), and have a 'plan B' to get you through something a bit worse but not catastrophic.

That's the way I see it.

The situation is different this time because with the enormous temporary addition of external energy from external non-renewable sources, our human population has overshot what the planet is capable of sustaining.

The forces against a large, growing population are massive.

On a finite planet in competition with other species for survival, we feed 6.6 billion people each day, and the population grows by about 200 thousand each day, thus crowding out other species. We consume approximately 40% of the planet's photosynthetic capacity. The Holocene extinction, human-caused, is underway.

In our huge population, we also compete with each other in war, further destroying both the underlying human condition without significantly reducing the population, and destroying the environment.

We compete with each other economically, expending energy toward ideas and projects, some of which inevitably go nowhere. Such as the oil that went into the plastic that made up Betamax video tapes and VCRs, 5 1/4" floppy disks and PC Juniors, hula hoops and four-function calculators.

The majority of the population requires huge amounts of regular "programming", for lack of a better term, driven by cheap energy. It holds together a society through media, organized religion, and addictive pacification through sex, money, drugs, pharmaceuticals, entertainment, and personalities. What is actually necessary for meaningful human existence is never made available, keeping the addiction cycle attractive, durable, and ridiculously easy thanks to cheap energy.

On a daily basis, the majority of the population must wash, bathe, and cook the food to prevent the spread of the disease that feeds on us. Another kind of competition, for our own flesh is food to the disease that feeds on us.

The food, over which we compete with various "pests", needs treatment with pesticide, then to be fertilized, preserved, and transported.

Our cities are ecological dead zones that support only humans, human disease, and human disease vectors that feed on us and our waste, aside from the occasional cat, parakeet, or singular tree. To support humans in such a barren ecosystem again requires large amounts of energy.

We continually push through these various forces of resistance using massive amounts of cheap energy. In order to sustain a tribal population, each member needed to contribute about 4 hours per day of work for everyone to get what they needed. Today, we contribute at least 8 hours of our mental and physical labor each day for survival, plus all the cheap energy we use.

If we value a barrel of oil at 12,000 hours of human labor, we currently use over 150 hours of additional labor each day per person to keep moving forward. Just from oil, the multiple-use resources that threads through everything.

And the problem with oil is that it isn't limited-use like coal, methane, or nuclear which generate mainly electricity and heat. Oil is both an incredibly dense energy source with no easy replacement, and a physical product (plastics, drugs, pesticides, lubricants, cosmetics).

The more our population grows, the more environmental resistance increases, requiring continually more energy expended the further we grow.

The less energy we have to keep pushing forward, the more resistance (social complexity, competition, overshoot and environmental degradation) to our large population increases.

It is a problem of both systemic nonlinear complexity and one-time-use energy. If we had built a society on solar and other renewables, we would have a problem of complexity alone. Maybe next time we'll learn.

This time around, a hard, fast crash is the likeliest option.

The situation is different this time because with the enormous temporary addition of external energy from external non-renewable sources, our human population has overshot what the planet is capable of sustaining.

We've faced overshoot before, though not worldwide. And result wasn't a fast crash. Easter Island took 50 years or more to collapse, and they were far more limited than we are. My guess is we will take longer than that.

This time around, a hard, fast crash is the likeliest option.

You don't know that. History suggests that you are wrong.

Yes I do know that, and I'm attempting to show why.

Easter Islanders had huge stone Moai statues and a limited living area, the island.

We have iPods, the Internet, Brittney Spears, Brad & Angelina, pr0n, prostitution, cocaine, methamphetamines, consumerism, capitalism, suburbia, overshot cities, Doritos, Twinkies, and the empty promises and exaggerated claims of religion, government, and the media. All wrapped up in our limited area, the planet.

Easter Islanders weren't more limited. We are far more dependent on finite energy sources and far more disconnected from the physical world that sustains us.

Energy and friction. As our ability to push is lessened (oil depletes), as the body grows in size (population), as friction increases (disease, war, social chaos, competition, destruction of the necessary environment), what does an engineer have to say about this nonlinear system?

It's like we're pushing a bicycle at Mach 1 through a dense tropical rainforest. We encounter enormous continuous resistance, the bicycle requires constant reinforcement, 6.6 billion of us require ongoing protection and and healing, all fueled by over 150 hours of energy per person per day from oil, each day simultaneously trying to go faster and adding 200K more riders.

Maybe this is about being trapped in predicting "when we crash" instead of predicting "that we crash".

The living, cultural system we haphazardly arrived at through complexity and unintended consequences is not designed to do what we are attempting to do, and the only thing holding it together is limited cheap energy.

When we have been in overshoot before, it was all local, with areas outside the overshoot to absorb survivors and environmental damage. There is no feasible area outside the earth for our damage, no place else we can export our wastes.

This is not our forefathers' crash and die-off.

You may "know" it, but you offer no evidence that would convince someone else.

We've faced overshoot before, though not worldwide

mostly by the overuse of above ground factors. this time, both the above and under ground factors are OVER used at the unprecedented industrial scale. besides, there are now WMDs that can instantly cause collapses worldwide at a push of button.

We've faced overshoot before, though not worldwide. And result wasn't a fast crash. Easter Island took 50 years or more to collapse, and they were far more limited than we are. My guess is we will take longer than that.

Leanan, the literature indicates that more complex systems crash harder and further than "limited" ones. This is epitomized in the "sand-pile effect," where sand is slowly dropped in a pile. Eventually, as the pile builds up and up, it reaches a point of criticality and the whole thing collapses. A similar effect is is seen in avalanches.


Why do you insist on using the Easter Island example, when in terms of complexity, it's like comparing a Mountain to a Mole hill?

Diamond uses the "avalanche" comparison, too, but it doesn't seem to apply to societal collapses. They are slow, not fast.

From Greer:

Minoan Crete 300 years
Mycenean Greece 150 years
Hittite Empire 100 years
Western Chou empire 163 years
Western Roman Empire 310 years
Medieval Mesopotamia 550 years
Lowland Classic Maya 150 years

The bigger they are, the harder they fall? Maybe. But it's not the faster they fall.

Why do you insist on using the Easter Island example, when in terms of complexity, it's like comparing a Mountain to a Mole hill?

Because, IMO, Easter Island is the closest to our situation, and simple enough that extraneous factors don't enter into it. Their resources were extremely limited, including energy. They could not escape (as the Romans, Minoans, etc., may have.)

I see it as a "worst case scenario." Since they did not have any means to mitigate the disaster. No way of taking other people's resources, or switching to different technologies (solar, wind, etc.) that might slow the collapse. In all likelihood, our collapse will be much slower. It may be much longer, and much worse in the end, but it won't be faster.

Because, IMO, Easter Island is the closest to our situation, and simple enough that extraneous factors don't enter into it. Their resources were extremely limited, including energy.

All I'm trying to say is that it is precisely this simplicity, which makes Easter a poor example.

The bigger they are, the harder they fall? Maybe. But it's not the faster they fall.

Here's an example of how acute resource shortage in highly complex systems, can have a snowball effect, which eventually will lead to a rapid, cascading collapse. (By rapid I mean less than 10 years).

South Africa Cascading Failure

All I'm trying to say is that it is precisely this simplicity, which makes Easter a poor example.

What proof do you have of this? It collapsed much faster than the more complex societies in the table I posted. There's zero evidence that more complex societies collapse faster than simple ones.

Here's an example of how acute resource shortage in highly complex systems, can have a snowball effect, which eventually will lead to a rapid, cascading collapse. (By rapid I mean less than 10 years).

Get back to me when it actually does cause collapse. Right now, it's just causing inconvenience, and is not really out of line with what usually goes on in Africa.

Most economists are saying -- 'Hey don't worry! It's not like the seventies at all!"

They're right. It's more like 1929. Runaway capitalism led to the worst market crash in history. Things got so expensive people just couldn't afford them anymore. Then runaway deflation set in and it took years to recover.

In the 70's we had labor to evenly spread the pain. Now the middle and lower classes are taking it. So far it hasn't trickled up yet. But it will.

Someone here said Peak Oil is deflationary. I think I tend to agree.

A snapshot from August, 2006. Note that many of these financial institutions were booking deferred interest payments as current income.

Published on 21 Aug 2006 by GraphOilogy / Energy Bulletin. Archived on 21 Aug 2006.
Net Oil Exports Revisited
by Jeffrey J. Brown

As I have been relentlessly pointing out, I think that we are looking at a series of bidding cycles for declining net oil export capacity, with the oil going to the high bidders and with the losers having to reduce consumption. Leanan, on The Oil Drum, has documented several case histories of poorer countries having to reduce consumption. Soon, the developed and rapidly developing countries will be bidding against each other, instead of bidding against regions like Africa.

However, we are beginning to see clear signs of stress here in the US, among poorer households and among financially overstretched homeowners. Consider some recent numbers from the 8/21/06 issue of Barron's.

"The No-Money-Down Disaster"
Lon Witter, Guest Column, 8/21/06 Barron's

• 32.6% of new US mortgages and home equity loans in 2005 were interest only, up from 0.6% in 2000
• 43% of first-time home buyers in 2005 put no money down
• 15.2% of 2005 buyers owe at least 10% more than their home is worth
• 10% of all home owners with mortgages have no equity in their homes
• $2.7 trillion dollars in loans will adjust to higher rates in 2006 and 2007

At the end of 2003, 1% of Washington Mutual's (WaMu's) option ARM (adjustable rate mortgage) loans were in negative amortization (the borrowers were borrowing more money each month, not even paying enough to pay the monthly interest charge in full). At the end of 2005, 47% of WaMu's option ARM's were in negative amortization (55% by value of the loans).

WaMu is booking these negative amortization payments as earnings. In prior times, loans where borrowers were making less than the interest payments would be classified as non-performing loans. In January-March, 2005, WaMu booked $25 million in earnings from negative amortization payments. In the same period in 2006, WaMu booked $203 million in earnings from these payments. These borrowers are increasing their mortgage balances as property values have started falling, so the default risk on these loans is extremely high.

Mr. Witter estimates that a simple revision to the mean suggests a 30% drop in residential property values in the US over the next three years. This is without considering in the effect of further increases in energy prices.

Jim Rogers is also on Bloomberg today. (video)

00:00 Outlook for oil prices, investment strategy
01:02 Ben Bernanke "doesn't know what he's doing."
02:39 Fed policy created "chaos"; contrast to Japan
04:10 Impact of U.S. economy on global markets
04:56 Strategy: agriculture, currencies; financials
05:21 China "buying reserves" in commodities
06:34 Aluminum Corp., Alcoa stake in Rio Tinto
08:07 Microsoft's bid for Yahoo; "shorting the ETF"
10:06 Recommends renminbi, "safest" for long-term


How about "ultra-capacitors"? Do you remember a science fiction classic movie(about 1955) "This Island Earth"? One of the featured high tech devices was an ultra-capacitor that made the "interocitor" possible. Of course, the ultimate problem for that advanced civilization was finding a source of energy to charge the capacitor!

At least the EEStor device seems to use something (barium titanate) as an electrolyte that probably isn't at imminent "peak". http://www.economist.com/science/displaystory.cfm?story_id=10601407
But I do wonder about the somewhat fluffy description of how "ultra-capacitors" are different from the ordinary variety

The reason ultracapacitors may be able to bridge the gap between speed and endurance is that, like batteries, they use ions and an electrolyte rather than simply relying on the static charges

that seems to directed at appealing to potential investors more than to people trying to understand how they might actually work.

Capacitance C=eA/t. Instead of trying to make the thickness t small, they are trying to make the permittivity e large. Barium titinate has a very large electric permitivity.

Thanks. A whole new field to study! Wikipedia spells that "permittivity".

It seems intuitive that anything that could charge rapidly could also discharge rapidly -- maybe catastrophically.

Do you think an improved capacitor would be a major step forward? Would it make all-electric, plug-in vehicles more practical, for instance? Would it lower cost and weight?

"Dielectric constant" is another term for the permitivity of electrical dielectrics. Also look up ferroelectric effect. Barium Titanate is one of a class of ferroelectric materials exhibiting high dielectric constants.

One of the comments above seems to be confusing a super-capacitor with an ultra-capacitor. They're not the same thing even though "sound logic" makes 'em sound almost alike.

Well, the permittivity of well-prepared barium titanate pretty much is what it is. That horizon was reached a very long time ago. Their patent appears to claim that they raise the electric field strength (i.e. the terminal voltage for a fixed construction) by a factor of five or more while avoiding breakdown. Apparently the idea is to coat the titanate with aluminum oxide or a similar material; perhaps, in some sense, that passivates it so that a breakdown avalanche won't start at one of the inevitable weak spots.

The only fly I see in this ointment is that we already have capacitors that saturate at rated voltage; any distributor will happily sell you as many reels as you like. (Many models of US type Y5V or Japanese type F will saturate fairly hard.) Saturating them harder by raising the voltage further will only store a little more energy, because the physics that allows the permittivity to be high is nearly exhausted even in the existing models. (In other words the stored energy is no longer CV2, but is much less.)

There's also the problem that ceramic multilayer capacitors are sold (in effect) by the milligram. So if you need to ask the price of tens of kilograms of that stuff for use in a car, you can't afford it. That's one reason why real and available ultracapacitors are the liquid-electrolyte type.

Since the beauty of their alleged process is that they can run it on an existing production line with relatively modest changes, I keep wondering why there are no engineering samples. The real companies (A123, Maxwell, Nesscap, and many others) all provide samples, as nothing prevents any of the processes from working in small sizes. And I keep wondering why their website does not function. Even Steorn has a functioning website.

Possibly what they're doing doesn't really work well enough to be worthwhile, or to be saleable at a commercially viable price. We shall see. In the meantime, I wouldn't set too much store by it, so to speak. I'd put it on the back shelf as yet another one of those 1% curiosities, and hope that enough 1% chances can be taken to find some useful stuff.

Re: Remarks by the IEA's Ramsey refuting 'Peak Oil"

There is a "black or white" view of peak oil which needs to be addressed here. Ramsey is reported as saying:

Ramsay noted that the majority of the world's key oil and gas reserves are located in places either largely off-limits to investors - Saudi Arabia and Venezuela, for instance - or in places that are plagued by political instability and even violent conflict, such as Iraq or the Caspian Sea region.

As a result, the crucial supply-side investments and reserve explorations needed to respond to steadily rising global demand for oil and gas are not being made, causing disruptions in the market and leading to higher prices, he said.

First, we must take it on faith that greater investment would more than compensate for the global decline rate. The popular number for that rate is 4.5%/year right now.

Second, the issues are presented as black or white. On the one hand, the IEA says that it's all "aboveground" factors causing the plateau (C+C), which is now over 3 years old. On the other side, the IEA attributes to those studying peak oil the position that oil production revolves around geology only. There are some one-dimensional observers who hold that position, and depletion is certainly the main driver of much of our problems, but a more nuanced view takes all factors into account when viewing the global view of peak oil production. Venezuela is a good case in point. Hugo has run PDVSA into the ground, so their oil production is declining. He is not investing money into E&P. This is not geology, although, as usual, geology is a factor.

On the other hand, everybody needs to be right.

Heaven Forbid the world should peak for the wrong reasons!

All this is painful to watch since most people are complaining or crowing and nobody is doing anything about the tenuous oil supply -- they would rather engage in a pissing contest.

Fine, as everything goes down the tubes, everybody can stand around and argue about who was right about what. I wish there were more responsible adults in this world than bickering children, but I guess we have to live with what we've got.

-- Dave

As previously mentioned on this site, hoarding would be a common thread among oil producers in a market if sellers don't think that more supplies are coming into the market and that higher prices would not bring much additional supply. In that case oil in the ground would be more valuable later, particularly if consumer countries try to inflate their currency to pay for oil or use fiat money to pay for imported oil. Why sell a valuable resource now for paper currency that will be worth less every year?
If the importer's paper currency causes huge inflation in the oil producer's economy, what incentive is there for the oil producer to produce more?

That is Lord Hugo's view. He will have SUV owners bowing toward Venezuela before filling up the Ford 150 for a Bud and Cheeto run to WaLMart. It helps not to need to bow to the quarterly profit. No hurry, it will just become more valuable. Plus, Venezuela learned never put power in the hands of a foreign elite over production during the last coup attempt. Venezuela is in the process of having it's own work force and technological knowledge.

Of course, some of us have been offering some very specific advice for some time:

ELP Plan (April, 2007)

Heaven Forbid the world should peak for the wrong reasons!

The reasons do matter big time, though. If above-ground issues are the predominant factor, then that would change the shape of the production curve going forward.

I would hazard that determining the shape of that curve is far more important than determining when peak occurs.

Both the geology and the human reaction to the initial perception of scarcity were always predictable. You can't separate the two in the real world. You have to combine them to figure out your curve.

Soros would say that the perception of permanent scarcity would inevitably lead to increased scarcity.

But that is, of course, exactly what Hubbert failed to do. His calculations did not take into account perception of scarcity.

Of course, scarcity is absolutely core to economic theory. (Just read the first 10 pages of any intro econ text)

Perception of scarcity can lead to husbanding of resources and that could improve the long term prospects for oil production.

Yeah, but George, it's not going to do much for the short and intermediate-term pain.

Actually, thinking about it, it won't do much for long-term pain either, just maybe alleviate the grimmest scenarios.

Husbanding resources makes the pain come sooner. This is good. Better we experience high prices and scarcity now than ten years from now when the world economy will be much larger and more difficult to adapt to an oil-scarce world.

So, perception of scarcity works in our favor at both ends. It moves the price increases closer to the present, forcing adaptation, and preserves production for future use.

Ever since it became clear oil was going to drive to $100 and beyond, I started to breath easier.

Better we experience high prices and scarcity now

Whether the price is higher or lower, the production amount does not change very much.
We are still running out of oil at about the same rate.
The oil production volume stays close to maximum with minor variation, which is usually SA withholding some production if the price goes too low.
The only major change is to who’s pockets get more of the money.
The price is generally only pushed higher by the inability to get higher output.



I should explain that higher prices are not “preserving production for future use”.
The higher prices are not slowing production at all, but increasing any possible production by putting any smaller sources of hard to get oil into production.
All the higher prices do, is to distribute the oil to the highest bidder so that actual shortages at the OUR gasoline pumps do not occur, as the oil wells deplete.

I've got to say I agree with George on this one. I don't think the peak is going to look like a perfect bell curve especially when you account for the mother of all scrambles that's going to happen if resources really get constrained. Though I don't believe in magic economics, I do think that humans can be very resourceful when put to it.

Right now, I think you're looking at a struggle to face depletion and difficult access to new oil. As a result you're seeing a raft of new energy just now attempting to make its way.

Now I'm not saying that this is going to happen. But wouldn't it be odd if, ten years from now increases in biofuels and alternative electric to transportation resulted in a net energy gain against traditional fuel declines? Then you have liberation from fossil fuels and that would be truly extraordinary.

We won't get a net energy gain that quickly out of renewables, but we might just manage to make the jump - get rail electrified, get enough renewables to meet our minimum operating requirements, and we're left in as good a position as can be expected, with only the climate change wildcard to worry us.

Why would anybody who claims there is conflict in the Caspian Sea region be taken seriously. This moron has no clue about current events. There are frozen conflicts in Azerbaijan (Nagorno-Karabakh) and Georgia (South Ossetia and Abkhazia) but this has not disrupted oil transport (i.e. Baku-Ceyhan) or field development (i.e. Azerbaijan). Kazakhstan has no conflicts and has most of its oil and gas deposits developed by western companies as does Azerbaijan. Turkmenistan is not subject to conflict and currently neither is Iran. So the comparison with Iraq is breathtakingly nonsensical.

As for Venezuela, I would like to see a real analysis showing that their production is responding to mismanagement more than geology. The motives of the critics are quite suspect given their total silence when PDVSA money was flowing into a few foregin backed pockets and straight out of the country. Also, it is not the obligation of any producer country to maximize production to death.

I would encourage everyone concerned about PDVSA to read this, http://www.venezuelanalysis.com/analysis/2808 and if more is desired peruse the many articles provided here, http://www.venezuelanalysis.com/search/node/pdvsa

As for how our Propaganda System reports on events in Latin America, especially those related to Venezuela, this is a good example of its method, http://www.venezuelanalysis.com/analysis/3119

Great links. It is clear that we are in the era of resource wars. So the propaganda machine is in full swing demonizing foreign enemies who dare set a fair price for their resources.

re: venezuelan propaganda
an organization with the resources(knowledge) to manage that kind of propaganda is the same one that brought us kkkarl rove and by extention el' befuddleoso (that would be the cia).

showing that their production is responding to mismanagement more than geology

The US would call lower production from Venezuela to be mismanagement,
But I would call it a benefit to mankind, to slow the oil output, and make it last longer.
I call it “Smart management” as they will be selling what they save, for a higher price, later on,
if in fact it is not all geology.



I agree. But I was actually buying into the notion that Venezuela's production was down to 2.4 million barrels instead of 3.25 million. The propaganda worked on me and most of it was piped through peak oil sites such as this one.

As usual, IEA's Ramsey is predicting nothing but a continued increase in demand for all forms of energy (page 17 of his presentation) as well as more than doubling of oil exports the the Straits of Hormuz by 2030 (page 13). Maybe the gas exports from Russia can continue to increase, but that would make Europe beholden to Russia. Not a recipe for good political relations, IMHO.

In case you were wondering, there's THIS from the IEA site:

William C. Ramsay was formerly Deputy Assistant Secretary for International Energy Issues, Economic and Foreign Policy Sanctions and Strategic Commodities for the United States Department of State....

As Deputy Assistant Secretary of State for Energy, Resources and Food Policy from 1989 - 1993, he was responsible for U.S. policy in the international trade and production of energy, industrial and agricultural commodities....

In the 1980s, he was Deputy Chief of the U.S. Liaison Mission in Riyadh, Saudi Arabia and afterwards, Economic Counselor in the Embassy there before serving again in Washington as Director of the office which formulated and oversaw implementation of U.S. international energy policy....

Ambassador Ramsay is a native of Michigan, and a graduate of Michigan State University, where he obtained bachelor's and master's degrees, and the University of Stanford, where he received a graduate degree in international economics.

Looks like another economist with the usual neocon sustainable growth delusion. Another Reagan/Bush the 1st man, I'd say.

E. Swanson

On the flu front;

Mutant Flu Virus Is Found That Resists Popular Drug


A small but significant percentage of the main influenza virus causing illness this winter in Europe, Canada and the United States has a mutation that makes it resistant to the anti-influenza drug Tamiflu, the World Health Organization said Wednesday.

Long time lurker, first time poster. When I came across this song parody, I finally had a reason to register here so I could post. Odd how something can be so funny and so depressing at the same time.

Welcome :-)

Welcome AndIFeelFine,

OUTSTANDING SONG-->I must have played it 10 times already!

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

Absolutely brilliant!

I finally got the 12 DVD ASPO Houston World Oil Conference set in the mail. I didn't see any copyright on them, and was hoping to make them available online. I haven't gotten an official response from their website contacts, so I was wondering if anybody on here knew if that was legal. And if it is, let me know if anybody is interested and I'll get you a link. I always figured the more we can get the word out the better.

I've watched the first 2 DVD's and they are simply amazing. I encourage everybody to watch, especially for the people on this board.

I am interested in taking a look at the information. You do not have a email address to contact. Can you email me ?

Is there a website that archives OPEC statements and price targets over the past ten years?

I'm interested in seeing what officials have been saying at various price levels as oil prices have continued to rise.

Top link : Climate 'could devastate crops'

""the biggest benefits will likely result from more costly measures, including the development of new crop varieties and expansion of irrigation," the authors wrote."

Much more costly, and time consuming, and I doubt if it is possible with irrigation. There are too many constraints already for water.

The green revolution was accomplished in large measure by new grain cultivars selected for yield response. But this added grain came at the expense of root development in the plant. The new plants had much smaller root masses and higher drought intolerance. Work has only begun to address this drought intolerance.

Thankfully, much of the west seems to be dodging the water bullet this winter. The latter half of Dec and Jan has brought large snows throughout the Rockies. The main predictor snow survey for much of the western area is Feb 1, so we will know shortly. In mid Dec, the situation was especially bleak for CA, with reservoirs at 60% and ag producers told to expect a 25% curtailment in their allotment.

I think the colder and snowier winter in the north this year is taking alot of the onus off climate change. And probably creating more warming deniers.

I also forsee much cheaper grains, though corn may stay level, next year. Soil moisture is way up in many of the regions hit by drought last year. Australia appears in much better shape, and it was their lack of production that started the big increases in wheat.

Which all told will probably push concern for climate change like a return to $70 barrels would do for peak oil.

I think people tend to conflate "snowy" with "cold". Here in NH we've had a very snowy winter (though we're having a sleet/freezing rain storm at the moment). But it hasn't been particularly cold. I'll bet we're above average, temperature-wise. But people think "see all this snow - so much for global warming".

I don't use the term global warming - I use either "global climate change", or "global weirding".

Very interesting article on "Rural Gentrification" http://finance.yahoo.com/focus-retirement/article/104333/The-New-America...

Is the "Retirement Industry" the next bubble?

Could be. I think what's happening is you have the majority of baby boomers living in suburban hell. They didn;t think it was hell because they had the kids and the theatre room and the foozball room and the dart room and the study and library and the massive kitchen and the jacuzzi and the pool and the five bathrooms etc. BUT, once the kids are gone, the whole thing seems like a big vacuous nothing. The kids have their own kids and even start visiting less. So it gets lonely. The neighborhood doesn't age well for various reasons, traffic has become oppressive. In short - they want out of there when they retire.

Some of them are coming to communities like mine - close in, walkable mixed use where you don't use a car to get to the grocer, the doctor, the theatre, the shops, the restaurants, the parks - its all close by. The yard is small or nonexistant so there is more time for walking everywhere in the community. The houses are smaller so they don't feel so empty and are cheaper to heat and cool and easier to clean.

Others have always wanted to live in "the country" - that's why they moved to the suburbs in the first place. So, they figure let's move out to real country, buy a house with even more land and be blissfully away from everybody and everything. EXCEPT - apparently they want all the latte shops and theatres etc and PROBABLY everyone else moving out there will also increase traffic and destroy the ruralness that they went out there for in the first place.

But I think just like Walmart stores and stripmalls are abandoned after a few decades and a bigger one with more parking is built, the current suburbs will be abandoned by the baby boomers because they just don't age well. Which way will they go ?

Some are staying put, which is putting increasing pressure on suburban social services.

There appears to be something of a boomerang effect. Relatively young retirees do move to vacation spots. But once they become too old or sick to live alone, they return to where they used to live, generally because their families are there. And a lot of them are choosing urban life. There's public transportation, more social services, more cultural opportunities, and lots of doctors and specialists nearby.

Certainly some will be staying. And, social services everywhere are going to be under pressure - there are a lot of baby boomers! The question is which communities will handle it better.

Here on the Oregon coast, retirement communities/assisted living facilities are a growth industry as many of those who moved here to retire desire to stay. Of the gentrification talked about in the link, it's quite normal here for new construction to mixed in with the much older, preferred (apparantly, considering their numbers) moblie home made permanent. It will be interesting to see how soon some of the new, speculative constuction will be sold/rented. The development I live at, http://www.overleafvillage.com/ I call a Ghost Village because aside from us there are only 2 other houses resided in yearround. The town mirrors this absentee aspect, but not nearly severely. The result is I have houses for neighbors instead of a peopled community.

We have people moving out here with tons of money, building a big house and generally keeping a horse or three, not growing anything, the horses don't do any work, it's just an extension of the suburbs. Some commute daily, some come up here "home" for the weekends and work in Phoenix the rest of the time, etc.

If you're working you'll never get to know anyone out here, and you barely can even if you're not working and have time to stop and say Hi.

Frankly I look forward to having my "street skills" together enough to move to a city and make a living. It will be nice getting to walk again!

Some have moved, but what most Boomers don'w realize yet is that most of them are going to be "aging in place", whether they want to or not. There just won't be buyers that can afford to pay what they need to get to afford to sell. This would have been so in any case, it will be doublely so now.

I don't think so. If necessary, they'll walk away.

This is true. Many of the new apartments and condos being built here incorporate universal design to allow easier 'aging in place'. I hate that term though, it sounds so depressing.

Lots of "rural gentrification" in my neighborhood in upstate New York. Not much of an economy, but that doesn't bother retirees. Lots of beautiful "Norman Rockwell" small towns with wonderful 19th century architecture. Quite a few universities in the area, to add a little cachet. Super-nice people.

And you can buy a beautiful 19th-century 4-bedroom house for $85,000.

Shell, Nexen reveal oil find in Gulf of Mexico

Shell's U.S. division, Shell Oil Company, said the find is in the eastern gulf at its Vicksburg prospect, at which a discovery well turned up a hydrocarbon column roughly 100 metres thick.

No other details were released, other than Shell saying the well was drilled in about 2,000 metres of water to an approximate depth of 8,000 metres.

Getting to 2050: Canada's Transition to a Low-emission Future.

The Advisory Report sets out clear recommendations for effective action to achieve the government's stated goal of deep, long-term greenhouse gas emission reductions of between 60-70% below current levels by 2050. It concludes that achieving this goal is feasible with the right policy pathway, at a manageable national economic cost over the long run. ...more



We're saved!

Abiogenic Hydrocarbon Production at Lost City Hydrothermal Field

Our findings illustrate that the abiotic synthesis of hydrocarbons in nature may occur in the presence of ultramafic rocks, water, and moderate amounts of heat.

Better tell Gail the Actuary to put her Peak Oil 1101 on hold then...

Couldnt subscribe so couldnt read the whole article which, I would presume would tell :

Flow Rates

I said they were quiescent, but would come back from the dead.

They will never give up. Just like the flat earth society.

Actually, the article appears to be more about the possibility of life evolving in such situations. There's a free summary here.

And I think most scientists agree that abiotic oil may exist, in tiny amounts. The question, as ever, is whether it exists in economically interesting accumulations.

But the cornucopians are already getting all excited.

Thanks for the link.

Phew! for a minute there I thought they may trump PO.... /sarconol off

Very localised, very rare. They have not found the creamy nougat centre yet.

Serpentinite is very old, very rare and very pretty. There is a quarry 40 miles to the north of me and it carves and polishes well. The only other location I can think of in Britain is in Cornwall.

I have this abiotic helium theory. You start with rocks containing elements with atomic numbers > 82 and capture the alpha emissions in a really tight formation. Only problem is it takes millions of years...

Blockbuster Lineup at www.financialsense.com tomorrow:
(Webcast available tomorrow morning)

Methinks there will be some discussion of net oil exports.

2nd Hour
with Jim & Guest Experts
Energy Roundtable with Guests

Matthew Simmons, Chairman, Simmons & Company Int'l

Dr. Robert L. Hirsch, Senior Energy Advisor at MISI, and consultant in energy, technology & management

Jeffrey G. Rubin, Chief Economist/Chief Strategist, Managing Director, CIBC World Markets

Looks like 3 hours of PEAK OIL at FSN. and maybe a bit of GOLD thrown in for good balance :P

Never miss it. These guys get it (well at least most of it).

Just finished listening. Pretty sobering stuff. Lots of discussion of net exports, with a continuation into the third hour.

I just heard Jim Cramer with Erin Burnett on CNBC saying that we were awash in natural gas. He just went on and on how how much natural gas we had and how that should be the energy we should use.

Erin said we get 50% of our energy comes from coal. Not true, 50% of our electricity comes from coal. Cramer said it was only 27%. That may be true for energy. They were not clear on what they were talking about, electricity or total energy.

Anyway here is the link to the video;

I think Cramer is totally wrong. Watch it and see what you think. The "awash in natural gas" remark comes near the end of this short video.

Ron Patterson

For year 2007: Month of Dec is estimated.
Dry production up 500 Billion Cu.Ft.
Delivered to customers up 1 trillion Cu. Ft.
Imports up 400 billion Cu. Ft.

Build a few more NGPP and we can freeze with the lights on or stay warm in the dark.

Interesting study on demand inelasticity from the University of California: http://repositories.cdlib.org/cgi/viewcontent.cgi?article=1062&context=u...

Essentially they find that demand has been much more inelastic from 2001-2006 than it was in the 70s.

Not surprising. I wonder how much of it is because in the '70s, there were actual shortages, rationing, etc. It really did change people's behavior, in a way mere price couldn't.

Gasoline at 4 bits per gallon is in desparate shortage today.

The actual shortages and (non-price) rationing in the 70's were short-lived, as I remember. The panicked-herd behaviour of that era's drivers was short-lived. I think the evidence supports the argument that the information contained in the price signal was the critical element in behavioural change, such as the purchase of more fuel efficient vehicles and the acceptance of government initiatives on fuel economy.

Very useful lead, Moe. Thanks.

From the abstract:

"One implication of these findings is that gasoline taxes would need to be significantly larger today in order to achieve an equivalent reduction in gasoline consumption. This, coupled with the political difficulties in adopting gasoline taxes, suggests that policies and technologies designed to improve fuel economy are likely becoming relatively more attractive as a means to reduce fuel consumption."

The actual shortages and (non-price) rationing in the 70's were short-lived, as I remember.

Yes, but I think it had impact well beyond that. People remembered what it was like, having to camp out all night at the gas station to make sure they got fuel, or not being able to visit their girlfriend because it was an odd day and you were even. It didn't matter how much money you had - you couldn't get gas. Even fairly wealthy families bought little Japanese cars, if only as a backup for their "real" car.

Now...if you have enough money, no problem. Keep driving that Explorer.

My father was the Fed charge of rationing for the Midwest. He doesn't talk about it much, kind-of like Iraq war vets.

Even fairly wealthy families bought little Japanese cars, if only as a backup for their "real" car.

Or, more importantly, an extra car so they would have both an even one and an odd one, and never be inconvenienced. That's the trouble with the seductive notion that if you do it politically, then people with money are going to catch it in the teeth. Maybe, but not for long. Then the gaming and the political and even shooting war of all-against-all start up. There was actually a little bit of stabbing and shooting, but fortunately the 1970s rationing episodes were too short to get it going in earnest.

In the real world, money buys:
Extra cars so at least one of them always qualifies.
"Business" exemption so you can drive as much as you like.
"Official" exemption so you can drive as much as you like.
Gas under the table or around the back so you can drive as much as you like.
Your very own private underground gas tank, lots of government bigwigs installed those.
Fill in the blank, at least one dodge for every new rule.

The only truly effective way to avoid having rich folks spend their money to improve their own lot would be to avoid having rich folks at all, something even the European Commission isn't trying. It would raise two issues. One is the usual question about sharing poverty equally or wealth unequally. The other is that an awful lot of not-rich folks are perfectly happy to repeatedly fork over large sums to rich folks, called "stars", in exchange for entertainment. Stop paying those "stars", and who would be available to live life for said non-rich folks, or would they just start entertaining themselves by shooting holes in, or blowing up, highway signs, trains, power lines, bridges, and other infrastructure?

If that were the case, why did they buy a little Japanese car? Keep driving the his and hers V8 gas guzzlers!

I think a critical flaw in most people(Non-peak aware), is thinking higher price is the worst that could happen. I think it is out of the scope of most's world view planning that actual availabiity is not a given. Shortages or not being able to get gas at any price is not something they using in their near term planning.

I recently coined the term "Drive or Starve" to describe Americans with no alternative means of access to the necessities of life.

Best Hopes for fewer "Drive or Starve" Americans.


In yesterday's Drumbeat, the issue of social/economic/intergenerational mobility was tossed around by several posters.

Here is some informed comment:

"Although the United States occupies a middle ground in international comparisons of occupational mobility, its ranking in terms of income mobility is lower. Both the United States and Great Britain have significantly less economic mobility than Canada, Finland, Sweden, Norway, and possibly Germany; and the United States may be a less economically mobile society than Great Britain.45 Much of the higher intergenerational elasticity in the United States is due to greater income immobility at the top and bottom of the earnings distribution; the mobility of middle earners looks more similar to that in the other countries.46

Two explanations for these international differences in income mobility appear particularly compelling. First, it seems plausible that high income inequality at a given time could cause a high intergenerational persistence of economic status. The United States and Great Britain have high income inequality coupled with low income mobility, whereas Scandinavian countries display the opposite pattern. Canada, however, casts doubt on this explanation, because it has relatively high income inequality coupled with high income mobility"

The full article at:


This probably should have been posted in yesterday's DrumBeat, since that's where the discussion started, and it's only marginally on topic.

There are some interesting tidbits. Most Americans don't stay in the class they were born in:

I would say that makes Americans pretty mobile.

Then there's this:

So the changes in the American mobility pattern since the early 1970s have resulted in more downward mobility, especially for the offspring of the most privileged classes, and somewhat less upward mobility.

Basically, because there's been less economic growth since then.

Gee, what happened in the early '70s that might account for that...


I'm not following your thinking on this one. We're watching Wall Street crater. This means almost everyone's 401K programs are going to get hammered. And from the looks of it, the damage will last a long while.

I think your stats represent what "was"... not what is or what will be.

You're not following because this is a continuation of a discussion from yesterday's DrumBeat. We are very much talking about what was, not what will be.

Social mobility in the US has been less over the last 50 years than it's been in any European country.

We've been mobile all right - downwardly mobile.

My grandparents would have thought of themselves as midddle class. Nowadays they'd be upper middle class, in the scheme of things. My parents started out middle class, and I grew up during the process of our family sinking into the deepest poverty allowed in the US - if you bend the rules a bit (You're actually *supposed* to have running water....)

The expectations have been steadily worse over the generations, and of the younger people who "make it', most of what they're buying is "bling", useless garish junk, they are far poorer than their humble parents who know how to budget, have friends, and did something real for a living.

Social mobility in the US has been less over the last 50 years than it's been in any European country.

That is simply untrue. Did you read that report? We've been less mobile than some, more mobile than others. We're about at the median. If you included all countries, not just the developed ones, we'd probably be near the top.

We've been mobile all right - downwardly mobile.

Again - not true. Look at the table I posted. "Upwardly mobile" is the biggest category. More Americans moved up than stayed the same or moved down.

The numbers in that table are a bit too symmetric, basically 1/3 for each of the three categories for people born after 1960. This is like some sort of energy equipartition in thermodynamics, in this case it says that there is a stochastic exchange between the three groups. This does not correspond to any known social structure (i.e. the rich stay rich and the poor stay poor). It also does not agree with the fact that inflation adjusted wages have been slipping in the USA since the 1970s, which would appear as an increase in the downwardly mobile category like presumably the post war boom led to the increase in the upwardly mobile category, if not to the same degree.

This is like some sort of energy equipartition in thermodynamics, in this case it says that there is a stochastic exchange between the three groups.

It pretty much is a stochastic process. Far more than most people realize.

There is a slight advantage for "upward." Which would be exactly what you would expect.

In a perfectly mobile society, you would expect it to be 1/3 in each category. 1/3 up, 1/3 down, 1/3 unchanged.

You would only see more in the "upward" category if the economy was growing. "A rising tide lifts all boats," as the saying goes.

(FWIW...the report says that a notable reason for the drop after the '70s was rich people failing to stay rich.)

If the economy shrinks, and keeps shrinking (a "greater depression"), then I expect we'll see a lot more downward mobility.

There has been a slide in wages, 1974 was the high point.
Of course if Bill Gates stumbled into a bar in Skid Row in LA, the average wage would be in the billions--
However the mean would be 15 grand---
Stats are for suckers.

There has been a slide in wages, 1974 was the high point.

Yeah, but that's not what we're talking about. We're talking about mobility. That is, how much chance do each of us have of being Bill Gates or the guy on skid row, and how much does the class we were born into affect those chances?

Venezuela and Chavez--
As long as oil stays over $50 dollars a barrel, Chavez can continue to pry The Global South away from control of the World Bank and IMF (substitute US economic and military dominance). He has paid off IMF loans in Argentina, offered low cost energy to the Caribbean, brought free education and health care to much of his region.
I can see why Capital has big problems with him.
A educated and health proletariat is dangerous to the elite.
I say let them have their revolution, make the needed mistakes, and try something new other than the current suicide economy (anybody put the head up and looked around lately?)
South America is one of the few bright spots on the planet, and this has not gone unnoticed, with the exodus of Euros and politically astute North Americans.
Many of my friends spend time in Venezuela, and I have fresh reports from the ground as to what is happening.

I have noticed a definite anti-Chavez slant to the MSM, and I don't pay the MSM much attention at all. It is interesting how Chavez gets the blame for any drop in oil exports, but GWB's good friends the Saudi's seem to get a free ride.

There is a Venezuelan family around here, and they don't like Mr. Chavez. They have a *very* large house, a couple SUV's, and all three of their kids take violin lessons.

I have two friends that played with the Venezuelan Elite--
They showed up a Chavez protests, in their Jaguar Convertibles.
For 20% of the population that was benefiting from Monopoly Export Capitalism, Chavez has been a nightmare.
For the other 80%, they now have education. healthcare, and a stake in society.
We will see if this will be crushed, but the cat is out of the bag.

Because I love - For Mr. Patterson:
The Necessary Embrace of Conspiracy

And For John15

Out-of-control predatory capitalists have perpetrated a worldwide economic depression.
Capitalism's degenerate character is now extraordinarily visible during this time of multiple crises.


Re: Mexican Farmers Protest NAFTA up top:

If I have my numbers correct, they are saying they need 15 pesos ($1.40)per kilogram and can only get 10 pesos on the market. They are claiming that U.S. subsidies make their livelihood impossible.

A bushel of corn weighs 56 pounds divided by 2.2 pounds per kilogram is about 25 kilograms per bushel. At that rate, the market price for corn near Mexico City is 10 x 25 = $25.00/bushel. They say they need 15 pesos/kilo to survive. That would be $1.40 x 25 kilo/bushel = $35.00/bushel of corn. Then they complain about U.S. subsidies! Currently the local price for corn is $4.63 in North Iowa. No wonder the Mexican government pays no attention!

How is 'need' defined ?

Living as a Mexican farmer trying to make a better life ?

Or living as you do in north Iowa or I do in SE Nebraska ?

Surely 'need' defined by only
currency is simplistic, at best.

Remember that the price per kg paid to the farmer is rather less than what it costs in the market when consumed. If it were, US consumer would pay 1 cent for a cob of corn.

And why is the US price $4.63/kg? Could it be those subsidies the Mexicans are complaining about?

Oh that's right, NAFTA has made food cheap and everybody rich. That's why Mexicans march to protest the rising price of corn.

But surely the Mexican poor can afford $4.63/kg? Maybe, but that's not what they pay.

From here we see,

"When there isn't enough money to buy meat, you do without," one woman in Mexico City, Bonifacia Ysidro, told the Associated press. "Tortillas you can't do without."

Ms Ysidro said she paid 25 pesos - about a sixth of her family's daily income - for enough tortillas to feed her family of six.

So they get 150 or so pesos a week. That puts the 10 pesos a bushel they get, and 15 they want, in perspective. A family income of 150 pesos a week, for that at 10 pesos/bushel you'd have to grow 150/10 x 52 = 780 bushels of corn; at 15 pesos/bushel, only 520 bushels.

Mexican farmers get yields of about 70 bushels/hectare, and the average farm size is 2-3 hectares. So they could get 1,400-2,100 pesos a year at 10 pesos/bushel, and 2,100-3,100 pesos annually at 15 pesos/bushel. When you have very little money, a little bit makes a big difference.