DrumBeat: February 8, 2008

Energy: The $22 trillion question

NEW YORK (CNNMoney.com) -- How safe are our oil supplies? Where will the new supplies come from? Have high oil prices killed the economy? Are speculative investors responsible for the price runup?

These are all central - an contentious - questions in the world of oil. And they're all up for debate as leading members of the oil and energy industry gather in Houston, Texas for Cambridge Energy Research Associates' (CERA) annual energy conference.

Venezuela oil minister denies $12 billion in assets frozen

CARACAS, Venezuela (AP) - Venezuela's oil minister denied today that the state oil company has had $12 billion in assets frozen by court orders obtained by Exxon Mobil.

Rafael Ramirez tells reporters that the courts have frozen just $300 million in cash. He calls that a "transitory measure" while state oil company Petroleos de Venezuela presents its case in New York and London.

Tribes honor Venezuelan-owned company for heating help

RAPID CITY, S.D. (AP) - American Indians are again receiving heating help from the CITGO oil company that's owned by Venezuela.

Several tribes honored the people involved yesterday in Rapid City, including CITGO's CEO and the head of Citizens Energy Corp., which sends oil profits to charitable programs.

The Sun Also Sets

Back in 1991, before Al Gore first shouted that the Earth was in the balance, the Danish Meteorological Institute released a study using data that went back centuries that showed that global temperatures closely tracked solar cycles.

To many, those data were convincing. Now, Canadian scientists are seeking additional funding for more and better "eyes" with which to observe our sun, which has a bigger impact on Earth's climate than all the tailpipes and smokestacks on our planet combined.

And they're worried about global cooling, not warming.

Richard Heinberg: Proportionality

There is a strange clause in the North American Free Trade Agreement (NAFTA) that applies to only one country—Canada. The clause states that Canada must continue to supply the same proportion of its oil and gas resources to the US in future years as it does now. That’s rather a good deal for the US: it formalizes Canada’s status as a resource satellite of its imperial hub to the south.

From a Canadian perspective there are some problems with the arrangement, though. First is the fact that Canada’s production of natural gas and conventional oil is declining. Second is that Canada uses lots of oil and gas domestically: 70 percent of Canadians heat their homes with gas, and Canadians drive cars more and further than just about anyone else. The problem is likely to come first with natural gas; as production declines, there will come a point when there isn’t enough to fill domestic needs and continue to export (roughly 60 percent of Canada’s gas now goes to the US).

That point is not decades in the future, it is fairly imminent.

Spying against oil-rich Norway returns to Cold War levels after lull, intelligence chief says

OSLO, Norway: International espionage against oil- and technology-rich Norway is now back at Cold War levels, after spying dwindled following the 1991 collapse of the Soviet Union, police intelligence said Friday.

NATO-member Norway is a major exporter of oil and natural gas and shares land and sea borders in the Arctic with Russia. That includes vast disputed areas claimed by both countries in the Barents Sea, which has massive fish stocks and is seen as a potentially rich area for petroleum production.

Canada, Brazil lead oil output growth in Americas

CALGARY, Alberta (Reuters) - Booming investment in Canada's oil sands and rising Brazilian crude production should more than make up for declines elsewhere in the Americas -- good news for the United States as it tries to reduce its reliance on Middle East imports, a Reuters survey showed.

North Sea Brent Crude-Oil Daily Shipments to Fall 15% in March

(Bloomberg) -- Daily shipments of North Sea Brent crude, part of the price benchmark for almost two-thirds of the world's oil, will fall by about 15 percent in March.

Tankers are set to load 157,346 barrels a day of Brent crude in March, down from 184,552 barrels a day scheduled for February, according to the loading program of field operator Royal Dutch Shell Plc, Europe's largest oil company.

Correa: Ecuador Govt Doesn't Plan on Taking Back All Concessions

President Rafael Correa said Thursday that his government doesn't plan on taking back all of the concessions that had been awarded in the mining, oil and hydroelectric sectors.

Several groups have pressured the Correa government to do so.

"The position of some sectors who are requesting the total reversion of the oil, mining and hydroelectric concessions is an absurdity. The country needs to develop those sectors," Correa told journalists.

Iran Starts Second Atomic Power Plant: Report

Iran has started building a second atomic power plant in an oil-rich region near the border with Iraq, Iran's Ambassador to Russia was quoted as saying on Friday by Itar-Tass news agency.

Gholamreza Ansari said construction had started at Darkhovin in south-western Khuzestan province. Iran has said it would construct a 360 megawatt plant at the site.

Papua New Guinea: Chaos in ESP over fuel

All police operations in East Sepik province have been thrown into chaos as the ongoing fuel shortage finally stalled the entire police operations in the province this week.

The problem had sparked a verbal confrontation between the public and police outside the Wewak police station after police could not move the detainees at the police lock-up to the district court houses for their cases yesterday morning.

Tennessee: Sheriff’s fuel crisis focus of Finance panel discussion

After discussing four options for addressing the fuel crisis in his letter, Sheriff Gobble said, “I will not willingly implement any of these so-called ‘options,’ nor will I voluntarily reduce the current level of services provided the citizens of Bradley County. As always you will vote as you will, but I recommend tapping the General Fund and benefits line items to properly fund all county departments during this gasoline shortage.”

The sheriff has requested a transfer from the county’s fund balance of $195,000 for fuel and an additional $30,000 for vehicle maintenance. These line items have been exhausted in his 2007-2008 budget with more than four months remaining.

Oil & Gas Expert Launches Facebook/My Space for Energy Industry

A Houston oil and gas communications expert hopes to help solve the talent crisis in the energy industry with the beta launch today of www.energypeopleconnect.com, a social media website she believes is a first in the industry.

Polysilicon Plant Costs On the Rise

Norwegian Renewable Energy Corp. said this week that the expected cost of its polysilicon plant in Moses Lake, Wash., has shot up nearly 20 percent from the $660 million previously expected.

The "mechanical completion" of the plant also will be delayed by approximately two months, with commercial production scheduled to begin at the end of this year, according to REC Silicon – a branch of REC -- and its contractor for the project, Fluor Corp. REC blamed the setbacks on tight market conditions that "have pushed the world's equipment vendor and fabrication show capacity to the limit" and delayed equipment deliveries.

Mexico oil production decline to increase in 2010

LOS ANGELES, Feb. 7 -- Mexico will face difficulties in producing crude oil over the coming 2 years, according to a media report, which claims that Cantarell and Ku-Maloob-Zaap (KMZ) fields will decline simultaneously in 2010.

"As we move toward that scenario," said El Financero newspaper, "Cantarell's decline became more pronounced in 2007, when it stopped producing an average of 304,000 b/d. It declined by 234,000 b/d in 2006 and 101,000 b/d in 2005, the paper reported.

According to the paper, that reduction contributed to a drop of 174,000 b/d in the country's total production in 2007, compared with a decline of 78,000 b/d in 2006 and 50,000 b/d in 2005.

Oil Insufficiency

The law of supply and demand suggests that prices will rise as access to any good thing in life becomes scarce. One of these products just happens be oil, a finite resource. As Michael T. Klare explains, "Petroleum is, of course, a finite substance, and geologists have long warned of its ultimate disappearance. The extraction of oil, like that of other nonrenewable resources, will follow a parabolic curve over time…

Russian military base in Tajikistan to remain functioning

DUSHANBE. February 8. KAZINFORM. Russian Military Base No. 201 on the territory of Tajikistan will continue to function in any emergency situations, Colonel Viktor Kindeyev, acting commander of the base, told journalists on Friday.

"The combat preparedness of the Russian military base will not be affected, even if the authorities have to cut us off from electricity supply. The base is connected to the power transmission line, which is turned off only in exceptional situations," he said.

Nigeria: New Policy to Make Gas Cheaper

As part of his panacea to the nation's energy crisis, President Umaru Musa Yar'adua has approved a new National Gas Pricing Policy aimed at ensuring short and long term gas availability at affordable prices, for the domestic and industrial sectors.

Under the new policy, Nigeria's gas will be supplied at the lowest commercially sustainable prices to the strategic domestic sector which provides electricity for residential and light commercial users.

South Africa: Car Companies Aim to Curb Electricity Use

CAREFUL planning and cutting back on electricity consumption by motor manufacturing companies will probably avert an energy crisis in the industry, but unscheduled power cuts remain a threat.

US-Russia nuclear deal upstages Iran

Tehran is not the only capital that must worry if the two heavyweights of the nuclear order begin hobnobbing. Many countries - such as India and South Africa - would also be affected by any redrawing of the nuclear fuel trade regime. But it is Iran which is in the firing line.

Workhorse trucks are dens of luxury at Chicago Auto Show

While 2008 by some measures in the car industry is about being green and smaller vehicles, the lust for big and brawny is still on display.

With 4-door crew cab pickups in demand, more people are using trucks as their primary vehicles, and Accavitti said they demand the same features they're used to in their cars and SUVs.

"You used to just see trucks at work sites or the rodeo, and seldom saw them at Smith & Wollensky for dinner," he said. "Now, it's socially acceptable to take them to the country club, and they want to know where are the leather seats, where's the navigation system?"

Farms and oil wells and mines, oh my

As unnerving as the markets' latest roller-coaster ride has been for investors, commodities remain a good bet for respectable gains in a portfolio, experts say. From corn and wheat to oil, iron ore, coal and precious metals, prices are likely to be driven higher by worldwide supply shortages and growing demand.

Nimbyism Jibe Fuels Wood-Plant Battle

A North Yorkshire village has found itself on the front line of the drive to make wood a fuel of the future.

The residents of Wombleton, near Helmsley, would prefer it to stay just like it is.

But Land Energy, the company which wants a big plant making wood pellets on Wombleton's doorstep, is going back into battle for the project - four months after withdrawing its first planning application because Ryedale Council officers supported the villagers' objections.

Wild Biofuels Stories Circulate on Internet

The biofuels market for all alternative bioufels is just a hoax. It's propped up the government and will lead the country down the wrong path, ending up in an energy crisis, in the long run. Therefore the recently enacted Energy Bill is also a sham that does disservice to the country.

Was that written or said by a politician? Maybe a scholar or a leading scientist? No, instead it came off an Internet search for facts about how soy biodiesel use is growing and catching on across the country.

Deffeyes: The Second Great Depression

Yesterday, I was pumped up to vote in the California primary. When I moved to California to enjoy my grandchildren, I filled out a voter registration form. They must have tossed the forms in the wastebasket, because I was not registered to vote here yesterday.

Here's my revenge on the system: We are now entering the Second Great Depression. The name isn't original with me – I picked it up off the Internet – but it seems to fit the situation. My interpretation is that world oil production will diminish faster than we can bring on alternatives.

Keeping the oil flowing

Physical scarcity of hydrocarbons is not an issue, despite Jeremiahs who forecast a point in time at which the maximum global petroleum production rate is reached, after which the rate of production enters its terminal decline. The 'peak oil' theory should not stick: new reserves are being discovered around the world on a regular basis. The bringing on stream this week of Iran's vast Azadegan field -- estimated to have some 26 billion barrels of oil -- and expansive, still largely untouched provinces in Russia, such as Yamal and East Siberia, show that the Earth is far from running on empty.

The Peak Oil Crisis: The Future of Our Cars – Part 3

Last week’s column explored the options for powering vehicles when supplies of imported petroleum and products start to decline. At present it appears that biofuels, natural gas, and electricity are the only alternatives that will be available in large deliverable, quantities in the next ten or 20 years. While biofuels are already in widespread use, it is becoming obvious that turning food crops into fuel is bad policy. Fuels from non-edible plants may provide a significant share of our fuel someday, but that day is still someway off. Many think it will be years and certainly well into the time of oil depletion, before cellulosic ethanol becomes commercially viable on a large scale. Not only does the technology and economics still need to be worked out, but also massive amounts of infrastructure would have to be built.

This leaves us with natural gas and electricity as the only realistic options to power our cars and trucks for the immediate future.

Corporate cafeterias go the green, healthy route

Forget about greasy hamburgers and french fries. Major employers such as Cisco Systems (CSCO), Dow Chemical (DOW) and others are overhauling cafeteria fare in a new effort to introduce healthier foods and programs that slash environmental waste.

Less driving means less demand for gas, lower prices

WASHINGTON — High prices and a slowing economy are leading consumers to significantly cut back on their driving, a development that could limit the pain at the pump this spring and summer.

U.S. drivers pumped 1% fewer gallons of gasoline on average during the four weeks through Feb. 1 compared with the same period a year ago, according to the Energy Information Administration, the statistical arm of the Energy Department.

That was the second-consecutive week of year-over-year drops. During the last 10 years, weekly gasoline demand has risen 1.6% on average.

"It's prices and the economy," EIA senior oil market analyst Douglas MacIntyre says. "We've had several months of $3 or so gasoline. People are probably thinking it's more lasting than a price spike. (And) the slowing down of the economy means people are buying less, going to the store less … people are just changing their driving patterns."

Oil Production: Will the Peak Hold?

It's any one's guess if the old high will stand or not. And, of course, there are questions about the accuracy of EIA's numbers. In fact, there's skepticism that any database attempting to consolidate such an unwieldy beast as the world's oil production into one number. Nonetheless, everyone will be watching the updates, eager to declare victory for their side. All the more so considering how close last October's total was to the May 2005 apex. As we wrote this article, EIA's monthly production figures run through October 2007. The November report is coming soon.

Talk of 'peak oil' prompts land rush

Tom Petrie, the oft-quoted energy analyst who sold his eponymous energy firm Petrie Parkman to Merrill Lynch i& Co. in 2006, said while the industry faces a challenging period given the country's "economic funk," he doesn't think oil will slip much lower than $70 to $80 per barrel, versus some doomsayers' prediction of $50 to $60. He just got back from the Middle East and said while the ability of OPEC to set oil prices is limited, Saudi Arabia wants the floor to be no lower than $60.

Petrie also lends credence to the notion that world oil production has peaked, which would keep oil prices aloft. One proof: Even Middle Eastern countries are talking about investing in renewable energy, including biofuels, solar and wind.

Oil firms ordered to Niger Delta

Nigeria's government has ordered all oil firms that fled the Niger Delta in the wake of militant attacks to return to the area or cease operations.

The upside to peak fertilizer

Synthetic fertilizer prices are spiking upwards all over the world, inflicting economic pain on farmers everywhere. Another sign of the peak oil apocalypse? The industrial production of nitrogen -- a key synthetic fertilizer ingredient -- is extraordinarily energy intensive. So when energy prices rise, so do fertilizer prices. And if you buy the thesis that without manmade fertilizer the world will be physically incapable of supporting a population of nine billion, then you start to get very nervous.

Coal outperforms energy rivals, earning title of other black gold

SAN FRANCISCO (MarketWatch) -- Coal, whose price surge has already outrun those of crude oil and natural gas, is generating an even louder buzz as a rash of bad weather has reduced its production globally.

Citigroup earlier this week raised its forecast for thermal coal, saying it now expects prices for the benchmark product to double this year as blizzards in China, power outages in South Africa, and floods in Queensland cut into global output. Meanwhile, demand for coal keeps rising as the world's electricity use expands.

Exxon wins $12b freeze on Venezuela assets

NEW YORK - Exxon Mobil Corp. has secured court orders to freeze more than $12 billion in worldwide assets of Venezuela's state-owned oil company, as it prepares to dispute the nationalization of a multi-billion dollar oil project.

The move limits Petroleos de Venezuela's room to maneuver as it fends off challenges from major Western oil companies over President Hugo Chavez's 2007 decision to nationalize four heavy oil projects in the Orinoco Basin, one of the richest oil deposits in the world.

Venezuela sovereign bonds slump on $12 bln asset freeze

NEW YORK (MarketWatch) -- Venezuela's sovereign bonds slumped Thursday after U.S. and U.K. courts froze more than $12 billion in worldwide assets of the country's state-owned oil company, Petroleos de Venezuela SA, or PdVSA.

Venezuela's risk premium on JPMorgan's Emerging Markets Bond Index Global Diversified was flat at 544 basis points over Treasurys, and returns were negative 1.93%. Earlier, returns were a negative 0.37%.

Protection sought for Pacific walrus

ANCHORAGE, Alaska - A conservation group asked the government Thursday to protect Pacific walruses from the effects global warming and energy development could have on the species' northern habitat.

Bolivia seeks aid to battle floods

LA PAZ, Bolivia - Bolivia's foreign minister said Thursday that the world has an obligation to send aid to flood-ravaged areas of Bolivia, linking a disaster that has killed 49 people to global climate change.

As Bolivia faces a second straight year of devastating floods, David Choquehuanca argued that developed nations who produce most of the world's greenhouse gases are morally obligated to pitch in when the negative effects of climate change strike poorer countries.

Converting land for biofuel worsens global warming: study

WASHINGTON (AFP) - Clearing raw land to produce biofuels actually contributes to global warming by emitting large amounts of greenhouse gases into the atmosphere, researchers have warned.

Carbon dioxide (CO2) emissions from new croplands carved into rainforests, savannas, wetlands or grasslands would easily surpass the overall amount of CO2 emissions reduced through the use of biofuels, according to a report in the February 8 edition of Science.

I had an interesting conversation this morning related to inflation and biofuels. I had pointed people to the article that Stuart did about arbitrage between food and fuel (which had more to do with corn ethanol), and one person replied:

I trade biofuels - soy oil is now an acceptable hedge under accounting rules for heating oil.

I asked for a link - they said that they didn't have one, but then added:

No, it is actually the daily mark to market correlations I do. Feb through Sept front soy contract to front HO - 94.3% correlation. FAS 133 requires less correlation than that to be an "effective hedge"

Interesting article in today's NY Times:

Studies Deem Biofuels a Greenhouse Threat


Its also in the Toronto Star today


Concerns about global warming will determine the energy future of the world. If global warming as a result of human created CO2 is a concern than biofuels look good. They do decrease the food supply but we've got to save the earth so we might as well kill a few people by starving them to death instead of having many more killed in a global climate catastrophe. If human created CO2 is not the source of global warming then biofuels are an awful solution to the problem of fossil fuel depletion because they deplete top soil and decrease the food supply. In this case Coal and Gas to Liquids and Microwaving oil shale In-Situ are much better options for our energy future.

Exxon wins $12b freeze on Venezuela assets

Chavez's troubles have only just begun. It's been a rough few months for him, but I suspect it's going to worse.

Talk about biting the hand that feeds you. If the US doesn't want to play nice with Venezuela, I'm sure they can find someone else to buy their oil. Happy year of the rat.

WAKE UP EVERYBODY!!! This is more western media misrepresentation of the truth. The actual order reads:

"until the return date or further order from the court," PDVSA "must not remove from England or Wales any of its assets which are in England or Wales up to the value of $12 billion (8.3 billion euros)."

How much in assets do you think Venezuela has in England or Wales?

Answer: Squat.

The ruling is against Venezualan Oil Company PDVSA, not Venezuela as a whole and is only until the next court date.

The credit rating agency Fitch Ratings said the British court order would "have a minimum impact on the company's day-to-day operations, as well as its near-term credit quality and financial flexibility." The agency noted that most of PDVSA's assets are located in Venezuela and the United States, where the company has refineries.

This is non-news turned into a disinformation attack by western media against Venezuela. What's new.


How much in assets do you think Venezuela has in England or Wales?

Answer: Squat.

Actually they do have assets there, and said so. What they said is they don't have close to $12 billion there.

But I do agree with this statement from the article:

But Ramirez, who is PDVSA's president, ... said Exxon Mobil's claims in the Venezuela nationalization dispute "don't even come close to half the sum of $12 billion claimed by them."

COP has more at stake than XOM does.

I think Hugo might have a few more tricks up his collectivist sleeve...and exxon is soo popular...

True enough, but I don't think the US is immune. During the 2002 'coup' attempt oil production was nearly stopped, and this could happen again. I am sure Chavez can find lots of countries willing to lend him money to tide him over any lean times. He will have oil to sell another day.

I cannot also stop wondering if the current admin will ever cease trying to start another war somewhere. I guess they really think our lifestyle is non-negotiable no matter how many die.

A global corporation starting a resource war. This is the right hand of the US making a move, and the left hand pays no attention.

Of course, a majority of the American people will support this, and then will also support the invasion when Venezuela stops supplying us with crude oil.

Of course, a majority of the American people will support this, and then will also support the invasion when Venezuela stops supplying us with crude oil.

I'm not sure anyone would support a war with Venezuela if they stopped sending us crude oil. I wouldn't support it, and I'm pretty hawkish politically. Does anyone here on TOD support war with Venezuela if they stopped exporting oil to us?

A few months ago, one of the talking heads on Fox News (employed by Fox full time) equated a decision by Venezuela to cutoff oil exports to the US to the use of a weapon of mass destruction against the US.

The ignorant blather that is spewed forth like so much bile from the mouths of those at Faux News is disgusting. It's a shame that there are some good shows on the Fox TV channel that I enjoy, however I do not watch them on the TV, but instead on my computer. I'd love to boycott Fox broadcasting in its entirity.

The Japanese undoubtedly went to war against the US because of the oil embargo. Why Did Japan Attack Us?

But FDR did not want to cut off oil. As he told his Cabinet on July 18, an embargo meant war, for that would force oil-starved Japan to seize the oil fields of the Dutch East Indies. But a State Department lawyer named Dean Acheson drew up the sanctions in such a way as to block any Japanese purchases of U.S. oil. By the time FDR found out, in September, he could not back down.

I guess history could repeat itself in unexpected ways. I mean, they ousted Chavez in a coup - why not try it again in a more direct way?

I saw this and thought the same, it will only get worse.
Who's land and country is this? Venezuela should have the say on what goes on in there country, and
not some court in another land, that money in holding belongs to Venezuela it was traded for oil.
My question is did Venezuela pay out for cancelling the oil companies contracts?

If Venezuela shut down production pending the courts, I feel this could drive there customers into a rush buying oil from other countries in a rush.

So my question is how long can the World get by with out Venezuela oil? a week, a month, a year.
Can another country or countries to makeup for Venezuela loss production, on the fly too?

After reading TOD this week the UK could go from a exporter to become an importer, plus Russia, and Mexico look to be in decline and most likely soon to have export issues?

A good power play for Chavez, but could Venezuela hold out.
Would Chavez turn the pumps off? I guess no.

My question is did Venezuela pay out for cancelling the oil companies contracts?

No, they didn't. That's why XOM made the move. They decided to play hardball. Some companies did accept the new terms, but XOM and COP were kicked out when they refused to renegotiate the contracts that had been signed and give up the investments they had made. So far, they have received no compensation, and COP I know has written off $4.5 billion as a result.

Would Chavez turn the pumps off? I guess no.

He can't afford to. His oil production is down, prices have fallen some, but he has been spending money as fast as it has come in. This move by XOM makes it more difficult for him to operate. Now, the oil fields and refineries are in bad need of investment, and he doesn't have the funds to do it. That's why just a few days ago PDVSA suggested that they were ready to cut some deals to bring private investment back in.

I expect Chavez to soon start arguing that a fair price for OPEC oil is $150 or $200.

Thanks for the info Robert

True if the pumps were shut off it would shut down Venezuela and then Chavez lose power.

Here another one, did Venezuela just sign new contracts with places like China? could there be enough demand there to drop America (Citgo stations). Sure it puts better profits for the US oil companies and more business, but could they keep up with the demand.

So it appears the real extent of the temporary court ordered action applies to $300 million in cash. We will see what the court makes of Venezuela's case, presumably in the near future.


"I expect Chavez to soon start arguing that a fair price for OPEC oil is $150 or $200."

I imagine that Chavez might soon take up the argument of Matt Simmons on price, since like Simmons he recognizes that peak oil is upon us and since he surely realizes that his country's oil is worth more than a few nickels per cup.

As for spending like crazy, I think this might apply to Venezuela if their public spending on health and education and military offence begins to approach that of the US (ppp adjusted and with the same lousy outcomes as US spending).

It's amazing to me how some are rankled by the refusal of some countries to be forever deferential to the Imperium. Oh well, you can always take comfort in Canada's butt kissing Prime Minister.

Typical media over-excitement. Turns out it's not 12 billion, it's "up to 12 billion." Big difference.

Well, $12 billion is well more than the projects were probably worth. I had seen some estimates that they were worth $20 billion, but COP had the biggest investments there and they wrote off $4.5 billion.

So it appears the real extent of the temporary court ordered action applies to $300 million in cash. We will see what the court makes of Venezuela's case, presumably in the near future.

No, that's how much was frozen in the U.S. alone. Money was also frozen in other countries.

It's amazing to me how some are rankled by the refusal of some countries to be forever deferential to the Imperium.

That's not what rankles me. What rankles me is that I am a shareholder and an employee of one of the companies whose assets were seized. We were invited in by the government, signed contracts, and invested billions in assets on the ground. When oil prices went up, Chavez decided to tear up the contracts and seize the assets. That's no different than the U.S. government seizing his Citgo refineries in the U.S. Or the U.S. seizing a Toyota manufacturing plant, or the assets of any other foreign company operating on U.S. soil. Contracts were signed in good faith, and we conducted ourselves there in a responsible manner. And because I am a shareholder, I feel like Chavez stole from me, personally. And I think that's a good reason for being rankled.

In all honesty, I don't give a rip whether he decides to sell any more oil to the U.S., or whether he ever invites oil companies back in to do business. I just want him to fairly compensate for that which he stole - which up to now he has refused to do.

If indeed the Venezuelan government's actions amount to theft by some definition agreed to by the courts of some countries, then I certainly hope they get away with it. It seems increasingly obvious to me that the prevailing property rights regime is nothing more than a way to perpetuate a massive intergenerational robbery (of the earth's fossil fuel endowment as well as of a relatively stable climate, among other things), not to mention the ongoing theft of opportunity from billions of our human co-inhabitants of this globe, including the poor of Venezuela. I see no reason from a moral viewpoint to defend this regime.

The best thing that can come of the actions of the Venezuelan government would be slowdown in the depletion of the hydrocarbon resource within their jurisdiction, though this might just be a fortunate unintended consequence of their actions.

RR -- here is a real challenge for you.

I know it rankles when I feel ripped off -- and I feel that way at times, but that's a whole 'nother story.

I wonder if you are aware of the work of activist Antonia Juhasz? An interview with her is available online here:


She has written two books:

"The Bush Agenda: Invading the World, One Economy At A Time"


"the Tyranny of Oil: The World's Most Powerful Industry and What We Must Do To Stop It"

Here is an excerpt:

"SSP: You talk about Iraq as being only a step in a larger plan for corporate domination in the Middle East. Is the push to sign up Arab states in the US/Middle East Free Trade Area (MEFTA) the cornerstone of that plan?

Juhasz: This is a really bold way of trying to extend U.S. influence in the Middle East. The Bush administration has used the Iraq war to convince nations across the Middle East to adopt its free trade agenda. The coalition includes among its 120 members, Chevron, ExxonMobil, Bechtel and Halliburton—companies intimately connected to the Bush administration that have already been big winners in Iraq. A unique negotiating strategy has been implemented for the MEFTA. Rather than negotiate with all of the nations as a bloc, the U.S.
negotiates one-on-one with each country, meaning that every nation—some half the size of one state in the U.S.—must deal with the most dominant nation in the world. If successful, the MEFTA would be concluded by 2013 with 20 signed countries."

RR -- maybe you see mostly the technical side of the oil business, but do you not see that there are dimensions to the oil business that are absolutely about ecological and economic rape? How can this be changed, if not by people simply wresting resources back and trying to develop them with a different agenda than "next quarter's profits"!?!?!?

If indeed the Venezuelan government's actions amount to theft by some definition agreed to by the courts of some countries, then I certainly hope they get away with it.

Likewise, if you are an Anglo living in North America, and your house is broken into and all of your stuff stolen, you deserved it because of the "massive intergenerational robbery" of your ancestors, and I certainly hope they get away with it. You wouldn't actually bring charges in that case, would you?

RR -- should the USA fairly compensate the Native Americans for a trail of broken treaties, broken promises, and genocide?

Should the USA -- and the US oil industry we are foisting upon Iraq pay fair compensation to the victims of starvation, rape, torture, false imprisonment, loss of loved ones, loss of homes and businesses, and for those millions of Iraqis reduced to refugee status?

How much compensation is owed by big oil companies for knowingly raping the planet, for continuing to push the energy equivalent of crack-cocaine with full knowledge that we are turning the planet into hostile Hell?

Compare "Big Oil" to "Big Tobacco." We all know that Big Tobacco used the same methods of denial and poisoning the well of public information in order to keep making money on cigarettes. Big Oil has done the same.

Now that we've inflicted fatal wounds to our environment, Big Oil attempts to Greenwash itself with token programs that are little more than PR lies on top of all the previous lies.

In addition, Big Oil has for decades raped Native peoples in Nigeria, Iraq and countless other places to get at the oil.. What is the tab for that?

Do you think that most people in the world are still ready to be used up and discarded on the human scrapheap? More folks in far away places are aware that "Big Oil" wants them to give up their future -- including that of their children -- for a "mess of pottage" in the present.

What if we paid these people a premium for access to oil that doubled or tripled the cost of each barrel? Would that not slow consumption, allow these countries to develop, and spur research on alternative energy sources? But it would also take the "plunder value" right out of Big Oil's various share prices.

Big Oil very intentionally operates in a criminal fashion around the world, does it not? Big Oil makes money by propping up violent, psychopathic dictators, does it not? (Remember the Saudis, Saddam Hussein, the Shah of Iran....)

So what does the USA owe (compared to Chavez) and how can we pay? What do Big Oil companies owe around the world and how can it pay?

Chavez' crimes against Big Oil -- very expensive. USA and Big Oil's crimes against humanity -- incalculable....?

RR -- should the USA fairly compensate the Native Americans for a trail of broken treaties, broken promises, and genocide?

I am part Native American. Do you have a proposal? Are you offering up your land to me? What exactly is your offer?

Should the USA -- and the US oil industry...

Which companies are you referring to? The US oil industry is not an entity, and I don't know of a single oil company who was on record as supporting the invasion in Iraq.

The rest of your rant is more just "Big Oil" this and that. You paint with a broad brush. But you use oil, do you not? What is your responsibility for demanding the product that you blame for all of these ills? And how can you live with yourself, given your contribution?

My point is not "How do you live with yourself?" or "How do I live with myself?" Good questions, though!

See my post below. I am asking for change. Radical change, yes.

Perhaps the Big Oil companies are pristine in your view? What about Columbia, Nigeria, Iran, and Iraq....?

Surely you are aware of some of the issues related to the rapacious character of the oil business as relates to planet and poor people around the globe?

Over the past months, there have been numerous reports alluded to on TOD as well as other places -- eg, Energy Bulletin -- chronicling the impacts of oil industry in Nigeria, Columbia, and other places.

We are all in this together, but we need to wrest control of oil from corporatism and somehow husband the resource while at the same time making sure that folks who live where the resources are do not get the gift of a Saddam Hussein, a Shah of Iran, a Musharraf, a Suharto -- all monster dictators who had lovely relationships with the USA and/or Big Business, especially Big Oil.

I urge you to look at the work of Antonia Juhasz before concluding that "Big Oil" is fictional or perhaps real but benign.

We all use oil. We are all in it together. But that does not mean that there is nothing we can do or say to reduce the crimes underway.

Or does it? Maybe our complicity makes change to a more positive way of doing things impossible? Or at least difficult.

Perhaps the Big Oil companies are pristine in your view? What about Columbia, Nigeria, Iran, and Iraq....?

Again with the broad brush. Stop looking at Big Oil as an entity. Shell is not responsible for the Exxon Valdez. Chevron isn't responsible for the Texas City explosion. Various oil companies bear responsibility for their own actions. But when you ask "What about Iraq?" - what is your question? Which companies do you think wanted us to go into Iraq? I know for a fact that mine didn't. And I know that my company conducted itself in a responsible manner in Venezuela, and employed a lot of Venezuelans with good-paying jobs. Those employees were sorry to see us go, because Chavez cut their pay in half when we left, and fired a lot of them.

Again, think back to the question of the land. There was a point to that question. I can paint with a broad brush as well. If you are an non-native American, you are responsible for taking the land from some of my ancestors. Or is the situation as black and white as that? Are all Americans equally responsible? Is the recently arrived Russian immigrant responsible? How about the descendents of the slaves? But you ignore those kinds of things when you say "Big Oil did this, they got what they deserved."

Years ago, I was talking to a friend of ours. An oil company had leased her father's land, and they had found oil (her father received the proceeds from about 20% of the production and paid none of the costs). She said that she wished that they could just get rid of the oil company, and produce the oil wells themselves. I asked her how long her father had owned the land. She said about 20 years or so. I suggested that the previous owner might want to cancel the sales contract and take his land back, now that there was oil production.

As Robert knows, there are two ways to allocate scare resources--via contracts and market forces or via the use of force. Take your pick, but remember that once you seize the property, there might be someone else behind you with a bigger force.

Having said all of that, is the US in Iraq because of oil? IMO, yes. Does anyone really disagree at this point? I think that the problem the Neocons are having is that their reach is exceeding their grasp.

"As Robert knows, there are two ways to allocate scare resources--via contracts and market forces or via the use of force."

If Robert does know this, then that would make two of you. Operating under the rule of law, the two ways to allocate scarce resources are via markets or 'command' directives. Both systems are ultimately backed by the state's legal monopoly on the legitimate use of force. All modern states use a combination of these two means, some choosing one or the other to a greater extent.

Actually the bigger concern for the neocons was and is the security of Israel.

If you do not believe me then perhaps you will believe them. Read their paper A Clean Break: A New Strategy for Securing the Realm written by, among others, Richard Perle and Douglas Feith. They were both in the Bush Administration. Their document was written the late 1990s for Binyamin Netanyahu trying to argue that Israel should overthrow Saddam for Israel's benefit.

The presence of oil in Iraq has confused a lot of people. It might have played a role in Cheney's and Bush's calculations. But Israel is the primary concern of the neoconservatives.

RR -- thanks for the reply.

I guess my post about Antonia Juhasz ended up being "above in this thread -- not "below" as I just posted.

At any rate, here's the link to the interview:


Your point is well taken that all oil companies act with a certain amount of autonomy. I also see that oil companies are not alone in often acting with overly-narrow views on what they are doing and especially with regard to wholistic and long-term impacts.

There are repeated themes of destructive behaviours that are more than a little disturbing. Have you read the book "The Corporation" by Joel Bakan? He is a lawyer and specialist in Constitutional and corporate law in Canada. He points out the patterns I am trying to point out as well.

As WT notes below, the problem with stealing stuff by force is that someone else may just steal it because can and want to.

There are corporate CEOs who realize that they have essentially been "plunderers" and that this is not sustainable (see Bakan's book for examples). The problem here is that the Neocons have indeed overextended their reach (as WT states) and that they have bankrupted us and worse in Iraq. Add to that all the dimensions of human suffering and fuel added to various conflicts resulting freom our brutal occupation of Iraq.

So now the big dogs will fight it out for control of resources, and the people -- and the dubiously named "free market" be damned, I guess. "Just another poor boy off to fight a rich man's war..."

"And so it goes..."

The only meaningful conversation is about how we might possibly peacefully power down and transition to another energy regime....?

Beggar - Thanks for taking this conversation on. I have wanted to also but guess I have not the cajones nor the lingua.

I too have listened to and read Antonia Juhasz.

There is no question that the US has "jacked the stuff" of the less agressive, resource rich nations at the point of a gun.

Sarc on
Who can blame the companies who come in and profit heavily off of these actions? They are just doing BAU. They didn't point the guns now did they?
sarc off

If the companies support the politicians who use the guns then they are complicit. Campaign contributions anyone? Support of militant local government (Nigeria) to violently oppress previously peaceful indigenous population anyone? Rush for control of recently conquered (Iraqi) oil assets anyone?

Think of global corporations as privately owned ships under charter by the state to set sail to foreign shores and use their considerable human and capital resources to control as much wealth as possible. Free trade breaks down the barriers and lets the biggest players in. On the flip side, very wealthy global corporations also exert immense influence and control of major power centers in the US government through extensive public and private lobbying, campaign contributions, and a steady supply of their executives to top government positions.

Oil is a bloody business that feeds on scarcity. No wonder why the idea of renewable, local, widely distributed energy is so abhorrent to the oil majors.

Peak oil is a problem of a limited resource. But the limits means a huge opportunity for a few people to become very wealthy at the expense and sometimes devastation of nearly everyone else. You'd better believe the majors will:

1. Do everything they can to keep people dependent on oil for as long as they can.
2. Reap as much profit as is possible while claiming all they while a constant state of duress.
3. Delay and sabotage viable alternatives to fossil fuels for as long as possible while keeping the price as high as possible. This includes keeping stakes in alternative industries to prop up price, discourage wide adoption of alternatives, and otherwise edge out competition.
4. Ensure that as many people as possible become dependent on the power structures they support and economically and politically exploit these to the greatest extent possible.

The majors see nationalization as a problem. I see it as the beginning of the cure to the oil addiction.

Or to put it another way. We will either invent ourselves out of this crisis by going to the alternatives. Or we will follow the neocons and go to war to control the world's remaining oil assets.

Oil is an economically, environmentally, and politically dangerous and unsustainable fuel source. We should make every effort to stop using it yesterday. We are paying the consequences now. But it only gets worse as we continue.

The invasion of Iraq is not a net economic benefit for the United States.

The big international oil companies opposed the invasion of Iraq.

The United States has not occupied Saudi Arabia or assorted other countries that have nationalized oil fields. Why not? There's the oil. Why not take it? Because it is not worth the trouble. Because it would undermine US desires to see property rights of US companies respected around the globe.

You got this story line that sounds like it makes sense to casual observers. But you can't understand the world thru casual observation. You need to look at lots of pesky tedious facts and those facts are not favorable to your position.

How do you think nationalizing oil would help? The main way the oil companies helped screw up the world is by paying their taxes. These shitty governments taking people's money(taxing) without contract are also the ones responsible for the horrible misuse of that money, including subsidizing suburbia, which makes sense, because people that fund their ideas through coercion must not have very many good marketable ideas


At this point I sure do not want to close off the conversation.

I think that this is a key issue, and is uncomfortable -- downright annoying and irritating for most of us.

Things are complex. I am sorry that Chavez and the oil multinational companies that were in Venezuela could not work things out.

I do not see the matter as "good guy-bad guy" though.

People are plundering the planet and the poor all the time -- sometimes with guns blazing, and sometimes with pens and under-the-table deals.

Many people who work in corporations simply merge their identities with the Corporatist system and offer the "love it or leave it" comments that cut off conversation.

Many people who do not work in corporations are left outside of all discussion because we supposedly do not have alternative plans. Actually, "parecon" and other plans and discussions of how to manage a transition have been offered -- see the good folks over at ZNet for example.

In reality, we have developed a brittle, rigid globalisation culture which has integrated economics and politics thoroughly in the so-called "developed" countries to the point that change is no longer possible. We are in the midst of catabolic collapse because of this, and the outcomes do not look as predictable as I'd like them to be.

I've talked with technical folks here in Minnesota who are still pumped about biofuels, and simply cannot see any downside. As Global Climate Change, Resource Depletion, Resource Wars, and Habitat Destruction and Toxification all accelerate, we will see more people in more pain -- looking for scapegoats. Even as we make our problems worse, and pain increases, we are still rigid and brittle in our responses: do more of the same thing that got us into trouble but too little culture change.

The Corporatists (none of them Free Market Capitalists at all, it seems to me) will see Chavez as a scapegoat ("the Mad Pinko Dictator," etc), just as he may see them as scapegoats ("the evil villians," etc).

Meanwhile, those of us who would like to make another kind of world continue to be marginalized. I see most people scrambling for security when I think that our best response is to embrace our absolute vulnerability and try to live as peacefully and sustainably as we can.

The only discussion that makes sense is one which starts with the premises that we have too many people competing for too few resources, and that we need to construct a whole new way of doing things in midflight.

Changing horses in midstream never looked so easy. We're trying to rebuild our shuttle as we re-enter the atmosphere.

I think that our best response is to embrace our absolute vulnerability and try to live as peacefully and sustainably as we can.

Close to my own thoughts, Embrace a community instead of seeking isolation.

Best Hopes for Getting Through This Together,


Jeezzz Loueezzzzzzz Beggar! I think I'm in love xoxoxoxo

Kidding aside I truely admire your ability to communicate.

You need to make sure you are still around after the bottle neck as your kind will be in great demand, along with many others who regulary post comments here along your thoughts.

My thoughts.

It is useless to lift the bottom 75% of humanity unless there is an equal reduction in the upper 25%.

deal with it or....

Hey, Alan and souperman2! Thanks!

I do think that many of the folks posting on TOD -- including RR and WT -- have shown different ways they are personally doing good things to prepare themselves, family, and friends for the difficult, tilted undulating, ans -- er, ahem, shall we say "tilted" -- plateau ahead of us.

I do tend to paint with a broad brush, as RR pointed out. I'm a big picture guy, but we'll need all kinds to maybe help get some of us through the Bottleneck.

Back to the topic of Corporatist and State theft: it is very easy to scapegoat even corporations and political leaders. They are big, easy targets. On the other hand, we will not keep the present Globalisated Neoliberal economy going as is for much longer.

The corporatists will need to become more open about fascism, and will enter into more open conflict with each other about establishing relative power in the new world order. This is not likely to be civil.

Common Dreams has had a number of articles this week related to the general theme of corporatist rule through the state's monopoly on power. The Taser is use instead of talking. This marginalises and disempowers people -- scares people into submission. Mukasey has refused to look into waterboarding, because his own agency said it is OK, therefore there is nothing to investigate. Government use of torture sends a strong message to us all. The FBI has been busy "Deputizing" business owners (?) all across the country in case martial law should be declared, giving these "Infragard" people authorization to use lethal force to protect our nation's infrastructure.

Bit by bit we are being prepared to accept authoritarian rule as never before. Maybe Chavez is a developing mirror image of our own authoritarian and militaristic culture.

I am a shareholder in energy cos via a mutual fund. But I am also well aware that the contracts that the energy cos, and not just the energy cos, were signed by corrupt and corrupted govt's. I am well aware that the US has invaded countries for oil and was complicit in the 2002 coup in Venezuela. I am well aware that our whole way of life is dependent on theft of unimaginable scale from the third world.

I am trying to not let portfolio disease get the better of me. To cry about theft in face of the crimes being committed by our gov't against a major part of the world is, well, while understandable, nevertheless not seeing the forest for the trees.

But even you Robert will be a victim, not of Venezuela, but of our own gov't as the dollar turns into kaka, as further militarization and war ravishes the land, as our kids and grandkids grow up in a society we dare not think about. What's been stolen from them is their future. That's the theft I'm concerned about. I could die happy even if I lost everything but knew they had a decent future.

Chavez is at least trying to see to it that the bottom half of Venezuela has a chance at a better future. No one in a comparable position here gives a rats ass about that.

To cry about theft in face of the crimes being committed by our gov't against a major part of the world is, well, while understandable, nevertheless not seeing the forest for the trees.

I am none too pleased about that either. But if you got mugged in the street, you might also be annoyed by the $100 the mugger got away with. You may be able to see the forest and the trees.

I do feel like our government has stolen from us with the fiasco in Iraq. They have mortgaged our future and run the economy into the ground. It pisses me off to think about what good could have been done with that money, and how it could have positioned us for hard times ahead. Instead, the money we threw away will just hasten our decline.

Chavez is at least trying to see to it that the bottom half of Venezuela has a chance at a better future.

Yet he has gone about it in an incompetent manner, and now he finds himself having to ask the oil companies to come back. He has made his bed. And if oil prices crash, he will probably find himself out of power.

re: 'Mortgaged our future..'

That's a good way to put it. It's not irrelevant, I hope, to remember the root for Mortgage is 'Dead Pledge'.

"WORD HISTORY: The great jurist Sir Edward Coke, who lived from 1552 to 1634, has explained why the term mortgage comes from the Old French words mort, “dead,” and gage, “pledge.” It seemed to him that it had to do with the doubtfulness of whether or not the mortgagor will pay the debt. If the mortgagor does not, then the land pledged to the mortgagee as security for the debt “is taken from him for ever, and so dead to him upon condition, &c. And if he doth pay the money, then the pledge is dead as to the [mortgagee].” http://www.bartleby.com/61/2/M0430200.html

"`You are fettered,' said Scrooge, trembling. `Tell me why?'

`I wear the chain I forged in life,' replied the Ghost. `I made it link by link, and yard by yard; I girded it on of my own free will, and of my own free will I wore it. Is its pattern strange to you?'

Scrooge trembled more and more.

`Or would you know,' pursued the Ghost, `the weight and length of the strong coil you bear yourself? It was full as heavy and as long as this, seven Christmas Eves ago. You have laboured on it, since. It is a ponderous chain!'

This isn't aimed at you, Robert. Lord help us..


Yet he has gone about it in an incompetent manner, and now he finds himself having to ask the oil companies to come back. He has made his bed. And if oil prices crash, he will probably find himself out of power.

The first issue is not competence, but direction. Chavez is trying to do right thing. That's first. I personally hope he succeeds because it will benefit everybody, including us. "Zero misery", that's their slogan. "Inflict infinite misery" might as well be the slogan of "our" guys. Chavez cannot avoid stepping on corporate toes -- he will surely fail if cannot deliver to the people on the bottom half.

and why does Chavez need the big oil cos to come back in?

Because they have the capital and there for the tools and knowledge.

How did that come about?

Americans are just naturally superior in so many ways.


did the contracts include the phrase "for as long as the grass shall grow" ?

did the contracts include the phrase "for as long as the grass shall grow" ?

The contracts were definitely of a long duration. If you are going to invest multiple billions in a foreign country on a project that will take years to develop, you damn well better have a long-term contract. What Chavez did was let the oil companies assume all the risk, and when it paid off he seized control. It wasn't like his people weren't benefitting from the deal in place. They were. But he wanted it all, and now he is finding that he can't manage it.

did the indigenous peoples of the Americas ever invite the conquistadors and their followers?

Contracts were signed in good faith

Contracts are divorce documents - the contract will NEVER be referenced if things are going well.

When one lacks a 'world body' for 'contract enforcement' (or other law enforcement) other than getting personally mad, what ya gonna do?

and we conducted ourselves there in a responsible manner.

Considering the history of bribes between oil firms and officials in other nations, the use of 'gunboat diplomacy' over oil - how SURE are you in what you state?

Enforceable contracts are the only basis for determining whether "things are going well."

If a mineral rights owner and an oil company have agreed on a three sixteenths lease and the oil company or the mineral rights owners want to change the terms unilaterally, they can't do it. If they renegotiate, fine.

In dealing with sovereign governments oil, companies are making a one way deal. If that government is stable and honorable, the deal will bind both sides. If not ...

Conoco and Exxon have a decent shot at recovering something due to the expropriation because Venzuela has assets outside Venzuela that they can go after. Either way it will be expensive.

Well, as they say, 'payback's a b*tch'. You can count yourself now with the countless millions around the world who've been screwed out of some/all of their money by our US government over the years in its quest to make our lives better at any cost.

The 300 million is a separate ruling in a New York court.

The ruling is only against PDVSA's assets in England or Wales, which are practically nothing, and only until the next court date. The up to 12 billion is meaningless. They could easily have said up to 100 trillion. If PDVSA only has a few million in England or Wales, that is all that this affects and only until the next court date.

This ruling has absolutely NO impact on day-to-day operations or credit ratings.

This is non-news turned into sensationalized propaganda against Venezuela. The actual intention is to attempt to hurt Venezuela in world markets through this disinformation campaign.


Another tidbit...

Venezuela's U.S. assets too hard to freeze - Exxon

NEW YORK, Feb 8 (Reuters) - ExxonMobil sought court orders in Europe to freeze $12 billion in Venezuela's overseas energy assets because getting a similar order in the United States before it won its arbitration case against Venezuela's state oil company PDVSA would be too difficult under U.S. law, court papers showed.

"Although PDVSA indirectly owns substantial assets in the U.S. mainly through its U.S. subsidiary, CITGO Petroleum Corporation, I am informed .... that it would be challenging to obtain pre-judgement relief against these assets as a matter of U.S. law," Exxon's UK attorney Thomas Kimpton Sprange wrote in an affidavit in late January before the High Court in Britain.

leanan -

I see that this has been a most contentious thread and has picked the scab off of some long festering wounds ... mainly related to various strongly held views on global corporate power vis-a-vis the largely corrupt control of third-world resourses.

Oil employee Robert Rapier has (quite persuasively) argued that a contract is a contract and that Venezuela is being an 'Indian-giver' for renaging on said contracts. He definitely does have a valid point.

On the other hand, there is also a stong argument that, as a matter of international law, a contract entered into by an illigitimate government (arguably, such as the pre-Chavez kleptocracy government of Venezuela) with a foreign power (such as US oil companies) could be construed as invalid on the basis that said government did not represent the will of the governed, and indeed represented a bypass around the will of the governed. We have seen this sort of thing time and time again, where some tin-horn dictator sells his nation's resources to foreign companies for pennies on the dollar to enrich himself and his chums with untold riches squirreled away in Swiss bank accounts.

I will leave it to the lawyers to sort that one out, but I think there is lot more to this matter than just legal arguments, namely global power politics.

However, the way I see it, the oil in the ground belongs to the people of Venezuela, not to ExxonMobil or Conoco Phillips, regardless of what was written on paper with the prior corrupt regime. However, since both companies have invested many billions in the country, it would only be equitable for Venezuela to compensate said companies for at least some substantial fraction of that amount. Sort of like eminent domain in the US.

I think that is the best we can hope can come of this matter. Once again, the US through it's foreign policy arrogance and ham-fistedness is being squeezed out of one oil source after another.

As I've said before: while the US makes war, the Chinese make deals. I would have never thought I'd see the day when the Chinese would be more welcome in Third World countries than the US.

Ultimately, sovereign nations are sovereign, and can and will do what they want. They can especially be counted upon to do what they perceive to be in their national interests. Normally, honoring contracts is something that is in the long-term national interest of a country. However, when it comes into conflict with other national interests, it may or may not take priority.

Any corporation doing business overseas should understand this before they even get started. If you do business overseas, you take your chances; often it works out well, sometimes it doesn't. I can understand their feeling angry, but I cannot understand their feeling surprised.

You are correct WNC. How many US businesses built factories in China and other places? The company I used to work for closed 7 plants in the US and built two in China. Who can predict the different geopolitical landscape 15 years from now? Think Tiawan will still be independant? Look at Russia in the last 10 years and the evolution of the ownership of their resources. A large Chess game. Losing possession/rights is like losing a Knight or castle in that game.

What a time to be alive and interested in current events and history in the making.

"indian giver"

Indian = indigenous people

"the oil in the ground belongs to the people of Venezuela"

when the people figure it out they reneg.

deal with it

The oil in the ground is a natural resource, and as such belongs to noone. The pumps and equipment for obtaining the oil and the oil once it has been obtained belong to the oil companies

Wouldn't it be ironic if Venezuela used the courts to delay, delay, delay, just as Exxon has to avoid paying out the compensation to the fishermen affected by the Exxon Valdez disaster?

Sauce for the goose......

RE: Less driving means less demand for gas, lower prices

As was discussed yesterday, the EIA data shows an increase in gasoline consumption. The increase was less than was historically the case year over year, but it was still a positive number. Here's the data from the EIA:

Products Supplied Last Week Year Ago Percent change
Finished Motor Gasoline 8,984 8,891 1.0

So, how come USA TODAY can write this?

U.S. drivers pumped 1% fewer gallons of gasoline on average during the four weeks through Feb. 1 compared with the same period a year ago, according to the Energy Information Administration, the statistical arm of the Energy Department.

Is it possible that they are so addicted to "growth" than they can no longer see the rate, only the derivative?

E. Swanson

I assume that you are talking about weekly data, while the second reference was to the four week running average. The four week running average is probably the more accurate number, but in both cases consumption (so far) is basically flat year over year.

Actually, I pulled the 4 week average.


E. Swanson

Maybe they meant per person consumption - if population increases by 1% per year and total consumption stays constant, that means per capita consumption is down 1%. However, seems unlikely too - journalists rarely take such complicated connections into account.

There is one other complication as well, which I analyzed once. Because there is so much more ethanol in the gasoline, demand will go up simply because the BTUs in the fuel went down. I calculated once that this was responsible for a fair amount of the year over year demand increase.


Over the last four weeks, motor gasoline demand has averaged about 9.0 million
barrels per day, or 1.0 percent above the same period last year.

That's from the EIA's Summary of Weekly Petroleum Data for the Week Ending February 1, 2008 (http://www.eia.doe.gov/pub/oil_gas/petroleum/data_publications/weekly_pe...)

And from USA Today one week ago:

Gasoline consumption in the most recent four-week period tracked by EIA was 1.1% more than a year ago — considered modest growth.

"There's a choke point somewhere, but $3 wasn't it," O'Connor says. "Maybe this year we'll see if $4 is it."


It amazes me. No self-respecting sportsbettor would ever accept data this crummy.

Should be obvious by now that mainstream media is not data-driven.

"U.S. drivers pumped 1% fewer gallons of gasoline on average during the four weeks through Feb. 1 compared with the same period a year ago, "

maybe US drivers aren't the only drivers in the US using gasoline? I don't know.

Recently there have been many posts here expressing concern over the recent levels of borrowed bank reserves. This analysis by Merrill should assuage these concerns.


In summary, the new Term Auction Facility has rapidly changed the way banks borrow money from the Fed. Unfortunately, the government reporting does not show this tactical change in a compact way - creating the appearance of collapse when one relies upon a SINGLE report.

Of course, because banks have suddenly and profoundly changed their tactics, we should probably hold healthy skepticism about the motivation involved. But the situation is clearly not one of imminent doom.

Thanks, good link.

Reported non-borrowed bank reserves have plummeted into negative territory for the first time in the past 47 years and this has prompted a large number of questions from clients (see Chart 1). However, as we pointed out in our morning note, the Fed’s newly introduced Term Auction Facility (TAF) has played havoc with the reported non-borrowed reserves data. Thus, the declines in non-borrowed reserves are not a sign of pending Armageddon for the economy or the banking system. Nor is it a sign that the Fed is undersupplying reserves to the banking system, i.e. actually tightening monetary policy.

Instead, what is simply happening is that some of the reserves that normally would be supplied into the banking system via the Fed’s daily repurchase operations (repos) or through Treasury bill or coupon purchases are instead being supplied to the banking system via the new Term Auction Facility (TAF). The reserves lent out to financial institutions from the Fed through its Term Auction Facility are being classified as borrowed reserves, similar to those funds borrowed from the Fed at its discount window. Repo operations or Treasury bill/coupon purchases show up in non-borrowed reserves. Therefore, total bank reserves outstanding (non-borrowed reserves + borrowed reserves) have not dropped off a cliff and remain around a healthy $42 billion (see chart 2).

Every CMBX index set a new record today.

The CMBX is a CMBS (Commercial Mortgage-Backed Securities) credit default index just like the ABX - except up is down. The rising delinquencies for commercial real estate is impacting the CMBX.


"The question really is where in the world does the inflated housing buck stop? Report after report from credible sources (unlike some lowly blogger) are now openly discussing nationwide price drops of 25 to 30 percent. The mainstream media is now running with this housing crash phenomenon but why are they still painting with the sub-prime brush? This is much larger than sub-prime and until we start hearing, “every home in virtually every area needs to be prepared for depreciation” we know that we still have a long way to go down."


In today’s Debt Rattle over at The Automatic Earth we report that the various groups of banks looking to bail out the bond insurers have -reluctantly- admitted their first major defeat: they no longer try to “buy” AAA ratings for them. AA will have to do.

And that means that first, there’s no new business for the monolines, and second, that huge piles of securities and bonds will enter the market looking for a buyer; many institutional investors are forbidden by law to hold anything but AAA. CDO’s, one of the categories involved, have this week been reported losing 83% in Korea and over 90% (in 1 year!!) in Springfield, MA. Nice prospect.

In the UK, the scope of what’s about to unfold is becoming apparent. 10 million Brits are expected to default on their repayments for mortgages, credit cards or personal loans by the end of the year. At the same time, the government looks to swallow £90 billion of Northern Rock's liabilities, and that’s not all. They want to guarantee every single bank and depositor that might fail. As a commenter says: “they might as well nationalize the entire economy”. Bright minds in the US are floating similar ideas: letting the soon-to-be impoverished taxpayer fork over for the banks’ losses.

"Bright minds in the US are floating similar ideas: letting the soon-to-be impoverished taxpayer fork over for the banks’ losses."

And that's the exact plan.

To imitate the worst of Japan and the UK at the same time.

Everytime the ISM Survey has tanked (2001 and 2003) you know what's happened.

And within weeks.

"When equity bubbles collapse; everybody pays. Demand for goods and services diminishes, unemployment soars, banks fold, and the economy stalls. That's when governments have to step in and provide programs and resources that keep people working and sustain business activity. Otherwise there will be anarchy. Middle class people are ill-suited for life under a freeway overpass. They need a helping hand from government. Big government. Good-bye, Reagan. Hello, F.D.R."
-Mike Whitney

From a systemic standpoint, I would propose that the more they try to ensure that each individual bank won't fail, the more likely it becomes that large segments of the entire banking system will fail.

Suppose that bank failures are like financial blackouts. Banks lend money to each other similar to the way utility interconnects shore-up momentary electrical deficits. Banks and utilities are also drawn on by society for their energy and resource needs.

This article (PDF warning) is about blackouts and cascade failures, how our efforts at making small blackouts less likely in turn make large blackouts more likely.

Our efforts at shoring up individual banks from collapsing may make it more likely that the entire system collapses.

This is also similar to our approach to food. Civilization's totalitarian style of agriculture makes individual hunger far less likely, while increasing the chance of widespread famine during crop failure.

In a Darwinian way, this is to be expected. The variability and resilience of systems is what ensures their survival, and it also means that regularly small segments of the system will fail.

By stripping variability from the system, by making it more efficient and monocultured, when a suitable environmental threat comes along the entire system is vulnerable at once, because the entire system contains the unforeseen fatal flaw.

Another interesting argument for the benefits of localised infrastructure/economy/production...

This article (PDF warning) is about blackouts and cascade failures, how our efforts at making small blackouts less likely in turn make large blackouts more likely.

There is a striking analogy (no pun intended) in the forest fire suppression area in that suppressing all the small fires tends to make the really big fires more likely. Hmmmm... maybe there's a relation to chaos theory or something.

Complexity and chaos theories are siblings. Complexity is in the area between chaos and the steady state (order).

Our level of complexity is maintained by cheap energy, and when the energy is sufficiently depleted, complexity will lose cohesion and turn into chaos.

Following chaos, we may either drop to a lower level of complexity, a simpler way of life, or we may drop to the steady state, extinction.

A possible taxpayer bailout of Fannie and Freddie Mac:

As the subprime crisis has grown, banks have backed away from buying mortgages in the secondary market. This has left Fannie and Freddie, which do the same thing, to pick up the slack.

As a result, the two government sponsored entities (GSEs) saw the housing debt they and the Federal Home Loan Banks carry grow by 16 percent to $6.3 trillion, more than the total public debt of the United States, according to Lockhart.

Some experts worry that if Fannie or Freddie take on too much debt and fail, that the government would have to bail them out using taxpayer money.


Doesn't government bail-out become a little difficult if we are talking about guaranteeing $6.3 trillion in debt? I don't know how much we are talking about, but even a 10% write-down would be $630 billion. It is not like the federal government doesn't have any debt otherwise.

More debt to come.

Higher loan limits will lead to Fannie Mae, Freddie Mac bailout

Now, thanks to Congress, junk bond investors will be able to pawn off their bad debt to Fannie and Freddie, instead of suing the big investment houses for ripping them off. This shift will certainly doom Fannie Mae and Freddie Mac, so don't be surprised if we, the taxpayers, have to bail out poor Fannie and Freddie - to the tune of more than $1 trillion.


A few weeks back there was a posting about large commercial projects for 2008 being on hold.
Lending was one of the issues? If I recall large stores like Lowes, Kohls, Walmart etc were putting there projects on hold for now, this stops growth, new jobs etc.

"The question really is where in the world does the inflated housing buck stop? Report after report from credible sources (unlike some lowly blogger) are now openly discussing nationwide price drops of 25 to 30 percent."

I have been talking to a developer about a commercial retail lots, 2 years ago it was $4.00SF,
today it's $1.75SF he is so hard up for cash, only a few more months before he fails. That clients project has been canceled, for good.

There was another developer who has 24k of commercial space for sale/lease, and 48 condos too, none sold or leased still sitting 24 months now, not even an anchor store to help with the payments. I can not understand why the banks would ever loaned them money, at lease with out some sales contracts in hand before lending out money, it's both parties fault.

Am I completely misreading this or is it the biggest piece of... intentional obfuscation.

In short, they want us to believe that negative bank reserves are not a problem because 1) banks are borrowing from the TAF rather than 2) selling assets like Treasury Bills in order to remain liquid.

Hmmm, so by this logic if I borrow from my credit card for this week's groceries instead of paying by check, I'm actually doing a good thing?

If you all will excuse me, I need to go to the bank and close out my accounts.

Exactly. It all amounts to the fact that the only reserves the banks have is what is currently being borrowed from(or given to them) by the Fed, which is evaporating as fast as they receive it. The world has ceased buying US debt, thus the reason for the financial shenanigans. Actually the world has pretty much stopped buying debt period. Debt as assets only works on the way up. On the way down Debt is liability.

Where can one get a true picture of the amount of capital the banking industry has to support the whole system? The $40 billion in reserves (including borrowed reserves) shown in these reports is trivial compared to the banking system, and even compared to historical write-downs, and expected future write-downs.

In the insurance industry, companies are required to report "statutory surplus." Some of the value of the surplus can be the value of other insurers it owns, so the measure isn't perfect. Also, notes issued by parent corporations can end up as capital, and bonds are usually carried at "amortized cost."

Is there a corresponding measure for banks? Where does one find it?

"There were some interesting developments in a case involving Merrill Lynch last week which sheds a bit of light on the true “market value” of these complex debt-pools called CDOs. The Massachusetts Secretary of State has charged Merrill with “fraud and misrepresentation” for selling them a CDO that was "highly risky and esoteric" and "unsuitable for the City of Springfield.” (Most cities are required by law to only purchase Triple A rated bonds) The city of Springfield bought the CDO less than a year ago for $13.9 million. It is presently valued at $1.2 million---MORE THAN A 90% LOSS IN LESS THAN A YEAR."


Banking Accountancy Rule Changes Take Effect

US accountancy rules changed November 15, affecting the upcoming financial year. "FASB 157" dictates that banks and securities firms can no longer hide their worst assets as Level 3, which allowed them to be kept off balance sheet. Trade in classes of commercial paper theoretically worth more than entire countries will have to be valued using observable inputs for the first time (where possible), rather than mark-to-make-believe.

In addition, as of January, banks can no longer indemnify their auditors for signing off on accounts they cannot verify, leaving the auditors potentially liable over the virtually unquanitfiable exposure of their clients to the derivatives market. Auditors are therefore likely to make every effort to verify valuations where evidence of true value can be found.

A cascading failure of financial institutions is all too possible.


When I looked at the reserve numbers, it seemed that the size of the new auctions was a lot bigger than the size of the reserves. This led me to wonder where the reserves come from. I had always thought that the reserves were deposits with the central bank made by the member banks. However, the Fed seems to be lending more money through the TAF than it had in reserves.

Where is the money coming from? Is the Fed just printing it up? In any case, the TAF loans will need to be paid back to the Fed, with interest, all too soon.

I'm skeptical of Merrill's "nothing to see here...move along" article. I'm not sure that the negative reserves per se is all that scary. It is the TAF itself that is scary to me. Whatever happened to all that stuff about transparency being essential to an efficient economic system? Maybe I'm being too emotional in my reaction, but I really don't like to be told "Don't worry your pretty little head about money, Darling. We'll make sure everything works out. Just go out and shop some more!"

As both an investor and a depositor, I want to know which banks are sound and which aren't. As long as they're withholding information from me, I'm going to assume they're all unsound.

Yeah, I agree that the ML article is misleading. These are borrowed funds that will need to be repayed.

A much higher percentage of collateral is accepted in the TAF than in the the repo operations (if I interpret the numbers correctly).

(over 80% of bank collateral accepted)

(around 10% of bank collateral accepted).

I interpret it as the Fed taking the toxic waste as collateral through TAF, which doesn't inspire much confidence.

What the FED accepts as collateral these days

The premise is this: The Fed loans money to banks, through the discount window, and through its Term Auction Facilities (TAF's). Two weeks ago we reported that banks' non-borrowed reserves had gone negative, and by now some people are starting to wonder what the Fed deems acceptable as collateral for all those loans. The answer looks somewhat surprising.

Free markets are supposed function best with an open flow of information. Restrict information and the behavior of the market starts to deviate in unexpected ways.

Massive amounts of information (about bad financial instruments) is still being withheld by the financial institutions. Is it any wonder that they have all basically stopped lending to one another? This is the crux of Bernanke's problem - inflating the money supply will do no good if there are no lenders to loan it and no borrowers to take it.

A Bloomberg article from today: Financial Funds Get $2.8 Billion of Inflows, Most in Four Years.

"Everyone is afraid to miss the party," said David Ellison, who manages the top-performing $140 million FBR Small Cap Financial Fund in Boston. "They don't want to miss out on the bottom of these stocks."

How could anyone possibly believe financial stocks are at their bottom? There's going to be a party all right, but these investors are going to be the roast suckling pig in the center of the banquet table.

Where can one get a true picture of the amount of capital the banking industry has to support the whole system?

That commodity brokerage video posted here a few days ago mentioned this:

According to the link you posted, the amount of funds in "System Open Market Account" holdings was $709 billion, which is a whole lot better than the $40 billion or so shown on the Federal Reserve Report of Aggregate Reserves.

My understanding is, though, is that the SOMA funds are really not funds of banks; they are the funds of the Federal Reserve Bank of New York, more or less backing up the system. I would think that these are the funds the Federal Reserve uses in conducting "open market operations".

Is it possible that the banks, themselves, don't really have much in the way of capital? That wouldn't seem to make sense, because write-offs would be a huge problem, without much capital.

I think the question remains though - is the reporting anomaly caused by the way TAFs show up in the accounting, or were the TAF a response to a precipitous drop in non-borrowed reserves?

For anyone looking for a new book to read:

"STUPID TO THE LAST DROP: How Alberta is Bringing Environmental Armageddon to Canada (And doesn't seem to care)"

By William Marsden (Oct 2007)

Not a bad read for those that want more than just OIL/PEAK OIL, he also discusses the environmental and human costs to the TAR SANDS and Natural gas projects in Alberta.

Some great info on the first well in Ontario, early plans for Nuclear weapon use in TAR SANDS (eeek), and hydrocracking disasters in Coal Bed Methane (CBM) projects.

Still reading, but thought I would give a heads up.

PS: I really like the title "STUPID TO THE LAST DROP" - we should make bumper stickers!

I'll second that recommendation. Marsden's book is really good - it paints an alarming picture that says 'addicted to oil no matter what the cost' very clearly.

I'm just finishing Stupid to the Last Drop and agree that it is worth the read and has one of the all time great titles. The book highlights the human tragedy caused by greedy corporations and gutless governments. The plight of Alberta farmers and First Nations communities is truly heartbreaking.

In a related post, Heinberg's Proportionality upthread made me think that, while Americans like to crow about how stupid their government is, they hardly have anything on Canadians. The big difference is that the Canadian government is far too weak to start wars.

Thanks for the recommendation, I'll be sure to check that out. As for Heinberg's article, I think he does a great job of summing up the issue in a compact, easy-to-understand matter. While others like Laxer, McQuaig and Barlow have mentioned this before, it's always nice to have another plank to hit people over the head with.

Bumper Stickers? for a slogan of "Stupid to the Last Drop"? That's rich! Too funny!

RE: Ken Deffeyes's article on the 2nd Great Depression:

I would prefer to refer to it as "The Great Decline".

Calling it a 2nd Great Depression would give people the impression that it would last a few years, and then the economy would eventually turn around and resume the growth trend. That isn't going to happen this time. Instead, the decline is going to be inexorable, and at best we might eventually level off to a soft landing at some permanently lower per capita GDP -- if we're lucky.

For what it's worth, I concur.

Coincidentally, the few people that I can talk about PO with have also started to use the word "decline" within the past week. For the first time I'm seriously wondering if people pick up on subconscious "vibes" on some level... or if it's just the negative tones of TV's "money-makers" shows.

I think that a lot of people are coming to the realization that, in many different ways, the USA has had its best years behind it now, and that it is all downhill from here. They see it in the education system, they see it in the offshoring of our manufacturing base, they see it in the pile up of problems upon problems, they see it in the dismal quality of our leadership, and they see it in the increasing disrepute with which the USA is held throughout the world.

"Decline" is indeed an apt word to describe our future.

I'd say we've seen the end of our Fattest Years, not necessarily our best.

as Governor Conan so wisely reminded us in the eighties, with the help of Nietzche(?),
"That which does not kill us, only makes us stronger."

Today is a good day to die. Huah!


Hello Jokuhl,

A LATOC forum menber [I forget the name] signs off with the more reality-based statement:

"That which does not kill us, only enhances the arrival of the inevitable."

I hope I quoted this person's signoff signature correctly. IMO, succinctly sums up Overshoot, MPP-striving, and the rapid growth of cascading blowbacks to whittle us back down to reasonable numbers.

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

Actually this is what I fear most - what will happen if indeed there is a severe economic crisis and all this (real and imaginatory) wealth evaporates? The last time this happened on a grand scale with a previously wealthy country the end result was the emergence of Hitler and Nazism.

If there is a cause worth pursuing it is that history won't repeat itself like that. Therefore I'm at odds about whether (and how) USA should lose its "fat"... let's hope it will be due to voluntary diet and not through the means of starvation.

I do fear it as well.

Sometimes I think we're like two guys trying to move a big piece of furniture. We're on opposite ends of it in some sense, so one of us focuses on pushing and the other on pulling.. opposite actions but ultimately towards the same goal.

Whether it's the Voluntary Diet or Starvation.. well, both are already with us, and both will grow if energy falls as predicted by PO. Most of my hope comes from the vast diversity of regions we inhabit, the number of tools we have learned to use, and the number of books we have planted everywhere people are. People are courageous, once they've been awakened, and they are passionate, and are not simply 'devotees of cash' or rewards, and they are able to learn. Even in the worst possible scenarios, there will be heroes, survivors and successes across the globe. I don't know that it will be a Faustian nightmare.. but there will be some of that. There already is. Machete's and Clusterbombs are in a frenzy as we speak, along with several forms of economic genocide. Is that peak oil? The Attorney General of the US declared today that he would not enforce the testimony of Harriet Myers and others before congress, nor validate any 'contempt' charges stemming from their absence. As unfashionable as it is to suggest it, are you sure that we aren't already well into that Fascist State that you would so like to prevent?

Will history be asking why no Von Stauffenbergs had shown up even by now, to challenge this regime after such a string of blatant violations?

Are we there yet?


Let's not ring the bell earlier than necessary. We still have our freedoms (almost) untouched. The establishment is not capable of doing whatever they want to maintain its power and wealth, at least not in the direct Orwellian way. If there is a fascist state on the books it has a long way to go.

This does not mean that a possible failure of democracy won't lead to it, much like the failure of Wiemar Germany lead to Nazi Germany.

"the USA has had its best years behind it now, and that it is all downhill from here."

Certainly true if what you mean is that the nation-state is probably on it's way out.

But if what you are referring to is the broader notion of the nation - as in the people and its culture - then I think it is a matter of perception. If you believe that the worship of consumption, profligate misuse of resources, disconnection from the natural world, hyper-atrophied social relations where TV characters and celebrities replace or neighbors and family are the pinnacle of the good life, than yeah, its probably all down hill.

Think of how wonderful it will be to get everyone around the campfire again to sing Kumbaya.

how bout the 'the perpetual [2nd] great depression'. decline seems too mild a term.

The Great Freefall.

The Perpetual Decline.

The End.


Oh, I don't know. I think the curious and thrifty people who can quickly learn and be satisfied with simple things have a good (or at least better) chance of making it through. I hope someone remembers to save a few good books to keep the next generation entertained (and educated).

I can't believe I'm writing such gloomy stuff.

The Great Global Off Ramp

That isn't going to happen this time.

It's different this time right? where have I heard that before?

Eventually everything turns different.... One day the Romans woke up and - after hundreds of years of reliable water delivery service - the aqueducts were dry.

And some people were probably caught totally by surprise, but then again, some people are just plain idiots.

"Past performance is no guarantee of future results" is in the fine print of every prospectus. Yet all the financial talking heads go on and on giving advice on the assumption that past performance IS a guarantee of future results.

This time IS different, because we are in the midst of a paradigm shift: from a world of ever-increasing energy supplies to a world of ever-more-constrained energy supplies. That WILL make a difference, and it is sheer folly to proceed on the assumption that it makes no difference at all.

Look at how long our land shortage lasted.

Because EVERY topic EVER discussed on TOD's Drumbeat is important:
Destiny of Destinyland fame joins us and we talk about all the groovy kids cartoons that had hippie-ish themes back in the ’60s/’70s.

1. "U.S. Financial Condition and Fiscal Future Briefing," by David M. Walker, comptroller general of the United States, at the University of Akron, Akron, Ohio.

2. "Saving Our Future Requires Tough Choices Today," by David M. Walker,

Regarding the US Financial Condition and Fiscal Future Briefing by David Walker, these are a few excerpts:

"The federal government is on a “burning platform,” and the status quo way of doing business is unacceptable for a variety of reasons, . . ."

Current Fiscal Policy Is Unsustainable

Fiscal burden per household: $455,000
Median Household Income: $48,201

Four National Deficits
•Balance of Payments

The report also gives ways to try to fix the mess.

OPEC says $80 oil too high and unsustainable 9/14/07

ready to defend $80 oil any less insufficient 2/8/08

OPEC stands ready to freeze or cut output if necessary to defend $80.

First they worried about the high price sending the US (and the world) into recession now they'll limp us along on the raged edge of the abyss just to extract the max benefit. Aside the element of OPEC wanting to seem in control and not having much on the up side this rolls things around nicely to a position where they do have some control. The ability to CUT output (or at least posture that they are cutting) based on retreating price from an underperforming world economy. An economy which is performing poorly in large part due to high oil prices.

Reminds me of a fanciful deer hunting tale from these parts. A hunter wounds a deer It doesn't go down but goes into a stupor. The hunter lassoes the hapess creature and leads it closer to the truck before delivering the cou de gras.

I don't think the "deer"{oil consumers} in this tale will wait for the coup...Tac-nukes and occupation is more likely...

The collective expectation now seems to be that there is an economic recovery out there in a year or so. Problem being every stimulus is now met with scarcity and energy price increase. Not to mention food.
Once the recovery is seen repeatedly as bankrupt then yeah the 'bad drunks' stage of the party...
Oh yeah and in one iteration of the tale the deer does come out of it and stomp the crap out of the hunter.

OECD in it's current modus operandi is held by the proverbial short and curlies and they know it. We are at OPEC's mercy as long as we consume vast quntities of oil. I don't think you are going to see mass protests of poeple boycotting oil use!

If I was OPEC I would reduce o/p by around 5% (say around 2mbpd) and watch us crack oil junkies clamber for the oil. You can bet your bottom dollar the price would go up by more than 5%. Ahhh but what about demand destruction you say? recession? 6.6Bn mouths to feed and adding 110,000 mouths each day. enough said!. Dome demand destruction that will cause!


I don't think you are going to see mass protests of poeple boycotting oil use!

Gawd no. People here in the US protest by 'barreling' down the road even faster and terrorising Prius drivers.

And to your point wheat is up limit again today with speculation as to the deree of civil unrest possible if droves of Chinese consumers go short of food. (Or what happens when Dominoes are 30 bucks a pop)

Answers own question. Collapse of the service and discrectionary spending areas of the economy wih emphasis shift to the essential. Not really there yet but negotiations are imminent.

Wheat is up because the US will run out at the current rate of export.

Watch Bush. Days from now some kind of grain embargo/duty is


By next wheat harvest in August watch for words
like "speculators/hoarders keeping wheat off the market.

One of the two.

Wow. We'll be watching. New oil for food program?

New oil for food program?

AAMOF, you're there.

What the Great Grain Robbery in 1972 was all about.

In Texas, wheat production is forecast at the lowest since 1971, and acres harvested for grain are the lowest since 1925.

You can find that all over google.

And yet, China/Russia wheat imports exploded in 1972/73. Coinkydink with Nixon's "breakthru"

We sold everything we had. When we could've cut their nuts off.

Get ready.

Wheat up limit every day this week. As Rick Santelli just said on the Squawk. Inflation isn't really a problem as long as you don't wanna eat, don't wanna drive and don't do much shopping.

Why is Texan wheat production low? I thought bad harvests were caused by draught, but according to the NCDC site Texas was wet this year. What gives?

Bad harvests are caused by too much rain too. Farming's a bitch!

Pending US wheat shortage due to exports

Wheat prices soared near their highest levels ever Tuesday on concerns that growing demand in Asia coupled with dwindling stockpiles could lead to a grain shortage in the United States.

U.S. wheat stockpiles have thinned as bad weather has battered crop after crop around the world, most recently in Argentina and India. The scarcity has fed seemingly relentless demand for wheat supplies, often at any cost. U.S. wheat exporters have sold more than 15 million bushels a week for seven of the last 11 weeks, well above the U.S. Department of Agriculture's weekly target of about 1 million bushels a week.

"We continue to export wheat at too fast a pace," said Jason Ward, analyst with Northstar Commodity in Minneapolis. "You've got enough forward contracts overseas so the fear is that what you've got sold thus far is possibly more than you've got planted."


During the famine years there was plenty of food in Ireland enough to feed double its population. Yes the potato failed but all other crops thrived. Under the system at the time Irish food was exported mainly to English markets but from they're found its way to many parts of the world. It puzzled many to hear there was famine in a land that had so much food to export. In normal countries it was usual to export food only after its population was fed. This was not the case in Ireland; during the period her food was taken away against the wishes of her people, usually at gunpoint and escorted to the ports under military guard. It was then carried away on ships leaving misery and starvation behind.


OPEC has seen the west devalue its currencies. OPEC has been importing inflation from the devaluation of western currencies. Could be the message OPEC is sending with an $80 crude floor is simply 'stabilize your currencies'.

Legions of people have used the Tulipomania analogy from "Extraordinary Delusions and the Madness of Crowds," by Charles Mackay, but it is a classic. Consider the similarity between McMansions and Tulips. Tulips are purely ornamental. Beyond the basic square footage one needs for living, excess housing space is basically ornamental, serving no truly useful purpose, but consuming vast amounts of energy needed to drive to and from and heat and cool suburban McMansions.

From Tulipomania:

At last, however, the more prudent began to see that the folly could not last forever. Rich people no longer bought the flowers to keep them in their gardens but to sell them again at per cent profit. It was seen that somebody must lose fearfully in the end. As this conviction spread, prices fell, and never rose again. Confidence was destroyed, and a universal panic seized upon the dealers.

“A” had agreed to purchase ten Semper Augustines From “B,” at four thousand florins each, at six weeks after signing of the contract. “B” was ready with the flowers at the appointed time; but the price had fallen to three or four hundred florins each, at six weeks after signing the contract, and “A” refused either to pay the difference or receive the tulips. Defaulters were announced day after day in all the towns of Holland.

Hundreds who, a few months previously had begun to doubt that there was such a thing as poverty in the land, suddenly found themselves the possessors of a few bulbs, which nobody would buy, even though they offered them at one quarter of the sums they had paid for them. The cry of distress resounded every where, and each man accused his neighbour. The few who had contrived to enrich themselves hid their wealth from the knowledge of the fellow-citizens, and invested in the English or other funds. Many who, for a brief season, had emerged from the humbler walks of life, were cast back into their original obscurity. Substantial merchants were reduced almost to beggary, and many a representative of a noble line saw the fortunes of his house ruined beyond redemption.

Why limit the application to McMansions? It could just as easily apply to cars, or stock portfolios.

As I have noted before, it is amazing how accurate End of Suburbia: Oil Depletion & the Collapse of the American Dream (EOS) has been.

If one had simply used EOS as an investment guide, one would have made a killing. The implications were obvious: go long food & energy and go short auto, housing & finance. It would be interesting to construct a model portfolio, with and without leverage, from 1/1/05 to 1/1/08 based on these assumptions and see how it would have performed.

Accurate, indeed. Very scary when it first came out -- but now we see the wisdom and the lucky ones have been adapting, based on that script.

In the short run, one might have made a killing on the hypothetical portfolio Westexas suggests. In the long run, though, short or long, all are doomed. "Freakin' doomed."

Some will survive and prosper, of course -- Europe blossomed after the Black Death burned itself out. That history, as well as EOS script, suggest that neither real property nor gold nor grain futures are the way to survival. The best chance is to create local, supportive communities.

The best chance is to create local, supportive communities.


suggest that neither real property nor gold nor grain futures are the way to survival.

But all of them will help your odds. A spot 'o metal may be the trade item that clinches the deal. Grain in the bucket waiting to mill could mean the difference between starvation/death and not. Land means a place to harvest solar energy...and a place to keep shelter.

The comparison is very apt.

What is Deflation and What Causes it to Occur?

Financial Values Can Disappear

People seem to take for granted that financial values can be created endlessly seemingly out of nowhere and pile up to the moon. Turn the direction around and mention that financial values can disappear into nowhere, and they insist that it is not possible. "The money has to go somewhere...It just moves from stocks to bonds to money funds...It never goes away...For every buyer, there is a seller, so the money just changes hands." That is true of the money, just as it was all the way up, but it's not true of the values, which changed all the way up.

Asset prices rise not because of "buying" per se, because indeed for every buyer, there is a seller. They rise because those transacting agree that their prices should be higher. All that everyone else - including those who own some of that asset and those who do not - need do is nothing. Conversely, for prices of assets to fall, it takes only one seller and one buyer who agree that the former value of an asset was too high. If no other bids are competing with that buyer's, then the value of the asset falls, and it falls for everyone who owns it. If a million other people own it, then their net worth goes down even though they did nothing. Two investors made it happen by transacting, and the rest of the investors made it happen by choosing not to disagree with their price. Financial values can disappear through a decrease in prices for any type of investment asset, including bonds, stocks and land....

.... A similar dynamic holds in the creation and destruction of credit. Let's suppose that a lender starts with a million dollars and the borrower starts with zero. Upon extending the loan, the borrower possesses the million dollars, yet the lender feels that he still owns the million dollars that he lent out. If anyone asks the lender what he is worth, he says, "a million dollars," and shows the note to prove it. Because of this conviction, there is, in the minds of the debtor and the creditor combined, two million dollars worth of value where before there was only one. When the lender calls in the debt and the borrower pays it, he gets back his million dollars. If the borrower can't pay it, the value of the note goes to zero. Either way, the extra value disappears. If the original lender sold his note for cash, then someone else down the line loses. In an actively traded bond market, the result of a sudden default is like a game of "hot potato": whoever holds it last loses. When the volume of credit is large, investors can perceive vast sums of money and value where in fact there are only repayment contracts, which are financial assets dependent upon consensus valuation and the ability of debtors to pay. IOUs can be issued indefinitely, but they have value only as long as their debtors can live up to them and only to the extent that people believe that they will.

The dynamics of value expansion and contraction explain why a bear market can bankrupt millions of people. At the peak of a credit expansion or a bull market, assets have been valued upward, and all participants are wealthy - both the people who sold the assets and the people who hold the assets. The latter group is far larger than the former, because the total supply of money has been relatively stable while the total value of financial assets has ballooned. When the market turns down, the dynamic goes into reverse. Only a very few owners of a collapsing financial asset trade it for money at 90 percent of peak value. Some others may get out at 80 percent, 50 percent or 30 percent of peak value. In each case, sellers are simply transforming the remaining future value losses to someone else. In a bear market, the vast, vast majority does nothing and gets stuck holding assets with low or non-existent valuations. The "million dollars" that a wealthy investor might have thought he had in his bond portfolio or at a stock's peak value can quite rapidly become $50,000 or $5000 or $50. The rest of it just disappears. You see, he never really had a million dollars; all he had was IOUs or stock certificates. The idea that it had a certain financial value was in his head and the heads of others who agreed. When the point of agreement changed, so did the value. Poof! Gone in a flash of aggregated neurons. This is exactly what happens to most investment assets in a period of deflation.

For on-going coverage of our modern Tulipmania see The Automatic Earth.

I'm certain that the very long term trend must be deflationary, because that is what happens to economies in long term decline. However, given the tools to create a hyperinflation in the hands of TPTB (particularly "Helicopter Ben"), and the stated willingness to use those tools, I still think that hyperinflation is the better short term bet.

Note that one basic mistake is being made by a lot of people: they assume that all prices of everything must move in lockstep. Nothing could be further from the truth. It is quite possible to have the prices of some (not all) things (like housing, for example) going down in the midst of a general inflation. It is also quite possible to have the prices of some (not all) things (like energy, for example) going up in the midst of a general deflation. I think that the failure of a lot of people to understand this fact has a lot to do with a lot of the confusion we have been seeing.

I thought this was the best part:

What is Deflation and What Causes it to Occur?

In reading a history of major depressions in the U.S. from 1830 on, I was impressed with the following:

(a) All were set off by a deflation of excess credit. This was the one factor in common.

(b) Sometimes the excess-of-credit situation seemed to last years before the bubble broke.

(c) Some outside event, such as a major failure, brought the thing to a head, but the signs were visible many months, and in some cases years, in advance.

(d) None was ever quite like the last, so that the public was always fooled thereby.

(e) Some panics occurred under great government surpluses of revenue (1837, for instance) and some under great government deficits.

(f) Credit is credit, whether non-self-liquidating or self-liquidating.

(g) Deflation of non-self-liquidating credit usually produces the greater slumps.

Self-liquidating credit is a loan that is paid back, with interest, in a moderately short time from production. Production facilitated by the loan - for business start-up or expansion, for example - generates the financial return that makes repayment possible. The full transaction adds value to the economy.

Non-self-liquidating credit is a loan that is not tied to production and tends to stay in the system. When financial institutions lend for consumer purchases such as cars, boats or homes, or for speculations such as the purchase of stock certificates, no production effort is tied to the loan. Interest payments on such loans stress some other source of income. Contrary to nearly ubiquitous belief, such lending is almost always counter-productive; it adds costs to the economy, not value. If someone needs a cheap car to get to work, then a loan to buy it adds value to the economy; if someone wants a new SUV to consume, then a loan to buy it does not add value to the economy. Advocates claim that such loans "stimulate production," but they ignore the cost of the required debt service, which burdens production. They also ignore the subtle deterioration in the quality of spending choices due to the shift of buying power from people who have demonstrated a superior ability to invest or produce (creditors) to those who have demonstrated primarily a superior ability to consume (debtors).

Near the end of a major expansion, few creditors expect default, which is why they lend freely to weak borrowers. Few borrowers expect their fortunes to change, which is why they borrow freely. Deflation involves a substantial amount of involuntary debt liquidation because almost no one expects deflation before it starts.

The dynamics of value expansion and contraction explain why a bear market can bankrupt millions of people. At the peak of a credit expansion or a bull market, assets have been valued upward, and all participants are wealthy - both the people who sold the assets and the people who hold the assets. The latter group is far larger than the former, because the total supply of money has been relatively stable while the total value of financial assets has ballooned. When the market turns down, the dynamic goes into reverse. Only a very few owners of a collapsing financial asset trade it for money at 90 percent of peak value. Some others may get out at 80 percent, 50 percent or 30 percent of peak value. In each case, sellers are simply transforming the remaining future value losses to someone else. In a bear market, the vast, vast majority does nothing and gets stuck holding assets with low or non-existent valuations. The "million dollars" that a wealthy investor might have thought he had in his bond portfolio or at a stock's peak value can quite rapidly become $50,000 or $5000 or $50. The rest of it just disappears. You see, he never really had a million dollars; all he had was IOUs or stock certificates. The idea that it had a certain financial value was in his head and the heads of others who agreed. When the point of agreement changed, so did the value. Poof! Gone in a flash of aggregated neurons. This is exactly what happens to most investment assets in a period of deflation.

"...few creditors expect default, which is why they lend freely to weak borrowers."

How about creditors run out of borrowers and so have to move down
the economic ladder to weak borrowers.

When borrowers stop borrowing is when the collapse happens.

Let's suppose that a lender starts with a million dollars and the borrower starts with zero. Upon extending the loan, the borrower possesses the million dollars, yet the lender feels that he still owns the million dollars that he lent out. If anyone asks the lender what he is worth, he says, "a million dollars," and shows the note to prove it. Because of this conviction, there is, in the minds of the debtor and the creditor combined, two million dollars worth of value where before there was only one.

The perception of 2 million is only possible if dishonest bookkeeping is involved. The debtor still would have zero net assets on a balance sheet that listed both the 1 million cash asset and the 1 million in debt payable. Of course, the 'Enron Era' taught us that these numbers can be manipulated in numerous ways and the true liabilities disguised.

Actually, with fractional banking, the loan is considered an asset and can be loaned again. Trust me banking is fantasyland when it comes to accounting.

the money can dissapear, no doubt. what about minerals ? they dont dissapear. if you own stocks in a mineral producer, you indirectly own some of the minerals, dont you ?

if you own stocks in a mineral producer, you indirectly own some of the minerals, dont you ?

Short answer: "No".

For example: http://en.wikipedia.org/wiki/Bre-X

Miners are running into relatively high inflation, and some minerals have been dropping in price lately, so owning a stock of a mineral producer is not really a guarantee of very much. In a weak market P/E ratios tend to contract as well. Junior miners need financing, while majors are facing reserve shortfalls. There can definitely be profit in mine investment, but I wouldn't put too many eggs in that basket.

Natural gas may boom by default

Roadblocks to building new coal and nuclear plants in the United States have some industry observers expecting a natural gas boom that could contribute to higher energy prices in Ontario over the coming decade.

Dozens of proposals for new coal and nuclear plants from U.S. utilities have been shelved or cancelled because of rocketing construction costs, financing risk, regulatory uncertainty and community resistance:

San Francisco-based Coal Moratorium Now reported last month that 59 coal plant proposals in the United States were derailed in 2007.

Nuclear power projects are also losing steam.

I have been watching the DVDs from the October ASPO Conference and they provide a wealth of information (and very nicely produced I might add). I would like to include some of the stats in my classes. I seem to recall that someone posted a link to PowerPoint Presentations from the conference. Are these still available?

Hi Klee, this is the link you want, http://www.aspousa.org/proceedings/houston/presentations/ This page http://www.aspo-usa.com/index.php?option=com_content&task=blogsection&id... has links to all 3 conferences and their presentations.

Thanks Karlof- a treasure trove of information!

klee, you may find my notes from the conference a useful guide to the tons of material that were presented.
Chris Nelder's Notes from ASPO-USA Houston Conference 2007

More shoppers head to discount stores

Amy Erickson of Bensalem, Pa., lives within a mile of a Macy's, a Target and an outlet mall, but these days spends most of her shopping time at Wal-Mart. She'll still rifle through sale racks at the outlet stores. And her husband jokes that they should have named their 1-year-old son Clearance. But since her family's adjustable-rate mortgage reset in October, jacking up their monthly payment by more than 35%, they value the savings on food, formula and diapers at Wal-Mart more than ever.

"It's just so much less expensive," she says.

That shift, suggests Marcy Syms, CEO of off-price retailer Syms, is "something we'll see more of, and it's consistent with past harbingers of recession. It takes a lot for people to change buying patterns. It usually has to be something they feel significantly in their home budgets."

It appears that Wal-Mart has a total lock on poverty. Not only do they cause it and foster it, they turn around and supply it. They have obviated the need for any other producer or supplier! And even better, they make people feel good about shopping there. Talk about a successful business model!

It does appear to me, however, that the model they use depends on relatively cheap energy -- how else could they hedge the cost of labor and the ability of consumers to pay over the entire world?

My question is, and it's hard to frame it-- is this model "sustainable?" Can they ride the oil supply right down to the bottom, and still keep themselves on top? Will the Newest World Order consist of relatively littler Wal-Mart islands as the cost of fuel becomes higher than the cost of local production? Will the Pax Wal-Marticus splinter into Wal-Mart Spain, Wal-Mart Britain, Wal-Mart China, etc.?

NeverLNG: My question is, and it's hard to frame it-- is this model "sustainable?" Can they ride the oil supply right down to the bottom, and still keep themselves on top?

First, amazing observation on Wal-Mart having a lock on poverty. I never thought of it that way. They could only add a pawn-shop section of the store to pawn old Chinese goods to obtain food or new Chinese goods. And maybe a paycheck advance service.

My guess: yes, Wal-Mart survives all the way in some form.

If Wal-Mart is an edge-fed mesh distribution network then it seems to me that their sensitivity to the price of energy is an order of magnitude less than the airlines. Mesh networks can be made robust in the event of localized failures (i.e., regional diesel shortages). Airlines would suffer greatly in that event (cascading isochronous delays).

For example, most dry goods don't mind going via Oklahoma vs. Sioux City, but many people do.

But saying you're better off than an airline in an oil crunch may not be saying much.

By forcing labor costs to a global minimum (pun intended) through wage arbitrage, and by shifting inventory/supply risk to their suppliers Wal-Mart seems to have become an IT, HR and shipping enterprise.

IMO their biggest risk in an extended downturn (after widespread fuel shortages) would be excess store square footage as the economy starts shrinking in earnest. It wouldn't be inventory (none), responsibility to employees (none), labor contracts (none).

The excess square footage is simply turned into dormitory space for the employees. They will also supply the food and clothing for their employees, and will be able to progressively turn down the thermostat as heating oil becomes more expensive.

Pretty soon, everyone eats, breathes, lives Wal-Mart.

I see it as the ultimate life raft for the Petroleum Order.

Interesting idea. The company would provide everything...all the basic needs...it would be our parents taking care of us. American mutation into a type of Soveit communism. Dmitry Orlov would love this kind of thing.

You load sixteen tons
And what do you get?
Another day older and deeper in debt
St. Peter don't you call me!
I can't go!
I owe my soul to the company store.

Very funny, but you know, I can actually see this happening.

wal-mart should grow food in their unused portions of their store!

wal-mart should grow food in their unused portions of their store!

Perhaps they can use LEDs! Oh wait. Somehow the plants have to get a level of photons at a level as great or greater than the Sun puts out.

I'll let *YOU* go run the numbers on that lumen levels and you can tell us all about how great your idea is.

They can set up a bunch of exercise bikes, attach generators to them, call it the "employee exercise facility", and "encourage" all their employees to work out on the bikes any spare moment they are not working or sleeping. It is all for their health, you know.

Even the plantation slaves got to knock off at sunset.

That's not far off from the scenario in the South Park episode about Wal-Mart--worth a watch if you haven't seen it.
Something Wall-Mart This Way Comes

would be excess store square footage

They allow RVs to stay in the parking lot - why not employees in-store 'camping'?

Less cheeky
Perhaps a way for 'local' vendors to place their wares on the shelf ala market bazaar. Localized barcodes, no returns to store (only to the manufactor), Mal-Wart gets a cut....even part of the parking lot makes 'em a 'destination'.

What an interesting 'future of Walmart' idea!

Walmart as bazaar! I love it!


Understand that Wal
Mart owns almost nothing in the store.

Except it's name brand.

The only time WalMart deals with anything else is at the cash (credit)

And the vendors have to buy space on the shelf.

But first, Wal-Amert must get the goods from China. At some point in this global recession China must get off the export strategy and start to build up internal demand, which requires higher spending by Chinese consumers. The trick is knowing when to switch strategies, and understanding that better consumers requires higher wages, not debt gimmicks. At that point Chinese wages go too high for Wal-Mart's model. No one has ever explained to me where our corporations could go for enough cheap labor after China.

Umm... the US?

With the housing and dollar crisis we may have not seen the end yet of American manufacturing. we do have record exports right now. I know some of that is waste paper and scrap metal, but not all.

For the most part American manufacturing has already ended, except for military hardware. The assumption that if wages drop then suddenly it will just pop back is quite naive. Even if tomorrow the conditions were right for a resurgence in US manufacturing, it would take some time for it to be re-created. Also, the idea that it is only worker wages that caused the jobs to be outsourced is a great oversimplification.

It is already gone.

The only thing that would drive manufacturing back to the US would be if (when) transport costs rise so high that they would offset the differential in prevailing wages between the US and China or other developing countries. The thing is, though, if transport costs are that high, we're not going to be able to manufacture for export, and it is even going to be expensive to move goods around within the domestic market. Thus, the economies of scale are going to shift in favor of much smaller manufacturing facilities than what was typical prior to the globalization era. It will never go back to being exactly as it was.

I wouldn't hold my breath. Oil has gone from $10 to $100 with no discernable affect on Chinese manufacturing imports to the USA. I agree that by the time it is an issue it will be overshadowed by other problems (like the difficulty of moving goods around the USA).

Reports of the death of American manufacturing have been much exagerated. It still accounts for 20% of US gnp and 20% of world manufacturing, which is the same proportion of World GNP the US has.

No one has ever explained to me where our corporations could go for enough cheap labor after China.

lots of people are still poor in china and haven't moved to factories and towns yet. after China it's probably India, Vietnam(the whole of SE Asia probably) and then Africa.

Consider also where Walmart stores are located. Are they close enough to large enough aggregations of people to continue to do business when driving habits have changed so that a 10 mile trip is a once a month event?

"when driving habits have changed so that a 10 mile trip is a once a month event?"

that's a bit of a stretch, that's not much oil to go 10 miles. people can stop on their way home from work. if your scenario is true, is there a better destination for one trip than wal-mart? maybe a mall?!

I make a 10 mile trip less than once a month. But then I have a WalMart 7 blocks away (useful for some stuff, bought some $5 fleece tops & bottoms for a group of street musicians & artists rooming together with minimal funds, also cheapest laundry detergent, my $200 LCD HDTV, etc.)

I will give WalMart one kudo. Post-Katrina they were the ONLY one that could keep rat poison in stock. Forklift load right by the front door, never out for over 24 hours.

Animal Rights rescuers removed all of the cats, unlimited food supply for months (same animal rights people left out rat feeding stations as well as tons of garbage, etc.).

When you need rat poison, you NEED it !


When motor fuels begin to be rationed (which I view as being a few years off yet, but eventually inevitable), then a 10 mile trip will be a big deal. Assuming you are one of the many unfortunates stuck with a 20 mpg car, that means you burn up 1/2 gallon. If you only get a ration of 5 gallons per week, that is a lot, especially if you have other places you also need to go - like to work. If a Sprawl-Mart is on the way home, you bet they'll probably swing by. If it is 10 miles out of their way, you can bet that they won't get there very often - if ever.

I doubt that the Sprawl-Mart exists that is on or near the commuting route of more than a small fraction of their total target population.

I read gas rationing a lot and most appear to expect it to be the panacea.
When enforced, I see it as the start of a fast collapse, it will be the warning to beef up your security and stock your store.

Rationing IMO will probably herald black markets and lawlessness on a scale we deeply fear.
I really think it will be a very last resort and probably only implemented to curtail hoarding, when shortages become common place.

WalMart .. Do what I do .. use Walmart.com

Triff ..

wal-mart causes poverty? talk to the chinese about that one and they'll give you a much different story.

btw- wal-mart keeps on truckin.


is this model "sustainable?"

Given that the very core of their model is built around an assumption of very cheap transport, I'd say that the long-term answer is "no". As energy becomes more scarce and expensive, the cost of transport will have to go up a lot. Eventually, goods produced and sold locally will gain a competitive advantage over goods transported from a distance. Then the entire Sprawl-Mart success story will unwind.

I would also point out that while it is possible for poor folks to find a lot of true necessities for sale at Sprawl-Mart at very low prices, one cannot stroll through through their aisles without concluding that the vast majority of items being sold there are not by any stretch of the imagination "necessities", but rather "discretionary purchases". As household budgets shrink, it is the discretionary purchases that will have to take the cuts. Even in their Sam's clubs, in spite of the much more limited selection, I would still say that the majority of items represent discretionary purchases rather than necessities. Thus, they are inevitably going to be forced to cut back substantially on the number of different items that they carry.

As that happens, and people find that there are only a small sub-set of what used to be available still being sold, the thought might occur to them that by forming a neighborhood buying club or co-op, they might be able to secure very competitive pricing, plus spare all of their households the individual trips to the Sprawl-Mart. This will truly be the beginning of the end for the Bentonville monster.

i think the wal mart model is also built on large volume (quantity over quality). what will they do when their sales drop by 1/2 ? is it feasible to barracade 1/2 of the store ? their stores dont appear to be very energy efficient either. i rarely go there.

one thing i notice about wal mart's parking lot is that there seems to be a scramble for the close parking spaces. i see minivans circling like buzzards waiting for a fresh carcase.

i went to sam's club a few weeks ago, the thing i noticed was the lighting, it made the shoppers appear as zombies, wandering around trying to decide between a case of froot loops or capt'n crunch.

the lighting, it made the shoppers appear as zombies

"We use both wavelengths; green and blue!"

Actually, if they're eating fruit loops or Cap'n Crunch they may well be zombies.

Seriously I think the stores are horrendously efficient, from the volume/surface area ratio gains of a large building to the absurd lighting and the employees per square foot.

Imagine what all those extra wavelengths must cost to emit. Oh, and health care for the missing full-time employees.

wal-mart just might survive after all!



Thermodynamics of Quality and Society

See point 7. Influence of Quality at the level of "Facts" : An adherent Desicison Making Tool page 10 figure 4 for a good chart of how to model decisions for maximum benefit.

8. Conclusions

The introduction of the physical quantity Emergy (Odum 1984) based on a new concept of Quality, the associated enunciation of the Maximum Em-Power Principle (Odum, 1990s) and its subsequent formulation in adherent mathematical terms represents the general reference and the appropriate linguistic-mathematical tools for a renewed description of the surrounding World. In particular, they are able to lead to a new way of thinking, speaking and acting in order to maximize the level of Ordinality (i.e. harmony) among Human Societies and, in addition, between Man and The Environment. As Prof. Odum showed by adopting his ostensive method, it is not strictly "obligatory" to follow such indications. It is only a question of ..... enticement, fascination, charm.

Maybe Khebab understands this paper completely but it seems very important and could certainly provide a basis for agreement for all sides, avoiding heretofore loaded concepts such as exponential growth vs. sustainability and left/right, reversalism, etc. We have here thermodynamics refined by the concept of Quality and applied to real world concepts of economics, among others. Is this related to or the source of ecolgical economics or is it a parallel coincidental development which simply confirms the more intuitive approach?

Excellent Powerpoint presentations below, easy to understand on energy, environment. PPT viewer free as download in net if you do not have the program.


I am way out of my depths here of course on that mathematical paper on Quality and I suspect emergy and exergy,etc. have ben discusssed enough here but it seems they hadtheir annual emergy conference and for me it is reltively new. Theyhave links at emergy.com to ecological economics so there is a connection there.

UN supports India's position on climate change

De Boer favoured developing countries including India's stand on the fight against climate change and said they cannot be forced to compromise to set emission targets at the cost of their development.

Richard Heinburg poses some interesting observations in "Proportionality", Energy Bulletin, above:

So Canada’s energy security and global climate security are both held hostage by a provision within a trade agreement—a provision that is unique in all of the world’s treaties. Canada has every reason to repudiate the proportionality clause, and to do so unilaterally and immediately.

...snip... Of course, the current Canadian government will not do so. Nor will the main opposition party. Both are securely bound to do the will of their puppeteers in Washington. But what about the NDP, Canada’s other main (center-left) party? .../snip...

... snip... Party leaders might be wary of the US response, but the latter would be fascinating to see. Of course the US would threaten all sorts of trade punishments. ... The unfairness of the proportionality clause would be apparent to everyone and the idiocy of US energy and climate policy would also be plain—not just to Canadians, but to the rest of the world and (crucially) to US citizens as well. .../snip...

With so much at stake, and with current policy leading inevitably toward crisis, isn’t it time for a bold move such as this?

An election in Canada is likely this spring as the Conservatives under Stephen Harper are eager to get from under their current minority position before the economy, the War in Afghanistan, or any other bad news arises.

Should the U.S. election cycle raise further the specter of NAFTA, the treaty will come under wider review. It would be interesting to see how the proportionality clause would play out on the Canadian landscape. CBC radio a couple of days ago ran a feature about Canada's uniqueness on not having an Oil/Energy reserve. Watch north of the American border. Canadians may not appreciate being so blatantly and generously unique, particularly at their own expense, and if polls are any indication, the next Parliament will be a minority.

Old maxim in history: “Countries don’t have morals. They have interests.”

Peak Oil in the Huffington Post

I just noticed that the Huffington Post has a story in their living section: "Sheryl Crow Sings About Peak Oil..."

Crow’s song sends the message that we’ve built our whole way of life on a shaky foundation that’s bound to crack when we run out of gas. Towards the end of “Gasoline,” she sings: I’ve got a message and a megaphone, and I’ll scream it to the death…”

Huffington Post

Oh, and when you click the "To continue reading, click here!" link, it takes you to the original article in takepart, which links the The Oil Drum!

Best Wishes for finding a funny tag line.

I posted a link to the entire lyrics awhile back. There was also an interview with the NY Times.

Perhaps the reporter misunderstood, or I did, but it sounded to me like she was more angry about high gas prices than worried about peak oil.

Yergin *gasp* says something intelligent:

Yergin said the world needs to invest $22 trillion - roughly 50% more than the entire annual economic output of the U.S. - in energy alone over the next 25 years to meet its growing needs.

I hope this helps people start thinking more in terms of the totality of the issues we face: oil depletion, climate change, economic collapse/recession and the geopolitical instability caused by the current administration, etc.

If he's anywhere near right, what does that say about our ability to address these challenges? How much more for climate change? To pay for more military spending to manage the oil access/people, etc? And if we go into deep recession/depression, where does the money come from?

A perfect storm cometh, indeed.

He could also be setting up his post-Peak Oil defense, i.e., we didn't invest enough money.

It was always implied in their wildly optimistic projections - even it there were 2-3 trillion bbl still in the ground, there is no way that the world could possibly have produced that much oil (especially since all the low hanging fruit was long gone) without requiring unprecedented massive financial investments. This is kind of a "Catch 22" type of thing: "Sure, don't worry, the world can produce all the world you need. . . oh, but by the way (now that I've lulled you into complacency over the past few years), it IS going to require a lot more money than you possibly have to spend."

The rising cost of production is just a reflection of the declining EROEI. More energy will be required, in it's various forms, to obtain some amount of oil which was previously easy to acquire. Corn ethanol, with an EROEI of about 1.3, is the poster child for the problem. If all our energy were supplied by corn ethanol, investing 1 unit of energy would produce 1.3 units of energy. Looping back to provide the next 1 unit input leaves only 0.3 units for everything else in the economy. That we are now providing most of the energy to produce corn from FF's such as natural gas and coal doesn't change the overall reality.

As EROEI for any so-called "primary" source declines toward 1.0, pretty soon, most of the economy becomes devoted to obtaining energy. In short, we are just digging a big hole ever deeper, just so we can dig some more. One might see this as the ultimate "rat race".

E. Swanson

The economy is going to become like a guy taking cocaine to help his sales production-now he has to sell more to fund his coke habit, which is necessary to keep his sales production up and round it goes.

Become? That's been the situation for a long, long time...

Yes, but NOT forever. The cycle does eventually end, one way or another.

One way to end the cycle is to switch that salesman to crack cocaine. Or is he using that already?

Through all levels and stations of society we are accepting ever increasing mania as normal behavior. The cycle is getting very dysfunctional.

You are right, it is partially an EROI issue. But it is also an ROI issue, too. It is not just the energy inputs that are a lot higher for the more difficult stuff -- ALL the inputs are a lot higher, including the most important input of all: $$$$$.

For example, I suspect that to get the the farthest out, deepest offshore oil, we might eventually have to go to UNDERWATER platforms, serviced by submarines. Does anyone have any idea how hugely expensive that will be? It will be cheaper than trying to head out to Titan, but that is about the best that can be said for it. This holds true even if we can still end up with a positive EROI for the project.

I really am sceptical that an economy that is going to be on the ropes at best and in free fall at worst is going to be able to come up with even a fraction of the investment capital needed.

I think that what is seen as a decline in ROI due to increasing costs reflects the impacts of increasing dollar values placed on the energy used. Please, please be aware that "investment" does not create energy. Most of what we do does not "create energy", with the exception of nuclear power, which is a conversion of matter into thermal energy. The energy from the Sun comes from fusion, and human survival is totally solar powered. Our food comes from sunlight.

The underlying reality is energy, as it takes energy to make all the stuff that is used to "produce" the oil. It also takes energy to support the workers, both as food and as fuel to provide the necessities of their lives. The money spent to pay "labor" gets passed on again to pay for home heating, electricity, gasoline for commuting and, of course, over time, the cost of the structure housing the worker and his/her family.

As the dollar price of oil has increased, so too has the cost of other energy sources, as these become more widely consumed alternatives. One must not look only at dollars to understand what is happening. This round of inflation is the result of the overall energy shortage. Remember the pre WW II Technocrats, who wanted to change to a money system based on BTU values actually represented by items in commerce. I think there's considerable truth in this approach. However, most of us have been trained from our youth to think of money as something we get for our time as workers, not as payment for the energy we consume so that we can actually live well enough to show up in the workplace. We do not see that when we buy something, we are actually consuming the energy used by all the others who worked to design, build and deliver the product into our hands.

E. Swanson

However, most of us have been trained from our youth to think of money as something we get for our time as workers, not as payment for the energy we consume so that we can actually live well enough to show up in the workplace. We do not see that when we buy something, we are actually consuming the energy used by all the others who worked to design, build and deliver the product into our hands.

Black_Dog, well said. You helped me to connect the dots between energy and money in a way I had not thought about before. A light bulb, complete with all its BTU values, just went on in my head. Thanks!

That's astonishing (although my take on it is the same as Westexas's--Yergin is covering his 8ss). Still, honest discussion seems to be emerging at last.

There was a documentary on last night about peak oil (was busy with something else and didn't catch the title or channel) featuring Thomas Friedman and some expert who sounded like he was from the Netherlands (no doubt this has been discussed at TOD 10x already, but I hadn't seen it). I was surprised by it, because they covered "solution" after "solution," and kept knocking them all down with pretty accurate information. For example, they discussed a big Saudi solar research project that had come to nothing because the maintenance problems were overwhelming in terms of the energy output. They also looked at biofuels, etc. Thomas Friedman kept stressing the idea that someone was probably tinkering in his garage even as he was speaking, coming up with the Grand Solution, but other than that it was very reality-oriented rather than faith-based.

Give me $1 trillion of that $22 trillion and I can create a large and robust Non-Oil Transportation system for the USA (and save enough natural gas on the side to operate essential services).

Best Hopes for Rational Investments,


Oil is pushing $92/bbl at the moment ($91.80). I don't see anything in the news to account for it.

Anyone know what's up?

If you look at the weekly data since oil crossed $90, through the first of Feruary it was only below $90 for two weeks out of 14 weeks, and then only down to the $89 range. So, it looks like the oil market, for the time being, doesn't like to stay below $90. Also, some problems with Nigeria and it could be a short squeeze.

Thanks, WT.

I was wondering that same thing, given the bearish inventory numbers we have been having for nearly a month now.

Possibly the Venezuelan showdown?

Interesting stat. The current one day move up in oil prices exceeds the nominal price of oil in the early Seventies.

May be jitters over Exxon's win in Venezuela asset freeze? Just a guess. Doesn't appear to be much else being reported, not overtly at this moment.

May be the industry is listening to Yergin's prognostications on need for investment?

Poetic irony, perhaps. Wouldn't that be funny if Yergin's musings pushed the price of oil to 3 or 4 Yergins:-)


These folks are brutally intelligent. Joke's on us, of course.

"Joke's on us, of course."

Jokers (or to borrow from the classics, tricksters) thrive when masterminding the the prank on unsuspecting bystanders. These guys are jokers (in Batman the Joker is the most clever fiend of them all) and they intend to make as much money, prestige, and bankroll their own futures for as long as they can.

That's their job and they intend to do it well.


Funny as in amusing, if it falls into the category of unintended consequences. Unlikely.

Funny as in strange, if it means Yergin is switching sides in mid-course. As noted above, Yergin may be hedging his bets and covering his rear if CERA is finding it harder to maintain credibility. Safe way to do this is say to the gullible there is simply not enough investment (too little, too late). Perhaps.

Funny as in ironic, if Yergin is playing his slight of hand to achieve a paradox - even when he's wrong, he's right. Most likely.

Only the joker knows for sure. And depending upon what cards are dealt, he may come out with a Royal Flush or a Full House. Funny how that works.

Trickster stories, even when they clearly have much more complicated cultural meanings, preserve a set of images from the days when what mattered above all else was hunting. At one point in the old Norse tales, the mischief-maker Loki has made the other gods so angry that he has to flee and go into hiding. In the mountains, he builds himself a house with doors on all sides so he can watch the four horizons. To amuse himself by day, he changes into a salmon, swimming the mountain streams, leaping the waterfalls. Sitting by the fire one morning, trying to imagine how the others might possibly capture him, he takes linen string and twists it into a mesh in the way that fishnets have been made ever since. Just at that moment, the others approach. Loki throws the net into the fire, changes into a salmon, and swims away. But the gods find the ashes of his net and from their pattern deduce the shape of the device they need to make. In this way, Loki is finally captured.

From Lewis Hyde Trickster Makes This World
Mischief, Myth, and Art

Another classic from Dr. Hyde -- harder to read than The Gift, but rewarding. In an odd sort of way of rewarding -- you can't get rich reading stuff like that

NeverLNG, you make a very good point.

The trickster holds a special, arguably a vital, place in pre-industrial society. Nicolai Tolstoy in his book, The Quest for Merlin (London, Sceptre, 1988) describes quite nicely the role of the trickster as the wild element that both sanctions and balances out the civilized/manmade/human centered world. In ancient societies, there was a tacit respect paid to the village idiot, the wise woman, the fool, and others of the same ilk since they reminded people of the connection between the forces of nature or the divine and the forces of man. The court fool, the jester, often had far more power/influence than the highest nobleman or courtier since he could speak truth to power, in the form of mocking parody to the Lord of the Castle.

Much literature is available on the subject and here I am only skimming the surface.

The western world as it developed into modernity became increasingly obsessed with control. And with such developments there was a demotion of the role for the fool/jester/trickster. They came to be seen as a far more threatening/sinister force. As the western mindset was beset with the quest to master the forces of nature, there were real and tangible consequences. The witchcraft hunts were pandemic during the 14th through the 16th century for a reason. Today, we medicate or isolate the tricksters among us since they represent forces beyond our managerial capacity. Hence the pharmaceutical cornucopia to prescribe Ritalin, Valium, and Prosac to an acquiescent medical establishment and compliant public. The wild is not welcomed in our overmanaged and artificial environment, one that is increasingly divorced from and overtly hostile to the natural order.

The contemporary joker has been transformed into a parody of the trickster - wild but constrained, a force of disorder but one that is in open contempt for both human and natural law. Unlike the trickster/fool of old, who bridged the worlds of man and beast, the joker represents the psychopathic/sociopathic demon in our midst, one who holds no consideration or empathy for the other.

Hence, the Joker (the pychopath) is the most fiendish of Batman's (the Lord of the Manor) enemies.

Where Daniel Yergin fits into all this is anybody's guess. But he does play a mean wild card.

Actually the Fool, archtypically, is best represented as Pooh, in The Tao of Pooh by Benjamin Hoff. The fool is neither threatening nor sinister, but an embodiment of enlightenment. This is how it is represented in the Tarot. Living in the moment, unconcerned with the usual details of mortal life, the fool though appearing as the lowest in the hierarchy, is happiest and most free.

Hoff is sweet, but not very convincing. Trickster can be vicious -- by our standards anyway. How about the great joke God played on Job? We don't know what the gods are up to, but in our arrogance, we imagine that we do.

God? Gods? I'm talking archtypal images in the cultural imagery of mankind. Jung and Joseph Campbell. PsychoSociological role models. Hoff is the Quinticential representation of Taoism.(as well as a good study of archtypes) If you can get recorded Alan Watts lectures, they are awesome.

knowers don't talk, talkers don't know. --LaoZi

What are "gods" but archetypes?

The main defense and offense for human beings -- together in groups, or individually, is deception, hence the importance of the "Trickster" to all human mythology.

Alan Watts lectures do have something to say and the fool does have redeeming features. What Taoism, eastern philosophical traditions, and practically every other culture in the world, including Eastern Christians and Muslims, all point to is not a new or startling revelation to the West but rather taps into a wisdom that we've lost.

The trickster has much to offer and stands as a reminder of connection between the spiritual and the material, between the human and the divine, and between the natural world and mankind. The reason for the transformation of the Joker into a beast in our culture is b/c we've lost these vital connections.

The West is obsessed with control and in our quest to manage everything, there is a tendency to dichotomize and to dissect. That's great when you dealing with systems. It's catastrophic when dealing with relationships.

Case in point. The West has at its foundation Christianity. Yet western Christianity has mutated to fit the current structure. The foolish are prized in the story of the faith. In the Beatitudes Jesus says, blessed are the poor in spirit. I can't tell you the number of times clergy (and they are my colleagues) either begin by disassociating themselves entirely from the passage (Christ is obviously referring to somebody else) or else, among my more well intentioned friends, begin to bring up a clinical expose on depression. Yet Jesus doesn't say, follow me and I will cure you if you're poor of spirit, or meek, or foolish. Instead, he says you are blessed and you have something concrete/valuable to contribute to your fellow human beings.

Further to the tradition of Christianity, St. Paul put it best when he wrote to the church in Corinth: "But God chose what is foolish in the world to shame the wise; God chose what is weak in the world to shame the strong; God chose what is low and despised in the world, things that are not, to reduce to nothing things that are, so that no one might boast in the presence of God."

How does that jive with how most westerners view the fools among us? We have become blinded by our arrogance and by the pervasive and on-going belief in a flattened and boxed universe.

Please don't misunderstand me. I am very well aware of the horrors faced by people suffering from depression or mental illness. They are inside my intimate circle of family and friends. However, we have a tendency to exasperate the problem by trying to relegate anybody outside the "norm" as needing therapy, medication, all so that they can cope in our systematic way of doing things. And the common sentiment is don't expect them to be of any value or use to the rest of us.

A few years back, John Cleese remarked that after he took psycho-therapy he lost the edge off his humour. Now that he was "fixed" he was not effective as a comedic actor. So what did he do? He went on to be a motivational speaker for corporations. Who lost in this exchange? The tricker was tamed and to everyone's sorrow except TPTB.

I'm all for rehabilitating the trickster. In fact, when times get rough, it will be the Joker who will have the last laugh.

Outages are mounting!GOM,NS,Nigeria,Russia.Some are weather related;others look more permanent.

I think it's cold weather and the force majeur through March in Nigeria.

Force majeurs are indefinite.Bongo down through Mar.

Bongo just pawn in game of life..

The wires carried this:

Royal Dutch Shell (RDSA) (RDSB) said Thursday it was halting 130,000 barrels per day of Nigerian output because of pipeline leaks, one day after an announcement by France's Total (TOT) that it had shut off around 280,000 barrels of oil equivalent in output from its North Sea oilfields.

Plus, there was the announcement that Iran was starting construction on a new nuclear power plant, and the story that OPEC would defend $80.

But a cut in production of over 400,000 barrels a day should move prices about $6, at least for a short time.

commodity in broad advance today, silver broke through $17/oz.

I read today's action as a broad-based return of speculative money to the energy sector, not having to do with specific events. Commodities and energy are the place to be right now, not the financials, not tech, & not the usual favorites, and so hedge funds are casting about looking for somewhere else to be. Look at some recent price charts for oil refiners, wheat and other basic foods, fertilizer, commodities in general...they're all on the uptick.

But as regards energy specifically, there has been a slew of bad news in the last few days. An AP article today gives a good summary:
Energy Sector Roundup: Oil Over $91

Russia will stop supplying Ukraine with Russia gas (but will continue supplying Turkmen gas) on February 12, after Ukraine refused paying-up it's gas dept (1.5 billion at this moment).

This could repeat situation that happened few years back, when Ukraine choose to steal European gas that is passing though Ukraine. I wonder if this would affect oil prices (electric plants might have to switch to oil)? And if this will give additional incentive to finish North Stream (pipeline directly linking Russia and Germany) sooner?

Today's talks between Gazprom and Naftogaz of Ukraine have proved that Ukrainian authorities are not willing to pay off the republic's debt to the Russian company for natural gas supplies, Sergei Kupriyanov, official representative of the energy holding, told journalists today following a meeting with Naftogaz of Ukraine's First Deputy Chairman of the Board Igor Didenko.


From Bloomberg:

Interesting news from Russia. The goverment there is planing to add export tariff to fertilizers (to fight inflation). I am not sure if Russia is a big player in fertilizers business, but if so, it might make sense to buy fertilizers sooner rather then latter.

Article links to themoscowtimes.com, but they are quoting Bloomberg.

Fertilizer Prices May Freeze

Russian fertilizer producers may freeze domestic prices through May as they lobby the government against introducing an export duty, Vedomosti said Wednesday.

The country's largest producers have agreed to lower domestic prices for their fertilizers from 1 percent to 5.6 percent and keep them at this level until June 1, the newspaper said, citing unidentified executives. (Bloomberg)


I’m horribly late, been away, but wanted to chip in...prompted by “The limits to scenarios” thread. http://anz.theoildrum.com/node/3572#comments

Group think, or group consensus is necessary for action. Ppl have to cohere around some kind of world view for action to take place, even for the non-actors who don’t participate - they have to agree, or submit to authority, one or the other. Concerted (or supported, or just accepted) action is more to the point I feel than energy conservation. The matter is more social than material. That is why ideas or memes or postulates etc. ‘catch on’ - not because they are intrinsically right but because it is in some sense necessary to agree or accept one’s neighbor’s, one’s boss’, the king’s world view. Without that agreement (it might be coerced) the whole group risks death. Not least because if fighting in the group takes place all will suffer.

The calculations, decisions, actions embarked on, often seem ‘irrational’, particularly with hindsight. That is because there are always ‘unknow unknows’ (pace Rummy), and innovation would never arise, nothing would ever change, if all was always figured in some ‘set frame.’ Adaptability requires exploration, trial and error, and innovation, by its very nature, will seem dangerous, wacky, misguided, and more, to some, or in some way, sometimes, as when innovation arises, old rules or schemes are laid aside, or daring action takes place. In some sense, thus, bad ideas are better than no ideas at all for the hairless chimps we are. Novelty is always welcome - to some degree. Brilliant leaders must be given a chance, an opening, some sway.

One could argue that in the US (and other west) today, these fundamentals have become bastardized by ersatz democracy, populist democracies, and a dystopic technotopia, the last an outcome of the industrial revolution and the age of oil. Not to mention high complexity. The 19th century visionary is defunct - he or very rarely she - is a cog in a rather rigid system.

Yet, it would be wrong to see this whole process as driven from top to down (innovators and/or authoritarians or those holding traditional power controlling the peons - see e.g. the Oil Drum today..), because the circulation and discussion of ideas, as well as the tremendous investment we have made in education, using cultural transmission to send knowledge down thru the generations, shows that the group has another function: that of making better decisions as a group. In social psychology this is well attested - insofar as such a sloppy quasi-science can demonstrate anything - let’s just say - illuminates one facet of human society. (One popular book, The Wisdom of Crowds, by James Surowiecki, is a smooth, easy, fascinating read.) Groups often take better decisions, I can’t be more explicit than that. Why exactly this is so cannot be laid out today - except of course that facts that are agreed on will serve: those that are not will die out, but the argument goes beyond that, as it is linked to for ex. mathematics (but not science as a whole.)

What is the conclusion? Much more could be said about human groups, but central are Man-Nature relations, the ease of exploitation and its eventual consequences.

-please delete if whatever!

Please DON'T delete!

Damn, Hazelnut! Some nice thinking in there, or at least it's resonating with a lot of things I personally chew on all the time.

As a teen, I was fascinated with some aspects of German culture, which seemed to contain at once a considerable level of conformity, which seemed to lead to a great level of functionality and productivity, but there were these shining lights in the rebels and challengers to the systems.. Beethoven comes to mind, as I learned that he 'broke the rules' of music with some of his work. It just had me wondering about the proportion of Steady, 'conservative' conformity, with the necessary addition of the right amount of radicals to rebreak the table here and there, and set in some new patterns.

Anyway, thanks for the notions.. I'll read it again.


One popular book, The Wisdom of Crowds, by James Surowiecki, is a smooth, easy, fascinating read. Groups often [m]ake better decisions, I can’t be more explicit than that.

For every group that appears to make a "better" decision, there are probably 99 groups that make a "fatal" extinction level "bad" decision.

The "wisdom of the crowd" is more often than not overshadowed by the Folly of the Fellowship, by the Manic Mentality of the Mob.

You are being fooled by what Nassim Nicholas Taleb (author of the Black Swan) calls, reverse-time reading of history. You start at the end where only the successful survivors remain and you then back track through their successful history. Then you conclude that all groups always choose wisely!

Consider however, how many start-up companies begin as a small group of very smart people and yet 90% plus of them fail. Where is the wisdom of the Netscape crowd? Where is the wisdom of the Yahoo crowd? Where is the wisdom of the General Motors crowd? Of the George W. Bush Jr. crowd? The Easter Island crowd?

What makes you think that GM's (predicted) failure comes from decisions made BY the crowd?

The 'GWB' crowd would be us Americans, would it not? It seems to me that the 'Group' has been summarily removed from having it's collected views heard or acted upon.. even the topmost scientists in this country can't get a hearing without facing the red-pen to excise any uncomfortable conclusions.. so if we are indeed failing, is that a failure of the thinking of this group, or has our thinking been usurped in countless devious ways by a precious few who think that they think much better, even as they are critical of the art of 'thinking' in the first place.

The comparison of a bunch of failed Business Startups is a hard fit, since a business start-up is an experiment to begin with.. even in its death, the instigators will probably have learned from the experience, and many surely try again, and again. 'Just what makes that little old ant...?' It sounds smart to me.

The reverse-time-reading is worth considering, but you draw an arbitrary conclusion from it. (or Taleb does).. Noisette doesn't say that 'ALL groups ALWAYS choose wisely!' ,you are handwaving with that one.. (are you in the graphic there?) We descend today from the successes AND the failures, many of which we've forgotten, while others remain in our cultural memory and wisdom. Deep in our languages and our house designs and basic trades, recipes etc.. lives lessons from the Egyptians, Greeks, Romans or whichever branches we derive from, and these help form the assumptions that guide (and misguide) our society today. The problem I have with the Collapse scenarios is that they are made to sound so finite and thorough, 'end of story'.. and yet here we are, not only thriving excessively, but also able to look back on those 'setbacks' and see where they messed up. Doesn't mean we won't mess up again.. but it also doesn't mean groups are stupid, since none of them or their societies lived forever.

We're writing to each other with electricity, over a vast network that feeds much of the world, using a complex language with cognates from numerous language groups. We went to the moon! We went to the moon! We're sure not right all the time, but we're not dumb, either.


Interesting debate.

I didn't say that groups always get it wrong. And I certainly am opposed to the idea that groups "often" get it right, or that the crowd is "wise".

There is nothing magical about a group of people flipping towards one point of view or another. Like a coin, they can be right 50% of the time even though the decision process may be a totally mindless one rather than one steeped in "wisdom". That sir, is the wisdom of the crowd.

But first I should have prefaced my comment to this earlier subthread (started by Dryki) where we were discussing the energetics of group conformance. In brief, it seems that there are energy conservation benefits to a group of people all agreeing to conform to one point of view (even a wrong one) rather than to keep duking it out.

The first thing to understand is that the group normally has a certain groupthink dynamic to it. Once an agreement threshold is crossed (favoring one position or another, i.e. invade Iraq/ don't invade; Global warming is true/false), the whole group seems to switch bistably into a conformance mode where they almost all align with the chosen direction.

(Stated otherwise, the group says inside of itself: "Either you're with us or you're against us; Stay loyal; We're all in this together; Don't rock the boat; Don't cut and run; Shift toward the center of the mainstream; Do not be on the lunatic fringe.")

Once a group has switched over like a bistable system to position A (i.e. Peak Oil is false), it takes much more energy to flip them the other way, towards a position B (i.e. Peak Oil is true) due to the group conformance dynamics.

To better understand this, imagine that your mission was to flip the TOD groupthink towards acceptance of the idea that Peak Oil is false and we have all been duped. Do you see how hard that would be?

Next imagine walking into a convention of "economists" and trying to flip them into accepting that "free trade" is bad. They nervously look at each other and quiver at the thought of becoming "disloyal" to their group. <--There sir, lies the wisdom of the crowd.

p.s.: As for us (the group) not being dumb all the time, let me suggest that a flipped coin is dumb. An electronic logic circuit that does deep analysis and then flips to a '1' decision or a '0' decision might be an intelligent one. When you study a particular group, you first have to determine whether they are more like a dumb coin that just got lucky, or more like the highly organized electronic logic circuit.

p.p.s.: "WE" didn't go to the moon. NASA did.

The wisdom of the crowd usually only applies when the crowd is self-organizing from within, without external, oppressive, or authoritative influences.

The wisdom of the crowd is what made tribal cultures so successful for millennia, until they faced the external, oppressive, authoritative force of European settlers.

And if "we" didn't go to the moon, then "we" also didn't win World War II. Nationalism is a peculiar illusion.

Nationalism is a peculiar illusion.

When it came to World War II, all the little people went to war and gave their lives for God & country (except of course the children of the elite who had to stay home and take care of the cavalry horses and the polo grounds).

When it came to going to the moon, only the best and the brightest were skimmed from the population and concentrated into an enterprise called NASA. Yes, the masses paid for it with their tax money. But they, the little people didn't go to the moon. Only an ultra elite few from NASA went to the moon. To this day you still can't book a round trip vacation trip to the moon and back. It is an illusion.

If "we" can go to the moon, we can do anything.
But "we" can't go to the moon.

WW II was the last war where the elite went to war.

FDR's son got a waiver (exec pull) so he could wear sneakers (flat feet) as an officer in the Marine Raiders, their elite unit during WW II.

Joe Kennedy's (founder of SEC, US ambassador to UK, quite rich) oldest son died on a near suicide mission (fly a worn out bomber full of explosives into a target, bail out at last minute into water and hope navy gets to you before the Germans). JFK was in plywood boats going against destroyers & cruisers. Almost died (many others did).


Hello TODers,

I have posted before on the need for biosolar mission-critical investing, at every scale. Not only will this help the eventual growth of biosolar habitats, it additionally helps prepare all for the paradigm shift.

The interesting question is the arrival of Sovereign Wealth Funds [SWFs], and their possible future effects upon biosolar 'hen & eggs' ownership. I hope those with greater expertise than me will consider the possible ramifications.

Western banks face backlash as they hand out begging bowl

...But having stepped into the breach so visibly late last year, some funds are now getting jitters. In China, for example, there are rising complaints that funds are foolish to shovel cash directly into risk-laden US banks when they could be using it in better ways, such as purchasing western commodity or manufacturing groups.

"The Chinese are worried they are turning into [the source of] dumb money," says one well-placed Asian financier, who partly blames the trend on the Blackstone saga, which produced significant paper losses for the Chinese investors.
If the SWFs buy the corporate stock of the hens: fertilizer, seed, PV & solar water heater Mfgs, windturbine Mfgs, RRs & mass-transit Mfgs, etc-- aren't they entitled to the eggs?

It makes me think that the US should immediately scale back its military, then use these incredible Billion$$$ to create an American SWF to get our share of the 'hen & eggs'.

Instead, we seem to be headed to a situation where fundamental property ownership rights will be ignored, and wasteful global resource wars run a high risk of killing all hen and eggs.

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

Green roofs seem to be very underutilized.

In hotter cities, such as Riyadh, the number of hours when air conditioning is needed would be cut from 12 hours to just 5.


I love what "they" come up with.

Knee Brace Generates Electricity From Walking

Some version of Greenroofing is one of my plans, but the engineering keeps it from being very high on my list currently. I think of all the Empty Attics in the Homes of America, and how a conversion of the Top Floor to a Greenhouse is a way to start using all the sun that is presently shunted away as a 'problem' in most home designs, and to create a bright, healthy place in the house that is growing some food, etc..

I know it's not the 'Greenroofs' of common conception, but it's the one I'm interested in. It would require (Here in Maine) a mechanism to Roll, fold or slide an Insulation Layer over the roof during cool and cold weather, but I think the Heat Gain, Food produced, etc could justify the costs of this system. (Would probably also have other solar collection integrated into it, such as Batch Heater Water Tanks, etc, made more efficient by being integrated into the House Envelope.

I would love to see rooftops in the Sunny parts of the world also be able to chill under the shade of a lot of PV, and Water Heating Collectors, too!
(I just think we'll have to Sprint to even start to catch up on this stuff.. knock Glass!)


"I would love to see rooftops in the Sunny parts of the world also be able to chill under the shade of a lot of PV, and Water Heating Collectors, too!"

I would like to seem more solar groves!.


So what to do about it all ??? Where to invest your resources ?

Buy/build a metal frame polycarbonate greenhouse ...... Prepare to Garden year round

what about gardening hydroponically in your basement year round?


Hunted today--
Candy Caps! Very Good---
Put some hedgehogs in the chili tonight. It is a bounty of mushrooms in northern Cal right now.

If in the future electricity becomes scarce/unavailable, basement hydroponics would become useless relics. A good greenhouse, on the other hand, would be able to produce actual plants. Not sure that it would be workable for the whole winter here, as it would need to be heated somehow on days like today*, but it would be useful to extend the season

* -25C tonight, -44C with windchill.

Oil futures jump on supply concerns:


"Crude gained on word that oil exports from Nigeria, Africa's biggest oil producer and a major U.S. supplier, could fall by as much as 1 million barrels a day due to the nation's deteriorating security situation and planned maintenance. Nigeria is locked in a long-running battle with rebels intent on hurting the nation's crude infrastructure.

Prices also rose on news that North Sea oil production has been cut by 280,000 barrels a day due to technical problems at a Total SA oil field, and that Russian crude output could fall this year due to the depletion of a large oil field, said JBC Energy GmbH, an energy research firm in Vienna, in a research report.

Concerns that Venezuela might retaliate in some way after Exxon Mobil Corp. won court orders freezing the assets of its state oil company also pushed prices higher. Exxon Mobil is seeking compensation for assets lost when Venezuela appropriated company assets last year as part of President Hugo Chavez's nationalization of several large oil projects."

Sad to see the passing of Sheldon Brown:


A guru of the bicycle and cycling.

"Still, it does roll."

Here's a review of Oil Empire: Visions of Prosperity in Austrian Galicia, a fascinating Central European episode in the early history of oil. The world's first commercial oil production was in Galicia, an area fought over and now split largely between Ukraine and Poland. The oil foundations of the Austro-Hungarian Empire and local social context give us an instructive, nuanced look at "above ground" factors in oil development.

Question: What would be the best biofuel crop for suburban cultivation?

For biodiesel I'd suggest sunflowers. Your neighbors will just think you like flowers. They are easy to grow & to harvest. You could rig up your own hand press. Don't expect to get more than a couple of gallons or so -- to produce in larger quantity you are going to need farmland acreage. In the suburbs, I think you would be better off concentrating on food production.

For ethanol you are going to have to get into distillation, which means you are going to have to comply with ATF regs, which is quite a pain. If you don't care to do that, there is a reason why moonshine stills were hidden way deep in the back woods here in the mountains. :-)

I'm thinking more along the lines of a community activity in terms of collection and processing of the crop. There is a tremendous resource of available space and labor in the suburbs. This activity could be similar to the Victory Gardens of WWII.

Rep. Bartlett's Latest Peak Oil Address

I caught this on C-SPAN last night - he had great charts and graphs. Too bad that so few people saw this.

Alan, over at Calculated Risk in the comments section for the posting "NAR: The Punch Bowl is Back!" there's a raging debate over whether mass transit is more energy efficient than personal automobiles. I thought you might want to demolish the opposition there.

Hello TODers,

My guess is Morocco has now studied EB's Peak Phosphorus article and is positioning itself for a very strong global market share [a crushing monopoly?] as the other mines around the globe deplete:

Morocco opens phosphate hub to foreign investors

OCP, with an annual output of 27.25 million tonnes of raw phosphate, has 43.5 percent of phosphate world's share and 47.2 percent of the world's phospheric acid share along with 9.5 percent of the global output of fertilisers, according the firm data.
For newbies: fertilizer is basically the elements NPK [nitrogen, phosphorus, potassium] and Isacc Asimov calls phosphorus life's bottleneck. Consider the global implications of monopolistic control of P. IMO, in the long run, the struggles for control of the depleting P & K mines will be more contentious than the control of any depleting FF-field. Sitting in the natural, nightly darkness will be welcomed in exchange for some food.

N can be sufficiently supplied by sensible crop rotation to avoid a N-Liebig Minimum. But mining/recycling very diffuse P & K from the ocean floor may be a magnitude more difficult than the current, feeble attempts at mining subsea methane clathrates.

More-rock-oh is very correctly named as we head PostPeak.

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

Here is a link that gives a very good overview of the grains, biofuels, and NPK situation:

Farmers typically spend 25% of their operating budget on fertilizer. With corn, soybeans and now wheat tacking on 100% price increases, fertilizer makers have jacked-up prices to suit. In addition, increasingly scant supplies of potassium and phosphate, two of the three key fertilizer components, are pushing record prices even higher.

Name of the Game: Low-cost production and distribution. Access to raw materials is fast becoming key to the phosphate and potassium segments.

Out of 50 billion tons of potential phosphate rock reserves worldwide, the USGS estimates the U.S. holds only 3.4 billion tons. Morocco owns 21 billion, China has 13 billion. All are keen to closely manage the resource.
I suggest reading the entire link, not just my teaser snippet above.

The thing to remember is the mind-boggling amounts of energy it takes to mine, beneficiate, amalgamate into a custom-finished NPK ratio, then distribute these multimillion tons globally across the planet.

Quoting Dave Cohen's phrasing, only applied to NPK: for the umpteenth time, it is not the theoretical reserves, but the actual production Now and in the immediate future that is important. Recall my earlier posting that a forty pound bag of NPK has 3 gallons of embedded energy in its manufacture. Depleting FFs plus depleting NPK creates a powerful blowback effect IMO.

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

Low cost means high efficiency which means low resiliency which means we trade off small problems for large problems.

Yes, Bob, we are smarter, but only by a fraction. Yeast couldn't get into this amount of overshoot all by themselves. It takes a considerable intelligence to create this level of clusterfsck.

From Automatic Earth yesterday, a great quote from Lily Tomlin "Things are going to get a lot worse before they get worse"

Not sure if this has already been posted... a commentary on overpopulation by Joe Bageant (foul language warning). An excerpt:

Old Tom Malthus said something like this was gonna happen, although he got some of the details wrong, which a person just might conceivably do in predicting the fate of human civilization a couple hundred years in advance. Call me a softie here, but I tend to give the guy a break for getting it 90% right.

But then I'm no scientist. Supposedly sophisticated American scientists have been pissing on the grave of poor Tom at least since I was a kid in school. All my life American capitalist economists have proclaimed they've licked the population problem by using the world up faster. "A failed prophet of doom," I believe my high school teacher called Malthus. Even commies kicked Tom's dog around. Engles called him a barbarian. Marx couldn't handle Tom's action, either. Nor practically anyone else, from John Stuart Mill to Allen Greenspan. And we still get the stale argument that "This planet isn't crowded; it is just mismanaged."

That was Joe's recent story.

This one from awhile ago was great. He even talked about Duncan's

Back to the Ancient Future

.... Anyway, I came away from the meeting deeply struck by one thing. Every person there seemed to understand and acknowledge the coming global human "die-off." The one that has already begun in places like Africa and will grow into a global event sometime within our lifetimes and/or those of our children. The one that will kill millions of white people. That's right, clean pink little Western World white people like you and me. Nobody in the U.S. seems to be able to deal with or even think about this near certainty, and the few who do are written off as nutcases by the media and the public. Mostly though, it goes unacknowledged. All of which drives me nuts because the now nearly visible end of civilization strikes me as worthy of at least modest discussion. You'd think so. But the mention of it causes my wife to go into, "Oh Joe, can't we talk about something more pleasant?" And talk about causing weird stares and dropped jaws at the office water cooler.

Here's the short course: Global die-off of mankind will occur when we run out of energy to support the complex technological grid sustaining modern industrial human civilization. In other words, when the electricity goes out, we are back in the Dark Age, with the Stone Age grunting at us from just around the corner. This will likely happen in 100 years or less, assuming the ecosystem does not collapse first. And you are thinking, "Well ho ho ho! Any other good news Bageant? And how the fock do you know this anyway?"


To make a long story short, there are three intervals of decline in the Olduvai schema: slope, slide and cliff -- each steeper than the previous. Right now we are in the slide headed for the cliff (see http://dieoff.org/page125.htm).


Samsara: Duncan is an original thinker and in some ways an intellectual giant. Having said that, he is making some assumptions which are questionable. At the median, the world population is getting poorer (at the median, the USA population is getting poorer). This does not necessary lead to the collapse of industrial civilization. There is a surplus of humans globally (just like there is a surplus of humans in the USA). Energy use per capita peaked at least 29 years ago and industrial civilization has not been halted- the planet just has a lot more slum dwellers (useless eaters as per Kissinger). The last 29 years have been utterly fantastic for the persons that control the global economy.

Glad to learn that SCREAMING MAN is still alive and kicking.

Look at the typical population pyramids for the poorer nations, compared with the U.S.


Better build that border fence real tall, sort of like that Great Wall in China or Hadrian's wall in Britain


E. Swanson

Joe just e-mailed me this one a couple days ago. I posted it here late at night, so it might have been missed.

Nine Billion Little Feet on the Highway of the Damned
Are we there yet Pa?

Joe Bageant


Hadrians wall should be seen more as an Imperial Statement or a customs boundary. There never was much of a threat from the North of the Wall. Odd piratical incursions, cattle thieving - a game played in Southern Scotland until about 200 years ago.

Look to the Danube and the mass migrations of Goths into the Empire.
How it happened, why it happened (Hunnic tribes) and how Rome dealt with it is a better guide.

Then as the legions became increasingly under pressure in the central empire, the Legions of Britain were withdrawn to support the centre. Leaving the Romano-British to deal with Picts, Gaels and Saxons as best they could.

Certainly, we are about to enter a period of unprecedented migrational pressure not seen since the volk-wanderings of the dark ages.

BTW: The greatest ever mass migration in History has been underway in China for the last 20 years. Numbering 100's of millions from the interior to the coastal strip.

I imagine this has been posted at various times but I just recently heard a clip from it for the first time and thought "well, that's not quite how things worked out for the future..."

From Disney's Magic Highway (1958):


This is one of the best threads ever on TOD!!! It's late so I don't have time to respond to all the "good stuff" but thanks to everyone for their time and thought.


Water is not a source of Lumens.

Lumens are a measure of light, photons.

Now, I know that confusion exists between water which can have wave properties, and photons which can have wave properties.

But just because both have waves does not mean they are the same. For a life lession in the difference, please go to your local beach on a sunny day and stand in the water.

I did not see any response to the pathological liars at the IBD (linked here under the title "The Sun Also Sets").

So if anyone is curious about just how pathological the folks at the Investors Business Daily are, please go to: