DrumBeat: March 11, 2008
Posted by Leanan on March 11, 2008 - 8:42am
Oil prices rocket close to 110 dollars a barrel
NEW YORK (AFP) - World oil prices continued their record charge Tuesday, rocketing close to 110 dollars amid lingering supply concerns and as the US dollar plumbed fresh lows against the euro.Traders say oil prices have also been propped up because "black gold" is priced in dollars and buyers and speculators armed with stronger currencies than the US dollar are buying up oil contracts.
New York's main oil futures contract, light sweet crude for delivery in April, finished up 85 cents at a record closing high of 108.75 dollars per barrel after hitting an all-time intra day high in earlier trading of 109.72 dollars.
In London, Brent North Sea crude for April delivery settled up 1.09 dollars at 105.25 dollars after earlier jumping to a record intraday high of 105.82 dollars.
"Oil rewrites the record books as the once mighty dollar sinks further into obscurity," Phil Flynn, a market analyst at Alaron Trading, said in a briefing note.
Valero may sell US plants in hard refinery times
SAN DIEGO (Reuters) - Top U.S. refining company Valero Energy Corp said Tuesday it is considering selling nearly a third of its North American refineries amid a U.S. economic slowdown that is crimping fuel demand, and that it is exploring new projects in the Middle East and Asia.The outlook marks a major shift in Valero's strategy after a decade of sterling profits, acquisitions and expansions transformed the San Antonio-based company from small independent refiner into a behemoth.
Chevron Raises Cost Estimates, Delays Two Projects
(Bloomberg) -- Chevron Corp., the second-largest U.S. oil company, raised its cost targets for seven projects by $3.8 billion and indefinitely delayed two others amid record prices for energy services and equipment.
Venezuela to tax oil firms for environmental damage
EDMONTON, Alberta (Reuters) - Venezuela plans to introduce a new tax on oil companies to help pay for environmental damage and to compensate the Venezuelan people, oil minister Rafael Ramirez said on Tuesday.Ramirez, speaking to reporters at a conference in Edmonton, added that OPEC-member Venezuela was sending to China crude oil that U.S. oil giant Exxon Mobil did not want for its Chalmette, Louisiana, refinery.
High oil prices hurt tourism, group says
CALGARY – High oil prices are squeezing business that rely on travellers for their livelihood, says the CEO of the Tourism Industry Association of Canada."It is a drag on tourism for sure," Randy Williams said in an interview Tuesday.
Gasoline: Painful, and getting worse
Experts say record pump prices are pushing energy spending to early 1980s levels, and that's helping pull the economy into recession.NEW YORK (CNNMoney.com) -- So gasoline prices are at an all-time high. But after adjusting for inflation, rising incomes and better fuel efficiency, how bad are they really?
The experts' answer: Bad. Nearly as bad as they've ever been, and not likely to get better anytime soon.
Gas prices rise to new national record
NEW YORK - The cost of filling up the family car jumped to a record high Tuesday, adding to the challenges consumers already face with falling home values and rising food prices.Gas prices at the pump rose overnight to a record national average of $3.2272 a gallon, according to AAA and the Oil Price Information Service. That's a tad higher than the previous record of $3.2265, set last May.
A year ago, rising demand and a string of refinery outages had raised concerns about supplies. Now, the soaring price of crude oil is the culprit, propelling gas higher even though supplies are at 15-year highs.
Russia oil exports 'hit $1bn per day'
Russian energy exports are close to reaching a milestone $1 billion per day value mark, bringing in more money for social spending and creating extra inflationary pressure, according to a report released today.
Total sees Saudi Jubail refinery start up in 2012
PARIS (Reuters) - Total and Saudi Aramco expect a new 400,000 barrels per day refinery in Saudi Arabia to start up in 2012 and a final decision will be made in mid-2008, a senior official of the French oil company said on Tuesday.The world's top oil exporter Saudi Arabia is planning four new plants as it looks to boost domestic refining capacity by as much as 1.6 million barrels per day from 2.098 million bpd.
But rising costs for equipment and labour have hit the energy sector worldwide, forcing project cancellations and delays and raising industry concern about the new Saudi plants.
Total, however, is confident that the final decision will be made in summer and operation of the Jubail refinery is expected in 2012, Jean-Jacques Mosconi, the senior vice president of the company's strategy and development, said at the European Fuels Conference organized by the World Refining Association.
Fuel imports flow to Nigeria amid recall row
But late last month, as traders were putting in offers for the latest round of potentially lucrative fuel deliveries to the West African oil exporter, the industry regulator linked a spate of engine damage to one cargo of imported gasoline....The Department of Petroleum Resources linked the damage to the 20 percent ethanol content of the fuel. Nigeria recommends its suppliers blend no more than 5 percent, its officials said.
Guess Who Hopes to Help Power New Hybrid Cars
Exxon Mobil Corp., the world's largest gasoline refiner, wants a piece of the hybrid-car market.After filling automobile gas tanks for decades, the company has started looking under the hood. It's betting that further development of a component it created for cellphone batteries can help improve a new type of battery that may eventually power most hybrid cars. If it's right, Exxon could play a part in ushering in a new generation of hybrid and electric cars, lessening the world's reliance on gasoline.
Michael J. Economides: Presidential Candidates Clueless on Energy
It is certain that the United States is in for an energy price and supply shock the likes of which we have never experienced or imagined. While high prices, to a reasonable extent can be tolerated, hell will break loose if massive supply disruptions emerge. We are much closer to them than people think. Those who think that we can conserve ourselves to energy independence need not read any further. They are vastly wrong and it is pointless to argue with them.
Sense and nonsense from Nansen Saleri
Assume you are an elected official from Connecticut, Minnesota, Virginia, or California, all states that have begun to wrestle with the implications of peak oil. Then last Monday you read Dr. Nansen Saleri’s op-ed, “The World Has Plenty of Oil,” in the prestigious Wall Street Journal. Should you accept his cornucopian view of our energy future, which holds that a peak in world oil production is many decades away?
Volatile Oil Prices Subject of Forum
The price of oil has escalated much more than expected. "It's caught most by surprise," says World Bank Senior Energy Economist Shane Streifel, a panelist at the forum's session on whether high and volatile prices are here to stay.That's happened even though oil stocks around the world are not "critically low," and oil output by the Organization of the Petroleum Exporting Countries (OPEC) has recently edged higher.
The whole system is daft, and not just from the point of view of global warming. Iran is blowing its oil profits on petrol subsidies, so that people end up spending hours a day in traffic jams. There are a few nods in the direction of public transport. On some of the wider boulevards, there is a fast lane in the centre for special high-speed buses, but there are clearly not enough buses. Each one is crammed to bursting.At this rate, Iran will burn through its oil wealth in a generation, ultimately justifying all the effort it is putting into nuclear development. The inverse of that argument is that if the country did not waste so much fuel, it would not have to worry so much about its future energy needs and their would be less urgency, and less tension, surrounding its nuclear programme.
Rise in oil prices set to impact all aspects of U.S. economy
That's right, ladies and gentlemen, the resource that single-handedly catapulted humanity into modernization is done for. Kaput. Disappearing fast and never to reappear again.That's the essential problem with oil: It's finite.
Pakistan: Welcome to the modern stone age
Half naked, half covered with leaves, barefooted, with shoulder-long hair and a spear in hand, hiding in a cave or on a tree, ready to ambush the prey--this is the scene that traditionally portrays the stone-age life. Fortunately, that time is gone, but the people of Pakistan are now having a new version of it, "modern stone-age," thanks to the energy crisis in the country.
Daily Record Prices for Oil, Gasoline Hammer Consumers and U.S. Economy
Congress and President Bush must take joint action against the speculators who have driven oil and gasoline prices past all-time records, said OilWatchdog.org, a project of the Foundation for Taxpayer and Consumer Rights. Gasoline prices nationally are expected today to surpass last year's record of $3.227, and California, at $3.571 per gallon as calculated by AAA, is more than 7 cents a gallon over last year's record."There is no shortage of gasoline, no shortage of crude oil, no underlying market reason for these excruciating record prices," said Judy Dugan, research director of OilWatchdog and the nonprofit, nonpartisan FTCR. "Speculators and hedge funds, today's Enron rogues, are driving an economic disaster by pouring billions into bets on continually rising prices."
Bolivia Starts Energy Revolution
La Paz (Prensa Latina) Bolivian President Evo Morales is presiding here on Monday a ceremony marking the start of the "energy revolution", which includes the distribution, free of charge, of five million energy-saving compact fluorescent lamps.
THE negative response from the Organization of Petroleum Exporting Countries to President Bush's request for increased production to help the United States meet the problem of rising gas prices follows from its member countries' overall judgment of Mr. Bush's foreign and domestic policies.
Slowdown turning the tide of shipping-industry profit
The glut of shipping capacity has forced down rates. But the shortage of crews and the rising oil price mean the cost of running ships is rising. And because inflation is pushing up the value of cargos, insurance costs are going up as well. Minor savings are possible, notably by reducing the speed of ships to save fuel, but customers are increasingly intolerant of delays.
Mexico Anticipates Petroleum Trade Deficit
The trade balance in Mexican petroleum products could stop being a surplus and turn into a deficit in the medium term.Last year Mexico recorded foreign currency revenue from exports of petroleum products totalling 42,885,844,000 dollars, and imports amounted to 25,704,844,000 dolalrs, so the surplus was 17.181 billion dolalrs.
Nevertheless, also taking into account foreign purchases of petrochemical products and natural gas made by private companies - not counted by Mexican Petroleum [Pemex] -imports totalled around 34 billion dolars, so the real surplus is under 7 billion dollars.
Chevron sees 2010 reserve growth, still below 2006
NEW YORK (Reuters) - Chevron Corp on Tuesday said it expects its oil and gas reserves to grow about 5 percent over the next three years, but the growth won't quite offset the 7 percent drop the second-largest U.S. oil company reported in 2007.The company said it expects its proved oil and gas reserves to be around 11.3 billion barrels of oil equivalent (boe) at the end of 2010, which is just slightly higher than what the company held before its 2005 purchase of Unocal.
Brazil's Tupi seen a bonanza for oil service companies
HOUSTON (Reuters) - Deep below the ocean floor off Brazil is Tupi, possibly the largest offshore oil field ever discovered.Brazil controls Tupi, but getting crude oil out will create billions in revenue for oilfield service companies like Halliburton Co and Transocean Inc that have the expertise needed to tap the extremely complex reservoir.
Citgo CEO: Venezuela to Keep Supplying Oil to W. Hemisphere
Despite recent conflicts between Venezuela's national oil company and oil giants operating in the country, a Venezuelan official stressed Monday that the country is open to foreign investment in its oil fields."Venezuela will continue to honor long-term crude agreements," said Alejandro Granado, chief executive of Citgo Petroleum Corp., Venezuela's U.S. refining arm.
Shell plans floating liquefied natural gas plant
The vessel would combine with technology for developing remote gas fields and reduce environmental concerns around the building of onshore gas plants. Shell said it would issue a tender within four months to Korean and Japanese shipyards and some engineering companies.The floating facility would have an annual production capacity of 3.5m tonnes, the Anglo-Dutch group said. Other companies such as Petronas of Malaysia have studied switching to floating facilities to tap growing demand for liquefied natural gas, particularly in Asia. The region buys about 60 per cent of world LNG production.
Nigeria oil rebel pipeline found
Nigeria's army says it has found a private pipeline that was used to supply oil to a militant leader's home.The underground pipeline ran from a major oil refinery to a hideout in Rivers State of Ateke Tom, the head of the Niger Delta Vigilantes.
The average tractor-trailer gets just 5 to 6 miles per gallon, and, at current prices, it can cost more than $700 to fill the empty tanks on most long-haul trucks. That's too much for many truckers to keep hauling goods.Todd Spencer, executive vice president of the Owner-Operator Independent Drivers Association in Grain Valley, Mo., estimates as much as 10 percent of the association's 161,293 members have parked their trucks.
Mass transit use hits 50-year high on pump prices
NEW YORK (Reuters) - The number of Americans hopping buses and grabbing subway straps has climbed to the highest level in half a century as soaring gasoline costs push more commuters to take mass transit.
Big Oil Profit Pushes Democrats to Seek $1.8 Billion
(Bloomberg) -- Record oil-company profits, gasoline prices over $3 a gallon and the threat of a U.S. recession are increasing Democrats' prospects for taxing oil and gas producers to pay for wind, solar and conservation programs.
How Many People Does It Take to Make a New Light Bulb?
A new scientific renaissance is exactly what the battle against climate change needs. As Kimberlin says: "We don't have an energy crisis; we have an imagination crisis." Solving global warming will require changes in the way we live and use energy, but even more vital are technological leaps in clean technology that must be every bit as revolutionary as Edison's incandescent bulb. Spencer Trask and the Rockefeller Foundation have inundated InnoCentive with an array of challenges in clean tech — including a call for a new kind of electricity-free light bulb that would make Edison's invention obsolete. "We want the kind of challenges that will make a difference in the world," says Spradlin.
Volunteers help warm New England homes
BANGOR, Maine - The low point in Kimberly Henderson's struggle to keep her family warm came in early January when she was too broke to order an oil delivery and had to buy a 5-gallon container to take to her dealer to get enough fuel to make it through the night.But later that month, with the gauge on her 275-gallon tank again approaching empty, Henderson's fortunes turned around when she got a phone call from a local clergyman: He just received a donation that would provide her with 50 gallons of heating fuel that day.
Beijing - China said on Tuesday its battle to rein in soaring greenhouse gas emissions has received a boost from an unexpected source - the nation's controversial family-planning policy.Since its adoption in the late 1970s, the so-called "one-child" policy has averted the births of more than 300 million people, who would have emitted an additional 1,3 billion tons of carbon dioxide per year, a government environment report said.
The news media and the government are fixated on the fact that the U.S. economy may be headed into a recession -- defined as two or more successive quarters of declining gross domestic product. The situation is actually much worse. By some measures of economic performance, the United States has been in a recession since 1975 -- a recession in quality of life, or well-being.
Progress seeks Florida OK to build new reactors
NEW YORK (Reuters) - Progress Energy Inc's Progress Energy Florida subsidiary Tuesday asked the Florida Public Service Commission to approve of the need for its proposed $14 billion Levy County, Florida nuclear power plant.The company estimated it would cost about $14 billion to build the two reactors and another $3 billion for the necessary transmission upgrades.
Data centers are an increasingly significant source of energy consumption. A recent EPA report to Congress estimated that U.S. servers and data centers used about 61 billion kilowatt-hours of electricity in 2006, or 1.5 percent of the total electricity used in the country that year. Concern about the amount of energy eaten up by data centers has led to a slew of research in the area, including new work from Microsoft Research's Networked Embedded Computing group, which was showcased last week in Redmond, WA, at Microsoft's TechFest 2008. The work attacks the energy-consumption problem in two ways: new algorithms make it possible to free up servers and put them into sleep mode, and sensors identify which servers would be best to shut down based on the environmental conditions in different parts of the server room. By eliminating hot spots and minimizing the number of active servers, Microsoft researchers say that the system could produce as much as 30 percent in energy savings in data centers.
Australia: WA warning over meat shortage
In a joint written submission to the ACCC due later today, WAFarmers and the Pastoralists and Graziers Association will argue returns to beef and sheep producers have failed to keep pace with rapidly rising costs of grain, fuel and labour. “In the past 12 months, prices have reached near record low levels for beef,” PGA spokesman Tim D’Arcy said. “At those prices, it is not viable for cow-calf operators to continue.”
According to government statistics grain production in the country has gone up by 5 percent in the last five years. That would have been more reassuring if population growth in the same period had also been 5 percent or less; but it was 8 percent. The green revolution of the 1960s has been in urgent need of being followed by a newer version.
Grass is greener when it’s used for biofuels
In Middle Musquodoboit, Jim Higgins and a small group of local residents recently formed Grass Roots Bioenergy Co-operative.Over the past several years, they’ve been quietly working on a plan to use idle land to grow unusual species of field crops like switchgrass and reed canary grass to be used to produce biofuels.
Growing about two metres high at maturity, these grasses appear well-suited to prosper in Nova Scotia. Harvested annually, they can be dried and processed into solid fuel pellets, providing heat or electrical energy at competitive costs to most other energy sources.
Beef industry reeling from rising feed costs
There are some public misconceptions about the influence of corn ethanol on the cattle industry, namely that once that corn has been processed for ethanol it can be delivered to feedlots, thereby reducing risks of a corn shortage. But corn comes out of the ethanol process resembling confetti and is very hard to ship, beef producers said. In some areas of the country, feedlots have managed to avoid shipping problems by locating across the street from ethanol refineries, but that's not an option for many.Weschenfelder said post-refinery corn is too high in sulfates and phosphates to be fed to cattle in high portions and can actually kill a cow.
Corn-Based Ethanol Could Worsen "Dead Zone" - Study
WASHINGTON - Growing more corn to meet the projected US demand for ethanol could worsen an expanding "dead zone" in the Gulf of Mexico that is bad for crawfish, shrimp and local fisheries, researchers reported on Monday.
A conservative yield estimate of three tonnes of wheat per organically-cultivated hectare is reasonable, Whitley suggests. Assuming you're going for an extremely wholewheat approach - using the whole grain, including bran and germ - each tonne of flour pretty much equates to a tonne of wheat (in British commercial milling 4.5 million tonnes of flour is made from 5.5 million tonnes of wheat every year), then you need 297 square metres of wheat to provide your family with bread.And there's the rub. According to Garden Organic, the organic growing charity, the average British garden size as of 2006 was about 90 square metres.
Furthermore, Whitley strongly advises you only use a quarter of your garden at any one time to produce wheat. A "monoculture" of wheat year in year out would exhaust the soil and allow the spread of disease.
Pollution is called a byproduct of a 'clean' fuel
MOUNDVILLE, Alabama: After residents of the Riverbend Farms subdivision noticed that an oily, fetid substance had begun fouling the Black Warrior River, which runs through their backyards, Mark Storey, a retired petroleum plant worker, hopped into his boat to follow it upstream to its source.It turned out to be an old chemical factory that had been converted into Alabama's first biodiesel plant, a refinery that intended to turn soybean oil into earth-friendly fuel.
It was only a few months ago when $100 a barrel for oil seemed to be a height just beyond the market's grasp. Now, get ready for $110, $120, or, just possibly, according to analysts at Goldman Sachs, $200 a barrel oil.
Frenzy in the oil-futures market leaves motorists in the lurch
Prices are heading to $120 "in the short term," said Matthew Simmons, chairman of Simmons & Co., a Houston investment bank."I'm one of the few people who's not surprised to see crude at $107. I still think it's a bargain."
Petroleum engineer to discuss peak production
While it took decades for oil production to reach current levels, the decline in production will likely be swifter, he predicted, noting the decline is not symmetrical with the increase."It tends to decline faster than it increases," he said of production. "There is a certain amount out there. And we use it a whole lot faster than it's being produced by Mother Nature. We also tend to go to the low-hanging fruit first."
The end of the world as we know it
Unfortunately, the tradition of Malthusian warnings is ingrained in our society without a corresponding memory of their tendency to overstate risk. All the catastrophes predicted were prevented, and we're still here. Yet we continue to issue warnings of our own demise. Again and again, we get into situations we can't possibly imagine a way out of. But then we discover solutions beyond anything we could ever have imagined.I can't imagine how we'll solve global warming. But I'm confident we will. Progress is the modus operandi of the human race. As we move forward, we're bound to encounter new threats to our way of life. Global warming itself is a descendant of Industrial Revolution-era pollution. Antibiotics have saved millions of lives, but we're facing fatal antibiotic-resistant infections as a result. Fertilizers and pesticides that prevent starvation also imbalance ocean ecosystems and poison drinking water. But human progress is indefatigable. Every time the world as we know it threatens to end, we move on to a new, better world.
Michigan conference on peak oil and climate starts May 30
The first “International Conference on Peak Oil and Climate Change: Paths to Sustainability” will feature:● Richard Heinberg author of “The Party's Over: Oil, War And The Fate Of Industrial Societies” and “PowerDown: Options And Actions For A Post-Carbon World”;
● Dr. David L. Goodstein author of "Out of Gas: The End of the Age of Oil", Frank J.Gilloon Distinguished teaching and Service Professor of Physics at the California Institute of Technology;
● Megan Quinn Bachman co-writer & co-producer of the documentary film, "The Power of Community: How Cuba Survived Peak Oil";
● Julian Darley author of “High Noon for Natural Gas”, Founder and President of the Relocalization Network and Post Carbon Institute;
● Stephanie Mills author of “Epicurean Simplicity, In Service of the Wild: Restoring and Reinhabiting Damaged Land”, and “Whatever Happened to Ecology?”;
● Pat Murphy author of "Plan C: Community Survival Strategies for Peak Oil and Climate Change" and Executive Director of "The Community Solution".
Internationally renowned authors Heinberg and Darley appear live via interactive videoconference from California. U.S. Representative Vernon Ehlers (R-MI) of the Congressional Peak Oil Caucus introduces the concept via pre-recorded video.
UK: Government to approve new coal power station
Jim Hansen's, Nasa's climate change scientist, said: "If the British Government indeed approves new coal-fired power plants before carbon-capture technology is ready, and if it believes that this egregious action is in any way compensated by restrictions on gas-guzzling vehicles, it is demonstrating a grievous lack of understanding of the gravity and urgency of dealing with climate change."It is not rocket science. The oil that Russia and Saudi Arabia have will be burned and the carbon dioxide will stay in the air for centuries. By delaying oil use a bit, with more efficient vehicles, we can buy a little time to develop a transportation system beyond fossil fuels, but that is all.
"Oil will take us to the brink of climate disasters, which can only be avoided with a moratorium and phase-out of coal that does not capture the carbon."
Oil tops $109 a barrel for first time
VIENNA, Austria - Oil prices topped $109 a barrel for the first time Tuesday as investors sought refuge from the anemic dollar.Speculation that rising prices for oil and other commodities will offset the falling dollar has driven oil up from $87 a barrel in January. Oil's latest rise came as the International Energy Agency said crude prices will likely be underpinned by brisk demand in China and other emerging markets.
Light sweet crude for April delivery on the New York Mercantile Exchange surged to $109.20 a barrel in electronic trading before slipping back to $108.84 by early afternoon in European trading.
But even that later level was 61 cents higher than the previous intraday peak set Monday, reflecting oil's seemingly inexorable march toward the psychologically significant $110 a barrel mark.
Kunstler: Cheap Oil Is Over: Kiss the Gas Guzzling NASCAR Era Goodbye
A suburban nation of snowmobilers, dirtbikers and NASCAR races -- all of it was made possible by the one-time blessing of cheap oil.
Record fuel prices blow budgets
Separate from the role energy prices play in the risk-and-reward scenario for speculating investors, the result for Americans' lives is that energy, and the mobility that it brings, is becoming crushingly expensive.High oil "makes us poorer than we would otherwise be," says St. Louis Federal Reserve President William Poole. "There's a hit to real income. It's a drain on your purchasing power."
How this shows up in everyday life...
IEA: no likely relief from oil prices
The International Energy Agency warned Tuesday that there is unlikely to be much relief from current high oil prices because of brisk demand in China and other emerging markets.While record prices above $100 per barrel may chip away at oil consumption in the United States and other developed countries, emerging markets are not slackening, the Paris-based agency said in its monthly report.
THE relentless rise in oil prices, perpetuated in large part by insatiable global demand, underlies a crucial principle: that the dream of energy independence is a delusion.The potent mixture of robust demand, limited spare capacity and multiple threats to supply that are now driving the market is the precursor to a world supply-demand imbalance.
Venezuela's oil belt reopens to private groups
Less than a year since president Hugo Chávez seized control of the vast oil fields in Venezuela's Orinoco belt, executives from international energy companies are back, armed with smiles, pens and cordial handshakes.US oil groups ExxonMobil and ConocoPhillips spurned the compensation offered by Caracas, preferring to fight it out in the courts - Exxon is awaiting a ruling in London this week. But France's Total, Norway's Statoil-Hydro and Italy's Eni have signed potentially significant new deals.
Trade deficit grows in January as imports, crude-oil prices hit record highs
WASHINGTON: The United States' trade deficit grew larger in January as imports — including crude-oil prices — zoomed to all-time highs.
CALGARY -- In response to concerns that new U.S. environmental legislation will drastically impact development of Canada's oilsands, Washington is considering classifying oil produced from the region as "conventional" fuel rather than subject it to the stringent standards expected of "alternative" fuels.
Liberals, NDP decry Tories' oilsands plan
EDMONTON - Alberta's Energy Minister -- and some oil industry leaders -- took a conciliatory tone to new federal rules affecting oilsands developments and coal-fired power plants yesterday, at the same time they were denounced by opposition parties.The restrictions will require new oilsands plants to install carbon-capture and storage systems by 2012, and restrict construction of coal-fired plants using dirty coal.
New technology has high costs and legal pitfalls
OTTAWA — The federal government has made a leap of faith that Canada's oil industry and coal-fired utilities can quickly incorporate carbon capture and storage technology that remains largely untested and is fraught with legal uncertainties.
D1 Oils chief leaves with broadside
Karl Watkin, the founder of biofuels pioneer, D1 Oils, today announced his departure from the company with a verbal broadside against governments, campaign groups and even the London Stock Exchange.All had played their part, he claimed, in unfairly damaging the financial value and progress of a firm which had been feted by Bill Clinton and other world leaders for its success with turning the Jatropha plant into a sustainable transport fuel.
China May Ease Price Controls on Vegetable Oil, Minister Says
(Bloomberg) -- China, which imposed price curbs on food to fight inflation, may ease controls on retail vegetable oil prices after supplies to consumers dropped, a minister said.
In the growing firestorm of criticisms about ethanol and other biofuels, the facts are being badly burned. Opponents decry policy incentives to encourage the industry's growth and make specious claims that American biofuels are driving up food prices and perhaps even encouraging the destruction of forests in other parts of the world. But no one is stopping to ask if any of it is true.
Rising Food Prices? Let Them Eat Biofuel
Who would have believed that in this day and age people would be rioting over food prices?With rice, wheat, maize and feedstock up between 30 and 50 percent this year, ordinary people around the world are struggling to afford a simple life-sustaining diet. Indeed, since 2005, the prices of essential commodities have risen by an average of 75 percent.
People in Egypt would be in dire straits if it wasn’t for the government’s quick action to broaden food subsidies, no doubt with memories of the bloody 1977 bread riots in mind that threatened to bring down the government.
Britons form clubs to cut carbon, pay for overuse
London - It's the time of year when many Britons might be thinking of hopping on a plane to get some sun. But Andy Ross won't be joining them.It's not that Mr. Ross is scared of flying. Instead, he is trying to make the world a cooler place. By cutting out leisure flights and adopting a host of other measures, he has reduced his own carbon emissions by more than 80 percent in two years.
Minority groups most at threat from climate change
LONDON (AFP) - Ethnic minorities and indigenous groups will suffer disproportionately from the effects of climate change, according to a report published Tuesday.The study by Minority Rights Group International (MRG), which analysed several recent environmental disasters, found that even though minorities and indigenous peoples were hardest hit, they were often the last to receive help and relief.
Food, energy costs risk UN poverty goals
UNITED NATIONS - Pricey food, high oil costs and grim projections of damage from global warming are the biggest challenges to meeting the United Nations' 2015 deadline for reducing poverty around the globe, officials said Monday.
Seal cubs threatened by global warming, WWF warns
HAMBURG, Germany (AFP) - Hundreds of newborn seal cubs risk dying of hunger and cold because global warming is making ice in the Arctic Circle melt too fast, the World Wide Fund for Nature in Germany warned Monday."In some parts perhaps not a single one of the seal cubs born in the past few weeks will survive," the WWF said in a statement.
Queen urges action, not talk, to tackle climate change
LONDON (AFP) - Queen Elizabeth II made rare comments on the environment as she issued her Commonwealth Day message Monday, calling for more action to meet rhetoric on tackling climate change.
California's greenhouse-gas law: Who will pay?
Oakland, Calif. - Somebody, somewhere will have to pay for California's landmark law that would force dramatic cuts in greenhouse-gas emissions by 2020. Two years on, it's not much clearer who.
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I know this has probably been explained here before, but I haven't seen it. Could someone explain why gas prices do not seem to be following oil prices up? I would have tought that oil at $109 would have moved gas prices to $4 or more, but they seem to be staying in place. Why the disconnect? Thanks.
The $109 price is not of crude oil in the refinery today, but of "futures". They're not spending $109 and getting a barrel of oil, but are buying the right to get a barrel of oil (say) in March 2009.
What people expect to pay a year or more from now does not necessarily affect the price of what's in the refineries and service station pumps today. It's a bit the way if you're paying rent, that mortgage rates or house prices go up doesn't always affect you - in paying rent, you're paying whatever the owner paid for it however many years ago, you're not paying whatever it's worth today. Likewise, when you pay for fuel at the pump you're paying for their costs in the last few weeks or months, not their costs today or a year from now.
If that 68% portion goes up, well the refining 8% is a fixed cost, as is the 13% taxes. So all the oil companies can change is the 11% distribution and marketing.
They have to choose whether to pass the cost onto the consumer, or just make a smaller profit. If they pass the whole cost on, customers might decide to just... buy less! Hell, the customers might even demand the government bring the streetcars back! And then where would the oil companies be, eh? :D
But we're talking about April 2008 delivery price here not 2009.
Naw, the NYMEX price is the spot price in Cushing, Oklahoma right now, or within a few pennies of it.
http://www.bloomberg.com/markets/commodities/energyprices.html
The major retailers follow the RBOB price on the NYMEX pretty closely. If the NYMEX price goes up today, you will see them out tomorrow morning, or sooner, changing their prices. But they are a bit slower to respond when the price falls. They say they must recover their cost. Of course they are making a windfall profit when they mark up the price immediately, regardless of what they bought their last load for. However deliveries to large retailers are made every couple of days so there is never much of a delay.
Ron Patterson
And once again, shawnott's (and others) are left unanswered.
The price of gasoline should be nearing $5 now.
It was made obvious last week as RBOB went to $2.72 and fell back to $2.51.
Even as crude has gone to $109, RBOB is $2.73,
dropping to 2.68 with crude at 107(up $4 over RBOB's
$2.73 price).
And this has been going on since crude topped $80.
Gasoline is still neck and neck with Katrina prices
of Sep 05.
Command Economy. Watch the Indies like Valero, Tesoro,
Sunoco. If I owned them, I would be putting just enough
thru to lubricate the machinery.
Something's got to give.
RBOB gasoline opened last week at $2.69, fell back on Tuesday when crude fell below $100 then closed on Friday at $2.69 exactly where it opened.
As Robert points out below RBOB does not follow oil exactly and there is no reason to believe it should. The difference is called “The Crack Spread”. [This has nothing to do with Eliot Spitzer. ;-) ] You can actually trade futures and options on the crack spread. It is precisely because the crack spread varies from time to time that futures and options are traded on it.
Bottom line, absolutely nothing unusual is happening.
http://www.nymex.com/crack_spread_overvi.aspx
Ron Patterson
We're looking at two different RBOB's.
http://futures.tradingcharts.com/intraday/RB/48
Mar 4 $2.62 to 2.52.
Mar 5 $2.52 to 2.68.
Mar 6 $2.65 to 2.61.
Mar 7 $2.70 to 2.67.
Mar 10$2.67 to 2.69.
Crude same time period.
$99 to 108.
http://futures.tradingcharts.com/intraday/CO/48
RBOB goes up $.17.
Should've gone up at least $.24. And RBOB always tracks Crude down.
And it's been doing this for at least a year.
That is the 30 minute chart is is basically useless as far as daily opening and closings are concerned. Go one step back to here:
http://futures.tradingcharts.com/chart/RB/48
Then click on each bar to get the opening and closing for each day. This gives you a much clearer picture and it is the exact same source as yours, except much clearer when you you look at the daily chart rather than the 30 minute chart.
Ron Patterson
Ron,
I thought that you would be interested in this missive from one of my Wall Street correspondents. No link yet. Note that the IEA considers a -7.7%/year decline rate in existing fields to be optimistic. At -7.7%/year, existing Non-Opec fields decline by 50% in about nine years. At -11%/year, they decline by 50% in about seven years.
Bloomberg: Oilfield Decline in Non-OPEC Producers `Exaggerated,' IEA Says
2008-03-11 05:09 (New York)
Thank you for this info. Very helpful.
''extended North Sea field shut ins''....
What extended North Sea field shut ins?
Just the usual summer maintenance shut downs.
Or maybe they think that the 1999 UK all time peak is just an anomaly.
Thanks Jeff. 7.7 percent is a far cry from the 4.5 percent that CERA came up with.
Ron Patterson
But it's pretty damned close to the 8% posited by the CEO of Schlumberger a few years ago.
Just to let you know this fits pretty well with my sharp drop off model.
Sounds like the oil industry may be having serious decline problems that are not being talked about.
Same I really suspect with production.
In any case with my model things change fast enough that the collated data from the government can't keep up with the situation. Absolute worst case is a 1mbpd drop in production every 4 months.
My absolute worst case is roughly 2x yours, memmel.
2x ? you must be factoring in war to get that I'd think.
The only way I could get steeper is to assume war in Mexico, Venezuela, ME etc.
Its not a bad assumption but impossible to figure.
Also note this did not include Export Land so that would boost it a bit more on the export side.
On this flip side this is assuming basically no large projects come online.
If you get a few of those it would probably make up a good bit of Export Land but not both steep declines and export land.
Assuming war takes out a constant 2-4 mbpd per year plus look at export land for exports only. And really push it you might get 2x.
Obviously a gulf war could take out more but I don't think that including that makes sense for a prediction its outside the scope.
Anyway I'd like to see you assumptions to get 2x mine. Lets see if my guess of above ground factors is right.
Creepy ! Any other facts to corroborate this ?
Read
http://hubbert.mines.edu/news/Ivanhoe_96-1.pdf
Christ, that was a great forcast. They nailed the 300bbo that al Husseini laid out last October... from 13 - 14 years ago.
Damn!
Cheers
That's very interesting!
EIA's March short term report was just released.
http://www.eia.doe.gov/emeu/steo/pub/contents.html
It said that "0.7 mbd of non-OPEC supply growth is projected in 2008, revised down by 0.2 mbd from the last Outlook. This change represents a revision to expected project schedules as well as a re-evaluation of decline rates at existing fields." Assuming that 0.5 mbd of this 0.7 mbd is biofuels growth, this gives 0.2 mbd growth in crude and NGLs. Undoubtedly further project delays will round this number down to 0 mbd growth.
Gross peak oil additions from wiki oil megaprojects 2008 is 4.1 mbd for crude/NGL.
http://en.wikipedia.org/wiki/Oil_Megaprojects/2008
However, only about 3 mbd of new production should occur since the 4.1 mbd refers to peak which can be delayed by several years.
Non-OPEC-13 crude/NGL production for 2007 was about 46 mbd. The adjusted EIA forecast non OPEC 13 growth of 0 mbd implies that the "EIA adjusted" non OPEC decline rate is 6.5% (3 mbd/46 mbd).
If the IEA's decline rate of 7.7% is used then non-OPEC-13 2008 crude/NGL estimate is 45.5 mbd, a drop of 0.5 mbd from 46 mbd in 2007. My latest forecast, updated for the recent EIA actual data, also predicts that non-OPEC-13 2008 crude/NGL is 45.5 mbd.
This is kinda interesting.
Since my worse case scenarios imply decline rates of 7-12%.
10% of 45.5 = 4.54 mpd
So if OPEC holds stead and Non Opec decline rate is closer to 10-12% then
we end up down. If Opec is actually 7% then for sure down.
So ending 2008 down 4mbd is not impossible.
My best guess ( gut feeeling ) is 2mbpd down by the end of 2008.
These propaganda bulletins by the IEA underscore its uselessness for the task it was designed for. Production in Russia has not stalled/dropped because of asset divestments. What drivel.
The mean age of oil fields is increasing simply because new discoveries are too small and too few. Oil field decline rates do not shrink or stay constant with age, they increase. So by mathematics, the mean decline rate in exiting world production centers is increasing. New production comes on stream intermittently so in some years the underlying decline becomes more apparent. The IEA is spewing nonsense just like CERA.
At some point, the oil companies may "bring the streetcars back" -- just as they destroyed them at the beginning of this sorry mess. At some point, they will run the "streetcar lobby", just as they run the highway lobby of today. I look for this transition quite soon, in fact.
The streetcars were destroyed when the people in Santa Monica and elsewhere started buying cars and stopped riding the streetcars. I once rode the streetcar (interurban) from Dallas to Waco during its last year. It was miserable compared to the bus. Of course it is fun to blame the oil companies for everything.
Conspiracy??
http://1134.org/stan/ul/GM-et-al.html
Of course, there are numerous stories about how this happened. In the short term, cars won, and the winners write the history.
In the long term, automobiles will prove to be an evolutionary dead end. The final word is not in. Probably not a conspiracy -- just mass delusion and stupidity. And cupidity.
opinions vary on this point, Robert, but it is what it is. Extreme and coordinated tactics where documented and proven:
http://en.wikipedia.org/wiki/General_Motors_streetcar_conspiracy
contributing causes did exist of course:
http://www.lovearth.net/gmdeliberatelydestroyed.htm
Even though the refiners are using oil they bought at yesterdays price, they know they will pay more for the next batch. If I owned a million gallons of gasoline, I wouldn't sell it based upon my sunk cost, but at what the market will bare. If I bought oil last month, and its price has gone up/down, that is a gain/loss on the commodity, the gain/loss on refining it is an independent manner. During the last several months supply/demand for gasoline has made it very difficult for refiners to make a profit. I think this is an effect of high (and increasing) oil prices. Demand is reduced, but the nations refining capacity remains the same.
In January of 2007 RBOB gasoline on the NYMEX hit $1.40 a gallon. Today it just hit $2.71. I think gasoline has been following crude oil.
http://futures.tradingcharts.com/chart/RB/W
Notice the huge move up last spring of over $1.00 per gallon. Retail gasoline prices usually average about half a buck higher than RBOB gasoline on the NYMEX. Perhaps it was a little higher than that last January. In other words it was slightly overpriced then and is now more fairly priced.
Ron Patterson
And I know it hasn't.
Chart it for us.
One yoy, from Mar 07 to today.
I agree, there has been a disconnect and I think it will be rectified this summer. You can plot Crude on Retail Gasoline at Gas Buddy website. I am guessing $.50 of retail gas for every $10 of crude so at $110 we will have $5.50 this summer.
plot some prices
Your "guess" is at odds with Kiashu's graphic above, which would suggest that about $2 out of a $3 price for gasoline is for the crude. Assuming that the crude delivered to produce gasoline sold in Jan 2008 cost $80/barrel(*) that would mean that every $10 in the crude price adds roughly $0.25 to the retail gasoline price, give or take. So (after adding back the $1 that goes to things other than crude) at $110 oil we might end up with roughly $3.75 at the pump sometime in the coming months. National US average, of course; in my neighborhood, that would mean $4.25 at the cheap station.
(*) $80 a barrel seems a decent enough rounded off average for the few months preceding Jan 2008. Note that if my guess is too low, then gasoline prices will increase less because of oil price increases. If my guess is too high, then gasoline prices should rise more.
are we neglecting the fact that the price a refiner pays is adjusted for oil gravity and sulphur content ? that NYMEX posted price is for wti. (edited)
Could someone explain why gas prices do not seem to be following oil prices up? I would have tought that oil at $109 would have moved gas prices to $4 or more, but they seem to be staying in place. Why the disconnect?
Gasoline inventories are at record high levels in the U.S. That has made it more difficult to pass on price increases. When inventories are where they are, and you try to pass on a price increase, a lower cost competitor may steal your customers.
Last year, we had the opposite situation. Falling inventories mean rising prices. Nobody could steal customers, because nobody had any excess product.
However, it is getting painful enough that prices are increasing now. The national average gasoline price has gone up now for 3 weeks in a row.
The only reason gasoline stocks are at record is
ethanol.
Here's the two Weekly price charts courtesy
TFC:
http://futures.tradingcharts.com/chart/RB/W
http://futures.tradingcharts.com/chart/CO/W
The key numbers:
Crude $75 down to $55, then up to $108 today.
RBOB $2.40 to 1.40 then up to $2.70 today.
All of this starting the second week in June 07 with that
huge "gasoline" increase.
Now we know today that 420 000 bbl of ethanol have been "added" every day since then.
Mcgowanmc, do you have any links to reliable sources who say that ethanol is included in the EIA's gasoline inventory figures?
I've been hearing this as the explanation for the high price of gasoline in the face of high inventory, and I've been hearing it from knowledgeable people. It would make sense. But no one can give me a good primary source.
US Petroleum Supply, Ethanol, and State of the Industry - API ...
According to API, “The figures cited here include gasoline that contains growing amounts of blended ethanol, amounting to well over 400000 barrels per day ...
www.eclipsenow.org/archives/561
"6. Ethanol
According to API, “The figures cited here include gasoline that contains growing amounts of blended ethanol, amounting to well over 400,000 barrels per day in 2007. If ethanol is excluded from the calculations, total domestic oil deliveries for the year would actually have shown a half percent decline.”
Analysis Based on EIA data, I would estimate US ethanol production would amount to 420,000 barrels per day in 2007, which is consistent with API indications. Last year’s US ethanol production amounted to 319,000 barrels per day, based on EIA data, so the difference is about 100,000 barrels a day. The 100,000 barrels per day increase during 2007 is about 0.5% of total petroleum products supplied of 20.7 million barrels a day."
Thank you very much, mcgowanmc. This is extremely helpful.
Straight from API:
http://www.api.org/Newsroom/record-high-us-fuel.cfm
"The demand data includes an increase in the amount of ethanol blended into gasoline, which averaged more than 400,000 barrels per day. Excluding ethanol, which accounted for nearly five percent of all gasoline sales during the year, total domestic oil deliveries in 2007 actually fell half a percent. An estimated 6.7 billon gallons of fuel ethanol were used by refiners in 2007, some two billion gallons more than the 4.7 billion gallons required by law but more than two billion gallons less than the recently-passed requirement for 2008."
The only reason gasoline stocks are at record is ethanol.
I guess I am not following that logic. As late as December, gasoline stocks were very low. They took off in December on the back of very strong gasoline imports - attracted by very high gasoline prices. The ethanol you cite is ethanol that went into the gasoline pool, not necessarily ethanol that went into inventories.
Wouldn't ethanol be included in blending components? (That is what I'm hearing from other analysts.)
It is, and it is the reason that the blending component portion of inventories has increased. But the reason for the record high inventories has nothing to do with ethanol. Look at the gasoline inventory chart (hover over the blue gasoline link under "stocks", bottom-left) at:
http://tonto.eia.doe.gov/oog/info/twip/twip.asp
Inventories have been on an almost vertical climb since mid-December. That's not ethanol; that's imports.
It's baffling.
I did notice that gasoline imports seem to be falling off in recent weeks. http://tonto.eia.doe.gov/oog/info/twip/twip_gasoline.html#production
Thanks to all the answers. I guess my confusion has been in my thinking: Katrina = $80 oil = $3 gas. Now $109 oil still equals $3 gas (roughly).
So if it is all about inventories... doesn't the cost to produce those inventories increase? I guess I am thinking of it as a pipeline... we take oil out of the ground and produce gasoline, even if it goes to inventories. If the price of that oil goes up, so should the end product. Sorry, I still have a lot to learn.
If the price of that oil goes up, so should the end product.
This is why refining margins have evaporated. They were around $40/bbl last year. Right now they are $5/bbl (last time I checked).
Thanks. That makes a lot more sense now.
I see the shrinking crack spread more disturbing than price. How small can it get before small refiners stop refining and true shortages arrive? The Chinese commies can outbid us for crude and absorb a negative crack spread through say duties on exports or the sale of bonds. The big oil companies can ride out a negative crack spread on the back of their recent profits. Parts of the country at the end of the delivery chain and unable to buy enough fuel to make that last mile worth it may suffer the fate of Dakota farmers last fall. Crops may not get planted soon enough and today's $5.50 corn price may look like a bargain next fall.
How small can it get before small refiners stop refining and true shortages arrive?
They are cutting back now. The least efficient producers will cut back the most, and some will go out of business if margins continue to remain low. That's the nature of the refining business. Perhaps we need a windfall profits tax that gives money back to refiners when the windfall disappears. :-)
Refining margins do occasionally turn negative. However, I don't think refineries can exit the market in a way that would create shortages. The least efficient producers will exit the market if demand falls below the point at which they are able to sell. However, if there were anything like shortages caused by refinery shutdowns, the margins would increase again and thiose that shut down would resume production.
But but KSA claimed the problem was a refining capacity issue ?
I'd have no problem believing them if I didn't have to swallow a whole new belief every six months. I wish they would just blame it on the horoscope for the week so at least the story is consistent.
that's why valero is slagging off 40% of their US refining
Partly because they are now selling winter blend gasoline. Many refineries in the world can ship winter blend gasoline to the US. Further, we are now in the time of year when winter blend is in the process of being flushed out of the system (no longer legal in the spring). Summer blend gasoline is more difficult to produce and more difficult for foreign refiners to make and ship into the US. Therefore, much lower margins on winter blend, especially at the end of the season - to be followed shortly by much higher margins on summer blend. You know, the supply/demand thing.
True.
I've also think that the Goldman re-weighting of the GSCI in August 2006 may continue to be a factor.
http://www.ft.com/cms/s/2/a378d634-b54b-11db-a5a5-0000779e2340.html
Goldman's reweighting forced funds to sell 73% of their gasoline futures to conform to the new index. http://www.gata.org/node/4404
Gasoline still has only roughly 60% of the weighting now that it had in 2006. (4.88% now: http://www2.standardandpoors.com/portal/site/sp/en/us/page.topic/indices... 7.98% in 2006: http://en.wikipedia.org/wiki/Goldman_Sachs_Commodity_Index)
The reweighting appears to have caused a permanent distortion in the price of gasoline relative to the price of oil. I don't think it would be too tin-foil-hat to say that a political decision was made to sacrifice refineries to make gasoline cheaper for consumers for as long as possible.
$109 today, three Yergins ($114) by the end of the month?
You are right about a disconnect. Local taxes are 64 cent/gallon, NYMEX is at $2.72 and I can buy retail gas anywhere for $3.29, a few stations in the 'burbs 10 or even 20 cents less. Guess the distribution costs are negative.
Deflation to Hyperinflation in Practically No Time at All, Part Two
Interesting action by the Fed and ECB.
As several people have discussed, the urge to hyperinflate, at some point, is going to be irresistible.
BTW, as we have discussed, as oil prices go up, in Export Land the cash flow from net oil export sales goes up (at least initially), even if an exporting country is exporting less oil.
But consider another factor in Import Land.
What energy price would cause Bill Gates to curtail his energy consumption and what energy price would cause a poor consumer in Africa to curtail his energy consumption? In other words, as forced energy conservation moves up the food chain, the bidders for declining net oil exports are stronger. So, as forced energy conservation moves up the food chain, doesn't the price have to go up faster in order to force richer consumers out of the market? And as this happens, we see a positive feedback loop in most exporting countries, causing their rate of increase in consumption, in most cases, to increase, e.g., Russia is on track to become the #1 new car market in Europe.
I have been wondering about the talk of the effect of the declining US dollar on the price of crude.
For my own enjoyment I looked at the price of WTI over the past year and the relative price in USD, $CDN and Euros.
The price of crude in USD is from the EIA data.
The exchange rates were read from the graphs of the past year on the BBC business currency site and so are not exact but very close.
http://f1.grp.yahoofs.com/v1/QHTWRzG__5TAdKYc0HrTjQ4T1SaQQS9DvGkFI90Zr3P...
I doubt I am looking at it very scientifically, but it appears to me that relative to the price in Euros at least, about one third of the past year's price increase could be attributed to the USD falling. The rest is due to other factors from speculation to perhaps a growing respect for the fundamentals.
As far as Canada is concerned it seems we have actually reached the point where we are taking in about the same number of dollars from US exports as we are paying out for east coast crude internationally.
Again I may be reading this wrong but it looks like we were actually net losers in the crude business until last October.
Overall the price rises would seem to have had less impact in the Euro Zone as in the USA with us Canadians finally getting on the plus side ourselves. Could someone point out a better way to look at this?
With the dollar looking for a 9.6 from the Russian judge today the ratios might change even more.
Since all currencies float, or are linked to currencies that float, there really is no absolute price. Oil doesn't look so bad when calculated in Euro, RMB, or in Canadian, Australian, or New Zealand currencies. However, those currencies (among others) have been artificially driven up by the carry trade, or are being strengthened internally to combat inflation.
My gut feeling is that your 1/3 is in the ballpark of how much of oil's rise to attribute to USD decline. It could be a bit higher, but I think tight supplies caused by Asian demand coupled with a risk premium account for more. I think we're also starting to see some actual ELM-induced supply crunch in the price. I think we've seen some demand destruction in some of the poorer countries, which has tended to dampen its effect on price. That could change soon, however.
Hi jografy,
Try plotting it against gold which unlike currencies cannot just be printed to order. Sorry I don't have the figures or time to work it out. Today with gold at say $1,000 and oil at $110 it's nine barrels per ounce of gold. Back in 1971(?) when the US came off the gold standard gold was around $35 and oil $2 so 17.5 barrels per ounce. Either gold is expensive or oil cheap, my money is on oil being cheap.
FWIW, in the UK petrol (gas) is around GBP 1.10 per litre which works out at
1.10 x 3.79 x 2.00 = USD $8.34 a US gallon.
Actually gold can be "printed to order," after a fashion. Just like any other resource, there are economic gold reserves and non-economic, but the boundary between them is not hard, it's flexible depending on the currency rate so the influx rate of gold (how fast it's being mined) greatly depends on the price of mining it, which includes oil, inflation and everything else, and how badly you want to mine it. So as the gold price goes up, there is an increase in the number of available reserves. So I wouldn't say there's anything magical about gold. It's no different from any other precious metal, only more rare than some and less rare than others (e.g. Rhenium is $10.5k per oz. right now).
Right now the price of gold is at a historic high and still the supply is growing at only 1% per annum. It is true that as the price goes higher it becomes economical to mine lower quality deposits, but it takes ever increasing amounts of energy, risk and effort to do so. Ultimately the supply of gold is constrained by energy, infrastructure and availability of ore. The supply of dollars on the other hand is only constrained by Bernanke's will. The money supply M3 is growing around 16%-17% per annum.
The reason I chose gold is that it has been seen a store of value for thousands of years and most of the gold ever mined is still around. Yes extraction can be increased according to the price but only by a very small percentage unlike paper money that can be printed at any rate. In Zimbabwe inflation is over 66,000% and they have notes of at least hundreds of thousands of Zim dollars. Also gold is subject to finite limits just as oil and all other minerals.
The reason governments were keen to get rid of gold is that it removed their constraints and allowed them to inflate the economy to give an impression of growth. A properly run gold standard would provide stability and remove the need for floating exchange rates which are only of benefit to speculating dealers who add nothing to civilisation. Another restriction of a gold standard is that it makes it difficult for a government to finance a war - which might be of some benefit in modern times:-)
I don't know if I would call this 'the urge to hyperinflate'...this is called 're-flation'.
The credit crisis draining liquidity at an enormous and never ending rate.
This is just trying to put a stopper in the tub.
Far be it from me to write a word in defense of rich people, but I should point out that a lot of people didn't become rich by being spendthrifts. It is a well known phenomenon that some of the richest people are also the biggest tightwads around. The assumption that rich people will just bid up the price of energy so they can continue their consumption without any conservation is a questionable one.
Perhaps you have curtailed your energy consumption as gasoline prices went from $2 to over $3. If you have not materially reduced your consumption (I haven't), you and I both have "bid the price of energy up so that we can continue our consumption without any conservation."
Actually I am indeed driving less than I was when gas was just $2/gal.
So the move from $1 to $2 didn't cause you to conserve, but from $2 to $3 did?
My point is that as we move up the food chain, current gasoline expenditures as a percentage of income tend to decline, so I am theorizing that the rate of increase of energy prices almost certainly has to accelerate, in order to inflict enough pain on higher income consumers to force them to curtail consumption.
When gasoline prices first crossed the $3 mark, the NYT profiled several consumers. With one exception (a guy who wanted to carpool, but couldn't find a carpool partner), the only consumers who had curtailed their driving were the ones physically incapable of buying gasoline in the same quantities that they used to.
I would say yes. It may not seem like a big difference when priced per gallon, but most of us don't buy gasoline by the gallon. We fill up our tanks, and I remember how outraged people were when it took over $50 to fill the tank of their SUVs.
The article above ("Record fuel prices blow budgets") is about how high prices are affecting even the (relatively) wealthy.
People aren't cutting back on commuting, because they can't, but they are cutting back on recreational driving.
I'm not arguing that the move from $1 to $2 didn't cause someone to conserve. My point is that energy expenditures at a given price point tend to represent a declining share of income, as we look at higher income groups, with Bill Gates being at one extreme and a poor African at the other extreme.
Let's assume two guys each buying 600 gallons per year of gasoline. One has a $40,000 take home income, the other $80,000. At $2, the lower income guy spends 3% of take home on gas, at $4, 6%. The higher income guy, 1.5% at $2, and 3% at $4. Let's double the income to $160,000 (assuming same volume). At $2, it's 0.75%, at $4, it's 1.5%.
So, on a percentage of take home income, the $160,000 guy would have to see a gasoline price of $16 per gallon to bring his gasoline expenditures up to 6% of income.
Drudge Report Headline:
Schwarzenegger's daily commute by private jet draws flak...
Well, I can say that I have reduced my consumption of gasoline since prices started to spike. I bought a compact to replace the mid-size sedan I had been driving. I can certainly afford to buy a larger car, and the gas for it, but that's not what I want to do with my money.
A bit of anecdotal evidence about gas prices at the pump...From this mornings paper...
Area gas prices spring ahead
Staff and wire report
'If you're not feeling the pinch of gas prices at the pump, you're not driving.
The average price of unleaded regular gasoline in the Daytona Beach area surged past $3.30 a gallon Sunday and Monday, a record for the area. Meanwhile, prices nationwide closed in on a record high.'...snip...
http://www.news-journalonline.com/NewsJournalOnline/Business/Headlines/b...
Two parts to demand: You have to be able and willing to buy gasoline at a given price.
My reasoning for advocating ELP is to get ready for much higher prices, and not because of conservation per se, because any energy saved is gobbled up by someone else, for example, the Govinator.
I am stuck in our current dwelling because of SNS (Spousal Nesting Syndrome). If I had my druthers, we would have been living in a two bedroom rented unit where I could walk to work.
Yeah, well, higher prices made me less willing.
The cost of fuel wasn't even a factor when I bought my first car. Safety, reliability, features, design, make...I considered all those things, but didn't give fuel efficiency a thought.
The second time around, fuel efficiency was one of my top concerns. Probably second only to reliability (which was my top concern the first time, too).
I have a bit of SNS at this end as well. We are still in the 2,300 sq ft home that we raised a family in. The 3 extra brs are filled with so much stuff it is bewildering. Large 2 car garage is full of motorcycles and parts of motorcycles, tools, a complete wood working shop, etc. One br is stuffed with 'hurricane supplies'. If a burgular broke into this place he wouldn't know where to start. We have a couple of small rental homes on beachside but at our age we don't want to live over there any more. Lots of special events here and they gridlock traffic on beachside. We would like to move out of this place and into a smaller home but prices and (strange) Florida taxes have made it unattractive to do so...plus, we are sort of stuck in our ways even though both of us know what is coming. Back to Smith Barney tomorrow to re-arrange stuff...been spending way too much time with those people recently.
I regularly walk to the local, old, small shopping center that contains a Publix Grocery, CVS Pharmacy, trendy clothing shops (that I have never been in), Dairy Queen, liquor store, etc. Its 3 1/2 miles round trip and a very pleasant walk across a golf course, large park, and part of our neighborhood. I suppose we will croak sitting here typing on our computers. I can think of worse ways to go. :)
motorcycles and parts of motorcycles,
Any oooolllld parts in there ?
I've got an '83 lowrider w/80" shovel, that I'm going to get on the road this year.
RMB, I have a 1944 WLA 45cu in flathead that is now back together. It is the second 45 Harley that I have owned. First was in 1958 when I was age 15. The first one cost me $100, the one I have now cost more. I have a 2000 cop road king that has been repainted, chrome front end, single solo seat (leather tractor style old Harley) and lots of other mods including engine and tank badges from a 58 Pan. Also have a 2003 Fat Boy with engine mods, 2001 Kawi W 650 vertical twin (similar to old Bonnie) and a Honda Trail 110. My best friend has a 80 Shovel kick and electric and around here (Daytona area) there are tons of guys on Shovels. Two other buds ride Pans. Everyone that has Shovels and Pans in this area are hording parts. :)
Sorry, I dont have any Shovel parts. Here's hoping you get it in the wind.
Nice collection !
If a person has a reasonable amount of "wealth" they have a reasonable chance of having some of that invested directly into commodities, or indirectly, e.g., by owning oil and gas stocks or those of the service companies. I have been following this for a number of years, including the last year on TOD. Essentially, my energy is free. As prices have risen, the value of my investments have increased much more than I could ever spend on higher energy costs. I would assume that most readers of TOD over the past few years have also adjusted their investments to reflect their agreement with Matt Simmons, BoonePickens, Richard Rainwater and most of the posters here.
I think your assumption is probably incorrect.
The average American is wealthy compared to the rest of the world, but that doesn't mean they have a lot of money to invest. Those who do generally invest in mutual funds (often through their employers' retirement plans). There are some energy mutual funds, but most of them have a fairly high minimum investment.
Most Americans are living in their investments. That's why the mortgage implosion is such a disaster.
Americans are feeling pain, but the point Westexas is making is that America as a whole is definitely in there bidding up the price of oil against China, for example. Our demand is flat or starting to decline, while China's continues to rise, but we aren't anywhere near dropping out of the bidding, and neither is Europe or the rest of the OECD. We have a long way to go before we start really dropping out of the bidding.
I was responding to jbunt's claim that most here would be profiting off peak oil if they really believed Simmons, et. al.
I'm sure most would...if they had the money. But 70% of Americans live paycheck-to-paycheck. They don't have spare money to invest. Not enough to offset the higher cost of energy, anyway.
Leanan, how did you come up with 70% as the percentage of Americans living paycheck-to-paycheck? Do you have some kind of data source on that? Is there any provision within that 70% for money going into a 401k or other retirement fund that may be investing for them or are we truly looking at this high a percentage of Americans with no savings beyond their home equity?
Here's one source (PDF warning) that spawned quite a bit of press some months ago. See question 16, which I think most would answer without considering 401k or other contributions, as those are not accessible if one's paycheck is delayed.
It's a widely quoted number. Like here.
Here's a slightly more optimistic 65%.
I suspect it's worse now, with the mortgage crisis and higher energy prices.
Not sure how many people have 401(k)s or other retirement accounts.
A bit OT - but I was wondering if folks here could answer a quick question?
As part of my PO preparations I have been trying to liquidate my 401k here at work (while still employed) and put the funds into an FDIC insured IRA, only to be told that this is not possible without a "triggering event" (hardship, resignation, etc).
I have taken in-service withdrawals in the past on a 401k at a previous company, but now I'm being told that IRS regulations prevent this. My research tells me that this is really up to the company and the financial institution.
I suspect early 401k withdrawals will soon become a more common concern - does any one know the real options for me or the company in general? Thanks in advance
AndyB
You might want to poke around the IRS web site. Here is part of the section on 401k withdrawals: http://www.irs.gov/faqs/faq-kw7.html
if you are over 59 1/2 you should be able to take an in-service withdrawl without tax penalty(the w/d will be taxed as ordinary income unless it is a roth 401k). i dunno about a rollover, which is what it sounds like you are trying to do.
i supppose the co you work for might have a rule against it. that is one problem with 401k's, you are subject to someone else's rules.
i am in the process of liquidating my 401k as well, i dont care much for the investment options. my ira's have done much better.
I am 15 years away from age 59 1/2, so that's not an option. I'm just surprised that there is now way to liquidate my 401k account, short of quitting. I figured that a company's 401k retirement benefits shouldn't be incentivizing people to leave the company. How else do I ever see that money if I believe inflation or a financial collapse will occur before 2023?
Stick it all in the "guaranteed" fund (eat the inflation) and plan a job change in the next year.
I did the first part a few months ago and chuckled quietly when a co-worker mentioned losing $10k with his 401k (in one quarter, I cleared a bit over 1.5%, I was happy).
The second part, for me, is a few months away (hopefully). You have the time, if the market holds up (thus my quoting on the guaranteed fund).
those are the rules if u still work there.
i've been struggling with this on some we could get . i'm close to the no penalty age but expect a lot of turmoil before then & have taken some out for preps. my wife still works where one can't be touched w/o med pbs. etc., etc. good luck.
Several years ago I was able to move about 20% of my 401k into an IRA "rollover" account while with the same employer.
I had to dig and go through lots of service agents before I found one capable of helping me.
Its still in there till I'm 59 1/2 but at least it offered me lots more choice in investment vehicles.
A fight we currently can't win. (But it won't stop americans from trying) Using 27 barrels of oil a year p/p and negative growth against a competitor who uses 2 1/2 and manages to flourish. A
fallingfailing currency vs. an undervalued & appreciating one. Hegemony based largely on maintaining huge projection of force vs. one mostly using economic and diplomatic power.Tis true we probably have a ways to go to stop our paddle going in the air, maybe the oil markets are probing for that level as we speak, but I feel we are about to find out something of inelasticity of demand hereabouts.
Hi Moe,
You bet there's a long way to go. The thing is that most of the oil consumed is consumed by "developed" countries, i.e. the ones with the deep pockets. For example, in 2006 India's oil consumption was around 2.5 million barrels/day with a population of nearly twice Europe and US combined who together used 41 million barrels/day. So even if India completely stopped using all oil it would hardly make any difference.
It's got to be the "developed" countries that make the difference and very soon.
I agree. I have stopped trying to explain peak oil or any of the bank mess to friends or family because they can't or won't stop long enough to consider the "facts", nor will they consider a different way of spending. So I, too, have reduced driving as best as possible and drive slower and in a more fuel efficient car. John
It's amazing how people mentally lock up and start going, "LA LA LA!! I can't hear you!!"
This is because the method of delivering the information is almost completely wrong, in regards to the respective receiver.
Long-held cultural memes are hardened against frontal assaults. A different strategy is needed. Such as finding out where a hole in the armor of culture already exists, and then exploiting it and widening it.
The multi-layered civilizational kevlar is largely composed of the following ideas:
* more is always better
* there is something inherently broken about the human species
* but "salvation" is still possible
* growth and hard work are beneficial
* all problems are solvable, usually through technology, to our collective satisfaction and a priori assessments
* mankind was made to rule the world
* the world was made for man to rule it
* the planet and all its resources are under humans' sole ownership
* only certain (civilized) humans have rights
* progress is a manifest destiny
* civilization is the pinnacle of human cultural achievement
* other societies and cultures are inferior and inhuman
* supernatural forces ("divine providence") protect humans from disaster
The idea of peak oil batters some of these ideas more so than others. The challenge is to find another cultural meme that has already been weakened.
Yes that has been my experience too, It is really sad--- to watch people I thought were "smart" but for them, forever gasoline--driving around without a care until the end of time-- is an issue of faith, not debatable or to be questioned. I think the US govt knows this and is counting on this mentality to prop up support for future questionable actions. Certainly the govt never seeks to undermine this thinking.
I wonder if "most readers of TOD" are "wealthy" people who have investments to adjust. I'm not such a person.
This is just speculation on my part, but I think that past price benchmarks do have something to do with the psychology of it. Those who lived through the 1970s (or read about it in their school history classes) know that gasoline priced anywhere <$3.00/gal is a relative bargain. Above that level, they know that it is getting seriously expensive. It is just my gut-level hunch, but I don't expect to start seeing any really serious behavioral changes (like extensive carpooling, for example) before we pass the $5 benchmark.
"...I don't expect to start seeing any serious behavioral changes..."
I don't either, at least not widespread, because (1) there is no universal magical benchmark round number of dollars - as some have pointed out, conservation moves up the food chain, and different uses have different economic value, (2) the alternatives are very costly in time and will not be taken until/unless one's time is worth little, and (3) some alternatives are not safe, or at least are not "safe".
Most no longer work in the huge unionized factories where everyone once started and stopped on the dot. It can easily cost an extra hour a day to wait for the last person in the carpool and then take the grand tour on the way to and from work. It easily costs an extra two hours to wait and creep along, stopping for a time at every single bloody corner, on the unreliable, tardy bus, to say nothing of the risk of being mugged at the stop or the transfer point. Just one "precautionary" trip to the hospital after a mugging will cost more than a swimming pool of $5 gas - never mind a real injury, which will cost more than an entire lake of gas. So what's all that worth?
Oh, and as to that other alternative often touted in these parts, though the harsh winter seems finally to have temporarily damped down the more extravagant claims on its behalf: just a few days ago I had a lengthy exchange with a mother whose son bicycles to the local university campus - she has long wished that he would cease to do so - again, for reasons of safety. When you judge this, recall also that the Bubble Wrap Generations have been assiduously trained by "consumer advocates" to pay a million bucks for a dime's worth of "safety".
On top of all else, and no matter the density of the city (except Manhattan), social and civic functions are scheduled with the car, not the bus or the bicycle, in mind. Parents, especially, want them crammed in earlier than possible after work, so they can get home and make sure the kids get to bed. They don't want the bother of hauling cranky kids out of bed in the morning. So the bus rider will arrive having had no supper and after the meeting or event has ended. And there's the 24/7 kids' sports, requiring frequent 60-120 minute drives, as local games simply would not rise to the level of hypercompetition now demanded (everybody thinks their kid is world-class.) All told, without ready access to a car, one becomes a social outcast, except, perhaps, if one is a university student.
So what exactly is one to do, until such time as a sort of force majeure physically intervenes to keep one from continuing as before? (Now, when I look at the Nymex graphs to the upper right... but then that may be partly a bubble... if... maybe... coulda... shoulda...)
"So what exactly is one to do?" Relocate to a small town, where something approximating a sane life is actually possible? That's what I did. I know a few of of the city dwellers that post here have set up wonderful lives for themselves, but they are the exception. For most people, city life is pretty bad. (Note that I include all metro-area suburban dwellers in the above comments. Your lives revolve around a city hub, even if you don't commute to it each day.)
Not everyone can relocate to a small town, of course, but everyone won't; only that small subset that really wants to. The ones I feel sorry for are the ones who would like to but can't, mainly for financial reasons. Finances may or may not be a valid reason, though; a lot of people could swing it if they would adjust their attitudes. Downsizing one's expectations (maybe deciding that one really could live without the latest and greatest electronic trinkets, for example) would go a long way toward making it possible financially. Small town life for most people means small town income; to make the big bucks, you do need to work in or close to a city. You've got to be willing to accept that lower income, and accept the fact that you just won't be able to afford to buy a lot of store stuff that is affordable for urban and suburban dwellers. The flip side is that you get a lot of quality-of-life that simply isn't for sale at any price in the metro areas.
"Relocate to a small town...only that small subset..."
Sigh. That's not even a sigh of disagreement or exasperation. It's a sigh about alternative realities passing in the night invisible to and wholly unengaged with each other. And maybe it's also a sigh about Procrustean one-size-fits-all memes like the one upthread about the "idiots sticking to their nightmare commuting patterns..." - that one wasn't yours, but Jim Kunstler has made it virtually impossible to not be reminded of it in any discussion touching on traffic or commuting.
I've known a few people who moved to small towns. One loves it. But a couple of others found it so stifling and provincial that after a while they moved back to large cities. And that's nothing new, those (formerly few) who were free to move from farms and villages to cities have done so almost since time immemorial. And they've always paid a price in health.
To really understand, you might need to live in a place like New York City for a bit. To many New Yorkers and nearby suburbanites, it's inconceivable that a person could survive socially, culturally, or occupationally, at any location on Planet Earth, even another big city, other than the Big Apple. It's so inconceivable that it's almost impossible to convey the depth, breadth, and strength of the feeling. The legendary New Yorker map is only a weak start.
So you're right. It's a small subset. Perhaps that's fortunate for those who live in small cities and in towns, which might otherwise have long since been overrun...
I've lived in a bunch of different places throughout my life, including big cities, mid-sized towns, and small towns, so I've developed some perspective about this that perhaps some people don't have.
You are right, in SOME small towns life can be pretty stifling, and SOME small towns can be pretty unfriendly to outsiders. Let's be fair, though, and not lay 100% of the blame for that on the small towns. We all know the stereotype of the pushy, arrogant, rude big city slicker that moves to the small community and proceeds to criticize and complain about anything and everything. This may only describe a small minority of those making the move, but if it didn't describe anyone, the stereotype wouldn't exist, would it? Unfortunately, many small town dwellers will assume that any newbie from the big city is guilty until they prove themselves innocent. And certainly, when ex-urban newcomers display such behavior it is not going to be endearing to any small town resident.
As I said in my post above, not every city dweller is going to want to live in a small town. Some (many?) really are not well suited to it. The flip side, as you have pointed out, is that not everyone that grew up in a small town wants to stay there.
To be honest, it has always been easier to move from the small towns into the cities than the other way around. This has been true for centuries, and maybe for as long as there have been cities. What is exception is the window of opportunity that has recently opened for people to feasibly go the other direction. As I said, some small towns are not very welcoming to newcomers, but some other towns aren't so bad about it. There are lots of small towns that have had a steady influx of newcomers over the past few decades. The personal dynamics become a lot different when you are not just the only newcomer, but one of many. There are other small towns that are dying, and would love to see some warm bodies and fresh blood move in to revitalize them. This is a truly exceptional situation, and will probably not last forever. Those who would like to try to escape the city should research their options carefully, find a congenial spot, and make the move while they can.
Speaking of behavioural changes, from the Mass Transit story posted by Leanan:
"Mass transit use increased by more than 2 percent in 2007 to the highest level in 50 years, with Americans taking more than 10 billion trips on public transport while the number of vehicle miles traveled was flat in the first 10 months of the year."
In another story, Todd Spencer of the Owner Operator Independent Drivers Association is estimating that ten percent of his members have parked their rigs.
This is the market in action. Fortunately, government in the US has been supporting investment in public transit options. It is not enough however. I suspect that business, that is people with actual power ($1 = 1 vote in the US democractic model), will soon be pressing for a rapid rampup in public transit capital investment and operating subsidies, as the optimal functioning of labour and retail markets increasingly demands it.
Freight transport is another matter. I expect private capital (Petrodollars?) will be expected to meet the challenge of expanding the rail infrastructure, though conditions may emerge demanding government intervention. Government will likely be pressed by shippers to either re-regulate pricing, or come up with alternative competitive models, now that long and even medium haul trucking is increasingly non competitive with rail.
While a few folks are out target practising on emptied cans of survival beans, the great majority of people will carry on, making adjustments as required by the circumstances of their lives.
I wonder to what extent truckers could adjust to higher fuel costs by slowing down. The aerodynamic portion of drag varies as velocity squared. If that were the only loss in the system, one could save 20% per mile by going 10% slower. But I suspect that aero drag isn't that large a part of the resistance to these trucks. Ocean freighters have been slowing down to save fuel, but it is a lot easier for a corporate office to impose a new speed limit on a ship than on a (clueless) trucker.
Trucks in America are basically designed without reference to aerodynamics. Large fuel savings could be made by making a nodding acquaintance with it, and it may even be possible to reduce drag in current trucks by the fitting of cowlings.
Cowlings have been pretty common on long distance rigs for decades. If one started from scratch assuming expensive fuel, then truck capacity would be greatly increased (road trains), and horsepower to weight reduced, as well as operational speeds.
Ocean freighters can slow down to save fuel, but I doubt that they have been doing it much. If a fleet operated at 90% of full speed, they would need roughly 10% more ships to move the same amount of goods. Given cost of the ships, crew, insurance, etc. fuel prices have to be very high and fleet utilization very low to make it worthwhile.
I am certain that dry bulk fleets are trying to go as fast as they can. Container fleets are probably already seeing enough slack to slow down a bit.
But it is the same equation for trucks. If you slow down by 10%, you may save some fuel costs, but do have to pay more in other expenses. It would be surprised if it is really worthwhile.
Some shipping lines have ordered their captains to slow down to save fuel, no references I am afraid, just from memory, which surprised me for the reasons you give but seems to indicate that there is some price for fuel which makes slowing down worthwhile.
There is no real difficulty about keeping trucks to speed for the operator, but you do need tachographs, which I don't know if they have to install in the States.
Truck driving in the UK is heavily regulated, mainly to ensure that driving hours are not exceeded, but could certainly be used to enforce speeds.
Yes. I am sure that if the demand for ship capacity is weak and fuel prices are high, it does make sense to slow down. Right now, I think container marjets are slow and no one is rushing to restock investories. Why not slow down.
In the bulk freight segment, demand is currently so high they are almost certainly running as fast as they can.
I don't know all the details, but did want to point out that there are trade offs.
Long haul freight will move back to rail. Rising energy prices will see to that, it is inevitable. Trucks will eventually only be used for short hauls between factories or warehouses and the nearest train depot -- at least until more rail spurs are put in.
"So, as forced energy conservation moves up the food chain, doesn't the price have to go up faster in order to force richer consumers out of the market? And as this happens, we see a positive feedback loop in most exporting countries, causing their rate of increase in consumption, in most cases, to increase, e.g., Russia is on track to become the #1 new car market in Europe."
And the exact same can be said of Americans living in the greatest wealth disparity since the Imperium of Rome.
The Bottom 80% never recovered from those gas prices of 1979/80.
And now must go into debt to pay the "inflation adjusted"
prices of today.
No one is adjusting wages of the Bottom 80% for inflation.
Which is why gasoline is being held artificially low.
$4 gasoline will cause riots. Watch.
Just so I have my disaster timeline straight in front of me, is the 4$ gas riots before or after the hoards of refugees move north from Atlanta?
After Katrina, there were several incidents in the northern suburbs of Atlanta of guns being pulled out to settle disputes in the lines to get gas. We've spent so much time and brain power in this country on spinning our perception of reality into the weird distorted view most now have of the world that I suspect that most of those living in environments highly dependent on cheap energy won't move along until they're physically forced to. They'll blame the Democrats, they'll blame the speculators, they'll blame the oil companies, they'll blame government corruption, they'll blame those nasty towel heads, they'll blame the environmentalists, they'll blame the rich, they'll blame the poor... the only people they won't blame is themselves. Just like traffic that keeps getting worse and worse but the idiots stick to their nightmare commuting patterns because they believe that when the next round of road expansion are finished, their commute will become easy, it's going to take a long time for people to stop believing that cheap energy isn't about to return "any day now".
Denial and magical thinking have a powerful grip on this country and pretty much guarantees that people will not react to the new realities of an energy poor world in any kind of logical fashion. Riots seem much more likely than the willing abandonment of the sprawling developments of metros like Atlanta. Until someone with a gun comes to force them out of their house and until they run out of ways to get food, the dream of cartopia and the suburban promise of having your cake and eating it too will be clung to and defended with violence.
However, I don't $4/gallon is when the riots begin. I don't think there is a particular price point that will cause the first bouts of social unrest but rather the accumulation of people's finances and lifestyles being worn down over the months and years to come. As more and more people fall behind on their mortgages, as their credit card limits are hit, as their ATM of a house stops spitting out easy money, the financial pain will push people to their breaking point. Higher gas prices accelerate that but I'm not sure that any particular dollar value will be the straw the breaks the camel's back when there are so many other straws being loaded up at the same time.
"...but the idiots stick to their nightmare commuting patterns...
"Denial and magical thinking..."
It may be useful to recall that nightmare commuting patterns and magical thinking had worked extremely well for almost 30 years, so in a certain practical sense they were neither stupid nor crazy. They got a lot of families into much safer and more lavish housing, and a lot of children into far better schools, than if those families had remained in overpriced, jam-packed, crime-ridden downtown areas. So you're right that few are likely to "abandon" their current housing easily and peaceably - but when would it ever have been different?
Indeed, if Lake Lanier literally runs so dry that lowering the outfalls no longer works, I would expect hasty arrangements to be made involving trucks, railcars, temporary pipelines, etc., long before such a large metro area (too big to fail, five million people are vastly more than the quarter-million or so who seem to be permanently displaced from NOLA) would simply be abandoned outright. And as to risk from folks using guns, I would definitely not wish to be the foolish enviro in any way publicly resisting said hasty arrangements, no matter the effect on some obscure species of fish.
So if you're looking for interesting times, I think you've got them. But if you're after a Kunstlerian morality play, I seriously doubt it will work out anything like that simply.
The biggest thing I see causing issue on that is states contesting having their water sent to bail out another state. When one state's resources are plundered for another state, it will only work as long as it is done willingly. When the state with water decides NOT to give up the water, we'll have an interesting debate on state sovereignty vs the feds.
Fortunately for the feds, and unfortunately for the states and Americans as a whole, Shrub Jr. can take control of the National Guard completely, ursurping the governor's control.. (Assuming the National Guard decides to follow Fed law as opposed to what the governor says.)
Both the scenarios above are not just possible/probable, they happen all the time in India.
In Bangalore, where I live, most of the water comes from a river about 55 miles south of the city. The groundwater here has been depleted due to the population growth and the recent construction activity. For perspective, the population here has grown from 2.9 million in 1981 to about 6.5 million in 2007. Bangalore's real estate (commercial) is the third highest in the world (after Tokyo and London) in terms of absorption - about 10 million sqft in 2007). Residential construction is close to another 6 millionsqft each year.
Chennai (360 km east of Bangalore) is another city which has had perennial water shortages. A few years back the reservoir supplying water pretty much ran dry. The government ran tanker trains to bring in water. There has been such exploitation of ground water that sea water (it is a coastal city) started entering the underground aquifers . The government has woken up finally and made rainwater harvesting mandatory along with water recycling. This with a very good monsoon over the last 3 years has turned around things.
The same story repeats for most Indian cities except Bombay (Mumbai). Water for Bombay comes locally from resevoirs less than 20 km. It gets about 120 inches of rainfall each year and that keeps it going.
So people are not going to give up on a big city easily. Hope seems to triumph reality and experience.
Interstate river disputes happen all the time with the lower riparian state crying foul when the upper riparian state builds dams or increases area under irrigation. We had protests (and small riots) recently when the national river tribunal awarded more water to one state.
The more I read blogs on this website, the more convinced I am that India (today) is what the developed world will look like in future (when an oil, food and fresh water crisis happens). We get by because this is the only way we know (at least the vast majority) things are. But you guys might have to make some pretty drastic adjustments. You guys at TOD need to visit our country soon :)
Srivathsa
Yeah, go ahead and laugh. I don't think $4 gas will do it, but that's a long way from saying the party will go on.
I do not think people are at all close to rioting - it will take many more years and swelling Hoovervilles for that to happen. The people are too indoctrinated and too ignorant of the nature of the problem, and their anger will be effectively directed towards the "other" for probably quite some time. Things will likely get very difficult and ugly rather quickly, but this event will be playing out for the rest of our lives.
Atlanta is not out of water yet, and it would be foolish to try to predict exactly when that might happen. And indeed, if their rainfall begins to steadily increase (by a fairly large amount), then they might not run out. But the trend is not looking good, recent small increases not withstanding. It is entirely possible that Lake Lanier could be dry by the end of Summer, or possibly the year after that, etc.
And what exactly do you think would happen if that came about? Why do you get such a chuckle out of the idea, as if it were so implausible? The lake is extremely low, the trends are not encouraging, and if they run out of water there won't be a damn thing that can be done about it. It would take very little time for people to abandon the area - these would be refugees.
Lanier wouldn't even have to go completely dry. The nightmare scenario is Lanier being extremely low, conditions are tenderbox dry, and then there's a wave of arsons. Then the decision needs to be made: fight the fires, and deplete Lanier below the danger point; or conserve water, let 'em burn, and risk a wider conflagration that -- with a little wind - could even turn into a firestorm.
Has it ever occurred to you that riots and mass migrations are exactly the thing that needs to happen to encourage massive investment in all the wonder technologies that you relentlessly hammer us with? Panic is what gets things done in America. The Stock Market Crash, Pearl Harbor, Sputnik, these are what force Americans to stop wasting their energies on trivia and work together. Why must you ridicule others for repeating the very sorts of bad news that will bring about the change you seek?
Unless your parade of perpetual motion machines is just a shill to get people to stop questioning the competence of the free market economy. Let's elect a government that will hike YOUR taxes to pay for these new technologies, and see who yelps.
Hi super390,
Wasn't it a shame that the reaction to 911 was "go shopping". At that point with the country in a state of shock Bush could have laid it on the line and people would have listened.
Very few petrol riots in the UK at $8.50 per gallon.
I don't think the riots will be triggered by a price point, they will be triggered by failing infrastructure, empty shelves and hyperinflation. We are all part of the most infantile, demanding, impatient instant gratification society ever. And most of us exist in the consensus trance of BAU and belief in the techno fairy. This leaves a huge desparity between reality and expectations. There will be riots.
I don't think that $4 would spark riots. As I mentioned in another post above, I don't expect to really start seeing any serious behavioral changes like carpooling until it passes $5/gal.
Now $10/gal might be another matter, but that depends on how rapidly we get to it - frog in water, temperature slowly rising.
The suburban commuters I have discussed my view of the future with plan to keep downsizing to a more fuel efficient vehicle-most claim it won't be a big hardship to them. IMHO the first response will be a turnover of the fleet to small, high mileage cars. The Tata costs maybe 23 fillups of a SUV, and the relative capital costs will keep decreasing.
In Britain oil is the equivelant of $10 a gallon, and no riots. Hows that for stoicism.
Weatherman writes: "In Britain oil is the equivalent of $10 a gallon, and no riots. Hows that for stoicism."
Us redneck Georgians have a bit to go before we start biting off the heads of chickens and politicians. Humm, when was the last time I sharpened my teeth? Neck bones are pert' near hard to bite through.
You say: "$4 gasoline will cause riots. Watch."
Nonsense! Diesel around here has been at 3.81 for a while, with unleaded at around 3.50. No one is rioting. Rioting will not occur, if at all, until the price is much, much higher, say $25 or $30. The whole trick is to have slow increments; if the price suddenly spiked from $4 (which is where it will be in a couple of weeks) to $15 or $20, that might cause some grumbles, maybe more drive-through thefts, but no riots.
chevron delays at least five projects
http://www.reuters.com/article/marketsNews/idINWNAS432320080311?rpc=44
the reuters article also says the karachaganak expansion may be delayed
There's no list of reasons for the delays. Could it be that Chevron expects demand to fall for the next few years, due to a world wide recession? A fall in demand would result in a reduction in the price of oil in the short run, even if we are now at peak production. Lots of high cost projects, including alternative energy projects, become too expensive with lower cost oil. Remember 1986, after the Saudis flooded the market and the price of oil fell to around $10 a barrel.
E. Swanson
i dunno the reason for the delays they are holding a teleconference right about now details can be found athttp://www.chevron.com/news/press/release/?id=2008-03-03
FWIW, this article says:
That is supposed to be what's delaying Khursaniyah, too.
Someone needs to make the changes in the Wikipedia Megaprojects.
That new peak in C&C that we keep being promised seems like the Chicago Cubs chasing the World Series. Cubs fans keep thinking "next year!" just like Yerginites. I distinctly recall the noise about 2006 back in 2005 but 2006 didn't materialize. Neither did 2007. Now 2008's starting to look shaky too. Oh well, now we'll hear about 2009.
A question to the public-at-large:
At what point do we think about lowering the speed limits? If high gas prices are breaking budgets, how about easing up on the accelerators on those V-8 gas hogs?
I'm all for the reduction of the speed limit back down to 55mph. This would also make it safer for those with small displacement engine cars or motorcycles to get back onto the freeway. I could handle riding my motorcycle on a 55mph freeway, but I'm asking for death riding my 225cc motorcycle on a 70mph freeway, with 75mph being the bike's top speed.
There is no evidence that the 55 mph limit actually saved any fuel. Most states looked the other way when it came to enforcement because the number of violators was overwhelming. Enforcing such a limit effectively would have resulted in every local and state politician being lynched.
When the limit was put down to 55, for sure there were people who didn't adhere to it, and for sure, it is tough to enforce. But I remember that the general speed on the highway came down a notch or two. I am sure that it saved some fuel, though I don't have a reference to hand.
No politicians lynched, either.
The 55 limit was a life saver for the VW Bug. At 70, especially in a hot climate, that little four banger was prone to valve failure, but at 55 it would run forever.
"There is no evidence that the 55 mph limit actually saved any fuel.
While this may be true in the perverse way Americans twist everything, DRIVING @ 55mph can deliver 20% better fuel economy than driving @ 70mph.
The problem with showing that a lower speed limit actually saved fuel is because in the late 70s people began buying higher mileage Japanese cars in much higher numbers. The introduction of CAFE then improved the mileage of new American cars which further clouded the evidence that the 55 mph limit was saving fuel. When oil prices dropped in the 80s people began to increase the number of miles driven by moving out of urban centers and into suburban sprawl which increased daily commutes. Jeavon's Paradox took effect.
I'd lower them now, but I'm not the public-at-large.
I remember the last time we did lower the speed limit. There was no end to the whining and moaning, and it probably cost Carter the election. No way is the FedGov going to be quick to try it again. This will be a next-to-last resort, to be tried just before things get so bad that we need to go to rationing. This is not going to happen just because the price is going up, there are going to have to be actual supply shortages, stations out of gas, etc.
I would just like to close by pointing out that there is no law that requires people to drive as fast as the speed limit allows. It is supposed to be a CEILING, not a FLOOR. I realize that on some stretches of highway, driving slower than prevailing traffic can be dangerous. However, in the vast majority of such cases, these routes are paralelled by less-traveled, older highways with lower speed limits. These can be far safer and less nerve-wracking to drive, and are a good way to achieve superior fuel economy.
One advantage in having "240D" on the rear truck lid is that there is less hostility if I travel 5 or 8 mph below the speed limit in the right hand lane. People assume I cannot move faster :-)
Best Hopes for old Diesels,
Alan
It's funny how we all have different realities. I live in the boondocks and "town" is 15 miles away. I usually drive to town twice a week to get the mail and do a little shopping. Anyway, here's my trip:
Mile 1: 5mph down our mile long private road.
Miles 2-3: 15-20mph on the dirt and gravel county road
Miles 4-15: 55mph on the state two lane highway
Depending upon the traffic I'll drive between 50 and 60. Non-locals go nuts when you drive slow since there are very few places to pass and time is of the essence :-)
Todd
"Non-locals go nuts when you drive slow since there are very few places to pass and time is of the essence :-)"
Yeah, they do, don't they?
:>)
If you choose to remember the 70s, you didn't dress in style.
Anyway, the 55 mph law was put in under Nixon in 1974. IMO Carter lost the election because of the Iran Hostage Crisis, although the sweater speech and the debate where he mentioned consulting his daughter Amy about nuclear arms didn't help.
Would it be easier for a Democratic Presidency to lower the speed limit to 55 then for a Republican to do it?
Are you old enough to remember "only Nixon could go to China"? The point was that any Democrat of that era who tried approaching China to normalize relations would be accused of being a commie sympathizer. Nixon, on the other hand, was a well known anti-communist cold warrior. Nixon could approach China because no one could produce any evidence that he was doing so as a result of prior sympathies to communism generally.
So I am not sure that Democrats can lower the speed limit without being hung as "tree hugger" sympathizers, whereas if GWB did it, it would almost amount to a flat admission of peak oil at the same time.
Unfortunately those places where you can choose to drive slower are not that common. Here in California I have enough problems with nutcakes who are pissed that I only do about 3mph ABOVE the limits. If I tried to slow down below the limit, I don't think my life expectancy would be very long.
I keep hoping that high prices will affect behavior -but that would probably require $10/gallon.
Yep.
Simple mind experiment. Your Corolla has 1 gal. useable in the tank. It is 40 mi. to a gas station. No traffic, flat road. How fast you gonna drive to get there?
There is a speed at which, for any vehicle, it really doesn't matter how much horsepower you have. You approach that you pay big.
To the list of overnight solutions to energy constraint add 55mph, enforced. Rationing by price alone means too many jerks with money get to run over the rest of us.
an added benefit: if the government sold the public on reduced speed limits it would send a message that maybe, just maybe, we're serious this time about decreasing demand. sell it to the public as the patriotic thing to do and watch the speculators scatter from the market. Oil probably drops $8 for a little while until it continues its march onward and upward. Double the affect by announcing an indefinite annual $0.10/gallon tax increase. you know, for patriotic reasons. get toby keith to sing a song about boots and asses and such. the song almost writes itself...
...sockin it to the A-rabs
Make it patriotic to use less oil, bring the troops home ....
What would be fairer: a heavy tax on fuel or rationing?
Seriously I think a heavy tax on fuel ,like Markegg is saying, with some kind of income tax offset to cover a nominal amount of use. Ride a bike use public transportaton you 'make' money. Have a long commute you get encouraged to go small, carpool, move in, or telecommute.
We better do someting like this before rationing is needed or shortages begin (we won't) but I started reading the old rationing plan developed in the 70's and it's a nightmare. And now with swipe cards....
A big increase in fuel taxes is not likely to work, simply because there are many, many people who already think gasoline and diesel prices are too high. We've seen repeated calls to roll back the present taxes by various politicians. So, increased taxes are not likely to become reality in the short term. As I've pointed out before, the time to increase taxes is when fuel prices are low, such as after the Saudis flooded the market in 1986 or after the 1997/98 Asian crisis. Did we do that? No, and now it's too late to add the $2 or so per gallon which might get people off their respective butts. And, the same big tax would need to be added to diesel and jet fuel as well, as they are somewhat interchangeable with gasoline. That's why the price of kerosene in the local mini-markets around here is just about what diesel costs. Lastly, the effect of a fuel tax is offset when there is a rebate. Back in the 1960's there was a credit for the fuel tax when figuring one's income tax. That only made things worse when 1973 rolled around.
No, I submit that the only workable solution after Peak Oil is rationing, (call it cap-and-trade?). And, I wouldn't limit that allocation system gasoline either.
E. Swanson
I'll put out something straightforward. We are about to send out rebates to stimulate the economy. They have no target other than to tell people to go out and spend. Simple enough. If you give me a check and say here is your conservation incentive go and behave wisely, I will be very happy and don't care that the tax on gasoline went up .20 this year and is going to .30 next because I see myself as a conservative (when it comes to energy) as many people do. If I need to I can maybe buy a small car or electric bike or use it for public transportation. I can put that money to work and I'll be more careful how many times I pay it back into the system.
For now diesel is higher than gasoline by a healthy magin. So Alan and his freight rail/240D program are ok :-) By and large business and agriculture run on diesel and consumers run on gasoline. They would not be very interchangeable in the short run and not much incentive to do so now. Therefore I'd leave diesel alone for the present.
If it is rationing 70's style, Iran style, war stamps style, there has to be a mechanism and as that's where the devil lives. How to do it?
We have been talking about this here for some time. As I said we won't do this thing. And we won't ration either until after the crisis is underway. Rationing or using the tax system has to be fair and percieved as fair or there will be trouble. Just to be clear what I am talking about is not a tax unless you consume a lot of gasoline and is revenue neutral. Right now we ration by price and I think most see people are being squeezed out. Whether it is the carrot or the stick. We need a plan.
There was no rationing of the war style in the 1970's. First, there was allocation after 1973, then odd-even limits on buying. Both were short term, as the problems were short term. What we have considered on TOD is permanent shortage, worse yet, a continuing decline in oil year after year. Attempting to use the tax system of the market alone will just lead to increasing prices, with greater prices year after year, which would be massively unstable. If the cost of alternatives increases due to inflation, then it is difficult to see where the inflationary spiral would end. Ration by price would allow the rich to continue with business as usual, while the poor would be SOL. The FWO in society would be extremely pissed and likely call for rationing in some form. instituting increased taxes would only make things worse, IMHO.
The plans are already out there. There was a U. S. plan back in 1980 and the ration coupons were printed. There are newer cap-and-trade plans as well. It won't be long.
E. Swanson
I'd agree that rationing is probable, but wonder how effective it will be over a longer time-frame.
Scams are usually quick to develop, and in a couple of years would be institutionalised - richfolk buying a clunker for someone who can't afford a car, then getting the rationing tickets, and so on ad infinitum.
In the end rationing usually avoids for a time the right price signals getting out, specifically in this instance it would transfer the problem to people to one of getting more ration cards, and de-emphasise paying more for a more fuel efficient car to some degree.
You could have slab based rates with an electronic card to track usage in a month - so upto say 10 gallons a month - $4/gal, 10-20 -$6/gal, 20 and above - $10/gal. (Our electricity tariffs are set up that way in India and I think it incentivises conservation). Each license holder gets a card and if you want to have 10 cars - go ahead - just pay high for high usage.
Rationing - tough one to implement - on what basis would the quotas be decided - equal for each household?, based on number of people in each family?, number of cars? (duh!). Each one would lead to one set of people crying foul and could lead to unintended consequences.
It could lead to a secondary market for rationed fuel. I could e.g. set up an exchange where I bid for unused fuel coupons and sell it to people who need more fuel than they are alloted.
It could lead to a black market (in India this is common in government run ration shops, where foodgrains are issued to non-existent customers - tough in the US with the SSN) if the cat were left to guard the milk. It used to be common in the foreign exchange market for USD (yes the USD used to be a much sought after piece of paper) where if you paid the proper price (outside the official channels of course), you could get as many dolars as you needed when going abroad.
You need a whole new systems and processes to make the rationing system effective and watertight.
Human ingenuity is capable of seeing loopholes and exploiting them in ways unimaginable as the following story will tell you (true story).
In one of the suburbs of Bombay a man created a novel form of insurance - insurance against ticketless travel in the suburban trains. Bombay's suburban trains carry about 8 million people a day. There are no automatic gates at the stations. You buy a ticket for each trip or you can buy a monthly/quarterly pass that allows you any number of rides (these are heavily discounted). Ticket inspectors check passengers for tickets. Given the number of passengers, the odds of getting checked are pretty low < 1 in 100 ( during the 3 years that I took trains there I was checked about 3 times).
The scheme was that you paid an insurance premium to the aforementioned gentleman and travelled ticketless. If you got caught, you pay the fine to the railways and produce the receipt to him and he would refund you the fine. All went well till word went around and he was finally arrested for running an illegal business. But goes to show how creative you can be when things are scarce.
Srivathsa
Srivathsa, welcome to TOD. We really need the perspective of people from many different parts of the world. I am very familiar with the ticket-less travel insurance scheme in Mumbai. If I remember correctly, the gentleman was from the suburb of Ulhasnagar. I also remember the hell of traveling in Mumbai's suburban trains (yes, it is hell) in the early eighties. It must be a lot worse now.
1977 Federal Energy Administration Rationing Plan
The 70's Plan
WW2 Gas stamp program
The War Stamp Plan
Iranians torching gas stations
The Iranian Plan
I personally think that dirtbikes are great to have. Mine is street legal, gets 80mpg, can go on or offroad, and when the roads go to pot due to poor maintenance, will handle rough roads better than my Civic! (Although, at a greater risk of personal injury to me.)
In regards to Snowmobiles, they're invaluable to have in an area where you might actually make use of one. You can go into town on one to get rations, and I would argue that they get better mileage than a truck with enough ground clearance to get over 1-2 feet of snow, with a lower cost of entry as well.
Lastly, NASCAR will be a nostaligic thing, just in the same way horse races are for those of us who no longer ride on horses. They can afford the gasoline even if the average person cannot.
Many times, I think that Kunstler predicts the demise of something just because he despises it, and then builds an argument to support his claim. I'd love for big noisy straight-pipe trucks to go away, so I'll build a claim that they WILL go away after prices are too high. I think he has a lot of good things to say, but I still think many of his claims are based upon bias first, then facts later.
~Durandal(http://www.wtdwtshtf.com)
I would disagree, to the extent that I believe Kunstler is more artist than journalist. His arguments are esthetically pleasing (imagine sparkling white snow unsullied by the clank and stink of noisesome machinery and the fear of being run over by some drunk who can't control his body, let alone his snowmobile) and always graced with wry humor. Sometimes a little sharper than many can tolerated -- but the artist is always on the edge. I don't need to point out to this readership that "kunstler" is "artist" in German -- maybe it's a pseudonym?
Pseudonym? Sure, with an emphasis on the 'Pseudo'
His better points are consistently undermined by his class-antagonisms. It's a serious blindspot, IMO. His ire against 'white trash' and 'rednecks', which only exist as much as do hippies, yuppies or fogies (ie, sure they do, but the actual details cloud these cliche's into useless mush)
My brother went winter camping with his fiance' up in the Maine Mts last week, and here was his take on the 'Ski-Dooers' (Snowmobile Brand in the US) "It took us an hour to hike in, each with a sled and me with a moderately full backpack. The trail is well packed for snowmobiles, and we saw plenty going each way. They mostly slow down and wave, but there are a few hotheads and young kids who don't know better that still zoom by. You would need snowshoes, you could borrow mine if you want to."
Your quote, "imagine sparkling white snow unsullied by the clank and stink of noisesome machinery and the fear of being run over by some drunk who can't control his body, let alone his snowmobile" wasn't about imaging that snow as soon as you mentioned the drunk. It's like saying 'think of anything BUT a Green Elephant. DON'T think of Green Elephants, or the way they might Smell.' AND, that Snow line ends up conflating Snowmobiles with Drinking.. another helpful stereotype. I'm not saying it isn't a problem, but it's not an automatic Marriage, either. Do you think nobody posts Blog Rants under the affluence of inkahol? (In fact, even here, they downright revel in it!) And If so, should we all be tarred with that brush?
Kunstler just uses text and a Pentium, not Briggs and Stratton to 'Zoom by' and offend self-righteously, but I'll try to emulate my brother's Zen-ness and remember that JHK just doesn't know any better. There's all kinds of art, some more inspiring or enlightening than others.
Bob
Kokuhl: IMO his cigarette smoking analogy was absolutely brilliant and totally original. In the 60s anyone that criticized cigarette smoke was considered pretty frigging strange-parents closed the car windows so their small children and infants could suck in their fumes. It was OK because the MSM told them so. The costs of the auto culture are being borne by the non drivers just as the costs of smoking were borne by non smokers.
Well, you know him, and I don't. The class thing is so stereotyped that I take it to be for rhetorical effect. His self-righteousness is hardly unique to artists as a class. Or anyone, for that matter -- he is just more eloquent in his denunciations of wrong-doing other than his own. A Pentium might be yesterday's technology, but it is hardly "Zen." All in all, I laugh when I read his stuff. But I suppose that I suffer his particular delusions, and it makes me susceptible to his humor.
By Zen, I didn't mean JHK as my 'figurative' brother, but my actual brother Todd, quoted earlier in the post being so patient and tempered about those few 'Loud and Arrogant' snowmobile riders that he encountered.
I feel that Kunstler's approach is just as abrasive and offensive as those motorheads who don't really care who gets run off the trail when they buzz through.. but I'll put it on him personally for that repeated and unapologetic behaviour, not on 'Bloggers' as a category. He collects all these different euphemisms and shotguns the whole gang.. it takes what could be eloquence and reduces it to a hot gust.
I realize many at this site like his set of spices, and I really don't intend to demean his fans, but I find this kind of standard-bearing to be directly opposed to the possible goal of getting this conversation out to a broader audience. I'd rather see Howard Stern try it than this guy.
Bob
I don't want to belabor this-- after all, I have no relationship whatever with JHK. I simply don't take him very seriously, and I find his exaggerations amusing. Sort of like the Mogambo Guru.
On the other hand, you don't have to tune into JHK or Howard Stern or MG, but if you are on a cross-country ski trail on Mt. St. Helens and drunk, loud snowmobilers violate the rules and go where they aren't supposed to be, you have to deal with them. There is a sort of rudeness to American life that seems to be cultivated and encouraged. And it isn't just among the lumpenproletariat or the "red-necks" either -- there are a lot of rude, angry, socially inappropriate people driving Escalades.
Now the way you just put it, I totally agree with.
Maybe the difference in emphasis seems academic to some, but I think it makes all the difference.
I do truly despise 'Redneck Jerks',... as well as Rich ones, and to no small degree myself and my own clansmen, too, when I see the jerk in us come out. That's different than saying 'Rednecks are jerks', 'NASCAR fans are morons', etc .. I see that kind of language as exactly part of the same 'rude, angry, socially inappropriate' cultural tendency as peoples' driving habits, shopping habits, etc..
My only relationship with JHK is that I see the regular heralding of his Angry Young Man pronouncements here just about every other day, and I have to take issue with what I see as a divisively antisocial use of his public platform.
Ok. Nuff..
Bob
If JHK gets you so riled, better not read Joe Bagent.
Dura-
I agree snowmobiles are handy (I used one the other day to access a friend snowed in), but Kunsler nails the lumpun character of the people who ride them.
I will be glad when the price of gas makes a trip to WalCrap for a case of Bud with the F150 in dirty camos a major investment.
These diabetic, overweight beings may get some much needed exercise.
See? You're attacking a stereotype of a person you despise.
Heaven forbid there are any other 'characters' of people who ride these things. Or that there are diabetic, overweight beings who are doing valuable research on the environment, or that someone in an F150 and camos just delivered some 'Meals-on-wheels' boxes to some of his older neighbors.
No more TV for you!
Bob
"You never told me you couldn't communicate!" -my brother Todd
jok-
Actually, I haven't had a TV in over 20 years, and some of my best friends are Mendo Rednecks, with F350's and ride dirt bikes and ATV's.
Except for the meth use, they are alright to hang with in limited doses.
My wal-mart is about 2 miles away, no major investment there. the trucks have to go somewhere in town to deliver goods whether it be one big wal-mart or 5 different stores of various size so no room for a warehouse on wheel argument there either.
Kunstler is the man. He should have his own talk show-he is the best commentator on contemporary America right now.
I would like to ask those on this forum who are knowledgeable about financial matters what the impact on energy projects of much higher inflation would be.
If for the sake of convenience we hypothesise that inflation in the US reaches the same level it did in the seventies presumably that would make nuclear power plants with their high up-front cost not financeable, but it could also impact projects such as upgrading the grid to allow more power to be generated by wind or solar.
The inflation outlook in Europe would appear to be much better than in the States, but I also wonder about the exposure to poor loans there too - how severe are the problems from this likely to be? What are the implications there for financing the needed infrastructure for post-peak?
Thanks.
IMO it depends on government reaction to inflation - more specifically interest rates. If inflation is more subtle and contained at least on paper (which IMO is the case now), interest rates may be kept low while real interest rates go to the negative. This may initially stimulate capital intensive projects as nuclear or transmission infrastructure as free capital looks for inflation hedge.
If inflation shoots up to the sky, at some point the FEDs will be unable to ignore it and will be forced to raise interest rates. This will be especially deadly for nukes with their long lead times, lack of incremental value and large initial investment.
If I need to make a prediction - if the current policy fixated on paper growth persists (and there are no reasons to expect otherwise), there is a real danger that we are going to have a moderately stimulating but unstable environment in the medium term and rampant inflation and recession/depression in the longer term. Not good for any kind of long term investments.
Another area which would be problematic in a high inflation environment would perhaps be efforts to build up the rail network, urban trams (beloved by Alan from the Big Easy!) and infrastructure to make living with more limited car transport very difficult to finance.
Anyone got any guesstimates on the extra cost with a 10% inflation rate for, say, a $5bn urban rail scheme?
Paul Volker, ex Fed chief, recently said that 'the Fed has lost control of inflation.'
Seems that investors believe Volker is right because they are buying 'inflation protected' assets like never before. Talk is cheap, but voting with the wallet requires requires some degree of risk and is sometimes costly.
'TIPS have returned 6.2 percent this year, compared with 3.7 percent from regular Treasuries, according to indexes compiled by Merrill Lynch & Co. Mutual funds that specialize in inflation-linked debt attracted a net $2.87 billion in January, boosting their assets to $47.6 billion, according the latest data available from Financial Research Corp. in Boston. In all of 2007, the funds added a net $3.54 billion.
``TIPS are a really good buy,'' said Bill Chepolis, a money manager who helps oversee $9 billion at Deutsche Asset Management in New York. He bought five-year TIPS in the last six months. ``They're cheap with the Fed continuing to emphasize growth over inflation and inflation continuing to come in higher.''
http://www.tickerforum.org/cgi-ticker/akcs-www?post=33351
The actual rate of inflation is less of a problem than the uncertainty of it. In an economy that was experiencing 10% inflation, year-after-year, with no sign of change, this would be little problem, it just gets factored in. Not knowing whether the rate is going to be zero, or 10% or 100% or 1000% in two or three or five years is a real problem, though. I suppose that it can be hedged against, but it is fair to say that this type of uncertainty does not make for a favorable investment climate.
The lender will be interested in inflation rates, when deciding whether to make the loan and determining the interest rate to charge. His view of inflation will be the overall inflation rate, including food and energy, not the inflation rate in drilling costs, but there is likely to be some connection between these two.
If the overall inflation rate is low, say 1% or 2% a year, the oil company may be able to finance its new project at an interest rate that is fairly low, say, 6% or 7% a year.
If the expected general inflation rate is 10% a year, the lender will want a higher interest rate, say 15%, to get a return, over and above the inflation rate. This higher inflation rate will be harder to pay back, especially in the early years of the loan. There may be a higher risk premium in the interest rate, because of this (say 16% or 17% interest rate).
If the expected general inflation rate is truly unknown - it could be 1%; it could be 10%; it could be 1000%, it is likely that lenders will be unwilling to make loans. In this case, the oil company will be forced to finance new projects out of cash flow only. This could slow down new projects greatly.
French problems with mortgage quality are much, much less severe than in the USA because , under French law, if a bank makes a mortgage loan to a household who could not afford to repay then the bank has lost its money. Nice one. The housing market in France is still behaving normally although there has been a reduction in the rate of price inflation due to rising Euro interest rates.
As for financing needed infrastructure for post-peak it’s already been done. French electricity is about 80% nuclear and 10% hydro. The billing systems reflect this as a major part of the cost of electricity depends on the peak kilowatts that the occupier selects. In off peak hours one can exceed the selected peak kilowatts without a problem but in peak hours all electricity supply is cut off until devices are switched off.
The public transport systems are efficient and cheap. Awareness of global warming and peak oil are commonplace. Both Nice and Cannes run some bus services using hydrogen power with hydrogen produced overnight by nukes.
The French elites endeavour to be self perpetuating as in the US but the French elites know the must merit mass support or the system will be changed from below No French elite could have survived treating French citizens the way he US elites have treated Americans.
Bears repeating.
Hey, all you Francophobes out there, you listening?
You bring up an interesting point.
There is a danger of a negative feedback loop forming. It works like this:
Energy production slows and that drives up interest rates. CPI = M2/Total Energy Production
Interest rates go up which slows the building of high capital cost energy sources.
Energy production slows that that drives up interest rates (and round and down we go).
We need a new financing mechanism for energy sources because they are a special case. The key is to figure out how to payback the investor without slowing the rate of building.
That would be a positive feedback.
positive = runaway
negative = control
Yes. Sorry, a positive feedback resulting in a negative impact.
What you describe is actually a positive feedback loop. Negative feedback is if a decrease in production leads eventually to an increase in production - it is self-correcting system not a self-reinforcing system.
However, you are in excellent company. I saw the following the Financial Times 3 days ago Payroll shocker
A real clanger!
Davemart:
I think you are assuming that because interest rates would presumably be higher than inflation that the time horizon needed for payback would be shorter. A proper accounting would also factor in the expected selling price of the electricity with time. If the price the N-plant can get for electricity increases at the same rate as inflation the effects would cancel out. If we assume that the electric price will increase even faster than inflation, then you can justify a longer payback period. The key is getting the public utilities commissions to preapprove the rate increases so that the accountants won't freak out (that their assumptions of future price might be wrong).
I used to do Cost and Works accountancy, but not at a very high level and we tended to leave amortisation at different interest rates to the big brains at the top.
My understanding though is that the problems occur where you have an investment which does not start paying off for a few years, and that shorter term investments are favoured in a high inflation environment and things like nuclear plants and power grids take a hammering.
In a 20% inflationary environment, for instance, if it takes you 4 years before you get any payback then, together with perhaps 7% normal interest, you have compounded you initial cost at around 17% instead of 7% in a nil interest environment.
This is not a very good explanation of the forces at work though, and I would be grateful if those with expert knowledge would step in to clarify.
There's been lots of interest in following the recent run up in oil prices, but there's been a conspicuous absence of talk about the simultaneous increase in oil price backwardation. Backwardation is when oil futures cost less in the more distant future (e.g. the 2010 future costs less than the 2008 future). While the front-month contract has been on a tear the past week, the Dec. 2010 and Dec. 2011 contracts have actually declined slightly. The standard explanation for bacwardation (which is "normal" in oil markets) is that there is a short term dispartity between supply and demand, but that the free market will even the situation out in time, which is why the market is banking on cheaper oil in the future. From a Peak Oil perspective, backwardation suggests (at least to me) that the market hasn't yet come to terms with peak oil--when it does, it seems likely that oil futures will flip to contango (the opposite of backwardation--no, I didn't make these terms up).
The alternate explanation is that oil is in backwardation because the market sees serious economic troubles ahead, which will lead to demand destruction. Personally, I think that US demand is far more inelastic than most pundits realize, and I don't see even a serious recession having a sufficient impact on China, India, etc. to slow growth in demand.
Anyone with web programming skills out there want to make a backwardation/contango chart that updates itself daily and shows the change day/day, month/month, year/year? It could be a nice, graphical "Peak Oil awareness indicator" to post in the sidebar of this and many other sites...
Many producers, who don't believe in Peak Oil, may be hedging prices, bringing the long dated futures market down. This would especially be true for producers--at the urging or insistence of their bankers---taking on debt for developmental projects.
I would be interesting to see what the the futures market was predicting, in March, 2005, that oil prices would be in March, 2008.
I'd also like to see a good historical treatment of backwardation/contango in the oil market... My feeling is that, 20 years from now, this graph will show a very clear set of inflection points. First, when backwardation increases beyond "normal" reflecting exactly what you mentioned as producers, or their financial backing, think that the price spike is temporary. Second, a gradual swing to contango as the reality of the fundamentals of peak oil dawns on the market as a whole. The other factor to watch, once the shift to contango begins, will be the cost of storage and the amount of crude storage available globally--this will determine if there is a cap on the degree of contango possible, as it limits the ability of arbitrageurs to store present oil for future delivery... I'm going to try to find historical contract data to put together a past view of backwardation/contango--anyone know of a good site to get historical data on multiple contracts (e.g. what the Dec. 2005, Dec. 2006, and Dec. 2007 contracts were trading at back in 2004)??
A slightly different approach, if one had the data, would be to plot the difference between the daily closing of the front month contract and the closing of the same month into the future, say 2 years, 5 years and 10 years forward. That would be a calculation of today minus 2 years, today minus 5 years and today minus 10 years. I would guess the only people buying out to 10 years would be the energy companies, so one might gain a sense of their perceptions from such a calculation. Of course, there might be other combinations.
It would be an interesting plot if it were possible to begin with data from a couple of decades back, especially if data were available from the 1970's.
E. Swanson
I had a look using internetarchive.org about a year ago. A snapshot of the June 05 futures market predicted about $56 for March 08.
There is always the possibility that the oil traders know something we don't know -- the Earth is hollow and filled with oil, and that oil will be released after 2010 when the magic spell holding it in will finally be broken.
I've always been a big fan of the "Creamy Nougat Center" theory of oil, ever since it was developed by Arne Saknussemm.
Oh! Oh! I know that one professer Flitwick! It's "Petrolium Leviosa"
?
Google for Winguardium Leviosa. And thats leh-vee-oh-sa, not leh-vee-OH-ser.
Here's Vic Sperandeo, a well-known trader, on backwardation:
In other words, backwardation should not be seen as a prediction that the market thinks future prices will fall. It's simply an incentive to speculators to get them to take on the price risk of buying futures contracts when the spot price is seen as high.
I think it IS a prediction that future prices won't skyrocket due to declining supply.
In the absence of greatly increased storage capcity, if oil producers all accepted an immediate peak to oil production and thought that there will be a decline in supply of 5% each year from hear out, then this business insurance would simply be too costly. Producers can shut in a certain quantity of production for the future (though they are often financially constrained here), and they can store some oil for the future (as can arbitrageurs, but this goes back to my storage comment above), but if, after those things are taken into account, they know they (and the world) will be producing less in the future, then the future increase in prices (assuming sufficient decline rate) should erase the "insurance policy" driver of backwardation and push markets into contango.
Speculators in the distant futures are joined by actual consumer seeking to hedge against the cost of their future demand (though futures may serve primarily as a means to set prices for forwards). If oil producers' consensus was that oil will cost $150/barrel in 2012, then even if we accept the current "insurance policy" effect of $10-$15/barrel between 2008 and 2012, the price of a 2012 contract would still be in serious contango compared to the 2008. All that shift requires is for people to think that peak oil will lead to $150/barrel oil in 2012 (which, I think, is conservative). So, while I agree that there are many sensible reasons for the current backwardation, it still seems likely that the onset of peak oil awareness by the market in general will lead to a shift to contango. I guess the unknown variable here is whether the money piling in to developing new production will increase faster than the price of oil (which would increase the demand for this "insurance" and maintain backwardation) or whether money for oil exploration will stagnate or dry up as the it becomes clear that the low-hanging fruit have already been picked, and as the ability to lock-in future prices at less than the spot price (due to backwardation) will fail to meet the cost of development of these projects??
No, because if future prices go up due to a perception of permanent shortages, the spot price will also go up.
I don't think this is necessarily true, though I must admit that the analysis gets very dicey. My thinking is this: if there is a perception of future permanent shortage, but not of present permanent shortage, and no ability to effectively store/shut in present oil to arbitrage with future demand, then the price of future oil can go up without dragging up the spot price. I realize that the PR machine will probably always tell us that the present price is a bubble, and that there is plenty of oil/alternative energy coming in the near future, but...
Jeff, I guess one of the questions is how hard it is to hoard oil. For example, are the Khursaniyah and Manifa and Chevron delays really due to shortages of equipment and personnel, or is there a hoarding component in these production delays?
Yeah, this is a very good point--lack of transparency goes well beyond reserves to the degree to deal with which NOCs are developing reserves as quickly as possible, and which intentionally holding back to (probably quite understandably) preserve more production for the future when it may (will?) be worth far more? China is building a large SPR--how much of this is actually a form of hoarding as an investment for a sovereign wealth fund, and how much is actually intended for a US-style SPR (whatever that implies...)? A few data points that aren't being tracked (at least not published anywhere I can find) are the current capacity for crude storage, the % filled, and the price of renting storage space. I think that data could be quite revealing, especially if we had historical data for comparison...
Gold mining companies do the same thing. Then, when gold prices take off as they have recently, the mining companies attempt to unwind their long positions. This can be costly for them.
Another thing that hampers gold mining companies is the 'gear-up, staff up' when gold prices rise. When gold is down in price the companies tend to lay off miners and let equipment decay. When gold rises the companies have trouble re-hiring enough miners, engineers, etc, because all companies are trying to hire the same pool of workers. I think to some degree that is true of oil companies as well.
Send me a data sheet and new data source and I could build it for you...
Are you looking for something like what is at http://www.fuelgaugereport.com ?
I'm looking for something like the graphic below (which is from XL), but that shows updated present backwardation curve, one-day-old backwardation curve, one-week-old backwardation curve, one-month-old backwardation curve, and one-year old backwardation curve:
My data source was:
http://www.nymex.com/lsco_fut_csf.aspx?product=CL
Interestingly, this discussion has so far focused on why there is backwardation between the present and present + 3 years. Notice that there is contango between +3 and +7 years. Is that the effect of the time-horizon of oil production and the "insurance policy" theory (it seems too short-term for that), or is it because the market is recognizing the potential for significant shortages beginning in 2012? Or is this simply a cost of storage/time value of money issue? I think these issues highlight why an updated backwardation curve graphic could yield lots of fodder for discussion...
New analysis finds alarming increase in expected growth of China CO2 emissions
The Beijing summer olympics are going to focus more attention on the environmental consequences of China's rapid economic expansion than in any case it has already been getting for the past few years. The Beijing air quality story is going to make China regret vying for the olympics if indeed it doesn't already regret it. First come the air quality stories, then the stories about what it actually means that China is powering up a new coal-fired plant every week and that these plants will be in operation for decades and that in all chances of reducing or slowing global growth of CO2 emissions are basically zero.
What happens when the United States tries to externalize the environmental cost of cheap consumer goods? They fail to externalize the environmental cost of cheap consumer goods.
Inconsistent funding slows UK residential solar thermal
http://www.telegraph.co.uk/earth/main.jhtml?xml=/earth/2008/03/09/easola...
Even obvious measures appear to get stuck in this country.
In southern Nevada, Nevada Power has a program for subsidizing home solar power installations. A 5-kilowatt system ($40k installed, before rebates) is supposed to qualify for a $15k Nevada Power rebate, and a $2k Federal rebate. (http://www.bombardelectric.com/html/bombardSolar/html/benefitsFAQ.html)
Unfortunately, as in the UK funding is unstable, and applications are closed until Summer 2008: http://www.solargenerations.com/NV_index.html.
The story on Mexico's looming petroleum trade deficit is sobering. It adds a shade of nuance to the export land model. For a country with declining oil exports, it may become a net energy importer or a net fossil fuel importer before its crude exports go to zero. And indeed, its oil exports need not ever go to zero if the oil it's exporting does not offset the petroleum products it's importing.
Today's silver BB's
http://www.kare11.com/news/ts_article.aspx?storyid=501156
Augsburg College announces discovery of a new fuel-making process
http://www.newswise.com/articles/view/538524/
Trash Today, Ethanol Tomorrow: Invention Promises Major Advance in BioFuel Production
http://www.ogj.com/display_article/322509/7/ONART/none/Prong/1/Chevron-t...
Chevron tests heavy oil hydrocracking technology
Ah, this reminds me of reading Popular Science in the 1970s. Remember those days? Whatever happened to those thousands of sure-thing solutions? Oh yeah, it took 25 years to market the hybrid-electric car that appeared on a Popular Science cover in 1973. And the solar power satellite paintings. God I loved those. Were you ever part of the Gerry O'Neill cult, Antidoomer? I was. The lesson I learned: it doesn't matter whether or not it would have worked, it only matters that no one would pay to find out.
A couple of years ago I glanced at a World Book yearly review circa 1975-it literally could have been written today re energy. It discussed the great plans for solar which would take over, how the transition from oil was around the corner-quite an eye opener. Thirty years of all talk and little action.
why wasn't it needed? the price of oil and energy decline for the 20 years.
In 1977 my paper had a full page article about a new electric car that would make the internal combustion engine obsolete. It now seems like those predictions of helicopter commutes early in the century.
Of course that assumes you already have things like soybeans and coconuts available, right? Would someone mind calculating how many seconds it takes to produce a coconut?
Sprouting palms and growing palms from seed, use fresh seeds and follow the advice for coconuts below
To start a coconut from the seed, it is best to have the outer fibrous husk intact
Get a 3-gallon pot. Use high quality nursery soil mixed with 40% coarse sand. Add drainage rocks to the bottom of the pot
Lay your coconut husk on the ground and see what way it wants to rest. Plant your coconut husk 1/2 way into the soil in the same position
You can leave the pot in the sun or the shade. Water lightly to keep very lightly moist. Partial shade will likely be more successful
Be patient. The first time we started a coconut from seed it took 9 nine months to sprout. It is common for many palms to take many months to sprout. Don't over water as you'll rot them out
Your coconut will first split its husk at the bottom and send down some roots. It may take several months before your coconut also splits the top of the husk pushing up its first fronds. In other words, your coconut will be growing and you won't even know it until it splits the top
After your coconut spouts, your coconut can live in your 3-gallon pot for about 3-6 months. After that, plant it out or in another larger pot or directly into the soil. Incorporate lots of manure. Fertilize properly starting after sprouting 3 fronds
From this page,
http://mgonline.com/coconut.html
Could we just use the bullshit for fuel instead?
I was thinking Algea was the most interesting of the items mentioned. If the process works as good as described, it could really make algea biodiesel feasible.
I come from an extended family heavy on the natural sciences, including biologists, botanists, agronomists,and microbiologist some of whom are quite familiar with the issues relating to cultivation of algae on a large scale. Sorry the six second controlled algal bloom ain't quite there yet either.
Ok, I'll drop the sarcasm for a moment to admit that there is certainly some promise in this particular line of research. However when I read a statement about a process that produces biodiesel in six seconds, I have a very hard time taking it without more than a few very large grains of salt,
with or without algae.
Just saw Michael Lynch on CNBC. He said the weak economy is causing the high price of oil. He said people are afraid to have money in stocks so they are putting it in commodities. And if the economy picks up, the oil prices will fall.
Twisted logic? I think so. Apparently supply and demand have nothing to do with it. High prices should be pricing a lot of buyers out of the market. Witness what is happening in Africa right now. That should create a glut of oil causing prices to drop. But noooooo, those damn speculators keep driving prices up. So what is happening to all that unsold oil that those very poor countries cannot afford to buy anymore?
Ron Patterson
As I said in a previous post, I am looking hard for a Huber/Lynch oil field, which is an oil field where individual wells peak and decline, but the aggregate sum of the production from discrete oil wells increases almost forever.
When I find the field, I intend to raise Unicorns there, tended to by elves and fairies.
That is the funniest thing I've ever read on TOD :)
I agree, this is the sort of thing that keeps me coming back to TOD every day. Never have I encountered such an incredible confluence of brilliant expertise and incisive humor. Keep it up y'all!
Re: Lynch...do you think us early peak-oil-aware people will ever get a decisive moment of public shaming of the Michael Lynch types for having thrown our country off track for 20 years and jeopardized the well-being of our civilization? I'd hope so...I'd like to think that my peak-oil-awareness and nagging of my family and friends about the issue will provide me with at least a little personal benefit (since I don't have any money to invest in oil futures, or else I'd be using my edge for something like that). Sure, I've kept away from buying a car, I've used my little bit of money to buy several bicycles, little things like that. But I'd like to have at least one "I should you so!" moment with my friends and family...that's all I'm asking for. But I have a queasy feeling that people like Lynch will either quietly fade into obscurity and go back to making money at whatever they were doing before with their intellectual credibility intact, or that they will adjust their viewpoints ever so slowly so as to appear that they were peak-oil-aware all along, and even "one of the early ones warning everyone else." Ugh...like one of the commenters said in the "7-7-7 Climate Change, Inc.", in all likelihood, once corporate America and the mainstream media (redundant?) really get their hands on the peak oil issue and somehow co-opt it, we will scarcely recognize it. Right now they are just denying it or ignoring it, and that's scary enough for our civilization, but will it be even scarier once they really start to embrace it (and like a big, scary, horror-movie green blob, envelope and consume the last hopeful promises of peak oil awareness)?
Britain is ahead of the field in legislation in this respect.
Edward I brought in a law to provide the death penalty to anyone guilty of harming fairies, which AFAIK is still on the statute book.
He was apparently quite progressive in some ways.
I would not take that statement on trust, I would ask a Scotsman first.
He must have liked Scotland, as he visited it quite a lot.
Funny remark, but you have to be fair to Lynch. I think he doesn't claim that we will magically increase production from existing wells but that we'll find new ones or tap those that were previously too costly to exploit. I know, he is too easy on dismissing depletion and flow rate, which is a real problem, not amount of resource under ground.
So, individual wells peak and decline, but there are many undiscovered wells in Huber/Lynch field.
If pressed, Peter Huber will admit that discrete oil producing regions peak and decline, but he asserts that our aggregate production of all forms of energy will increase, essentially forever. Strictly speaking, I don't think Lynch accepts this view, but he is not too far away.
So, the Huber (and kinda sorta the Lynch) position is that while discrete sources of energy peak and decline, our aggregate energy production--the sum of discrete sources of energy--increases forever.
I have simply compared this view to an oil field, where the discrete wells peak and decline, but the overall field production--the sum of the output of discrete wells--increases forever.
I asked a colleague what he thought about the $109 oil.
He said 'we're sitting on 3 Trillion barrels in the oil Shale', but the environmentalists won't let them drill/dig for it'..
Me: 'I hear the inputs are too high, energy; water.. Shale's been promised since the 70's and can't deliver (enough)'
Him: 'Conoco or Shell said that they can do it, that the tech has advanced since then..'
Me: 'I don't buy it. But we'll see..'
__
http://cleburnetimesreview.com/cnhi/cleburnetimesreview/opinion/local_st...
"It is fair to say that the Barnett Shale and similar sources of domestically produced natural gas are no longer “unconventional.” They are in fact becoming the new conventional sources of natural gas and they offer the potential for the U.S. to become more energy self-sufficient. The Barnett Shale is truly a bounty from below that is transforming the economy of North Texas and helping to reshape the energy picture in the U.S. " 'Ed Ireland is executive director of the Barnett Shale Energy Education Council.'
Bob
EDIT -PS, if this seems totally non-sequitur to your comment, Ron, I was just reacting to my co-worker's summary.. 'Supply and Demand.. if they let us get the shale, the price will drop' RF
Jokuhl, I hope you are not confusing the Barnett Shale with the Green River Shale. I wonder because your post first talks about Shale oil, (The Green River Shale) while your link deals with the Barnett Shale. The Barnett Shale is a gas field in Texas, deep underground. But as far as I know there is no oil there. The Green River Shale is located in Colorado, Utah and Wyoming. That is where the 3 trillion barrel myth comes from. And of course you cannot drill it, it must be mined.
I suppose the new technology your friend is talking about was the Shell experiment of building a freeze wall and heating the interior of it for four years or so, then extract the oil. I haven't heard much from that project in over a year now. I wonder if it is still happening. At any rate, the oil extracted, if any, will not be very much, and years in the future.
Ron Patterson
In all honesty, I didn't know one shale from the other.. I took a shot, but I did like the confident promises that closed up that article, after puzzling over why they were talking about gas, not oil. Hoped it would elicit some informative counterpoints.
Thanks for the clarification, and the confirmation that Shale Oil isn't necessarily booming.. but this myth is so persistent, and with three stout legs;
1) 'There's TONS of it out there'
2) 'The tech is just coming online to get it for us' and..
3) (We don't have to prove it'll work, because) 'the Environmental movement is standing in the way, so the whole problem is THEIR fault.'
ah well..
Regards,
Bob
There was an article in a business magazine about it a few weeks ago including an interview with the Shell man, a guy called Vinegar as I recall. They are doing pilot programs. He was optimistic but didn't think much oil would be produced before 2015 at the earliest.
Ron,
Some of the Barnett Shale wells do produce oil, I have heard of up to 200 B/D, but are known to be more prolific on the gas. The oil production which I have heard of is in the north end, in Montague County, TX, where the Barnett Shale seems to terminate against the Muenster Arch. I am hoping that the Balmoreah (TX) area deep shales pan out to be much the same. They will not leave us with a great excess of gas when fully developed, though. The deep, superpressurized gas in south TX and Anadarko Basin are in enough decline that they might serve to replace much of that production, but again, the low hanging fruit is still gone.
People never admit it when they're wrong. They just keep rewriting reality and their memories of what they've said. In another two years, Lynch will be saying that he was one of the first to predict peak oil.
Lynch is so stupid he makes Yergin look smart.
Here is the video link to his comments.
http://www.cnbc.com/id/15840232?video=681737303&play=1
Funny. The other day there was a link on TOD to a financial site talking about the Fed causing inflation. He took rising food, commodity and energy prices as a result of easy money. World supply and demand didn't impinge on his consciousness. How stupid can you get?
A bit OT, but since everyone here is a news buff, thought you might enjoy this fun widget:
http://marumushi.com/apps/newsmap/newsmap.cfm
From a more recent article about $4+ diesel in California, http://origin.mercurynews.com/valley/ci_8519917 "At a Shell station on El Camino Real in San Bruno, diesel on Sunday was going for $4.39 a gallon. At a Valero on Mission Boulevard in Fremont, it was selling for $4.29. At a Shell on Hamilton Avenue in Campbell, it was $4.25."
"The only thing my company can do is pass this increase along to the customers, who will need to mark up their product also," said Lindamar Morehouse, president of G&L Supply in Morgan Hill, which transports construction materials such as sand and gravel. "So the increase will affect everyone."
Can someone provide the current European diesel price?
Official price is 1.268 eur/l, cheapest price is 1.108 (http://www.carbu.be/best_price.php). Which translated in $/ US gal give respectively: 7.35 and 6.42.
Thanks for that. So is there a tax differential that makes diesel cheaper than gas or ?
Yep. Most European countries give diesel preferential tax treatment.
So preferential tax treatment led to better usage of fuel? T/F
Higher fuel taxes led to greater funding for alternative transport modes. T/F
I'm certain the answer to both is T, but am asking for clarification. It would also seem that this taxation policy is/was a onetime deal, as it would be politcally difficult to embark on such a policy now, with the US being a prime example.
I wonder what effects will be caused when the independent truckers cease operations because they cannot pass costs along like the larger trucking companies? Will the larger companies just grow and absorb the independents? If overall trucking declines, what will happen to state highway revenues as the associated fees drop? When diesel approaches European prices, likely by decade's end, what will the US trucking industry look like?
It is difficult in Europe to generalise, as the tax regimes vary from country to country, as do the 'alternative transport modes'
In two of the big ones though, France and Germany, preferential tax treatment for diesel was influenced by the desire to support national car industries, as the Japanese at the time did not do many diesels.
The answer to both your questions for these two countries would be true, but for Britain for instance the case is quite different.
The tax regime did not favour diesel sufficiently to make up for the increased cost of the engine, partly due to concern over high particulate emissions, partly because the UK car industry was already decimated.
Although fuel taxes are high in the UK, the public transport system is far from wonderful, with the money all going into the general Treasury pot.
In the US supposing it became possible, for instance say, to generate electricity by solar PV on people's rooftops and power cars with it, then the revenue losses would be far less significant than in Europe, where other taxes would have to rise hugely to counter exchequer losses.
To partially answer the question on what the US trucking industry would look like with fuel costs at European levels, as least for local runs there is a big move to power delivery vehicles electrically.
Thanks for the input, DaveMart.
What are folks saying now that the Falklands has petroleum resources?
Falklands oil is just speculation at the moment, and the Argentinians would be pretty miffed.
I would imagine they could make exploitation difficult or impossible, and it should not be imagined that the Royal Navy is the force is was in 1982 - cutbacks have seen to that.
Maybe that's why the Royal Navy is getting two new Queen Elizabeth Class super-carriers...
Yep, they are on the drawing board, still to be financed. I was talking about present capability.
With current projections for UK deficits I will believe in these carriers when one floats past me.
So all that Argentina needs is a few Sunburns. Carriers are dinosaurs that today only serve to attack defenseless countries.
They don't even need to do that. Just give some hassle to shipping and equipment as it tries to enter the area.
Deep sea drilling is challenging enough already, without having to fend off unfriendly neighbours.
Argentina is not exactly rich either, so guerrilla action would probably suit better.
The UK plans an $86bn deficit this year, before anything goes wrong, and haven't got money to throw away on another war, not that an oilfield down there would really be defensible - and they haven't found the odd few billions to build the carriers yet.
Plus, there is a "balancing" additional sales/VAT tax on diesel cars but not tractors (at least in some countries). This means diesel cars make sense from a certain mileage upwards. Heating fuel is even cheaper, but it has a color in it to identify tax cheats who use it in diesel cars.
In the UK diesel is around GBP 1.15 per litre which is around USD 8.50 per US gallon.
Diesel was $4.19 along I-75 in mid Michigan this weekend.
401(k)s tapped to save homes
Foreclosure crisis has ripple effect
Thanks for all those links. I am glad to see that there is at least open reporting about the effects of the credit crisis in the US. This contrasts sharply to what happens in France, where I guess there are also a lot of foreclosures and sky-rocketing poverty but absolutely no reporting. The official lore is "our economy is strong dispite its 2% or less growth, we won't be hit by any crisis". My experience with the population from where I live tells me otherwise.
I wanted to report for what I have seen past Week-end. I have already posted here about trailer villages increasing all over France. I have been able to locate a more complex of these "villages". There are no links since these things go unreported. And on google earth it is a low resolution area.
Most of the trailer villages are located on rural campings, using existing infrastructure for sanitation and water supply, sometimes providing free electricity to its residents. All of them are well hidden, far from the main roads.
But the last structure I saw was more complex. It consists of trailers dispersed in a village, located for some in backyards, others on public areas. I found this place because I had a patient who has told me he lived there. He pays a modest rent to the owner of the farmhouse. 6 other families live there packed on the yard. The whole village contains at least 50 other such trailers in about 20 farmhouses. I counted another 40 trailers on small public places. The most intriguing is the fact that the urban district seems to be planning for this trend to increase. They are freeing up scattered places and equip them with water and electricity facilities. It seems like a giant camping within a village. This kind of structure exist in at least 3 other villages around where I live. For this I am sure, the rest of the accounting in France is a mere matter of hear-say.
I met an owner there who tries to sell his house. You can guess how the price of his house goes with such a neighboorhood. However it seems that this kind of scattering and mingling with the local population keeps the criminality low, at least locally (so said the home owner ...).
My conclusions : at least at the local level, the french administration has acknowleged the fact that poverty will increase fast.
If I could get to it I would cash it out to try to buy things of real, lasting value that may help my family's position in the future. And to help pay for my children's private school, now that the education system has fallen victim to profiteering by the crony capitalists and their buddies in the "education industry". I don't have any expectations that the money I have in there will have any value when I'm old enough to retire, nor that I actually will ever be able to retire. I stopped contributing to it about 6mo. ago, and I'll pay the taxes and penalty rather than have it all stolen.
We are on the verge of a great deflationary depression. Inflation/deflation are defined as an increase/decrease in the supply of legal tender (erroniously called money). The total supply of money and CREDIT is called the money supply. 97% of the money supply is credit. The Govt. prints Federal Reserve Notes which it sells to FED for the cost of printing. The FED blesses it, calls it money and loans it to the Govt. at interest. The FED enters it onto its books as an asset, The Govt. enters it onto it's books as a liability. Credit is debt. We have a debt based economy, not a savings based economy. Debt can be resolved by default or pay off. If all debt was defaulted their would be virtualy no money
The intrest the Govt pays the Fed is also debt. The debt from the interest paid now exceeds all monies collected from income tax, so your income tax money is going to the banks. The FED increases the money supply through the majic of Fractional Reserve Banking. I believe the Reserve Requirment is now 8%, so the FED is limited to the amount of money it can create. More credit is created by GSE, Freedy, Fanny and FLHB. Money as credit is also created by non-bank banks. Non-bank banks do not take deposits but issue credit. 40% of corporate profits are from issue of credit or creation of debt.
With $11 trillion in morgage debt and $3 trillion in credit card and other consumer debt, enough is being or will be defalted in cascade to greatly shrink the money supply. Banks will not loan to people who cannot pay it back and the consumer is taped out. The longer the FED tries to keep the wheels from falling off the worse the deflationary depression will be. We will not have hyper inflation because globalization will keep wages from rising.
This is at best a summery overview, the whole problem is much more complex.
Roysyl
Exactly. Thank You.
Possibly-the USA isn`t Japan (not by a long shot). There is no floor under the US dollar. If deflationary means everything Americans need goes way up in price, maybe.
Rising prices are a symptom of inflation, which is really a monetary phenomenon, as declining prices is a symptom of deflation. However, there are other reasons that prices rise and fall that have nothing to do with money supply. Thus, it is perfectly possible to have monetary deflation at the same time as rising prices, albeit probalby only in essentials. The prices of non-essentials will have to fall in this scenario.
Economists used to think this was impossible until the stagflation of the 1970s. Now they think it can only happen when there is a political shock. It is a matter of faith to many economists that supply and demand are unlimited, which is to say there is no level of demand that supply is not able to meet, given a strong enough price signal and enough time. This is a fatal myopia in economists, and they are about to learn a hard lesson.
IMO, there is no such thing as supply and demand. They are abstractions for production and consumption. With many economists, they take the form of "magical thinking" that distorts everything they write. With Peak Oil, I find it much clearer to think in terms of production and consumption and not deal with the airy abstractions of supply and demand.
So did the Soviet Union. I thought the collapse of communism pretty much showed that it doesn't work to think of an economy in terms of production and consumption alone.
Fed Gets into the Mortgage Business--
Overtly, for the first time.
http://www.bloomberg.com/apps/news?pid=20601087&sid=ai3MU.ZEZb44&refer=w...
UK diesel prices are now E1.30 to E1.50 per litre (I think that's not far off $10 per US gallon). As yet this has not impacted much on car use with total milage continuing to rise to rise.
The UK experience suggests that demand does not respond strongly to price rises. Oil prices will have to rise a long long way to get people out of their cars .
We knew, that Pickens was shorting oil. I'm wondering, what he is doing right now.
Pickens's BP Capital Energy Fund Fell 14% This Year
http://www.bloomberg.com/apps/news?pid=20601087&sid=a2RfjTLL3wGI&refer=home
He probably cursed, admitted his mistake, vowed not to second-guess himself again, and went long.
A related thought to the "It's the Speculators" mantra. It seems logical that a considerable portion of petrodollars find there way to the futures market to continue the upward pressure on oil to counteract the devaluation of that same petrodollar. Also, it makes sense for the USG's geopolitical rivals to do the same as a form of asymmetric economic warfare. I expect the petrodollar to be dropped at some point in the bidding war. Then we will see just how debased the dollar truely is.
Hardy har har: http://bloomberg.com/apps/news?pid=20601087&sid=a2RfjTLL3wGI&refer=home
Pickens should have known never to short a strong market. Maybe he's getting senile. It's the shorts that have to cover that force bull markets up to new highs.
Rio expects strong coal prices to 2011
I think people would be very surprised if the coal supply suddenly became a bigger short-term problem than oil for global energy demand. So much for peak oil mitigation.
Lest anyone forget just how finite and precious are our two most important natural resources, air and water, here's a nicely rendered graphic showing spheres of the all the earth's water and its entire atmosphere, respectively, compared to the size of the earth.
"A suburban nation of snowmobilers, dirtbikers and NASCAR races -- all of it was made possible by the one-time blessing of cheap oil."
oil is at an all-time high and yet we still have snowmobilers, dirtbikers and NASCAR. good work JHK.
What's your point? Oil is still incredibly cheap. What is it? 15 cents a cup, or something like that?
So, yes, JHK is 100% right. He may have understated the case.
What's your point?
He doesn't have one.
Haven't you noticed, whenever Kunstler is mentioned, John15 is required to give some example how some prediction Kunstler might have made in the last 10 years is wrong.
Ignore it.
Jim Kunstler was on the OnPoint radio show this morning. It will be run again at 7 PM EDT tonight on WBUR 90.9 FM in the Bostom area, or at http://www.wbur.org, or you can listen to it anytime at http://www.onpointradio.org/shows/2008/03/20080311_a_main.asp.
Kingdom of Saudi Arabia welcomes its guarantor of Royal Stability...
Dick: We must hit Iran.
Abdullah: You are crazy.
D: Do not worry. We continue to honor our guarantee. Our Armed Forces will handle any threat to KSA. You can plainly see our naval fleet on-station.
A: Your guarantee has become weak in the face of modern weapons. We observed your Naval war-games. Your navy concluded that the old guarantee is no longer operable.
D: I tell you it is!
A: You risk shutdown of 30% of world crude[oil] supply.
D: We and our allies have over 30 days SPR [Strategic Petroleum Reserve]
A: Any blockage of [Gulf of Hormez] shipping will likely be way over 30 days. And any resumption of shipping will not return to former volumes or tanker terms.
D: Bullshit. I guarantee it or else!
A: What if the Royal Family is forced to abdicate? Then what?
D: Our Marines will hold KSA and and the oil fields until a new government is stabilized.
A: Is that the real reason your Navy is on alert? It is not about Iran?
D: Of course not. You can trust me. It is just in case.
A: Your "just in case" is after the fact of Korea, VietNam, Afghanistan, Iraq, America is now a desperate importer of oil and, worst of all, the world is now in a bidding-war for crude. Your guarantee and my presence on the Royal Throne are equally in doubt. America has made too many enemies. The KSA must not make too many enemies.
D: You question our guarantee?
A: We agree that world crude production is not sustainable, is falling and will fall faster each year from now on. You know supergiant Ghawar [5.5 million bbl/day] is tired. As an old friend of America, I repeat what I have said for years. The bidding war will not stop until America cuts per capita consumption and raises gasoline prices to match Europe. Only then can nations cooperate to develop sustainable energy sources. KSA will act responsibly and in concert with others to force consumption to match dwindling production. Thank you for your visit. Farewell old friend.
US Mid-East commander steps down
wasn't Fallon the sane one?
Hmmmm....
A Pentagon problem – loose lips
"Looks like I picked the wrong week to quit drinking!"
- Lloyd Bridges (Airplane)
Fallon Stepping Down as Mideast Commander, Gates Says (Update2)
http://www.bloomberg.com/apps/news?pid=20601087&sid=aaVcHyFFVsjU&refer=home
So much for Fallon...came to the decision all by his little lone self too! :P
Iran should be worried now. Can anyone say -glass- desert?
I take this as a signal that there is going to be an attack on Iran. This is very, very bad. But these are the times we live in. If there is history written about this period, it will be in the textbooks as "The Crazy Years".
Ominous.
This is the guy who said we would not attack Iran on his watch. Well, his watch just ended.
If Iran gets attacked, it should be very good for Mccain-the lizard brain of the sheeple will react very strongly.
Hello Tetsudo,
From a LATOC forum poster named Pagancelt:
---------------------------------------------
Phone rings, Fallon answers:
Hi, Bill?
Yeah.
This is George, you know we have some pictures, and you might've heard about Elliot, right?
Yeah.
Well, like I said we have some pictures, and we, Dick and me, thought it might be best if you step aside, get my drift, Billy?
Yeah.
Ok, so I'll see the letter tomorrow, then?
Yeah.
Good talking to you, Billy.
Click, line goes dead.
----------------------------
Ficticious? or maybe not?
A historical analogue?
Three Star General Greg Newbold resigned prior to the Bush/Cheney invasion of Iraq (in protest over the decision to go to war):
http://www.time.com/time/magazine/article/0,9171,1181629,00.html
BTW, remember that Bush is filling the SPR to its current capacity, scheduled to be done by October.
And what happens in November?
And of course, John McCain discusses his plans for Iraq & Iran in this video clip:
http://www.youtube.com/watch?v=3gwqEneBKUs
Sounds remarkably like the neocon/Israeli faction have got the approval for a war on Iran, which incidentally might well lead to a lot of votes swinging behind McCain, as his strong suit is assumed to be in warfare rather than on the economy.
Wouldn't this be a great time to attack Iran?
I mean from a distraction point of view. Mccain't could sound all presidential, the dem's could look impotent and/or confused. Gas price? What gas price? Mortgage crisis? What mortgage crisis - we're at WAR!
Bush could have a second shot at a legacy. Cheney is in Saudi Arabia holding hands with someone. Israel's always ready to kill perceived enemies.
Beware the ides of March.
Who said "The third war is the charm"
I think OCTOBER.
Typically a difficult time for oil due to transistions.
7 weeks or better to elections...perfect timing.
There are a couple of the possible reasons for October...but no point carrying on...just idle speculation.
Frankly, don't know if the financial system can hold on that long.
I thought West Texas clearly implied October in his post - that is when the strategic oil reserve will be full.
An attack could be a month or so before though, to give some element of surprise, and may not actually be a US action, at least at first, but an Israeli one.
I would imagine that the Israelis have basically told the US that if the US doesn't take out the Iranian nuclear capacity, they will.
Even if they did not carry out the initial attack, US forces would still get involved to defend oil passing through the Straights of Hormuz, which the Iranians, being somewhat miffed, would no doubt seek to interdict, so it looks like they are twisting the arms of Israel to delay action until their reserves are more or less full.
Then let's say I was clarifying...I thought he meant November after it is full in October.
Either way...I agree, it would be a likely time.
I can put away the tinhat now.
http://www.ww4report.com/node/3940
Further, it explicitly sets the president above the other two branches of government by stating he shall act as the coordinator of the two.
One wonders if the move to declare martial law - if it is to come at all - wouldn't be better timed between the election and inauguration. If McCain wins, it's a smooth transition. If he loses, they can put the inauguration on hold while always claiming it will take place just as soon as things cool down.
Cheers
EDIT: This is well stated:
World warned on food price spiral
Pretty interesting. Most of the families are doing okay, but many are eating less meat, and the Egyptian family is now eating only two meals a day instead of three.
There's also this bit, from Beijing:
Biking an hour every day, to save less than one yuan? (I think a yuan is about 15 cents.)
I wonder if that's an hour one way, or an hour round trip.
Leanan, you sure are outta line here with that story. Don't you know that Stuart proved that food supplies will increase linearly for the next 50 years? There's no problem there! It must be speculators or something!
/end sarconal drip
Ah, but did Stuart say much about the price? Does anyone in their right mind, other than grifters from the farm lobby, seriously profess that we can burn huge quantities of food as fuel - whether directly, or indirectly by way of land use - and not have the price go up?
That is why Stuart specifically said that if agricultural land were given over to biofuels then his scenario of food supplies being adequate would be falsified.
I sometimes wonder if some of those who seek to criticise articles here have actually read them.
I read the article. I thought Stuart didn't take into sufficient account (a) water resources, (b) topsoil loss (1%/annum), and (c) the absolute dependency of agribusiness on fertilizer and pesticide. With agribusiness the soil is little more than a nutrition-free anchor to hold the roots, almost like hydroponic gardening. A fertilizer shortfall wouldn't reduce agribusiness yields, it would almost eliminate the crop. There just isn't enough nutrition in the soil to grow anything in it any more. Soil abuse is also why we have a topsoil problem.
I think there is a significant chance that small organic farms may be the only sustainable way to produce food. The problem is, of course, they can't produce enough food for 6.5 billion people. For that we need limitless water and huge quantities of fertilizer and pesticides, something I don't think we're likely to have.
Slide 2
Slide 3
Slide 4
Slide 5
Slide 6
http://www.guardian.co.uk/environment/gallery/2008/mar/10/climatechange....
Thought exercises are fun, I suppose, but I wish we'd see some analysis that actually deals with the fundamentals as they really are. The water issue should have been dealt with first, imnsho, because all else hinges on that. It's logical.
As a teacher, I always drive my students to be clear in their writing. That includes a certain degree of brevity. Don't write it if it gets you nowhere. Doing the food first then saying, "but here's how much water there is, so that would affect what I said in the previous essay" is not the best way to get clarity. Starting with the water gets you past Pollyanna from the get go and allows you to only deal with those realities allowed by constrained water - which are the only ones that have any chance of happening.
My 2c.
Cheers
Save a yuan + wife looking trim == marital bliss
I wonder how much of the 15 cents is consumed by the act of biking...
I think, it is the first time within 100 years, that the US is facing recession, but the rest of the world not. Bad for the US. Commodities are not sinking this time, but rising. Nobody cares, whether the US is in recession, because the other countries (economies) on this world are running like mad. Wind of changes?!
Hello TODers,
According to my 'Porridge Principle of Metered Decline' speculation: the Iraqi surplus will be siphoned off as fast as their oilfields.
http://news.yahoo.com/s/ap/20080311/ap_on_go_co/us_iraq
-----------------------------------
Auditors: Iraq faces budget surplus
WASHINGTON - Iraq isn't spending much of its own money, despite soaring oil revenues that are pushing the country toward a massive budget surplus, auditors told Congress on Tuesday.
The expected surplus comes as the U.S. continues to invest billions of dollars in rebuilding Iraq and faces a financial squeeze domestically because of record oil prices.
"The Iraqis have a budget surplus," said U.S. Comptroller General David Walker. "We have a huge budget deficit. . . . One of the questions is who should be paying."
---------------------------------------
Bob Shaw in Phx,Az Are Humans Smarter than Yeast?
Uhhh...bet I know the answer to that one.
I think that it was "Donsailorman" who posted several months ago that the FED had a lot of tools at its disposal. Don, if you are still out there, feel free to post an "I told you so."
Huh? No one ever doubted that the Fed had tools at its disposal, and would try to use them. The doubt was about whether they would work.
I think that's still very much up in the air. In fact, I see deflation as more likely than ever in the light of recent events.
The Fed still has a lot of tools to use, but at what cost? These will be checks that America can not cash. The world market will start to devalue the US dollar, very soon. I feel this will turn into a bad virus and effect all markets.
And then there is our grand oil issue, I feel we will see our #1 and #2 import supplies will adjust our imports by late summer. Someone was talking about a spike in oil to $200/barrel, a very sad thought. See what happens when you screw third world countries.
Well we will have new job growth in about 2014, when we start exporting salad shooters, cheap plastic crap, etc. to China, that is once there dollar is worth more than our dollar.
The value of a dollar really dropping.
Looks like its ready to go exponential.
http://finance.yahoo.com/q/bc?s=USDCNY=X&t=2y&l=on&z=m&q=b&c=USDEUR=X
The graph is the value of dollars against euros and chinese yuans.
Don't worry-as the dollar drops it will fix the trade deficit (ask any economist). All the manufacturing jobs will flow back to Motown.
I trust that was sarcanol. Otherwise, you've got a bit of explaining to do about the latest increase in the trade deficit.
Oh, but exports are up -- too bad they won't keep up with the ballooning trade deficit.
From what? One day's rise that did not even wipe out the fall from Friday and Monday? In a market that is barely above 12K, at 12156.81 which in inflation adjusted 2000 dollars is really worth 10,098.42? That's according to this same Fed that you praise too. Here's their inflation calculator. So the Dow, for the last 7 years, has basically been in a funk, losing money after inflation. Aren't stocks a great way to give your money to stock brokers?
Yet you claim one day's reaction as some great victory? Against months of declines with unknown losses still on every bank's balance sheets?
Wow, you really really wanna believe, doncha? This show is a long ways from over. And let's not even discuss wars, rumors of wars, etc., right as the economy sputters again.
Nate said don't look at the stock market. Look at the bond market. He says the bond market is "smarter," in his experience.
This knee jerk reaction is just the same as the last 3. Temporary in nature.
These moves by the FEDs do nothing to solve the REAL problems in the Mortgage, and Credit markets...and let's not even consider the dangers of the derivatives market looming.
Don's a very smart guy, and the FED is going to try everything it can, but even he would not likely stick his head in today hours, after close on a day when the FED takes EMERGENCY action to say 'I told you so'.
Who knows it might work for a few weeks, but there are SERIOUS skeletons in the closets of the major dealers and banks.
O.K., "I told you so." But the credit crunch is much worse than I expected it to be, so I'll eat crow on that one.
To combat a deflationary depression I am sure the U.S. government would run massive deficits, and the Fed will be ready to buy this new debt. This monetizing of the national debt would be inflationary, and hence we could have the worst of both worlds--a severe depression with high unemployment combined with high and rising inflation.
"a severe depression with high unemployment combined with high and rising inflation."
i.e., a hyperinflationary depression. This is how fiat always ends. And no "lender of last resort" this time. But we still have a long way to go yet before people reconnect the concept of "tangible" and "currency" so we should see plenty of currency twitching in the markets in the years to come. The Euro is a joke... the yen the same... watch the dominoes tumble.
Aren't you supposed to be the optimist?
You know, as an economist, you have to put a quarter in the "bad word jar" every time you use the word "depression".
A little premature...don't ya think!
The Fed has a lot of tools, but it is burning through them very fast (see this article by Mish). Their tools are also lousy tools for a solvency crisis. The Fed is desperately "putting bandaids on severed jugulars", as one writer put it.
Today's action doesn't fix anything. It actually wasn't even directed at the primary problems, nor at the stock market. Many banks are short treasuries and long other debt instruments. This is a disaster the way the spreads have been going. Yields on treasuries are at near historic lows, while yields on everything else are skyrocketing.
The Fed's action today allowed banks to trade asset backed securities for treasuries, so they banks could short treasuries (that the reason anyone borrows securities from their broker). So treasuries tanked today and probably saved some banks from going under. For now. That the stock market took off like a crack addict taking a deep hit is just a side effect and is evidence the markets are clueless, and/or grasping at straws. Even so, the markets only went back up to about where they were last Thursday.
I think this was a sign of absolute desperation from the Fed. It will maybe get them through to the Fed meeting next week. A big drop in interest rates then will buy them another few days. Then what? They're going to run out of runway, just like the Bank of Japan did. The last time rates went to 1% in the US, we had the "jobless recovery". Rates had to stay that low for years, and as soon as they started to raise rates a little, the economy unwound like a poorly wrapped ball of string. Rates are going to 1% (or lower), and they're going to stay there indefinitely. And it won't make a damn bit of difference to the economy.
Hate to be redundant, but this Japan analogy is used to death. When Japan ran out of runway, they had (have) a very strong trade surplus and a strong industrial economy overall. Yes, the USA rates can drop to .25% and stay there, until the T-bill bubble (the biggest of all) bursts and then Americans are going to be like Argentinians wondering "what the hell happened". China and Japan are supporting the USA for tactical reasons but eventually the support will be pulled and the USA will have to sink or swim unassisted.
Japan is a convenient analogy. But a similar thing happened in the Great Depression. The Fed lowered rates then, quite quickly and quite low. Later, while Hoover was still president, they realized it wasn't working, so they raised rates. I also brought up the rate cuts of 2001-2002 that dropped rates to 1% in the US. Even though the US was not in a depression then, the 1% rates did not set the US economy on fire. It just blew a credit bubble that's popping now.
The fundamental point is that low interest rates are not a panacea for a sluggish economy. Depending on the reason the economy is sluggish, they can actually prevent the economy from recovering.
All low interest rates do is make credit cheaper. When an economy's problem is a credit meltdown, lowering interest rates doesn't help. When the credit meltdown was caused by a lack of savings and investment, low interest rates actively prevent the savings that is necessary to rebuild the economy. I'll freely admit that that is not Japan's problem, so to that extent Japan is an imperfect analogy.
So, ditch the Japan analogy if you don't like it. My points in no way depend on Japan's experience.
In any case, as I think you imply, the Fed doesn't really control interest rates. And when no one wants to buy US debt, the yield on treasuries is going to skyrocket, and there's nothing the Fed can do about it. They'll still try, though. Which is one of the reasons why we'll have ZIRP for the forseeable future.
I think you've missed something basic here. You say:
From where I sit, it sure looked like the economy was on fire. While the U.S. industrial production may not have surged, housing production surely did. One heck of a lot of that credit went into buying those new houses and the builders and the industry which supplied the builders exploded. There were many more buyers than usual with the easy credit as the mortgage companies began to refinance existing properties and loaned money to anyone that could crawl in the door. The price of houses would not have gone up if there weren't the demand for houses, demand which resulted from the low rates and easy credit. Sure, it was a bubble, but Gee Dubyah got re-elected.
E. Swanson
This maybe a little more real than we think, to see that big D word used more and more.
Last night the town board meeting we were informed our state government may cut our local share, that spells a possible $580k budget short fall come June. That spells layoffs and cut in services, but is this happening across the country too?
Yes.
Cities in California are facing possible bankruptcy. A county in Alabama missed a margin call on their debt and are probably going to default. It's starting to happen all over.
Meanwhile the Fed has had to offer trades of over $400 billion in exchange for toxic waste "securities" that when placed on the open market (see collapse of Peloton and Focus Capital for examples) brings $0.10 to $0.12 per dollar of originally declared value. In other words, the Fed got back collateral for these latest two moves that is probably worth, in the current market, about $40 billion.
There are no margin calls on municipal debt. The county may have missed a payment.
It is not at all accurate to say that the broad range of securities that the fed is accepting as collateral are worth anywhere near $0.10 on the dollar. Certainly a large number of funds that have leveraged hugely against these assets could see net returns that are negative. However, this does not imply any value for the securities themselves.
When I last looked at the index for asset backed securities, typical instruments were trading near $0.50. LTCM had leverage of over 30 to one (according to Greenspan) and had to go bust selling assets into a firesale. However, those acquiring the assets did very well well once markets receovered.
The Fed might make money on this deal and might lose money on the deal. Since they seem to be taking on the risk at a rate above what the market would provide, the latter seems more probably. However, only time will tell.
Jeez.
Jeez, what?
I'm no expert in this area but it would appear that the downgrade of Birmingham's sewer bond to junk grade triggered something like a margin call - they've received a no confidence vote and have to come up with some cash or perhaps declare bankruptcy.
This can be looked at as is and one can come to a certain conclusion, but the southeast stands on a shifting mix of water issues and the financial stuff that is about to let go. Maybe they avoid bankruptcy based on current conditions ... only to have something else hit six weeks later that makes it certain.
http://www.al.com/news/birminghamnews/index.ssf?/base/news/1204362972233...
It looks like a missed payment triggered a set of covenants (agreements in the debt contract that change terms if certain conditions aren’t met), which blew the interest rate threw the roof.
I think this is similar to when you miss a payment on a credit card and they hike the interest rate, which makes it even less likely you will make the next one. If I am reading it right, they needed to issue more debt to pay the old debt. When market conditions made that impossible, the whole thing came undone.
It does seem incredible that a municipality could go bankrupt funding a sewer system when nothing actually went wrong with the sewer.
Here is a similar point from the comments section of The Big Picture.
"More generally, a capable lender of last resort is likely to make money on its lending, because it steps in only when financial markets are sufficiently self-destructing that the feared assets are highly likely to increase in value when panic subsides. We may have reached that point regarding mortgage-backed securities in the U.S. economy."
Question: how many here feel that the FED will end up "making money," on these pieces of crap paper?
http://bigpicture.typepad.com/comments/2008/03/wilbur-ross-on.html#comments
I rather doubt that any government so-called 'investment' has ever made money.
The reason for that is simple - they put money into dead ducks for political reasons that no-one else would touch with a barge-pole.
That doesn't mean that the decision to try to carry out a bail-out is wrong, faced with the possibility of systemic collapse there is no real choice, but the chances of this being a money-making move and not a loss-leader would seem to be slight.
If I am not wrong, the Hong Kong governmnet injected funds into its stock market in the aftermath of the 1997 crisis to avert panic. The market later recovered and the government did make a lot of money.
This is a situation that was similar, if far less severe than what the US is facing now.
Actually the funny part is seeing the US jump in to bail out the private investors after hectoring Asian countries about leaving it to market forces. It is a different story when it is closer to home.
Well, hush my cynical old mouth! :-)
UK government 'investments' lower the average a long, long way though!
More Northern Rock, anyone?
According to what I have read the Fed is giving a 15% up-front haircut to all the securities that they are accepting as collateral. That was not mentioned in the Fed action Tuesday but in fomer and ongoing actions with the TAF 'window'.
I had not seen that, but it does make sense. As long as the securities are collateral there may be no real haircut. If the banks do meet their obligations, presumably, they would get their full collateral back. It is not unusual to treat them at less than face value.
Hello TODers,
http://www.theaustralian.news.com.au/story/0,25197,23360117-27703,00.html
------------------------------
Warning of world phosphate shortage
--------------------------------
Recall my prior AFRICOM & Morocco postings, US Navy as modern Barbary P-irates, the need for Federal Reserve Banks of I-NPK, sulphur prices, and SpiderWebRiding from the endpoints of Alan Drake's ideas to help close the O-NPK recycling loop.
Have you hugged your bag of NPK today? Long after the lights fail to glow--We still need massive quantities of I/O-NPK to help reduce the scale and duration of machete' moshpits.
Bob Shaw in Phx,Az Are Humans Smarter than Yeast?
During the late 50's I heard the McGill biologist N.J. Berrill predict that the availability of phosphorus might place an ultimate limit on population. Later I learned that this along with other resource problems were discussed in the 1928 Aldous Huxley novel, Point Counter Point, especially on page 57.
Hello Robert Wilson,
Thxs for responding. This link is instructive:
http://www.backyardnature.net/phosphor.htm
------------------------------------------
A Bottleneck in Nature
---------------------------
Hello TODers,
Sometime earlier I posted that the double-whammy of having to use evermore expensive energy to provide NPK could make fertilizer prices rise faster than FF prices.
http://economictimes.indiatimes.com/News/News_By_Industry/Indl_Goods__Sv...
----------------------------
Tripling of Di-ammonium phosphate price to send subsidy bill soaring
NEW DELHI: Global fertiliser market is on fire. Di-ammonium phosphate (DAP), critical for good rice and corn harvests, has crossed $1,000 a tonne for the first time. This is a three-fold jump in the price in a year.
The strong rally is the result of a combination of factors. The rise in manufacturing costs due to more expensive phosphoric acid, sulphur and natural gas, plant outages and the recent ban on exports by China have added in making DAP move up strongly.
---------------------------------------------
Bob Shaw in Phx,Az Are Humans Smnarter than Yeast?
Russian oil exports might drop 16% in four to five years... (Prime Tass, Moscow)
http://www.prime-tass.com/news/show.asp?topicid=65&id=433364
Russia is the second largest oil exporter in the world.
What does this mean?
NYMEX To Change Margins For Crude Oil, Related Futures Contracts
Margin money is the money you must have in your brokerage account to buy or sell, (go long or go short) one contract. This time last year the amount required was, if I remember correctly, was $4,050. Now it is $7,763. It has increased because the price and volatility have increased.
This is to protect the brokerage house against losses. One dollar movement in contract price is worth $1,000 in cash, either for you or against you. If you put up only $4,000 margin and the price of oil moved $5 against you, then you would lose all your margin plus $1,000. If you did not cough up that $1,000 then the brokerage house would be liable for that money. To protect themselves they try to set the margin higher than they think the price would move in any one day.
Maintenance margin is the amount you must have in your account to avoid a margin call and that is usually about 75% of the original margin. That is, if the margin was $4,000 then if your contract moved against you and you were down to $3,000, then you would be issued a margin call and if you did not meet it your contract would be closed, or sold at the current market price. You would still then have money left in your account but a lot less than you started with.
Basically it means that if you have $7,763 in your account, you can buy or sell a crude oil futures contract worth $108,000 or a few bucks thereabout.
Ron Patterson
One of the features of exchange-traded derivatives, which is what Nymex futures contracts are, is that the contract is guaranteed by the exchange. If one party renegs on the contract, the exchange guarantees to make good. Because they're on the hook, they have an incentive to make sure people have enough margin and that things in general don't get out of hand.
The over-the-counter derivatives market, which hit $681,000,000,000,000 (that's 681 trillion dollars, about 50x the world's combined GDP, and that was back when the USD was worth something!) in the 3rd quarter of last year, has no such rules, no guarantee of contract fulfillment, and nothing to hinder trading in any way shape and form. At some point later this year, you'll be hearing about the OTC derivatives problem, just as you're hearing about sub-prime mortgages now.
So, it seems that there is another irrational gas price e-mail gimmick going around. I got this from my uncle-in-law today:
> > THIS IS NOT THE 'DON'T BUY' GAS FOR ONE DA Y, BUT IT WILL SHOW YOU HOW
> > WE CAN GET GAS BACK DOWN TO $1.30 PER GALLON.
=================
So, my question is, what is the most effective way to reach these sorts of people (the kind that buy into the "blame the oil companies and OPEC" scapegoat reasoning for current prices)?
Of course, there ARE legitimate things to blame the oil companies and OPEC for: namely, their fraudulent oil reserve accounting and propaganda meant to trick us into thinking that we have at least 30 years left until a peak in oil production, so that we see no need to get ourselves off of our oil fix, and so we keep on paying up like junkies in the meantime. I think what we need to explain is that the other gasoline companies will not necessarily drop prices if the big companies do so because if we are buying all of our gas from the smaller gasoline companies, those companies are doing just fine (even better than fine--such that they could actually afford to raise prices if people are determined to keep on buying gasoline, but have confined themselves to buying only from the smaller oil companies). This is, of course, assuming that you could get 300 million Americans to work together on any political effort in the first place. But if we could get people to participate in such an experiment, we could quickly prove that this sort of thing won't work.
So maybe this is the message that we should send to these sorts of people: The only thing that will really work is if we seriously RETOOL our lifestyles so that we need to buy less oil...MUCH less oil. If we can decrease our need for oil faster than India and China increase their need for oil, then we might be able to bring down oil and gasoline prices...except for the pesky fact of oil depletion, which means that prices would probably still go up unless we decreased our oil consumption even more. But at least we will be buying less oil and gasoline, and thus spending less on it overall, even if we are spending the same amount per barrel or per gallon.
People, though, are still in the mindset that these higher oil and gasoline prices are temporary phenomena. We will know that peak oil awareness is spreading when we stop seeing e-mail gimmicks like this and start seeing e-mail discussing going around our circles of acquaintances in which they have discussions and make resolutions along the lines of what I wrote above.
Send 'em to Snopes.com:
http://www.snopes.com/politics/gasoline/gasout.asp
(And I'm editing out the text of the e-mail from your post. One, it's formatted ugly, and two, we've all seen it, and it's been posted here many a time before. I think we've even done a dedicated post on it.)
There is no way to reach those sorts of people...
Actually there is a way to get to these people. But it is politically incorrect because it involves a prefrontal lobotomy.
Last year and the year before, I used to regularly receive the gas boycott and gas-out day emails and myspace bulletins. I took the time to reply to each and every one of them and explained what supply and demand were, what it means to have finite supply, and resource depletion. I'm even more connected into the social network realm today and I've only received two such bulletins over the past 6 months. I have a sense that many more people are aware that price is not a huge Exxon/Mobil induced conspiracy. There will always be people who need to point their fingers and blame someone or something for their own problems.
Take a minute to write a short and concise reply, and then save it so you can copy and paste if you receive another one. The person who you enlighten will likely spread the knowledge you provided them and so on.
It's interesting how the EIA and the IEA continue to provide data which are so different.
EIA: OPEC crude production increased by 0.22 mbd from Jan08 to Feb08 and OPEC crude surplus capacity is 1.40 mbd.
IEA: OPEC crude production decreased by 0.12 mbd from Jan08 to Feb08 and OPEC crude surplus capacity remaings near 2 mbd.
http://tonto.eia.doe.gov/cfapps/STEO_Query/steotables.cfm?periodType=Mon...
http://omrpublic.iea.org/
EIA: Total liquids production for Dec 07 was 85.73 mbd.
IEA: 86.43 mbd.
http://www.eia.doe.gov/emeu/international/contents.html
http://omrpublic.iea.org/currentissues/full.pdf
Do any customers or government energy departments, which rely upon the EIA and IEA, ever ask why there is a continuing difference in the data?
http://www.energybulletin.net/16745.html
Published on 3 Jun 2006 by Energy Bulletin. Archived on 3 Jun 2006.
Confessions of a statistician
by Sohbet Karbuz
Dr. Sohbet Karbuz is the former head of Non-OECD Energy Statistics Section of the International Energy Agency.
Dr. Sohbet Karbuz formerly of the International Energy Agency says:
Some of us have been saying this for years. Yet we still hear that there are 85 or 86 million barrels per day produced when actually there is only about 74 million barrels of oil produced. Propane and butane are not oil. There is a fundamental difference between gas and oil. Peak oil will be when oil production peaks. Peak gas will happen a few years later.
Ron Patterson
Iran Discovers 2.2bln Barrel Oil Layer
Is this news, or did I miss a previous discussion of it?
I get 25.6 days' supply for this ole earth, at 86MMbbl per day. Still, a pretty good find. It only takes about a decade to bring it into production.
Yes, the usual caveats - I realize it is not the "answer" to anything. It can affect the details of how these things impact our lives I suppose. And a relatively large oil find in that particular spot has an ironic humor about it.
The other day someone was asking about what happens to the corn stalks after harvest. They're generally distributed on the field but in this case the farmer has cattle so he has baled stalks for winter feeding. The six stacks on the left are corn stalks, the ones on the right are hay. I hope the person wanting to see this wanders in later tonight ...
QUESTION: Is there any significance to the fact that, currently, a little less than one-half of all oil produced is exported? Net exports peaked in 2005 when they were exactly one-half of production and have been decreasing since. I have this gut feeling that somehow this is strong evidence that "peak oil" has passed but I can't put it into words. Retained oil over the last 7 years has been steadly but slowly rising.
Hello TODers,
More bad news on grain:
http://www.abc.net.au/rural/news/content/200803/s2187239.htm
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Another upward move for grain prices, Wednesday, 12/03/2008
Wheat prices are expected to surge again after final wheat stocks in the US where reduced by 30 million bushels.
"We're already sitting at the lowest stocks in 60 years, so an extra million tonnes off their balance sheet obviously just makes it that critically more tight", he says.
"And it makes it more important that people in Australia and everywhere else around the world get rain this year and we get a crop".
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Buckle up--we maybe in for a hell of a downslope roller-coaster ride, especially if the 7.7% oilfield depletion is the optimistic consensus now.