DrumBeat: May 20, 2008

IHT: Middle East Oil: Defying the Experts

At a time of rapid price increases, our natural resources seem ever more precious and their future more uncertain. In particular, the arguments of advocates of "peak oil," who assert that global oil production has now climaxed and will start to decline, appear increasingly plausible.

Fortunately, however, a coming centenary puts their claims into a timely and fitting perspective. Almost 100 years ago - on May 26, 1908 - British geologists, working in a remote Persian wilderness, first discovered oil in the Middle East.

Saudi Arabia celebrates 75 years of its national oil company in era of record energy prices

Saudi Arabia has marked the 75th anniversary of its national oil company, once a joint operation with the Americans, but gave no sign of acquiescing to a U.S. request to increase its oil output.

Dollar extends losses after U.S. inflation data

The dollar index, which measures the U.S. unit against a basket of six major currencies, was at 72.496, down from 73.059 in late North American trading Monday. The Labor Dept. said its producer price index slowed to 0.2% in April after seasonable adjustments, with food prices flat and energy prices falling. Economists had expected a 0.4% rise. See Economic Report. However, core PPI, which excludes food and energy prices, rose a higher-than-expected 0.4% in April. Core prices are up 3% in the past year, the biggest year-over-year rise since late 1991.

Supply Worries Lift Crude To Yet Another New High

Crude-oil futures marched to a new record Tuesday amid continued uncertainty over supply in a period of growing world consumption. Light, sweet crude for June delivery was recently up $1.80 at $128.85 a barrel on the New York Mercantile Exchange, after notching an all-time high of $129.31. The contract expires Tuesday. More actively traded July Nymex crude was at $128.78 a barrel, up $2.06, or 1.6%. July Brent crude on the ICE futures exchange rose $2.27 to $127.33 a barrel.

What the Export Land Model Means for Energy Prices

Which brings us to the Export Land Model (or ELM, as I will refer to it from here). The basic thesis expressed by Jeff Brown and other students of the ELM is that, to fully appreciate the impact of peak oil, you cannot look only at the production declines so presciently anticipated by MK Hubbard in 1956. You also have to look at the rate of local consumption and the effect of that consumption on the ability of a country to export its oil.

What the Export Land Model Means for Energy Prices

To understand the importance of exports when discussing peak oil, ask yourself the question, "What's more important: the fact that global oil production is falling ... or that the oil-exporting nations are cutting off their exports?"

While the two questions are clearly linked, it is the nuance of the export question that clearly matters the most. Especially if you live in a country such as the US, which currently imports about 70% of its oil.

Which brings us to the Export Land Model (or ELM, as I will refer to it from here). The basic thesis expressed by Jeff Brown and other students of the ELM is that, to fully appreciate the impact of peak oil, you cannot look only at the production declines so presciently anticipated by MK Hubbard in 1956. You also have to look at the rate of local consumption and the effect of that consumption on the ability of a country to export its oil.

For more on the ELM, click here for the Export Land Model tag search.

America must face the harsh realities over oil

The first is that higher energy costs are here to stay. You don't have to buy Goldman Sachs's headline-grabbing forecast this month that crude will reach $200 a barrel.

Iraq could have largest oil reserves in the world

Iraq dramatically increased the official size of its oil reserves yesterday after new data suggested that they could exceed Saudi Arabia’s and be the largest in the world.

Stranded in Suburbia

To see what I’m talking about, consider where I am at the moment: in a pleasant, middle-class neighborhood consisting mainly of four- or five-story apartment buildings, with easy access to public transit and plenty of local shopping.

It’s the kind of neighborhood in which people don’t have to drive a lot, but it’s also a kind of neighborhood that barely exists in America, even in big metropolitan areas. Greater Atlanta has roughly the same population as Greater Berlin — but Berlin is a city of trains, buses and bikes, while Atlanta is a city of cars, cars and cars.

And in the face of rising oil prices, which have left many Americans stranded in suburbia — utterly dependent on their cars, yet having a hard time affording gas — it’s starting to look as if Berlin had the better idea.

Not Enough Oil Is Lament of BP, Exxon on Spending (ed: EROEI for oil going declining rapidly--thanks Cole.)

May 19 (Bloomberg) -- Never have so many oil and gas companies spent so much to produce so little.

That's the challenge facing Exxon Mobil Corp., Royal Dutch Shell Plc, BP Plc, Chevron Corp., Total SA and ConocoPhillips, which will spend a record $98.7 billion this year on exploration and production, Lehman Brothers Holdings Inc. estimates. Costs more than quadrupled since 2000 as explorers targeted more challenging reservoirs and demand rose for labor and material.

From Krugman today:

Stranded in Suburbia

To see what I’m talking about, consider where I am at the moment: in a pleasant, middle-class neighborhood consisting mainly of four- or five-story apartment buildings, with easy access to public transit and plenty of local shopping.

It’s the kind of neighborhood in which people don’t have to drive a lot, but it’s also a kind of neighborhood that barely exists in America, even in big metropolitan areas. Greater Atlanta has roughly the same population as Greater Berlin — but Berlin is a city of trains, buses and bikes, while Atlanta is a city of cars, cars and cars.

And in the face of rising oil prices, which have left many Americans stranded in suburbia — utterly dependent on their cars, yet having a hard time affording gas — it’s starting to look as if Berlin had the better idea.

I think it quite nice of Krugman to confirm what many of us have said: Most of the EU is ready for the age of high oil prices. I also consider it very important that most of the world has a very long history of localized economies with life before oil-based transport. As Krugman alludes to, suburbia is the US and Canada's Ball & Chain.

Europe relies on fossil fuels as much as anyone, remember petroleum is not only used for gasoline but for making pretty much everything that you see in the modern world, either directly from oil or indirectly by oil. Peak oil is not just a transport issue and to think of it as such is dangerous.

The EU uses 1/2 the oil per capita than the USA. In that sense, which includes areas other than transport, they are 200% more efficient users of oil products than the USA. It is that mountain the USA must climb, which is what Krugman was trying to say without saying.

Let's also remember something--much of the price paid in Europe is in taxes, meaning that in some way, folks get something back out of the prices, whether it is a service like rail or maintenance of bikeway, etc.

Paul is exactly right. Imagine paying $8/gal and getting absolutely nothing back out of it.

And thus you describe the dirty little secret: That Europeans may be highly taxed, but they get healthcare, bike paths, a good social safety net, etc out of it. Americans are less-taxed but then have to pay for all these things, which makes Americans the most highly taxed population in the world.

Americans are NOT, I repeat NOT, less taxed. THAT is the great secret nobody knows. When you add up the various state, local and federal taxes, duties, fees, etc., that Americans pay it is equal to the up-front taxation of Europe.

And what do we get for it? Better health care than Europe? Ha! Better education? Ha! Better infrastructure? Ha! Higher life expectancy? Ha! Longer vacations? Ha! More maternity leave? Ha!

America is not the Utopia some liars/ostriches would have you believe.


"And what do we get for it?"

Oh, Oh, I know this one.

Bigger guns?

Do you just like to make up facts? Don't want reality intruding on your fantasy?

Compare countries' government expenditures as a percentage of GDP.

It took me less than 2 minutes to find that table.

*clap* *clap*

(Wonder if anyone has done a study when that income stream goes away)

Be that as it may, nearly all products are made from or through oil and shipped using oil. I don't care how many bike paths they have, their society will not be better off when there food prices skyrocket and they can't buy products from overseas because of transport costs. I grant you that their taxes cause them to drive less, and they get medical care and other things out of it, which is great, but in the long run they will not be better off when the products that they rely on like those rubber tires for bikes aren't available and the food that they get shipped to them disappears off the shelves. Oh, I found this list on the post carbon website http://www.postcarbon.org/node/2845 that lists the things made from oil, not counting the myriad of things made through oil, like food:

Air conditioners, ammonia, anti-histamines, antiseptics, artificial turf, asphalt, aspirin, balloons, bandages, boats, bottles, bras, bubble gum, butane, cameras, candles, car batteries, car bodies, carpet, cassette tapes, caulking, CDs, chewing gum, cold, combs/brushes, computers, contacts, cortisone, crayons, cream, denture adhesives, deodorant, detergents, dice, dishwashing liquid, dresses, dryers, electric blankets, electrician’s tape, fertilisers, fishing lures, fishing nets, fishing rods, floor wax, footballs, glues, glycerin, golf balls, guitar strings, hair, hair colouring, hair curlers, hearing aids, heart valves, heating oil, house paint, ice chests, ink, insect repellent, insulation, jet fuel, life jackets, linoleum, lip balm, lipstick, loudspeakers, medicines, mops, motor oil, motorcycle helmets, movie film, nail polish, nylons, oil filters, paddles, paint brushes, paints, parachutes, paraffin, pens, perfumes, petroleum jelly, plastic chairs, plastic cups, plastic forks, plastic wrap, plastics, plywood adhesives, refrigerators, roller-skate wheels, roofing paper, rubber bands, rubber boots, rubber cement, rubbish bags, running shoes, saccharine, seals, shirts (non-cotton), shoe polish, shoes, shower curtains, solvents, solvents, spectacles, stereos, sweaters, table tennis balls, tape recorders, telephones, tennis rackets, thermos, tights, toilet seats, toners, toothpaste, transparencies, transparent tape, TV cabinets, typewriter/computer ribbons, tyres, umbrellas, upholstery, vaporisers, vitamin capsules, volleyballs, water pipes, water skis, wax, wax paper

No one is saying Europe will have no problems, but they are far better prepared than the US.

They have a better rail system and more fuel efficient cars which is fantastic. But a rail system without abundant electricity from coal/nat. gas, and exceptional fuel costs means that Europe is just barely more prepared physically than the US. The most important part of European peak oil is that they have a mindset that is based more upon sustainability than we do, a mindset that will not originate overnight in the US, i.e. look at how long global warming acceptance has taken to penetrate into the mainstream. That may be their saving grace and ours to if we decide to adopt this policy now.

I believe they have a better passenger rail system but almost no rail freight, which is America's strong suit. Europe relies on trucks to haul most of their freight. That part of their system is not going to fare as well as America's.

Not so fast.

In the past 10 years it has grown by almost 50%, increasing its market share of surface transport to 11.5% and in so doing removing thousands of lorries from Britain's roads. In 2002/03 alone, rail freight moved the equivalent of 5.6 million lorry journeys and saved 1.4 billion lorry kilometres and a growth of just under 30% is forecast through to 2014/15.


Now OK, the US rail freight level is much larger. However there are differences in distances etc. that account for 80% of that difference - plus of course rails being used for passengers are not available for freight.

Water transport also pays a surprisingly large role in moving goods in the EU, and is poised to increase it's share.
For delivery vehicles EV's are being adopted:
J Sainsbury plc : Responsibility : Case studies : Case studies - Environment

"by 2000, the share of U.S. rail freight was 38% while in Europe only 8% of freight traveled by rail" -Wikipedia

They've messed it up pretty good:

‘Interoperability’ is the buzz word at these European wordfests but it can have a rather hollow meaning when the very way that the railways are being reorganised seems to ensure that they have less chance of bringing it about. Indeed, there has been a heavy price to pay for enforced separation because it has meant that some of the inherent advantages of the railways have been lost.


I think America is better prepared:

1) We have more of our own fossil fuels resources.

2) We have more wind and solar potential per capita.

3) We have more geothermal potential per capita.

4) We haven't done many of the easier adaptations and therefore have greater potential to cut back on energy usage.

5) We are self sufficient for food and export.

As for Europe's trains: Big deal. I've previously posted a number of times here a URL to a chart of European passenger travel by car and train. In many Euro states less than 10% of passenger travel miles are by train. The value of trains is much exaggerated.

I see you've been registered here for just over 4 weeks and have just started writing comments, which is why I haven't read anything from you before. What I'm curious about is what sort of future you seek given what you now know about Peak Oil (and Climate Change, since they're linked)?

I have written comments, and futureseeker is just a screen name, but if you want to read into it I seek a world with a stable population, a high standard of living, and the reduction and eventual elimination of greenhouse gas pollution in the world. I started reading about peak oil because I found myself driving through suburbia with an empty feeling inside and thinking to myself how suburbia was a lie meant to be bought and sold by the public who wanted to live in the country but not really. That led me to peak oil which terrifies me because although it will eventually curb global warming, put an end to suburbia and bring back communities, it will leave a lot of dead people around the world in the process. I don't find either prospect desirable, on the one hand you have a polluted dysfunctional world ruled by consumerism and on the other you have a broken, poor world ruled by necessity. I guess that deep down inside I'm hoping that green technology and common sense will lead to a better place in the future but I'm not holding my breath.

Not to be a stickler for details, but almost NONE of the items on this list are made from oil...jet fuel, motor oil and heating oil yes, but most of the rest of the items on the list are extracted from natural gas. Petroleum yes, but not oil.

It may sound like a small detail, but it's huge. North America is still 85% self reliant on natural gas despite declining natural gas production. The type of lists above, while completely inaccurate, lead to many of the "doomsday scenarios" that claim that modern culture will completely collapse with declining oil production, and that there will be no way to construct alternatives because after all, as everyone knows (incorrectly of course) EVERYTHING comes from oil. It's one of many myths that exist in the mind of the public that helps convince there will never be an alternative to oil


Oh thank god. I had been trembling at the thought of a world without volleyballs or floor wax.

How about food?

First of all petroleum and crude oil are the same thing. If the natural gas is derived from petroleum then it is based upon hubbard's peak and we do have cause for concern. Also, I'm not sure that you are correct in saying that these products are made from natural gas, but for the sake of argument I'll except this. Secondly you said that natural gas has peaked and then went on to say that we shouldn't be worried about civilization cracking up. That is a contradiction. I do not believe that the loss of petro products will cause civilization to crack up because the main issue is food production which is made with petro/nat.gas based ferilizer, with machines built by machines burning coal, natural gas and using oil, and powered by gasoline and shipped by gasoline and packaged by oil. This is the real concern, the loss of made from petro products will just add massive insult to injury.

Air conditioners: Not needed
Ammonia: Alternative fedstocks & production pathways, or substitutes (apply composted agricultural and municipal wastes to fields to supply N)
Anti-histamines: Alternative feedstocks & production pathways available
Antiseptics: Alternative feedstocks & production pathways available
Artificial turf: Somehow, I think we could get by without it
Asphalt: If we moved all long-distance freight and passenger traffic to rails, we wouldn't need many paved roads - and they DID have roads before asphalt
Aspirin: Willow bark
Balloons: Somehow, I think we could get by without them
Bandages: Cotton cloth - what do you think they used to use?
Boats: People have been building them out of wood for thousands of years, why can't we?
Bottles: Made out of glass, made out of sand & recycled broken bottles, found in Egyptian tombs
Bras:: Made of cotton and latex rubber, renewable resources
Bubble gum: Chewing gum is made from the sap of a tropical tree, a renewable resource
Butane: Could be synthesized from biogas methane or from methanol or ethanol feedstocks to the extent we really need it - if people stopped smoking (an utterly unnecessary habit) we wouldn't need butane lighters
Cameras: Photography was being done before the first oil well was drilled, we can make cameras and film out of renewable/recyclable materials to the extent that we really need photography
Candles: Beeswax & tallow are renewable resources
Car batteries: No petroleum = no cars
Car bodies: ditto
Carpet: They've been woven from wool or rags for thousands of years
Cassette tapes: Hardly even used any more. Cellulose (made from renewable resources) coated with iron oxide (no shortage of that) could be used for recording tapes to the extent we really needed them
Caulking: Could be made from latex, from rubber trees - a renewable resource
CDs: We could live without them, we might have to go back to older recording technologies, and use renewable resources to make recordings
Chewing gum: See above
Cold: ???, move north?
Combs/brushes: Used to be made out of animal horns and hair, could be again
Computers: We'll have to figure out how to construct every single part out of renewable resources; it can be done if we want computers badly enough. By far the largest amount of plastic is used in cases and brackets, rather than in the actual operating guts, and these could be replaced with wood, etc.
Contacts (lenses?): Well, people needing vision correction just might have to accept the blow to their vanity and go back to old-fashioned eyeglasses, made with glass and metal or animal horn
Cortisone: Could be synthesized from renewable feedstocks
Crayons: Kids could learn to use pastels or chalk or colored pencils or water colors instead; it would hardly be the end of the world if they couldn't have crayons
Cream: Comes from COWS, idiot!
Denture adhesives: Could be formulated from renewable feedstocks
Deodorant: Maybe we just need to adjust our socially acceptable norms a little bit. Bathing and washing clothes are alternatives, too.
Detergents: Soap can be made from lye (from wood ashes) and oils or fats, and was being made long before the oil age; we might need to modify our laundry practices a bit
Dice: Could be made out of wood or any number of other things - as if we really need them
Dishwashing liquid: See detergents above
Dresses: Can be made out of cotton or wool or linen fabric, as they were for thousands of years in the past
Dryers: Can be replaced with clotheslines or wooden drying stands
Electric blankets: Can be replaced with down comforters/duvets
Electrician’s tape: Could be replaced with cotton tape if necessary
Fertilisers: Compost, blood meal, bone meal, wood ashes, etc.
Fishing lures: Could be carved out of wood, or tie flies
Fishing nets: Could be woven from cotton line, as they have been for thousands of years
Fishing rods: Can be made of bamboo, as the best ones always were
Floor wax: Can be formulated from beeswax and other natural waxes, if you REALLY need it (everyone except royalty apparently got along quite well without it for most of human history)
Footballs: Pigskin
Glues: Could be formulated from various renewable feedstocks
Glycerin: Can be synthesized from renewable feedstocks
Golf balls: Were made of leather and other natural ingredients
Guitar strings: Animal guts
Hair: ??? on your head
Hair colouring: Could be formulated from natural ingredients, to the extent that this is really needed?
Hair curlers: Were probably made with wood, animal bristles, etc. in the past, could be again
Hearing aids: Similar problem to computers above, the biggest use of plastic is in the outer case, maybe something could be carved out of some natural material
Heart valves: Not a huge quantity needed each year, synthetic materials from renewable feedstocks could be made in the lab to the extent needed
Heating oil: Houses need to be super-insulated and building envelopes tightly sealed, interior temps reduced to low 60s F, then heating systems replaced by solar as much as possible, supplemented by wood if possible, or neighborhood steam plants powered by CSP or wood or biogas
House paint: Can be formulated from linseed oil and other natural materials, but brick or stone exteriors are more durable and don't require paint
Ice chests: Used to be made out of metal + other recyclable materials
Ink: Used to be and can be made out of natural materials
Insect repellent: Formulations using natural materials might have to do, woven cotton insect netting can help at night
Insulation: Fiberglass is made from glass, celluose from paper
Jet fuel: Take the train or boat instead of flying; a little juet fuel could probably be formulated from ethanol and biodiesel feedstocks for truly essential aviation
Life jackets: Used to be filled with cork or kapok, both renewable materials
Linoleum: Is made from linseed oil and cork
Lip balm: Can be formulated from beeswax and other natural ingredients
Lipstick: Can be formulated from beeswax and other natural ingredients
Loudspeakers: Cabinets are/can be made out of wood, speakers are made out of paper and metal (which can be recycled)
Medicines: Most of these are either biologicals from natural renewable sources to begin with (vaccines, penicillin, insulin, estrogen), or could be synthesized from renewable feedstocks
Mops: String mops are made out of cotton, sponge mops could be made out of sea sponges (if managed for maximum sustainable yield)
Motor oil: No petroleum, no automobiles; there are natural oils that could be formulated to serve as lubricants for electrical motors
Motorcycle helmets: No petroleum, no motorcycles. Bicycle helmets (which have lower performance demands placed upon them than motorcycle helmets) could be fabricated out of leather and other natural materials
Movie film: Is made out of cellulose, which can be made from natural feedstocks
Nail polish: Could be formulated from natural materials, to the extent really needed
Nylons: Silk stockings are the alternative, to the extent really needed
Oil filters: Not needed if no petroleum products
Paddles: Have been and can be made from wood
Paint brushes: Many still are, and all could be, made of wood and animal hair
Paints: Can be formulated from natural materials
Parachutes: Could be made from silk, as they originally were - but with very little aviation, there will also be little need for parachutes
Paraffin: Beeswax and other natural waxes
Pens: Can be made of wood, metal, animal horn, etc. - even goose quills if it really comes to that
Perfumes: Are almost all formulated from natural ingredients now, and could be 100% natural
Petroleum jelly: Substitutes could be formulated from natural ingredients to the extent needed
Plastic chairs: Wood, metal, cloth, leather
Plastic cups: Glass
Plastic forks: Metal
Plastic wrap: Wax paper (see below)
Plastics: See rest of list for examples of alternatives
Plywood adhesives: See glues above
Refrigerators: Could be made mostly out of metal, wood and glass
Roller-skate wheels: Could be made out of rubber, if these are really necessary
Roofing paper (and shingles, not mentioned): Asphalt is the problem, but metal, slate or tile roofing is a more durable roofing alternative anyway
Rubber bands: Rubber is a renewable resource
Rubber boots: Rubber is a renewable resource
Rubber cement: Rubber is a renewable resource, the solvent is the problem, but alternative formulations using natural materials is possible
Rubbish bags: Paper bags, rubbish cans
Running shoes: Could be made of rubber, cloth and leather
Saccharine: Sugar and honey are renewable resources, people who should consume them need to just do without
Seals: ???
Shirts (non-cotton): Blending a little wool or linen in with cotton will make them more durable and less in need of ironing
Shoe polish: Can be formulated from natural materials
Shoes: Can be made from leather
Shower curtains: Could be made from wax-saturated cotton
Solvents: Less need for them in a not-petroleum world, could be systhesized from methanol, ethanol, etc. to the extent still needed
Spectacles: Eyeglasses, see contacts above
Stereos: Similar problem to computers, most of the plastics are in the outer case, which could be made of wood & metal
Sweaters: Knitted from wool & cotton
Table tennis balls: Made from cellulose
Tape recorders: See comments about stereos and recording tape above
Telephones Were made of wood and metal (and just a little bit of bakelite plastic (which can be made from renewable materials), and could be again
Tennis rackets: Made of wood, strung with animal gut
Thermos: Metal (stainless steel) or glass
Tights: Wool or cotton
Toilet seats: Wood
Toners: Copiers and printers need to be re-engineered to work with natural materials
Toothpaste: Sodium Bicarbonate (abundant, and could be synthezized from other abundant materials if need be) and other natural materials
Transparencies: Cellulose, to the extent needed
Transparent tape: Cellulose and natural adhesives
TV cabinets: See stereos
Typewriter/computer ribbons: Cotton and inks
Tyres Rubber
Umbrellas: Silk and metal
Upholstery: Leather, wool, etc.
Vaporisers: Glass & metal
Vitamin capsules: Can be systnesized or formulated from natural materials
Volleyballs: Leather
Water pipes: Iron & steel, brass, copper
Water skis: No gas for pleasure boats, not needed (wood for snow skis)
Wax: Beeswax and other natural waxes
Wax paper: paper coated with beeswax or other natural waxes, it goes back a couple of centuries

In conclusion, it seems to me that a lot of people are ignorant about how society did things before the petroleum & plastic age. It also seems to me that the middle and even lower classes have come to enjoy and expect things that used to just be in the realm of the upper classes. We might just have to learn to be poor again and get by on less.

Air conditioners: Not needed

That's pretty cavalier, especially as the climate gets even hotter. (I do not have any but I live in a very special micro climate.)

We are not facing an inevitable shortage of electricity. The world has vast nuclear, wind and solar resources. And plenty of low grade hydrocarbons for everything we need except fuel.

Not intending to be cavalier, just recognizing the reality that energy might be so expensive that for all bu the top 10% or 5% or 1%, this might be a discretionary item that has to go. There is no possible way that most people will be able to afford enough PV panels, or have the space to put them, to power a/c. Yes, of we can manage to keep the grid up then more renewables will be feeding into it. But most of that will go to replace the NG that is depleting, and to substitute for essential things that were running on petrofuels. Fans, most people can probably still have; a/c, probably not.

If people buy air heat pumps they would save on energy costs, and could also use them to run the a/c.
In old houses they are around 2.5 times more efficient than using the electricity directly, and in new builds perhaps 4 times I believe, but my figures may be somewhat in error as I looked into it from the European perspective where it would be used for piped water heating, not running air cooling.

This might possibly mean that some would still be able to keep a/c, although there is no guaranteeing it.

Yes, of we can manage to keep the grid up then more renewables will be feeding into it.

Are you not forgetting nuclear? I think there is good reason to think nuclear could rise to 60% of all energy by 2050 (20% renewables and 20% fossil fuels). That would mean about a 90% increase in total energy consumption from today, a 20 fold increase in nuclear and a 40 fold increase in wind and solar.

Furthermore, I think if it can, it will. If there is a way out, people will take it. Unless the physical reality changes, I think a nuclear dominated future is inevitable.

I think we'll have some more nukes, but it will be slow going adding them, and we're getting close to the point where new additions are going to be increasingly replacing decommissionings. Nukes are one thing where you do NOT want to cut any corners, which means that proper time and effort need to be spent in siting, engineering & building them. We just don't have the capacity to ramp them up that fast, even if all the NIMBYs went away.

Then, too, if the US economy is going into long-term decline (which seems to me almost certain), then how are we going to come up with the capital to finance all of these? How is our economy even going to be able to produce all of the stuff that goes into building a NPP?

As I say, I do think we will manage to build some more nukes, but they will be fewer than you are thinking. Your 60% figure might be right, though - if US electricity consumption drops by 50-66% (which it probably must). That's probably not what you had in mind, though.

Opinion without factual basis.
Long-term decline - opinion.
NPP supply chain - you do not even know what is happening with the supply chain.

The large forgings supply issue is being solved.

Korea's Doosan will make the reactor pressure vessels for China's Sanmen AP1000 reactors (so not just Japan Steel and Russia)


Nuclear reactors being built or on order

EIA forecast for when the climate change bill is passed. Shows high growth in nuclear. All the remaining presidential candidates support a climate change bill. The only thing stopping one now is the Bush veto.

Tyres Rubber

I'll remind people that tires/tyres can be made from alcohol. WWII level tech.

That was because the Japanese had occupied Malaysia, Indonesia and Indochina. Except for a little bit of rubber production in Latin America, they pretty much had a lock on it. Assuming some sort of more or less open global trading system, there should be enough rubber available from tropical plantations to supply ESSENTIAL needs. That includes tires only for bicycles, public safety & emergency response vehicles, agricultural equipment, and other essential vehicles. There may not be a whole lot available beyond that.

Impressive list. But that would require a revolution.

But my point is that for almost everything on that list, we were formerly able to make products that were derived only from renewable or recyclable materials. It is not so much a revolution as a reversion. If we can no longer able to do things the way we have been doing them, then if it is important enough to still do, we'll figure out a way, even if that ends up being the former way.

Bravo for your compilation. I would add that many items were once made in the home and then sold by what were once called Cottage Industries.

Agreed, but it will be out of necessity.

WHY "things" get manufactured out of and with petroleum products.
Impossible to produce and distribute any of those things in similar amounts to what is manufactured now without oil.

Just one thing. Plastic cups, billions replaced with glass made without oil, that I gotta see.
I guess when it comes to whittling hair curlers from wood, the TS has well and truly HTF.
No doubt, tinkers, tailors, cobblers, fletcher's, wheelwright's, cartwright's, thatcher's, smith's, mason's, tanner's, shipwright's, beggar's and hangmen to name a few, will be professions in demand.

That's another thing that struck me as I was working through that list: it isn't that it was impossible for some equivalent or substitute to be made with renewables and recyclables, for in almost all cases it was done previously. But those equavlents from earlier days were much more expensive (in terms of inflation-adjusted purchasing power, or percent of per-capita GDP) than today's FF-based products. It wasn't that things like those were unavailable, it was just that a much smaller percentage of the population could afford them. What cheap, abundant oil has most enabled us to do is to make cheap, abundant goods available to a very large slice of the population. As the oil goes away, the goods go with it. They'll still be around, just not affordable for most people.

Glass was made for many centuries before anyone knew that oil was anything more than a curiousity that seeped out of the ground in a few places.

I don't know if we'll ever see hair curlers made out of wood or not. My point was simply that they could be. They can probably be made out of lots of things. Running out of plastic to make hair curlers is hardly like to cause the collapse of civilization.

As to amounts: It is cheap and abundant FF that have made possible the throw-away society. In earlier days, people were very reluctant to throw anything away. Goods were expensive, and if people could afford to buy them at all they were treasured and carefully cared for. Goods were made super-durable, because everyone understood that they weren't going to be thrown away, and buyers would be looking for the most durable items they could find. We are in the process of shifting from a paradigm of producing cheap stuff in abundance and throwing it away to a paradigm where fewer things are produced, they are made to last, and people own fewer things and take good care of them.

Robert Hirsche was on CNBC this morning talking about Peak Oil. I think this is very significant. Hirsche really spells it out, pulling no punches. The only problem was it came on so early, 5:51AM Eastern Time. But it will probably be posted on YouTube soon and perhaps a separate thread on TOD. Yes, I think this interview is that big. This is the first time, to my knowledge, that peak oil has been discussed in such detail on any of the financial networks. I think this the threshold, the point where Peak Oil surpasses Global Warming in the news.

Peak Oil Worries

Economic insights, with Robert Hirsch, Management Information Services; Robert McTeer, former Federal Reserve Bank of Dallas and CNBC's Becky Quick

Later Boone Pickens was on talking about oil, wind and other things.

Boone Pickens on Alternative Energy

Discussing energy and the state of the economy, with Boone Pickens, BP Capital CEO and CNBC's Becky Quick

He says oil will be$150 before the year is out. He said ethanol was a joke.

Ron Patterson

Further highlights of the Pickens interview:
$150/barrel oil can't be borne by importing economies, and a world recession will ensue.
85million barrels a day is as much as we will ever get, demand is 87million barrels, 400,000 has been taken out by demand destruction in the States, the rest is inventory draw-down meaning prices must rise.
Wind and solar can free up natural gas to replace 40% of oil use in the US within 10 years.
A shortage of welders and personnel will restrict oil sands.
Energy will be a major issue in November, but none of the Presidential candidates has any worthwhile policies.
Plenty to chew on there!

Does anyone have reference to what worldwide storage inventory capacity is? If the difference between world production and world demand is 2 million barrels a day wouldn't we expect shortages to begin to occur when the cumulative daily shortfall exceeds total inventory capacity?

EIA says that Feb 2008, the world is at 85.921 million bpd.

March and April had 300,000 bpd increase from Saudi Arabia and 42,000 bpd increases in Brazil.


It would appear by end of 2008, Thunder Horse comes online for 250,000 bpd sometime in 2009.
More additions in Saudi Arabia in July.
More increases in Brazil up to 500,000-600,000 bpd more by end of 2008.

I predict that Pickens is wrong on the production peak.
I predict that the April, 2008 EIA numbers will be 86+ million bpd.
I predict that the Sept, 2008 EIa numbers will be 87+ million bpd.

Encana is projecting growth in their holdings in the Alberta oilsands from 35,000 barrels a day net to EnCana today to 100,000 next year (2009), to 200,000 by 2012 and to 400,000 barrels a day by 2016.

a third-quarter startup of the massive Horizon oilsands project, which will deliver 110,000 barrels per day (bpd) in the first phase. Construction to increase capacity to 250,000 bpd is already underway.


We will just have to see how about 4 million bpd of depletion per year cuts into that.

Cornucopians tend to forget little details like that. . .

Doomers don't read down the thread and see the posting about 6-7 million bpd being added in 2008 (and the link to the reference which is the data gathered by Stuart Staniford, an oildrum editor and others) which would exceed the 4 million bpd decline in 2008.



Megaprojects is only fo 20,000 bpd or more. So it does not include Bakken oil which is made of a lot of smaller wells. 200-3000 bopd for initial production.

I did not forget. You did not read. The decline is also mentioned in the article which I wrote.

Your posting shows how lazy and sloppy you are to not read even the relevant part of this thread on this site. Little details like reading...

Assuming that the Ghawar complex is in decline, which I think that it is, it appears that every oil field in the world which has ever produced one mbpd or more of crude oil (C+C) is now in decline.

We don't stop finding oil in post-peak regions. We can't offset the declines from the old, large oil fields. But as noted down the thread, the real issue is net oil export capacity.

In any case, what is your point? That we can have an infinte rate of increase in our consumption of a finite resource base?

The point was to provide up to date information to these discussions, where many people are automatically assuming declines. Others can interpret the facts or find sources for other facts as they please. I want to reduce the amount of non-current/non-reality based opinion. There is no need for opinion when there is data to be used.

There is also the point that there was no peak in 2005, if production is still setting new highs now.

The point also that Pickens was wrong about an 85 million bpd maximum.

I also believe that the data appears to be indicating that world oil production would be on track to break 92 million bpd over the next 2-4 years. Demand could still be exceeding supply but that is a different situation than where we are already in supply decline.

Also, if there is a managed OPEC/Saudi situation where supply is being constrained by OPEC choice versus actual limitations in oil capacity. If that is the definition of peak oil then OPEC could chop production by a few million bpd each year to ensure a peak in world production.

If Nigeria and Iraq oil supply can be increased by an enforced peace that is a different situation from too many wells going into irreversible decline.

Do you see the point of how the discussion can be more productive if there is data to answers or get closer to better answers ?

I agree that oil is a finite resource, but perhaps not as finite as some others think. I also do not think real peak oil is upon the world and will not be for at least several years. This will provide more time for a transition. The high prices are helping to motivate the early steps of a transition from oil. I believe oil consumption can be substituted with biofuels and synthetics and with electricity from nuclear and renewables [battery/ultracapacitor combinations for sufficient performance, direct drive electric in the tires of electric vehicles etc...]

A few years will allow time for:
More nuclear power to be built or to get closer for the build that is started to get completed.

More time for more biofuels to be produced

More time for more of the transition to higher mpg cars

More time for more oilsands to be brought into production

More time for more oil from unconventional or new sources. (Shale, Bakken etc...)

More time for renewables to actually scale to more significant levels

More time for technologies that are underdeveloped or not developed now to get commercialized and to make a difference (thermoelectrics, 50% power uprates from new fuel for nuclear, new nuclear reactors etc...)

The point was to provide up to date information to these discussions, where many people are automatically assuming declines. Others can interpret the facts or find sources for other facts as they please. I want to reduce the amount of non-current/non-reality based opinion. There is no need for opinion when there is data to be used.

Hmmm... how long have you been around? It's pretty much a given around here that new peaks are possbile in the '08 - '09 time frame based on Megaprojects, so I'm not sure what it is you're on about.

Further, I don't think you mentioned Russian decline above, did you? Also, have you removed Kashagan from the Megaprojects listing for '08 - '09?

Did you factor in the 300,000 bp/d DROP in OPEC production in the last month or two, which means the KSA jump of 300,000 only kept them even?

If you're going to tweak noses, you should be thorough so you can't be tweaked in return.


What am I on about in regards to Megaprojects ? New peaks a given around here ?

It is looks Leanan (Drumbeat Editor) is not taking it as a given that there will be new peaks in 08 and 09. She seems to be saying that enough the projects will be delayed or that other circumstances will happen.

I can take being tweaked because I can come back with more facts and analysis to back up my position. I am also willing to modify my position if I am proven wrong, so I don't mind being proven wrong or not totally correct. I accept the actual reality as the situation without emotion or ego. I find people who have no data or who are unwilling to click through a few web pages over at a wiki where a link has been provided or just unsubstantiated opinion humorous. It is easy to tweak them and show that they are wrong. I do not get great pleasure out of it and sometimes I cannot be bothered to do it. Sometimes it is necessary to try and curb the incorrect beliefs.

I do not control the megaprojects wiki list. They moved Kashagan out to 2012. Russia has megaprojects that are coming online in 2008 and 2009, so Russia may or may not decline.

You could have found that out with a few clicks of the mouse on the megaprojects wikipages. It would be easier to suggest that something was missed if you looked.


In my view, the extra time is very welcome and also very very short. Not nearly enough time to build any significant quantity of most of the items you mention.

Also, it's enough time to add an additional 78 million people to the planet every year, and for a large segment of the current population to purchase cars for the first time.

I believe that we are seeing demand (whether it is fulfilled is a different matter) grow faster than the supply. This is certainly the case with renewables (www.ren21.org) in which the growth of the energy provided by the fossil fuel sector is faster than the growth of energy from wind, tidal, geothermal and PV combined.

Renewables are not yet keeping pace with the enlargement of the world fossil fuel industry, but may soon if the fossil fuel sector can't expand as quickly as in the past and the faltering economy doesn't undercut renewables projects.

I'm probably showing my advanced ignorance.
I was wondering though if an EROEI on all liquids produced from say 2000, year by year till 2008 has been estimated?

I say that because we are getting, shale, heavy oil and oil sands thrown into the mix.
Like if oil sand somehow started producing 20 Billion barrels a year and it took 18 billion barrels or the equivalent to produce it would the 20 billion get added to the yearly production rate or just the 2 billion which was the actual net gain.

Even light sweet crude is more energy intensive to produce now.
Net exports is a good guide but does it actually tell the whole story?

Be gentle with me, as I said I really don't know squat.

So 3 mbpd of new capacity in OPEC (during 2008) automatically = a 3 mbpd increase in their quota does it?

Can I ask you to please be more civil?

Also, keep in mind that the Megaprojects is just the ideal situation: if all the projects come online on schedule, and produce as promised. That will not be the reality.

Can I ask you to please be more civil?

And what about WNC Observers snarky quote?

Cornucopians tend to forget little details like that. . .

can we ask folks to be civil on both sides of the argument?

Excuse me if that offended you. It was not intended to be directed exclusively at you, and is hardly the worst thing seen around here.

As noted by Antidoomer. I was responding to the tone of those who were posting. Where there is a civil tone then I will respond civilly. If there is an uncivil tone then I have sometimes responded to it. So when you ask the others who are not civil to be civil and to enforce it then I will also remain civil at all times. I will go back to the high road now, but theoildrum should police the discussions with a more balanced hand.

I will note that Big Gav, editor/contributor on the Australian Oildrum is one of the biggest offenders. He responded to data and research links which ran counter to his preformed opinions by going off the deep end. As opposed to responding with research and facts that proved that assertions made were correct or incorrect.

"Nuclear trolls and various accusations"

Information which I provided which showed how costly and difficult (though not impossible) it would be to rely on mass transit solutions

Slanted view of Big Gav. focusing on overall increase in transit but not on the decline per capita.

No insults from me but a clarification of facts and a statement that I am right and Gav is wrong

Insults instead of data from Big Gav

Big Gav also having the non-data based belief that CSP will boom and make new nuclear power look like a rounding error by 2028.

I would prefer a more civilized and fact/research based discussions instead of insults and unsupported opinion. However, that is often not the case here.

I remain curious to see if you are going to go down the discussion lists to tell everyone who was not civil to do so.


We also tend to overlook that not all oil is oil. That is, it is not completely fungible nor interchangeable. If the oil coming online with the new mega projects is heavy sour crude, that does little to relieve price pressure. And, it presents a whole new set of problems about who gets the oil and who does not based on refinery processing ability.

The Canada oil sands??? Living very close and near to that area, production above 3 Mbbl/day would leave a more desolate wasteland than it already is. Note from a local, it is not a panacea.


We also tend to overlook that not all oil is oil. That is, it is not completely fungible nor interchangeable. If the oil coming online with the new mega projects is heavy sour crude, that does little to relieve price pressure. And, it presents a whole new set of problems about who gets the oil and who does not based on refinery processing ability.

The Canada oil sands??? Living very close and near to that area, production above 3 Mbbl/day would leave a more desolate wasteland than it already is. Note from a local, it is not a panacea.

The EIA when it says 87 million barrels per day, means almost 2.5 mpd is biofuels and CTL and other things that shouldn't really be considered oil. According to the BP 2007 Statistical Review, we have not gone over 85 mpd or so production of tar sands, oil sands, condensates and regular conventional oil, just like Picken's says. With megaprojects and all I expect the plateau to continue for ~2 years before production starts to fall.

What will the losses of production be from Mexico, UK, Russia, Iran, US, Norway, etc be? Gotta look at both sides of the equation.

Where exactly are 500-600kbpd new Brazilian production going to come from by the end of the year?

6-7 million bpd from oil megaprojects around the world. BTW: I want to defer the April 2008 prediction to May 2008 because of the UK strikes etc... Production for EIA stats could bump up over 86 million in March numbers but not sure if April will hold them. The IEA already is saying that production is over 87 million bpd.


Brazil has a bunch of deepwater oil coming online. Rigs started in 2007 are being ramped up and new rigs have started and will start in 2008.


This 42 thousand bpd difference was the outcome of new wells going online at the P-52 and P-54 platforms, both in Roncador, at the P-35, in Marlim, and at the PPM-1, in Pampo. Production being kicked-off at FPSO-Cidade de Rio das Ostras, on March 31, in the Badejo field, also in the Campos basin, contributed to this mark as well.

Petrobras’ daily production capacity is expected to grow an additional 500,000 barrels in 2008, when four more platforms kick-off their operations, three of which in the Campos Basin and one in the Espírito Santo Sea. Furthermore, the five platforms that started producing in 2007 are also slated to reach their maximum capacities during the year

2008 oil megaprojects

Also track the 2007 megaprojects that continue to ramp up production

And what are the crude C+C numbers?

All else is smoke and mirrors.


Look them up yourself


Are we a little sensitive? I would except previous posts on this issue mentioned they are being lumped with synthetics. I don't have the chops - nor the time - to sort out what is hidden. Others have, and sometimes do. Hopefully, they will.

Honesty would dictate doing so if one is posting about new highs. One might be thought disingenuous to happily post on new highs without indicating their nature.



According to the EDUBourse link, the numbers are barrels of oil equivalent per day (boe). Total domestic production is claimed as 2,157,226 boe per day. Natural gas production is claimed at 50,064 million cubic meters per day.

Natural gas converts to "tons" of oil at 1,125 cubic feet per ton. On average, tons of oil convert to barrels of oil at 7.333 tons to the barrel, at an API of 33. The actual range is 6.8 to 8.0 tons per barrel, depending on API.

If my calculations are right the natural gas production is therefore approximately 326,200 boe per day, or about one seventh the total boe per day claimed.

Excellent news, wonderful analysis.

I will rush straight out and buy His 'n' Hers matching Hummers...

The tar sands Nat Gas needs and water requirements will end up depleting their regions of both.

March and April had 300,000 bpd increase from Saudi Arabia...

Not so, according to OPEC's own Monthly Oil Market Report (large PDF) Saudi 2008 production in kb/d:

Feb. 9,090
Mar. 9,056
Apr. 9,019

So you see production from Saudi was down 71,000 bp/d in March and April. They say they began increasing their production by 300,000 bp/d on May 10th. But we will just have to wait to see if that was the fact. There are no reports from anyone yet verifying that claim.

Ron Patterson

Thanks Darwin for actually adding some research and information.

The Saudi claim was indeed that they started production in April but that it would not ramp up to 300,000 bpd until May. It is also supposed to go up to 500,000 bpd toward the end of 2008 or in 2009.

It would be nice if depletion was a non-factor, but it's useful to take a look at recent annual Saudi data. The Texas/Saudi chart is updated, with 2006 and 2007 data, from the graph in the following article. As many of us expected, Saudi Arabia has shown a rebound in production, but, like Ron, I believe that 2005 was the final annual production peak for Saudi Arabia.

Texas and the Lower 48 as a Model for Saudi Arabia and the World (2006)

I guess it depends on where you get your news:

Here is a quote from an article on the recent Platt survey Platt Survey: OPEC Output Down for April

The 13 members of the Organization of Petroleum Exporting Countries (OPEC) pumped an average 31.87 million barrels per day (b/d) of crude oil in April, a 350,000 b/d decrease from March, according to a Platts survey of OPEC and oil industry officials released Friday.

I think the final numbers for April will show an overall production drop, which is why oil shot up in April. I have heard anecdotally that May may be down another 100KBBL from April, but that's just a rumor at this point. Oil prices to seem to confirm the rumor, however.

Anyone know where he gets demand is 87 mbd and supply 85 mbd?

There's 2 parts to the Pickens interview in case anyone misses one.


WTI climbed above $129 just a moment ago.

Boone Pickens is a moron throwing darts at the wall trying to influence the market with his nonsense. Whatever happened to shorting oil Boone? Don't listen to these idiot billionaires pretending to predict prices while not embracing peak oil.

Pickens is basically predicting that oil prices will hit four "Yergins" this year (one "Yergin" = $38 per barrel; for new readers, do a Google Search for Daniel Yergin Day).

Is this the makings of a new currency?
4 Yergins = 1 Picken?

Pickens' was very poignant this a.m., his best sound byte to the effect of (not verbatim) "with $100 oil, the US is spending $600 billion annually for oil and this can't go on for 10 years"

Then add net imports of nat gas to the US.

Curiously Boone did comment on abundant domestic nat gas supplies on occasion. Maybe just building his position before his short,,,

He said he was long on gas, but wants to use it to substitute for oil, however he does not seem to be counting on any great increase in NG supplies, as he wants to displace the needed quantities by wind and solar energy.
He feels that 40% of oil (I'm not clear if it is just imports, or total use) could be replaced by NG.
Can anyone clear this up?
Insight on the quantities of NG we are talking about, and how that compares to current output, would also be useful.

I had to rewind that part myself too. I think his point was that the only way we can substitute 40% imported oil for nat. gas is if we remove that nat. gas from power production. To do that, he wants to maximize wind production, the pecentage he quotes is that we could generate 20% of our power using wind.

I'm not sure about the details, but at least it is a constructive suggestion in the right direction. Could form the basis of a starting point for futher discussion. We'll need a big energy efficiency/conservation wedge in there too, and I'm sorry, but there is also going to have to be a big curtailment/demand destruction wedge as well. Too late to avoid it at this point. Maybe not too late to manage it and cushion the blows just a little bit, but not much constructive talk about that yet.

Yeah I agree, it sounds like a good idea. Traditionally, the only big detriment to using nat. gas as a fuel is its portability, but the issues with storing it seems like they've been dealt with as many municipalities and UPS use natural gas to run their vehicles on it. It also makes sense to stop burning up your easily portable fuels (oil, nat. gas) to generate power when that can be done by other less versatile energy sources like nuclear, wind, solar, coal (*cough* environmental disaster though it is *cough*), etc.

When you start looking at the amount of alternative energy that we are going to need is when things get frightening. Last summer I heard a talk by a guy at the National Renewable Energy Laboratory and he had a great chart showing the seemingly large growth in megawatts generated by solar and wind power in the U.S. Then... he overlayed on top of that what we're going to need in order to stop burning coal to minimize the effects of climate change. If I remember correctly, it's about two orders of magnitude higher than what we're doing.

You hear some rumors around the department of energy about a manhattan project for solar, but as far as I know it's just talk. We could get caught here with our pants around our ankles (as you say, and we may have already gotten caught and just don't know it yet). Demand destruction may take place the hard way.

This is why I see curtailments (AKA Demand Destruction) as an unavoidable necessity. All plans to enable us to maintain BAU, let alone continue growth, are doomed to end up looking totally rediculous and beyond any bounds of reality. We are going to have to come to grips with the reality that we, as an economy & society, AND individually, are going to have to get by on a lot less energy, which means that we're going to have to stop using it for a lot of things that we're using it for now. Not just be more efficient in using it, but STOP using it for some things. That is going to directly translate into a lower GDP per capita, which means that just about ALL of us, on average, are going to be POORER.

No politician (and probably no corporate CEO either) in his or her right mind can possibly admit it (and most are probably too afraid to even allow themselves to think it), which is probably the single biggest reason why the curtailment wedge will end up being bigger rather than smaller, and more painful for more people.

The sooner all of us start getting into a "giving things up, learning to live without, cheap chic" mode of living, the more ahead of the curve we will be and the less painful it will be when the inevitable comes.

"(Pickens)...long on gas..."

Stock Sink On Oil Price Surge


Finally the stock market is beginning to behave like an instrument that reflects economic realities. Now it only needs to lose about 4000 pts and we can start to work out some of the anomilies. Beter to have some pain now than suffer a meltdown later.

My 401(k) thanks you.

The reason Pickens wants to push natural gas is obvious. The company he founded in 1997 is in the business of converting nat. gas to vehicle fuel.

Boone Pickens, Chairman Emeritus of Clean Energy, former Chairman and CEO of MESA Inc. and former Chairman of the Natural Gas Vehicle Coalition, had a vision: to tap into natural gas as a vehicular fuel. His motivation was two-fold: one, to ensure a cleaner environment for future generations, and two, to lessen dependency on foreign oil. While Chairman of the National Natural Gas Vehicle Coalition for almost three years, Mr. Pickens traveled the country advocating the merits of natural gas. Mr. Pickens is committed to the natural gas vehicle (NGV) industry and has invested several million dollars of his personal capital in Clean Energy.

Today, Mr. Pickens' vision is a reality. Incorporated as Pickens Fuel Corp. in 1997 and reincorporated as Clean Energy in 2001, the company now owns and operates natural gas fueling stations from British Columbia to the Mexican border and is expanding steadily.

I'm not saying his plan is bad, but rather he seems to be poised to profit from it.

I worked for Boone for 8 years. He has many faults. But, trying to make money I do not think is one of them. So, yes he is trying to profit from what he does, and I think that capitalism has proven to be the best method of solving economic issues. [I know that many communist/socialists disagree]

I think you raise an interesting point: What sort of economic management will perform best during the paradigm change from fossil fuels to Solar and Geo-based energy generating systems? Will it be an unplanned, uncoordinated, unsubsidised "Free Market Economy" or some sort of planned, coordinated and subsidized "Mixed Market" or "Command" Economy? Since the first doesn't exist, it can be eliminated. The latter doesn't exist either, so it can be eliminated. That leaves us with the Mixed, which I define as being a blend of public and private management and is neither capitalist or socilaist. Could it be socilaist though if the People told the government what they wanted to happen and the government then hired private business to do the building, although this begs the question, What is Socialism? If a project is concieved, paid for, and owned by the public, even though its construction was undertaken by a private firm that made a profit, is the project socialist?

is the project socialist?


Now there's some fine think'n on commies. Fine like jblunt.

I think that capitalism has proven to be the best method of solving economic issues. [I know that many communist/socialists disagree]

Then you best leave the US of A and move to a place where there is actual capitalism without all the pesky government regulations.

I hear Baghdad is nice and safe.

In theory it sounds great, but explain that to the private companies that invested in NG power plants for a 30-year life. The U.S. electrical NG generation is 21.5% and increasing a bit this year (look it up on the EIA site).

So we take all the NG plants off-line stranding assets of major proportion and start to build other sources. Now, as an EE I should be doing the happy jig around the room, but this is not realistic. Along with the new generation sources new transmission would be needed and the existing stranded circuits would be written off.

I'll tell you about the wealth transfer in this plan. It would go from the oil exporting countries and into the civil attorneys parading every liquidated damages law suit (plus the usual U.S. love for penal amounts amounting to lottery winnings) into each and every county court room in The Land of The Free, and Home of The Tort Suit.

Rhetoric aside, I agree with the idea because "using natural gas to generate electricity is like using your best scotch to wash the dishes". It would take a major federal law to enact the plan and would smack of Patriot Act proportions. Can the nation abide? I highly doubt it as I envision every conservative, capitalist, free market pundit lining up in the cable news green rooms awaiting their sound bite moment of vitriol for the socialist New Deal-like federal intervention. Nation security and survivability aside, of course.

I think what is required is a transparent Continental Energy Reserve Audit (CERA - hee, hee - supposedly by the EIA), and then the U.S. hold a national election as referendum about the use of the remaining reserves, and the plan to move beyond this reserve dependence. Then the nation could vote whether to pop CERA in the corn hole and drain it dry, or husband the resource for future generations.

Disclaimer: The depiction of actual or real characters is unintentional and does not convey the opinion of the producers or host site.

The market may do the job of stranding the assets.
Natural gas prices should continue rising so that people will simply not be able to afford to use it to heat their houses.

I can remember when 100% of electrical generation in Texas, Louisiana and Oklahoma was natural gas, and I think that base load still requires NG generation in those states.

The Co-op on the other side of Lake Ponchartrain from New Orleans is just completing their first non-NG unit (about half of total MWh) that will burn petroleum coke (fluidized bed can also burn coal of several grades).

In all cases, Peak and most of the "shoulder" generation is NG in these states and it will be a multi-decade effort to replace that power.

New Orleans gets base load from nukes, and surplus coal fired power from Alabama Power (seasonally) but burns NG to meet the summer air conditioning load. Our fuel costs adjustment takes a massive hike then.

NG also makes very good spinning reserve power.


I had been arguing that oil would not, at any rate as long as it is not a purely luxury and specialist commodity, reach west texas's projection of $800 dollars in real terms, as it would be simply unaffordable however much people might want it, and whatever sufferings it's lack caused, but would peak at $300-500/barrel, after which whatever level of demand destruction was needed to keep the price within those bounds would occur.

Pickens moves this forward, arguing that oil will reach $150/barrel by the end of this year, but that even $100/barrel is unsustainable, and prices will be held in check by a world recession, starting after the Olympics, as China will not cut back until then.

At any rate this would reduce the incentive to hoard, as prices would have to drop, but with supplies limited they can't drop far enough to stimulate economic demand.
Instead these falling prices will restrict the ability of the oil exporters to import goods, thus further diminishing world markets.

On the bright side, such as it is, it should increase their incentive to try to raise petrol prides within their own economies to free oil for export, but the high prices of everything else will limit the political possibilities or they will simply be deposed.

It looks very much like recession until alternatives can be brought on line, or things totally fall apart.

Sorry no links for this, but I've seen this several places now:

Oil at $120 = 6% of world GDP spent on oil


Oil at $2,000 = 100% of world GDP spent on oil

This is not going to be possible! All of the world's economic output spent on oil, and nothing on food, water, clothing, or shelter. Now, of course, as the dollar weakens with more and more pieces of paper chasing fewer barrels, who know's where the non-inflation adjusted price of oil could go.

The point you are missing is that the price per barrel will be much higher, but the volume of exported oil will be much lower.

Exactly-using your ELM and keeping the real dollars spent on imported oil at a constant yields some pretty impressive future prices for oil-far exceeding these $150 and $200 ceilings discussed.


Question is will global oil output decline (or net exports) as fast as you seem to assume?

A combination of declining oil supply and increased oil prices must have some macroeconomic effects i.e. slowing economic activity thus leading to reduced oil consumption.

A too steep increase in oil (and energy prices) will obviously shrink GDP (in real terms) thus a continuing increase in oil price will accelerate the GDP shrinkage.

If the 1 % of the population that still are able to pay for US$800/b your argument seems to suggest that this 1 % will increase their consumption.


IMO, the very lifeblood of the world industrial economy--net oil exports--is draining away in front of our very eyes, for those who choose to see what is really going on. For most of us, the "Sixth Sense" outlook prevails (in the movie, many dead people don't know they are dead and they only see what they want to see). For most of us, our auto-centric suburban way of life is dead, but we choose to see what we want to see.


Was that an attempt to answer my reply?

I am not questioning “Peak Oil” and declining global oil supplies, and an even steeper decline in net exports.

I am questioning your rationale on the oil price forecasts which seems to have been generated in a vacuum, without acknowledging that increased oil (and energy) prices and declining availability will have an effect on GDP (I am not talking about official massaged numbers).

The 1 % of the richest of the global population will no doubt not need to change their habits if oil price reached US$800/b (or higher), they could even increase it if they so wished.

In the real world the richest 1 % of the population would in many ways be affected by a slowing or shrinking economy caused by increased oil prices and/or due to declining supplies.

Peak Oil affects everyone, and there is no way that anyone, no matter how rich they are, will be able to buy their way completley out of it.


You need to move to Perry Arnett to answer your question.

When everyone sees PO, then "slowing", "shrinking",
will not be the operative words.

"Collapse", "1930", "1886" will be.

"The first major effects of oil peak will have occurred by ~2012? - this coming just a few years after the NG cliff!; the availability of
electricity in the US will soon be on a par with electricity availability in say, China or Ukraine now; spotty, rationed, rolling blackouts,
and less and less of it each month, until -

Some day soon, ~2010-15? the Net will go down - and never come back up; some time after that ~2015-2020? the US electrical
grid will go down, - and never come back up.

As soon as those two events occur, life "as we know it" will have been changed forever.


WT is doing his best to get a power down to a sustainable

But you're right. No one can afford to prepare for
complete collapse.

McGowan - you are right, the Olduvai Theory is so far right on track, if anything we may get less than the predicted 100 years of modern civilization, 1930-2030.

During the oil crisis of the early 80’s, oil consumption went down and prices went up during some years without the world collapsing.

Peak Oil is primarily a liquid fuel crisis.

Big difference.

The World was still growing oil.

I'll need to see your figures on consumption going down.

If it did, it was oh so brief.

Just like with prices.

$.89 bought me gas in 1990.

$.89 bought me gas in 1990.

Damn!! Those were some expensive beans!

Oil consumption in the US went down dramatically. IIRC from previous threads on this forum, it went from somewhere around 19 or 20 mb/d to in the neigborhood of 15 mb/d.

This fact is one thing that keeps me from being a complete run-for-the-hills-and-dig-a-hole-to-hide-in doomer. We *can* reduce by a lot. There's a lot of waste. Cutting out the waste alone would stave off PO for a year or better. Were we to get into serious relocalization, coordinated job swapping to reduce commutes, telecommuting, etc., we could probably put if off for a number of years. At least, that would be the case if the planet had the same degree of waste the US does. However, I don't see that other nations do have the same amount of waste that the US does, so conservation won't go as far for the rest of the planet. Still, I could see the curve moving out a minimum of 5 years based on conservation and relocalizing alone. And that's without considering localizing food production and building out mass transit.

Maybe someone could run the numbers?


Reduced economic activity is the quickest and most certain way to reduce oil consumption.

I am trying to work out the impact of increased transportation bicycling.

As for the rest ....

Hard to guess,


NO! NO, that will not happen I say! I am super-EE and I will raise my scientific graphing calculator in triumph over the evil-doers of Grid Death! I will lift a humming 100 ton transformer, leap over a transmission tower in a single bound, and be faster than 60 cycle wave propagation in an aluminum conductor (which is far faster than Clark's speeding bullet BTW).

This system will not fail on my watch. We of the graph paper class will save 'Murika!

Well, if the evil-doers show up with their krypton masked as decaffeinated coffee and take away our fearless prophet Dilbert, we may succumb to tragedy of the grid collapse.

Want to hear something ironic though? In my senior year our graduate EE class beat out all the other teams in a charity bus pull event on campus. This is a test of strength and endurance pulling a small school bus over the circuit. We beat out the Phys. Ed., the Rugby team, and the weight lifting club. Then we went to the pub and blew them away in beer drinking. We had some real freaks in that grad year! ERTW - Engineers Rule The World baby!

ERTW - Engineers Rule The World baby!

Yet do not get paid a rules wages :-(

From a non-economist. ..Somewhat over 120 dollars to 200 dollars a barrel means consequent and catastrophic changes. (But remember different currencies, etc.)

Why should oil price in the lower highs diminish oil output? Demand will still be there on the part of those who can afford it, oil companies and exporters make out big, exporting countries want the money, and don’t themselves, over time, tend to consume less (to sell more), at least not so far. Oil exports is another story, but that also depends on how much oil is ‘needed’ or can be used intelligently ‘at home.’ Countries that live off oil rents can’t change overnight, Saudi Arabia (US satellite, low employment, much imports, etc.) has trying to do so in many ways - growing wheat, training and employing its young men, cutting back (steeply) on Gvmt. handouts, etc.

Countries or communities will do acceptably, one can sincerely hope, or spectacularly badly according to a whole host of factors: a) level of dependency, with some of the ‘poor’ countries thus hopefully doing OK, b) richness and ‘cushion’, turn around time, c) capacity to cut back, prioritize (EU better than the US), d) space for conservation measures (US better than EU, say, details skipped), d) international trade and its energy input, transport, agriculture, etc.

Oh well - thrilling times.

Chinese Curse:

May you live in interesting times...

I think those times are here....

From the latest posting at Net Oil Exports Website

Lets say that $100/barrel of oil = $3.00 gallon of gas. Then $800/barrel of oil = $24.00 gallon of gas.
I might cry, scream, jump up and down and a few other things, but I would still fill my farm tank. And I would still mow my 3 acre lawn with a riding mower rather than a push mower (I am almost 70) (until I can get it fenced and run livestock to do the mowing for me - And they will mow around trees, bushes, equipment and vehicles a lot better than I can!) Maybe that will be a new source of farm income - Renting out sheep to city folks to put on their lawn for a day or two to mow the grass - Simple temp electric fence - Ya that would work. Probably a few City Rules on livestock inside the City Limits will have to change?
I would still drive to town from the farm as it is too far to walk - Just make fewer trips probably. I'd still drive my full size pickup to haul farm supplies home and farm products to town (food will be expensive too!)If city people want to eat, they will have to pay farmers enough for their farm products to cover the extra cost of the fuel to produce it and haul it to town.
I just don't see $24 gallon gas being the end of the world as we know it!

The question I have is what do the city dwellers produce that will provide the income to allow them to afford your farm products?

Suppose it would be that riding mower when it wears out. Fertilizer, seed, tractor parts, maybe a restaurant meal when you make your trip. Now I wonder if you need widgets, lawyers, and soda pop that bad now that your diesel is $24. a gallon?

Somebody around here has been saying it. "Get thee to the non-discrectionary side of the economy" Think I get it now.

Financial services, lawyers, psychotherapists, home decorators, clothes designers, conceptual artists, fancy gadget sellers do fine in times of plenty.

Otherwise, marginally only - and in the long run, only a few make money, for a tiny market. (See 1700 -1820 AD.)

The servant class in big rich towns in the Western World -- nurses, fire, police, public school teachers, cleaners, garbage management, infrastructure upkeep, water delivery, state run transport, etc. have been stiffed by false promises, some rise in living standards (1950 >), destruction of unions, political hoo-ha, and mainstream propaganda.

More seriously, their intellectual input has been set aside, ignored. Engineers on waste and water; nurses on triage; police on drugs; teachers on best education; etc.

Besides that, the ‘City’ produces, in the US and elsewhere, financial jiggery-boo, frill products that sell well, cultural hegemony, trend setters, innovators, opinion makers. They concoct, and disseminate, a picture of the world. (Not alone but in partnership.)

Yeah wow. That's a very interesting picture.

As intellectual curiosity overcomes each person on the Urban utopian express as to why the 'ride' is slowing down I wonder how long it will take individuals to make the decision that they're going to have to get off and 'make other arrangements'.

My thoughts xactly xburb.

I guess them farmers are going to need armies of software engineers tapping out code for their farming operations. LOL

Hi Jon,

One problem is that unless there are sufficient people buying gas then it will not be worthwhile for "gas stations".

Second, IMO people won't be paying you to drive in with your sheep to cut their grass since they will be converting it to grow food. Maybe you can sell shares in your sheep to townies, i.e. money for guaranteed food.

I'm already walking to work, so gas could be $24 billion/gal and it would not impact me as far as that goes. Whether my employer would still be in operation is another matter.

Leaving macroeconomics to one side, my wife and I still do have two cars, she still has to drive to work for a while (but might be done with that by the time motor fuel gets that high), and we still do have some errands around town. I could do some of those on foot, but I would probably have bought a bike by then, because at $24/gal I doubt that the streets would still be filled with SUVs and pickups zipping along at 40-50mph. Hopefully, I will have also purchased an NEV to replace one of those cars before we get to that point. That covers our in-town transport.

Our trips to the nearest big city (Asheville) once or twice per month to visit my parents and do some shopping would be more of a problem. Maybe we'd have to ask them to try to relocate to our town. We could team up with some neighbors to ride share for the shopping trips, and just cut them down to a few times per year.

We rent a car for our two annual trips to visit my wife's mother, 450 miles away. At $24/gal, we probably would switch to Amtrak, which is feasible but adds at least two extra days to the trip. Hopefully, by the time gas was at $24/gal, there would at least be a shuttle bus to the nearest Amtrak station 90 miles away. I'd like to think that at $24/gal people would finally get in gear and extend it to Asheville, but I'm beginning to dispair of that ever happening.

I've got a small lawn, and it is increasingly being converted over to fruit and vegetable production. I will probably eventually be buying a scythe for the little bit of mowing that remains.

So yes, we could live with motor fuel at $24/gal. Notice, though, that by then we'd be using very little of it - maybe 5-15% of what we're using now, and that is already only a small fraction of the average US usage.

Jon, the question isn't whether certain individuals can afford whatever price for fuel, it's a matter of what happens to the world economy at certain thresholds of oil price. Even the wealthiest magnate will be affected when the overall economy shrinks to a crawl. In fact, in a world of diminishing standards, as desperation sets in for the majority, those without will take from those that have. All the niceties of social etiquette will be replaced by Darwinian survival tactics. No home or building will be safe from marauding packs of well armed hungry citizens. Just like dogs, humans will band together in tough times to exert the force necessary to insure survival. Join them or get out of the way.

That'd be over $1500 per month in gas. At $24/gallon it's highly likely that their wouldn't be any farm equipment because the companies that make them would be bankrupt, the fleets of trucks that deliver their parts and products wouldn't be able to operate and their wouldn't be any road repairs because the price to repair them would bankrupt your state/locality. Also the price of cattle would be so expensive because of the fact that the food market would crash that you'd have to be extremely rich in order to purchase them. In addition by the time gas reaches that level it is highly likely that the power grid will be at or near total collapse and even if you do have power the price that you will pay will be many many times higher than today due to increased coal/natural gas prices and probably more electric vehicles on the road.

Also the price of cattle would be so expensive because of the fact that the food market would crash

Naw - cattle are a fine way of taking grass and concentrating that 'energy' in the form of dung. They can also be used for tilling. The old and lame become lunch.

So cattle and horse meat would be 'on the table' (so to speak) in a world WITHOUT oil.

You just made my point, they would be so expensive that nobody could afford them if the world is in famine and the tranport system is in chaos.

You just made my point,

On what planet is *THAT* true?

You are assuming:

1. Stable currency exchange rates
2. Low inflation rates
3. That increasing energy prices *must* cause a recession
4. That only the top 1% will be able to buy fuel at $800/barrel

However, in the 1000% runup in prices/barrel so far we've seen:

1. Declining value of the dollar
2. Increasing inflation rates
3. No recession, or only a mild slowdown (note the leading economic indicators have risen the past two months)
4. People have cut back on other things but most have not reduced their gasoline use.

You're also leaving out the possibility that people will just use less than they do now. My family uses about $250 in gas per year. Neither my wife nor I drive a car to work. Even at $24 per gallon, we could probably afford most of the driving we do now, and we are *not* in the top 1%.

Frankly, if/when oil reaches $400 per barrel, I think there will be a world war for oil supplies. If there is world war, $800 per barrel will be peanuts.

Fair enough. Let's say the global volume of oil production is reduced by 50%. Then $4,000 per barrel becomes the amount that equals 100% of world GDP. Still a finite top end to the price.

Following your point on EXPORTS, I think what this means is that there will soon no longer be a global price for oil. There will be price for EXPORTED oil which can go very, very high as EXPORT volumes are drasticly reduced. And there will be the controlled oil price that applies only internally to oil producing countries.

BTW, did you see the article this morning that Kazakhstan banned the export of all refined oil products?

that there will soon no longer be a global price for oil ... And there will be the controlled oil price that applies only internally to oil producing countries..

There never was a global price for oil - the current ~$128 WTI price is for light sweet crude, world production of light sweet peaked in 1999.

The people at most immediate risk of having no oil at all are those that import nearly all their oil - the 15 countries with the greatest demand consume ~60% of the world’s oil but ~80% of net exports.

Country imports ~% of total
Belgium 98%
Turkey 93%
Thailand 64%
Singapore 99%
Netherlands 92%
Taiwan 99%
Spain 98%
Italy 91%
India 67%
France 96%
Korea, South 100%
Germany 94%
China 47%
Japan 98%
United States 59%

Dependency on oil imports is meaningless without proper context (energy mix).

For example, while France imports 96% of their oil, oil only contributes 33% of the total energy mix - Nuclear is 40%. Energy imports are 50% of total energy, with oil accounting for 2/3 of imports. France has a good electrified transport network, and produces almost 80% of its electricity from nuclear. I anticipate that it is far better insulated from rising oil prices than the US.

The above statistics come from here:

I think 30% to 40% of primary energy from oil is in the 'normal' range for an OECD country.

Basically, the 27 EU states (as an example) will soon (by 2020?)import most of their oil and gas - and net imports of both look set to become very expensive as a percentage of GDP.

It isn't clear to me that there won't be peak Uranium (or peak debt, or peak batteries) as well - flow of resource seems normaly to be a small percentage of URR judging by things like oil, coal, gas, whales, herrings, phosphorus, fossil fresh water etc etc.

The current cars and trucks won't get very far without sufficient oil.

My impression is that France has done pretty much all it can reasonably do to reduce oil consumption - good mass transit, less sprawl, electrified rail etc. Still though there are no easy substitutes for oil for cars, trucks, airplanes... and there will always be demand for those, and some of them quite essential. Bottom line - France may suffer less, but it doesn't mean they won't suffer.

I think it may be difficult for those in the US to realise how discretionary most use of cars is in the EU.
For most of us, almost never using a car will be far easier than for people in the the US to cut their mileage in half.
Of course, those in rural areas will have great difficulty, but even there the reduction in car use will make it easier to ramp up scheduled bus services.
The thing is that the basics of public transport are universal, so what is needed is expanding them, which is far easier than creating them from scratch.
The increased ridership will also improve the economics, and more relatively wealthy people using it increase pressure to improve services.
Keeping heating going may be a bigger problem in the EU than lack of vehicle fuel.

Absolutely. Heating fuel is a, or the, big issue.

I am European myself, I know what you are talking about. In Europe the car is an expensive luxury, mostly due to circumstances - not enough land, historical cities etc. We can't afford sprawl, we can't afford to tear down and rebuild our downtowns. And this is good.

Having said that, mass transit suffers one inherent disadvantage - it has to rely on local authorities to offer good quality service. And most authorities suck, be them local, federal or whatever. This on one hand and the freedom of having the car on the other will always make the private auto a desired thing, something that improves the quality of life. We shouldn't just mark it as "evil" and write it off as unnecessary luxury.

The US is in better shape than France - the US imports 30%, vs France's 50%.

The US only(!) uses oil for 40% of it's energy mix, and it imports 70% of that, for a net of 28% of energy from imported oil - less than France. It imports, IIRC, about 15% of it's natural gas (it exports coal), so it's total imports are around 30% of it's total energy needs.

France can afford to buy what it wants, the USA cannot.

France can switch to non-oil, domestic alternatives if imported energy gets expensive and/or scarce, the USA cannot. France has a viable non-oil transportation alternative (running off domestic sources of energy), the USA has only an oil based transportation system for 80+% of it's population and 100% of it's freight.

France is planning to install 5 million solar hot water heaters in the next years and 50,0000 ground source geat pumps/year. France is planning to add a large number of wind turbines, as is the USA (the one item in common).

You use percentages, not per capita #s.

The USA buys $3 for every $2 it sells abroad. France ha a small balance of payments surplus (including an ag surplus).

The USA uses the US $, of which there is a glut world wide. France uses the euro, the preferred reserve currency.

Best Hopes for the USA running to catch up with the French,


Alan, a small correction, France is installing 50,000 air source heat pumps a year, not ground source.
They are a lot cheaper than ground source and even the current models are fine for the relatively equable French climate.
Newer CO2 models will soon be available which can deal with harsher climates cost effectively.

On another note, I was surprised that the rail freight network is so ineffective and poorly coordinated in Europe.
This would seem to me to be an area which will need addressing with the utmost priority.
I wonder if you have nay insight on how this is likely to impact passenger carrying capacity in Europe?
Of course, freight must take priority regardless of the consequences for passengers.

"The USA buys $3 for every $2 it sells abroad. "

True - most of this deficit is due to oil.

"France can switch to non-oil, domestic alternatives if imported energy gets expensive and/or scarce, the USA cannot."

This doesn't quite make sense to me. France imports about 97% of it's oil and gas, and all of it's coal and uranium (technically, nuclear fuel's not truly domestic, which leaves it vulnerable to short-term disruptions). If imported oil & gas become truly scarce, how would France cope?

Personal transportation rolling stock can simply be replaced with electric over about 10 years (once manufacturing ramps up, which might take an additional 5 years). You've argued strongly that US suburbia can't retrofit for energy efficiency (I don't agree, but here I'm looking for internal consistency in your arguments) - how would much older, less easily replaced (and often suburban or rural) housing stock in France do the same thing, if US suburbia couldn't?

How would French industry (including agriculture) cope with a true scarcity of oil & gas?

"France has a viable non-oil transportation alternative"

The French travel via motororized ground vehicles about 14K KM per year (per http://www.cfit.gov.uk/docs/2007/ebp/index.htm Ch. 2) vs about 26K KM per yr for the US (per http://www.bts.gov/publications/national_transportation_statistics/#fron... ) - That's a real difference, but it's not as overwhelmingly large as you suggest. Only 6% of it is via rail, tram or metro (ibid cfit.gov above) - that's a real dependency.

Does France have "a viable non-oil transportation alternative" for freight?

"USA has only an oil based transportation system for...100% of it's freight."

You've argued that US freight trains are fuel-efficient, and can electrify - have you changed your mind?

You've also argued in the past that "in an oil emergency, the Euros can drive half as much, double the use of non-oil transportation, because there is an alternative, unlike in the USA "

But, in the US 9% of commuters carpool, vs 4.5% which use mass transit (and 1% which use rail). US'ers could drive half as much by car-pooling, do it overnight, and it would be likely rather more convenient than rail. The French would have to not double rail, but increase it by a factor of 5 to 10!

"France is planning to install 5 million solar hot water heaters in the next years"

How many years is "next"? This doesn't address heating, right?

"and 50,0000 ground source geat pumps/year. "

Have you looked into the same stats for the US? I think you'll find per capita installation rates are much higher.

When France imports 50% of it's energy, and the US only 30%, I find it hard to accept that France will have a dramatically easier time coping with truly scarce oil & gas. True, the US's transportation is much more dependent on oil, but that's only part of the story.

Finally, the US does still produce 30% of the oil that it consumes, and that could supply most of US oil consumption on an emergency WWII type footing (where consumption was reduced by 50%, largely through reduced personal VMT via telecommuting, car-pooling and car-sharing) - that makes a difference.

Nick, in the EU a lot more of the miles are discretionary compared to the US.
Rural housing in France is pretty old fashioned, and tends towards thick walls and wood burners.
The comments that the French would have to multiply rail use manifold, but this does not take account of the possibilities of using buses in relatively dense urban areas.
The figure for ground source heat pumps is in error - it is air source heat pumps France is installing.
Your figures indicating a greater rate for US installations refer to swimming pool installations, rather than how water for household use.
The imports of fossil fuels in France as against the US are indeed a weighty point, and you are correct to draw attention to it.
Nonetheless, it should be noted that the proportion of nuclear fuels that are imported are more or less a matter of taste, as fast breeder technologies etc were only rejected on cost grounds in other eras of lower fossil fuel costs,and that it is darn sight easier to increase the number of reactors needed to run the whole society by 100% or so than to multiply them by ten.
Finally, the export of nuclear technology itself should lead to a considerable ability by France to pay for whatever fossil fuels are left.

"in the EU a lot more of the miles are discretionary compared to the US."

hmmm. How do you know? A lot of US miles are discretionary. And, even so, what about the ones that aren't?

"Rural housing in France is pretty old fashioned, and tends towards thick walls and wood burners."

And yet they still use quite a bit of oil and gas. What is it for? How will it be replaced?

"this does not take account of the possibilities of using buses "

Buses use a lot of fuel, roughly the same amount as light vehicles.

"Your figures indicating a greater rate for US installations refer to swimming pool installations, rather than how water for household use."

I was referring to heat pumps.

"fast breeder technologies etc were only rejected on cost grounds in other eras of lower fossil fuel costs,and that it is darn sight easier to increase the number of reactors needed to run the whole society by 100% or so than to multiply them by ten."

Both the US and France have more than enough electricity, so that's not so important in a comparison of the two. My point was simply that France's nuclear fuel is imported, which introduces some supply risk - while that risk isn't enormous, it's not something that can be eliminated quickly.

"the export of nuclear technology itself should lead to a considerable ability by France to pay for whatever fossil fuels are left."

That would help. On the one hand, because a nation can afford imports doesn't mean that it's members can. IOW, there will be substantial pain on the part of some Frenchmen, whose fuel costs are above the national average, and who will therefore not be compensated by whatever financial mechanism is used to bring the benefits of exports to the average citizen (perhaps lower taxes, or electricity bills). On the other hand, do we know how much that export income will be, and how it might compare to the national oil & gas bill?

Only if the same amount of oil is consumed in both cases.

At $2000 a barrel, a lot of people and use will be priced out, so total usage would be lower.

Gee, I've been under the impression that the rising cost of energy was responsible for GDP growth ^..^

Whats funny is if you can hold all other outputs at constant, rising energy prices do cause GDP growth.

Unfortunately rising energy prices are inputs to other industries and to hold output stable you would have to have productivity growth at exactly the same rate as energy prices are rising just to keep up with costs.

We're entering a world where "GDP" is meaningless. (Not that it ever was that meaningful.) The key is EROEI * - in a situation where EROEI is 3:1 a full 1/3 of "the economy" is dedicated to extracting energy, while 2/3 is left available to do what we really want to do: use that energy to create food, clothing, shelter, transportation, etc. An EROEI of about 100:1 in "the good oil days" was essentially infinite, but we're now somewhere near 10:1 and falling. One consequence will be a drop in the FROFI: food return on farmers invested, i.e., more of us will have to work in the food-production system. Most of us will end up working in either that or the energy industry or some other essential venture.

*) EROEI: energy return on energy invested

Yes, which is why every prior energy transition occurred with about 5 decades transition time plus another energy source that was close to or even cheaper than the energy source it was replacing.

This time we don't get 5 decades to transition so that's a major problem. We do have some options on energy sources that will be near or even below the current price of fossil fuels but so far we're not making good use of those options (primarily nuclear, solar, and wind).

Just think how sustainable life is when you pay $2000 a barrel. Walking suddenly looks like a wise investment!

Let's hope we are well on our way in the transition to electrified transportation by then.

IMO, we are looking at an accelerating net export decline rate, combined with a requirement for an accelerating rate of increase in oil prices, in order to balance supply & demand, as forced energy conservation moves up the food chain.

Let's take all consumers in all oil importing countries and break them into five groups, and then rank them by income. So, at the bottom of the bottom quintile, we have a poor Third World consumer. At the top of the top quintile, we have Bill Gates. As we go up the income ladder, the cumulative purchasing power vastly increases, which as noted, IMO, suggests a requirement for an accelerating rate of increase in oil prices in order to balance supply & demand.

I think that these two factors will interact to produce the following oil prices: $50, $100, $200, $400, $800 . . .

The question is the time period between the doublings.

For more than two years, I have been suggesting, begging and pleading that people assume that their income will drop by 50% and assume that energy prices will more than double, and to arrange their lifestyles based on these two assumptions, with an added suggestion that people invest in, become and/or work for providers of essential goods and services, because the discretionary side of the economy would get crushed:

ELP Plan (April, 2007)

Not quite.

Its not their income that really matters, its their disposable income after all known debts, unavoidable expenses etc. are taken into account. A first world family which spends every cent it earns is as badly off as a third world consumer that has unallocated disposable income.

Put it together and you get plateaus, one of which we should be hitting around now.

The fundamental problem is an accelerating net export decline rate. It's not a plateau; it's more like trying to catch a falling knife. What we will see is higher income groups drastically reducing their discretionary spending, in order to pay their increasing food & energy bills. The discretionary side of the economy will get, and is getting, absolutely crushed. Even those who can afford conspicuous consumption will increasingly, if they are smart, choose not to flaunt it. "Cheap is the new chic."

Oh I agree. Point is however the price we become immaterial fairly quickly. Once large parts of you populous can't afford to travel much and take part in normal commerce the whole thing comes apart. That is less gradual than it appears because people have debts up to their spend level.

Thus there may well be a punctuated exponential rise is price, but beyond a point it doesn't really matter. That key 'crunch' level is more important than the slope (eg $125 > $250 matters. $250 > $500 matters. $500 > $1000 is also ran next to the stories on the progress of the civil war)

I can't really back this up but in general I think your decline rates are too high. The consequences of rushing headlong towards zero net exports would be too severe -especially as pretty soon we will be in a serious crisis situation wrt. energy price escalation.

I think the problem may be that your model cannot take account substitution effects in the exporting countries -for example; suppose that its 2012 and a global energy crisis is declared. Along with a massive drilling effort and general consensus that we must conserve and move to renewables the USA deploys nuclear reactors to KSA in order that they may export that which they would otherwise burn to fuel their electricity generation and desalination plants.

Againm, I've not run the numbers but it just doesn't seem logical to me that Nations will sit back and 'crumble to dust' once the scale of the problem is grasped. Having said that even if all efforts are undertaken it might only act to shift the zero exprot point into the future by 5 or 10 years...


The net export decline rates, from the final production peaks to the final year of net oil exports, for Indonesia and for the UK were respectively about -28%/year and -56%/year. The year over year annual net export decline rates tended to accelerate with time.

Would the UK and Indonesia be comparable to countries whose GDP comes primarily from oil, such as KSA?

I noticed in random news that Dubai is building a new metro, and Qatar is building solar generation. I suspect that they'd like to maximize their exports.

Are those Nukes you're going to "deploy" to KSA will be the type where you just add a drop of water and theey become reality?

The US?
Build nuclear reactors?
In the home of al-Qaeda?

Oh, I want to see the press conference for this fiasco. Doubtless this will occur the week after we go to war with Iran for its evil exercise of its sovereign right to nuclear power.

Hi super390--Please see the link I provided Ron just below.

Few talk about the whole 'peaceful atom' discussion of the 1950's.

As for the press conference - odds are it'll be as hyprcritcal as any other one.

I'll see your press conference and raise you a 'rogue nation' status - and the effect(s) of the US Dollar being 'no good' for trade with other nations.

USA deploys nuclear reactors to KSA in order that they may export that which they would otherwise burn to fuel their electricity generation and desalination plants.

Though Saudi's electrical and desal plants can burn raw crude, they do not. They burn mostly natural gas. On rare occasions they will burn naphtha or bunker oil. Bunker oil is the heavy goo left over after the good stuff, gasoline and diesel, have been refined out. (I worked in a Saudi power plant for two years.)

So exporting nuclear reactors to Saudi may save them a lot of natural gs to export, it would save them no crude oil whatsoever. That being said, I don't think there is any way in hell the US would export nuclear technology to Saudi. That would be absolutely insane.

Ron Patterson

I don't think there is any way in hell the US would export nuclear technology to Saudi. That would be absolutely insane.

If the Saudis want nuke tech they can buy it from Pakistan or France or China, or they can develop it homegrown. I don't favor fission reactors period, but if the Saudis are in the market why shouldn't US manufacturers sell to them, since they can readily get it elsewhere? Strategic considerations are rather moot.

I don't think there is any way in hell the US would export nuclear technology to Saudi. That would be absolutely insane.

Ron, Here's a list of links to news items announcing the deal you term insane.

Jeff, have a look at this: http://bp1.blogger.com/_kdcZbozWthI/R87VcdbEGII/AAAAAAAAAa0/7Mmn8v3uVvM/...


Sure US NUKE Batteries!

Hundreds of these parachuted in:

Send 'em to Canada to warm up the oil sands too replacing all that Gas we are using...

And in the meantime we can take some of the Gas we are burning to provide electricity and use it to power transport -GTL. If we do head there quickly this is fuel is going to be so precious and the price so high that it is NOT going to be used to drive SUVs to work and back. Wind Power can also be used to substitute this Gas -T.Boone Pickens has a plan...

It gonna be tough for sure -if we do go to 25% <2005> exports by 2030/2 we are stuffed IMO. 22 years to go from whatever you have now + imports to whatever you will be producing yourself + a wee bit. Haha -good luck!!


Just because it is being done does not mean it is not insane.

The WSJ had an article a few months ago. The King authorized burning crude when needed. And they do today.


It seems nearly all the Middle East oil states are looking at nuclear power, of course including Iran. The amount of time it currently takes to get a nuclear power program operational is about the same as the current oil export life for those countries so they sure all need to get started.

I agree that there will be plateaus, and even retracements in oil prices, during its long rise. I don't think that's inconsistent with what Westexas is saying.

As for first world families, I think most people in the top 80% of US incomes have a significant amount of disposable income. They are currently using that income to buy flat-screen TVs, to eat out, to buy $100+ running shoes, etc. As oil prices rise, that income will be diverted away from non-essential things to oil-related consumption.

As you move up the economic food chain, the amount of divertable disposable income increases a lot faster than the income. A very poor person may spend 80%+ of total income on essentials. I spend less than 25%, including my mortgage. It is going to take a much bigger rise in the price of oil to price me out of the market than a poor person.

As for first world families, I think most people in the top 80% of US incomes have a significant amount of disposable income. They are currently using that income to buy flat-screen TVs, to eat out, to buy $100+ running shoes, etc. As oil prices rise, that income will be diverted away from non-essential things to oil-related consumption.

The point you're missing there is that the money to buy those things came not from disposable income but from home equity loans and credit cards in recent years...so problems are coming even sooner than expected.

I understand your point, and you are right as far as it goes. My point is that the top 80% of the country is not where the heart of that problem lies. It is in the middle 50-60 percent. The top 80% has done very well under George Bush. The people making $250,000 anually and up aren't living hand-to-mouth and running up credit card bills.

The US has two economies. In one wages have been stagnant or declining for 25 years. Those people have grown their standard of living through borrowing. In the other, wealth has grown substantially in real dollars. While some of the second group of people have got themselves into credit problems, as a group, they still have a lot of money unencumbered by debt.

The top 80% has done very well under George Bush.

Way too generous. The top 5% has done very well. The top 20% has done OK. Everyone else is stagnant or down.

It is going to take a much bigger rise in the price of oil to price me out of the market than a poor person.

For most employed people the disposable income can fall very steeply if they lose their job.

Right, and the drop in "discretionary" purchases has a direct impact on the viability of jobs in the "discretionary sectors" of the economy.

Amen. I think we'll soon find out how many Americans are employed in fluff jobs that don't produce anything that the average person can't do without.

For most employed people the disposable income can fall very steeply if they lose their job.

This is true, but it is not really relevant to my point. Rising oil prices are going to squeeze progressively higher economic strata, starting at the bottom and working its way up. If someone loses their job, they have probably passed into a lower economic stratum and may well now be priced out of the oil market. However, the rich are not going to roll over and go belly up at the same time as the poor. The rich are going to be able to afford oil for a long time. For that reason, the price of oil is going to rise as long as there are rich people to buy it.

Also, rising oil prices does not in itself destroy money. It transfers it from oil consumers to oil producers. For every barrel of oil that an American can no longer afford, there is someone in Brazil or Saudi Arabia who can afford it.

Hi xeriod,

Agreed, but more, as the price of gas rises to chew into discretionary income, the prices of the nondiscretionary items purchased will rise as an effect of the increase in gas for the mfr, the shipper, the merchant, etc., further decreasing discretionary spending, hastening the layoffs of fluff workers in fluff industries, adding to the mass of misserable mooks already having nervous breakdowns. This is going to be one big ugly snowball rolling down an ever steepening slope, with no bottom of the hill in site.

What a world, what a world. I should be shot for having children. I didn't know.


A first world family which spends every cent it earns is as badly off as a third world consumer that has unallocated disposable income.

Obviously this is not true. Go ask any third-worlder, or go live there yourself for a while then make the same statement.

Well, I know which of the two will survive longer in a depression.

The third worlder may well be better off.

I am uneasy knowing how many first worlders have already spent tomorrow's hoped for income for yesterday's stuff, leaving investors, hoping for interest payment, holding the bag.

If the music stops, there are gonna be a lot of investors holding paper for assets such as used SUV's and McMansions which require massive loans to support its price level.

I feel investors may have a good time trying to recover their assets in one piece. Its surprising to me that anybody is funding loans these days - I suppose they wouldn't if it was their own money, not stuff shoved through Bernake's Discount Window, that they were waving bye-bye to.

But then, thats the function of the discount window - to insulate the people shoving the money through it from the realities of being accountable for it.

The American Way: Privatize the profit and socialize the loss.

The third worlder may well be better off.

It makes me cringe every time I read something like this not only because I think it untrue but also because I think it makes some people think that maybe the coming crunch will not be such a bad thing because the wealthy will get their comeuppance.

Food prices move with oil prices because there is such a high energy content to food production and also due to the West's ridiculous biofuels policy. This disproportionately affects the third world. The only good thing about this is that maybe it will revive local food production in the third world which has greatly declined due to high subsidies in the developed world. But it is wrong to think the people in these countries can easily settle back into subsistence farming since they are now so straining the local carrying capacities due to high population growth and deforestation. They are often right on the edge, even with cheap fossil fuels. High fuel prices will cause massive misery in the third world. The third world will first be completely priced out of the fuel and food markets.

And a superb job you have done of your analysis, west texas.
What I am suggesting though, is that the loss of purchasing power at the lower income groups feeds through to those in higher income groups, thus reducing their incomes in a cascade.
This would mean that the same price, Pickens thinks around $100/barrel is unsustainable, and will continue to drive incomes lower as it is not sustainable by society as a whole, and the richer members only have their high incomes as a premium upon the overall productivity of the society.
And so effectively the price is still rising by exactly the functions you give, but the difference is being made up by the lower productivity of the society.
In non-inflation adjusted terms the price would still be under $100/barrel,and it is in present terms $100 of goods it will buy, it is just that less and less people have that $100 worth of other goods.
This just substitutes massive demand destruction for rising prices.
Of course, some societies will be more tolerant to higher prices than others, and some will find it easier to move to substitutes.

BTW, this would mean that additional funds would not become available to exploit more difficult resources, and so if correct would lead to a faster fall-off of output.
Let's hope oil just appreciates in real terms, and does not fall with the world economy it is dragging down!

Surely society's productivity is unrelated to the wealth of the workers ? They will still work in the factories, they will just not be able to drive there or watch plasma TVs when they get home.

What factories? The ones that have been offshored to China or Mexico or the Caribbean or the CAFTA states, or to Taiwan or perhaps the garment workers jobs that are now in Pakistan and Bangladesh or the shoe factories in Vietnam or the steel mills that are now in Korea, perhaps the few American ones that have been so automated that there are few if any real employees.

The USA still makes some VERY good shoes !

I have been surprised that they are not exported more. Cole Haan and Johnston & Murphy are better shoes than Bally (having worn all three).

Best Hopes for Expanding Residual American Production,


I don't know exactly how the price of oil will play out, but I can make a pretty safe bet that ordinary people like myself will eventually be priced out of it (and all products derived from it), and probably within the next 10-15 years -- 20 at the most. That's all I really need to know to make my own plans.

IMHO it terms of being priced out, it is almost all about how many miles per year you need to drive a car-home heating is going to be the next big shoe to drop.

For me, home heating (and H2O heating, and cooking) means propane, and that has me more worried than gasoline. We use less than 200 gal of gasoline/year, and I walk to work, and could start walking for a lot of in-town errands, so we're not that vulnerable to gasoline price increases. We use about 3-4 times that much propane though, and that's after setting the programmable thermostat to a max of 66F all winter, and 60F when we are away weekdays and at night. I'm planning on using the wood stove a lot more in the future, and I'm trying to get some more energy efficiency investments made as quickly as I can. I hope I can save up enough money to get solar H2O heating and solar space heating panels installed on a fast track. I also need to get a solar oven ASAP. I hope that will be enough, though we might have to do even more in the future.

Before you get too far, you might consider working on the insulation in the structure. It's not easy to retrofit an older house, but doing so will cut the overall cost of the solar installation as a smaller system would then be needed. Also, you wouldn't need to cut as much firewood for those cloudy days. Not knowing how far you've progressed, you might think of replacing your windows with smaller ones to the north and use low-e double or triple glazed windows where possible.

Adding insulation to exterior walls is tough to do but possible. Using 2 inch thick Styrofoam sheets adds R-10 to an existing wall, but the placement on the inside of a wall would mean removing the drywall or whatever covering you now have. One must be very careful adding insulation, as moisture problems can occur later due to poor water vapor control. Adding insulation to the attic space is a great idea too, with a total of 12 to 18 inches of fiberglass (R-38 to R-57) not unreasonable in your cool climate.

Best of luck on your efforts!

E. Swanson

Yeah, I've got a whole long list of building envelope projects, everything you've thought of and a lot more. Even stuff few would think of, like fabricating inserts of 2X4s wrapped in 4mil plastic for the screen porch to turn it into a more-or-less airlocked entry vestibule in the winter time. Overall, the house isn't too bad by current standards, but I need to step it up to a much higher level. The exterior wall insulation will get an upgrade when I replace siding, which is one of the more expensive projects toward the end of the list.

The exterior wall insulation will get an upgrade when I replace siding, which is one of the more expensive projects toward the end of the list.

Insulation from the exterior is a whole lot more work than from the interior (depending on when the house was built). On older homes you have the ship lap boards above which the tar paper and then siding gest fastened. On newer homes you have plywood sheathing, and in many places that sheating serves structural purposes (sheer walls) with very specific nailing requirements.

There are some slow-rise foam insulation that you spray into wall cavities and expand to fill the space that might work out for you - you would cut a hole at the top and fill, then patch the drywall. Not sure what it does as far as moisture control, though. I do know that sprayed insulation on the underside of roof sheathing is legit (e.g. cathedral type ceilings), and elimnates the need for venting that you have for other types of insulation.

Also, if you go with foam insulation, polyisocyanurate has the highest R values that I've found, much much better than polystyrene and fiberglass batt.

polyisocyanurate has the highest R values that I've found,

But Polyureathane does not soak up water. And water is not a good thing for insulation.

But Polyureathane does not soak up water. And water is not a good thing for insulation.

I'm afraid I don't understand what you were getting at, sorry. Can you clarify?


I also need to get a solar oven ASAP

Might I suggest picking up a non-functioning large rear projector tv for next to nothing and extracting the Fresnel lens for cooking.

Might I suggest picking up a non-functioning large rear projector tv for next to nothing and extracting the Fresnel lens for cooking.

I'll suggest that one goes to http://solarcooking.wikia.com/wiki/Main_Page and get actual designs.

You are probably right that it won't go up forever. However, when you consider how much the richest 20% or 5% or 1% are willing and able to pay for it if need be, then you have to realize that it still has room to go up quite a lot.

Demand destruction in the poorer members of society would seem to me likely to rapidly decrease the wealth of the richer.
For example, you might be well off and have a lot of shares in a motor company and apartments that you rent out.
If poorer people can't buy gas your shares tank along with motor sales, and they can't afford the rent in your apartments.
If you are leveraged at all then you are rapidly in the situation where your commitments are way above your income.

Those 1% or 20% or whatever do not have financial clout in some sort of isolation from the rest of society, and their ability to finance consumption might erode even faster than for others if they are highly leveraged.

Globalization is set up to mitigate the effects you describe-e.g. Chinese retail sales are up 23% YOY with $129 oil-there is a savings rate of 50%. Conclusion: 150 oil is dirt cheap-but probably not for USA suburbanites.

And the money in China comes largely from sales to it's export markets, the US for instance.....

I remember the last stat was 19% of Chinese exports to USA-China is perfectly matching the rise of the USA-first export-driven, then internal demand driven. IMO because this is a USA site, the economic importance of the USA globally is dramatically overstated.

IMO because this is a USA site, the economic importance of the USA globally is dramatically overstated.

Man, is that ever right!

Yeah, we 5% of the world consume 25% of its oil. No economic importance here.

Like you say, China is just a rice bowl economy totally dependent on the kindness of its big brother.

The key to getting rid of that last 19% of exports to the US is finding other countries that are getting fed up with the US dollar scam - they have to keep shipping their earned $ to the US to prop it up and lower the value of their own currencies.

What if China, the rest of the Shanghai Cooperation Organization, Saudi Arabia, the Gulf States, and Iran just suddenly came out with a comprehensive settlement? They really don't need the US, except for the Arab monarchs' need for the Pentagon to protect them from genuine Arabs.

However, the value of the weapons we sell to the Saudis must surely be questioned in light of their failure to control anything in Iraq. The day a US fleet takes on Iran's Russian and Chinese-designed anti-ship missiles and suffers the USN's worst losses since Pearl Harbor, there will be a revolution in our understanding of what constitutes defense.

In an impoverished future, infantry will again rule, and the state that can export the most infantry of reasonable quality will have the most influence over shaky governments. If China has to create all-Moslem regiments for the purpose of stationing them in the oil fields of a Moslem ally, it will do so. Hessians for oil. It makes more sense than the current global system.


"Importance" isn't the issue. Overstating its importance is. An indicator that proves this is the escalating price of diesel; overall global consumption has pushed its USA price up, not the ohter-way-round. Another real good question to ask is: If USA consumes so much oil, then why do its auto manufacturers lose so much money?

overall global consumption has pushed its USA price up, not the ohter-way-round.

Isn't this a bit of a false distinction? US consumption is a part of global consumption, US price is based on global price.

While I tend to come down on the importance side, I think it is more to the point to stop thinking about national economies. They are really just false divisions upon which to build statistics. Nations matter little in contemporary global capitalism. The state apparatuses are merely tools that moneyed interests use to advance their own cause.

While it is true that North American consumption is a big part of global consumption. The real importance of the US in the global economy is the financial institutions and markets that are located in NY, DC and Delaware.

Hi shaman--I was specifically referring to diesel, as you'll see when you re-read the sentence. And while I agree with you about the managerial characteristics of corporate globalization, it is still held hostage by nation-states as it's fueled by their petroleum.

Hi Karlof1 - diesel, gas, oil, corn, wheat, rice, widgets, whatever. The global market is where it's at. There are of course regional variations, and (economic) distance from a significant capital center is important.

The role of nation states in petroleum prices is an excellent example of what I was referring to with regard to the moneyed classes. Take for example a basic middle eastern emirate or kingdom. Leaving aside whether there is truly a nation there to have formed a state. There is a state apparatus. That apparatus is controlled by a small number of very wealthy people. This group of people use the state apparatus and all the aspects of that institution (from internal tax collection to external sovereignty under international law) to advance their own interests. That they outwit or not the moneyed groups who control other state apparatuses is irrelevant to the working of the overall system.

Contemporary global capitalism is not about the free market, it is about the size, inclusiveness and totalization of the market. The "free" thing is just sham marketing ploy to keep those outside the controlling moneyed groups happy.

Whereas the EU is 7% of the world population and consumes 18% of the worlds oil.

I had been arguing that oil would not, at any rate as long as it is not a purely luxury and specialist commodity, reach west texas's projection of $800 dollars in real terms, as it would be simply unaffordable however much people might want it, ...

This is an interesting argument. Let me argue the other side of it: Does it matter that $800 is unaffordable for the majority? $50 or even $30 was unaffordable for the majority in the third world. It was only the middle classes (a minority in the world) that could ever afford it. I suggest the middle classes will shrink everywhere. The costs of getting the oil will go up, up, up and therefore so will the price, no matter who it prices out. Because there is no limit to the cost, there can be no limit to the price.

That being said, at some point the whole thing does come crashing down: the societal infrastructure for getting the oil out of the ground breaks down, and the remaining oil stays in the ground.

I get into it with people who speak about "the bottom". What bottom? Why is there a bottom? I think there is a bottom only in the above sense, i.e. when we collapse into having to confront sustainability and restructuring our whole relationship to the planet.

Every $10 increase in the price of a barrel of oil = ~$76 billion less money for the economy (365days x 21mb/day x $10/barrel = $76 billion)

And where does that $76 billion go?

Some returns to the US in the form of asset and equity purchases (why the stock market hasn't tanked yet). Plus the US sells to the oil exporters: military hardware, transportation equipment, construction equipment, coal, grain, IT wares, etc. So, some of this comes back to the US but what percentage I don't know. Main problem is the US assets of property, companies, metal resources, infrastructure, etc. being purchased by foreign entities. At some point the US may be like a third world country with less than 50% of the country's assets domestically owned.

I believe that Chavez has shown how such a problem can be remedied?
Foreign owned assets are "Nationalized". Then they can be resold to domestic owners?
And look at how much money the Government can make doing something like that!

The point I have been trying to make, and I am thinking myopically for now, about the US economy and position in the world, is that even the current price has the catastrophic effect of exporting a huge amount of national wealth to the oil exporting countries. We know from the experience of the Europeans than $8-$10 gasoline won't freeze up a modern economy. The difference is that over half of the price the Europeans pay is tax, which is retained by their respective economies. I think it is this unsustainability of the import/export that will hit harder and sooner, than pricing out of individuals. The underdeveloped world OTOH, never became so dependent on cheap oil. If oil had always been expensive, the US and Europe still would have developed, probably a slower pace, and with certain key differences in infrastructure buildout however.

As entertaining and poignant as Pickens is,the comments by Hirsch are more significant. Pickens profits handsomely from high oil prices (as does Simmons). Hirsch, however, does not have such obvious biases and it is therefore harder for skeptics to dismiss him.


Two Pickens equals One Simmons and two Simmons equals a full Kunstler (or a Half Savinar)

After that it no longer matters anyway.

Them's very Slim Pickens. T.Boone is worth much more than that!

I think I've got a Yergin's, Picken's, Kroner comprehension problem.

I don't know if anyone has mentioned this but Yergin has recently been selling a significant amount of his IHS (CERA's parent company) stock. Per Bloomberg, he has sold more than 53,000 shares in the last 30-45 days or about one half of the stated 113,000 shares he held at 3/31. Lots of other recent insider sales as well. Maybe their past predictions are having an effect on business after all.

Hello BiggerPicture,

Thxs for this info on Yergin bailing out--I think that pretty much puts to bed the idea of a future cornucopian heaven of a George Jetson future.

Look for Yergin to imitate Richard Rainwater's eco-tech survival farm next. Now we just need a highly prized papparazzi-snapped photo of Yergin buying a wheelbarrow, I-NPK, gardening tools, and seeds at his local Home Depot.

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

Now we just need a highly prized papparazzi-snapped photo of Yergin buying a wheelbarrow, I-NPK, gardening tools, and seeds at his local Home Depot.

Even better would be if the I-NPK was organic cow manure, some blood and bone meal, and maybe some Espoma products. Now that would be a statement.


From JeffVail's post yesterday:

" mkcmkc on May 19, 2008 - 1:49pm | Permalink | Subthread | Comments top

You're assuming that the goal of the market is to keep buyers supplied. This is incorrect--the goal is to make money. If sellers can make more money by selling their oil later as opposed to right now, they will do so, no matter how dire the present shortage.

This is one reason why unregulated markets should never be used for things like emergency medical care.

* Q: What's the market price for a tracheotomy when you cannot breathe?
* A: All of the money you have and all you will ever make {Pink Floyd, eh?-8D}(and probably all that of all those that care about you)."

I'll go one better. The goal of the market is to facilitate
survival. Money is nothing but debt for energy stored.

You can't create energy with money.

There is "no profit" in storing energy. Bring it to the market now.

Capitalism is simply the most efficient way of deciding who lives and who dies.

This is why America needs to spread Capitalism,aka Democracy around the world as fast as possible.

Souperman2 Are you serious?

"Capitalism, aka Democracy".

Come on now. One is an economic system and the other a political system. You can have Capitalism without Democracy (Nazi Germany, China) and Democracy without Capitalism (Venezuela, arguable about European socialist economies).

My point is (stating the obvious here) US efforts to spread democracy is more about making the world safe for capitalism which is an efficient way of funneling the resources/money to the haves from the have nots.

Sorry if I was too cryptic.

Got It!

I think Bush now says he is trying to spread "freedom". For conservatives, that means all of society's assets are owned and controlled by them, for their benefit.

Thats silly. You cant funnel money from the have not by definition. They haven't got it.

You are correct, so they take their god given resources including WATER instead.

You can funnel resources from third world countries to first world countries at rates favorable to the first world country and unfavorable to the third world country. Lo and behold, that's exactly what we've done, isn't it?

Then why did conservative former Federal Reserve chairman Paul Volcker recently say that "America can no longer make a living off the savings of the world's poor?"

Souperman2 - Everything was better before capitalism. The Kings took care of all of their peasant subjects very well. I do not know why the world ever changed. From what I have read, the world's standard of living was much better back then. Look at China, they held out against capitalism for centuries and then they changed 20 years ago and now they have nothing. Same with Russia - lived thru the luxuries of Communism for decades and then threw it all away when they had the minor inconvenience of no food or consumer products in their stores. Yet, they succumbed to capitalism and now no one in Russia has anything, much less than they had 20 years ago. If only souperman2 would have had a chance to set them straight, but they did not have the internet back then. But, have your economic wisdom translatted into Chinese and Russian and I am sure that they will beg you to come and rule their countries. You can probably pick up Japan and South Korea also, plus Chile and Brazil - why you could rule the world if only they would listen to your wonderful insights.

Jbunt - I understand that you have been well indoctrinated into the Black or White world of TPTB but I live in a world of possiblities, a world with more tools than just a hammer or a bigger hammer if you will.

I feel sorry for you in this upcomming crisis.


Actually, capitalism is just another word for mercantilism, which itself is a way to describe the relationship between a monarchy and its supporting institutions and is an adaptation of manorialism and its liege. In competition with the manorial estates were what became known as market and cathedral towns, both of which were formed on socilaist principals--the townsfolk financed the building, maintenence and advertising of their market or cathedral to attract revenue. These latter became centers of freedom as they were independent of the feudal relationships that bound manor holders. It should be an easy guess for anyone as to which form of organization was dominant in England or France.

Other forms of organization existed as well. For example, in Russia and much of Eastern Europe, the village was organized anound the Soviet (or some other descriptive word) that collectivised ownership and decision making and allocated resources to the village's populace. The Bolschevicks attempted to co-opt and industrialize this concept and failed miserably, as jbunt relishes in pointing out but doesn't say/ask why. The why is because management was directed in a top-down, corporatist manner and avoided input from the collective's members, which is the exact opposite of the bottom-up management of the Soviet or idealist Jeffersonian Yeomanry. Indeed, in the Greek system, only those eligible and willing to bear arms were allowed to vote. Imagine how different things would be if that were the case since 1450 in the "West." First and foremost, there would never have been a Union producing a UK nor a Castillian Monarchy for it to become antagonistic.

History is interesting regarding Cause and Effect; often, the result is dysfunctional in the longrun. Imagine the result if Spain's Armada beat Elizabeth's Drake; what if the German government hadn't sent Lenin to Russia; if the Trinity Test had failed; if the US had also allowed for the direct election of the President when it did so for Senators? The list of What Ifs? is long and important and is ignored for a reason as jbunt shows so well.

You're assuming that the goal of the market is to keep buyers supplied. This is incorrect--the goal is to make money.

The goal of the market is to match buyers and sellers, anything else which happens as a result of this matching process is not the 'goal' of the market, it is a result of the goals of the market participents. Blaming the market for these outcomes is like blaming your piggy bank for not having any money in it.

Piggy not give enough money! Make Hulk mad! Hulk smash!

Hulk is a pretty good representation of the average American ego type.

Please. I saw Hunt crushed in the silver market.

Who decides when to raise margins?

Who decides when only sell orders will be accepted.

Tulip bulb mania? South Seas and John Law?

It's socialism for the rich.

Free markets for the poor.

"The scheme worked beautifully at first, with some £10 million of government debt redeemed for South Sea paper that paid 6% per year in interest and rose nearly 40% in price by the end of 1713 alone.

Come 1719, however, the Company over-reached itself, offering to swap half of the government's outstanding debts for a new issue of stock worth £31.5 million.

"Tiz amazing," said an anonymous broadside hawked around the coffee-houses of Exchange Alley, "that a company at first erected upon pretence of trade should take so little care to begin, fix or improve any Trade, and that when at last they had got into their possession a great deal of ready money, they should employ their genius in stock-jobbing, or so to speak plain, in gaming away their own Treasure, and encouraging others to do the same."


Please. I saw Hunt crushed in the silver market.

The Hunt brothers tried to corner the market in silver and failed. No one is trying to corner the oil market. There is simply no comparison to be made here so why do you keep bringing it up? And would you also stop comparing the oil market with the South Seas or Tulip Bulb bubbles. The fact that you continue to do so just shows that you know absolutely about the commodities market.

Who decides when to raise margins?

The exchange board of directors. The NIMEX board of directors in the case of oil.

Who decides when only sell orders will be accepted.

Mac, now you have proven that you know absolutely nothing about the commodities market. No one can make such a decision because it is an impossibility. There can be no sell order without a corresponding buy order. A buy is always matched with a sell. That is the only way to either open a contract or close a contract.

Oil prices are going higher because demand is going up while the available supply of oil exports are going down. That means that this is not a bubble! It is quite possible that oil prices will fall but only because they get so high they cause a severe recession. Prices driven down by a severe recession is not the same as a bubble bursting.

Ron Patterson

Excuse me?
Who decides when only sell orders will be accepted.

"No one can make such a decision because it is an impossibility."

H.L. Hunt's Boys and the Circle K Cowboys
Oil was selling at over $1.00/bbl and fell to $.15/bbl after the field was .... They would only accept liquidation orders. Silver dropped $10/oz and stayed ...
www.silverbearcafe.com/private/circlek.html - 32k

"There can be no sell order without a corresponding buy order."

You and everyone else are about to find out what counter party risk is, or is not.

You can go to CFO Mag and counterparty risk on CDO's
for details.

Again Mac, you haven't a clue as to what the hell you are talking about and try to mix apples and oranges to try to make your case.

Oil was selling at over $1.00/bbl and fell to $.15/bbl after the field was .

That was during the great depression and had nothing to do with the futures market. That was the spot price and it was based purely on the fundamentals not a speculative bubble!

They would only accept liquidation orders.

First, they are talking about silver, not oil, closing trading in response to the Hunts attempt to corner the silver market.

A liquidation order simply means the contract must be closed. That happens to all commodities contracts at the expiration date. And it involves a buyer and a seller! There can be no such thing as a sell without a corresponding buy. When a holder of a long contract sells to close his contract, a corresponding short must buy to close his end of that contract. All liquidation of contracts involves a buy order and a sell order.

Again, there can be no sell order without a corresponding buy order. Mac, really! That is not that hard to understand.

Mac, I don't mean to be rude but I get so damn tired of you trying to compare oil prices to the Tulip Mania, the South Seas Bubble or the Hunt's attempt to corner the silver market. There is absolutely no comparison so please stop trying to make a connection

Ron Patterson

To echo Ron here, there's no evidence of naked shorting occurring in the Commodities Markets, whereas in the US financial markets there's billions of dollars in naked short transactions happening daily.

Citing requests and warnings by the Commodity Futures Trading Commission (CFTC) and the National Futures Association (NFA), Sen. Tom Harkin, Senate Agriculture Committee chairman — along with North Dakota Sen. Kent Conrad — introduced an amendment that would expand CFTC jurisdiction over forex contracts. Without proper oversight, said Harkin, such contracts are low-hanging fruit for the criminally inclined.

“In 2004, the 7th Circuit Court made a decision in a case called CFTC vs. Zelener. It adopted a very narrow definition of the term ‘transactions for future delivery.’ What it held is that a three-day contract offered to retail customers for foreign currency that, on its face promised delivery, was not a futures contract and was therefore outside the CFTC’s jurisdiction. This was even though the contracts operated, in practice, as futures contracts.”

The problem with the court’s decision is that “there’s nothing that limits these contracts just to foreign exchange. No court has said ‘we think rolling spot contracts aren’t futures contracts only if they’re for foreign currency.’ They never said that.”

The potential gap in consumer protection has been long known. Harkin pointed to 2005 testimony from NFA officials — “on the front lines of protecting investors and consumers” — warning about the lack of forex oversight.

Adequate oversight of foreign exchange contracts?


"They would only accept liquidation orders."

CFO mag:

Caveat Counterparty
When banks cannot trust each other.

Economist Staff
The Economist

March 24, 2008

But, as often in finance, an instrument designed for insurance became a tool for speculators. In some cases, the amount of outstanding insurance via CDSs is far greater than the underlying value of the bonds. That can be overcome through cash settlements in the event of default. But the auction price of the cash settlement may not represent the eventual recovery rate after the company has been wound up. So the CDS is far from a perfect hedge.


DOUG KRIZNER: British oil giant BP is in the hot seat again. The company says it could face charges of price fixing. This time in unleaded market for gasoline. From London, Stephan Beard reports.
STEPHEN BEARD: BP has already been accused of trying to corner the propane market as well as massage crude oil prices.

Now the company says it could be facing legal action on yet another front: A U.S. futures regulator has alleged that BP manipulated the price of unleaded gasoline.

There is absolutely no comparison so please stop trying to make a connection."

You think the Fed's gonna be able to fix our collapsing economy?


Do you realize that your talkin' head buds on MSM have been wrong since at least 2001? On just about everything?

I hear this oil price "bubble" argument every day. I've resorted to telling people, "Talk to me in a year. If oil is $60 (and there's not a global depression occurring) then I will concede that these high prices were a bubble. If oil is at $200 next year, will you concede that supply is issue, not speculation?"

If you continue to see inventory builds at these prices, eventually it will be like the day someone wrote that WTI Cushing facilities were full, the only way to buy more oil was to accept delivery. Most people do not have oil tanks large enough to buy that much oil. For the time being oil inventories are close to normal and there are many ways to try to reduce consumption and switch to other energy sources.

Some underdeveloped countries might be giving up oil imports at this point, it is hard to tell as what is most easily available are the United States inventories and imports. Supposidely OPEC was predicting they might raise spare capacity to five million barrels a day. Yesterday I read they did bit plan to increase oil exports before their September meeting.

I did not expect oil prices to go up this fast this early.

Have been seeing my net worth rising daily with the appreciation of oil & gas stock.

The point is, if current crude oil prices are a bubble created by speculation, then they are unsustainable and at some point, the bubble will burst. Will my point be incorrect if in May of 2009, oil trades at $175, $185 or $195 instead of $200?

Anyways, maybe Cody has it right...oil will be $20 a barrel in 2010. Ahh, I can't wait until gas is less than a dollar again. That F-450 I've been eying is looking better and better already.

anything else which happens as a result of this matching process is not the 'goal' of the market, it is a result of the goals of the market participents

Yes, I was not speaking precisely yesterday. Markets, as non-living processes have no goals--I was really talking about the goals of the (living) participants.

But the point is the same. No one in the oil market cares one whit (at least, not in their role as buyers and sellers) about whether or not anyone is well-supplied with oil, or even whether millions of bystanders die as a result of the market's activities. Markets are remorseless and profoundly amoral and expecting anything else will just lead to grief.

Thanks Ron for posting.

Does this mean we can expect WTI to go above US$130/b to day?

Strange, everyone is talking about the Pickens video. I thought the Hirsch video was by far the most significant.

Ron Patterson

I agree here is the link to the video.

Thanks for the link, OJ. Enjoyed Mr. Hirsch's trite dismissal of former Dallas fed reserve's Robert McTeer's hulk-like proclamation "drill more, pay less".

when HULK destroys humvees in the new movie trailer, is it symbolic of US demand destruction?

For every sober academic like Hirsch there are two wide-eyed optimists proclaiming "we have plenty of options going into the future".

People that I warned about the perils of peak oil years ago continue to believe that I am Chicken Little. Until recently I almost started to believe them!

People that I warned about the perils of peak oil years ago continue to believe that I am Chicken Little. Until recently I almost started to believe them!

Pure gold.

I trust there is a kernal of truth to your jest. My experience is not disimilar. After shouting at people for years to just "Look at the evidence!", I finally did, and realized that with everyone disagreeing with me, I could not refute the proposition that I was crazy...

When you genuinely are following the oil markets simply because you are curious to find out whether you are crazy or not, well, it can drive you crazy...

Yes, it reminds me of a statement I heard former Secretary of State under Bush I, James A. Baker, say on TV the other day. It went something like this, I am writing from memory.

People kept asking me why we did not go all the way to Baghdad. No one asks me that question anymore!

I had to smile.... smugly.

Ron Patterson

For every sober academic like Hirsch there are two wide-eyed optimists proclaiming "we have plenty of options going into the future".

My Pollyanna to Cassandra ratio is more like 6 to 1 but, I think the Cassandra's are gaining ground each day.

Edit:fixed missing blockquote tag.


as most of the time you are absolutely right!

My point was merely that the attention MSM now is giving the subject of "Peak Oil", it could affect prices. It is interesting to observe how short term psychological effects draw the attention away from the long term and more dire effects.


not sure how to post a screen save, but the second link on the yahoo finance page right now is to the CNBC video with Hirsch shot this morning. the link says "Peak Oil worries take center stage." it's getting really close now.

Ron: yes, if Hirsch would get out more it'd be great, he's really putting it out there. He went right to "rationing" without even being prodded.

and gee, I'd like to have my investments down by that time. Interestingly, I asked my broker about the price on DEC2013 crude call options, and he sent a guy down to the nymex pits to ask the actual price for a 125 option. They gave it, I said buy, and he had to get back to me and say that nobody was willing to sell at their "ask" price. Is that unusual? I thought an "ask" price was, well, the asking price. Apparently not. At least today, there was an "ask"price that, when met, did not result in a sale.

That happened to me in rice a few years ago.

I sat there realizing that the price quote on the screen
was mine.

Long peak oil article in the Financial Times today as well:

So are the peak oilists right? A series of recent events certainly appears to lend credence to those who argue that the world's ageing oilfields are being sucked dry amid China's and India's determination to lift themselves out of poverty and the west's reluctance to give up the luxuries of modern oil-dependent life.

The fact that Russia's oil production declined almost half a percentage point in April, the first drop in a decade, was shocking enough news from the world's second biggest oil producer, whose output was growing at a rate of 12 per cent just five years ago. But Russian oil executives have gone a step further: Leonid Fedun, vice-president of Lukoil, told the Financial Times the country's production may have already reached its peak.

Just days later Saudi Arabia, the world's biggest oil producer and by far the largest exporter, confirmed it had put on hold plans to increase the kingdom's production capacity. Ali Naimi, Saudi energy minister, said the demand forecasts he was reading did not warrant an expansion past the 12.5m b/d capacity Saudi Arabia's fields will reach next year, following a laborious investment of more than $20bn (£10.3bn, €12.9bn). King Abdullah, the country's ruler, put it more bluntly: "I keep no secret from you that, when there were some new finds, I told them, 'No, leave it in the ground, with grace from God, our children need it'.'

There is quite a lot more, including a mention of peak oil 'websites ranging from those with an academic air to more alarmist ones that come complete with advertisements for freeze-dried food and survival guides'. Presumably, the Oil Drum is one which has an 'academic air'!

King Abdullah, the country's ruler, put it more bluntly: "I keep no secret from you that, when there were some new finds, I told them, 'No, leave it in the ground, with grace from God, our children need it'.'

Why would we want to give them "democracy"? That sounds far, far wiser than any statement that any democratically-elected leader has ever made.

Because when says our children he means that literally.


Is he joking about the Natural Gas replacement?

The best a NG switchover of 40% capacity could do is a band aid...the capacity isn't there as well...seems he had Peak OIL tunnel vision...Natural Gas is not is much of a better situation.

Anywho...still a good interview.

How much natural gas there is available is much more debatable than oil, and his projections don't seem to call for an increase, just moving it to different use as wind and solar take up the slack.
he seems to know it is a band-aid, but that can be useful if you cut yourself.

I agree that he is thinking short term...not just for that fact that is all it could do...but he is thinking national security. It isn't the best approach necessarily.

But then again, electric cars won't do it either...so what the hell, it might ease the pain...a bit...maybe.

Conservation will have to be a HUGE part of his plan...forced or otherwise.

66 Million barrels(c+c) a day by 2012 is frightening.

You don't get to the long term without taking care of the short term - and his plan would greatly increase non-oil energy sources.

Russia's oil exports down 3.3% to 448 mln bbls in Jan-March
RIA Novosti - Moscow,Russia
MOSCOW, May 19 (RIA Novosti) - Russia's crude exports declined 3.3% year-on-year in the first quarter to 61.1 million metric tons (448 million barrels), ...

Regarding the decline in Russian oil exports, our (Khebab/Brown) middle case shows them approaching zero net oil exports around 2025. The initial overall projected 10 year net export decline rate is shown. Note that the annual decline rate should accelerate with time.

A quantitative assessment of future net oil exports by the top five net oil exporters 
(January, 2008)

Another one for you Westexas; Colombia auto sales up 10% in April. It would seem that high oil prices may actually increase the ELM factor and accelerate its effects.

This supports the "accelerating net exports decline". But, globally, how can you know this to be the case? Does the data you have support this or is it more gutteral? Not that I don't believe this theory ... but I would like to not believe it. My sense is that you are probably correct and the ELM does work. But how many producers are at this stage of declining exports?

If you have not had a chance, you might want to review our linked article on the top five net oil exporters. We chose to model the top five, accounting for about half of world net oil exports in 2005, because it was easier than modeling all of the key net oil exporters--and the top five will determine the fate of the world industrial economy. Our middle case is that the top five collectively will approach zero net oil exports around 2031. There are some smaller net oil exporters showing some increasing oil exports, e.g., Angola, but for every Angola, we have a Mexico, which will probably approach zero net oil exports by 2014, in six years.

My guess is that total world net oil exports in 2031 will be down by at least 75% or so from the 2005 peak.

total world net oil exports in 2031 will be down by at least 75% or so from the 2005 peak

One assumption that Americans make is that the USA will, at a minimum, get their pro rata share of world oil exports.

Given our balance of payments deficit and ill will, I cannot see the USA successfully competing against the rest of the oil importing world.

We may have to get by with oil imports from Canada, perhaps a trickle from Trinidad and domestic production. And we may not get 100% of Canadian oil exports.

Best Hopes for Non-Oil Transportation,


Hello Alan,

Good points! My guess is that much of this remaining trickle of FF-energy will be directed to mining, making, and moving I-NPK--people will gladly sit in the dark if it means they can eat! Sadly--we eventually will have to mine these spots by pick and shovel again. I wonder how many millions will be forced by Halliburton/Blackwater armed guards?

Recall my posting of O-NPK being so valuable that I expect people to steal/rake up the autumn leaves overnight from their neighbors to add to their own compost pit. When the Overshoot decline kicks in--how many 'Murkans will have their bicycles and wheelbarrows ready to go? Recall my postings of 60-75% of Americans being devoted to agriculture and relocalized permaculture so that some food surpluses allows some measure of job specialization.

Have you hugged your bag of NPK today?

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

I expect people to steal/rake up the autumn leaves overnight from their neighbors to add to their own compost pit.

Locally people rake their leaves into the street in the fall for the city to pick up. On occasion I have taken advantage of this practice to add mulch to my berry patch ;-)

In Eugene, OR, the city collects leaves and other material to add to the community gardens' compost project. Any city where the waste disposal company collects "green" waste could run a similar program, but unfortunately most cities do not have community gardens--not even at the public schools.

People also implicitly assume that whatever is available will still be distributed to the domestic economy in the same percentages as at present, but that is also a false assumption. The FedGov, and especially the military, will be assured of getting what they need first. Then will come first responders, other essential state and local government functions, hospitals, agriculture, freight transport, and critical industries. Everything else, including ordinary people, will get whatever - if anything - is left. Add to that your correct observation that the USA's competitive position will weaken and we'll be getting smaller slices of the world export pie. This is why I don't think I've got another 22-23 years of access to petroleum products; ten years, or maybe fifteen years tops, that's it. Plan accordingly.

The people in the oil exporting countries like to eat and predominately they have to import large amounts of food for their people.
The USA is still the biggest and best at producing and exporting food products of the large oil importing nations.
I think oil for food trading in the next 10-15 years will be an interesting thing to watch and see how it plays out?
Perhaps we will start basing food export prices on the energy content tied to the price of oil based upon energy content.
Oil at $xyz per 100,000 btu
Wheat at $xyz per 100,000 btu
Corn at $xyz per 100,000 btu
Soybeans at $xyz per 100,000 btu

Note I was too lazy to calculate the current $ per 100,000 btu for oil so just substituted $xyz.
I think you will find that the current prices of food exports in $/100,000 btu is way lower than the value of oil - And I think it is crazy to import expensive oil in $/100,000 btu and use it to produce food and export the food for cheap $/100,000 btu?

The point is well taken. As our individual and national debts mount and as we produce less of our own manufactured goods and as our fisheries are degraded and as farming our last income producer starts to suffer from equipment and infrastructure decline (hard to get crops to market when the interstate is crumbling as a result of no money to repair them and not enough drivers to make them work as tll roads) and competition from Brazil.

We shall have little if any hard assets with which to buy oil. We are going to be down and out, as our economy slows taxes will rise to recoup revenue losses, government spending will be allocated almost entirely to debt payments and entitlements and the military, discretionary spending and bail outs will cease, our mega corps will have no reason to stay in the US and pay high taxes for no real benefit having already have placed their workforces overseas and with a maxed out American consumer unable to purchase their goods they will have no reason to stay in America they will move corporate offices to the ME which will be the new tax havens.

The US will be hard pressed to find any one to lend it money with which to buy oil.

The US will go to coal gasification, drill in ANWAR and off the coast of Florida, even in downtown Orlando if that is what it takes to find and produce every last drop of oil, at the expense of the environment and the rights of the coastal states. As we will be a debtor nation with the desire to still be a first world nation we will drill as much as the equipment and technology allows. (Yerginites will still be saying drill - drill for $35.00 a barrel oil)

The Canadians will also be hard pressed to sell us any oil that is not at the market price, which will be astronomical. Canada although rich in oil will have problems with its economy because as the US declines it will have an impact on Canada, the Canadians will have to cushion that impact by selling their oil to the countries with a hard currency i.e. Rial's or Dirham's not greenbacks. The Canadians will also have to deal with the environmental costs of their extraction methods, and their desire to increase military spending to protect their north from foreign interlopers.

You might want to have a gander at the EIA's Country Energy Profiles, where you can see a country's consumption vs. net imports vs. total production etc. Hours of fun!

I'd like to see the ELM examined more closely; for one thing we should see whether there's a ceiling to demand in some of these countries, or a bottleneck to new car imports, etc.

So far the wheels are still on the cart; for example KSA has increased consumption by about 600 kb/d this decade but still has basically maintained its level of exports.

If I had a time machine I'd go back and build cheap CNG vehicles for these ME countries!

KSA has increased consumption by about 600 kb/d this decade but still has basically maintained its level of exports.

Saudi net oil exports dropped from 9.1 mbpd in 2005 to 8.7 mbpd in 2006 (EIA, Total Liquids). I estimate that they dropped to around 8.1 mbpd in 2007. As we all know, they have shown a recent rebound in production (which I expected would happen), but if they wanted, and more importantly, were able, in 2008 to match their 2005 net oil export level of 9.1 mbpd, I estimate that they would have to boost their 2008 production to about 11.7 mbpd (versus 11.1 mbpd in 2005).

For what it's worth, I think that the decline in oil production from North Ghawar surprised the Saudis, and it has taken some time for them to regroup, drill some developmental wells as fast as possible and bring on some of their shut-in production, which had been shut-in for some very good reasons. I do expect the 2005 annual C+C production rate of 9.6 mbpd to stand as their final annual peak production rate.

Can I ask a basic question about the ELM? How does EROEI factor into it?

In other words, does the fact that it takes more and more oil to extract the oil factor into the ELM? If not, should it?

Sounds like an interesting line of research, if you want to pursue it.

One of the reasons I think things are even worse than they appear is that I don't believe EROI or BOE (Barrels of Oil Equivalant) are properly taken into account. I'm also not that some oil production isn't counted twice, such as the oil used to dilute heavy synthetic oil to make it flow better.

I'd really like to see an EROIBOEELM. I think it would be ugly.

A further weakness with BOE is that it is an energy calculation. It doesn't account for restrictions on how the various types of energy can be used. You can't make all the same things from NG that that you can from oil, for example.

I'd like to see a BUOE: barrels of useful oil equivalent.


Hello WT,

Thxs to you/Khebab for this graph. I thought it was Very Telling that Putin said that Russia needs to grow its own food [see my post in yesterdays DB].

I think he is very Peak Aware, and realizes ELM will flood Russia with money. So he is making early efforts to head off Russia from adopting Nauru-behavior, KSA-behavior, Dubai-behavior, USA-behavior, etc. This is where the 'Party-On' mindset takes hold and they import workers so they act long-term detritovore foolish.

If he can keep Russia focused and humble; 'Cheap is the new chic' and growing their own food: this will serve them far better long-term. Compare with Nauru now, or a future KSA, Dubai, etc. without oil-income to import food.

Is Russia going to be the first to start the sequential building and enlargement of biosolar habitats?

If Putin can suppress the internal oil and natgas consumption: then he can sell exports for far longer for even greater income. I think he knows that if Russia stays humble to its farming roots--they will be much better off in the long run. Will he soon start my suggested idea of building a twenty year supply of I-NPK? Who knows?

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


Kazakhstan bans export of oil products amid soaring fuel costs

Kazakhstan on Monday banned the export of all refined oil products, news agencies reported, as the energy-rich Central Asian nation grapples with soaring fuel costs.

The announcement, made by Prime Minister Karim Masimov at a government meeting, comes just days after opposition parties called on his government to resign amid what they call a worsening economic climate.

Kazakhstan has huge oil and gas resources, but soaring prices for consumer products like diesel and other fuel are having a knock-on effect on the country's agricultural sector.

The increase in the cost of diesel and gasoline have outstripped the rate of inflation in recent months. Inflation already looks set to hit last year's rate of 18 percent.

Industry insiders insist rising fuel costs are caused by foreign demand, but the head of Kazakhstan anti-monoply body said Monday he believed there have been instances of price-fixing for some forms of fuel.

Is nice. I like.

How much were they exporting the first place?

Year Oil - exports Rank Percent Change Date of Information
2005 890,000 13   2003
2006 890,000 16 0.00 % 2003
2007 1,000,000 16 12.36 % 2005 est.

via http://www.indexmundi.com/kazakhstan/oil_exports.html

That's crude oil. They are stopping export of refinery output, I think.

You are correct, nice catch. My first post and I muck it up :(

This EIA data table shows total liquids net oil exports. 2007 data are not yet out.


Since 2003, total liquids consumption has grown at over +5%/year (which would double consumption in 14 years). Note that 2006 net exports were up only slightly, in contrast to the increases in prior years.

He also knows that climate change will work to their advantage as far as food production is concerned. They also have huge fresh water and forest resources. If they play their cards right, they could position themselves very well for the future.

At least they have a leader that is apparently aware that they ARE in the game and DO need to be thinking about how to play their cards. That's more than can be said for the USA.

I have been reading TOD too long. I don't even react to the verbiage in Totoneila's posts. They seem normal to me now.

Hello Treeman,

Glad you understand. It appears Super390 below correctly understands what I am talking about in Putin's future Russia.

Yeah, Are people smarter than yeast if they hug their bag of I-NPK?

Hello Geckolizard,

Thxs for responding. Good question.

Hoarding food won't get a person very far compared to growing food. I-NPK is much better than No-NPK, but obviously, we will eventually be thermodynamically forced back to just O-NPK recycling; Mother Nature's Circle of Life.

He's also got the advantage that the wheat belt will move north from rival Ukraine more fully into his turf as it warms up. The world's endangered wheat belts include Australia (fried), Argentina (frying), and US Great Plains (moving north). Now if something goes wrong with wheat production in western Europe, he's going to control a resource more valuable than oil - but he needs to talk a whole lot of his folks into picking up manual tools to keep exploiting it.

Yup! This from an Australian paper:

Murray-Darling drought may be permanent

There is no end in sight to the drought afflicting the Murray-Darling Basin, the nation's major food bowl, and the big dry could become a permanent feature of eastern Australia, experts warn.

The latest Murray System Drought Update contains nothing but bad news for farmers and communities struggling to cope. Even grimmer news is that it could become worse next year. Meteorologists have warned that another dreaded El Nino weather pattern - which brings dry weather to eastern Australia - could be on the way.

"The prognosis for the future's not good." The basin covers much of eastern Australia, stretching from southern Queensland through NSW and Victoria and into South Australia. For the first time in recorded history, the water level of some inland lakes has plunged below sea levels. South Australia's lower lakes are deteriorating particularly quickly. The drought is so bad in some parts of the basin that it has surpassed the worst climate change predictions for 2055.

"It's come across us a lot more quickly than we anticipated." There could be zero or very low water allocations for irrigators this year. There had been an average 30mm in rain across the basin so far this autumn and it would probably be one of the driest on record. Predictions are for average rainfall for the rest of this year, but that is not enough to turn around the situation.


I saw a programe on rationing just now and thought of you:-)


>>The Standard Rations
I read with great interest the article on this site from the Derby Telegraph Bygones WWII: Cabbage patch army beat the rationing blues during wartime[[1]] Eric Swales memories of that era and how people had to manage on food rations got me thinking just what sort of meals were made then – what recipes were created using only the standard rations?

I found the following details on what the standard rations were. The quantities are per person per week unless otherwise stated:

Food rations
1s 2d (approximately 1 lb 3 oz or 540 g) of meat (offal or sausages weren't rationed)
4 oz (113 g) bacon or ham
3 pints (1.7 l) of milk per week or 1 packet of milk powder per month
2 oz (57 g) butter
2 oz (57 g) margarine
2 oz (57 g) fat or lard
2 oz (57 g) loose tea (teabags were not used widely in the UK)
1 egg per week or 1 packet (makes 12 “eggs”) of egg powder per month
2 oz (57 g) jam
3 oz (85 g) sugar
1 oz (28 g) cheese (vegetarians were allowed a bigger cheese ration, as they gave up their meat ration)
3 oz (85 g) sweets
2 lb (907g) onions (onions were only rationed between 1942-1944)
plus, 16 "points" per month for tinned and dried food.

Non-food rations
67 (later 48) “points” for clothing per year (e.g. 2 points for a pair of knickers, 5 points for a man's shirt, 5 points for a pair of shoes, 7 points for a dress and 26 points for a man's suit). Clothing rationing points could be used for wool, cotton and household textiles. People had extra points for work clothes, such as overalls for factory work. No points were required for second-hand clothing and fur coats, but their prices were fixed. Before rationing lace and frills were popular on knickers but these were soon banned so material could be saved. (Parachute Silk was sought after)
16 oz (454 g) of soap per month (household soap, beauty soap, and soap flakes, but not shaving soap)

How on earth would we manage today?

Woolton Pie
I found the following recipe which was created by Chef of the Savoy hotel and named after Lord Woolton, head of the Ministry of Food.

A tasty dish of vegetables made from the rations of the day:

Woolton Pie
1lb diced potatoes
1lb cauliflower
1lb diced carrots
1lb diced swede
3 spring onions
1 teaspoon vegetable extract
1 tablespoon oatmeal
A little chopped parsley

Cook everything together for 10 mins with just enough water to cover, stirring often to prevent it sticking to the pan. Let the mixture cool. Spoon into a pie dish, sprinkle with chopped parsley. Cover with a crust of potatoes or wholemeal pastry. Bake in a moderate oven until golden brown. Serve hot with gravy.<<

Dig for Victory



And some good ones here.

have fun. I am going to do that Woolton Pie.

That's not too bad, we could manage. The eggs and onions, now that's a problem. We'd be keeping chickens in the backyard in the warm weather and growing lots more onions, lots more onions. Were dried beans and pulses rationed? You inspire me to further work on the year's allotment plot which is already heavy towards potatoes, onions, tubers and cabbage.

We struggled to feed a UK population of ~48 million in the late 1940s, how will we cope with trying to feed >60 million (and growing) in the same way year after year ... for ever, while using flush toilets to dispose of the nutrients so expensively imported?

Sadly, rationing for food (or oil) is just a short term band-aid. BTW, I think that Woolton Pie had to feed a family of four for a week! yum,yum! :-)

Unless I'm missing something obvious, the Russian numbers don't add up (literally). From the article:


Exports are roughly equal to domestic sales/refining, and sum to almost exactly match overall production, so there is no "third" component lurking. Yet total production was down only fractionally (0.2%) while overall domestic sales/refining are up 5.8% and exports down only 3.3%. One of those percentages must be in error.

I had a "WTF moment" and almost lost my keyboard to the coffee, when I read this:

The 0.4 percent gain in so-called core prices was twice as big as anticipated and followed a 0.2 percent increase in March, the Labor Department said today in Washington. A drop in energy costs and unchanged food expenses held the total price measure to a 0.2 percent gain.


So, guys, here is the news: energy prices have been actually dropping in April! I went to gasbuddy.com and made this graph:

That's some beautiful price drop here... obviously enough to keep those inflation numbers under check. But who am I to believe my own eyes...

Diesel has now "dropped" to $4.79 in town.

Diesel is $4.99 in Mill Valley and San Rafael in Marin County where I live.

It seems to me that prices are usually the lowest in either Ukiah or Willits, and rises when you head north or south, although I don't know about Santa Rosa, cuz I never stop there, nor Eureka, cuz I haven't been there in 10 years. Seems the highest is in the City, and down around Menlo Park/Palo Alto.

We've got to be pretty close to the eve of demand destruction.

Demand destruction is not going to happen soon in Menlo Park and Palo Alto. Way too affluent. More likely in the working class exurbs. They go before the suburbs. What a shock for the life boaters.

Yes-people forget that in North America, there are many urban dwellers driving their cars 5000 miles per annum (as opposed to the overall ave quoted of 20000). $150 oil is peanuts, nothing if you drive your car 5000 miles per year.

My goal this year is to use less than 60 gallons of diesel (excluding any hurricane evacs).

Last filled up in January, I am NOT looking forward to my hurricane season fill-up (always keep 60% of a tank full plus a couple of gallons in jugs during hurricane season).

But price alone will not reduce my use.


I bet there's plenty of Demand Destruction in East Palo Alto and its sister regions.

Have you seen EPA recently? Getting all gentrified and Home Depoted. Not many working class enclaves left in the Bay Area.

But who is going to clean their houses and take care of their children if gas is too expensive for the servants to drive to work?

Don't you have live-in servants, are your houses too small:-)

The EIA posted the gas numbers yesterday. The average price for regular gasoline is above $4/gallon in Chicago:

U.S. 3.791
Chicago 4.019

This is bizarre. The federal government puts out patently false information, easily disprovable and that flies in the face of common sense, and the people fall in line like trained goats.

What's it going to take for reality to strike?

OTOH count your blessings-it is done for a few reasons, but one of the important ones is to help sustain the value of the US dollar-it is in your interest if people keep believing this nonsense.

that is the question.

I fear the answer will be "something really bad." Maybe we'll be lucky though.

People put up with it in the Soviet Union for a long time, but apparently they drew the line at actual declines in their standard of living. Then again, they didn't have credit cards to hide their shortfalls.

This was batted around on the financial sites a few days back. From memory (no linky, sorry), energy prices were nominally up 5.6%, but the BLS applied a "seasonal adjustment" and, lo and behold, energy prices DROPPED 2%. This more than made up for a 0.9% in food prices. The core rate was thus actually higher than the headline rate, so they are reporting the headline rate this time around.

Lies, damned lies, and statistics.

The U.S. Government has to continue to sell to foreigners our debt so we can cover budget and trade deficits.

Why get excited because they are massaging the numbers. You want the truth?

"You can't handle the truth" Jack Nicholson

This needs to be researched more because it makes you wonder how real is what you see. I am eager to see, will those downwards seasonal adjustments be logically fallowed by the corresponding upwards adjustments, once the season is off. Are we going to get the same 8.6% adjustment in October, but on the upside? Hmm...

"Ignorance is Strength"

Up is down and down is up.

I just wathced the third installment of Priates of The Caribbean

"Energy" includes more than gasoline. You would have to look at electricity, natural gas, etc. too.

But you knew that

I don't have the time to lookup the prices for those, but NG usually goes up in lockstep with oil, and then electricity goes up in lockstep with NG.

Oil rose about 20$ that month, it's hard to see how electricity and natural gas have deflated or even stayed the same to compensate. It's all a rampant inflation to me and they are claiming it's a deflation. What kind of magic would explain this?

Monetary discipline died with lies.

Home Depot's profits are down 66%. Target's profits down 8%. NexCen Brands facing a severe cash crisis and expressing doubt it can remain in business.

The downturn is weaving its way rapidly through the retail sector. Consumer spending is hitting a wall. The wall in this case comprised of declining home values, rising unemployment and $4 gallon gas.

Another great NY Times article about a guy who makes his living repossessing boats. The recreational boating industry is going to have a sad summer. The only upside of summer tourism in general is going to be the coming waves of Europeans who can vacation in the U.S. for free.

I mentioned awhile ago that it was time to short sell retailers. That advice still holds.

Another great NY Times article about a guy who makes his living repossessing boats. The recreational boating industry is going to have a sad summer.

Brings to mind a '60's joke about the Russian Commissar who came back from a trip to the US and had to spin a description of the US economy that would please his superiors. His report was that the cars driven in the US were so crummy that they had to have boats pushing them down the roads.

Poor, poor Americans. With boats repossessed they won't be able to push their crummy cars down the roads any more:0

From the article

From now on, Mr. Dahmen said, the consumer economy would have to get by without him. “I have no intention of ever buying anything, ever,” he said. “I don’t think I could if I wanted to.”

Sucks for us who have jobs in the consumer economy.

Far From Normal

JH Kunstler in Klusterfuck Nation, this weeks post:


"There's a great wish for American finance to return to business-as-usual -- raking in fantastic fees for innovating new modes of tradable paper, and engineering mergers and buy-outs that generate huge fees plus $100 million kiss-offs for corporate CEOs in the noble struggle to dismantle America's productive capacity"

The parasite class continues to rake the coals of a fast dying economy.

When Bear Sterns were "saved" this was the signal that banks would not be allowed to go broke, so game on again - they could borrow at low rates against the dodgy collateral nobody else would touch.

Now in the true spirit of freedom and screwing everbody else the banks are passing the buck to the central banks as quickly as they can.

"...European Central Bank council member Yves Mersch said the ECB is examining whether the quality of collateral it receives from commercial banks at its money-market operations has worsened..."

I can't imagine how the quality would improve.

Kunstler captures my sentiments perfectly.

I would like to be optimistic, but when I look out over the American landscape, I just don't see anything to give me hope.

An epiphany is needed in America, but I don't see the trigger for that being anything short of disaster. That would be OK, but by then it may be too late.

America must face the harsh realities over oil

The first is that higher energy costs are here to stay. You don't have to buy Goldman Sachs's headline-grabbing forecast this month that crude will reach $200 a barrel.

Iraq could have largest oil reserves in the world

Iraq dramatically increased the official size of its oil reserves yesterday after new data suggested that they could exceed Saudi Arabia’s and be the largest in the world.

In the past 12 months we had 1000 billion barrels in India, 300 billion barrels in Indonesia, 300 billion barrels in Brazil, 400 billion barrels in USA... now we have 350 billion barrels in Iraq. Who is behind this disinformation campaign?

Another tipping point is going to be when the average American starts getting real nervous about talk of USA troops possibly leaving Iraq-we aren't at that point yet, but it is coming. This discussion will stretch political correctness to the limit.

That Americans have not rallied behind troop withdrawal in any meaningful way should tell you something. That something in this case is that most people understand the difference between Vietnam and Iraq.

Wrong conclusion. People understand Iraq is joke. People also don't give enough of a damn, even though they know the truth now, to do anything about it.

It's apathy, not support.

Nice try.


Actually, I think some people have come around to the realization that Iraq has served to restrain Bush and his puppeteers from undertaking riskier and more costly foreign adventures. We are being so pinned down and so drained that we really can't afford to get into a real war with anyone that has the ability to lob any nukes our way.

I think people simply understand, and have known all along, that occupying Iraq is about our strategic interests in Middle Eastern oil reserves. Iraq is one country where we don't have to worry about the "export land model." All we have to do is suppress the standard of living of Iraqis indefinitely while we syphon off the oil.

The only real hitch in the plan has been our inability to stabilize the country just enough so that we can invest in the oil infrastructure.

I'm not sure things are going that badly. Oil imports to the US from Iraq are up 50% from last year according to the EIA, totalling over 700k b/d.

That's $84 million per day to fund al Qaida and pro-Iran Shia. Maybe they share it 50-50.

The active opposition to the Vietnam war had a lot to do with the draft.

Just preempt "American Idol" one week for the national draft lottery* and you'll see the troops headed home.

*I remember watching this in the 60s. Birth dates were pulled to pick who was first in line for the draft.

Pulled number 257 myself.

Pulled number 257 myself.

They pulled 76 for me, which meant cannon fodder.

It was an interesting thing, to have it decided by lottery whether you would be dropped into a war zone to kill and be killed, or have utterly no responsibity. Surreal. I though I was going to die, and that society had done it with no more thinking than a bingo game.

When people wonder "how real" things can get, there's a precedent for you. Drawing lots to see who must choose between fighting a pointless war or going to prison, and freeing up the rest of society for consumption without worries.

Involuntary servitude by drawing straws.

And society still had a great EROEI then.

Did you go?

The Pentagon said yesterday that they're readying a further 25,000 troops to be sent to Iraq in late summer.

"That Americans have not rallied behind troop withdrawal in any meaningful way should tell you something. That something in this case is that most people understand the difference between Vietnam and Iraq."



Who is behind this disinformation campaign?

Why, the economic "hitmen" of course. If you don't know what I'm talking about, go read "confessions of an economic hitman." After reading the article, it seems like their standard modus operandi to me.

Don't forget Canada and Venezuela counting their Syn/heavy as regular oil for a combined total of about a trillion bbls. Countries whose refineries are capable of processing heavy crude will find there's no shortage of oil, and it can be obtained at a discounted price. What we're seeing price-wise is the peaking of light-sweet, as that's what the 7 Sisters set their--and by extension the planet's--refineries to process. Like building Suburbia, that is proving to be a mistake.

I found 100 billion barrels in my back yard last weekend.

As far as you know. :-)

As of now, we have just one lonely article up top. "What the Export Land Model..." (Let Leanan sleep in)

However, we are witness to Mr. Brown's ascension to financial genius/guru (at least his ideas...). Astute followers of Casey Financials, author of the article, will be on the leading edge of an investment boom in all things energy. Not that energy hasn't been 'hot', but now it will be 'desperate hot'.

With Pickens and Hirsch and financial channels and the whole 'financial industry' jumping on board, we are seeing, IMVHO, a Peak Oil breakout. But PO really takes time to digest. And the financial industry is not the whole US, or the whole world, obviously. It also includes all the Baaken shale people and the zero-point energy people and the run-your-car-on-water people.

So as awareness increases, so will a subset of misinformation.

And the investment dollars will flow!! There's money to be made, and money to be lost. Lucky, or smart, investor types, like the Casey/ELM article crowd, will find their way to The Oil Drum.

Investment dollars are not energy, but hopefully there is some correlation between this latest level of awareness gained, and mitigation to some of the issues around Peak Oil.

With Pickens and Hirsch and financial channels and the whole 'financial industry' jumping on board, we are seeing, IMVHO, a Peak Oil breakout.

I disagree. The breakout happened last summer and fall, particularly in October, after you had the paper by Robelius, the Energy Watch Group Report, the IEA report expecting a crunch by 2012, the ASPO conferences, etc. But the real breakout came when al Husseini verified everyone's unhappy thoughts about KSA and ME reserves.

What you are seeing now is the rising of the wave, not the beginning of it. Yet to crest, however, but it may come within the next weeks and/or months.


An new update to Net Oil Exports came out yesterday. Net oil exports were down 135,000 barrels per day in April.

Ron Patterson

Ron: As far as you know, is anybody (Yergin et al) claiming that the 2005 peak in oil exports will eventually be exceeded? If not, then effectively the most important economic aspect of Peak Oil has 100% agreement IMO.

No, Michael Lynch is saying oil will move to $45 a barrel. He does not address exports but clearly believes there will be a boom in production driving prices much lower. Lynch from an article on Energy Bulletin, reproduced on the "Net Oil Exports" link above:

Unless there are serious demand side pressures (which I don’t expect), oil production will probably pass 100 mb/d within 12-15 years. Certainly, given that we’ve produced only 10-15% of conventional oil resources and unconventional resources are larger than that, there seems no reason to consider petroleum to be a scarce resource.....

Instead, we appear to be experiencing a financially-driven oil price bubble, which will eventually burst and leave oil prices much lower than the current $110/barrel. (Prices might not go below $80 this year, but longer term, $45 is more likely the norm.)

Ron Patterson

Ron: Thanks-not surprising that he never specifies where the approx 16 trillion barrels in total might be hidden.

I'd have thought it would have been far greater a drop than that given that OPEC production was down almost 400,000 bpd in April. This from OPEC's April Report for which you posted the link earlier.

A 393k/d drop in OPEC production but only a 135k/d drop in world exports? Maybe we'll see the difference show up in May export figures.

In France, turmoil among fishermen is continuing. They block oil fuel depots not very consistently yet. A major meeting between the government and a professional organisation is due tomorrow.

France is among the top exporters of gasoline to the USA. A blockade of its refineries could definitely help WTI jump over the 130$ limit.

But fishermen are not the only ones in a bad mood.

Here a link to an interview in french with the president of the main truck drivers trade union (UNOSTRA). They are having a meeting on wednesday and are going to decide if they will go on a strike. "Could they join with the fishermen ?" "We don't want to lose our identity. But some are talking about destroying some Total's gas pumps and neither some fishermen neither some drivers would mind joining this action".

Some panick buying has already begun in France.

Sorry for the links in french but the situation is quite tense here and I wanted to share in advance.

The Titanic sinking of US Middle East policy is recapped:

It would have been unthinkable five or six years ago that a visiting US president would receive such an open rebuff in the Middle East. Last weekend's exchanges revealed the extent of decline in the US's dominance of the Middle East through the present Bush administration. No doubt, oil lies at the very center of the decline of the American dominion. The cascading rise in oil prices has led to a massive transfer of resources to the energy exporting countries. Iran is one principal beneficiary.

China is not asking for lower prices they "just" want to know about supplies.

Great article.

I think it boils down to this: Bush had a choice between going with the guys with the oil wells or going with the neocons. He went with the neocons.

So far we've only seen the tip of the iceberg as to what that decision is going to cost us. As is stated in the article: "The point is, the historic failure of the Iraq war is yet to be fully grasped."

Oil Tops $129

NEW YORK (AP) -- Oil prices spiked to a new trading high Tuesday, sweeping toward $130 a barrel as supply concerns intensified the momentum buying that has lifted crude deeper into record territory.

The June contract for light, sweet crude traded as high as $129.58 on the New York Mercantile Exchange before settling back to $129.12, up $2.07.

Oil's trek toward $130 coincided with the Labor Department's report of an unexpectedly sharp rise in wholesale inflation last month.

At what point will the US government intervene to reduce the retail costs of petro-fuels in the USA?
Will their first move be to offset heating oil prices later this year?
Perhaps diesel price relief for truckers to keep the just-in-time systems from breaking down?
How about gasoline price caps? Chrysler is (re)introducing the concept to Americans with it's latest '$2.99 gas guarantee' marketing scheme.
You know its coming...

Since the US gov cannot really do anything about the price...I expect that any intervention will come in the form or gas rationing.

I've often commented that rationing is the only solution to prevent massive market disruptions, once Peak Oil is proven and the amount of available oil plus products begins to decline. Otherwise, the continued increase in prices will push many people out of the market. Rationing will not stop the price increase, although rationing might slow it down. That's because there would be the need to allow some to buy more than the standard allotment thru a white market mechanism for adjusting the amount per consumer to that needed. Any extra allocation which a consumer did not use would be sold to those who needed more. This approach would penalize those with higher consumption and provide a major incentive for them to conserve, both immediately and later as they replace their oil consuming equipment.

I would also argue that the same system should be applied to all fossil fuels, especially coal, with the ultimate goal of reducing CO2 emissions. Thus, rationing would create conditions for the fastest real reductions in oil use and thus foster a rapid conversion to non-fossil fuel alternatives without causing major inflationary distortions in the economy. If the market mechanism is allowed to function, prices can be expected to rise to the level that many poor and formally middle class would simply be left out on the street. The wealthy in the U.S. might find it hard to ride around in their cars, especially given the wide availability of $.25 bullets...

E. Swanson

"the wide availability of $.25 bullets" Only if you roll your own or shoot 22s.


From the article:

a gun shop owner in nearby Douglas, Arizona, says he now pays $250 for a case of 1,000 rounds of assault rifle ammunition, up from $80 two years ago,

That's probably Russian AK-47 ammo and it's $0.25 a round. And, when push comes to shove, I could "roll my own", including bullets cast from the lead in old car batteries and wheel weights. Black Powder, anyone? Besides, a well placed .22 can kill a deer (or a person). Not to mention the fact that a .22 will surely kill a tire.

E. Swanson

I expect that rationing will eventually come, but I also expect that the US will be very reluctant and very late to implement it. I don't expect to see it until around 2012-13 at the earliest.

I'm guessing most people born after 1970 have no first-hand memories of fuel rationing in the U.S. (or the draft, for that matter).
It will be a shock when it happens.

We import about 60% of our crude oil and petroleum consumption. How do we dictate a price cap on what we import?

Set the price and finance the difference.

Don't get me wrong - I don't think it's a good idea. But seeing our govt propping up the financial sector, mortgage bailouts, stimulus checks, etc, has got me wondering what ill-conceived and expensive plan they float when enough citizens (oh sorry, consumers :P) make noise.

During the twin Oil Shocks of the 1970s, two differnet methods for managing shotages were tried: Price caps and Odd/Even rationing by Nixon, and Rationing by Price under Carter. The Carter method won and is expected as well over 3/4 of Americans expect gas to top $5 soon. As I mentioned up the thread, countries with heavy crude refining capacity will be better off in the long run. That would be one method of controlling the price of imports--have the ability to buy the cheaper oil, which are the heavy grades. The United States could also lower the price of imported oil by ceasing its attempts to destabilize the global oil patch. Unfortunately, as this article concludes,

Let’s remember that it isn’t about who occupies the chair in the Oval Office, but those who are around that person. And that doesn’t change much whether the occupant is a Democrat or a Republican. The military-industrial complex, the big bankers and the transnationals are the ones that really govern in the United States. And they are not leaving power in November.

In the UK consumers currently pay $354.88 per barrel for petrol(GAS for those in USA) and $392.79 for Diesel. US $2.2320 per litre for petrol and $2.4704 for Diesel, not a lot of demand destruction is occurring demand is remaining flat. In Australia where I reside petrol(GAS) retails for around $5.50-$6.00 US$ and demand is rising slowly. So the weirdo beliefs that the current prices in the US are going to cause some sort of economic meltdown and catastrophy for all is clearly bunkum! Oil Prices will have to rise a lot more to have any effect on demand, and that is what will happen. It's the global middle class vs the global middle class in an auction for the available oil whose got the money will win it, countries with nothing to sell will loose, the sky is the limit on price it just depends on who will pay what(and the sellers are not going to take inflating funny money 70's style). The US is a huge risk with aerospace and auto/machinery all of these sectors the future is terminal not in 20 years in 2 or 3. The next US Pesident will have to tell the American people that Oil consumption is going to need to fall by %50 in the next 10 years, it can't be fudged by promises of "Manhatten Project" to produce oil from coal or ethanol and if a fudge is attempted it will be detected prior to the presidents re-election when these Manhatten projects stall or don't produce quickly enough (it will prove impossible to to produce alternate fuels at a rate beyond %10 of the decline in global oil production).
The sellers of oil will (countries like Mexico will cut sales when they realise that they will not be able to afford to buy in the open market at future prices so they will "hoard") hording will become more common very quickly at a certain price (I speculate this price to be around $175-200 USD but possibly lower.Sudden shortages could develop quickly once the trigger price is reached also exporters could reduce output once they feel that holding onto oil is more profitable and they will also will demand political concessions (Arab explorters may demand that Jews leave Israel, or ask for supply of nuclear weapons or insist on islamic law being applied to importing countries).
WAR for oil won't work as the complex production facilities will be destroyed in the process so worsening the shortage.
THE JIG IS UP AND GOVERNMENT IS GOING TO HAVE TO COME CLEAN ON WHAT WILL NEED TO BE DONE, no solutions that involve the continuning of the Auto lifestyle is going to be possible, all spare funding is going to be needed to secure electricty supplies (it takes oil to produce coal, oil and gas) so rebuilding the entire electrical generating equipment to Solar, Wind and Nuke will have to be accomplished in under 25 years and mandatory appliance efficency standards and mandatory industrial and household efficiency standards will need to be introduced (no "BABY STEPS") along with very large taxation on elecricty and liquid fuels.Electrification of railways and expansion of built track. No more Roads,airports,business as usual. All available funding left to be spent on Electrified Mass Transit which will be build on exsisting roads.It's going to take a war economy and huge restrictions on Democratic freedoms we now enjoy, but if this is not done within a few years the US and many other countries will be ruled by tribal warlords and no freedom will exsist.


You are making a rather large assumption that "government" knows 1) that the "jig" is up and 2) what needs to be done.

I see no evidence that this is the case, perhaps you know differently?

Rather, what I would expect to see is that the "government" (which is really just an institution used by people of differing interests to promote said interests) comes down solidly on the side of BAU. We will remove limitations on drilling anywhere. We will pursue any tech fix any charlatan comes up with. We'll "cut taxes" if it's the Rs, "provide benefits" if its the Ds. But the people who compete to control the institution of the U.S. government are completely vested in the global economic system. It's not just that they don't believe it will fail, they can't believe it because their entire self understanding is built upon the success of that system.

Good post. Much to agree with here and have been saying as well.

Crash programs for mass transit on existing roads.
The possibility of a trigger for hoarding by producers (see Kasakhstan and recent statements from Iran Oil minister)
The long range difficulty of seizing a complex oil infrastructure by force.
The increasing demands and concessions to be garnered by energy (and food) producers everywhere.
The need to 'come clean' for the magnitude of the crisis on the part of leadership in order to elicit the needed conservation and taxation for mitigation.

(If US leaders do understand our situation they sure are acting clueless as the Senate voted 97 to 1 to suspend filling of the strategic petroleum reserve and then had the 'foresight' to amend it if oil should fall below $75)

The ability to curtail consumption as a response to high fuel price in the US and maintain BAU will be a tough one. Overleveraged from homeowner to top investment bank will mean that both government and individuals will have a horrible time buying conversion to fuel efficient systems. Saddled with long commutes and basically very little alternative passenger network availiability means sector/job destruction will indeed strand many in suburbia in the 'concrete culdesac without a fill-up' We possibly have a terminal systemic condition. The mitigation for that one is gonna get mighty interesting.

Tossing aside supply/demand equations at the moment,,,

A U.S. official urged China on Tuesday to join the International Energy Agency - a group of major oil consumers that includes the United States and European governments - and aid its efforts to keep petroleum markets stable in times of crisis.


membership has its privileges?

Just a quick update on my contango post from yesterday with current prices:

Dec. '08 +$3.11
Dec. '11 +$5.31
Dec. '16 +$9.02

I don't think I've ever seen a contract move $9 in a day.

See: http://www.nymex.com/lsco_fut_csf.aspx

Admittedly, the volume on the Dec. '16 is only 3426 contracts, compared with 368,000 contracts for July '08, but the volume on the Dec. '11 is 28,400 contracts, and the volume on the Dec. '12 is 32,600 contracts. That's not chump change--suggests this is not just due to low volume...

Another thing that has changed is that some months ago the front-month price would dip on its last trading day, now it rose instead.

Ummm, NYMEX Dec 2016 crude up over nine dollars so far today folks.

At $10 jump the market (not sure if just that contract) should go into it's first ever enforced 10 minute cool-off shutdown.

[Guess which idiot sold off all his contracts to take some profits yesterday - doh]

This just adds a little more fuel to the overshoot oil is in now... I fear that when it inevitably corrects people will start "calling off" Peak Oil again. Until next year, same time around. An October 2009, headline: "Oil plummets from $200 to $180, once again proving the Peak Oil fears are unjustified". We humans have such a short attention span.

I'm not sure oil is in overshoot right now (I just don't know enough about the real supply & demand balance), however we are sure to see headlines like that no matter what happens. On Friday, Bloomberg had two headlines referencing "drop in oil prices." Oil was up on Friday. It was up for the week. It was up for the month. I keept scratching my head, trying to figure out what the heck they were talking about. But if the MSM can trumpet a drop in oil prices when oil actually went up, imagine what they'll do with every little retracement from new highs.

I think the front months might be in slight overshoot right now - and might correct soon - front month only went up another $2 or so.

But there's no way the long dated contracts are - these contracts have just started to work towards their value in an informed market (ie: one that accommodates, rather than simply dismisses peak oil theory).

I think we will start seeing the later dated contracts hold their value much more, even with a near dated correction. (It never made much sense that 2016 contract prices go up and down with the weekly EIA reports - I think that effect might disappear over the next couple of months).

Still seems really cheap to me. 2016 crude at 139/bbl? I think I am going to go long 2016 Light Sweet Crude. Am I missing something here?

Also, who do recommend as a brokerage? Is OptionsExpress any good?

Consider 2015 rather than 2016 - just because it's a more active market.

eg yesterday contracts traded
2012 : 5368
2015 : 310
2016 : 86

It makes it easier.

Buying long dated options is very difficult it seems - which makes sense because the volatility cost would make them two expensive for buyers, and too risky for sellers.

I buy options for near-term (out to 2010) and futures (was 2016, but I'm going with 2012 & 2015 from now on)

[Guess which idiot sold off all his contracts to take some profits yesterday - doh]

At least you had something to sell off, and you took some profits. Better than me - I wouldn't know how to invest at this point, and hardly have time to. I actually pulled out of the market completely, and am focusing on paying down debt/improving my residence's energy efficiency...

For info - this is the rule it go close to yesterday...

Maximum Daily Price Fluctuation
$10.00 per barrel ($10,000 per contract) for all months. If any contract is traded, bid, or offered at the limit for five minutes, trading is halted for five minutes. When trading resumes, the limit is expanded by $10.00 per barrel in either direction. If another halt were triggered, the market would continue to be expanded by $10.00 per barrel in either direction after each successive five-minute trading halt. There will be no maximum price fluctuation limits during any one trading session.

I think oil and gasoline are still cheap. In Sweden with high taxes i pay propably about 8 USD/gallon. I am not rich, we are retirees with modest pensions.
I use gasoline for our car and a small floatplane, and if the gasolineprice doubled or more(to 20 USD/gallon or so), it would not put a dent in our use of it. So i believe that the oilprice has to rise substantially before we have a significant demand destruction(more than 300 USD/barrel?)

Iraq dramatically increased the official size of its oil reserves yesterday after new data suggested that they could exceed Saudi Arabia’s and be the largest in the world.


Ah! the good old overnight reserve increase, I know there was a solution to peak oil!

Some world governing body needs to assign an expert to independently assess every country's oil reserves. I'm so tired of the Middle East culture's macho, with reckless abandon attitude towards infinitely increasing oil reserves.

Hello Cslater8,

Well said--if one mentally rotates Khebab's graph 90 degrees clockwise--> looks like a sudden dose of geologic Viagra.

Any erection of drilling rigs lasting more than four hours--Please seek medical attention.



US state department reports Iraq oil production for second week of MAy at 2.52 million bpd. (slide 22 of the 35 slide report)

Iraq exporting 1.88 -2.04 million bpd Since sept 2007.

Vitol, Anadarko, and Dome oil companies have formed a consortium currently negotiating with the GOI for a technical service contract. The GOI has been working with other companies on five short-term technical service contracts, each with an approximate value of $500 million. This sixth contract would involve the Luhaisoilfield located in southern Iraq. The deal would increase production at Luhaisfrom 50,000 barrel per day (bpd) to an estimated 150,000 bpd. The GOI hopes that the completion of all deals will result in an increase in output of 600,000 bpd, translating into a more than 25% increase in the country’s daily production over a two year span.

Iraq exporting 1.88 -2.04 million bpd Since sept 2007

Well, we didn't go into Iraq to save the Iraqis from Saddam Hussein. I don't think we specifically went into Iraq to destroy it's economy to push up exports in a reverse-ELM. I think that was just a happy side effect (well, happy, to Dick Cheyney and a few others).

The problem is that I don't think the Banana Republic Model[1] will work in Iraq for any length of time.

[1]In the BRM, multinational corporations bribe corrupt leaders of 2nd and 3rd world nations to keep the populace under control while the natural resources of the country are pillaged for huge profits for the multinationals. Q.v. Nigeria. Also see references under Colonialism and Imperialism.

When can we expect them to hit 8 mbpd production?

They must have hired the guy that Shell must have fired when it was discovered that their reserves were so unreal.

But was this independently verified by major oil companies?

What a great way for Iraq's gangster ruling parties, which get aid from both the US and Iran, to reinforce the case to their patrons that their survival is indispensable. I guess when Sadr's masses have the Green Zone surrounded Beirut-style, Maliki and his allies will find another 250 billion barrels (on territory that they do not and will not ever control).


beats your Hahahahahahahah!

So where are your link sources Sam?

It looks like Iraq got a hard on!

It's a miracle! Maybe that guy praying for gas prices to go down in California helped.

Noticed oil shot up close to 130 a barrel today, the day after Bush came out and said the Middle East is running out of oil and should plan for a different future. Up until that moment, the World was living in an illusion that the Middle East could at any time they decided to open the valves a little wider and burst the oil price bubble. But alas, instead of holding that kind of information close to his vest, Bush simply blurted it out. Now the cat is out of the bag and we may pass 130 like it's standing still.

Someone else above read that article this way as well...if you read the whole thing it's more like: "If you don't pump more oil we're...we're...well, we're gonna make stuff that will work without it! Then you'll be poor! Ha ha!"

Rather than an admission of reality, simply a veiled threat that we'd come up with alternatives and put them out of business.

The House of Representatives just passed HR6074 (with a veto-proof majority), an amendment to the Sherman Anti-Trust act that will allow the federal government to sue oil cartels for anti-competitive practices. Between suspending additions to the SPR and this, don't complain that Congress isn't on top of peak oil. NOTE: This posting may contain small amounts of sarconol.

I can't wait to see the enforcement effort on that one.

Yeah, we can't even get independent analysis of OPEC member reserve estimates, so how will we force them change their business practices? How does anyone even know what's discussed at their meetings? As this Admin. likes to say; This is a non-starter.

Gee, the Commerce Clause now extends to the whole planet?! Talk about arrogance. Since when is not selling all you have to sell restraint of trade?

I thought the invasion of Iraq was the enforcement effort?



by the Govt's enforcers, or the OilCo's enforcers?

Laws of Nature to be Repealed
By Paul V. Cameron

As a result of recent disasters and extreme weather, in a move some say will only incite anger and retribution by none other than the Almighty, a UN-led group is planning to repeal most, if not all laws of nature.

"There are four laws we don't like," said UN spokesperson Liam Snugglam. "If it weren't for these laws, we could prevent the deaths of innumerable vulnerable citizens world wide." Drawing on an unconfirmed source, Snugglam noted the laws and the specific problems this UN-led group hopes to eliminate.

. . . Conservation of matter and energy (matter and/or energy are neither created nor destroyed over time) - "This perhaps," laughed Snugglam, "is the most ridiculous of laws. Natural disasters are constantly destroying things - people, their homes, and their lives. We don't even think this is a real law at all. It's a faux law. All dressed up to look like a law, but, on all sorts of levels, it is not."

Here's the news article:

House passes bill to sue OPEC over oil prices

Oil - we might have to fight for it

Interesting article in French

What about aging population? How does it affect consumption?

Sorry if this is off topic. I'm wondering how projections for future consumption take into account oil consumption as a factor of a population's age?

In the USA the first of the baby boomers are now retiring in meaningful numbers. I learned from my financial adviser that most retirees travel a lot the first few years and then it tapers off to nearly zero as they shift to a more sedentary life for medical or financial reasons. This huge demographic wave would theoretically be consuming a lot but then it would taper down with some correlation to median age and other demographic shifts. How does the USA compare to countries with lower median ages with regard to forecasts for fossil fuel consumption? (Obviously migration plays a role here too.)

The baby boomers have the income to outbid youngsters with mortgages for travel costs.

There is a drop in UK births from '65 [contraception??] so you have to suffer the pain for ~25 years.

see here:


By then our immigrants will have us at 3rd world birth rates in the UK.

A major Indian oil company predicted declines from some of its largest fields:

ONGC Report

Nigeria was seeking to recover 1.9 billion dolars from oil companies:

Shell and Exxon ordered to surrender production proceeds

Governments' demands for more taxes and royalites take away from the funding of oil and gas developments.


Oil Futures have flipped into total contango today. Front month is the cheapest all the way to the last month.

That is so untrue - July 08 contracts are still less then June 08:)

Ok, ok so you mean EVERY other contract:) The numbers are quite extreme today huh. If this is the new trend then it can get very interesting very fast. I'm sure airlines that have been buying future gas at lower prices are not to happy this week. Its' going to be very hard for them to plan out prices now.


June contracts expired today.

General question. How many days running has the price of WTI crude hit a new record? Seems we've had a string of consecutive days here of over a week.

White House denies Iran attack report

The White House on Tuesday flatly denied an Army Radio report that claimed US President George W. Bush intends to attack Iran before the end of his term. It said that while the military option had not been taken off the table, the administration preferred to resolve concerns about Iran's push for a nuclear weapon "through peaceful diplomatic means."

Army Radio had quoted a top official in Jerusalem claiming that a senior member in the entourage of President Bush, who visited Israel last week, had said in a closed meeting here that Bush and Vice President Dick Cheney were of the opinion that military action against Iran was called for.

The official reportedly went on to say that, for the time being, "the hesitancy of Defense Secretary Robert Gates and Secretary of State Condoleezza Rice" was preventing the administration from deciding to launch such an attack on the Islamic Republic.

What a string, ladies and gentlemen, what a string! 367 posts of full blown hysteria, ranging from the re-emergence of the "Ulduvial" collapse to the claim that typewriter ribbons are made from oil (by the way, is there still a big market for typewriter ribbons?)

Oh well. Interestingly, those buying oil at the current $125 per price are showing great faith in the world's modern economy to keep going strong and consuming oil...while at the same time shooting to new highs above $150 or $200 per barrel which many experts here seem to believe would mark the collapse ("for good") of that very same modern economy...

Of course, the question is how far the balloon can be expanded before it pops. With the current mood of schitzophrenic investors (OH DEAR HEAVEN THE WORLD IS ENDING! vs. WE CAN STILL MAKE A BUNDLE ON THIS OIL THING, IT'S NOT TOO LATE!)

"Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one!" Charles Mackay "Extraordinary Popular Delusions and the Madness of Crowds". It is becoming obvious that herd has moved to the side of fear regarding oil and no longer see it as a coming and long term event but as an event that is here NOW and something that is going to happen very very fast. Given this environment, it is impossible to even guess at future oil prices. They could, at least for a time, move upwards to $400 even $500 dollars.

Solaris, posting on this very string yesterday made an interesting point that bears repeating:

"Sorry no links for this, but I've seen this several places now:

Oil at $120 = 6% of world GDP spent on oil


Oil at $2,000 = 100% of world GDP spent on oil

This is not going to be possible! All of the world's economic output spent on oil, and nothing on food, water, clothing, or shelter. Now, of course, as the dollar weakens with more and more pieces of paper chasing fewer barrels, who know's where the non-inflation adjusted price of oil could go."

Indeed, who knows. But using the numbers that Solaris used (and they do not seem far off base from what I have seen in other places) an oil price of $500 would mean 25% of GDP, or every fourth year of world Gross Production going to oil (never mind natural gas, nuclear and LPG, which mean an even larger share of all world production going to the energy that drives world production).

If peak oil is here NOW and declines in production match increases in prices (which to this point they have in no way done) this of course would be "doomsday scenario". Not that the world would "run out" of oil, but that the price of oil would rise to the point that modern technical society would become the snake eating itself from the tail forward to survive. But the question that still remains: Are the current prices "rational" given the known recoverable reserves and current oil production rates? Or is this a mania, driven as much by hysteria as by evidence?

I am not pretending that I know the answers to these questions, I would be a far wealthier man if I did. I do know one thing though: Prices change up and change down far, far faster than production does. While oil production has been flat or even slightly declining in the last few years, prices have in no way reflected the actual production of oil, which has not changed much, as opposed to a price that has changed very fast. This means that the current oil price run up is based on conjecture, as is all "futures" betting.

And conjecture, like price, can change very, very fast.


How do you solve the SUV issue?

Like this.

Easy enough. You just have to want to.

Oil hits $130/barrel

Yo! I'm on CNN!
The Financial analyst read out my response to his blog on oil!

He had the good grace to agree with me, that oil will stay high because new oil is more difficult to find.

Here was my post:
This rise is not due primarily to speculation or political factors or even drilling restrictions, but new fields are getting more and more difficult to find, are smaller and cost more to develop.

The statements of massive reserves that can be produced in most oil producing countries is nonsense - the state run bodies in places like Saudi Arabia had every incentive to overstate reserves, as quotas were based on them.
Although they have pumped billions of barrels, remaining reserves remain exactly the same as they were according to their (unaudited) figures!
What a coincidence!
Give or take, production is about as high as it will get:
Demand is going up all the time, with major new consumers like China and India wanting ever more oil.
Demand always balances supply.
Result? Ever rising prices.
When supply is static, the only way to balance things out is by demand destruction.
The poorest people in the world have already been forced out.
Driving out the next tier up will be tougher - it is people like those in America who need to drive a long way to work, and are relatively poorer than some others.
But supply and demand will balance, so if $200/barrel oil does not do it, then it will go to $400/barrel:

It gets worse, as in fact as in the North sea or Mexico when supplies have peaked, they drop rapidly - Russia is on the verge of this, as they have recently half-admitted.
Oil exporters also tend to keep it cheap in their own land, leading to rocketing demand - Saudi Arabian demand is going through the roof.

So if $800/barrel oil is what it takes to knock out the next level of demand, that is what will happen, to put the middle classes on the bus