Peak Oil Media - 31 MAY 2008

The ELM (and the WSJ article yesterday) makes Yahoo Finance:

Henry Blodget and Aaron Task. Well worth watching!! Here's a link to the article (from which this video comes, that links to TOD in the last sentence).

Under the fold, more videos from TOD's own Rembrandt Koppelaar, Matt Simmons, Bob Hirsch, Amory Lovins, Randy Udall, Marvin Odum, and others...

Here's TOD's own Rembrandt Koppelaar, ASPO Netherlands President on Dutch Television Show NOVA 23 May 2008

Simmons on CNBC...

"What we need to worry about is not high prices, but shortages -- especially for diesel."

"The economists ought to be embarrassed, and the energy economists are the worst of the lot."


Dr. Robert L. Hirsch, Sr. Energy Advisor at Management Information Systems, delivers a keynote speech at the 2008 AFVi Conference in Las Vegas.


Amory Lovins, Randy Udall, Marvin Odum (VP of E&P at Shell) at the first ever Aspen Environment Forum.

Great to get all the coverage-OTOH Blodget carries so much slime baggage it is possible it would be better to have him stay away from the subject-might provide unneeded fodder for the conspiracy guys.

For any new readers, ELM (Export Land Model) explained below:
Declining Net Oil Exports Versus “Near Record High” Crude Oil Inventories: What is going on?
(September, 2007)
A quantitative assessment of future net oil exports by the top five net oil exporters
(January, 2008)

Neil King was just on CNN, basically discussing the ELM.

Concerning assessments, I picked up Energy Bulletin today 5/31 that Texas is experiencing export declines. Where Mexico and Venezuela are now both showing higher decline rates. I am concerned because of EB comment about imports dropping like a rock, and it does not look good.
Any comment about this?

I attempted a simple connect the dots exercise, with three different data bases. Venezuela & Mexico = V&M. In 10/07, V&M accounted for 20% of total US petroleum imports and probably about 40% of Gulf Coast imports.

In any case, connecting the dots:

V&M showed a sharp annual decline rate in net oil exports in 2007.

From 10/07 to 3/08, they showed a very sharp decline rate in the volume of net oil exports delivered to American shores (annual decline rate of 32%/year).

Over the past four weeks, we have seen a big drop in the volume of crude oil imports into the Gulf Coast (from all sources).

I think my take away from that collection is the very poor standard of recognition of the important system level interconnections of the whole. Too many implicit or explicit expectation that this is a 2-3 year phase before things sort themselves out. Too many wide boys looking to make a fast buck.

What's not coming through is the big picture, the whole story, the way in which its a fundamental shift; before PO and after PO.

What's needed is someone with the ability to draw together and present an obvious story that leads people to realise that big picture. Someone like an Adam Curtis; a reporter that could do a real job of presenting the facts in a way that gets to the heart of why people get worried.

Too many people calling themselves journalists when they don't have the attention or intellect to be anything other than talking heads.

As Jerome pointed out recently, sooner or later the MSM gets around to publishing the stuff that has been on blogs for months (or years). From our top five paper:

Declining net oil exports will inevitably result, absent a severe decline in demand in importing countries, in continued rapid increases in oil prices, as oil importing countries furiously bid against each other for declining oil exports.

In simplest terms, we are concerned that the very lifeblood of the world industrial economy—net oil export capacity—is draining away in front of our very eyes, and we believe that it is imperative that major oil importing countries like the United States launch an emergency Electrification of Transportation program--electric light rail and streetcars--combined with a crash wind power program.

As Alan Drake has pointed out, the United States--with roughly 1/3rd its current population, 1/25th of its current inflation adjusted GDP and with primitive Technology --built subways in its largest cities and streetcars in 500 cities, towns and villages in just 20 years (1897-1916), which does not even take into account numerous interurban systems.

If we could do it in 1908 with mules, manual labor and with minimal fossil fuel input, why can't we do it 2008?

Two top 10 net oil exporters and two top sources of imported oil to the US, Venezuela & Mexico, from 10/07 to 3/08 showed sharply lower net oil exports to the US--with their net oil exports to the US declining at an annual rate of 32%/year.

I have a question.

If there were NO Fossil Fuels of any type stuck in the ground, to be dug out by the monkeymen, what would we be doing in the year 2008 for power(energy) in terms of a "civilized" society?

Without abundant coal the industrial revolution would never have happened. We would still live in a low population agrarian society (which may be preferable to the current mess we've gotten ourselves into).

It would have been nearly impossible to develop our level of technology without the cheap, abundant energy provided by fossil fuels. We can only hope that we have enough of it left to build an economy based on renewable energy, or we're in for a nasty surprise when the wells run dry.

Sure, we could do that so long as the whole society doesn't collapse into warring factions. What worries me is that this nation is so Balkanized with multiculturalism. Will it hold together under severe stress? I'm afraid we're in for a really rough ride.
Russian oil exports down 4.9%

Oil exports stood at 81.7 million metric tons in the first four months
of 2008, down 4.9% against the same period last year.

Isn't this a bit steep to just be decline rate? I know they have a tax boondoggle at the moment but it still seems a bit much. Does anyone know if they have major regions that unexpectedly went belly up? Or is there some kind of market manipulation/hoarding going on?

Wasn't it at about 3.5% a month ago? A 1.4% drop month on month is pretty huge.

Heck, what I want to know is when did Russia join OPEC? ... only partly laughing.

Net Export decline rates tend to be steeper than the production decline rates, and the export decline rates tend to accelerate with time. Our middle case (not the worst case) has Russia approaching zero net oil exports within 16 years.

Have you tried contacting him?

curtis I mean?


A rather funny video meme on the oil prices:

funny? depressing.
read the comments.

mikeB, youtube comments are always depressing. You can watch a video about bird feeders that twirl to shake off squirrels, and the comments will still manage to erode your faith in humanity.

Not Funny.

And why's it necessary to drop the 'f' word? Is it supposed to make more of an impact or something? Like, 'sex sells'?

Strewth, just sell it straight.

The comment I found most interesting (vis-a-vis the "oil is a bubble waiting to burst" perspective) is that if CL were a stock in a bull market, this week's pullback would be viewed as healthy. During the tech/telecom stock & housing bubbles, such assurances were given all the time with the appearance of the slightest pullback. In addition, both of those bubbles had very few folks actively playing the short side of the market. With CL, we've been hearing that "the bubble is about to burst" since $80/barrel. I think the main difference between the previous stock & housing bubbles and the current run-up in CL is that (generally speaking) no-one was harmed while tech/telecom stocks and housing prices rose. The harm came only after the crash. (Yes, renters who were actually saving to buy a house felt priced-out during the climb in housing prices, but they weren't harmed financially.) But, the increase in oil prices is different in that people are immediately "harmed" financially. Because the reasons for the price increase, I believe, are structural, rather than cyclical, there's little to be done to bring prices back to significantly lower levels absent major changes in the way people live. And, we all know how difficult it is to get ourselves to make major changes to the way we live. So, what are the PTB to do? Claim that we're in a bubble like tech/telecom stocks and housing were and hope its true.

It was heartening to hear Marvin Odum state that "energy was the original currency", and indicate the reason for the weakening dollar.

Back in March I ran a series of blogs looking at economics from a different perspective, namely the idea that money should be based on an energy standard. I proposed that the money supply be pegged to the amount of energy available to do useful work. Take a look at:

As we watch our global economies suffer the slings and arrows of contraction + inflation due to the fact that we have less and less net energy available to support the production-consumption cycle, we might all give some consideration to waking up from our hubristic slumber and recognize physical reality. We did not invent money as a currency. We invented money as a way of tracking the flow of energy. We just didn't realize it at the time, and by the time we had the science to understand this we got so full of ourselves that we didn't bother to check in with the real world. We created the banking system. We forgot the idea that banks were safety repositories for keeping excess production. Instead we got creative and invented fractional reserve banking to create faux money that had no real backing of energy - no real work could be done. But what made it even feasible for this system to appear to work was the growth rate of production of oil. This made it seem as if we could print money in anticipation of the energy yet to be produced. It seemed to work until the production of oil (and other fossil fuels) started to decelerate. Now the effects of this ignorance and hubris is catching up.

Eventually, I think, we will understand that money = energy and no currency can float free as it tries to equilibrate with a basket of arbitrarily chosen goods/services. Work is work. Work requires energy. It really is that simple, in principle.

As I said, it is nice to have a recognized expert finally put 2 and 2 together.


actually that's Randy. :)

I agree George. The problem is that scholars, analysts and academics have a hard time attributing the causality of any dependent variable directly to "energy." It seems to me that it is so far back up the causal chain that it is too hard for people to noodle on, unless they are really complex thinkers or understand the place of energy inside the whole matrix. It is, of course, common sense to us... *laugh*

I'd love to see a study of energy E&P correlated with currency movements over time at the country level...but that'd be a bitch to do. :)

Oops! I knew it was one of them!

I actually started to try something like this correlation once. But I soon found that the definitions of M1, M2, etc. made it exceedingly difficult to filter noise from signal. There might be a way to just look at M1, but the feedback effects on economic activity of M2, etc. are really hard to isolate. There has been correlation studies done on inflation and cost of oil, as I'm sure you and readers are aware. I would have to dig out the references, but I seem to recall r values > +0.7 after factoring an appropriate lag time.

Another complicating factor was when Nixon took the dollar off the gold standard. Even though gold is not a meaningful standard, at least it had the benefit of fixing the dollar value to a measurable quantity. Under today's floating valuation methods it has become impossible to actually relate the dollar's value to anything.

Another approach would be to set up a shadow cost accounting system that would use the same basic techniques as money accounting, but record accounts measured in joules (or some convenient measure). This would have to start at the very bottom - the extractive and farm industries - and track costs in energy up the chain. It would necessitate inclusion of energy cost estimates from higher manufacturing to seed the process (e.g. energy costs of tractors and big trucks, pumps, rigs, etc.) Once some believable numbers could be obtained (as in for example EROEI calculations) we could then track the correlation of costs with energy used. I gave a simplified version of this in my blog:


George.Mobus -

I can appreciate your ideas about trying to better tie money to energy, as during the 1970s I had some ill-formed ideas along the same lines that never got beyond the stage of idle speculation.

At one time, say well before the pre-WW II era, when most of the economies of the developed nations were dominated by the production of physical things, such an energy/monetary tie-in might have been possible. But at this stage, so much of our economy has little or nothing to do with anything physical going on that I would think it an almost hopeless proposition ... one fraught with all manner of problems having to do with energy and cost allocations and just plain old arbitrary value judgements.

A man gets paid x dollars to produce y real widgets, and those widgets represent z amount of real energy. Amother man also gets paid x dollars to produce x' amount of legal services which essentially represent next to zero amount of real energy (apart from generating hot air). How do you reconcile these two very different forms of economic activity with respect to the relation between energy and money?

Don't get me wrong .... I'm all for having our money get back to being a store of real physical value particularly with regard to energy content. It's just going to be very hard to do, and no two people will agree on exactly how it should be done. It's still a fascinating question.

You are right, it is a massive and daunting task to tease out all the nuances. Perhaps it will become more palatable when oil prices go higher than $200 and so many of the 'hot air' jobs go missing that things will get back to basics. When it gets down to farming and basic needs manufacturing (and away from so-called service jobs) then it might be a lot easier to see the relationship.

Back in the days of a barter economy people had little trouble making comparisons between their work efforts and goods that they needed but couldn't produce themselves. Today we have to really wonder what the energy value of an iPod might be.

In various places in my blog I discuss the meaning of 'useful' work and hence what counts as useful energy. Even listening to music on an iPod might be a net energy gain for society if the person listening does his/her work more efficiently and that work is either contributing in some way to energy production or to material production of a product that is needed. I identify useful work as that which sustains the society (and infrastructure).

And anyway, if civilization crashes and we get a chance to start over again maybe this notion of money = energy will be adopted and prevent future civilizations from making the same mistakes!


The idea is great, and intuitively pleasing. Yet as an anthropologist one of my first questions would be - what constitutes "work"? I'm not trying to be obfuscatory ("eschew obfuscation!"), but rather pointing to a real dilemma facing your project.

Generally speaking I'd say that a final good toward which humans strive is building social capital - networks of relationships that we find deeply sustaining. How we get the means to convert economic wealth into these relationships (hunting, gathering, herding animals, working as peasant laborers on estates, working at McDonald's flipping burgers, designing software), how we are expected to go about converting this appropriately (money can't buy a lot of things), and toward what ends is consumption oriented - well, that's where culture comes in.

For examples, in KSA you would be expected to put on an elaborate dinner for a visiting group of foreign businessman before closing a business deal; is that "work"? Correspondingly, you are a middle level manager in XYZ Corp.; you have the boss over for dinnner, which your wife has to prepare. Are her unwaged efforts on your behalf "work"? Concerned about PO, you help your neighbor put in a larger raised bed garden. Is that "work"? In the Trobriand Islands, people put a lot of effort into raising yams to contribute to a common pool, which big men then redistribute in an elaborate feast. No money exchanged. Is that "work"?

Again, I like the idea (and I'll try to visit your blog). But I think there's a real danger in accepting our culture's definition of "work" as only that labor which is waged or that exchange which is monetized.

What I'm advocating isn't to micro-define anyone's notion of what work is valid. Rather, by setting a standard for money based on an energy standard, and then fixing the amount of money according to the aggregate measure of available energy (taking into account quality issues) those definitions will, in short order, sort themselves out. Indeed, in an economy of contracting energy resources I think people will quickly make decisions about what sorts of products and services they really need to purchase. These decisions will flow back through the production economy relatively quickly. What my proposal entails is creating transparency in understanding real costs.

The bad news will be the number of frivolous jobs that will be gone. But in a contracting economy jobs are going to be lost anyway. Using an energy basis for valuation might lead to better decisions as to which jobs should go and which are needed to sustain life and society.

In a contracting economy - less net energy means less work gets accomplished - if we don't have some rational basis for monetary policy we will get not just stagflation, but a combination of depression and inflation, less real money and the artificially created money (by fractional reserve banking) worth less per unit. We won't be able to tell what amount is real and what is created.

Anyway, applying my proposal doesn't necessarily imply that we have to remap everything. Determining what is useful work should be more readily accomplished once people know what their source of energy entails and their ability to use that energy allows. In those circumstances I would hope folks would generally tend to choose, for example, local food over shipped food, or bicycles over SUVs where possible. I guess you would say it will facilitate a self-organizing dynamic!


We invented money as a way of tracking the flow of energy.

Present efforts at new accounting, it seems to me, take money for granted as a base and add a new layer on top.

Ex. carbon credits. If somewhat properly worked out (as was sort of vaguely proposed by some British parliament members with their individual or family CO2 quota, which, btw, was rejected) it would entail: giving a carbon credit to a country, the country dividing it up, so much to collectives (businesses, factories, etc. etc. or so much to X area, etc.), with the remainder, or the appropriate part, offered to families. The (well, one of the..) nefarious outputs of the energy-using-system would thereby be limited, capped. Presumably, the implicit idea is that a feedback loop would thus reduce the energy input, but one never sees it formulated that way which makes me suspect unwitting or deliberate useless green fluffery. (But the devil is in the details.) This is a form of rationing, which I personally consider far superior to taxation. The compensation for reduction in unwanted output, or as it is more usually seen, the reward for good, principled, ecologically aware behavior, would be returned in Oops! I Similarly, overshoot would be punished with fines and not useful work.

Well, I'll take gold and silver any day. Money has nothing to do with energy, its a measure of value used for exchange. Whatever we use for money it should be related to a stable unit value like gold and silver the supply of which remains relatively constant.

Gold and silver have been money for at least 10,000 years with good reason.

Aside from the questionable dating of what you are calling money, good luck with eating the gold.


I'd like to slightly twist the words of a sage from a few millennia back and say:

the concept of money is the root of all evil

The comeback might be: "Yes and the concept of energy is the root of all good!" But, of course that wouldn't be quite right. In my mind the root of all evil is ignorance coupled with poor judgment. The former is fixable if the mind-possessor is willing. The latter is just our human nature, evolved to work OK in the late Pleistocene, unable to grow to the global and intergenerational scales needed for today's problems. Humans are destined to dissipate energy and the more you give them the more they will do it. In spite of the species name, Homo sapiens, humans aren't particularly wise, certainly not wise enough.

I've been doing research on the brain's capacity for judgment and wisdom and have blogged about it. See What is sapience?


Udall is the man.

There was also a very interesting interiew of Raymond Kurzweil on the Glenn Beck show yesterday. Of course Beck mentioned peak oil several times. Kurzweil was spouting solar energy and that the globe can meet it's demands for electricity solely from the sun. I don't have a video link but here is a link to the transcript:

BECK: Here`s the thing. All of our -- all of our leaders are -- they seem to be blocking everything, every step of the way. And there doesn`t seem to be anybody who is articulating a grand vision.

There is -- I`m looking for the president who is going to say, OK, peak oil, no peak oil. It doesn`t matter. We`re going to do this, we`re going to this, and we are going to have a moon shot. If you say...

KURZWEIL: The science is the same. We just had a National Science Foundation, National Academy of Engineering blue ribbon panel with Larry Page and Dean Kamen, and Craig Benter (ph) and myself, we came out with this plan to replace fossil fuels within 20 years with solar energy and store it in nano-engineered fuel cells. And we also came out with some other ideas to overcome disease by reprogramming our biochemistry through biotechnology and move towards virtual reality and a few other things.

KURZWEIL: If we captured one part in 10,000 of the sunlight, we would meet all of our energy needs. And we will be able to do that with these new nano-engineered solar panels.

The terminology you use says it all...people "discuss" or "mention" peak oil, but they "spout" solar energy.


When Kurzweil describes people in the future spending most of their time in VR, call that whatever you like.

Beck is a grade A douchebag but at least he prompted Kurz to explain how he'd address energy needs. Which he did with the usual trotting out of Moore's Law for solar. Yawn...Beck asking him what people like his cameraman should do when they want to install solar panels but are faced with a $68K bill was a good zinger as well. And Nanosolar's your answer, Ray? What about all those rare earth metals in CIGS? Hulllo? Oh, you'd rather talk about the Singularity...

If Nanosolar were the only technology on the market, worries about supplies of rare earth would have a lot more weight.
As it is it is one amongst numerous technologies using different materials, some of which like silicon are essentially inexhaustible.

Blodget and Task both quite off-handedly used the phrases "Peak Oil" and also "Peak Oilers" with such an ease and comfort as to suggest that they assumed that the audience already knew what the terms meant. That is a good sign. Getting those phrases into the mainstream vernacular is critical, and the media's frequent employment of the terms is the only way that can happen. Even if half the audience did NOT know what the phrases meant, there's always Google.

Dr. Hirsch correctly points out that the main problem is liquid fuel for transport. He then falls into the EROEI trap by giving short shrift to corn ethanol while holding out promise for cellulosic ethanol which for all practical purposes does not excess and may not ever exist given the the problems involved.

As with electricity produced from fossil fuel, the EROEI is immaterial when a form of energy has high utility and a high price. We have been producing electricity with EROEI of about .3 for over a hundred years using fossil fuel and it is still the dominant form of electricity production.

How is this possible that such a low EROEI could go on so long? It is because of the high utility and high price of electricity. The same applies to corn ethanol. If the problem is liquid fuel for transport then the high utility and the high price enable a low EROEI to work, at least for a while.

Randy Udall points out that we are hemmoraging our wealth to pay for imported oil and correctly so. Here again corn ethanol despite its low EROEI is a partial solution. When wealth is kept inside the country instead of sent outside to pay for imported oil, it has the effect of mitigating the severity of the decline due to Peak Oil.

Iowa is a case study of this which is happening even now.

It's funny how people think they have to have a positive message, even when it's almost impossible to substantiate.

Case in point: Hirsch says that in 2050 "things are going to be good" and that most of our problems will have been worked though. Yes, he also says that we'll have a lot of trouble ahead and some behavior will be "catastrophically negative" between now and then.

But it's difficult for me to see us getting to "good" in just forty years after reeling from shortage to shortage, businesses not knowing which suppliers are next going to go under, societal breakdown in most countries in the world, a world currency system that will plummet to zero value when the world's financiers realize that the debt on the books will never be paid back, many forests cut down to replace the energy that used to come from oil, and reduced crop yields due to global warming.

And of course, one of the biggest challenges we face:

To say that things will be "good" in forty years seems to stretch the meaning of "good" to me.