DrumBeat: September 15, 2008

Former oil exec: Gas rationing needed

John Hofmeister, the former president of Shell Oil Co. and one of the most influential voices in the oil industry, called for short-term gasoline rationing by introducing odd-even purchases based on an automobile's license plate and by limiting the amount of gasoline drivers can purchase.

The United States will be in "a world of hurt" for the next four to six weeks as the oil industry recovers from the damage from Hurricanes Gustav and Ike, said Mr. Hofmeister, who recently founded a new company, Citizens for Affordable Energy. The areas where rationing will be needed include the Southeast and extend northward toward Denver, the upper Midwest and Washington, D.C., Mr. Hofmeister said in a newsmaker interview Monday morning with editors and reporters of The Washington Times.

Fact Sheet: Increasing Fuel Supply in the Aftermath of Hurricanes Gustav and Ike

Today, President Bush discussed Federal actions his Administration is taking to increase fuel supply in the aftermath of Hurricanes Gustav and Ike. These storms have disrupted our energy sources, and the Federal government is leading the effort to minimize the impact on American families. This recovery effort will take time, but the Administration is acting quickly to help the millions of residents in Texas and Louisiana who have been affected by Hurricane Ike. We are coordinating with State and local governments to help restore power, remove debris, and get water and sewage plants back up and running. Tomorrow, President Bush will visit Texas to support the rebuilding and recovery efforts following the storms.

President Bush Has Directed His Administration To Take The Necessary Steps To Ensure An Adequate Supply Of Energy

The Energy Department stands ready to release crude oil from the Strategic Petroleum Reserve (SPR) when and where it is necessary to ensure refineries are capable of maintaining operations. In the wake of Hurricane Gustav, Secretary Bodman released crude oil from the SPR. This oil was released at the request of two companies – Marathon Petroleum Company (500,000 barrels total; two deliveries of 250,000 each) and Placid Oil (130,000 barrels total). To date, these three deliveries of emergency exchange SPR oil are complete. Yesterday, the Energy Department approved the release of an additional 309,000 barrels of crude oil to two companies – ConocoPhillips (200,000 barrels total) and Placid Oil (109,000 barrels).

Valero restores partial power at Texas City plant

NEW YORK (Reuters) - Valero Energy Corp. has restored partial power to some production units at its 245,000-barrel per day Texas City, Texas oil refinery on Monday after power was lost due to Hurricane Ike.

Thompson urges state of emergency

INDIANAPOLIS – Democratic gubernatorial candidate Jill Long Thompson said today the state should be doing more to investigate price gouging by gas stations and oil companies, even though the attorney general’s office is already probing several complaints.

...The criticism was part of her ongoing call for Republican Gov. Mitch Daniels to declare an energy emergency and suspend the state’s 7 percent sales tax on gasoline purchases.

Nigeria militants 'raze' Shell oil complex

LAGOS, Nigeria (CNN) -- A day after declaring war in Nigeria's oil-rich delta region, the country's main rebel group said Monday it was continuing its "destructive sweep" against oil facilities in Rivers State.

The Movement for the Emancipation of the Niger Delta said its militant forces "stormed" the Alakiri flow station complex, operated by the Shell Petroleum Development Company, set fire to the facility and "razed it to the ground."

A day earlier, MEND had warned all international oil workers to evacuate their staff from their facilities because it planned to "bring these structures to the ground."

Retailers may cut prices of diesel

Abu Dhabi: Dubai oil retailers, Emirates National Oil Company (Enoc), Emirates Petroleum Products Company (Eppco) and Emarat may again cut the price of diesel at the pumps following a steep decline in global oil prices, Gulf News has learnt from officials.

Global crude price may fall to $90/barrel

International crude oil prices have fallen over 33 per cent from their recent record highs and are projected to fall further towards $90 per barrel with the second hurricane in the Gulf of Mexico not causing as much loss of production as was initially estimated.

Analysts expect oil prices to decline further in the next couple of months as production remains robust and demand for oil and oil products falls, especially in big consumers such as the US, China and Europe, in the face of global economic slowdown.

Iran's oil, nuclear ambitions pose risk to next president

Iran has approximately one-tenth of the world’s proven oil reserves, plus more than one-tenth of the world’s reserves of natural gas.

The government of Iran may also be developing nuclear weapons.

American Petroleum Institute criticizes energy proposals in both House, Senate

American Petroleum Institute President Red Cavaney on Sept. 12 criticized recent efforts in both the U.S. Senate and House that could open up more areas of the Outer Continental Shelf to drilling, but would also increase taxes on the oil and natural gas industry.

Bush: Ike brings 'upward pressure' on gas prices

WASHINGTON (AFP) — US President George W. Bush said Monday that deadly Hurricane Ike's trail of devastation through key US oil refining areas would bring "upward pressure" on already soaring gasoline prices.

"And so there's going to be a pinch. I wish it wasn't the case, but it is," he said after top aides briefed him on recovery efforts as well as Ike's impact on the US energy sector, much of it in his adoptive home state of Texas.

"Our drivers, our folks at the pump are going to have to expect some upward pressure on price because the storm disrupted the supply of gasoline as a result of shutting down refineries and pipelines," said Bush.

At the same time, the US president said electricity was coming online again and that the two major pipelines got up and running more quickly than he had expected, but that refineries were not yet "running full blast."

Exxon Sends Teams to Gulf Production Facilities After Storm

(Bloomberg) -- Exxon Mobil Corp., the world's largest oil company, said it is sending ``post-storm assessment teams'' to Gulf of Mexico oil and gas production facilities that were in the immediate path of Hurricane Ike.

``Once we ensure that our systems are both safe and operational, we will begin the process of returning to normal operations,'' Exxon Mobil said in a release today.

Gas Prices Climb Quickly as Refineries Remain Closed

HOUSTON — Oil companies were warning motorists on Sunday that they would not be able to produce adequate supplies of gasoline in the days ahead because so many of their refineries were still not operating in the aftermath of Hurricane Ike. As a result, prices at the pump began soaring again.

...At least 14 Texas refineries, representing nearly a quarter of the nation’s refining capacity, will probably remain shut for the next week or more. Three more Louisiana refineries may be damaged from widespread flooding.

“It may not be possible for us — and other manufacturers — to maintain normal supplies in the coming days,” Chevron stated in a bleak assessment on its Web site on Sunday, warning of “severe supply disruptions in the wake of Hurricane Ike.”

IEA Needs More Time to Assess Ike Oil Disruption

The International Energy Agency is still assessing the impact of Hurricane Ike on U.S. oil and gas output and a decision on whether it needs to release strategic stocks could take some time, the IEA said on Monday.

Two major Plaquemines levee breaches endanger refinery

In flood-plagued Plaquemines parish, the west bank continues to struggle.

Oil transfers from strategic reserve OK'd

WASHINGTON, Sept. 15 (UPI) -- The U.S. Department of Energy has agreed to deliver 239,000 barrels of emergency exchange oil from the U.S. Strategic Petroleum Reserve to the Placid Oil Co.

Department spokesman Andrew Beck said the oil will be moved using a Shell Oil. Co. pipeline.

ENSCO Unable to Locate One Jackup After Ike's Passage

The rig that is not accounted for is ENSCO 74, a MLT Super 116-C that had been located in approximately 230 feet of water 92 miles from shore in South Marsh Island Block 149. Aerial reconnaissance and a boat dispatched to the location failed to locate the rig.

Diamond's Ocean Tower Jackup Loses Drilling Equipment

Diamond Offshore Drilling reported today that tracking devices indicate all of the Company’s rigs maintained station during Hurricane Ike, and 10 of 12 units most impacted by the storm appear to have suffered relatively little or no damage according to reports from start-up crews and visual air inspections.

Of the remaining two, visual inspections by air indicate the 350-ft. IC jack-up rig Ocean Tower, which was directly in the path of the storm, lost its entire drilling package, including the derrick. An assessment team will fly to the Tower today, weather permitting. The jack-up unit Ocean Drake is in a Galveston shipyard, but due to access issues has not been inspected.

Conoco says Belle Chasse refinery still down

NEW YORK (Reuters) - ConocoPhillips said on Monday its 195,000 barrel per day Alliance oil refinery in Belle Chasse, Louisiana, remained down after shutting more than two weeks ago prior to Hurricane Gustav.

The refinery has power and is preparing for restart, the company said in a press release.

Hotline for gas gouging concerns

State officials are aggressively monitoring gas prices over the next several days. Gov. Jodi Rell asked the Department of Consumer Protection to monitor prices, and Attorney General Richard Blumenthal says his office sent out investigators to check prices over the weekend and into the coming week to make sure prices stay fair.

"Why should the gas prices go up if there is no shortage," Andrea Danetiu of New York said. "I don't think anyone should take advantage of the people."

Connecticut is no stranger to gas gouging in the wake of major disasters. In 2006, six retail gas stations paid nearly $45,000 for profiteering after Hurricane Katrina.

Governor Sonny Perdue's gas saving tips

Georgia Governor Sonny Perdue is asking drivers to do their part to help curb the gas shortage. He wants people to carpool and use mass transit, drive slower, and fuel up only when they need to.

Time For A Real Investigation Into The Price Of Gas

How can you say that the storm in the southern USA has resulted in residents of Prince George finding ourselves short of gasoline when one; the pipe line comes right into the city and two; the refinery that we get most of our fuel from is operating just as it was before the price of crude dropped from $150 a barrel to right around $100.

Price Controls Hurt Everyone in the Long Run

Understanding economics has never been a requirement to be a reporter or a politician. With gas prices moving back toward $4 a gallon, "price-gouging" seems again to be everyone’s favorite phrase these days. With the price of gasoline already Americans’ greatest concern, more so than the economy or taxes, it is a message that many people will be primed to hear. Presumably that is why a majority of Americans want higher taxes on oil companies.

Yet, if political threats of price controls and price-gouging lawsuits prevent prices from rising now, it is the consumers nationwide who will suffer in the long run. In the coming weeks, as people living in the disaster area try to get everything from fallen trees removed to food, the outcry against higher prices will only get worse.

Fuel surcharges are the top concern for many shippers

Imports from Asia via all-water routes to U.S. East Coast ports remain strong despite the weak U.S. economy, while exports continued to fill ships thanks to the boost from the weak dollar.

As a result, exporters and forwarders often find themselves scrambling for containers to carry their cargo.

But for many shippers and carriers, bunker fuel surcharges are the top concern. The surcharges are designed to offset the difference between a base cost for fuel built into a carrier’s official rate and the actual cost paid by the carriers when they fill up their ships.

Yemen Consumes 10 Million Barrels of Oil in Half Year

A report issued recently by the Central Bank of Yemen revealed that the country consumed over 10 million barrels of oils during the first half of 2008.

The report also noted that the domestic consumption of oil increased markedly to reach 10.9 million barrels of oil by the end of June 2008, some 31.5 of Yemen's total production of oil.

Shell reduces staff at Nigeria fields after attacks

ABUJA (Reuters) - Royal Dutch Shell has reduced the number of employees at some of its Nigerian oil fields after militants attacked several of its facilities in the last three days, a spokeswoman said on Monday. Militants attacked a Shell-operated flow station and gas plant in Alakiri in Rivers state earlier on Monday, killing at least one security guard and injuring four others.

Chevron says oil output not hurt by Nigeria attacks

ABUJA (Reuters) - Chevron Corp said on Monday that its oil production in Nigeria has not been affected by three days of heavy clashes between militants and security forces in the restive Niger Delta.

Iraq's oil exports reduced to 860,000 bpd

Iraq shipped oil exports at less than half the typical rate on Monday as bad weather slowed the main southern Basra terminal and a blast idled the northern pipeline to Turkey, officials and shippers said.

Oil exports flowed at around 860,000 barrels per day (bpd), down from average rates of close to 2 million bpd, shipping agents said.

United doubles second-bag fee to $50

CHICAGO (AP) -- United Airlines on Monday doubled its fee for a second checked bag to $50, citing volatile fuel prices.

Unlimited mpg? The great Volt debate

At some point, the EPA will have to give GM's new electric car a fuel-economy rating. It won't be easy.

Small glaciers -- not large -- account for most of Greenland's recent loss of ice, study shows

COLUMBUS, Ohio – The recent dramatic melting and breakup of a few huge Greenland glaciers have fueled public concerns over the impact of global climate change, but that isn't the island's biggest problem.

A new study shows that the dozens of much smaller outflow glaciers dotting Greenland's coast together account for three times more loss from the island's ice sheet than the amount coming from their huge relatives.

Kurt Cobb: The net energy cliff

Charles Hall, the father of the energy return on investment (EROI) concept, once told me that our current society would probably not be able to function if the EROI for the entire society slipped below five.

What does that mean? First, a quick review. It takes energy to get energy. EROI is a measurement of how efficient a process, an enterprise or a society is in obtaining energy. EROI is usually expressed in a ratio, say, 20 to 1. That would mean that the process being studied produced 20 units of energy for every one unit expended. As it turns out, that's about what conventional crude oil returns.

Hall estimates that the United States is currently running on an EROI of just under 40 to 1. This looks like a fairly substantial margin of safety over the 5 to 1 that might lead to societal breakdown. But worrisome developments in the oil, natural gas and coal fields may send us rushing toward that figure.

EPA Approves Hurricane-Related Fuel Waivers for Virginia and Ohio

As the result of the disruption in the supply of fuel caused by Hurricanes Gustav and Ike, EPA is exercising its authority under the Clean Air Act to temporarily waive certain gasoline requirements in the states of Ohio and Virginia. The waivers were granted by EPA, in coordination with the Department of Energy, at the request of Ohio and Virginia, and will allow greater flexibility for fuel distribution systems in these areas.

Pakistan: Angry people take to streets protesting power cuts

KARACHI - Scorching summer-stricken people Sunday took to streets after the continued and unscheduled loadshedding here in City.

The temperature remained around 40 C all the day and the relentless power outages by KESC added to the heat Karachiites faced Sunday.

Enraged people, after Iftar, came to different City roads and protested against the power-cuts, they chanted slogans against the government and pelted stones on the passing-by vehicles.

Edmonds calls for UK immigration ban

Edmonds insisted his views are not racist, adding that his fears centre on a looming energy crisis.

"Please be clear. I do not have an agenda that involves where people come from, the colour of their skin or what their religion is. But it is a fact that there is a finite number of people who can fit into a lift. This is an island and we have a situation now where we are going to run out of energy," he said.

Travel Green Wisconsin Was First, Now is the Largest, Program of Its Kind

For Hugh and Alicia Mulliken, proprietors of the charming Lodgings at Pioneer Lane in Ephraim, qualifying for certification by Travel Green Wisconsin came naturally.

Hugh, who designed the building about eight years ago as a replica of a historic store in the Door County village, included extra energy-efficient, two-by-six walls, high energy-efficient windows, lowvolume showerheads and extra efficient water heaters to save money and as a reaction to the energy crisis of the 1970s.

Adding to these features, Alicia wrote educational materials encouraging guests to turn off the air-conditioning when not in the rooms and to opt out of having all towels changed daily. Two bicycles are provided for guests to pedal to the sights.

High Costs Could Prompt Premature End to Oil Production

Consider what's now happening at the major mining companies as a harbinger of what we can expect to see with oil production companies. According to a recent article appearing in The Wall Street Journal (link below), a number of mining companies are curtailing certain of their operations, in some cases shutting them down completely. The explanation, which at first blush seems strange, especially given the run up in commodity prices over the last few years, has to do with operating and investment costs. The cost of energy to run mining trucks and other equipment has skyrocketed. In addition, certain materials needed to make mining buildings and related infrastructure, materials like steel, have also become considerably more expensive.

Carl Etnier: Survival 101

Can a young person risk going to college these days?_ That's a question nagging me after reading Zachary Nowak's "Crash Course: Preparing for Peak Oil." Nowak urges us to apply home-insurance reasoning to a future with less energy. Homeowners generally think the likelihood of their house burning down is tiny, but they pay thousands of dollars to have the resources for rebuilding in case it is destroyed by fire.

Iran, Venezuela must stop crying over falling oil prices

Iran and Venezuela are the two price hawks in the 13-member Organization of Petroleum Exporting Countries (Opec), which are virtually openly vowing to defend $100 a barrel as the benchmark price for oil. Such aggressive posturing, triggered, no doubt, by oil prices sinking to a five-month low, betrays a lack of their appreciation of an all-round fall in demand under the weight of credit crunch and high prices.

The price of oil has nowhere to go but up

It's amazing how quickly we've become accustomed to expensive oil. But what is expensive? When oil climbed to an all-time high of $147 (U.S.) a barrel in July, our oil-addicted planet seemed on the verge of economic suicide. Then came the selloff. The current price of $100-and-change seems a bargain, even though it's quadruple 2003's level and almost 30-per-cent higher than a year ago.

Oil bull still snorting

"Almost all of the world's largest oil fields were discovered over 30 years ago and have been lifting crude oil for 30, 40 or more years. So crude oil output from many of the world's oil fields is either flat (such as in Saudi Arabia) or falling (such as in Mexico). Even Russian oil output is dropping this year. No less an authority than the head of Gazprom recently stated that oil should sell for $250 or more per barrel."

Senate's 'Gang Of 10' Gains Another 10 Members, Pushes For Compromise On Offshore Drilling

Washington, D.C. (AHN) - A bipartisan group of senators known as the "Gang of 10" that is pushing for a compromise energy bill grew to 20 members last week ahead of a vote on offshore drilling.

Ten Reasons Not to Expand Offshore Drilling

The House of Representatives tomorrow will consider the Comprehensive American Energy Security and Consumer Protection Act. The bill is expected to give states the option of allowing offshore drilling 50 miles off the coastline. The bill does include some positive measures, such as “use it or lose it” language that would force oil companies to develop existing leases and a requirement that royalty payments be invested in alternative energy sources.

Yet allowing offshore oil drilling in areas that have been off-limits since 1982 is not the way to solve our energy crisis. There are many reasons that offshore drilling in sensitive coastal areas is a bad idea. These 10 are only the beginning:

Wind tunnel

The answer to America’s ever-increasing need for energy may indeed be blowing in the wind.

At least 20 percent of America’s electricity can come from the wind using the giant wind farms that are already becoming more prevalent across Texas, according to the Department of Energy.

Outspoken scientist delivers shots with book

When Environment Canada scientists were ordered to refer all media calls to Ottawa earlier this year, climatologist Andrew Weaver denounced the Harper government for "muzzling" federal researchers.

After the Conservatives announced "aspirational" targets for reducing Canada's greenhouse-gas emissions, the University of Victoria researcher said he could see no scientific rationale for the numbers. "Maybe they have a Ouija board or something," he suggested.

Now the colourful and outspoken academic has a new book, Keeping Our Cool, Canada in a Warming World, coincidentally published by Viking Canada the same week Prime Minister Stephen Harper called the election.

Oil Falls More Than $7 as Lehman Fails, Ike Spares Refineries

(Bloomberg) -- Crude oil fell more than $7 to a seven-month low as Lehman Brothers Holdings Inc. filed for bankruptcy and refineries along the Gulf of Mexico escaped major damage from Hurricane Ike.

Futures dropped on speculation turmoil on Wall Street and the worsening credit crisis may slow the global economy, cutting energy demand. ICE Futures, the exchange for Brent oil, suspended Lehman's access. Refiners said preparations are under way to restart plants in the Houston area, home to more than 20 percent of U.S. refining capacity.

``Oil has fallen because Ike's legacy will not be long- lasting, but also because of the carcasses on Wall Street,' said Rob Laughlin, senior broker at MF Global Ltd. in London. ``The ramifications of the Lehman fallout will be felt for some days.''

Hurricane Hangover, Shortages Ahead

Ike's sudden left turn just before it made landfall meant that the 13 refineries in Houston escaped the brunt of the hurricane's force. All are reporting they sustained no material damage and will begin the restart process as soon as power is restored. That could be a week to ten days before power is stable and another 2-3 days to restart. This suggests there could be a serious problem for refined products like gasoline and diesel.

Florida slaps gas sellers that raised prices with subpoenas

Florida's attorney general issued subpoenas Sunday to four companies that have reportedly raised gasoline prices dramatically as Hurricane Ike threatened oil supplies in the Gulf of Mexico.

Flying J, Dodge's Gas Stores, Valero and Pilot Travel Centers will have to provide invoices and other documents to prove that the costs they passed on to Florida consumers were justified, said Attorney General Bill McCollum.

Oil Is Down, So Why Is Gas Going Up?

So how do oil prices fall but gasoline prices rise in many parts of the country?

Shell finds "moderate damage" offshore after Ike

NEW YORK (Reuters) - Shell Oil said it found "moderate damage" at some of its Gulf of Mexico offshore production platforms in the wake of Hurricane Ike.

Morales struggling to control Bolivia

LA PAZ, Bolivia (AP) -- President Evo Morales struggled to assert control over a badly fractured Bolivia on Sunday as protesters set fire to a town hall and blockaded highways in opposition-controlled provinces, provoking gasoline and food shortages.

Nigerian Militants Launch Attack on Shell Oil Installation

PORT HARCOURT, Nigeria (Reuters) - Nigerian militants attacked a Royal Dutch Shell-operated oil installation on Monday in a third day of heavy fighting with security forces in the Niger Delta region.

The Movement for the Emancipation of the Niger Delta declared an "oil war" on Sunday and warned all oil workers to evacuate the delta immediately, threatening to further disrupt production in the world's eighth largest oil exporter.

MEND: Twenty-seven oil workers trapped in fighting zone in S Nigeria

The militant group in fight with Nigerian government forces said on Saturday that 27 hostages, including five foreign oil workers, have been trapped in a fighting zone in Eleme-Tombia, a riverside community in the Degemacouncil area of Rivers State.

International vs. national oil companies

IOCs offer technological expertise, operational capacity and project management as core strengths in striking oil and gas deals, yet they are finding it more difficult to provide a value proposition that is acceptable to the owners of natural resources and in terms of shareholder return.

Officials address Kashagan field delays

Astana has hosted the Third Eurasian Energy Forum Global Challenges and Energy Solutions sponsored by the Association of Oil Producing Companies of Kazakhstan KazEnergy. The main news discussed in the lobbies of the forum was possible further production delay at Kazakhstan’s giant oil field Kashagan. The Kazakh President’s advisor for the Caspian Region and the former head of Kazakhoil and the former prime minister, Nurlan Balgimbaev, believed that a likely time for the first Kashagan oil would be 2014, considering that “it is a technically and geologically complex project.”

Iran says oil prices down on stronger dollar

TEHRAN (Reuters) - Iran's oil minister said on Sunday the stronger dollar was behind falling oil prices, and said the market was still oversupplied with oil as OPEC's decision to cut output had not been fully implemented.

Kuwait Oil Min to face MP questions over refinery

KUWAIT (Reuters) - Kuwait's oil minister will face another round of questioning when he briefs a parliamentary committee on Tuesday about tenders for a giant oil refinery project some politicians say broke the law.

It is the second time that Mohammad al-Olaim has been summoned to parliament in a two-month-old row over the awarding of contracts in a $15 billion tender to build the 615,000 barrels per day al-Zour refinery.

Iraq to host fair for oil giants

Iraq is to host a giant conclave of the worlds biggest oil companies in London next month in a bid to open its vast reserves to long-term drilling contracts and counter impressions that it aims to shut out Western firms, it was reported here Monday.

Uganda: Norway Warns Country Over Oil

Uganda risks losing Norwegian money meant to support oil extraction and management if government does not consider environmental concerns in the areas near the oil wells, a Norwegian minister has said.

Physicists to Unveil Major Energy Efficiency Plan Addressing U.S. Energy Security, Global Warming at NPC "Newsmakers"

The American Physical Society (APS), representing 46,000 physicists in academia, industry and national laboratories, including nearly 60 Nobel Laureates, will release a major new study, Energy Future: Think Efficiency, that provides a roadmap for reducing America's dependence on foreign oil and its contribution to global warming through dramatic improvements in energy efficiency.

DARPA Eyes Cheaper, Greener Fuel from Coal

The U.S. Defense Advanced Research Projects Agency has unveiled an "aggressive" program to demonstrate economical and environmentally friendly conversion of coal-to-liquid (CTL) fuels.

DARPA has issued a broad agency announcement (BAA) soliciting research proposals and plans to award 12-month contracts totaling $4.56 million to demonstrate the feasibility of alternative coal to liquid (CTL) technologies. Already investigating biofuels, the agency says its CTL program is intended to demonstrate processes that could meet Defense Department demand for JP-8 jet fuel from U.S. coal reserves at a cost-competitive price compared with petroleum-based fuels.

Critics claim deception in Calif. energy measures

Supporters say the measures on the Nov. 4 ballot would help combat global warming and make California a leader in the alternative energy industry. Like most initiatives that wind up on the state's ballot, however, they're more complicated and contentious than advertised.

Opponents say they actually would undermine state efforts to promote alternative energy, add to California's already bloated budget deficit, saddle taxpayers with billions in debt and potentially benefit a handful of companies, including one linked to Texas oilman T. Boone Pickens.

Don't put all your eggs in one food basket: experts

In an era of climate change leading to more unpredictable rainfall, the way to food security is to diversify what one grows on the field, say international experts.

Singapore ready for rising seas

ENVIRONMENT and Water Resources Minister Yaacob Ibrahim has revealed some preliminary findings of a two-year government study on the impact of climate change.

The good news: Singapore is well placed to deal with the threat of rising sea-levels.

Global warming creating ‘environmental refugees’

Sunderbans: Global warming and consequent rise in the sea level is posing a threat to the population, turning them into ‘environmental refugees,’ in the Sunderbans, the largest delta region in the world.

Ocean scientists say the islands of Lohachara and Suparibhanga have been submerged . Erosion and submergence have been taking place in 12 sea-facing southern islands of the Sunderbans, putting at risk the lives of thousands of people and wildlife.

UK: Kindest cut

Let's face it – the 60% cut in CO2 envisaged in the original climate change bill is not enough. We need 80% well before 2050.

Lowest Ever Sea Ice in Arctic - WWF

Dr. Sommerkorn said the continuing loss of older, thicker ice, means that the Arctic ice cover is following a trend of becoming younger and thinner each year. The area of ice that is at least five years old has decreased by 56 per cent between 1985 and 2007. The oldest ice types have essentially disappeared. Taken together, the new figures clearly show the Arctic is experiencing the continuation of an accelerated declining trend.

Re: Oil prices fall. Two possibilities: Massive intervention. The Depression is on.

I guess, some entities were helping to the raising oil price trend to artificially high value of $147, the OPEC was tricked to produce "flat-out", now same entities are helping the falling oil price trend to run even lower, with elections in mind:)

I thought the suggestion was that Lehman had a large tranche of oil futures that they would have to sell - depressing the market.

Maybe so, but if so it puts to rest the notion that fundamentals control prices. Today gas stations are paying almost $2 a gallon more for gasoline right here in San Antonio than futures prices reflect for October. Stocks of gasoline are periously low. Production in the gulf at a standstill and refineries out of commission for a time and the effin' price falls?

Who'd have ever thought the United States of America would go Communist under a Republican administration?

Command Economy began Memorial Day, 2007 in the oil

And the US like every other successful nation, has borrowed the
"successful" elements of every defeated nation.

Ex-Jefferson Davis would be thrilled with today's DC.

Maybe so, but if so it puts to rest the notion that fundamentals control prices. Today gas stations are paying almost $2 a gallon more for gasoline right here in San Antonio than futures prices reflect for October.

Cowboy, there is a shortage of gasoline because 25 percent of US refining capacity is off line. While it is true that the most of the crude supply from the Gulf is off line it simply does not matter because there is no demand for that oil and will not be until those refineries come back on line.

I have been thinking a lot about this issue since yesterday. The financial markets are collapsing and the entire world, save oil producing nations, is in a recession. This has caused enormous demand destruction. The very poor and undeveloped nations of the world simply cannot afford to pay such a high price for oil.

The price of oil must drop until those nations can afford to buy again, or until supply drops so low that they are priced out of the market...forever. The fundamentals are still very much in play here.

Ron Patterson

...the entire world, save oil producing nations, is in a recession.

I believe that statement to be incorrect.

I too made that statement last week but was corrected by a couple of commenters here on TOD.

I did a little research and found that even Nouriel Roubini (and you don't get much more doom and gloom than that) says that only 50% of global GDP is contracting.

His comments can be found by going to Calculated Risk, scrolling down to the bottom of the page and clicking on the photo of Roubini. In his discussion he enumerates some of the countries that are currently in recession--United States, Eurozone, Japan and other advanced economies. China, India, Russia and other emerging economies are not in recession.

However, he does acknowlege that there is a real risk that the emerging economies could begin contracting, in which case we would find ourselves in a global recession.

China is growing at 10% YOY. Retail sales are up 24% YOY. No economy the size of China's has ever grown at this speed. IMO most are just reading the headlines about slowing global growth-the details do not match the headlines at all. In the USA right now, demand for gasoline exceeds supply by a large margin, which is why extreme price discrepancies are starting to occur-some areas cannot access the product in sufficient supply. IMO the USA is slightly below MOL for gasoline supply right now.

Thank you, BrianT. As I recall you were one of those who corrected me last week.

Wouldn't it be wild if we went into a prolonged period where the advanced economies continued declining and the emerging economies continued to grow?

Wouldn't it be wild if we went into a prolonged period where the advanced economies continued declining and the emerging economies continued to grow?

I think that is a very likely scenario. In Asia we can see the emergence of a new middle class with the buying power to begin the accumulation of mountains of middle class stuff.

In North America the middle class already has their mountain of stuff but now they have to pay for it. In addition, the equity they once had in their homes and investments is declining, and high value jobs are vanishing (have yet to see any forecasts of the impact of the current financial sector rationalization on NY property values and the luxury cupcake business).

If the two regions were forests the North American one is a mature old growth stand verging on collapse and decay while the Asian forest represents early first growth.

The real question is the degree to which Asia can develop internal markets and transition away from dependence on North American consumers.

It has begun-right now the #1 customer of Japan is China, not the USA.

US growth came about due to large internal markets and high tariffs to protect infant industry. Henry Ford played a role by voluntarily increasing the wage paid in his plants. His objective was to create a consumer class that could afford to buy his products. The key question is can China duplicate this and create an internal market of sufficient size to replace the declining purchases of US consumers.

If yes, then China and the other Asian nations possibly sidestep the crash.

If no, then the world goes into a depression and the outcome is ugly.

Do you have any data on other Chinese trading partners?

Patterns do not necessarily have to repeat exactly.
Enough of the command economy could perhaps be reconstituted in China so that an economy based for a few years on building capital equipment to deal with energy shortages might be possible.
Important trading partners of China would include Australia, Russia and Brazil, for iron, coal and agricultural produce as well as goods perhaps by barter from the US.

The far eastern nexus including Japan and Korea and South-East Asia is probably the most powerful in the world now.

It's not supposed to work that way. That would represent a paradigm shift away from 500 years of Western colonialism and neo-colonialism:

...the function of the Spanish crown was to promote the development of the Iberian Peninsula and that of the American colonies was to furnish raw materials and cheap labor for the greater prosperity of Spain.

Carlos Fuentes, A New Time for Mexico

Yes and no-quite a while ago the global elite identified the USA government as the #1 threat to their continued dominance-the threat is being dealt with rather effectively IMO.

If you look at history the leading state was the Netherlands. But the Dutch blew everything on a tulip bubble

Spain took over the economic lead as they had galleons full of sliver plundered from the New World. They spent this as fast as it arrived and built no industry apart from bullfighting.

The lead then passed to the UK due to low cost FF, cheap sea transport (later canal and rail) and the benefits of an open internal market. Imperialism followed.

The UK went bankrupt paying for WWI and WWII and the US, with even greater resources of FF, cheap transport, and a single global market gained ascendency. A good overview of the process is Paul Kennedy's The Rise and Fall of the Great Powers.

I cannot remember now all the details of his analysis but "Imperial overstretch," over-investment in military force and a consequent credit crunch were part of the dynamic.

Or maybe I missed the /sarconal tag? :-(

Yah, I agree with BOP: there's always some sort of change going on between which countries are dominant. You could even claim that the roman empire was weakened because of a transition of power from Romans to the colonies ("the trouser wearing senators" as opposed to toga wearers).

I can venture a possible continuation of the theme though: U.S. goes bankrupt because cheap oil ceases to exist, per capita we don't produce as much as we used to, and making money by selling each other houses has finally collapsed. What's strange is the the first part, cheap oil, is straight from the neocon playbook. Remember the project for a new american century papers published a few years before the second iraq war. However, as far as I can tell, the neocon response to this problem, invasion, has only exacerbated the problem thus far (costs a lot and isn't securing any oil supplies). A better strategy might have been to try to focus on the next resource that would drive world power rather than the last one, but who knows.

I thought the North American one was a clear-cut, barren wasteland, riven with soil erosion and a few monoculture stands of douglas fir ekeing it out, destined for carcinogenic chipboard bookshelves at wal-mart.


Hard to tell if that is supposed to be sarcastic. However, to a large extent, it is true.

Hello NeverLNG,

Yep, gotta agree with you. If we had never discovered the North American supplies of FFs & I-NPK*--> our population would probably be 50-100 million living in Haitian levels of deforestation and deprivation:

The First Patent
* Element K = Potassium, found in pot ashes

Most 'Murkans have no idea of our agricultural history and the impact upon the habitat. I like to use the 'excessive' example whereby most of my local neighbors in my Asphalt Wonderland think the food in the grocery store is delivered by lobsters bearing bananas in their claws across the Sonoran Desert. The madness continues: the golf courses, the upscale malls, and the well-to-do resorts are now starting to put down their winter lawn grass seed to lure the endangered snowbird.

Sadly, I wasn't being sarcastic. I don't know how much the state of our forests mirrors the state of our financial system, or the state of any other system or ecosystem in this country. It's a good guess though, that they are all reflections of each other, and that they are not being managed properly. My grandfather, Gordon Robinson, was one of the pioneers of multiple-use forestry, and he would take me up into the Sierra's and describe the different systems at play, including the soil, and the microbes within the soil that contain most of the water and nutrients of the forest system. In a multiple-use system, there is logging, but its not clear-cutting to be replaced with a mono-crop tree farm. The multiple-use includes: wilderness, selective-logging, recreation, hunting and fishing and overall maintaining the forest in a state where it can be used by humans and nature, indefinitely.

Here's a link to Gordon's book, The Forest and the Trees, from google, if anyone is interested.

The Forest and Trees Gordon Robinson


I am a forester these last 30 years, and quite familiar with your grandfather's work. Alas, he (and all of us "scientifically trained" foresters) assumed that policy would be determined by a rational analysis of the situation. But it's the same in forest management as it is in every other field of endeavor. But we soon learned that money, greed, venality always seem to trump a rational analysis. And so it goes, as it always has.

If the two regions were forests the North American one is a mature old growth stand verging on collapse and decay while the Asian forest represents early first growth

More like the old-growth forest was clear-cut, with its ecosystem nearing collapse, and the nation iyself symbolized by its treatment of the Bald Eagle, Spotted Owl and Polar Bear.

I just got back from China including the city and countryside. They are growing at a very fast rate and the beast demands energy. Their economy has a lot of momentum in the energy use area. Use range the spectrum from inefficient diesel carts to huge construction projects. As Matt Simmons is fond of pointing out, oil is cheap at these prices and 2x these prices for its energy output. Only profligate use of oil enables China's (and any developing country's) rapid growth. They will keep going for growth or else they will have a revolution on their hands. IMO what is going on with price has very little to do with demand destruction. That is just the line and I'm not buying it. Tomorrow the line will be something different, maybe even the truth.

I was with you right up until that last word.

Damn, you were so close.

truth is another receding horizon.

Yeah, I admit that I temporarily lost my mind on that one! However, I take some solace in the truth that is available on TOD. Thank you, everyone for all of the excellent posts and comments. Lots of food for thought to drown out the noise that otherwise passes as the truth from the new media and politicos.

C'mon BrianT ! You know how the US produces BS statistics. Like, the US economy really grew 3.3 % in Q2. Hahaha ! Well, yes, if inflation was 1.1% (that was the "GDP deflator" used to produce the 3.3% number). And you don't think China, with even less openness than the US, doesn't thumb-suck its numbers according to whatever T(Chinese)PTB decide they're gonna be ?
10 % Shmen-percent.
China has been exporting to the US and Europe.
The US and Europe are in recession.
Enough "stuff" already.
China is going down, bigtime, at least for 6-12 months. Then let's see.

Actually, although USA GDP numbers are bogus, there is no evidence that USA or China retail sales numbers are fabricated or purposefully inaccurate. If you have any, present it.

The total sales figure is "inflation-adjusted". If everything costs 5% more, and the same items are sold in the same quantities, then the retail sales figure goes up 5% unless you adjust for inflation. The skewed CPI numbers infect everything they're associated with.

The oil in the Gulf of Mexico isn't being produced so it doesn't exist as of yet where the market is concerned. Granted: the amount of oil produced in the Gulf is small on the worldwide scale.

The real law of supply and demand appears to be the law of money/product, not need/product.

I call that manipulation.

The GOM refineries import oil. That means Gulf production capacity is less than refining capacity. Unless the percentage loss in oil production was much larger than the percentage loss of refinery capacity (the reverse may have been true), that means there is a reduced demand for oil and a reduced supply of gasoline. By economic fundamentals, oil should go down and gasoline up. And so it is.

Gasoline futures are way down, not up.

What's the contract expiration? If people expect the shortfall to be of brief duration, then the futures could be low and spot prices very high. If you were to tell me that spot prices were way down, I would be suspicious.

An even greater disconnect seems to be going on in the natural gas markets. According to the EIA, domestic natual gas production is up about 9% over last year. Consumption is up only 2%. But in Sept 2007 Henry Hub spot averaged $6.08/MMbtu. Friday's Henry Hub spot was $8.05.

And that doesn't even begin to explain the wierdness with the run-up to over $13 in June.

Cowboy, you do have a strange definition for manipulation. Greed and fear drive the market and that is not manipulation. Right now hedge funds are dumping their crude oil and gasoline futures in mass. They are just getting out, cutting their losses. That is the "fear" half of the market. In a few days I expect the greed factor to kick in and prices will start to rise again. Perhaps, perhaps not, it is all just a crap shoot.

Manipulation implies that someone is deliberately controlling the futures or spot market in hopes of reaping a huge profit in the future. The Hunt brothers tried that with silver several decades ago and lost their ass. The oil market is many, many times the size of the silver market, especially the size of the silver market in those days. No one has the money to corner or even control the oil market.

However that is not to say that the oil market cannot be controlled, to some extent anyway. OPEC, which produces 45% of the world's oil and controls about 63% of world oil exports can manipulate the market. However no one else has that kind of clout so you should just get off your "manipulation" horse and forget about it.

Ron Patterson

Cowboy says he's a farmer, Ron. If I were a farmer, the markets would drive me crazy too.

Cowboy, the markets are mostly about confusion and the financial crisis today. Give it a few weeks.

Ron, I've never been much of a conspiracy theorist, and I also know stuff all about finance, but it does seem to me that the markets are being gamed, not just the oil market but the stock market and currencies.
Here is a link to how part of it works:http://seekingalpha.com/article/94314-the-great-dollar-pump-of-2008-a-doomed-central-bank-intervention?source=d_email#comment-248210

What you are saying about corporations playing manipulating the market is true, of course, as they will loose money.
It does not apply to other entities like, for instance, the US Government, which can use tax dollars, or actually debt dollars and so don't have to worry about losses.

They are also in a far better position to catch the market out than companies, as they can arrange an event, say a small invasion, and catch out the shorts or longs in markets to taste.

None of this means that the corporations aren't involved, as they are very cosy with the Administration, but they could not carry out manipulations on their own.

The money, or the ability to take on debt, may be bringing the game to an end though, and then we will get some idea of what it has all cost.

As we get closer and closer to a single world bank, doesn't it seem reasonable that "manipulation of the market" might be the goal? You don't need a "conspiracy" if you are the only player.

I've never been much of a conspiracy theorist, and I also know stuff all about finance, but it does seem to me that the markets are being gamed, not just the oil market but the stock market and currencies.

If the plan is published - does it stop being a conspiracy?

During those years, I had, as the boys in the back room would say, a swell racket. Looking back on it, I feel that I could have given Al Capone a few hints. The best he could do was to operate his racket in three districts. I operated on three continents. - Mr. Butler

What you are saying about corporations playing manipulating the market is true, of course, as they will loose money.
It does not apply to other entities like, for instance, the US Government, which can use tax dollars, or actually debt dollars and so don't have to worry about losses.

Surely you must realize that the US Government does not, cannot, and is not allowed to buy commodities futures. The US Government is perhaps the world's largest oil customer, not just for the SPR but for the military and civilian use. They (occasionally) buy crude for the SPR and finished products for everything else. But they never buy futures. I thought everyone knew that.

Ron Patterson

Your sarcasm is very subtle.

Since I am not American I am perhaps less familiar with all workings of their Government than you seem to deem proper.

You also seem to have a remarkable and somewhat touching faith that the present administration abides strictly within its legal confines.

Even the most naive can surely see the potential for proxy arrangements which whilst honouring the letter of the law would utterly evade its intent.

Dave, you do not seem to understand what you are really implying. Such a scheme would be bigger than Watergate if exposed. I know there are some really dumb people in this administration but not quite that dumb. What would be the risk/reward ratio? Prosecuted and sent to jail, anyone who was caught using taxpayers money in an attempt to manipulate the futures market, but what gain if not caught?

No Dave, no one in the Bush administration is using taxpayers money in an attempt to manipulate the futures market. It would take billions and be too big to hide.
Ron Patterson

Dunno, but the risks would seem minimal compared to an apparent willingness to court war.
They don't seem particularly worried that they will get prosecuted for any misdeed, judging by the way Hathaway was fed contracts.
It's really not too surprising when they have chums in the establishment who all scratch each others backs - witness Paulson's incestous relationship with Goldman Sach's and his bailing his billionaire chums out with taxpayers money in the Frannie fiasco.

Ten years ago, I would have agreed with you, but like inflation corruption and the debasement of office accelerates as it goes on, as does the insolence of office in a similar manner to a serial killer, who starts making mistakes as he feels himself over and above the law.

Hubris is a universal human failing, and all it's symptoms are fully on display in the current administration.

Dave, this whole debate is absolutely silly. Why on earth would Bush wish to diddle with the crude futures market when he has absolutely nothing to gain from such and such a stupid scheme and so much to lose? I think you grossly overestimate the effect of such a scheme and greatly underestimate the risk. Bye now.

Jeez, you argue as though Dubya is a rational actor. History shows otherwise.

I thought he had absolutely nothing to gain and a great deal to loose from invading Iraq, but he thought differently.

More seriously, whatever may be the case due to the constitutional niceties of America, which I have grave doubts the administration would observe, they certainly do not apply to the Governments of Europe, Japan or China, who if there is any such restriction would not think of observing it for a minute.

A large movement in the exchange rate, oil price or shares is very likely to attract intervention, and in the interests of preventing 'excessive' movements almost certainly would, up until the point where they give up because they run out of money - they've intervened loads of times.

Why on earth would Bush wish to diddle with the crude futures market

so the ship doesn't sink on his watch?

And the Republicans retain the golden seat.

Perhaps it is not just the Bush administration "gaming" the system. Who is going to whistleblow this if all the players are playing the same game?

What would be the risk/reward ratio? Prosecuted and sent to jail, anyone who was caught using taxpayers money in an attempt to manipulate the futures market, but what gain if not caught?

They didn't seem to have any moral scrupals about mudering over a million and displacing millions more in waging a terroristic war on Iraq and Afghanistan. So what's a little market manipulation compared to genocide?

The CIA has billions and the ghost companies to do it.

Here is information that the Fed is knowingly acting illegally by allowing Banks to use depositors money for trading:

Bernanke Violates Federal Reserve Act Section 23A

Allowing banks to extend funds to their brokerage affiliates is in violation of Federal Reserve Act Section 23A.

Section 23A of the Federal Reserve Act ( Act ), originally enacted as part of the Banking Act of 1933, is designed to prevent the misuse of a bank's resources through non-arm's-length transactions with its affiliates and to limit the ability of a bank to transfer its federal subsidy to its affiliates.

Permissions have been issued to AIG to do so, even though the Fed does not have that power:

Hello Darwinian,

Your Quote: "Surely you must realize that the US Government does not, cannot, and is not allowed to buy commodities futures."

Much easier and faster to just nationalize a strategic commodity when required:

Will Brazil Really Nationalize Oil?

Brazil threatens to nationalize fertilizer mines
Lots more examples spring to mind such as Mexico-->Pemex, and KSA-->Aramco, Morocco-->OCP, and Russia-->Gazprom soon?

Hmmm...perhaps that ability has been "outsourced" like everything else.

Control the money supply, you control the market.

Publishing disinformation is a useful tool if you want to manipulate markets.

Politicians are puppets. Their armies serve the needs of wealthy interests.

I've seen corn and other grain prices drop with the sound of a combine starting one too many times not to know that commodity prices can be manipulated.

For whatever it's worth, my dad is an oil man (geologist) as are two of my brothers.

ps. I don't like your condescending tone sir.

What kind of army does Saudi Arabia have?

They walk on eggs, trapped between a hostile population and a bunch of countries with big ass guns.

As for oil, Gulf refineries don't have enough of it:



What about gasoline prices?

$2.50 a gallon on paper. $4.50 a gallon to a service station for a real gallon in the real world.

And people (and the stations that service them) ARE buying gasoline at these prices.

RBOB gasoline futures are right now trading at about $2.57 a gallon, down 19 cents on the day. Add about 70 cents to 80 cents to that and you get the fair retail price. However there is a temporary shortage right now due to refinery and pipeline outage.

NYMEX RBOB futures expire the last trading day of the month. That is the 30th or fifteen days away. Obviously traders believe that the problem will be fixed by then. Think not? If so then it is a great time to buy gasoline futures.

That being said, the crack spread has been so narrow the last few months that many refineries have actually been losing money. They are now making a mint. I guess they believe it is about time.

Ron Patterson

"the crack spread has been so narrow the last few months that many refineries have actually been losing money"

Can you source this, please?

Who'd have ever thought the United States of America would go Communist

Are you a practicing Communist?

Actually, I consider myself a libertarian-leaning Independant. At the moment I'm registered as a Republican (so I could vote for Ron Paul in the Texas primary).

ps. Notice the capital C. Big difference between Communist and communist. I advocate local cooperation on a voluntary basis (communism), but detest large scale authoritarian Communism forced down my throat.

I heard similar on AIG - short swaps and long positions to clear out...not great for the oil price.

AIG is next on the block...the axeman is sharpening his axe, and the hood is on.

AIG could really do a number on the FDIC.

So, my take on the thread opening question...both...but it certainly looks more like the depression is on!

I'm not sure if its either of those reasons. It may be opportunistic selling from Lehman's portfolio. Regardless of the reason, I wonder if OPEC and Russia are amused. Likely not...

From an OPEC/Russian producer standpoint, I would imagine that if you told them last year that the conventional wisdom in September 2008 would be that they would be "unhappy" selling their product for $95 per barrel, they'd be in danger of an aneurysm from laughing so hard.

I believe that the current shenanagens have both OPEC/Russia's attention. A couple of points are:
1. The dollar isn't what it used to be and its prospects are indeed quite bad. The recent dollar rally is a total sham/prop. Producers are trading something real (BTUs/oil) for a paper promises.
2. Saudi/Russia/Venezuela etc. economies are very corrupt. The social programs and growth schemes become very dependent on higher prices. Nobody likes to get their allowance cut from the new normal. Spending cuts are not just a third rail of politics in this country. Further, all of these countries have rampant inflation, which incidentally they are at least admitting.
3. The marginal cost of producing a barrel of fuel is rising at a very fast rate. I don't know what it is for each of the regions, but it may be quite exponential in some cases.

The dollar rally certainly wasn't a sham. The dollar rallied not because the US economy was looking better, but all of a sudden everybody realized that this isn't going to be an exclusively US recession. It's obvious now that Europe is going into a recession, likely Japan as well, while China, India, etc are cooling. The dollar rally was based on global weakness, not US weakness.

I think the key to what is happening to the dollar is the yen/dollar ratio. The Yen has actually been getting stronger (despite the weak Japanese economy) relative to the dollar, even as the dollar gets stronger against a basket of currencies. The Yen dollar ratio is down today to barely over 105. It was over 110 back in August (i.e one USD now buys fewer Yen, so the dollar is weaker & the Yen stronger).

The (partial) explanation is the "Yen carry trade". The Japanese keep the Yen artificially weak by flooding the world with Yen loaned at 0.5% interest. They do this to keep their exports competitive. Until about last summer, this money flowed into US markets, keeping the dollar artificially inflated. Until, the yen/dollar ratio & the S&P500 moved in lockstep. As the Yen went down, the S&P500 went up, and vice versa.

When the US markets began to unwind last July, Yen began to flow out of the USD and into other currencies, including the Euro. The dollar went down, and the Euro went up.

What appears to me to be happening now is that the Yen carry trade is unwinding. This will cause money to flow out of the Euro, Swiss Franc, Australian dollar, etc (weakening them) and into the Yen (strengthening it). The dollar will appear to be getting stronger because nearly everything is going down in the basket of currencies that make up the dollar index, except the Yen.

The other main explanation for the rise in the dollar is the fall in oil prices. To be long oil is implicitly to be short the dollar, because oil is priced in dollars. As oil declines in value, the dollar in essence becomes worth more. But I don't believe this is the sole reason; the Yen would be going down if it were.

In any case, when the Yen carry trade winds down, oil stops falling, and the Fed lowers interest rates again, I expect the dollar to resume its decline.

As I noted over on the Lehman thread, worldwide oil consumption in 1939 was higher than in 1929:


The world was consuming more in 1939, because the world was producing more, and the US was a leading oil exporter. We were a primary source of oil for the Allies in the Second World War, but in 1939 we were less than 10 years away from being a net oil importer--more than 20 years before we peaked.

Big difference between 1929 and today: Our model (ELM), recent case histories and two years of annual worldwide data show an accelerating net export decline rate. Also, in 1929, millions of people in the US wanted to drive a car for the first time. Today, hundreds of millions of people worldwide want to drive a car for the first time.

However, the ELM suggests that the really bad news for financial institutions is still ahead of us:


American individuals and families were becoming more nomadic. This was partly due to the omnipresence of the automobile; there were three million more cars on the road in 1937 than in 1929...

Fredrick Lewis Allen, Since Yesterday

first. Thank you, Gail.


second. Ike. Meet Katrina. K-I-S-S-I-N-G. first comes love
and you know the rest.

Like NOLA, Houston will now start losing population.

The pop that can move, will move.

And it's no accident that the markets are sharply off
following Ike.

And that the US is desperate in it's foreign policy:

The Venezuelan President urged the White House not to “think of launching a coup or some madness such as this. I warn you, I am not the Hugo Chavez of 2002," he said, referring to a failed coup attempt against him in April of that year.

Tensions between the two countries grew this week after Russia deployed two of its strategic bombers to the country. The measure came in response to Washington's sending its warships to the Black sea in order to deliver what it calls humanitarian aid to Georgians after the Caucasus crisis.

"I have no doubt at all that the United States is behind plans to bomb this palace," Chavez said, warning that "difficult times" lied ahead for Venezuela."


Heres one to make you more safe and secure in the world;

"With White House Push, U.S. Arms Sales Jump"


"Department of Defense has agreed so far this fiscal year to sell or transfer more than $32 billion in weapons and other military equipment to foreign governments, compared with $12 billion in 2005."

This as much as any other reason is why we went into Iraq and why we are stirring up trouble elsewhere.

Cynical me has been wondering how much of the Georgian attack on Russian troops was designed to create a market to replace all that fancy new hardware that would be destroyed by the Russian counterattack. Arms sales are ever so much more lucrative when the weapons are actually being used rather than just rolling down the street on parade day.

Intervention by who? As far as I can see, it's just new money pulling out of a market they didn't understand in the first place. Pension funds, commodity index trackers, ETFs and the odd hedge fund. Triggered by OPEC overproduction versus a massive worldwide demand slump.

Stupid people losing money, it's always the same story.

I wish I knew the answer to that question. As a farmer who has suffered for years to those bastards, (whoever they are), suffice it to say that our meeting would not be friendly.

Anybody that honestly believes we operate in free markets is delusional or uninformed.

Anybody that honestly believes we operate in free markets is delusional or uninformed.

How about programmed or indoctrinated.

``The ramifications of the Lehman fallout will be felt for some days.''


This is most interesting. I wonder if the early dumping will be to reinforce the strong dollar trend and the later dumping will drive it the other way. WE of course don't know, but surely all of the Fed's stooges have great opportunity. It would be informative to know what the stooges are buying today. Could this be a Rothschild's scenerio unfolding?

CNN is showing some video from the Houston ABC affiliate. People are waiting in line for gas for four hours (and sometimes finding the station out of gas by the time they get to the front of the line). Some have to push their cars to the pump.

They interviewed one guy who was pretty ticked off, but said he would wait however long it took. He said he needed gasoline for his generator.

The lines were just insane. Several columns wide, wrapped around the block.

Here in Toronto, the financial media is talking about an oil and gasoline glut (as reflected in the futures prices ) while gasoline prices are at a record high (and rising). Shades of 1984 for sure.

Direct TV has already taken KHOU off Ch 361.

Like this thing is over.

Even as KHOU was just now showing the Bolivar Penninsula.

haven't even seen Port Arthur yet.

The US has never seen a major metropolitan area go a week with out

BTW-the eye of Ike went over us in NW AR. including the
calm. I kid you not.

17 000 homes w/o power.

Talked to the lineman who restored my power (lucky me).

Every outage was caused by downed poles. A "gustnado"
knocked down 6 large oaks on that pole.

As I said yesterday there is widespread confusion in the markets, traders don't know what hedge funds or positions are being unwound and few of them are willing to go long, yet. But once the refineries are up and running and once gas returns to a normal price demand will pick up and crude will go up again, but that's probably mid-October or November from here.

In addition to Lehman's positions being unwound Lehman may have loaned money or stocks to hedge funds who now have to settle those trades so that creates even more turmoil and uncertainty in the markets.

Exactly. It's confusion, and it will take time to work out.

Surely the big story is AIG?

The shares are down 60%, and according to CNN they have a $1,000 bn position in the markets.
This could be so much toxic waste - at least the buildings had some value to back up Frannie.

System crash would surely be a real possibility if it goes down.

EDIT: Peter Schiff was just on CNN, telling it like it is - the interviewer was gobsmacked.
The takeover of Merril Lynch is an attempt to get too big to be allowed to fail, and his advice is to go for gold and assets abroad.
Get out of Dodge, in his words.

Good job he is not peak oil aware, AFAIK, or he might turn pessimistic! :-)

Surely the big story is AIG?

Marc Faber had a video on Bloomberg saying that AIG could be a much bigger problem than Lehman. I had always assumed that Fannie and Freddy were the biggest problems around.

James Kunstler this morning had the best description of what has been going on:

The final act of this farce has been the so-called "financial industry."

That "industry" turned out to be most earnestly devoted to the production of complex swindles. They were so finely engineered that it took twenty years for the swindles to stand revealed, and they were cleverly hitched to the primary thing that the American public vested its identity in: house-and-home. Thus, much of the public finds itself in very real danger of becoming homeless and broke.

No wonder they needed people with PhD's in mathematics to develop financial models. They weren't *mitigating* risk - they were *hiding* risk. And now it is blowing up in their (and our) faces.

May Palin show mercy to the homeless ... :\

May Palin show mercy to the homeless ... :\

She is probably planning on arranging hunting trips, and gunning them down from a helicopter.

CNN is turning surprisingly anti-establishment, they comment everytime they show the clip of Greenspan commenting on the meltdown, they say 'some hold him responsible', and they have countered Paulson by putting on Paul Krugman directly after, to say that the system is certainly not sound.

After some U.S. attorneys were fired by the Bush attorney general for allegedly not going after Democratic campaign finance issues, instead of campaign finance issues of both parties, there is Troopergate. That is the politicization of the beaurocracy. If Palin did not think someone was loyal to her she fired the person. One is not allowed to fire people for political reasons, i.e. party affilitation. An indictment might be possible. The Republican party does not have a strong record of helping the poor, more likely they might pity the billionaire who complains about not having enough.

Baton Rouge recently emerged from a week plus blackout. And Washington DC took almost two weeks to get some neighborhoods back on-line after a hurricane about 6 years ago.


I thought generators only run on diesel? Not?

Small home generators almost all run on gasoline (in the US anyway). Big commercial generators run on diesel.

And there are SOME Home Generators that run on Propane and NG.

"He has the cure for the common Blackout"

There are many different kinds of generators. Gasoline, diesel, propane.

This resulted in "cascading shortages" in Africa a couple years back. When one fuel got scarce, everyone would run out and get a generator that ran on a different fuel, then there would be shortages of that one.

I lived in South America for a couple of years when I was a kid. We were "off the grid" in the jungle, and had two generators. One diesel, one gasoline. We never used both at the same time. We had two in case of failure or fuel shortage.

A few months back, I converted 2 small (3500 watt) generators to run on both gasoline or propane. The conversion kits can be ordered online, cost about 150 bucks and can be installed in about an hour. The advantage is that propane burns more completely and is a bit cleaner. It also allows the engine to run a bit 'cooler' and the fuel can be stored indefinitely.


CNN reports there's no gasoline to be had in Houston/Galveston. They showed people sucking a gas station dry. When they ran out of regular, people switched to premium, despite the premium prices. There was some fighting in the line. One woman was hoping to put gas into empty gallon milk containers, but they wouldn't allow that. Someone took pity on her and gave her a gas container, but the gas station went dry before she got to the pumps. (I assume she was trying to get gas for a generator.) The cops broke up the crowd, and people with no gas had to push their cars into a nearby parking lot and call someone to pick them up.

U.S. Aug. industrial output plunges 1.1%

The news isn't getting much play because of Lehman, but it isn't just financials that are in trouble.

Edit: Once again I have to shake my head in amazement at the markets. Today is the worst single day of financial news in my memory. Besides industrial production plunging and Lehman going belly up, AIG is borrowing $40 billion from the govt when it's market cap was only about $32 billion before the market opened and the shares plunged. AIG going under would be a bigger deal than Lehman. The Fed is now allowing equities(!!) as collateral for Fed loans. What happens to the Fed balance sheet when the companies whose stock it is holding go bankrupt (of couse, a cynic might say we now have a good idea of who is "too big to fail")? Do struggling banks get margin calls from the Fed? Can the Fed go bankrupt?

This is all really grim, and the equities markets are down less than they were last Tuesday. Today should be a bloodbath. So far it is just another down day.

It all seems kind of surreal, doesn't it shargash?

Something tells me this is a slow motion train wreck and it's going to take a while to see the broader implications unfold.

Yes, I think this is a slow-motion train wreck, and it might be a long time before people fully realize this.

There was this kind of panic last spring, but then Bear Stearns was bailed out, and everyone thought it was over. Or almost over. Now they've been reminded that it's not over. But this crisis will pass, and once again, they'll think it's over.

To use a baseball analogy...some analysts say we're in the bottom of the 9th. Others the top of the 7th. A few pessimists say the top of the 3rd.

But what if this is actually just the singer warming up for the national anthem?

Greenspan says it won't end until houses are affordable again. But what's "affordable," when people's incomes are falling and credit is evaporating? When prices drop enough so that an ordinary person can buy a house for cash on the barrelhead?

where will they get that cash to put on the barrelhead?

And what is cash, anyway? I used to think it was checking and savings deposits for sure, but if the banks go tits up, and FDIC is toast, then what will zeros and ones on a bank hard drive mean in terms of "cash"? What will come out of the ATM?

Stuff was cheap in the 30's. And there was lots of it. Just no one had any "cash."

Buddy, can you spare a dime?

Maybe the investor class is under the delusion that their paradise of totally biased government has arrived; everywhere they see that their kind is too important to be allowed to fail. The worse things get, the more government will hand them at our expense; not just cash, but privatization contracts that will never have oversight, trade protection for the few things we still manufacture, even the opportunity to build and operate a vast network of gulags cost-plus!

Why, by the time the country is bankrupt, all the holdings of the elites will have been converted into fiefdoms in the new order - ownership of the very laws that govern you, ownership of you.

"Why, by the time the country is bankrupt, all the holdings of the elites will have been converted into fiefdoms in the new order - ownership of the very laws that govern you, ownership of you."

And this my friend super390 is why I preach to keep the powder dry, despite our obvious political differences.

The most weird (and scary) part of all is that the MSM is reporting virtually nothing about the cataclysm we are going through.

I imagine a day most americans will learn US doesn't have a financial system anymore, only after their credit cards stop working.

Hello TODers,

I got a kick out of the photo in this link showing dozens [hundreds?] queued up for gasoline with their plastic gas containers in Spring, Texas:


My thoughts:

1. The gas stations are probably requiring this to eliminate the safety problem of ignorant people fueling their jugs in the back of their vehicles where a static spark then ignites the fuel due to no grounding. We TODers have all seen the YouTube videos of idiots setting the gas stations on fire by not practicing common sense.

2. Interesting logistic dilemma for those with more than two containers. See the newbie in the photo with four brand new 5-gal jugs. I picture him paying for the fillup of all four jugs, then while he is handcarrying the first two jugs back to his car, the other two full jugs will be stolen.

3.I bet an entrepreneur could make a fortune selling wheelbarrows, little red wagons, and two-wheel dollies to this crowd. Alternatively, some bright teenage kids could earn decent pocket change hiring themselves out to help schlepp these containers for their owners. If you haven't had the 'thrill' of your arms stretching while carrying two 5-gallon jugs for a quarter mile or more, after the first time: that wheelbarrow, or stoutly built teenager wanting some money will look pretty good.

4. I am guessing that Spring, TX which is north of Houston, is without grid power. Therefore, most of these people are queued up for genset fuel, and some family member is going to have to wait in line EACH and EVERY DAY for multiple hours until their grid power is finally restored [especially if there is a ten-gallon limit each purchase].

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

Allowing people to buy petrol in plastic containers sounds dangerous.
You have to have a proper container in the UK, which is a health and safety measure I would agree with.

Most modern ones in the U.S. are plastic. As long as it's the high density polyethylene it's probably okay as long as you don't heat it.

No matter what the oil prices are doing:

Rebound of 2005 peak group coming to an end?

Russia peaking; only a matter of time until hitherto growing group peaks fully and goes into decline

Methodology first explained here:
Bumpy Crude Oil Plateau in the Rear View Mirror

Happy days! CNN has announced that the executives at Frannie will loose their golden parachutes as the Treasury is refusing to pay out!

The smell of bad fish was obviously too great for them to slide this one under the counter, although a legal action from the executives would not surprise me.

Only a few hundred billion in scammed assets to recover elsewhere, then.

Let's hope Bernanke has to contribute eventually to make up some of the shortfall for the $1bn of assets he has bought for at least $200bn.

This is timely! Saturday in Boulder, CO there is a day long event about the energy and global warming crises. I look forward to cranky arguments between Mr. Kunstler and some of the panelists:


Saturday, Sept. 20, 10 am-12 noon, the Colorado Chautauqua welcomes the general public to a provocative, free-thinking forum titled "Catastrophe or Opportunity? Climate and Energy Action Heroes" in the Chautauqua Auditorium. This compelling event will be moderated by local author Richard Brenne, and will pit Jim Kuntsler, author of The Long Emergency (Atlantic Monthly Press, 2005), against some of our Western region's greatest thinkers, including:

* -Statesmen and former U.S. senators Hank Brown and Gary Hart on leadership and political solutions
* -Bill E. Shutkin of the University of Colorado's Leeds School of Business on entrepreneurial solutions
* -Faculty director and chair of the board of the Center of the American West at CU Patty Limerick on cultural solutions
* -Lead scientist for The Nature Conservancy, Sanjayan, on environmental solutions, and Chuck Kutscher, a Nobel Prize-winning scientist from NREL, on energy solutions.
* -Tickets for that morning's forum are $5 each.

After a lunchtime Texado BBQ (advance-purchase tickets required - $10 per person), there will be a series of forums with thinkers and Nobel-prize winners 1:30-4 pm, titled "Changing the Climate", "Power of - and for - the People" and "The Future of Food", all held in the Chautauqua Community House. There is no charge for these three afternoon panels or for guided tours of the Colorado Chautauqua National Historic Landmark. For full details, ticket purchases, and a list of speakers and biographies, visit Chautauqua's Grand Convergence website.

At 7 pm, the Grand Convergence's "grand finale" will be Joan Baez and Brett Dennen in a special etown live radio show taping in the Auditorium. This live radio show taping will feature music and conversation with the legendary singer/songwriter Baez, and budding star Dennen. 2008 is a landmark year for Baez, marking 50 years since she began her legendary residency at Boston's famed Club 47. Baez' celebration of her 50th year on the stage includes a new album, Day After Tomorrow, produced by Steve Earle. Dennen was named one of Rolling Stone Magazine's "10 Artists to Watch." Tickets are $20-$30 and can be purchased online.

So there's one guy that thinks we are in big trouble and an entire panel of folks brought in to tell you why he's wrong?

I wanna see Baez debate Kunstler. I don't really care what the subject is, really. I'm sure they'll find something.

After this week, you wonder if it will be a debate at all? More like a wake?

I am especially eager to hear the (former) politician's spin. Generally they are more pessimistic once they are out of office.

In case any one missed it Pierre Tristam really nails it.

"Flat-Out Lies Finding a Receptive Audience in Voters Seeking Denial"


"The last thing those brave Americans want is change. They want leadership that validates their delusion. Palin-McCain is their narcotic bridge to nowhere."

Americans have been swallowing lies for so long that truth is no longer an option.

No, we all know we're being lied to but the change Obama is talking about is the death of the US as it currently exists. Better to go with the liars, atleast you can muddle along. Obama supporters actually believe what he says despite his blank sheet resume and Marxist tendancies.

To paraphase Alan: Best hopes for peaceful Balkanization.

As an old leftie, I kind of wish Obama really had "Marxist tendencies" but look at the NY Times/New York magazine articles about his economic policies and they would line up fine with any Rockefeller era Republican. Mildly progressive tax structures which take some account of ability to pay, modest increases in capital gains taxes,etc.

But nothing so as "Marxist" as returning to the much more progressive income tax system that we had under 1950's Republicans. The truth is that Obama is tepidly centrist, but the current crop of
Republicans is HARD right, way outside the historical spectrum. The whole US political spectrum does not really include a "left" in the sense that the rest of the world has.

Which is why McCain can propose additional tax reductions for the top 0.1% despite the unprecedented and increasing levels of income and asset inequality in the US with a straight face, and nobody gets too excited. One imagines the peasants lying in the mud, tossing the last few coins in their pockets at the nobility rolling by in their gilded carriages. McCain wants to make sure they can afford more gilding and plenty of US peasants are happy to hand over their last few pennies (McCain is proposing much smaller tax breaks for working people than Obama).

I have to agree with you. Obama is not even close to leftist in any meaningful sense of the word.

Luckily for me, I'm tepidly centrist, so Obama works for me. He's far from perfect, but a hell of a lot better than McPalin. I could see Obama becoming another Bill Clinton - a smart centrist Democrat who gets things done. Hopefully he won't get as many people done, otherwise that's all the press will talk about.

"The whole US political spectrum does not really include a "left" in the sense that the rest of the world has."

Having traveled widely and seen the rest of the world, I'm really not interested in living like the Belgians. The current system, as ugly as it is, is preferable to anything the Pelosicrats can dream up. We are different than the rest of the world in a number of ways in that we are still a relatively free society, ask any Belgian, Frenchman or German who isn't on welfare.

I wouldn't mind paying higher taxes in exchange for some social benefits, but unfortunately, it results in just another mess. Just look at the Department of Education or Workman's Comp. Good idea, but we were much better of without it.

I'm not interested in lower taxes, I would prefer to pay more if the money goes to the debt reduction. Otherwise, I would just as soon keep my money.

You should really look at Obama's friends, they are all Marxist or even worse.

We are different than the rest of the world in a number of ways in that we are still a relatively free society, ask any Belgian, Frenchman or German who isn't on welfare.

Having spent most of May/June in France, it is hard to let this go by.
Nobody in France thinks of the US, where most people live in fear of bankruptcy from medical problems and/or destitution in retirement, with no trial/no charge Gulags in Guantanamo, where people get 2 weeks of vacation and take less, as particularly "free". Most of my wife's relatives are unwilling to come to the US, despite the power of the Euro, because of the police state gauntlet that the Transportation Security/"Homeland" Security makes them go through.

Keep drinking the Kool-Aid, but there is a reality out there (and in that reality, the "free" US has an incarceration rate ranging from 2x to 10X the rates in those "unfree" Euro countries). Ask the 2 million US citizens in jail, on parole, or on probation how "free" they feel?

And you don't have to go to Europe to see the difference. The border crossings between the U.S. and Canada used to be a neighborly affair, and now I detest traveling into the U.S. to suffer the storm trooper jack booted ICE, or whatever they are called these days.

Just as the Federal Reserve is neither federal nor a reserve, the Land of the Free and Home of the Brave is neither free nor brave. Living in fear locking one's doors, or taking refuge in gated communities is not freedom. It is fear and imprisonment.

I am convinced the "Great American Experiment" may very well go down in the history books as the "Great Advertising Campaign". You've been swindled and bamboozled. Heck, most think Budweiser is a real beer. Ureana de Cabello is what they call it in S. America - but I digress, ... and yet it seems to sum up the point entirely.

We are different than the rest of the world in a number of ways in that we are still a relatively free society, ask any Belgian, Frenchman or German who isn't on welfare.

I wouldn't mind paying higher taxes in exchange for some social benefits, but unfortunately, it results in just another mess.

Talking points and BS. FACT: the standard of living for much of Europe is higher than in the US. For their taxes they get better health care, better education, better social welfare and better government.

What do we get for paying EQUAL taxes (Yeah, that's right: your payroll taxes may be lower, but your total taxes ARE NOT.)

Ah... tired of bullshit and lies. This world is going to collapse for all the bullshit and lies, if nothing else.


Obama is talking about is the death of the US as it currently exists.

The US of A as shown in common media and presented in the books k-12 students read is already dead.

The dead are food for others. Sometimes the eater of the dead is man, sometimes vultures, sometimes maggots - but almost always bacteria along the way.

How much damage the dead does is what is up for debate.

Obama is mainstream mainstream mainstream. Not a marxist tendency in his being. It doesn't matter though, because the death of the US as it currently exists is happening as we "speak". Is this a bad thing? Think about it.

You seem to be leaning toward the right-wingnut side of the spectrum yourself.

It was obvious in 1990 that communism had died.
It is now obvious that laissez-faire capitalism has died, it is just that some do not realise it yet.

The notion that giving staggering rewards to the top people on the grounds that they created wealth seems to have been somewhat blown upon, as it's chief use has been wealth destruction via financial scams, whilst the social division in real and leads to a fatal division between the interests of the elite and the rest of society.

Nothing encourages sin so much as mercy, and the people who have sacked their companies, shareholders and workers whilst engineering huge bonuses for themselves need tracking down, imprisoning for gross negligence, and having their assets taken with punitive damages and interest.

Hopefully their joining the homeless will allow the preservation of their lives and that of their families, as just in the 30's when this mess strikes home their selfish rapacity will not go unnoticed by the population.

It was obvious in 1990 that communism had died.
It is now obvious that laissez-faire capitalism has died

Do you have actual Communist or laissez-faire systems to show, or just ones that someone has decided to call communist/laissez-faire for press purposes?

Well, Eric, from your comment it is apparent that I will not have any which meet whatever criteria you have to define that, so I must make do with societies which sufficiently fulfil them in my eyes.

Pol Pot, Ronald Reagan, presumably had identical economic ideals, you believe, I can only assume.

Technical Analysis (TA) – Fourth Post

Yet another oil takedown! My guess is that this low in price will last for at least a couple of days as the last of the weak longs are eaten up by the Smart Money (SM). Maybe the commodities markets will be kept down until after the oil expiration on the 16th and the options expiration on the 19th.

Now that the financials are starting to melt down, I'm guessing that everyone is going to start to wonder what is really “real money.” And, even with the world economy in the tank, commodities have real value. One possible reason for the commodities takedown was that that it induced a lot of the longs to let go of their positions, so that the SM could get them.

So, what would happen to the price of commodities if there was a “systemic” collapse of the system? If there is an inflationary jump, then pretty much all commodity prices should jump. If there is a deflationary dump, then zero coupon bonds should be the way to go. Only one problem with zero coupon bonds, someone has to issue them, and you have to trust that that someone will be “stable.”

Me? I'm putting all of my money into one dollar bills! Ha, ha, just kidding... Actually, I believe that now may be the time for a bunch of flexible, nimble trading, combined with the best fortune telling that money can buy.

So, what does TA say about all of this? I am using OmniTrader with the pattern recognition module, and I trade USO as a proxy for oil. Once again, I am getting a strong short signal on all of my strategies except for the “Reversal” strategy. I don't think that anyone needs a fancy program to figure out that things don't look too good for the price of oil. One interesting thing from last week was that the prices of the oil companies started to creep up...

I would guess that the SM will attempt to try to hold down the price of oil until as many expirations can be used as possible. Things like gold and silver will be no problem for them. However, as we all know on this website, oil is a different story. If I was a trader for any transportation company, I would be starting to fill up the storage tanks, and buying up every hedge I could find (for consumable fuels). Once the price of oil (and other consumable energy products) starts to trend up, these dudes will assure that the price spends very little time below the $100 level. On the other hand, many CFOs won't let go of a penny until said price does start an upward trend. That might not be a bad idea for paper oil, but IMHO, I would get every drop of physical fuel that I could store.

Right now paper silver is around $10.50; however, in some towns physical silver is around $20. We may see something similar with oil. On the other hand, I have heard that it has been made difficult to trade in the paper silver for physical. I would like to see such a thing attempted with oil! A version of this may be to allow the price of the oil products to go up while keeping the price of crude down.

So, I'm still keeping my USO puts for now. My TA is telling me to cash out now (profit goal has been met), so I may do that today. However, my TA is also telling me to add to my short position (all indicators are for more downward movement). I guess I'll just watch the market today and play it by ear.

Once again I have put myself out as a fortune teller – a sure way to end up looking like a fool. I am not an expert at TA, I am a beginner. Please add to this analysis, and don't feel shy about flaming me if I said something dumb. I definitely want to stay out of the group of the “stupid people losing money.”


Hello TODers,

NEW YORK (AP) -- Potash Corp. of Saskatchewan Inc. on Thursday said its board declared a regular quarterly dividend of 10 cents.
My feeble analysis: IMO, as long as people have the desire to eat then this dividend should be a reliable payment.

This should be a much safer postPeak investment than stock shares in swimming pool companies, tanning booths, Disney, golf course communities, etc. Maybe even safer than US Treasuries...if we start building Federal Reserve Banks of I-NPK. Recall my Ft. Knox postings: gold outside, I-NPK and seeds inside.

...And consider that most people's most liquid asset is equities. I think people are going to be selling equities just because they need to raise money. Broadly speaking, we've been in a bear market for a while, and that's going to continue. You're going to be better off in productive real assets such as commodities, fertilizer and food...
As posted before: It will be interesting to see how I-NPK stock prices gyrate between those that need to immediately sell to get cash now versus those taking the longer postPeak view.

No price relief for fertilisers

The latest from the USGS on sulfur [pdf warning]:

...Reported prices continued to increase through June as
supplies remained tight globally. The average customs value of
elemental sulfur imported into the United States in June 2008
was $252 per ton. This was 4% higher than that of May 2008
and nearly 12 times what it was in June 2007.
IMO, extended refinery shutdowns will only add to sulfur and I-NPK pricing pressure.

Have you hugged your bag of NPK today?

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

Only 10 cents ..
Generous SOBs considering the $$$ they're making ..
But none for the shareholders .. go figure ..

Triff ..

Hello Triffin,

Thxs for responding. My guess is that the I-NPK companies need to retain billions in profits so that they can continue to invest in expanded infrastructure. It takes billions and multiple years to start a greenfield mine and build the beneficiation factory. IMO, they will also have to start investing bigtime for transportation [RRs, ships, etc] to get the I-NPK moved to global markets.

They had the same problems back in the olden days of ramping guano, Atacama desert nitrates, and the 'deadheading' of multiple millions of 'immigrants' per year. Imagine financing a ship to sail around the Horn, then waiting six months or more for its return. Many were sunk by adverse weather, piracy broke out, navies went to war: all because there are No Substitutes to NPK, and job specialization is only possible by food surpluses.

I still am hoping for a President to announce universal O-NPK recycling [composts, manures, etc] to try and help forestall further I-NPK price increases and habitat decimation. Our national food security is at profound risk since we now import 44% of our Nitrogen [ammonia & urea products], plus the other imports of P, K, sulfur, and other trace Elements needed to power our topsoil above Liebig Minimums. Recall that when Germany shut off our Potassium imports in 1914: the price shot up to $500/ton, inflation-adjusted that's $14,500 per ton. Back then: I bet farmers cried bigtime when a heavy rain washed this potash away.

SPR Releases and Oil Prices

The first SPR releases are physical swaps, oil today traded for oil returned at a later date.

If a refinery is part of an integrated oil company, they have the option of returning oil with future production, a subtle future supply signal at most.

But independent refiners need to protect themselves by buying oil futures to offset their future crude liability.

So an SPR release should be balanced with a long future XX months in the future. Bullish for oil IMHO.


Holy crap. Dubya's on TV now, talking about gasoline shortages and empty pipelines.

I wonder when we will start hearing about flight curtailments because of jet fuel shortages.

Well, the Houston airport's not open. Maybe there will be enough "demand destruction" to avoid jet fuel shortages.

Like most refined products, the supply will not match demand geographically. Some airports will be fine, others out of fuel, depending on a large # of factors.

Air freighting fuel (fill up too much in a surplus airport and carry the fuel to a shortage airport) is not economic but some airliens will do this.


Last time, at least one airline trucked fuel in. Which some analysts pointed was kinda like trying to empty the ocean with a teaspoon.

It was in the southwest, IIRC. Phoenix, Denver, someplace like that. The southwest seems to be particularly vulnerable to shortages. There are pipelines from west Texas, but they aren't connected to the big pipeline system that serves the eastern US, and of course, they have no ports.

Atlanta would be a leading candidate.

They are open (limited) as of today, Monday, both Bush Intercontinental and Hobby. Status updates here.

I'm not sure how well their jet fuel pipeline is working, no updates at web site and I'm not as familiar with the usual reporting sources as others here.

Nah. Quick spot shortages aside, most people could be dissipating their lives in gas/diesel lines stretching halfway to the moon, and still there would be little or no curtailment of flights. After all, a government's gotta do whatever it takes to keep a vast army of self-appointed "VIPs" aimlessly flitting from "meeting" to pointless "meeting", lest said VIPs threaten economic Armageddon. That, and a vast army of "tourists" flitting in with all-important "tourist dollars" - never forget all those luscious campaign "contributions" from the tourist "industry".

Well, at least that's the way the thinking seemed to have worked during the shortages of the 1970s. However, there was one consolation - I never had the slightest trouble getting a nicely discounted flight home from university, which sure beat taking chances on gas outages along the way. Sadly, now that Homeland "Security" and pigheaded cheapskatedness (a.k.a. "democratization of aviation") have combined to make flying an absolute misery, even that consolation is utterly gone.

Of course there's always the slim chance that It Will Be Different This Time. But it would be very foolish to hold one's breath in anticipation.

Hello TODers,

Most of us are familiar with Richard Rainwater. For any TOD newbies:

The Rainwater Prophecy
Richard Rainwater made billions by knowing how to PROFIT FROM A CRISIS. Now he foresees the biggest one yet.

...Such insights have allowed Rainwater to turn moments of cataclysm into gigantic paydays before. In the mid-1990s he saw panic selling in Houston real estate and bought some 15 million square feet; now the properties are selling for three times his purchase price..
My guess is that he has probably already sold much of this real estate BEFORE Gustave and Ike hit Houston for a massive profit. Since he is now such a farmer: I wonder if he has shifted much of his portfolio into I-NPK stocks and/or more farmland for the long haul?

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

Hello TODers,

Lehman Workers Clear Desks, Weep After Bankruptcy (Update2)

`Hugging Each Other'

Sphinx Patterson, who takes a so-called body-pump and step class every Monday afternoon at Lehman's seventh-floor gym, said the complex was shut today, and the piles of towels had gone.

``People were hugging each other in the corridor,'' said Patterson, 35, who's worked at the gym for five years. ``I saw girls crying. They don't know what to do,'' he added.
Glad to see that many of these employees were consistently working out in the gym. All the better for a future of hugging bags of NPK and pushing wheelbarrows and pedaling bicycles....

I think it is postPeak critical that their resumes have info on cardio-levels, and the total number of pull-ups and sit-ups they can accomplish in a few minutes to enhance their future employment opportunities. As we shift the labor force to 60-75% manual labor: the physically fit young will be able to demand a premium over old farts like me.


Please excuse me if the toipc I'm about to discuss has been flogged previously -- I have been reading TOD fairly regularly for only about a year...

The toplink Kurt Cobb: The Net Energy Cliff got me to thinking about EROI, and an idea I have not seen discussed much here but one which has been bothering me a bit -- that EROI of less than one (less energy returned than invested) is or could be acceptable if it converts a form of energy into a more useful or desirable form. The obvious example is coal-fired electricity generating facilities, which according to my 10-seconds of research are about 40% or a bit less efficient ref: http://ims.eionet.europa.eu/Sectors_and_activities/energy/indicators/EN1...

Much of the instant dismissal of various alternative energies is based on low EROI, but this completely ignores the ideas that not all forms of energy are equal (energy density, portability, storage, etc.) and that some energy forms may be more highly valued by energy users as a result. Dismissing the seemingly significant technological hurdles involved with fuel cells, I can easily envision hybrid electric cars with limited (~100 mile) battery powered range, but instead of a supplemental internal combustion power source, either ethanol/methanol or hydrogen fuel cells provide extended (unlimited if refilled) range. If an energy source is valued to a greater degree than all the energy potential that went into creating it, it makes economic sense (is this a new concept -- energy opportunity cost?). If the source's creation uses "surplus" energy such as off-peak electricity generation or some form of otherwise wasted energy, does the concept of EROI begin to break down and have less meaning?

Billy Smith

...that EROI of less than one (less energy returned than invested) is or could be acceptable if it converts a form of energy into a more useful or desirable form. The obvious example is coal-fired electricity generating facilities, which according to my 10-seconds of research are about 40% or a bit less efficient......If the source's creation uses "surplus" energy such as off-peak electricity generation or some form of otherwise wasted energy, does the concept of EROI begin to break down and have less meaning?

Short answer, NO. Long answer: I'm concerned that you are muddying the waters here. I think EROI is a concept better applied to energy "manufacture" rather than energy conversion. We convert less useful forms of energy into more useful forms of energy all the time. We burn petrol in our cars to turn stored chemical energy (in the oil) into kinetic energy while constantly counteracting the effects of friction. These conversion processes are subject to the constraints of thermodynamic efficiency and therefore are necessarily ALWAYS less than 1. In other words, you put in more crappy energy than you get out useful energy. Energy conversion processes CANNOT EVER have an efficiency greater than 1 unless somebody discovers some new wacky physics.

But this thermodynamic reality (referred to as the second law of thermodynamics) is EXACTLY why we need an EROI greater than 1 when we "manufacture" energy, in order for society to function. When I say "manufacture" I mean, dig coal, oil etc out of the ground. Since these are in fact vast stores of fossil solar energy, the moment we started running society on these sources, we started running the battery down. But the point is, you get more energy out than you put in. This means you can make up for all the thermodynamic losses involved in turning that coal into something mechanically useful (e.g., a spinning electric motor).

So I guess I would strongly advocate that you don't confuse EROI with the second law of thermodynamics. Of course, making our living processes more efficient (e.g., doing something useful with off-peak spare electricity) mean we use less fossil fuel, which is a good thing since we're simply running down our planetary store of excess energy. However, there HAS to be a way to get energy at an EROI greater than 1 in order for us to exist. Ultimately there is only one source of free excess energy, our sun, so we're going to end up using solar energy (or it's derivatives, like wind) whether we like it or not.

Two quibbles:

1) Tidal and Geothermal energy are not solar energy. There are a number of these types of power plants operating.

2) EROEI can tell you comparatively how large a backend an energy systems will have. But, to do this you need to consider the energy out as delivered energy which means you need to consider conversion efficiencies. You can rename the measure if it makes you feel more comfortable. Cutler Cleveland often includes a figure with the mouth-of-the-mine EROEI of coal around 80. But, once the stuff is delivered to your toaster more energy has been spent than for wind or solar toasting your bread. So, coal requires more effort even if the mouth-of-the-mine figure looks favorable. http://mdsolar.blogspot.com/2008/01/eroie.html


Thanks to all who responded to my post. I have not yet had time to track down all the references but clearly I was mixing a couple of oranges in with my apples, and perhaps ignoring a couple of physics laws in there for good measure.

I had not really followed my ideas to their logical conclusion -- that all (or nearly all?) energy is converted into more convenient forms by humans for our own purposes, and that that process is inherently inefficient. At first glance, the exception seems to be using energy (converted to a useful form, naturally) to harvest/extract/generate more energy.


EROI is probably the single most important concept in discussing our energy future and, by extension, whether civilization is viable as an ongoing project.

It is a very complex subject and it involves making a lot of assumptions. Wikipedia has a fairly good article:

Measuring the EROEI of a single physical process is unambiguous, but there is no agreed standard on which activities should be included in measuring the EROEI of an economic process. In addition, the form of energy of the input can be completely different from the output. For example, energy in the form of coal could be used in the production of ethanol. This might have an EROEI of less than one, but could still be desirable due to the benefits of liquid fuels.

I think that this is close to what you were getting at in your post.

Richard Heinberg has a series of videos on EROEI (search Google videos) and what he calls "Peak Everything". Sort of a more generalized version of Cobb's "Energy Cliff". They are worth watching to get some more background.

Sometimes a concept from physics The Second law of thermodynamics is used to justify the assertion that we are approaching an "Energy Cliff". However, the second law is formulated for isolated systems:

In the natural sciences an isolated system, as contrasted with a open system, is a physical system that does not interact with its surroundings.

Real-world energy producing systems don't meet that criteria at all, so it is inappropriate to draw conclusions based on the second law.

I'll give you an example that you might find useful. Suppose that you had a pump that was draining the last oil from a field. As time goes by, it takes more and more energy to get less and less oil.

Case 1: The pump is powered by the oil that it produces
The net amount of oil available for outside work would continuously decline. At some point, there wouldn't be enough oil being produced to keep the pump running and it would stop. This is an example of the "Energy Cliff" in action.

Case 2: The pump is powered by electricity
The net amount of oil available for outside work would be the amount of oil produced and would continue until the field ran dry or someone turned the pump off. It would continue even if the EROEI was below 1.0. BTW, all the rocker pumps that I have seen around this area are powered by electricity - the electricity, in turn, is generated by a mix of coal, NG, hydro, and wind.

Why would someone produce energy with an EROEI of < 1.0? Well, one reason is that farm tractors and harvestors run on gasoline or diesel - and they don't run on coal, NG, or electricity.

A final point is that the EROEI for the entire energy system that I described - the pump along with its electricity sources - must remain > 1.0.

Hope some of this helps.

EROEI is the invisable hand of energy.

There is almost no wasted energy (people driving Hummers excepted). The only one I am aware of is Iceland has about 150 MW of excess hydro every summer.

EROEI is a parallel to economics and one must solve both "equations", economic & energy, to get what you want, or do without.


What focal points of new energy investments are there in USA?

The largest economics newspaper in Sweden today had an article pointing out that electricity production and distribution would be among the largest investment areas during the next 10 years. They estamated about $ 30 billion in electricity production and about $ 15 billion in distribution investments. This do not include any new nuclear reactors, its mostly life lengt extensions and upratings of nuclear reactors, renovation of hydro power, wind power and biomass fired CHP plants, cablification of the rural distribution, reinvestments in city areas and some new backbone grid parts. It seems plausible since this years investments are about $5 billion.

This do not count the investments in district heating and cooling networks or efficiency.

The latest official prognosis is 4,5 % electricity export in 2010 if it is an average year.
(The production were 140,1 TWh in 2006 and it is estimated to exceed 150 TWh in 2009)

This seems like a perfect market driven adaption to a post peak oil era since it assures the availablility of reasonably priced electricity. It might be the largest peak oil relevant investment although summing up sales of fuel efficient cars and private investments in energy efficiency, ground surce heat pumps, pellet burners etc would give a large figure.

The next realy intresting part is if we will get a political ok for new nuclear power plants.
(There are 10 operating reactors, 2 mothballed due to political reasons and the political spectrum runs from scrap some to build 4 new ones. )

What are the equivalent US investments? It might be best to compare on a state basis since Sweden only have a 9 million population.

Hello TODers,

I prefer the ag-experts do the talking, as I am not an expert on NPK:

Scientist says ag costs continuing to rise

.."We're seeing fertilizer prices skyrocket, primarily because worldwide market prices for crops are high, which increases the demand for fertilizers," he said. "The higher market prices are not only causing an influx of demand for fertilizers, but adding value to seed genetics and precision ag technology in the form of increased yields."
As posted before: I expect postPeak I-NPK prices to outpace FF prices due to the double whammy effect, FF/NPK latency, plus 80 million more global mouths to feed annually until the Dieoff kicks into high gear. JIT farming is an extremely dangerous process versus the warning to have seven years of stockpiles.

Also, the Defense National Stockpile Center is curtailing the sale of strategic items:


Of Wars and Strategic Metals

..One little noticed news item caught my attention and convinced me that our government is indeed making strategic preparation for a possible global war. It's recent announcements by the Defense National Stockpile Center. It's public information. On August 7th, DNSC suspended sales of six materials from the stockpile inventory, one of them being platinum...

..But facing the reality of global resource depletions including Peak Oil, I think a global resource war is all but inevitable in the very near future. I just hope it doesn't go nuclear. I am happy to see our government is trying to stock up on critical strategic materials like platinum and titanium. At least our leaders are sane enough to want to fight a conventional war, not a nuclear war...
As posted before: we are evolved to sit in the dark, starvation is the big hurdle. I think most Americans would gladly park their SUVs, then pedal, to keep their kids from being sent to bleed out in foreign wars.

But if we reach a situation of insufficient food: I could see lots of parents encouraging their kids to enlist, then telling them to not come home again unless they can return bearing a couple of cases of SPAM in their backpack.

toto - As much as you would like to deny it...on TOD at least for me..you are the expert on NPK! Obviously you are following this situation closely..and I like to read your numerous posts on the subject. I think when it is all said and done and long before we are draining the last of the oil...the food supply issue will be numero uno.

Brazil's Petrobras To Contract 10 Platforms For Pre-Salt Area

The FPSO platforms will be used in pilot projects in pre-salt areas.

The first two units, which are due to enter into production in 2013 and 2014, will have a daily production capacity of 100,000 barrels of oil and five million cubic meters of gas.


Australia had a 100,000 barrel a day offshore project lined up. This is the result as reported by the EIA:

"In July 2006, Woodside brought online the Enfield project. However, while the project was planned to have reached 100,000 bbl/d, output peaked at just 74,000 bbl/d, before dropping to 10,000 bbl/d due to water and sand in one of the main wells. Woodside has estimated that production from Enfield will average 50,000 bbl/d throughout 2007."

After the larger offshore prospects were developed, they turned to the smaller ones. The depletion rate was much higher. ASPO reported this alarming trend years ago. The larger fields in the Santos pre-salt, and GOM OCS should last longer. In the North Sea, most of the coming projects will be small and deplete more rapidly, than Buzzard and the larger fields discovered in the past. With declining prices, fewer projects may be possible as the funding dissappears.

A Sept 3, 2008 report; Australian oil production dropped 11.5% over the past financial year (2007-2008).

Australian oil production may have peaked in 2000. Australian oil consumption was projected to grow at about 2% per year through the next several years. Australia in the fifth largest country in the world.

Just heard on the CBS evening news: It will probably be well in to next year before the economy is back on track.

Wishful thinking if you ask me.

John Hofmeister wants gasoline rationing. The DoE has the authority to do it. However, it has been some years since an Administrator of the Economic Regulatory Administration (ERA) has been appointed by the President or confirmed by the Senate. http://www.law.cornell.edu/uscode/42/usc_sec_42_00007136----000-.html

As a result, rationing plans are a little stale and need updating. However, there is a very good one to start from that the ERA produced. You can read a little about it here: http://www.osti.gov/energycitations/product.biblio.jsp?osti_id=6307185


Stupid question about oil (product) pipelines: on the one hand it is said that it takes a week or two to get product through (from SE to NE US), as if the stuff enters one end of the pipe and travels to the other. On the other hand, it is said that the pipe needs to be kept full, thus MOLs etc. In other words, if no new product is available then the movement in the pipe is stopped, but the pipe is still full. As soon as some new stuff is added to the input end, some old stuff exits the output end. If so, there should be no delays: lack of new product should result in immediate shutdown of the flow, and appearance of new product should result in immediate restarting of the flow. How then to interpret statements such as this one? (This example is from Whipple's PO review, titled Sep. 1 but dated Sep. 15.)

It takes about 18 days for oil products to make the pipeline trip from Texas to New Jersey; therefore the impact of reduced refining is only now being felt across the southeast.
Even as power and offshore oil production is restored, the distribution network will be largely empty ... After production starts, moving the fuel to southern and east coast distributors will take anywhere from one to three weeks.

Hopefully somebody here knows how pipelines are managed and will clarify this.

I suppose you could put a pig in following the last product(gasoline say), and push itb with water, or oil. Then you wouldn't see any shortage until you emptied all the product. Of course this would simply delay the shortfall -and I suspect it isn't a good idea to use water as a pusher.

So if it is done as you suggest, it is the pressure that determines the output -presure travels at the speed of sound in the medium (close to a mile a second), so essentially the speed of product at the feed and exit points can be assumed to be the same, i.e. the product shortfall will be seen very quickly (i.e. it should already have happened).