DrumBeat: October 9, 2008

Demand destruction: Oil prices drop to 1-year low

Oil prices closed at their lowest level in a year Thursday, falling below $85 a barrel even after OPEC signaled it may try to slow crude's downward spiral by cutting production.

...Light, sweet crude for November Delivery fell $1.81 to settle at $86.62 a barrel on the New York Mercantile Exchange, the lowest closing price since Oct. 15, 2007. In aftermarket trading, prices edged below $85, a key technical level that traders say could signal another plunge.

In London, November Brent crude fell $1.70 to settle at $82.66 on the ICE Futures exchange, after earlier falling to a one-year low of $80.40.

Crude has shed about $60 — or 40 percent of its value — since soaring to a record $147.27 on July 11. The massive losses come as a global financial downturn forces people and businesses everywhere to cut back.

Behind OPEC's November Meeting in Vienna

Less than three weeks after an acrimonious Ramadan meeting in Vienna, OPEC has now called an emergency meeting for Nov. 18 in the Austrian capital. The reason is clear: The cartel is worried about the precipitous 40% fall in oil prices since they peaked at $147 per barrel in mid-July. The OPEC basket, a blend of OPEC crudes, dropped through the psychologically important $80-per-barrel level, to $77.38, on Oct. 9. OPEC countries typically receive less for their crude than the widely reported West Texas Intermediate (U.S.) crude, which is now trading at about $87 per barrel. "The organization is concerned about the deteriorating economic conditions with contagion risks," OPEC said in calling for the rushed confab.

Canadian dollar plunges to 87 cents on oil drop

Canada's currency dropped to the lowest since April 2007 as crude oil declined.

The currency has depreciated 5.8% so far this week following a fall of 4.5% during the period through Oct. 3, which was the biggest weekly loss since at least January 1971 when Bloomberg records begin. Canada relies on commodities for about half its export revenue. The U.S. is Canada's largest trading partner.

Energy deregulation compromise in jeopardy

LUXEMBOURG - A spat over foreign investments, notably by Russia's Gazprom, threatens to wreck the EU's plan to adopt by year's end a landmark climate change bill that would end gas and electricity monopolies and stoke more energy efficiency and renewable energy use.

Iraq to outline oil contracts to companies

Iraq will provide foreign oil and gas companies with details of service contracts under which it hopes the companies will help boost the country's oil output by 1.5 million barrels per day.

Brazil poised to become oil superpower

RIO DE JANEIRO, Brazil (AP) -- Four miles under the ocean's surface off Brazil's lush coast lie billions of barrels of recently discovered light crude - a treasure that could transform the country into an oil superpower.

President Luiz Inacio Lula da Silva called it "a gift from God" and pledged to end chronic poverty and narrow the country's broad gap between the rich and the poor.

But before rhetoric becomes reality, Brazil must first get to the underwater reserves, among the world's deepest, and then manage a massive influx of wealth - a formidable task that has left other national economies awash in corruption and even greater gaps between the rich and poor.

Proposed Canada oil sales ban may backfire-Alberta

TORONTO (Reuters) - While Canadian Prime Minister Stephen Harper wants to ban heavy-oil sales to countries with lax environmental records, he should not forget that Canada relies on crude imports from nations that make little effort to cut emissions, Alberta's premier said on Thursday.

The Peak Oil Crisis: Mea Culpa

Earlier this week The Washington Post's media critic, Howard Kurtz, published an apology on behalf of the media for its weak coverage of the multi-year run-up to the current financial debacle.

To quote the Post, "The shaky house of financial cards that has come tumbling down was erected largely in public view: overextended investment banks, risky practices by Fannie Mae and Freddie Mac, exotic mortgage instruments that became part of a shadow banking system. But while these were conveyed in incremental stories -- and a few whistle-blowing columns -- the business press never conveyed a real sense of alarm until institutions began to collapse."

In reading through the story I was struck by how eerily similar are the now admitted journalistic lapses and the failure to connect the dots in the financial story to what we have been witnessing in the media's coverage of peak oil. The heart of Kurtz's apologia is the troubling question "Why didn't they see this coming?"

OPEC schedules early meeting to discuss falling crude price

The Organization of the Petroleum Exporting Countries said today it will meet Nov. 18, a month ahead of schedule, to consider how to react to falling oil prices.

Oil continued its fall today, trading at $86.75 a barrel, down $2.20, on the New York Mercantile Exchange.

As Oil Use, Price Slide, OPEC's Hawks Fret

Right on cue, OPEC's price hawks are calling for an emergency meeting as the price of the group's reference basket of crudes hits $80 a barrel for the first time in a year.

The clamoring from Libya, Venezuela and others comes amid indications that even already deeply reduced expectations for global oil demand next year still may be too high, given the widening financial crisis.

Chavez Says Russia Supports Creating Oil Bank

Russia supports the creation of "an international petroleum bank," Venezuelan President Hugo Chavez said at a ceremony honoring late Argentine guerrilla leader Ernesto "Che" Guevara.

"We are going to create an international petroleum bank," Chavez said Wednesday on the eve of the 41st anniversary of the death of Che Guevara, who was executed by the Bolivian army on Oct. 9, 1967.

"Enough already with our people's resources having to be deposited in banks in the north, which you can see are sinking," Chavez said, referring to the global financial crisis.

OPEC exports to rise 320,000 bpd to Oct 25 - analyst

LONDON (Reuters) - OPEC oil exports, excluding Angola and Ecuador, will rise 320,000 barrels per day (bpd) in the four weeks to Oct. 25 on winter demand with no sign the group's decision to curb supply is crimping flows, an analyst who tracks future shipments said on Thursday.

Seaborne crude exports from 11 OPEC members, including Iraq, will rise to 24.69 million bpd, up from 24.370 million bpd in the period to Sept. 27, British consultancy Oil Movements reported.

The head of the consultancy, Roy Mason, said shipments were still rising ahead of peak fourth quarter winter demand for crude as refiner capacity builds to refine heating oil.

He said most of the export increase was heading to Western consumers.

Mexico unveils emergency spending to combat crisis

President Felipe Calderon on Wednesday unveiled plans for 53 billion pesos ($4.4 billion) in emergency spending on roads, schools, hospitals and an oil refinery next year to help Mexico combat the world financial crisis.

In a televised address, Calderon assured Mexicans the nation's banks are solid and haven't slowed lending to companies or individuals, despite a global credit crunch that has sent stocks here tumbling and seen the peso weaken to a record low against the dollar.

Mexico's Calderon Proposes Pemex Autonomy to Confront Crisis

Mexican President Felipe Calderon said Wednesday he is proposing to Congress giving autonomy to state oil monopoly Pemex to free the company from federal budget restrictions and give the government more money to spend next year.

Idemitsu starts selling spot gas oil to Mexico

TOKYO (Reuters) - Idemitsu Kosan Co, Japan's No. 3 oil refiner, has started exporting gas oil to Mexico on a spot basis, in addition to longer contracts, as demand for oil products in the Central American nation grows.

Company officials declined to disclose the volume and timing of the shipments.

Canada: Refinery maintenance creating diesel shortage

Refinery maintenance projects are crimping supplies and creating a shortage of diesel fuel, according to plant spokesmen.

"We have seen the demand for diesel sales go through the roof," said Jon Hamilton, a Petro-Canada spokes-

man. "Diesel is available but it's a lot tighter than it normally is. We are bringing product from the east and the west but it's not a gap we can fill."

"Fuel Crisis" In Erie County

Erie County Executive Chris Collins says because of the unexpected increase of fuel prices this year the county will soon run out of money to pay for fuel for county vehicles by the middle of this month. This shortage would impact important services such as sheriff road patrols, snow plowing, and emergency response. "I'm asking for the third time for the legislature to approve this administrative transfer of funds," Executive Chris Collins said in a news conference Wednesday.

Alabama: Gas shortages impact operations

An on-going gas shortage, both of regular fuel and diesel, is creating problems for county residents and local government operations as well.

“The county is out of gas,” reported Cleburne County Engineer Shannon Robbins during a Cleburne County Commission work session Monday afternoon.

Economic crisis same old for city's poor

Consider facts contained in a stunning report released Tuesday by the Food Bank For New York City, at its annual conference at the New York Marriott Marquis in the Times Square: "In the period from 2003 to 2007, basic living costs in the metro area increased as follows: food by 15%, fuel and utility by 37%, housing by 18%, medical care by 17% and transportation by 14%.".

During the same period, the report, titled "Child Hunger: The Unhealthy Return on Missed Investments," found that the number of city households with children who found it difficult to afford needed food grew by 41% and now reaches a whopping 45% of all New York City households with children.

The ripple effect of high oil prices

In America, rural regions stand to suffer significantly from the effects of high oil prices and may face substantial challenges in the years ahead. Rural areas generally lack public transportation, forcing people to spend record amounts of their income on energy. Up from 1.9 % in 1998, Americans on average now spend about 4 percent of their after-tax income on transportation fuels, according to Brian A. Bethune, an economist at the forecasting firm Global Insight. The number is worse for rural residents who are seeing as much as 13% of their paychecks spent on transportation. At the same time, the total amount of miles traveled on U.S. roads has dropped by some 2.8% this year. The increase in cost and decline in demand has resulted in rural interstate travel decreasing five times more than urban interstate travel.

At current or higher price levels, life in rural America is simply unsustainable. For example, Holmes County, Mississippi with a median income of around $20,000 is currently spending 16% ($3,200) of that on transportation. Should this continue, rural residents would be forced to migrate from rural areas to urban centers in search of greater economic opportunity, affordable living, and to take advantage of publicly subsidized transit systems. Christopher B. Leinberger of the Brookings Institute argues that in the long term other core governance functions like "schooling and safety are likely to improve in urban areas" as the tax base increases with a population influx.

Iran's gas exporters to skip West, eye Asia - Qeshm

AMSTERDAM (Reuters) - Most of Iran's future gas exports are likely to head to Asian buyers, skipping Europe due to tensions with the West, the managing director of Iranian petrochemical company Qeshm Energy said on Thursday.

Iran faces U.S. challenge in "pistachio war"

KERMAN PROVINCE, Iran (Reuters) - For some Iranians, it's a galling thought: the United States may oust Iran as the world's largest producer of pistachio nuts this year because of one of the worst harvests ever in the Islamic Republic.

The popular nibble is Iran's main export commodity outside the oil sector, earning it more than $1 billion last year, and providing many people with jobs in the arid, southeastern province of Kerman, which has 140,000 pistachio farmers.

Unusually cold weather during the flowering in April dealt a blow to the 2008 crop, which farmers say is down by as much as 75 percent from last season's record of 280,000 tons (617.3 million pounds).

...The poor harvest follows a severe drought that is forcing Iran to import millions of tons of wheat and causing power shortages in the world's fourth-largest crude producer.

Angola says neutralised rebels in oil enclave

LUANDA (Reuters) - Angola's army said on Thursday it had neutralised separatist rebels in the Cabinda enclave which produces half the African nation's oil.

Guerrillas from the Front for the Liberation of the Enclave of Cabinda (FLEC) have waged a low-level insurgency for three decades demanding more autonomy from Luanda and a greater share of revenues from Angola's 2 million barrels a day of oil output.

U.S. tries tough love to reduce Iraq's dependence

RAMADI, Iraq — In the past, when Iraqi police here ran out of gas, they often turned to the Marines, who generally obliged by filling the trucks and generators — courtesy of the U.S. taxpayer.

The Marines have a new answer for the Iraqis: no.

New U.S. intelligence report warns 'victory' not certain in Iraq

WASHINGTON — A nearly completed high-level U.S. intelligence analysis warns that unresolved ethnic and sectarian tensions in Iraq could unleash a new wave of violence, potentially reversing the major security and political gains achieved over the last year.

U.S. officials familiar with the new National Intelligence Estimate said they were unsure when the top-secret report would be completed and whether it would be published before the Nov. 4 presidential election.

Suspected U.S. missiles strike in Pakistan

DERA ISMAIL KHAN, Pakistan - Suspected U.S. missiles struck a Pakistani tribal region along the Afghan border on Thursday, intelligence officials said Thursday. Local sources told NBC News that nine people were killed.

They said civilians were among the dead, and the toll expected was to rise as victims were being taken to hospitals.

Pakistan: Loadshedding returns to haunt Karachiites

KARACHI - A respite for the citizens with regard to the power supply seems to be over as loadshedding has once again begun to disturb industrial and commercial activities in the city after Eid holidays.

North Korea prepares to restart nuclear facility

VIENNA, Austria (AP) -- North Korea announced Thursday that it is preparing to restart the facility that produced its atomic bomb, clearly indicating that it plans to completely pull out of an international deal to end its nuclear program.

...The North was to eventually dismantle the complex in return for diplomatic concessions and energy aid equivalent to 1 million tons of oil under a February 2007 deal with the U.S., South Korea, China, Russia and Japan.

But the accord hit a bump in mid-August when the U.S. refused to remove North Korea from its list of states that sponsor terrorism until the North accepts a plan for verifying a list of nuclear assets that the Pyongyang regime submitted to its negotiating partners earlier.

Paying at the pump just got more risky: Secret Service, police warn of 'well-organized' debit card skimmers

“We are looking at a sophisticated, very well-organized group of individuals,” says Detective Jason Visnaw with the Puyallup Police Department. When all the victims from these two incidents are identified, the total loss could reach half a million dollars.

Why steal debit card numbers? “With a credit card you have to go and buy merchandise and then you have to fence it or pawn it,” Det. Visnaw explains. “With a debit card, you’re getting cash money.”

The Power of the nonrational

For a quarter century, those who recalled Charles Mackay’s Extraordinary Popular Delusions and the Madness of Crowds and its many successors, and pointed out that uncontrolled speculation always ends the same dismal way, were told that they ought to shut up until they learned something about economics. Sober warnings from distinguished scholars were drowned out by a chorus of cheerleading, while less prestigious voices were pushed out to the fringes of the blogosphere. What is now painfully clear is that those marginalized voices were right all along, and their warnings could have spared us a massive economic disaster if the pundits and politicians who dismissed them had listened instead.

All this raises a question that deserves more attention than it usually receives: what makes a society accept or reject any given set of warnings about the future? At the ASPO-USA peak oil conference last month, a slightly more focused version of this question was much in the air. Several of the speakers expressed their frustration at the way warnings of global climate change have been picked up by the media and turned into an international cause célèbre, while warnings of the imminence of peak oil are still being dismissed as a nonissue by most people straight across the political and cultural spectrum.

GM, Ford fall sharply as outlook dims

A new report says U.S. auto sales will hit recession levels this year, threatening their survival.

Hybrid SUVs that carry real value

"Hybrid SUV." It used to sound like an oxymoron, but it doesn't sound so strange as fuel prices stay high. As long as drivers want them - why not make them as fuel-efficient as possible?

But not all hybrids are going to save you money in the long run when put next to their non-hybrid counterparts.

To figure out which hybrid vehicles are indeed a better value, analysts at automotive-cost tracking Web site IntelliChoice.com conducted an exclusive study for CNNMoney.com.

Green-collar pioneers eye offshore wind riches

Even with today's credit crunch and falling energy prices, money continues to flow for new U.S. wind farms, Armistead says, as major wind developers race to build the nation's first offshore project.

China's Faltering Oil Appetite

A lot of people who forecast the future tend to draw a straight line forward from existing trends. That's why people forecast a continuation of the breakneck increases in Chinese oil consumption.

There are at least two reasons to question that. One is that the current financial crisis could hammer the U.S. economy, and cut deeply into our purchases of all kinds of stuff, including stuff that comes from China. If that happened, it's doubtful that China would keep up its double-digit economic growth in the coming months.

The other reason is more benign: China has drastically raised fuel prices, effectively slashing its subsidies for motor fuel. And we all know that when retail petroleum product prices rise sharply, we tend to use less of them. Will the Chinese be any different?

Russia to face tough FX choice if oil falls further

MOSCOW (Reuters) - Russia is battling to keep its currency stable and prevent the stock market panic spreading to the streets but a further decline in oil prices could trigger a change in course.

With almost $550 billion accumulated in reserves, the world's third largest, Russia's authorities have enjoyed a certain degree of comfort in defending the ruble since foreign investors fled, spooked by the confrontation with Georgia that erupted in August just when global risk aversion was ramping up.

"The central bank will hold the (currency) level for as long as it can. Otherwise it may spread panic among the population," said Nikolai Kashcheyev, analyst at MDM Bank.

But even such a sizeable cash pile, accumulated thanks to oil revenues, might not be enough to sustain currency interventions requiring billions of dollars every day after the government pledged to spend $210 billion -- including $70 billion from reserves -- on rescuing the financial sector and bailing out struggling banks.

Libya cuts off supplies to Swiss oil refinery

Libya halted oil supplies to its Swiss refining unit Tamoil SA, a decision that will cut deliveries to the European country by about 2 million metric tons a year, Switzerland's Oil Association said.

"This is a political decision, not an economic one," said Rolf Hartl of Association de L'industrie Petroliere Suisse in a telephone interview today. "The whole of Tamoil's business in Switzerland is at risk."

Energy Markets: Losing their gloss: A liberalised market model is falling from favour

For over a decade Britain’s energy market has been among the most liberalised in the world. At one end, firms compete to sell electricity and gas to customers; at the other, market forces determine investment in power stations and infrastructure. But despite Ofgem’s relatively clean bill of health, in some respects the market is not delivering the goods.

Going for Gas

Europe needs oil and gas from the South Caucasus and the Caspian. So while the conflict between Georgia and Russia might appear to be mainly about territory, the biggest practical effects are being felt in energy supply. None of the solutions is especially appetising. A few days after the end of the Georgian war, major flows resumed through the twin arteries than carry Azerbaijani oil and gas to Europe: the $4 billion Baku-Tbilisi-Ceyhan (BTC) oil pipeline and the $1 billion Baku-Tbilisi-Erzerum (BTE) gas pipe. But the restoration of the greater part of Azerbaijan's export capacity masked a string of underlying problems that will force companies and governments, producers and consumers, to re-evaluate energy policy in general and their reliance on routes through the South Caucasus in particular.

What does the financial crisis mean for greens?

In the last two presidential debates, Barack Obama has twice said that solving America’s energy and environmental problems would be his administration’s top priority, regardless of what state he found the economy in when he arrived in office. John McCain, too, has said that we can fix the energy crisis and prevent climate change even while putting the financial system back on an even keel. But is the candidates’ optimism really justified?

According to a new Rasmussen poll, 48 percent of voters say there’s a fundamental contradiction between environmental policy and economic growth; essentially, half of Americans now believe we can’t have both a sound environmental policy and a strong economy. And let’s be honest: with the Dow in the doldrums and foreclosures still spreading like a rash, it’s pretty obvious which of the two options voters would prefer their leaders to prioritize.

Wood as a power source may be making comeback, even in Mass.

RUSSELL, Mass. (AP) - A proposed wood burning power plant in Russell is just the tip of the iceberg.

While airwaves have been permeated by advertisements for solar and wind power, last year wood generated more net electricity in the U.S. than those two up & comers combined.

ABC Won't Air Gore's Global Warming Ad

The media in the hip pocket of big oil and coal? Sounds like an outrageous claim given how much those industries get blasted on the networks. But that’s just what the CEO of the Al Gore’s Alliance for Climate Protection’s “We Campaign” has alleged.

CEO Cathy Zoi, in an Oct. 8 e-mail, complained that ABC, CBS and CNN aired TV spots for the oil and coal industry during the Oct. 7 presidential debate, but ABC was refusing to air theirs.

'Armageddon' in the oil patch

CALGARY -- Jeffery Tonken has lost a fortune over the past six weeks.

"It's Armageddon out there," Mr. Tonken, the chief executive officer of junior oil and gas company Birchcliff Energy Ltd., said yesterday.

"I've lost millions. Everyone has."

The value of Canada's energy companies has been devastated since oil plunged from record levels in the summer. Among the 58 companies in the S&P/TSX capped energy index, about $110-billion in market value has been wiped out in the past six weeks, calculations show.

..."Buy some ammunition, go to the hills and hide," said William Lacey, an analyst at FirstEnergy Capital Corp.

"We've gone beyond doomsday scenarios. There's no logic any more and this is an outright capitulation. Investors are simply throwing up their hands and saying 'I'm out,' " he said.

Richard Heinberg: Say Goodbye to Peak Oil

Now that the world’s credit markets are suffering the equivalent of a cardiac arrest, one can confidently say that the peak in global oil production is behind us. With demand for oil declining (because of global recession), OPEC will want to constrain production. With investment capital disappearing in a deflationary bonfire, oil companies will have difficulty financing new projects (even if they have full governmental go-ahead to drill, baby, drill). Thus even though the peak might have been delayed for another year or five if the credit crunch hadn’t intervened, that time cushion is now effectively gone.

This is not to say that Peak Oil should no longer to be considered to be of importance. In the larger, longer view of things, the energy decline will be the determining factor in the fate of our civilization—not a money or credit crisis.

Nigeria: Refineries Crippled As Crises Take Toll

The twin problem of pipeline breaks and epileptic power supply are taking their toll on the nation's refining capacity, as activities at all the nation's refineries have been completely crippled.

South Africa: Knock-on Effects of Increasing Petrol Price

Close to a fifth of car drivers claimed that they now occasionally travel with other people in a car pool arrangement and 6% claimed they are now making more use of public transport. In addition, over 9% claimed they had postponed a long trip or holiday because of the high petrol price. While the extent to which the petrol price is having this effect, as opposed to every other price increase is a moot point, the fact remains that many drivers report that the petrol price has directly changed their behaviour.

Of course, this still leaves the majority of drivers for whom nothing has changed, and this has to be the brutal reality for much of the working population for whom petrol is an essential, if grudge, purchase.

Africa: Global Food and Fuel Crisis Will Increase Malnourished by 44 Million

High food and fuel prices will increase the number of malnourished people around the world in 2008 by 44 million to reach a total of 967 million, a report from the World Bank says.

While food and fuel price increases may have moderated in recent months, prices remain much higher than previous years and show few signs of declining significantly, according to the report entitled “Rising food and fuel prices: addressing the risks to future generations”. Poor families around the world are being pushed to the brink of survival, causing irreparable damage to the health of millions of children. As families cut back on spending, there are also grave risks for the educational performance of poor children.

Oil, war, lies and bulls**t'

In this critical sense, I will argue, rather regretfully, the anti-war movement itself has indeed played a significant part in the Bush administration's reckless and frantic foreign policy. Moreover, I contend that speaking of oil as the cause of war is clumsily out of context and thereby distracts our attention from the neoconservative /militarist/Christian Zionist vision of the Bush-Cheney administration.

And, particularly, by invoking "No Blood for Oil", the anti-war left - including radicals and certain self-proclaimed "Marxists" - is, advertently or inadvertently, blameworthy of sweeping the real cause of war under the carpet.

Indonesia Papua forests seen under palm oil threat

JAKARTA (Reuters) - Indonesia must do more to save pristine rainforests in Papua from destruction, particularly with plans to open up huge tracts of land to develop palm oil plantations, environmentalists said on Wednesday.

The rapidly expanding palm oil industry in Southeast Asia has come under attack by green groups for destroying rainforests and wildlife, as well the emission of greenhouse gases.

Green architecture opportunity in financial woes

WASHINGTON (Reuters) - The current financial downturn could spur demand for sustainably designed buildings and communities, the chairman of one of the world's largest green architecture firms said on Tuesday.

"It's the environmental opportunity of a lifetime," Bill Valentine of the HOK firm told the Reuters Global Environment Summit. "And if we don't use it now as an opportunity to make the sustainable movement not just make progress, but gallop ahead, we've lost our chance."

OPEC reportedly considers meeting to stop crude's fall

The price of crude continued to drop Wednesday as the sagging world economy sapped demand.

The Organization of the Petroleum Exporting Countries reportedly was considering a November meeting to discuss reducing production to shore up prices.

Shokri Ghanem, chairman of Libya's National Oil Corp., told Bloomberg News in a telephone interview from Tripoli that OPEC may meet Nov. 18 in Vienna.

"Oil producers are losing money because prices are falling," Ghanem said. "We'd better keep the oil in the ground and not sell it because the international banks are collapsing, and we may lose our money there as well."

Global crunch strains Russian economy

MOSCOW — Battered by the global sell-off, the economy Vladimir Putin built has begun to show its chinks. Russian stock markets have nose-dived, a construction boom has ground to a halt and energy titans like Gazprom and Lukoil are urging the Kremlin to lend a hand.

Like other emerging economies, Russia is finding itself far from immune to the turmoil afflicting U.S. and European markets. And with oil prices continuing to drop, the country's overdependence on energy as the engine of its economy only makes matters worse, analysts say.

Energy descent

Capitalism works! Just as the planet is driven to the brink of environmental destruction by our crazed pursuit of increased growth and consumption, so the hand that guides us begins to crumble.

Financial commentators have agreed on the cause. It was the bankers who made bets with money they did not have, putting new money into circulation as debt, often in excess of 20 times more than the value of assets they actually held. Then, as those limited assets dramatically lost value, there became no way to service these ludicrously leveraged bets.

What is not being discussed quite so openly is that the dramatic fall in the value of these assets is not a US sub-prime issue. This is only the symptom, not the cause. What caused this meltdown in asset value is a realisation by the international financial community that we have peaked. Ladies and gentlemen, our generation has inherited the era of peak oil, peak everything. The oil has not yet run out, but from now on, year on year, there will be an ever-decreasing supply available to us. The all powerful neo-liberal model of unceasing expansion and growth lies in tatters.

Scottish councils urged to get into peak oil practice

AS THEY grapple with the implications of climate change and the imperatives of "going green", Scotland's local councils, as an integral part of their responses to these twin "missions", also need to come up with sustainable transport and energy solutions. To help councils formulate their thinking, two organisations, the Oil Depletion Analysis Centre (ODAC) and the Post Carbon Institute, have got together to produce a guide aimed at local councils, outlining the implications of "peak oil" and the kinds of responsible options that are available to councils.

Next 20 years will see rapid changes - Sargent

“We need to drop that energy demand or else we drop people and that’s a pretty stark choice. Our global village depends on a sea of oil and in 2020 that will not be possible to depend on.”

He went on: “The next 12 or 20 years will probably contain more change than has been the case in the last 100 years. But, hopefully, it will be voluntary change.

“Life will be busier but less stressful and we will probably be healthier and lead more useful lives.”

Who's the man with the plan now?

There are more storms brewing on the horizon – global warming, peak oil, water scarcity, food insecurity are rolling towards us. These are momentous, frightening times. The fundamentals of our economy, the sustainability of human life are under threat. This is no time for timid, piecemeal politics.

Petrobras Seeks Redress After Losing Ecuador Block, Gazeta Says

(Bloomberg) -- Petroleo Brasileiro SA, Brazil's state oil producer, is in talks with the Ecuadorian government on getting $250 million compensation for ceding an oil block, Gazeta Mercantil reported, citing an unidentified person at the company.

Petrobras has given up exploring Block 31, which may yield as many as 30,000 barrels a day, because it's located in an Amazon Indian reserve and could present the company with social and environmental problems, according to Gazeta. The transfer of the block and receipt of payment may take at least four months, the Brazilian newspaper said.

Angola oil output dips to 1.959 mln bpd - Sonangol

CAPE TOWN (Reuters) - Angola's oil production has dipped to 1.959 million barrels per day after touching 2 million bpd earlier in 2008, a senior official with the state-run Sonangol oil firm said on Thursday.

...He cited production problems in one of the southwest African nation's oil developments for the drop.

Iran Offers to Cooperate With Saudi Arabia, Kuwait on Gas Field

(Bloomberg) -- Iran, holder of the world's second- largest oil and gas reserves, offered to cooperate with Saudi Arabia and Kuwait to jointly develop the disputed Arash gas field, which spreads over the three Persian Gulf nations.

Iran has suggested the three countries cooperate on ``investment, development and production and for the natural gas to be exported to Kuwait and Saudi Arabia,'' Mahmoud Zirak Chianzadeh, managing director of state-owned Falat Ghareh Oil Co., was quoted as saying by Shana.

S. Korea indefinitely delays power cost hikes

SEOUL (Reuters) - South Korea has put an indefinite hold on its plan to lift power costs in the latter half of the year, Seoul's energy ministry said on Thursday, a decision prompted by inflation pressure and falling oil prices.

South Korea, heavily dependent on foreign energy reserves, was planning to raise electricity and gas prices by 5-8 percent as fuel costs increasingly became a burden for state-run energy companies -- Korea Electric Power Corp and Korea Gas Corp.

Is it possible to spend a winter without heat?

With rising energy costs, is central heating for wimps? And can you face winter without turning on the heat and without breaking up your marriage?

Cheaper food and petrol offer cheer amid the gloom

The first signs of respite for consumers came yesterday as a slump in the price of crude oil held out the prospect of lower prices for fuel and food.

Supermarkets are preparing a new round of price cuts in coming weeks after the dramatic slide in crude oil to $86 (£50) a barrel, the lowest price for a year, and amid signs that food inflation has stalled.

Can Korea Learn From Wall Street Folly?

Asian economies, such as Korea's, have benefited for decades from the exchange of cheap Asian credit for American consumption of Asian products. But should this arrangement significantly falter or fail, we could see America's weakening economic leadership position being filled in part by China.

Police look to trade 'gas hogs' for fuel-efficient fleet

Last year at this time, Mike Cochran, assistant chief of the Lauderhill, Fla., police department, was driving a Ford Crown Victoria cruiser that he says got about 14 miles per gallon.

Now, as municipalities count every penny amid the economic crisis, he drives a four-cylinder Chevrolet Malibu that, according the Environmental Protection Agency, gets about 30 mpg on the highway.

"We started trying to segue away from the gas hogs," Cochran said. "When we can, and where we can, we are trying to put officers in more fuel-efficient vehicles."

Fancy a free (electric) car?

LONDON (Reuters) - Plummeting car sales, climate change, high oil prices and the threat of global recession. The answer? Free electric cars.

So says the founder of California-based electric car operator Better Place, Shai Agassi.

"Do you want a $40,000 car, a $20,000 car or drive this car off the lot for free?" he asks.

...Agassi calculates the present running cost of a pure electric car at some 7 cents per mile compared with about 35 cents to run on gasoline -- contrasting the dual cost of electricity plus battery with the cost of gasoline.

That price difference is the source of his teaser.

Why motoring will only get more expensive: three views of the future

As we struggle with high fuel prices and taxes intended to tackle global warming, Andrew English analyses three views of the future.

Exxon to Build $325 Million Battery-Part Plant in South Korea

(Bloomberg) -- Exxon Mobil Corp., the world's largest oil company, will invest $325 million to build a factory in South Korea to produce a main part of lithium batteries used in power-hybrid cars.

Consensus takes form on forests and climate change

BARCELONA (AFP) - An elusive consensus on the best way to reduce forest carbon emissions took shape Wednesday with the release of a joint statement by forestry companies, green organisations and indigenous peoples.

Climate change poised to devastate penguins: WWF

BARCELONA (AFP) - Half to three-quarters of major Antarctic penguin colonies could be damaged or wiped out if global temperatures are allowed to climb by more than two degrees Celsius (3.6 degrees Fahrenheit), according to a report released Wednesday.

A two degree hike would threaten 50 percent of breeding grounds of emperor penguins, and 75 percent of Adelie penguin colonies, said the study, released by the World Wildlife Fund (WWF) at the World Conservation Congress in Barcelona.

On the possible Opec meeting

What will be the affect of closing the taps, considering the current crisis


I think it cements Peak Oil as a fact of present history (barrels of oil produced) and insures collapse of the neo-liberal model of continual economic growth.

Thats in the long term I suppose, but what in the short term?

Nicely said though :)

According to a new Rasmussen poll, 48 percent of voters say there’s a fundamental contradiction between environmental policy and economic growth; essentially, half of Americans now believe we can’t have both a sound environmental policy and a strong economy. And let’s be honest: with the Dow in the doldrums and foreclosures still spreading like a rash, it’s pretty obvious which of the two options voters would prefer their leaders to prioritize.

Stupid Americans, go to the blackboard and write 700 billion times, *ECONOMIC GROWTH IS NOT SUSTAINABLE!!!* Ok, now go back and study some physics, chemistry and biology with an emphasis on ecology and population overshoot.

It will help drive the global economy further into a recession. If demand keeps falling and OPEC keeps lowering its output to keep oil prices above the 1980 level in real terms then they are helping to create a depression. All the talk about the immunity of the western economies to high oil prices are ludicrous.

So they are shooting themselves in the foot, if they do so?

Exactly. So they probably will not follow this path.

I disagree oil demand is known to be inelastic once they figure out that most of the demand drop was from the crashing housing industry and that further demand reduction is inelastic I think they will have no problem ensuring that we have a depression with high oil prices.

And thats assuming that OPEC actually has enough spare capacity to have a long term effect on oil prices. So far the data for 2008 indicates that at best they have some short term surge capacity that lasts only a few months and worse results in low production in the months before the surge as normal production is redirected to storage and after the surge as fields are rested and normal storage levels restored. So basically it seems OPEC can surge production for 2 months at the expense of 4-5 months of low production. Thus they can only surge once a year this leads to artificially high prices in the months leading up to the surge and artificially low prices after the surge. The net effect is simply to increase the volatility of oil prices.

Yes, ultimately there will be no capacity in OPEC and the rest of the world to supply even depressed levels of demand. But in the next couple of years I do not think this is a problem.

Memmel, I love your posts and agree with you about 90 percent of the time. But this time I must disagree. (That is if you are saying what I think you are saying.)

Oil demand is not inelastic by any stretch of the imagination. During the run up in oil prices during the early 80s, oil demand dropped 15 percent. (Supply dropped by 15 percent so oil demand had to drop by 15 percent also.)High oil prices cause people to drive less. High oil prices cause people to stop buying SUVs and start buying fuel efficient cars. Even electrical consumption is starting to drop, especially in poor countries, because of high fuel costs. The higher the price of oil goes, the less demand there is for that very high priced oil.

Ron Patterson

I think inelastic, in the economic sense, indicates how fast the price will go up if supply is constrained. Of course consumption has to decline if supplies decline, but I don't think that's what Memmel is getting at.

It is important to distinguish between demand destruction caused by high prices and by economic weakness. When supply is short, prices go up as a mechanism for rationing short supply. That won't cause oil prices to weaken any more than any other form of rationing. On the other hand, when people either don't have the money, or are worried about not having enough money, they will cut back on consumption, and that form of demand destruction absolutely will drive prices down.

I really don't have a clue as to where oil prices will be in a depression. On the one hand, people are clearly going to have less money; even more significantly, they are going to have almost zero credit, whether voluntarily or involuntarily. This means they have to cut back somewhere. On the other hand, I suspect there is something like an MOL of oil for society to continue to function. If we see consumption fall below that level, we're into a pretty nasty collapse scenario. I suspect that a depression alone won't cause consumption to fall below that MOL (whatever that is).

My guess is that we see weak oil prices until demand destruction comes up against the MOL, then prices start to rise as depletion brings the suppply down to the MOL. After that, we get the nasty collapse.

Exactly sure overall demand must match supply at some price. But the problem is that a lot of people have got the misguided belief that demand destruction has resulted in lower prices.

If demand is destroyed by high prices but can be recovered at lower prices it does not result in permanent destruction. Example:

Gasoline prices are high so you start riding the bus but keep your car. Gasoline gets cheaper so you start driving your car vs gasoline prices are high so you sell your car and depend on public transport. In the second case the demand will not return even if prices are low because its a structural change later if prices are really low for a while you may buy a new car probably more fuel efficient but the point is you have to pay attention to demand suppression to caused by high prices and real demand destruction i.e a structural change thats not easily reversed.

The collapse of the housing construction industry is exactly the sort of change that can result in a real destruction in demand and it will not be revived by a drop in oil prices since other factors actually caused the collapse with peak oil playing a secondary role. A combination of factors has resulted in the collapse of housing construction and oil supply to result in temporarily cheaper oil.

But housing construction is very seasonal peak driving season is also peak building season we did not have peak building season this year. As we head into winter the precentage of oil used by the housing industry naturally drops and the remaining demand determines the oil price.

If supply cannot meet normal winter demand we will see a sharp increase in oil prices. If supply is then lower next summer then demand without the housing industry these prices will remain high.

In the US at least I cannot think of another structural collapse of an industry that results in a serious decline in oil usage housing is pretty unique in this respect. The other one is of course the vacation industry but you have the problem that people will save gas by taking more shorter local vacations vs one long drive the total miles driven hanging around the house could well be more than what you would do taking a long vacation.

This leaves the next wave of permanent demand destruction to some point in the future unless someone points out one I missed. As far as I can tell the next big one is several years out when people begin to actually sell their cars.

In most other cases what we have is more demand suppression which is temporary.

I think a lot of people have this wrong in fact the next time prices increase which will be in a matter of weeks now everyone will assume that we will get the same change we had this summer and keep buying gasoline because any day now the price will drop because someone else is going to conserve.

Instead if I'm right then all that happened was whats really a one shot structural change with no obvious next one on the horizon.

Memmel, do you still think we will hit $165 by the end of the year?
Now the olympics are over and refinery outages due to hurricane Ike are history.
Why does the price keep dropping?

FWIW, my contacts in China have told me that things have not picked up as much as was expected.

With only 12 weeks to go it is hard for me to imagine the price doubling even though I thought the price would be at that level by the end of this year. Gosh, predicting the future is hard.

I guess we should have predicted that the price of oil would rise until the planet broke. Because it's looking very broken the last few weeks.

My prediction is 160+ by December but more importantly I also predicted that if we are going to strike Iran before the elections that the price target was 70-80.

So the entire prediction was to potentially hit 70-80 before the election have a strike on Iran then see oil head quickly to 160 post strike.

Barring an attack on Iran which as far as I can tell imminent it could literally happen any day now we would see the price go to 160+ just on fundamental alone.

I've not seen anything to date that changes this view. I've been very skeptical that they could hit the 70-80 dollar mark but I'll admit I'm impressed.

We should see 70-80 range next week and the way things are going even 60 is possible.

In any case I'm down to guessing the best week for and attack or even days. Best guess now is Wednesday of next week as the first best day for and attack.
Thats Oct 15. Right now I'm figuring if we don't see and attack by Oct 22 we might not see one.

Now assuming for what ever reason and attack does not happen I think we will see a faux overreaction by OPEC slashing production sending us to 160 anyway.

However I'm assuming two important things will happen if we attack Mcain wins as the world is revolted by the Iranian aggression that sparked the war and people are afraid. This leaves Bush pushing through a draft as a lame duck. So the Neocons get Mcain and the draft. They already have the power to control the country.

If I'm wrong on the timing it may mean that the plan is to suspend the election with and attack within days of the election. I don't think this is the real plan since Mcain is pretty much a sure bet if we are at war.

As far as the economy and banks and all that if I'm right its really just a show for the masses they know that the world economy is toast and they are playing a bigger game now. Crashing banks etc are not really all that important.

What I don't understand is how anyone can control the price of physical oil. Sure, "they" can drive down the price of futures by shorting them. But why would oil exporters sell their oil for less money if they could get more based on market fundamentals? Why is Saudi Arabia selling its oil today for $85/barrel if it could get much more?

The fact that we don't have significant shortages (excluding hurricane related gasoline shortages) tells me that supply & demand are in balance and the price is not being manipulated.

You only need to look at two things.

Explain the spike on closing in Oct and explain the current levels in Cushing.

And lets not exclude the effects of the hurricane.

OK, so you are making a bullish case for oil by pointing out that inventories are low. I can accept that. But you were alleging that the Bush administration had manipulated the price down from $147 to $84 in order to make room for attacking Iran. How did they do that?

We have to exclude the effects of the hurricane because,
1. The Bush administration can't control hurricanes &
2. The shortages of gasoline - which occurred because the refineries were knocked out - would have occurred even if the price of oil was $10/barrel.

The reason I said don't exclude the hurricanes was to think about what did not happen which we did not see any real price action from them.

I did not say that Bush pushed prices down. Certainly financial moves are playing a role and a fairly large one at that. But its not just financial moves. What about the witch hunt for speculators ? We say some pretty strong public statements what happened behind closed doors ?

The big second half is the timing and size of exports from OPEC primarily KSA. If you have read my older posts I've always maintained real oil played a big role in the price drops.

Look I don't know what to tell you I've posted on this in probably 20 posts at least. Its got to be five pages of junk you have to wade through to lay it all out.

I'll do my best to bullet point it if your trying to disprove me in a post on the drum beat at least read and reference my previous posts first its way to much friggin crap

The biggest and most important part is probably the flow of real oil out of KSA and in particular light sweet. Total oil flow fell before prices reached the peak this summer then we got a flood of oil later as demand weakend near the end of the summer.
Also we had all kinds of reports about Khursaniyah increment being online or not I believe it is in production at a significant level. This helped a lot.

We have two surges this year lead by Saudi Arabia and I believe the oil quality is high primarily light sweet crude. I have long posts on Light Sweet vs Heavy Sour vs NG I'm not even going to get into.

But it should be obvious that hitting the market wit 1-2mbd of light sweet crude is going to wack it pretty hard.

Now between the surges with the second one just starting to arrive the price was kept down using financial means with no real oil available. Basically from September to just this week oil prices where kept low using financial means as no real oil was coming.
The second surge is just now starting to show up and should last for a few more weeks after that we will see a significant decline.

And all this was figure out well before OPEC started talking about cuts you can find the older posts.

So as you can see real oil and particular light sweet played a large role in price changes Saudi Arabia by surging the oil supply twice in conjunction with a variety of financial manipulation on the part of the US, Mexico and others managed to keep the prices low. Most people that claim manipulation don't seem to look at it as the concerted effort that I see involving the type of oil timing of delivery and coordinated financial moves.

Whats important and if you read my older posts all of this ends over the next couple of weeks after that oil supplies from KSA will drop off significantly my opinion and I'm guessing here is it will be four months before they will be able to mount any sort of surge. Next my opinion was and has been that this was simply to much work just to influence the elections and its not clear that we won't see a substantial increase in prices before the election. Thus even more research that lead to the conclusion that the most probably reason was a pre-election attack on Iran.

Prices are headed to 160+ no matter what happens. If the Saudia's had just pumped normally then we should have seen oil prices top out at about 130 then decline to about 120 and given the current financial situation we could have naturally declined as low as 110 then headed back towards say 140-160 by the end of the year. Tough to figure since we did not get normal production long enough this year. In fact most of the year was manipulated on the supply side.

Instead it looks like we will see 130 -> 80 ->160+ regardless of if there is a war or not.

"pre-election attack on Iran"?
This makes it hard for me to take seriously other claims you make. Of course you are just saying "maybe". A lot of things may be.

To bad you feel that way. Everything seems to be in line the possibility is very high.

By maybe I'm mean about a 90% chance of and attack before the elections.


I respect the information you provide in your posts, and mostly agree with your logic. Have you any links to news items regarding an imminent attack on Iran? I haven't come across much lately, but have intuitively felt it makes some sense for the establishment.


Two things are probably most important although you can chases tons of news snippets.


This is one of the lastest reports I have. For like the last three weeks I've actually lost track of the location of our carrier groups. This is not unusual the information about them tends to come in sporadically.

On the Iranian side the Revolutionary guard has taken over security in the gulf from the regular Iranian navy.
These guys are known to be level headed :) Incidents are routine.

Probably the lynchpin argument for me at least is that the US has finally restocked on cruise missiles.

In general all this military stuff swirls the US has pretty much maintained a constant ability to strike Iran for the last several years. As I said the most compelling argument is the fact that we are now well stocked with cruise missiles which has not been the case for some time. Other military news has to be taken in context.

On the context side the world at the moment believes that oils supplies are ample and that the economic crash will ensure that demand is well below supply. I disagree but hey its not my call. This is a temporary condition if you understand peak oil and even worse its probably wrong about the real underlying demand but I digress.

We are not going to have a chance like this basically ever again. The window of opportunity is now.
I think and attack on Iran insures a Mcain victory when at war elect a warrior.
I think that it allows Bush to institute the draft as a lame duck president something difficult for a setting president regardless of our military status.

Strategically it would put the US in nominal control of oil from the Middle East and the Stans. This coupled with the new African command and our geographic location vs Mexico and Venezuela give the US a direct Military presence near practically all sources of exported oil. The strategic argument is and has been incredibly compelling. Actual occupation of Iran is not actually needed for a long time they just need to be initially neutralized a old fashioned siege is sufficient for a while.

However I stress that the military side of the game is the big issue since the ability has been there for a while.
It the external factors which make me believe that we are now at the best possible window of opportunity for striking Iran.
If we defer now future windows will not be as favorable. If Obama wins it could be four years before we attack.
Even if Mcain wins which is currently doubtful without and event it would take in my opinion at least a year for him to get setup for and attack.

On the political front I think that the rejection of the original bailout offer by the house was a shock to the powers that be.
They realized that the people still have a voice this makes me pretty sure that they now are concerned about their ability to completely control the population simply by buying the senators and congressman. This shock may well spur them into action.

Perhaps things have changed. McCain is not gaining traction. It may be that an attack on Iran now would merely drive people towards Obama. I think I saw a poll result that Obama leads McCain by a small margin when it comes to handling Iraq. That is a first. McCain is being seen more and more as erratic and out of control and Obama is seen as in control of himself. In a time of uncertainty like that people may turn to Obama. Also, Bush is very much a lame duck. He could probably force an attack on Iran but he wouldn't have nearly the support he would have a year ago. It may merely tick people off. Before invading Iraq Bush/Cheney/Rove managed to whip up a storm of public opinion. Some people were fearful because of 9/11. That is absent this time around. My sense is that Bush does not have enough backing to launch a strike against Iran. Especially now, a few weeks before the election it would be seen as clearly a cynical, political move.

The physical / spot price and the future price for WTI have a strong tendency [bordering on absolute till now] to converge because the crude gatherers TEPPCO / Sunoco etc. who make the market in Cushing buy oil from producers at a small discount to the often quoted "spot" and sell the front month future locking in a small but certain risk free profit.

Although other players would have some additional logistical issues / cost and probably additional risks, the two prices are linked because of the opportuntiy for a virtually risk free arbitrage situation if the two prices ever significantly diverged.

"Inelastic" doesn't denote "absolutely 100% rigid". When real oil price goes up more than sixfold (from 1973 to 1979, not the early 80s) and demand only drops a negligible 15%, that's extremely inelastic, as such things go in the real world.


I suspect you're quit possible right. Anticipating that OPEC could someday become an effective cartel is easy enough. Judging when we may be on the brink of that moment is much more difficult. Many efforts to quantify all the factors seem to lead to as many different answers. I'll offer one very simplistic model: oil prices have, at least momentarily, settled in the high $80. Various estimates abound but I think most would agree to some level of demand destruction in the last 12 month. But, on a y-o-y basis, this DD has yielded no change in oil price. We’re current just a few percent over last Oct prices. As you point out, much volatility during this period. None the less, even with all the voluntary and non-voluntary reduction in oil consumption, prices have remained static. The question now seems to be is the current oil price the normal or is it part of a volatile down spike. Production surges do seem to develop. I wonder if they are systemic of the current process or intentional. Based on the multiyear price forecast we've used for the last 4 years oil prices were expected to be in the $80-$90 range right now. Perhaps more luck then insight but when you throw out the extreme highs and lows this is where you end up.

It's also interesting to look at annual oil prices through 2007:

Note that Saudi Arabia ramped up their production to their all time record annual high rate of 9.9 mbpd (C+C)) in 1980, because of the Iranian Revolution and then they cut production for five straight years, down to 3.4 mbpd in 1985 (Matt Simmons thinks that part of the production decline was really mandatory, because of damage to the fields at the 9.9 mbpd rate).

It's interesting that oil prices did not fall below the 1980 level until 1986--when Saudi Arabia started ramping up production again.

It's also interesting to be fair and if you're going to post such a chart, you should include a chart with inflation adjusted oil prices:


I've always thought that we should show long term oil prices in terms of pork bellies. Alternatively, since oil is bought and sold in nominal dollars, not inflation adjusted dollars (or in terms of pork bellies), we could just use nominal dollars.

The fact remains that oil prices were up, relative to 1980, for the five years that Saudi Arabia cut production, and oil prices did not fall below their 1980 level until they kicked up their production rate in 1986.

The question is what is the prospect for a comparable long term increase in Saudi production--and far more importantly--for a comparable long term increase in Saudi net oil exports? Next year it's a near certainty that the cumulative shortfall between what the Saudis would have (net) exported at their 2005 rate and what they actually exported will exceed a billion barrels of oil.

Price things in MARS BARS.

(I think you colonial types call them Snickers)


No, no. Mars bars and Snickers bars are two different candy bars. What you call Mars bars, we call Milky Way bars. (And it was your candy bar that copied ours.) Snickers bars have peanuts.

American Mars bars were basically Snickers with almonds instead of peanuts, and a few years ago, they changed the name to reflect that. (They're now Snickers Almond.)

And candy bars would not be a good measure. They have varied markedly in size over the years. Candy makers often just shrink the size of the bar, rather than raise the price. Then when the price increase comes, the candy bar becomes huge. Then it slowly shrinks again. Rinse and repeat.

Man you never know what you can learn on the oildrum. Leanan do you have a inflation adjusted logistic fit to back up these assertions :)

I don't, but Stephen Jay Gould has a famous essay called "Phyletic size decrease in Hershey bars," in his book Hen's Teeth and Horse's Toes. You can see the discontinuities:

Cool you can just about follow the economy from this. I'd love to see data through now.

In a sense this shows you what real demand destruction is in the sense that the cheaper
bars had to be discontinued at some point. They made them as small as they could reasonably do
then gave up.

Candy bars represent a tight market in a lot of ways or did at least when I was a kid
deciding what candy to buy with money from returned coke bottles as a tough problem.

thankyou for the correction.

'A Mars a day helps you work, rest and play.'

Well then for giggles lets see one adjusted by minimum wage.

How come you ignore purchasing power ?

median wage would be a very robust measure of purchasing power

SocGen produced a report some time ago that showed in terms of share of GDP oil would have to rise to around $190/barrel.

They are doing the standard, inane thing of dividing by the ratio of the GDP today to what it was in 1980. Too bad that the GDP does not function as a system where every dollar is completely independent of every other dollar. Oil prices hit the GDP at its core and all of the derivative industries such as finance are not free to ignore this. I haven't seen any explanation of why the current mortgage crisis arose. There was no interest rate shock or serious downturn in the economy that would have made house prices tumble and people default on their relatively cheap mortgages. The only thing that has transpired in the last four years is the increase in oil prices and the associated impact on food and goods prices. This appears to have pushed the marginal households into conditions where they could not afford the mortgage payments.

Obviously the increase in oil prices is a factor however it was the zero initial interest with the actual interest rate tied to some variable of interest rate. People's payments went from $500 to $1800 so they walked. Congress encouraged this low income "own a home", the banks went along, the realtors made out like gang busters, the title companies were happy so who gets to pay for it all. Mostly the people who own their home and pay taxes because the low income people nor the financials don't pay taxes anyway. They got cheap rent for a couple years. Why are we not surprised?

Even with $1/barrel oil, the housing prices were unsustainable. The ridiculously lax lending standards and leverage insured that the parts of the economy not directly related to housing or banking would also be seriously impacted.

This is the key - completely unsustainable housing prices.

Dwellings were WAY oversold as an "investment" rather than as a place to live...

It was a get rich quick scheme for the masses - who took it hook, line and sinker.

The financial world had to invent all these new "instruments" to facilitate the implementation of the "ownership" society by selling vastly overpriced properties.

Nowhere to go but down now - either a long protracted decline in home prices or even more of a crash - no matter what the politicians and bankers try there's no escaping that prices are STILL way too high for most people to legitimately afford.

Once prices truly do bottom out people will learn that the "value" of a house is in its ability to provide shelter - even if it's market price never goes up.

The nearing retirement of the Baby boomer generation could be another contributing factor in the USA. Many boomers appear to realize that they do not have enough assets (especially true today, during the financial meltdown). I speculate that they are desperately searching for a Golden Goose solution to the problem of having spent, yesterday, today's income and of having only debt, rather than savings, left in their hands. One consequence of this is what could be called a bubble mentality, or perhaps 'irrational exuberance' as Mr. Greenspan named it. I feel that part of the .com bubble and a larger part of the real estate bubble could be attributed to the boomer's search for an unrealistic return on investment -- they are trying to make up for lost time. Perhaps the current financial crisis will squelch the bubble mentality and leave them in a poorer and more realistic state of existence.

Of course, hindsight will enable us to realize that the overall situation is far more complicated than current speculations.

Most "subprime" and "Alt-A" loans had very low payments for the first couple of years that then reset higher. The idea was that rising prices would happen and they could flip it.

Head fake.

They only have to cut production for one month, then, after prices go crazy, they can slowly sneak the oil back on the market. The constant fluctuation should keep any money that still exists away from those pesky alternatives.

Agree. Whoever controls the information (almost) controls the world. And if one controls physical resources as well....

This might be true, but they do not control your mind.
Not yet anyway.
Do not let TPTB put an rfid chip in you and they will never have your mind.

It looks to me like OPEC and Russia might hold all the cards.

It is difficult for those of us way down on the information chain to divine what is going on, but one thing is for certain: The leaders of these countries will operate in what they perceive to be their own best interests. And there is a growing likelihood those interests will not coincide with the interests of the United States and other OECD countries.

It is necessary to keep constantly in mind that the interests of the leaders of Saudia Arabia are not necessarily the same as those of its people. In the era of neo-colonialism, Saudia Arabia and its oil flows were (Still are? That I believe is the key question here.) controlled with the same techniques the U.S. and its allies have used around the world for the past two hundred years, described here by Carlos Fuentes:

...they employed the same instruments of economic power, namely favorable agreements for their merchants, loans and credits, investment, and the handling of the export economy of minerals, agricultural produce, and natural products required by Anglo-American expansion. A highly privileged local minority served as intermediaries, both for these exports and for the imports of manufacured European and North American goods...

Carlos Fuentes, The Burried Mirror

Classical liberal economics--the Chicago School, the school of Milton Friedman, neo-liberalism, neo-classicism--is the religion of the neo-colonialists.

However, U.S. neo-colonialism and its philosophical underpinning may be perched on the precipice of implosion. The possibility of this, and its historical precedent, were discussed by Carlos Fuentes as far back as 1992:

Spain also became the first example of an anomaly that the United States runs the risk of repeating as our own century ends: that of being a poor empire, debt-ridden, incapable of solving its internal problems while insistent on playing an imperial role overseas, but begging alms from other, surplus-wealthy nations in order to finance its expensive role as a world policeman.

Carlos Fuentes, The Burried Mirror

I am always amazed at how violently and irrationaly so many Westerners react to the suggestion that the American Empire, and the dominance of the West in general, may be coming to an end. I think the title to a post on Naked Capitalism yesterday--"Why Oil Prices Must Fall," along with some of the comments, serve as a perfect example of how emotional some people become, and how all their defense mechanisms go up, at the prospect of wanning American dominance.

Well the thing is that Saudi Arabia has shown no interest in having oil much above $100/bbl, and there are a lot of reasons for that. While it does give them more income in the short run, it decreases demand in the long run and increases the supply for energy (including other fossil fuel substitutions like CNG), so it could depress the long run price. Also, reduced US GDP hurts the dollar, which most of Saudi Arabia's foreign exchange reserves are denominated in. Also, Saudi Arabia isn't too happy about some of new powers that the massive influx of petrodollars is giving its neighbors, especially Iran with the nukes. So it could be seen that >>$100/bbl could be counter to Saudi Arabia's interests.


I would tend to agree. If we are to take Saudia Arabia's official statements at face value when oil soared to $148/barrel, it was very uncomfortable with that price. But again, we live in a Machiavellian world, and I am highly distrustful of proclamations and appearances of political players, even those emanating from Saudia Arabia.

There's an article posted above--Oil, war, lies and bulls**t'--that although obtuse and horribly written and difficult to follow and understand, gives some interesting insights.

The author argues that Pax Americana, American hegemony, American exceptionalism or what I call American neo-colonialism ended in the 1970s. The cartel (the seven sisters) that had controlled oil prices from 1928 to 1973 thus became inoperative. He argues that globiliazation then became the dominant paradigm and oil prices since have been determined by global markets, with the "long-run price" of oil gravitating towards the cost to "produce" a barrel of oil from the "marginal" oil field.

I find his history somewhat blinkered. To begin with, the demise of the U.S. cartel pretty much conicided with peaking U.S. production, an issue he doesn't address. Also, after the U.S. cartel folded, OPEC tried to pick up the ball and run with it. But its efforts were premature. It encountered a world-wide recession in the early 1980s that greatly curtailed global demand, and at the same time it faced increasing non-OPEC production. So it wasn't able to carry the ball through the goal posts.

I also find his explanation of "long-run price" discovery in the global markets to be somewhat lacking. He argues that " 'marginal' oilfields must not be necessarily identified with the newly invested capital on the newly leased fields, but with the ones that are already producing the bulk of oil from the older oilfields in the United States." In other words, what he is using as his basis for price discovery is the lifting cost of what I have heard referred here on TOD as "legacy" or "heritage" reserves. While this may have been the operative price discovery mechanism in the period between 1985 and 2005, when there were an excess of heritage reserves to be pumped out of the ground, that surely was not the case in the interim 2005 to 2008. But, that said, if the looming recession is long and deep and world-wide, and a great deal of oil demand is destroyed, the price discovery mechanism he describes might once again become operative.

But there again, maybe not. For the other thing the author seems to not be cognizant of, or in denial of, is that non-OPEC production appears to have peaked in 2005. If this is indeed the case, whereas the OPEC cartel failed in the 1970s and 80s, largely due to an increase in non-OPEC production, a renewed attempt almost certainly would not fail now, especially if it is joined in its efforts by Russia.

If neo-colonialism has indeed ended, or if Saudia Arabia decides to throw the U.S. overboard and join forces with Russia (which seems to have its own colonial ambitions), what I see is the emergence of a new cartel. And this time, unlike in the 1980s, it will not fail.

There is also another possibility, and that is that we have reached global peak oil, and if supply plummets faster than demand, OPEC would be powerless to control oil prices.

Since the usual wishful thinking parade of articles about the imminent demise of Russia are routinely posted here, I present the following analysis by more qualified people:


Thanks for the link--good information.

Russia is undoubtedly in much better condition to weather the storm than is the United States.

Provided Russia does not make the same mistakes as the US in spending it's wealth on gas guzzlers and military adventures it should be well placed.
Bloomberg today reports russian farmers have been hit by the credit freeze.

The financial meltdown that started on Wall Street is now hurting farmers in Siberia, threatening a Russian agricultural revival that the United Nations says is needed to help avert a world food shortage.

Cash-strapped banks have cut funding to an industry already reeling from plummeting grain prices and soaring borrowing costs. The collapse of the stock market has closed off the other main money source for Russian agricultural companies, which produce nine percent of the world's wheat.

``Russian farmers may need to repay as much as $10 billion of loans by the end of the year,'' said Arkady Zlochevsky, president of the Russian Grain Union. ``Many farmers probably won't be able to borrow money for the spring sowing.''

I feel as if we're in a glass elevator with its cable cut, and the intercom continually reassures us that the other elevators are the ones falling, when we can see that it's just a race to the bottom.

You mean Chicken Little was wrong and the sky isn't falling, but it's the ground that's rushing up?

It's the Export Land Model rushing up. I wonder if TPTB in Russia are aware of this, dissident??

Aware of it? They practically embraced it as the thing that would make the voters happy in the short run. I guess they figured once they restored their military prestige, Russians would again be willing to make personal sacrifices to keep the system running, but not yet.

A recent comment by Medvedev about natural gas makes me think that they are not really aware of resource limitations. So the ELM does not feature in any discussion.

I imagine they are posted here in order to discuss them in the usual TOD tear-it-apart fashion. It seems unlikely very many PeakOilers would be swayed by the MSM meme about Russia. Reading the NYT is like an extended meditation on George Orwell--

Let's see-- are we fighting Eastasia or Oceanea this year? And where is that pesky Emanuel Goldstein now? Last seen in Pakistan....

I imagine they are posted here in order to discuss them in the usual TOD tear-it-apart fashion.

That, and as a clue to what our fearless leaders are thinking. Or want us to think they're thinking...

"That, and as a clue to what our fearless leaders are thinking. Or want us to think they're thinking..."

They have you fooled ! You are imagining that they ARE thinking. Of course, it is probably better that they not think, seeing how absurd our situation is now.

Imminent demise, No. Taxes too high to allow needed reinvestment in continued oil/gas production, yes. Tax money (see above) p*ss*d away on bomber flights and naval junkets to Venezuela, yes. Twenty years is not imminent. Ask Dubyah and Dick.

The primary tax on the oil industry is the export tariff. It is a function of the oil price with a month delay. Just like in the west, Russian companies like to spook politicians with talk of economic collapse to pay as little as possible.

A couple of Tu-160 planes and rather small flotilla of four ships (the largest one nuclear powered) going on a world tour is a drop in the bucket in terms of government spending. Russia's leadership has swallowed the monetarist mythology hook, line and sinker. It has been running massive budget surpluses for several years now ($69 billion US in 2007). The personal income tax is a flat 13% and the corporate tax is 24%. Social welfare spending is much smaller per capita compared to the USA. Unlike the USA, Russia cannot print money in unlimited amounts since the rest of the world does not absorb its excess liquidity.

When the oil money was flowing in, the fantastically unequal distribution of wealth was not an issue. Will Putin/Medvedev now convert themselves back into socialists and impose redistributive taxation along with big job-creating infrastructure programs?

As for strategic assets, I think Russia is in a position to pick up Cuba, Iceland and Turkey cheap. The right bases serve as a multiplier for relatively cheap weapons. I wish they'd get their ekranoplan development going again; those could be a revolution in conventional weaponry, assuming that conventional warfare is really relevant anymore. Imagine a giant seaplane with the weapons of a missile frigate that can cruise all day fifty feet above the waves and cross land when necessary.

Well, even as late as 2005 the oil money was flowing to offshore banks and not into government revenues to be spent on health care and education. But the standard of living trend has been in the right direction and now there is serious money for education and other "socialism". Given the scale of the Russian budget and the surpluses there would be no crisis even if oil revenues fell by half. A big chunk of the oil income was funneled into sovereign wealth funds and not general revenues. That money went offshore (about $5 billion US was lost from the collapse of Freddie Mac and Fannie Mae).

For now the population is not looking for more intense socialist policies judging by the shrinking support for the Communist Party. Putin was delivering in terms of standard of living increases and I do not see things getting like the 1990s under Medvedev in spite of the credit crisis. Contrary to western media propaganda (which never cites any Russian opinion polls) the Russian population is actually establishing the political climate in the country.

Is it possible to spend a winter without heat?

short answer: yes
long answer, yes, but it's going to be hard, and possibly damaging to one's health in the long term. ears and eyes don't like cold very much, articulations also don't like cold.
imho, going without heat is too damn extreme. insulate one room, live there with minimal heating.

ps: a plastic bottle of 2 liters, filled with hot water does wonders to warm a cold bed before bedtime :)

In most locations in the UK that may well be true. Ditto for many places in the US. However, speaking from the upper Midwest (southern Wisconsin), I don't consider it to be very plausible. During a cold snap (which, in these parts, translates to nighttime lows around -20 F), you'd better keep your house at 50 F or warmer or you're going to be freezing water pipes in a hurry. The really unpleasant part comes when the weather warms back up again and that broken pipe turns into a geyser inside your wall. That happened to a friend of mine several years ago after he had the clever idea of sealing off the unused second story of his home, which had a working bathroom with the necessary plumbing. Hell of a mess.

If you are sealing off part of the house either install a valve and drain the system of the part which is not going to be heated, or use heat tape - the energy use from that is very low:


Without having performed any calculations, I'll admit that I'm skeptical that full pipes could be kept unfrozen in a very cold environment without major energy inputs. I took a hot water plumbing course a year ago, which provides a bit of insight. One of the take-home lessons was the importance of heat loss not only from the water heater, but from the various hot-water pipes running through the house. It takes a lot of energy to maintain a pipe at 50 degrees above its ambient environment, even with some insulation.

How cold does it get in your neck of the woods in a typical winter?

See my disclaimers in my other post.
In a very cold climate I would certainly go for the option of installing a valve and draining the system.

In a climate similar to the UK where I live, where the danger is of a sudden cold snap, then heat tape might do the trick - I haven't used it, and in any case as you say suitability or one climate is not a good indicator for others. Below -10C is unheard of here.
Either thee website of your supplier or the packaging should give you an indication of what the product is rated to withstand and energy consumption.

How cold does it get in your neck of the woods in a typical winter?

Last winter Calgary got down to -37C (-34.6F) and stayed below -30C for several days.

Energy security is not optional at this latitude.

stclair i fear is right that it is not very plausible to live without heat through a winter. i would add "at all" at least not for very long. having burned wood for most of 33 years in northern minnesota in a variety of winter temps. i can say its a bitch to stay warm with a wood burning stove at your side when it gets "COLD" out. and don't even think about having an outside thermometer...you'll start watching it..until it messes with your mind and kills your moral. next thing you know they're finding you frozen in the corner of the room naked with your clothes folded neatly in a pile next to you with plenty of wood still in the wood box. hypothermia happiness will be frozen on yo face.

Here is some stuff I've started collating on my blog regarding how to insulate just one room:

Important caveat: It is 20 years since I have done any building, and at the time insulation was hardly a priority, nor were many of the current materials available.
The three main things to watch out for are stopping your pipes freezing, preventing condensation and being aware of flammability issues.
If anyone can contribute to the few initial thoughts I have thrown together here, then that would help a lot.

Pretty comical article. After a slow arrival, fall is getting serious. Low twenties has stopped even the stalwart peas and chard.

But there are other immediate benefits to burning less gas. You don't wake up in a pool of sweat. When you step outside you feel the benefit of the increase in temperature.

Had to laugh at the truth in that. Get outside so you can warm up, at least for the fall.

Much easier to do without heat in New Orleans (two out of three years we do get below 32 F/0 C, although a humid cold can bite).

Ground water temperature is about 69 F/20 C.

When many homes were built, air conditioning did not exist. In an experiment a couple of years ago, it took me about 2 weeks of suffering to acclimate to August w/o a/c.

So a no heat and no cooling (but with fans) existence is quite possible in New Orleans, if trying.


acclimation is key! it's nice to see AlanfromBigEasy "experimenting". i'm not the only one here that does that sort of stuff huh. eating expired food, get flu-shot, dont get flu-shot, consuming fruit that's more compost than ripe...still haven't turned the heat on at my place of stay, trying to make it to November 1.(it's been mild so far - good for my raspberry stock) i might start going around sniff'n chickens though just in case RalphW's flock comes down with something.

From yesterday: How is RalphW doing?

I'm fine :)

I've been reading TOD and similar sites for years. I've long since abandoned hope of a pension.

I spend far too little time working on my paid job most days!

The chickens haven't caught flu.

That's good. I hope the job keeps going.

Yesterday our new CEO was appointed.

He is an accountant with a reputation of downsizing...

Part of why I was feeling panicked.

I have no debts and i am busy spending my savings on useful infrastructure. Yesterday I bought a pneumatic log splitter.

PNEUMATIC? Maybe you mean Hydraulic? Never heard of an air driven log splitter!!!! Although, I remember as a kid, Granpa used to fart every time he swung an axe to split a log. Just entertaining us stupid farm kids I guess.


of course.

"I spend far too little time working on my paid job most days!"

Sounds familiar. I think one should carefully balance time spend here and time spend working. It's a matter of priorities.

I spend at least 2 hours a day, during work, here and at other sites.

Senator Saxby Chambliss of Georgia says that "there is more oil in the US than in Saudi Arabia!"
He must be counting the shale.....What a joke?
Sad fact is most people in Georgia believe him, and do not bother to check the facts.
They will just keep driving those SUVs, Hummers, and Jeeps.

Such politicians are only creating the conditions where they or their successors will be boiled in oil when the angry masses demand the cheap gasoline that is supposedly available.

Uh, won't that hot oil get kinda pricey at that point, what with the cost for the product and the boiler heat cost?

Rope will still be cheap, though.

"Oil" could be vegetable or even lard. Perhaps the saying should be "Deep Fried," which is essentially the same as "Boiled In Oil." Using corn or soy-based oil would really be appropriate, as would bacon grease. Maybe one of those theme restaurants like TGIFridays will offer a new appetizer--Deep Fried Politico. With some ranch dressing for dipping, I hear they taste like pork rinds.

"Rope will still be cheap, though."

Kudzu and those nasty green brier vines cheaper still.

I bet many people in the US believe him, there are many many get-rich-quick teaser emails that say similar things. In fact there are an incredible number of get-rich-quick teaser emails around the whole area of energy, green, renewable, oil, gas, coal & nuke :-(

It's amazing in my discussions with people on airplanes how many people believe that the US is sitting on the largest oil supply in the world, it's just that those darned environmentalists are keeping us from getting to it. It doesn't matter if you point out that the majority of that oil is oil shale and oil sands, and is incredibly difficult to obtain, and in many cases, not worth trying to obtain. They mentally stick their fingers in their ears, and start yelling, "LA LA LA! I can't hear you!"

Well, I think that we should drill wells in the front yards of all these people who think there's huge piles of oil lying around, especially politicians. Then we'd see a change in their tune. It's much easier to say, let's drill for oil in land that belongs to the public and is preserved so that we don't completley ruin our ecosystem.

Better yet, drill in their yard for a month and come up dry :)

Actually, just building a location and the roads necessary to drill the well, or using the City streets (which will be otherwise unusable after the location is built without a four wheel drive) would be enough. The amount of work which goes into properly preparing a safe location should make anyone concerned about the environment around the location, without even drilling the well. In remote areas, it doesn't seem like much, but take a trip to Ft. Worth and you will see why the advertising / PR campaign is going on there. Most of it disappears once the drilling is done, whether it is a producer or not. But in the meantime, it is destructive to the environment, especially in rough terrain.

That's why I almost almost spewed my beverage all over myself and the couch when Palin mentioned "safe and environmentally friendly drilling". There is no such thing as environmentally friendly drilling, there is only "minimally invasive drilling". Resource extraction always results in some sort of environmental "change" but often it's damage. The question is how much damage are we as a society willing to accept? Also, how much does it cost to maintain a livable ecosystem due to our activities? (e.g., if the drinking water gets petroleum products in it, how much does it cost to remove enough to make it potable?) It doesn't sound quite as nice to put it this way.

I can't comment much on the safe part because I haven't any statistics about oil field fatalities, but in the U.S. about 30 miners a year die due to accidents while at work, mostly in the coal business, to say nothing of chronic ailments like black lung. It used to be a lot higher, since 1870 about 120,000 have died, but I still wouldn't call it "safe".

A woman who shoots wolves from helicopters has a radically different concept of "acceptable" than I.

As a man who gets his info about wolves from role playing games and vampire erotica, I highly approve of shooting at the things from a distance.

Right -- and they are still offering 0% credit cards.

This must be some kind of weird momentum from a recent past we can only dimly remember.

The trick is getting it all out of his hair!

...there is more oil in the US than in Saudi Arabia!

Some quick facts:

  • the is currently only ONE oil shale demonstration project underway - Shell's "Mahogany Ridge" project
  • after many years and tens of millions of dollars, this project has produced less than 2,000 barrels of oil in TOTAL
  • it took about 40 years for oilsand production in Alberta to reach 1 million bpd
  • the US imports about 10 million bpd

The basic engineering required for large scale production from oil shale has not yet been demonstrated.

Techniques developed for "oil sands" extraction in Alberta simply aren't applicable to "oil shale" production in Utah or Colorado.

You don't jump from a tiny demo project that has produced 2,000 barrels total to huge production plants that produce millions of barrels per day.

Nothing commercial will get built until the basic engineering is done - and that, IMHO, will take many, many years.

You mean to say I cant just put shale rocks in my car?
BTW just moved to calgary myself.

Welcome to the city.

Where are you coming from?

One more quick fact:
The Athabasca bitumen is recovered with huge inputs of fresh water and NG. It's economic because otherwise much of that gas would've been stranded. But from an EROEI standpoint, it's a big ole loser compared to just burning that same CNG in your car.
Now if there were fast-breeder reactors generating all that steam, it would be a different story.

I'll also add that in order to produce oil shale, you'll probably have to do in situ retorting which requires a lot of steam to be injected underground along with other things (like fuel). To make steam you need water. The green river of the green river shale drains into the Colorado. The line of people who have water rights to the Colorado is long and the organizations/individuals in this line are often wealthy (e.g. LA). The water is precious, by the time the Colorado gets to Mexico, it's nearly a standing pool, i.e. all water is used by someone. If you wanted to develop oil shale there, I imagine that all these organizations/individuals will only stop fighting each other over water rights just long enough to make sure you didn't get it.

I did leave out a few *tiny* details:

  • as you pointed out, there is no water available
  • the Shell process requires (AFICT) the electrical output of a mediums-sized power plant for each 100,000 bpd of production - each of which requires a lot of water (and coal)
  • the Shell process uses "ice walls" to protect the ground water - nobody has ever explained what happens when the "ice wall" unfreezes (or else how you can keep it frozen forever)

As for the offshore drilling crowd, Matt Simmons was pointing out that:

a) no rigs available
b) insufficient seismic data

But why let that stop anyone,

Drill, Baby, Drill*

*(the *official* Palin version)

I am not much of a believer in Green River Formation oil shales. However, the freeze wall issue may not be the issue you think it is, if the formation water is not potable [or "treatable"] and the shale / marlstone is as generally impermiable as it has been described.

Under that circumstance the contamination of the ground water would not be much of an issue. There are a lot of naturally occuring very lightly oil stained brines out there in an around most producing oil provinces. Water pollution really only becomes an issue when the brines / oil gets into aquifers charged with potable water.

A freeze wall would still be necessary to trap or contain any oil cooked out of the marlstone so that it could be produced and to avoid having to heat an unnecessary volume of foreign water that might migrate into the area being produced.

Thanks for the feedback.

Viewed from the perspective of keeping foreign water out during production, a freeze wall makes perfect sense.

And as you say, it may not be the show-stopper that I had assumed.

As for the offshore drilling crowd, Matt Simmons was pointing out that:

a) no rigs available
b) insufficient seismic data

Add to the above:
c) no source rock
d) no reservoir rock

Where c) and d) do exist there is enough seismic data to have made the decision you don't want to invest in more seismic data.

Happy peak-DJIA day! On this day one year ago the Dow Jones Industrial Average closed at a record 14,164.53. Yesterday it closed at 9258.10, a 34.6% drop.

In retrospect, maybe "happy" isn't the right word, and who knows if this was the absolute peak or not...

9258 is still in bubble land, imo. what is the current p/e of the dow ?

historically the p/e has been around 7.

and arent you happy you didnt let bush privatize social security ?

Nouriel Roubini (www.rgemonitor.com) is claiming the DJIA will plummet to 7000...


I don't think this is your run-of-the-mill bear market. Roubini is an optimist.

Don't forget to add in the real inflation. I figure we're two-thirds down from 2000.

historically the p/e has been around 7.

Not even close! What is the historic PE Ratio for the Dow Jones?

According to the Investors Business Daily, the lowest in it's 5 year history is 15.5 on 11/26/07. It's high was 102 on 05/29/08. As of August 24th, 2008, the PE of DJIA is 91.5

On the other hand! Historical Bottom for a Bear Market? About Dow 6,000

Where will it stop? Well, the bottom of bear markets tends to be around 7 time the price/earnings (p/e) ratio. Right now, very roughly, that's about Dow 6,000.

A bit of explanation is needed here. P/E ratio is a tricky thing. When the Dow P/E ratio is calculated using only members of the Dow that have earnings, then the P/E is likely to be quite low. But when ALL 30 Dow stocks is used in the calculation, it is likely to be quite high. That is because many companies have negative earnings. This drives the P/E ratio to sometimes ridiculous numbers. The above P/E ratio for the Dow on August 24 of 91.5 proves that point. Several Dow stocks are actually losing money. All auto industry stocks appear to be in the red right now.

During a recession, earnings of many companies go way down. And even though the price of their shares drop to very low levels their P/E ratio goes way up because their earnings drop even further. So many companies will have a very high P/E ratio at the bottom of the market because their earnings are almost nothing. And if their earnings are negative, that is they are losing money, then their P/E ratio cannot even be calculated.

Ron Patterson

Of course, if those earnings decline as well, then that lower p/e ratio applied to lower earnings will yield an even lower price.

Share prices generally are a prediction of what people think the earnings will be in the future, so share prices are predicting a drop in earnings. I don't think most people here would find that surprising.

Also i don't think it's much use looking at ratios that only cover a few years, i.e. the recent period know as the NICE period. We need to look as far back as possible to see what has been posible before.

Ron a lot of those bottoms came at a time of much higher interest rates. Hence treasuries provided decent competition for stocks.Today I think we will bottom a lot sooner as there is no whee to go if you want more than 2% a year. Also the best stocks have been beaten down to really abd levels. Nexen at a P/E of 3? Petrocanada at a P/E of 3?
Mosaic at a P/E 4? Sure earnings estimates may come down a bit but this getting ridiculous. If Nexen paid out everything it earned as dividends then you would get at least a 25% return on your money at oil prices around $80.00
FD: I own and will add to stocks mentioned above

It's insane, isn't it?

These are companies with "real" assets and yet they're getting hammered just as badly as some of the banks with all their "paper" assets.

It makes no sense.

Given that the consumer is 70% of the economy it makes perfect sense. What little manufacturing we do have is probably just as poorly positioned as suburbia for a post peak world.

As and example consider Caterpillar demand for their products will drop dramatically as real large suburban developments ceases along with the malls and towers etc. Also mining will drop of dramatically. Heavy equipment tends to have a long life and strong resale market and the world will be flooded with un-needed heavy equipment of all types. Probably a 20 year oversupply.

This goes for shipbuilding and cars and well you get the picture. Also the US is still a large manufacture of equipment for factories. If you go to china and look in the factories you will see a lot of the line equipment is from the US, Japan, Korea, EU etc. This is a sort of leverage game once factory expansion slows dramatically in the US all these industrial support manufactures are no longer needed. Same in electronics etc. Exporting the factories and building the equipment for them is a sort of leverage play.

And lost but not least the myraid of manufactures needed to support housing and automobiles are not needed. Not to mention aircraft factories.

Until we start seriously putting in electric rail once we go to a no growth or shrinking society we probably only need a fraction of our current industrial base despite the fact its been gutted.

This may seem surprising but if you think about it we only really know manufacturing needs from boom periods starting in the 1800's with a very brief period of overcapacity in the 1930's depression. The later recession where not long enough and globalization played a increasing role after the 1960's.

I do think that as things get worse we will see a need for small machine shops to make replacement parts for factories that are still operating and this will be somewhat of a growth industry. I suspect it will be fueled by large companies dumping equipment as their factories shut down making high end C&C mills insanely cheap.

Anyway I'm hoping so since one of my post peak dreams it to own a nice machine shop. You guys can go grow potatoes I'll take a year's supply to create a broken gear on your electric tractor thats no longer available :)

But back on topic overall manufacturing in the US should get hammered hard.
And I don't know exactly what the level of sustainable manufacturing is esp if you consider that this stuff is still readily shippable even via a sail powered ship and its durable. But its really really low compared to todays manufacturing levels even in the US.

"You guys can go grow potatoes I'll take a year's supply to create a broken gear on your electric tractor thats no longer available :)"

Sorry, I drive a horse.

I had a great harvest of potatoes this year.

Damn a smart ass farmer :)

Seriously though the other time honored profession is blacksmith not just farming.
Along with baker etc.

My deeper point is we need to think about the complete infrastructure needed to have a localized economy. Unless I win the lottery I won't have enough money to buy a farm large enough to be commercial anytime soon but a 20k investment in decent machine tools plus a smaller farm seems to be a good idea. Are you sure you don't need a nice shiny tractor that breaks ?

Don't need a tractor, but there are all sorts of metal things that need fixin', even if you work with horses. Luckily, my next door neighbor has a forge...

I agree with you totally re: infrastructure. Localization is all about bringing back a lot of "lost" skills...

I don't see how you can go wrong putting together a nice little machine shop :-)

Thanks :)

I've farmed before even got stuck with the Amish for a summer my parents would do anything to get rid of me. My dad caught me trying to blow up the house with a five pound coffee can full of black powder he was pretty nervous about having me around the house in the summer after that.

Here is a link to stuff about imports and exports and the US.


You can see that despite the claims of lost jobs. Manufacturing has grown and is just now starting to flatten out. We have a long long way to fall.

why did you want to blow up the house ?


Don't even remember the details but I got a spanking and grounded for something.

When I was a kid black powder rifles where the big thing in Arkansas so we pilfered pounds of the stuff from our neighbors. They probably wondered why we where always asking to clean their garages. People would buy these big kegs of the stuff.
That coupled with 4th july fireworks turned me into a budding bomb maker.
Once I buried one of these under a boulder and manged to dislodge blocking the spillway of the local lake.
One time I set a field on fire blowing up a hornets nest. Nothing in the world compares to a bunch of pissed of hornets from a blown up nest.

And our other form of excitement was taking 22 shells sticking them in straws and throwing them up in the air over pavement or concrete. One time I took a whole box of 22's and straws and through them of the top of a apt building that was being built.
The whole neighborhood was excited about the automatic weapons fire heard one weekend.
I've never seen so many cop cars in one place in my life lucky I made it to the woods before they showed up :)
You would think one would try to show up without the sirens blaring.

So just to give you a bit of perspective making a pretty decent black powder bomb was a fairly normal summer activity for me.
I'm lucky to have lived through my childhood and kept my fingers.

I realize now that a lot of people where really stupid about blackpowder and 22 shells at the time the adults generally did not think much about them. As I grew older I became even more respectful of firearms now I don't keep any. The older I get the more I realize how dangerous they are and I don't have anything agianst them but in this case I don't want my kids to have the same opportunities I did.

Pouring boiling water on a ground wasps' nest is pretty good too. My spouse was literally ROFLHAO as I ran like hell with the survivors after me. I used to play with firecrackers alot too as a kid until one with a dud fuse went off in my hand. Packing green coconuts in the bottom of campfires was pretty good for impressive explosions too. They can really build up alot of pressure before they blow. Not sure how many of us survive our misspent youths.

Dropped 38.7% in a year. Ouch.

But, to look on the bright side, it's still up 9% over the 1998 close.

We're down to 8579 now (big fall after the closing bell again). That's about 39.5% loss. Let's call it 40%

Read Roubini, its going to 7000...

Denninger says 4000.

Where does he get the 4000 from? The DJIA has not been at that level since the 90s... More likely it will bounce of the old support line back in 2003 of ~7000. And accounting for some inflation it might even be a bit higher (7000 x 1.03^5 = 8100). If it is 8100 we are not a million miles away...

It's the hedge funds, they are liquidating to build cash ahead of investor withdrawels as losses mount and confidence is lost. It's like an investor run on the banks. Money is being sucked out of speculative assets (stocks) and put into Gilts and t-bills. It's now affecting 'the rich' who thought their assets were safe...

Is this how people thought it would turn out? I am coming to the conclusion that the upcoming 'real event' (Peak Oil going 'mass mainstream' in -say 2012) is going to be just horrible. We can paper over these cracks with -well- paper (money), but then we will be talking about a situation that cannot just have Trillions 'printed'. Oil is a real asset and it will take 5-10 years to bring online substantial replacements by which time decline in major fields will probably wipe out all the new stuff anyway...

I need to make $1 Million quick and buy an island -any stock tips? :o)


Maybe to get back to a pre-1980s P/E, something like 7?

That translates to a 5000 to 7000 DOW.

And that's only if earnings hold up.

One of the theories I'm formulating is that housing prices will follow the stock market.
If it gets as low as it was in the 1990's then housing prices will follow down to that level.

It makes sense since salaries are closely tied to stock prices.

The underlying idea is that housing prices are pulled up by the high end as the stock market
collapse high end home prices collapse pushing down the the value of housing.

And behind that is the concept that high end home prices are closely tied to bonus's used instead
of savings as a down payment on high end homes. Without the bonus's the high end market collapses.

Thus the housing market will not bottom out until after the stock market finally bottoms and rallies.

Thanks Gwydion for the anniversary reminder,

Happy peak-DJIA day! On this day one year ago the Dow Jones Industrial Average closed at a record 14,164.53. Yesterday it closed at 9258.10, a 34.6% drop.

At the end of today's trading 08/10/09, the DOW finished at 8579.19, a loss of 7.33% since yesterday.

Hoping that my math skills haven't deserted me... that revises the figures from the end of trading day 07/10/09 to end of trading day 08/10/09 to a decline of 5585.34 points or a drop of 39.43%, just shy under 40%.

What a difference a day makes.

Speaking of "Since Yesterday," I've read some of the book today and it's quite interesting.

Nor did Wall Street seem to have any answer. The men of Wall Street were complaining that the trouble lay in a "lack of confidence" (how often had we all heard, how often were we all to hear those hoary words parroted!); and that this lack of confidence arose from fear of inflation and from the unpredictable and dangerous behavior of Congress, which was all-too-lukewarm about balancing the Federal budget and was full of unsound notions. The defenders of the old order seemed as bewildered as any one else; they didn't know what had hit them. Said a banker noted for his astuteness, in a newsreel talk, "As for the cause of the Depression, or the way out, you know as much as I do." And Charles M. Schwab of Bethlehem Steel, who had once been unfailingly optimistic, was quoted as saying at a luncheon in New York, ". . . . I'm afraid, every man is afraid. I don't know, we don't know, whether the values we have are going to be real next month or not."

Compare to today's news:

"Are we at a bottom or at a point of capitulation or despair? I don't know. It could get worse before it gets better," said Brian Gendreau, investment strategist at ING Investment Management.

Just caught this from the blog “Beyond Fossil Fuel”. If it was posted earlier I apologize.

Five points on why oil will go much higher

Fourth, one day the world will learn maybe sooner than later that Saudi Arabia’s reserves are not what it claims to be. Their stated reserves have not changed in years. If you continue to pump oil out of your reserves without adding more infrastructures, your reserves cannot stay constant.

The article is good but oil prices cannot rise if the world slides into a deep recession and possibly a depression. People cannot buy when they are flat broke.

High oil prices this past summer along with the collapse of the housing market has plunged us into a recession. This has caused a drop in oil demand and a corresponding drop in oil prices. There is nothing surprising about this, under current conditions it simply had to happen. But this has disguised the fact that oil production has peaked. Non-OPEC oil production is dropping and it is my opinion that OPEC oil production peaked in July.

The three year plateau in oil production was what caused the dramatic rise in the price of oil. It is also largely the cause of the current recession. Is this not what the peak oil folks have been predicting for years? Why is everyone so shocked because it is actually happening?

The economy cannot possibly grow unless the supply of energy grows also. And non-growth is the definition of a recession.

Ron Patterson

So if oil price goes down, company profits plunge, putting us further into recession. But if oil rices nobody is able to buy?

Doesn't one have a special word for such situations?


I’ve been a petroleum geologist for 33 years. Let me give you a clear picture of what life is like in the oil patch right now in the face of $86 oil: we’re happier then a puppy with two peckers. First, oil prices are not way down….they are slightly above prices 12 months ago and way above prices 24 months ago and way, way above prices 36 months ago. The recent price drop may have killed the folks playing the futures market but I have no more sympathy for them then folks who blow their retirement saving in Las Vegas. Wells that were drilled in 2005 – 07 used price expectations of $40 -$50 per bbl for the next 3 years or so and then a slight inflation after that. Even when prices peaked ay $147 a few months ago I know of no company using price expectations over $70 - $80 per bbl. And even then most used lower oil prices after year 2 of the price projections. There may be swindling promoters out their pitching drilling deals to foolish non-industry investors based upon $150 oil but no one in the legitimate oil patch would ever entertain that idea.

But right now oil isn’t the big play for domestic independent companies: it’s NG and more commonly, unconventional NG. And yes, NG prices fell from $13/mcf last spring to $7.50 or so recently. But you have to understand that last Jan, during the high point of the NG heating season, NG was going for a little over $7. Right now, during what is the low NG pricing season, NG is way up against the historic trend. And the DOE just announced residential winter NG bills will be 15% or higher than last winter. And remember that much NG from the GOM is still shutin from the hurricanes. And this NG should be going into storage to meet winter peak demand when the full NG production stream is insufficient to meet demand.

In the forth coming recession there we’ll certainly see demand destruction that could soften prices from where they are right now. That will be seen in the numbers 12+ months from right now. But today, as you see energy stocks taking a beating, the companies are more profitable then ever and certainly cash flow is currently much higher then was ever projected a year or two ago. I can’t explain the stock market reaction to the oil/NG sector other then to say they’re just following the herd over the cliff. One of my favorite NG independents just fell 50% from its peak just several months ago. At that time all the analysts loved the company at that high price. Needless to say, as a buyer, right now I’m happier then a puppy with 3 peckers.

And, actually, a little slow down in drilling activity wouldn’t be so bad. The oil patch is highly overworked at the moment and competition has caused significant inflation on the drilling side. These cost run ups have hurt the bottom line as much or more then any price reductions

As I'm living in Flanders I know nothing of shaking granny's in Vegas,
but nevertheless thanks for the answer

The special word that comes to mind is "Estamos jodidos"


I just put that into Google translate (my Spanish is beyond rusty). I agree.

just so you don't need to go to google
"We screwed"

"Estamos jodidos" kind of sounds like "estados unidos" doesn't it?

I think that was the neocon plan all along, to remake the United States in the image of Mexico.

Oh well, we can now commiserate with our southern neighbors, because we're now all hijos de la chingada.

So, Canada will now be bordering the United (Mexican) States - Estados Unidos (Mexicanos).

Makes it a whole lot easier to take a low-cost vacation... :)

What makes you think people will be able to take vactions?
Cheap vacations will be in the US.
Stay at home vacations will become popular = staycations.

Just don't use Brazil as and example and your ok :)

"It is also largely the cause of the current recession"

I told my mother yesterday that not being able to grow energy use, the economy wouldn't grow either. So I agree with you.

However on the face of it, it looks more like the west have been able to maintain growth by ever increasing amounts of credit, which has now dried up. Halucinated wealth is, after al, a halucination.

If the world decoupled from the dollar oil would go up.


HUGE RISK OF LOSING WORLD RESERVE CURRENCY: As preface, the world banking structure rests atop a world currency foundation denominated in USDollars, with USTreasury Bonds and USAgency Mortgage Bonds serving the primary role as financial instruments. These toxic building blocks are all really bad lego blocks. Foreigners must respond very soon, to replace the US$ as global reserve currency, or else risk a similar implosion to their banking systems. Many USAgency Bonds have been replaced by USTBonds, not much of an upgrade. If the USTreasurys soon suffer in the heart attack seizures underway, foreign economies will be at risk of serious deterioration. So foreigners are working toward a solution. One might be announced soon, with a new world reserve basket announced, based upon the Euro, Russian ruble, Japanese yen, and newly crowned Gulf dinar. The common theme is these are all currencies from nations boasting export surplus. They are taking action, but behind the scenes, like in Berlin. The consequence to the USEconomy is dire. The beleaguered nation would be forced to attract foreign capital, and bid up foreign currencies in order to purchase crude oil. The word inflation would soon be replaced in the press networks with the word “hyper-inflation” as the Untied States enters the Third World overnight. It seems that the vast majority will be caught blindsided.

Al Jazeera has some great coverage of world markets (Al Jaz has been stellar in their coverage of world events IMO)



Hurtin' for certain

This is another "gold bug" promoting gold so please read what they say with caution. IMHO at this point in time no other currency is capable of functioning as the de-facto world reserve currency. The Euro is the second largest currency but for example lacks a central bank with the ability to bail-out banks across the Euro zone - for the moment each country must make its own arrangements and policies. This was a "design" of the Euro wanted by the Germans in order to avoid having to bail-out loose countries.

I have not heard of any secret talks "like in Berlin" or like anywhere else taking place with the objective of creating a world reserve currency.

In the recent past I have heard these "gold bugs" claim that notes including plastic are just further proof the currency is being debased since plastic is cheaper than paper! The incorporation of plastic into paper is more expensive than paper alone and is done to make it more difficult to counterfeit.

Any oil producing country can opt to receive oil revenues in any currency they would prefer by the simple expedient of converting USD to ??? in the foreign exchange markets which are still fully functioning.

Disclaimer, the above does not mean that all is fine and dandy for the US nor that gold is a bad investment:-)

Lu explains the dynamic in a little more detail(not a gold bug). The world wants out...


Breaking free from dollar hegemony
By Henry C K Liu

The vast expansion of US-led globalized trade since the Cold War ended in 1991 had been fueled by unsustainable serial debt bubbles built on dollar hegemony, which came into existence on a global scale with the emergence of deregulated global financial markets that made cross-border flow of funds routine since the 1990s.

Dollar hegemony is a geopolitically constructed peculiarity through which critical commodities, the most notable being oil, are denominated in fiat dollars, not backed by gold or other species since then president Richard Nixon took the US dollar off gold in 1971. The recycling of petro-dollars into other dollar assets is the price the US has extracted from oil-producing countries for US tolerance of the oil-exporting cartel since 1973. After that, everyone accepts dollars because dollars can buy oil, and every

economy needs oil. Dollar hegemony separates the trade value of every currency from direct connection to the productivity of the issuing economy to link it directly to the size of dollar reserves held by the issuing central bank. Dollar hegemony enables the US to own indirectly but essentially the entire global economy by requiring its wealth to be denominated in fiat dollars that the US can print at will with little in the way of monetary penalties.

I assume the only reason this hasn't already happened is that our foreign creditors keep wanting to find a way to preserve most of the value of the US debt & cash they hold. I can't think of a way they can do it. Now Gresham's Law says that bad currency drives out good, so maybe these countries could pass a temporary law making US $ legal tender and then literally dump it out of their vaults, hoping that its inflationary spiral out in the streets would stimulate their economies temporarily. This would give them time to re-create Bretton Woods I by tying their world reserve basket to gold or silver, though I sense that Bretton Woods required the enforcement role of American power to punish those currencies that refused to join (few did).

XTO (one of US top nat gas producers) Chairman Bob Simpson sold over $100,000,000 of XTO stock in past week. Rumor has it is due to margin calls on other holdings. It looks like this is slightly over 1/3 of his XTO stock. Anyone know whats going on here? Or has he turned bearish on NG industry...?

Weekly NG storage report:

Working gas in storage was 3,198 Bcf as of Friday, October 3, 2008, according to EIA estimates. This represents a net increase of 88 Bcf from the previous week. Stocks were 117 Bcf less than last year at this time and 69 Bcf above the 5-year average of 3,129 Bcf. In the East Region, stocks were 76 Bcf above the 5-year average following net injections of 44 Bcf. Stocks in the Producing Region were 23 Bcf below the 5-year average of 890 Bcf after a net injection of 35 Bcf. Stocks in the West Region were 16 Bcf above the 5-year average after a net addition of 9 Bcf. At 3,198 Bcf, total working gas is within the 5-year historical range.

When you combine the NG well depletion rate with the oil fields ability to aquire interm financing for new wells we can expect some big problems in a year or two.
I would expect the summer elect grid and the winter storage draw to be the first indications of the problem.

From the Chicago Tribune, regarding Cook County:

Sheriff: I will stop enforcing evictions

Dart cited the growing number of evictions that involve rent-paying tenants who suddenly learn their building is in foreclosure because the landlord neglected to pay the mortgage. By refusing to do any foreclosure-related evictions, the hope is that banks will change their policies.

As it happens, the decision also will spare from eviction those legitimately in foreclosure.

It is the latest, and perhaps most curious, government response to the soaring number of foreclosures. Even as federal bailouts and rescues are under way, the local action provoked a mixture of respect and confusion from housing advocates and banks.

Indeed, some mortgage experts suggested Dart's vow could compound problems by making lenders reluctant to extend credit at a time when loans are already hard to get.

Something similar happened in Philadelphia a month or two back.

This happened to me as an undergrad living in St. Paul. The "landlord" had recently bought the house and rented it out right away. He then never made a single payment to the bank. They gave him time to "work out" the mortgage, but after 6 months the game was up. We (myself and 4 fellow students) had to move out in the middle of winter. The "landlord" was a professor on campus and I have to believe that he made no down payment on the home that was foreclosed. 6 months x $2,000 (the house was a duplex): $12,000 in "free" money for the good professor. I side with the Sheriff.

I read this news article as it broke yesterday and knew you would glean it. I also knew in advance I would write this. This Deja vu is beginning to become habitual, if only I could get back my portfolio, my youth, the 8 track tape player that was stolen in 1977, I,d be happy.

To folks who already commented on my "peak oil careers" post, and wonder where it is, it will be up tomorrow. Sorry, we got our wires crossed.

I am still puzzled over this bit from yesterday's EIA report:

Total products supplied over the last four-week period ... down by 8.6 percent compared to the similar period last year. Over the last four weeks, motor gasoline demand ... down by 5.3 percent... Distillate fuel demand ... down by 8.3 percent... Jet fuel demand is 5.5 percent lower ..."

- How can the sum be down 8.6% if each component is down less than 8.6%?

Also, at 5.3% down, gasoline demand is not down as much as trumpeted by some here. Gasoline is what almost all people in the USA use for personal transportation. Note that "distillate fuel demand" dropped more, that signifies the effects of the economic "slowdown" on trucking (also construction).

Memmel has said here that the main reason for the YOY drop in gasoline use is the cessation of most construction as the housing bubble popped. If that is true, that's a one-time drop, and not a trend. Unless, that is, collapse of other sectors of the economy result in large reduction in driving. But short of large real increases in unemployment, I don't see that happening. Construction is more driving-intensive than other activities.

How can the sum be down 8.6% if each component is down less than 8.6%?

You forgot the ones down 34.3%!

                              4 week avg wk/ending     %
                               10/03/08  10/03/07    Change 
Products Supplied
Finished Motor Gasoline (4)      8,767     9,253      -5.3
Kerosene-Type Jet Fuel           1,456     1,541      -5.5
Distillate Fuel Oil              3,819     4,165      -8.3
Residual Fuel Oil                  441       671     -34.3
Propane/Propylene                  764     1,162     -34.3
Other Oils (8)                   3,412     3,629      -6.0

Total Products Supplied         18,660    20,419      -8.6

Hank's going out of business it seems.

Also I presume with several states suffering severe fuel shortages over the last month then some of the drop in supplied product must be because it was unavailable for anyone to buy.

Good thing I got my propane tank filled a few weeks ago.

I wonder if this is the year that I'm going to need to make a single tank last the whole winter?

In addition to your reasons:
The seasonal fuels; Dist and Prop were anticipated by many to be more expensive as the year wore on. At the retail level many that buy at the beginning of the season bought early, dragging down inventories and increasing demand during the summer. Now they won't purchase again until the tanks are down. This causes over all demand to appear lower than normal now, however as the heating season progresses heating fuel demand will be controlled by the weather and price.

Remember this is 'implied demand',not actual sales.It is calculated from deliveries.If pipelines are not running properly(hurricanes),then demand will appear to be reduced.

"The value of Canada's energy companies has been devastated since oil plunged from record levels in the summer."

This refers to publicly traded companies, of course. The smart money is in private equity junior petes, which will not be affected by the Panic of 2008 as long as they stay within their cash flow. As has been mentioned before in this blog by many posters, the ones who will suffer over the next few years will be those paying back debt.

Calgary house prices have been on a plateau for six months and are now slowly declining at roughly 5% to 10% a year depending on the neighbourhood. The cause is that all the speculators who bought pre-build condos and houses during the 2007 boom are now trying to unload simultaneously, putting a glut of listings that realtors say won't be worked off for at least six months and probably a year.

It will be interesting to see when the 2008 oil price graph crosses below the 2007 graph, probably in the next fortnight or so. Then, instead of everyone posting that oil is still higher than it was a year ago, we'll have to say it is higher than just two years ago.

One final word: Kondratieff.

Very sentient of you to mention Nikolai Dmyitriyevich Kondratieff , His telling of the economic truth got him a vacation in Siberia, all inclusive, the transportation was included, as was the meals, and even clothing. If you could call rats food and rags clothing. Do you think he would have survived a different vacation under the neocons and Bush, instead of communism and Stalin? Maybe the cloths would be orange and the vacation destination Gitmo...but the final results...death! would have been the same.

It is amazing how things change in a few months. 3 months back we had people talking about zimbabwe and hyperinflation and now deflation and 150 on the S and P. Neither is true of course. We are calling $90 oil deflation. 7 years back we would have called it hyperinflation. I guess it all depends on how long the year is. If our year was 2500 days long then gosh we would be recording 800% increase in energy prices. It is funny how when prices go up...it is not inflation for the chronic deflationists (Mike "you dont know the definition of deflation" Shedlock) and when they go down from a higher point..that is deflation.

Coming to oil fundamentals...the worst growth for China in the past 10 years, during the asian crisis was a 6% increase in GDP.
That means a 6% increase in oil usage. Plus they would be foolish not to build their stockpiles now.
I dont think the US is slowing down that much...all that TWIP is pure BS to me. I cannot believe that the US GDP contracted 5% in 2 months.

I can. I'm in the trucking business.

oK. What evidence do you see of such a slowdown?
Also on the TWIP...remember after RITA and KATRINA when prices spiked? Well certainly the percentage was a huge increase versus no change after Gustav and IKE. EIA showed massive demand destruction in its numbers for 2 months. Then magically almost all of it was revised away a few months later.

Sales down 40% from last year

FYI: the Kondratieff Theory


It is called the 401-KEG Plan.

REALITY CHECK, INVESTMENT ALTERNATIVE: If you had purchased $1000 of Delta Airlines stock one year ago, you would have $49 today. If you had purchased $1000 of AIG stock one year ago, you would have $33 today. If you had purchased $1000 of Lehman Brothers stock one year ago, you will have $0 today. However, if you had purchased $1000 worth of beer one year ago, drank all the beer, then turned in the aluminum cans for recycling, you would have received $214 today at redemptions. Based on the above, the best current investment plan is to drink heavily & recycle. It is called the 401-KEG Plan.

For states, it's a 'worst-case scenario'

NEW YORK (CNNMoney.com) -- States and municipalities are facing their worst budget crunches in decades - and it's only going to get worse.

As the weakening economy undermines consumers and businesses alike, governments are facing a rare confluence of declines in personal and corporate income taxes, property taxes and sales taxes. This is forcing officials to raise taxes and fees, lay off workers and slash spending - cutting aid to hospitals, schools, Medicaid and more.

At the same time, as unemployment and inflation rise, demand for public services and the cost of delivering them is on the increase.

On top of all that, the credit crunch has made it virtually impossible for some governments to borrow to cover short-term financing needs, forcing states such as California to appeal to Washington for help.

...States and municipalities usually suffer when the national economy turns south, but many experts said they can't remember a time since the Great Depression when all sources of tax revenue have declined simultaneously.

The real issue is that we have gutted our employment opportunities by allowing companies to ship manufacturing and production over seas where cheap labor can be found. This in return reduces the higher paying wages that are available in this country which effects the middle class. If the middle class cannot make decent wages, then how can they pay anything into taxes?

Further, the current president thinks that cutting taxes, especially for the wealthy will somehow stimulate the economy. The old trickle down theory. The reality which we now see on Wall Street is that rich people do not want to stimulate the economy. They would rather put things into a phantom set of financial books that require government bailout. In the end the rich still have all their money and benefits.

Until we can raise the median income level in the country and remove the large disparity between rich and poor, we are going nowhere but into a depression.

I think we might be going into a depression anyway.

No doubt, cheap labor is a big reason for offshoring. As are tax laws that date from 1930s and are ill-suited for today's global economy.

But I suspect that peak oil is another reason behind globalization. In particular, peak oil USA, ca. 1970. It wasn't just cheap labor that lured factories overseas. It was cheap energy, too.

Leanan 2 - jteehan 0

Well, like you said...it's only money. :-/

Pity the poor retirees, though, and those close to it. They're freaking out, and I don't blame them.

Tomorrow's going to be interesting, with the long weekend coming up.

Curious. Thanksgiving Monday coming up here in Canada.

What's the approaching holiday in the States? Or is it Europe?

The upcoming holiday in the States is Columbus Day, wherein we celebrate the "discovery" of the "new world" by ol' Christopher Columbus. As you can imagine, this is a negative-holiday for Native Americans.

Poetic justice perhaps? Perhaps the Dow Jones, like the original bargain for Manhattan, will be worth a handful of trinkets by Monday.

Monday is Columbus Day in the U.S. (Discoverer's Day in Hawai`i, so Capt. Cook can be honored as well.) I believe it's always on Canadian Thanksgiving (second Monday of October).

It's the day we celebrate colonialism, genocide, military force, and all that good stuff.

Gotcha. Thanks for filling me in.

Happy long weekends, folks, wherever you are. Cheers!

No kidding. I manage my Mom's money as well. She's 70. I put her in cash over a year ago. Today, cash. Next month, cash, and so on. The plan I described for me yesterday is not suitable for her. That's what the Bubblevision people always fail to mention and that's why the retirees are going to get seriously burned, as you sadly referenced.

I told her a long time ago this mess was coming and she's damn glad she listened.

Ironically, she just signed her closing docs for a brand new (smaller) house with a 30 year fixed at 5.25%. She's downsizing to a simpler life, and just in time.

States with the Worst Budget Shortfalls: Twenty States That Can't Pay for Themselves

What I found interesting about this feature was what the states are doing to plug their budget holes. Raising taxes is more popular than I thought. Especially corporate taxes, and "sin taxes" on cigarettes and booze.

University funding appears to be another popular target. And programs for children and the elderly.

Booze and cigs are proven winners in a depression.

And kids don't vote. Too bad it'll end up costing far more to incarcerate them in a few years than those Head Start programs would've cost us.

Department of Treasury on California’s Current Financial Situation

Governor Arnold Schwarzenegger sent the following letter updating the U.S. Department of Treasury on California’s current financial situation.

Text of the letter:

October 9, 2008

The Honorable Henry M. Paulson, Jr.
Secretary of the Treasury
1500 Pennsylvania Avenue, NW
Washington, DC 20220

Dear Mr. Secretary,

I congratulate you on the passage of the Emergency Economic Stabilization Act (EESA). As I’ve said before, bringing stability and liquidity to the U.S. financial markets is essential to protecting the life savings, businesses, retirement plans and jobs of millions of our fellow Americans. This rescue plan is particularly vital in California, where we have been especially hard hit by home foreclosures and the economic downturn.

Last week, I alerted you to the immediate challenges California and a number of others states and local governments are experiencing due to the lack of liquidity in the credit markets. I write to update you on our situation and inform you of our progress.

Yesterday, California State Treasurer Bill Lockyer officially began the process of selling the first $4 billion tranche of $7 billion in Revenue Anticipation Notes, our normal short-term cash flow borrowing instrument. Although it’s difficult to assess market conditions with perfect precision, the passage of EESA and ongoing actions by the Federal Deposit Insurance Corporation and the Federal Reserve System appear to be improving liquidity. We are also encouraged by the state of Massachusetts’s sale of $750 million in short-term notes yesterday, and we’re hopeful we can successfully sell these notes.

Although California feels the enormous effects of our current economic crisis, I am optimistic that these efforts to improve liquidity are moving the country toward more stable economic footing. I will continue to update you on our progress. Thank you for your continued vigilance in addressing these urgent matters.


Arnold Schwarzenegger

Cynical thought for the day:

The gov't could choose to specifically punish "savers" and "inadequate debtors" to further their goals. If you assume that the bubble was caused by those taking advantage of loose credit, and that it is politically advisable to restore the bubble, then the obvious solution is to specifically encourage borrowing and to discourage saving by financially punishing savers.

This can be done by bailing out deep-debtors in trouble via gov't borrowing (federal borrowing is good remember) and raising middle-class taxes (making that mortgage deduction valuable!), taxing and investment-directing existing savings such as 401K (a tax is almost as good as borrowing, and an unfunded mandate is just another tax), outlaw gold ownership, and devalue equities (a house without a loan is after all a liability), while increasing inflation.

I feel the urge to run up debt and refinance with cash-out and then default on my mortgage so I can benefit from handouts and inflation too. I get the message that I'm on the hook for bailouts, and that I was foolish not to "believe" before now.

Maybe they can't really make me believe, but they can make me wish I had.

The gov't could choose to specifically punish "savers" and "inadequate debtors" to further their goals.

The NYPD report on Homegrown Terrorists explicitly lists people without debt as more likely terrorist suspects.

Total Surveillance

cfm in Gray, ME

In reading through the story I was struck by how eerily similar are the now admitted journalistic lapses and the failure to connect the dots in the financial story to what we have been witnessing in the media's coverage of peak oil. The heart of Kurtz's apologia is the troubling question "Why didn't they see this coming?"

Tom Whipple's "Peak Oil Crisis - Mea Culpa", Falls Church News Press, Thursday 09 October 2008

Reminds me of Bill Moyer's question, "How did the mainstream press get it so wrong?" in his esposé on "Buying the [Iraqi] War". http://www.pbs.org/moyers/journal/btw/watch.html

There was a time when the MSM press saw its chief function as critical watchdog not head cheerleader. The emergence of celebrity cult fetishism with the ubiquitous yet ever shorter sound bite meant thinking, and certainly critical thinking, was sacrificed for ever higher ratings.

Superficiality substituted for substance. Infotainment eased out the fifth estate.

The dumbing down of western civilization has been ongoing for several decades now. Lately, it's been accelerating.

Problem is, IMHO, we're reaping what is sown.

Time to bring back classical education.

"There was a time when the MSM press saw its chief function as critical watchdog not head cheerleader."

When exactly was that?

The idea of declining social values is very common, and has been around since the Greeks. The MSM have pretty much always been a mouthpiece for rich and powerful, i.e. big business and government. The chief function of the MSM media has always been to make money for its owners.

I might concede that the current press is even less critical than ever though. In other ways, the speed and volume modern media has exposed more of the truth than before, e.g. 24/7 coverage from embedded reporters in Iraq. Previously foreign [mis]adventures were buried on page 7 (Foreign News), now no-one can say they are not aware of what happened in Iraq, or New York for that matter.

I can't say the public have become less informed either, they never were. Hence, bread and circuses.

Bob, I agree with much of you say. There has always been a symbiotic relationship between power brokers and the press. And true enough, the profit motive or the bottom line was, as now, a bread and butter consideration among journalists particularly outside publicly funded broadcasters like BBC, CBC, etc.

Nor do I discount nostalgia as a factor in my prognostications of decline.

Yet... and this is a pretty big yet... I remember the hard hitting days of "This hour has seven days" in Canada and investigative pieces by "Nightline" in the 1970s that I thought pushed the envelop on reporting. Moreover, whatever happened to the Michael MacLear type journalists or the Walter Cronkite type anchors?

Perhaps it is a matter of trust. Perhaps it's selective memory on my part. Still it seems to me as though there were individuals in the journalistic field who seemed to exude a credibility and integrity that was not manufactured. And it seems to me there was a time when newscasts did not spend much time obsessing or fondling over celebrities.

Perhaps I've become too jaded and cynical to go back implicitly trusting anchors, newsmen, and other public spokesmen, but I yearn for reliable sources for my news. Moreover, I'm not yet ready to concede that the decline in standards has been entirely concocted by my imagination.

Your right on.

Note that the MSM no longer reports news. They interview other reporters.

They then try to CREATE news by these means.

How often do you see them interview the citizen on the street?
They never never leave their 'studio'.
They will on occasion show the 'monkeypeople' standing outside staring at the News People in awe I suppose and will then do almost anything to get a second of attention.

No wonder the News People think we are idiots. However that is not the real citizens. It just NewYarkers and visitors there.

I used to live in Woodstock. The disconnect between that part of the state and the city was stunning.

Yes the news is 'made' and controlled.

Airdale-no TV no longer as a result of the above. I refuse to listen to baboons like I used to see on the MSM news shows.

I think, it's time to trim the holidays for US workers to ZERO. Currently they have 2 weeks per year. Although in Europe, workers have around 5 to 6 weeks holidays per year, with all the mess in the US, there is no other way than to cut those 2 weeks. Productivity would go up and so the earnings for the companies.

Euro, you may want to throw in weekends and statutory holidays too. All that wasted time could be going to ever greater productivity.

And look at all those idle vagabonds over 65/70 years who sit on their lazy bums and draw pensions. Much more productive to shuffle them back to the workforce.

And what about those urchins sponging off their parents -- oh bring back the good old days when kindly managers could get 12 year olds slogging away for them at the coal face or in textile factories.

Yes, these reminiscences are bringing tears to my eye.

Euro, I really hope you were being sarcastic.

We need earnings Growth!! Yes, Growth! Growth here and now!!

I am certain he was being sarcastic.

But that doesn't stop it becoming true :-(

Especially the bit about 65 year old pensioners. Our glorious leaders were kite flying this earlier this year. (except of course for themselves).

But that doesn't stop it becoming true :-(

MUDLOGGER, your point is well taken. We're only a couple of generations removed from very rudimentary labour standards. My great grandfather was killed in the coal mines of Cape Breton at the age of 70 in 1940 by a runaway coal car. My grandfather had to relocate back to the area so as to take care of his mother. Pensions are, by and large, a post World War II phenomenon.

The erosion of labour influence (and rights) in the last two decades means that many people may be susceptible to a return to Dickensian conditions. Hardly what I would describe as the good life.

Please add the Sarcanol or S85 stamp as necessary.

Unless you're really serious.

The article by Tom Whipple about Howie Kurtz reminded me of the oilshock series that the Washington Post did earlier this summer:


It was supposed to be a 5-part series. The first 4 parts had some good points and some bad points, but they never even got around to running the final part that has to do with alternatives. It was right around the time that oil started to come down from the $140/bbl.

Short selling ban was lifted today. In the absence of short sellers, the peak to trough move from the high on the day the ban was implemented to the low today was a mere 24.8% drop.

As I wrote about the night the rule was announced, change the rules and people leave the game.

This is not to say we might not have sold off this much irrespective of what SEC/Paulson did, but I personally know of many multi billion dollar investment managers that are/have closed their doors. Wait another week or two until we hear stories in mainstream media about massive hedge fund forced liquidations.

The leverage allowed hedge funds trumps that of banks when dealing with small exits in public markets. Never again will they allow this high alcohol content punch. However, given the consistent myopic trend of our leaders, Chris Cox will institute a 50 cent uptick rule in order to 'save peoples 401ks' (it won't).

Dollars trump energy, for now. But this seals the deal on peak oil, as many are now catching on to.

(*Edit -make that 29.1%)

And the Dow Jones has just fallen below 9000 for the first time since 2003.


"Still going." It's like the Energizer Bunny with his batteries reversed.

At the moment, 8786, down 471 points on the day (3:40 EDT)

Zadok: I genuflect and ask permission to approach...
I said and have been saying all along, this was comming and sooner then anyone thought, even TODers.
Simple to click my nic and peruse my prior posts. I see with clarity whats happening. Sadly, mostly among the proles, they can't accept whats happening, even when it's happening. Winston (No not Harry Winston) Winston Smith even questioned himself, from the vantage of working for the "Ministry of Truth".

A few TODers who thought this titallating to speak about and muse, may now be shocked at whats happening.
Most will shake their heads and feel remorse that their worst fears, have in fact come true.

Outside of TOD, 99.999% will never see what hit them.

Lets keep some levity in it anyway and start that long row, we are all gonna hoe.

Nephilim, after you sacrificed a good cuppa Earl Grey up the nose a few nights ago, genuflection will not be necessary.

You are indeed entitled to say, "I told you so", and have done us "doomers" proud.

I emailed a friend yesterday and told him the Great Depression took several years to unravel hoping to allay his fears. The difference this time is that trillions of dollar/euros are mere pixels on a screen and are manipulated by millions of keystrokes throughout the world.

I'm seriously wondering what the world is going to look like by American Thanksgiving.

I live in a rectory, in a rural area where basic foodstuffs are available within a hundred miles, and am part of a generous social network of family, friends, and parishioners. I suspect old fashioned charity and mutual good will/sharing may have some resonance here.

That's my hope anyway.

Welcome to the post-globalization brave new world.

Oil is at $85. Need a new poll.


Suggest $42.50 to $170. Half or double in the next 60 days

Ha, that might be just enough range to have TOD community end their 7 poll losing streak. :)

It's not TOD that's losing. You're not forgetting that, are you?

Speaking of predictions wasn't Yergin talking about $150 barrel oil earlier this year?

Here is an easy way to downsize a too big house:

An estranged couple in Cambodia have sawed their house in half to avoid the country's convoluted divorce process.Moeun Rim and his wife, Nhanh, who have been married nearly 40 years, split the building last week following an argument, local officials said.


Radical measures to save fuel? :-)

There are a handful of homes in my little city (pop 25K) that have been "bisected" and placed on separate lots. They seem to have been old farm houses that the city enveloped. The house next to mine split off their back yard at one point to create a 60' by 40' lot that now supports a two floor house with a garage- this was done to accommodate the grandparents who were moving in to the city from the farm.

with 20 mins to go

Here is the VIX index, also called the fear index (http://www.cboe.com/micro/vix/historical.aspx):

good luck to us all!

We've had the same 22% drop as on black Monday - it's just taken one week instead of one day.

GM shares drop to 58-year low, global risks eyed

"....GM shares fell as much as 22 percent to $5.42 -- driving its market capitalization to its lowest level since 1929, according to California-based Global Financial Data...."

"....GM's market cap stands at about $3.3 billion, compared with a market cap of about $4 billion in March 1929 before the stock market crash that preceded the Great Depression...."


GM needs to go. The time for the Dinosaurs has come to an end. The UAW has gotten so very fat off of the Government subsidies of bogus CAFE, tax breaks, and on and on and on...No more bailouts..Just say no. The Volt? Another Bridge to nowhere.

GM and the GOP are dinosaurs mating----
What is that funny thing in the sky?

There was a time when GM was too big to fail. "What's good for General Motors is good for America."

Add another casualty to the list: Merrill Lynch, Lehman Brothers, AIG, Fanny May and Freddy Mac.

Sooner or later, this is going to be felt far and wide. And not just by ex-bankers and former auto workers.

To whom the bell tolls? It tolls for thee.

Debt Rattle, October 9 2008: Debts no honest man could pay

When Marion King Hubbert introduced his Peak Oil theory for the US and the world (he didn’t name it that) in 1956, the general assumption is that it was dismissed across the board, that none of the folks in charge paid much attention.

My assumption is that they did. I think they jumped on it like a bunch of pouncing tigers, because if Hubbert was right, power itself would be at stake. And power needs to look ahead, power needs to be pro-active, it can’t afford to just react to events. Power also doesn’t rhyme with visibility, so we’re not talking about the presidents et al you see, they are mere hand puppets.

If Hubbert was right 50 years ago, the wizards behind the curtain reasoned, American society would be a whole new and different game. If oil supplies were sure to go down year after year at a certain point, the whole society would change, and not just a little bit.

So, in 1987, Alaln Greenspan was brought in, with the clear and defined task to liquidate and gut the American society and economy. See, that’s where people think I’ve lost it. And I understand. All I have to defend myself with is that, so far, I have been right about economic developments as long as I’ve written about them. All of them.

Yeah. I'd not considered that it might go back that far, but certainly the PTBs have factored it in over the past several years. Disaster capitalism and making sure they come out on top. This is one of the reasons I advocate 'chaos' rather than some sort of marginal changes. Marginal changes only preserve the existing structures; only chaos - a boiling and resettling - can change the structure. It's going to come down to guns and force vs what's left of community. Too many things change to guess beyond that.

cfm in Gray, ME

Someones always eating my Wheaties. I understand, I post a joke on line on Tuesday and Jay Leno has it in his monologue on Wednesday nite. Heres another freebe.
Home prices in Cleveland Ohio are averaging approx $4000.00 in East Cleveland proper, acording to recent figures available from the public records in the auditors office.

Watch for this info in the Chicago Tribune, New York Times, Boston Globe, Miami Herald, heck, look for it soon in the Cleveland Plain Dealer. Sharks I tell ya,
sharks with pens and keyboards instead of rods and gatts.

$100 a barrel oil might not be sustainable.

Egypt crossed the 700,000 barrel a day production mark for the first time in 14 years after massive investments spurred by record high oil prices reversed petroleum production declines:


A case study of Egypt is applicable to numerous pro-capitalist oil producing nations around the world where declines may be reversed.

Even Mexico was considering allowing publically owned companies to drill offshore. Canadian oilsands mining had operating costs of 40-45 dollars a barrel (Syncrude). Fixed costs had to be factored in including management & administration, interest, depreciation, perhaps royalties, mineral lease rents, and taxes as well.

If OPEC can keep prices at $100 a barrel, numerous energy and energy conservation projects will alter the landscape. If the oil prices continue to fall some projects might be delayed or cancelled. Eventually shortages will occur and prices will rise again.

In the last 12 years, oil prices have tripled. For several years the basic trajectory of prices was up. Now, we've hit a wall financially and prices of some commodities are dropping. Three months ago I would not have predicted that oil would be at $85 while it was at $147. Only in hindsight can I agree with some rationale that I see which explains what happened. I am not smart enough to develop a theory with predictive power regarding oil prices; perhaps no else is either. I have only guessed. Others with data and mathematical formulas have also predicted, but probably not much better than chance. We are not in a time of predictability.

We all know that peak oil caused this financial crisis. We've been following the same basic economic model for decades now... the infinite growth model. All these recent problems came about for one reason and one reason only: infinite growth was no longer possible. If we had a poll, I bet 90% would agree with that statement. But the general public doesnt understand that, and that is going to prevent us from finding and implementing the proper solution.

Here is my attempt at the simplest possible explanation of how peak oil caused this mess.

It was a factor, but in no way did oil prices cause this mess. Oil could be $10 a barrel and AIG would still have sunk, along with Lehman-possibly it would have allowed an even bigger mess. Reckless, corrupt and stupid management is the problem, and this won't be fixed with lower oil prices or taxpayer money. In China, the head of the food safety didn't get reprimanded like Fuld-if I remember correctly they executed the guy. There are currently ZERO consequences for reckless, corrupt and stupid behaviour by the management of financial firms. Guys like Fuld, Paulson, Rubin etc.-you could give them XOM or COP to run and within a few years the firm would be in trouble-instead of focusing on running the oil business, they would lever up like crazy and take foolhardy risks in the hope of increasing their personal wealth. What these types are really skilled at is increasing their own personal wealth-they aren't qualified to manage a dog pound, and without implicit and explicit taxpayer support they could have never kept anything afloat.

Agreed. Iceland failed because they tried to be the world's banker and took on far too much leverage and risk. Peak oil or not, they would have failed sooner or later.

I have tried explaining to my family members in the USA that infinite growth is not possible on a finite planet. They say things like "There's plenty of room here!" and "why don't we talk about something else we can agree on". Infinite growth is more like a religious belief, a beautiful dream from which waking up would cause severe mental anguish. They believe that when they emigrated from the "old country" (my mom and dad are from 2 different countries in Europe) they left all those ideas about limits behind too. No limits, no end, onward infinity!! That is the American Way! "We're in America now! It's different here!"

My mother asks which books I've been reading (Kunstler, Orlov, etc.) ..."where are those people from? What are their credentials? Why should anyone believe them?"


pi, denial is more than de river in Egypt.

Believe me, we share your frustration.

what could they do if they did agree?
"your right son we have acted irresponsibly by having 3 kids so we have deiced to put down the youngest,you wont go to waste though were gonna compost you in the back yard,i know you understand."
get e saver light bulbs?
forage for meals twice a week?

theres really only one game in town,you play or its the park bench.
playing is energy intensive.

Tales of the Crash

My office is in a series of two storey buildings in an office park setting. We all arrived at work this morning to find that all of the hallway artwork and furniture had been removed from all buildings. I emailed the prior owner asking if knew what was up. He said that the new owner had defaulted on the mortgage and the bank was about to foreclose. Apparently the guy stripped everything portable from the buildings that he could carry away, before the bank took over.

Hi WT,

I wonder where he's going to store it.

During the Houston oil bust of the 1980s, the apartment owner suddenly gave a discount to anyone paying the rent a month early. I asked what about 3 months early and got a "good deal" with a receipt.

Foreclosed three days later, new owner honored the prepaid rent.



Have you seen this idea? (Apologies if it's been discussed previously.)

And is there a modification possible? (Something that eliminates the build-out of the EVs, perhaps.)


Isn't that called the Auto Train?

Busy helping friends install a gas tankless hot water heater# so limited time.

Save the private car at all costs. WHY carry your car with you ?

What is the station dwell time to roll cars on and off ? 10 minutes maybe ?

How many cars per carrier ? 6 ? 8 ? (vs over a hundred for light car cars carrying just people and bicycles).

Totally impractical as discussed. Autotrain (take the car with you by train from New York to Florida) is a marginal idea. Certainly not the solution to our problems.


# 1940s galvanized iron plumbing was nearing end of life (gas piping was old but a bit undersized). I talked owner into eliminating gas water heater in shed and mounting a tankless gas water heater on the wall outside the bathroom (total run to bathtub faucet 15', up, down, sideways). Much less hot water plumbing (just bathroom & 1/2" run to nearby kitchen in copper) helped offset cost of tankless gas hot water heater. No standby heat loss from the tank (high outside in the winter) and much less hot water in pipes are the energy savings.

Spray painted copper pipes in black as a theft deterrent (does not look like copper, cuts value in scrap yard in half) and will put dabs of tar on later (drops scrap value even more, messy to steal).

Iam going to get a jump on tomorrows thread concerning PO careers. Possible future jobs with a future!
#1; Bodyguard for the ultra rich who are more afraid of roving hordes of Mad Max ruffians than the tax man.

#2; PO home decorators, "These drapes are insulative"
"The wood stove is a focal point and should be prominently displayed as such, allowing room for guest to gather around and socialise" you get the picture.

#3; Undertaker, Shoddy service won't be a concern, repeat customers aren't part of the business model.

#4; Historian, Life will pretty much be remembered pre and post PO, no more confusion about AD, BC and all that complicated stuff

I will save a bunch more, you thought I was going for shoe repair or bicycle mechanic, didnt you?

I think a Sanford and Son business will do just fine too.

If the futures, Nikkei, and S. Korean markets foreshadow much, tomorrow's gonna be pretty bad on Wall Street, too.

Man, that's ugly.

Trying to keep it oil related...

Stocks everywhere taking a beating, at least in early trading Friday.

Asian markets at a glance in handy chart form.

At the moment the Nikkei is down 'only' 9.5%. And Indonesia isn't even opening their market today, to "prevent panic."

Meanwhile, interesting story from Reuters:

JD Powers:

The global auto market may experience an "outright collapse" in 2009 amid growing concerns around credit availability of credit and general economic stress.

Global auto market may "collapse" in 2009: J.D.Power

Might be a good time to invest in horse breeding, yes?

Or sponsor a mechanically inclined Cuban to come to your home town to give a crash course on 'Auto Repairs Using Junkyard Parts for the Next 50 Years.'

The story about GM and Ford I posted up top says both companies are "on death watch."

It also has this bit:

The impact of oil prices at the beginning of the year was mild compared to the squeeze from the credit crunch. As Nigel Griffiths, Global Insight's managing director of global forecasting, points out, expensive oil merely meant that wealth was being transferred to oil-producing countries like Russia from oil-consuming ones like the United States. Now, the credit crunch is destroying wealth and making it impossible for customers to buy.

"The impact is worse than if the price of oil had been sustained at $200 a barrel," he said.

Looking like 3 - zip, isn't it?

It's one thing to know the crash is coming, quite another to actually see it up close and personal.


Looks like the Nikkei has been put on hold (temporarily it seems) as of 11:30 a.m. Japanese time.

Wonder what new and wonderful tricks/surprises Paulson, Bernanke, Bush, Central Bankers, etc., will try tomorrow morning to forestall another bust until the weekend. It is Friday after all, and these boys like to order room service on the weekends, huddled together in high powered meetings.

Hate for the trading floor to give way big time before the G7 finance ministers get a chance to shmooze over cocktail hour.

Tokyo Stock Exchange breaks daily from 11:00am to 12:30pm local time.

What cedar said.

Look at the flat spots on that graph. Was trading suspended?

It looks like it, at least for a half hour or so. At that point the Nikkei was down 10+ points.

Can anyone explain why the US dollar is so strong at the moment?

The only thing I've heard is that US companies and hedge funds abroad are converting everything they can into dollars to ship home for liquidity.

I found this. http://wallstreetpit.com/dollar-rallies-on-quarter-end-repatriation/
and this search "US Dollar Repatriation" got a lot of hits.

It's that, or our booming economy which is the envy of the world.. Ah hell, I'm too tired to even type sarcasm tonight.

Google the carry trade.
Yen and the Iceland Kroner where also popular with the carry trade.
Oldie but goodie.

And a current one.

But the simple answer is a lot of contracts are done in dollars and as people unwind leveraged positions the need dollars to close out the contracts of various sorts. Also of course you have flight to safety etc. I've seen several good posts on this.

A lot of this money also went into oil its my opinion that the decision to attack the oil prices like I outlined above played a big role in blowing up the carry trade. So we have already payed a huge price just to force the oil prices lower.

I think the carry trade is now blown no matter what happens going forward with oil I don't think that it can restart.

I pretty much agree with whats outlined in the post except that real oil was the trigger not the buying of the GSE's.
The differences of viewpoint are fairly minor outside that real oil was absolutely needed to crash the commodities markets.


A lot of this money also went into oil its my opinion that the decision to attack the oil prices like I outlined above played a big role in blowing up the carry trade. So we have already payed a huge price just to force the oil prices lower.

The whole story of Soros' activities in the collapse of southeast asian currencies comes to mind as an example of what was possible when there was a whole lot less money flowing around. The Chinese colonels' 1999 book, "Unrestricted Warfare", mentions that as an example of the type of warfare that would be carried on. And I cannot imagine that this financial meltdown is not being treated at that level - as a virtual war.

I can't imagine that it's Paulsen and his buddies struggling heroicly on behalf of schmucks like me. No, I'm a bit of cannon fodder. Logically it would have to be the sovereign funds, because they are not going to sit back and let Paulsen and his buddies loot everything and leave them out in the cold. What might have started as an internal civil/class war would have to generalize to worldwide brinksmanship. Still, those involved at the elite level might well have decided they can do better by cooperating and splitting up the plunder.

cfm in Gray, ME

Back to reality--
Systems that matter:
The Real Economic Loss

Your link doesn't work.


westexas, P.U.M.A. is obviously anti-Obama.

I get the impression it's an organization of Hilary supporters hell bent on sabotaging the Democratic Party's chances in 2008.

But what pray tell does the acronym, P.U.M.A., stand for?

party unity my ass

CNN has a new feature called "Culprits of the Collapse." It's a "Ten Most Wanted" list, with western-style "wanted" posters.

So far they're only picking on CEOs. I wonder if they'll have the nads to name any of the politicians who allowed the foxes to run the chicken coop.

Only ten wanted posters?

Can we use the posters again after the hangings?

Hello TODers,

Bush Plans Statement Tomorrow to `Assure' Nation (Update2)

Oct. 9 (Bloomberg) -- President George W. Bush will address the nation tomorrow to tell Americans they should remain ``confident'' amid falling stock markets and a worldwide credit crisis, administration spokeswoman Dana Perino said.

The president wants to ``assure'' the country that Treasury Secretary Henry Paulson and other administration officials are making ``every effort to stabilize our financial system,'' Perino said.

The statement, spurred by ``volatility'' in U.S. markets today, will be given at 10:25 a.m., Perino said.
I hope the various TV channels go to a split-screen format: the Shrub on the left, real-time stock market info on the right. It will be fascinating to see what happens.

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

At this moment Nikkei is down 11%, Dow futures down over 200.

Are Huamns Smarter than Yeast?

My money's on the yeast.

Please no!!! Confidence would go up (or at least stay where it is) if he would just keep his mouth shut.

It's been one disaster after another with him on watch. I think all of us in the rest of the world need to get to vote on the next American president, considering how much we get impacted by his/her decisions.


I'm getting really worried by this whole thing. I was hoping this would all herald the post-oil age, but it looks like the opposite is going to happen. Does anyone, in their heart of hearts, really believe now that we're seeing peak oil? Oil prices are crashing. We were winning the argument at $147. But now it's getting hard to persuade people (who forget that even $75 is high!).

Does anyone, in their heart of hearts, really believe now that we're seeing peak oil?

Yes. I am now pretty much convinced we are at peak oil. Because with demand dropping and credit drying up, a lot of projects will be delayed. They may never happen, and if they do, the aging giants will be that much farther down the back side of Hubbert's peak, and it will be that much harder to make up for their production.

But it will be hard to convince people of this. Nobody will be much interested in peak oil. Peak oil may mean we never climb out of this depression, but nobody will understand that.

This is probably also destroying our chances of building a lot of renewable energy infrastructure, and pushing climate change and other environmental concerns way down the list of priorities. We won't be able to afford it.

I think what happens to oil prices (as all prices) depends now mostly upon what actions are taken by governments. They still have the option of trying to bail-out the financial system with hyperinflationary processes. If they create enough new money - trillions rather than billions - they might manage to avoid an imminent depression (although it's now looking unlikely). This would of course only make matters worse, but would send oil to new highs.

Most people still think about prices with the unconscious assumption that the quantity of money in the system is stable, and only the supply of goods/services changes. Therefore hyperinflation would seem to them to indicate that all goods were genuinely suddenly scarce. I find it quite difficult to convince most people that the amount of money in the system is as big a determinant of prices as the amount of goods.

I agree though... this episode will probably obscure the peak and defeat any serious attempt at sustainable society.

Yes. Peak Oil is about the amount of oil, not the price. As leanan points out, projects delayed or cancelled because of a falling price cut production too. More effectively than high prices. Where keeping production up depends on oil with a high marginal cost, cutting the price paid for oil will drop production.

This is probably also destroying our chances of building a lot of renewable energy infrastructure, and pushing climate change and other environmental concerns way down the list of priorities. We won't be able to afford it.

Obama's team had to know that the pattern of leave-no-banker-behind legislation would mean we couldn't afford anything that his "constituency" seems to think he's promising. I can hear him now, we really should do so-and-so, but there isn't the money. On the bright side, we might find the count of US overseas bases dropping from the 800 or so we have now. But all those career soldiers - programmed to enhance their obedience and killing abilities - will be coming home. Maybe that's not such a bright side.

McCain, I don't know. I don't think he really aims to get elected. Better to let Obama and the dems clean up the mess - which they will not be able to do - and then Ms. Palin can come back next cycle, riding out of the western sun. Remember, if elected, Obama/Biden go into office with every power Bush/Cheney took; they will end up "legitimizing" all of them.

That sends us down what the Millenium Assessment terms the least satisfactory path "Order from Strength". Strength in this case being weapons, surveillance and police.

cfm in Gray, ME

This is probably also destroying our chances of building a lot of renewable energy infrastructure, and pushing climate change and other environmental concerns way down the list of priorities. We won't be able to afford it.

It depends on who the 'we' is.
For the US, and perhaps most of Europe, sure, but I don't see that most of that applies to China, who after they have given up putting their savings into dodgy Californian real estate should have a lot of funds to invest, and that should continue.

The death of their Western export market will affect them, but a combination of regionalisation and re-directing their productive capacity may carry them through.

Eastern stock markets have taken a hammering, as they do need to re-prioritise their production, but the banks are not now nearly as over-leveraged as those in the West.

I don't think so.

Some are arguing that the correct comparison is not the Great Depression, but the Real Great Depression - Panic of 1873. The Panic of 1873 marked the shift of the center of financial power from Europe to the U.S., and this crisis, the argument goes, is marking the shift from the U.S. to India and China.

I disagree. India and China simply do not have the resources. That's the problem I have with a lot of financial talking heads. They don't seem to understand that natural resources are the base of every economy.

Rather than a shift to Asia, I think what we are seeing is the end of globalization.

To sustain that argument you would need to be specific about what they are going to run out of and when.
Iron ore and coal they can import, principally from Australia.
In China they are doing a truly massive nuclear build, with the objective of having 100GW built or under construction by 2020, around the same as the present US capacity, and they will be making them on production lines, so that they will be4 able to turn out 10-20 a year in conventional reactors, plus an unknown but large number of the modular pebble bed reactors.
In wind power they are rapidly building up their capacity, and are likely to be either number one or two for this resource.

Solar power should be broadly competitive for grid use by 2015, and India with it's more equatorial location is far better situated for this than the US.
It would also to some extent avoid their grid issues depending on how it is implemented.

On the transport front, China already has 60 million electric bikes and scooters on the road, and is the biggest source of batteries.

I would agree that we will see far more regionalisation, but by far the most powerful region is likely to be the far east and perhaps south Asia.

Looking just to the immediate future, banks in the region and Government finances are far stronger than in the West.
A collapse in the West will lead to a change of emphasis, with Japan, China and the rest seeking to export to each other.
The very high savings rate in much of the area means that it will be much easier to finance shifting energy sources, and they haven't got huge suburban populations to re-arrange transport for.

My first post here at TOD.
I am in agreeance with Leanan and andybts. All the little oil explorers have got absolutely hammered. Even those with proven discoveris are finding it hard to raise cash.
Lets just hope demand is hit by more than I think it will be causing world spare capacity to increase giving us in the know a good 10-15 years to try and set up little self sustainable communities.
The upside to the financial crisis:
The harder we fall now the longer there is to organise.

As one of the "little oil explorers" out here I need to point out that we are not getting hammered as far as cash flow goes at this point in time. Oil is still selling for about the same price it was 12 months ago. And that price was far greater then any of us used to make investment decisions prior to 1/1/08. And NG prices are still at a relatively high level for this time of the year. Those prices might have fallen since the spring price spike but they are still close to the price of last January...the high season. Much NG in the GOM is still shutin due the hurricanes at a time when it should be going into storage to meet winter peak demand. Just yesterday the gov't announced a long term forecast showing a much colder winter than average. All these factors bode well for the NG drillers and especially for the unconventional NG players.

Availability of capital is a whole other question, of course. There will be big players unable to sustain planned operations from their cash flow w/o making some big loans. Some will be able to meet the criteria...some will not. I don't follow the individual spreadsheets of each company so I can't guess the percentage of future active players vs. those who will have to sit on the sidelines. But just as in the financial markets, there are players who are heavily leveraged and those that are not. There is one big result of this budgeting problem that seems easy to predict though: there may be a number of very big corporate oil/NG acquisitions in the next few months. Those that have the strength will use that power to seize the weakened.

SIGH! I keep reminding people: Oil is a commodity. Like all commodities, its price goes up and down. The thing to understand about post-peak is that there will be more ups than downs, and the ups will be up more than the downs will be down, but ups and downs there will still be.

Anyone who thinks that peak oil means that the price of oil will go up continuously and without interruption simply isn't thinking correctly.