DrumBeat: October 10, 2008

The Official Demise of the Oil Bubble

On Sept. 11, 2007, the price of crude oil closed at $78.23 a barrel — the last time oil closed below $79 a barrel, until Friday. What seemed like a bewildering ascent in the price of crude at the time is now a relief to traders, who watched oil fall $8.98 a barrel to close at $77.61 on the New York Mercantile Exchange, the lowest closing price in more than a year.

Like a number of other commodities, oil’s move went from a steady ascent to a vertical bounce in the spring of 2008, topping out near $150 a barrel before speculative excess started to drain from the market. And those who believed that the oil price was justified by fundamentals — being, as it is, an actual product, rather than an Internet company’s vague promise of revenue — are smarting.

“This is a market that is basically returning to the price level of a year ago which it arguably should never have left,” says Tim Evans, energy analyst at Citigroup. “We pumped up a big bubble, expanded it to an impressive dimension, and now it is popped and we have bubble gum in our hair.”

OPEC May `Tear Apart' If Saudis Shun Supply Cut, Bernstein Says

(Bloomberg) -- OPEC divisions could ``tear the organization apart'' as its biggest producer, Saudi Arabia, pursues a more moderate course than other members calling for supply cuts to revive oil prices, a London analyst said.

``Saudi Arabia has not joined the OPEC hawks, led by Venezuela and Iran, in calling for another supply cut, and we think we could be witnessing the beginning of the end for the organization,'' Neil McMahon, a London-based analyst at Sanford C. Bernstein & Co., wrote in a report today.

...``As the only country likely to have any real influence on supply within OPEC in the near and longer term, the Saudis are the key to the future existence of OPEC,'' the report said.

``However, we do not necessarily think that Saudi wants to cut, as a falling oil price should contain the amount of demand destruction, and secondly if Saudi cuts its share, will the hawks actually cut theirs?,'' Bernstein said.

Oil sheds more than $9 to hit 13-month low

NEW YORK (CNNMoney.com) -- Oil prices plunged to a 13-month low Friday, following steep stock market declines, as investors worried that the weakening global economy was driving down demand for fuel worldwide.

U.S. crude for November delivery sank $9.50 to a low of $77.09 a barrel during Friday trading, its lowest level since Sept. 11, 2007, when crude hit an intraday low of $77.00.

Prices later recovered slightly to settle down $8.89 to $77.70 a barrel in New York, oil's lowest close since Sept. 10, 2007, when oil ended the day at $77.49.

Investors remain concerned that a crumbling economy is causing businesses and consumers to cut back on fuel consumption.

Nigerian Oil Workers to Strike

Oil workers in Nigeria say they will embark on an indefinite strike if the government fails to reverse the sale of two state-owned oil and gas companies within two weeks. The government says privatizing the two companies will make them more efficient and profit-driven. Gilbert da Costa reports from Abuja.

Russia taps oil money for use in stock market

MOSCOW: Prime Minister Vladimir Putin said Friday that his government would go ahead with a plan to spend budget money to buy shares on the Russian stock exchanges, starting Monday, in the hope of lifting the deeply depressed market.

Putin said $6.7 billion would be set aside for the purpose and that the state development bank would place the orders, continuing a strategy that has essentially relied on making the government's oil windfall profits available to banks, hoping they would in turn lend to companies or buy equity to maintain growth.

Also Friday, the Parliament passed a law unlocking central bank lending to private banks in a $36 billion bailout that had been announced earlier this week.

Meanwhile, the authorities closed both principal stock markets Friday after Asian shares plunged and European markers followed, in falls that did not augur well for the market here.

The meltdown's silver lining - cheap oil: With experts predicting a global economic slowdown, oil prices could fall to $60 a barrel, or lower - with gas prices soon to follow.

NEW YORK (CNNMoney.com) -- As the world loses confidence in the foundations of its economic system, the silver lining may be that oil prices are about to get a whole lot cheaper.

In a new report Friday, Deutsche Bank uses a number of interesting yard sticks to suggest crude is currently way too expensive and may fall to the $60 a barrel range as the economy worsens.

And the bank does expect the economy to worsen, painting a bleak picture - caused be the current financial turmoil - but stopping just short of predicting a multi-year recession.

U.S. says Russia would not cut off gas to Europe

ROME (Reuters) - European dependence on Russian gas is dangerous partly because of future supply shortfalls, not because Russia may cut off supplies over tensions with the West, the U.S. envoy for Eurasian energy diplomacy said on Friday.

"I don't think it would do that (cut off supplies). It hasn't done that to Western Europe in the past and I don't think it's going to do it intentionally," C. Boyden Grey said.

Alternative energy outlook clouds up

As hot as the alternative energy sector is, the international credit crunch coupled with falling oil prices could squeeze investment, particularly for startup companies, an analyst said Thursday.

"The concept of alternative energy has a lot of momentum," said Dan Pickering, head of research for Tudor, Pickering, Holt & Co. Securities in Houston. "But lower oil prices make it harder to justify investment. At $50 a barrel, a lot of that investment will die."

But even if oil doesn't fall that far amid global economic woes, access to capital for new ventures is tough to get despite the sector's political popularity, Pickering said after giving a presentation at an alternative energy forum sponsored by Ernst & Young.

"This is an environment where existing companies have an advantage," he said. "Wall Street risk tolerance is going down."

Exxon Mobil shares drop as crude continues slide

Shares of energy giant Exxon Mobil Corp. hit their lowest point in more than two years Friday as crude prices dropped and concern continued to escalate on the state of the global economy.

Shell Leads Oil Stocks to 5-Year Low on Economy Fears

(Bloomberg) -- The Dow Jones Europe Stoxx Oil & Gas Index dropped to its lowest in almost five years, led by Europe's three biggest oil companies, as crude prices slumped on concern the global economy will fall into a recession.

Next president could make huge oil sands deal with Canada

With no silver bullets available to wean the U.S. off oil in the foreseeable future, the next President will likely take a good look at Canada’s oil sands. And this might lead to either Barack Obama or John McCain championing a massive North American oil sands deal, even if it means huge investments to reduce the negative environmental impacts, according to Pierre Fournier, director of research and geopolitical analyst at National Bank Financial. That’s what energy guru T. Boone Pickens has been telling President Bush to do.

British Energy U.K. Power Plants Are Behind Schedule

(Bloomberg) -- British Energy Group Plc, the nuclear utility being bought by Electricite de France SA for 12.5 billion pounds ($21.1 billion), said repair work on two reactors is behind schedule and costs will be higher than expected.

The U.K.'s biggest power producer said two of the four reactors at its Hartlepool and Heysham 1 plants, already closed for about a year because of corroded wires, probably won't start until 2009 instead of this quarter. The delays were announced after work on Heysham 1 Unit 1 took longer than planned.

EU ministers solve energy liberalisation stand-off

LUXEMBOURG (Reuters) - European energy ministers cleared up final disagreements about liberalising energy markets on Friday, agreeing measures to prevent giant utilities from unfairly dominating the market.

They also approved a "Gazprom Clause", which would prevent energy companies from outside the bloc -- such as Russia's state-owned Gazprom (GAZP.MM: Quote, Profile, Research, Stock Buzz) -- from buying up distribution networks without agreement at a political level.

CTA plans 2009 fare increase

The CTA's announcement Thursday that the agency must hike fares next year was greeted with frustration by riders who are already stressed over the high cost of commuting and the ailing economy.

CTA President Ron Huberman said the agency needs to raise prices for bus and rail passes for the first time in about a decade and for cash fares for the second time since 2004 because the cost of fuel and other materials have soared. They also cited spiraling costs to maintain rickety CTA buses and trains that would have been retired years ago if, in their view, the transit agency had received the necessary capital funds.

BP's Texas City, Tex refinery back at normal operations

NEW YORK (Reuters) - BP's 467,000 barrel-per-day refinery in Texas City, Texas was back at normal operations after shutting ahead of Hurricane Ike, a source familiar with refinery operations said Friday.

Richard Heinberg: The End of Growth

Several of us who have been watching the world oil production and depletion picture closely for the last few years are now concluding that the world has now seen the highest rate of production ever. Matt Simmons agrees: It’s all downhill from here.

The worldwide financial crisis, and the decline in available energy, mean that we may also have seen the final year of aggregate world economic growth.

This is a breathtaking statement. I found myself uttering it yesterday at a strategy meeting of some environmental and economic justice organizations organized by the International Forum on Globalization; I surprised even myself, and immediately began wondering whether what I had said could possibly by true.

There are obvious objections. Perhaps the wealthy nations could still wring out a few years of growth by increasing global economic inequality. But this is essentially what they did over the past two decades with the strategy of corporate globalization—and that strategy is losing steam because of high transport costs due to Peak Oil.

As China slows, commodities may feel outsize pain

HONG KONG (Reuters) - An unscripted slowdown in China's economy may take an exaggerated toll on commodity markets as demand from its construction sector and export-oriented manufacturers, which drove prices sky high, falls back to earth.

As the financial crisis threatens to sink the global economy into recession, the question of China's future demand for oil, coal, copper and iron ore has taken on new importance for traders more accustomed to pricing in unstoppable growth.

Roger Wiegand: Oil to Reach New Highs by Year-End

Despite severe economic turmoil, demand for oil is rising significantly—in fact, it will land somewhere in the range of $150 to $157, according to Roger Wiegand, editor of Trader Tracks.

Iran Uses Price Power in $2 Billion Gas Deal

TEHRAN, Iran -- Oil prices may be softening, but the price of natural gas is climbing sharply in the Persian Gulf, thanks to the booming economies of the Arab petro-states.

Iran looks set to squeeze the region's highest wholesale gas prices from the United Arab Emirates as part of a 25-year, $2 billion natural-gas export deal between the two countries. Crescent Petroleum, based in the emirate of Sharjah, has offered to pay about $5 per million British thermal units for Iranian gas, according to a person familiar with the matter.

Mexico back to full oil production after Ike

MEXICO CITY: Mexico's state-run oil company is back at full oil-production levels after repairing the damage Hurricane Ike caused to key refineries in Texas and Louisiana.

Petroleos Mexicanos, or Pemex, cut back production by 250,000 barrels a day on Sept. 23, after Ike hit the refineries.

Third China refinery set to delay start-up to 2009

BEIJING (Reuters) - PetroChina (0857.HK: Quote, Profile, Research, Stock Buzz) is likely to delay the commissioning of a new unit that would double capacity at a Western refinery, the third Chinese project to get pushed into next year, when extra fuel could run into weakening demand.

The 100,000 barrel per day crude distillation unit at the Chinese oil giant's Dushanzi refinery in the western province of Xinjiang was originally meant to be operational early this year. Dushanzi's 1 million tonne-per-year ethylene project, also due for completion this year, had already been pushed back to 2009.

Brazil Reiterates No Change to Oil Contracts

Brazil will not alter existing contracts with foreign and local oil producers that have discovered huge reserves in the subsalt cluster deep under the ocean floor, Energy Minister Edison Lobao reiterated on Friday.

Ban lift paves way for oil shale

WASHINGTON, D.C. — There is a tiny glimmer of sunshine breaking through the darkness spreading across the nation over the current economic crisis — a possible solution to gas prices. A moratorium preventing oil shale development on federal lands has been allowed to expire, paving the way for tapping into a possible 800 billion barrels of oil in Utah, Wyoming and Colorado.

Economic Meltdown in America Saves the World from Peak Oil

Why would the price of oil be dropping when supply is in an overall trend of decline if demand is robustly rising?

Well, the world is rapidly changing, and it may be that the economic decline of the US, with the accompanying decline in consumption, and therefore lowering of the demand for oil and its products, is impacting on the world oil markets. Declining demand may be lowering the level of oil scarcity and so allowing the crude prices to fall (Reuters, 2008).

The subprime mortgage industry meltdown, and its knock-on effects, may yet prove to be titanic in their full implications. The full debt problem in the US is so vast and huge, it is ­almost beyond comprehension.

Doubts grow over Belgian plan to cap energy prices

BRUSSELS (Reuters) - Doubts emerged on Friday over a proposal by Belgium's energy minister to cap wholesale electricity prices at GDF Suez subsidiary Electrabel, with rival politicians clearly opposed to the plan.

Crude Oil Drops Below $80 as Equities Slump on Credit Freeze

(Bloomberg) -- Crude oil fell below $80 for the first time in a year and copper headed for its biggest weekly drop in more than 20 years on concern that the deepening financial crisis will push the global economy into a recession.

Oil in New York is heading for its biggest weekly decline since 2003 as plunging share prices in Asia and Europe caused the MSCI World equity index to drop to the lowest since 1970. All commodities with the exception of gold are down on signs that demand for raw material will drop as the global economy falters.

``This is a market that is moving on emotion, not the supply and demand picture,'' said Sarah Emerson, managing director of Energy Security Analysis Inc., a consulting firm in Wakefield, Massachusetts. ``We are looking for a landing place and I have no idea where it is.''

Trade Deficit Down as Oil Imports Dip

WASHINGTON (AP) — The United States trade deficit edged down slightly in August, reflecting a drop in foreign oil from record levels.

But the politically sensitive deficit with China increased as imports from that country hit a record.

OPEC Should Cut Supply at Nov. 18 Meeting, Libya Says

(Bloomberg) -- The Organization of Petroleum Exporting Countries should cut oil production when it meets next month in Vienna to halt the decline in oil prices, Libya's top energy official said, echoing earlier comments from the group's president.

Doubts cloud outlook for Libyan oil bonanza

RABAT (Reuters) - Majors oil companies are pouring money into Libya, home to Africa's biggest petroleum reserves, but it is unclear whether the desert country can achieve its goal of almost doubling output within four years.

Tripoli wants to increase output to 3 million barrels of crude oil per day by about 2012 from 1.7 million now, raising extra revenues to help rebuild infrastructure that is crumbling after years of sanctions.

Libya's peak oil output was around 3.3 million bopd in the late 1960s but analysts said that, with output at mature fields declining, it might be hard to push production above 2 million.

GM says no to bankruptcy

NEW YORK (CNNMoney.com) -- General Motors is not considering bankruptcy, the company said in a prepared statement Friday morning. The statement was in response to the company's precipitous stock price decline the previous day, a spokesman said.

E.ON Foe Sees `End of World' in Coal as Germany Shuns Reactors

(Bloomberg) -- Winfried Schwab-Posselt feels he's driving toward Armageddon when commuting to work.

Every day, the 56-year-old night-school teacher drives down the main street in the southwest German town of Hainburg under the shadow of five gray-and-white towers spewing clouds of vapor from E.ON AG's Staudinger coal-fired power plant. Now, Germany's biggest utility is planning to build a larger facility.

``It's like moving toward a big wall and facing the end of the world,'' Schwab-Posselt says. ``Now there's the fear that an even bigger wall is coming.''

IEA cuts world oil demand forecast on weak economy

LONDON (Reuters) - The International Energy Agency (IEA) on Friday cut its oil demand growth forecast for 2008 to the lowest rate in 15 years, citing economic weakness and "a spiralling liquidity crisis."

In a monthly report, the agency, adviser to 28 industrialised countries, reduced its 2008 demand growth forecast by 250,000 barrels per day (bpd) to 440,000 bpd. This represents a 0.5 percent growth rate -- the lowest in percentage terms since 1993.

The report adds to evidence slowing economies and the worsening financial crisis are reducing oil consumption. Oil prices fell further after it was released to a one-year low near $81 a barrel.

Oil near $83 after fall to 12-month low

LONDON (Reuters) - Oil was near $83 a barrel after a fall to its lowest in 12 months on Friday, depressed by expectations global demand growth will shrink if the credit crisis pushes the world economy into recession.

Economic weakness spurred the International Energy Agency (IEA) to cut its forecasts for world oil demand growth for 2008 to its lowest rate since 1993.

U.S. light crude for November delivery was $3.59 down at $83.00 a barrel by 1133 GMT. It touched a session low of $81.13, its lowest since October 2007.

Prices have dropped nearly 45 percent from a peak of $147.27 in July.

London Brent crude was down $3.47 a barrel at $79.19, below $80 for the first time in a year.

Brown says OPEC output cut would be wrong

LONDON (Reuters) - Prime Minister Gordon Brown said on Friday it would be "wrong" for the Organisation of the Petroleum Exporting Countries (OPEC) to cut production just as oil prices are falling.

"I'm concerned when I hear that the OPEC countries are meeting, or are about to meet, to discuss cutting production -- in other words, making the price potentially higher than it should be," Brown told reporters.

Lacking Credit, Trust, Banks Exiting Physical Energy Markets

NEW YORK (Dow Jones)--Banks are beating a hasty retreat from the physical oil and fuel markets, as the credit crisis cuts financial institutions out of a once-promising line of business.

Much like the credit market itself, the trading of physical barrels of oil or refined products for prompt delivery relies on trust. Deals are arranged between two parties or through a broker, and most agreements aren't cleared, meaning that if one side doesn't hold their end, the other takes the loss.

Physical deals are priced off of benchmark futures contracts, which are traded on exchanges in financial transactions that rarely involve exchanging actual commodities.

Companies often use borrowed cash to finance inventories and the transportation of oil and fuel by pipelines or tankers, making it difficult for companies seen as default risks to operate in the market. Over the last month, confidence in the banking sector has been badly shaken, with several failures, a rash of forced mergers and expectations of even more government support. In some energy markets, banks are being kept at arm's length by oil companies and refineries that are wary of not being paid should a counterparty join the list of failed banks.

Oil bulls sharpen horns

Jeff Rubin, chief economist and strategist at CIBC World Markets, has seen his forecast for oil to hit $200 (U.S.) by 2012 take a beating as the price of crude oil goes down, down, down. It was last seen at about $87 a barrel, down more than 40 per cent from its record high in July.

In his updated strategy, Mr. Rubin maintains a bullish outlook, arguing that the fundamentals that drove up oil during its remarkable run are still in place. Speculators may be gone, he said, but the marginal cost of a new barrel of oil is between $90 and $100. As well, the demand for oil has been driven mostly by developing economies, especially China, and not the G7, where economies are contracting and oil demand was stagnant even during good times.

Big Issue: Energy crisis hitting home

MURPHY, N.C. (AP) — When oil topped $100 a barrel earlier this year, and gasoline prices soared above $4 a gallon, Americans cried out for relief.

Some called for more offshore oil drilling. Others pushed for the development of alternative fuels. And many made energy policy a top priority as they consider the presidential campaign.

In an Associated Press-Yahoo News survey of voters taken early in September, 77 percent said gas prices were an important or extremely important issue. Only the economy ranked significantly higher.

Libya to Withdraw $7 Billion From Swiss Bank Accounts

(Bloomberg) -- Libya said it will withdraw $7 billion from Swiss bank accounts and halt oil shipments to Switzerland in an escalation of a diplomatic dispute over the July arrest of Libyan leader Muammar Qaddafi's youngest son.

``All forms of economic cooperation with Switzerland will stop until the motives of this bad treatment are made clear,'' the state news agency JANA reported, citing an unidentified foreign ministry spokesman.

BP brings Azeri back on line

A BP-led group resumed oil production at one of its two Azeri offshore platforms shut after a gas leak in September, BP Azerbaijan said today.

"Oil production at Western Azeri was resumed late Thursday," a company spokeswoman Tamam Bayatly told Reuters.

A source in the consortium told Reuters earlier this month that resumption of oil production at Western Azeri would double production at the Azeri-Chirag-Gyuneshli (ACG) offshore group of fields to around 600,000 barrels per day, down from the usual 900,000 bpd.

BTC Oil Pipe Outage Cuts Supplies Nearly as Much as Hurricanes

(Bloomberg) -- Disruptions to BP Plc's Baku- Tbilisi-Ceyhan crude pipeline may cut oil supplies by nearly as much as Gulf of Mexico production stoppages after Hurricanes Gustav and Ike, according to the International Energy Agency.

Supplies through the link, which transports the Azeri crude blend from the Caspian Sea to Turkey's Mediterranean coast, have been curbed by a series of disruptions since August. Production from the fields which pump oil via the pipeline is currently about a third of normal output after a gas leak on Sept. 17, the IEA said in its monthly oil market report today.

Hungary bourse suspends MOL trade

BUDAPEST (Reuters) - Shares of Hungarian oil and gas group MOL MOLB.BU were suspended on the Budapest Stock Exchange on Friday, the bourse said.

Dimming the Lights

For the past few years, OI has been selecting investment ideas in companies that appear to have bright futures in a looming era of rising energy and resource demand. And many - most, really - of the investment ideas did well. Some did very well. A lot of readers made a lot of money. Whether it was oil, gold, refineries, cement or energy infrastructure, it seemed like we were investing in places where the world was going. Right?

But now it seems like the investment locomotive - energy, resources and related infrastructure - has derailed. Energy prices are declining. Energy-related stock plays are down. Commodities are down. Mining and infrastructure stocks are in the dumps. The falling tide is leaving us high and dry.

Alternative Fossil Fuels Have Economic Potential, Study Shows

ScienceDaily — Alternative sources of fossil fuels such as oil sands and coal-to-liquids have significant economic promise, but the environmental consequences must also be considered, according to a RAND Corporation study issued October 8.

N.J. vows to 'race to the sea' for wind power

ATLANTIC CITY, N.J. - New Jersey is powering up an ambitious plan to become a world leader in the use of wind-generated energy.

Gov. Jon Corzine wants the Garden State to triple the amount of wind power it plans to use by 2020 to 3,000 megawatts. That would be 13 percent of New Jersey's total energy, enough to power between 800,000 to just under 1 million homes.

"We want to create this generation's race to the moon, but this time, a race to the sea, to harness this potential wind source off of our coasts, and bring economic development, environmental benefits, and new, green jobs to the Garden State," Corzine said Monday.

Liveblogging Litquake II

Mander says that our current economical model relies on constantly growing, which means constantly destroying more natural resources. He says given twin economic and ecological crises (and peak oil), that the era of growth may simply be over and we're going to have to change the way we do things. He predicts doom: We're not going to see much of a recovery in our lifetimes; there just aren't enough resources to do it. The idea of never-ending growth is preposterous on a finite planet. The goal of our (environmental) work is to devise a Plan B.

McCain and Obama's energy proposals

A look at some of the positions of the presidential candidates on energy and global warming.

Report Warns of Great Lakes Perfect Storm

A researcher in Wisconsin warns that climate change may put Great Lakes' water quality at risk.

Johnathan Patz of the University of Wisconsin School of Medicine and Public Health says an increase in extreme monsoon-like rains, as occurred in some regions last spring, is likely to aggravate the risk of outbreaks of waterborne disease in the Great Lakes region.

Global warming sending tropical species uphill: study

WASHINGTON (AFP) - Global warming is driving tropical plant and animal species to higher altitudes, potentially leaving lowland rainforest with nothing to take their place, ecologists argue in this week's issue of Science.

Coastal rebuilding awash in debate

Locals and officials throughout the Gulf Coast continue to press for more stringent building requirements and stronger levees and floodwalls to prevent floods. But some coastal analysts argue that coastal erosion is growing too fast and some Gulf Coast towns need to depopulate and move to higher ground.

The debate could be repeated in coastal communities in Florida, Louisiana, Alabama, Mississippi and elsewhere throughout the USA, said Robert Young, professor of coastal geology at Western Carolina University.

"It's hard to see how the federal government can continue pumping billions of dollars in protecting coastal communities," Young said. "At some point within the next two decades, some of these vulnerable communities may need to relocate."

Added Robert Thomas, director of the Center for Environmental Communication at Loyola University in New Orleans: "Once the nation begins this discussion, it opens a Pandora's box. It applies to everybody."

Well, this is it. The wheels are exploding off the bus. I am starting to hear of problems in some of the clearing exchanges - orderly trade may be falling apart. A lot of little guys could lose their lunch.

In my personal opinion...

1. There is too much leverage and too much of this leverage is coming from one-sided derivative contracts. At least debt leverage is two-sided and can be dealt with linearly.

2. De-leveraging has to be done on the liability side. We simply don't have enough wealth to capitalize our way out of the problem on the asset side. The central bank actions are fundamentally misguided.

3. They are going to have to shut down the global financial system, cancel large numbers of derivative contracts and maybe forgive large chunks of debt.

4. Complaining about mis-incentives and fairness is irrelevant. There simply isn't enough wealth to cover the obligations and they will be defaulted anyway. Might as well do the whole thing in an orderly manner.

5. I don't think these financial problems are necessarily peak oil generated, if at all. But the financial problems will have a profound impact on our ability to manage peak oil going forward.

The credit freeze has real life consequences:

Grain piles up in ports


Before cargoes can be loaded at port, buyers typically must produce proof they are good for the money. But more deals are falling through as sellers decide they don't trust the financial institution named in the buyer's letter of credit, analysts said.

Will this effect oil tanker deliveries?

Perhaps this is the big one.

I bet exxon and co. don't have to make a Letter of Credit at Citibank out to Saudi Arabia so they will probably get their tanker delivery.

This brings up the question of who are th customers and suppliers, National Oil companies and US and European refineries perhaps. What isthe chain from supplier to refiner and end customer and where could it break down so that oil won'T be delivered because somebody is not credit worthy?

Another question is whether the credit crunch will affect BP or ExxonMobile or Shell's oil production. Each of the US IOCs use a lot of subcontractors. These subcontractors can be highly leveraged. The gas stations can also be separately owned.

Some of the refiners are not IOCs. I found this news item:

Credit crunch may hit oil refinery output, trade

LONDON -- Liquidity problems in the global financial market may reduce oil product trade as refiners find it more difficult to obtain letters of credit and the number of trading counterparties falls, the IEA said on Friday.

With the letters of credit needed to facilitate exports subject to rising interest rates, refineries are finding it hard to maximise the value of their production, the Paris-based International Energy Agency said in its monthly oil market report.

"Counterparty risk is also limiting some trading companies' ability to deal with other companies, similarly resulting in reduced levels of trade," the report said.

Jeez. Denninger's right. If this goes on, there's going to be no food or fuel.

About 24 years ago, I read a book called "Normal Accidents", which laid out a thesis that accidents happen because people tend to misunderstand the situation within which they are operating, thus make fatal decisions. In the U.S., the present financial problems are due to the mortgage bubble, which came about from the creation of debit from lending for purchases which were not likely to be repaid while selling the mortgages to keep them off the bank's books. The resulting leverage coupled with the bursting of the speculative bubble then led to the implosion of the debit based financial system. Building a bubble based on leverage "creates" apparent wealth, which evaporates when the process is thrown into reverse as we are now experiencing.

The increased cost of fuel (whether due to Peak Oil or a short term mismatch between rapidly increasing demand and an the producers ability to increase supply) may have been the proverbial "straw that broke the camel's back" as the commuter's budget went bust. The systematic failure that resulted is the consequence of a lack of understanding by the economic theorists of very real resource limits on this finite Earth. The problem is that growth in resource consumption (particularly, fossil fuels) is not sustainable, no matter what the economists or politicians write or say.

E. Swanson

"Normal Accidents", which laid out a thesis that accidents happen because people tend to misunderstand the situation within which they are operating, thus make fatal decisions.

Great book.

The thesis is not so much that people misunderstand but rather that people do not operate well in complex environments; they are biased in a certain way. They "understand" and act in reflection of this bias and therefore mis-perceive the hazard and degree of risk exposure. The "accidents" are therefore not random events which cannot be foreseen but are "normal" artifacts of the manner in which the specific environment has been structured.

Three thousand people lost their lives on 9/11 with the result that the US has engaged in a costly war that has caused further great loss of life. Yet the automobile transport system results in an annual loss rate 10x the 9/11 losses and no one decides to wage war on Detroit. AGW may result in 100X the losses from 9/11 and still no one decides to wage war on Detroit.

We accept automobile casualties as a "normal" part of life, hence "normal" accidents. You are much safer on a commercial aircraft, or on an offshore MODU, than you are in your car but the public perceives the automobile as "safe" and the car and drilling rig as "risky" or dangerous.

Complex systems have multiple points of failure that interact in unpredictable and often undetectable ways, and are very difficult to diagnose and fix. We think of autos as under our control but in fact automobile operation is subject to a large range of variables over which we have little or no control.

With regards to the credit problem it is difficult to see how having several trillion of notional value (credit) supported by 1/60th of its true value (assets) could have any outcome other than the one we now experience. Having the people who bear responsibility for the problem attempt to resolve it is unlikely to work (unless you are a friend of Hank). The credit crunch is what occurs when you are no longer operating in a reality based economy. I would argue that the entire US is no longer anchored in reality and the problem is that reality will always assert itself.

The full title of the book is Normal Accidents: Living with High-Risk Technologies

Exactly this is why I don't care much for the popularity of the concept of black swan events.
They are intrinsic if you will in complex systems if we really understood complex systems we could prove statements such as in a sufficiently complex system that contains white swans black swans would also exist. These sorts of concepts are actually related to prime numbers for example the unanswered questions that deal with primes actually deal with complexity. Are numbers complex enough that the distribution of primes cannot be written in a closed form ?

I for example came up with a conjecture that between every prime and its square exists another prime. This density assertion seems true.

Turns out its closely related to Goldbach's conjecture.


In fact if my statement is true then you can prove Golbach's conjecture and if Golbach is true you can prove my statement.

Damn :)

And worse the two statements are not equal but similar thus immensely tantalizing.
If I ever get thrown in prison I'll work on it again. The key is the density of primes needed for Globach's conjecture to be true is less than the requirement for mine thus primes are denser than than the prime and its square.

My point is that narly problems exist and proof of these are actually like what we consider a black swan they are a singular event you solve them once just like the proof of fermats last theorem.

This is complexity in all its beauty and power and we have not even left the integers to explore a more complex space. The complexity explodes almost immediately. Simply creating a pile of sand and predicting when it will suffer a big slide is impossible.

This is life its our universe its the way things really work.
Give this what do you do ?

You build in buffers and redundancy you do not push or stress these sorts of systems in fact you better treat them with gentleness and respect and go with the flow if you will. They can and will bite back.

Renewable concepts and all sorts of living in harmony concepts are really just recognition that we are really dealing with complex systems that we better not stress at our peril.

At some point we failed to communicate these truths to the average person certainly after we discovered the atomic bomb we lost our way. It could well have even been earlier with the discovery of the steam engine. We never figured out how to translate this complexity into a form that the common person could understand instead we reinvented the shaman and his secrets. Eventually we have create a world full of secrets a complex financial system full of acronyms understood by none and reliance on a finite energy source a reckless life style etc.

All of this in my opinion comes from our arrogance and inability to explain the unknown most people don't even realize we don't even fu%@!+n understand integers.

Simply creating a pile of sand and predicting when it will suffer a big slide is impossible.

On the one hand you dismiss Black Swan theory, then quote examples which agree with it.

On numbers, Godel showed that any sufficiently complex system contains propositions that are undecidable. Chaos theory shows that many natural phenomena, as well as artificial ones, are inherently unpredictable. We tend to dismiss the random part as being "abnormal", and prefer the linear parts. But the random part is normal, and we ignore it at our cost. This is what Black Swan theory alludes to.

Instead of acting all surprised about financial crashes, we should expect them to happen as an inherent and normal feature of the system. In order to create a truly stable system, it would have to be a lot simpler. Unfortunately, simpler systems do not provide the dopamine rush we crave.

A general theme throughout some cultures is to treat outliers as exceptions, instead of part of the norm. This assumption is fixed in the Judeo-Christian tradition, as well as others, where a creation of God is assumed to be harmonious and predictable. Other religions incorporate the idea of uncertainty, in the form of capricious gods who wreak destruction. The idea of the clockwork universe easily predates the atomic age. The idea of the chaotic universe has yet to percolate into popular understanding.

Reading Memmel I had the same confusion. He provides evidence for black swan events and then seeks to deny them. Do not understand his position.

I posit the existence of two parallel systems: 1) the human cognitive system anchored in language. This gives us the basis for logic and rationality which we try (to greater and lesser degrees) to ensure is self-referentially complete and without contradiction; 2) the enveloping reality in which we find ourselves embedded and about which we lack full understanding but which we attempt to "map" to conceptual constructs with varying degrees of success. The reality keeps "biting back" which reveals the shallowness of our own understanding and the true chaotic nature of that in which we are embedded.

Denninger is apoplectic. He's demanding that people take to the streets.

And CNN is turning increasingly against the bailout, which they pushed. They're now saying things like it's a failure, or that Paulson didn't have a plan for what to do with the money once he got it. The picture they painted is of people who just don't know what to do. It's not working out like they hoped, and they're running out of options.

Dow falls below 8000.

Fell more than 600 points but bouncing now (up over 400 points in 5 minutes). Looks like an attempt to stop the fall. Last night on Bloomberg they were talking matter of factly about how the PPT stepped in to halt the rot on Monday. Now on Bloomberg one expert is saying it's time the powers that be got out of the way as he thinks stretching things out is just making things worse not better.

And now Dow turns positive!

Someone's buying financials. Who could that be?

I wonder if this could be the "panic spike down" today Stoneleigh predicted recently to a false bottom. Then a slow recovery (which could be stretched for a few months) followed by a return to the downslope.

In any case this has to temporarily stabilise within days I would guess at some level but this is Friday and as a commentator just said: "Who want's to go into this weekend long".

Everyone always says that the fed and treasury can't inflate out of this mess as they can not get the money into the hands of the people.

Question; Is it possible to pump money into the public through the stock market by TPTB buying high and selling low?

Was this the thought behind putting everyone in the stock market via social security?

Bush vows to stabilise US economy
Breaking News

President George W Bush has promised the American people the US government is working "aggressively" to restore stability to the economy.


It's the "aggressively" part that worries me.

And the "US Government" part as well.


That picture is slightly misleading. It ignores the fact that for the past several decades the elites have done the so called named 'starve the beast' strategy. which is basically take a good government organization. under fund it, then put at the head of it a complete idiot so it self destructs and then claim it was like this all along.

A properly run government can do allot of things, most of them very well. it's just that there is a religion here that for profit companies can do things better and to make it look like that they do the above.

The picture is not slightly misleading, it is greatly misleading. You are perfectly correct. Government can do things well. The problem since 1980 the group in power has been actively trying to destroy government.

I should have used the term - "the current US administration" and not government in general.


Undertow, congratulations, the most optimistic posting all day... so far.

Hate to burst the bubble but the Dow is downward sliding again at 10:20 a.m. at -136 points.

I suspect the treasury, the FED, and anyone with any kind of authority in the US will do anything ... and I mean anything!! ... to stop this hemorrhaging leading into the long weekend. Food and gasoline shortages starting on US Columbus Day would not be pretty.

The G7 finance ministers may have a bit of trouble getting home, too, if disruptions to international lines of credit interfered with air travel. Now that would be a first.

We'll see how long this upswing/downswing roller coaster lasts. And I'm very interested to hear what slight of hand card trick Dubya has for us today.

Undertow, congratulations, the most optimistic posting all day... so far.

Hate to burst the bubble but the Dow is downward sliding again at 10:20 a.m. at -136 points.

It comes in waves ;-)

LSD — My Problem Child

Then in a flash of insight I realized to my horror that the black thing was actually devouring me. I was the flower and this foreign, creeping thing was eating me!

I shouted or screamed, I really don't remember. I was too full of fear and loathing. I heard my guide say: "Easy now. Just go with it. Don't fight it. Go with it." I tried, but the hideous blackness caused such repulsion that I screamed: "I can't! For God's sake help me! Help me!" The voice was soothing, reassuring: "Let it come. Everything is all right. Don't worry. Go with it. Don't fight."

I felt myself dissolving into the terrifying apparition, my body melting in waves into the core of blackness, my mind stripped of ego and life and, yes even death. In one great crystal instant I realized that I was immortal. I asked the question: "Am I dead?" But the question had no meaning. Meaning was meaningless. Suddenly there was white light and the shimmering beauty of unity. There was light everywhere, white light with a clarity beyond description. I was dead and I was born and the exultation was pure and holy. My lungs were bursting with the joyful song of being. There was unity and life and the exquisite love that filled my being was unbounded. My awareness was acute and complete. I saw God and the devil and all the saints and I knew the truth. I felt myself flowing into the cosmos, levitated beyond all restraint, liberated to swim in the blissful radiance of the heavenly visions.

--Albert Hofmann

Hey dude you boguarding pass it on. Then you realize your just setting there stoned off your ass and all you really care about is sleeping with the patchouli smelling girl across from the fire.

At first you waver do you re-enter the world of unity or light or do you go talk to her and see if you can get her in your bed.

With a sigh you get up and circle around the fire leaving the white light to dim and die and embrace the wild scents of dust, sand, patchouli oil and female sweat.

Looking back years later you have no regret having chosen the brief richness of life over the stark pure world of understanding.

FRANCIS CRICK, the Nobel Prize-winning father of modern genetics, was under
the influence of LSD when he first deduced the double-helix structure of
DNA nearly 50 years ago.


Mullis begins with the event that changed his life, during a May 1983 nighttime drive through the mountains of Mendocino County (of course:>) in a silver Honda. Applying his knowledge of computer programming, Mullis mentally conjured up a technique of finding a specific sequence on DNA and replicating the hell out of it. 'Natural DNA is a tractless coil,' he says, 'like an unwound and tangled audiotape on the floor of the car in the dark.' The polymerase chain reaction makes sense of that tape. Now 'you could have all the DNA you wanted,' he writes. And it's 'easy.' P.C.R. finds and multiplies tiny fragments of DNA. After 30 doublings, for instance, you have a billion times as much as you started with.

Mullis explains: 'It was a chemical procedure that would make the structures of the molecules of our genes as easy to see as billboards in the desert and as easy to manipulate as Tinkertoys. . . . It would find infectious diseases by detecting the genes of pathogens that were difficult or impossible to culture. . . . The field of molecular paleobiology would blossom because of P.C.R. Its practitioners would inquire into the specifics of evolution from the DNA in ancient specimens. . . . And when DNA was finally found on other planets, it would be P.C.R. that would tell us whether we had been there before.'

Mullis submitted his paper to the two most prestigious science journals in the world, Science and Nature. Both rejected it. He had some consolation. On Oct. 13, 1993, a phone call from Stockholm offered him the Nobel Prize in Chemistry. 'I'll take it!' he said, displaying the decisiveness that has marked his career. He then called his mother to tell her she could stop sending him articles from Reader's Digest about advances in DNA chemistry.


"FRANCIS CRICK, the Nobel Prize-winning father of modern genetics, was under
the influence of LSD when he first deduced the double-helix structure of
DNA nearly 50 years ago."

That's what druggies might have you believe, and while Crick may have taken LSD (a lot of people did...), there is no evidence it influenced his work.

Not sure if it affected Crick's work, but it was a big part of Mullis' life (at least from what I've heard).

I'm thinking "L" shaped, where the DJI levels off in a trading range of - what? Maybe 5-10K at best, or maybe 4-8K?

I'm thinking a hockey stick standing up where it goes from vertical decent to slightly downward sloping decent until it is done away with.

You can get seasick, whiplash, and mush-brained if you follow the stock market minute by minute or hour by hour. Step back and get a bit of perspective. When the market closes today will it end up back where it was in 1987 when the market "crashed?" Buy index funds and make periodic investments; sleep well and prosper. People who panic in the stock market usually come out on the short end of the stick.

Buy index funds and make periodic investments; sleep well and prosper.

Don't buy index funds. That worked for the previous generation. It won't work now.

I'm with Stoneleigh. Most people should be on the sidelines now. In cash.

Leanan, there's no reason to sit idly by now, when there's so much to be made in such a short time with inverse funds. I've never written a put option in my life, but I nonetheless have been profiting by them. I just liquidated all of my QID at 91 - nice to be able to trade them intraday - but I'm betting that the MSCI EAFE has still got a ways to slide yet. Now it's almost time to go back into metals and NPK. Almost.

Fine for you. Most people don't understand those things.

And most importantly, like Nate says...nobody wants to play the game when the biggest kid can change the rules whenever he wants.

Stoneleigh recommended not even trusting the FDIC, and I'm inclined to agree.

I would have to agree. I had everything in stocks, in a fund that tracked the S&P 500, up until about a year ago, when I switched it all over into cash. As several posters have noted on TOD -- the discretionary consumer economy in the U.S. is dying. All one has to do is look at the list of the companies that make up the S&P to realize how many of them are dependent on discretionary consumer spending, which is in turn dependent on the cheap oil-and-gas economy. Index funds unfortunately are not the way to go any longer.

Well, the U.S. stock market is headed off a cliff this AM. At 9:42, the Dow was down 690 points to 7,888. A wild opening for sure. It's already headed back up...we hope...

E. Swanson

I don't really want to see it go up, not very much anyway. IMHO, it is just now getting down to something approaching a reasonable p/e range. I don't see the real economy doing well for the next few years, if ever again, so there really is no good reason for the DJI to be much above where it has gotten to right now.

Both Nate and Stoneleigh think we'll see a rebound. Temporary, of course.

I'm expecting a lot of volatility.

Bets on whether trading limits will be triggered?

Definitely volatile today...

Really, really volatile...

Pretty strange when ending down "only" a hundred points seems like a good thing...

And that chart's just not sensitive enough to fully show it. Looks like someone scribbling with a pen.

Actually crossed over between positive and negative 16 times in the last hour before settling down 128

"Well, the U.S. stock market is headed off a cliff this AM. At 9:42, the Dow was down 690 points to 7,888. A wild opening for sure. It's already headed back up...we hope..."

I saw the DOW down 1100 points on YAHOO while GOOGLE showed only 500 or so. Apparently there was a LARGE number of sell orders this AM. Those were processed first, then the resulting buy orders. It took almost an hour for those sell/buy orders to process.

The Yahoo ticker had some issues this morning. For the first hour or so, they were confused regarding the value of yesterday's close, and the error carried through to their calculation of the loss for today. I think the mistake originated by using Wednesday's closing numbers (~9300) rather than Thursday's close (~8600).

Leanan, you posted this yesterday about Anderson Cooper's "10 Most Wanted", but I don't think you posted links to the actual video segments:



I just love the part where they are showing Fuld, who made (ripped off?) almost $500 million as head of Lehman, and his palacial mansion in Grennich, Conneticut, his $21 million apartment in New York and his multi-million dollar estate in Miami.

All this is necessary and will be cathartic for the nation if these men are eventually stripped of their wealth and sent to prison. Does the nation still have the political will to do this? Does the word "accountability" still exist in America? Even though many politicians are rushing to exculpate criminality with arguments of incompetence, I hope the grass roots can raise enough of a cry and howl that justice will eventually prevail. If these men are not brought to justice, confidence in the system cannot be resored.

The country went through a similar process during the Great Depression:

Intermittently throughout the year 1933 the Senate Committee on Banking and Currency, with the aid of its inexorable counsel, Ferdinand Pecora, had been putting on one of the most extraordinary shows ever produced in a Washington committee room: a sort of protracted coroner's inquest upon American finance. One by one, a long line of railroad and public-utility holding-company promoters, stockbrokers, and big speculators—had filed up to the witness table; and from these unwilling gentlemen, and from their office files, had been extracted a sorry story of pubic irresponsibility and private greed. Day by day this story had been spread upon the front pages of the newspapers.

The investigation showed how pool operators in Wall Street had manipulated the prices of stocks on the Exchange, with the assistance of men inside the companies with whose securities they toyed. It showed how they had made huge profits (which represented the exercise of no socially useful function) at the expense of the little speculators and of investors generally, and had fostered a speculative mania which had racked the whole economic system of the country--and this not only in 1928 and 1929, but as recently as the spring of 1933, when Roosevelt was in the White House and Wall street had supposedly been wearing the sackcloth and ashes of repentance. The investigation showed, too, how powerful bankers had unloaded stocks and bonds upon the unwary through high-pressure salesmanship and had made millions trading in the securities of their own banks, at the expense of stockholders whose interest they claimed to be serving. It showed how the issuing of new securities had been so organized as to yield rich fruits to those on the inside, and how opportunities to taste these fruits had been offered to gentlemen of political influence. It showed how that modern engine of financial power, the holding company, had been misused by promoters: how some of these promoters had piled company upon company till their structures of corporate influence were seven or eight stories high; how these structures had become so complex that they were readily looted by unscrupulous men, and so unstable that many of them came crashing down during the Depression. It showed how grave could be the results when the holding-company technic was applied to banking. It showed how men of wealth had used devices like the personal holding company and tricks like the sale of stock (at a loss) to members of their families to dodge the tax collector—at the very moment when men of humbler station had been paying the taxes which supported the government. Again and again it showed how men occupying fiduciary positions in the financial world had been false to their trust.

Naturally the composite picture blocked out by these revelations was not fair to the financiers generally. The worst scandals got the biggest headlines. Yet the amount of black in the picture was shocking even to the most judicial observer, and the way in which the severity of the Depression had been intensified by greedy and shortsighted financial practices seemed blindingly plain. So high did the public anger mount that the New deal was sure of strong support as it drove on to new measures of reform.

Frederick Lewis Allen, Since Yesterday

The greedy elites should at least be classified a flight risk. Release those denied a fair trial from Gitmo, and prepare the way for those that truly utilized the WMDs of unregulated finance. Is Paulson a L or XL in orange suits?

Funny enough, the orange suits come in only two sizes
to big and to small. But you have a choice of colors, as long as its orange.

Yet again the financial elites fleece the common man, where before it was the common investor. They promulgated retirement through the use of 401k retirement plans, IRAs, etc. Even today, people cling to the idea that they MUST invest in their 401k, it's been brainwashed into their minds. "I can't pull my money out, I'll take an IRS penalty," they proclaim, while watching their portfolios drop BELOW what the 10% penalty would cost them in a MERE DAY.

I think this time, due to the inability of FWO's to grow their own food, they will not stand in line for food, they will gather outside the mansions of CEO's, demanding blood.


I'm reading an excellent book by Jacob S. Hacker called The Great Risk Shift that gives many of the dirty details of just how and why the fiction you speak of--that 401(k)s are superior to defined-benefit plans--was crafted and sold to a gullible and unsuspecting American public.

If the old virtues of defined-benefit plans seemed less compelling to employers, the one singular virtue of 401(k) plans became all the more irresistible: 401(k)s are dirt cheap. In the late 1970s, employers devoted more than 4 percent of workers' payrolls to pensions. By the late 1980s, they were contributing around 2.5 percent...

If employers were the biggest beneficiaries of Section 401(k), they were hardly the only ones. Mutual funds and investment banks embraced 401(k)s as the Second Coming. One financial planning publication seemed unable to find sufficient praise: "A cultural icon, a measure of our financial well-being, and a symbol of democratic power--individuals of all walks of life own Corporate America through their 401(k)s." In 1999 Money magazine offered up a breathless history of mutual funds and the 401(k). "Over the full sweep of time, mutual funds have shown that they are probably the greatest contribution to financial democracy ever devised," the review began.

I may have to pick that up. I've been thinking for a couple of years now, about why we have 401(k)s. I think they are designed in part to force everyone to care about what happens to the stock market. The biggest reason for their use, being the shifting of risk to the individual.

I read once that the 401(k) was originally designed to be a supplemental fund, something in addition to the pension. Or maybe that's just the way it was sold, the real intention being that it would replace pensions.

If you have an interest in this subject, you might also want to take a look at this PBS Frontline special from a couple of years ago:


I think I may have seen this before and it was one of the things that influenced my opinion on 401(k)s. I'll try to watch it again though if I can find time.

I think this was the show that told of a truck driver with a 401(k). He really didn't know what to invest in and he made some poor choices. As a result, he had a fairly low balance when he retired and then he made the mistake of withdrawing the whole balance at once and got hit with a huge tax bill. I think he was left with something like $20,000 to retire on. He went back to work.

The people who are really hurting are the ones who let their 401K money be invested by the "experts". These are people who "knew" that the stock market "always" went up in the long run, that growth stocks always outperformed all other investments, and that portfolios should be heavily weighted toward equities, even when the investor is nearing retirement age. Thus, the average 401K account was way overloaded with risky equities, many bought at or near market peaks. Very few 401K investors even know how to request that their funds be transferred to safer investments, or even knew that this was possible. Thus, I am hearing stories now of people with 401K balances down 30%, 40%, even 50% or more.

Big mistake, trusting "experts" like that.

I can reallocate portions of my 401K online with my company. When I saw international funds tanking earlier this year and read about resets in ARMs, I decided to transfer it all to a conservative, stable fund to ride out the storm. It is just barely in the green at this point.

"Does the nation still have the political will to do this? Does the word "accountability" still exist in America? "

Both should be answerred by a firm NO I'm affraid. Y'see, if war criminals are in charge and can remain in charge for so long, justice don't longer exists.

Yeah, just ask congress when they plan to finally bring Rove and Meiers in for their little Parley..

apparently, accountability is off the table.

Wow...I am seeing oil at 80.29 (and was below 80 earlier). Another 6.70 down.

Yikes. I don't see how this is good for infrastructure investment.

I am on the fence whether a depression will postpone peak oil effects...in many ways I think it might accelerate them.

Just my morning, uncaffeinated thoughts.

"I am on the fence whether a depression will postpone peak oil effects...in many ways I think it might accelerate them."

Depression is Peak Oil. At least one scenario is the oil staying in the ground because it costs too much(EROEI) to pull it.

See Bahktiari's Transitions. And Limits to Growth.

A downward price trend would function as a tipping point or trap. Price goes below a certain point, the production justified by higher prices stops and production ratchets down. It won't go back up because businesses won't want to invest in the higher priced oil in such an environment.

When do the producers in Canada's tar sands take themselves offline? Maybe stranded gas - once they have built the investment - keeps it going. Is there a better example of some producer with high operating costs shutting down?

cfm in Gray, ME

Connacher CEO on BNN this morning.

Said SAGD operations can cover operating expenses down to about $45 WTI.

Not only does it decrease infrastructure development in further extraction of oil resources, it also decreases investment in renewable energy sources and renewable fuels for transportation. Electrification of transportation should be a high priority, but it will be neglected, just as the electric grid is being neglected. Electric companies have no real motivation to spend money on grid reliability, as there is no liability attached to it. The amount of money lost from lost electricity sales is much less than the cost of maintaining the grid to prevent outages. We can all expect many evenings in the dark in the future, as blackouts pervade more often.

~Durandal (http://www.wtdwtshtf.com)

In 2005, Matt Simmons said that it might turn out that Jim Kunstler was an optimist. It increasingly looks like Matt was right.

I think that most of us (including me) underestimated the collateral damage from the mortgage meltdown. The debt buildup is like a perpetual killing machine. We have the obvious economic impact--the foreclosures, the bank failures and now the credit markets seizing up. Of course, the government is desperately striving, at a huge cost, to keep the debt driven consumer culture going. All of this is having detrimental effects on the food & energy producers, which doesn't bode well for future food & energy supplies.

I do think that there will be a dawning realization at some point that the best sectors to be in will be food & energy. We are headed toward an economy focused on meeting real needs, not wants, substantially based on cash & barter. The problem is that the desperate effort to keep the debt driven consumer culture going is hurting the real producers.

I would like to add that I find Jim Kuntsler has been very prescient and if anything it disturbs me more...why...I think we all try to discount and see the silver lining, glass half full, bright side, best(of the worst) case scenario...

But seeing what is going on...I am horrified at the rate of change(delta). I thought that there was more time to prepare.

Even my brother (who has long been a closet denialist/best case scenario-ist) has been withdrawing money everyday to put under his mattress (this is no small deal as he has significant assets).

Market just opened:

DOW down 445

TSX 540 down

GOLD up 31.40

CAD$ getting hammered in all this commodity action.

two minutes later

BOVESPA (Brazil) - closed/halted - after 10%+ drop


I was once in love with the BOVSPA because of Fidelity's FLATX fund. I always sang when checking its ascent.

"Tall and tan and young and lovely
The girl from ipanema goes walking
And when she passes, each one she passes goes - ahhhh"

Surprisingly, I see gold is down now. I can't see people thinking the slide is over. Is there commodity selling even in gold to meet other obligations, or am I just slow to turn optimistic?

Sir, Mr Margin on Line 2.

If the payment doesn't arrive by 2 pm Eastern, your
position will be liquidated at market.

PS-never meet a margin call.

BTW, as Nate points out in today's article, Stoneleigh, et al, did not underestimate the collateral damage from the mortgage meltdown.

A "cheerful" comment on CNBC. A guy is calling for a day or two off, because of irrational pessimism. I guess he wants to close the stock market for a couple of days. I think that at last count, six stock markets worldwide were closed.

I can't find the article now, and Bloomberg is too slow (or I'm too impatient) to look right now, but Trichet is reported to have said the EU & G8 were considering closing the markets for a while to "rewrite the rules".

Great. That's the scariest thing I've heard so far. I'm in the process of unloading everything I own that I don't absolutely want to hold for at least 4 or 5 years. I can always buy it back after this weekend's G7 meeting, if we still have a market then.

I am surprised you're still in this long. I exited everything quite a while ago when it became obvious that rules would change daily. My wife held onto one pet stock, and has now lost 52% on it. For once I even got the "you were right, I was wrong" speech!

Volker tried to weigh in on the side of the gov't, but when he said:

The inevitable recession can be moderated. The groundwork can be laid for reconstructing the financial system and the regulatory and supervisory arrangements from the bottom up. The extraordinary interventions by the government (and taxpayer) should be ended as soon as reasonably feasible.

That rebuilding will be the job of another day -- of a new administration here in the U.S., of finance ministries and central banks working together. It must draw upon the strength of the now chastened private sector. It will require more understanding of the risks embedded in so-called financial engineering and of the perverse compensation incentives that have exalted risk over prudence.

I think the "rebuilding" of the regulatory framework is necessary before an effective bottom can be reached. Lack of confidence coupled with structural faults does not a robust financial system make.

Right now about 85% of my money is in cash or oil trusts. The oil trusts are taking a beating, but I bought them for the income, so I'm willing (not happy, but willing) to ride out the price declines.

What I'm still in are trades, not investments. I have bought & sold POT 3 times this week, making about 5K on the trades. I have been in and out of some other things, with mixed results (GLD, for example). As of now I'm out, except for cash & oil trusts.

I think I pretty much nailed what would happen as well. In my Peak Oil and the Financial Markets: A Forecast for 2008, written in early January, I said:

15. There is a chance that some type of discontinuity will make financial conditions suddenly take a turn for the worse.

This is pretty much what we are seeing now. Most of the rest of the things on my list have happened as well.

In Economic Impact of Peak Oil Part 2: Our Current Situation, written in September 2007, I talk about debt being the "glue that holds the economy together". I also talk about the fact that in order for rising debt to continue, there needs economic growth. In a finite world, and with peak oil, this can't happen. From that post:

We are facing a world that is already stressed - by a debt market that is not working well, by pressure on limited resources, and by climate change. In such a world, it does not take much of a change to disturb the debt system, and to cause serious problems with the world monetary system.

Peak oil, or even the squeeze preceding peak oil, is likely to result in a decline in real growth. Even a slowdown in growth might cause a problem at this point, given the existing problems in the system. This disruption of economic growth is likely to put pressure on the monetary system, because our monetary system is tied to debt, and debt is easily disrupted by declining economic growth.

The United States is particularly vulnerable to problems because we are living beyond our means and because we are already straining our debt-based system to its limits. There is a significant possibility of a discontinuity of some type--either deflation or rapid inflation. There is even a possibility that our monetary system will fail completely, and need to be replaced.

My list of things to invest in, looks like this...
Peanut Butter
Mac N Sneeze
Ramon noodles
Powder milk....etc etc etc

"(Bloomberg) -- Disruptions to BP Plc's Baku- Tbilisi-Ceyhan crude pipeline may cut oil supplies by nearly as much as Gulf of Mexico production stoppages after Hurricanes Gustav and Ike, according to the International Energy Agency.

Supplies through the link, which transports the Azeri crude blend from the Caspian Sea to Turkey's Mediterranean coast, have been curbed by a series of disruptions since August. Production from the fields which pump oil via the pipeline is currently about a third of normal output after a gas leak on Sept. 17, the IEA said in its monthly oil market report today. "

Georgia attacking Russia having absolutely nothing to do with this.

Meet your new boss.

See Iceland become the newest Russian Base.

I do wonder about this new cold war...it seems to be a bit of a last gasp from Russia as they go post peak themselves. (not unlike the USAs and UKs final breathes)

At the same time they learn all that 'free' western investment and capitalist system has a price to pay (see closed markets for 2 days)

So, I lose ZERO sleep about the threats of the ancient Russian bear. They will have their own troubles and it is unlikely they will be able to project significant power to western hemisphere.

They may try to rattle their neighbors and strangle energy supplies on occasion.

Unfortunately, we really did need Iceland for ASW to keep track of Russian subs in the Atlantic and to deal with them if need be. Not being nice enough to the Icelanders so that they would let us keep our base there was our first strategic mistake. Not being nice enough to Iceland to keep them from being driven into the financial embrace of the Russians was our second strategic mistake. I don't think that a Russian base in Iceland will be their price, just an assurance that the US never gets basing rights back in the future.

What an absolute strategic disaster. This really takes the cake.

The Icelanders might also hold a grudge against us Americans for preaching economic cornucopianism and pimping consumer debt as a way of life. However, Putin hasn't agreed to send the money yet.

It is ironic, though, that Keflavik was the only base where the Air Force could not send African-American personnel because of the unrelenting racial hatred of the Icelanders. How do you figure they're gonna react to a black President?

Dont worry.

Britain now owns each Icelanders ass.

To the tune of £116,000.00 per Icelander.

...and if we had a Navy, we could collect.

The Icelanders won both Cod Wars :-)

Best Hopes for the Little Guys,


Your information about Keflavik is dated - perhaps that was the case in the 1950s.

Cool down, I don't think RUssia will attack the US. What has it to gain ?

Behind the WSJ paywall, but you can read it for free if you go in through Google News:

Oil's Drop Squeezes Producers: Economies of Iran, Venezuela Vulnerable as Crude Price Falls but Demand Stays Low

Big oil-producing countries are showing signs of distress as the global credit crunch and falling crude prices begin to squeeze government budgets and delay projects.

Fears that the boom days are fading appear strongest in Iran and Venezuela, whose governments have come to rely on oil prices to prop up otherwise shaky economies. Both countries this week led a chorus within the Organization of Petroleum Exporting Countries calling for an emergency meeting of the cartel, now set for Nov. 18, to weigh a production cut.

The global economic crisis is eating into oil demand, particularly in the U.S. and Europe, and helping drive down crude prices. Some forecasters said that despite a strong thirst for oil in Asia and the Middle East, global oil consumption could flatten out next year, potentially ending nearly a decade of steady demand growth.

Oil prices in the near future will depend on what OPEC and Russia decide to do.

Will they cut production? Or will they not?

I can see valid arguments either way.

I predict they will decide to cut production. I'd say they will set a price target of around $80 per barrel, low enough to put the brakes on new drilling and development of alternatives around the world, but high enough to render excellent rents for those members who are not economic basket cases like Venezuela and Iran.

$70 * 9MM = $630MM/day
$100 *7MM = $700MM/day


That of course is the most cogent argument, and the one which I believe will carry the day. Face it, the goal for the leaders of OPEC member countries is to stay in power, and I would tend to think that, all other factors taken into consideration, making the most money they can from the sale of their oil is the best way to do that. Any decision by the Saudi royal family to moderate the price of oil in a move that is perceived to help the United States would not only be highly unpopular amongst other OPEC members, but also incendiary with its own population. I would say any gesture of offering comfort or aid to the United States will be a quick ticket out of the country for the Saudi royal family.

Also, consider:

1) They are selling a depletable, non-renewable resource that is absolutely necessary for the functioning of any country's economy

2) With peaking oil in non-OPEC countries, there is no other place to obtain this oil

3) In return, they are receiving either a)little pieces of paper with pictures of American presidents printed on them or b)a promise to receive, sometime in the future, little pieces of paper with pictures of American presidents printed on them

Here's a question though... Why did Saudi continue to accept US dollars in exchange for their oil after 1971? Dollars were no longer denominated in gold, as you point out, little bits of green paper. Their existing dollar reserves simply began devaluing after that point.

There is some agreement between the countries, or ruling families.

I would say any gesture of offering comfort or aid to the United States will be a quick ticket out of the country for the Saudi royal family.

15 of the 19 9/11 attackers were Saudi. Two were UAE... The 9/11 attack might as well have been called an OPEC attack, there's a 90% correlation.

Why did Saudi continue to accept US dollars in exchange for their oil after 1971?

Because those dollars were accepted in Europe where the KSA upper crust spent a lot of their time. The outcome was the rise in the "eurodollar" market, a pool of US funds sitting outside of the US and the start of US dollar hegemony.

As the financial turmoil temporarily turns people's attention away from Peak Oil (which, of course, hasn't gone anywhere) I decided to make a new news headline collection site about climate change:


It's based on the same simple engine & layout as my previous sketch peak-oil-crisis.org. Is the content interesting enough? Probably needs more depth in the future.

The IEA's new Highlights of the Latest OMR is out this morning. World oil supply was down 1.1 million barrels per day in September after falling a similar amount in August. World oil supply, (all liquids), according to the IEA, has fallen 2.2 million barrels per day in the last two months after hitting a new record high in July.

Half a million barrels of that two month decline is from OPEC and the other 1.7 mb/d is non-OPEC. Of course a large chunk of that is due to Gustav and Ike which will recover slowly over the next few months. Be that is it may, non-OPEC has definitely peaked and is now in a slow decline. Non-OPEC currently accounts for about 55 percent of the world oil supply.

Ron Patterson

I am not believing what I see and hear.

Yesterday the DJIA took another beating.Down close to 700 points.

On TOD the news about phosphorus is devastating.

Strangely oil is dropping in price.

The financial world is dying as I type.

The grain commodity market appears to be shaking out.

Yet thru all this I do not notice any appearance of extreme angst.
My farmer buddy is working like a madman and doesn't appear to be listening to the news. I think he is worried so bad he doesn't know how to act.

I think here in the USA we are hiding our eyes. Trying to make believe that what we thought might happen is now apparently happening yet
where is the concern. I mean PANIC. Not that panic will fix anything in and of itself but it might be needful in order to galvanize some type of behavioural pattern changes.

If so I certainly see no evidence of such occurring.

As to the news of the dow drop yesterday? Almost nothing on the radar screen.

My mother who was higly invested in the market appears to be close to being wiped out. Instead of having plenty of assets she now may die a poor destitute woman. I warned her and my son the accountant who oversees and invests for her to get out of the market.

Well they didn't. Too bad. His 401k is in freefall yet he doesn't appear to be in panic mode.

I am puzzled.

What am I doing? While I have time I am making the remaining purchases in order to seriously hunker down. I am putting my garden into deep hibernation mode. I am planning to start my greenhouse as soon as my 16ft trailer is free up. I am looking for last springs seed packages and going to hoard everyone I can find.

I am thinking of taking up a friends offer on a free horse. I used to breed,raise,train and shoe horses. As many as 14 at one time. I have some hay and some ground. Time to get an animal. At least I can move around the countryside afterwards.

Where is the anger? Where is the angst? When does realization finally set in?

Just the P205 peak is enough to scare the shit out of this country boy.

Next week I take a pickup to purchase a ton of smithing coal over in Missouri(DCL if you read this the town is Piedmont,Mo. Check the Blacksmith Gazette on the net for other listings). PS: Your email address didn't work.

Airdale-running scared

One of the cable channels recently replayed a movie from the Eighties about a nuclear exchange between the US and the Soviet Union. The setting was a town near a Minuteman missile base. One of the surreal scenes that several of us noted was a housewife continuing to clean house as one could see Minuteman missiles being launched in the distance (and therefore Soviet missiles were inbound). It was denial in the first degree. Her husband had to carry her screaming down to the basement.

your talking about the one that was shot near kansas city?
Yea i think most everyone is in that state at the moment, when my mother found out i was starting a fuel hedge she went, well nuts to say a non-swear word and wanted it out of the house thinking it would spontaneously combust and insurance would not cover the damage.

I believe you must mean "The Day After", from 1983:


I thought it was a good movie, which I am now going to have to revisit.

No panic here in the UK either.

Personally I am quite relaxed. Fear of the future is always worse than facing reality. I have made my preparations, not as many as I should, but more than most. A bit like the family man just told he has 6 months to live, I feel each day of normal family life is a bonus from now on.

My parents are now so old that they are unlikely to live to see destitution, unlike many in this country.

I am spending my savings as fast as I can find things worth buying.

"I am spending my savings as fast as I can find things worth buying."


That is exactly the advice I give to anyone who asks “how do I protect my wealth?”

That and invest in local food production. I have underwritten several major greenhouse projects and farming lease and production startups.

Spend it now or risk loosing it all.

This is a serious point. One of the things worth buying is property; provided you need it and the price, location and build quality are acceptable. Property prices are now deflating rapidly in the UK. Isn't the best strategy to hold onto cash and buy a nice flat (or whatever) when the market has properly flatlined? (IMO this will be after 2012 - baby boomers retiring in 2010 etc.)

I am spending my savings as fast as I can find things worth buying.

I considered this as a strategy, but it's not at all obvious to me what I could buy that would have a better "return" than doing nothing. I could, for example, buy a 10-year supply of TP--we'll always need that--but figuring the storage costs, odds of spoilage, etc., this doesn't really look like a winner. I could lay down a ton of rice, but same problem. Some people buy gold bars, but what am I going to do with a gold bar?

What are people buying that actually makes sense? (I live in suburbia, BTW.)

I'm putting everything I have in whiskey.

(it ain't much.)

I'm thinking of putting all the whisky I have in me :-)

All those yeast that are supposedly smarter than us do drown their sorrows in alcohol on their way to their end, so maybe you are on to something. ;-)

As for myself, I find myself trying to ignore it. What can I do? I can't control the markets, the guys who created all this will stay wealthy, I'll have to keep working harder and longer to ever retire. I was almost sick yesterday from watching the news and market. I find it is easier to just try and ignore it. Defense mechanism I guess.

The point is that the guys who created this have names and addresses, but are off the hook in some sort of morbid way. Alan Greenspan, just to name one.

That great prophet of free markets was talking about how the housing market is going to rebound in 2009 and how people will once more start feeling comfortable with risk.

When I see that man, my blood boils.


Ben Bernanke's past words of wisdom:

"Over the years, the U.S. economy has shown a remarkable ability to absorb shocks of all kinds, to recover, and to continue to grow. Flexible and efficient markets for labor and capital, an entrepreneurial tradition, and a general willingness to tolerate and even embrace technological and economic change all contribute to this resiliency."

"Our mission, as set forth by the Congress is a critical one: to preserve price stability, to foster maximum sustainable growth in output and employment, and to promote a stable and efficient financial system that serves all Americans well and fairly."

"If I am confirmed, I am confident that my colleagues on the Federal Open Market Committee and I will maintain the focus on long-term price stability as monetary policy's greatest contribution to general economic prosperity and maximum employment."

i do not know who said this but even though i am not a theist, it does fit the times.

god, please give me the strength to win the battles i can win, the humility to walk away from the battles that i can't, and the wisdom to tell the difference between the two.

“God, grant me the Senility to forget the people I never liked anyway, the good fortune to run into the ones I do, and the eyesight to tell the difference”

Hey Airdale. Glad to see you're still online.

Where's the angst? I'm seeing it start to come out, especially when I'm at a bar. People are getting mad, but right now it's only slipping out when they've had a few drinks.

Myself, I'm gettin quite scared. Earlier this week I was so stressed out about it, I became physically ill, and later that day I had the most extreme headache I've had in years. I knew it was coming, but I'M NOT READY YET!

I was anticipating another year or two before things became this bad, but maybe that was just MY form of denial... Instead of thinking it cannot happen, as everyone else does, I was thinking that I had two years to prepare... At least I have SOME level of preparation, but I'm by no means ready yet. My house doesn't even have all the walls up yet!


Been back for a while. Have been forced to use EVDO via my cellphone tethered to my laptop. Works slow but at least I have some connectivity.

Right now I am using the shop computer at the farmers workplace. A Desktop I owned and installed here and on very fast broadband.

Anger,angst,fear,disgust....well here its not talked about much. Everyone is hiding their heads in the sand.

Today I try to find as many of last springs seed packets as I can.
Sharpen up two chainsaws and start cutting winter heating wood.

Try to find a good riding/work horse. Get some harness from the Amish. Snag a single bottom working walking plow. Get some smithing coal. Get a forge. Lots to do yet and I fear little time.


Good idea on getting seeds now. I think I will go ahead and place an order with a seed company.

Airdale: Iam certain you are aware you can make a forge for little or no investment, using stuff found anywhere USA.


Ive seen 1 ton dually rims used and it was a sweet set up. NOTE...All Dually rims should be the same weather Ford, Chevy, GMC, Dodge...cause all had Dana rears and axles, but the dually rims were superior metal and extra thick, mine were anyway.


If you can keep your head when all about you
Are losing theirs and blaming it on you,
If you can trust yourself when all men doubt you
But make allowance for their doubting too,
If you can wait and not be tired by waiting,
Or being lied about, don't deal in lies,
Or being hated, don't give way to hating,
And yet don't look too good, nor talk too wise:
If you can dream--and not make dreams your master,
If you can think--and not make thoughts your aim;
If you can meet with Triumph and Disaster
And treat those two impostors just the same;
If you can bear to hear the truth you've spoken
Twisted by knaves to make a trap for fools,
Or watch the things you gave your life to, broken,
And stoop and build 'em up with worn-out tools:

If you can make one heap of all your winnings
And risk it all on one turn of pitch-and-toss,
And lose, and start again at your beginnings
And never breath a word about your loss;
If you can force your heart and nerve and sinew
To serve your turn long after they are gone,
And so hold on when there is nothing in you
Except the Will which says to them: "Hold on!"

If you can talk with crowds and keep your virtue,
Or walk with kings--nor lose the common touch,
If neither foes nor loving friends can hurt you;
If all men count with you, but none too much,
If you can fill the unforgiving minute
With sixty seconds' worth of distance run,
Yours is the Earth and everything that's in it,
And--which is more--you'll be a Man, my son!

--Rudyard Kipling

Thanks Wharf Rat.

Memorized the poem as a kid and it has been a source of common sense inspiration ever since.

Interesting - you are better prepared and have more useful skills than most, and have been participating in the conversation here for quite some time. You should be past the panic stage, and panic does you no good.

As for the sheeple - well, they're scared. Talk to anyone, and the fear is there. The game is up, and they are all in full protection mode, but they are completely unprepared emotionally and physically. There is little understanding of the issues and the whats and whys, but they're scared and angry. Hell, those of us who've read and talked about this stuff every day for years are having a hard enough time getting a clear picture - what must it be like for someone just rousing from the dream? There's anger and fear, and people will be casting about for quite some time trying to figure out who to blame.

But this is what we've all been talking about. You can say it's different, that these things are not related to PO, but in general we've been looking at the confluence of PO, climate change, and the attendant economic and political problems for years.

I guess I'm surprised that so many here seem so worked up - this is entirely within the realm of possible scenarios. If you were taking this seriously, then being scared is a reasonable reaction, but the time for panic should have passed. I know I'm nowhere near as prepared as I would like to be, but I also figured that would happen, and I'm not surprised at all.

Airdale, Out here in the weeds, awareness of our growing predicament is gaining traction. Yesterday, my neighbor, age 77, who still is actively ranching, stopped by while changing water in his fields, and noted that we "might have some tough times coming". I said I thought he might be right. This spring, the community planted a huge bunch of potatoes, for here anyway, and we have harvested about 4,000 pounds of spuds. They're all safe and sound in cold cellars. My garden, however, was wiped out by a very unexpected hard frost the first of September. It killed about everything. So, no bottled Salsa this winter. But, on the positive side, the freezer is full to the top with venison, pork, and a couple of fat lambs. I'm very dependent upon electricity for my freezer. Next years project, and I hope I've got time to get it done, is a Smokehouse.

I've noted what seems to me to be a big drop off in hunter numbers this fall. The folks who come here from up north during the Elk Hunts seem to be largely missing this year. Most of them hunt off of ATV's and are wasting their time anyhow. I did run into a couple of fellers on the mountain, both mounted on ATV's complete with camo, and I asked how was it possible to sneak up on an Elk, even with the neat Camo paint, on their machines, and their faces. Both became immediately indignant, and one blurted out, "It's not that much noisier than you on your horse". I nodded in agreement, and rode off.

The Blacksmith shop is up and going, complete with a very nice forge with a Baldor Blower on a rheostat. Lots to learn this winter.

Best to all from the Fremont.

I once had a very nice Champion blower(hand cranked of course) and also a great big Buffalo. I had three forges and 8 anvils and 4 leg vices.

All that went at my farm auction three years ago , alas.

Now I have to restock all at far higher prices.

I finally got my potatoes outen the ground. A wheelbarrow full.

I am ordering the "New Edge of The Anvil" by Andrews. Never had the old one.


Where is the anger? Where is the angst? When does realization finally set in?

The sheeple aren't outwardly panicking yet because they've been conditioned to believe things will return to normal. They don't understand peak oil or overshoot so have no frame of reference for what's happening. Besides, there's still food at the supermarket and most of them are still getting a pay check.

When this changes, and its just a matter of time, that's when all hell breaks loose. Still a little time left to get your beans and bullets together.

Remember though that humans are entering their dieoff phase. No one gets out alive anyway, and who wants to be the last one standing. You may not even want to be around in a few years.

The anger is being whipped up at Palin rallies. And they're not talking about the failure of their glorious class system. They're calling everyone else terrorists and traitors for refusing to obey the Right. They're like the Russian peasants who would revolt not because feudalism was unjust and irrational, but because they were sure their hardship was caused by the czar being replaced by an evil duplicate.

If this keeps up, I may die a poor destitute woman, and I am a 53 year old man.....

where is the concern. I mean PANIC.

There is panic in my household. My (adult) son just came home from the store with bags and bags of Mothers' cookies. He said they're almost gone from the shelves.

He has been upset since last night when he heard the company declared bankruptcy and shut down.

Peak Cookies Panic.

Maybe he'll stop making fun of me for my food storage...

I shouldn't laugh, since we all have our foibles...but he's upset about cookies?

I hadn't heard about Mother's Cookies. It is peak oil related...

Mother's Cookies abruptly shut down

Mother's Cookies, an Oakland institution for 92 years, has been shuttered, its owner seeking bankruptcy protection for the company.

The ending was abrupt: Workers for the company, which shifted its baking and distribution operations to plants in Ohio and Canada in 2006, told workers Friday that operations would cease and cookies would no longer be made as of Monday.

The company cited rising prices for raw materials and fuel, and on Monday filed for Chapter 11 bankruptcy in U.S. Bankruptcy Court for the District of Delaware.

Yeah, I'm laughing too, but he really is shook up.

I've got 5 grocery bags full of Mother's cookies sitting here. His favorite kind was all gone, though.

p.s. I do bake it's not like the kid id cookie-deprived - I just can't right now due to an injury.

What a load of crok. Non-OPEC like OPEC themselves are restricting the supply because of falling demand to protect oil prices.

I was just wondering if anyone has a decent definition of a depression.

The only quantitive definition I can find is a decline in GDP of 10% (in real terms).i.e. 5% decline and 5% inflation is a depression.

Can anyone confirm this or provide an alternative definition?

Answer: A depression is a severe economic downturn that lasts several years. Fortunately, the U.S. economy has not experienced a depression since The Great Depression of 1929, which lasted ten years. The GDP growth rates were of a magnitude not seen since:

1930 -8.6%
1931 -6.4%
1932 -13%
1933 -1.3%.
During the Depression, unemployment was 25% and wages (for those who still had jobs) fell 42%. Total U.S. economic output fell from $103 to $55 billion and world trade plummeted 65% as measured in dollars.
The Depression was aggravated by poor monetary policy. Instead of pumping money into the economy, and increasing the money supply, the Fed allowed the money supply to fall 30%. The "New Deal" created many government programs to end the Depression, but government programs alone could not end it. Unemployment remained in the double-digits until 1941, when the U.S. entry into World War II created defense-related jobs. "So WWII ended the great depression".

Here is a false statement -
We probably won't see a depression like that again, simply because the government has learned how to avoid it. Many laws and government agencies were put in place because of The Great Depression with the express purpose of preventing that type of cataclysmic economic pain.

One thing left out. The US economy started to recover strongly in 1934 and by 1937 had reached it's pre-depression levels. This facilitated the Democrats landslide victory in the 1936 elections. Then you had the 'Roosevelt recession' when FDR balanced the budget and the Fed tightened credit. This double whammy plunged the economy back in to the depths of depression, from which the war rescued it. Had it not been for this lunacy the depression would have been over by the late 1930's.

Oh, but all the true believers know that FDR was a communist and thus there was no way the '37 recession could be due to a return to right wing policies.

Also, what about the right-wing Supreme Court's role in striking down New Deal programs?

So... balancing the budget and raising interest rates (to levels resembling a sane risk premium) are considered "right-wing policies"? If so, paint me right-wing red.

That said, the typical reactionary-right accusations of FDR being a Commie are ridiculous.

Depression is when you thought the party would never end and then you realize you will lose your job, your home, and your retirement - but you watched FOX News and you never saw it coming at all.

One of the talking heads the other day said that in a depression, there is no safe haven. Stocks, gold, real estate, commodities, bonds, cash...nothing is safe. In a recession, bonds or gold or real estate might be a shelter, but in a depression, there's no place to hide.

Prior to the 1930s, there were no such things as "recessions", they were all called "depressions" (or "panics", an even earlier term). After the 1930s, they are never called "depressions", always "recessions". The difference is pure politics and PR. They both mean an economic downturn over an extended period of time (at least half a year or more).

Yes, but before 1940 panics and depressions were associated with price deflation - which we've since had practically none of due to the bloody terror that the Great Depression left in the hearts of policymakers.

If there's price deflation this time, I think it will be called a depression.

Seems to me that when GM has to issue a statement that they are not filing for bankruptcy protection, it must be right around the corner - like when a baseball owner announces he's not firing the manager.

I've read reports that GM is shedding costs and assets, but to my knowledge they haven't sold Hummer - the most prominent asset said to be for sale. They have announced that their plant here in Dayton will be closing on Dec 23 - about a year earlier than they led us to expect. I'm sure they are having a tough time getting credit - a tougher time now that their credit rating has been downgraded.

Seems like re-organization is something they should be looking at.

S & P sees it as a possibility:

GM, Ford May Face Bankruptcy on Slowdown, S&P Says (Update3)


The article includes an interesting projection about the future NA auto fleet shrinking.

I suspect that long term what's left of the US auto companies will be combined. Maybe some small part of it will continue to survive for a while. What must the world-wide overcapacity for automobiles be by now?

Denninger predicts that many automobiles will be abandoned. "As in The Depression millions of automobiles will be scrapped after being abandoned by their owners for lack of insurance and registration fee money. Cheap scooters will become the dominant form of transportation for those with jobs, as they will be all most people can afford."

Cars make fine solar dehydrators and OK greenhouses.

Or solar ovens. More than one person has been known to heat up food on a dashboard under a windshield on a sunny summer day!

Well geez in California people have been driving around in unregisterred, uninsured vehicles for decades and it didn't occur to them to abandon them before. Maybe when they can't afford or find gasoline. Then it's mad max time.

Most of the compacts and subcompacts are good candidates for eventual EV conversion. Because they are not designed for purpose, they are still too heavy, and those doing the conversions will mostly have to rely on whatever lead-acid batteries that they can scrounge up. These things will end up being just enough to allow a trip for shopping or other local errands.

I can see quite a few SUVs and minivans becoming carpool vehicles or the basis of local jitney services. Some enterprising people might be able to pick these up for pennies on the dollar.

What I don't see much future for are vehicles that can't be made to have much economic sense for their owners.

Lead-acid batteries can often be given a "second life" albeit a shorter life than the first, but still a good long time.

Empty battery of acid, fill with diluted baking soda and water, let bubble profusely, rinse thoroughly, rinse out some more, rinse some more, fill with distilled water, charge. You have cleaned the plates now and the battery isnt gassed. The water will turn to acid during use. This wont work on batteries with damaged cells or with exausted plates. It will work on batteries people wouldnt have thought worth the effort though. Sounds like alot of work???. Try stealing a battery and see how far you can carry one.

The way I see it, the US economy will be able to support one or maybe two small domestic automakers specializing in EVs, NEVs, and hybrids, and one or maybe two small domestic manufacturers making pickup trucks, vans, shuttle buses, and other commercial/utility vehicles. These two lines may or may not be consolidated within the same company. I say "small" because I think that market demand will be quite limited, and because they will continue to have considerable competition from foreign manufacturers. (I exclude specialized equipment makers like Cat and Deere from this discussion.)

Can any of the big three successfully downsize itself to become one of these survivor companies? Hard to say, it will be an almost impossible challenge for all of them. More likely, all three will have to go bankrupt, and someone will come along, pick up the best pieces for pennies on the dollar, and cobble together something viable along the lines described above.

Both spark and diesel engines can run on wood gas. So-- make a wood gas generator, compress and store the gas. Put pressure tanks in vehicles, to be recharged from the wood gas storage, then, run the vehicles hither and yon on a nice schedule for the local folk, and get paid in potatoes, beans, pigs and peanuts. Sell that in the farmer's market for what you need. Like more woodgas generators.

Of course, ya gotta be living in the woods. Like me. Ahaaa! Woodsmoke. Koff.

This should probably be under the key post on phosphorus but perhaps better here.

I just spoke to the ag chem guy a few minutes ago about what he thought about phosphorus.

He said that there are only two companies who put P on the river. Mosiac is one and that yesterday they informed him that they were going to be only producing 1/4 of what they produced last year.

Reason: With grain prices dropping like a rock they forsee less and less demand for P so they will keep the price up high by cutting production.

I asked him about how safe his 401K was and he said he tried to get a loan to take a large amount out but they told him .."No way" not in our plan and so he realizes that with the stock market in bad shape he is rapidly losing his retirement...but he said that young as he was (high 30s) that he wasn't worried. "Besides we came thru the Great Depression and we did ok."

I just nodded and drove off.


I find I can scan the Drumbeat really fast right now, since I have little or no attention for following economic discussions. Just looking for a little fortification and encouragement, I guess.

For what it's worth, I'm building 'the Tower' today which replaces (appropriately enough) one of my old chimneys. It will hold the Solar Hot-air Collector on its south face, a glazed box that uses black polyester felt as an absorber, and air is pushed through this fabric, from the front chamber to the back, to gather the heat and bring it into the house. This is allegedly more efficient than the traditional Flat-Plate approach, where a boundary layer of air keeps the heat transfer off the plate far less thorough.

The roof of this turret will have 45watts of PV on it, (Pretty cheap $249 right now at http://www.harborfreight.com/cpi/ctaf/displayitem.taf?Itemnumber=90599 , albeit Chinese made, if that's an issue for you) .. and these will directly run the fan for the Hot Air, or can be diverted to charge batteries when not needed for that.

Finally, the tower top will also house a tracked mirror pair that will send a shaft of sunlight down the retired Chimney Shaft, to be 'dipped into' by more mirrors in the Three rooms and cellar-workshop that adjoin this space. "It's a crazy plan, but some of it just might work!" ..and if it does, I have two more chimney shafts, and a bunch more glass and mirrors!


I do sometimes wonder about very low tech heating options; e.g.

- Black/dark rugs on the sunny side of the house
- Mirrors in the garden to reflect sunlight onto the shady side of the house. I'm not sure the garden is long enough to catch the low winter sun though.

If you send a little smoke up those chimneys, you could bundle it with the mirrors and sell it to the FED or the Treasury. I hear they're running short.

I also took all the previous warnings on the Oil Drum and elsewhere seriously and have removed all of my money from the stock market. Where to put that money? Renewable energy for our house. Here is a picture of the solar air heater I installed last week:


In fact, our home no longer uses any fossil fuels at all. It took about two years, a lot of hard work, and around $40,000. If you feel so inclined, you can read about it in our book The Carbon-Free Home: 36 Remodeling Projects to Kick the Fossil Fuel Habit from Chelsea Green.

Stephen Hren
Durham, NC

jokuhl -

A question regarding your solar hot air collector:

Is there a filter on the intake side of the air moving system, and if not, won't the heat-collecting polyester felt eventually get clogged with dust normally present in the air?

Just curious, as it otherwise sounds like a nice simple system.

Many years ago I dabbled a bit in solar energy, and I vaguely recall that the Russians did some work using a particulate-laden air stream as both the collecting medium and the heat transfer medium. This 'smokie' air would be continually recirculated from the collector to a heat exchanger. I also seem to recall that the particulate matter was some form of very small particle-size carbon black. Do you have any familiarity with this type of system?

There will be a filter, but I'm not as worried about clogged felt, there's a 2.5'x 6' span of this fabric. The designer of this particular setup (Bill Kreamer, Belfast - Maine) touts the 'Massively Parallelized' heat transfer as a central aspect of its efficiency, and I would suspect would make clogging a somewhat rare problem.

I haven't heard about the Carbon-black/ particle approach. I hope it's not in the room air.. isn't Carbon-black carcinogenic? (Not to mention dirty..)


(Tower form is together in the yard.. now my wife is starting to get that worried look, since it actually seems real now.. Courage!)

Reread the description carbon system.. my bad. But no, I don't know about this.

The thing about directly heating air is that it's ephemeral. It's low mass, so quick to come and quick to go away as well. It can be cheap and very helpful, but since the building's air IS the storage medium for the collected heat, it is also extremely dependent upon having a tight and well-insulated enclosure. (and in our case.. well, I'm getting there. I'm working on increasing inputs AND reducing losses in alternating babysteps..)



I applaud your efforts to reduce energy use. Air does indeed hold little heat, .018 Btu per cubic foot per degree F. In my experience, the interior surfaces in a home (typical drywall construction) hold about 6 Btu's per square foot of floor area per degree F. It is these surfaces that will hold the heat from your solar collector and prevent overheating if you have sufficiently reduced infiltration and conductive heat loss. If overheating does occur, extra thermal mass will temper the indoor environment and help hold the collected heat.


Thanks btu.

With all the old brick coming out of these chimneys, I have toyed with making some Decorative Brick 'Registers' to route and channel the air through to hold onto & moderate the heating effect and carry the warmth a bit further past sundown. They'd have to be a bit bulky and beastly to do much good, but could make a fun 'Faux Fireplace' art project..


I like the brick storage idea, a good way to reuse existing material. Brick, rock and the like hold about .2 Btu per pound per degree F, water at 1 Btu per pound is a great storage medium, a membrane lined brick indoor fish pond perhaps?

Have you seen the mirrored ducts? They are capable of sending a single light source to many, even dozens of places from a single source of light. The round seem to work better than the square. I will get a pic and link and send it to you.

I've only seen the single tubes. I'd be interested in what variations are out there.

Having done quite a bit of film/video lighting, I'm a fan of a direct beam of full sunlight. It has a lot of oomph to it. With the tracked setup, I'd have a shaft full of full sunlight (when it's sunny), minus a very modest efficiency cost.. (I hear it's 2 to 4% per mirror, depending on thickness, I guess) Once applied indoors, that can be a pretty significant beam of light to tap in a number of ways, diffuse or direct.

But I would love to see that link, if you happen to find it.


Couldnt find the link to the multiples yet, but did find the flexible. First link is traditional solar tube and second is both traditional and flex, sure elbows and tees and Y's could make a multiple from a single dome source.



Ive seen (but dont have the link yet) where a single clear light bulb was placed inside the main trunk and sent light to the several "outlets" during nitetime usage, the clear lightbulb did not diminsh the daytime solar output. Also dampers were used to cut light to bedrooms during those times when light wasnt wanted....like afternoon naps for old Nephilims.

I bought the same "45W" array from HarborFreight for $200 when it was on sale a couple years ago. Even at high noon on a California Summer day, it manages only 36W. The controller box is pretty cool, buzzing when the voltage gets too low or too high, but I wish it would just shut off instead. I was also disappointed by the fact that it's a thin-film construction, not Si cells.

I wired up some AA battery holders and bought a mess o' NiMH Tenergy AA's for them from All-Battery. There's a particular series-parallel arrangement with the load that the solar array likes. After charging a few hours I unplug the holders and rearrange them in a different series-parallel array for the laptop. I just plug it into the laptop charger, and it's enough juice to fully charge the computer.

That solar array has just enough oomph to charge up two battery arrays in a day, which means that I can run two full charges of the laptop on any sunny day. The only effort it takes is switching the 8-battery holders around between the two harnesses, one for charging from the sun, the other for discharging into the laptop.

Thanks for the info.

I got my set on sale ($199!)a couple years back as a hedge, and haven't really used them but for demo purposes. ie, this Earth Day, I used one of them to run a little HO-scale train at the City Event.. (if you try that, use a 1000mfd Capacitor or a battery in there.. might smooth the ride.)

Another TOD poster said he (she) had not found the charge circuit to be reliable, as it allowed the batts to overcharge.. plus some other fault. I do like the lights, which are more helpful if mounted into a reflector and used as Task Lighting.

Here's an inexpensive charge controller you might look at if you find yours is also not treating your batteries very well. ( Morningstar Sunguard 4.5 has PWM, but not MPPT or LVD, IIRC)


Never fear:

Brown ‘DEMANDS’ Petrol Cuts.

Brown ‘DEMANDS’ Iceland give us our money back

Brown ‘ORDERS’ World to follow his example:

Brown ‘STATES’ OPEC cuts would be wrong.

What a silly Canute.

The speculators are still out there gambling with OPiuM(other peoples money). They're shorting the market for their final fix.

My 'stimulus' plan for the banks and Wall Street?

Halt trading. End all shorts.

(And if the descent resumes?

Firing squads.)

Halting shorts on financial stocks a few weeks ago sure worked well.

Shorts actually make a decline more orderly, because during big downturns, often the only buyers are people covering their shorts. When stocks go "no bid" is when you have a crash.

The arguments against shorts are delusional. The shares of healthy companies don't go down when they're shorted. The shares of unhealthy companies go down whether they're shorted or not. By removing shorts, you remove a major mechanism of price discovery, you remove a major ability to hedge, you make a crash more likely, and you do nothing whatsoever for a company except to prop up a failing company longer than it should be propped up.

The arguments against shorts are delusional. The shares of healthy companies don't go down when they're shorted. The shares of unhealthy companies go down whether they're shorted or not. By removing shorts, you remove a major mechanism of price discovery, you remove a major ability to hedge, you make a crash more likely, and you do nothing whatsoever for a company except to prop up a failing company longer than it should be propped up.

Short selling is a loan, it's leverage.(In effect, magnifying assets with credit, a kind of Ponzi insanity-- you borrow a $1 million, so you are a million dollars richer and therefore you are better able to accept another $1 million dollars, etc.)

Worse, the intent is to make money by driving down the price of the asset. You justify shorting the way that they used to justify

That's exactly the thinking that got us into this mess.

I know people right now who are selling stocks on margin and selling futures in a final gamble.

It seems that even know you can't see that your free-market thinking is fundamentally flawed and that your beliefs are sending this market to Hell.

For much of 2002-2003, the DJIA bounced around 7500-9000 (The Horror!). During that same time, the price of oil bounced around $22 to $32 per barrel (The Humanity!).

It seems that measured in terms of the equity market, oil is still 2x-3x what it was in 2002-2003, and by this measure it is "expensive" for those economic activities that use energy. If the marginal cost of oil is above $60, it will likely still be expensive for some time.

There is one commodity that continues to grow through all of this: trees.

Oil SHOULD be more expensive, and all of us here know why - it is getting more scarce. Don't be misled by short-term fluctuations between $75-150 - that IS the trading range.

IMHO, the DJI is just getting itself back to an appropriate trading range. There has been little real growth in the economy (if one discounts the fraudulent official stats, as one should), and there is little realistic reason to think that there will be much real growth in the economy in the future, so there is no good reason to think that the DJI should be any higher today than it was in 2002-3. If anything, the long term trend should be a slow drift lower, in real dollars.

If I understand correctly, for every sell there must be a buy. Who is buying all these sells? I fear 'someone' will end up owning us all... or rather what's left of us all. But seriously, can someone answer this question?

Who is buying all these sells?


More seriously, some of the buying is by people who have been conditioned by long-running bull market to buy on the dips. They're going to get ground to hamburger. Some of the buying is by people with very long time frames (and sometimes very short vision). Some of the buying is by people covering their short sales. Some of the buying is by people who think we're near an interim bottom and want to be in place to pick up a little money on a "dead cat bounce" rally. There are a zillion reasons to buy. Some of them are even good ones.

Some people have been sitting on the sidelines with a big pile of cash (acquired when they sold high to suckers), and are now in a position to buy low as the suckers panic. This is not all of it, but it is a big part of it.

Another thing to remember is that if you buy a stock at $100, and it goes up to $200, and then it goes back down to $100, you haven't really "lost" any money. The only time that stock values ever equate to real money is at the point that a trade is actually made. The rest of the time the values are just theoretical. Even those theoretical values are only valid if it is assumed that there is not a mass sell-off when one tries to sell.

It's an excellent question; I have been wondering the same thing. Also, what happens if the panic during a downturn becomes general enough that essentially no buyers can be found for the collapsing stocks that essentially everyone is trying to sell? Is this the underlying reason why markets in many parts of the world have had to be shut down of late?

They are correct "For every sell...there is a buy"

Your question was " no buyers can be found for the collapsing stocks that essentially everyone is trying to sell?"

Not possible! A hobo would by GE if it were going for .01 cent. It will never get to zero or 1 penny. Because as you see, someone will snatch it up when it gets no where near that.

Real concern for you is "What will the future ratio of poor to wealthy be?" "How rich will the rich be VS how poor the poor are?" "Which camp am I in?"

"Real concern for you is "What will the future ratio of poor to wealthy be?" "How rich will the rich be VS how poor the poor are?" "Which camp am I in?"

I agree, this is the guestion.

And it's a moving target.

I suppose, in a way it's sort of like the old, what to do being chased by a lion saying in that you just need to wealthier than the other guy. Hah!

In addition to the other replies, my understanding is that the stock market price does not include the volume of stock trades being done, just the price level of those trades that did occur. You sometimes see commentators talking about "the price was X, but this was done on light volumes" which means that only a relatively small number of transactions actually took place; most people holding shares didn't do anything.

I have no idea if the volume of sales over the past week has been average, above average or below average.

I feel like watching "Trading Places" with Eddie Murphy and Dan Aykroyd as 'Louis Winthorpe III'.


'Looking good, Louis!'
'Feeling good, Todd!'

and of course,

'..Do you have any better ideas?'

'Yeah, it seems the best way to hurt rich
people is by turning 'em into poor people.'


South Africa: Mystery hemorrhagic fever kills 3

GENEVA (AP) -- -- The U.N. health agency says it is investigating a mystery disease that killed three people in the South African city of Johannesburg.

The World Health Organization says the disease appears to be a form of hemorrhagic fever.

It says tests have proved negative for Ebola, Lassa fever, Rift Valley fever, Marburg fever and other main types of hemorrhagic fever.

WHO spokesman Gregory Hartl says the first death on Sept. 13 was a tour guide who had fallen ill in Zambia before being evacuated to South Africa. Two further deaths on Sept. 30 and Oct. 4. involved a paramedic and a nurse who treated the woman.

Hartl said Friday that 121 people are being monitored and WHO hopes to receive further test results by Sunday

Here's a shocking fact I learned from a documentary: the Black Death was a hemorrhagic fever and was not the plague. The researcher in the documentary studied the pattern of deaths in an English village where records were kept and found that the disease seemed to spread between family members, which is not what you would expect if it was spread via rat fleas. The reported symptoms also supported this new interpretation. The Black Death burnt itself out, but the virus itself probably lived on somewhere.

I don't believe that's the mainstream view of plague. There are lots of inconsistencies in the historical record, not the least because of the state of both record keeping and medecine in that time. It should also be noted that the plague bacillus has (at least) two different forms, the bubonic and pneumonic versions. The pneumonic version is passed through the air, not through flea bites.

I can also assert, having lived with cats & dogs much of my life, that flea bites absolutely "spread" between family members. The fleas leave their hosts to lay eggs in organic material. After the fleas hatch, they jump onto any host that passes by, which is quite likely someone who lives in the same place as the original host (i.e. a family member). Moreover, most forms of transportation in the middle ages were entirely suitable for carrying fleas (rats on ships & barges, rats in hay or grain wagons, fleas on horses or people).

Having a life-long interest in the Black Death, I watched that documentary and did some subsequent reading based on it. I thought they were way out on a speculative limb.

Black Death

In 2001, epidemiologists Susan Scott and Christopher Duncan from Liverpool University proposed the theory that the Black Death might have been caused by an Ebola-like virus, not a bacterium. Their rationale was that this plague spread much faster and the incubation period was much longer than other confirmed Y.pestis-caused plagues. A longer period of incubation will allow carriers of the infection to travel farther and infect more people than a shorter one. When the primary vector is humans, as opposed to birds, this is of great importance. Studies of English church records indicate an unusually long incubation period in excess of thirty days, which could account for the rapid spread...

Now something as lethal and with an incubation period of 30 days would be a nightmare scenario if it were to hit today I guess. Even if nature chucked such a black swan at us now everyone would assume it was engineered somewhere.

Everyone might be right. If something engineered escapes out of the bottle from a lab somewhere, you got it! With thousands of possible somethings, it will happen sooner or later.

And amazingly none of the people who thought it was a good idea to put one of the world's most most deadly germ-warfare (oh sorry bio-defence or whatever they want to call it) labs on Galveston Island have been imprisoned. Course they'd have to imprison the entire chain all the way up to the president if they did that...

It is incredibly lucky (according to the official story anyway) that Ike hit one week before it was due to be "stocked up".

Maybe thats what Putin was aiming 'Ike' at..

I saw a documentry on it once, proposing that the Black Death was a form of Anthrax. After all it spread very quickly even in Winter, which was unlike Bubonic plague. The idea that it was Bubonic plague was created by a study of an epidemic in India in the late 19th century, where sufferers had similar symptoms. However that epidemic spread slowly, and there were other inconsistencies.

The speed at which the black death moved throughout Europe, from dense urban areas , through rural areas and as far north as Norway and Russia has always been problematic regarding the conventional rat flea vector.

However (and I dont think anyone will ever know if the flea vector for plague or a haemorragic fever is the culprit), it is worth bearing in mind that the summers prior to the black death were reported to be terrible and that malnutrition was widespread.

The population of Europe is believed by some to have been in very poor shape when it hit and it doesnt appear to have behaved as the slower spreading bubonic plague did in 19th Century India or China.

IIRC: There was a similar, devastating plague in Alexandria in the 6th Cent.

A six-week multi-player game to design what 2019 could look like started on Oct 6. Food, energy, disease, geopolitics, etc -- it's all there.


"Superstruct is the world's first massively multiplayer forecasting game. By playing the game, you'll help us chronicle the world of 2019--and imagine how we might solve the problems we'll face. Because this is about more than just envisioning the future. It's about making the future, inventing new ways to organize the human race and augment our collective human potential.Everyone who enters the world of superstruct immediately becomes a Super-Empowered Hopeful Individual-a SEHI. By telling stories, strategizing with others, and superstructing, you demonstrate your hope that we can make a difference in our own futures."

Crikey... my wife and I brainstormed a similar idea last January. Had no idea who to contact about developing it. Maybe we should pursue it.


Germany's program of building up to 15 coal fired power stations seems to make a mockery of their green credentials. While I believe they have up to 30 GW of nameplate wind and solar (thanks to expensive feed-in tariffs) my impression is that the system can't absorb much more. Those tariffs are slated to expire before long as a budgetary measure I believe. Their clean coal experiment in Berlin is a mere 5 MW if I recall and not yet online.

We should remember this when green utopians start prescribing the German energy model as one to be followed.

Germany will look after Germany. As all countries look after themselves.

Now, you all know me as a notorious AGW 'denier', but I am not inclined to cross the street to pick a fight: Dirty sources of additional loose carbon are not particularly helpful at this time...

Germany is crossing the street because it doesnt have an option. Compared with the rest of the EU , Germany is an industrial power-house. She makes things, lots of things, and to do that, She needs electricity.

Germany's mistake was ''Atom-Kraft? - Nein Danke!''.

Believe this: Lots of Nations will now start to take unilateral action in what they will see to be in their best interests.

The commonality of 'globalisation' will evapourate quickly. Both in theory and in practice.

Germany's mistake was ''Atom-Kraft? - Nein Danke!''.

Was at university with someone who was a CND activist and sported exactly these stickers. Years afterwards when I met him again he was working in the UK nuclear power industry in technical public relations. Hi Peter if you read this!

I guess it's Ja Bitte now - and, after a quick google, it turns out there is a badge saying that now.

Very sharp.

Oh yes, now that we are all in socialist economies, nuclear energy can be safely resurrected without even having to lie about its ability to pay for itself.

Berlusconi Says Leaders May Close World's Markets

Oct. 10 (Bloomberg) -- Italian Prime Minister Silvio Berlusconi said political leaders are discussing the idea of closing the world's financial markets while they ``rewrite the rules of international finance.''

``The idea of suspending the markets for the time it takes to rewrite the rules is being discussed,'' Berlusconi said today after a Cabinet meeting in Naples, Italy. A solution to the financial crisis ``can't just be for one country, or even just for Europe, but global.''

Whups, grab your ankles.

"When do the producers in Canada's tar sands take themselves offline?"

Depends on the individual plants. The ones that have been up and running for a while will stay in business and follow the price of oil down to $40 or so. New plants aborning will be postponed with the usual explanation of "high labour costs".

I think the more critical factors will not be the price of oil but demand destruction and credit freezes, especially the latter. The petroleum companies themselves may not freeze up, but there are a lot of sub-contractors, suppliers, and trucking companies who live perpetually on a line of credit. The pitifully few companies that minimized debt and paid for things out of cash flow will get by.

One word: Kondratieff.

Could someone help me understand what is happening from a 50k foot view?

So, the stockmarket meltdown is a result of the credit markets freezing up, right?

The credit markets freezing up is a result of a bunch of bad mortgages, right?

While a lot of the mortgages were given to people who never should have qualified, I assume at least initially that most were making their payments. So they stopped making their payments when the payments readjusted due to interest rates? right?

The interest rates went up? Why? Was it because the Fed was fighting inflation? Were they seeing the rise of oil and commodities as a sign of inflation and thus raised rates? (I don't think the fed rates and mortgage rates are the same but maybe there is a relationship there?) Was it the rise in gas and other prices that made people to no longer afford the house payments?

I guess my question is that if it wasn't oil prices (peak oil) that cause the mortgage problems (and ultimately the stock market crash), what was it?

Thanks in advance.

I am not an expert, but here is the piece I think you are missing:

When these ARMs were made, the rates were artificially low, like an introductory credit card rate. So it's not that they started at current market rate, and then would adjust to the market rate in 5 years, it's that they were started at a discount to the market rate, and then adjusted to a premium to the market rate.

Let's say the market rate was unchanged 6% in 2003 and 6% in 2008. The ARM was negotiated at 4% in 2003 going to 8% in 2008.

See, as long rates go up house prices go down, since the value of a home for most people is Dependant on what they can finance, and that is directly related to interest rates. Get out your HP12C and run the principal value change for a fixed payment if interest rates change from 6% to 8% or 10% - that's the impact on the value of your house from these changes that are occurring in the Treasury marketplace.


And the underlying assumption was that the housing market could only go up. So if these buyers got in trouble (as was fully expected), they could sell their homes and pay off the mortgage. Or be foreclosed on, and have the debt fully covered.

But if property values go down, it all falls apart.

It's the same thing that happened during the dot-com boom, when people were saying actual earnings didn't matter any more, it was mouse clicks and page views that counted.

Consumer has it right. Even those that took low adj rate mort who knew they couldn't make the new note were convinced by the real estate agents et al to not worry about it. The story went like this: you can get into the house with almost no equity because of the low rates and liberal rules. By the time the mort. adjusts the price of the house will inflate to provide the equity you'll need to get a new standard mort. It wasn't so much the rate adj that hit people as hard as it was the fact that home prices didn't keep running up.

If only the mort. holders got burned in the process matters wouldn't be so bad. But the financial industry turned those mortgages into some akin to shares in a public company by creating all those credit swaps etc. All these investment interest were then sold on a leverage basis...essentially with borrowed money. And some of this borrowed money was leveraged by the folks how supplied this capital. Thus many layers of leveraged investments were built on a bad investment: loan money to uncreditworth individuals to buy overpriced real estate.

That's my basic crude understanding of the mess.

like an introductory credit card rate

Good explanation, but missing one last piece: Our belief in perpetual progress.

So let's say you have a young married couple.

She just graduated college and started a career as an MBA financial analyst at one of the "prestige" big investment bank houses.

He too, just got out of college and started a career at a software start up company. They tell him this is going to be the next Google and he is fortunate to have gotten in on the ground floor even though the salary is not that great just yet.

Sure times are tough now, but isn't that true for every young couple?

And since history is guaranteed to repeat itself, all their past successes (good grades, making grad school, etc.) point to one inevitable future: it's all going to get better and better from here on out.

So why not take the home loan with the front end teaser low rate? Paying the higher rate in the far off future is not going to be a problem. By then, they are 101% guaranteed to be making those higher salaries that others in their fields make.

Tick tick tick ...

You have a dollar

Each time you loan out that dollar you sell the resulting loan to someone else, collect a fee and then make a new loan with the same dollar.

Repeat the above cycle 600 times.

The one day you are faced with a default which cascades through the network of loans and all of sudden you have 600 folks all laying claim to the same dollar which underlies all of those loans. A lot of folks are going to come up empty handed which in turn makes it difficult if not impossible for them to meet other financial obligations. This creates a further cascade of defaults.

The outcome is what we see today.

The interest rates went up? Why?

If you are talking about individual mortgages, that was part of the deal from day 1.

Person with bad credit score can't get a "regular" mortgage, but Countrywide or similar will make them a special deal - 2% interest for the first couple years, then it goes up starting year 3. But that's OK, by that time your job will take off and you'll have that promotion, and the higher payments won't be a big deal.

Unless in the meantime you buy a Hummer with "employee pricing" and perhaps change jobs once or twice and forget about your adjustable mortgage, and then suddenly your $600 house payment is $2000 a month and holy crap, I need to refinance, like yesterday!

Only Countrywide is gone, and you won't qualify with anyone else, so you decide to sell. But nobody wants your house, not for the price you're asking, and it suddenly occurs to you that this same situation happened to about half your neighbors and the house is now worth a fraction of what you thought and that $2,000 a month could buy gas.

Wash, rinse, repeat.

In a free market, the free market would set interest rates. In the US, the Federal Reserve is effectively a central planning agency that continually interferes with real interest rates, trying to adjust them to its liking. Sometimes it can manipulate the market, but it (arguably) distorts the market when it does that. Sometimes the distortions get so great that the Fed can't control interest rates any more.

That's part of what is happening now. The Fed is trying to push interest rates too low. It is failing, and that is causing a problem (usually it is successful at pushing rates too low).

Here are mortgage rates from Bloomberg's home page:

            CURRENT      1 MO. PRIOR 
15-YEAR      5.73           5.42 
30-YEAR      5.97           5.79 
1-YEAR ARM   7.20           5.94 

The economy is melting down, the Fed is trying its best to push interest rates lower, and yet interest rates are rising. Why? IMO, because higher risk demands higher interest rates. The Fed can swim against that current all day and not get anywhere.

Depending on what level of understanding you are looking for, this is the best overview of the Very Big Picture view of the the current crisis:

Asia's Revenge

The meltdown's silver lining - cheap oil

In a new report Friday, Deutsche Bank uses a number of interesting yard sticks to suggest crude is currently way too expensive and may fall to the $60 a barrel range as the economy worsens.

"As night follows day, low oil prices have always followed high prices, and the decline has always been swifter than the advance," said Peter Beutel, an oil analyst at Cameron Hanover.

Beutel sees a 2009 low of around $50 or $60 a barrel, then even lower prices in 2010.

goodnight all her.

Simon Schama's History of America is about to begin.

But for all out there who hate bankers at this time, Here is Monty Python's Office sketch:


enjoy :-)

How to account for the stock surge in the last hour of trading? Was it the PPT trying to calm things a bit before a long weekend?

In the other thread, Nate said it was because the Lehman CDS auction went better than expected.

I'm not sure what "better" means in this case. The auction concerned the market price of credit default swaps.
See: http://www.bloomberg.com/apps/news?pid=20601087&sid=a7u7y24vbV38&refer=home

So those who guaranteed Lehman debt agreed to pay 91.375 cents on the dollar for the defaulted debt, which beat analytical expectations of 87 cents. The implication is that the debt involved is even more worthless than expected. And yet people are happy. I hope someone explains. Because all I can see is that so-called "toxic debt" is worth 8.625 cents on the dollar. Well, I suppose it's cheaper for the Feds to buy this way...

OK. I get it. The idea was this was an auction to determine how much people were going to pay to settle an instruments based on Lehman default. The risk of the auction was that no one would come or people would come and bid low on settlement. In either of those cases, the implication would be twofold: institutions that held CDSs would risk insolvency by outlaying cash at settlement (counterparty default) and those whose debt was guaranteed would not get cash for their bad debt. So high price means the holder institutions have sufficient liquidity to honor the defaults to a fairly high value and give Lehman's creditors some cash. Fannie and Freddie CDSs sold even higher because the initial debt was guaranteed by the Feds.

However, a high price could be a bad sign, too. What if you are an exceptionally large institution "too big to fail"? Heck, isn't it worth paying closer to par with your last cash reserves to keep the party going for another month?

"So high price means the holder institutions have sufficient liquidity to honor the defaults..."

IMO this is where the 700 billion would get the most bang for the buck.

There will be a few more well placed "better than expected" bids to keep the plates in the air as long as possible.

But all it takes is a well placed spitwad to topple the whole show.

Denninger thinks the auction was very good news. Less than a dime on the dollar doesn't sound good, but he says anything that's a positive number is great. People were fearing much worse.

Also heard this from some talking head last night.

There was an old technical support level from way back in the mists of time, which mere humans had forgotten but computers hadn't, when the Dow was last around 8000 (and an equivalent level for the S&P). It was tested three times during the day and held - this triggered a surge of computer trading "buys" after the third "bottom" of the day just before the close.

Don't know how accurate that is but it sounds plausible.

Hello TODers,

My thxs to Leanan for posting the toplink:

Richard Heinberg: The End of Growth

Several of us who have been watching the world oil production and depletion picture closely for the last few years are now concluding that the world has now seen the highest rate of production ever. Matt Simmons agrees: It’s all downhill from here...

Upthread: WT again expressed the fear that Simmons thinks that JHK may be proven an optimist. I wonder how many think that Jay Hanson may be proven an optimist too?

[8-page PDF Warning]
..If you were born after 1960, you will probably die of violence, starvation or contagious disease...

..Fifteen years, plus or minus ten years, is when I estimate anarchy will reign in the United States...

I hope that the best minds here on TOD will now consider what is required for 'Optimal Overshoot Decline' so we can try and shoot the gap between Jay's fast-crash scenario and the ArchDruid's grinding Catabolic Collapse.

IMO, We owe it to the young so they can partake of Harry Chapin's,
"Remember when the music...Was the best of what we dreamed of for our children's time..

...And I feel that something's coming, and it's not just in the wind.
It's more than just tomorrow, it's more than where we've been,
It offers me a promise, it's telling me "Begin",
I know we're needing something worth believing in."

My hundreds of earlier speculative postings only briefly sketch how I think this might occur, but I gladly defer to those TODers of far superior intellect and skill [most of you now reading]. I welcome your thoughts pro & con for the necessary process of bringing the human specie numerically back into the finite ecological constraints of our little blue marble, but yet strives to optimally minimize the decimation of other lifeforms for a small Undershoot phase.

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

I myself started out as a fast-crash doomer when I first became Peak Oil aware in 2004, but I have found myself gravitating toward the slow-grind collapsism characteristic of the Greers, Kunstlers, Orlovs and Heinbergs (in his more realistic moments, anyhow) the more I have come to understand the intricacies of the matter.

I just think that the Cascading-Systems-Failures/Fast-Crash-Collapse type scenarios that one commonly reads about are avertable for the simple reason that the systems of civilization are at least sufficiently resilient to admit of patch-work solutions of the sort that have been common in the Third World ever since it became the Third World in the shadow of the industrialization of the First World.

I guess you could say that the third world jury rig approach to maintaining functioning systems despite their fragility proves that human beings really ARE smarter than yeast after all.

CNN is currently running a story about how suburban voters will determine who wins the presidential election. And their #1 concern in the economy. Six in ten say they are driving less because of the high cost of gas.

I guess this means we can't expect either candidate to tell them "Suburbia is doomed!"

We are heading out this evening to a screening of The End of Suburbia. It was seeing this for the first time several years ago that started us on the path to Peak Oil awareness. I'm really interested to see how it will look in light of recent developments. We have been making progress toward preparation for these events, but thought we had a few more years...

They are dancing in the streets here, since gas is back to "only" $3.00 a gallon.

No one I've talked to is making the connection between gas prices and economic slowdown.

Well, Ive read the entire TOD thread yet again today, great stuff as always. Seems everyone is wondering "Is this really it?" The short answer is "YES". Heres the who, what , why, when and where of it all. We all know about the markets decline, the credit issues, the housing issues, the energy equations. During the last 15 odd plus years, house builders have been cutting corners. It started innocently enough with the use of OSB oriented strand board. Then added fiber board, and a host of other inferior materials. first OSB would only be used on an interior floor, then under an exterior wall that would be surfaced with vinyl siding or sprayed on stucco crap. Then it was used as roof decking also. soon the cabinets in the kitchen were fiber board compressed and vinyl coated. In short and for brevity, these houses were not the houses constructed in the 70's or 60's or 50's. These homes were junk!
And it mattered little if it was a $200,000.00 or $2 million dollar house. the only difference was sqaure feet and more fiber board and more sprayed on stucco and more oriented strand board. They werent designed or engineered to last. No old growth wood was used BECAUSE THERE ISNT ANY LEFT! No quality whatsoever. cloths went the same pattern, so did applainces and furniture, yard maintenance equipment, the whole she bang. The whole western world was onboard and couldnt turn out the cheap substandard crap fast enough. Educated people didnt know, they saw other degreed people buying all the same crap and were eager to get in the check out line and join the neighborhood Home Owners association, as long as they didnt have to attend the monthly meetings. The driveway cement started spalling, the tree held up by a piece of twine when they bought the place, died. The stucco turned green and cracked, the shingles blew off, the cabinets in the 2 and 1/2 baths and kitchen wouldnt close and warped, the appliances soon made strange noises and quit working. They couldnt start the weed wacker, leaf blower, lawn mower, hedge trimmers they purchased JUST LAST YEAR. They were in debt up to their colons and now THIS hits.

Hey! I could go on and on and on but you get the picture. Now I ask, should I shoot straight? or go with the jokes next time? I can tickle an ear if thats more effective. I can blurt it out if thats how you want it too.

Neph - You are 100% dead on right. The list is endless.

The vertical leg of the exponential drive for profit and damn the torpedos.

Someone needs to start a website listing all the top Corp execs who profited from this in the last 6 to 8 years.

Include names numbers addresses.

It flat out ain't right and if we don't call them out on this then we as a society are toast.

I could point out other mis-deeds that need to be called out but we have to start somewhere.

As I have mentioned before, I make high end heirloom quality furniture. I charge $35 per hour for shop time (local Midas charges $95) which would be a losing proposition for a man with childred. A small hall table will have 10 hours and about $80 (depends on the typr of wood) in materials. This does not count design time, travel to the customer, measuring time, etc. Dove tails of course, designed for wood movement of course, deep hand rubbed finishes of course. Try to sell a small hall table for $450 when there are hundreds of particle board POS tables out there for $150. When I say this curly cherry table will last over two hundred years the eyes glaze over.

This is a throwaway society so why should we not expect houses to be the same.

What about your grandchildren? Screw em, let them find their own oil.

Yes, it is frustrating.

I just refinished a antique maple drop leaf table. It was old growth. The wood was like iron, nay, harder on a rockwell scale than iron. The palm sander couldnt
reduce the surface unless hours and hours were spent on it. I spent days sanding it. I cursed the fact I couldnt run it thru a plainer, then thought of the cost of sharpening the plainer knives if I could have.

Todays houses all have six panel, raised, white fiber doors to every room. Kwikset or Stanley hinges and door knobs. Doesnt matter if its a $200,000.00 or $2 million dollar home. The floating panel maple, ash, oak, cherry, walnut doors with craftmanship of the past is gone.

The best clothing manufactures produce inferior junk now also. All home maintenance equipment is made by a single manufacture MTD, regardless of the color or decal of brand name thats on it.

Even the molding in new homes is a oil based product that resembles hard foam, the faux brown wood vinyl coating or thin white primer paint looks cheesy. Windows sills and stiles rot out from high moisture content from the day they were installed.

America has entire regions of ticky tacky home developments that have a shelf life of 25 years max.
Millions of houses that wont see the kids in them to college. 250, 500, 5000 homes in subdivisions all over suburbia with engineered and pre planned obscelecence.....good luck with that...emmmm k !

I was told by an architecture professor that 14 or so years ago, the house building industry went from building to last for 30 years to building to last for 20 years, unless code required higher specs.

I have an interest in a home, built in 1930 from heart pine (the resin filled center, found only in very old trees) and some cypress. A new house in the neighborhood (Coliseum Square Park in the Lower Garden District), it was built on the site where a church burned down.

Carefully built, of the best quality materials then available (except galvanized iron plumbing). IMHO, easily 10x the hand labor/sq ft of modern homes. Simple lines, a bit out of place amidst the larger columned homes around it.

Best Hopes for a return to quality construction,


Builders have told me that there's no need to build a house to last more then 10 or 20 years. They assume that people will "upgrade" - either move to a bigger, better house, or renovate the existing one - every eight years or so. Nobody wants to live in last year's house, after all.

I'm told by friends of mine in the building game that the new waterfront builds common in the UK are built to similarly low standards.
In effect, purpose built slums.
Oh well, when I first moved to Bristol one of it's attractions was the rather derelict waterfronts.
I've never been a great fan ot the late-Noddyland school of architecture which underlay the virtually identical developments in so many cities in Britain.

Planned obsolescence is a corner-stone of modern day capitalism. Building things that last forever is not in a company's best interest since they want to sell the most product as fast as possible.

Now we see how prescient Stanford's Vehicle Miles Traveled (VMT) data is as a predictor of a recession. The current market insanity will not cause a recession. It is a response to the recession. The recession started long ago as high gas prices forced those at the bottom of the economic pyramid to cut back on not just gas purchases but on other purchases as well in order to buy the gas they couldn't do without. The problem meant those who had planned on going from renters to homeowners could no longer do as planned. This happened in large enough numbers that home prices started to drop. Those counting on home equity to be the down payment on a newly constructed home had to cancel their plans. This caused once prosperous construction workers to lose their jobs. The construction workers put off buying a new F-150. Well paid auto workers got laid off and had to cutback on spending. Those trying to sell new cars and trucks had their honey buckets go dry. The big real estate commissions are no longer there. The cycle just goes higher and higher. The formally well off are now defaulting on their mortgages. Once the rich started feeling the pain the White House finally could no longer keep denying we have a very sick economy. We now see how good deregulation, globalization, and tax cuts for the rich are at creating jobs. Is an increase in VMT a predictor of a recovery? What are the latest VMT figures?

China car sales slump for second month in a row:


China becoming increasingly dependent on oil imports:


In January 2008 Bloomberg reported falling Daqing oilfield production. Daqing was the largest oilfield in China. Elsewhere in China petroleum production was growing:


New pipeline spur from East Siberia to Daqing, China (reverse flow) is being considered:


Updated chart for the recent drop in oil prices and the IEA OMR Oct 2008

Supply, Demand and Price to 2012 - click to enlarge

There have been statements made about falling oil demand. While OECD demand has been falling, non OECD demand has been increasing more, causing the IEA to forecast a small demand growth 0.5% for 2009.

The IEA stated that September production was 85.6 mbd. The IEA forecasts that average demand for 4Q08 is 87.7 mbd, shown in the IEA's chart below.

That means that world production has to increase by about 2 mbd to meet 4Q08 demand. There is still shut in production from Gulf of Mexico and Azerbaijan which will come back onstream adding about 1 mbd, but I believe that there could be difficulties meeting the demand with a required additional 2 mbd. Consequently, there is likely to be upward pressure on the oil price.

Platts reported OPEC Sept. production was down less than the OPEC quotas require; OPEC members were rumored to be less than serious about making full production cuts:


Bloomberg reporting OPEC needed to call a special meeting in November as low prices threaten the economies of oil producing nations:


It looks like it is time for a new poll, and not before comments close on teh old poll. Should the new poll have the range $65 to $110?


This head fake wont last long, gas at $3.00 a gallon is smoke I tells ya.

The pusher at the school yard gives out free samples at first to get his customers hooked. Like when gas was a by-product, thrown away, untill combustion engines could be carborated to run on it. Then the first price increases begin in earnest. Soon the addict is seen running around chasing the supplier.
The price rises. Supplies become erratic, preasure is blamed "on the man", turf wars, demand, always ends up at the morgue, pale, cold, toe tag and paupers grave.

Imelda Marcos had, "... 15 mink coats, 508 gowns, 888 handbags, and 1060 pairs of shoes." That was a compulsion, not an addiction. Some people were compulsive drivers.

The price of oil might go so low, drilling might cease. One might find the 'peak oil' theorists saying, "I told you so." Currently the near term future of oil investors seems bleak.

I heard a joke on the radio while driving yesterday, "Due to the financial crisis, the government has turned off the power to the light at the end of the tunnel."

Good thing I paid off my debts in July.

I think it is an excellent idea to push the price of oil low enough that exploration comes to an end. The oil left to discover or develop is expensive to produce. So. I think it is much cheaper to conserve an switch to alternative reducing consumption fast enough that there is always substatial over capacity in existing wells. Then we pay much much less for the already developed oil and don't waste efforts of developing oil that is bad for the economy because the level of investment it too high. In a modern economy, a trend to more energy sector jobs and economic activity that isn't temporary is a bad thing since it implies that EROEI is declining. You want energy to become a smaller and smaller part of the overall economic activity.



Might want to hurry before we reach $65/barrel?


I can certainly understand that in these uncertain economic times people would want a tangible asset like gold or even silver, but i am starting to hear on radio that gold is poised to go up by end of year to around $1000 an ounce and possibly higher, even into $2000 an ounce by next year end. i know its all speculative, but was thinking about the relationship of gold and oil, and how gold sells for about 10 times the price of a barrel of oil. thereabouts.

i even hear that one should not wait to buy gold, but to buy gold and wait. clever sales pitch.

I can see oil staying low for a while, since the sheeple are cutting back on consumption, and i can see how precious metals would shoot way up. but then that would blow away the 10x relationship.
which has held true for the longest time.

anyone have a crystal ball?

Someone has to do some very difficult assessments of the non-elasticity of oil use.

I own three old cars, and one is an SUV. Over the summer, I parked the SUV and drove the little car. Now that gas is cheaper, I am already finding myself driving the SUV more (Garbage dump, etc.).

If someone could put numbers to where the oil is used it would help.

5% - people driving to grocery stores - very inelastic!
20% - People driving to work - somewhat elastic, as jobs are lost, but people tend to find other work?
20% - business use of energy - very elastic, probably correlated with GDP.
20% - home heating - very inelastic, but seasonal

Again, these are not good percentages, I was just thinking out loud. In my head, it would help to break down consumption in categories like this, because at different points in the economic deterioration, these different elements become "in play".

I don't think driving to grocery stores is all that inelastic.

IME, that one area where people have been cutting back. You can use a smaller car. You can go to a closer store. You can go less often. Some of my friends go to the grocery store every day.

Wal-Mart said in their reports last year that people were cutting back their number of visits, due to high cost of gas, and USA Today ran interviews with people who said they had stopped going to Wal-Mart. It was too far away. They went to closer stores, even though they were more expensive.

I average about 8 to 9 trips/week to Zara's Grocery, 2.5 blocks away. This likely increases my annual cobbler bill, but has no effect on my oil use.

I also walk several times/month to WalMart, 7 blocks away. I took on of their on-line surveys (web site printed on bottom of receipt).

One question was "how far did you drive ?"

No category for walking (or bicycling or public transit) and none for <1 mile.

So I answered >99 miles :-)

Best Hopes for Expanding the Box at WalMart,


Economic decline in the US would lead to a drop in oil consumption in the US and therefore free up a lot of oil on the international markets – 13 mbpd. This would likely postpone the effects of worldwide peak oil for a several years

the assumption from the article is wrong. using just 6 mpbd of oil, america would cease to exist. that's one

and about postponing peak oil by several years.... with a 10% drop in oil consumption, after a period of 10 loong years, we have postponed peak oil by the enormous amount of .. 1 year of normal consumption. that should do it, because there are many days in a year and like as such (more than 50, anyway)

“This is a market that is basically returning to the price level of a year ago which it arguably should never have left”

With rising prices a lot of investment in drilling, unconventional oil and alternative energy was done. These investments need a lot of energy (e.g. for steel etc.). Even with EROEIs bigger than 1 usually no or little energy is produced during the first years of development leading to EROEIs near to 0 during the first project years. So the hunt for further energy sources worsend the energy crunch.
Now the pendelum is going into the other direction. Investments are delayed - freeing up energy in the short run.
This effect is strengthend by speculators: During rising oil prices oil (or futures) is hoarded whereas with falling prices nobody wants to stack oil.
These effects may explain why the oil price is so volatile. Since the oil price does not depend on production costs but on supply and demand, there is no "normal" price where the oil price should be. In the long run the price will not drop below the full cost of producing the last barrel (including investment costs). Due to the inertness of oil production however the price may fall for a short time frame below that near the marginal costs fo producing the last barrel (without investment costs).
Similarly the demand side on the short run is not very elastic. Nothing happend during the first months of high oil prices. In the long term, the miles driven are reduced, less and smaller cars are purchased and the economy adjusts demand by reducing growth (shrinking).

Since supply and demand are not elastic in the short run, the market is very volatile. But the production costs for the last barrel will continue to increase during the next years. This leads to a continued rise in oil prices within this volatile environment.