DrumBeat: October 16, 2008

The Peak Oil Crisis: The Crash of 2008

Despite the dramatic drop in oil prices during the last three months, recent developments have only made the supply and demand situation worse. Oil consumption in the U.S. has fallen by 1.8 million barrels a day (b/d) or nearly 9 percent as compared to last year due to a combination of high prices, a slowing economy, and the shortages resulting from the hurricanes that tore up Gulf coast production and refining last month. During September, however, Chinese imports increased by 2 million b/d as Beijing took advantage of the low prices to start building its strategic reserves -so much for falling American demand. The major oil forecasting agencies are now saying that the increase in worldwide demand for oil will slow from rates seen in recent years, but that worldwide oil consumption is still forecast to increase this year and next.

Report says Arctic temperatures at record highs

WASHINGTON - Autumn temperatures in the Arctic are at record levels, the Arctic Ocean is getting warmer and less salty as sea ice melts, and reindeer herds appear to be declining, researchers reported Thursday.

..."Changes in the Arctic show a domino effect from multiple causes more clearly than in other regions," said James Overland, an oceanographer at the National Oceanic and Atmospheric Administration's Pacific Marine Environmental Laboratory in Seattle. "It's a sensitive system and often reflects changes in relatively fast and dramatic ways."

Second attack made on Canadian gas pipeline

VANCOUVER, British Columbia (Reuters) - There has been a second attempt in less than a week to bomb a natural gas pipeline in northeastern British Columbia, police said on Thursday.

The pipeline, near the town of Dawson Creek, was damaged in the incident but did not rupture, the Royal Canadian Mounted Police said. The pipeline is owned by EnCana Corp.

Details remained sketchy, but police said the incident happened late on Wednesday or early Thursday, and appeared to be similar to an attempt to bomb a pipeline in the Dawson Creek area on Saturday.

Qatar Expects OPEC to Cut Oil Output by 1 Million Barrels a Day

(Bloomberg) -- OPEC will likely cut oil output by 1 million barrels a day at its Oct. 24 meeting to check the drop in prices, Qatari Oil Minister Abdullah al-Attiyah said.

``It will be one million, or more,'' he told Qatar's al- Jazeera television channel. ``Prices have fallen a lot and we need to take measures.''

OPEC should cut oil output: Ecuador

QUITO (Reuters) - OPEC should cut oil production at its next meeting as crude prices fall sharply over fears of a global economic downturn, Ecuador's Oil and Mines Minister Derlis Palacios told Reuters on Thursday.

...He said if oil prices keep falling, Ecuador would be forced to adjust its national budget for 2009.

Angola oil exports up at 1.84 mln bpd in Dec-traders

LONDON (Reuters) - Angola is set to export about 1.84 million barrels per day of crude oil in December, up from the estimated 1.74 million barrels per day in the shorter month of November, traders said on Thursday.

The December volume is an increase from November but is still down on the levels seen earlier this year.

Morgan Keegan cuts oil services cos on recession fears

(Reuters) - Morgan Keegan analyst Michael Drickamer downgraded the oilfield services industry, and said shares of companies in the sector are not set to rebound from current lows in the face of a looming global recession.

Ethanol pipeline test a success, says Kinder Morgan

Kinder Morgan Energy Partners LP says it has successfully tested what could become the nation’s first transmarket ethanol pipeline.

Oil falls below $69

NEW YORK (CNNMoney.com) -- The price of oil continued to fall Thursday after a government report showed the nation's supplies of crude and gasoline grew more than expected last week.

Light, sweet crude for November delivery was down $4.73 to $68.87 a barrel on the New York Mercantile Exchange. Oil was down $1.34 a barrel just before the report was released at 11 a.m. ET.

The drop brought prices to levels not seen in more than a year. The last time oil settled at these levels was on August 22, 2007 when it closed at $69.26. It has lost about half of its value since hitting an all-time high above $147 a barrel in July.

Thursday's inventory report was "very bearish," said Phil Flynn, senior market analyst at Alaron Trading in Chicago. "There's a lot of supply hitting the market at a time when demand is questionable."

EPA slashes lead limit in air by 90 percent

WASHINGTON (AP) -- The Environmental Protection Agency is setting a new health standard for lead to slash the amount of the toxic metal in the nation's air by 90 percent.

EPA officials, who were under a federal court order to set a new standard by midnight Wednesday, said the new limit would better protect health, especially children.

Iraqi official: $100 a barrel is 'fair'

BAGHDAD (AP) -- An Iraqi official says Iraq believes that the $100 a barrel is a "fair and acceptable" oil price for both producers and consumers.

Oil Ministry spokesman Assem Jihad says that if crude prices continue to fluctuate, OPEC will cut its production.

OPEC says reschedules emergency meeting to Oct. 24

LONDON (Reuters) - The Organization of the Petroleum Exporting Countries said on Thursday it had brought forward an emergency meeting to discuss the impact of global recession on oil markets to Friday next week.

Pressure has been mounting within the 13-member group to reduce supplies as oil prices have fallen by around 50 percent from an all-time high of $147.27 hit in July following the global economic slowdown which is expected to eat into demand.

A statement from the Vienna secretariat on Thursday said only that the OPEC secretary general, following consultations with other ministers, had decided to reschedule a meeting planned for Nov. 18 to Oct. 24.

Norway plans no oil output cuts, minister says

OSLO (Reuters) - Norway's oil minister said on Thursday that the non-OPEC country had no plans to cut oil production due to falling crude prices.

Norway is the world's fourth biggest oil exporter, exporting most of its 2 million barrels per day production.

UK's Brown urges retailers to cut petrol price

BRUSSELS (Reuters) - Prime Minister Gordon Brown urged British retailers on Thursday to cut petrol prices to reflect the drop in the oil price.

Brown also said that, despite the halving of the oil price from a high of $147 a barrel in July to under $74 for U.S. crude on Thursday, oil prices were "still too high".

OPEC President Says Oil's `Ideal' Price Is $70-$90 a Barrel

(Bloomberg) -- The ``ideal'' price for crude oil is between $70 and $90 a barrel, OPEC President Chakib Khelil said today.

The Organization of Petroleum Exporting Countries hasn't decided the size of an output cut it may opt for at a meeting in Vienna next month, Khelil told reporters at the Hassi Rmel gas fields.

``No-one can say how much,'' said Khelil, who also doubles as Algeria's oil minister. ``The decision is made in the meeting.''

China's Shrewd Long-Term Oil Plan: What America Can Learn

The important thing for investors to understand now is that oil ownership, as I have said for many years, is an illusion. It does not guarantee price, nor profit. What really matters in the end is having secure supply lines and sources from the Middle East (and other parts of the world).

American, Delta earnings hit hard by high fuel prices

American Airlines parent AMR swung to a third quarter profit thanks to the sale of its money management subsidiary, but excluding one-time accounting items both it and rival Delta reported big third quarter losses.

Like airlines around the globe, American and Delta were hammered this summer by record fuel prices and refining costs. Crude peaked at $147 early in the third quarter, and the so-called "crack spread" — the added cost of turning crude into jet fuel — that historically was less than $10 a barrel reached $70 at one point this summer.

Nuclear Reactors May Supply a Fifth of Power by 2050

(Bloomberg) -- Nuclear reactors may produce more than a fifth of global electricity by 2050 as demand for power rises in countries such as China and India, according to a report by the Organization for Economic Cooperation and Development.

Shell Quadruples Renewable-Energy Project Spending

(Bloomberg) -- Royal Dutch Shell Plc, Europe's largest oil company, has quadrupled spending on renewable energy projects this year to meet rising demand and a global target of halving emissions by 2050.

Time to banish the god of growth

IMAGINE an industry that runs out of raw materials. Companies go bust, workers are laid off, families suffer and associated organisations are thrown into turmoil. Eventually governments are forced to take drastic action. Welcome to global banking, brought to its knees by the interruption of its lifeblood - the flow of cash.

In this case we seem to have been fortunate. In the nick of time, governments released reserves that should with luck get cash circulating again. But what if they hadn't been there? There are no reserves of fish, tropical hardwoods, fresh water or metals such as indium, so what are we going to do when supplies of these vital materials dry up? We live on a planet with finite resources - that's no surprise to anyone - so why do we have an economic system in which all that matters is growth (see "Why our economy is killing the planet and what we can do about it")? More growth means using more resources.

When the human population was counted in millions and resources were sparse, people could simply move to pastures new. But with 9 billion people expected around 2050, moving on is not an option. As politicians reconstruct the global economy, they should take heed. If we are to leave any kind of planet to our children we need an economic system that lets us live within our means.

(Many of the stories in this special report are behind a paywall, but a few are free.)

Oil falls to 14-month low on bad US economic data

VIENNA, Austria - Oil prices fell to a 14-month low Thursday as bad U.S. economic news stoked fears that a significant global economic slowdown will undermine demand for crude.

Concerns over the economy overrode growing expectations that the Organization of Petroleum Exporting Countries could opt to cut back production in an effort to shore up prices.

Light, sweet crude for November delivery was down US$2.44 to US$72.10 a barrel in electronic trading on the New York Mercantile Exchange by noon in Europe. The contract fell overnight US$4.09 to settle at US$74.54, the lowest settlement price since Aug. 31, 2007.

Oil prices are now half of the peak they reached in mid-July.

Drill-baby-drill, meet $75 oil

NEW YORK (CNNMoney.com) -- "Drill-baby-drill!"

With the price of oil falling below $75 a barrel Wednesday - down about 49% from last summer's highs - the industry's battle cry is sounding less and less convincing.

But falling oil prices are not the only reason why the air is coming out of the drilling balloon. The credit crunch has hampered oil company's ability to fund big-ticket drilling projects. Meanwhile, the prices that producers pay for raw materials and labor remain high.

"Any project that assumed oil would average $100 over the next 10 to 20 years is being seriously reconsidered at this time," said Richard Ward, senior cost analyst at IHS Cambridge Energy Research Associates (CERA).

As recently as July, tapping deep water sources and extracting crude from Canadian oil sands - two very expensive production methods - were seen as economically viable ways to deal with the energy crisis. At that time, the price of oil was above $140 a barrel.

Now that the price has fallen below $75 a barrel, and could go even lower, many experts say the future of these projects is uncertain.

Positive Outlook Amid Plunging Prices: Industry Forges A Productive Future

Despite the U.S. commodity market's financial slump, with both prices and spirits sunk to all-time lows, the petroleum industry is forging ahead to build on its production and operational position to fulfill worldwide energy needs.

In fact, the energy industry has helped to buoy the economy throughout recent market meltdowns and has provided its own saving grace in the midst of a sluggish national job sector. According to Reuters, Houston, home to one of the fastest growth rates

Russian Stocks Tumble With World Markets as Crude Oil Retreats

(Bloomberg) -- Russian stocks fell to the lowest in three years, led by OAO Rosneft and OAO Lukoil, as sinking oil prices hurt the outlook for Russia's economy.

U.S. Consumer Prices Probably Tempered By Cheaper Fuel Costs

(Bloomberg) -- Plummeting fuel costs probably restrained prices paid by U.S. consumers in September, signaling a slowing economy diminished the threat of inflation, economists said before a report today.

The cost of living increased 0.1 percent after a 0.1 percent drop in August, according to the median forecast of 75 economists in a Bloomberg News survey. Other reports today are projected to show manufacturing contracted for a second month, and job losses remained elevated.

In global crisis, oil insulates Gulf

Economists say that Arab states such as Saudi Arabia will feel the pinch, but a year of record oil prices provides a deep cushion.

Falling oil prices make Iraq revisit budget

BAGHDAD - A steep drop in the price of oil may force Iraq to scale back its $79 billion budget for 2009, the Finance Ministry said Wednesday.

Also, a U.S. projection for a cumulative $79 billion budget surplus this year based largely on oil revenues is now unlikely. The surplus projection by congressional auditors brought angry demands from Americans for Iraq to shoulder more of the financial burden of reconstruction.

Last month, the ministry set next year's budget at nearly $79 billion based on expectations that the average price per barrel of oil would not drop below $80. But on Wednesday, oil for November delivery was trading around $76 per barrel — far below a record $147 in July. Oil revenues represent more than 90 percent of the national budget.

Russia May Need to Cut 2009 Spending Amid Falling Oil Prices

(Bloomberg) -- Russia, the world's biggest energy exporter, is facing shrinking government revenue as concern that the global economy may slip into recession pushes down oil prices.

The price of Urals blend of crude fell to $68.71 a barrel today, the lowest level this year, after peaking at $142.50 a barrel in July. It has averaged $106.85 a barrel since the beginning of the year, according to Bloomberg data.

Credit crisis redirects companies' game plans

WHO Encana Corp., Canada's largest independent oil-and-gas producer

CHANGE Delaying plans to split into two independent companies due to tightness in credit markets

WHO CI Financial Income Fund, Canadian independent mutual fund manager

CHANGE Reverting to a corporation from an income fund to take advantage of acquisition opportunities as they arise

ACP Leaders Want Global Strategy for Oil Prices

African, Caribbean and Pacific (ACP) Leaders have called on the international community to agree on a global strategy to stabilise oil prices at affordable levels in order to protect the growth prospects of the developing countries.

India has no immediate plan to cut fuel prices: Govt

NEW DELHI: India has no immediate plans to cut fuel prices despite crude oil's fall to a 13-½ month low near $72 a barrel, oil minister Murli Deora told reporters on Thursday.

He said a cut in prices would not be considered unless the price of crude oil imported by Indian refiners fell to $61 per barrel.

Russia opens up new Siberian oil frontier

VERKHNECHONSKOYE OILFIELD, Russia, Oct 16 (Reuters) - It's very cold, very old and rather salty. And that's just the oil.

Russian oil major TNK-BP has just brought on stream a pioneering big new oilfield in eastern Siberia, part of a wave of development overcoming huge technical challenges to open up some of this vast country's most inaccessible crude reserves.

Kuwait Has `Alternative Plan' If Oil Workers Strike

(Bloomberg) -- Kuwait National Petroleum Co., the state-run refiner, has an ``alternative plan'' to ensure the country's three oil refineries and exports suffer minimum impact by a workers' strike planned for Oct. 19.

``We have an alternative plan, or scenario, to ensure the refineries will have the minimum impact,'' KNPC Deputy Chairman Asaad al-Saad said today in a phone interview. ``The impact will depend on how the strike will happen, if it is total or minimum. There will never be a total shutdown,'' he said.

Kuwait's Oil Refineries Run at 63% of Capacity After Power Cut

(Bloomberg) -- Kuwait's three oil refineries are running at 63 percent of capacity, three days after a power failure halted operations.

``We're now producing 587,000 barrels'' a day, compared with full capacity of 936,000 barrels a day, Kuwait National Petroleum Co. spokesman Mohammed al-Ajmi said today by telephone. ``Shuaiba is running at full capacity and Mina Abdullah is almost at full capacity. Mina Al-Ahmadi is a longer process than the other refineries.''

Russia's antitrust body may take action against five oil giants

MOSCOW (RIA Novosti) - Russia's antimonopoly watchdog could take new legal action against the country's five largest crude producers unless they cut oil prices within two weeks, the head of the Federal Antitrust Service (FAS) said on Thursday.

"I will write letters to the five largest oil companies saying that unless they voluntary cut prices for oil products, the FAS will bring new legal action against them, and the threat of administrative fines," Igor Artemyev said.

Omar strengthens into major hurricane

SAN JUAN (Reuters) - Hurricane Omar swirled away from the small Leeward islands in the northeastern Caribbean on Thursday after strengthening into a major Category 3 storm and threatening to bring torrential rains that could trigger floods and mudslides.

The 15th tropical cyclone of a busy Atlantic hurricane season, Omar formed north of the Dutch island of Curacao on Tuesday, briefly disrupting oil operations in Venezuela and shut down processing units at a refinery in the U.S. Virgin Islands.

Pakistan gets help from China for ailing economy

BEIJING — Pakistan's president Wednesday won more help from longtime ally China as his country grapples with an ailing economy and chronic electricity shortages, though the prospect of a much anticipated civilian nuclear deal remained uncertain.

Chinese Exports Slowed By Global Economic Woes

Even China isn’t immune to the world’s economic hangover. The country’s export growth in September is 4.2% less than for all of 2007 and 11.2% less for exports to the U.S., specifically, according to China’s customs bureau. In fact, China will see its economic growth slowed by .3% in 2008, compared to a 2.6% jump in growth in 2007.

Economists Jeff Rubin and Benjamin Tal argue that China’s trade slowdown can be attributed to fuel and shipping costs. In their piece titled "Will Soaring Transport Costs Reverse Globalization?" they point out that a standard 40-foot container shipping from Shanghai to the Eastern seaboard of the U.S. cost $3,000 in 2000, when oil was at $20 a barrel. As the price of oil soared earlier this year, the cost to ship that container jumped to $8,000 – and will cost $15,000 should oil ever hit $200 a barrel. Oil prices have since come back down (a little over $80 a barrel at the beginning of the week), but the economic alarm has hurt China in the short-term and portends greater damage in the long-term. "Ultimately," write the CIBC World Markets economists about past oil shocks, "soaring transport costs were borne by consumers, and markets responded accordingly, substituting goods that could be sourced from closer locations than half-way around the world carrying hugely inflated freight costs.”

Market crisis to hit R&D spending, says EU

R&D investment by the world’s biggest companies rose a torrid 9 per cent last year – but the current financial crisis is likely to hit industrial spending on future research, said the European Union’s top research official.

European Oil Companies Plunge as Crude Price Declines

(Bloomberg) -- The Dow Jones Europe Stoxx Oil & Gas Index dropped, led by Europe's two biggest oil companies, as crude prices sank to the lowest in more than a year on concern the global economy will slide into a recession.

Diesel fuel shortage felt across North America

A diesel fuel shortage across Western Canada has many drivers nervous about the supply and whether it will dry up altogether.

Prior to 3rd Presidential Debate, World Energy TV Interviews Matt Simmons, Clayton Williams and Others

Oil investor Matt Simmons asserted that about half of Obama's comments make some sense, and only about 10 percent of McCain's make sense. Rod Erskine of Erskine Energy, by contrast, believes that "McCain has a little better handle on energy than Obama does, but I don't think either candidate -- or the American public -- really understands what it takes to drill for, find and develop oil and gas."

First global crisis of century harrowing

Whether we will go through a major recession, long and deep, or even a depression, what might emerge is the realization that our society is much poorer than we had realized. The housing bubble, credit crunch and stock market crash have wiped out trillions of dollars and this will not go unnoticed.

This is truly the first global crisis of the 21st century. It is not climate change. It is not pollution. It is not a fresh water crisis. It is not a food crisis, notwithstanding current food security issues in several countries. It is not an energy crisis, although energy prices might have played a major role in bursting the U.S. housing bubble. It is an economic crisis of epic proportions that questions the very economic system we chose to build. The house of cards called Wall Street and banking sector has tumbled. The Ponzi scheme has been revealed.

Climate Change, Global Credit Crisis Deepen Poverty and Hunger in East Timor

Aid agencies warn that East Timor faces a food crisis and more than half of its youngest children are going hungry as global food prices soar. A new survey reveals that more than 70 percent of households across East Timor are unable to find enough to eat each day for almost half the year. From Sydney, Phil Mercer reports.

A group of international aid organizations says that East Timor's "hungry season", which usually lasts for a couple of months, now extends for almost half of the year.

Billion go hungry as rich countries fail to pay up, Oxfam says

Five months after countries pledged to give more than $12bn (£6.9bn) to address the global food emergency, less than $1bn has been given, according to Oxfam.

In a report to coincide with World Food Day today, the international aid charity berates rich countries for failing to respond speedily or adequately to soaring food and fuel prices.

Richard Heinberg: Food Crisis on the Way

A perfect storm is brewing in the global food system, and North Americans and Europeans may not be spared this time.

Greening Big Oil?: The Difference Between Changing Image and Changing Actions

Chevron launched its “I will” campaign last month in Washington, Houston and cities throughout California. The new ads continue the oil company’s “Power of Human Energy” ad campaign that began about a year ago. Through TV spots, print ads, billboards and a website called Will You Join Us, Chevron says it seeks to raise awareness about energy conservation and efficiency.

But exactly how green can an oil company claim to be? And will consumers buy its claims?

How to survive the energy crisis

Local businesses shared examples of energy saving changes they had made at a practical energy efficient workshop for businesses and institutions, held recently by the Biddeford-Saco Chamber of Commerce and Industry in collaboration with the Natural Resources Council of Maine. Over 40 people listened to suggestions and ideas that were presented at the workshop. With heating oil costs so high, and electricity costs due to increase shortly almost 30%, we need to increase energy savings in our office buildings, apartment houses, factories and homes.

Growing Costs Slow County Road Projects

Highway Commissioner Gary Kennedy says this year was the worst of 27 years he's spent with the Manitowoc County Highway Department. He lists a litany of problems.

"We had record snowfall, and because of then-record snowfall we had a salt shortage and we used up all our salt, and then came spring, then we had record floods, then came the asphalt prices went up 35 percent, and then diesel fuel prices went up another 35-40 percent."

Chrysler shops for options

Overall auto sales are expected to be 16% lower this year than last. Sales are expected to fall another 11% next year, according to market analysts at J.D. Power and Associates, as worried consumers continue to put off car purchases.

That kind of pressure threatens to kill off at least one of the major Detroit carmakers, Jim Hossack of the automotive consulting firm AutoPacific predicted, and with the steepest sales drops, Chrysler seems to be the weakest of the three.

American Airlines to buy 42 jets

DALLAS (AP) -- American Airlines says it will buy 42 Boeing 787-9 jets as part of a move to improve the fuel efficiency of its fleet.

American said Wednesday it expects to get the planes delivered from 2012 through 2018.

Tesla CEO out, layoffs coming

Maybe Tesla chairman Elon Musk flipped through the “R.I.P. Good Times” slide deck that Sequoia Capital showed its startup CEOs last week about the tough road ahead. Whether he did or didn’t, Musk pulled a few pages from it, as he announced Wednesday on the Tesla blog that not only would there be layoffs at the electric car startup, he would be taking over as CEO from Ze’ev Drori and delaying the company’s next vehicle.

Ryanair refers 'profiteering' BP to UK regulator

Ryanair announced today it has referred BP to Britain's Office of Fair Trading (OFT) for trying to put up delivery charges for aviation fuel at two airports by 50 per cent.

The budget airline accused Air BP of profiteering and using its monopoly position as fuel supplier at Belfast City and Prestwick airports to introduce unjustified increases.

Airline chief executive Michael O’Leary said: “Because they have a monopoly, they are determined to abuse it. We can’t get a rational explanation from Air BP so we have asked the OFT to write to them and ask.”

Consultant: Green power a real threat to coal

MORGANTOWN, W.Va. -- Solar power plants and other renewable energy sources are real, competitive threats that neither the coal industry nor the state's political and academic leaders should dismiss, a consultant warned Wednesday at the second West Virginia Coal Forum.

California releases plan to cut greenhouse gases

SACRAMENTO, Calif. - To reach its global warming goals, California must cut greenhouse gas emissions by about four tons per person, which would require cleaner cars, more renewable energy and a cap on major polluters, according to a state plan released Wednesday.

It's the first comprehensive effort of any state to reduce greenhouse gases in the absence of federal regulation. The plan to be voted on by the California Air Resources Board in December builds upon an earlier draft on ways to meet the global warming law signed by Gov. Arnold Schwarzenegger two years ago.

EU leaders maintain climate targets, timetable

BRUSSELS (AFP) - European Union leaders maintained Thursday their targets and the timetable for their climate change plans, despite objections from some nations, French President Nicolas Sarkozy said.

"I can confirm that the objectives remain the same, the calendar remains the same, now it's up to (us) to find solutions for those countries that expressed concerns," he said, at the close of an EU summit in Brussels.

"The climate package is so important that we cannot simply drop it, under the pretext of a financial crisis," Sarkozy, whose country holds the EU's rotating presidency, told reporters.

"Energy superpower emerges in the Caspian"
By M K Bhadrakumar


"The immense scale of Turkmenistan's gas reserves, revealed after an independent audit, elevates the country to the top rank of gas producers. More, it renders Moscow's energy strategy obsolescent and rekindles United States and European hopes of loosening Russia's grip on Central Asian gas pipelines. Former invader China has its own trump cards to play."

Thanks for the link, souperman2, really a great article.

A couple of things I don't understand. Looking at the following maps:



Turkmenistan is located east of the Caspian Sea.

First, how is the gas to be transported to the intake of the Nabucco pipeline without crossing Russian or Iranian territory? Are they planning a sub-sea pipeline to cross the Caspian Sea?

Second, if you look at the two existing trunks that connect the intake of the Nabucco pipeline at Erzurum to the Caspian Sea, one crosses Iran and the other crosses Georgia. Since Russia made it very clear that it considers Georgia to be within its sphere of influence, doesn't this also present a problem?

I also found another very telling tidbit of information in the article:

But Russia also has factors of advantage. It has a surplus of hard cash at a time when the Western banking system is collapsing... A Russian business daily reported on Tuesday that Putin is forthwith providing $9 billion to Russia's four largest oil and gas companies to "refinance" their foreign debt in the context of the meltdown of the Western banking system.

The government had earlier announced $5.5 billion in tax breaks for the Russian energy companies. The four Russian oil majors had addressed a letter to Putin last month asking for a total of $80 billion to pay off their foreign debts and finance strategic projects. Putin responded on Friday by saying the government would disburse up to $50 billion.

So while Putin is busy bailing out oil companies, the United States is busy bailing out the finance industry. And while this may go a long way in keeping up the price of luxury condos in Manhattan, it does nothing to help our domestic energy production.

Kevin Phillips claims this is not accidental:

Finance became the chose sector of the U.S. economy--the one that would be protected and promoted because it was too important to fail. Manufacturing would receive no such help, however excited members of Congress might get from time to time.

Kevin Phillips, Bad Money

In the USA Presidential debates last night, John McCain indicated he is opposed to the notion of:
"spreading" the wealth around.

That got me thinking.
What is the opposite of spreading well-being to all fellow humans?
Is it "concentrating" and "hoarding" well-being so that it remains in the hands of just a few? And how do those concepts apply to oil?

Is oil a concentration of "well being" or is it a combination of both good and bad? Sure there is the short term burst of concentrated goodness (high energy) when gasoline or diesel is ignited in one's internal combustion engine. But there is also the long term, spread out deposit of CO2 into the atmosphere which arguably "spreads" the opposite of well being, namely, ill-being to everyone around the world. So oil is not a simple substance. It provides well being and it provides ill-being; both from the same instance of use. However the well-being part is "concentrated" into the short term future and its benefits are concentrated into the hands of the immediate user while the ill effects (arguably) of burning oil are "spread" out over a long term time line and also "spread" out spatially and population wise to many people and many places around the globe.

Also, of course, on a macro-economic scale, oil works to "concentrate" money into the hands of a few and to "spread" desperation and poverty to all who became addicted to the short term high of an oil injection. So the notions of spreading and concentrating play interesting roles in humanity's use of the black gold.

Any energy source would be the same, I would think. Energy functions as Maxwell's Demon, to decrease randomness--and increase "wealth" for whoever controls it and increases randomness--and increase "misery" for everyone else.

Energy sources that are less concentrated, like solar energy, should be more "democratic" than concentrated sources because they are more difficult to corral by a ruling class. I imagine that is why solar power has been largely discouraged. Not because it is "expensive", but because it is harder to "administer" and "manage."

Not because it is "expensive", but because it is harder to "administer" and "manage."

Only if you can't store it.

Life became a lot less egalitarian once we started growing food that could be stored: grain.

Ahah! That is how you control sunlight energy. Develop a priesthood to manage agricultural land and water resources, then grain storage and a writing system (just for the priests) to "manage" it all. Before petroleum there was grain and olive oil and wine.

It's still more democratic, because it is still harder to centralize. However -- if you can make agriculture dependent on petroleum -- well, there you have it all.

I dunno. The life of a medieval serf doesn't seem like it was very democratic to me.

DENNIS: Listen -- strange women lying in ponds distributing swords
is no basis for a system of government. Supreme executive power
derives from a mandate from the masses, not from some farcical
aquatic ceremony.
ARTHUR: Be quiet!
DENNIS: Well you can't expect to wield supreme executive power
just 'cause some watery tart threw a sword at you!
ARTHUR: Shut up!
DENNIS: I mean, if I went around sayin' I was an empereror just
because some moistened bint had lobbed a scimitar at me they'd
put me away!
ARTHUR: Shut up! Will you shut up!
DENNIS: Ah, now we see the violence inherent in the system.
ARTHUR: Shut up!
DENNIS: Oh! Come and see the violence inherent in the system!
HELP! HELP! I'm being repressed!
ARTHUR: Bloody peasant!
DENNIS: Oh, what a give away. Did you here that, did you here that,
eh? That's what I'm on about -- did you see him repressing me,
you saw it didn't you?


What I needed!

Livestock "on the hoof" is also a great way to "store" food until it is needed.

Don't forget the greatest invention of all: Beer. One can imagine a brand new but leaky clay storage vessel straight from the (wood or charcoal-fired) kiln. It is clean enough to start brewing after a good summer downpour. Next, the pleasant revelations, the visionary haze, the incredibly bad decisions and the ensuing headache that results in a brand new urban culture. Let's call it chip-chop...

The "keep" was originally the place where grain and other food was stored. Obviously, it doubles as a watchtower. The food surplus from agriculture leads to the first civilization, and it's all based on accumulation and specialization. Armies, walls, rulers' tombs and monuments first. Slaves, horses and camels next. The GOP's brand new agenda goes back a very long way.

Agreed. So It's really tough to 'sell' the idea of these very helpful BB's to our neighbors as we continue to reminisce over the age of Muscle Cars and Unlimited Energy.

A producer I work with has proposed making an 'Energy Show' to me today, but I'm trying to unspin some of his expectations of paying for it with the involvement of various Energy Companies that would be profiled and hence, promoted with the program. Even if its Green Energy and essentially positive, it's still ALL pointing towards Bigger Stone Heads, as Leanan would say. Who pays for an episode on 'Negawatts' (Amory Lovins and Grants, perhaps) .. It's not unsolvable, but it's life in a system where the ideas that can get airtime are the ones that have profit-motive behind them.

It reminds me of the arguments the other day about whether 'debt' is money or not. As an artist, I call it 'negative space', as an electrician, I might call it the 'return path' for the current. In terms of our energy use, the power we DON'T use is the essential balance to the energy we DO use.. and the things that DON'T make money are, similarly, a fully essential counterpart to that which fits in the marketplace.

"Who will buy this wonderful Morning?..." -Oliver Twist

I don't know where you are based, but here in Minnesota utilities are now mandated to reduce energy consumption. They are scrambling to find ways to talk consumers into using less. Maybe he should pitch the idea here?

Here in Nebraska, the utilities are also looking for ways to get customers to use less, primarily by becoming more efficient. Course the difference here, compare to the other 49 states is electricity here is a public utility. I find it kind of nice that an investor's profit is not involved.

Funny, we tried to pitch the same kind of show to Discovery Channel as a spin-off to Discovery Planet. They'd have nothing of it. The show was to feature a producer on a stationary bicycle powering the monitor. Free lunches sell a lot better than farming.

"Congratulations Joe. You're rich!" John McCain

While John McCain raised the old red-baiting argument of "redistribution" Obama offered no alternative to the economic growth paradigm. Oh Well!

After the debate Chris Matthews said "McCain looked like a grumpy old guy in a housecoat and slippers telling the kids to get off his lawn".

With less than 3 weeks to go it is clearly Obama's election to lose. Maybe if Chris Hansen of To Catch A Predator caught Obama red handed trying to have sex with an under-age teen it might make a difference. But even then the prospect of 4 years of listening to "grouchy old man" might be too much!


My mother is 86 and she thinks McCain is an Old Fart! And she's always voted Republican. And we live in Arizona.

Massachusetts residents will have a chance this year to eliminate their state income tax. Which would be almost $4,000 per taxpayer.

Deleted, still showing up in the wrong thread:(

It's not showing up in the wrong thread. You are reading the threads incorrectly.

The discussion here is threaded. Your reply will not be directly under the post you are replying to unless there have been no other replies to that post.

To find out which post a message is replying to, click on the little icon on top of the post - the one that looks like a single speech balloon with an up arrow.

From Reuters, last night's debate as the candidates left the stage.


hahahaha thx , I needed that one!

The "next" president of the US of Addams family- Is it the same fellow ?

Caption contest:

Gasp, your natural gassification plan is killing me.

Hold on, don't lead so fast. I've got scars you know.

Here's some "spread the wealth" right back at you Barry.

To Ayer is human, to throttle you with a plumber's line is divine.

The economic cheer is never-ending...

U.S. Industrial Production Fell 2.8%, Most Since 1974

(Bloomberg) -- Industrial production in the U.S. fell in September by the most in almost 34 years as hurricanes and an aircraft strike combined with the credit crunch to weaken manufacturing.

The 2.8 percent decrease in production at factories, mines and utilities exceeded forecasts and followed a revised 1 percent decrease in August, the Federal Reserve said today. For the third quarter, output fell at an annual rate of 6 percent, the biggest decline since 1991.

Philadelphia Fed's Factory Index Plunged in October

(Bloomberg) -- Manufacturing in the Philadelphia region shrank in October at the fastest pace in almost two decades, a sign the credit crunch is hurting producers.

The Federal Reserve Bank of Philadelphia's general economic index plunged to minus 37.5 this, the lowest reading since October 1990, month from 3.8 the prior month, the bank said today. Negative readings signal contraction. The index averaged 5.1 last year.

Mortgage rates spike - biggest jump since '87

Rate on 30-year fixed mortgages jump could climb higher still. One cause: Government's rescue efforts.

Big loss for Merrill

NEW YORK (CNNMoney.com) -- Another quarter, another massive loss for Merrill Lynch.

Merrill, which is about to fold into Bank of America, turned in its fifth-straight quarterly loss Thursday. The nation's largest brokerage firm reported a net loss of $5.2 billion, or $5.58 per share, compared with $2.2 billion, or $2.82 per share, a year ago.

Citigroup Has Fourth Straight Loss as Bad-Loan Reserves, Writedowns Climb

(Bloomberg) -- Citigroup Inc., the second-biggest U.S. bank by assets, reported a fourth consecutive quarterly loss after at least $13.2 billion of loan losses and securities writedowns.

Swiss back UBS with $54 billion

BERN, Switzerland (AP) -- Switzerland followed the lead of other European countries and the United States on Thursday by announcing it would inject billions of dollars into its banking system.

Inventory report not due out until 11am.


The Dow and S&P just broke their lows from Friday. Uh-oh.

And the TED is rebounding from it's morning dip.

It's times like these we learn to live again.


Bit volatile these days...

I may be wrong, but this all seems like a normal October only just a bit more scary.

There a reason there is a Halloween. It is the climax of all the fears associated with the end of the growing season and death. There is something instinctual in human group behavior that happens in October. I have watched it with amazement over the years, warning friends and relatives.

Doesn't help though. My 90 year mother whom have have warned many times to be careful in October fell and broke her leg at the beginning of the month. Old people have a death wish in October for some reason. My grandmother died at 99 in October.

And John McCain insists on committing political suicide.

IMO Obama and more Democrats will be elected. Democrats are better for the stock market than Republicans if history is a guide. Obama will withdraw from Iraq because there is no reasonable alternative.

Looking back this October will be viewed as the bottom where fear and the madness of crowds ran amok. I hope.

Nice looking canyon, Leanan. Now to find the tourists.

We are only down 194 points (DJIA) so far today, not bad. WOW, that used to be considered bad.

Why have the last several days started on an up beat for about an hour before somebody flinches and we're out to the races again?

Southwest posts 3rd Quarter loss

Breaks a 17 year profit streak.

Southwest lost about a quarter billion this quarter hedging against high oil prices. Remove the hedging losses and Southwest had a profitable quarter. So if they had not believed in $110-200 per barrel oil then they would have made money. Did TOD want to take credit for helping generate some of the business losses this quarter ?

Why not? We're trying to kill growth, aren't we? >:-)

For anyone interested, more on Southwest and their hedging.


There could be more pain to come. Southwest said it's already hedged 75% of its estimated 2009 fuel purchases at $73 a barrel and 50% of its 2010 purchases at $90 a barrel.

What are the odds that oil will be over/under $73 for next year?

Dare you to short oil at this level... Double dare. Or does cornycopiousness only apply to situations where shareholders can get fleeced in order for CEO's to hoard cashmere sweaters?

This graph from the New Scientist article is truly mind boggling. Exponential insanity?

EDIT: This one too!

As the late economist Herb Stein used to say, if something can't go on forever, then it won't.

Thanks, I've been waiting for some "respectable" media outlet to do this.

What to make of it all...

:) I've been validated.

Oh No! I've been validated!

Wow. Those are some scary graphs.

It's interesting that I was talking to my dad just last night and mentioned how many graphs I've seen lately that just seem to have taken on a hockey stick shape. I'm truly worried about what those curves will be doing in the future.

Is it day 28?

Answers to The Lily Pond Parable
If a pond lily doubles everyday and it takes 30 days to completely cover a pond, on what day will the pond be 1/4 covered?

Answer: Day 28. Growth will be barely visible until the final few days. (On the 25th day, the lilys cover 1/32nd of the pond; on the 21st day, the lilys cover 1/512th of the pond).

1/2 covered?

Answer: Day 29.

Normally, it takes 30 days to cover the pond. But recent flooding temporarily greatly increased the size of the available area in which to grow.

We are now somewhere around day 32 or 33.

As the size of our petroleum pond shrinks, so will the number of us lilies.

The recent flooding also took some of the lilies and dumped them into the river, where they can do some more damage to other people's ponds...

It would be interesting to see those numbers plotted relative to population, i.e per capita. I suspect that exploitation of resources in general is proportional to population.

Yes VT they truly are. Look at the magic "year" of 1950 (!) That's that year kickstarting it all.

I have read several places that 90% of all infrastructure on this planet came into being since 1950 - which in turn coincides with the usage of 90% of all consumed crude till date.

And: if you look around yourself ,with some old photos in hand, you will see that that actually makes perfect sense.

I like old movies and am always impressed with the lack of traffic, even during the prosperous 1960's. The crush of parked cars has ruined so many picturesque old villages in Europe. Time to get young people thinking: Cars are so 20th century. Anything but...

One of my favorite movies is "The Bicycle Thief." Not too many cars in that one, most everyone still walked or rode bikes or the bus.

Cornycopians call these graphs evidence of success and proof of their thesis. There's something else going on apart from denial.

Summary of Weekly Petroleum Data for the Week Ending October 10, 2008

U.S. crude oil refinery inputs averaged 14.1 million barrels per day during the week ending October 10, up 91 thousand barrels per day from the previous week's average. Refineries operated at 82.2 percent of their operable capacity last week. Gasoline production rose last week, averaging about 9.2 million barrels per day.Distillate fuel production increased last week, averaging nearly 4.2 million barrels per day.

U.S. crude oil imports averaged nearly 10.2 million barrels per day last week, down 185 thousand barrels per day from the previous week. Over the last four weeks, crude oil imports have averaged about 9.2 million barrels per day, 963 thousand barrels per day below the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged nearly 1.5 million barrels per day. Distillate fuel imports averaged 91 thousand barrels per day last week

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 5.6 million barrels from the previous week. At 308.2 million barrels, U.S. crude oil inventories are in the middle of the average range for this time of year. Total motor gasoline inventories increased by 7.0 million barrels last week, and are below the lower boundary of the average range. Both finished gasoline inventories and gasoline blending components inventories increased last week. Distillate fuel inventories fell by 0.5 million barrels, and are below the lower limit of the average range for this time of year. Propane/propylene inventories increased by 0.3 million barrels last week but remain slightly below the lower limit of the average range. Total commercial petroleum inventories increased by 11.8 million barrels last week, and are near the lower boundary of the average range for this time of year.

And here is what they were expecting:

The Energy Department will likely report a 3.1 million barrel rise in crude oil reserves on Thursday for the week ended Oct. 10, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.

...Platts expects gasoline stockpiles to rise by 3.1 million barrels, distillate reserves to slip 850,000 barrels and refineries to improve capacity by 2.9 percent to 83.8 percent.

Price Elasticity of Demand ?

4 week avg Y-o-Y and YTD

Finished Motor Gasoline       8,764     9,248 -5.2% -2.8%
Kerosene-Type Jet Fuel        1,467     1,567  -6.4%    -4.8%
Distillate Fuel Oil           3,888     4,178  -6.9%    -4.7%
Residual Fuel Oil               414       659 -37.2%   -17.2%
Propane/Propylene               792     1,161 -31.8%    -7.9%
Other Oils                    3,287     3,623  -9.3%    -7.7%

Total Products Supplied      18,614    20,435 -8.9% -5.0%


Wow, nearly 10% decrease in demand. That's like 2 million bpd. It's like we discovered and drilled and produced a brand new Cantarell in just 1 year. Three cheers for "drill, baby, drill!"

More like three cheers for Gustav and Ike.

I don't think the demand numbers are trustworthy yet. A four week average would still include the southeast hurricane shortages.

Notice too that the smallest reduction is in gasoline.

We are getting quite a bit bigger reduction in distillate fuel oil. I hope this doesn't mean there will be some folks looking for heating oil this winter, and can't find it. Also, it could mean real reduction in goods shipped.

Propane is also used for winter heating, with a huge drop. I hope we don't have an unusually cold winter.

It would be really helpful to have the demand side of this equation on a weekly basis. I guess that is not possible. With the price of oil about to dip below 70$ barrel and the slowing economy to blame...I just wonder how do the traders really understand this data? I have heard mastercard reciept analysis as one way of tracking US demand. If we are truly at the peak...returning to cheap oil does not bode well. Perhaps the hedge funds exiting this commodity market is also a factor in the reduced price. So baffling to me.

The DOE used to provide the weekly data, but then switched to the 4 week averages. That supposedly removes some of the volatility from the data. However, using a 4 week average also introduces a time lag into the resulting data. Thus, today's data for 10 October should be given a date of 26 September. As a result, the supply data is about useless as far as the market is concerned, since it's really 2 weeks old. This would benefit the traders who closely follow other demand indicators or those with inside information, but would penalize the rest of us who do not have this available.

E. Swanson

Black Dog--they still supply the weekly's Just download the "Special File" and scroll clear to the bottom of the data.

There's also this link, which reports:

Product              09/05/08 09/12/08 09/19/08 09/26/08 10/03/08 10/10/08

Total	               19,784   19,049   18,784   18,465   18,341   18,865
Finished Motor Gasoline 9,090    8,907    8,741    8,730    8,691    8,894
Kerosene-Type Jet Fuel  1,702    1,448    1,447    1,509    1,418    1,495
Distillate Fuel Oil     3,895    3,728    3,732    3,888    3,928    4,004
Residual Fuel Oil         594      457      529      333      446      349
Propane/Propylene         841      939      790      657      669    1,052
Other Oils              3,663    3,569    3,544    3,347    3,188    3,070 

It would appear that the demand for gasoline and distillate has recovered considerably since the hurricanes.

E. Swanson

You would almost think that the demand was there but no supply ?

Like maybe some serious shortages in parts of the country ??

Naw can't be its got to be demand destruction from high prices even though "demand" fell as prices fell.

Demand destruction in the US seems to be quite fickle able to resume at a moments notice when need be.

Naw can't be its got to be demand destruction from high prices even though "demand" fell as prices fell.

There's nothing strange about consumption and price falling at the same time. In fact, it's to be expected in cases where some third factor - such as a recession - provides an external reduction to demand. Keep in mind that what constitutes a "high price" for gasoline won't be the same in a recession as it normally is.

Roughly speaking, you have 4 cases:

1) Demand falls, price falls: external demand drop
2) Demand falls, price rises: scarcity
3) Demand rises, price rises: growth
4) Demand rises, price falls: oversupply

Like maybe some serious shortages in parts of the country ??

Possible, but the evidence suggests otherwise.

Here is per-PADD data for crude oil, and here for gasoline, and stocks are roughly where they were last year. Is there evidence of serious shortages? I can't find any news reports indicating that such shortages are occurring in the US. When contrasted with the wide-spread reports of shortages following the hurricanes (which demonstrated that shortages would indeed be reported), the lack of reports is fairly strong evidence regarding the lack of serious shortages.

Accordingly, the simplest and most likely explanation is simply that the recent high prices coupled with the economic slowdown have lowered oil consumption. Not a very exciting explanation, but reality often isn't that astonishing.

There definitely appears to be more cars on the road compared to last month and the summer (here in the DC area).

This file gives even more data by week.
-Domestic US oil production
-Crude oil inputs
-Refinery Utilization
-Production by product
-Days' supply
-Imports of various things
- Exports (surprisingly high)
-Product supplied, as you show

Lots of Gas...

Distillates down and propane still in unknown depths for this time of the year.

I guess we are hoping for another warm winter.

Gee...I wonder if you can burn gasoline in an oil furnace...hehe...sorry...don't try this at home!

I am wondering if anybody knows the best way to follow the decline in global shipping of raw materials and finished goods. There's the Baltic Dry Index: http://www.dryships.com/index.cfm?get=report

But this looks at prices to ship, not actual volume, and I am not clear on how close the two match. For example, oil prices are nearly half what they were a few months ago though output is no greater. So, prices can fluctuate madly with very little change in output.

Are there actual data on number of ships moving and how well loaded they are?

I would like to second this inquiry. The letters of credit (L/C) issue would seem to be halting international shipping/trade. Although it is the largest ship type for dry goods trade and therefore the first and most to fall, the cost of a day's use of a Capesize ship has gone down 94.4% since June! Is the L/C issue halting trade or just driving the cost down?

The average daily cost for the largest dry bulk vessels – known as Capesize and used mostly to ship iron ore from Brazil and Australia to China – yesterday sunk 28.9 per cent, its largest daily fall in a decade, to just $13,070 a day.

The rate has collapsed 94.4 per cent since it hit an all-time high of $233,988 a day in early June.


For example, oil prices are nearly half what they were a few months ago though output is no greater. So, prices can fluctuate madly with very little change in output.

Of course. And nobody should be surprised at this. Demand for oil is falling significantly in the OECD. And expectations for global demand growth are being rapidly trimmed.

As far as I know, no peak oiler of any status predicted that US consumption would decline substantially before a drop off in world production. And yet, that is exactly what we have.

If we really do have another Great Depression...say with real GDP falling 10% in each of the next 2 years....oil consumption could fall by 30% or more (as it did in the 30's).

Demand can crash.

Of course, the data table that you did shows that the cumulative shortfall between what world net oil exports would have been at the 2005 rate and what was actually exported was about 730 mb for 2006 and 2007 (combined).

WT, rapidly falling oil prices (now below $70) mean that the effects of declining net exports are being absolutely swamped by fears of declining demand.

I don't recall anybody predicting this.

Instead you predicted that oil would go from $100 to $200 to $400. i.e. that it would continue doubling.

Strictly speaking, I predicted (and am predicting) a series of doublings, but I said that I had no way of predicting what the time period would be between the doublings. I also said that prices were a horserace between declining net oil exports and declining demand.

In any case, I was really referring to your statement:

As far as I know, no peak oiler of any status predicted that US consumption would decline substantially before a drop off in world production.

The decline in US demand followed an accelerating net export decline worldwide--as declining net oil exports were auctioned off the high bidders.

The net export decline was never huge. And it's effects are minor.

How do we know? Because prices are falling rapidly and OPEC is completely panicked and desperate to try to make net exports decline more rapidly!!!

Net export decline would only be minor if prices and demand curves were linear, but they're not. I am a reasonably latecomer to PO, introduced 2 years ago and a "true believer" for maybe a year, but when I searched for pricing expectations I got "increasingly strong oscillations on a decreasing average". This was expressed vividly in the historic whale oil marketplace and the more recent caviar markets, and at least for me was perfectly expected, though I could not and cannot call the "tops and bottoms" of the cycles.

I think it is simplistic to assume that somehow the economy crashed just before the oil plateau reached a downturn; instead, I submit that the production plateau (which mean net export decreases and EROEI net declines lower than that) was possible ONLY because of rapidly rising prices, which in turn conspired to pop price bubbles in several unsustainable markets.

In a complex economy, you cannot view oil (or even energy) in a vacuum, but as a tightly coupled component of the whole. My opinion is that precise predictions will be impossible, but that over time we'll produce and use less energy, and the economy will decrease to match, but with oscillations in both.

For the me the surprising point is the speed of oscillations we've seen so far, and the massive overshoot we've been able to create in many aspects of the world economy.

For the me the surprising point is the speed of oscillations we've seen so far, and the massive overshoot we've been able to create in many aspects of the world economy.

I think currently the magnitude is exaggerated by the financial crisis. Big investors are being forced to sell oil and other commodities to raise cash.

Oil is in contango - not really what you'd expect if it was purely fear of a recession and lower demand that was driving prices lower. I think it's at least partly a fire sale.

This article basically equates the drop in commodities prices with a "going out of business" sale.

And predicts, as do several of TOD staff, that "It will be corrected violently to the bullish side once the false surge of supply is exhausted and the effect of supply destruction becomes evident."

This is evidence for my point. Peak oilers have yet to come to grips with the fact that consumption can fall faster than supply.

I'm not arguing that prices won't rise again to $150. They could..... but only if the economy snaps out of recession nicely.

My general point -- to risk repeating myself -- is that demand can contract faster than supply can post peak. Among other things, don't count on astronomical prices.

A agree with all this. I would add that we will never see above $200, maybe $250 in the future - markets won't function and oil industry would be nationalized. (and I've said this many times before). But as long as there is 2 trillion $ in hedge fund money that is leveraged multiple times and as long as investment banks can lever 30 times, 'fundamentals' will be secondary. Which if you think about it is a big part of the problem. When there are dislocations (like now), there is so much abstract wealth sloshing around that it overwhelms price signals on things that have real long term scarcity. Watch what this crisis does to NA NG production and world oil production. Watch 2009-10 grain crops - if you were a farmer would you be spending alot in spring on seeds and fertilizer on sub $4 corn? I think Paulson had the right idea in delevering the community - but the way they and SEC went about it caused the letter of credit/LIBOR freeze up which has casued MANY unintended consequences. I expect there will be more


I've been a bit surprised by the rapid decline in oil prices. I was buying into there was some what of a legit reason for the high prices and that it wasn't speculators. There was the CNBC video about how it isn't speculators because people still have to close out of contracts at the end of the month. But your comment "2 trillion $ in hedge fund money that is leveraged multiple times and as long as investment banks can lever 30 times" makes it sound like speculators can drive the price that high. If it isn't fundamentals, what is it? I guess I was surprised as the price has dropped 50% but demand certainly hasn't dropped 50%. So is it really speculators or does that last barrel of oil produced really drive that much of the price (ie 10% drop in demand equates to 50% drop in price)

I've also started thinking about the "bumpy plateau". Prices got high and the economy has down shifted, so prices have come down. They will come down enough where people will start using more gas again. So demand goes back up and then prices go up. Wash, rinse, repeat. Doesn't that make for a bumpy plateau?

Thanks in advance.

Yes - except that in T1, the bumpy plateau will consist of upward bumps on a level surface overall, whereas beginning in T2, the bumpy plateau will consist of slightly downward bumps followed by level periods, giving rise to a sort of stair-step pattern.

(See two of my posts below re T1 and T2.)

Back in August of 2005 oil had reached a record price of $66. a barrel. Demand for oil was increasing. If I recall, probably in excess of 1 million barrels per day annual demand increases. Would not expect a long term trend below 60 dollars a barrel. That type of demand increase is hard to keep up with.


Yesterday I saw a self-propelled large RV towing an SUV. The first time I had seen something like that in a long time.

Yesterday I saw a self-propelled large RV towing an SUV. The first time I had seen something like that in a long time.

An acquaintance who runs an RV park told me business was down 50% from September last year. August was down over 60%.

"I was buying into there was some what of a legit reason for the high prices and that it wasn't speculators. There was the CNBC video about how it isn't speculators because people still have to close out of contracts at the end of the month."

I've been a vocal advocate of this 'the price at the contract close is purely determined by physical supply can demand' theory.

But recently I've been having doubts. Perhaps the market is ... how to say it ... non-commutative.

So is it really speculators or does that last barrel of oil produced really drive that much of the price (ie 10% drop in demand equates to 50% drop in price)

Probably both, but certainly the latter.

The latter is oil's short-term price elasticity - how quickly demand responds to price changes - and recent estimates have put it at around 5-10%. A 5% price elasticity means demand changes by only 5% as much as price changes, so a 20% increase in price means just a 1% drop in demand.

A 50% drop in price, then, could correspond to a 3-4% drop in demand, or drop in expected demand (what people expect the world will be using in a number of months). If in July I expected the world to be using 88Mb/d in January but today I only expect the world to be using 86Mb/d in January, this new information would put the "fair market price" for a barrel of oil in January about ~30% lower.

(The leverage demand has on prices due to the low elasticity is exactly why OPEC quotas exist, by the way.)

John Michael Greer's new post discusses this problem of the mismatch between abstract and real wealth:


Watch what this crisis does to NA NG production and world oil production.

Indeed. Canadian production in particular needs high prices to make a buck. It may be in for a long hibernation.

RE hedge funds...

Greenspan used to preach that in our complex world we needed hedge funds because nobody else had the resources to research imbalances and market inefficiencies and exploit them thus giving the rest of us better price signals.

I confess I thought at one time he made the case rather well. What delusion!

[Though maybe with decent regulation they could function more as he envisioned]

I would add that we will never see above $200, maybe $250 in the future - markets won't function and oil industry would be nationalized.

But recent product prices in Europe of $8 per gallon plus would equate to approximately $300 or more per barrel crude oil in the US--if we were paying $8 per gallon at the pump.


It is often repeated that Europe has done OK with $8/gal fuel, but there is one big caveat: their government is collecting the difference between that and the price those in the US pay. This is used to provide much for the citizenry that the paltry US gas tax cannot. $8/gal gas, at current import rates, means that $3 billion/day would be flowing out of the US for imported oil. I don't think that is sustainable.

Now, would it be possible to have $8/gal gas INCLUDING tax in the US (i.e. with $100/barrel oil) as in Europe? Perhaps, but it would not be an easy transition.


I think that a mistake that many people make is to assume that the US will still be consuming 18 mbpd or so at much higher prices. I think that we are in the early stages of a long term trend of fewer consumers paying a higher unit price for a smaller volume of exported oil.

As to when and if social order breaks down, I do not know, but I think that the prevailing "Iron Triangle" message that we can have an infinite rate of increase in our consumption of a finite fossil fuel resource base is definitely not helping matters.

I certainly don't think we would be consuming that much. But there is probably some "minimum operating volume", given present infrastructure, below which things don't work at all.

The iron triangle is simply on autopilot. The latest message is "don't lock in your losses".

Joules and easy way to deal with this is to lower your housing costs. Say gasoline is now 10% of your budget you could readily decrease your housing expenses and not change your driving habits one bit. Say your spending 1000 a month on housing and 200 a month on gasoline to keep gasoline the same you would have to drop your housing costs by 200 a month. This is readily doable for renters and in most places in the US owning a home is more expensive then renting in California homes cost twice what equivalent rentals do. Baring moving to a rental yourself you can take in boarders since a lot of homes in the US have empty bedrooms. This lowers your housing costs and the new renters costs. People who rent can get roommates etc.

Also as WT pointed out below you would certainly drive less given such high prices and if you do rent you would probably rent closer to work.

In fact if home prices declined by a further 20% many places would still be above historical norms. This indicates we have plenty of room via declining ability to pay for housing to absorb high gasoline prices and this is without even assuming a decline in driving.

Finally if the number of people that take on roomates increased by say 10% the excess housing stock in the US will be even greater driving down rents and housing prices freeing up money to pay for gasoline.

So overall simply moving to a more realistic housing/rental price scheme thats even in line with historical norms provides more than enough money to pay for gasoline well beyond 300 a barrel for oil.

If people simply moved back to 1200-1400 square foot houses or smaller and renters became common in the larger homes we would easily absorb it. And these are conditions that where quite common till recently.

How far can devaluing the housing stock take us to free up money for gasoline ?

Well the average price for a four bedroom home in Flint Michigan is 20k

The average price in Oklahoma City, OK is 256k


No intrinsic reason that Oklahoma City housing costs cannot decline to be inline with Flint.

Plenty of money exists to pay for gasoline simply allowing housing prices to fall to levels currently seen in regions with depressed economies.

Looking at California shows a even greater gulf.

Just in Oklahoma City itself buying a three bedroom vs a 4 bedroom saves 50k in housing costs or about 300 dollars a month. So even keeping housing prices constant and downsizing alone would absorb the difference in gasoline prices for a lot of people.

Can you keep paying insane amounts for large houses and buy expensive gasoline nope.
Can you live reasonably and still afford 8 dollar a gallon gasoline sure you can and probably will.

Nate I disagree on 200 - 250. We have yet to see serious conservation efforts. If US fuel economy was down around that of Europe right now then I'd agree. We have a long long way to go towards using oil efficiently and changing lifestyles to do that. These changes will be entirely price driven and will happen when the price of oil is painful.

Oil prices just recently reached the point that the most ridiculous uses SUV/RV's etc are being curtailed. This means what ever price point that causes real conservation is higher then todays.

My best guess is its in the range of 500-800 a barrel where we finally see oil prices topping and conservation balance supply. As far as serious conservation starting my best guess is actually in the range of 200-300 dollars a barrel before a real and stable alternatives to oil can be created and expand.

For your up to 200 dollar range I'd say I'd agree that thats as high as it can go and still largely do BAU. After that we will have to change but that does not stop oil from going much higher.

No on the short term I see no reason why oil prices can't hit 160 by December. I did a lot of research on demand destruction looking primarly at Detriot which has been in a slump for ever along with other rust belt states gasoline demand in these regions has remained robust despite the long term economic decline in these areas.

Here is one link tons exist this is for Ohio one of the classic rust belt states.

Despite Ohio's stagnant to declining economy VMT remained healthy you can find other sources.

As I've said before VMT declines are highly correlated with housing busts which is not unexpected but I can find no evidence that general economic downturn or areas with long term declining economies suffer significant declines in VMT.

However I've read a lot of papers that discuss the error in VMT measurements and 5% seems to be a common figure. I'm not talking about high oil priced induced conservation but simple reduction because of economic effects.

Stuart did a big review but with national data that hides regional declines for economic factors if they even exist.


And you can look at some of the original data.


Certainly traffic volume has been declining no question but the trend started well back in the past.

You can play with the data but economic recession generally results in flattening of VMT.

Just randomly picking months in various years and dividing the lowest by the highest can give a -12% change in VMT.

Looking at the difference between Jan and August often gives a 10% change.

Basically US driving during driving season/ house building season / farming changes by about 10%.

Real i.e basic economic demand destruction if its happened will begin to show up in the coming months and into Jan-Feb as driving is reduced to its traditional minimum.

Feel free to play with the numbers but the point is we do seem to have about a 10% slack if you will in US oil consumption or demand. We can reduce consumption closer to whats common in January without a lot of changes. January demand seems to vary by about 1-2% historically.

Given all the data I think its pretty safe to assume that Summer Driving Season is probably dead or close to it and of course housing construction is probably dead.

Does this mean oil prices will always remain under 200 a barrel well no longer term VMT trends in economically depressed areas that I've found don't show any significant changes as the economy declines. Seasonally it seems we have a 10% range of fairly elective travel once we absorb this remaining demand is probably highly inelastic. Prices should therefore increase until people make lifestyle changes which result in effectively permanent demand destruction.

As I stated at the beginning we are a long way from those sorts of changes and therefore oil prices will increase until they happen. I've got my guesses about where those price points are but almost all start to happen after you pass 200 dollar a barrel oil.

The market right now is probably badly mistaken about the future. From Oil Movements we have this year managed to get two surges of oil from OPEC. The last one arriving during one of the lowest seasonal demand periods over the last several weeks. Getting the most oil at the point of lowest demand can and will send prices lower but unless the trend continues as we head into the winter things can and will change rapidly. The rapid price declines we have seen recently can rapidly be erased just as fast if I'm right about the market being misled. Also of course it look like OPEC is going to reduce supply exactly when intrinsic demand is least volatile.

Price itself is set by supply and demand but looking at the data if oil production does not increase significantly next year we will again starting late November enter a period where supply does not match demand.

Bottom line is lets see what happens in the coming months.

The requirement that the economy snaps out of recession nicely in order to provoke skyrocketing crude prices will only hold for another few years, I think - until the conclusion of what Samsam Bakhtiari referred to as the T1 phase of the oil transition, where oil supplies are level (lasting from about 2006 to 2010).

Bakhtiari predicted that around 2010, this T1 phase would give way to phase T2, wherein the world experiences 3-4 years of relatively gentle yet noticeable and tangible year-over-year declines in oil production - say 1-2 percent.

What I am proposing is that, once we get to T2, it will no longer be necessary for the economy to snap out of recession, thus causing rising demand to bump up against flat supply, in order to provoke skyrocketing prices. One we get to T2, gently declining supply bumping down against even flat, non-snap-out-of-recession demand will be sufficient to induce the same effects - on a periodic and cyclic basis.

Though rather abstract and vague as to details, I think that Bakhtiari's T1-T2-T3-T4 scheme, which I just reread last night, does prove helpful in conceptualizing possible future outcomes along the lines advanced above.

Even if we don't fall off the oil production plateau, if the OECD economies stagnate, but the developing world continue to grow (probably a bit slower than recently), within only a few years demand will again bid up the price. Either way the current period of lowisg oil prices is likely to only last a couple of years.

"Big investors are being forced to sell oil and other commodities to raise cash."

And that "forcing" was described in http://www.optionstrategist.com/ as:

"It seems that the major catalyst for this selling is the fact that the newest large banks primarily J. P. Morgan, Goldman Sachs, and possibly Morgan Stanley as well -- have issued massive margin calls to hedge funds and other professional traders who use these banks as prime brokers. These calls were not issued because of market losses, but more because the banks arbitrarily decided that they wanted their customers to use less leverage. Margin rates as low as 15% for broker dealers were raised to 35%;"

And guess who has a NET LONG position equal to 10% of the open interest in crude oil futures in the Tokio Commodity Exchange? Hint: find "Goldman" in

Yes, steep oscillations are characteristic of a system in the throes of breaking down, one that can't be stabilized. This eccentric behaviour looks like it will continue until...? China and India will keep buying mogas and diesel as long as they have a domestic car market and people will keep flying and people need to heat their houses and use fertilizers. With no buffer supplies, demand and supply move in offset tandems, enough to exaggerate spikes and canyons into intolerable market swings such as what we have seen. Youch.

I agree that over time we will use less oil as we go through this volatile period of transition. The next 5-10 years will be tumultuous as we make the switch from fossil fuel based to electricity based economy. Once we've made the transition to electricity, we will be wide open to diverse energy sources as technology advances.

I disagree that the economy will shrink. The next 5-10 years will likely be flat and then resume growth once the energy transition is complete. The Earth shouldn't be the "boundary condition" that limits out growth potential - we have an entire solar system we can exploit!

The Earth shouldn't be the "boundary condition" that limits out growth potential - we have an entire solar system we can exploit!

Quick... Someone build a pipeline to Titan...

You are still stuck in the "burn something for energy" mindset. There is an amazing amount of solar and magnetic energy available just in the space between the Earth and Moon. The possibilities are endless with a little imagination.

¿¿¿ Magnetic energy ???

Yes. As the solar wind varies, it causes the shape of the magnetic field induced by the Earth to change. A large conductive loop placed in the space surrounding the planet would have a voltage induced as the magnetic field changes. This could be ONE way to extract energy from varying solar wind intensity.

Our power grid is like a large loop (or several loops). When a solar storm hits Earth the magnetic field shape changes and causes induced volatages on our power grid. That is why we sometimes have power surges during strong solar storms. This effect would be much larger up in orbit.

large magnetic storms contain huge amounts of energy

that we have no way of tapping

so it is useless to us

"a large conductive loop surrounding the planet?" BWAHAHAHAHA!

sure, we can mine the lunar surface for helium 3 to use in the non-existant helium3 fusion reactors to create the energy needed to create the giant conductive loop around the earth! great plan, I will sleep better now knowing we are saved

or let's just go witha Dyson sphere instead! we could start building next week if only the shuttle program wasn't grounded...

cornicopians crack me up - you guys have a great sense of humor

People like you crack me up...You are using technology that was unimaginable (except to a few) 20 years ago - and then you have no imagination for what may be possible 20 years from now.

We already have a planetary-wide high bandwidth communication system in place. What's so hard to believe about a planetary wide power system?

"people like me? my father is one of the leading researchers in the world on magnetic substorms - I would say he has more than a passing knowledge of what is possible and not - and he tells me that it is not possible to harness the energy in magnetic storms with any technology we possess - I'll take his expert opinion over those kicked about the internet

as for your other point

we landed on the moon nearly 40 years ago - and now have no manned space program at all - what does that tell you about the inevitable march of progress? The ISS is a tiny joke compared to what is possible (or what science fiction visionaries thought the future would look like) - the manned mars mission will probably never take place - the US shuttle fleet is done - so who is going to build all these fabulous space power systems?

technology unimaginable 20 years ago? please, I am using refinements of technology that has been around for 50 years or more....the pace of scientific (major) breakthroughs has been slowing for years.

and finally - for a planetary-wide power system - who pays? how? who builds it? how? what materials? - all of this is supposed to happen in an energy & resource constrained era? good luck

I have HEAPS of imagination - and enough realism to know what is possible and what is not

possible: electrifying and expanding our train system
cutting down on fossil fuel inputs to agriculture
cutting back and increasing efficency
making large solar-collecting plants in the mojave and North Africa
installing large quantities of wind power in the Dakotas down thru Texas
birth control to lessen the effects overpopulation have on our planet

and yet - I see very little movement towards any of these - and these are possible, using existant technology - there are large forces who do not benefit from such a change, and so will fight with all their $ and influence (WT's "Iron Triangle) such change

what is NOT possible is switching quickly to non-existant and hopelessly expensive large-scale projects - and if we don't switch quickly to even the easy stuff listed above, we won't ever switch

an illustrative example ITER - which is a fusion research project (from Wiki)
"On November 21, 2006, the seven participants formally agreed to fund the (ITER) project.[1] The program is anticipated to last for 30 years — 10 for construction, and 20 of operation — and cost approximately US$ 9.3 billion [2], which would make it one of the most expensive modern technoscientific megaprojects. It will be based in Cadarache, France. It is technically ready to start construction and the first plasma operation is expected in 2018."

note "technically ready to start" - one or two problems...

"Canada was previously a full member, but has since pulled out due to a lack of funding from the Federal government."

"In December 2007, the United States zeroed funding for ITER in fiscal year 2008"

so Canada, a wealthy nation busy exporting it's natural resources couldn't afford to participate

and the US, one of the key partners, didn't fund their share this year - and this was BEFORE the present world-wide financial collapse - The EU, Russia, Korea, Japan - all are losing 100's of BILLIONS each week in this crisis - you really think large-scale projects are going to start anytime soon?

so who is going to pay for megaprojects for technology that doesn't even exist, when we aren't even able to fund research into technology that (almost) does?

And yet we could have built a 100 of such projects for the cost of the bailouts so far, with plenty of money left over for overruns.

It is not that we cannot, simply we have chosen not to. Our dreams are petty, and our successes few.

As a child I saw a demonstration of this "energy source" at the Univ. of West Virginia (I lived in Morgantown from ages 5 to 8).

A professor have put up wires in a field (visual memory over 100' on a side, forgot geometry) and the energy drove a meter and a very small motor (from one of those miniature race cars, 1/100th hp ?).

Much of the time, no energy (no change in solar flux, it is powered not off of magnetic forces but off of CHANGES in magnetic flux) but every now and then the meter would twitch (VERY fast and erratic), and the motor would buzz. Every few days a new motor would be required as a surge burned up the old one.

I asked questions (I was by FAR the youngest and shortest one there) and it made an impression. I strongly suspect that my skepticism of new technology "solutions", and promotion of same, was born in that field. It was manifestly clear to a 7 year old that this could not be turned into a practical power source.

Best Hopes for Educational Science Experiments,


Wow - I'm surprized by the negative response to some of my comments. It's good to get the critism though although the sarcasm just makes me feel bad ;-)

Sorry to see how snarky the responses were to your post. The people who say 'Impossible' are just as shortsighted as those who say 'Inevitable'. Even if we can't grab it now, it's worth looking at where there is energy, including the Planet's Magnetosphere.

Any time someone posts 'Bwahahahaha!' I think I'm being timewarped back into middle-school gym class. We can do better than that here, I hope.

I agree with jo. You're getting some rather rude and, frankly, foolish responses. You are suggesting people look at what *might* be possible, not what can be built starting tomorrow. We all have our agendas. Some limit the future more than others.

Heck, hundreds of little satellites with either a real filament or some sort of field/beam between them in geosynchronous orbit... why not? As with many things, we are limited far more by the lack of cooperation, greed and agendas than by any real physical limits.

Personally, I see no way out of a very messy time ahead, but various bright futures are possible beyond the darkness we now face. If not, wtf is the point?


Indeed. (mostly)

The reason I raised the issue and have attempted to perhaps ruffle a few feathers is to make the point that demand can fall rapidly.

For years, there was a strong tendency among peak oilers to say essentially, "Oil production is going to peak and rapidly decline and ....guess what...you can't cut back. Thus prices will rise astronomically".

But No. It doesn't work that way. Oil consumption is very GDP sensitive. If real GDP falls, oil consumption falls much faster and further.

Essentially the economy can shed oil consumption far faster than TODers and other peak oilers thought. They were too oil-centric and I'll bet a lot of money was lost on that account.

And it has implications for our personal planning.

As I suggested a year ago on TOD (using a different user name):


As a general rule, if you can keep your job, you'll be able to afford the gas as some of your competition for fuel -- ie. your unemployed neighbors -- will be knocked out of the game.


Peak oilers have been telling us for years: "Demand will rise inexorably while supply contracts." But that's simply not true.

"Demand will rise inexorably while supply contracts."

Someone may have been saying this, but the more accurate definition of demand is the volume of product that consumers are both willing and able to buy. By definition, supply and demand are in rough equilibrium. As we have seen two years of contracting net oil exports, by definition the demand for oil exports had to fall.

Clutching at straws in the face of crashing oil prices I see. :D You are wrong. If the exports were going down the price would go up not down like now.

Yes, but even with relatively low prices for oil, the demand-destruction we are seeing is proving sufficient to induce an incipient economic depression. I should think that prices would have to get way back down to $25 per barrel in order to reverse and re-rev growth - but it wouldn't be long before the growth dynamic would bump back up against supply limits, thus inducing another round of skyrocketing, demand-killing prices.

Whether we even get low enough in oil price to ever re-rev growth again even temporarily remains to be seen. I have my doubts.

There is an empirical basis, by the way, for the $25 per barrel figure. Steven Leeb has documented in his book on Peak Oil investing how closely economic upturns and downturns have historically been tied to previously falling or rising oil prices. This was an ironclad rule even during the 30 years from 1973 to 2003 when the world had a lot of spare capacity, and all instances of rising oil prices were thus essentially political.

I think what's happening now in the economy is proving that growth is simply not possible if the price is above $25 or so - anything higher than that induces contraction, the degree of which is determined by how much above $25 or so the price of oil is. Obviously $147 oil causes much faster contraction than $68 oil, but even the latter causes significant contraction - especially over a stretch of months or years.

PhilRelig see my longer post about VMT per month etc.

Lets see what happens as we enter December and January. For a whole host of reasons making predictions using the current so called demand destruction numbers is a mistake.

The truth will be known soon enough. On the price side I personally doubt it will turn out that the current oil prices are correct.

Whats important is right now no one has a good handle on oil prices vs supply and demand and demand destruction etc. The truth will be clear as we enter Dec-Jan-Feb when demand becomes very inelastic. What ever price points we hit over these months is a pretty good indicator of base demand vs supply.

And as far as the death of Summer driving season well that only helps until supply falls below base demand for summer.

The truth will be clear as we enter Dec-Jan-Feb when demand becomes very inelastic.

Why do you suggest that demand is less elastic in those months?

The data doesn't seem to support that view - average consumption during those months has not risen since 2004. Indeed, there was a significant fall in oil consumption between the 06/07 winter and the 07/08 winter, despite the latter winter being colder.

So there is strong evidence that oil consumption is still somewhat elastic, even in the middle of winter.

That should not be at all surprising, though, as only a small fraction of oil is used for heating in the US. Only 7% of US homes use oil for heat, and 6% use propane, meaning that space heating represents only a tiny fraction of US oil consumption.

Fundamentally, there doesn't seem to be much reason why oil's price elasticity in January should be much different than its elasticity in August. Unless you have evidence to the contrary?

I have observed (from natural gas) that price elasticity of demand for home heating is larger than for transportation/gasoline, av fuel & diesel.

That said, "common sense" suggest that summer vacation driving should have very high elasticity. It is an open question (in my mind at least) if common sense is true.

Reality may be that driving to Disney World has greater aggregate priority over keeping warm (upper middle class demand displaces retiree demand ?)


To be clear I was looking at the VMT data not heating demand. VMT has at least from a scan of the data its lowest variance in January and Feb and its lowest level. This is as close as you can get with real data to baseline US demand for gasoline for driving.

There has been a lot of hype about demand destruction leading to lower oil prices and as far as I can tell its just hype. VMT can differ by as much as 12% during a year with the lowest VMT in February I picked Jan instead to focus on because of the issue of days in a month.

VMT data itself seems to have a error of at least 5%. Looking at VMT in areas that have long term stagnant economies i.e the RustBelt does not show a lot of changes in VMT over decades it fairly flat. I question claims that a Recession will result in any serious drop in VMT much past the intrinsic variance which is itself pretty high.

Net result is I'd be surprised to see the yearly VMT decline by mure than 10%.


From 2001 to 2007 VMT increase from 2,795,610 to 2,995,748 or 6.6% given the population increase over the time period getting the cumulative to even roll back that much is a task.

I think what people are really missing right now is the difference between demand suppression and demand destruction. Demand destruction by definition means the demand will not come back its gone.

The herd is claiming demand destruction and thus assuming that oil will never ever go higher then 140 a barrel.

I see plenty of evidence looking at the data that US demand could easily be suppressed by up to 12% with no real demand destruction taking place using normal VMT data.

Right now the cumulative estimate for VMT for 2008 is 1,692,900 a total we have not seen since 1983. God only knows how they figure that one. I checked month to month and this number is simply strange. Population growth alone makes it highly unlikely we will go that low.

All I'm trying to say is I see no evidence of real demand destruction taking place either for economic reasons or because of higher prices for gasoline. I do see looking at the data that we can tighten our belt so to speak and easily suppress demand by up to 5-10% in any given month. Year over year its not clear but I'd say getting driving below 2001 levels will probably be pretty tough. Thus the interest in the winter months VMT.

Finally in looking at how VMT is calculated it seemed to me that it could easily be overestimated because of construction of suburban houses in formerly rural areas and underestimated when the construction stops.


Look at this article for example although it does not ask nor answer this question but VMT
flattens during recessions. It does note that hotspots exist and these seem correlated with areas undergoing suburban expansion. These changes in these VMT hotspots as they are built out probably represents a large part of the variance in VMT we see this year and obviously its related to construction. See the last page of the report page 9.
And last but not least St. Louis although not a certified Rust Belt city is one thats not growing much.

With a job growth of 5.5%% between 1997 and 2007.

Whats interesting is VMT in this report is coupled with the age of the drivers. Given that many baby boomers are reaching retirement age this alone has a big effect on VMT regardless of the economic situation.

Claims that high fuel prices influence VMT seem false claims that a recession will result in a dramatic drop in VMT seem false.

The one factor that seems assured to really change VMT lower in the coming years is retirement of our aging population. Even this might not be as large as expected as economic problems wipe out retirement savings forcing people to extend their working career's.

Real demand destruction is thus a future event as far as I can tell. Growth in VMT in the US has and will continue to slow variability in our usage of gasoline month on month shows that we have a intrinsic flexibility or demand suppression level that surprisingly high maybe as high as 10%.

Once this flexibility is worked out of the system by a combination of higher prices and recession its not clear that future real demand destruction will ever result in lower prices. Probably it will be highly inelastic with permanent demand destruction only coming from lifestyle changes which are a slow event and probably will lag supply changes.

What this mean is that I believe I'm correct in proposing the following scenario as how things will play out over the coming years.

Demand for gasoline will exceed supply during the winter and eventually during the summer as oil supplies decline this will lead to a increasingly robust floor in oil prices and increasingly inelastic demand as demand suppression no longer works and lifestyle changes are needed to lower oil demand.

At the monthly level this means that the ability to save money in excess of monthly expenses will decline over time. This means that fewer and fewer people will be able to by entry level homes as they face a continuously declining net amount they can pay on a mortgage. The problem is pretty severe since housing prices are sticky on the way down with sellers generally holding out for the highest price they can get. Same for car manufactures. Purchases made with long term debt begin to suffer a downward spiral of receding horizons with sellers unable to capture the market but underpricing their wares to get a sale. A substantial portion of these same consumer will default on their mortgages and car and credit loans effectively leaving the market place for both long term debt and revolving debt.

The entire time this is taking place demand for gasoline is probably not going down substantially once the shakeout period when of new home construction and initial demand suppression passes. Its a one shot event and 2008 is the demarcation year between previous growth years and entry into this longer term decline period.

The consumer becomes frozen locked in a spiral and cannot successfully take on either revolving credit or long term debts. He cannot break out of the month to month paycheck cycle.

This can go on for years who knows. But it only ends when the consumer can start modifying his life style to lower expenditures for food and gasoline to such a level that he can save.

Even then its year of saving before he can take on longer term debt despite the fact that housing prices would be falling the entire time your talking decades before you see the new frugal consumer finally able to reasonably begin to better his life via a increase in purchases of homes and cars.

Back to VMT the declines as they happen will be driven by demographic changes and probably a reverse flight from the suburbs to the inner cities. However even with this pressure to move back you still have the catch 22 that prices have to line up with a cash strapped consumers wallet. Prices probably will firm up in the city centers but its all agianst and overall relative decline caused by lack of cash.

So just to finish we are on the top of a slippery slope right now or at the tip of and iceberg as we enter into next year we will see the economy begin to take on the sort of dynamics I've outlined above and it does not include demand destruction resulting in low oil prices for any long period of time. Demand suppression can and will induce variability in prices but at time goes on these will lessen.

So, you are asserting that if world net oil exports fell to 40 mbpd, but if the demand was only for 20 mbpd, oil prices would rise?

...the volume of product that consumers are both willing and able to buy.

I thought that was "quantity demanded", which normally equals "quantity supplied" (less minor amounts going into strategic reserve and trivial amounts going into inventory.)

And the difference between "demand" and "quantity demanded" is?

Westexas, the difference is huge.

Quantity demanded always must equal quantity supplied; it is a single point on a supply and demand graph, where the demand and supply curves intersect.

On the other hand, demand is a whole curve (normally donward sloping) that shows a whole array of quantities vs. prices. Similarly, supply is a the whole curve that shows a whole array of quantities supplied at various prices; it normally slopes upward.

These usages are standard in economics (See any economics textbook.), and we could save a lot of confusion by adhering to these established usages of words.

The distinction is easy to see in graphs, but noneconomists frequently confuse "demand" and "quantity demanded"--often incorrectly using them as synonyms.

Of course, as we know classical economists have problems with Peak Oil arguments. However, the Texas and North Sea declines have shown a correlation between higher oil prices and lower production. Texas especially had the following pattern: Higher Oil Prices + Increased Drilling = Lower Crude Oil Production. Even with a year over year increase in production, this is the same pattern that we have seen for three years in Saudi Arabia, relative to their 2005 production rate.

In any case, back to the original point. Isn't it incorrect to predict increasing demand versus falling supply? If the supply is not there, how can there be a demand for what is not available?

demand is a whole curve (normally donward sloping) that shows a whole array of quantities vs. prices. Similarly, supply is a the whole curve that shows a whole array of quantities supplied at various prices; it normally slopes upward.

These usages are standard in economics (See any economics textbook.), and we could save a lot of confusion by adhering to these established usages of words.

Isn't it incorrect to predict increasing demand versus falling supply?

No. Think of it this way: "demand" is not "demand at one price point", it's "demand as a function of price".

  • "Increasing demand" means you shift the demand curve upwards. At any fixed price, more will be demanded.
  • "Decreasing supply" means you shift the supply curve downwards. At any fixed price, less will be supplied.

Where those two curves intersect is the actual amount produced (Y axis) at the actual price paid (X axis). Check out this introduction; skip to the bottom where they show graphs for "Change in demand for beer" and "Change in supply of beer" to see how changing supply or demand works.

Apparently some Peak Oilers have problems with economic arguments!

Peak oilers rightly ridicule most conventional economics. The fundamental assumptions of modern economics go back to the nineteenth and even the eighteenth century; the world has changed to require an economics of decline and eventual stability, rather than an economics of growth. Nevertheless, when discussing economic ideas such as supply and demand we should use correct terminology.

One idea in conventional economics that I seldom see Peak Oilers discussing at length is that an end to real GDP growth means an increase in long-term unemployment. Of course real GDP growth will not and cannot go on forever, and I think one of the main results of declining oil production is going to be a huge increase in unemployment over the next twenty years. I'd like to see dialogues on how to deal with chronic mass unemployment on TOD.

To me, economic theory is fairly neutral, it's a tool. It's engaged to promote growth, but I don't see where the theory necessitates growth. The economists who suggest that theory promises infinite growth deserve ridicule.

Interesting point about unemployment. I have difficulty imagining what a zero growth society would look like.

I submit that a more accurate phrasing would be

"Unfulfilled desire will rise inexorably while supply contracts"

Of course, a global credit meltdown has had an effect on demand--as have higher oil prices as importers bid for declining oil exports.

In any case, the market was anticipating a continued increase in net oil exports of probably 2% or so per year, when in fact we saw back to back declines of -1.1%/year and -2.2%/year for 2006 and 2007 respectively.

Strictly speaking, I predicted (and am predicting) a series of doublings, but I said that I had no way of predicting what the time period would be between the doublings.

Which is what makes this prediction completely useless. Over time the price of everything can be looked at a series of doublings, a can of coke, a bottle of aspirin, over time the price of all these things have doubled.

If you could enlighten us as to how one models how prices respond to the interaction between demand and a long term accelerating decline in net oil exports--with a global credit meltdown thrown in for added fun--perhaps we could do a better job of predicting oil prices.

That's the thing, you really can't predict it. Like predicting the weather, there are too many variables to ever have any consistency in these predictions.

Which is my point. I think that we can do a plausible job predicting: (1) a reasonable range for production using the logistic (HL) method and (2) a reasonable range for consumption using a Monte Carlo Analysis, which gives us a low case, middle case and high case for remaining net oil exports from a group of key net oil exporters.

In my opinion, these mathematical models suggest a long term accelerating net export decline rate, which in turn suggests that higher oil prices will be needed to balance supply & demand. But as to what oil prices will be in a specific time frame, especially in the context of a credit crisis--there are just too many variables.

That really doesn't make sense. You admit that there are too many variables to make a decent prediction. How can you then claim that your own predictions are "plausible"? They are as much a wild guess as anyone else's.

Usually at this point you pass the buck to Khebab and how dare we question him, or provide some other brush off.

I really don't know if a prediction can be made ... BUT ... If I wanted to know I would start by researching someones work in the area of modeling ... like ... oh maybe Taleb ?

Anti – so how much about modeling is in your background ?

I think this chart that Ken Deffeyes put up awhile ago is very telling:

We've hit the "wall" there with regards to world production at around 27 bbpy and here on out it's likely that we can expect only small increases to offset consistent decreases. One consequence of being on that wall is that there can be higher prices, but also there is a huge variability in price for essentially zero change in production. The slope of that line at ~27 bbpy looks to be nearly vertical, which means you can't really predict oil prices based on production any more. The price could be anywhere from ~$40/barrel to some maximum that we may or may not have seen yet just for that one level of production. It kind of looks like we're in a chaotic system where negative and positive feedback effects like small fluctuations in demand or other things like housing market collapses can lead to wildly fluctuating price and that this doesn't appear to be predictable using any easy metric.

As far as I know, no peak oiler of any status predicted that US consumption would decline substantially before a drop off in world production. And yet, that is exactly what we have.

Former TOD staff Ilargi and Stoneleigh predicted exactly that. Read them over at The Automatic Earth.

So did Ken Deffeyes. He pointed out that extreme volatility is what you get when a resource is scarce.

Where did Deffeyes predict a substantial decline in US consumption before an clear dropoff in world production?

I'd bet heavily against anybody being able to produce such a quote.

In fact Deffeyes has been long oil for some time and complained publicly about his losses.

I'm away from home right now so don't have access to my copy of his book, where he explained the model in more depth, but a brief Google shows Deffeyes has long predicted volatility in price, which implies volatility in demand.

The Impending Oil Shortage

Professor Kenneth Deffeyes predicts that world oil production will peak on Thanksgiving Day 2005. Present high prices reflect an oil supply that is not growing, as well as rapidly increasing demand in China and India. The supply chain is also highly vulnerable to disasters such as Hurricane Katrina. Instead of a simple rise to a new "equilibrium" price, enormous price volatility is to be expected.

I looked but I can't find the part where he discusses US oil consumption declining very substantially before or concurrent to a peak in world oil production.

As you may have noticed, "volatility" is a bit of weasel word.

I don't know. How many people were predicting a stock market crash?

A nuclear war destroying all our major cities would also cause US oil consumption to drop a lot, but no one was predicting it, nor does it prove we don't have an oil production problem.

Au contraire. Matt Savinar of Life After the Oil Crash is predicting a nuclear war. He is using radiation fallout maps to choose his peak oil hideaway.

Okay, how about this one ca. 2005:

But the kinds of things that I am predicting are increased volatility in price because when the demand on the system approaches the capacity of the system little things mean a lot; a SARS scare that cuts back on air transport, an unusually warm winter in the American northeast will cut back on the demand for oil and the price falls much more than just that change in demand. On the other hand, an abnormally cold winter and suddenly the price shoots up.

Obviously, he's talking about at or near the peak, and in the U.S.

Another example...in the beginning of his first peak oil book, Hubbert's Peak, he describes what he expects peak oil to be like. He says it will be like the '70s gas crisis, with rationing by price as well as by inconvenience (long lines). He describes how miserable it was as a professor at Princeton, because his salary did not keep up with the cost of living...then pointed out that Ivory tower residents like himself likely had it a lot easier than other people.

Clearly, he was expecting demand to drop, even in the US.

And so were most peak oilers. In 2005, one of the PeakOil.com staff members started a thread called The Coming Peak Oil Grand Depression, with stories from the Great Depression and such. People would turn their car engines off while driving downhill, to save gas. Obviously, many peak oilers were expecting this economic slump, and the demand destruction that went along with it. Heck, Simmons, Ruppert, etc., are the ones who brought us the term "demand destruction."

Nobody thought American consumption could not fall. There were many who thought consumption could not fall without significant economic pain...which appears to be the situation we have now.

Can anybody dig up a quotation?

....say 2006 or 2007 vintage.

[But I don't think they count as peak oilers of status in any event]

You might be expecting a little much from "Peak Oilers"-where they also expected to have predicted the rise of Hank Paulson to Emperor of America?

I thought we were making "Joe the Plumber" our next emperor. Did I miss the vote?

He's the second emperor... You forget, Emperor Norton was the first.

(And for giggles, Emperor Norton did create currency, just like Emperor Paulson is... Just on a smaller scale. And both are probably crazy.)


I had heard about Emperor Norton before, but had never delved into the actual details until reading the link you provided.

In accordance with his self-appointed role of emperor, Norton issued numerous decrees on matters of the state. After assuming absolute control over the country, he saw no further need for a legislature, and on October 12, 1859, he issued a decree that formally "dissolved" the United States Congress. In the decree, Norton observed:

“ ...fraud and corruption prevent a fair and proper expression of the public voice; that open violation of the laws are constantly occurring, caused by mobs, parties, factions and undue influence of political sects; that the citizen has not that protection of person and property which he is entitled.

Apparently he was quite prescient and observant, which of course resulted in his being labeled "crazy".

Well, I'm not a peak oiler of 'status', but I have been talking about demand side from the start. When asked a similar question last month, here is a link to my reply. You only need look at the first one from my volatility post of 12/26/2007, when oil was $95.90:

My personal view is that oil continues to rally but the credit crunch/recession causes demand 'management' to overtake depletion as the year progresses. I see a high of $134 and a low of $79

There were many comments that predated this one but my slight arrogance is offset by more dominant laziness. Peruse at will. I also predicted this would happen in all 3 of my interviews on Global Public Media with Jason Bradford, and specifically asked Red Cavaney twice (once last year, once this spring) what the impact of credit crisis would be on US oil production.

I knew what pattern was likely but until I saw the knucklehead policy moves that caused/are causing a mass exodus from the hedge fund community, I didn't expect oil to get quite this low. Keep in mind these people aren't selling because they are bearish, they are selling because they are being forced to. And the normal other side of the trade has just walked away due to lack of confidence in system/fear of new rule changes. And it continues...

In any case, my interest in this whole circus from the beginning was not to argue about 1 million barrels here or there but to change the way we define 'success' in our everyday life - for whether the peak is 2005 or 2015, for all the animals, ecosystems, children of the world, it makes little difference other than a little more time of ignorance. Of course, the reason YOU care, is there is seemingly an autocorrelation of belief with someone who was 'right' like a 'hot hand'. When someone sends out an email with a recommendation, there is often a prelude: 'this is what such and such predicts...he/she nailed the last 2 stock market selloffs'....implying that it was non-random and some follow through vestigial insight will remain. Elaine Garzarelli at Shearson Lehman after 1987 a great example.

A final thought George - at least many "Peak Oilers", of any status, write under and make predictions under their real names. Go on datamungering...In any case, I suspect more than a single digit % of Peak Oilers will in 5 years be smug in the fact 'they were right' but still have little food in the pantry and no back up electricity.

I'd be a bum on the street with a tin cup if the markets were always efficient.

--Warren Buffet

You are being too modest. :)

On the radio a year ago you said could go as low as $60!

I linked it in comment above.

This is how I introduced the Oct. 2007 interview with Nate, found here:

Jason Bradford: Good morning to you. Thanks for coming back on the Reality Report, and I'm going to start of by kind of giving people a summary of our show. It's a complex topic and I just want to go over what we're going to talk about, and then we'll talk about it. So the basic premise for our show is that the US and global economy will contract in the near future and we are discussing two main reasons for this. The first is a crisis of credit as a result of huge debt levels in the US, many of which are looking poor, including mortgage backed securities linked to declining real estate markets. Now, being bitten by defaults following cheap credit, banks will develop more stringent lending criteria and likely require higher interest rates on loans needed to attract investment capital. At the same time, the Federal Reserve will probably work very hard to ease credit by lowering the interest rates it controls such as the overnight lending rate of banks. However, lowering the cost of money by the fed will probably lead to higher inflation through weakening of the US dollar, which may also put a brake on the US economy since the US has such a large negative trade balance. Thus the Feds hands is somewhat tied compared to other historical crisis; furthermore, as banks fold, solvent banks will be reluctant to take on the risk of debts from banks needing capital, effectively forcing cutback in the number of loans being made. In summary, there is a real possibility of loss of market liquidity either by deflation or an expanding money supply with inflation rapidly eating away its purchasing power.

Ok, so that's the first part of this. Now the second reason for an economic slowdown has to do with higher energy costs. It looks as though oil has peaked and so the price isn't likely to decline significantly absent some economic contraction. So historically economic growth is highly correlated with energy consumption because energy is literally the motive force behind economic activity, such as mining, manufacturing, transportation, residential and commercial heating and cooling, and food production. Now while efficiency gains have cut down on the energy required per unit of economic activity, there is no precedent for an economy responding to energy contraction in any other way besides economic contraction. The rate at which prices increase or shortages develop is critically important. Slow and steady price increases that are foreseeable will be more manageable than rapid and unforeseen increases in shortages. In terms of the global economy, it looks as though current energy price increases have been unexpected by governments and businesses. Until recently, for example, the International Energy Agency and the Energy Information Administration of the US Department of Energy were anticipating ample supplies and low prices for oil and natural gas. Ok, now when the economy does contract, demand for oil may reduce. If demand reduction is greater than the depletion rate of oil supplies, prices will actually decline. Now this cheaper oil will signal to the market that alternatives to oil are not currently needed. On top of this, a contracting economy is a difficult environment in which to raise large sums of capital for sustainable alternatives. If you really don't understand what I just said folks, stay tuned. Nate Hagens is here to put this all in perspective for us, develop some possible scenarios, discuss the implications and consider what might be done about it. All in less than an hour. Amazing Nate, good luck.

I'd say that Robert Rapier pretty much indicated as much in his "Peak Lite Revisited" article from 16 Jul 2007. Robert stated in the first line of the article that he didn't believe that Peak Oil had yet occurred, an important consideration when reading the following quote (emphasis in italcs mine):

In the event of a worldwide peak in oil production, there won't be enough oil to go around. Poorer countries will find themselves priced out of the market at various price points. The situation will be the same for Peak Lite, and this is what we have observed in the past 2-3 years. Many developed countries have seen their oil consumption rise over the past 2 years, even though world oil production has been slightly negative. This means that demand destruction is occurring in some locations. I expect this trend to continue.

At the point that developed countries are bidding against each other for remaining supplies, the price of crude is likely to go much higher. Until now, demand has been moderated as poor countries in Africa and Asia are increasingly unable to afford $70/bbl oil. This price point is unlikely to significantly alter the demands of the United States, Europe, or Japan, which means that at some point of capacity erosion we could see oil prices quickly shoot past $100/bbl.

I suggest that the "...see oil prices quickly shoot past $100/bbl" stage is what happened in the Summer 2008. Then, significant demand destruction hit the OECD (especially the USA). Remember, as WT and others have pointed out, there certainly has been "capacity erosion," especially for importing countries, in terms of declining net exports.

Indeed, I recommend that TODers reread Robert's article. Robert made some predictions that appear to have been very prescient now that 2009 is right on the doorstep, such as:

OPEC has gradually increased the price that they are satisfied with as they have seen that demand has remained strong at $50, $60, and finally $70/bbl oil. I expect them to continue to push this limit. By 2009, they may be suggesting $90/bbl as the price they are comfortable with.



Ed: Fixed link.

This price point is unlikely to significantly alter the demands of the United States, Europe, or Japan, which means that at some point of capacity erosion we could see oil prices quickly shoot past $100/bbl.

I suggest that the "...see oil prices quickly shoot past $100/bbl" stage is what happened in the Summer 2008. Then, significant demand destruction hit the OECD (especially the USA).

OECD and USA demand was down well before prices got near $100/bbl. US and OECD demand peaked in 2005, and by the second half of 2007 was already averaging -200/-300Kb/d YOY. Significant demand destruction certainly occurred before this summer, as the first six months of this year saw US/OECD demand down 900/1100Kb/d YOY, and -1000/-2000Kb/d vs. 2005 levels. (Note that this is from the IPM dataset, which doesn't synch very well with the "Product Supplied" dataset.)

Not only was demand sharply falling, but supply was substantially increasing; both the IEA and EIA are showing an increase in oil supply (from OPEC) of about 1500Kb/d in 2008 from 2007.

From the looks of it, US/OECD demand decreased substantially (~500Kb/d) over the summer while OPEC supply increased substantially (~1000Kb/d) starting in June. Given that, the fall in prices is perhaps less surprising.


Thanks for the clarifications and additional information. Quite useful stuff!



This is from Nate Hagens, stated live on my radio show in Oct. 2007.

"Nate Hagens: Marginal barrel. Right now we've used about a trillion barrels of oil and there's about a trillion left, so that second trillion is much harder to find, refine, etc. But it doesn't matter how many are left five years from now, ten years from now, because next month is all we care about. There's plenty of oil next month, in fact, there's more than enough to supply and there's just stuff sitting around that has nowhere to be stored; the oil price could go down to $50 a barrel because we have no mechanism of really storing it. If demand destruction due to a depression or what-have-you causes the demand for driving, vacations, etc to go down more than the supply of oil is going down, the oil prices plummet -- even though they're scarce."


Nate really nailed it!

I've been following peak oil issues for about 2 years now. Caveats of the sort that oil prices could collapse in the event of either a sharp drop in demand or a sharp rise in production were so commonplace that they've just become part of my world view. I've heard it from Boone Pickens. I've heard it from Jim Rodgers. And I've read it often in ToD.

I'm not going to try to find the quotes, because it seems to me Datamunger is just trying to manufacture an argument for the sake of having an argument. Datamunger is correct: no one (very few?) predicted that the economic chaos would come on so fast that demand would decline as fast as it did. So what? What's the point of making that point? More significantly, what's the point of repeatedly trying to rub people's nose in it?

I would also add that no one really has a clue what "real" supply and "real" demand are right now. Just last week a couple oil refiners were begging the government for oil from the SPR. If there's so much oil floating around, why wouldn't they just buy it?

People are having trouble getting letters of credit to ship goods, presumably including oil. Refiners are having trouble getting credit to purchase oil. We had a pipeline shut down and widespread shortages of gasoline in the SE. We have hedge funds imploding and the two remaining investment banks have to get down from 35-1 leverage to 12-1. You're trying to make elevation measurements in the middle of an earthquake.

I propose, before anyone writes any more self-congratulatory or accusatory posts about oil supply and demand, that we let the financial and physical oil markets settle down a bit and see how fast the global economy really is slowing, how much demand has really dropped, and how much oil is really being produced.

I'm not going to try to find the quotes, because it seems to me Datamunger is just trying to manufacture an argument for the sake of having an argument.

Not really. My original comment was mostly about how demand can behave.

Consumption can fall very quickly. This is more than a caveat. It's not some exotic fact. It's a statement about an aspect of oil consumption in the US that people need to know.

Why? Because it puts a brake on prices. Thus stratospheric oil prices (>$200) are unlikely and, if they do occur, are unlikely to last.

I think that's very important for household planning. For the next decade, you don't need to plan for more than $8 gasoline at the most. That's the size of the problem (that relates directly to oil usage).

Many people what to blow it into a much greater issue and let their imaginations run wild. But the more they talk up the possibility of a depression, they have to realize they are talking down the price of oil.

Consumption can fall very quickly

Yes, no and maybe.

It depends on the time period to adjust to new price levels (we have had almost a century to adjust to low oil prices). "Quickly" implies immediate demand response without any structural changes (new urban form or even new cars & SUVs).

It depends on how big a change. "Observed" is that $4/gallon reduces gasoline demand by -4% to -5% and overall oil use by -8%.

But what if demand needs to be reduced by -15% ? -20% ? -25% ? (Islamic Republic of Arabia or some idiot bombs Iran or US $ is no longer a reserve currency ?)

Given the large number of "Drive or Starve" Americans, people that not only cannot work but cannot even put food on their table without burning oil, the prices required are likely quite high.

I fear, and expect, that -5% and -8% respectively are the "easy savings", the high elasticity of demand part of the curve. The next -5% and -8% are going to be more painful.


But most miles driven are not for commuting. So I see that a lot of people can cut back drastically on driving if they had to.


However, the market definitely looks further into the future than next month. In fact, producers have to plan ahead by several years. Consuming nations also plan ahead. There would be no such thing as the SPR if that were not the case.

But he did indeed state explicitly that a drop in consumption could outpace supply declines, driving down prices.

More MSM news that could come straight from THE ONION-Paulson says that "initially" HEDGE FUNDS will not be getting TAXPAYER MONEY http://www.bloomberg.com/apps/news?pid=20601087&sid=aSyZWj_aAwMQ&refer=home

I thought this was rather telling:

US hedge funds suffer heavy withdrawals

The chief executive of a leading alternative investment manager said he expected the hedge fund industry to shrink by 50 per cent in coming months – with half the decline coming from withdrawals and half coming from investment losses.


I wonder how Buffetts bet is coming along with all that's going on?


OPEC is holding their meeting early. I guess the "emergency meeting" is even more of an emergency than they thought. It will now be Oct. 24 instead of Nov. 18.

In regard to the New Scientist link, economic growth is not a problem, it is rather a prerequisite for creating means to make the environment cleaner. Making everyone poorer is not the answer to help the environment.

Remember, what is usually loosely referred to as "growth" is economic growth. Economic growth is the change in value of all produced goods and services over a specified time frame. Hence, economic growth does not necessarily mean more goods and services produced, it could just mean that the combined total value of the goods and services produced is increased.

...it could just mean that the combined total value of the goods and services produced is increased.

Oh I get it. You must mean the speculative value of what is produced or consumed. Like derivatives...

Reminds me of Stephen Moore and The Club for Growth

Let's have a definition of "growth". First, it doesn't exist as we think it does, in the creating something from nothing. Second, this is because all "growth" is the appropriation or usurption of energy and matter from someplace else. In that "someplace else", the matter and energy are depleted.

The more we "grow", the more we take.

No growth is bad. Some growth is good. Attempting perpetual growth is ignorance or insanity.

Now, what is this thing called "value" that you bandy about? Suppose you have a simple human economy that needs wood, apples, and cattle which provide shelter, food, and clothing. 10 cords of wood trades for 50 bushels of apples trades for one cow. How does the "value" of all these things increase simultaneously?

This is a "boundary condition" issue.

When you define the boundary of the "economy" as that which is monetarily recognized by humans today, then growth can be appealing because it gives the illusion that "we have more" and are therefore richer, not poorer.

When you define the boundary of the economy as the Earth system, then growth can be "uneconomic" because it causes more harm to the life support system than it provides in benefits.

Now, those who make a profit by doing something that "grows" the economy do their best to make sure the boundary conditions are defined as narrowly as possible. This is called deregulation.

On the other hand, those who are harmed, usually the public, try to broaden the boundary by suggesting that air, water, species, etc. are important and shouldn't be harmed. This is called regulation.

Jason - You seem to have a handle on text-book economics. Answer me this question:

From an economists point of view, what is the value of The Seventh Generation?

Seven generations sustainability is an ecological concept that admonishes the current generation of humans to be working for the benefit of the seventh generation into the future.

"In every deliberation we must consider the impact on the seventh generation... even if it requires having skin as thick as the bark of a pine."

- Great Law of the Iroquois

Neoclassical economists, as in the professor I listened to at UC Davis, would say not to worry about the 7th generation. They would say maximize growth in the economy today because that will create the technology and capacity to solve the problems of the future.

Personally, I consider this a load of humanure. No, actually, humanure would be quite valuable. I consider this a pile of Credit Default Swaps.

The problem is that the religion of perpetual growth requires that the percentage of growth for a given period always has to outpace the previous period. If some business grows 3% for one year and growth falls to 2% for the following year this is immediately paraded around as a bad "economic indicator" - never mind that the business is still growing - just not as fast. Yet this is always presented as a negative statistic - with the implicit assumption that of course it is possible for the rate of growth to just keep increasing - straight to the moon.

To paraphrase Westexas - the fact that those who suggest that growth can continue ever upwards - 3%, 4%, 5% year after year - are regarded as the rational, level-headed analysts and those that point out the obvious fact that there is NO possible way the rate of growth can continually increase in a (essentially) finite system are labeled as "radicals", "enviro-wackjobs", "delusional" or worse, simply points out the level of insanity and brainwashing we've reached in our society.

Perpetual growth in a restricted sub-system can continue at the expense of the larger system.

American Capitalism was able, may still be able, to perpetually grow -- but for an increasingly restricted group, and at the expense of vast slums and wastelands.

It's another boundary problem issue. Define "Capitalism" as only applying to the world of money, and render Lagos and East Chicago and vast tracts of Los Angeles invisible.

However, the current situation may make even the illusion of growth impossible to sustain. We'll see how smart Bernanke and his collegues really are, and probably very soon.

TPTB can prolong the 'perpetual growth' paradigm
as long as they periodically reset the 'clock' via
market crashes, recessions, depressions ..

Triff ..

Anyone have an update on the impact of frozen letters of credit on grain and other shipments?

Energy Debate: McCain and Obama sparred over energy. Although it was mostly a re-hash of prior positions Obama clearly came off as more honest when he said:

America has 3% of the worlds' Oil reserves yet consumes 25% of the worlds energy. This is a problem we're not going to be able to drill our way out of.

Can't argue with that.

Neither candidate offered an alternative to the "economic growth paradigm", however for those of us who are looking at economic hard times, "redistribution" sounded like a nice proposal. After all if the lowly taxpayer has to bail out a system that is gamed for the top 5% I think the taxpayer should have a seat at that table.

The taxpayers who pay most of the money that funds the US government are not lowly. The bottom half get more than they pay. Only the upper quarter or so pay more than they receive in benefits.

In a toplink about "slowdown" in China:

Even China isn’t immune to the world’s economic hangover. The country’s export growth in September is 4.2% less than for all of 2007 and 11.2% less for exports to the U.S., specifically, according to China’s customs bureau. In fact, China will see its economic growth slowed by .3% in 2008, compared to a 2.6% jump in growth in 2007.

I'm having a hard time deciphering that gibberish: was the export in 2008 higher or lower than in 2007? The prevailing paradigm of "growth" is so pervasive that they may be calling a decline "less growth" or "slowed growth" because the word "decline" is taboo? Or, they may be calling slower (but still positive) growth a "slowdown" because growth is supposed to accelerate too, as if steady exponential growth is not enough?

Glad to see that in contrast the New Scientist (a different toplink) is willing to come out against "the god of growth".

vt -- from what I've seen recently it's more than gibberish: it's deceiving spin. As I recall China 2007 growth was around 12%. So being down around 4% would mean China has a current growth of about 8%. And that matches the latest numbers I've seen. So implying that China is some how suffering from slow growth is absurd. Based upon comments from a number of economist China had been trying to reduce growth from those very high levels for fear of an overly expanding economy.

I couldn't open the link so perhaps I'm interpreting the perceived tone incorrectly.

Where is Matthew Simmons? We are back down to 10 cents per cup again!!!!!!
We are also back down below 2 Yergins!!!!!!
Breakout the Hummers again!!!!!!

It's interesting that oil prices started falling when Yergin stopped predicting lower prices. Who knew that one man wielded such vast power?

It is uncanny-the minute he got bullish the price started to collapse.

New investment strategy? The Anti-Yergin

In my opinion the falling price has nothing to do with Yergin or peak oil. It is related to the once fashionable and apparently still valid formula P = M x V where P is price, M is money supply and V is velocity. As the velocity of money flow tends toward zero, price will tend in the same direction.

The problem with this is that even though V is approaching 0, M (the money supply) is increasing rapidly. You will end up with (something like) infinity multiplied by (something like) 0. Any mathemeticians here know the result of infinity times zero?

Unpredictability, like the inside of a black hole.

Personally I have real doubts that the money supply is currently increasing.

I've heard it said that we are not experiencing deflation just deleveraging. But I doubt that's true. Every time someone can't met a margin call or has there house foreclosed that's debt being paid of which is a decrease of the money supply i.e. true deflation.

Velocity can change overnight. It often takes longer to increase the money supply.
--Zero times any number is zero. One could argue that infinity is not a number??

RW ( who doesn't claim to be an economist, a geologist or a mathematician)

Assuming that the modeling actually applies over the range that it's being applied, which is always the important thing when using mathematics, what matters is the way the various components tend to zero/infinity, and you can get various limits depending on the relative "strengths" of the various components going to their limits. But I suspect that even in a recession there's a positive lower limit on the velocity of money and that when that gets hit some people are so poor that they die off and the remaining people now have more money to spend which they spend at this lower limit until things resolve one way or another.

robert wilson -

Trying to do normal arithmetical operations with zeros and infinite can get rather sticky. Infinity is indeed not a number, but rather a 'state', or a type of set.


- There can be no argument that there are twice as many odd + even integers as there are even integers (e.g., ther are 10 integers in the interval from 1 through 10, but only 5 odd ones).

- There are an infinite number of odd + even integers, and also an infinite number of only even integers, yet we know that there are twice as many of the former as there are of the latter.

Thus, one infinite set of numbers (i.e., odd + even integers) will be, at any point in the counting, twice as large as the other set of infinite numbers (even integers only). This gets into the concept of 'ordinals' of infinities. Some infinite sets are larger than other infinite sets. Yet both are still infinite.

So, 'infinity' cannot be treated as a number. It took a long time for this concept to be take hold, and the question of 'what is an infinite number?' has been one of the thornier difficulties in mathematics for centuries.

Some of the seemingly simple question are the most difficult to deal with.

"There can be no argument that there are twice as many odd + even integers as there are even integers (e.g., ther are 10 integers in the interval from 1 through 10, but only 5 odd ones)." This is rather dogmatic in view of the fact that mathematicians universally consider that the cardinality of all integers equals the cardinality of just the even ones. But given the freedom to mean by "many" whatever you want you could argue on.

"So, 'infinity' cannot be treated as a number. It took a long time for this concept to be take hold, and the question of 'what is an infinite number?'" For the longer period of time, infinities were suspect, then for a short period of non-rigor they were thrown around with abandon.

Now something that blows my mind is that there is no end of higher orders of infinity. It's not that statement that upsets me, but the proof which is very simple yet leaves one feeling one has been tricked.

You forgot to add...quickly.

Iceland can avoid shortages, needs funds - importers

REYKJAVIK (Reuters) - Iceland has food stocks for about 3 to 5 weeks, but needs quickly to restore a proper foreign exchange market so importers can get back to normal business and avoid shortages, importers said on Wednesday.

Since crisis broke out on the north Atlantic island of 300,000 people, involving the government taking over the top three banks, suppliers to Iceland have cut credit to importers. Some have also demanded pre-payment for goods.

Though the central bank has said it has foreign reserves for eight to nine months of food, importers said a cash injection from abroad was the only solution to avoid shortages.

Two saving graces for Iceland.

The Republic of Iceland paid off their national debt a couple of years ago. This makes them look credit worthy when they ask for loans again.

They have a diverse and generally strong group of exports, with fish and aluminum being the two largest exports; but prosthetic limbs (best in the world, Iraq has created more business), genetic information (deCode), software, children's programming, etc. as well.

Best Hopes for Iceland,


Make Them Pay: Why aren't the big fish on the hook for the financial crash?

To a far greater extent than the public realizes, fraudulently inflated home values, wholly invented incomes and other illegal schemes figured in a huge percentage of subprime loans that were turned into securities during the boom—possibly at least 50 percent nationwide, according to county and state officials as well as real-estate experts interviewed around the country. Some experts, like Anthony Accetta, a former federal prosecutor in New York, contend that many big Wall Street players know far more than they are admitting about the extent of this fraud. For years before the subprime market collapsed, he says, they got in the habit of quietly "swapping" defaulted loans for good ones, for favored investors—and selling securities that are not as good as you say they are is, on its face, securities fraud. "The criminality lies in the fact that the investment bank now knows that a substantial portion of mortgages are going to go south. Putting them into securities without disclosing the high probability of default is aiding and abetting mortgage fraud," says Accetta.

The middlemen did make money from brokering the sale of overinflated assets, but the real bandits are those that sold during the inflation of the bubble. That's where the money went to, but people just want to believe that those gains were fair and square.

If a bank mistakenly deposits $1M in your account and you spend it, they arrest you for theft and/or fraud. Everybody feel free to turn themselves in.

Excellent story Leanan. And I can verify that the SEC can be tenacious when they choose to be. For decades they've prosecuted one oil promoter after another. Typical story: promoter A sells an interest in a drilling project to investor B. A drills a dry hole and B runs to the SEC to complain he was mislead about the risk (which was almost always true). The promoters were usually nailed by charging them with selling unregistered securities. But the center point of the cases was the fact that B was an unsophisticated investor who was not clearly shown the risk of failure.

Maybe we’ll see the same level of effort against the latest band of con men but I have my doubts.

Chavez says "Comrade Bush" turns left in crisis

CARACAS (Reuters) - Socialist Venezuelan President Hugo Chavez mocked George W. Bush as a "comrade" on Wednesday, saying the U.S. president was a hard-line leftist for his government's intervention of major private banks in the U.S. financial crisis.

Chavez, who calls capitalism an evil and ex-Cuban leader Fidel Castro his mentor, ridiculed Bush for his plan for the federal government to take equity in American banks despite the U.S. right-wing's criticism of Venezuelan nationalizations.

"Bush is to the left of me now," Chavez told an audience of international intellectuals debating the benefits of socialism. "Comrade Bush announced he will buy shares in private banks."

Thanks Leanan...always good to start a Friday with a chuckle.

Obama to declare CO2 a dangerous pollutant:


I think he has overlooked Di-Hydrogen Oxide as well. This stuff is even worse and he should be told.

Don't get me started on this one...

Let's see what the world would be like with no CO2 in the atmosphere! CO2 is as crucial as water to life on the planet. When we pump oil out of the ground and burn it we are taking a toxic substance that kills everything it touches and converting it into a life giving compound and energy. If we did not pump it out, it would eventually make its way to the surface anyway and either pollute the ocean or land.

I guess I did get started on it... sorry

Oh shush. :) It's well known that all pollutants are fine as long as the concentration is low enough. E.g., arsenic is fine too as long as you don't get above the EPA maximum contaminant level for drinking water at 10 parts per billion. As long as you lower than that, you're probably okay, but more than that and it's toxic. Something like Polonium however is a lethal dose just about as soon as you can weight it. Carbon dioxide is only dangerous in very large quantities, but it is dangerous. (Incidentally, there are bans against building houses in flood plains, which falls under the dihydrogen oxide toxicity problem.)

Obama isn't taking a unique stance here. A superior court judge this past July ruled that a permit to build a coal-fired power plant was invalid because there was no plan to deal with CO2 as a pollutant (link). No word yet on if this ruling will stand, but based on recent rulings on regulating carbon emissions my guess is the supreme court will look favorably on it treating CO2 as a pollutant.

Carbon dioxide is not toxic in any quantity...It's the lack of oxygen that would kill us. Based on Obama's logic, you could say any substance is toxic then.

Any substance is toxic in large enough doses! Go read the material safety data sheet for sodium chloride (table salt).

Here are the lethal doses (LD50 = dose at which 50% probability of death):

Draize test, rabbit, eye: 100 mg Mild;
Draize test, rabbit, eye: 100 mg/24H Moderate;
Draize test, rabbit, eye: 10 mg Moderate;
Draize test, rabbit, skin: 50 mg/24H Mild;
Draize test, rabbit, skin: 500 mg/24H Mild;
Inhalation, rat: LC50 = >42 gm/m3/1H;
Oral, mouse: LD50 = 4 gm/kg;
Oral, rat: LD50 = 3 gm/kg;
Skin, rabbit: LD50 = >10 gm/kg;

In any case, Obama never said it was toxic, he said it's a pollutant. Many pollutants are toxic, but not always so, you could say the same thing about SO2 emissions, but we regulate those as well because of the side effects.

Carbon dioxide is not toxic in any quantity...It's the lack of oxygen that would kill us.

That is absolutely false.


A moderate concentration ~5% causes breathing difficulties, an increase in heart rate and possible headaches. At 20% loss of concentration, and then unconsciousness will occur in less than a minute.

This is not simply deprivation of oxygen. If you simply (further) diluted air with the same amount of nitrogen, you would notice it but you would not die.

Oxygen is actually toxic when the concentration gets high enough because it is highly reactive and tends to "oxidize" things, including living tissues.

And when the temperature gets high, say a soybean field in Illinois in August, oxygen is toxic to plants causing what is called photorespiration in which oxygen competitively binds with co2.

So, too much co2 warms the Earth and increases the toxicity of oxygen to the plants that remove the excess co2 from the air.

As Paracelsus said, "The poison is in the dose."

Well, middle-west, if you like CO2 so much there's plenty of it on Venus..., although at over 460 degrees Celsius you'd burn into an ash in less than a minute.

And, I'm sure that places like sub-sahara Africa would agree that CO2 is harmless... I mean, come on, all that famine, that's OK... And the sea level rise due to Antarctic melt- who cares if millions become homeless?

But, for me, I love C2H5OH as a refreshing drink. No greenhouse warming. (Kudos to any chemistry student out there and knows wat this is.)

The extreme heat on Venus is NOT due to CO2. It is due to being closer to the sun and high concentrations of SO2.

Mars' atmosphere is also CO2 dominant - it's pretty cold there!

Mercury is closer than Venus, but still colder (no CO2 on Mercury).

Mars has about 1% the atmosphere of Earth ( http://en.wikipedia.org/wiki/Mars#Atmosphere ) and is 1.5 time further from the sun than earth, so that won;t have much greenhouse anything.

We can agree to disagree. But my real point is that I wish we could focus on REAL polutants that actually cause harm (I don't buy global warming...) like oxides of Sulfur and Nitrogen as well as ozone. These substances actually cause real environmental harm, but instead everybody is obsesing about CO2 for some reason.

All this attention on Carbon as the thing that is going to kill all of us takes away from efforts to reduce actual polutants that cause harm.

I don't buy global warming

Why does that not surprise me? Perhaps if you understood the science of why Venus is so hot, you would be a little more receptive to the science of global warming.

We can agree to disagree

That is not "Standard Operating Procedure" on TOD.

So far, no one has really engaged the meat grinder with you. Perhaps because you bring an attitude with few facts.

Best Hopes for Technically Supported Judgments,



Without CO2, Venus would still be hot, but over 100 C cooler.

Greater insolation on highly reflective surface without greenhouse effect gave some hope of habitability at poles before first spacecraft.


Okay, so it would still be 360 deg C. I'll rephrase to say SO2 is the dominant greenhouse gas for Venus.

I, Emperor Geckolizard, the wise and noble creature inhabiting theoildrum.com and Geico commercials, as well as warm temperate climates all over the world, have the following decree:

1) Insofar that Global Warming has been proven scientifically and accepted by mainstream academia and mainstream media; and

2) Insofar that Carbon Dioxide has been proven scientifically as a 'Greenhouse Gas' and a contributor of said Global Warming; and

3) Insofar that there exists individuals who do not beleive proven facts as shown in 1) and 2); therefore-

I hereby resolve that any individuals who do not believe in 1) and 2) be sent to Venus via one way spacecraft to suffer a quick 'Greenhouse Gas' death under the crushing and furnace-like Venutian atmosphere.

-Emperor Geckolizard

You'd STILL be wrong.

Sulfur dioxide is NOT a greehouse gas. In the atmosphere it's bad because it makes sulfuric acid/acid rain.

In fact, to the contrary, Nobel laureate Paul Crutzen suggests injecting sulfur into the atmosphere to fight GW(LOL-so it may be that the SO2 in Venus's atmosphere may be actually COOLING it!)


However sulfur hexafluoride is with a GW potential of 22000 times that of CO2.


Sorry but you should at least TRY to backup your opinions at this website.

I apologize. SO2 was not correct - my memory failed me. The sulfuric acid clouds reflect a lot of the energy incident on Venus, but they also keep the energy that does enter trapped near the surface. Without these clouds the surface temperature would be much cooler(it could cool on the night side of the planet). Anyhow, this thread got way off topic...

SO2 is NOT a heat trapping(greenhouse gas).

The atmosphere on the surface of Venus is equivalent to 90 Earth atmospheres ( equivalent to the pressure 3000 feet below the sea)even though the gravitation of Venus is the same as Earth; for one thing, it is 96% CO2(plus 3% nitrogen), a gas which is 50% heavier than air at standard pressure and temperature.


If Venus had the earth's atmosphere it would receive twice times(93/67)^2=~2 the solar insolation as the Earth(1367 W/m2,~44 degF), using the Stefan-Boltzmann equation, the temperature might be something like 150 deg F; sq(sq(2*1376)/4/5.67E-8)= 331 degK ~136 degF as a very rough approximation.

So the temperature difference is really due to the thermal properties of carbon dioxide (or conceivably the internal heat of Venus). The temperature of Venus is 701 degK (or 867 degF).

Just don't spike it with CH3OH - you might go blind.


Let's see what the world would be like with no CO2 in the atmosphere!

Ah, the utter lack of logic. FYI: Nobody is claiming there should be no CO2 in the atmosphere, just less of it - and not because it is toxic.

I think he has overlooked Di-Hydrogen Oxide as well. This stuff is even worse and he should be told.

For more details see http://www.dhmo.org/

Welcome to the web site for the Dihydrogen Monoxide Research Division (DMRD), currently located in Newark, Delaware. The controversy surrounding dihydrogen monoxide has never been more widely debated, and the goal of this site is to provide an unbiased data clearinghouse and a forum for public discussion.

Explore our many Special Reports, including the DHMO FAQ, a definitive primer on the subject, plus reports on the environment, cancer, current research, and an insider exposé about the use of DHMO in the dairy industry.

The success of this site depends on you, the citizen concerned about Dihydrogen Monoxide. We welcome your comments and suggestions.

I heard that DiHydrogen Monoxide is found in polluted rivers, cancer cells and is a major component of acid rain. Can anyone here verify this? We should ban this horrible chemical right away.

And recall, too, that all cases of cancer (100%!) occur in people who have a history of regularly ingesting DHM. What more proof could you need of the danger threatening our health and environment?

I think I know where I got my exposure from. They used to make us sell Dehydrated DHMO at Boy Scout fundraisers. Handling all of those containers must have been how I was exposed to this chemical.

an anyone here verify this? We should ban this horrible chemical right away.

If we don't take action now I've heard it will be in our domestic water supply before we know it!

OK, that's it. YOU WIN! :-)

I wish I had kept my big mouth shut....

Time to banish the god of growth

The underlying fact:

Industrial civilization has built its entire existence on the platform of perpetual growth: “credit is a claim on future profit / growth.”

Drilling down, we find that this platform stands on the sands of the deepest of our fundamental beliefs in religion, economic principles and individual social behavior. We rotate around one ideological center of gravity. This human mindset is genetic: Since Homo erectus, growth has been equivalent of better protection [against wilderness and predators], of improved success [hunting together, farming, construction], of increased power [striking power of armies, packs of wolves], of emerging structures of civilization [trade, comfort, money, bible, laws, states, nations]. The short period on Earth with “an infinite environment condition” has formed today’s Homo sapiens by basic Darwinian selection.

Hence, perpetual growth can only exist [and favorite the Darwinian model] in an infinite environment. With Earth suddenly becoming finite by the exponential growth of the suddenly emerging industrial civilization, Homo sapiens has had not the time for mitigation. [We know that evolution of species can only follow environmental changes and events.] A “two-dimensionally-thinking” Homo sapiens has unexpectedly been catapulted into the three dimensional environment of a finite sphere which he is unable to understand.

In light of the above it becomes clear that our choice is limited to “mitigation of mindset” or total extinction of our species. Terminal decline has already begun.

The world's fifth largest natural gas field was discovered in Turkmenistan (Wall Street Journal):


South Yolotan-Osman field in the southeast of Turkmenistan contained between 4 trillion and 14 trillion cubic meters of gas in place. The upper end of that estimate is three times the European Union's annual consumption of the fuel.

Just how much gas does EU consume??

I don't understand the prices of things; apparently localization hasn't happened yet:

I live in Minnesota, and it's apple harvest time. I went to the store by my work for a snack, and found:

Apple = $1.25, Banana = $0.65

The world rice harvest is expected to increase 1% this year and much of that increase might be use to rebuild stockpiles:


If worldwide population increase is limited by food supply, then nations with greater birth rates might not be sustainable.

This year's U.S. corn harvest is expected to be worse than last year's. New ethanol distilleries are being built on the supposition that it is a profitible industry.

In spite of quotas and subsidies a Lima, Ohio ethanol plant recently filed for bankruptcy.


Suppose the lower cost of gasoline is competing with ethanol. When combusted ethanol produced known carcinogens and an eye irritant. Not good for city drivers.

OPEC exports to fall 390,000 bpd to Nov 1-analyst

LONDON, Oct 16 (Reuters) - OPEC seaborne oil exports, excluding Angola and Ecuador, will drop 390,000 barrels per day (bpd) in the four weeks to November 1, an oil analyst who tracks future shipments said on Thursday.

Seaborne crude exports from 11 OPEC members, including Iraq, will fall to 24.32 million bpd, down from 24.71 million in the period to Oct. 4, British consultancy Oil Movements reported.

Yes, and in spite of all the bullish news the price of oil keeps falling.
I thought $110 was the floor, then $100, then $90 and then $80.......
Today we touched $68. Maybe Yergin is right and it will fall to $38/barrel.

But it won't lead to reignition of economic growth like he probably also is claiming - or, if it does, rising oil demand hitting against supply limits and spiking the price will put the kibosh on that growth right quick.

I think it is mostly hedge funds and financial organizations selling--either because of margin call, or because they can't get the credit. For hedge funds, it can also be because investors are withdrawing funds. They have to sell something quick, and oil futures are easy to sell.

It is not clear it has much to do with "real" demand for the product at all. We may start seeing shortages and rapid price rises.

There are about three of these companies, including petrologistics and Lloyds and they seem to contradict each other regularly. I wonder if anyone has compared them to see how accurate there numbers are in retrospect.

Alan Drake to Speak in Dallas on 10/24

Details at: http://smu.edu/esp/
(Look for Electrification of Transportation panel on left side)

We are going to have a very good line up, including the president of Dallas Area Rapid Transit (DART). I'm giving a brief intro on our export model. Bonnie Jacobs, with SMU, has put this together.

Rail Here, Rail Now, Pay Less*

*Because you are taking mass transit instead of driving.

Hello WT,

Kudos to you and AlanFBE for tag-teaming on this presentation!

BTW: I Love that slogan: "Rail Here, Rail Now, Pay Less"

That slogan might also come in handy when the Mobs [also equipped with tar & feathers] decides to apply wooden-rail movement to Wall Street and Govt. topdogs.

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

Okay, this settles it. Peak oil is here.

Wall St. forces NASCAR to wave yellow flag

Some of the most illustrious names in the sport, including Dale Earnhardt Jr. and Michael Waltrip, have suddenly lost a slew of big-time sponsors as struggling auto makers, flailing financial firms and retrenching oil companies decide they have better things to do with their shrinking capital than spend up to $25-million (U.S.) annually to sponsor a team.

NASCAR races are supposed to have 43 cars. But fields are certain to be smaller next year.

“There's maybe 26 teams that have sponsorship for next year, and five or six that have partial,” Mr. Waltrip told Bloomberg News.

Actually, the defections have already started. Major corporations that have sponsored race teams and events for many years are pulling up stakes and bidding NASCAR farewell.

That was written 8 years ago, when you could sponsor for merely $10 to 15 million.

I figure they'll be around at least another 8 years. They may change things, but this is a big business to a lot of people.

NASCAR is a non-productive industry. Doesn't that make them eligible for a government bailout?

"NASCAR is a non-productive industry. Doesn't that make them eligible for a government bailout?"

Let's be honest, is NASCAR any less productive that ballet dancing or symphony orchestras? And yet they are subsidized all the time.

It all depends on who's ox is being gored, don't it? :-)


Let's be honest, is NASCAR any less productive that ballet dancing

Combine them both...

Hey, Pavarotti sang at soccer matches. Somehow I don't think replacing Aaron Tippin with Renee Fleming at a NASCAR race would go over too well, however.

The local sypmphony would surely put a sticker or two on their hats if they were sponsored to the tune of $20 million a year.

Nascar is second biggest spectator sport in America, behind Football. It is not just a bunch of rednecks turning left for 500 miles, although that image has done nothing to hurt the sport. Between sponsorships, licensing, and TV broadcasting fees it is huge.

And at the root of it all is America's love of the personal automobile, and getting somewhere in the least amount of time. Even if that somewhere is exactly where you started, just hundreds of miles and several hours later.

You've apparently never seen the program book at a symphony! Most of those corporate sponsors on that car also support the arts.

Ah, I'll give you that. I haven't seen a program in a while (we don't have a symphony here)

Actually that comment was meant more as a subtle dig at the concept of the banking and finance "industries". More black-holish than industry.

Gas lines, due to sub-$3 prices in MD. I don't see demand destruction lasting for too long.

They're lined up 75 to 100 deep. It's not for a temporary promotion, not for a giveaway, but for the new regular price at one gas station in Frederick. It's $2.69.

"It's been like this ever since we dropped our gas prices," said Carleton Copeland, Costco Assistant Manager.

Big lines come from the small price, but getting the gas came with a 10 minute wait.


Check out the new GEAB Bulletin N.28.

(Laboratoire Europeen d'Anticipation Politique).

They're saying the US Govt will default on its debts in summer 2009.

They say get ready for a new currency, worth 10 cents on the dollar, perhaps.

So...is everyone....ready???????

Well...they did predict a financial crisis. But they've predicting one for years, so I'm not sure we can trust their timing.

Russian President signaled his intention to position the ruble as a regional reserve currency

As a step along the way, the worlds first non dollar-denominated internet based oil and gas bourse is launched by Russia (not Iran, whose proposed bourse has been sunk on the rocks of corrupt self interest).


As an adenddum, I wrote this in 2005
"In november 2005 Russia started preparations to denominate its trade in oil and gas exports to europe in the euro. Russias European market is 66% of its total oil and gas export business. Logically, it should price 66% of its around 9 million barrel a day production in euros. When there is a general turn toward paying for oil and gas with euros in West Eurasia, plus central bank desire to 'rebalance' their currency weightings away from dollar dependence, that is when the greenback will start to lose value."



(ignore the polemics)