DrumBeat: October 30, 2008

The Peak Oil Crisis: A Steepening Slope

At the minute, the oil and other commodity markets seem seized with the notion that a rip-roaring, world engulfing depression is on the way that will demolish oil consumption. People are actually starting to talk about oil falling all the way to $20 a barrel again. Is this likely or even remotely possible?

Start with the International Energy Agency, which is still forecasting that worldwide demand for oil will grow during 2008 and 2009. They have of course reduced their growth estimates in the last six months, but they still are talking about actual growth in world consumption - not declines.

In thinking about who might slow their use of oil in the world these days, let's start with the oil exporting countries as this is where consumption has been growing the fastest. Most of these sell their oil products domestically at discounts, some substantial, to world prices. Their foreign exchange earnings are obviously hurting from much lower prices at the minute and they are starting to talk about slowing economic development projects, but there certainly has been no sign of lower domestic consumption for now.

Oil consumption is so ubiquitous today that, somewhere, oil is used by people in all walks of life - from multi-billionaires to those who are just getting by. As hard economic times descend, it is obvious that people at the bottom of the economic scale will stop consuming oil first. Reduced consumption then will climb right on up through the several billion of us who are at least moderate oil consumers until we get to those who are so rich there is almost no price that would force them to lower their consumption.

Britain’s Brown Heads for Gulf to Seek Bailout Plan Support

LONDON - British Prime Minister Gordon Brown embarks on a mini-tour of oil-rich Gulf states on Saturday, but could struggle to win support for his plan to boost funds available to nations hit by global economic chaos.

Brown will head to Saudi Arabia, the United Arab Emirates and Qatar in a four-day visit and is likely argue to that Gulf states should be among the biggest donors to an expanded International Monetary Fund (IMF) bailout scheme.

“It’s the countries that have got substantial reserves, the oil-rich countries and others who are going to be the biggest contributors to this fund,” Brown said before the trip, adding he also wanted China to contribute.

‘The Low Energy Price Age Is Over’

Mr. de Margerie said that when oil prices bounce back, they could reach unprecedented levels, making it wise for investors to keep investing in alternatives.

“Do we stop being clean because of this crisis?” asked Mr. de Margerie. Prices for oil could climb “to the sky,” he warned, and waiting to invest in low-carbon energy projects could triple their cost.

OPEC likely to cut production again: Venezuela

CARACAS: Venezuela said the Organization of Petroleum Exporting Countries will soon need to make another production cut to boost falling oil prices.

Oil Minister Rafael Ramirez estimates the 13-member cartel will need to cut production by at least 1 million barrels per day.

Central Asia and the financial crisis: After the boom

FOR almost a decade, oil-rich Kazakhstan has been the economic engine of Central Asia. Since 2000 its GDP has grown by an annual average of around 10%. But now the global financial crisis is taking its toll and the Kazakhstani motor is spluttering. In 2008 the economy is expected to grow by just 5%, which sounds healthy but is still a wrenching slowdown.

Kazakhstani officials were long in denial about the crisis. But in mid-October President Nursultan Nazarbayev announced a series of measures to deal with it. Since then, the government, criticised for inaction, has gone into overdrive. Mr Nazarbayev has given Karim Massimov, the prime minister, a free hand to take any steps necessary to stabilise the economy. Mr Massimov has taken on the job with relish, declaring almost daily that everything is under control.

ONGC Profit Unexpectedly Declines as Subsidy Triples

(Bloomberg) -- Oil & Natural Gas Corp., India's biggest explorer, reported an unexpected drop in second-quarter profit after it was forced by the government to sell crude to state-owned refiners at below market rates.

Brazil oil delays may cause industry exodus, Maersk oil says

A lack of new Brazilian offshore exploration leases and delays defining rules for future rights sales may prompt foreign energy companies to leave the country, Jorg Pigaht, Maersk Oil's Brazil chief, said.

Russia says Rosneft, LUKOIL break competition laws

MOSCOW (Reuters) - Russia's anti-trust watchdog, known as FAS, said on Thursday that the Russian oil firms Rosneft and LUKOIL have broken competition laws on the domestic product market.

State-controlled Rosneft, which is the largest oil firm in the country, and no. 2 oil privately-owned oil company LUKOIL have abused dominant positions on the wholesale market of oil products, such as diesel, jet and fuel oil, FAS said.

Gazprom, Eni, Enel agree to develop Russian assets

MOSCOW (RIA Novosti) - Gazprom, Italian electricity company Eni, and oil and gas giant Enel have agreed to develop Italian assets in Russia, the Russian energy giant said on Thursday.

Richard Heinberg: Go Develop Yourself

In a recent commentary I suggested that, due to the confluence of the unfolding economic crisis and Peak Oil, we have now seen the last of aggregate world economic growth—forever—if the word “growth” is conventionally defined. So far no one else seems to have taken up this idea. So, in forthcoming commentaries, I will seek to sort out the evidence that might confirm or disconfirm the notion, and also unpack some of its implications.

Today I am somewhat exercised by a spate of recent articles that suggest the financial collapse may cause “developed” countries to forgo promised aid packages (i.e., loans) to “developing” ones.

For many years I have resisted using the language of “development,” as the term can mean so many things. At its base, it is a metaphor for industrialization, if it is first assumed that industrialism is the goal and destiny of all human societies. Those that are already industrialized are “developed,” while those that aren’t are “developing.”

However, if (as I believe is the case) industrialization was a consequence of the brief historical period of fossil fuel consumption, then it is not the destiny of all societies, and may not survive for long in any of them.

UK will face peak oil crisis within five years, report warns

The "peak oil" debate has raged for many years. Some governments and oil companies believe that crude oil production will meet rising demand for decades to come. But an increasingly vocal group - including many experts from within the oil industry - claim that a production peak is imminent.

The new report marks the first time a group of businesses has weighed into this debate. At its core are two newly commissioned assessments of future oil production: one from Chris Skrebowski, consulting editor of Petroleum Review, and one from Shell.

Jeremy Leggett: Peak oil (audio)

Now to the supply of oil, which affects us all just as much as the economic meltdown. A report from a British Industry Taskforce is due to be released tonight, which predicts a premature peak in oil production will arrive much earlier than expected. But if this task force is correct, peak oil not only poses further risk to the global economy but will have enormous repercussions on food production, energy supply, transportation -- in fact most aspects of modern life.

Oil's stunning retreat: How long can it last?

NEW YORK: After surging to record levels this summer, oil prices have suffered a dizzying collapse in recent months, echoing the darkening prospects of the global economy.

...While consumers can cheer the drop, producers have been alarmed at the sudden downturn in their fortunes. Fears of a global slowdown have kicked off a down cycle in the oil sector: It is unclear how long it will last and how low prices will go.

As oil gets caught in the wild gyrations of the financial meltdown, three major questions loom over the oil markets for next year.

What will happen to oil consumption in the United States and in China? How will producers respond to lower prices? Can the oil cartel OPEC stop the slide in prices?

Mexico's Pemex Reports $1.3B 3Q Net Loss

Mexican state oil firm Petroleos Mexicanos reported a net loss of $1.3 billion during the third quarter of this year.

In a Tuesday filing to the Mexican Stock Exchange attributed the poor results to exchange rate losses. Pemex reported at $1.2 billion loss during the year-ago period.

First Solar jumps into residential rooftop market

In a move that will bring thin-film solar panels to the U.S. residential market, First Solar has signed a deal to provide installer SolarCity with 100 megawatts’ worth of solar arrays over the next five years. First Solar is also investing $25 million into SolarCity, the Silicon Valley startup backed by Tesla Motors founder Elon Musk.

This is First Solar’s initial foray into the home market — and apparently the first of any thin-film solar module maker. Thin-film solar panels are made by depositing solar cells on sheets of glass or flexible material and use little of the expensive silicon that forms the heart of more bulky conventional solar modules. That makes thin-film panels cheaper, although they are less efficient at converting sunlight into electricity. And thin is in for homeowners who prefer less-obtrusive panels on their roofs.

Oil-Price Rebound Could Be Severe

The slump in oil prices has spread relief among consumers and fuel-reliant industries, but also is squeezing the companies who could invest in new sources of oil -- spurring concerns that prices will prompt them to shelve investments.

Industry executives warn that could mean the world will face a dramatic ramping up of prices as soon as the global economy, and demand, begins to rebound.

"Low oil prices are very dangerous for the world economy," said Mohamed Bin Dhaen Al Hamli, the United Arab Emirates' energy minister, speaking Tuesday at an oil-industry conference in London. "We need an adequate and reasonable oil price that will continue to stimulate investment." With prices now languishing, he said, "a lot of projects that are in the pipeline are going to be reassessed."

Richard Heinberg: Nine Percent

The Financial Times has leaked the results of the International Energy Agency's long-awaited study of the depletion profiles of the world's 400 largest oilfields, indicating that, "Without extra investment to raise production, the natural annual rate of output decline is 9.1 per cent."

This is a stunning figure.

Exxon Mobil: Biggest profit in U.S. history

NEW YORK (CNNMoney.com) -- Exxon Mobil Corp. set a quarterly profit record for a U.S. company Thursday, surging past analyst estimates.

Exxon Mobil, the leading U.S. oil company, said its third-quarter net profit was $14.83 billion, or $2.86 per share, up from $9.41 billion, or $1.70, a year earlier. That profit included $1.45 billion in special items.

MEXICO: Oil Reforms Leave State in the Red

MEXICO CITY (IPS) - The oil industry reforms approved by the Mexican Congress and applauded by the government and most of the country’s parties, with the exception of factions on the left and part of the business community, will deprive the state of a source of funding that currently finances 40 percent of the public budget.

"Good for the oil industry, which will now have more funds, but the lack of an alternative source of financing for the state is very worrisome," Roberto Gutiérrez, an expert on energy issues at the Autonomous Metropolitan University (UAM), told IPS.

No More Urban Hype

Just months ago, urban revivalists could see the rosy dawn of a new era for America's cities. With rising gas prices and soaring foreclosures hitting the long-despised hinterland, urban boosters and their media claque were proclaiming suburbia home to, as the Atlantic put it, "the next slums." Time magazine, the Financial Times, CNN and, of course, The New York Times all embraced the notion of a new urban epoch.

Yet in one of those ironies that markets play on hypesters, the mortgage crisis is now puncturing the urbanists' bubble. The mortgage meltdown that first singed the suburbs and exurbs, after all, was largely financed by Wall Street, the hedge funds, the investment banks, insurers and the rest of the highly city-centric top of the paper food chain.

Over 70 Nobel Science Laureates Endorse Obama

It's no secret that, to many of his critics, George W. Bush hasn't exactly been the "science and technology president."

From stem-cell research to global warming to evolution, Bush and his allies have displayed a decidedly anti-science attitude, according to critics. Moreover, faced with the energy crisis, Bush and his allies have refused to make major investments in the technology needed to wean our country off fossil fuels and move to an economy powered by renewable energy sources.

300 steel mills burning tyres

LAHORE: Around 300 steel mills in the city are increasingly burning used tyres as fuel, releasing toxic smoke into the environment, it was learnt on Wednesday.

The mills have resorted to using tyres as fuel following the shortage of natural gas.

Dirty Traditional Energy Sources Outweigh Clean Alternatives

Gas prices have dropped. Some state utilities have lowered the cost of heating oil for this winter. And recently permitted nuclear and coal-fired plants will keep the state out of a projected “energy deficit.”

But not so fast, says state Danny Verdin, R-Laurens and chairman of the Senate Agriculture and Natural Resources Committee. “Inflation in energy costs will come faster and faster over the next 15 years,” Verdin says. “We’re being told that we’re just two years into steep fuel cost increases; we’re already a year into steep food prices inflation.”

As a result, Verdin says his committee and his colleagues in the General Assembly have been looking for a solution to a pending energy crisis, but that a magic bullet hasn’t presented itself.

People Still Have to Eat: Many restaurants will weather a bad economy just fine

To start with, more and more women have joined the workforce over the years. Thus, in most families, no one regularly has the time to shop, cook and clean up afterwards. Second, our tax laws continue to favor eating out for business. Last, the Immigration Act of 1965 led to a diversification of inexpensive, ethnic cuisines. Today roughly 50% of all meals consumed around the U.S. are prepared outside the home.

As a result, we've witnessed the exponential growth of what we call Better Alternative to Home (BATH) restaurants -- casual, modestly priced eateries (pasta-rias, burger joints, BBQs, upscale diners, noodle shops and myriad ethnic places) as well as family dining chains. These restaurants buy wholesale and produce meals far more efficiently than home cooks.

Surprise: Lean times may actually make you fat

Tough times inspire belt-tightening, or so the popular notion goes, but scientists who study public health say they’re worried that a slumping economy will make American waistlines wider than ever.

Rising unemployment, higher food prices and dwindling savings may exacerbate the nation’s obesity problem, sending already high rates ballooning as consumers turn to cheaper, less healthful choices ranging from boxed mac ‘n’ cheese to fast-food dollar menus.

A Solar Gold Rush Is Spreading From California to New Jersey

With new solar-powered movie theaters and factories, the solar industry is exploding. But how far can it take us toward a clean energy future?

As Gas Prices Go Down, Driving Goes Up

The sharp decline in gasoline use earlier this year — with volume down nearly 10 percent in some weeks — suggested to many people, including the automobile companies, that a permanent change in American habits might be at hand. But with gasoline prices falling drastically in recent weeks, some American drivers are returning to their old ways.

...Lawrence J. Goldstein, a director of the Energy Policy Research Foundation, said that what happened over the summer “was not demand destruction but demand reduction, which is largely reversible.” He added, “The sharp price increases did not happen long enough to permanently affect behavioral decisions.”

Chevron Project Offers Glimpse Of Future: More Work, Less Oil

RIO DE JANEIRO -- Chevron Corp. executive Ali Moshiri spent the past seven years scouring the globe for hard-to-get equipment, schmoozing foreign officials and taking billion-dollar risks to fast-track a new oil prospect off the coast of Brazil.

Despite the full-out effort, Mr. Moshiri concedes Chevron's $3 billion Frade (pronounced Frah-jay) project is a mediocre prospect compared with the huge pools of easy-to-get oil the company has tapped in the past. Even if it fulfills its greatest promise, the deep-water oil field will contribute only a trickle to the global river of petroleum. And Frade, whose first well is now being drilled, could still fail to deliver enough oil to make all the effort worthwhile.

Oil's Dropped, but Price Contracts Haven't

As oil prices were spiking in July, Southwest Airlines chief executive Gary C. Kelly told a conference that his company was "very well prepared to weather the storm" and "prepared for $4 jet fuel." But it turned out that what Southwest wasn't ready for was $2 jet fuel.

Famous for its ability to play the oil markets to lock in low fuel costs, Southwest made some bad bets in late spring and summer. Now, it's paying a heavy price just when it should be celebrating lower costs. A $189 million loss on fuel contracts put the company in the red for the first time in 17 years.

Southwest isn't alone. Though plunging oil prices have been a silver lining for the ailing economy, many companies are still covering high costs they locked in months or weeks ago.

An Interview With the World's Top Commodity Investor

Porter Stansberry: That all makes sense to me. I don't know what side of the fence you come down on in terms of "Peak Oil" but I think a lot of the evidence for Peak Oil has been actually created by the mal-investment of the state oil companies.

Rick Rule: I think that's absolutely true. I think Peak Oil – at least from my point of view at age 55 – is an economic rather than a geological function. You'll notice gasoline prices are falling and storage numbers are rising. And the politicians are sort of flummoxed as to how that happened. Well, it happened because markets worked. People could afford less of it at $4, than they could at $1. And you know, from an economic point of view, this makes sense. From an economic point of view, Peak Oil is a function of price in the near term, not geology.

Credit crunch may hit Aramco

DUBAI - Saudi Aramco expects the global credit crunch to affect joint-financing projects in transportation, distribution and refining areas, a senior company official said.

...“In reality, financing these gigantic projects by borrowing from international credit institutions which are suffering from a shortage of funds poses a great challenge,” Abu Al-Aynain said.

Wind Farm's Future Under Uncertain Economic Times

One of the largest, is T. Boone Pickens, Mesa Power project outside of Pampa.

The original proposal of 4,000 megawatts, may not turn out to be as big because of the stock market.

Climate-warming methane levels rose fast in 2007

WASHINGTON (Reuters) - Levels of climate-warming methane -- a greenhouse gas 25 times as potent as carbon dioxide -- rose abruptly in Earth's atmosphere last year, and scientists who reported the change don't know why it occurred.

Methane, the primary component of natural gas, has more than doubled in the atmosphere since pre-industrial times, but stayed largely stable over the last decade or so before rising in 2007, researchers said on Wednesday.

This stability led scientists to believe that the emissions of methane, from natural sources like cows, sheep and wetlands, as well as from human activities like coal and gas production, were balanced by the destruction of methane in the atmosphere.

But that balance was upset starting early last year, releasing millions of metric tonnes more methane into the air, the scientists wrote in the Geophysical Research Letters.

Q&A: Andrew C. Revkin

Mother Jones: How does "whiplash coverage" of global warming damage people's understanding of the science?

Andrew C. Revkin: It's one of the many reasons this issue hasn't grabbed hold of people in a concrete way. The aspects of global warming that matter most to people—how rapidly will the seas rise? Are hurricanes already getting stronger? How strong will they get as a result of warming?—those are still immersed in complexity. So in those realms that catch people's attention most, or that get used as symbols by environmental campaigners, those facets really do come with significant back-and-forthing. Early stage science always has these disputes, and they're normal. You've heard a lot about the deniers and the professional campaign to muddy the waters and highlight uncertainty—that's another factor, but this is perhaps even more profound because it's deeper and not a function of some campaign. It's just reality. For the average person who's not attuned to the rhythms of science it just looks like one thing: "Oh, they're questioning aspects of global warming. I don't have to worry."

Eastern Europe looks to nuclear revival to meet its power needs

BERLIN: From the Baltic to Bulgaria, governments in Eastern Europe are increasingly looking toward a revival of nuclear power generation to meet growing energy demand.

The renewed interest in nuclear energy in a region that has been under intense pressure from the European Union to close unsafe older-generation plants coincides with a lively debate in several West European countries, in which governments seek cleaner energy options to combat climate change.

The Oil Crunch: Securing the UK’s energy future (PDF)

There isn’t any shortage of oil, but there is a real shortage of the cheap oil that for too long we have taken for granted. During the 20th century, cheap oil - $20 – 30/barrel in today’s terms - allowed the internal combustion engine to replace the steam engine and sparked a transport revolution that fostered and fed the innate human desire to travel. We loved it.

By the middle of the century warning bells began to ring and some such as King Hubbert began to point out that world oil was a finite resource and furthermore that it was possible to estimate how much remained. At the time Hubbert was regarded by many as a crank and the industry line was that new discoveries would continue to replace what had been used. We now know differently.

A great deal more oil has been discovered since Hubbert’s day but his basic thesis still holds. The difference is that today, with more exploration and more sophisticated exploration tools, we know the Earth much better and it is pretty clear that there is not much chance of finding any significant quantity of new cheap oil. Any new or unconventional oil is going to be expensive.

(If the link doesn't work, go in through the front page.)

Oil shortage "bigger threat to UK than terrorism"

A global shortage of oil within five years poses a bigger threat to the UK than terrorism, an industry group has warned.

It will also see prices soar to far higher levels than the $147 a barrel peak of July, which saw the country's motorists paying 119.7 pence a litre for petrol.

Rise and fall

A peak oil timeline.

Oil rises above $69 on weak dollar, market rally

KUALA LUMPUR, Malaysia – Oil prices climbed above $69 a barrel in Asia Thursday, steadily extending gains as the dollar tumbled and stock markets in the region rallied after the U.S. Federal Reserve cut interest rates to boost the world's largest economy.

TNK-BP CEO says Russia oil output likely peaked

LONDON (AP) -- Robert Dudley, chief executive of oil company TNK-BP, said Wednesday that Russia's oil production has likely reached its peak and is now headed for a slow decline, due in part to lack of investment.

Dudley, who will leave TNK-BP in early December after a long-running dispute between shareholders of the Anglo-Russian joint venture, said oil production had probably touched a high in August.

"There isn't going to be a precipitous decline. It's very mature oil fields and there'll probably be a gentle decline as we move on," Dudley told reporters on the sidelines of the annual Oil and Money conference in London.

"But I believe we are ... at the top of a broad curve or cycle right now until other things happen."

Russia pushes an 'OPEC' for natural-gas nations

For Russia, which blames the US for causing the current global financial crisis and the attendant collapse of oil and other commodity prices, forging new energy-based international relationships holds political promise. "There is a clear desire in Moscow to work toward breaking what it perceives as US dominance of the world economy, but it's way too soon to predict where this global crisis is leading," says Masha Lipman, an expert with the Carnegie Center in Moscow. "If the US should really go into decline, I suppose we shall see new groups of states, and new contenders, come forward."

As global energy prices plunge, cooperating with the Organization of Petroleum Exporting Countries (OPEC) to stabilize markets has gained fresh traction in the Kremlin while the long-discussed idea of creating a "gas OPEC" of leading producers is suddenly getting a big push from Moscow.

Mexican energy reforms still keep oil giants shut out

WASHINGTON — Mexican lawmakers’ decision Tuesday to revamp the country’s oil and natural gas law will provide some new flexibility for oil field service companies doing business there but will keep the door shut on foreign oil companies eager to explore in the crude-rich nation.

“For international oil companies, this does not change the Mexican situation at all,” said RoseAnne Franco, lead analyst for PFC Energy in Washington.

Further delay to start-up of North Sea development

Canadian energy group Nexen yesterday announced a further delay to first output from the Ettrick field development in the North Sea.

Nexen said a leased floating production, storage and offloading (FPSO) vessel would not now be delivered until December following previous delays because of third-party labour shortages at a construction yard in Singapore.

Nexen said the latest hitch was the result of commissioning delays for the FPSO, whose late arrival means production from Ettrick has been postponed until “early 2009”.

Shell Postpones Athabasca Oil-Sands Decision on Higher Costs

(Bloomberg) -- Royal Dutch Shell Plc, Europe's largest oil producer, postponed an investment decision on expanding its Athabasca oil-sands project in Canada because of rising costs.

Supply and Demand Have Little Relevance in Commodities Prices

The oil run-up of last year bothered me a great deal. So I decided to make an effort to make sense of it. Back then everybody was talking about supply and demand, peak-oil production, Saudi Arabia's exaggerated oil reserve, etc. etc. But I couldn't understand how these slow-moving variables could possibly cause the insanely fast-moving price. Then I read about how a new breed of speculators have joined the market and driven up price. That makes perfect sense, but just as explaining why water boils by saying the temperature is 100C -- it provides absolutely no information. Why did those speculators all of a sudden swamp into commodities?

Then it hit me. The real negative interest rate. When the real interest rate is negative, it doesn't make economic sense to hold cash. Real assets that people need have a much better chance of holding value through inflation. (I know, I can't be even the millionth one realizing this.) With real estate out of the question last year, commodities was a logical place to park your money. And it's a self-fulfilling proposition and yet another positive feedback -- the higher the commodities price, the higher the inflation pressure, and therefore the higher the commodities price...ad nauseam.

Gazprom CEO says foreign cash available - paper

VIENNA (Reuters) - Russian gas export monopoly Gazprom is not worried by its financial position and can use more credit lines from foreign banks if needed, its chief executive was quoted as saying on Thursday.

"Like everyone else, we have felt the effects of the global financial market crisis," CEO Alexei Miller told Austrian daily Die Presse in an interview.

"But we are not worried about our financial position or our ability to use new credit lines from foreign banks. For us the state help is above all a safety net and that should reassure our shareholders."

Oil giants try to polish image before latest gusher

African children smile for the camera, a youngster sips pink medicine from a spoon and a doctor explains his part in a venture to fight malaria, the No. 1 killer on the continent. It's an effort, he says, that will help save hundreds of thousands of lives.

The images look like something out of a health documentary, but it's a commercial for oil giant Exxon Mobil, for which the doctor is medical-projects director.

Fourth Chinese hostage found dead in Sudan

KHARTOUM (AFP) – The body of a fourth Chinese hostage was found in Sudan on Wednesday as two local staff for a Yemeni company were shot dead, exacerbating fears of growing insecurity for the country's oil industry.

The recovery of the Chinese oil worker, one of a group of nine snatched in central Sudan 11 days ago, confirms Beijing's official death toll of four, although the circumstances of their killings remain murky.

India plays at Russian Imperial roulette

MOSCOW - India's Minister of Petroleum and Natural Gas Murli Deora was to have been in Moscow last week to urge approval of a controversial plan to put 1.4 billion pounds sterling (US$2.43 billion) into a London-listed company called Imperial Energy Corporation. Questions the deal raises include why Imperial, why so much, and why was the visit delayed?

Imperial's oil deposits in the Tomsk region of Siberia are years from full production, its current operations are loss-making, and its oil, when it finally is lifted, will either be refined in Russia or be exported by pipeline to China.

Syrian riot police form ring around US Embassy

DAMASCUS, Syria – Tens of thousands of Syrians turned out Thursday for a massive government-orchestrated protest against a deadly U.S. raid near the Iraqi border.

A mile away, hundreds of Syrian riot police formed a protective ring around the closed U.S. Embassy, but the flag-waving crowds dispersed peacefully after a couple of hours later, with students heading to schools and employees to work.

'We're not going to win this war'

All the indications are that the US military and foreign policy establishment has already abandoned the ambitious neo-conservative objective of crushing the Taliban and remaking Afghanistan as a functioning democracy.

America's Afghanistan policy is falling into the hands of the realists, whose highest priority is maintaining a tractable and viable client in Kabul, keeping Afghanistan securely inside the US sphere of interest, holding on to a key chess piece in Central Asia's "great game" of energy resources and pipeline infrastructure, and offering the Pentagon another basing option to bedevil Russia and Iran.

Oil-rich, remote and difficult

As rich countries poured billions of dollars into bank bailouts, China quietly announced plans last month to invest $100bn building roads and railways to open up remote central Asia to the rest of the world. More than 20,000km of rail track will be built in the coming decade to bring Chinese goods into central Asia and carry back oil and metals to China.

Reaching out towards Russia, Europe, Iran and Pakistan, the railways will create a modern equivalent of the region's ancient Silk Road.

Learsy: Oil Prices Slipping? Hurry Moscow Call Our Strategic Petroleum Reserve Maven Energy Secretary Bodman

The Russians, perhaps a little reluctant to jump into the OPEC pool with both feet have come up with a better idea. And here, Secretary Bodman you and your staff and all those good folks at the White House can play a role which, in the old days, would have been attributed in the European parlance of another time as help from the "Onkel aus Amerika". You see the Russians have this concept that they can support oil prices by, yes you guessed it, diverting part of their production to a national petroleum reserve with the purpose of limiting oil supply on global markets. A concept being put forward with the weighty support of Russia's deputy prime minister Igor Sechin.

And who knows better about national petroleum reserves (here known as the "Strategic Petroleum Reserve") and their impact on prices than our own administration who for years has been taking millions of barrels off the market and pouring them into salt caverns willy nilly while oil prices were going through the roof leaping some 700 percent. A program that continued in such unabated excess that it literally took an act of Congress to get them to desist.

US natural gas use to rise under next president

Some in the industry see some differences in the candidates' attitudes toward natural gas.

"Any introduction of greenhouse gas legislation is going to create demand for natural gas because there are very limited ways to meet the targets," said Dean Girdis, president of Downeast LNG. "In that respect maybe Obama is better for gas because he is going to have more stringent adherence to climate control mechanisms because of the desire to meet support to slow down coal power production," he added.

Still, some analysts said the oil and gas industry is more comfortable with McCain's policies of increased drilling.

Palin calls for break from Bush energy policy

TOLEDO, Ohio – Republican vice presidential candidate Sarah Palin called Wednesday for a "clean break" from the Bush administration's energy policies, which she says rely too much on importing foreign oil.

In her second policy speech in a week, the Alaska governor said the recent drop in gas and oil prices shouldn't deter consumers and lawmakers from seeking alternative energy sources. She cast energy independence as a national security issue and said dependence on Middle East oil leaves the U.S. more vulnerable to terrorists.

Renewable energy debuts on ballots

Three states — California, Colorado and Missouri — have measures on their ballots that deal with alternative energy sources, including wind and solar power. "This is a fairly new issue to the ballot," says Jennie Drage Bowser, who has been tracking ballot measures for more than a decade at the National Conference of State Legislatures. "It's a direct response to the demand for energy independence and the rising cost of energy."

How Parked Cars Could Power the Future

Imagine running a parking meter backwards and actually being paid to park your car. Along those lines, electric vehicles might one day make money for their owners by providing electrical storage for the nation's power grid.

The monthly income could add up to a lot more than what you pay for a big-city parking ticket and many moving violations.

Fatalities on the rise in vehicle-animal crashes

WASHINGTON – Fatalities from vehicle crashes with deer and other animals have more than doubled over the last 15 years, according to a new study by an auto insurance-funded highway safety group that cites urban sprawl overlapping into deer habitat.

One-third of world fish catch used for animal feed

WASHINGTON (Reuters) - One-third of the world's ocean fish catch is ground up for animal feed, a potential problem for marine ecosystems and a waste of a resource that could directly nourish humans, scientists said on Wednesday.

The fish being used to feed pigs, chickens and farm-raised fish are often thought of as bait, including anchovies, sardines, menhaden and other small- to medium-sized species, researchers wrote in a study to be published in November in the Annual Review of Environment and Resources.

In Brazil, Biofuels Dream Is Already Reality

The problems confronting the U.S. industry stand in sharp contrast to the experience of the world's other major ethanol producer -- Brazil. Together, Brazil and the United States lead a rising market, poised to produce a record 16 billion gallons this year. Yet biofuels have gained the kind of mainstream acceptance in Brazil that Grassley can still only hope for in the United States.

That is partly because the Brazilians have come far closer to achieving the ultimate promise of biofuels -- the generation of a greener, cheaper alternative to gasoline. Production methods in Brazil are considered the world's most efficient, helping make ethanol commercially viable for the masses. From the Amazon region to their country's deep south, Brazilians now consume more ethanol than gas at the pumps.

Ethanol's environmental advantage over petrol confirmed by US study

The Illinois Corn Growers Association (ICGA), US, has unveiled the results of two studies this week that confirm ethanol can grow substantially without affecting the food or feed sectors' supply of corn and that the carbon footprint of ethanol is less than that of gasoline.

Betting on Green

Falling oil prices mean tough times for renewable energy, but experts expect the industry to bounce back.

Less grass, less gas, says cattle researcher

WINNIPEG -- A University of Manitoba scientist says he's figured out how to cut the amount of greenhouse gas belching from cows by as much as 200 litres a day -- feed them grain instead of grass.

Royal Society to research potential of geo-engineering to limit global warming

The Royal Society has announced plans today to study which planetary-scale geo-engineering techniques might play a practical role in stemming the worst impacts of climate change.

Geo-engineering includes everything from placing mirrors in space that reflect sunlight from the Earth to seeding the oceans with iron to encourage the growth of algae that can soak up atmospheric carbon dioxide. The Royal Society study will look at which techniques might be feasible to carry out and what their impacts or unintended consequences might be on society.

“Post 2012″ strikes fear in carbon market players

No pun intended but for the world’s carbon community, times are looking a little black.

The global financial crisis, or GFC as it is being called this week during Australia’s largest ever carbon market gathering, is deeply troubling many participants. But a larger, more worrying issue remains “post 2012″.

This is when the Clean Development Mechanism under the current phase of the U.N. Kyoto Protocol runs out, along with the hundreds of CDM projects already approved and the 3,000 still awaiting approval by a U.N. board.

I figured out a new form of linearization that complements Hubbert Linearization here:

It would be nice to get some feedback on this, and perhaps some test cases.

As a semi-educated layman in this area (too many years since stochastics and diff-E in college!), I appreciate your effort to keep the math relatively simple.

Simple transformations to yield linear results is obviously a perfectly valid approach and makes a intuitive level of understanding simpler, at the risk of obscuring the underlying data a bit for neophytes (the notion if reciprocal time is easy to calculate, but hard to grasp meaninfully!). If you can take previously published real-world data for various fields, plot them using your model, and universally have lines fall out, that certainly provides value.

Of course the whole point for us engineers to linearize situations (and of course many times that requires us to limit the part of a situation we look at so that a linear approximation is reasonable for that domain) is so that we can design or predict something.

What valuable predictions can be ascertained from the newly linearized model? The bounds of likely reserve growth for given existing fields over any reasonable time frame?

Can the model help predict the find rate for a given field size going forward, as a sort of global dispersive model, maybe normalized by some notion of search effort?

Having a model that helps profile the future potential of existing fields is valuable, but having one that quantifies future finds would be divine.

The bounds of the reserve growth are easy to detect from the linearized model. It turns out to be the y-intercept (or more precisely, the reciprocal of the y-intercept). This is similar to HL, only in that case, it is the X-intercept for URR. The rate at which the bounds are achieved comes from the slope of the line. Transforming this from a local model to a global model is where you have to introduce the idea of accelerating search. For exponential increases in search, you end up with the Logistic, which is at the heart of Hubbert Linearization. This basically closes the circle. These are ideal questions that you posed and would like to pursue.

Debt Rattle, October 29 2008: The lone and level sands

As I said before, 'moral hazard' concerns have long since been thrown away with the bathwater of the meek and innocent. All it took was a few ass clowns shouting 'crisis' and Mayday. Jim Kunstler this week asked why we hardly ever see terms like 'fraud' and 'swindle' in the media. Well, because we have a crisis, of course. First things first. The Fed will lower interest rates to levels so low that banks get paid (even more) just to take money from the public trough.

Nobody wonders anymore whether it’s a good idea to try and 'save' bankrput and insolvent gambling houses. It’s a sort of shoot first, talk later mentality. And by golly, it works.

This is the disaster doctrine. The Chicago school, the IMF, the World Bank and the CIA have long since learned how to shock people into submission. They've practiced for years in Latin America, Africa and Asia, and it's time to bring the doctrine home to the world's largest economy. Which was always the intention.

We see it play out in the USA, where Hank Paulson has been handed anti-constitutional dictatorial powers after threatening Congressmen and Senators with hellfire, brimstone and ensuing lost elections.

I love Denninger's take last night. He argues that everyone should just stop paying their mortgages. People who do pay will be bailing out those who don't. And those who actually accept the government bailout will be in the worst situation of all.

Suddenly home "ownership" seems like a colossal liability.

I had not seen that the bailout included recourse -- that's the nastiest clause of all. It's "indentured servitude" for the 21st century -- one step from debtor's prison!

I wonder how long it will be before they start digging for gold out of houses that are already paid for? New real estate taxes based on equity instead of value, perhaps?

I wonder how long it will be before they start digging for gold out of houses that are already paid for?

Home equity loans and second mortgages already got some of them. Unemployment and grinding poverty will get more. But I agree. After they've feasted on pensions & retirement accounts, they'll come for the houses. I would venture TPTB don't see any downsides to having a populace indentured by debt.

Exactly. We're going to see a chaotic grab for the real wealth that underlies all the excess claims created through leverage. As I have said before, credit hyperexpansion creates multiple and mutually exclusive claims to the same pieces of underlying real wealth pie (whereas currency inflation would cut the pie into smaller and smaller pieces). Most of those excess claims - virtual wealth - will be extinguished, and rapidly enough that the mechanisms for dealing with deleveraging will be completely overwhelmed.

We're looking at a world of cascading margin calls, loans being called in, forced bankruptcy, kleptocracy, fraud on a grand scale, institutionalized debt slavery etc. The credit boom itself was predatory, but that was nothing compared to what's coming. There'll be nothing left of the pots of money people thought they had put by for the future - savings, pensions etc.

Many people will even lose paid for homes if they have no income and can't pay the property taxes that will skyrocket as governments try to wring every penny from their constituents in order to keep themselves afloat. Property ownership will indeed be a colossal liability, which is why Ilargi and I generally recommend renting, unless you already own a viable homestead free and clear and still have money left over. It's not enough to own your house outright - you need liquidity under your own control as well in order to be able to pay taxes and expenses. Borrowing against property probably won't even be possible, but if it is, the rate would be absolutely punitive.

Property ownership will indeed be a colossal liability, which is why Ilargi and I generally recommend renting, unless you already own a viable homestead free and clear and still have money left over.

And landlords won't jack up rent? HA! If they get slammed with property taxes, and have a mortgage on the property with resetting rates(which they do, from time to time), they'll just come to your door and raise your rent $100 more a month from time to time. At least with my 30 year fixed mortgage I have locked in my 'rent' at today's low prices... You, on the other hand, obviously have not...

Yes, but a renter can always move. Go someplace where the rent is lower, or share an apartment with others in similar straits.

And what if you have move for other reasons? Your kid needs medical treatment that isn't provided in your area, you get a job offer somewhere else, your current address is the victim of fire, earthquake, or flood...or all your neighbors are foreclosed on, and the rest of the homes in your neighborhood become crack houses.

That is the reason I am renting. I don't want to be tied down.

I already have a homestead free and clear and owe nothing to anyone because I saw this coming years ago and have been preparing for a long time (including moving half way round the world). I have been explaining on this site why we were heading for deflation since October 2005.

Rent is merely paying someone else a fee to take the property price risk for you, which is a very good bet right now. As access to credit dries up, property prices will go into freefall - ending up down 90% on average IMO. Rents will fall substantially in a deflation, as landlords look at recover at least some of the cost of property ownership. They won't be able to charge more than the market will bear, and that will be very little.

Even if your mortgage rate is indeed fixed for 30 years, which I doubt very much, a low nominal rate of interest means little when inflation is negative and the real interest rate is therefore very high. More likely you will find that fixed rates cease to be available, even if rules have to be changed retroactively, and that you will end up paying a high nominal rate, which will actually be an even higher real rate. Debt is a killer in a deflation.

Also, your income is probably far less secure than you think. Earning enough to cover your present payment will be vastly more difficult in a world of wage and benefit cuts and very widespread unemployment. Your saving and investments are also at risk from bank runs and market crashes. Now is the time to hold liquidity under your own control.

I'd like to expand upon the word "homestead." It is important for people to realize that a true homestead is not simply living in the boondocks with a couple of chickens.

Rather, it is a lifestyle with its own skill-sets, its own specialized equipment and, finally, its own philosophy of life. I've lived in the boondocks for over 30 years and seen dozens of people come, fail and leave because they saw rural living as nothing more than exurbia with even larger lots.

Well, I have to quit - maybe more later - a guy who works now and then for us just showed up and I have to show him what I want done.


I would add: a true homesteader wouldn't even think of calculating the labor costs involved in homesteading. What I mean is, it's absolutely anathema to think: "Geez, I just spent how many hours making this gouda cheese from my American Milking Devon milk, and I could buy two pounds of cheese at the story for how much???"

No, such skills are priceless. Even more so in the future.

Acquiring skills is one of the few things that do appreciate vastly over time. The first time you do something is hard and costly and often painful.
The next time, it goes a little better, and over time it becomes easy.
Go ahead and try anything. If it works, it will give you a kick. The process of finding out how to do things in a more elegant way (elegance can be usefully defined as : minimal effort for maximum effect) can keep you happy for a whole life.

"its own philosophy of life" I call it self-reliance Todd, and in a time of diminishing resources, it's going to be even more important.

Don in Maine

There appears to be the very strong assumption that deflation will rule the roost. While it may today, tomorrow it may not for any of the following reasons:

1) Excessive government borrowing to create new money suppliesand spending/'relief'
2) Decreasing availability of fossil fuels, ergo increased energy costs driving all costs up
3) Long term trend of fiat currency (such as the dollar) to inflate
4) Increased costs needed to service existing government debt, coupled to decrease of income due to lower taxes (either by a decreased workforce or by voluntarily decreasing taxes to stimulate the economy), will (must) result in high inflation
5) Future treasuries sold will (must) be a higher interest rate due to increasing uncertainty, decreasing quantities of investor money available, and increasing supplies of treasuries sold.
6) Low FED rate due to future economic uncertainty.

There seems to be the assumption that we are headed into something like America in 1929-1930 with deflation. I assume that we're heading into something more like Germany in 1922-1924. They faced an extraordinary debt due to WWI, and inflated their way out, unlike America in 1929 which had little debt to service but instead had a lack of liquidity that caused deflation (i.e. people and governement saved too much and spent too little).

I think Uncle Ben will do all in his power to keep us from deflating. I think the printing presses will be running all night. Create and spend, rinse and repeat.

I've no doubt they'll try. I just don't think it will work.

The wealth destruction has been incredible, and it's only begun. How do you print enough money to make up for that?

The Fed can print enough money if and only if deficits are large enough. The Fed is the lender of last resort, and the Treasury is the borrower and spender of last resort. The deficit for 2008 will be over a trillion dollars. I expect the deficit for 2009 to be in the two trillion dollar range, and after 2009 I expect us to get into really serious deficit spending, with the deficit possibly going as high as thirty percent of GDP when unemployment is also around 30%. None of my thinking rules out temporary deflation, however; I've been influenced a lot by Stonleigh and Ilargi.

I still believe that politics and our system of government favor inflation over deflation, and in the long run I expect increasing inflation.

I think it's pretty clear that the FED, Treasury, Congress and Executive will team up to create, borrow and spend as much as possible. If they can find a way to get the Judiciary involved, they will. I think in 2009 you will see them create $600B to send every man, woman and child in the US $2,000.

"Taxes" will go down, but spending will go up, so I think you are right. Depending on the outcome next week, "Joe the Plumber" will become "Joe the Treasury Secretary". Where does one hide (financially) during events like this? Buy a home with cash? Stocks? Gold? Ammo and canned food? That's the part I can't figure out.

Right now I am: 35% stocks, 25% cash, 20% bonds, 20% Oil. Also carrying a $12,000 car loan. I rent an apartment. How does that look?

I think in 2009 you will see them create $600B to send every man, woman and child in the US $2,000.

Maybe, but it will be a table top electric fan up against a Cat. 5 hurricane.

I think they'd have to give everyone the cost of a house to really make a difference. $2,000 is a drop in the ocean.

And if you did give everyone the value of a house...would they all really go out and spend it? Or would they pay off debt, and sit on the cash, waiting for prices to fall more?

Where does one hide (financially) during events like this? Buy a home with cash? Stocks? Gold? Ammo and canned food? That's the part I can't figure out.

Because there is no answer. In a depression, there is no place to hide.

Because there is no answer. In a depression, there is no place to hide.

Thanks for cheering me up [empties flask into his coffee].


If I were you I'd sell all stocks--just take your losses to avoid much bigger ones in the future. Pay off your car. Put more of your portfolio into oil. Own some TIPs (Treasury Inflation Protected securities). Be prepared for deflation. Also be prepared for inflation;-)

In addition I'd invest in skills that will be useful no matter what happens to the economy--cooking good meals from scratch is an especially useful skill to have. Can you tend bar? Fix a leaky toilet? Use hand tools to saw wood skilfully? Hunt for meat? Spear large fish with a crossbow? Garden? The more useful skills you have, the richer you are. Also, insofar as you can teach these skills to others, you are an especially valuable member of your community.

But aren't stocks a good inflation hedge? If FedGov prints massive amounts of money, my bonds become worthless, my cash loses some value but retains some (it's based on short-term interest rates) and my car loan (fixed rate) goes effectively to zero. Shouldn't equities follow inflation upwards (in nominal terms) as the $ becomes worth less and less, the nominal stock price should go up as nominal EPS increases.

Deflation I just can't figure out, it's beyong my intellectual capacity (but so are most things these days). My car loan would become a burden, but my bonds would be worth more, as the nominal interest payments are fixed. My cash would lose a lot of value. What would happen to stocks and oil? I think they would go down.

Only in the very long run (say 25 years or more) are stocks a good inflation hedge. I know a lot about this topic, because I wrote my Master's thesis on "Common Stocks as an Inflation Hedge." Consider the period from 1970 through 1984: Inflation soared but stocks did poorly. In the Greater Depression to come I expect real earnings on stocks to plummet; nominal earnings may go down to less than half their current levels if we have long-term deflation. Indeed, nominal earnings (and hence stock prices) would go down even faster than real earnings in a deflationary depression.

I think oil will go up, then go up more--then really go up a great deal, with plenty of volatility along the way. Declining supply will trump declining demand, and hence the price of oil is bound to increase.

Cash will eventually lose value as we eventually go back to the double digit inflation that we had thirty years ago. But "eventually" could be several years. The best inflation hedge I know is TIPs.

In a deflation cash will increase in value. It happened during the early nineteen thirties, and it could happen again.

I don't think anyone really sees this as the same sort of deflation as happened in the 1920's. We are facing debt deflation vs monetary inflation thus its a tad more complicated. Plus worse on the monetary side almost all the money is going in and attempt to cancel out debt or worse going into useless stuff like bank mergers.

So although your right that cash is king there is so little cash vs the total amount of debt that its almost a sideshow.

Dunno exactly what this means but this situation is not a repeat of 1930's in my opinion its even worse.

In the 1930's the monetary system held together this time around its and actual structural failure of our debt based fiat currencies.

So its the inability to extend and receive credit and attempts to prevent and effective default on the debt based currency.

I suspect we will look back and wish we had a simpler economic crash like the 1930's instead.

This time around I don't think it actually ends in deflation or inflation I think at some point the whole system just stops.

So far so called "liquidity" problems suggest that this is actually the way we will fail the system simply stops functioning.

So instead of inflation or deflation we are faced with the velocity of money going to zero. I.e the rate of financial transactions simply goes to zero.

If you read this is what is freaking the Fed out its not inflation or deflation is lack of transactions.

On the deflation side you have the same problem defaults needed to cause deflation do not happen we are seeing this also.

'This time around I don't think it actually ends in deflation or inflation I think at some point the whole system just stops.'

my impression is orlvo thinks like this too.

i think in part because such smart/wise people disagree & u need to give odds on which inflation/deflation [as don & even puplava does]because we really can't know yet & as above memmel says it'll be so quick.

maybe we'll see different periods of both as deflation now & then as stoneleigh says inflation at the end.

skills & community/relationships the real secure investment.

But aren't stocks a good inflation hedge? If FedGov prints massive amounts of money, my bonds become worthless, my cash loses some value but retains some (it's based on short-term interest rates) and my car loan (fixed rate) goes effectively to zero.

Yup, Stocks go up in an inflationary economic (see 2007 as an example of an inflationary economy)

But is likely for the near term, prices of stocks are likely to fall, until the economy reaches a point of equiliberum. While the Federal gov't is pumping trillions into the economy, its takes time for liquidity to reach consumers. Currently consumers are cutting back on spending. This is causing coporate earnings to fall, and thus declining stock prices. A turn around make be months or years away depending on the gov't policies. Consider that come late January we will have a new administration which will almost certianly make major policy changes. Depending on what policy changes are enacted will decide how long we remain in a deflationary cycle.

Deflation I just can't figure out, it's beyong my intellectual capacity (but so are most things these days). My car loan would become a burden, but my bonds would be worth more, as the nominal interest payments are fixed. My cash would lose a lot of value. What would happen to stocks and oil? I think they would go down.

The value of cash will increase in a deflationary economy, unles your thinking that foriegn investors will pull capital out of the US (perhaps because of thier own deflationary local economy, fear of US default, or fear of US hyperinflation). Which of course is a possibility.

One thing is for certain: A future full of uncertainty!

Thanks both for responding. I do realize that my cash increases in value in a deflation, I just typed that wrong. I may sell some more stock tomorrow, and buy some more oil. I'm thinking of buying a condo.

Why buy a condo when rent is so cheap? The value of a condo is likely to go down over the next five to ten years. Even if you pay cash, it is an illiquid and risky investment.


Exon had it's party dress on today but with the recent drop in oil prices do you think that oil companies might have a drop in store after the next earnings period. That a buy might be better when that has worked it's way through? I am tempted to average in now, but for that thought.


In my opinion the best investment strategy for oil is to get long now and stay long, regardless of future price fluctuations. If you try to guess the fluctuations, you'll get killed sooner or later. The long term trend is up. An excess profits tax might hurt oil companies in the future; I like companies that service oil and gas producers, because they are safe from any future windfall profits tax. As oil production falls there is going to be a great deal more exploration and drilling, just as happened in Texas post-peak.

Thanks Don! My father, in my youth, said I would likely live to get my neck broke but in the meantime that advice about service companies sounds good, I will start looking about.

why consider it a financial investment. it is an investment to be sure. i dont plan to sell my castle.......er i mean home, so why does the market value matter. if the market value goes down, so do my advaloem taxes.

not sure a condo can ever have the same "value". and those maintainance fees ....... watch out.

Also be prepared for inflation.

Yes, after the deflationary period, the unknown that arises is that as the energy to run the economy goes away, we will be left with a whole bunch of currency that can't do anything.

Why not spend $100 on a tomato (if I have the $100)? There won't be much else of worth to buy.

Jeffrey puts it this way: how much value do the top 10 banks have without the top ten oil fields?

My answer: not much.

I was joking with friends about investing in a shipping container full of hard liquor (not quite as fungible as cigarettes but it's non-perishable). The downside is security. Storing it in a warehouse means shrinkage. Storing it in your backyard makes it a magnet for criminals.

I think you are right, leave the government to do what it wants and it will inflate. I also think that Stoneleigh and Ilargi are right in the sense that if the economy is left to do what it wants then it will deflate.

Short-run, I tend to think that the government will get its way.

Long-run, I tend to think that the economy will get its way.

In the long run I also expect inflation - hyperinflation in fact, as all fiat currencies perish this way - but IMO we have a very nasty bought of debt deflation to live through first. As for how long it will last, I think it will persist for quite a while as deflation and depression reinforce each other. I don't see a slow Japanese-style affair though. I think a rapid collapse similar to what happened in Argentina is far more likely, complete with bank runs, loss of savings, rioting in the streets and political upheaval.

Although the deleveraging will probably be rapid, I don't see us escaping the downward spiral quickly. A cash-hoarding mentality has taken hold, and that will be difficult to reverse without a restoration of trust, and I don't see that happening any time soon.

To some extent, it depends on the longevity of the international debt financing model, as that places a great deal of power in the bond market. My guess is that we'll see a substantial dislocation in the long end of the treasury bond market next year. That would involve long term interest rates shooting up into double digits in nominal terms (far higher in real terms against a backdrop of a collapsing money supply), and would be akin to hitting the emergency stop button on the economy. Although there would be dollar devaluation, that wouldn't compensate for the deflationary effect of on-going credit destruction. Essential services would be completely gutted.

I don't think we'll see hyperinflation until the international debt financing model is well and truly broken. Once countries are on their own, then currency printing will be the obvious thing to do. Until then, attempts at debt monetization (as opposed to currency printing) are merely shooting money into a black hole of credit destruction. We are well on the way into the liquidity trap.

Hi Stoneleigh.
I came across this earlier, which indicates that 3 European countries have had to pull bond issues:
the disparate nature of Europe means that individual countries have to maintain their credit ratings, and however much they want to continue to bail their banks capacity is likely to be severely limited.
A European bail out will not happen, as Germany would not allow it.
It seems to me that this will work through quite quickly, with individual countries being picked off one by one, and banks falling like dominoes as their host countries have to give up on sustaining them.
This in turn should mean that the pressure should switch to the US, as the unsustainable nature of their commitments becomes clear.
I would expect meltdown in the next few months, probably before January.

Your assessment of this data would be much appreciated.

Deflation for the well off, inflation for the rest of us. TODers generally fall into the first class so that's what get emphasized here.

Yes he will, but the vast majority of Americans (95%+) will not be benefitting from all this printing. Uncle Ben's only responsibility is to do everything he can to help out certain interests. The "bailout", along with all his other measures, is a preview of the future path-how many on this site have been a direct beneficiary of Uncle Ben's printing so far? The only way most can participate is through investing/speculating. It won't matter how much money is printed, wages are going to take a major nosedive in the USA-all the printed money will be transferred directly to the connected.

Yes, exactly, Brian:
Deflation is happening all around, real property is becoming unsaleable like in the '30s, and yet the casino runs and the T Bills are printed. As faith in the dollar wanes and the interest rates on the notes rises the currency has to inflate away to nothing - what other way can the debt load be managed except by monetization?

Stagflation run amok: lebensmittel are rationed first by price and later by scarcity, at the same time as the paper (electronic, actually) proxies for wealth are debased to zero value.

When I bought 1oz. silver Eagles, they went for <20% over spot. Now the same vendor offers them at 80% over spot. And the fun has just begun.

Why do they cost so much over spot? Is it just a supply-demand mis-match? Will they retain that kind of premium, or will the spot have to increase by 50% for you to recover your investment?

There is (has been for two months) a complete disconnect between the physical metal markets and the paper markets. The 80% above spot is just that dealers way of presenting the issue. One dealer I buy from uses flat fees - until July they charged spot plus $3 for eagles, now it is spot plus $6

I've seen several explanations about this disconnect. None of them satisfactory. But one related issue that might shed light on this - the mint stopped pressing SAEs and claimed it was because they didn't have sufficient planchets from their supplier. But considering that it is the mint that provides the silver out of which the planchets are made, the only reason for the supplier not to have planchets is because the mint wasn't providing the silver.

"real property is becoming unsaleable like in the '30s,"

Where do you get nonsense like this? Go to a local MLS realtor and ask to see the list of sales for the last month or whatever. Go to your local court house and get a list there. Look on the web and notice where home sales went up.

"As faith in the dollar wanes.." The dollar is at a 30 month high against a basket of currencies. Again, check the web.


"Stagflation run amok.." Do you even have any idea of what the unemployment rate + inflation is currently? As compared to Jimmy Carter's stagflation rate? Give us a clue as to what amok is? You might even notice quite a few people are worried about deflation.

What is your point with silver which is off $10 from its recent high? Looks more like a big deflation in price to me. Please note one can draw any conclusion from one data point.

Finally you start with, "..Deflation is happening all around." Then you start on a inflation rant; so which is it?

editor's note:
first sentence - "will do" should read "is doing"
second sentence - "will be" should read "are"

Think 700 billion plus 125 billion (IAG), plus 35+ billion (Fannie and Freddie), etc. And the U.S. isn't the only one doing this. The Europeans are in for 3 Trillion, 500 billion for the Japanese.... And they still have not staunched the flow!

Could an already-existing fixed rate really be changed retroactively into a variable-rate mortgage? That's breath-taking if it's really true.

Could an already-existing fixed rate really be changed retroactively into a variable-rate mortgage?

No, and I am not sure why Stoneleigh "doubts" anyone has a fixed rate mortgage for 30 years, they are quite common.


A fixed rate mortgage (FRM) is a mortgage loan where the interest rate on the note remains the same through the term of the loan, as opposed to loans where the interest rate may adjust or "float."

Fixed rate mortgages are the most classic form of loan for home and product purchasing in the United States. The most common terms are 15-year and 30-year mortgages, but shorter terms are available, and 40-year and 50-year mortgages are now available (common in areas with high priced housing, where even a 30-year term leaves the mortgage amount out of reach of the average family).

Somewhere in the "small print" there is likely to be a clause that calls for repayment within a certain time period unless a new condition is agreed to. THis usually means that you have to repay in full if you don't agree to some new terms such as an increase in the interest rate.

The borrower is sure to be screwed before the lender takes a hit.

Could an already-existing fixed rate really be changed retroactively into a variable-rate mortgage?

Apparently yes. That seems to be what Congress did to some student loans. Why not mortgages as well? Of course, at first it will be to relieve "high" mortgage interest rates.

Of course, perhaps it's simply a matter of what is the definition of "fixed".

cfm in Gray, ME

After the ban on short-selling and other recent shenanigans, I think it's clear that the house can change the rules whenever they want. Anyone playing the game is at risk.

To add to Stoneleigh's comments about a homestead, I think that there are arguments in favor of being tied down as well - and they have to do with the retention of some real wealth. A mobile renter does have mobility, but they also lack the ability to invest in long term soil improvements, perennial plantings, etc... Not all of us view our homes as an investment - it didn't matter much to me whether people told me my house was worth $400K (as some idiot tried to claim once) or the 90K we paid for it years ago - those were words on a page, not its value. Its value was what we could afford, and what it could return to us, both in direct economic value (produce we grow, animals we graze, wood we cut) and in indirect economic value (a secure place to remain).

So what does someone with a mortgage do? Well, some people genuinely might want to do as Denninger suggests and blow their mortgage. This is particularly true on overvalued houses. But the other alternative is to move other people in with you - if you have a house and land that are valuable because of what they can produce - and it doesn't have to be vast acreage - talented gardeners on the edge of cities may well do very well - need to combine housing with others. 1-2 people supporting a household isn't going to work - 3-5 adults is probably better. This is the traditional poor-world model - lots of family members (and it works for chosen as well as biological family) putting their basic interests together.


In my zip code, rents have risen 10% over the last couple of years, while prices have fallen around 20%. Despite that, it's still cheaper to rent, although the cost of renting and buying are still converging. Rental demand seems strong.

At some point, the ability of taxing authorities to collect taxes will be rendered ineffective. I would think that we are more likely to see widespread failures of municipal and county govt's than for such local authorities to successfully hike property taxes to a level that drives people out of homes.

We live in the county just a short way out of Reno, NV. Like many county governments, they would like to charge higher and higher taxes to maintain BAU for them. A few years ago, we voted in a cap of 4% increase. Of course that is exponential and untenable over many years. Our tax last year was about $1800 (thank you Californians for gambling here) and this year will be $1900 even though property values lost 20% or more. The problem occurs in county government that now there are vacancies in home ownership and estimated expansion of the tax base is not occurring. Unless the county can do something about the squeeze they are in, we will see massive loss of services like low-income health care, police, fire, road maintenance, etc. We might even lose some bureaucrats.

We might even lose some bureaucrats.

The Horror!

$1900? I wish... Here the property tax is more than double that for a modest house. I am curiously awaiting the school-budget vote next April. (75% of the tax is for the schools, 25% for other municipal purposes.)

I'm sure a number of people here will play "Mr. Goody Two Shoes", (Who was that idiot that said it is "Patriotic" to pay more taxes?) but just stop paying your taxes altogether. In every way possible. Barter, do whatever you have to do. Drag the payments out until the very end, cut off the snakes head. It is not only your right as a citizen to not pay illegal tax, it is your responsibility to the Constitution to do so. The Treason, shown by your government in Washington seems to be building daily. The only way the idiots in Washington will get the message is by force. Spread the word...Do not, go quietly, into the night.

Sorry for the misquote...here is the whole Enchilada.
Do not go gentle into that good night,
Old age should burn and rave at close of day;
Rage, rage against the dying of the light.

-- Dylan Thomas

Sorry, not the whole enchilada. Copyright, and all that.

This is exactly what I've been thinking too. We have to kill the monster and rebuild from scratch. 70% of the economy is consumer spending - we have the POWER - yet we are not doing anything. My idea is to reduce consumer spending 20-25% and stop/postpone tax payments to the government. Bring the entire structure to the ground: TPTB are relying on us to keep consuming and paying our taxes. They know that without that, they are doomed. The whole system is so fragile already right now, it wouldn't take much to bring it all down. It will take major sacrifice and adjustment from all of us to make it through to the other side, but it is the only option. We cannot just let the existing system "rebuild" itself in some new hideous form.

If anyone has any information on legally refusing to pay taxes or assistance for those who wish to stop paying taxes in protest, legal precedents, etc., please post them. This could be the beginning of a new movement where the CITIZEN CONSUMER uses the power that it already has.

I don't have any hope of refusing to pay taxes -- I hire employees, and they don't necessarily share my antipathy to mismanaged government. Their withholding and Social Security has to be paid.

I could refuse to pay my own taxes, but they would just close my doors and put my employees out of work.

My solution to date is to minimize income -- not so hard to do -- and pay relatively high salaries to the employees. That minimizes taxes, and it might be a useful strategy for some people, depending on their personal needs and aspirations. It feels like I am doing something, and if a lot of people did it, the slowdown in the whole economy would be noticeable. Though perhaps useless.

Congratulations N-lng

Pay yourself and all your employees all the profits from the business so that the excess taxes can be avoided. If feasible pay your wife/partner/sons/daughters/ to ensure a tax-loss for your business. If you are not in the top 5% of income earners, then you are being screwed by the system, irrespective of which country you live in.

My idea is to reduce consumer spending 20-25% and stop/postpone tax payments to the government. Bring the entire structure to the ground: TPTB are relying on us to keep consuming and paying our taxes. They know that without that, they are doomed.

Yo!,Psst, malcolmkettering if you are still sitting at your computer, RUUUUUUUUNNNNNNN!!!!

In the background we can hear the sounds of the increasing staccato of heavily laden helicopters above the normally placid and tranquil neighborhood where malcolmkettering makes (made) his home.

Central Command to Black Vulture report ETA to target, over.
Black Vulture to Command, missiles are locked on target, commencing final launch sequence, Over and Out.

WHOOOSH!!! Blinding flash of intense white light lights up the night sky and deafening explosions are heard from miles away.

In the background we can hear the sounds of the decreasing staccato of now much lighter helicopters receding into the distance.

Black Vulture to Central Command on current heading ETA to home base 20 mins. Over and Out!

If it is "patriotic" to risk life and limb serving in the military then why isn't paying taxes "patriotic". But then there are those who believe exporting jobs to China and India is good for America. We live in a country where the young and poor are expected to do their patriotic duty while the old and rich don't give a damn what happens to their fellow citizens. By the way all that oil and cheap goods we import are taxes paid to Arabs and communist Chinese bureaucrats who detest free expression and would quickly put you away for writing what you wrote. I became a disabled veteran so you could freely express your lack of support for millions like me.

I became a disabled veteran so you could freely express your lack of support for millions like me.

I'm sorry that you have suffered a disability, but I can't think of any war in the 4 decades I've been alive that has had any impact one way or the other on my freedom of speech (aside from the "war on terror" which is mostly a "war on the constitution").

Imagine however, if the Federal government had been prevented by financial reality from getting involved in wars in which the outcomes (win or lose) have no practical impact on the US or our freedoms. If that was the case, you would in all probability NOT be disabled.

There is more than a little truth in the statement that depriving the Feds of money would make a lot of people an awful lot safer.

My tactic is Canadian dividend paying stocks. Canada takes 15% tax on the dividend. By treaty, I can choose to petition Canada for a refund, or I can take a dollar for dollar credit against my Federal taxes (not a reduction of taxable income, every dollar of tax taken by Canada is subtracted from my Fed income tax). This year, I expect to legally deprive the Feds of about $700. What's that, about 3/10ths of a second in Iraq? Still, every bit counts.

Based on random googling of 10bn/month, i.e., $3805 per second, my $700 amounts to 0.184 seconds of the Iraq war -- or if rounding up, 2/10ths of a second. Lame. I gotta do more.

they can have my castle when they pry my cold dead fingers from it.

Many people will even lose paid for homes if they have no income and can't pay the property taxes that will skyrocket as governments try to wring every penny from their constituents in order to keep themselves afloat.

Nope, If they did that none of them will get re-elected, and the politicans too will be among unemployment. Its more likely that local and state politicans will do everything to prevent getting the boot by voters. A much more probable scenerio is high/hyper-inflation. The gov't starts bailing out everyone and prints money to pay for it all. Joe Six Pack keeps his home and federal assistance money bails out state and local gov't so Joe Six Pack's property taxes decline. Consider that the US treasury is already working on new programs to tunnel cash into the hands of state and local gov't, and also already funneled trillions to prop up insolvent banks, auto manufactures, and insurance companies.

Soon the Democrats will gain control over Congress and the White House, and renew the socialism programs began in the FDR and LBJ years. By 2010 or 2011 you'll see programs like the NRA, WPA, etc (but with new fancy acronyms) make a big come back. As more people end up on the unemployment lines, the more voters will demand free lunches. As any economist, physicist, or engineer knows, there is no such thing as a free lunch.

"A democracy cannot exist as a permanent form of government. It can only exist until a majority of voters discover that they can vote themselves largess out of the public treasury."

One county has a hiring freeze of civilian employees and a large reduction in police cadet training. A state government has stopped many transportation programs. A county might close libraries one day a week. New parks programs might get cut. Iraq war expenses might be cut. If they could ever cut tobacco subsidies they might improve the health of a nation without having to build hospitals. Cancer was an expensive way for many to die.

Now I get what they meant by the "Ownership Society"

They OWN you (us)...

Paleo -- Of course that's how we got into this mess: folks didn't have a mind set that taking on a couple of hundred thousand $‘s of debt was a liability. It was an "investment". With borrowed money, of course. Didn't work out too good for the Chesapeake CEO when he borrowed $100 million to "invest" in his own company. Maybe the Feds should set up a bail out for him too.

More importantly, the real estate tax issue you mention could be the next nail in the coffin. Every taxing agency must be preparing themselves for applications for massive property valuation amendments. Maybe the best stock investment out there is a public law firm that specializes in representing home owners in such disputes. Some will just raise their taxing rate. But consider CA. They can't raise the rate legally and should be seeing a huge drop in property valuations. Given their budget was already in a shambles they might end up looking back at '08 as "the good times".

The term "bailout" is used a lot lately. I know of two definitions. One is nautical where we man the bilge pumps to keep from going under. The other is what you need to get out of jail while awaiting trial for an alleged crime. I think the second definition fits what is going on better than the first. First they didn't have any rules for an activity that was putting everyone at risk Then they fired the cops who kept watch over the bankers who loaned the crooks the money.

interesting concept, probably not a viable option for people with good credit. but if a person was to do this, it would make sense to milk the house and your good credit for all you can get, i.e. the full montey,bankruptcy(but be sure to max out your credit cards 1st).

consult an attorney. i doubt you will find many who will say this is a good idea.

tax based on equity ? what if you have negative equity, would you get money back ?

reminds me of the current election, who can promise to increase the debt more, i.e. lower taxes ? denninger makes the mistake of stating that the taxpayer will pay for his neighbor's scam.
i havent heard any politician propose to raise taxes to actually pay for any of this. it will be our children and grandchildren who pay and they may not pay with real money either.

and of course if lowering taxes and increasing the debt is good for the economy (as one white haired politician claims is an economic fundamental) then why not eliminate taxes altogether ?

From Automatic Earth:

Also, Fannie Mae writes down $20 billlion in -tax deferred- assets. They were already worthless when Fannie and Freddie were taken over by the government, but it was a trifle inconvenient to say so at the time. Freddie Mac will soon come with similar losses. This means both companies will need new capital injections from the government. Yes, that means you.

Looks like more 'good' news for your kids and grand kids elwoodelmore. Oh and If the money is not real at that time, as you say, I would think the chains will be - in one form or another.

"tax based on equity ? what if you have negative equity, would you get money back ?"

- exactly. They're now talking about "bailing out struggling homeowners". (It's really bailing out those homeowners' creditors.)

Although they may not raise taxes to "pay" for all the bailouts, the net effect of these money transfers is to shift the division of the wealth pie (however it is measured, even if in dollars that are losing value) from the average Joe to the connected.

... digging for gold ... ! Heh! You have a evil mind, possibly even a corporate one:)

People stuck with foreclosed recourse mortgages might as well seriously consider emigration - there have got to be places in the world where life won't be so bad for them as it will be here in the US.

I had thought about this too, and decided there should soon be a new visa requirement that you will need to discharge bankruptcy before leaving the country, or perhaps post a surety bond.

Better still, you'd have to post bond for your share of the national debt before leaving.

We are already reaching the rule-change part of the game. You certainly can't win, you can't tie, and you can't quit the game. Your decreed job is to lose, as slowly as you can possibly manage.

"....your share of the national debt ..."

that would be about $33,000, $1700 in the last month.

Move to Canada if you don't like your national debt... (Oh, and notice how the numbers are going DOWN?)

I hear that they are a bit more liberal and have a public health care system too...

"Move to Canada"

i have thought of it. and the smart politicians in the us have increased our debt by about 2/3 as much in the last month as the entire canadian national debt.

candadian's per capita debt is high to, but fortunately there are fewer of them. (not really)

Be careful to make a fair comparison. The net debt of the Canadian government (i.e. not including any provincial or municipal government debt, and note that debt varies greatly by province including one that actually has a surplus) is $508 billion Cdn. Expressed per-capita, the Canadian federal debt is about $16K Cdn (pop >31 million). The exchange rate has fluctuated wildly recently, but today it's at about 0.82 US$/Cdn$, making the per-capita figure $13K US. Heck, make it $14K US just to compensate for my rounding error and to err on the side of stating it as too large.

Contrast that with the U.S. government's debt of roughly $10,525 billion, which is roughly $35K (pop >301 million).

$35K vs $14K.



By the way, don't believe the propaganda that states that taxes are much higher in Canada than in the U.S. It is not, in general, true. Total taxation varies greatly depending on your personal situation and the jurisdiction in which you live, but I can state for a fact that the tax I paid in California was higher by a smidgen than what I would have paid in British Columbia. Just take a look at the federal income tax tables: the top rate in Canada is 29%, the top rate in the United States is 35%:


I can see it now....family of four wanting to vacation in Europe....$120K bond.

"I need to see your tickets, your picture ID, your passport, and your surety bond".

Your friendly credit card companies could post your bond for a few percent -- they know your situation and if you're a flight risk, and they'll follow you wherever you go.

I'll outsmart them though -- I'll just post my house as collateral for my bond! The banknote says I have that much equity!

For many years in the UK currency controls meant that you could go where you liked, but could only take a few pounds with you.
This seems quite possible.
Or alternatively, for the UK at least, if you sold up all your assets here in the UK they are likely to buy you, perhaps, a cardboard box in France.

Expect capital controls to make a comeback. Your freedom of movement will be limited, but your money's freedom of movement will be curtailed to a much greater extent.

Don't cry for me, Argentina.

Now you've just gone and given me a new career; transporting economic refugees overseas. Sounds like I'll be in on the ground wave of this one.

And totally unrelated to that, yacht Meander will be sailing to New Caledonia / Australia via Tahiti, Rarotonga, Fiji, and Vanuatu on May 1, 2009.

Peak Oil aware fugitives welcome.

Dave on Meander,


That's a sail I'd love to be in on.

Our profiles here on TOD don't seem to have contact information any longer, I hesitate to stick my e-mail in a post. How could I connect? Where will your sail start?

Can you tell us a little about Meander?

That's some awesome surf/sail/dive country!

You can show your e-mail addy in your profile if you wish. The default is that it's hidden.

Sorry I forgot to enter my email in my bio. Now corrected.

Simply click on WaveRider to get my address.


Hello Waverider,

The default economic model in the poor countries of Africa and Asia is to collect the cash and/or valuables from the refugees, then forcibly make them walk the plank when sufficient miles offshore. That way they don't have to actually burn all that expensive fuel on a long round trip. More short excursions are much more profitable. :(

EDIT: ATTN Got2Surf: be careful, you don't want to have to change your handle to Got2Swim. Does 'Meander' mean the same as treading saltwater as the ocean current sweeps you further from any hope of landfall?

Hello Tontonella

It's a slippery slope; from yacht skipper to criminal. Sort of like barbeque master to arsonist [ default economic model and growth industry]. And while I've worked long and hard to get a bad reputation, some damn fool always comes along and says something like, " He's the real deal and a very generous guy" Spoils years of hard work.

I'll be leaving San Rafael Ca. in May

I live in Mill Valley, but spent a large amount of time in Micronesia and Hawaii, a lot of it offshore--
Are you a experienced Blue Water sailor?


Thanks for the words of caution. I needed a laugh also. Before throwing crew overboard, remember there's also Got2Sleep, Got2Eat, and someone's Got2Steer the boat. Plus I'm 1/2 plankton and 1/2 marine mammal.

Just to tie-in Peak Oil: I think living on a boat will survive the oil crises. Solar and wind power generation. An ocean full of fish or jellies or whatever to snack upon. Lots of mobility... Efficient diesel engines: just stop for coconuts once in a while for fuel. Battery and DC technology and minimal energy use is what long-haul sailing is all about.

Plus there's waves...

(BTW Thanks Leanan)

Sure there are, come to pakistan and buy a fertile homestead. Recently dollar price has jumped 50%, from Rs. 56 to Rs. 84. You can get very fertile land for less than $5000/acre. You can make a nice 2160 sq ft house in less than $2,000. My own experience from farming shows that you can comfortably make 24% ROI if you buy farm land and 100% ROI if you rent farm land and grow your crops. We have no taxes on farm land, less than 4% income tax which only 10% people pay and a lot of farm subsidies. Our only problem is load shedding in which you get electricity for 18 hours a day instead of 24 but you will lose electricity sooner or later given the fact of peak oil so better you get accustomed to it sooner. You have to use manual power i.e. labour which is very cheap here ($1.25/day salary) to do work that you now do with machines. In $150/month income you can comfortably support a family in a big city and in $100/month you can in a village because our prices are very very low compare to yours. Certainly you can feel yourself to be many times richer the day you move here. You can contact me at i_love_to_know at yahoo.com. I will be happy to help you settling down here at no commission ofcourse because it will help spread the wealth by helping the poor by giving them jobs and providing pakistan with much needed foreign exchange. Thanks.

Lets suppose you have $10,000 in all including your cash, property etc. It can buy you almost no hard assets in usa, europe, japan, australia etc but in pakistan you can buy 2 to 2.5 acres of fertile land. If you invest $10,000 in business you can get may be $2,000/year which is enough for may be only one month expenses there but here you can get $10,000/year which given prices here is enough for 66 months expenses if you live in big city and 100 months expenses if you live in village.

Note: Expenses are of living with a family of five, two adults, two kids and one elderly.

Ours is paid for in full. Still have to pay taxes of course - no way to escape that one, but in the broader scheme of things it isn't all that much.

I have begun to compare buying a house with a mortgage to buying stocks on margin. In the old days people tended to stay in houses for many years - in some cases paying the whole thing off entirely, and with this model of home buying the analogy doesn't really work because the debt is eventually retired. But in today's world where people are flipping and using ARMS and HELOC, it is far more apt.

"Ask not for whom the margin calls - it calls for thee"

"Suddenly home "ownership" seems like a colossal liability."

Horse feathers!
Well, home ownership has always been a liability because you have to pay property tax, insurance, and maintenance as well as the bank. But then again, you pay the same things when you rent they are just not itemized. It is easier to move if you rent, but you already know that.
That being said an awful lot of people own their homes outright and therefore I find it hard to to see how this is a major liability. Then there are thousands of people that don't live in the wrong zip codes of California, Arizona, Utah, and Florida. Even if you live in one of the super depressed areas not all housing is depressed. Last time I looked housing addresses in the shadow of Camel Back mountain and Mummy Mountain in the Scottsdale Phoenix area are still appreciating. (At a much reduced rate but still going up in value.) If you have a conventional conforming loan, which the vast majority of people have and bought four or five years ago the housing market may make you uneasy but there is no "colossal liability" there either. There are housing markets in the US that haven't gone to Hell in a row boat; they may be somewhat "weak" but not "collapsed." Think Houston and New Orleans.

"Colossal liability" it would seem refers to the 8-9% of subprime loans made in the last four years or so. I assume the house flippers have already walked away and in as much the balance basically put up none to next to nothing up front really do not have much to loose by walking away.


The real colossal liability was and still lingering is the ability to make bad loans and the political pandering to do so.


The silver lining in all this is housing is becoming "more affordable" for many in may areas where it was anything but affordable.

I had "ownership" in quotes just to emphasize the faux nature of the term for many who make a monthly interest payment yet own almost no equity.

For sure Leanan, Denninger's 'take' means converting a loan to a debt-slave's collar and chains. Sounds like a great corporate inspired mousetrap to me.

See, a refinance, which this is, converts your mortgage into a recourse loan. That means if you take their "great deal" and then default later on (e.g. you lose your job in the upcoming Depression) your wages can be garnished forever and, if you earn more than the median income, you can't even get rid of the debt in bankruptcy.

This system already exists with federally insured student loans. I have (foolish me) student loans that need to be repaid, and even if I were to declare bankruptcy they don't go away... See http://www.finaid.org/questions/bankruptcyexception.phtml . I suspect that we might head for the same thing with mortgages sturctured as above. And, yes, I beleive that they can even go so far as to garnish my wages...

If the Grand Depression is underway, and you've been out of a job for a year, and your kids are going hungry, I suspect that you could claim undue hardship and get the student loans discharged in a bankruptcy. The big issue under these circumstances is that the lawyer's fees to accomplish this (show hardship) may be too high--in other words, putting the student loans on the "chopping block" may not be affordable.



I suppose to take things to an extreme, one could always become a non-person.

Or if that is not your cup of gruel it could be off to the greenwood to build a bow of yew "To live outside the law ...". Of course B. Dylan says to do that, " ... you must be honest" and even going that way it seems, has a COST today.

I've dropped out for years at a time, even in urban settings (it is easy to be invisible in big cities)--
You just follow a set of simple rules, and don't pick situations where winning is impossible.
With no utility bills, registered cars, rents in your name, checking accounts, magazine subscriptions one becomes invisible fast.
One must have a lifestyle that is simple and invisible. Most people can't do this.
Have a drivers license, if necessary, several counties or states away, at a PO Box. Have physical address, if required, on large rural ranches, with multiple residencies, and confused delivery.
But, why bother? I don't think anyone will be available to answer the phone soon.

hightrekker you could also mention drop out life as a wharf rat. It's a mobile lifestyle and one is quite inconspicuous, with boat work to be had on a cash basis. One little perk I found was not needing to change back and forth from standard to daylight time, just stay on tide table time.

I spear fished in Micronesia for a while, all on a barter or cash basis--
i also commercial fished on a cash basis. Anything having to do with oceans and water attracts interesting people who often live on the grey side of the economy.

A nice "just" war and be offered a chance to discharge debts by becoming cannon fodder in the liberation army.

I have really started debating if a college education is worth it if it requires student loans. After years of payments going only to interest I have really started working on getting my principal payed down. I've gotten about a 1/3 paid off so far and absolutely hate that debt.

While the loans can't be discharged through bankruptcy, a person theoretically could put those student debts on a credit card and then walk away from the credit card. I morally can't let myself do it, but I certainly have thought about it.

A different thought, could a person put their home in a trust (ie not their name) then pay the mortgage off with their own credit cards and walk away from the credit card debt and the house be protected?

I doubt it. You can't knowingly use a trust to avoid legal liabilities, afaik.


What the hell happened to "get out of dept, get out of dept!"?

So, now I am paying off my mortgage pronto, and you tell me I just missed the boat again.
I now have more equity than the bank in this house. I'm not able to give them the house. This whole conversation assumes that we have no equity.

You guys won't stop till I cry.

I consider myself a liberal, but do not support the idea, that McCain proposed, for example,to bailout the banks or the mortgage holders. Crashing housing prices are a negative for the homeowner but will be a boon to those who are able to purchase these houses at the new lower prices. Housing has been way overpriced in many areas for years, anyway. Trying to prop these prices up is just perpetuating an unsustainable situation.

When I bought my house, I made sure that the payments were way below my means. But now I am being punished for my prudence.

The attempt to bail out housing is just an admission that there is little besides housing that props up our economy. Krugman stated years ago that this is a losing proposition in the long term. We need to build other things that are real, not just real estate. China is pointing the way as reported in the drumbeat.

It seems to be taken as a given (on both sides of the political aisle) that home prices should not be allowed to drop any further, and that keeping these prices from dropping is an important policy objective. I have yet to hear a good explanation of why this is the case. The best one I heard was that if prices fall too much, people will walk away from their payments, but it seems that you could get banks to re-negotiate and take an equity stake in the houses without inflating their values.

It seems to me, that unless home prices are allowed to fluctuate as the market determines, you will never have anything resembling an efficient market. You will merely be denying people who don't own houses from getting one (I am biased, as I rent).

China is leading the way? Perhaps, if you consider that the number of closed factories is a "leading" indicator.

Europe at least seems likely to me to move in a deflationary direction, rather than towards inflation as is more possible in the US.
Austria has already cancelled a bond issue, as have Spain and Belgium:

European countries are easier to pick off one by one than the US, and Germany is not going to allow massive EU issuance.
It seems that although they want to provide unlimited support for the banks and derivatives, they just won't be able to.
I would guess that as this becomes clear, that should bring down the financial system and bankruptcies will sweep through the banking system.

Perhaps this will mean that the dollar will crash and bond issues cease for the US as the results play out.

If this is correct, then profound deflation will result.

Gage thinks it might take five to 10 years for enough electric cars to be on the road and for V2G to be truly viable.

That livescience toplink on How Parked Cars Could Power The Future is a hoot. Do we really need more scientists????

cfm in Gray, ME

Dryki -- "five to 10 years for enough electric cars to be on the road" eh? Given the current volitility in oil prices and the tight credit market I would guess 5 to 10 years to just build enough plants that can produce a significant numer of electric cars would be an optimistic out look. Just an opinion though. Just seems scalabity still eludes many out there.

I've been looking at total US primary energy consumption numbers--about 101 quadrillion BTU's in 2007. If I've got the conversion factor right, this is the equivalent of about 17 Gb of oil per year.

As you know, the largest Lower 48 oil field is (or was) the East Texas Field, about 5.5 Gb. The largest oil field in the US is Prudhoe Bay, about 12.5 Gb. And of course, it takes decades to fully deplete fields like this.

So, in order to keep the US going, at our current rate of consumption, we burn through the energy equivalent of close to the Prudhoe Bay Field + the East Texas Field every single year.

"If something can't go on forever, then it won't." Herb Stein

WNC Observer... I'll just add that most of society's problems are due to the inability to understand that very fundamental concept. (The housing bubble, credit crunch, peak oil, etc. are just a few problems that come to mind)

Or, as I like to say, "The trouble with unsustainable systems is that they can't be sustained."

Or "all life forms in the universe are by there very nature replicating machines, intent on exponential growth, which is always limited on finite planets, thus regardless of how clever the organism thinks it has become, what goes up must come down."

It strikes me that "intent" is a specifically human notion. I'm not sure that it is entirely appropriate to be applying such species-centric notions to "all life forms in the universe."

Language is a human attribute and as such, intentionality is built into the structure of human language. It is very cumbersome and difficult to discuss selective vectors without employing the language of intentionality. It's implicit when discussing biological evolution that the seeming intentionality is only metaphorical. All life forms, by definition *are* exponential replicators, whether or not they "intend" to be such or not.

Well, of course, it is us humans who have defined what "life" is, so there is little point to discussing what something is "by definition."

(And while you are correct that within the "evolutionary science" disciplines that intentionality is generally understood to be metaphorical, that is not the popular understanding.)

But your broader note about the difficulty of using human language is precisely my point. Would that not be critical in any discussion about organisms that think they are clever? Which was veganmasters original tilt, unless I misread him.

Why did Chevron indicate the 300 sq. mile Jack lease contained up to 15 billion barrels? According to one article I read it is not a continuous field but a series of discrete fields in the same layer of strata dated to the Lower Tertiary. I cannot believe it, nor disbelieve it. It is difficult to verify such reports at this early date.

Any definition of "life" that failed to include self-replication & auto-catalysis would be worse than incomplete. It would be meaningless. Not just organisms can be "alive," viruses can be, along with software and perhaps even universes.

It isn't my fault that the popular understanding is overly literal. When Dawkins speaks of the "selfish" gene, or veganmaster alludes to the "intent" of organisms to replicate exponentially, the misunderstanding is on the part of those who interpret such anthropomorphic metaphor literally.

The only organisms I know of who might consider themselves to be clever are humans. I would dispute this consideration.

"We'll keep on doing what we're doing until we can't, and then we won't." - Kunstler

We don't burn any whale oil for lighting, then again we don't burn much kerosene for lighting either, but we could. Maybe that quote should read "We'll keep doing what we're doing until we find something better to do"

As Amory Lovins and many others have pointed out for more than 30 years, the best "source" of energy is conservation. Or, as Lovins calls it, Negawatts.

Conservation does not mean turning down the thermostat, but learning to achieve the same results in the economy using less energy to begin with. I think there's still lots of "low hanging fruit" to be gathered, such as scrapping many of those big SUV's before their time. If the price of oil were to remain high, people would respond and energy use would decline. The trick would be keeping the cost of energy to the consumer at high levels, either thru some tax scheme or thru a rationing system.

I know, you've heard this before (probably dozens of times a week on TOD). But, aren't we speaking to the choir here anyway?

E. Swanson

My pet peeve is washing machines.
Why have the hot water inlet?

Mine are:

1. Dark roofs in the south
2. Lack of solar hot water heaters (especially in the south)
3. No grey water systems - seriously, people are softening, then filtering their water, then crapping in it.
4. Pretty much everything in suburbia.

BTW, I had a brilliant idea for how to get rid of Hummers (I thought of this before gas prices got high):

Congress should pass the "Hummer Requisition Act":

Citizens are allowed to buy Hummers, but must register themselves as the driver of the Hummer when they do so. If the military decides that the Hummer is needed for military action overseas, they can seize it by eminent domain, and the driver will be deployed along with his vehicle to the theatre of operations. Driver will be compensated for the value of the Hummer, and will given an enlistment, and paid as a PFC, with promotion possible to SPEC with good performance in combat.

Hummer sales would slow appreciably.

3. No grey water systems - seriously, people are softening, then filtering their water, then crapping in it.

Can't be much better than municipal water systems... We pump it, then filter and treat it, then pump it up to the tower to pressurize the whole system, and then crap in it. Or, piss in it.

I am in the city, but seriously considering an open loop geothermal system, and using the well as greywater for my toilets, garden hoses and non-potable faucets. And as for pissing in it... Have you ever walked into a residential house and seen a urinal in the bathroom? These things save water... I mean, seriously. My dream is to install a urinal in each of my two bathrooms, for both the water savings and for both my benefit and the benefit of my son (peeing onto a flat surface that goes into a drain is much easier and neater than peeing into a bowl of water).

And I fully expect a response from Totoneila about what should be done with the crap that we're flushing now...

I'm all over it, Geckolizard:
The well is done now, a variable-speed soft-start pump is on the way, and the installation will divide the system between a raw side for irrigation and a conditioned side for the house and the open-loop hydronic heat pump. It remains to be seen if the iron is low enough and the pH high enough to run the raw water to the toilets, but water availability is not an issue per se in W. OR. The static water level is only 20' down - in the Autumn, at its lowest!

My pet peeve is washing machines.

Mine: driers. Evil.

Mine: local laws that forbid drying clothes on a line. And air conditioned businesses that prop their doors open.

And air conditioned businesses that prop their doors open

Mine are open coolers, like in grocery stores. Some isles are freezing cold (in the really bad old days they added heat lamps). We probably need a law -I presume someone has done a study that says a food customer might not impulsively grab frozen food it he must first open a glas door). Fix these issues and you could save a huge amount of negawatts. People always advertise alt energy, as power for N houses. But this is very deceptive, we use a similar amount of power for commercial as residential, and a similar amount for industrial sector. Its not just a matter of powering houses, and cars, we gotta deal with industrial and commercial as well.

Hanging wash indoors in January is less than fun. And if you vent the dryer indoors you're replacing other heat.

I think that Ahrenius equations imply that soap is more effective at high temperatures. Also, high temperatures (>60C) are useful in actually killing germs.

Hi Eric,

When you put your mind to it, it's not difficult to find any number of ways to reduce your energy requirements without necessarily impacting comfort, convenience or cash flow, and if you're willing to re-invest those savings in similar upgrades, the situation continues to improve over time. Get a game plan in place and set clear targets; start out with the easy and inexpensive stuff and closely monitor your progress; then, take that critical next step and plough all (or most) of those savings back into additional upgrades.

As I've mentioned here many times before, the previous owners of this home used 5,700 litres/1,500 gallons of heating oil a year and approximately 14,000 kWh of electricity which, admittedly, established an extraordinary generous baseline (an annual expenditure of just over $7,000.00 at today's prices). After some six year's worth of ongoing improvements, our annual fuel oil consumption clocks in at 700 litres/185 gallons, our electricity usage (with heat pump) at 10,500 kWh and we burn another 80 litres/21 gallons of propane, mostly for cooking (outdoor BBQ) and clothes drying. Our combined energy cost (oil + electricity + propane) is now just under $1,900.00.

This coming year, the electric water heater should drop our fuel oil needs to 450 litres or less, and we hope to get our electricity consumption under the 10,000 kWh mark (thankfully, limiting the use of the dehumidifier as conditions permit and switching off the satellite receivers and various other home electronics has more than offset the addition of the water heater). With the electric hob (purchased by redeeming credit card points) we no longer use the propane cook top unless there's an extended power cut and we could easily hang our clothes out to dry if I were willing to forego the convenience of tossing everything into the tumble dryer -- that last step would eliminate virtually all of our remaining propane usage.


All the above proposals sound wonderful, except...

Even if every single proposal were universally adopted across the entire "developed" world (however you choose to define that), it would not significantly reduce the human footprint one iota.

A: 75 million new people added to the world's population each year.

We can all switch to solar water heaters, install urinals, use grey water on laws/toilets, build earthship houses with used tires, wear hemp clothing, commute to work by llama, and grow our own veggies in biodynamic gardens. Unfortunately, any marginal net savings in energy/carbon/nonrenawable resource consumption in the first world will be more than offset by those additional 75 million people per annum (another Europe added every ten years). This is true even assuming 100% of population growth occurs in third world countries that have a relatively low energy/resource footprint per capita.

And at the end of the day the elephant in the room is still: Too many people living on a planet of finite natural resources.

Most everyone here has great intentions and good ideas for positive change. Unfortunately, minus some display of actual leadership and acknowledgment of the population problem at the highest levels of government (which means standing up to powerful religious fanatics and right wing demagogues), there's not a whole lot that can be done at the individual level. Depressing, but true.

Hi Harm,

There may been a "growing population problem", but how does one remedy that? I asked this question of someone else on this forum who voiced similar concerns, and he suggested we close our borders to immigration, presumably so that these new arrivals don't adopt our excessive ways. Did you have something else in mind?


Hi, Paul,

Now there's a question for the ages.

I don't believe closing U.S. borders 100% is going to do the trick, nor is it even practically (or politically) feasible at this point. And even if we somehow managed to do it, all it would do is to prevent the third world's poor from entering the U.S. It might improve things here (pressure on wages, domestic consumption and resources), but would do nothing to solve the underlying population growth problem everywhere else.

The only solution I can fathom (aside from world governments adopting harsh measures like forced sterilization or one-child-per-couple a-la China) is an acknowledgment of the problem by world political leaders, and financial incentivazation of smaller families by governments. Simple acknowledgement of the problem would be a *huge* first step we have yet to see from any world leader.

Right now, if there is any population "policy" by world governments, it's generally in favor of MORE births, not fewer. In the U.S., we directly incentivize couples having more babies via tax credits and itemized write-offs, and indirectly via welfare/AFDC, MediCal type programs, etc. And of course, our current Dear Leader is *cutting* not increasing funding for family planning both domestically and internationally. Hopefully, this situation will be changing after Novermber 4th, but it's pretty bad right now.

I really think government policies aimed at reducing population growth via voluntary incentives could go a long way. Would it be enough? I don't know, but at least it's worth a try.

I appreciate your thoughtful reply, Harm. This is an uncomfortable topic for me, even though I'm not a parent and thus possess no direct stake in the matter. However, I do believe the decision whether to have a child is a private matter and that public policy should never unfairly discriminate against those who wish to bear children. I'm far more comfortable addressing energy issues by minimizing my own consumption and by choosing technologies and fuel sources that have the least social, political and environmental impact and, in turn, encouraging others who may be so inclined to do the same.

I guess my underlying concern is that the issue of population growth, which invariably points its finger at the non-industrial world, will serve as a convenient excuse for not doing the things that we in the industrial world can and should do; namely, getting our own house in order.


Paul, that is actually an easy one. Way, way back when limits to growth first came out, "replacement" was the idea. A couple had 2 children and that was it. It replaces them, and does not add. It covers all the issues. Quite simple. I also suggest when you have had your 2, a vasectomy is the idea. Much safer than anything the young lady might do to ensure no further pregnancies. Taking hormones, etc is not healthy, a quick snip is not going to hurt. After all be a man.

I did it, had 2 sons, and then ended up with custody, single Dads with children kind of limit your life style. Not many hours in a day for yourself. I ended up meeting a divorced Mom with 2 daughters.
Can you say Brady bunch? So I fathered 2, but raised 4. Not much difference actually, there is the same place in my heart for all of them. There are many children in the world who could use loving parents. If you think about it, actually, we really don't need to make as many as we can, but yeah that takes thinking about it, and not just having sex.

That said, I am really incensed by the church with it's action against birth control, and this whole be fruitfull and multiply thing. Simply, it says to me, we can outbreed them and then we can be in power. Go Christians.

Don in Maine

Conservation does not mean turning down the thermostat, but learning to achieve the same results in the economy using less energy to begin with.

OK. Now, let's have a discussion of what the word RESULTS means.

Actually, that is usually called "efficiency".

"Conservation" is doing without, a concept that many Americans will soon be acquainted with, for the first time, and will be rather surprised.

Posted in the headlines, the report by the Arup group

This seems like really big news to me, as it indicates that everyone other than the terminally stupid, ie. Governments and politicians, is now peak oil aware, and the Arup group in this as one of their 3 scenarios, a plateau, decline and collapse gives significant weight to the collapse scenario.
They don't really seem to believe the plateau theory.
They also make passing mention of the gas availability problem, although they don't look at it in depth, so I suspect they have no idea of just how hideously that is likely to pan out.

"300 steel mills burning tyres"
Bleah! Can you say Catabolic Collapse?
Compared to stringing out this kind of horror for another couple decades, a fast crash sounds positively upbeat.

My guess is that in the UK fast crash means civil war, and possibly mass starvation.
I will take the 300 mills burning tyres, thank you.

Sorry, yes, DaveMart,
it's not something to be glib about.

We find ourselves in the same position as the world banking system, where a slow hemorrhaging of resources is preferable to facing the music today - and dying tomorrow.

oh, but Dave, civil war is far more romantic than death by pollution.

I get downright unromantic when my feet get cold. ;-)

I get unromantic when I have a persistent cough due to breathing air that has too many irritants in it. :) Civil war is avoidable, respiratory ailments due to bad air much less so.

These plans would have to meet EU pollution regulations, so would emit very little pollution.
Civic breakdown would mean that the ones which weren't being used to burn around people's necks would be burnt to keep warm on open fires.

Just how avoidable do you imagine civil war would be if there were not enough food to go around, and not enough money to import it, in a society which now has massive ethnic and religious diversity?
Someone would have to go without, and war would be how it was determined who that would be.

Did Londoners have a civil war during the battle of Britain? Did the Germans have a civil war in the furious winter of 1947 when large portions of them were starving and freezing because their houses were all blown up? Later on, instead of telling their children that they should eat all their food because people in Africa were starving, German mothers would tell their children that they would never have survived the winter of '47.

Civil wars require more than just adversity to start. Sure, cultural diversity will make matters more tense and you might get riots, but those happen even in the best of times and are usually put down by the armed forces.

Ethnic and religious diversity is a very good starting point for civil war.
The examples you have chosen display neither, and in the German case you are talking about a population which was even more beaten down by long conflict,and occupied by ruthless conquerors who would not have hesitated to shoot the population.

Under much less extreme stress there are a thousand examples of Civil War, from Bosnia to Kashmir.

nelsone -

Regarding those '300 steel mills in Lahore, Pakistan burning tires for fuel', I strongly suspect that something got badly screwed up in the translation into English.

First, Pakistan is a very minor steel producer and is not even among the top 40 steel-producing countries. So, it is absolutely ludicrous that a single city in Pakistan has anything remotely close to 300 actual steel mills. (A steel mill being an operation that either smelts iron from the ore to then produce steel or remelts scrap steel to make new steel).

I strongly suspect that what the author of the article is referring to are iron foundries and/or other metal-working factories. Nevertheless, 300 such operations is a large concentration of heavy industry, which for a city like Lahore seems highly dubious.

Regarding the burning of scrap tires (or 'tyres' for you Brits), it can be done in a reasonably environmentally safe manner, but I seriously doubt that such would be the case for ad hoc situations where it is used as an emergency substitute for fossil fuels. (Real nasty stuff when not properly controlled!)

I very much doubt that Pakistan has a well-regulated scrap-tire management program, so they very likely have an accumulation of scrap tires representing many years of indifferent tire disposal. As in the US, once they get through 'mining' this existing inventory, then the amount of scrap tires available will roughly equal the ongoing tire usage rate. The latter is pretty easy to calculate using number of vehicles, average miles travelled, and typical tire life. Over the long run scrap tires can never be a major source of fuel.

Peak Tires too. Wasn't there an article on TOD maybe 6 months back about no more big tires available? 300 operations burning tires regularly - not even steel mills - that would deplete strategic tire stockpiles quickly.

Just wait until people start cramming them into their woodstoves.

cfm in Gray, ME

My dad tells the tale of my great grandfather burning rail road ties to heat his home in winter back in the day..made a small mini-saw mill with a model T car that was on blocks and a 4 foot saw blade attached to the drive side of the axel to cut them into logs that would fit into the wood burning stove...now that I think of it, I bet the tires from that rig found there way into the stove also..anything to keep the house warm.
My lungs ache from the thought of the color coming from his stove pipe.

Burning tires in the wood stove is an interesting spectacle. Fire and black smoke blasts from the chimney pipe; the stove becomes cherry red and sucks air, blowing smoke and fire, as one could imagine a dragon, blowing fire from it's nostrils. Then, the neighborhood is evacuated as the fire engines arrive. Apologies are necessary as is restitution.

Fremont -

Burning tires can be very bad, but not as bad as burning plastic insulation.

During the pre-environmental era of the 1950s and 1960s there were a number of operations along the northern part of the New Jersey Turnpike that operated these very large and very crude 'tee-pee burners' (so named for their conical shape) that recovered copper by burning the plastic insulation off of wires. No air pollution controls whatsoever. You wouldn't believe the awful smell and acrid smoke that came off those things.

The thought of someone burning tires in a residential stove is truly frightening. But people have done far, far worse things when it became a matter of physical survival.

That horrific method of reclaiming copper is still in use in Asia and Africa. In fact I bet world wide that this method is more used now than ever. http://www.modernghana.com/news/184974/1/dumping-old-computers-in-ghana-... I can't remember where I saw the article about Asia but this recycling of computer waste is wide spread. Most done by child labor.

An excellent idea to make people cut down on their postPeak vehicle miles: instead, steal someone's tires to burn for heating. Sure beats burning your furniture.../rant off


The IEA's long awaited report has been leaked by the Financial Times.

Output from the world’s oilfields is declining faster than previously thought, the first authoritative public study of the biggest fields shows.

Without extra investment to raise production, the natural annual rate of output decline is 9.1 per cent, the International Energy Agency says in its annual report, the World Energy Outlook, a draft of which has been obtained by the Financial Times.


The agency says even with investment, the annual rate of output decline is 6.4 per cent.

2%? 4%? HA! All of the cornucopians who said we were being doom mongers have just had their birds shot clean out of the sky by no less than the IEA.

How long do people think we can keep adding to base crude oil production when natural decline rates have reached 9%? And worse, oil prices are now falling badly, creating zero incentive to invest.

Bakhtiari's 55mbpd by 2020 sure sounds awfully plausible now, doesn't it? And everything that might go with a world of 8 billion people trying to share 55 mbpd of oil is going to come to the foreground.

You think it's been a bumpy ride so far? We've only begun to hit the turbulence this will generate.

Fasten your seatbelts. The end of the oil plateau is in sight and the dropoff is going to be dramatic.

I refer the honourable gentleman to the discussion yesterday...

And the day before. :)

There will probably be a key post about this report...when it is actually released. (The IEA claims the FT article is not accurate.)

I've been thinking about that 'its not accurate' statement.

When you look at the 6.4% figure after infill and more advanced recovery, that results in about a 5Mbpd decline rate. Comparing that with the megaprojects numbers over previous years and it ties in quite well, the little left over shows up as small rises on the plateau.

There are three interesting things that come from that observation, besides the IEA having to spin like a top to try to refute it.

1) You can only do so much to infill and redevelop existing fields, eventually you run out of tricks and the 6.4% rate edges up towards 9.1%

2) The Megaprojects data doesn't look that hot beyond next year, not enough to equal 5Mbpd. That means net decline.

3) The 9.1% figure sets a base decline rate for the 'old world fields'. That's not only higher than expected, the newer fields deplete faster. So it will tend to accelerate somewhat over time.

All of which is fairly academic. The world and society can't handle that rate of decline, it can't adjust fast enough. Put politely those figures specify 'dislocations' in societal structures within the 5-10 year time horizon.

The essence of the leaked report is that the IEA has increased their estimate of the global decline rate for existing fields to 6.4% from 5%.

This is definitely not good news. But it's not doom either.

There is about 70 mbpd of conventional oil being produced. That means 4.5 mbpd of new projects must come online every year to keep things flat for conventional oil.

They are projecting a slightly rising plateau for conventional oil production to 2030.

But, in addition, on top of that plateau of conventional oil, they are projecting rising production of unconventional oil and other hydrocarbon liquids like CTL, LPG, bio-fuels. The global decline rate of 6.4% doesn't apply to these because they have very different production profiles.



For the IEA's previous estimate of global decline rate see page 23 of the following:

Show me a solid study that actually gives a scientific basis for believing we're going to achieve 30 mbpd of unconventional production by 2030. And further, show me a study that says we can hold the line around 70 mbpd of crude for another 22 years. That's simply an absolutely incredible assertion backed by zero scientific data whatsoever.

And further, show me a study that says we can hold the line around 70 mbpd of crude for another 22 years.

Take it up with the IEA.

The Financial Times article says that the IEA study is based on looking at 500 oil fields. That's pretty significant and it's the first bottom-up study of such magnitude from an authoritative source.

I'm not suggesting people shouldn't question it. But it can't be dismissed out of hand.

Personally I don't think the world is going to need 100 mbpd of hydrocarbon liquids in 2030. 70 mbpd of "all liquids" will do just fine. By 2030 the US will have scaled back driving much more than at present, cars will be much more efficient and range-extended EVs will be common. (along with bicycles)

Add it all up, and US requirements by 2030 may only be about 10 mbpd. That's definitely doable. (We currently use about 18.5 million barrels per day)

EDIT: To get to 10 mbpd in 2030 we need to reduce consumption by about 2.6% per year. i.e. a much slower rate of decline than we have seen recently.

If the population continues to grow at the projected rates in the USA, the increases in automobiles, houses, businesses, government operations, etc... will not only negate any savings you might get from some increases in efficiency, but add major amounts of new energy "needs".
Without population control there is and can be no good future.

For the reasons I outlined I don't see it as positively as you do.

1) The unconventional will be hard hit by the credit crunch and the slow down in investment. Essentially we shouldn't expect anything that hasn't already proven itself to find funding.

2) You say 4.5Mbpd, I say 5. They straddle the current megaproject data into the future and essentially cap and prevent recovery from recession. The world that meet the decline is a world in recession.

3) The 9.1% is key. That high a number means the 'plateau' cost is high, in terms of time, cost, expertise, manpower, investment. Just standing still requires a sprint in the red queen race. No effort left for other actions, no slack.

I'd say the data does suggest doom precisely because it is that little bit over the line, or actually a whole lot over the line (somewhere around 3% net decline).

I saw half a dozen relevant posts in yesterday's Drumbeat about what should probably be the biggest piece of peak oil news released in months. There were lots of others that rambled off in some other direction but very few that discussed this story directly. How about we adjust some models with a 9% natural decline rate and see what we might expect to occur then, eh?

It's hard to get too excited when the IEA claims the article is not an accurate representation of their report.

Also, if it is accurate - they are still expecting production to increase. IOW, it's the same old, same old. Yes, the old fields are fading fast, but don't worry, all we need is enough investment, and we can party on.

But who knows, maybe the real report will be better. The recent price collapse and financial crisis may have raised some questions about how much investment there will be.

The recent price collapse and financial crisis may have raised some questions about how much investment there will be.

I suspect that this is being set up as the cover story: "Oh, yes, we COULD have postponed the peak for as long as we formerly claimed, but we never could have anticipated that the funding would be unavailable for all of the megaprojects that we were counting upon when we made our projections."

It could most certainly be a cover story.

The time-honored way to deliver bad news in public speaking is to say what needs to happen to avoid a specific consequence rather than saying, "this consequence is going to happen." It allows one to avoid sticking out one's head very much lest it get chopped off.

So for instance I would say, "Without $1B in extra funding, more children will die of malnutrition" rather than "It's almost certain that 500,000 children will die of malnutrition next year." The first method is "gentler."

Sometimes after saying the action required the speaker might go so far as to say, "This will be a challenge" or "This will be difficult" or even "This will be very difficult" but under no circumstances can the speaker talk more plainly than that.

They will almost never say, "This is a preposterous assumption" or "This is clearly impossible."

After all, it is slightly possible that we'll have 30 mb/d of unconventional oil by 2030, right?

The sooner the voracious appetite of human overpopulation is reduced, the better for both the planet and net human suffering (because more people exponentially means more suffering in the future). Energy flows are the key to raping the planet, and the only future is for humanity to learn a very hard and fast lesson in humility. Organic polyculture works much better than chemical ag, regardless of the propaganda. Soils and water will finally be seen as the foundation of economies, which they truly are.


I agree with your comment. It is because of that 9% number that I'm a qualified doomer. We have the natural resources, the labor, the physical capital of tools and machines and building, and the technologies we need to cope with swiftly declining oil production; that is the qualification in my doomerism. But what we lack is political will, leadership, and culture (in the sociological sense) to make the changes that will have to be made swiftly.

Thus I predict a Greater Depression based on declining oil production, with unemployment rates in the 25%-40% range over the next twenty years. Once we see double-digit unemployment we'll also probably see double-digit inflation as well--much more deficit spending, much more printing of money, more attempted bailouts.


Yes, that 9% is truly distressing. I believed that at 2-4%, the US could probably have muddled through, but I don't see how we can possibly handle a decline rate that is as steep as that.

Dark days ahead, I fear.

To add my ignorant,sad, and pathetic thoughts to this observation about the decline rate of vs the declining gas prices. .

The current price of gas scares the shit out of this doomer country boy.

Today I paid $2.29..it has gone below what a closed station down the road had posted from a long time back! The sign still hangs there.

I think that we will have lower prices until whatever the hell is causing it disappears and THEN? It will climb and climb and climb until it reaches unbelievable price ranges.

The recent trip to Raleigh, NC and back was frought with peril and angst. My son learned a very scary lesson ,,then promptly forgot it.I woke him almost to Nashville and said.."we have 30 miles left to go on the trip computer in gas in the tank. No stations are open. What do you propose? We might not make it much past Nashville if they are shutdown." We almost coasted into Clarksville on fumes.

I am waiting then for the shoe to drop and those gas prices to scream to the max.

Then we will see just what way this nation is going to go. Black or white President will not matter in the least. Congress will not matter in the least. Cities will surely dive into chaos and blackouts. The past will come back but with multitudes of dead bodies rotting away. Many will suddenly find 'religion'. The rest is a trip into the outer darkness.

Yes the numbers are speaking clearly. We are out of options. There is no time left. Ok..on my way to BLP and a smidgen of hope. A very small sliver of hope. Then home to sharpen my axes from the last auction. A good clean sharp double-bit ax or poleax is a wonder to behold and own. My 3 two man crosscut saws are awaiting patiently. For now the Stihl 028 SuperAV rules along with the Sachs 133 with a 31 inch bar and chain.

I do so love the smell of fuel mix early of a morning.


Even in my little urban corner of Colorado I just had my two chainsaws sharpened and tuned up. I found a nifty manual hydraulic wood splitter that works amazingly well and costs less that $100 at Checker Auto Parts... go figure. Already we have an antelope and a deer in the freezer this season, I'm off to get one more before elk season starts up. My new flock of chickens should start laying by about Christmas. And all of this hidden in a small lot in the middle of a city.

I am praying this winter is calm and we have a soft landing from Wall Street crashing but anything is possible and 9% decline will catch us quickly. Enjoy that cheap gasoline now as it might be our last.

Huge number of the exploration dry wells is a root
of the Peak Oil Crisis:

Today, as it was decade years before, oil companies have drilled mostly dry exploration wells. Drilling success rate doesn’t overcome 25% on average. It means that three dry wells go to waste from four drilled. It means also that discovery occurs much slowly then if the success rate significantly rise. Let us assume, for now just hypothetically, that there is a highly productive Х-technology for detection of hydrocarbon deposits that provides a success rate of 75%. In other words, 3 productive wells for each dry well. Obviously with the technology world oil industry will discover every year in three times more oil fields then with conventional technology if other conditions being equal. It will mitigate world oil shortage significantly.
Why the success rate is so low?
The success rate results from the unreliability of the predictions based on seismic data, which uses as a foundation for laying wells. Seismics is the dominant method in oil exploration, with a full-year revenue of $2.47 billion (2006). Losses caused by dry holes overcome this revenue much more.
Other methods as electromagnetic (EM) technologies have low investigation depth (1.5 – 2.0 km) and low productivity.
What measures take leaders of oil industry to increase the success rate?
Practically nothing: because they have no interest in fast discoveries and low oil prices.
Dry wells are a fee society has to pay for conservatism of the oil industry leaders, who have built an array they are happy with –

low drilling success rate (25%) – large number of dry wells – large volume of exploration drilling – large number of drill-ships – large number of staff – expensive oil and gasoline – large investments and subsidies into the oil industry – high revenues of the oil and service companies, high dividends for investors – a drop in world economics and the quality of life of the population in oil-importing countries.

Conventional exploration technologies, how it was mentioned above, can not to provide required success.
However there is a technology which has 75% success rate, depth of investigation about 18,000 ft and high productivity.
How would the above-presented array change if the new technology was to be used? It would be like this:

high success rate (75%) – less number of dry wells – significant increase of new discoveries – a decrease number of drill-ships – cheap o il and gasoline – a decrease investments, subsidies and dividends – average oil and service companies revenues – a recovery of economic system and the quality of life of the oil-importing countries.

New technology requires in three times less of drill ships as well as investments; almost in two times less time to detect all prospects on investigated area. Beside of that hundreds dry wells never will be drilled that improves environmental situation and so on.


Bakhtiari's 55mbpd by 2020 sure sounds awfully plausible now, doesn't it?

I'm starting to wonder if we'll all be extremely grateful in 2020 if global production is still as much as 55mbpd?

Not if China is receiving 95% of all oil exports.

But look at what the article actually said:

It expects oil consumption in 2030 to reach 106.4m barrels a day, down from last year's forecast of 116.3m b/d.

This report, if the article is accurate, is not a confirmation of Bakhtiari's prediction - quite the opposite.

The whole article reads like one big double entendre-those on TOD realize what 9.1% means but the public could care less-what they take away from this is -no immediate problem.

I've read that report several times these past days and still wonder what they are trying to say. It's either sloppy journalism on FT's part, a poor, garbled leak, incompetency at IEA, or a clouded head on my part.

"The agency says even with investment, the annual rate of output decline is 6.4 per cent."

What kind of investment-it's not specified, or even to where those $ are directed. Is it solely for EOR of existing wells, or is that a field average with new wells, or including new production or new fields?

Yet they turn around in the next breath and predict 106 mpd by 2030, an increase ~ 20 mpd. That certainly doesn't square with 6.4% decline. So the above must be just for headlines, or on existing wells or fields, who knows.

"“The future rate of decline in output from producing oilfields as they mature is the single most important determinant of the amount of new capacity that will need to be built globally to meet demand,” the IEA says."

So a hint that now we must find new fields to meet their 106 figure-but still no hint on what the investments are for in the 6.4 decline references.

The takeaway? That second sentence.

"Without extra investment to raise production, the natural annual rate of output decline is 9.1 per cent, the International Energy Agency says in its annual report, the World Energy Outlook, a draft of which has been obtained by the Financial Times"

Which I guess is if we just sit here and let the oil ooze up on it's own. I assume they mean worldwide, not field, but what is "natural annual". Have we seen that historically? Maybe WT or Rockman has specific examples. I would sure appreciate that.

Yet from today's toplink from Rigzone:

"To be sure, most big oil companies have shown no sign of trimming their investments. Royal Dutch Shell PLC says it is sticking to its capital-investment target of $36 billion for this year -- the largest in its history -- and Chevron Corp. is also charging ahead with its $23 billion program."

What does that 9.1% decline mean, how did they arrive at it. It certainly is a headline grabber, especially to those of us used to considering 2-4% declines. Did they find new evidence of accelerating declines, or are they, or someone in the organization, trying to highlight worst case scenarios. Guess we have to wait for the unleaked version.

Edit before posting:

DataMunger says the essence of the report is an increase from 5 to 6.4 on the IEA's estimate of global decline of existing fields. Thanks. It certainly doesn't come across in the FT article. Care to elaborate on the big takeaway, the 9.1 decline?

Following some tips by WestTexas, I'm surmising that the 9.1 is the decline with absolutely no new money invested
in improving production.

The normal thing, of course, is to invest more on existing fields to improve production, bringing it up to a 6.4% decline rate for existing fields.

Not sure how one goes about posting news items but I found this:


I figured Alan may have covered this in the past but I didnt recall.

Apparently this will be on the Ballot in California Nov4th.

I'm voting for it. We sure as hell need it, but I'm still worried about delays and cost overruns related to the financial crisis and resource scarcity; a lot can happen between now and 2020.

One of the criticisms is overly optimistic estimates of ridership. Does anyone know where to find numbers on the passengers that fly between Northern and Southern California? It's a very busy short hop route. Southwest alone has 27 flights a day each way between LAX and SFO/OAK. If you include Burbank and San Jose, it's 65 flights each way.

Russian Oil Output May Fall 8% Over Next 2 Years, UralSib Says


Our (or more accurately, Khebab's) projected production decline rate for Russia over the next 10 years is -5.1%/year plus or minus 2%.


Feds probe Countrywide's 'VIP' program

NBC News has learned that Robert Feinberg - a former Countrywide loan officer who handled what were known as the "VIP" mortgages - spent six hours last Thursday with a six-person team from the Justice Department. The team included prosecutors from the Public Integrity section, which handles investigations of possible public corruption.

"The Justice Department is making very serious inquiry into any possible wrongdoing that may involve (former Countrywide CEO) Angelo Mozilo, other Countrywide employees, Sen. Chris Dodd, Sen. Kent Conrad, (former Fannie Mae CEO) Franklin Raines or other public officials," said Feinberg's lawyer, Anthony Salvano. "Robert has always cooperated thoroughly with authorities and is strictly a witness in their investigation."

Hmmm. Chris Dodd? The chairman of the banking committee? One of the guys who rammed the bailout through?


Any possible wrongdoing???

German “Spiegel Magazin” writes this morning: “RETTUNGSPAKET BIZARR” translates “Bizarre Bailout” http://www.spiegel.de/wirtschaft/0,1518,587446,00.html

Referring to this article of the Washington Post:


"U.S. banks getting more than $163 billion from the Treasury Department for new lending are on pace to pay more than half of that sum to their shareholders, with government permission, over the next three years..."

People in Germany just can’t understand it.

And giant bonuses. The money transfer from the taxpayers was never intended to facilitate lending-that is the cover story. Increasing borrowing and lending in the USA is relatively easy if that was your intention-simply increase the deductibility of interest expense. Instead of a $1000 expense against income for $1000 in interest expense, make it a $2000 writeoff. The problem with this approach is that you cannot funnel giant sums of taxpayer money directly to those you choose. This program is about the connected using taxpayer money to attack those with less influence.

I'm shocked, shocked to find that Paulson is funneling money to his old cronies.

If on some bright sunshiny day, Paulson is found guilty of treason and executed, I will give up being an agnostic and believe there is a god.

Nah, Cheney would have to get the chop too to make a believer of me.
I don't think these 'wise fools' realise the depths of the anger they will incur when their confidence tricks become clear to the average person who they bankrupt and abuse.

Correct me if I'm wrong: the engineers of the Great Depression lived long and happy lives. There is no consensus today that there even were such engineers, let alone their names.

We are not talking about mistaken policies here. We are talking about behaviour which was criminal or criminally negligent at the time of commission.
At a guess, most of the huge bonuses came to people engaged in criminal deception.
At the moment they are taking taxpayer handouts whilst claiming huge bonuses.
When TSHTF if they are not prosecuted I think they will be lynched, or I certainly hope so.

This is not new. Paul Warburg deliberately crashed the entire US market in 1907. Then he got picked to sit on Wilson's secret commission that concocted the legislation to create the Federal Reserve.

Ah, but we're different now? Special? Smarter than our ancestors?

I don't think so. I think we are even more gullible than our ancestors and thus more accepting of massive scams. And I point to the $700 billion bailout bill as proof.

Paulson helped develop the derivatives market and then helped lead Goldman Sachs to the top of that market. And now, wonder of wonders, he sits as Secretary of the Treasury bailing out Government Goldman Sachs from their own follies.

And some of you still think this is accidental? The capacity of homo sapiens to swallow lie after lie continues to astound me.

The life-cycle viability of nuclear power apparently depends on harvesting the unearned fruits of "growth" (in the rest of the economy), before the decommissioning can be paid for:

Entergy plan calls for 60 years before Yankee decommissioning

Even if Vermont Yankee nuclear plant shuts down in 2012 when its original federal license expires, Entergy Nuclear wouldn't start cleaning up and dismantling the reactor for close to 60 years, according to a plan filed with the Nuclear Regulatory Commission.

Entergy Nuclear has agreed to add $60 million to its shrinking decommissioning fund for the Vermont Yankee nuclear plant — but not until 2026.

In its filing with the Nuclear Regulatory Commission, Entergy Nuclear said it planned on decommissioning the reactor in 2067, and completing the job by 2072, at a total cost of $875 million.

The filing however is based on the decommissioning fund having a value of $440 million, which is no longer accurate due to losses in the stock market.

Earlier this month, Entergy said the fund was valued at $397 million. Additionally, Entergy includes the cost of handling high-level waste in its $875 million budget.

The long delay before cleanup and dismantlement is allowed under NRC rules. The company can put the reactor into mothballs once it is shut down, which allows its decommissioning trust fund to grow to cover the costs of cleanup.

I wonder if they are really just waiting for the radioactivity levels to go down a bit before they try and take the thing apart.

The cost of decommissioning is pretty much what you fancy paying.
The reason it is difficult is because of the radioactivity levels, but by their nature the really nasty ones decay quickest.
You can pretty much leave the structure as is if you want to, after the fuel has been extracted, as you are mainly talking about things like irradiated steel, which is going to stay where it was left.
A lot of the specifications for decommissioning are pretty gold plated, with relatively early dismantling.
Just leave it longer if cost reduction is more important.

Since Yestermonth

I see that WTI spot prices are on the decline again today: About $65/bbl as I write.

Here is a glimpse into the recent past, 11 Jul 2008:

In some ways, the high prices depicted above seem like they occurred much longer ago than in reality. Wow, what a price drop since maximum! All part of the growing turmoil, and uncertainty in 2008. The roller coaster has arrived, it would appear.



Hello TODers,

Another weblink showing how I-NPK producers can quickly curtail production to help keep prices high:

Uralkali cuts 2008 potash fertiliser output plan

"The decision ... is prompted by the current decrease in potash fertilisers purchase in the global market... The planned reduction in production offers Uralkali a good opportunity to repair and modernise its facilities that for the last several years have been used at their full capacity," it said.

"Liquidity crisis is hindering the farmers' ability to purchase and use fertilisers," it added.

Some great news, the Navy seems to be moving forward with additional funding for the Bussard Fusion device:

Huge Polywell Update: Project Going Forward(?)


Hard to say how much this means exactly, (i.e. whether it’s just a small contract to keep things moving or the beginning of a WB-100 effort) but it’s clearly very good news. It means the review found that the technology is at least promising enough to continue funding research at some level.

Thanks. I have been trying to track this, but info is hard to get.

RE: Washington Post article above, In Brazil Biofuels Dream is Already A Reality,

I have some postings on youtube, flickr and my blog site that documents small scale ethanol production in Sao Paulo State, Brazil. I'm spending time with some folks in Angatuba, a small community and documenting by video and digital images all sorts of ventures that require little or no investment. I have studies so far two small ethanol plants.

First a vintage plant that has operated for many years by a farmer. Second a cane syrup and ethanol plant that is community operated as part of a subsidized system of food and energy for local use. I also toured and video taped several community farms, two tropical fruit orchards and a vegetable farm.

here is this link to the vintage plant. It was not operating at the time but all components are in view.

This is the Youtube posting of my tour at the Angatuba municipal cane syrup and ethanol plant. Here the plant was operating and the crew was quite casual because they held the plant open because we were late arriving. In addition to watching processing of cane syrup there is also a demonstration of an ethanol cooking stove. Watching the pressing of the cane which is supplied by local small farmers is quite interesting. The cane press was powered by a very small electric motor. also viewed is operating the bagasse powered boiler.

TOD readers may also enjoy looking at this series of video clips I did at a beehive charcoal kiln that uses a unique method of condensation tubes to collect smoke liquids and to make products from some factions of these liquids that have insecticidal properties, these clips are here, here, here, here, here, and here.

Finally my host is working on a charcoal gasifier to provide fuel to small engines and also as dual fuel in automotive engines. Everything here is made from recycled materials.

What has impressed me most about this part of rural Sao Paulo State that has been bypassed by economic stimulus and bank financed development is how this community and surrounding small farmers and businesses are sustaining themselves with minimum dependence on outside imports of capital and goods, and how this peaceful place reminds me of life in the rural communities of Kansas in the late 1950's.

Rich H

I applaud those TODers that own sufficient land to grow and harvest their own firewood for cooking and heating; good way to be self-sufficient WTSHTF.

My sprawling Asphalt Wonderland, along with many other cities in the Southern US, stupidly does the exact opposite: we grow, by using imported fertilizers and water, untold numbers of palm trees [that provide very little shade from the blazing sun], then daily pay hundreds [thousands?] of people to climb dangerously high to trim these trees so that we can lastly haul the debris miles outside the city to be buried in a landfill.

Palm fronds will make a poor source of Phoenix cooking fuels compared to those that live in an area where quality hardwoods can be harvested. I would expect tires, plastics, and wood & roofing shingles ripped from abandoned McMansions to be the default burning choice WTSHTF and we become Asphaltistan. The toxic chemicals should nicely spice the food cooking above. :(

Imagine the embedded and wasted energy in this palm-tree trimming operation:


Not much shade after trimming:


Of course, if you don't trim up the tree regularly, when it does catch on fire, it burns like a blowtorch scattering burning embers everywhere:


A homeowner, that has a towering palm, that has kept it regularly pruned over many years, can now have a staggering sum invested in a tree that provides a convenient place for pigeons to poop on his vehicle. Then the homeowner gets a double whammy by then having to buy natgas or electricity for heating or cooking. Compare these dual sums to those who saved much by self-harvesting lots of cords of firewood from their property.

Makes no sense to me, but I bet my city budgets millions annually for these trees. This won't be possible if the credit crunch makes many city govts bankrupt.

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

Toto... Come on, you gotta look at the bright side... These things could make a lot of potash when you burn them.

But, yes, Arizona is kind of a funny place to live post peak... Not a whole lot of surface water, hot continental climate, little/no fertile topsoil... What starts to happen in Phoenix when there are rolling blackouts and they can no longer pump groundwater?

I have a funny feeling that Phoenix is just one of those cities (like, for instance, New Orleans) that is built in a place where a city doesn't really belong...

It must be painful to be PO/NPK/Resource Scarcity aware and live in Phoenix. My uncle lived there for a year, about two years ago, and couldn't stand it. All that sun and heat, no solar hot water heaters, no grey water systems or even low-flow shower heads, people watering lawns in the midday sun, the whole city made out of black asphalt. It's like they purposefully designed it to be wasteful (at least nearby Vegas admits this).

What future does Phoenix have in a post-peak world? Better get busy with concentrated solar power and plug in cars. Get you food via electric rail from SoCal.

Hello Consumer,

Your Quote: "It must be painful to be PO/NPK/Resource Scarcity aware and live in Phoenix."

Yep. When I see the thousands of children be chauffeured around by countless soccer moms in their SUVs: I often wonder if I am looking into the face of a child that will, in 15-20 years of time [or less?], be the face of my killer.

I imagine a future Tadeusz Borowski, #119198:

"Ah, Mr. Shaw, it is so very nice to see you again. It has been many years. Do you remember that you use to generously patch my bicycle tubes when I was a kid so long ago? I certainly recall you.

Now, will you please climb carefully into this boxcar? Yes, I realize it is damn hot in this scorching Phoenix summer heat, but I promise you, I truly do, that you will be so very grateful for the cool shower that they have planned for you when you get to Yuma..."


Bob Shaw, always the optimist. This is why children (and adults) must be taught history.

I worry about the future more because nobody seems to know that there is anything wrong.

The Brazilian ethanol industry stocks have dropped from their highs. The Brazilian New Energy index has fallen over 65% from its high. The ethanol companies were overleveraged and underperforming. It was not miracle to keep an industry alive with borrowed funds, until the credit crisis occurred.

In the United States some gasoline merchants were accused of selling gasoline with more than 10% ethanol after it was splash blended. This resulted in poorer performance, fewer miles per gallon, as ethanol contains 30% less energy per liter than gasoline. Too much ethanol in gasoline might damage engines and fuel systems.

Rainsong The Brazilian producers I documented above were not corporations or bank financed. They were producing ethanol from small farmer fields and for local markets. In the month I have been residing in the small community of Angatuba most of the newer cars are flex fuel and some cool models made by Ford, VW and Fiat that I would like to see in the USA. Including some tiny pickup trucks. Fuel is 1.35 Rials per liter for ethanol and 2.35 for gasoline. At my residence morning startup of cars is rough to hear but they run fine when warm. Sweet smell of ethanol is in the air.

After my experiences here is Brazil I think the Brazil sustainability model is an untold story because all that is reported is what the big corporations are doing. It is these survivors in the parts of Brazil that have been bypassed by the economic model who have lots to teach us as we mitigate for energy and financial woes.

I think natural gas cars might beat sugar cane ethanol. NG is under 7.00 and NG inventories were rising with LNG imports falling.

I suspected corn ethanol as it needs government subsidies to prop it up and quotas to force people to buy. When governments all over the world started to copy U.S. legislation the potential for catastrophy in corn markets was magnified. According to recent reports 900,000,000 people are very malnourished. Some of these were living on relatively unrefined foods such as rice, corn or wheat flour bread, lentils, etc. They were not dining at high end restaurants where food ingrediants are a minor business cost. As ethanol took nearly a third of the world's largest corn producer's output and ethanol output had not reached longterm worldwide ethanol quotas, the problem of more than ten percent of the world's people hungry was not yet solved.

An article describes some of the woes of the sugar cane ethanol industry. Rising fertilizer costs, difficulty securing credit, and lower prices paid for ethanol. If ethanol were so highly liked by Brazilians it would reach parity with gasoline per BTU or surpass gasoline in price per BTU. Obviously there was some dislike of ethanol.

I believe in free trade. Back in the 60's the Soviet Union used to come out with five-year plans for the production of grain, commodities, manufactured items, etc., then they agreed about what prices to set at the retail and wholesale levels. The over-manipulation caused a their economy to freeze up and we got reports of workers taking time off from work to stand in line to get bread from the state owned bakeries as there were shortages. It was as if one needed to be in with the Communist party to get bread.

When one looked at forecasts for cellulosic ethanal costs it seems an expensive trap to increase the cost of fuels for motorists in support of a few special interests and the "new energy" politics. Pretending to be energy production specialists while taxing the efficent energy providers and creating expensive state controlled monopolies for the inefficient ones.

Recent chart from Laherrere and Wingert showing peak total liquids about now.

The source of this chart is from http://aspofrance.viabloga.com/files/ASPO7_2008_Laherrere_Wingert.pdf

Laherrere's report should be required reading by all governments, instead of relying on the useless forecasts from the EIA, IEA, CERA and ExxonMobil.

Notice Laherrere's note "Assuming no above ground restraints." Good show.

I wish all graphers would read Taleb's books and add a note like this. One really ugly Black Swan can put all of the pretty future curves in the toilet. According to Taleb, with the complexity increases from globalization, the chance of a significant negative Black Swan is great.

And, now, for a little levity, What transmission pylons do whilst no one is looking....



Windfall Profit Taxes

I've been searching the net, including the Oil Drum, and can't seem to locate any current information regarding a windfall profits tax. Due to the huge fall in prices across the board, could anyone shed some light on whether Obama still plans on distributing a thousand per couple from the Oil companies pots or has the plan been shelved due to liquidity concerns? One further question, what are the chances of this actually passing? TIA

There is no windfall tax legislation in the works. That could change in a hurry when oil prices go above $150 per barrel. You can count on Obama and a strongly Democratic congress to cut income taxes and also to increase government spending and transfer payments.

There will probably be more than one fiscal economic stimulus package next year, as the first one or two become grossly inadequate to deal with rising unemployment. Politicians love to spend more and to cut taxes; it keeps their constituents and their special-interest donors happy.

My guestimate for next fiscal year's deficit is $2 trillion, and much more than that in 2010, as unemployment keeps rising.

With no WFP tax proposed at the moment we can't speculate on how it might be structured. But the last time the public got all giddy over the WFPT back in the price spike of the late 70's they didn't understand how they were snookered by the gov't. The constitution does not allow different TAX RATES for various industries or individuals. It's the law and couldn't change without a national constitutional amendment vote. What the feds actually did was collect an oil surcharge. Just like the gasoline tax you pay at the point, all the oil companies were required to pay $X for each bbl of oil they sold. Just like the motor fuel tax any WFPT on oil sales will be passed thru to the consumer. The feds will never call it a consumption tax but that's what it would be. And remember, this WFPT would only apply to oil produced by US companies. It would have no bearing on oil purchased overseas.

If you want a picture of how such a WFPT screws up the exploration/production side of the equation just Google the effects the last time the feds used this little scam on the American public.

Not to mention, potential moisture issues.

Re: Climate-warming methane levels rose fast in 2007


One often wonders (I do anyway) how much the peak oil and peak debt problem is being reflected in the stock markets now. It seems like the world's markets have reacted appropriately with some being down 50% or more from recent highs. But those highs were out-of-whack run ups - maybe out-of-whack by 50% or more to begin with.

If you look at the U.S. markets, you should really look at the small caps since they have been the leading edge both down and up in this bear market:

You can designate a "normal" market range going clear back into '07 and see a departure from normal that, despite all the massive evidence building for years indicating massive debt problems, didn't really take place untill just about 3 weeks ago! Then, we finally had a clear break from trading as usual with the major indexes starting to form a volatile slide down. When viewed this way, we've gone from the boundary of normal just from about 90 to 100. This is a 2x short ETF, so that translates to a decline from normal of just around 5% so far in this "collapse"! I could be wrong, but I somehow suspect we have more than a 5% problem brewing. This is a picture of a market just now departing from business as usual.

I made a post earlier about my kids, and got nostalgic thinking about it. They could yell and bicker big time. and this may be interesting and it might not be. When the kids got to me big time, I'd walk down cellar and cut their power, trip the breaker. No walk upstairs and yelling, no reaction other than they lost their power. No words. No Tv, the atari went down,no music, no lights. Dark and quiet.

The children all got quite docile after that.

Chuckle, is that our future?

Don in Maine

Thanks Don. My mental image of your kids’ faces did give me a chuckle. But on the darker side of that theory about a year ago in Texas a dad took a teenager's Game Boy away as punishment. At which point the kid took a shotgun and killed his parents and I think a sibling or two. A buzz killer to your post for sure but I pass this tidbit along as another potential reaction we might see from oil deprivation. Despite what some may think were good reasons for going into Iraq we have to accept that oil access must have been an issue also. If you recall ancient history McNamara made a similar point about one reason for the US involvement in Viet Nam: it showed the communist gov't the US was willing to shed its money and blood to halt their efforts.

Whether that was ever a spoken goal for invading Iraq or not, it's easy to imagine the other oil exporters visualizing the potential for a similar fate if the American felt provoked enough.

Hi Don,

As a sidebar, I don't know if you've heard of this family's pain regarding their son and his addiction to his Xbox:



Hello TODers,

'Human catastrophe' grips Congo
Killings, rapes and looting have been reported around Goma
Please see the embedded videos: notice that not one refugee has a wheelbarrow or a two-wheeled cargo-cart, even bicycles are practically non-existent-->their life's possessions are balanced on their heads as they trudge along-->maximum inefficiency, quick exhaustion, excruciating pain-->the Huahtl Tlameme transport scheme at its worst!

Have you bought a bicycle & wheelbarrow yet?

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

Hello TODers,

More evidence of I-NPK shutdowns to help keep prices high:

Tunisia to halt some ferts output, sulphur delivery

Tunisian phosphates producer Groupe Chimique Tunisien (GCT) will stop production at two sites and has asked sulphur suppliers to delay, or in some cases cancel, shipments due to high stock levels, market sources said on Thursday.

GCT is stopping production of diammonium phosphate (DAP) and phosphoric acid production at its Gabes and La Skhira complexes until the end of the year in response to weak market conditions, according to a GCT announcement.

This will leave just its triple superphosphate (TSP) and phosphoric acid plants in Sfax running.

Black Sea sulphur suppliers reported that GCT asked them to delay or cancel cargoes scheduled to be delivered before the end of the year so that the producer can avoid having to store all the volumes.
Once market demand returns back to the upside, let's hope that the I-NPK can be quickly moved to the final acres to match the critical seasonal timeslot towards Liebscher's Optimum. Otherwise, IMO, the price spikes and/or shortages could be pretty vicious in some locales.

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

Grain Outlook: Whoops! USDA Revises Estimates

..Never before has the USDA issued a revised WASDE report between regular release dates. But never before has the USDA experienced such an error...

..We may look back a few weeks from now and see this as the turning point in the four-month long agricultural commodity market meltdown. During the summer and early fall, commodity prices have been beaten down by outside influences such as the precipitous oil price drop, a tremendous hedge and index fund sell-off, the credit market freeze, overseas buyers waiting out the down price trends, and the global economic downturn. Now, maybe buyers and sellers can concentrate on supply and demand fundamentals.

..Export sales of U.S. commodities have held up fairly well given the tight credit conditions and the tendency of overseas buyers to put off purchases hoping for lower prices. The easing of credit, extremely low ocean freight rates, and the turn-around in prices may move foreign buyers off of dead-center. For all the recent talk about demand destruction, people will still need grain and oilseed products to eat and livestock will be fed. However, a remaining uncertainty is how long and how severe a global recession might be and how it will affect consumption and usage.

News out of the Southern Hemisphere adds to the new climate of bullishness. Crops south of the equator have been struggling with adverse weather. Wheat in both Australia and Argentina has been stressed by lack of rain. Even though rain has fallen in recent days, the damage may be done and wheat yields could be lower than anticipated. Brazilian farmer financial difficulties may limit soybean planting expansion in that country. Farmers in Argentina are still not happy with the government-imposed export tax on soybeans and threaten to strike again.

The Shipping News Suggests World Economy Is Toast

Oct. 30 (Bloomberg) -- In the third quarter of 2007, Volvo AB booked 41,970 European orders for new trucks. Guess how many prospective purchases Volvo, the world's second-biggest maker of heavy rigs, received in the third quarter of this year?

Here's a clue. Picture a highway gridlocked by 41,815 abandoned trucks -- because Volvo's order book got destroyed to the tune of 99.63 percent, with customers signing up for just 155 vehicles in the three-month period, the Gothenburg, Sweden-based company said last week.