DrumBeat: November 22, 2008

The Oil Industry's Future

HOUSTON, Texas (AP) -- Big Oil is set to spend billions on new exploration in 2009, but in addition to ocean beds thousands of feet below the water's surface, major producers are surveying the balance sheets of vulnerable companies in the sector.

Major oil companies are sitting on enormous piles of cash after posting record profits in recent quarters, while crumbling stock and crude prices have made many smaller oil and gas companies potential targets.

The disparity in the energy sector comes as Exxon Mobil Corp., BP PLC and other oil giants find it increasingly difficult to secure new sources of fossil fuels the old-fashioned way -- exploring and drilling for them.

The Medvedev Doctrine

He wants to build a new security bloc and a gas cartel, and transform Moscow into a financial hub.

China’s Impact on Oil Market

The future of oil market lies in the hands of China. If its economy does not register another year of growth in oil demand, global oil consumption will decline next year.

China’s clout in the international markets is immense, but the way it reacts to market signals is different from the way industrialized countries do. It still has many characteristics of a centralized economic system and its moves are unpredictable.

Minister: Gasoline rationing saves 20 million litre daily in Iran

TEHRAN (Xinhua) -- Iran's Oil Minister Gholam-Hossein Nozari said on Saturday that gasoline rationing scheme has helped the country to curb the consumption as much as 20 million liters a day, Iran's Energy and Oil Information Network (SHANA) reported.

Aramco Reviewing $9 Billion Manifa Project

MILAN - Saudi Arabian oil company Aramco is reviewing its $9 billion Manifa oil field project and Saipem SpA, a major contractor, has been told not to take on any more commitments for it, the Italian company said on Friday.

The review involving the 900,000-barrels-a-day offshore project is another sign Saudi Aramco, by far the world’s biggest oil company by output, wants to renegotiate contracts it signed at the height of the commodities price boom.

Surprise Drop in Power Use Delivers Jolt to Utilities

An unexpected drop in U.S. electricity consumption has utility companies worried that the trend isn't a byproduct of the economic downturn, and could reflect a permanent shift in consumption that will require sweeping change in their industry.

Numbers are trickling in from several large utilities that show shrinking power use by households and businesses in pockets across the country. Utilities have long counted on sales growth of 1% to 2% annually in the U.S., and they created complex operating and expansion plans to meet the needs of a growing population.

Mexican oil production down nearly 10 percent

MEXICO CITY (AP) — America's third-largest oil supplier has exported 17 percent less crude this year.

Mexico's state-owned Petroleos Mexicanos company says daily production through October averaged 2.8 million barrels, down nearly 10 percent from the same period last year.

Pemex says production has dropped by a third this year at Mexico's main Cantarell oil field.

Oil Could Hit $35/Bbl Without Major OPEC Cuts

Oil prices are likely to sink as low as $35 a barrel without a massive production cut from the Organization of Petroleum Exporting Countries, Lawrence Eagles, head of commodities research at JPMorgan Chase & Co., said Friday.

OPEC needs to cut 3 million barrels a day to compensate for the bleak global economic outlook, which is expected to result next year in the first contraction to oil demand since the early 1980s. The group agreed in October to reduce output by 1.5 million barrels a day, but OPEC is unlikely to successfully make further cuts quickly enough to prevent further declines in oil prices, Eagles said in a conference call.

From the Kremlin to Caracas, how oil collapse changes everything

As the price of a barrel falls to below $50 for the first time in years - to a third of its value just a few months ago - petrol will be cheaper but the shockwaves mean crisis for oil-producing nations and further instability for a battered global economy.

Sinai low on fuel because of Gaza smuggling: Egypt

EL-ARISH (AFP) - Egypt's northern Sinai is running low on fuel supplies because of the amount of smuggling across the border to the Israeli-blockaded Gaza Strip, Egyptian officials said on Saturday.

"Smuggling to Gaza through tunnels has led to a drastic reduction in fuel supplies at petrol stations" in the northern Sinai, said Mohammed Hussein, a senior official of the Sinai governorate.

Eni CEO says oil prices could fall more - report

MILAN (Reuters) - Oil prices could fall further, Italian oil company Eni SpA's chief executive officer, Paolo Scaroni, was quoted as saying on Saturday.

Saudi shares close near five-year low

The stock market in Saudi Arabia shed more than nine per cent of its value on Saturday and closed at its lowest level in almost five years after crude oil prices closed below 50 dollars on Friday.

Ex-oil exec says nation needs energy board

A former oil industry executive said Friday that an independent body comparable to the Federal Reserve Board should be created to set and guide national energy policy.

John Hofmeister, who stepped down as president of Shell Oil earlier this year to head Citizens for Affordable Energy, a nonprofit advocacy group, called for a Federal Energy Resources Board to determine the future "strategy of the land" on oil and gas exploration, production and distribution and on the development of alternative energy sources and technologies.

Challenges To Environmentally Responsible Energy Use In Today's Society

Now we are rushing to escape the energy culture as we know it, in order to remake it as we don’t know it. The irony is that a marginal amount of planning – continual improvement in mileage standards, closing of the loophole in those standards that exempted light trucks, steady federal investment in renewable energy – might have alleviated the energy and climate crunch facing us today.

“We could be using half the energy that we’re using,” says political scientist and energy policy expert Mark Bernstein, managing director of the new USC Energy Institute.

Report says pandemic will threaten coal, power supplies

A new report from the University of Minnesota warns that an influenza pandemic could disrupt the coal industry, thereby endangering the nation's significantly coal-dependent electric power system and everything that depends on it.

Wind farm ruling stirs mixed reaction, jubilation and disapointment (Washington)

The unanimous decision by the state’s highest court that upheld the governor’s approval of the Kittitas Valley Wind Power Project has stirred both disappointment and jubilation, depending on how one views the role of state and local government.

China's crops at risk from massive erosion

BEIJING (Reuters) - Over a third of China's land is being scoured by serious erosion that is putting its crops and water supply a risk, a three-year nationwide survey has found.

Soil is being washed and blown away not only in remote rural areas, but near mines, factories and even in cities, the official Xinhua agency cited the country's bio-environment security research team saying.

Plugging the supply gap

The Middle East is facing one of the most serious water problems in the world, with the level of available renewable water in the region just one fifth of what the rest of the world enjoys on a per capita basis.

Demographics are a major concern, given that the population of the region is growing 55% more quickly than the global average, and it is estimated that by 2011, water needs will be double current levels. Despite this, Saudi Arabia is expected to require investment of more than US $600 billion over the next 15 years to service the 45% increase in population that is expected to happen by 2020.

Food crisis leading to an unsustainable land grab

The world map is being redrawn. Over the past six months, China, South Korea, Japan, Saudi Arabia, Kuwait and other nations have been buying and leasing huge quantities of foreign land for the production of food or biofuels for domestic consumption. It's a modern day version of the 19th-century scramble for Africa.

Burning desire

A buying frenzy has descended on the wood pellet business as Ontario and Quebec homeowners, frightened by a serious shortage in the low-cost heating alternative, snap up every bag in sight.

The Science of the Future of War

Our global population from just one billion people in 1800 to six billion in 2000. We live in a globalized world now, and worldwide population is expected to increase to over eight billion by 2030. The evidence of that increase is now all around us, in our polluted environment, our warming climate, our disappearing rainforests, and our increasingly degraded farmland: We are, as a species, in the process of proving Malthus’s proposition that population will always outstrip resources.

Has the age of rapid resource expansion really come to an end? Human ingenuity continues as unchecked as our population growth, and we will no doubt find ways to squeeze more food, water, and energy out of the existing supplies. But there are natural limits on how far efficiency and invention can take us. Thomas Homer-Dixon, Director of Peace and conflict Studies at the University of Toronto, and Ambassador Richard Benedick, who was the chief U.S. negotiator for the 1987 Montreal Protocol on atmospheric ozone levels, argue that resource wars will become increasingly common in many parts of the world in the twenty-first century. Water, for example, is becoming a key constraint on development and quality of life in many places. Thanks to dwindling supplies and burgeoning populations, the Middle East and much of North Africa now have one-third as much water per capita as in 1960. Israel has already exploited 95 percent of the available water supply in the country, and uses it efficiently; there is no new supply to tap. In the Gaza Strip, seawater is contaminating groundwater supplies as fresh water is pumped out to supply the growing population.

Obama outlines job-creation plan

(CNN) -- President-elect Barack Obama on Saturday offered an outline of his economic recovery plan and jobs were the top priority.

American workers will rebuild the nation's roads and bridges, modernize its schools and create more sources of alternative energy, creating 2.5 million jobs by 2011, Obama said in the weekly Democratic address, posted on his Web site.

GM weighs bankruptcy option: report

WASHINGTON -- The board of directors of embattled U.S. automaker General Motors Corp is considering "all options" including bankruptcy, according to a report on the Wall Street Journal's website late on Friday.

The paper, citing people familiar with the board's thinking, said the stance puts it in conflict with chief executive Rick Wagoner, who told lawmakers this week bankruptcy is not a viable alternative for the company.

Somali pirates vow to resist any rescue efforts

Somali pirates holding a huge oil-laden Saudi tanker on Saturday vowed to fight back should any assault be attempted to free the ship and urged its owners to pay up a 25 million dollars ransom.

As world powers rushed naval forces to Somalia's dangerous waters amid growing concerns of major disruptions in international trade, the pirates consolidated their land base with more men and weapons.

Even the good news is bad

I understand if some readers are confused at this point. If soaring commodity prices spelled doom for civilization last spring, isn't it good that commodity prices are falling now?

If you think so, you clearly do not have what it takes to make it in the news business.

Carbon dioxide levels already a danger

LONDON, England (CNN) -- A team of international scientists led by Dr James Hansen, director of NASA's Goddard Institute for Space Studies, say that carbon dioxide (CO2) levels are already in the danger zone.

Concentrations of CO2 in the atmosphere currently stand at 385 parts per million (ppm) and are rising at a rate of two ppm per year. This is enough, say the scientists, to encourage dangerous changes to the Earth's climate.

Report: Climate protests rising

The Worldwatch Institute reports that climate protests are escalating worldwide, as more and more people join movements to block the construction of coal-fired power plants and pressure their governments to mandate greenhouse-gas-emission caps.

Russia threatens to cut off gas to Ukraine: report

MOSCOW (AFP) – Russia's Gazprom will cut off gas deliveries to Ukraine on January 1 unless a new contract is signed, a company spokesman said on Saturday, making a threat that could affect deliveries to Europe.

"We would like to avoid such a scenario, we would like to agree on everything before New Year's, but as you understand, we cannot deliver gas without a contract," spokesman Sergei Kupriyanov was quoted as saying by Interfax news agency.

Turkish pipeline ablaze following attack

A section of the Kirkuk-Ceyhan oil pipeline linking Iraq and Turkey was still ablaze on Saturday after an apparent Kurdish guerrilla bomb attack but the fire was under control, a Turkish energy ministry source told newswire Reuters.

Oil exports from Iraq remained halted after the blast in southeast Turkey on Friday evening and the source said the timing of the pipeline's repairs and reopening would only become clear once the fire had been extinguished.

What will President-Elect Obama's energy plan mean for Houston?

“At the rate we’re going, we’re planting the seeds for the mother of all energy crises,” energy expert Matt Simmons said.

Simmons believes we’ve already reached our peak energy production.

“Workers of Houston ought to be worried about – will the Obama administration grasp the urgency to get prices higher than they are today?” Simmons said.

Greece: Pirates release tanker, crew safe

ATHENS, Greece – Somali pirates have released a Greek-owned tanker that was hijacked in September, a Greek government spokesman said Saturday.

The tanker MV Genius was released Friday with its cargo of refined oil intact and the crew of 19 safe, Merchant Marine Ministry spokesman Constantine Gialelis said. He said the ship's owners would not provide any information, including whether ransom was paid.

French May Aid Cameroon In Securing Oil-Rich Bakassi - Report

YAOUNDE, Cameroon -(Dow Jones)- Senior French military Brigadier General Claude Reglat, based in neighboring Gabon, has discussed the possibility of his country's troops assisting Cameroon to ensure security in the oil-rich Bakassi peninsula, which has met with incessant pirate attacks in recent months, state- run Cameroon Radio Television, or CRTV, reported Saturday.

ConocoPhillips delays Louisville site by a year

ConocoPhillips is pushing back the opening of a training facility and research center in Louisville to 2012 or 2013, a move that a company official Thursday attributed in part to the economic downturn.

Pakistani retail outlets seek 5% commission on fuel

KARACHI -- Pakistan Petroleum Dealers Association Chairman Abdul Sami Khan has urged the government to raise the commission received by retail outlet owners to 5% of the consumer price. Otherwise retail outlets in the country will have to close, he said.

Saying outlets would no longer buy gasoline from oil marketing companies unless they are allowed the higher commission, he added, "We will not be responsible for any shortage of petroleum products due to closure of [retail outlets]."

Officials curbed in oil-sex scandal

Washington —- The Interior Department has taken disciplinary action against more than a half-dozen workers who accepted lavish gifts, partied and in some cases had sex with employees from the energy companies they regulated.

UAE growth rate to drop to 4% due to global financial crisis

ABU DHABI (Xinhua) -- The economic growth rate of the oil-rich United Arab Emirates (UAE) is forecast to drop to four percent in 2008 from last year's 7.4 percent due to the impact of the global financial crisis, local newspaper The National reported on Saturday.

Medicine Bow coal-to-liquids plan still on

Despite the economic downturn, plans are still moving forward for a coal-to-liquids plant in Carbon County under development by Medicine Bow Fuel & Power LLC, a subsidiary of DKRW Advanced Fuels LLC.

"At the time we decided to move forward on this, oil was half of what it is today," DKRW chief executive Jon Doyle told a state legislative committee in Casper on Wednesday. "The issue today is not, 'Is there money?' It's the confidence of banks about where do they put that money?"

The wonder of Wanda Jablonski, the woman who broke the stranglehold of oil’s Seven Sisters

Where’s our Wanda? In a world that fears peak oil, climate change, blackmail by energy czars and volatile prices, it is hard to get a clear view of the choices we face.

We lack an authoritative and dispassionate guide. We lack, in short, the 21st-century successor to Wanda Jablonski, a petite but steely oil journalist who for 40 years spoke on equal terms with shahs, sheikhs and oil barons. But however close her relationships with some of the world’s most powerful men, her real achievements were to enlighten her readership and to advance the debate.

How Arctic melting could benefit shippers, oil companies

WASHINGTON — With global warming melting the Arctic 's eons-old ice at an alarming rate, shipping and oil companies are looking ahead at how to exploit the new open waters.

Hollywood and climate change experts ponder global warming

LOS ANGELES (AP) - Hollywood insiders and climate change experts agree that they can't shove messages about global warming down audiences' throats.

They met at the Skirball Cultural Center on Tuesday to discuss how storytelling in film and TV can translate broad issues about climate change to everyday audiences.

"The storytelling has to trump everything," said "West Wing" actor Bradley Whitford.

New Senate to get major global warming bill

WASHINGTON (AFP) – The US Senate will take up two sweeping global warming bills in January, in the latest sign that Barack Obama's election could quickly reverse years of US footdragging on climate change.

Democratic Senators, openly gleeful that years of fierce struggles against George W. Bush's Republican administration on the issue were drawing to a close, proclaimed the United States would undergo a "sea change" in environmental policy.

Is Obama's Energy Plan Enough? No, Many Environmentalists Say

As ambitious as Obama's campaign promises were — at least compared to his predecessor's — the future state of global energy will demand government policies with a much longer reach, according to alternative-energy leaders. The International Energy Agency's (IEA) annual World Energy Outlook, released Nov. 12, projects that global energy demand will increase by 45% between 2006 and 2030 — and that $26 trillion in power-supply investments will be necessary simply to meet those needs. Barring radical changes in our energy policy — beyond what Obama has pledged — greenhouse gas emissions will rise 45% by 2030, and extreme global warming would be virtually unavoidable.

I noticed a recent story about Yemen’s oil production problems on the Energy Bulletin:


(Edited to correct mistake regarding Yibal Field.)

I looked at the EIA production, consumption and net export numbers, which are shown below. Once again, we see an accelerating net export decline rate.

Yemen , 2000 to 2007:

2000 Net Exports: 340,000 bpd

2007 Net Exports: 177,000 bpd

Production: -4.5%/year

Consumption: +5.7%/year

Net Exports: -9.3%year

Initial and Most Recent Net Export Declines:

Initial Year Over Year Net Export Decline Rate (2001): -0.8%/year

Most Recent Year Over Year Net Export Decline Rate (2007): -31%/year


Total Liquids Production:


Net Exports:

Oman, where the Yibal Field is located, is not showing as sharp a decline as Yemen (chiefly because of Oman's increasing, but low, consumption), but it shows what happens with "low" net export decline rate of -5.1%/year, over a seven year period:

The combined net exports from Yemen and Oman have dropped by 440,000 bpd since 2000, and it would appear that their current combined 2007 net exports of 819,000 are going bye-bye at a pretty rapid clip.

I'm analyzing the petroleum supply situation in the Pacific NW - want to throw something together for an article, too. Studying how we get our oil/gasoline, I'm beginning to think of WA/OR as nations wholly dependent on the outside, which will be more and more apropos with time. Interesting to consider CA as suffering from irreversible production declines and ELM...pluribus unum, you bet, but if you want our pinot noir and hydro DC fork over that heavy crude!

Will you announce when you publish your article? I'm involved with Sustainable Communities ALL Over Puget Sound (SCALLOPS) and we'd be very interested in your analysis. Thanks!

I'll submit it to the editors here first - should be up their alley. I guess! Mostly just an exposition of where our oil comes from, how import sources have changed over time - the EIA keeps track of all foreign imports by state back to 1986. Also illustrating the pipeline systems on the West coast and throughputs for each, local and out-of-state refineries we utilize, legislative roadblocks to expansion of inputs to same - did you know there's a law on the books for WA forbidding tankers larger than 125k deadweight tons from entering Puget Sound? Etc etc.

wt, Oct 08 production at Cantarell down to 902,000 bpd.

The Manifa mystery continues. They canceled the contract, they didn't cancel it, it's delayed, it's not delayed.

MEED is reporting Aramco plans Manifa production boost. Behind a paywall, but Google gives us this bit:

State oil giant conducts study on increasing output levels at the field despite contractor price talks.

Saudi Aramco is conducting an internal study on boosting production at the $11bn Manifa development to 1.2 million barrels a day (b/d)

The Energy Bulletin pointed out this article: Nine Percent.

The article points out that oil production has risen by about 2 percent over the past century. However they point out that because they pushed the fields well beyond normal production limits, using secondary and tertiary recovery techniques to scour the formations, that the decline is likely to be closer to 9 percent.

Now I think that is way too steep. I believe the decline will be between 3 and 5 percent, beginning about five or so years after the peak, which is right now. But that is not the point I wish to make, or argue. Here is the statement from the essay that caught my attention:

Gross Domestic Product in the developed world has always been a 1:1 ratio with fossil fuel consumption. Our economy and our oil use are essentially identical.

In a debt based economy such as ours, as well as all the developed world, the economy must grow or collapse. If the economy does not grow then there is nothing to pay interest on all that debt. Also as the population is always growing the economy must grow just to keep full employment. So the economy simply cannot simply gradually shrink in step with the decline in oil production, it must either grow or collapse. And we are witnessing the first stages of collapse right now.

But you ain't seen nothing yet!

Ron Patterson

i dont want a job, i want a bailout.

So do the dying bees, the bats dropping from white-nose fungi, the frogs with deformities, the fish with lesions, the polar bears watching the ice recede, the shellfish having acidifed seawater dissolve their shells, the forests being strip-mined with no replanting...

Which would you rather see go extinct?
Big3: GM, Ford, Chrysler
BIG3: bees,bats,birds

not aimed at Elwoodelmore, just a general comment.


And not to overlook our own species: the dying masses in the giant slums of the world, the detritus of an "expanding" economy that grows the market class and rejects and marginalizes everything and everyone else.

A couple of days ago I was upbraided for my "tedious" comments. I will continue to make them until I perceive a growth in justice while we try to expand our economy.

Of course, I would use the word "tendentious", not tedious.

sobering reality imho, for the earth to live in any way shape or form similar to what it has built up from the last major extinction event, most of us will have to die. yet we are all biologically programed to live and to fight to live.

step up everyone, take your seats! for the greatest show on earth you will ever see!

If the economy does not grow then there is nothing to pay interest on all that debt.

Ron you're right the tipping point can't be too far off.

National debt servce

The headline debt currently is 10 trillion (lots of other unfunded liabilities) and just the interest to service that may hit 600 billion for FY 2009. All the while the red continues with 'borrowing' to hit 1 trillion per year starting now. I think this is where Don Sailorman's 'monetization' comes in.

Estimates vary as to when debt service will exceed tax revenues. One thng I know for sure is that the removal of trillions of vapor dollars in the current meltdown will hasten that day. That and +20% unemployment.

OBTW that sound in the backgound was that of the traditional lenders wallets going shut as they fund their own 'stimulus' packages. Government fiscal response to 'spotfires' becomes rapidly ineffective. Katrina on steroids.

Got ELP?

Re USA debt, China appears to be the last remaining support for Obama's grand plans. Their is a rumour that Chinese automakers will take GM and Ford off the USA taxpayers' hands as the technology might be useful. It seems like a lifetime ago that China taking over American industry would be alarming, not it is a relief.

hadn't heard that one though Toyota had been mentioned due to sharing parts chains. They're gonna be smaller but how small and how many potentially unemployed will the solution keep working. Ideally there would be someway to get that 'relief' and get them building something useful in the bargain

But then is the FED coming to the rescue.
Who actually is owning the FED? Is that such a mystery?
In Europe and all over the world, the central banks are owned by the governments. Not so in the US! It seems to be private.

The Fed seems to be privately owned, and technically it is. However, in fact the Fed is a quaisigovernmental agency; it works in cooperation with the Treasury and never (in the past half century) at cross purposes with the Treasury Department.

Hence, we can be sure that the Fed will buy up any debt that the Treasury issues and wants the Fed to purchase. Congress created the Fed, and Congress could dissolve the Federal Reserve System or take away its powers. Thus the Fed is not going to get into a big conflict with Congress. With its power of creating money out of thin air the Fed can guarantee an orderly market in Treasury securities no matter if the deficit goes to two trillion or to four trillion dollars. Theoretically the Fed is an independent body that does not have to do what the President and the Congress desire, but for all intents and purposes the Fed is under governmental control, and the banks that own the Fed have no say in monetary policy or in who gets appointed the the Board of Governors of the Federal Reserve System.

Yes I believe that the Fed will do what is needed to have money flowing through the economy. However, patience is running thin. If there is a severe shortage of dollars in the US and World economies (and the evidence suggests that there is) then they need to move fast on quantitative easing (i.e. purchase of some treasury securities from the US treasury). A Fed governor did suggest that Thursday - now get moving.

I think that both the Fed and the Treasury are bailing as fast as they can. Note that the Fed cannot force lenders to lend, nor can it force borrowers to borrow. Pumping more money into a liquidity trap does not help.

On the other hand, the Fed has been doing a fine and dandy job of lending to distressed banks and others, and the Fed is doing an admirable job of financing this year's one trillion dollar deficit. I expect them to do a wonderful job of financing next years two trillion dollar deficit and Obama's two-year stimulus package also. It is right to blame the Fed for the excessively easy monetary policy that fueled the increase in house prices, but I don't think the Fed is being at all tight now. When it makes mistakes these days the Fed tends to err on the side of excessive looseness of monetary policy, not on the side of tightness. Thus I expect inflation rather than deflation, despite a falling real GDP.

While conventional wisdom does blame low interest rates, IMO that blame lies elsewhere and should be ascribed to less politically correct actors. The bubble was caused by
(1) lax underwriting standards
(2) greed on part of Joe and Jane - they speculated wildly on real-estate and flipping was a path to riches and retirement
(3) Loan officers are human - and Joe and Jane (a) look like them and (2) often are nephews, nieces, cousins, neighbors, church members.... - so the loan gets made.
(4) Securitization played a role too -
(5) rampant fraud by mortgage originators (often mom and pop or one person operations)- who fraudulently mis-filled applications
(6) fraud by the local real estate community via inflated appraisals
(7) WS fixed income types who sold these securities because there was a market for them - and poor due diligence on part of buyers of those securities

I hope that you are right about the Fed.

I agree with your list of seven causes of the housing debacle. However, if the Fed had kept money tighter, the bubble would have been insignificantly small. Easy money which caused easy credit allowed the seven factors to grow mortgage debt and derivatives to monster proportions.

The main job of the Fed is to take away the punchbowl just when the party is starting to get fun. The Greenspan Fed failed miserably in that primary mission.

As I've mentioned elsewhere, I advcocate monetarism, which means a slow and gradual change in the money supply in accordance with long-term growth or decline in real GDP. With monetarism we would not need a central bank to control monetary policy.

One thing I have no idea of: When will the Fed recognize that our economy is on a path of long-term decline? It won't be soon. The Fed sees its primary objective as providing enough money and credit for the real GDP to grow at least 3% per year--a rate of growth in money and credit sufficient to stop unemployment rates from rising.

Not having studied economics professionally (except for one undergraduate course - Paul Samuelson's book and Henderson and Quandt on micro economic theory) I have not given much thought to monetarism. Does monetarism still work with China in the picture and currency that does not float?

I do not believe that the US economy is on a path of long term decline - and any decline is because of social reasons - the primary two IMO

(1) the country became incredibly wealthy and therefore has now become a country of whiners who want everything for little effort and

(2) the artificial strength of the dollar against several currencies has made consumerism go out of control because manufactured goods are so incredibly inexpensive. However the United States is still dynamic and capable of self renewal, and I think that the current election is one evidence of that. Similarly opposition to another blank check to the UAW is another. (I consider the whining culture and runaway union power as the two primary reasons for the decline in US manufacturing)

Getting the dollar down against some major currencies (Yuan, Euro, middle-eastern currencies) would help with many of the issues that we face, and reenergize American ingenuity.

In my opinion monetarism makes more sense than discretionary monetary policy does. The main problem with discretionary monetary policy is that it operates with long and unpredictable time lags--and thus tends to overshoot. For example, now the worry is about deflation, and the Fed pours money into the banking system to counteract deflationary tendencies and to prop up banks. But a year from now we're likely to have increasing inflation based on what the Fed is doing today.

I also used the Samuelson text and then the Henderson and Quandt book as a student. Later, when I was an instructor, I used the Samuelson text for many years and saw big changes in content as older ideas became discredited and new ones came into the foreground.

Declining oil production is going to cause a bleak future for the U.S., regardless of what monetary and fiscal policies are followed. It is highly questionable whether we will be able to make a successful transition away from oil--regardless of our technical ingenuity. Business as usual and politics as usual makes it hard to adapt to radical change.

Monetarism - OK - (IMO flexibility inherent in the current policy is a plus since the macro situation is dynamic)

I did not realize that Samuelson's text had changed in some fundamental fashion over the years - I will have to pick up a recent edition.

A lot has happened in economics since the first edition of Samuelson back in 1947 or '48. It is no longer a leading textbook. Just for fun, you might like to compare an edition from, say the 1970s with one of the recent editions. For macroeconomics, a good basic textbook is by Colander, but there are half a dozen others that are about as good. For microeconomics I like the text by Robert Frank. You can get old editions, only a few years out of date, for very little money.

I will check them out on Amazon. I took the course in the early 80s so that should be 11th or 12th edition - but the copy that I had was probably an earlier edition, likely from the 70s.

- What the Fed is doing is ruining its own balance sheet, swapping bad loans from banks (and whatnot) for 'Good' Treasury securities. Unlike a bank, which can go bankrupt and have the court wipe the debt away, the Fed has to make it all good, somehow. They are the Fed, after all, not some cheap bank ...

- The Fed and the Treasury are also taking on trillions in off-balance sheet liabilities, that will have to be paid for.

- The fundamental concept behind inflation is the counterparty will accept the devalued money and find some way to pass along that devaluation. Where this has happened, the counterparties have had no option but to accept the Weimar Marks, Argentine Pesos or Zimbabwe Dollars. The counterparties to dollar transactions have options, they can demand gold, for instance instead of American dollars. Additionally, many of these counterparties are lenders to us, they can refuse to lend further unless we give them 'good' money or some valuable good in return.

If the US monetizes, Saudi Arabia would stop lending. Why would they continue to do so a) knowing they aren't going to get paid and b) that they have something they can sell for value somewhere else?

In fact, the US is in borrowing trouble already; our big overseas lenders have finance problems of their own. Russia and China are burning through their reserves of foreign capital as fast as they can to stave off economic decline in their countries and Saudi Arabia is not as rich - at $50 a barrel of oil - as they were this past summer. Neither is Kuwait, even the UAE is cutting bank.

Finding the funds that we the people - and our government - need to finance day to day operations is going to get pretty interesting. The long bear market in bonds may be about over.

Hence, we can be sure that the Fed will buy up any debt that the Treasury issues and wants the Fed to purchase.

Nope I still don't get it.

How is issuing debt better than issuing currency?

Fed have no say in monetary policy

Oh you mean that's handled by people like Paulson... or Geithner?

Monetary policy is decided by the Board of Governors of the Federal Reserve System. Theoretically, the Board of Governors are protected from political influence by their long (fourteen year) terms, but Congress is always hovering in the background, as is the Treasury with its needs to finance ever-expanding deficits.

Issuing debt isn't any "better" than issuing currency; it is just the way our fiscal and monetary policy work. When the federal government spends more than it takes in in tax revenue, then there is a deficit. These deficits need to be financed in an orderly fashion, and the Fed is always ready to gobble up more Treasury securities if nobody else wants them. However, you can see by the extremely low interest rate on Treasury bills and the rather low rates on Treasury bonds that plenty of people want to buy Treasury securities.

What the Fed is doing when it finances government deficits is to create money out of thin air to buy the Treasury securities. All this is legal. It seems a strange system, and it is--but it just evolved to be the way it is.

On U.S. currency is printed the motto, "In God we trust." I think that is misleading and blasphemous. God has nothing to do with creating money or seeing that it holds its value. An honest motto would be "In the Federal Reserve System we trust."

I trust the Federal Reserve System--to inflate the money supply as it has since 1913 to the extent that a dollar now is worth about what four or five cents was worth in 1913. What do I think the dollar will be worth in 2020? Much less than it is worth today.

It's been shown a number of times that the relationship between oil and the economy is a far cry from a 1:1 ratio. Excluding the current credit crisis, the global economy grew quite well between 2001 and 2007 when oil production was essentially flat. The relationship is far more colorful than the black and white picture that is occasionally painted.

I've found the best way to look at it is that the economy and oil are related on an order-of-magnitude basis, per Hirsch's view.

See my assessment of four different reports to see where that comes from:

Estimating the Economic Impacts of Peak Oil

canopener - I am sure someone else will do a better job than I of saying this but...

Global economy growth from 2001 to 2007 was a virtual farce generated through "Financial Engineering" and is now in reversal which will wipe all that growth and then some off the planet.

Global economy growth from 2001 to 2007 was a virtual farce...

I don't agree with that. USA economic growth most likely was such a farce, but the world economic growth is now dominated by the so called developing economies, often typified by the acronym BRIC (Brasil, Russia, India, China). The growth in those economies, as well as in middle eastern oil exporters was real. Now real growth, does not equate to sustainable growth. We are about to see how well the gains for these economies holds up to the collapse of the rich world Ponzi economy.

I don't deny that those countries economies grew but "I believe" (don't have the charts to prove it) that the virtual wealth that was created during that peroid, which is large enough to bring down whole countries, factors in at as a much higher percentage.

In regards to the "real" gains of these countries, they just like any and all who have any wealth to speak of, will do what ever they can to "protect their wealth".

In all the forums I read wealth protection is the bottom line issue. When ever I hear that phrase I can't help but visuallise
someone straddling a pile of gold holding an M16 and a knife in their teeth.

It seems humanity (americans?) will toss babies into the mouth of the beast before giving up their "hard earned gains".

We will see what the world does.


I don't pretend to know the exact relationship of oil extraction to GDP growth, but I don't think using just a few years of data establishes the relationship. Buying on credit can create nice GDP figures...for a while.

If peak has arrived and oil production will decline from here on out, will GDP continue to increase in the long run? I have my doubts.

Suburban/exurban land values are inversely related to gas prices (vis commuting costs).

And another one gone, and another one gone, another one bites the dust...

Three banks in California, Georgia fail

Regulators close down two California thrifts and Community Bank of Loganville, Ga., raising the toll in the financial crisis to 22 banks.

From the FDIC: Bank Closures in 2008. Found it at Dollars & Sense blog: Bank Closures in 2008 | Dollars & Sense ... "Thanks to Bob Feldman for directing us to the handy list at the FDIC site of recent bank closures. The page lists bank closures since October 1, 2000. There were 27 closures between then and the beginning of 2008 (including eleven in 2002); there have been 19 so far in 2008." Make that 22 with these latest.

CITI next?

Re: Obama outlines job-creation plan posted above...

"These aren't just steps to pull ourselves out of this immediate crisis," he (Obama) said. "These are the long-term investments in our economic future that have been ignored for far too long."...

"We'll put people back to work rebuilding our crumbling roads and bridges, modernizing schools that are failing our children, and building wind farms and solar panels, fuel-efficient cars and the alternative energy technology that can free us from our dependence on foreign oil and keep our economy competitive in the years head," he said.

This guy gets it. Kudos to him.

This guy gets business as usual.

"...rebuilding our crumbling roads and bridges..." ????

He's getting closer, but needs to change priorities to "rebuilding our crumbling Railroads and Electric Transmission..."

As for the rest (like "modernizing schools," whatever that means), we will have to wait and see what the small print says.

Regardless, I wouldn't call this BAU even though I agree with your priorities. However, it seems like we cannot let bridges crumble for safety reasons. As for roads, let them crumble.

As for roads, let them crumble.

Back when I was driving a 4WD pickup, I said "let them crumble, just makes the ride more fun, and maybe will keep some of the rifraff off the roads". Now, I'm driving a Prius. High efficiency vehicles, require a quality road surface.

The off-road market has not been important for EV's and high efficiency vehicles to date, but there doesn't seem to be any inherent reason why they can't cope.
There are already some mean dirt-track electric motorbikes!

Umm, talking about high efficiency, rather than "electric" vehicles which can obviously be designed to have various efficiency ratings in terms of passenger miles/energy unit, isn't one of the reasons for the efficiency that they don't have the heavy suspension and the general weight that smooths out the ride? Likewise for very small, short cars (which again reduce the weight, increasing efficiency) of a size like the cinquecento isn't the reduced distance between wheels relative to a ford pickup another cause of a poor ride?

These may not be unsolvable problems, but it's not obvious that efficiency doesn't suffer as you make vehicles suitable for seriously degraded roads.

There is no reason why the wheels can't be outside the main body, on tubular supports to give a wider base.
Some prototypes also use in-wheel motors, and the suspension can be more isolated than in a traditional ICE, I believe, as the mechanical linkage can be reduced.

The efficiency would certainly suffer, but it is in a different ball-park anyway to traditional ICE cars.
I think a lot of people are going to have fun over the next few years trying out a lot of innovative designs, now that some of the basic building blocks are more or less in place!
This is traditionally the time when things get kooky!

I was actually thinking about a shorter distance between front and back wheels giving a much more bumpy ride. (It also embodies an assumption that, since most car journeys have one or two passengers it makes sense to move most cars to carry two people and have larger vehicles available for hire, etc. I suspect people won't like the idea, but then people don't like most new things.)

The general point I was wondering about was: we've grown used to idea that you have one vehicle you go everywhere in (because it's your personal vehicle), but maybe the best way to reduce energy expended on people transportation is to keep current high efficiency designs for city cores where "society" can afford to maintain the roads and different more rugged designs for rural use (where roads are used much less so maintaining them may not be viable).

The "one size must be made to fit all" mentality is arguably a feature of a high-energy availability world.

If you haven't got the problem of transmitting drive from a central engine, there is no reason why the front or rear wheels should not be ahead or behind of the main body!

Once you are free from the constraints of an ICE geometry, things can be wild and whacky!

I rather like the inflatable car:

Rather boringly though, perhaps most designs would just rely on isolating the body from the wheels via superior suspension systems, and reducing speed if you meet a rough patch.

When designing a major highway, the only thing that counts is the number of 18 wheelers to be accomodated. Cars contribute very little to highway degradation. Ergo, if semi loads were shifted to rail for long distance transportation, we would buy a considerable amount of time before the existing highway system becomes a literal PITA.

"These are the long-term investments in our economic future that have been ignored for far too long."...

... and we will borrow TRILLIONS of dollars from the Countries around the globe who have been economically sabotaged by our financial geniuses.

… and we will pull even more money out of our a$$es to buy up the worlds resources WE require to accomplish this great build out that I propose to initiate which means we can not let other developing countries get any of the resources.

…and the World will do this for America why you ask?

Because they love Americans and I represent HOPE.

Harrumph Harrumph

What else can he say?

I'm willing to wait until he is President and has a real bully pulpit, and possibly some real power. Then we can see.

In theory, the country can turn in a new and hopeful direction, and raise by our bootstraps -- after all, huge resources exist here, but they have been squandered and mis-allocated.

Great leadership, combined with iron political will can work wonders. Might as well hope for it, what's to lose?

If we do have this hope, we need to push the leadership. The people must find their voice. Enough of corrupt oligarchs!

You are right he might say;

My fellow Americans we have two choices here.

We can reduce our consumption of the worlds resources by one fifth, changing the "American way of life" dramatically, creating a more fair and equitable world.


War & Terrorism

and the masses chant

Go get it for us! Go get it for us!

"If we do have this hope, we need to push the leadership. The people must find their voice. Enough of corrupt oligarchs!"

I agree with you but first people would have to agree that these are the two choices.

Yes that frames the choice well. What if many in this country are sincerely waiting to be asked that question? I believe in the last great depression political views changed markedly.
..as in, when you have them by the short hairs their hearts and minds will follow. (by all means, go green, go local, give em all a break, "that's what we've always wanted")

Perhaps many are finally hanging out the sign "Driver carries no Cash"
At long last do we tire of this nauseating consumerism?

Denninger is supposed to be on vacation, but the Geithner picked lured him back.

Change We Can('t) Believe In

As I expected, he's not happy about this pick.

He also finds the timing of it very suspicious.

I would be willing to live with some crumbling roads and no new roads for more rail. But yeh, he way gets it compared to our current President who should leave office early.

Data I would love to see!

While on my morning walk a thought suddenly hit me. I was contemplating Net Oil Exports which peaked in 2005, when it hit me that the importers were also in decline. In fact, I would wager that the decline of production by net importing nations has been even steeper than the decline of exports.

OPEC produces only 45 percent of all oil but have about a 65 percent share of all oil exports. Non-OPEC production has been on a five year plateau with the peak year being 2005. So far, average 2008 production is down about 1.2 percent from 2005 non-OPEC production. However the peak month for non-OPEC was in December of 2003 and August 2008 production was down 4.4% from that peak.

My point is that all importing nations, except Indonesia, are non-OPEC nations and they are also in decline. So if we combined Net Oil Exports" with production of importing nations", what would that chart look like? Does anyone have a list of net importing nations. If so, I will create the chart myself using data from "Net Oil Exports" and production data from the EIA.

Ron Patterson

I think that the key metric is still the volume of net exports worldwide, because this is the volume of oil that importers have to bid for. The decline in production in importing countries versus their consumption, affects what they will bid for worldwide net exports.

I do suspect that net import math tends to look like net export math, i.e., increasing consumption + declining production should result in an accelerating rate of increase in imports.

Until recently, it does appear that the US was showing an accelerating rate of increase in imports, from about 5%/year in 1998 to about 7%/year in 2004. Of course, the recent 100%/year increase in oil prices + the recession/depression have caused consumption to fall in the US.

Actually Westy, I think falling domestic production for importers is more telling than net export numbers.

It affects the value the importer's currency.

It affects whether the importer is tempted to liberate places like Iraq. Or... create military command_and_contingencies for places like Africa and the Arctic.

Or tries to NATOize far away places like the 'stans...

There is also a big difference in importers. Some, like the US are in decline, some, like Japan have zero production and some are mostly flat/increasing like China.

And don't forget EROEI issues this reduces the available energy quite a bit. And also I guess the glut principle fuel is generally not used efficiently in exporting nations where it is heavily subsidized so not only is the oil not exported but its generally used in a very wasteful manner.

The problem with this is KSA needs a lot more fuel per capita to generate the same GDP vs say the US.
This is effectively a EROEI concept.

And last but not least my real concern for our future is the dwindling supplies of light sweet and increasing prices of Natural Gas. Right now on a per btu bases NG and oil are very close in price and the last surge of light sweet oil from KSA dwindles and oil prices can remain low we probably can expect them to push heavy sour crudes at the current prices. This increases demand for NG.

The US is probably at the point right now that NG prices vs oil prices make it no longer profitable to refine heavy sour crudes. So for oil prices and complex refining you also have to look at strong NG prices.

There are a lot of variable that have gotten worse not better even as overall crude production has not declined significantly 2008 is not 2005 and 2009 will not be 2008.

I was on NPR on Planet Money yesterday. The editor, Laura Conaway, called me and said she wanted to talk to me--in about 5 minutes, on the cell phone she had called me on. The topic was what impact the recession would have on global warming. When you listen to the tape, Adam Davidson doing the introduction starts by mentioning what peak oil is, and says that while I subscribe to the theory, he doesn't. I am not sure how relevant all of that was to the question at hand.

The place where the interview is mentioned is here and the podcast can be found here. I only talk for five minutes or less. The piece is about 25% or 30% of the way into the podcast.

Kudos to you. I was under the impression they gave people a bit more notice than that. Anyway, since the global warming cake is pretty much baked, it is hard to see how a short term recession will have much impact. Maybe a long term depression would be helpful, thought.

Great job Gail.

Here is the video of Peter Schiff to which they refer in the podcast. He nailed it.

Here's the original of him vs. Laffer on 8/28/06. Please to enjoy.


Good for you! It sounds like after you spoke, they noted that Gail "doesn't like alternative energy much better than fossil fuels, she says that making the alternative stuff uses a lot of fossil fuels, and that we're all just going to need to use less, like riding bikes." Is this an accurate representation of your views? I know that using less is a large component of what we'll need to do.


They asked me about what impact a reduction in ethanol production would have on global warming gasses. I said that making ethanol from corn uses a lot of fossil fuel, and that reducing its production would reduce global warming gasses. I didn't mention that there seem to be other global warming impacts of raising corn for ethanol, and that some studies show that it actually produces more green house gasses than ethanol, per unit of energy produced. So if your goal is reducing green house gasses, you need to use less fuel whether it is gasoline or ethanol.

We talked a bit about wind also. If during a recession you cut back on new wind turbines built, the impact is to reduce the amount of steel used for wind turbines, the number of miles driven delivering and installing them, and the amount of new electric transmission lines installed. It really doesn't have any impact on installed capacity. The net effect is to reduce green house gasses, since fewer fossil fuels are used if you don't build and install the wind capacity.

I think the jury is probably out on the long-term impact of wind and solar voltaic on GHG, partly because people look only at the impact of making the wind turbines or solar panels. They also need to consider the transporting and installing and maintaining them, the costs of grid upgrades and new transmission lines, and the cost electric storage, so that spikes are not added to the grid. The fossil fuels used in all of these are at the front end, when the wind turbines and solar panels are installed. So in the short term, they are net negative for GHG. If in the long term, they actually displace fossil fuels, there many be a long term benefit, but it is no doubt much lower than narrow analyses suggest.

I am not entirely convinced that GHG explain as much as people think they do, but if reducing GHG is your goal, then a cut back in both fossil fuels and alternatives, especially corn ethanol, is the way to go.

One of several references on detailed EROEI for wind turbines.


In relation to their expected lifetime power production, an EROI of between 28.3 and 36.7 is calculated for the GE turbine and between 30.5 and 39.6 for the Vestas turbine. The average energy requirement is about 4.22 million kWh for the GE turbine and 4.64 million kWh for the Vestas turbine. The energy payback period for both turbines is less than one year

This detailed analysis clearly contradicts your "seat of the pants" guess.

As noted in a TOD article a couple of years ago, one issue is where do you draw the boundary.

That paper asked "Should a fraction of Paris Hilton's carbon footprint be allocated to each wind turbine, since she is required for the economy to "operate properly" and the economy must operate properly to produce wind turbines".

Expanding the boundaries to any reasonable degree is unlikely to extend the payback much beyond 12 months.

Best Hopes for Analysis before just guessing,


It might help to read his full post before posting a reply like that.
eroei or eroi was not the point it was purely green house gasses.

There is a very strong correlation between energy and EROEI, except where hydroelectric power is used to produce aluminum.

Coal (different grades I admit) can be used to generate electricity or to smelt steel for wind turbine towers.

WT towers are often the single greatest energy input into a WT, fortunately tower steel (with it's embedded GHG emissions) can likely be used for two generations of WTs (50 years) and then be recycled with low energy/carbon emissions.

The coal use avoided (used in electrical generation with 30% efficiency) with WT generation balances the coal/energy used to smelt the steel. Energy = 3.3 x GHG in that case and a 10 month energy payback shrinks to a 3 month GHG payback.

There are a number of modifications (some NG fired electricity is avoided with WTs, some aluminum from hydroelectric sources is used, some copper (with it's own energy and GHG profile) is used. Fiberglass blades use oil, (energy used) but do not emit GHG since the oil compounds are embedded into the fiberglass resin (yes some do evaporate etc. but some potential GHG stay embedded in the fiberglass).

If EROEI is < 1 year, then it is reasonable to assume that GHG payback is also <1 year (or very close).

Best Hopes for basic analysis before guessing,


I think this link provides some further back up for your analytical approach.
A bit dated, but the picture seems similar.
A useful worked example on wind turbines is at
Wind turbines' energy return is indeed high over a lifetime, even for worst case, compared with embodied fossil fuel energy, but there can be an 8 fold difference, in albeit relatively small totals of embodied energy, between the same turbine made in Germany (dominated by coal-based electricity ) and then located in less favorable wind sites, and the version of the same turbine made in Brazil (dominated by hydro electricity, with re-cycled steel) and located in better wind sites.

The isa.org link is bad.

There is a very strong correlation between energy and EROEI

I meant to write "There is a very strong correlation between GHG (Greenhouse Gases) and EROEI".

Thanks for the link Phil, I will read it.


I can not now get in to edit the above Link. Latter does not work because the ToD site has automatically chopped the end off. Same happens in this comment according to Preview. Link needs addition of 2004.pdf after LCA_ see below

Another way that EROEI calculations are often miss-stated to the detriment of new energy sources is to use the argument that no net energy will be made available for donkey's years due to the energy expense of building an expanding fleet of them, and the figures are usually carefully chosen to give a result unfavourable to whatever new energy resource the writer has a hang-up about.

The underlying assumption of this sort of argument seems to be that the present energy fleet is static.
Of course in reality it is being turned over, and old plant is gradually replaced, so there is an ongoing energy cost in this replacement build anyway.

The only things that matters is that the new energy source should have a reasonable EROEI, and so the present fleet could be gradually replaced.

Several resources including wind, thin film solar and high-burn nuclear give excellent EROEI, so the difficulty seems largely imaginary.

Good for you, Gail.

Davidson didn't seem to have much justification for his position against peak oil. As in, none at all. I noticed they weren't so dismissive of Peter Schiff (since he has been proven correct).

Texas Instruments thanks engineers. (Flash videos.)

I'll refrain from comment right now, except to observe that although they might be trying to show holiday spirit, it might require a sort of strength to endure all three videos. While the announcement email did mention something about spoofs, the underlying cultural assumptions ... well, you decide.

Regarding Surprise Drop in Power Use Delivers Jolt to Utilities

This comes as absolutely NO surprise to me at all. With the prominence of CFLs over regular incandescent light bulbs, and the trend for consumer products to consume less electricity both when active and on standby mode 'less phantom draw', electrical consumption can only do one thing: drop. Up to 12-13% of a households annual energy usage goes towards simply lighting the home. If a CFL uses 1/4th as much energy as an incandescent bulb, it very easily explains the 7%+ declines in consumer electricity usage.

Perhaps what we should be worried about is that we are cutting consumption a little TOO well and it might lead people away from investing in the needed Solar and Wind alternatives.

"Regarding Surprise Drop in Power Use Delivers Jolt to Utilities"

IMO it is because the level of unemployment and poverty are grossly UNderstated.

Given the volume of pro-conservation messages out there, it would be sort of sad if electricity consumption did simply continue on its trajectory. This is the predicament of many power plant owner: if conservation is the flavor of the day, how does out profit model survive? Decoupling of profit from demand growth is needed system wide,and it may be an easier sell now.

Electricity prices have risen throughout much of North America in recent years, in some cases rather dramatically due to deregulation efforts and/or rising fuel costs, so simple price elasticity could account for much of this fall in demand. It's generally believed that a one per cent increase in electricity rates results in a 0.25 to 0.3 per cent drop in demand over the near term (i.e., 2 to 3 years) and a 0.7 to 0.8 per cent fall long term (i.e., 10 to 20 years). The response to sharp and/or rapid price increases after a period of relative stability can be even more impressive.


A conservation behavior can apparently be penalized by an electric utility in an effort to keep a profit ...

I reside in the only US state that is 100% public power – Nebraska - so I find profit motivated power companies responses interesting.

I was discussing the market for the Rennai tankless water heater (that AlanFBE had mentioned in a previous DB) in our region with my community college program chair person who is a plumber by trade. He mentioned reading an article, most likely a trade pub, that told the story of a electric customer in South Carolina that was actually billed at a higher rate due to the on demand nature of the technology coupled with use at peak use time as determined by the utility.

I have done limited online research to verify this story but have been unsuccessful, ATM. I would like to learn more of the details, if anyone has them.

Natural gas does not have "time of day" or "peak demand" charges. I have been mainly installing Bosch gas (not electric) tankless hot water heaters. Peak demand is not an issue with NG (assuming NG pipes in house are large enough, which is not always the case).

I have also installed Rinnai ventless gas space heaters. Maximum BTUs (in most areas, check local code !) are 6,000 BTU in bathrooms and 10,000 BTUs in bedrooms (no supplemental fans in bathrooms). Over 50 ft3 per 1,000 BTUs required in each room these space heaters are installed (lower limits if tight construction). 99+% efficient and heat rooms that people are using.

Best Hopes for Efficiency AND safety,


Thanks for the feedback, Alan.

Since electricity is so economical here, I think gas is a strong second choice.


I'm wholly convinced there's a special place in hell reserved for electric tankless units, but that's my personal opinion. However, I'd say http://www.palelec.com/about/ceo_02_2008.html is fairly representative of the industry view.

In terms of potential financial penalties, the Portland General Electric Company classifies "whole house instant or tankless hot water heaters with a Demand of 18 kW or greater" as "Intermittent Use Service". "Intermittent Use Service" is defined as "continually available Electricity Service which a Customer uses intermittently for a short duration and at a high Demand level such that standard Energy or Demand measurement does not adequately reflect the burden imposed on the Company's equipment and facilities." Their policy is that "[w]here the Company must furnish, install, and maintain additional or specific facilities or capacity to provide Intermittent Use Service, the Customer must pay the entire cost of the portion of the Line Extension associated with such service and is ineligible for a Line Extension Allowance for that portion of the service. The Customer is also responsible for a maintenance charge equal to the present value of future maintenance of the facilities at the time the service is installed."

Source: http://www.portlandgeneral.com/about_pge/regulatory_affairs/pdfs/rules/r...

As noted in their Standard Electrical Service Requirements, Tampa Electric's position is that the utility "has the right to insist that all apparatus connected to its circuits be operated and maintained so that no undesirable service characteristics are imposed on its system which might jeopardize the quality of service rendered any customer. It cautions “[t]he Company may require disconnection of any item of customer equipment which causes a voltage dip of four per cent or more, or objectionable voltage flicker. Electric instantaneous and tankless water heaters can cause excessive voltage drop or voltage fluctuation. Customers considering installation of electric instantaneous and tankless water heating equipment should contact Tampa Electric prior to installation of such equipment to determine the equipment’s impact on Tampa Electric’s system. The Customer shall bear the full cost of necessary upgrades to Tampa Electric’s equipment to accommodate or correct system problems caused by the Customer’s electric instantaneous and tankless water heating equipment.”

Source: http://www.tampaelectric.com/data/files/SESR.pdf

Florida Power and Light’s Electric Service Standards document notes this:

"Electric welders, furnaces, electric draglines, electric dredges, large, frequently started, motorized equipment, variable speed drives, SCR converters, and tankless water heaters are examples of equipment that have operating characteristics which may require rapidly fluctuating amounts of current. If the device is large, significant voltage fluctuations may result, even on a system which is adequate for normal service. These voltage fluctuations may affect the operation and life of other equipment in the customer's facility as well as the equipment of other customers in the vicinity.


The cost for any additional or upgraded facilities that are required to be installed by FPL in order to serve these devices will be borne by the customer as CIAC. If the adverse effects cannot be mitigated by the installation of additional or upgraded facilities, or if these devices cause objectionable flicker to other customers’ service, FPL may require the device to be disconnected from the electrical system.

Source: http://www.fpl.com/doingbusiness/builder/select_your_project/pdf/ess.pdf

Basically, if you install a tankless water heater and your neighbour who shares the same pole pig complains about flickering lights, you could find yourself in a place you really don't want to be.

Hope this is helpful.


Oh, yeah. My gut feeling when I first heard about the concept of heating water on demand, was their was something missing in the scenario - as your links indicate.

a Demand of 18 kW or greater

Current spikes created by any appliance are to be avoided !

Perhaps it is worth another look at solar hot water heating, where feasible?

Tankless gas water heaters (special model) can be used to supplement solar hot water heaters. When the solar unit is not warm enough or just runs out, the gas tankless (specific units) can just take over.

I have tried to install tankless gas hot water heaters where solar can be added "later". Most of these were post-Katrina rebuilds and both finances and time were tight.

Best Hopes for Solar Hot Water Heating, with tankless gas supplement,


At this point, any cut in consumption is welcome.

The drop in usage of electric power shows possibly two things:
1. People are generally cutting back on everything, especially as it affects their personal budgets,
2. Possibly residential use is lower than commercial use of electric power. As people are laid off, they stay at home using less electricity than the now shut down mall store, factory or office where they were employed.

boarded-up houses and malls and factories dont consume much power.

I've been seemingly going into a lot more discussions about these subjects now that people are paying attention (somewhat) to the present situation and how they tire of the constant "Markets opened lower today on fears we may be headed for a recession" crap the media keeps spurting.

Anyway, two posts I made elsewhere, if interested:

Post The First.

Post The Second.

I can only thank the contributors of this site, and others related to analysing this unfolding event, for allowing me to try and at least reach others with such information.

Actually, the whole quadrillion thing is a bit of a red herring. Many have commented that the whole derivatives scam exists solely at the discretion of the various governments, the USA the main culprit. The whole thing could be closed down before it does further damage-not that it will anytime soon (Obama is firmly under control) but it probably eventually will, as none of these economies have enough wealth to continue to transfer unlimited sums of it to one largely non-productive yet politically powerful sector. People are dreaming if they think the leaders of China are going to turn over the future of their economy and nation to these grifters (IMO).

I think it's a better indicator of how far we've been living beyond our means, rather than a case of "We need to pay back a quadrillion bucks or we're in someone's pocket" kind of thing. It shows you the extent to which we've gone crazy with financial instruments and credit with no firm basis in reality.

Not really-what has happened over the last year in terms of government policy is a massive transfer of wealth (through increased public debt not increased taxation, i.e. increased future taxation or dilution of currency) from the productive portion of the economy to pay off the bad bets of the politically connected speculators. All that is reported is the benefits of the spending of the government funds and the dire consequences of not doing it-the spending of massive (trillions) of dollars of government funds in any sector of the economy would produce almost instant positive results. Logic would say that if a sustainable banking system was the goal, the money would have provided the capital for the formation of new banking institutions, and top executives from the current crop of grifter firms would be excluded. Of course, this assumes that the desire to actually improve the lot of the economy actually exists.


What you're describing, the massive transfer and re-distributiion of wealth from the many to the few, is often labelled "class warfare" in classic Marxist thought. I only mention this to show that it's possible to put a very radical interpretation on what's been happening in the US, and other places. One could argue that ordinary Americans have, for whatever reason, allowed themselves to be robbed blind for decades, and now it actually becoming worse. The audacity of transfering over a trillion dollars from the taxpayer to the financial aristocracy, without any control or oversight as to how and where this money is used, is extraordinary.

I think dirivatives are as 'real' or 'unreal' as other exotic financial products, like credit or debt, only more so. Every since banks began lending multiples of their capital or deposits, hasn't the entire system been based on vague terms like 'trust' and 'confidence?'

Of course time and circumstances play an important role in how crazy we think the financial system really is. When they've been selling debts as if they were solid assests and creating money out of thin air, with fantastic profits to follow, and enormous consequences if things go wrong, it's highly debatable that this was 'sane.'

I think time is speeding up, as it does in periods of rapid change in society, and clearly we are in a period characterised by a lot of change.

Whilst I don't own a giant SUV made in Detroit, I can see their appeal, and I know a lot of people who've bought these things during the last few years. One of my neighbours bought a huge, beast, black and powerful, made by Mercedes; another bought one by Toyota Lexus.

Still, I wouldn't like to see the Big Three collapse and Detroit wiped off the map, this would have tremendous negative implications for the lives of millions of people who've committed no crime and don't deserve to be punished so harshly. It would rip the heart out of what's left of American manufacturing.

What's needed in a planned and gradualy change in Detroit, not all these threats and brutality, we need to retain civilized values, despite what's happening around us.

Hello Writerman,

I understand & echo your sentiment to protect the Big3 unemployed from impacts, but I disagree. A sound plan to emerge from bankruptcy would allow the Big3 to leapfrog past Toyota, Honda, VW, etc, by making Nike/Tiger Woods-brand wheelbarrows & garden tools, bicycles, trains & track for Alan's standard-gauge RR & TOD ideas, narrow-gauge minitrains for jumpstarting SpiderWebRiding, no-water toilets, home insulation retrofits, solar water-heaters, wind turbines, birth control, pollution cleanup equipment, composting equipment, bat-roosting houses,etc.

I really hope Obama can see this far ahead towards the degree, intensity, and scale of what we need to do for Optimal Overshoot Decline vs a haphazard and uncontrollable collapse [Hanson or Greer]. Need I mention again Asimov's Foundations for predictive collapse and directed decline?

In addition, they could mass produce portable small and tiny houses like this http://www.martinhousetogo.com/ for the teeming masses soon to be without a home. Set these homes on the millions of acres devoted throughout the country to big box stores and not so big box store parking lots. We can downsize our way out this mess while providing full employment for the otherwise laid off auto workers.

As much as I respect Obama, he will fall into the trap of trying to perpetuate an industry that simply cannot be revived under any circumstances. At some point, you just have to put away the paddles and quit with the artificial respiration. Their are other patients with more hope to be attended to.

When you said "teeming masses" and "downsize" I was expecting one of these:


I agree with you about the need to change what Detroit produces. However, saying this is far easier than actually doing it. There are literally billions invested in the production lines in Detroit for the production of automobiles, switching over to the admirable alternatives you mention in your list, which I could supplement, isn't going to happen overnight and it won't be cheap, on the contrary. Finding the billions needed for three, more or less bankrupt, companies will be a challenge, especially now.

They'll probably need massive state financial support to accomplish your 'leapfrog.' And in a vicious recession everyone is going to want support, not just the banks and Detroit. Financing and telling Detroit what to produce, is once again, a rather 'radical' departure from the principles of the 'free market' and confronts fundamental notions about the nature of US society and the relationships that existed between those with wealth and power and the rest of society.

I don't see Obama, and certainly not the 'Clinton Clan' he's surrounding himself with and bringing back to power, as 'revolutionaries.'

I just think the changes you refer to are going to either quick or easy to introduce and will probably be violently opposed right down to the wire by powerful vested interests. I doubt it's possible to radically change society and our economic structure without radically changing our political system first.

Well, it turns out that the materials, skills, equipment, processes needed to make solar thermal machines are quite close to what Detroit is using making those elephantine cars. And once upon a time I made a back of napkin calculation here showing that the solar thermal widget needed to supply one piggish american with all the power used per capita today happens to nearly exactly equal one SUV. (please, please note that I am NOT talking about PV, so don't you dare say anything about scarce silicon. I am talking about iron/aluminum. Our planet is made of iron/aluminum.)

So, if we charged Detroit to get to it and turn us into the first solar power, it would take about 10 years of the same kind of effort they waste now on cars. Meanwhile, we use what we have- in plenty- on the road, in the used car lots, or stored in those outdoor storage lockers surrounding every city and town. And we all get more exercise, look slim and beautiful, and earn some self-respect. For once.

>don't you dare say anything about scarce silicon. I am talking about iron/aluminum. Our planet is made of iron/aluminum.

Sorry, but there is a lot more silicon on our planet than either iron
or aluminum. Silicon dioxide is the largest constituent of the earth's
continental crust at 60.6%, according to Wikipedia.

There is *no* shortage of silicon and never will be, and it's dirt
cheap since it is the primary ingredient in dirt :-)

The reported shortage has been of semiconductor-grade silicon, purified
to less than one part per million impurities.

The only thing wrong with silicon PV is that it's expensive. But, it's
only about 4 times as expensive as retail grid electricity, which puts
a tolerable upper bound on the cost of electric power. Unfortunately,
there is no upper bound on oil.

Well now, you don't think I knew that??? When I said scarce silicon, I was not refering to sand. I was referring to :

"The only thing wrong with silicon PV is that it's expensive". For god's sake!

The stuff needed for solar thermal is not expensive iron and other metals.

Gripe, gripe. Aw, come on, people. let's get grown up. Every time I hear some pundit pund about solar power they start with " Solar thermal is less expensive than PV, now we are gonna spend the rest of the hour talking about PV" Drives me the rest of the way to nuts.

Me too. Except that I don't usually hear the first part. I just hear "coal produces CO2, but solar panels are too expensive". Solar Thermal is rarely mentioned.

After reading all the good and high-level critique of the 2008 World Energy Outlook, I have a suggestion. Why not release an Alternate World Energy Outlook for 2009? Co-produced by ASPO-Global and The Oil Drum.

I know it´s not a modest proposal and I should probably do most of the work myself, but seriously, considering all the hard work that already goes into the high quality posts at this and other sites, isn´t it exactly what the world needs to know about? Not just critique of the work of others, but "these are our projections".

I think something like that is in the works.

I'd rather suggest *not* to produce an entirely new opposing model (like those that already exist from Collin Campbell or the Energy Watch Group), as the public will regard this new model as "just another alternative model" but rather to subtract the obvious errors from the WEO 2008 and present a "corrected WEO 2008". This would result in an entirely different message.

Obama picks another of the "in-crowd"

Summers Is Said to Be Obama’s Choice for Top Economic Post

Nov. 23 (Bloomberg) -- President-elect Barack Obama will name Lawrence Summers to head the National Economic Council, one of the three top economic jobs in the new administration, a Democratic aide said.

He's got a rather large "controversies" section on Wikipedia.


Summers was a member of the Council of Economic Advisers under President Reagan from 1982-1983. He also served as an economic adviser to the Dukakis Presidential campaign in 1988.

Summers left Harvard in 1991 and served as Chief Economist for the World Bank (1991–1993) and later in various posts in the United States Department of the Treasury under the Clinton administration.

From 1999 to 2001 he served as Secretary of the Treasury, a position in which he succeeded his long-time political mentor Robert Rubin. In 2001, he left the Treasury and returned to Harvard as its President. Summers served as the 27th President of Harvard University from July 2001 until June 2006.

In 2006 he was a member of the Panel of Eminent Persons which reviewed the work of The United Nations Conference on Trade and Development or UNCTAD.


Summers is an ardent proponent of free trade and globalization, and frequently takes positions on a number of politically-charged subjects. This, along with his direct style of management, made him controversial as President of Harvard.

# 3 Controversies

    * 3.1 World Bank Pollution Memo
    * 3.2 Cornel West
    * 3.3 Anti-Israel attitude among academics
    * 3.4 Differences between the sexes
    * 3.5 Summers' opposition and support at Harvard
    * 3.6 The AIDS Drug Scandal with HSPH
    * 3.7 Support of economist Andrei Shleifer
    * 3.8 Other factors in the opposition to Summers

He'll need some real smarties to find the money he'll need for his lastest proposal: 2.5 million new jobs in 2 years. They'll be used to improve the highway infrastructure and repair schools according to the plan. Assumming $30k per worker and that in construction projects the labor runs around 12% of the total cost, the back of the napkin calc shows a tad under $1 trillion per year of new spending.

No problem...we'll just sell all that bank stock the gov't has been accumulating at a bog profit to fund the new program.