DrumBeat: December 22, 2008

Pemex Oil Output Falls 6.5% to 2.711 Million Barrels a Day

(Bloomberg) -- Petroleos Mexicanos, the state-owned oil company, said crude oil output fell 6.5 percent in November from the year-earlier period as production at its Cantarell field declined at a faster-than-expected rate.

Production dropped to 2.711 million barrels a day, from 2.901 million barrels a day a year earlier, the company known as Pemex said today on its Web site. In an e-mail, Pemex cited Cantarell, its largest field, as the reason for the drop.

...Cantarell’s output fell 33 percent, more than twice as fast as government estimates, to 862,060 barrels a day from a year earlier. Declining pressure at Cantarell has made it more expensive and harder to continue pumping oil from the offshore deposit.

Cantarell accounted for 32 percent of Pemex’s total output, half of the 65 percent it once represented at its peak.

Oil exports fell 20 percent to 1.511 million barrels a day, according to a chart on Pemex’s Web site.

Mexico Looks To Buck Global Oil Trend By Raising 09 Spending

MEXICO CITY -(Dow Jones)- Oil firms from offshore Louisiana to Middle Eastern deserts are cutting back during the price collapse, but oil-hungry Mexico is spending as if the boom is just starting.

In Mexico, oil exports will run out in less than seven years at current decline rates, and the urgency to reverse the sharp fall has created a flurry of activity in Mexico's oil patch.

Fatih Birol interview on Youtube for the film "PetroApocalypse Now?"

In this 40 minute exclusive interview for my film "PetroApocalypse Now?" I interviewed Fatih Birol, Chief Economist of the IEA about reserves, the USGS, technology, demand and recession, solutions and peak oil.

Shell Says 'Risk-free' North Sea Still Vital

Shell's UK chairman has pledged the oil major's continuing commitment to the North Sea despite his belief that more than half the area's natural reserves have been produced.

James Smith told The Scotsman that the fact that there was still a "low risk" in operating in the North Sea compared with some regions of the world also remained a big plus for the major explorers.

The Last Traffic Jam

Unless we exercise foresight and devise growth-limits policies for the auto industry, events will thrust us into a crisis that will lead to a substantial erosion of our domestic oil supply as well as the independence it provides us with, and a level of petroleum imports that could cost as much as $20 to $30 billion per year. (This in turn would produce a staggering balance-of-payments problem for the United States, and give the Middle Eastern suppliers a dangerous leverage over our transportation system as well.) Moreover, we would still be depleting our remaining oil reserves at an unacceptable rate, and scrambling for petroleum substitutes, with enormous potential damage to the environment.

Indonesia: Gas Shortage Pushes Prices Higher

Jakarta: Retail vendors in Jakarta were in short supply of Liquified Petroleum Gas for household consumers as shortage widens to reach the capital city. Shortage in various part of the country were reported months before the problem emerged in Jakarta.

Iran set to build 5 new nuclear reactors

Iran's Atomic Energy Organization (AEO) says the country plans to construct five additional nuclear reactors in the next five years.

AEO Deputy Head Mohammad Qannad revealed Sunday that the agency has been tasked with meeting 10 percent of the country's energy demand -- approximately 20,000 megawatts -- through nuclear energy in the near future.

"For the next five years, Iran plans to produce 5,000 megawatts of [nuclear] energy," he added.

Bushehr nuclear plant's completion could be delayed - Iranian FM

TEHRAN (RIA Novosti) - The completion of the $1 billion Bushehr nuclear power plant, being built by Russia in southern Iran, could be subject to delays, an Iranian Foreign Ministry spokesman said on Monday.

Over a barrel

The plunging oil price is like a dangerously addictive painkiller: short-term relief is being provided at a cost of serious long-term harm.

It took more than four years for oil to go from $35 per barrel in 2004 to over $147 in July 2008, and less than six months to fall all the way back again.

For hard-pressed businesses and consumers in the US, Europe and other oil importers, the price collapse has been one ray of light in an increasingly gloomy economic outlook.

But it has also caused a seismic shock to the energy industry worldwide, re-shaping it in ways that will often be unwelcome for oil consumers.

See also: Oil price at which fuel sources become economically viable

Flying J files for bankruptcy

Flying J. Inc., which operates 250 travel plazas and fuel stations across the country, on Monday filed for bankruptcy, citing a cash shortage brought on by plummeting oil prices and problems getting credit.

...The company is seeking protection from creditors after facing "an unprecedented combination of factors," said J. Phillip Adams, Flying J CEO and president.

He cited a precipitous drop in the price of crude oil and a lack of available financing from its usual lending sources.

Fuel nearly ran out

GUERNSEY came within days of running out of fuel before the States took control of the supply chain, it emerged at the weekend.

Policy Council sources indicated that stocks of petrol and heating oil were at one stage down to three to four days before the crisis was resolved.

A news blackout was imposed by senior politicians and the fuel suppliers to prevent panic buying. The fear was that unnecessary topping up of cars and oil tanks would have triggered an actual shortage.

The problem was caused by administrators impounding the two ships owned by Swedish firm Svithoid Tankers after it collapsed to prevent the assets from being lost to them.

StatoilHydro Terminates Rig Tender for Norwegian Continental Shelf

StatoilHydro is terminating its procurement process for rig hire for operations on the Norwegian Continental Shelf due to high rig rates.

"We focus on reducing costs and making strict priorities," said Anders Opedal, head of procurements in StatoilHydro.

Australia: Petrol stations run dry

A NUMBER of Caltex service stations across the Gold Coast have run dry as the fuel shortage continues.

But the worst may be yet to come as the service stations say they do not know when their tanks will be re-filled, with some already cutting back staff hours.

Petrobras' Oil Output Down 1.5% in November

Petrobras' average oil production in Brazil was 1,844,940 barrels per day in November, 4.6% more than a year ago and a slight 1.5% decrease compared to October 2008. Natural gas production, also in domestic fields, averaged 51.241 million cubic meters per day, 16.7% above November 2007 and 4.8% more than a month earlier. Production in November was lower due to the scheduled shutdowns at platforms operating in the Northeastern Pole of the Campos Basin, which are already running normally again.

Iranian official pledges no stop of fuel oil export

TEHRAN (Xinhua) -- An Iranian official has pledged that the country would never stop its fuel oil export, the semi-official Fars news agency reported on Monday.

"The export of this product will not be stopped under any circumstance," Farid Ameri, Managing Director of the Oil Products Distribution Company, was quoted as saying.

Ameri's remarks came in response to some foreign media reports that Iran would stop the export of fuel oil in winter to meet its local power plants' demands.

Kyrgyzstan: Water Shortage Ratchets up Social Tension

As if electricity blackouts weren’t bad enough, now residents in rural Kyrgyzstan are having difficulties accessing water. Without electricity, Kyrgyzstan’s new water pumping system is inoperable; and some pumps have been damaged by the irregular supply of power.

"The energy crisis and the drinking water supply have a direct connection. If there is no electricity, in most cases it means there is no water," Talant Ormushev, head of production at the Department of Rural Water Supply, told EurasiaNet.

Will crude oil price crash help plastics industry?

Can the crash in crude oil prices help the plastics industry? The input cost for plastics--crude oil--has collapsed. But the demand for plastics has also drastically come down.

Japan Oil Imports Fall 17% as Recession Damps Demand

(Bloomberg) -- Japan’s crude oil imports fell for the first time in three months as exports plunged to a record in November, cutting consumption by the world’s third-biggest user.

Japan imported 17.7 million kiloliters, or about 3.71 million barrels, a day of crude last month, down 17 percent from a year earlier, the finance ministry said in a preliminary report released in Tokyo today. Imports of liquefied natural gas decreased 5.9 percent to 5.24 million metric tons.

Japan’s total exports fell 26.7 percent in the month, the finance ministry said, marking the sharpest decline since data were made available in 1980. Stagnant demand has forced Nippon Oil Corp., the country’s largest refiner, and other local oil companies to slash output. Utilities cut generation for a fourth month in November as the recession reduced electricity use.

Russia's oil companies face short-term crunch

ANALYSIS: In the short term, Russia's leading oil companies are facing a cash squeeze caused by falling crude and petrol prices. This decline has been exacerbated by the impact of export duties, which had been set for two-month periods (although the Kremlin has now reduced this time frame to one month). This meant that when oil prices fell, the duty paid on exports became a much higher proportion of the prices actually realized, and margins were severely reduced. Producers with no spare refining capacity either took a potential loss, or tried to sell crude in the oversupplied domestic market, where prices have consequently been even more depressed.

Russia may rethink debt stance if oil below $30

MOSCOW (Reuters) - Russia may reconsider its debt strategy if oil prices remain below $30 for a long time, Deputy Finance Minister Dmitry Pankin said on Monday.

'At the moment our debt strtaegy does not include external borrowing. But if the price of oil remains...below $30 for a long time, we do not exclude that we may have to reconsider our debt strategy,' Pankin told a news briefing.

Russia warns energy supplies to Europe at risk in Ukraine dispute

Moscow - Russian gas export monopoly Gazprom Monday warned European customers of a potential shortage in gas supplies, as it has hit a deadlock in a pricing dispute with Ukraine.

Australia: No profiteering, but big oil still dominates

THE "Big Four" oil companies did not use price rises in 2008 to increase their profit margins, a report by the Australian Competition and Consumer Commission has found.

But the dominance of Shell, BP, Caltex and Mobil over the wholesale trade has caused alarm for the petrol commissioner, Joe Dimasi, who said the concentration of imports may affect competitiveness in the future.

Ike damage to delay Exxon facility start-up

NEW YORK (Reuters) - Hurricane damage discovered at Exxon Mobil Corp's (XOM.N) $1 billion natural gas terminal under construction in Texas will postpone the facility's start up, according to a report in the online edition of The Wall Street Journal on Saturday, citing people familiar with the matter.

The liquefied natural gas, or LNG, facility in southeast Texas was damaged by seawater from Hurricane Ike nearly three months ago and assessing damage has taken time, it said.

Oil’s origins revisited

Once upon a time, clever people scared themselves by trying to predict the end of the world. Sir Isaac Newton’s best estimate, for example – recently uncovered in archived manuscripts – was some time in the year 2060.

Today smart people seem intent on scaring all of us by trying to predict an event no less apocalyptic for modern economies: the arrival of “peak oil”, after which output of crude oil falls into terminal decline.

Can OPEC Save the World Economy?

After the Peak Oil plateau, from 2010, we will move into the post-plateau downslope in world oil availability. Average annual long-term loss will likely run at about 4% by volume, and about 6% annual for export volumes, specially due to the immoderate appetites of oil producer countries – who actually use the stuff themselves ! According to the IBRD's Global Economic Prospects 2009 world oil reserves are (I cite) 'incredibly stable' at approximately 40 years-equivalent of current demand. Confusing this with 'abundance', by design or ignorance, will in no way ensure adequate world oil supply. The World Bank, to be sure, likes to maintain the folksy notion that present production will stay rock solid for exactly 40 years, then fall to zero in an instant! In fact the Consumer Herd will soon face, and adapt to ever-declining annual export supply because there is No Alternative.

Cramer's Solution for $150 Oil

Cramer has a plan to make sure the U.S. never again suffers $4 gasoline. Barack Obama should, as one of his first acts as president, build storage facilities – tankers, tanks, whatever is needed – and buy a vast reserve of oil at these low prices.

Let’s face it, $34 crude just isn’t going to last. So the new president needs to take advantage of oil’s tremendous decline and buy as much of the commodity as the U.S. can hold, Cramer said. Drilling doesn’t make economic sense at these levels. But we can buy oil on the open market right now and store it for later use.

Lower gas prices won't last forever, economists warn

"As soon as the world economy turns around, then prices will shoot higher again," said economist Ken Mayland of ClearView Economics LLC in suburban Cleveland. "As soon as those economies pick back up, we're going to be right back in the soup."

Mr. Mayland is talking about the economic theory of peak oil, the belief that oil production will or already has reached its maximum, and that as production declines, prices will rise accordingly. Peak oil theory, first proposed in 1956, may play out in a series of wildly speculative price swings that grow increasingly volatile over time, proponents say.

"World crude oil production stopped growing in 2005. It's hard to hide that one behind the curtain," argues Ken Deffeyes, professor emeritus of geology at Princeton University and a longtime proponent of the peak oil theory.

Big oil wants more renewables

Both oil producing and consuming countries were represented at the meeting on Friday, December 19 which was principally about stabilizing energy markets in today's turbulent world economy.

But with peak oil looming ever larger on the horizon, even countries that rely heavily on oil revenue acknowledged that a greater uptake of renewables world wide would be of value to everyone.

Australia - A Future Saudi Arabia of Coal?

Imagine a peak oil world - which isn't too far off according to the International Energy Agency. Perhaps we'll all be driving electric cars by then, recharged via our rooftop solar systems. Or perhaps they'll be powered by liquid coal fuels.

While abundant, coal generates 25 to 50 percent more carbon dioxide per energy unit than petroleum according to the IEA. Everything to do with coal is essentially an environmental nightmare, from the mining through to combustion.

Impostor disrupts lands bid

He didn't pour sugar into a bulldozer's gas tank. He didn't spike a tree or set a billboard on fire. But wielding only a bidder's paddle, a University of Utah student just as surely monkey-wrenched a federal oil- and gas-lease sale Friday, ensuring that thousands of acres near two southern Utah national parks won't be opened to drilling anytime soon.

Tim DeChristopher, 27, faces possible federal charges after winning bids totaling about $1.8 million on more than 10 lease parcels that he admits he has neither the intention nor the money to buy -- and he's not sorry.

Climate change could one day doom "white Christmas"

"The probability of snow on the ground at Christmas is already lower than it was even 50 years ago but it will become an even greater rarity many places by the latter half of the century," said Friedrich-Wilhelm Gerstengarber, climate researcher at the Potsdam Institute for Climate Impact Research. In the northern German city of Berlin, for instance, the chances of snow on the ground on December 24, 25 and 26 have fallen from 20 percent a century ago to approximately 15 percent in 2008, he said. By 2100 the odds will be less than 5 percent.

Melting Yosemite glacier an omen of climate change: More water runs off Mt. Lyell than can be replaced by snow

As signals of climate change begin to come into focus in the Sierra Nevada, its melting glaciers spell trouble. Not only are they in-your-face barometers of global warming, they also reflect what scientists are beginning to uncover: that the Sierra snowpack -- the source of 65 percent of California's water -- is dwindling, too.

More of the Sierra's precipitation is falling as rain instead of snow, studies show, and the snow that blankets the range in winter is running off earlier in the spring. And snow in the Sierra touches everything. Take it away and droughts deepen, ski areas go bust and fire seasons rage longer.

So what’s the story on Alaska North Slope spot at $27.49? How much storage capacity is available in Valdez and are they short of customers? How long is the pipeline viable at this price?


The story is glut, glut, glut, glut. And more gluts.
Mexico is selling oil in the $20s also.
The story is not enough storage capacity to store the world's oil. Tanks are full, sea tankers are full. The story is that several refineries, able to refine heavy and sour crudes (which have lacked for buyers in recent years), opened up in recent years, and more are opening up in the future.
2009 will be the worst glut of oil ever. Everyone is using less, even as more becomes available.
Glut, gluts, gluts-a-rama.
And years ahead of more gluts. Demand may not recover to 2007 levels for 10 years, if the 1980s are an indicator.
I think the negative effects of peak oil have been re-set to 10 Years After (anyone old enough to remember that band?)
And the price mechanism may help us dodge any bullets, even then.

opec's el badri recently stated that inventory is about 5 days oecd demand in excess of average operating levels. and i suppose you can call that a glut, but that glut didn't occur overnight, $ 134 oil and ca 10 million bpd saudi production had something to do with it.

if you are claiming glut, gluts, glut a rama, show us some data. show us how supply going forward will exceed demand, show us what demand is now, show us what demand will be in the future, show us some data.

ace, etal have invested a lot of time and effort in forecasting these things and while i dont agree 100%, i for one respect their work a lot more than your rhetoric.

If you check out British Petroleum's website, World Statistical Review, you can see that after the price spike 1979-80, oil demand fell by about 11 percent (annual peak to annual trough), and did not recover for 10 years.
Okay, making predictions is hard, especially about the future. I hope I am wrong. I hope the world economy roars ahead in 2009.
But, from all indicators, this recession has "global ugly" written all over it.
So, you get a confluence of trends: Recession, and market reaction to higher oil prices of 2004-2008. Together, that confluence will likely mean at least an 11 percent reduction in global oil demand in 2009-10.
Call that 9 mbd of demand disappearing. Then, thanks to higher prices of 2004-2008, you get another net 2-3 mbd of production, that is too far along in development to stop. Anyways, the marginal cost of production is less than $20, or even $10.
So, you get 10, maybe 11, maybe 12 mbd of excess production, in world that demands maybe 78-79 mbd.
That is one honking glut to the moon. We will have oil pouring out of every orifice we have.
How far into the future can any of us see? Well, last time around it took 10 years for demand to recover after a price spike. There was some power plant fuel switching in the 1980s, but this time around we have much, much higher mpg cars available (if anyone buys them) and some biofuels.
Like I said, this recession looks global and ugly. Oil could $10. I think it will.

Then, thanks to higher prices of 2004-2008, you get another net 2-3 mbd of production, that is too far along in development to stop.

Let me get this straight. You are forecasting that physical world crude production is going to increase by 2 or 3 mbpd over and above the reported current peak in the next few years?

I can see the possibility that demand continues to crash faster than production but to actually forecast a considerable increase in physical oil production when OPEC is currently cutting production seems strange.

I think hes talking about "capacity"...

or bull$hit.

Thanks for asking the clarifying question. I am referring to total liquid fuel production, from oil, GLTs, CTLs, and biofuels....and yes, it is back of the envelope stuff.
But the demand drop is so large, you don't need anything but the big map. This one ain't even close. It is glut to the moon and beyond.
As for global liquid fuel production, even some Peakers have said it will rise for next couple of years.....

I'll try to put some(one else's) math into the picture.

In the recent Puplava interview, Hirsch commented that every decrease in demand of 1 million barrels per day buys us just one month — such is the rate of decline post peak.

I don't know how he came up with that number but as a starting point I suggest you try to reproduce it otherwise your assertion doesn't seem to have much validity.

That doesn't seem likely (it means that the decline in capacity equals at least that million bpb/month... that by spring, OPEC's 4.5 million bpd cut won't need to be enforced because it will be the most they can produce.

It's silly to take such a ridiculous number at face value and then insist that someone else "try to reproduce" it.

PP, Angel was talking about the effect on peak of reductions in demand (use), which you are conflating with the demand/production curve.


U.S. total products supplied was down 4.9% YOY, not 11%. Demand for petroleum products has been recovering even though the economy has not. The price of gasoline is little more than a third of its peak summer price that triggered conservation measures.

While oil supplies rose last week, total crude + petroleum product inventories declined by 2.7 million barrels from the previous week average (-.3%). They were 3.1% above last year's levels.

Oil imports have increased YOY (four week average), it is not that recent demand for imports is falling faster than OPEC can cut.

Gasoline demand is recovering, while jet fuel sales remain depressed after the airlines cut unprofitable routes. The airlines have not fully recovered from the surge in jet fuel prices.

Some Canadian in-situ tar sands bitumen production has been cut due to high costs eliminating the profit margin (Connacher). Some new oil production projects were based on assumed higher oil prices. Some of these may have been modified, delayed, or cancelled.

Really the same thing in this case.

If we're on the downside of the curve and a reduction in demand merely pushes things back by a month, then whatever that amount is.. is the amount of production capacity you expect to lose in that month.

A long series of conjecture, based on false premises, from someone who's been a member of TOD for less than three weeks. I smell a troll. But just for fun I will point out some issues with bigglutman2009's assertions.

1. There are many important differences in both supply and demand between now and '79-80. I have no reason to assume that we will now repeat what happened then, with an 11% drop in demand and a 10-year recovery. This point is wholly unsubstantiated.

2. Where is this alleged 2-3 mbpd of new production? Against what baseline? Is that net production growth, or before accounting for declining fields?

3. The "marginal cost of production" isn't under $20 anywhere in the world. Globally it's more like $65.

4. Nobody keeps adding excess production capacity when there is a large oversupply, and when OPEC is cutting production. Which projects are "too far along in development to stop," exactly? There are numerous and expensive projects all over the world that have been halted mid-stream as oil prices crashed in the last 6 months.

5. 9 mbpd becomes 12 mbpd of excess production...how??

6. Having higher mpg cars available today than we had in the '80s is irrelevant. To prove that demand destruction this time, due to higher efficiency, will be even close to the demand destruction then, you have to prove a) that the difference between the efficiency of new vehicles today and the average fleet mpg is proportionally greater than the difference that existed then (it isn't); b) that switching power plant fuels today could achieve the same result as was achieved in the '80s (it can't); and c) that under the current horrible economic conditions, people are still going to shell out for an expensive, new, more efficient vehicle, when it now costs less than $40 to fill the tank of an SUV (they won't).

7. Even a cursory glance at the production cost and flow rates of GTL, CTL, and biofuels makes it clear that none of them amount to a drop in the bucket against 86 mbpd, nor will they for a long time to come.

It was probably a waste of my time to even try to address this post but I really tire of newbies spouting completely unfounded rhetoric as if it were fact.

South Korea oil demand in November is off 12.5 percent y-o-y. This is looking pretty ugly. The global demand drop this time around may be worse than 11 percent. It's down a lot laready, and this recession is barely out of the crib.
How long until oil demand revives to peak levels? You say 10 years is too long. So, when does global reovery begin, and how much can oil demand revive in each year?
If we assume a "good scenario," maybe demand can recover at 2 percent a year. That's five years (roughly) from the bottom. If we bottom in 2010, then we are saying 2015 until we reach peak demand levesl again.
But demand may recover more slowly. If prices go up, demand for fossil oil may never recover. Crude oil demand was falling in Europe, Japan and the United States even before recession, due to higher prices.
We get 12 mbd of excess supply in 2009-10 due to 9 mbd of demand disappearing, and 3 mbd of total new net suuply, predicted by many agenciies, and not me. If we got no new net supply, we still have a glut. If OPEC takes production off the table, we still have a glut.
Hey, I hope I am wrong, and the global recovery starts tomorrow, and we get 5 percent global growth, and the US recovery is immediate. I hope we all have multiple job offers, including you. I hope for a lot of things. But what is happening is another thing.

South Korea exports a lot of finished products Gasoline and Diesel to China and the US and Japan.

Since you did not provide a link and I cannot find a hit for what your saying using google.

I'd suggest you be careful about double counting. If South Korea imports 12% less oil and its finished product exports are down 10% then this is the same 10% thats being counted depending on what your looking at in other countries decline. Same for the US for that matter we do export finished products esp Gasoline to Mexico. You need to be a bit careful or your double counting by mixing various sources.

I did find this.


Imports dropped to 73 million barrels last month from 78.1 million a year earlier, the Ministry of Knowledge Economy said in an e-mailed statement today. The country's crude oil import bill dropped 21 percent to $5.1 billion.

Its say 72 million barrels from 78.1 YOY change.

This would be a 6.5% change in imports.

Assuming demand is down 3% in China/Japan/US i.e its export markets and 3% internally then then 6% or so sounds about right for South Korea.

And we have hints that they have cut back on exports of fuels

Next South Korea is a big chemical manufacture and Naptha is the prime feedstock used in chemical that actually comes from oil most of the rest comes from various non-crude sources.
So a lot of their internal slow down is related to the slowdown in housing and auto manufacturing and the related plastics. The Naptha kinda skews things a bit for them.

In any case assuming 50% exports then 3% is a pretty good indicator of demand drops in their customers. Assuming that world demand was 75mbd then 75*.03 = 2.25 or about 72 mbd.

Believe it or not its in excellent agreement with what I've calculated !

World demand is about 72mbd and we have excess capacity. Going back and looking at the historical price data.


2004 $37.66 $42.80


A perfect fit with 2004 production of 72.52 barrels.

Assuming that OPEC really cuts and that its cuts take us to about this number and assume that some production has started to shut in and continued declines i.e Mexico we should see a tight oil market any day now. This would leave OPEC and in particular Saudia Arabia with about 2mbd or so of real spare capacity that I seriously doubt they will turn back on any day soon.

I'd say that simply reading off past years demand and prices is itself a valid and good estimate of the current oil demand more complex guesses support this.

10mbd ? Don't think so this would show up clearly in US imports alone and it has not we have seen gasoline imports decline which fits very well with the South Korean declines.

The glut man is clearly someone who has a horse in the race and believes that repeating this mantra can have an effect on prices. So be it. I doubt US demand will even be down in '09 when it's all said and done.

The Economist Magazine predicts low oil prices for foreseeable future

Huh? That article was written in 1999, oil prices did remain fairly low for the 5-6 years after that. I guess it all depends on how you define "forseeable future.", but i'd say the 5 year time frame is about as far as that goes (and thats pushing it).

The article was published in early March, 1999, which means that they had price data through most of February, 1999 (which averaged $12, US spot). They were predicting $5 to $10 oil for the foreseeable future.

Here are the annual rate of changes in prices, for Februarys, from 2/99 to 2/09 (assuming $40 oil for 2/09). Note that 2000 is for one year, 2001 for two years, and so on.

2000: +88%/year
2001: +46%/year
2002: +19%/year
2003: +27%/year
2004: +21%/year
2005: +23%/year
2006: +28%/year
2007: +20%/year
2008: +23%/year
2009: +12%/year*

*Assuming $40 oil for 2/09


But let's be honest, gasoline (which what most americans care about) remained very very affordable for the entire "forseeable future" as they called it. In a sense the economist was telling people that gasoline/heating oil would remain affordable to american for the forseeable future. You of all people should know how hard it is to predict a specific price point ;-)

Well, here is what the Economist Magazine said in 1999:

Yet here is a thought: $10 might actually be too optimistic. We may be heading for $5. Thanks to new technology and productivity gains, you might expect the price of oil, like that of most other commodities, to fall slowly over the years. Judging by the oil market in the pre-OPEC era, a "normal" market price might now be in the $5-10 range. Factor in the current slow growth of the world economy and the normal price drops to the bottom of that range.

That the recent fall in prices has been so precipitous merely confirms that, for the past 25 years, oil has been anything but a normal commodity. Although the Middle East contains two-thirds of the world's proven oil reserves, it produces less than a third of the world's oil. If production were determined by cost and quality alone, most oil would come from these countries. Oil in the Gulf is cheap to extract-barely $2 a barrel, a quarter of the cost in the North Sea. Unlike the heavy crudes of Mexico or Venezuela, it is of high quality and high value. Much of the world needs fancy technology and expensive rigs to extract oil; in Arabia, as the old hands say, "you just stick a straw in the ground and it gushes out."

I have tried to stay away from picking both prices and time frame, since there are so many variables. For what it's worth, my two most repeated statements were that prices were best characterized as a series of doublings, $50, $100, $200, $400. . . with the caveat that I didn't know over what time frame, and I noted that the price of oil is a horserace between declining demand and a long term (and IMO accelerating) decline in net oil exports. Having said all of that, I do think that there is a pretty decent chance that the average 2009 price will exceed the average 2008 price.

For what it's worth, my two most repeated statements were that prices were best characterized as a series of doublings, $50, $100, $200, $400. . . with the caveat that I didn't know over what time frame,...

A technical quibble: once you hold back on the time frame, you haven't said much more than that price peaks will go ever higher. If that's true, you then just mark the points where doublings have occurred. You could, in principle, have a very slowly growing graph despite talk of doublings.

True, any steady exponential rate of increase results in doublings,

How about ANY increase, for example the rise in the price of goods with inflation results in doublings. A movie ticket....was 1$, 2$, 4$, 8$, you know a doubling.

Also, speaking of doublings, has anyone seen this graph of Solar cell production:


PV production went from 250 in 2000 to 500 in 2002 to 1000 in 2004, to 2000 in 2006, and 4000 in 2007! Now that's what i like to call "doublings"!

Any linearly increasing graph will suffice -- that's the point.

And if you adjust for inflation? And plug in $30 oil for 2009?

And if we take the square root of $30, the price of oil would only be $5.50 in 2009.

The story is glut, glut, glut, glut. And more gluts.
Mexico is selling oil in the $20s also.
The story is not enough storage capacity to store the world's oil. Tanks are full, sea tankers are full. The story is that several refineries, able to refine heavy and sour crudes (which have lacked for buyers in recent years), opened up in recent years, and more are opening up in the future.
2009 will be the worst glut of oil ever. Everyone is using less, even as more becomes available.

I don't disagree. We're priced at the margin and the margin is low.

I think the negative effects of peak oil have been re-set to 10 Years After-
And the price mechanism may help us dodge any bullets, even then.

TOTALLY disagree. First of all, if we really do need ten years to get back to 2008 demand levels, then we have some pretty big geopolitical conflicts in a 10 year depression. But more importantly, each month that goes by without increased investment narrows the difference between future natural decline and observed. Natural decline is over 40% per year for NA Natty and probably close to 10% on global oil. With those numbers, even in a world depression, drop in supply will overtake drop in demand WELL before 10 years. (but for 2009 I suspect you may be correct).

I do worry about under-investment in fossil oil, thanks to the $10 oil we will see in 2009. I think that is a legitimate concern. I don't know what to do about it, however. Always, investors tend to over or under-invest, from real estate to dot.coms to oil. Actually, I think all energy investments get cranked back and hard now, just like the late 1980s, with bad long-term results.
But I don't think it is so far-fetched to expect crude oil demand will not reach peak levels again for 10 years. After all, that is what happened in the 1980s, after a similar price spike. Except this time we have a honkin' bad recession staring us in the face.
South Korea oil demand in November is off 12.5 percent y-o-y.
This is looking really bad.
Maybe supply will fall faster than demand. That will be a first, especially after a price spike-recession combo.

And now we will see $10/bbl in 2009? LOL! If I wait another hour, will you say it's going to $5?

I am sticking with $10 a barrel, but I will "cheat" and not say what type of crude. And I won't say for how long. It might be the Mexican crap, which is already done in the $20s, and it might be for one hour.
But I think it will happen, we will see $10 oil in 2009. Jeez, look at the cover of the Wall Street Journal today. Now, commercial real estate borrowers say it is all turning to crap too. I keep looking for good news. If anybody sees a case for strong oil demand in 2009-10. I want to see it.
If not, where is all the oil goint to be stored?
And $10 is not so crazy. Let's see, we have gone from $147 to mid-$30s. That $110 or so. Another ten-spot down, and some weak news, and presto, you see $10 oil in some crappy grades.

You make some good points, but you haven't acknowledged that a strong US dollar is an implicit part of your price forecasts.

That is correct I think. What if the oil producers stop accepting US$ or JPyen or other currencies? There's already murmuring about backwardation in the gold market and about what this means for the dollar.

There are so many factors interacting that it's hard to go along with a scenario as simplistic as a long term glut, with people continuing to build nothing and rein in spending while enjoying cheap gas for ten years. BAU-Lite?? I don't buy it.

Neither do I. Nor peak lite.
We are blowing off the Peak production with the lowest prices seen in years. With that tailwind on the downside of the economy it'll matter less that oil is unaffordable. It'll still be cheap enough for almost anyone who had access previously to at least drive some and there are way more potential consumers around the world than the last time we we're here on price.

But last time there was plenty of easy oil left.

The massive stimuli will bring the dollar down and all that printed crap will be used to buy the most undervalued oil the world has ever seen. The oil which might have made the transition to powerdown possible. This sets the stage for much higher prices post stimulus when US inflation begins to run rampant.

Producers will want 'tangeble' for their now obviously declining net exports and those that lack it and haven't made provision will lack leverage. Insufficient ability to produde tradable value will not go unnoticed. Not by OPEC or those who struggle for power within the regimes.

The economic news is abysmal this morning:

Japan recession deepens, China cuts rates

SINGAPORE/LONDON (Reuters) - China cut interest rates on Monday and Japan warned it was sliding deeper into a recession encroaching steadily on the global economy, closing factories and throttling trade.

China fights "Mafia-style" gangs as crisis bites

BEIJING (Reuters) - China plans to set up a new police division to combat growing Mafia-style gang violence as the global financial crisis bites and millions find themselves out of work, state media said on Monday.

Police were keeping "a close eye" on crimes stemming from unemployment as falling demand from overseas leads to the closure of factories, especially in the once-booming south, a senior official from the Ministry of Public Security was quoted as saying.

"Murder, rape, robbery, kidnapping, assault ... they dare do anything," an unidentified director of the ministry's organized crime investigation division was quoted as saying. "Gang-related crimes have become a threat to our social stability and the economy."

Toyota sees first operating loss

NAGOYA, Japan (Reuters) - Toyota Motor Corp forecast a first-ever annual operating loss, blaming a relentless sales slide and a crippling rise in the yen in what it said was an emergency unprecedented in its 70-year history.

CNBC had a story today about how "printing money" in Japan did not increase inflation. The only thing that increased inflation was rising oil prices.

Then there's this...

World faces "total" financial meltdown: Bank of Spain chief

MADRID (AFP) — The governor of the Bank of Spain on Sunday issued a bleak assessment of the economic crisis, warning that the world faced a "total" financial meltdown unseen since the Great Depression.

And of course, any time a senior political or institutional person (as opposed to a blogger) says things are worse than the average public perception, you can bet that it really is.

3 months later after the Monty Hall campaigns began in earnest, Paulson admits 'there is no playbook'. Why am I not surprised?

Lubchenko, Chu and Holdren GREAT choices by Obama on environment and science fronts. Lawrence Summers and Geitner? More of the same. And I'd be surprised if science and environment will come ahead of finance with the same old crew at helm. (Except John Holdren DID write an essay in one of Herman Daly's books......hmmmmm.)

The opportunity has passed, but Bernie Madoff would have been the ideal choice for Paulson's job-the guy knows how to make a Ponzi scheme last. A second approach would have been to just bailout Bernie with 50 billion of taxpayer money because avoiding the hit to investor confidence would have been worth it.

Speaking of Government Jobs...

Obama transition sees eye-popping 300,000 resumes

Just weeks after opening shop, the Obama transition team has been flooded by what looks like an unprecedented wave of hundreds of thousands of resumes from people who want positions in the new president's administration.

"We've actually had more than 300,000 expressions of interest," Obama transition spokesman Nick Shapiro told CNN Radio.

That is roughly equivalent to the entire population of Iceland.

It dwarfs the 44,000 applicants reported by a Bush transition spokeswoman to the San Francisco Chronicle just days before George W. Bush was inaugurated in January 2001. The Clinton transition team in 1993 put its number of applicants near Inauguration Day at approximately 100,000. And the Obama boom has another month to build.

The Change Jobs We Need

Meet the new boss... Same as the old boss...

I really fail to see how applications for jobs indicates that new boss will be the same as the old boss or that there will be no change. Your rank cynicism has led you to draw absurd conclusions from peoples desire to be part of the new administration.

You know, Darwinian, I want to agree with you that change is coming... Then I read on this board about how the people being given positions in Obama's administration aren't really agents for change. Beleive it or not, I am a Democrat, and voted Obama, but based on things I have seen here I am not hopeful for change, or at least enough change... And perhaps it is Obama's desire to step aside and let Bush ride out his last few days as Commander In Chief that I'm confusing for a lack of bold, eye-grabbing initiatives.

I see the job applications as a function of the poor economy of the times. And yes, Obama will have to create jobs... If he came across to me as more of a change agent, hell I'd apply for a job for him. We need change; and that's not a slogan. We need to move away from fossil fuel consumption, we need to move away from a materialistic society that redistributes money from the bottom to the top, and we need to have trappings of a modern society like universal health care. I want to see him actively pushing at least *some* of these, but I don't. Again, it could be his low key nature (he definitely deserves the nickname No-Drama Obama), but we're in a battle here and I'm not hearing much of a battle cry from our general.

Geckolizard, I made absolutely no claim as to whether change was coming or not. I stated that the number of applications for jobs is no indication as to whether change was coming or not. And also the number of job applications is no indication as to whether or not the new boss will be any difference from the old boss. That was your claim and it is my claim that making such judgments based on the number of applications for jobs is totally absurd.

That was your evidence in your post and that is no evidence at all. And I believe any rational person would agree. Total cynics however are seldom rational.

A good politician has to practice the art of the possible. To expect radical change is not in the realm of the possible IMO.

Obama is trying to solidify his base while appeasing some of his opposition so that he can govern. It is not possible to govern effectively if some of the opposition is not brought in. Witness the disaster of George W. Bush with his far right social and economic agenda and his go it alone foreign policy.

Obama has nominated Clinton, Richardson and Vilsack who were former rivals to solidify his base. He has retained Gates as a sop to the right and chosen an inauguration minister who is disliked by all except those like Obama who are hoping to reach some kind of consensus so that governing is possible.

He has picked competent energy advisers, and promised science instead of dogma in contrast to the Bush administration.

That may not be radical enough change for some, but it's enough for me.

He didn't put any 'Therefore' between the 300k resumes and the 'meet the new boss'.. You chose to take it as a claim of causation. He was pretty clear that there is still considerable doubt, regardless of the number of applicants, that this administration isn't just going to be your daddy's DNC, all over again.

I don't see anything irrational in being very concerned that the Land of Clinton, Pelosi and Reid will have the inclination to allow a change of course anywhere near what is called for. But feel free to believe the hype, if it sounds nice and Rational to you.


Jokuhl, let us not be ridiculous! You know as well as I that the "therefore" was implied, else why did he post the article at all. The comment was clearly meant to refer to the article posted.

Please read X's comments above. There is every indication that change is in the works. Obama is absolutely nothing like Bush. Only an idiot or a total cynic would conclude that Obama is just another Bush. What about global warming, abortion, stem cell research and a dozen other issues. Are Ogama's positions on these issues the same as Bush's?

It's his position on Wall street and Corporate lobbyists that will really determine the direction of this Admin. Let's see what he does.

I am guardedly hopeful about HIM.. but those who surround him in the Party scare the hell out of me. There are a lot of rigid, concrete viewpoints and habits in play here, Ron. You can sling around your "Idiot" calls and your indignance over "Irrational, Total Cynics" .. but it's just your version of expletives and namecalling. What have the DEMS done in the last year? Their willingness to 'let bygones be bygones' is stunning.

It's not just about the man. This is not 'Hero saves the day' .. it's the system around him that has to be moved. If he doesn't manage it, what can we find as a contingency to at least make our own plans locally and personally to deal with more slipping down the slope?

Okay, I take it that you are a so-called "Pro Lifer", against stem cell research and a global warming denier, else you would admit that there is a tremendous difference between Obama and Bush.

You haven't bothered to hear a word I said.

You can keep on Tilting at Fundies, while the Cargills and the Blackwaters run rampant up and down Pennsylvania Avenue..

"Meet the new boss, same as the old boss." - The man behind the curtain, Ron, is not George Walker Bush or Barack Hussein Obama, who are most certainly different.. but while their picture is projected the biggest, theirs is the voice we hear and the banner we fly.. a banner which now looks nice and 'changed'.. are you willing to look into the behavior and the motives of the Party structure that supports and influences them? at the Industry experts who represent 'real power' and get all the face time with the Cabinet, with Congress? How about the bankers who will be guiding the policy pens to make a happy ending out of this financial crisis?

Yes, it's a vast improvement to have some decent Lip-Service behind even the existence of science, of evidence and fact, of the needs of a society, of the Biosphere, of all the peoples in the world. Just don't forget how much power is being pushed around the Manifold Valences of Washington. This guy cannot move mountains on his own. Can he move Scalia? Can he move Biden?

Knock wood.

the change will come from obama actually listening to his advisors instead of the looters,imo.

Actually, given that the US Treasury is being operated as a wholly-owned subsidiary of Goldman Sachs, it is not quite true that there is "no playbook". More accurately, there is no playbook FOR THE US ECONOMY. Paulson has been operating from a playbook, it has just been naive for anyone to think that it is the US Economy that has been the intended beneficiary.

Not just China--Ariz. police say they are prepared as War College warns military must prep for unrest; IMF warns of economic riots

A new report by the U.S. Army War College talks about the possibility of Pentagon resources and troops being used should the economic crisis lead to civil unrest, such as protests against businesses and government or runs on beleaguered banks.

“Widespread civil violence inside the United States would force the defense establishment to reorient priorities in extremis to defend bas

North Coast completely socked in with highly unusual snow and ice -- if this is "global warming", I don't like it very much. No civil unrest here, though -- can't move around. But when things thaw out, and the loggers find they really have no jobs, and all the restaurants close for lack of business and people wake up to see what a mess we are in, then even this little patch of Eden could be pretty rough

Gee, I wonder if the fact that just about everyone (other than the handful of people who are the beneficiaries of these hundreds of billions of dollars in bailouts) is getting pi$$ed as hell could possibly have anything to do with this?

Got to protect the nations wealth, don't cha know.

"Michael Hudson: What do you mean “failure”? Your perspective is from the bottom looking up. But the financial model has been a great success from the vantage point of the top of the economic pyramid looking down? The economy has polarized to the point where the wealthiest 10 percent now own 85 percent of the nation’s wealth. Never before have the bottom 90 percent been so highly indebted, so dependent on the wealthy. From their point of view, their power has exceeded that of any time in which economic statistics have been kept."

From; "How the Chicago boys wrecked the economy"


The critical turning point in French revolution came when the army troops disobeyed their orders and turned the canons around 180 degrees, firing at the Bastile rather than the crowd.

This was not the only time and place where this kind of thing has happened.

Something that TPTB ought to keep in mind, given that it is not THEIR sons and daughters that are wearing the uniforms these days.

Sounds like a perfect storm cumulating to a lot of wealthy heads on sticks. Revolutions dont start with the poor they start in an angry middle class.

Makes one wonder why the government has systematically destroyed the middle class.

Because there was nothing left to take from the lower class.

Because they can.

At this point the people who own society are literally daring us plebes to hold them accountable. Their bluffs will become larger and more obnoxious until the masses hold them to account.

Dare and double dare. People comment on how scared Paulson looked during the small tussel over getting the looting bill passed. I saw a man lying and afraid of being caught - not someone afraid an economy might melt down. First the $30B, then the $150B, then the $700B, now the Fed isn't bothering to get legislation and we're up somewhere around $5T or more. Every time the plebes back down, the fatcatters bump up their demands another order of magnitude. Of course, Al Bartlett will tell them that won't work forever - small comfort in that.

cfm in Gray, ME

I like your take on the source of Paulson's nervousness. However, we've passed $5T and are in the $8.5T range and moving quickly.


Don't worry-that is only equal to about 23 years of total corporate income tax revenue for the USA-Madoff gets all the press while a relatively small number of individuals totally gut the economy of the USA (with puppet-elect's total blessing).

Madoff is the bad apple. Just like some poor schmuck GI is that bad apple that shot up a school full of Iraqi girls. But you get it. 23 years. Discounted that is just about not worth accounting for. Watch Madoff, don't watch Paulson or any of the other bastards.

Watching is not enough. If the "governement" doesn't bring these thugs in, then what is left? Violence. And the longer it gets put off the worse it will be. I don't see any way around that. Oblama isn't up to it, but it cannot be skipped, no more than outing the toxics at every bank, hedge fund and commercial real estate firm. Huh? Commercial real estate? Yup. I'm not going to pay for that.

cfm in Gray, ME

What middle class?

Probably refers to those Indian shop keepers who own the local minimart. They are just waiting for you to drive in, fill up with cheap gas, so they can sell you some beer and cigs or bread and toothpaste, so they can make a profit.

E. Swanson

But no unrest please.
Just shutup, hunker down and take it.

War College?

Is it not the right of the people to demand what they see as rightfully theres? Oh..of course not the tax payers money. That belongs to someone else. Say bankers,medical industry,nursing(a joke) homes.Etc and like pork barrel spending.

Deja Vu all over again? Like in the 60s?

Or is he really 'For the People' or the lobbyists?

I think the Lpeople.

Calling out the troops or even envisioning it is wrong, wrong.

But we could put the Black Panthers in charge of soup kitchens couldn't we? Liken Ye Oldense Dayse?

Airfella-everything changes..but nothing changes

Modified mortgages re-defaulting at high rates: regulators (MarketWatch)

More than half of mortgages modified in the first quarter were at least 30 days delinquent after half a year, and it's necessary to figure out why so many modifications are not preventing re-defaults, regulators said Monday.

The proportion of modified loans delinquent by 30 days or more was 55% after six months, according to the Office of the Comptroller of the Currency and the Office of Thrift Supervision. Modified loans that were 30 or more days delinquent after three months stood at 37%, the agencies' data showed.
During the third quarter of 2008, delinquency increased in all loan categories -- prime, Alt-A and subprime -- with the percentage of mortgages that were current and performing falling to 91.47% at the end of the September, down from 93.33% at the end of the first quarter, the report compiled by the Comptroller of the Currency and the Office of Thrift Supervision said.

This has been reported previously, but now it's is official...

E. Swanson

They bought more house than they needed, because they could "flip-it" and make a bunch of money. Well, things didn't work out the way they saw it on HGTV, so they got the loan reworked to match their budget for the long term.

But...now they lost their J.O.B.


maybe you can help my puny monkey brain out here regarding the CNBC story -and I know we have had this discussion here b4- but isn't 'printing money' the very definition of Inflation? (Or at least 'The Austrian School' definition -aha! I have learned something from my TOD forays!)...

-Also can someone please explain the difference -if any- between 'de-leveraging' and 'deflation' -is this: 'losing a shed load of money that was only really there on paper' as opposed to 'an actual decrease in the money supply...' -and what's the consequences of getting the two mixed up IF THEY ARE DIFFERENT...??

Regards, Nick.

I think what happened in Japan was that nobody spent the money. If the money isn't spent, it might as well not exist.

A penny saved is a penny gone...

That's what inflation is for. To punish the savers and make their money non-existant by reducing it's purchasing power.


That is what they tried to do in Japan.

But it didn't work. If nobody spends the money, how do you have inflation? Nobody can raise prices if nobody's buying.

Wow, looking at today's Drumbeat, it seems to me that the non-scientific, nonsensical crap regarding the World's oil situation keeps flying and getting deeper by the day...time to put the waders on.

First, the article (from someone in the British press?) beating the tired old drum of abiotic oil. So some folks drill 7 km into a granite formation in Sweden a while ago (the 'Siljan Formation) and extract 90 barrels of oil and some bacteria...whoo-whooo, call off the crisis! Hey, Sweden has granite, and the good ole US of A has lots of granite, too! Drill, Baby, Drill! Haliburton and Schlumberger had better start hiring fast! Get those kids enrolled in petro-engineering fast!

Second: I had the misfortune to channel-surf over to Cramer and his goofy 'Mad Money' show a few days ago when I was deathly ill in my hotel room on business. I saw the very episode quoted above. The man is a huckster, or delusional. He was ringing his bells and setting off his canned sound effects and waving his arms and claiming that the very low price of oil is our economic salvation and great cause for hope for a robust turn-around in the very near future. All we have to have is a positive attitude! Further he launches into his easy-cheesy 'solution' of having President Obama build gazillions of barrels worth of oil storage so we can buy all the cheap oil right now, store it, and never have to worry about oil price spikes again. Never.

I have an idea...since Lake Mead is on its way to drying up, why don't we divert what's left of the Colorodo river around it and fill Lake Mead with oil instead? Hey, we could pump all of the water out of Lake Erie into the bigger Great Lakes and fill Lake Erie with cheap, cheap ME crude as well!

Of course Cramer proffered a goofy tie-in to two stocks from companies that could profit from building mass quantities of oil tankers, oil storage takes, pipelines, etc. Buy, Buy Now! It is a wonder that Obama doesn't make Cramer the new Energy Secretary.

I imagine Sara Palin is on-board 100%, you-betcha!

I do not think we have reached either Peal Obfuscation or Peal Stupidity yet...those may have huge untapped reservoirs yet!

What we probably HAVE reached is Peak Discussion on oil, in an empirical sense. Increasing demand is no longer a constant, so there are too many moving variables to say with any certainty what/when/where will happen. I am personally 99.9% sure than July 2008 was the all time peak in oil production. Those that agree with me understand the reasons why. Those that disagree with me will likely always disagree - irrespective of what future events/data emerge. So we will devolve to persuasion and pseudoscience until the smoke from the gun is just too thick to ignore..

This could be a sign of "Peak Tolerance." I think the two main variables were the hurricane wiping out the offloading of oil in the gulf and the Russians playing chicken with the pipeline in Georgia. I believe investors in the know took their money and ran. I believe that Deffeyes is still correct.

I am personally 99.9% sure than July 2008 was the all time peak in oil production.

IMO the official figures for oil are not particularly accurate, just like most other official statistics, oil is no different.

I suspect that the recent figures were, and still are, deliberately being massaged higher for political reasons - since they have every reason to exaggerate and nobody gets punished if the figures are wrong.

IMO we would be wise to expect that conventional oil has peaked (but maybe not as recently as you say?) ... and 'net exports' are now well past peak.

I think that probably means economic output in oil importing nations can't grow any more ... despite all the various bailouts!

Well the much more salient issue is when energy surplus peaked - and again, though based on scientific principles, cannot be proved because we lack the data. Costs were going up more than revenues. Now costs will go down slower than revenues. All these data points add up to tighter economic conditions for broader economy, so declaring 'peak month' as July 2008 is kind of a misnomer anyways.

I would never say we have reached energy surplus peaking. We still have options such as superconductivity. If we can get the temperature up towards 0 celsius using the arctic we could create a stronger electro magnetic field creating a huge new force to generate electricity.

Yep thatal work ok.

Ask the polar bears how it works out there in the Artic.


I would never say we have reached energy surplus peaking. We still have options such as superconductivity. If we can get the temperature up towards 0 celsius using the arctic we could create a stronger electro magnetic field creating a huge new force to generate electricity.

I'm curious, notalemming, were you being serious or sarcastic with this comment. Sometimes it's hard to tell on this forum.


He can't be serious because nobody knows how to get superconductivity at 0 C.

I was being serious about peak energy. As for superconductivity it has been observed so the possibility exist. More or less the example I gave is far fetched. I don't believe in shutting the door on hope. As for polar bears I believe they have a tendency towards fear mongering.

IMO the official figures for oil are not particularly accurate...

Data analysts for the field services invent data for malfunctioning meters based on past performance or mean flows. At any given time up to 1/3 of meters may be malfunctioning. Production rates in many nations are state secrets. IEA & EIA, et al., reports are politically motivated... The shittiness of the data, compounded at every level, doesn't prevent those enamored with the Chart Wizard from making colorful graphs from it, upon which their prognostications are based. Garbage in, garbage out.

"Data analysts for the field services invent data for malfunctioning meters based on past performance or mean flows."

what in the world are you talking about ?

what in the world are you talking about ?

This topic has been discussed in here before but for your benefit I'll reiterate:

Meters at wellheads & on pipelines transmit flow data via radio signal to computers in field service companys' offices, where data analysts evaluate & record it. At any given time, between one quarter & one third of the meters are malfunctioning. Analysts report the malfunctioning meters to service technicians, who eventually go out & fix or replace the broken meters. In the mean time, in order to have some guesstimate of flow rates, analysts are obliged to "make up" data, based on past flow rate of the malfunctioning meter or on the flow rates of functioning meters similarly situated to the malfunctioning ones. This gives some vague idea of flow rates but how accurate & precise rates actually are, is anyone's guess.

My point is that production data is bad from the very get-go, and only gets worse as data becomes aggregated & subjected to manipulation due to business & political motives. By the time aggregate data comes to the attention of internet "pundits" who so love to graph it & make projections & predictions & progostications from it, it's absolute garbage.

Perhaps it's a bit of a leap to go directly from production issues to prices, but if the data was any good to begin with the abrupt fall in prices we've experienced in the latter half of 2008 would have been anticipated. I didn't see any graphs on TOD projecting the imminent fall of prices back in July, did you?

well, if there is so much inaccuracy in metered oil someone would notice. when oil changes ownership, someone has to pay money for it and someone gets paid money for it. that isnt based upon a guesstimate.

inventories are a different matter.

My point is that production data is bad from the very get-go, and only gets worse as data becomes aggregated & subjected to manipulation due to business & political motives.

That necessarily assumes that it's only measured at the "get-go" which is obviously not the case. You may be able to say with precision what a particular well is doing, but that's not very relevant. Data errors would show up pretty quickly later down-stream.

You certainly can't load a 2 million bbl tanker 75% full and say "that's all... acording to our flow rates that's 2 million".

That necessarily assumes that it's only measured at the "get-go" which is obviously not the case.

My contention is that data gets worse the further from the "get-go" it gets. It's bad enuf initially and error becomes compounded at every level. The "proof is in the pudding," as they say. Accurately & consistently project future trends based on current production data, since you have such confidence in them. I'm sure you must have seen the price drop since summer coming.

My contention is that data gets worse the further from the "get-go" it gets.

I understand that... but it doesn't make sense. There are far too many stages of production where it would be caught.

As I said... if you have a storage facility with (you think) 25 million bbl supply (based on adding up guestimate pump totals) and you fill up ten tankers with 2 million bbl each only to find that you have run out... you know that your totals were wrong.

And it would be obvious well before that. They aren't doing this on the back of a napkin.

Accurately & consistently project future trends based on current production data, since you have such confidence in them.

You don't make predictions of future global trends based on well-head flow meters.

I'm sure you must have seen the price drop since summer coming.

Yes... and was roundly derided for it.

what in the world are you talking about ?

Or for loading tankers from Iraq.

If we take the official figures at face value would it not be true to say that 2008 had a one off monthly high, but that the annual peak is still 2005? Some might say that this is all academic in light of present decline destruction & the oncoming great depression 2.0, but a 2005 date means we could have the first big annual declines as soon as this year if we are post plateau.

Ironically, we're probably trending to a big annual decline this year, but not because of below ground factors but above ground factors... In other words, this depression might be very well timed to mask Peak Oil for a while...

I am personally 99.9% sure than (sic) July 2008 was the all time peak in oil production... Those that disagree with me will likely always disagree - irrespective of what future events/data emerge.

If those "future events/data" show production in excess of July 2008, disagreement will be vindicated & you will have been wrong. If they don't, you won't have been "proven" correct, since production may still exceed 2008 levels at some future date. So what is the point of even making such claims?

What is the point of asking me what the point is of making such claims?
Your answers, if truthful, will be the same as mine.

So what is the point of even making such claims?

Because we are trying to accurately assess the real situation so that we can plan appropriately?

Saying that oil production has peaked carries some significant impacts...impacts for which we should plan, in my view, regardless of whether others play the finger-pointing game.

Anyone on this net who is not prepared for Peak Oil and the possible chaos to follow really needs help.

Furthermore anyone not aware that any sort of negative oil based Black Swan will hasten that time considerably needs help too.

Yep, I'm a doomer and I have seen nothing in last few years to change my mind.

Not prepared?

Change we change that to 'trying to get prepared'?


Roger that Airdale:

I guess we will never be fully prepared.

Because we are trying to accurately assess the real situation so that we can plan appropriately?

This would be an appropriate response IF the data was reliable upon which such assessment was made. Since the data is not reliable, these assessment attempts are an exercise in futility and any plans made on the basis of them are worthless.

Well there is a difference between reliable data and sampling size the problem with oil has a lot more to do with the fact that the data we do have samples a small precentage of the overall volume thus the error term is high. This is outside of outright sampling errors.

Europe does not provide timely storage information thus the weekly US reports have a inordinate effect on oil prices for example. However you can use price as a proxy for oil availability in the sense that the direction that price is moving tells you a lot about the market. If supply exceeds demand then prices will fall.

Right now we are still in a supply exceeds demand situation. Unfortunately this has caused the price to drop significantly basically making a lot of current production and most future production on profitable. I'm guessing but it seems that and excess of a few million barrels has resulted in probably close to 15 million barrels of oil to be produced at a loss. And a large number of project to be publicly delayed and canceled along with a huge psychological impact on the oil industry that in dire need of billions if not trillions in investment.

This is not a stable situation.

Next a combination of events this year played a large role in the excess several will not be repeated KSA provided a significant surge in the second half of the year this will not be repeated. Next the hurricanes knocked down demand in the US during this surge.

On top of these real market factors the economic meltdown has punished all asset classes esp liquid ones as various complex bets are unwound. This unwinding will eventually come to a end one good signal is the Yen/Dollar ratio since a lot of these trades are backed buy cheap Yen loans as long as the Yen remains strong we can assume these trades are still unwinding.

And last but not least there has been obvious demand destruction however the extent is difficult to determine. This coupled with a large surge results in a significant excess in oil on the market that will have to be burned over time. Reasonable estimates are in the range of 100 million barrels to almost 300 million barrels. This slug of oil will take time to burn as demand still seems to be weakening. But it will pass eventually and OECD inventories will be drawn down.

Three very important longer term trends have been set in motion.

1.) Future price increases simply will not result in near the investment we have seen in the past to expand oil supplies as the stability of these prices will be questioned. Thus we are assured that we will need both a larger and longer term price signal to result in renewed investment in oil extraction. This is coupled with lower investments in existing infrastructure which may actually be worse. Next of course alternative initiatives have been hit as hard or worse than oil.

2.) KSA will probably never surge oil supplies again and will go into conservative mode OPEC in general simply won't respond regardless of capacity over the long term eventually of course they simply won't have the capacity. When this happens probably won't be obvious so it will take time for the world to become peak oil aware and realize that increases from OPEC will simply not offset overall decline. Given the long lead times for oil infrastructure projects the chances are very high that even if OPEC could expand production they simply cannot bring it online fast enough to offset declines around the globe.
Politically they now no longer have the desire to do this. Russia is now also becoming closely aligned with OPEC on future energy production.
Politically one would imagine that the next time prices increase the export land model will go into overdrive as they try and diversify their economies before the "next" crash in prices.

3.) Global Natural Gas prices and Oil prices are nearing are effectively at parity the is esp important for North America where regional production can only be increased via expensive marginal UNG supplies. This is probably the biggest thing that has happened and does not bode will for the future. Cheap NG is no longer a substitute for oil. The cost of refining the heaviest sour grades has probably been increased considerably. Of course we don't know the future but if NG and Oil remain close in prices on a btu bases then its not clear what the real situation is for our overall energy security. The evolution of this situation into the future is the most worrisome for me.

If you look at this list you realize that practically every opportunity we could have had to transition off of oil has probably been smashed beyond revival in time to avert serious energy problems. In exchange of course the American consumer has a few more dollars in his pocket to buy cheap Chinese goods or go for a drive and feel good. Time will tell of course how much of the current price move is from what are one time events and how much is from a real excess from demand destruction and more important how much of the oil supply will remain if low prices last for any length of time. My opinion continues to be that the current oversupply will start declining in a matter of weeks if its not already on its way down and that as consumers are finally forced to refill they will find that light sweet crude is again in tight supply. In any case once this situation sets up again regardless of when we will see if I'm right about a more troublesome situation which is NG prices vs costs of refining heavy sour crudes. I think we will find the benefit of complex refining of the marginal crudes will be a lot lower during the next round of price increases then it was during the past few years.

...the problem with oil has a lot more to do with the fact that the data we do have samples a small precentage of the overall volume thus the error term is high.

If all the assumptions of parametric statistics were adhered to, sample size would be adequate. The problem is that not only are the assumptions NOT adhered to, but data is fabricated. The error term can't even be assessed.

Well to some extent it can be assessed but that does not mean its a constant. My +/- 2mbd seems to work quite well from what I can tell. On and absolute scale a change of 50 million barrels somewhere from extraction to final product also shows up on the radar. That would be 25 days of a 2mbd change in production. Think about it if Mexico quite producing oil for 25 days we would notice it and on the same hand if something the size of Mexico started up for 25 days it would be noticeable. Anything less than this and your getting into changes from storage and or changes in field production. If you look at the pre 1980 data for ARAMCO you would see variations of up to 2mbd in any given month. Seasonal variations are certainly this high. 2008 was notable in that little seasonal variation is present in the data. Thus anything less than a 2-3% change in production over about a month is very difficult to discern however a consistent variation of 2-3% for at least a month eventually has a noticeable effect.

For the entire product lifecycle from well head to gas tank your really talking about three months for changes to be fully expressed. This is not to say the market cannot act before the changes are obvious but if it wants to resist and wait till the last minute it takes about 3 months for a change in well production to be fully felt throughout the supply chain.

Saudi Arabia seems to have cut back production in November thus the latest this effect could be felt if its going to make a difference is January - Feb. But we have the caveat that storage was close to full going into November and is pretty much maxed out now. Given that if the market really wants to wait longer to respond it could potentially wait a bit longer say until we hit the March contract. But I'd say that if we don't see a strong response by then then the world really does have a real excess supply of oil if this is true then the March contract should be cheap and the storage levels remain high through January.

If however I'm right and the surge from KSA is finally moving into the past then we should see storage levels begin to decline and prices begin to firm up the market can move at any time it could have made a move the first part of December if it wished enough people have real information about the current real state of the oil markets that if they felt the need to lock in future prices they could have done so in December.

We may not have that info but oil importers in the US know already for the most part what the situation will be into March. So far at least they seem unconcerned. They may literally simply not have the storage right now regardless. All we can do is wait and see.

However is the final surge from KSA was light oil and it ended in November and if I'm right and the cutbacks they are making are sensibly in their lightest grades Arab Light and Arab Ultra Light then if we are going to have a deficit of light oil big players in the market already know this its simply a matter of if/when the situation shows up in the Futures Market. The strong contango indicates to me that the expectation is we don't have a glut of light sweet crude anymore however it so far says that supplies are not strained. At the moment the market is well supplied but not indicating a glut. The fact that storage levels remain high continues to indicate that price is still flexible going forward it could still potentially go down but odds are it will start increasing before march when we don't know.

As I said so far the people with real information have not seen fit to make any moves that impact the futures market outside of storing oil in what seems to be every storage tank available.

As I've said before and I'll repeat if we had a true oil glut one would expect the market to go into backwardation for say a few weeks at least this has not happened.

Next given that prices have fallen consistently every month at a new front month comes on one would expect even if backwardation does not happen we would see people lowering storage and prices remain falling.

What we see is a market thats in contango with people willing to store a lot of oil despite the falling prices recently this says to me that the market is indicating its well supplied in the short term but is not sure about the future.

I'n my opinion this is about the only thing we know for sure we would expect that this situation cannot last forever and when it does change one way or another the true state of affairs will begin to become clearer. Market makers who do know the truth can our could have already made moves we don't know.

A lot of the current storage excess right now could readily be big players that have stored to the maximum and plan on using the stored oil over the next several months while smaller players could easily be keeping storage low and buying the cheapest oil they can get on falling spot prices. So we could easily and in fact I think probable that the market has now made a split decision with the big boys with a lot of storage choosing to store up as much oil as we can and the smaller players going for the best spread by keeping storage low and buying on the spot market.

Regardless until storage levels are clearly falling in the US the market is probably going to remain in its current state. Once they begin to fall then we will begin to know the real supply demand situation. This can be visualized by someone driving a car with a full tank they may pass gas station after gas station with low prices and it does not matter once the tank is half empty then they begin to pay attention to the prices. At this moment and probably for a short time the US has a full tank and this one fact is sufficient to keep the futures market basically in a waiting mode.

Bottom line is even without good numbers its possible to make a educated guess. I expect storage to already be falling I'm wondering to some extent if the needle is not stuck if you will as far as US storage reports go we should have already started falling but given hat I said at the beginning its still way to early to tell. The US needed only acquire and additional 10-20 million barrels of oil to get its current levels despite the Saudi cutbacks this is readily doable. 2-3 more weeks of top storage and I'll become very interested in where this oil is coming from and begin to question if our own storage reports are not a tad optimistic. My hunch is that recent oil storage levels have bit a bit overstated on purpose.

You can read about the sampling process here.


Note on page 6 they give a 2% error between the weekly and monthly however the survey is voluntary and only outlier values are red flagged. However the approach they take is heavily geared toward getting the same answer the got before i.e error is flagged if something changes significantly reporting something close to what you did before works quite well.

Eventually of course it look like in reading the paper that they do get decent data but this could be several months later.

The final reports seem reliable but the weekly data is fairly suspect.

I'll not that it does not seem that any physical audit is attempted to ensure that systematic errors have not crept into the process. I.e I see no indication of a attempt to actually collect raw data in the field to help identify systematic error.

Eventually of course since these are public companies for the most part other constrains limit the amount of error that can happen without it becoming obvious but even here there i probably a lot of leeway.

The data are not totally accurate however they are not totally garbage either. The EIA data on crude production may be off by a certain percentage point but only a total cynic would deem them totally worthless. (However we do have a lot of total cynics on this list.)

The EIA data gives us trends and peaks even though all the data are not exactly correct. The data they publish is the exact data that is supplied to them by the agencies producing the oil. What else would you have them do?

The data they publish is the exact data that is supplied to them by the agencies producing the oil. What else would you have them do?

The least they could do would be to advise data consumers of the huge uncertainties inherent to the data, and that any conclusions drawn from the data are drawn at the consumers' own risk. Even if the data is published exactly as reported by the producers (which I'm skeptical of), the spin placed on it by commentary is so politically motivated as to be intentionally misleading.

Darwinsdog, skepticism is a very healthy thing. I am a natural born skeptic myself. I am the only disbeliever to spring from a very large family of religious fundamentalists. Total cynicism however is, intectually, very unhealthy. "All politicians are crooks", "all data are bull$hit", "nothing in the MSM can be believed", "the new boss will be exactly like the old boss"! Dear God, it is enough to make an atheist like myself get religion.

I get so frigging tired of hearing nothing but cynicism from a lot of people on this list. What motivates these people to go on living if they totally disbelieve everything and everyone?

I believe, I firmly believe, that the world situation can be described, and analyzed, without resorting to total cynicism. Nate Hagens was simply trying to explain his belief that oil peaked in July of 2008, an opinion which I share. But all he got was a lot of static from cynics who stated that, in effect, all data are worthless so we can never know anything.

That is pure bullcrap! The data are not perfect but is relatively accurate. The people at the EIA and the IEA are not perfect and they have historically been overly optimistic, but they are getting better. The IEA head has even become pessimistic and has been highly criticized by the cynics who are cornucopians.

Cannot we have a rational discussion without resorting to total cynicism?

Cynic, Greek κύων = "dog." I call myself darwinsDOG, after all.

"The Cynics rejected all conventions, whether of religion, manners, housing, dress, or decency..." Yup, that'd just about be me.

"In pop culture, the word cynicism generally describes the opinions of those who see self-interest as the primary motive of human behaviour... Others define cynicism as the direct opposite of fanaticism, thus also implying agnosticism as its integral part."
Dang! More & more me all over.

Okay, so I'm a cynic. You've made your point. I'm a cynic, guilty as charged. MY point is, however, that if fossil fuel production data was anything but garbage, accurate projections of future supply & price trends would be possible based on it. The track records of those making projections of future trends have been no better than random guessing. This fact supports my contention that the data is, after all, garbage. Calling me a cynic fails to refute, or even address, my point.

"I am personally 99.9% sure than July 2008 was the all time peak in oil production."

And so like I asked way way back:
"now that we see what is going to happen...Just Exactly what are YOU going to do about it?"

Oh...start a Campfire. Brillant idea. Kudos. The time is right/ripe.

Another marshmallow then?

Just a tad of sacarasm..in jest that is.


So some folks drill 7 km into a granite formation in Sweden a while ago (the 'Siljan Formation) and extract 90 barrels of oil and some bacteria...whoo-whooo, call off the crisis!

Couple of things with that... First, even if Oil were abiotic, it doesn't matter. Oil could fall from the sky or travel via wormholes from Titan or be created by oil fairies. The biggest problem we'll have is flow rate, and abiotic oil doesn't solve that.

Second, if it took a 7 km well to produce 90 barrels of oil there is no EROEI. End of story.

He was ringing his bells and setting off his canned sound effects and waving his arms and claiming that the very low price of oil is our economic salvation and great cause for hope for a robust turn-around in the very near future. All we have to have is a positive attitude!

And The Beatles once sang all you need is love. Doesn't make it true...

I imagine Sara Palin is on-board 100%, you-betcha!

Sara is too busy arresting the boy who got her daughter pregnant. Too bad, because he apparently was a big supporter of 'Drill, Baby, Drill'... Welcome to the Alaskan Mafia.

I'd say both he and the daughter "chose poorly". You'd think he'd have enough sense to be squeaky clean knowing the level of scrutiny he would enjoy as a significant liability to a presidential-race contender.

errr, all, reread the headline (or story):

Bristol Palin's boyfriend's mom arrested in drug case

Emphasis added.

Sorry... good catch. It's Monday... I can't beleive I skimmed over that.

90 barrels, that is about equal to the cummulative production from iowa.

Next big play: Iowa Oil Shale.

The deepest oil test yet drilled was to 17,851 feet in Carroll County in 1987, and while no petroleum was found, thick black shales suggest past formation and migration of potentially large volumes of oil.

The heart of corn and soybean country ?

Sounds like some hard choices would have to be made.

According to Kevin Phillips in "Wealth and Democracy," markets have their roots in carnivals. So when you hear "market analyst," just think carnival huckster. Viewed in this light, current movements of the oil markets (and commentaries regarding same) begin to make a lot more sense.

Benoit Mandelbrot expresses a similar view in his book "The Misbehavior of Markets," which I'm about halfway through reading. Mandelbrot is Nassim Taleb's intellectual mentor.

"Rational" markets was a load of crap foisted on the American people to get them to opt for 401(k)s over defined benefit plans, and also for the finance industry to try to get its sordid hands on social security funds.


Given what I have seen on this board of your writing, I hope to see at least a summary of The Misbehavior of Markets from you.

Thanks in Advance.

RE: Oil's Origins revisited

Ok lets all go nuts for a minutes and say that all these abiogenic oil believers are right. Sweet. We just double/quadrupled/octupled our oil reserves. Now these reserves may be several miles below ground but what the heck at least its there right?

What these fools seem to forget is that peak oil is about PRODUCTION and FLOW RATES not RESERVES!


What these morons ignore or are uneducated about is the second law of thermodynamics. Conversion of CO2 into long chain hydrocarbons is not going to happen without some processes that transfers the entropy increase into some other form. If it is so readily happening in nature (without a shred of evidence) why aren't we just installing some device at the exhaust pipes of factories or automobiles and cycling CO2 back into fuel.

I personally think it unwise to label the 95% of Americans whose world view is essentially magical as "morons". That just doesn't foster good communication-- even if it is true.

Two hundred years after the Enlightenment, we now see Reason is under heavy attack, and the forces of irrationality and medieval mysticism on the ascendant. The most vigorous organization in my little town is the Catholic Church.

But you can't debate them, either. I find myself in some kind of parallel universe.

95% of Americans ARE morons.....it's the 5% that will survive.

Pray all you want,,,

Power Down.

The problem is that the 95% have overbred so much it puts the other 5% in the minority.

Let Sarah Palin's rapture come and take them...

No, they aren't morons, except perhaps in the sense it appears in "Blazing Saddles" as stated by Gene Wilder. "These are people of the earth...you know, morons."

That is, magical thinking doesn't make you stupid - it makes you human - for most of human history we thought magically - we are supposed to think magically. We just abandoned all of the constraints that made magical thinking a functional worldview, one that can have a measure of wisdom and utility - and replaced it with another worldview, a combination of inadequate scientific education and lots of advertising that created people who don't know anything really well - but that's not their fault - it isn't their fault that they did know how to understand the world, but their worldview was stripped, abandoned and discredited.

There are a few people in the world who are fitted to live in a world of scientific accuracy, and the rest need a narrative and magical - in the sense of allowing space for participation without fully understanding - worldview. And as long as we deny the validity of that worldview, we're going to be frustrated that most people don't really understand what's going on.


"That is, magical thinking doesn't make you stupid - it makes you human - for most of human history we thought magically - we are supposed to think magically."

Thank you for that.

We need to come up with a magical narrative for limits to growth.

We need to come up with a magical narrative for limits to growth.

Double plus good observation.

"Gaia dances with Shiva" is way too elliptical. I bet there are ready made creation myths of that sort. It's really part of an oral narrative (as opposed to "modern" linear thinking. Thanks for planting that bug.

cfm in Gray, ME

And what is so very wrong with reality? Narratives... memes... criminy. I used to be a touchy-feely, candles and massage kind of guy, but it seems to me it's all a function of being in the last phase of society as put forward by Kennedy in Rise and Fall.

We have had too much time on our hands and too much money (albeit in reality nothing but debt). An idle mind is the devil's playground, right? Yet, despite this time, what have we done with it? Learned all the stats of every player on our favorite baseball team? Memorized every line from every episode of Friends? Gone all Bling on ourselves?

Sorry, Gail, but we are, by and large, stupid. I agree with Diamond's assessment that people in "developed" nations, fed by TV and movies, have lower IQs than most aboriginals.

Want proof? How many years of known and obvious lies did it take for Americans to react at all to the BuCheney nightmare? Six. (And even still all we've done is change one form of BAU for another.) Why is it that two of the most "developed" nations in the world, the US and Britain, have the largest number of climate deniers?

Stupid, indeed.

Make all the New Age, touchy-feely (I actually do not mean that in any offensive sense) excuses you want, but we are ever so completely and utterly stupid.

Heard how to catch a monkey? Put a banana in a box with a hole large enough for the monkey's hand, but not the hand and the banana. You can catch 'em every time. That's us in a nutshell. How are the use of FF and the lack of change, given the science behind climate change and the empirical evidence around us, any different?


"Why did you come here, Rick?"

"I came for the Waters."

"But surely, Casablanca is in the Desert.."

"I was misinformed."

Not Stupid, CCPO, just very badly misinformed, I would say.. and kept soft by the availability of countless, very cheap energy-slaves.


But..but if your easily 'misinformed' and pushed this way at that at the whim of those who want you to act in such a manner...like buy this,buy a new house,flip it , buy another, get a Hummer,,,,

If you are swayed so easily, as I see the masses doing..then can't that be construed as a form of stupidity?

Answer IMO is yes it is.

We all knew something was going to end the dreamwalkabout. We didn't care and just went on and on ...so therefore rather stupid. Just cause millions and billioins did it doesn't make it 'smart'.

Badly informed then? When we have the most powerful communication entity know to man? The internet. A supposedly grassroots medium.

Turned then into a marketing playground but still its just fruit hanging on a tree with a serpents head rising behind it.

Airdale-"behind the bride the serpent raises its head"(meaning in one sense..that as the bride is being given away she is planning her next affair....or can be taken as the Church in modern day life. "...just a bit of trivia I threw in..everyone is sooooo serious...Its juust death-on-a-stick that comes this way across the fruited plain...

The way people are driving around Portland after a good snow, Airdale, I'm almost willing to just go with it and say most everyone is just stupid. But it's a trap. City People call country people stupid, and vice versa. The North and the South.. The Rich, Middle Class and Poor, the Blacks and Whites, Indians, Asians, etc.. Even calling someone a brain or an egghead is calling them 'stupid', since they obviously lack the common-sense that is really needed to understand life. Vegans v. Nascar, Christians, Moslems and Jews .. and everybody versus the Moonies - and Vice Versa.

I have known too many people who have hamstrung their lives because they had been convinced long, long ago that they weren't really smart, and there was nothing they could do about it.

We're all capable of being knuckleheads, but this '5% and 95%' is just an Us/Them game.. and simply a form of that knuckleheadedness itself. There are much more useful ways to understand people than to get caught up in this old Puritan 'Hate thy neighbor as thy hateth thyself' approach.

As far as communications goes.. I like the internet, but I don't have to tell you that the quality of information ( XXX, Hot Young Things! ) covers the full spectrum and can mislead far more easily than it can lead.

No, you're taking it too far and too literally. There is not us/them, there is just us in the end. You think the US stands if just you do? Or a hundred thousand like you? Or a million?

No. So, obviously I am not literally saying every American/human being is stupid, only that we are collectively stupid, and generally less intelligent than those that use their wits/store of knowledge wrt pretty much everything they do, that is, actively.


I hear you, CCPO

I'm just waxing too semantical, I guess.

There's different ways to say 'stupid'. It's true enough that we need to get smarter, here.. look at what we're doing and make those not-too-tough connections on where it is going to take us. I think my saying that the energy-slaves have made us too soft makes more sense to me.. it has let us rise to the level of least resistance, and just float there.

Ok.. for my part, I am shutting off the computer and continuing to tighten up a few more windows before bed. It's getting pretty nippy in Maine.

Kom Su mi da, brother. (That's all I remember from a week in Seoul!)
Ulale gache' ('Sleep well' in Zulu, I think)


From WIKI...

Moron" was coined in 1910 by psychologist Henry H. Goddard[3] from the Greek word moros, which meant "dull" (as opposed to "sharp"), and used to describe a person with a mental age located between 8 and 12 on the Binet scale.[4] It was once applied to people with an IQ of 51-70, being superior in one degree to "imbecile" (IQ of 26-50) and superior in two degrees to "idiot" (IQ of 0-25). The word moron, along with others including "retarded", "idiotic", "imbecilic", "stupid", and "feeble-minded", was formerly considered a valid descriptor in the psychological community, though these words have all now passed into common slang use, exclusively in a derogatory context.[5]

Following opposition to Goddard's attempts to popularize his ideas,[6] Goddard recanted his earlier claims about the moron: "It may still be objected that moron parents are likely to have imbecile or idiot children. There is not much evidence that this is the case. The danger is probably negligible."[7]

(Lets just use the term DULL, then.)
Power Down

A moron is, by definition, a person with an IQ between 1 & 2 standard deviations below the mean. IQ is normally distributed with a mean of 100 and a SD of 15, hence a moron's IQ is between 85 & 70. Bush, with an estimated IQ of 91 +/- 3, is not a moron, despite what people call him; his IQ is in the low normal range, rather. Idiots have IQs between -2 & -3 SD, and imbeciles <-3 SD. There are no equivalent designations for IQs above the mean, besides "genius" which is defined as IQ >4 SDs above the mean, i.e., >160. Having an IQ well above the mean is just as dysfunctional as having an IQ the equivalent distance below it.

And I still say that one of the most profoundly disturbing thoughts is the realization that 1/2 of the US population must be below average in intelligence. This explains so very much. . .

...the realization that 1/2 of the US population must be below average in intelligence.

And that isn't the half of it. Since mean IQ is set at 100 by definition, and since IQ & fecundity are rather strongly negatively correlated, it stands to reason that an IQ of 100 today is the equivalent of 90 a few generations in the past. If you're at all interested in the implications of this, read the second half of R. A. Fisher's "Genetical Theory of Natural Selection," 1930.

That was the point that the movie "Idiocracy" explored, and took it to the logical conclusion. Some people consider the film to be kind of odd, I guess - I found it to be brilliant.

My son recommended "Idiocracy" to me just this past weekend. I haven't seen it yet.

Fisher's book is a classic, arguably the most influential work on evolutionary biology save for the "Origin" itself. Yet it's only the first half that's widely lauded. It's almost as if there's a "conspiracy of silence" in regards to the second half. I guess that people don't want to have to face up to the consequences of the fact that since fecundity & intelligence are negatively correlated when selection pressure is relaxed, the mean intelligence of the population at large tends to decline. It's like it's this embarrassing family secret that just isn't talked about.

During the 30's, before the Nazis did their thing, eugenics was rather popular. I haven't read Fisher's book, but your description sounds a bit like eugenic concepts. Does the second half say anything about reversing the postulated natural "trend" toward IQ? Also, is Fisher's work similar to that which appeared a few years ago in Herrnstein and Murry's book "The Bell Curve"?? I read about half of that one, but lost interest...

EDIT: A little further reading shows that Fisher was deeply interested in eugenics and did present eugenics concepts in the last 5 chapters of the book...

E. Swanson

I don't buy it.

I don't think there's any evidence that IQ and fecundity are "strongly negatively correlated," nor that intelligence can be changed so quickly.

The wealthy tend to have fewer children, but that doesn't mean they're smarter. It's not a level playing field. Some very smart people end up on the bottom, and some really dumb people end up at the top.

I suspect that the best reproductive strategy changes depending on your socioeconomic situation, and that's the main driver, not any correlation between IQ and fecundity. Otherwise, how would intelligence ever have evolved?

Then there's that famous experiment with the lines of mice that had been bred for many, many generations to be smart or dumb. They switched the labels on their cages, and lo and behold, scientists who didn't know about the switch found the smart mice to be dumb, and the dumb mice to be smart. Presumably because they paid more attention to the "smart" mice, and thus enriched their environment.

No, I'm not saying there's no genetic component to intelligence. But I'd say it's about 50% nature, 50% nurture. And far more complicated than the "marching morons" theory assumes.

In fact, I kind of doubt we've affected human genetics much over the past century or two. It's just not enough time. I suspect evolution can work quickly, but it requires isolated small populations, or massive dieoffs. And we've had the opposite.

"Intelligence" is not a scalar. And members of a class are not the same as the category "that class".

Damn it Sharon! According to your blog, you are supposed to be working on your book and Must Stay Off Net.

Enough with the good points and get back to work. ;)

Sharon: Since I have been reading your posts and Starhawk's, and even before that, Marja Gimbutras (sp?) books -- I think I know what you are saying.

I have no problem with a "magical" worldview as long as it has some spiritual grounding. I seek it myself, though I have trouble letting go of the chemistry and biology and math I was taught. However, ever since the Industrial Revolution we (humans) have combined total disregard for Nature and Creation with a sort of arrogant materialism and Big Rock Candy /Tooth Fairy kind of magic-- not what you are talking about as the ancient magical worldview.

Your practical and tolerant wisdom is always a welcome tonic, and it somehow clarifies and contrasts yet knits together the tidbits of technical excellence, sophistry, inquisitiveness, opinion, and stubborness that is TOD.

Certainly marketeers and politicians understand the foibles and weaknesses of the typical human torn between half-understood science, half-believed statistics, half-fear of the future, and half-faith in the spiritual. I often muse that the reactions of atheists, intellectuals, and liberals is more like a fundamental religious person than a luke-warm Easter-service believer. I wonder if people are to varying degrees pre-wired to have "faith" and to "believe" in something, and many or most do so without even realizing their own particular blinders, biases, and inconsistencies. Maybe its even required to be truly successful in many endeavors, as the "true believers" certainly make a difference in businesses and technology realms.

Life is certainly easier if you are tolerant to other religious views, but now too many supposedly scientific topics have their own semi-religious sects as well.

There are a few people in the world who are fitted to live in a world of scientific accuracy, and the rest need a narrative and magical---

When I'm flying at 35,000 feet, I want the ones "who live in a world of scientific accuracy" to have designed the plane. Let the magical people do something else, but not anything that demands immersion in the physical world. Maybe the sensual world, but nothing I want to count on when my life is at stake.
We can only take relativism so far. A basic understanding of thermodynamics and evolutionary biology would leave most magic types in a fetal position screaming, if the real world started to become visible (sorry Plato).
Disclaimer: I live with a magical artist, who reads ruins.

Sorry if I gave the impression of attacking all Americans. I was attacking the writers of such articles. I also do not think that 95% of Americans are this uneducated. I would guess it is some minority, albeit not a small one. And if these people were informed properly they would make a rational conclusion and not lynch the one bringing them the news. This is why those that write such garbage are doing a lot of damage to intelligent discussion on the subject.

Our trouble is that even amongst that 50% of the population that is above average in intelligence, they have been "dumbed down". I don't know to what extent it is deliberate or just unintended consequences, but between poor schooling, disinterested parents, obfuscating media, or a distracting and corroding popular culture, most "educated" Americans at all levels end up being less well educated and more ignorant than their counterparts in most other countries.

Just look at the composition of the studentry at most US university graduate programs, if you do not believe me. The US may have world-class universities, but it does not produce world-class students. This phenomenon carries on all the way down the scale.

Because the "Oil Companies" bought the rights to the technology and are hiding it until needed? Right? Of course! (Great Big Grin!)

I'm not an expert on abiotic oil by any means but I've studied the concept. I don't buy it as a potential source of any significant volume of oil. But let's forget that and assume they are 100% correct as to the origin of most oil. So what? You still have to find those reservoirs where it has accumulated. Experts on thermodynamics around here will readily verify that there is a limited temperature range that oil can survive. And for over 80 years we've been drilling in formations that fall in that range for the most part. Regardless of the oil's source it has to accumulate in a geologic trap and we have to find those traps. The abiotic oil folks get very excited about their concept and how much more oil may have been generated but never explain how it helps our prospects for producing more oil. As spudw said, it's the rate and not the volume. OTOH, where is this great volume they to which they allude?

Just a pre-holiday rant

I have a question:

How low can oil really go? I would think that the cost of production alone is getting higher as time goes on. Then there is the whole supply-demand issue. As prices have gotten down to $30/bbl, people have started driving more. How elastic is the oil market? My impression was "not much."

I remember after the last oil bust that oil got down to around $8/bbl. Could it get that low again? It doesn't seem plausible; but then again, markets almost always overshoot to the downside as well.

I'd be interested to see what people here think.

I think we need to abolish the futures market. Too much speculation/manipulation on the up and down sides. Consumer and producer get screwed so the middle-man can make a few bucks.

If you abolish the futures market, there will be way less oil produced, because it will be way more difficult for producers to lay off price risk.

Anyway, smart producers were selling futures when the price was $147, and smart consumers will be buying down here. The market will be working well for them.

If you abolish the futures market, there will be way less oil produced...

Then by all means abolish it, before the atmosphere & surface ocean becomes even more polluted with the oxidized byproduct.

Then they'll just switch to coal. Worse for the atmosphere per kWh, joule or whatever.

There's no NYMEX futures trade for coal? I wasn't so specific as to exclude coal. Abolish 'em all!

Humans need to, in theory, liberate no more, and in practice much less, carbon than green plants fix per annum. That's all there is to it if we want our own species, and myriad others, to have a future.

My impression is that the marginal cost to produce oil in most cases is very low, less than 20$/bbl in the major producing countries. So producers will still be making money from every extra barrel @ 20$ even though overall they may be at loss, considering the sunk costs. This will force them to pump more to compensate for the lost revenue, which further depresses the prices and so on. - a vicious spiral.

My guess is that if OPEC cuts do not work out quickly, prices may fall to less than $20/bbl at which point of time marginal producers will start shutting down. But even this will take time to play out, so lower levels are still possible. I have that feeling that the market "wants" the oil to be beaten down (by discounting bullish news an focusing on bearish ones), so I put a huge probability on $20, which is my personal buy target.

I provided data from XOM's November 05,2008 10Q report from the 3rd quarter which indicated they generated no pre-tax income below $50/barrel.


This doesn't contract what Leanan said because capital costs (depreciation) are included in pre-tex nat income.

As long as they generate profit at the EBITDA level, then it remains worthwhile to produce.

EBITDA (earnings before interest, texes and depreciation) is not a bad proxy for the point at which earnings don't even cover fixed costs and a facility would consider shutting down.

operating costs define the limits of reserves. and once reserves are developed, it doesnt matter if they were economical to develope or not, iow reserve evaluators dont look at the past, only the future.

take the term urr, ultimate recoverable reserves. i see some pretty smart individuals on this site using the term urr. the only time urr has any meaning is before any oil is produced. after that there is cummulative production and remaining reserves and the total is ultimate recoverable oil.

How low can oil really go?

It could definitely go down to $8, because the price is controlled by very short-term supply and demand, and the price moves a lot for a very small imbalance of supply and demand.

The reason it could go down to $8 (or even less) in the short run is because it can go down to the lifting cost, which as Rockman has pointed out numerous times, is very low.

Also, the big players are all away for Christmas right now. That means low volume, and tendencies toward excessive moves.

yes, where is the santa claus rally ? where is santa claus ?

I kind of agree with Cramer for once. What I think should happen is the govt should begin buying massive amounts of oil to fill the SPR, and then keep buying even more. And they should sell bonds backed by that oil. Knowing that inflation will eventually return, why not prepare for the day when we again moronically march toward the energy cliff?

You just may have solved the financial crisis... Buy oil at $35/barrel, store it, and sell when it's closer to $100/barrel.

Better yet, we can just squirrel it away, like acorns, for the long winter coming and watch everyone else starve for not preparing.

Aren't we Murrikans just soooo smart! No other country would think of doing this now would they? Duh.

If I was Chinese I would spend all those worthless Murrikan treasuries/etc. on storage and cheap oil. Who knows, maybe they are waiting for it to get even cheaper. Maybe we are waiting for it to get even cheaper. Gambling is a sick addiction.

All the oil in the world aint gonna save us from the REAL problem, right Toto? Where can I find I-NPK prices, spot or future?

Hello Spudw,

Speaking of I-NPK:

The world's largest potash fertilizer production base is built in Lop Nor, Xinjiang by the State Development and Investment Corporation, China's largest state-owned investment holding company. The project will ease China's severe shortage of potash fertilizer supply and heavy reliance on imports.
This greatly enhances China's food security plus its national security as potassium nitrate is essential for production of munitions and explosives. Meanwhile, the US is heavily import reliant on Canada for potash. I recently found this USGS link [11 page PDF Warning]:

..During the First World War, there were no imports from Germany. Potassium was needed for the solid oxidizer potassium permanganate in
First World War gas masks and as potassium nitrate, an oxidizer in the munitions and signaling rockets. The price of potash rose to $600 per ton measured in 1916 dollars..

..The year of peak U.S. potash production was 1966, as Canadian potash started to enter the U.S. market. At the end of the 20th century, Canada provided approximately 90% of the KCl consumed in the United States.
Using this inflation calculator:

This Historical Inflation Calculator will calculate the amount of CPI price inflation between any two dates from 1913 up to the latest month reported by the U.S. Bureau of Labor Statistics (BLS).

The CPI data is sourced from the BLS. However, we also present our own "Alternate SGS" CPI estimates for comparison purposes.

Note that we show the Alternate SGS estimates graphically for non-subscribers, and with numerical precision for subscribers.
Since I am a non-subscriber: $600/ton in 1916 is BLS inflation adjusted to $11,081.74/ton for 2008.

But by my eye-balling calculator of the Shadowstat inflation graphic: ***approx $30,000/ton*** for 1916 wartime potash is the more real inflation adjusted price. I have being using approx. $15,000/ton in my postings as a conservative adjustment.

Just goes to show that people back then in 1916 [gold was $19-21/oz] were willing to pay a TERRIBLY HIGH PRICE for potash [K] in order to grow food plus kill their enemies in wartime. Thus, I think most Americans underestimate the importance of the 1918 Webb-Pomerene Act [google prior postings on this subject in TOD archives].

As posted before, people will do anything to get the Elements N,P,K,S:

In historical times, urine was collected and used in the manufacture of gunpowder. Stale urine was filtered through a barrel full of dry straw and allowed to continue to sour for a year or more. After this period of time, water was used to wash the resulting chemical salts from the straw. This slurry was filtered through wood ashes and allowed to dry in the sun. Saltpeter crystals were then collected and added to sulfur and charcoal to create black powder.
IMO, just another reason we should be moving to full-on O-NPK recycling to enhance our national security. YMMV.

Have you hugged your bag of NPK today?

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

For your consideration: let's compare US crude pricing back in 1916 vs potash.

crude = $1.10 per barrel
Therefore, using the standard API conversion: a ton of crude cost 7.333 barrels/ton X $1.10 = $8.07 per ton

Plugging this into the Shadowstats calculator we get:

$149.05/ton [BLS] or eyeballing the graphic again approx. $450/ton for 1916 crude. 30,000/450 = Potash was **67 TIMES MORE VALUED** than crude!!!

Hopefully this early US comparision will now give you a 'real value' emotional indicator of how much we will postPeak value NPK, food, and gunpowder over crude oil. Have you hugged your bag of NPK today?

bob, Regarding N,P and the naughty K...

I have been creating quite a lot of wood ash from heating this winter totally with wood.

So I looked up what ashes would contain in the form of P and K.

It appears that they are good sources of both and also lime.

Around here we spread ag lime quite a bit. I have a pile of it in my front yard as a matter of fact but I am going to use my unused lawn spreader this spring to lay down all my wood ashes and till them in.

No Nitrogen of course. Here are two links I looked at:

On that note I would add this: due to the latest of my switching to wood this year I have been burning Red Oak felled from the remains of hurricane IKE. This produces very little heat as it has to deal with a high moisture content. So today I started cutting a large hickory that had been down for 3 years. Some spalting but it burns far far hotter that damp oak , needs less fueling,doesn't smolder and splits far easier. My neigbor farmer gives me free access to his couple of thousand acres of woodland/fields and I can cut anything that is dead,fallen or standing for free.

So I have plenty of available organic P and K and lime. I am also going to build an ashhopper to suck out the lye to make soap and for other uses , like treating corn to make better grits and hominy.

The article says that we used to use a lot of wood ash for fertilizer in the past. Rather nice to take my heating off the grid and also have a use for the byproduct as well.

NOTE: I only use downed or dead timber. The farmers would push it in a dozer pile and burn it anyway,,most of it if its sticking in the field.


Hello Airdale,

Thxs for responding. Yep, ashes can be a good PostPeak fertilizer, soap source, or gunpowder additive. Google First US Patent for more historical background info on Pot-ash.

What worries me is when [not if] the US starts running low on I-NPK and natgas: people will be burning wood in huge quantities for heating/cooking then selling the pot-ashes, plus farmers will pay for people to burn woodlands [and abandoned McMansions?] so they can have an even larger additional source of P & K for their crops.

Recall that back in 1916 most farmers were O-NPK oriented with guanos and livestock manures plus serious crop rotation for the N-fixation; ie, most needed very little I-NPK to boost their yields towards a Liebscher' Optimum. Not close to that at all today--most farmers are highly I-NPK dependent. As Nobel Prize Winner Borlaug has stated: without I-NPK, it's game over.

If I was Chinese I would spend all those worthless Murrikan treasuries/etc. on storage and cheap oil.

I believe they are doing this.


There is this story/joke about an entrapenuer(sp?i know)...who went to deepest Africa and seeing a lot of monkeys told the natives of this village to trap them and he would buy them for ...........

anyway if you know or had read the story/joke you would understand everything you ever needed to know about the futures market.


I don't think it's wrong to buy it low.. of course, I don't know that there's much room left in the SPR, didn't we buy a lot last spring when it was so high? And it still represents what, 175 days of US Consumption? ( ~700 m-barrels? ) (EDIT: YIKES, pardon my math.. at a rounded up 25 mbd, that would be more like 28 days.. but all from a very distracted memory.. I eagerly await the corrections)

Still and all, having a stockpile of energy or food is simply one, preventative step. The other steps that must not be overlooked are

A) Not then spending down your 'savings' as if it were going to be as easy to refill the next time.. use it very sparingly, and expect to keep having to do it that way.

B) Finding/Establishing a reliable source of power (or food, largely the same thing) that is going to be sustainable.

Did Cramer take a stab at either of these.. or just offer the same bland lip-service we always hear?

Our SPR is largely full, but it would make a lot of sense to stop lifting "our" own oil, and instead save that while importing more from the folks selling it cheap. Wouldn't be popular, but tax domestic oil at $50/bbl, and foreign oil at $20.

Our SPR is largely full, but it would make a lot of sense to stop lifting "our" own oil, and instead save that while importing more from the folks selling it cheap.

I get it... but that's really not a great idea.

OPEC is fitting internally to try to artificially constrain production to boost prices... and it's going to get harder and harder for them to enforce discipline as countries cheat (because they need the money and they still turn a profit in the 30s).

They're so desperate this time that they're trying to convince other exporting nations (Russia) to share some of the pain.

There's no point in helping them close the gap.

If you want to restrain demand then go ahead and tax the oil, but don't don't come up with a plan that says "we'll take less money here and send more to you".

Yup...Until recently I cringed at every announcement of trade deficits, and winced at the value of my dollars (or the price of oil, or other commodities). Nowadays, however, I'm coming to accept that BAU will cease, and perhaps we will see some very painful defaults, so what the *heck*...why not share the pain (send more dollars to our friends) and hope that there are some real assets left in the ground to help any recovery/rebuilding that my kids might see.

Slightly more seriously....I'd like to see our foreign expenditures on oil plummet, so perhaps it would be better to phrase my earlier statement as "importing a larger percentage of oil". I acknowledge that taxes might further damage our economy, but maybe some higher tariffs would be appropriate....$100/bbl domestically, and $50 on the imported stuff. I'd guess this sort of action would really depress the world prices for oil, so the total dollars sent abroad would fall because of both volume and price/bbl.

Fat chance!

I am hearing rumors (from same hedge fund that was correct in explaining early about Glencore) that Venezuela is not months or years away from a coup but weeks or days - the lack of oil revenue has the government in dire straits. What this would mean for oil, were it to occur, is unclear - the old regime was pretty savvy about maximizing production so if Chavez is out, it would be a short term positive but perhaps long term negative? I don't know - anyone else hearing anything on this front?

I would not hold your breath. Chavez has huge support, and learned his lessons from the last coup attempt. Reports out of any US media or corporate source on Venezuela should be taken with suspicion, as they are almost always wrong.
But, I will put out some feelers (I have friends who travel and work in Venezuela).

Haven't heard anything about Venezuela but Aljazeera was reporting that Pakistan is on red alert for a possible attack by India this morning. Right now Aljazeera is down and its been down more often than not for the past week. Very strange. Oddly enough no mention of this on CNN at all.

I've no problem accessing Al Jazeera website right now although with the failure of most of the subsea cables to the middle east over the last few days there are likely sporadic problems.

Pakistan military on 'red alert'

Pakistan media is reporting that the country's military is on high alert over a possible strike by India.

Monday's reports come after a ratcheting up of tension between the two countries following attacks in Mumbai last month which killed 163 people.

Kamal Hyder, Al Jazeera's correspondent in Pakistan, said the local media attributed its reports to military sources, who were confirming that the navy, air force and army were on red alert.

"The Pakistani air force have been seen visibly in a number of locations flying close to the Pakistani-India border in what is being described as an aggressive patrolling mode, following reports that India is planning pre-emptive strikes against locations in Pakistan," Hyder reported.

Also streaming video is up at http://english.aljazeera.net/watch_now/


Iran using Venezuela ties to duck UN sanctions: report

ROME (AFP) — Iran is using its warm relations with Venezuela to dodge UN sanctions and use Venezuelan aircraft to ship missile parts to Syria, an Italian newspaper reported Sunday.

Citing US and other Western intelligence agencies, La Stampa said Iran is using aircraft from Venezuelan airline Conviasa to transport computers and engine components to Syria for use in missiles.

...In return for providing aircraft, Iran has made available to Caracas members of its Revolution Guards and the elite Al-Quds unit to train and reinforce the Venezuelan police and secret services, La Stampa reported.

It's that time of the month again. The front month crude oil contract is now February. The graph on the RHS of the page is stuck on last Friday's price near $32, while the today's price for February is near $41 per barrel.


E. Swanson

Your Brain on Shopping

In the hot field of neuroeconomics, MRI scans have turned up heightened activity in deep, primitive areas of the brain as subjects shop. The nucleus accumbens, a seat of pleasure, lights up when they are contemplating a purchase, and the insula, a seat of disgust and pain, lights upwhen they are thinking about how much that purchase is going to cost.

"MRI scans have turned up heightened activity in deep,....."

someone took an mri machine with them while shopping ?

Saw this MRI machine on special offer. Couldn't resist it :)

someone took an mri machine with them while shopping ?

As someone who has spent a fair amount of time in an mri machine recently, I also had to wonder about that.

Typically, the way it works is they ask people to think about whatever situation they're studying. "Think about something you really want that's really expensive. Think about buying it. Now think about getting the bill."

And we're expected to make the leap of faith of regarding "thinking about" something as the neurological equivalent of actually doing it?

These posts should be referring to fMRI not MRI. MRI shows anatomy. fMRI (Functional Magnetic Resonance imaging) shows relative blood flow to various parts of the brain. There is a potential for fMRI studies to produce junk science. This is a hot field and everyone wants to get published. It is probably best to retain some skepticism. The resolution of fMRI is actually quite poor. Still it is an amazing science.
R Wilson M.D. Radiology ret.

Antonio Damasio explains that the brain has a "What if" mode, that activates the same areas of the brain that we use when the thing it`s real.

there was a documentary a while back where a paraplegic woman had electrodes attached to certain parts of her brain and a data port attached to the top of her head which was connected to a computer which operated her wheel chair. she was able to manipulate the wheel chair simply by thinking about where she wanted it to go.

and i believe the air force has experimented with reading a pilots eye movements to control a jet airplane.

And now its understandable why Eve went shopping for fruit.

And led us to exactly where we are now. Lust will do it every time. But perhaps it was the brain. Not thinking!

A devil, a tree,some low hanging fruit, Adam off digging in the garden......yes..its all coming together now.


Don't forget the snake, who was probably a reporter for CNBC at the time. . .

But what about that Talking Snake? Aside from Mohammed's Flying Horse, and Ram's Army of Monkeys that built a bridge to Sri Lanka, the Talking Snake is my favorite.
But I'm not a expert in Bronze and Iron Age Fiction.

Serpent,snake,devil...I posted a bit more in this vein in another post today...

We know she had the 'shopping gene' in her dna. Its recorded somewhere in perhaps the Dead Sea Scrolls or whereever but it was surely there.

And according to the Orcales of Elizabeth Warren this brought about our downfall...the Second Downfall of Man....the two wage earner family and and and what would she be going to work for if not to later go shopping mad?

The bride,snake,serpent and dat old debil. Yes its all there...and thats where the MSM and its Ad nonsense mad us all go crazy. We couldn't help ourselves and Credit Cards? Devil spawn. We know that now.

Will we ever learn?


Yow! AirUnit! You are on a roll today!

I, for one, am thoroughly enjoying it :-)

Tell it!

and what would she be going to work for if not to later go shopping mad?

According to Elizabeth Warren, what women went to work for was to provide a better life for their children. In particular, a house in a good school district. Women did not go to work in order to buy designer clothes and fancy furniture.

Indeed, that's a point Warren has made repeatedly: people today, men and women, do not spend more frivolously than their parents or grandparents. The people who get in trouble are not the ones who are throwing their money away on big screen TVs and Starbucks lattes. Rather, they are people with children at home, who are trying to give their kids the best start they can. They get in trouble precisely because they don't waste their money. If you're buying a new car every year and eating at gourmet restaurants every night, you can easily cut back if you need to. But if all your money is going toward a house in a good school district - there's no place to cut back if something happens.

And so its a 'better life' for your children when someone else is rearing them? Dropping them off at daycare centers? Not being there in their very important formative years?

I don't buy that.

Give them the best is what worked for centuries. The male did the hard physical work. The female provided for the young offspring until the boy could follow his father and the girl learned what the mother did.

But all that went awry and we kids with bizarre clothes hanging out at the malls. And I could name worse like teenage sex gone way out line.

Children running away from home. Home alone....

The money in Warrens video showed that they went house crazy. Maxed out credit cards.

Funny that the few short times my wife worked I had to first outfit here with all new clothes, then she needed a car and other things but when the paycheck came in it was not deposited in our joint acct.

It went for more clothes and decorator knickknacks.

Not saying this was the way for every couple but those I lived near in the burbs told it about the same.

So the family unit was more or less dramatically changed. And this Warren said did NOT mean better vacations,moving closer into the city,lots richer,,,it meant where we are now.

Or as her title states. The Collapse of the Middle Class,or similiar words.

The scenario about the 'shopping gene' was a puton. Yet perhaps more true than not. How big is the clothing depts in most stores vs the men's dept. How hard is it to find men's cologne when getting lost in the huge women's cosmetics depts?

Ohhh way way over there in that corner is a dab of men's aftershave.

Most men in the mall you find sitting out in the center walkway on seats while the women are busy trying on clothes endlessly. Heck they are throwing some of their purchases away as they walk out the doors
saying "Ohhh I don't like this, why did I buy it?"...a joke but like my wifes aunt had 8 closets of clothes and most never worn. Most my wifes shoes were too small.

So a shopping gene? Well......

Airdale-ok..not all women are the same..I'll give that up..so where can I find one of those? Help me split wood. Cook biscuits and homemade pies. Clean my fish? Dig in my garden? Here is the rural outback maybe 3 women in the whole county. Sans that shopping gene of course.

And so its a 'better life' for your children when someone else is rearing them? Dropping them off at daycare centers? Not being there in their very important formative years?

They're thinking about the future, not the present. What changed, IMO, is that suddenly you had to get a degree from a good college in order to be middle class. No longer could 8th grade dropouts (like my grandfather, who was a very good stonemason) make a good living.

Give them the best is what worked for centuries. The male did the hard physical work. The female provided for the young offspring until the boy could follow his father and the girl learned what the mother did.

The economy has changed. It's no longer possible to achieve the living standards of your parents by doing what they did. And few parents want their children to be poorer than they were.

(It's also not the case the men did the hard physical work. In many societies, including our own, women did very hard physical work as well.)

But all that went awry and we kids with bizarre clothes hanging out at the malls. And I could name worse like teenage sex gone way out line.

I don't think teenage sex is all that much different. The difference is that it's no longer necessary to get married if the girl gets pregnant. There was that fascinating study awhile back, that found the percentage of American women who had premarital sex has not changed in generations.

IMO, expecting teenagers not to have sex is futile. You're fighting nature there. Especially now, when good nutrition means children reach sexual maturity relatively early and the long educational period means marriage is occurring later. We're expecting hormone-filled kids to practice abstinence for a decade or more. That's just not reasonable.

How big is the clothing depts in most stores vs the men's dept. How hard is it to find men's cologne when getting lost in the huge women's cosmetics depts?

Men and women spend the same amount of money, but they spend it on different things. Instead of clothes and cosmetics, men spend on things like stereo systems, car stuff, tools, stuff for the yard.

The WSJ had an article about compulsive shopping last week. It does seem to be addictive for some people, like gambling or substance abuse.

It's also found among just as many men as women.

And it was first identified in 1915 - before we became such a rabidly consumerist society.

I can hardly take serious a newpaper whose existance is based on 'financials' and totally fail to see what was 'afoot' there.

So reporting on shopping habits when the cats have swallowed all the canaries and they had zeros clues and if they did I surely didn't read about it there. Online or otherwise...in fact as I recall they were defensive about it when it started going southwards.Supporative of TPTB in financials.

But I don't read it every day..once a week maybe.

The job of the MSM is to us keep blind and sheep like so they can catch us easily and then fleece us.

From GM-Volt via Slashdot comes news that EEStore, the company claiming to have developed a new ultracapacitor technology for automotive energy storage, has a patent on it with a lot of details.

"The core ingredient is an aluminum coated barium titanate powder immersed in a polyethylene terephthalate plastic matrix. The EESU is composed of 31,353 of these components arranged in parallel. It is said to have a total capacitance of 30.693 F and can hold 52.220 kWh of energy. The device is said to have a weight of 281.56 pound including the box and all hardware. Unlike lithium-ion cells, the technology is said not to degrade with cycling and thus has a functionally unlimited lifetime. It is mentioned the device cannot explode when being charge or impacted and is thus safe for vehicles."

52 kwh of energy is the equivalent of 1.44 gallons of gasoline. Of course, you get more useful driving out of the stored electrical energy due to the inefficiency of the internal combustion engine. Using David Pimentel's figures, it might take 6.5 gallons of gasoline to deliver the same useful energy (although this assumes 100% efficiency for the electric version). In any event, 1-6 gallons of gasoline + tank weighs less than 281 pounds.

Well, good things come to those who wait -- and we've been waiting for awhile. This better be good.

Is it much different from the patent they filed a couple of years ago?

We've discussed this before, and it didn't sound very promising to me:



We've discussed this before, and it didn't sound very promising to me:

meh, I don't think a few TOD posters saying it wont work makes it any less promising. What does interest me is the company is reportably funded by Kleiner Perkins, not known to make many bad investments, the company is run by Richard Weir who was very successful at IBM in developing new technologies for disk memory storage. Anywho, there's a decent article/summary of the patent here:


Oh TAD, the only thing more infinite than abiogenic oil is your optimism. lolz

Well look here then.

Did they not use a capacitor type system in the DeLorean in Back to the Future"? And in the follow on sequels?

So it must work.

Sure it was the heart of the 'goback' machine. Which without this they couldn't have boogied back and for so much that it got real confusing in the last one.


That was the flux capacitor

Problem was it needed 1.21 gigawatts to operate.

"where we're going we dont need roads"

Sigh. We may be waiting quite a while longer. After all, we discussed EEStor's earlier patent in April. I had already been waiting impatiently for months way back then, and still all I've got is hype.

Remember, patents are handed out like popcorn these days. The requirement that they describe working processes is long gone, on the theory that handing out lots of bogus patents would somehow magically help us compete with the Japanese, ages ago when that was the issue du jour.

One never knows, but count me as skeptical about the usefulness of mixing high-permittivity powder with plastic. Coating it with aluminum oxide seemed like a better idea, if not necessarily a useful one, but who's to say. I'm still waiting to see engineering samples of the individual capacitors - with or without the "polyethylene terephthalate", aka PET, aka Mylar, a bog-standard capacitor film. They could be handy little electronic components in their own right if they existed. And after all, one can readily obtain samples of real items like A123 cells and a variety of carbon-based ultracapacitors. So will we ever see anything but vaporware beyond this particular ever-receding horizon? I wouldn't hold my breath...


Bear in mind 2 things, Firstly Ultracaps can be recharged very quickly (as it is not an electrochemical process) and secondly "1-6 gallons of gasoline + tank weighs less than 281 pounds." but 6 gallons of gasoline + tank + engine would weigh about the same as 281 lbs + electric motor


52 KWhr for 281 pounds would make a pretty passable plugin hybrid. The plugin Prius demonstraters with two metal hydride batteries gets maybe 8miles out of 2.5KWhr, twenty times eight is over 160.

I for one, am more than skeptical about EEstor, simple because their claims are just too good to be true. But also traditional super (or are the ultra) caps are pretty pricey. I just don't trust um...

Depends to some extent on the physical size of the devices but 52 KWHr for 281 pounds is approaching the energy level stored in chemical bonds. I'd be surprised to see any surface electrostatic storage system reach that level. Weight is not a good indicator its the surface area of the system and charge density thats important. What they are claiming looks close to something I'd expect to see from some sort of nan-patterned surface with a increadibly high mesh. Think of a big bag of carbon nano-tubes.

Looking at their process from the patent I'm not buying it. If they do have samples with this high of a storage level which the might get periodically then I'd be surprised if they can repeat it. The patenet at least looks like they are making a theoretical calculation assuming their process is producing this sort of nano composite not that it actually does it.

I will say that eventually I'd expect a nano-composite supercapacitor material to be created that can actually perform close to these levels its not beyond the realm of possibility but I'd expect to see a number of process which produce far more realistic capacitors that have a ready and large market well before they reach these levels.

Basically if they had anything even reasonable large markets exists already for good super capacitors the fact they have not produced lesser grade products for current markets makes my think they are simply full of it.

For the real deal I'd believe someone starting with some sort of nanotube process backed by a number of good papers in the peer reviewed literature.

Something real like this.


That I believe and I confident that given they estimate five years to commercialization within 20-25 years we should really see these products.

Same with batteries based on nano-electrodes.

This stuff is coming and it will happen eventually.

Belgian king accepts resignation of government

BRUSSELS, Belgium: Belgium's King Albert II has accepted the resignation of the government, opening the way for negotiations to form a new coalition.

According to CNBC, the reason is the handling of Fortis.

Hey! Are we still in good standing with that Queenny across the pond? Think she would accept the resignation of OUR government?

One can only dream.

Power Down.

In the Holiday spirit, here's a YouTube video I created, from David Farant's parody of White Christmas, as heard on the Financial Sense Newshour with Jim Puplava.

"I'm Dreaming of an Oil Crisis"


Australia - A Future Saudi Arabia of Coal?

The Australian government has watered down the carbon trading scheme to the point of irrelevance, breaking a major election promise. Not only that it is helping increase coal export capacity from about 250 Mtpa to 300. To put that in perspective Australia's net CO2e emissions were 565 Mt in 2006 but CO2 from coal exports can be estimated at around 250 X 2.4 = 600 Mt, more emissions than at home! If drug pushers are liable under the criminal code then in my opinion so are coal exporters.

The correct thing to do is to levy an export carbon tax or a cap that shrinks 5% a year. As others point out coal exports pay for oil imports. Better still maybe everybody learns to use less fossil fuel. Obama has got to do better than this.

Here's some neighbors that won't be looking for coal plant expansion:

HARRIMAN, Tenn. - A retention pond wall collapsed early Monday morning at a power plant run by the nation's largest public utility, releasing a frigid mix of water and ash that flooded as many as 10 homes and put hundreds of acres of rural land under water.

The 40-acre pond was used by the Tennessee Valley Authority to hold a slurry of ash generated by the coal-burning Kingston Steam Plant in Harriman, about 50 miles west of Knoxville, said TVA spokesman Gil Francis.

Just another great 'feature'

Holy crap.

Merry frickin' Christmas...

I wonder who their insurance company is. And if they're solvent.

Pemex Oil Output Fell 9.3% First 11 Months of 2008 vs Year Ago

Schizophrenic Oil Market Needs Better Reserve Data, Yergin Says


Someone posted this link and translation at PO.com:

Caen 17.3% exportaciones de crudo en 11 meses

Mexico's oil exports fell 17.3% between January and November, to an average of one million 410 thousand bpd, compared to the same period in 2007.

Acording to Pemex, crude production declined 9.3% in the same period, to 2 million 806 thousand bpd, while the production at Cantarell declined 31% in the first 11 months of the year, to an average of one million 28 thousand bpd.

Proof of the Export Land Model.....
Mexico dropped exports twice as much as production this year.
In 5 more years Mexico will not export any oil.
Then the US will rely on Canada and Saudi.
As more and more countries go into decline, there will be zero exports.
Then the US will live with what we have.
Which is 30% of what we have now. What a cut back it will be!!!!!
70% less driving, less food, less power, less heat.
Nuclear cannot fill that gap soon enough.
IT would take 50 plus years.

Hey..you forgot Highly Flavored Coffee Drinks.

With no Starbucks we won't make it.

"Yes, I want a Machiatto Caramel Viene"...with foam, no lid,cinnamon sprinkles on the top." "ohhh and no coffee with it,,just the other stuff"

Airdale-my son orders that, I drink junk I make with my La Pavoni Chrome Peacock. Simpe Espresso roast, hand pulled and made at home. Cost about $0.05...vs his $4.95 or so.

Much of our decline as a Nation State has to be due to this weird shit people drink.


airdale - I think Obama should have created a cabinet post just for you.

I estimate that the 2008 net export decline rate (-34%/year) will be about three times the production decline rate (-12%/year), assuming no change in consumption from 2007 to 2008.

Bloomberg is reporting that the US Treasury 2 year bond auction didn't get the demand that they had forecast. Is this a sign of things to come?

The US will have to pay higher yields to finance its debt and then........(the spiral shape of this crisis is twisting tighter and stronger and narrower I guess.)

Now it should be clear why Bernanke said the last arrow in the quiver was for the Fed to buy the treasuries.

Because nobody else will.


US votes against "right to food"
December 22, 2008 - 3:25pm.

The UN general assembly voted, and approved, draft resolution XX on "the right to food". 180 nations voted in favor, 1 nation against: United States.

Apparently the DC Mafia don't believe hunger constitutes an outrage and a violation of human dignity, one that would require "urgent measures" to eliminate.

As the rest of the world asks us to spare a slice of good ole American pie to feed the hungry, the DC Mafia balked. Our politicians don't seem to have a problem if people starve, then again those millionaires have never been hungry a day in their life.

Why would our so called leaders vote against feeding people?, easy, its bad business for the DC Mafias banker gangster owners at the International Monetary Fund (IMF).

Oh, my dear, and Misguided America..

- You will be visited by three ghosts.

Yeah. Their thinking is, "Why give hungry people food when we can convert said food to ethanol. (And most likely lose net energy in the process.) We have to bail out our ethanol industry somehow, right?"


A fascinating new angle on the Madoff scam by Richard Posner on the Becker-Posner blog:


Madoff's scheme, as described in the media ... is not a classic Ponzi scheme. The classic scheme is a "con" in the sense of a fraud perpetrated against greedy dopes. A skillful con man uses his gift of salesmanship to inveigle people by such ludicrous pitches that only the least sophisticated, or those most blinded by greed, are conned. A typical Ponzi scheme might offer a 10 percent monthly return on investment--the very improbability that such an offer could be genuine assures that only suckers will invest and they are least likely to discover that they have been conned until the con man has made a bundle. They may never discover that they have been conned--they may be convinced by the con man that they lost their money because of a legitmate business failure. Or they may be embarrassed to complain, or even afraid to complain because they suspect that they've been involved with a criminal enterprise--what but a criminal enterprise could generate a 10 percent monthly return on one's investment? It is possible therefore that many Ponzi schemes are never reported to the authorities and hence never detected.


Thats an intresting angle. We ought to get a spontanous review of funds on a global level with at least a mass withdrawal from all that are doubtfull. The financial markets will be in very good order within a few years...

I don't read Posner, but his math understanding is very suspect-the reason a Ponzi scheme like Madoff's had sustainability is because of the moderate (as opposed to 10% per month) returns paid out. In fact, if Bernie could have gradually lowered his payout without causing redemptions or limiting inflow it could still be running.

United States petroleum production has increased YOY as of last week. This gain has been offset by a larger drop in NGL production including liquid propane.

The four week average for products supplied is down a million barrels a day, but inventories have been building as a result.

The U.S. has been importing more oil this time of year than the same time last year.

With the cold weather one may expect inventories are likely to decline as the world used more oil in the winter than in the summer due to the need to heat homes in the northern hemisphere.

There will be a new petroleum report tomorrow.

Sorry, that report will be out on Wednesday.

Check this out:


Student posing as oil- man 'buys' thousands of acres of leases on BLM land in Utah, disrupting lease auction.

I like it. Beats chaining yourself to a tree.

Pemex Oil Production Drops 6.5% on Cantarell Field

So which basket-case is going to collapse first? Mexico or Venezuela?

We should organise some kind of wager between ourselves. I feel guilty saying this but frankly I find vicariously experienced misery quite enjoyable - it certainly makes for good TV coverage. Yummy yum -- 2009 promises to be a great year for the couch-potato doomster community!

Mexico is on track for net exports of about 1.0 mbpd in 2008, versus 1.9 mbpd in 2004.

The annual net export decline rate per year is shown (year over year):

2005: -11%/year
2006: -6%/year
2007: -13%/year
2008: -34%/year*

*Estimated, assuming no change in consumption versus 2007
(EIA data for 2004-2007, Pemex data for 2008, through 9/08)

Some people would call that a long term accelerating rate of decline in net exports. If they show the same volumetric decline in 2009, it would be a -50%/year decline rate.

In the Bloomberg article, PEMEX says Cantarell is down to 862k bpd.

Assuming 3.1 mbpd total liquids for 2008, their production has declined at -5%/year from 2004 to 2008, while their consumption has gone up at +1.2%/year, assuming no consumption change from 2007 to 2008. This, along with consumption at about half of production at final peak, resulted in the above accelerating net export decline rate. Rinse & repeat for other net exporters.

Pigs at the trough:

AP – In this Sept. 15, 2008
Banks that are getting taxpayer bailouts awarded their top executives nearly $1.6 billion in salaries, bonuses, and other benefits last year, an Associated Press analysis reveals.
The rewards came even at banks where poor results last year foretold the economic crisis that sent them to Washington for a government rescue. Some trimmed their executive compensation due to lagging bank performance, but still forked over multimillion-dollar executive pay packages.

I'm pleased to report our lights are back on and the clean-up of the yard and driveway is mostly done (Tack så mycket, Husqvarna); it was a wild ride, for sure.

Almost half of Nova Scotia Power customers who experienced a service disruption today had their power restored by late afternoon. The outages were caused by extremely high winds associated with a severe winter storm.

As of 6:00 p.m., less than 60,000 customers are without power – half of those in the central part of the province, including Halifax Regional Municipality. Damage is most severe near the coast, where winds were strongest.

The storm brought heavy winds gusting well in excess of 100 kilometres per hour to much of the province....



A few days ago..maybe Friday we had 65 degrees..then Saturday it got real cold. That night it hit 6 degrees on my porch.

I call this chaotic.


Hi Airdale,

In some parts of the province, winds topped 170 kph, so it was a rip-roaring affair (if you've seen Stephen King's "Storm of the Century", you'll get the picture). I don't think we had it quite as bad as did the folks in Cape Breton and Yarmouth Co., but I'm sure Don in Maine would feel right at home. :-)


Chuckle, that's for sure Paul, I love that stuff. I've been known to climb our local "mountain" in conditions like that, just to see what it feels like and if I could do it. Wife just shakes her head. BTW her family comes from Cape Breton.

But to me it's elemental, maybe something to do with Sharons "magic". It fills me up and makes me feel, and feel whole. One with everything around me yet distinct, like the show is for me, alone.

Course I spent a number of years, climbing towers doing broadcast work, so there isn't much fear in me, if any. As I got up to geezer age though, lost the upper body strength so had to give it up.

Watching that storm track towards you, every once in a while the radar looked very cyclonic, like it really wanted to start a rotation. I suspect we might all have an interesting future in store. Keep the generator of yours well maintained.

Glad you weathered the storm !!

Don in Maine

Hi Don,

I enjoy a good storm as well; I'm constantly amazed by the power and beauty of nature and a strong nor'easter speaks directly to the soul. Our home is reasonably well sheltered, so I don't worry too much about storm damage, but I know others are not as fortunate, and the potential loss of life and property damage tempers this pleasure.

I wish I could have seen the radar images, but my DSL connection went down. I hadn't noticed any shift in wind patterns, but I wouldn't be surprised if there were elements of cyclonic activity. BTW, it appears these wind gusts were a little stronger than initially reported -- upwards of 194 kph (source: http://www.cbc.ca/canada/story/2008/12/23/storm-snow.html).



The massive run up in commodities prices, following the massive run up in real estate prices, which followed the massive run up in the tech sector begs a question: Where was all that money coming from? Let us take a look at an extraction from an interview with Charles Schwab:


“The decision was made by the SEC in April of 2004 to permit investment-banking firms to go to any leverage that they thought was wise if they had $5 billion in capital or more. So between 2004 and 2008 some of these firms went to leverage of 30 times capital or even more.
It doesn't take a genius to figure out what happens when business turns down a little bit. So is there culpability? I think there was, at the margin. And I think somebody's hands should be slapped, frankly.

What new regulations do you expect in the financial system?

There will be a lot, and there will be a risk of overdoing it. There'll be consolidation of banking regulation, but I have to say that in many respects it's not regulation, it's good sense.

There'll be re-regulation - or regulation, I should say - in the hedge fund world. They got to an incredible scale right under the nose of the regulators. At one point last year, hedge funds had some $2 trillion of capital, and that was just the equity side of the thing. Then they could lever that to three to five times more, so you're talking about the economic power of as much as $10 trillion.
To put that in perspective, our GDP is only $14 trillion. So they had huge, huge influence on stocks, futures, lots of things.”

For those who dismissed the massive speculative bubble(s) created by the hedge fund industry, these numbers should go a long way in explaining the out of control volatility in many industries.

So where is the money going now?

So it seems the rich are still doing what the rich do, with the exception of the idiots who were invested with other idiots like Madoff.

The point of this little discussion is simply this: There is still plenty of money out there, and it is doing what it is supposed to do in these whipped up catastrophes, i.e., moving from the poorer amateurs to the richer pros. They don’t play this game as a hobby.

Of course, this situation will rebalance. At some point the bond yields will decline as money leaves the bond market and moves back to "risk" investment such as stocks and commodities, but it may be awhile. The people who miss the rebalance will be those who fled to CD's and Treasuries, which have no appreciation but which feel safe. That includes mostly small individual investors who have suffered terribly in this financial setback.

The problem for the small investor is twofold: First, no one knows how long it will take for the rebalance to occur. The wealthy, earning big returns while they wait, don't care, and they have the spare money to stay somewhat invested in stocks so they will make the lions share of money on the turnaround. Second, the small investor waited too long to bail out of stocks and has already given up 1/3 to over 1/2 of his/her money. It will take ASTOUNDING returns for years for the bang-uped investor to get back to even break even, and most of these investors are now inside a decade of their hoped for retirement age. A friend of mine who was heavily invested told me "I am nearly 60 years old and now back to where I was in 1995 on invested savings." He has given up 15 years of savings and all of the lost returns on them. Even if the economy turns around BIG and NOW, his planned retirement has been pushed back from 62 to 77 years old. What are the odds that the economy will turn around big and now? Many investors got knocked to the floor twice back to back, because they moved from stocks after they had declined to the commodites markets just before they declined, seeking "safety".

This is a tragic situation for many average working class people. They are of course now terrified of taking any chances in investing so their prospects of gaining even fair and competitive returns are lowered even more. There is also a complete credibility gap. Who wil they now turn to for investment advice, the same hucksters who helped them wipe out years of money they worked hard for and all the returns it would have earned?

But of course, this is not a new story. I saw people get wiped out in the 1970's who have essentially never recovered financially. Investment is a competitive and brutal race, and if you fall down even once, the odds in favor of catching back up becomes long. It can be done, but it requires exceptional ability, greater risk and favorable circumstances. The deadliest philosophy in investing: "This time, it's different." But it's not. It is still the same old shell game, and the dealer only needs three shells to continue robbing the sucker blind. They control where the pea under the shell is.

Let's all give each other a break. It is a tragic situation.

Roger Conner Jr.

The shift of capital to Treasury Bonds only appears to be recent phenomenon, because of the parabolic move in price (higher) kicked off by the acute phase of the crisis. However, US Treasury Bonds have been in a bull market for 26 years. So this latest move would be more typically associated with the final move--not a smart money allocation trade associated with "wise" wealth preservation. Alot of the capital in the longer end comes from foreign central banks, and price insensitive buyers like pension funds.

In your post, you appear to want to strike a theme that the wealthy are able to dance around these events more nimbly. But I would just point out what has happened to Harvard and Yale endowments. These two investment "companies" have access to all the same expertise and in many cases even superior investment expertise than your average person in the super-rich club. And, both Yale and Harvard got hammered this year.

The reversal in Treasury bond (prices) will likely mark the next phase of this crisis. We have been getting counter-trend signals for weeks now, with selected 30 year and more recently 2 year auctions not going very well. The reversal back down in the USD is also a warning.

Actually, the situation with bonds is very reminiscent of the housing bubble right now. Everyone knows current bond prices (low yields) are unsustainable, but most have stepped aside to get out of the way.

In October, I began to write about the bond situation as a lever for reflationary policy. I think that's still the case. i.e. the FEDs clearly stated goal is to drive capital back out of cash and into risk again, just as you say.

My script is as follows: the bonds of some other sovereign will fall first (in price) as a canary as to what is about to happen in the US. My guess would be UK Gilts. I think we will see a period soon where the Pound Sterling falls, and then UK Gilts start to fall in price at the same time. That will give everyone a preview of coming attractions in the US


Definitely-the other thing is that the US economy and US dollar is not large or strong enough to be sucked continually by the Treasury (Paulson) and Fed. The second half of the TARP that Hank is demanding (after the first half failed to create one job) is approximately equal to an entire year of corporate income tax revenue. I think most can agree that if USA corporate income taxes had been abolished it would have been a very powerful boost to the overall economy. IMO the possibility that all these fund transfers are not in any way intended to benefit the USA economy is an aspect that is underreported and mostly ignored.

This certainly does sound suspicious:


Top internet strategist Michael Connell, 45, was the only person in his single-engine private plane that crashed three miles short of the Akron-Canton airport on Friday night as he prepared to land after flying from College Park, Maryland, close to Washington.
He had worked on Mr Bush's two presidential campaigns, advised John McCain this year and was also linked to allegedly missing White House emails in the 2006 controversy over a string of firings of US attorneys.
The death of the married father of four immediately triggered conspiracy theories amid speculation that he had been about to reveal embarrassing details of the complicity of senior members of the Bush administration in fixing an election and destroying incriminating emails.

I've brought the connel story up here before (you know, before he was dead) Get ready for ron patterson to shit on your fertive young mind.