DrumBeat: December 31, 2008

The Peak Oil Crisis: Civil Unrest

Before grappling with 2009, it might be useful to remind ourselves that there is a dark side to what lies ahead.

There was a little flurry in the news last week when it was discovered that the Army War College had released a report talking about preparing for civil unrest in the U.S. When you read the report, it turns out to be yet another warning about generals preparing for the last war. It devotes only three pages to the idea that the Army might soon find itself so embroiled in helping local authorities cope with civil unrest that international commitments, such as the war on terrorism, could become secondary concerns.

Since the close of the Civil War, America has enjoyed nearly 150 years of domestic tranquility. There were, of course the Indian wars, some labor disputes and a handful of urban riots in recent decades, but these were isolated and did not last for long. Even during the great depression of the 1930's America's social fabric stayed largely intact. Signs that these idyllic decades may be coming to close are starting to arise. In the last few weeks the deteriorating economic situation has seen serious disturbances in Greece and Thailand. We are beginning to read of disturbances in Russia and China.

Oil prices surge $5 a barrel in pre-holiday trading amid concern about Russia-Ukraine natural gas dispute

COLUMBUS, Ohio – Oil prices jumped above $44 per barrel on the last day of 2008, wrapping up what has been the most turbulent year ever for crude markets in which crude gave up four years of gains in just five months.

It may be a temporary spike.

An unprecedented collapse in energy prices that began in July came as the world's leading economies sank into recession.

Gazprom Will Cut Off Gas Supply to Ukraine Tomorrow, Miller Says

(Bloomberg) -- OAO Gazprom will cut off gas supplies to Ukraine from 10 a.m. tomorrow, Chief Executive Alexei Miller said.

Reports: Ukraine, Russia at impasse in gas dispute

MOSCOW (AP) -- The chance of a deal to avert a New Year's Day shutoff of Russian gas to Ukraine is waning with talks showing no sign of progress as the midnight deadline approaches.

All three Russian news agencies are reporting that the delegation from Ukrainian gas company Naftogaz has been called back to Kiev. The reports cite an unnamed member of the delegation and could not immediately be confirmed.

Venezuela Halves Travelers Dollar Allowance to $2,500

(Bloomberg) -- Venezuela pared in half the amount of dollars it will let people buy at the official exchange rate when traveling abroad to $2,500 as part of a push by President Hugo Chavez to curb outflows as oil, the country’s biggest export, plunges.

Review: Ditching car OK with Net transit planners

SEATTLE - As a New Yorker, I don't own a car, and I really hate driving.

So I challenged myself to avoid the driver's seat as much as possible during a recent West Coast trip, something made practical with all the online transit planners that have cropped up in recent years.

More Gulf industrial projects at risk after Dow

DUBAI (Reuters) - More Gulf projects may go the way of Kuwait's aborted $17.4 billion deal with Dow Chemical or be renegotiated as states take a hard look at spending amid the global financial crisis and an oil price slump.

Gulf Arab states -- which form the Gulf Cooperation Council (GCC), a loose economic bloc -- have enjoyed a six-year boom on the back of soaring oil prices. But oil export revenues have shrunk as crude fell from a record above $147 in July to $38 at the year end.

Coupled with the financial crisis, this has led to a big push among Gulf states to revisit contracts as prices in general fall.

Tough choice for Gulf leaders

As GCC leaders gather in Muscat today, the deepening global economic crisis may force them to choose between multibillion-dollar projects proposed during more optimistic times.

Cancellations or delays of government-backed deals worth tens of billions of dollars have already been announced in industries from petrochemicals to aluminium production and oilfield expansion. On Sunday, the Kuwaiti government issued an 11th-hour reversal and cancelled a US$17.4 billion (Dh63.9bn) deal to create a petrochemical joint venture with the US company Dow Chemical.

Russia says slim chance of avoiding gas cut-off

MOSCOW/KIEV (Reuters) - Russia said on Wednesday the chances were receding that a gas deal will be clinched with Ukraine to avoid a threatened January 1 gas cut-off that could disrupt supplies to customers in Europe.

Ukraine PM cancels trip to Russia - source

KIEV (Reuters) - Ukrainian Prime Minister Yulia Tymoshenko will not fly to Moscow on Wednesday for a last ditch attempt to resolve a gas dispute with Russia, a source close to the Ukrainian government told Reuters.

Somali pirates to release Saudi tanker

Somali pirates have reportedly agreed to release the Saudi super-tanker, Sirius Star, withdrawing a 25 million dollar ransom demand.

"We decided to respect the request of Saudi Foreign Affairs Minister Saud Al-Faysal who asked us to release the ship..." Press TV correspondent quoted pirate's spokesman Mohammed Said as saying.

2008 was the year forecasters got it all wrong

Oil to soar to $200 US a barrel.

This is a good time to buy stocks.

A lot of things economic took a battering in 2008 -- from stock markets to autos to consumer confidence -- but the list wouldn't be complete without adding the pride of professional economic forecasters.

With commodities soaring in the first half of the year and plunging in the second, Wall Street financial giants collapsing, the Detroit Three teetering and the world heading into recession -- all surprises -- 2008 may be remembered as the year nobody got right.

Byron W. King: Comments on $37 oil

Today oil is trading in the range of $37 per barrel, or about $110 less than its price back in July. That’s a dramatic, 75% change downwards. Back when oil was selling at $147, I said that the world does not run very well at such lofty energy prices. A lot of things just stop working at $147 for a barrel of oil, particularly things with a large energy component. The airlines come to mind. So something had to give. The world economy could crash (no jokes about airlines here…), or the price of oil could come down.

As it turned out, we had both events. The world economy hit the wall, and the price of oil came down in almost a straight line over five months. I believe that the high oil prices of late spring and early summer – with gasoline prices well over $4 per gallon (and over $5 in some parts of the country) – had a lot to do with triggering the financial crash that we saw in the fall.

The Impact Of Asian National Oil Companies In Nigeria

There is no shortage of literature on the renewed interest in Africa by Asian countries seeking oil and other minerals to fuel their rapid industrialisation. Most attention has been focussed on China, and on India and others to a lesser extent. But there are few case studies.

This paper tries to fill that gap. It addresses the experience and impact of Asian National Oil Companies (ANOCs) in Nigeria, Africa's premier oil producer. The study suggests that many of the general assumptions about the enhanced Asian presence in Africa need to be re-visited. However, Nigeria may be a special case.

Refinery fire’s Interior impact unknown

FAIRBANKS — Petro Star officials say it could be three weeks before they know the extent of the damage to a Valdez refinery following a major blaze Sunday night.

Until then, officials also say it’s unclear how the Interior will be affected by stalled production at one of the state’s four refineries.

Australia: Fuel shortage fears

FUEL shortages are likely to continue at service stations after another fault discovered at the Caltex refinery on the weekend pushed the re-start time back a week.

Students in Nepal cut electricity to protest power cuts

KATMANDU, Nepal – Students stormed an electricity transmission office and shut down power in western Nepal affecting hundreds of thousands of residents in a protest against government imposed power outages.

Will Mexico Fail in 2009 or 2010?

The Mexican government needs $70-per-barrel oil prices to balance its budget. For now, government spending is covered. But by the end of 2009, its fixed-rate contracts to sell oil at $70 will have expired.

If oil prices are still low by the end of next year, the government could be in real trouble. If oil had to be sold at today’s prices, almost 20 percent of the government’s budget would disappear.

Economic crisis has small car sales making a U-turn

No other vehicle segment saw such sales volatility in 2008. First, it was falling gas prices that slowed small-car sales. Now, it's the inability of recent college graduates and other price-conscious drivers to qualify for loans.

RWE advances plan for new nuclear plant on Anglesey

RWE has unveiled plans for massive new nuclear capacity in Wales by obtaining grid connections for 3.6 gigawatts of electricity and buying up land for up to three new atomic power stations.

The British arm of the German-owned business, RWE nPower, said it was intending to make a "multibillion-pound investment" that could provide light and heat for 5m homes from 2017.

Ford Exec Admits Hybrid Battery Shortage

The new 2010 Ford Fusion Hybrid—the first mid-size sedan to break the 40-mpg mark in city driving—could become the hit that Ford so desperately needs. Unfortunately, Ford is already claiming that it can’t get enough hybrid batteries to meet potential demand.

Stern hope over US climate deal

Economist Lord Stern has said he is optimistic a global deal to reduce carbon dioxide emissions will be struck under Barack Obama's US presidency.

Is oil cheap only because of the recession?

Several commenters on Tierney's blog seem to acknowledge that he's likely to win. (Oil is below $40.) But they say he lucked out with the severe global recession, which has depressed the demand for energy. The oil-price plunge, these commenters suggest, says nothing about long-term resource sustainability and long-term resource prices.

Not true. Granted, the recession does force energy prices lower, and the recession won't last forever. But recessions and limits to growth are a crucial factor in favor of anybody who's betting against long-term resource inflation. Until recently world GDP was growing close to an annual rate of 5 percent -- an astonishingly fast pace. The idea that it couldn't keep up was crucial to anybody betting against higher oil prices. Unsustainable demand was a key factor in the oil bubble.

But the business cycle is only one way economies adjust to seemingly scarce resources. When resources become expensive, we buy fewer of them. When resources become expensive, people switch to alternatives. When resources become expensive, entrepreneurs seek new sources or invent technology to better exploit old ones. All of these things have been going on with oil in the last two years. They are real but unmeasurable factors in its price decline. It's not just the recession. Tierney didn't luck out. He knew the odds favor the resource optimists for many reasons.

Crude Oil Falls a Second Day, Heading for Record Annual Decline

(Bloomberg) -- Crude oil fell for a second day, heading for a record annual drop, on speculation that U.S. fuel stockpiles are increasing as the recession cuts demand.

...Crude oil for February delivery dropped as much as $2.09, or 5.4 percent, to $36.94 a barrel on the New York Mercantile Exchange and traded at $37.07 as of 11:50 a.m. London time. Prices are down 61 percent this year, the first annual decline since 2001 when oil fell 26 percent, and the biggest slide since trading began in 1983.

Iran May Scrap Subsidies on Fuel as Oil Income Drops

(Bloomberg) -- Iran’s parliament may vote to scrap energy subsidies after a motion presented by President Mahmoud Ahmadinejad was approved by a majority of lawmakers yesterday, Iran’s Press TV reported.

Domestic fuel and utility prices will rise if an economic reform bill is passed, with some funds redistributed to low-income families, the state-run satellite news channel said, citing Ahmadinejad. A further vote is required.

Iran, holder of the world’s second-largest oil and gas reserves, relies on oil revenue for at least half of the government’s budget. The slide in oil prices -- the biggest annual decline since futures trading began in 1983 -- has prompted the government motion and could lead to social unrest, observers said.

“It shows that they’re running out of dough,” said Dalton Garis, associate professor of economics at The Petroleum Institute of Abu Dhabi in the United Arab Emirates. “It is extremely dangerous for the regime as it may precipitate some grass-roots action that could get out of hand, and the ultimate result might be quite chaotic in the short run.”

Iraq opens oil fields

BAGHDAD (Reuters) -- Iraq on Wednesday opened up some of its most prized oil and gas fields to international firms that have been excluded for decades, part of new deals that could more than double its output within a few years.

PetroChina Parent's Crude Oil Output Rises to Record

(Bloomberg) -- China National Petroleum Corp., the country's biggest oil company, boosted crude-oil output to a record in 2008 as the nation stepped up production to meet increased demand and build fuel reserves.

This is the seventh straight year in which the company's crude output has grown ``steadily,'' China National said in a statement on its Web site today without giving details. The company's crude production rose 2.2 percent to 137.6 million metric tons in 2007. Natural-gas output expanded ``rapidly'' this year, the statement said.

Gazprom accuses Ukraine of 'blackmail' on gas transit: Gazprom

MOSCOW (AFP) – Russian state gas monopoly Gazprom accused Ukraine on Wednesday of "blackmail," saying it had threatened to confiscate Russian gas en route to delivery to customers in Europe.

"We are in a situation when transit volumes to western Europe are in danger," Gazprom's deputy chief executive, Alexander Medvedev, said at a news conference. "This position cannot be called anything but blackmail."

Oil price collapse wreaks havoc on forecasts and budgeting

The global economic slowdown which unfolded in the second half of 2008, hit Russia hardest through the collapse in oil prices. They have fallen more than 70% in 6 months, making a mockery of predictions earlier in 2008 and undermining the entire Russian economy.

Sfakianakis Says Oil's Decline Threatens Sovereign Funds: Video

(Bloomberg) -- John Sfakianakis, chief economist at Saudi British Bank, talks with Bloomberg's Erik Schatzker about the impact of lower oil prices on sovereign wealth funds in the Persian Gulf.

Crude oil's biggest decline since 1983 may push the biggest oil producers in the region into budget deficit, limiting the nations' ability to invest in foreign companies stung by the global credit crisis.

The Last Road Trip

It is the frightening rule du jour: the cheaper gas gets right now, the more completely screwed you know we are. At the same time, a cheap tank of gas is one of the few strokes of fiscal relief we have right now, a tiny reprieve from the brutal economic turmoil. What a thing.

But on the whole, it is not good news. Normally, the price of a barrel of crude drops a couple hundred percent in less than a year and we'd be out celebrating, joyous in the knowledge that ExxonMobileShellScrewYou must've just shoved an enormous drill bit the size of Sarah Palin's vacuity deep into Russia or Venezuela or a precious Alaskan wildlife preserve and come up with enough pure, sweet crude to last us until you're very, very dead and your grandkids are using the burned-out hull of your Chevy Tahoe XLT as a bomb shelter against the global warming food riots.

Gold was the best, oil the worst

Ironical, isn’t it, that gold should be the best performing commodity in a year when crude oil turned out to be the worst? After all, gold prices have historically marched in-step with crude oil. Remember that gold attained its previous record of $850 an ounce during the oil crisis of the eighties. In 2008, gold prices (in dollar terms) have gained 6 per cent while crude oil has lost 62 per cent.

The Gold to Oil Ratio Does Matter

Producing gold is essentially converting energy into bullion. How many calories go into producing a one ounce gold coin? In some cases to produce a single ounce hundreds of tons of rock are moved. Ultimately, money is about energy. To make it personal, how much value should you put on that nice steak dinner, bottle of water from Fiji or 3,000 mile Ceaser salad? Well, think through the supply chain and how much energy the good or service represents.

UK: The future for renewable energy

Renewable energy will be a highly dynamic part of the cleantech spectrum for several decades to come. The drivers for the sector are aligned and strengthening all the time. And remember these go beyond just climate change. Energy security too is a key plank of policy, especially in countries like the UK and the US whose domestic oil and gas supplies are a dwindling part of the energy mix.

Russia’s RTS Ends Worst Year Since 1998; Gazprom Tumbles

(Bloomberg) -- A 72 percent drop in the RTS Index made Russia the worst index among the world’s 20 biggest equity markets this year and gave investors in the country their biggest losses since Russia defaulted on its debt 10 years ago.

OAO Gazprom dropped from being the world’s third-biggest company to 47th, and other stocks slumped amid falling oil prices, capital flight following the August war with Georgia and forced selling by investors and billionaires who faced margin calls from banks and brokers.

Ukraine govt delegation due to fly to Russia-source

KIEV (Reuters) - Ukrainian Prime Minister Yulia Tymoshenko is to fly to Moscow shortly to try to resolve a gas dispute with Russia before a deadline to cut Ukraine from supplies, a source close to the negotiations said.

Feds approve gas drilling plan for Montana

BILLINGS, Mont. – The Bush administration has approved a plan that could allow more than 18,000 natural gas wells to be drilled in southeastern Montana over the next two decades.

The decision by C. Stephen Allred, assistant secretary for land and minerals management at the Department of Interior, would allow companies to proceed with plans to drill on more than 1.5 million acres of federal land in Montana's remote Powder River Basin.

China Datang to Build Wind Farm as Government Speeds Approvals

(Bloomberg) -- China Datang Corp., the nation's second-biggest power producer, received state permission to build a 4.5 billion-yuan ($659 million) wind farm as the government expedites project approvals to spur economic growth.

Winds of change come to country plagued by power blackouts

The forest of white windmills that make up Asia's largest wind farm can be seen from miles away. Dotted across 2,000 square kilometres of hills and villages on a basalt plateau in western India sit more than 800 turbines - generating more than 1,000 megawatts of electricity.

The towering machines, which stand 80 metres tall, cast shadows across fields tilled by man and buffalo - a stark juxtaposition of ancient and modern India. For one man, however, the windmill farm in Dhule is a fitting riposte to the critics who derided his dream to build a global green energy business from a country plagued by crippling power cuts.

Ethanol sales top gasoline sales in a first in Brazil

SAO PAULO (AFP) – Ethanol sales for 2008 for the first time are outpacing those of gasoline in Brazil, a top ethanol producer, the National Petroleum Agency reported Tuesday.

Geothermal energy a booming business

PROVO, Utah - Within six months of discovering a massive geothermal field, a small Utah company had erected and fired up a power plant — just one example of the speed with which companies are capitalizing on state mandates for alternative energy.

Anticipation of new energy policies has sparked a rush on land leases as companies like Raser Technologies Inc., based in Provo, lock up property that hold geothermal fields and potentially huge profits.

Global warming may spread tick-borne disease

The brown dog tick (Rhipicephalus sanguineus) rarely bites people, far preferring the taste of dog. But global warming could be changing that, exposing people to dangerous diseases as a result.

2009 to be one of warmest years on record: researchers

LONDON (Reuters) - Next year is set to be one of the top-five warmest on record, British climate scientists said on Tuesday.

The average global temperature for 2009 is expected to be more than 0.4 degrees celsius above the long-term average, despite the continued cooling of huge areas of the Pacific Ocean, a phenomenon known as La Nina.

I saw this yesterday and thought it interesting -- apparently this was also news about a year ago but I had missed it then.

Japan auto sales plunge as young lose interest

"The changes in individuals' values on cars came cumulatively over time," said Nissan Chief Operating Officer Toshiyuki Shiga. "The change in young people's attitude toward cars didn't happen overnight. So we have to keep convincing them cars are great."

I think this is really interesting. Generational tastes change, and the trends may align nicely with the need for a lower energy future.

Last July there was an article in the German FAZ, written by a person with japanese name. The title means "In Japan the car is going to be a phased-out model", and the writer complains about young japanese losing any interest in cars. The "worst of all" he describes is the continuing disinterest of the japanese royal family in motor sports. The Tenno is said to attend only horse races, but has never been seen at a formula-1 race.

Really disgraceful ... ;-)

And the thing is that the auto companies see these changes as a problem that needs to be solved.

But ultimately people will race virtually anything that moves. I saw something on TV once where they have belt sander racing. My recollection is that you pick it up, lock the trigger, let it spin up to full speed, and then drop it on a long board that serves as the track. When the thing gets to the end of the track, I guess the power is cut because it pulls out it's own power cord. I was telling a friend that that was one type of racing that was in my budget :-).

But despite having read this a couple of years ago, I still don't have a belt sander.

A couple years ago Porter Cable 3 X 24 belt sander took everything hands down but now since Bosch and others have come out with new models we will have to again have races. There are two kinds ...

1. The 50 foot race where you use an 14 gage extension cord. The sander has to be pretty well tuned or it will hit the sides of the track and sometimes roll over or at least slow down. Raced Man on Man "Sander on Sander". Loser buys beer.

2. The distance contest where the sander runs as far as the cord will allow, pull the plug and coast to a stop. There is a handicap for cord length to even the playing field. A distance carved plaque is given with the sander's manufacturer and distance hand carved on it.

To be a knowledgable woodworker you have to know all these things. :-)

There are battery operated belt sanders. Probably wouldn't go as fast, but most likely would go farther. Modern tortoise and hare?

Need to work on a solar powered sander, good for races in the desert.

In one cabinet shop I worked at a few years ago we would have belt sander races where a person would perch on top of the belt sander (usually Porter-Cable or old Stanley), reach down to control the trigger, and off you'd go! Forty or thirty-two grit would give the most traction. Foreman: "why the hell do you want forty grit belts?" The shit you would do during slow times in the shop.

Being into 'renewable' energy, I prefer retractable tape measure races. Hook the tape on the end of a board, stretch to agreed upon length, let tape slide to board end. Must of course have classes for length of tape and so on. The amount of esoterica involved would obviously take too much space to explain.

Last July there was an article in the German FAZ, written by a person with japanese name

Here are some details of this article:

(1) The author, Yoshihiro Kimura, finds within 300 m of his flat an ATM, a post office and 3 convenience stores open 365 days a year.

(2)Using the freeway in Tokyo or Osaka costs 4 Euro, whether it's for 1 or for 20 kms. Speed limit is 50 km/h.

(3)If you have a GPS system in your car and want to find a way around a traffic jam the GPS buttons are disabled as long as the car is moving - for insurance reasons.

(4)Car parks cost also 4 Euro per hr. and metered parking along the road 300 Yen per hr. If you exceed 1 hr parking a red alarm light goes off attracting the immediate attention of a ranger who'll book you.

That doesn't look like having fun when using a car in Japanese cities.

This could happen in Japan. I lived there for some years in the 80s and around 2000. In the large cities there are so many buses and trains that you can get around quite easily without a car. However, there is a grey area where you live more than 20 minutes walking distance from the train. Do you get a car or pay for taxis?

In any event, I can see where the decision to have a car or not is one that you'd think about for a while whereas in the US a car of some sort is a necessity for most people.

A few years ago a few students out of every class (college) had a car. Out of 40 maybe 3 or 4 did. Now it's zero all the time. I always ask everyone in my classes if they do so I know. (I'm in the suburbs of Tokyo). Now they're all into CELLPHONES. I don't like cellphones much better than cars but at least they're smaller.

Concerning that recent DrumBeat post about the Russian professor's prediction that the U.S. will fragment within a few short years: I didn't take the article too seriously, but after seeing what happened yesterday after the appointment of the Senator from Illinois I now wonder.

It amazed me how all these people with the fancy titles don't understand how constitutional government is supposed to work. Do they even teach about constitutional government in 4th Grade anymore?

Even in professional settings procedural operation is often put aside for convenience. We have these mechanical infrastructure failures because the inspection process was-

Oh never mind. You all have a Happy and Healthy New Year.

Denninger this morning is on about the Fed and Congress blatantly ignoring the constitution with a number of their recent actions. Then the Whiskey and Gunpowder update was a re-print of Thoreau's essay on Civil Disobedience. How timely...

For those interested in socio-political cycles, found this today:


I've only skimmed it, but it is a very nice discussion of various looks at cycles and the rise and fall of states. Their concept of upward sweeps is interesting and may be informative in assessing progressions in the short term.

Warning: the paper is narrowly focused on the political spectrum. Those who will dismiss anything not including energy descent should not read this. I find it useful as far as the theory takes it.


Re: Post above about oil and recession. Not good to have my cortisol levels explode so early in the morning. Implies that alternatives a big factor in oil decline. These are unmeasurable, of course, although they are. Must have been all those solar panels replacing liquid oil. Or was it the ethanol? Why let facts get in the way of a good theory. Oh, and I forgot. The streets are so crowded with electric vehicles, I can barely move. Damn all those EVs bringing the oil price down. People like that should pay us to read their insipid articles.

I am sticking with the view that no one really knows what the hell is going on. I may not be able to explain the price drop but it damn sure is not alternatives.

There have been price bubbles in most commodities recently and oil is a commodity - the commodities are traded on markets deliberately set up to permit gambling as well as trading, just like stocks and shares.

Too many people are gambling for a 'free lunch' (which doesn't exist in the real world) rather than actually consuming the commodity. Gamblers fear and greed results in price swings that are inexplicable if you just consider the fundamentals.

Sadly, our whole international financial system is based around the myth that everybody can build things like a retirement fund based on all those impossible free lunches.

The gambler tail is wagging the energy dog - but how do we stop it?

Well put xeroid. I've was on the fence back then as to the effect the oil future gamblers (as you describe them) had on pricing. With the collapse of all those players it seems clear to me how they drove prices above what would have been a normal supply/demand status. And now their abrupt departure has pushed pricing to an artificial low level. I vividly recall how the demand destruction of the early 80’s drove oil prices down. It’s a slow but inevitable process. I think very little of the price collapse we’ve seen to date is directly the result of DD but it is coming. And probably dropping to a level few anticipate. None of the economic indictors predict anything but worse times ahead. I wouldn’t be surprised to see some oil price rebound even if OPEC can’t control the cheaters. But DD is an unstoppable SLOW MOVING force which has yet to affect the market to any great degree yet.

Given the wide range of potential stunning success/failure we’ll see with current gov’t efforts to save the economy will ultimately determine the energy markets in the short term. In the long term PO is still lurking.

Demand certainly dropped in the early Eighties, but the big drop in oil prices occurred in 1986 when Saudi Arabia boosted their production:

Granted, an inflation adjusted chart looks different, but commerce is done with nominal dollars.

And I disagree about Peak Oil being a long term phenomenon. Crude oil production has basically been flat since 2005, with a slight boost in total liquids--which Simmons attributes to dying oil fields with gas caps that are being blown down.

And IMO, 2005 was almost certainly the peak for world net oil exports. Our middle case is that we have already burned through about one-fifth of the cumulative post-2005 net oil exports from from Saudi Arabia, Russian, Norway, Iran and the UAE. I estimate that Mexico, our #3 source of imported oil, has already shipped about 80% of their cumulative post-2004 net oil exports.

I have to agree with WT. IMO we've hit peak oil. It explains quite a bit of what we're seeing. The flat production combined with the increasing demand due to global economic growth shot the price of oil through the roof. Since oil is a necessary component of economic activity, and you need increasing amounts of oil for sustained growth, the demand was inelastic....until it wasn't.

The sheer volume of cutbacks, closings, layoffs, slowdowns, etc. across the entire globe contribute to the decreased demand for oil. Businesses just weren't economically viable with oil at $147/barrel. The bankruptcies, closings, and curtailments of business activities are not easily or quickly undone. This experience will be fresh in their memories going forward. I rather think that demand regeneration will be slower than the demand destruction was. The demand destruction was enough to bring the price of oil back down to earth, but you don't see too many people taking advantage of it. If we revert to BAU and emphasize infinite economic growth, we'll experience another oil price spike.


If we revert to BAU and emphasize infinite economic growth, we'll experience another oil price spike.

Precisely the scenario I expect for the next decade, possibly two, before it becomes so obvious that even the most diehard deniers come around. Sometime in 2010 we will begin to see an economic "recovery." "Everyone" will breath a sigh of relief and start buying again. By 2012 we'll be pushing against production levels again and the price of oil will head upwards again, perhaps again reaching $150 a barrel. The "recovery" comes to a screeching halt and we fall again into "recession." Rinse and Repeat.

Remember the Thanksgiving Turkey forcasting everything will be fine, lots of food, good place to live, really great should last forever ... that is, until a couple days before Thanksgiving.

Well, I agree with Taleb that forcasting anything for any time in the future is a waste of energy.

Better to spend your time assembling your caca for the worst possible times and just hoping it doesn't happen.

Right now we have the making of a war in the ME and most anyone could shut down the straights. That is the reason the price of crude is over $42 now.

Better to spend your time assembling your caca for the worst possible times

I think a crucial distinction is that, depending on how you apply values things, it might be worth assembling your stuff for the worst possible time you personally can deal effectively with. For instance, I occasionally mention "if things go Mad Max", but I'm not preparing for such an event, because I don't think there's anything I can do that will effectively prepare for such an event (certainly not in the remaining time before it hypothetically happens). I'm preparing for the case of sudden dramatic disruptions to supply of anything shipped (including food) and thinking about retraining in some job more livable for a less industrial and information-technology world.

Rockman I agree that demand destruction so far has been marginal and that its a slow relentless force this effect says nothing about the price of oil and in general one would expect demand destruction the be driven by high not low prices.

Now as far as the current price goes we have plenty of evidence that KSA flooded the market with oil as nominal demand was falling and of course the hurricanes that everyone ignores had a large effect on oil.
This is the physical half of the equation the financial half has been well documented in this forum.

Now we have extensive evidence that the economy slowed sharply in the second half of 2008 generally after prices had already fallen significantly this results in reduced demand I'd not call it demand destruction perse just your garden variety demand drop/slowdown from a sharp recession. Looking at past recessions and economically challenged areas of the countries its a reasonable bet that oil demand generally falls to some sort of baseline level representing that needed for the economy to function.

Now what does that mean for me at least it means we simply don't know what 2009 really has in store for us. My own work has come to the stunning conclusion that if supply does not meet demand then prices will rise rapidly back to high levels. The next half is that total demand declines so far seem to be small enough that production slowdowns in OPEC and Russia and other parts of the world coupled with a pullback in drilling are enough to ensure that the supply and demand equation can become strained in a matter of months.

If this is true then at some point the market will probably suddenly respond to signs of a shortage right now in general the market is signaling to me at least that its reserving judgment on the future.

However looking at todays chart and the futures we finally begin to see the market break out of contango and backwardation set in.

Time will tell what the decision of the market is as regards to price but whats important is that it finally seems to have awakened and people are again interested in hedging future prices. Lets see what a functioning futures market has to say in the coming months.

My conclusion is that the oil price collapse had virtually zero to do with fundamental economic factors, including demand destruction, peak oil and the high price of gas. An avalanche of selling was likely orchestrated by the Plunge Protection Team of Paulson and Bernanke in mid July as the Fannie/Freddie disaster was becoming clear. The avalanche was easy to get started because the high number of leveraged bets that were long commodity, short dollar, short financials. Once the PPT got the margin call snowball rolling, the deleveraging worked its way through the economy like a wrecking ball. It's great we have such talent as Bernanke/Paulson on our side(NOT!), as the dollar did indeed eek out an improbable rally(now failing). The "strong dollar" enabled the PPT to cut interest rates and enable the recent shock and awe of money creation. The high commodity prices simply had to be smashed before the money printing could occur. Elsewise, oil truly would have spike to $200 or more on the inflation. This explanation has been offered by Don Coxe and is available on the Financial Sense News hour website in much more eloquent detail than above. Now that we are here and the leveraged players have been wiped out, the peak oil/geopolitical fundamental story will very shortly resume control of the price in a most unpleasant and dramatic upward spike. As Matt Simmons is fond of saying, the surprise will be to the upside. The oil cartel will beat the dollar cartel, unless of course the dollar cartel sends in the military or some other abomination

Rockman I agree that demand destruction so far has been marginal

Rockman, Memmel, I encourage you to look at the 11 December 2008 IEA Oil Market Report

page 6: OECD "Total Oil Product Demand". You see that demand is on a declining trend since Nov 2007 (start of the US recession) and that by October 2008, the latest month in those statistics, demand is down by 2.5 mb/d year-on-year.

And while we are at it, on page 13 of the same report you find a China demand spike starting in May 2008 and peaking in July 2008 around 1 mb/d higher than usual. As I said before, these were the most expensive OIL-YMPIC Games the world ever had.

I remember a slide from Matthew Simmons saying that if supply exceeds demand by 1 mb/d, oil markets think there is an oil glut, and if supply is less than demand by 1 mb/d oil markets fear there will be shortages.

"....and that by October 2008, the latest month in those statistics, demand is down by 2.5 mb/d year-on-year."

you must be refering to a different oil market report than the one you link. i dont find any such wording on page 6 and the latest month in the linked report is sept '08.

i dont find any such wording on page 6

The graph shows it

the graph shows jan 1 through sept 30, so i see where you arrived at the 2.5 mbpd, but that is not year on year.

sept '07 to sept '08 was down by 2.62 million bpd according to table just below the graph.

"Too many people are gambling for a 'free lunch'....."

pouring money into a 401k is starting to look a lot like gambling also. and we have some self appointed experts in the msm telling us that this is a good time to increase 401k contributions. it may be and it may not be.

i gave up on "investing" in the stock market a long time ago, i called it speculating for a while, but now it is just gambling. no matter, my gambling has been paying off better recently than anything like investing or speculating. viva the free lunch !

"I am sticking with the view that no one really knows what the hell is going on."

I agree and I am quite sure the chartologists will jump in and show that it was supply and demand that caused the price to go up and demand and supply caused the price to go down. But the hedge fund speculators made a bundle and/or lost a bundle in the mean time.

Now this ... "I may not be able to explain the price drop but it damn sure is not alternatives."

I don't agree. My solar powered golf cart will save me probably $30 a year in gas. As for the rest of the country ... I can't do much for them. We have a lot of dry lakes around here (and the world famous Black Rock Desert) and on the right day a sail driven tricycle will go fast enough to get the adrenals up. So wind power is replacing gas for go-carts, motor boats etc. See, there are lots of uses to replace gas use with alternatives. So the money I spend for gas goes down.

Of course the guys at the lumber yard use an 18 wheeler to carry their sail carts out to the lakes but the lumber yard pays for the fuel so it cost them nothing.

Saving money on gas is an individual responsibility.

(I know better ... I'm joking)

Looks like yellowstone is still quake swarming. Just under the lake..

Really NOT Good! The World's largest volcanic dome sits there. If a quake causes a crack in the crust, and the gases dissolved in the magma start to vent, then all discussions on TOD become academic.

But have a Happy New Year anyway.

Last time this erupted, it wiped out much of the surrounding area, including Colorado. So, in that event, there will be no more discussions of any kind in this neck of the woods. Any worries I have will be over.

Well, if it's the big one, we probably won't have to worry about global warming any more.


I've seen the model of the last major lava out pouring about 75,000 years ago. It really would generate the ultimate Mad Max world as ascribed to by the worst of the doomers around here. But the good news is that for a number of years now the magma dome has actually been residing. Perhaps these new shocks are just the result of the crust settling back. The detailed monitoring has only been going on for about 30+ years or so but the current theory is that the magma dome "breathes": periodically rising and falling. Perhaps it will be that EOLAWKO belch one day but I think we're safe through New Years day.

The last big eruption blew out 240 cubic miles of material. If the period is regular (a bit IF) we're about due for another, but recent eruptions (in the last few hundred thousand years) have just covered the caldera in rhyolite.

This is officially one of those threats that is interesting but ignorable -- we can do nothing to stop it, nothing to mitigate it, and nothing to get away from it.

From a TOD perspective, though, one should include "Yellowstone geothermal" in one of the great untapped energy assets of the US.

Will using it as geothermal drain away the heat and make it harmless?


The energy extracted will be trivially small % of the total, but will that affect the balance and delay the eruption for a millennium ?

IMVHO, not enough is known to truly answer that question.


Are there any thoughts in the scientific community as to whether teh earth has any more of those Class 8 Super Mega eruptions left in her?

I don't think there is any reason to believe that there aren't any more of those. It is just that these events are so incredibly rare that we have no experience with them.

I understand that there are already some brilliant scientific minds working on solving this problem. Technology will save us.

See for example New Spray on Earthquake dissolver

What? Only a 2.8. Not a problem.....

On another note, for a time to remember.

The passing of a very influential man this year (no, sorry, not GWB..we wish) but Sir Arthur Charles Clarke.

Best wishes to Power Down in 2009.

Thanks for reminding us that we ARE attached to the Earth.

Here's the list of recent quakes in the area. With my limited knowledge of volcanoes, my guess is that this activity indicates magma movement under Yellowstone. As I recall, the potential for a massive eruption at Yellowstone is always there. One surely hopes this activity isn't leading up to The Big One...

E. Swanson

I made a bar graph of the intensity of the quakes sine 12/28. The graph is here: http://img72.imageshack.us/my.php?image=yellowstonequakeintensiay4.jpg

I watched the BBC docu-drama supervolcano on youtube last night. http://www.youtube.com/watch?v=xDB4fJm-6L8 It was the perfect time to watch it due to the recent news headlines. In the movie, i thought the scene where harmonic tremor is discussed was very intense. So i am on the lookout for this harmonic tremor. So far, one link has been found on iReport: http://www.ireport.com/docs/DOC-170499

On a daily basis, the list looks like this as of 1:30 PM EST:

DATE    #/D

27 Dec	14
28 Dec	103
29 Dec	37
30 Dec	26
31 Dec	14(incomplete)

There's nothing earlier in the weekly list before 27 Dec and the biggest day (so far) was 28 Dec. Back in November 1997 into January 1998, there was an earthquake swarm under the Long Valley Caldera in California. The surface of the caldera bulged upwards and it looked like we were goners, but it didn't happen. There's nothing we can do about volcanoes, except cross one's fingers or pray that one's favorite deity can change the laws of Nature and will look favorably upon his children. Of course, if there is such a deity, he/she/it might be the cause of the problem.

I've been interested in earthquakes for decades, since my roommate after college worked for the USGS. One of my pet theories is that more earthquakes happen near high tides and the highest tides are at new moon and full moon. The new moon was on 27 December. Also, the Earth's orbit places the Earth closest to the Sun on 4 January, which maximizes the solar component of tidal forces at that date. The next full moon will be about 11 January, just a week after the solar tidal forces reach maximum. I doubt that one could make a prediction from that, but, neither would I be surprised to hear that some large earthquake(s) happened about that time.

E. Swanson

One of my pet theories is that more earthquakes happen near high tides and the highest tides are at new moon and full moon

Why wonder when you can know? :)

My pet theory, though I no longer track it, is earthquake clouds!

Can you believe I've got only two degrees of separation from this guy (Zhou)?

More: http://www.newscientist.com/article/mg19826514.600-curious-cloud-formati...




Looking at the total database for the U.S., one finds:

DATE    M=1+    M=3+   M=1+
 UT     #/D     #/D    -Yellowstone

25 Dec  135      8     135
26 Dec   94     10      94
27 Dec	109     18      95
28 Dec	208     10     105
29 Dec	133      6      96
30 Dec	130      6     104
31 Dec	 94     12      80  (incomplete)

Doesn't add much understanding, does it?

E. Swanson

This should have been posted last night. Too much bubbly, I suppose.



Great minds think alike. I was just looking at another version of that article and tried to edit my post. Turns out that the theory of tides causing earthquakes is rather old. The press release you link to is dated October 2004. The paper appeared in SCIENCE:

Earth Tides Can Trigger Shallow Thrust Fault Earthquakes, Elizabeth S. Cochran, John E. Vidale, and Sachiko Tanaka Science 12 November 2004 306: 1164-1166; published online 21 October 2004 [DOI: 10.1126/science.1103961]

The big Boxing Day quake in Indonesia happened on 26 December 2004, when the Moon was full. Here's to a Happy New Year without seeing The Big One in Yellowstone. I need a beer...

E. Swanson

You'll remember it has only been VERY recently that science has figured out that earthquakes beget earthquakes. Now, this is another of those what-are-you-eggheads-thinking-of-course-they-do moments (along with animals don't think). It was always ever so clear that if you wiggle this here, you jiggle that there. Ah! But it couldn't be PROVEN!


I actually think the earthquake cloud thing might eventually be shown to have some merit based on the obvious: that kind of precursor movement/pressure creates a lot of heat energy, no? It's got to go somewhere, and in some cases it almost certainly can propagate into the atmosphere. Maybe not. We'll see, I suppose.


MMmmmm.....Peak Caldera. Yeah, that would put a quick end to the worries of peak oil, for sure.


news reports equate this to the 1959 quake adjacent to the park that killed several campers. this could be..... quoting fred sanford "the big one".

I was in Yellowstone right after the 1959 quake. I was young, bur still remember.

Supposedly, this is the "same" mantle plume that was under southeastern Oregon several million years ago, and was responsible in part at least for the huge Columbia Basalt flows, among other things. There is apparently no good reason to believe the earth has cooled off significantly since then -- the Yellowstone Hot Spot is presumably quite capable of lots more surprises.

I believe it's been determined that animals thousands of miles away from the last super-volcano explosion at Yellowstone died from bleeding to death in their lungs, having inhaled the piercing spew that came forth and was airborne.

I'd take the total collapse of the banking system over an exploding caldera any day.(I think) :-)


Hello Gregor,

Yep, volcanic emissions of hydrogen sulfide gas is quite lethal--I would much prefer to be quickly killed by a super-heated pyroclastic flow instead of having sulfuric acid making me choke to death on my own blood. Please see my sulfur posting near the bottom of today's DB.

Hydrogen sulfide is a highly toxic and flammable gas. Being heavier than air, it tends to accumulate at the bottom of poorly ventilated spaces. Although very pungent at first, it quickly deadens the sense of smell, so potential victims may be unaware of its presence until it is too late...

Manitoba to confiscate drunk driver's cars


Any drunk you kills or injures OR three DWIs in five years.

One way to reduce VMT and promote public transportation. Clearly justified as a way to significantly reduce the 16,000 killed each year by drunk drivers; and many more severely injured. (What about first offense DWI means walking, bicycling, taking the bus or a moped ? And a big monthly car note for an empty driveway ?)

But access to an auto is required to function in most of the USA, so this approach is unthinkable !

Best Hopes for staying off the roads after midnight,


I believe that around here a 1st offense DUI also results in riding a bicycle or taking transit. They don't screw around with that sort of thing like they used to years ago..

US oil production has again dropped below 5 mb/d. It had fully recovered from hurricanes Ike and Gustov and with Thunder Horse coming fully on line, production shot up to 5,152,000 barrels per day for the week ending December 5. Then it slipped below 5 mb/d for three weeks in a row.

Week Ending	Production in thousands of barrels per day.
11/21/2008	5,006
11/28/2008	5,118
12/5/2008	5,152
12/12/2008	4,967
12/19/2008	4,972
12/26/2008	4,979

At first I thought it was maintenance but nothing like this happened last year or the year before. Could this be stripper wells being shut down? Or other production being shut down because prices are so low it is no longer profitable?

Ron Patterson

Summary of Weekly Petroleum Data for the Week Ending December 26, 2008

U.S. crude oil refinery inputs averaged nearly 14.2 million barrels per day during the week ending December 26, down 321 thousand barrels per day from the previous week's average. Refineries operated at 82.5 percent of their operable capacity last week. Gasoline production dropped last week, averaging 8.9 million barrels per day. Distillate fuel production increased last week, averaging 4.5 million barrels per day.

UU.S. crude oil imports averaged 9.2 million barrels per day last week, up 131 thousand barrels per day from the previous week. Over the last four weeks, crude oil imports have averaged 9.5 million barrels per day, 351 thousand barrels per day below the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 1.1 million barrels per day. Distillate fuel imports averaged 150 thousand barrels per day last week.

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased 0.5 million barrels from the previous week. At 318.7 million barrels, U.S. crude oil inventories are near the upper limit of the average range for this time of year. Total motor gasoline inventories increased by 0.8 million barrels last week, and are in the lower half of the average range. Finished gasoline inventories decreased last week while gasoline blending components inventories increased during this same time. Distillate fuel inventories increased by 0.7 million barrels, and are in the middle of the average range for this time of year. Propane/propylene inventories decreased last week by 2.4 million barrels and are in the lower half of the average range. Total commercial petroleum inventories decreased by 4.2 million barrels last week and are in the upper half of average range for this time of year.

What was expected:

Crude supplies were expected to have fallen 1.5 million barrels, according to a Reuters analyst survey.

Distillate supplies were seen up 1.1 million barrels, with gasoline up 1.5 million barrels and refinery utilization up 0.3 percentage point.

Oil is way up today and one source explained this was due to the unexpected rise in supplies. What? What am I missing? Did they just ascribe a cause and effect that makes no sense? Prices go up, so the reason is whatever happened today even if what happened today clearly cannot be the cause for higher prices. Hello!!

As I mentioned above ...

"Right now we have the making of a war in the ME and most anyone could shut down the straights. That is the reason the price of crude is over $42 now."

If you were speculating on oil knowing there was a possibility of war in the ME would you be short or long? Especially on a day before a holiday. Is there any posibility that there will be a giant unknown-till-now oil find in the next day or two or that demand will fall on its face in the next day or two? This is typical speculation play for a couple days in and out if nothing happens BUT if something does happen it may be a good ride with limit up for a few days. All the other reasons given IMHO are covering BS.

Price Elasticity of Demand ? (or Economic elasticity ?)
4 week avg and YTD %

Products Supplied
Finished Motor Gasoline       9,041    9,249     -2.2% -3.3%
Kerosene-Type Jet Fuel        1,404    1,603     -12.4%    -7.0%
Distillate Fuel Oil           4,044    4,180      -3.3%    -5.7%
Residual Fuel Oil               697      676      +3.1%   -16.3%
Propane/Propylene             1,397    1,476      -5.4%    -5.5%
Other Oils                    3,354    3,516      -4.6%   -10.3%

Total Products Supplied      19,936   20,699     -3.7% -5.9%

And a year end bonus statistic

Total Net Imports            11,243   11,336     -0.8% -7.7%


Imports were just 9.2 mb/d last week, the second straight week of lower imports. Imports for the last 6 weeks are: 11.0; 9.5; 10.0; 9.7; 9.1; 9.2. It looks like the first round of OPEC cuts are finally showing up in the numbers. Crude inventories had a small rise this week due to low refinery utilization and lower inputs to the refineries. But the usage numbers continue to hold up. Products supplied over the last six weeks are: 19.5; 19.6; 19.1; 20.2; 20.2; 20.2. The average for products supplied in December last year was 21.2 so demand is down about 1 million b/d.

If crude imports stay around 9.1 or 9.2 then crude inventories will start to drop by 2-3 million barrels a week. If OPEC does implement another round of cuts then crude inventories will drop by more. I think this is why crude oil prices have started to firm up today along with the news yesterday that the Saudi's want the price to go up.

Do you still have your Christmas lights up? Is this a new year eve? What other reasons could there be besides the OPEC?

BTW: Happy New Year to all the readers and especially Leanan and the staff for making this site work.

I also see that annual US crude oil production averaged less than 5 million barrels per day for the first time (not counting on the way up obviously).

Crude Oil Supply               2008    2007      %chng
Domestic Production (1)        4,951   5,064    -2.2

If the drilling of new wells stops or slows (for whatever reason, but usually lack of profitability) the overall decline rate will accelerate sharply - lack of adequate profitable investment is the essence of peak oil supply.

As it's the end of the year, here's the latest graph for post 1982 US production.

And US crude imports over the period.

And I might as well include the message on the EIA site.


Happy New Year

From the many contributing authors, support staff, and others in EIA who make “This Week In Petroleum” possible, best wishes for a safe and happy new year.

that is a good question ron. but it seems like it has to be a combination of factors.
if the decline was all because of stripper wells (10bopd or less), that would be .....well.... a whole bunch of wells.

After the GOM hurricanes, there was permanent supply destruction due to platform loss.

Now I'm wondering if something similar is happening due to low prices.

So, my question is this:

When a well is shut in for a period of time, and then reactivated, is there any effect on production rates or URRs?

How much is involved in getting a well going again?

I realize this is broad question and answers likely range from "not much" to "a lot" depending on the formation, but the bottom line is:

What sort of permanent supply destruction can be expected, if any?


Could this be stripper wells being shut down? Or other production being shut down because prices are so low it is no longer profitable?

Total upstream costs per boe US onshore ($20) and US offshore ($70) for 2006 are here:


Housing swaps gaining popularity in slow market

"I thought it would be really easy to sell my house because of the price and the location. Boy was I wrong," Linda Gatchell, 49, said. "I had this big old plan, and now it's crumbling before me."

Caught between a deepening recession and poor housing market, the Gatchells decided on a different approach. They became one of a growing number of home sellers nationwide turning to a new strategy — permanent housing swaps.

..."Think of it as reciprocal selling. I'll buy your house, if you buy mine," said Westbrook. "There are a lot more motivated sellers out there today than there are buyers. This is as simple as two sellers helping each other out."

Also interesting:

Where people are moving to

• Atlas for the first time handled more household moves out of Florida than in. Inbound shipments started to drop after several hurricanes hit the state in 2004 and 2005. The housing meltdown followed two years later.

"Some people are moving out because they can't support the 'second housing' option," says Drew Klacik, policy analyst for Indiana University Center for Urban Policy and the Environment. "A lot of us who want to avoid the ice in Indiana and move to Florida, can't. It's harder and harder for people to sell their homes."

• Oregon and other parts of the Northwest continue to draw people.

• Despite a slowdown in Nevada's growth, both United and Atlas show more shipments going there than coming out.

• Moving trucks are heading out of the Midwest, center of the hard-hit automobile industry

How do you do a swap if you both have mortgages? "I pay yours, you pay mine" seems like a pretty poor mechanism.

It's more "I buy yours, you buy mine." You can sell your house, even if you still have a mortgage.

Basically, it's two sales, taking place simultaneously. So your properties don't have to be worth the same.

OK, but you both still have to pay off your mortgages and get new ones, so you'd have to get both houses appraised for more than the outstanding mortgage balances.

If no realtors were involved you'd save a good bit, though.

You'd have to do that in a normal sell your house, buy another one transaction, too.

The point isn't to save money. It's to find a buyer for your house in a buyer's market. Why should I buy your house, when there are 500 just like it for sale in the same neighborhood, for the same price? Because you're willing to buy my house, which is also competing against 500 similar homes for sale.

Housing swaps for the purpose of reducing commutes ought to be strongly encouraged by the gov't in some way. The long ribbons of slowly moving cars in and out of our major cities at rush hour everyday are the height of insanity.

Even more desirable but complicated to pull off would be job swaps to the same end.

Plus, you can wave a final farewell to George Bush's America, the sour megachurches and the gun shops and the liquor barns (usually all in the same mini mall), the giant industrial feedlots and the creationist museums and the prisons overflowing with white collar criminals and hey! Isn't that Scooter Libby, hitchhiking down the highway toward Sodom? Can we take a quick detour up to the Minneapolis airport so I can take one last snapshot of Sen. Larry Craig's favorite "I am not gay" totally gay restroom before it vanishes from the tourist map forevermore? Cool.

From MM at SFG.

Even the big chemical players are struggling.

NEW YORK (Reuters) - LyondellBasell, the world's third-largest petrochemical company, is considering filing for Chapter 11 bankruptcy as part of its efforts to restructure debt, a company spokeswoman said on Wednesday.

"As we have said publicly, we are looking to restructure our debt and we are exploring all of our options. Filing for Chapter 11 is one of those options," spokeswoman Susan Moore said.

  • http://biz.yahoo.com/rb/081231/business_us_lyondellbasell_bankruptcy.html
  • For those interested in Thorium:

    Thorium Fuel Cycle Development in India

    Bhabha believed that nuclear generated electricity would play an important future role in the Indian economy, and that India possessed only limited Uranium resources. However, India possessed large thorium reserves. Thus Bhabha believed that the Indian nuclear research must be directed toward the development of the thorium fuel cycle. During the 1950’s Bhabha set out a three stage development program for Indian Nuclear technology.

    In the first stage, Heavy water reactors using unenriched uranium derived from India’s limited uranium reserve, would be constructed and begin operating. The use of heavy water reactors meant that India did not need to to develop expensive and power demanding uranium enrichment facilities.

    During the second stage, India was to construct Fast Breeder Reactors, which burned plutonium reprocessed from the spent fuel of the heavy water reactors as well as their depleted uranium. India needed to develop breeder technology quickly, because it had limited uranium resources. Breeders allowed India’s uranium supply to be used much more efficiently.

    During the third stage thorium was to be bred, and U-233 would fuel Indian power reactors.

    India has 13 heavy water reactors with 4 more under construction. These Indian reactors are smaller than western commercial power reactors. India also has fuel reprocessing facilities, and a developmental breeder reactor. A full scale fast breeder (500,000 MW), which will breed both U-238 and Th-232 in a hybrid fuel cycle, is under construction, and is expected to be completed in 2010. A second large thorium fast breeder, the ATGB is already in the planning stage. The KAMINI test reactor is used to test the use of U-233 produced by the Kalpakkam experimental breeder. A Generation 3+ Thorium fuel cycle Advanced Heavy Water Reactor is also in the planning stage. India plans, by 2020, to have reactors capable of generating 20 GWs of power, most of it using thorium fuel cycle nuclear fuel. Bu 2050, India plans to produce 30% of its electricity from thorium fuel cycle nuclear generating facilities. The Indians believe that their thorium reserve will last them for at least 350 years.

    They have found a way to highly efficient technology, a technology that is far more efficient in its use of nuclear fuel, than the French/American nuclear system by ingeniously mastering and organizing relatively old nuclear technologies, and leveraging them into a fuel efficient system. By doing so they will achieve EROIE's many times that achieved by Western fuel/reactor systems.

    IIRC, Indian heavy water reactors were derived from a CANDU model developed in the 1960's.

    I expect that most of the real breakthrough technologies in the 21st century will come from the big Asian countries. They have the need, the brains, and now they have the money to do this.

    Most importantly, they lack the century of legacy infrastructure that impedes western economies from changing.

    Thanks! I see the author of the blog is Charles Barton, who wrote the thorium part of an Oil Drum nuclear post in April 2008.

    It was bad enough reading it the first time.

    Hello TODers,

    As you hug your bag of NPK today, here are some more thoughts on I/O-NPK, SCT's Ammonia Infrastructure, and our national security as we head towards an eventual natgas cliff:

    Using this January 2008 USGS data [PDF Warning]:

    The United States was one of the world’s leading producers and consumers of ammonia...Approximately 90% of apparent domestic ammonia consumption was for fertilizer use, including anhydrous ammonia for direct application, urea, ammonium nitrates, ammonium phosphates, and other nitrogen compounds. Ammonia also was used to produce plastics, synthetic fibers and resins, explosives, and numerous other chemical compounds.

    2007 Net import reliance as a percentage of apparent consumption: 44%

    Import Sources (2003-06): Trinidad and Tobago, 55%; Canada, 16%; Russia, 12%; Ukraine, 9%; and other, 8%.

    Trinidad and Tobago 2007 production 5.2 million tons
    Recall that we have closed many US ammonia plants as natgas prices increased, thus our increasing import reliance.

    [Please see the two charts in this weblink]

    US domestic natgas in 2007 was 19,268 billion cubic feet.
    Trinidad's LNG exports to US 451 billion cubic feet, approx. 2% of total U.S. natural gas supply.
    PDF Warning again for the next 19-page USDA link:

    Impact of Rising Natural Gas Prices on U.S. Ammonia Supply

    ..A substantial increase in U.S. imports of ammonia would likely come from the Republic of Trinidad and Tobago because of the country’s relatively low natural gas prices and geographic proximity to the United States...Trinidad and Tobago has 19 trillion cubic feet
    of natural gas proven reserves, which could supply ammonia for 20 more
    years (Kamara).

    Approximately 33 million British thermal units (mm Btu) of natural gas are needed to produce 1 ton of ammonia.
    19 trillion is 19,000 billion. Thus, the US domestically burns a Trinidad/year! If we had 'magic' and extracted ALL of Trinidad's natgas as LNG and ammonia in one year: where would we get the LNG & ammonia for the Next Year?

    My SWAG is that as global pop. grows: the price of LNG and ammonia will continue to rise, but O-NPK recycling can help mitigate this trend. Natgas for home heat, and growing and cooking food will be much more important than using natgas for processing oilshale or tarsands. Recall that a potato has the same energy content as an equivalently sized shale rock.

    I hope Obama & his Cabinet is aware of this developing problem and is seriously considering SCT's ammonia infrastructure ideas. Failing the funding for a national ammonia infrastructure: IMO, the next best way to extend coal, natgas & ammonia flowrates is for us to learn to sit in the nightly darkness, and go to full-on O-NPK recycling w/ SpiderWebRiding when the sun is shining for Optimal Overshoot Decline.

    Obama's daughters will only be middle-aged 20-30 years from now. Same with Tiger Woods' children: the sooner he starts plowing golf courses, the better off his kids will be. Nobody should desire to dance in a machete' moshpit, but it sure seems like that is the Thermo/Gene direction we are headed.

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


    Thanks for all your posts on NPK. Although you post daily I don't think I am putting all the pieces together. Have you thought about doing a longer feature where you combine all your thoughts on where we are going and what problems and roadblocks you see ahead of us? I think it would be useful.

    Hello Ravencroft,

    Google is your friend. I work hard at brevity so my posts don't get deleted--some of my postings take 3+ hours. :(

    I work hard at brevity so my posts don't get deleted--some of my postings take 3+ hours. :(

    My good totoneila,

    This is why you really ought to consider getting your own blog or simple website, where you can have everything archived with permalinks that you can send folks to. It's really not that hard at all, and it would be a crying shame for any of your wonderful and important contributions to fall through the digital cracks.

    But don't take that to mean you should stop posting here!

    Happy New Year! I hope...

    Exactly. Just the "key words" feature that you can use in a blog would work wonders. That would make it so much easier for people to find earlier posts on the same subject.

    SuperG doesn't allow me to use key words on DrumBeat posts. He points out, rightly, that they just clutter up the search results, since the range of topics is so wide in the DrumBeats.

    Google doesn't work very well on blog comments.

    You should post your work to your own blog if you want people to be able to find it.

    Although I think that in most cases it should be a felony to start a new blog, I agree with Leanan in this case.

    Although I think that in most cases it should be a felony to start a new blog

    I have to ask...why?

    Ironic that you should respond to that statement.

    Why because I think all sides have a right to their own opinions?

    BTW is this not a blog? http://graphoilogy.blogspot.com/

    It was a joke, with a point. Perhaps his best move is to sign on as a contributor to an existing blog, perhaps something like Sharon's blog.

    You can't just sign on as a contributor to someone else's blog. You generally have to be invited, and the way you get invited to have a blog of your own that showcases your work.

    EB recently posted a link to this guide to blogging. It points out that you have to be patient; it will take at least a year to build an audience.

    Even if you never get a huge audience, a blog can be worthwhile just to keep track of your own ideas, build your writing skills, and serve as a backup for things you post elsewhere.

    That's how I use my blog. I am not really expecting a lot of visitors. But I post things there that I want to be able to find later. The Internet is ephemeral. That great article you think everyone should read may be gone tomorrow. Even TOD may not be around forever.

    I started mine simply to share my thoughts on The Perfect Storm with family and friends. Ironically, of the repeat visitors I get, I don't think any of them are family and friends! (Since I don't post much these days, there aren't many visitors at all! Even my repeats seem to have given up on me. Ya gotta feed the beast...)


    Yes, that's true. Matt Savinar said that he found three updates a week to be the "sweet spot." More than that didn't increase traffic appreciably, but was a lot more work.

    But I'm not that concerned about building an audience. I just like to be able to link to previous things I've written, without spending hours searching. It might be different if we had a better way of searching comments, but we don't. Just Google web search, which really wasn't designed for blog comments.

    re: ditch your car. The Google Transit site would be great if it also included AMTRAK and AMTRAK bus, the only options in my semirural area. But these sites are online, and it is nice to be able to look at all of the local systems. Last year, I was trying to get to the San Francisco airport and leave my car at home to avoid the huge parking fees, but gave up and ended up driving.

    In 2008, 6 Years of Market Gains Are Lost

    ...All told, about $7 trillion of shareholders’ wealth — the gains of the last six years — will be wiped out in a year marked by violent market swings...

    ...Losses in the credit markets, which are at the heart of this financial crisis, appear small relative to the devastation in other markets. The International Monetary Fund estimated in October that banks and other investors would suffer $1.4 trillion in losses on loans and securities, a loss of just 6 percent. Financial institutions globally have already reported $1 trillion in write-downs, according to Bloomberg.

    The I.M.F.’s estimate, however, does not count losses on derivatives, those complex instruments that derive their value from other assets. Losses on these instruments could outstrip those in the so-called cash markets because they are much bigger than their underlying assets (emphasis added)...


    Tierney is really angling for the Julian Simon title. Well I suppose we can always take bets whether Tierney eventually rots in hell where Simon currently resides.

    Auto dealers offer cash back, low rates, 2-for-1 sales

    Peterson Super Center in Boise, for instance, has a "two-for-the-price-of-one" sale this week: Buy a full-size Cadillac or Chevy SUV or Chevy diesel pickup at full price and get a free 2009 Chevy Cobalt sedan. Interest in the deal has been "really good," ad director Sharon Potter says.

    About the slump in oil prices, this post from daily kos relates it to US legislation - the “Enron loophole” and its closing in June 08 care of, amongst others, Senator Levin.

    It is a bit of slog to read, not terribly clear, but has links, etc.

    No personal comments, I don’t know enough about the ins and outs.

    However, as many associated the rise in oil prices to speculation in commodities, contra to supply/demand issues, one might also wonder what exactly caused the speculation.... I don’t recall this being mentioned at the time on TOD, maybe it was. Even if so, hindsight might be of interest.

    story, daily kos

    Hello TODers,

    [5-page PDF Warning]:


    During the month, production of recovered elemental sulfur
    was 771,000 metric tons (t), according to the U.S. Geological
    Survey. Production was 29% higher than that of September
    2008 and 9% higher than that of October 2007. Shipments were
    777,000 t, 34% higher than those of September 2008.

    Production and shipments increased significantly because
    petroleum refineries in the Gulf Coast region recovered from
    shutdowns forced by hurricanes in September.

    U.S. sulfur consumption, calculated as shipments minus exports plus imports, was 954,000 t in October 2008. This was 17% higher than that of September 2008 and 13% higher than that of October 2007.

    ..Global and domestic sulfur prices have begun to decline
    although the average unit value of imported sulfur in October
    was $329 per ton, slightly higher than that of September 2008.
    This was still seven times what it was in October 2007.
    Sorry, but I cannot afford the latest proprietary $ulfur market reports-->so please fumble along with me and this older data...

    I still expect the price to decline, but it appears demand is still quite strong compared to crude oil's decline. Of course, any flowrate decline in sour crude and/or sour gas processing helps to keep recovered sulfur pricing up. $329 divided by 7.333 barrels/ton = $44.87/barrel, so there is still a nice additional porportional offset profit by processing sour FFs vs processing sweet FFs. Recall that Leanan and others have posted weblinks on how the sweet vs sour gap is narrowing.

    [56-page PDF Warning]:


    H2S must be removed from natural gas because of its extreme toxicity. It also causes corrosion problems; are minor when compared to the hazards of breathing even very low concentrations of H2S. At natural gas processing facilities, the first step in recovery of sulfur is the separation of H2S from the rest of the natural gas stream. The natural gas containing H2S—know as sour gas—is passed through a solvent in which the H2S dissolves and the desirable portions of the natural gas are insoluble. The solvent is then heated, and the H2S is expelled from the solution (Fischer, 1984, p. 33-35). The most common solvents used are amines, which are organic derivatives of ammonia (Schmerling, 1981, p. 71).

    For those TODers upgrading their home's wall thickness & insulation: Please be careful and do not use cheap Chinese gypsum wallboard as they are not adequately removing the sulfur from the phosphate benefication process; the excess gypsum is contaminated and making people VERY SICK and/or WRECKING A/C units;


    IMO, this toxicity is not much worse than the melamine disaster in baby formula and other foods.

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

    Kind of makes you wonder about China's quality control regarding vitamins and pharmaceuticals. An article from 2007:


    SHIJIAZHUANG, China — If you pop a vitamin C tablet in your mouth, it's a good bet it came from China. Indeed, many of the world's vitamins are now made in China.

    In less than a decade, China has captured 90 percent of the U.S. market for vitamin C, driving almost everyone else out of business.

    Chinese pharmaceutical companies also have taken over much of the world market in the production of antibiotics, analgesics, enzymes and primary amino acids. According to an industry group, China makes 70 percent of the world's penicillin, 50 percent of its aspirin and 35 percent of its acetaminophen (often sold under the brand name Tylenol), as well as the bulk of vitamins A, B12, C and E.

    Denninger has posted his 2009 predictions.

    Deflation, not inflation, will become evident well beyond housing. Other capital goods beyond housing will see real price declines for the first time since the 1930s. Debt is inherently deflationary; the "hyperinflationists" will once again be shown to be wrong (how many years running will it be now?)

    Tell that Einstein,Debt is only deflationary an the individual level, not at the govt level where these guys have no restraint in spending. We have just 1 case of deflation and 98 cases of hyperinflation since 1930's in the world. Oh yes the odds looked stacked against us.

    His prediction is for '09, not eternity, Sherlock.



    Although inflation is historically the failure mode, we are undeniably in massive hyperdeflation - houses dropping >10% a year, oil and most commodities down dramtically, stock markets down ~30%, huge discounts in the shops etc. etc. Much of the wealth we thought we had was, in reality, mostly an illusion.

    You only really notice/experience the inflation or deflation when you buy or sell something ... especially something big like your house or your pension fund ... daily expenditures on things like food that is measured in Government inflation statistics are, for most people, inconsequential in comparison.

    The Government injections of money are only inflationary if they are actually spent by the recipients ... at the moment mostly they are not being spent, they are just replacing money thet has vanished just as magically as it was created or, if they are spent, clearly the amounts are completely inadequate.

    Government injections are not intended to be inflationary-they have been intended to transfer wealth from the overall economy to the financial sector (secondarily some other sectors have lined up). How about a refund of all personal income taxes paid in 2008 and zero personal income tax for 2009? The bill is about 2.5 trillion dollars-are you saying this wouldn't stimulate demand and juice the economy temporarily? Of course it would, which is why a massive income tax cut has never been on the agenda. What the USA will get is 2.5 trillion of extra pork barrel, a la the taxpayer paying $500 for the equvalent of a hammer or screwdriver. Different puppets, same show.

    BBC news is reporting that Gasprom of Russia has cut off supply of natural gas to Ukraine.


    Gasprom is promising not to inturrupt supplies to Western European nations and for now Ukraine is saying they will not inturrupt or interfere with this transited gas.