DrumBeat: January 21, 2009

Texas oil country sees the downturn coming

MIDLAND, Texas (AP) -- In the West Texas oil patch, they can see the downturn coming at them from miles away like a pickup truck kicking up a dust cloud on the horizon.

With crude dropping below $40 a barrel from a high of around $150 over the summer, oil and gas companies in the Lone Star State are cutting back on drilling, the layoffs are beginning, and the boom of the past few years appears to be drawing to a close.

The boom may not necessarily give way to a bust. But the days of plentiful jobs, big paychecks and shiny new pickups and SUVS seem to be numbered.

"It's been a good ride up, but we're bracing ourselves for the ride down," said Midland City Manager Courtney Sharp, who expects a drop in tax revenue next month because of slumping sales in the city of about 98,000.

The perils of plunging oil prices

The soaring price of oil punished airlines through the first half of 2008. Now we're seeing how they got pounded again on the barrel's way back down. UAL, parent of United Airlines, reported on Wednesday a $1.3 billion loss for the fourth quarter. While a drop in passengers accounts for some of the decline, the company's cash losses and write-downs on fuel hedges added up to a staggering $936 million, a classic case of the cure causing more harm than the disease.

Antarctica is warming, not cooling: study

ROTHERA BASE, Antarctica (Reuters) – Antarctica is getting warmer rather than cooling as widely believed, according to a study that fits the icy continent into a trend of global warming.

A review by U.S. scientists of satellite and weather records for Antarctica, which contains 90 percent of the world's ice and would raise world sea levels if it thaws, showed that freezing temperatures had risen by about 0.5 Celsius (0.8 Fahrenheit) since the 1950s.

"The thing you hear all the time is that Antarctica is cooling and that's not the case," said Eric Steig of the University of Washington in Seattle, lead author of the study in Thursday's edition of the journal Nature.

Gap Oil

It is Gap Oil not Peak Oil that is the problem. Rising demand for oil will exceed the quantity of it that can be withdrawn from the earth, resulting in a supply-demand gap. Once production does peak the gap will be enlarged from both sides, drawing down the supply side against rising demand. This I suggest should be termed "Gap Oil". Energy efficiency and a reduction in our demand for oil is paramount and a growing dependence on what can be grown, to create a sustainable "bioeconomy".

You heard it here first: GAP OIL. I am coining this term since I haven't seen it used before but it succinctly sums-up the prevailing situation regarding the provision and price of oil. We hear much about peak oil, and often this is misunderstood to mean that the world will imminently run out of oil. However, this is neither the case nor the definition of peak oil. Dr Richard Pike, the CEO of the Royal Society of Chemistry and a former oil-man, has made convincing arguments that there is more oil - about twice as much - to be recovered than the 1.2 trillion barrels worth that is generally accepted. That may well be true, but it does not impact on the rate of recovery of oil per se, which is the crux of the issue.

Mexican crude production down 9.2 percent in 2008

MEXICO CITY (AP) -- Mexico's state-run oil monopoly said Wednesday its 2008 crude production was down 9.2 percent from 2007.

Petroleos Mexicanos, or Pemex, blamed bad weather and declining reserves at its biggest oil field, Cantarell.

Pemex produced 2.79 million barrels of crude a day in 2008, down from 3.08 million barrels daily in 2007. Exports dropped 16.8 percent to 1.4 million barrels a day.

Pemex said production at Cantarell fell 461,000 barrels a day in 2008, to close out the year at 1.01 million barrels daily. But production rose to 702,000 barrels a day, from 513,000 daily in 2007, at the second-largest field, Ku-Maloob-Zaap.

Williams Discovery Mainline Restored After Hurricane

(Bloomberg) -- Williams Partners LP said the 30-inch mainline of its Discovery offshore gas-gathering system in the Gulf of Mexico returned to service after repairs for damage sustained from Hurricane Ike last year.

The mainline is now delivering 150 million cubic feet of gas per day, its approximate volume prior to the hurricane, the Tulsa, Oklahoma-based partnership said today in a statement.

Petrobras Says It May Build Refinery Without PDVSA

(Bloomberg) -- Petroleo Brasileiro SA, Brazil´s state-owned oil company, said it may build a planned oil refinery in northeast Brazil on its own if it fails to agree on a fuel-supply contract with partner Petroleos de Venezuela SA.

PDVSA, as the Venezuelan oil producer is known, wants above-market prices for heavy crude to supply the Abreu e Lima refinery near Recife, Paulo Roberto da Costa, head of refining at Petrobras, told reporters today in Sao Goncalo, Brazil.

“Petrobras very much wants to build the refinery with PDVSA,” he said at the event in Rio de Janeiro state. “But it will build it on its own if it has to.”

The cost of the biofuel boom on Indonesia's forests

The clearing of Indonesia's rainforest for palm oil plantations is having profound effects – threatening endangered species, upending the lives of indigenous people, and releasing massive amounts of carbon dioxide.

Automakers aim for green nirvana in Detroit

Up until now, most hybrid-electric cars have been built with fuel economy, not comfort or prestige, in mind. That means thin soundproofing and tinny stereo speakers, and probably no multi-adjustable leather seats or cushy ride.

But Cadillac, Lincoln, Lexus and others are planning luxury green models that will offer great gas mileage without asking the driver to wear an automotive hair shirt.

ASPO Newsletter - January 2009 (PDF)

1100. Imaginative Data Reporting
1101. U.S. Election.
1102. Non-Conventional Oil and Gas
1103. Major Oil Company Production
1104. A Prestigious Peak Oil Taskforce
1105. Iraq re-visited
1106. The Energy Challenge facing the United States

World food crisis will be 'survival of the fittest'

A looming world food crisis, caused by climate change and economic growth in emerging nations, will come down to 'survival of the fittest', according to the Working Party chairman of a new report published today by the Royal Society of Chemistry and the Institution of Chemical Engineers.

'The Vital Ingredient – chemical science and engineering for sustainable food' says changing weather patterns, crops being used for fuel rather than food, and emerging Chinese and Indian middle classes will all contribute to a breakdown in the global food supply chain.

The report describes meeting energy and food demand despite declining fossil fuel resources - without permanently damaging the environment - as the greatest technological challenge facing humanity.

Peak Moment: The Twilight of an Age (video)

In his book, The Long Descent, John Michael Greer observes that our culture has two primary stories: “Infinite Progress” or “Catastrophe”. On the contrary, he sees history as cyclic: civilizations rise and fall. Like others, ours is exhausting its resource base. Cheap energy is over. Decline is here, but the descent will be a long one. It’s too late to maintain the status quo by swapping energy sources. How to deal with this predicament? He lays out practical ideas, possibilities, and potentials, including reconnecting with natural and human capacities pushed aside by industrial life.

Ecuador sees no benefit in another OPEC cut

QUITO (Reuters) - Ecuador sees no benefit in OPEC slashing oil output again at its next meeting if world prices do not start to recover, Oil Minister Derlis Palacios said Wednesday.

Palacios said his country, which is a marginal producer of around 500,000 barrels per day, would lose money if it agrees to cut output again with prices at current levels.

Cheap oil: a poisoned gift

We can expect renewed shortages of oil and price hikes way beyond $150 a barrel very soon, and this will have economic, political and geopolitical implications beyond what many expect. This could forewarn of a new world (dis)order, with the “rise of the rest”, as we see the world move into post-globalization, post-AngloSaxon fragmentation – what the late Samuel Huntington and others have called “civilization clash”, when international rivalries are exacerbated by power blocs, jockeying for advantage, to ensure the secure supply of oil at the best possible price.

GM loses sales title to Toyota

NEW YORK (CNNMoney.com) -- General Motors lost the title of world's largest automaker to rival Toyota Motor in 2008, according to sales figures released Wednesday by the troubled U.S. automaker. It was the first time in nearly 80 years that GM did not sell the most cars in the world.

World oil demand shrinks

LONDON/NEW YORK (Reuters) - Global oil demand is seen contracting more sharply this year than previously expected, as the deepening economic crisis spreads to the developing world.

World oil demand will decline by 430,000 barrels per day in 2009 to 85.43 million bpd, according to a Reuters poll of 10 analysts, banks and industry groups.

The large predicted fall is a significant shift from a Reuters poll in November, which forecast demand would slip by 20,000 bpd in 2009, following a similar decline in 2008.

"Demand growth in emerging nations almost offset the demand contraction in the developed world in 2008, but with demand growth now expected to almost halve in 2009 in the developing world, that is no longer the case," said Francisco Blanch, head of commodities research at Merrill Lynch.

The Audacity of Hope, I hope.

President Obama asked us to choose hope over fear but at least on the day of his inauguration, the market chose fear over hope. Wide spread fears were played out all over the market place as the UK bailed out some banks reminding us that this crisis is not quite over.

Oil fell hard in the back end of the curve and gold soared and treasuries fell as traders feared another global meltdown and seemed to be preparing for the worst instead of the best. Platitudes and finger pointing did not inspire the type of confidence that the market wanted to hear.

Do WTI Oil Prices Reflect Underlying Market Conditions?

The volume of oil stored in tankers has climbed to 80 million barrels, based on 40 VLCCs each holding roughly two million barrels of oil. According to Frontline (FRO-NYSE), the world’s largest operator of VLCCs, the current rate to charter these tankers is about $75,000 a day. That translates into about $1.12 a barrel per month for storage. As long as a buyer of crude oil can cover this cost for storing the oil, he will engage in these time-spread trades. The contango condition (future crude oil prices being substantially higher than current prices) that exists in the crude oil market today as it relates to West Texas Intermediate (WTI) oil has begun to raise questions of whether the price for this crude actually reflects the oil market's underlying fundamentals, or rather is a victim of a regional market imbalance between supply and demand.

Join Wendell Berry and Bill McKibben in Civil Disobedience Against Coal-Fired Power Plants

There are moments in a nation's -- and a planet's -- history when it may be necessary for some to break the law in order to bear witness to an evil, bring it to wider attention, and push for its correction. We think such a time has arrived, and we are writing to say that we hope some of you will join us in Washington D.C. on Monday March 2 in order to take part in a civil act of civil disobedience outside a coal-fired power plant near Capitol Hill.

Coal Will Still Be King

Assuming that CCS turns out to work, it will take decades to deploy in new coal-fired plants and to retrofit old generation facilities. In addition, moving carbon dioxide around from power plants to locations where it can be stored geologically will require constructing a pipeline infrastructure that rivals the hundreds of thousands of miles of gas and oil pipelines. While there might be a moratorium on new coal-fired plants in the U.S., the rest of the world will not be joining it. The International Energy Agency's World Energy Outlook 2008 projects that fossil fuels will still account for 80 percent of the world's primary energy production in 2030. Nearly 90 percent of the increase in world electricity demand will be driven by the economic growth of developing countries, especially that of China and India. In other words, coal will still be fueling civilization for the next couple of generations.

In Canada, a Push for Obama-style Green Stimulus

The proposal for a Green Economy Action Fund is backed by unions, environmental organizations and other Canadian civil society groups with a combined membership of over 850,000 people.

The plan calls for $22.7 billion in federal investments and $18.6 billion in low-interest loans to stimulate the green economy and catalyze provincial action. Dollars would flow to retrofit buildings, ramp up renewable energy, expand public transit and support clean-tech manufacturing.

The risks of Plan B

The dynamic is this: An energy transition from Bush’s Plan A to Obama’s Plan B is likely to be felt as a major and decisive shift in U.S. national consciousness, as well as in policy detail. This shift of plans may be as wrenching and controversial a change in national character as has been achieved since the gradual awakenings of the civil rights era. It should be no surprise that a shift of this magnitude would contain some risk of failure, and the possibility that Plan B might fail therefore merits open and serious discussion. We should be talking about whether Plan B is really a risk worth taking – and even if so, whether some investment should simultaneously be made in the low-risk, high-reward Plan C.

Big Oil Races to Become Big Clean

The realization that diversification of energy is in everyone's interest has shifted perceptions and the big oil companies, the likes of BP and Shell, have taken the lead in alternative energy.

Astrophysicist Neil deGrasse Tyson

With this new administration, is there a sense in the scientific community that there is at least an attitudinal change coming to Washington with regard to science?

What's driving attitudinal change is the fact that we need solutions to our energy crisis and we need them fast. You can't get those solutions from politics. You have to get them from scientists and engineers. So the value of science to the nation, I think, is currently being driven by our economic needs. But what people need to keep sight of is that the bigger value of science and technology to a nation is so that you can thrive as a nation going forward, so that you can thrive five years out, ten years out, twenty years out. And investments in research and development today pay dividends on those time scales, not on the time scales of the re-election of politicians. Someone has to have foresight beyond their own election cycle.

Oil Addiction: Don’t Count on Mexico to Supplant Mid-East Crude

Whether the calls for reducing America’s oil dependence on the Middle East that played such a big part in Barack Obama’s campaign will find a home in today’s inaugural address is an open question. But one thing is increasingly clear: America won’t be able to count much on Mexico, still its third-biggest supplier, to help it wean off Persian Gulf oil.

Mexico sees refinery costing up to $10 bln

MEXICO CITY (Reuters) - A planned new oil refinery in Mexico could cost up to $10 billion, the head of the state oil company Pemex said on Tuesday.

Gaza Aftermath May Impact Israel Oil Pipe Development

Israel's offensive in Gaza will certainly have an effect on the country's status as an energy corridor, experts say. But whether it will be positive or negative depends on Israel's ability to prevent further attacks from Gaza and the country's battered relationship with Turkey.

A little-known 254-kilometer Israeli pipeline, from the Mediterranean port of Ashkelon to the Red Sea port of Eilat, could rival the Suez Canal as an oil shipment route between former Soviet Union producers and Asian consumers.

China to seek 60,000-90,000T Feb naphtha on shortage

SINGAPORE - China, normally a net naphtha exporter, has emerged to seek spot cargoes for February delivery to fill a shortfall in domestic production, regional traders said on Tuesday.

Traders estimated that the country could need about 60,000-90,000 tonnes of the petrochemical feedstock to plug the shortfall, as its top refiners cut runs to their lowest in about 2-½ years due to slow overall fuel demand.

CNOOC Cites Strong Production Growth, Anticipates Busy Schedule in '09

CNOOC has announced its business strategy and development plan for year 2009.

The total targeted net production of the Company in 2009 is 225-231 million barrels of oil equivalent (BOE) (with WTI at US $60.0/barrel), compared with the estimated net production of 194-196 million BOE (with WTI at US $100.1/barrel) for 2008.

During the year, ten new projects are expected to come on stream, eight of which are located in offshore China. In overseas, OML130 in Nigeria and Tangguh LNG project in Indonesia will start production this year. These new projects are major contributors to the production growth in 2009.

The Philippines: The coming perfect storm

According to Energy Secretary Angelo Reyes and the big oil companies, there is no hoarding of liquefied petroleum gas, the most common cooking fuel in the Philippines that is also fast becoming an alternative fuel for thousands of taxicabs all over the country. There’s just none that can be bought anywhere.

The oil companies have long been predicting price increases for LPG, and now we have a full-blown shortage in our hands even if petroleum prices remain depressed the world over. But, Reyes and the Big Three say, there’s really no evidence of hoarding.

Who do they think they’re fooling?

Indonesia: Gas stations dry up due to supply reroute

A number of gas stations in Jakarta reported they were out of Premium gasoline Tuesday despite the state-owned oil company claiming supply to the city would not be threatened by the massive explosion at one of its Premium gas tanks at its Plumpang depot in North Jakarta on Sunday.

Alaska: Rural energy crisis isn't a surprise

The increased attention the residents of Emmonak are receiving is long overdue. The crisis isn't, however, a surprise to the governor or anyone in the Alaska Legislature.

Recent press reports fail to note that Alaska's rural fuel cost crisis was a loud topic of debate during the August special session, when the governor and other policymakers were told fuel costs were going to reach and exceed $9/gallon in some villages. The following summary is being provided to give those reporting on this issue some context on this issue, and the efforts many made to prevent the problems faced by residents in Alaska's small communities like Emmonak.

Era of cheap oil is over

"We will work our way through these financial problems, but what would be really unfortunate is that once things bounce back, oil prices will bounce back too," said Matt Simmons, chairman of Simmons & Company International, at a roundtable held in mid-December. He says that supply shortages could help oil prices soar through $147 as unhindered as a hot knife cuts through butter.

..."Oilfields aren't like emptying a bucket or taking boxes out of inventory," says Robert Hirsch, a senior energy adviser at Management Information Services, speaking at the same roundtable as Simmons. "You can't keep pulling oil out of the ground at the rate that you did in the past because of the basic geological processes."

In the midst of a global recession, much of the explanation for falling prices has focused on the supposed collapse in demand for oil, particularly from Asia's rising economic powerhouses, but talk of China's falling oil imports is misleading. It is only growth that is falling – from 28% in October to 17% in November.

According to Simmons, the story of supply destruction is a more immediate problem. "We're unwinding supply right now just as fast as we've ever done and it's like a bulldog chewing on somebody's behind," he says.

Oil around $41 amid grim economic news

VIENNA, Austria (AP) -- Dismal global economic news pointing to deteriorating energy demand kept oil prices in check Wednesday, with crude oscillating around $41 a barrel.

The market continued to focus on bad news from the banking sector, with investors concerned that a deepening global slowdown will further undermine demand for crude. But indications that OPEC was showing unusual discipline in taking extra barrels off the market gave prices some lift.

Japan’s Power Sales Drop Most Since 1972 on Recession

(Bloomberg) -- Japan’s industrial power sales fell the most in more than three decades, plummeting 13 percent in December from a year earlier, as automakers such as Toyota Motor Co. and steel companies shut plants and scale back output.

The drop was the biggest since May 1972, when the Federation of Power Companies of Japan started compiling data, the group said in a statement today. Sales to steel companies declined 25 percent last month, exceeding the previous record in February 1981, and sales to machinery manufacturers sank 18 percent.

Russia gas heads to Europe after Ukraine dispute ends

MOSCOW (AFP) – Russia started pumping natural gas to Europe after ending an energy war with Ukraine that left millions in deprived of winter heating.

"We can now tell our citizens that gas is finally on its way," European Commission president Jose Manuel Barroso said after the taps were turned on again. "Our monitors on the ground report that the gas is flowing normally."

Can Ukraine leverage gas deal with Russia?

After weeks of tense negotiations that involved the European Union, Kiev reached a compromise with Moscow over how much Ukraine would pay for its gas imports and how much Russia would pay for sending gas across Ukraine's transit pipeline network to Europe. Those parts of the deal made the news.

What is not so well known is that their agreement also involved RosUkrEnergo, a Russian-Ukrainian energy trading company that has played a considerable role in thwarting Tymoshenko's efforts to push through economic reforms.

Kazakhstan bumps up gas transit price

Kazakhstan has raised transit fees for Uzbek and Turkmen gas being piped to Russia by 21%, Energy Minister Sauat Mynbayev said today.

Iran: OPEC needs non-OPEC help to steady oil market

TEHRAN: Iran's oil minister said demand for oil had declined more than supply and cooperation between producers inside and outside OPEC was needed to reach market balance, an official news agency said on Wednesday.

3 oil firms compete for Iraq oil field

BAGDHAD (AP) -- The Iraqi Oil Ministry is studying offers submitted by three international oil companies to develop a prized oil field in southern Iraq, an official said Wednesday.

Ministry spokesman Assem Jihad said Italy's Eni SpA, Spain's Repsol and Japan's Nippon Oil submitted bids for a service contract to develop Nasiriyah oil field.

Oil tanker attacked off Nigeria

Unidentified armed men have abducted a Romanian crew member after an attack on an oil tanker off Nigeria's southern coast, security sources say.

The MT Meredith, loaded with 4,000 tonnes of diesel, was badly damaged in the attack early on Wednesday.

Crime, not politics, drives Nigeria oil delta unrest

LAGOS (Reuters) - Kidnapping oil workers and blowing up pipelines may have focused attention on Nigeria's oil delta, but three years of militant attacks have locked the region into a spiral of crime which is hindering much-needed development.

New Nigeria oil firm to rival Petrobras, Saudi Aramco

ABUJA (Reuters) - The new head of Nigeria's state oil firm NNPC has pledged to press ahead with reforms that would break up the company into profit-driven units able to operate like counterparts in Brazil, Malaysia or Saudi Arabia.

Chevron reconsidering Indonesian deepwater venture

Chevron Corp., the second-largest U.S. oil company, will review a $7 billion project to extract natural gas in Indonesia’s first deep-sea drilling venture because of the global recession.

Chevron will consider the cost and schedule to develop the Ganal gas fields off the country’s part of Borneo, Suwito Anggoro, president director of the oil company’s Indonesian unit, said in an interview in Jakarta today.

Police departments look for more fuel-cutting cars

CAHOKIA, Ill. (AP) — Police Chief Richard Watson admits his department's newest patrol car is a curious departure from its big-horsepower Ford Crown Victorias. But the four-cylinder Pontiac Vibe GT has plenty of pep for policing, he said, and gets twice the gas mileage.

Law enforcement agencies across the country looking for ways to cut corners and reduce costs after last year's $4-a-gallon gas are increasingly turning to more fuel-efficient cars.

Clock is ticking for GM and Chrysler

NEW YORK (CNNMoney.com) -- General Motors and Chrysler LLC have four weeks to win deep concessions from unions and creditors to prove they are viable, or they risk losing the $17.4 billion in government loans that are keeping them from bankruptcy.

Blacks feel auto industry's pain; it was road to middle class

The financial crisis in the auto industry has been more devastating for African Americans than any other community, threatening a half-century's economic gains by the black middle class. From blacks who left behind subsistence jobs in the South for high-paying factory jobs in the North during the Great Migration, to entrepreneurs who translated hard work and the gift of selling into their own businesses — they're all getting hammered.

"One of the engines of the black middle class has been the auto sector," says John Schmitt, an economist who studies the issue at the Center for Economic and Policy Research, a liberal Washington think tank. In the late 1970s, "one of every 50 African Americans in the U.S. was working in the auto sector. These jobs were the best jobs. Particularly for African Americans who had migrated from the South, these were the culmination of a long upward trajectory of economic mobility."

Which company did best under Bush? Southwestern Energy

The runaway winner: Southwestern Energy, (SWN) the natural gas exploration and production company that had a compounded annual return of 48%, says Capital IQ. That's far better than Apple, up 31%, even though it dropped in the last days over concerns for the health of CEO Steve Jobs. Apple may have been the most regaled highflier of the Bush era. Google, (GOOG) which was not included because it first joined the S&P 500 in 2004, has had a 28% compounded return since.

New group prepares for high gas prices

There’s a group of Lawrence residents who definitely aren’t betting on cheap gasoline prices being around for long.

The city’s new Peak Oil Task Force met for the first time Tuesday with discussions of how the future may include the need for more food to be grown locally and more jobs to be closer to home because fuel prices will be at new highs.

Stand Up to Corporate Power: 5 Ways to Get Free

Making lifestyle choices that protect the environment, reduce global injustice, reflect social responsibility, and contribute to richer communities can also move us away from corporate control.

Customizing legend is bringing Batmobile panache to Prius

LOS ANGELES — He built the Clampetts' jalopy for The Beverly Hillbillies, TV's original Batmobile, the Monkeemobile and KITT, the chatty Trans Am in the first Knight Rider series.

Now auto-customizing legend George Barris, 83, says he's taking a bold voyage into the 21st century: He's trying to give dowdy hybrids like the Toyota Prius his distinctive, flamboyant touch.

Little cars get big electric boost

Regular Prius models, which sell for $22,000 to $28,000, get 40 to 45 miles a gallon depending on how aggressively they are driven - they switch to gas use when traveling above 35 mph.

When adding the A123/Hymotion 5-kilowatt-hour battery, a driver can expect 80 to 95 miles a gallon. Each battery operates on 50 percent to 70 percent of the charge, taking the driver about 40 miles using both gas and battery power. After a battery is spent, the engine switches to the car's 11 to 12 gallon gasoline tank. A driver can then plug the battery, which is estimated to last a decade, into a standard 120-volt wall outlet for charging.

Top 100 Stories of 2008 #1: The Post-Oil Era Begins

If biofuels aren’t the answer, what is? Surprisingly, the thing that replaces oil might not be a liquid fuel. It might not, strictly speaking, be a fuel at all. Nor is it some exotic source you have never heard of.

It is electricity. And it is already making its way into an auto dealership near you.

Sun 'could supply Gulf's day-time energy needs'

ABU DHABI (AFP) – Oil-rich Gulf Arab states enjoy year-round sunshine but they remain slow in adopting environmental technologies to let them harvest their abundant solar power, industrialists said Tuesday.

UK: New nuclear power plans

SCOTTISH & Southern Energy and Iberdrola – the Spanish owner of Scottish Power – are launching a joint bid to build new nuclear power stations in the UK.

Excerpts and Commentary on Ben McGrath’s “The Distopians” – Jan 26th, New Yorker

In a blog that he maintains, Club Orlov, he categorises his readers into three basic cultural categories;

1. “back-to-the-land types,” united in their opposition to industrial agriculture;

2. “peak oilers,” who worry about the shock effects on energy markets of reaching the maximum global crude-extraction rate; and all-around Cassandras, and

3. “people who sometimes derisively are called doomers.” (The doomers are currently enjoying a little less derision, which is a mixed blessing, because it is axiomatic among true believers that mainstream respect means that it is too late for anything to be done.)

Orlov has recently acquired a fourth audience, composed of financial professionals, who have been, as he said, “bolstering my gut feeling that the United States is bankrupt.” A number of them have placed orders for multiple copies of his book, and he took some pleasure in imagining them passing it on to their friends and families this past holiday season as a grim kind of stocking stuffer.

Ecology: The moment of truth—an introduction

It is impossible to exaggerate the environmental problem facing humanity in the twenty-first century. Nearly fifteen years ago one of us observed: “We have only four decades left in which to gain control over our major environmental problems if we are to avoid irreversible ecological decline.” Today, with a quarter-century still remaining in this projected time line, it appears to have been too optimistic. Available evidence now strongly suggests that under a regime of business as usual we could be facing an irrevocable “tipping point” with respect to climate change within a mere decade. Other crises such as species extinction (percentages of bird, mammal, and fish species “vulnerable or in immediate danger of extinction” are “now measured in double digits”); the rapid depletion of the oceans’ bounty; desertification; deforestation; air pollution; water shortages/pollution; soil degradation; the imminent peaking of world oil production (creating new geopolitical tensions); and a chronic world food crisis—all point to the fact that the planet as we know it and its ecosystems are stretched to the breaking point. The moment of truth for the earth and human civilization has arrived.

It's a new day and we're still at peak. What's the deal? I thought Obama would change our situation.


I spent all morning raking the $50's out of my yard it rained last night.


Obama will be busy all week un-screwing the anti-environment executive memos issues by former President George W. Bush in the 11th hour of his reign of stupidity.

I guess that's why the "Earth in Balance" crowd at the event yesterday was allowed to trash the National Mall.

GD Bush.


One thing a treehugger learns is the meaning of "wind chill" and how it feels to be out in the cold without walls to hide behind. Besides, a true treehugger wouldn't have wasted the gas to make the trip to the Mall...

E. Swanson

I used an electric train from Baltimore and shoe leather. And the down from several renewable birds, wool from renewable sheep, etc.



That would be burning coal and a dead cow for transport, and numerous dead birds for warmth (I'll grant you the sheep!)


I used Cable and a big dog on my lap to keep me warm.

Looks like you had lots of fun, tree hugger.


Apples and oranges (maybe)...but...I caught one comment on the radio from an inner city school nurse who said that this morning the big change she noticed was the number of boys at the bus stop ready to go to school. (She hadn't seen some of them for weeks.)

His time would be better spent undoing the Glass-Steagal mess and addressing the financial regulatory issues first, and then getting bank regulators ready for the flood of collapses that must follow.

I'm all for the environment, but the bulk of Obama's time needs to spent getting the US solvent again.

There's no solvency in a fucked up environment. Get your priorities straight.

My parents who live in the east bay area CA, just called to tell me they are rationing water in there area. Said it has been high 70s for weeks, often gets into mid 80s where they live.

Brother in Monterey bay CA rationing water, 70s, dry air, (thats just freaky)Surfs great he says.

Just saying...

Alberta has just initiated cutbacks on the water available to tar sands plants. This is a first and a bit of a suprise. Hopefully there are folks out that way who will post further details. Not sure about the surfing.

Suncor Says Reduced Water Has No Impact on Oil Sands Output

(Bloomberg) -- Suncor Energy Inc. said production from its Fort McMurray, Alberta, oil sands operation won’t be affected by a reduction in water from the Athabasca River.

“We withdraw 0.3 percent of Athabasca River’s annual flow so we don’t expect this to have impact on our production,” Shawn Davis, a Suncor spokeswoman, said in a telephone interview.

Boy, are you good. Fast too!!

Sorry about the BR's. Comes with the custardy trousers.

The surfing here is great at the moment...

Not gonna happen.

Executive orders where the 1st thing BO was a-signing. By 'tradition'.

Michael Economides says oil is going back to $100 and very soon. Oil Price Over $100, in a Blink

He says the average cost of new oil is $70, therefore without oil above that price there will not be enough investment in the oil patch to keep production up.

Today, I calculate the world break-even price at about $70. This is, of course, the average, meaning that in some places it is $30 and somewhere else may be over $90. The bottom line is this: Oil below $70 simply cannot generate new production in great swaths of oil places and some of them are huge, like Russia and Venezuela.

It is hard to be more bearish than Michael Economides but I am afraid I must be in this case, but while hedging my bets. I agree oil will go back to $100 but only if the economy recovers. And that, I believe, is simply not going to happen.

Oil production is falling like a rock. It is no coincidence that oil production peaked in the very same month that the price of oil peaked. With oil over $140 a barrel, everyone was squeezing every barrel out of every crevice they could find. But with oil below $50 a barrel, stripper wells are being shut down along with other marginal high cost production. New production is also being stifled. And it is all because of demand destruction.

Oil production, on average, stopped growing in 2005. I have argued that this, along with the very high cost of oil and other energy sources, was what drove us into this current recession. However I will not belabor the point. One can argue that the recession has other causes, like the sub-prime mortgage crisis, and they are partly correct. But I believe the combination of energy production peak and high price was very large contributing factor.

But my primary point is that our debt based economy requires growth and growth cannot return until growth in the energy supply returns. That is not going to happen. Oil production would have peaked in 2005 were it not for the price climbing well above $100. And even with oil above $140 a barrel, production only barely inched above the 2005 peak.

Bottom line, low oil production is trying to drive the price of oil back up while the deep recession is trying to drive it right back down. Which will win the battle? I am betting on the latter.

Ron Patterson

Economides has always been an odd duck--a Peak Oil opponent, but an oil price bull.

In any case, consider the fact that all of the money spent by the industry worldwide in the past three years basically kept crude production flat, and on a cumulative basis--what we would have produced at the 5/05 rate, versus what was actually produced--we have a sizable shortfall. So what happens as drilling falls off and as unconventional projects are delayed or canceled?

And then there is the net export story. We will have to see how it all plays out, but the eight year crash in Indonesian net exports all happened at prices below the current US oil price (an average of $21, within an annual range from $14 to $31, as Indonesian net exports crashed).

Even if it were possible to jump start the economy, I don't think that we would have the volume of world oil exports necessary to power a recovery.

Interesting. I support the idea there will not be a recovery to the previous economic modes of operation. (Hopefully something else will grow out of this misery)

But I have a question on net exports. With the oilprice now crashed, does't that mean consumption in producing countries is/will also decline?

With the oilprice now crashed, does't that mean consumption in producing countries is/will also decline?

The Baltic dry has flatlined.

The Ukraine just became part of the Russian Commonwealth.

Portugal, Ireland, Greece, Slovakia, the Baltic triumvirate
of Latvia, Lithuania, Estonia.

Which will be the first to Sovereign default.

Will riots consume them before or after.

mc, I just potulated this question in light of ELM theory, and I don't see how your reply answers this.

But the interesting times have arrived, that's for sure.

mc, I just potulated this question in light of ELM theory, and I don't see how your reply answers this.

So let me try again.

Oil is being pumped out as fast as possible now.

But world trade is grinding to a halt.

World wide depression will crush oil consumption
back to (fill in the blank).

What ever consumption turns out to be, sovereign collapse
will over ride. Example: If the US collapses back to
1960 rates of consumption, the ELM has to be re calibrated.

Oil exporters will for a short time longer, look to
put out everything possible to fend off collapse.

People are just not realizing how rapidly cars will
give way to trains in the US. This time next year
in a SWAG, we'll be using 3 mbd less.


World wide depression will crush oil consumption
back to (fill in the blank).

As I said, we will have to see how it all plays out, but looking at a chart of world oil production (and thus consumption) in the Thirties, worldwide it looks like we only saw a one year decline in consumption, in 1930, with consumption in the late Thirties being above the 1929 rate. Also, as Downsouth has pointed out, there were three million more cars on the road in 1937 in the US, than in 1929. Regarding cars, big difference now is that hundreds of millions of consumers worldwide want to drive a car for the first time, versus mere millions in 1929.

Regarding US consumption, the last four week running average of total product supplied was down by about 500,000 bpd over a comparable time period in 2007, while the EIA estimates that US crude production fell by about 350,000 bpd over the same time period. In order to show a long term reduction in net imports, the US first has to cut consumption enough to offset the decline in domestic production. This is true of all post-peak net oil importing countries.

Thsnk you for your reply, WT.

I thoughtfully read each of your postings.

"in the Thirties, worldwide it looks like we only saw a one year decline in consumption, in 1930, with consumption in the late Thirties being above the 1929 rate."

But oil was almost floating out of the ground then and the pop
was what 75 million?

Now we're at 300 million, floating in debt, working a paradigm
that must be hitting on all cylinders.

"Regarding cars, big difference now is that hundreds of millions of consumers worldwide want to drive a car for the first time, versus mere millions in 1929."

And they want phones, meat, and electricity. they're not getting those
things either. But back to the US, we're using 25% of world resources.
With Global Trade coming to a stand still, that will change rapidly
in 09.

Trains will be huge this time next year. Interstates will be
empty or full in the exit lanes from our mega cities.

Mexico, the UK and Pakistan the states to watch.

"the US first has to cut consumption enough to offset the decline in domestic production. "

Consider that a done deal. The instant Obama tries to implement
his "bad bank" idea. We've got days.

I saw State Street mentioned Zero times on Bloomberg CNBC.
As it has gone from 35 to 15 in one day.
"Banks, which recently accounted for 12+% of S&P 500 market-cap, generate more than 25% of total dividends for the index (proxy SPY). In addition to a general slowing of dividend increases across industries, the large banks that make up the bulk of the S&P financial sector (proxy XLF, and closely tracked by KBE) are dramatically reducing dividends. If the combination of business needs and TARP rules force virtually all large banks to reduce dividends to $0.01 per quarter, the S&P index would have to decline into the 600's to restore the current 3+% index dividend yield."


Keeping the $ strong is all our government will have left.
To keep our empire intact. As our Empire collapses
(another thing we didn't have in the Thirties), so will
our import of oil.

Your ELM is the marker, and I do keep up with your posts.
Keep 'em coming.


Googling "historical oil prices" I could find nothing prior to 1946. However I would be very interested in finding out what the price of oil were in the late 30s verses 1929. I would bet that prices, during the depression were extremely low. Also there was likely a great glut of very cheap oil during that period. It was an era of very abundant oil and very cheap oil.

My point is that I do not believe we can compare oil consumption during the current recession/depression with that of the Great Depression for obvious reasons.

One more point. Cheap oil and an ever increasing supply of oil enabled us to eventually pull our of the Great Depression. Now we have cheap oil but an ever decreasing supply of oil. Whatever happens to the price of oil, supply will continue to decrease. There will not likely be a recovery from the coming Great Depression.


Here is a chart showing posted oil prices. It would appear that oil prices in the second half of the thirties were higher than in the first half, when the East Texas Field flooded the market (and briefly drove price down to about 10¢). If memory serves, the Texas RRC finally was able to restrict the East Texas Field enough to push prices up to the $1.50 range by around 1937 (all nominal prices of course).

And the Oil Poster chart shows a steady Thirties era increase in world oil production & consumption, from 1930 on:


And here is a very interesting take on the question of oil prices in the Thirties:

Saturday, November 15, 2008
Carpe Diem: The Oil Shock of the 1930s: Another Factor?

The chart above shows the real monthly price of oil from January 1931 to December 1939, using monthly oil prices adjusted for inflation using monthly CPI data, both data series from Global Financial Data (paid subscription required). Between 1931 and 1934, real oil prices more than doubled from $20 to $40 (in 2008 dollars), and peaked at $42.59 by the summer of 1937. The oil shock of the early 1930s was roughly equivalent to the oil shock that resulted in a doubling of oil prices between 1979 and 1981, contributing to an 18-month recession and 10.8% unemployment.

Along with contractionary fiscal policy via tax hikes, contractionary monetary policy, and huge increases in tariffs and trade protection, perhaps it was also the "energy shock of the 1930s" that helped turned what would have been a fairly ordinary recession into the Great Depression?

And here is a response by "Spencer" to the above Carpe Diem post, showing annual BP inflation adjusted prices (it would be nice to find the actual nominal prices):

British Petroleum reports very different data for real oil prices in the 1930s.

according to them it was:
(2007 $)



In any event, from the 1931 annual low, the BP data appear to show an annual rate of increase in oil prices of +11%/year from 1931 to 1937.

Spencer has a followup post showing the increase in nominal gasoline prices in the US. They increased at +2.7%/year from 1931 to 1937.

It seems to me that from 1931 to 1937 oil prices had to rise in order to balance rising demand against supply that wasn't rising fast enough.

It was my understanding that oil got as low as 15-20c a barrel at one point during the depression. This would be $1.50-$2 by the generally accepted multiplier of 10.

The U.S. went off the gold standard by order of Richard M. Nixon in the 70's. The currency was allowed to float without gold deposits to back it.

The banks are insolvent:


Oil producing countries had gasoline to burn when the price of oil was over a hundred dollars a barrel. A sharp drop in oil prices and they may have difficulty making tha oilfield payrolls and paying the children's college tuition bills, much less go for a joy ride across the desert.

If the price of oil goes up three dollars it will not help some of the highly leveraged (deeply indebted) oil explorers who need to pay their interest payments or go to try to burrow more in order to make the interest payments, stuck with sky high drilling costs.

As noted up the thread, the flood of oil from the East Texas Field briefly drove the price of oil down to the 10¢ range, which is reflected in the low annual inflation adjusted price in 1931, but the interesting thing to me is that we saw rising consumption after 1930 and rising prices from 1931 to 1937.

People are just not realizing how rapidly cars will give way to trains in the US.

I wish that were true.

As for your broader point about depression, well, I think that's pretty straightforward at this point. Yeah, we enter depression if the Anglo-American banking system collapse runs to completion, and then there's no telling how low we can go in demand. Depression risk is rising quickly.

Back to trains: The Obama stimulus plan proposes to spend barely 1.00% on rail.


"But world trade is grinding to a halt."

--That's interesting. I sell media (books,AV) on the internet.A decent part of my sales are to Europe,Japan, and Australia. Sales to these locales are off, but are no softer than they are for domestic sales.I certainly see nothing as severe as what you are suggesting.

Riots come in the spring

It's too cold in the northern countries to riot right now


Not even then.

People are getting too fat and old in America and Europe to riot. Though this opens the interesting question of what obese middle-aged bourgeoises do when they can't take it any more. Join fascist parties? Road rage (rioting while wearing a 4000-lb metal skin)? Phone local hate radio shows in support?

Believe me, I think we need riots. The kids are disappointingly mature and responsible these days, compared to their parents. Oh wait, the kids are too fat to get out the door.

Riots are just a waste of time and accomplish nothing. TPTB know how to handle those.

Everyone withdrawing their deposits from the banks at the same time? Now THAT is something that would truly make them go pale and start to shake in their boots!

"Riots are just a waste of time and accomplish nothing."

Agreed. About 6 months ago, some South Africans burned the trains because they didn't leave the station in a timely fashion. I hope they realized in retrospect, as they were subsequently walking for miles and miles, that torching the train was a pretty stupid idea. Same for the Indian protesters burning power company utility offices, vehicles, parts warehouses, and transformer substations, then wondering why the blackouts got worse. Duh!

Successful Peak Outreach would prevent this kind of 'shoot yourself in the foot' stupidity because people would seek to protect their infrastructure while transitioning to more energy-efficiency.

TPTB know how to handle those....truly make them go pale

Yup. Things that TPTB care about AND have no power to prevent/change is the way to go. General riots - Meh, they have plans, A general strike? So long as most people are shackled by the need for FRNs - that won't happen.

"Riots are just a waste of time and accomplish nothing."

"The tree of liberty must be refreshed from time to time with the blood of patriots and tyrants."

-- Thomas Jefferson

So where else do we start?

In times like these what else can be done, make another post on a blog.....?


As much as I advocate for "peaceful" solutions, I don't see any way for meaningful change to sprout in our present situation.

The masses don't have any power within the bounds of our legal and economic framework.

Does anyone see any way to realistically bring change within our present system?


Enough people stop paying their credit cards off and the system crashes fast. That's a great place to start.

Even simpler, everyone stops paying their credit card balances.

Don't forget posting curses to the new chief exec whose administration is only hours old.

Iceland's government is on the point of collapse as angry protesters stake out the parliament in Reykjavik

This despite winter season in Iceland (and on the back of one of the world's longest running democracies).

Wow. It's barely making the news on this side of the pond, but I found this link:

Iceland protests grow, premier vows to stay on

I wonder, are they rehearsing for Up Helly Aa in Shetland next week ? /snark


Joke aside, the "mob" attacked the premiers car and "hammered and egged" it,shown in a 1/2- minute section on Norwegian tv-news

But I have a question on net exports. With the oilprice now crashed, does't that mean consumption in producing countries is/will also decline?

As I said up the thread, we will have to see how it all plays out, but we do know that Indonesian net exports crashed at about -29%/year (over a 7 year period), with an overall accelerating net export decline rate, at an average oil price that was about half of current US oil prices.

All I can point to is our little mathematical model, versus two real life case histories, all showing accelerating net export decline rates, with three different rates of increase in consumption (+0.2%year, +2.5%year and +4.1%/year):


With a production decline rate of -5%/year, if "Export Land" wanted to maintain flat net exports of one mbpd (from a peak production rate of 2 mbpd and consumption of one mbpd), their consumption would have to fall at a -15.6%/year rate (falling by half about every five years) over a 10 year period. They would have to reduce their consumption from one mbpd to 0.21 mbpd over a 10 year period.

Here is Indonesia's consumption response to an average US oil price of $21 from 1996 to 2003 (when their net exports fell at -29%/year):


But I have a question on net exports. With the oilprice now crashed, does't that mean consumption in producing countries is/will also decline?

Increasing consumption in oil producing countries has been driven primarily by the booming economy in those countries. Their economy has been booming primarily because of high oil prices. Now that prices have plunged, their economy will almost certainly suffer. This should mean that their consumption will also fall but how much I would not venture to guess.

But we can be assured that their exports will drop even further due to declining production and little to no new investments in exploration and production.

Ron Patterson

Since each Saudi citizen is dependent on the state the loss of oil revenues will result in a very unhappy population.

I would also expect the various Princes to liquidate assets in order to maintain current consumption. Since T-bills form a large part of those assets we may expect a global repricing of the worth of a US dollar and a likely rise in US real interest rates. This would have further negative feedbacks on the US economy. My hunch is we are all going to be Orloved as it will get worse before it gets worse.


BOP - don't use <BR> tags. They make your posts look very strange in Firefox (though IE seems to weed them out). Just use hard returns.

Since each Saudi citizen is dependent on the state the loss of oil revenues will result in a very unhappy population.

Contrary to what a lot of people seem to believe Saudi citizens do not live off the dole. There is no dole in Saudi Arabia (except for the royal family of course). But the loss of oil revenues will affect every citizen. Saudi Arabia has one of the fastest growing populations in the world and one of the highest unemployment rates. Officially it is about 11% but most realistic estimates put it at above 25% and unemployment among those under 25 is far higher than that. And it is likely to get a lot worse.


Add to that the fact that you can't grow food there, and please to enjoy the chaos.

Officially it is about 11% but more realistic estimates put it above 25%? Wow, Saudi Arabia stole our statistical methodology.

economides appears to have established himself as an expert so he can charge big consulting fees. he has written some valuable articles as well as some that appear to solve problems that dont exist.


In a major game of "beggar thy neighbor", Russia, Saudi, and VenMex had their turn first.

Now the UK is at bat.

US will be next/last. Watch the TBT and US dollar.

Have popcorn roll film.


Hi FF,

How do you see that UK is "at bat in a game of beggar thy neighbour". Being a UK citizen and resident, all I can see is UK playing a game of "beggar thyself" or perhaps, indeed, "bugger thyself". It's already incredibly ugly and I cannot see any way for it to improve.

We have no manufacturing industry to take advantage of our weak currency. Even if we did, we would have to import almost all the natural resources required to manufacture anything. If we could do that and still make a margin, we are a faced with a domestic workforce that believes in an "entitlement society" and, generally, has no concept of the meaning of hard work. A sizable minority views a blue collar job as something they could do for a few weeks and then go on long term paid sick-leave for spurious job-related illnesses which nevertheless have been signed off by a doctor...

The only export industry we really have is in financial services and I do not think I need to point out the parlous state of that particular game of smoke and mirrors. I will be astonished if less than 90% of our banking system is NOT nationalised by the middle of this year.

Hi bunyon,

I was just referring to the race to devalue currency fastest first.

First they devalued the oil- it didn't work and now the currency race is about to begin.


Ah, ok. As I said in my first reply, a severely weakened currency is not going to do a lot to help the UK in my opinion, though possibly we will lose those foreign (EC) blue-collar guys who actually do a hard day's work for a fair day's pay... that will please the Little Englanders (and serve to ensure our already poor infrastructure crumbles all the quicker).

All the UK media can talk about is how we need our currency to be strong, though they don't say why! Earnings and jobs are down the pan and round the bend and set to get worse. If there is little or no discretionary income, a stronger currency (engendered by higher interest rates) is not going to help at all.

I don't think you can say this devaluation is deliberate. Interest rates in all the major countries( except the Euro zone) are at or near zero. Even in the euro zone they are only 2% and likely to fall further. The reason the pound is weak is due to investors lack of confidence in the British economy.
When Britain crashed out of the ERM in 1992 the shadow chancellor, one Gordon Brown said "a weak currency is the sign of a weak economy and a weak government". Quite

The UK needs a strong currency so that by 2020 or so we can afford to buy in nearly all our oil, gas, coal, uranium, cars, iPods, computers, food, fertiliser etc etc.

Sadly, only wealthy people get to borrow lots of money to enable them to live beyond their means and unless we have a weak currency we won't be able to export anything to earn a wealthy living!

A paradox - I'm not sure how/if this works out!

Agreed, it is complex. Personally I'd go with weak currency rather than strong, IF it made us realise that we have to be far more self-sufficient in just about everything, but particularly energy. IF we utilise the renewables available to us in the form of wind, wave, tide and (some) solar thermal, it is just, barely, possible that we could start to rebuild some sort of manufacturing base....

However, our currency is being weakened by creating (borrowing) money to throw down the (already broken and unfixable) financial toilet. Better to use it to build a new sustainable energy infrastructure. I keep saying this, in the full knowledge it will NEVER happen.

As to the banks, I'd nationalise the lot of them right now, do a massive debt for equity swap (ie crystallise the loss) and retrain the tens of thousands of bank workers to do something useful in the renewable or sustainable field of work. That's not going to happen either (and I fully appreciate that my "plan" is less than half-baked....).

A story about devaluation.

The Japanese yen used to be a silver coin the size of a US dollar. By the Depression it had already greatly shrunk. After the US victory, the exchange rate remained at 50 yen per dollar until 1948, when the American Occupation devalued it suddenly to 360 yen per dollar.

Now the question is, why did the devaluations before 1945 not accomplish what the 1948 devaluation did? Is it because prewar Japan lacked a clear plan to turn its exporting advantage into long-term prosperity? Is it because the Depression and the Smoot-Hawley trade act derailed what in fact was beginning to be a successful strategy? Is it because the global institutions created by the US in 1944-45 (fixed exchange rates, GATT, etc) created an environment in which a devaluation could finally get Japan ahead? Or is it because the US used its vast weight to make sure that Occupation Japan had plenty of markets?

The ordinary Japanese were certainly just as hard-working after the war as before.

It certainly doesn't look good.

From the NY Times this morning more confirmation that the banking industry is a basket case that nobody knows what do with:

Even before they have settled into their new jobs, President Obama’s economic team faces an acute crisis in the nation’s banking system that has no easy answers and that they are not yet prepared to address....

One main difference between the options under consideration is how transparent the government would be about the ultimate costs to taxpayers and whether banks would be required to reveal the true magnitude of their likely losses.

The ultimate taxpayer cost could be very high. A new analysis from the Congressional Budget Office suggests that the taxpayer costs are highest when the government’s asset purchases involve opaque transactions that are difficult to understand.


Meanwhile, the underlying assets upon which the entire sand castle is built continue to erode. The National Association of Homebuilders is predicting housing prices to fall another 29% in 2009, putting housing prices the end of this year at 47% below the peak. OUCH!


Denninger knows what to do with it. And it won't cost taxpayer money, either.

I am at this moment living the absurd juxtaposition of reading Denninger and listening to Geithner confirmation hearing.

Life can be bizarre at times.

And so you note the DJIA just went negative.

Cram Down and TARP repealed.

Denninger exactly right.

Plus the perp walk. And the end of the Fed Res.

The only purpose of the Fed Res was to prevent just what is happening.

Andrew Jackson was exactly right. That's why they tried to shoot him
at point blank range. Both pistols misfired.

The only purpose of the Fed reserve was to ensure that the elites controlled the money supply, and as such control everything. The Fed was not created to prevent what is happening, but to create what is happening, to further erode the civil liberties and wealth of the lower classes. The US dollar has lost over 95% of its value since the creation of the Fed. Inflation is up 1300%. Returning to a sound monetary system is the first step in returning America, and the world, to solid ground. Any other measures to deal with this financial crisis, peak oil, or environmental issues will fail until this is addressed.



and now we have Geithner and Bernanke, both Fed Heads making the decisions.

Not good.


I am in complete agreement with Denninger's solution.

The problem is that the people who own those bank stocks and bonds that Denninger and I want to render worthless, or near worthless, are the same people who also own the United States government.

This is indeed a free market fundamentalist's dream, now that even the government is bought and sold to the highest bidder. The libertarians should be elated. I'm sure they would be disappointed, however, to find out that it's not one of their own, nor even a recent, innovation. Seventeenth-century Spain beat us to the punch:

By the mid-seventeenth century, the fiscal difficulties that perennially beset the Spanish crown had become acute. The prolonged struggle with the Dutch and the French, the revolts of the 1640s and Philip IV's increasingly desperate attempts to recover control over the newly independent kingdom of Portugal, placed enormous strains on a treasurey perennially incapable of meeting the demands made upon it. The resulting fiscal crisis forced the crown to resort to every kind of financial expedient...

In Peru, traditionally a more lucrative source of revenue for the crown than New Spain, high-ranking treasury offices began to be offered for sale on a systematic basis from 1633. As the crown's difficulties multiplied, so too did the number of offices created and put up for sale. While the sale of offices proved to be a highly profitable source of revenue, it was acquired at a heavy political price. Offices that came onto the market were snapped up by creoles or by Lima merchants with strong local connections. Large sums were diverted into private pockets by corrupt officials, and viceroys watched in despair as the sale of office drastically reduced both the efficiency of the administration and their own powers of patronage, which they considered essential for the effective exercise of viceregal authority...

The purchase of offices and titles to land, the acquisition of new credit opportunities as royal revenues failed to cover costs, and informal alliances struck with corrupt royal officials for the clandestine distribution of state resources, enabled oligarchies throughout Spanish America to entrench themselves still further. By the middle years of the seventeenth century the crown was putting provincial governorships up for sale, and under Carlos II the last dam was breached when the crown began systematically selling the judicial posts in the eleven Audencias of the Indies. Between 1687 and 1695, 24 such sales occurred, 18 of them in the jurisdiction of Peru. The control of justice as well as administration was beginning to slip from the hands of Madrid.

--J.H. Elliott, Empires of the Atlantic World: Britain and Spain in America 1492-1830

The NYT articled also notes this:

If policy makers were even remotely honest, analysts said, they would force banks to take huge write-downs and insist on a high price in return for taking bailout money. For practical purposes, that could mean nationalization or partial nationalization [emphasis added] for many banks.

The use of the word "nationalization" seems to be new, coming from the NYT. Maybe Denninger and the others who have made similar comments, such as the folks on the Automatic Earth, are finally being recognized.

E. Swanson

It's amazing to watch what happens when Disneyland bumps up against reality, no? A year or so ago when Denninger and Automatic Earth started saying these things they seemed quite radical. Now they are mainstream.

Reminds me of what Kevin Phillips said about the twilight years of the British Empire:

In Britain, changes that seemed impossible in 1902 or 1904 became serious discussions in 1909, law in 1913, and were supplanted by even tougher statutes in 1919 or 1938.

--Kevin Phillips, Wealth and Democracy

It might hit 75. If that. Huge resistance.

Then gradually decline.

I am betting on the latter.

And Matt Simmons missed it-

""We will work our way through these financial problems..."

No we won't. But the UK will precede us into the new Panic of 1873.


The psychology of many here in California during the boom was that the avalanche of debt would never catch up to them. I still think that people don’t realize how big a $500,000 mortgage is (that was the peak median price of the state according to one data source). Now with prices half off, people think this is the bottom and will somehow come back up. They will not.

Unrelenting depletion rates plus lack of financing for new megaprojects can only mean one thing: decline of supply. The big question is: how elastic is demand, really? Everyone has always assumed that it is very inelastic. We are now discovering that this is not quite true, it is more elastic than we thought. As the economy continues to get worse, demand is probably going to become more and more elastic.

I always thought that those charts showing demand continuing up to the right while supply curved downward were misleading at best. Now we are beginning to see what is really going to happen: a race between supply and demand to the bottom.

I think demand elasticity for oil has taken everyone by surprise, particularly OECD demand elasticity. However, I think the demand destroyed so far has been the easy part and it took several months above $100 and a banking meltdown to achieve that.

The next slice of destruction will be a lot harder to achieve and will likely require a higher price spike. This could take a couple of years at the least because this depression we are in is not going away in the medium term (if at all). This means that depletion will have to bring supply down to match demand before prices can rise again. I'm thinking maybe 2011 for this to occur.

This means that depletion will have to bring supply down to match demand before prices can rise again.

Does this mean you give zero weight to the ability of OPEC to curb supply?

Not zero weight, and I accept that I had not considered their influence on all this. However, they do cheat a lot, they cheated even with $10 oil in 1998, so maybe not as much significance as some will assume. OPEC national budgets have been decimated by this price collapse and it's now a clasic prisoners' dilemma for them.

Decline rates in the 800 biggest fields are so big, and no new fields are going to be developed at these prices, so supply will drop far more quickly than most analysts are currently predicting.

If OPEC does have an impact, they are going to cheat a lot more when/if we get to the marginal price of a new barrel, which appears to be in the $70 area.

I think we will continue to see high volatility in a $30 to $70 range for the next two years. Below $30 we drop below marginal operating cost for some of the most expensive production (eg tar sands), above $70 OPEC runs the risk of new production becoming viable. Extreme vovlatility is OPEC's best friend, it totally ruins the ability of non-national oil companies to make rational planning decisions.

Extreme vovlatility is OPEC's best friend, it totally ruins the ability of non-national oil companies to make rational planning decisions.

It also ruins the ability of alternates to find funding. This is turning into 1986 redux. The only differenece is that in 1986 it was the industry that took the hit while the rest of the economy galloped forward.

Price volatility will insure that expensive oil projects will not be developed unless prices remain high for a VERY long time, when the next spike take place, investors will not rush to develop the oil sands, and deep sea oil, they will wait to see staying power, this will insure that supply will lag demand rather then run ahead of it; what will happen with oil development is more or less what happened with copper at $4 a pound, copper traded at depressed levels for so long (under $1 a pound), that even at $4 juniors could not develop their reserves (this is confirmed by a conversation that I had with NovaGold CEO early 2008, where he couldn’t convince TCK to develop their massive BC copper reserves at above $2.5 pounds price point), the next time we visit $100 oil, we will have to stay there for a couple of years, before get a new supply of expensive oil in my opinion.


I agree with you Nawar.

When the industry contracted after 1986 no one who survived that contraction wanted to invest until they were absolutely sure the price would remain high and on an upward trajectory. It was only in the last few years when prices spiked above $70 that CAPEX expanded and new projects were greenlighted.

What is interesting is that the same effect will impact all other production. We likely face global overcapacity in everything from copper to computers. Production capacity will be closed to match the available demand. Fewer producers, lower overall volume, and difficulty sourcing credit will result in high profits for those firm that survive and high prices for all consumers. So we likely face a bout of inflation which will be accelerated to the degree governments print money to escape the current debt trap.

This means that depletion will have to bring supply down to match demand before prices can rise again

Always : supply = demand (at a sudden and agreed upon price), since crude is traded at an auction. Highest bidder takes it (units of 1000 barrels), end of story.
Just like a "Mona Lisa". ..... The "Crude Mona Lisa" will get more scarce in the future and you will all see what I mean.

Bottom line, low oil production is trying to drive the price of oil back up while the deep recession is trying to drive it right back down. Which will win the battle? I am betting on the latter.

Are you saying that from now on demand will remain below production? This can't be right. One way or another, there will be ever more aggressive attempts to jump start the economy (local and global). It can be done -- if nothing else works, war will do it. The gov't itself becomes the consumer of last resort, i.e it supplies demand. This cannot fail to work in one sense. But because any revival will immediately press up against resource constraints (unlike post-WW2), wild inflation will become the next catastrophe.

How soon? On that I'm less certain, but I don't think it will be so long, and maybe very soon before oil reverses course. There are just so many factors that are operating against the suppy-side.

In any case, there can be debate about what form the disaster will take. But that we face disaster is less and less debatable.

...jump start the economy (local and global). ...if nothing else works, war will do it.

Common wisdom is that WW2 "jump started" the economy (US & global) following the Great Depression. I don't buy this. To my mind, what happened is that the world, led by the US, ramped up fossil fuel (especially petroleum) exploitation, leading to economic & population growth. WW2 may have facilitated this ramping up, but it would have occurred anyway. It may be more accurate to say that the ramping up of FF exploitation facilitated WW2. To me, saying that WW2 lifted the world out of economic depression is a classic case of mistaking correlation for causation.

The reason for saying WW2 did it is that the New Deal didn't (for the most part). The economy seemed to just bump along at a low level. There was a lack of demand, millions out of work. The gov't supplied it with war spending. None of the New Deal spending was sufficient. What would have happened anyway is irrelevant. It seems that some massive gov't spending was required. Time alone does not do the trick.

We've had another example since then. Japan has never fully recovered from its crash in the late 80s (or was it early 90s?) Japan also spent a lot, but not enough apparently. They built infrastructure up the gazoo, highways to nowhere. Another war wasn't really an option for them. I would like to think it's not an option for us either, but I'm not at all sure it won't be. (Or wider war -- we're already have a few going.)

P.S. Ah, I forgot -- Nazi Gernmany. Rearmament pulled them out of the Depression long before we came out of it.

I googled "cost of World War Two" and "cost of New Deal programs" and from the first things that came up got figures of $5 trillion and $500 million, both in inflation adjusted dollars, respectively. This isn't a very reliable methodology, admittedly, but gives a couple ballpark estimates of relative costs. If these figures are anywhere near accurate, WW2 cost 10x what all the New Deal programs cost. Hence, comparing the effects of New Deal spending to that of spending on the war isn't all that meaningful. But maybe you're right, and $500 billion just wasn't sufficient to jump start a depressed economy and $5 trillion was.

Recent links, mostly Leanan’s:

Era of cheap oil is over , Rebound in oil prices could be years off , Forget "peak oil", West's demand growth peaking , Saudi Arabia and the need for $75 oil , The reasons why crude oil could double this year , Only a matter of time for higher energy prices ,Dramatic shift lies just ahead in oil production , Iran: OPEC needs non-OPEC help to steady oil market , New group prepares for high gas prices , Top 100 Stories of 2008 #1: The Post-Oil Era Begins , Oil Price Over $100, in a Blink

I am getting dizzy. Leanan’s links are amazing, and definitely show the conflicting opinions out there. I keep thinking about the line from, IIRC, Catcher in the Rye, “Lennie, tell me again how good it is going to be when we get there.”

From all of the above, it seems like it is anybody’s guess. But, is it really?

While the economic turmoil is freaking out the spot markets, six months out, it looks like there is hope for both economic relief from outrageous prices and an impending disaster due to budget cuts in the oil industry as a whole.

The whole world wants and needs to know what is going to happen, so even Economides chimes in again, and Leanan pointed out to me his cornucopian leanings a year or so ago.

I would like to see if there is some meeting of the minds here, without all of the posturing by the regulars, about what, how and when things will get sorted out, and will they be as good or bad as some of the links above would indicate?

My own hope was that we would have an opportunity for the oil and gas industry to “catch up” in the sense that there is additional production possibilities which will come on line, someday, like Jack # 2, and the Petrobras et al offshore developments, which will serve to delay the time where we are ALL in gas lines, except for a few who planned ahead sufficiently to avoid that mess. (If projects were to catch up while demand is down, it might well create an oversupply situation and give us a break. Geopolitical factors won't be effected, but all else could be the same.) The world needs to do a transition, but all I seem to find are "now or never" solutions. Heck, even getting a divorce takes time, so I do not think that we can make a worldwide transition in only a “few” years. All of the options for alternatives are virtually going to have to be on the table, so what mix will actually work? I would say that if everyone were to keep their heads, we can do something, realistically, in about 10 years. Maybe not enough, but a pretty good start.

Does the world have the time to transition or not?

Things are never going to "get sorted out." Transition implies that there was some sort of steady state to begin with, from which human civilization will shift to another steady state. This isn't the case. The fossil fuel culture has been an extraordinarily brief interlude in human history. My grandparents farmed with horses, my granddaughter will likely starve. As a kid, I tore around the American Midwest in disposable muscle cars (disposable in the sense that I wrecked them). This bubble in energy waste was never sustainable, never steady state. Hunger has haunted Homo since the time of speciation, never let up for hundreds of millions, and is about to become the norm in the developed world once again. Except this time, there will be no temporary reprieves, all the nonsense about thorium fission & electric trains notwithstanding. The chemistry of the atmosphere & surface ocean, biogeochemical cycling dynamics, ecosystem integrity, etc., have all been so profoundly perturbed that the carrying capacity (K) of the biosphere for Homo has been wrecked. When forced, as we surely soon will be, to live under K sans fossil fuel inputs, life will be as brutal & short for us internet pundits of the West as it has always been for the teeming throngs of the real world. Dreams of some "transition" to some ecotopian powered down egalitarian agrarian society are just that: dreams. Get real, all you dreamers. Starvation impends for all.

Jolly good. Well, that's that then, eh ? Tell you what - you go and sit in your cave with your tins and guns and in the meantime we'll figure out the solution.
OK so we drop to 25% of today's output in 30 years or so at worst ? So ? You think we'll be using that 25% of oil to make Bratz and drive Hummers ? Or driving next-gen agriculture and building reactors and windgen ?
Please try and seperate the USA ( & Canada ) from the rest of the world. You lot waste staggering amounts of energy on utter nonsense and that will change.
I seem to remember life in the 70s when we used a lot less energy than we do now in and I wasn't dead. My grandmother says the same for the 1950s ( altough she is dead ). Take that amount per capita and compare to modern USA and the difference is scary.
IMO new steady state means much lower energy and until productivity in recycling and energy sourcing catches up ( and it will - unless you want to play the "this time it's different game" ) we'll be a bit miserable on rice, beans and water at worst. Maybe the 3rd world will hit hard - but we CAN feed, clothe and house ourselves many many times over if we stop wasting on crap and think straight.

I checked this morning and I am not dead so maybe be can figure out a way from A to B. As my self-made multi-millionaire father-in-law says - "nothing is as bad as it seems or as good as it seems" - gets you a loooong way that. Oh and "there's no decision to be made until there's a decision to be made" - so stop thinking about how big your Victory garden will need to be in 2030 and start by making sure you're finances are in order and hedged.

...meantime we'll figure out the solution.

Sure you will. Keep telling yourself that, if it makes you feel better. Fear is a great motivator for rationalization & self-delusion.

Actually, I think you are both part right and part wrong.

Darwinsdog is correct in saying things will not be sorted out. And absolutely correct to note the dynamic aspects of our social existence as oppossed to our desire to believe in stasis. However, he makes a fundamental misreading of history that leads him down a path as mistaken as it is gloomy. Granted that we will see massive starvation and death of all types during the next few generations as we come down off of the absurd population levels engendered by cheap fossil fuel energy. But it is wrong to suggest that fear of starvation is the fundamental condition of our species (do not accept Hobbes' formulation, he knew not of what he spoke). While I agree that we will not "transition" to to an "egalitarian agrarian society," do not make the modern's typical error of thinking that the only alternative to industrial/post industrial society is agrarian. The vast majority of human history was spent in social organization neither industrial nor agrarian.

Orbit500 is correct to argue that life is possible at greatly reduced consumption levels. And absolutely right to reject the self-fulfilling survivalist implications of surrender to doom and gloom (though I didn't see the dog actually say that). But the continued concentration on standard of living in his response is indicative of the very problems that will make Darwinsdog's observation about sorting things out come true. We frequently talk about our modern society as based on cheap oil, or on industrial production or on this or that material base. If we are to make a transition to a livable, meaningful life on an individual basis (I've already said it won't happen globally in our life-times), we must recognize that it is this predilection toward the material that must be surrendered. When we stop worrying about whether or not we can live at some % of our current consumption and start concerning ourselves with things like our relation with the natural world, our relation with family and neighbors, our internal search for meaning, the search for beauty, etc (all things we moderns have lost or denigrated), then we can start talking about "tomorrow."

Um, humans are animals and always have been. Give my a bone to each of my 2 dogs and they each want the others and their own. That's NEVER going to change. Some people may spend their days watching little fluffy clouds but the paradigm of life is improvement and competition.
Humans are so succesfull because we adapt. We make our living anywhere, everywhere and with anything. I am not arguing for a continuation or focus on materialism as that can be argued to express itself in many ways unrecognisable between cultures - the Ethiopian with 20 goats is just as driven as the banker with 3 Porsches.
This drive is ironically what will preserve and guide us. You can't arbitrate it away with eco-talk or destroy it with anything short of extinction.
Nothing 'individual' will happen. I keep saying this - if the food supply goes then we all go. Except for an elite of course.
If I'm wrong then I'll be proven so but I see a stable global population and a different energy paradigm not spiralling doom and destruction. That has been predicted so many times down the millenia its not even funny any more.
For those places which have not yet reached the stable phase of the population curve then yes, things WILL be apocalyptic on a localised level. Think Pakistan ( you go, Mr Wisdom - let's compare notes in 10 years after 70% of you are dead and you've exchanged nukes with India over water ) etc.
Yes, Rome collapsed and we had to put up with badly made pottery for a few centuries.

That humans are animals tells me nothing. When you say the "paradigm of life is improvement and competition," you are not defining what it is to be an animal (or life), but what you, orbit500, think life is. Nothing more, nothing less. You have no more incite into the absolute meaning of the universe as anyone else. So please do not confuse your personal belief with truth.

Otherwise, I'm not sure what you are on about with regard to gloom and doom. From the standards of circa AD 2000, the sort of life you are projecting would be considered doomerish by many. And that was my point. You seem to imagine a greatly changed world, but one that maintains the same exact value standards as the present. That can not be. And if you can't see the difference between the 20 goats and the 3 Porsches, than I would encourage you to look again.

And if you can't see the difference between the 20 goats and the 3 Porsches, than I would encourage you to look again

To look at one end of the continuum see "Ascent of Money"

Segment 'Risky Business': Ken Griffin "$20 Billion in the hands of a thousand people is really a 21st century phenomena. This never happened 50 years ago."

And I don't swallow that, either. Besides the data point of 50 years ago not representing the data set { < 2000AD ) are you telling me that the Gini coefficient is higher now than in 1905 ? 1820 ? 1100 ? 80BC ?
Honestly the only animals that work for each other are ants and even then the Queen gets it all.

What kind of mumbo-psychobabble is this ? Sorry but you're arguing that animals and humans are not driven by inter competition for resources ? huh ?!
Take a step back and think on that - it's you versus the whole body of biological science. Good luck.

Yes, Rome collapsed and we had to put up with badly made pottery for a few centuries.

And the population of Western Europe declined by something like 80% over a generation or two ...

80% ? LOL Source ?

The Fall of Rome and the End of Civilization by Bryan Ward-Perkins. Oxford University Press, September 2005.

OK, he estimates between 50 and 75%. But I've seen higher elsewhere, just can't remember where.

Darwinsdog.. makes a fundamental misreading of history that leads him down a path as mistaken as it is gloomy.

Study population biology. Observe what happens when a population exceeds K. It crashes. Before crashing, K is lowered due to environmental degradation. Sometimes the crashing population avoids extinction (local or complete), to oscillate around some level well below the lower new K value. When this happens, typically Allee effects eventually take the population all the way down to the absorbing value of extinction. Other times it crashes directly to extinction. This is the dynamic of a population that only exceeds K somewhat - say by 10%. For a natural vertebrate population to exceed K by > a full order of magnitude is unprecedented. The only analogue we have is of bacteria in petri dish culture. The culture consumes sufficient nutrients to inflate its population to the point where it poisons itself to extinction on its own metabolic wastes. Homo isn't "special" in this regard. Despite our science, poetry, & pride, we are just another species of Terran organism subject to the same population dynamics as any other. I understand the desire of many to believe otherwise but human population collapse is inevitable and extinction within the lifetimes of those already born is more likely than most would care to believe.

Oh, please. We have Thorium!!

I need to track down that show on lions in the Serengeti.

Life is not about equilibrium, it is about sea legs.

Not to mix too fine a metaphor.


Where the hell's my bifurcation? Anybody seen my bifurcation?

I don't think you need to have studied much population biology to have learned that a population crash is not the same thing as extinction. You're being a little loose in your logic there and that's not like you.

As for K, the trick is not in platitudes about exceeding it or not, but in understanding exactly where it stands in a particular ecosystem and how it changes. I get a little frustrated with references to the "hockey stick" chart references. I can draw you two charts plotting the exact same set of numbers over the exact same x axis, one will look like a hockey stick, the other will look like a straight line. The difference? The presumed K as implied by the y axis scale.

A population crash isn't the same as extinction, true, but we are not yet being polluted by our own wastes because we undo their effects by increasing our energy expenditure.

Our wastes, however, are polluting the support system upon which we depend, which is far more dire a situation.

And unlike the wastes that have been produced thus far on this planet, mostly organic in nature like poop or alcohol, the wastes being produced by humanity now are industrial, sometimes toxic, and have wide-reaching effects through broad scopes of the ecology, throughout the entire food cycle.

Bacteria, viruses, algae, insects, fish, birds, and other mammals are all being affected. The entire ecological support system which we humans depend on, just as our petroleum-dependent social/cultural support system is deteriorating, while we happen to be in severe population overshoot.

Realizing that nonlinear forces and tipping points abound in the natural world, our extinction is a real possibility.


Dreams of some "transition" to some ecotopian powered down egalitarian agrarian society are just that: dreams. Get real, all you dreamers. Starvation impends for all.


Jolly good. Well, that's that then, eh ? Tell you what - you go and sit in your cave with your tins and guns and in the meantime we'll figure out the solution.

If we could just keep the internet going up until the end, I could at least die laughing! Hungry and cold, maybe, but laughing. I could barely breathe by the end of this thread. Keep it up guys! :)

And, I agree, shaman, they are both partly right.


Back in the '60's, the U.S. oil production had not peaked out and our level of oil imports was much less than today. And, the population was lower back then as well. We were still coasting on the good times which appeared after WW II, when the U.S. had most of the world's manufacturing capacity after Europe and Japan were flattened. Since then, the U.S. multinationals have moved much of the U.S. industrial capacity to Third World nations with rock bottom labor costs, which has given those people money to buy oil and vehicles to burn it, thus competing with us.

So, who makes your shoes and the textiles which go into the cloths on your back? Where are the parts inside your computer made? Who makes the cheapest solar thermal collectors and PV today?

E. Swanson

"I seem to remember life in the 70s when we used a lot less energy than we do now in and I wasn't dead"

Except that's not really true. I think energy use per capita peaked in the US somewhere around 1980, and we use less per capita now than then.

I've been thinking about that. Is that really true or has the appearent primary energy consumption per capita been going down because we import goods(and services) rather than make them locally? (you know, a bit like exporting pollution by making widgets in Asia rather than in the US)?

World energy use per capita also peaked some time ago, but admittedly, perhaps a decade or so after it peaked here in the US.

right - and there's half the argument - if energy use per capita is declining and population is projected to peak then fall then the problem is finite.
Let's not all run around with our freaking hair on fire.

in the meantime we'll figure out the solution.

Let us know what the solution to the P problem is, m'kay?

“Lennie, tell me again how good it is going to be when we get there.”

"Of Mice and Men" -Steinbeck

Famous last words - Imagining living on the fat of the land.

Does the world have the time to transition or not?

See the Department of Energy's Hirsch Report (pdf) ( you can Google it or I think the URL is in yesterdays DB) Hirsch estimated 20 years for a US transition.

Does the world have the time to transition or not?

who knows? i'm trying to fit it all in a rational / irrational scheme, and my head hurts.

the rational would be that we have enough oil for our needs for at least 20 years. cut out some suv's, un-needed trips, build some rail and there you have it.
the irrational on the other hand, is how quickly economies and cities can go into a state of chaos. cut the power for a couple of days and that's all you need. a perception of shortage would lead to real shoartages and riots in no-time.

what bothers me the most is that our society is based on irrational choices. the economy must rebound in order to allow green technologies to flourish, but that would mean just another bubble. we must buy petrol cars so that companies build ev's. and so on

Wall Street crisis snares Main St. schools

Five Wisconsin school districts claim they were misled by advisors and could lose most of $200 million investment.

The World in Depression: Lessons from the Great Depression: Part XXIV: Economic Crises Around the World in Synchronization.

For an economy like ours so dependent on spending and consumption, deflation will make this into a depression. Just think about it. Why would you buy a home today if you knew it would be cheaper tomorrow? Why would you buy a car today if you were worried about your employment? That is the issue with deflation. Bernanke’s mistake was that he thought he had the power to induce inflation which he clearly cannot. The consumer psychology has changed. Even if people had access to credit (which they don’t) it is wrong to assume they will spend it again. The gig is up.

Why would you buy a home today if you knew it would be cheaper tomorrow?

If you consider a home to be a mere investment opportunity then it makes no sense to buy it today if it will be cheaper tomorrow. But if you buy a home to LIVE in, as a place to raise produce & livestock & children, then it doesn't matter how much it costs today versus tomorrow. It's your HOME. The problem is with people who want wealth without actually producing something. The farmers, the miners, the fishermen, the craftsmen who actually MAKE something useful.. these are the real people, the "salt of the Earth," as it were. Everyone else is a paper pushing parasite. "Wealth" that accrues to a person who didn't work for it is ill-gotten gains. Such people would be reviled in a sane society. As things stand, such people constitutes the plutocratic overlords of the productive folk. Things won't stand this way much longer. I'm going to laugh my ass off at the former banker or realtor or executive whining about the blisters on his hand from the hoe.

Everyone else is a paper pushing parasite

G*D D**M those paper pushing engineers who just design "real things", foresters who plan tree planting and harvesting, etc..

And God Love those Hummer assembling auto workers.


It's hard to draw the line between "parasite" and "value added synergist". Some paper pushers are necessary -- every business needs an accountant, some basic legal representation, and clerical help. Many benefit from engineers and scientists as well.

But what about a house cleaner for the engineer who needs to work 80 hours per week on a new high-efficiency gizmo, but would otherwise be doing his own laundry and dusting? If his time is valuable enough to support it, it makes sense.

What doesn't make sense is massive industries that add virtual GDP but no real productivity. Much of the tax accounting world, investment advisors, educational think-tanks, and many mid/upper-level managers could fit that category. You need a FEW of each, but not very many, and any are a tax on productivity.

At a macro scale, I think our quality of life is determined by our manufactured products and assets divided by the population. Some assets have a long service life, and those help build real wealth for coming generations (or our own retirement). Most products have a short lifetime, and those determine the effective wealth of the current generation. If we all want to be "rich", we all have to produce enough to cost-effectively BE comfortable, and that doesn't mean "money in the bank", but continued productivity. Retirees hold the same place as tax analysts and politicians -- suckers at the teat of worker productivity. No offense to retirees intended -- many will have "earned" their rest, but it's naive to think there is no ongoing "opportinity cost" for their lost productivity.

If the boomers retire, and the jobs that held go away, and the products they built decay, then they can't retire "rich" unless others coming behind are willing to build new stuff cheaply for them. But many retirees with fewer workers mean wages go up as production goes down, and the retirees savings don't go as far (unless per-worker productivity goes up). This is why I think 401Ks are toast -- there can be no new stock bubble when more people are retiring and living off savings than are going to work and putting back savings.

The only real future for us all is to rebuild real economy productivity, and devise sufficiently cheap power to run it. Less power and lower productivity means a higher fraction of "real world" workers and fewer free-riders.

Collapse of the cheap Asian import trade will make all of this worse of course, as US dollars won't buy as much around the world, and US product exports will have to pick up the slack. It's time to worry less about some virtual GDP that includes gov't spending and finance "earnings", and to focus more on total new production and per-worker productivity.

Good analysis.


I guess I'm one of those Baby Boomer old guys that are about to sink the economy by consuming all their hard earned savings. Worse, I'm one of those who was supposed to be productive, but who could not find where to "fit in" to the economy since the recession of '75. I was trained as a design engineer as part of my Mechanical Engineering degree, but found only one short job in that capacity. I've spent years trying to find work where my talents and education might be put to use. The trouble is, I found that I could not function in the smog of N. California and thus did not believe it possible for me to live in that area or others which had even worse smog, such as LA. That limited the scope of my search and probably branded me as a "malinger" or other negative assessment. All the while, the industrial jobs were lost as companies moved production overseas. As the years passed, my continued unemployment only made things worse. As a result, I have no 401K nor do I have a pension. My savings may last a few more years and without Social Security, I might as well give it up.

Whether I "deserve" those SS and Medicare payments or not, they represent a social contract, one which allowed many to approach life differently than did our parents. We moved to cities and had fewer children, taking jobs which we might not have liked with the notion that when our future retirement began (as it must), we would not be left beside the road to starve or freeze. Some of us were able to accumulate "wealth" by investing in stocks or bonds thru 401K's, an option which appeared after my "work" years. But, it turns out that we were all fooled in that stocks and bonds may not be a good store of "wealth" as the value assigned to them was part of the Great Financial Bubble of the late 20th Century. I've been thru a couple of corporate bankruptcies and watched as the asset prices plunged. As the bubble continues to deflate and little is left for us older folks, the importance of Social Security will become much greater, as that may be all we have left. And, older folks tend to vote in large numbers, especially when they feel threatened...

E. Swanson

I'm not maligning you or any other retiree, or any person working in the "parasite class" of jobs. We all made our decisions based on what we knew, me included. The trouble is the social contract was poorly written, fundamentally flawed, and unenforceable.

The notion that 401Ks always go up, that SS will "be there" in a viable manner, and that corporate pensions are "real" require a number of flawed assumptions. The most critical is that there is value in money outside of resources and productivity. Second to that is the simple expectation that you can "make" future people support a contract that is not in their best interest. Finally there is the issue of resources and debt, and whether a will set of workers can support the system at all.

I have LONG expected that 401Ks, SS, and pensions will fail, due to the simple outline from my earlier post taken to extremes as a thought experiment: what happens if EVERYBODY retired, or NOBODY retired? If everybody retires, all will be pulling money out of their accounts to buy goods, which are evaporating since nobody is working to make more. Very quickly the investments will crash, prices will rocket, the value of money will plummet, and people will have nothing -- no products, no money, no investments. As it happens some will predict a quick dollar crash, some will be watching every bump in the stocks, and some will with the gov't would just do something, but it wouldn't matter.

If NOBODY retires, and all worked producing goods, things would be good. 401Ks would stay solvent, as would SS (which of course has no money in it, but it wouldn't matter), prices would be reasonably low, and money would maintain some value.

Of course we live somewhere in between, but my point is that on the macro scale we need to push workers and productivity, and limit non-working (of any sort). Energy and resources come in on both sides -- efficiency limits the consumption of working and non-working people alike, and productivity increases the availability of goods to the extent that resources and energy allow.

So, I don't think I'll see any SS, I already cashed out my 401K and stocks a year ago, I'll move cash to products before too long, and I'll expect to work until I die. And that's my "best case" future. Thanks, Stoneleigh!

Retirement is a fairly recent invention. There are cultures where the word for retirement doesn't even exist.

That said...retirement came about because people were simply no longer capable of working as they aged. Derek Jeter, at age 34, no longer has the range at shortstop that he used to. My dad, in his sixties, doesn't have the sharp vision required for lab work and photography that he used to.

While many jobs today are not physically demanding, those are the very jobs that are likely to go away with our consumer economy.

I don't think we need to push workers and productivity. I think we need the opposite. Less productivity, less work. We don't need more goods. It would be better for us and better for the planet if we worked less.

However about everyone works...but only part-time?

Actually, I think most "retirees" will be part-time or otherwise partially employed, often in the houses of relatives (like my earlier post about the high-value engineer with a housekeeper -- that could be Grandma who also watches a youngster after school or Cousin Sue who is between jobs).

I'm not thinking "productivity" will create new heights of wealth, but more like a modest base of higher-efficiency manufacturing coupled with lower expectations for all -- less stuff, more work. By "goods" I include food, housing, appliances -- any physical asset and some limited virtual ones (skills, education, etc.) that take resources to maintain.

Nothing new I can add on the overall curve -- downward trending with wide oscillations, I suspect (but don't have any way to know or predict). As so many have said.

But the key point is that EVERYBODY needs to be productive enough to survive, on average, or some won't.

I don't think the work will be in high-efficiency manufacturing. It will be, like it used to be, at home. Tending a garden, sewing, laundry, etc.

The flip side is that this old, pre-industrial model was itself something of a pyramid scheme. One reason SS is in trouble is that people are living so long now, and having fewer children to support them (via payroll taxes).

SS probably should be one of the last things we give up. Without it, people will be forced to have more children, to provide their own safety net.

The more we fail to maintain and even enhance our manufacturing, and the further we fail to maintain high agricultural production, both of which depend on cheap energy, the lower the plateau will be for all, and the fewer "high on the pyramid" jobs we can envision.

I tend to look at the engines of the economy as a transfer function -- converting a lot of resources (material, energy, and labor) into some higher-value products and a bunch of waste. When I say "high-eff manufacturing" I mean maximum yield with minimum energy and material waste and least human effort consumed -- anything that falls short of that will likely waste precious energy, precious resources, and plentiful human effort -- in some cases the latter may be seen as a GOOD thing.

I dither between total collapse and a post-industrial existence, depending on how fast we slide down the post-peak energy curve and how fast the world economy crashes, and most importantly how quickly we determine we're really post-peak and sliding down. 20 years would be enough time to build a bunch of solar, wind, and nuke, and with enough reasonably cheap energy I can envision a vibrant nouveau-manufacturing economy in the US and elsewhere. I fear that even if we still have 20 years, we won't realize it and make changes in time, probably not until 5 years after (like 25 years too late!).

The headlong-into-the-wall future seems a lot less promising, as struggles for efficiency and productivity will fall behind massive hoards struggling simply to survive. The simplest and most scalable 'transfer functions' tend to be exceedingly wasteful, creating their own deflationary spiral as what resources and energy remain are rapidly squandered.

Remember The Gospel of Consumption?

In a 1927 interview with the magazine Nation’s Business, Secretary of Labor James J. Davis provided some numbers to illustrate a problem that the New York Times called “need saturation.” Davis noted that “the textile mills of this country can produce all the cloth needed in six months’ operation each year” and that 14 percent of the American shoe factories could produce a year’s supply of footwear. The magazine went on to suggest, “It may be that the world’s needs ultimately will be produced by three days’ work a week.”

There simply isn't enough work for everyone, unless that work involves making things people don't need. The last thing we need is more productivity.

And the amount of stuff per person is a poor measure of standard of living, IMO.

The real reason for TOD finally comes out. Leanan is creating jobs by reducing our productivity.

There simply isn't enough work for everyone, unless that work involves making things people don't need. The last thing we need is more productivity.

With aging population, there is going to be more and more work in health care. At least in my small central-european country, there is already a serious lack of medical staff. Maybe the jobs from China aren't coming back, but people still want to gamble, take vacation, eat fine.

You probably reply, that people won't be able to afford vacation, I say croupiers, chefs et other tourist staff will probably work for less so that vacation eventually gets cheaper.

So, I see a lot of low paying jobs. At least in the first innings of the Collapse.

Maybe, but again, that's just consumption. If the point is to reduce recreational consumption, that's not the kind of job we're talking about.

It would be better for us and better for the planet if we worked less.

Ok, I see your original premise now. People have the liberty to consume. You may take other liberties away, but they won't let you take that.

I disagree. I think for most people it's a fair trade: less consumption for more free time. Kellogg used to have a short work week, and when they wanted to switch back to regular hours, they found it very hard to get people to do it. More money wasn't enough to get them to work longer.

Consumption will go down, one way or another. That's what peak oil is all about. The question is how. I think most people would prefer shorter work hours and less money to not having a job at all.

A lot of people have to pay off mortgages in addition to the utility bills, food, etc.... And then It depends on the wage too:

Lower paid (at least here) make 400-500 euros per month. Take 50 euros per month away and they are actually going to feel it. The workweek was shortened in many companies (because of lack of work) and people aren't really happy about it. Of course, it's better to work 32 hours than not at all.

Regarding consumption - we might consume more electricity instead. I know, electricity cannot substitute gasoline in full, but people could perhaps consume more video games and less trips. They could save oil by working from home. I am no cornucopian, but we can lower consumption of oil quite a bit and consume something else.

I don't deny that there would be hardship involved.

But I am expecting deflation. Prices of everything, including homes, will go down, precisely because people can no longer afford to pay their mortgages.

This is looking more and more like the Great Depression every day. And during the Great Depression, there was an attempt to pass a law shortening the work week, so more people would have jobs (even though they earned less).

Paleocon wrote:

I tend to look at the engines of the economy as a transfer function -- converting a lot of resources (material, energy, and labor) into some higher-value products and a bunch of waste. When I say "high-eff manufacturing" I mean maximum yield with minimum energy and material waste and least human effort consumed...

During my ramblings thru the world of economics, I stumbled upon the work of Wassily Leontief who built economic models using input-output matrices. I thought that that model was very good and what you describe sounds similar. The economy acts on the whole as one big machine which converts "raw materials" (i.e., the Earth) from natural resources to an output of finished goods. His models have been used by the U.S. government, which tracks various "sectors" of the economy, much as Lenotief's models did. I still have a copy of a book describing the input-output model of the U.S. from the mid 1960's. Using the matrix approach, one can ask questions such as, how many nails does it take to make a shoe? or how many barrels of oil does it take to make a car or a nuclear power plant? I think that the input-output model point of view still holds true, especially as the other view of economics, that of the creation of wealth thru fractional banking and debit creation, has been shown to be flawed.

The models are essentially one snapshot pictures of economic activity produced by looking at one year's total economic inputs and output. Changes in the efficiency of energy use would change the various weights on each sector, but, overall, given less energy input, there would be a corresponding reduction in output in the near term. There are lags within each sector as it takes time for improvements in efficiency to spread thru any one sector. I tend to agree with you that the rate of decline in available energy may be too fast for "The System" to adapt, without some crisis to stimulate the massive overhaul required.

E. Swanson

I've never worked so hard any time in the last twenty years as I have since I retired a few years ago. But by doing my own chores at home, I'm denying a wage to some service worker, and thereby denying the government the slice they need to keep the show running.
I guess I'm a useless parasite, then, because I'm no longer developing engineering processes, and my post-retirement actions are serving to further reduce the GDP.

The foregoing is intentionally ironic - an attempt to show that a busted paradigm can't be rationalized, the turd won't be polished, no sense will be made of nonsense. There is no "way back," because our Western Way was always an illusion. And that's why I have no faith in a gradual, managed, or moderately peaceful descent.

I don't think we need to push workers and productivity. I think we need the opposite. Less productivity, less work. We don't need more goods. It would be better for us and better for the planet if we worked less.

However about everyone works...but only part-time?

Yes! Have you read Juliet Schor's The Overworked American?

It's been awhile since I did, but she makes basically the same argument. She says we've increased productivity nearly every decade since WW II, but took the productivity gains in increased consumption rather than decreased hours of work.


I don't think we need to push workers and productivity. I think we need the opposite. Less productivity, less work. We don't need more goods. It would be better for us and better for the planet if we worked less.

Probably one of the sagest things I've ever seen written on TOD.

OK...I have it now. Let's all become,,,,wait for it,,,,,


Ohhhh Yaaaaaa..

The concept of a single over-arching utility disregards a major human attribute observable in the behavior under study: people do not seek to maximize their pleasure, but to balance the service of two major purposes--to advance their well-being and to act morally. The quest for balance is evident in that, as individuals advance one major over-arching concern, they continuously strive not to neglect the other...

If one examines people's allocation of resources among work, consumption, leisure, saving, and civility, a similar balance is evident. Juster (1986, unpublished) found, in contradiction to the neoclassical assumption that work is a pain, and leisure a pleasure (people must be compensated to work), that most people prefer a mix of work and leisure over leisure alone, and that work has great intrinsic rewards. Specifically, many people prefer a part-time job and more leisure to either full-time work and little leisure, or full-time leisure. However, as part-time jobs are scarce, people prefer full-time jobs and little leisure to full-time leisure because being at work is valued positively in our society...

Expressing all of one's preferences (under given constraints)--moral commitments included--by one summary indicator, as the mono-utility (neoclassical) theory does (typically in the price a person is willing to pay), distracts attention from the crux of the matter: the people's quest for a balance...

Stress is inherent in the deontological individual, in being a socio-economic person, because the balance between pleasure and moral conduct is not achieved once and for all. Rather as in riding a bicycle, individuals continuously "correct" tendencies to tilt excessively in one direction or the other. Also, circumstances affect the balance. For example, behavior is balanced at a quite different pleasure/moral ratio in a highly integrated community (in which there is a clear moral code, well supported) as compared to a community that is in social and moral disarray (Banfield, 1958). Hence, one would look in vain for a fixed proportionality of "that much to Caesar, that much to God." While the sought-after combination is expected to change over time and among social contexts, (1) both elements are expected to always be present, and in non-trivial amounts, and (2) much is to be gained, both in explaining and in predicting individual behavior and the aggregation of it, once the factors that modify the balance are understood.

--Amitai Etzioni, The Moral Dimension: Toward a New Economics

The trouble is the social contract was poorly written

Written? What play book are you working off of that has a written 'social contract'

and unenforceable.

That is due to the verbal and vague nature. There is no contact.

Most pensions and SS have written rules and policies, but they won't work out that way. The "fine print" of law and policy changes will eat people alive. 401Ks won't be much better, probably.

The rest is just cultural mores which will shift when they need to. We'll have younger generation who wonders why all the oldsters are so cranky.

Second to that is the simple expectation that you can "make" future people support a contract that is not in their best interest...

The rest is just cultural mores which will shift when they need to.

I could not disagree more. Although your ideology sounds compelling and logical, there is little empirical evidence to support it.

I'll let Etzioni respond:

[T]he fact is that neoclassicists have labored long and hard to show that practically all behavior is driven by pleasure and self-interest...

In his 1986 presidential address to the Public Choice Society, Mueller stated: "And I submit, the only assumption essential to a descriptive and predictive science of human behavior is egoism..."

The specific propositions advanced by various members of the Public Choice school follow:

(1) Individuals will not allot resources to public goods...

(2) People are expected to free ride whenever they can get away with it. That is, they are expected to let others pay for a public good since they can use it even when they do not pay for it...

(3) People are expected to be more inclined to free ride in large groups than in small ones, because here it is more difficult to tie efforts to rewards ("shirking" is said to be easier). Members of a large group will not contribute to activities on behalf of the collectivity...(Olson, 1965)..

A large number of experiments, under different conditions, most of them highly unfavorable to civility, show that people do not take free rides, but pay voluntarily as much as 40 percent to 60 percent of what economists figured is due to the public till if the person was not to free ride at all. The main reason: the subjects consider it the "right" or "fair" thing to do. (For an article about these experiments, as well as a report of their own, see Marwell and Amers, 1981, pp. 295-310).

An overview of the available evidence concludes: "The logic of the problem of collective action [as captured in the Public Choice school] is both compelling and illuminating. The problem with this logic, however, is that empirical evidence for its ability to predict actual behavior is either scant or nonexistent. The fact seems to be that under the conditions described by the theory as leading to free riding, people often cooperate instead." And, "in over 13 experiments we have found that subjects persist in investing substantial proportions of their resources in public goods despite conditions specifically designed to maximinze the impact of free riding and thus minimize investment. The prevalence of such economically 'illogical' behavior was replicated over and over again. Nor do other experiments find their subjects behaving much differently (e.g., Bohm, 1972; Brubaker, 1974; Schneider and Pomerahne, 1979)."

--Amitai Etzioni, The Moral Dimension: Towards a New Economics

I admit I was stretching a bit, and I certainly have little researched support, but there is a bit of apples and oranges in your superb response. An individual wanting "to do right" in a situation of possible "free rides" is a bit different than the case in which one party believes they have already earned a ride that somebody else must now pay for.

In some cases, such as SS and maybe big-industry pensions, there will simply be no way for the current workers to support the retirees to the level promised. If the gov't can't borrow enough money to cover SS and medicaid (and I think it won't) it will just try to inflate its way into solvency, and decrease benefits (and/or decrease benefit inflation escalation) until the numbers work. The people depending on the dollars will feel (and be) screwed, but if the economy won't bear the load what other option is there except putting people back to work?

I think what the research above shows is that many people will elect to work even if they should have had money coming to them, and many taxpayers will suck it up and pay as much tax as they can. Maybe the retirees will get the 40-60% the studies above found?

Edit - A note from the CATO institute, circa 1997:

As everyone on this Committee knows, the long term financial outlook for Social Security is bleak. Depending on how it is measured the unfunded liability of the system ranges from $3 trillion to $5 trillion. This is much like a second national debt. Yet the financial sustainability of Social Security could be assured with a series of conventional reforms that include raising payroll taxes and reducing future benefits. Though young people, of course, are none too enthusiastic about these "pay more in, get less out" solutions.

the unfunded liability of the system ranges from $3 trillion to $5 trillion. This is much like a second national debt.

That was before the last years of GWB's presidency (on & off balance sheet national debt).


It was pretty obvious to me a long time ago that with all the boomers stampeding for the exits starting right about now, there was going to be a whole lot of stock sellers and not nearly so many stock buyers, even if times were good.

The time for most boomers to disinvest in stocks was right about when that damn fool "Dow 36,000" article came out in 1999.

The ability to store wealth (especially through financial instruments) could be a thing of the past.
This is going to make things very interesting.

A flight to gold, perhaps?

But they'll come and get you anyhow:

From: President of the United States Franklin Delano Roosevelt
To: The United States Congress
Dated: 5 April, 1933
Presidential Executive Order 6102


Section 2. All persons are hereby required to deliver on or before May 1, 1933, to a Federal Reserve bank or a branch or agency thereof or to any member bank of the Federal Reserve System all gold coin, gold bullion, and gold certificates now owned by them or coming into their ownership on or before April 28, 1933 ...

I posted this exec order complete, a few weeks ago.

I have also said, and it becomes more important as each day passes.

Get out of the US financial system completely. I have, only keep 6 months cash on hand for any sudden need and to pay daily bills.

I have NO faith in the runaway train, being stopped anytime soon.

Respect -- somehow I missed out on your posting.


While I don't believe that we are going to just go back and replicate the way things were before the FF age, I nevertheless, believe that understanding how people lived then offers some useful insights into how people might be living in the post FF age. In particular, I believe that if they were doing something in the pre-FF age, then I tend to discount claims that such will be "impossible" in the post-FF age.

The truth is that most human societies, for most of human history, found it difficult to generate enough of a surplus to enable more than a small percentage of the population to be employed in something other than food production. We might argue about whether or not the things that this lucky minority were engaged in were or were not productive and socially valuable things, but that does not change the fact that there is a fairly low upper limit as to how many of such people a society can support, however they may be employed.

I thus have good reason to expect that in our post-FF age, most societies are going to have to put a majority of their population back to work on the farm. What will those precious few do that society might be able to support through hard-earned, meager surpluses? I don't know. Societies have often supported elites engaged in what now appear to us to be utterly unproductive, wasteful activities. What I do know is that we won't be able to afford to support very many such people.

The truth is that most human societies, for most of human history, found it difficult to generate enough of a surplus to enable more than a small percentage of the population to be employed in something other than food production.

The problem with this is that you are confining yourself to history. Look outside of history, meaning beyond the boundaries of "civilized" societies in the last 6000 years and most all human societies prior to the advent of "civilization." If you do, you will find in those societies that people spend a small fraction of their time in food production activities.

Look outside of history...you will find in those societies that people spend a small fraction of their time in food production activities.

You're extrapolating from historical gatherer/scavenger societies, for instance Khosian speakers of the Kalahari, to prehistoric peoples of the environment of ancestral adaptation. Truth is, we don't know how much time peoples of the ancestral environment devoted to various activities.

I imagine that the Victorian era is probably close to what we will end up with. But, in reverse. It was a period of immense change when both the old and the new occupied the same time and space. Only the old was being replaced by the new, we will probably see the new being replaced with the neo-old.

Resilience will be the ability to use both the new and old ways seamlessly. It may not look like the Victorian era, but the underlying trends may be similar. We will use whatever we can, introducing older methods when modern ones become less feasible.

Again - smock-wearing rural bucolic idealist alert. Get A Grip. You think the moneyed class are going to labour in the fields ? The same people who maneuvered you into all that debt and strangled your income to tie you into the system ? The same people who have locked down their wealth right now and are watching and waiting for the right time to buy the assets back at penny rates ? The same people who pass the laws, control the police, the army and the media ? LOOOOOL.
Newsflash - it will be YOU in the field. Maybe there will be bankers, realtors or executives alongside you but then there are bankers and there are bankers - but not the big boys. The vast majority will be dirt poor - possibly happier for it but not while you can see the castles and smell the roast chicken while you eat beans.
This is where we're going unless someone is brave enough to blow the whole thing open and call the hand.

Most people are going to end up working in the fields in the post-FF era no matter what happens - see my post above. One need not dream up any conspiracy theories about this, there is only one conspirator necessary - Mother Nature.

There will probably be a small elite that will be enjoying a life of luxury while most people toil and live in poverty. That has been the norm for most societies, most of the time. We might not like it, but it is true. To my way of thinking, the best we can hope for is a relatively humane and benign society. We might be destined for grinding poverty, but having our noses ground into it by arrogant, brutal elites is not an inevitable and unavoidable outcome.

People who work hard do not spend just as well. Fat cats need wealthy spenders so they can get even more fat.

Sorry, it is what it is.

Peak Diamonds?

De Beers May Cut Diamond Supply by 50% on U.S. Slump

Jan. 21 (Bloomberg) -- De Beers, the world’s largest diamond producer, may cut the amount of rough gems offered to its customers by 50 percent until April after U.S. retail sales slumped over Christmas.

Retail sales in the U.S., the world’s largest diamond market, dropped 15 to 20 percent over Christmas and “underperformed” compared with the company’s expectations, said Varda Shine, the head of Johannesburg-based De Beers’s marketing unit. The drop in full-year U.S. sales was in “the high single digits,” Shine, 45, said in a speech, a copy of which was e-mailed today.

Consumers in the U.S., which accounts for about half of global retail sales, are reining in spending as the economy shrinks. Global demand contracted marginally last year and will do so again this year, Shine said.

It is impossible to exaggerate the environmental problem facing humanity in the twenty-first century.

DOOMER PORN !! Thorium fission & electric trains, or SOMEthing, will save us.

...under a regime of business as usual we could be facing an irrevocable “tipping point” with respect to climate change within a mere decade.

Notice how there's always a decade, or some time interval, remaining, in which we have the chance to get our act together. I contend that irrevocable forces have already been set in motion, that are in the process of undermining the very environmental foundations upon which human agriculture & energy provision rest. I contend that these forces are acting with amazing rapidity from the ecological, evolutionary & geological time perspectives and it is only because most people are so myopic that profound disruption may appear to be having a slow onset. Changes that naturally require periods of 10^4 - 10^6 yrs. are currently taking place on the order of 10^1 - 10^3 yrs. due to anthropogenic factors. Range shifts & natural selection can't keep pace with the rapidity of change, resulting in mass extinction of a magnitude not seen since the end-Cretaceous. Human civilization can't withstand such dynamics and the human species itself is likely to be taken down by the very processes it has initiated.

Notice how there's always a decade, or some time interval, remaining, in which we have the chance to get our act together.

I suspect that some of this is a "lessons learned" from some of the over the top warnings from the 70s. This discussion has been going on for a very long time, at least since Carson's "Silent Spring" (although if you look hard enough you'll find it even before that in intellectual circles). But, the point is, many of the "alarmists" of the 70's were pilloried in the public square, so now those who want to draw attention to these issues are always careful to end on a positive note - allowing for time to act, possible easy solutions, etc.

But, the point is, many of the "alarmists" of the 70's were pilloried in the public square,

Alarmists in quotes, indeed. The point you really bring home is that the prophet is never welcome in his/her home town/nation, right? Thing is, they weren't alarmists. They were simply right. Carter was right. We have started decades too late. Same with PO. Same with population. Same with everything.


Consider that humans are integrated into the natural world. We are but a segment of the ecology, not independent of it as we like to think. Our anthropogenic "cause" of climate change (and resource depletion, and overpopulation, and soiling our environment) may be nothing more than a natural part of nonlinear periods of expansion and collapse, of ecological flourish and extinction.

Consider that as part of the natural forces of reality, we humans are less the causes of what's happening and more only being swept along, and perhaps cannot "change" no matter what. Parts of humanity may be beneficially selected by the natural forces already in motion, or we may all be buried. And the ability to affect the change we desire may be nothing more than an illusion, because there is no-one actually in control.

It's really very easy to state the threats facing humanity in the 21st century.

"All of us may be extinguished. Everything we have ever achieved or even dreamed may have been for nothing."

The occupants of a lifeboat may belong in the lifeboat, and they may eventually starve or drown in spite of their best efforts to avoid it. But they are being just plain stupid if they start chopping up the lifeboat for wood and build a fire in the boat to stay warm.

I suggest that we stop worrying so much about humankind's ultimate fate, and start worrying more about how we can stop ourselves from doing so many stupid things right now.

From the ASPO newsletter:

....On the other hand, his election, which required massive funding, suggests that he relied on more than the simple ballot box. Indeed, the financier, Rahm Emanuel, who has apparently served in the Israeli Army and is the son of a former member of the Irgun Zvai Leumi terrorist movement, has been appointed as Chief of Staff, suggesting that the established influences will remain in power.

The ASPO seems to go deeper and deeper into the lunatic fringe.

What part of the above are you suggesting is "lunatic"?

Obama's Pick for Chief of Staff Tops Recipients of Wall Street Money

A day after being elected president and acknowledging "the worst financial crisis in a century," Barack Obama asked one of the biggest recipients of Wall Street campaign contributions to be his chief of staff. Rep. Rahm Emanuel, the Illinois congressman who was an aide in the Clinton White House, was the top House recipient in the 2008 election cycle of contributions from hedge funds, private equity firms and the larger securities/investment industry--not the most popular of industries in the current economy.

Rahm Emanuel is a despicable thug. I knew the best we could hope for after this appointment was a center-right selection from the bureaucratic elite. I was not disappointed. It appears from the cabinet that Hillary won the election. On a micro level, I do believe workplace, women's, and the environment will have positive change.
As far as confronting a superstition based economic and social model, it would be impossible with the current Obama team.

It seems to me that Khebab is suggesting that ASPO's digression into Zionist conspiracy theories digresses and saps credibility from the ASPO and by proxy, peak oil discussions in general, particularly as PO has recently begun to emerge from the fringe a real issue.

It's interesting these comments would be seen as comment and "opinion" in most parts of the world (and certainly the UK/Ireland from which the newsletter originates). But Zionist conspiracy theory in the US.

All the comment seems to boil down to me is saying expect a strongly pro-Israel (relevant to ASPO because of middle east oil and possible repurcussions) and pro big money stance if Emmanuel's past is anything to go by.

There's an article by Time Magazine's Cairo Bureau Chief which explains some of the concerns.

Obama Mideast Watch: Rahm Emanuel

Yet, news of Emanuel's appointment is causing a stir in the Middle East. It's being met with some elation in Israel, a country that has been notably uneasy about an Obama presidency, and some despair in the Arab world, which had largely embraced Obama. An Oxford-educated Arab friend called Thursday night to ask me in a tone of deep disappointment, "Did you notice how in the span of 24 hours Egyptians went from being ecstatic to being depressed about Obama?" The Arab News in Jeddah, whose editorials are a good reflection of the Arab mainstream, did an astounding somersault on Friday. Just the previous day, the paper hailed the "symbol of hope and change" in the U.S., saying Obama's historic election "threatens the cosy Washington consensus. We are, therefore, embarking on exciting times." After hearing of Emanuel's appointment, the paper headlined its next editorial "Don't pin much hope on Obama." Arab expectations, the paper warned, "are likely to be dashed, generating a great deal of pain and resentment...The new team may turn out to be as pro-Israeli as the one it is replacing."

Obama has repeatedly said that he wants people around him with differing viewpoints, and the COS doesn't set ME policy, so I don't see it as a major thing either way.

And where are these "differing viewpoints"? This is a very homogenous Cabinet, about as center- right as one could get. I would not hold my breath.

It's very true that Obama's cabinet is center-right. But earlier today he provided initial evidence that at least some of his flowery rhetoric will translate into meaningful concrete actions.

Obama Freezes Pay, Toughens Ethics and Lobbying

Jan. 21 (Bloomberg) -- President Barack Obama said he’s freezing the pay of senior White House staff employees who make more than $100,000 a year and imposing new ethics rules designed to diminish the influence of lobbyists.

Obama also said he is ordering federal agencies to make it easier for the public to get documents and information from the government.

In all, Obama signed two executive orders and three presidential directives aimed at making government more open and accountable and taking steps toward fulfilling some of his campaign promises.

Regarding the pay freeze, Obama said he is acting because “families are tightening their belts and so should Washington.”

With their pay now frozen [a good thing overall], I expect the US govt employees to eventually start imitating the Zim govt employees who increased their pay by moving to smuggling/selling/stealing 'real assets' such as FFs & I-NPK.

Hopefully, there will be plenty of watchdogs to prevent this from occurring plus early adoption of replicating the Bangladeshi military 'shoot-on-sight' policy. As the Zim saying goes, "A 100 trillion dollar currency banknote doesn't buy much nowadays".

Have you hugged your bag of NPK today?

Here's the quote from ASPO:

"On the other hand, his election, which required massive funding, suggests that he relied on more than the simple ballot box. Indeed, the financier, Rahm Emanuel, who has apparently served in the Israeli Army and is the son of a former member of the Irgun Zvai Leumi terrorist movement, has been appointed as Chief of Staff, suggesting that the established influences will remain in power."

I suppose I am unsophisticated about international opinions but if the characterizations above are not intended as suggesting conspiracy then they suggest an inherent antisemitism.

In fact, as I read it again, I think the latter is the case as well as their disconnection with the "facts on the ground" that the vast majority of Obama's money came from small donations from millions of individuals not from "established influences" whoever they are.


I also noticed they refer to Iraq as "landlocked" which it of course is not unless the major port of Basra doesn't count. Not much of a coast, I admit, but a coast nonetheless.

I trust ASPO analyses but this is the second time I've commented on lax editorial standards. A problem considering the importance of their mission.

Regarding the middle east, I think they're all crazy (Israel, Arabs alike). I would be too if I lived in the middle of that madness.

We used to have a law here in the US to the effect that if you serve in a foreign army, you lose your US citizenship. This seems to me to be a perfectly good law, and should never have been dropped.


I have no opinion on that.

But I wonder how Hemingway's character Robert Jordan, an American teacher in "For Whom the Bell Tolls" who lost his fictional life fighting for the anti-fascist's in the Spanish Civil War, would be viewed in the context of that law.

Private individuals fighting wars overseas annoys the government. They don't like the competition.

I noticed the "landlocked" flub as well, which does little for their credibility.

That said:

One is led to conclude that the entire Stock Market, including especially the oil market, has become a thoroughly debased speculative institution.

Sounds about right.

Stocks up on financial rebound http://finance.yahoo.com/news/Stocks-up-on-financial-rb-14118250.html

The Dow closed up 280 points.

"People are excited because financials are valued so low at this point. It's the mentality that they can't get any lower, but they've proven time and time again that they can,"

The banks are insolvent, period. Until mark to fantasy becomes mark to market, the very necessary unwinding will not happen nor will market capitulation.

I think this delusional denialist behaviour will continue to carry over into ACC and PO, guaranteeing Robert Hirsh's worst case scenario.

Compared to us, yeast has a PhD.

"Compared to us, yeast has a PhD."


ASPO does great work. We need to remain critical.

Also, I imagine it's the technical analysts reaping the profits these days. Squiggly lines make sense especially when lacking fundamentals.

Rahm Emanuel's father was quiet helpful in this matter. He said very specifically that his son would do what was right for Israel IIRC.

I suppose I am unsophisticated about international opinions but if the characterizations above are not intended as suggesting conspiracy then they suggest an inherent antisemitism.

No they don't. And it's about time people stopped playing the anti-semitism card every five minutes.

Fault-line between Jews over Gaza

Some of the strongest language elsewhere has come from British Jews, notably Gerald Kaufman - a leading figure in the Labour Party.

He accused Israel of exploiting the guilt felt by non-Jews in order to continue its offensive in Gaza.

Sir Gerald, who has been a stern critic of Israel in recent years, said: "The present Israeli government ruthless and cynically exploits the continuing guilt from Gentiles over the slaughter of Jews in the Holocaust as justification for their murder of Palestinians."

In a speech in the House of Commons, Sir Gerald recalled how his grandmother was shot by invading German troops as she lay ill in bed.

In a stinging rebuke, he said: "My grandmother did not die to provide cover for Israeli soldiers murdering Palestinian grandmothers in Gaza."

It is very possible to criticise particular policies without being anti-semitic.

Not in America, it seems.

Regarding the middle east, I think they're all crazy (Israel, Arabs alike). I would be too if I lived in the middle of that madness.

I agree, so does Sic Semper Tyrannis:

Adults would find a workable compromise in order to make an end of the craziness of white phosphorus shellings of schools filled with refugee civilians followed by scenes of defiance that will inevitably lead to the murder of more children. Clearly, there is a scarcity of adults in the Holy Land.

Useful gas find offshore Israel: possibly 3Tcf:



Khebab, you write:

The ASPO seems to go deeper and deeper into the lunatic fringe.

Could you elucidate? The article seemed quite sensible to me. At any rate a few paragraphs further down the author (CC, I presume) writes:

Meanwhile, desperate efforts are being made around the world to shore up the crumbling financial system. For example, the Bank of England has radically reduced interest rates in a country facing a severe recession, effectively taking money from savers to give to spenders. The Government has evidently failed to grasp the underlying causes of recession and hopes that pumping a bit of money into the system will restore it to its previous condition. That was premised on eternal economic growth, which is a somewhat unrealistic proposition for a Planet of finite dimensions, but Governments subject to re-election are by nature short-term in their thinking.

More like the 'sanity fringe' than the 'lunatic fringe' IMO.

But then one man's tinfoil hat is another man's thinking cap.

U.K. Natural Gas Declines as Chevron Starts Britannia Field

Jan. 21 (Bloomberg) -- U.K. natural gas for delivery today declined after Chevron Corp.’s North Sea Britannia field started yesterday evening following an unplanned outage.

...Russian gas deliveries to Europe via Ukraine started yesterday, relieving some pressure on U.K. gas producers from buyers on mainland Europe.

Deliveries to Belgium are forecast to decline today to 16.5 million cubic meters from a high last week of about 51 million, according to a Web site run by Interconnector (U.K.) Ltd., operator of the pipeline between Bacton and Zeebrugge.

Interestingly the volume of gas being shipped out of the UK had already fallen sharply in the last few days (by about 60%) from last week's peak even before the restoration of Russian gas. I wonder if someone finally woke up somewhere...

"Coincidentally" the export reduction seems to have started right after The Daily Mail published an article about it.

It seems strange to me that here on TOD the concept of "The Black Swan" is common knowledge but yet no one here is including it in their forcasts ... ie 'no forcast is worth the paper it is written on' ... just so much BS. Sorry if I offended any of the absolute forcasters but it is really nonsense because no one knows all the variables.

Who knows what wonders Greenland could reveal when the icecap recedes?

I don't think you can include a black swan event in your forecasts. That's kind of the point - a black swan is an unpredictable event.

Benevolent aliens would be my preferred Black Swan - Vulcans would do (but without the Global Nuclear Holocaust first preferably) :-)

all it means is that whatever your predictions, you need to have a wider confidence bands - on everything - doesn't mean that predictions are BS or worthless. in my minds eye I can envision many possible futures based on the data I see and incorporate - but I overlay a 10-15% 'i have no idea' on top of the whole distribution - and even that is probably too small. The existence of black swans in no way invalidates predictive science - just means that those who underestimate 5 std dev events will be wrong more often than they expect

I think you are knocking down a straw man.

I think most of the forecasters here are well aware that "black swans" can (and do) come along, and are quite clear about their models' assumptions.

Forecasting is not simply "so much BS", nor is it nonsense. Modeling is all about trying to understand what the variables are, what directions they work in, and how they interact, what feedbacks might occur. Unforeseen feedback mechanisms are a whole class of black swans, so trying to tease them out is useful.

Of course no one knows ALL the variables, but that doesn't make the exercise "really nonsense", as you put it.

I think you are being a bit absolute and dogmatic here yourself. Your attitude is really just another way of saying "I don't want to think about complex things - it gives me a headache. Let's just ignore the juggernaut headed our way, and continue with BAU."

I'd liken it to driving a car. Forecasting can tell if you are heading towards a cliff and ought to divert soonist. Of course there is always the possibility that a vast hole will open up ahead of you on a smooth road; or that you will magically do a 'roadrunner' when you eventually drive off the edge of a cliff.

However most people in most situations would consider keeping their eyes open when they drive a sensible option.

Black Swan events are useful to consider when analyzing the robustness of a system's response to perturbations, but by definition they happen rarely and so must be discounted for any reasonable forecasting time-frame.

Plus, one man's black swan is another man's proof of genetically predicted outcomes. Those who research, model, and understand their systems are generally much better equipped to deal with unexpected events. Was it Yogi who said, "The harder I practice the luckier I get?"

From my perspective, the possibility of black swan events is not a major concern in and of itself. The fact that our current approach to markets, infrastructure, personal economics, etc. discounts the possibility of ANY perturbation event is a critical weakness. It seems that every subsystem is optimized for output rather than robustness, which creates the likelihood of cascading failures with few opportunities for make-shift mid-crisis fire-breaks. Ideally, a black swan in one area of our world would cause isolated faults as assumptions were invalidated, but without cross-coupling into other areas. Unfortunately, I think the latter is at hand.

Paleocon -

As I recall, one of Taleb's main points regarding Black Swans is that just because there is a very low probability of their occurring does NOT mean that they should be treated as insignificant. In simplistic terms: a highly significant low-probability event may deserve far more attention and worry than a high-probability event with lower significance. And I think this is where Taleb says many predictive models get into big trouble: their bases and assumptions tend to define away the possibility of Black Swans playing any role. I guess it boils down to a matter of what the model is for and how and by whom the boundaries of the model are set.

That being said, I am not against modeling as a tool to define the pertinent variables of a complex system and to explore the hypothetical behavior of that system under various scenarios. But I think where people sometimes get into trouble with models (particularly financial ones) is when they unconsciously lapse into the mindset that they have somehow magically created a crystal ball actually capable of predicting the future. No such thing.

Incidentally, I am in full agreement with you regarding the weaknesses inherent in stressing output efficiency over robustness in large complex systems. We've got to give such systems more slack, even if it means less than optimum performance, as a single major catastrophic event can in an instant easily wipe out a year's worth of efficiency gains.

I think that most of us here who are at least somewhat well educated understand that most projections and forecasts posted here only hold valid if an ABSENCE of "black swans" is assumed, and that this is a very dubious and improbable assumption.

The problem is that by definition a future black swan is unknowable and unforseeable. If that were not the case, then it wouldn't really be a "black swan".

There are techniques that can be used to identify what magnitudes of changes to what variables would cause the most severe discontinuities to forecasts. It might be a useful exercise for someone to dive into.

There are at least two classes of 'black swans':

-- (a) the ones that wéren't envisaged by the goofballs who haven't read Taleb's 'The Black Swan'
-- (b) the ones that haven't been envisaged by anybody, not even TOD smarts who HAVE read TBS.

Category (a) would include the subprime crisis, peak oil, etc

Category (b) would include ... well, dunno. If I did, it wouldn't be a Black Swan, would it?

Or as a certain Very Unpopular Person once said, "there are known unknowns, and then there are unknown unknowns".

Or as a more popular person once said:

"It's tough making predictions, especially about the future".

Making predictions is easy.

Being consistently correct is a whole other matter.

And when your predictions fail, you have three choices:

A. I didn't have all the data.

B. We are dealing with a multi-variate nonlinear system.

C. The lord works in mysterious ways.


As Yogi Berra says, "It's tough to make predictions, especially about the future".

Nevertheless, here are some updated forecasts.

Forecast gross world supply additions show a decreasing trend to 2012 due to delayed projects caused by credit constraints and low oil prices. This decreasing trend is likely to cause another high oil price spike.

World Supply Additions including Yet to be Sanctioned and Yet to Find to 2020 - click to enlarge

The low oil prices have caused OPEC to announce production cuts of 4.2 mbd from September 2008 levels. World crude and condensate (C&C) production has probably fallen off of its peak plateau now. C&C is estimated at 71.1 mbd in Jan 2009 which assumes that OPEC will comply with 75% of its announced cuts.

World Crude Oil & Lease Condensate Production to 2012 - click to enlarge

The long term forecast to the end of this century remains unchanged. The peak year for crude oil, lease condensate and oil sands probably occurred in 2005.

World Crude Oil & Lease Condensate Production to 2100 - click to enlarge

Price is especially difficult to forecast. However, the focus should be on the long term trend of price, shown by the dashed green line. I believe that OPEC is serious about making production cuts to target a $75 price. Unfortunately, non OPEC C&C production peaked in 2004 and continues declining. This could cause prices to spike upwards again. As Matt Simmons says

"We will work our way through these financial problems, but what would be really unfortunate is that once things bounce back, oil prices will bounce back too," said Matt Simmons, chairman of Simmons & Company International, at a roundtable held in mid-December. He says that supply shortages could help oil prices soar through $147 as unhindered as a hot knife cuts through butter.

Supply, Demand and Price to 2012 - click to enlarge

I believe the creator of similar graphs (Campbell) said "Barring unseen surface events ... ". while most of the forcasts here are submitted to TOD like they came from some sort of burning bush.

Picture of two hands clapping.
Wonderful response Lynford. I like your style.

Even if your wrong I still like it.
After all we are of the same generation.



As we currently do not have a ratings system I just wanted to say thank you for your detailed work on these forecasts.



Hello TODers,

When the next gasoline price crunch and/or outright shortages hit your area: I hope TODers are prepared ahead of time with the some of following choices: pedal-bicycle or trike, e-bike, bicycle with small ICE-kicker motorkit, ICE-moped, scooter or small motorcycle, Piaggio 3-wheel scooter or multi-Mfgs 4-wheeler ATV [for those who have balance problems or face the propect of bad roads and weather].

Consider that a 100cc scooter engine screaming its heart out at 50mph is probably still burning much less gasoline than a 6.0 liter [6,000cc] V-8 engine in a pickup or SUV idling in a fast-food drive-thru with the A/C running full blast inside the cabin.

Consider how much of our urban and suburban travel time is actually spent just sitting in your vehicle waiting for the traffic-light to turn green. Imagine 60 scooters idling with 120 [rider and passenger] burning less fuel than a single, large SUV. Then even more gasoline conservation when the scooters are moving compared to the vehicle.

Also, the riders are much more inclined to turn off their engines at a long light or RR-crossing, while the vehicle owners seem to delight in keeping the A/C pumping. How many CCs is the average A/C compressor in an SUV? It wouldn't surprise me if it is more than 750CC and requires 20 hp or more to power it.

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

Imagine 60 scooters idling with 120 [rider and passenger] burning less fuel than a single, large SUV. Then even more gasoline conservation when the scooters are moving compared to the vehicle.

No need to imagine, you just described every traffic light in Bangkok. At some intersections, the cars stop about 25 feet back from the DOT line to give the scooters room to congregate at the front.

Sounds like someone has been working in Benchamas. Been to NEP lately? :-)

Sounds like someone has been working in Benchamas.

Sadly, not since 2006. I was often amazed by people's ingenuity when I would see the variety and quantity of things that people would carry on scooters (a family of four with everyone holding cargo was not an uncommon sight, and a 16-foot extension ladder wasn't out of the question).

When scooters become more prevalent than autos, due to fuel consumption and cost of acquisition, the majority rules the road. Beautiful country, horrendous traffic.

And beautiful people. I was always fascinated by the various modes of transport and how they all coexisted. Very Thai.

I was there last in late '07. The BTS extensions and the subway don't seem to have helped much. The pollution was horrific.


Kuhn Bob

Hello OilfieldTrash,

Thxs for responding with a real life example. Sure wish my Asphaltistan would allow lane-splitting and pole-position congregation gathering at intersections like Bangkok. This minor incentive could conserve much postpeak gasoline. I fear my local leaders, caught up in the Iron Triangle, will not move in this direction, thus locally wasting untold millions of gallons of gasoline. Unfortunately, when the crisis hits: I also fear that the Mfgs of these pedal, batt-powered, or small-ICE transport options will not be able to sufficiently ramp production in the time required.

Any one know why crude market flattened like crazy today. Long contango reversed almost $6.5 per barrel - it started 2 months out - by dec 09 was down $3 and by 2016 the spread was $6.7 (front month up almost $3.5 back month down over $3)

on surface it suggests either some hedge fund squaring/bailing (always the wimpy answer for "I don't know" or the Sleestaks are giving back their oil? Ideas?

I don't see what you see when I look at the NYMEX chart.

Dec 09 up 0.65 to 54.29 ; Dec 16 down 0.17 to 71. Am I missing something?


their page hasn't updated yet - try here

To my knowledge, as % of price this is biggest one day move in contango ever (nearly 15%)

Ok, I'll throw some ideas. What if the market was simply due to normalize again? Prices for future delivery couldn't fall as quickly as prices for front contract did (from summer 08), as front contract is far more traded and somehow all this time a rebound of oil price was probably expected.

Moreover, January stockmarket downturn also made prospects for economy quite grim. Yes, we had a rally today (hence the rally of the front contract), but we were at approx. S&P 940 two weeks ago and fell more than 10 percent from there (so still clearly in a bear market). I wonder if on the less traded contracts there's lag. If just a few traders trade big there, the move can happen anytime.

Finally, maybe it's also important that Feb contract expired yesterday.

disclaimer: I do not trade oil yet ;)

It appears that my DBO isn't worth a bucket of warm spit. It was only up 70 basis points today.

Food banks: 30% rise in needy

Nationwide, food banks are reporting a 30% increase in the number of people seeking assistance -- double the increase reported just six months ago, according to Feeding America, a network of more than 200 food banks across the country. The organization says food banks serve 25 million Americans of the 35 million it estimates are in need of food banks's services.

As a result of growing demand, 72% of food banks have been unable to adequately meet needs, resulting in cut backs in the amount of food they make available to pantries that serve food.

This site is absolutly amazing! All of the smart (or semi-smart) analysis of the world and how progress revolves around energy. Well, energy is a factor. But, a more realistic view of the future depends not on energy but on the trend in computing power. If it continues on the course of the last twenty years [that is a conservative stretch since all progress in the last 20 years vastly surpasses a trend line from 20 years ago - genetics, robotics, productivity (all dependent upon computatonal power)] suggests that by 2050, a $500 laptop will have more computational power than the combined power of every human being alive today. So, in the face of that, most here are predicting a Kunstler view. And, many here wallow in the sorrow of why their lives are not better. Well, you have no vision (and never had any).


No kidding. Wha? There has been some crazy word salad posts around here lately.

Speechless.... just speechless.

There has been some crazy word salad posts around here lately.

You too eh? I thought it was just me.


A salad you can eat, but try eating "computing power".

.. no no not so, jblunt just had a brain salad surgary.
He is excused, cus' his mind became reset to the 1990's.

My interpretation: jblunt is sick of all the doomerism and has had it up to here. I am a bit depressed myself with all the gloom and doom around here. What is really depressing is that, with the exception of the price of oil, the predictions of doom made here have by and large come true. To make things worse, I have no problem with the analyses posted on this site that suggest that an economic recovery is unlikely and even it were to happen cannot be sustained.

I have always had difficulty with an economic system that allows the financial services industry to appear wealthy and consume disproportionate amounts of resources. I have often wished that it were not so. I guess I should be careful what I wish for.

I do not see the likelihood of any technological savior arriving in time to allow us to continue business as usual and allow for the prospect of perpetual growth. I guess jblunt is betting on the opposite of a black swan, some unknown abundant energy source being discovered or some extremely rapid progress on one of the known technologies to save the day (eg. fuel cells, batteries, fuel from algae, fusion, Thorium reactors or highly efficient, cheap PV). What would you call that? A white swan?

Alan from the islands

Won't matter. Computational power can double, triple, quadruple, whatever. But when you add sufficient parameters to make for a realistic model, computations explode factorially. This is why heuristic methods are necessary. No guarantee you won't become trapped in some local optima. Computing power is no more the panacea than thorium powered electric wheelbarrows are.

A lot of hedge funds blew up lately, even though a lot of them used models for trading. I read in fall 08 somewhere (sorry, no link) that one hedge fund manager complained: "On Wednesday, three things happened, that should happen once in 10.000 years." Of course they took a huge loss. Also LTCM (blew up in 1998) was top notch. Models are flawed somewhere, but since someone is selling them, the common knowledge is (or perhaps it used to be) that they work.

It works until it doesn't. Like our society.

BMW - good post, but why is everyone here in LOVE with climate models 100 years into the future???

I don't think anyone is in love with climate models. If anything, recent events show the models are far too conservative. Clearly, there's something we don't fully understand. (And the models are what makes that clear.)

Hello Jbunt,

Kind of tough for Moore's Law to keep advancing exponentially, plus any societal computing advancement, if this trend accelerates postPeak:

Intel to cut jobs as it consolidates manufacturing
I got laid-off from Intel way back in 2003. The digital amputation of the workforce continues...

When the time comes: people will gladly abandon the WWWeb, then sit in the dark, to keep food coming for their family. Recall the recent link and graphic discussing how over a million web-pings have disappeared.

I suggest you consider getting some NPK going as a farmer will be more willing to trade foodstuffs for future-oriented fertilizer than if you offer him a big-screen HDTV, or a desktop computer and big CRT monitor. These farmers are generally early to bed, early to rise; they cycle their sleep with the nightly occurring darkness so they can get things done when the sun is shining. IMO, they will be the first career field to successfully continue functioning without electricity. What will Intel make with highly sporadic or no electricity?

Just as the economic crash may occlude visibility of peak oil and whether Hubbert's curve was "accurate", the crash may also spell the end of Moore's Law despite some head-room for continued improvement. Without a very strong market, it will be hard to see the current performance increase rate hold for more than one more generation.

In the short term, companies will cut back and wait for recover on the production/sales side, but they'll be scrambling like mad internally to 'scoop' the competition for the next generation, striving to increase their share of a decreasing market. Then, inevitably, some will fail and fall out of the race, and the pace will slow until the market grows again. Except it won't, and Moore's curve will tail over at last and we will most likely never get to the point of having computer sentience to worry about. Which is too bad, since we could really use something smart on this planet. But then, if we did, the cybernetic-genius would probably decide the world didn't really need many of us anyway.

Having worked with computers starting more than 40 years ago, please tell us how you can fly an aircraft with a computer but no fuel. Also, how will all your postulated computer power keep your house warm on a cold night, absent some external energy source.

E. Swanson

Answer Question #1: Slingshot.

Answer Question #2: Tubes.


Well, you have no vision (and never had any).

And besides, Al Gore is really fat!

But, a more realistic view of the future depends not on energy, but on the trend in computing power

There are a whole lot of "trends" besides that of oil production that could obliterate the expected singularity in computing power.

One disturbing "trend" ... well at least in the USA, is the rising rate of high school drop outs and rising rate of functional illiteracy.

Who is going to need these high powered supercomputers (or know how to use them) if trends continue?

Other disturbing trends include rising jobless rate, rising bank failures, rising social discontent, ... need we go on?

--just another optimistic doomer

What Groves (Intel)giveth, Gates taketh away.
Wonder how long that year 2050 laptop will take to
wake up and actually do something useful w/o rebooting for updates.
Perhaps it's not Peak Oil, it's unmanageable bloatware that is the root cause of all evil.

The clue, Jbunt, and I'll admit, it's subtle..

Windows still ships with Solitaire. AND.. people still play it!

(it was funny. On a plane trip a year back, and there was an old lady across the aisle with a deck of cards, and a 'dude' up ahead with a laptop.. both playing solitaire.)

So, if the 'card deck' in Window's solitaire is set up as a House of Cards, but the machine is never powered on again, can that house of cards fall?

Keep fightin', ya rebel!

a $500 laptop will have more computational power than the combined power of every human being alive today.

Well maybe it could adapt to generate it's own power by evolving little solar panels and develop a new form of photosynthesis. It might even morph into a Silicon (as opposed to Carbon) based reproducing life form. It would then be the perfect substitute for all of the components of earth's current biosphere and we wouldn't need humans anymore. George Carlin, you were wrong! The reason for our existence isn't plastic, it's to lay the foundation for super intelligent non carbon based life forms.

Sheesh! I've been spending waaay too much time in front of computers lately. Reminder to self, must go hit the beach this weekend.

You heard it here first: GAP OIL. I am coining this term since I haven't seen it used before but it succinctly sums-up the prevailing situation regarding the provision and price of oil. We hear much about peak oil, and often this is misunderstood to mean that the world will imminently run out of oil. However, this is neither the case nor the definition of peak oil.

I'm sorry but that is the funniest damn thing I've read today.


Yeah! If he bothered to read a description of "peak oil," he'd know that he has just changed the name from peak oil to "gap oil."

Peak Oil has nothing to do with running out of oil reserves, and everything to do with the temporal production of oil.


"Why don't you just make TEN louder, and just make ten be the top- number and make that a little louder?"

"- this goes to Eleven."



Thanks, I needed that!

It fits right in with a commenter on a Guardian blog, explaining ACC.

"If an engine runs our of oil, it overheats. We have been taking all the oil out of the earth, so of course the earth is going to heat up"

You can't make this s**t up.

By extension, oil extraction causes earthquakes 'cos the tectonic plates don't slide as smoothly.

Can anyone please tell me when we are going to reach "peak stupidity"?

A steep decline would be nice as well, if you please.

unfortunatly I beleive human stupidity is the only thing that's infinite ! sham it can't used as a form of energy .......


I was wondering what The Oil Drum reader's thoughts might be regarding the 60 Minutes piece that ran recently, about the Commodities Futures Market being the driving force behind the unprecedented and rapid oil price increases in 2008, their assertion being that the price was greatly inflated by demand for Futures Contracts and not the actual commodity, i.e. oil? I'm going to watch it again...

http://www.cbsnews.com/video/watch/?id=4713382n (60 Minutes: The Price of Oil)

Maybe readers have already commented on this? If so, feel free to steer me to the thread.

I tend to be a big fan and advocate of the scientific method, and of systems modeling, what little I've gleaned about such things. Can anyone show us some systems schematic for the commodities markets? With flows of currency, the actually commodities, showing respective feedback loops, rate and velocity controlling elements? That would be extremely interesting, I think.


As a professed IT geek I would have assumed that you knew how to use the search function. (upper left hand corner of the page)

Please do not try to disguise laziness as curiosity. If you want to revive the discussion, by all means, but at least have the courtesy to read what has already been posted.