Drumbeat: May 6, 2009

Distillate glut may cut U.S. refinery summer runs

NEW YORK (Reuters) - U.S. refiners may curb summer activity for the first time in at least 20 years to combat brimming inventories of key transportation and industrial fuels, like diesel and jet fuel, as a slow economy hurts demand.

A glut in these petroleum products, known as distillates, is expected to pressure prices and prompt refiners to cut runs, which could mean foregoing a bump in output and revenue that usually results from operating units near full blast in May through August.

Mexico finding, expanding deep Gulf oil, gas - exec

HOUSTON (Reuters) - Mexico is having success finding oil and gas in the deep Gulf of Mexico and is ramping up rapidly to expand production, a Pemex executive said Wednesday.

Drilling activity will increase from two wells currently to as many as 10 wells in 2011, and five rigs will be working in deep Mexican waters of the Gulf by 2012, Pemex PEMX.UL exploration and production director Carlos Morales Gil told an Offshore Technology Conference breakfast meeting.

Chesapeake loses conviction buy spot

Goldman Sachs removed Chesapeake Energy from its Americas conviction buy list, citing the company's underperformance in comparison to other exploration and production, and coal stocks under its coverage.

However, the brokerage maintained a "buy" rating on the natural gas company, and said asset sale news and lower spending in the next three to six months could allow Chesapeake shares to recover.

PetroChina says it needs $22 bln in financing for 2009

HONG KONG (Reuters) - PetroChina, the world's second-most valuable oil and gas producer after Exxon Mobil, on Wednesday said it would need 150 billion yuan ($21.99 billion) to finance its operations and investment activities in 2009.

PetroChina, Asia's top oil and gas producer, said it expected to pay 84.2 billion yuan in taxes for its refined products in 2009, up 71 billion yuan from the year before, according to documents from its shareholders meeting filed to the Shanghai stock exchange.

Tallying the toll of transportation privatization

Call it a tale of two airports.

In Missouri, a plan to open the nation’s first privately developed and operated commercial airport will come to fruition when the built-from-scratch Branson Airport opens on May 11.

In Illinois, a plan to lease Chicago’s Midway Airport that was seen as a model for privatization has collapsed in the face of the global credit crunch.

Two airports, two unique approaches and two completely different outcomes. Yet each in its own way may offer insights on how the U.S. funds, builds and manages its transportation infrastructure for years to come.

No Fix for Public Transit

This was the choice faced by New York lawmakers. There were two plans on the table to rescue about eight million public transit riders in the New York City area who, unless something is done quickly, will have to pay much higher fares for sharply curtailed service.

One plan would have taken the long-range approach, shoring up the subway, bus and rail systems to hold down fares and maintain decent service for years to come. The other would be a quick political fix that holds down fare increases for the moment and puts off the hard decisions until later.

It should not come as a surprise to hear that far too many of Albany’s politicians would rather go with the cheap political fix.

Resource scarcity: what does it mean for business?

A new report, launched by Lloyd’s and the International Institute of Strategic Studies last week, advised businesses to assess their vulnerability to the increasing scarcity of resources such as fresh water, food and energy triggered by global warming.

In this, the second of two features marking the launch of the report, we explore what others are saying on resource scarcity—and what it means for business.

Nate Silver: The End of Car Culture

We are driving a lot less in this country, even less than one would have expected in a bad economy with fluctuating gas prices. The graph above charts 1) actual miles driven per capita in America during each January for the last thirty years and 2) how many miles per capita we could have been expected to drive based on my model, which accounts for changes in population, gas prices, unemployment rates, and other factors. The downward trend last year was stark. Indeed, Americans have rarely cut back on their driving so consistently for so long.

This is surely one of the signs of the apocalypse: Americans aren't driving as much as they used to.

Ford Spending $550 Million To Convert Truck Factory To Build Electric, Small Cars

Ford (F) says it will spend $550 million to convert a manufacturing facility to build small and electric cars. The current facility is set up for trucks.

Review: 'Tar Sands' by Andrew Nikiforuk

If you’ve been following energy news with a discerning eye, then you already know better than to buy into all the hype about the Canadian tar sands. Far from being a panacea for declining supplies of conventional oil, the sands could never contribute more than a proverbial drop in the bucket to daily world oil production. And even achieving this modest rate of production would require such staggering quantities of water, natural gas and boreal forestland as to leave Alberta resembling “a third-rate golf course in the Sudan” before the bulk of the sands’ 175 billion barrels had ever been produced.

The Sudanese-golf-course quote comes from Andrew Nikiforuk’s new book Tar Sands, a powerful, eloquent litany of horrors associated with North America’s frenzied dash toward tar sands bitumen as its next fuel of choice. An investigative journalist of formidable caliber, Nikiforuk illustrates how the tar sands’ woeful inability to sustain our cheap-oil-addicted lifestyle is only one in a long list of reasons why their unchecked exploitation must be stopped immediately.

Russia exports 21.5 bln cu m of gas, 55 mln tons of oil in 1Q09

MOSCOW (RIA Novosti) - Russia exported 21.5 billion cubic meters of gas worth $7 billion, and over 55 million metric tons of oil to the tune of $16.5 billion in the first quarter of 2009, the Federal Customs Service said on Wednesday.

Gas exports to non-CIS countries plummeted by 61% in January-March 2009 to 18.6 billion cubic meters year-on-year, while gas exports to former Soviet republics totaled 2.9 bln cu m, down 49.8% against the first three months of 2008.

Transocean profits dip

Transocean reported a drop in quarterly profit today as the world's largest offshore drilling contractor was pinched by weaker industry activity with oil and gas prices half that of a year before.

OTC: Aramco pursues 70% oil recovery rate

HOUSTON -- Saudi Aramco wants to improve its oil recovery rate to 70% from 50% over the next 20 years by focusing on enhanced oil recovery (EOR) techniques and other new technologies, said Amin H. Nasser, Aramco senior vice-president, exploration and production.

Nasser told delegates May 4 at the Offshore Technology Conference in Houston that the company wants to expand its resources from 742 billion bbl to 900 billion bbl to address the world's future energy needs. "In the most optimistic scenario, world oil demand is placed at 125 million b/d and this would require 15-40 million b/d of additional capacity and compensation for declining fields."

Saudi oil output will stay at 8 mln bpd - spokesman

HOUSTON (Reuters) - Saudi Arabian oil output is now 8 million barrels per day and there are no immediate expectations of a cut, a spokesman for Aramco's senior vice president of exploration and production said Tuesday.

Saudi oil capacity at 12.5 mln bpd by June 30 - exec

HOUSTON (Reuters) - Saudi Arabia will meet an end-of-June target for raising its oil output capacity to 12.5 million barrels per day (bpd), a Saudi Aramcoexecutive said Tuesday.

Amin Nasser, Saudi Aramco's senior vice president for exploration and production, made the prediction to Reuters on the sidelines of the Offshore Technology Conference.

Saudi aims to double spot jet fuel supply

DUBAI/SINGAPORE: Saudi Arabia will double its monthly spot aviation fuel supply available for exports starting in May due to lower domestic consumption, industry sources said yesterday.

The world’s top oil exporter which typically sells around 550,000 barrels of spot aviation fuel monthly, was likely to boost supply for spot sales to 1.1 million barrels monthly starting in May, traders said.

Venezuela May Pass Law to Seize Oil Services Cos

Venezuelan lawmakers are ready to support a law that would allow President Hugo Chavez to seize the assets of all oil-services companies, giving the state greater control over the industry.

Members of Venezuela's National Assembly may approve in a first reading the law proposal Tuesday that would declare of "public interest" all goods and services related to primary hydrocarbon activities, a needed step before expropriation.

Foreign Oil Majors Drilling in Brazil Despite Oil Prices

Foreign oil companies continue prospecting for crude at Brazilian concessions, including the key BM-S-22 block in the Santos Basin, despite a steep decline in oil prices and daunting costs.

A series of high-profile oil discoveries in the past few years has made Brazil one of the world's most exciting oil frontiers. Last week, state-run energy giant Petroleo Brasileiro SA (PBR), or Petrobras, pumped the first crude from a Santos Basin sub-salt well at the Tupi field.

Total Profit Declines 35% on Lower Crude Prices

(Bloomberg) -- Total SA, Europe’s third-largest oil producer, said first-quarter earnings declined 35 percent as the global recession eroded energy demand, causing crude prices to drop and production to fall.

Profit excluding changes in inventories and the value of a stake in Sanofi-Aventis SA fell to 2.1 billion euros ($2.79 billion) from 3.25 billion euros a year earlier, the Paris-based company said today in a statement. That beat the 2 billion-euro median estimate of analysts surveyed by Bloomberg News. Net income dropped 36 percent to 2.3 billion euros.

Why Are There So Many More Energy Experts than Energy Billionaires?

There are many energy experts. They make a lot of predictions. If only half of those predictions were correct, these experts would be among the richest people in the world. All they need do is act on their advice. Why, then, are there so many energy experts and so few energy billionaires?

The simple and correct response is that most energy experts are wrong most of the time on most topics. Their forecasting record is far worse than that of weather forecasters. The very few experts who get the trends and inflexion points right at least half the time don’t talk about their predictions: they act on them by betting risk capital and building organizational capability and by so doing, become billionaires. As the axiom has it, “Those who can, do; those who can’t, teach.” The vast majority of energy experts teach because they cannot do.

Shell call to avoid energy crunch

A TAX on carbon emissions would address the failure of the market to reflect the full economic cost of energy use, Shell Australia chairman Russell Caplan said yesterday.

In a speech to the Netherlands and American Chambers of Commerce in Melbourne, Mr Caplan said he supported the government's proposed carbon emissions trading scheme as an example of leadership in setting clear rules for markets to operate.

Russian Deputy PM Warns of Coming Energy Crisis

Eastern Europe could face a new energy crisis in the coming winter, facing shortages of gas and oil, according to Russian Deputy Prime-Minister Igor Sechin. Sechin, who came forward with the warning at a meeting with European Union Energy Commissioner Andris Piebalgs Monday, said the problem lay with Ukraine.

Shortages may come about if the Russian neighbor does not stock-up on enough natural gas, Sechin said, warning that Ukrainian gas infrastructure may not be sufficient in any case.

Kenya: Deathly nightmare for fuel tankers

"I recall driving peacefully at night in the company of my turn boy. Then all of a sudden there was a maddening flash from the opposite direction and I rammed into an oncoming canter truck head on," he recalls.

He then remembers being cruelly dragged out of his damaged lorry and being hurled to the ground.

"At first I expected they would take me to hospital. Then they started raining blows on me. They frisked my pockets and took all the valuables," Ibrahim painfully recalls shaking his head in anger.

The six gangsters, who were armed with crude weapons, then started emptying the 40,000 litres of oil in his tanker.

"They abandoned the mission after realising I was ferrying factory oil, also know as black oil. This has limited use and has no ready market. They, however, stole all the wheels and spanners," he adds.

Nepal: Consequence of Rolling Blackouts

As we know, the country is facing one of the worst rolling blackouts problems ever. The time on rolling blackouts had gone up to 16 hours a day, severely crippling the normal and daily economic activitivities of the people. According to the recent NEA (Nepal Electricity Authority) report for load shedding improvement, there is a generating capacity deficit of about 41%, which means the system peak load is about 300 MW higher than the firm generating capacity in the dry season. Due to this, the government has declared a state of emergency to deal with such severe energy crisis. The poor water levels in the reservoirs of several hydropower plants are blamed for this consequence. Hence, if there are no immediate measures taken by the government, the situation will further deteriorate. Even though NEA claims that there will be a surplus power after 5 years, there is a very little validity to the statement and it looks like the problem will continue easily for next 10 years, if not more.

ERITREA: Reaping the wind

ASSAB, 5 May 2009 (IRIN) - The old fisherman leaned heavily on his walking stick and sighed. For the first time in 50 years, the sea, the winds and the weather in Edi village, in the Southern Red Sea Region of Eritrea – his trusted allies in making a living - are baffling him.

"It is getting hotter and hotter every year; the hot period is starting later now and we have to go deeper and deeper into the sea to find fish," he told IRIN. "The sea is everything to us – we do not understand what is happening."

Energy bill to include plan offering cash for gas guzzlers

President Obama and key House Democrats agreed Tuesday to include a "cash for clunkers" program in the major energy bill being written in Congress, but they ended a White House meeting without reaching agreement on thornier issues -- including how to reduce the economic impact of curbing greenhouse gas emissions.

The "clunkers" program would offer federal payments to consumers who scrapped older gas-guzzling vehicles and bought new, more environmentally friendly ones to replace them. Similar programs have enjoyed some success in Europe.

Rep. John D. Dingell (D-Mich.), a longtime champion of the auto industry, said the plan would "result in hundreds of thousands of new vehicles being purchased across the country."

Oil rises above $54 on economic recovery optimism

Oil prices remained above $54 a barrel Wednesday as comments by the U.S. central bank chief stoked investor optimism that economic growth and crude demand may pick up by the end of the year.

A report showing a fall in U.S. stocks of oil and gasoline also helped sustain prices.

East Timor Says It Won’t Approve Woodside LNG Plan

(Bloomberg) -- The East Timor government said it doesn’t intend to approve plans that Woodside Petroleum Ltd., Australia’s second-largest oil and gas producer, has said it will put forward to develop the Sunrise field in the Timor Sea.

Progress on the natural gas project has stalled, the Pacific nation said in an e-mailed statement today. Woodside’s partners in the venture include Royal Dutch Shell Plc and ConocoPhillips.

Chevron Announces First Oil from Tahiti Field in Gulf of Mexico

SAN RAMON, Calif.--(BUSINESS WIRE)--Chevron Corporation has announced that it has started crude oil production from its Tahiti Field, the deepest producing field in the Gulf of Mexico. First oil from Tahiti was achieved on May 5, 2009. Daily production is expected to ramp up to approximately 125,000 barrels of crude oil and 70 million cubic feet of natural gas before the end of the year.

Eni Resumes Normal Exports of Nigeria’s Brass Crude

(Bloomberg) -- Eni SpA, Italy’s biggest energy company, resumed normal deliveries of Nigeria’s Brass River crude oil after night-time loading was suspended in April because of security concerns.

Nigerian National Petroleum Corp. yesterday told exporters of Brass River crude that Eni, operator of the local terminal, had revoked its declaration of “force majeure” on shipments, according to three people familiar with the announcement who declined to be identified because of company policy.

Canada racing Alaska on gas pipe

The race to finish the Northwest Territories’ Mackenzie gas pipeline before Alaska is heating up.

The territorial government says it is trying to streamline the regulatory process by ensuring requirements are in place by the end of this year to ensure industry is not mired by bureaucratic red tape.

Heritage Oil Has ‘Major’ Find at Miran West in Iraq

(Bloomberg) -- Heritage Oil Ltd., a U.K.-based explorer, said it has made a “major” oil discovery in the Miran West structure of the Kurdistan Region of Iraq, driving the stock to the highest since it began trading.

The estimated oil-in-place at Miran West is between 2.3 billion and 4.2 billion barrels, St. Helier, Jersey-based Heritage said in a statement distributed by the Regulatory News Service. The recovery factor is likely to be between 50 percent and 70 percent due to the fractured nature of the reservoirs.

Shell to sell most French fuel stations

PARIS (Reuters) - Royal Dutch Shell plans to sell 70 percent of its French fuel stations and cut by a third its 1,200 person work force in France, French newspaper Les Echos reported in its Wednesday edition.

The Anglo-Dutch oil major will divest 240 out of the 340 stations it owns in France, Les Echos said in an advance copy of its front page received by Reuters late on Tuesday.

Canadian pleads guilty in "Toronto 18" bomb plot

TORONTO – A Canadian man has pleaded guilty to his role in an alleged plan to bomb nuclear power plants and a building housing Canada's spy service.

Cnooc Parent, Datong Plan $4.4 Billion Coal-to-Gas Project

(Bloomberg) -- China National Offshore Oil Corp., the country’s biggest offshore petroleum explorer, and Datong Coal Mine Group Co. plan to invest 30 billion yuan ($4.4 billion) in a plant that will turn coal into gas and electricity.

China National Offshore’s New Energy subsidiary, Datong Coal and the city government of Datong agreed on the joint project in the northern province of Shanxi at the end of last month, the parent of Hong Kong-listed Cnooc Ltd. said in a May 4 statement on its Web site.

Cuomo sends letter to Chevron seeking assurances over liability in $27B Ecuadorean lawsuit

NEW YORK (AP) — New York Attorney General Andrew Cuomo has sent a letter to the Chevron Corp., questioning whether executives have been upfront with shareholders about the company's potential liability for decades of pollution in the jungles of Ecuador.

For years, the nation's second-largest oil company has been fighting a lawsuit filed on behalf of tens of thousands of residents of the Amazon rain forest over environmental damage and alleged cancer deaths they blame on oil spills and water contamination.

Australia seeks $18 m over toxic oil spill

SYDNEY (AFP) – Australia will seek more than 18 million US dollars in compensation from a Hong Kong-based shipping company over a massive toxic oil spill during a wild storm, officials said.

We have the energy for a green future

For the best part of a decade, Britain has had no energy policy to speak of. As a result, we are grossly unprepared for the decade ahead, during which much of Britain's current electricity-generating capacity is due to be closed down and we will move from being a net exporter of oil and gas to importing 80% of our supplies from overseas. All this while we face stringent binding targets for renewable energy and the reduction of our greenhouse gas emissions.

Archer Daniels Midland 3Q profit tumbles

ST. LOUIS – Archer Daniels Midland Co., a major corn and soybean processor and ethanol maker, said Tuesday its fiscal third-quarter profit tumbled an unexpectedly sharp 98 percent due to a drop in sales along with an unexpected tax payment and a loss on equity investments.

New energy for alternative power projects

CTED Senior Policy Analyst Mark Anderson said the funds are meant for three things: renewable energy production and research, weatherization for low-income households and energy efficiency projects on public lands and structures.

Anderson said CTED wants to devote much of the money to long-term renewable energy programs, with only a portion going to one-time projects in low-income weatherization and similar efforts.

Administration addressing ethanol, climate change

WASHINGTON – The Obama administration renewed its commitment Tuesday to speed up investments in ethanol and other biofuels while seeking to deflect some environmentalists' claims that huge increases in corn ethanol use will hinder the fight against global warming.

U.S. raises the bar for ethanol producers

OTTAWA and TORONTO — The corn-based ethanol industry will have to substantially reduce its emissions of greenhouse gases in order to play a leading role in the U.S. drive to boost the use of renewable transportation fuels.

In releasing new regulations yesterday, the U.S. Environmental Protection Agency said much corn-based ethanol is worse than gasoline - at least in the short term - in producing greenhouse gas emissions when agricultural practices are factored in.

Celebs use star power to spotlight environmental issues

Celebrities "have a bigger megaphone than we would ever have or ever be able to buy," said Julia Bovey, spokeswoman for the Natural Resources Defense Council, which counts DiCaprio, Redford and James Taylor among its trustees. "When we have celebrities getting attention for their work talk about what we do and why it matters, we're able to reach hundreds of thousands, or even millions."

Stars can even sway lawmakers to hold a hearing on an issue that may have otherwise never occurred, Bovey said. And stars say they hear stories through their travels that they can then relay to policymakers.

Global Warming Threatens Tibet Railway

BEIJING (Reuters) - China's controversial railway to the remote and restless mountainous region of Tibet could be threatened by global warming, which may melt the permafrost on which the tracks are built, state media said on Wednesday.

Mercury Levels In Arctic Seals May Be Linked To Global Warming

ScienceDaily — Researchers in Canada are reporting for the first time that high mercury levels in certain Arctic seals appear to be linked to vanishing sea ice caused by global warming. Their study provides new insight into the impact of climate change on Arctic marine life.

Population and Climate Change Solutions

Positive initiatives to slow global population growth -- such as empowering women and girls -- can play a significant role in addressing rising pollution levels worldwide, says population and climate change expert Kathleen Mogelgaard.

"Slower population growth would have significant benefits in addressing climate change," writes Mogelgaard, senior program manager for population and climate change at the research institute Population Action International. These include a reduction in fossil fuel-related emissions and reduced stress on forests and other natural resources that absorb carbon dioxide. And we already know of positive interventions to bring down birth rates around the world, continues Mogelgaard: "expanding education, especially for the world's girls; enhancing economic opportunities for women; and providing access to voluntary reproductive health and family planning services, so that women and men can freely decide the number and timing of their children."

Just gone through $55 for WTI.

Where are those tankers full of 100M+ barrels oil on the oceans?

Yes, I thought there was supposed to be 'an ocean of oil' waiting to dock...

Truth is it probably represents something like 2 days supply...


And those tankers are waiting for a few more $/barrel to make this expensive form of storage really pay for itself. It's looking like they'll probably get it.

Not judging from how low the Baltic tanker indexes have cratered. See Capital Link Shipping for charts with free registration.

Probably jokuhl. Last time I saw the numbers it was costing $1/bbl/month to keep the oil afloat. So write another $2 million check this month and maybe make an extra $6 million or more next month. Just another high stakes game of chicken.

If/when the economy turns around the price of oil will rise if demand increases - but at the moment it looks like a good bit of world production is just going into non-productive storage.

If storage gets to full capacity before any economic recovery then oil demand will suddenly fall some more - and so will the price if people like OPEC can't afford to drop production yet more.

So, which happens first, full oil tanks, depletion/curtailing of existing production, or economic recovery?

Great graph on the "End of Car Culture" article.

But if the public is not driving, and the public is not buying goods transported by road, and Cushing is full, and loaded tankers are sitting at anchor, then who is buying and why is oil going up?

edited to put errant apostrophe in its place

why is oil going up?

Jobs are not as bad as thought... But remember even in this nasty recession we've been trading at ~$50/barrel, which is a much higher floor on the price of oil than we had a few years ago...

Oil jumps ahead of supply report
Futures advance as stocks cheer signs of life in the job market. Government report is expected to show the nation's supplies of crude grew by 2.2 million barrels last week.

Oil prices rose nearly 3% Wednesday after two reports on the job market raised hopes the economy may be stabilizing.

The advance comes ahead of a government report that is expected to show the nation's already flush crude supplies grew last week.

Light, sweet crude was up $1.58, or 2.9%, at $54.43.

Automatic Data Processing, a payroll processing firm, said private-sector employment decreased by 491,000 in April, a 31% improvement from the revised 708,000 drop in March. Economists had expected a loss of 643,000 jobs.

Separately, outplacement firm Challenger, Gray & Christmas Inc. reported that the number of announced layoffs fell for the third consecutive month in April, dropping 12% to 132,590.

Also, check out the futures chain for oil to see where the market expects oil to be...

Automatic Data Processing, a payroll processing firm, said private-sector employment decreased by 491,000 in April,

Expect the price of champagne to rise too! We have reason to celebrate!! Only half a million folks lost their jobs.

That's private-sector; so other estimates suggest large additional numbers in April.
Bloomberg quoted on TAE says

"Government employers and auto companies announced the largest cutbacks, accounting for 39 percent of the layoffs.".

I have my own theories about the decline in vehicle miles.
There were a lot of people who could barely, marginally afford to own and maintain a car and with the economic downturn; have given up their car entirely. I'm talking about people who are barely employable; maybe with drinking or drug problems perhaps with $1000s in tickets from drunk driving or reckless driving; illegal immigrants; people living in the inner city with $1000s of unpaid parking tickets; seniors who maybe are not able to react fast enough.
Many of these people are barely able to manage owning a car in the best of times, and the economic slowdown has pushed them over the edge.
Don't forget that the majority of people are very horrible with managing money. Add in an expensive potentially dangerous car, some alchohol, bills; and the result is not pretty.
The second factor is the housing bust. Millions of real estate agents are not out showing homes. Less construction workers driving around in F350s. Less mortgage brokers buying new H3s with their bonuses and HELOC money.

barely employable .. drinking .. drug problems .. drunk driving .. reckless driving .. illegal immigrants .. unpaid parking tickets .. seniors .. horrible with managing money .. alchohol

.. and of course the 25 million adults who are simply poor.

Energy bill to include plan offering cash for gas guzzlers

Great! I'll run out and buy two... oh, wait a minute, my business is bankrupt, I laid off all my employees, lost my house and can't afford to pay my credit card bills so I don't think I'll be able to get a loan. Sounds like this plan is the 21st century version of "let them eat cake"!

Never mind the inconvenient fact that it is just a continuation of trying to shore up BAU, which everything indicates is a really, really bad idea.

The equivalent plan has been running for some months in Germany. It helped to increase the sale of small economical cars considerably. The offer was €2500 for your old car which must be older than 9 years and the new cars must fullfil the Euro 6 or 6 norm.

The only problem was that other suppliers of long term heavy investment products suffered as a result. People have only so much money. Shift it across to autos and someone else can't sell their goods.

Hopefully this new tax break does NOT include any guzzlers that were purchased under Bush's 2002 tax credit that offered a $100,000 tax credit to business owners who purchased "any vehicle weighing 6000 pounds or more when fully loaded." Concurrently with that legislation, Bush was phasing out the $2000 tax break for purchasing fuel efficient hybrid cars.

Agreed. The trade in needs to be pre-1996. Otherwise the energy used to produce these traded-in vehicles will be wasted.

Also agreed.

So many people around this part of the country use their business vehicles for personal transportation. You should see the Colorado river area or the sand dunes of Glamis. Looks like a business fair with all the company trucks out there towing boats or dune buggies. What will these people do? I know, slightly off topic. Just bugs me.

My next door neighbor drives a Chevy Tahoe 75 miles a day up and down interstate 5 , one way, to an office, by himself. No doubt he purchased his "Company vehicle" to take advantage of that tax credit.

Also, I wonder if Obama's new "Tax enforcement policy" will go after small businesses. Seems like they all cook the books in one way or another.

People have only so much money. Shift it across to autos and someone else can't sell their goods.


The essence of a world with limits. I've been trying to explain this in 10,000 words or more for some time.

This is what EROEI actually means the amount of true wealth becomes limited and all governments can do is change how big on a precentage basis various pie slices are they can do nothing about the fact the overall pie is shrinking.

This is why printing money does not work when a civilization is in decline generally all it does is cause further missallocation of resources as it favors classes of people and goods over others. Almost universally the worst allocation scheme possible.

This is why I'm trying to say that if we are post peak regardless of the price of oil you simply won't get the allocation from the rest of the economy to expand oil production. Simply because it cannot if it tries then other parts suffer. The problem is its indirect and only obvious when you look at the big picture.

Underlying this financially is a huge amount of pressure for the oil companies to reinvest in anything but oil as their profits increase but using them to expand extraction of expensive oil simply drives up the price of other resources needed by their customers to buy oil.

The problem is how this is achieved or transmitted is not obvious in a finite world obviously the system has to balance even in a growing world you still have to partition correctly but its obvious that its more of a rate of growth problem which is easier to address. Even this was routinely messed up by the Feds. They had the absolutely easiest macro economic problem possible i.e a system growing at a robust and steady rate and they still managed to induce recession after recession with their economic policies.

Makes you wonder how they will fare with the hard problem of shrinking resources and expanding population. And probably more important the lack of political will to admit its more than they can deal with using monetary policy alone.

And this is probably the most important part of the issue right now the world believes it must simply play some monetary games the nature of the game is not all that important it really does not matter if its efficient reduction of zombie banks or wasted attempts to shore up dead banks and companies. No matter what you do the growth economy cannot return because of the intrinsic limits of falling per capita resources.

Most people right now believe all we have to do is follow some economic policy and all will be well but even if we do the best allocation of resources with the best economic policy we still face a very brutal situation going forward. You have no choice but to eventually address the population issue you can dance around it suggesting optimized strategies such as renewables but they really don't solve the problem of population they may buy some time and thats questionable since from a economic standpoint a push to renewables works almost exactly like expanding extraction of expensive oil. It does not matter if its renewable energy more aggressive oil extraction or nuclear or even a expansion of coal fired plants your still looking at reallocation of a shrinking pie away from other sectors of the economy. Certainly longer term renewables have a better payback but in the short term the pain is the same and worse a move to renewable energy requires change in both lifestyle and infrastructure and worse the structure at the top of the pyramid.

This is why I absolutely detest the fact the many renewable energy proponents try to sell it as some sort of silver bullet that leads to some sort of nirvana of happy EV motoring suburbanites driving off into the sunset. The system simply does not work that way. If we aggressively switch to renewables and reform our economic system and move to more durable goods we will lessen the pain vs other approaches but absolutely no way it won't be very painful. Most other choices that I can see tend to lead to a civilization collapse within a few decades. A push to renewables is certainly better than alternatives but the best answer is relative and not even close to whats been sold. Its time to start telling the real truth we have to stop having to many children and switch to renewables and electric rail not because it will create some sort of nirvana but because if we don't we face certain collapse. Life will be hard but the alternatives are worse. Instead what I see in general from most of the proponents of alternative energy are the same pack of lies told by TPTB. The real truth is if we transition to alternative energy it will probably be 100 years before the per capita energy levels start increasing and this is primarly because of a program to reduce population.

Simple stuff like considering halving the small amount of oil most of the third world uses to cook with are utterly ignored and the fact that of the six billion people in the world only a small fraction would actually benefit from current renewable proposals are not even addressed. THe elite are not going to be successful developing alternative energy for themselves any more than they would be aggressively extracting expensive oil or gas or controlling the remaining coal supplies. It does not matter how the top 1% of the worlds population moves to ensure its energy security if the rest of the world is left to scramble for the scraps. It has no more effect than if its Goldman Sachs or JP Morgan or Citi that makes 10 billion and one of the others makes 2 billion. BFD. What do we care which bank got the most vs its competitors. Current alternative energy proponents work exactly the same way. They argue that they should be the worthy bank to get the money vs all the rest. This simply does not solve the problem of going from 100 billion in total to 50 billion potential profit for all the banks. How they manage to slice the pie is not a solution. Its not one for banks and its not one for the world.
Its time to quit cutting pies and deal with the size of the pie.

That sounds stupid but its true :)

Memmel: I totally agree however one cannot get elected by telling the truth. That is the only goal and has been for a long time here.

memmel: Everything you say makes sense and rings true. For this reason your words will continue to be ignored by the PTB as their acceptance would endanger the existence of our current political class.

Half way down this thread I said to myself "Where's Memmel?".

Thank you for your insights. I'm starting to acquire a big picture concept!

I also work in the renewable energy field (residential and small commercial PV solar). I don't disagree that 'renewables' are misunderstood and misrepresented. We cater to the rich, simply put. I expect people to slowly, or not so slowly, become poorer, and solar panels to become less affordable. Right now it's a luxury for the rich. Poor folks aren't 'going solar'. Friends get mad when I point out that pretty much everyone's broke - everyone who could help us all, that is, as opposed to just helping themselves.

I think the future for solar PV is for gadgets like well pumps in the middle of the desert and for government subsidized projects like schools and libraries. But it's not sustainable because the gov's broke. People who have acquired and preserved wealth at this point may or may not choose to 'go solar'. I talk to them every day. Instead, they're probably buying oil futures right now or shorting banks or car companies. Except for the ones with 5000+ sq ft homes who want to 'be green'...

Someone wisely said a while back: "The dirty little secret about renewables is that they're MORE EXPENSIVE than what we have now and need to replace". Tie that in with a static or shrinking pie and Memmel's got it nailed.

I sell renewables as a 'save yourself' investment. Part of ELP. But you say that won't do any good - why? Zombie hordes?

Has the rise in oil confirmed your theory about 'phantom storage'? The only reason I can come up with for the steady rise (too fast to buy a few stocks even!) is speculation. Folks with OPM to spend all expect the price to rise...

I've bought in to the idea that the oil price can only go so high ($100+ ??) before it crashes the global economy again. Rinse and repeat... 'Investing' is all about timing.


The key with PV is recognizing that our information systems will be electric for a long time even if we eventually go photonic we still need electric type energy. Very efficient informations systems powered by PV are doable and yest this include the drivel spewed from TV :) The point is globally there is a place for PV thats fairly obvious in the form of information access systems. For the poorest communities this could be a single mobile phone on a wireless network powered by PV for the entire community. I'd suggest that even the poorest communities in the world can do better than this.

After this of course wind/solar for pumping water is probably the next biggest use case and this need not be super advanced systems but mechanical/thermal systems would work.

As a sort of aside simple solar ovens or other simple uses for food prep/storage are possible.

First world or the technology for the wealthy must be a variant of whats sent to the third world so the wealthy can subsidize development for third world countries. This is the real problem as you note and I rage about what we are doing now simply is not the right answer. Hell even the automobile industry works to send its older cars to be reused in third world countries. I'd argue in the case of PV for example that the technology is already good enough for supplying electricity for information systems. Its great that it gets better but whats missing are simple durable renewable energy systems to meet the mechanical power needs of the third world. I'm a hug fan of Amish electricity ( compressed air) as it works well in lower technology environment and I'd argue that compressed air powered appliances are actually better then electrical powered.

Has the rise in oil confirmed your theory about 'phantom storage'? The only reason I can come up with for the steady rise (too fast to buy a few stocks even!) is speculation. Folks with OPM to spend all expect the price to rise...

I've bought in to the idea that the oil price can only go so high ($100+ ??) before it crashes the global economy again. Rinse and repeat... 'Investing' is all about timing.

Well I've argued that even 40 dollars a barrel is impossible given the storage claims the higher the oil price goes the less viable the current storage levels look. Once you dismiss the storage claims then your demand calculations fall apart. You simply have no idea how much real oil has been imported and burned.
The rising price support the thesis that both demand and storage claims are suspect.

As far as 100 dollars a barrel being a magic number I disagree certainly as oil crosses 100 a barrel it becomes difficult to live well beyond your means in a McMansion driving a SUV financed with credit.
But this just suggest that as oil becomes more expensive people will be forced to allocate more of their income to commodities and less to debt service. The claim that 100 a barrel is a sort of limit rests on assuming people will cut back on commodity usage to preserve their ability to service debt. I simply don't believe this thesis is correct. Eventually people will cut back on debt service either via paying it off and not acquiring more or far more likely default.

The real price at which oil becomes unfordable is when debt service is cut literally to zero i.e the person has no debt and his cash flow cannot cover basics such as rent food and gasoline. Only at this point do further price increases make energy simply unaffordable. We are a long long long way from this number. My best guess is 500-800 dollar a barrel oil is really reaching the unaffordable level.
At this point even if you cut to the bone and use a bicycle or public transport the embedded energy costs in food and most other goods makes it impossible for a significant amount of the population to literally not be able to afford energy using our core transport infrastructure. ELP at the community level would then be a must to localize food production and other goods as transportation costs would now be so high that transportation of many goods long distance would simply not be viable.

For the US only when outright starvation become visible in the lowest economic rungs would I say that energy costs have reached the point they are no longer affordable.

Now on the economy side you really only have two items that can be cut fast enough to cause falling oil prices thats building and buying housing and commercial building at insane prices and new cars.
We have started cutting these. Beyond this I see nothing that can give you a real sharp downturn outside of general financial collapse. Assuming the financial system does not collapse then you have no source of a concerted set of goods and services that can be simultaneously rejected that results in a fast decline in demand. There simply is nothing else that consumers can agree to reject together to result in a fast drop in demand. Without a source of rapid decline I just don't see that demand and supply won't simply contract together at ever higher price points.

And as far as housing and cars go we have a massive oversupply of both so their real value goes to zero in concert with the rejection of long term debt needed to finance these assets. Especially if you consider denser living conditions closer to even European levels and people either car pooling or not driving. We certainly have a glut but its in cars, houses, stores and office buildings and factories.

Only after you have devalued these assets to effectively zero and also reduced the use of debt to effectively zero do you reach the point that increasing prices in food and transportation become unsustainable. Certainly at any point along this road the entire system can collapse but what I really don't see any reasonable explanation for some sort of limit existing below what I've suggested. Its just not there. The vast majority of the worlds population lives at the limits I suggested and yes for them the price at which they are demand destructed is lower but they already use very little oil so many of these nations can fail without causing a huge drop in oil demand. And even in nations which have fallen apart oil demand remains high and in fact can go higher as generators are used to offset the failed electrical grid. As far as I know AlQueda does not drive EV's.

The vast majority of the worlds population lives at the limits I suggested and yes for them the price at which they are demand destructed is lower but they already use very little oil so many of these nations can fail without causing a huge drop in oil demand.

Actually the collective consumption of nations with $2500 year per capita GDP or lower is around 2.1 mb/d, leaving out India and a few minor producers like Yemen. When global production begins to decline and spare capacity is burnt through we'll see more and more reports of shortages in these countries, as we do now, presumably due to the OPEC cuts - starvation in the time of plenty.

What the impact on these poorer countries will be is difficult to predict, as you say the average citizen has little chance to avail themselves of oil's bounty, but we would be talking a situation where no opportunity exists to even fuel machinery for mining or transport of raw materials to ports, absolutely no fuel for aircraft or the military, assuming the producing nations completely turned their back on these countries. I'd like to think this would be screaming headlines worldwide but the MSM has taken essentially no interest in 4 years of effectively flat production or the decline in LSC so my guess would be it would only make news here. This would make for a definite leading indicator, no? Assuming the decline rate is gentle enough, otherwise they would just be wiped out in a year. But 1%-2% would allow this to build up over a few years, until producers had to face the prospect of cutting off the OECD nations, and then the geopolitics would foment.

I also see that some of the nations which have suffered shortages in the recent past have higher per capita GDP, Bhutan, say. Presumably this is a supply chain issue.

Actually the collective consumption of nations with $2500 year per capita GDP or lower is around 2.1 mb/d, leaving out India and a few minor producers like Yemen.

I've looked at this informally i.e if oil went to 200 a barrel and nations like this where forced to cut usage in half how much would you save. Your talking 2-4mbd depending on how you do the division.
Given the demographics of third world countries the average is not a good number. At least 50% of the oil consumption is concentrated in the top 10% of the economic ladder if not more. A much larger precentage say 30% is concentrated in critical transport needs and less than 20% is used by the majority of the population. The point is a lot of the oil purchasers in the third world can compete directly with first world customers and have the same financial profile. Given the lower living costs i.e 30k in China is similar in purchasing power to 60-90k in the US many actually have more room to spend on gasoline then we do. And you have various government subsidies and abundant corruption to ensure the flow of oil into these countries. Plus in many cases they are buying finished products on the open market and are very flexible in sourcing supplies. We talk about the free market breaking down I'd suggest the third world countries would be far more accommodating to any agreement required to keep the oil flowing.

At the end of the day its really not clear when anyone but the large poor population really gets priced out of oil. Obviously I don't agree with the strict per capita approach given the disparity of income in these countries it simply does not capture the true dynamics of oil consumption and purchasing power.

And even if you do it as you said the change in overall consumption is quite small given my approach the ones who will be forced to give up have so little to relinquish its irrelevant from the overall oil supply perspective. Squeezing blood out of a turnip is apt.

I don't think the producing nations will turn their backs on these nations but I do expect the wealthy to rapidly retreat to semi-stable enclaves and try and fend off the starving masses with extreme brutality.
And of course as things get worse the wealthy that can leave these countries will and they will take everything not nailed down with them and this includes their oil usage requirements :)

No matter it seems regardless of how you run the numbers there simply is not a price that will result in the collapse of the third world causing a glut of oil. They simply don't use enough now.

Over the short term i.e then next five years I continue to come back to rejection of paying insane prices for goods that are in excess as the primary mechanism to deal with rising oil prices. People are simply not going to pay 500k-400k-300k-200k and then less for houses and 20-40k for cars.
Only after the oil prices rises high enough that paying insane amounts for houses and cars is forced to stop and then only after the cost of housing has fallen to the point that you get limited relief from further drops do you reach the point that the price of oil is too "high".

I see absolutely no reason that housing costs won't in general be driven down to a median price of 50k and cars down to 5k for ease assume both are financed over 30 years still.

Throwing 60k into a calculator gives a monthly payment of 350 a month.
250k gives about 1400 a month. So lets just assume we are talking about freeing about 1000 dollars a month for say 70% of Americans since this drop would also cause rents to fall substantially.

Assuming 20mpg and 20 miles of commute a day or 1 gal a day for 30 days or 30 gallons a month.
1000/30.0 == 33 dollars a gallon or assuming that 20 dollars of this is oil cost * 25 gallons of gas per 55 gallon barrel gives 1100 dollars a barrel as a sort of maximum price. You can assume this is crazy so fine 500 a barrel. Well thats still insane we don't know why fine 250 a barrel. Well I was just calculating savings off falling home prices so then assume 4X higher for housing and voila you get 200k for a house and 20k for cars. So with close to no changes we probably could go as high as say 250 before we really started to have problems and we had to pay less for housing and cars. This is just using the savings from declining costs for housing and auto it does not include spending more of your income on gasoline and cutting back anywhere else.

Certainly I see that as oil climbs over 100-150 that the housing industry and auto industry would be under tremendous pressure as people simply cannot take on the long term debt the do now. The costs of cars and houses has to fall by 50%. For houses its easy live in a cheaper place or take on roomates problems solved for cars almost as easy don't buy a new car, buy the cheapest model available or use alternative transport or maintain your current car.

The conclusion continues to be that the housing and auto industry have yet to really collapse and we have a long way to go and only after this can we start talking about oil prices being to high.
At some point along this road the suburban way of live simply is no longer viable and homes without decent access to public transportation literally have no value. So social issues will become important but regardless the economy can continue to absorb much higher oil prices then most realize.

The two groups that lose are suburban home owners and the poorest members of the third world.
One represents the largest population base the other represents the greatest distribution of wealth outside of the true rich but with 90% of that wealth is locked up in speculative equity.

I could well be a real world example first my best friend was laid off he has a 2 bdrm apt and I have a 2bdrm apt and 3 kids. I'm going to rent a 4bdrm house fully expecting a fried or relative to take at least one of the rooms in the near future. Consolidating households leaves one of these apts completely empty. If I say hit hard times I'll move in with my own parents who have a 4bdrm home and again probably with another family member this frees two existing dwellings. Or I could easily except one more person into my household. Regardless you now have 33-66% increase in the number of empty dwellings and life is still ok its not horrible density. Given the real physical overhang of empty homes and this sort of conservation of housing costs there is literally no support for house prices.

New cars are pretty much out under these conditions also however gasoline usage could vary it could go higher if everyone is employed but making less money but can still operate a car. It could go a bit lower if some car pooling is done. I don't see any dramatic change assuming that everyone had some sort of work even if it was as a day laborer. Gasoline would have to go dramatically higher before working for a day as a laborer just to buy food and cover transportation costs and net a say 10 dollars did not pencil out.

Now for the people with decent jobs falling housing costs assuming they decide to rent or pay cash results in increasing cash flow for quite some time. Anyone stupid enough to get a large mortgage would be wiped out repeatedly obviously. Basically given my scenario all mortgages made in the last 15 years would probably end up deeply underwater. Anyone betting on selling their house to fund retirement is hosed.

And of course far far worse most third world countries will probably collapse as the elite flee.

But I really don't see anything else happening until after we have effectively spent all the equity thats in our housing stock. Until it reaches its true value which under the conditions is zero we can continue to absorb higher and higher oil prices. Only when housing costs have hit rock bottom and going to higher density living conditions does not buy you much do we finally really start hitting the wall.

In the interim people can and will abandon low density living until it forces housing costs to zero.
And of course not buy expensive new cars.

Even after suburban housing prices collapse you still win moving to denser living conditions closer to public transport so you get a bit of a paradox with empty houses probably turned into slums and dense living conditions with the cost balanced against the price of fuel. So I see many structures eventually permanently abandoned even as it forces up density in certain areas. If your spending 500 a month for gasoline living with the parents then you can afford 400 rent riding a bike for example.
So its not exactly going to zero but balanced against transportation costs. Given the demographics of the US however most of the current housing stock does effectively go to zero before you can no longer balance against rising oil prices. And of course food costs are increasing in step with oil so gardens are also cost effective if you have enough land to actually provide a significant amount of your food. I'd suggest this would require 50% to 75% drop in housing density in the fring suburbs. So to balance living that far from work with transportation costs you need to remove two houses for everyone left and convert the land back to agricultural use. Obviously you can do that until the value of the homes is discounted to zero.

So at some point you probably will see people buying up whole blocks by the acre ripping out most of the homes for salvage and effectively homesteading the former suburban regions. I suspect it will be profitable to salvage these home and reuse the material to build higher density housing.


Sorry for another long post but at what point in my story is the price of oil to high ?
As you can see in my story people can via changing where they live and the density they are willing to live at offset the cost of fuel until both the overall usage and the price actually make alternatives viable. Next no matter how I do the math and I could be wrong this is some very high price basically 50% of minimum wage. I.e if you make 64 dollars a day spend 10 on housing 20 on food and 30 on transport you still net 4 dollars profit a day. And the 30 on transport can be dramatically reduced by riding a bicycle. This if everything is equal gives you 40 a day for housing that close to a hotel stay in a fleebag hotel now. I don't see assuming less than minimum wage as a median income makes a lot of sense at least for a while so you can arbitrate against to price of oil to insane price levels.

At no point in may scenario until the very end do you actually hit the wall and can't afford oil thats as it goes into the 500-800 a barrel range and at that point alternatives are now viable.

Now the society itself will probably simply collapse before it actually reaches the end of its rope effectively it will be just another third world country collapsing just now the remaining elite have no place to run. At some point in my above scenario you would classify the US as a third world country. Other factors will probably cause collapse but simply looking at the effects of oil prices itself I cannot come up with any other conclusion except that we can effectively move to live more like people in the third world and absorb the higher fuel costs until the society no longer uses oil. I really don't see any limits like 100 a barrel or even really 1000 a barrel the limit is when demand has been reduced to the point that alternative fuels are viable and the volume used has dropped to a fraction of todays.

My own calculations point to the shockingly high values of 250-500 as being the price point at which the society will seriously transition to a lower energy usage pattern but its really as far as I can tell a transition to lower housing costs balanced against energy costs. A full and final transition seems to require oil to go into the 800-1000 dollar range before we simply abandon it for cost and now volume competitive plant based liquid fuels and electric rail. All that happens at that point is non-renewable sources simply continue to decline and the society changes structurally to limit its liquid fuel use.
At some point the demand is finally simply not there because alternatives have completely replaced the oil based transport system. Similar to how we abandoned coal once the infrastructure is gone its no longer viable.

Even the with societies collapsing at some point new power structures will emerge probably with new smaller city states and new transportation will be used depending on how things go I expect the remaining population to focus on wind powered sea and river transport along with some electric rail. It all depends on how the population changes during these troubled times. We have a good chance that disease could decimate the current population and in many areas for civilization to completely collapse causing a rapid drop to hunter gather levels against a ravaged ecosystem. For the same reasons I see no real limit to oil prices with collapse happening before the limit is reached I also don't see any reason that most of the planet won't fall all the way back to scattered bands of hunter gatherers. Any larger grouping of wealth that cannot be defended will eventually fall to repeated attack. You can't maintain a agricultural society with bands of determined bandits armed with AK47 then what ever they can find constantly attacking you. This is not to say that in certain regions you won't see agricultural based communities become re-established and of course not all will fall and we have no reason to think that a few areas will not be able to maintain a technology level close to today. However I suspect that the remaining technical areas will be devoted to arming their opponents roving hoards with AK47 and RPG's.

This pretty much ensures that life outside of the enclaves at any level higher than becoming a member of a AK47 armed roaming hoard is impossible. Indeed the fact that certain areas won't fail effectively ensures that most of the rest of the earth will. Its a bit of a catch 22 since your almost certain one of the remaining enclaves will resort to arming the new barbarians to settle old and new grudges against some other enclave. The very lack of total collapse in a sense makes the final outcome very certain at least for me. Only after you exhaust this proxy bandit and maybe direct armed conflict will we finally rebuild.

Look at Somalia and other African nations for our future in this respect.

Now I get it - that's why PV won't work!

Actually it will done correctly. See my other post below. The answer is to aggressively deploy PV solutions
like I mentioned in this post.


Give the poor some dignity. The PV powered electric hot plate ( and simple solar oven) along with say ozone water purifier would go a long way to dramatically improving the living conditions in the third world and remove the dependency on fossil fuels for cooking. Information technology gives them a chance to bypass their governments and learn and also teach. The little camera on mobile phones has probably saved more lives from government brutality then any other single invention.

You want to stop the madness then give the poor dignity and something besides endless despair. And don't worry about the first world the ever shrinking pie ensures that eventually we will welcome these technologies in the former first world. Start building the foundations at the edges of our current society and as the center crumbles simply work your way inwards. Eventually most of the planets population will be grateful for the small amount of technology needed to make a dramatic difference in your standard of living. This may sound trite but the choice is mobile phone chargers and hot plates or guns. We either are going to spread alternative technologies throughout the globe or violence.
For me its very black and white and I obviously don't care about the US until its forced to beg for help.

Most of the current alternative energy market reminds me of people selling birth control to ninety year old ladies.

Thanks for the reply, Mike. By no means am I expecting a glut of oil coming from the third world being priced out, rather speculating that when the time comes they will be the first to do without, owing for one thing to the developed countries' considerable military might, not least our nuclear weapons. No matter how well-heeled the third world elites are the producers would want to sweep the reality of decline under the rug as much as possible, I'd think; also with time the pricing mechanisms for oil products will perhaps revert to their traditional forms. The flexibility offered by trading wouldn't jibe with increasing scarcity, consuming nations would want to switch to alternatives as soon as possible when peak becomes an undeniable reality, and need a steady price to guarantee that these alternatives are viable. This year could see a minor crude price spike, which would no doubt lead to renewed discussion of reining in traders, with added vehemence due to the recession.

I see what you mean about the higher ups having more buying power in the third world, but would they take a direct interest in obtaining fuel for, say logging trucks? Or have any sway with producers who want to assuage the customers in the OECD? I think the producers will simply have to conduct triage, much as happened in the 70s oil shocks as documented by Yergin, where you had the spectacle of the Chair of BP informing the UK PM that there was nothing he could do to insure that Britain would obtain preferential treatment. Of course while bidding still goes on the price will be completely haywire.

Your not all that far off in some respects on my own thoughts on the matter.
I asked a lot of questions of Pupp55 over on peakoil.com he is the expert on the short term oil situation.

Login required.


I don't believe the current inventory numbers however if you follow this thread back I've come up
with the idea that a oil bank may be forming. Once peak oil is certain you have the chance for arbitrage holding oil for several months and selling at a higher price for a profit you would also use various
hedging strategies. If you have enough oil 100 million barrels and enough money you can make this oil bank work. Basically your applying the concept of fractional reserve lending to oil. And if your Goldman Sachs you can even do better ( I won't hazard to guess how )

Read the thread but we have every indication that a oil bank is forming operating in a sense like a SPR for profit.

Now as far as consuming nations switching to renewables etc my only argument is that the pie is shrinking fast for everyone and trying to re-allocate a shrinking pie is a very hard problem. Obviously I don't see that they make a huge difference if we do it the way we plan which is to deploy renewables in the wealthiest of regions. One big reason I did not explicitly mention is you get what I call the partial substitution effect. Substitution of NG for oil did not lower the overall energy usage but it continued to increase. Substitution of renewables for oil will not lower oil demand but be used to grow if its large enough. Oil will continue to be priced to match supply and demand. And last but not least the renewable industry is attempting to grow itself using existing financial structures loans, tax write offs etc. In many cases the underlying assumption is that the property being fitted with PV cells has a high intrinsic value my own research and real examples such as Detroit indicate that the value of property can itself go to zero. No one is going to put 15K worth of solar cells on a 10K house. Falling property values alone are sufficient to dramatically dampen demand for solar. And last but not least electricity prices are probably going to be the slowest ones to increase vs liquid fuels. Everything I've read indicates we have plenty of base load supply only peak loads are a real problem. The culprit is of course air-conditioning. This can be handled with more extreme peak load pricing to discourage use of air-conditioning. And even here the real problem has to do with the cheap way we start electric motors adding a clutch of some sort to slowly bring the load onto a electric motor removes a tremendous amount of the surge problem. Its the surge at startup thats the real culprit. But again do we need air-conditioning ???

Having lived through the .com crap I'm highly attuned to what I call blinder business plans and the renewable energy industry looks like it has every intention of giving the .com bubble a run for its money. I'm just waiting for someone to explain how they can sell solar panels at a loss and make it up in volume by taking market share then at some unknown date sprinkle pixie dust and magically costs or prices or something will change and a profit will be born. Of course its going to be fun watching people trying to execute the traditional debt based ponzi scheme bubble with the world going to crap.
I'll work on building cheap solutions that can provide a small profit even in the poorest third world countries and wait till America fits my market demographics.

I'm not so sure that solar has the potential to become a bubble. In the first place, the solar equipment does produce a real product with some value. It's not like the vaporware startups that had a web concept, borrowed lots of money, then burned thru that before making a profit.

The other issue I have is that solar is more than just PV or wind generated electricity. There are many locations where low temperature solar thermal can provide considerable energy services, such as hot water and winter space heating. These uses are much cheaper per BTU than PV generated electricity and are already economical when compared with today's cost of electricity to provide the same service. Also, the price of PV appears to be declining and the newest technology is likely to be cost competitive with new nuclear power, which has been said to be near $7,000 per kW of generating capacity. Lastly, PV is well matched to the summer peak A/C load, which is usually the highest cost electricity.

Whether or not PV can be used to charge electric cars is another matter. With enough PV on the grid, both the A/C demand and the battery charging could be supplied, but the electric cars would need to be charged during the day, not at night as is presently envisioned by the electric car folks. People who commute to an 8 hour-a-day job could easily plug in their cars at work, then start their drive home with a full charge.

You worry about placing PV on derelict houses, but consider that the land under them would still provide a placement for the PV cells. Or, better yet, if enough houses are bulldozed, new structures could be built to replace then which included the latest technology, such as super insulation, solar thermal heating and PV roofing. Here's one example of a low cost PV system which integrates the PV with the roofing material. Remember that roofing must be replaced every so often, so systems such as this would "kill 2 birds with 1 stone", as the old saying goes. Besides, structures "wear out" just like everything else and many of these buildings in cities like Detroit are rather old...

E. Swanson

Okay well given what you said lets look at it a different way.

Here is how I see it. First don't question to much the overall financial system and prices of home etc assume that once affordability returns to markets that you get something close to BAU from the pre bubble days this is not a bad assumption. Maybe we overshoot a bit but overall the housing prices stabalize in the 2X-3X income range and incomes don't fall much and we get a weak but stable housing market.

Next you assume that as oil gets more expensive expansion of EV's and solar cells on roofs etc will work to allow the current lifestyle to continue with basically some modifications none are technically all that extreme a PV system for a house really means say not buying a new car for 10 years vs say five. We can even assume as EV production increases that the premium will drop and we can even go further and assume that as peak oil becomes obvious that government support will be forthcoming to help cover increased costs.

I won't get into non PV based solutions simply because thermal methods take significantly larger collected areas and if you have money then PV is best. Not that the others are not viable and I'm keenly intrested but for your average wealthy middle class American maintaining their current lifestyle is focused on transportation and air conditioning and to some extent heating.

But first before what your saying is even relevant you should ask yourself if this is the problem we have to solve ?

If its not the problem we are facing then all the arguments are irrelevant. The basis of my thesis is that the answers your describing and the challenge you want to solve is simply not relevant to the problems the world faces. Its just as irrelevant as the classical debate on how many angels can dance on the head of a pin. I'm suggesting that the middle class will basically cease to exist therefore it makes no sense to solve the problems for a soon to be extinct segment of our population.

Now if you solve the problems that I feel will lead to the destruction of the middle class then and only then can you really consider transitioning traditional American middle class lifestyles to be more renewable. I'd suggest in the interm if they continue to exist that they can turn off the AC turn down the heat, add some insulation, car pool, take public transit and buy more fuel efficient cars either EV's or conventional. And of course start moving to denser housing and demand more rail transport etc etc.
Once they do all of that and if they are still alive then you can start talking about how PV/EV based solutions actually now improve their quality of life.

Now my opinion is that the underlying thesis supporting that the middle class will be around to save is that they will continue to have jobs and pay substantial amounts of money for our existing housing stock and our fiat currencies will continue and recover from our current crisis. Peak oil is a isolated energy source crisis that can be met with alternative technologies.

Prove your underlying assumptions are true you use to frame the problem your attempting to solve.
I think I've written plenty about the interaction of large long term debt and rising commodity prices.
All the facts so far point towards my model being broadly correct from historical data to the present.
The middle class will not recover and rising oil prices will work to ensure that it can't.

Why debate what a class of people who will effectively cease to exist within five years can do to convert from oil to renewable energy ?

Please, do try to understand that solar thermal is more efficient than PV, therefore uses less area for the same amount of energy collected. PV for space heating works only with heat pumps and they tend to produce less thermal energy as the outside temperature decreases, that is, when you want it most. Using PV to run a resistance hot water heater would use perhaps 3 times the collector area as a solar thermal hot water heater and you can store hot water much more easily than electricity.

OK, I'm not going to argue with you about whether the whole middle class American Way of Life ball-of-wax will continue or not. But, the middle class has existed for centuries before the age of oil. By "middle class", I mean the craftsmen, tradesmen and shop keepers who make and sell stuff which people need. What we have now is a perversion of the old ideas of working to make a living. Now, we have services industries, of which the financial mess is a large part. But the things people can do with their lives to produce what's needed can still continue without the banks, though much more slowly. We could have a society that looks more like a developing country, where what you can do is as important as how much money you can spend. When things get tough, we drop back to a pay-as-you-go life, instead of borrowing for today's fun and paying later. Having been out of work for years, I know what that's like...

I do agree that the transport problem is going to hit hard, but there are many solutions, including mass transit, which are more efficient than the individual car with 1 person wandering around at all hours of the day and night. After Peak Oil, things will change and I doubt the next version of Life in America will look like that of the 1960's and 70's with people moving out from town to the low cost land and houses, then driving to where ever a job is available. We won't see people driving for an hour at freeway speeds to get to a minimum wage job bagging groceries or flipping burgers. People will need to move closer to their jobs, if they have one. I expect that we might move back to the situation where one person worked in a family and the other stayed home, taking care of things. Or, the multi generational family living in one place, perhaps on a farm...

E. Swanson

We cater to the rich, simply put. I expect people to slowly, or not so slowly, become poorer, and solar panels to become less affordable. Right now it's a luxury for the rich. Poor folks aren't 'going solar'.

As someone who is looking at pv for his undoubtedly-too-big suburban house, allow me to go into a defensive crouch with a few sentences.

1) I'd like to think that a bit of market pull from those who can afford it could goose solar PV closer to an affordable option.

2) After rebates and tax credits, a payback of 8 years looks reasonable (if utility rates stay the same). Longer than most consumers want but acceptable.

3) Those less able to afford something like solar have less equity (perhaps none) in their property and don't pay enough in taxes to benefit from the credit. I'd love to see that change.

"The dirty little secret about renewables is that they're MORE EXPENSIVE than what we have now and need to replace".

Well said. However:

4) The dirty little secret about Tar Sands and Oil Shale is that they are more expensive. It doesn't get spun that way because our experience is so informed by cheap Saudi oil.

5) The dirty little secret about Shale Gas plays (lots of great discussion on this today) is that they are more expensive. It doesn't get spun that way because our experience is so informed by oil-associated natural gas from Texas.

6) The dirty little secret about coal is that, well shoot, we are a little ways away from running out of coal so it's still cheap, albeit openly dirty.

My only point being, the poor among us are threatened by all of this (disproportionately to the well-off), not just the expense of cleaner energy sources.

Howdy Steve,

don't get me wrong - I'm a fan of solar PV - it's my job as well. My points were in light of accepting memmel's latest brief comment and others that preceded it.

Mainly: energy is getting more expensive on average and folks are getting poorer. 'New' energy is unaffordable in many instances. Therefore we will have less available energy in the future. This dovetails with memmel's shrinking pie - there will never be more wealth to change that equation.

You own a home in suburbia and are considering PV. Great! If you're in central CA give me a call... I consider you one of the richest 1% in the world. You may feel relatively poor, nothing personal, but I think you're not. Most folks on the planet have never used a telephone or a toilet. $2 is a windfall. We are the richest there ever were or will be... If you can afford PV now you should go for it - you've done well for your self and it will put money in your pocket.

The ITC (in CA = 30%) has been made more accessible. It's unlikely anyone with a home getting PV could not collect it. Also sweeping our state (and now in CO) is the AB 811 thing. Your county or city writes the check for your solar PV (or windows, furnace, etc.) and you pay through property taxes for 20 years. If you move, the new homeowner pays.

There's a lot of dirty little secrets out there... renewables and green energy are just assumed to also be less expensive somehow... TOD'ers know it's not true but your average joe doesn't think of it in those terms. Receding horizons... Another DLS: we'll burn every FF we can when TSHTF

Points well taken. Folks expect new tech will save them money, sort of the nuclear power fantasy. They hope the same from a new oil field, CNG vehicles, or whatever. They will be disappointed continually.

And you are right to say I am wealthy, in that sense. Among the wealthiest, in a land that is (arguably) the wealthiest not just now, but in all of human history. Yet, it is surprisingly easy to run into people who are wealthier still. Odd that our lenses seem to be fitted that way.

.. And it's still worth noting in your further defense, that there are American/Western people poorer than you who's spare change is still pouring into addictions and toys. That few of us even in the 3 to 4% of the richest people ever to live on Earth have been shown that this investment could be a lot more advantageous to them than the new Blu-Ray release of the Final Season of ER.

I'm in a fairly humble income bracket (and getting quickly humbler), but I've put my birthday money and a few lucky cashy-gigs into what few bits of PV I could assemble.

Season tix to the Sox don't have nearly the lifespan or utility of these boring blue boards.


"I consider you one of the richest 1% in the world. You may feel relatively poor, nothing personal, but I think you're not."

You see this often about Americans, almost as a wealth guilt trip. I wonder about the veracity, not the figures of USD income, those you must concede, but of poor, of destitute, and all of that ramification.

In my travels, meager though they be, I don't see that dramatic difference. Even in third world native villages, people are well fed, and clothed, happy. Certainly better than some of the slums of US urban areas. But even more contrasting, the children are exuberant, full of life and laughing. They may not have all the "things", but they are usually no poorer for it.

Even with "things", it is deceiving. My son recently took a job in Venezuela, and he tells me although cell phones cost the equivalent of $1000, everyone in his travels in the barrios of Caracas or Barquisimeto, seems to have one. "How can they afford it?" I ask. I have no idea." is the reply. Must be some program or something. Even allowing for a tendency of many to value personal appearance higher than say lower class US, their clothing is clean, well kept, and fashionable.

The values they have, their wealth and lifestyle, is often superior to ours in many regards. Our myriad forms of personal debt and finances enslave us from just living and enjoying life. I don't wish an argument on the suffering endured in the barrio in a global famine or some such calamity. But post peak, I think many of those native villages will fare far, far better than us. Makes one wish they might change their race and blend in.

Even with "things", it is deceiving. My son recently took a job in Venezuela, and he tells me although cell phones cost the equivalent of $1000, everyone in his travels in the barrios of Caracas or Barquisimeto, seems to have one. "How can they afford it?" I ask. I have no idea." is the reply.

I work in the mobile phone industry and I assure you I've very familiar with the fact that the world has found mobile phones one of the few pieces of technology that is indispensable. If there was not 1000 people who could do my job I'd feel a lot better :) 100 of us should do ok as long as some reasonably technically advanced regions remain. This is why on the electric front the key from a global perspective is enough power to charge a mobile phone and of course the power usage is dropping over time.

What I call the must have use case for PV which is probably a mobile phone and a single White LED light is actually already met with our current technology. Later enough PV for a electric bike make become a growing use case. Now its argued that large power arrays for the wealthy are important for growing PV usages I'd suggest that much smaller arrays for charging mobile phones and a single LED light is a far far more scalable approach and would bring costs down faster. As the markets grow in these poorer countries PV factories could then be built locally.

In this particular case my experience in the mobile industry indicates that expanding into the third world markets is what really brings down the cost of technology. It was only after mobile technology was targeted at the third world markets that mobile phones became ubiquitous and relatively cheap.

Here is what needs to happen for PV.

1.) Solar powered white LED light.
2.) Mobile Phone Charger.
3.) Solar Powered hot plate for cooking
4.) Solar powered water purifier probably ozone.

And I'll let you in on a well known secret once you sell something for the world the US is a backwater no one cares about the US mobile phone market. I get excited about contracts in South America, India, China, Europe and Japan selling into the US's fractured market with a small population is really not that interesting. I think you can see given my list how you can get people to expand their PV arrays to power a wide range of first wanted then truly useful pieces of electric equipment. The volumes would dwarf the approach of selling a few large expensive arrays in the US and costs would come tumbling down. My own industry has proven it can be done.

Anyway I simply don't agree with the conventional wisdom about solar its wrong what I'm saying is the right answer and this is without any modifiers. I'm 100% right on how it should be done.

Hell this is part of my own business plan I'm not going to give the whole thing away :)
Actually I don't mind just won't go into details
But I've written enough about Amish electricity that given that and this anyone should be able to put it together :)

What I actually find a bit sad is that people that work in the third world have ideas very similar to mine yet the people that actually raise money to develop alternative energy seem to simply ignore this market even though the success of the mobile phone is hidden in plain sight.

The ITC (in CA = 30%) has been made more accessible. It's unlikely anyone with a home getting PV could not collect it. Also sweeping our state (and now in CO) is the AB 811 thing. Your county or city writes the check for your solar PV (or windows, furnace, etc.) and you pay through property taxes for 20 years. If you move, the new homeowner pays.

There's a lot of dirty little secrets out there... renewables and green energy are just assumed to also be less expensive somehow... TOD'ers know it's not true but your average joe doesn't think of it in those terms. Receding horizons... Another DLS: we'll burn every FF we can when TSHTF

Isn't there some sort-of new program in CA so that the poor can purchase PV systems on state money? I haven't paid enough attention since I wouldn't qualify. I was considering getting a system this year, but I discovered a mistake on my 2007 taxes (actually the good folks at the IRS discovered it), and just sent away $2600. Now since I gotta pay kids college tuition in the fall as well, so I've decided I can't afford it just now. I may even be in your area -far east bay.

Now, at least in the manufacturing area, PV is growing cheaper. Until the GFC (crash) hit, it seemed that PV demand was so strong consumer prices were actually increasing. But, I do think the general trend for the technology should be towards lower cost, many are predicting grid parity in a few years.

There is a program for low income solar ... I met all the requirements ... applied and was told it was changed to allow only those who lived in low income financed structures. I own my home and not under a low income mortgage so I am excluded.

County by county and city by city the property tax model ('city first') is taking hold in CA. Sonoma, palm desert, berkeley have done it. Santa cruz sounds imminent. Monterey is working on it. The local gov. pays for your solar (you are a home owner...) and it is assessed against property taxes for 20 years. For most folks the monthly savings are greater than the monthly cost.

Prices for panels and components have come down in the last 6 months. But people are generally more poor... Manufacturing has caught up to demand (supposedly).

Do you honestly think that energy company that is paying you for the extra electricity you put in the grid let alone the grid it's self will stay intact enough for you to see that '8 year r.o.i.'?

If you do i have a few bridges i need to sell, how much are you willing to pay for them?

Do you honestly think that energy company that is paying you for the extra electricity you put in the grid let alone the grid it's self will stay intact enough for you to see that '8 year r.o.i.'?

Well, the rebate is paid up front, and the ITC would get claimed next year. So, if I thought my utility would really be gone in eight years, I better get PV put in right away. That way I'll have at least some source of electric power when my grid tie fails.

Should stock up on batteries and NPK while I'm at it. Maybe learn to shoot, though I'm averse.

Collapse of the grid within the next decade is a pretty dark scenario. If it comes to that, there is not much any of us can do to make a huge difference.

"If it comes to that, there is not much any of us can do to make a huge difference."

There is a hell of a lot to do that will make a 'hugh difference' to you and your family.

No I can't save the world but I can pump water from our well with the solar powered golf cart. I can raise a garden and dry fruits. I can make things from wood using hand tools.

One of the problems is everyone wants to save the world ... can't be done so they give up thinking about it and go back to dream world.

It is quite enough to save yourself and family and see what can be done for your immediate community as the outer world goes TU.

One of the questions I get from the few people who don't just roll their eyes, "Where are you going to get the wood after the grid goes down and there is no money?" Answer, "Hello, we live in the high desert and you will not stay here without heat, water, fuel, electricity or money. I will use any empty house (and there will be lots of them around) for lumber." Now that usually gets their attention.

Do you honestly think that energy company that is paying you for the extra electricity you put in the grid let alone the grid it's self will stay intact enough for you to see that '8 year r.o.i.'?

Short answer, NO! But, When the grid fails and my 6KWp solar panels are delivering only 4KWp due to aging I will be king. I have a lot of battery operated tools that will last my life time.

Personally I believe TPTB know about PO. I see every day PO mitagation stratagies coming from government. The people are not on board, that's the problem. No one who wants votes is going to campaign on this issue, but they know it is an issue. When the people start to take it seriously, the goverments will respond.

I know I will get a lot of flak for this comment, but really, the government cannot function without the cooperation of the people it governs.

Good answer, Steve.

To put it another way, Kaiser, Steve has ALREADY bought his bridge.. but maybe he'll give you a good price for charging some batteries, if you need to get across the river at some point. (And if you ask nicely!)

Re: OTC: Aramco pursues 70% oil recovery rate

. . . expand its resources from 742 billion bbl to 900 billion bbl

I wrote and discarded a couple of sarcastic comments. What can you say in response to the captioned quote? Here is my 2¢ worth:

In the following article, we supported Deffeyes’ work, and we added Texas as a model for Saudi Arabia, noting that Saudi Arabia was at about the same stage of depletion at which Texas had peaked:

Texas and the Lower 48 as a Model for Saudi Arabia and the World (2006)

The EIA shows the following for recent Saudi crude oil production:

2005: 9.6 mbpd
2006: 9.2
2007: 8.7
2008: 9.3

While the data don’t yet confirm that 2005 was the final Saudi peak, the data certainly suggest that their reserves are wildly overstated. In any case time will tell.

However, what is more important is the volume of exported oil worldwide. Using the total liquids production numbers, and subtracting out domestic consumption, the EIA shows the following for Saudi net oil exports:

2005: 9.1 mbpd
2006: 8.6
2007: 8.0
2008: 8.4

They did fess up to one thing, at least:

With capacity now at 12 million bpd, the expected increase exceeds the target of 12.5 million bpd of kingdom capacity by the end of June, but Nasser said some additions will merely offset declines elsewhere.

"We don't use all of it for expanding our capacity. Some of it's being utilized for maintaining potential. It's a combination," he said.

They're bringing on 1150 kb/d this year. You wonder where "elsewhere" refers to in that statement.

Wow! At the current rate of increase in exports, Saudi Arabia will be providing the world's importers with more than 28 million barrels per day of oil within 25 years. With whiter and brighter EOR, that could easily top 40 mb/d. The coming surge in exports from Iraq should add another 10 to 20 mb/d. At some point free enterprise is going to return to Venezuela (admittedly some troops may have to be redeployed from Afghanistan once mopping up is finished there this summer) and with market forces at work, importers can count on another 5 to 10 million barrels per day under the stewardship of properly incentivized managers. And don't forget Brazil where almost daily new discoveries of oil and salt promise salad days ahead. Wow!

To infinity and beyond! The really crazy thing is that Peak Oilers and finite earth types are generally considered to be the nutcases. . . while 900 Gb for Saudi Arabia is probably considered a legitimate estimate by most MSM types.

BTW, Michael Lynch weighed in on the tail end of the recent WSJ blog posting on Peak Oil (it's since gone off the main page). In any case, my response:

Jeffrey J. Brown wrote:

Here is the “Peaks Happen” slide, lining the 1972 Texas peak up with the 1999 overall North Sea peak:


There are two regions, developed by private companies, using the best available technology, with virtually no restrictions on drilling.

Michael Lynch is apparently arguing that discrete regions can peak, but the world won’t. In other words, he is arguing that the sum of the output of discrete sources of oil that peak and decline will show a virtually infinite rate of increase in production. This is equivalent to expecting production from a field (the sum of the output of discrete wells that peak and decline) to increase forever.

In honor of Peter Huber and Michael Lynch, I have named this type of field a “Huber/Lynch” Field. These types of fields are found in areas occupied by elves, fairies and unicorns.

This is the key problem with Shale your effectively always wildcatting the field.

With the new multi-completion wells having a unknown connection with the existing fracture system the worst case scenario is a single fantastic well and zero from any more wells drilled.

You simply have no idea as you develop the field what the outcome will be on a per well basis.

FF who posted above or maybe someone else could tell us how well they can model these fields. I'm skeptical that we can easily get a detailed map of the natural fracture network. And even with this I still think the super sweet spots will always be a small precentage of the field 10% or less.

memmel -- from the little I've seen first hand of the exploratory effort, a 10% sweet spot goal across the entire trend might be a tad optimistic.


I don't know oil but I did extensive work on the Ogalla aquifer


And similar ones in north western Arkansas and Oklahoma. I did trace mineral toxicology essays on the wells and at least where I worked the aquifer was underlain by a extensive shale bed. I think its the same layer or one below that the Fayetteville NG plays are drilling into. In this respect I know a bit about it from the water perspective and a lot of these wells also have natural gas contamination. I also happen to know that these shales are full of all kinds of nasty trace minerals selenium boron etc. In a few cases you actually have significant uranium concentrations and radon gas issues.

But even working with shale from this viewpoint I got a handle on how it varied over its extent. And these shale beds are huge covering hundreds of square miles. But your talking huge differences over the extent even in the work I did.

Here is a wiki on the Bakken but for what I'm talking about they are all the same.


Basically these big pretty graphs people see of these huge shale deposits are showing the entire deposit or old ocean basin. You can do exactly the same damned thing for the associated limestone and sandstone deposits even salt. Guess what these are friggen dried up oceans. Just looking at say salt deposits alone they may stretch for hundreds of miles with only a very small precentage viable for commercial mining.

Given what I know about methane contamination in deep water wells drilled into effectively the same shale no friggin way your getting massive NG production across the play from deeper formations. If this was true half the water wells drilled from Ohio to the rockies would require methane removal.


April 22, 2009 - Jesse Ellsworth thought something was wrong with his water when it began to smell funny and popped out of his faucet in bursts. Then, in February, the Fort Lupton resident launched an experiment: He flipped on the kitchen tap and touched a cigarette lighter to the stream. As flint sparked steel, the water lit on fire like a torch.

Ellsworth is one of at least 29 residents in small farming communities northeast of Denver who have asked either the energy companies or the Colorado Oil and Gas Conservation Commission to test for natural gas in their water wells.

I'm not a oil and gas guy but we have drilled a effectively uncountable number of water wells into these shale layers some very deep. And no they are not overflowing with methane its a contamination problem.

Ergo the basis for my 10% guess :)

from your bakken reference(wiki):

"[6] However, the presence of horizontal fractures makes the Bakken an excellent candidate for horizontal drilling techniques in which a well drills horizontally along the bedding, rather than vertically through it. In this way, a borehole can contact many thousands of feet of oil reservoir rock in a unit with a maximum thickness of only about 140 feet (40 m).[7] Production is also enhanced by artificially fracturing the rock,[8] to allow oil to seep to the oil well."

reference [6]:

[6]^ Diagenesis and Fracture Development in the Bakken Formation, Williston Basin: Implications for Reservoir Quality in the Middle Member, by Janet K. Pitman, Leigh C. Price, and Julie A. LeFever, U.S. Geological Survey Professional Paper 1653, 2001.

there is some evidence of (natural) horizontal fractures from ref [6]. imo,these (natural) hz fractures have to occur in shear zones associated with regional faults. horizontal fractures at an overburden pressure of ca 10,000 psi are of no consequence. natural fractures are predominatly vertical and hydraulically induced fractures are propagated vertically as evidenced by treating pressures and microseismogram studies during frac'ing operations.

Yes the faulting plays a big role. I honestly don't know if they can map all of these local faults to a high degree of accuracy. You know from oil that water flows through the fracture zones and at least in my work it really depended on how far the water had moved through the shale its contact are with the shale etc. These shales can get very nasty loaded with all kinds of toxic trace minerals.
The faults can extend for miles. For water its not a huge issue since your getting recharged but for the deeper layers with NG it just seems to me that if you drill a well long enough chances are you will hit one of these extensive fracture networks but I can't see it acting much different from the water wells if you drain faster than it can recharge even if your in one of these fault systems you not only run dry but you dry up every single well along the fault.

Tried to google some links online but it can be amazing whats connected to what when your dealing with shale. You can drill a water well and dry one up miles away. When you do the trace mineral content vi

You actually can get a very good fingerprint if you will on the water. You can have water wells 5-6 or more miles apart obviously tapping into the same underlying fracture network.

Now your link is claiming.

there is some evidence of (natural) horizontal fractures from ref [6]. imo,these (natural) hz fractures have to occur in shear zones associated with regional faults. horizontal fractures at an overburden pressure of ca 10,000 psi are of no consequence. natural fractures are predominatly vertical and hydraulically induced fractures are propagated vertically as evidenced by treating pressures and microseismogram studies during frac'ing operations.

I actually don't agree or maybe this is poorly worded. God I wish I could find this googling.
Certainly you have vertical fractures yes but you also have long horizontal ones or more correctly extensive horizontally connected fracture networks. Once you have any sort of faulting your going to crack the shale bed all along the fault line. I agree in the sense that its probably not one perfect crack but the shale itself is shattered and crack connected all along the fault.

This seems to agree with what I saw in water fingerprint analysis.


I argue that the NG guys don't have a clue how much of the formation they are draining with on of these get lucky wells.

Slightly different way to look at it.

The quarts deposits associated with cracked shales show the complex and interconnected natural fracture network they leave a perfect cast if you will of the fractures in the shale.

And yes I watched the gold content of the water :)

If I'm right this is a easy one they will drill a few of these long multi-frac wells then it will be dry hole after dry hole.

horizontal fractures may exist at shallow depths, but with an obp of 10,000 psi, any fractures would close up. horizontal fractures are associated with thrust faulting, e.g. overthrust.

interestingly, initial reservoir pressure in the williston basin bakken is about the same as that required to initiate a vertical fracture. the reference cited above [6] claims that the fractures are created when kerogen is converted to petroleum with about a 1.5 increase in volume. if pressure in the fractures is holding the rock face apart, the compressibility of the fracture part of the pore space would be excessive.

the compressibility of a normal intergranular pore space is usually in the range of 4 e-6(vol/vol/psi), whereas spe 24320 gives the compressibility of the fracture part of the pore space at about 80 e-6, from memory. the fractures would close up as pressure depletes, and the pore space compressibility would decrease. this would probably be a minor but not insignificant factor in a gas reservoir, but would be a major factor in the recovery of oil above the bubble point pressure.

2005: 9.6 mbpd
2006: 9.2
2007: 8.7
2008: 9.3

While the data don’t yet confirm that 2005 was the final Saudi peak, the data certainly suggest that their reserves are wildly overstated. In any case time will tell.

The data are no reason for optimism. Important to know also is how much of their reserves is heavy oil.

None. Saudi's heavy oil or "tar pits" are very deep, unlike those in Venezuela which are near the survace.
Saudi Arabia tests potential for unlocking heavy-oil reserves

Saudi Oil Minister Ali Naimi said many heavy-oil fields in his country aren't currently included in its official tally of 260 billion barrels of recoverable reserves, the world's largest. If steam injection works in these fields, it would add "tens of billion of barrels" to Saudi reserves, Mr. Naimi said in an interview.

Saudi's heavy oil cannot simply be mined like Canada's tar sands and Venezuela's tar deposits. It would be very expensive to pipe steam to the desert, melt the tar, pump it out, then keep it hot while it is being piped to the refinery. Also, the tar is still embedded in the reservoir rock. This makes it doubly hard to recover very deep heavy oil. I doubt that we will ever see heavy oil recovered in Saudi Arabia.

Ron P.

Summary of Weekly Petroleum Data for the Week Ending May 1, 2009

U.S. crude oil refinery inputs averaged about 14.8 million barrels per day during the week ending May 1, up 420 thousand barrels per day from the previous week's average. Refineries operated at 85.3 percent of their operable capacity last week. Gasoline production increased last week, averaging 8.9 million barrels per day. Distillate fuel production was slightly higher last week, averaging 4.2 million barrels per day.

U.S. crude oil imports averaged 9.9 million barrels per day last week, up 96 thousand barrels per day from the previous week. Over the last four weeks, crude oil imports have averaged 9.7 million barrels per day, 156 thousand barrels per day below the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 823 thousand barrels per day. Distillate fuel imports averaged 165 thousand barrels per day last week.

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 0.6 million barrels from the previous week. At 375.3 million barrels, U.S. crude oil inventories are above the upper boundary of the average range for this time of year. Total motor gasoline inventories decreased by 0.2 million barrels last week and are in the upper half of the average range. Finished gasoline inventories rose last week but gasoline blending components inventories decreased during this same time. Distillate fuel inventories increased by 2.4 million barrels and are above the upper boundary of the average range for this time of year. Propane/propylene inventories increased by 2.4 million barrels last week and are above the upper limit of the average range. Total commercial petroleum inventories increased by 7.9 million barrels last week and are above the upper limit of the average range for this time of year.

And here's the rest of the report summary:

"Total products supplied over the last four-week period has averaged 18.2 million
barrels per day, down by 7.9 percent compared to the similar period last year.
Over the last four weeks, motor gasoline demand has averaged 9.0 million barrels
per day, down by 0.9 percent from the same period last year. Distillate fuel
demand has averaged 3.5 million barrels per day over the last four weeks, down
by 14.1 percent from the same period last year. Jet fuel demand is 11.6 percent
lower over the last four weeks compared to the same four-week period last year."

I'm not sure why Leanan leaves off the most relevant part of each week's report, unless it's for copyright issues, but this is a US Govt-produced report for public consumption.

Basically, it's bandwidth. Everyone has a different idea of what the "most relevant" part of the report is. No need to post the whole thing. A link is enough.

Motor gasoline demand down 0.9%, but driving apparently took a 4% nosedive (see snazzy graph above), and many metro areas have seen decreases in traffic in the 20-30% range (from a DB article a few days ago).

I'm trying to figure out how these numbers fit together. People are travelling fewer miles on same gasoline tank, but not driving around cities as much. They are either carpooling less or driving less efficiently (worse cars, less highway). Are these possibly suburbanites no longer commuting into town as much (but they still have to drive a fair bit, as Memmel has pointed out)?.

Just wondering about coming up with a hypothesis which would be consistent with all these numbers, so we can test it against future numbers. In my view, numbers are a starting point, whereas all the interpretations by the MSM (such as Nate Silver's the economy is fine, just American's aren't into driving anymore) are terribly confusing.

Then the rest of the 7.9% decrease in "total products supplied", is that accounted for by diesel not being used by trucks and construction vehicles?

That 20-30% number was for congestion -- traffic jams. IME a 2% drop in cars on the road will cut the duration of a rush hour traffic jam by 20%.


I gave up on 'logic' as regards our society and culture some time back.
Along about the time I unplugged the satellite dish and gave my wife the TV and remote. I know she wanted it. I know how it controls her very life so...both went away and I put all my Dockers pants on hangers perhaps to never wear again. Got out my bib overalls and laid back in the recliner and started getting serious about what real 'reality' was all about.That was like 5 years ago and never looked back.

There is a lot more to life and can be found 'disconnected' from it all. Or as we once said ,in a different multiverse," Tune out and turn on"...the turn on is one's choice. Mine is really good scotch and keg beer laced with Kentucky Bourbon.

Nothing makes sense anymore.

Airdale-I now only trust the enduring logic of silicon and its cousins,and never, ever lie to the metal(logic ckts)

PS: For others. I have been reconditioning very large diesel tractor batteries. My buddy pitches them when his numbskull workers say they are bad. They are almost always wrong. I have three in prime shape right now and getting ready for my PV panel purchase upcoming.
This is 'reality'...the photons strike the media and loose free electrons and voila ..current flow.."I love it, I really do."

And now I am asking the question' What is the best controller?'

Outback MX-60 is on my wish list.. tho' the real installers here will have more informed preferences. I like the color.

Oops! Guess there's a new model I need to fawn over..

As Far as never lying to the metal..
'People think if you put honest numbers into a computer, you'll get honest numbers out. So did I, until I met a computer with a sense of humor' Mannie, The moon is a harsh Mistress, RA Heinlein


No its not garbage in ,garbage out. Its lies in and lies out.

You go to almost any store. Small town USA types are pretty bad about this.
You make some purchases all the time checking the tags on the price listed on the tab on the shelf.

You go to check out and the first thing you notice is that you can't see the LCD on the automated computerized cashregister.

But if you crane you neck or look closely at your receipt you will most times find you have been cheated with overcharges.

If you then mention it to the clerk,usually a rather ignorant looking ,just out of high school,boy or girl they will first look at you like your nuts,then try to get you to check again and finally the will when caught say "oh thats the computers fault"...and may or may not rering it correctly.

Most at this point never even noticed, didn't care, gave up or just left.
I never never do that. I speak somewhat loudly and say "No you are incorrect. I will go get the price tag." I make sure everyone hears me and go rip the tag off the shelf,come back and lay it on the counter, and wait for her to laboriously call someone over and make it right.

If you check the people in line behind you then you will usually note that most won't look you in the eye and have a rather droidlike look on their face. Like 'duhhh whats the holdup'.

I also mention to the clerk this: "no its not a computer mistake, and I think it was delibeately entered incorrectly because I never find an error in the shoppers favor."

They then decide that you might be dangerous and hurry you along. Next time you go in its a different one and you go thru it all again.

This is the stealing of not only the shopper but the morality of the employees.
Its rampant. Its deliberate and its not going away.

If no one complains? Then it never will change and only get worse.

This too me explains the government,the fraud in the banks and the stock market shysters, car salesmen,,and all the rest.

We have become a nation of thieves and fraudsters.

Oddly enough I find that in Walmarts and Sam's this never happens.

At my favorite grocery store some miles away it also never happpens but those are very very few exceptions. Sometimes my favorite does make an honest mistake. But rarely.

Airdale-the metal never lies, the humans at the KB do lie,
Take my Blackberry Storm..supposed to be state of the art...its rift with monkey code...it fails quite often depending on what your doing. If you are not very careful when taking EVDO down then you get rather ugly problems,,always...mousey code,thats all and bad programmes who constantly 'lie to the metal'.

It is all explainable. Walmart and Sam's have no Union employees.

$469 bucks?



$699 list $454 wholesale

Link for the $454 ???

Our supplier is Conergy and we're an 'official' dealer...


I know, but it's got a good rep, as far as I know.

Also flexible, choice of input and battery pack voltages of 12 to 60volts.

-Here are the two cheaper controllers that I already own and use.. so far no complaints

Morningstar Sunguard 4.5amp Charge Controller (small, portable for up to ~50watts of PV, $29)
(No LVD or LowVolt-Disconnect, which protects batteries from being overDIScharged by appliances, tho' many inverters do offer a LV cutoff)

BZ Products 250watt MPPT controller (Med/Small Controller - $91)

Hope these give you something to chew on!



Check the Xantrex SCC XW60 also -
100% service factor w/o Fans.
No bugs or dust to suck into the works.
I have installed both w/o a return call.
The kWh harvest metering on the XW seems to be
better. MPPT Solar Charge Controller (SCCs) for battery system is possibly the best ROI there is. They reduce all costs.

Outback FLEXmax is what we often use.

With a few details (batteries, panels) I can give you a good recommendation...

Thanks. I hoped one of y'all would pitch in a confirmation!


A 60 amp controller will take a lot of power. Say 48V of 220 amp batteries at 60 amps is almost 3000 watts or 15 200watt panels. About $11,500 in panel costs another $1000 for controller and another $1000 for a 48V 3000watt inverter and fittings. About 13,500 for a lot of power. Can charge almost dead batteries in four or five hours.

Ok,,,$13,500...when my 'boat comes in'.



My system is 36VDC and 3-130watt 12volt panels, 10 amp controller and best price was about $2K or $6/watt.

I thought about making a controller out of a 36V zener, a power transister, heat sink and a few other parts. I am quite sure it would work but didn't want to take a chance with big bucks in the batteries and solar panels. Google solar controller skematics and you will find a couple.

My current buy list is 8 Kyocera KD180GX-LP 180 Watt Panels


48 volt system
Outback MX60 or 80 controller

Outback GVFX3648 Grid Interactive Inverter


on a zomeworks utrf 120tracker

any bids ???

Crude Oil Rises Above $56 on Smaller-Than-Forecast Supply Gain

(Bloomberg) -- Crude oil rose above $56 a barrel for the first time since November after a U.S. government report showed a smaller-than-expected increase in stockpiles.

Ford Spending $550 Million To Convert Truck Factory To Build Electric, Small Cars

We'll be seeing an awful lot of this from those auto companies that want to stay in business.

The “all spin all the time” zone on CNBC wasted no time striking back at the proposal from Ford to build hippy cars rather than big manly SUVs and F-250s. Talking points include:

1. Nobody is buying small cars.

2. Nobody likes the styling of small cars vs. the implied “aggressive” styles available in SUVs and trucks.

3. Small cars are unsafe.

One of the talking heads then proceeded to describe how no one she knows who has a family is buying a small car. And people just aren’t going to drive a small car unless gas prices are high enough to force them to do so… So she left the viewer mulling over the question of just who is going to buy a smaller car when they have other gigantic options available…?

Apparently even though she has covered this mess for months now she has failed to recognize that the housing ATM which funded the purchase of a lot of these behemoths is FINISHED. I’d say a great many people who are underwater / unemployed would be extremely happy to be able to buy any car – including, oh the humanity, even a small car…

It is difficult for us European cheese eating types to understand this kind of media mentality. Here, small cars are, and have pretty much always been, popular! Think of the new mini, the new fiat500, and a whole raft of stylish small cars like VW golfs, Toyotas etc etc. I have v. small car - in the form of a 900cc Daihatsu. 4 doors, aircon, seats 5 (a real squash though). The advantages?
a) it is cheap (to buy and to run)
b) you can park it just about anywhere.
Yes, safety-wise it will be less secure than driving in a 4x4 of twice or 3 times the mass. But hey, for urban driving at an average speed of 10-30mph the sort of risks are low. You have more chances of accidentaly maiming your own family by manoeuvring a tank-sized SUV from which you cannot see small kids, pets etc.
I suspect you are right - the single driving force for the US to adopt a positive view of a small car will be fuel economy. Maybe then you will start to like the styling!

I don't know about new construction, but one of the things I noticed when I was in Scotland many years ago was how narrow most of the roads were compared to equivalent roads in the US.

Perhaps that may have an influence? It would certainly make larger vehicles less convenient.

Remember when everyone stupid people got lines of credit against their home and used it as an ATM? Or they got a house on an interest-only ARM with no money down? Here's the result...

20% of homeowners 'underwater'
Study finds more than 20% of U.S. homeowners - about 20 million residences - owe more than their homes are worth.

More than 20% of American homeowners owe more on their mortgage debt than they can sell their homes for, according to an industry report released Wednesday...

"A combination of falling prices and low down payments has left many borrowers underwater," said Stan Humphries, Zillow's vice president in charge of data and analytics. "In some markets, more than half of all homes are in negative equity."

Those markets include Las Vegas, where a whopping 67.2% of homeowners would have to bring cash to the table if they sold their homes. Other markets are Stockton, Calif., where 51.1% of homes are underwater, and Modesto, Calif., where 50.8% of homes are in that position.

"That's really important, because homeowners in negative equity have fewer options if they take financial shocks such as divorce, job loss or medical bills, making foreclosure more likely," said Humphries.

I believe I recall reading that about 30% of homes have no mortgage. So for the population of homes with a mortgage, incidence of negative equity is significantly higher.

Point well taken... Too bad folks (usually) can't afford to pay cash for their homes upon purchasing them...

Any house that you buy with less than a 5% downpayment is underwater when you close, since the real estate commission is 6% to sell. My take, just like with auto's, statistics like this are somewhat misleading.

Attack on oil pipelines in Iraq

UPDATE: Gunmen Blow Up 2 Pipelines In Iraq -Oil Ministry

AMMAN (Dow Jones)--Unknown gunmen early Wednesday blew up two oil pipelines from Iraq's northern Bai Hassan oil field near Kirkuk, but the flow of the country's northern oil exports weren't affected, the Iraqi Oil Ministry said.


There was no much damage, however a clear pattern is emerging the last couple of weeks, oil installations are again a target for the insurgency, I expect the northern pipeline to experience a bigger attack halting exports in the near future.


Maybe the Iraqis are executing a brilliant move... Without infrastructure to export oil, they'll keep it in the country as long as possible and buffer themselves post-peak. I think it would be delicious irony if Iraq ended up becoming the new Saudi Arabia of the 21st century, just because they didn't export their oil when everyone else did...

Is it possible the Sunni insurgents are acting up because they don't want US forces to leave, leaving them at the mercy of the Shiite majority?

Given that the Sunnis and the Shiites have been killing each other for about 1200 years, I doubt that they have stopped. I think it's also clear that Saddam was able to quell the conflict only thru the use of brutal repression. It would seem obvious that the U.S. public doesn't have the stomach for such tactics, so the two sides are probably just sitting out the rest of the American game in Iraq, awaiting the time to begin the "discussion" again. And, this time, the door to Iran has been left open, which will make the "debate" much more interesting. Whether the Suniis will try to inflame the situation before the U.S. actually withdraws would be difficult to know. Of course, there are other actors on the stage who also might not want the U.S. complete the planned withdrawal...

E. Swanson

Iraq should be partitioned. Point blank. It only exists as a state because it was drawn up on a map somewhere in Europe with no consideration of the ethinc makeup and history of the individuals living there...

The same could have been said for British India... or Yugoslavia for that matter (which goes to show this isn't about where the map was drawn). Partitions can be very bloody.

Oddly it seems to me that some of the bloodiest partitions are the ones seperating different sects of the same basic religion.

Protestants and Catholics in Ireland being another example. Dividing them up on the map doesnt always mean they leave each other alone.

.. leave each other alone .

Ireland was 'planted' (colonised) by northern-english protestants during british religious war period.
They formed majorities in various places, especially the northern quarter.
Trouble flared up after being fanned by factory-owners eager to divide the workforce which was unionising and striking (1913 etc).
After independance-and-partition, the native 'catholics' up north continued to be dominated by the immigrant majority, forming an aparthied-like system.

west, here is a key reason:

Iraq security at risk in crackdown on militias who fought al-Qaeda

Some U.S.-backed Iraqi fighters desert posts


Re: Nate Silver's model. The reason the model is failing to predict downward moves is because it is not properly interpretting unemployment. The people who lost their jobs in the first big spikes of job losses of 2008 have long since fallen off the unemployment rolls. But obviously they havent found jobs. They're still unemployed, they're just not counted. If the model was based on U6 unemployment it would probably be more accurate.

IRS individual tax receipts are down 15% over last year. There is your most accurate and precise measure of unemployment/underemployment.

Where do you find that information? I know state revenues are down too.

On a scale of one to five, I would award this article Five Gold Stars. It ought to be a guest post.

Shale Plays, Risk Analysis and Other Perils of Conventional Thinking: Haynesville Shale Sizzle Turns to Fizzle
By Ellis Hugh

A total of 1,966 horizontally-drilled producing wells from the Barnett Shale were evaluated to determine commercial gas reserves using standard decline methods. Based on this analysis, only 30% of Barnett Shale wells will realize revenues that meet or exceed drilling, completion and operating costs in the most-likely case based on assumptions incorporated into a 10% net present value (NPV10) economic model. The economic model includes per-well drilling and completion costs of $3.25 million, a wellhead gas price of $6.25/MMbtu (the average spot sales price for 2007), 75% net revenue interest, 7.5% Texas severance tax, and $1.25/Mcfg lease operating and overhead cost. These assumptions are consistent with information published in 10-K U.S. Securities and Exchange Commission (SEC) filings by key Barnett Shale operators. The model requires per-well cumulative production of about 1,325 MMcfg over 10 years to reach an economic threshold.

An early analysis of 20 horizontally drilled wells in the Haynesville Shale play in Louisiana and parts of adjacent East Texas suggests a disappointing outcome because of extremely high decline rates. Average monthly decline rates are 24%, with 75% of wells declining 20-35% per month. The impressive initial production rates (IP) for these wells do not, therefore, necessarily translate into high reserves (actual daily production rates from the maximum 30-day period were, in fact, about 20% lower than reported IPs). Fifteen Haynesville Shale wells had sufficient production history to analyze using standard rate-versus-time decline methods. Estimated ultimately recoverable reserves (EUR) averaged 1.5 Bcfg, and 67% of wells had reserves between 0.5 and 1.5 Bcf. These results indicate that Haynesville Shale reserves will be about the same as Barnett Shale wells at approximately twice the cost to lease, drill and complete. . .

Shale plays represent a disturbing tendency in the E&P business away from critical thinking. The belief in reward without risk is irrational. Failure to acknowledge the marginal economics of the play is bewildering. Unless opinion leaders confront the underlying economic and geological risks of these plays, I fear that a financial crisis may develop that will discredit the E&P industry.


You're starting to sound too much like an engineer.

Are you drilling any deals.


Just to clarify slightly, I'm not the author of the article. I forwarded the article on to Matt Simmons, since it supports a lot of his work.

I'm always drilling, but we are down to one rig, from two last year. I'm presently focusing on what for us is an "elephant" prospect, a potential 10 mb plus shallow shelf-slope play. Enough oil, to be produced over several decades, to meet world demand for a few hours.

BTW one of my current theories is that most remaining undiscovered one mb and larger fields in onshore Lower 48 plays do not have any reported oil shows. If a show, that is related to a one mb plus field, was reported, in all likelihood that field has been found. We are probably not going to find a million barrels of oil by drilling yet another offset to a one well field, or strong show, that has already been offset several times.

Great link WT. I knew sooner or later some verifiable facts would surface. From the little real rock data I’ve seen from the Haynesville it was very difficult to imagine URR being very high. The matrix porosity just isn’t there to support a longer life. It’s the frac planes that are producing the high rates. But we also know the volumes held in those planes is minor. We’re still testing our model for the Haynesville since we have so much land tied up. Plus we’re not spending much money elsewhere so why not. Maybe we’ll get lucky and find some sweet spots that out produce the averages. That seems like the best hope now.

That looks like the exact text of an article written by Arthur Berman of World Oil. He now has a blog


And there is quite a bit of detail there.

You're right. It looks like it was a copy of his article.

Johnson Rice provided a list of all the currently producing wells in Haynesville. I don't have URRs for Haynesville wells but here is a histogram of the rates of initial production. (click to see a higher resolution version)


What this says to me is that high rates are making it into the press, but there are just as many wells with low rates. Actually, it is a slightly bottom weighted and I am expecting that the distribution will become more bottom weighted over time (few high production wells, lots and lots of low production wells) if Haynesville follows the Barnett well distribution.

I find this is generally supportive of Berman's viewpoint. Yes there are high performing wells. But there are also many that are not high performers.

And, as Rockman has stated, we need to know if the high flow rates mean a high URR?

Did you find a link to the original World Oil column? The Haynesville blog link now has an elaborate signup procedure, but if memory serves I didn't see any reference to a World Oil link. I wonder if the blogger based his post on the World Oil column or copied it word for word. In any case, pretty interesting work by Berman.

World Oil also went behind a paywall recently, but he has his last two columns on Haynesville at the Petroleum Truth Report.

I thought the article was very interesting. He makes the point that most companies have $2.00 - $3.00 of overhead per Mcf. I went looking at 10k statements and he was right. Not that those costs cannot come down. Petrohawk spent more pre Mcf on stock options than on workovers.

The big question in my mind is how accurately does a Hyperbolic decline model predict URR for those kinds of wells?

I don't have any background in reservoir engineering. But I can fit a line through data points. So after reading Berman's article I found the well production data at the Louisiana DNR site. And I fitted hyperbolic declines to every well with more than 6 months of production data.

And it basically showed the same thing Berman did. None of the wells I modeled had 6 bcf of ultimate.

So, back to the big question: Does a hyperbolic decline actually model these wells? I have some doubts because of the the steepness of the decline tends to make a hyperbolic function overestimate the URR. So things are inconclusive. I spoke with Elwoodelmore, and he recommended a full reservoir simulation. But the trick is getting the data.

If someone is willing to release some data, no company names revealed, no exact locations, etc, then we could get further. (Just send me an email. My address is in my profile).

from chesapeake’s earnings conference call:


Brian Singer - Goldman Sachs
You now have some of your Haynesville wells that have reached or near their one-year anniversary and I was wondering if you could provide some color on what decline rates you have seen and whether and when you are seeing production leveling off.
Aubrey McClendon
Yeah, Brian we have a pro forma decline curve, that I will let Steve Dixon go through with you I think the first year decline rate, its close to 80%. But I will let him answer this.
Steve Dixon
Yes. Its over 80, about 86. And Brian I really haven't looked at, or have numbers here with me on particular wells. We only have I think, two wells that are over a year old and those would have been our very early wells with not very many stages and not long laterals. Really don't have a well set yet to a have full-year's decline -- as everyone knows the Haynesville now is a very steep first year, and how that will break, is still a little early yet.
Aubrey McClendon
Steve, you want to go through…
Brian Singer - Goldman Sachs
Do you have second and third-year declines for the Haynesville compared to say, the Barnett?
Steve Dixon
Well, our pro forma now is 29.5 in the second year, and 20.5 in the third year for the Haynesville but again, there is just pro forma, we don't have that knowledge today.

pro forma = WAG

Jon -- I suspect there will be a consistent relationship between IP and URR. I can't guess what that might be at the moment. But what might help predict the trend is a very common relationship I've documented in many other plays. A log-normal plot of URR vs. well count tends to form a rather straight (and thus predictable) line. I don't know if this phenomenon will hold up in the shale gas plays but it's common in conventional reservoirs. Just eye balling your chart it doesn't seem to fit to well at the moment (not a predominance of small wells). That might be the artifact of the cost to complete such wells. Wildcats that don't look viable might not be completed. Such cherry picking is not typically done with relatively cheaply completed conventional wells.


simmons stated recently that williston basin nd bakken shale wells produced 40 - 50 % of their ultimate recovey in the 1st yr on production. harrold hamm (contintal resources) made a statement a while back that reserves were equal to 1000 x the initial 7 day's production test. i have found this to be totally unrealistic.

i have data on 16 wells(15 sections) in the parshall field with at least 18 months history. 1st yr recovery ranges from 29 to 58 % of my estimated ultimate recovery. so i would ageee generally with simmons, the average is probably in the 40 - 50 % range.

ultimate recovery for the 15 sections averages 350 mbo, half the often quoted amount. declines range from 25 to 80 % (after 18 mos). most are in the 50 % range.

some of the wells in the discovery area of the parshall field are showing evidence of
free gas flow (depletion below the bubble point pressure).

i have found that there is a decent rank correlation between ip and uro, but not a direct correlation.
part of the difficulty in evaluating ip vs uro is that the tests are not always conducted on a consistant basis. for example one well in the parshall field has an ip based on a 1 hr test.

Good info elwood. With re: to test reliability I recall my first learning point about 30 years ago: the test engineer running the show asked if I wanted the “certified test” high or low. It was just a function of how quickly he manipulated the valves. Just one reason why I consider published initial production rates to be one of the most useless oil patch numbers.

Does anyone have a point-by-point rebuttal of the Questar speech going around?

Funny that he notes "we have a finite amount of wealth in the world" but seems pretty sure that we have an almost infinite amount of fossil fuels. He then fails to note the connection between wealth and fossil fuels. What side of that equation does his checkbook reside? Anything that starts with a premise of "The world's people will demand 50% more energy in the next 20 years" as its beginning point seems wobbly. The world's people may also demand 50% more ocean fish, clean air, productive soils, etc. Doesn't mean that they're actually gonna get it, does it? In fact, aren't there some of his tradeoffs involved there too?

You mean Keith Rattie's graduation speech at UVU?

The first part is full of the usual anti-science claims regarding AGW, long ago rebutted by several commentators. The list is long and not worth repeating, since we aren't actually able to rebut his disinformation in real time. He gave the speech back on 2 April, so it's ancient history in the MSM world of 24 hour news cycles.

But, much of what he said about the Earth's energy situation is correct...that is, as far as it goes. He does not mention Peak Oil, for example, nor does he talk about how much natural gas will be available in 2050, his reference time point. He does mention the fact that the rest of the people on Earth outside the U.S. would like to increase their energy consumption, while population may increase almost 50%, facts which points to an impending shortage of all fossil fuels if the average consumption per capita for the entire population of the Earth were to increase to half of that which the people in the U.S. are accustomed to. Just more of the BAU philosophy which Corporate America would have us believe we must accept.

E. Swanson

it's ancient history in the MSM world of 24 hour news cycles.

Yes, but it's making the rounds...well, just about everywhere I turn in the blogosphere.

Not knowing your taste in blogs, I assume you are referring to the usual right wing nut sites.

That Rattie quotes Willy Soon claiming that CO2 helps plants grow and claims that Greenland was "green" during the so-called Medieval Warm Period are just two examples of typical denialist propaganda. Sure, under certain circumstances, increasing CO2 will make plants grow faster, but the net effect seems to be less growth of the sort of plants we find most useful, especially when less precipitation is the result. And, as climate zones move northward, the vegetation in any location will change as a result. Sorry but trees don't move very fast.

As for Greenland, that's the old story about the Viking colonies farming, etc, but that notion ignores the facts of volcanic eruptions, several of which were large enough that a repeat today would wipe out a subsistence colony in Greenland today if there were still such living as the Vikings did. There's no absolute proof (that I am aware of) that the Vikings enjoyed warmer conditions back then. The Viking settlements were colonies and depended on trade for their survival. Little problems, such as the Black Death which killed about half of the population in Iceland, may have reduced that trade below the point at which the colony could have survived. How long would most city people live if the food and fuel transports stopped?

E. Swanson

Does anyone have a point-by-point rebuttal?

His major point; it seems, is that his financial future relies on everyone switching to use of NG and therefore what is good for Questar is good for America (and for the world).

Rattie: "The story with natural gas is even better – here and around the world enormous amounts of natural gas have been found. More will be found."

Proterra electric bus gets over 20 MPGe in tests

After going through three different duty cycles, the worst result returned was 17.55 MPGe, while the best was 29.23 MPGe, earned during the "commuter" phase which featured just one stop and speeds of up to 40 mph. The "central business district" phase which included 7 stops per mile and speeds of up to 20 mph gave an impressive result of 21.35 MPGe. The performance is even more amazing when you consider that the tests were performed at a gross vehicle weight of 36,680 lbs which simulated a full complement of 38 seated passengers, another 34 standing and, of course, a driver.

According to the reporter in the video accompanying the story, this bust cost a cool 2 million. He doesn't elaborate as to whether that is the cost of this prototype or the expected production cost with volume production. With a fuel cost saving of about $45,000 per year, the cost of this bus needs to get to around $300,000 more than a conventional bus, for it to make sense. Of course, there's the wild card of, how much the cost of diesel fuel is going to rise over the next few years.

Deeya Energy lands funds to build 'flow battery'

California start-up Deeya Energy said on Tuesday it raised $30 million to build "redox flow batteries" which it says will be a competitively priced way to replace diesel generators and store wind and solar energy.

I wonder if flow batteries wouldn't be a cost effective way of storing the energy recaptured during deceleration of freight locomotives? something like that should be possible in a unit the size of one or two freight cars, shouldn't it?

It would be great to see these things develop as a solution to utility scale storage.

Alan from the islands

As I understand it, vanadium flow batteries are completely scalable from golfcart size all the way up to storage for wind turbines. Not only that but they can be recharged in situ or off-site.

I wonder if flow batteries wouldn't be a cost effective way of storing the energy recaptured during deceleration of freight locomotives?

There was a company called RAILPOWER which took diesel locomotives, removed the diesel power plant and replaced it with batteries. They added in a small gen set. Their target market was switch and yard engines where the tractive effort is proportional to the weight of the engine. The heavy batteries resulted in an increase in drawbar pull. Yard locomotives make lots of starts and stops and regenerative braking permitted recapture of some of the energy which would otherwise be lost as heat.

A number of main line roads bought their units and they appeared to have a bright future up until the market crash / credit crunch. Company went bankrupt and was delisted a month or so ago. They were attempting to adapt the technology to road locomotives but the rails were not buying during a period of retrenchement.

Hello Leanan,

Thxs for your DB toplink on Nepal: Consequence of Rolling Blackouts

It would appear the Nepali Govt needs to study Dr. Duncan's Olduvai Gorge Theory and Hanson's Thermo/Gene Collision to gain a greater grasp of what awaits them postPeak as their cascading blowbacks continue to accumulate.

My guess is that their hydro-situation approximates Bangladesh's coal-situation [see EnergyBangla weblink series in earlier posting]: they have untapped resources, but no way to develop the internal funding and other required resources to exploit them. I would suggest they both move to full-on Peak Outreach & Optimal Overshoot Decline strategies as street rioting and a resumption back into civil war will only lead to faster decline.

I wonder what are the future prospects for Nepali habitats and species?

After trapping bats, Chepangs kill them by tearing out their heart, or by biting off their heads...

..Earlier they used to leave the cultivation sites fallow for some years to regain soil fertility but now, due to increased demand for food, they cultivate these sites without a break. This has led to degradation of land in this area.

..The main threats to biodiversity are excessive drainage of lake water, overgrazing on adjacent forest, use of poison for fishing, use of pesticides, herbicides and inorganic fertilisers on agricultural land, water pollution, eutrophication, proliferation of alien invasive species, hunting, excessive collection of fuel wood, fodder and timber and unplanned infrastructure development.

CIA Factbook link for more on Nepal:

Nepal is among the poorest and least developed countries in the world with almost one-third of its population living below the poverty line. Agriculture is the mainstay of the economy, providing a livelihood for three-fourths of the population and accounting for 38% of GDP.

..The deteriorating world economy in 2009 will challenge tourism and remittance growth, a key source of foreign exchange. Nepal has considerable scope for exploiting its potential in hydropower and tourism, areas of recent foreign investment interest. Prospects for foreign trade or investment in other sectors will remain poor, however, because of the small size of the economy, its technological backwardness, its remoteness and landlocked geographic location, its civil strife and labor unrest, and its susceptibility to natural disaster.

Environment - current issues:
deforestation (overuse of wood for fuel and lack of alternatives); contaminated water (with human and animal wastes, agricultural runoff, and industrial effluents); wildlife conservation; vehicular emissions

This page was last updated on 23 April 2009
Bob Shaw in Phx,Az Are Humans Smarter than Yeast?

Hi Bob et al:

I'm glad you mentioned Dr. Duncan's Olduvai Gorge Theory. I re-read it after several years and much more knowledge after a while on TOD. 11.5 barrels of crude is 483 gallons and that will not heat a northern tier state typical house for one long winter let alone auto fuel, electricity, etc. Some burn that much an hour in their private jet going to a global warming / peak oil convention. :(

It is obvious that some parts of the human race are already knocking at the door of the Olduvai Gorge, many billions more are just a bit away and others are a long way. Just the fact that we are here on TOD and communicating around the world means we are well up from the bottom of the scale. Unless there is a pterodactyl sized Black Swan on the horizon in Pakistan or a real flu pandemic we have a while (but not a long while) to prepare. Time to assemble our caca.

BTW: Something the under-fifty crowd thinks is that all this stuff about finite world is new. I’ve known about it for more than 50 years. The Korean War was on and we discussed the finite planet in college. Of course we had no way to know how it would play out but thinking back there have been few surprises that have changed the general direction. Maybe nuclear power bent the straight line to the gorge a little but now, considering the cost in energy to build a nuclear plant, even that is suspect.


Hello TODers,

I think a little Peak Outreach to this jury and property owner might have brought much different results:

If Evergreen Park wants to purchase the Evergreen Country Club property it will cost $25 million, a jury decided Tuesday after deliberating for about 20 minutes.

The verdict ends a 7-year-old eminent domain lawsuit that Evergreen Park filed against Anna Mae Ahern, the property's owner, to preserve the 95 acres as green space.

The lawsuit was sparked after Ahern, whose family has owned the property for almost 100 years, planned to sell the golf course at 91st Street and Western Avenue to Home Depot in 1999.

Anna probably long ago realized that she would go broke if she continued to run this land as a golf course. The city probably wanted to convert this to a park or wildlife preserve. Home Depot wanted to pave it all over for short term profit. In short: it seems to be a small, compressed example of JHKunstler's "We will stupidly BAU march ahead, until we just can't anymore".

Golf Row Continues

ANGER over the decision to close Dalmilling Golf Course is rumbling on with the local action group determined to save their 18-holes.

The course is due to shut in January next year after it was axed in the council’s 2009/10 budget.

..“At a time when Westminster and Holyrood are rightly concerned about the level of fitness and increase in obesity of the citizens, it seems perverse of the council to consider closing Dalmilling golf course.
If this is a new UK Transition Town: these former duffers should be actually be very grateful for the chance to get plenty of future exercise in relocalized permaculture. Pushing a heaping wheelbarrow of O-NPK will generate much more food than swinging at a little ball..

The NY area has the most extensive public transit system in the nation -- and I'm one of the people who depend on it -- but it's in big trouble. The city tried to fund it with a well-thought-out congestion pricing plan but the state legislature, which has an obscene amount of power over the city's affairs, spiked that idea by not even voting on it. In the process the city gave up half a billion in federal funds that it would have gotten for implementing congestion pricing! Then a commission led by the very credible Richard Ravich recommended a complex plan that involved a payroll tax, tolls on the "free" East River bridges, and other revenue sources. What we're getting is a far more limited version of that with the payroll tax, a cab surcharge, fees on vehicle registrations and rentals, and a too-small fare hike. This will stave off a larger fare hike and some serious service cuts, but only temporarily. The MTA will probably come looking for more revenue by the end of the year. It has to, because the current plan provides inadequate operating funds and no capital funds. There is a real danger that the system will go back to the deferred maintenance of the 1970s which nearly caused a systemwide breakdown. Millions of people depend on the city's subways, buses, and suburban trains. Those of us who are living under the misrule of the NY state legislature are goggling at the sheer irresponsibility of our "three men in a room" (the governor and the heads of the state senate and state assembly). I agree with the peak oil scenario, and believe that the car will play a diminishing role in our lives, but we need a Plan B, namely transit, and though systems across the country are seeing the highest ridership in decades, few of them are being adequately funded. Washington, wake up! Our transit systems are not just shovel ready, they already exist, they're crammed with people, and they need both operating and capital assistance now! Let's invest in America's future.

I agree. Transit is a problem for cities, and it is difficult to see the situation get better. It seems like cities are having more and more problems.

In Atlanta, the water system is a major problem:
City water system fix down the drain?

Atlanta officials fear the city’s $4 billion water and sewer system overhaul could collapse because the city’s crushing debt and already low credit rating threaten the city’s ability to borrow money in ever-tightening credit markets.

The city hopes Monday to issue $500 million to $700 million in new bonds for the program, with much of the money to refund old debt that must be repaid before interest rates or other factors send payments skyrocketing.

We know that over the very long term, large cities are likely not to be viable. But if cities lose their ability to provide needed services, residents may find it desirable to leave sooner rather than later. Who is going to provide the funds for all of the services cities need, if residents' income is declining?


The federal gov. is broke.

The state gov's are broke.

The county gov's are broke.

The city gov's are broke.

Who's gonna do all this refurbishing everyone's talking about?

At the same time people are demanding more from the electricity grid. Ridership in public transport is up in many places. Along with demand on other utility's remaining the same. Something will have to give and i will bet you it's the infrastructure that will before the poor management.

Hello TODers,

Have you hugged your bag of NPK today?

.."We've reached the theoretical maximum in terms of what our industry can do with energy efficiency," said Kathy Mathers of the Fertilizer Institute about the industry's worries about additional carbon-cutting measures. "At this point, we're limited by the laws of chemistry."

During marathon hearings on the bill in April, several business leaders warned that a bill done the wrong way could shut down factories in the United States only to have them reopen in countries without parallel regulations. That simply would have the effect of transferring emissions from one place to the other, they said.

Some industries would still see a move offshore

The Fertilizer Institute's Mathers questioned the validity of the study's findings, however. Unlike some energy-intensive products, there's not an obvious substitute for fertilizer, she said. Farmers need a stable amount, regardless of whether there's a price on carbon.

So most of the hit in that industry under global-warming regulation would come from a switch to imports, rather than from farmers switching to a lower-emission substitute, she said.

"A lot of our factories already have closed and moved offshore," she said.

As detailed in prior postings, I think it would be foolish for our national security to outsource I-NPK anymore than we already have [see USGE website], unless we massively ramp O-NPK internally with Alan's RR & TOD standard gauge ideas plus local, narrow gauge SpiderWebRiding. If the I-NPK industry is at its Thermodynamic Maximum; unable to massively reduce costs postPeak; we will be at the mercy of rising transport costs as the global supply chain breaks down.

Recall that depending on inland distance and elevation rise to be overcome: the final topsoil square foot application cost of I-NPK may be six times or more the sea-level cost. Again, consider that some smugglers in India are undaunted by the threat of bullets to backpack I-NPK to the highest slopes in Nepal.

When is the last time a 'Murkan backpacked Nuhautl Tlameme-style a 50 lbs sack of I-NPK from sea-level to a golf course resort high in the Rockies?

EDIT: correction--> USGS website for info on the Non-Substitutable Elements:[N]itrogen, [P]hosphorus, Potassium[K], and [S]ulfur.

Just a reminder: as the price of FF energy continues to go up-->that directly increases the cost of I-NPK over time, because the dirt and Nitrogen are essentially free, but it takes mucho energy to turn these Elements into finished products, then move them to the farmgate.

Since this is a pull-chain global network: the I-NPK manufacturers have no choice but to continue to curtail flowrate volumes to keep themselves financially viable. Bill Doyle, POT's topdog, has much discussed this trend.

Let's hope all govts see the need for my speculative 'Federal Reserve Banks of I-NPK' before we get too far postPeak. IMO, this is crucial to serve as a 'bridge' while we ramp O-NPK recycling.

Duke Nukem Dies Due to Lack of Funds?

Shacknews is reporting that a "very reliable source" involved with 3D Realms has confirmed that the company is shutting down. Their source says the studio is shuttering as the result of a funding shortfall, but so far no official statements have been made.
IMO, this is great news if it help makes kids and young adults take up bicycling and gardening.

totoneila duke nukem was never going to be released, everyone in the gaming industry knew it and has used it's name to label other projects that won't ever be released.

Thxs for the reply as I know nothing about video games.

Reposted again for your convenience. Please read the entire weblink for a more in-depth understanding:

Potash Corp. cuts forecast as sales come to 'virtual halt' [April 23, '09

..“This scenario is unprecedented in magnitude and unpredictable in consequences,” the company said.

Mr. Doyle said reduced fertilizer use is contributing to lower crop yields in Brazil and Argentina and may lead to a “grain crisis” as the world emerges from recession.

“You could see dramatically higher grain prices going into this fall,” he said on a call with investors and analysts.

“A dangerous game is now unfolding around the world,” Mr. Doyle said.
Recall his 1,000 yard stare. Now add FF/I-NPK latency [see prior TOD postings] into this scenario and things could really get ugly.

Rich Default on Luxury Homes Like Subprime Victims (Update1)

May 6 (Bloomberg) -- Chuck Dayton put down a quarter of the $950,000 purchase price when he bought his house in Newport Beach, California, in 2004. He was making $500,000 a year with his drywall company and he expected home values to keep rising...
Wow! I can only dream of pissing approx. $250,000 away. I would have gladly helped him save this sum for nothing if only he could have accidently found one of my many Peak Outreach notes scattered about. Recall my prior postings on this subject.

Are other TODers still taping their cards/notes to gas pumps, or sticking them inside magazines while waiting at the dentist or doctors office, etc?

Toto - any chance you could scan an image of your peak outreach cards so we could see what you are talking about?

Hello Consumer,

Sorry, no scanner. But the basic idea is to just jot down 3 or 4 FREE Peak websites on one side [ex: TOD, Dieoff, EB, LATOC], then maybe list 3 or 4 Peak books on the other side for those without computers. Have a catchy title such as: "This info is free and may save your life and fortune" or "Google Peak Everything, ELM & ELP." You can even quickly write this down on pieces of scrap paper, or merely grab a pen and scribble it inside those old magazines while you wait to see the doctor/dentist; having your car repaired, etc. Some have suggested writing Peak Oil on the old greenback, too. :)

Caterpillar CEO searches for "shovel-ready" projects

The chief executive officer of Caterpillar has directed field employees to keep an eye out for "shovel-ready" infrastructure projects. James Owens will also have company economists analyze projects for economic benefits and then present a list of projects to President Barack Obama. Owens, who holds a doctorate in economics, serves on the President's Economic Advisory Board.
I would suggest that James Owen could benefit even sooner if he and his staff looked at rehabilitating or improving already 'SHOVEL-DONE' projects such as the sixty miles of narrow gauge track under downtown Chicago [I have posted much on this before--see TOD archives]:


IMO, nearly every major city could greatly benefit, at low cost, with a system like this to serve as the starting point for a narrow gauge SpiderWebRiding Network. Caterpillar could generate lots of business for themselves if they grasped the postpeak necessity of avoiding the Nuhautl Tlameme backpacking scheme and became big promoters of full-on Peak Outreach.

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

Hello TODers,

Bart's EB has a link to the Archdruid's latest and greatest:

Rethinking the Rust Belt by John Michael Greer
I wonder if Chi-town will again get as crowded as in this photo from 1910 [please scroll down a little]:


As usual, Europe may leap ahead with this low-tech efficiency:

A world without trucks: underground freight networks