Drumbeat: May 8, 2009

Many gains and a big constraint for wind industry

CHICAGO – A nagging issue wound its way through the chatter at what was an otherwise celebratory event for the nation's wind industry in Chicago.

The U.S. has become the world's biggest wind-power generator and of the electricity production added in the country last year, 42 percent came from wind turbines. But as more megawatts come on line, the problem of getting power from wind-swept plains to places where people actually live becomes more urgent.

"In some ways we're reaching the glass ceiling," said Rob Gramlich, vice president of policy at the American Wind Energy Association. It was the organization's biggest annual conference to date, drawing 1,200 exhibitors and more than 20,000 people.

The country's grid is aging, often overloaded and, in the case of wide-open states like Wyoming and North Dakota — some of the best places to erect wind turbines — not nearly extensive enough to move electricity to major markets where customers wait.

Gov't sticks with Bush-era polar bear rule

WASHINGTON – The Obama administration on Friday let stand a Bush-era regulation that limits protection of the polar bear from global warming, saying that a law protecting endangered species shouldn't be used to take on the broader issue of climate change.

Interior Secretary Ken Salazar said that he will not rescind the Bush rule, although Congress gave him authority to do so. The bear was declared threatened under the Endangered Species Act a little over a year ago, because global warming is harming its habitat.

Acolytes of neo-Malthusian Apocalypticism

The key to understanding this graph, and indeed the entire Limits To Growth mindset, is that they assume there is a fixed amount of something we can’t do without, and then predict that if we continue to consume it, we must necessarily run out. Note, by the way, that even the “sustainable” prediction runs out too, as it must. It just takes longer.

Perhaps one of the reasons that LtG got such play in the 1970s was that they were actually experiencing what was effectively “peak oil”, as I argue here. But the history since then actually bolsters the substitutability argument more than it does a finite-resources point of view.

First, rising prices spur development and new technologies make recovery of hitherto expensive resources cheap. This effectively increases the supply.

Second, in the case of energy, other ways of getting the same effect are found, such as buying insulation instead of more heating oil. One of the worst effects of apocalypticism is that it often impedes these efforts and thus becomes a self-fulfilling prophecy. A classic example is the strangulation of nuclear power in the US contemporaneous with LtG. All our currently-running reactors are designs from the 1970s. Compare today’s computers with 1970s ones and see how different the reactors might be today if the same kind of development had taken place.

Charlie Munger's Thoughts on Just About Everything

On adapting to peak oil: "The world will adapt to higher oil prices, because it has to. It won't be the end of the world. Even at $200 a barrel, we'd be fine. People would adapt [mentions smaller cars, electric cars, solar power]. We have an enormous power to adapt."

Suburbia is changing, but will Long Island follow?

Suburban expansion has been hit hard by the current recession and consumer preferences. Across the country, growth rates in outer suburban areas have dropped to an anemic 1.6 percent, the lowest we have seen. The flip side is that 50 percent of folks want to live near town centers, according to a poll by the National Association of Realtors, the highest in this survey since its inception.

By a two-to-one margin folks would rather have investments in mass transportation than in road building. In addition, not one new indoor mall has been built in the past two years ANYWHERE in the country, whereas during the ‘90s, 19 were built each year. To put an exclamation point on this, the second-largest mall builder in the country just filed for bankruptcy.

The trend is toward folks living in smaller housing, near transit, closer to their jobs and seeking amenities associated with town and village-style living, versus those of traditional suburbia. On Long Island, the drop in building permits for single-family homes and the increase in applications for multifamily apartments, condos and plans for new town centers mirror these trends.

Venezuela Taking 60 Oilfield Services Companies, Chavez Says

(Bloomberg) -- Petroleos de Venezuela SA, the state oil company, is beginning the process of taking control of assets and operations from 60 oilfield services companies today, President Hugo Chavez said.

Number of active oil rigs falls by 17

HOUSTON — The number of rigs actively exploring for oil and natural gas in the United States fell by 17 this week to 928, down nearly half from a year ago.

Natural Gas Rises Toward Biggest Weekly Advance Since 2006

(Bloomberg) -- Natural gas futures surged, heading for the biggest weekly gain in more than two years, amid signs the worst of the recession has passed and demand for the industrial fuel may begin to pick up.

Duke Energy to Leave Trade Group Over Climate Policy

(Bloomberg) -- Duke Energy Corp., the owner of utilities in the U.S. Southeast and Midwest, won’t renew its membership in the National Association of Manufacturers partly because of differences over climate policy.

Global wind power capacity up 29 percent in 2008

LONDON (Reuters) - Global wind capacity grew by 29 percent in 2008 with the United States surpassing Germany to become the world's leading wind power generator, Worldwatch Institute said.

The Washington-based research organisation said on Thursday that global wind capacity rose by over 27,000 megawatts (MW), or enough to power around 27 million homes, to some 120,798 MW last year.

Wind now provides 1.5 percent of the world's energy demand, up from 0.1 percent in 1997.

U.S. wind capacity increased by 50 percent to 25,170 MW, or 21 percent of world capacity.

In Europe, wind represented the leading source of new power capacity, with 8,877 MW installed last year.

This was 28 percent more than new natural gas capacity and over 10 times more than new coal, Worldwatch said.

Venezuela’s Bonds Tumble as Chavez Moves to Seize Oil Assets

(Bloomberg) -- Venezuela’s benchmark bonds fell the most in four months after President Hugo Chavez said he will “immediately” use a new law to start seizing assets from oilfield services companies.

Petrobras Presalt Oil Growth to Support Valuation, Goldman Says

(Bloomberg) -- Goldman Sachs Group Inc. boosted its U.S. share-price forecast for Petroleo Brasileiro SA by 25 percent as the Brazilian oil producer’s development of the pre- salt region may give support to valuations.

Investors should take a “longer-term view of Petrobras,” as the Rio de Janeiro-based oil company is known, because the offshore reserves won’t contribute cash flow until “some time next decade,” analyst Arjun Murti wrote in a note.

Kurdistan to Start Tawke, Taq-Taq Oil Exports in June

(Bloomberg) -- Crude oil exports from the Tawke and Taq-Taq fields in the Kurdish region of northern Iraq will start next month, according to the Kurdistan Regional Government.

Exports from the Tawke field will commence June 1 at a rate of 60,000 barrels a day, once it has been linked with Iraq’s main export pipeline to Turkey, Ashti Hawrami, Kurdistan’s minister for natural resources, said in a statement on the KRG’s Web site. Exports from Taq-Taq will start at a rate of 40,000 barrels a day, according to the statement.

China explains details of new oil pricing mechanism

BEIJING (Xinhua) -- China's top economic planner Friday announced details of the country's new oil pricing mechanism, for the first time after the new pricing system kicked in at the beginning of this year.

In a statement on its website, the National Development and Reform Commission (NDRC) said China would adjust domestic fuel prices when global crude prices reported a daily fluctuation band of more than 4 percent for 22 working days in a row.

Shell Withdraws Alaska Well Project Amid Opposition

(Bloomberg) -- Royal Dutch Shell Plc, Europe’s largest oil company, has formally withdrawn a three-year plan for exploration in Alaska’s Beaufort Sea because of environmental issues.

“The 2007-2009 plan of exploration no longer represents Shell’s current drilling objectives,” The Hague-based Shell said in an e-mailed statement today. “Additionally, Shell will file a 2010 plan of exploration that reflects Shell’s current drilling plans for Camden Bay,” the company added in the statement.

Toyota sees losses deepening this year

TOKYO - Toyota Motor Corp. lost $7.7 billion (765.8 billion yen) in the January-March quarter — a bigger loss than General Motors reported — resulting in its worst fiscal year since the Japanese automaker was founded in 1937.

Toyota also warned Friday that because of the global auto slump its net loss would deepen in the year through March 2010 to $5.55 billion (550 billion yen) from $4.4 billion (436.94 billion yen) in the just-ended fiscal year.

Maximum cash for clunkers

The "cash for clunkers" bill now making its way through Congress won't do much for car owners who want to trade in for a more fuel efficient model. If you own an SUV, though, you could stand to gain a lot.

The reason this rule won't help car buyers is that most cars, even older ones, aren't inefficient enough to qualify as "clunkers." The ones that do, meaning they get less than 18 mpg, are large luxury models that are probably worth more than the $4,500 credit for scrapping them.

Sharon Astyk: Barter, Baby, Barter

Which brings me to the marvellous Barbara Ehrenreich’s latest essay, which is just a delight - in it she properly takes aim at the idea that the newly unemployed should work full time at job hunting, and argues that this is keeping us artificially passive. She offers a list of useful things one could and should do with their time, now that they are unemployed, to which I’d like to suggest “get as far out of the money economy as possible.” Now this is not a magical panacea, and for households with a single earner, or multi-earner households where all earners are unemployed, at some point, someone is going to have to get a job if at all possible, even if it is a crappy one.

But until a job appears, the reality is that there are things one can do to minimize one’s dependency on the formal economy - and those things include thrift, subsistence labor (ie, making, scavenging, growing, preserving, fixing the things you would ordinarily pay for), and barter. Frankly, I think that these are more productive and better things for the world as a whole than many of the things we do as jobs, and to the extent that it is possible for one to spend one’s unemployment fighting for justice or even just growing beans (ideally both), I think that most of us do less harm this way, and a great deal more good.

What If the Economy Never Recovers?

Given the circumstances, it's entirely understandable that President Obama, Congress, the private sector, and advocates across the political spectrum are working hard to "stimulate" the economy, to get the consumer growth-fest back on track (though perhaps at least powered by green energy).

But what if the growth-based economy never comes back? What if we're actually bumping up against the limits that our finite earth has been screaming at us to pay attention to, but which we've assumed we would never reach? We're above nature, after all, not subject to its laws. Or are we?

Ethanol vs. electricity

Suppose you take an acre's worth of switchgrass and turn it into ethanol for your flex-fuel car, while your neighbors take their acre's worth and burn it in a power plant to generate electricity for their plug-in hybrid. Which car would go farther?

If you guessed that your car would, you'd be way off. About 7,000 miles off, in fact.

In a study published online today by the journal Science, researchers say using biomass to generate electricity is more efficient for transportation than making biofuels - and might actually do more to cut CO2 emissions as well.

With Easy Oil Gone, Pemex Sobers Up

Cantarell's decline has marked the end of an era of easy oil for Petróleos Mexicanos, or Pemex, as the state oil giant is called. Needless to say, Pemex needs to stabilize production, which today stands at 2.7 million barrels of oil a day, down from 3.3 million at its peak. The company, however, is realizing how soft its hands became by coasting through the late 1980s and 1990s, not investing enough in exploration, particularly in deep waters, where the future growth of Pemex rests.

"That was not the correct strategy," Carlos Morales Gil, Pemex's director of exploration and production, said during a speech here Wednesday at the Offshore Technology Conference. "We cannot stay dependent on one single reservoir anymore, even if it's very good. That is something that we have to keep in mind every day that we wake up."

China April fuel stocks fall 15 pct - source

BEIJING (Reuters) - Refined fuel inventories held by China's top two oil firms fell 15 percent to below 12 million tonnes during April, while their fuel sales rose 5.2 percent, an industry official with access to the data told Reuters on Friday.

The fall in fuel stocks at Sinopec O386.HK and CNPC is the second monthly decline in a row, following nearly a year of rising inventories in the world's second biggest oil-consuming nation.

The source said March's stockdraw was 6.1 percent, much less than a figure of 14.7 percent reported last month by the Beijing News, which cited industry figures. The sudden fall was explained by some analysts as evidence of rising demand and by others as an indication of wholesalers stockpiling fuel.

China Refineries to Have ‘Normal’ Margin With $80 Oil

(Bloomberg) -- Chinese refineries, which rely on imports to meet more than half of their crude-oil needs, will have “normal” profits when crude trades below $80 a barrel, said the nation’s top economic planning agency.

The government will consider subsidizing refiners to guarantee fuel supplies when crude oil exceeds $130 a barrel, the National Development and Reform Commission said on its Web site today. China will likely “freeze” fuel prices should crude surpass that level, the commission said in an outline of its fuel-pricing mechanism introduced in December.

Alleged fuel shortage another media campaign of the opposition in Venezuala

The alleged fuel shortage in Venezuela is part of a media campaign of the opposition to generate chaos in the country, because local refineries are producing fuel normally, said the oil expert David Paravisini.

China April Auto Sales Jump 37% on Government Support

(Bloomberg) -- China’s passenger-vehicle sales rose 37 percent last month, the most in three years, as government subsidies spurred demand for minivans and small cars.

Local drivers bought 831,000 cars, minivans and other passenger vehicles in April, the China Association of Automobile Manufacturers said in an e-mailed statement today. Vehicle sales, including buses and trucks, rose 25 percent to 1.15 million.

Another Case for Making People Pay for Scarce Blacktop

I do think there is an underlying shift in preferences taking place, helped along by demographic changes and economic conditions, but as Nate says, most Americans do not live in places where they can easily reduce the miles they travel. Communities in which most daily tasks can be accomplished on foot or bicycle are fairly rare, and obviously transit infrastructure is underdeveloped in this country.

So it seems really, really odd that we’d use federal money, stimulus or otherwise, on new road miles. It doesn’t help congestion, and it diverts resources from alternative investments that would make it cheaper and easier for people to substitute away from driving. The best way to address that is to make people pay for use of scarce blacktop. Keep in mind, because transit-accessible and walkable neighborhoods are rare, they tend to be expensive, which means that those who can least afford to handle increases in driving costs are the ones with the least access to alternatives (or good alternatives, anyway).

Oil Workers Stay Put in a Downturn

The downturn has helped management with one of its biggest headaches during the rapid growth: employee turnover. When oil prices were high a year ago, Diamond and rivals Transocean (RIG) and Noble (NE) couldn't build new rigs quickly enough to meet demand. There were many opportunities for low-level rig workers, known as "roustabouts" and "roughnecks," to work at other drill contracting companies and for senior management to find positions at oil companies. People jumped ship when another company dangled a wage increase.

Oil Glut Takes Temporary Back Seat in Setting Crude Prices

Analysts with Goldman Sachs Group Inc. (GS) on Tuesday described the market as in a "tight race," with the direction of oil prices hinging on whether demand can recover before storage space runs out. If the economy wins, oil prices could reach $65 a barrel in the second half of the year; if terminals hit full capacity, prices could be pushed down to $45 a barrel by July.

Obama Omits New Gulf of Mexico Drilling Tax, for Now

The Obama administration left a plan to raise $5 billion through a new excise tax on oil and gas production in the Gulf of Mexico out of its proposed fiscal 2010 budget - but may revive those plans when it provides more detail next week.

Next Gen Biofuel: Verenium’s Riva on Cellulosic Ethanol’s Challenges

The Obama administration’s new road map for biofuels, announced this week, was seen as a broad endorsement of next-generation biofuels, relegating corn-based ethanol to a fading role.

The Usefulness of Fear

Our sense of entitlement and hopefulness has created a blinding spell of optimism and trust that has been difficult to dislodge. This attitudinal barrier has been the unspoken obstacle that environmentalists and health-care professions have struggled against for decades. People who are neither fearful nor doubtful are unable to anticipate the sorry consequences of careless behaviour. So we still insist on incontrovertible proof to counteract our faith that whatever we make is good. The deleterious health effects of smoking have finally been established. But do we still need more evidence about transfats, pesticides, asbestos, mercury, arsenic or a plethora of complex concoctions produced by the ingenuity of our chemical industries? How many more statistics do we need to establish that oil tankers will inevitably spill their toxic cargo? How many more studies do we need to establish that open-net salmon farms are environmentally unsound? The unquestioned trust and boundless optimism of a society without fear has made a mockery of the Precautionary Principle's sensible carefulness.

Food Miles: Do They Really Matter?

Despite significant recent public concern and media attention to the environmental impacts of food, few studies in the United States have systematically compared the life-cycle greenhouse gas (GHG) emissions associated with food production against long-distance distribution, aka "food-miles." We find that although food is transported long distances in general (1640 km delivery and 6760 km life-cycle supply chain on average) the GHG emissions associated with food are dominated by the production phase, contributing 83% of the average U.S. household's 8.1 t CO2e/yr footprint for food consumption. Transportation as a whole represents only 11% of life-cycle GHG emissions, and final delivery from producer to retail contributes only 4%. Different food groups exhibit a large range in GHG-intensity; on average, red meat is around 150% more GHG-intensive than chicken or fish. Thus, we suggest that dietary shift can be a more effective means of lowering an average household's food-related climate footprint than "buying local." Shifting less than one day per week's worth of calories from red meat and dairy products to chicken, fish, eggs, or a vegetable-based diet achieves more GHG reduction than buying all locally sourced food.

Eastern Cape mall powers up with solar and wind

Local alternative energy company SolarCon has supplied IBC photovoltaic (PV) solar panels to the Equinox Mall in Jeffrey's Bay on the Eastern Cape coastline. The eight 260 W panels will provide 40% of the total alternative energy requirement daily at the mall, with the balance of what is a 3kW wind turbine providing the other 60% of renewable-energy.

How much oil have we used?

Estimates of how much crude oil we have extracted from the planet vary wildly. Now, UK researchers have published a new estimate in the International Journal of Oil, Gas and Coal Technology that suggests we may have used more than we think.

The idea that we are running out of oil is not a new one, but do we even know how much oil we have extracted from since the first commercial oil wells were sunk in the middle of the nineteenth century? In 2008, chemists Istvan Lakatos and Julianna Lakatos-Szabo of the Hungarian Academy of Sciences theorised that less than 100 billion tonne of crude oil has been produced since 1850 and that the average annual production rate is less than 700 million barrels per year.

They compared proven reserves and estimates of yet-to-find (YTF) resources and echoed the sentiment that we will soon face oil shortages even though a substantial part of those reserves remain in the ground untapped.

Now, John Jones in the School of Engineering, at the University of Aberdeen, UK, suggests that the figures cited by Istvan Lakatos and Julianna Lakatos-Szabo for which they give no references grossly underestimates how much oil we have used already. Jones says that we have used at least 135 billion barrels of oil since 1870, the period during which J.D. Rockefeller established The Standard Oil Company and began drilling in earnest.

Jeremy Rifkin: Leading the Way to the Third Industrial Revolution

While oil, coal, and natural gas will continue to provide a substantial portion of the world’s and the European Union’s energy well into the 21st century, there is a growing consensus that we are entering a twilight period where the full costs of our fossil fuel addiction is beginning to act as a drag on the world economy.

Ship Owners Forced to Pay to Carry Middle East Oil

(Bloomberg) -- Ship owners are being forced to pay to carry oil from the Middle East to the U.S. for the first time in at least a decade after demand collapsed and the fleet expanded.

Supertanker owners make no rental income from the voyages and are paying $3,445 a day toward fuel costs, data from the Baltic Exchange in London show. Rental rates normally cover fuel costs. The journey to the Louisiana Offshore Oil Port from Ras Tanura, Saudi Arabia’s largest export facility, earned owners as much as $104,663 a day in July.

Some owners may be prepared to subsidize voyages as they relocate vessels to the Atlantic, Anders Karlsen, a shipping analyst at Nordea Markets in Oslo, said by phone today. The alternative would be paying all the fuel costs themselves and sailing empty. Owners could also mothball ships, Karlsen said.

North Sea Brent Crude Oil Daily Shipments to Drop 11% in June

(Bloomberg) -- Daily shipments of North Sea Brent crude, part of the price benchmark for almost two-thirds of the world’s oil, will drop 11 percent in June.

Tankers are set to load 122,267 barrels a day of Brent crude next month, compared with 136,774 barrels a day scheduled for May, according to two traders with knowledge of the loading schedule.

Venezuela to nationalize oil service companies

CARACAS (AFP) – Venezuela will Friday begin to expropriate some oil service providers, after the congress passed a law extending the state's control to all activities related to the oil industry.

"We will start to recover assets that will now belong to the state, as they always should have," President Hugo Chavez said.

The law approved Thursday by a majority of the National Assembly "reserves for the state, the goods and services connected to primary hydrocarbon activities."

PDVSA Takes Wood Group Contract, Squeezes Companies

(Bloomberg) -- Petroleos de Venezuela SA took over the contract of energy services company John Wood Group Plc, as the Venezuelan state oil company moved to seize greater control of the petroleum industry.

Obama budget rescinds energy industry tax breaks

WASHINGTON – President Barack Obama outlined a budget plan Thursday that would end $26 billion in oil and gas industry tax breaks, point to a new direction for dealing with nuclear waste and shift government aggressively toward helping to develop renewable energy sources.

Obama called the tax break to the oil and gas industry "unjustifiable loopholes" in the tax system that in most cases other companies do not get.

First comprehensive atlas maps riches of Arctic

OTTAWA — Canada has published the first comprehensive atlas of Arctic geology — everything from continental plates to rock types that signal where to hunt for gold, diamonds, gas and oil.

China Oil-Product Demand to Grow at 0.6-0.7 of GDP

(Bloomberg) -- China Petroleum & Chemical Corp., Asia’s biggest refiner, expects the nation’s oil-product demand to grow at 0.6 to 0.7 times that of the gain in gross domestic product, said Zheng Baomin, director of investor relations.

The government has forecast GDP to expand 8 percent in 2009, Zheng said at a conference today in Singapore. This equates to China’s oil-product demand growing between 4.8 percent and 5.6 percent this year, according to Bloomberg calculations based on Zheng’s speech.

Oil Set to Break Resistance Point, PVM Says: Technical Analysis

(Bloomberg) -- Crude oil is set to reach $62.65 a barrel “in the near future” and rally to $78 within six months as prices retrace the surge that started in 1998, according to technical analysis by PVM Oil Associates Ltd.

Russia’s Ruble Extends Record Rally as Oil, Stocks Advance

(Bloomberg) -- Russia’s ruble climbed against its target currency basket, extending a record run of weekly gains, as surging oil prices and rising stocks spurred policy makers to let it strengthen.

Porter Stansberry Discusses Sea Change in U.S. Natural Gas Industry

Old hands in the industry will tell you that $3.50 is the shut-in price. Once you go below $3.50, people will stop producing because it costs them more to produce than the price. The big problem with that argument is that a lot of these wells are now coal-bed methane wells, and you can’t shut them in. They get connected to pipelines and they just run. They run because each well has a very small amount of production. It doesn’t do any good to turn all these wells off. It would cost more to turn them off than to keep them running.

NY trial to decide Shell's role in Nigerian deaths

NEW YORK (Reuters) – A civil trial that will judge any involvement by oil giant Royal Dutch Shell in the executions of protesters in Nigeria will start this month in New York City, more than 13 years after their deaths.

Shell is accused of human rights abuses, including in connection with the 1995 hangings of prominent activist Ken Saro-Wiwa and eight other protesters by Nigeria's then-military government. Shell has denied allegations of involvement.

Ford CO2 emissions show biggest improvement

Ford's CO2 emissions have improved more than any other manufacturer, according to green car website Clean Green Cars.

The introduction the Ka and Fiesta, Ford's newest fuel-efficient models, are largely responsible for the reduction in CO2 emissions.

Auto industry suppliers cross over to wind power

Merrill is among dozens of companies at the American Wind Energy Association conference in Chicago — which ends Thursday — that have their traded auto-related business for a niche in wind-power.

"We have seen these indicators for years," Ostrander, an engineer, said of the auto industry. "They needed to clean up their own closets."

Japan nuke plant to restart two years after quake

TOKYO (AFP) – The world's largest nuclear power plant will resume operations this weekend, two years after it was shut down following a strong earthquake off the Japanese coast, according to the operator.

One of seven reactors at the Kashiwazaki-Kariwa plant, located 300 kilometres (185 miles) northwest of Tokyo, will likely start test operations on Saturday, said operator Tokyo Electric Power Co. (TEPCO).

Gook: forest industry needs to be more sustainable

Re-localization, he says, is also important for the agriculture industry, which includes Community Share Agriculture models and food security initiatives.

“These are the very fundamental pillars for our survival, especially in the new age of peak oil and needing to move to renewable energy future,” he says. “We can’t rely on trucks bringing lettuce up from Mexico anymore.”

Domesticated bee numbers soar amid buzzing demand

WASHINGTON (AFP) – The number of domesticated bees is on the rise worldwide despite declining numbers of wild honey bees in the United States and Europe, a study said Thursday.

"The honey bee decline observed in the USA and in other European countries including Great Britain, which has been attributed in part to parasitic mites and more recently to colony collapse disorder, could be misguiding us to think that this is a global phenomenon," said Marcelo Aizen of Universidad Nacional del Comahue in Argentina.

"We found here that is not the case."

Christians Unsure About Climate Change's Causes, but They Back Solutions

Can evangelicals and Roman Catholics be skeptical of human-created climate change but still want to combat global warming? Sure.

US won't drop cap-and-trade auctions: White House

WASHINGTON (AFP) – The White House is committed to auctioning off polluter permits under a "cap-and-trade" system to fight climate change, a top official said Thursday in remarks likely to anger US industry.

"You should anticipate no changes in our climate proposals," Office of Management and Budget chief Peter Orszag told reporters, despite reported hints that President Barack Obama might now compromise about the auctions.

Obama Climate Bill Could Anger Greens

Eager to get a climate change bill out of committee, the White House is telling Democrats it will accept a deal on cap-and-trade legislation that gives away some -- possibly even a large majority -- of the carbon permits to business.

Gov't faces weekend deadline on polar bear rule

WASHINGTON – A decision involving the iconic polar bear could determine whether protecting endangered species might also help save the earth from global warming.

The Obama administration is approaching a weekend deadline to decide whether it should allow government agencies to cite the federal Endangered Species Act, which protects the bear, for imposing limits on greenhouse gases from power plants, factories and automobiles even if the pollution occurs thousands of miles from where the polar bear lives.

The Climate Debate Heats Up

Earlier this week, and not a moment too soon, President Obama put the weight of his office behind a bill that aims to reduce the nation’s dependence on foreign oil, tackle the rise in greenhouse gases and create millions of clean-energy jobs.

How much oil have we used?

Another good question: How much oil have we wasted?

Is wasted a happy meal toy or the fuel to get the toy?

I always wonder how much we used when people treated oil like it was coming out of the tap, for activities such as using oil to keep the dust down on parking lots, etc.
And also how much was wasted percentage-wise due to activities like uncontrolled flaring.

I was thinking about this just yesterday. I was thinking about this post by Debbie Cook in the May 6 DB

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.

When you consider the additional cost of buying a hybrid or battery EV one has to wonder what would have been the result if it had been the other way around, a tax credit for buying any vehicle that gets more than say, 30mpg, coupled with increased taxes on fuel such that, people who upgraded to significantly more fuel efficient vehicles would still see savings at the pump.

Oops, in 2002 how many vehicles, made in the US would qualify? That makes the 2002 Bucheny tax credit a shortsighted jingoistic move aimed at spurring the sales of behemoths from the big three. Go Bush!

I wonder how many "expensive" PHEVs or EVs could be bought with the money NOT saved (wasted) on such extravagances. As usual the problem with wasting fossil fuels is that once you've burned them, thats it they're gone and so is the money used to buy them. On the other hand electric vehicles can use renewable energy sources, so money spent on an EV is potentially "the gift that keeps on giving".

Even in my neck of the woods the Peak Oil idea is so far from mainstream it's not funny. I still see people driving obviously brand new (2009), full size SUVs and think to myself, if only they knew.

Alan from the islands

I agree with the thrust of your comment, but it should be noted that it was not a 100K tax credit that was legislated, but rather a tax deduction.

As another poster in that thread linked, the effect of the deduction would total around $15K for an upper income H2 Hummer buyer.


Will someone please explain what the link up top, How much oil have we used? is talking about? Are they really talking about the planet as the article states? Using 72 million barrels per day as a rough guide, we are using roughly 26.3 billion barrels per year. That comes out to a lot more than 135 billion barrels since J.D. Rockefeller established The Standard Oil Company and began drilling in earnest. I was under the impression that the figure was just a tad above 1 trillion barrels.

I understand that we are using a lot more per year than in the past but 135 billion barrels since 1870 is absurd. It is off by a factor of greater than 7.

What am I missing here?

Ron P.

It first mentions 100 billion TONS and later 135 billion BARRELS. I suggest it is an error in that it should read 135 Billion TONS, which is about 7 times 135 billion barrels.

Edit: from the original article:"He has calculated a better estimate by using the volume of a barrel (42 US gallons, or 0.16 cubic metres) and a crude oil density of 0.9 tonnes per cubic metre. ODAC's 944 billion barrels is thus the equivalent of 135 billion tonnes."

Of course! In hindsight the error seems obvious, I don't know why I did not realize that immediately. However I remember seeing the estimate of 944 billion barrels, or somewhere around that figure, about three years ago. Should not the figure be somewhat above one trillion now?

Do you, or anyone else, have any idea of the date of OADC's estimate of 944 billion barrels? Does anyone have a current estimate of the total amount of oil produced?

Ron P.

Can't find anything when searching the ODAC site. Neither google turns out anything usefull. Nor does peakoil.net.

Anyway, if we asume this 944 figure to be 3 years old, total cumilative world oil production should be around 1030 BB.

Okay, I think I found it. Colin Campbell revised this page in February 2002 so I assume the production data is through 2001:
Peak Oil: an Outlook on Crude Oil Depletion

Produced-to-date ... 873 Gb

Using EIA data from their International Petroleum monthly, a total of 183 billion barrels of C+C has been produced in the seven years since. That would put total world production to date at 1.057 trillion barrels.

The EIA annual data can be found here:International Petroleum Monthly For world annual data click on 4.1d. This gives world production in barrels per day. This must be converted into barrels per year (*365.25) then the seven years summed. This comes to 183,747,796,000 barrels.

A total of 868,652,892,000 barrels has been produced just since 1970. That is as far back as the EIA data goes.

Ron P.

That would put total world production to date at 1.057 trillion barrels.

Campbell's latest newsletter (pdf) put total production (Regular Oil) to date at 1.054 trillion barrels (see table on page 2).

Has this paper been discussed on TOD?
GEEI Global Energy and Environmental Initiative.

GEEI Green Paper Series: No. 1, Spring 2009

Building Long Term Energy Security:
Seize the Moment


Also todays unemployment:


RE: GEEI paper

A solid start. However, the authors would appear to have missed one glaring issue... a true and transparent accounting of remaining global supply - something that Simmons et al. have been calling for for some time.

Its not looking good for spring corn planting here in my region of the uppper southern mississippi valley.

Too wet to go in the fields. Some put the planting deadline at the 15th,some at the 20th. We have a week left til the 15th. And the fields also have to be chemically burned down before planting but that can come rather soon after the spray couple leaves. How soon? Don't know.

Our rain almost always comes up thru Arkansas from the south and may come thru parts of Oklahoma as well. It comes straight across the Mississippi always and right thru the 'bootheel' of Missouri. It will on occassion come from the north but not often.

So far we are ahead in our totals and the fields have been soggy for weeks now. A little bit was planted during one very small window back in early April.

And getting it planted late means that the heat of midsummer is likely to kill or damage the pollen. As well as reduced , sometimes very much reduced , yields.

I am not up on the rest of the nation. A lot of times what we get here doesn't fall much to our east. Our plant/season zone is one count ahead of the rest of Ky due to our location and that weather from the southwest and up from the Gulf. We are always about 3 weeks ahead of the rest of the state in vegetative states. However there is less and less good corn ground the further east you go here.

Airdale-going to a Native American Powwow tomorrow up in Crittinden Country.Since I missed the one in Alabama. A big three day event. Pick me up a good handmade flute if possible.

Yeah, I have had trouble with digging out the rest of my garden beds due to the rain. Guess what? It is raining today. There are always problems with crops -- too much rain, not enough rain, floods, winds, etc...

Indiana farmers far behind planting corn

The soggiest April in decades has left Indiana farmers far behind in their annual sprint to plant the state’s corn crop, a delay that could cut farmers’ yields if fields don’t dry out within the next two weeks.

As of Sunday, only 5 percent of Indiana’s corn crop had been planted. In contrast, an average of 47 percent of the state’s corn acreage had been planted by early May during the past five years, said Chris Hurt, an agricultural economist at Purdue University.

China auto sales in April up 37.4% YOY-looks like China will keep the title of #1 auto market permanently-anyone that would have predicted this 30 years ago would have been laughed at, which is why any predictions of the appearance of the world of 2039 need to be taken with a grain of salt IMO.

I don't think that's true. I think many people expected that to happen.

Matt Simmons says that's what led him to peak oil. Everyone was expecting China and other developing nations to catch up to the US. He started wondering if there was enough oil to make that possible.

That's great piece Leanan. Never saw it before, thanks. Bookmarked.

Interesting article, but I am not aware of anyone making the prediction in 1979 that as of 2009 China would overtake the USA to become the #1 auto market.

It was implied, though, in the assumptions about standard of living and resource consumption.

China has more than four times the population of the US. Would it really be shocking to think they would buy more cars than we do?

Especially 30 years ago. Back then, people expected the gap between rich and poor to narrow. A car in every garage.

True-I guess the next important milestone will be when the Chinese auto market is more than 4 times the size of the USA market.


Greer advocates reading the original edition - in his opinion later updates are too, hope I'm remembering his choice of words correctly, "politicized." Planning to pick up a copy of the 1st edition sometime - likely they're selling for $.01 + shipping.

By my count, China 4m09 lv sales were 2.946mm vs 3.023 in US.

Total no. of "motor vehicles for civilian use" in China in '08

was 64.67mm "including 14.92mm 3-wheel vehicles & low-speed trucks".

US veh registrations in '07 (auto/bus/truck) totaled 247.2mm.

"Crude oil is set to reach $62.65 a barrel “in the near future” and rally to $78 within six months as prices retrace the surge that started in 1998, according to technical analysis by PVM Oil Associates Ltd."

This is very close to my estimate obtained by quite different (but also technical) approach.
Current price should add between 30 and 50 per cent by the end of 2009. Might be sooner.


Latest employment report by Statistics Canada is now out. Canada added 36,000 jobs in April, and the national unemployment rate is unchanged at 8%. Ontario, where Canada's manufacturing industry is concentrated, is 8.7%. Alberta's rate is 6% and Calgary is 6.3%. The latter is up because of oilsands new-project cancellations, and all the petroleum head offices are here in Cowtown.

Conventional oil still seems to be keeping people on, since the break-even point is down in the $20/barrel range, whereas the oilsands need about $80. Trouble is, Alberta's conventional oil peaked in 1976, and production is now one-third of what it was despite three times as many producing wells. The joke around here is that a well producing a barrel a day is no longer considered a stripper well; it's a gusher.

It should be noted that most of the 'new jobs' are formerly fully employed people now entering the ranks of the 'self-employed', which means less pay, few if any benefits and generally a loss of wealth until full-time employment is again found.

U.S. may face years of sluggish economic growth

Today, despite encouraging signs that the economy's recent disorienting plummet is slowing, the long-run picture is darker. "Potential real GDP growth has never grown as slowly during the history of the U.S. since 1875 as it is growing today," economist Robert Gordon told a November conference at the Federal Reserve Bank of San Francisco.

Dubai Monorail from artificial island (Palm Tree) opens


Low volume, but suited to task. Will soon connect as a feeder to expanding Dubai Metro (7 lines planned from memory).

Best Hopes for Non-Oil Transportation,


Forbes: With Easy Oil Gone, Pemex Sobers Up (linked uptop)

The writer of this article offers up Brazil and Norway as models for Mexico. Brazil, although they were still net importers as of last year, is increasing their production, while Norway and Mexico are post-peak. One problem with holding up Norway as an example for Mexico: Norway's crude production decline rate since peaking in 2001 has been -5.6%/year, while Mexico's crude production decline rate since peaking in 2004 has been -4.8%/year (EIA).

Granted, Pemex is handicapped by their lack of deepwater expertise, but the implication of the article is that if a region is developed by private companies (or at least by state owned companies that allow private participation), using the best available technology, with virtually no restrictions on drilling, then a production peak is some kind of distant mirage.

As I constantly point out, the Texas and North Sea case histories directly contradict this assertion, which is what I refer to as the "Huber/Lynch" model. Huber/Lynch type fields are those fields that have discrete wells that peak and decline, but the combined production from the discrete depleting wells increases forever.

As someone in yesterdays' Db asserted, Norways primery energy consumption is 40 % domestic hydro, which enables them to export the bulk of their FF. Of course Mexico lacks the geological possibilities for this.

Norway has also a much smaller population and pop. growth compared to Mexico (CIA world factbook).

This is of course more relevant to net exports than production decline rates.

But regarding net exports, Sam's middle case is that Norway will be a net oil importer in about 18 years or so. As you noted, the key difference between Norway and Mexico, in regard to their respective net export declines, is domestic consumption as a percentage of production at final peak.

Thanks for tirelessly hammering the message home wt. Besides investing in deepwater E & P, I think Mexico should go solar big time. And fast (law of reciding horizons etc.)

I still consider Norway to be the place to be. I think they can still shed quite some domestic use by ditching big cars and fuel-guzzling boats (they have a lot of those). Another question arises from Sam's middle case that Norway will be a net oil importer in 18 years: where is it going to import from?? I would guess Norway will never be an oil importer.

Edit: I'm not sure if my first reply is more relevant; just trying to point out that Norway as a model for Mexico is not relevant at all.

I would guess Norway will never be an oil importer.

I would guess that Norwegians aren't stupid, will learn from the UK stupidity, and will soon make their oil last as long as possible by only allowing the exports of enough oil to ensure their balance of payments don't go negative. At present exports are double imports, why would a sensible Government allow this?


They should have learned from their recent 75 billion Euro investing disasters (and world history) that pieces of paper are not a safe long term place to store any cuurent account excess (that applies to personal pensions as well).


There are still areas offshore Norway (Lofoten/Troms) that has not yet been opened for petroleum activities by Norwegian authorities, which many oil companies expects to contain "huge" reserves og oil and nat gas. Estimates point to several decades of Norwegian domestic oil consumption at present levels.

I would guess that Norwegians aren't stupid, will learn from the UK stupidity, and will soon make their oil last as long as possible by only allowing the exports of enough oil to ensure their balance of payments don't go negative. At present exports are double imports, why would a sensible Government allow this?

Well... I'm Norwegian, and, frankly, saying that feels a bit like confessing alcoholism at an AA meeting.

I don't have much hope we'll learn from the UK stupidity. Voluntarily reducing oil production has been proposed... and ridiculed and dismissed. Excess money is mostly invested in the "Oil Fund", which is heavily into american stocks and bonds... it's taken quite a hit since last summer, as you note. But the debate is over whether the rate of stocks to bonds was too high, or whether the management strategy was at fault: not whether it's a good idea to put our wealth into foreign financials or not. And the pundits assure us '09 will be a golden year for the fund...

There are those who get it. Physics professor Egil Lillestøl, for instance, has been trying to explain the coming energy crisis, and promoting research on thorium power (accelerator-driven reactors is his favourite)... fetching himself a bloody forehead, as we say (as in, the result of banging it against a wall). Anti-nuclear sentiments are strong in Norway... And there is dissident economist Erik Reinert, who devotes a chapter to "the oil curse" in his latest book, Spontant Kaos ("Spontaneous Chaos", only available in norwegian) and notes that:

The greatest problem is, however, that we didn't use more of the revenue stream to develop new energy technology, instead of just cleaning the old one. We could have used Statoil strategically for an industrial approach to new sustainable energy sources: wind, waves, large oceanic heat pumps, or osmotic facilities. The great uncertainty around such development requires risk-willing and very long term capital. Had the Norwegian nation-state given more money to engineers and less to stockbrokers we could have achieved something for the environment and future generations. (p. 181f, my translation)

(note the past tense!)

Instead, oil and oil production dominates the norwegian economy to a greater degree each year...

But norwegians... drive the biggest SUVs, live in huge houses, and consider electrically heated driveways a neat and cheap way to evade the chore of snow removal.

The really sad thing is, by norwegian standards it is cheap.

Convincing the average norwegian there's such a thing as an energy crisis is... difficult.

So what if oil production is down 30%? The price is up 100%! We're getting ever richer! What with the oil fund, our children won't have to work at all!!!


Norway is, I guess, one of the countries least effected by the current crisis... But as a society, we're too complacent, too rich, too self-satisfied to prepare for, or even envision, living in anything but abundance. We're completely addicted to oil, and most people don't even realize it; not to any meaningful degree, anyway.

I shudder when I think of what this country may look like in 20 years.

I agreed with the sentiments of putting more money into science to find a path to resolve part of the energy dilemma. Instead of money going to bankers, more money going to science and education of environmental/energy issues would make a better impact for society. We found out that capitalism is NOT efficient at distributing capital to best serve society. Since capitalism is wasting many of our critical resources, we should ask why should we let this continue on.

As for Norway, probably the best thing they can do is to throttle the oil output just enough to serve the population and maintain trade deficit. No point of over-exploiting resource and giving it to Americans to spend on big McMansions.

Here are Sam's projections for Norway's liquids production & consumption (the projected 10 year production and consumption rates of change ranges are shown):

Seems like Norway more or less can sync with Swedens effort for becomming self sufficient with sustainable wehicle fuels. But their natural gas will as far as I know last longer then their oil.

To get back to my original point, the Forbes writer implied that Mexico needs to emulate Norway, if they wanted to boost their production. My point was that this is a little nonsensical, since Norway's post-peak crude production decline rate exceeds Mexico's post-peak crude production decline rate. What the writer is missing is that all of these producing regions, and now the world, have the same problem, to-wit, the rise and fall of the large oil fields largely drives the production peak and subsequent decline.

Norway also has (sometimes, depending on exchange rates) the world's highest gasoline taxes. (At other times they are #2 or #3 in gas taxes).


Of course you can always fill up quickly at the subsidised diesel public transport pump and then protest your innoncence as a silly English tourist then repeat 8 or 9 times as you tour the country ...
Did I do that ?
Anyway - oil yes but in case anyone forgot, Norway is bloody cold and dark over the extended winter and I bet on a good deal of energy use for space heating and lighting. Got to come from somewhere and if push came to shove their navy is impotent.

Using BP data Norway's primary energy consumption is approximately 70 % hydroelectric. Most of Norwegian domestic nat gas usage is for petroleum related activities.


I believe the 70% number does not take into account the "38% thermal efficiency" that BP uses when creating its "mtoe" (million tonnes oil equivalent) datasheets.

To calculate energy consumption percentages from the BP dataset we must of course use common units. Within the BP dataset, the only common units are "mtoe". However, for the nuclear and hydro "mtoe" worksheets BP uses a "38% thermal efficiency" factor to answer the question: " How much oil would it take to generate this much electricity in a power station working at 38% thermal efficiency?".

In essence, the BP "mtoe" worksheets for nuclear and hydro overstate the amount of energy by a factor of 1/0.38 = 2.63.

For countries where coal and gas are used primarily for generation of electricity the BP "mtoe" units are quite appropriate. But, as you have said, this is not the case for Norway. For Norway it is important to correct for that factor in the nuclear and hydro worksheets.

The Energy Export Databrowser performs this correction if you ask for units of "Joules" but uses the uncorrected data from the "mtoe" worksheets if you select units of "mtoe". This allows you to decide how to perform the comparison. (Note to self: Write some documentation explaining this!)

The corrected consumption plot for Norway shows hydropower making up about 45% of their total energy consumption:

-- Jon


I agree this is important to get right, inclusive conversion factors.
1 TOE ~ 42 GJ (Giga Joules), which with a thermal efficiency of 38 % yields about 4,4 MWh (useful energy, like electricity).

BP Statistical Review 2008 has proposed and applied the conversion of 1 TOE ~ 4,4 MWh.

Norway (according to the listing in BP Statistical Review 2008) consumed (which I here, for reasons of simplification, will equal produced) 135,3 TWh with hydroelectric power in 2007.

Applying BP’s proposed conversion of 1 TOE ~ 4,4 MWh results in 30,75 MTOE of hydroelectric power for Norway.

BP Statistical Review 2008 also lists Norway’s hydroelectric consumption, also in MTOE, as 30, 6 MTOE.

Total primary energy consumption for Norway in 2007 was 45 MTOE, which results in that approximately 68 % of Norway’s primary energy consumption in 2007 was hydroelectric.

Where is it I come astray?

Norway exports electricity, (and imports some on occasion), which can confuse your statistics.

I suppose that Norway burns VERY little coal (I say the stats a decade ago), so for the major energy uses of Norway:

Oil - Exporter
Natural Gas - Exporter
Natural Gas Liquids (propane, butane, etc.) - Exporter
Electricity - Exporter (directly and via Al and other power intensive industries)
Biomass - Exporter (forest products)

So for every major energy use within the Kingdom of Norway, Norway is an exporter.


BTW: My Icelandic guests were offended that the Norwegian Seaman's Church (2 blocks from me) had Norwegian, USA, Swedish, Danish and Finnish flags but no Icelandic flag. They stopped in (and politely registered their complaints) and were invited to a Norwegian Jazz Fest party that evening. Afterwards, they commented that "Norwegian Party" was like "Military Intelligence" and "Legal Ethics", a phrase that contradicts itself (I told them that was called an oxymoron).

Such is the state of Norwegian-Icelandic relations. A bit amusing to an outsider.

Hello Alan,

I hope I soon get the opportunity to revisit “The Big Easy”, I have not been there since 1982, and take some time at the seafood restaurants (just the thought of Louisiana cuisine makes it hard to concentrate), a good jazzclub/event and perhaps a drink over at the “Old Absinthe House”, if that one is still around.

Yes, you are right taking into account electricity embedded in products like aluminum makes Norway a net exporter of hydroelectricity as well. Actualy I also think Norway is a small exporter of coal dug out on the arctic island Svalbard/Spitzbergen.

So what remains to make the list complete is uranium, but Norway has huge amounts of Thorium which someone has proposed be used in the next generation of nuclear power plants.

I have the impression that Norwegian Icelandic relations are good.
By the way did you get “vafler” at the Norwegian Seaman’s Church?

That is often one quoted reason for visiting.

The Seaman's Kirke serves very nice little waffles with strawberry preserves.

Officially, relations between the Repubulic of Iceland and the Kingdom of Norway are quite good (both associate members of the EU). On a personal level, not quite so good (at least in Iceland).

And yes. the Old Absinthe House is still open, and the food and jazz are quite good. Let me know if you are coming :-) Just do not visit during July or August.



I sure will let you know if/when I am coming to NOLA. You probably know about a lot of the good spots for Cajun cuisine and nice, good jazz.

I know July and August, I lived/stayed in Louisiana 1981-82 and visited NO often during the week ends, and also of course, during Mardi Gras.

- Rune

I think you forgot to update the total with the new (reduced) power generated from hydro.

From BP 2008 worksheet 38 "Primary Energy Cons by Fuel":

Norway in units of mtoe

        mtoe    mtoe corrected for hydro  
  oil = 10.1    10.1
  gas =  3.8     3.8
 coal =  0.4     0.4
hydro = 30.6    11.63
total = 45.0    25.93

So hydro and oil are neck and neck in Norway. I hope that clears it up.

When the Energy Export Databrowser calculates power in terms of Joules it converts from mtoe to Joules for oil, gas and coal and converts from terawatt-hours to Joules for nuclear and hydro.

This gives the same results as undoing the "38% thermal efficiency" factor for nuclear and hydro in the all the "mtoe" worksheets but is less confusing because it avoids the concept of the efficiency factor entirely.

"Million tonnes of oil equivalent" is a useful unit for oil companies but has inherent ambiguities like the one in this thread. Something like Joules that is an official SI unit is less ambiguous.

That said, it all comes down to what you are going to do with the energy. Every conversion from one form of energy to another involves losses and it is important to understand how each type of energy is being used.

We will get the highest EROI if we use each energy for those tasks it is best suited for:

  • oil for transportation
  • gas for heating and cooking
  • coal for heating
  • hydro and nuclear for electrical

Using gas fired power plants to pump water uphill while at the same time using hydro generated electricity to heat homes would probably be a bad idea.

-- Jon


Thank you.
The way I interpret is that electricity, measured as kWh, is assumed to be 100 % energy, if oil were converted to electricity BP has assumed that it will only be possible to convert 38 % (which is way too low for a modern COGEN plant, but possibly close as an global average taking into account plants with outdated technologies) of the potential energy in the oil.

So what BP have done in their listings is to take hydro generated electricity and convert it back to how many tons of oil (equivalents) would be required to produce the same amount of electricity at a thermal efficiency of 38 %.

This could be done in an alternative way, by taking the amount of oil (which is mainly used for transportation with an average thermal efficiency of 15 - 20 % in ICE’s) and convert this into TWh electricity equivalents.

Norway used 10,1 MTOE of oil in 2007 and assuming (most of it for transportation) a total thermal efficiency of 20 %, this would amount to approximately 117 TWh electricity equivalents.

Norway consumed 135 TWh of hydro electricity in 2007.

What you seems to propose is to look into how much useful energy we extract from each energy source, which will give a different, but in my opinion more honest picture of our energy usage.

One alternative is to convert everything into useful TWh, and I agree this would change how we look upon how much useful energy we get from each energy source.

Using gas fired power plants to pump water uphill while at the same time using hydro generated electricity to heat homes would probably be a bad idea.

Do you have any references to where this is done?

I would not be surprised if it is done, which only can happen if there is a poor understanding of energy and one energy source is subsidized or there is some perverted regulation at work.

Does this change the picture of the relative contribution from the energy sources for like USA if your better method was applied?

- Rune


I think your interpretation is correct and that's why I offer units of Joules as a first attempt to address this issue. More work needs to be done of course to guesstimate how much useful work is done for each Joule of oil, coal, gas or electrical energy. And this will depend on precisely how it is used. Ultimately, useful work (or GDP for some) is the thing that is really important to people.

The "gas fired power plants to pump water uphill" comment had no specific region in mind. California of course does this but only because the hydro power plants are far away from where the irrigation water is needed. And I don't have the data to do a thorough analysis of how different sources of energy are used in the US.

I mostly wanted to raise the issue of "total energy" comparisons being challenging. It's fairly straightforward, with a few assumptions, to calculate the embedded energy in the oil, coal and gas, we use each year. And nuclear and hydro report in fine detail how much power they generate.

So we can answer questions about how much energy we consume but not necessarily about the amount of useful work we get. One of the topics that I feel needs more attention is the most appropriate use of fuels so that we have the least losses when the embedded energy is converted into work.

I am still of the opinion that the amount of waste in our human and engineered systems is pretty staggering and that just focusing on conservation and efficiency is probably our cheapest and best way forward at the moment.

Like the US, Mexico's hydro potential is vastly underestimated by all but hydrologists.

Huber/Lynch type fields are those fields that have discrete wells that peak and decline, but the combined production from the discrete depleting wells increases forever.

You wouldn't have a mailing list for the owners of these fields would you? I have some shimmering translucent bridles to offer them so they can ride their invisible pink unicorns in style.

You're so right WT. Anyone who thinks Brazil oil patch is being run by a bunch of incompetents is foolish. Not only have they retained some of the most experienced Deep water hands on the planet, much of their expertise is delivered by the service companies. The same folks providing critical support to all the US operators in the GOM are the same ones providing support to Brazil.

Additionally, many of the leases in DW Brazil are being operated by the same players who drill the GOM and North Sea.

As far as PEMEX being handicapped they have the same personnel and technology available as all the other operators. They're problem is lack of capital. Of course, being completely controlled by a corrupt gov't doesn't help either.

Witch hunts, murder and evil in Papua New Guinea


An interesting story, esp for its comments. None that I read saw it as a form of population control in the villages, or maintaining strict cultural taboos in primitive environments. With the even modern day choice of death or flee to the city, tribal population control is a result. Doubt I'd want to live there though.

Edit: article quotes:
"Detective Inspector Blacky Koglame estimates there are up to 20 killings a month in this area alone, most of which are not reported...
According to Mr Urame the victims are typically older women or women on their own, who have no extended family to defend them. Witch hunts can also be used as a pretext to settle scores or land disputes he said."

According to Darwinian (yesterday's DB):

They should form farming communities with all the houses in a central location and the farms surrounding the central community. The community should have a blacksmith, a doctor or nurse, and all the other trades that are needed to survive. And...your entire community should be armed to the teeth. Were I a younger man I would be active in forming such a community myself.

I agree with this sentiment and would love to find this place in America. Well I have found it, but not in America. It is in Israel. The community was designed by Richard Kauffman. National Geographic magazine had an article on this place a few months back.

Nahalal, Israel

From the article (author: Alan Mairson):

Full Circle - When the founders of Nahalal established this farming community in Palestine in 1921, they envisioned a cooperative that would radiate their highest ideals. At its center would be shared public buildings, barns, and supply sheds, girded by a ring of private residences, all surrounded by farmland. While concentric layouts are hardly new - centuries ago, many villages had a radial orientation for security reasons - Nahalal also reflects its founders' egalitarianism: Living in a circle, all residents would enjoy equal access to the facilities and to their neighbors. Today Nahalal (Hebrew for "pasture") is home to roughly 750 people, many of whom work here producing everything from chicken to olives to grapefruit. But the cooperative spirit largely dissipated when families began marketing their own goods in the 1990s. One structural kink of this design: Growth is limited. Once a rigid circle is drawn, there's little room to go forth and multiply.

I really think of the movie "Field of Dreams" when I see this, "Build it and they will come". I think people would gravitate to a community like this in America.

When the founders of Nahalal established this farming community in Palestine in 1921, they envisioned a cooperative that would radiate their highest ideals

Yeah, maybe if you enforced a no-n*ggers policy to ensure the authenticity.
I don't want to see a racist colonial movement used as an example of how we might organise our lives for the better, thanks.
Rich landowners sold their holdings to Jewish immigrants and turfed the peasants off the land they had worked for centuries. Still, that's their 'ideals' for you.
Sorry to hijack but let's try and not mention this kind of activity in any context other than resource grabbing to relieve population pressure shall we ? Unless you want to talk about the grain farms established in the lebensraum of Prussia, eh ?

Disclaimer - I'm Jewish as if it matters ...

If you're going to rant like that, at least try to get your facts right.

Nahalal is in the Jezre'el Valley. In the 1920's that region was malarial and the local Arab villagers had migrated uphill, as was their modus operandi (stay uphill enough the mosquitoes don't kill your children, but not so high you can't find well water). The Nahalal colonists had no need to turf anyone out. They bought the land fair and square because they thought (correctly) that they had the means to defeat the anopheles mosquitoes.

The founders of Nahalal might be dead now but that doesn't mean it's okay to libel them like that.

Well, that's alright then - just like we showed them dumb injuns how to farm, eh ?

Last I heard, buying land from its lawful owner and setting up a village on it is not a crime.

That is what the founders of Nahalal did in 1921.

Like I said, if you're going to cast aspersions, at least get your facts straight.

aye well there's the rub - buying the land from absentee landlords is techncially legal, yes. And I'm sure exclusion by race was legal - after all we made the law, right ?
Now one day someone might ask you the difference between moral and lawful. Very few things under the Juden laws were unlawful.
But that's fine - cowboys and indians is obviously a level of moral sophisi=tication some people will never get beyond.

buying the land from absentee landlords is techncially legal

And also perfectly moral when THERE ARE NO TENANTS.

And I'm sure exclusion by race was legal

And also a moot point. It's not like anyone from the Arab communities was interested in dying of malaria along these Jewish oddball.

No tenants ? LOL. Sure ... pesky imaginary Muslims, eh ?

Colonial land grabs are iniquitous enough but when you twist and turn around it 180 degrees ...

Look, give it up, like I said it's obviously beyond you. I guess we'll have to wait 50 years or so for the revisionists to die out then we can look at it objectively.

Like I said, the specific purchase of land, in 1921, by the founders of Nahalal, was of land abandoned because of malaria.

Reading comments such as yours makes me have to go out on the porch and vomit.

Then sign off and go take a stiff shot.

What happened to the Arabs when their new downhill neighbors lowered the aquifer level? Did their land dry up? Could they afford the energy to pump the water up to irrigate their crops? Or did they have to watch as their land turned arid and unproductive?

Apuleius could you give information that would explain why you think that there is something wrong with the current ownership of Nahalel? Most of us probably don't know any details about the situation.

I have been watching an interesting case unfold near me. There was a big plantation which was owned by a family ever since the land was "civilized". There was a community of peasants that also lived on the land and worked for the family as well as farming for their own subsistence. Recently the plantation was sold to a multinational which has converted the place into a factory farm. The peasants have been turned into minimum wage employees with 0 years seniority and must respect the multinational's wishes in respect to land usage. Understandably they are dissatisfied with the situation and are seeking political and legal support. Personally I hope they get it, because to my way of thinking the people who live on land should have more priority than absentee landlords.

Look at the surrounding Arab villages in the Galille and Carmel. They did not suffer water shortages, nor did their land turn arid.

Apuleius could you give information that would explain why you think that there is something wrong with the current ownership of Nahalel? Most of us probably don't know any details about the situation.

orbit500 seems to think the village is tainted with original sin. As I've pointed out to him, it was lawfully bought from its owner. The owner was indeed absentee, but he did not have tenantry at the time. Ironically, what DID happen in the 1920's was that in nearby villages, there were plantations owned by Sunni landowners, and tenant farmed by Shia peasants. When the latter fell under influence from utopian minded left wing Jewish Zionists who had their own ideas about the relations between labor and management, the landed gentry in the region was mighty pissed.

wtf does that mean ? utter nonsense.

They should form farming communities with all the houses in a central location

I agree with this sentiment and would love to find this place in America.

Acworth, New Hampshire. As a bonus, the fields are still open enough that any Frenchman trying to sneak up is toast.

Pretty much all the towns in western NH were originally settled on the hilltops for defensibility. Most of them, including mine, moved to the valleys around 1800. Acworth didn't. Nice place. No jobs.

A favor needed

Limited time today. An Icelander I hosted for Jazz Fest flew to London and will be talking about a HV DC connection from Iceland to Scotland (and perhaps Ireland) with several people there.

I want to send him TOD links on retiring UK nukes and reduced North Sea NG, but I simply do NOT have time to look them up today.

BTW, both Icelanders started talking about moving to New Orleans after only 28 hours in town. I know that I chose a good restaurant when Antonion Scalio came in (with at least four Secret Service agents & party) as we were waiting for a table. I gave a thumbs down from my table when the judge exited by me.

I told one of the Icelanders that he was the man who elected GWB in 2000, which provoked his ire.



Watch out, his bodyguards might come over and take your thumb. (A reference, of course, to the tape recorder(s?) taken from people listening to his speech at ...USM, if I recall correctly, just down 59 from you)

nuclear power stations:


gas stats current:


The last page sums the situation up!!!!


The main Government site is 'BERR'.

Presumably he wants to send juice from Iceland to the UK?

If so, it sounds like a potentially profitable enterprise. I know the Icelanders had scaled up their production with hopes of smelting Aluminum. In the face of the current downturn do they now have excess generation on a scale that makes such an adventure worthwhile?

At the risk of becoming a one-one samba I will advertise the Energy Export Databrowser again as an easy way of perusing the historical data for Iceland, Ireland, the UK, the North Sea as a whole, etc.

You can see import/export charts for coal, oil, gas, hydro and nuclear power as well as consumption and production profiles for any region. It's all based on data from the BP Statistical Review.

I would be very interested in whether these historical charts are at all useful in answering some of your Icelanders' questions or whether they only want forward looking information.

Personally, I find the future is difficult to predict and believe that a review of historical trends is one of the best ways to put others' predictions in perspective.

Happy Exploring!

-- Jon

Hydroelectricity to make aluminum with is the lowest marginal cost power source, and Icelandic production has not been significantly reduced.

Exports to the UK would be mainly new renewable generation and some seasonal surplus power.

Best Hopes for more renewable electricity,


We live in a world where 500,000 job losses is an improvement...

Job losses ease, but unemployment rate up
Payrolls post smallest decline since October, even as unemployment rises to 25-year high.

The unemployment rate hit a 25-year high in April, but there were signs of hope as the monthly job loss total fell to the lowest level in six months.

The Labor Department reported Friday that employers cut 539,000 jobs from payrolls in the month. That's an improvement from the revised reading of 699,000 that were lost in March, and the best reading since October, when the economy shed 380,000 jobs.

Still, that brings job losses since the start of 2008 to 5.7 million. And even some economists who believe that economic growth and an end to the recession are close at hand project that job losses could continue through the end of the year or into 2010.

At this rate we'll start adding jobs in 2012...

And Fannie Mae got it handed to them as well because of the foreclosure meltdown...

Fannie loses $23 billion, seeks more U.S. aid
Troubled mortgage giant asks Treasury for $19 billion, and says government doubles its funding committment to $200 billion.

Fannie Mae, the troubled mortgage finance company, reported a first-quarter loss of $23.2 billion on Friday.

The mortgage giant also reported that it submitted a request for $19 billion from the Treasury Department, to cover its net worth deficit of $18.9 billion. It also said Treasury has doubled its support level to the company to $200 billion.

Fannie Mae said its diluted loss per common share was $4.09.

In its quarterly release, Fannie Mae said its "entire guaranty book of business, including loans with lower risk characteristics," was experiencing "increases in delinquency and default rates as a result of the sharp rise in unemployment, the continued decline in home prices, the prolonged downturn in the economy, and the resulting increase in mark-to-market loan-to-value ratios."

But hey, over half a million job losses and continued housing weakness is all good to investors...

Stocks rally after jobs report
Wall Street advances after government reports fewer job losses in April, although unemployment rate hits 25-year high. Stress test results in focus too.

Stocks rallied at Friday's open as investors welcomed a report that showed employers cut less jobs than expected last month, even as the unemployment rate soared to a 25-year high.

The Dow Jones industrial average (INDU) gained 113 points, or 1.1% in the early going. The S&P 500 (SPX) index rose 13 points, or 1.5%. The Nasdaq composite (COMP) added 18 points, or 1.1%.

Bank and commodity shares led the early advance. Stocks had been primed for a strong start to the session even before the employment report after the government unveiled the results of its bank stress tests late Thursday.

It feels like the Titanic. The investors are sitting in first class, the bulk of the population is holed up down below deck in steerage (with water rushing in) and the whole damned thing is going down...

Champaigne anyone?

From the "champagne anyone" link: "Simon Johnson, a former International Monetary Fund chief economist.."
Well, no, thanks. But I'll take the champagne.

Before you drink the "champagne", you might want to check it for Kool Aid content.

The Quiet Coup

E. Swanson

Thanks B-dog for the "Quiet Coup" article. Best written article I have read yet on the underlying problem of our banking oligarchy's corrosive influence on government. WELL WORTH THE READ. Highly recommend to all TOD'ers.

It feels like the Titanic. The investors are sitting in first class, the bulk of the population is holed up down below deck in steerage (with water rushing in) and the whole damned thing is going down...
Champaigne anyone?

See my comment here.

However be forewarned as it is "Drowning in Metaphors" ;-)

It is said that a picture is worth a thousand words but a metaphor is worth a thousand stories. No need to apologize for your writing style.

From Denninger

Fannie reported 1Q 2009 results and, bluntly, they blew big bananas.

They lost $4.09 a share (!) and will be "asking" for $19 billion from Treasury. That's the bad news.

The worse news is:

* They see home price declines of 7-12% nationally for 2009. But but but but I thought home prices had stopped going down?
* They see "losses continuing" and see "09 credit losses exceeding 2008." (!)
* They don't see the firm operating profitably in "the foreseeable future." (!!!)


The Big Lie: Stress Test Optimism Just Wall St. Propaganda, Former Bank Regulator Says


about the financial propaganda ...

"It's remarkable not that they do it but that it still works."

Fannie and Freddie: In July 2008, Treasury Secretary Paulson testified that Fannie and Freddie were "adequately capitalized" under the test. In August 2008: "even in [Freddie's] most severe stress tests, [show] losses ... less than $5 billion." Actual losses: 20 to 40 times greater.

AIG: "It is hard for us, without being flippant, to even see a scenario within any kind of realm of reason that would see us losing one dollar in any of those [CDS] transactions." AIG claimed in 2008 "Using a severe stress test ... losses could go as high as $900 million."
 Actual losses: 200 times greater.

IndyMac: Sold over $200 billion of "liar's loans." Actual losses: 160 times greater than its tests.

Rating Agencies: Their stress tests gave AAA ratings to toxic waste. Actual losses: more than an order of magnitude greater.

"The examinations and stress tests are shams..."

That's what kills me - how can anyone still believe the trail of lies were simply "errors" ????

Everyone looks the other way and hopes the Giant Fraud can continue, including all of the Joe-Sixpack Plumbers on Mainstreet.

The Cons, and the Conned, should Expect No Mercy.

About William K Black:

On April 3, 2009 Black appeared on "Bill Moyers Journal" on PBS and provided some disturbing commentary on the current banking crisis.[3] In the interview with Bill Moyers,[4] Black asserted that our current banking crisis is essentially a big Ponzi scheme, that the "liar loans" and other financial tricks were essentially illegal frauds, and that the triple-A ratings given to these loans was part of a criminal cover up. He said that the "Prompt Corrective Action Law" passed after the Savings and Loan crisis mandated that ailing banks should be put into receivership. Black also stated that trying to hide how bad the situation is will simply prolong the problem, as happened in Japan's lost decade. Black stated that Timothy Geithner is engaged in a cover-up, and that the administration does not want people to understand what went wrong or how bad the banking situation is today.


Bill Black was a key player in sorting out the S&L mess and he doesn't pull any punches.

Audio only (mp3) http://www-tc.pbs.org/moyers/rss/media/BMJ-1251.mp3

Video and more info on Bill Black http://www.pbs.org/moyers/journal/04032009/watch.html

Yup. I was struck by the illegality he mentioned, saying that basically they were all breaking the law by not handling this right.


Some more of the same with Black from Barron's, but with some great detail on the law.



Ya...about those job losses...

Job Numbers from the Bureau of Spurious Statistics

We're leveling off! We're leveling off!"—so is the hope of TTT, Helicopter Ben, Larry the Wall Street Lackey and the rest of Team Obama. "This recession is leveling off!"

No it's not: The unemployment figures just released by the Bureau of Labor Statistics are totally cosmetic: We lost a whole lot more than 531,000 unemployed.

First, the "seasonal adjustment", which is a black box that can tweak me into looking like Dumbo the flying elephant. They're knocking off ±65,000 workers for no clearly discernible reason.
Second, notice that the Census Bureau hired 60,000 people last month. Those workers (by definition) are temporary, and are a net cost to the economy, as they will not be adding marginal utility to any economic sector, the census being merely a social expenditure.
Those two items alone turn 530,000 new unemployed into 655,000.

Now notice how, once again, previous months' figures have been readjusted. This time, the readjustments weren't so bad — a mere 30,000 more unemployed in February, turning that month's official totals to 681,000, and another 30,000 for March, making that month's official number 699,000, just shy of that magic 700,000 monthly number (BTW, remember back in the good old days when 300,000 monthly unemployed was"shocking"?)

In comparing numbers for April 2009 compared to April 2008, a difference is that this year Easter was in the middle of April, while last year it was in March. This probably affects retail sales more than unemployment.

Guess you missed the increase in overtime and the 683,000 who joined the workforce. The economy is driven by people who are working not people unemployed.

Yes, actually, if you count self-employed, and farm we have 120,000 more people working this month than last.


It's the first increase in 11 months.

Interesting article linked at TAE (re Obama's incredible salesmanship) http://www.truthdig.com/report/print/20090503_buying_brand_obama/

Did anyone catch this interview (which I also picked up at TAE):Naomi Klein: 'The Wall Street Bailout Is the Greatest Heist in Monetary History' | wowOwow. Of all the commentary on the Obama dilemma - that is, having to argue with people on why we had our doubts about him from day 1, which grow with every day - this is by far the most erudite I've read.

And I don’t believe these guys are dumb. I think they’re corrupt.

JOAN: Which guys?

NAOMI: Summers. Geithner. It may be legal corruption but I still consider it corrupt. Wall Street funded Obama’s campaign. They funded his Inauguration. They paid huge speaking and consulting fees to some of his closest advisers. What I am calling corruption is better understood as “crony capitalism.” It’s the systematic trading of favors between corporate and political elites to secure wealth and power. And the truth is, most of the time the trading of favors doesn’t even need to be explicit. It’s more that this corporate-political nexus creates an impenetrable culture in Washington, so the hedge-fund managers and bank CEOs are the ones who are in the ears of the Washington policy makers — they are their constituency, their community, the ones saying whether or not a given policy will work. And, of course, the problem is that the voices of regular people are left out.

JOAN: Why is my perception that Obama was funded by the tiny donations?

NAOMI: Because both are true. His campaign was historic in the number of small donations and the grassroots campaigning that brought him to office. But it was also historic in the levels of Wall Street financing. The grassroots movement that brought Obama to power needs to understand that the fight is on, that Wall Street is pushing Obama hard behind the scenes because they feel they have a claim to him. And the appointment of Summers and Geithner were all messages to Wall Street – “Don’t worry, things are not going to change too much.” And the market cheered. For the people who sent the $100 donations and volunteered their time for the Obama campaign, the only way to respond to this is to push hard from the other direction. Because the dynamic where Obama’s grassroots support just cheers him and defends anything he does, while the Wall Street heavy hitters and the defense companies take the gloves and lobby hard for their agenda does not work. The grassroots will lose that battle because they aren’t actually fighting. What they’re saying to Obama is, “You can take us for granted.”

Pinko bastion spawns capitalist solution to solar financing

But this hotbed of East Bay Bolshevism has also become a wellspring of municipal eco-capitalism that’s serving as a model for less leftist locales. As you may have heard, Berkeley will finance a solar array for any home or business that wants one, tacking on a surcharge to the owner’s property tax bill for 20 years to recoup the cost. If you sell your house, the assessment rolls over to the new owner.

Go Bears

Ship Owners Forced to Pay to Carry Middle East Oil

There's a link in this story to the R.S. Platou T/C Converter, where you can plug in the current Worldscale rate for various voyages and see if they're breaking even. VLCC Ras Tanura to LOOP at today's 17.5 WS (one figure used in the story, don't know if it applies to that voyage) loses $625/day, for instance. Interesting tool.

From April 17: Tankerworld News - Latest News - MEG-East spot VLCC rates at WS 25 and 'falling'

Fearnleys told Tankerworld in a note on Wednesday that “rates continue to fall without any apparent resistance whatsoever.”

“Indicators are all horrible,” another broker told Tankerworld. “Too many ships available for too little cargoes. Owners are already not breaking even, but rates are still falling.”

Brokers are reporting MEG-East voyages at around WS 25 currently, while the MEG-West route cracked a two-week long stalemate at WS 22.5 to fall to WS 20.

Voyages moving West African crude to the US Gulf also sank from WS 45 last week to WS 42.5 this week.

Today's story relates that WS 17.5 for a voyage to Japan, the calculator showing a loss of $6787/day. This will eventually result in ships scrapped.

Anyone that thinks we are now swimming in oil should think about the implications of these numbers.

Of course you can believe that demand has crashed and ignore the price of oil and tanker rates.

This means you believe the storage reports which because of the market contango contain a lot of "oil" stored by the likes of Goldman Sachs, Morgan Stanely et al.

I'd suggest that we have already reached the point that anyone with a brain has to question the numbers and consider what our real situation might be.

I'm convinced that the world is awash in a flood of paper barrels booked as being stored and backed by future delivery contracts with only enough real oil to hopefully prevent yet another move to the brink of a catastrophic chain of failure to delivers freezing the worlds oil markets.

All I hope is that these bastards don't take out the world economy playing their games.

OK, maybe my brain is being incredibly unwilling to function (it's Friday afternoon), but I'm trying to figure this out.

If demand hasn't crashed, where's the oil going? It's not going on the tankers; they're fighting over who can lose the most money per trip.

Correct me if I get the implications wrong:
Supply has been cut to the point where the tankers are having trouble finding something to ship?
Inventories are largely futures contracts rather than actual oil in tank farms?

Am I missing something or what?

One of the facts we have been given is wrong. No way you can have storage reach 19 year highs with oil at almost 60 a barrel.

I leave it to you to decide which "truth" must be thrown out take your pick but no way everything reported as fact makes sense.

Read the last few pages of this to get my opinion I don't want to repeat the entire thing its too complicated.


No way, really? Why not?

As long as nobody's selling their inventory (and why should they when they can hedge instead and take advantage of the contango?), it's not going to weigh on the market.

Is it really inconceivable that you could be wrong about this market? You wouldn't be the first.

Memmel, I agree with you about 99% of the time but this time I must favor FF. The EIA simply polls refineries and storage facilities and asks them for their storage numbers. Do you think they would be lying? Why? Or is it the EIA that is lying about the numbers they are collecting? What would be their motive? And why are their numbers so very close to those of the API? (American Petroleum Institute) Are they lying also?

No, I simply cannot accept that everyone is lying. There has to be another explanation. Perhaps it just irrational exuberance. Perhaps everyone is expecting a recovery soon and demand will pick up. Or perhaps it is just me who simply cannot accept that everyone got together and all decided to lie about the oil they have in storage.

Ron P.

How on earth can oil be approaching 60 a barrel with the US and according to some reports most of the world being flooded with oil ?

Market manipulation ?

I have no problem with other valid hypothesis but a world swimming and oil with demand supposedly falling off a cliff and 60 dollar a barrel does not compute. If inventories have really built this much then the OPEC cut had little effect the more the cut the more inventories build ?

Certainly I have my view on the matter but you have to admit the current situation is bordering on the bizarre. Are oil prices going to simply crash any day now ? Maybe but then why the increase ?

If all this oil in storage is real I'd suggest that the crash scenario would imply a price of below 30 dollars a barrel probably 20 which would cause a massive loss on most of these stored barrels.

And last but not least I did not say everyone was lying just some very well placed and powerful companies heavily engaged in the commodities market are lying. My guess is they have 30-100 million physical barrels and are effectively bluffing to act like they have more.

How much oil might not be real a sample scenario.


The US supposedly has 375 million barrels in storage and last year it had 325 million at this time.

Lets assume right off the top that of this 375 million barrels at least 50 million are real barrels held by speculators Cushing is at 29 most of this is probably oil bought and sold via NYMEX and other storage exists on the gulf used by traders. 50 million barrels held by traders is something that fairly easy to agree on and this is on land an in tank storage. The Gulf padd the other primary place they would store is at 196 vs 170 last year for a difference of 26 million barrels 29.8+26 = 55.8 its trivial to assume that refineries have taken advantage of cheap prices to at least build some inventory so how much of the Gulf storage is traders is debatable allowing a 5 million barrel inventory build for the refiners is easy to accept.

375 - 50 = 325 so ignoring for the moment a reasonable estimate of whats owned by traders one finds that the rest of the industry is not swimming in oil but now lets wonder if the situation is not as it seems.

Speculators are only required to deliver when the front month expires and this can be handled by buying forward on the futures market and selling down current storage.

Now if you assume that some double counting has taken place to force the market does it make sense ?
Well sure figure five dollars a barrel for storage over say three months if you can push the market down for a while by 15 dollars a barrel then you have completely covered storage costs esp if most of your claimed barrels are not even in storage yet because you also bought forward for delivery your self.
Even a five dollar depression of the market is lucrative as long as you can get it. Since you are going to be buying barrels to replace the the ones you claimed you had in the first place you have a pretty good idea that from your own trades demand will be there. If not then you settle for cash.
The position you don't want to be in is actually sitting on a lot of physical oil with storage close to full on the verge of a price crash.

Whats interesting is the common argument is that oil storage is almost full and these stupid speculators have millions of barrels of oil and we are on the verge of a price crash. And of course the OPEC cuts have not had a huge effect.

Next of course if your going to play this game you also need to be reasonably sure that OPEC is not going to open the taps on you as the oil prices increase potentially crashing the market. I'd suggest that 59 a barrel has to be tempting to many OPEC producers to forget about quotas if they can.

Now lets think about what would make these speculators so confident that they are willing to play this game.

First lets just assume that they don't really have 50 million barrels. Lets say they have 25 million barrels in land storage well then this would mean the US is at 350 million physical barrels.

Next the calculation of US oil inventories is not as simple as you describe you can read about the process itself on key factor is its a sort of running average carrying forward last weeks inventory and effectively throwing out any sudden inventory changes as noise. The question arises did this process ever get messed up ? Indeed when you look back to when the hurricanes happened the US inventory never went down. What exactly happened is arguable but for the sake of my train of thought lets assume that during the chaos inventories where overestimated by 25 million barrels. As time went on even people that later sent in corrected inventories has their data dropped as being out of range. There is a good reason why I picked 25 million barrels and its because if you happen to know that the storage number became inflated during the hurricanes if you then inflate your own imports to "cover" these missing barrels then
the stats work. As honest reporters are finally able to report lower real inventory numbers you goose the number by your own matching fictional import number. The data collectors see no discontinuity they do see oil being shifted from one reporter to another but this looks like a trade. Indeed you probably had a lot of real trades where refiners sold oil to speculators simply because their refineries where not operating and they could not accept oil for weeks or months. The real physical trade was actually going this way.

The net result is you just managed to import 25 million paper barrels and it looks like 50.
Next I do believe that they stored some oil offshore reports of this have been repeated many times from a number of credible sources tanker traffic at the time indicated a move to store oil offshore the market conditions of steep contango made storing oil very profitable. No reason to not believe that the traders have at least on one point taken control of 100 million barrels of oil.

So now the question becomes how much real oil is out there ? Well thats impossible to tell if they are lying they pulled a whopper off with the hurricanes but if your willing to fudge the numbers week after week say by 2 million barrels each week. Its been 7 months since the hurricanes or about 28 weeks
2*28 = 56 million barrels. This can be done a variety of ways simply truthfully report your imports but not your drawdowns. You would tend to get a linear increase in the oil in storage if you simply import at the rate you sell I think we have seen this.

To be clear where we are at is unkown but where could we be lets run with this conjecture that and additional 56 million paper barrels have been imported and we started with 25 so this gives 81 million paper barrels. 375 - 81 = 294

Suddenly instead of swimming in oil we are sitting near the bottom of the five year range.
Its not quite as bad as it looks since lest say 50 million barrels are still sitting offshore maybe.
Some is almost certainly still out there lets say at least 25 million barrels this puts the hedge or fractional reserve lending at about 2:1 i.e the speculators have succesfully passed off at this moment about 50 million barrels of oil with half on land and half offshore as about 80-100 million barrels.
And further more they know they have bought forward on the futures market for at least 50 million barrels to cover their hedge if they are forced to deliver.

Now taking into account the demand drop which is real certainly vs 2008 even if real oil storage on land is towards the bottom of the average range storage levels are closer to mid range for the lower demand.
We are almost certainly using less oil this year so we need less. Given everything I've said this would indicate a market thats just tight but not oversupplied or at the moment significantly undersupplied.
This fits well with both the current price action and the price action over the last several months.

However we know that tankers rates have crashed so unless OPEC can and does open the taps looking forward we see the market tightening significantly. And of course the people that have set up their physical bank of oil can continue to profit handsomely rotating out their stored oil as needed and taking delivery on the front months. If they can no longer keep the steep contango then for it to remain very lucrative they need only ensure the price increases steadily by about 5 dollars a month as the futures contracts move to wards the front the recent spike alone if it holds has probably completely covered any real physical storage costs. And of course if they have been systematically lying about their real levels to show a false build they can readily slowly roll down the amount of paper barrels held in storage if needed to get a price increase. A weekly draw of 2-4 million barrels is certain to pop the price at least a few bucks.

Whats important is that if this scenario is correct then we will see a relentless price increase very month probably in the 5-10 dollar range. This goes until the traders decide to liquidate the physical storage liquidating could itself crash the price to some extent but one would guess external economic conditions would have to turn for the worse and the liquidation would happen as both economic conditions where low and the total amount of storage has dropped i.e they won't liquidate 100 million barrels since this would just flood the market and cost them money.

They may never liquidate if oil production is crashing like I think it is then regardless of what they report they will continue to build physical stores most probably offshore where its hard to count.
By timing when they build offshore and when they report drawdowns on land and actually land the barrels
if they get up over 200 million barrels they have plenty of room to play to ensure that the game is always profitable if they are confident that the price wont crash.

Although this means that on average the oil market should see relentless increases in price this oil bank as long as it exists acts as a sort of commercial SPR ensuring you wont get outright shortages it technically not a bad thing. And of course as it grows it can play on the seasonal demand swings storing oil as demand falls during the slow periods and selling as demand picks up on a natural seasonal basis.
Oil producers get a steady rising price eventually if any real capacity exists and a OPEC member breaks and starts pumping a lot of the excess could be soaked up and depending on the global decline rate a renegade OPEC member would probably be unable to influence the price all that much.

As it operates the need to have fictional paper barrels declines for the most part the use of these is replaced with real barrels hidden offshore but with the amount unknown.

Overall its not a bad thing but obviously no one is going to play this game even if you really believe the physical storage numbers unless they expected the oil price to continue to climb at a healthy rate.

Paper barrels or not its still a huge gamble and gambles of this magnitude tend to be safe bets.

And last but not least looking forward and assuming 294 million real barrels in storage whats a more adverse scenario. Well the people playing oil bank may choose to increase their storage levels for real.
And they may know for a fact that real production is falling fast if so lets say the accumulate at 2 million barrels a week net positive how they decide to partition storage is up to them offshore may be slightly more expensive which is questionable give the current tanker rates but offers a way to hide the amount of oil you have while onshore is counted but probably cheaper regardless they would need to bring enough onshore to settle front month contracts.

Lets say they continue to build some of their real physical supply while trimming paper barrels. Let assume this works out to a net deficit for real oil users like refineries of about 2million barrels a week the US would then start seeing a net drawdown of about 4 million barrels with 2 million real and 2 million paper and additional 2 million going offshore. They oil storage guys are just trading paper for real and holding most of it offshore while reporting draw downs of onshore storage.

We would then be down 50 million barrels in oil stored at refineries in 25 weeks or about six months.
This would put land levels at 244 historically the lowest we go is just above 280 million barrels.
So if this adverse scenario plays out price would blow up well before 6 months. In fact you really only need to pull storage down by say 20 million barrels to put the entire system comfortably in the bottom with a lot of pressure on prices this is like five weeks with the adverse scenario.

If the system is being gamed you could even see the game change and speculators report lower storage levels then they have to boost prices and force refineries towards drawing down.

Regardless if this is even a reasonably close estimate of the game thats going on I really expect us to finally start seeing a steady draw down in storage we are getting close to the point where this would happen seasonally anyway.

Next given that this game strongly suggest that OPEC will be unable to boost production I also would not be surprised to see OPEC also announce when they meet in May that compliance with the current cuts have been achieved the economy looks like its starting to recover and they will phase in and additional 2mbd of cuts until the reach a comfortable prices point ( 80 a barrel has been mentioned ).
This whole game really depends on OPEC actually being in a fairly steep decline if so then I really think they must announce at least one more round of cuts to cover real production declines.

Later if we get substantial price increases they may or may not increase production or say they have but they certainly will blame any price increases over whatever the last one they claimed was reasonable on speculators that ploy worked once before.

On the price side we already hit 140 I don't see why it can't go to 200 without people really freaking out they will expect a major price crash any day now. Heck we probably could set at 200+ for six months before people really started to wonder. Also of course on the financial side I think we can expect the dollar to start weakening so a lot of the price increase could also be pawned off on a weak dollar.

And you can bet that the MSM will actually use the drawdowns real or paper and price increases to triumph that the economy has turned around and all is well and inflation is now the problem. This also nicely covers increasing interest rates on treasuries as "inflation fears" mount. This will probably keep the stock market pumped maybe sending the S&P to 10,000 or higher.

Now of course for the middle class the rising interest rates will kill housing even more keeping housing prices falling but heck they have been falling forever now. The MSM will finally start bringing out charts and graphs showing traditional 3X income rules and how many markets are overpriced. Continued unemployment claims will be sold off as employment is a lagging indicator and the recession is really over and you just don't know it. Basically they will tell J6pk as soon as prices finally return to normal levels all will be well and hiring will pick up soon. Once housing falls below 3X then they will explain well housing downturns tend to overshoot the norm you should really buy a house they are cheap cheap cheap and interest rates are rising. Hurry up and buy before your priced out forever the foreclosure stream could dry up any minute.

Finally the economy just can't stand 200+ oil and we start seeing the unemployment rate start increasing again from the new normal of probably 10-12% dunno what TPTB will say then but thats a couple of years out.

In any case we have finally hit the real end game at this point and now things are going to start getting really shitty. Its going to be a very close call if this starts before 2012 I think things will start cracking again by 2011. But I really see no reason why we can't manage to get through 2009 and even 2010 without peak oil becoming a mainstream issue maybe the acceptance of peak in 2011 will be used to cover politically for the new economic downturn. Of course on the street the entire time its been a jobless recovery with housing prices falling and persistent high unemployment.

Its actually a bit funny on the oil side that it really seems that the entire game with oil could be set up with only 25 million paper barrels. I don't see that a lie larger than that is really required to get us to the point we are at today.

Memmel, a lot of what you have to say makes sense but from reading just a few lines of your post it became obvious that you are laboring under a false assumption concerning the definition of "speculators". A person who buys and stores oil, either in tankers or in tanks, is not a speculator, they are "hedgers". There are different kinds of hedgers of course. Refineries hedge, producers hedge and sometimes hedgers are just buyers and sellers of the actual product.

Speculators, on the other hand, never buy actual oil, they never store oil and most important of all, they never take or make delivery of the actual product. Even if a speculator is caught holding a long or short contract at expiration they are still not required to either take or make delivery. That is, they can still settle for cash. The NYMEX clearing house simply matches all long contracts with holders of short contracts. These contract holders can either settle for cash of take or make delivery of the actual product. Very seldom is any actual product exchanged.

It is a myth that speculators are ever actually required to take or make delivery of actual product. I see this same mistake made almost daily, even by professional writers and bloggers that should know better.

Today on the NYMEX floor, (not counting electronic trading), 738,315 contracts were traded. That is all contracts. 377,826 of those contracts were for the near term month (June). Those contracts were for 1,000 barrels. This means 738,315,000 barrels of West Texas Intermediate crude was traded. That is ten times the actual oil that was traded in all the world and several hundred times the actual amount of WTI that actually changed hands at the Cushing Hub. My point in all this is to point out that the contracts traded on the floor of the NYMEX has only price effect on the market. It does not affect in the least the amount of oil actually traded.

I am at a total loss to explain why the price of oil is so high at the same time oil storage is so high. But I believe you are simply barking up the wrong tree. No one is deliberately manipulating the market. That is what a lot of people said when oil was over $145 a barrel. Now a few peak oilers are saying the same thing. No, a thousand times no, that is simply not happening. No one has the clout to do that and if producers or hedgers were caught even trying they would go to prison.

It is possible that speculators are simply wrong and are bidding the price of oil way too high. And it is also possible that they are right and oil is poised for a crunch and a rise in price. But Occams Razor must apply, the simplest answer is most likely the correct one. And the simplest answer sure as hell is not that someone is manipulating the market like a puppet.

Ron P.

Edit: I am going to bed now so if I have any replies to this post, I will not be able to reply until morning.


First I was obviously using the more general definition of speculator.


One who engages in speculation; one who buys and
sells goods, land, etc., with the expectation of deriving
profit from fluctuations in price.

I think I clearly split when I was discussing speculation in this sense and in the sense of financial speculation in the futures market itself.

That is ten times the actual oil that was traded in all the world and several hundred times the actual amount of WTI that actually changed hands at the Cushing Hub. My point in all this is to point out that the contracts traded on the floor of the NYMEX has only price effect on the market. It does not affect in the least the amount of oil actually traded.

Incorrect your mixing the liquidity the futures markets provide with the tie to physical oil prices.
A significant amount of the worlds oil is bought and sold based on a premium or discount to the NYMEX trading prices its a quality index to set the price of many types of oil. The requirement for physical delivery keeps it a real market. As long as enough physical oil is directly traded and indirectly indexed it is a real market. Certainly a much larger oil market exists but the spot and indexed markets are tightly coupled. Any attempt to manipulate the market eventually requires physical oil.

I am at a total loss to explain why the price of oil is so high at the same time oil storage is so high.

Darwinian here I must get fairly direct you fashion yourself as and expert on oil. Often making bombastic posts. If your at a loss you better think hard about why. I suggest you may have made mistakes in your thinking.

And here I have no choice but to really step well beyond the line.
I have zero doubt that I'm probably one of the best people in the world at understanding complex systems if I'm not the Beethoven of complexity them I'm the closest this world will see for generations. Mathematics fails to capture what I can see and words no matter how many I right cannot capture it. You have no idea you deeply I understand it because I simply have no idea how to express my understanding.

Maybe I should resort to haiku's I'm sure the readear of the oildrum with low bandwith connections would appreciate it :)

The oil dances on the plate
The fire heats the plate
Does the oil drop burst into flames
Does the plate crack
Does it dissipate in its last vapors
Does the fire burn out
Does the plate melt

Its a myriad of paths different endings with time barely visible.
If your capable of groking Feynman path integrals
Then you can understand.

This formulation has proved crucial to the subsequent development of theoretical physics, because it is manifestly symmetric between time and space. Unlike previous methods, the path-integral allows a physicist to easily change coordinates between very different canonical descriptions of the same quantum system.

The most important thing is to forget completely about time the truth about a complex system has no interest in time. Eventually you can most of the time drop out a time dependency for the system but think of it as a ball dropping into a maze of poles once you figure out the position of the pole with reasonable certainty you know 100% that when the ball hits the pole it will go to the left of the right of the pole. The positions of the poles may be still be somewhat ill defined but if your right your 100% certain beyond a shadow of a doubt that when it hits the pole it must go left or right. Intrinsically complex systems always reduce to boolean logic if your really good the your guesses to the topography of the poles are close enough.

I'm really fucking good.

Sorry to be crude but I am and its important good enough that if I'm wrong then it means someone managed to move one of the pole on me. Obviously you know this is non trivial given the nature of oil.
Your talking about metaphorically and only barely moving heaven and earth.

To be clear any complex system with defined states can be modeled as a small finite set of poles with a ball dropping through them if you allow the poles to move the set is small. If you allow the pole to move at infinite velocity in a infinite plane while restricting the ball to move at a finite velocity only a single ball and single pole is required to replicate or model a system of arbitrary complexity. Or back to my original assertion complexity is intrinsically boolean.

Thus I'm confident enough in my abilities that if I'm ever wrong it means a very very powerful set of events where initiated to shift the poles intrinsically they are practically immovable. To the point its not worth considering a concerted effort to shift them vs your own error in their exact placement.

Thus being wrong can often be far more important than being right because if your wrong it means you where originally correct and someone else knew you where right and went through and extraordinary amount of effort to ensure at least briefly the right answer was delayed.

Yes you have to be one seriously confident bastard to come up with this conclusion but as far as I know I'm the only one on the planet that has realized that the world economy was crashed to prevent the collapse of the global oil market. And what funny is the price of oil was obviously heading toward infinity. How do you stop something getting ready to effectively explode ?

This little game that has developed is interesting because it did manage to time shift the eventual crunch by a few months but its obviously just and expensive and also very dangerous game. Everyone is worried now about the flood of oil crashing oil prices yet for some reason because people are unwilling to accept that within constraints the system can be gamed they miss the real danger.

The danger we dodged by crashing the worlds economy has not gone away its just been delayed the danger the current game of hoarding oil and its initially depressing effects on price when coupled with enough money for almost infinite monetary speculation is that the next time we come close to the pole it probably cannot be moved.

Indeed we are not approaching a crash in oil prices but screaming full speed ahead right into a collapse of the oil markets from a massive chain of failure to delivers. And we now have no speculative bubble to pop to stave off the event. Everyone seems to be focused on the financial problems but consider a world in which the oil markets collapse and no one is willing to trade oil in exchange for fiat currency.

The moment even the merest hint that oil is no longer exchangeable for fiat currencies our civilization immediately collapses. That is the real pole that was pushed ever so slightly to one side.

I know the game thats being played Goldman Sachs knows the game and more importantly we both are fully aware that its the end game.

Kudos to being able to push the pole I'm sure many at Goldman think they now rule the world by succeeding in moving it a few inches soon they are going to find out that they did not move it very far and the chances of moving it again are ever slimmer.

Now lacking a immediate collapse from the gaming of the system the real collapse will not happen until effectively all debt is defaulted on of course as some really unknown point debt defaults will probably collapse the system of their own accord. This could easily cause us to collapse before the oil markets collapse or more correctly precipitate the collapse of the oil trade. Your legally dead when brian function stops your damned close when the heart stops the financial system is the heart and oil is the brain in this scenario. Barring financial collapse effectively all debt can and will be rung out of our monetary system we can prevent it from collapsing but only be being forced to move to a whats for all intents and purposes a finite shrinking oil backed currency. This does not prevent attempts to inflate but all they will do is devalue the currency vs oil. If you read my posts then you know I in probably ever third post state that the value of housing and any other good that requires long term debt and is in excess will go effectively to zero before we actually collapse.

The underlying reason is simple before the oil market can collapse the monetary system has to reform itself to be a true store of wealth which means it has to convert to being a oil based currency. This means that the value of goods and services vs oil go effectively to zero before the currency is no longer exchangeable for oil. Money for all intents in purposes becomes only worth the goods and services that oil producers are interested in buying it practically pure barter. Accessory goods and services demanded by the oil consumer have zero intrinsic value vs the demand from the oil producers.

Thus my disregard for schemes to save the middle class outside of their ability to produce goods and services in exchange for oil the middle class not has no value. Just like their suburban houses their value also goes to zero. Certainly a minority will be retained to generate high tech goods for their owners to ensure we have something to give in exchange for oil but this is a fraction of the current numbers. ELP effectively focuses on a new or old non oil based economy to increase the standard of living for those left out of the shrinking oil economy but its in its basic form just and alternative economy offering something better than being in the now huge bottom of the smaller oil economy. ELP or starve should be the complete definition.

Regardless all of these are minor moves vs the eventual collapse of the fungible trading of oil in fiat currencies. Our civilization ends when this happens.

So given this long diatribe go back and look at what I'm saying. Clearly I don't take market manipulation lightly if I'm saying the market has been manipulated then hopefully I've given the context in which it happened. To continue to be a pompous ass manipulating the market to the extent that I get things wrong is just as big as me getting them right. Hopefully you understand that for me to even suggest it is enormous and scarier then any prediction I've ever made.

Hi memmel

Could you please try to shorten your posts on Drumbeat. They are way too long for people who have a limited amount of time to spend on this site.

Your points might be quite valid, but they are so long that I (and I suspect many others) don't have time to read them.

I'll second that.

And here: ...,....,......,......

I hope you can find some use for these. It would make reading your long posts a lot faster.


I signed in specifically and only to post this comment:

I have been PO aware for almost four years.

I have read broadly and deeply. I have read the writings of the most popular writers, and I have read the meanderings of unknown bloggers.

I find it disingenuous - and I'm being gracious with the choice of that term - that somebody wants Memmel to shorten his posts in order to save readers' time. If you want to save time, skip Memmel's posts. Does this actually need to be written? If you think reading the NYTs every morning takes too much time, then, rather than sending in a request for them to shorten their articles, just don't read it.

My 2 cents, which I again note I registered exclusively to offer, is that Memmel's product in TOD is unique, effective, and incredibly valuable.

When a throng pushes in one direction, it is the individual pushing along a different vector who interests me.

As for his failure to adhere to your preferred rules of grammar, I can only repeat: if you don't like chocolate ice cream, then don't order the chocolate ice cream.

I reiterate - attacking Memmel's posts based on an accusation of prolixity or obfuscated message is, it seems to me, an attempt to transform the actual reason for disliking his posts into something more palatable, if not believable.

Memmel's posts are an asset. As they are. And I hope he continues to post long messages in his usual style. I personally read every one, and he is the only author on this site for whom I have searched and read previous posts.

Think about that.

If you don't like Memmel's posts, just ignore them.

When the option of ignoring is so incredibly simple to realize and to execute, then what can be said of the ostensible reasons being offered for wanting him to shorten and alter his posts: saving us all time.

You worry about your time, please. I'll worry about mine.

Yes you have to be one seriously confident bastard to come up with this conclusion but as far as I know I'm the only one on the planet that has realized that the world economy was crashed to prevent the collapse of the global oil market.
Hopefully you understand that for me to even suggest it is enormous and scarier then any prediction I've ever made.

I understand perfectly Memmel. You should take a few weeks off, get away from your computer and TV. Go fishing. Go see your family and just do anything except watch the economy or oil market.

Take it easy, you have gone completely off the deep end and only complete rest and isolation from the rest of the world are likely to help you.

Ron P.

just do anything except watch the economy or oil market.

That must be sometimes a good advice for everyone (who understands the implications of peak oil) reading Drumbeat every day.
About long posts one could say:
"Knowledge speaks, but wisdom listens" - Jimmi Hendrix. However, everyone who is PO aware and considers PO as a threat to humanity can be called a wise person.

memmel -

I understand your frustration; the frustration of having a penetrating insight and then being unable to communicate it... and while you may indeed have crossed the line, I for one think it should be forgiven. You're not bragging, just honestly reporting your self-assesment... I have been fascinated by complexity for some time, and know enough about it to realize that I really don't understand it at all. I've no doubt you really are very good.

Granted, your posts are long; I have wondered how you find the time to write them. But I relish them, and rather than ask you to stop, urge you to continue. I am learning a lot from you, not only about oil, and complexity, but something much deeper and more valuable: effectively, your flow-of-consciuosness style of writing is letting us observe a very, very good thinker in the process of thinking.

I guess watching like that makes me some kind of voyeur, but whatever...

I have to agree with Merv_NZ and Darwinian. Your posts are overly long and thus difficult to comprehend. While there is a lot of truth in what you write, I think you are missing some basic points. For starters, oil isn't the only source of useful energy. Engineering is about how to use energy, not just oil. There's said to be lots of coal, which could be used to provide the services now provided by oil. This is especially important as the oil appears to be likely to run out before the coal is gone. The oil producers may have the upper hand for a while, but, if TSHTF, they will find that they will not be able to dominate the discussion.

That's because all civilization is solar powered. By that, I mean that all people are solar powered, is in, eat plants or the other products derived from agriculture, such as meat and fish. Plants are rather inefficient at capturing solar energy in the form of food, so the countries with the most arable land per capita will have the last word in the debate.

Hey, it's spring time in the U.S. Go for a walk in the woods and sell the flowers. All this ranting on the web (and I've been doing it for about 15 years) won't change a thing until most people agree that there is a real need to change. How about another summer with oil above $100 a barrel, perhaps due to a hurricane or two? The price of WTI is pushing $60 already and the summer driving season hasn't started yet (although the traffic around here is already getting crazy)...

E. Swanson

How about another summer with oil above $100 a barrel ... ?

I suggest not pushing the "price as proof of peak" meme.

"Price" is just another random noise that we chattering monkeys make as we sit in our gravitational cage slinging mud at each other and trying to out-fool one another.

Do you actually believe that Adam Smith was right? Do you believe that the course of the world is set by rational consumers making rational choices so as to encourage rational producers to produce what we "need" (what we demand) at the appropriate "price"?

No. It's a chaotic, positive feedback system. Producers produce irrational wants (demands) which in turn drive irrational consumers toward consuming the most insane of things (i.e. "happy" meals filled with trans fats, fructose concoctions filled with fizz and the "ahhh" factor, etc.) all as part of the insane stampede towards generating mo' money (out of thin air) and thus making one's "numbers" look good on the street of the defaulty derivative thinking dweebs. Price is just one of those deceptively derived numbers. It doesn't prove much of anything. When Pet Rocks were at $100 a box, did that prove we were running low on rocks? D'oh. No. It just proved how crazy we were (and still are).

Charlton Heston was right. It's a mad house (Planet of the Apes).
Left click on the image above to read more about pricing and the Pet Rock phenomenon. (I don't know that any actually sold for $100. That was just to get your attention. The human mind likes goose eggs.)

Memmel, I for one find your thought trains totally fascinating and hope you will hammer in the message. Do not format it in any other way, I just love it ! By the way, after my last chat with you (a year ago?) I have been following the whole scene closely and circumstantial evidence tells me "somethings terribly rotten in the kingdom!" I do think you are spot on. Keep on rocking !

Do not format it in any other way

No, do format differently. There is nothing more demoralizing to a reader than having to re-read phrases, sentences or even paragraphs simply because of formatting.

Send them to me, if you like, memmel.



I think I used speculation clearly when I was discussing speculation in this sense and in the sense of financial speculation in the futures market. That is ten times the actual oil that was traded in all the world, and several hundred times the actual amount of WTI that actually changed hands at the Cushing Hub. My point in all this is to point out that the contracts traded on the floor of the NYMEX have only price effect on the market. They do not affect, in the least, the amount of oil actually traded.

Incorrect. You're mixing the liquidity the futures markets provide with the tie to physical oil prices. A significant amount of the worlds oil is bought and sold based on a premium or discount to the NYMEX trading prices. It's a quality index to set the prices of many types of oil. The requirement for physical delivery keeps it a real market.

As long as enough physical oil is directly traded and indirectly indexed, it is a real market. Certainly, a much larger oil market exists, but the spot and indexed markets are tightly coupled. Any attempt to manipulate the market eventually requires physical oil.

The requirement for physical delivery keeps it a real market.

I'm still waiting for "physical delivery" of my rebate check. :-)

Wow, that was a long post. I read it all, and the biggest impression I came away with was "paper barrels". And I thought yes, this makes sense. Real barrels are not exchanged on the trading floor, nor are they taken delivery of. It is all SUPPOSED to balance out, but come on, with all the millions of transactions, isn't there the possibility of the paper oil supply growing bigger than the real one? And of course I think that this is possible. I don't buy into grand conspiracy theories or believe Bush & Cheny ever were pulling the stings of the puppet market. I do think that like our current banking fiasco, people acting to maximize personal advantage and leverage will twist the system into something resembling a Hunter S. Thompson novel. Trade in the electronic age is wickedly twisted.

Odysseus you nailed it and why with all those paper barrels flowing not treat a few as if they where real ?

One last thing historically when a good starts to become in short supply physical speculators will hoard.
If oil has peaked I'd be shocked if we don't see hoarding schemes happen.

How on earth can oil be approaching 60 a barrel with the US and according to some reports most of the world being flooded with oil ?

Perhaps the purshasing power of the dollar has been halved?

A trillion here, a trillion there, and pretty soon you're talking about worthless paper (and void-backed promises).

Question: If you see a penny on the street, do you bother any more to bend and pick it up?

If you see a foreclosed McMansion, do you rush in to place your bid?

I think there might be One way.

If all of the really, really big players are convinced Ghawar's going down, and the "supply" won't be there when the recession is over.

Possibly, helped along by a little "double-counting."

One thing I haven't seen discussed.

There's this cat named "Obama" that's sitting on 700,000,000 Barrels of the Real Stuff.

When does HE pull the trigger?

If all of the really, really big players are convinced Ghawar's going down, and the "supply" won't be there when the recession is over.

North Ghawar maybe is crashing. Otherwise a few other fields, like Khurais, will fill the gap preventing KSA to go down soon. Anyway, problably there will not be sufficient oil for the worldeconomy to grow healthy again.

Smith Bits has published their Weekly Rig Stats:

Overall rigs down 27 to 956.
Gas rigs dropped 26 down to 717.
Horizontal rigs dropped 6, so even the shale plays are contracting.

Baker Hughes has also published:
Overall rigs are down 17 to 928.
Gas rigs dropped 11 to 730.
Horizontal rigs dropped 5 to 380.

These rig counts are well below what Johnson Rice and Chesapeake both thought would balance the market. A nasty price spike is being setup.

Transparent plastic solar cells fitted into windows

The advantage of these flexible cells is that they can be used for a wide range of applications, such as power-generating military tents, portable chargers for electronics, and sensors. But these organic photovoltaics aren't very efficient at converting sunlight to electricity and won't last as long as a rooftop solar panel, which is typically under warranty for 25 years. Konarka said late last year that it achieved 6 percent efficiency in its labs but that's not yet available in its products. A high-efficiency silicon solar cell, the most common cell material, can be over 20 percent.

Another tiny drop in the alternative energy bucket? I'm thinking tinted glass windows that produce at least enough energy to power a laptop or a cell phone or a few LED lamps.

Alan from the islands

Chicken and egg type questions and I know no one really knows the answer, but thought I'd ask anyway?

So, crude prices have busted out of their recently bound range and the same with the DOW. Is there a direct relationship? Is one causing the other? Is it merely expected increased driving demand that is causing crude to go up?

IMO it has zero to do with increased driving demand. Realistically, with GS moving 25% of the money whatever they buy or sell is going to move-the more it moves the more medium and smaller size fish jump into the pond. It is starting to look like it might turn out to be the most spectacular Pump and Dump of all time-insider selling is at record levels.

GS is talking down oil. They say it should be at 45.

I said their money moves prices-I don't know if their statements have much of an effect-they have been caught repeatedly advising one thing and doing the opposite-good thing fraud is still legal in the USA.

Bloomberg pretty clearly believes that oil is following the Dow, which is expecting things to pick up next quarter.

Me, I think the Dow is smoking something I'd like a hit of. As for oil, I believe that published numbers, both production and consumption, are pure fantasy, and not being in the biz, will stay far from a prediction.

And who in the MSM is covering the runup in crude and gasoline prices? It's no where to be found. I guess it could be interpreted as "negative" to consumers!!

Frickin A...we are very close to $60 again. If we go to $70 or $80 or higher in this economic environment...the unemployed will be in a world of hurt.

During last year's run-up in oil, a lot of hay was made about the weakening dollar. This is not talked about much lately, but...
Dollar Slips Beyond $1.36 per Euro for First Time Since March

The Dollar Index, which the ICE uses to track the greenback against the euro, yen, pound, Canadian dollar, Swedish krona and Swiss franc, fell for a third straight week, decreasing 2.1 percent to 82.735. It touched the lowest level since March 19.

A weakening dollar is regularly seen as a reason for higher oil prices, but rarely/never used to explain higher stock prices, which always struck me as odd. If the US devalued its currency to 1/2 present value, wouldn't stock prices (those traded in dollars) go up?

Only if you imported most of your stocks from abroad. US seems to have plenty of locally produced shares, in fact increasing by the day.
Stock price rises reflect an bottoming of the recession, ie it's not going to be a depression

Bear with me for a second. Suppose there's a US based airline company. They own a lot of planes and fly internationally. They have 1 million shares and today those shares trade on an internationally-accessible stock exchange for $100 each. All other things equal, the US government decides the next day to devalue its currency 50%, so where it used to be $1=1.3 Euros, now it's $1=0.65 Euros. How could the value of the airline company's stocks stay at $100 each? Wouldn't they quickly move to $200? Does the proportion of foreign demand for a company's stock impact this type of analysis? I agree, we have/create shares domestically, but aren't we importing most of the financial capital that is used to buy them?

How much of their "Income" is in Dollars, and how much of their "Expenses" are in Foreign Currency. And, vice - versus.

Yes, so financial performance of the company will likely be impacted. If they owned their planes outright, seems that the liquidation value of the company would go up, but I see how the profit position of the company would be rather complicated.

House Agriculture Committee Chairman Collin Peterson (D. Minn.) says he has had it with the indirect land use argument and will not support environmental legislation in letter to Obama:


Maybe his hissy fit will wake some in the administration up to the unfairness of applying indirect environmental impacts to ethanol but not to oil/gasoline.

If you think this is unfair, you will be tearing your hair out for quite some time with the emissions loophole bonanza.

The other day's Monbiot post has it right. I'm not really a fan of the guy but it's a rare occasion the simple truth is said publicly: to curb fossil fuel use, you've got to curb production. And to protect forests, you've got to stop cutting them down.
What's a tax on ethanol (subsidize then tax... the brilliance!) supposed to do?

Before there was The Oil Drum, there was this: http://www.youtube.com/watch?v=5WCTn4FljUQ

Lord, I miss my DEC Rainbow. BTW, is that a DEC VT05 terminal in SF Chronicle office?


Hi Paul

That DEC Rainbow with its 10MB harddrive was quite a machine in its day. Did you run yours on MSDOS or the infinitely superior MPM86?


Hi Merv,

The Rainbow was a truly elegant machine in so many ways. I purchased three of them back in the fall of 1983 -- a 100A and two 100Bs, the latter being fitted with larger power supplies capable of supporting an internal hard drive. All three had floor stands and were "DECed out" with 256K of RAM (the maximum supported), but only one of the 100Bs was equipped with a hard drive -- a 5 MB Seagate if my memory is correct. Some 25 years later, I clearly recall the cost of each component. The base unit with floor stand was $4,000.00 CDN, and that was a special discounted offer through the University of Toronto book store. The 192K memory expansion cards were $1,050.00 each and the 5 MB hard drive was a whopping $3,040.00! What the hell was I thinking?

One of the nice things about the Rainbow is that you could boot either CP/M (both CP/M and CP/M-86) or MS-DOS, or log on to a VAX as a VT102. I can't recall running much in the way of CP/M (maybe Word Star?), but I do remember WordPerfect 3.0, 4.0, 4.1 and 5.0, Lotus 1-2-3 (and maybe something called Multi-plan before that?) and dB-II and dB-III under DOS. The printer was a DEC LQP01, which undoubtedly accounts for much of my hearing loss.


... and a 5 MB hard drive was a whopping $3,040.00! What the hell was I thinking?

The dollar isn't what it used to be. ;-)

Hello TODers,

Have you hugged your bag of NPK today?

MINSK, May 8 (Reuters) - Belarus, home to the world's largest potash exporter, should not accept lower prices for the soil nutrient despite a dip in demand linked to the world financial crisis, President Alexander Lukashenko said on Friday.

The Belarussian Potash Co, a 50-50 joint venture between Belaruskali and Russian miner Uralkali (URKA.MM), covers about 30 percent of world potash markets. Exports amount to over 12 million tonnes to 45 countries, led by China, India and Brazil.

.."They think we will provide fertiliser at a loss. Well, we're not going to do that."
Recall that this echoes the strategy of POT's Topdog, Bill Doyle.

When one considers the power of Webb/Pomerene and other legal International Acts, combined with the consortiums Canpotex and the companies listed above: IMO, the world should be grateful that they are price-makers, not price takers. Recall my recent weblink:

.."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."
The VERY LAST THING we should want to have happen is a breakdown in the I-NPK supply chain due to bad decisions.

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

As posted before: IMO, Nepal could really use a dose of full-on Peak Outreach before TSHTF:

Maoists forced Indian-owned cos to shut shop in Nepal

Much before the showdown between Nepal's Maoist premier and his army chief began leading to the former's resignation, the Left wing
cadres had began forcing Indian-owned companies to shut down operations and shift businesses out of the Himalayan nation.

..A survey, conducted by the industry chambers on Indian enterprises in Nepal, said economy is grinding to a halt and unless corrective action is taken, it would result into large scale industrial sickness and unemployment.

The FICCI report quotes a senior official of the Nepalese industry association as saying that the foreign investments have nearly dried and no new joint ventures are being worked out in the given scenario. He said the impact has been felt across sectors while the 15-day strike in the Terai region has already stymied supply of raw materials. The situation has been compounded by the sealing of the Indo-Nepal border.

Hello TODers,

Another golf course closing:

AREI investors struggle with losses in alleged Ponzi scheme

..AREI, a Redding-based property-acquisition firm, at one time controlled 23 senior living centers, a now-defunct San Joaquin Valley golf course and Lake College, the recently closed-and-taken-over private for-profit vocational school on Redcliff Drive. AREI did business directly and indirectly with over 2,000 investors.

The Skins Game, a Thanksgiving weekend tradition for nearly three decades, became golf's latest victim of the economic downturn when organizers said it would be postponed this year with no guarantees it would return.
As we go postPeak, I would imagine that we will see ever fewer tournaments as sponsorship money for purses evaporates.

Study reveals how the Antarctica’s ice sheet might respond to future warming

..The images, which the researchers got, show channels as wide as a motorway and three giant troughs, as wide as the English Channel, and the researchers pointed out that much of the drainage of the West Antarctic Ice Sheet (WAIS) appears to be happened in this area.

The images helped the researches to conclude that the Amundsen Sea embayment is the major drainage point for the West Antarctic Ice Sheet and according to the researchers, it is the most likely site for a major ice sheet collapse. The researchers also concluded that the sheet covering West Antarctica is highly unstable because it lies on rock below sea level, resulting in more icebergs breaking off.

From WIKI: http://en.wikipedia.org/wiki/Amundsen_Sea
The ice sheet which drains into the Amundsen Sea averages about 3 km (2 miles) in thickness; is roughly the size of the state of Texas and the area is know as the Amundsen Sea Embayment (ASE); it forms one of the three major ice drainage basins of the West Antarctic Ice Sheet.

..Some scientists have proposed that this region may be a "weak underbelly" of the West Antarctic Ice Sheet. The Pine Island and Thwaites Glaciers, which both flow into the Amundsen Sea, are two of Antarctica's largest five. Scientists have found that the flow of these glaciers has increased in recent years, if they were to melt completely global sea levels would rise by about 0.9-1.9 m (1-2 yards). Scientist have suggested that the loss of these glaciers would destabilize the entire West Antarctic ice sheet and possibly sections of the East Antarctic Ice Sheet.[2]

A subglacial volcano has also been detected in the area, just west of the Pine Island Glacier near the Hudson Mountains. It last erupted approximately 2,200 years ago, indicated by widespread ash deposits within the ice, in what was the largest known eruption in Antarctica within the past 10 millenia.[3][4] Volcanic activity in the region may be contributing to the observed increase of glacial flow,[5] although currently the most popular theory amongst the scientists studying this area is that the flow has increased due to warming ocean water.[6][7] This water has warmed due to an upwelling of deep ocean water which is due to variations in pressure systems, which could have been affected by global warming.[8]