Reserves and Resources

In trying to estimate the size of the problem that will face the world as the available reserves of fossil fuel begin to decline, one has to make some assumptions about the size of the volumes that are available. It is a debate that can lead to people talking past one another if they make different assumptions about the size of those reserves. This holds true in discussions that dot the web sites of those that write about energy, whether writing about oil, natural gas, coal or uranium.

The issue that becomes important is the fact that the amount of oil, coal, natural gas or uranium that can be economically extracted varies with the price of the fuel.

CERA estimate of full cost of production of various oil sources, at time when oil was about $90 a barrel, so blue line represented then-highest cost of new production justified by $90 price, from Horizon Oil presentation.

This current post was motivated by a couple of different stimuli, firstly there was an article on Seeking Alpha about the natural gas reserves of the USA and then I was asked a question about the coal reserve assumptions for Alaska.

The natural gas article illustrates, in some ways, the problem of discussing the remaining gas that the United States has available, and whether we have a problem in future supply. With a consumption of around 23 tcf per year, it questions whether the remaining gas reserve is 337 tcf or 1,747 tcf. It was followed, interestingly, by a second article on natural gas that points out the folly (as it turns out) of being in the natural gas market this past year, as an example of the “no free lunch” argument.

“Natural gas is probably the best demonstration of the ‘no free lunch’ law in commodity indexing, as evidenced by the S&P GSCI Natural Gas Index which commenced at 100 in January of 1994, ended September at 2.63. Over the same period, the natural gas future has increased about 125%. While 2008 served as a strong reminder ‘to know what you own,’ 2009 has reminded investors ‘to know how to be properly exposed to commodities.’”

This ties into estimating the size of the reserve, because, in raising money to develop reserves, you have to be confident that the money that you invest will give you a financial return on that investment. If the price of natural gas has tumbled to $3 or less (per kcf) then you may not make that return, and may even lose money. You will therefore look more cautiously at what are potential sources and be more selective on where you drill. Some of the more questionable areas will no longer be sites that justify the investment. And thus these areas move from being in the reserve account into that of being a resource that is available, but not justifiable as being exploitable AT THE PRESENT TIME.

Yes I know I was shouting, I did because it is that qualifying clause that gets overlooked time and again when discussions arise over what the fossil fuel base is for the world. The condition as to whether the volume has enough worth to justify being developed changes with conditions. Coal in the UK had a considerable future before the oil and gas reserves of the North Sea were developed. At that time the reserve was proven at over 45 billion tons and the coal was being mined at around 200 million tons a year - but times change, and the cheapness of the liquid fuels, relative to the cost of mining, meant that a lot of the coal, although still there, is currently too expensive to produce – relative to the alternative. It is thus no longer counted as being part of the reserve.

Now this gets into the climate change debate a little, since one of the arguments that are raised is that the users of coal do not pay the full price, since the price they do pay does not include some of the social and environmental costs associated with burning the product. Since the customer ultimately pays for the product, this seems in part to be an argument to justify raising the price of coal based energy to the point that other sources become cost effective. The problem is that in some locations it is hard to find current technologies, even at cost equality, that can provide a replacement for coal as oil and natural gas supplies run down.

Which gets us back to the question as to how much of a reserve of oil and gas we have, and how long will it last before we have to face the reality of a return to coal.

And this is where the price of the product controls, transiently, the volume of fuel available. In the short term natural gas prices are down and it becomes harder to justify continuing to drill new wells, if they aren’t going to make money. But as more folk stop drilling, then with the very transient life of the existing wells, the supply will shorten, and after the stored volumes begin to be used up, then prices will rise to the point that an effective market can be reestablished. How long will that take? Probably until sometime next year is my current guess, though it depends in part on how hard a winter Europe and North America experience this year.

In the longer term there are so many power plants that now rely on natural gas that demand will sustain a higher price, and lead to an increase in the drilling rate, until price:supply and demand reach a more stable platform. At that time the reserve volumes that are currently moving into the resource category will start to move back and the projections for a longer “age of Natural Gas” will start to assume a little more reality.

However I would like to throw a small caveat into that debate, at the beginning of the year the SEC changed the rules for counting the validity of an oil or gas resource, loosening the requirement that the fuel be “proved” to be there. This is a link to the new regulations. The ramifications of the new rules are likely to have some impact on this debate.

The thing that strikes me is that the availability of credit is extremely important in determining demand, and hence price. Peak oil tends to imply peak credit, because then the economy can't grow fast enough to support the amount of credit it currently has.

So peak oil -> peak credit -> lower demand for products using fossil fuels (new houses, cars, computers, etc.)-> lower prices for all types of fossil fuels -> less fossil fuel production than without peak oil.

This is non-intuitive, and perhaps other factors, such as substitutability for oil, will help overcome it.

Gail, To me, capital is formed when productivity is greater than one. In other words, we are able to produce more than we need. Productivity greater than one comes partially from the energy we are able to harvest from nature. With the invention of money, capital could be saved in that form. With the invention of credit, capital could be borrowed from expected future productivity.

To answer the question: do we have enough capital to build a new sustainable energy system, I would ask, what is the net availability of capital world wide? By that I mean money saved minus money borrowed. Is the world's net worth positive or negative?

For oil, if EROEI (I like to call it energy leverage) is currently 100:1, and the price is $70 per barrel and there are about 1 trillion barrels left, then there is something like $7000 trillion dollars of "oil captial" available for the future. It could be asked whether a dollar of capital would equal a dollar of oil capital. Human ingenuity could form a multiplicative factor.

Except for having your timing of and ignoring the debt balance i.e if we ended with all debt paid off at say 5% interest over 30 years what amount of that $7000 trillion would have gone to debt payments ?

Regardless surprisingly we are in a sense in 100% agreement things used to work like your saying.

The key is this argument is no longer valid. Things simply don't work this way anymore. At the economic level that fairly obvious as debt deflation is rapidly destroying our ability to pay current debts much less dip into this 1 trillion barrels of oil that may or may not exist.

The truth is we can't afford to extract it even if its there we can only afford a very very small amount of the remaining oil supply this should be fairly obvious from the debt situation our access to future resources using debt financing has literally been shut off. Real remaining URR is effectively zero for our economic system. Thats not to say we won't extract a bit more but this oil will be bought by and ever declining wealthy class that has profited of the system. Larger and large parts of the population will be shut off by declining access to credit and declining incomes and spiraling oil prices.

All remaining extraction will go to the wealthy at the expense of impoverishing the many. And the wealthy will at most make only a token effort to expand production of oil. They are not going to reinvest in us because their ability to maintain wealth concentration has now turned since its impossible to grow the rich turn vicious and grind the last bit of diffuse but large wealth out of the poor.

Its looting time.

The warning is obvious the Government has already told the consumers point blank either borrow and spend or die. They are not joking if we can't borrow more and support our masters than we will be destroyed as needed to ensure the concentration of wealth continues. Given by any metric we are obviously tapped out we will be quickly sucked dry and discarded.

Oil is actually rent, not capital.

Or is it capital with a very fast depreciation?

In so far as it contributes to the production equation allowing productivity greater than 1, it could be considered capital.

Here are a couple of interesting numbers. Compare them to the leveraged value of the remaining oil, about $1400 trillion with an EROEI of 20 at today's price - $70 assuming a trillion barrels remain.

World wide GDP is about 60 trillion.

World wide capitalization is about 300 trillion.

Not according to Ricardo, who framed and introduced the issue. One could say that the ownership of the equipment (as long as that equipment was not owned by the people actually doing the work) could be capital, if surplus value could be extracted from the rent (the oil).
This would be labor, obviously.

From a physical economy view the theoretical value of oil in the ground needs to be evaluated through what you can do with it. The way economic models work, dealing only with equations that assume the growth conditions of the past will never change, and things like that, they turn out to be unrealistic and ignore what become the main issues. Modeling the future with equations is "unrealistic" because the one thing you can be sure of in nature is that no equation can account for the failure of its own assumptions.

I think as the price of energy switches from following the average cost of production to approaching the average cost of new reserves, quite a lot of assumptions will turn out to not be valid. The price of energy would soar worldwide and stay there it seems, with no alternative but abandoning market mechanisms worldwide. We built the whole infrastructure of society on the basis of energy costs in line with the average cost of supply, and it continuing to decline with increased investment. Now we'll find out what parts of what we built with that theory are sustainable now when that no longer applies.

So, in addition to asking whether we'd have enough cheap energy available to rebuild the infrastructure of civilization for using expensive energy, one should ask the question of whether we'll use it for that. At the moment the market forces seem to indicate the answer to the second question is clearly "no", and so clearly implying that the answer to the first question is "no" at the present too.

The next question is whether something like our civilization will survive to tell the story of how they did it... Wouldn't it be nice to have our stories survive us to be told to future generations?

I'd say a resource thats yet to be exploited is probably best described as and asset that can be borrowed against now. Just like a farm for example is treated as and asset even though its really the soil resources.

It value of course depends on how you define future profitability if the asset is converted to cash either via extraction for a resource or raising crops for land.

Now commodities are interesting since their very simple once you buy food you eat it therefore you literally threw your money away in order to simply live. Thus to make enough money to buy food you have to work doing something else and lets assume its not farming so generally at some level you need to buy additional resources to create something. Even what I do programing requires a fairly significant amount of resources hopefully I'm not able to program once I'm dead :)

Now if the farmer gets paid and simply puts the money in a lockbox and never uses it since lets say he is entirely self sufficient. Then money is continuously sucked out of the economy assume everyone that converts natural resources never spends a dime and you have a bit of a problem as you quickly would run out of money if it was at a fixed level.

In the real world of course the money is eventually put back into circulation as the farmer or oil well owner buys something you made at a hefty markup. He obviously has to pay back all the money he was paid for feeding you and then some. But he gets whatever widget you made and then some. Now of course he feeds a lot more people then he actually gets in total profit so the more people the farmer can feed at the highest price the more in a sense he makes.

Now all of this is really just a big cycle outside of the injections of natural resources at the bottom if they are renewable then its a steady injection of basically this years solar energy and obviously overtime the total amount of wealth in the form of value add using that energy steadily increases. Generally the incremental increase in wealth is much lower than what it is to day but over a span of 100 to 200 years it adds up. Now of course population in general expands but its hampered by natural constraints and in the past disease.

This is all well and good but in any given generation your not a lot better off than your parents and if you take into account the natural rise and fall of fortune at the individual level a lot of people are actually not getting wealthy and of course even in this system wealth concentration continues so a lot of this incremental wealth becomes concentrated at the top.

This is pretty slow however as wealth concentrates or more likely as a barbarian with very little spies a land where wealth has concentrated for generations we hit on a very simple way to speed up the process you take someone else's store of wealth. Or you fight a war.

Whats interesting is that if you harvest trees then coal then oil and even on to nuclear fuels all your really doing is dodging around the hard constraint of generally having only access to a small precentage of the solar energy absorbed by the planet. It does not change the game really simply speeds it up and allows you to dramatically expand the resource base your exploiting to produce wealth.

Its a faster game and allows the society to obviously become more complex as it has a higher energy flux but its exactly the same game we have always played with the same rules and we quickly find that even this accelerated game is to slow for us and go on to continue to play the take from someone else game or war.

Now even though we don't talk about it in polite society there is a very very tight and cozy relationship between warfare and money. First and foremost you can use the threat of physical harm or better throwing someone in jail for life to take their money. And money of course makes this game a lot easier as you don't have to deal with a bunch of goats and rotting grain. So the foundation of money is not at all in commerce or trade as thats a myth its real foundation is it allows you to fight a war without destroying to many resources just kill a few people from time to time and everyone coughs up their taxes and of course in exchange you provide protection for them from other nasty brutes that want to take your place and kill people and take their money.

Of course the fact that the people who your being protected from act the same way as the people who are protecting you i.e both simply want to kill you for money is interesting but what the heck who cares you still have to live.

Now of course its all well and good to lay about and take food from poor peasants but if you go back to the beginning it does not do a lot of good unless you develop a commerce system to get different goods. Setting around and eating pigs and wheat in a drafty castle is not a lot of fun after a while you would rather have the shiny new two seater carriage you saw the benevolent lout ruling fairytale land was running around in.

So you go talk to him and find out he's hired this guy called Mr. Banker that knows how to play tricks on people to get them to do stuff so you make more money. Sure in exchange you can't go around killing everyone but this makes you look even better vs your peers your protecting your populace from. And they get a few more morsel then their neighbors and work even harder. Of course if they ever bother to read the laws of the land they will eventually find something called imminent domain plus land taxes or similar which actually tells them they can never really own anything and the lord can kill or imprison them if he wishes.

As long as you work hard and pay him its ok no big deal and you can even pass on some of your wealth to your children if he does not take it either via inflation or outright simply taking it.

And of course once we learned how to exploit coal to make steal and the steam engine pretty much the rest was history.

But you can if you wish to look see that money has it roots in taxes which has its roots in warfare not commerce. The commerce part is more to ensure the lords and ladies of the manor have lots of shiny toys to play with as they idle away there days protecting you from the bogeymen around the corner.

Whats funny is one reason I think we will keep technology for a long time barring absolute collapse is the wealthy are addicted to technology the love it since it provides them tons of toys. Heck they can even ride into space now if they wish. And of course don't forget the weapons which are vital to maintaining the status quo without them the peasants stand a fighting chance. It not surprising that many technologies are military spin offs and even when they are not the money to fund the research is often directly related to profits from military spending. Not all of course but a lot.

Over time we have gotten very good at concentration of wealth and we know all kinds of tricks now to do it.
Also we are really good at killing each other. Whats wrong now is the concentrated resources esp oil are fading and the huge stimulus it provides is ending yet for quite a while the framework for concentration of wealth based on a steady influx of oil remains in place even as it falls off.

Now back to the simple story this is exactly the same result as if the farmer had simply stuck his money in a mattress and never spent it. It simply does not matter what you do with your currencies you can inflate them deflate them or do nothing its not a money problem its a very simple problem that ever smaller quantities of a critical basic resource are entering a system.

Most of the people that think we can come out of this without facing serious hardship are eventually assuming that we can say make fine pottery for each other and exchange it even though we have suffered a massive crop failure and famine is near.

No food no pottery.

No oil no electric car driving suburbia.

With the food example the only way you can keep making pots and stay alive is if someone else has food in excess they are willing to trade for your pots.

Without the oil we have no core resource input to even transition. You would have to cut back substantially on your daily oil consumption and conserve to perform the conversion and its a fairly large job to convert our economy over to renewable that will take decades if not longer. For a good amount of time the net excess will steadily shrink i.e energy not put into renewable resources will decline.

Back to my brillant potters who are going to make pots and sell them to offset their local crop failure thats all well and good but what if these potters had borrowed massive amounts of money fomr the guy with the food while times where good ?

Well obviously the guy is going to say well why don't you pay me back all the money you owe me and then we can talk about exchanging pots for food.

So the very very simple economics of conversion of resources either relatively renewable or not into goods and services and thence into wealth makes any plan to deal with their decline suspect unless it involves a lot of sacrifice for a long time. Since it sets below the money system at the more primitive wealth concentration/Warfare/Trinkets for the rich level its not a easy problem to solve. In general its actually not solvable with the only reasonable partial solution esp if your deep in debt is to go and take from others while you still can before you get to feeble. The real answer is bullets not PV's and batteries.

So for me at least not only would I have to see a serious commitment to alternatives despite the pain it seems a real decision to fore go the quick fix of warfare is critical. I'm actually not aware of a single culture in history that had the warefare option as a way out not taking it during resource decline.
If not externally then internally via civil war. Given the very very basic nature of the problem almost any culture thats ever existed beyond basic survival could give us valuable information on how to get out of this issue. So it would be interesting if even one example exists.

Without surplus, how can surplus value be squeezed out of labor on the relation between user and exchange value?
Capitalism needs surplus and exploitation, plus a strong central state to enforce the rules.

This appears to assume that financial capital is a thing, rather than a relationship:

To answer the question: do we have enough capital to build a new sustainable energy system, I would ask, what is the net availability of capital world wide? By that I mean money saved minus money borrowed. Is the world's net worth positive or negative?

Since "money saved" will increase in response to an increase in borrowing, and decrease in response to a decrease in borrowing, it is difficult to see how it can play the role of a constraint that is assumed in the question.

That is, "availability of [financial] capital" is a constraint on individual borrowers, but of course not on the system as a whole, and the way that an individual escapes the constraint is by persuading someone with the means of creating more money to do so.

The fallacy of "no growth = no credit" is to assume that interest is paid out of growth. It is a quite widespread fallacy, but is quite simply not true - a static economy that includes credit extended simply means that the lender is cut in for a share of that static income.

Gail I'm working through the situation now that I think I've got it figured out but I think your missing a critical factor.

Everyone has assumed that oil has been cheap for a very long time in reality its been expensive. We have not lived in a decades long environment of cheap oil instead its been decades of expensive oil with ballooning credit papering over the truth.

To see this simple go back before the late 1970's when oil was 3 bucks a barrel abundantly available and we where on a stable gold back currency system. The transition off of this was complex but in the end we had 20 plus dollar a barrel oil and magic fiat currencies and the formation of the petrodollar.

I can of course get into the details but its critical to understand that oil has been expensive vs its production cost for decades. If you say figure that lifting costs in the 1980's was about 1 dollar a barrel then oil producers when from making a 200% profit to a 1900% profit margin. EROEI etc did not change much during this transition thus oil has been wildly overpriced for decades. Expanding debt papered over this massive inflation of the price of a key resource. These extreme profits allowed investment in marginally more expensive production increasing overall volume even as profit margins steadily declined from absolute insanity.

Once you figure this out then you can unravel the entire problem. The long recession during the 1980's is readily explainable. In fact the economic indicators are crystal clear and the critical role of having a swing producer willing to take a substantial amount of oil offline is clear. And of course it also clear that no significant source of 3 dollar a barrel oil remained by 1980 otherwise this situation could not have set up. The era of cheap oil ended a very long time ago and the rest is now history.

Whats interesting is the power of the US rested in its ability to prostitute its citizens as consumers of this new expensive oil by providing cheap credit to them and turning them into consumer debt slaves. Effectively we sold our consumption to enable the infinite expansion fiat model to work. In my opinion expensive oil played a large role in initiating the debt spiral without the artificial and sudden increase in the oil prices people probably would not have given up on the hard won depression era conservatism and bought into endless cheap credit. Recessions during the period help a lot as credit allowed people to stave off changing their living style. Once we where hooked it was off to the races from this point on as concentration of wealth in the oil and banking industries ignited the bubble we all came to love.

Once you get the price/profit margins right then its a lot easier to understand.

Now going forward its obvious that TPTB want to try and set the game up again at a new higher price point i.e 70 dollar oil is supposed to provide sufficient profit margin to allow the game to continue.
Aint gonna happen.

And of course on the geology side if your driving a system with 1000% profit margins its pretty easy to guess that when you finally hit the wall there is not a drop of oil left that can be pumped for a profit.
Thats hyperbole yes but not far from the truth. No way are we at 50% URR the question is how much reserve is left when your on E and more important how fast can you produce it.

Your stuff is always fun memmel, keep it up! This is a viewpoint I've never considered.

Something I'd like to add: The phony wealth we have experienced has also been affected by the off-shoring of high paying jobs to 3rd world countries. The mass of Americans, and probably many Europeans, have been placated by the low prices based on the extreme poverty, lack of environmental and labor protections in the mostly totalitarian regimes that have provided manufacturing goods. Who has profited? The financiers, the dictators, the executives of the companies primarily. Working people in the mature economies have been played with an old game. If you still have a job, more likely two jobs, you are OK because prices have been held down. If you loose a good manufacturing job you are dead meat. Those are disappearing so rapidly that labor unions are de-fanged. In virtually all US private industry pensions are long gone. Bankers and civil servants are the only protected classes.

Yes thats all true but realistically its like talking about the problems from advanced cancer or the various secondary complications that effect AID's or other terminal but generally long lasting diseases.

By the time this becomes a real problem your already terminal. Weirdly enough its not clear that the sort of exploitation is actually a real problem in the sense it could not happen until after its already to late.
Obviously it only works if you run and ever mounting deficit and you can't do that until the inflationary fiat regime is well entrenched. Only after the disease has gone systemic and global can you expand it to leverage differences across borders. That not to say that it was not a powerful tool in allowing the system to become systemic. Outsourcing to cheaper countries has been done for thousands of years its just the introduction of debt leverage makes it much much easier to pull off. Cheap imports undercutting locally produced goods made with cheap or slave labor is a problem that spans history. But it does not become virulent without the warped capitol system to drive it. For sure the fiat money system was put into place first then the globalization tool added second. So I think the order is fairly clear. Lots of good things to think about.

The beauty of it of course if you look is that I'm claiming that oil prices where artifically held at high levels for decades so of course the natural outcome is that goods get more expensive across the board. However globalization is a very neat trick as it sidesteps this and allows you to use cheaper labor costs to offset the artificially high energy costs. As long as people buy your debt you can literally have your cake and eat it too !

And of course the biggest winner is China which uses coal for its manufacturing with little or no pollution controls. So you not only win you hit the JackPot !. If you go read your history books right when the US decided to embark on this game of fiat it opened up ties with China.

Given where we are today can and given my arguments do you really think all of this was by chance ?

I don't think these people where stupid and everything I've read point towards the fact that the fallacy of fiat money and inflation has been well understood for centuries. This was not something that just happen to happen it was done intentionally. And of course the peak in oil production is right there.

Taking into account what your saying about globalization and adding in the coal aspect the chances of this trifecta of peak oil end of the gold standard and opening up with China all happening over a short span of time being pure coincidence is low.

The decision was made on purpose. Now whats even more interesting is how later on Nixon became the fall guy in Watergate shortly after this. And of course over the preceding decades time after time we could have moved off of this path right up till about 2000 and even as late as 2003 we could have still pulled back.

During this entire time period one single president stands out from the crowd and that Carter who suffered the humiliation of Iran of course it somehow happened after his famous sweater speach.

So the two presidents most connected with the great Con the guy that rubber stamped it and the one that stood up against are unique in modern history in being effectively destroyed politically.

One of the really neat things about my economic theory as how all kinds of very interesting things line up and don't forget the cold war as the underlying driver.

And basically the recent history of the world seems to center around peak oil in the US its the nexus or critical point it does extend backwards to slightly prepeak so you have to include as context the internal events of the second half of the 1960's and also the external cold war/Vietnam war. The pressure on the system was tremendous when we decided to opt for the long suicide. I have to think at the time that the belief was that things would come to a head very rapidly at most within a decade if that.

Not at all unlike today when the end seems obviously near but its quite different by making the decision to play the cards the way they where played we simply don't have the options they had back in the late 1960's and early 70's. Dodging the bullet then resulted in a crazy system that ran for a very long time far longer I'm sure than the original creators would ever have suspected and eventually the structure that was put in place allowed us to smash the Soviet Union when it hit peak oil. However its not clear in the least that we will survive this second peak. Realistically we did not really survive the first one just took a suicide pact to defer when the final accounting would take place. And obviously again our foe did not survive his encounter with peak oil with a good push from us via the arms race and are pals in crime the Saudis.

I think its foolish to assume after living this long on literally borrowed time that we will dance through the even more profound peaking of world oil which leaves no one in a position to help anyone even if they wanted to. Accountants love to put monetary values on goodwill. Not only do we owe a tremendous amount of money but the bad will the US has created over the last several decades of artificial growth is probably uncountable and far exceeds even our monstrous debt. I don't think a black president is going to do much to solve this festering problem. Nothing against Obama but he can't undo decades of damage even if he wishes to.
And its becoming increasingly clear that he as as much and insider as Clinton and thus the changing of parties was nothing more than window dressing just like the Clinton years where.

And nothing against Clinton I'm from Arkansas but not once did I ever consider that he was not a pure insider politician sure the political arena he catered to differed slightly from that of the Republicans but Tammany Hall Democrats like Clinton and in my opinion Obama are simply not cut from the same cloth as the Carters and perhaps JFK. And on the republican side Eisenhower. Its not a partisan viewpoint. Just happens that in the time period of interest a maybe exists in the Democratic party with JFK and he was of course killed.

A good place in fact to really start with the roots of our insanity is actually right here.

Crises there will continue to be. In meeting them, whether foreign or domestic, great or small, there is a recurring temptation to feel that some spectacular and costly action could become the miraculous solution to all current difficulties. A huge increase in newer elements of our defense; development of unrealistic programs to cure every ill in agriculture; a dramatic expansion in basic and applied research -- these and many other possibilities, each possibly promising in itself, may be suggested as the only way to the road we wish to travel.

But each proposal must be weighed in the light of a broader consideration: the need to maintain balance in and among national programs -- balance between the private and the public economy, balance between cost and hoped for advantage -- balance between the clearly necessary and the comfortably desirable; balance between our essential requirements as a nation and the duties imposed by the nation upon the individual; balance between actions of the moment and the national welfare of the future. Good judgment seeks balance and progress; lack of it eventually finds imbalance and frustration.

Read that and consider what I'm saying. I suggest that I'm looking back on a nation that ignored the first warning thence the second in the form of Carter it will not get a third chance this is not baseball.

Now whats even more interesting is how later on Nixon became the fall guy in Watergate shortly after this.

I would rewrite this passage to say: "Interesting how Nixon was so depraved to allow something like Watergate to happen"

During this entire time period one single president stands out from the crowd and that Carter who suffered the humiliation of Iran of course it somehow happened after his famous sweater speach.

So the two presidents most connected with the great Con the guy that rubber stamped it and the one that stood up against are unique in modern history in being effectively destroyed politically.

One of the really neat things about my economic theory as how all kinds of very interesting things line up and don't forget the cold war as the underlying driver.

Consider that William Shakespeare was 46 around the time that the King James Version of the Bible was written. In Psalms 46, the 46th word from the first word is "shake" and the 46th word from the last word is "spear". Think about it.

"....the fall guy ..."

the original fall guy was albert bacon fall, the interior secretary to warren g harding, the most corrupt administration until bush jr came along.

see:"the teapot dome scandal" by laton mcmartney

i just cant figure how anyone , with the possible exception or rush limbaugh, could perverse reality to come to the conclusion that nixon was a fall guy. or maybe this line was meant as jest.

I'm not guessing at why things happened like that did but Nixon made some landmark decisions yet in the end was viewed as a simple thug.

I was a young child at the time so my own impressions are not helpful. But with Nixon at least I come away with the impression that he was a bit of a puppet president very much like George Bush. Different personalties but completely dependent on their advisors and basically simple political animals.

I'm not a tinfoil hat type in the sense that I don't see some massive controlled scandal however I do see overall trends and overall goals esp among the elite. And as these very powerful people move to achieve their goals they use this power to take advantage of situations.

For example 9/11 was probably a real terrorist plot that the various agencies bungled dealing with it.
However whats important is the reaction to 9/11.

Same with Nixon after he made his landmark decisions first his vice president then he himself fell into disgrace.

Ford was a bit of a outsider however some fascinating information surrounds his presidency.

And the most interesting part of all was his narrow defeat of Ronald Reagan for reelection.

As the US entered the late 1960 through 1980's you can see your dealing with a very troubled nation with large cracks in its social fabric and in general nearing the end of its ability to carry on the good fight through the cold war. Under extreme pressures like this you generally see the elite become emboldened to act.
Cumulating with deficits don't matter Regan and trickle down economics.

Whats funny is we have just barely exited a similar set of conditions and the Bankers won by a landslide.

Regardless I think its important to differentiate between people seizing a opportunity when they see it even if it means helping things a long a bit and the traditional tin foil hat grand inner circle conspiracy theory. The run of the mill tin foil hatter implicitly believes someone is in control down to a detailed level I simply don't see thats the case at all. The ego's at the top have to be huge regardless of how things turn out no one is really in control. However you have flocking tendencies and of course consensus on certain goals or shared desires. Probably best to think of the top levels of our society as a sort of loosely knit terrorist organization with its members being very autonomous and taking action on their own initiative. Maybe like taggers painting on various walls but never meeting in person. The tightly synchronized requirement for tin foil hat theorist is simply not required any more than its required for Organizations like AlQueda the shared vision is sufficient for these groups to generally work together with any real communication probably spotty to almost non-exsistant. They certainly know about each other but the need for some sort of central terrorist organization thats tightly controlled simply does not exist.

So my assumption is that our elite are organized along the same lines as the more traditional terrorist organization and this is what critical to them maintain power any one cell can be destroyed but the overall organization continues to chase the common goals of its members with each effectively a sleeper agent waiting and watching for the chance to further the goals of the group. As far as I know this is the most powerful form of creating a group thus its makes a lot of sense that the elite would adopt it.

What this loose organization decides to do not do and seize upon is itself interesting as it tells you what there overall intentions are. Unlike AlQueda they don't publish a manifesto to read. Outside of enriching themselves and maintaining power we actually know very little about our elite and how they interact. For example the claim of a personal relationship between Ford and Nixon which seems true.

During one of the darkest days of the Watergate scandal, Nixon secretly confided in Ford, at the time the House minority leader. He begged for help. He complained about fair-weather friends and swore at perceived rivals in his own party. "Tell the guys, goddamn it, to get off their ass and start fighting back," Nixon pleaded with Ford in one call recorded by the president's secret taping system.

Certainly Nixon felt he was being hung out to dry he expected and did not get the support he needed to bury watergate. One gets the impression that the depth of the relationship between Nixon and Ford was actually not all the well known.
In the case of Nixon the decision of inaction and the later positioning of Regan to go against Ford are the interesting moves along of course with the assassination attempts against Ford himself.

And last but not least after living in Vietnam and China I've got no expectation of some sort of control existing at the top there is no morality at that level except at the individual level. There are no real limits just simply powerful people blocking the moves of others for their own reasons are more often then not not blocking certain moves. I'd argue for example that today in the top leadership of our country exist many people that would be very willing to accept leadership if democracy was dissolved and martial law instituted. Does this mean a conspiracy as often portrayed ? No not really thats just in my opinion the reality of the situation. Now given the right circumstances and decisions to block or not block certain actions I suspect many will be stunned at how fast this underlying potential could be harnessed and turned into the truth.

Its much easier to see in the so called communist countries where the leadership does not really hide and obfuscate its intentions they are far more transparent and quite open with their people. Surprisingly I found that it was much easier to deal with the communist regime in Vietnam then our own government as the decision maker was not hidden behind a wall of bureaucracy. They acted and took responsibility for their actions at a very personal level. I'm by no means saying they were good or bad just simply direct and thus easier to comprehend. The majority of the time your dealing with a direct aid of the final decision maker.
Once you see this it makes it much easier to understand our cloaked government you know what the direct channels are and you can see the maze of indirection that can only be bypassed by working with a lobbyist.

Laugh if you will but my own experiences where very humbling I've at least got some understanding of the absolute power available to the highest levels of government and this was in a two bit dirt poor third world country. Its tough to imagine what capacity lies beyond the curtain if indirection in the US. We are not privy to the inner circles of power in our own country. But I simply cannot see that these people have limited their power vs the government of Vietnam. Hide it sure but limit it not a chance.

So yes in a lot of ways its as bad as the tin foil hatists say it is but the mistake they make is pretty simple but guts most of the theories since the organizational structure is fundamentally different from that required to support tinfoilist and is effectively based on your typical terrorist organization with loosely coupled cells or better maybe fluid couplings. The Cabal does not exist.

By that approach, perhaps Nixon was sent on his way out for creating the EPA and detaching from the gold standard and supporting ERA and integrating the schools via busing.

Well, I don't buy any of this stuff.

L. F. Buz Ivanhoe on reserves and resources. 1996.


I of course get exactly the same result as Ivanhoe as far as production goes however the economic model that enabled this sort of profile is becoming clearer.

Before you dismiss it think about the implications of a infinite growth economy the chances of it being conservative with its exploitation of raw materials is zero. Ivanhoe's result which I effectively adopted is the natural outcome of a aggressively driven economy. Look at it this way obviously from the financial perspective given the debt loads we have effectively stolen the economic production of several future generations to do this its sensible that we would have also managed to take the resources they they would have used. Otherwise the system simply would not have worked. Once you set up the magical finance system and everyone buys in its powered by the underlying ability to aggressively extract raw materials at and ever higher rate even as EROEI falls. This is simply a variant of the economy of scale which works until it does not.

When it finally fails if its resource constrained you have effectively nothing left as the engine overshoots near the end as debt expands rapidly. It has to overshoot it has no choice therefore absolutely no way are the remaining extractable resources even close the the levels generally estimated.

Whats critical to understanding this is once you reach the overshoot condition the remaining resources are no extractable in the resulting declining economy. As Gail points out we will simply not try to extract as economic contraction makes them unprofitable. However that does not mean cheap prices as its a credit deflation not a cash deflation issue. Resources become unprofitable because of lack of debt financing across the entire economy and the use of cash simply makes no sense. Better to simply allow existing production to decline at its accelerated natural rate since its close to exhaustion anyway and take the profit.

Thats not to say that the model of rising prices followed by economic contraction and falling prices is not viable simply unlikely for a number of reasons the obvious one is if we are in the situation outlined by Ivanhoe production is falling so rapidly that the economy simply cannot contract fast enough to offset rising prices and still work within the infrastructure created on the basis of oil being a small percentage of GDP ( debt inflated or not ). The system is intrinsically simply not designed to fail gracefully under these conditions. Next of course thats not to say it won't deflate dramatically but almost all of this deflation is initially concentrated in debt default and falling luxury spending this eventually does not result in falling oil consumption as oil consumption is tied to the infrastructure design not the amount of excess wealth or debt that drives the excesses of the economy. Effectively even before it can really collapse to its high structural limits most of the debt has to be defaulted on.
Given that the money supply is infinite the only way to force the system to collapse if for oil prices to rise to offset attempts to infinitely expand the money supply to offset the collapse of the credit system.

Given that every attempt no matter how insane will be made to try and stall the collapse of the credit system we can't even move as fast as we could to move away from oil.

Yes eventually you do actually hit the final ceiling where the existing infrastructure is simply abandoned and demand is withdrawn as oil is eliminated from the economy but you only hit this after the fiat/fractional banking system has finally collapsed as long as it remains you can't get on with the business of abandoning oil. Obviously in the end the infrastructure financed by the fiat money is devalued to zero and thus its collapsed the game ends when we no longer attach any value at all to infrastructure that requires cheap oil to have value. The price of oil has to rise until we are literally forced to give up and allow the natural collapse and transition to take place. I assert we cannot play games and beat the intrinsic situation its impossible.

I of course get exactly the same result as Ivanhoe as far as production goes however the economic model that enabled this sort of profile is becoming clearer.

Do you mind sharing your result? Ivanhoe sketches a peak with a cusp that is concave upward on both sides. I would like to see the model that would generate such a sharp discontinuity. No plateau in sight.

Then again likely that curve was just roughly created via a french curve and he may not have a real model.

Funny you mention french curve. Effectively the same as using a bezier fit he was French also :)

Bezier worked as an engineer for a french automaker. To satisfy the needs of manufacturing, they needed a way of describing a curve exactly at every point. In those days, engineers sitting at drafting tables would would mark a starting point and an ending point of the curve they wanted, then pulled out a french curve and drew an approximate best-fit curve.

At the machine shop level, these best fit approximations were not good enough. In order for pieces to fit together the parts could only vary within certain tolerances, many of these approximate curves were outside the tolerances. By 1960, hardware became available that allowed the machining of 3D shapes out of blocks of wood or steel, known today as CAM or Computer Aided Manufacturing. Computer graphics was still in its infancy at the time, so designing a method of describing any curve you wanted was of utmost importance.

Bezier had to come up with a method of describing a best fit curve that would be easy to use and exact enough to meet the demands of manufacturing. Unfortunately, no mathematics existed at the time to do the job adequately(1). After numerous schemes, he came up with a method of describing any 2nd degree curve using only four points.

Pretty cool stuff actually. However I can fully understand why no one would ever believe such and approach is valid. I just said its effectively the same curve as Ivanhoes but with three bezier splines to fit and a physical interpretation of the control points. The curve itself is not so important outside of course the obvious steepness of the final decline whats important is effectively the same reason that Bezier used to create them in the first place. Its the fact you need three and how the control points relate where the real information lies. For effectively all the same reasons it solved the precision engineering problems of complex curves in Beziers day. Its the minimum information required to model a collapsing complex system.
I.e the control points are sufficient no more and no less.

Just like its all you need to precision machine a complex curved part its all you need to know to understand peak oil. The biggest problem lies in deciding that three are required once your happy with that decision then your done. In the case of oil the pre 1980's ramp up was easy to understand. Reasons for and eventual crash are understandable if debatable. It was the period from 1980 to 2000 that turned out to be the real problem and the key to understanding the solution or the constraints on the control points for the three curves. Again the curve itself is nothing more than Ivanhoe's its never been anything different. I'm not sure that it even makes sense to model the finer grained details as they require the ability to split into even more beziers not that it can't be done but just figuring out three was a pita.

Given that after 1980 public numbers for world production seem to be highly distorted using just the three curve fit its tough to go forward.

For example right now its impossible for Saudi Arabia to have actually cut production to 3mbd.

The simple model forces production from them to be steady in the 5-6mbd range over the entire time.

Thats a heck of a lot of oil right there and I'm pondering the implications. If you simplex accept that KSA actually pumped 2-3mbd more than they said they did for decades that makes things very interesting.

Also I've looked at oil prices i.e demand vs supply and what sort of shortfall is needed to really drive up the price of oil. The result from that approach is a 500kbd to 1mbd shortfall is more than enough to substantially increase prices 2mbd for sure thats like the entire world going without oil for 1-2 weeks.
Depending on the overall supply levels when the shortfall happened.

Looking back at the recent history before that time.

The Arab oil embargo had a tremendous effect on prices and its tough to even find it on the official production graph.

So already if the concept is correct its setting on one hell of a fascinating piece of information if true.
And even cooler goes a long long way to explaining some of the support for creation of a fiat money bubble fueled by high oil prices. If correct then not only where they high but day in and day out for decades 2-3mbd of Saudi oil was effectively being sold as hot oil with the proceeds disappearing directly into the highest levels of the worlds rich and powerful. Sure other similar schemes may have happened elsewhere in particular the post collapse Soviet Union reported production figures also are simply not plausible for the same reasons again no matter what I do production was higher post collapse by again 2-3mbd.

So no far how I set it up I'm left with these two fascinating bombshells but they go a long long way to explaining a lot about how our strange economic system may have actually worked.

The power petro dollar. Given that in general for US geopolitics we tended to favor the corrupt regimes that sent oil oil or other resources I can't easily rule these out as being something the US would not do on political grounds.

Given the model is really just a geometric exercise that leverages concepts about information I was surprised this popped out but once it did I've been unable to figure out a way to push it back into the box.
I've wondered of course about this for a long time and posted on it a few times how much hot oil has really entered the market over the decades ? To have this result literally pop out to answer this question with such large numbers implies I'm completely crackers or managed to do something cool.

And boy does it explain lots and lots and lots of things. Why did the US suddenly become so complacent about oil supplies ? Thats just the tip of the iceberg all kinds of information suddenly makes tons of sense.

I'll never look at the word petrodollar in the same way again.

Bezier is pure curve fitting that a retarded monkey could do. The beauty and ultimate danger and fraud of naive curve fitting is that the underlying mechanism is totally independent of the use of the interpolation procedure. I suppose we can also model global warming trends with this approach. After all, ordered temperature data act as control points too, no?

Face it, all that a bezier does is make the curve look pleasing to the eye. You are seeing the equivalent of shapes of animals in the clouds if you believe that it explains anything. We might as well take up numerology if we start going down that path. Suggestion: try applying it to the curve of the Dow Jones or S&P 500 and see how fast you lose your money.

arps described a 3 segment spline for analysing oil production decline. arps method was a graphical technique, but is easily done mathmetically as well. this was published in 1945. (1)

(1) Arps, J. J. "Analysis of Decline Curves", trans aime, v 160, p 28, 1945

Yet, the Arps hyperbolic decline interpolation technique is likely based on some fundamental underlying assumptions. For instance, I have found that hyperbolic decline comes about from a dispersion of exponential declines.

So if I am referring to the same Arps technique that you are, I think it is a little more than just a garden-variety spline technique. That doesn't answer the question as to whether Arps or anybody else has sufficiently explained why it works, other than as an empirical match.

Compare this against what the bezier curve offers .. which is basically naive curve fitting.

Exactly !

The question is what if its not naive ?

Thats whats so cool about it. The fitting itself is trivial. Whats important is if the rational used to decide how to fit is correct i.e our economy was driven with Saudi Arabia being a critical control point via its swing producer status and thus able to artificially inflate the price of oil. Resulting in development of marginal oil resources far sooner than they would have otherwise been economical to develop.

There are of course other control points and they are all constrained by their relationships but for oil this is the kingpin or fundamental control. And if it was done correctly then we will beyond a shadow of a doubt see oil production crash.

Thats all thats important for oil. The surrounding economics and moves are really secondary as this is in my opinion the key stone and the rest follows.

This turns out to be the absolutely central driver for the worlds economy after 1980 and if it has been ripped out i.e failed then a final crash is certain across oil production and the rest of the economy that evolved to support the in effect artificial economics that existed right until a year or so ago.

Either this conclusion is correct or its not bezier fitting just happens to allow and easy route to identify and understand this at least for me.

Obviously given this critical piece once you assume its true all kinds of secondary information can be reinterpreted and its role understood. Its not critical like the above and you don't really have to use my method just understand the result and its implications.

And whats really interesting is how the entire construct or false economy of the last several decades rested on the simple differential of a few million barrels of cheap oil held off the market in a secretive kingdom in the desert. Talk about building your house on sand.

You bring up the idea of control points.

Well, in control theory, the two important aspects are observability and controllability. You have perhaps a potential germ of an idea, but you have not proven that any of these parameters are observable. And without a tangible set to work with, you cannot control them and therefore test your model. It becomes essentially a hypothetical exercise.

In other words, the lack of observability makes it impractical to apply. I am sensitive to this because I got asked a variation of this question on my PhD qualifiers. I think I faked my way through an answer.


You nailed it. Thats what I was saying all along its a hypothetical exercise with the difference being if I correctly constrained the magical unobservable observables which are these control point of uncertain dimensions much less controlling equations.

Given this exercise I can generate a number of effectively unprovable statements based on educated guesswork on what the constraints are. However only one solution is possible. So the vagaries of the method don't really matter all that much.

The result is simple regardless of how stupid the hypothetical construct is if it was properly constrained then oil production is crashing. Most of the evidence or constraints outside of the requirement for a swing producer are outside of the realm of oil production and economic and political. Only one is related to real oil production and the relationship is some difficult to determine spare capacity level almost entirely controlled by Saudi Arabia. Its oil production that was intentionally time shifted for political ends that throws the monkey wrench into traditional peak oil theories. They break down because the worlds largest oil producer played a different game for different reasons that had absolutely little to do with the worlds natural endowment of oil whatever the real number is. The fact they where able to play this game leads back of course into working out the constraints but its just a logic cycle that can readily be followed given just this one fact no more are needed to refine the system and get a single result.

The bezier trick just happens to be the write way in my opinion to express this mathematically. The fact my real life work is 2D graphics aka good old postscript is why its very natural for me to adopt this concept when faced with a tough problem its what I do for a living. In fact about four or five weeks ago I spent quit a bit of my time working through ensuring that 64bit doubles worked in my graphics system simply to ensure that it also worked to develop CAD based designs for engineering instead of using floats which are fine for screen graphics. Its amusing that I literally just recently to the effort to ensure that I was C&C machining compatible with my work. Obviously I am a expert in this area so I understand the esoteric details of it. Aliasing and antialiasing single stuff come in in spades for example. There are fundamental connections between bezier curves and signal processing.

The problem is of course you have to say screw math and trust your instincts to develop the constraints its not really a math problem but a logic problem working through what your truth set is and whats cause and whats effect and what real and whats fake. The biezer is simply a tool that works well as a sort of construct for creating a truth set. Its very natural when using this approach. But what your really doing is leveraging the human ability to do partial pattern recognition which very convoluted visual cues. We have amazing accuracy in this that traditionally stomps most computers esp motion sorts of problems.

All I'm doing is sort of redirection this natural computational ability to see what pops out I'm just playing hunter with the rare glimpse of the prey and small clues.

Thus this truth table is simply a image and if it locks in and becomes self reinforcing i.e all kinds of facts start falling into place then its either correct or a really neat way to get the wrong answer.

If of course I'm right then the methodology is valid and it should be explored in the interim of course any scientist should readily dismiss it. Anyone that actually really hunts animals knows exactly what I've done and won't dismiss it out of hand. And its really funny that I used to hunt and fish a lot as a kid. I'm actually a really good fisherman which given you can't see below the water is itself interesting. I'd argue my success at fishing and being one with the fish is why I'm not against such strange approaches.

Most people I fish with hate going with me because I fish circles around them. In any case its this sort of innate skill we have with our brains that can when properly constrained develop a solution out of lots of almost random information.

Of course as you know we generate a pattern out of anything but just because it will generate a pattern out of randomness does not mean its and incorrect approach if constrained.

If the filters are correct then the answer is correct and I think I've posted enough telling you to look at KSA and the real effects of them withholding production as the key to understanding our future.
You free to assume this is true and stuff it into the more physically based shock model but include the 5mbd error term thats the second important result. And all you really need to know.
This tea leaf reading methodology to figure out the right answer is really not relevant until later on if I prove to be correct only then does it make sense to come back and really think about it.

Its something that you will just have to wonder about if I'm right lots and lots of neat mathematical implications hidden if you choose to look.

But I've given you the answer the key the holy grail whatever you want do with it what you will I'm basically finished and have solved the problem to my satisfaction and within the bounds of what I think is possible. A few details I'm still mulling over but nothing at all important any more.

Obviously this "fundamental" approach is closely related to technical analysis used by many that trade in the markets. I'm now actually moving to ponder the significance of this. I'm done with peak oil theory and starting to think about more general problems. Have fun and I'm waiting with the rest to see if I'm right.
Knowing probably soon if I got it right or wrong will go a long way in helping expand the concept.
I'm for the most part waiting on experimental proof with everyone else as I think about expanded variants.
For oil I was focused of course on the truth but with the markets a faux control point that "evaporates" seems to be required and of course makes the problem unsolvable plus of course scaling issues in spades and no way can you do this sort of trivial fitting with a market even a simple look at an market movement indicates a number of curves at a number of scales are at play. Its too hard a problem to actually solve but should keep me occupied. Partial solutions might be possible even though a total one is not so ...

2D and 3D Bezier curves as used in graphics applications are meaningless for any domain outside geometrical graphics. There is nothing that distinguishes the X, Y, and Z dimensions, except for anisotropy. I can tell this because you mention CNC milling, and that is PURE geometry.

What we are dealing with time as one of the dimensions, and some quantity as another dimension. It is definitely not spatial vs spatial. I won't try to follow you in any of your arguments, as I also do quite a bit of 3D graphics rendering work in my profession and, frankly, I don't think any of this applies. When you have a hammer, not every solution is a nail. And I don't think I NAILED your argument because you changed direction on me. I have no idea where you are going with any of this.

Opps one more really important conclusion. If my model is correct then illict oil flows are huge on the order of 2-3mbd or probably more correctly where.

And statistical error in global oil production of about 2mbd or so has been shown a few times on the oildrum if the illicit flows add and additional lest say 3mbd error then your talking and overall error term of about +/- 5mbd. And thats just a rough guess. Needless to say with and error that large you can pretty much make any curve you want using the data.

With a magnitude of 10mbd your talking about more oil than exported by any single exporter. However given the nature of oil esp with my model its really just a 5% error or so and thats not unreasonable depending on how uncertain you think the data is.

Enough to make the truth effectively impossible to deduce from the published data but given in my model that was itself and important part of the model its not surprising. Very very few people would know all the details of all the variations and gyrations of actual oil flows in fact I would not be surprised if no one actually has real numbers. Some maybe better than others but generally given the nature of the accusation it makes sense that even people that are aware of the scale of illicit flows may not actually know the values all that well.

I don't really know what to do with this conclusion except that again its interesting to realize that the fog and uncertainty surrounding global oil supplies is probably this high. Certain above ground events suggest that at certain times the numbers where close to the truth but thats pure guesswork trying to figure out if they periodically converged on reality from time to time. Even though the room for variation is large that does not mean it was always obfuscated. Regardless any attempt to model the worlds oil supply that depends on accuracy much higher than +/- 5mbd or so is probably pissing in the wind.

Given the resulting incremental differences in overall production from this sort of error determining URR from production can be way the hell off over several decades its on the order of several hundred GB's.
Your talking about the entire production of Mexico or even the US to give you a sense of have large the incremental error could potentially be. I think its of course less than this but its big enough to make any attempt of using the public production numbers to guess URR a fairly hopeless task.

Thats not to say you can't use secondary information esp economic information to refine your approach but thats just drawing French curves :)

But the slightly refined French curve method of Bezier splines actually pops out the above error term in the real data. Which is pretty nifty. Again assuming I got my constraints right but it sure explains lots of things esp the overconfidence exuded by the oil industry. Why are they so dismissive of peak oil ?

Well it seems because they have been selling far more oil than they admit for decades at a artificially high price. But just because a lot more oil has flowed in the past does not mean it will in the future.
Certainly it was below capacity by whatever KSA was holding off the market but the amount of oil required to influence price simply is not in itself that large its a marginal barrel. So you have the interesting result that yes we pumped less oil than was physically possible but we also pumped a heck of a lot more than we admit too. Most of this is of course centered on KSA but even outside of KSA the uncertainty is not small.

Whats funny is their view point boils down to there is plenty of oil because we have been ripping you off forever but we can't put it that way :)

So there are all kinds of hidden nuggets of truth floating around in our sea of uncertainty.

And even neater is of course if this model is correct it actually tells you why all the other ones are wrong.
Thats really cool.

Of course we will just have to wait and see how events unfold over the next 12 months but if I've got my constraints correct no way we are not going to see so big events soon that make whats happened to date pale in comparison. With the model we have to be sitting on a powder keg right now with a lit fuse.

how long will it last before we have to face the reality of a return to coal.

?? Given the abundance of wind, solar, geothermal, hydro, wave, nuclear, and other energy sources, I don't see that there is an "reality" to assuming we will return to being chained to coal as a predominant energy source. There are scenarios where this could happen, but there are several other scenarios as well where it doesn't. If Cap and Trade goes through, even in a weakened state, coal will play a steadily decreasing role. is hard to find current technologies, even at cost equality, that can provide a replacement for coal as oil and natural gas supplies run down.

Totally disagree. In terms of cost equality, wind, passive solar, and solar hot water (to name a few) are right up there with coal and gas (even more so when carbon caps are considered), so it's unclear where you are getting your data from. To understand the difference in costs, one needs to understand all the variables that come into play. See 6 specific cost scenarios at the link below, starting at page 26;

Every day that I teach I walk under one of the wind turbines that we have on campus. It is rarely turning. The prof running the program has pointed out in his presentations that it would take decades to pay for with the wind volumes that we get in this part of Missouri. Similarly we don't get enough sun. (See the map of renewable resources) There are many places that face the same problems.

Just saying that things are so does not make the statement correct. At the volumes that are needed (you might try calculating how much space is required to generate a million barrels of oil a day from algae - and we are talking at that level of production) the current resources that are realistically available is finite. The number of places, for example, to put wind farms in California is finite, without significant public opposition.

Those who are responsible for ensuring that folk have power cannot be other than conservative in their assumptions as to what will be available over the course of the time that they build the new power plant and then run it long enough to repay the investment. And if they weren't then they might not be able to raise the money to get the plant erected. Power plants take time to be built, and postponing their construction (vide Kingsnorth) may well deny power down the road to folk that need it.

Every day that I teach I walk under one of the wind turbines that we have on campus. It is rarely turning. The prof running the program has pointed out in his presentations that it would take decades to pay for with the wind volumes that we get in this part of Missouri.

Simply because a wind turbine is not placed in a optimum location does not invariably discount wind generation for locations with good to outstanding wind resources. It's almost like I walked past a junkyard and concluded that all cars were junk (though they may be soon enough). Simply looking around you and using that extremely limited perspective to project to the nation and the world is far too minuscule of a context.

Similarly we don't get enough sun. (See the map of renewable resources) There are many places that face the same problems.

There is plenty of sun for solar hot water, solar PV, passive solar, and active solar. You simply made an unsupported pronouncement. Throwing a map link in proves nothing.

you might try calculating how much space is required to generate a million barrels of oil a day from algae

Easy. At a conservative 3000 gallons per year per acre (5000-15000 are now being estimated), that's 8.22 gallons per acre per day, or 0.19 barrels per day. To reach 1 million barrels of oil per day would take roughly 5 million acres, or 0.2% of the US land area. With greater yields, that percentage drops proportionally.

I have no problems moving forward with construction of wind, solar, geothermal, hydro, nuclear, and wave power stations, so the rest of your post is not applicable.

The reference to the map takes you to a site that shows the wind intensities around the country. (And in a different page the solar isolation) My colleague is quite knowledgeable about what works and does not, and the issues of siting. Whether the wind is blowing or not does not require an advanced degree to observe.

Some years ago I put passive solar water heating on my house (black plastic tubing) as part of a building modification. I also put tubes under the concrete in the addition, installed a wood stove, and a number of other modifications. I instrumented the whole thing with thermocouples and ran it for a year in a number of combinations, and a graduate student at the time (in another department with a different advisory committee so that there would be no conflict of interest) then looked at the investment relative to the payback, and he concluded I would never get my money back in savings on my fuel bill. (Missouri has one of the lowest prices for electricity in the nation, partly because 85% of that energy is produced from coal).

I don't accept the argument that 'you would never get your money back'. I've seen it said of photovoltaics that they take a century to 'pay for themselves', and so on, but as a financial decision it does not depend on today's energy price, it depends on one's perception of tomorrow's energy price and tomorrow's PV (or whatever) price. It also depends on one's attitude to risk - the payback might include increased energy security. Furthermore at an individual level maybe the 'greater fool' theory holds here - I will spend more on renewable energy than it is really worth because I know someone else will also overvalue it.

My colleague is quite knowledgeable about what works and does not, and the issues of siting. Whether the wind is blowing or not does not require an advanced degree to observe.

Who is your colleague and what information do they bring to bear? Please provide one of his/her publications so that we can evaluate their data collection and analysis. Granted, Missouri doesn't have much in the way of good wind locations, but you really must get out more often.

Whether the wind is blowing, how hard, and when DOES take more than walking outside and putting up a wetted finger. See the wind map for more information.

So you made a particular design without assessing the payback first and this is supposed to somehow prove that renewable energy can never have a payback?? It's a good thing you have tenure...

He concluded I would never get my money back in savings on my fuel bill. (Missouri has one of the lowest prices for electricity in the nation, partly because 85% of that energy is produced from coal).

He concluded that from...current prices? There is certainly a price-point at which you would get your money back, it's just a question of whether energy prices will get there.

(And what do electricity costs have to do with your fuel bill? ;-) )

The only way that any alternative energy system should be evaluated is in how many BTUs or Joules or(you pick the unit of energy) it "costs" to build and install and maintain in it's final end use location verses the amount of energy in equivalent units it generates over it's service life.
Very easy to find a break even date in those terms.
Everything should be evaluated in terms of energy costs from now on.

In principle, I agree. But unfortunately what you're talking about is a lot harder to actually do than calculating the financial aspects. See Jeff Vail's recent series here on EROEI, part 2.

IOW, the questions I asked about HO's installation are still relevant and interesting regardless.

So the real bug in the ointment is the overall cost of power transmission over distance. Many vast areas with incredible wind or solar potential are also incredibly far from the areas than need the energy. It will likey be a long, long time (at some point-assuming some sort of BAU and unforeseeable improvement in power transmission technology-the cost curves of the two will cross) before we can transmit the generated power near as cost effectively as we can now transmit the energy stored in fossil fuels. In the meantimne we will continue to burn it baby burn it, which of course could preclude a long enough BAU time span to allow the two curves to cross.

I assume your grad students analysis of your payback assumed a fairly constant rate structure. I'm also assuming your analyst determined what the cost of power would have to be for your investment would have been returned in timely fashion...would you care to share that information with us as well...

Thanks for the link good info

One short fall however, unless I missed this the report fails to take into account a major cost factor issue.

The report assumes that cost are based on current resource prices and fails to take into account that as a massive build out takes place it will greatly increase demand and therefore cost.

Agreed, though an increase in demand will proportionally increase competition.

So a major increase in the demand for copper will result in more competition which will keep prices down? Am I missing something here? Increased demand on a declining resource will drive prices significantly and increasing higher.

Do you believe that copper will be the limiting factor in a renewable energy buildout? Please explain.

You need copper for transmisson lines. Of course a lot of copper (and energy) could be saved with solar street lights.

I just used copper as an example. I see copper as one of many limiting factor but not the limiting factor. The limiting factor will be energy to power the build out.

True there is no shortage of copper but only a shortage of energy to refine and concentrate the copper into a usable product. As copper ores get increasingly of lower and lower quality the energy needed to process gets greater and greater and at some point the copper needed to make the windmill will take more energy to produce than the windmill will ever produce in it's entire lifetime.

Sure maybe we can find a substitute for copper but this something will also likely run into this same issue. So will all the other components needed for the build out. It all comes down to a EROEI issue.

It not just wind power, its any BAU fossil fuel replacement. How much energy production can be put into place before EROEI issues force cost above realistic levels? Wild guess 30 percent. Really I don't know but this is a major issue that needs to be addressed.

in the broader sense energy does limit copper supplies, no question.

But in the day to day sense ,we have energy invested in heavy industrial plant and equipment out the ying yang that can to a lagre extent be diverted to copper mining -housing construction ,automobile manufacture , road building, and so forth are probably going to decline.
The giant trucks , bulldozers, gravel plants, and so forth can probably haul and crush copper ore as easily as rock and dirt. Stone for manufactured gravel is most likely at least as hard to pulverize as copper ore.
Aluminum can also be successfully substituted for copper, if properly installed and sized.

Between these declining markets and increasing need for the hvdc long distance lines I think we can find the copper and steel needed to build them.

Will, you have to think Logistics.

The LONGNOW foundation had a AWESOME Talk about all of this. I just watched last night.
I -BEG- EVERYONE here to take an hour and suck all this info in. DEEP stuff, and a --GREAT-- talk.Even if you disagree with some parts of it, its VERY thought provoking!

Watch it for free:

That's interesting, just last night I was thumbing through Greg Benford's Deep Time : How Humanity Communicates Across Millennia, which is centered around the Long Now foundation's work. Great book.

Logistics are behind any projected solution to future energy generation, so it applies to coal as much as wind, solar, etc. Coal simply has a number of other issues that must also be addressed.

I'm actually a longnow member, and Brand is giving a presentation tomorrow night-
I have some issues with Brand.

The problem is that on the cost curve (and production curve), people will wait as long as possible with the hope that they catch the "economics" just right...not likely to happen. How many people do you know (like me) who pulled all of their money out of stock funds before the crash came.

There is another insidious, yet important, point that I make when advocating for longer term thinking for things like wind and need sources of high entropic energy to initiate and construct these technologies.

Although it's been a couple of years since I've done this type of demonstration, I used a one meter square shallow box to illustrate this point for a PV panel where I put sand, coal (for a reducing carbon source and possibly an energy source), other rocks (for source ores), and some oil (for the necessary organics) into the box and just set it on the table. I was telling people, at the time, that the energy payback time for the PV had improved dramatically as the technology of the multi-layer thin cells had improved and the energy payback time from older inefficienct cells had dropeed from 32-40 years, down to a range from 900-2500 days (still nearly a range from 3 years up to 7 years, but a vast improvement).

The point was, I could take that one-meter square box, put it out in the parking lot so that the energy of the sun was shining on it every day for 900-2500 days AND the materials would not spontaneously assemble themselves into a PV cell. You had to have energy and alot of it concentrated at the front end of the cycle to fabricate a useful energy production system.

Waitng too long gets you into a real compettion for energy resources.

I agree, now is better than later.

I might point out that the summary of the report you link to says:

Wind energy has become increasingly competitive with other power generation options. Wind technology has improved significantly over the past two decades. CRS analysis presented here shows that wind energy still depends on federal tax incentives to compete, but that key uncertainties like climate policy, fossil fuel prices, and technology progress could dominate future cost competitiveness. (Emphasis added)

Since mid-2008 (when the report was issued), prices of fossil fuels have dropped, making the comparison worse. Debt availability is worse as well. Without a large amount of debt, it is hard to see wind expanding.

I think Heading Out was particularly talking about places like Poland and India--poorer countries that don't already have a subsidy in place.

One quote in the report says, "The PTC is set to expire on December 31, 2008", so obviously the authors went through a lengthy period of data collection, analysis, review, rewrite, and then the final publishing cycle. Hence, we can be sure that the energy prices were not at their June 2008 peak, but some number of months before that. Oil is above $70 now, and gas is low due to a down economy, but solar and wind systems are also at low prices, so we can consider this a wash. However, the report does quite effectively show that wind is in the ball park when compared to coal and natural gas. I would also point out portions of the document that you chose not to emphasize, namely "key uncertainties like climate policy, fossil fuel prices, and technology progress could dominate future cost competitiveness", giving wind and other renewables an advantage.

I think Heading Out was particularly talking about places like Poland and India--poorer countries that don't already have a subsidy in place.

I have a hard time believing he was referring to those places.
Indian Wind Turbine Manufacturer's Association
Wind farms in Poland

That statement should be corrected to read "wind energy still needs subsidies to compete with heavily subsidised competitors like coal, oil, and nuclear.

The cost of wind and the vast majority of current PV installations have one major problem, they don't overlap demand, they can not be dialed up or down based on demand. Some forms of passive solar do, a trombe wall can if it is well designed, solar water heat always does, and for space heat the solar "radiant" sytems do as well. I'm not sure if you classify the products like solarsheat as "passive solar", but this very fast growing niche also suffers from not overlapping demand. I use all of these including wind to attempt to offset grid use, and do it successfully on my farm; however, without a dialable source for the base load (heavily modeled for years) we will be stuck with coal forever. As an engineer and more focused on the mid-atlantic and northeast in experiences, I would like to see some reasonable 5 year steps to reduce the use of fossil fuels that would include incorporation of fast payoff technologies at first moving to some more medium term ones. Obviously the fastest return is going to be conservation, but moving from there from my research and experimentation I would place solar water heating and passive sheet based solar space heating very high on the list. I believe that Arizona next year requires all new homes to incorporate solar water heating, bravo to them, this is something that should be emulated throughout most of the US. Following that would be solar radiant heat in my mind, in the Northeast the amount of fuel oil used to heat homes is amazingly high.

Now, somewhat controversially, I would bring up biomass heating+ at the same time as solar radiant heat, my limited example (on my farm) is my outdoor furnace complete with catalytic converter which provides all the heat I need, how water etc from the limbs that fall down on the farm. My Township has thousands of tons of woodchips put into their dump every year, so I am now installing a wood gasifer to finally close the door on grid usage (and all fossil fuels) by connecting it to a diesel generator and using it as the "grid" at night (the only time I have demand issues, approximately twice a week). At this dump site the township is soon to install a 5MW solar system, my hope is that eventually someone will have a packaged biomass burning plant that they could add to this site.

What you say is true for wind, but is not the complete picture. Up to 20% grid penetration by wind is doable now;

The PJM system is so large that we will be able to integrate a good deal of wind into the system without operational difficulties, and the wind generators them-selves are carrying costs associated with their variable nature. Smaller transmission systems have studied this issue and found that, at levels below 20 percent penetration, the costs of integrating wind generation are a small fraction of the value of that generation.
-- Karl Pfirrmann, Interim President and CEO of PJM Interconnection (PJM). PJM is the organization that operates the grid for the entire PJM region that includes nearly all of Pennsylvania and much of 14 other states

PV output does overlap demand by a majority percentage. Solar concentrating systems can store their energy to be dispatchable.

I agree with your points on solar hot water, passive solar, etc.

Agree with your criticism overall, especially re. solar thermal.

Assessment of Parabolic Trough and Power Tower Solar Technology - Cost and Performance Forecasts - Sargent & Lundy LLC Engineering Group Chicago, Illinois

For the more technically aggressive low-cost case, S&L found the National Laboratories’ “SunLab” methodology and analysis to be credible. The projections by SunLab, developed in conjunction with industry, are considered by S&L to represent a “best-case analysis” in which the technology is optimized and a high deployment rate is achieved. The two sets of estimates, by SunLab and S&L, provide a band within which the costs can be expected to fall. The figure and table below highlight these results, with initial electricity costs in the range of 10 to 12.6 ¢/kWh and eventually achieving costs in the range of 3.5 to 6.2 ¢/kWh. The specific values will depend on total capacity of various technologies deployed and the extent of R&D program success. In the technically aggressive cases for troughs / towers, the S&L analysis found that cost reductions were due to volume production (26%/28%), plant scale-up (20%/48%), and technological advance (54%/24%).

Given Sargent & Lundy Engineering's worst case scenario provides peak time solar electricity at $0.062/kwh by only building 2.8 GW and doing a few minor and definitely achievable R&D improvements, plus transmission, and a clear path is provided to offering 83% capacity factor using cheap sand and gravel tanks for thermal storage with 3x collector area and no additional central plant, which should make the installation no more expensive PER KWH if only the industry can get to 2.8 GW installed, I don't see what we are waiting for.

It also appears to me that the more agressive forecasts of NREL / SunLab of $0.035 / kwh if we can get to 8.2 GW installed quite quickly is entirely within reach.

Would just note that the stated 20% penetration possible for wind (without heavy load management, a viable option agreed but another huge project) is nameplate rating, eg. only perhaps 7% to 10% net energy generated.

I spent several hours in meetings yesterday with potential investors in the renewable energy company we are capitalizing through private equity funding. Their current business is carbon capture and sequestration technology development. In the course of the conversation, they placed a cost of $60.00 per metric ton on carbon capture using best available technology.

A couple of years ago I looked at the life cycle cost new coal plants using a $70.00 cost/taxation metric and concluded that over a thirty year life cycle, current technology solar thermal and wind energy is already far less expensive than future coal. Could be the reason why no new pulverized coal plants were being funded here-- even before the Wall Street derivatives Ponzi scheme collapsed.

So I suggest you take a look beyond the motionless windmills on your campus before implying that wind turbines are simply devices to capture subsidies rather than energy.

David Mills of AUSRA has pointed out that an area 90 miles x 90 miles in Nevada could generate enough solar power to supply the entire national needs. Mining and transport of coal currently occupies a land area this large, so the notion that there isn't enough suitable land to power the nation from wind, solar, tidal, hydro, (and natural gas for peak loads) is a red herring.

I did not, and do not, consider that wind turbines are devices merely to capture subsidies. Where they can be erected and operated effectively then they will significantly help towards providing the replacement power that we will need as oil and gas supplies diminish.

However, if you go, for example to the figure on page CRS-10 of the report that Will cites, you will see that the places where the potential for wind energy to exploit an excellent potential are quite limited, and the places where it provides a good resource does not cover large portions of the country.

Those of us who live in those places also use power.

Almost every state in the nation has at least good wind resources - those that don't are next to states or bodies of water that do. Note that this is a 50 meter wind map - wind turbines are now installed at hub heights over 100 meters, reaching even better wind resources. You'll also notice that most areas with high populations have good to outstanding wind resources nearby. Those that don't will have access via the national grid.

I regret that I'm asking a lot to take so many hours to watch vids or listen to thing, but I am not entirely sure you understand just how ill prepared "The grid" is for renewables.

"Brookings" had a -NICE- 3 and a half hour talk about all of this. 2 audio files.

Most def worth it. I found it better then ANY gov report or news article that I could link to. I was not sure if I should laugh, or cry wile listening to this. I choose to laugh, but im not insisting that should be everyone's response... lol

I'm completely aware of how decrepit our grid is, and how it is decades overdue for an overhaul. Look at the chart above on the left, where it shows what is existing and what is planned. If we are going to be able to move electricity around where it is needed, then we have to take the steps to plan, design, implement, operate, and maintain the next generation of the national grid.

If you live in Missouri the power you use probably comes from a strip mine in the Powder River Basin in Wyoming. The coal burned to produce the electricity you use was moved by rail by Denny Washington's Burlington Northern railway at a cost per unit of energy four times as high as if the same energy had been moved on a HVDC power line. The fact that you do not have local wind, solar, tidal or geothermal resources does not preclude you from using them in a cost effective manner. Of course we would need a rational HVDC distribution network instead of the Balkanized fiefdoms that passes for a grid system in the US----.

I think your being way to lenient in your description of the US electrical "grid".

At the minimum decrepit poorly maintained balkanized fiefdoms with the natural monopolies intent on evading regulation and sucking out as much profit as they can.

Or something along that line definitely needs to be spiced up. I like to consider that the US electrical grid exists solely to allow the local utilities to play CYA when they really screw up. If they were not so screwed up in the first place they probably would not have ever connected. The concept is to loosely connect a lot of ill maintained networks together to lower the frequency and duration of outages to the point that they meet regulatory constraints. Anyone that lives in the country knows that without the political pressure electricity is a spotty unreliable resource.

Actually no, it comes from a mine in Illinois.

I notice that HVDC seems to be getting a better press these days - is it that much better?

Actually no, it comes from a mine in Illinois.

And wind power could just as easily be imported from Illinois, Nebraska, Kansas, Oklahoma, and the Great Lakes.

I notice that HVDC seems to be getting a better press these days - is it that much better?

Provides the ability to span great distances with little loss.

They are talking about the best available technology for retrofit to existing PC power stations for $60 per ton; basically $50 for capture (including additional fuel cost/efficiency penalty and capital cost) and $10 for transport and sequestration. The price for the best available technology, integrated gasification combined cycle with carbon capture) IGCC-CCS the price today is $25 for capture and $10 transport and sequestration.
The additional cost of $60 per ton looks scary but is misleading IMO.
The cost per kwh is a better measure. For a new PC plant without
CCS the price is $.044 per kwh. For the same PC plant with capture technology the price is $.0771 per kwh, a 75% increase in the price of electricity. If the price of transport and sequestration is added in that would be closer to $.093 per kwh. Of course if it is in sequestered in an Oklahoma oil field it is the recovered oil would likely cover the transport and sequestration expense as it does today in the EOR industry.

The price of PV solar is currently around $.30 per kwh.

The price of new nuclear is insane, around $.25 per kwh.

Electricity is very in expensive in the US about $.1 per kwh versus
$.3 per kwh in Germany, so we can certainly afford CCS.

But CCS is a long way from being perfected. It is not clear it ever will be.

I would add that the $60/tonne is just for the 'CC' part of 'CCS'. Nobody has floated cost estimates for storing carbon once it is captured (that I know of), but with the exception of a few choice locations sequestration will more than double that cost.

Nobody has floated cost estimates for storing carbon once it is captured (that I know of), but with the exception of a few choice locations sequestration will more than double that cost.

Pipelines and carbon sequestration has been done for 30 years in the oil business for a profit(as I stated).
It's called CO2-EOR--5% of US domestic oil production.

I can't believe how people here keep denying well established technology that has operated for decades.


But CCS is a long way from being perfected. It is not clear it ever will be.

Heh...that goes for EVERYTHING.

This is Gail the politician talking.
For an energy site, TOD does very little explaining but LOTS of fretting.

Try this...

But TOD is a long way from being perfected. It is not clear it ever will be.

CCS is going to happen despite the collective misgivings of TOD.

Certainly doesn't "go" for solar thermal.

Assessment of Parabolic Trough and Power Tower Solar Technology - Cost and Performance Forecasts - Sargent & Lundy LLC Engineering Group Chicago, Illinois

eventually achieving costs in the range of 3.5 to 6.2 ¢/kWh by only building 2.8 to 8.2 GW, full baseload reliability (83%)capacity factor using cheap sand and gravel tanks for thermal storage with 3x collector area and no additional central plant.

You are correct in identifying the $60 figure as being appropriate for refit rather than what we might hope for in new plant construction. However, I have seen no credible information that leads me to believe that CC can be implemented at the scale necessary to turn coal into a relatively clean energy source. I attended a high-level meeting in Jackson WY two years ago which included the governor of the state and chairman of the ICCP. Gov. Frudenthal lobbied for an APPOLO scale 12 billion per year program to develop and implement CC technology. When I asked him how long it would take develop the capacity to capture and sequester 50% of the current atmospheric carbon output from coal in the US if his program were funded immediately, he answered, "I have no idea." Imagine that--- an honest politician!

I agree with you Star that we might make great strides in alts replacing FF. But to date very little effort has been made and even less is ongoing today. Yes...alts have increased a significant percentage. But they are still not even a minor component of the load. Not saying they couldn't be but that will take a strong political will which will require a strong public will pushing the politicians in that direction. I personally see very little chance of the public will to make that push today and even less chance down the road when matters worsen. Jusy my opinion, of course.

Not true, IMO. Renewables have already exceeded nuclear power in the US. Solar tax credits were extended in 2008 and expanded to include utilities. But the real game changer is feed in tariffs. Several states (Florida being the first) have now enacted feed in tariffs. What this means is you can put solar panels on your roof and the electric company HAS TO buy the power. Up until this point, the excess power was a giveaway. That's why you see a lot of small systems installed. PV installations should increase exponentially.

conservationist -- yes...very true...that is my opinion. Will I be proven right? I wouldn't waste a breath arguing it. Only time will tell. You're also certainly free to predict what will happen. But todate alts have added a relatively insignificant portion to our mix. And so has nuclear so being better then nuclear isn't much to brag about. Not only do I anticipate alts not becoming a significant portion of our energy base but I see coal becoming an every increasing portion. Not that this is a good thing at all or the way a moral society would approach the problem. But this is my expectation which is just as sure as the sun rising tomorrow. Not a debatable topic...just my expectations with all the hope that I'm wrong and you're right. But I'm not wrong IMHO.

But we have other major players trying to push things a different direction as monopolistic energy firms hammer at legislatures and regulators to make their century plus stranglehold on electrical generation the only path to the future. In August Colorado's Xcel shelved its SURCHARGE for business and residential rooftop solar generation after the public screamed and democrat Gov. Ritter pressured it. Guaranteed their next attempt will have considerable pressure greasing the most influential least affected by public outcry wheels first. Monopoly/oligopoly types don't generally respond in a constructive manner when defending their turf.

The political will we will need to bring the needed changes online in a timely fashion last showed its head in the U.S. during the early 1940s.

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About that CERA graph at the top. If theres one thing CERA have been wonderfully consistant at over the last ten years is getting it wrong. I was just thinking maybe there would be a more trustworth source for getting that information.

I have no insight as to the accuracy, but assuming it's in the ballpark...

It looks like half the world's production is in the ~$60+ range, which is an interesting number to keep in mind when someone declares on CNBC that oil should be at $50.

If we take into consideration the recent articals about 80$ per barrel plus sending the economy into recession then this gives us quite a narrow margin to work in. With the fluctuations in price we have seen in the last 3 years and that have been predicted for the future (whale oil artical), staying in this 60 to 80$ price band is going to be difficult.

Rapid swings in price will see us in a permenant recession and most future projects on hold.

I am puzzled after every account I read of UK coal (not just HO's).
By 1957 it was widely accepted that UK economy could not compete, based as it was largely on coal. The only future envisaged was nuclear power. Then came huge expansion of Middle East low cost oil. (I was working in 1964 on construction of a 1000MW oil-fired power station next to the import terminal in Southampton Water. The facility has long-since been moth-balled.) The oil-price shocks in the 1970s just about unseated the economy and confrontations ensued with the still large and crucial coal mining workforce. (Coal production though had never approached the Peak of 1913, even in extremis of WWII, and post-war mechanization gave only a brief boost.)
By the end of the 1990s most deep coal mining had stopped. I have seen a later Cabinet Office paper (not to hand just now) circa 1999 that massively down-rated previous estimates of coal reserves.

In recent two decades British coal has competed not just with N Sea NG, but with imported coal. Coal still provides about 36% of UK electricity. We import around 50 million tons per year and produce around 20mt and use 70mt, ~75% for electricity. Present production is a very small fraction of the close to 300mt peak nearly 100 years ago. Much of present production is from surface mining using technology that was not available even 4 or 5 decades ago.

I would like to see the full geological description of accessible coal available to a future UK. Even with very low cost picks and shovels or with subsidized strip-mining retaining the use of huge machines I doubt it is there.

The North Sea holds a trillion tons of undersea coal. (Actually 'sea coal' is
what they called millions of tons of coal that was washed up on the shores
from that gigantic deposit.)

Clean coal(CCS) with underground gasification(UCG) are both proven technologies that could work here. You could even use North Sea wind to
split water for the oxygen needed for UCG.

Sadly, this 'no-brainer' is not thoroughly discussed on TOD due to
political correctness, energy illiteracy and groupthink.

maj --I'd be glad to chat about UCG with you. But you'll have to do most of the chatting as I'm not too up on the process. In particular, have you got any current economic analysis of the process? If memory serves it seems as that's where the discussion got hung up: what's technically capable vs. what's economicly doable.

These Aussie guys seem on top of it.

Converted 2000 tons of coal into 175 mmcf of syngas to make GTL fuel(ultraclean diesel).
Assuming undersea UCG recovers 5% of the 1 trillion North Sea coal resource that's 4375 Tcf of syngas(about half of world conventional NG resource of 6600 Tcf).

Bye bye Russia.

Funny thing, lazy money-mad US industry seems content to let the taxpayer do all the heavy lifting with pilot plants, etc.(DOE has done a helluva lot) but overseas corporates do more.

Thanks maj

Trueman's book is a good place to start, since they did a physical inventory when the Government nationalized the Coal Industry after the Second World War.

When I first learned about peak oil, I was convinced that it meant climate change disaster, since I foresaw a return to the coal usage of earlier industrial society. Of course, the likelihood of coal reassuming its earlier central role is dependent on how much coal there is, and I've since been swayed one way or another by various commentators on that subject. But at this point it seems clear to me that there is enough coal to have a significant if not primary impact, if we collectively allow it to.

Those who are focused on resource constraints and limits to growth tend to understate resource availability and those focused on climate change tend to overstate it, but the truth is that resources have their own stories and do not follow the same time frames. Despite what some have said on this site, I think that Heading Out has this correct. The coal age is going to last much longer than the oil age, at the end as well as the beginning.

The good news, I think, is that the fossil fuel resources are available to "bootstrap" ourselves, sooner or later, to a future where real-time solar energy (direct, and in its wind and hydro forms) can supply us with enough electricity to maintain a global civilization which will be more pleasant to exist in than the constant warfare of the past. (And yes, warfare WAS more constant in the past than today.) That's if we, the entire human race, collectively build and maintain enough civility to decide to do that. The bad news is, if we do not make that decision, humans may well have enough coal at our disposal to turn the planet's climate into something closer to that of Venus.

I guess the future is nuclear ....


Where does the energy come from to produce these batteries, and do they even supply as much energy as they take to produce?

current batteries certainly do not as I am sure you would agree

nether the less the future is nuclear , be it fission or solar fusion. not a pancea for all the things that oil provides because - well theres a lot on this site that explains why

to this billy beer barrel ( former joe six pack :) ) all means are needed , wind , dams, tidal, , nuclear , PV and mostly and whats lacking , political will to impliment them . ( espcially the less people bit, somehow )

not looking good so far


(back to east-corri-dale land)

In general reserve estimates need to be made under the assumption of deflation and negative growth. I'll add my viewpoint that under these conditions future reserves are close to zero with only near term commitments contributing zero new development will occur until existing profits are large enough to justify expansion.

Under deflationary conditions resource extraction becomes a pay as you go sort of system as demand contraction and pricing have to be proven to have bottomed out before you expand.

You can effectively throw every single reserve estimate made to date into the dustbin and start over using the new macro economic system.

I've given my answer however its important for others to reevaluate all the assumption that have been made and see what kinds of results they get using the assumption of debt deflation and steady overall economic contraction.

I'd love to see the answers.

In general reserve estimates need to be made under the assumption of deflation and negative growth. I'll add my viewpoint that under these conditions future reserves are close to zero with only near term commitments contributing zero new development will occur until existing profits are large enough to justify expansion.

In a comment above you say that your results agree with Ivanhoe, who says reserves are defined as:
(known) RESERVES + (undiscovered) resources = (unknown) resources

Yet you say future reserves are near zero, which according to Ivanhoe's definition means that the remaining undiscovered resources will forever equal unknown resources. In other words, this means that we will never find any more oil, and the best that we can say is that obtaining more oil is tantalizingly out of reach. Well I don't buy that since we won't run out of oil, just find gradually diminishing reserves. If you believe that we will just suddenly stop looking because the profit is not there, well, that is a very pessimistic outlook as countries do not need profit to keep looking.

As Elwood says in a comment below, we have people on TOD that either believe that current reserves are equal to all the oil that has ever been discovered, or it is nearly equal to zero (as memmel says will happen). Obviously the pragmatic truth is somewhere in between :)

Perhaps I missed it, but three terms are bandied about: (unadorned) "reserves", "estimated ultimately recoverable reserves (EUR)", and "technically recoverable reserves (TRR?)."

So, "reserves" implies "under current market conditions". What about the other two? Does EUR include an allowance for expected price changes?

I guess that TRR would be independent of price, but make assumptions about technology. And to some extent, technological development effort is dependent on expected price. So that would point to EUR and TRR being the same. Or would it?

I'm groping for a question about the differences between EUR and TRR, but perhaps you can sense what it is, HO, and answer it. :-)

Edit: Peace Memmel :-) I'm trying to get a handle on the orthodox, "textbook" version, before we start introducing real-world complications about deflation and economic contraction.

in common usage, the meaning of the term "reserves" (herinafter refered to as big r or R )is variable depending on the meaning the author attaches to it.

in other words, it can mean anything (or nothing). a 1st cousin of b--- s---, but only in common usage. the sec has a very specific definition.

eur means estimated ultimate recoverable(oil or gas). the term estimated ultimate R will apply at one time and one time only, before any is produced. R only applies to future recovery. that which is already produced is not R. sorry to belabor the point, but i see that mistake being made all over tod and all of msm.

technically recoverable R is an oxymoron. trr means technically recoverable resources(R by definition specifically excludes resources that are not economical to produce). trr is a term invented by the usgs, i believe, to describe what they(usgs)believes is technically recoverable without hindrance of economics.

********BUYER BEWARE*********

Thanks for the explanation, Elwoodmore.

Yes, agreed.

Trying to get to the bottom of why this mistake has continued over the years, it occurs to me that it may have something to do with the Verhulst equation, which generates the Logistic curve.

dU/dt = k*U*(Urr-U)

Since the Verhulst equation is a differential equation, it needs the boundary conditions set up at time=0. So this means that, way back in 1860, all the oil had been "discovered instantaneously" and we have played out everything since that time deterministically. Believe it or not, that is what the equation says, and I have a feeling that anyone who reads Hubbert Linearization curves uses this as a shorthand for reserve. Nowhere in this equation does the idea of actual reserve show up and the HL crowd only deals with URR and cumulative production. So Elwood's correct definition of reserve never gets mentioned.

Bottom line is that the important concept of continuous discovery and updated reserves never gets a proper accounting. This miraculous "immaculate conception" discovery at year 0 due to the Verhulst equation has everyone on a tangent and ultimately very confused. I wish Mr. Verhulst was never born :)

that which is already produced is not R. sorry to belabor the point, but i see that mistake being made all over tod and all of msm.

Thank you. This is the most elementary principal to learn if we want to make any headway with the numbers, or do any kind of modeling.

It just might help to call this uncombusted oil (or non-depreciated oil for the financial types :)

Good explanation elwood. Just my personal opinion but I think anyone who uses the term "technical recoverable reserves" should be castrated immediately to protect the gene pool. There are trillions of ounces of gold that can be "technically recovered" from sea water. Will we ever profitably recover a single ounce of gold from sea water? I suspect we can all agree on that answer. The term is more then just useless. It's used to mis-inform, intentionally or otherwise, the public IMO

Puzzling with this.

how we got here.
Don't hang me up on the dates they are way off.

1700ad start of industrialised coal.
First used to mimic human labor.
Perfected into mass movement machines.

1920ad Peak coal in U.S. (keep in mind that coal was needed to get coal out of the ground)

1937ad Oil took over mass movement from coal. Credit with a perpuse starts.

1971ad Peak oil in U.S.

1975ad Coal passed previous peak (driven by oil nuclear gas and coal)

1980ad mass movement for fun, new base for economy. The funny money starts.

1995ad Coal energy content (US) starts to plateau.

2007ad Peak oil. Does peak oil imply an energy constrained world?

Doesn't this change the ballgame so much that "old rules" are no longer valid.

Does an energy constrained world imply that the amount of money in a real sense can't grow.

If money can't grow! Can credit grow?

Reserves and resourses (also renewables) in an energy constrained world:

Means you or someone else has to give up something! (all energy is used for our baseload) Before you can extract, process and build something else.

It just keeps me puzzled.

note: Replying to someone isn't my thing. My typing speed is way to low. Sorry for that.

Let me put it this way, neither Oil or Money stand alone, they are simply part of the mix!

In fact, it would be correct to say, that the "inherent value of all printed government money is zero"! It is only the "perception" of what that printed money can be exchanged for, where it may or may not attract some temporary value?

Another major factor to be included in the mix, is the total Population capacity of the planet.

That said, the current system is reliant on DEBT and in fact Debt that is permanently borrowed from the future. The whole Economic system relies on the ractional banking system, which assumes that Growth will be perpetuated, as it is forever creating Debt out of thin air, based on the assumption that this Debt will be repaid by higher future growth.

That Growth assumption was based on an erroneous beliefs that Cheap & Abundant Energy would always be available and that the Population levels would continue to expand exponentially.

These two assumptions were wrong!

Flowing from that we are now locked into an era, where the EROEI is falling rapidly, Debt must de-leverage, because the future earnings will not continue to support "Exponential Economic Growth" and the laws of nature are dictating that population levels must also be reduced, to enable the future habitaton of this planet, by the human species.

Surprisingly, this is the first time I question some of the debate here. Unless I missed it, there has been no EROEI appraisal of coal - to be more specific - the remaining coal. Presumably the best has been cherry-picked.

Then - and Gail is absolutely right, no politics about it - sequestration is as-yet unproven (google it and you just get computer-generated pictures of non-existent buildings - a sure sign).

To go for coal in the EROEI quantities we currently get from oil, without sequestration, means the even it the IPCC are only half right, our kids are dead.

My guess on sequestration is 50% energy taken, so even if it happens, halve your resource. Then add the exponential function - which Heading Out seems to overlook.

Then there is the question of what you're going to do with it - it won't go near shifting all the people within a metre of the high-tide mark, for example.

This is interesting, in light of the 'campfire' debate - some folk get maths and get oil, but seem not to get the limits to growth, or the obligation to hand on the planet in a viable condition. Hard to see why, really.

Coal mining is very efficient.
Surface mining requires 5-10 kwh of energy per ton of rock and typically 1.5 tons of rock is required to produce 1 ton of coal.
Underground mining requires 15-30 kwh of energy per ton of rock
and typically 2.5 tons of rock yields 1 ton of coal.
Therefore around 10 kwh per ton is required for surface mines and 60 kwh per ton is required for underground mining.
An 'average' ton of coal produces 2000 kwh of electricity.
Typically a coal train uses 900 BTU to transport 1 ton of coal
one mile. So a 2000 mile train trip would use 1800000 BTUs of diesel(13 gallons).
The energy density of coal is falling slowly about 1/2 a percent per year in part because lower BTU western coal is being mixed in to reduce sulfur emissions.

My guess on sequestration is 50% energy taken, so even if it happens, halve your resource. Then add the exponential function - which Heading Out seems to overlook.

The amount of energy required to separate and compress CO2 to 150 bar by the 1930s amine process is about 200 kwh per ton of CO2. A ton of coal produces 2.2 tons of CO2 so that's about 440 kwh per ton of coal. The preferred method of sequestering CO2 is by the more efficient coal gasification IGCC
method where the CO2 is already compressed to about 50 psi in the process.

If a ton of coal produces 2000 kwh of electricity 440 kwh represents a 22% energy penalty for CO2 capture, not 50% as you guessed.

The amount of energy required for pipeline transport is about 200 BTU per ton mile so a 1000 mile pipeline would require 132 kwh of energy to move the CO2 produced by burning a ton of coal 1000 miles.

The thermal efficiency of new IGCC is about 45% versus 35% for existing coal plants.
2000 kwh x 45%/35% = 2571 kwh per ton of coalso subtracting 440 kwh and 132 kwh for transport leaves us back at about 2000 kwh per ton of coal for the grid.

I will repeat that we have 30 years experience sequestering CO2(2000 feet underground) in the US
despite skepticism by Gail and others.
I agree that if we burn carbon we must bury it as I believe the IPCC who fully endorse CCS technology.
Clean coal allows us energy to responsibly extend civilization for another century when hopefully new energy technologies can be developed.

It seems EROEI mainly serves as a way for lazy people to avoid doing the math.

Thanks for doing the calcs - and lest you think they will just languish here, I plan on using them as part of my class next week on CCS.

Coal mining is very efficient.

True, mining can very efficiently shear off eternal mountain-tops with little difficulty at all. Welcome to the prairies of the east coast.

A failure of imagination, WHT.

If you want to ban MTM, by all means do it.
But then you must pay for more expensive underground mining.
(A source for CBM and possibly a place to sequester carbon in the future).

MTM will eventually ban itself. Once you shear off the tops and fill in the valleys, the laws of entropy say that the topography will not recover.

Typically a coal train uses 900 BTU to transport 1 ton of coal
one mile. So a 2000 mile train trip would use 1800000 BTUs of diesel(13 gallons)

Are coal trains less fuel efficient than the average train? Because using BNSF's number for fuel efficiency, I get less than 5 gallons for 2000 miles.

Just curious...Where did the number come from?

One of the "accelerators" people often overlook is switch from the price of a resource begin determined by the cost of production to its scarcity and price people are willing to pay to not be denied access to the resource.

In a "normal" market where demand is less than supply, yes, then the price fluctuates around the average cost of production. In the "abnormal" market condition we're not entering, with ever escalating costs for new supply, prices tend to gravitate toward the price of new reserves rather than the average of all reserves. see "Profiting from Scarcity">/a>

thank you majorian, I will now use 22% as a baseline.


The EROEI thing still exists. Where I live, they are just contemplating a panic-attack on lignite - as the best coal and the closest to the surface has already been gotten. where does lignite stand in thermal output?

Then, the extraction efficiencies you quote will be with oil-driven machinery, and the resultant kwh are quoted as 'at grid'. Fair enough, but that just begs the next question:

If we are to wean ourselves off oil in any meaningful way, in the timeframe we have left to us, just saying 'at grid' is not good enough. The debate about the quantity of resource needed to upgrade the grid has been addressed above, so I won't re-enter that. My concern is the need to replace the physical attributes of oil, and the inevitably increasing demand to do so.

The apples-with-apples question, if we are to supply our packaging, roading, adhesives, synthetics etc, is: what is the CO2 emission rate for coal-to-liquid, and how do you then sequester the transport CO2 from the exhaust pipes?

I'd like to believe we could go electric transport off a beefed-up grid, but that takes more energy to build the infrastructure and the vehicles, even as the existing infrastructure ages towards retirement - EROEI again!

The oil-based structure we all use took 100 years to incrementally build, and in your country at least, has ended up in an insurmountable debt situation at the end of that free ride. Are you seriously suggesting you can move to a coal-based interim, while piling up enough reserve surplus to build a replacement - presumably a sustainable one - all the while paying your way in the current fiscal structure?

Seems to me the sooner we go for the sustainable version, the more of your coal resource we would have as an emergency back-up. We will probably denude the planet of trees and succumb before we get there, but nonetheless that should be the target.

US lignite has about 15 MJ/kg of energy in it whereas bituminous and sub-bituminous coal has about 24 MJ/kg. It produces about the same amount of CO2 per ton as bituminous at ~200 kg per GJ of energy. It is an ideal fuel for coal gasification as is occuring today at Dakota Gasification in Beulah, ND--half the CO2 is transported 200 miles to an oil field in Weyburn, Sask. The site produces 54 bcf per year of natural gas thru methanation of syngas.

About 80% of our petroleum is burnt as fuel, leaving 20% for plastics, asphalt, etc---so we still need oil. But I agree we must
switch to something else.

As I have stated several times, I believe our best hope is, most importantly, to double the efficiency of all vehicles above current. The best way to do that today is by 1)hybrid technology which raises engine efficiency by about 50% 2)design smaller much lighter cars and vehicles. In the future fuel cells will raise it a tiny bit further but further improvements will be very difficult.

This reduces the amount of fuel we need to produce by 50%.

The substitute for diesel fuel IMO is LNG. Here the idea is to make or convert dual fuel LNG-diesel engines. Typically they start a bit of diesel fuel and then after warming up switch over to liquified natural gas. Locomotives would have tenders filled with LNG--this is far cheaper than electrification of rail which would cost as much as building rail in the first place. Highway trucks would be replaced with bi-fuel(lng-diesel) hybrid heavy trucks.

This will reduce the diesel requirements of trains and trucks by about 70%. Natural gas produces about 72% of the CO2 produced by burning diesel fuel.

Hybrid cars would run on cellulosic ethanol(E85) instead of gasoline. A billion tons of biomass would produce 70 billion gallons of ethanol. Cellulosic ethanol is carbon neutral.

Eventually zero carbon hydrogen will power cars or plug-in fuel cell hybrids but right now this is years away.
I don't believe there are adequate amounts of lithium or nickel to
provide battery cars for everyone.

The amount of world coal is certainly limited but is at least 4 times larger than remaining oil and gas reserves. If we use it responsibly we will have hundred years to figure out fusion or a integrated system of efficient renewable energy sources.

Here's what I could find about Lithium and Nickel.

According to Wiki, global estimated reserves are 35 million tonnes. Using the Volt battery weight of 170kg, that's about 205,800,000 electric cars with Lithium batteries.

According to USGS, there's 150 million tonnes of Nickel reserves. Using the EV1 battery weight of 400kg, that's about 375,000,000 electric cars with Nickel batteries.

Lead reserves are quite a bit higher. According to USGS there are 1.5 billion tonnes of Lead. Using the EV1 battery weight of 500kg, that's about 3 billion electric cars using lead/acid batteries. Of course, Lithium, Nickel, and Lead can all be recycled.

If the US tries to replace oil with gasified coal or natural gas, we would run out of those resources in a few decades. As much as I hate to agree with Al Gore on anything, renewables and EVs are the answer. IMO.

Electric cars run on coal.
Conservationist,do you even own an EV?
You are the Perfect Tool.

Yeah I own EVs, but you would probably say pit bikes and forklifts don't count. lol

After doing some more research on Lithium, it appears that most of the battery weight is from other components. So the 200 million car number is probably closer to 400 million. This is why battery manufacturers are not worried about running out anytime soon. There's also an estimated 600 billion tonnes of Lithium in sea water. And proven methods for extracting it.

I just thought of a proxy for oil that is not easy to hide.

Its sulfur production. It tells you a lot about whats really going on. And of course the implementation of ULSD right now is interesting given my theory.

However for anyone that believes everything is rosy the sulfur market tells a different story.

Lots of interesting tibits of information is in the sulfur market I've though of asphalt and fuel oil in the past but for some stupid reason I never really thought of sulfur until just now.

I've not hit any really good graphs for it and I'm just spot checking right now but I'll take a hard look this report from 2009 is pretty dang interesting I'm sure there is more out there.

We have lots of proxies for oil in the prices of its secondary products outside of the gasoline and diesel markets and of course sulfur is closely linked in with the NG markets so all kinds of cool stuff is probably buried in the lowly sulfur world.

Finding more stuff I'll edit and add relevant links.

Sufuric Acid prices still sky high as late as Jan 2009.

And finally found some nice graphs.

Notice the bottom forming for Sulfuric Acid even after the massive economic bust.

I'd suggest that if we see sufur prices start to strengthen even with our economic weakness then somethings going on.

So here is what I think about sulfur on the way up in prices rising sulfur prices are a strong indicator that oil production is falling rapidly.

However after and economic crash sulfur demand is taken out lack of a rebound indicates no way has the economy recovered.

So now I suspect sulfur becomes a bit of a lagging indicator with oil prices rising faster than sulfur prices. So yes when sulfur finally takes off again then we are in deep doodoo.

Prices seem to be bottoming out for sulfur although I can't find any super recent reference.
I'll find what I can over the coming months. We know that economic activity is going nowhere so if sulfur does start taking off then its a safe bet that the real problems have just started.

Sulphur? We should have a jolly good thread about 'peak fire' and 'peak brimstone'.

Seems to me, majorian, that you brush aside EROEI rather easily. We have an example (100 years old admittedly) of undersea coal-mining hereabouts. The pumping beat them - and it is said it took a certain kind of psyche to work down the mine, listening to the thump of the coastal freighter's engines overhead.....

The physics of the return has to get worse with accessability, and with density.

Then the apples with apples thing is that even if you reduce the oil demand from vehicles by 50% now, double the cars, and you're back at square one. One of the frustrations of being a powerdown leader, is that you watch others taking up the slack. It's tempting to join back in, given that nobody else seems to know or care.

I've long held the view that not far past peak energy, things would collapse well before an orderly retreat got put in place. Even a wholesale attack on coal at this stage wouldn't keep a growth regime chugging along, and it's only a matter of time before non-growth kills the fiscal system. The biggest danger is (as is happening near me) a panic attack on coal in an effort to continue BaU, and 'the devil take sequestration, we need the energy'.

The sooner wealth gets tagged to energy, the better. At least there would be relativity, and realisable underwriting.