Drumbeat: October 13, 2009

A Path to Downward Mobility: Today's youngest Americans are likely to be worse off than their parents.

Every generation of Americans should live better than its predecessor. That's Americans' core definition of economic "progress."

But for today's young, it may be a mirage. Higher health spending, increasing energy prices and stretched governments at all levels may squeeze future disposable incomes—what people have to spend—and public services. Are we condemning our children to downward mobility?

Experts warn glaciers in Indian Kashmir melting

SRINAGAR, India – Indian Kashmir's glaciers are melting fast because of rising temperatures, threatening the water supply of millions of people in the Himalayan region, a new study by Indian scientists says.

The study by Kashmir University's geology and geophysics department blamed the effect on climate change, and said it endangered the livelihoods of two-thirds of the region's nearly 10 million people engaged in agriculture, horticulture, livestock rearing and forestry.

Water shortages causes 100,000 to flee homes in Iraq: UN

PARIS — More than 100,000 people in northern Iraq have abandoned their homes since 2005 because of water stress, after drought and over-extraction of groundwater caused the collapse of an ancient water system, UNESCO said on Tuesday.

"Drought and excessive well pumping have drawn down aquifer levels in the region, causing a dramatic decline of water flow in ancient underground aqueducts" known as karez, the UN's Educational, Scientific and Cultural Organisation (UNESCO) said.

Brazil's Lula vows to slow rate of Amazon deforestation

RIO DE JANEIRO, Brazil (AFP) – President Luiz Inacio Lula da Silva said Tuesday he will offer to reduce the pace of deforestation in Brazil's Amazon rain forest by 80 percent by 2020 when he attends December's global climate talks in Copenhagen.

'House' star electrified over powering African hospitals

I found the concept to be so brilliant: taking existing hospitals and clinics in Gambia and providing them with solar panels to generate the electricity they lack.

The Gambia is a country that has access to medical equipment but not enough power to run it efficiently. Imagine a hospital in which a cesarean section is performed by candlelight, with power from a generator for just two hours a day.

My hope is that Power Up Gambia can one day outfit every clinic and hospital in The Gambia with solar panels, then take that example to the rest of Africa and, hopefully, even to the United States where, for example, Native American reservations are facing a similar crisis.

Saudi Arabia Plans Enhanced Oil Recovery Project in Ghawar

(Bloomberg) -- Saudi Arabia plans to test enhanced oil recovery, a method of increasing fossil-fuel production by injecting gas in the ground, at its Ghawar Field in the country’s east.

The project, planned for 2013, involves injecting about 40 million cubic feet of carbon dioxide daily into an area flooded by water in the Arab-D reservoir in the Ghawar field, Prince Abdulaziz Bin Salman Al-Saud, the country’s assistant minister for petroleum affairs, said today at a carbon capture and storage conference in London.

The oil recovery project is aimed at helping spread a technology that the International Energy Agency today said is a necessary tool to cut by half global emissions of carbon dioxide from fossil fuels by 2050. It will be the first of its kind in Saudi Arabia, a member of the Saudi delegation said.

“It’s worth mentioning that Saudi Arabia does not need to produce oil through enhanced oil recovery at production scale for decades to come,” Bin Salman Al-Saud said. “This is a key focus area in our carbon management technology road map,” a set of Saudi policies to help reduce greenhouse-gas emissions blamed for global warming.

Off the Interstate: Turning 'Blue Highways' Green

Kim Gallagher has a plan for America's "blue highways," the thousands of miles of dusty, old, single-lane heritage routes that wend desolately through the countryside: turn them green. Superseded by high-speed interstates, many of these narrow byways have been long forgotten, along with the faded small towns they connect, says Gallagher, a project manager for the Southwest Michigan Planning Commission. But off-the-beaten-path America could be revived, she says, by transforming little-used roadways into "green highways" that cater specifically to electric-vehicle drivers and other slow-moving, eco-minded tourists traveling by bicycle or on foot.

Thousands of Shell workers asked to reapply for their jobs

A "few thousand" employees at Royal Dutch Shell have been asked to submit applications for their own jobs, as BP predicts stable oil prices over the next few years.

Mexico state utility shut due to broad policy-govt

MEXICO CITY (Reuters) - Mexico's shutdown of an inefficient federally run power utility is part of a broader policy to make state companies more efficient, the energy minister said on Tuesday.

Coal shortages curb India's Sept power output - govt

NEW DELHI (Reuters) - Coal shortages restricted growth in India's overall power generation to an annual 7.5 percent in September, power regulator Central Electricity Authority said on Tuesday.

Generation would have grown 9.8 percent had enough coal been available at plants of NTPC Ltd, it said in a statement.


In his widely reported London speech earlier this month, Gen. Stanley McChrystal, the U.S. commander in Afghanistan, described how people constantly offer him ideas for fixing that country's problems. One of the more unusual recommendations, he suggested, came from a paper that advocated using a "plan called 'Chaosistan.' " McChrystal said it advised letting Afghanistan become a "Somalia-like haven of chaos that we simply manage from outside," but there was no further explanation of its origins.

Cities offer freedom from cars, green living

New York is not alone in its push to get citizens out of their cars and onto the streets. As the environmental and economic benefits of car-free living become impossible to ignore, urban leaders across the country are working to create ongoing motivation for us to ditch our gas-guzzling ways.

'Mad scientist' to build greener future with 'megacrete'

On the day we visit Fisk he's about to launch the first prototype test of his latest invention -- an environmentally friendly cement and building structure. Fisk hopes these new ideas will revolutionize how homes and office buildings are built and how communities are planned and organized.

The cement will be called "megacrete." Fisk says it will be made of magnesium oxide and phosphate from brine, which is a by-product of petroleum and water treatment facilities.

NASA flights will study Antarctic ice changes

(CNN) -- NASA plans to launch next week the first of 17 planned flights to study changes in Antarctic ice and collect data that may help scientists better predict the consequences of those changes, officials said Thursday.

A battery maker powers up post-IPO

SAN FRANCISCO (Fortune) -- If you believe that the battery in your car will soon be bigger than the engine -- or replace it entirely -- you should keep an eye on A123 Systems.

The Watertown, Mass.-based company, which develops advanced lithium ion batteries for things like power tools and cars, went public toward the end of September after pulling an earlier IPO bid to wait for a better investing climate.

Exploration: Driven to ever more inaccessible regions

The Tiber well is a striking example of how oil and gas companies – particularly the large western groups – are being driven to ever more difficult and inaccessible regions in their search for resources.

Oil men often bristle at the suggestion that the world is running out of “easy oil”: the oil business was never easy, they say. But there is no denying that most of the world’s most physically accessible oil and gas is politically difficult for western companies to exploit because it is held by countries such as Russia and the members of Opec, which are generally unwelcoming to foreign investors.

In many areas where western companies can operate, such as the relatively shallow waters of the North Sea or parts of the Gulf of Mexico closer to the shore, the best of the oil has now gone, and output is in decline.

To sustain their production, western companies have to stay at the technological frontier. Year by year, they are pushing to exploit resources that are deeper, heavier, hotter, or under higher pressure, in rocks that are less yielding, and in locations that are harsher and more remote, than ever before.

Address to the ASPO International Conference 2009 (Denver, Colorado)

The experiences of those years, with frequent travel and contact with a wide variety of audiences, lead me now to reflect on what has worked in getting the Peak Oil warning across, and what hasn’t. Certainly I think all of us would agree that high oil prices create a window of opportunity, a teachable moment, while low prices and news of big new oil discoveries tend to deflate interest in our message. That being the case, it’s useful, as a presenter, to have constantly updated information, to keep presentations topical, and to anticipate likely questions and objections based on recent news stories.

Of course, each presenter has a unique profile of strengths and weaknesses, and it’s important to know your strengths—whether they be facility with humor, experience in the industry, or skill at data analysis—and make the most of them. Further advice that I might give about how to be a successful Peak Oil communicator is likely to descend even further to the level of mere platitude, but platitudes occasionally have their place.

Here’s one: Make definite assertions. If you’re not quotable or memorable, you will not be quoted or remembered. But back your assertions up with evidence.

Peak Oil

Ever heard the term "peak oil"? If so, you likely have some feelings about what it means, and if you have not heard of it, I plan on presenting some things you might find interesting about it.

First off, the term peak oil refers to the point in time when the maximum rate of global petroleum extraction is reached, after which the rate of production enters terminal decline. There is a lot of debate about what will happen after the peak is achieved (everybody seems to agree oil is a finite resource), and how close we are to that point and the challenges it may present now is hotly debated.

Africa's new apartheid

The continent is doing a booming business selling diamonds, oil and coffee to China, but is it benefiting Africans?

The Speech Obama Needs to Give (...in which he renounces Industrial Civilization)

We, as a species, are now bumping up against -- slamming into, really -- some very immutable biophysical limits on a global scale. These limits and the mounting consequences for their continued violation have been predicted and well documented by our best scientists for many decades -- complete with dire warnings for the consequences of failing to change our course.

We have not heeded these warnings and we are now suffering the predicted consequences. It is our own fault.

We have reached limits in two very real and dangerous senses. Firstly, our voracious material wants have outstripped the Earth’s physical limits -- hard limits on how much and how rapidly the Earth can provide us with material and energy resources to run our industrial lifestyles. A partial list of these increasingly scarce resources includes fossil and nuclear energy sources, freshwater for drinking and irrigation, phosphate fertilizer, and various key metal ores. Even theoretically renewable resources such as our ocean fisheries, fertile soil, and forest products are being destroyed by persistent abuse.

In short, we cannot have infinite wants on a finite planet. These were childish wishes.

Russia Gas Pipeline Heightens East Europe’s Fears

MOSCOW — With an ambitious new pipeline planned to run along the bed of the Baltic Sea, the Russian natural gas giant Gazprom is driving a political wedge between Eastern and Western Europe.

While the Russian-German pipeline offers clear energy benefits to Western Europe, Central and Eastern European leaders fear it could lead to a new era of gas-leveraged Russian domination of the former Soviet bloc. With its gas wealth and eyebrow-raising network of personal ties, Russia has divided members of the European Union that have vowed to act collectively to protect their security.

Kuwait lines up new oil policy makers

Kuwait's Supreme Petroleum Council (SPC) is expected to appoint four new members soon, replacing others who have resigned, according to local media reports.

The SPC is the top energy decision-making body and is responsible for oil policy in Kuwait, the world's fourth-largest oil exporter.

Norway's Offshore Activity High But Oil Output in Decline

"In a period of turmoil and uncertainty due to the financial crisis the Norway's oil and gas revenues have enabled actions to limit the effects on employment, trade and industry. The actions have lessened the impact of the financial crisis in Norway compared to several other countries. The high level of offshore activity is expected to be sustained also in the coming years. I will now start the work on a White Paper on petroleum policy. The White Paper will include all aspects of Norway's largest industry and pave the way for stability in the years to come," said Terje Riis-Johansen, Minister of Petroleum and Energy.

Iran says most of its oil is not sold in dollars

TEHRAN (Reuters) - Most of Iran's oil sales take place in currencies other than the U.S. dollar, mainly the euro, a senior official was quoted as saying on Tuesday.

US Drilling Activity Gets Boost in Third Quarter

Despite continuing at a sluggish pace compared with a year ago, U.S. drilling activity rebounded somewhat in the third quarter, with total well completions up 10.2 percent from the second quarter, API's third quarter 2009 drilling estimates indicate. Still, the estimated total number of oil wells, natural gas wells and dry holes completed in the quarter -- 8,856 -- was down 46 percent from 2008's third quarter and remained at levels not seen since 2003-2004, according to API's 2009 Quarterly Well Completion Report: Third Quarter.

"The trend of declining well completions is a clear indication that oil and gas companies, which are facing declining earnings and threats of increased taxes, continued to carefully monitor their expenditures," said Hazem Arafa, director of API's statistics department.

Shell still in Iraq oil talks - CEO

LONDON (Reuters) - Royal Dutch Shell is still in talks with the Iraqi government on fields that the country failed to award in a bidding round in June, its chief executive said on Tuesday.

Peter Voser was asked whether Baghdad had approached Shell about entering new offers for contracts it bid for in the first round of auctions in June.

Some Oil Firms Now Accept Iraq Terms, Minister Says

BAGHDAD -- Several oil companies that initially rejected the Iraqi oil ministry's terms for the country's first round of oil-field bidding in the summer are now close to accepting the agency's terms, Oil Minister Hussein al-Shahristani said in a press conference here Tuesday.

The round, held in June, was seen as a disappointment because just one international consortium agreed to the tough terms set out by the ministry. Mr. Shahristani said the ministry is continuing discussions with some of the firms that walked away, and is closing in on deals after some companies relented on terms.

Dallas Revising Zoning to Regulate Gas Drilling

There's no natural-gas drilling in Dallas, but that's not stopping the borough from deciding where it will allow drilling.

As part of the revision of its zoning ordinance, Dallas is adding provisions that would restrict sitting gas wells to areas zoned industrial, highway or business. It would also designate distance setbacks from residences, waterways, streets and wetlands.

The proactive stance is putting Dallas at the forefront of what could become a major issue as drilling in the Marcellus Shale increases.

IHS CERA: Oil Demand from Developed Countries Has Peaked

Oil demand in developed countries -- currently 54 percent of all oil demand -- likely reached its all-time peak in 2005, according to a new research report by IHS Cambridge Energy Research Associates. While world oil demand is now set to grow as the world economy moves from recession to recovery, the demand lost in 30 developed countries that make up the Organization for Economic Cooperation and Development (OECD) is not likely to ever be regained, the report finds.

"The economic downturn has been masking a larger trend in the oil demand of developed countries," said IHS CERA Chairman and Pulitzer Prize-winning author of The Prize, Daniel Yergin. "The fact is that OECD oil demand has been falling since late 2005, well before the Great Recession began."

The Real Impact of America's Oil Crisis

Esoteric climate-science warnings about America's oil dependence can make even the most well-meaning of eyes glaze over. Amanda Little, author of Power Trip: From Oil Wells to Solar Cells — Our Ride to the Renewable Future, took a different approach. She traveled from an offshore oil rig to the halls of the Pentagon, from NASCAR racetracks to the office of a pricey plastic surgeon in order to tell a more human side of the energy story. TIME talked to Little about how fossil fuels saturate our lives and why taking personal responsibility is the key to pulling out of this mess.

Arab income likely to halve this year

Arab oil producers netted more than $70 million (Dh256m) per hour in crude export revenues in 2008, official figures showed.

However, income could dive below half this amount in 2009 because of the sharp fall in oil prices.

Pemex Chicontepec plan trumped by government and rightly so.

The Mexican government on Thursday ordered Petroleos Mexicanos to halt its exploration in the Chicontepec oil field. Juan Carlos Zepeda, president of the National Hydrocarbons Commission, wants Pemex to come up with a proper development plan before going further. This commission sets technical standards for the country's crude oil and natural gas fields. Pemex claims that the project is too important to be abandoned because of a large investment already made. 8 projects would be scrapped.

Water source reporting required of oil and gas operators

Effective this month, the state conservation office will enforce a new requirement for reporting water sources utilized by oil and gas companies for hydraulic fracturing operations.

The policy is in response to the intense development of the Haynesville Shale natural gas formation in northwest Louisiana. The reporting requirement is part of the Office of Conservation's efforts to ensure the balance between preserving the state's natural resources while allowing responsible development, Commissioner James Welsh said.

Britain's 'energy gap' is down to ministers, not market failure

Britain's energy policy has been a mess for almost as long as anyone can remember. On the evidence of two reports published over the last week, one from Ofgem, the energy regulator, and the other from the Committee on Climate Change, it is not about to get much better.

It’s in the numbers, stupid!

What MacKay is trying to get away from is the kind of ethical arguments about energy issues that so muddy the waters of the environment debate. Take the mobile phone charger. Plugged in it uses about half a watt or 0.01 kWh per day. A television on stand-by uses 10 watts. It thus might have been better for the BBC to concentrate on TVs rather than phone chargers, but then it is a TV corporation!

Governor signs bills that boost solar power

Gov. Arnold Schwarzenegger signed several bills Sunday that will tweak the way California's electricity market works, encouraging solar power and phasing out some rules created during the state's electricity crisis.

Will oil demand soon outgrow supply?: Peak oil believers think so, but oil, gas companies say that theory is bogus

A “peak oil” conference wrapping up today in Denver is sounding the alarm that oil demand will soon outgrow supply, posing a potential economic threat to the country’s economic well being.

However, most oil and gas companies say the peak oil theory is bogus and that there are plenty of the natural resource to go around.

Mayor John Hickenlooper is among the peak oil believers. The former geologist told conference attendees yesterday that it’s not a question of if the world will reach peak oil — meaning the time of maximum oil production — but when it will happen.

“We cannot afford to ignore the issue,” he said in a statement. “By anticipating the expected rapid changes in both supply and demand, we can begin to frame the issue not only as a challenge but also as an economic opportunity.”

But The Colorado Oil and Gas Association, for one, doesn’t think Hickenlooper’s school of thought has much credibility.

Assembly of peak oil experts look at shale gas: New finds are a 'game-changer' or overrated

DENVER – As a boy in Arizona, Randy Udall did a “science experiment” by putting a tarantula and a scorpion together in a Mason jar to see what would happen.

He did the same kind of experiment Monday, pitting energy executives against each other in a debate over a large new source of natural gas.

Udall is a co-founder of the Association for the Study of Peak Oil-USA and the brother of U.S. Sen. Mark Udall, D-Colo. At Monday’s national peak oil conference in Denver, he tried to make sense of major changes in the gas industry the last few years.

OPEC boosts growth forecast

World demand for OPEC's oil will be stronger than expected next year, the producer group said on Tuesday, the latest sign that a more positive economic outlook will boost oil consumption.

The 12-member group is the latest forecaster to lift its oil demand estimates in the past week, following upward revisions from the International Energy Agency and the U.S. government's Energy Information Administration.

Norway counts on output dip

Norway expects oil prices to rise next year, but sees its total output dropping by about 1.3% on this year's figures, the government said in its 2010 draft budget, unveiled today.

The government also unveiled plans to spend more of its oil wealth next year compared to this year in a bid to help the economy regain speed after a mild recession.

Shell Nigerian onshore oil output heavily down

LONDON (Reuters) - Royal Dutch Shell's (RDSa.L) onshore oil output in Nigeria has been heavily curtailed by violence, the company's chief executive said on Tuesday.

"We have a huge proportion of our onshore production shut in at this stage," Peter Vosel told reporters. "I think we are now at 120,000 barrels per day and we used to be close to 300,000. These are Shell's share (production)."

Exxon Turns to Kosmos to Boost Oil Reserves in Africa

(Bloomberg) -- Exxon Mobil Corp.’s agreement to buy the Ghana oil assets of Kosmos Energy LLC marks an effort by the world’s most valuable company to acquire what it couldn’t find after drilling dry holes in West Africa.

Closely held Kosmos, backed by Blackstone Group LP and Warburg Pincus LLC, said yesterday it agreed to sell its Ghana properties to Irving, Texas-based Exxon Mobil. The deal, which a person familiar with the sale estimated to be worth at least $4 billion, may still be blocked by Ghana’s government.

Gazprom strikes preliminary gas deal with China

BEIJING — China and Russia signed a framework agreement Tuesday that could see a steady flow of natural gas to energy-hungry China from its resource-rich neighbor.

It was one of numerous trade and military agreements signed during a state visit by Prime Minister Vladimir Putin as the countries overcome traditional mistrust to push ahead mutual economic interests. Even so, there has been a growing imbalance in their ties with Russia's economy lagging behind its booming neighbor.

China vows crackdown on industry overcapacity

BEIJING (Reuters) - China's cabinet has laid out detailed plans to curb overcapacity in industries such as steel, aluminium, cement and wind power, warning that the country's economic recovery could otherwise be hampered.

PetroChina May Benefit From Gas Price Increase, Bernstein Says

(Bloomberg) -- PetroChina Co. may benefit as China increases natural gas prices to encourage production and narrow the differences between domestic gas levels and imported fuel, Sanford Bernstein & Co. said.

The average “well head” price of gas excluding transport and other charges in China is $3.50 per million cubic feet, compared with imports of pipeline gas from Central Asia at $7.60 at the Chinese border and as high as $15 at oil parity for liquefied natural gas supplies, Bernstein said in a report today. Prices will increase by as much as 6 percent compounded annually over the next five years, it said.

Toyota Wants California Low-Carbon Credits for Its Battery Cars

(Bloomberg) -- Toyota Motor Corp., the world’s largest seller of hybrid vehicles, said potentially valuable emissions credits that California plans to give to utilities for supporting rechargeable cars should go to automakers instead.

Carmakers absorbed the costs to develop advanced vehicles to meet state requirements, Kevin Webber, Toyota’s U.S. general manager for regulation and certification engineering, said in comments filed last week with the California Public Utilities Commission. “Any societal benefit from the low-carbon-fuel aspect of these vehicles, especially the generation of credits, must accrue to the auto manufacturer,” he said.

Eco-friendly parking garages drive transit movement

Parking garages have become key to the success of transit lines, developments that emphasize transit, and suburban town centers — all popular with environmental groups and others who support reduced dependence on the automobile.

Without abundant parking near transit stations in suburban areas, people won't bother to hop on subways and trains, says Martin Stein, president of the 1,200-member National Parking Association, which is meeting near Washington, D.C., this week.

'Nuclear threat' to power grids

Scientists have warned that Iran and North Korea could produce a weapon capable of paralysing Western electricity grids for months or years.

Belgium delays nuclear phase-out until 2025: minister

BRUSSELS (AFP) – The Belgian government on Monday decided to delay the start of a progressive phasing out of nuclear power by 10 years until 2025, Energy and Climate Minister Paul Magnette said in a statement.

"The government has decided to delay by 10 years the first stage of phasing out nuclear power," the statement said.

Green walls taking root in green building design

PITTSBURGH – The next big thing in green building design might be to turn an existing idea on its side. PNC Financial Services Group Inc. recently installed a green wall the size of two tennis courts on one side of its headquarters.

Like green roofs — their perpendicular counterparts — green walls are covered in vegetation and provide the benefits of natural insulation and removal of air pollutants. PNC, which provides banking and wealth management services, estimates it will be 25 percent cooler behind the wall than the ambient summer temperatures.

Smart grid gets island test in Maui resort area

HONOLULU – A 4-square-mile patch of Maui in the nation's most fossil-fuel dependent state soon will be home to a new kind of power grid, one that saves energy by turning off household appliances when electricity is expensive and makes better use of wind and solar power.

General Electric Co. recently announced it would test its "smart grid" technology in the luxury resort community of Wailea, hoping to reduce peak electricity consumption there by 15 percent by 2012.

'Alternative Nobel' to Africa, New Zealand

STOCKHOLM – Two activists from Congo and New Zealand and a doctor from Australia on Tuesday won the Right Livelihood Award, also known as the "alternative Nobel," for work to protect rain forests, improve women's health and rid the world of nuclear weapons.

Congolese activist Rene Ngongo, Alyn Ware of New Zealand and Australian-born Catherine Hamlin, who has been based in Ethiopia for five decades, each will receive euro50,000 (US$74,000), the Right Livelihood Foundation said.

The honorary part of the award — without prize money — went to Canadian environmentalist David Suzuki, 73, for raising awareness of climate change.

Amanda Little Takes a Power Trip Across America - The TreeHugger Interview

Peak oil is an important discussion but the discussion shouldn't begin and end there. When you look at the reality of global warming, of national security, and economic volatility, then peak oil is sort of a moot discussion. You have to address it and saying 'here is a range of different opinions, but does it matter when how real and immediate and urgent the problems of climate, economic volatility and geopolitical conflict are.'

People ask me that all the time, 'are we running out of oil?' The problem isn't running out of oil, it's running out of the ability to increase our supply of oil. Then people go, "Oh! It's not that we're running out of oil. It's just going to become vastly more expensive, every year."

Local Food: How to Make it Happen in Your Community

With the current dire warnings of our continued unreadiness for reaching peak oil, how can we begin to rebuild local food networks that will allow us to reduce our dependence on the global food market? Tamzin Pinkerton and Rob Hopkins provide the Transition take on how grassroots action could save our bacon.

2012 forecast: Food riots, ghost malls, mob rule, terror

A trends forecaster says the current economic "rebound" from last winter's Wall Street collapse of banks, insurance companies and automobile manufacturers is an artificial blip created by 'phantom money printed out of thin air backed by nothing."

And Gerald Celente of TrendsResearch.com, says people right now should be bracing for "the greatest recession" which will hit worldwide and will mark the "decline of empire America." Crop failures could be among the minor concerns.

"Here we are in 2012. Food riots, tax protests, farmer rebellions, student revolts, squatter diggins, homeless uprisings, tent cities, ghost malls, general strikes, bossnappings, kidnappings, industrial saboteurs, gang warfare, mob rule, terror," he writes for a quarterly publication that is available through subscription on his website.

'Civilisation at the carbon crossroads'

A GWENDRAETH Valley group is leading the way in a bid to reduce carbon emissions as part of an ambitious nationwide project.

The aim of 10:10 is to unite every sector of British society behind one simple idea: that by working together we can achieve a 10% cut in the UK’s carbon emissions by 2010.

IEA Seeks $2.4 Trillion in Carbon-Capture Investments

(Bloomberg) -- Businesses and governments need to invest at least $2.4 trillion between now and 2050 to capture carbon-dioxide emissions from power plants and factories and pump them underground, the International Energy Agency said.

The funding is required to develop 3,400 projects globally that trap and store the greenhouse gas and help cut emissions from fossil fuels by half from 2005 levels, according to the IEA’s “road map” for carbon capture that was published today.

Climate change to re-shape tourism

High energy costs, water scarcity, an ageing population and terrorism are likely to dramatically change the tourism landscape over the next 14 years, according to a report on the future of tourism.

Tourism 2023, a "what-if?" report from sustainability think tank Forum for the Future, suggests that climate change could drastically change the destinations that people are willing to visit, and that a ballooning population in Asia will lead to a dramatic shift in tourism traffic patterns that could cause congestion problems at a number of global transport hubs.

India's Floods Reveal Climate Change Specter

Indian farmers had been praying for rain after the weakest monsoon season in 40 years had left their crops stricken by drought. But when the rains finally came, forceful and incessant at six times their normal levels, they left behind the worst floods southern India had seen in more than a century.

Global warming 'to triple rain over Taiwan'

TAIPEI (AFP) – Global warming will cause the amount of heavy rain dumped on Taiwan to triple over the next 20 years, facing the government with the urgent need to beef up flood defences, a scientist warned Tuesday.

The projection is based on data showing the incidence of heavy rain has doubled in the past 45 years, coinciding with a global rise in temperatures, said Liu Shaw-chen of Taiwan's leading research institute Academia Sinica.

Climate sceptics celebrate BBC story

Given that they occupy a position on the scientific credibility spectrum that could charitably be characterised as ‘fringe’, it is no surprise that those who deny climate change have to take their victories where they find them.

Hence the glee following the BBC’s recent story ‘What happened to global warming?’

Veterans push to stop global warming for the sake of national security

Some U.S. military veterans say climate change isn't just a threat to the environment, but national security. A busload of veterans on a crisscross tour of the nation are in the Natural State to bring attention to the problem. And the country's leaders are listening.

Retired U.S. General Wesley Clark said, "I know to most of us national security is about men and women in uniform, it's about a strong national defense." But Clark told folks at Monday's town hall meeting in Little Rock that it's also about protecting Americans from natural disasters. And he says global warming caused by over-use of fossil fuels poses a threat. "A series of changes of rainfall, snowfall, glaciation, moisture, sea level, which taken together are so enormous that they will displace millions of people," he said.

Global warming can be delayed four decades, study finds

Abrupt and potentially deadly climate change can be delayed about 40 years without the need for enormously costly cuts in carbon dioxide emissions, according to a new study by a team including scientists at Scripps Institution of Oceanography.

Cutting back on non-CO2 contributors to climate change will push back the threshold for reaching a dangerous level of global warming, stated the study, published Monday in the Proceedings of the National Academy of Sciences. Its authors include Mario Molina and Veerabhadran Ramanathan of the institution, part of UC San Diego.

Love the following quote:

"Here we are in 2012. Food riots, tax protests, farmer rebellions, student revolts, squatter diggins, homeless uprisings, tent cities, ghost malls, general strikes, bossnappings, kidnappings, industrial saboteurs, gang warfare, mob rule, terror."

And he might be right...

Reminds me of the Mayan predictions revolving around 2012.

What people don't seem to realize is that the 'printing of money' actually occurred earlier during the debt boom. This is what caused the inflation in housing prices. Now we're at, or were at, the point where either the whole shebang is allowed to collapse or actual money created to cover the debts - or at least cover the interest until the 'market comes back'. To blame the current printing of money for anything is like blaming the patch for the hole in the tire.

The alternative was to let housing collapse back to traditional wage/price multiples. This is so simple that no expert would be paid to point it out. It would also bankrupt most US and European financial institutions. Unintended consequences would occur. Unless one is willing to accept the reality of what would have happened if the bailouts hadn't - and it would have been grim - it is pretty juvenile to whine about them. What is worth whining about is the fact that all this has done is buy time, perhaps in the hope that somehow the price/income and debt/income ratios will sort themselves out somehow and the principles upon which the interest is being printed will fade away somehow.

When you wish upon a star....

This is what caused the inflation in housing prices.

I am afraid you are mistaken here Petrosaurus. Inflation is not selective. Inflation added the same premium to housing prices as it added to everything else but no more. We had a housing price bubble but not a bubble in food prices, or clothing prices or anything else except perhaps oil. (Which peaked well after housing prices and also for a reason that had little to do with inflation.)

Housing prices were inflated for an entirely different reason, people just bid them up, always expecting that they would be even higher next year. Housing prices rose because of the greater fool principle.

You gave a great description of why housing prices had to collapse except you say this was all about inflation. Well if you consider the tulip bulb bubble to be simply "inflation in the price of tulip bulbs" then you would be correct. However I think there is a fundamental difference between a bubble and inflation and calling them both by the same name really muddies the waters and makes nothing clearer.

Ron P.

Housing prices rose because of the greater fool principle.

I'll augment that a touch.

Housing prices are a function of what people can get for a mortgage at that point in time- it's that simple. Mortgages are set by wages and the interest rate at the time.

If wages go up, the mortgage that people can afford will go up and ergo people will bid houses up. If interest rates go down, the amount of principal you can afford goes up and ergo house price goes up. I'd love to do a regression with wages, employment and interest rates to house prices - my guess is that the correlation/regression is very high.

So, if you want to raise house prices, you need to lower interest rates, increase employment, and increase wages. Good luck on the last two in this economy.

As for the greater fool: the fool that spends the most amount of money he can for a mortgage bids up the house he wants and makes it more expensive for the rest of us. I spend less than 15% of my income on a mortgage (the bank tried to upsell me to a bigger mortgage!) but at the end of the day, I am as comfortable in my smaller home as I would have been in a bigger one.

Mortgages are set by wages and the interest rate at the time.

Interest rates yes but wages no. Wages had little to do with the housing bubble, people bought way more house than their income could justify. Banks let them get away with it because they thought even if there was a default they could still sell the foreclosed house for more than the mortgage. That is why they issued Liars LoansMany of those Alt-A loans, which didn’t require income documentation and became known as “liar’s loans,” had interest-only features that allowed borrowers to defer principal payments for an initial period or option adjustable-rate mortgages, which allow borrowers to make minimal payments at first only to face sharply higher ones later.

People could get loans even if they had no wages whatsoever, and a lot did. Many made money by "flipping" houses. They bought a house and then sold it a year or so later for a six or seven percent profit and that was their only source of income. They had many houses in the process of flipping at the same time. They only paid interest on the loans. But when the bubble collapsed they were left holding a lot of big mortgages that were not worth the amount owed.

It was a bubble pure and simple and had nothing to do with the actual income of the borrower. He just lied about his income and the banks knew full well that he was lying.

Ron P.

Whoops, I assumed the banks were making sound financial decisions here and giving mortgages to people with jobs... my bad. I guess bank incompetence also was a factor here- thanks for the correction.

It has nothing to do with incompetence. It was naked greed and fraud, throughout the entire market. Buyers, mortgage originators, banks, ratings agencies, they all committed fraud through and through. Read Denninger's back articles for details.

What's even worse is they're STILL doing it (thank you FHA).

Agree, Agree. I watched it happening and called it an epidemic of fraud.
I called Freddie and Fannie blowing up 2 years in advance and I also insisted that it was a way bigger problem than just sub-prime.
If you saw the worthless liars that I witnessed making a killing as fraudsters you would be as irrate.....or maybe you did?

Oh one other thing. At the time I was screaming all this I was considered a kook.............now they are all asking me what to do and when I tell them we are toast because of people like them they don't listen.

.now they are all asking me what to do and when I tell them we are toast because of people like them they don't listen.

Porge, you need to butter em up ;-)

The reason the banks made crap loans was because they were allowed to securitize the loans bundles and sell them to unsuspecting fools and thus get rid of the risk and keep the fees they generated.
This was a direct result of Banking deregulation that started in the late 1990s.

Edit: Or at least this was the strategy

Right on Porge!

The guys doing appraisals were making fifty grand and the banks were charging five times that for the results- everything else was in proportion-and the loan went to a new address within weeks.

Yes-The one thing that I have the most difficulty understanding is why anyone anywhere would want to hold a low interest rate mortgage as an investment vehicle-it SEEMS as if the whole and only reason for the existence of a bundle of mortgages to EXIST is to get rid of them.

I wish somebody would COHERENTLY explain the theory behind Fanny and Freddie-I can't make sense of them suppoesdly making huge amounts of money by holding all that paper-nothing I have read adds up -not that I have spent any time on it.

Fannie and Freddie were originally chartered to increase the availability of mortgages to the public by having the government implicitly guarantee the paper and provide a dumping ground for the banks to sell the paper to.
This allowed the banks to keep recycling cash into mortgages over and over. Really a great idea originally.
Theoretically the bundles allowed the individual loan risk to be spread by lumping say 10,000 loans together all having similar default risk of say 3% and then chopping up the bundle and selling the pieces. So instead owning one mortgage with the potential of a total loss now you could invest the same amount of capital to own a little piece of 10k different loans with a very defined default rate of 3%. That is the whole idea behind debt securitization. This is also what a money market fund does with different debt instruments of different maturities albeit shorter than mortgages backed securities.
If everyone plays by the rules it is a brilliant strategy.
Fraud is the problem not the idea of mortgage backed securities.

Porge ,I'm with you as far as you go-
but why can you make money holding mortgages at say 5 percent?

Unless you can either borrow the money to buy the mortgage for LESS THAN five percent- or else you have gigabucks and can't find a better investment and therefore buy up five percent mortgages.The default part of the picture is not an issue on the average-if you know the default rate-I understand that.

But in the END where do Fanny and Freddy get hold of so much money?It just seems to defy reason that any person or instition with megabucks of cash would both be smart enough to get hold of the cash and dumb enough to spend it on mortgages paying interest that hardly covers day to day inflation.

Of course I realize that some of the money was pension fund money and insurance company money and regulations required that some or most of such money be lept in "low risk " investments.

But still -where do you get megabucks cheap enough to buy mortgages that pay peanuts in terms of interest and still turn a profit?

They sell the shares public so the money comes from the investors that buy the shares just like a stock offering.
And the primary customers are huge pension and mutual funds etc. Fannie and Freddie used to be a sure thing especially when you factor in the implicit government guarantee.
As far as the inventors getting the investment money it comes from the premiums in the case of insurance and contributions from the pension funds.
You remember Freddie and Fannie stock right?

And on top of all the rest the mortgages were collateralized by the Real Estate that the lien was on. So when you add up all the recourse it justifies the low return.
However like anything else the participants in the Real Estate and mortgage business had to play nice to make the risk/reward numbers valid.


Ok I understand where you are confused.
They were initially bank rolled by the government.

I know Wikipedia lacks rigor but............



Granted -they sell shares and raise money that way.
Granted the insurance companies and unions have premiums and members money to invest.

But nothing so far explains why where the xxxxing profit COMES FROM.

A bank makes money originating a loan.easy. Every body who handles the paper gets paid along the way. easy.

But if Fanny buys a hundred million of thirty year mortgages paying five percent from a bank,how can Fanny make any money-unless Fanny is getting money from somewhere for less than five percent?

Let me rephrase the question.

You are thinking about putting your own money in Fanny.

Just WHERE and HOW does Fanny earn the profit that supposedly will enable you to collect dividends and rack up some capital gains?

The whole damn thing looks like a black hole with Fanny and Freddy at the bottom of it to me-a couple of giant suckers created(?) for the express purpose of getting thier clock cleaned like a couple of rubes in a poker game by a bunch of old card sharks playing in collusion.

If I were just a hair more cynical I would dismiss the whole concept of Fanny Freddy as a ponzi scheme that simply could not ever earn a legit profit on a grand scale.

Earning a modest profit as a broker facilitating the sale of mortgages from banks to pension funds and insurance companies looks reasonable.Earning enough to become a hot stock on the grand scale ???? Something just does not add up.

Fannie and Freddie's charter was to provide a secondary mortgage market so issuers could sell their mortgages, and diversify their risk, and investors such as life insurance companies and pension funds could get access to liquid securities with long maturities. And in order to do so they were allowed to have an inventory of securities to be able to make markets (buy when somebody wanted to sell and vice versa).
What happened over the years was the incentive structure for management became more and more stock based, thereby increasing the incentive to focus on the stock price rather than the operating end of the company.
One way for them to make money is to increase the size of the balance sheet ( buy mortages from issuers but not reselling them) and get the money to buy those mortgages by issuing bonds. because they are (incorrectly so) considered to be part of the government they have access to funding rates close the that of the government. They could buy mortgages with a yield of 6%, and finance them with 3% bonds. multiply that 3% margin times many billions and your earnings go up nicely---> stockprice goes up nicely----> pay goes up nicely.
The problem starts is when some of loans start to default (because they never should have been made in the first place). All of a sudden they have to take impairment charges and the whole scheme started to collapse.
None of this was a newsflash to people in the mortgage business and on the hill. Quite a few dealers and investors went to Washington over the years and wrote and spoke about it, not because banks and hedgefunds are altruistic, but because FNMA/FHR had essentially an unfair competitive advantage over the evil unregulated hedgefunds.
But..... FNMA and FHR spent a whole lot more on lobbying than the banks/hedgefunds so they won, and no regulation with teeth was ever implemented.

Thanks for explaining clearly what I was stumbling around.
The real question: Who was stupid enough to buy those 3% bonds?
Other than being one place closer to the front of the line in the event of insolvency that was a horrendously bad risk/reward ratio.

A lot of the bonds they issue are have short maturities, and money market funds are a large purchaser of those. A lot of the longer dated paper goes to pension funds, life insurance companies and other investors who need long dated investments because they have long dated liabilities.
Their paper has always traded very close to government debt - often just a fraction of a percentage above it When 3 year government debt yielded 3% they could sell their paper for 3.20% . Buying FNMA/FHR paper makes it easier to beat the benchmark (often a government debt based index) because even just a couple of basis points (one basis point is 100th of 1%)makes a big difference.
In a way the types of buyers (money market funds and pension/lifers) makes it much harder for FNMA/FHR to go bankrupt because the consequences are so severe for people who had nothing to do with how they were running their business. All of this made it inevitable that they had to be bailed out, and in a way made for a very good risk/reward ratio for the purchaser of the 3% paper......
Hedgefunds would buy FNM paper and sell goverment bonds against it, making in effect riskless return. In reality those returns were subsidized by the implicit (not explicit) goverment (read taxpayer) guarantee.
lobbying for loose regulation paid off very handsomely for management (and the receivers of all that lobby money of course).

Weekend, Porge, Thanks!

I strongly suspected the whole scheme depended on the looting of the public in some fashion-and in the last analysis the looting was made possible by Fred and Fan getting govt rates on bonds at rates well under mortgage rates.Profits become perfectly clear.It's simply amazing how many newspaper and biz articles I have read that did not make this clear.

Now insofar as the big institutional investors buying this crap fro Fand F is concerned, only over educated cya professional managers of money would have done so-any large investor could have assembled his own basket of mortgages directly with the same risk and cut out the middle man.

A given default rate would have the same effect at either level of ownership if the bundle is large enough to ensure the default rate is accurately anticipated-and if not, the systemic risk remains the same if the whole shooting match collapses, does it not?

In theory a large investor can put together a basket of mortgages. However, the two big drawbacks to that is that somebody has to collect, consolidate and, if neccesary, pursue monthly payments, deal with delinquency issues, foreclosures etc. Secondly, the mortgage "pools" that FNMA and FHR assemble are standardized - all the mortgages are first lien, are in a certain rate range and are all the roughly the same age and have an LTV of 80% or less. That makes them very easily tradable (very good liquidity). Also, they are guaranteed as to payment of interest and principal (btw only GNMA guarantees mortgages as to TIMELY payment of interest and principal).
What happens is that a big chunk of the pools created every month are taken by bankers who put them together in a trust and than carve up the cashflows into tranches. For example, one tranch gets all the interest and another tranch gets all the principal every month (that would be an IO (Interest Only) and PO (Principal Only) bond.
Another banker then can take a bunch of IOs and POs and put them back together. That happens for example when there is particular demand for pools with a lot of (and this is just and example) midwest exposure, and those particular IOs and POs happen to have a lot of midwest loans in them.
One can argue that had the mortgages been less liquid there would have been less leverage, which would have limited the extend of the meltdown, so in a way owning mortgages directly would have been safer (but bankers would not have made all the fees for creating securities)...

Thanks for the further info-most of that i have seen before and it makes good sense that there are various economies of scale to be had, not available to an individual investor,even a big one. And of courese it's always easier to let somebody else do all the productive work if you have the "investor mind set".

The FandF part is clear now.

But a five percent cash return over the last forty or fifty years is pretty miserable-after inflation pretty much nonexistent.

And the down side is not like collecting coins-a collectible silver dollar will never be worth less than a dollar,whatever a dollar is worth.Lots of mortgages may wind up nearly worthless.

The upside is worse-you get paid but in worthless money in an inflationary environment-so the rationale for the mortgage investment is long term stability-something I personally have never had much faith in.

make money holding mortgages at say 5 percent?

Put on a different perception lens. Look at the problem of not 'making' money but that of preservation of your money in a safe way.

The 'safe' was the government backing.

But in the END somebody has to be the long term owners of this paper.Who would want to be in that position?Why?

Part of the why is the government backing.

The idea is The Government won't go back on its word.

Ask the Indians from Georgia about the words of governments and how much stock should be put there.

Now - as for the rest of the questions about price of real estate. I was told by a local wanna be land baron that so long as there is 'cheap money' real estate prices will rise. Like most topics you can usually find someone who is in 'researched opposition' and there is one author (whom I don't remember but heard on my mp3 listening) who has a whole book with observations about the real estate market (most of his examples were in New York and the write downs of assets) and how the tax code and laws exist to support them. I'm not sure if the conclusion from the data points is right but its worth listening to the data points.

I'll leave Freddy and Fannie to the experts.

One of the reasons anyone would want to buy these loans is that they were only in effect for a few years at most. People were moving and buying a new place which paid off the previous mortgage + fees. If you held an interest only mortgage and it was paid off early, you got the interest, additional early payment fees and all your money from the investment back.

My wife and I rode the bubble up and essentially bought this (our last) house at 20% of value. We moved five times from 1991 to 2001. Each time we fixed the place up for a few thousand and lots of part time work and sold at a good profit and excellent pay for our DIY labor. Because of our age we decided to make this our retirement house and we have spent quite a bit building the wood shop, barn, interior upgrades, and making the place very comfortable for two. We have been PO aware for more than 20 years. The financial crash, world situation and other Black Swans on the horizon (surprise) made us realize it is time to put the final touches on this place to make it mostly self sufficient. This winter I will get a CONEX box and fill it with lumber for my woodworking business, a ton of triple 16 (NPK) and increase our garden 7 fold (400 sq ft to 2800 sq ft) + some one straw planted grains.

That’s our plan … what’s yours?

Excellent, excellent ideas. I was thinking of buying and storing a few ton of pure DAP to allow me to mix up my own triple-16, what with all the green manure and wood ash hereabouts. I don't know about storing lumber long-term, though - unless it's rooted and growing, like these rock maples raining leaves down all around me right now.

My big question is the best way to operate the well, since a 6" bore isn't so well suited for a bucket and rope. These new systems are nice and all, but I need phase-controlled 220V to operate the variable-speed motor, and if the controller dies, I'm SOL.

DAP is not completely stable, but it degrades rather slowly if not in a sealed conatiner. MAP is stable, as most other fertilizer, oncluding urea.

Now is an exccellent time to buy N fertilizers becasue of the recent low price of natural gas. I was planning to load up on urea.


I have a solar powered golf cart, inverter and 220 step up transformer. It is not quite as efficient as I would like but I power our 220 well right at the accumulator pressure switch. I unplug from the house 220 and plug into the golf cart. I believe it is possible to have a solar pump in the same well casing as the 220 pump. Our well is 120ft deep, water level is ~40ft down and the 220 pump is at 80ft. I hope to put a solar pump at 75ft next summer when we will be faced with a lot of irrigation water requirement. The solar pump will put out about 4 gal per minute into a 1500 gal tank then we will actually irrigate at night.

My wood requirement is for mostly walnut, cherry and a few exoctics for high end furniture. I have a deal with a fellow in the next valley who makes ceramic pots. We will make full sized walnut arm chairs with a thunder mug built in. Priced about $500 in todays market with inlays, carving etc extra. The design is based on Bostonian chairs of 150 years ago. When not in use, they will be a pillowed bedroom reading chair.

Right now I am tied up with too much custom work to take time to make a prototype but I have the drawings and it will be just a matter of "Cut and Paste" if we need them. <;-)

I can see where some money was made on mortgages paid off early-and certainly plenty was made on fees originating them.

It's the idea that buying and holding very low rate long term paper is a good investment that buffalos me.

I understand trading in bonds and so forth-if you anticipate the interest rate moves correctly you can make money.

But in the END somebody has to be the long term owners of this paper.Who would want to be in that position?Why?
You sound as if you have a good plan and are well on the way putting it into effect.

As for my personal situation , I have more or less always been peak everything aware-comes of taking the courses I took in school and messing around in farming. Plus reading a ton of science fiction and history, all sorts of books.

But the reality of the peaks -the realization that they are right here right now in our face
real-did not come until recent years.

I'm still not nearly so pessimistic as most followers of this site-but I do take the POSSIBILITY of collapse very seriously and have taken steps to get ready .

I live on the small (family) farm- we have lots of good long term potential for power down here, including gravity feed potable and irrigation water, timber and firewood , extensive tool collection , farm garage/shop,orchard, root cellar, extensive gardens,all basic farm machinery well kept, five years worth of emergency diesel, generator-welder,stockpiles of pipe, angle iron, roofing metal , nuts and bolts,fertilizer, lime,etc.

Lots of firearms and ammo and informal arrangements with extended family and nieghbors to keep an eye out for each other bodily and property wise.

Pigs and chickens are doing fine, and we will start raising beef again(we used to keep a few cows for market) this spring for our own use.

Instead of saving money ,I buy and stockpile things we will need and use regardless when I can get really good deals-soap,rope,oil and grease,boots-you name it-fortunately we have lots of secure storage.

This winter I will build at least a thousand square feet of raised bed gardens because I have decided that in the long run raised beds are the way to go if for no other reason than that they are easy on the back and knees.

If it becomes necessary we can grow all our own food.We use only about fifty gallons of heating oil a year to supplement our wood stove.We have a wood fired kitchen range and can cook on it if necessary,although we don't , as a rule.

Giving serious thought to either solar or wood fired hot water as a near tern project.Looking for somebody interested to share in building a wood gasifier truck for the learning experience.It would be a lot more fun if I had company.

So everything I'm doing is things it would be good and useful to do anyway.Collapse or not.

I can't get excited enough to buy a horse or mule or stockpile a lot of food beyond what we can and freeze and salt down anyway or to build a bombshelter or join a militia or anything of that nature.

But if I heard that there is a hot war started in oil country,I'll buy a truck load or two of non perishable staple foods within the day, and fill up as many drums with gasoline as I can while the getting is good

Mainly I just take it a day at a time now,help look after the older folks,hunt and fish a little, read a lot, and try to do a good deed once in a while-mostly visiting folks to old to get out much, maybe taking them to town or to the doctor once in a while.

Don't forget that if banks dream up ridiculous mortgage schemes like Option ARMS or 40 year mortgages they make more expensive housing appear affordable to the suckers. The suckers will then bid up prices more, generating bigger cuts for the banks.

I wish I were as mistaken as you say I am. The knock on effect of the housing bubble was to create a credit bubble [re fi boom] which distorted the apparent income much as a typical wage inflation would. The housing market cap is multiples of the size of the bond market which is multiples of the equities market, yet the Dow Jones narrow average is the most commonly quoted 'market' indicator. In terms of impact, a bubble in the housing assets has a far greater effect - perhaps the greatest effect - than other asset bubbles.

We did have inflation all right, but because it wasn't across the board and being unsupported by wages it had to collapse. Wages could have risen to service the debt, but they didn't. So now we have exactly the conundrum that I was trying to point out. We didn't print money and raise wages and devalue the currency but instead kited debt. Post facto inflation of the rest of the economy or systemic collapse were the options and instead we chose to paper over the interest with pixel money. The inflation is inevitable but just hasn't realized itself yet. That's Exactly the mistake I was Intentionally making in order to point this out. Calling it a housing bubble downgrades it into a minefield of misunderestimation. The last time we had a 'housing bubble' of similar proportions was followed by the dirty thirties. This time, hopefully, we can inflate our way out of it somehow instead of ten deflationary lost years and a war.

By definition, bubbles are inflated; a bubble is a narrow and isolated form of inflation which inevitably collapses. If only the housing 'bubble' fit those parameters. I have spoken with economists about the deflationary effects of Chinese labor rates upon the world economy. There are constant inflationary and deflationary events and effects going on and the summation of these gives us the overall inflation or deflation. If you can figure out how to get out of this collapsis interruptis without inflation thanks to the housing 'bubble' let us know. Right now we seem to be Hoping for Change.

The primary tool against price inflation has been the interest rate and its effect upon debt accumulation. To allow the interest rate to remain low while asset prices rise above traditional multiples of wages is risking inflation. Central banking 101 and Greenspan must have known better. Inflation isn't always successful, as we now see, and we did have inflation during the boom, but you won't calculate that by factoring in the price of Chinese running shoes like the government likes to. And it isn't necessary to increase the money supply to get inflation. Merely increasing the rate of transactions of existing money will have the same effect. Energy = Money X Velocity [squared?]

The knock on effect of the housing bubble was to create a credit bubble

You will not get this equation right until you sort out how incorrect your statement is.


It seems to me that the extremely low interest rates over the past decade may have a hidden cause beyond the generally accepted "errors of Greenspan" and "political purposes of republicans". Returns to capital (investments) since the neo-liberal revolution of the 1980's (Reaganomics, Thatcherism) have so dramatically increased the net returns to invested capital that there has accumulated huge amounts of excess capital sloshing around searching for any positive net return, to the point where acceptable returns had to drop below safe levels for a stable housing / commercial real estate market. Combine that with a steadily rising price of oil causing ME national and private entities to be searching for reasonable investments, and high savings rates in China and India, the low interest rates in "safe" economies were inevitable.


Also interesting is this document Financial & Investment Dictionary: Capital Formation

They list some interesting statistics.

"the value of total tangible capital assets of the USA, which doubled since 1980 (to 2003)"

"Secondly, the transfer of funds to corporations may not result in increased output or economic expansion at all; given excess capacity, a low rate of return and/or lacklustre demand, corporations may not in fact invest those funds to expand output, and engage in asset speculation instead"

"The net wealth of the US is calculated at $94 trillion. The total value of marketable financial assets in the USA was estimated in 2007 at about US$46 trillion [1]. This total obviously does not include assets, deposits and reserves which are not traded)."

I've been tiptoing around that in my mind. Its what makes the most sense to me. The transfer of wealth into fewer and fewer hands created a tsunami of cash needing places to be invested. Guaranteed, insured real estate, that forever increases in "value" can be made to look perfect. Co-incidentally working people, getting poorer and poorer due to the same policies, seeing the equity in their houses increase beyond belief, get greedy. Its Romeo and Juliet. Same ending, too.

Darwinian, I agree that the housing bubble was mostly a "greater fool" poster child.

But it might be worthwhile to acknowledge that in NORMAL times(meaning times when getting a large loan depends on strong credit and ample collateral) the upper price limit of houses IS determined by wages and interest rates.minor quibble;)

A couple of guys I know have done well investing in "keeper" rental houses-and they quit buying BEFORE prices exceeded the ability of local people to qualify for realistic mortgages-on the assumption that in the long run prices simply cannot exceed the ability of locals to get financed with a realistic loan.

So they are doing just fine.

Yes a good rule of thumb is rents should exceed to PITI+maintenance( the cost of owning).
So So simple but watch the fools act like fools.

ALL commodities peaked:


"We had a housing price bubble but not a bubble in food prices, or clothing prices or anything else except perhaps oil. (Which peaked well after housing prices and also for a reason that had little to do with inflation.)"

Healthcare and our Economy

It is remarkable that, despite extensive healthcare debate, there has been no linkage made between our current financial crisis and runaway healthcare expenses. Since 1970 the after-tax, after-healthcare median purchasing power of workers has been on the decline. This decline steepened over the last decade as employers, squeezed by rapidly rising healthcare costs, froze salaries and increased the health care burden on employees. Two economists identified this collapse in purchasing power and used it to predict our current economic crisis well in advance. Professor Ravi Batra, a liberal economist from SMU calls this as a “wage gap” where demand for goods and services does not meet supply. John Williams, a libertarian economist who publishes on www.shadowstats.com, refers to this as a “structural problem” with our economy. Both concluded years ago that worker purchasing power was no longer adequate to pay for sufficient goods and services to keep our economy afloat.

Federal Reserve Chairman Alan Greenspan, in an effort to avoid recession, bridged this wage gap by loosening the reins on credit -- allowing personal and corporate debt to grow at a much faster rate than our economy. As we have learned the hard way, this was not sustainable. Now, on an emergency basis, the wage gap is being filled by stimulus financed by rapid growth in federal debt. This is also unsustainable and will have even graver consequences if not contained over the next few years.
Healthcare expenses are by far the largest piece of projected federal budgets. In fact, the healthcare losses of the U.S. last year exceeded $3.0 trillion -- $10,000 per citizen -- three times the size of Social Security or the entire Defense Department budget including the cost of the wars in Iraq and Afghanistan.

This is not a zero-sum game. All income classes have sustained major losses of assets and income over the past year. Yet we continue stubbornly on with two forms of healthcare madness. We believe that we can continue to absorb exponentially increasing healthcare costs without financial ruin and that only we know best how to deliver healthcare, when virtually every other developed country is providing higher quality at half the cost.

Healthcare cost reduction is the key to closing the wage gap and restoring our economy. We can all win, but we need to act now. The demagogues are waiting in the wings to gain power by preying on the growing multitudes who are fearful over healthcare and jobs. Our democracy may not survive until the next window of opportunity.

Every member of congress should be made aware that the single most patriotic vote of their career would be for healthcare reform that controls cost and covers most citizens. It is up to all of us to keep the pressure on by calling and writing senators and representatives to make sure this happens.

Alas, with healthcare costs growing exponentially, even halving them wouldn't help all that much for very long. If, for more than a short time, economic growth stops or even slows down greatly, things are going to get very interesting and fairly quickly - reducing the current querulous, timid efforts of Congress and President Obama to utter insignificance.

Perhaps it's paradise in other countries as you'd like to think. But in England and Europe, one finds that concepts such as the "Quality-Adjusted Life Year" are used openly and overtly. I can't yet conceive of anything of the sort being politically possible in the USA, but that's what it would take to keep healthcare from eating up the entire economy within a few decades. The country is too diverse for agreement of that sort, and there's also too much fundamentalist religion of both right and left ("it's immoral to count costs in these matters") for such agreement, so it seems more likely that the current non-system will remain and simply become ever more broken.

'merkuns with an addiction to healthcare ?

most oil and gas companies say the peak oil theory is bogus

But The Colorado Oil and Gas Association, for one, doesn’t think Hickenlooper’s school of thought has much credibility.

You folks are just a bunch of theorists! Without much credibility!

You folks are just a bunch of theorists! Without much credibility!

Sounds like economists to me.

I'll once again make the distinction between the PR put out by the oil CEO's and what we know inside the industry. The CEO's job is to push the company stock...not inform the public of the realities of PO. On the inside we completely understand PO and it's implication. And have for decades. The CEO's won't discuss it because it would cost them their jobs. And the rest of us don't discuss it internally because it's such old news. I only discuss it on TOD just to show off how smart I am.

I'll pass on an amazing discussion I had last week with a former co-worker of Hubert. They actually shared a work space for a time. He was an even older fart then me, of course, but still sharp as a tack. We were discussing a new play I have and he was a wealth of knowledge. Back to Hubert. This fellow dropped a number of interesting points not the least of which was that Hubert felt that anyone who thought they could predict the backside of his curve "was an idiot". Not sure exactly how Hubert phrased it but that was the tone. I re-read Hubert's work a while back and he does specificly say that the backside of his curve could only be drawn as the data came in. The symmetry he drew was not based upon any specific expectation. Hubert also felt the world would have a similar "Hubert curve" but a lack of reliable data base wouldn't let him make an even a WAG. More amazing he said Hubert felt the public would never understand the implications he was reporting. It was just food for the wheels at the top of the company to chew on. In essence, Hubert viewed the public at large of never being capable of understanding and anticipating the future.

Smart guy it would appear.

"As a boy in Arizona, Randy Udall did a “science experiment” by putting a tarantula and a scorpion together in a Mason jar to see what would happen."

that would have been an interesting spectacle.....it doesnt say which was the scorpion and which was the tarantula.

i think the gas cornucopians will win the pr battle and loose the war. if the public believes there is 100 yrs ng supply, we all loose, imo.

Most people aren't interested in "peak oil" any more than they are interested in "health care."

They expect gasoline to come from a gas pump a a very low price, and they expect always to be healthy, or if they are temporarily under the weather. to be made well for free.

We don't think about what we take for granted. And our economy is built on producing that illusion of granting unreality -- so that people will continue their happy motoring and other excessive ways.

Also, I presume that Hubbert was like most prophets -- didn't likely start out wanting to be a prophet, and was likely a lot more realistic, non-doctrinaire and overall more sensible than some of his acolytes.

I actually first learned about PO from a ride sponsored by Shell corp at Epcot center in Disneyworld in 1997. The cute, family friendly ride said oil would peak in 2008. I went around telling people at the time and they literally told me I was crazy. I also told them that their SUVs would loose value at that time (my own deduction). Guess they are biting their tongues now. :)

But my point is that an oil company sponsored this ride and the information in it, so they are not total deniers.

That's an amazing story Von. Thanks. I'm sure Shell had their own self-forwarding motives but they did offer the truth in the process.

Here's another story for you. Back in the middle 80's we were building test pits using various rock formations to test wire-line tools. We contracted an old Shell PhD. Geologist to help select and arrange the different formations. Well one day at lunch he told us that in 20-30 years the world would not be able to produce enough oil to keep up with demand and if we didn't believe that look at U S and Texas production. He said they still can not match production of the late 60's even though we have record number of rigs working. Then came the 86 crash. Lately I have suspected that he knew Hubbert personally.

From the top link "However, most oil and gas companies say the peak oil theory is bogus"

Most? I only know of Exxon-Mobile to dissmiss peak oil; as far as I know all others just disagree about the timing. Please correct me if I'm wrong. If I'm not wrong the writer of this piece better check his sources.

Oil companies are all private about their "real" thoughts on peak oil.
They would prefer to keep selling until the last drop is pumped out.
Someday when the real peak date is verified, then the oil companies will say
"Yea, we knew that at the time, but did not say anything....."

The CERA "peak demand" theory -
CERA assumes that more people will not equal more energy use?
What a broad assumption!

Demand is interesting. In developed economies there is clearly a combination of factors which seem to be reducing demand - improved fuel effeciency (driven by cost to some extent), efforts to restrict carbon emissions (restrictions on vehicle use in inner-cities and greater investment in public transport) and demographics (industrialised countries are just not seeing much population growth). You could possibly add the effects of communication technology to this (homeworking via the internet). The simple fact is that OECD oil demand has fallen for 15 consecutive quarters since 2005. It took 10 years to get from 46 million b/d to 50, and approximately 5 years to get back.

Of course the real question is not about developed economies but the devleoping economies. Can they improve living standards without raising oil demand at historic growth rates? That will be absolutely key.

Sounds like CERA can avoid looking dumb when oil peaks soon by just saying that demand peaked.

But that would only work if prices were low. In the case of $200 oil, it will be tough to argue that no one wants the stuff.

The new Global Oil Depletion Report 2009 by UK Energy Research Center is a great resource on the forecast date of peak oil by different companies and organizations. Check out the figure on my blog which is on page 156 in the full report.
(Figure 7.7 Mapping global supply forecasts according to the implied URR of conventional oil, the date of peak production and the post-peak aggregate decline rate.)

I only know of Exxon-Mobile to dissmiss peak oil.

In Holland there is now a commercial on t.v. from E-M about the challenges of winning 'shale-gas'. Anyhow, they will succeed and there is nothing to worry about in the future. The same commercial talks about oilproduction by beautifully coloured little organisms, called algae. That is why they dismiss peak oil. The missing oil will be produced by algae.

They were talking about cellulosic ethanol as the solution to all our problems years ago; not much of it is on the market.

Algae oil did not get much funding from Congress.

Now the fad is thin film PV cells. I read one opinion that there is not enough tellurium, indium, or gallium to produce the amount of thin film PV's the world will need just to keep up with the electric needs of annual incremental population growth, much less light up the whole world with it. Asarco used to mine tellurium. Asarco was forced to declare bankruptcy over allegations of pollution.

Does the manufacture of foam home insulation release hydrocarbons? Does the manufacture of plastics release hydrocarbons? More pain for the consumer if these products are outlawed. I do not suppose they will be successful in making algae cells produce polyethelene in a zero carbon process.

At an energy industry conference in 2008 I saw a scientist from the Dept. of Energy make that same assertion about all solar cell types except silicon, that is, there simply was not enough of the raw materials on the planet to make a difference. Silicon based cells were the only real option. I couldn't get his sources from him due to the mob surrounding him after the talk.

Behind a paywall, but viewable through Google:

FOCUS: Saudi, Facing Oil Consumption Spike, Mulls Nuclear

JEDDAH (Zawya Dow Jones)--The world's oil producing powerhouse Saudi Arabia may be the next Arab Gulf state after the United Arab Emirates to build nuclear power plants in an effort to save more of its valuable crude for export and domestic demand, according to officials.

"We want to see 20% to 25% of our energy coming from nuclear power in 15 years," Bakr Khoshaim, a power consultant and member of the Shura Council, Saudi's consultative body, told Zawya Dow Jones.

Saudi may need nuclear power as its rapidly growing population consumes more of its oil in the domestic market for transport and to fuel its existing power plants.

Great! So even more pressure on the world's uranium stocks and all the more reason for the radicals to start salivating at the prospect of overthrowing the KSA's royal family and holding the world to ransom witht their very own dirty bomb factory.

Interesting times...

This is odd considering the KSA has no Uranium to speak of... It's kind of like saying "I own a thousand acre forest and live there in my cabin, but will be heating my house with coal this winter."

Unless this is an implicit admission to peak oil/gas... i.e. the Saudis won't produce as much 15 years from now, and they know it.

Unless this is an implicit admission to peak oil/gas... i.e. the Saudis won't produce as much 15 years from now, and they know it

By every indication the rulers of KSA don't seem to me to be dumb. If I were in their place I would look at the following two alternatives:
(1) Use my local oil & gas for internal needs, and export the remaining.
(2) Use only as much local oil and gas as I need after Nuke plants, and exort the remaining production.
Then calculate which one maximizes revenue. As Uranium is cheap -even if imported, the oil it displaces can be exported, so the delta is the world market price of the oil saved by the Nuke plant versus the cost of the Nuke plant.

Again if you lived in your forest, and your neighbors were willing to pay $10000 a cord for firewood, would you burn it instead of cheap coal? Just because you can obtain something cheaply (but not in unlimited quantities) does not mean it is in your interest to waste it.

Its been obvious to me for years that exactly the same calculation applies more strongly to Iran (higher population, higher average consumption), so why is everyone so convinced that Iran is building a bomb? I suppose because Iran, not being so friendy wih the US, will refuse to depend on US enriched uranium supplies. Obviously.

KSA already does a lot of importing, grains most notably.

Story picked up in full at Zawya.com: = FOCUS: Saudi, Facing Oil Consumption Spike, Mulls Nuclear

With electric power using around 75% of Saudi Arabia's domestic oil, the need for another source of energy has become acute. And as the kingdom rolls out a $400 billion spending plan over the next five years to build the infrastructure needed to diversify its economy away from hydrocarbons, it will need all the money it can get from oil exports.

That is a staggering amount of low hanging fruit that could be picked. It would be comparable to the US burning 15 mb/d for electrical generation.

And solar thermal?

The capital cost is competitive with nuclear (even with an 0.3 load factor), and the fuel is free. And there's all that employment, dusting the mirrors...

Why aren't they using the Rub-al-Khali for energy? Why nuclear?

Why nuclear? Because Uranium shines at night.

I understand they have a few solar projects in the works, also.

I read this situation as first , uranium is probably seriously under priced if you believe that the costs (relative to output and inflation)of building reactors is going come down with the next generation reactor or if you don't have any problems getting dirt cheap loans.

Second, that the relative value of liquid fuels and electricity is going to shift in favor of making electricity with nukes and selling gasoline , diesel and perto chemicals.

The Saudi's have plenty of money to buy up uranium well ahead of time-and even if they don't the price of oil will probably(my guess) go up faster than the price of uranium.

And this last is pure speculation-but the Saudis are not stupid and have a very well educated class of technocrats both home grown and imported on thier payroll.They have come out of the middle ages into the twenty first century in only three generations-it's probably easy for them(meaning tptb) to believe in breeder reactors.

If you believe in breeders and have no anti nuke lobby opposed then nuclear is a hands down winner in an energy constrained world.

And so far as proliferation is concerned-well, maybe they will eventually build some bombs-and maybe they feel the "eventual" need already-they can't count on the US to keep an army on the ground there forever-we'll be pulling out once the oil is mostly gone if not before.

My personal guess is that the House of Saud would last less than thirty days if we just packed up and left.

Hey! Selling nukes was important and supportable in the past - look at the old "See? The Shaw of Iran is buying our nukes" ads.

What could possibly have went wrong with the Shaw having nuke power?

My source in Saudi Arabia says that the Saudis are very serious about nuclear power.

Who will win the bidding war to supply KSA with reactors?

France's Areva with a strong Euro [Franc by then?] plus an up-to-date, highly skilled workforce? The Russians like in Iran? Or is it GE** with a collapsing dollar built by 'Murkans at an ever lower minimum wage as the low cost, low quality, lowest bidder?

**I don't know who still makes nuke reactors in the USA, so correct me if I am wrong, as I don't have time to do a Google Search.

I think the "low quality" sneer is uncalled for. I'd rather fly on a Boeing airplane than any other. Very high tech stuff is still done very well in the US. Consumer products, not so much.

GE and Westinghouse are the big US manufacturers, I think both of their programs are still live.

Japan could also come in with a strong bid in many areas if the Toshiba 4s reactor passes trials.

My sources tell me Iran is very serious about nuclear power for the very same reasons.

Energy Crisis on Hold? From Right Side News the Right News for Americans. ;-)

Another basic concept of financial literacy is supply and demand. People talk as if they understand supply and demand, and then a moment later they may be explaining to you that we are running out of oil and that soon food and water will be in short supply. In fact, these are basic necessities. Absent mercantile interference (monetary elite promotions adopted and supported by the state) food, water and fuel will probably remain available to large populations, certainly Western ones.

While it is true that there are Peak Oilers on the right as well as the left, and ditto for peak oil deniers, however from my readings, I am of the opinion that the vast majority of Peak Oilers are of a more liberal persuasion. The reason is simple, one of the central tenants of the Right is that the free market is all powerful, and if left alone, laissez-faire, supply and demand in the free market will solve all energy problems.

Also notice that editors of this Right Wing publication even believe that the free market will even solve our water problems. Well, at least it will in Western Nations where right thinking people understand the laws of supply and demand.

Ron P.

Right-wing or not, I have to agree with:

...food, water and fuel will probably remain available to large populations, certainly Western ones.

for the simple reason that some large population centers and the West represent the richest regions. The civilization could shed perhaps half its people and still keep these regions supplied, although it would neither feel comfortable nor be safe to be one of the economic "winners" in such an outcome.

"...for the simple reason that population centers and the West represent the richest regions"

And we have the most guns.

I think the free market is more likely to "solve our energy problems" than, say, elected governments working on a 2 or 4 year election cycle. But that's why I'm a doomer.

RE: Pemex Chicontepec plan trumped by government and rightly so

With Leanan posting the ugly truth in regards to the great hope of Pemex -- I decided to turn on the way back machine and here is a quote from one of the first links from February, 2005. I am sure there are funnier Chicontepec links to be found, depending on your sense of humor.

Mexico state oil company Pemex expects to increase its hydrocarbons production 55% to 3.8 million barrels of oil equivalent a day (Mboe/d) in 2006 compared to 2004, a Pemex official said at the company's oil technology conference (Exitep) in Veracruz.

The 2.1Mboe/d of new production will mainly come from the Lankahusa natural gas field, the Chicontepec oil reserve and marginal oilfields in Poza Rica, Pemex exploration and production division (PEP) head Carlos Morales Gil said.


David Shields, who seems to be a fan of the Export Land Model, gave a very good talk on Pemex at ASPO. He thinks that they will be a net oil importer around 2013-2014. He said that they already need to be importing light, sweet oil for some of their refineries.

Wayback machines are fun. Here's a trip to March 1998: Big Oil's Pipe Dream CHEVRON THOUGHT it could turn a windswept corner of Kazakhstan, site of the largest oil strike in 20 years, into the next Houston. Five years later, the American oil giant - March 2, 1998

On the surface, big oil's reasoning looked unassailable. The Caspian shelf could produce some 5% of the world's oil by 2010. Assuming a price of $20 a barrel--which analysts consider a reasonable benchmark for the medium term--the region could generate about $27 billion a year in gross revenues.

$20/bbl, those were the days. Actual output for the Caspian by 2007 was more like 2.7% of world total: Caspian Sea: Energy profile | EnerPub - Energy Publisher. A story about these shots that went way off the mark would make for a good post here; just in time for Halloween: "The Graveyard of Bad Calls."

"The Graveyard of Bad Calls."--LOL!

Yep, how come the Cornucopian contingent doesn't widely advertise in all MSMedia their bad forecasts, bad timing, and bad moves? Then, to top it all off, they then get mad at us for pointing these facts out.

I envision the classic haunted house blindfold tour, only about resource depletion. "And stick your fingers into this bowl, and what do you feel? 6 mb/d Iraqi production for 2010 - and REAL HUMAN BRAINS! (hint - use wet macaroni).

This is familiar territory to me, as my burg in years past was one of many that sported a conservative Christian haunted house, replete with aborted fetuses and spooky wooky married gay couples that would jump out to give the kiddies a fright.

Guinea confirms huge China deal

Guinean Mines Minister Mahmoud Thiam said a Chinese firm would invest more than $7bn (£4.5bn) in infrastructure.

In return, he said the firm would be a "strategic partner" in all mining projects in the mineral-rich nation.

Guinea is thought to have the world's largest reserves of the aluminium ore, bauxite.


Thanks NO. Just another example of China tying up resources. Some folks see stories like this and wonder why the U.S. isn't doing the same. Easy answer: we're not a totalitarian dictatorship run with a single minded goal: expansion. I know that sounds like a knock on the Chinese but it's easy to be envious of them when you read such stories. No other country, let alone company, can compete on this field with them. Absolute control by the gov't over your economic enterpises is certainly un-American but you have to appreciate the results. Like the old story about Musolini before WWII. The younger won't know the story but he was able to get a very poorly run national rail system turned around in no time and got the trains running on schedule. Easy to do: just execute enough train engineers until the rest get their act together.

Some folks see stories like this and wonder why the U.S. isn't doing the same. Easy answer: we're not a totalitarian

There's also the minor issue that China has a billion people in need of even basic infrastructure. Trains, apartments, better farm implements, etc. etc.

I suppose that demand is one reason the gov't has some support level from the people lengould. I've only spent a very little time in China but when you see the tenacity of those folks it's amazing what you might imagine if they are provided the resources needed to advance themselves. I'm not much of a history buff but I wonder if China today doesn't mimic the U.S. at the beginning of the 1900's. In a way our culture then was dominated by a single dominant philosophy: free enterprise. The Chinese have a Communist structure but I see it more as a very focused business plan. The Chinese gov't has absolute control in the same manner that the big corporations did back in the day. That can certainly mean harsh times for some individuals but it does wonders for the business plan.

I just renewed my passport so I happened to count the stamps - seven trips to the PRC memorialized there. Every time I go, I come back with the same two observations:
- Those people are better Americans than Americans are. Free enterprise, caveat emptor, corner-cutting, skid-greasing cutthroats, and I say that with a gleam in my eye. The rest of Creation doesn't have a chance competing against people this hungry.

- The food sure tastes better there. Prolly 'cause it's grown in - well, you know.

This drumbeat is probably dead, but FWIW the belief about Mussolini is a false folk-belief:
typical link.

Energy crisis is postponed as new gas rescues the world

This article has been debated some days ago, but can someone comment on this statement:

"Texas A&M University said US methods could increase global gas reserves by nine times to 16,000 TCF (trillion cubic feet). Almost a quarter is in China but it may lack the water resources to harness the technology given the depletion of the North China water basin."

Is this estimate realistic? Is it talking about recoverable gas or 'gas in place'? Have there been EROEI studies of shale gas? ...

Tony -- when you hear any numbers thrown out (in place, recoverable, etc) they are absolutely worthless unless they also include pricing assumptions. It is an absolute truth that the is technology today that can recover 1 billion ounces of gold from sea water. Of course, the cost to do so is many, many times the current price of gold. But the reserve number (1 billion on of recoverable gold) is true. At a certain high gold price, of course. There are trillions of cf of NG recoverable from the gas shales...at a certain price. Last year I worked with a company that had 18 rigs drilling shale gas wells as fast as they could. And they were trying to contract more rigs at the same time. And then NG prices fell and the company released 14 of those 18 rigs...and paid a $40 million penalty to do so. What does that tell you about the reserve numbers? This company was drilling for billions of CF of NG reserves which instantly disappeared when prices dropped. From their perspective that NG was no longer "reserves".

Good points. There is lots of methane in the atmosphere (about 1800 ppb), though most of the mass is in the lower troposphere. So..., in theory we could use our own atmosphere as a "reserve."

Now, if we could just figure out how to get around that pesky 2nd law of thermodynamics.

one more question: how long does it take to develop such a shale gas field?

The Fayetteville shale has been developed in 5 years.

tony -- The term "shale field" is something of a misnomer. A convetional oil/NG has lateral and vertical limits. The shale gas plays are a regional phenominon. There will be areas more productive then others but essentially all portions of the formation are potential targets. Basicly the limits of these "fields" are the limits of their extent. That's why the companies jumped on the different plays so hard: almost an unlimited amount of drill sites. Different basins have differnt shales with different potential. As blondie mentioned the Fayette began 5 years ago. Others longer ago, Newer basins yet drilled. This is one reason the projected reserve numbers are so high. Shale is by far the most abundant rock type so globally there's a thousand times as much shale as other rock types. That's why you see such huge and rather ridiculous numbers. Almost as bad as the old line about how many angels can you fit on a pin head?

From "It's the numbers stupid" above:

Take the mobile phone charger. Plugged in it uses about half a watt or 0.01 kWh per day. A television on stand-by uses 10 watts.

Now, I'm one of those innumerate folks that gets and deserves no respect around here, so somebody help me decipher that quote. First, if I take 1000 and multiply it by 0.01 the result is 10, but half a watt consumption = 12wh per day, non?. I guess they are rounding. Hmmn, so the mobile phone charger uses 12wh per day. They are reporting 10w consumption for the idle television. Watts up with that, isn't it less? I guess I have to times that by 24 to get the wh usage of the TV. 10x24 = 240, so I guess that the difference is 12wh consumption for the phone charger, 240wh for the TV on standby. Is that right? Why don't they just report it that way? Would someone tell me if I am right or what I am doing wrong?


You're right to mult the 10watts by 24.. while it's REALLY important to remember that some TV's standby at a good deal more than that, upwards of 100 watts to keep some tubes warmed up for a 'quick start' capability..

Even the .01w is a generalized figure (and which would come out as .24, or a quarter of a watt/hour for a day.), and there will be wallwarts like your cordless phone or your wireless router that will consume a good deal more power than that.

The real answers come when you can play with a 'Watts Up' meter or equiv., and see what you're really getting from your own appliances.

One good indicator, if a wall-wort gets hot, then it's burning up some watts.


"...some TV's standby at a good deal more than that, upwards of 100 watts..."

What on earth kind of TV that's still extant and in operating condition could possibly draw anything like that kind of standby power??? Some kind of projection unit for a huge theater? A very early historical antique with the heaters ballasted by resistor-lamps (but no one in their right mind would leave a valuable antique powered up all the time)? If it's a normal household TV that still has a CRT, the heater circuit might draw a few watts, and the remote control module, if it's fairly bad, another watt or two.

Multiply by three and call that 20 watts, tops, in terms of fossil fuel heat to generate the electricity. Like plastic bags and wall warts, a fun thing for cultural warriors opposed to modernity to obsess over, but small beer compared to overall per capita gross energy consumption (24/7/365 average, mainly FF) on the order of 11kW.

Nope, there have been some.. the ones I heard about were biggish, but not hideously so. Probably drew up to 500 watts in full operation, big CRTs or rear projection units, from the 90's, maybe some 80's models, and were just ridiculous in their 'off' consumption.

Sorry, don't have links or names. I can understand that it seems unbelievable to you, but some of the big Home Theater stuff was designed purely with 'Performance' in mind, and it seems very little concern over power use.

Even my Advent Video Beam projector only draws 7 watts while off keeping the 3 CRT filaments warm. (Fluke-77 .07A)

An old one, maybe? Our 2-year old HDTV takes about 3W on standby, but the 10 year old VHS VCR above it draws 14W when turned off. We put all of the electronics on a wall switch and keep the thing off when not in use, maybe saving 40-50W continuously. Sure, it's small potatoes but it costs nothing to get started and every watt counts.

Note added: excerpt from the Watts Up site, emphasis added:

Watts up? PRO
120 v, 60 Hz, 15 amps
+/- 1.5%, + 3 counts of the displayed value
Below 60 watts, amps and power factor lose accuracy

For that "below 6o watts" clause, read "essentially useless for assessing standby power of an individual appliance". (That doesn't mean it's a bad meter - it's fine within its capabilities. But it's expensive to make a data-logging meter that can measure both 1800 watts and 100mW accurately on the same scale, and none of the models is that expensive. Alternatively, a designer might use automatic range-switching but that adds complexity and, in a data logger, the need to manage the complexity; so that approach costs extra too.)

I have a digital meter like this one


It is quoted to 2% on most readings, to a resolution of 1w. I have tested everything in the house, the worst was a HiFi stack about ten years old, pulled 10w on standby. Nothing else above 2w. My dvd player only pulls 6w when working... TV about 70w. Laptops up to 70w when working hard.

That's the EU equivalent of the popular Kill-a-Watt meter available in the US. It works great, but as you say it can't measure anything less than 1 Watt. I guess that's a good problem to have.

I don't know about this meter, but a frequent technique used by inexpensive power meters is the use of chips that measure "average RMS" current - assuming both current and voltage have perfect sine waves, then calculating VA or wattage based on simple math. The more accurate meters divide each 60Hz cycle into many (say 64) time intervals, and use high speed A/D converters to measure and calculate current and voltage during each interval, summing this to calculate power usage to 0.1% or better. This works regardless of the power factor. These are called "true RMS" meters and cost a lot more. I wouldn't expect to find one below $400US.

What boggles my mind is the idea that EITHER they target unplugging the phone charger OR they target unplugging the TV. 

Wouldn't it be better if they said "Unplug everything, then only plug it back in when you need to use it." Or would that scare away mainstream consumers?

I think that would confuse people too much. How about eliminating one <5 mile car trip per year to offset all those cell phone chargers and DVD player clocks that I hear so much about.

Yes you are on the right track and yes it is confusing when people change the units half way through an argument.

Much of this rubbish was hyped by the BBC to make people feel good/bad about 'doing their bit' but it is just smoke and mirrors.

Have a look here for a clear explanation of what difference wall-warts really make to country-wide consumption (hint: nearly nothing)


digg link for Robert's Winter gas post:


digg if you are so inclined!

Folks don't miss the link up top: Saudi Arabia Plans Enhanced Oil Recovery Project in Ghawar.

“It’s worth mentioning that Saudi Arabia does not need to produce oil through enhanced oil recovery at production scale for decades to come,” Bin Salman Al-Saud said.

That's right, they don't really need to use enhanced recovery for decades to come because of all the surplus reserves they have. They also don't need to look for very expensive to produce oil in the pre-salt areas deep under the Red Sea, but they are looking there anyway. They don't really need to do these things that are costing them billions, but they just do it anyway.

Why is Saudi spending so much money doing things they really don't need to be doing? As Gomer Pyle used to say; "That is a poser ain't it."

Ron P.


against boredom, even Sheiks struggle in vain

Hello Darwinian,

Yep, that Bloomberg link was sure short on critical info. 40 million cubic feet/day by 2013 just precisely Where in the water-flooded parts of Ghawar: N & S Ain Dar, or Shedgum, or Uthmaniyah [UTMH]? All of these Ghawar subfields? Just how big an area of all Ghawar can 40 million cubic feet cover? Plus, how soon until they project that they then need to ramp it even more to 400 or 800 million cubic feet/day?

Furthermore, will TODer JoulesBurn be able to track this CO2 infrastructure buildout by satellite? Or will KSA confidently back up their Ghawar cornucopianism by issuing all specific details and related photos to save JB many hours of work?

Is the first target area the anticline tops or more towards the outside boundaries to get crude from waterfront override bypassed pockets? IMO, that could be a key bit of info to discover. Or is all 40 million cubic feet being targeted for Ghawar's tarmat down the east side of UTMH? Lots of questions that KSA's PR-spokesman didn't answer to my satisfaction.

EDIT: what is the ERoEI for this CO2 project compared to other areas of Ghawar? What flowrate increase, if any, are they expecting from this CO2 injection program?

What flowrate increase, if any, are they expecting from this CO2 injection program?

Flowrate increase is impressive (in percentage), but only when production is far down from peakproduction. So for the insider these KSA CO2 programs means nothing more than that they admit that production has peaked in their key fields.

" What flowrate increase, if any, are they expecting from this CO2 injection program?"

difficult to say, because there are so many variables, but from the link i posted yesterday:


for all of the permian basin, 1.6 bcfd of co2 injection accounts for 170,000 bopd incremental production.

and before we all whip out our sliderules, co2 is recycled, so the 1.6 bcfd is not a continuous supply.

Link is no go, here's another bigger pdf from NETL: NETL CO2 EOR Technology Brochure

Roughly half of the
world’s CO2 floods
are in the Permian
basin, not far from
some of the biggest
natural sources of
CO2 in the U.S.

You don't say. CO2 injection was pioneered in the Permian 37 years ago. Wonder what KSA has for domestic sources, maybe current crop of oil burning power plants would be in close enough proximity to Ain Dar etc to provide some of this?

Weird admission as usual from SA. A production chart with arrows pointing to dates of jaw dropping statements would be a good visual.

what is the ERoEI for this CO2 project compared to other areas of Ghawar? What flowrate increase, if any, are they expecting from this CO2 injection program?

Or, are they doing the CO2 injection for the stated reason "carbon sequestration"? Perhaps it is an attempt to be ready (with action -or at least spinable action) for Copenhagen? Of course they might be doing it also or primarily for enhanced oil recovery, and they are using the climate change sequestration explanation as camoflage for the fact that secondary production on Ghawar is running out faster than hoped?

Speculation, of course, but a likely candidate is the northern tip of the 'Ain Dar sub-area:


Very mature, confined, limited fracturing, relaatively predictable.

Hello JoulesBurn,

Thxs for the speculation. Two questions:

1. Have you been able to gather any total #s on the quantity of ESPs & jetpumps installed in Ghawar or KSA in general? Recall my recent speculation on KSA's diesel shortage.

2. I know very little about CO2-injection. Could it quickly bubble up through or migrate past the waterflood by flowing through Discrete Fracture Networks [DFNs per Voelker Motherlode] so that the MRC horizontals start sucking CO2 gas instead of oil-stained brine?

Thxs for any reply from you or other expert TODer.

1) Electric submersible pumps (ESPs) are not just put on isolated wells, as you need to run power to them. Rough numbers in fields are:

Hawtah 170
Abu Sa'fah 90
Khurais: 200+
Safaniya 42

2) The flow of CO2 will definitely have the same issues as water. To free the stranded oil, it needs to reach it. But it will choose its own path from injector to the wells.

Is the introduction of CO2 at Ghawar considered a secondary or tertiary recovery technique? Did Pemex inject salt water at Cantarell to increase pressure, or did they go straight to nitrogen injection?

that would be called eor, enhanced oil recovery. the term tertiary recovery has been replaced by enhanced recovery. but in principal that would be tertiary recovery.

primary,secondary and tertiary.

i dont think pemex was injecting above miscibility pressure, so i dont think they did any repressurization prior to nitrogen injection.

repressurization to above mmp, minimum miscibility pressure, is a standard practice in co2 recovery (unless the pressure at the end of secondary is already above mmp).
mmp for nitrogen/oil is much higher than co2/oil mmp and is typically prohibitive because, injection pressure needs to be below frac' pressure.

as a general rule, the more similar two components are, the lower the miscibility pressure. as an example, gasoline is readily miscible in crude oil while methane has a relatively high miscibility pressure with crude oil.

Anyone know what the Iraqi Information Minister is doing these days.


I think Aramco is a perfect fit for him. Looks like he is in the UAE right now.

Comeback time for Baghdad Bob is on the horizon.

Hello TODers,

Colorado minimum wage to drop as living costs fall
...and for the Ponzi-men in Wall Street & DC, the only time their wage drops is when they are sent to jail, but that doesn't seem to happen much nowadays except for a few like Madeoff.

It took me a few reads to understand your misspelling of Madeoff. Nicely done.

And he's having a good time in prison too...

Madoff wins prison yard scuffle over stock market

Convicted Ponzi king Bernard Madoff was involved in a prison-yard fight with a fellow prisoner over the state of the stock market.

Eyewitnesses say Madoff, 71, got into a heated argument with another elder inmate about the financial markets before the disagreement turned physical.

Madoff, who is serving 150 years for the world’s biggest investment fraud, got shoved by the other inmate in the altercation. But Madoff shoved back even harder with both hands causing his attacker to stumble and lose his footing, according to the New York Post.

The stunned attacker then retreated, the report said.

The EIA's IPM, that was released Oct. 6, contained data for the first seven months of 09. The data shows 2009 world crude oil production to be less than the first seven months of 2004, 71,848 m/b/d to 72,0435 m/b/d in 04. So 09 crude production to date is less than all years after 2003 for the same seven month average.

Hello TODers,

As suggested before, 'TheOnion', a satirical website, doesn't stand a chance against Reality and how bizarre it can truly be twisted using Bernay's PR-techniques. Do you remember the earlier postings on the Indonesian mud volcano caused by a poorly managed drilling crew?

Indonesian tycoon voted Golkar party chief

JAKARTA — Controversial tycoon Aburizal Bakrie was elected to lead Indonesia's Golkar party Thursday..

..The billionaire businessman and outgoing welfare minister was elected chairman..

..."We've chosen someone whom we think is capable of regaining the people's trust in the Golkar Party and raising its image. Aburizal Bakrie is the answer," congress chairman Andi Mattalatta told AFP.

..A Bakrie group gas drilling company has been blamed for triggering a massive mud volcano that has been devouring land and homes in East Java since May 2, 2006, causing an estimated 4.9 billion dollars in damage and killing 13 people.

..independent scientists say the company was almost certainly to blame and warn that the volcano could continue to erupt for thousands of years.
When Mr Bakrie & buddies finally reveal the postPeak 'answer' to the Indonesian Overshoot, the people won't be very happy then. Consider his track record as Welfare Minister..

My guess is Bakrie's favorite toast is "Here's mud in your eyes", followed by huge guffaws of laughter.

POET's 14 minute Corn cob ethanol 'commercial'.
Still, lot's of facts--worth viewing.

POET says they think the US can eventually get 130 billion gallons of ethanol per year from corn(35 Gg) and cellulosic ethanol(85 Gg) to replace gasoline if we can eliminate the 10% cap on ethanol in auto fuel.


The western MSM once again shows its propaganda credentials but this time it is outdoing the tin foil hat crowd. Let's see now, Nord Stream will divide east and west Europe just how? Instead of receiving gas from the pipeline running through Ukraine they will receive it from one running into Germany. What is the difference? It is the same Russian gas but delivered at a different location. Isn't the leverage at the Russian end of the pipe? At least with Nabucco it is supposed to be filled with non-Russian gas. Nord Stream does nothing to undermine Nabucco.

What idiots are such articles aimed at?

Hello TODers,

First a repost on nursing home closings:

Nursing homes struggling across the state, many already in bankruptcy

Seventy-five nursing homes have shut down over the past decade in Wisconsin -- and administrators say more will follow if they continue to be underfunded.

Wisconsin is now ranked the worst in the country for reimbursing the cost of medical care to nursing homes and other elderly care givers.

Administrators say that's why 17 percent of nursing homes in Wisconsin are currently going into bankruptcy -- and why many more may follow...
Then the Final Step:

Indigent Burials Are on the Rise

Coroners and medical examiners across the country are reporting spikes in the number of unclaimed bodies and indigent burials, with states, counties and private funeral homes having to foot the bill when families cannot...
A repost of my earlier O-NPK 'embedded cost':

..Illinois is currently deep burying vital food input nutrients at a very high cost:


At $1,655/person and 10 lbs I-NPK equivalency: 200 people/ton X $1655/person = $331,000.00 per I-NPK ton.

State Govts should be rapidly moving now to reduce these costs by moving to Full-on Peak Outreach and O-NPK Recycling of the Dead...
...but sadly, they won't.

Nader does what the NY Times and boob tube cannot do-point out that the emperor has no clothes at all http://finance.yahoo.com/tech-ticker/article/352917/Nader-on-Obama-%22A-...

Hi, below is something my son wrote to me. I was wondering what your thoughts are.

Now is a confusing time in our country. Every expert seems to have a different opinion. We are in a recession? Yes, but its almost over-no, its just beginning. Are we spending too much? Yes we are, no we need more stimulus...and on and on. However the most ubiquitous concern seems to be about inflation. After how much we spent injecting liquidity back to the markets, it seems like a rational concern. "Concern" though would be an understatement. Overall there seems to be a genuine fear, an increasing worry that maybe in our haste to salvage our faltering financial system we may have haphazardly committed financial seppuku.

I'm not here to rule out such a scenario. Some of the brightest economic minds of our time are at work on this very problem and even they seem to have come to contradictory conclusions. My objective is not to convince you one outcome is more likely than the other, as I mentioned before, there are much more qualified people to make those cases. But I do think its important that we see all sides and, perhaps most importantly, understand the debate that's taking place. However, given the near panic that seems to have gripped quite a few people over spending and inflation, it seems worthwhile to look at some alternate possibilities and to explain why not everyone is of the opinion that the US economy is near collapse due to inflation. This is one chart that seems to everywhere. Its a chart of our national debt and, as you can see, illustrates the dramatic rise of our debt in relation to past years.

The chart isn't displaying any false data, but it is misleading data. I have to assume that the reason most people are looking at this chart isn't because it illustrates our national debt, but because it conveys sense of urgency about that debt and about our ability to repay it. In this sense the chart fails miserably. The reason the chart doesn't paint an accurate picture of our economic condition is because it fails to take into account the growth of our gross domestic product (GDP). In other words, though the chart accurately shows our debt, it doesn't convey how much we can afford in relation to that debt.

The debt is higher in the year 2001 than 1990, but we are also generating much more revenue in 2001 than in 1990. In order to gain an accurate perspective from which we can draw a conclusion about our economy, we have to judge America's financial situation by looking at our debt while simultaneously looking at our GDP and it's growth. This gives us our debt to GDP ratio. To ignore GDP growth and simply assume more debt is bad for the economy is like saying Bill Gates or Tiger Woods are worse off financially than a busboy because the busboy has less debt. The concept exists in residential lending as well, only its called an individual's "debt to income ratio" or DTI. This chart gives us a more accurate representation of our national debt.

As you can see from this chart, our debt to GDP ratio is definitely climbing. However, we are not in the new territory that the other chart would have us believe. Today it looks like our debt to GDP ratio is around 80%, 50% higher than the lows under Carter and 30% lower than the highs during world war 2. Some would argue that it was the deficit spending before and during world war 2 that took is from the great depression to the booming decades after. Now that we know we are sitting at 80%debt to GDP we can look around the world to see how we compare to other countries.

According to the CIA, America has the 23rd highest debt to GDP ratio as of 2007. Japan has the second highest at 170%! France, India and Italy all place above us. As I mentioned before, I'm not advocating deficit spending. I'm not saying our debt level is acceptable. I'm just trying to understand the dilemma. After all, if we are concerned we are nearing a collapse of the US government due to unprecedented deficit spending, this information causes me to ask questions. I'm not an economist. I can't refute the notion that some kind of inflationary collapse is imminent.

But I would ask some questions to those who say it is. For example: Why us and why now? How can Japan thrive with a debt to GDP of more than twice ours? Why didn't such a disaster happen when our own ratio went much higher than it is today for around 10 years? How can we explain the increase in economic activity in the years after we reached those highs in debt? What exactly is going to trigger such a collapse? After all, Jefferson assumed such a thing would happen the second we moved to paper currency. People said the same thing would happen when we went off the gold standard, and when our national debt first hit $1 trillion. These are the questions that come into my mind. I'm not suggesting that there aren't answers for each of them, but I haven't been able to find them so far.

There is another concept we should examine and that's the concept of low interest rates causing inflation. I'm not going to get into the complex macroeconomic calculations. Frankly, such equations go whizzing over my head. But there is one we should look into. In 1885 Simon Newcomb and Irving Fisher developed the Quantity Theory of Money which can be expressed simply as MV=PT. The supply of money (M) times velocity of circulation (V) equals Price (P) times real output (T). In this original form velocity of currency (V) and T (real output) are fixed, thus any change in monetary supply (M, i.e. the fed dropping interest rates) has a proportional impact on price level. Basically this equation is saying if the Fed drops rates and pumps more dollars into the economy, the dollar as a currency loses some of its purchasing power.

I don't think anyone disagrees with that, but there was one person who had something to add. His name was John Maynard Keynes. Keynes postulated that the the velocity of circulation (V) isn't constant. Put simply, velocity of circulation is the rate at which money changes hands. If the velocity of currency slows it means people aren't spending money for whatever reason, they are saving it. This happens in recessions and is indicative of slowing economic activity. Keynes argued that during the slow economic times, though the Fed may increase the monetary supply, velocity is also slowing; people are saving their money. This decline in velocity of currency, as we are seeing today, could potentially offset the rising monetary supply. According to Keynes, inflation is unlikely to rear its ugly head until economic activity increases. Once again, I am not at all an authority on the quantity theory of money, but it appears Keynes has a point.

These are all just a few points to consider. I'm investigating this myself and haven't made up my mind yet. But I think its important that we all comprehend the situation our country is in, no doubt its an important time. I hope this article provided you with more information because we all know cable news doesn't do a very good job of that.