Oilwatch Monthly October 2009

The October 2009 edition of Oilwatch Monthly can be downloaded at this weblink (PDF, 1.37 MB, 33 pp).

Figure 1 - EU-27, United States and Chinese oil consumption from January 2004 to August 2009

The Oilwatch Monthly is a newsletter that is available free of charge with the latest data on oil supply, demand, oil stocks, spare capacity and exports.

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Latest Developments:

1) Conventional crude production - Latest figures from the Energy Information Administration (EIA) show that crude oil production including lease condensates increased by 715,000 b/d from June to July 2009, resulting in total production of crude oil including lease condensates of 72.42 million b/d. Crude oil production in the EIA International Petroleum Monthly for June 2009 was revised downward from 71.76 to 71.71 million b/d. The all time high production record of crude oil stands at 74.75 million b/d reached in July 2008.

2) Total liquid fuels production - In September 2009, world production of all liquid fuels increased by 320,000 barrels per day from August according to the latest fgures of the International Energy Agency (IEA), resulting in total world liquid fuels production of 84.92 million b/d. Liquids production for August 2009 was revised downwards in the IEA Oil Market Report of October from 84.88 to 84.60 million b/d. Average global liquid fuels production in 2009 up to September was 84.61 versus 86.6 and 85.32 million b/d in 2008 and 2007.

3) OPEC Production - Total liquid fuels production in OPEC countries increased by 120,000 b/d from August to September to a level of 34.28 million b/d. Average liquid fuels production in 2009 through August was 33.66 million b/d, versus 36.09 and 35.02 million b/d in 2008 and 2007 respectively. All time high production of OPEC liquid fuels stands at 36.58 million b/d reached in July 2008. Total crude oil production excluding lease condensates of the OPEC cartel increased by 120,000 b/d to a level of 28.92 million b/d, from August to September 2009, according to the latest available estimate of the IEA. Average crude oil production in 2009 through September was 28.62 million b/d, versus 31.43 and 30.37 million b/d in 2008 and 2007 respectively. OPEC natural gas liquids remained stable from August to September 2009 at a level of 5.36 million b/d. Average OPEC natural gas liquids production in 2009 through September was 5.05 million b/d, versus 4.66 and 4.55 million b/d in 2008 and 2007 respectively.

4) Non-OPEC Production - Total liquid fuels production excluding biofuels in Non-OPEC countries increased by 190,000 b/d from August to September 2009, resulting in a production level of 49.00 million b/d according to the International Energy Agency. Average liquid fuels production in 2009 through September was 49.41 million b/d, versus 49.32 and 49.34 million b/d in 2008 and 2007 respectively. Total Non-OPEC crude oil production excluding lease condensates increased by 418,000 b/d to a level of 41.63 million b/d, from June to July 2009, according to the latest available estimate of the EIA. Crude oil production in the EIA International Petroleum Monthly for June 2009 was revised downward from 41.24 to 41.21 million b/d. Average crude oil production in 2009 up to July was 41.52 million b/d, versus 41.32 and 41.80 million b/d in respectively 2008 and 2007. Non-OPEC natural gas liquids production decreased by 6,000 from June to July to a level of 3.28 million b/d. Average Non-OPEC natural gas liquids production in 2009 through July was 3.39 million b/d, versus 3.65 and 3.79 million b/d in 2008 and 2007 respectively.

5) OECD Oil Consumption - Oil consumption in OECD countries increased by 413,000 b/d from June to July and decreased by 359,000 b/d from July to August, resulting in a consumption level of 43.46 million b/d in August. Average OECD oil consumption in 2009 through August was 43.83 million b/d, versus 46.10 and 47.68 million b/d in 2008 and 2007 respectively.

6) Chinese & Indian liquids demand - Oil consumption in China increased by 205,000 b/d from June to July and decreased by 115,000 b/d from July to August, resulting in a consumption level of 9.28 million b/d in August 2009. Average oil consumption in China in 2009 through August was 7.84 million b/d, versus 6.92 and 7.29 million b/d in respectively 2008 and 2007. Oil consumption in India decreased by 274,000 b/d from June to July and 52,000 b/d from July to August, resulting in a consumption level of 2.64 million b/d in August 2009. Average oil consumption in India in 2009 up to August was 2.86 million b/d, versus 2.60 and 2.43 million b/d in 2008 and 2007 respectively.

8) OPEC spare capacity - According to the International Energy Agency total effective spare capacity (excluding Iraq, Venezuela and Nigeria) increased from August to September 2009 by 190,000 b/d to a level of 6.74 million b/d. Of total August spare capacity, Saudi Arabia can produce an additional 3.45 million b/d within 90 days according to the IEA, the United Arab Emirates 0.57 million b/d, Angola 0.23 million b/d, Iran 0.22 million b/d, Libya 0.22 million b/d, Qatar 0.14 million b/d, and the other remaining countries 0.80 million b/d.

Total OPEC spare production capacity in September 2009 increased by 110,000 b/d to a level of 3.81 million b/d from 3.7 million b/d in August, according to the Energy Information Administration. Of total September spare capacity, 2.70 million b/d is estimated to come from Saudi Arabia by the EIA, 0.21 million b/d from Qatar, 0.20 million b/d from Angola, 0.30 million b/d from Kuwait, 0.30 million b/d from the United Arab Emirates, and 0.10 million b/d from Iran. Other countries contribute no spare capacity.

9) OECD oil stocks - Industrial inventories of crude oil in the OECD in August 2009 decreased to a level of 985 million from 1001 million barrels in July according to the latest IEA statistics. Current OECD crude oil stocks are 26 million barrels higher than the five year average of 959 million barrels. In IEA's August Oil Market Report, a total stock level of 1011 million barrels was tabulated for July; this has been revised downwards to 1001 million barrels in the October edition. Industrial product stocks in the OECD in August 2009 increased to 1471 million from 1452 million barrels in July according to the latest IEA Statistics. Current OECD product stocks are 72 million barrels higher than the five year average of 1399 million barrels. In the August Oil Market Report of the IEA, a total stock level of 1459 million barrels was tabulated for July which has been revised downwards to 1452 million barrels in the October edition.

Figure 2 - OECD Crude Oil Stocks from January 2002 to August 2009.

Figure 3 - OECD Oil Product Stocks from January 2002 to August 2009

Figure 4 - World Crude Oil Production from January 2002 to September 2009

Figure 5 - Non-OPEC crude oil production from January 2002 to July 2009

Figure 6 - OPEC crude oil Production from January 2002 to September 2009

Figure 7 - World liquid fuels production from January 2002 to September 2009

Figure 8 - Non-OPEC liquid fuels production from January 2002 to September 2009

Figure 9 - OPEC liquid fuels production from January 2002 to September 2009

Always interested in data to see what follows. Lots of noise over the last seven years with a general increase in oil and liquids production to 2008 worldwide. It appears that there is more capacity due to drop in demand. My question is whether this drop in demand will be followed by a further drop in production which is more than cyclical due to recession. Is this drop in demand and production an unprecedented trend since the onset of the oil age, or is it an anomaly?

That's a good question. I think it's due to recession. However, the production ability is due to the high price of oil...

As time goes on, the price will go up. If the economy recovers, the price will go up. The only real solution is alternative forms of energy.

I wouldn't say the drop in demand and production is unprecedented. Look at the time period around 1980.

That's not saying that the reasons for that dip in oil use are the same or even similar to what's going on now.

Any guesses as to how long this plateau will hold out? To the best of my knowledge, the 2008 peak will apparently not be exceeded, because of the plunge in new investments in further drilling during the recession. I'll guess, along with Rembrant Koppelaar, that the plateau will hold out until roughly 2012, although he predicts that it will continue at +/-80 MBd until 2015. I'll also guess that the next price spike will come next year.

It's hard to get a handle of the scale on these short time duration plots.

Here is the crude oil plotted on a historical plot with a longer range forecast. Note that this is only crude oil, not all liquids. Look closely at the small inset pointed at by the arrow which is the range of Rembrandt's plots.

This kind of view puts things in perspective and all the little monthly glitches get swamped out by the greater trajectory.
(from http://www.theoildrum.com/node/3287)

Look closely at the small inset pointed at by the arrow which is the range of Rembrandt's plots.

I was referring to the presentation Mr Koppelaar gave at the ASPO 2009 Conference, with his analysis of oil megaprojects coming online.

Here is the link to the presentation:


On Page 6 there is a graph which stretches the plateau out to 2015, though this seems optimistic compared to other graphs.

Rembrandt uses a bottom-up kind of analysis which I do not usually perform. I prefer to start from a model of discovery and production and then use historical trends to determine rate parameters and use that to extrapolate. The peak as I showed will occur if the current extraction rate continues as shown below. The plateau extends only if the extraction rate increases (or even more temporarily, if excess inventory gets used). Inferring from the model, the world woke up during the 70's and started to modulate the excessive extraction and consumption rates that occurred in the past. We could potentially return to these levels of extraction and this could extend the plateau a few years, and by adding the alternative liquids, I can certainly justify a longer plateau for all liquids. Rembrandt uses a decline rate of 4.5% (I have an extraction rate rate of 4%) and then increases that to 6.5% over the next 5 years. That would put it at previous levels last time seen prior to 1960. It certainly could extend the plateau for crude oil for a couple of years. But the problem then is that the decline will be that much sharper afterwards.

I will also assert that all new discoveries will just produce noise on the curve and this will not modify the overall trend. Except for the possibility of a Black Swan, which I consider remote because the discovery model is already a "fat tail" probability distribution.

It certainly could extend the plateau for crude oil for a couple of years. But the problem then is that the decline will be that much sharper afterwards.

Given the short-term vision of politics and the free market, perhaps this is the choice that will be made. I dread the long term aftermath for sure.

Thanks, rale. Every once in a while, we need to be reminded that we are little microbes eating away at the surface of a speck of clay, which revolves around a modest sun, which humbly takes its place in a greater galaxy, which itself is one of infinitely many others just like it.

Fortunately, most men are protected from this wisdom since birth:

"Nature innoculates us with egotism that we may consent to live. Who could bear to see himself in the light of eternity?" - Will Durant, Historian, 1885-1981

Thanks, I needed that.

I see your Monty Python and raise you a Symphony of Science - 'We Are All Connected' (ft. Sagan, Feynman, deGrasse Tyson & Bill Nye)


good stuff, hadn't seen the symphony before, good reasons to hope we can somehow get this civilization through what appears a heck of bottleneck somewhat intact...

...John Cleese just lifting his head as the walls shatter...genius

as long as hope and connectedness are in thread I throw out a tidbit that I at least thought incorporates a worthwhile use of jet fuel

hope some enjoy

Rembrandt’s plot may be a small inset, nevertheless I find them interesting. Isn’t Figure 5 confirming that Non-OPEC C+C, according to the EIA, peaked in December 03. Here we are almost 6 years later and the steady decline is undeniable.

Figure 8, Non-OPEC liquids is not as clear, since the IEA is showing a liquids peak in the middle of 08, much later than the EIA. However, since then we are down about 1 M b/d. Can anyone see how the Non–OPEC countries can increase their production to close that 1 M b/d gap and exceed it significantly?

I think that we need to keep publicizing the peaking of Non-OPEC C+C and almost certainly Non-OPEC liquids to the deniers of peak oil. Good building block data like this forms a good foundation for peak oil theory and is hard to deny.

Peaking of Non-OPEC C+C and peaking of Non-OPEC liquids are steps 1 and 2 to the peak/plateau region we are in now.

The peaking of Non-OPEC oil is just one step removed from the world peak and hopefully the deniers will finally see the light.

If one believes the spare capacities reported by the IEA and EIA, world crude oil and condensates production could increase to something between 79.1 Mb/d and 76.2 Mb/d within 90 days upon sufficient demand.

IMO, it only makes sense that the production that is shut-in is generally high water cut production, with high lifting costs. Some of this stuff was probably 90% water cut production--which might be 95% water cut production when and if they try to bring it back on line, because of ongoing depletion. And the EIA is estimating the 2009 worldwide annual decline in demand at about 2% down from 2008.

Also, one of the thing I am wondering about is the cumulative effect of smaller net oil exporters showing an accelerating rate of decline in net oil exports. Normally, smaller producers don't have a large effect on production (going up and down), but if the cumulative effect of a lot of smaller exporters showing accelerating net export decline rates might be having a significant effect.

In any case, IMO we are in the early stages of a long term decline in net oil exports, with a long term accelrating rate of decline.

Does anybody know where the spare capacity goes ? This seems like a lot of oil to store. I Don't know about you guys but I hope somebody is not double counting mixing in SC with later production down the road. Double counting is just part of Human nature.

I suspect the economic effect of super-high oil prices will help drag out the plateau for years, but it's going to be a bumpy ride. I expect to see $150-200 oil by mid 2010, and then enter into the super-high (i.e. $300-$1000) phase by 2012-2015. All of which will control consumption.

The worrying figure is the huge spike in Chinese consumption this year - if that continues for just a couple more years we can wave goodbye to any spare capacity.

It's always 'fun' speculating on the future oil price but I suspect that any rise to the $150+ range would cause an already weakened US Economy to plunge back into recession.
I suspect as oil rises into the $100+ range OPEC will on their increasingly turn on the taps -until they can't anymore.

I think we probably have 2-3 years of this sort of moderation before we see another uncontrolled 'super-spike' - $200+ perhaps, resulting in another recession.
I still think 2012 is looking like a good year for this blow-up... Not really sure if this will be the PO Ephiphany moment, depends on what exactly blows up, might be spun as another speculative binge or financial/banking crisis...

-If you look back at the Carter 1970s period / fireside video it wasn't until 1978 that they admitted there was an 'energy problem'.


P.S. I'm here in Phuket Thailand and am seeing a worrying trend: lots of big Pickups and SUVs. Perhaps a few more Australians and Russians than last time too...

gee Obama will be trying to get re-elected 2012, should be an easy year to write headlines

P.S. I'm here in Phuket Thailand and am seeing a worrying trend: lots of big Pickups and SUVs. Perhaps a few more Australians and Russians than last time too...

That'll be all the kiddy fiddlers getting their low-risk kicks before the airfares get too expensive...

The worrying figure is the huge spike in Chinese consumption this year - if that continues for just a couple more years we can wave goodbye to any spare capacity.

Not to mention that demand within the producing countries themselves is increasing, eating away at exports.

shox -- I see that quick spike in Chinese consumption as a good indicator of the great advantage the China has over the US (and most other countries): their energy industry is controlled by a single entity: the gov't. Why wouldn't their consumption shoot through the roof when oil drops from $147/bbl to $38/bbl? They have trillions of US $'s to pay for energy. The US couldn't take advantage because our industry is privately owned and the down turn in prices combined with an already badly damaged credit market left the majority of companies impotent. Could the US gov't have intervened? Not likely. On a good day the relationship between the gov't and the oil industry is poor. On a bad day it's quit adversarial.

When oil prices dropped China's oil industry (with the full support and capital of their gov't) charged into the global oil market and continues to gobble up every every energy resources they can get their hands on. And the US response: hire Dr. Chu (a very smart man, no doubt) who is busy forming committees to study the problem. I'm sure in a few years the gov't will come up with a few plans. Also, don't misunderstand: I'm not advocating our gov't teaming up with our oil industry. Surviving the cyclic nature of the industry is difficult enough without "the gov't is here to help."

I suspect it is more the case that the US companies were so weakened by the recession that they couldn't snap up the cheap oil. China was far less affected and therefore has been on the front foot for the last 12 months.

If oil gets back to $120-$150 again soon, it'll be interesting to see whether the Chinese keep increasing consumption. My gut feel is that they will - if only from domestic auto demand rising at a breakneck rate. The middle-class Chinese might be a little perturbed by $10/gallon gasoline (rather than, say $5/g thus far this year), but it really isn't going to stop them driving or wanting to drive. Many of them haven't had the luxury/curse of getting used to cheap oil.

In the UK the price of petrol has just reached about £1.10/litre, which is about $8/gallon at current exchange rates - and the roads are as busy as ever. A small rise leads to a lot of moaning, but it takes a huge rise to stop motoring.

I think it would need to reach £2/litre for most people to seriously think about not driving - the alternative costs (public transport) are just so much more expensive. Given the way fuel duties and taxes work here, that implies something like $250-300/bbl oil...

i think it's about time that we recognize that the Chinese are buying up everything that can be bought -excepting paper-as fast as they can get rid of PAPER -ours. without crashing the market for Yankee debt.

Why some should still refuse to see this, as obvious as it is, is beyond me.

singo -- Exactly my point. Companies, including NOC's, with producing fields and other properties in development were forced to sell all or part of their interests in order to keep moving forward. How much future increased oil prices might slow up the Chinese economy remains to be seen. I can't offer a sense of magniture but China's efforts to tie up oil/NG reserves not only allows them access but also protects them from price spikes to some degree. For example, 2 years from now oil might spike to $140/bbl again. But at that point X% of China's oil was acquired years earlier at $30/bbl. I haven't seen anyone try to quantify how much production/long term purchase contracts China has tied up. But the $ amount is well into the hundreds of billion. Add that to the increase ownership of refineries, including those supplying the US market, and they may keep on trucking quit well with higher future prices.

"Chinese officials have said they want to use a fall in prices over the past year to stock up on crude oil, since China depends on imports for around half of its crude oil needs, a proportion that is expected to continue growing.

"They have also said they intend to stockpile 3 million tons of oil products this year, a goal which was dismissed as practically impossible in May by a researcher at a think-tank run by the country's top oil refiner, Sinopec Group."


Rockman, OT but I am looking for the posted conversation you had with a former office mate of Hubbert:
This is the only reference I had:

You may have also read my post re: a conversation with Hubbert's former office mate: According to him Hubbert never expected many to appreciate his work or even care for the most part. Basicly just something he thought was a cool exercise.

Any keywords I can search on? (as I don't want to impose too much)

Web -- I couldn't find that post either but there wasn't much more meat to it. He said that Hubbert didn't think management would either really understand his work or, if they did, would act upon the info. I think he was implying the relative short time frame management tends to relate to. He did say that Hubbert never expected the public to grasp his message. He didn't think most in the business would either.

I can call Bob any time. You have any questions in particular?

Nothing in particular. I was just intrigued that Hubbert treated his analysis almost like a hobby. That is essentially the same thing that I am doing, and perhaps many others on TOD. It's a sidelight, yet the analysis seems to have some deeper implications. Kind of an odd position that Hubbert found himself in.

Web: When I started in 1975 the research labs with the majors were still going strong. I'll have to ask Bob if he and Hubbert were in the lab or working in one of the other divisions. The lab guys had a good bit of flexibility as to their direction. But, if you weren't aware, after the oil bust of the 80's the research labs at the majors almost completely disappeared. Since then the companies have increasing let the service companies lead the way in technical advances. Even to the point where the more activity operators kept service company personnel officed in house. The deal: the service company pays the salary and the operator uses their services. Truly a symbiotic relationship. And it's progressed to the point where the most experience/skilled folks working on an oerator's well aren't employees. This is especially true at the well site. In 2008 I was on a DW GOM well that cost the operator $150 million. Of the 140 souls onboard while drill this well not one was a company employee. We were all subcontractors/service hands.

Not a situation seen only in the oil patch. I bet you've heard stories about some of the high tech systems deployed on Navy vessels which are actually operated by civilian contractors because the Navy can't hire/retain enough talented tech types.

A personal view of Hubbert: two weeks ago I brought in a consultant to advise me on a new project. An old fart even older than me. Turns out he shared office space with Hubbert while he was generating his model. This guy dropped some interesting points. He was till sharp as a tack and I trusted his memory. Hubbert said he didn't really expect management to make use of his model. Not so much that they wouldn't understand it or accept it but that the time frame was far too distant for management to be concerned with. He apparently didn't expect the public to be aware of his work. And if they did read about it they wouldn't be able to comprehend the implications. He said neither Hubbert nor any of their cohorts considered his curve to be any big news. They had all been experiencing the ever increasing difficulty in exploring for new discoveries. As I've mentioned before PO is very old news inside the oil patch...decades old. We never called it "PO" though. It was just the reserve replacement problem. Essentially a no brainer since at least the 1970's when my career began.

out of the SA article, obviously I'm stalling all I can to keep from more unpleasant work, I will butt out.

Thanks, I had seen that before. That is the one I guess Rockman was referring to.

Some caution is in order when estimating a super-high price for crude oil. If the price rises due to inflation or hyperinflation, then the high price is possible. If you are thinking inflation adjusted dollars, then $1,000 per barrel while the U.S. consumes 19 Mb/d is $6.9 trillion per year, which is nearly 50% of U.S. GDP. I think the economy would deflate causing demand for crude oil to decline drastically before the price would rise this high. There was a thread here on TOD concerning the maximum possible peak price which concluded ~$500 / barrel (inflation adjusted to 2009) or 25% of U.S. GDP (if maintained for a year), would be the highest possible spike. Economies can not bear too much stress.

Yep between 400-500 is what I come up fairly easily.
In inflated dollar i.e a 50% devaluation this is 800-1000 a barrel.
I can't see any reason to not assume something on the order of 50% devaluation of the US dollar vs oil if oil production is dropping rapidly.

This suggest that if say oil is declining rapidly at least 20% of the price increase is from devaluation. One of my pet peeves is that dollar devaluation vs oil and increasing prices are the same thing i.e both happen simultaneously to claim the price increased only because the dollar got weaker is incorrect as as oil gets more expensive the dollar gets weaker as do most of the fiat currencies. The reason is fairly simple the higher oil goes the less chance that debt will be paid unless you print like mad. Everyone has to devalue their currencies to effectively default on existing debt as oil production slows. These are simply not independent variables but locked in a explosive positive feedback loop. The only way to break it is to rapidly increase interest rates not to prevent the devaluation but to halt the creation of new debt which just adds nitro fuel to the fire.

Underlying all of this is the obvious fact that a oil poor world can't have much debt thats not significantly secured by valuable assets and rock steady in price. Your former gold back currency.

On that note I get a kick out of the fact that people think gold won't become a money system again because our economy is to large well thats easy to fix reduce it till gold works. Longer term gold will in my opinion become the prime way international trade is conducted esp since in a oil depleted world the ability to mine the remaining marginal ores is severely restricted so for the most part the gold supply effectively becomes constant. It will then of course deflate rapidly i.e gold buys more every year but assuming we retain the concept of technical innovation then gold deflation will effectively match real technical advances. Thus a ounce of gold will always buy the latest widget.

Thus assuming we don't go brain dead a highly deflationary currency will do well. And of course this will obviously spur isolation of trace minerals from seawater so eventually the gold supply will creep up. And note this is only for international trade and even then gold certificates work most of the time as long as the accounts balance to zero and gold does not become a common currency then its a perfect money. The problem in the past was gold was used for many transactions where it simply was not needed there is no reason for people that share the same bank to engage in gold transactions. Thus the mistake in the past was using gold for transaction where a third party could ensure the transaction succeeded. In the future gold will be reserved for transaction between disjoint economic spheres where no established third party can ensure the transaction completes.

In a sense in the past the traders abused the use of gold for long range transactions locally treating people they knew like strangers.

Simply moving to a forced exchange to gold certificates when translating fiat currencies would solve 98% of our fiat currency problems. The actual volume of transactions using gold need not be large simply significant and place in the right place just like the bank reserves in a fractional reserve lending system are power money a move to gold for cross currency trade is depowering money.

Moving to some sort of certificate of gold reserves would be the logical thing to do,however,past U.S. history would seem to indicate that this policy is not congruent with Federal Governmental domestic policy.It is a well known fact the U.S. Government under Executive Order 6102 confiscated gold from the general public in exchange for $20.67 USD per troy/oz back in 1933 due to the perceived threat the Depression was having on the actual credibility of the dollar.
In effect, the government was dictating to the people that the USD,which had become a 'fiat' currency at this point in US history, was to be the only means of transactions whether the general populace agreed to these terms or not.It was a non-negotiable deal...

By 1971 France and England were perhaps the largest holders of USD in reserve currencies at the time, and were becoming quite nervous over the value of their US dollars.Realizing that the Vietnam War had for all intents and purposes bankrupted the U.S. Government (from a purely balanced economy/which coincidently coincided with the peak in oil production)they began to demand the promised 1oz of gold for every $35 dollars of U.S. currency they held.
At this point in time the Nixon Administration, with great effrontery to be sure,closed the bank window and abruptly reneged on the promise to back the USD with gold.The backing of the USD with gold internationally was a stipulation that the international community agreed to in accepting the USD as the global reserve currency as the new financial order was being established following the chaos of WW 2 and the obvious need for a new world order.

At this point in time, the entire world was forced to accept a fiat currency as the norm.

Like I said, money backed by gold is a great idea and would actually curtail inflation greatly as far as currencies go.
I find it hard to believe, however, that the US Government, in obvious collusion with big banking interests, would actually retreat to such a system.
It is quite evident throughout history that fiat currencies ALWAYS inevitably fail, and because of the overwhelming ubiquitous use of the USD in world trade, the collapse of the dollar is going to have devastating effects globally.
It should be obvious to the wise that we are headed rapidly to a cashless system that will eventually use RFID computer chip technology as a means of transactions.In this way everthing can be monitored efficiently and the global corporate system can operate smoothly with stringent controls.

The thought of this type of centralized power should make most uncomfortable save a global threat or two; perhaps even peak oil itself, or as Reagan once said at the UN no less "...imagine if we were threatened by a power not of this earth...an extraterrestrial threat..."

If anyone finds this hard to believe just Yutube 'Reagans speech at the UN'.I believe he gave that speech in 1984.

It should be obvious to the wise that we are headed rapidly to a cashless system that will eventually use RFID computer chip technology as a means of transactions.In this way everthing can be monitored efficiently and the global corporate system can operate smoothly with stringent controls

sorry don't see where this changes a thing, RFID is merely replacing bar codes and magnetic strips in the system you envision. There will be some sort of value unit, and it won't be locked into a straightjacket with any commodity as the controls will be as manipulable as the ones in place now, because that allows power to accrete fastest to those most involved in the game. The OECD economies are essentially cashless now, the volume of digital transaction so dwarfs those made with actual cash. The digital markers could be called oreos or cabbages it makes no difference as long as there is aggreement in how to manufacture them through debt creation. This system isn't going away as long as any sort of world economy is able to maintain itself in any fashion, and the RFID system you mention assumes that maintenance.

You are correct insofar as the amount of digital transactions that are being used everyday as compared with cash,particularly in America.What I was trying to infer is that each individual will be assigned their own chip that more than likely will be imbedded into a plastic ID card,but will eventually be implanted into the individuals flesh.
If this sounds appalling - believe it or not - it is already being done on a small scale within certain companies and with the military.
That kind of control is very unsettling to my generation, but perhaps maybe not so much to the highly technocratic youth of today.Nonetheless it smacks of people being analogous with cattle.It would take quite a crisis to bring about such a paradigm shift within the minds of most people, but people are usually willing to make drastic changes in the face of a perceived threat to their way of life;which does appear to be close at hand.

I understood your implication, but the RFID chip is just like having a debit or credit card embedded, a biometric system could be used as easily, unless of course tracking every human at every moment was critical to the system.

Whatever 'currency' system is used will have no bearing on the monetary system controls themselves. Let this one explode or implode or whatever it is going to do and see what replaces it. Massive intervention in something so huge and complex usually brings its own disaster, so we are likely as well off following through with the explosion/implosion or whatever potentially under way. Plenty of gold standard economies have crashed and burned in the past because of the lack of flexibility the standard imposed. Lets see what the failure of this new system brings, how long it takes and what emerges from it, a little variety will be good for future historians.

Back to the RFID. Wasn't Jimmie Coburn being hunted by every intelligence agency on the planet in the old movie 'The President's Analyst.' In the end the real enemy was the phone company because they were planning to embed a phone in everyone's brain at birth or in vitro--I can't remember which, that is just a step or two away from blue tooth earpiece. Embeds or some biometrics ID system acting as such is a likely progression of the system now running, if we get that far and don't vaporize or just plain overheat the planet first.

Yep whats really interesting is if the US had been truthful about its money situation it would have done two currencies one internally that was fiat and a international dollar backed by gold.

It could have even limited the gold certificate to interbank or even central bank/ central bank transactions.

The reason for the gold back currency was to provide a store of wealth it did not have to be in broad circulation just enough so it could have served as a benchmark to measure fiat inflation.

One of my big problems with inflation as its presented is its measured assuming a sort of flat base however technical progress and efficiency gains actually suggest in a normal market prices are falling in general over time i.e as we get better at making stuff the price falls. The relatively unfettered electronics industry shows this beautifully. Whats funny is it seems that the move to cheap labor instead of automation seems to put a bit of a price floor in as the factory efficiencies don't increase like they should. If we had gone the automated route similar to Japan then the reinvestment in automation would have accelerated the decline in prices.

One has to wonder how the move to cheap credit and steady inflation effected our industrial processes. Personally I think it results in a desire to keep fixed costs low and output high since your focus is on servicing your debt your goal is to simply make X amount over your debt service costs and given you may have taken debt out for a long period of time i.e 20 years you won't make capitol improvements while paying off your original costs.

I'm not convinced that moving towards having large amounts of debt was good for companies in the long run.
At first of course it looks great you get your factory and start making money steady inflation allows you to raise prices but after that first little bit...
It does not work if you need to improve your process.
It does not work if a competitor builds a new factory and undercuts your prices.
Economic downturn ..
In fact it starts to fail the moment you look at anything but the rosiest scenario.
One would think prudent companies and prudent nations would have cleaned up on ones trying to inflate and spend.

They did not.
First of course monetary inflation gives the debtor a bit of advantage if prices are rising to match inflation as debt is paid off in cheaper currency. The prudent company is faced with its savings constantly devalued and competition for investment is vigorous with only risky assets beating inflation. I.e its forced to invest in its risk taking competitors to even manage to break even.

However this hides the real truth i.e how the game really works.

You nailed how it really works because when the US went off the gold standard CB around the world had almost all their assets in USD !
They where then forced to buy our relatively high yield debt to offset our fiat inflation and its off to the races. As we printed and ran negative trade balances the piles of USD outside the US grew even more forcing even more risk taking investment. Of course high yield investments generally give good returns while everything is expanding so it all looks good. Even a mild recession is of course horrible but these are solved by expanding the debt yet even more and offering government debt to offset losses.

The trick that made it all work turns out to be the bait and switch leaving everyone else holding the bag.

Of course after this everyone else got on the fiat money train and the rest is history.

Something that seems impossible i.e the ability to expand debt without limit suddenly becomes possible.
And whats really wild is that the willingness of countries to devalue their currencies to engage in trade with the US drives the system even more. Since it makes the steadily worthless USD the best of the bunch as others race to lower their currencies to be competitive.

The system is completely inverted the most worthless currency becomes the strongest as external central banks create huge piles of dollars that they exchange for US Government debt in order to keep their own currencies weak.

The US keeps internal demand high esp for the rising tide of imports by steadily lowering credit standards !
On top of this various moral hazards such as defense and bloated government agencies financed you guessed it with treasury debt serve to soak up workers as our real industries lose competitive edge.
Think welfare state on steroids with most of the welfare moms driving SUV's and living in suburbia not even aware that their welfare check is directly or in directly effectively a government handout.

Only a very small number of businesses eventually are functional without the steady influx of funds from government agencies.

Obviously at this point taxes don't work since all your primarily doing is collecting back a percentage of government outlay's from deficit spending. This causes deficits to explode at all levels of government and if your willing to look makes the fact that the US is really one big welfare state obvious. The tax revenue is for the most part just an accounting trick to make people think they are doing something useful.

Real money only comes in from the federal government to the state and local government forcing them to give up even more rights in order to keep the game going.

Oil or more correctly cheap oil plays a critical role esp since most oil producers have some of the largest piles of USD around the stead influx of oil literally greases the economy and allows it to detach from resource constraints.

If its starting to look like a magical fairytale land then your getting the right viewpoint.
So much of it is artificial trying to understand whats real and whats fake becomes almost impossible. The entire system is so incredibly warped the distortion itself drives the system. Its the financial equivalent of a black hole with every action working in such a distorted set of rules nothing is real anymore.

Except oil.

Eventually of course even this crazy system starts hitting resource constraints and reality starts to intrude.
The VAST majority of people including many readers of the oildrum are so embedded in the warped system that they assume that all thats needed is a bit more deficit spending aka investment in alternative energies and everything will be ok.

However if you look at the depths of the insanity we have created you realize this is impossible not even low probability but completely impossible. The system can't afford to not grow for long. And real investment means nothing since the balance sheet is so distorted.

The US would have to dramatically devalue its Dollar to fund a conversion not only to alternatives but to a resumption of growth to keep the game alive. Other countries of course have to follow suite and devalue their currencies to keep the trade imbalances going and of course the US has to radically expand its make work program to keep the influx of goods coming.

And all of this has to happen as oil intrinsically becomes more valuable as its in short supply.

This leads to a impossible situation. Obviously the fiat money supply has to expand dramatically to effectively default on existing debt as you transition. It does not matter how you do it but the net result is US Government Debt has to expand almost beyond comprehension. Next all other currencies have to be dramatically devalued to keep their ratios with the USD aka everyone takes on monstrous debt. And the price of resources has to follow i.e even though oil is now in short supply it has keep its relative price low.
It cannot increase to much as all this devaluation is taking place. Resource producers actually take a huge hit and bear the brunt of the system attempting to escape the resource constraint. For all intents and purposes they have to play along and except nothing for something.

Its rather obvious that we can't get out and have no choice but to try and execute the above strategy its the only play we have and in my opinion its a certain loser. To some extent it works because everyone is convinced the real problem is expensive oil and this is solved by simply moving to electric cars. As long as most of the population believes this then no problem the losing escape gimmick works.

But its just a gimmick a side show. Back in the real world the true situation becomes obvious for the US to execute its plans all its partners need to devalue their currencies to the point that they are unable to purchase oil for internal consumption. They literally have to become so focused on exporting to the US that they can no longer support their populations with their newly devalued currencies. Again to pull this off everyone else really has to devalue like crazy vis the USD even keeping the ratios as they are now does not work for all intents and purposes the rest of the world is forced to default to play longer.

This means of course their own population can afford nothing zero zip nada. The only way to get oil is via the exchange of a now worthless currency or goods for dollars.

This ensures the flow of oil into the US and powers our transition to electric cars with maybe a bit of economic slackness for a time but ballooning deficits offset the lack of growth and eventually as the flow of funds from the Fed to the local government expands the welfare state expands some more to offset falling private employment.

I argue that this cannot be executed its impossible to pull it off. The entire world is not going to default so we can keep our SUV's and McMansions. It does not matter how many guns we have they simply can't support us anymore. They have played the devaluation game for so long that its run its course. As the price of oil increases they simply are not going to because they cannot.

Instead while the USD has value they will spend their USD reserves for oil. Even as the value falls they spend it. Now of course they may initially continue to devalue their own currencies but only to a point.
As the price of oil increases in USD they are forced to stop devaluation in order to support their internal economies and own population so they all one at a time are forced to change game plans and allow their fiat currencies to strengthen to maintain the flow of oil into their own countries.

Understand outside the US for the most part this move to electric SUV suburbia is not viable no one else except perhaps a few European countries can even consider moving off of oil Everyone is forced to wait until the US conversion results in economy of scale to the point the rest of the world can convert and of course keep the US well supplied with oil in the interm.
But like I said they have no choice but to quit playing the game and allow their currencies to steadily increase in value and charge and increasing premium for dollars and of course the oil trade itself will probably increasingly move off of dollars as the reserve currency and maybe even the pricing currency but that does not matter so much as its the currency used to denominate reserves that suffers during devaluation.

Of course a large amount of money is actually US Government debt so this means of course these countries not only stop buying US debt they steadily allow existing debt to mature or sell their treasuries.

If this sounds like the recipe for the bank run of all time then you understand our world today.
At this moment the recognition that this will happen works in our warped world to keep anyone from pulling the trigger and starting the downward spiral. We are not only in a fairy tale world turned into a horror show but right now sitting in a ever stranger twilight zone where government are willing to keep the status quo as they set up for the big one.

The trigger event is of course if oil prices increase in terms of USD no other currency matters at first as rising prices in terms of USD are sufficient to trigger the downward spiral. So oil is not what ends our fantasy world its simply the trigger on a very large gun we have pointed at our head. Or better on a suicide vest that will take out many bystanders. Thus the US is now the suicide bomber on a global scale and everyone is packed tightly against it and knows that sooner or later the bomb will go off.

The problem is that as oil prices increase the rest of the world has no choice but to let the bomb go off they can't help us and we can't help ourselves. The world is not going to starve for us.

memmel - That is perhaps the most laconic explanation of our contemporary global economy I have ever read.

Two thumbs way up....


Just for fun what would the $value of all the sunlight that falls on our planet each day be if it were run through an LA meter (just for giggles assume it converts with 100% efficiency to useable watts and for a $# use the average 2008 price of an LA watt-peak lumped in with off peak price)?

The just for a little more fun what is the total value of all the currencies currently at work on this planet?

Just curious to see how many days sunlight we could afford buy before we ran out of money or how fast we would have to grow the money supply to keep paying the bill--assuming some extraterrestial was doing the collecting ;-)

A thought experiment.

Take this data and the price of oil say from 2002-2004 and reconstruct what you think the prices should be through 2009.


In particular note spare capacity and production.

If you find no way to reconcile your projects with the known price movement then.

1.) Oil prices have been completely detached from fundamentals for years.

2.) This data does not correctly represent the world oil production.

3.) Some other conclusion is possible and sensible and and explains everything I'm just being dense.

Give it a try its not hard use any method you wish that does not reference known price data.

And my best answer:
A peak price of maybe 35-40 in 2004. In 2007 its a bit interesting but also spare capacity was climbing and storage was good so of the data I'd call a sort of double dip recession in 2007 then a bit of a recovery followed by another more serious one in 2008. This looks demand driven why the dip in spare capacity in 2008 ?
Prices after 2004 say 30 with dips to 20 in 2007 and the obvious drop in 2008 so 10-20 ? Note OECD oil imports look good in 2008.

So a bit of weirdness seems present in 2008 ( Obviously I know the right answer so I try cheating) But even cheating does not work for me. At best I'd gues prices might have tightened maybe in 2008 and thats questionable I'm split 50/50.

Surprisingly the only point I can match up is 2004. If you play this game back in time the correlation is pretty good you can pick out the wars in the ME very easily. Guessing the peak price is of course difficult its hard to say more that double from this sort of data but agreement is good. So I can do a decent job 2004 in back but this data is probably not the best to use going back since it does not oil production back in time far enough.

I don't think me giving my answer harms the question the 2004 guess is pretty obvious and everyones going to try and cheat in 2008 anyway so :)

EDIT: And hurricanes are ok they show up in the US data and perhaps help explain the weirdness in 2008 no reason to exclude them as knowledge. Including or excluding them seems to not make a huge difference. But then you have to guess the price with them included so ..

Good luck ..

It is sad to think that after being warned three times before from the first oil embargo in 1973, the Iranian embargo in 79/80 and the 2008 run up to $147-per-barrel price of oil -- we will soon face a new oil disruption, this time one that comes from global demand for oil outstripping the production of oil from conventional sources.

Therefore, if we are not to repeat the mistakes of the past -- which has been to ignore the problem and let it keep growing so that now we importing 10 million barrels a day of crude oil at a cost of over $200-Billion American fuel-dollars that are better spent here at home developing America's homegrown crude oil resources.

No, not the "drill, baby, drill" kind of conventional oil resources whose domestic production has declined now to 5-million barrels a day of WTI light crude -- but what America should be spending its fuel-dollars on here at home is developing America's trillion-barrel UNconventional heavy oil resources -- especially its tar sands in Utah and California and its oil shale in Colorado.

There's over a trillion barrels of recoverable oil right there for the taking at a cost of less than $30-a barrel.

This should be America's next Manhattan -- the new Gold Rush in the West -- mining oil from rocks made in America.

This would get America back to work -- producing a new form of "clean oil" that is produced in an environmentally-friendly way that does not consumer river water, does not burn natural gas and does not produce oil-contaminated effluent waste.

Yes, I am talking about a clean tar sands and clean oil shale extraction technology that solves all the problems of previous heat-based retort and insitu systems that cause more problems and waste vital water and energy resources than their oil is worth.

But this new chemical-based technology uses American ingenuity to solve all those problems that environmentalists objected to -- now there is no reason to object.

This is the technology that I am talking about, that I believe can enable America to become energy independent:

No one I know has been able to get oil to do what this can...

See the Videos: http://encapsol.com/media/ and


America needs to replace its imported oil with oil produced here in America by American workers.

This time, before then next run-up to $147 a barrel oil -- let's be smart about how we spend our fuel dollars -- we must invest in America's energy independence.

Hint: World already headed for +4C. Burning oil is suigenocide.

And just how many jobs would that be? Thousands? A few tens of thousands at the outside? "Putting America back to work" is just a tad hyperbolic, isn't it?


it seems the american public (at least) disagrees with you

WASHINGTON - The number of Americans who believe there is solid evidence the Earth is warming because of pollution is at its lowest point in three years, according to a survey released Thursday.

The poll of 1,500 adults by the Pew Research Center for the People & the Press found that only 57 percent believe there is strong scientific evidence the Earth has gotten hotter over the past few decades, and as a result, people are viewing the situation as less serious. That's down from 77 percent in 2006, and 71 percent in April 2008.

I would not be very surprised to find out that these numbers fluctuate wildly depending on whether the weather outside is getting warmer or colder during the season the survey is conducted. Want to bet on closer to 70 percent again next April? (Sigh.)

The important part of the poll is that only 36% believe in AGW.

Is this comment supposed to be a reasoned argument countering the likelyhood that global warming is occurring and could likely cause a +4C rise in temperature over the same time period that oil is likely to be declining over? And your scientific evidence to support this refutation is the weight of american public opinion?

Read the book, hope it's wrong but do something about it for yours and everyones sake. You can't take out an insurance policy against it. It is a non-insurable risk that the world is facing.


err...i put a link to the frontpage of MSNBC - a link is not only not a reasoned argument but not even a disagreement..

the point is that people watch mainstream media, and don't read science books (in general) so their opinions about resource depletion and environmental externalities (like climate change) are primarily not based on science. I expect this to get worse as economy gets worse in coming years, unfortunately.

btw you must not read here often if you thought I was defending business as usual trajectory..

Well, Nate, you may recall what I think of the typical American these days...


Predicament, where do we find Plato's enlightened despot to set it all straight...? and how could one be seemlessly installed...? best somehow try to deal with the typical America? ...wish us luck

trader -- I'm not arguing against the development of tar sands if it can be done well economicly/environmentally. But, FYI, as far as getting oil out the ground at $30/bbl that's a non-starter for us. I work for a contrarian oil man who will have us investing $300 million over the next few years to develop oil/NG with the drill bit. A simple though somewhat crude method of looking at ROR is the simple multiple: produce oil at $30/bbl and sell it for $80/bbl. A little better then 2.5 to 1. When I'm screening deals I immediately reject any project that doesn't reach at least a 5 to 1 ratio. Each company has its own metric. We're drilling wells that have a potential that ranges between 5 and 15 to 1. And remember, most companies right now don't have the capital to justify drilling even this metric. Would we do tar sand at 5 to 1? Maybe...but that means $150/bbl oil and absolute confidence that this price would hold for many years.

I know there are players in the tar sands that push their PR machines to talk up the potential. Everyone has there own agenda. I've seen operators make many millions of $'s drilling dry hole after dry hole. Easy to make a profit (for yourself)when failing if you're using someone elses money. Perhaps that's the real future for the tar sands: have the gov't subsidize the effort. After all, profitability isn't important to them. They can just raise taxes to cover the loses.

The oil sands already have sort of a subsidy--the royalties collected are quite low.

If the US isn't interested production from the oil sands (or even if it is), there are plenty of others that will take it. Korea is the latest one to get involved.

With very good reason. Virtually no resources there. One of the reasons I am here now.


That's pretty nifty in concept, but forgive my skepticism. I'm also not sure if I like the idea of injecting solvents into the Earth; it reminds me of some of these newer methods of solvent-based uranium extraction techniques that ultimately end up contaminating groundwater supplies. Besides, at a rate of consumption of some 26 or so billion barrels a year, all you're doing is pushing off depletion for another 40 years or so at best. We still have a serious problem to solve.

Mark Fiore's "Drill, Baby, Drill":


Or we could just burn piles of potatoes.

For some reason I was very unsurprised when I clicked on your name and saw that you have been an member of this website for only 8 days.

Perhaps instead of developing oil shale into liquid oil, the US should just mine the shale and burn it in power plants. The electricity could then be used to recharge electric cars. This would be a much more efficient use of the resource.

mining oil from rocks made in America.

Hmm, I'm not a geologist but I believe rocks on earth came into existence about 3.9 billion years ago. Neither am I a historian but if I recall the United States now known as "America" was founded on July 4, 1776. So it would it seem there is a small matter of an error of a few orders of magnitude in the elapsed time necessary to be able to claim American made rocks.

On the other hand, perchance you are referring to the continent of North America making those rocks, well...

EncapSol's description of its chemical process lacks details that would allow a rational assessment of its claims of cost and environmental impact. ERoEI and the ability to produce the chemical on the scale of ~10 Mb/d are not established.

Written by EncapSol:
Encapsol is the only environmentally-friendly technology that is capable of cleanly unlocking America’s vast, but currently untapped and stranded, oil shale and oil sand resources....

Since burning the finished product would release fossil carbon into the atmosphere, this claim of the process being environmentally friendly is just plain wrong.

Wow...solve the problems that environmentalists object to!?

Perhaps they would object to your proposal based upon what they see happening in Alberta where a swath of land the size of Florida is being turned into a moonscape.There is no way they can extract oil on that scale from the sedimentary stratum of Utah and Wyoming without affecting the Green River, and consequently the Colorado River, which feeds the entire Southwest.....

Oh wait, I get it.You just want to make lots of money eh?

Ah...screw those guys in the Southwest.My cousin lives in Phoenix, and I don't like him anyway.
I'm in brotha.....

right on, ccpo. The idea of tucking into yet another carbon store and releasing it, and a finite one at that, is - to put it politely - stupid.

For a start, I've been looking at sequestration, and it ain't there. The volumes ain't there. Period.
Open-cast mines don't do it, and the deep ones are not enough in volumetric terms.

Our obligation to future generations is to give them a chance. Which means handing on a planet in roughly the same condition we found it.

If you/we don't do that, then Bartlett and Malthus tell you what happens in one respect, and the law of diminishing returns tells you the rest.

All spelled out by Dr Seuss in 'The Lorax', 1970. It was pitched at the lower end too...

Sustainability is the key, and even if you know it's a doomed trip logistically, it's the only morally-correct one.

Ripping into the shale, or the coal,is essentially visiting a debt on future generations, who didn't (and wouldn't) sign up to it.

Where I come from, foisting a debt onto an unwitting party is called fraud.....

Is there any explanation for the big July-August drop in EU oil consumption? Other countries appear to show a rebound in consumption for that time period.

I think a very interesting speculative analysis would be to treat OPEC as "one country", for the purposes of ELM

So if OPECland is producing an average of 30 MBD, and they are at the 50% point of cumulative production, and internal consumption is growing at 7.9% (!)

what will be the decline rate in exports

the thing I find extraordinary is the OPEC 7.9% internal growth rate.
their growth rate in oil use is faster than their GDP growth rate
it is also about as fast as China

poly -- I'm not much of a student of ME demographics but your statement got me to thinking. I can't quantify it, but their high increase rate of internal consumption might have an additional factor beyond birth rate. Birth rate was the first thought I had but then I remembered the huge immigrant worker populations in many of the OPEC nations. Granted those workers might not be on the high end of consumerism but they are performing tasks which alone should require additional energy resources. An interesting potential feed back loop: increased ME wealth leads to increased imported worker population which increases internal consumption while decreasing export capability which provides long term support for higher oil prices which provides more income to support the importation of more foreign workers.

OPEC is really just a subset of the non-OECD group, which has shown a significant increase in oil consumption relative to the late Nineties. There are three reasons I don't expect to see any meaningful overall declines in consumption in exporting countries as more and more of them start to show accelerating net export decline rates: (1) So far, we haven't seen any examples of exporters cutting their consumtion enough to keep their net export decline rate above their production decline rate; (2) many exporters have domestic subsidies and (3) We are seeing a consistent pattern of non-OECD countries (exporters & importers alike) increaseing their oil consumption as oil prices have increased from 1998 to 2008.

Hello Polytropos,

If you download the full oil report, then look at page 7, Chart 19 [Saudi Arabia Oil Consumption Jan. 2004 - August 2009]:

One can readily see a fast growing seasonal spike during the months when using A/C would be most desirable. So if one assumes the Saudis, and other OPEC people, are buying and installing this equipment in their homes and businesses: this would help explain the fast ramp in internal consumption.

A/C represents a huge jump in comfort for a family, but remember this can be 24/7 usage [except when the desired temp is reached]. Thus, Much energy is required for this. Nobody, not even a Saudi Prince driving a HUMMER, will relentlessly use energy 24/7 in such a manner. That A/C wall thermostat is ruthless--eager to burn energy at the smallest indication of temperature increase, or from the slightest touch/twist from a person who thinks the house needs to be even cooler.

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

Also consider how A/C can induce a greater birthrate in a country already religiously inclined to make lots of kids anyhow.

Without A/C, the already constantly-sweating man & wife in their bed may be more interested in trying to get some sleep somehow versus ratcheting up the sex action, then sweating even more. Also add in the effect of their other kids not sleeping soundly in the heat & humidity, thus the parents have other distractions during the night.

With A/C: the house is cool & dry, the kids sleep quietly & deeply, and the bedsheets can feel like heaven, thus it is more likely for the parents to romp more frequently for more babies to come. If they get sweaty during the act: that's okay temporarily, because they know the A/C will later cool them down for a soothing sleep.

A Cool & Dry A/C house is the Ultimate Sex Toy in hot climates!

Some info.


Certainly growing but not quite as your describing also of course desalination plays a large role and its not as variable.

When you see what looks like and exponential growth in consumption then its in my opinion a sure bet that internal oil production is crashing and some of this is being passed off as increased internal consumption.

Same for that matter with China everyone is attributing their increase in imports as still rapid growth while if my thesis is correct then domestic oil production is declining rapidly in china.

Not that they are not growing just not exponentially as they present and small wonder they are going crazy trying to secure future oil supplies as China right now is crossing the Rubicon so to speak of trying to run a large economy with falling domestic oil output.

This is a huge issue for both China and Saudi Arabia although we don't pay attention to history both countries are very aware of where the US and Britain and Indonesia are today after having internal oil production peak. Of course for Saudi Arabia the clock is ticking since its completely dependent on future oil revenues to diversify its economy. I doubt either is going to be super successful. For China at least the faltering export economy simply can't drive the creating of a internal economy with exports covering raw material import costs.
I really don't see them fully executing their goal. The problem for them is the huge hoard of dollars is being devalued to rapidly to fund the transition and eventually they will also become a debtor nation in and attempt to "finish" the transition.

In a lot of ways the Chinese where to greedy and kept internal consumption low for to long. Your theoretical correct economy is one which exports enough to pay for critical imports and only for imports it has to get or that someone else can sensibly produce much cheaper.
This theoretical economy also assume labor costs are not dramatically different between countries. Nirvana.

However its useful to understand since its not only nirvana its the only stable economic model where trade is optimized based on correct specialization of the participants with the bulk of the goods that can sensibly be made locally made locally.

It makes sense to understand that other countries have saner economic policies then the US and that they know what they want to achieve. In fact both China and Saudi Arabia are very much on the road to WT ELP.
Maybe with poor execution in retrospect both drank a bit to much koolaid.

Its important since this means China is 100% committed to increasing the flow of imports esp oil to what ever level is needed to stabilize its economy and balance production with internal consumption.

Saudi Arabia will NEVER give its oil away from now on it will take the absolutely highest price it can and if that crashes the western economies so what its got longer term bets placed with China and India. Both will be able to pay the price to buy whatever Saudi Arabia can export for the foreseeable future. If anything the Western nations with their both inflated and way overvalued fiat currencies are now a problem not a solution for Saudi Arabia which wins huge trading resources directly for everything it needs with India and China. Sure it needs food but this could come from Africa as easily as from anywhere else.

If you notice that the world has grown up and no longer needs the western nations and Japan then your on the right track what they do need however is the oil we consume.

In the end the problem with Globalization is the west and Japan never went on to really add the new level to move up to turns out there was nothing there except financial ponzi schemes and selling technology to build the factories that build stuff. Both are not viable long term. Once the factories are financed and built we simply are not needed and can be eliminated.

Or I should say will be eliminated.

Hello Memmel,

Thxs for your reply. Yep, that is why I said the spreading use of A/C in KSA can 'Help' explain the fast-rising internal energy consumption. Obviously, KSA's fast-rising demographics, plus their aquifers going kaput, creates a huge need for more ramping of desalination, then pumping this water uphill to Kingdom Come all over the place, then even more energy for sewage treatment. It is all a vicious cycle fueled by FFs.

Don't forget that an A/C house is always burning energy to work against the heat & humidity thrown off from the occupants plus their using other house appliances, lighting, TVs and computers, etc. Imagine how much additional energy is required if you have 5-10 kids taking showers, laundry, cooking, etc. Hell, just imagine a bunch of kids always running back and forth, inside and outside nearly constantly, letting A/C escape into the Saudi desert [I remember my Dad yelling at me to be quick about going in/out to help save A/C].

I am unaware of how cold and/or damp it might get in KSA, but I am sure those A/C heat pump units can provide heat, too, if required during the winter months--proving once again the "Tyranny of the Thermostat" for 24/7 energy usage for comfort.


My point was and maybe it was lost in the verbage was as far as I can tell energy consumption increases linearly with population.

Only two nations deviate from this rule as far as I know and thats China and KSA and both happen to deviate from linearity right when a possibility of having a peak in production exists.

And both have autocratic regimes. I'm not yet convinced that exponential growth in energy consumption is possible. Now explosive linear growth yes the slope can be steep but non-linear still seems difficult to envision.

If you look at the graph KSA's growth rate in my opinion is a set of linear growths well correlated with the price of oil. In 2003 it certainly moved to a new linear regime but obviously back from 1998-2000 it had under-invested in energy projects. This of course is almost certainly related to earlier price drops in oil. Although not smooth the overall growth is in my opinion linear not exponential.
These are big projects and occur at discrete intervals so any smoothing is a bit dubious.

Now this indicates expansion is based on NG turbines.


This is the split.


For Saudi Arabia, in 2008 oil was the dominant fuel, accounting for 59.7% of primary energy demand (PED), followed by gas at 40.3%. Regional energy demand is forecast to reach 871.0mn tonnes of oil equivalent (toe) by 2013, representing 18.5% growth over the period since 2008. Saudi Arabia's 2008 market share of 23.73% is set to rise to 24.42% by 2013.

Now I'll admit I don't have a clear view of the exact nature of Saudi additional capacity. However they have been very aggressive in doing everything they could to use NG instead of oil.

Another wrapup.


Now the actual real split between oil and NG for new power generation and when oil based generation was installed vs NG and whats NG with oil backup etc etc does not seem available as far as I can tell.

However despite the claims of being oil based new generation.


Looking here and looking around suggest instead that it was primarly NG based outside of the EIA report nothing indicates that expanded Electrical production was not based on NG turbines with oil backup.
There is not evidence of new primary oil based electrical generation capacity.

Now there does seem to be a time when you had primary NG generation running on oil because of a temporary lack of NG but this seems to have been a short term logistical issue that was overcome not a long term situation.

In general despite the rapid growth in Saudi Arabia they seem to have aggressively worked to utilize there NG resources more effectively to ensure they could maintain exports yet on the same hand also claim rising internal consumption which results in a nice total production result...

Similar situation for China but with coal as the substitute not NG.

In general both countries seem to be using either NG or Coal to do aggressive partial substitution of oil wherever possible in their economies very similar to what the US did in the 1980's.
In the US at least it resulted in falling consumption of oil products but one would think with such policies oil consumption would at least remain on the common linear track. Realistically from all my other countries it actually flattens quite a bit so the rate of oil consumption increases actually falls.

And this is not by any means and attack on Export Land other issues such as more transportation can cloud the issue however I'm unable to buy into excepting the supposed facts of non-linear increases in oil consumption. Instead given where both countries probably are compared to depletion and the nature of the Governments I argue that aggressive oil consumption internally is used to partially hide a production peak. Now with that said I expect China's decline rate to be much milder following in the footsteps of the US and Russia given the nature of their production.

Obviously I don't feel the same about KSA which I consider to be on the Mexican track.

And of course as usual I offer no obvious proof however if I'm correct then the government policies of these nations will follow the true internal situation and in both cases this does not bode well for the US. So you don't necessarily have to prove the truth using energy arguments alone given the above and readily available information about how these two countries have reacted over the last few years and one can be a bit bold in asserting difficult to prove statements.

Putting all the facts together in this case creates a sum far more important than the individual tibits.

Everyone expecting a flood of Saudi oil at some price point may be in for a bit of a shocker.



Looks like they started importing coal in 2006 interesting :)

I'll do this as a reply as and example of a country following what I consider correct stats one can look at Brazil.


My assertion is that most countries when they invest in NG and or Coal use it to offset former oil usage almost exactly like in the US.
This results in linear growth for oil and eventually as the partial substitutes have made their impact from the initial ramp up linear growth in all in some cases like the US that are very mature the slope becomes effectively zero and on the financial side the countries debt approaches infinity.

So KSA and China don't have magical powers despite the claims of the media.

This chart shows KSAs population rising from 4 million in 1961 to 24 million in 2003.


Country reports, CIA factbook, gives 28 million today. See:


There are doubts and quarrels about the numbers concerning chiefly immigrants, and women.

KSA along with Qatar and UAE have a very unbalanced m/f ratio, women die at earlier ages, this is not something they like to advertise.

Obviously I've given up on "official" numbers of most types. The books are cooked and recooked and reheated to the point that I can't even easily discern what the truth might be.

However it does not matter so much as all you really need to do is develop and understanding of the real economic model if you think you know how the system really works then its actually not that hard to look at various economic indicators to get a feel for where we are on the curve so to speak.

Exact values are hard but excellent guesses are actually easy as even though getting the magnitude of the lies is hard detecting the lie using the correct economic model is easy. The larger the set of truths and lies you build the more you can constrain the actual values the truth can take.

Whats really funny is at the heart of many of the lies is the creation of immense wealth via a rapid rise in land prices and taking cheap building materials and creating expensive buildings. This coupled with expanding governments comprises a large amount of our notational wealth. Given how long its gone on the excessive building has resulted in a large excess of overvalued properties globally.

The simplest solution is to discount all of it to zero and assume no value. Eventually of course some of it might prove to have some value but thats not all that important as the real value is so small it just as well be zero.

Next of course you discount all outstanding debts to zero as they will never be repaid.

Then of course your looking at surplus assets across effectively everything industrial capacity is far larger than whats required again although eventually it has some value for now discount it to zero as debt default will increase uncertainty about future profits and ensure that the assets flood the market making valuing them impossible. So in effect zero value.

Continued resource utilization outside of whats needed to stay alive is really simply propping up the price of assets that have zero long term value as the BAU case itself is dead.

For me at least thats the baseline I work from to expect that any statistics coming out of such a system are trustworthy is asking a lot. However even with this their are constraints and these constraints eventually follow through to the truth.

One of the biggest truths is that the lies cannot hide export land math. Eventually the flow of real resources falls and nothing can stop this. All the distortions do as far as I can tell is hide the nature of the real reason for falling commodity exports esp of oil. Export Land itself is immune it can take the false stats and give the right answer it does not matter if the real reason is falling production or inflated claims of internal consumption.

However if its inflated claims the outcome is slightly different as real production is falling while even though claims or inflated that does not mean consumption is not rising. All I'm saying is that exporters have been facing falling real production and rising internal consumption for quite a while now probably close to a decade. Peak oil happened a long time ago its just been masked.

One big reason we where able to hide peak oil has to do with countries around the world adopting energy usage patterns that model what the US did in the 1980's inefficient oil based electrical generation is replaced with coal or Natural Gas. This allowed exporters of oil to hide falling production and even claim dubious internal consumption increases.

Building uneeded buildings helps hide this since the primary energy input into buildings comes not from oil but from the expanded coal and NG usage often distributed around the world but shipped using efficient large bulk carriers. As we ran low on oil about the only thing we could do was build buildings using NG and Coal and assign crazy valuations to the result.

Now this is where my export land model and the one that takes all stats at face value differ dramatically.

In my model falling production is masked by a global conversion to using oil only in the transportation sector and using construction to continue to create the appearance of wealth from substitution of coal and natural gas for oil.

Next the oil consumption stats of the wealthier countries are assumed to be valid enough to also assert that global consumption of oil will at least follow the OECD model and be flat to falling as wealth becomes denominated in building empty buildings using NG and Coal.

As long as coal and NG usage could be expanded and the globe adopt efficiencies similar to the US the faked stats did not matter. Of course WT's export land model shows the imbalance its obvious its just the real underlying situation is different.

The problem is that in my "real world" once the ability to substitute coal and NG for oil reaches its maximum and efficiency gains fall off the real fact that overall oil production is falling and oil demand is close to flat becomes obvious. To use GhostBusters the streams cross :)

Violently I might add as many probably noticed.

Further more all along this path for decades oil production itself has been goosed as much as possible so its not just a simple Gaussian production situation. Indeed as far as I can tell overall production could readily have been almost flat to slowly increasing on top of effieciency gains from NG/Coal substitution. Regardless of what the true answer is one thing seems certain that extraction was steadily super charged and we threw and almost infinite amount of money into the problem of oil extraction.

Next of course I assert all this did was increase the rate of depletion of remaining reserves while keeping production from changing all that much overall. Exactly is probably unknown but it seems certain that anything that could be done to keep production levels as high as possible was done and done for decades.

Of course if your steadily maximizing your depletion rate then at some point eventually production has to flat line so regardless of how it happened eventually you at best reach a plateau. And the time you stay on this plateau is determined by what your maximized depletion rate is.

Now all the data if you use my interpetation points to this having occurred sometime in the late 1990's to 2000. The acceleration of the global building boom aligns very well with this if you use my model everything is self consistent.

Next I guessed a maximum depletion rate of 10% i.e once we hit the plateau we would fall off in at most ten years. Understand that a maximum and probably the system begins to falter before it hits the last 20-30%

Although its a cliff its a cliff with a curved lip over the top.

The price spike in 2008 and collapse of the decades long fake boom of building empty buildings serves to pin the real situation almost exactly. The radius of the curve is still a bit ill defined and probably we started the down turn well before 2008. Maybe 2006 reports of accelerated natural decline rates occurred about that time for example.

Regardless we are now on Export Land model on steriods at this point exports of oil fall off a cliff.
It looks like the global collapse allowed a build up of oil to occur simply because it was executed so rapidly. So fast in fact it almost brought the entire house of cards or better concrete and steel crashing down.

I suspect that the opinion was that the resulting fall in demand would cover the fall in exports which where expected to be a temporary glitch i.e no one really believed we hit the wall. The expectation was that it was simply a bit of a imbalance and aggressive expansion of oil extraction technology and demand fall off would get us back on the plateau. The fall in oil prices would have slowed the expansion of the oil exporting economies and thus allowed even more exports.

Here you can again see a divergence between simple export land and rapidly falling production export land.
In my case the oil never existed it was all fake production so blowing up the economy turned out to not work for long at all.

This becomes obvious today if your willing to look because the entire oil industry simply has massive overcapacity as real oil production continues to plummet. We have hundreds of uneeded oil tankers and refineries etc regardless of how high oil prices are nothing happens as they are increasing because of falling exports driven by falling production and fairly stagnant consumption in the oil exporting nations.

Eventually of course even the new reduced economy faces the second stream crossing event not long after the first one my opinion is its already started and falling exports can no longer support even the new reduced economic system.

It can't collapse further in real terms as it was based on fake building valuations in the first place. Not that it won't go on and eventually devalue these to zero but this does not help the oil situation in the least. Playing games with the valuation of things that have no real value is fruitless it looks good but it has no real effect. More real money simply goes to purchase ever higher priced oil forcing the valuation of non oil worthless assets to zero or hyper inflation one or the other.

The intrinsic problem is of course trying to change the valuation of coal/NG based products in a system thats optimized its oil usage simply and literally does no good as its a oil problem.

Another very intresting aspect of the problem that shows through with my model is that coal and NG production also falls off a cliff along with oil. Surprising at first but true.

The reason is as these resources where exploited they where also following their own depletion curves and EROEI issues and lower quality resources. Eventually only the valuations placed on useless buildings and demand for electricity etc was all that made the resource extraction economically viable. The great building bubble was also driving the economic viability of continued extraction of NG and coal well past what it should have been. You reached the point that we where drilling wells in shale that had production fall close to zero within 1-2 years.

Once the flow of funds from building stops none of our remaining deposits of coal or NG are economically viable just to support electrical production and day to day living.

At first demand falls and prices for NG and coal collapse and the mines shutdown but the economy itself can't support the higher prices needed to extract less of these reserves for the shrinking demand. Sure we will produce our way down the curve but whats important is that as production falls and prices start increasing the system is unable to absorb the higher prices as its actually shrinking. Each year its less production for higher prices.

Whats obvious is that only the fake subsidy from valuation of building made even our current extraction rate profitable for the remaining NG and Coal resources. In reality we massively overshot the economic viability of these resources and once the subsidy is removed production even of these collapse regardless of price.
Once you revalue the primary use of coal and NG to zero you see that our current sources are simply not viable we long ago extracted the last viable sources of NG and Coal.

Of course eventually the system reaches a new balance point but this point is a small fraction of where we are today. Sure all of this will unwind but you note how I set the valuations at where the unwind point exists to effectively zero versus our current economy. The bottom is so far away its final value is simply outside our current system it bears little relationship to any of our current valuation levels for goods labor and resources.

So hopefully you understand why we did what we did and why in the end the choice we made assures that collapse will be for all intents and purposes complete. Thats not to say micro-scale local economies wont weather the storm where natural resources that can support a steady state economy don't exist. But these islands are just that islands compared to what we have today.

Needless to say this argument makes a strong prediction that NG and coal production will soon also fall rapidly with prices at first bottoming then rising but production continue to fall regardless.
This should of course already be happening with the most costly NG and coal sources being shuttered not to reopen then ever cheaper sources closing. The overall situation may well prove complex and volatile however the underlying situation is NG/Coal for building is falling so the current distribution infrastructure is simply wrong and you have all kinds of strange paradoxes as NG for example becomes dirt cheap in one place and expensive in another depending on when you hit the final electrical demand case vs sources.

I know it seems weird but thats what happens when the value of the energy usage drops dramatically. The value add of using electricity for daily living is small vs the costs of extraction of the resources needed to provide the electricity. We basically simply can't produce enough goods and services to pay the real cost of our electrical supply once the building subsidy is removed.

I don't believe it will take long for this paradox to set up we should tailspin on NG/Coal effectively in tandem with oil.

Your assessment is in line with a couple of somewhat intelligent experts on the subject of when the peak in CC would actually happen:



Both Marion and Kenneth came to the same conclusion that CC would peak in roughly 2005.
One using calculus and the other simple algebra with their data.
Marion made a very sharp analysis in 1976 by predicating the 1995 prediction of peak could be forestalled by ten years if the current political scenario in the Middle East continued to curtail production, which it did.

All I can say is that was a very impressive observation - just like your posts today memmel.
You should have a radio program and produce documentaries like Alex Jones or something
....ah...well...maybe not.
You make to much sense memmel - you might confuse the masses with to many facts.

People love to have their ears tickled anyway;confer with Alex Jones' frequent guest the Rev. Lindsay Williams and his Disney like science of huge tapped reserves on the order of Ghawar(sic) that were capped off after their initial discovery.The knowledge of which is purposely withheld from the public by those "evil" oil executives.

If you look up the word demagogue in the dictionary, I believe Alex Jones is the 3rd or 4th definition of the word....

Thanks to be honest outside of trying to understand the old system if you will I don't have a lot of interest in it. I'm a bit of a history buff obviously it just happens that the ink has yet to dry on the last pages of the oil age even though the story is already written. Or the actors need to finish the last few scenes even though the story line has given away the plot.

I'm far more interested in the future even though the averages are awful. Most people probably die those that don't will be ruled by tyrants etc etc. We are also looking at the return of the city state so despite everything a few Athens should form hopefully with less slave labor this time around preferably none.

I'm big into local currencies and done correctly money can actually become a utility not a tool of power.
Borrowing a bit from communism and other communal concept one can readily create a group thats relatively wealthy as a group and much better off than they would be as individuals. In fact the difference between a renewable and healthy society tends to come down to simply how ownership is dealt with and how concentration of wealth is handled. Concentration or the steady accumulation of excess wealth happens even in a simple society based on agriculture as generally year in and year out the energy from the sun is transformed into durable and valuable goods.

Believe it or not the natural state is for us to slowly become wealthier and wealthier if we keep our populations in check. Thus the real problem in the future is to ensure that growing wealth does not lead to tyranny. Weirdly enough :) In a perfect world we would deal with our population problem with dignity and courage and if we did for a long time managing the decline in population would keep us busy but eventually of course we would still turn the corner.

If we go out with a bang like I suspect then it means that we restart in little islands that don't succumb to either collapse or a borg like ultra rich ruling class. Fate and chance pretty much assures that the borg won't get everything. Not that they won't try. Long term of course societies based on killing people eventually fail most within a few generations if that overall they are fail fast so assuming the islands make it and new ones are created overtime we again are faced with averting a richer terror system perhaps models somewhat off our current system. The key is to prevent the cycle of commmunalism->communism->capitolism->kings->tyranny->collapse->communal->communism->

And by communism I mean in the sense of a modern union or real communism where the common property is taken by a few leading to some variant of capitalism regardless of what its actually called. Communal property is effectively controlled by a minority via fraud. Generally this system is replaced by conversion to and openly fraudulent system called capitalism which treats the fraudsters as champions. The ones that eventually win the game of take all become kings ....

I think there are ways to break this cycle as far as I can tell the only real reason we fall into it is because people get into position to take advantage of a group via their vested authority i.e they become corrupted. Done correctly a system of checks and balances can break this cycle. In fact the US constitution was almost perfect indeed it effectively was.
Two things really caused it to fail.
1.) Opening of the vote to non landowner and the fact that personal arms became ineffective against modern military arms. Farmers did not keep their right to bear arms up to allow them to keep and effective arsenal.

2.) The formation of a central bank subverted the government.

Point one may gall a lot of people but regardless of right or wrong only unfettered voters can cast a true vote. This does not mean women and others cannot vote simply that democracy should be deferred to people that own farms. Sure they can leave the running of the farm to others and work in the city but its the farm not the city job that ensures they will vote in the best interests of true property ownership. Outright ownership of property that cannot be taken by any government serves as the basic check on government.

Next of course to pull this off forever you must have a static to falling population and a large amount of land owned in common. By creating a large commons as the population rises and falls within certain boundaries and people choose to not have children the commons serves to ensure the landowners don't gain power via land itself being overvalued. So over the long term everyone is granted land at birth with land returning to the commons at death. Of course all land is not equal so its not perfect but good enough. The purpose is of course to tie people to the community not actually make them farmers. And it also ensures everyone gets a grain measure if you will at the end of the year thus everyone is fed and everyone has property that cannot be sold or taken its a birthright for the citizen.

If eventually we reach the point that war is not a problem the right to bear arms can be dropped but until that happens the citizens themselves shoulder the responsibility of maintaining a citizen army never succumbing to the use of professional soldiers. And they maintain their right to vote via the land tie.

And of course control the population. The US was set up right just subverted the key is to not fall for subversive tactics no matter how fair they look. The right to vote should have never been diluted instead the land should have been divided to give more the right to vote we simply biffed it on that one.

I suspect if the founding fathers had had a chance to weigh in on the decision to expand the vote they would have suggested my course of action because the reason was to ensure and unfettered vote not to allow everyone to vote. They where pretty clear on this point actually.

Of course my stance of 40 acres some machine guns' RPG's and grenades and plenty of guns and ammo for all probably is not considered patriotic these days although outside of upgrading the arms its exactly what the founding fathers envisioned.

Pretty idealized view of the colonial farmer. Lots of speculation and high living with a heck of debt base characterized a good piece of the tobacco states. Speculators can hardly be said to have the best interest of true property ownership in mind.

Secondly the U.S. Constitution voting requirement simply states in Article I. Section 2. "and the Electors in each State shall have the Qualifications requisite for Electors of the most numerous Branch of the State Legislature."

There is no specific property requirement for voter eligibility in the U.S. Constitution.

States varied, some required specific acreage real property ownership, others personal property worth a certain amount, or taxes paid equal to what would be paid on a certain amount of property or in one case 30 pounds cash, so the old English commonlaw landholding requirement was not universal across the states at the time the constitution was ratified.

unfortunately the tables I finally found that best described the situation before and after the revolution did not come up as tables on my screen. Here is a link to the dissertation in which I found them.

It was about ideals not the real world :)

Seriously though checks and balances are designed to achieve balance they are ways to ensure the system constantly returns to normal despite forces which act on the system.

I almost wrote some more and now you bring up the constitution. Land ownership was obviously the best way to ensure someone could place a reasonably unfettered vote. However in my opinion the expectation was that voters where themselves representatives its interesting you mention the exact wording of the constitution since the implication or design in my opinion was intended to be that voters actually where representatives of the people themselves i.e they would in effect be lobbied by the people to cast their vote one way or the other.
Obviously one of the voters would be the representative but in a sense all voters were expected to act as representatives of the people and be capable of acting as the single representative.

A bit of a neat side effect of having a restricted but reasonably large group of people allowed to vote is it effectively allows micro political parties to form and have a voice each voter is readily accessible and thus can be lobbied however they are numerous enough that its difficult to lobby them all. Your pretty certain that they would probably get many different viewpoints and opinions on the same issue.

I of course was trying to show the importance of ensuring that voting happened with both free of obligation i.e votes where difficult to simply buy and with a personal interest in the outcome i.e you cared about the result. Those are the two vital points.

I will say that despite my own views the open debate on the oildrum has allowed me to understand alternative viewpoints. The only real issue is are all the assumptions needed to defend a particular point of view valid ?
I'd say that the refined arguments made to say support alternative energies and our ability to move to electric cars could well turn out to be true and peak oil is not a huge problem however these arguments make implicit and explicit assumptions which are generally left undefended and on review may prove incorrect.

Without and open debate between people that care about a issue even if they have different view points none of this would have happened. That by no means suggests that anyone is correct in fact unless the government suddenly took action we are all pretty much going to just have to watch how it unfolds. But we are all educated we know all the viewpoints and in many cases we can guess when one or the other view is invalidated or maybe all of them depending on how things go.

If we where as a group allowed to argue and vote I suspect we would come up with a reasonable solution. It may be to little to late it might not be who knows. I'd argue if so then we could then come up with a reasonable additional escalation policy etc etc.

This is the sort of well thought out voting that the constitution envisioned and free of corruption ( ideal).
But most important capable of finding and following the right path without being lead astray.

In the general sense they tried their best to codify a way to create enlightened debate and solution of common problems however you do it thats what has to happen simple and hard to do at the same time.

Actually memmel when you mentioned the property requirement thing, I had a copy of the constitution right next to me and since it is so short a document (not counting ammendments since the bill of rights) I was curious as to what the actual property requirement was as I could not remember exact restriction. Had to skim the document twice to realize the line I quoted was all there was, then to the web to get the details. I probably checked upwards of 50-80 web sites before I came up with the dissertation I linked. I actually was just interested in the real property requirements and had no arguement with the effectiveness of some property requirement--I personally never voted until I owned property (I rode my horse to the polls to cast my first vote--against Reagan).

I have recently read the Federalist Papers and a bit of the Anti Federalist compilation though the latter doesn't hang together quite as well. From those works it is obvious the framers of the constitution were under no false impressions about the nobility of man or about the ability of informed debate to overcome the power of special interests. Their deep understanding of how men and groups of men act were what gave them the insights needed to frame as self balancing a system as they did. But they wrote it in the 1780s, and no one had a clue that transport and communication would attain even the speed it had by the end of the 19th century.

Many of the checks that would have limited the power of central government became ineffectual when communication and transport became efficient. Just an observation, but one that jumped out at me as I read Madison especially--Hamilton wasn't much for limiting the power of the executive himself. Both these guys showed as much savvy about human nature as it relates to the nature of power I have ever seen displayed in print. These men were extremely practicle, even though they were men of great vision. They were building something that had to work and they knew the odds were stacked against that happening.

Two sections in this online article caught my attention. The first is:

...a consumption level of 9.28 million b/d in August 2009. Average oil consumption in China in 2009 through August was 7.84 million b/d, versus 6.92 and 7.29 million b/d in respectively 2008 and 2007.

If you consider that many experts were suggesting China's economy bubble might burst any day due to lower exports from the recent collapse, yet oil consumption is up to 9.28 mbd in August after only averaging 7.84 throughout 2009, is phenomenal! Not only did they buck the predictions of a bubble burst, but they increased consumption in August over the average for this year by 1.44 mbd! That economy is heating up regardless of a U.S. & European sluggish recovery.

The 2nd item is:

Saudi Arabia can produce an additional 3.45 million b/d within 90 days according to the IEA

That represents a huge potential for increased production that dwarfs any other country's, signifying an amazing amount of infrastructure flexibility. I knew a lot about SA but didn't know the extent of their ability to ramp up extraction.

But one must wonder how long it will be before China's rapidly expanding economy increases consumption, absorbing all available spare capacity. Is there any projections as to when that might occur?

I wish P.T. Barnum was still alive he would love to meet you.

memmel, I'd sure enjoy meeting P.T. Barnum. Maybe learn a few things about promotion for my wife and I's businesses. However, my exemplary compliments to Saudi Aramco was a sort of dig at the IEA for so easily accepting 3.45 mbd spare capacity without proven data to back it up. If SA couldn't ramp up during the 147 oil price spike then what makes the IEA think they can now?

Sorry Peak Earl :)

Its just I see a lot of people willing to buy into things.
The Chinese crap for example pisses me off a bit like I said in my post below I used to friggen live there. In fact I live in this huge ultra luxury apt in Pudong must have been close to 1800sqft or more for 800USD a month. They sold as many apts as they could then the owner "Government Dude" bought all the rest outright at hugely inflated prices and these set empty. Probably was 10% occupied if that. Each floor was only 1-4 apts mine was two ours and a empty one so I had half of a entire floor.

Four towers total about 20 stories maybe mike from the river if that.
Hard to tell how far things are in Shanghai since the main streets are like walking in a crowd after a football game distance is not quite and accurate measure :)

My Father In Law visited form Taipei and could not stand the crowds so that gives you and idea :)

Never got my Mom to come out she would have freaked :)

Most people walk around in Shanghai because they actually live in this super tiny little apts generally extended family so almost everyone basically walks around or goes out till they are ready for bed. We did a lot because our place was a ghost town and a bit spooky I did not like being there.

The sort of social dissonance is incredible here are these people packed in like sardines surrounded by empty guarded towers.

Beijing is worse. Shenzen is a bit more sane people actually living in most of the places and Hong Kong is Hong Kong its unique to say the least. The buildings with all the plumbing on the outside are a trip.

So I guess for me at least having lived in China and seen the truth its hard to watch people just eat the BS from Beijing and buy into it without even bothering to read some more about the country.

And thats not to say China not growing for real it is just its a lot harder for them then it looks from the rosy government stats. And 99% of the stuff the Gov does do is corrupt not needed and not helpful to the normal people in China and its not growing Chinese internal consumption by 5-10% thats for sure. Think Reganomics on steroids and trickle down economics or better slow drops and you got a much better picture of the Chinese economy. At the top however no telling what they are technically worth since non of their projects can go bankrupt and they never fail. My complex made its owner a tremendous amount of money after he bought all his apts from himself for a huge gain. I have to guess he had to use two banks and two companies to make it all look legit but thats how blatant the corruption is.

Thanks memmel for the very interesting incite into China. Sounds almost like an episode out of the Twilight Zone or Outer Limits. Near empty big towers while people shuffle around all day because they are so jammed into small dwellings. Macalb and corrupt.

Morgan Downey: Chinese Oil Demand Shock (Sep 16, 2009)

If China follows a similar pattern to other developing nations then Chinese demand is likely to not just grow by its past 5 year rate of around 5% per year over the next 2 years. Chinese oil demand is on the precipice of a significant jump in annual growth over the next few years.

Earl -- I was also very surprised to see such a large and rapid jump in Chinese consumption. But after thinking on it for a bit it makes sense. True, their exports might have taken a hit with the global recession. But their economy is growing via advances in various industries many of which market internally such as their automobile industry. While they do sell much to the rest of the world they too are a huge market themselves. I believe China has now surpassed the US in auto sales. When oil prices fell the Chinese gov't was able to take immediate advantage of the situation. Export income might have dropped but they were also sitting $2 trillion in cash reserves. What a great situation for a country that imports half its oil: prices fell almost 75% from the peak and they have the capital to buy all they want.

As a comparison: when oil got down to $38/bbl how much additional oil did our gov't buy for the SPR? I've never seen a story about increased purchases. How many millions of bbls of oil did our gov't contract for at $38/bbl that they could later sell to our industries at such a low price? None that I've heard about. How many millions of bbls of oil reserves in the ground did our gov't buy at the low end of the market? None that I've heard of. While we were lending 100's of billions of $'s to the auto and banking industries how much did we loan to domestic oil companies so they could compete with China's global oil acquisitions? Oh, right...the gov't couldn't do that. The domestic oil industry is evil and shouldn't be helped to survive. Don't really need them as long as our friends in Saudi and Venezuela will supply us with our needs. Many years ago while adopting my daughter in China I had a few conversations with Chinese business men. A very common question was repeated: why doesn't the gov't do more to support the energy industry? Their logic: our industries consume a huge amount of energy. How can we expect to maintain our economy if we can't secure energy resources?

A reasonable point to make: we are a free market economy. It's not the gov't role to financially support the oil industry. Maybe support the banking and investment industries but certainly not the oil industry. After all, the domestic suppliers of energy to this nation are the enemy. It's the foreign exporters who are our true allies. Here's another take: had the US gov't tied up 100's of billions of $'s of cheap crude contracts they could have sold them later to our domestic consumers and would have dampened the prices oil companies could have charged otherwise. Could have had our cake and eat it too. But that didn't happen either.

Sorry...just a Friday afternoon rant took me over

A free-market economy is not necessarily the same as an unguided economy. To accept that our economy should have no rules makes about as much sense as saying we shouldn't have traffic laws or ANY laws. Chaos is the obvious resulting extreme.

I cannot fathom why we have a Dept of Energy that provides no effective guidance on energy policy. I'm a small-gov't, states-rights sort of person, but when it comes to full-nation strategic goals only a Fed Gov't can suffice. I'd even call it matter of national security, akin to maintaining a strong defense.

Good point Paleo. I was stumbling around trying to find a path. Your "unguided economy" is the subject. I would say that "unguided" would be a nicer wau of describing our gov't policies. WE obviously don't need the gov't tied at the hip with the oil industry but we don't need ittaking and adversarial role either. I'll be interested to see how others expand on your thoghts.

Take a look at the issue of "Net Neutrality". The roles seem completely reversed on this one.

Anti-neutral want a guided internet economy and more "traffic laws" -- (conservatives are anti-NN)
Net neutral folks want less restrictions --(progressives are net neutral)

The issue reduces to which side wants more power to be granted to corporations. The amount of guidance wanted is simply a result of a business decision by conservatives, and has nothing to do with ideological fairness. So in this case, the government will hire industry consultants who provide the guidance so that the rich get richer.

LOL or far more likely building even more empty office towers and bridges did little for the economy.

Given the nature of China your forced to rely on personal stories to get a understanding of what might be happening in china which does not give a greate over view.

But the truth is probably that their stock market tanked the economy when south exports plummeted and the stimulus from the central government worked as well as it worked here. It prevented a collapse but left a economy faltering with inefficient industries propped up by government bailouts overproducing stuff no one wants. Effectively dumping the stuff on the internal economies helps keep things from falling but thats about it.


I used to live in Shanghai and my wife is Chinese from Taiwan but I assure you even if I did not know about peak oil I'd not believe whats coming out of China today. Even back when I was there 10 years ago the place was slam full of empty buildings and silent hotels.
Bejing was a big cluster even back then. China has been pumping their internal economy for decades without a lot of success. Generally because of the low wages which makes all the glitz just a shell.

Thats by no means not saying its not growing organically China probably is still showing positive growth now tepid but I'd figure 2-3% even after getting hammered.

I'd be keen to know what this paper says.



When I lived in Shanghai I met many times with powerful business men most where Taiwanese with Singapore and Shanghai addresses. If you know anything about Asian financial flows this is one of the biggest routes for investment money into China and out as well. Hong Kong is of course the other. Even back then they laughed about the official growth numbers and these are the guys building the factories and stuff. One day I was even given a tour and was shown a plastic bag making machine in one computer factory. They had to make their own bags because they did not have a reliable supplier.

I also met with many high level people with Huawei and learned a whole lot about how China works :)

And I'm not saying they are not growing and not industrious and not working their asses off but I know for a fact that what the government was saying was happening and what was really going on where not even close back then. China's always suffered from what I call dark tower syndrome since they started to expand. Over buildings been a chronic and persistent problem. Beijing is practically Orwellian if you spend some time there and get away from the five star hotels and tourist traps. Its like a city of empty towers plopped on top of a real economy powered by donkey carts with the people living in old brick shacks.

Of course right now everyone is desperate to believe the Chinese numbers so I doubt that the truth will get in the way.

Found this.


Rawski concludes that, between 1998 and 2001, China grew by approximately 4 percent rather than the 7 percent to 10 percent claimed by the government...

The government auditing body has admitted that more than two-thirds of the biggest Chinese companies falsify their accounting...In many cases, corrupt Chinese managers have used funds stolen from SOEs [state-owned enterprises] to build enormous, virtually useless buildings on China's eastern seaboard as showpieces of their newfound wealth. Parts of Pudong, Shanghai's newest commercial district, look like a ghost town. ...gleaming buildings that, having drawn no tenants, were just empty shells staffed by guards who spent their time alternating between marching in circles and conducting spitting contests.

Exactly when I lived there I used to live in Pudong and it exactly what I personally saw. Right down to the spitting for some reason Chinese guards spit constantly never did figure that one out :)

So true about Chinese "numbers" memmel. Even in my limited China exposure while adopting my daughter in 2000 it was amazing how they make up numbers even when it's of no real importance. My Reagan was suppose to be 10 months old according to Chinese birth certificate. She seemed older. The real clue came from the birth dates of the other 5 babies from the same orph. adopted by our travel group: all 6 babies were born on the same day. Why lie? Most adopting families want younger babies so the Chinese dummy the birth cert. Not a terrible unlike the kids shot records. All show they had been given their shots as recommended by the WHO. When we returned we had Reagan tested. No Hep B which is so common. But 6 months later she was positive for Hep B. We found out that the Chinese typically don't keep the shot schedule but will try to catch up with babies approved for adoption. Add that to the habit of reusing needles and Reagan probably contracted Hep b from the last minute shots. It takes a few moths for it to show up in the blood work...that's why she was negative at first. This is a more serious lie as many folks might not retest: Hep B shows no symptoms in children. But they can transmit it very easily. Had her grandma caught it from her while changing a diaper it could well have been fatal for granny. A rather more serious fib.

Bottom line: if the Chinese gov't is so prone to fibbing about such minor matters what can you believe when it comes to the big stuff.

I see your point Rockman and well deserved rant about US govt not purchasing oil at $38. Buy low, sell high they say. In fact every successful big time investor does exactly that. I remember an old time movie, 30's I think, and someone said what the country needs is a good business person as President. Well, at least as it relates to oil it sure would help. Meanwhile China is making all the right moves.

@Perk Earl

Im not so sure whether these demand figures are correct as Reuters reports contradictory figures. I've written my monthly editorial about it to be found on page 1.


Got it Rembrandt, thanks.

An increase that is mainly due to increasing car sales, in July 2009 sales were up 70.5% versus the previous year as more than 800,000 cars are now sold per month in China.

Up 70.5% over previous year to 800k cars per month! Wow, no wonder oil consumption is rising so fast there. The World is streaking towards post peak decline>>>

In all likelihood, Peak Oil is already, effectively part of history!

Subsequent to 2005, production has stalled, it has not kept up with inflation, Population growth or Demand.

However, it is possible that production could temporarily break out of its decline and may well do so, as part of a strategy to slow the transition away from the current Oil based Global Economy?

In my opinion, there are a few possible scenario's -
1) The levels of reserves are substantially UNDERSTATED, THE IS MUCH MORE OIL THAN COMMONLY THOUGHT.
Whilst this is a very unlikely outcome, in this instance the result would be the usual where Supply exceeds Demand, the Price of Oil would fall!
An outcome not favoured by major self interest groups!

2) The levels of reserves are substantially OVERSTATED, THE IS MUCH LESS OIL THAN COMMONLY THOUGHT.
This would be the likely outcome and in this instance that would spark a MASSIVE & URGENT MOVE AWAY FROM OIL, towards other possible Energy sources, particularly for the transport sector.
That would result in a massive fall in Demand for Oil, in the near term and as usual where Supply exceeds Demand, the Price of Oil would fall!
An outcome not favoured by major self interest groups!

This is the current Status Quo outcome and the result is as usual where Demand appears to exceed Supply, there is constant pressure on the Price of Oil to rise!
THE PREFERRED OUTCOME for major self interest groups!

Scenario's 1 & 2, would result in catastrophic outcomes, for the major interest groups and a none-to-pleasant outcomes for humanity, in the short to medium term, but with possible redemption in the medium to longer term?

Scenario 3, may well see a more favourable outcome for some of the major interest groups, but with a lack of risk mitigation in Energy & Climate issues, the longer term outcomes for humanity, may decline toward an unmitigated catastrophy!

Assuming scenario 3 gets up, then we could well see a process where the Oil price creep up, only to have the real Global economy fall back, as the Oil cost ratio becomes too high, thus lessening Demand, thus reducing the price again. This may happen a few times over the short to near term, whilst self interest groups suck what they can from the economy.

The problem is that whilst this “status quo” continues, the transition efforts that are needed will be delayed, causing events to transition straight over the cliff, instead of trying to slowly adjust to what will be new realities!

Small Rant, Has I think about this and considering how much we depend on Oil. It confirms a suspicion I had for a long time, and that suspicion is, somebody in Government has to be a raving lunatic!! Let me put this in a military terms. The Offensive has been taken from us. The outcome of the Oil situation is not ours to decide, where relying on the generosity of friends, ( well friends is probably a bad way to describe it) but it sounds cool.

Opec has the ability to bring great harm to the USA, Our Nataniel security and Economy depends on Opec. The direction we go has a Country will not be Determined in the Halls of our Congress, but in the Cathedrals and palsies of the Mid East. LOL. the insane part is Where not even publicly trying to get independent confirmation of there current situation. There monarchs our determining our fate from across the Atlantic. (Like I said we surrendered the offensive) No Energy policy can be realistic, without independent confirmation. YOU GUYS, THIS IS NO WAY TO RUN A COUNTRY.

So in order for the world to come out of the Recession we need more Oil,for any real recovery world wide 3-6 M a day. Yet where depleting 5 percent a year. Now where does this new Oil come from in those quantities ? Where in a car on a country road with no head lights, That's not a good way to drive.

Sorry for my spelling I'm working on it.

pocampo: It's not so much your spelling but use of certain words. Hope you don't mind my assisting. 1st paragraph: Small Rant, Has -- the word Has should just be as. 2nd paragraph: the insane part is Where -- the T in the word The needs to be capitalized because it's the first word of the sentence, and the word Where would not be capitalized, but also it would be used as we are or abbreviated as we're. 3rd paragraph: You use the word where correctly in the sentence: Now where does this new Oil come from in those quantities? But in the following sentence: Where in a car on a country road with no head lights, -- is a situation to once again use we are or we're. Otherwise an interesting post and it's true we are in a pickle oil wise. What to do about it? Well, that's just one topic we're on here to discuss, because there are a myriad of viewpoints.

Thanks for the friendly advise. I just get excited.
Po. If anybody can give me a Idea where the Edit link is that would help a lot. I don't see on my OP.

i don't believe that you can edit a post once it has been replied to (i'm sure one of the editors of this site will correct me if i'm wrong)

There monarchs our determining our fate from across the Atlantic.

One thing that needs to be considered is that the sheiks running "Saudi" Arabia & the other Gulf States are concerned, first & foremost, with staying in power. The ruling families of these places have no social base and thus need the backing of a strong external power (e.g. the USA) to protect them from their own subjects. Of course, while everything is going swimmingly in terms of their own policies, this conflict is kept below the surface. "Saudi" Arabia, however, is one of the biggest importers of US arms and has its own Al-Qaeda opposition to deal with.

For the countries of the Middle East really to start dictating to an oil-dependent USA, their despotic monarchies would have to be replaced by governments which had a somewhat broader base. An example is Iran, where the clerical regime, corrupt & authoritarian (and increasingly unpopular) as it is, has a wider base of support & legitimacy than the tyranny of the Shah that it replaced in 1979.

P.S. The word "Saudi" is in quotes because I cannot think of another country so socially reactionary that it is named after its ruling family. It is hard to describe the evil that is the House of Saud.

The problem of course with 2 resulting in falling prices is your not attempting to determine the demand for oil to use to move away from oil.

Realistically we need to burn a lot of oil to create the new oil free infrastructure just like a lot of coal was burned between the start of the oil age and the final replacement of coal for many use cases. In facto of course coal consumption continued to climb even as its use cases where marginalized in favor of oil. What really happened was not exactly replacement but specialization of coal usage.

The same of course happened with wood as we entered the coal and then oil age demand for wood did not decline it increased overtime.

I simply don't buy into this massive move away from oil at all much less the possibility of it leading to cheap oil. If it did why continue to move simply halt your transition until oil is more expensive again.

And last but certainly not least to have any sort of steady move away from oil it seems important to not disrupt the status quo to much. Its been noted many times that business failures occur during a recovery as strained firms down to the wire actually are unable to expand as business picks up and they are beaten by competitors which may be in marginally better shape.

Thus its difficult to envision a rapid move off of oil thats not highly disruptive of the very economic system your trying to save by moving off of oil. One can consider the move from the icebox to the refrigerator obviously the ice industry was not saved by the transition. In a move off of oil large swaths of our economy will discover that they are effectively icebox salesmen in the new oil free economy.

Thus its not clear in the least for a whole host of reasons that such a rapid transition is viable regardless of the danger posed to the system by declining oil production and increasing prices.

For more likely is that rising oil prices will steadily force us to devalue the existing economic system i.e we flat get poorer.

And its very likely that this rising poverty makes it more and more difficult to fund the existing system much less embark on and expensive transition project.

This is the slumlord solution. As your buildings decay repair costs increase but your forced to lower rents because of the condition of the buildings leaving ever less money for repairs. However the rents actually pay more than the dilapidated buildings are worth so they surprisingly cash flow since all you need to do is discount the rent sufficiently to entice the poor to live there. Anyone thats ever walked into a homeless camp or squatter situation knows that humans can live in incredible squalor and stench. We are cavemen.

And last but not least this rapid move for all intents in purposes requires a commitment from the wealthiest portion of society. At the end of the day its their banks and businesses that will be used to finance and build this new economy. Sure they get a long term benefit from such a move but obviously over the short term it hurts their existing business. These are the guys that own the icebox companies. And in general they benefit from rising oil prices as a large portion of their wealth is actually based in oil.

And of course as oil gets more expensive one obvious side effect is rising unemployment yet this works to cause wages to fall which more than offsets rising oil costs these same businessmen find their profit margins increasing as falling wages cause their greatest expense to fall. Of course eventually these poorer workers simply can't afford what they are producing and you get into a classical depression but thats again later.

The only real reason to make a rapid and expensive move off of oil regardless of the price is to save the middle class neither the wealthy nor the poor benefit. The poor will walk and the wealthy can drive cars.

Outside of the utility of the middle class as consumers which becomes questionable in and expensive oil environment its not clear at all that there is any real interest in saving the middle class except of course buy the members of the middle class. Neither the poor nor the rich care. The rich can make money without the middle class older methods utilizing large poverty stricken workers produce fabulous amounts of wealth for a few.

Even a brief review of recent history indicates that until now the wealthy have simply exploited the middle class steadily marginalizing it. Expensive oil actually offers them and opportunity to smash the middle class once and for all and develop a large pool of desperate poor to ensure that never again will they have to share power.

It makes far more sense that the poor many former middle class and desperate to escape abject poverty will cave in and deal with the rich. Both groups are happy enough to destroy the remaining middle class and split the dwindling resource base amongst a large number of poor and few rich. Destroying the middle class is a win win for everyone including ex-members of the middle class. Now instead of the factories producing baubles for the middle class they produce necessities for the poor and the money no longer has to go through the middle class before reaching the rich. This simpler economy readily consumes the resources formerly devoted to the middle class. The poor of course walk or ride bicycles so their oil usage becomes miniscule leaving plenty for the rich. In fact the rising oil prices as we noted squeeze out the remaining middle class steadily reducing it.

Now of course as oil production falls at some point even the wealthy find getting oil problematic however at this point overall usage of very high priced oil has fallen to the point that substitution with renewable sources is valid i.e the transition off oil is very easy to make if it need only be done for a small wealthy class. Indeed they can effectively transition at their leisure and take advantage of their large pool of cheap labor to effect the transition if needed. One can probably guess for them at least ethanol and vegetable oils make sense. And of course by moving land over to fuel production it supports the price of food and they own all the farms so the poor are kept poor via rising food prices. So they can basically steadily expand the wealthy class and the poor pay via higher and higher food prices ensuring the poor remain poor.

With all the farmland owned by the rich and the poor forced into high rise tenements close to the factories they can't escape by growing food in fact I suspect anyone caught growing food would be killed.

Of course you have a new middle class rising but these people are now the straw bosses of the old plantation era. I suspect they will be given the freedom to beat or kill the poor as needed but are also subject to being killed by their own masters. Artisans and skilled labor are to some extent coddled but only to a point everyone is replaceable and everyone knows it. At no point is labor regardless of how skilled allowed to effect a shortage. And of course the top workers are actually allowed in the outer ring of the wealthy. So the best of the best get a chance to be in the bottom of the elite group. Just like CEO's are given enough money to be in the lower levels of the ultra rich world.

I'd suggest the middle class work very hard on figuring out why its continued existence is justified I see absolutely no reason why it won't be destroyed and in fact history indicates that its eventual destruction has been in the plans for a long time the only thing slowing it was the steady extraction of wealth from the middle class by turning it into highly indebted consumers. Peak oil simply offers both a reason and a means to finish the kill. It should be rather obvious that the middle class no longer has any control of its democratic government so voting is useless. It will become clear very quickly that the middle class will find no support from the poor either people who have been in poverty for a long time or the newly poor former middle class. As these ranks swell if votes are needed to justify something you now have a large pool of willing voters that cost little to sway.

I just don't see the argument that we need EV's to go to our suburban homes we overpayed for as valid.
Obviously since we don't run the government its willing and able to backstop any losses incurred by the banking system as real-estate values plummet. Indeed eventually this property will be purchased at pennies on the dollar to form the new mega-farms and high rise tenements to house and feed the poor.
The rich get all their money back and then all the property to boot. They get everything. And of course if we need a new monetary system they also get their wealth converted at par.
Given the rich already won the war its a bit funny that the middle class is just now finally waking up and realizing its in a fight for survival.

Its a bit late in the game don't you think ?

Memmel you spin a good yarn :-)

tuned into McLaughlin Group last night for little entertainment. Oh the rending of garments over the salary cap ($500,000 a year+stock) the salary czar imposed on the big bailed out seven (AIG thru GMAC). Now I'm not sure its a good or effective policy myself and no doubt it was meant to play on 'mainstreet' but the most interesting part of the panel's rant was when it acknowledged that capping the salaries for those major companies could well drive salaries down across the whole sector (and a great many in that sector are the rich). The horrors of lower wages elsewhere in the finance industry keeping any deserving young stud from keeping hold of the brass ring (god knows their mortgage payments must be well above the entire amount of the cap).

Certainly a different tune than most of McLaughlan and company sang as high wage domestic manufacturing was farmed across the border and then oversees thus reducing wages of that sector. That was efficient and what the market demanded. Somehow the market only alows the very top to keep gaining, they have 'dervived' their fully deserved position by dint of their awesome talent, vision and unparalleled hard work. Any interference with that sacrilege. I have never before seen the group (with Eleanor merely acting the cat who ate the canary while giving the bleeding heart liberal dissent) display quite the same emotion and I have watched them for years.

I'm interested to see how blatant they are in getting around this one.

Its going to be a good test for how in control they are of the government. Certainly their are loopholes in the rules put there for good reason. The question is how blatant will the wealthy be at exploiting these loopholes.

I'd not be surprised to see the companies purchase all the homes of the execs as corporate housing and then right in giving the house to the exec when they leave or retire.

I'd not even be surprised to see the exec's first upscale big time or grab a number of estates before playing this game. Probably do it with boats, planes vacation homes etc.

The banks will probably even claim they are simply investing in lucrative high end real estate.
Platinum parachutes for all.
Expense accounts will of course be made as generous as possible under and beyond the law.

Given these are multi-national corporations one can also suspect the exec's will suddenly gain new titles in their overseas's offices with compensation for this work handled by some entity that does not report to the US.

Possibly consulting gigs for false companies ?

Its not what they do thats interesting but how blatant they are about it. One can still hope that they will at least work to hide he cheating such that the government can safely and easily ignore it.

One can consider this and and attempt by the government to beg them be a bit more discreet about the looting and pillaging so it will be interesting if this plea is simply ignored.

One can of course hope these guys take the hint and move everything discreetly out into some money laundering scheme on the same hand if they do the Gov could potentially use this against them. And this of course means Goldman and Sachs will get them. I've posted this a few times but never forget that now its a shark eat shark world. Consolidation of power is intense right now. Not all the super wealthy will make it through this one.


Although the shark eat shark world is not so important to us peons its certainly a big part of the dynamics of the overall situation. In the end expect power to concentrate in the hands of a few key players.

I continue to expect GS to buy Bank Of America and change its name to be Bank of America and eventually merge with the Federal Reserve. It may sound crazy but I think the crazy nuts really really want to be called Bank of America they want that name and want to get rid of their current one. Citi of course will be broken up but I happen to think only after Goldman reaches the point the Government can hand them Bank of America then at that point they will split Citi up amongst a few of the top banks. Citi itself is toast.

Basically the plan is to transform the to big to fails into to big to control or super ultra-national banks beyond the rule of law. These new super banks will then create their own international regulatory body as government admit they can't control the banks. Of course it will be played off as a new stronger oversite body but its nothing of the sort.

By merging retail banks, GS and the Fed in to one ultra bank thats opaque and then integration of this bank with new ultra banks created in a similar fashion in other countries we get our new world order out of the old. Since these banks now issue the worlds currencies they are now in control and can safely collapse the worlds governments now stuffed with debt.

Whats interesting is this takes time to pull off so I really wonder if oil production collapses like I think it will if they even have time to set all this up. If I'm right about oil then we should see them forced to accelerate the formation of ultra banks they will literally have to take citi apart in the next several months and merge GS and Bank of America they don' have time to dwaddle around and wait for balance sheets to get repaired. This means of course that US Government has to swallow several trillion dollars worth of debt thats on the books of Citi and Bank of America although it might hide in the Fed for a bit. The Fed itself has to disgorge its own large pile of crappy debt onto the government shortly thereafter to merge into the ultra-bank.

You could be looking at almost 10 trillion dollars worth of debt plopped on the government balance sheet and then of course the ultra-bank has to turn around and "bailout" the Gov at least in theory. I suspect however it will be a temporary action if it comes at all suffice it to say if all of this gets executed the plug will be pulled on the current US government not doubt about it.

Lots and lots to do and time could very well have run out so life will be interesting. Right now my best guess was these guys thought they had at least five years to execute if I'm close to right then they have to compress all of this down into actions over months not years.

The public face they put on certainly will be telling when trying to discern the time frame being contemplated.

I've recently read that in a healthy coral reef ecosystem there are a lot of sharks swimming around with pretty empty stomaches. The mature system has as many sharks as can just make a living off the food chain below them, thus keeping down the other predators and grazers and allowing the reef to thrive. That is how I remember it anyway but I will be damned if I can find the article again.

Like you said, it should be interesting. Maybe a bank ruled world will be healthier...or maybe not

Maybe a bank ruled world will be healthier...or maybe not

Pretty much has been that way the moment the US left the gold standard. We sold our soul to the devil to fight the Vietnam war and "defeat communism" while of course our citizens where coddled at home.
So if you think they have done a fantastic job to date my best guess is they are now just getting started.
If you think about it with the US government backstopping all their losses its hard to imagine what they will do next.


And in an attempt to quash the inevitable criticism of its excess, Goldman is reportedly considering making a huge donation to charity. Perhaps in the ballpark of $1 billion.

I mean their nice guys dontcha think ?

And this.

“Banks have reverted to what they do best, take risks and make money,” a recruiting executive told Bloomberg. “There’s a feel-good factor out there at this point. It’s not what it used to be, but it’s definitely better than 2008.”

Whatever happens next it fairly certain that Wall Street is not fully detached from Main Street.

However this is not what really scares me what scares the shit out of me is there is no groundswell of indignation no marching in the streets nothing ...

Americans have become like a cargo cult hoping the gods on Wall Street bring back the housing bubble one more time. Most have turned int budding con artists that believe their house is worth a million bucks and they just need to let the guys on Wall Street turn it around. Instead if causing indignation I really think these monstrous bonus's have emboldened our now throughly corrupt Main Street to support the crooks so they to can get the piece of action they deserve. By the time the realize they have been duped it will be beyond to late.

Thats both the saddest and scariest part of the whole thing American has been throughly corrupted just exactly as Rome was eventually corrupted after the fall of the Republic. Once this happens thats when you know we are now in the end game. Its not the antics of the elite that tells the truth but the pure greed thats now America which tells you that the end game is now in action.

This same thing has happened around the globe in China, Europe, Russia, and the Middle East across the world the majority have been so corrupted buy the easy money of the housing bubble they will allow anything to get it back.

I honestly don't think this was intended I suspect the Bankers figured they would have to hunker down and hide for a bit obviously Goldman read the tea leaves correctly. They are far far from stupid. But now of course its obvious that Wall Street has realized their are no boundaries and no rules and no way to lose.
Given whats happened over the decades with them steadily loosening the rules that kept them in check almost no telling what they will do now that they are free to literally do anything they want and for all intents and purposes rule the world.

I have a sneaking suspicion this won't end well :)

Before someone nails me about the few rallies planned read the fine print.


With their reckless behavior and unchecked greed, big banks caused the most severe economic crisis since the Great Depression. We were told we had to bail the big banks out so they would start putting money back into our communities—and our jobs and our homes would be saved.

This needs to be translated esp for people outside the US.

It can be translated to plain English in a few different ways.

Hey where is my cut ?
If you don't pay me off at least a little bit I'll throw a tantrum !

Probably the best translation is:
Where is the money I deserve ?

Crooks don't like getting stiffed its a bit funny how this works.

What you want see is people demanding that the insanity stop that houses fall back in-line with incomes and we cut our losses take the pain and curtail banking. In fact outside of the blogs that followed the housing bubble its really rare to find any mention of the fact that housing prices are still way out of wack with incomes esp in an almost depression level recession with rampant unemployment. Theoretically the demand should be that everyone share the pain of righting our economy together. But of course thats theoretical.
So yes there is some outcry but understand its nature.

"....With their reckless behavior and unchecked greed, big banks caused the most severe economic crisis since the Great Depression. We were told we had to bail the big banks out so they would start putting money back into our communities—and our jobs and our homes would be saved...."

Putting "bail out" money back into the community is evidently the biggest of the large banks buying distressed residential and commercial property/financial institutions back at fire sale prices.In effect, the tax payers are possibly flipping the bill for their continued bondage to debt (when I say possibly/I do not feel this amount of money can be repaid - even if taxes are increased).
Forgive me of my crudity - but this is nothing less than fascism with a smiley face with the ever increasing azimuthal centralization of wealth and power.
In the end a very eclectic collection of large banking institutions will be holding most of the legal paper of true ownership;I suppose this is the modern expression of what being a "good" business man is.

memmel - Very good points...It seems that whenever the "elite" in financial and governmental institutions want change for the sole purpose of increasing power/financial gains, all they have to do is deregulate,or simply put,serve the ball into the court of the general public and let them govern themselves.
Let the public screw the system up as it were.
The second Glass-Steagall Act was passed in 1933 to separate commercial banking institutions from investing in Wall Street and utilizing our hard earned money to invest in risky financial adventures which are euphemistically called "securities" (wth?).With one solitary signature, William Clinton abrogated that regulation without a noticeable mention in the main stream media.This along with the rescission of several other regulatory acts paved the way for the populace to take part in the recent Wall Street orgy.
Think of all of those day traders pretending to know how the financial markets work and trying to stay afloat in the shark tank called Wall street - they were nothing more than squirrel meat to the big money of The Eastern Establishment.
This is the very same scenario that happened in the 20's, but infinitely larger - and as you pointed out - not only was the general public of America involved this time around, but the general public of the developed world were sucked into that insatiable greed for easy money.However, as science/engineering/laws of thermodynamics/physics et. al. predicate - their is nothing 'free' and easy in the real world.

Perhaps that is why it was stated so long ago a man shall earn his bread by the sweat of his brow.
Seems to me that if everyone lived by this rule there would be alot less trouble in the world.

Examples of our leadership giving warning and then allowing the consensus to make the final decision:

Eisenhower warning the public of the dangers of having a ubiquitous arms industry that would effect every stratum of the American culture.He was the first person publicly to coin the phrase "The Military Industrial Complex", and I did not see a tin foil hat on his head when he gave that speech.


Jimmy Carter warning Americans repeatedly concerning the autochthonous energy crisis and giving them the advice - learn to live a more frugal lifestyle....This needs no commentary.


One thing we learn from history is that man learns nothing from history..

Rome - Republic/Democracy/Emperor

America - Republic/Democracy/?????

I think we will soon see the true meaning of "full spectrum dominance" with regard to ELM. As the petrodollar fails the U.S. will try to control the flow of oil from the Middle East by force. Iraq, Pakistan, Afghanistan, Saudi Arabia and soon, Iran will be dominated by the U.S. military. Other nations will starve first simply because they do not control the oil exports and demand destruction will help the U.S. The "market" will play less and less of a role. Iraq will not be rebuilt, we don't want the indigenous population using the oil and Saudi Arabia will be cowed into submission regardless of what the Russians have to offer. It almost time to play some real hardball. Greatly increased warfare and terrorism are the likely outcome.

Although from a unexpected approach looks like one heck of a opening round on the path to raising interest rates.



Eventually of course this will percolate up to government debt.

Although its not surprising I tended to focus on the game ender which is when interest rates begin to rise on government bonds it makes sense that consumer debt should be the first to get the whip.

If this is the trend then somehow rates for home loans will also start going up. Given the large government intervention not sure how.

And why the heck is this in a oil usage thread well its my understanding from Mish's post many of the cards where gas cards !

Given my viewpoint this move was done for two purposes.

First the obvious one to wind down Citi's credit card operations and give them the cash flow to cover the defaults. The expectation is of course more people will pay the 30% than will default thus it winds down and puts a net profit in Citi's coffers.

Next and slightly hidden its and attempt to force conservation of gasoline without causing prices to increase. By hitting the cards used for gas purchases the hope is those that can will move to cash and become naturally more conservative in their gasoline purchases as its paid up front.

If thats correct it indicates that a deeper fear exists about the future of gasoline supplies than is generally acknowledged.

One can expect more targeted moves to try and eliminate the use of credit for gasoline/diesel purchases in the future. I'd not be surprised in the least in fact to see the use of credit for gasoline disbanded and only debit or cash allowed.

I'll now watch with interest to see if any further moves that look like they are attempts to reign in credit based purchases of gasoline and diesel happen.

Of course it depends on if this move is designed to do this and if its successful i.e gasoline consumption drops because of this move.

Potentially a brilliant move on the part of the Government despite it also being and act of desperation.

Obviously most consumers have a lot of different credit cards so I bet all this does is change the usage pattern i.e people will simply charge up other cards they own and pay off the Citi ones. I doubt gasoline consumption declines as hoped instead it will curtail other consumer spending as people try and pay off the citi cards and paradoxically charge more often for gasoline on their remaining cards while buying less of other stuff. Those now planning on default because of this action will of course bing spend to the limit.

This group should offset the ones that curtail spending in fact it could very well result in a uptick in overall spending as those planning on going out in a blaze of glory spend to the limit. Of course they too will put all gasoline purchases on the card but also will increase spending maxing out all their credit lines.

Still a sign of desperation IMHO. Of course the blaze of glory credit holders will default the moment they hit their limits and thus have more cash for gasoline afterwards.

Regardless I still think the Government is desperately hoping all that happens is a simple move to cash and pull back in gasoline purchases I don't think they really understand the American consumer.

Memmel. Man your amazing when you put pen to paper, or in this age fingers to key board. Its appreciated very much.