Drumbeat: November 3, 2009

Shale gas row gets nasty

Today Daniel Yergin, author of the seminal oil industry tome ‘The Prize’, wrote in the Wall Street Journal that shale gas is a game changer for US energy. Those who follow natgas will have heard it all before: more advanced and affordable technology, mainly hydraulic fracturing or fracking, has opened up an abundant supply of gas that could satisfy US needs for many, many decades to come. Yergin’s point that this has happened with ‘no great fanfare,’ however, probably stands true for the average person who isn’t an avid follower of energy news.

Shale gas not only promises to relieve the US of a potential energy security headache, but there’s the oft-quoted environmental angle, too: as a source of electricity, natural gas can give off 50 per less CO2 than coal, when burnt in the modern plants. It’s not just for the US, either: suggestions are that Europe and Asia might have huge supplies of shale gas, too (although Yergin notes that development of such resources could be some way off).

But there’s a persistent bunch of doubters about the shale gas story. The explosion in shale gas is new, and the horizontal wells that are being drilled furiously by Chesapeake are widely known to decline in output fairly rapidly after the first 12 months. This has led some respected resource watchers, including Matt Simmons, to voice scepticism that the shale gas is really about to revolutionise supply.

Crisis averted?

The drop in oil demand due to the world economic downturn, and recent oil exploration successes in Brazil, the US and west Africa, may have allayed fears that the world is running out of oil, but prices could rise once again as the economy recovers and demand outstrips supply.

That is exactly what happened in the summer of 2008, when oil prices surged to records of $147 a barrel as oil producers pumped as much oil as they could, but still failed to quench the thirst of the growing Chinese economy.

Despite the recent drop in demand, Christophe de Margerie, chief executive of Total, the French energy group, warns of more upheaval. “We are running the risk of another oil crisis when demand outstrips supply around 2014 or 2015,” he told Le Parisien newspaper in September.

Copenhagen talks could leave oil industry with a sinking feeling

Vast amounts of oil lie in the bitumen-rich sands of Northern Canada, but whether oil companies choose to spend billions extracting them will hinge on decisions made 6,000 miles away in Denmark next month.

Even at the best of times, squeezing crude from Alberta’s tar sands is an environmentally fraught process that is economic only with very high oil prices. The cost of oil production can be $70 (£43) per barrel compared with only $5 for the onshore oilfields of Saudi Arabia or Kuwait.

The prospect of a successful climate deal in Copenhagen threatens to hit the industry with a cost that could drive it out of business: international carbon regulation. Like all big economies, Canada will be expected to agree to make cuts in its CO2 emissions of at least 20 per cent by 2020 and up to 80 per cent by 2050.

Peak oil, peak transport

In my view, the key to oil demand lies with transport, not really with overall energy demand. Over the past 35 years the percentage of the usable barrel of oil (oil less processing energy less bitumen/asphalt demand) going to transport has risen from 41% to 61% and continues to increase (see figure). Increasing amounts of the heavy end of the barrel are being upgraded to transport fuels even as heavier and more difficult crudes make up more of the overall oil supply available. The only real transport fuel that “leaks” out of the system and into the broader energy arena is gasoil. Its use is split between residential, commercial and agricultural sectors for heating, small generators, construction equipment and so on. Some gasoil is also used for electricity generation but with pressure from the transport sector this will slowly be returned, although it only represents about 5% of global demand for gasoil in transport.

Gazprom Finds ‘Big Accumulation’ of Gas Off Venezuela

(Bloomberg) -- OAO Gazprom discovered “a big accumulation” of natural gas off of Venezuela’s northwest coast, marking what may be the second major find in the area in two months, the country’s oil and energy minister said.

Gazprom was “authorized under their license to drill another well and this has confirmed a big accumulation of gas,” Minister Rafael Ramirez told reporters today in the Venezuelan city of Porlamar. Gazprom is Russia’s largest energy producer.

Iraq-Turkey Oil Pipeline Pumps at Limited Rates After Breakdown

(Bloomberg) -- An Iraqi pipeline carrying crude oil from the north of the country to Turkey continues to pump with limited flows after a breakdown, Turkish Energy Ministry deputy spokesman Kerem Eskigun said.

Volume through the line has reached as much as 7 cubic meters an hour from 4 cubic meters an hour yesterday, Eskigun said in a telephone interview from Ankara today.

Chevron Defends Use of Tapes by American With Felony Conviction

(Bloomberg) -- Chevron Corp., facing a $27 billion pollution lawsuit in Ecuador, said revelations that an American who secretly recorded the judge overseeing the case was convicted of a drug-smuggling conspiracy won’t affect its reliance on information in the recordings given to the company.

Chevron, the second-largest U.S. oil company, said Aug. 31 that California resident Wayne Hansen was an “American businessman” whose tape recordings of meetings in Ecuador in May and June show that the judge is biased against the company and may have been involved in a $3 million bribery scheme.

A tragedy waiting to happen

RANCHI: Hardly a stone's throw away from a prestigious residential school and an army residential colony, the Indian Oil Corporation (IOC) fuel storage depot at Namkom it appears is yet to learn lessons from the Jaipur inferno.

In a reality check, ToI found huge oil leakage on the tracks from railway oil tankers. As a result, the drains in and around the depot are thick with oil making it vulnerable for a Jaipur-like tragedy waiting to happen.

Tribe: Wind farm would harm sacred rituals

MASHPEE, Mass. - From a blustery perch over a Cape Cod beach, Chuckie Green gestures toward a stretch of horizon where he says construction of the nation's first offshore wind farm would destroy his Indian tribe's religion.

The Wampanoag — the tribe that welcomed the Pilgrims in the 17th century and known as "The People of the First Light" — practice sacred rituals requiring an unblocked view of the sunrise. That view won't exist once 130 turbines, each over 400 feet tall, are built several miles from shore in Nantucket Sound, visible to Wampanoag in Mashpee and on Martha's Vineyard.

Things to consider in setting up a CSA

Farmer's interested in setting up a CSA in their local community might be a bit mystified about where to start.

CSAs are like a farming club for consumers, and like all clubs the first priority is to find members. Local networking is an essential step. One of the ways is to approach local groups representing people who might be interested.

Daniel Yergin and Robert Ineson: America's Natural Gas Revolution

The biggest energy innovation of the decade is natural gas—more specifically what is called "unconventional" natural gas. Some call it a revolution.

Yet the natural gas revolution has unfolded with no great fanfare, no grand opening ceremony, no ribbon cutting. It just crept up. In 1990, unconventional gas—from shales, coal-bed methane and so-called "tight" formations—was about 10% of total U.S. production. Today it is around 40%, and growing fast, with shale gas by far the biggest part.

The potential of this "shale gale" only really became clear around 2007. In Washington, D.C., the discovery has come later—only in the last few months. Yet it is already changing the national energy dialogue and overall energy outlook in the U.S.—and could change the global natural gas balance.

Are Higher Prices the 'New Normal' for Oil?

Oil prices have bounced more than 150 percent off of December 2008 lows but inventory levels remain at historically high levels despite a healing global economy.

However, Goldman Sachs says robust 2010 oil demand growth will deplete these inventories over the next 12-to-18 months and diminishing production rates in key areas around the world will create a supply/demand imbalance.

The Irrationality Of Not Preparing Contingency Plans For Peak Oil

With all the credible evidence that peak oil is real, not a "theory" as some would have us believe, why is it that organizations such as the Federal government have steadfastly refused to draw up contingency plans to deal with the impacts of peak oil? There is no doubt that, as a society, we have dragged our feet way too long, and because it takes years to change many elements of our energy infrastructure, many of the desirable transitions to alternative energy cannot now be achieved. So now we are forced to do the best we can, now we must deal with the repercussions of our extensive dependence on petroleum (fully 50% of America's energy comes from petroleum). At the same time, that same vital substance will soon get very expensive, will get increasingly scarce, and the delivery systems for providing it will become increasingly unreliable. So at the very least, we should get real, and do a risk assessment and figure out how we will be affected, and then draw up situation-specific contingency plans. To refuse to undertake this important activity is illogical, as the numbers provided below clearly indicate.

The Changing Face of National Oil Companies (NOCs)

National oil companies (NOCs) of major resource holding countries driven by the aim of developing domestic oil and gas reserves will account for a major part of the investments in the oil and gas sector during the next five years. Major oil and gas producing national oil companies have announced huge investment programs for the next five years, a major part of the investment being diverted towards the development of the country’s oil and gas sector. Six major NOCs namely Petrobras, PDVSA, Kuwait Petroleum Corporation, Sonatrach, Saudi Aramco and National Oil Corporation will together invest over $540 billion in the energy sector over the next five years.

BP, CNPC to Triple Output from Super-Giant Rumaila Field

BP, and China National Petroleum Corporation (CNPC), have signed a technical service contract with Iraq's state-owned South Oil Company (SOC) to expand production from the Rumaila oil field, near Basra in southern Iraq.

Outcry against 'colonial' takeover by BP of Rumaila oilfield in Iraq

The British oil giant BP will today take control of Iraq’s biggest oilfield in the first important energy deal since the 2003 invasion. The move has created uproar among local politicians invoking resentful memories of their nation’s colonial past.

Putin warns Europe about winter gas supply amid more rows with Ukraine

Russia has warned the European Union that a new gas conflict is brewing with Ukraine, reviving memories of a previous dispute that led to fuel shortages across a swath of Central and Western Europe.

Moscow is pointing the finger at internal politics in Kiev and is complaining about disputes over bills owed by Ukraine.

Construction on Aramco's Karan gas project well under way

HOUSTON -- Saudi Aramco’s Karan gas project swung into full speed last month as all four contract packages began construction, according to a company announcement.

Following the awarding of program contracts in March, the offshore platforms and subsea pipeline package began fabrication in September. The units involved 30,000 tonnes of steel for 38 structures, said an announcement from the company in mid October.

The three onshore packages—Karan gas facilities, pipeline utilities and cogeneration, and the Karan sulfur recovery and Manifa gas facilities—have all begun initial construction at Khursaniyah (OGJ, June 22, 2009, p. 50).

Mexico reopens one of three Gulf oil ports

MEXICO CITY (Reuters) - Mexican oil exporting port Cayo Arcas reopened on Monday afternoon but two of the country's other main oil ports remained closed due to bad weather, the government said.

The Dos Bocas, Cayo Arcas and Coatzacoalcos ports, which ship out the majority of Mexico's crude exports, all closed on Saturday as a cold front moved into the Gulf of Mexico.

Mexico Has ‘Long Way to Go’ on Budget, Garza Says

(Bloomberg) -- Mexico has a “long way to go” in its effort to strengthen the economy by reining in its budget deficit and boosting investment in the oil industry, said Tony Garza, former U.S. ambassador to the Latin American country.

Dominicans look to Pemex for help

The Dominican Republic has asked Mexico for help with efforts to explore for oil and gas in its territory, the Caribbean nation’s economy minister said.

Temistocles Montas said his country is totally dependent on foreign suppliers of gas and oil and therefore the search for these resources is an urgent policy matter.

The Philippines: Fuel price cap to stay as long as Luzon is in a state of calamity, Palace says

A presidential edict capping fuel prices will remain in force as long as Luzon, the Philippines’ largest island, is still in a state of calamity.

This was emphasized by deputy presidential spokesman Lorelei Fajardo on Tuesday after the Joint Foreign Chambers (JFC) asked the termination date of Executive Order 839.

China OGP halts coverage of crude, products stockpiles

BEIJING (Reuters) - China OGP, an oil industry newsletter issued by Xinhua news agency, will no longer publish data on China's stockpiles of crude oil, gasoline and diesel, it said on Tuesday.

The move removes the only public source of information on Chinese crude and fuel stockpiles, key information for oil traders trying to assess the real level of demand in China, the world's second-biggest oil consumer.

Recent gasoline price spikes seem to level off

Gasoline's post-summer ascent leveled off over the weekend, just as consumers begin to decide whether the money they pour into their tanks will force them to cut back on holiday spending.

Sinopec expects over 50 mln T Saudi crude supply in 2010

BEIJING (Reuters) - Top Asian refiner Sinopec Corp (0386.HK) expects to buy more than 50 million tonnes of crude from Saudi Aramco next year, Sinopec's president Wang Tianpu said on Tuesday.

Wang told reporters that Saudi Basic Industries Corp 2010.SE will supply 10 million tonnes crude to Sinopec's Tianjin refinery now being expanded.

Putin requests EU credits for Ukraine

MOSCOW — Russian Prime Minister Vladimir Putin urged the European Union on Monday to lend Ukraine at least $1 billion to help it pay for natural gas supplies from Russia and avoid another disruption of flows to Europe.

Europe gets 20 percent of its gas from Russia via pipelines that cross Ukraine and has an interest in helping prevent a repeat of the January gas crisis. When Russia cut off gas shipments via Ukraine for nearly two weeks as a price and payment dispute between the two neighbors escalated, more than 15 European countries were sent scrambling to find alternative sources of energy.

Putin said Russia had done its part by paying transit fees of $2.5 billion in advance.

BP In Iraq's 1st Big Post - Invasion Oil Deal

BAGHDAD (Reuters) - Oil major BP and China's CNPC on Tuesday signed Iraq's first major new oil deal since the 2003 U.S. invasion, snapping up a development contract for the Rumaila oilfield, one of the world's biggest.

The 20-year development contract for the southern oilfield is the first of several deals that Iraq expects to sign in the coming weeks and months as it tries to catapult itself to third place from 11th in the league of oil-producing nations.

Iraq's oil wealth eludes the poor

The Iraqi government has been busy signing a series of billion-dollar deals with major international oil companies who are attempting to gain access to Iraq's vast oil wells.

But in poverty-stricken areas of the oil-rich southern city of Basra, residents say they have not seen any of the wealth generated by the deals.

Yemen Said to Export First Liquefied Natural Gas Cargo Nov. 7

(Bloomberg) -- Yemen will export its first cargo of liquefied natural gas on Nov. 7 as it seeks to expand oil and gas revenue, two people familiar with the matter said.

PTTEP Stopped Oil Spill, Blaze on Rig Off Australia

(Bloomberg) -- PTT Exploration & Production Pcl has plugged a well that has been leaking oil and gas off northwestern Australia for 10 weeks, and extinguished the main blaze engulfing a drilling rig.

Experts on board a nearby rig pumped about 3,400 barrels of heavy mud down a relief well to stop the leak, PTTEP said in an e-mailed statement. The main fire at the Montara well head platform has been put out, although some material on the rig may still be ablaze, the company said.

Archer Daniels Midland profit falls on weak demand

ST. LOUIS — Archer Daniels Midland says its first-quarter profit tumbled 53 percent as the global recession dragged down demand for crops and ethanol.

Global Warming: The Wrong Argument

There are many arguments in favor of clean energy that are far more difficult to argue against than global warming. First, consider pollution. It is undeniable that spewing contaminants into the air harms human health. Anyone who has been in Los Angeles understands this well. The smog, benzene, and other products of combustion are poisonous. This is very believable, but the impact and reason for urgency of pollution pales in comparison to global climate change.

There are, however, other reasons that do have the same brutal imagery. Look at the risk for resource wars. As oil supplies dwindle, economic and security interests will dictate the need to secure oil resources. States have used, continue to use, and will use their military power to secure oil resources. Saddam Hussein attempted to expand his oil empire by invading Kuwait. China’s involvement in Sudan is almost certainly linked to the latter’s oil. According to the Energy Information Administration, Sudan has five billion barrels of proven oil reserves, which is enough to warrant China’s military involvement in the region.

The future of planning in the UK

UK energy legislation has changed greatly over the last few years to reflect the country’s necessity to meet projected energy demands as well as carbon emission reduction targets. With the UK Energy Act 2008, the Climate Change Act 2008 and the Planning Act 2008 all now published, these important legislative changes indicate the country’s commitment to the UK’s 2006 Climate Change Programme, which sets a framework for domestic policy initiatives in the final years of the Kyoto agreement to 2012.

Renewable Energy is Here to Stay

In October, I told you that when the new president moved into the White House, our entire energy infrastructure would begin a major transition from one based almost entirely on fossil fuels to one that would finally include a significant contribution from renewable energy.

Well, my friends—that transition has begun.

Thanks to a crumbling electric infrastructure, the threat of peak oil, and global climate change (whether you believe it’s real or not), the move to integrate more renewable energy has not been the hard sell so many had expected.

The End Of Electricity

There seems to be a consensus that the depletion of fossil fuels will follow a fairly impressive slope. What may need to be looked at more closely, however, is not the "when" but the "what." Looking at the temporary shortages of the 1970s may give us the impression that the most serious consequence will be lineups at the pump. Fossil-fuel decline, however, will also mean the end of electricity, a far more serious matter.

What to do with the digital refuseniks?

In the greater scheme of things, Enders admits, accessing government services from a home PC will start to make a lot of sense. “One or two years past peak oil,” she says, “the future involves people working more in the local space”.

Yet she also warns that Whitehall has “a completely optimistic view about the transition in the case of digital have-nots”.

“Ultimately, what they’re talking about is health and education,” she says. “But the poor and the elderly, like everyone else, want a doctor who is going to feel them, touch them, comfort them.”

Responding to Alex Steffen’s Critique of Transition at WorldChanging

I have been following with interest the discussions surrounding Alex Steffen’s piece at WorldChanging in which he critiques Transition. I am honoured that someone so widely respected as a writer on sustainability issues saw fit to engage in discussions around Transition, but, as a critique of Transition, it leaves a lot to be desired. It is a confusing piece in which, in spite of Alex’s protestations in the comments thread to have read everything about Transition that is out there, seems to have somewhat missed the point. I’ll go through some of Alex’s main points, but an overall reflection is that it appears to me that what Alex does is to describe Transition as something it isn’t, criticise it for being that, and then propose something to replace Transition which is actually what Transition was all along. An odd approach. Carolyn Baker has already posted an articulate response to Alex’s piece, but here’s mine.

Cnooc Group May Set Up Electric-Car Battery Network

(Bloomberg) -- China National Offshore Oil Corp. may build a network of battery-changing stations for electric cars in China, the world’s second-biggest automobile market.

Cnooc Group is considering the plan after the company invested 5 billion yuan ($732 million) in July for a stake in closely held Tianjin Lishen Battery Joint-Stock Co., a mainland battery maker for electric vehicles, Shan Lianwen, director of corporate strategy at China’s third-largest oil producer, said in an interview today.

Is hydrogen the future? This car goes 0 to 60 in 12 seconds

Yongin, South Korea – When the US government cut funding for hydrogen-fueled cars last May, Energy Secretary Steven Chu said such vehicles will not be practical for another decade or two.

Lim Tae-won thinks he can prove Secretary Chu wrong.

Dr. Lim runs the team at Hyundai-Kia Motors that is developing hydrogen fuel cell technology. And they are on course, he says, to mass produce hydrogen cars in six years.

Harvard Univ. to buy power from Maine wind farm

CAMBRIDGE, Mass. – Harvard University has entered into a 15-year agreement to buy power and renewable energy certificates from a wind energy farm to be built in Maine.

Harvard officials announced Monday that Stetson Wind II facility near Danforth, Maine, expected to go online in the middle of next year, will eventually provide more than 10 percent of the university's electricity needs. Federal environmental regulators say that will make Harvard the largest purchaser of wind power by a university or college in New England.

Turkey Aims for Second Nuclear Tender Next Year, Star Reports

(Bloomberg) -- Turkey plans to be ready to tender for the construction of a second nuclear power plant in September next year, Star newspaper reported, without saying how it got the information.

A Defense of Meat Goes Too Far

The American diet is so meat-based compared with the rest of the world that questioning how much meat we eat, and what kinds, is a very good place to start the conversation.

Allianz Says Climate Change Battle Needs ‘Enormous Investments’

(Bloomberg) -- Allianz SE, Europe’s biggest insurer, said “enormous investments must be mobilized” to fight global warming and that financial markets may be able to fund those efforts.

“To reach the ambitious reduction targets for CO2 emissions, the rebuilding of the energy sector alone would require” $1 trillion in additional investments annually in low- emission technologies by 2050, Joachim Faber, the management board member in charge of Allianz’s asset-management business, said today in an e-mailed statement.

Religion gets behind fight against climate change

PARIS (AFP) – Leaders from nine major faiths meet at Windsor Castle on Tuesday in an exceptional initiative that supporters predict will harness the power of religion in the fight against climate change.

The models are unreal

The Jaccard study assumes no external capital inflows or outflows occur, dampening some of the mechanisms for economic shocks. As for other components of their model, the reader is simply unable to judge. There is some evidence that energy elasticity estimates are lower now than they were a decade ago. The lower the elasticity, the larger the price shocks that must be imposed to achieve the same change in consumption. During the massive oil price hikes of 2005 and 2006, one of the surprising things was how little the level of consumption changed given the size of the price change. If the elasticities in the CGE model are not up to date, they may predict unrealistically smooth and painless policy responses.

Kjell Aleklett: The EU’s climate change offer to the USA and a railway around the coast of Africa

Until 1 January 2010 Sweden holds the presidency of the EU. This means that Sweden’s Prime Minister Fredrik Reinfeldt is head of the EU-delegation that today travels to the USA for a summit on climate between the EU and the USA on Wednesday. Reinfeldt will meet president Obama today and can then present the offer that the EU nations agreed on last week.

In terms of emissions the offer is: The EU nations commit to, as a whole, reduce emissions by 30% by 2020 as calculated from the level of emissions in 1990. But there is one condition – other nations must make equivalent commitments in a climate change treaty that is binding under international law.

Africans boycott meetings at UN climate talks

BARCELONA, Spain – African countries boycotted meetings at U.N. climate talks Tuesday, saying that industrial countries had set carbon-cutting targets too low for reducing global greenhouse gas emissions.

The action forced several technical meetings to be canceled. Delegates to this week's U.N. climate talks in Barcelona warned that, unless the African protest was settled, it could set back the timetable for concluding a new climate change pact at a major U.N. conference next month in Copenhagen.

E.P.A. Lawyers Challenge ‘Cap and Trade’ for Climate

When an economist at the Environmental Protection Agency rejected the Obama administration’s stance on global warming by writing an unsolicited report challenging the scientific consensus on greenhouse dangers, groups fighting restrictions on greenhouse gases hailed him as a courageous maverick. Climate campaigners said he was irrelevant and ill informed.

Now two more functionaries at the agency — Laurie Williams and Allan Zabel, who are lawyers and a married couple — have sharply criticized the core element of climate legislation pushed by Democratic lawmakers and President Obama.

Flurry of lobbying cash obscures US climate debate

WASHINGTON (AFP) – When it comes to the debate in the United States over what to do about climate change, cash has clouded the issue.

Lobbying groups for both the energy and environmental sides have boosted their spending by double digits over last year as the US Senate is poised to debate key legislation ahead of global climate change talks next month.

But science and specifics are hard to find in the barrage of ads and messages about green jobs, alternative energy and the dangers of pollution.

Viability of Welsh coastal defences questioned

People living in high flood risk coastal communities in Wales may have to leave as a report says the nation’s flood defences cannot keep up with environmental change.

Snow cap disappearing from Mount Kilimanjaro

WASHINGTON — The snows of Kilimanjaro may soon be gone. The African mountain's white peak — made famous by writer Ernest Hemingway — is rapidly melting, researchers report.

Some 85 percent of the ice that made up the mountaintop glaciers in 1912 was gone by 2007, researchers led by paleoclimatologist Lonnie Thompson of Ohio State University report in Tuesday's edition of Proceedings of the National Academy of Sciences.

And more than a quarter of the ice present in 2000 was gone by 2007.

Battle over the causes of Kilimanjaro's melt hots up

Yet a study, published yesterday, is a serious blow to the sceptics. It not only supplies new evidence that global warming is contributing to the melting but it is co-authored by Doug Hardy, a climatologist previously quoted by sceptics as supporting their case.

petrohawk threatened to cancel their free subscription to world oil and berman has resigned as contributing editor:


The President/CEO of World Oil's publisher canceled his column, he didn't resign. Rather blatant machination, which will hopefully result in a big messy controversy.

Yes he did resign. It is the second paragraph in his blog, Petroleum Truth Report.

I see that in Berman's blog, Petroleum Truth Report, he has posted Tudor Pickering & Holt's rebuttal to his shale gas thesis. While I have respect for TPH, their rebuttal is not very good nor is it compelling.

A request to TPTB at TOD. Could you contact TPH and see if they would post their rebuttal here?

Let me see what I can do.

imo, their rebuttal amounts to "see how good we are at promoting our consultancy".

Re: China OGP halts coverage of crude, products stockpiles, up top:

So let's connect the dots. We know from the article and graph that China has been destockpiling after the Olympics. We know that Chinese auto sales are on a tear and more vehicles use more gas and diesel. We know that they are about to extend the stimulus programs for autos rather that cut back as the U.S. and Europe are doing.

We know that China has been going around the world trying and often succeeding to buy up oil reserves and production. We also know that speculators use data to infer likely demand for oil. And we know that China acts in its own self interest most of the time and that lower prices would be in the self interest of China as a buyer of oil and oil products.

Now China halts release of stockpile data. It appears the Chinese fear the data will be interpreted as bullish for oil IMO and its release will make further purchases of oil reserves and products more expensive and consequently more difficult. Conclusion: China by halting the release of data is attempting to hide its likely increased demand for oil and oil products.

I'm pretty sure the market will see it this way and bid up oil prices anyway, perhaps even higher than if the data had been released as in the past.

More walk away from homes, mortgages

"I'm walking away from my house," says Sakson, 57, who stopped making payments about six months ago on her home in Pennington, N.J. "The bank can have it."

What Sakson did is called a strategic default, or a voluntary foreclosure, and it's fast becoming a major challenge to the government's $75 billion effort to keep distressed borrowers in their homes. Walking away from a mortgage is serious business — it can knock 100 points off your credit score and make you ineligible for a new mortgage for seven years. Yet, about 588,000 borrowers walked away from homes last year, double the number in 2007, according to a recent study by credit-scoring firm Experian and management consultants Oliver Wyman. While home prices are rising, the increases pale compared with overall drops in home prices since 2005 that threaten to push millions more homeowners into Sakson's predicament, owing more than their homes are worth and seeing little chance of rebuilding equity soon.

Makes sense if one views the home as a short term investment ... however, one has to live somewhere.

Sure...but if the cost of that alternate housing is falling, you can live somewhere a lot cheaper.

If Stoneleigh is correct, and real estate drops 90%, I expect just about everyone who can walk away, will.

But where will they go ?

According to this article, 57.5% of homes were owned, 27.5% rented and 15% vacant at the end of 2008 :-


If a large percentage of those 57.5% of owned homes were vacated, where would the people go? What would happen to the housing stock ? Right now, it just gets boarded up if it can't be sold at auction. I can't see the banks wanting to own and maintain all those formerly owned homes. I believe some arrangement would have to be made to keep people in those homes.

It is my understanding that some people are simply buying the house around the corner-I am not sure how they swing the financing but apparently it can be accomplished-it works for the banks because the new loans are being covered by the taxpayer.

Some people are doing that - buying an identical house next door or across the street, for half the price. They arrange the new purchase while their credit is still good. Then default after they have the financing for the new home. Their credit ends up trashed for seven years, but the money they save on their mortgage means they don't need credit, anyway. Or so the theory goes.

But where will they go ?

They'll rent, or buy a cheaper house, or move in with friends or family, or live in their cars. Americans are accustomed to a huge amount of space in their homes. If necessary, we'll get used to having less, as the rest of the world does.

What would happen to the housing stock ?

Nothing good.

My guess is we'll end up doing what they've already done in several Rust Belt cities: demolish houses to make neighborhoods more compact.

I believe some arrangement would have to be made to keep people in those homes.

I think they'll try. Heck, they already are. But I don't think they'll succeed. How will services like firefighting, police, water, sewer, schools, and trash pickup be maintained if people aren't paying? Allowing squatters to stay works only if there are only a few of them in a "normal" neighborhood. You reach a certain point, and no one will want to stay.

Maybe it's just me being dense, but I still can't wrap my mind around where the people would go. Ok, one could say folks would live in tent cities or their cars (without gas) and the houses would remain empty or be de-constructed.

Right now, relatively speaking, defaults are still fairly small, imho, in relation to total home ownership, and some people are walking not because they can't pay, but because they are under water, and they view the home solely as "monetary investment".

If there was such a massive devaluation, wouldn't credit availability just sink further along with home values so that new loans would become non-existent? How many would realistically be buying ?

No bailout would be able to support the large banks, they would probably fail, and mortgage paper would probably end up being shredded. I think we'd have to see debt forgiveness (or whatever term they'd be calling it at that point). Of course, if there was hyperinflation, the debt would just get very small.

As for local services, which are largely paid for by property taxes, they would take a huge hit. I imagine neighborhoods would have to step in and provide some voluntary support to those services.

There's a big difference, though, between a person who can still pay the mortgage, and who wilfully walks away, to their own benefit, and someone who cannot pay at all, and wouldn't qualify to rent either.

The reason banks were "bailed out" was because the assets on their balance sheets fell to the point where they were technically insolvent
Assets < Liabilites -> Insolvency
The cash was given to them to shore up their balance sheets, not to promote lending.
In the event of a fall in asset prices such as Stoneleigh suggests, no amount of cash could prevent the banks from insolvency.

I still can't wrap my mind around where the people would go

Stoneleigh wrote a comment about "the fastest growing form of human habitation".

IMO, the U.S. would catch up to much of the rest of the world in the percentage of Americans living in slums.

Maybe it's just me being dense, but I still can't wrap my mind around where the people would go.

Probably most would go live with friends and family. That's considered kind of embarrassing now, but only a couple of generations ago, it was normal for extended families to live together. It was also normal for perfectly respectable people to take in boarders to help pay expenses.

My mom and some of her sisters moved out from their parents' house before they got married. They weren't kids - young women in their 20s - but this was considered quite shocking. People just didn't do that. The whole neighborhood was gossiping about it. (And truth to tell, the reason they did it was because their father was abusive. They would not have done anything so radical otherwise.)

I think communal living might grow more popular, too. Not just the idealistic co-housing and senior complexes we have now, but older forms, like poor farms, church "retreats," and things like that.

If there was such a massive devaluation, wouldn't credit availability just sink further along with home values so that new loans would become non-existent? How many would realistically be buying ?

If it gets that bad, I expect those who are buying will be required to pay cash on the barrelhead. That will be a big reason prices fall, in fact.

There is probably a pretty good business opportunity out there for someone that can develop a website that matches up homeowners (with empty space and not enough money) with people with a little money and needing a place to live. It would be an especially hot deal if there could be some sort of premium vetting service for people using the system - automated checks of criminal records and credit files, for example.

I don't have the inclination to pursue the idea, so whoever does, please consider this idea my gift to TOD, and redirect a small slice of your profits as a contribution to TOD in payment! :-)

In the UK such sites already exist.


I have a friend who matches up commuters requiring parking space during the week in central London with people who have spaces available - seems like a good small business idea.

I moved an ex girlfriend into the spare room (with the consent of my wife !) so she could avoid a 50 mile commute for a few months.

When the SHTF I will be looking for boarders at my place. I have a small farm and am now over 50 and my knees are starting to go. I'll be looking for someone young and physically fit who doesn't mind a lot hard physical labor.

better yet, try http://www.helpx.net/ (cheaper and you get free basic access, unlike WWOOF, or 2 years of premium global access for a small fee)

At some point the vacant properties just default back to the municipalities for non-payment of back taxes. If there is nobody to buy them, then the municipalities have to make a basic decision: find some way to get taxpayers into those houses, or become a city of empty houses with no people - and no taxpayers.

Or they could choose to be a smaller city.

In some cities, they are consolidating neighborhoods by offering people money to move. That saves the city money on things like trash collection and police protection. Detroit is turning the newly empty land into things like community gardens.

""There's a big difference, though, between a person who can still pay the mortgage, and who wilfully walks away, to their own benefit, and someone who cannot pay at all, and wouldn't qualify to rent either.""

No, there is no difference. It is about the choice that one makes in life to do one thing or the other. A choice was made to purchase a property one could not afford...it is also a choice one makes to walk away from a property one feels they do not want, to afford.

Regardless of any outside influence, a choice was made by someone to purchase the property. That's the way it works in this country. Get what you can get away with.....


But where will they go ?

A lot just stay put. Banks are unwilling to proceed with foreclosure. There are stories of people living in "their" houses for months and in some cases over a year mortgage free.

That was my experience in South Africa.
There was a huge shift in population, an influx of immigrants & refugees, many folks relocating, leaving houses and apartments empty.
Squatters moved in, and have proved beyond the ability of landlords and authorities to evict.
Essentially, properties were abandoned en-masse to squatters, in some areas.

Residential Real estate in Japan dropped by 90% from the peak, and commercial real estate dropped by considerably more than that. However, only people with mortgages have an incentive to walk away, and as long as payments are comfortable they are likely to keep paying - you have to live somewhere.
Falling real estate does put downward pressure on inflation measures, causing the gap between measured inflation and experienced inflation to increase.

I'd live in one of these:


Rather than give one cent to the scam that is the real estate & banking "industry" (beyond what I've already generously contributed through my tax dollars of course).

Here's an outside the box option to think about.


Out of the tree I would suggest..about 3 pages down on that site, after suggesting moving it with a kite, it says weight 90kg!!

owing more than their homes are worth and seeing little chance of rebuilding equity soon.

My current mortgage rent that I pay the bank every month is still less than what I would have to pay for rent in a similar home. So despite the fact that I now owe more than what my home is worth it still makes no sense to walk away as long as I can afford the mortgage. Sure I'm not building equity and I'm enough of a realist to understand that if real estate values continue to plummet I probably never will. However until there is free housing somewhere it still makes economic sense to keep my current roof over my head. Maybe it's just me?

The cost of owning a house varies from state to state, with property taxes being the biggest variable, but here in Texas a good estimate is that it will cost you 5% of the value of the house, per year, to live in the house, even without a mortgage payment. This includes property taxes, maintenance, insurance, utilities, etc.

So, a $250,000 house in Texas would cost you about $1,050 per month, even with no mortgage. My daughter is renting a house appraised at about $250,000, and her monthly cost, including utilities, is about $1,500. So, her monthly cost, in excess of what it would cost her to live in the house, with no mortgage, but with a quarter million dollars tied up in real estate, is only about $450 per month.

Incidentally, I think that one should now view a house purchase pretty much the same way that you view a car purchase, i.e., the key determinant is how much depreciation you an afford. Assuming only about an initial 5% annual depreciation rate for a $250,000 house, the monthly cost of living there with no mortgage would be about $2,100 per month. Given the outlook for real estate I would assume a linear decline in value of at least $12,500 per year. As the appraised value falls, I would assume that the taxing authorities will increase the tax rate.

5% depreciation of the asset is a 20 year lifespan, too short.
40 years is more typical.

The building finishes last maybe 10 years.
Appliances and MEP maybe 15 years.
Sheathing/envelope maybe 25 years.
The basic structural members maybe 50 years.
If you factor these costs in with annual operating costs you can determine the life cycle cost of a building.
Generally the cost of maintaining and operating a house is 2.5% per year of the cost of the original purchase price (no property taxes).
In the end the present value of your home over 40 years is about double the orginal building cost.

People should buy super efficient homes to last over the product life which can be extended with more better design and building materials but they cost 20-40% more initially.

Retrofitting/renovating an old home to be energy efficient will cost 75% the orginial cost of the building and you'll still end up with a very old building.

Unfortunately people buy what they can afford or worse what their credit card can bear.

This shows that the 'market' fails to provide adequate shelter for people but degenerates into a unfair con-game.

residential rental property is depreciated over 27.5 yrs for irs purposes.

what are you including in operating costs ? it would seem that including utilities would be a lot more than 2.5%.

i use 5% of the gross rental income for maintaining residential rental real estate, for budgeting purposes.

and no-one told all the newly minted bush era homeowners(remember the "ownership" society ?) about maintenance. that doesnt seem to bother them(the newly minted owners), they "just say no" to maintenance.

i use 5% of the gross rental income for maintaining residential rental real estate, for budgeting purposes.

I'm not including overall inflation at 3% so maybe 5% as a rule of thumb is better, but 2.5% seems right for the value of the property.

The more expensive the property the greater the operating costs.
Single family homes are the cheapest to build and cheapest to maintain and have the shortest life span(so why maintain?).

The politicians(like Reagan) are always screwing around with depreciation life.
They increased a residential from 18 year to 27.5. That probably had a lot to do with real estate inflation.

Until recently I once owned a "crackerbox"(my personal description) little house that was built in the midfifties -concrete poured in a trench , six courses of cinderblock fof the foundation,wood framing with asbestos siding , asphalt shingle roof.

That's about as cheap as you can get.With reasonable maintainence that house will still be in good livable condition probably a hundred years from now.I put in new windows, cabinetss, flooring , etc, before I sold out-the first time any of that was done in fifty years.It got aluminum wrapped around the eaves and trim thirty years ago-that was still in fine condition.

Maybe they don't have building codes and building inspectors where most of the folks live who are talking about houses falling down.

But I don't dispute that lots of houses have many features that are addeed for cosmetic purposes that are very bad news in terms of maintainence-dormers, skylights, excessive wall and roof area compared to useful living area, etc.

And chip board is a joke-but houses around here don't fall down-they get fixed up.

A house that is kept dry and free of termites will last indefinitely-if it is built to any building code I know about.Of course you will have to spend some money on it occasionally-but for anyone who bought and stayed put before the year two thousand in a decent place-one not doomed by politics or other circumstances-houses have generally been bargains for thier owners.

In forty years of wandering around in this part of the counrty-the southeast-I have never known anybody who bought and stayed put that could have rented cheaper.But I have known numerous people who paid piti that was much less than the rent on a comparable place-even after repairs.I have seen houses rented to excellent tenants for more than three times the payments piti towards the end of a thirty year mortgage.

But there are bubbles of course-anyone who sees prices rising past the ability of the locals to make payments should have enough sense to recognize them if business savvy.

Any city other than a a few ritzy nieghborhoods) prices shoot past some particular multiple of the median income is getting into bubble territory.

I was speaking of the declining value of the money pit, i.e., house. The annual decline rate in house prices in Detroit has been about 50%/year since around 2005, about an overall 90% drop, which is Stoneleigh's forecast for the overall decline in US house prices, presumably measured from the 2005-2006 peak.

Here is a real life California example from Calculated Risk. The house fell in value from $559,000 to $360,000, from 2006 to 2009. If you plug in the 5% factor and look at the annual total cost of living in the house--using the quaint notion that someone actually paid cash for it--their annual cost of living in their dream home may have approached six figures per year, for three years (assuming that they sold in 2009). Of course, this is why people are walking away from mortgages.

Home Ownership Can be a Nightmare

In any case, the point of my post was to compare the cost of renting versus the cost--and risks--of owning. Do you think that the California couple profiled in CR wished that they had stayed renters?

From Bloomberg, via CR:

Kajal and Vishal Dharod paid $559,000 in 2006 for a new four-bedroom house built in Rancho Cucamonga, California. Today, it’s worth about $360,000.

“We don’t know how we can come back from a loss like that,” said Kajal Dharod, 29, a first-time homeowner with a $4,200-a-month mortgage. “Buying the house was a mistake.”

American homeownership, once considered a path to wealth, is now leading to disillusionment.

What many people don't realize is that when you buy a house and finance most of it you are essentially buying on margin. The margin requirement has gone up from zero(in 2006) back to 20%(needed down payment now)but it is still leverage. Buying on margin worked great for 25 years when we had a consistantly rising market. Banks are still trying to settle the margin debt but they don't have a lot of transperency and liquidity to do so.

I don't agree with her 90% drop forecast, but if interest rates skyrocket she will hit that target for sure. This is one big mess-a lot of the younger homeowners have no idea that these interest rates are very low by historical standards and even if you lock in long at a low rate it won't help much if your neighbours don't and rates skyrocket-your equity will fly out the window.

Only 40 years?!?!? There are a great many places in this world where you can find people living in houses that were built centuries ago. Not rich people's mansions, either (although there are those), but the rustic architecture of poor people.

It is quite possible to build houses that will last for centuries, and reasonably inexpensively, too. I know this because it has been done, in many times and places.

The one thing I am not so certain about is if it is possible to build such houses in conformity with modern building and zoning codes, and with the types of creature comforts that people have become accustomed to these days. I'm especially not certain if it is possible to build such durable housing up to modern standards and it still be inexpensive. Building and zoning codes drive the cost of housing up a very great deal.

An economy that is declining and will have to level off at a much lower level of per capita GDP if it is to be sustainable, or indeed is to level off at all, cannot afford to have disposable housing, even if "disposable" is over a 40-year time frame. Buildings will have to be built to last, even if some other things we have come to enjoy and take for granted may have to go by the wayside.

'merika is fairly unique in building disposable houses, slightly more durable than a grass hut. the story of the three little pigs comes to mind.

capitalist no 1 built his house of straw, capitalist no 2 built his house of sticks and,
capitalist no 3 built his house of bricks.

That's a relatively recent thing.

But yes, I do think that will be an issue. New houses aren't built to last; it was expected that the owner would move or renovate within a few years, meaning there was no reason to build for durability.

During the Great Depression, a lot of large homes were converted into apartments. I wonder if it will even be worth it with today's McMansions.

Capitalists 2 and 3 froze to death in their poorly insulated houses, while capitalist no 1 was warm cozy in his straw bale house. Anyway, there are many ways to build a house, and a durable structure can be made using a variety of techniques and materials. Knowledge is the important part.

I think people will need to re-evaluate what is really important in regard to shelter.

And after hurricane wolf, capitalist #3 sold FEMA some trailers to house capitalists #1 and #2, and didn't even charge extra for the formaldehyde.

We capitalists prefer to call them "Chipboard Palaces", gives the rubes some precious self-esteem.

Given a high value house is a liability if ones strategy is to have a 'low profile' retirement. I built my own house and by design left it unfinished and is only valued at $30,000. It functions perfectly and my taxes are fraction of neighbors. Set back into the forest where is not noticed also. 10 acres of high value timber is my 'equity'. If I make it to the end, er ,my end, i will donate to nature conservancy.

buffett tips his hat to stoneleigh and says:

“It’s an all-in wager on the economic future of the United States. I love these bets.” (link)

It has been a busy morning. Some things seem more understandable in retrospect.

Best Hopes for Railroad Electrification :-)


It's an energy integration play.

BNSF mostly moves western coal. Lots of western coal. Berkshire owns MidAmerican Energy and Pacificorp, utilities in the Midwest and West that use western coal. Berkshire thinks they can make this work even if the markets go against them.

Lots of press about this being a bet on the future of the US economy. Part of me is curious about it being more of a bet on regional economies. The large bulk of the operating portions of these holdings (now including BNSF) are west of the Mississippi.

BNSF mostly moves western coal.

BNSF is the largest container railroad in the world (I think the Russians are #2, moving containers from China, S. Korea & Japan to the EU and to Russia itself).

I cannot disclose confidential info, but BNSF makes more $ moving containers than coal.

They share tracks with UP to get coal from Wyoming, and do move their share of ton-miles, but coal revenue is less than container revenue.


I would say political intergration play, the man is an arch-plutocrat if there ever was one. Still I think it was a good move as long as his political machinations do not hurt the small lines that service small town America (especially my bug out residence's local), or fix the rates at a bleed 'em dry level.

If - as the Archdruid suggests - money is all an illusory abstraction, then societal economic debt is also an illusory abstraction. As long as there is money to cover withdrawals of funds from instruments of (yet further) illusory abstraction there should be no problems.

Simple, just hire a financial engineer with juggling skills.

I can't tell if you are joking but I think you have hit upon the core of what is going on. Facing reality is only optional in politics and economics. With energy, we are faced with hard limits, but money and finance are a real Alice-in-wonderland alternate reality. I logically follow Stonleigh's arguments on how we will have deflation and a day of reckoning, but at the core of this government and economy is a lot of faith, "in God we trust", and mammalian herd thinking that expects the future to look like the immediate past. Here on TOD we have a lot of intellectuals, scientists and engineers. I think we greatly underestimate the power of the pervasive belief in eternal economic growth and how the illusion keeps changing and shifting to maintain itself (creative accounting, new debt instruments, etc.).

So you joke that we can "just hire a financial engineer with juggling skills" but that is exactly what we have done. Reagan's economic team really understood this as demonstrated by record deficit spending and his "It's morning again in America" brand of blind optimism. Even today he's revered by most Americans yet he is the one who started making voodoo economics, credit and outrageous hyper-spending seem normal and natural. So all I am saying is we may be amazed at how long this illusion can hold together. There's armies of wizards behind the big curtain in Wall Street and Washington who's life and power all depend upon keeping the illusion going. Reality, EROI, and ecological limits to growth may take much, much, much longer to overcome all the collective wishing and wizardry.

Sssst, that route leads to starting to think about mass delusions. We haven't had one since '55. Sssst

BrianT beat me to this but, I have some questions so, here goes.

Berkshire Hathaway to Acquire Burlington Northern Railroad

It would be the biggest acquisition ever for Berkshire Hathaway Inc.

Anybody want to hazard a guess as to why Warren Buffet would do this? I mean, I know Buffet is on board with a reasonably near term peak but, OMG what's all this about? From what I know of the man he has never been one to make an investment witout the prospect of serious long term gains. What message does this send to the markets?

Alan from the islands

Buffett's comment: "This is a bet on the future of the country, 5, 10, 20 years from now."

That's Berkshire's and Buffett's mantra, and in addition this is a bet that rails will be the big winner over time in terms of moving products in a world that is increasingly hamstrung by both energy constraints and (in my view insane) "global warming" nonsense.

Well, at least Denninger doesn't call energy constraints "insane nonsense."

Gates is the largest shareholder in CN Rail-Buffett and his cronies have been well aware of oil depletion, they just have never felt any need to broadcast useful info.

I only have to look back to my own childhood to conclude CC is for real(I'm only 39). Scating on natural ice EACH winter, no exception. Last winter was the first time in 7 years that was possible. Summers get warmer and more moist also.

But for Denninger he should read this http://www.guardian.co.uk/environment/2009/oct/20/arctic-tundra and this http://cluborlov.blogspot.com/2009/10/oceans-are-coming.html

More questions than answers! Does Buffet know something "we" don't?

Alan from the islands

Maybe he as been reading Alan Drake's posts.

He's paying too much ...

but, it's not his money.

He's betting on the future of the current bull market; if stocks retreat BNSF could be had for a lot less ...

the thing denniger is missing is that berkshire is essentially an operating mutual fund, and buffett is ensuring that he can make his stable of ceos/companies play in the same sandbox - partner and cooperate, learn from each other, etc. for future gain/growth/development/sustainability.

denniger's whiny gripe about the pe ratio is exactly the type of short-sighted stupidity that crippled the global financial system. he'd benefit if he would stop focusing on the short-term and raise his eyes to the bigger picture. (we all would.)

Wilbur Ross discussed this acquisition and railroads in general this morning on CNBC. He was supposed to talk exclusively about Commercial Real Estate but it is over half way through the interview before he gets around to that subject. The first four minutes or so he talks about Buffett and railroads. He points out that it takes one fourth the fuel to move freight by rail as by truck.

But his remarks on commercial real estate are worth the watch. He expects "quite a lot of tragedies" in the commercial real estate section.

Wilbur Ross on Commercial Real Estate CNBC Video

Airtime: Tues. Nov. 3 2009 | 7:40 AM ET
Wilbur Ross, chairman and CEO of WL Ross & Co., discusses the state of commercial real estate.

He also says that the credit card applications being mailed out to people are a tiny fraction of those that were mailed out one year ago. He says that tells you a lot about banks willingness to loan to ordinary citizens.

Ron P.

TickerForum has link to coincidental WSJ piece: New Rule to Benefit Rail, Plane Unions - WSJ.com

Organized labor appears to be gaining the upper hand in the skies and on rails, as labor and business battle for influence under the Obama administration.

The National Mediation Board wants to make it easier for thousands of airline and railway workers to unionize under the Railway Labor Act by seeking to junk a 75-year-old election rule, according to a proposal published Monday in the Federal Register.

The move comes after a White House appointment shifted the balance of the government agency's three-person board. Linda Puchala, a former flight attendant union leader, was selected to replace Read Van de Water, a former Northwest Airlines lobbyist, earlier this year. She joined Harry Hoglander, a former pilots union leader appointed in 2002. The NMB regulates labor relations in aviation and rail.

More than 570,000 workers are employed by railroads and airlines, more than two-thirds of whom already are unionized. But changes to the election rules could affect thousands more workers. Delta Air Lines Inc., the world's largest airline, and Continental Airlines Inc. are awaiting unionization votes that would affect about 40,000 workers.

Yes, now that you mention it I am now only getting 2-3 peices of credit card junk mail per week vs. 2-3 per day a year or two ago.

There's no doubt about the credit card issue...I have gone from one (or two) a day to maybe one a week.

Meanwhile I keep hearing people I work with paying just the minimums on what they owe....we went to a 32 hour workweek and now people with big balances can't make a dent in them, apparently.

No schadenfreude here, however. As we say in the civil engineering business, the 's' runs downhill, maybe I'm so low it just hasn't hit me yet.


A couple of thoughts:
Buffett doesn’t bet directly on commodity prices but this is indirectly a bet on:

- higher energy prices
- higher commodity prices in general
- a weaker dollar
- a strong China (the goods have to be shipped to the coasts so they can then be shipped to China). Imports of coal to China are up 20% year to year. Burlington Northern ships the coal.

Correct me if I am wrong, but I had understood that very little if any US coal finds its way to China. From what I know, coal markets remain essentially regional. Chinese coal imports go come from Australia, Indonesia and Vietnam. US coal exports go to Europe.

And BNSF ships to WEST COAST ports. Interesting.

I wonder if those who have been counting on the USA's vast coal reserves to fuel its energy future realize that the USA might not be the only potential customer for that coal, or that the USA might need to actually export something to pay for the remaining trickle of oil imports?

Why? The railroads are still likely to actually be operating 25 years from now. I wouldn't be so sure about most of the rest of the Fortune 500.

Late last year I saw quite a few restaurants go out of business as the economy dropped. Then things stabilized earlier this year.

I don't know yet if there is a significance, but I've noticed 3 restaurants (along a busy route) have closed within the past month. Anyone noticing anything similar?

Yup. Retail food operations closing all over. The number of pages have shrunk in the local free papers - less advertising.

The local brew pub would be closed 'cept their supplier extended them credit to buy the grain.

Not seeing new restaurants, but am seeing new car repair shops. As dealers are shut down and as more people hold on to their cars past warranty, there should be more demand for car repairs by locally-owned shops.

I have been seeing, for the last 9 months, more and more commercial real estate going vacant...not noticing restaurants drying up, but strip mall storefronts and small office buildings. Kind of a slow-motion wave of closures.

I loved the battle between WHT and memmel. Although it was not really a fair fight.
WHT was beating him like a rug.

which reminds me - WHT could you repost your Hybrid Shock Model and any updates.It has been quite a while. I thought this was one of the most unique and thoughtful approaches

You know about WHT's blog, right? Mobjectivist

WHT is smart, but memmel is brilliant.

I'd respect WHT more if he could understand memmel.

Just place commas as you read and be glad that memmel has devoted some of the language portion of his brain to logic and systems analysis.

Memmel's comments remind me of the hybrid on Battlestar Galactica.

Nate invited me to do a post on TOD. This will be a doozy. I am 90% done and it should go in the queue in a few days.

If only Memmel would do a front-page post on TOD, but he claims that he gets restless leg syndrome (or something like that) if he can't free-form associate.

French Ideal of Bicycle-Sharing Meets Reality

Good idea + badly behaving people = disappointment

Too bad!

an expectation is a premeditated resentment

Completely predictable, though. The bikes are an almost "free" common resource, to be used and abused.

From college, I rapidly learned the goal is to have a cheap and crappy bike with a sturdy lock. Any bike could be stolen, but the goal was to have a bike that nobody would want to steal or vandalize.

Community cars probably have issues as well, but at least for those there is typically a like-minded, homogeneous group who is doing the sharing.

I think you could create a bike-sharing system that worked, but it would need to address the darker tendencies of humanities rather than assuming the best. Disaffected youth are an expensive scourge anywhere they loiter.

I don't think it was that predictable. It's not that they didn't think of it.

Other cities had dealt with the vandalism problem by requiring that people register for the program, or swipe a credit card. It worked for them. They had reasonable grounds for thinking it would work in Paris, too. Turns out, it didn't. Perhaps because, as the article notes, the demographics are different in Paris.

I guess part of the problem is determining whether your goal is to provide bikes to all or to tourists and businessmen. Car rental places require age (often 25), credit card, and driver's license, and often some form of insurance/CDW for high-theft/damage areas. That, plus monitored stations, would probably work, but then you wouldn't be providing effective transport for the urban poor at all, and that would promote other issues.

From what I could see, the issue was also that the bikes were left unsupervised. Many rental places are a shop that has someone minding the products. Many of the vandalized bikes were just left outside.

Perhaps a system where people rent the bikes from within a shop, and the person is responsible for the bike's care until return, would do better?

Yep, I don't think the business model of unattended stations is going to work. Gotta have someone minding the store. The one nice thing is that it doesn't have to be a dedicated, single-purpose storefront. This works quite nicely as a sideline for a whole lot of established businesses. Get the shopkeeper to check out and check in the bikes, in exchange for a cut that is big enough to make it worth their while, but less than what it would cost to repair the vandalism or replace the thefts.

A question for a geologist:

Is it possible that there could be an oil resevoir at say, 2000 meters below the surface and another resevoir/anticline directly beneath it, say at 10000 meters. In other words, is it possible that the seismology only picks up the first but there is a second hidden beneath it?

This may sound like a weird question. I am trying to get a good figure on how much genuine exploration there is left to do.

thanks as ever

This is exactly what happened in the Chatam Ohio field. Initial drilling was in the twenties and redrilling was in the seventies the fields were at ca 1200 ft and 5000 ft both very shallow as I recall

so has anyone ruled out that there isn't another Ghawar under the current Ghawar, or another Brent under the current Brent etc etc..

One might estimate the probability of success of any effort to drill deeper is too low but, at the end of the day, the only way to prove there's no oil/Ng there is to drill.

Just a guess but I think those deep wells around Ghawar have been drilled.

well, there is another anticline beneath the arab d(cretacious) in ghawar, that is the khuff(permian) which contains gas/condensate. i dunno the temperature of the khuff, but it is undoubtedly hotter than hell. the arab d is at about 220 deg f if i recall correctly.

multipay reservoirs are sort of common. the vacuum field of se nm is an example, the permian san andres formation was discovered ca 1940's using primative seismic. these initial wells were stimulated with nitro. later these wells were fractured hydraulically via tubing, with an early version of a "swell packer". in those good old days, a lynes inflatable packer was used.

the deeper permian, devonian and ordivician reservoirs were discovered in the '60's using improved seismic.

the operators, texaco, shell and humble had the bright idea to complete the wells "tubingless" with completions in up to 5 reservoirs with 5 strings of 2 7/8" tubing in a single wellbore. fortunately that was a short lived dud of a technological "game changer".

the groningan gas field(holland) was also completed "tubingless". "casingless" would have been a more accurate description.

I'm no expert in this, but it sounds like you are talking about two similar geological events that result in oil forming and pooling that occur at the same place, but separated in time by many many tens of millions of years. This sounds a little to me like the probability of two discrete events coinciding. For example, the probability of each coin flip is 0.5 each for heads and tails; the probability of two coin flips each being heads is thus 0.5 X 0.5 = 0.25. Lower, notice. With oil, consider the very small fraction of the earth's surface (or more accurately, the layer that goes a few thousand feet deep) that is known to have oil fields. That means that the probability of there being oil at any given spot (within a square mile, say) must be very low - less than 0.01, I would think. Now consider a second, deeper layer with a similar oil field distribution (an extremely hypothetical and optimistic assumption, given the lack of supporting data). What are the probabilities of the two matching up? It would seem to me to be quite remote. Of course, there might always be that one or two that just happened to hit the jackpot, so to speak.

Of course, the assumption that oil formation and pooling are totally discrete events may not be justified. Maybe certain spots on the earth were especially fortuitous for oil over the course of hundreds of millions of years, in spite of changing geology, climate, and biosphere. Maybe. Given what we know about continental drift, though, I would doubt that the same place would stay that productive for that long a time; the continents just move around and bump into each other too much.

This is all extremely simplistic and inaccurate reasoning, I'm well aware. I'm just trying to apply some very simple reasoning tools to try to point in the way of a first-order approximation of the final answer.

Actually WNC the subject of oil generation and trap timing is probably one of the most complex/poorly understood and difficult problems in petroleum geology. Lots of permutations: oil forms at time X when traps are present; oil from at time X and is trapped but 10 million years later the trap leaks and the oil migrates many miles to another trap; oil forms at time X and is trapped. 10 million years later oil is generated 40 miles away at another depth and then migrates to a trap just below the first trap; etc, etc.

Often it's almost impossible to offer even a poor guess to the history. You can have a single trapping event with several plausible but very different histories. There is a general rule that oil has to migrate to a trap within a short time after generation otherwise it will leak all the way to the surface. No way to calculate the number but many believe as much as 90% or more of all the oil ever generated has leaked to the surface. The state of CA estimates that 175,000 bo leaks into the Santa Barbara Channel yearly from natural processes. I've seen films of live oil leak from the sea floor in the GOM.

To show I've paid attention to TOD and others...

1) Oil and gas tend to only exist down to a certain depth. Lower than that the heat either prevents or breaks up formed oil.
2) while methods of detection like radiation would give you what you've noted, using seismic methods from many points of sending/receiving would show your deeper pocket.

A good question HA. And a very easy one to answer. An old oil patch questions: where is the best place to look for an oil field? Answer: Under an existing oil field. There are oil fields in La. where 30 or more oil/NG reservoirs stack on top of each other. The potential for this to happen varies from trend to trend. In some areas it's the potential of X reservoir being productive or nothing at all.

Seismic essentially gives you a view of the shape of the rocks way down below. Oil/NG tends to accumulate in the higher portions of a reservoir (oil floating on top of the vinegar in your salad dressing). Thus you might see the potential from trapping oil/NG over many thousands of vertical feet of section. But you need more than just the shape of a trap. About 99.9% of all shapes that could trap oil/NG haven't trapped any. Coming up with an expectation that oil/NG might exist is where the bulk of the effort falls and not just imaging a prospective shape.

A good current example: in a few weeks we'll start drilling a well next to an abandoned well another operator drilled 6 years ago. We'll drill 2000' deeper then where they stopped. They thought they had drilled deep enough to see the reservoir they were targeting so they stopped drilling. But we (actually the guy that came up with the idea originally...we just agree with him) think they were wrong. The target size: 20 million bo and 100 bcf of NG. It can happen. About 30 years ago a friend stopped drilling his well...couldn't justify drilling any deeper. A year later Exxon drilled a well right next to his location and found over $1 billion of NG just 400' below where my friend stopped. And he had a 2% royalty on his well. How many time do you think he calculated 2% of $1 billion? True torture, eh?

Thanks Rockman, very informative as ever.

Re A Defense of Meat Goes Too Far

It seems that most everyone fails to approach this as a question involving a system, and instead focus on a single pathway out of multiple potential pathways comprising the system. Poor systems thinking seems a huge problem for all sides of this important debate. As Donella Meadows wrote, first seek to understand the system before imposing your favorite solution on it! (Dancing with Systems, Leverage Points). As a post from a grazier's blog indicates, balanced thinking is needed.

Once plants convert the sun's energy into organic chemical energy, something is going to break that back down into inorganic materials as a component of one of the pathways. Whether a ste[ occurs under anaerobic conditions, producing methane that is oxidized to carbon dioxide with at least a log less half-life, or aerobic conditions, releasing the carbon directly back as carbon dioxide, it is going to occur. Period. Something is going to eat that plant, be they bison of old, other wild cervids such as deer, antelope or elk, or smaller herbiovres such as rabbits down to herbivorous insects such as grasshoppers, in a typical US grassland ecosystem, or other critters in the other grassland ecosystems of the world. The final critters everywhere are the fungi and bacteria of the soil, which will break down either the residue (fecal matter) left by previous herbivores in the chain or the plant material directly without any intervening steps. So whether the pathway has a step involving a critter that we consume or not, one or more pathways inevitably occur as the system cycles.

An excellent book on the photosynthesis part of this cycle: Oliver Morton's Eating the Sun: How Plants Power the Planet (2008). His blog Heliophage

As to what humans should or should not eat and how our digestive track compares to other critters, an excellent book is Harvard anthropologist Richard Wrangham's book Catching Fire: How cooking made us human (2009).

If we assume greenhouse gas production is proportional to total biomass, the question becomes the total amount of biomass. Do the livestock animals displace an equal amount of wild animals, and do the farmed crops displace an equal amount of wild plants?

One place where this gets out of balance is synthetic fertilizer. We're putting fossil NPK back into circulation that was previously buried.

Warren B has become quite keen on railways over the last little while. I believe in 2007 he bought pieces of Wabco and CNI.

Speaking of railway economics this item from the BBC caught my eye a few minutes ago. Loony, huh? I mean the UK is roughly comparable in size to Michigan, how can there be a thousand pound train ticket in an area like that involving lines and equipment I would have thought long ago paid for? I suppose the point is that the finacial/political/management component of rail, high speed or otherwise, can trump the technical component with ease.

The UK's first £1,000 rail ticket has been described as "scandalous" and "appalling value" by opposition MPs.


For all: referring to the report up top highlighting shale gas I'll once again point out that any numbers offered regarding reservoir potential from the SG plays that doesn't include a pricing assumption is completely meaningless. At $15/mcf there are many trillions of cuft of NG to be produced from the SG plays. That is a fact. At $3.50/mcf there's a much smaller amount. And that's a fact. One day it would be nice if someone pointed that out to Mr. Yergin (wink..wink...he actually does understand that point quit well. Just doesn't care to discuss it much apparently).

And a small historical correction to the story: SG is not a new play. The first major NG play in the US from any source was the New Albany SG in the Appalachian Mnts. There were NG street light burning in KY before 1900 fueled by the NA SG. Getting higher flow rates from horizontal wells with multistage fracs is the new story. But there are still NA SG wells producing today that were drilled over 50 years ago.

Thanks ROCKMAN. I agree that pricing, especially the whacky destructive swings from $15 to $3 will limit what we get from these plays. Rig counts are finally going up again after dropping by - what- 50% last year?

He also fails to mention the decline rates for wells in the Barnett. Bryan Sell gave a great talk on this at the recent BPE Conference. See my review of the presentation here.

Also, he fails to mention how much more expensive wells in Marcellus and Haynesville are going to be than Barnett, in both per foot cost and total feet drilled.

Finally, there is growing environmental opposition to drilling in the Marcellus which includes headwaters of the Delaware and Chesapeake watersheds, as well as feeders to the Ohio river system, and reservoirs for all of New York City's drinking water.

All this adds up to more erroneous conclusions from Mr. Yergin.

yeah, indeed some of the early oil successes were from fractured reservoirs, florence field in colorado is an example, discovered in the late 19th century.

involving lines and equipment I would have thought long ago paid for

No, No, No, no, no, no....no, no, no, no, no....nope, negative, no ;)

The rail infrastructure which includes: track, cabling, rolling-stock, stations, platforms, gorges, embankments, bridges, tunnels, signalling, termini stations, pruning rail-side trees and vegetation and of course power connection to the grid - substations and all.

This is a mind bogglingly expensive operation which never ends. Just because our rail network was extensively built out during the reign of Victoria does not mean there is no on-going costs! Quite the opposite; a lot of the rail infrastructure is very, very old and crumbling away.

One other thing to bear in mind: while mainland Europe can have double-decker trains, we can't because the Victorians only gave us single-decker bridges!

Rail will always be heavily subsidised. It is monstrously capital intensive.

Rail will always be heavily subsidised. It is monstrously capital intensive.

At one time there were rail monopolies in the US of A. They didn't have government subsidies and in fact had the government pass laws because of the way the acted.

I know but the key here is the start of your sentence: "at one time". The building of the US railroads was, like the Victorian British railways, carried out by very low paid Chinese/Irish navvies. Deaths were common place.

There is not a hope in hell of being able to build out and maintain a pan-continental US railroad system from scratch today without generous subsidies. Ditto the UK. Wages would be restrictive and health and safety issue paramount. One of the reasons that railways were not able to compete with asphalt roads in the later half of the last century was because the maintenance costs per user were so much smaller for roads than rail.

edit: also there is a huge difference in a railway designed for freight and one designed for passengers.

New large scale railways are being built in manny european countries. Is your economy weaker then the one in Spain or France? Is it that bad all over the US? Sweden is fairly like large parts of USA in population density but we still manage to run and enlarge our railway network.

Railways for freight and passangers can be exactly the same as long as the passanger train speeds are low or medium. Mixing trainspeeds is bad for the capacity.

When freight trains get heavy you also get a larger risk for them to move the tracks in ways that are bad for high speed trains, its mostly a comfort issue.

Freight trains can handle fairly sharp curves but want a flat track.
High speed trains cant handle sharp curves but fairly steep hills is no major problem.
This means that you can lower the cost for a new track depending on the main use.

There are differences but I dont find them to be huge, its basically the same technology and you can mix and match traffic between freight and passanger service.

Magnus - the difference is in how you price and structure the cash flow. This is exactly the problem the UK has/had. The biggest problem is getting the price of a passenger ticket somewhere near the cost of road travel.

As for new railways being built in Europe - yes they are but with subsidy. And subsidy does not have to be cold hard cash either. changing the tax system etc can also 'subsidise' roll-out. At some point capital projects of this nature either implicitly or explicitly always rely on assistance from the state. For instance, can you imaging building a new rail line which needs to go through existing infrastructure such as housing and farm land? This happened in the UK with the new St Pancras super-fast connection to the channel tunnel. No way could the rail company buy up the land they needed without government support and legislation. We are talking big capital investment!

There is not a hope in hell of being able to build out and maintain a pan-continental US railroad system from scratch today without generous subsidies.

I think the original buildout had huge hidden subsidies, in the form of land on both sides of the tracks. It was supposedly so bad that railroads to nowhere were built, and others took circuitous routes so they could claim more government land. That was politically easy in the days when we could just take the land from the Cheyenne (or whichever tribe) lived there, but now you gotta pay for rights of way.

The railroads were paid for by native Americans. The federal government gave land to the railroad companies that was simply seized from the original owners (well I guess the land belonged to the buffalo and the indians). If a railroad company laid 10 miles of track they were given alternate sections of land (640 acres/section)along the track and for 10 miles on either side of the track. That would amount to a checkerboard (only the black squares) of 100 square miles of free land for 10 miles of track. The land was mostly sold to farmers who then provided business for the railroad.

One of the interesting results of this giveaway was that by the time that the Penn Central failed in 1970 its revenues and operations were more of a real estate holding company than a railroad.

"...rail monopolies..."

Yup, setting up monopolies is one of the ways around giving subsidies, if it turns out that customers have little choice but to pay the possibly extortionate monopoly price. However, one side effect that's not so useful in the present-day context was a widely held visceral hatred of railroads, especially among farmers, especially west of the Mississippi, that has perhaps still not quite fully worn off.

'We' also set up monopolies in other areas of life - some of them are for example called "patents" and "copyrights", and some of those are every bit as extortionate as the railroads were in their heyday.

There's the other issue that the Victorian rail network was designed for, well, Victorian needs and there's an amount of work that needs to be done to increase capacity (eg, buying new rolling stock, lengthening platforms where feasible, etc). I don't think it's as much as the rail operating companies claim *and a thousand pound ticket is ridiculous), but the rail infrastructure can't be considered static and hence "paid for".

Maybe a thousand-pound ticket is a bit ridiculous, but OTOH the Shinkansen in Japan wasn't cheap, ranging from maybe 45 to 65 US cents per mile, and that was for just a seat (though a comfortable one) and wouldn't lend itself to carrying luggage or "stuff" with anything remotely like the convenience of a car. That was with JR getting a heavy subsidy (though the subsidy must be diluted by heavy usage) so I'm left to wonder what would happen if the (Japanese) government could no longer afford to hand out partly-free rides. Given the huge distances in the USA, maybe a thousand-pound ticket would be only marginally ridiculous once the capacity to hand out lavish subsidies becomes exhausted. (Well, actually, that capacity is long since exhausted and done for, but we're still in the phase of mad borrowing where we're Wile E Coyote out over the abyss but not yet falling.)

Okay, I used weak language/genralization and you've called it out. I actually do know a little about those maintenance costs. I was thinking of how much has been plowed into the UK's rail network over 150+ years including what has been spent just since the demise of British Rail. A thousand pounds to go anywhere in the UK by rail is insane, whatever the costs of doing business are.

Probably more liberal lies to deny me my divine right to prosperty:

"The sediments from the mid-20th century were not all that different from previous warming intervals," said Jason P. Briner, PhD, assistant professor of geology in the UB College of Arts and Sciences. "But after that things really changed. And the change is unprecedented." …

"There are periods of time reflected in this sediment core that demonstrate that the climate was as warm as today," said Briner, "but that was due to natural causes, having to do with well-understood patterns of the Earth's orbit around the sun. The whole ecosystem has now shifted and the ecosystem we see during just the last few decades is different from those seen during any of the past warm intervals."

Yarrow Axford, a research associate at the University of Colorado, and the paper's lead author, noted: "The 20th century is the only period during the past 200 millennia in which aquatic indicators reflect increased warming, despite the declining effect of slow changes in the tilt of the Earth's axis which, under natural conditions, would lead to climatic cooling." …

That story was from last week, I think.

Here's a link to a story on the PNAS report from Science Daily. There's a direct link to the abstract and thus to the report at the bottom of the page.

E. Swanson

US corn and soybean condition falls to season low

'Big concern'

US Commodities, the Iowa-based broker, has already warned that "crop quality will be a big concern this winter".

"It is now a concern on how many bushels of #3 corn will hit the market," the broker added, referring to lower grade corn fit only for animal, rather than human, use.

Many crops are coming in light on so-called "test weights" – the actual weight of the crop per bushel of volume, and which can vary to between 45-60 pounds per bushel.

Low test-weights signal a weaker protein composition in the grain, and higher concentration of starch, and are typical of crops that have not matured entirely.

Higher moisture levels in damper crops are also a concern, limiting how much crop can be pushed through limited drier capacity.

Nearly 25% of Ukraine grain in 'poor' health

Nearly one-quarter of Ukraine's winter grain crop is in poor condition, following a dry period that US officials have termed "alarmingly unfavourable".

About 85% of grain sown for harvest next year has sprouted, official regional data showed.

Of this, 24.2% was rated as being in poor condition.

2010 may be a difficult year food wise as the top 4 wheat producers are suffering problems planting next years crop.

Here in France the local wine makers are complaining about the bad grape harvest. Seems wine production may be as little as 20% of last years production, although the quality will be good.

Burgundy comments on winter wheat.

Here is how it goes in my area. At least for 'soft red winter wheat' and not exactly the same as up north where they do 'hard red winter wheat'.

The crop rotation used to not vary much. A three crop in two year rotation.
Corn, followed by wheat followed by soybeans then start over.
You pulled two crops in one year. You harvested the wheat in spring and then sowed soybeans in the wheat stubble and harvested the soybeans in the fall,or late fall. Then after some hopeful nitrogen fixation by the legume you sowed corn the following spring. Two crops in one year and corn only in the next year.

So if your corn came out too late you might miss sowing the wheat crop. Muddy fields,late corn harvest and weather could mean less wheat sowed , if any. Wheat here is not a real money maker but sometimes it is and it keeps the ground occupied preventing erosion,etc.

Yet a few years back late frost killed most all the wheat around here. About a dead loss or really negative since all the inputs were pretty much lost.

I have seen NO wheat being sown so far. Many many acres of corn yet to combine here. I wouldn't bet much on a wheat crop. Also many are now just skipping wheat and even doing 'corn on corn'. No soybeans.

Its all based on markets and weather.

BTW all our river bottom crops were finally harvested as of late last night. Barely, just barely got it all done. The river has now taken the fields. Its all a big mudball.Couldn't count how many combines were all working on that one job. Getting tractor trailers in and out was problematic.Glad I gave up driving those rigs.

Up north I see pix of huge pieces of equipment buried up past the axles and sometimes half way up the cab. Some fording deep water. Snow now in many areas yet the crops are slowly getting out.

As the above article states: Lots of grain damage,lots of very wet grains. Can't put it in your own bins and if the elevators don't want it? What does one do? So far its going to market but losses are piling up on the profit sides, or so I hear.

I think Big Ag is in for a bad future from here on out. I would NOT like to be todays farmer. No way. I was in it with someone else putting in my ground and on one year(two crops came out) the 'operator' said after the accounting that 'you owe me some money'.

I told him " you owe me the right to never see you on my land again ,,get out"....I sowed it down in pasture and made more money cutting,baling and selling my own hay and the land appreciated it as well. To this day his wife gives me angry stares and he looks the other way when we pass.

Truth is I do not like supermarket food. I find it tasteless,overpriced and rather insulting to eat such trash. Been a long time since I brought a piece of meat that was actually almost edible. I throw a lot of it out in fact. Even what I buy at a slaughterhouse barely suffices.

Airdale-a million stories out here in farmland yet the farmers never want to talk about it,the bad times that is and the food retailers are scamming everyone as well


Ah, once you start eating real food you can never go back to that tasteless rubbish they sell in the supermarkets. Even if involves doing chicken deals in parking lots ("The chickens will be in a cooler in the back seat. Leave the check in the glove compartment...")

Are any of the farmers surrounding you switching to manure or otherwise doing anything to rebuild the soil? There have been some local conventional farmers who have started buying waste from dairy operations because the cost of fertilizer is so high.


No but what they do is some spread hog confinement waste and chicken broiler waste on the crop lands.

The stench is extreme and sometimes they spread it near churches and other places that are inappropriate. Of course it then leaches into nearby creeks and further. Being composed of very bad
chemicals and other disparate byproducts one never knows exactly what your breathing or is slowly seeping into the ground in forms that can put your nearby wells at extreme levels of very bad elements.

So manure? Not as you may know it. Its well on record what the hog confinements did to the Falls of Neuse river in Eastern N. Carolina(where I used to live). Being a poor area to the east of Raleigh,NC there was no one with the means to fight them. Finally enormous pressure caused by the Raligh News and Observer forced them to move elsewhere. Elsewhere where they could get by with it IMO.

I have gone in chicken houses in the past. It will take you breath away and put you off chicken meat for the rest of your life.


That's the trouble with big ag, you need big equipment, and big equipment just churns up the ground and sinks that much deeper into the mud. I guess take this to its absurd conclusion and you have the entire nation as a single farm, with a combine the size of Indiana, almost totally submerged in a mud wallow the size of Texas.

We've been substituting machine for man for a long time now. One wonders when we are going to start substituting smart for big.

Here's my take on the difference between the oil production curve and the natural gas production curve in the US:


Oil peaked in 1970, and hasn't looked back, with a steady decline in US production over the last couple of decades.

Natural gas production, on the other hand, may exceed the 1973 peak next year, and is on pace to be only 3% below the 1973 peak this year.

It looks like liquid fuels continue to be the bigger issue, not an immediate decline in fossil fuel availability across the board.

No way that 2010 ng production exceeds 2009. With drilling rigs under 750 the production will fall next year. Nothing could be more certain than that.

What is the most effective way to put a stake thru the heart of the idea that peak oil will mean no electricity?

I use to argue based on hydro power, nuclear power various other minor electricity sources and how easy it is to maintain a grid. Its even a historical fact that rural electrification in Sweden accelerated during the first world war to handle a shortage of kerosene for lamps that no longer could be imported freely from USA. This were a miniscule ammount of fossil fule by todays standards and it still made sense and were possible to build a grid that distributed hydro power.

I think the point is that the amount of energy available in electrical form will never be as much as when FF ruled the Earth. Sure, electricity will be around but not 24/7/365 at current quantities and reliability and growing year-in, year-out to meet the continued exponential GDP growth quest.

Which is to say that basically the author feels that 'Less Electricity' is indistinguishable from 'no electricity'

- sacrifice, compromise and 'less' are anathema.

I felt he didn't make a very compelling connection for why All Electricity is thoroughly dependant upon Petroleum. While I was very happy to stew over the mechanical Windmill options in that post the other day, and felt the Electrical Engineers were acting overly protective against there being other useful ways to harness that power, I am still basically in agreement with them that electrical power transmission is just incredibly flexible and useful, large scale and small, for physical work and for tossing whispery words across the planet. I don't want us to be as blindly subservient to any one source as we've been to Oil, but I doubt we're going to see the 'end of electricity'.. not in this generation or the next few.

the Grid, you ask.. on that one, I'm ambivalent.

It is pretty unfortunate that ideas like 'the end of electricity' get attached to the obvious fact that fossil energy supplies are limited. As long as there are humans who haven't lost their engineering experience, we will have electricity from wind, solar, hydro, and nuclear. It might be less than we are used to, but I suspect that electric production is going to rise substantially in the next few decades. Once fossil fuel prices rise, investments in renewable energy sources are going to explode. They may not keep up with declining oil supplies and transportation may get tough, but we don't use much oil for electricity anyway. Natural gas lasts longer and coal will fill in when gas gets scarce. During this process, wind, solar, and nuclear will be growing exponentially. The infrastructure will be expensive and electricity prices may rise significantly, but I wouldn't bet on a decrease in the electricity supply. It currently costs $50k to put 7 kW of solar photovoltaic on a residential roof. Humans are going to figure out a way to keep using electricity.

Several times I have mentioned here that oil (I mean liquid oil not every type of fossil fuel)is used for transportation not electric generation or making "plastic salad shooters". The numbers are readily available on the EIA website but we constantly seem to conflate peak oil with peak electricity, peak manufacturing, peak plastic.

About 50% of American electricity is produced by burning coal. Virtually none by burning oil since the 1970s. Coal is probably our worst existing environmental problem because it is so dirty to dig up, so dirty to burn and so cheap.

There is no relationship between peak oil and electricity generation in the US.

Actually, while it is not 'direct' use, oil IS used for electricity. First of all, in transporting all of that coal, the BNSF RR [subject to many posts today] uses oil. The construction of electical producing machinery - generators, wires, computers used in controlling the grid, all use oil at some significant points. The people who work in the generating facilities use oil to get there and back to their homes. There is virtually nothing in our lives that is not impacted significantly by the availability of cheap oil. And that is why peak oil is so frightening. Also, IMO, that is why folks won't face the fact that oil is beginning to decline, and with it much of what we have come to expect day-to-day. Like fast foods, large screen television sets, cell phones, and personal automobiles that are affordable to drive to work, to the store, and to Grandmother's house in a few weeks for Thanksgiving dinner.

So, "There is no relationship between peak oil and electricity generation in the US." is your way of hiding your head in the sand and refusing to acknowledge how serious things have become.

Fact: since 2005 oil production has remained static. Even when price was at $147 a barrel. Saudis tried to kick it up, but even after adding 500 new wells in 6 months, could not manage it. At 5% per year to 5.5% per year decline in oil supply, maybe less if useage drops, but all that does is postpone and slow it down, it won't take very many years to manifest to everyone. And that is when TSHTF big time!

Still, you can find optimistic appraisals, even amongst us TOD doomers. I happen to believe that the transition will be rough, but in the end those who make it will see a slower paced world, but will still have educationally and aesthetically rewarding lives. I hope my grandchildren will be part of that, and they could if us old timers would only quit burning up all the remaining oil so fast and leave a few quarts for them.

Additionally, as we transition to using natural gas in cars and to GTL and CTL processes, there will be much less gas and coal for available for power. Basically every country in the world besides the US, Russia, Australia, and South Africa will have trouble obtaining coal in twenty years time or less, especially if those mentioned countries are using so much of their coal for CTL. See Richard Heinberg's Blackout

Yes, but the US could probably cut oil use by half just by driving different cars. Transporting all that coal could be done with electricity and the US has large solar, wind and wave resources which could be tapped if any serious effort was made to do so. I was a bit of a doomer when I first learned about peak oil, but since then I have come to realise that until now we've made virtually no serious effort whatsoever to wean ourselves off it. I wouldn't describe myself as a cornucopian, but I am optimistic for the future.

The US car fleet "turns over" every 17 years (with normal sales, at today's levels, 20+ years). Not quickly enough to mitigate post-Peak Oil quickly enough.


50% of miles travelled come from vehicles less than 6 years old. 17 years is misleading.

If fuel prices double, why not just buy a Prius (which will reduce fuel consumption by 50%)? Or, if Priuses are suddenly back-ordered (because everyone else has the same idea), put in your order and carpool with one other person (which will reduce fuel consumption by 50%) until it comes??

If they double again, put in an order for a Volt (which will reduce fuel consumption by another 80%), and carpool in your old vehicle with 3 other people, or your Prius with one other person until it comes.

Carpooling - the horror.

Or just bicycle (tandem or solo) :-)

The pace of new car sales (see last month's) is such that "just drive more efficient cars" is a long term solution.

The model mix being built today is all wrong, a year or two to fix that. New efficient models are 4 to 5 years away. THEN the fleet changeover starts in earnest.

Best Hopes for old Mercedes diesels that get 28 to 30 mpg in the city :-)


Yeah, it'll take a little while to changeover. A good 20 years to substantially complete it even if we work faster than we are now.

Bicycling, carpooling, PHEV taxis..it'll take a lot of strategies.

I'm grateful that I can manage to be in a city with excellent electric rail, as I know you are.

Keep that Mercedes going! :)

I get your point Nick but what (if the price jump isn't due to taxes) if you lose your job? You can't buy a new car. Granted not everyone will lose their jobs in such a price spike but the general result would be the same: another crushing recession. The only practical way I can see price incentives to move the population very quickly to more efficient vehicles is a drastic tax increase. And I won't hold my breath for that one. In such a recession folks will anticipate a drop in gasoline prices and thus lose the incentive to switch. The only practical approach IMO is to jump taxes during a low gasoline price period. Right...our politicians are more then ready to take that plunge.

Well, we had a real overshoot last time, due to a petrodollar (and asian mercantile dollar) recycling mechanism that broke down suddenly (RE based CDO's).

I think we'll bump up against oil import problems more gently next time, and use sovereign borrowing (t-bills), instead.

Unless the US wakes up, we'll gradually send a lot of wealth to oil exporters, and end up with a big debt to them before their exports run out, and we finally kick the habit.

There is virtually nothing in our lives that is not impacted significantly by the availability of cheap oil. And that is why peak oil is so frightening.

I agree. Still the 'peak oil debunked' folks see more fuel efficient cars,carpooling, EV's, electric ships, windmills, solar energy, etc as 'savers'. How much will it help when oilproduction starts to decline 2-5% a year ? Something, but not enough to avoid a lot of troubles and panic for a lot of years ahead.

Now see, I think you've gone too far in the other direction.

There is the saying 'If you bought it, a truck brought it', and the same applies for everything made for our electrical infrastructure. Generation, Transmission and End use, Control Systems, etc..

There is still a serious relationship between Peak Oil and our industrial system, and we do have to respect the hits that are going to cascade throughout our countries.. look at these people who, because of their heating bills or their healthcare and food on fixed incomes end up getting their electricity shut off for non-payment. Can you imagine a blowup starting there, where electric demand crumbles, and utilities follow.. I think there are surely dangers and electric is woven into the whole system, but I felt his portrayal was extreme and unimaginative.


There was a debate some years ago about how much energy went into building a car compared to how much fuel the car used to move itself around. As I recall there was no contest, it took perhaps 5% as much energy to build a car as the car uses in its normal life expectancy. I suspect the same issue with oil and electrical generation.

Of course if you count the employees use of fuel driving to work and the diesel used to transport the generataor from the factory will there be an effect? Well, duh, some but we're back to 5%, in the noise. I still say that's a transportation issue not an electricity generation issue.

And I never said that peak oil wasn't potentially disruptive of society as a whole. Of course it is. Duh, again. In the US we are acutely dependent on trucking for movement of goods and automobiles for personal transport. Focusing on these area and the ramifications of either extreme fuel costs or lack of availability will tell you a lot more about the future effects of peak oil than focusing on grid power.

This evening I noticed that Statnet has started a giant overhaul of the Norwegian grid. All of the old 330 kV AC lines are going to be replaced by 420 kV lines and it will give a very large capacity increase over the next 20 years. I love our neighbour!

Retailers scramble to adapt to new realities

The recession has dramatically changed many Americans’ shopaholic habits, at least temporarily and perhaps forever.

Now the question is whether the nation’s retailers have kept up.

“The answer is no,” said Marshal Cohen, chief industry analyst with NPD Group.

Should be interesting to see how holiday sales go. I could see it go either way at this point.

British plan breakup of bailed-out banks

LONDON -- The British government is moving to break up parts of major financial institutions bailed out by taxpayers, with a restructuring plan expected to be unveiled as soon as Tuesday. The move highlights a growing divide across the Atlantic over how to deal with the massive banks partially nationalized during the height of the financial crisis.

I wonder if we'll have the 'nads to do that.

Tribune Co. newspapers to skip AP stories

CHICAGO - Tribune Co., owner of The Chicago Tribune, the Los Angeles Times and several other news outlets, will not use most Associated Press content next week to test whether the financially struggling company can do without it, according to a story on the Chicago Tribune's Web site.

I'm kind of surprised by this. I thought it would go the opposite, with more papers relying on wire stories, so they could cut their budgets for in-house stuff.

About the British bank "break up", it's worth noting that over here the sceptical are saying that the "break-up into smaller bits" is just a convient side-effect of the fact that the "good bits" to sell off (keeping the "bad bits" semi-nationalised) happen to naturally come in the form of "previously absorbed bank brands" that are smaller, and that the impetus to sell now comes from political considerations of being able to say "the taxpayer's liability is being reduced" before a general election. It's far from clear that selling off the "good bits" NOW is significantly reducing the amount the taxpayer is on the hook for (since by definition the good bits are very low risk) whilst now is not a good time to get a good selling price for them.

RBS, Lloyds Get 31.3 Billion Pounds From U.K. in Second Bailout

Nov. 3 (Bloomberg) -- Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc will receive 31.3 billion pounds ($51 billion) in a second bailout from the U.K. taxpayer as the two banks agreed to cap bonuses.

The Treasury will inject 25.5 billion pounds of capital into RBS, for a total of 45.5 billion pounds, making it the costliest bailout of any bank worldwide. The government will fund about a quarter of Lloyds’s 21 billion-pound fundraising. Both banks said they won’t pay cash bonuses to workers earning more than 39,000 pounds this year.


I have been involved in publishing for many years. Most newspapers did, in fact, cut on local staff and relied on wire stories. That made them competitors with national rags, and ignored the simple needs for news. Like politics, news is local, and gossip is what drives local papers.

Look at what people read first. The funnies, gossip columns, sports. That is why so many papers went broke. They fired the people they should keep and lost sight of their mission. I blame the trend to monopoly. Bigger eat smaller, and then to drive up stock prices so their CEOs can have big bonuses and options, they cut staff. If they could, they would outsource their news reporting to India!

But it is a wrong headed idea, and just like big industry killing itself by destroying the workers who purchase their products, the bit newspapers destroyed their readership by not reporting what was important...

Like politics, all news is local.

Look at what people read first. The funnies, gossip columns, sports.

Not me. But that's probably why I've never subscribed to a paper. My parents subscribe to every paper in town, but I'm just not that interested in who died and who went to jail.

Look at what people read first. The funnies, gossip columns, sports.

I'm just not that interested in who died and who went to jail.

Funnies and sports is something different. And for some time the paper publishes articles about ......energy.

I haven't seen this commented yet: 18 out 58 French nuclear reactors are out of service for the moment, meaning that France will have to import electricity instead of exporting it this winter. Link (in French, haven't found it in English):
A quick summary is that a 10 weeks strike this spring delayed the schedule maintenances that are normally completed during the summer when electricity needs are usually low. In addition there has been more technical problems than usual.
13 of the reactors are in maintenance/refueling that will take 20 to 100 days. (normally only 4 or 5 reactors are out at this time of the year).
4 suffered from serious technical problem including one that will need a new steam generator.
One reactor is under intensive evaluation to get a 10 year lifespan extension.
Also one reactor is working only at 60% because a secondary steam generator is out of order.
Anyway, if the winter is cold, France will have to import a lot of electricity for heating and some places might face brown-out (not only in France...) in addition to potentially run out of natural gas.
I think these "temporary" problems illustrate the danger of relying too much on a single source of energy.

"...illustrate the danger of relying too much on a single source of energy."

You got that one right..

Its good to have redundancy and spare capacity.

Well they ain't going to get is from us! We normally import a few sparks from them! They could try the Germans, they usually have the foresight to build more capacity than they need. Wouldn't bother with the Italians...unless they are willing to send a few Parisienne Hotties down for the randy old Berlusconi ;)

Since the French company EDF just bought some reactors in the UK, they might use those to export needed electricity back to France, specially if the British pound keep going down against the Euro... and of course the UK natural gas can be exported to the continent if the price is right, letting the poor Brits shivering in the dark :).
Well, rage against the French might warm them up :)
Actually, some of the coal power plant in eastern France might have to be used more than the 5000h/year they are allowed to cover up some of the gap.
Also France is planing to build 13 combine cycle natural gas power plants in the coming years for a power output of around 5 GW, with more being planed. Where the gas is going to come from?

Where the gas is going to come from?

Why, from invisible pink unicorn farts, from the herds that the Russians are breeding in the Ukraine, of course...

From the LNG that the Brits & Italians cannot afford.

France can outbid most of the competing nations for the limited NG/LNG that they need.


Where the gas is going to come from?

From Algeria, through the gasoducts in Spain.
Also Spain can sell France now a lot of electricity, because of the Depression and Demand Destruction a lot less is used by the Spanish industry.

Spain didn't put all the eggs in one basket, it makes electricity from Coal, Gas, Nuclear Power Stations, Hydro, PV Solar, CSP, and Windpower in a nice admixture. Not bad for a famously not very industrial or technological country, laying bricks is more our thing.

If Spain sells some electricity to France perhaps ZP can use the revenues to pay the unemployed who are, give or take, 20% of the active age population. Or use the monies for his famous Plan E2, that is, pay the ex-bricklayers to dig holes, then another lot to fill them up.

No Brits, or French will shiver in the dark, the European Union will come to their rescue.

Seems like the times keep on getting more interestinger..

Reading Zero Hedge this afternoon and one of the "usuals" named Cheeky Bastard posted an article about Saudi's exports to the US dropping by over 50% this year. Wasn't sure what he was talking about and wondered if there was any truth to his claims.

Also interesting is the comments to his article; someone mentioned the esteemed J Brown and the ELM and showed Mr. Cheeky the light. If nothing else, it showed me that (slowly) the reality of the situation is finding it's way to the surface. The folks on here are doing a real service. Thank you for that.

Oh and one last thing, anyone who doesn't think the system is being played, AIG was up 15% today on no news whatsoever. Nada. The entire system is rigged and for you and your family's sake you should get out if you haven't already.

I want to be smarter than a yeast.

It is pretty wild how Goldman, the biggest contributor to Obama and the company with the most influence over him, can do all this and not one reporter can even publicly question Barack on any of it http://www.youtube.com/watch?v=e2GvuOVcCB8

"Chevron in last stage of tests in Saudi oilfield"


Seems that at least 500.000 barrels (of steam recovered)heavy oil per day are garanteed from this project until 2039.