The folks at Rice didn't have any better information than anyone else. According to Saudi Aramco, Abqaiq was producing 400k barrels/day in 2006. And they were still drilling more wells there.

http://www.theoildrum.com/node/3923

Hi Westexes, I may have missed it because I had a period of abstinence from TOD but did you ever publish your ELM report?

Regards, Nick.

eric --Your post reminded me of one of those Mad Max spin offs. The one where the good guys were defending a refinery from the bad guys. Seemed like a worse case doomer scenario. But my point wasn't so much about how much or who might still be pumping a few very old oil wells. It was the loose choice of language folks on both sides of the fence use. Let's go out 300 years. Whether it's needed or not folks can still boat out into the Santa Barbara Channel and collect some of the 175,000 bbls of oil that naturally seeps out of the sea floor there. That's why such statements as "we'll never run out of oil" is technically true but completely misses the point about PO. And, in many cases IMHO, intentionally so. But the cornucopians can easily sell the idea to Joe6Pack because 1) it's true and 2) J6P doesn't really want to accept the truth.

I prefer to not use the term inflation because I don't think it really fits.

If banks have losses of say 1 trillion dollars and the US Gov buys the bad assets at par then the amount of inflation is minimal i.e very little money has actually entered the economy. Note they are not also paying all the interest which would have been inflationary. Whats happened is 1 trillion dollars worth of debt is now on the governments balance sheet and not backed by any asset and not even causing a faux increase in GDP.

Theoretically the debt will become more valuable as the economy recovers and the US would effectively be able to eventually sell it close to par. Thats the plan. In a weird way it makes sense because if we don't then we crashed any way and if we don't buy the debt we crash.

Now of course the US Government itself has to borrow to create this money certainly a good bit is printed by the feds i.e the debt is zeroed using printed money but the inflationary pressure is global i.e interest rates rise on the US Government debt because its increasingly less credit worthy not just because of inflation of the money supply.

In fact the overall money supply will probably continue to steadily contract however its best to say its being rapidly devalued vs commodities esp which can maintain and in the case of oil even increase in price probably food also.

However peoples traditional concept of inflation does not work because wages will be falling in real and nominal terms. Dollar for dollar people will actually make less and less even as the currency is being devalued.

This is because the money is never borrowed into circulation most of it is used to simply zero accounts the rest at best will never leave Wall Street and circulate in the world of high finance.
In short its gambling money for wall street to goose all liquid markets.

Thats why I call it rich mans inflation poor mans deflation. In this case the US Government itself is in the wealth cadre borrowing like a drunken fool to pay others bad gambling debts and worse giving them more money to gamble with.

Now the real problem of course is it is poor mans deflation which means tax revenues are going to plummet. As far as housing goes I really suspect that that bubble will bust this spring esp if oil prices sky rocket. I think what will happen is transactions will simply cease. I really think that the US has finally reached the point that its drained the pool of suckers willing to buy homes at high prices. All the mortgage plan has done is blow up a natural dead cat bounce to double or triple what it should have been pulling forward god knows how many years of demand. And causing rents to start really falling.

So you should see tax revenues continue to plummet and housing price eventually nose dive near the end of the year after transaction volume is gone. But its simply not coming back this time around there really simply are not any buyers left.

Someone noted that the number of cash buyers was evenly split with the number of people using FHA loans this suggest that right now whats happening is people are buying houses in bulk with cash and flipping them to FHA buyers at a markup. The real sales to someone actually living in the home are already 50% less than whats reported or close to that. Sure some are supposedly going to be held as rentals but as rents fall and interest rates rise most of these will be dumped back on the market as housing prices fall. I question how many actually plan to really hold.

Next I also question how many of the cash deals are really cash and how many are LLC's set up with investor money thats used to borrow more to buy up real estate. A lot of that investor money is probably HELOC money that had been drawn out and put into and account. Just because the house sale is a cash deal says nothing about how the money was actually raised esp assuming its companies doing a lot of the buying.

Given that I suspect there is a plenty of money willing to match with 20%-50% cash I have to imagine that many of these cash deals really have LTV's at anywhere from 80%-50%. Better than direct loans but still borrowed money. As housing prices fall and rents fall you know these guys will be forced to dump.
They will have no choice as they can't cash flow enough to cover the loan and the expenses etc. They really can't actually hold.

In any case the key now is falling tax revenue and ballooning government debt this is the real deadly combo since it will force interest rates higher and inflation is trapped inside the government itself and a few of its cronies never making it to main street. We will get all the typical effects of inflation i.e high prices and high interest rates plus all the effects of deflation falling wages and falling prices for assets that require loans. Anything bought with debt will crash and anything bought with cash will skyrocket. And of course wages will crash.

This is purely from financial trickery however if you throw peak oil on top your really light a fire as commodities would have been pushed up in price already with real shortages the pressure is to the moon.
And rising oil prices push up food prices narrowing profit margins on all other commodities.

Hot money flows could well keep the stock market buoyant a lot longer than most people think for example. But its all a mirage. None of the printing is making it very far the vast majority of it simply balloons the Government balance sheet and enriches only the elite of the elite.

I don't think there is a good modern example of this back in the 15th century onwards it was quite common for this to happen and for Governments to go bankrupt and have their internal debt problems literally detach the currency from the real economy and devalue it even as deflation occurred on the street.

http://en.wikipedia.org/wiki/Spanish_Empire

http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6WFJ-4D7K19S-1...

Thus this is in my opinion "new" in the 20th century and should not be equated to recent past history.

Another excellent paper.

http://eh.net/Clio/Conferences/ASSA/Jan_96/motomura.shtml

If you notice its a period of large empires at war using basically the same financial games we do today then you got it.

Whats important in my opinion is how the "real" economy was effectively distinct from the tax based mega bureaucracy. And both where effectively equal in size i.e government was as large as the rest of the economy. I believe the above paper is really important for understanding whats happening now.

Revenues

Many Spanish Monarchy revenues were fixed traditional incomes. Prices in silver terms roughly tripled from 1521 to 1627 (Hamilton 1934, 403), with the most rapid percentage increases occurring in the first 40 years of that period. Many expenses, of course, rose with inflation or faster. In contrast, the Dutch Republic was a new state and thus not set in traditional fixed revenues. Further investigation is needed to learn whether Dutch revenues kept up with inflation more easily than Spanish ones did.

The body which represented the elite of Spain's towns, the Cortes, resisted the Crown's efforts to meet greater spending needs through taxes. The Monarchy also faced practical limits to increasing tax rates in those areas which politics allowed.

An important example of the Monarchy's limitations occurred in the mid-1570s. Tax revenues from the Netherlands dropped sharply after 1571 as resistance stiffened to the tax increases of the late 1560s. In 1574, Philip II coerced the Cortes into raising the encabezamiento, a contribution required of towns, by 206% to 3.716 million ducats (Lovett 1980). The towns were supposed to generate the revenue for the through an excise tax on staples called the alcabala. Philip's advisors believed the towns could meet their quotas by raising the alcabala rates to the legally authorized 10%. The towns did not meet their quotas and organized, threatening to withhold more revenue from the Crown. After two years, Philip II agreed to reduce the encabezamiento by 27% to 2.716 million ducats.

Unable to extract as much as he wanted from the encabezamiento, Philip tried to introduce a new tax, but failed. He proposed an excise tax on some items not covered by the alcabala. The Cortes resisted fiercely, partly because it feared giving the Crown potentially unlimited rights to another revenue source, and the proposal died (Fortea 1990).

Thus the US is in the same position unable to raise taxes however unlike Spain it can print and does.
However just like then very little of this money makes it into the real economy thus government induced inflation cannot act like traditional 20th century inflation because consumer debt is actually falling not increasing.

In fact the governments are now aggressively competing with their own citizens for money thus putting even more pressure on outstanding debt and leading to more defaults.

It simply is not traditional 20th century inflation its a government thats headed rapidly to collapse and a currency collapse traditional inflation fails to happen as the money never flows into the real economy.

The closest example you have in the 20th century is Japan and to some extent Russia. But the US is not Japan and they played this game for decades against a backdrop where the rest of the world was inflating. The Yen carry trade certainly helped matters along. They never ever succeeded in inducing inflation no matter how much they printed because of crony capitalism soaking all the money up.

As far as general economics go I expect the following.

1.) Sharply rising commodity prices esp oil because of peak oil in addition to speculative flows.
2.) Stock market to actually remain buoyant but with ever higher volatility. It will swing increasingly erratically but somehow not crash as expected it will later but it could well do big swings well into 2011. The swings themselves will keep people gambling i.e its fully decoupled from reality and one day it will just simply crash on its own accord probably with no notice.
3.) Interest rates rising simply because the credit worthiness of Governments is falling. How fast is unknown but attempts to print and buy your own debt just inflame the matter once your credit rating is falling. There is simply no escape from this trap no government that depends eventually on banks to borrow from ever has escaped and in the end its banks doing the real lending.

4.) Falling wages and eventually falling housing prices however more important will be a plummeting transaction rate it does not matter if prices are forced higher if no one is willing or able to buy.
Without sales defaults will sky rocket. Then falling prices but sales volume will either not rebound or may even well fall even as prices fall. Thats the price we will pay for intervention. The propped up market price is now so divorced from the ability of the market to pay that there simply are not enough buyers period. Falling wages rising unemployment and rising commodity prices will work to deplete the potential buyer pool far far faster than any government program can act. Falling rents and inability to flip will dry up the cash buyer pool and soon falling prices will make these buyers net sellers as they try to escape the next downturn. Thus given how slow housing moves in general its a surprisingly fast crash. Although not a prediction I'd not be surprised in the least to see housing prices fall 50% by the end of this year to first second quarter of next year.

Next I think the Feds will be forced to stop propping up Fannie and Freddie as the FHA explodes and the next big one hits.

5.) The next big bomb is defaulting state and local governments at some point next year I expect one large state or local government to default sending interest rates spiraling on their bonds and halting the ability of these entities to borrow. The government will be forced to do some bailing out but it won't matter and it will force it to give up on propping up housing. And on top of course commercial real estate defaults and failing smaller banks will begin in earnest. This coupled with rising interest rates will finally push the US Government to the limit where it has to choose one bailout not all.

So basically I see use starting to hit the wall early next year in fact I'd argue all the key ingredients are now in place for the beginning of the end. We won't make it long enough to have traditional inflation probably not even hyper inflation. The financial system itself will collapse before we can even have the time to really even try and induce inflation.

However although its starting now the various rates are not yet known it could take 2 years it could take five no telling. We just have to see how things unfold. But the whole reason I replied is I just don't get the feeling we will make it to the hyper inflation scenario you describe. I think that instead we will see a currency event of some sort where one of the major currencies collapses taking all of them down and some sort of replacement attempt. And yes this is the specter of a one world currency but I really think we go right to that with the bankers effectively taking overt control away from the governments. In exchange of course I suspect the ones that play along will get a jubilee and the ones that don't wiped out in hyper inflation. The reason is outright defaults will beat inflation in a sense forcing the bankers to act.

Of course underlying all of this the real reason I think it happens this way is underneath all the fiat money games its growth that makes it work coupled with debt supported asset price inflation for debt based purchases. Once this is gone and its obvious its gone then the fiat currencies don't inflate their value goes directly to zero. Debt in fiat currencies which is all bankers have to offer has no value. I.e they literally are not needed. Thus the new financial regime will attempt to institute a new fiat controlled by the bankers in a desperate attempt to keep the fiat money regime. Of course given peak oil it will simply fail no matter what games they play. The collapse is endemic and can't be stopped via financial games no matter how desperate.

I don't think that's really much of an advantage in most of the US, including old northeastern cities like New York and Boston. Because parking is so much of a premium, parking spaces are delineated (via painted lines, meters, etc.). Some have "compact only" spaces, but you don't need a SmartCar to use those. You could pack more cars into a "theater parking" lot, but that's an advantage to the parking lot owner, not the driver.

A Smart car requires an extremely small parking space, slightly more than a dog it seems...

I think there are people who would choose to buy a fuel-efficient car. However, the SmartCar is not all that fuel-efficient. It seems like a high price to pay for a small return.

LOL frickin' Dutch rednecks. Wasn't sure if you were serious - this is really an article about Smarts being dumped into canals. I can see testosterone crazed yanks running them over with F350s just for the sport. When I lived in Pendleton Oregon (home of the in the early 90s there was a cafe with a Spotted Owl burger on the menu. No, nothing fowl :) just ground beef; owner was simply making a statement about the controversial endangered tweety birds, who were being protected at the expense of logging jobs, or so the rational went, anyway. Reality was of course a bit more complex than that, but the Spotted Owl was a potent symbol of hatred.

Most people don't choose to buy a small car, they do so because they don't have the money for a larger one.

Nonsense. Smart people don't buy a bigger car than they need to. They have better places to put their money.

I've never bought a car bigger than I needed. Of course, I was a business analyst, so I analyzed it from a business perspective.

Really rich people don't own cars at all. They just have cars available wherever they need them and people to drive them wherever they need to go.

New Dutch Sport: Smart Car Tossing

New American sport: Shooting people who touch your Smart Car.

I think buying used cars with better fuel efficiency and living in a walkable community is the way to go. Many questions surround the viability of batteries in cars. Using lithium ion, for example, batteries only last three years. Some of the new answers may cause more problems in the future.

The the EPA rating for the americanized version is 41 mpg highway. That's in the same range of several other subcompacts that are lots cheaper.

If I drove more than I do, I would probably get a Prius.

As it is, I drive a Corolla. It gets good mileage, it's cheaper than a Prius, it's reliable, and because it's been around so long, parts are readily available.

I expect to drive this car for 15-20 years, which I suspect is more sustainable than buying a new car with new technology.

I was flipping thru the headlines on marketwatch.com and one that made me chuckle was "US govt kicks off Detroit auto show".

http://www.marketwatch.com/story/us-government-kicks-off-detroit-auto-sh...

I thought, is that a mistake? But no the article talks about political folk cheerleading the auto industry. This world isn't just comical anymore, it's like watching the proverbial trainwreck. Hollywood couldn't make this up.

Anywho, this quote caught my eye: "Within the next 10 to 20 years, we will not only reach peak oil we will enter a period where demand for all liquid fuels will exceed supply," Toyota Motor Sales President Jim Lentz said. "A century after the invention of the automobile, we must re-invent it ..."

Good to see some "higher ups" get it.

Good luck...

Q.E.D. - as I predicted some of you here have given multiple reasons in the same sentence for not driving a Smart Car, I sure hope you in the USA never have to collectively live within your means and pay back all your debts. :-)

Re crumple zones, the Smart is made by Mercedes, do you really think they would produce an unsafe vehicle and damage their reputation? In my experience of American cars all there is behind the metal is lots of easily compressible air.

The Smart most certainly isn't suitable for all aplications but for a single person that regularly needs to park in tight spots and with high annual milage it's the car to beat with £0.16 per mile running costs (especially if like me you can claim back £250 per month + £0.45 per mile from your employer - it turns a very expensive company supplied vehicle (because of tax) into a zero cost personal vehicle.)

It looks familiar. I think I recognize the group, but we had to leave the goat behind because it refused to get in a minivan with that many people.

My comment on this WSJ thread:

8:34 am November 28, 2009
Jeffrey J. Brown wrote:
Law schools need to add some kind of vocational courses to their curriculum, perhaps something related to agriculture, so that the hordes of unemployed law school graduates will have some kind of useful job skills.

An interesting comment by Liz:

Liz wrote:
I read so many posts focusing on the people who want to attend law school, but no one ever wonders why we have a billion dollar business focused on creating more lawyers? Since the year 2000, the number of lawyers grew from 1.06 million, to 1.18 million, yet 406,338 people graduated from law school.

In 1965, when the Higher Education Act provided the schools with reliable access to federal student loan money, we had 10,491 law school graduates paying about $4,000 for their law school education. This year we have 43,518 law school graduates, borrowing an AVERAGE of $70,000-$90,000 for their law school education - many borrow $100,000 and more. This is billions of dollars going to a legal education system that just keeps growing, beyond all reason.

This is hurting the profession, and the economy overall. It’s not just about the individuals involved. It’s also about the fact that graduation from an ABA accredited school is a requirement for taking the bar in most states, and the schools who benefit from this monopoly refuse to place any reasonable limits on tuition or class sizes. Why are we spending so much money on this - and remember, much of the money spent is in taxpayer subsidized and guaranteed loans?

Based on these numbers, in 9 years 406,338 people graduated from law school, but the net increase in lawyers was only 120,000. Of course, there is some natural attrition, due to people leaving the profession, retirements, deaths, etc.

I have no idea if the lawyer slump will continue but my step daughter was just laid off along with 70% of the rest of the associates of a good sized Houston firm. She was a proven money maker for them. And Houston is till doing pretty good economicly compared to the rest of the country. But it is a national/international firm and i suppose Houston couldn't keep the whole ship afloat.

This was from September, 2007:

http://online.wsj.com/article/SB119040786780835602.html
Hard Case: Job Market Wanes for U.S. Lawyers
Growth of Legal Sector Lags Broader Economy; Law Schools Proliferate

A law degree isn't necessarily a license to print money these days.

For graduates of elite law schools, prospects have never been better. Big law firms this year boosted their starting salaries to as high as $160,000. But the majority of law-school graduates are suffering from a supply-and-demand imbalance that's suppressing pay and job growth. The result: Graduates who don't score at the top of their class are struggling to find well-paying jobs to make payments on law-school debts that can exceed $100,000. Some are taking temporary contract work, reviewing documents for as little as $20 an hour, without benefits. And many are blaming their law schools for failing to warn them about the dark side of the job market.

The law degree that Scott Bullock gained in 2005 from Seton Hall University -- where he says he ranked in the top third of his class -- is a "waste," he says. Some former high-school friends are earning considerably more as plumbers and electricians than the $50,000-a-year Mr. Bullock is making as a personal-injury attorney in Manhattan. To boot, he is paying off $118,000 in law-school debt.

Bravo to the welding English major!

My son is in his second semester towards getting an Associates degree in Industrial Maintenance. He looks at it as a way of becoming employable at a good wage so that he has a strong financial foundation to later figure out what he wants to do with the rest of his life. In other words, he probably won't do maintenance forever. He is 17...

As an aside, his tech school eliminated the Industrial Electrician program for lack of students. Very unfortunate for industries in our region.

When I was in grad school (in Physics), we used to take cabs every once in a while. Half the drivers seemed to have degrees in philosophy from Harvard. I guess that job gives them plenty of time to contemplate the meaning of life..

I can't picture going to law school - I would find it mind-numbingly dull. And at the end all you have to look forward to is a 'coyote job' (based on the story about how a coyote will gnaw off its own leg to escape from a trap - a 'coyote job' is one where you would gnaw off your arm to be able to quit and do something else). But in this case, the trap is one made of debt and not steel. I think there are a lot of coyote jobs out there..

Yeah - given all that is happening, it's pretty irritating that people get all hyped up over a movie. Pretty much everyone is nuts.

Oh yes, those things should make you feel better...here's an idea, go for a walk.

Saw the problem right off. Its NDD (Nature Deficit Disorder).

JN2, yes, 72 months is not really enough to know, witness the 1970's, and when production/consumption droped post 1982 it didn't come back to the old peaks for about a decade! Astounding.

This is small consolation when you think about it though...if we assume that we go on to 100 million barrels per day in production consumption, which even consensus in the oil industry agrees would tax the world oil production system absolutely to the max even IF the available oil can be found, you woud confront three big problems: (a) the amount of investment in infrastructure would be fantastic (b) the release of carbon would go through the roof, for those who are concerned about taht nasty climate change stuff and (c)the biggie, the export of money from developed and developing nations would be MASSIVE.

And then when we hit the 100 million per barrel mark, what next? Are we to assume we could continue on into infinity at that pace? Or should we assume that depletion would still be an issue, and we would begin to fall (now from a far higher place) and possibly very fast?

I cannot accept that as a workable alternative: I have often said here on TOD that in the bigger view the only reality worse than if the oil is not "out there" is that the oil is "out there".

Having said that, I never see oil demand rising to 100 million barrels per day, despite wild predictions of energy demand by the EIA and others...no one, not even the most blue sky optimist, sees that as a workable alternative...the developed world is already pretty much at the peak oil it will ever demand, with Japanese demand falling (even before radical new technoloy is implemented) the U.S. and European demand is flat and soon to decline. We can assume that China and India are working very hard to bring down oil consumption per GDP, with advanced batteries, plug hybrid and electric vehicles coming online very soon. The oil age is ending, as we always knew it would have to, and really, the sooner the better. Oil in the future will be an optional/recreational fuel.

RC