Drumbeat: March 14, 2010

Gasoline refining lacks its spark, for now

NEW YORK (MarketWatch) -- While the cost of crude has risen in the past year much faster than the price of gasoline at the pump, Big Oil absorbed a huge body blow to the bottom line.

After racking up sharp losses on their refining businesses in the last quarter of 2009, energy companies are facing a longer-term struggle even as the summer driving season approaches and the economy shows signs of life.

"There's been a fundamental shift in the U.S. demand and the price of gasoline," said Lynn Westfall, chief economist for Tesoro Corp., an independent refiner that posted a loss of $179 million in its latest quarterly report. "Growth in China and India are driving crude prices higher. But demand in the U.S. is weak and so you can't pass the higher costs along."

The Falklands: For Argentina, Oil Reopens Old Wounds

Argentines could be said to share three passions: soccer, the tango and their longstanding claim over Las Malvinas, which the British who control the island archipelago 300 miles off Argentina's coast call the Falklands. Even though Britain decisively beat back an Argentine invasion of the Falklands in 1982, the cry of "Las Malvinas son Argentinas!" (The Malvinas are Argentine!) still resonates in national politics. "It doesn't matter if you're from the left or the right, when you become President in Argentina, sooner or later you start beating your chest about the Malvinas," says writer Sylvia Walger, who is set to publish a book on current President Cristina Fernandez.

That time has now come for Fernandez, who has begun vigorously asserting Argentina's rights to the Falklands after a British oil rig recently arrived to explore what may be vast crude reserves beneath the sea bed around the islands. Last month, Fernandez vowed to argue "one thousand and one times for [Argentina's] international rights" to the islands and the oil, and ordered all ships stopping at Argentine ports obtain a special government permit if they want to continue on to the Falklands. This month, during a visit by U.S. Secretary of State Hillary Clinton, she requested Washington's mediation in the dispute — and while Clinton declined to mediate, she appeared to endorse the principle that the dispute ought to be up for negotiation. "We would like to see Argentina and Great Britain sitting down to discuss this issue," she said.

Iran says no need to change OPEC output ceiling

TEHRAN (Reuters) - Iran said on Sunday there was no need to change OPEC's output ceiling at the oil producing cartel's meeting on March 17 in Vienna, the Iranian oil ministry's website SHANA reported.

"There is no need to change the output ceiling in the next OPEC meeting ... OPEC will insist on the members' quota compliance in the next meeting," Iran's representative to OPEC, Mohammad Ali Khatibi, was quoted as saying by SHANA.

Qatar minister sees no OPEC output change

KHOBAR, Saudi Arabia: OPEC is not expected to make any fundamental change in output at its next meeting, Qatar's oil minister was quoted yesterday as saying by Al-Hayat newspaper.

Separately, the Saudi newspaper al-Riyadh quoted an unnamed senior OPEC official as saying the producers group is expected to maintain its production ceiling unchanged at the meeting.

Relax, there’s plenty of oil and gas

We are not staring soaring oil prices in the face. After crossing the then-record $120/bbl mark in May 2008, oil moved on to just shy of $150. By end 2008 the pricking of the financial bubble saw the price fall to $30/bbl and it has taken months to creep back to $80 or so. But, one argument goes, the millions of new cars expected on Chinese and Indian roads over the next decades will mean soaring demand and prices for oil. Perhaps.

Daniel Yergin, founder of CERA (Cambridge Energy Research Associates), is not convinced. Demand in rich countries fell in 2008 as oil prices soared and affected economic activity. In the US, daily oil consumption fell by two million barrels last year, though motoring only accounted for 15% of the fall and slower economic activity and flying for the rest. Meanwhile, the world looks increasingly awash with crude.

Spillage from the Oil Curse

“Not a single one of the 23 countries that derive most of their export earnings from oil and gas is a democracy today,” Diamond noted in an essay earlier this year. Especially in Arab countries, the fabulous riches that come from under the ground tend to create overbearing governments with apathetic citizens. “In these systems, the state is large, centralised, and repressive,” 
Diamond wrote.

Societies are usually “intensely policed” because “there is plenty of money to lavish on a huge and active state-security apparatus,” and bureaucracies are “profoundly corrupt.” They tend to see the money that pours into state coffers as everybody’s and nobody’s, and therefore more or less free for the taking. The public pays no taxes in the richer states, and in the view of the entrenched potentates no taxation means no need for representation.

Delta Says Strategic Review Is in ‘Advanced Stages’

(Bloomberg) -- Delta Petroleum Corp., the money- losing U.S. energy producer whose largest shareholder is Kirk Kerkorian, said its review of strategic alternatives including a possible sale is in “advanced stages.”

Cnooc to Announce Information on Overseas Cooperation ‘Soon’

(Bloomberg) -- Cnooc Ltd., China’s biggest offshore oil explorer, may announce information about the progress of overseas cooperation “very soon,” said Chairman Fu Chengyu.

“We have stressed our intention to intensify cooperation with foreign countries and companies since the crisis, and good progress has been made,” Fu said in an interview today in Beijing, where he’s attending parliamentary meetings.

Cnooc to Buy Half of Argentina’s Bridas for $3.1 Bln

(Bloomberg) -- Cnooc Ltd., China’s biggest offshore oil explorer, said it will buy half of Bridas Corporation from Carlos Bulgheroni for $3.1 billion, giving it a stake in Argentina’s largest oil exporter.

Nigeria's state-owned oil corporation to go private

Nigeria's state-owned National Petroleum Corporation (NNPC) has initiated talks with investment banks including Standard Chartered, JP Morgan, and Deutsche Bank to explore financing options as it changes into a fully privatised commercial company.

China Delivers Venezuela Jets For Anti - Drugs Fight

CARACAS (Reuters) - Venezuela on Saturday tested six training and light attack jets bought from China for defense and anti-drugs flights in a deal that dodges an embargo banning sales of U.S. weapons parts to oil exporter Venezuela.

President Hugo Chavez ordered a total of 18 K-8 jets built by China after a plan to buy similar jets from Brazil's Embraer fell through, apparently because they include U.S. electrical systems.

Global hunt for phosphates is on

Are we facing a food disaster with catastrophic shortages of fertilisers? Will the world feed the three billion or so more people likely to be added, by 2050, to the six billion already on the planet?

Plunging price heats up ethanol

CHICAGO — Ethanol, the commodity that cost Bill Gates more than $44 million the last time prices collapsed, is poised to rally as much as 20 percent as the fastest drop since 2008 spurs demand.

Falling corn prices and record ethanol supplies have driven the price down more than 17 percent in three months to $1.585 a gallon Friday, its worst run since 2008's fourth quarter. It will average $1.96 a gallon at the peak of the U.S. summer driving season as refiners from Valero Energy to Sunoco mix more into gasoline made from increasingly pricey oil, according to the median of 10 analyst estimates compiled by Bloomberg.

Taxpayer-subsidized manure digesters stimulate factory farm pollution

At the U.N. Climate Change Conference in Copenhagen last December, U.S. Department of Agriculture Secretary Tom Vilsack unveiled plans to promote manure digesters as a way to reduce U.S. greenhouse gas emissions by 25 percent. The trick is that you have to be a factory farm to qualify.

Renewable energy also needs to be sustainable energy

William "Bill" Ayres, business manager for the biomass division at R3 Sciences, has an idea that could dramatically increase the sustainability of the biodiesel industry. Ayres has been involved with biodiesel since 1990 and helped form the National Biodiesel Board.

"I did some research several years back and took some soybean oil and soy biodiesel, ran them through a catalytic reformer and converted them to hydrogen," Ayres said. "I did it just to show that it could be done."

Tokyo Electric Power planning trial of smart meters

TOKYO — Tokyo Electric Power Co said Thursday it will launch trials of smart meters for more efficient power consumption by October in a bid to start their full-fledged introduction in two or three years.

Operations normal at Japan nuke plants after quake

TOKYO (Reuters) - Operations at Tokyo Electric Power Co's Fukushima Daiichi and Daini nuclear power plants are as usual after a strong quake hit northern Japan on Sunday, a spokesman at the company said.

Health Costs of California Air Pollution

Filthy air in California cost federal, state and private health insurers $193 million in hospital costs, according to a RAND Corporation study released last week.

The report is the first to show how California’s failure to meet federal clean air quality standards is increasing hospital expenses and its impact on insurers, said John Romley, the study’s lead author and a RAND economist.

China, Not UN, Controls Supply for CO2 Offsets, Stanford Says

(Bloomberg) -- China’s power to set prices for electricity from windfarms is dictating the supply of tradable emission credits in the UN carbon market, the world’s second biggest, according to a report from Stanford University.

State suing for responsible scientific conclusions

The Environmental Protection Agency recently concluded that man-made greenhouse gas emissions — including carbon dioxide — are harmful pollutants and must be regulated. The lawsuit I filed challenging that finding does not address the disputed science surrounding global warming. Instead, it focuses on the indisputable fact that the EPA relied on information that has been discredited, manipulated, lost or destroyed, and sometimes evaded peer review. The lawsuit does not attempt to show that the globe is not warming. It does, however, show that the process used by the EPA in deciding to regulate greenhouse gases is riddled with errors that render its conclusion untrustworthy.

Climate snapshot reveals things are heating up

THE nation's two leading scientific agencies will release a report today showing Australia has warmed up significantly over the past 50 years. It is a response to recent attacks on the science underpinning climate change.

The ''State of the Climate'' snapshot, drawn together by the CSIRO and the Bureau of Meteorology, shows the mean temperature has increased 0.7 degrees since 1960.

The snapshot also finds average daily maximum temperatures have increased every decade for the past 50 years.

The report states temperature observations, among other indicators, ''clearly demonstrate climate change is real''.

Two really great videos were linked yesterday on Chris Martenson's blog: Daily Digest - March 13

One was "Harry Markopolos on The Daily Show with Jon Stewart" about the Madoff Ponzi Sheme. The other was "Ratigan And Spitzer Discuss Repo 105, Conclude "Civil Cases Will Be Brought" about the Lehman Brothers collapse.

Both will make you so angry you could chew nails.

Ron P.

Thanks for pointing those out.

I'm as interested in the item at the end:

Monsanto, Big Ag, Get Warning From Obama Administration (mhoop)

[Monsanto], the Creve Coeur-based company, which has helped pioneer the use of genetic traits in seed to help farmers control weeds and ward off pests, has already acknowledged that it received a formal request for information from the Justice Department as part of an ongoing probe of the seed industry.

The way Monsanto is operating right now has to stop. There are plenty of documentaries that discuss their monopolistic tactics (Food, Inc., for instance).

"The way Monsanto is operating right now has to stop."

Their not the only ones by far;

DuPont, Dow Chemical, Syngenta, BASF and Bayer CropScience are ALL just as bad and if you think big pharma is bad these guys can make them look like furry kittens.

Screw organics, this is where the battle field is and if it is not addressed organic will be irrelevant.

This is a no brainer. But will the Obama administration have the fortitude to see this through. What took them so long to start the process?

GMOs are enabling the likes of Monsanto to make dependent farmers thieir virtual slaves. The most egregious aspect of this is that Monsanto sues farmers who are not even planting their seeds. Even if they have a good case, Monsanto's overwhelming financial assets intimidate the farmer into settling with Monsanto.

And the conservatives should be all over this, not just us socialists out here. Monsanto has effectively killed free enterprise in the farming industry and should be resisted and prosecuted for anti trust at all costs and as soon as possible.

This was all made possible by the court decision that said it was acceptable to patent life.

How do we decide that a company is too big to allow to collapse? Apparently, Lehman was allowed to collapse but Bear-Stearns was not.

In 2007 Bear had 13,566 employees, while Lehman had 25,936.

The size of a firm is unstable with respect to the number of employees. If we try to model the size distribution, we see that the best interpretation leads to a situation where the average size of the firm will diverge if left to its own devices. Since we live in a world of finite constraints, this can't happen so something has to give.

If you integrate the following probability profile to obtain a mean firm size it will logarithmically diverge to infinity. It leads almost directly to a situation where one large monopolistic company will employ everyone on the planet. (It's a very slow process fortunately)

In the Lehman case, the people previously employed by Lehman (at least some fraction) will go to Goldman-Sachs and that will grow bigger. Some of the decisions made with the help of anti-monopolistic policies have to take this into account. I can imagine the difficulty in making these decisions because my arguments are all based on entropy and the only way you can fight entropy is by exercising some external control and maintaining that control.

I describe the situation in a recent blog post:

Ron - I had seen the Harry Markopolos piece last week, but Spitzer with Ratigan was something new for me. The Enron comparison is perfectly valid.

The Enron Headcount:

Kenneth Lay, Enron Founder – died of an acute myocardial infarction while on vacation in Colorado on July 6, 2006 while awaiting his sentencing for his convictions on six counts of conspiracy and fraud.

Jeffery Skilling, Enron CEO – scheduled to be sentenced on October 23, 2006 for his convictions on 19 counts of conspiracy, fraud, false statements and insider trading.

Andrew Fastow, Enron CFO - pled guilty to two counts of wire and securities fraud, and agreed to serve a ten-year prison sentence in exchange for his cooperation with federal authorities in the prosecutions of other former Enron executives. Fastow remains out of jail pending the investigation conclusion.

Richard Causey, Enron CAO – pled guilty to securities fraud. Causey is serving 7 years in prison and was forced pay $1.25 million to the U.S. Government.

Ben Glisan Jr., Enron Treasurer – pled guilty to one count of conspiracy to commit security and wire fraud. Glisan was the first Enron executive to go to prison.

J. Clifford Baxter, Fastow Capo - committed suicide, January 25, 2002, in Sugar Land, Texas.

Arthur Anderson, Accounting Firm – Driven out of Business by the U.S. government and the SEC.

I have a hard time believing that little Andy Fastow cooked up the giant Enron scheme all by himself. There were a lot of big players who knew perfectly well what was going on at Enron but were making such huge sums on the phony transactions that they turned a blind eye. Now an even bigger scheme with Lehman Brothers is coming to the surface and two years later there has yet to be a prosecution or any change to the financial regulations that allowed these Ponzi Schemes to prosper.

Personally I don't care if Elliot Spitzer had a harem of underage asian hookers living with him. I would like this hound of the Baskervilles unleashed on Wall St. He's right: "We need to start leading people away in handcuffs." Fat chance!


Joe, my sentiments exactly. No one at the SEC has been fired and no one involved in the Lehman Brothers scandal prosecuted. Damn shame, they should go to jail and those idiots at the SEC should all be fired.

Ron P.

The elephant in the room is political. The problem is political.

Until we decouple congress for the sewer flow of corporate "contributions" we are going to have meaningless regulation, meaningless prosecution, and a chronically sick economy.

Where the buck stops is not Dick Fuld, it's the chairman of the House Banking committee. If we fix congress, we can fix the rest of it.

If we fix congress, we can fix the rest of it.

Will - Fixing Congress? Please tell me something that is possible. Going after Dick Fuld and his confederates however is something that can create a shit-storm that will go all the way back to Washington.


Exactly no one at the Treasury or the Federal Reserve wants Dick's day in court to occur. Forget that shit-storm. Not gonna happen.

Now... We can fix Congress. All we gotta do is vote for the guy who tells us he won't take corporate money.

Of course, we gotta find that guy, or 535 of them rather. But it is a dead-easy campaign pledge to make. And we have to agree, as an electorate, and as a society, that it is the proverbial litmus test. We keep it very simple. We make it the defining issue. Once we do... that ball starts rolling.

All the rest of it: abortion, health care, war, all of that gets ignored. Focus on the money.

Now... We can fix Congress. All we gotta do is vote for the guy who tells us he won't take corporate money.

And when we find out he/she's lied to us, 2 or 4 years later, do it again? The problem is DC operates a certain way, and money is only one of the factors. I am sure many politicians have went there to buck the system and operate using their morals and constituents as their guide. They get absorbed, kicked out, or burnt out.

Many of these folks have money already, the pay to be a politician is nothing to sneeze at for most people.

The government needs a redo honestly, but the legal methods of doing this are almost as scary as the illegal. The people that have the power and skill to do this are exactly the people I don't want doing it. Lawyers and politicians.

Another point, the collective "We" need to quit saying "Lehman Brothers did..." "Citi caused.." Case in point the story goes "Bank of American repo's wrong house." NO BofA did not, some shill in the corporate entity that is BofA did, and that person should be fired, the tried for his crimes. Corporate people are allowing real people to hide behind their names and keep from being held accountable for their actions.

We use the old Persian system: put a satrap in each Congressional office.

We'd have to pay 535 watchers, so to speak, to keep elected hands from the grease. But that level of scrutiny would be the best investment we could possibly make.

Where we are today is pathetic.

We can fix Congress. All we gotta do is vote for the guy who tells us he won't take corporate money.

Of course, we gotta find that guy, or 535 of them rather. But it is a dead-easy campaign pledge to make.

And the guy who makes it gets one tenth the campaign donations, and one tenth the political advertising. The voters here a one sided story, and fall for it most of the time. So we are back where we started. As long as we are hung up on first amendment means all the government that money can buy, we won't get anywhere.

The govt. doesn't have to do anything about it. Depletion will re-shuffle the deck.

Of course depletion reshuffles the deck.

But our deteriorating economy is a lot more complicated than depletion.

We can live without cars. We can live without salad greens from California, wine from Chile, or goods from China.

But how much more mal-investment can we absorb?

We Californians still want our money back

Peak Minerals -- Phosphate, Potash

The Global hunt for phosphates is on article is the latest installment in a recurring theme. Phosphate is one of those minerals for which there is no replacement and global phosphate production will thus go through a geologically determined "peak" just like oil. From the article:

We've had doomsday scenarios before. Forty-odd years ago, the Club of Rome was predicting dire shortages of most raw materials by the past century's end. Lately, it's been peak oil. And now we are hearing of peak phosphates, a crucial ingredient in fertilisers.
The authoritative US Geological Survey (USGS) puts it bluntly: there are no substitutes for phosphorus in agriculture. And phosphate fertilisers cannot be recycled like tin cans; they wash away forever.

Let's do a quick review of the situation with graphics from the US Minerals Databrowser.

On the left we have US production, consumption and net exports/imports. Clearly, the US is past peak production and is now an importing nation for this most important commodity. On the right hand side we see world production with US production superimposed and an inflation adjusted price marker to show the relative cost of this mineral over time. If I had to describe the global situation the phrase "bumpy plateau" might come to mind.

The other mineral mentioned in the article was potash, the source of potassium in fertilizers -- the 'K' in of 'NPK'. Let's do the same review:

US production of potash peaked in the mid sixties and has since been in steady decline. We now import over 80% of the potash we use. And global production can again be described as a "bumpy plateau". But what's up with the price? What happened between 1914 and 1918 that made the price skyrocket?

Well, it turns out that German imports were the primary source of potash in North America from the 1860’s all the way up until World War I. The WWI embargo of German goods caused supplies to shrink and prices to skyrocket. The development of domestic US potash deposits began at this time in California, Utah, and Nebraska. (Interestingly, some potash deposits like the Carlsbad Potash Basin in New Mexico were discovered accidentally while drilling for oil.)

Are we at peak phosphate or peak potash? It's hard to know for sure. Undoubtedly there is still a lot of these minerals in the ground around the world.

Can we expect the price we pay for fertilizer to rise as we deplete the easy-to-find supplies of phosphate and potash? Without a doubt!

Best hopes for exploring the data and learning a little history along the way.

-- Jon

I would suggest that we have to distinguish between the origins of the specific material to figure out the potential depletion dynamics.

Concentrated phosphorus in the form of organically-derived phosphates goes through a Gompertz-like production life-cycle (not a Hubbert logistic). It is easy to extract and the extraction builds up exponentially as demand increases and then will follow a rapid crash.

Distributed phosphorus and less accessible rock phosphate can be mined through various techniques so that will continue to contribute to the tails. That is closer to what happens with oil, since oil is not always easily accessible but as technology improves and it grows in value, the dispersed nature of discovery leads to a Logistic curve as opposed to a Gompertz. (See Dispersive Discovery on TOD to understand the difference)

I imagine, potash has a mix of the behaviors of phosphate and oil. The first step is to figure out which deposits were created as organically-derived and which have a dispersed origin. I realize that everyone understands this, but lifeforms can concentrate these materials into highly extractable forms, but this same efficiency leads to rapid depletion of the same resources if it all gets discovered at a single point in time.

Thanks WHT,

Your comment and link here helped me a lot by clarifying and simplifying a great deal of your thinking on Dispersive Discovery models.

I will admit to being a 'Show Me' state skeptic when it comes to modeling, but your distinction between bioconcentrated vs. dispersed deposts of different resources is one that has huge intuitive appeal.

Statistical models, Gompertz or Hubbert, can be useful in predicting production curves and utlimate recovery of a resource if one understands these differences. Their utility is limited, however, when human nature becomes involved in the form of politics, economics or warfare. Then all bets are off.

-- Jon

I agree on the human nature beyond a certain stage, yet the macro aspects of human economics can be modeled in a very similar fashion.

I have recently been on an econophysics kick and the field looks wide open because most of the research doesn't view or interpret the data in the same way I do.

Firm Size: http://mobjectivist.blogspot.com/2010/03/firm-size-entroplet.html
Income Disparity: http://mobjectivist.blogspot.com/2010/03/econophysics-and-sunk-costs.html
City Size: http://mobjectivist.blogspot.com/2010/03/entroplets-of-city-population.html
Investments: http://mobjectivist.blogspot.com/2010/03/volatile-investment-trap.html

I kind of know the boundaries of the general analysis and that has to do with scaling to the micro level. I stay at the macro level where all the individual game theoretic strategies cancel out and all that is left is entropy and disorder.

And these micro-features cancel out for the same reason that the specifics of the data for individual oil reservoirs (or any other constrained resource) cancel out when aggregated. In other words, beyond a certain point you no longer you need to know the detailed data, and the aggregate is good enough to make predictions or extrapolate the behavior. That is not to say that data collection is not important, as we need data to validate the models and to convince someone else that you can use a model as a proxy.


Recently I've been thinking that some of what we hear about in financial circles seem like the eddies and whorls that form during turbulent flows. Something in the business environment today seems to be preventing the spreading of risk -- vehicles that at one time successfully mitigated individual risk (while raising overall costs modestly) seem to now be increasing systemic risk while maximizing third-party cash-out.

For example, in Florida the traditional insurers lost money in 2004/5, and pulled back. Rules were loosened to spur new investment in the insurance community, but the new companies are more like ponzi vehicles for investors than risk-spreading insurance. Small insurance companies spin out premium cash to shell companies, while their new re-insurance companies have no real assets to provide the supposed back-up. While the pseudo-insurance supports overly-expensive loans for housing, and all parties seem to be happy pretending that risk has been mitigated, if a hurricane hits it will all collapse. While it is obviously impossible to spread risk far enough in an overall risky environment, where there is more aggregate risk than aggregate mitigation funds, might such a situation be reached 'early' if the insurance process and industry becomes part of the risk itself?

Retirement funds (in Soc Sec or private funds) are likely in similar jeopardy. While an individual can plan for retirement, might the opportunities for everyone in aggregate be limited such that it's impossible for all who think they can retire to actually do so?

Is there a way to model such risk in a entropic manner? Is it piece and parcel of the same phenomena -- without continued specific effort nature (or human nature) creeps in and risk and losses/gains distribute themselves according to your heuristics?

Is there a way to model such risk in a entropic manner?

Good question. Intuitively I'd expect it to be like modeling earthquakes, slides that occur as gravel is added to piles, or tomorrow afternoon's rainfall. As with those, you might be able to get a decent statistical feel while being unable to predict anything particularly useful. (The Weather Service will tell me, say, that there's a "30% chance" of rain, which is essentially useless for deciding whether to cancel tomorrow's picnic.)

I remember the analogy. The gravel or sandpile idea was due to the physicist Per Bak. Many of these physicists want to find the "critical behavior" phenomena that has a self-organizing character to it, ostensibly so they can discover some new laws of nature and therefore perhaps win a Nobel Prize.

In actuality, the behavior can be explained by more mundane arguments. All it takes is a variation of fault strain release points and various stress rates in reaching those points. Then you get a graph that looks like this:


So if you had an insurance policy against earthquakes, the insurance actuarian would consider this model quite useful. They couldn't tell you when the earthquake would happen, but they could reasonably predict the size in terms of a probability (essentially related the slope of the above curve).

Intriguing ideas Paleocon.

I had a post titled "Failure is the Complement of Success" in which I tried to point out that the path to success follows some of the same patterns as the path to failure. So I can use the entropic arguments to model reliability & risk arguably well: http://mobjectivist.blogspot.com/2009/10/failure-is-complement-of-succes...

So I can imagine dispersion in compounding investments may also provide some insight in how we can understand dispersion in risk mitigation strategies such as insurance policies. Dispersion in an aggregation of insurance policies consists of various probabilities of occurrence weighted against the potential payouts. I know that actuarians think in this way, but they treat all the possibilities as discrete or categorized events and then sum the aggregate. I don't know whether they would ever consider a continuous distribution of risks, which describes the entropic route. Gail might know (if she can figure out my abstract notions) and she did say this:

Insurance is of course another area where people are interested in describing what might look like completely chaotic distributions--both the number of claims (often Poisson or binomial) and the size of individual claims (often log normal, or perhaps Pareto--especially at the tail). Very large claims are of special interest, because these can comprise a disproportionate share of an insurance company's costs. Because of this, insurance companies pay particular attention to modeling a fat enough tail. If you are in the black swan business, you can't assume there are no black swans. http://www.theoildrum.com/node/6255#comment-594287

I think what you may be getting at is the dispersion of risk may push certain payouts well into the future. However since dispersion causes fat-tail effects, the continual buildup of these future payouts rise to such a high value that any adverse event may drain the insurance companies reserve. Yet I also think that this is exactly what the insurance companies want. They would gladly want to defer payouts as long as they can.

I will definitely look into this and I suspect it will lead to a pessimistic outlook, especially for certain outcomes such as Soc Sec.

Thanks for the feedback WHT. I recall enough college math to be able to follow your work, but I'd not be able to synthesize it myself!

Pushing risk into the future is an interesting concept -- if you can borrow or bank monetary risk like you can money itself then you could end up with situations where artificially low risk returns (calamities) would skew actuarial and regulatory views, only for the eventual risk to swamp the system. Perhaps, more generically, monetary risk is actually a component of debt, and the two are intertwined?

I'm not sure social security is any different than other debt or investment, except that the supposed savings have already been borrowed by the gov't and spent, so the "Where does the money come from?" question is more obvious.

In any long-term, society-wide investment mechanism I think it is a valid question to ask whether the scope of the investments sufficiency affects the market as to make the desired outcome uncertain. Similar questions could be asked about hedge funds, large investment funds/banks, and Fed actions -- as the players become few and large rather than many and small, does it affect the game significantly?

Back to your "corporate size" distribution model, if you add nation-states to the mix (with each gov't being a "company") does the distribution still fit the curve?

Fat-tails imply that the rare but large entity can sway things economically. Also, nation states are like big coprporations I would think.

Oh no!

The world needs to keep growing indefinitely. We need to increase consumption and population to keep our economy humming.

If need be, price signals will lead to substitutes. The invisible hand will care for us all, forever!

Depletion of fossil water, peak oil and natural gas, depletion of top soil, coal, and dieing oceans need not concern us. We must continue to plow ahead until God decides to pull the plug on judgement day.

Remember..., we have marching orders...,

We must be fruitful and multiply!

What exactly is phosphate used for and is it really necessary. Sorry for the dumb questions but I am not at all clued up on phosphate at all. Thanks

In the case of phosphate, a Google search doesn't immediately take you to the answers you want. The first link is to the wikipedia page has been take over by chemists. The second link is to a USGS page that itself contains numerous links. What you want is the US Minerals Yearbook section on phosphate. From that document:

Phosphorus is an essential element for plant and animal nutrition and is consumed primarily as a principal component of nitrogen-phosphorus-potassium (NPK) fertilizers. Phosphate rock minerals are the only significant global resources of phosphorus.
Phosphate rock was used primarily for production of wet-process phosphoric acid for fertilizer applications, which accounted for more than 95% of domestic consumption. The remainder was used in the manufacturing of animal feed supplements, for direct application to soil, and for elemental phosphorus production.

Phosphate fertilizers were a key component of the Green Revolution that began after WWII.

-- Jon

Thanks Jon. Do you think that the world could be fed without fertilizers, using purely organic methods. I would imagine not. (btw I am talking about being technically possible from a pure yield basis, not taking into consideration logistics and politics.)

We'd all have to become much more familiar with Joe Jenkins and humanure.


I'd rather starve...!

One down. 6 billion to go!

LOL! I had exactly the same thought. Then again people are squeamish about things like even thinking of eating insects...

Do you think that the world could be fed without fertilizers, using purely organic methods.

Unless you mean "natural-gas-and-nitrogen-based fertilizers," the idea that "organic" methods are fertilizer-free, i. e. "pure," is a myth.

Certified organic farmers regularly use mined materials, such as rock phosphate, lime, and greensand (and kaolin as a crop protectorant).

"Composting," if that's what you mean, does not require organic certification and is practiced by many farmers who have no interest in "organics."

I suspect even that is unsustainable. The materials in compost come largely from conventional farms.

Do you think that the world could be fed without fertilizers, using purely organic methods?

We're not feeding 'the world' today even with fertilizers.

Distribution of food calories is highly inhomogeneous -- just look at the impoverished classes in India, Brazil, Central America, etc. or the entire nation of North Korea.

I believe that organic agriculture will be sufficient in many areas of the globe but not in others. I would be paying close attention to areas with the following characteristics:

  1. current overcrowding
  2. current food importers
  3. insufficient rainfall
  4. high birth rates
  5. authoritarian rule

However, I think it is important to realize that any shortages of phosphate or potash will appear as increasing commodity prices over several years or decades. We may be hearing increasing news about food riots from time to time as we did in 2008 but I'm not expecting any 'crash' in supplies of fertilizers or any severe food shortages in current food exporting nations.

Best Hopes for a compassionate distribution of food resources.

-- Jon

The fish catch rarely appears to get a mention.
Fish stocks and ocean catches are declining. Farmed fish requires protein mostly extracted from grain.
Fish supplements a good amount of our food supply. I think the logical conclusion is as the ocean catch declines there will be an inevitable growing reliance on farmed fish. Feeding the fish further intrudes into the grain supply. Feedbacks (excuse the pun).
To state the obvious I think we are in a wee bit of trouble.

If we started with a world like our own that looked like ours from say 1,000 BC. Without all the damage that people have bought on by clear cutting and what not. I would say if you limited the way people lived on the land, no over grazing, limited growth, parceling out about 5,000,000 square miles of land into 1/4 arce lots and giving them a lot of edible plants that would grow on each lot, not all of them native to their region, but able to grow in the climate of the plot of land. You could feed all the current world's population.

But that can't happen here on Earth, we have greed and hate for our fellow man to contend with. We have no known society that will allow itself to be limited in the fashion listed above.

With what we have have now, we can grow a lot of plants that are edible, using some animals to fill into the mix, Chickens, sheep, goats, rabbits, ducks, and several other small animals can be grown on small plots with some limitations. The problem is transtioning from what we do now to a new lifestyle is not as easy as people want it to be.

There are methods to grow food without mining rocks or FF to feed the plants, but you have to work closely with the Natural systems that are already there. Man has this nasty habit of trying to tame nature, beat it into the form we want, and that has been our down fall.

We took productive land that grew forests, or plains and tilled it until all we were growing was one kind of plant, or maybe several, but still the numbers of plants that were there before we arrived was a 100 fold or more. Farming even before the Green Revolution was hard on the land.

There are dozens of people out there that have proven you can live off the land a lot better than we do now. Methods of setting up growing systems that use what nature normally does, without us doing a lot beating nature into our ideals of monoculture. These methods don't allow for factory food production though, and we would need to change a lot of how we get our food to feed our tummies.

What you ask is possible, but what you point out is that politics and BAU will not allow it to happen in any way besides on a small scale within a small number of people.

People did feed themselves long before FF were part of the mix, but all that we have gained since their use does not have to be lost. We have a lot more knowledge about how the world works than we did even 50 years ago, we don't have to lose that knowledge base.

TOD does have a lot of Doomers reading and posting here, but as someone else said a lot of people read that don't post. So to those I say, look into growing food on your bit of world, look at the methods of Forest Gardening, Permaculture, Edible Landscapes, BioWebScape designs, and others that show you how to live within the means of the land you have working with nature and not trying to tame it.

It is true that plants need NPK but they got it just fine before we showed up on the scene, going back to that way of life is possible. Maybe not an easy trip from here to there, but a possible one.

BioWebScape designs for a better fed future.

...look into growing food on your bit of world, look at the methods of Forest Gardening, Permaculture, Edible Landscapes, BioWebScape designs, and others that show you how to live within the means of the land you have working with nature and not trying to tame it.

Hi, Charles. That is good advice. And we need to remind ourselves that survival will be individual. We could summarize all of the items we read on food production, and I submit we would find the following.

1. We are producting one heck of a lot of food by using commercial fertilizers and farming methods.
2. Certain organic farmers, using intensive farming and using sustainable methods are able to equal the production of the commercial fields, and keep it up indefinitely.
3. If everyone did that, we might be able to support about as many people as there are on earth today.
4. For # 3 to occur, land would have to be divided equally and into small plots for the organic farmers.
5. #4 is not likely to occur in this universe, on this planet.
6. Factory farms / commercial methods render the land less productive, and depend on every growing supplies of fertilizers.
7. These fertilizers are made from natural gas.
8. Factory farms use huge quantities of diesel fuel in various stages of production, packaging and distribution.
9. Diesel fuel will become scarce as Peak Oil occurs.
10. Natural gas will peak shortly after oil (after oil, NG use will increase, as will coal use - coal is another source of gas for fertilizer production).
11. When FF have all peaked and are declining, factory farming will first become extremely expensive, and then impossible.
12. When #11 occurs, it will be far too late to do anything about getting to #3.
13. All steps above could take place in a timeframe of from 10 to 50 years.
14. The shorter the time frame, the more uncomfortable the situation will be at the end.
15. The best we can do is to arrange for our own small parcel, sufficient to farm for ourselves and enough for trade as these steps take place.
16. We should thank those in TOD who have freely contributed their ideas and knowledge to this forum.

I would like to see a regular masthead on "Farming After the Peak", where all contributions could be archived and searched. Topics could include use of animals, tack for use with draft animals, preparing the soil, maintaining the soil, simple animal driven mechanical devices useful on small farms, etc. Also, how large a plot is needed to support a family of 2, 3, 4, ... n?


2. Certain organic farmers, using intensive farming and using sustainable methods are able to equal the production of the commercial fields, and keep it up indefinitely.

This is question-begging. What constitutes "organic" farming--strictly composting, or using mined materials such as rock phosphate? If composting, do the materials come from conventional farms or just from "organic" farms? If any compost comes from conventional farms, then the term "organic" has been compromised.

"Sustainable?" Does that mean "able to be maintained indefinitely without further harm to the environment," or is it being used as a buzzword? Which "organic" crops, under which conditions and climates, are "sustainable?" Does anyone really know?

Let's not forget that all farmers--conventional or "organic"--grow people.

Which is not sustainable.

My BioWebScape designs I don't call them Organic. That word has been used and abused to the point that it is no longer what it was meant to be, and some people who are organic farmers use methods that work against nature like tilling.

I work with what you have already on the parcel. If need be pruning or cutting down of some plant material is done, but all the material stays on site, and use of it is maximised.

If you have a lawn, I might look for places where weeds grow, some of them are edibles, others not. If I plant something be it a plant or a seed I mulch the area, using material on the site. Cutting grass down to the roots and using that, or leaves or even rocks. Building up from a lawn or barren site is the hardest, it'll take a few years of working to grow enough food to eat off most suburban lots, unless they have left some nature grow on them.

I try to stay away from tilling in my plans, though you can use raised beds if you have a lot of organic matter handy, or you can use compost or manure from human and animal sources. If I have to import organic material into the system I like to exchange it for organic material or food crops, keeping a balance in and balance out. Though given how erosion works and how the sun can change organic matter and all those other processes, some movement of organic inputs are okay, because the system is more in flux than we give it credit.

If I raise animals in a design, all the food for the animals needs to come from the parcel and not be imported from a grain crop somewhere, unless the grain crop is using the same methods as my design, but then the manure must be exchanged completing the cycle. The whole in and out cycling is still a work in progress, but the plan is to limit the use of foods from outside the parcel of land to get a better understanding of how long term it is and if the numbers really do work out like I think they can.

Basically the land use has to be sustainable for humans and for the animals we place on it, but then there is the animals that visit, how do you account for them? How do you account for things like houses already on site, do you only use rainfall and not the streams that flow over the land? Do you only use rainfall and not ground water? Do you use solar power via panels you brought at the store? I am still trying to work out the details of whether someone plopped down on a parcel of land can use it and only what is there for living, and not import anything else besides seeds and young plants from places which have a climate like the parcel does.

So yes, BioWebScape designs are a work in progress, and maybe in the long run I'll be the only one pracicing my own designs, but I hope to get enough information gathered, so that others can at least use it to plan out their niche in the world. With over 20,000 edible species of plants out there, there should be more than enough variety for everyone, whereever they live.

Just one acre of ground per person living today is about 11 million square miles if you use the high number of 7 billion people. That seems more than enough to feed them all, without fossil fuel inputs and only using the plant materials found on the land and with methods that do not distroy the land's ability to stay healthy.

BioWebScape designs for a better fed future.

Have you seen any Mercury thermometers lately?
Have you seen any Mercury anything lately?

What ever happened to Merucry?

It's in our fish and our children's neurons. It is moving up the food chain in everything downstream/wind of a coal-fired power plant or a Nevada gold mine. Collateral damage in the march to a healthy economy


Just wait till the dioxins kick in when we burn the rubbish tips for heat..

Hi leduck,

The lighting industry, for one, is using a lot less mercury than in the past. Not long ago, a traditional F34 or F40T12 lamp contained up to 20 mg of Hg. These lamps have a rated service life of approximately 20,000 hours. Today, a replacement F32T8 contains as little as 1.7 mg and lasts up to 42,000 hours (e.g., http://www.nam.lighting.philips.com/us/ecatalog/catalogs/p-5569.pdf).

Older T12 lighting is being gradually phased out, but according to a recent article in LD+A, there are an estimated 500 million T12 lamps still in operation within the United States alone. The good news is that these lamps will no longer be manufactured or imported for sale as at July 1, 2012, so their days are numbered. Our firm, like many others, recycles every T12 lamp we remove from service and the Hg that is recovered can be reused to produce three, four or more T8s.

In addition to the Hg that's physically contained inside these lamps, converting from T12 to T8 will dramatically reduce the amount of Hg that is released into our environment through the burning of coal. For example, based on Nova Scotia Power's current generation mix, converting just ONE 4-lamp T12 troffer to T8 will prevent the release of some 47 mg of Hg over the life of the replacement lamps.

Edit #1: Seems I was a bit too conservative in my estimate of Hg content. According to the Philips brochure linked above, the average 4 ft. T12 manufactured in 1994 contained 22.9 mg of Hg (in years prior to this, the amount would have been presumably much higher as the industry has been steadily reducing its dousing for quite some time). It's also worth noting that Philip's Alto II lamps use 100 percent recycled/reclaimed mercury.

Edit #2: Yooza ! Seems I was even more shy of the mark than first thought. According to Osram Sylvania, the average 4 ft. lamp manufactured in 1990 contained an average of 43 mg.

Source: http://www.sylvania.com/cgi-bin/MsmGo.exe?grab_id=110&page_id=13894656&q...

Best hopes for more environmentally responsible firms like Philips (and Osram Sylvania)!



Your comments are always a joy to read!

-- Jon

Thanks, Jon. I'd like to thank you in return for the graphic presentations and analysis you've shared with us; they add considerable clarity and richness to this data and much added value to the conversation.


Toxicity, primarily. Mercury is also bad news in contact with aluminium, or even steel.

At one time I looked into using mercury ballast instead of lead ballast, as the density is higher and the ability to cold-pour would have been useful. Unfortunately it needed a ceramic receptacle. And it was going to violate MARPOL.

Does Honeywell still make the classic round thermostat? Each one of them has/had a glob of mercury in the switch bulb that tilts up and down to cycle the HVAC. They work great and basically never fail but I cringe to think of how many of those end up in landfills. If they were recycled the mercury would be easy to recover.

Hi Walt,

I have three of those Honeywell classic round thermostats in our home and each reportedly contains some 3,000 mg of Hg (see: http://www.purdue.edu/envirosoft/mercbuild/src/devicepage.htm). In hindsight, I should have installed electronic/programmable units as I can't guarantee they'll be properly disposed after this home changes hands.

Also, many older homes are fitted with light switches that contain Hg (they were popular years ago because they're completely silent). Apparently, each contain approximately 2,000 mg of Hg.

Addendum: To put this into context, a 20-watt Philips SLS Marathon CFL contains 2.64 mg of Hg, so the mercury found inside just one of these silent wall switches would roughly equal 750 of these CFLs and a Honeywell round thermostat would exceed 1,100.


Thanks Paul. I had forgotten about all those silent mercury switches out there, even more likely to be disposed of casually rather than recycled. Of course from a purely technical standpoint mercury is an ideal contacting medium because the contacting surface is always in flux and so no degradation from arcing or wear. Solid metal OTOH provides a fixed contact surface which is subject to wear and degradation over time. It is encouraging to learn of the extent to which modern fluorescent lighting has reduced mercury content as well as increased efficiency.

Re: Relax, there’s plenty of oil and gas (uptop)
March 14, 2010

But, one argument goes, the millions of new cars expected on Chinese and Indian roads over the next decades will mean soaring demand and prices for oil. Perhaps. . . Daniel Yergin, founder of CERA (Cambridge Energy Research Associates), is not convinced. Demand in rich countries fell in 2008 as oil prices soared and affected economic activity. In the US, daily oil consumption fell by two million barrels last year, though motoring only accounted for 15% of the fall and slower economic activity and flying for the rest. Meanwhile, the world looks increasingly awash with crude.

Capitalism's Amazing Resilience
November 1, 2004

Given these facts, where will oil prices be a year from now--$75 a barrel? $100? Wrong numbers, says Daniel Yergin. Wrong direction, too. Try $38. Yergin knows oil. . . Yergin is pretty clear about his predictions. He says oil demand will rise, yet prices will drop. How can this be?

Answer: capitalism's amazing resiliency. Oil prices rise--oilmen become innovative. They work, they invest, they put their heads to the task, they apply technology, and pretty soon they'll discover how to extract oil profitably from oil sand. Or open wells in deeper water. Or scour the planet for new sources using scanners thousands of miles in space. As Yergin reminds us, oil output is 60% higher today than it was in the 1970s. Not many sages from the 1970s would have bet their reputations on this development. The opposite sentiment prevailed back then; experts said the planet was running out of oil. Wrong.

Yergin says he's always asked when oil will run out for good. He shrugs. He's willing to say the world will need 40% more oil in 2025. Hard work and technology probably will find a way to meet the demand.

Incidentally, Yergin was dead wrong about the oil markets in late 2004. The price of oil went up to balance demand against flat to declining crude supply. But rest assured, "Yergin knows oil."

And Yergin's prediction--for a long term price ceiling of $38--was really remarkable. Based on 64 monthly data points, he nailed the price floor over this time period (11/04 to 2/10). The monthly spot price over the 64 month period ranged from a low of $39 in February, 2009 to a high of $134 in June, 2008, with a 64 month average price of $72, i.e., a little less than twice his predicted long term price:

In the US, daily oil consumption fell by two million barrels last year, though motoring only accounted for 15% of the fall and slower economic activity and flying for the rest.

Chris Nelder picked up on that theme a week or so ago and concluded that no economic recovery was possible given that we were "conserving oil" by shrinking our productive capacity. Awash in crude, indeed. Too bad we can't eat it.

We've seen businesses fail @ $30 a barrel, they couldn't make a profit unless oil cost less than $20. These were the most vulnerable: heavy, energy dependent manufacturing industries. The high worker pay plus higher aggregate energy costs ruined these companies' bottom line. While their input costs rose their returns declined as higher prices constrained sales volume; they sold at higher prices but lost money on declining sales. Result: factories closed and jobs sent to China and Mexico.

At $40 a barrel, businesses that couldn't make a profit unless oil cost less than $35 failed. These were businesses that had widespread customer bases such as light industry and real estate developers. Those who didn't flat out fail began to rely on credit as a substitute for top line returns. Again, input costs rose while returns declined as higher prices throttled sales volume; companies sold at higher prices but lost money on declining sales volume.

At $50 a barrel, the next level of vulnerable businesses failed. Now, house prices and other bits of exurbia were coming under price and interest rate pressure. The higher money cost plus higher aggregate energy costs rose while returns declined as higher prices throttled sales volume; companies sold at higher prices but margins shrank on declining sales volume.

At $60 a barrel, business failure had invaded the securitization markets.

At $80 a barrel the refining industry is now facing higher input costs while the increase is constraining overall demand. This time it is high sunk capital costs to expand capacity and accommodate increasingly sour feed-stocks added to increased energy costs themselves are ruining the refining industry's bottom line.

In every case the dynamic has been the same; increased costs destroying an industry segment profit margin as the cost to end users destroys demand and the input costs overtake cash flows.

Gasoline refining lacks its spark, for now

A few more refinery closings and there is going to be a real problem.

A nice summary Steve. oddly enough you and add the oil/NG industry to the group damaged by $100+ oil. Counterintuitive I know but the dynamics were there: "increased costs destroying an industry segment profit margin as the cost to end users destroys demand and the input costs overtake cash flows." As prices rose so did activity. This led to a very rapid inflation in leasing, drilling and completion costs. Consider the fate of Devon. During the summer of ‘08 they were leasing every drill rig available for their shale gas play regardless of the costs. Just 6 months later, with NG prices falling, they pay a $40 million penalty to drop 14 of the 18 rigs they had in the SG play. A few days ago they announced the sale of their Deep Water GOM and Brazil for $7 billion cash. Their future is unknown but I won’t be surprised to see them absorbed by another company within the year. Same thing is happening throughout the industry: Schlumberger acquiring Smith Industries. Most don’t realize but this is a huge consolidation. Don’t have the numbers but unemployment in the oil patch has been every significant. This isn’t a unique event. The oil boom of the late 70’s led to a boom in drilling. The subsequent price collapse and bust destroyed a very big segment of the industry.

This dynamic will have an impact as the effects of PO become more significant. A common assumption is that increasing prices will again spur more oil/NG development. Granted we could never drill ourselves out of PO but the industry is a major employer and source of tax revenue. We might not see an increase in activity with rising prices as we’ve seen in past periods. During recent time we’ve seen oil/NG prices more then adequate to spur conventional oil/NG development but it didn’t happen to degree it should have IMHO. This may be due to a combination of restricted capital availability and the very recent memory of huge losses suffered as the3 cycle swung back.

Thanks for the perspective.

This is all so much propaganda. In a functioning society, guys like Yergin would be laughed off and would have to find a job in the circus.

I don't wish to sound too paranoid, but I sense things are starting to loosen up a bit. The maintream publications are getting more brazen with their BS, while people on the street fill up the tank and see the bill for themselves. The disconnect is surreal. Tread carefully and best of luck.

I don't wish to sound too paranoid, but I sense things are starting to loosen up a bit. The maintream publications are getting more brazen with their BS, while people on the street fill up the tank and see the bill for themselves. The disconnect is surreal.

Yes. To correct anyone because they just plain got it wrong is considered to be elitist paternalism. They are instantly voted out of the debate for poor manners. So the people are becoming gloriously disconnected from truth. Especially with regards to any of the limits togrowth issues, all sorts of bizzare things like abiotic oil are being pushed. Its all political, any acknowledgement of the possibility of peak anything is assumed to help the pinko-liberal commies, and that just can't be permitted.

WT: Interesting that the "Relax" article was written by a guy named Jim Jones. He's definitely drinking the CERA Kool-Aid on this one.

And Yerginites, true believers in the Fantasy Island myth of non-depleting oil fields, will probably have, at least financially, the same reaction to the Kool-Aid that the unfortunate residents of Jonestown had.

and yet MSM keeps turning to yergin for predictions and forcasts.

Anybody hear David Brooks on NPR last week?
He was telling Washington to remember Wall Street, 'Where the smart people are..'

I'm getting ready to trade my pledge for a sledge.

wt, I find the most fascinating aspect of Yergin to be his moniker amongst the media top end publications, i.e. "The Most Knowledgable man about oil." That quote was not in that article, but I have seen words to that effect numerous times. Somehow they picked Yergin of all people for that title. I suppose he keeps the BAU crowd filled with hope for the same old stuff at a reasonable price, ad infinitum, and that has value to their wishful readers.

Yergin saying US oil demand dropped 2 million barrels last year is factually incorrect. It did drop about 2 million barrels from late summer 2007 until about late 2009. In recent weeks, the demand trends is decidely upward - so it appears the US oil demand downturn is finished for now.

While some say an $80 oil price is the highest it can go without pushing the US economy into recession, I think a price of $90 may be closer to a tipping point - and it may have to reach $100 to have a significant effect of gasoline demand.

But I do agree that US demand will be dropping later on at the same time Chindia will continue to demand more. And with their population about 8 or 9 times larger, a small drop in the US will be more than overcome by those countries.

Disagree on 90.

I've seen no convincing evidence to suggest that there is a top price for oil.
The crash in prices accepted.

I've seen plenty that suggests that the crash in prices was a very interesting event with a complex set of causes that had little to do with fundamental changes in demand.

A substantial amount of demand was deferred by the credit shock. We certainly saw a lot of valid and real economic activity that was viable simply stop because of problems in the financial world. The net result is the entire world basically took at least 1-2 days off of work. Of course this did not slow oil production and this breather if you will caused by the sharp onset of the credit crisis allowed a build in oil.

There is a lot more to it than that with the hurricanes also playing a big role but the point is that the shock itself along with the hurricanes resulted in deferred demand. The collapse of housing construction resulted in some real demand loss.

Further collapses in construction will have little impact on demand as its already very low a 50% further drop does not change much. As long as the economy continues to function the chances of even that level of drop are low as people still have money and many will continue to build. Albeit probably at and ever slower rate but it tails out pretty much from here.

I'd argue another credit shock is unlikely simply because we could not survive it.
If or more correctly when it happens our financial system will simply collapse this time.

The hurricanes are a act of nature and who knows.

Thus none of the key contributions to the drop are likely again and further more outside of housing in general they resulted in deferred demand.

The fact that it was not a decline in demand but deferred demand is what has been steadily driving up oil prices as real demand that was deferred resurfaced.

Thus the price collapse is useless as some sort of model for future prices its a one time event and its not predictive. Certainly we could have another set of events result in a price collapse but if so they would have their own unique signature and reasons.

There is absolutely nothing preventing another set of events to come together and result in a collapse of oil prices and if so just like the last time it has no predictive value nor can it be predicted.

Whats important is its not correct to use such a set of conditions as predictive of some top price for oil thats simply wrong. As the oil price could rise to any level. Think about it this way consider the events and its obvious that they could all have happened with the price of oil at 50,80,100,150,200,250.
We could have easily gone to 200 or 250 who knows. But more important all the arguments confidently predicting some peak price for oil would have been equally valid at 50,60,80 etc. Thus they have zero predictive value. If they had happened with oil at say 60 then everyone would have been claiming 60 was the magic price point and oil can't go over that value.

Now with that said rising oil prices certainly put tremendous stress on the system and play a contributing role in being initiators if you will of a potential shock.
Just like stress on a fault line contributes to and eventual earthquake.

Sure as price rise we will eventually see some sort of earthquake if you will in our economy but it can be anything from a price collapse to war to a total collapse of the system itself. Thus although there is no real bound to oil prices there are plenty of other constraints that can lead to any number of outcomes.
This just says that BAU becomes impossible and the system will make a probably dramatic shift to operate a different way.

I'd argue that this time around its far more likely to see outright currency collapse, global economic collapse and or war than to see a simple price collapse for oil. This is because the conditions which allowed a sharp financial turmoil and resulting deepest recession no longer apply. We are past that stage and it won't be repeated.

As far as to what the future holds right now it seems clear that we will see rising prices for oil. Next if we assume this is true the next issue is how fast they increase. This will become clearer over the next couple of months obviously the rate of increase itself plays a huge role. Going to 120 in two months is not the same as say being at 90-110 by December. Regardless of how prices move my feeling is what they do over the next few months will be important.

And of course depending on how they move you then have to watch the response. Its not predictable and there are simply to many possibilities.

My opinion is that we will see prices begin to increase sharply and people will find that demand is surprisingly resilient up to higher prices then most will believe. However if so then the entire economy is effectively dead over the short to longer term as the reason it can go high is its effectively using up its reserves. This sets up the mother of all events and the price of oil will quickly be the least of our problems more likely the willingness to accept the currencies we use now for oil at all will be a problem as exporting countries become unwilling to even accept the fiat currencies at any price. Thus there is no dollar price for oil simply because no one will sell it to you for dollars.

If this is true then its a good chance you see war before our currencies are completely rejected.

Who knows but If I'm right then we are headed towards this sort of fundamental crisis not a simple shock.

"I've seen no convincing evidence to suggest that there is a top price for oil."

Surely you jest. $1,000 a barrel would not be a top price? Then how about $2,000 a barrel? There is always a top price for absolutely everything. Even if you must pay for life over death, the limit of your funds becomes the top price for life.

"I'd argue another credit shock is unlikely simply because we could not survive it.
If or more correctly when it happens our financial system will simply collapse this time."

That's what a credit shock could cause, the collapse of our financial system. Simply because we could not survive it is no guarantee that it could not happen.

I do however believe our economy could survive $90 oil. It would keep us in this deep recession but it would not likely tip us into a depression. I think the tipping point would be somewhere between $100 and $200 a barrel. A price that high would throw the economy into a much deeper recession that would, within a few months, tip us right into another Great Depression. But there would be no recovery from this one.

Ron P.

Why should there be a limit ?

As I mentioned before and as you state the highest price you can pay is your life however thats not the limit on the price. What if we end up with nuclear war or biological war whats the price of that I'd argue greater than the loss of human life alone. Next of course you have to consider not only potential lives lost now but the effects on future generations of humans and of course the planet itself depending on what lengths we go to.

Consider Iraq sure there has been tremendous loss of life to date but what are the difficult to measure effects from both previous war and political jocking for oil and current issues one the future. Indeed Iraq itself exists because of meddling in the region for oil in preceding decades.

If this concept of a top price for oil was true then we would not be in Iraq right now. If one spend even a few moments considering simply the cost of maintaining the military industrial complex required to partly ensure oil supplies then what are we paying right now. Far more than the nominal price on a barrel thats for sure.

So I stand by what I say there is no top price for oil only the collapse of our oil based civilization will stop our insatiable demand for oil at any price no matter how great.

Like any drug addict we can certainly kill ourselves in our attempt to fulfill our needs and also like any drug addict we will continue to do whatever it takes to meet our needs until we eventually die trying.

If there was some real limit then we have had plenty of opportunities to kick the oil addiction and plenty of warning signs that suggest it could well prove fatal we have not therefore we won't. You have 100 years of history backing this and thousands of years of previous history of how humans have acted in the face of dwindling resources suggesting that the chances of change are slim and the chances of collapse almost certain.

Against this we have a period of less than one year of falling prices and a huge number of simplistic crackpot theories explaining why oil prices cannot go higher.
Most variants of the peak demand argument.

And whats really funny is the holders of these theories are so certain of their validity they don't even feel the need to justify them if someone points out that history suggests otherwise.

While my own theory suggests that this fanatical blindness is indeed one of the main reasons why there is no limit to the price of oil. This practically mass delusion with I swear only a hand full of people capable of recognizing it for what it is happens to be one of the critical factors ensuring that oil prices can rise without limit or to the point that the entire system self destructs.

All it is is the junkie rationalizing why he can get just one more fix and theres sure to be more drugs he can afford.

I think the tipping point would be somewhere between $100 and $200 a barrel. A price that high would throw the economy into a much deeper recession that would, within a few months, tip us right into another Great Depression.

Prove it.

I'll make my argument.

Now again back to my own analysis I'd argue that as prices rose over 80 that recognition that the economy could no longer grow happened and as they rose higher this recognition turned to fear. This fear has nothing to do with oil itself but recognition that the massive amounts of outstanding debts we have would never be repayable in a high priced oil economy. Certain doom for our current banking system not necessarily unaffordable oil. Next the shutting down of Bear Stearns and Lehman was a deliberate act on the part of the US Government that obviously sparked the financial crisis. I'm not going to go into all the other facets but this alone is sufficient to question the chain of events. Regardless given the price of oil fell substantially as the world stood on the brink of collapse. One has to assume that a real oil surplus had to play a role in this also. Otherwise even this financial move could not have contained it. So during the price fall we have two reasonable facts. One that the financial crisis we deliberately started next that at the same time a physical oversupply of oil had to have developed or existed my full theory suggests that the required oil was probably stored up before the US made its financial move. The point is not the details of my theory but the claim its reasonable to assume that we managed to ensure the world was briefly well supplied with oil and that the initiation of the financial crisis was premeditated.

Now I suspect that although it was started on purpose that events did not unfold as expected I'd have to imagine that the original goal was simply to tame the economy tone it down a bit and let oil prices back off. I'd argue that initially one has to imagine that at worst most people expected this to simply slow the rate of growth not escalate as it did. I assume the reasoning was that the price was more than high enough for oil to spur further development and it was approaching dangerous levels.

Indeed we have seen the Saudi's repeatedly suggest that 70-80 was a fair price for oil and more than high enough to spur expansion of production and it fits well with everything I've seen concerning development costs. Fine I have no problem with that.

However I see no reason to not believe that the low prices where not the result of a chain of events which resulted in a brief surplus of oil. Indeed once oil hit its lows a massive contango existed and prices have risen steadily till now.

Certainly its fascinating and I have studied the time period extensively and come to my own conclusions. The most important to repeat myself is there is no indication that it was a fundamental event. Indeed the more I dug the more I become convinced it was and orchestrated event that got well out of hand.

In many ways a lot like the Japanese attack on Pearl Harbor. It succeeded far better than I suspect the Japanese thought it would and also history shows turned out to be a really really bad idea and it did not take long for this to become clear. And just like Pearl Harbor pundits claiming it was a fundamental event and ignoring the real basics will miss the truth.

Now although I did not give my full theory its rather obvious that underlying it are some fairly extraordinary claims. However my basic thesis is we are oil addicts and will do anything to keep our addiction going. If so then given this baseline the claims are not only not extraordinary they are fairly mild and represent the tip of the iceberg so to speak of what we could possibly do or more likely have already done if you bother to read up on some of the changes to US law.

Thus if I'm right the sad part is not that your wrong but that the horror's we will face in the future are difficult to imagine as we go to ever greater lengths to meet our addiction. But this utter revulsion is a common response when one views a drug addled addict mired in his own filth and delusion.

I hope I'm wrong but I see nothing that to justify a different conclusion.
Chilling yes but the human wreckage of addiction can readily be found on most downtown street corners the scale does not change the outcome.

Prove it.

Now you are just being silly. You know very well there is no way to prove an economic hypothesis before it happens. One can only rely on the logic of what is most likely to happen.

All but one of the recessions since the Great Depression has been brought on by high oil prices. And every incidence of very high oil prices has brought on a recession. Now you might insist that this was just a coincidence but most would not.

High oil prices are like a higher tax on everyone and every business. The higher this tax the the less they have to spend on other things and the greater the drag on the economy. There is a limit as to how high this tax can go before it drags the economy into a deep recession. No, I will not try to prove it, I will just insist that everyone use their common sense.

Ron Patterson

Careful, or you'll prove the case for lower taxation while you're at it.

High oil prices are like a higher tax on everyone and every business. The higher this tax the the less they have to spend on other things and the greater the drag on the economy.

Thats not the point the point is the claim that this leads to low oil prices or some sort of cap. I claim it does not. The impact of high oil prices is not uniform across industries regardless of the amount of oil they use. And obvious example is that the food industry and the nail salon industry both use differing amounts of oil however as oil prices increase one can expect the nail salon industry to take the brunt of the hit even though the food industry uses more oil.

If you read my scenarios they are full of contraction and destruction of equity and impoverishment however they are also simply suggesting that rising oil prices forces the economy steadily into a leaner and meaner form generally via reduction of debt almost universally via default on debt.

Its wrong to claim a general recession as the certain outcome in fact its fairly clear already that some business areas of suffered disproportionately to others. Housing and the Hotel industry are for example in the midst of a deep depression.

The key is to recognize that persistently high and rising oil prices do not trigger a traditional recession but trigger a economic evolution thats not captured with simple average like GDP.

Your wrong to call it a recession it is not is a fundamental and steady shift in the economy away from debt to increase daily cash flow. As oil prices increase certainly a lot of this cash flow will be diverted to oil but whats not used for oil food and shelter will be spent on a new mix of goods and services. Some might finally be saved as consumers loose access to all credit. The most wrenching aspect is of course the rejection of long term debt in the form of cars and homes.
But other than that its very much a shift in spending patterns. Some will benefit some will not. Exactly what consumers in general decide is important is unknown.

In general I expect them to keep the mobile phones, cars and cable tv and internet for example. Changes in housing I've discussed to the point it does not need repeating. Other shifts of interest is for example the rebound in restaurant traffic for example. I suspect to cheaper places and cheaper menu items but taking the family out to eat every now and then is a pleasure most can still afford and its one people will do. I've been unemployed for a while and I still take my kids to McDonalds certainly not as often but they enjoy it so I indulge them.

What I don't do is go to the high end restaurants that me and my wife like from time to time. I have no problem with this. I've been many times and don't need to go. My point is my own spending patterns have changed and will evolve overtime.
So far my oil usage has not changed one bit but I worked at home before. I.e I was already basically inelastic in my demand so I don't have any really easy way to conserve. I'm obviously using myself as a test subject but in general the evolution of my spending patterns fits well with the general situation. Massive pullback in large capitol outlays and retention of the smaller pleasures in life including driving.

Thus I stand by my claim you have proved nothing and your claims have no merit.


McDonald's has claimed its profit for the final quarter of 2009 jumped 23%.

Fourth-quarter overall profits for the US-based company were $1.22 billion, up from $985 million for the same period a year earlier.

If you would actually try and seriously back your theory then I argue the facts speak for themselves and the pattern of economic transition is clear. Its not a recession and has nothing to do with a recession.

I have very little disagreement with almost all your points. Gasoline demand is down only 2% from its 2007 peak despite massive unemployment - and is on its way back up again. I was just referring to the statements made by many here that oil over $80 more or less automatically results in a US recession. To clarify, I do not see the economic balance tip into recession again until closer to $100.

I just posted a few days ago that it was my conclusion that $100 is what Iraq needs to develop its oil fields - the fields which are the last shining hope in the darkening world of post peak oil.

Although I think the oil is on a fast trend upward, there is a possibility of some combination of a dollar and bond market crash almost any time that will lead to a temporary panic liquidation of most everything.

Having said that, it looks like the US government will simply guarantee everything in a more traditional financial crisis like we saw in 2008 - 2009, and next time, I expect oil to soar in a purely financial crisis. Eventually the dollar will no longer be the benchmark by which we measure oil, but that will take a few more years or so to develop.

At some point its difficult to predict as the system itself comes unhinged and its like trying to measure using a ruler that on fire.

I think we both see this. Now as far as a US recession goes as oil prices go over 100 almost certainly indeed outside of dubious government numbers its not clear we even left the last recession. Certainly the rate of economic contraction slowed but other than believing the Chinese and US governments there is little to indicate we have not steadily seen the overall economy drift downward.

Next I seriously question the magnitude of the drop in US consumption secondary measures such as VMT and rail and truck data do not point to as large a sustained drop. I don't like the averages because they are very misleading we had a very intense negative spike in demand not just in the US but world wide at the hight of the financial crises followed by a fairly robust rebound as deferred demand returned.

I don't agree with averaging across such and event. In any case if one takes the negative demand spike from financial crisis and hurricanes as a one time event that generally resulted in deferred demand then the real demand drop is probably much closer to 0.5-1% with the collapse of housing construction making up the bulk of this. As far as data goes the EIA data is in general in my opinion not to be trusted especially claimed storage levels. Refinery utilization for example is suspicious not in its rate of change but in its basic level because the amount of capacity thats realistically usable is very questionable.

Assuming we are significantly post peak for production it makes sense that we will have a large amount of refining capacity that will never be used simply because the oil is not there to refine. As far as I can tell refinery capacity is overstated for a long time after it peaks. Real capacity is actually much lower.
So although I don't disagree with the changes reported by the EIA in refining levels I think the precentage of true usable capacity is much higher closer to 85-90% with 5% of claimed refining capacity remaining permanently shut in.

This is capacity that will never make sense to fire up in a world of high oil prices and overcapacity and thin refining margins. Its at best theoretically available if that consisting of inefficient units that will never be turned back on.

So yes we still have a refining capacity surpluses and a healthy or unhealthy one depending on your view point but its not as dire as claimed. Recognize that as oil prices rose our refineries made significant investments in optimizing some of our capacity so your comparison basis is apples to oranges over the last few years. The introduction of ULSD also played a role in parts of our refining capacity receiving significant upgrades along with large gains in product efficiency and ability to produce the most valuable products diesel and gasoline at the expense of lesser products while some was relegated to effectively emergency status even though it was not officially dismantled. Its complex but well worth reviewing.

Next I see no intrinsic reason for imports to be falsified indeed it seems given that the loading information is fairly public I think it would be hard to hide the truth about imports. I could prove wrong but so far I've seen no real reason to distrust them.

Next as a check on oil consumption I prefer VMT as being far more reliable esp now given I suspect massive fraud in the EIA data overall to show a large storage level which is probably simply a fraud.

If we look at VMT then we see that indeed after a sharp drop fitting my spike argument its rebounded and remained surprisingly flat. This is exactly what I predicted would happen if we hit our inelastic demand levels. Now I also predicted we had hit them but that was far less assured better than and educated guess but far from certain.

Now that last little part is probably the most important part is if we are indeed at our inelastic levels then demand from here on out will be very price insensitive. This means we basically cannot use much less oil than we do today without falling not into a recession but into the start of a breakdown of the economy itself. Sure we can use less I'm not saying that I am saying that to use less parts of our economy will begin to outright fail. And obvious one is whatever is left of the leisure industry will collapse Las Vegas and all over the US. This failure on non-essential parts of the economy does not mean lower prices it simply means for demand to meet supply even as prices rise parts of the economy will collapse.

Now we can begin to discuss a recession or more correctly the continued crumbling of our economy and oil prices. If demand is indeed starting to hit its fundamental level and has become inelastic then other parts of the economy will have to give as oil prices rise. I mentioned one already which is the leisure industry. In general however as I've said a zillion times whats probably going to happen is consumers will choose to default on credit in order to continue their daily existance. Thus the next leg down is a massive increase in the rate of defaults on mortages and revolving credit card debt. Indeed despite the change in oil prices it seems that this trend barely had a blip in it. Thus all thats going to happen as oil prices increase is that this trend will simply accelerate even faster. With oil prices driving the default rates even higher.

One new trend that I've been predicting for a while is the real silent spring when house purchases effectively stop we are seeing initial signs that this may well indeed already be happening again rising oil prices will simply enforce this trend even more. As people start getting ever higher gasoline bills the will become reluctant and increasingly unable to purchase a house as they increasingly find it difficult to simply pay their current bills. Rising oil prices will steadily erode the amount of money people can spend on a mortgage even if they are crazy enough to still want to buy. As this happens they are forced to downsize their dreams and housing prices tend not to fall rapidly as its illiquid market thus people will see their dream home slip away as bill mount.

And here you get a bit of a paradox as of course these insane people that are eager to buy a home now will be the same ones that also believe that we are just seeing a price spike that will end soon. Both the reality of simply not having the cash flow as more goes to oil and the expectation that they are simply deferring the purchase of the dream home until the spike clears will serve to keep them from purchasing now. Of course if I'm right then its a game of receeding horizons with ever spiraling oil prices coupled with sticky housing prices ensuring that homes are unaffordable pretty much all the way down with people purchasing power pretty much always falling faster than home prices.

So overall our recession will intensify again I'd not call it a double dip simply a sort of change in slope. However from now on out the brunt of the losses will be increasingly focused in the debt economy and surplus based sectors.

This is obviously housing, hospitality, and my FIREM which adds the medical industry to the list. And I need a catchy one for this also state and local governments should reach their breaking point and be forced to layoff and cut back.

Mish Shedlock is of course all over the resulting friction with the Unions but misses that its just one part of a bigger picture. Its no small surprise that Universal Health Care is now on the agenda give we face the imminent collapse of our medical industry in the very near future. Its not about protecting people.

I don't see any magic price point as there was really no recovery all my predictions are already well established trends that have been visible for some time now. Oil prices should simply continue to rise and the "fluff" parts of our economy FIREM and Gov simply continue to contract as the consumer becomes increasingly worried about simply living day to day then eventually surviving.

Economically at least as far as oil is concerned I don't see any sharp breaking point really just a relentless squeeze. If I'm right about us being at inelastic demand levels for oil this will not only be relentless but also increasing at a ever more rapid rate.

Now looking outside of oil the Government has already made some almost insane moves to try to slow down this certain change I expect them to continue to do so with ever more desperate measures. Not only will this not solve the problem as our new society simply cannot afford the expense of FIREM and G it will make matters worse by slowing the rate of collapse and keeping oil demand artificially high putting even more pressure on oil prices.

Next of course this rapidly mounting government debt cannot continue forever and eventually it will force interest rates higher damaging the very industries they where trying to save in the first place. Such is the nature of a moral hazard once its embarked upon. Not only are we going to see rising interest rates but finally we should see the value of the dollar decline as recognition of the certain default or hyperinflation required to offset the debt spreads.

This monetary event itself forces oil and all commodities higher vs all fiat currencies as their future value becomes ever more doubtful.

Obviously this is a impossible situation its exact outcome is also impossible to predict however I seriously doubt it will be something as benign as a recession or depression. Thus everything I'm "predicting" is already in the past and its result is not what others are predicting because it does not end in a depression. We are thus already on the path to the eventual even more fatal result whatever it is and its a fairly smooth continuation of the current trends. I do expect things to accelerate i.e begin to unfold at a even faster pace but other than that no real changes until it finally simply explodes. Even the trend towards higher interest rates has shown some fairly signs of happening and its the last one that activates and its start is to me obvious.

The end of the world as we know it is now BAU as far as I can tell.

Do you have a time frame for these calamitous events?

A few years?

There does seem to be very little to be done.

Today`s newspaper had a map of all the department stores shutting down this year all over Japan. Most have existed since the 1970s or so. No big leap to realize they were built on cheap oil and they`ll shut down as the oil goes away. Yet the newspaper doesn`t talk about that. That would be scary. Readers are left with a vague sense of unease as financial problems seemingly grow more heads and multiply without explanation. But what about those of us who know what is at the root? Being gloomy won`t do. That would be poor sportsmanship. "Let`s not go there at least!" The store manager bows honorably when the shop closes for the last time, as the shutters come down with the "Thanks for 30 years!" sign. That is today`s cover photo on the Asahi Shimbun.

I think a lot of people all over the world will have to emulate this kind of attitude. What is left? What else is there?

We are being left with a lot of huge items of trash. There are so many abandoned buildings around that I can`t count them. What happens when the cars become trash? The roads? The factories?

Will people be able to manage this transition?

Do you have a time frame for these calamitous events?

A few years?

There does seem to be very little to be done.

Don't really know to be honest. At the end of the day the real issue becomes that the Government can print as much money as it wishes regardless of economic output. This is the nature of fiat currencies. Of course this leads if it continues to hyperinflation however Zimbabwe survived a long time under hyperinflation. Thus things can get really bad and on the brink of collapse for years then get worse.

However I don't see this is really viable for a country the size of the US even if we managed to come out ok for a bit we would definitely take out other countries and eventually this leads to war. In many ways not unlike the Great Depression where although things were bad in the US they were worse in other countries and eventually those problems spilled over. For the US the fate of Mexico probably has a sort of cap on how far we can go before things get very messy. How long does Mexico have tough to say already things are definitely falling apart its just a matter of time before the drug war gets outright political. And of course falling revenue from declining oil production and net export problems pretty much ensures there is basically no price of oil thats really going to save them given all the other issues.

So perhaps Mexico has at most five more years and we have say 2-3 after that before getting pulled in. One has to imagine that if Mexico destabilizes we will have issues ripple through central and South America. If one assumes a fairly weakend US then the additional strain of dealing with a growing regional conflict seems to ensure a final downward spiral.

Now thats sort of and estimate as to at what point the US will have problems as a cohesive political entity thus best guess is 8-10 years out perhaps 15 but at some point it becomes and event driven situation once all the pieces are in place for things to collapse almost random events determine the outcome. War could say start in Iran tomorrow for all we know or some where else for that matter. But the earliest I could see a general collapse is perhaps 2-3 years from now.

I'd argue what most people on this board care about is not when things really fall apart and obviously don't work anymore. What we care about ( well not me :) but most readers is when suburban lifestyles become untenable and the debt pyramid supporting suburbia collapses. Well thats already well underway in my opinion but the big shoe to drop is I think when its obvious that housing prices are in a freefall with no bottom in site. Assuming oil prices continue to rise at a similar rate to what they did last year going from 30-80 or so say a 2X increase then we should be seeing 100+ by the end of the year and certainly hitting previous highs if not surpassing them next year. Certainly I think it can go much faster but I'd argue that at the minimum a relentless increase at a rate similar to what we have already seen makes sense. And it fits well with the rate before the crash.

One has to think as we cross 100 and go higher that the duct tape holding suburbia together and suburban housing prices will fail and prices will again clearly head downwards. Ignoring oil and looking at shadow inventory issues endemic unemployment probably the start of increasing interest rates. And of course demand pulled forward by the housing credit. Potential for the stock market to at least start looking spooky etc. I'd argue that this spring is going to be a disaster.

If so then suburbia is probably dead within two years as there are simply way to many strikes against it. By dead I mean another 30% fall in home prices with no real change in the negative issues. New foreclosures will more than replace any cleared the price drop will encourage more walkaways. If you read the stats on who bought a home in 2008-2009 taking advantage of the tax credit about 50% of them where really not eligible to buy a home and effectively put zero down. Further price declines coupled with unemployment will certainly result in homes supposedly sold in 2008-2009 defaulting at rates that steadily approach ones sold earlier in the bubble.

CalculateRisk had some nice stats posted on this its subprime all over again. I'm sure more are out there I did not find what I was looking for in a quick google.

Probably conditions are already sufficient to ensure a sort of endless downward spiral for suburban home prices. If not then if I'm even close to right they will be fairly soon.

Now assuming by some miracle home sales are are least ok this spring and housing prices remain about where they are at then its just a waiting game to see what conditions are like next spring. I would be surprised to see the suburban home game make it through next spring but lets see what happens this spring.

In any case for your typical suburbanite lets assume I'm write and this spring is the silent spring with high oil prices 90+ and home sales at a standstill. People will start slashing prices but this does not really matter is there simply are not any buyers left.

If so and assuming oil prices continue to decline then suburbia will be in obvious and steep decline sometime this year to early next year. This of course will cause a lot of people that are holding homes waiting for prices to return to try and sale before its too late putting even more pressure on homes. Banks holding inventory will see new foreclosures rising and be forced to dump inventory simply to keep from being overwhelmed. At some point in this madness falling rents will squelch anyone looking to buy for cash flow and again every single buyer up to that point will be underwater.

You can see the problem as falling home values result in very few sales actually sticking for any length of time thus supposedly sold inventory returns to the market rentals or not as people unload.

Baby boomers forced into early retirments and looking at stinging losses on their investments are going to be trying to unload their second homes and primary homes and downsize. Perhaps doing that and looking for some sort of work instead of retirement. Regardless they are either not going to retire or if they do their job probably won't be filled. Many may be forced into looking for part time work.

Any one recently graduated from college or high school will have to compete against boomers and other older folks just looking for some job any job. This of course puts the kebosh on new household formation that can buy a entry level home drying up the first time home buyer market. And of course rising oil prices ensure disposable income for home purchases steadily decline.

I can continue forever thats not all the factors I assure you the list of factors that are weighing on home prices is long and the number of serious ones probably goes into the hundreds.

Obviously suburbanites deeply underwater on their homes are not going to be rushing out buying new cars on credit except perhaps a few that do it intentionally before defaulting on their home loans. So you might well see a sort of mini rebound in car sales as people planning on defaulting buy new cars. Also of course you will see them splurge and run up the credit cards as they prepare for bankruptcy.

My point is that one of the symptoms should be rising credit card purchases and perhaps a small surge in car sales but this is just a signal that a serious increase in strategic defaults and bankruptcy is on the way. Sort of a last party if you will. In any case overtime creditors will be forced to slash credit lines bringing this to and end.

Now with all that said at least for a while I suspect that most suburbanites will continue to live like they always have at least while the credit lasts shopping at the malls etc until their broke. What else are they going to do most don't have a lot of savings. Now generally once they are finally evicted most will choose either a much cheaper apt and or living with relatives this higher density of course ensures even more homes are left empty.

And at least for a bit thats pretty much it. Basically what happens is people simply stop buying new cars and houses for credit. Other purchases tail off at a much slower rate. If you think about it for many after they transition to cheaper living conditions anywhere from free with relatives or friends to cheap apts their cash flow levels actually improve esp if they also default on all debt and go bankrupt. Amazingly enough if you play with the math a bit for many the amount of free spending money actually increases even as they take lower paying jobs. Most had little money left after paying for the cars and houses and associated costs so even as the lose access to credit cards the overall cash flow tends to increase.

This is important because obviously it ensures that the amount they can spend on gasoline does not change or with a change in spending habits on smaller stuff it goes up.

Now of course most of the junk the bought was for the house and most of it made in China and most of it really uneeded junk anyway so as gasoline prices rise it has surprisingly little effect on people who have defaulted. They give up on the chinese junk but it effects few Americans as its all imports anyway.

I would not call this a recovery but recognize that there is a sort of false dawn period between when housing is obviously collapsing and when American start having problems living day to day after defaulting on all their debt. In a very real sense they are monetizing all the equity that was supposedly in homes by choosing to try and keep daily lifestyles closer to the middle class level while giving up on home ownership. This of course implied that gasoline usage remains sticky and thus prices rising as driving your own car becomes one of the last symbols of the American Dream.

Thus even as suburban housing prices and sales continue to collapse and eventually new car purchases we should have and interm semi stable period with continued rising oil prices. I'd argue at least for one if not two years.

This goes until it too fails and buying necessities becomes problematic. Rising gasoline prices finally force people towards public transport however good chance this will also be having problems at this point.

I'd argue that this represents the end of suburbia and the associated middle class. So I see that being pretty much dead within 2-3 years.

Finally at this point social strife within the US itself should become problematic local problems i.e Mexico should be increasing. One has to imagine the US probably has printed a few more trillion dollars and now our ability to pay is openly questioned. Thus for America it seems the real end count probably starts in a couple of years or so. Exact timing is difficult to decided. Obviously at some point along this path one would expect the stock market to steadily weaken if not crash. I happen to think it will hang in there for a surprisingly long time.

The banks are pretty much backstopped government largess although it won't help will probably make the balance sheets of quite a few companies look good. One has to think that the dollar will weaken a bit helping exports and the trade imbalance with China will tighten etc. My point is outside of the death of housing itself and at this point its really resale of existing homes which does not add much to the economy a lot of other economic indicators are not going to look all that bleak for quite a while even as the intrinsics collapse.

Again a lot of this is not really predictions if you dig around you will see evidence that most of this seeems to be already happening its really simply a matter of it progressing till the situation becomes clearer.

Thus pretty much no matter how you do the math it seems that 2-3 years are left before the middle class is obviously dead and perhaps 2-3 more before it gets hard to even live much less play at some hollowed out variant of the American Dream.
Some point after that say 6-10 years from now but really just about anytime along the path the house of cards will come tumbling down.

I think given how things are now even without sharply rising oil prices its gonna happen even if they hover for years around current prices with everything else its enough. About the only thing that could really save us is some sort of massive oil discovery leading to and influx of millions of barrels of oil say another Saudi Arabia.

Of course given this one finds it interesting that thats exactly the claim thats being made about Iraq that it will come on within the time frame I've outlined and grow quickly to rival Saudi Arabia. This would of course turn oil prices downwards at least back to say 50 a barrel if not lower. The boost to cash flow would be a nice injection. 2-3 years from now houses would be cheap people would have cash and start buying again prices would stabilize perhaps somewhere at 1990's prices if not lower and we have boom times again. One has to think that all this government spending would at that point be highly inflationary so interest rates would soar. But houses would be so cheap that even 15% interest rates won't hurt since people would have money. Inflation would be brought under control. And interest rates would peak say perhaps at 15% perhaps a bit lower and start falling again. This leads to many decades of a bull market in housing. Extreme conservation via mandated EV's and high fuel efficiency standards would ensure that the now growing consumer class buys efficient cars despite falling oil prices.

Debt again begins to grow the can has been kicked out decades into the future and everyone is happy.

Don't think so but there is a very very good reason for the outrageous claims about Iraq as its the only way out and I'm sure I'm not the only one thats figured it out. However given when they where made if Iraq's not pumping 6mbd in three years and obviously on its way towards 12 well then its still party over.

Anyway the next 3-4 months are going to be very very important and I think will tell us a lot about our future lets see what happens.

memmel wrote regarding Iraq:

...Iraq that it will come on within the time frame I've outlined and grow quickly to rival Saudi Arabia. This would of course turn oil prices downwards at least back to say 50 a barrel if not lower.

memmel, one have to think what happens then with deep offshore and tarsands oil projects that need at least $60 oilprices.
If Iraq produces 6 mbod within 3 years and
bring down oilprices at $50 (which I doubt) the net gain soon will not be 6 mbod anymore. Maybe 3-4 mbd. What counts most of course is oil-exports and for ELM one has to know that Iraq and KSA have the highest fertility rate in the Middle-East region (close to 4).

Well to be clear Iraq is almost pure propaganda not that there are not a few large fields there but it makes no material difference. I'd be surprised to see them much higher than 3mbd over the next 3-5 years at best 4mbd. By the time they actually increase production declines elsewhere in the world will wipe out any growth here by a huge margin. It would be interesting to get a export land projection. However obviously to even get the above Iraq would have to stabilize dramatically this ensures their internal consumption will go up a lot. Net exports would thus be a lot lower I suspect at best a 500kbd net gain in exports against and overall decline in net exports over the same period of what 10mbd or so ?

Practically irrelevant IMHO.

indeed memmel, that's why I wrote 'if'. If Iraq could bring oilprices down to $50 by producing 6 mbd in a few years, then a lot of 'megaprojects' would be cancelled.

Re: Relax, there´s plenty of oil

"CERAWeek speakers said refining margins are close to zero and there is a vast surplus of refined product available from new Asian and mid-East refineries.

This has persuaded Shell and Total to sell or close refineries."

Shifting refinery capazity is nothing but the institutionalization of WT´s ELM 2.0.
So <> is quite correct, but should be published in China Daily

There seems to be a meme that natural resources are just "commodities" and they are worthless by themselves and that only brands and technology are the real deal.

If what Mr.Yergin says is true we all ought to have a few tonnes of gold in our homes. After all what is true for oil ought to be true for gold. (Weight for weight gold is some 75000 times as expensive as oil). In fact gold ought to be cheaper than even iron in the long run given how miners would have invested in new technology including alchemy. Gold that was uneconomical to mine at $100/oz should now just be oozing out of the ground below Mr.Yergin's feet. There ought to be no such thing as a precious metal.

Why has that not happened?


from the top article:
"Growth in China and India are driving crude prices higher. But demand in the U.S. is weak and so you can't pass the higher costs along."

Isn't this exactly as WT's Export Model partII predicts? That the marginal value of a barrel of oil is much higher in the developing world where it is more directly turned into GDP and exports, than in the US where maybe it is used to get to the mini-mart for a pack of smokes, or to get to work at some dead-end job that barely pays for child care, and doesn't pay at all if the cost of gas goes up?

...the marginal value of a barrel of oil is much higher in the developing world where it is more directly turned into GDP and exports, than in the US where maybe it is used to get to the mini-mart for a pack of smokes...

This is a point about which I'm confused. I'm reading Jeff Rubin's book (Why Your World...) and he states that "energy use per unit of GDP in the Chinese economy is four times that of the US economy. That is, it takes four times as much energy to make a dollar of GDP there as it does in the US." (page 163, paragraph 3).

The implications of this are considerable as Rubin contends that it is this energy inefficiency which will eventually drive manufacturing jobs back to North America (i.e. as the price of energy rises, our energy efficiency will trump Asia's cheap labor advantage).

My gut says that Rubin fundamentally misses the mark, here.

I read Rubin's book and I have no doubt that he has good intentions, but I find most of his analyses overly simplistic. For example, he calls for a carbon tax, which may be a good idea, without considering the political difficulties of such. He seems to completely discount the cost advantage of a seemingly infinite supply of cheap labor in a command economy such as China.
You see, the deeper down the pool one looks, the scarier it is. I think Jeff is a relative newcomer and hasn't really looked that far down.

PeakOil Tarzan -

I strongly suspect that this supposedly large different in energy use per unit of GDP between the US and China is more the result of a corresponding difference in the composition of the two GDPs rather than strictly a matter of energy inefficiency.

If China's GDP contains a much higher fraction of manufacturing (particularly heavy manufacturing) than that of the US, and if the US GDP contains an increasingly smaller component of manufacturing and an increasingly larger component of 'service' related entities, then China's energy/GSP ratio would necessarily have to much larger. No way around it. As an example, China's steel production is something like three or four times that of the US (if I recall correctly), and primary steel production is a very energy-intensive industry.

I really don't think that energy inefficiency has all much to do with it. If we all of a sudden moved back to the US all of the manufacturing of goods now made in China and imported to the US, then our own energy/GDP ratio would increase markedly. Perhaps not as much as a factor of four, but still quite a bit.

The Chinese are nothing if not pragmatic. As energy costs rise, you can be sure that they will replace older energy-inefficient manufacturing operations with more energy-efficient ones. So, I really find it hard to be bullish on the prospect of many manufacturing jobs returning to the US as a direct result of higher energy prices.

joule, Sachs, ET; I'm inclined to agree with you. As has been pointed out, by importing cheap Asian goods, the US has effectively off-shored its energy consumption (and carbon emissions). A service-sector economy may be less energy intensive but it is certainly joined at the hip to the manufacturing sector, whether that manufacturing occurs Stateside or in Asia.

J. Rubin advocates placing a carbon tariff on Chinese imports. That, in combination with the increased cost of transport from Asia will, he claims, level the field and will give domestic producers (who are, in Rubin's view, much more efficient users of energy) a leg up on foreign competition. But how would the Chinese act to a sudden impostion of, say, a 20% tariff on their exports? Would they not likely retaliate in some way (surely, they would)? And in the short run, this would simply drive up the cost of living for Americans. So, Rubin's prescription, it seems, is a bit too tidy.

So we are all members of the Rubin book club here.

I'm inclined to agree with most of his conclusions. For much of the modern manufacturing, where it is highly mechanised, the cheap labour advantage diminishes. American steel can be made as cheaply as Chinese steel. Plus, much of it can be made from scrap, of which there are HUGE amounts in the US, but china must smelt from ore. Aluminium production is cheaper in Canada (hydro electric) than China - (coal powered). Add in a carbon tax and the differrence gets even greater.

Things like electronics will continue to be made there of course, as these are more labour intensive.

BUt if you take a close look at what gets imported from China, there are a lot of non-necessary items (e.g. consumer electronics). SO adding a carbon tax will raise prices in the short term, but the things you REALLy need to live, food, housing, fuel, health care, cellphone/internet plan, will change much, as none of them come from China, and (except fuel) energy is not a big component of their cost.

So those "discretionary" items will increase in price a bit, which should be offset by a carbon tax "dividend", or bay raising the income tax threshold, or something.

His example of furniture made there, from wood imported from Canada, and then shipped back is a good one. That is a lot of carbon per $ value of cabinet.

But best of all, a carbon tax, combined with country of origin labelling for everything, will highlight to people where stuff comes from, and how much energy was used to make and ship it. It then becomes like the mileage readout on a car computer - once you can see the number, you start to change your habits to lower it - right now, most people have no idea. That, people being "carbon aware", would, I think, be the single biggest benefit of a carbon tax. It doesn't have to be very high to work, it just has to be there to make a difference.

On a more fundamental level, consider what we currently do and don;t tax. We tax labour very heavily (income tax) and energy very lightly, or not at all. Not suprisingly, every business has used energy to replace labour whenever possible (though not for that reason alone). A reversal of tax policy, where we tax energy and not labour (or less on labour) would have very interesting results.

..the marginal value of a barrel of oil is much higher in the developing world where it is more directly turned into GDP and exports, than in the US where maybe it is used to get to the mini-mart for a pack of smokes...

This is a point about which I'm confused. I'm reading Jeff Rubin's book (Why Your World...) and he states that "energy use per unit of GDP in the Chinese economy is four times that of the US economy. That is, it takes four times as much energy to make a dollar of GDP there as it does in the US." (page 163, paragraph 3).

Maybe this is one of those counter-intuitive measures that would occur when comparing vastly different economies. I can see millions of Chinese traveling to their factory jobs by walking, riding a bicycle or riding a donkey--contributing virtually nothing to the GDP and offsetting the inefficiency of the factory they are working in. Then there are probably huge parts of Chinese and Indian societies that are still outside the monetary economy. Altogether, I suspect that GDP, a crude measure at best in Western economies, is much less useful or indicative of real economic activity in the 'developing' world.

If net 3mm lvs leave US roads this year, that will nearly cancel expected Chinese gasoline consumption increase. That doesn't include the effect of 2010 new sales mpg vs existing fleet departures. Then there is the cafe rampup to 2016,combined with fleet shrinkage of several million per year.
The north american gas tank has great potential as a source of new product.

So we won't worry about refiners going bankrupt. We'll just import all of our "product".

I'm with joule on this one.

The question is how much of China's GDP is made up of service jobs vs agriculture, mining or manufacturing and what the balance is for the US or other OECD countries? I'm sure if you measure the contribution of the US financial industry to the GDP you will come up with some pretty impressive numbers. The financial service industry by it's very nature uses hardly any energy compared to say aluminum production so it's energy use per unit GDP is probably several orders of magnitude less. Unless the energy use per unit of GDP is broken down by industry I think it is a pretty useless metric. The question is, does Chinese steel manufacturing require four times as much energy per unit GDP than US steel manufacturing? I really doubt that. A quick google search brought up this page:


In 2007, 1.2 percent of total US GDP was contributed by agricultural sector. Industrial sector made up 19.8 percent of US GDP in 2007. Services sector made up 79 percent of US GDP in that same period.

and the corresponding page for China


Eleven percent of China GDP comprises agricultural sector and 48.6 percent is made up by industrial sector. 40.1 percent of China GDP is made up by services sector in China. Industrial sector that is owned by government of China contributes 40 percent of China's GDP.

Although the above statistics shed some light on the matter, the data still does not give energy use per unit GDP by sector. Until I see data suggesting otherwise, I remain unconvinced that there is any meaningful energy efficiency advantage from manufacturing in the US. ELM 2.0 is still a very distinct possibility.

Alan from the islands

Yesterday there was an impressive document on BBC2. I videotaped it but a digital version is more difficult.
There was a companion article a couple days before
Detroit: the last days
Detroit is a city in terminal decline. When film director Julien Temple arrived in town, he was shocked by what he found

The drive along eerily empty ghost freeways into the ruins of inner-city Detroit is an Alice-like journey into a severely dystopian future. Passing the giant rubber tyre that dwarfs the nonexistent traffic in ironic testament to the busted hubris of Motown's auto-makers, the city's ripped backside begins to glide past outside the windows.
Like The Passenger, it's hard to believe what we're seeing. The vast, rusting hulks of abandoned car plants, (some of the largest structures ever built and far too expensive to pull down), beached amid a shining sea of grass. The blackened corpses of hundreds of burned-out houses, pulled back to earth by the green tentacles of nature. Only the drunken rows of telegraph poles marching away across acres of wildflowers and prairie give any clue as to where teeming city streets might once have been.

At the GM plant in Zaragoza, Spain, the unions have accepted a raise in salaries of 1% -way below inflation- and severe job cuts.
SEAT-VW lost 339 million euros last year.
That is with a cash-por-clunquers program still going on in Spain. I figure when it stops they won't sell much.

Last days. Not only for Detroit.

I will be making a presentation to the economics club of a local prestigious boarding school. The title is going to be "Hubbert v. Kurzweil". I have about 15 minutes allocated to the Hubbert part. Does anyone have any powerpoint slides they could share that would make the case for peak oil?

First thing, show that you are different by ditching the PowerPoint.

Fight the Power(.)

Lots of slides available at ASPO-USA from the many conferences. For some reason, the 2009 pages are experiencing a problem loading, but the 2008 directory is here.

How about this one:

Point to the North Sea curve and emphasize that we are with out fronts (not backs) pointed to the edge of the continental cliff. Like lemmings on the ledge.

The Kurzweil part should be more entertaining. How about "Kurzweil thinks his personal destiny is to be uploaded into an immortal robot body. This is his Plan A. Any questions?"

That's hilarious!

Perhaps you could suggest a better alternative? I am looking for a futurist who can put together a positive scenario that stretches the imagination on the upside. Kurzweil came to mind.

I will be making a presentation to the economics club of a local prestigious boarding school. The title is going to be "Hubbert v. Kurzweil". I have about 15 minutes allocated to the Hubbert part. Does anyone have any powerpoint slides they could share that would make the case for peak oil?

Hi npdx. Evolutionary psychology and peak oil: A Malthusian inspired "heads up" for humanity. by Dr. Michael E. Mills, should be just the ticket;


I initially developed this webpage for my students, especially those in
my Ecological Psychology course. The goal was to provide a succinct
overview peak oil, and "heads up" about the social and personal challenges
we will need to confront in the near future.

This web page is divided into the following topics, which will be explored
in turn:

Ecological overshoot as a general problem in population biology.
The possibility of avoiding a human Mathusian collapse via
a Kurzweillian "techno-fix"
Peak oil as a an example of human ecological overshoot.
Possible economic and social scenarios following peak oil.
Contributions by psychological science, and evolutionary
psychology in particular, that may help to mitigate these problems.

The US oil infrastructure faces three problems - declining oil reserves and the fact many have been laid off from the industry, and the fact the infrastructure is aging. I don't know what the situation is like in Europe.

I would add that demand for that infrastructure's products is declining, which is causing refiners to end operations. So, the physical plant is not only aging, it's shrinking too. And remember, there are no nationalized refineries in the USA, so operators are free to close and move operations elsewhere in pursuit of profits. The USA may have a Strategic Petroleum Reserve, but without refineries, that oil is useless.

Daniel Yergin ?

The guy in this video ?


Energy Future : Report of the Energy Project at the Harvard Business School, edited by Robert Stobaugh and Daniel Yergin

The above book available in FULL as a PDF download at this link (no fee) :


An interesting read!

edit : I just downloaded it now, haven't finished reading it, but very interesting and looks like it really truthfully describes the issues.

China, Not UN, Controls Supply for CO2 Offsets, Stanford Says

I think we should ask
1) is the CDM offset principle legit?
2) if so is it measured correctly?

The idea is that entitled emissions that are replaced by wind energy in China can be sold as an offset for coal burning in Europe. First of all the question of entitled emissions is subjective as the UN agency is struggling with. Double the entitlement double the offset. Secondly what if backup power sources like coal and gas keep spinning away ready for when the wind dies? Does that standby CO2 get netted out? In other words an offset to the offset.

Note the involvement of banks in these deals. I smell a rat. To keep it simple I suggest we forget carbon credits and focus on carbon debits ie burn less coal. This could be one of the biggest scams around.

Boof,all emissions trading is a scam and designed solely to enable BAU to continue and for various smart operators to make a squillion dollars.

It is NOT designed to reduce emissions and that has been obvious from the very beginning to anybody prepared to reason from first principles and not blinded by the current conventional thinking.

The NY Times has another segment of their "The New Poor" series:

In Hard Times, Lured Into Trade School and Debt

At institutions that train students for careers in areas like health care, computers and food service, enrollments are soaring as people anxious about weak job prospects borrow aggressively to pay tuition that can exceed $30,000 a year.

But the profits have come at substantial taxpayer expense while often delivering dubious benefits to students, according to academics and advocates for greater oversight of financial aid. Critics say many schools exaggerate the value of their degree programs, selling young people on dreams of middle-class wages while setting them up for default on untenable debts, low-wage work and a struggle to avoid poverty. And the schools are harvesting growing federal student aid dollars, including Pell grants awarded to low-income students.

For the vast majority of career programs that proprietary schools offer, there are community colleges that offer programs that are just as good for a small fraction of the cost. What the community colleges don't have are slick marketing and hihg-pressure salespeople.

And a significant stigma that they can't market their way out of.

Here there is a solid community college that feeds into state colleges. Nobody will ever ask "where did you take your first two years" when they see your four-year degree. The 2-year comm college is currently FREE to residents on certain course paths.

Certainly there are diploma mills that deserve all the stigma they collect. Community colleges, not necessarily.

The 2-year comm college is currently FREE to residents on certain course paths.

what state is that ?

It's not like these trade schools have a better reputation. Some of them are only a step above diploma mills.

What the community colleges don't have are slick marketing and high-pressure salespeople.

Boy you got that one hammered square onto the nails' head!

Turns out that is just half the story.

Recently, I had a chance to glimpse into one of these private "career school" operations.

It stunned me to learn that the high pressure sales people; the ones who talk $30K apiece out of gullible and desperate wannabe students, are the most prized employees of the organization.

What students are not told is that the school will do its darnedest to flunk out all but the top 25% of the incoming students. The school is not there to help the students but rather to take the money and then fail most of the students out so that they don't graduate.

The school wins in three ways with this strategy:

1) Their exit success statistics go up. Consider this ad: 50% of our 'graduating' students got jobs (Note the trick word is 'graduating' --if you don't graduate it's you own damn fault, or so you think. Actually they intended for you not to graduate in the first place.)

2) Pushing students out before they graduate makes room for more new students to enter and use the limited campus facilities.

3) The school keeps all of the $30K paid up front even though the student doesn't graduate and doesn't get the promised education.

Now, of course, community colleges don't do that kind of thing. That's because their goal is to educate the students and push the students towards graduation as opposed to towards failing.

The amazing thing is that the government knows about all this and yet does nothing. (Well, not exactly nothing. Local government takes it's share in taxes from the 'profits' generated by these 'enterprising' private schools.)

Regulators accused of lax oversight at LA oilfield

"LOS ANGELES – This sprawling metropolis is built atop one of the richest oil basins in the world. Wells dot the city landscape, some hidden behind hollow building facades much like a Hollywood movie set, or, in the case of Beverly Hills High School, encased in a tower painted with flowers.

For decades, it had been assumed that one oil field, the historic Inglewood, just minutes from the downtown skyline, would eventually play out, that the nodding pumpjacks would give way to an elaborately planned, two square-mile park.

But in 2004 Houston-based Plains Exploration & Production Co., which had acquired the drilling rights from Chevron, used new technology to discover that only 35 percent of the reserves had been pumped out and began to drill the first of what is expected to become 600 new wells over the next 20 years. This renewed push for oil was helped along by county and state regulators who determined that the additional wells didn't require any environmental review.

One state engineer charged with granting new permits apparently saw himself as more of a cheerleader for Plains than an impartial regulator, according to e-mails acquired by The Associated Press and an investigation by the state auditor. Not only did he own stock in the company whose wells he was approving, he solicited donations from the oil companies he regulated for his wife's nonprofit.........."


Some have suggested a troubling trend that AGW at its core is turning into a conspiracy theory, with the scientist conspirators all in collusion with the intent to do something nefarious, perhaps to stop capitalism.


This tend appears to have gained traction as AGW denialism has started to become mainstream. According to the argument, when some idea becomes mainstream, the alternative theories turn into conspiracy theories.

Interesting to consider that PO could similarly become a conspiracy theory (if it hasn't started already). I would imagine that the conspiracy that the skeptics would need to dream up is that all the oil depletion analysts want to rid the world of cars.

Peak oil is a certainty, but AGW is an unknown quantity when one considers climate variations. A cold snap could erase all the effects of AGW and then some, and then fossil fuel depletion would increase rapidly. Just how close are we to the end of the interglacial ?

That's not the point. The point is why so many people would consider that the AGW research is some sort of conspiracy. Who exactly is involved in this conspiracy and why would they take such a circuitous route to meet their objectives?

why would they take such a circuitous route to meet their objectives?

WHT, one of the problems we science and engineering types often have is political tone-deafness, often accompanied by a sort of functional aphasia. So at the risk of appearing to endorse some things by explaining them, let's lay it out:

1. Most climate scientists are part of academia. Academia is also the source of many pronouncements about how unfair it is that certain countries are prosperous while others are, well, abject failures. (We see plenty of comments on TOD that are well-aligned with that attitude.) The climate remedies and the "unfairness" remedies give the appearance of at least partial alignment: punish the successful by impoverishing them. This gives guilt by association.

2. People like James Hansen have become quite shrill and seem to have converted from science to advocacy. So shrill that it's not unreasonable to think that if their proposals were implemented as presented, then large parts of the economy would be severely curtailed within a timeframe that would concern a lot of people. This aligns very nicely indeed with the picture in (1).

3. "Conspiracy" is a straw-man that keeps popping up because it's an easy shorthand that everyone understands. It's not needed, all it really takes is alignment. Alignment can be created in many ways: for example, a cultivated messiah complex is more than enough. Consider all the horsepucky about "recovered memories" that supported the day-care witch trials of the 1990s. It wasn't that psychologists "conspired". They merely built themselves an echo chamber, listened exclusively to whatever rubbish and nonsense resonated, then appointed themselves and each other as (self-)righteous world saviors. To a non-scientist, Hansen et al. may look roughly the same.

4. You take the circuitous route because you need to do whatever it takes to save the world - knowing full well that a political program transparently directed to economic curtailment simply will not fly. Not with business, not with labor, not with anyone but a few batty professors. Or you take the circuitous route because you are the type of socialist who seeks to level to the lowest common denominator, and, ummm, you know full well that a political program transparently directed to economic curtailment simply will not fly. Or you take the route not for its circuitousness but because what's coming out of your computer scares you. Doesn't matter, it all looks about the same to non-scientists: try to scare the bejeezus out of people and hope they stampede in the direction you prefer. (Kind of like Al Gore taking great care in the movie - vide the logo with the hurricane coming out of the smokestack - to leave the impression that weather, in the form of Hurricane Katrina, could never have happened without AGW.)

5. Let's not forget Political Correctness, which has backfired in too many ways to count, this being another: anyone who states a scientific or engineering fact that contradicts anything another person wishes or chooses to believe is an elitist snob who deserves to be ostracized. It's simply not "fair" that one person may have a better grip on some portion of reality than another, much less that some have no useful grip on any portion of reality. [This doesn't stop anyone from suing for multimillions if they feel that, say, their doctor doesn't have an adequate grip on her area of reality. As (I think) Asimov said, the fact that two opinions are contradictory has never been much of a barrier to the same person holding both of them.]

From a bit further up:

I would imagine that the conspiracy that the skeptics would need to dream up is that all the oil depletion analysts want to rid the world of cars.

5. Possibly. Consider Jim Kunstler's seeming nostalgia for the horse-and-buggy days. There's certainly a fair bit of sentiment leaning that way in academia and amongst city planners - more than enough, since it doesn't take much, to align with a view that oil depletion might be a way of getting it enforced when - as before - it would never fly as a direct, transparent political program.

Oh, and to wrap up:

6. I seem to remember somebody recently trying to start up a public-communication initiative for climate scientists, but I can't seem to find it. (I'm finding stuff like this, which isn't quite it.) It's probably a good idea, at least for those who might choose to engage in advocacy. Go to any "conference" and watch scientists or engineers fail to communicate effectively or competently or sometimes even audibly in a relatively benign environment. Then imagine them as advocates, sparring with reporters in less benign circumstances - no, not a pretty picture at all, is it?

The original conspiracy theory started with the smarty-pants penning the Declaration of Independence:

"We hold these truths to be self-evident .."


En garde!??

The original conspiracy theory started with the smarty-pants penning the Declaration of Independence

Yes, the National Geographic had a special on this. It is a matter of historical record that at least 9 and possibly more of the signers of the Declaration were Freemasons. The Boston Tea Party was planned in a Freemason-infested tavern. Paul Revere was a Freemason. Benjamin Franklin was a Freemason. George Washington and most of his generals were Freemasons.

George Washington wore his Freemason apron when laying the first foundation stone for the Capitol - of course the Freemasons started as a labor union of stonemasons so it seemed appropriate to him.

If it wasn't for all these conspirators, the US might still be a loyal colony of Great Britain. Of course, the entire American Revolution was a conspiracy, but it helped the conspirators that they had a secret society available to hold their meetings in.

Since George Washington, 14 more Presidents of the US have been Freemasons. Who knows what they have been plotting in their secret Lodge meetings?... The triumph of capitalism over communism, perhaps?

I thought the real conspiracy was by all these right wing politicians "tickling" themselves silly in the back rooms of power.

1. Most climate scientists are part of [the commie oriented] academia.

Well score one point for you here, PaulS.

But of course! All those for-profit private enterprises (oil, coal, steel, cement companies) are just begging to hire climate scientists of their own to do 'independent' research.

However, it's those commie oriented academic institutions that lure away the good scientists with promises of tenure, So there are none left in the market for private enterprise to hire. That's it. That's the problem.

2. People like James Hansen have become quite shrill

But your long screed is not shrill. Right?

LOL. Your sarconal-titer reagent might be expired...

3. ... They merely built themselves an echo chamber, listened exclusively to whatever rubbish and nonsense resonated, then appointed themselves and each other as (self-)righteous world saviors.

Than goodness the righteous right wingers don't have echo chamber music radio stations. Glen Beck and Lush Limbaugh are just there to speak truth to science.

4. ... try to scare the bejeezus out of people and hope they stampede in the direction you prefer.

Hold on. Wasn't that play right out of the right wing play book? Be all you can be and die for your country in Iraq. We need the oil. Only cowards cut and run?

(P.S. Glorious leader GW Bush went AWOL only because he was answering the call of the higher father. Otherwise he too would have made the 'ultimate sacrifice' for the 'noble cause'. Yeah right.)

I thought it was "an army of one", whatever in Hades that is...

6. ... Go to any "conference" and watch [most] scientists or engineers fail to communicate effectively or competently or sometimes even audibly in a relatively benign environment.

Sad to say, this is true.

Most scientists and engineers are not trained in the dark arts of fooling most of the people most of the time.

Step back old buddy, I hate to tell ya-but you just missed the whole entire point the man was making.

He is trying to explain how all this stuff plays in Pieroria-he is nit saying that this is the actuality, but the PERCEPTION of the actuality.

And to think that he started OFF by mentioning the term tone deaf!

I myself have posted a lot of long comments along these same general lines, in respect to the cc camp being tone deaf in respect to the emails hacking.

For instance-technically the emails were stolen, but in terms of practical politics and public perceptions, they were and always will be public property(created by people on the public payroll in the literal sense for the most part , and the payroll of a publicly supported institution otherwise) , and thus since publishing and distributing them did not destroy them , they could not be stolen, in a moral sense.

(If your wife catches you in a motel with the other woman, because she poked into the contacts list and recent calls list of your personal phone she might actually be guilty of invading your privacy-but you are sorely deficient in understanding of human nature if you expect her to give any wieght to that argument-as she sees it,her dirty trick is no more than justified payback at worst.)

Now you can argue the ethics and the legality of this to your heart's content-if you don't UNDERSTAND IT, you are politically tone deaf.My point is to do with political tone deafness-nothing else.

Bill had perfect pitch-Hillary is tone deaf-which is why Hillary is not the President today.

Incidentally, I do believe in climate change.

But I also have lived a long time and understand that if you want a job at the IPCC,or a job associated with publicly funded climate research, you gotta be a BORN AGAIN believer.

Skeptics, commies, Irishmen, etc, need not apply.

you just missed the whole entire point the man was making

You're right. I guess the engineer in me made me totally deaf to the tongue in cheek tone.

Most scientists and engineers are not trained in the dark arts of fooling most of the people most of the time.

Sorry, step, but forget about fooling people, that's not even on the table. Sadly, they're not even trained in the art of communicating about something where they're dead serious and not trying to fool a soul.

Look who became tune inept now. That was meant to be a play on Abe Lincoln's folksy wisdoms.

Except that you can fool most of the people most of the time.
Joe five n' half pack proves it every day.

LOL. Of course, I was going by the collective tone of your several replies. But anyway Lincoln wound up that statement by saying you can't fool all the people all the time. If just one person out of 300 million can't quite be fooled all the time, then he's correct. Even if we're more generous, the statement says nothing useful: under any system of majority voting, it makes little or no difference that even a fairly significant minority might not be easily fooled.

Note - normally, as I've said before, I don't get my undies in too much of a twist over AGW itself. I figure somebody will burn all the fossil fuel that's accessible, albeit with minor (i.e. not enough to affect the scenarios more than a little) wiggle room over burning, or not, the last dregs of what's really hard to access. So after people have exhausted themselves with whining, moaning, and unsupported prophesying of mass death by three o'clock tomorrow afternoon, they will simply, out of necessity, adapt.

Be that as it may, it continually bemuses me that scientists are so shocked that their intended message fails to get across to the wider public, when experience teaches me that so many can barely get across merely to each other. Even when there's collaboration with people who supposedly know better, we get stuff like Inconvenient Truth. Sure, Truth beats nearly every "conference" presentation I've ever had to suffer through by miles. Nonetheless it's so bloody soporific, and so thoroughly rooted in archaic lantern-slide-lecture pedagogy, that it boggles the mind... and the latter defect reinforces the notion, so evident in TOD comments, that many who fuss publicly over AGW (or oil) are far more caught up with nostalgia, with pushing others willy-nilly back into a mythical arcadian past - for example the recurrent surreal discussion of farming with mule teams seemingly fed on thin air - than with any actual concern over, oh, say, future climate...

[When] experience teaches me that so many [scientist / engineer types] can barely get across [a message] merely to each other.

I don't think making fun is helpful or constructive.

No doubt there are many lurker-type readers out there on the TOD readers' list who are afraid to comment because the system has convinced them that silence is best in their case and they should shake with fear before daring to publicly put out even a few words in ink or via digital expression.

The fault is really with the education system. It has given license to too many a charlatan "English" teacher who know nothing of how to teach the craft of writing.

Engineers and scientists think differently than your every day liberal arts major. As a result they should have gotten communication instructions from teachers who can connect with the engineers and scientists.

And certainly, communicating things of a technical nature is very difficult. Any TODder out there who has tried to communicate the importance of the Peak Oil event to family and friends can attest to that.

Bloody hell... what a ranting fart you've produced here.

Listen, ya little whatever-the-heck-can-be-made-brainless-by-drivel, the effect of GHGs was discovered some 100+ years ago.

How's that fit into yer crap above?

It was confirmed something on the order of half a century ago, if not more.

How's that fit into yer crap above?


An amusing read Paul, while I'm not sure about whether the air is fit to breathe or the food fit to eat (http://www.youtube.com/watch?v=dib2-HBsF08)I can say that I enjoyed reading your comment.

Yesterday, I was just reading the synopsis of a book I read as a kid called Tintin : Land of Black Gold. What a good read.

Actually the other way round.

AGW has been studied a lot lot more. Simulations take care of all your Sun cycles, earth's rotational changes etc.

Read these books.

Frozen earth : the once and future story of ice ages by Doug Macdougall

The two-mile time machine : ice cores, abrupt climate change, and our future by Richard B. Alley.

I really don't think a simulation can realistically account for the suns weather or even remotely predict ice ages.. the cyclic temperature cycles (real empirical data) from ice cores give a rough schedule. Weather forecasting on Earth is fairly good a few days ahead because readings of weather conditions (including Doppler radar) can and are taken across wide areas and that information can be correlated to previous weather data. Even so predictions of the weather a few years ahead on Earth are usually wrong, so I really don't see supercomputers being able to predict the suns output at all.

Simulations at different scales are solving different problems. Forecasting weather is not the same as forecasting climate.

There may be variations in solar output that we don't understand, or climate drivers we have yet to model, but that does not alleviate the need to deal with the output of the models we do have today. It is intelligently precautionary to mitigate potential threats that have at least a moderate probability of happening, or that have massive consequences. It is folly to believe that mankind can significantly change the content of the atmosphere without some unexpected consequences.

But then, I'm in the camp who believes we're incapable of addressing climate change in a meaningful way, and that energy, food, and water are nearer-term issues. I do think those actions which obviously address a number of issues, such as shifting from fossil fuels to renewables, and increasing efficiency of homes, businesses, and transportation, should be done first and best. It is possible at an individual level to make many such changes.....which is good since that is all I expect to see anytime soon.

Hmm.. but the suns output still over-rides warming from CO2. We know an ice age will come again, and that point the potential hazardous consequences of excess CO2 would pale in comparison to freezing up like a popsicle and crop failures. On the other hand, man-made chemicals that are toxic and don't degrade will be around for millions of years. We all know that the world has been and is more and more becoming man's garbage dump.

I love it when people reach a point of being rediculously in denial, and will absolutely love the point in time when they are hit smack dab in the kisser with a climate change tipping point cataclysm.

That may be in the offing too. Since 07 methane releases from the Arctic have been increasing, particularly in Siberian waters. The only thing that has kept this methane in place was cold enough water to keep a frozen cap securing the methane from release. Well that cap is already starting to break up and release methane. If just the Siberian methane in Artic waters releases it a huge climate change game changer. 10% of it will change the world temperature .7 degrees F. Doesn't sound like much, but it will have a dramatic effect on the weather and probably raise ocean levels much faster than anticipated. But what if more than 10% releases in a short period of time? Whoops. Don't want to go there while so many are in denial. Keep it quiet. Let them figure it out for themselves.

Coverage of AGW in the media is pathetic. Instead of sober analysis you have a sensationalist circus where there has been a flurry of inane *-gate "scandals" based on nothing but lies. What is lacking in the Siberian shelf methane story is context. This region has been cold enough over the last 3 million years not to have outgassed during inter-glacials. These methane deposits even survived the period of warming when half of Greenland was ice free (about 125,000 years ago during the Eemian).

The oceans have been doing a good job hiding the warming during the last 150 years. We see this in the warming Arctic Ocean currents and the impact on Siberian shelf permafrost. Even with the current CO2 levels we have set ourselves up for centuries of warming with sea level rise exceeding 10 meters in the long term. And the life time of CO2 in the atmosphere is not subject to a simple exponential attenuation with an e-folding time of a couple of centuries. Fifty percent of the current excess will be around even 10,000 years from now.

I'm curious, how much methane is in the Arctic ? Please list your sources for such values.


There are over 1.4 Teratons of methane under subsea permafrost, i.e. just the part of the Arctic basin pertaining to the Siberian shelf.


There is around 1.6 Teratons of carbon locked up in surface permafrost. This translates into 5.8 Teratons of CO2.

The current CO2 excess from pre-industrial levels is 235 Gigatons. Releasing the carbon locked up by Arctic permafrost is *cataclysmic*.

While your sources state what you claim, I'm having great difficulty finding the sources for their claims. The reason I have doubts is because commercial use of these vast stores of hydrates is almost zero, although I found two places, one in the U.S and the other in Russia, that are commercially producing small amounts of nat gas from these methane hydrate sources.