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Drumbeat: March 15, 2010
Posted by Leanan on March 15, 2010 - 10:27am
OPEC Expands Oil Rigs Most in Three Years as Quota Promises Prove Illusory
(Bloomberg) -- OPEC is increasing oil drilling at the fastest rate in 2 1/2 years, even as production exceeds its quotas by the equivalent of a supertanker of crude a day and delegates prepare to pledge no increase in output.The 12-nation group boosted its number of oil and gas rigs by 8.4 percent in January and February, the biggest two-month gain since June 2007, data from Baker Hughes Inc. show. OPEC members excluding Iraq pumped 26.8 million barrels a day last month, 1.9 million more than targeted, data compiled by Bloomberg show. Shipments will rise again this month, according to tanker-tracker Oil Movements.
While oil prices recovered from a four-year low at the end of 2008 as OPEC announced a record supply cut, excess production means the doubling in oil prices since then may have run its course, according to the Centre for Global Energy Studies and Commerzbank AG. The premium charged for crude deliveries in 2015 has plunged 43 percent in three months, indicating investors are less concerned of future shortages.
OPEC to urge compliance, keep output target steady
VIENNA (Reuters) - OPEC ministers due to arrive here for their meeting on March 17 say there is no need to change output targets with oil prices above their preferred range, but soft demand is prompting calls to curb overproduction."In my opinion, I don't think we are going to see any change, even though inventories are high," Qatar's Oil Minister Abdullah al-Attiyah told Reuters by telephone on Monday.
Global LNG Shipments to Accelerate This Year, JPMorgan Says
(Bloomberg) -- Liquefied natural gas shipments may grow at a faster pace this year because of the global economic recovery and plants increase output, JPMorgan Chase & Co. said.“The last two months of 2009 global LNG exports were the highest on record,” Joseph Allman and Xin Liu, analysts for the U.S. bank, said in a report to clients on March 12. “Large new LNG liquefaction plants are ramping-up and several more are scheduled to start up through 2010 and into 2011.”
Power lines take shape in Iraq
DAMASCUS - It is now certain that the final results from Iraq's March 7 parliamentary elections will not be out before the end of March. What we do know for sure is that voter turnout was impressively high, at 62%, and that the State of Law Coalition, headed by Prime Minister Nuri al-Maliki, has the lead across southern Iraq, within the capital Baghdad and in the oil-rich province of Basra, effectively winning seven provinces out of a total of 18.Ex-prime minister Iyad Allawi, a secular Shi'ite and former Ba'athist, is also winning the vote in the predominately Sunni al-Anbar province and the controversial city of Kirkuk, which is inhabited by Arabs and Kurds. Both leaders are bracing themselves for the premiership - Maliki for a continuation, Allawi for a thundering comeback.
Chile May Face More Blackouts After 80% Lose Power
(Bloomberg) -- Chileans braced for more blackouts after an outage yesterday left 80 percent of the population in part of the country without electricity, the result of grid damage from last month’s earthquake.
Explosions hit Nigeria oil amnesty talks
Two suspected car bombs have been set off in the Nigerian oil city of Warri, where officials were in talks over an amnesty for militants in the area.Witnesses said the explosions shattered windows at the state governor's office and sent officials fleeing for cover.
The militant group Movement for the Emancipation of the Niger Delta (Mend) had issued a bomb threat earlier.
Russia Rejects Eni Call to Merge Europe Gas Pipelines
(Bloomberg) -- Russia isn’t considering merging its South Stream gas pipeline to Europe with the rival European Union-backed Nabucco link, Energy Minister Sergei Shmatko said.South Stream is “more competitive” than Nabucco, Shmatko told reporters in Moscow today. Paolo Scaroni, chief executive officer of Italy’s Eni SpA, Gazprom’s partner in South Stream, last week said combining the two pipeline projects would save time and money.
Shell Said to Plan Oil Output Growth Out to 2020
(Bloomberg) -- Royal Dutch Shell Plc, vying with BP Plc to be Europe’s largest oil and gas company, will outline a plan tomorrow to increase output every year until 2020, a person familiar with the company’s strategy said.Chief Executive Officer Peter Voser, due to brief investors at an annual strategy update in London, will say Shell has a pipeline of more than 20 projects with the potential to sustain low single-digit average annual production growth in the second half of the decade, the person said, asking not to be indentified because the presentation hasn’t yet been made.
Arrow May Reject A$3.3 Billion Shell Bid, Review Says
(Bloomberg) -- Arrow Energy Ltd. may reject a A$3.3 billion ($3.03 billion) takeover offer from Royal Dutch Shell Plc and PetroChina Co., the Australian Financial Review reported, without saying where it got the information.
Energy Secretary: renewables key to future energy needs
The U.S. Secretary of Energy wasted no time outlining his arguments for climate change legislation at a Houston energy conference, even as the governor of the state in which he was speaking is pushing back against the Environmental Protection Agency’s recent moves to regulate greenhouse gas emissions.The Nobel Prize-winning physicist, Steven Chu, stressed that U.S. residents will live in a carbon-constrained environment in the near future, and while other countries, such as India and China, recognize this fact and are investing hundreds of millions in renewable energy resources, the U.S. has been slow to act.
Eugene gets EPA funds for transport program
The Environmental Protection Agency last week awarded the City of Eugene $104,126 to fund SmartTrips, a greenhouse gas reduction program. Next year, the money will help encourage walking and biking to reduce instances of individuals driving alone.The money is a small portion of a nationwide grant worth $7.8 million and offered by Climate Showcase Communities Grants, an EPA division, to environmentally aware communities nationwide. Eugene was one of 20 cities and counties that received a grant.
Nuclear Bill Stalls in India, Delaying GE-Hitachi Venture Entry
(Bloomberg) -- India’s government failed to introduce a bill intended to shield U.S. nuclear equipment suppliers from liability, delaying the entry of companies including General Electric Co.’s atomic venture.
Hall then and now: Former nuclear critic still an activist in changing times
Rep. John Hall, D-Dover Plains, a pioneer of the 1970s anti-nuclear movement as a rock star, and harsh critic of the Indian Point nuclear power plant as congressman, has voted for legislation that includes $7.5 billion for clean energy — including nuclear power.Hall was, long before he got elected in 2006 to represent New York state's 19th Congressional District, a rock 'n' roll singer, songwriter and guitarist with the hugely successful Woodstock-based band Orleans. In 1979, Hall, along with fellow rockers Jackson Browne, Graham Nash and Bonnie Raitt, founded the organization MUSE — Musicians United for Safe Energy. The group staged the famous No Nukes concerts, five nights of music at Madison Square Garden in September 1979. The concert raised more than $1 million.
Vestas Sells Bonds for First Time as Growth Slows
(Bloomberg) -- Vestas Wind Systems A/S, the biggest maker of wind turbines, is selling bonds for the first time to diversify funding as growth in the market slows.
Kunstler: Where Have We Been; Where Are We Going?
Being an actualist, I'm in favor of getting real about things, and the reality we've entered is one of comprehensive contraction, especially for our cities. One of the reasons places like Cleveland (and Detroit, and Milwaukee, and St Louis, and Kansas City....) continue to fail in their redevelopment efforts is because they are already too big. They became overgrown organisms a while ago, unsuited to the realities of the future -- especially the energy resource realities of the future -- and they have tried everything except consciously contracting into smaller, finer, denser, differently-scaled organisms. In fact, the trend up until the so-called housing bubble of recent years was to just keep on expanding ever outward beyond the suburban frontier, which left our cities in a condition like imploded death-stars -- cold and inert at the center, with debris speeding uselessly outward to an unreachable infinity.This future we're entering, which I call the long emergency, compels us to imagine our society differently. Our cities and towns exist where they do because they occupy important sites. Cleveland is where a significant river empties into the world's greatest inland sea (which has the additional amazing benefit of being fresh water). Some human settlement will continue to be there, very probably a place of consequence, but it will not be run under the same circumstances that produced, for instance, the civic center of Daniel Burnham with its giant Beaux Arts courthouses, banks, and municipal towers.
EU’s Arctic Policy skating on thin ice
STRASBOURG – As global warming will open up new sea routes and make it possible to exploit oil and gas resources in the North Pole, MEPs discussed developing the EU’s Arctic strategy at the Strasbourg’s plenary session last week. EU High Representative for Foreign Affairs and Security Policy Catherine Ashton continued what was started by the Commission and followed up by the European Council last autumn, launching a debate on EU’s Arctic strategy.
Bjorn Lomborg: ‘Carbon cuts have got us nowhere in tackling global warming’
Sceptic or realist? Bjorn Lomborg speaks to Tom Levitt about why his ideas on tackling climate change will actually help to solve the crisis.
If You Care About The Climate Do Not Read This Article
Dear Pablo: What is the contribution to climate change by TreeHugger.com for each page view?If the reverse-psychology of this article's title got you please keep reading, you will find it interesting. Past articles have explored the environmental impact of the internet and the environmental benefits of shopping online but this time I am taking our favorite sustainability media outlet under the microscope. Let's see what we can find!
Abu Dhabi, the emirate that holds almost all of the United Arab Emirates' oil reserves, has ambitious plans to boost oil-production capacity to 3.5 million barrels a day by 2017 from about 2.8 million barrels now. But meeting and maintaining the output target won't be an easy task.The crude reservoirs that are easiest to access have already dwindled. Extracting the remaining reserves is becoming more complicated and expensive.
It may seem odd for a country sitting on one of the world's largest oil and gas reserves, but the United Arab Emirates has an energy problem—one that it hopes to solve by building nuclear power plants.Most of the power stations in the U.A.E. run on natural gas at present. But the country is running short of this commodity. Much of the gas that the country produces has already been sold through long-term export contracts or is being used to help extract oil or produce petrochemicals. The U.A.E. is already importing gas from neighboring Qatar, the only country in the region that doesn't face a gas shortage.
On top of this, every barrel of oil or cubic meter of natural gas that the country burns to meet its own energy needs is a barrel or cubic meter that it can't sell. With oil prices hovering around $70 to $80 a barrel, that adds up to quite an opportunity cost. Far better to export the country's hydrocarbon wealth and use some of the proceeds to invest in new energy sources to meet growing domestic demand.
Oil Refinery Slumps Together With Worldwide Oil Demand
"Global financial and economic crisis are eroding oil and gas demand. The financial crisis in the U.S. has had a domino effect worldwide which in turn may stem the flow of capital expenditure by exploration and production (E&P) companies," adds Collier.
Oil trading price predictions for 2010 to 2012
Oil prices are back on their way up and currently, oil trading prices on global markets have hit highs last week for 2010 for both NYMEX Light crude oil and ICE Brent crude oil futures. So, the golden question is, what’s in store for the rest of the year and what’s the price oil going to be in the future years, 2011 and 2012?Of course that question is impossible to answer with any accuracy because of poor oil reserve data, the obscure intentions of oil producers and elasticity effects that lead to oil demand destruction or substitution. However, it is possible to do simple minded extrapolations of recent price behaviour to see what might happen if various trends continue.
OPEC has little wiggle room at upcoming meeting
VIENNA — With U.S. demand for oil lackluster, even traditional OPEC price hawks like Iran and Venezuela are happy with present prices near $80 a barrel as they head into Tuesday's meeting of the 12-nation organization.These two countries traditionally are the greatest advocates of tight OPEC supply. But ahead of their meeting there is informal unanimity among OPEC oil ministers that - with the world's economic recovery feeble at best and crude prices at preferred levels - it's best not to rock the boat.
Cnooc Turns to Ventures in Global Oil Push After Unocal Defeat
(Bloomberg) -- Cnooc Ltd.’s failure to buy Unocal Corp. for $18.5 billion in 2005 taught Chairman Fu Chengyu a lesson: use overseas ventures rather than takeovers to gain the global oil resources China needs.
If there's a headline from the recent CERAWeek conference here that deserves to be flashed in neon to President Barack Obama and the rest of the nation, it is this one: “Domestic natural gas is clean, cheap and plentiful — look here for answers, Mr. President, as you seek energy security.”Indeed. Natural gas appears to be all those things — and maybe much more. A report by IHS Cambridge Energy Research Associates, released here last week, confirms that North American gas potential has tripled in just the past three years.
Technology and abundant gas extending the fossil fuel era
It was a star studded attraction, with the movers and shakers of the energy world almost on their annual pilgrimage - the CERAWeek - at the Hilton Americas-Houston downtown. And with Houston the "ecosystem for the world's energy," there could be no better place for the august gathering.With roughly 2,200 in attendance, the IHS Cambridge Energy Research Associate's annual energy forum, held under the title, "Energy: Building a New Future," reflected the renewed optimism in the global scenario. Yet it also suggested the uncertainty that exists. While the worst of the recession may be over, and this indeed is open to debate, yet one certainty exists - what's ahead for the industry is unlikely to look anything like the past.
Natural gas exceeds 24% of world total energy mix and going higher
Big oil appears to be making natural gas the core of its business. The abundance of it combined with low extraction cost seems bound to change the energy landscape forever. ExxonMobil, Royal Dutch Shell and ConocoPhillips are making the transition from crude oil to natural gas. Currently in focus is the shale gas business which is profitable if run on an assembly line basis. U.S independent energy companies were the first to exploit the shale gas potential. Now the majors are coming fast.
As Its Arms Makers Falter, Russia Buys Abroad
Russian-made cars may be rickety, and its passenger airplanes such fuel-guzzlers that even the country’s flag carrier, Aeroflot, has switched to a mostly Western fleet. But Russians could always point with pride to the fearsome reputation of their weapons — the Kalashnikov and the MIG and Sukhoi fighter jets.Indeed, until recently, Russia’s military exports were second in volume only to the United States.
But in today’s Russia, the $40 billion military equipment industry is withering alongside civilian manufacturing.
Spate of Myanmar privatisations raises questions
BANGKOK — Myanmar's junta has embarked on a flurry of privatisations of state firms, raising questions about whether it is reforming the economy or trying to take profits before 2010 elections.The military government, which faces strict Western sanctions because of its human rights record, is trying to sell off petrol stations, ports and state-owned buildings including cinemas and warehouses.
Saving U.S. Water and Sewer Systems Would Be Costly
As city employees searched for underground valves, a growing crowd started asking angry questions. Pipes were breaking across town, and fire hydrants weren’t working, they complained. Why couldn’t the city deliver water, one man yelled at Mr. Hawkins.Such questions are becoming common across the nation as water and sewer systems break down. Today, a significant water line bursts on average every two minutes somewhere in the country, according to a New York Times analysis of Environmental Protection Agency data.
Conn. would waive student loans in 'green' jobs
HARTFORD, Conn. — Paul Goulet hopes Connecticut will help him get from under nearly $8,000 he's borrowed for college after losing his job in a paper manufacturing plant.Goulet, 55, is a student in environmental studies at Goodwin College in East Hartford, aiming to find work in wastewater treatment. State legislation that would waive thousands of dollars in loans would benefit him and other students who earn degrees or certificates in green technology and other jobs.
Bees in the City? New York May Let the Hives Come Out of Hiding
New York City is among the few jurisdictions in the country that deem beekeeping illegal, lumping the honeybee together with hyenas, tarantulas, cobras, dingoes and other animals considered too dangerous or venomous for city life. But the honeybee’s bad rap — and the days of urban beekeepers being outlaws — may soon be over.On Tuesday, the Department of Health and Mental Hygiene’s board will take up the issue of amending the health code to allow residents to keep hives of Apis mellifera, the common, nonaggressive honeybee. Health department officials said the change was being considered after research showed that the reports of bee stings in the city were minimal and that honeybees did not pose a public health threat.
The officials were also prodded by beekeepers who, in a petition and at a public hearing last month, argued that their hives promoted sustainable agriculture in the city.
Leaders answer our readers' questions
Q: Given that the effects of peak oil are most likely to begin being felt during this term of Parliament, how will you lead the response to the challenge in Tasmania?
Cuba’s green revolution — achieving sustainability
Applying the yardsticks of conventional economics to assess Cuban society (for example focusing on disposable income, gross domestic product or levels of consumption) commentators often conclude that the revolution has failed to pull the Cuban people out of poverty.But such criticism omits the facts that: the Cuban state guarantees every citizen a basic food supply; most incomes are not taxed; most people own their own homes or pay very little rent; utility bills, transport and medicine costs are symbolic; and the opera, cinema and ballet are cheap for all.
MENA Has The Potential To Become One Of The World’s Largest Producers Of Renewable Energy
The Middle East and North Africa (MENA) region has the potential to become one of the world's largest producers of renewable energy. Renewable energy industry developments combined with the region's potential in wind and solar power could create significant advantage for countries that move to capitalize on them, according to a new study by Booz & Company.
Charging Ahead: Electric Vehicle Rollout On Track In NW
The West Coast is about to take part in the biggest rollout of electric cars and charging stations in the world.The first mass-market electric cars go on sale in greater Seattle and Oregon's Willamette Valley at the end of this year. Pollsters are finding high interest in the Northwest in electric cars.
If you're one of those curious drivers, now is your time. Tom Banse has the latest on what prospective plug in car buyers need to know.
Firefly Energy gives up battery business
PEORIA — Firefly Energy Inc. filed for Chapter 7 bankruptcy Friday, and both the city of Peoria and Peoria County will likely pursue legal action to regain the $6 million the governments loaned the start-up in 2007....The high-tech start-up company was founded in 2003 by Williams and Mil Ovan, who was senior vice president. The company developed and manufactured a lighter, powerful lead-acid battery, replacing lead plates with graphite foam.
Kurt Cobb: Ocean acidification: Why the climate change deniers don't want to talk about it
Most people know that the release of carbon dioxide into the air from human sources has contributed to rising global temperatures and massive increases in the rate of melting of the ice at the poles and on Greenland. One of the major consequences they may not know about is the acidification of the oceans.
The panelists concluded that through 2030 climatic changes in the region may aggravate civil unrest and internal conflicts leading to increased migration, and that strong, centralized states, and states with robust civil societies, will likely fare better than others.Although the region does not contribute to significant global greenhouse gases, it is highly vulnerable to the effects generated by increasing climate variability. Rising temperatures, rising sea levels, increased rainfall in some places, drought in others, and a greater frequency of extreme weather events such as hurricanes, floods, and heat waves are expected from climate change.
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NYT headline today. Didn't read the article.
I mean, imagine. The bastards -- using the rules to their own advantage!
Paul Krugman’s solution and the price of oil from the New York Times.
http://www.nytimes.com/2010/03/15/opinion/15krugman.html
Suppose Krugman got his way and we forced a revaluation of the renminbi upwards by 25 percent. The dollar would likely fall as the Chinese dump it. We then can expect that oil would rise by maybe 25%.
What then is the new situation? Clearly the United States, the largest oil importer, would likely be faced with a 25% increase in the cost of oil imports or about $100.00 crude oil. But what would be the effect of the renmimbi rising 25% for the Chinese?
It is pretty clear that the rise in the Chinese currency would offset its increased cost for crude oil, so China would in effect face the same real price for oil imports that it faces now while Americans would face a 25% rise in crude oil prices.
After the revaluation China would still have the advantage since its real oil cost would be about the same while crude costs facing the United States would be up 25% due to the falling dollar. Some contend that the U.S. economy in its weakened condition can not handle $100.00 oil. We know it can not handle $147 dollar oil, at least it couldn't in 2008.
There would be some benefit too the economy in that competition from cheap Chinese imports would be reduced. But we know from bitter experience over the years that the response of American businessmen to lessened competition is mostly not to produce more, at least at first, but to raise prices.
So even if the Administration were to follow Krugman’s recommendations the likely outcome would not be as beneficial as Krugman imagines. We would likely face $100 crude sooner than otherwise and due to oil being priced in dollars China would not face higher real oil prices than now.
It’s labor cost advantage would still remain since a 25% rise in a very low wage is not very much in the world scheme of things. It is not the same thing as a 25% rise in an American wage or European or Japanese wage for that matter.
This all does not even consider the consequences of rising interest rates as American debt falls in value due to Chinese dumping.
The United States would be in a situation of rising interest rates, rising crude oil prices and probable rising inflation due to reduced Chinese imports. Is that worse that what we have now? I think so.
Krugman should be careful what he recommends. He might get it and be sorry.
Krugman has moved from the semi-loyal opposition to being an apologist for the empire. Were it not for the profit interests of the ruling elite, i.e. the corporatocracy, it would be possible formulate a policy not dependent on China's actions.
For example, curtail military expenditures, bases, wars, etc. Abandon empire. Raise taxes on the wealthy. Nationalize what needs nationalizing. Redo our infrastructure to facilitate downsizing, localization. Recognize that growth is not going resume and plan for retrenchment. Move step by step away from such total dependence on global markets. Focus on minimal and comfortable survival for everyone.
Now of course all of this is pie-in-the-sky, at least for now. But it's important to raise it in order to show that there's nothing inescapable about our current woes, that it could be different were we not completely dominated by profit addicts, suicidal ones at that, which wouldn't be so terrible except that they want to take all of us with.
My worst fear is that seeing China as growing challenger to the (weakening) empire, the "planners" have decided that it's better to have a showdown sooner rather than later. This kind of showdown would dwarf the escapades up til now. China was always the ultimate target.
Not that I'm an admirer of the Chinese leadership. Far from it. Mao made many mistakes, but trying to build up the countryside and keep people there wasn't one of them. That half the Chinese are off the farm will turn out to be a disaster of monumental proportions.
Krugman: It's America That Has China Over A Barrel, Let's Take Advantage Of it
video ....
http://tinyurl.com/yhm39n8
There's an old saying, something like "when you owe $1000, the bank owns you. When you owe a million dollars, you own the bank"
To grow China needs a U.S. as a buyer and needs to be paid for Treasury Bonds with a non-inflated dollar.
I've said it several times here, China can't grow rapidly without a healthy west, and particularly a healthy dollar. China faces enormous risks on many fronts. Being Capitalist Commies is not an easy business......
The question about the value of Chinese money answers itself; it is pegged to the now hard dollar which in turn is pegged to crude oil. This is what a hard currency is; it can be exchanged at a fixed rate for some other valuable good. Generally, currency that is hard is exchanged or redeemed at a fixed rate for gold. It is arguable that oil is far more useful and necessary to industrial society than is pleasantly decorative gold.
A hard currency - we'll call it the Niewe Bernanke Dollar - is worth something. It is a proxy for a useful good. The 'basis' or what can be traded for it is also diminishing which makes each dollar more useful - since not only is the quantity of the dollar important but WHAT CAN BE BOUGHT WITH IT!
For example, the dollar can buy anything at all made in China ... as well as any good made in the USA. The yuan - or renmimbi - cannot buy anything in the USA or in other countries except for Argentina, Belarus, Hong Kong and a few other places and there only Chinese imports. Countries needing crude imports have a need to buy dollars first - which China has done with boatloads of cheap consumer goods. Because the best price for crude is fixed in dollars, the fact of the relationship between dollars and crude reduces the other currencies into 2d tier status. That is, the other currencies' values will fluctuate around the fixed value of the dollar, this fluctuation making those other currencies less and less intrinsically valuable.
One would think this is not a problem but in general the value of a currency expands at the expense of the commerce which the currency leverages. One either has valuable money or valuable business, not both. It is in fact impossible as the success of commerce expands the money supply devaluing the currency in question. Nations desiring commerce and business rather than deflationary depression will seek to decouple from the hard dollar as rapidly as possible.
This is a fact of life, like elephants cannot flap their ears and fly is a fact of life! The dollar will always be the hardest currency; there is no way the non- trading yuan can be harder than the dollar! This is why pundits and US government officials are sounding like idiots.
Part of this is certainly the effect of swing producer Saudi Arabia which can keep a lid on prices. But ... circumstances are beginning to do the same thing! The world is a lot poorer than it was in 2008. The credit is constrained and higher dollar prices for fuel - a soft dollar - would crash the world's economy very rapidly.
$82 is the new $147. Higher prices are right now stranding the oil refining business. Just like high prices stranded suburbia, subprime lending, medium- box retailing and myriads of other businesses on its way to ruining the entire world's industrial economies.
China cannot and won't revalue 'upward'. How? Revaluing a currency requires it to be traded on the open market which the yuan currently is NOT. Nobody knows what the yuan is 'worth'. See David Goldman and pay attention!
http://www.cnbc.com/id/15840232?video=1441867748&play=1
The USA doesn't currently buy enough Chinese goods to allow such a revision to take place! Ordinary currency revaluation require either FOREX trading, massive goods exchanges or open market operations by central banks. How is the USA going to convince China to intervene in markets against its own interests? The demand is for China to raise its export prices to the US. Fat chance - or, "Up yours!" as is said on the video.
The increase in price would be opposed by all US importers of consumer goods which depend on cheap Chinese supply. Buying goods with dollars is the means for revaluing a currency. The dollar is instead revising the Chinese economy, bringing its stimulus to an end as the newly hard dollar makes the yuan which is pegged to it equally hard.
If the Chinese don't flood the country with yuan they have a burst real estate bubble. Since real estate speculators in China are also big shots in the Chinese government, this won't happen! They will pour yuan into the country, and the yuan will wind up where it winds up ... the USA be damned!
People don't understand what is happening with the oil refineries. They don't realize how serious the situation is. Many refineries have closed and the remainder are losing money. This is the same exact thing that has been taking place in the other areas of the world's economy since 2004. Margins have shrunk because of increasing input prices while the overall high costs are shrinking aggregate returns. Customers confronted with higher final- goods cost react by purchasing less of the good. The higher the price the less of the good is purchased. The exact same phenomenon has been taking place in real estate, transport, finance, manufacturing, sovereigns and now in refiners.
When enough refiners fail there will be shortages. A business that cannot make money will close whether in France, USA, China or South America. Whatever the price is now is too high. Subprime mortgages were the canary in the finance/energy matrix coal mine. Now the miners themselves are starting to keel over.
I don't know how many more refineries have to close before there is trouble, the the number is shrinking all the time. This problem races along side sovereign issues in the Eurozone, the UK, Japan and Dubai. Just because the headline machine is pointed elsewhere doesn't mean the problems have been solved. They haven't - just gotten worse.
"curtail military expenditures, bases, wars, etc. Abandon empire. Raise taxes on the wealthy. Nationalize what needs nationalizing. Redo our infrastructure to facilitate downsizing, localization. Recognize that growth is not going resume and plan for retrenchment. Move step by step away from such total dependence on global markets. Focus on minimal and comfortable survival for everyone"
Not an easy sell. I agree with most of it but I can see how its not an easy sell.
"Focus on minimal and comfortable survival for everyone." In other words, replace one recession/depression with another more explicitly permanent one. I'm sure that'll play well both in Peoria and New York.
As long as "minimal and survivable" are relative terms defined by the recipient, New York will be fine. CEOs and investment bankers NEED a minimum of $10M per year in bonuses for their lifestyle to survive.
People sleeping underneath bridges are not experiencing comfortable survival. Nor or those who are momentarily better off, but are panicked by impending job losses and foreclosures. Once people see that this is not temporary, they'll look on minimal and comfortable survival with a much kinder eye.
We aren't going to be able to grow our way out of this, not if peak oil is here or impending.
My daughter and a grandson live on a farm/commune that consumes a small fraction of the resources the same number of people would if scattered in individual houses in the burbs. Yep, shared bathrooms, vehicles, huge living room, huge dining room -- but very comfortable with minimal stress. Most people would not choose this over middle class life as it was, where nothing was shared, everyone had their own, and privacy was maximized. But as that life becomes impossible, it will be a much different story.
Our big houses in large house farms are going to be the way of the past, and the current way of the past will be new again. Tribes of people sharing everything for the comfort of all, we called them communes a while back, but they were just people realizing that tribes were a better living arrangement and bucky the trend of house farms.
Charles,
BioWebScape designs for a better fed future.
The last empire was the soviet union. I don't recall Krugman being all that supportive of those guys.
Krugman fashions himself as some sort of hero, trying desperately to convince America that it can stave off debt deflation, collapse, and the election of some nasty right-wingers.
Silly Keynesian! Tricks are for kids!
Given that we've never really tried Keynesian Economics, I think he can't be faulted. Remember, the largest increases in the national debit happened under Republican governments. The latest binge in debit is a hangover from the previous period of Republican (lack of) regulation under Bush #2.
E. Swanson
"It is pretty clear that the rise in the Chinese currency would offset its increased cost for crude oil, so China would in effect face the same real price for oil imports that it faces now while Americans would face a 25% rise in crude oil prices."
Premier Wen, et al, don't seem interested in this idea.
http://www.bloomberg.com/apps/news?pid=20601084&sid=avqg3FO1XNhI
It is pretty clear we're in a vice of our own making. If the dollar weakens, we pay through the nose for imports to fuel any export gains while our entitlements consume all. If the dollar remains strong we increase debt to cover unemployment while our internal industrial base weakens and our debt consumes all. If it stays flat we'll be mired in a stagnant morass for decades while our bubbles deflate and centralized gov't grows.
If we're determined to buy overseas and rack up debt, the least we should be doing is using the debt to buy wind turbines and solar panels, versus oil and consumer junk.
Even if we stipulate that solar panels are dependent upon the continued existence of cheap fossil fuels, it might make sense to look at the panels as a form of long term oil storage. China may push us out of the oil market and we apparently are not going to significantly increase our strategic reserve. Accordingly, let's buy as many cheap panels from China while the oil is still around to make them.
Solar panels are at least equivalent to 30 years of stored energy. Maybe more. It is not clear.
The oil is going to be burned up quickly, increasingly by the China's and India's of the world. Arguably, to invest in solar is like investing in long term storage of oil.
This is not a strategy that will necessarily work after we get into the serious downward curve on oil, but what other strategy is currently available. In the mean time, maybe efficiency of the cells themselves and the efficiency of manufacturing cost can make solar viable beyond the point in which the fossil fuel subsidy is not available.
We may be screwed regardless of what we do but it does not seem to make sense to not have a proxy for long term storage of an energy source that will soon we in very short supply. Besides, the Chinese are doing a better job than we are of securing oil for themselves all over the world while we piss away our empire worrying about terrorists.
I agree wth Krugman, in the long term we're better off. This is a good time too, with interest rates so low. As far as more expensive oil, that just encourages alternatives with most of the money spent here. With the productions numbers at the top of the news page it seems that short term prices may be coming down.
What Krugman points out is about getting the fundamentals right. The sooner the better.
It's not so much whether one agrees with Krugman or not. The point is to understand the factors that lead to his assessment of the situation. If there is a flaw in his reasoning that I could respond to it would be his apparent knee jerk assumption of economist dogma that lowering the currency price would result in a response in the trade deficit. When the replacement industries no longer exist on this side of the Pacific or never happened and the wage differential is still a matter of obscene multiples I think he's rather out of touch with industrial reality.
Not to mention compliance with labor and environmental rules. Or the obscene profits available from import from low wage countries. The horse has gone, Paul, and the status of the gate is irrelevant now. Thus, a lowering of the relative value of the dollar would just result in higher goods prices and lower prosperity and employment. A five dollar item becomes ten. Making it here for fifty- even if it creates employment and the ability to buy - isn't likely short term.
No sh*t. What do you expect from the co-author of International Economics: Theory and Policy?
Isn't most of the wind and solar bought from overseas, especially China?
On the other hand, a weaker dollar may make it possible for manufacturers based in the U.S. to compete.
However, I don't have much faith in American manufacturing even with a devaluation of the dollar by as much as 25%. We seem to be mainly interested in outsourcing.
Alternatively, why don't we buy up all the cheap Chinese solar panels we can while the dollar is strong? But nooooo. We will just continue to buy salad shooters, big screen tvs, and other doo dads.
I think you are weighting China at 100% and US (actually rest of world) at 0% when it comes to affecting prices. Since China is far less than 100% of either the world economy or oil imports -or even of US trade, the dollar would fall but much less than the 25%, perhaps only by 10% or so. US products would be relatively more competitive against the Chinese. The Israelis devalued their currency by roughly 25% as a response the to meltdown, and their economy is doing fine.
I think Krugman understands economics a lot better than anyone on TOD, and I see no reason not to trust his economic judgement.
Is that true or what? Got any empirical evidence to support your argument?
Why would China dump dollars and lose money ? By revaluating renminbi upwards by 25 percent, they would have already lost 25% os their holdings in renminbi terms.
Look at it another way. China now doesn't want to upvalue their currency because that would lower their exports. If they dump dollars, it would cause dollar to go further down reducing their exports even further.
Whatever they are, the Chinese leadership isn't stupid.
Ofcourse, our ability to force China to upvalue is probably close to 0 - esp by 25%. We may be able to get them to upvalue by 25% over the next decade or so ....
http://www.inhabitat.com/2010/03/15/china-to-connect-its-high-speed-rail...
China already has the most advanced and extensive high speed rail line in the world, and soon that network will be connected all the way to Europe and the UK! With initial negotiations and surveys already complete, China is now making plans to connect its high speed rail line through 17 other countries in Asia and Eastern Europe in order to connect to the existing infrastructure in the EU. Additional rail lines will also be built into South East Asia as well as Russia, in what will likely become the largest infrastructure project in history.
...
Financing and planning for this monstrous project is actually being provided by China
...
Financing for the infrastructure will be provided by China and in return the partnering nation will provide natural resources to China. For instance, Burma, which is about to build its link, will exchange lithium (used in batteries), in order for China to build the line.
....
so china (asians) do have a plan
but the western nations has obama and @hope@ (sarcasm intended)
hope is translated to bunkrapcy
Not so good journalism from your source.
It is not clear if the EU has more HSR than China or not, but China invested $88 billion in rail in 2009 and will soon pass the EU if not already.
I have been following the "Iron Silk Road" closely, and it will be mainly a freight line at good "normal" speeds (100 to 125 kph is what I have heard). Passenger demand between Kazakhstan and China will never support HSR.
Alan
Chinese National Oil Co. pays $2.5 billion for half of Tullow's Uganda field
150,000 b/day in six years. 1 billion barrel field. CNOOC is responsible for building 1,200 km export pipeline through Kenya.
Couple of weeks old story I just found. Sorry if a repeat although it goes with headline story and Argentine play.
http://online.wsj.com/article/SB1000142405274870453320457504648158494625...
Alan
Death by a thousand cuts...
59.64% of East/South African oil goes to China. Sound alarming? 66.88%
of South+Central American oil goes to the US; the volume of S+C is 10 times the size, too. Gobble gobble.
Very interesating KLR. Any guess on how much China has cumulatively picked up in Vz in recent years?
Stat Review says for 2008 9.2% of S+C Am heads to China; I assume they don't have their fingers in any pies except PDVSA's, do you know if there's any Santos Basin action from CNOOC etc? All I see looking at the megaprojects list there is Petrobras and a sprinkling of Chevron and Shell, but many of those are joints and I think only the primary operator is listed.
To find the trend I'd have to go through the 2002-2008 Stat Reviews and build up tables of how the intra trade movements have evolved, kind of a chore. We'll see. Helps that BP have mostly stuck to the same formatting over the years. Checking for 2002, they were at 0.2%. That's your typical Far East exponential there.
The evolution of those trade movements would make for a good article here.
KLR -- I don't think the Chinese will have much luck with direct ownership of DW Brazil. The gov't pulled leases off the market and even beginning to restrict Petrobras. But there are other angles. A year or so ago there was a story about China lending Bz or Petrobras multi-billions. You have to figure the Chinese did that for more than the interest income. Something like a right of first refusal on future oil exportds or some such trade.
It's a CD payable only in Texas T, natch: Brazil sells oil to China, expects $10b loan
"Holding hands at midnight
'Neath a starry sky
Nice work if you can get it
And you can get it if you try"
Excellent KLR. I need to check out that google thing I keep hearing about.
Back when I started ROFR was becoming a very big deal. Especially when the utilities and refineries began investing directly in the oil patch. It turned into a big part of the trade often becoming a pivital component. And then the bust came and it dropped out of the discussions. Seems like what was old is now new again.
Mish has a post on the Barron's cover story on the public pension mess:
http://globaleconomicanalysis.blogspot.com/2010/03/2-trillion-public-pen...
My post on the topic:
http://www.theoildrum.com/node/6290#comment-599810
A trillion dollars in pensions, another trillion for deferred road/bridge infrastructure maintenance, yet another for SSN/Med, and still more for water and sewer needs nationwide.....and that's before we start talking about new grids and massive renewable buildouts.
How many trillions can we have piled up before we decide to cutback on our expectations?
Skip most of the trillion for road/bridge infrastructure maintenance.
Cut the maximum truck weight (now 80,000 lb) back below what it used to be (72,000 lb from memory) to, say, 67,500 lb and tax/toll the heavy trucks for what maintenance needs to be done. Pay as you go.
Selling all of the interstate highways to toll authorities could raise lots of money.
Alan
Only if they can charge confiscatory tolls yielding not only enough to do maintenance but also to pay off the bonds. What, then, do we do about the traffic jams that will appear on the smaller rural roads? Do we barricade and cut off those roads, eliminating the traffic by causing the roads to go nowhere? How would farmers whose short hop into town suddenly became a lengthy expensive ordeal owing to the barricades feel about that? Or do we expand the smaller roads until they look like US 9 going over the Raritan River in New Jersey parallel to the tolled Parkway?
Oh, and we know very well that politicians would fritter away a pot of money like that in an instant, if they ever got it. Over and over again they demonstrate that they're money addicts who simply can't help themselves. Everything else may be falling apart, but they never have the slightest trouble funding, say, Palaces Of Moronic Entertainment. So we should expect, for example, that the (now-unpopular) sale of the Indiana Turnpike will burden one small region with skyrocketing tolls, probably to the nearly exclusive benefit of the well-heeled larcenous buddies of corrupt larcenous politicians.
Tolls are rarely onerous for those who value their time (I say this as a guy who spends $65 per month on tolls). If rates on trucks are sufficiently high, the rates for cars should be reasonable. When time is worth little, meandering along whatever roads are left will have to suffice.
Politicians will always fritter away all money, and when they're in charge of the toll roads they'll fritter away money that should be spend on maintenance on building new toll roads that can't ever pay for themselves. Pretending that public roads are free won't help anybody, long term.
Of course, until we toll all of the roads, we're pretending that most are free. And I'm still left to wonder about the spillover traffic, the "meandering along whatever roads are left will have to suffice" part of it. What happens when Joe or Jane Farmer can't get a timely ambulance because the local roads are clogged with toll-dodging traffic? There are certainly enough drivers on the Interstates who don't value their time highly to bring that about.
When the tolls get high enough, the roads will close due to lack of interest. Until big trucks are taxed or tolled to the extent that they damage the roads, the costs will not lessen. Eventually the Interstates, and the other inter city roadways will become so broken that trucks cannot travel them.
Not that EV's will have it any easier, so don't count on driving to see your Auntie in Ypsilanti.
Craig
No worries for those who've pre-paid their Helicopter Ambulance service.
Onerous commutes beg for other solutions, such as mass transit and higher-density colocation of labor and industry (Alan's TOD vision).
When we get to the push-comes-to-shove point, there aren't going to be as many long-distance commuters anyway. Sure, it'll be "worse", but such is the nature of the collapse of complexity.
"confiscatory tolls" are better than socialized roads.
Some socialism is VERY bad, and socialized roads are one example.
A good way to reduce VMT, oil use, air pollution, deaths by accident and more.
I HATE paying property taxes for city streets. Gas taxes would be much more appropriate funding for them, and tolls for highways.
Alan
The problem here is with partial socialism; sometimes the mixture may not work well and you end up having to go all or nothing. If you sell off the interstates and charge huge tolls, that will divert traffic to the local roads; there are plenty of drivers who do not value their time highly, or simply can't afford to. Which means lots more places will look like northern New Jersey, with even the smallest road that goes anywhere at all packed bumper-to-bumper.
That in turn means forget about a lot of that local walking and bicycling stuff, with the local roads bursting with dangerously impatient drivers priced off the Interstates. This sort of thing is a well-known problem - the English even have a phrase for trips routed to avoid inadequate or over-tolled motorways - "rat runs".
One way out is to toll by forcing everyone to have a GPS in the car that continually reports even the smallest move to Big Brother (and to advertisers when Big Brother starts selling the data to raise even more money.) But I just phrased that pejoratively in order to point out the problems it will raise. Keep in mind, for example, that in many 'Third World' countries, buses and trains routinely suffer mysterious breakdowns when they are headed towards the sites of, say, opposition political rallies. Is anyone so delusional as to think that politicians could really be prevented from abusing universally mandated GPS not only in that way, but in myriad other ways?
Last time I checked, Federal tax per gallon of gasoline was about 18cents. California also matches with about 18cents tax per gallon, too, for a total 36cents/gallon.
I thought that those taxes helped pay for the roads....
It seems reasonable for them to go up a penny every now and then, until both were about 25cents/gallon, if it would help keep the roads in shape.
I do not know of a single state where gas taxes pay for city streets.
In a triumph for the road & sprawl lobby, property taxes are the most common source of funding for city streets (except major thoroughfares dubbed "highways") (sales taxes, parking meters, fines, etc. as well in some locales). Meanwhile the gas taxes on fuel burned on city streets goes to pay for more highways & sprawl (and now to pay for repairs of same).
Best Hopes for Gas taxes on Tolled Highways paying for repairs on city streets,
Alan
Except that wouldn't be enough, especially if you add in city streets. Here the streets last more or less 30 years. The replacement rate would take over 100 years, assuming no new build Most new money goes to widening and improving. Hence, existing roads are bad and getting worse. To fix it would take thousands of dollars per citizen -- and would still take years.
Speaking of trillions, Michael Lewis was interviewed on 60 Minutes last night. Very interesting. A link to his book:
http://www.amazon.com/Big-Short-Inside-Doomsday-Machine/dp/0393072231
The Big Short: Inside the Doomsday Machine
By Michael Lewis
Did not know this was the same guy who did The Blind Side. A broad-spectrum writer!
Link to Lewis interview:
http://www.huffingtonpost.com/2010/03/14/michael-lewis-wall-street_n_498...
Lewis said something to the effect that Wall Streeters were paid to take delusional positions (about the housing bubble), so they took delusional positions.
Kind of reminds me of Yergin, et al, regarding global oil supplies. And I suppose that one could extend this to large portions of the MSM.
In "Moneyball", on a topic I know a lot about, baseball, Lewis wrote a very interesting but ultimately flawed narrative. Accordingly, I have a hard time taking his "cast of characters" at face value.
He exaggerated things in "Moneyball", so I take it that he probably has done the same in his other books.
Guy is a hell of a writer, but if he has a narrative he's not afraid to bend some facts to make sure everything lines up the way he wants it.
mad -- In that case sounds like he might have a big future in politics.
MIsh's comments:
Insurance is another bubble....I have seen very little analysis of the funding state of insurance plans, but what little I've seen indicates they are just as riddled with income-maxing tricks as any other major fund. If insurance wealth has also turned to dryrot and dust with off-balance-sheet riders and shell companies, what will happen when boomers try to cash in whole-life policies at the same time CA has "the big one"? Long-term, broad-market insurance is likely not viable due to the unavoidable coupling of events -- when it comes to aging of boomeres or mass disasters there isn't sufficient statistical independence.
Not sure how they do it in other states, but here in FL all the companies are subsidiaries, i.e. we have State Farm FL which was kicked out, then allowed back in after proposing massive rate hikes. There was a 10 page article this weekend in the ...Herald Tribune? http://www.heraldtribune.com/article/20100315/ARTICLE/3141081/2416/NEWS?...
They all claim losses but that is after paying bonuses, reinsurance, fees to the master company.... so it's small losses on paper in good years (but 'secret' profits), massive losses all around in a bad one.
It's the 'reinsurance' that might be in trouble if we ever had a real disaster (i.e. a hurricane here, and earthquake there...)
If reinsurance is to the insurance industry what mortgage insurance is to the mortgage industry, the reinsurance industry is tiny but the profits are massive......and the losses will instantly accrue to the insurance company.
This is likely a case where the existence of reinsurance increases risks and low capital for the insurers, and the low-likelihood of yearly loss drives risky behavior (i.e. no real assets to speak of) for the re-insurers.
Insurance, like banking, almost has to be highly regulated because it serves a public service which is prone to abuse when left to its own devices.
Here I am, a free-market guy once again complaining about how free some markets have become.
The worst of this is that, rather than allowing the worst offenders to fail, we bailed them out. Here, the reinsurance companies privatize and pocket the profits (mostly by way of bonuses and other 'incentives') and when the implosion happens, they transfer the losses to society. Talk about your welfare mentalities!
Craig
Of course the aspect that nobody wants to own up to is that people should not build homes in many catastrophe-prone zones, and those that are built should be built either with risk capital (and no insurance) or much stronger designs (cost up-front and individualized, rather than deferred and socialized).
I am going to write up a short post showing how insuring against earthquakes can lead to diverging, unbounded pay-outs.
Thanks for the motivation, Paleocon.
While you're at it, do one on federal flood insurance. Especially coastal.
I did an eathquake one, with a bit on flood insurance in there.
http://mobjectivist.blogspot.com/2010/03/insurance-payouts.html
Floods were one of the original motivations for observing fractal behavior and generating the fat-tails.
http://www.stator-afm.com/hurst-exponent.html
Flooding has a quasi-periodic nature to it. I would just suggest that people not live in places that will flood.
I couldn't agree more. As a hydrologist, I consider everyone living within the 100-year floodplain to be living IN THE RIVER. Just because it's not wet all the time, doesn't mean the river isn't using it.
And then people want money when their house on the floodplain floods? Absolute insanity!
I can see relief for hard to predict, widespread events like earthquakes and hurricanes, but we pretty well know how often and to what depth our rivers will flood. Stay out, or you're on your own when it washes away.
Is the problem really with the amount that public employees are being compensated (and realize that their pension is just part of their total compensation package), or is it that many states and localities have elected to not fully fund their obligations when they were promised, and these unfunded liabilities have been left to accumulate?
I would argue that the real problem is the latter. There are those who will complain about public employee compensation even if public employees are paid one penny per hour. I don't know what the "right" level of public employee compensation is - that is partly an economic issue and partly a political issue. However, I am confident that the real question to focus on is the total compensation package, not just one part of it. And I am also confident that it is really, really stupid to not fully fund the pulbic pension liability when it is incurred. Those jurisdictions that are now in big trouble have gotten into it through the delberate choices of their own elected politicians, and really have nobody else to blame. It was not their public employees who chose to defer rather than fully fund their obligations.
Edit: And by the way, my own state - NC - HAS fully funded its public employee obligations, which is why it is not in trouble at least on that issue. It CAN be done, and HAS been done at least by a few prudent governments.
I would argue that when pensions, salaries, and benefits for public employees exceed the average for private employees, it has gone to far.
Fully funded plans can rapidly become underfunded with an increase in medical expenses or "unexpectedly" poor returns on pension investments. It's worth understanding the future prognostications for earnings on investments -- not many will make their expected returns during a long-term decline.
RANT WARNING RANT WARNING RANT WARNING RANT WARNING
I would argue that this whole fiscal mess regarding pensions, unfunded liabilities/mandates of various sorts,overwhelming govt debt levels,etc, is a result of the general idea that the govt is our Mommy-the basic premise of liberal politics in terms of real world policy and money.
This is not to say that there are not just as many or more self styled and liberally tarred as such CONSERVATIVES out there rooting for a bigger and better spot at the public trough-Our former President Bush and his close to twenty million dollar return on a trivial investment in a baseball team was made possible by fleecing the taxpayers for a fxxxing stadium-and probably less than ten percent of the local taxpayers who were stuck with the bill have ever set foot in the place.
Those who have followed my comments here for the last year will understand that I hold to a large number of what are generally counted as liberal positions, SOCIALLY speaking, including equal rights for women and gays,liberalization and decriminalization of drug use and possession,single payer medicine,tight environmental regulation, and many more.Given time, I could present principled conservative arguments for holding the same positions.OTHERWISE I NECESSARILY WOULD BE DESCRIBING MYSELF AS A LIBERAL.
But in the end, as a CONSERVATIVE IN PRINCIPLE, I have been convinced for decades that the easy solution would eventually be our downfall-and the easy solution has always been to just put it on the tab and worry about it later;and it has been by and large the liberal establishment that has been the effective driving force behind the continious expansion of govt and govt liabilities.
Of course the conservative wing has been more than willing to go along to get what it wants and/or percieves as desirable, or as a necessity, thier main money mania being the gargangatuan military establishment-all politicians principles are after all necessarily flexible enough to keep them in office.
Now I'm used to being roasted as a Neanderthal or worse here, and it doesn't bother me much, except that those doing the roasting don't seem to realize that I'm just as soft hearted as they come.
The only real reason I didn't run off to jion the green revolution wasn't that my favorite professor convinced me not too by saying "double thier food production and there'll just be twice as many of'em in twenty years". I didn't go because I was madly in love with a real country girl with a heart of gold and a Barbie doll body.My hair was down to my shoulders and I was wearing a chain around my neck with a big peace sign dangleing on it.She wouldn't leave the general area where her family lived, and that was that.
I have worked at and supported a lot of things over the years that my brain has interpreted as a lost cause-simply because it was the right thing to do in the SHORT RUN.
But short run solutions, no matter how humane and just they are, when combined with long run reality, human nature , and politics,have a way of turning into long run disasters.
Quite a few of the most perceptive regulars here understand the general overshoot situation very well , and advocate solutions that will require not only biting the bullet in terms of sacrifice and life style changes, but actually CHEWING THAT BULLET LIKE BUBBLE GUM for the rest of our lives.
WE ARE JUST AS MUCH IN A SITUATION OF GOVERNMENTAL OVERSHOOT as we are of ecological overshoot.Of course there is great irony involved and a huge paradox to be dealt with as a result-the only likely solutions to problems that have arisen as a result of too much govt are in many cases likely to be even MORE govt.
Once the govt got big enough that the average citizen no longer had any idea what most of his socalled public servants were up to,the game was essentially lost-the people out to get a nice feed at the trough were able to get it without much if any scrutiny after that.
Since there was little scrutiny, we have a situation now where the average employee of a county govt in my part of the world is light years ahead of his counter part in the world of business and industry-I have a sister who has in less than three years collected over two hundred thousand dollars in insurance benefits for her husband, who had a very severe pre existing condition before she was hired-less than three years ago.
No private employer in this area could afford such a policy-a guy who has driven a dumptruck for a paving company all his life has a pension not at all- but his counterpart at the highway dept made as much money , got four or five times as many paid days off , and retired with not only a pretty decent pension but also highly subsidized insurance.These two examples are the rule, not the exception.These salary and benefit absurdities in relation to the job responsibilities are the reason "going postal " is a day to day phrase in colloquial English.
Of course as I said I'm a softie at heart and I don't want to see my brother in law die.
In a world with infinite resources, I wouldn't mind supporting a larger liesure class of musicians and artists and grant writers and petty bueracrats of every sort out of my very limited EARNED BY PRODUCING something useful income.
Truth be told, now that I'm old,I wouldn't mind having a nice soft job at some state supported college teaching a class or two and puttering around doing a little research occasionally-and I could have had it at one time, except for my uncontrollable habit of actually saying not what is politic but what I percieve the truth to be.The flip side of the old saying about not understanding if the salary depends on not understanding is that if you insist on the truth you simply are locked out.This never bothered me when I was younger, as I was always able to get along just fine without selling out.
Now we in the end find out what the actual results of the truly fine intentions of the liberal impulse are, in terms of the public purse-my truly needy nieghbor who worked his Axx off all his life, and paid in taxes every year,has about half the living standard of the other nieghbor who worked half as hard as a govt employee.My good buddy the housing advocate has collected well over a million bucks already shuffling paper for the Richmond city govt,and will collect as much more again-he never has and never will create a single square foot of housing-I have done more myself over the course of a few temporary jobs there, refurbishing old buildings and houses to modern standards-and I did it as a skilled worker without a benefit package for half the monthly money.
Now none of this is to say that the people who identify themselves as conservatives in our society, and who are sneered at as such by others who call them the same, are any better people , or any smarter, or more realistic, in any way, except in this ONE RESPECT-- they for the most part don't believe in the GOVT-AS-MOMMY concept.This does not prevent them of course for believing in socialism or govt as mommy for themselves and free enterprise for everyone else when it suits them-as for instance collecting a subsidy to make ethanol.
And it certainly does not mean that the magority of them have even a vague understanding of current day realities vis avis the environment, bau,resource depletion, etc- but then niether does a typical liberal.The kind of liberal that really understands these things is fairly rare and is to be found only in small numbers if you look in such places as this forum.;)
Of course the kind of conservative that understands them is rarer still:(
I think I'll add that to my list of quotes.
Thanks.
Seems to me these are inextricably intertwined. Those who choose to fully fund have to balance compensation issues against other matters. Those who choose instead to fiddle can offer the public, and in some cases their union-boss buddies, something for nothing (and hope for a nice juicy bailout from Federal taxpayers when it ultimately goes wrong.) And, vide the housing bubble, who's going to call BS on something for nothing?
As to the compensation levels, well, where I live, every year we get the stories about city bus drivers paid $100k+ to twirl their steering wheels (in utter disregard of the published schedule) - and that's only the cash, not the otherworldly ultra super deluxe luxury retirement (and medical) plans. So I do think public employees are often overpaid, sometimes absurdly so, relative to the private sector that's taxed to pay them. But whether they are or not, the politicians need not even think about it as long as they can put a big chunk of the tab on the never-never or on the Federal taxpayer.
It isn't the pay of the bus driver, but the unfunded liabilities for the pensions that will have the greater impact. You can always drop pay scales, in recognition of exigencies. Retirment funds are a wholly different animal.
Do you think that the failure of state retirement funds (and many private funds), and the Federalization of payments by way of the PBGC will be the single item that finally breaks the proverbial economic camel's back?
Craig
The pay and the accruing pension liabilities are merely inseparable components of total compensation, along with the luxury medical plan and any other odds and ends such as free gym memberships. The only reason we're isolating the pension portion for discussion is that it's easiest for politicians to put part of the bill on the never-never by pretending that the pension liability doesn't exist. To put some other part on the never-never, the politicians would have to issue bonds, which would make their nefarious ways more transparent.
Plus, it would of course be totally outrageous and unfair to expect a 45-year-old to work for a living for a couple of decades longer, when s/he is physically totally worn out from the immensely hard labor of twirling a powered steering wheel. This is so horrible to contemplate that no one would even consider it. Instead, we'll have the tax collector give the already near-naked sheep yet another shearing, which would please the union bosses better than making the compensation reasonable.
I doubt that there will be any single item widely seen as breaking the camel's back - in somewhat the same way that I doubt that 'peak oil' in a geological sense will be widely seen to have occurred except maybe a very long way back in the rearview mirror. Events tend not to unfold nearly as simplistically and instantaneously as many TOD commenters tacitly assume - just consider how long the USA had been hollowing out, running up debt, and even making countless notional house-millionaires out of thin air, all with no visible consequences. That leaves many ways to spin events even simply by emphasizing selected aspects of their unfolding. So it is that we get assertions about the shortage of oil demand, or on the other hand about the forever-imminent sudden irreversible descent into Mad Max.
It's not that different. They can always increase the amount current employees must pay into the pension system. That is traditionally what they have done when the budget doesn't balance.
Both? If they had to fund the commitments they wouldn't make them, and hence the compensation packages wouldn't become so obscene.
I doubt that. There are rules which specify how much capitalisation retire funds must have. The problem is that those rules assume that future investment returns are not much below historical norms. So when markets crash, the suddenly nearly all pension funds public and private which had looked healthy are now seriously underfunded. Of course the added pressure to start shovelling more money to make up the shortfall comes just when everyone is hurting financially. Defined benefit plans thusly accellerate the business (boom bust) cycle. Now all this is independent of whether public employees may be overcompensated. But accounting for funding defined benefit programs ignores the systemic risk that a market crash can leave them seriously underfunded.
Few private companies can force their customers to cough up the money needed to refund their bust pension plans. In the case of PG&E however, they were given a rate increase to force their customers to pay up.
There are rules, but the pension funds are routinely raided for cash when the budget is tight. Massachusetts ran into trouble because of that a few years ago. They raided the "lockbox," then had to pay it back.
New York is in better shape, because their office of the comptroller has a long tradition of fending off pension raids (which irritates the governor no end). Still, they recently made their pension more generous, because it was doing so well. They lowered the age of retirement to 55, and lowered the amount that had to be contributed. Stupid, IMO. They were expecting the market to go on like it had been. It didn't.
Well it is true, get a few good years investment wise, and some CFO type will discover that they can become a hero by discovering this magic way to improve the bottom line. For public corporations, the payoff is short term profits and stock prices (never mind the longer term). For public government, the payoff is "I cut your taxes -because I was so smart to find this extra cash".
One of the things that happens on the downside is that the rules don't force extra funding after a single bad year. Under the assumption it was just a temporary markey movement, that avoid overreaction to short term changes. But, then a year or two later it becomes necessary to pay the piper. But I see this whole thing less an an example of perfidity of the managers, than of a system which is flawed in the first place -it assumes that the good times will continue to roll. The managers are just doing what the law and the incentives tell them they are supposed to.
The moral of the story is to always be extremely wary of any public sector CFO who promises big bucks by doing something that is not ordinarilly done. The number of times I have seen this type of scenario backfire and explode are too many to list.
States are considered sovereign and thus are not subject to the same regulations as are private pension plans. Some states do have their own laws that bind themselves. (NC is one of the few in this category with very rigid laws, which is why our plans are fully funded.) What will happen for states that elect to not fully fund is that their auditors will insist that there be a note disclosure in their annual financial reports. The only real consequence of that is that rating agencies might downgrade them if they get too far out of whack. I wish I could have a dime for every citizen who does NOT read their state's annual financial reports, I would retire a very wealthy man.
Cities and counties will, like most large corporations with an unwieldy pension problem, shed the necessary portion of those obligations in bankruptcy court. Pensioners are always dismayed to discover how far down the priority list pension obligations fall in a bankruptcy. States themselves can't do that -- Congress has made no provision for a state to declare bankruptcy -- but the federal courts may find that a state has the authority to unilaterally change pension benefits on their own, assuming that such action does not violate their state constitution.
It is also worth remembering that while a state's pension fund may be "insolvent", the only creditors are the people with pensions. Some number of state pension funds that look insolvent would be fine if they only had to pay 90 cents on each dollar owed.
Congress can't make provisions for state bankruptcy, because the states are sovereign. It's outside the scope of national law.
Four men stand in a large field. A large and unusual storm appears on the horizon. One man sees it. One man hears it. One man feels the wind. It is a storm unlike any they have experienced, but all of them can tell in which direction it is, and that it is approaching fast. The fourth man does not see it (he is social networking on his ipod).
After some time it has become quite obvious that it is headed right at them. One man says that it is very bad, there is nothing that can be done to stop it and there is no shelter (all true), and that it will probably kill most of them. One man recognizes that the chances of survival are slim, but is looking for what paltry shelter is available. One man is busy calculating approach velocities to find exactly where the center will pass and how high the winds will be. The forth has now seen the storm, but is angrily insisting that it will tun at any moment, and trying to interest the others in a game of Monopoly.
Good luck to all.
It looks like the weather will be turning soon here in eastern Pennsylvania, and there is so much to do. There will be way too many demands on my time, both at work and at home. I am determined to make progress on many projects, so something has to give – one thing will be time spent on the internet reading. As I said in another thread recently, I think the broad outlines of what is coming are more than clear now, and it is time for more doing and less studying - early to bed and early to rise and all that.
Re: Kunstler: Where have we been; Where are we going?
In the comment section of Kunstler's Blog was a reference to a NY Times article about an internet phenomenon: Lots of Web Traffic for such a Tiny Town
I watched the slideshow presentation and I was deeply impressed...not simply with Mr. Smith's attention to detail but his unerring instinct to tap into my own personal nostalgia. I suddenly remembered long ago road-trips with my family in a shiny 64' Cadillac Coupe De-Ville, road-side cafe's...It was all so seductive.
But today that dream has morphed into a nightmare. I pass by storefronts downtown that are empty while a couple of miles down the freeway a WallMart is packed with Consumers buying things. Sometimes I feel eerily like Kevin McCarthy in the 1956 film: Invasion Of The Body Snatchers:
I suppose it will take a disaster of epic proportions to wake us from our dreams of "technotriumphulism".
Joe
jimmy cracks corn and i dont care.....
someone should make a graph of all the times jhk calls some group of people "nahzees".
as to internet meme i recommend:
http://rbantiques.com/AC4804.htm
"In 1934, electrician and hobbyist Frank Skroback built the first airplane that could be driven on a road. Or the first car that could be flown. It has six wings and an overall width of seven feet, so it can fit inside a lane. The plane will be auctioned at Red Baron’s Antiques in Atlanta on March 13."
or
http://nowthatsnifty.blogspot.com/2010/03/30-marvelous-motorcycles.html
"When it comes to custom motorcycle builders, there’s crazy and there’s really crazy. Falling into the latter category is one Mr. Clemens F. Leonhardt, who has just finished building what he refers to as “the world’s biggest motorcycle.” Excluding some other crazy creations, such as the Monster Bike, the guy’s got a point. Unlike other two-wheeled behemoths, the Leonhardt Gunbus is actually ready to ride on normal roads and will soon go into series production. That’s right… you’ll actually be able to buy one of these. Next on the agenda is an equally massive sidecar, which somehow seems just right for this bike."
i get a real jolt about folks using the internet to complain about technology. HAH_HAH!
no one gets out of here alive & it's all good.
That ship sailed at least 20 years ago, the last time I drove through the small towns of Oklahoma. This is something you mainly notice when you don't take the interstate. On the interstate, it's all junk, so there is no danger that you will be subject to any nostalgia pangs.
On the other hand, there a lot of towns here in Northern California which still retain much of their charm and have not been lobotomized by the likes of Wal Mart. Arcata, Ca., for example won't allow big box stores.
Not much nostalgia here. It has been said that New Orleans lives it's history.
Today, I walked 10 blocks up Magazine Street (4+ miles of small shops & restaurants. 11 coffee shops but only one is Starbucks) in a streetscape alive with people (chatted with acquaintance). Looked for changes in neighborhood (I walked from Lower Garden District to Garden District, quite beautiful !). Went to Helm's Paint branch (local Benjamin Moore dealer), bought a gallon of Aura and two tubes of lifetime caulk and joked with saleslady.
Came back on Camp Street and stopped by house where Jefferson Davis died. Talked to tourists there. Joked with crew working on building as I passed.
I feel as if the "Good Old Days" are today :-)
Best Hopes for Living Today,
Alan
Excuse me Dr Chu! Did you say that
?
What exactly do you mean by that? Do you foresee some sort of constraint on fossil fuels in "the near future"? What form might these constraints take, pray tell?
Alan from the islands
He's from Berkeley, and I do Cal-speak...it means "We're at Peak Oil, folks. Buy some solar panels"
Apparently some people missed the memo, but Chu was asked point blank about peak oil recently and gave a generally dismissive "we'll think of something" technocopian response. So if you think when he says "carbon constraints" you think Chu is forseeing anything resembling powerdown, forget it.
Of course Chu believes in Peak Oil. He just can't say that thanks to his current job (if he wants to keep it that is). Goldman Sachs (or whoever it is runs things these days) won't let him.
Here's a slide he presented in 2004
http://www.lbl.gov/solar/ipfiles/plenary/chu_Solar_to_Chem_Energy_3-28-0...
"hundreds of millions"? "$154 million"? He sounds like Dr. Evil in Austin Powers. Like he's been frozen for the past 30 years and doesn't realize that all the important budgets today cost "Trillions". He is talking about research investments of one one-hundred-thousandth of GDP.
From today's Kunstler:
A perfunctory googling couldn't help me with this, but someone once said a true "prophet" reveals to us not the circumstances of the future but the truth of the present.
Kunstler is someone who has said things that I find despicable, but the above quote shows his capacity to reveal to us who we are today, in sheer poetic style with that "gaping into the rear-view mirror, which is the last place to look for your destination."
We have enough "pundits" trying (vainly) to predict the future, which is a fool's game. They should give up the pretense of augury.
But that doesn't mean we should sit around moping for what is lost.
I can't read Kunstler with a straight face. He's like the left's answer to Peggy Noonan: the grand proclamations, the constant first person plural, the endless moralizing, the "feeling that something is slipping away"...
He reminds me of the computer generated Foucault analysis that got published in a respected literary journal only to have the grand hoax revealed on them after the fact. It's among the worst pseudo-science out there, and people eat it up. Now that's scarier than anything Kuntsler writes.
"I can't read Kunstler with a straight face.""
I can't either...I find him a Misogynistic nut case that is capable of writing a few words to feed Pablum to his audience.
He is a bookseller....not much more.
Whatever his faults, he's synthesized a view of the future that is much closer to what you are going to get than anything you'll get from the mainstream pundits. I suppose his message gets a bit old if you read him week-in and week-out, but The Long Emergency was, IMHO, a brilliant opening shot in what promises to be a long and tumultuous century. I wouldn't ignore the man. His anger may be over the top, at times but he has a message that needs to be heard.
Kunstler's schtick just isn't very useful, I'm afraid. All it really does is make people simmer in hatred over the status quo. Kunstler also doesn't seem to have the ability to grasp the bigger picture. He sees everything in a simplistic battle of suburbs vs. new urbanism. He likes to disparage the malthusian camp of peakers. I just think Kunstler is in the lower end of the intellectual gene pool of doomers. He's appropriated a lot of ideas from elsewhere and branded them for himself, but he doesn't bring a lot of unique insight to the table vs, let's say, Greer or Sharon Astyk.
I think it is more likely that Kunstler can attract and hold an audience than either of the two you mentioned. Both are quite good and certainly his intellectual equal. But Kunstler has a way with words that makes otherwise dull and gloomy subjects interesting.
Kunstler is a top feeder on the intellectual ideas of others but that doesn't change the fact that he is a good and very entertaining writer. The Long Emergency was a wake up call for many and was a useful contribution to the idea that we cannot expect to continue business as usual. Artists sometimes see what is happening before the more cerebral, including the scientists.
For example Cormac McCarthy's The Road, a post-apocalyptic tale of a man and his son trying to survive by any means possible. Quite a simple story actually that McCarthy said came to him in a dream after he had had a son late in life. That primal drive, the bond between a father and his son, is all the novel was about but it was awarded the 2007 Pulitzer Prize for Fiction and the James Tait Black Memorial Prize for Fiction in 2006.
The movie, which was directed by John Hillcoat, was a box office flop but a critical success. Although the Academy passed it by (no surprise there) I can guarantee you that 20 years on it will be considered one of the more significant works of the new millennium. How many on this site have actually got off their derriere long enough to see the film? I would guess a small minority.
As far as the venom of the attacks on this site towards Kunstler I don't get it. Kunstler is a writer of significance who has reached a larger audience than any other peak-oil writer. He's not a scientist. So What! Neither was Upton Sinclair! Everyone forgets the nit-wits at the IPCC with scientific credentials that have set the message of Climate Change back 10 years.
Enough...
Joe
You realize you're talking about a druid and a lady who has 4 children, don't you? Not exactly the best spokespeople for how we can manage the decline.
There is just not anybody out there who is a leader for any type of new movement that incorporates both peak oil and acc, because they are exceedingly complex and global issues. Hopefully as collapse accelerates we will get more and more people on the local/state level who will see the light and begin taking the baby steps towards peaceful transition.
I happen to get alot of valuable insights from reading Kunstler. I think he's one of the best social critics of our time.
Ha! Yes, exactly.
Both charlatans.
I don't think there is any call to label Sharon a 'charlatan'. She provides useful information with a more personal touch than most, and appeals to a crowd that isn't just numbers-and-data nerds like those here. Plenty of people end up with children before they figure out where the world is headed, or have blended families of various sorts to grow the total.
As for Greer, why throw out the baby with the bathwater? So what if he's a druid, if some of what he says has value? I don't automatically throw out what Ron Paul says just because he's a bit right of normality, or Beck because he can cry on cue, or Ilargi because he's a social liberal. I think "charlatan" should be saved for those who speak disingenuously for personal gain.
A very reasonable and humane analysis :-)
Best Hopes for Comity,
Alan
There's very little about Kunstler that's "Left." He's far more akin to Glenn Beck and Rush Limbaugh and has a similar group of acolytes.
yea, agreed. He preaches to the folks who see conspiracy theories in government, which is sad. I work in government, I see the sausage made everyday, while it's often incredibly dysfunctional, wasteful, corrupted, etc -- the one thing it's certainly not is a conspiracy theory.
It's laughable that so many people are so sure of their conspiracy theories lock solid grip on consensus (they all agree to screw us over!), but if you get 30 pols in a room you'll have 30 different opinions. These folks couldn't agree on a dinner menu, let alone a grand conspiracy.
He's no Tea Party sort, and conspiracy is as much left as right. The left held out all sorts of conspiracies for Bush and crew that they probably aren't smart enough or motivated enough to ever hold together. Not to mention most of the policies have continued under Obama.
Death of suburbs is a progressive movement. Here the mid-town crowd (most of the politically active) is heavily left-leaning. Kunstler is a shock-jock for societal nihilism from what I've seen.
Beck has recently been teaching history on his show, showing the rise of Nazi groups in the US before WWII, and the subsequent interment camps. Yet a couple of decades later we had red scares and communist groups on campus.
Some are readily convinced by those who speak firmly with a sense of conviction. Other like to be subtly nuanced with a cleverly marketed message. Some want to be angry, and other want to be afraid. Some are simply depressed.
In this Internet age, you can rest assured that whatever the listener wants, they'll find somewhere. That's neither good nor bad. IMHO, the mistake each of makes is assuming that we're somehow smarter, wiser, and better to judge than most others -- most likely we're just in a group with similarly attuned filters and predispositions.
I find he is very entertaining if only done occasionally. I need to wait six to eight weeks between reading posts. Then they are very enjoyable. When I tried reading him every week, it soon became depressing.
I am off to the movies tonight to see 'Dirty Oil' by Leslie Iwerks. On the off-chance that there are other readers of TOD in Sussex, England it is showing at the Duke of York cinema in Brighton:
http://www.picturehouses.co.uk/cinema/Duke_Of_Yorks/News/Item/Dirty_Oil_...
Best to book in advanced as only 100ish tickets remaining - booking number is 0871 704 2056
There is then a panel discussion with some interesting people and the director via satellite link up, I believe.
From the blurb on the cinema's website : "Here the vast and toxic Tar Sands deposit supplies the U.S. with the majority of its oil" which is clearly factually wrong!
Anyone got any questions to be posed; I'd be happy to try and get answers.
Speaking of movies the drill rig broke down Sunday and I was able to sneak off to see the "Green Zone". A truly great action pic. An added bit of trivia: many of the supporting cast are vets from the first Iraq war. Is it a true depiction the weapons of mass destruction fable? Maybe...maybe be not. That horse has been ridden to death on TOD. But it does offer a plausible possibility. Not so much an anti-war flick as an anti-gov't tale. Be warned: the ending will keep you on the edge of your seat for a good 20 minutes. For all us action junkies it's a very good ride. The only downside is the time it takes to get that bad taste out of your mouth afterwards. Does a fair job of depicting our military being simultaneous heroes and victems IMHO.
Oh yeah.. the old 'drill rig broke down' routine to skive off work and go to the flicks. You don't fool anyone Rockman!
HA --And I pulled the same trick again this morning at 1 AM. So here I sit in a nice motel room waiting on the pizza delivery guy and enjoying TOD. And still on the clock. Think I'll cruise down to Hooters for supper tonight and enjoy my expense account. It is good to be king!!!
From article on top:
This cheating from OPEC I mentioned last saterday. It is important news and says something about their spare capacity. It must be far less than what they claim.
Yes, selling oil fast at a lower price is a standard wealth enhancing strategy.
Not sure if that's sarcasm? Either way, for any particular country selling more oil = more money. The quota system is their way of solving the tragedy of the commons problem -- it's just not working too well.
Even at $80 there could be "more expensive" oil to be produced at a profit. Or they could be foreseeing a much higher price in 2-3 years and planning for that.
In any case, prices are still very high given the supposedly relaxed quota compliance.
Re: High Oil Prices
The average price to date for 2010 exceeds the annual oil price for all prior years, except for 2008 (when we averaged $100).
The rational behavior for an exporting country expecting oil shortages this decade would be to only sell enough oil to meet immediate financial need. That reduced production would make future extraction less expensive.
Ah, yes, but "immediate financial need" is always determined by the ruling class as "all we can get hold of".
Rational is not part of the equation, else the entire world would be saving oil for the future on purpose.
I simply expect the ruling class to act in their own best interest.
I think you may be mistaken in believing they act collectively rather than individually. It is to the relative advantage of each player to maximize near-term gains. A ruling family may endeavor to do better, but even that requires recognition of the broader situation.
Not only that, but on average they may be no better at intertemporal comparison of utility than anyone else.
exactly
yes, and oil fairies
Hahaha! LOL, in fact. Check out Barbara Tuchman's The March of Folly. Or, come to think of it, any other history book.
Thanks for the laugh.
dc -- As odd as it might seem it's really more of a wealth maintenance strategy. I don't knoiw if they have the same pressure as US companies but here when prices drop operators are more likely to do what ever they can to increase production rates as prices drop. Profits are one thing. But cash flow remains to be the driving strategy for most companies. Look what Devon just did: sold their Deep Water GOM and Brazil fields for $7 billion cash. You can bet they gave up a lot of future profit for the sake of an immediate cash flow injection. Just a guess but considering how much money these govt's spend to keep the natives happy and peaceful I suspect they worry more about cutting back on their budgets then ultinate profitability.
What's true too is that much oil is under contract, I believe. Also public companies must produce steady revenue.
My point is mostly to people who grab on to any negative piece of news. I believe it's still valid to say that it's hard to look at the overall behavior of the market, including futures, and say that people in the industry are behaving in a way that indicates a sharp downward trend in supply.
dc -- Not sure I follow. Are you thinking that the industry is not acting agressive because it doesn't see a drop in production? Most operators I deal with want to be drilling more right now if the capex were there. My company's biz model is predicated upon a supply disruption in 3 to 5 years. Until the recent slide in NG prices economics for conventional oil/NG drilling were very good. Much lower drilling costs and many viable prospects for sale. We see a drop in supply but not for 2 or 3 years for NG. Oil in the short term is difficult to predict IMHO. But on the long term everyone I know in the oil patch understands PO quit well. The more difficult question is repeated demand destruction from price spike periods.
This does not follow. If they are pumping *more* than they are supposed to, if anything, that tells us they have *more* spare capacity than advertised rather than *less.* If they had less spare capacity than advertised, they wouldn't be as able to pump more than they're supposed to.
No. What OPEC produces more you have to substract from the spare capacity. The spare capacity calculation is based upon its production quota.
Look at that last paragraph. Doesn't that size up peak oil? Seems like greater efforts are being employed with super straws to maintain and in some cases even force greater flow, but at ever increasing costs. But the thing I keep wondering is, won't all these efforts to raise and keep the flow at a sustained high level, just exacerbate the descent from peak?
It's kind of like running a 400 meter race, and as you start to feel there is only a certain amount of reserve left, you acclerate towards the finish line at your fastest pace, breaking the finish line, only to then have your energy level and physical state go into a sharp drop off. Then all you can hear and feel is the beat of your heart. Well, I'm pretty certain when that time comes we'll all be feeling our hearts beat real fast.
In our case the finish line may be a cliff, and we won't have enough energy to stop in time.
Not a problem when one can fly.
Yes, I have been thinking about this a lot lately. In fact I have hardly thought of anything else. All these efforts, like Saudi Arabia going from verticle wells to horizontal wells and from simple horizontal wells to horizontal MRC wells, every time they went into steep decline.
What I believe we will see, when the final production profile is drawn of world oil production, is a shark fin production curve. Well, actually a long plateau, beginning in 2005 with a shark fin dropoff. All those MRC wells are keeping the oil production high but are sucking oil right off the top of the reservoirs.
I think that sometime between now and the end of 2013, most likely about mid 2012, it will become obvious to everyone that those huge OPEC reserves are a myth.
And it is the same story in Saudi Arabia, Kuwait and just about every other nation. Even Russia has gone to this type of recovery in order to keep their tired old fields alive. The point is these enhanced oil-recovery methods, like horizontal MRC wells, are keeping prodction at peak, or near peak, well past the 50 percent depletion mark.
Ron P.
For 2006 the UAE had the dubious distinction of having the 3rd highest percentage of gas for power generation of any country in the world, no less than 98%, save Trinidad and Tobago and Turkmenistan. Burning oil would be a step forward for them, sorta kinda. And they are one of the wealthiest and most credit swollen of OPEC nations with a 3 year old push for renewables, yet are still spinning their wheels in the mud. Their goal is 7% renewable by 2020, modest enough, yet we've seen how much boosted production came out of the Kuwait Project. Maybe these people aren't cut out for grand schemes? Oh yeah, forgot about the islands and monstrous buildings.
At any rate, striving to achieve "only" 91% dependency on NG is...?
2,000 MW (24/7) for Phase I of the world's largest aluminum smelter.
http://www.business24-7.ae/companies-markets/construction/emal-will-be-f...
Hint: Aluminum smelters go where electricity is cheap.
Best Hopes for less Coal Fired Al smelting,
Alan
Cripes. Similar addition for phase II, and according to this link they are currently sporting about 11k MW in the first place; my calc suggest about 7.6k MW in 2006.
Did we scrap all of those smelters up here in the PNW? Cheap hydro trumps stalled NG, Kuwait of course have major peak demand A/C needs in the summer, and were shutting down refineries a few years ago to cope. Local News | Intalco Works says it could shut without BPA break | Seattle Times Newspaper
I don't see any good coming from selling them power below market price. If they can't make a profit at market price, that implies the power could be better utilized elsewhere. During the early years of BPA there may have been excess power, but there are plenty of power consumers on the other end of the transmission lines.
As we continue to hear that oil must drop because inventories are way up, it seems to me that those who are purchasing today to hold in inventory are probably wise. If oil price increases as production drops, those inventories will rise in value as well.
Then we hear:
Now, if the OPEC needs to increase rigs by 8.4 % just to maintain steady production, what do you think is going to happen to price?
The twin items on Shell's plans to increase production every year through 2020 is a laugher as well. What they plan to do is to purchase other producers, and add that production to their own steadily declining base. And, the second item shows that they may not succeed. I mean, what if no one will sell to them? They go down with the rest of the rats... I mean ships.
Craig
Storage of renewables
I found this panel discussion last week very interesting:
(video starts on link)
http://alwayson.goingon.com/page/display/34622
"The UN climate panel estimates the average person in the developing world will be about 35 times richer by the end of the century, so we’re talking about very rich people. If you look at a Bangladeshi today they are poor, but by 2100 they will be as rich as people in the developed world." Lomborg
Just when I thought we'd already hit peak stupidity.
This is perfectly possible in the relative sense. Paleocon's Lopsided Lemma: We can't all be rich, but we can all be poor. And actually that's the best possible outcome.
This is a part of my universal leveraging theory, that we leverage the past through fossil fuels, the world through globalization and capitalism, and the future through debt and pollution: Since the human mind institutes high time discount factors, we will always err toward more human suffering later (and distant) rather than taking some lumps earlier (and close to home). Whether spread over time, between nations, or across social classes, equalized suffering should be the goal, but the reverse is true. By having some few suffer less, a large number of others must suffer disproportionately more.
Corollary: the future can't be brighter -- if it were, we'd borrow more from it.
Entropy sucks.
But the U.N. is probably estimating 10 billion people and those of us in the "developed world" living like kings as we become melded into cybernetic robots with nanobot fuel to run our flying cars. Most likely not what you have in mind.
I suspect you will have kings, and many living like kings, though of a terribly small percentage overall. If WHT's dispersive/entropic theories hold true across enough orders of magnitude, at some level of wealth fulfilling the mildest whim could result in suffering or death for a multitude, likely without either party even understanding how or why.
Relatively speaking, I'm no "king" but I suppose I could be an oppressive minor lord. If I drive 6 miles in an SUV to get myself a steak dinner, have I sealed the fate of a half-dozen Bangladeshi orphans?
No, they sealed their own fates. The steak is from the Midwestern U.S., not Bangladesh.
So you're saying it's their fault being born in Bangladesh instead of Kansas, where I could at least have given them my scraps after the meal? Why are poor people so adamant about being born a long ways away from the rich people that could help them>
It's their fault for their population boom, they can reap the consequences if they don't get to eat.
"It's their fault for their population boom"
Yeah Flo, they have about 80+ million children. We can blame them. But don't worry, they don't live nearly as long as we do.
And not the fault of westerners who sold them the green revolution but forgot the condoms?
Although I agree that the third world will do very poorly, I take no pleasure in it. In fact, I think it's downright perverse that North America will survive the die off and boiling phase of mankind better than most - after doing all it can to cause it!
I think he expects 34 out of 35 to die in overshoot, with the survivors inheriting the spoils.
Re: Charging Ahead: Electric Vehicle Rollout On Track In NW
The EV Project » Charging Maps
Sweet, I can drive to some winery out in Dayton or a trailer park in Wilsonville, or the Hillsboro Civic Center. Or various branch offices of my electric utility, PGE. They also count all 3 PGE chargers at the Portland WTC, which have been in place for about 30 years. For that matter the branch office chargers may be vintage, too.
I count 22 in Oregon. Pick up the pace, chop chop!
Putting them in homes is an interesting idea - and probably lawsuit fodder, too.
Econbrowser: The challenges ahead for world oil
I've charted the decreasing elasticity of oil markets myself a bit, with charts of YOY production change over 1965-present - in the 60s we could utterly swamp the market in a snap of the fingers. It's good to see this topic fleshed out in detail.
Here's a graph I cooked up the other day:
Just a simple head count per year of the number of nations which either increased or decreased oil production. The increases are showing a recent downturn after decades of plateauing, and the decreases show an unmistakable trend up. One would want to balance this out by weighting how much actual volume is in either camp, but this is a good starting point, a simple visualization of maturity spreading through the petroleum production world.
Nice chart, KLR. Did anyone else notice that strange flattening in 2003 and 2006, followed by two consecutive bars where red is lower than blue? Could that be the look in the rearview mirror at the peak of oil in 2005? That, after all, was the year that production of crude reached its peak (as a bon mot to the deniers, I will add, "to date").
Predictions: many more wells added, insufficient to impact production. Cost of extraction increases: demand is now based on, not price, but a triaged sense of need. Cost of necessities grows, availability of luxury items declines. Food, shelter, clothing and transportation costs overcome the rest of our 'economy,' and international trade drops precipitously.
On second thought, perhaps this is actually a look at the present rather than any sort of prophetic utterance. What we see today is a lot of "official" spin, a rather clear perception by the public of reality, and a chaotic beginning to the decline of the age of oil. What we need is clear headed leadership from government, a well thought out plan to replace the unsustainable megalopolis of growth with a means to reduce energy consumption and population during the run down before it gets totally out of hand.
Any bets humankind doesn't get it? I'd bet on final numbers, but don't think there is any way to collect in any case.
Strange species, homo sapiens. Wonder if they'll be missed.
Craig
What are "deniers" denying anyway?
- that there is a finite amount of oil ?
- that peak oil irrefutably leads to economic disaster?
- that everything sucks?
Seriously, I don't know. It just seems to be a term that means "any jerk who's opinion varies from mine". I've never read a person here who doesn't believe there are important issues concerning oil and energy.
No, it's more than that. It's a riff on "Holocaust denier", which can draw imprisonment in a number of European countries. It's meant to be an automatic conversation-stopper. If I call you a denier, I win. (Plus, I put you in the impossible position of having to prove a negative, so I win forever.)
I will take a serious stab on your question, what does "denier" mean.
Denier, in the context we are using it, means a person who takes a position in opposition to established scientific data, with no rational basis, or whose basis is specious.
Deniers are linked to the professional deniers who claimed cancer is not caused by smoking. The same group also denies Anthropogenic Global Warmingution, and Peak Oil.
They are establishment employees who are paid to cherry pick data to try to establish a "controversy." They then urge others to teach that controversy, and be 'even handed' by giving the denial the same weight as the established data, though the data used is either nonexistent or of highly questionable veracity.
Their job is, basically, to delay any changes to allow BAU for a longer period of time, so as to continue profits for their employers. Sometimes they are called things like 'spinmeister,' spokesperson for the 'such and such think tankj,' or frauds.
The job of science is to review even the denial data, and to ferret out truth. The job of deniers is to delay and confuse. Deniers' job is much easier, since they have most of the MSM working with them, and because the average homo sap is afraid of change, and AGW and PO portend enormous and uncomfortable change. Anyone who tells the average Joe that everything will be fine, and that he can stay plugged in to his 58-inch HDTV, eating junk food and drinking beer, is fine. Never mind that delaying needed change will make things much worse.
I guess I should put in my own rant alert now?
Craig
That is a good call for the professional denier, but I think there are other subtypes in the phylum ... perhaps they can be called "amateurs". These are people whose whole life has been based on a couple of very strong themes - firstly, that economic prosperity (and therefore a happy life) is based on growth ... not spectacularly outrageous growth, but just a gentle up-slope through the generations - what we have done in the past will continue into the future.
Secondly, not only is growth seen as both good and the norm, but industrial enterprise, bustling new towns, lush cornfields, throbbing factories, and subduing nature with great dams and mighty highways, is both admirable and morally right - and only an outright Commie would want to see this come to an end.
And thirdly, there are so many problems with the American Dream (and it is not limited to America - let us say the Western Dream - but even that is unambitious), that Peak Oil and AGW are seen as huge threats to all of the above. Real last straws, brought about (a) possibly by dodgy science, and (b) certainly by lefties and dirty-bum hippies who want to see the end of the American Enterprise, and this is their foot in the door.
In other words ... give in on Peak Oil or AGW, and the whole jig is up - the bad guys win, and we're sleeping in plastic bags and our kids do worse than we did ... it is literally unthinkable, and to the extent possible, totally unacceptable. These are the amateur deniers, and there are far more of them in the room than you think.
zaphod42:
Agree 100%, and thanks for calling them out.
The diff between the two values for '80/'81 was -7 and -2 with the contracting side in ascendancy of course. For '07/'08: -2 and -6. Again, why would the number decreasers increase during history's largest price runup? This is just a crude approximation of the conclusions in the paper Hamilton reviews, but you get the idea.
Ostensibly unconventional oil can be likened to a new nation, with infinite URR for all intents and purposes, assuming it can be brought on line in meaningful quantities in the first place. Or peak demand will make the whole thing irrelevant. I've an article in the pipeline here analyzing the latter. Like the supply side we're not matching up to historical precedents.
One thing I've not seen talked about much is that in a lot of countries (including India & China, IIRC) oil price is fixed by the government. The price is adjusted slowly and doesn't fluctuate much.
That would be a good reason why the elasticity would be low.
Ofcourse, even in most OECD countries tax is a substantial part of the price. We are talking 50% or more. In the US it is just around 3%. So, when the price of oil goes up, as a % it is felt immidiately in the US, to a smaller extent in other OECD - not at all in many developing countries with fixed government price.
In OPEC it is even worse. As the price of oil increases, those countries get more money which triggers more economic activity. The oil price is ofcourse extremely low and fixed. This means, in OPEC as oil price increases, the consumption icreases too.
Does anyone have contact coordinates for David Hughes, formerly of the Geological Survey of Canada.
Try
davehughes at xplornet dot com
Don
Looks like we should have some more oil coming on line soon;
"America's First War in Africa. US AFRICOM Launches Large-Scale Offensive In Somalia"
http://www.globalresearch.ca/index.php?context=va&aid=18099
"A United Press International report of March 10, placed under energy news, offered another explanation. In a feature titled “East Africa is next hot oil zone,” the news agency disclosed that “East Africa is emerging as the next oil boom following a big strike in Uganda’s Lake Albert Basin. Other oil and natural gas reserves have been found in Tanzania and Mozambique and exploration is under way in Ethiopia and even war-torn Somalia.”
The region is, in the words of the Western chief executive officer of an oil prospecting firm, “the last real high-potential area in the world that hasn’t been fully explored.” [13]
The article added: “The discovery at Lake Albert, in the center of Africa between Uganda and the Democratic Republic of Congo, is estimated to contain the equivalent of several billion barrels of oil. It is likely to be the biggest onshore field found south of the Sahara Desert in two decades.”
It also spoke of “a vast 135,000-square-mile territory in landlocked Ethiopia that is believed to contain sizable reserves of oil. It is estimated to hold 4 trillion cubic feet of natural gas as well.”
And, more pertinent to the Horn of Africa:
“A 1993 study by Petroconsultants of Geneva concluded that Somalia has two of the most potentially interesting hydrocarbon-yielding basins in the entire region – one in the central Mudugh region, the other in the Gulf of Aden. More recent analyses indicate that Somalia could have reserves of up to 10 billion barrels.” [14]"
In perspective, about 115 days supply at present rates. It does not put off PO by even one day, but every dollop we find will help extend the available time for retrofitting. Another 4 months helps just a bit.
OTOH, I would be much more sanguine if it looked like the world's leaders give a sh*t.
Craig
BP deign to even bother to track Somalian production, it's just folded into "Other Africa," which BTW is the 2nd smallest source they list - right ahead of "Other Middle East," i.e., Jordan etc. We'll liken Somalia's future prospects to those of another seriously screwed up African nation, Chad; they averaged 14 kb/d gains per year 2000-2008. Most of that happened with 2004's 144 kb/d; since then it's -10 kb/d average.
Point is we will kill for every last drop.
Come to think of it, if the Somalis put the oil into a hijacked VLCC to use they'd have "production" of 5.48 kb/d.
Recommended reading: the chapters on overseas oil in the book Oil on the Brain. Eye openers like the dummy head of a local oil company in Chad who could speak neither English, French, or standard Arabic, so everything was translated at 2nd remove for the author; all the translated statements were vehemently contradicted or denied by standersby, too..
Can't resist pointing out a spot-on prediction I made on Friday, in response to Perk Earl's prediction the Dow would fall 100 today:
Dow up 10-30 on Monday
And the result?
Dow up 17.46
But sorry, I don't give investment advice. :-)
Stuck my foot in it on that one!
A boosted rig count seems like it could mean anything:
1) They are just upgrading things & getting more spare capacity available.
2) Some countries are going to start cheating . . . oil prices drop?
3) They need more rigs & wells just to keep the current production flat . . . heavy declines setting in?
Which is it?
lawyer -- How about all of the above...and then some. I know this might sound simplistic but it just may be so. Assuming they view such investments as the rest of the industry the first priority is typically cash flow. Second priority is cash flow and third, profit. All production declines sooner or later. Old fields are in decline...no debate there. Lots of debate as to how fast but they are declining and that means eventual decreased cash flow. And that means taking action to offset such declines. The question then becomes timing. OTOH drilling during a period of excess capacity might not seem logical but you have to consider two important factors: time lag and costs. Every exporter has X number of projects that will add capacity. But drilling obviously takes time. How do you balance timing? Difficult to model: future price assumptions, cost variables, success rate, depletion rate, demand destruction. I suspect declining drilling costs has been a significant factor for the last 12 months. I’m not connected to global costs but suspect they run similar to domestic. We just drilled a well that had a cost estimate of $23 million a year ago but it costs us $14 million last month. The folks with the project couldn’t find partners last year so it was suspended. Even in the face of falling oil/NG prices the deal sold when costs fell. Thus part of the upswing (perhaps a major portion) is similar cost delayed projects.
So here we are today: lower drilling costs and continued depletion. Excess capacity doesn’t hurt nearly as much as producing below capacity when prices spike. Last summer our company began a biz plan to spend $300 million drilling for oil/NG in the face of falling prices. We still focus on short term cash flow but the end game is to establish a large in-ground reserve base that we’ll flip when prices spike again in 3 to 5 years (according to our owner's projection). And a major factor in our plan is the greatly reduced drilling costs. And that knife cuts both ways: look at Devon that ramped up shale gas drilling a couple of years ago despite a huge drilling cost inflation. Made sense combined with very optimistic NG price expectations. Now 12 months later Devon is liquidating itself: just sold its Deep Water GOM and Brazil for $7 million cash. And their stated plan: plow the money back into domestic projects. Those projects: US shale gas and Canadian tar sands.
As they say, timing is everything.
"As they say, timing is everything."
Amen.
Yes, I agree. That bit of news doesn't really tell us what's going on with OPEC.
My guess is 1), with a little bit of 2) and 3). During the oil price spike, OPEC had serious problems building infrastructure. There were shortages of steel, concrete, pipe, labor. The projects were all coming in late and way over budget. With the drop in prices, it must look like a bargain now.
I think the Bloomberg report is a bit misleading. Worldwide rig counts are still down on peak and the increases do not come from the "core" middle-east OPEC members but from Africa, South America and Asia Pacific regions. 60% of the February rig count increase (compared with January) worldwide comes from China.
http://investor.shareholder.com/bhi/rig_counts/rc_index.cfm
or it could mean reserves are finite.
Comments at TOD often praise China's investment in wind along the Gobi desert but what are the chinese themselves saying about their heavy commitment to renewables?
"Miao Wei, a vice minister of PRC's Industry and Information Ministry, expressed skepticism towards (the effectiveness of) Beijing's climate protection policies. China has invested billions of Yuan in renewable energy, but according to him, much of the money have been wasted. The vice minister said that 'China's current wind power generation park are by large only for show,' and, because those wind turbine generators are erected in mostly sandy and dusty areas, they will soon be damaged, 'in five years, the consequences will be catastrophic'. "
Just another POV.