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Drumbeat: April 9, 2010
Posted by Leanan on April 9, 2010 - 10:15am
Michael T. Klare: 'Two, Three, Many Afghanistans'
"The struggle against violent extremism will not be finished quickly, and it extends well beyond Afghanistan and Pakistan," Obama declared at West Point on December 1. "Unlike the great power conflicts and clear lines of division that defined the twentieth century, our effort will involve disorderly regions, failed states, diffuse enemies." To prevail in these contests, "we'll have to be nimble and precise in our use of military power. Where Al Qaeda and its allies attempt to establish a foothold--whether in Somalia or Yemen or elsewhere--they must be confronted by growing pressure and strong partnerships."Clearly, this is a long-term strategy with far-reaching implications. Even if Obama brings some forces back from Afghanistan in the summer of 2011, as he has pledged, US troops are likely to be engaged there (some perhaps in a covert mode) and in a number of other hot spots--"two, three, many Afghanistans," to put Che's dictum into contemporary parlance.
Richard Heinberg: How Much Oil Is Left?
Mr. Heinberg, your most successful book-title to this date is ”The Party’s Over.“ For those of our readers who have never heard of you and that book: What kind of party is it that you were writing about and why do you assume that this festivity and its special features are about to come to an end?The “party” was humanity’s one-time-only opportunity to fuel economic growth and technological innovation with a bounty of cheap, abundant energy from fossil fuels. The harvesting of oil, coal, and natural gas has inevitably proceeded on a best-first or low-hanging fruit basis. While the Earth still possesses a wealth of unexploited energy resources, the cheapest and easiest-accessed of those resources have by now already been used. All of these fuels are in the process of becoming more expensive, and the various energy alternatives are limited in one way or another in their ability to replace hydrocarbons. That means we are currently seeing the end of economic growth as we have known it. The impacts for transportation, globalization, and world food supplies will be serious indeed.
Saudi Arabia makes strategic shift to increase search for gas and oil
In the face of summer electricity shortages, Riyadh has fast-tracked energy development but is turning to oil instead of gas to fuel new power plants due to insufficient domestic gas supplies. The OPEC cuts have hurt Saudi gas production, which mostly comes from the kingdom’s oilfields, while aggravating the power shortage.That has led to a Saudi drive to find and develop new gas reserves that are not associated with its oil deposits.
Watch out for a double dip as prices at the pumps soar
Are we heading for another oil price shock? I ask the question because the price of a litre of unleaded petrol at the UK pumps has today reached a new all time high, marginally surpassing the previous record set in July 2008.
Will oil be the kiss of death for recovery?
The price of oil has suddenly broken higher - to the point where triple-digit crude is once again in the offing.This week oil climbed to $87 a barrel, its highest level since October 2008. This was after a period of eight months when oil traded between $70 and $80, a narrow band that pleased oil producers without hurting consumers too much.
A rapid rise of prices to levels above $100 would help oil companies, but would it hurt the economy much? Perhaps not.Oil consumption is rising rapidly in the developing world, particularly in China which needs crude to fuel its huge transportation infrastructure system and energy needs of its factories. The People’s Republic may not be able to pass these costs along to consumers outside China, particularly if the global economic recovery is slow. Margins on Chinese goods may be pressured, but the nation’s exporters cannot sell what the global consumer cannot buy. And, the prices that the customer can pay, whether it is an enterprise or an individual, are already strained due to the recession.
British factory gate prices rise sharply
British factory gate inflation rose in March at its fastest pace in 16 months, driven by a surge in the cost of oil and imported goods, official data showed today.
Southern Sudan: oil boom to bust-up?
(Reuters) - With southern Sudan stumbling toward independence next year, the Chinese oil workers in Africa's biggest country are bracing for trouble. For southern villagers like Maria Jande, trouble is already here.
It’s March 2010 and the clang of metal rings out down a dusty street in Sana’a, the capital of Yemen. Soldiers in blue camouflage hold oiled assault rifles, standing among a gathering crowd. One of the city’s dispensaries for cooking gas has just received a shipment. There’s a shortage of fuel all around the city, which is groaning under the twin strains of governmental dysfunction and an influx of refugees from the north. A jet streaks high above us, presumably en route to the border with Saudi Arabia, where the Yemeni military is targeting anti-government Houthi rebels and alleged cells of al Qa’eda in the Arabian Peninsula (AQAP). Some in the West have begun to call Yemen a failed state, but at least they’re calling it something.
Costlier power, longer outages
CUSTOMERS of Manila Electric Co. (Meralco) were greeted yesterday with even longer three-hour brownouts and the announcement of a nearly one peso per kilowatt-hour (kWh) increase in power rates.
Venezuela extends electricity rationing
Venezuelan President Hugo Chavez on Thursday extended electricity rationing until June in hopes that seasonal rains will help refill a key hydroelectric dam that has been drained to critical lows by drought.Chavez said the government will extend its declaration of an emergency in the electrical sector for 60 days. The rationing measures have included rolling blackouts in parts of Venezuela and fines for major users that don't meet government goals for reduced usage.
Rwanda: Gov't Concerned By Increase in Oil Prices
Kigali — As the rest of the region grapples over a continuous increase in fuel crisis, Rwanda remains calm but government acknowledges the looming threat, and according to officials, discussions are going on to mitigate it.Reports indicate that motorists in Uganda and Kenya, for example, are braving fuel shortage largely attributed to the rising world crude oil prices.
Kyrgyzstan Air Base Is Back to Normal Operations, U.S. Says
(Bloomberg) -- The U.S. air base in Kyrgyzstan has resumed regular operations after unrest in the former Soviet republic limited flights temporarily, according to a U.S. military spokesman.“The base has returned to normal flying ops today,” Major John Redfield, a spokesman for the U.S. Central Command, said in an e-mail.
Iran: Obama Pours Fuel on the Fire
Containment and deterrence are both easier said than done. To treat containment or deterrence simply as a rhetorical alternative to military action without making the preparations to conduct military strikes is not only irresponsible, but can also encourage Iranian aggression.
British oil worker shot dead in Ethiopia
A British scientist has been shot dead in Ethiopia's conflict-ridden southeastern Ogaden region.
Gunmen kidnap 4 foreign workers in Nigerian oil hub
PORT HARCOURT, Nigeria (Reuters) - Nigerian gunmen Friday kidnapped three Syrian expatriates and one Lebanese worker near the oil hub Port Harcourt, a police spokeswoman said.The four expatriates are employed by an engineering company in Port Harcourt, the main oil city of Africa's biggest energy producer.
Reliance Purchases Marcellus Stake From Atlas
(Bloomberg) -- Reliance Industries Ltd., India’s biggest company by market value, agreed to buy a stake in U.S. Marcellus Shale natural-gas properties from Atlas Energy Inc. for $1.7 billion.
Gazprom says it has contracts covering all Nord Stream pipeline gas deliveries
PORTOVAYA BAY, Russia (AP) — Russian and German leaders marked the start of construction on a new pipeline from Russia to Europe under the Baltic Sea, with the deputy CEO of gas company Gazprom saying it had already signed up customers for the entire supply."All the gas volumes have either been contracted, or have been formalized in binding obligations," Alexander Medvedev told reporters.
Brazil-West African Connection Sparks Subsalt Oil Search
Chevron is just one of several companies and African governments taking a fresh look at West African prospects as they seek to replicate the huge discoveries made in a Brazilian region with a similar geology.
French Power Legislation Cleared by Conseil d’Etat, Borloo Says
(Bloomberg) -- French legislation that would force Electricite de France SA to sell output to rivals cleared the country’s highest administrative court, Environment and Energy Minister Jean-Louis Borloo said.
PG&E must stop threats to public power agencies
California energy regulators delivered a rare rebuke to Pacific Gas and Electric Co. on Thursday, banning some of the hardball tactics the utility has used in its efforts to derail Marin County's new public power agency.
Gore: Climate change a ‘moral issue’
Gore—who won the Nobel Peace Prize in 2007 for his environmental activism and penned the bestselling book “An Inconvenient Truth”—said the tools needed to deal with global warming are already available. He noted that technological advancements in solar, wind and geothermal energy provide alternatives to a fossil fuel-based economy.But ultimately, what is needed to correct climate change is the political will to make harmful environmental practices—like carbon-dioxide emissions—economically unattractive in the marketplace, Gore said. He emphasized that reversing the effects of climate change is a moral imperative and that ignoring the problem will only imperil future generations.
“Make no mistake, this is not just a political issue, not just a market issue, not just a national security issue, not just a jobs issue,” Gore said. “It is a moral issue.”
Royal Mail's decision to park its bikes defies logic
Bicycles are zero-carbon, cheap, reliable and congestion-cutting - so why is the Royal Mail planning to phase out deliveries by posties on two wheels?
The Coolest Storage Technologies You've Never Heard Of
On the first day of this year, I wrote: "The intermittency problem of wind and solar will be largely solved this decade, as new storage solutions come to market."Yet the pace of progress in storage during just the first quarter has surprised even me.
Readers of this space are well familiar with storage technologies like pumped water, vehicle-to-grid, concentrating solar thermal, supercapacitors, hydrogen fuel cells, and flywheels.
This week, I'll take a look at a few unusual, utility-scale applications.
UK: Record gas prices may be election issue
"With the election campaign now in full swing, Britain's hard-pressed motorists will be keen to hear what the political parties have to say about the escalating petrol prices," Adrian Tink, motoring strategist for driver-support service RAC told the Press Association."This is a key issue for Britain's 32 million motorists, who are watching their bank accounts drained every time they fill up."
Oil up above $86 on signs of stronger US economy
Oil prices rose above $86 a barrel Friday on a weaker dollar and after robust U.S. retail sales in March pointed to growing consumer demand in the world's biggest energy market.
Oil's moves leave traders scratching their heads
TOKYO (MarketWatch) -- The price of crude-oil futures has jumped more than 70% in the past year and that's left quite a few traders scratching their heads.After all, at more than 356 million barrels, U.S. commercial crude-oil inventories are "above the upper limit of the average range for this time of year," according to a report from the Energy Department.
EIA Reports Bearish Inventory Data
The bigger-than-forecast increase in crude reserves, which are now at their highest level since mid-June 2009, again indicates that energy consumption in the world's biggest economy remains slack. Further, the large build in crude stockpiles came even as refineries boosted operating rates to 84.5% of capacity, the highest since the week ended Oct. 2, 2009. We take this as a sign that there is no problem with the commodity supply.The only saving grace came in the form of a larger-than-expected drawdown in gasoline supplies. But then again we note that the drop was concentrated on blending components, not the finished product. All these factors make the latest EIA report a fundamentally bearish one.
Russian gas pipeline plans make progress
EUOBSERVER / BRUSSELS - Russian and EU officials will on Friday (9 April) mark the start of construction of the Nord Stream gas pipeline, as Russia strengthens its grip on EU gas supply despite concerns about its reliability.
Nord Stream unmoved by shale gas as building starts
MOSCOW (Reuters) - Work will begin on Friday on Nord Stream, Russia's biggest post-Soviet gas pipeline, and its builder said on Thursday alternative fuels, such as shale or liquefied gas, cannot undermine Russia's leading role in Europe."Shale deposits are a very big topic in the U.S. gas market. However the EU has a different geology," said Paul Corcoran, chief financial officer at Nord Stream, which will ship gas from Russia under the Baltic Sea to Germany and onward to Europe.
Should Gazprom fear shale gas revolution?
European countries heavily dependent on Russian gas supplies are cheered by signs of a balance shift in the continent's energy market.Dozens of companies, including world majors, have begun exploring or even drilling in search of shale gas, amid talk of huge reserves in the US, Poland and many other countries.
Russian gas giant Gazprom's deputy chief executive Alexander Medvedev has reacted by branding shale gas projects as "dangerous", provoking suspicions that Russia could be unnerved by the latest developments in the world gas market.
BP to cut Thunder Horse output by half - source
LONDON (Reuters) - Oil major BP Plc will cut production at its 250,000 barrels of oil per day Thunder Horse platform in the Gulf of Mexico by half to facilitate planned maintenance, a source familiar with the matter said on Friday.The shutdown, which is likely to last weeks, will cut BP's total annual production by about 10,000 barrels of oil and gas equivalent per day in 2010, the source said.
One analyst said this made it more likely BP's output would fall this year.
Petrobras Will Start Cachalote Output This Quarter, SBM Says
(Bloomberg) -- Petroleo Brasileiro SA, Brazil’s state-run oil producer, will start output at the Cachalote offshore field in Brazil this quarter with a 100,000-barrel-a- day vessel upgraded by SBM Offshore NV.
Oil and gas leases put on hold in Mont., Dakotas
BILLINGS, Mont. — Federal land managers are suspending an April 13 sale of 91,000 acres of oil and gas leases in Montana and the Dakotas until they can study how oil field activities contribute to climate change.Thursday's suspension comes three weeks after the Bureau of Land Management agreed to suspend another 38,000 acres of leases. That agreement was part of a settlement between the agency and environmentalists who sued over a 2008 lease sale in U.S. District Court.
Reliance Said to Find Gas in India’s Biggest Field
(Bloomberg) -- Reliance Industries Ltd., India’s biggest company by market value, discovered natural gas in four additional areas at its largest field, two people familiar with the matter said.
Chavez Says Offshore Natural Gas Field May Be ‘Largest in World’
(Bloomberg) -- Venezuelan President Hugo Chavez said that an offshore gas field in the South American country, which Petroleos de Venezuela SA is developing along with Repsol YPF and Eni SpA, may be the “largest in the world.”
Report: Tanker owner in talks with Somali pirates
SEOUL, South Korea — Reports say negotiations for the release of a South Korean supertanker hijacked by Somali pirates have begun.Authorities say Somali pirates hijacked the 300,000-ton Samho Dream in the Indian Ocean on Sunday. The ship was transporting crude oil worth about $160 million from Iraq to the U.S. with a crew of 24 South Koreans and Filipinos.
World Bank Lends Eskom $3.75 Billion for Power Plant
(Bloomberg) -- Eskom Holdings Ltd., the state-owned power utility that supplies 95 percent of South Africa’s electricity, was granted a $3.75 billion World Bank loan to help fund expansion aimed at preventing a repeat of 2008 blackouts.The deal, to fund the construction of one of the world’s largest coal-fired plants, is the Washington-based institution’s first major loan to South Africa since apartheid ended in 1994, the bank said in an e-mailed statement yesterday.
Xstrata Approaches Macarthur Holder as Rivals Bid
Xstrata may join Peabody, New Hope and Hong Kong-based Noble Group Ltd. in a fight to control Macarthur, the world’s biggest exporter of pulverized coal used by steelmakers, after coal prices doubled and China’s imports tripled last year. Macarthur already rejected bids from Peabody and New Hope.
Rescuers Still Unable to Return to Mine Because of Toxic Gases
(Bloomberg) -- Rescue teams were unable to resume their efforts to find four missing workers at a Massey Energy Co. mine in West Virginia because conditions in the mine were still potentially explosive, West Virginia Governor Joe Manchin said at the news conference tonight.
Chinese Coal Carrier Stranded on Reef Was Off Course
(Bloomberg) -- Shenzhen Energy Transport Co., owner of the Chinese coal carrier that ran aground on Australia’s Great Barrier Reef, said the vessel failed to stick to its planned route.The Shen Neng 1 became stranded April 3 after it “did not alter course to the east to go through the passage as planned,” Shenzhen Energy Transport said in an e-mailed statement, without explaining why the vessel failed to follow its course. The ship slammed into the Douglas Shoals at 5:05 p.m. local time and authorities were notified at 5:10 p.m., it said.
Amtrak expects record 2010 ridership
Amtrak, which is asking Congress for additional funding to modernize its fleet and meet growing ridership demands, said it expects record ridership in fiscal 2010.Through the first two quarters of Amtrak’s fiscal year, total rail ridership was 13.6 million, up 4.3 percent from the same period a year ago. With its busiest travel months ahead, Amtrak expects to beat its previous annual record of 28.7 million passengers.
Peak Oil - What's The Big Deal?
For the life of me, I don’t understand all the attention the world pays to the concept of Peak Oil. Is our path of extracting, refining, and burning crude oil sustainable? Of course not. But could someone please explain the significance of the date – even to the decade -- where we truly started – or will start – to decline in terms of oil production?
Adding a Price to Blunt Energy Waste
So I would submit that while we need lots of government research, we need a great sucking sound of people — families, builders, industries — investing in saving fuel and reducing their CO2 emissions drastically. As one of my students said, these vehicles are 20, 30, or 40 percent reductions in CO2 when 80 percent is closer to what is called for. We also have to change the way we move about.But as long as both political parties promise cheap energy and tax breaks, we will just pile up idea after idea on the academic shelf but see little real change in the marketplace.
Connecticut Mulls Rollback on Clean Energy
Connecticut could become the first state to roll back its renewable portfolio standard, which is the amount of electricity that, by state mandate, must come from renewable sources.Legislation that has passed through committee in the current legislative session, which ends May 5, would cut by nearly half the state’s relatively ambitious goal of obtaining 20 percent of its electricity from renewable sources by 2020.
Of Smart Meters and Smart Consumers
Mounting evidence of widespread consumer dissatisfaction with smart meters is linked to a lack of understanding about how businesses and homeowners can boost energy efficiency, says Gary Fromer, the chief executive of CPower Inc., an energy management company based in New York.“Educating users on how to manage their electricity use is under-emphasized, especially with smart grid grants,” Mr. Fromer said, adding that smart meters alone are “insufficient” to change behavior.
Enel, Endesa, Renault Sign Electric Car Accord, Set Pilot Plan
Bloomberg) -- Enel SpA said in a statement today that it and Endesa SA signed an agreement with Renault SA for the electric-car sector.
Suzlon Gains on Report Repower Order Book Full, Aims 20% Growth
(Bloomberg) -- Suzlon Energy Ltd. rose as much as 1.1 percent in Mumbai trading after Sueddeutsche Zeitung reported that Repower Systems AG, a unit of India’s biggest maker of wind-turbine generators, has a largely full order book and will expand 20 percent annually.
Solar Power Plant at Kennedy Supplying Electricity to Floridians
CAPE CANAVERAL, Fla. - A newly constructed solar power facility at NASA's Kennedy Space Center, Fla., officially is providing electricity to Florida homes. NASA, Florida Power & Light, or FPL, and political leaders commissioned FPL's Space Coast Next Generation Solar Energy Center on Thursday.
IPOs May Cut ‘Eye-Popping’ Debt at T-Solar, Renovalia
(Bloomberg) -- Grupo T-Solar Global SA and Renovalia Energy SA may pay down debt through initial stock sales, reducing credit risk accumulated in becoming the world’s largest and third-largest power producers from solar panels.
A Novel Way to Thin-Film Solar Cells?
A Silicon Valley company said on Wednesday that it had raised $10 million to bring to market a novel way of making thin-film solar cells.
Cutting the cost of solar by watching every nut and bolt
Solar power involves wondrous quantum physics and materials science, but its fate may hinge on whether contractors can learn to bolt on the panels without losing too many screws. The panels themselves account for only about half the cost of a solar array; the rest is the installation and back-end equipment. As panel makers slash their prices, the nuts and bolts loom ever larger. Fortunately, a quiet revolution is now underway in installation. Brendan Neagle, the chief operations officer of Borrego Solar, a major U.S. installer, says they've sped up installation by 40 percent over the past two years. Zep Solar has invented a new roof mounting system, already supported by the module maker Canadian Solar, that speeds things up by another factor of two. And Nat Kreamer, president of Acro Energy, another large installer, says they've streamlined the preparation work and can get a system up on your roof within 30 days of your first phone call -- quite an improvement on the eight or so months it took me.
Growth Rate Slows for U.S. Wind Manufacturing
Established industry leaders maintain their top positions and manufacturing continues to grow - albeit at a slower rate than in 2008 - according to the annual wind industry market report released today by the American Wind Energy Association (AWEA).
US adds record amount of wind power in 2009 - AWEA
NEW YORK (Reuters) - Installations of wind turbine power hit a record in the United States last year despite the financial crisis that choked off funding for half the year, wind power advocates said on Thursday.More than 10,000 megawatts of wind power capacity, or 5,700 turbines, were installed in 2009, the American Wind Energy Association said in its annual report, bringing the total capacity in the United States to 35,000 MW.
That kept the United States in the top spot globally for wind power, ahead of China and Germany, which each had about 25.8 MW of capacity. One megawatt is enough power for about 800 U.S. households.
GE Heads U.S. Wind Turbine Field, Faces Test in Asia, WSJ Says
(Bloomberg) -- General Electric Co. was responsible for installing 40 percent of wind turbine capacity in the U.S. last year, although it is facing stiff competition from rivals in Asia and Europe, the Wall Street Journal reported, citing a report by the American Wind Energy Association.
Canadian Cement Plant Becomes First to Capture CO2 in Algae
A Canadian company called Pond Biofuels is capturing CO2 emissions from a cement plant in algae — algae the company ultimately plans on using to make biofuel.
Indian Scientists Probe Mild Radiation Exposure in West Delhi
(Bloomberg) -- Indian scientists have sealed off part of an industrial area in the west of the capital, New Delhi, after radioactive material injured five people.“An expert team has already identified the radiation source and removed it,” said Sharad Agarwal, deputy commissioner of Delhi police. “They are in the process of scanning the whole area and hopefully in the next few hours the area will be cleared.”
Global warming: Divorcing wealth from energy
Tobis may have been sleeping for most of the past 50 years, so let's try and assuage his fears. America has turned into an economy driven by services which consume far less resources than previous editions of our economy. It hasn't turned into an Ethernet economy--we still grow more food and manufacture more goods than a century ago, but most of the growth has occurred in the service sector.We can be confident that the American economy will grow because our population will continue to grow for most of this century, and because we have a good university system and because we are leading lights in the scientific areas that will drive growth in this century--nanotechnology, genetics, biotechnology and robotics.
UN seeks way forward on climate at Bonn meeting
PARIS (AFP) – Countries gather this week in the hope of erasing bitter memories of the Copenhagen summit and restoring faith in the battered UN process for combatting climate change.Negotiators meet in Bonn from Friday to Sunday for the first official talks under the UN Framework Convention on Climate Change (UNFCCC) since the strife-torn confab.
ASEAN seek binding global climate change pact
HANOI (AFP) – Southeast Asian leaders called Friday for a legally binding global pact on climate change and urged richer nations to provide them with "scaled-up" financial help to combat its effects.In a joint summit statement, leaders of the Association of Southeast Asian Nations (ASEAN) meeting in Vietnam said a new deal should go further than the non-binding 11th-hour pact reached in Copenhagen in December.
You've heard of a "life list" -- the vacation spots you want to see before you die. This is a little different. These are top U.S. destinations you might want to see before they die. "They" being the destinations themselves. Each of these vacation ideas is located in a landscape that is threatened in some way by an environmental hazard.
On Plains, concern about another Dust Bowl
Seventy-five years have passed since the worst of the Dust Bowl, a relentless series of dust storms that ravaged farms and livelihoods in the southern Great Plains that carried a layer of silt as far east as New York City. Today, the lessons learned during that era are more relevant than ever as impending water shortages and more severe droughts threaten broad swaths of the nation.The storms, made worse by insufficient crop rotation and other farming practices that eroded the soil, unleashed one of the biggest migrations in American history, as thousands fled from Texas and Oklahoma to places such as California. Interior Secretary Ken Salazar, whose department oversees America's land and other natural resources, says another period of mass "relocation" is possible in the 21st century — especially if rain patterns and temperatures change as some expect.
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Why the current deflationary trend must give way to runaway inflation… soon.
While googling peak oil this morning I found this article:
Why We Aren't Headed for a Decade of 1970s-Style 'Stagflation'
The same article also contained this chart: Total Credit Market as a percent of GDP
Quarterly Data 12/31/1922 - 12/31/2006
The numbers on the chart at this site are impossible to read but a very clear version of the same chart can be found here. I found this same chart in several places on the web. But it ends December 31st, 2006, over three years ago. I could not locate an updated chart.
12/31/2006 Debt = $44. 549 Trillion
12/31/2006 GDP = $13. 450 Trillion = 331.2%
Understand this is total debt, not just government debt. It would probably be at about 400 percent today. It briefly reached 260 percent during the great depression but it did not remain at those lofty levels for very long. For over three decades, until about 1980, it averaged about 150 percent.
Chris Martenson wrote about this chart 15 months ago:
The crisis explained in one chart: Debt-to-GDP
In other words, today’s growth is mostly growth via debt, mostly government debt and private credit card debt. Option #3, in my opinion, is the only possible outcome.
Ron P.
If that article looks familiar, it's because it was posted in the April 7 DrumBeat.
Here is a later one: http://market-ticker.org/uploads/KeyCharts/AbsoluteDebtToGDP.png
Speaking of Denninger...he thinks Greece is going to have to pull out of the euro.
Even if they get an international bailout, like the market is expecting this morning?
He also points out that a bond auction failed in China.
Simon Johnson, Peter Boone and James Kwak at baselinescenario.com
take a similar view, e.g. see:
http://baselinescenario.com/2010/04/08/standing-at-thermopylae/
and
http://baselinescenario.com/2010/04/06/greece-and-the-fatal-flaw-in-an-i...
Peter.
Interesting. Not sure I buy the idea that the crisis is a global threat, but these days, who knows. Looks like either way, Greece's oil consumption will probably drop.
The debt crisis is such that if one thing goes away, another thing is sure to put up.
The SEC is looking into allegations that the big US banks used techniques to make their balance sheets look better. (WSJ so may need to type in title to find.)
Big Banks Mask Risk Levels
If this investigation finds planned distortion and outlaws the techniques used, we could see big banks getting back into difficulty again, it seems to me. Of course, the government can attempt to change the rules again, but at some point, people start not believing in the system.
Very interesting and quite obvious - here is a link to the interactive chart from the article comprising 5 Quarters- http://s.wsj.net/public/resources/documents/info-REPO100408.html
Sidenote: A report in Norwegian media today announces that 33 US states must borrow money from the central gvm't in order to pay unemployment benefits. 33 states(!)
Also (from WSJ) Los Angeles Faces Threat of Insolvency
This is all about a disputed electricity rate increase, to cover the higher cost of renewables. To make things worse, a new report by UCLA came out saying that higher subsidies for solar are needed in order for solar to be competitive with fossil fuels.
It seems to me we may see some cities go under, even before states. States have more funds to "play with". They can cut off pension funding, for example, to a greater extent than cities.
I think just reducing the open and especially hidden subsidies of fossil fuels would go quite a ways to narrowing that gap.
That would perhaps push along the replacement of FF-generated electricity (mostly gas in CA) with solar or wind, but not without consequences.
Since the political problem is the electricity rate, increasing the fuel cost won't help with it, even if it helps with other things.
Yes. While a state can (depending on its constitutional limits) exercise selective sovereign default, they will tend to hang on as long as possible. Most states do not pay pensions out of their general funds; the pension funds have sufficient money to meet today's obligations; the big problems in state pensions start 10 or 20 years from now. Cities and counties, OTOH, can voluntarily enter bankruptcy or be forced into it by their creditors.
Everyone here has to make their own call. Personally, I think we're in for a long period of monetary deflation likely followed by monetary inflation. I'm referring to the overall money supply. Individual prices will vary: some will rise, others will fall, but the overall trend of a basket of goods will be falling. Virtual wealth is still disappearing in great bundles and a $200,000 loss on one's home more than makes up for slight increases in the price of bread. When someone loses their home, same thing. Any equity they had vanishes and a lot more people are going to lose their home.
When the bubble has mostly popped, then inflation can really kick in. But there is much of the bubble still to go.
See:
The Unbearable Mightiness of Deflation
http://theautomaticearth.blogspot.com/2009/07/july-5-2009-unbearable-mig...
Inflation, The Least of Your Worries
http://theautomaticearth.blogspot.com/2009/07/july-6-2009-inflation-leas...
Gail also discusses the liquidity trap we are (still) in...credit is moving a little now, but nothing like how it was.
Oil is going to make option three even less palatable to most than it would be otherwise. If it weren't for oil, and I had to make a guess I would guess option three. I think we'll see a combination of 1 and 3 ( and since 3 is a form of 2, this makes it a combination of all three ). No one interest will bear the whole brunt.
I am really wondering why we need banks. And I am not the only one.
http://gregmankiw.blogspot.com/2010/03/comments-on-alan-greenspans-crisi... The interesting bit is at the bottom:
This guy is a mainstream economist, not a wacko, and he's saying economists don't know if banks earn their keep and that economists should find out.
Thanks for the link. I noticed that the government is going to be cutting out the bankster middlemen for student loans. Why not do the same with other types. I always thought that an essential tragedy of the whole bail out thing is that it was a chance to allow the whole banking system to die a natural death. What if the gov had given/loaned the entire bailout to houseowners, taxpayers and small businesses, instead of to the crooks who engineered the entire disaster int he first place. For decades we were told that the market would magically regulate itself because banks would be to afraid to fail to do anything too stupid or corrupt. Greenspan now admits he was wrong on that one (but won't take any official blame for the melt down). Of course, when the sh*t h*t the f*n, we all had to pony up to make sure the too-big-to-fail domestic enemies (those guys all our senators and representative swore on the Bible they would protect us from) remained on life support.
Remember to:
http://moveyourmoney.info/
Inflation cannot remove debts if they are weighted toward short maturities (needing to be renewed or 'rolled over' frequently) or if the loans are indexed to inflation. In either case the rate of indexing will rapidly outrun the rate of inflation. This indexing is a kind of hedge, as is the general lack of savings ... as is a well- developed finance system with many non- money assets to offer.
Note that countries that have experienced high rates of inflation did not have non- money assets such as real estate or a derivatives- producing finance sectors: Weimar Republic, Hungary, Argentina, Brazil, Zimbabwe, etc. Assets 'drain off' excess money and credit from the productive economy. Right now, excess monies in China are directed toward real estate speculation. Prices of land and buildings rise while ordinary costs are effected less.
The US experience inflation after Vietnam, WWII and the Great War and finance was a much smaller part of the American experience. Credit itself is a hedge against inflation; the overall inflation bias in our economy has meant a parallel increase in credit as a hedge against that same inflation. In non- finance economies, there are no swaps. hedge funds, synthetic positions, no alternative 'monies'.
The least painful way out of excess indebtedness is restructuring. The fatal flaw of our (US) last run of bailouts is that no restructuring was attempted. All the insolvent banks needed to have been closed and bad loans written off. Unfortunately, those who run the government are the same who would be ruined by this writing off process ...
We need banks to perform the crucial function of lending - in a growing economy, that is. Without lending, economic growth would be difficult if not impossible. The rise of finance/banking is one of among many factors which led to the emergence of the modern world out of medieval Europe.
However, IMO, growth, or the need for growth, came first, then came finance. I think many people to this day misunderstand this. They believe that credit creates prosperity. Rather, its budding prosperity which demands credit. The banks didn't create Bill Gates. Bill Gates had an idea, and he had to go to banks to get financing.
In a non growing or steady state economy, which peak oil implies, we really don't need banks. They only serve to siphon off money for themselves, making everybody poorer. But then again - without the banks, we quickly head back to the dark ages as nobody has credit.
So we've now entered a situation where we can't win with them, we can't win without them. Too big to fail indeed.
oilman, Bill Gates DIDN'T have to go to banks to get financing. Banks are just one option. He could have raised money from venture capitalists (popular in Silicon Valley) or he could of sold a part share to a bigger company and share the profits. Some people also finance start ups by using their own (or family) money. Plenty of options besides banks and none lead to the dark ages.
IIRC, Bill Gates didn't have to go out for financing at all.
Micro Soft was very much a bootstrap operation when their product was Basic (both Gates and Allen had other jobs for a while).
No he is a wacko. I find it strange that a Harvard Professor should be saying such wacky things but that does not change the fact that he is a wacko.
If banks were required to hold 100 percent of reserves against demand deposits then they would be no reason for them to take deposits. They would earn them nothing unless they charged heavy fees for checks and even charged interest on the money they held. Banks make money from charging interest on the money they lend out and this is money on deposit.
Requiring them to lend only their on capital is silly. Only people with huge amounts of capital could open a bank. There would be very, very few banks, probably less than 1 percent of the banks that exist today. And if they lent their own capital very few could loans could be made because there is just not enough capital, without counting money on deposit, to do that. And interest rates would likely be very high on the tiny amount of loans made.
Ron P.
There are demand deposits, then there are CD's and other instruments of extended deposit.
If banks couldn't lend against demand deposits they'd do what they do now and charge people for the privilege of easy access to their money.
They would still have an incentive to accept demand deposit accounts as people are more likely to take out CD's with their own bank than they are to shop around, so it would merely decrease the amount of profit to be had rather than eliminating it completely.
I've come around to that view, although how "long" the deflation lasts may be based on how radical the govt response is.
It seems unlikely to me that there will be inflation. People are losing jobs, and will lose more...which should mean less money flying around. When energy prices go up it will affect the prices of things affected by energy, which is almost everything, but with everyone broke there shouldn't be an endless bidding war to drive up prices. People should find themselves priced out of the market even though the prices themselves might not change much. The only reason it seems that prices managed to top $147/bbl was due to the momentum already in place...there was so much growth, with so many projects underway, it couldn't be stopped. Even though prices on things were going bananas - it would have been stupid to stop a project 3/4ths built.
I can understand why some people might talk about inflation, when infact the main problem is deflation. Apart from deflation being scary, it is mostly ideological. Chicago school never bought into Keynesian economics - infact most of them never studied it (according to DeLong).
Krugman : Economists Who Say “Ni!” (http://krugman.blogs.nytimes.com/2010/03/30/economists-who-say-ni/)
http://www.youtube.com/watch?v=QTQfGd3G6dg
Personally, I just can't see any convincing argument for deflation, considering a few basic premises.
The whole premise of the existence of, and discussion on, this board is peak oil, which I think we all would agree means that the cost of a barrel of oil is going to get more and more expensive as time goes on(inflation). As oil becomes more expensive, everything that is produced with or transported by oil (almost everything, especially food) will become more expensive (inflation).
Now, consider the fact that the national debt of the US is over 12.8 Trillion dollars as of today (87.3% of GDP as of the end of the first quarter of 2010). Consider as well that our debt burden is projected to grow by over 1 trillion dollars per year for the forseeable future (deficit spending). Now imagine that you are a financial manager for the government in China (the biggest buyer of US debt). How long are your going to keep buying bonds from the US with these stats staring you in the face? Draw the parallel between the financial crisis that occured because banks were loaning out ridiculous sums of money for houses to people with almost no realistic ability to pay those loans back. Guess what, China is loaning the US ridiculous amounts of money and our ability to pay them back becomes less and less likely the deeper we fall into the debt trap.
As a country, we are getting close to the point where all revenue to the government will go towards 3 legal obligations, interest on the debt, Medicare and Medicaid, and Social Security. As in, NO money left over to pay for ANY national defense, homeland security, social programs of any kind, subsidies of any kind etc. etc.
So, our political leadership, Democrats and Republicans, are going to stand up and say "Sorry folks, but we know that times are tough right now, but in order to prevent a catastrophic collapse of the US government, we have bipartisanly decided to substantially raise taxes across the board in order to keep this country solvent." (Option 1). Anyone care to lay odds on that outcome? Or, if you prefer, "Sorry folks, but in order to balance the federal budget, we are going to reduce the size of the military to 10% of the current size, cut discretionary domestic spending 50% across the board, AND reduce Social Security benefits, Medicare and Medicaid benefits to everyone." (Alt Option 1). Any takers on that bet?
As for defaulting on the debt (Option 2), it really isn't much different than just inflating the currency. Defaulting would make us an international pariah, the Lotto winner that ends up declaring bankrupcy, the rich person that wastes away their entire fortune on drugs, etc. It could also be considered a justification for a declaration of war against the US (ie Hey China! We aren't going to pay you back one RED cent (haha)... what are you going to do about it?...) It also would tank the dollar (inflation), as well as the stock market. Compare the carnage of the "mortgage meltdown", to what would happen with a US govenment debt meltdown... which would you expect to be worse?
That pretty much leaves us with the answer we as a nation are bound to use. (Option 3) How simple it will be to just crank up the presses and print a few more pretty pictures on green paper, and then pass those over to our creditors. No messy need to raise taxes, or take an axe to the budget. No spitting in the face of our creditors... just silently running the press a little more, and look, we are paying off our debts just like we promised, see! No need for hard choices at the government level, and additional government spending will put people to work, right?
So when you add more dollars chasing the same number of goods, by definition we get inflation, and when those goods independantly get more expensive to produce we get more inflation. When we add in that Oil is currently priced only in dollars, we get even bigger price shocks in the oil market (at least until pricing Oil in dollars ends, which it will). Then we add peak oil into the mix with a declining supply of oil coming onto the market and we add even more inflation to the mix. All in all, this does not paint a pretty picture. Whether inflation rises to the level of a Zimbabwe, or post-war Germany or Yugoslavia is hard to know, but we can all hope or pray not.
The unfortunate summary is, the expectation should be for extreme inflation under this unfortunate combination of events. The only things that might defate are goods that are not necessary for survival, as there won't be much money left over for frills. Even then, however, if our inflation gets bad enough, even the frills will be affected. On the bright side, however, if you owe money on your home, it should become almost trivial to completely pay off your mortgage if inflation gets bad enough.
Sorry for a somewhat depressing post, but this is the direction I see us heading. If someone cares to lay out a case for Deflation under the circumstances that we find ourselves, I'd love to hear it. For those interested in the unsubtainable US Debt (and Deficit), I'd recommend the documentary $10 Trillion and Counting from Frontline/PBS, which was aired on March 24, 2009, and note that in just over 1 year we have gone from $10 Trillion and counting to $12.8 Trillion and counting.
http://www.pbs.org/wgbh/pages/frontline/tentrillion/view/
Runeshade:
You are just way off here. Those of us who have been paying attention can see that what we've just experienced is an immense 30 year credit/debt inflation. A combination of factors, but mostly peak oil, ended this, more or less permanently. We are now in store for a debt deflation of equal or greater magnitude.
The powers that be are out of tricks - they can't lower interest rates further, they can't spend more (we've essentially had Keynesianism since WWII), and they can't print tons of money, lest interest rates rise. In other words - the emperor has no clothes.
Thereby they want to manage this as best possible - allowing the rich to liquidate and get into cash and real assets such as valuable farmland. What is the recent manufactured stock rally but an attempt to allow the rich one more chance to get out of stocks before the final downturn? In short, there will be no hyperinflation and we are headed for feudalism.
My point is that they both can and will print more money, because as you mentioned, there is no other choice. Choosing NOT to print more money, combined with NOT being able to borrow it from abroad and NOT cutting spending/raising taxes, would result in total government collapse, as you can't spend money that you don't have. Social Security recipients aren't going to stand for not receiving their monthly checks, and Medicare providers won't provide services if they don't get paid. (this is basically option 2 again)
The recent stock market rally is BAU... the pendulum swung back from fear towards greed, it can reverse at any time and means very little to government finances and inflation/deflation. I don't believe that some "entity" is controlling the market to enrich certain people. Tons of the "rich" lost a heck of a lot of money in the market collapse. Do you currently see evidence of the rich bailing out of the market and buying up farmland?
I agree with you, and basically, long term consumer price deflation is virually impossible under the current Fed-Treasury linked monetary system.
As I have frequently mentioned, the 1930s was not a period of sustained deflation - the US Treasury devalued the dollar and created a high rate of inflation in the mid 1930s for about two years, even after unemployment was 25%. This was despite tremendous oil discoveries in Texas in the early 1930s, which at first knocked down the price of oil. I keep mentioning thes inflationary facts but the deflationists here say over and over inflation is not possible with high unemployment, or without a credit bubble, etc.. It is not only possible, but most likely during periods of high unemployment - and there is no need for a credit bubble. There was none in the mid 1930s.
The US government can create all the money it wants. Unfortunately the end result of this money process will be outright default of the US dollar and/or bond market at some point. Most likely, the default process will shield most US citizens as much as possible, and the dollar will lose value vs. gold, oil, etc., and/or some new type of IMF backed currency.
I think they will "print money," but I don't think it will work. It's not just money supply that matters, it's the velocity of money.
To keep up with the credit bubble bursting, they would have to give everyone enough money to make up for their lost jobs, lost home equity, and lost access to credit. There's not enough helicopters.
Japan battled deflation for twenty years by "printing money," and all it got them was the yen carry trade.
I think the main difference here is that Japan funded most of its own deficits, while the US is mostly relying on foreigners to fund deficits. With Japan, the illusion that increasing supplies of money somehow holds its value is relatovely easy to maintain until their national deficit exceeds avaialble savings. After that, all hell breaks loose. Either the yen crashes in value or interest rates soar, or some cobimation.
How can it cause inflation when the US Gov't borrows all the money the Fed hallucinates? I mean, it doesn't even get into circulation. Except for the interest they are paying to the banks ahd the super rich who hold the bonds. At least that is the way it seems to me.
Maybe some of the $ get out by way of government spending, but that is less that the tax take, and cancels out. I just have a bad feeling that what the Fed is doing now is just putting off the fall of the greenback, and making it worse when the time does come.
Maybe we haven't passed the point of no return yet, but if not we are damned close!
Craig
I've explained this before - the new money the Fed creates did go into circulation.
For the most part, the $1 trillion of so of the new money the Fed created this last year went to buy mortgages. The mortgages were given to new home buyers, so the new money was used to pay sellers of homes. The money therefore went directly into the economy.
There seems to be a fundemental misunderstanding of many financial writers these days of how our financial system works, leading to the wrong conclusions about the Fed's policies, and its effects on the economy. I suspect the Fed is happy to a considerable extent this misunderstanding exists, otherwise it could not get away with very inflationary policies.
The mortgages were given to new home buyers...
No. The ownership of the existing mortgages changed hands.
Alan
I disagree, but even if they did buy old mortgages, the money still - directly or indirectly - went into the economy to sellers of those mortgages, as the Fed effectively bought 100% of all new conventional mortgages in the last year.
What about door number four:
Contract the money supply by moving the reserve ratio of banks to 1 while simultaneously expanding the money supply by printing notes with which to retire the national debt, being careful to keep the money supply constant.
This puts non inflated dollars in the hands of bondholders who will have to find some other use for them ( such as investing in the private sector ) since dollars bear no interest. Foreign holders of US government debt will have to find private investments ( replacing the capital formerly lent by banks ) or exchange the dollars for other government debt denominated in other currencies devaluing the dollar and helping US exports.
Well, that would certainly employ many printers, and keep the presses running overtime. Do you propose a larger denomination of Federal Reserve Note than $100? Of, is this money to be printed by the U.S. Treasury?
Are you proposing the end of electronic banking? Do you have any idea the number of dollars you are talking about here? I mean, at $100 each, that would be maybe 10 Billion bills, just for current accounts. And, must the banks hold them on site in cash? I see a new career of bankrobber becoming suddenly very popular. If there must be cash on hand for every transaction, how would debit cards work? Direct deposit of paychecks? You would need daily deliveries of huge numbers of notes every business day. The energy cost for delivering money would be unworkable by itself!
I don't like door number 4.
I don't see inflation as probable either... what I see instead is that the greenback will crash in a flury of Depressionary Deflation, and when all is said and done it will be worthless. Something new will need to be done. Of course, debt denominated in dollars will be worthless as well. Stock certicates? Well, I guess they could be traded for goods, or later valued with whatever new currency comes on the scene. This is going to be a very difficult transition!
Craig
The terms "dollar crashing" and "deflationary depression" are contradictory. The dollar crashes under inflation... under deflation each dollar actually buys more. Deflation usually occurs when a currency is backed by a hard asset, like when dollars were backed by Gold, and not faith in the US government, as is currently the case.
Dollar crash will happen after deflation drives the economy to its knees. At which point, instant inflation = dollar crash! It won't be pretty, and it won't help property owners who will already have been foreclosed. The big money interests will own all of the hard assets, at least on paper, and won't care at all if inflation destroys what is left of the bucks. They will take produce and goods and services for rent. Pay up or move out.
Oh, and they will own the police as well, paying them in kind. They will be more like militia, or private armies, and when they come knocking, believe me, you will move out.
Good luck with the new economy and high inflation after the Depression.
Craig
Once upon a time there were ( not in general circulation, but in the vaults of banks ) 100,000 bills with a picture of Woodrow Wilson on them. And nobody robs Fort Knox, so a few very secure vaults with lotsodough don't ruin things. As long as the bills exist somewhere in a vault then electronic accounts can transfer ownership of them without transferring them physically. In fact it is electronic banking that makes this whole thing convenient. If the issuer of the money also handles the vault then the physical bills don't really need to physically exist.
There are companies that keep gold in vaults, that is never removed. It's never removed because it has been weighed examined and certified to be of a certain purity and amount. Taking it out of the vault would undo the certification process DECREASING IT'S VALUE. In the vault, the gold is worth more, so it is never moved, only the ownership of the stationary gold in the vault changes. The same could be done with large denomination physical currency.
Ron P., sure hope you're right about the economy headed for inflation. We need inflation so the relative cost of our fixed mortgage goes down. I'm hoping for so much inflation the tab feels like its been sliced in two.
Although it will be great to have your mortgage substantially chopped down (or eliminated) by inflation, the flip side is that you might be paying a higher percentage of your total income just for food, compared to the current percentage of your income that you are putting towards your mortgage at this time. The basic premise behind Cslater8's statement is completely valid however, which is why you REALLY want to be holding a low FIXED rate mortgage during severe inflation, as versus an adjustable rate. If you have been putting off converting to a fixed rate, my personal opinion is that you at the very least consider doing so at this time, while rates are still fairly low historically. A variable rate mortgage combined with high inflation is the epitomy of a personal financial disaster in the making.
One reason I don't think we will see inflation is because the folks at the Fed, who would REALLY like to see it, do not have a way to contain it once it starts. They know that once the tab is cut in two, it will be cut in two again... and again... and again... and again... and suddenly you pay your mortagae off for the price of a loaf of bread or a gallon of milk.
Of course, the real estate tax bill might scare the bejesus out of you, but hey! Your home is free and clear. Right?
Craig
Yeah, stopping inflation is the problem. But some inflation would seem to be the only choice. The Chinese even warned the fed about inflation. Which probably means it's a good idea.
It might well be the only choice. And, the policies may already have made it certain. The question is still, will there be ruinoius deflation and Depression before the inflation kicks in? And, at the point that it does, will there be any way to control it?
The only option that would be an honest and direct way out would be paying off the debt. That would mean ruinous tax rates! The very wealth worked too hard to get their tax rates cut! They would never allow it! That is why they are working to defeat any program Obama proposes, and doing what they can to sabotage any that are passed. They want back in the White House! They want their tax cuts! They are, after all, the ones who are truly entitled.
Craig
I agreed with your statement up until the point that you mentioned Obama. If only Obama actually was working on a program to pay off the debt. Unfortunately, the projected deficits going forward under Obama are as bad, or worse, then they were under Bush. Neither party will be willing to do what it takes to eliminate the deficit... much less pay off the ever growing debt. The only difference between the two is in deciding what they propose to use the debt spending for. The reason Republicans are fighting to defeat any program that Obama proposes is solely because Obama proposed it. When its a Republican created boondoggle costing truckloads of money and bringing us deeper into debt (ie. Medicare Part D anyone), suddenly fiscal responsibility isn't important. Don't fool yourself into believing that either party is going to solve this problem.
There is hope with Obama.
The bi-partisan commission on reducing the deficit will give political cover & good ideas (perhaps implemented in the 2nd term).
Obama did walk into the worst financial crisis since at least 1933 (I think worse than 1933, but that is debatable). Long term financial issues were not the order of the day on 1/21/2009.
Democrats - Tax and Spend
Republicans - Borrow and Waste
Alan
The unfunded liabilities and debt will be unserviceable. You will end up seeing all these socio-economic promises thrown out. Pension obligations, medicare, social security, etc can simply not be funded. Because the spoiled boomers didn't even bother to replace themselves their ponzi entitlements will blow up. Exponential functions aren't very forgiving.
Obama will end up as just another failed presidency, he will be thought of as just another Carter. Except the fallout of Obama's presidency will be much worse than Carter's Operation Eagle Claw. It will result in actual nuclear fallout in Iran. It is BAU or complete collapse, there can be no alternative.
http://www.zerohedge.com/article/bank-international-settlements-sees-us-...
Are portfolio managers getting nervous, worried about inflation, or is this just a small blip on the screen?
Farther down:
http://www.reuters.com/article/idUSTRE6361B120100409
What will China do this time, and what will it mean?
The argument against this is that the central banks are "pushing on a string." A general CPI-type inflation requires that wages and prices chase each other up the spiral. The problem that the Fed faces is how to deliver the cash into the hands of consumers that will spend it. The normal channels are unlikely to work: 25 years ago, cheap credit created by the Fed ended up being loaned to domestic businesses for expansion, so that more workers were hired and paid. Today, that business expansion is as likely to occur in China or India as to occur domestically.
Bernanke earned his nickname "Helicopter Ben" by proposing that the Fed could always avoid a deflation by the expedient of dropping bales of cash into people's backyards. In practice, helicopters are not a channel to which the Fed has actual access. It seems, at least to me, that for political reasons, the federal government will not be able to push the dollars (not credit, but actual income) into the proper hands.
Re: BP to cut Thunder Horse output by half - source
I hope this is just routine maintenance and not a recurrence of this
Thunder Horse Delay Due to Subsea Manifold Crack (August 2006)
Such a big drop should rapidly show up in US Oil Production Stats (Take note EIA) and it will be bizarre if production figures continue to increase after the partial shutdown.
*Disclaimer: I once worked for FMC (in the subsea division but in IT) but have no knowledge other than printed in the article.
IIRC, the cracks were due to hydrogen ingress, or absorption, to the steel caused by the immense pressure at those depths. The welds became brittle and were failing the inspection tests. To their credit, they found a fix and passed it onto the other deep sea oil companies.
However, this does not bode well for those that believe technology runs off to a phone booth, changes into cape and tights and flies off to save the day. That evil-doer Physics wins again.
I also assume that the deeper we go to find oil, the more this type of problem occurs due to added pressure...correct?
They said the shutdown is likely to last weeks, but they didn't say how many weeks. But doing the math, if it cost them 10,000 barrels per day averaged out over one year, then the shutdown would last a little over 4 weeks. If they run into problems and it ran over that time limit, then it could cost them more than 10,000 bp/d for the year.
The manifold on Thunder Horse sits at a depth of 6,050 feet, over a mile down. Would not working on welds, if that is the problem this time, at that depth be extremely risky? Especially since they are still producing at 50 percent? Or... perhaps there are two manifolds and they are completely shutting down one of them?
Ron P.
I know the original problem couldn't be fixed in-situ
BP’s Thunder Horse oil field goes online
Hopefully this is just routine but we'll know in a few weeks I guess.
Makes sense from an engineering POV. Find a work-around asap in-situ that will get you through a couple of years while working on a permanent solution. Shut down production in modules while they are replaced, and although by no means an oil rig expert, (dummkopf really), four weeks sounds about right for this type of work on 24/7 schedules IMHUO (In My Highly Uninformed Opinion).
This article seems to have some additional information. Apparently this shutdown is for installing a permanent fix to the problems that were fixed on a temporary basis before.
BP to reduce Thunder Horse production
Last time I tried to ask anyone who might know anything about Thunder Horse manifolds they said: "Don't Know. Can't Speak." And that was a few years ago.
Interesting the BP comments that the previous fix was "not intended to be permanent" as I don't recall that being reported previously in news items at the time but could be mistaken.
Edit: I notice the "market" seems to be taking it well. WTI Front Month dropped by over $1.50 after the first report in the press. Doubt that direction can last too long though.
Re: Chavez Says Offshore Natural Gas Field May Be ‘Largest in World’
Eh??
14 tcf wouldn't even get in the official top-20 list of largest gas fields. It's only a bit over 6 months supply for the USA.
Whenever I hear this man talk in superlatives "Anton Hynkel" comes to my mind, with his "Tomania hat groetste ALLES!" (see 1:23 ff.)
Tow -- I don't know if this info is valid but a couple of years ago I saw where Trinidad and Vz came to agreement over spltting an offshore NG field that fell on their borders, It was stated that the Vz share of the field was over 60 tcf. But I don't know the source of that number so ???
Net Oil Exports Peaked in 2006! [from The Seventh Fold]
And Net Oil Imports into IEA member countries peaked in 2005 according to the IEA. Imports from Saudi Arabia into IEA countries curiously peaked in 2003. Saudi Light imports peaked even more curiously in 2002 (IEA).
Who wrote this article? I looked for an author and saw none.
http://theseventhfold.com/derik-andreoli/
Well, also using the BP data I came up with this for net exports:
One can see a good few one year downturns in net exports, that little mini plateau 1997-2001, also the protracted slump in the 80s. Presumably what we went through in the last 5 years is just a blip, at least from the point of those bullish on supply; they would say that it's just taking a bit longer for oil to reach consumers owing to the major lag from discovery to production. Or that we've hit Peak Demand and this is all moot.
From just eyeballing that chart, if that implausible rate of exponential growth which supposedly took place in the late 60s and early 70s had continued, it looks like net exports would be well over 500 million barrels per day by now and on its way to a billion barrels per day.
Yep. World production 1966-1973 averaged 7.32% growth, a gusher that hasn't been equaled since in any year. Even the most meager year in that span of time was 1.19% higher than the biggest single year gain in the last 25 years, 2004's 4.07%. This doesn't make that string of records "implausible," it just means that E&P ain't what it used to be. Field discoveries that are fodder for screaming headlines these days would've been greeted with yawns back then.
Tupi confirmation well
8 billion barrels of light sweet crude. A decision of commercial viability by December
http://online.wsj.com/article/BT-CO-20100407-714635.html
Alan
Maybe there is but I don't think the linked article confirms 8 billion barrels
So they've confirmed a "potential" with another well drilled but the 8 billion is still an estimate.
Alan, not "light sweet crude" .....but BOE's according to article
Wikipedia on Tupi :
So there we go, Tupi is ONLY 1/4 of earlier extreme estimates. Neeeeeext
Most folks probably will agree that Tupi's oil will become the most expensive conventional oil on the planet- I mean the Tupi field lies 250 km offshore and below a water depth of 2,140 m (7,020 ft), then a 2,000 metres (6,600 ft)-thick salt layer that itself is under as much as 5,000 metres (16,000 ft) of sand and rocks
What "we" need is a gigantic shallow unimagined oilfield just under Germany or France..
What "I" need is a gigantic shallow unimagined oilfield in my back yard, accessible only from my back yard. Then I can get Rockman and his buddies to come drill it, retire and buy a big cowboy hat and a fat cigar and just sit on my porch and smile at all my poor neighbours!
Rockman, I'll cut you and your gang in for 25% but you got to provide the rig. Deal?
;)
Sorry HA but since we're one of the few companies with drilling $'s I'll have to hammer you down to a 25% royalty. Don't think long...there's a line of folks waiting outside my door to kiss my butt. But I will throw in lunch when we close.
Ahhhh...it's good to be King.
Mr. HAcland,
Don't ya know Cali-forny is the place ya ought to be? Pack up the kin folk and move to Bever-lee. You'll see swimming pools and movie stars!
Sincerely,
Mr. Drysdale
mh:MD
;-)
Yeah, great idea! I'll move to LA, CA, USA and start paying for my health care..
No thanks! Blighty born and bred, Blighty till I die..
;)
Been there, seen that. Driving back from Beverly Hills, was held up for two hours on the Hollywood Freeway because two people had jumped off an overpass into rush-hour traffic. Had to make a detour to reach the hotel because the condo complex next door was on fire. Was woken up at 3 AM by a helicopter hovering over the pool, with a couple of dozen policeman standing around it. Next morning, a couple of frogmen were dragging the pool while we had breakfast.
Realized that this was not my kind of place, and went back to oil country.
How do they change the bit? Aircraft carriers for barges?
Another energy-related item: http://www.miningweekly.com/article/newcrest-board-approves-a19bn-mine-2...
Newcrest Mining is going ahead with their new underground mine at Cadia, NSW, Australia. No, this is not a coal mine. It is a copper and gold mine. The first mine started in the second half of the 19th century, and ceased operations in about 1910.
In the early 1990s, operations were restarted at Cadia with an open pit mine. Reserves which are economical for this technique have now been exhausted, but the company has calculated that they can make money with an underground mine.
The grade of the reserves is astoundingly low, both for copper and gold. The average copper grade is 0.28%, and for each ounce of gold they will mine and process 70 tonnes of ore. I don't know how much energy they will use to do this, but mining and processing 26 million tonnes a year of ore will certainly use a lot of energy. I would guess most of it will be electricity, probably supplied by the 1000 MW Wallerawang coal-fired plant, 100 km away.
Edit: Some very rough "back of the envelope" figures suggest processing 360 tonnes of ore will produce about one tonne of copper and five ounces of gold, at the energy cost of about 10 tonnes of coal.
Anyone find it interesting that both Timothy Geithner and Hank Paulson have been having high level meetings with the Chinese over the last few days?
Chinese VP meets former US treasury secretary
Geithner flies to China for talks on currency
...and hasn't Bill Clinton been sucking up to the Saudis?
I don't get the connection to Undertow's post. Are you suggesting that perhaps Clinton can suck up to the Saudi King and persuade him to try to persuade the Chinese to revalue their currency?
Ron P.
no, I was jokingly implying that Bill was asking the Saudis not to sell the Chinese anymore oil. In fact I wasn't really suggesting anything, just bored.. it is Friday evening after all and I am still waiting for a client to get back to me about a fix I made earlier in the day. Bloody clients. Can't live with them, can't live without them. And I want a beer. A nice cold beer. mmmmm, beer... and possibly a salted snack of some kind... mmmm, salt and beer! The perfect way to leave one's troubles behind and work towards that well deserved coronary! (ah, well. at least I don't have to buy health insurance ;)
Wow - salt and beer!
That's pretty much the whole story.
A little pork too.
Friday night! Some thick Auissie shiraz. Ice cream?
Who knows what they were discussing...
http://www.politico.com/blogs/laurarozen/0410/Bill_Clinton_in_Saudi_Arab...
Did Saudi Oil Minister Ali Al-Naimi not get an invite then? Suppose he could have been one the unnamed "officials".
I'd suspect that Clinton would be talking about Israel/Palestine. That is more of his bailiwick.
Maybe he is looking for donations to a PAC for Hillary's Presidential bid, soon to come? I know, I know, foreign dontations and all that, but certainly there would be a corporation involved that would have the right to give as much as they want. I mean, you never know with ol; Bill.
Craig
Giethner also went to India ...
http://www.nytimes.com/2010/04/07/business/global/07rupee.html?partner=rss
Not sure what the deal is.
Israeli minister touts new 'oil weapon'
The Israelis are planning on bombing Iran when they finally get enough enrichment to nuke test. Israel needs to get off oil before they strike and oil goes to $300/barrel as a result. That's the reason for the green push.
A simple question: Why do you Americans always need wars to survive?
Simpler answer: Because we're human. Until we master other baser natures, including procreation, wars are inevitable.
There are lots of humans, paleo, but few are as bellicose as Americans.
I would say it is because we are Empire.
Americans have nothing on the Europeans, who have been massacring each other for 2000 years and didn't tire of it until they completely destroyed their societies - twice!
Well, it has only been half a century since the last one. Give them time to forget.
The short answer is, war is a convenient distraction. It changes the subject from the things we would prefer not to discuss (ie, the decline of our nation and what to do to prevent it) and substitutes patriotism and cheerleading in its place. "Take that Evil One!" Its much easier for politicians to get re-elected when we collectively feel like we have a common enemy and we are a team (Prime example: Re-election of George W Bush) as versus when we think we are going to have to cut back on our excesses (Prime example: Re-election campaign of Jimmy Carter).
Because there is little risk of being at the receiving end of bombs & war. Just send others kids to far off places who are too weak to attack the homeland.
Geckolizard -
In my view, this is just tough talking wishful thinking on the part of the Israelis. It is really quite silly and possibly reflects a disconnect from reality. For a country with virtually no fossil fuel reserves, nothing Israel could possibly do within the time frame of even five years out would make more than a minor dent in their total energy consumption, particularly energy in a form usable for transportation.
I also don't think that Israel is too worried about the price of oil going through the roof, because all they have to do is pressure our bought-and-paid-for US Congress to increase the current $3 billion+ we annually send to Israel to make up the difference.
Furthermore, fully recognizing that Iran is short on refining capacity and must import a certain percentage of its refined products, I still think it is the height of hubris and foolishness for a major oil importer to threaten a major oil exporter with the 'oil weapon'.
In general, it is far easier to prevent a country from doing something you don't want it to do than to force it do something it doesn't want to do. As such, what happens if the West puts an embargo on refined products going into Iran, and Iran in turn says, 'OK, no refined products in, then no crude oil out'? Crude oil being largely fungible, Iran's big customers, like China, would now be competing with the US and others for the remaining global crude production less Iran's. Result? Big price spike.
What a brilliant strategy!
Until the late 1980's, life in Israel was austere in peacetime, let alone in war. It is not the price of oil they're worried about. It's lack of access to it altogether in wartime, which is why Israel has a navy to prevent the Mediterrenean coast from being blockaded.
A bigger concern the Israelis have is that in Iran, it was once the law that Jews could not use the same water fountains as Muslims, or even walk outside when it was raining. (Until the 1920's.) Iran's current leadership feels that a subordinate place for Jews is mandated by God. That has a lot to do with why Israel is willing to spark a war to prevent Iran from getting nuclear weapons.
There is reserved seat for a Jewish member of the Majlis (Parliament) in Iran, reserved because 25,000 to 35,000 Jews do not have the numbers to elect one directly.
To quote that member:
http://www.ejpress.org/article/31716
Alan
And he knows exactly which shibboleths to utter to keep the mullahs happy. The term for such a person is Court Jew, and Jewish history is full of them. Even the Nazis set up a dog&pony show with Theresienstadt's Jewish council.
No matter. Now that Iraq's Kurds have the leeway to conduct their own unofficial foreign policy, a new escape route out of Iran is opening for the remaining Jews. The Jewish community of Iran will decline to a nullity over the next few years.
You are unique in claiming that Iranian Jews cannot emigrate. I have not heard such a claim elsewhere. The Jewish community there is 3,000 years old and well established.
The "Court Jew" had quite a few negative things to say, so I doubt your claims of apologist. And Court Jews were traditionally quite influential and powerful, assimilated but not apologists (any more than any politician is).
The fact remains that Iran gives over representation in Parliament to Jews, hardly the sign of massive persecution.
But I agree that Israel will use any pretext to bomb Iran, and make up motives in their own minds (and PR) to justify it. That Iran has had a millennium of non-aggression will not matter to them.
Alan
You are unique in claiming that Iranian Jews cannot emigrate. I have not heard such a claim elsewhere. The Jewish community there is 3,000 years old and well established.
And before the Mullahs took over it was over 10 times its current size. Gee, I wonder why. Emigration is possible, but for not whole families at a time. When it's whole families, the goverment develops sudden "technical difficulties" in issuing exit visas.
The fact remains that Iran gives over representation in Parliament to Jews, hardly the sign of massive persecution.
So one puppet gets a parking spot and a desk at the Majlis so he can show up and utter the expected plattitude at an assembly that has no real power even for the Muslim reps, and that privilege is on behalf of fewer people than the constituents of Muslim districts. How lovely.
But I agree that Israel will use any pretext to bomb Iran, and make up motives in their own minds (and PR) to justify it. That Iran has had a millennium of non-aggression will not matter to them.
Right. Because flying over 2 other countries to reach and attack a country 20 times its size, is something Israel is so intent to do, for no possible reason.
The psychology of Likud is as warped as that of the Afrikaans aparthied, if not more so. They elected not one but two mass murderers and war criminals for PM.
That would be the reason for Israel to attack Iran.
Please note that Iraq used WMD against Iran (in their war of aggression against Iran) and Iran did not respond in kind.
Alan
Which naturally owes to the fact that Iran doesn't only see little Israel, but the US and others holding it's hand. Not that I'm faulting Iran here.. I just think that this is the reason that Israel gets to display as much bluster (and keep pounding Gaza) the way she does.
Remember the outrage when a ship from Iran was caught trying to supply arms to the Palestinians? No doubt the Israeli interdiction was carried out with sorties by F15s and Blackhawks.
At least in a stalemate, the oil keeps flowing!
Those "mass murderers" are called thus for daring to protect their citizens against the local branch of the Muslim Brotherhood, whose other branch is the one America pounded out of Afghanistan.
Begin's Irgun and Sharon personally (and later also via IDF auxiliaries) murdered innocent civilians.
Well documented. No "protecting their citizens", cold blooded murder as policy.
Both war criminals. Ben-Gurion supposedly banned Begin from any part of government because of the blood on his hands.
from Ha'artz, quoting Ben-Gurion
http://www.haaretz.com/hasen/spages/1097435.html
Alan
Is that like Michael Steele ?
Flower power http://news.bbc.co.uk/olmedia/750000/images/_752704_rapeseed300.jpg oil from rapeseed. It is just so much nicer with love than war.
Shai Agassi is smiling ear-to-ear.
Shai Agassi's efforts to help the world move off oil have made him a national hero in Israel.
No loans! Major colleges pledge aid without debt
Not sure how long they can continue that, given the beating college endowments took.
But there's always this:
College: Pay Double And You're In
Stanford is free with a family income less that $100,000
Many of these schools have endowments so big that the IRS has threatened their tax free status.
China Announces a Trade Deficit in March, Its First Since 2004
http://www.nytimes.com/2010/04/10/business/global/10china.html
That may not surprise others more aware of china's economy, but that bit of news did surprise me. I thought they consistently had huge trade surpluses via exports to the West.
Gee whiz, where is everyone this morning?
Here's some fun conjecture: I was playing with numbers to see if I could find a correlation between the Dow and the price of oil. If we look at the peak oil price to date, 147, the Dow was at about 14700, or 100 dow pts for every dollar of oil price. A ratio of 100 to 1.
Once it dropped off the edge of a table to 7400 and oil to 35 a barrel, the ratio changed to 211 to 1.
Today the Dow is close to 11,000 and oil is at 85, with a ratio of 130 to 1.
The dow only has 3700 pts to go to match the level reached prior to the temp. collapse, and to get back to a 100 to 1 ratio. Thus, to round numbers off a little, when the dow hits 12k the ratio should be 122 to 1. That would make the price then at (12,000 divided by 122) is 98 per barrel.
Dow at 13,000 is a 113 to 1 ratio, with an oil price of 115.
14,000/ 104 to 1, price: 135
14,700/ 100 to 1, p: 147
I'm figuring that $115 is max. for what the economy can handle after a tepid recovery made possible mostly by huge Fed borrowing. Thus the max. the Dow should be able to muster is 13k.