Drumbeat: June 9, 2010

Exponential Growth Meets Finite Resources

Anyone devoted to the study of resource economics, especially peak oil, must finally abandon the comfortable foundations of geologic science and face up to the much messier and much less predictable economic side effects implied by the end of cheap energy.

The end of cheap oil is now deeply intertwined with a growing sovereign (meaning national government) debt problem in such a way that treating either problem generally tends to make the other problem worse. Global economic stimulation, if effective in leading to global recovery, probably soon leads to a rise in global oil demand.

BP report shows importance of Gulf of Mexico

The growing importance of the US Gulf oil sector is highlighted in the 59th annual statistical review produced by BP, which shows American crude production rising faster last year than anywhere else in the world.

The 7% increase to 7.2m barrels a day is largely attributed by Christof Ruehl, the company's chief economist, to the ramping up of new fields in the Gulf of Mexico, although it also includes shale and other oil deposits.

BP Spill Provides Unprecedented Buying Opportunity for Oil

Most people realize that our planet is quickly running out of the black stuff. The recent downturn in oil prices, I believe, provides a major buying opportunity so that you can position yourself for a PERMANENT INCREASE in the price of oil which many believe is right around the corner.

Western oil demand may have peaked

BP's annual statistical review of world energy highlighted the contrasting drivers of global recession and Asia-led recovery. Global energy consumption fell in 2009 for the first time since 1982 as the world economy contracted for the first time since the Second World War. But the impact was very different in developed (OECD) economies, where energy consumption fell faster than GDP, compared with developing (non-OECD) economies where consumption increased faster than GDP.

IMF Says Vietnam Reserves Fall to 7 Weeks of Imports

(Bloomberg) -- Vietnam’s foreign-currency reserves have fallen to the equivalent of seven weeks of imports from coverage of less than two-and-a-half months in December, according to the International Monetary Fund.

Reserves “had been under pressure,” before picking up in the second quarter, the IMF said in a statement posted on its website today. Reserves declined in 2009 as the government defended the dong, the fund said on Dec. 3.

I Can't Believe It's Oil!

It's clear that our dependence on oil won't go away soon, even if the internal combustion engine disappeared overnight. Black gold is an integral part of virtually every aspect of everyday life as we know it. Green energy may help to reduce our need for fossil-based fuels, but it won't curb the demand for all the other products that depend on this valuable resource.

Interview with Chris Martenson

If you had to explain the Crash Course to somebody in a lift for three minutes, how would you encapsulate the essence of the Crash Course?

I would say that there’s an amazingly high chance that there’s going to be an enormous change in our future. The economy is the way in which we organise ourselves, it’s how we get things done, it’s the living, breathing creature that surrounds our daily lives and so we have a commanding interest in its health and well-being – certainly the events of 2008 have really brought that to the forefront of people. But the economy doesn’t exist by itself – it’s intimately connected to, and feeds upon resources that come out of the earth, human resources, all kinds of resources.

The Gulf of Mexico (GOM) oil spew demonstrates that we just don’t get it

The GOM oil spew reinforces the extent to which Americans “just don’t get it” regarding the unsustainable nature of our American way of life.

Our self-righteous indignation at BP regarding the GOM oil spew—our insistence that they “fix ‘their’ problem immediately”, that they insure that “nothing like this ever happens again”, and, oh yeah, that they maintain continuous flows of black gold (from somewhere else) in order to perpetuate our American way of life—demonstrate total ignorance on the part of the American public regarding how our American way of life is enabled, why it is unsustainable, and why it will soon come to an end.

Richard Heinberg: FREE!!! Oil Exec Quote Generator

So there you have it. Worldwide production of “conventional” oil will peak and drop off frighteningly soon. But, not to worry: “We will not peak relative to the resources left in the earth.”

Huh? Did Hofmeister just endorse the Peak Oil hypothesis, or deny it? And what does he mean by saying that “the resources left in the earth” will not peak? After all, we’re talking about depleting, non-renewable resources here; does Hofmeister intend to imply that there’s more oil in the Earth’s crust today than there was a couple of hundred years ago before we extracted and burned that last trillion barrels? Weird.

Can BP survive the Gulf spill? Can its CEO?

As we all know, Einstein went to his grave refusing to accept quantum mechanics until it was linked with a unified theory of physics. In that vein, it's not surprising to see the Gulf of Mexico oil spill, too, setting the minds of restless geniuses to work. In one of the latest examples, Federal Judge Richard A. Posner, the indefatigable Chicago writer and thinker, outdoes himself with a unified theory of catastrophes. The gulf spill, Posner argues in The Washington Post, is of a piece with the global financial crisis, the Indian Ocean tsunami of 2004, and Hurricane Katrina the following year, not to mention flu epidemics, the extinction of species, nuclear accidents, global warming, and the collision of an asteroid with Earth. Why does no one take action to prevent or avoid injury in such catastrophes? ponders Posner. Because there's no date certain of their occurrence.

That's all very interesting. As for me, I'd like to get past the waiting and simply learn at last whether or not BP CEO Tony Hayward and the company itself are toast. For help to this end, I called and emailed around to people in and out of the oil industry. Among the first was Ken Robertson of Paddy Power, a Dublin-based online betting site. Sometimes when people are putting down their own money, they find judgment inaccessible to the rest of us.

Interior Dept. Offers Offshore Drilling Requirements

The Department of the Interior issued a directive to oil and gas lessees and operators on the Outer Continental Shelf implementing stronger safety requirements that Secretary of the Interior Ken Salazar recommended in his 30-day safety report to the President.

Jeremy Leggett: The oil spill and credit crunch were bad. An oil crunch would be worse

Big as BP's problems are as a result of failed risk assessments, it will very probably soon become worse. Growing numbers of people doubt its annual review of oil reserves, published today. Society builds its oil dependency on key cultural statements of faith about secure supply, such as BP's annual announcement that there is 40 years of supply or more, and no danger of supply falling short of demand, so ambushing oil-addicted economies.

You would think that BP's risk-assessment failures in the Gulf, and in US refineries, would make the company measured, given the stakes in this particular assessment. The reverse seems true.

Feds give BP deadline on contingency plans for oil collection

(CNN) -- Federal authorities have given BP a 72-hour deadline to provide contingency plans for the collection of oil in the Gulf of Mexico, according to a letter -- dated Tuesday -- sent to the company.

The development comes as oil disaster hearings continue Wednesday on Capitol Hill, with the House and Senate tackling issues ranging from safety and cleanup to liability.

Spill forecasts: Take with a grain of salt water

The relentlessly spreading oil in the Gulf of Mexico has spawned a likewise burgeoning number of forecasts seeking to predict which beach the crude will foul next.

Initially there was just the National Oceanic Atmospheric Administration's three-day forecast. But last week the National Center for Atmospheric Research joined the fray, with an alarming projection showing oil billowing up the entire length of the East Coast this summer.

Then there's a forecast from Accuweather, predicting a 35 percent chance of oil on Galveston's beaches by Labor Day.

Such forecasts are sobering. But are they credible? Maybe not, scientists say.

Sharron Angle: In wake of Gulf spill, we need to "deregulate" Big Oil

Dems are gearing up to paint Sharron Angle, the ultra-conservative candidate who's now taking on Harry Reid, as another Rand Paul and possibly even further to his right.

And here's another data point: Angle said in a recent interview that the Gulf spill was an "accident" and opined that we need to further "deregulate" the oil industry in the wake of the disaster.

Study compares 2010 and 1979 oil spills

"What is happening today, especially the failures to cap the well, happened in a similar way back in 1979," Guinasso said. "And just like the current spill, there was a blowout preventer that was supposed to have worked, but it did not.

"But the big difference … was the depth of the water -- it was only in 160 feet of water, not like the more-than-5,000-foot depth of the current oil leak."

Why We Hate the Oil Companies: Straight Talk From an Energy Insider

Talk about timing. Why We Hate the Oil Companies hits the shelves in the midst of the most catastrophic oil spill in U.S. history, with one particular company drawing an unprecedented amount of public hatred. As politicians feverishly debate the country’s offshore-drilling policy, Hofmeister spells out a plan to solve Americans’ increasing need for energy that includes serious investments in sustainable resources, revolutionizing the country’s urban infrastructure, a whole new independent regulatory agency, and, yes, much more drilling. The good news: his ideas could actually work. Caveat: the ideas are controversial.

Clean Energy: The Nuclear Solution

Controversy over rising demands for “clean energy” and costs associated with it has made finding “alternative energy sources” a priority on Capitol Hill. The New American sat down with an expert in power-generation technology to discuss why nuclear is the safest, most efficient answer to the so-called “energy crisis.”

Utah to craft energy blueprint that may include nuclear

Gov. Gary Herbert announced the formation of a task force Tuesday to craft a 10-year energy blueprint that will include an assessment of whether Utah should embrace nuclear power.

"Inherent in this discussion needs to be at least a consideration of nuclear energy," Herbert said.

Federal gov't approves $600M for Ottawa light-rail project

OTTAWA — The long wait wait is over. Federal Transport Minister John Baird announced $600 million Tuesday morning for the city's light rail project, giving it a much needed boost.

Baird said the money shows the federal government delivers for Ottawa.

Palm Oil Declines as Brazil Increases Soybean Crop Forecast

(Bloomberg) -- Palm oil futures dropped for a third day after Brazil, the world’s second-largest producer of rival soybeans, raised its crop forecast.

India may impose cess on farm power to cut water table depletion

New Delhi – Alarmed over the rapid decline in groundwater levels, the north Indian states of Punjab and Haryana, the country's food bowl, has asked its farmers not to grow paddy this season even as a top advisory policy-making body is toying with the idea of a cess and also do away with free power to farmers to boost water table across the country.

Farmers' Markets of the Future

The winning design proposes a four-storey building that allows for the market to take place in the lower level, while outdoor seating surrounds the structure and business in offices and state departments takes place in the upper storeys.

Shoppers are able to view the three main streets in downtown Toronto within the glass atrium of the structure, which also creates an open indoor market with an outdoor feeling — plus lots of natural light and protection from the elements.

The dangers of deep-sea oil drilling

Chicken Little that he was, Hubbert also predicted that as soon as 1970, the rich fields of Texas and those elsewhere in the lower 48 states would fail to meet our demand.

Then the U.S. home-produced supply did start to dry up in the 1970s. Now, we're pretty much out of all the easily accessible oil. That's why companies are going a mile underwater and drilling thousands more feet into the seafloor to get at high-pressure oil deposits full of potentially explosive natural gas.

In retrospect, it sounds somewhat dangerous.

10 oil-spill ills

How did so many things go so wrong at the Deepwater Horizon oil-spill site? Was it human error, an act of nature, or a blend of both? And why didn't any of those great engineering ideas to stem the spill work out? There are lots more questions than answers, even on Day 50 of the disaster on the Gulf. But a couple of things are clear: First, we got into this fix because of multiple failures and miscalculations. Second, still more ills could well surface before all this is over. Here's a quick recap of what went wrong at the wellhead, and what could go wrong in the future:

Journalist dives into Gulf, can only see oil

UNDER THE MURKY DEPTHS OF THE GULF OF MEXICO - Some 40 miles out into the Gulf Of Mexico, I jump off the boat into the thickest patch of red oil I've ever seen. I open my eyes and realize my mask is already smeared. I can't see anything and we're just five seconds into the dive.

Dropping beneath the surface the only thing I see is oil. To the left, right, up and down — it sits on top of the water in giant pools, and hangs suspended fifteen feet beneath the surface in softball sized blobs. There is nothing alive under the slick, although I see a dead jellyfish and handful of small bait fish.

Does Obama need more oilmen, not fewer, in his administration?

Last week, I suggested that Obama "purge his administration of oil hacks." I identified three: William Reilly, co-chair of the administration's oil-spill investigation commission and a well-compensated director of ConocoPhillips since 1998; Steve Koonin, who took the a top Department of Energy post in 2009 after serving as BP's chief scientist since 2004; and Sylvia Baca, who set up shop as deputy administrator for land and minerals management at the Minerals Management Service in 2009 after serving as a BP exec since 2001.

I considered my proposal to be eminently modest, given what's going on in the Gulf. But Michael Levi, senior fellow for energy and environment at the Council on Foreign Relations, disagrees. In a Monday blog post entitled "Obama needs more oilmen," Levi takes me and other critics to task.

“It's Our Energy Pearl Harbor” – Matt Simmons

As a well-known and respected oil industry executive and author of the book Twilight in the Desert: the Coming Saudi Oil Shock and the World Economy, Mr. Simmons drew quite a crowd this afternoon. He spoke about the oil spill in the gulf saying, “It is the greatest human tragedy we’ve ever had. It is our Energy Pearl Harbor.” The oil spill must be attended to with the same “intensity” as was used by the U.S. in WWII after the attack on Pearl Harbor. He says that BP has given us nothing but bad information about this disaster from the very conservative BP report of 1,000 barrels leaking a day to the release of the video that they say is the leaking oil. Simmons claims there is a different source of the leak and the video being released to the media is just a 4-foot oil plume, which is much too small to cause such a massive oil slick.

Energy: Are You A Pig - And A Bigot?

Those who argue for a "western lifestyle" but demand that others, whether defined as Chinese, Nigerians, Arabs, Mexicans or anyone else "eat" the risk and pollution that comes from their profligate lifestyles, or who argue for you to live as the above while they have their cars, boats, mansions and planes, are both pigs and bigots.

This means you Mr. Gore, it means you Mr. Kunstler, and it means you I won't even bother getting into the financial deals many of these people have entered into that will generate huge windfalls if we do have "carbon exchanges" and similar claptrap - I don't need to in order to make my point.

I like my car, my boat, my pool and my house. I like my A/C in the summer and my natural-gas fired heat in the winter.

I therefore support extraction and production of each and every BTU that I desire to consume right here, inside our borders, where the risk of the production of that BTU falls on ME, as part of the collective known as The United States.

Saudi Electric to get loan for $2.1 bln plant in June

"General Electric will supply the equipment for the plant and we have selected Hyundai Heavy Industries as main contractor for the construction of the plant," Barrak added.

The Riyadh 11 plant will use natural gas as a feedstock. "Aramco will supply us with the natural gas," Barrak said.

Reset: Stephen Kinzer's Vision of a New U.S. Relationship with Turkey and Iran

Since many Americans know little about Turkey, many may find it plausible when Liz Cheney claims that "it looks like" Turkey is "supporting Hamas" in "wanting to destroy the state of Israel."

It's a very opportune time to hear from former New York Times correspondent and bestselling author Stephen Kinzer, whose new book "Reset: Iran, Turkey, and America's Future" is published today. Kinzer argues that the world has changed sufficiently since the Cold War so that a fundamental rebalancing of U.S. relationships in the Middle East, away from excessive attachment to the current policies of the Israeli and Saudi governments and towards greater cooperation with Turkey and Iran, would be in the interests of the United States.

The new abnormal

People in a bad economy tend to perpetuate it by reducing consumption, fearing tough times ahead. Often we even spend to save. Richard Florida in his new book The Great Reset notes that families during the Depression quickly bought the new invention of radio because it was, after the initial hefty investment, a cheap form of entertainment. Rather than purchasing restaurant meals and sports and entertainment tickets, will we see high-definition TVs and iPads become inexpensive fun?

Oh yes, there is the small detail of oil, which is used in almost everything we produce. It is a finite resource. The respected economist Jeff Rubin is concerned that oil will skyrocket in price over the next few years due to limited supply. To make matters worse, the BP oil spill is likely to restrict drilling offshore where massive future reserves are located.

Jeremy Leggett: After the credit crisis – next it will be oil

As it now admits, BP “did not have the tools” to contain a deepwater oil leak. Its failure with that risk must now raise questions about its approach to other risks. Top of the list must be the threat that global oil production will fall sooner than generally forecast, ambushing oil-dependent economies with a rapidly opening gap between supply and demand. The approach of the point at which global oil supplies reach an apex, “peak oil” as it is often known, worries growing numbers of people. But, until now, BP has poured scorn on the worriers, encouraging the oil industry’s effort to reassure society about peak oil. The disaster in the Gulf of Mexico casts doubt on the viability of the deepwater production on which industry forecasts depend.

Oil Rises a Second Day as Stockpile Drop Signals Growing Demand

(Bloomberg) -- Oil advanced for a second day amid evidence that stockpiles are falling as the U.S. economic recovery fans demand.

Crude climbed as much as 1.2 percent on the New York Mercantile Exchange after an American Petroleum Institute report yesterday showed crude inventories dropped the most in six months last week. U.S. Department of Energy data today will probably also show a second weekly decline, according to a Bloomberg News survey.

OPEC holds oil demand forecast steady

VIENNA, Austria (AFP) – The organization of oil exporting countries (OPEC) held its forecast for oil demand to rise by 0.95 million barrels a day but was cautious about market trends in 2010, in a monthly report on Wednesday.

BP Spill Means Oil Prices Gain as Output Falls

(Bloomberg) -- Higher crude prices and rising imports may be in store for the U.S. after the government slashed its forecasts for Gulf of Mexico output by 6.1 percent following the BP Plc spill, the worst in the nation’s history.

How bad could BP oil spill get for the Gulf and the nation?

So how bad could it get?

The numbers point to an unprecedented ecological disaster unfolding in the Gulf of Mexico and possibly along the Eastern Seaboard.

Shallow-Water Drillers Must Verify Blowout Devices, U.S. Says

(Bloomberg) -- Oil and gas companies drilling in the Gulf of Mexico’s shallow waters must verify that they meet new requirements for blowout preventers by June 17, U.S. regulators said.

Companies will have to get an independent third party to confirm that the devices to stop spills work and are compatible with well locations, the Interior Department said in a statement yesterday. Those that don’t comply will be subject to shut-in orders, meaning operations on the rigs may be halted.

BP plans to burn some oil pumping up to surface

NEW ORLEANS – Now that crews are collecting more and more oil from the sea-bottom spill, the question is where to put it.

How about burning it?

Equipment collecting the oil and bringing it to the surface is believed to be nearing its daily processing capacity. A floating platform could be the solution to process most of the flow, BP said.

As Missteps Mount, So Does the Backlash

Frustration over the spill could cost BP and its oil industry rivals heavily in the years to come. The costs will come in the form of new regulations—such as those issued Tuesday by the Obama administration as the prerequisite for companies to resume offshore drilling in waters shallower than 500 feet.

BP exec: No large concentrations of underwater oil

NEW ORLEANS — BP Chief Operating Officer Doug Suttles continues to insist that no massive underwater oil plumes in “large concentrations” have been detected from the spill in the Gulf of Mexico.

Suttles’ comments came Wednesday morning on network news shows, a day after the government said water tests confirmed underwater oil plumes from the oil spill, but that concentrations are “very low.”

Raising Remnants of Oil Rig Is Still on the Agenda

WASHINGTON — Even as they focus on the struggle to plug the leaking oil well in the Gulf of Mexico, engineers are longing for the twisted and scorched metal at the bottom of the sea and other evidence that might tell them what went wrong seven weeks ago.

Obama talks, investors flee drillers

Investors pummeled shares of oil drillers and BP on Tuesday, after President Obama talked tough about dealing with the worst oil spill in the nation's history.

Analysts added fuel to the sell-off by cutting their earnings outlooks on companies that figure to be hurt by the six-month moratorium on deepwater drilling in the Gulf or the temporary delay in issuing permits for drilling in shallow water.

Obama's getting really, really mad — or is he?

WASHINGTON – First he was going to make BP pay for the Gulf oil mess. Then he declared himself in charge. Now he's trying to find out "whose ass to kick" and making clear he'd fire BP's chief if only he could.

President Barack Obama is talking ever tougher as the Gulf oil spill crisis drags on, the public's patience wears thin and the peril to his presidency increases. With pressure building on Obama to fix the crisis, the White House said he'll be heading back to the scene, spending next Monday and Tuesday inspecting oil damage in Mississippi, Alabama and Florida.

Hercules, Seahawk Hire Lobbyists to Avert U.S. Drilling Curbs

(Bloomberg) -- Shallow-water drillers Hercules Offshore Inc. and Seahawk Drilling Inc. hired the lobbying firms of former New York New York Mayor Rudolph Giuliani and ex- Republican Representative Bob Livingston to help ward off possible U.S. drilling curbs following the BP Plc oil spill.

Louisiana's economic hurt from drilling moratorium warrants action

Louisiana's economic pain from President Obama's moratorium on oil drilling becomes more acute with each passing day.

The six-month suspension of deepwater exploratory drilling is shutting down 25 active rigs and five others that were scheduled to launch operations before the end of the year, according to federal regulators. Those rigs, almost all of which are located off Louisiana's coast, normally employ between 24,000 and 42,000 workers. Thousands of other Louisianians work for boat operators, contractors, caterers and other firms that service those platforms.

Florida Charter Boats Gird for Losses as BP Leak Ruins Fishing

(Bloomberg) -- Gary Jarvis, a charter-boat captain from Destin, Florida, says he planned to make at least $60,000 this month taking anglers out in the Gulf of Mexico to catch red snapper. Instead he’s living on $5,000 he got from BP Plc to help cover income lost to the worst oil spill in U.S. history.

“This is crushing,” said Jarvis, 58, who says he has $20,000 a month in bills and normally grosses about $350,000 a year as a charter and commercial fisherman. “I’m already calling creditors and saying, ‘Look, this may go really south.’”

BP Slumps to 20-Month Low as Obama, Congress Raise Pressure

(Bloomberg) -- BP Plc plunged to a 20-month low in London trading as President Barack Obama and U.S. Congress stepped up pressure on Chief Executive Officer Tony Hayward to stop the worst oil leak in U.S. history.

The shares fell as much as 5.4 percent to the lowest level since October 2008 after a 5 percent drop yesterday. The stock traded at 389.50 pence as of 10:50 a.m. in London, 41 percent lower than April 20, when an explosion on the Deepwater Horizon rig triggered the spill.

BP paying out $2.63B in dividends

NEW YORK - BP PLC will pay shareholders $2.63 billion in dividends on June 21 as investors and U.S. lawmakers wait to see what the oil company decides about future payouts.

BP under pressure as U.S. probes Gulf spill

VENICE, La./LONDON (Reuters) – BP Plc's efforts to stop oil from its blown-out well gushing into the Gulf of Mexico will come under U.S. congressional scrutiny on Wednesday as the British oil company's stock price continued to fall.

BP shares fell 3.2 percent in London, following a 5 percent drop on Tuesday, on worries that the energy giant will have to suspend its dividend payment under pressure from U.S. politicians who say it should go to pay for legal claims and environmental damage in the Gulf.

Oilfield Insurance Costs to Rise After BP, ONGC Says

(Bloomberg) -- Insurance costs for oil companies are set to rise “exponentially” after the BP Plc spill, the worst oil leak in U.S. history, the chairman of India’s biggest energy explorer said.

“This spill is going to be a game changer,” R.S. Sharma of Oil & Natural Gas Corp. told reporters today in New Delhi where he was attending a conference. “Insurance costs are going to go up exponentially around the world.”

Jeff Rubin: Gulf oil disaster doesn’t make the tar sands green

It’s funny how it’s taken the worst ecological disaster in U.S. history to suddenly make other forms of oil extraction and processing look green. Only months ago, the carbon trail from the massive planned expansion of tar sands production made Canada a pariah at the world environmental summit in Copenhagen. But now tar sands producers and others are promoting tar sands oil as an ecologically friendly alternative to the environmental risks of another deep-water oil spill.

How low the bar has fallen.

A Last Line of Defense? National Parks at Sea

Today is World Oceans Day, an occasion to pay homage to the seas — perhaps a sober occasion, in view of the catastrophic oil spill in the Gulf of Mexico.

Now, a group of scientists are calling for world leaders to create more marine reserves like the Great Barrier Reef of Australia — national parks at sea, as they put it. In a statement issued Tuesday and signed by nearly 250 scientists from 35 countries, they asked lawmakers around the globe to consider designating vast reserves of the ocean as protected areas.

Will disaster in Gulf change our attitudes about fossil fuels?

But peak oil is more than shrinking geologic reservoirs. Peak oil is also reflected in the desperate act of trying to meet growing demand with blatantly unsafe methods. Imagine a nuclear power plant with one coolant system to contain an accident. Today, this is illegal and unethical practice.

Imagine a deep-water oil well with a "fail-safe" relief well available 16 weeks down the road at the earliest. All existing deep-water oil wells need to be immediately shut down while their owners install relief wells.

This precaution is a necessary cost of production even if it forces the price of gasoline to levels not yet experienced.

Maximize your EROEI

Energy Return on Energy Invested (EROEI) or Net Energy Productivity, is the ratio of energy that comes out of a system, divided by the energy put into it. I was fascinated with comparing pre-industrial with the industrial agriculture and food systems.

Pre-industrial systems showed an EROEI of five to fifty. That is to say that for every unit of energy put into the system, between five and fifty units came out. In pre-industrial agriculture, that energy was human labour, draft animals, tools, and seeds saved from previous crops.

The high end of the scale was an intensively managed and layered system, like paddy rice. The low end was simple subsistence agriculture. To me, the interesting thing was that agriculture systems did not go lower than five units out per unit in. My guess is that an agricultural system that produced less than five units literally "starved out"; it didn't yield enough surplus energy to have a reserve for bad harvests or to raise the next generation.

By contrast, industrial agriculture — with its fertilizers, pesticides, diesel fuel, big machines, transport, processing and distribution networks — has an EROEI of zero point one. In other words, ten units of energy are used in the system to get one unit of energy to the table. Industrial agriculture is a system for converting petroleum into food in an extremely wasteful fashion.

Marin Man Cashing In on Oil Fears

"Peak Oil" is the catchy phrase to describe the point at which oil is cheapest and most available before the inevitable downward spiral in reserves -- taking the economy, and possibly civilization as we know it, along for the ride.

Scenes like the ones we see every night on television from the Gulf of Mexico have become great publicity for "peak oil" preparedness peddlers.

EIA Lowers Oil Supply Estimates

Noted energy economist and editor of Energy World Profits advisory service Gregor Macdonald has been questioning the EIA’s overly optimistic production estimates for years.

"You will recall the story that the EIA had either been fudging data or at the very least downplaying data, in an effort to diminish the urgency of peak oil," said Macdonald. "The forecasting of the EIA has been abysmal this decade. The actual growth of global crude oil supply compared to their forecasts has been so far off the mark that the agency probably shouldn’t have even bothered to produce forecasts."

The International Energy Outlook Is Bullish for Canada

On May 25 the EIA published highlights from its forthcoming International Energy Outlook 2010 (IEO). (The full report will be released in July.) The data and forecasts released last month reveal a startling shift in the EIA’s position in the “Peak Oil” debate.

As recently as 2007 the EIA estimated oil supplies would increase largely in step with demand. But the new IEO predicts that through 2020, a period during which China will hit its economic growth stride, no year in which liquids production will increase by even 1 percent. Petroleum liquids supply increases by an average of 0.6 percent per year from 2011 to 2020. In other words, the EIA is expecting the oil supply to be essentially flat for the rest of the decade.

The EIA’s oil production optimism peaks

Has the US Energy Information Agency, traditionally one of the more bullish of the long-term forecasters on oil production, changed its tune?

Steven Kopits of energy consultants Douglas-Westwood (and sometime FT ES reader), thinks so — particularly with its forecasts out to 2020.

Why Shifting to Natural Gas Won't Reduce Energy Prices

In the recent past, the switch to natural gas has been argued as a means by which to blaze a path towards cleaner air, less foreign oil dependency and lower energy costs. However, benefits expected from a shift to natural gas are not likely to pan out.

Peru Regains Fuel Exporter Status as Country Lures $9 Billion

(Bloomberg) -- Peru, a net fuel importer for the past four decades, is set to become an exporter as Repsol YPF SA and Petroleo Brasileiro SA lead $9 billion of investments in oil and natural gas projects, an industry group said.

Two Killed in Second Fatal Texas Gas Pipeline Blast in Two Days

(Bloomberg) -- Two people were killed and three injured after a natural gas pipeline exploded in the Texas Panhandle, the second deadly blast in the state in as many days.

Russia becomes leading oil producer, BP says

Russia overtook Saudi Arabia to become the world's leading oil producer in 2009, while global oil consumption fell the most since 1982, BP has said.

According to the oil giant's latest Statistical Review of World Energy, Russia increased oil production by 1.5% in 2009, claiming a 12.9% market share.

Production in Saudi Arabia fell 10.6%, giving the country a 12% market share.

Coal’s Share of Energy Use Rises as Natural Gas Falls, BP Says

(Bloomberg) -- Coal’s share of global energy consumption rose last year to its highest level since 1970 as use of natural gas fell the most on record, BP Plc said.

Coal accounted for 29 percent of world energy use, BP said in its annual Statistical Review of World Energy, released today. The report measures consumption of oil, gas, coal, nuclear energy and hydro electricity. Global consumption fell 1.3 percent in 2009 to 11.16 billion metric tons of oil equivalent, the first decline since 1982, BP said.

Dirty Illinois Coal Revived by Mining Deaths, Obama Crackdown

(Bloomberg) -- Coal has been cruel to Carlinville, Illinois, robbing it of hundreds of jobs in the past two decades. Tragedy and tougher regulation in Appalachia promise to reverse those fortunes in a state where the unemployment rate hovers near a 26-year high.

Illinois coal, once considered too dirty to be burned by utilities, is on the rise after the worst U.S. coal disaster in 40 years. The April 5 blast at Massey Energy Co.’s Upper Big Branch mine in Montcoal, West Virginia, killed 29 workers.

China reaps benefits of Iraq war

"For China, oil security is largely about avoiding disruption to supplies and cushioning the effects of dramatic fluctuations in oil prices," said Barclays Capital oil analyst Amrita Sen. "Iraq has become an obvious target to secure the barrels of oil for future consumption."

From among the most outspoken of critics of the 2003 U.S.-led invasion to topple Saddam Hussein, China has emerged as one of the biggest economic beneficiaries of the war, snagging five lucrative deals. While Western firms were largely subdued in their interest in Iraq's recent oil auctions, China snapped up three contracts, shrugging off the security risks and the country's political instability for the promise of oil.

Iran may face new sanctions

The United Nations is moving forward with new sanctions that would expand an arms embargo against Iran and ban some travel to the Islamic nation if it refuses to honor agreements over its nuclear program.

The U.N. Security Council is set to vote today on whether to levy what the Obama administration is calling the toughest sanctions Iran has faced yet for its renegade nuclear program.

U.S., France Urge Japan to Make India Nuke Deal, Nikkei Says

(Bloomberg) -- U.S. and French officials are encouraging Japan to sign a nuclear agreement with India even though India isn’t part of the Nuclear Nonproliferation Treaty, Nikkei English News reported, citing unnamed Japanese officials.

Minnesota plant will produce fertilizer from wind

MORRIS, Minn. (AP) — The winds sweeping across the Northern Plains could soon help farmers fertilize their crops of corn, wheat and sorghum.

Minnesota researchers have designed a $3.75 million carbon-free system that uses wind power from a towering turbine to produce anhydrous ammonia, a common nitrogen-based fertilizer.

Abengoa Joins Masdar, Total on Middle East’s First Solar Plant

(Bloomberg) -- Abengoa SA of Spain joined Total SA and Abu Dhabi’s renewable energy company, Masdar, in building the Middle East’s first major solar power plant.

Amish Farming Draws Rare Government Scrutiny

LANCASTER, Pa. — With simplicity as their credo, Amish farmers consume so little that some might consider them model environmental citizens.

“We are supposed to be stewards of the land,” said Matthew Stoltzfus, a 34-year-old dairy farmer and father of seven whose family, like many other Amish, shuns cars in favor of horse and buggy and lives without electricity. “It is our Christian duty.”

But farmers like Mr. Stoltzfus are facing growing scrutiny for agricultural practices that the federal government sees as environmentally destructive. Their cows generate heaps of manure that easily washes into streams and flows onward into the Chesapeake Bay.

American Opinion on Climate Change Warms Up

ScienceDaily — Public concern about global warming is once again on the rise, according to a national survey released June 8 by researchers at Yale and George Mason Universities. The results come as the U.S. Senate prepares to vote this week on a resolution to block the EPA from regulating carbon dioxide as a pollutant.

Why Wait for a Climate Bill, GE Argues

Given the dicey odds for congressional approval of climate legislation, at least in the near term, a company that sells equipment for reducing carbon dioxide emissions is promoting a new strategy: federal money for tactical planning.

That company would be General Electric, which makes equipment to remove carbon dioxide from coal through a gasification process and store it underground, preventing it from entering the atmosphere. Coal is the most carbon-rich fuel in common use.

Fossil-Fuel Aid Cuts Would Lower CO2 Output 10%, OECD Says

(Bloomberg) -- Reducing subsidies for oil, coal and natural gas has the potential to reduce greenhouse gas emissions by 10 percent and help countries meet their climate targets, the Organization of Economic Co-Operation and Development said.

White House Threatens Veto of Move to Thwart E.P.A.

The White House made clear on Tuesday what had been assumed for months – that it does not like a resolution sponsored by Senator Lisa Murkowski, Republican of Alaska, that would thwart the Environmental Protection Agency’s ability to regulate greenhouse gases.

The White House says that if the resolution, scheduled for debate and a vote on Thursday, reaches President Obama’s desk, his advisers will recommend that he veto it. That’s what is known as a veto threat and in this case it is not a bluff.

Remember the Copenhagen Accord?

Back in December, representatives of more than 190 nations gathered in Copenhagen under the auspices of the United Nations Framework Convention on Climate Change to debate the fate of the world. They did not agree on much, but at the end of two contentious weeks they produced a three-page document known as the Copenhagen accord [pdf]. Delegates did not formally adopt it; instead, they voted to “take note” of it.

Six months later, 133 nations have decided to “associate” with the pact, which sets some rather ill-defined goals for reducing greenhouse emissions and helping poorer nations adapt to anticipated changes in the global climate like rising sea levels. Signing on to the accord does not impose any legal requirements, but it does indicate that a country will work to achieve its modest goals in advance of the next United Nations climate summit, in Mexico in late November.

New climate chief: 'no choice' but to take action

BONN, Germany – The new U.N. climate chief says nations have no choice but to join forces to stop global warming, even after her predecessor said he doubts sufficient climate goals will be set by 2020.

Climate Change Linked to Major Vegetation Shifts Worldwide

ScienceDaily — Vegetation around the world is on the move, and climate change is the culprit, according to a new analysis of global vegetation shifts led by a University of California, Berkeley, ecologist in collaboration with researchers from the U.S. Department of Agriculture Forest Service.

Looks like the EIA has made a lot of changes to the Weekly Petroleum Status Report.

Previously everything was available in one large special file. Now everything will be posted on different pages. Don't know if there will be a summary or not. But I think we can dig everything out, it will just take more digging.

Ron P.

Edit: The report is now out and I cannot make heads or tails of it. I did figure out that US stocks are down 1.8 million barrels per day. Haven't found US production numbers anywhere however.

The old summary report is still available, but now only as a pdf


Summary of Weekly Petroleum Data for the Week Ending June 4, 2010

U.S. crude oil refinery inputs averaged 15.2 million barrels per day during the week
ending June 4, 82 thousand barrels per day above the previous week’s average. Refineries
operated at 89.1 percent of their operable capacity last week. Gasoline production
decreased last week, averaging 9.1 million barrels per day. Distillate fuel production
increased last week, averaging 4.4 million barrels per day.

U.S. crude oil imports averaged 9.5 million barrels per day last week, up 80 thousand
barrels per day from the previous week. Over the last four weeks, crude oil imports have
averaged 9.7 million barrels per day, 641 thousand barrels per day above the same four-
week period last year. Total motor gasoline imports (including both finished gasoline and
gasoline blending components) last week averaged 788 thousand barrels per day.
Distillate fuel imports averaged 236 thousand barrels per day last week.

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum
Reserve) decreased by 1.8 million barrels from the previous week. At 361.4 million
barrels, U.S. crude oil inventories are above the upper limit of the average range for this
time of year. Total motor gasoline inventories remained unchanged at 219.0 million
barrels last week, and are above the upper limit of the average range. Finished gasoline
inventories decreased while blending components inventories increased last week.
Distillate fuel inventories increased by 1.8 million barrels, and are above the upper
boundary of the average range for this time of year. Propane/propylene inventories
increased by 1.2 million barrels last week and are in the upper half of the average range.
Total commercial petroleum inventories decreased by 0.5 million barrels last week.

This sort of info should be put in a simple table. Who is EIA reporting to ? Grandmas or kids?

The issue of whether oil imports into the Gulf of Mexico have been silently impacted by the oil spill disaster is clearer this week. Crude imports into the Gulf Coast area actually peaked for the year in the week of April 2, and are about 500,000 bpd below recent import trends in the last two weeks. However total national imports only dipped slightly due to an unusual surge of imports into the West Coast (although its not clear if that had anything to do with the situation in the Gulf). Total oil inventories along the Gulf Coast also peaked out around April 2, and are now about 10 million barrels less than 2 months ago.

Reports from the Louisiana Offshore Port continue to state that operations were not impacted by the spill, but it appears that a supertanker or two simply may have not shown up in the Gulf and took its cargo elsewhere.

Otherwise the slowdown in net crude shipments to the US finally is starting to mirror the minor slowdown in net OPEC exports that started in early April. Since then net OPEC exports to the world have been very steady, which contradicts the claims of many who say OPEC has become weak and disorganized. The coming true test for OPEC will be whether we see a summer reduction in OPEC exports to meet the increased demands of the Arabian Peninsula “air conditioning season”. Here’s something I previously posted in April about summer air conditioning demand in the KSA:

The demand on utilities in the Kingdom has significantly increased. Underlying this growth are two drivers — residential end-use energy requirements and industrialization. On the residential side, the combination of high population growth, a young population, and a rising standard of living, has led to a substantial increase in the demand for housing and subsequently an increasing need for more electricity and water.

Otherwise this may be called an example of Exportland 2.0

US oil product demand continues to race ahead at about a 7% pace over last year. Curiously, gasoline demand has started to slacken, but demand for other products has increased. Due to these somewhat contradictory indicators of demand, it is still a little premature to say if we will have product supply problems this summer (that is, of course, barring a GOM hurricane and/or closure of shipping lanes due to the oil spill).

"BP Chief Operating Officer Doug Suttles continues to insist that no massive underwater oil plumes in “large concentrations” have been detected from the spill in the Gulf of Mexico"

Clarke & Dawe on the oilspill: http://www.dumpert.nl/mediabase/983341/b3304134/bp_over_olielek.html

They are now admitting that the plumes exist but saying it is good news because the oil is sparce.

BP's 'Good News': Subsea Oil Exists, But It's Sparse. Video on page.

A day after government scientists confirmed the existence of undersea plumes of oil in the Gulf of Mexico , a top BP official said the concentration of oil found amounted to "good news."
BP COO Doug Suttles: "Haven't found large concentrations below the surface."

"We're putting lots and lots of effort out there to see where the oil is, but I can say right now -- and I'm really pleased about that -- it's good news in that we haven't found any large concentrations of oil below the surface," BP chief operating officer Doug Suttles told "Good Morning America" today.

I am very glad we are finally getting some good news from BP. ;-)

Ron P.

If the Rache didn't spend so much time flying around the country, and driving and boating around La, maybe they wouldn't need to drill in the Gulf. Last night? In SF to cover an election she could have covered from NY.
My name is Mike, and I am an oilcoholic.

"We're putting lots and lots of effort out there to see where the oil is, but I can say right now -- and I'm really pleased about that -- it's good news in that we haven't found any large concentrations of oil below the surface," BP chief operating officer Doug Suttles told "Good Morning America" today.

I just enjoy these critical-thinking exercises.

Factually I believe Mr. Suttles is correct:
1. BP did not find the oil in "any large concentrations of oil below the surface."
2. Other entities are finding the oil. (http://www.msnbc.msn.com/id/37589237/ns/disaster_in_the_gulf/)

His excellent 'spin' implies there was none found.

And for popular consumption they're banking on the fact that the masses have no idea what would constitute a "large concentration".

I heard they were finding a few parts per million at depth - any confirmation on that ?

I deal mostly with groundwater contamination issues and to say that a few ppm detection of any of the BTEX compounds would be considered a "large concentration" would be quite the understatement.

Lubchenco said the water analysis "indicate there is definitely oil sub surface. It's in very low concentrations" of less than 0.5 parts per million. Additional samples from another research vessel are being tested, she said
per H O

Jane Lubchencco, the Chief of NOAA, was someone I had great hopes for in this administration but it now appears that she is just another corporate whore. When the initial leak was being downplayed by BP, NOAA leapt into action:

When one scientist funded by NOAA released a figure much higher than the government's estimate, he found himself being pressured to retract it by officials at the agency. "Are you sure you want to keep saying this?" they badgered him. Lubchenco, the head of NOAA, even denounced as "misleading" and "premature" reports that scientists aboard the research vessel Pelican had discovered a massive subsea oil plume. Speaking to PBS, she offered a bizarre denial of the obvious. "It's clear that there is something at depth," she said, "but we don't even know that it's oil yet."

Scientists were stunned that NOAA, an agency widely respected for its scientific integrity, appeared to have been co-opted by the White House spin machine. "NOAA has actively pushed back on every fact that has ever come out," says one ocean scientist who works with the agency. "They're denying until the facts are so overwhelming, they finally come out and issue an admittance." Others are furious at the agency for criticizing the work of scientists studying the oil plumes rather than leading them. "Why they didn't have vessels there right then and start to gather the scientific data on oil and what the impacts are to different organisms is inexcusable," says a former government marine biologist. "They should have been right on top of that." Only six weeks into the disaster did the agency finally deploy its own research vessel to investigate the plumes.

As bad as NOAA has been that idiot Salazar (Interior Secretary) with his Stetson and string tie shooting his big stupid mouth off is the epitome of "Big Hat No Cattle":

"People are being really circumspect, not pointing the finger at Salazar and Obama," says Rep. Raul Grijalva, who oversees the Interior Department as chair of the House subcommittee on public lands. "But the troublesome point is, the administration knew that it had this rot in the middle of the process on offshore drilling – yet it empowered an already discredited, disgraced agency to essentially be in charge."

On April 6th of last year, less than a month after BP submitted its application, MMS gave the oil giant the go-ahead to drill in the Gulf without a comprehensive environmental review. The one-page approval put no restrictions on BP, issuing only a mild suggestion that would prove prescient: "Exercise caution while drilling due to indications of shallow gas."

All this leaves me confused...is the Obama administration inept or corrupt?


Maybe it just is what it is; an over-eager scientist rushing out with a conclusion before the lab tests were done, in order to get his 15 minutes, and the chief of the project saying "wait until we've analyzed it."

I'd put odds on it that it was knee-jerk response to political pressure. NOAA did everything they could to keep the lid on the extent of the damage until they could no longer remain in denial.

Joe as you said above:

Jane Lubchencco, the Chief of NOAA, was someone I had great hopes for in this administration but it now appears that she is just another corporate whore. When the initial leak was being downplayed by BP, NOAA leapt into action:

Couldn't agree more! I too had high hopes for her, what a huge disappointment! I haven't quite figured out if she has been corrupted by her access to power or is just another coward.

Only a fraction of those in need file for bankruptcy

Carmen Gardiner, 25, a 2007 graduate of Louisiana State University, is weighed down by her private student loans. Her debt is now about $80,000, and her monthly payments are more than $600. Gardiner's undergraduate degree is in psychology. She lives with her husband, who is still in college, and earns $13 an hour at a call center in Atlanta. They have a 6-month-old daughter.

She hasn't defaulted on her student loan. But she doesn't see much hope. Bankruptcy would not discharge her debt.

"I'm completely sour about the whole idea of going to college," she says. "My future is gone before I have a chance to make one. But if I could discharge this using bankruptcy, it would be better than winning the lottery."

It looks like Congress might pass a law allowing student loans to be discharged via bankruptcy. Of course, the banks will complain that this will reduce the amount of money they'd be willing to loan. But that would be a very good thing, IMO.

That 2005 change in bankruptcy law was a bad idea then, and is worse now. It didn't even benefit the banks that were pushing for it.

welcome back!

And thanks, Gail, for filling in so ably.

I never understood how people leave their minds at the door when they pursue a college degree. For so many people, the financial benefits of a college education, if they can even find a job these days, doesn't come close to paying off their college debt. This is especially ironic for recipients of BUSINESS DEGREES!

There was a recent article in the New York Times about a family looking for "someone to blame" for all the student debt this woman accumulated at New York University. Sooner or later, I hope that prospective college students will take a hard look at the cost of education and calibrate what they are willing to pay and borrow, to what they believe they will be able to repay upon graduation. Obviously the status quo is not working. Tuitions are astronomical in large part because of fancy dormitories, health facilities, and other amenities rather than education.

Perhaps state universities, community college and online education are part of the answer. First course in college should be LIFE 101: Don't get in over your head!

Yeah, I agree. But the average 18-year-old probably doesn't even know how to write a check. Grownups with far more experience get fleeced by banks (see the mortgage crisis); it's probably not reasonable to expect teenagers to figure it all out.

Just as there is shared responsibility between lenders and borrowers in the mortgage debacle, the colleges have a considerable part of the blame for these disasters. So far, they have not been seen as being quite as wicked as banks that pushed mortgages on people they knew would never be able to avoid bankruptcy, but that might change. (Full disclosure, both myself and my wife work at expensive private colleges--tautology, that--and we're both concerned about the morality of what our institutions are telling prospective students.)

I think traditional colleges are somewhat protected because of the abuses of for-profit colleges, many of which seem to exist solely to extract loan money from students who will never earn a degree.

Sooner or later, I hope that prospective college students will take a hard look at the cost of education and calibrate what they are willing to pay and borrow, to what they believe they will be able to repay upon graduation.

What about the person that entered college during a great time for the economy, but graduated just after the 08 credit bubble burst? See, just when it seems like there is a good rule of thumb it gets thrown off by booms & busts, ah ha!

Note the strong appeal of high rates of inflation (even hyperinflation) to those with $80,000 of student loans and a degree in psychology or art history or political science or most humanities and social sciences. Also note the appeal of higher rates of inflation to those under water in their mortgages. The superior political force of debtors compared to creditors will eventually put irresistible pressure on the politicians to wipe out debt through increased rates of inflation.

First comes the deflationary depression that we're now in. After a few years of deflationary depression, politicians will feel overwhelming pressure to greatly increase federal deficits, and the Fed will underwrite these deficits by buying greater and greater amounts of U.S. Treasuries. Increasing government deficits combined with the Fed monetizing these deficits will eventually defeat deflation and abruptly put us on the road to rapidly increasing inflation, even as real GDP declines at perhaps four percent per year--the decline in real GDP caused by declining oil production after peak oil, and especially by declining net oil exports and imports.

I do not know when the deflationary depression will end, but note that 2012 is a presidential election year. Also note that inflationary or deflationary expectations can change almost on a dime. Thus I expect the change to be abrupt, not slow and continuous.

I continue to think that constrained oil supplies, especially constrained net oil exports, are acting as an accelerant--pushing us faster along the path to inflation/hyperinflation, like an aerial tanker dropping napalm on a forest fire, instead of fire retardant.

Undoubtedly you are correct. When oil prices spike upwards the Consumer Price Index (and the GDP deflator, another index of inflation) will go up. When there are supply-side increases in inflation, the Fed almost invariably increases the growth in the excess reserves of banks and also tries to cut interest rates to "accommodate" the inflation, because there is a short-term trade off between unanticipated increases in inflation and the rate of unemployment--the famous and infamous Phillips curve.

Of course in the long-term increasing inflation does not help real GDP to grow, but politicians and the Fed tend to think short-term.

When and if hyperinflation comes, I do not expect it to last very long.

"...I do not expect it to last very long."

That has an ominous tone to it Don...

What happens after hyperinflation ? (maybe I don't want to know ?)

Edit: Nevermind - I read your reply below about Germany. I was right - I really didn't want to know...

Well put don and westexas.

The kick off down the path to inflation/hyperinflation will probably be a rise in oil prices. Once we go down that road, there will almost no way to turn back before the economy sputters into an financial wasteland.

Recent monetary moves by the Fed, ECB, and more surprisingly the Swiss central bank, show a clear pattern that when a financial problem turns up, they will not hesitate to rapidly increase the money base (the money base, that is money under control of central banks, has a strong correlation to the total money supply of a country – albeit much less so in the last year).

Note that Weimar Germany (1919 - 1923) did not go to hyperinflation overnight, but was at first only gradually sucked into the vortex of inflation.

However, once Weimar Germany got into actual hyperinflation, it didn't last long. The hyperinflation was stopped largely through the efforts of Hjalmer Schact, who later went on to finance Hitler's war. The history of Weimar Germany is fascinating, and we can learn much from it.

Note that the hyperinflation and the wiping out of the German middle class was prerequisite to the rise of Hitler.

Seems to me that substantial inflation requires more than supplying money to banks. Doesn't there have to be some way for money to get into the hands of consumers?

Money gets into the hands of the consumer through increased spending by government. These deficits will be financed by the Federal Reserve System. Monetary and fiscal policy work together.

D&G dad - IMO you are 100% correct. It takes participation. We have already had massive inflation globally and it was primarily debt, so everyone is asking "why don't I see wheelbarrows of money and million dollar loaves of bread?" well if all that virtual money were to all of a sudden enter the economy (trickle down BS) then we would.

The reason for hyperinflation, as Don Sailorman implies, is the "strong appeal" to those in debt to inflate away their debt. The dynamics of this working are MUCH more difficult and devastating to all but the most wealthy, than Don is implying. Having said that IMO the US could care less about inflating away their debt and with the hard core reality of resource constraints which are priced predominantly in dollars, it would be the last thing they would do. No, we will see full on default then probably skip right to global rationing.

Hey my guess is just as good as any others.

It is probably true that spectacular, Weimar-style hyperinflations are inherently self-limiting. When it gets to the point where currency is more valuable for fuel for the woodstove than anything else, then the end of it must be pretty close. A value of zero does set an absolute floor under how far a currency can fall.

On the other hand, there were plenty of Latin American nations (not to single those out and suggest that it was exclusively their phenomenon - it was not) that managed to run double digit and triple digit inflation for year after year after year. That eventually ended, too, but it did last way too long for most people.

Note that through these Latin American years of inflation they almost completely repudiated their national debts.

My instinct tell me we can't hyperinflate from where we are now its simply not possible.

One interesting thought on the matter is the impact of decades of mild inflation. If one looks at the monetary base today vs say 1960 we already have hyperinflated. Only the intervening decades hides the truth.

I see no strong reason to assume that hyperinflation is tide to any particular time interval. Once you remove the debt bolstered price inflation the "real" inflation since 1960 is well within hyperinflation levels. The currency has lost 90% plus of its value.

In any case the impact of decades of "mild" inflation may well be equal to a short sharp hyperinflationary episode. Once I've considered this I see no real intrinsic reason for any assumptions about the time scale associated with a hyperinflationary collapse. With fiat currencies even less reason to assume that we actually manage to inflate to move the final collapse from debt to a final currency dis-basement. There is no intrinsic reason for the notational bookeeping to actually happen inflating the currency and paying off debt with worthless notes. The inflation is already baked in if you will in the huge debt load. The actual execution of the final inflationary run is not required.

Basically the fact we managed to string out the period of time over which the inflationary collapse happened seems to have no impact on the outcome. All you have to do is compress the time interval and viola we are way farther down the road to collapse than most people think.

What the long time interval allowed was a massive inflation of debt on top of effective hyperinflation devaluing older debt. A neat trick but it takes well past any sort of traditional hyperinflation as your already past that point.

Its really a novel sort of collapse where you managed to cover hyperinflation by expanding the time window and pile on even more debt even as older debt was rendered worthless.

The reality is that the hyperinflation approach has already played out sending you into and economic state that not covered by historical models as no one has managed to pull off this unique condition before.

I'd like to see a past pre industrial revolution example of a country pulling off decades of inflation and what happened next. The closest historical model I can think of is the rise and fall of the Spanish Empire where wealth flowing in form the New World allowed decades indeed hundreds of years of inflation before the empire crumbled.

Its different but its the closest model I can think of that fits my concept.

If you read this part the correspondence with the US is striking.

It ended in eighty years of warfare.

It did not end in a hyperinflation collapse Spain defaulted. The closet example I have to what I thinks happened does not end in hyperinflation because as I said the hyperinflation episode is hidden in time and in the end this does not matter.

Of course we cannot and will not hyperinflate from where we are now. Prerequisite to increased inflation is vastly increased government deficits. The political pressure to combat deflationary depression will increase as time goes on, and hence we can expect both government spending and inflation to increase over the years. First we'll have one or two or three more years of deflation. Then will come gradual inflation. This inflation will tend to increase as real GDP goes down due to falling oil imports. All the economists know is more financial stimulus (i.e. bigger deficits) to combat economic downturns. The economists advise the politicians. Politicians love to increase spending and to reduce taxes.

Your missing what I'm saying we have if I'm correct that time does not matter already hyperinflated our debts away.

However because it was done stealthily over a period of time we piled on massive levels of debt on top of an hyperinflated economy. Its different this time. Regardless of what the government does past inflationary moves coupled with debt levels have in my opinion moved us past the point that a traditional episode of hyperinflation is possible.

Squeeze 40 years into say ten and the result is the same. The time period over which inflation of a fiat currency occurs does not change the end result. All it seems to do is result in a lot of the inflation still denominated as outstanding debt instead of fully discharged in a short term hyperinflationary episode. The books look on the surface a bit different but there is no intrinsic difference between the two outcomes. Slow inflation and mounting debt equals a shorter term hyperinflation with debt fully discharged.

If so then there is no hyperinflation phase in the future we will not get there because we bypassed this outcome.

Instead we go right into the collapse phase as we are really post hyperinflation its in the past not the future.

Now thats not to say the US won't attempt to try and hyperinflate however a few more moves in this direction and the truth that its now default time ensures that interest rates zoom before enough money can be printed to even come close to inflation much less hyperinflation. Repudiation of the currency itself should precede before it can be inflated.

This in my opinion means spiraling interest rates with no ability to expand the debt.

I could be wrong but its the only way if we really are in a post hyperinflationary phase for the system to end. Existing debt cannot be rolled over as interest rates spiral leading to default and even higher interest rates.

Further inflation is impossible as interest rates are forced skyward to account for the past hyper-inflationary phase which was hidden via time.

Attempts to do a sort of double hyperinflation if you will simply spur the interest hyperinflation phase.

Your forced to either default or move to austerity or both. Indeed one can look at Spain yet again to get a clue about our real situation. Sure they could leave the Eurozone and try and float a currency but interest rates would skyrocket before they even started to print to pay down the debt levels. The currency would be DOA.

Same for the US we don't have to change currencies but it does not matter as rising interest rates will kill our ability to finance our current debt loads. This probably happens regardless of how much more we try and print as we are post hyperinflation not entering it.

And this sharp rise in interest rates is highly deflationary not inflationary its and attempt to extract cash out of existing debts not expansion of the money supply to cause inflation with existing debts devalued.

Its really cool actually because we manage to hyperinflate against falling interest rates over a period of decades.
Its a beautiful trick however I argue in the end the result is the same. We have to pay all the interest that was not extracted over the decades of hidden inflation therefore the hyperinflationary window is already closed and not and option.

For debt at least its highly deflationary and therefore impossible to print your way out of the hole. Your almost immediately paying 100% of your printed money to interest and the principle never decreases.

Heck you can even see the situation on a microscale. Take your typical underwater home with a variable interest rate loan. At some point interest rates will rise and of course the sale value is well below the loan value.

Its literally impossible to inflate your way out. Any attempt to inflate the money supply to cure this loan results in interest rates which make actually paying the loan off untenable.

For example lets say a home went for 500k in 2005 and is now worth 250k. In 2005 the interest was lets say 6% and attempt to inflate to get the value back to 500k would result in say a 18% interest rate. No one is able to pay a 500k loan at 18% there simply are no buyers therefore you cannot go there. Its a financially forbidden zone.

With that example you can see that we are almost certainly in a post hyperinflation collapse its just at the moment hidden by some very neat accounting tricks that in the end accomplish nothing.

Indeed its was pulled off by Volcker artificially hiking interest rate way beyond where they needed to be to "fight" inflation. The inflation in the 1980's was fake and never happened it was just a slight of hand that allowed real hyperinflation to occur in stealth mode. Your right in that stagflation was thought to be impossible because it really is impossible it never happened. I happen to believe Volcker figured out the trick while he was at the New York Fed.
Most people don't realize he was in one of the most important positions during so called stagflation that he later "fought".

Somewhere somehow someone figured out that you could cause the specter of inflation on top of deflation crank interest rates way beyond what was needed and thence inflate for real for practically ever as interest rates fell despite expanding debt.

It was one of the absolutely most brilliant financial moves in history the problem of course is what happens when the game ends as you hit the wall when you have to expand against rising interest rates.

I'm guessing back in the early 70's when this approach was formulated they figured by the time the wall hit technology would have advanced us way beyond where we are now. It was a issue for a world with flying cars to deal with.
Or perhaps they thought they could achieve and undulating plateau with interest moving in a narrow band and the debt load slowly working its way down. Dunno but if your playing this game the eventual result is obvious from the start.

If I'm right then the end game is immediately obvious as it has to end with interest rates at zero and debt loads so high that rising interest rates are impossible to handle.

Thats why we are dead now not in the future and also in my opinion unable to execute hyperinflation.

Incredible game yes but certain death at the end.

I am not predicting hyperinflation. I am predicting that deflation is temporary and that after the 2012 election we will have huge increases in national deficits combined with quantitative easy. Within a few years that will produce a return to inflation, and the tendency will be for inflation rates to increase. Whether or not they reach hyperinflationary levels depends almost entirely on politics but also the price of oil.

Note that the history of the U.S. since 1913 has been one of varying rates of inflation--interrupted by the Great Depression for ten years and now interrupted by the deflation following the 2008 financial collapse. In the long run, the trend has always been toward inflation (with the single exception of Britain during the industrial revolution years of 1814 to 1913).

Yes but so what ?

Plenty of other things happened over the same time period. Notably a technical revolution.

Monetary inflation does not determine the end game regardless of how long it occurs. Indeed I'm suggesting that excess capitol expansion above and beyond the real increase in wealth aka rolling of debts is the critical factor.

Next of course is the interest rate environment these debts are rolled over in. If its rising interest rates then the debt is forced to shrink in real terms regardless of the inflation rate. ( I know over the top but its simple to put it this way)

Once you can no longer service your debt your bankrupt. If your a government and print your own money well dandy problem is all other outstanding debt in your currency faces a uphill interest rate curve and it defaults. Sure you can print but it does no good. Debt levels, interest rates and cash flow are more fundamental than inflation.

Sooner rather than later the US will be forced to either backstop some additional massive amount of debt and or some of the existing debt its already backstopped will obviously deteriorate and interest rates will rise.

Given the what the US has positioned itself with Freddie Fanny and the FHA all we need to send us down is for housing prices to fall further. I don't think 30% is needed to induced a insolvency interest crisis probably only and additional 15% drop is sufficient to cause a crisis. Attempt to expand debt once it starts simply sends interest rates higher and makes the real situation that we are bankrupt clearer sending interest rates even higher.

Regardless of how it plays out it does not matter either the US balance sheet becomes bloated with backstopped existing debt forcing interest rates up or default on that debt forces interest rates up there is no way out.

Germany fell into the trap of deficit finance carried to it's logical conclusion largely as a result of losing WWI and being unable to buy and sell it the international markets due to the reparations scheme imposed on them by the winners-namely , us, as in "we have met the enemy and".

Pretty much everybody was wiped out,by any ordinary standard.

I do agree that Hitler would never have come to power except for the extraordinary mess that was the German economy during the years between the end WWI and his taking power.

Inflation helps debtors, but only if their incomes actually go up with inflation. There is no guarantee that will happen this time around - not for everyone, anyway. The absolutely worst case for anyone is to be stuck with the same debt, same income, and the price of everything else going through the roof.

I don't see how the price of anything will go through the roof unless most people's incomes are also going through the roof.

Unlike in the '70s, the average American has little savings. And access to credit, after increasing for decades, is decreasing. How do we pay those rising prices if our incomes are not rising as well?

As I've been saying for five years now...I've no doubt that inflation is more desirable than deflation to TPTB. What I doubt is the government's power to determine whether we have inflation or deflation.

First, the U.S. government will run ever increasing deficits to fund ever increasing spending on everything from the military to Social Security and Medicare. Second, the Federal Reserve System will finance these deficits by ever increasing purchases of U.S. Treasuries. This is sometimes called quantitative easing, sometimes printing money--same thing.

How do increased deficits get translated into greater consumer spending and greater nominal (in dollar terms) investment? Very easily--more government spending on social programs and probably more on the military. Deficits of 10% of real or nominal GDP are small potatoes. Deficits of 20% to 30% are a whole 'nother story.

The history of money is largely the history of inflation. Deflations are rare and seldom last more than ten years, though the value of the British pound did increase slightly from most of the years of industrialization, from 1814 to 1914.

Show me a country with government deficits of 30% of GDP, and I'll show you a country with rapid inflation.

Rapid and sustained inflation can happen without a Weimar style hyperinflation. I am by no means convinced that the U.S. will have true hyperinflation, but I do think the U.S. dollar over the next sixty years will go the way of the Mexican peso over the last sixty years.

Bernanke was serious about loading up the helicopters to prevent prolonged and serious deflation. How long our current deflation will last I don't know, but I do know that there will be a presidential election in 2012, and the pressures on those seeking election or re-election to increase government spending and fight deflation may well be overwhelming.

There is nothing that says that everything has to change by the same percentage during an inflation (or deflation). For example, It is quite easy for me to imagine a scenario where the relative prices of energy, food, and a few other essentials are increasing rapidly, the relative prices of housing and many consumer discretionary goods are decreasing, and most wages are stagnant or falling.

Possible, but I don't think it's probable. Certainly, some things - like food and gas - will hold up better than others. But so much of our consumption is unnecessary, that I think even "necessities" will see a lot of demand destruction.

Indeed, we have seen it. Gas got cheaper as demand fell. So did food, as people "traded down" and bought cheaper food, ate at McDonald's instead of Olive Garden, cooked more at home, etc.

The $1 trillion + the Federal Reserve essentially ‘printed up’ the last year or so (the new money showing up as ‘free bank reserves’ – more simply new bank deposits) that already did go into consumer hands first, then made its way back to banks quickly. So since it went into the hands of consumers, and it has already been spent, perhaps a more appropriate question is – why haven’t prices already started rising faster?

Well in some areas, especially energy, they have. Mostly the inflationary impact of rising prices in some essential areas so far has been offset by the deflationary effects of the housing credit collapse. Generally it has been observed that the impact of Federal Reserve policy will take around two years to have full effect. So we really don’t what exactly awaits us the next two years.

Granted the situation does not appear to be changing imminently. But as memmel says further above, inflation has crept up on us. In the almost 70 years since the US dollar was taken off gold backing (at $20 an ounce), the dollar has lost maybe 98% of its value. Prices that are 50 times higher are certainly a monumental and historical change, which has effectively almost completely wiped out the debts of an earlier generation.

I would be very reluctant to say now what can or can’t happen in our future.

I'm really kind of undecided on all this. On the one hand, the best way of predicting the future is looking at what's happened to others in a similar situation. I can't help thinking of Japan. They have been struggling with deflation for 20 years, and still are, despite the government building roads to nowhere just to try and get money moving.

OTOH, it's possible that it really is different this time. People I have a lot of respect for think there may be currency problems far more disruptive than inflation in our near future.

Overall, though, I'm inclined to think BAU will probably go on far longer than most peak oilers believe. Just because that's what's happened so far. Which doesn't mean things won't change. If something "creeps up on us," it becomes normal, part of BAU.

You are correct, and everyone else here is wrong, because they don't understand the basics of our monetary system. If you want to learn about this, you can check out these sites:


Note that Japan never ran the massive deficits (the kind that got us out of the Great Depression and that financed U.S. participation in World War II) that are necessary to break out of deflationary stagnation or depression.

Inflation is caused by both politics and economics. What are politicians going to promise us before the 2012 elections? Austerity? Cuts in Medicare and Social Security? No way. They are going to promise what they typically do: cut taxes and increase government spending to stimulate the economy so as to return to prosperity and economic growth. No need to worry about increases in the national debt, because BAU economic growth will reduce the burden of the national debt to something we don't have to worry about.

Thus, I see increasing deficits and increasing quantitative easing by the Fed to finance these deficits.

Nominal (money) GDP can undoubtedly be increased by massive deficits, say twenty percent of GDP. Prices will eventually rise much faster than incomes, and it is through this process and increased unemployment that living standards will fall to reflect declining production of oil.

Deflation now, yes. Political response to this deflation will be increased inflation (not necessarily hyperinflation) later.

Your completely ignoring the critical role interest rates play in the situation. Unless the Fed prints enough money to backstop most of the outstanding debt in the US it will default in the face of rising interest rates if the Fed prints to induce inflation.

The US government cannot borrow its way out of this mess unless people are willing and able to lend US trillions of dollars at ridiculously low interest rates for years. Rates would need to go even lower than they are now even as the US Government balance sheet balloons.

Tax revenue is falling rapidly also thus our ability to even finance existing debt is falling.

There simply is no magic formula that allows you to steadily expand your debt levels in a rising interest rate environment as your income falls. Voters can say whatever they want it cannot be done.

Heck look at Greece its pretty obvious the Greeks where very happy with the old situation and want to continue to play the same old BAU game even as interest rates rise and its pretty obvious thats simply not possible.

Here are some examples.


I'll give you the doomer case.

A full two-dimensional sensitivity analysis also takes into consideration the only real natural source of cash for the Treasury (aside from financings): tax receipts, both individual and corporate. We have demonstrated previously the dramatic deterioration in Treasury tax withholdings. The continued persistence of this trend is the single biggest nightmare for the Administration, as one can only finance budget shortfalls for so long, as tax receipts decline. The current combined LTM Treasury tax receipts (gross, not net of refunds) amount to $1.8 trillion. Should this number decline further, due to the administration's heavy handed approach in appeasing the electorate at the expense of the relevant tax payers (i.e, the richest 10% of the population which pays the bulk of the nation's taxes), and should increasing numbers of US taxpayers flee to overseas tax havens, there is legitimate case that should interest rates skyrocket, then the US Treasury could see 100%+ of all tax revenues going simply to cover interest expense. As anyone remotely familiar with economics or finance is well aware, this would be the end for America. In other words, we currently have a buffer of $400 billion in tax receipts declines, and about 10% in interest rate increases before America is officially bankrupt.

Once you include state and local government debt and falling tax revenue I argue you don't even have to reach these doomer numbers before the situation blows up. And you have to add in insolvent pension funds you cannot leave them out.

Falling tax revenue alone is sufficient to trigger defaults on state and local governments risk will force interest rates higher given the magnitude of the debt attempting to print to cover these debts will force interest rates higher.
Further expansion of debt will also force interest rates higher albeit at a lower rate.

If we assume rising oil prices dragging down disposable income and causing the economy to falter from simple scarcity price increases for oil then tax revenue must fall i.e you still fail if absolutely nothing more is done.

I argue we are on the verge of a spike in interest rates our ability to hold them down won't last forever. Sooner or later defaults at the state and local level will force the governments hand. And no matter what move they make interest rates are heading up simply because of default risk.

All that has to happen is for it to become clear that the US is headed towards insolvency and thats it. We don't have to reach it just clearly be on that path. And its all our government levels and pension funds that play a role in this transition not just the Federal deficit.

We have to get a V shaped recovery now without further stimulus or we are toast it literally does not matter what the American people do or who they vote for they no longer have control of the situation no more than the Greeks can control their financial outcome.

All thats happening now is a sort of zombie phase or twilight zone before the shoe drops. At some point one of the forces currently at play is going to start the whole situation unwinding. If I had to guess at the moment it will be a state or large city going bankrupt. Also I think oil prices could at any moment strengthen and play a role.

Heck it could simply be a slew of smaller cities filing bankruptcy who knows regardless it will set off a chain of rising interest rates for state and local governments and as I said the liabilities are simply so large if the Fed moves to backstop it then interest rates for Treasuries will be forced higher as the debt they would be forced to eventually backstop is mind boggling.

Understand there are no trillions for stimulus spending in my scenario this is simply spending to keep everything from collapsing. Go ahead and throw a few trillion in stimulus spending on top of this situation no problem your still dead.
The US government and the Fed become the only lender to state and local governments at low interest rates and even to themselves. At that point your dead and your currency is worthless.

Its a catch 22 borrowing to cover defaults from a few years ago on out simply causes interest rates to rise and defaults to mushroom leading to higher interest rates more borrowing and more defaults. Magical low interest rates right now are just that magical and all its doing is allowing state and local government to dig themselves in even deeper before they are finally forced into default. Sooner rather than later this game will fail.

Interest rates will rise as expectations of inflation rise; they always do. Rising interest rates make it harder and harder to service the increasing debt, so the Fed is forced to buy more and more treasury securities. This cannot go on forever, of course; nothing is forever.

I believe that long-term inflation is in our future, because long-term inflation is the statistical norm as we look at history and around the world. Whenever governments have faced falling tax revenues they borrow more, and as the deficits become ever larger the inflationary pressures increase.

Real interest rates matter more than nominal interest rates, but nominal rates are also important. For considerable periods in our recent history (late seventies, early eighties) the real interest rate has gone negative, while at the same time nominal interest rates go to record highs. The Fed may want a negative real interest rate to encourage economic growth. If inflation rises faster than expectations of inflation, then the real interest rate will go negative. However, the high nominal rates kill home construction, car sales, and most business investment.

Interest rates will rise as expectations of inflation rise; they always do.

Ahh and this is where our major differences lie actually. I argue there is a more sinister reason for interest rates to rise and thats the possibility of default. Indeed interest rates differ significantly because of differences in your credit scores from individuals to governments. We are not used to the US being subject to interest rate pressure because of concerns about default. And this is where moral hazard comes home to roost with a vengeance. By backstopping the housing industry the banks and the auto industry and god knows what else the US has set itself up to be sensitive to credit risk across a vast swath of the economy. And this includes state and local governments and pension funds etc.

Its no longer simply default risk of the Federal government but default across broad sectors of the economy. By taking on the role of lender of last resort for way to much of the economy and in general making bond holders 100% whole the US has literally bitten off more than it can chew if the economy continues to deteriorate. If it continues to pour money down a black hole then its transferring the default risk on itself. If it does not then rising interest rates from default risk in other sectors of the economy ensure they go down. This of course eventually makes current US debt levels untenable.

This is the problem when you have massive levels of debt through out the system the only real cure is to actually allow debt deflation to run its course any attempt to advert it simply increases the systematic risk till the entire system pops.

Thus US is certainly not used to being a banana republic debt risk economy but thats exactly where we have put ourselves.

Risk based rises in interest rates short circuit simple inflationary based rises and generally lead to outright default.

Its not a BAU situation the moral hazard thats been created recently cannot be swept under the rug.

I agree that in purely economic terms it would be better for debt deflation to continue to wipe out debts. However, economists only advise, politicians rule. To save their political lives in a time of increasing unemployment, politicians will spend more and tax less, thus increasing U.S. deficits to two, then three, then perhaps four or five trillion dollars per year. These high and increasing deficits are highly inflationary. Thus I see a progression of inflation from 2% per year to 4% per year, then perhaps 8% in the third year and 16% or 24% in the fourth year. My guess, based on our past history is that rates above 20% per year (along with inflation rates exceeding the nominal interest rates) will not last long. Along will come another Volker who will ruthlessly tighten money to drive down the rate of inflation. As inflation rates fall and expectations of future inflations fall, the interest rate will also fall.

Thus my best guess is that we will have high rates of inflation without true hyperinflation. Many counties have plugged along year after year with inflation rates of ten to thirty percent. See Latin America for examples.

In regard to moral hazard, I don't think there is any with respect to the question of whether or not the U.S. will service the debt it has created. That's easy, with the Fed accommodating higher deficits with more quantitative easing.

The Chinese may not like our inflating the dollar, but there is absolutely nothing they can do to stop it. If the Chinese decide to dump their trillion dollars of U.S. Treasuries into the market, the Fed can buy all of that in one morning with just a few phone calls.

"Deflation now, yes. Political response to this deflation will be increased inflation (not necessarily hyperinflation) later."
How much later? By the 2012 elections? I foresee armies of the unemployed screaming to cut unemployment insurance, myriads of underwater homeowners opposing expenditures for mortgage relief. etc. There's a grave structural defect in our political system. In order to vote their interests, people need to know what's going on. But that needed information comes via a media that is privately owned and dishes out what's in the interest of those owners. Hopefully the Sarah Palin presidency will be the final disillusionment of the Reganistas.

And I say whats probably going to happen is they will be screaming in vain. Nothings going to be done to save them.

And realistically despite the trillions that have been spent to date the vast majority of the money went into bolstering the banking system with very little actually spent on direct economic aid that did not support banking. The housing tax credit is obviously a banker bailout. Falling house price will quickly erase any benefit to the individual.

And if you take to the streets to protest well welcome to post democratic America. Any civil disturbance will result in the stripping of whatever rights we have left with blinding speed. From what I've read about the recent laws its not clear we have anything left if we protest.

I actually suspect what will happen is good old fashioned divide and conquer special interest groups will be played against each other and the fragmentation will ensure that nothing radical happens. In the end that how all totalitarian regimes establish power. I see absolutely no reason this won't happen in the US.

You misread. The protesters will be demanding actions against their interests and will get them. People with realistic information continually expect others to react as if they too had that information. They don't. Their sources of information have been corrupted.

No, the new excess reserves merely replaced existing dollar denominated assets on bank balance sheets. It did not go through consumer's hands, and it didn't add to the net financial assets of the private sector. All it did was change long term interest rates by a few basis points.


And getting enough money into consumer's hands to make up for the wealth that has vanished would be quite difficult. A tax rebate here and some food stamps there aren't going to do it. You'd have to give people enough money to make up for what they've lost: their jobs, their homes, their access to credit. We're not even close to that.

How is the Fed's new money not going to consumers?

Historically up until 2008 the Fed's monetary policy consisted almost entirely of just buying US public debt. Public debt generated from deficit financing - mostly for paying salaries, social security, and interest. Where does it then not go to ordinary people?

In 2009 and 2010, mostly the Fed's new money has been used to buy mortgage pools of new mortgages. Therefore all the money goes to sellers of homes. Granted many sellers will need some or all of the money to pay off their old mortgages, but those old mortgage holders may also be held directly or indirectly owned by other ordinary people who will get repaid. Even if the money ends up paying off a bank mortgage, the bank will use the excess cash to buy US treasuries. And US treasuries are used for ... well everyone should get my point by now.

In 2009 and 2010, mostly the Fed's new money has been used to buy mortgage pools of new mortgages.

Hmm I think this is wrong most of the money went to buy existing MBS pools not new ones. Very little of the total was actually spend on new mortgages.

If you have numbers I'd love to see them. If you post them and I don't respond please email me.

My understanding is that the Feds bought craploads of existing MBS's most coming from private lenders transfered to Fred and Fannie and thence to the Fed. The private holders generally took the money and bought treasuries helping keep interest rates low. In general in the end the money ended up in treasuries.

The important difference between what I'm saying and what you are saying is I'm saying it was movements of existing debt not new debt. Important because most of the stimulus did not stimulate simply averted a crash.

To actually get real stimulus several trillion more needs to be spent expansion of new debt. And several is probably and understatement.

Based upon information from the Fed, starting around September 2009, the Fed bought only recently issued mortgage backed securities. Before that they did not concentrate so much on the newest issues. Anyway my point is that the Fed essentially bought almost all of the new conventional mortgages (which leaves out low income mostly FHA type financing and jumbo (large) mortgages) from March 2009 to March 2010.

Granted the Fed is replacing some old debt with its new money issues. Then we also have the issue of whether Fannie Mae and Freddie Mac should be considered as consolidated into the US government, and whether they are part of a scheme to expand debt issuance. Therefore the situation is a little muddy as to what is really happening.

Since some of the assets of the Fed, Fannie, and Freddie probably are junk - that is devalued or even almost worthless - I believe the government has a strong motivating factor to issue even more debt before it is realized that Federal Reserve dollars are much like a stock in a company that has gone bankrupt. Or in other words, increase the debt of the country so much that the default on a few trillion dollars of debt won't seem like much. So yes, trillions more in debt is probably coming.

Look, it doesn't matter what they bought. Say you have a savings account, and you call up your bank and have them transfer the money in it into you checking account. Are you now wealthier? No - you just have a different composition of assets.

The only way new net assets are added to the private sector's balance sheets is through the government spending it into circulation. The Fed merely facilitates that process by cashing the governement's checks. Fed monetary actions like QE or open market ops merely adjust the composition of assets in the private sector in order to adjust interest rates. Private loan activity creates new assets, but it also creates offsetting liabilities, so no net assets are created.

Those of us who live as producers would say that the price of everything that matters to us as an input or production expense has already gone through the roof, although some prices have declined a bit over the last year or so.

For anyone who can actually remember what stuff cost ten or twenty years ago, or even five years ago, at a farm supply, a building supply, a concrete plant, a quarry, an auto parts store, or an equipment dealer, prices are downright scary.

Older used trucks that in times gone by would be selling for ten percent of the new price are bringing twenty five percent.

And the offocial inflation rate is a crock of dung, in respect to the actual day to day purchases most people make, excepting fuel and housing.

Incomes will not go up as fast as prices increase. This and increased unemployment is how lower living standards will result from declining oil exports and imports.

I am not in the least bit convinced of the danger of hyperinflation, at least for now.

One of the key parts to understanding the whole dynamic is the role of the dollar as the world's reserve currency. This actually serves to limit the amount of inflation the Fed can conjure - if it does too much, the wealth of many powerful people and institutions the world over would be wiped out. You have to "follow the money," so to say, to realize that this is an impossibility.

You see, if you are really wealthy, you can tolerate a little bit of inflation here or a little bit of deflation there. It doesn't impact you. A hyperinflation, though, would destroy you. And the NYC/D.C. axis serves to protect the oil flows from the Middle East as well as the wealth of the world's oligarchs. There is no way that hyperinflation would be allowed, as both of these roles would then vanish.

A hyperinflation would be a suicide pact on the part of the world's bankers and warlords. Do you really think they are going to let this happen?

Ultimately (10 to 20 years?) the dollar will lose it's role as the world's reserve currency, but not because of hyperinflation, but rather because of loss of confidence of the creditors (China, Japan, M.E.), as the U.S. defaults on Treasuries. It won't hyperinflate (see above); it will simply just refuse to pay. And what is China going to do? Drop an atomic bomb on the U.S. mainland? Give me a break. There is nothing they can do.

This sets the stage for a return to some sort of gold standard that will serve as a universal peg for the world's national fiat currencies. The first step is happening, as the ongoing strength of gold despite weaknesses in almost asset classes clearly demonstrates.

If we come out of this on the other end with sound money backed by gold, we might just avoid hyperinflation (at least for the major countries). The key part is sound money.

I'm not sure if humans are capable of this, so yeah, we might get hyperinflation eventually. But not until the dollar loses it's status as the world's reserve currency. It can't happen before that.

See my post above with the comparison to the Spanish empire. I won't repeat it but I think the financial situation that puts us in such a bind is exposed. Most important is that the hyperinflation phase has already happened.

John Maynard Keynes noted the superior political influence of the debtor class. Debtors and retired folks will vote themselves more benefits and relief from debt. Increased inflation is commonly the way that government debt and other debts are repudiated.

For centuries in the Roman Empire its monetary system (based on gold and silver) was debased, until the denarius in the final centuries of the Empire was worth less than 1% what it was worth under the first emperor, Julius Caesar. The Roman empire could not finance its wars and bread and circuses through taxes, so one emperor after another reduced the amount of precious metal in the coins that were issued. And according to Gresham's Law, the old coins, with a high percentage of gold or silver went out of circulation, to be replaced by the bad debased money.

As I said deep in some other thread, this is guaranteed to get "interesting". Last time around we got Nixon's price controls. That kinda sorta worked a little because oil and consumer imports were still small, and domestic firms could be forced to eat it for a time. (Though there was soon a fantastic array of "new" consumer products, utterly indistinguishable from the "old" ones except that they no longer had established "base prices"...)

Nowadays oil and consumer goods (except a few obscenely expensive luxury goods) are coming mainly from places well outside Federal jurisdiction. Either J&J6P will pay the going (inflated) rate whatever it is, or else the shelves will go bare, and the "no gas" signs will go up and J&J won't go to work (except the tiny minority who can take a train and whose jobs don't disappear in the chaos, no doubt comprised mainly of the sort of redundant plushbottomed bureaucrats whose lavish compensation makes DC Metro the richest area in the country.) Self-important Federal buraucrats might even install gasoline storage tanks in their yards as they did before.

Keep some popcorn on hand, I guess.

One thing that is rarely mentioned in print, that a lot of the colleges are apparently not pushing, and that a lot of these indebted students are apparently not even aware of, are the various student loan forgiveness programs that are out there. Go into military service, or become a teacher, or volunteer for the Peace Corps, or do something else that qualifies, and you can get your student loan at least partially forgiven.

Many of these do, of course, require doing some non-lucrative things that people might not want to do. On the other hand, it is not like there are abundant, well-paying job openings out there right now anyway.

I do have some sympathy toward those who are now stuck with huge student loans - but only SOME. I do wonder how many of these have really carefully researched these loan forgiveness programs and at least seriously considered them. I'm not sure how much sympathy I really have for someone who racks up huge debts while working on a non-employable major, and then refuses to even consider any of these loan forgiveness programs. Especially given that between community colleges, state university branch campuses, credit by examination, and other options there are inexpensive ways to get a college education, and there are some majors that are more employable than others - options that many of these people have failed to even consider.

If any laws are going to be changed at all, I would be more in favor of further expanding these loan forgiveness programs. It should be possible, for example, for any college graduate with a major in ANY field to be able to enter some sort of public or military service and stay in it long enough to completely discharge their debts. We really should make such a track available so that anyone who is desperate enough has at least something they can do to eventually get that debt monkey off their shoulders.

Nearly all the college students I know who are taking out loans are counting on getting their loans forgiven by getting jobs at nonprofits when they graduate.

I dunno how realistic that is - the one guy I know who graduated and tried it was laid off well before the 10-year mark when his loans would be forgiven, and is still unemployed - but awareness and willingness seem very high, IME.

Well, that's interesting, maybe the awareness level is higher than I have assumed. It doesn't seem to be the case in most of the stories we see in the media, but maybe that's just the case of certain types grabbing all the attention.

I think there are problems with these programs, they are clearly inadequate to do what really needs to be done. Since they are already in place, though, expanding and tweaking them so they work better should be within the realm of possibility.

Thanks for the forgiveness link. I just sent it to my nephew.

It should be possible, for example, for any college graduate with a major in ANY field to be able to enter some sort of public or military service and stay in it long enough to completely discharge their debts.

I would automatically disqualify all MBAs and Law degrees...except possibly for latrine duty!

Sort of on the topic of BP, I read an interesting post on another blog just now.

The federal government is fed up with the amount of fraud, especially recurring fraud from the same companies, happening in the pharmaceutical industry. Therefore, regulators have decided that when it comes to punishments, it is time to get personal.

From now on, individual executives risk being ejected from their jobs — and perhaps even barred from the industry — for fraud their companies commit, even if they did not participate or even know about the crimes.

Apparently it's enough that the executive was in a position where he or she could have stopped the fraud. The poster goes on to wonder if other regulators will use the same powers. I wonder if the powers can be used for other crimes--say, safety or environmental violations.

Time follow the lead of Halliburton and move those companies offshore and outside the reach of US-centric regulators.
...And its done. It's electronic commerce wonderful?

I just saw Gail being interviewed on BNN (the Business News Network here in Canada). This network is less cheerleading and a bit more rational than CNBC, though still believing in business as usual. Gail made a very clear presentation of the oil conundrum and the interviwer was not hostile. If anything though the message that all of this new expensive production will not offset the decline in conventional oil production and export needs to be made more directly and very clearly. Gail alluded to it but it was kind of passed over.
It is very apparent that the MSM are now trying to bring the PO debate forwards and it should be a point of pride to you rational people running TOD that they are turning here.
Perhaps TOD and ASPO can now try to make some coordinated effort to work with the media who want to present the issue. I think the problem the MSM have is that they must gradually go from accepting the Yurgin/economists version to one more resource reality based. If they reverse quickly their own credibility will suffer and the message will be lost. Again, great job Gail!

Thanks for mentioning this. The interviewer clearly had been reading TOD, so could ask leading questions. I had been told ahead of time that the topic that they would want to talk about was resource constrainst; later they changed it to arctic drilling, but still ended up with some resource constraint issues.

Glad you liked it. I am more of a writer than a TV personality. This is a link to the clip. The segment is called, "Can't we drill somewhere else?"

I noticed they added some written banners also.

About Denninger’s latest screed, “Energy: Are You A Pig - And A Bigot?” …….

I really have got to stop reading stuff like that. Like Fox news, it tells half the story and that pisses me off.

For starters I may work for the Government, but my work is part of the nuclear industry and they scare the hell out of me. The stories of budget cutting bean counters and management induced safety problems are always circulating at the conventions. Not to mention the use of illegal aliens, illiterate in the English language, inside a nuclear plant.

Greedy managers can cause a disaster in any industry. There is not a lot of difference between BP and how a reactor is run.

Second of all, not everywhere in the world has weather like Florida. In some places in this country (like the Tennessee valley where I live) the air can get so polluted that it will induce an asthma attack if you open the windows. I know, I have been trying to live without air conditioning for years.

Long before he made up his little list, I have been trying to adhere to a minimal living lifestle, and sometimes if you want to breathe, the windows have to be closed and the air-conditioning turned on. If every idiot redneck in the valley wasn’t driving a full size pickup truck maybe I could leave my air off and windows open.

I could keep going, but I just find his brand of “one eye closed” logic exhausting.

I wonder if Denninger has run the numbers on how much electricity would need to be generated just to replace oil, and then done the math on how many power plants this would take. I don't think he is going to like coming to terms with reality.

The EIA certainly does not agree with him in regards to magical, too cheap to meter nuclear power either. http://www.eia.doe.gov/oiaf/ieo/pdf/ieoreftab_2.pdf

But I must be some sort of fool who does not realize Fusion is just twenty years away, unfortunately that's what it's always been.

Like speed of light in regard to Special relativity, Fusion is always 20 years away.

"I wonder if Denninger has run the numbers on how much electricity would need..."

It looks he did not run any numbers on anything. It looks like he might have done some quick google searches and simply reconfirmed his bias with questionable sources that base their arguments on terribly mistaken assumptions.

In other words, reading Karl's post is like Deja Vu - same misconceptions and unchallanged assumptions we've read over, and over, and over again the past decade.

He even included the cute a little "hypocrite tree hugger" strawman.

I bet Karl would be embarrassed by his rant if he took the time to actually understand the subject.

Karl embarrassed???

I don’t think so.

Although I have to laugh at the current pickle he has gotten himself in to. Several years ago he basically kicked me off tickerforum, because I was questioning his view that offshore drilling was so safe nothing bad could ever possible happen.

I suspect that is why his is spitting so much venom now. The little gears in his head are making a horrible grinding noise.

My favorite:

Biodiesel from blue-green algae. It will work. We have lots of arid, hot and sunny land on which we can build fully-closed systems. Once we have scadloads of power (see above), we might choose to. But we don't need to in order to get where we need to go.

I like this idea. We'll just build closed-loop photobioreactors to produce biodiesel at 30x the cost of a barrel of oil, in the furthest place from both demand and the resources needed to do so. Where will we get the water to grow that much algae? We'll manufacture it, using utility-scale solar plants in those same deserts, or possibly using thorium-based nuclear reactors, which we can also construct in the desert and don't require any water to run. I wonder if he has bothered to figure out EROEI for mining all that thorium out of the coal and constructing, operating, and then dismantling these next-generation reactors.

Considering the depth of his argument elsewhere, I cannot imagine he has even conceived of this potential problem - his point about the thorium content of coal smells a lot like claims about gold reserves dissolved in the ocean, etc. Then there is the baseless equivalence he draws between different renewables (wind vs. solar), which forms the foundation for his statement that no renewables can possibly scale up to the level of coal, gas and nuclear (in his mind, northern Europe, the U.S. midwest and hopefully soon east coast are not real places) and hence the double standard that we dare not criticize problems with coal or nuclear power, but shouldn't even TRY to scale up or improve renewable technologies because they will never ever work. Of course not, if you never invest in technology it has little hope of coming to fruition - kind of like how nuclear power would never have come to be without government R&D support.

When you believe in unlimited free energy, there's no limit to what you can accomplish (literally). And when and if your big plans don't work out (because they violate the laws of thermodynamics), just blame the environmentalists!

Thanks for providing this window into the "thought" process of a limits-to-growth-denier type. But unfortunately, pointing out the hypocrisy of statements made by some environmentalists does not serve to erase one's own footprint or justify excess - two wrongs don't make a right. Well, I suppose it's not the first time someone has been wrong on the Internet, and it probably won't be the last either.

Denninger is an idiot, granted. But he's not talking about Fusion, he's talking about Liquid Floride Thorium Reactor (LFTR) which is an improved form of fission that is based on well-tested and understood technology. (It's been discussed before on this site, and even the doomers here weren't able to really poke holes in it.)

A wholesale conversion to LFTRs would, (IMO) deal with our energy problems, but I see no evidence that the powers that be see that, and I don't think we have enough to time to do it at this point.

Ya, and then you try and get the transmission lines built... It would work if these plants were constructed adjacent to existing power plants so the existing transmission system can be used. Otherwise it's 7-10 years of absurd NIMBYism and catering to ridiculous "concerns" or "fears" from people that think thermodynamics is a groovy new massager chair.

Not that I want to build transmission lines all over the place, but we need to consider the entire infrastructure in these grandiose plans to fix the world.

Nicely done.

Somebody must have peed in Karl's cornflakes because he is so way off the mark on this one.

I see real irony here, because has written about exponential growth several times and continues to repeat that you can't argue with the math.

That's right Karl, and when you can't, you can fall back on tantrums and ad hominem attacks.

This is typical of Denninger. He's a card-carrying Republican; his reaction to Al Gore or Jim Kunstler is entirely predictable.

Yes, he understands exponential growth cannot go on forever. But like many rightwingers, he doesn't make the connection to resource limits. To him, it's all about money. Wipe out peoples' debt via "jubilee," and everything's fine.

He refuses to consider resource-based limits to growth, or the ever-growing population required for a growth economy. These extra people can't be wiped out as easily as bad debt.

I think he can't consider it, because then he'd have to admit that he himself is a pig, with his house and car and boat. Limited resources means anything he has is something someone else can't have.

"Limited resources means anything he has is something someone else can't have." This is exactly right, but it makes of capitalism a zero-sum game; and few conservatives are willing to concede that. They seem to think we can go on forever baking bigger and bigger pies; never mind that we're running out of ingredients. There is, as Leanan suggests, a disconnect here that precludes such folks from considering resource-based limits to growth.

That doesn't sound "conservative" at all.

In fact I'm hard pressed to call that anything but wild-eyed pollyanna-ism.

How far our political labels have drifted from anything resembling objective reality, eh?

"Sunlight does not matter for calculating EROEI because it of its low energy density."

I think that statement was a little off. The reason Sunlight doesn't matter in calculation of EROEI is because 'you' don't have to invest it. It's energy provided by the system. You're only going to count your own inputs, or possibly inputs that are a drain on the environment if you want your boundaries to cover that part of the sustainability.

Hot off the presses from Bankruptcy Pending: Statistical Review of World Energy 2010 | BP Ironically I attempted to open it just now straight from the website and OpenOffice crashed - crashes in this manner happen perhaps once a year...

OK, opened it without further mishap. Sweet, KSA holding steady at 264.6 bbo P1, a gain of 0.2%. Thank you monolithic corporate entity!

The House of Saud must truly be blessed, I see they have magical increasing oil reserves according to this BP Report.

1989 1999 2008
260.1 262.8 264.1

Meanwhile, OPEC production was down 7.3% from 08-09

The P1 numbers for China from BP and EIA still don't add up. According to EIA Chinese P1 was precisely 24 bbo 1990-2002, which is one of those flat trends that are so ludicrous you wonder if there's an accepted explanation among specialists you just haven't stumbled across yet. BP has a lower number, which at least wobbles around a bit. But why are there distinctions, often quite large, among any of these agencies in the first place? I can't believe their methodology differs that greatly.

Note the very small print (bottom right page 2 as just pointed out by Jeremy Leggett on BBC Newsnight)

The data series for proved oil and gas reserves in BP Statistical Review of World
Energy June 2010 does not necessarily meet the definitions, guidelines and
practices used for determining proved reserves at company level, for instance,
under UK accounting rules contained in the Statement of Recommended
Practice, ‘Accounting for Oil and Gas Exploration, Development, Production and
Decommissioning Activities’ (UK SORP) or as published by the US Securities and
Exchange Commission, nor does it necessarily represent BP’s view of proved
reserves by country. Rather, the data series has been compiled using a
combination of primary official sources and third-party data.

I had to make heavy use of the magnifying glass to read it in the PDF

Their conclusions differ from their own numbers? That's...fill in the blank here.

Here's last year's caveat:

Source of data – The estimates in this table have been compiled using a combination of primary official sources, third-party data from the OPEC Secretariat, World Oil, Oil & Gas
Journal and an independent estimate of Russian reserves based on information in the public domain. Canadian proved reserves include an official estimate of 22.0 billion barrels for oil
sands ‘under active development’. Reserves include gas condensate and natural gas liquids (NGLs) as well as crude oil.

Sounds like a lot of people were asking them for more meaty explanations in the last year. Certainly I've posted off and on wondering about what's going on, having made a copy of the 2009 Stat Review and played with the numbers therein in all sorts of ways, then crosschecked EIA and found that they might as well be describing countries on another planet at times. Although all agree that OPEC is da bomb, A #1, the Best and Brightest, the All Powerful Oz, etc.

Someone sent me a link to a post on the Economist blog. In Buttonwood's Notebook. Buttonwood quotes Dangerous Exponentials, a report by Tim Morgan.

There are two main elements to the report, two sets of exponential relationships. The first is the growth in government debt, money supply and inflation. . .

The other exponential relates to population and energy. . .

Now you can probably see where this argument is going - peak oil - and will be suitably cynical. We have been hearing predictions about resource constraints since the late 1960s. But the world tends to come up with new supplies of energy and the peak gets postponed.

But Tullett has a more subtle point, and one which seems rather telling. Yes, new energy sources are discovered (tar sands, deepwater oil) but they are much more expensive to produce, both in terms of money and the energy required to extract it.

If you view the wealth of mankind as a function of the equation EROEI, the energy return on energy invested, this is a serious deterioration. The wealth added per unit of energy extracted is declining. But the structure of our societies is built not just on abundant energy but on cheap energy.

It is surprising to see these things mentioned in a blog associated with the Economist magazine. I don't think it is in the print version.

Does Obama need more oilmen, not fewer, in his administration?

(up above)

The referenced article leans heavily on the lobbying effort in Washington by the oil industry.

The same source indicates the legal industry spent $233,727,521 buying political favors while the oil industry spent $134,595,402 buying influence.

There are, of course legions of lawyers in Washington, with one right at the top of the pile.

The BP oil spill will probably be the greatest bonanza for the legal industry since asbestos was discovered to be harmful. Cui bono?

I'm waiting for someone to blame the oil spill on lawyers. That would be as logical as many of the other far-fetched claims being made. Did the oil industry lobby for regulations making it easier to find and produce oil? Probably. Did the legal industry lobby for regulations which would make it more profitable to be a lawyer? Probably. Did the oil industry lobby for easing regulations so they could shortcut safety precautions they knew were necessary? Probably not: who would knowingly risk putting their company in the position BP is now in? Did the legal industry lobby for easing regulations in the hope of a major disaster which would create a bonanza for lawyers? I don't think so, but perhaps I'm underestimating them.

Should President Obama have more folks in the White House with practical oil field backgrounds? Let's frame in a context easier to relate to: who would you want piloting your cross country flight: an experienced commercial pilot or a dentist? Most would go with the pilot. But did I mention the pilot is a raging alcoholic with a death wish? And the dentist has had a private multi-engin license for 30 years?

How about having someone in the WH with a practical background who is also ethical and there for the right reason? Shouldn't that be the primary critiria for anyone hired to serve the president?

The BP spill as our Energy Pearl Harbor: this is outstanding framing, regardless of the value of whatever else Simmons is saying. This meme needs to be spread far and wide.

i've seen so many black swans of late, the black ones are starting to look white.

Thank you, earldaily, what a treat!!

Ants are fascinating: labour stratification, gender differentiation (a sisterhood, amazons in microcosm), warfare, agriculture, social cohesion, cultural identification, even slavery and domestication. And size is important: staying small has distinct advantages.

Puts the world of humans into perspective.


Hi ED,

For anyone who could use a break from all the gloom of late, a couple clips from the April 9th episode of The Republic of Doyle:





BBC TV Newsnight just now running a major story on Peak Oil.


Is time running out for the oil industry?

Many energy experts are warning that we are fast approaching "peak oil" - the moment when the maximum rate of global extraction is reached, after which the rate of production enters terminal decline.

And, while there are as yet untapped reserves, they are often in inaccessible areas, and the Deep Water Horizon disaster in the Gulf of Mexico has raised questions about whether mining them is worth the risk and the expense.

Jeremy Leggett, author of Half Gone, said in the Financial Times today that we are facing an oil crunch in the same way that we had a credit crunch.

He will be joining us on the programme tonight, along with the CEO of an oil company.

Is time running out for the oil industry?

.. paraphrase "Is time running out for the earthlings?"
And why can't I watch BBC TV News night on my tube?

Post a review, for those of us on the wrong side of the pond.

I watched it. The introductory film was the usual "Are we running out of oil?" style quoting the BP review saying we have 46 years of supply left, and peak oil alarmists raising concerns. You would think that they have been doing this stuff for long enough to understand the difference between r/p ratios and production flows. A clip from Chris Skrebowski did make the point that oil reservoirs are not like cans of beer and you cannot pour the stuff out as you want it to the last drop.

The discussion had Jeremy Leggett and the CEO of (I think) a Norwegian oil company. Rather more heat than light with Paxman calling on Leggett to declare his commercial interest in renewable energy and the oil man saying we can now recover much more from existing reservoirs, e.g. Norwegian North Sea, and there is a lot of hydrocarbon if the price is high enough. Leggett did get in the point about production flows and a supply crunch coming by 2015 and his participation in the UK peak oil industry task force which is raising concerns about this, also questioning the true level of reserves and BP's own disclaimers about this in their statistical review publication.

Overall I thought it was pretty standard fare and would not make a doubter sit up and take notice but at least the issue has made it on to Newsnight again.

I highly doubt the article about EROEI in pre-industrial agriculture is correct. If the old ways produced 5 times as much energy as they took in, we wouldn't have needed oil to begin with. I can't find any peer-reviewed sources, but the guy at http://earlywarn.blogspot.com/2010/03/net-energy-of-pre-industrial.html at least goes through his calculations, and he only comes out with about 1.1 EROEI for pre-industrial methods, barely enough for subsistence.

I don't know if he's correct about current EROEI being in the 0.1 range, but numbers below 1 become 'sustainable' in the presence of external energy sources like oil. Solar could probably power a fair bit of agriculture work, since by definition, most agriculture work takes place during sunny times.

Interview with Greg Stringham, VP Oilsands and Markets, CAPP. Video is on the sidebar.


Starting at 3:47

MSN Interviewer: Tell me about Bellingham, Washington, and specifically these folks. These were the guys who came out this week and said, we don't want to use Canadian oil sands crude. We don't want to. But not only do they not have control over the stuff that flows into their collective pipes, but they also have a pipe under the ground about three kilometers worth. So do you see a big disconnect between the political rhetoric versus the actual U.S. consumption of Canadian crude?

GS: It's not just the U.S. consumption. As we look around the world right now, the entire crude slate is getting heavier. The easy to find light oil is not easy to get anywhere and so we are getting heavier oil from a variety of new countries. Canada fits into that and so we need to make sure we do a good job in talking to folks at Bellingham and others. I think the invitation is to come to see how this is developed and to put it into context of their secure energy supply.

PO by any other name.

Canadian oil sands are scheduled to produce 1.5 million barrels/day this year to rise to 3.5 million barrels/day by 2025. The good folks in Bellingham, Washington, probably won't have much of a say in the matter.


And what about all the Canadians that travel to Bellingham to shop, eat, and yes, buy gasoline. Maybe it's a push back, but that region of upper Washington near the Canadian border wouldn't exist, per se, without the Canucks. It's a big resentment that has been going on for years. My parents had a place in Birch Bay which is just north of Bellingham.

U.S. cross-border joke: How can you tell someone is a Canadian? They're the one with a gallon of milk under one arm, a turkey under the other and they smell of gas.

Goes to speak of the subsidized food products in the U.S. also. Of course, since watching the documentary The Corporation, I haven't bought regular milk in the U.S. for quite a while.

And what about all the Canadians that travel to Bellingham to shop, eat, and yes, buy gasoline.

Sounds like border towns everywhere. Makes one wonder should the loonie ever overshoot the greenback in a big way if the Muricuns in the northern states would reverse the traditional trade flow and arrive north in droves for bargains.

Dollar to dollar parity has slowed somewhat the cross border shopping extravaganzas that were a common feature of Canadian life in the not-so-distant past.


From 2005 to 2009, US oil imports fell over 2 mbd. From 2005 to 2009, oil products actually increased. Maybe I should go to sleep because a plausible reason isn't popping into my head...

We the People apparently cannot rely on the government to allow us to know what is going on in our own country:



In the UK opinions are hardening to the way BP is being dealt with in the US:




London mayor Boris Johnson told the BBC that BP had paid a "very, very heavy price", and expressed concern that the oil spill was beginning to damage the entire image of the UK in the US.

"I do think there's something slightly worrying about the anti-British rhetoric that seems to be permeating from America," he told BBC Radio 4's Today programme.

"I do think that it starts to become a matter of national concern if a great British company is being continually beaten up on the international airwaves," he added.

"I would like to see a bit of cool heads and a bit of calm reflection about how to deal with this problem rather than endlessly buck passing and name calling."
'Ass to kick'

President Obama and other US politicians have repeatedly referred to BP as "British Petroleum", even though the company has not used this name since 1998.

I think any attempt to tar the UK as a bad actor in this mess is ridiculous...I personally lay the blame with a corporation called 'BP'.

I think the reversion to the usage of 'British Petroleum' was meant to repudiate the nick-name 'Beyond Petroleum'...to expose it as the sham it is. I do not think the intent was to accuse the UK of malicious intent.

If any wags out there are pursuing this anti-UK line of propaganda they are playing into BP's hands by creating an annoying and distracting side-show.

As far as I have heard, not least on TOD, the immediate cause of the blowout was a BP operative overriding the valid safety fears of the rig crew, to save costs.

The secondary cause of the ensuing disaster was the inoperative BOP which was down to a mixture of poor maintenance, inadequate testing, and being installed in spite of being known not to be fit for purpose. This is a wider issue of operations and regulatory oversight.

We all know the ultimate cause is PO leading to drilling in ever more extreme environments at the limits of available technology.

BP has a lousy safety record, in every disaster they have been involved in, safety has been demonstrably been sacrificed for increased profits.

I'm not sure how much worse they are than the other oil internationals, but BP does need to be brought into line.

News flash, British resentment in the U.S. has been going on since about, oh 1750-something. Maybe sooner. Wasn't there, so can't speak first hand. There's been a few reprieves due to war, the Beatles, Lady Di, Austin Powers; but all in all, it's the price paid for the end of empire and dominion and no amount of Union Jack painted Mini's or beer battered fish and chips is going to change that.

Shagedelic baby.

How the media are missing the real drama of the Oil Spill
by Bill McKibben

Let's think about the stories that are suggested by this trouble.

One has something to do with peak oil. BP has gone to all this trouble for a well that taps into what they now think may be 100 million barrels of oil. And that's... five days supply for the U.S? Does that give you any sense of the precariousness of the arrangements under-girding our economy right at the moment?

Another -- even more important -- has to do with global warming. Let's assume that the oil from the Deepwater Horizon made it safely onshore and was refined and then burned in the gas tank of your car. What then? Well, the CO2 in the atmosphere would be doing at least as much damage as the oil spreading across the Gulf. Consider the following things that have happened since the Deepwater exploded:
* Asia and Southeast Asia have each recorded their hottest temperatures ever -- 129 degrees in Pakistan, and 117 in Burma. India is having the worst heatwave since the British started keeping records -- people are dying by the hundreds. * We've seen the biggest rainstorms ever recorded in lots of places, from Nashville to Guatemala -- the clear result of an atmosphere made 5% wetter because warm air holds more water vapor than cold. * Satellite data has shown that Arctic ice is now melting even faster than in the record year of 2007. * NASA has released new statistics showing that the past 12 months were the warmest on record and that 2010 is almost certain to set the title for the warmest calendar year yet.

All of these, it seems to me, could be considered parts of the Deepwater Horizon story because they demonstrate that fossil fuel is everywhere dirty. They change the political question from "is Obama angry enough" to "can Obama lead a credible fight for real energy and climate legislation?" More to the point, they connect with the mood of existential despair and anger that the oil spill has set off across the country. People are sad and bitter only in part because they see those pelicans oiled; mostly, they sense correctly that our leaders have yet to deal with what is clearly the biggest problem we face: the transition off of fossil fuels.