Drumbeat: November 6, 2010

Arab world to face severe water scarcity by 2015

BEIRUT — The Arab world, one of the driest regions on the planet, will tip into severe water scarcity as early as 2015, a report issued on Thursday predicts.

By then, Arabs will have to survive on less than 500 cubic metres of water a year each, or below a tenth of the world average of more than 6,000 cubic metres per capita, said the report by the Arab Forum for Environment and Development (AFED).

"The Arab world is already living a water crisis that will only get worse with inaction," the report says, adding per capita supply has plunged to only a quarter of its 1960 level.

Oil Rises to Highest Since October 2008 as Dollar Decline Spurs Purchases

Oil traded near its highest level in two years as U.S. payrolls rose more than forecast in October, a sign the economy is recovering, and the dollar strengthened against other major currencies.

Futures touched $87.22, the highest price in more than two years, as payrolls increased and the jobless rate held at 9.6 percent. The dollar, whose decline drove a 6.2 percent rally in oil this week, advanced for the first time since the Federal Reserve announced $600 billion in stimulus measures Nov. 3.

PetroChina Parent to Refine Record Oil to Meet Demand

China National Petroleum Corp., the country’s largest oil and gas producer, plans to continue processing crude at record levels reached on Nov. 3 for the rest of the month to help meet increased year-end demand.

Report: Somali pirates release SKorean ship

SEOUL, South Korea – Somali pirates freed a hijacked South Korean supertanker and its crew, a South Korean news agency said Saturday.

Former BP Exec Jeremy Gilbert Shoots Down Every Argument Against Peak Oil

Peak oilists, who gather every year at ASPO-USA, are happy that mainstream media and politicians are acknowledging the concept of diminishing production.

However, they can't understand why the reaction has been so muted.

Former BP Chief Petroleum Engineer Jeremy Gilbert just gave an excellent presentation that responds to every argument against peak oil and emphasizes the need for immediate action.

Peak oil: what dwindling oil supplies means for the world

One of the world's leading peak oil authorities will discuss the economic threat of dwindling oil supplies and explain that we have already reached the peak of the oil age in a special presentation at the University of Sydney next week.

Professor Kjell Aleklett, co-founder and president of the Association for the Study of Peak Oil and Gas (ASPO) and leader of the Global Energy Systems Group at Uppsala University Sweden is an internationally renowned peak oil expert who has advised the United States House of Representatives and the Australian Senate.

Study: Oil spill to cost Alabama economy between $1 billion and $3.3 billion in 2010

A new study from the University of Alabama estimates that the state's economy will lose between $1 billion and $3.3 billion in economic activity this year because of the Gulf of Mexico oil spill. But overall, the numbers were less pessimistic than those adopted by state government in August, when it submitted a claim for lost tax revenue to BP PLC.

Shell Bribes Among `Culture of Corruption,' Panalpina Admits

Bribes paid on behalf of Royal Dutch Shell Plc’s Nigerian unit came from “a culture of corruption” that Swiss freight forwarder Panalpina World Transport Holding Ltd. admitted in a U.S. court yesterday.

Saudis warned US of package bomb plot weeks ago

WASHINGTON – Western officials are crediting a Saudi intelligence tip they received in early October, nearly three weeks before terrorists in Yemen managed to smuggle mail bombs onto airplanes, with heading off what could have been a series of catastrophic explosions aboard jetliners.

Saudi Electricity launches bidding for Qurayyah power

The plant is the third of six planned IPP projects, which involve the private sector, that would add around 11,000 megawatts of capacity.

Saudi Electricity will buy all the power produced by the plant from the winning consortium, which will run it on a build-own-operate basis.

Trafigura Wins U.K. Court Ruling Threatening Emarat Manager With Jail Term

Trafigura, an Amsterdam-based commodities trader, sued Emarat in 2009 after it refused to fully pay for two cargoes of oil shipped the previous year. Trafigura had given Emarat an extension on the payment because the company needed an infusion of cash from the government, according to a Jan. 26 ruling in the case.

An Uncertain Nuclear Countdown

If the clock is ticking on the lifetime of the Vermont Yankee nuclear plant, when will it actually close?

Quebec wind energy group lobbies for bigger green energy committment

By 2015, Quebec's wind energy industry will have created more than 1,300 new permanent jobs and 37,000 jobs during construction phases, an industry-commissioned study says. "These are more than just numbers, these are real jobs for people living in areas of the province that have been hit by declines to other industries," Robert Hornung, president of the Canadian Wind Energy Association, said.

Suntech, Infigen Propose $792 Million of Australian Solar Power Projects

Suntech Power Holdings Co. and Infigen Energy propose building four solar energy farms in Australia’s New South Wales state that would cost A$780 million ($792 million), documents filed with the government show.

Higher Levels of Lead Seen in City Tap Water

New York City health and environmental officials on Thursday advised residents to run their tap water for at least 30 seconds before drinking or cooking with it after testing showed a rise in the percentage of homes with elevated levels of lead.

Palm Oil Output May Grow Below Average in 2011 on El Nino, Ganling Says

World palm oil output may grow at a below-normal rate next year because the warmer, drier El Nino weather pattern affecting Malaysia and Indonesia will likely reduce yields, a Malaysia-based industry adviser said.

Production will rise at a rate of 4 percent instead of 6 percent to 8 percent, or an increase of 1.6 million metric tons, Ah Hong Ling, director of plantation investment company Ganling Sdn Bhn, said in slides prepared to be delivered at a conference in Guangzhou today.

Population growth is a choice

It took all of human history to reach one billion people early in the nineteenth century and a mere hundred years to add the next billion. We are now adding a billion every thirteen years and stand just short of seven billion people.

With this extraordinary growth, thanks largely to the exploitation of finite resources, it’s understandable that some are wilfully ignorant of limits to growth.

They are happy to live the comfortable lie, paying scant attention to peak oil and the depletion of other finite resources, the sprawl-fed loss of arable land, food security, water supply, carbon emissions or climate change.

But living on an arid desert continent with an estimated six per cent arable land, Australians in particular have much at stake as we clamour together on our thin green coastal strip.

New York's Bloomberg Urges Cities to Take Lead on Tackling Climate Change

New York City Mayor Michael Bloomberg urged cities to set clear targets in tackling climate change and to fill the “vacuum of leadership” surrounding the issue.

“We must be bolder, we must be more collaborative and we must be more determined,” Bloomberg said today in Hong Kong at a forum on global warming.

Mexico, UN see some progress in climate talks

MEXICO CITY (Reuters) - Talks over new accords to fight climate change have made progress on some issues ahead of a global summit in Cancun, Mexico, later this month but organizers downplayed on Friday the chances of a breakthrough.

Hosts Mexico and the United Nations offered few details on the progress after two days of meetings in Mexico City but said they were optimistic a package of agreements to drive forward the process would be reached in Cancun.

Climate Panel Offers Ways to Raise Cash to Cope

UNITED NATIONS — After grappling with a fundamental deadlock between rich and poor nations over climate change, a high-level United Nations panel on Friday proposed a smorgasbord of ways to raise $100 billion annually to help developing countries cope with global warming.

The Heat Was On: Atmospheric CO2 Triggered a Global Warming Event 40 Million Years Ago

Atmospheric CO2 was the primary driver of a 400,000-year global warming event, known as the middle Eocene climatic optimum (MECO), according to a new study. The finding, which could help climatologists better understand the precise relationship between CO2 concentration and climate change today, is described in the November 5 issue of Science.

re An Uncertain Nuclear Countdown



Just posted Bob Hargreaves defence of Vermont Yankee as a link to Coalition for Energy Solutions in the German PV FITs article posted yesterday.


Here's the Wiki take:


Here's the abstract for the report in SCIENCE:
Transient Middle Eocene Atmospheric CO2 and Temperature Variations

P. K. Bijl, A. J. P. Houben, S. Schouten, S. M. Bohaty, A. Sluijs, G. Reichart, J. S. S. Damsté, H. Brinkhuis

The long-term warmth of the Eocene (~56 to 34 million years ago) is commonly associated with elevated partial pressure of atmospheric carbon dioxide (pCO2). However, a direct relationship between the two has not been established for short-term climate perturbations. We reconstructed changes in both pCO2 and temperature over an episode of transient global warming called the Middle Eocene Climatic Optimum (MECO; ~40 million years ago). Organic molecular paleothermometry indicates a warming of southwest Pacific sea surface temperatures (SSTs) by 3° to 6°C. Reconstructions of pCO2 indicate a concomitant increase by a factor of 2 to 3. The marked consistency between SST and pCO2 trends during the MECO suggests that elevated pCO2 played a major role in global warming during the MECO.

Science 330, pp. 819 - 821, 5 November 2010
DOI: 10.1126/science.1193654

There's also a commentary on the report which appears on page 763.

This is all rather new science, as the MECO was only discovered about 7 years ago. One important aspect of this study is that during the time period of the data, the Earth did not have ice caps. That means that the warming which was indicated was apparently NOT influenced by the so-called snow/ice albedo feedback. The results of this analysis suggest that the climate sensitivity from a doubling of CO2 would be a warming of the Earth in the range of 2 to 5 C, which would be a larger sensitivity than previously projected...

E. Swanson

Thats a pretty good summary. The current sensitivity estimates cluster around 3C for the present earth, where snow/ice feedbacks are expecetd to make it higher that during the MECO period (this is
before Antarctic glaciation began). If I take combinations of doubling or tripling of CO2, versus 3C and 6C increase the numbers I get are 1.89,3.00,3.79,6.00, which indicate sensitivity a bit over 3C per doubling. Not too far from, but a little higher than current estimates. Of course the expectation would have been that the sensitivity then should have been a bit smaller than today.

There are more then a dozen different ways to estimate sensitivity -both from paleoclimate data, and from theory, and all come up with the 2C to 5C range, so adding this new data point will only
tighten the uncertainties slightly.

Re: tip from Saudis on bomb plot: We all know,of course, that we are heavily dependent upon the Saudis for oil. I wonder if there are any implications with respect to being dependent upon the Saudis for bomb tips. Maybe there are no implications, especially since it appears we are not going to do anything to reduce oil dependency, anyway. I don't mean to be a conspiracy theorist. But I wonder.

On a somewhat related matter, the sales of SUVs and light trucks have become dominant again. The U.S. government owns GM but is also allegedly concerned about AGW and oil dependency. The government will profit from this latest news, both literally and politically. Don't expect them to raise concerns about trends that are not good for either peak oil or AGW.

The American people have spoken loud and clear both in their buying habits and their political votes. The future be damned.

You don't need to be a conspiracy theorist to realize that the US has a strategic interest in seeing that oil from the Kingdom of Saudi Arabia (and surrounding Gulf States) flows into free markets and that Saudi Arabia has a strategic interest in allying itself with the United States to defend itself against enemies - both foreign and domestic - in the region. This mutual interest in the stability of oil markets and regional security makes the US and SA allies - especially since the Iranian revolution - despite cultural and political differences.

It will be interesting to see how the relationship between the Arabian states and the US evolves as China buys up a larger share of Gulf oil.

The American people have spoken loud and clear both in their buying habits and their political votes. The future be damned.

...unless you happen to be a Californian :)


California is not an example of how to run a state. They have no way of making the hard choices to get their economy in the right shape. There is noway to go green if you spend yourself into a hole. ... and Jerry Brown knows this. But he has shown himself to a lair from before. Don't be surprised when you see him cutting green programs.

A lot of the SUV sales are crossover SUVs built on car chassis. It is not easy to extract sales figures by models and make sense of how mileage is improving or not. Probably fleet mileage is still going up strongly as more vehicles in the Honda CRX, Toyota RAV4 category are sold.

Link up top: Former BP Exec Jeremy Gilbert Shoots Down Every Argument Against Peak Oil

Slide 15 gives reserves to production ratio of different sections of the world and the entire world. Interesting that he gives two figures for the Middle East R/P ratio. He gives the ratio for what they say they have and the ratio for what he thinks they really have. He downgrades their estimate by about 40 percent.

Transferring that ratio to actual reserves, they say they have, the six Middle East OPEC nations claim 790 billion barrels of reserves. But Gilbert's estimation would put their reserves at about 476 billion barrels. My guess is that is still too high, I would put actual reserves of the six Middle East OPEC nations at about 350 billion barrels, give or take.

Anyway it is good to see a former BP executive who is well aware of those vast OPEC inflated reserves. I suspect most of the oil company insiders are aware of that fact as well but are keeping quiet about it. Of course some are not aware of it at all and completely buy into the myth.

Ron P.

"I suspect most of the oil company insiders are aware of that fact as well but are keeping quiet about it. "

I have to believe this is true as well. As Rockman has reminded us a few times, many of these people are the Boots on the Ground, and there are going to be a lot of people who can't ignore what's in front of them, even if they have to Toe the Line in their day-to-day exchanges.

There is of course the axiom to the 'A person will have trouble understanding something his paycheck is depending on him NOT to understand..' .. and that would be that 'a PRson* won't be able to COMMUNICATE something that his company depends on him not communicating..' (* IE, a PR-rep, Liaison or Executive)

.. 'Don't rock the (sinking) boat if you're standing in it', eh?

He gives the ratio for what they say they have and the ratio for what he thinks they really have.

'possible over reporting' does not equal 'what he thinks they have'. has gilbert actually made that statement ?

you seem to have lost any semblance of objectivity.

Well would it not be damn strange, in the context of the presentation if he adjusted the numbers to something he didn't believe was more likely?

Or are you suggesting he just adjusted the values at random because he believes there is only a remote possibility in his mind they are over-reporting but he will throw it into the chart anyway just to confuse things?

"Possible over-reporting" seems like political language to avoid an outright accusation of lying.

has gilbert actually made that statement ?

Well yes, he has made such a statement. In fact he put that statement into a slide. Go to the link, then click forward to slide 15 and there it is. He calls it "Middle East (adjusted)". That means he adjusted their reserves to what he thinks they are rather than what they claim they are.

I was being very objective in reporting that. ;-)

Ron P.

Link up top: Former BP Exec Jeremy Gilbert Shoots Down Every Argument Against Peak Oil

I notice that when you click to the article the headline has changed to the even more direct "Former BP Exec: Here's Why Peak Oil Is Real"

My favorite slide (which has been posted here in other forms) is #6, which shows that the last year in which we discovered as much oil as we consumed was 1981. If that fact doesn't make people think, I don't know what will.

I am reminded of the Matt Simmons blue power points when I read throughout this presentation. Good to see the torch being carried.

All of the latest ASPO 2010 presentations, including Jeremy's, can be viewed here. The formatting on the linked story here is a bit cramped.

Yes, that link has been posted before.

I post the article links because a lot of people don't like PDFs.

Whats funny is Matt seems to have been one of the few people willing to consider that world R/P are roughly equal.

Indeed given we are pretty danged sure people are lying a obvious solution is simply to assume R/P ratios are similar for provinces well past initial discovery.

Thus if we assume global R/P is closer to 15-20 years for everyone you end up with the basics of my model.

Note I said everyone is lying not just OPEC if we further discount reserve expansion not linked directly to major discoveries i.e try to discount most of the reserves from backdated extensions past the discovery period we get down to the R/P of 10 or so that I can get using a number of approaches.

Anyway its really not that hard simply assume everyone is technically competent and trying to maintain production rate near peak levels.
As the fields age this forces R/P ratio to its technical maximum.

Now this will certainly underestimate future production because R/P is a crappy number to use much past peak production.
However this is where the concept of fast oil comes into play. Most of our remaining oil resources become concentrated in depleted and hard to produce field so the production rate falls. Certainly my approach discounts future oil flows but this discounted oil will predominantly be in the long tail of production are rates much lower than today if it is produced at all.

Realistically we only really care about oil production until it falls about 15mbd or so from its peak rate. After that the social/political situation will overwhelm the geologic details of oil production. Its impossible to even guess exactly what happens past that point and projections about oil depletion which intrinsically make a BAU assumption are simply of no value. The long tail does not matter.

What I don't really understand is why so few people are willing to take the step in assuming that the global oil industry is fairly homogenous same people same technology field discovery dates similar etc etc.

The only real difference seems to be how big of a lie is told for various regions. This seems to follow a set pattern. The western oil companies overstate their reserves by 2X about half of OPEC by 4X and some perhaps as high as 8x (Iraq). This is for my fast oil not hard to produce depleted fields.

The great lie is itself well established and fairly homogeneous in some sort of warped pecking order of fish tales.

In any case I'm just trying to say my crazy assertions are not really that hard to produce simply take the R/P ratios of North America/Asia Pacific assume they are inflated by 2X vs high production rate oil i.e only half will be produced at anything close to the R/P ratio claimed propagate the great lie multiplier and your done.

A rough guess is then that we are really depleting our remaining easy to produce oil reserves at about 10% per year. Assuming 25GB per year gives you 250GB of high production rate reserves. As far as when you actually started burning through these last of the easy oil well thats also trivial set the start date as the last time prices where low and production was high. Regardless of what real production has been since then we know prices rose and even reported production did not increase. This means we are then drawing down our fast oil reserves. A good date is 2003 others are possible. Assuming 2003 gives us about three more years at production rates within 10% or so of the peak rate.

All kinds of production curves are possible through this period indeed the 2003 date is probably a bit late 1999-2000 is probably even better as it would include a period where production rates and prices indicate maximum production of easy to produce oil. Peak fast oil should be time shifted to slightly before production peak. On the other side not all of our oil production is coming from easy to produce fields so technically you should discount some production in the US and Russia and elsewhere from depletion of the easy produce reserves.
Obviously in the US 2mbd is from stripper wells perhaps 5mbd from Russia is from heavily depleted fields etc. On a field basis a substantial portion of the worlds oil is actually coming from fields in their tail and should not be counted. However all that seems to do is throw the calculation by 1-2 years and its rough enough that it does not matter all that much. Given the crude nature of the concept a 2-3 year error is easily possible. No intrinsic reason the world can't have 200GB of oil that can be extracted at a fast rate vs 250GB dunno the real number but it seems to consistently be less than 300GB and also we started drawing it down sometime after 1995 at the absolute earliest. My point is to emphasize that this is a number of guesses on top of the basic premise that world oil extraction practice is homogeneous.

Regardless no matter what you do if you assume homogeneous extraction practice along with discovery being well in the past and current production rates the problem is well bounded in that you have 10-15 years of production near current rates since 1995-2004 before they begin to obviously fall off significantly aka your in the shark of the shark fin curve.

Lat but not least the magic number of and R/P of ten years is not magic but a number I've seen repeatedly at the field level show me fields that are not in significant decline ten years after reaching peak production. Very few pass this test by any significant amount.

Some papers which explore this concept.


This is funny I need to find the original.

The Energy Information Administration’s study breaks with Hubbert peak theory on several points. It does not use symmetry. It uses a post-peak constant reserves to production ratio of 10, and the authors believe in recovery from “geologically conceivable small sources of conventionally reservoired crude oil”.

My max R/P of 10 was at least proposed by another source. Thus its probably reasonably close to right.

Plenty of room exists for some variation but regardless it seems we have a sort fairly well constrained envelop where depletion of readily producible reserves will result in production drops which cannot be covered up. Its not just prices but a fundamental lack of oil to actually drive the worlds economy given its current infrastructure. Parts of the world will simply not have enough oil to operate their existing infrastructure. From filling oil tankers and pipelines to running refineries. The oil simply won't be there regardless of price.

At that point one would expect a major oversupply of oil tankers, Refineries closing down and eventually pipeline operations being curtailed as the oil supply drops below infrastructure design constraints regardless of public claims. New upstream projects will be canceled etc.

That is not a prediction its already happened. All you have to do is read a bit the truth is hidden in plain sight.

Memmel, on this we agree. I have maintained from day one that everyone produces the oil they can produce. Reserve to production ration averages about 20, give or take. That is it might be 15 and it might be 25 or on rare cases close to 30. But it is never 80, not even close.

Ron P.

Yep thats the basics. Really the only big difference is I effectively split remaining reserves once a province has maxed R/P at 15-30 in half allocating 50% of reserves to fast oil and 50% of reserves to "slow" or post peak production.

Assuming 15-30 you would get 7-15 as the "fast" or easy production R/P ratio thats common.

Or you could say R/P estimates are only good for 50% of the time period claimed once they max out.
Further expansion of reserve estimates will seldom result in keeping production from falling unless they are real discoveries.

And of course although I mentioned it at the end of my long diatribe the smoking gun that global peak is in the past is when
upstream infrastructure is clearly in excess and not being repaired and replaced. Eventually we will see more and more pipelines
shutdown. Oil tankers scrapped and refineries shutdown.

You not required to believe anything outside the fact its impossible to hide tanker rates and closures of refineries and eventually
pipelines. On the financial side its even more obvious the collapse of upstream profitability is so freaking obvious yet everyone seems to ignore it. I find this ironic since its the signal that peak oil is in the past and its impossible to hide and it seems no one really pays any attention to it. It seems that everyone buys into it was just a margin squeeze/demand issue.

The upstream oil industry seems to have collapsed and no one noticed much less connected the obvious relationship between spare upstream capacity and peak oil.

I have been criticized from day one for maintaining that how much oil a country produces is directly related to how much oil they have to produce. Yet the whole Hubbert Linearization method is based on that fact. That is how much oil is left in the ground is based directly upon how much they have produced so far and how fast it is being produced right now. If how much oil a country does produce has no relation to how much oil they have to produce then the Hubbert Linearization method does not work.

Ron P.

I have been criticized from day one for maintaining that how much oil a country produces is directly related to how much oil they have to produce.

woah ! you are starting to scare me, ron. if that is the case, then ksa's reserves are the same today as they were in 1991.

8.115 millionbopd in '91
8.250 millionbopd in '09

eia data, crude oil production.

Well no, SA has found Shabah since then and they had a lot of mothballed fields in 1991 and they do not today. There was Khurais and Manifa. So Saudi is a special case in they had mothballed fields. They no longer have any mothballed fields... of any size anyway.

Ron P.

so the barrels produced were not magically replaced ?

Well yes they were. Khurais and Manifa has counted as part of their reserves for decades. Only Shabyah, discovered in the early 70 but added to their reserves in the 80s was legitimate. Everything since has been "magic" barrels. Or more correctly just reserves added with a pencil.

Ron P.

what if they found something and didn't tell you about it ?

what if they drilled into a deeper horizon and didn't tell you about that ?

what if they updated their giga cell reservoir models and didn't tell you about that either ?

what if saudi aramco could hit a bull in the a$$ with a bowl of rice ?

Just to throw in my two cents since Saudi Arabia is fascinating.

First and foremost they are the only country that seems to have really followed a depletion protocol and managed their production below capacity.

Some history.


This is the first mention I can find of the 12.5 mbd claim.

Oldie but goodie.


More info...


The problem I have is there does not seem to be a good paper trail between the mothballing of fields and the reactivation claim in 2004.

And you have interesting stuff like this.


The bottom line is Saudi Arabia has definitely cycled wells I don't think thats in dispute obviously by resting individual wells you won't produce at maximum capacity. Next it seems clear in the literature trail that some GOSP's have also been mothballed. That does not seem to be in dispute. Now the relationship between ones that where mothballed other GOSP's and pipelines I don't know. There is a lot of stuff in Saudi's main producing region.

Your free to search yourself this is a good resource.


You can find talks about production cuts in 1998 for example.

You can find articles like this.


Saudi Arabia reportedly has plans to increase its oil production capacity, especially of relatively light crudes, to 12.5 MMBD in coming years. One possible project, at the Qatif field, could boost Arab Light and Arab Medium production capacity by 500,000 bbl/d at a cost of $1.2-$1.5 billion. Qatif contains medium quality, 33-34o API gravity oil. Another potential project, at the Khurais field, could increase Saudi production capacity by 800,000 bbl/d by 2005 at a cost of $3 billion. This would involve installation of four gas/oil separation plants (GOSPs), with a capacity of 200,000 bbl/d each, at Khurais, which first came online in the 1960s but was mothballed by Aramco (along with several other fields -- Abu Hadriya, Abu Jifan, Harmaliyah, and Khursaniyah) in the 1990s. For 2001, Saudi Aramco's budget calls for drilling 246 wells (208 onshore, 38 offshore) at a cost of $1 billion, a 25% increase from 2000 and nearly double the 1999 drilling budget of $580 million. For 2002, Aramco plans to drill 292 wells at a cost of $1.2 billion. Many of these wells will be drilled in Ghawar.

Problem is so far I've not found a single original news article related to the mothballing of fields by Saudi Arabia in the 1990's.
Plenty about managing production and OPEC quota's and cheating and production claims. But I've never found a string of articles contemporary with when the fields where supposedly shut in.

And I say supposedly simply because contemporary articles that match up with later claims are very difficult to find.

One thing thats very common with information about Saudi Arabia is that news seems to often refer to events that where common knowledge at some point X yet when you look for articles during that time period in support of later articles they just don't exist.

Indeed in my last search Saudi Arabia turning on mothballed fields to reach 12.5mbd of production was mentioned in 2001 again in 2004 and repeatedly after that.

I'd like to see a consistent and definite paper trail matching contemporary articles with later claims for Saudi Arabia.
This as far as I can tell simply does not exist. I'd don't even care what the story is just a consistent one.


One more link and a good read.

Not a single article contemporary with when Saudi oil fields where supposed to be shut in.

One last Edit not a single source confirms Qatif actually being shut in at best max production seems to have been about 150kbd from Simmons.

The closest to and original source.


Three oil bearing reservoirs have been produced in the past at relatively low production rates and are being further developed to produce a blend of 500,000 BOPD of Arabian Light crude grade (33-35° API). These reservoirs have practically no or very limited aquifer support due to existence of tar mats below the oil zone and poor petrophysical rock properties towards the aquifer. A peripheral water injection system will provide pressure support to these reservoirs. The three targeted reservoirs contain sour hydrocarbons with the hydrogen sulfide (H2S) content in the flashed gas as high as 16 mole%.

Shutin claims for Qatif actually vary widely from early 1990's, 1991 with 1995 being common.

Is a very problematic field don't get me wrong but nothing supports it actually be shutin completely simply never very productive withs a serious hydrogen sulfide problem until its massive overhaul.

Enough but hopefully this gives you some idea about "facts" from KSA the paper trail is riddled with statements which are impossible to verify once one digs back into documentation when and event was supposed to have occurred. For KSA the claim that Qatif was shut in seems to result in a circle of reports related to its redevelopment in 2001 that said it had been shutin previously. Yet its impossible to find any real support for this statement.

yeah, thanks memmel. a lot to regurgitate there, i am always willing to learn. i doubt the list covers a fraction of what is out there.

the problem i see with the pr approach is ignorance - one will never know that which has not been reported and that which is intentionally ignored. the same limitation as with the megaprojects approach to forecasting - omission.

what i think is needed is an exhaustive evaluation of the entire history of saudi arabia's oil history. sorry, i don't think 'twilight in the desert' comes anywhere close. niether do i think the efforts of euan mearns or joules burns, admirable though they were, are very difinitive. i doubt such a project can ever be accomplished, given the adjenda based studies that have been reported heretofor.

edit: i took the time to re read euan's post and comments of 3'07. what i came away with is that the shrill calls of the 'sky is falling' have become less frequent and shrill. kind of funny what 3 1/2 years of the sky not falling will do.

Well the sky probably has fallen. However what has happened is we have in a sense made a deal with the devil traded any chance of mitigation of peak oil in exchange for extending BAU for a little bit longer.

The chances of us digging out of the damage thats been financially is close to zero. We are now pretty much destined to see a financial Armageddon with the next few years with a good chance of the collapse of a world currency if not all of them.

Oil remains extremely expensive despite the onset of depression conditions. The nature of the games also make the onset of war far more likely.

As far as KSA goes their main importance in the future is if they are really capable of making up for significant falls in oil production elsewhere in the world and increasingly important now of providing the cheap oil required for the recovery needed to cover our monetary backside. The answer to that is probably no.

Even assuming that they are in decline given the nature of their reserves one can expect it to be driven initially by the fall of Ghawar then level off as more fields are intensely developed. They can probably do 5-7mbd of production for years to come and I'm of course a pessimist. Exactly what they can do really depends on the production profile of Ghwahar. Regardless net exports out of KSA are taking it on the chin. Export Land becomes a factor. For the world oil is fungible a 1mbd decline in exports from Saudi Arabia is just that a decline it does not matter where it comes from. Indeed in general Saudi Oil is of fairly low quality so Nigeria for example is probably more important at first as quality matters.

So overall perhaps at the moment the sky has not fallen that depends on if you have a job. I lost my job and only by the grace of god and hard work have I managed to make it contracting. But I'm now living a precarious existence not quite paycheck by paycheck but starting a small business in the midst of and economic downturn with little long term stability. Many many others are not even this lucky.

My point is that even though so far at least things have not gotten as bad as fast as some including me predicted does not mean they are not indeed the future I see today has gotten far worse over the last year. Delays in general have happened at the expense of making things eventually worse.

Heck simply look back in the past at the .com bubble then the housing bubble I'd say its clear now that these bubbles have made things worse today. The software industry in the US was eviscerated by the .com bubble the way we have done offshoring destroyed innovation.
And the housing bubble needs no explanation as far as the damage it has wrought.

Spiking and falling of oil prices and even the recent price stability with dubious promises of ample supply along with financial problems has killed any chance of rail which is the only real solution. Alternative energy investments target BAU and most are effectively practically useless if we undergo a structural collapse.

All this for a few more years that look relatively normal on the surface ?

I'm assume I'm not that shrill any more if so its because I'm sure now we have doomed ourselves with our antics. Not only have we not even tried to solve the surface problems of altering our economy to match declining energy we have not even begun to address the real problem of population. Addressing energy would have forced us to confront the population/lifestyle problem. In failing to do so we left the real killer untouched. So why be shrill there is nothing that can be done our course is now determined the collapse is in progress.

What I do feel sorry for are the billions of people that are going to realize over the coming years that their future was stolen from them as the do the results won't be pretty but worse regardless of what they do they can't get it back. Thats the real tragedy by the time most wake up and realize they they really have no hope they will be powerless to change the situation for the better only make it worse.

When not if the riots finally break out in the US what good will they do ?

Re: Former BP Exec Jeremy Gilbert Shoots Down Every Argument Against Peak Oil

Wait a minute - where do his Campbell slides come from as they are later versions than anything I've seen previously since he stopped publishing his newsletters?

I notice that even combined with natural gas the start of the downslope to 2020 is more steep than in the last Campbell chart published by ASPO Ireland (the projected mini plateau from 2015 to 2020 has gone). Anyone know of a later source or are these perhaps the latest Gilbert has obtained directly from Campbell?

Also I don't understand why natural gas has so much energy. It seems there is a mistake in that chart as it implies that the energy value currently produced by natural gas is approximately equal to that of oil and that is not the case. In the latest "official" Campbell slide the oil+gas peak is about 48 Gboe (about right according to reported production I think) not the 56 GBoe shown on the new chart. Unless the difference could include gas flaring or something? [Edit: Flaring wouldn't make up the difference as that only very roughly adds 1 Billion boe from a quick search.]

Here is the last Campbell update from ASPO Ireland I know of. The last revision date was March 2009.

They look old to me. And they look wrong. Note that they show a steep decline throughout 2010 with the average production for oil production for 2010 lower than for 2008. That just isn't factually correct. Oil production is oil production currently RISING and there is no sign of a decline. Presenting curves that everybody knows to be wrong seems to be unwise to me.

Once again (from the EIA in 1000s):

Jan - 73,123
Feb - 73,537
Mar - 73,518
Apr - 73,438
May - 73,389
Jun - 73,291
Jul - 73,691
Average 2010: 73,426*

Average 2009: 72,299
Average 2008: 73,647

* Average for 2010 only includes data up to July. Quite likely that 2010 average will exceed 2008 average by the end of the year. 2010 UP 1 million bbls/day from 2009. Now if these graphs are new then why can't I see the increase from 2009 to 2010 anywhere? Could somebody please explain that to me?

Do you have a model of some sort?

Charles Darwin once said this: "all observation must be for or against some view if it is to be of any service"

Don't you find it fascinating that the model or view that you must be proposing is nothing more than "hope"?

Don't you find it fascinating that the model or view that you must be proposing is nothing more than "hope"?

Now, is that response warranted? I haven't researched Nordic mist's previous comments to see if he is a cornucopian. Just readinh his post here, he is simply stating facts. A slight uptick in recent production may be inconvienient for arguing about the sriousness of PO, but data is data, and must be respected as such. We aren't like climate denialists here, we are not looking to cherry pick any subset of data to prove PO is a fraud -or some such. So if it is slightly rising there are
several possibilities:

(1) 09 production was below capacity because the economic slump depressed demand below production capacity.

(2) Simple stocasticity of the time series.

(3) Maybe the industry is doing a bit better than we have anticipated? Perhaps we will stay on the bump plateau a couple year longer than we (TOD) anticipate?

EOS. I'm one of those guys who believes we are fairly close to peak oil in the long term scheme of things but probably still 5 or 10 years away. And I'm fairly optimistic that we may have a successful transition to other sources of energy during that time. I also believe that we are likely to see a huge transition to electric vehicles greatly reducing the need for oil. (Purely an opinion and time will show me right or wrong).

I believe population growth is the biggest problem in the world and the pope and the muslim leaders who refuse to accept birth control are the biggest criminals in the world - and should most definitely be tried by the international criminal court for crimes against humanity.

Apart from that I'm an engineer and I hate it when people publish incorrect curves showing oil production collapsing when it just isn't. I don't haven't any brilliant model myself - I am just observing the data. WHT and his friends always respond with furious attacks when the data (reality) doesn't follow their models.

The great thing about TOD is that old posts are in the archive. Look at this post for one of WHT and co.s "brilliant" models:


Except according to this "brilliant" model world oil production should now be about 66.5 million bbls/day and falling. It isn't though. As noted in my previous post it is now 73.4 mill. bbls/day and rising. WHT doesn't like this reality so he prefers to attack. Typical case of severe denial when the facts don't fit the model. :-)


I've made some pretty good predictions on TOD in the past such as predicting that oil prices would fall and stabilise at 80-90 USD/bbl (made in 2008). (At a point when "everybody" else was screaming that oil prices could never fall below 100 USD/bbl and would soon hit 150 USD/bbl and 200 USD/bbl). They may have had great models but their conclusions were of course soon to be proved wrong. I am also consistent in what I am saying.


September 2008 Nordic_Mist:
"The current fall in oil prices is much as expected. As I commented in the thread following the previous vote on oil prices I believe that oil prices will fall to about 80-90 USD/BBL and then start gradually trending upwards again. However, I may of course be wrong. Perhaps the reduction in demand is in fact so great that oil prices will be reduced further? Once again, let me reiterate that I believe that we are fairly close to Peak oil, but that I don't necessarily subscribe to the most dramatic views as to the effect of Peak oil. "

The answer is almost certainly a combination of (1) and (3). Remember that it usually takes about 3-10 years to bring an oilfield into production. At the moment there are still a lot of oil fields coming online as a result of the recent high oil prices prior to the financial crisis. These projects will continue coming on-line over the coming years and could lead to quite a glut of oil supply over the next few years. Also (as I keep harping on about) oil prices are rising in USD at the moment but for the rest of the world the effects are much less dramatic.

Now if these graphs are new then why can't I see the increase from 2009 to 2010 anywhere? Could somebody please explain that to me?

At no point did I say they were brand new, I said they appear to be newer than the 2008 base case (revised March 2009) version I had last seen. The 2008 bump in reported production is visible in the oil chart above but it was not visible in the last chart published by ASPO Ireland which is why assume it is a later chart. Perhaps Gail could contact Campbell and see if he he could provide his latest charts if he still keeps them updated?

And as you seem to put so much faith in all these happy digits can you tell me what the error bar is on the world production data? Is it 0% (no obviously), +/- 0.5%, +/-1%, +-/2%, +-5% or what?

By the way I believe it is more likely than not that recent years production figures are biased so far in the up direction that claiming to know exactly where the peak occurs to the year based on noisy public data is very difficult. Simmons, for example, claimed that 2008 crude + condensate was actually down 2mb/day on 2005 (and produced his "peek inside the peak" slides claiming to show that) and not almost exactly the same as the official figures say.

However, perhaps you are right and we will get a new genuine peak. Let's see what happens to the oil price over the next few months. If we really are in involuntary decline masked with paper barrels then I expect to see the price rise considerably over the next year until and unless something "breaks" in the world's economy again.

Undertow. Totally agree with you. The figures are probably +/- 5% or 2% if we are lucky. They are certainly not accurate to the nearest barrel! (But you can look back at past posts on TOD and you will see that when the numbers are falling they are always taken as exact by most of the posters and used as scientific evidence that we are post peak!). But the point is that the huge fall predicted in earlier posts, particularly in 2008, certainly hasn't happened and at the moment an increase seems more likely than not.

What worries me most is that in 2008 all the graphs ("brilliant" models) being presented showed a steep and continuous decline from then onwards. In 2009 they showed a steep and continuous decline from then ownwards. In 2010 they are showing a steep and continuous decline from now ownwards. I would really like to see a long and sensible post from somebody like ACE who has consistently predicted a collapse in oil production explaining why it hasn't happened and why his theory was wrong. (He could also throw in an explanation as to how the oil price fell to below 50 USD/bbl when he claimed it had been proved beyond all doubt that it couldn't fall below 100 USD/bbl).

I feel that people making crazy predictions get away with it time after time. If they keep predicting for long enough they will hit the jackpot at some time. But it will be a fluke and not the result of some "brilliant" model.

(But you can look back at past posts on TOD and you will see that when the numbers are falling they are always taken as exact by most of the posters and used as scientific evidence that we are post peak!)

that is the modus operandi of the loudest and most persistant on here, particularly as applied to saudi arabia. the variation of that theme is that any information contrary to pre concieved notion is attributed to 'they are lying'.

As many of you know, I've been a vocal advocate of ductless heat pump technology and I think they're a great option for those of us who heat with oil. A friend of mine in Prince Edward Island installed a three zone mini-split in his century old farm home two years ago and it reportedly supplies "99.9%" of his home's space heating needs. He estimates its annual operating costs at $700.00 and that it has reduced his fuel oil consumption by some $3,000.00 a year, a net reduction of just over 75 per cent (bear in mind that PEI has the highest electricity rates in Canada and some of the highest in North America). You can view his website at: http://peiweather.comyr.com/weather/

By my calculations, the older our two units will have offset 5,000 litres of fuel oil demand either later today or tomorrow, marking another major milestone in its service.


reportedly supplies "99.9%" of his home's space heating needs

I suspect he is getting some space heating from waste-heat and solar gain. Most houses, with no heating would average about 10F higher than the outside weather without any heating. But I take it his number means he isn't using another heat source, which means his heat pump is getting him through the coldest periods no problem. Weren't air source heat pumps supposed to drop in efficiency during the coldest weather?

Air source heat pumps are rare around these parts. Geothermal units are tough in the city (impossible?) so you really only see them in new constructions or in the country. I do see a lot of outdoor wood burning units, but these can be extremely polluting. One guy i know of can smoke out an entire neighborhood (i drive past it sometimes in the winter) when the atmospheric conditions are ripe.

I'm putting plastic over my windows (again). Without it i get horrible condensation problems. The windows are still in great shape (Marvin) and only 20 years old, but the seals must be bad or something (double hung). My neighbor was telling me the crank outs are more efficient, but i don't think i could find them big enough for my bedrooms (special order?).

I have Marvin casement windows which are 16 years old and have several complaints about them. They are built with two sets of gaskets and I had to remove the outer gaskets 10 years into their life because the windows wouldn't latch any more without busting the latch. I would not get another wood frame window. Fiberglass windows are much better for dimensional stability and strength and insulative value. If you want triple pane, I don't think you can even get wood windows. Look up fiberglass windows.

Thanks for the info. Mine are all wood interior (AL exterior) and the condensation is so bad that it pools up on the wood. I literally was using a roll of toilet paper a week to dry the windows every morning. I said screw it last year and had a bunch of window kits (plastic) and they worked great (no condensation whatsoever on the window or on the plastic).

I also have a Marvin sliding glass door and that leaks so bad you can see the curtains move.

I'll go with fiberglass. I may do one bedroom at a time when i do swap them out.

Instead of using a new sheet of plastic each year and taping it directly to your window frames, try building some indoor storm windows. These are built with a simple wooden frame, and then heat shrink plastic is applied to each side, along with foam weather stripping around the edges. These will give you two dead air spaces, for double the insulating value, and then you can take them out and store them someplace for the summer, and put them back in the fall. They can probably be used for five years or more if you can keep them away from cats claws and other sharp objects, but no one around here knows for sure. The oldest ones I’ve seen myself are only three years old.

You can find a good description of how to make some at http://www.midcoastgreencollaborative.org/storms.html

I’ve made about thirty five of these over the last year, and I’m planning to make some up to 5 feet wide by 9 feet high for some stained glass windows in a church.

Hi EoS,

Correct. There would be some passive solar and internal heat gain, although the sun is a relative stranger in these parts and being a century old farm house it's not particularly strong in this regard. Barry tells us that he uses his oil-fired furnace three days a year for backup heat which is quite remarkable given our local climate (-20 to -30°C temperatures are not uncommon) and given that it's a larger, older home with a relatively high space heating demand.

Our fuel oil consumption is effectively nil and our rolling, twelve-month electricity usage now stands at 10,450 kWh (down from just over 13,000 kWh earlier this year); virtually all of our space heating requirements are met by our two ductless units as our home is oriented east-west and heavily shaded by mature trees year round.


Welcome back HereinHalifax.

Thanks kindly, TFL. There's been a lot on my plate lately and, regrettably, that's cut into my time for other things, including this forum. There's a huge push to ramp up our kWh savings as we approach year-end. This week we racked up 81,871 kWh under the Small Business Lighting Solutions programme and perhaps that again with respect to our C&I efforts (my firm is responsible for one of six zones in the province and we're all madly racing against the clock).

Last month, one of our primary sub-contractors installed measures that will help our clients reduce their lighting demands by an estimated 348,000 kWh/year. Unfortunately, the person who wrote the message on the cake didn't understand that "congratulations" is one word (not two) and that it has two "t"s as well as an "l", but no "d" (it tasted just fine nonetheless).


Another good morning chuckle, thanks :-)

And see, I thought that was just some kind of Engineer's pun, 'Con' your 'Gradually' towering successes!

Actually, Bob, I'm inclined to believe a good number of my fellow engineers would be none the wiser. I'm not particularly adept when it comes to spelling and grammar, but I have a leg up on some of my counterparts. For example, there's an e-mail in my in box from a colleague entitled "hassard assessment" and another one below it called "safty program".

And just so that no one thinks I'm making this up:


My guess would be that the cake shop employee was a Spanish speaker, and thought that the phrase was "With Graduations"

I thought it was what you have when a bunch of prisoners finish their degrees...

Reminds me of my favorite Handscrawled Sign at a sweet little bakeshop in Chinatown, NYC;

"Please no outside food. Thank you for your corporation!"

(And then there was the Mad Magazine funny signs book that had a KFC with some lights out, and it read

"...Ucky Fried ...Ick"

Even if God doesn't exist, she does have a fine sense of humor!

Thanks for the reminder, Paul.

I've got to make this pitch to my wife. We just had our audits.. there's a lot of incentive $$ to switch over to gas, but I have to see if there's something similar for Ductless Heat Pumps..


Hi Bob,

Another friend who lives in Summerside, PEI just e-mailed me about his experience with these products. A couple years ago he installed an off-brand unit (an "Amcor Aire") that blew its compressor this past May. He decided to cut his losses and replaced it with a 15,000 BTU/hr high efficiency Fujitsu. The cost was $2,300.00 including HST (our 15% sales tax). A far superior product that should provide many years of reliable service.

Gas is not available in our area but our boiler can be easily converted if that option should arise (it's certified for both fuels and you simply swap out the burner head). However, unless the relative cost of natural gas and electricity should shift dramatically, I doubt we'll bother; at current rates, our effective cost per kWh of heat is a little over 4-cents (the equivalent of fuel oil at about $1.40 a gallon at 85% AFUE).


I've been following your comments on ductless heat pumps and wonder if such a system would be effective in my neck of the woods. I live in central Texas between San Antonio and Austin. I have a 900 sqft home with a forced-air heat pump that makes so much noise when the air handler comes on that I literally have to turn up the volume on the music. I also have a detached single garage that I want to convert to liviable space. The exterior on both house/garage is stucco (on stick frame). I have no idea what the insulation is as I didn't build it; however we are very prudent users - always less then 1000 Kwh/mo during the extreme periods. Also, the floors are concrete - great in summer, chilly in winter.

I don't know what can be done about the air handler. The two return vents are floor level with the unit above them. Sitting on the floor is a sump pump which carries condensation up through the attic space to the outside. My friends look at me when either handler/pump comes on and say "What's that??" I'd like to bitch slap the person who designed this install!!

Hi Ed,

Sorry to hear of the problems you've been encountering with your air handler; what you describe is damn annoying. I'm wondering if a duct silencer (aka duct muffler) and/or one or more duct isolators (i.e., flexible duct connectors) might help quiet things down. Do you know anyone who is HVAC knowledgeable who can help you properly diagnosis the problem and assess your options? Have you spoken to the company that services your system? Also, if your current fan motor is fast approaching retirement age, I'd strongly recommend replacing it with a variable speed ECM motor -- they're quieter and considerably more energy efficient.

It would be a shame to spend a large amount of money installing a secondary heating and cooling system if you can possibly avoid doing so.

Good luck!


I loved my Sanyo Ductless Heat Pump. Would install it or similar again in a heart beat.

Thanks for the real-world results. I started looking at these in Florida as our existing central air units were at their end of life - now on CPR. We have a 120-year old house with modern insulation and refabed windows. Think Forrest Gump's house turned 90-degrees.

The only drawback is wiring in new 240 V circuits for the units. But, I believe their advantages far outweigh the negatives. Other than saving on energy (some with a SEER of 16+), we like the idea because my wife and I like different temperatures around the house. I definitely like it cooler for sleeping.

It seems ridiculous on the surface of it to heat/cool an entire house to maintain the temperature in a couple of rooms. We're looking at constructing a new home and will have to move the split system heat pumps to the top of the list. Thanks for the reminder. Also, they are actually cheaper when the cost of installing duct work is included.


Our Sanyo 12KHS71 is a 115-volt inverter unit (http://us.sanyo.com/HVAC-Single-Split-Systems-Wall-Mounted-Heat-Pumps/Wa...) which allows us to monitor its energy usage with a standard Kill-a-Watt device. It's a 17.0 SEER/9.3 HSPF model which makes it a pretty decent performer vis-à-vis a conventional split system. However, the Fujitsu 12RLS at 25.0 SEER/12.0 HSPF (http://www.fujitsugeneral.com/wallmounted9-12RLS_specs.htm#specs) is unquestionably the gold standard in energy efficiency and well worth the price premium. I'd highly recommend the Sanyo if you're limited to just 115-volts, but if you can possibly swing 230, the Fujitsu can't be beat.


I opted for the 12KHS71, too, so that I didn't have to wire for 230. However, I knowingly undersized it thinking it would be ok for "just a few days of the year" and regretted that.

Next time I would get the 230V, higher-capacity version. Mind you, these units have improved tremendously since I bought mine five years ago so perhaps the modern 115V model would get the job done where the older model currently doesn't.

Hi André,

The current generation 12KHS71 provides a good amount of heat even when outdoor temperatures fall sharply; for example, at -18°C/0°F, the 12KHS71 still cranks out a little over 2.3 kW of heat or about the same amount of heat as would be supplied by a 10 ft. electric baseboard strip. Our Sanyo serves all of our lower level -- approximately 90 m2 with an uninsulated slab and wall-to-wall, floor to ceiling north facing glass -- and it has no problem keeping up. It's an amazing performer and I highly recommend it to anyone looking for a 15-amp/115-volt unit.


Unfortunately we are in the transition period between technologies, and like the early electrical wiring replacing gas tubing, we have to bit the bullet. Fortunately, changing out a whole electrical panel is around $1,500.

Note: early electrical wiring looks like gas tubing because that is what they knew, so they wired homes like gas tubing. Hence, knock and tube wiring.

If we construct a new home, I will specify the 240 V circuits for split heat pump systems. No different than dryer outlets or 120 V outlets for garbage disposals.

My only concern with the SEER ratings is I wonder if they are playing a little loose with the energy in/out definitions. The Fujitsu unit uses switching power supply to modulate the active components. That in itself isn't a bad thing, but the SEER may be higher due to the definitions of electrical energy in vs. mechanical energy out.

Regardless, thanks for the product testimony, that sells better than anything!

Re: Oil Rises to Highest Since October 2008 as Dollar Decline Spurs Purchases

The dollar, whose decline drove a 6.2 percent rally in oil this week, advanced for the first time since the Federal Reserve announced $600 billion in stimulus measures Nov. 3.

Ok how did a 1.2% drop in the value of the dollar drive a 6.2% rally in oil? Why did oil rise on Friday when, as the article says, the dollar actually increased in value?

Undertow, the market is not rational. The market is actually just people who make often make good rational decisions but far more often do not. That is not to say that what should logically happen does not. It usually does but takes its own good time in doing it. But one cannot apply rational arguments to day to day fluctuations.

Ron P.

Yes I'm saying that the report is not rational (not that that is new). We shall see over the next few months whether the dollar value is anything other than a side issue and that there are more important factors driving the rise. Personally I feel oil is rising due to supply/demand issues. So I expect oil to continue to rise in all currencies unless demand drops or else OPEC opens up some of that supposed spare capacity. I think the next few months will be interesting.

Oil at $87 is already over $100 a barrel (relative to 2008 rates) as far as the UK consumer is concerned due to the pound being worth 20% less than the last time oil was over $100 per barrel in actual dollars.

The year over year increase in annual oil prices that we are apparently going to see from 2009 to 2010 (from $62 to high $70's) is in comparable to the long term average increase that we saw from 1998 to 2008 (20%/year). My bet is that the next year over year decline in annual oil prices will fit the "doubling" pattern, falling to the $120 range (average annual).

My bet is that the next year over year decline in annual oil prices will fit the "doubling" pattern, falling to the $120 range (average annual).

That price is very possible, but I'm wondering if you view 120 as a price that will cause another 'Step Down' for the economy? The reason I ask, is because my guesstimate is 110-125 will put the brakes on the economy. By step down, I'm referring to deep recession again.

Hundreds of billions of dollars will be pumped into the banks in the near future. Wonder if they will use part of the money for speculation.

Hundreds of billions of dollars will be pumped into the banks in the near future. Wonder if they will use part of the money for speculation.

What might be a more interesting question is, if printing money to get the economy moving by providing more funds for banks to lend causes the dollar to lose value, which in turn increases the cost of oil, making all oil related products and transport more expensive, isn't the increased energy expense going to act as a drag on the economy, which will mean we might have been better off never having printed the extra money in the first place, because all we're doing is spinning our Helicopter Ben blades?

Ben Bernanke's new nickname is Helicopter Ben due to the constant spinning of the printing presses making more money. Although in reality its just made up money, they don't even have to print it.

Bernanke earned the Helicopter Ben nick back in 2002.

Looking at the month-to-month volatility in WTI I see something curious; it seems to be decreasing. Perhaps big traders are running out of ready cash to push the price around?

WTI Spot Price Monthly Volatility

That shape's a bit like a volcano, appropriately enough. Or a horst and graben.

Perhaps the renewed volatility last year was courtesy government stimulation? Note that in the middle of a recession it topped anything in the last 10 years barring late '07, and of course the plunge of '08.

Not that I think volatility is really decreasing from those graphs, but tracking volatility in a quantity can give you forewarning that there is likely to be a discontinuity in level of that quantity.

The way it works is that the value tends to smooth out and drift, rather than being driven up and down, as you near a break point. Then, in what seems like a sudden, unexpected event, all hell breaks loose and the value changes wildly. What seems to cause it is related to feedback loops and attractors.

In general the value of a quantity remains well behaved via the action of feedback loops. In oil, if the price rise consumption is cut, so the price falls again. If the supply is cut for some reason (usually the US bombing someone) then the feedback loops react to create a new dynamic equilibrium. The tight coupling induces a day to day instability, that produces a long term average stability - hence the dynamic stability.

However, if the feedback loops break down, or if the relative weights change such that stability is no longer possible, then the prelude is the lessening of those loops, and thus the lessening of the volatility. The quantity becomes 'decoupled' from the forcing function. Sounds strange, but with some evidence to back it up.

As you may recognise, there is a key feedback that we would expect to fail as we move from a pre-peak to a post-peak world. That's the one that says 'if price increases, pump more, leading to decreasing price'. Short term games can be played to meet spikes, but eventually we hit a point where physics and policy collide to say xx mbpd and no-more. I'll leave it as an exercise for the reader to identify some more of the likely failing feedback loops.

It's not a new nickname, and it's not because spinning printing presses are like helicopters.

It's because he said back in 2002 that he could prevent deflation by dropping money from helicopters.


Don't forget that for "us" Europeans the oil price is currently on a falling trend. Using the usual arguments of extrapolation you will end up concluding that it will be free by the end of the year :-)

Since the low in August for crude, the price has risen about 20% in $US terms. The $US index has fallen about 8.6%. The Euro has risen ~11.6%. How do you quantify that oil is getting cheaper in Europe?? Even here in Australia the price of crude is rising in $Aus terms.

And last week the Euro rose about 1.2% against the dollar while oil rose by over 6%. So the price rose very considerably last week in Euro (and all other currencies) terms. The Euro is worth less now than it was the last time prices spiked well over $100 per barrel as Nordic seems to have forgotten that the Euro plunged against the dollar during the "flight to safety" and later Eurozone debt problems.

I live in the UK and one UK pound bought approximately $2 in 2008 but only buys $1.60 today so the pound is even worse off than the Euro and oil is effectively already over $100 barrel relative to 2008 rates.

I have pointed this out to Nordic Mist previously but I guess he missed it.

Prices at UK pumps have been rising again recently. The average price for regular unleaded petrol in the UK is now about £1.20 /litre. That's getting close to the max price we paid in 2008 (there has been a slight tax increase since 2008 as well I should point out) so this particular European does not expect it to be free by the end of the year - Nordic's hallucination not withstanding :-) To be fair though Nordic has referenced data that did not include the recent price rise of the last couple of weeks (latest price is about 9% higher in dollar terms than shown on chart). It does still however show oil price in Euros has risen considerably since the Euro low for 2009 in February.

So I think what Nordic is actually saying is that price in Euros fell from the May spike but that was true in dollars as well - until last week.

Do not try to apply rationality to the financial media. In their minds, two unrelated events are considered causation regardless of the obvious lack of logic in correlating the two events.

We see that reported every day of the week. Everytime the stock market makes a move up and down, the media has to report it as being "caused" by a single event. This has absolutely no basis in fact but instead serves to present some perceived rationality to the public.

Yes, I know that but I'd just replied to a post in yesterday's drumbeat where it was claimed that oil was rising in Dollars but falling in Euros - which was clearly wrong as far as the current rise is concerned and then I read that news item straight after and felt I had to comment.

I have no idea what the QE is and what it will do? Where does the 600 billion go? Isn't it just digits in a computer? This won't physically be put into the money supply? Its not like all of us are getting new Chevy Volts :)

Good summary on Wikipedia


A central bank implements quantitative easing by first crediting its own account with money it creates ex nihilo ("out of nothing").[2] It then purchases financial assets, including government bonds, agency debt, mortgage-backed securities and corporate bonds, from banks and other financial institutions in a process referred to as open market operations. The purchases, by way of account deposits, give banks the excess reserves required for them to create new money, and thus hopefully induce a stimulation of the economy, by the process of deposit multiplication from increased lending in the fractional reserve banking system.

But alas when the UK restarts QE in a few months as well I doubt the Bank of England will buy my "Undertow Chevy Volt Fund" bonds :)

So QE is just buying up a bunch of garbage debt? They hope to stimulate the economy? How? Jobs are nowhere to be found, will they just start borrowing to anyone with a pulse again?

you're not thinking straight! QE is not about helping the average bloke in the street. It is about helping the bankers so they don't go under at the expense of the rest of us, devaluing the currency. Because the banksters get the newly printed 'money' they get to benefit by filling their own bonus pots. Central banking is a fraud which is only ever about helping the rich secure more assets and screw the rest of us.

Central banking is a fraud which is only ever about helping the rich secure more assets and screw the rest of us.

Especially in comparison to pre-central banking when the system was about the poor securing more assets and screwing the rich. Right?

I wouldn't go that far. I think that central banks are interested in a certain degree of stability, lest they risk rioting and/or collapse. I don't think central banks want to starve us. Keeping us fat and happy is the name of the game (and, of course, keeping the oligarchs in charge).

The rabbit hole goes deep, but not in the way you imagine. You see, if a government can be completely financed by a central bank - then the very notion of government becomes meaningless. Why should individuals or businesses pay taxes, if government can just get free money from a central bank?

The truth is that they really don't need to. The entire idea that government is funded through taxation and/or borrowing (as they can now "borrow" from the Fed) is bunk.

We live in a centrally planned finance economy now. The Federal Reserve, for all intents and purposes, is now the government of the United States. Can it work? Who knows. We are in completely uncharted waters here. You can read Smith, Marx, Keynes, it doesn't matter. Nobody in the past had anything to say regarding what's happening now.

The purpose of QE is not to help the average person. It is to raise asset values so banksters can be made whole again.
We will have a bubble in commodities. If you want to save yourself financially, pay down your debt and invest your money in food, energy and precious metals.

"It is to raise asset values so banksters can be made whole again."

Good point suyog. A big part of QE is Buying Time and pumping asset prices until "mark-to-market" can be restored without wiping out the banks.


I have been ill lately, so I'm having trouble remembering quite where I saw this... but I think it was in a Drumbeat in the last few days, or perhaps in a story that was linked to a Drumbeat.

Anyway, the person said something along the lines of, "watch for super-rich suddenly dumping large quantities of stock in their own companies." As a sign that things are about to get really hinky with the economy/world financials.

Then today in the MSM I saw this:

"Steve Ballmer this week sold $1.3 billion worth of shares in Microsoft Corp... Ballmer sold 49.3 million Microsoft shares in the last three days"

(Balmer is the CEO of Microsoft)I got a real creepy feeling when I read the story, after having just seen the other one warning of just this very thing.

What QE is:
A way for the Federal Reserve to buy toxic assets (like fraud-laced 'mortgage backed securities') from the Piggy Banks. This takes the toxic asset off the piggy bank's books, and replaces it with cash.

What will it do:

It buys time for the Piggy Banks.

Buying time for 1) the Piggy Banks to continue to front-run markets, robo-trade to skim the markets, etc and 2) the statute of limitations for fraud to run out.

I understand a little better now. Hopefully it goes well for them and they get bigger bonuses.

Or, hopefully it goes well for them until they end up disembowling each other.

What makes you think the Fed is going to buy any toxic assets?
QE2 will make the banks whole but the banks are not paying down their bad loans.

"The Bank was saved, but the people were ruined."

In times of prosperity, when confidence is high, they are tempted by the prospect of gain or by the influence of those who hope to profit by it to extend their issues of paper beyond the bounds of discretion and the reasonable demands of business; and when these issues have been pushed on from day to day, until public confidence is at length shaken, then a reaction takes place, and they immediately withdraw the credits they have given, suddenly curtail their issues, and produce an unexpected and ruinous contraction of the circulating medium, which is felt by the whole community. The banks by this means save themselves, and the mischievous consequences of their imprudence or cupidity are visited upon the public. Nor does the evil stop here. These ebbs and flows in the currency and these indiscreet extensions of credit naturally engender a spirit of speculation injurious to the habits and character of the people. We have already seen its effects in the wild spirit of speculation in the public lands and various kinds of stock which within the last year or two seized upon such a multitude of our citizens and threatened to pervade all classes of society and to withdraw their attention from the sober pursuits of honest industry. It is not by encouraging this spirit that we shall best preserve public virtue and promote the true interests of our country; but if your currency continues as exclusively paper as it now is, it will foster this eager desire to amass wealth without labor; it will multiply the number of dependents on bank accommodations and bank favors; the temptation to obtain money at any sacrifice will become stronger and stronger, and inevitably lead to corruption, which will find its way into your public councils and destroy at no distant day the purity of your Government.

Andrew Jackson Speech - Farewell Address March 4, 1837 - About Currency and banks

Back to the future 2010,

Spencer Bachus R-AL, a potential Republican chairman of the House financial services committee, has fired the first salvo in a battle with regulators – warning them against harming US banks by curbing their trading activity....

“The derivatives provisions in Dodd-Frank alone... as they stand now they’re going to take a trillion dollars out of our economy. Think how many jobs that’s going to kill,” he said.

So it's a war on the Volcker Rule, one of the handful of provisions in the Wall Street reform bill that had the potential to make a significant difference in how the big banks bet their capital. Wall Street just bought themselves a shiny new GOP House, and are counting on payback.

Majorian, you might be right. The fed might not buy any more toxic assets from the banks. Maybe they will buy municipal bonds of failing cities or states ... who knows.

But you are right about War on the Volker Rule. The republican clowns sound just like Phil Gramm et. al. in the 90s, "too many regulations hurt business" (i.e. limit the looting by criminals like Wendy Gramm, Phil's wife).

They want to pretend this election gave them a mandate to go back to the Fraud Economy. And since Obama took office he did everything possible to enable the fraud and nothing to put an end the fraud, so it looks like the repulsives in the republican party will be successful.

"..but if your currency continues as exclusively paper as it now is, it will foster this eager desire to amass wealth without labor.."

but wait! Isn't that the American dream I was promised at birth?

Thank you for the post!
Most people don't know about Andrew Jackson.
He thought banks were an evil that put the uncaring at the levers of power.
Narcissism and Poverty: Triggers of Terrorism

Re: Toxic Assets

I thought that the Fed was going to be buying treasuries, not MBSs.

(I guess we could argue about whether or not treasuries are "toxic assets").

To fall back on literature, I think it is something like "Good money for Bad", i.e. the government takes in risky bonds, and issues safe ones. The theory being that more money chasing safe yields than "safe" products is a big part of the problem. Or is it the other way around, try to force people with money looking for a safe parking place to spend it. In any case it is arcane enough to fly under the political radar, because only a few economist types have a clue about it. Since fiscal stimulation is now politically impossible, they are desperate to find some way to boost the economy that is politically acceptable.

Ilargi in The Automatic Earth explains the QE2: It's a scam, for the public, anyway. Real for bankers, I guess.

People tend to be myopic on prices. A price is but a proxy for other fundamental measures.

Part of the price proxy applies to a concrete measure like supply, but a significant amount relates to it being a device to game the system and others into making money.

As long as this duality occurs -- a real metric versus a game theory element -- it makes no sense to impose any kind of rationality to price.

That's what makes oil production and oil depletion analysis so straightforward. The amount of oil produced in barrels is not a proxy for anything else. It stands on its own terms and is very hard to misinterpret.

1.2% against what?

1.2% against the standard "basket of currencies" (US Dollar Index). 1.22% against the Euro in particular.

From the article about Arab water scarcity:

By then, Arabs will have to survive on less than 500 cubic metres of water a year each, or below a tenth of the world average of more than 6,000 cubic metres per capita, said the report by the Arab Forum for Environment and Development (AFED).

That has got to include embedded water in products and food we buy. I had a water meter installed on February 1st this year. To date I have only used 53 cubic meters since Feb 1st. There is no conceivable way I could get anywhere near using 6,000 cubic meters at home. Frankly, I would be amazed if I even come close to 6,000 adding in all the 'embedded' water from all the products, food and drink I buy.

A VLCC tanker can hold 84,000,000 gallons of oil, so what if we filled them with freshwater instead? Fill them up in Lake Michigan and sail them to Saudi Arabia... 80 gallons of water per person/per day... SA population is 24.5 million. So we need to ship 24 tankers per day out of Lake Michigan to keep the Saudis in freshwater. Charge them a $1 a gallon...Wisconsin will be the richest state in the union (we'll fight and enslave the Canadians and those clowns from Michigan over the water)!

What if there was a spill? The environmentalists will be up in arms if 84,000,000 gallons of water is spilled into the Atlantic. Can you imagine the devastation? Oh, hang on... nah, scratch that.

If we don't count added rainfall/snow/evaporation/other things...the amt of water in Lake Michigan would keep the Saudis in water for 1,800 years, if my math is correct.

If we don't count added rainfall/snow/evaporation/other things...the amt of water in Lake Michigan would keep the Saudis in water for 1,800 years, if my math is correct.

tut, tut, tut! You have committed the cardinal sin on TOD!

If we don't count added rainfall/snow/evaporation/other things...the amt of water in Lake Michigan would keep the Saudis in water for 1,800 years at current consumption, if my math is correct.


Yeah... I like to break the TOD rules often.

Water is our biggest resource in this state (we also have a lot of trees, and the girls are pretty good looking) so i figure we could help our money problems by selling off some state assets (we also need to build a wall to keep Illinois deer hunters out of Wisconsin).

don't know much about Wisconsin. Don't you guys also make a lot of cheese?

As for good looking girls, are you proposing selling them to the Saudis too?!

All I know is the Wisconsin State Motto, "Come smell our dairy air." ;-)

and the girls are pretty good looking

I seem to remember my girlfriend at the time whining about all the 4x4!s around town. She wasn't talking about PUs or SUVs, but rather that so many people were 4 feet tall, and 4 feet around! I guess it was all the cheese curds and beer. Then I ended up with a Minnesota woman......

we also need to build a wall to keep Illinois deer hunters out of Wisconsin

The Cheddar Curtain at the Illinois-Wisconsin border has turned into Swiss cheese. Especially on Friday afternoon - too many dang flatlanders driving up here.

The Cheddar Curtain at the Illinois-Wisconsin border has turned into Swiss cheese

OMG! A foreign brand of cheese. That settles it, the end of the world is nigh!

Except, if we didn't have Illinoisans helping out by hunting deer, the dang things would be so thick on the ground you couldn't safely drive or even bicycle anywhere. When I visit Ohio, I hear news stories about how Ohio is ridiculously overrun with deer and something ought to be done about it - and yet they only have about 1/8 the number on a similar amount of land. Two hundred thousand or a quarter million, versus two million, something roughly like that.

Isn't that what they thought about the Aral Sea in Russia?

...the amt of water in Lake Michigan would keep the Saudis in water for 1,800 years, if my math is correct.

But, didn't some faux-populist overreaction a couple of decades ago, make the exportation of great lakes water illegal! Those folks can get pretty jealous about their water.

Are you talking about Great Lakes Compact that was passed into law 2 years ago?

The Compact that would prevent greedy private enterprises from selling the water to the dehydrating south western states, or the dehydrating arab states?

There's plenty of water in Antarctica, no need to tap the Great Lakes.

And on the moon. There is plenty there also. Let the dehydrating parts of the planet build pipelines and shipping lanes to both antartica and the moon. Problem solved. No need for the compact.

added bonus..it's down hill from the moon, so there'd be lots of hydro power too.


But its frozen...you'd have to tow it...then it would melt by the time it got there.

just grind it into small chunks and put it in the tanks.

NUCLEAR NEWS FLASHES - Thursday, October 28, 2010
--SAUDI ARABIA WANTS TO BUILD 32 POWER REACTORS AND WILL MAKE PROGRESS TOWARD STARTING a nuclear energy program in the next 12 months, Jim Bernhard, chairman of The Shaw Group, said October 28 in a conference call with analysts. Shaw signed an agreement in July with US nuclear power plant operator Exelon and reactor vendors Westinghouse and its majority owner, Toshiba, to jointly seek nuclear plant business in Saudi Arabia. Shaw and its partners would bid to build nuclear power plants in Saudi Arabia under engineering, procurement and construction contracts, he said.

I guess they can make their own water.

Department Of Labor Comes Begging: Asks For Extension Of Emergency Unemployment Compensation Program

Not even two full days have passed since the announcement of what will become the single biggest monetary stimulus/experiment in the history of the world (since anything that never ends is by definition "biggest"), and here come the fiscal aid panhandlers...

"With millions of Americans still looking for work, now is not the time to cut key safety net programs like Unemployment Insurance. The Emergency Unemployment Compensation program is set to expire at the end of November. If that happens, 2 million people will lose benefits in December and 6 million by the end of next year.

Read the discussion in that thread - it is quickly becoming a pig-eat-pig world out there!

There are some really great rants and name calling in the comment section there.

Here in Reno, NV if two working adults are laid off at the same time, they can proceed on unemployment at about $800/wk or 40K per year now for a couple years (99 weeks). One working adult with spouse and three kids won't make it two weeks without welfare which takes a couple months to qualify. Since unemployment here is the nation's high, it can take quite a while to get a job, none of which pay as much as two years ago.

A sad fact of life is that a small business owner losing money week after week, is broke and no credit; then goes out of business for lack of customers, s/he is not eligible for unemployment and immediately goes on welfare which still takes a couple months to qualify.

Good point Lynford, about the small business person being thrown to the wolves if their business goes under. The government wants to encourage small business, but the risk of failure is high and there is no "safety net."

Also, the cost of living in places like Reno should help drive out the poor - but where can they go? How many are "trapped" in place and become the local homeless?

As for the rants in that thread - I am amazed at the amount of arrogance in that audience. Many seem to think they are special - that they could not become long-term unemployed. I know several people who once thought that and now have learned the hard way how far they and their family could fall.

It's the same here in Belgium.If you are "zelfstanding" i.e small business owner and fail then no help for you but if you are an asylum seeker with kids to go, you get everything including free housing,food and medicare.If you are an "arbieder" or worker you can go on years of unemployment cheques without again working.Then the govt wonders why there are no new startup's.


Correct me if I'm wrong, but I though that self-employed people could buy into the same unemployment insurance that corporations do, it is just that it's voluntary, and most choose not to (don't want to pay the premiums).

Freelancers and unemployment insurance

Answer: One of the drawbacks of being self-employed is that you're usually ineligible for unemployment insurance once work dries up. The most common reason why artists operating as a freelance sole proprietor are excluded is that they file their income on a Schedule FC tax form. Yes, you get to take tax deductions as an operating business, but in most cases you can't claim unemployment insurance.

I want to emphasize the phrase, "in most cases." The rules surrounding unemployment insurance are complicated. So, if you ever do find yourself in need of filing, check with a professional. You can get good information at online resources geared toward artists in most major metropolitan areas.

23 Disadvantagees of Self Employment

17. When you aren’t employed by someone else, you are often ineligible for unemployment insurance when the work slows down (though under certain conditions you can get Disaster Unemployment Insurance from the Department of Labor).

Here in NV one can buy into unemployment insurance but it is quite specific and costly and as the small business owner lays off employees and money get tighter and tighter, it is more difficult to make those unemployment payments. So they get dropped. Another thing is often the small business is great and next week it isn't viable at all.

In my case even though I had to pay into the unemployment compensation program, I am retired AF and my retirement was enough to preclude ever getting anything out of the system. No complaints because so many need more.

Depressing, isn't it.

America's prosperity is based upon cheap oil and dollar leverage. Take those away and you are left with Argentina/Brazil, or worse.

Life goes on, I guess. Nature and/or God never made a promise for good times ad infinitum.

Nature and/or God never made a promise for good times ad infinitum.

But, the countries founding mythology thinks otherwise.


Probably big pig eats, ex-pig down on his luck. Better chomp down on his ribs, before starvation makes him any skinnier!

The Chinese government plans to invest 3.5 trillion yuan (US$525.9 billion) in railway construction during the 12th Five-Year Plan program (2011-2015), the "Economic Observer" reports.

An unnamed official with the Ministry of Railways told the newspaper that the government would invest an average of 700 billion yuan annually in the coming five years for a total increase of 1.3 trillion yuan compared with the amount it has invested during the current five-year plan period.

According to the ministry's plan, future railway construction will focus on the refurbishment of old railways and the building of high-speed rail lines.

In 2015, the length of railways in China will total more than 120,000 kilometers and include 30,000 kilometers of new track.


Wow... They are going to have a heck of a rail system in place in another 5 years.

One with hot mom: If half of the money is spent on new rail, it works out to over $8 million per Km. Of course that counts rolling stock too, I would presume.

I sometimes post comments on Paul Krugman's blog, suggesting that if every country tried to get back to growth, as he recommends, then that would require more oil than can currently be pumped. He does finally have a comment on commodities: http://krugman.blogs.nytimes.com/2010/11/06/are-rising-commodity-prices-an-inflationary-signal/, but it is responding to other concerns. Peak Oil is an issue for the Left, because the way it is playing out, and will continue to play out, is that the poor are being hammered. We need to get everyone back to work, considerably increase infrastructure investment (nuclear power and electrified transport), but not increase total spending. Not easy.

From the article:

What I see here is a secular upward trend, presumably driven by rising demand from emerging economies in the face of limited resources, culminating in a big price rise in 2007-2008; we can argue about how much or little role speculation played in that final rise. Prices then slumped in the face of global recession, and have since recovered after the recession’s end.

Where, in all this, is evidence of huge inflationary pressures? The basic story seems, again, to be one of a secular upward trend reflecting real factors, with more or less the kinds of fluctuations around that trend that you’d expect given the business cycle.

It’s also worth pointing out that the commodities price spike of 2007-2008 was seen by some as a harbinger of major inflation; they were wrong.

There’s really nothing here to shake my view that deflation, not inflation, is the threat.

Another of the group of new-Keynesians, as the group is sometimes broadly described, James Galbraith emphasizes again and again the need to address an emerging energy supply problem. What you won't see from these economists is handwringing about national economies failing because 'the resources won't be there to permit debt repayment' or some other such nonsense expounded by people still in the grip of the idea that a national economy resembles a household economy.

What you won't see from these economists is handwringing about national economies failing because 'the resources won't be there to permit debt repayment' or some other such nonsense expounded by people still in the grip of the idea that a national economy resembles a household economy.

Well, OK, people age and die, so households are eventually wound up with debts being paid or cancelled, whereas government goes on forever and rolls over debt forever. But on the other hand, the bothersome part under current circumstances with, say, Paul Krugman and others, is the whole free-lunch thing (I don't quite see how one could ever spend the quasi-infinite amount of money required to please Krugman, without risking Weimar levels of inflation - and no sane person should want to go there, it didn't work out well the first time.)

If it starts to become clear that the government has so overreached that it really can't pay the interest or keep rolling the debt over, or that it's going to default either directly or via confiscation through inflation, then, well, no more lending, or more accurately, not nearly as much, and at ruinous interest rates. And as I've said before, we can't force businesses to "eat it" with price controls to the same extent we did last time around in the 1970s, simply because so much is imported and is thus out of our jurisdiction. We're now seeing this - the moment Helicopter Ben made his announcement, we got a spike-ette in oil and gasoline prices (up about 15 cents around here since not too long ago.) Sure, President Obama could slap on price controls, but that would make the 5% or so 1970s shortages look like kindergarten stuff and maybe send things back into a tailspin.

I think I sort of understand the Keynesian argument somewhat, and yet I keep wondering to what extent we can really 'print' our way back into the old-time prosperity. It seems like "debauch the currency and try to make up for it with price controls" hasn't worked out too well in a number of places around the world. Argentina a while ago; Pakistan and some African countries today. Plus, if we want to go that route, it looks we've got China and the EU ready, set, and primed to engage in competitive currency-debauching; it's hard to see how that takes us anywhere any sane person would want to go.

Max - "Peak Oil is an issue for the Left". I do understand your point...just seems odd to see the written words. The oil patch could hardly be thought of as leaning to the left. So I’ll offer details once again on what the oil patch believes re: PO. In 35 years I’ve never met anyone in the oil patch who didn’t understand and appreciate PO. In fact, My first mentor sat me down when I was a newbie and explained in great detail the “reserve replacement problem”….what everyone else calls PO. And I’m not just talking about the “Boots On The Ground“ if you meant just the rank and file. Management, including presidents and CEO’s, understand PO even better than the staff level. After all, they are the one’s tasked with growing the reserve base. My current company exists solely because of the belief in PO my owner holds. He's willing to bet $300 millison on this expectation. I think folks often confuse the spin coming from the PR machine of public corporations with the reality most oil patch hands understand. “Drill, baby, drill” is considered an absurd joke at the grunt level. In fact, I doubt many in the PR departments buy it either. After all, we’re the ones who end up banging their heads against the wall daily trying to find one more hole worth poking in the ground.

I pop in and out of TOD often. This is my only venue for discussing PO. I don’t chat about it with my cohorts for a simple reason: it very, very old news. Additionally we don’t chat much about the public view of PO: they don’t get it and probably never will even after it slams them right between the eyes. We just naturally assume they’ll blame supply problems on us “greedy bastards” in the oil patch.

And once again I note that this information never shows up in petroleun engineering textbooks.

Rockman, you are pretty rational about this issue, but the other oil dudes here like reservegrowthrulz, Alaska_geo, and a few others have conniption fits when I bring this fact up.

So the PO idea is taught to industry newbies but not college seniors. That tells you a lot of where the mindset is at.

It's like budding EE's were taught everything about electrons in school, but only when they get their first jobs were they explained about electron shortages. It is really hard for me to rationalize in that context.

You mean "holes"? (Solid-State Physics)
And ROCKMAN speaks of "holes worth poking".
(((I think Richard Feynman is much more qualified to make this joke than I am.)))

(roll eyes)
I was about ready to put in a disclaimer about holes because I knew that there would be a joker out there, but if you are worth your salt in device electronics you know that holes only exist in semiconductors and on top of that are simply an abstraction to represent the mass-action law in electron motion. Holes only "move" in the sense that electrons move to fill unoccupied states. Try again because your snark is very weak.

Web - Newbies aren't so much taught about PO but face it everyday. It's somewhat similar to writter's block: you know what you're suppose to write the great American novel (or find new oil field). But 6 months later you're still looking at a blank sheet (or map). And then you see the two guys hired after you are laid off and it's pretty easy to appreciate the difficulty of finding more reserves.

And today the pressure is even greater. Not only is it difficult to come up with a prospect of any significant size you also have a problem with low capex budgets. That may seem odd given the high price of oil but many US companies are heavy on NG reserves. Consider Chesapeake: they just traded away 1/3 of 600,000 acres of one of the hottest oil plays (the Eagleford Shale) to the Chinese because CHK is capex starved. So even though they found the oil they can't develop it by themselves. The victems of the SG bust are everywhere. Consider that Devon sold off 100% of their interest in one of the biggest oil plays (DW Brazil) discovered in the last 20 years.

I'm sympathetic with the other oil patch hands here who might be a little defensive given how we all know were the "lying greedy bastards" in the eye of the public. Also don't underestimate the mind set needed to wake up everyday and try to do the impossible especially when your paycheck is dependent on doing so. Also geologists are like every other profession: some understand the reality and some don't. As I've said before I truly appreciate the efforts of exploration geologists...without their efforts there wouldn't be much work for development geologists/reservoir engineers like me. OTOH I've spent much of my 35 years making downward adjustments of initial reserve estimates. And that included a lot of reserve killing during my long acquisition phase. Many times I've driven the other company's hands to near rage by showing the errors in their reserve estimates. Recall that my first project when I started at MobilOil in 1975 led to the first 5 "development" wells drilled from a GOM platform being dry holes. The scar from that effort is buried deep but it never goes away.

"And once again I note that this information never shows up in petroleun engineering textbooks. Rockman, you are pretty rational about this issue, but the other oil dudes here like reservegrowthrulz, Alaska_geo, and a few others have conniption fits when I bring this fact up. So the PO idea is taught to industry newbies but not college seniors. That tells you a lot of where the mindset is at."

Web, I don't believe I've had "conniption fits", whatever those are. However, you don't seem to get the point of my posts. I'm well aware of PO, and have been for a long time. I don't deny that reality. However, YOU seem to be hung up on the idea that because PO doesn't show up in textbooks, therefore the whole field of petroleum engineering and petroleum geology is bogus.

My point is that the concept of world wide PO doesn't really have much effect on what I do in my job, day to day. Should I be thinking "Gee...the PO models say production probably peaked in 2005, so there is really no point in completing this next well..."???

Unlike world renowned pundits like you, I don't really have much influence on national policy. I only get to influence my little corner of the oil patch. I just try to do the best job I can in exploration (which I've done a lot of in the past) or development (my current role). Your approach is useful for understanding what happens on a world wide scale. But it really doesn't have much to do with the kinds of descisions and choices that engineers and geos make every day. We just try to stretch the plateau out as long as possible, while you figure out how to save the world.

However, YOU seem to be hung up on the idea that because PO doesn't show up in textbooks, therefore the whole field of petroleum engineering and petroleum geology is bogus.

No, I am only trying to get verification that it doesn't show up in textbooks. Since you haven't been able to challenge this fact, I assume you think it is true as well. I haven't been able to find anything myself.

"No, I am only trying to get verification that it doesn't show up in textbooks."

To be perfectly honest, I could give a big fat flying (insert your expletive of choice) whether or not it shows up in textbooks. While it may bother you that it doesn't show up, that isn't really a problem for me.

To be perfectly honest, I could give a big fat flying [flapadooodle] whether or not it shows up in textbooks. While it may bother you that it doesn't show up, that isn't really a problem for me.

I filled it in for you and you added to my knowledgebase. Thanks for your input.

Web - it just occurred to me that many may think geologists learn much about the oil biz in school. In reality very little direct info is presented about hydrocarbon exploration or production. I got my BS at the state university in New Orleans, a major oil/NG base and my MS at Texas A&M in the heartland of the oil patch. And very little was offered in the world of petroleum development. My background is very unique in that I did my thesis on a petroleum project. Therewas a seperate geophysics dept. at A&M but they taught absolutely nothing about the oil patch: all earth physics and "rock squeezing" .Imagine the lack of exposure some western and Yankee geostudents have to the oil patch. That's why we go to work for major oil companies: we're not fit to work anywhere in the oil patch when we get out of school. At a major you get training but that varies greatly with the company. On the job training dominates. Thus you're taught by the older hands who may well be stuck in old mindsets.

Petroleum engineers obvious get more book learning. But from what I've seen it's very general and I suspect most of an experienced engineer's knowledge base also cam from OTJ training.

I have some geology books from the 70's, one by Peter Flawn who did a very good job of describing oil depletion. http://en.wikipedia.org/wiki/Peter_T._Flawn

The Pet Eng ones are the bafflers. Nothing on PO.

I don’t chat about it [PO] with my cohorts for a simple reason: ...

Ditto here.

I don’t chat about it [PO] with my cohorts for a simple reason:
In the land of the blind, the one-eyed man is the kook.

But then again, if you don't chat about and I don't chat about it, how does the necessary "discourse" (to use aangel's terminology) ever enter the main stream?

China, France join forces for world monetary reform

AFP - France's President Nicolas Sarkozy was celebrating a diplomatic victory on Saturday after winning Chinese support for his upcoming G20 presidency and plans for global financial reform.

Here's a good article on QE2:


Why do we need another round?

Something needs to be done given the stubbornly high unemployment rate (currently at 9.6%), and lethargic, slower-than-expected growth (forecast to continue into 2011). So, while the first round (some $1.7 trillion) in 2008 was meant to help clean some bad assets off the banks' books, reassure spooked markets, and ultimately prevent a global depression, this time, ($600 billion) it's about shaking the economy out of its slumber and getting companies and consumers to spend again.

Something occurred to me regarding the concern for deflation as it has been occurring in Japan, and in the US recently to a lesser degree. Is high unemployment, deflation, along with asset value loss directly associated with higher priced oil? If so, then will QE2 work in the long run? If we haven't even gotten to a post peak plateau descent and all these problems are persisting, then won't the descent into much higher priced oil make any QE2 efforts being made now seem meaningless and irrational later?

Yes, probably.

But our entire financial edifice is meaningless and irrational. It's not just QE.

Not a single major currency around the world, not one, has a fixed value in relation to the physical universe. The last to go was the Swiss Franc in 2000.

Some countries around the world get around this by fixing their currency, or devaluing relative to, the "gold standard" which is the U.S. dollar reserve currency. What a joke that is turning out to be.

I had a much harder time understanding this than peak oil, which is elementary school level in comparison.

Not a single major currency around the world, not one, has a fixed value in relation to the physical universe.

What's fascinating about that is how people over the many years currencies have been used, have gradually been psychologicially adjusted from insisting a currency has a base value, like gold or even silver, to being ok with it not being tied to anything.

I saw a movie depicting a part of old english history in which the coins in circulation were considered worthless because they were not made of silver or gold, but instead made of tin. These days our currency is made of cheap ores worth much less than a quarter or a dime but people accept them as being of that value. A 50 dollar bill is just a piece of paper with nothing to back it up, but vendors take them because the banks will take them.

It makes no sense, but it does if you can get everyone to agree a dollar is a dollar no matter what. In a sense, it's a form of mass hypnosis brought on by multiple generations being desenitised to the idea of money needing a basis of value. You start with gold, then downgrade to silver, then you look around and say,
"Well, shall we try it?"
"Wow, people still think this stuff is worth something?!"
"Shh, not so loud!!"

to being ok with it not being tied to anything.

About 25 to 50% of economic activity in most countries is government activity.

Part of the answer is that money is the thing that governments let you pay your taxes with. "Legal tender for all debts public and private".

a much harder time understanding this

Contrary to popular belief, the world is a complicated place.

(1) What is money; where did it come from and where is it going?

(2) What is oil; where did it come from and will it be with us forever?

(3) What is rational thinking; and will homo sapiens ever acquire that functionality?

Earl - far from my area but I figure it has to have some significant impact. Oil consumption in the US cost $270 billion/year more at $80/bbl than $40/bbl. That’s more than a quarter trillion less going into salaries, corporate profits, the taxing base, etc. That’s has had to pull the economy down a good bit IMHO. Then add the loss of equity from the housing bust, the loss in income from unemployment, loss of revenue for businesses from the recession, etc.

How much can $600 billion help the economy? As I understand it the money flow it will take a couple of years for that full amount to make it into the economy. So it might offset the increased oil costs over the same time period (as long as oil prices don’t rise). So while it will add some liquidity it doesn’t seem like it while offset all the negatives factors to a great degree. Bound to help some but way beyond me to try to quantify the bump.

Oil consumption in the US costs $270 billion/year more at $80/bbl than $40/bbl.

I had no idea what the financial impact of higher priced oil was, so that is an interesting bit of information. If 80/bbl cost 270b more than 40/bbl, then each dollar of oil price costs 6.75 billion per year.

If the current price of approx. 87 remained for one year, the cost would be 587.5 billion.

Thus, at 147 a barrel it would cost 992.5b or almost a trillion a year for oil for the US. But as we know 147 was only reached briefly. If we did reach 300/bbl it would cost over 2 trillion. That helps quantify higher priced oil (energy) and its impacts on the economy.

So it might offset the increased oil costs over the same time period (as long as oil prices don’t rise).

Now that might be a greater reason for QE2 than any other, and more evidence of the impact higher priced oil is having.

Earl - And I used 18 million bopd for current US consumption. But prior to the recession our consumption maxed around 21 million bopd. So there's one of those nasty feedback loops: if somehow the stimulus increases economic activity up that extra 3 million bopd, then at $80/bbl we spend an additional $120 million PER DAY. Or $3.6 bilion PER MONTH. Or over $40 billion PER YEAR. Now for another grounding effort: multiple 21 million bopd by $80/bbl and then by 365 days. And remember the majority of that money is sent overseas to the oil exporters. That's quit a bump in the road for our economy to deal with. The govt can keep inventing money out of thin air but it seems those chickens will come home to roost pretty quick IMHO. If they say there won't be bad consequencies then why not stop collecting taxes from everyone and just crank up those imaginary digits in the fed account to make up the difference.

The govt can keep inventing money out of thin air but it seems those chickens will come home to roost pretty quick IMHO.

Astonishing numbers indeed. 21 mbd would increase US and for that matter World oil demand 3 mbd higher - sounds like a recipe for disaster, including widdling away at spare capacity (provided it really is there) towards a supply crunch. However, it should be interesting watching all the desperate accounting techiques being employed. Guess we are going to find out just how far can that currency ink be spread?

Halifax averages 122 days of fog each year -- that's one in three -- so unless you like your sunshine in liquid form, best look elsewhere. However, now comes word that Halifax could become Canada's "Solar City"!

Can Halifax be Canada's 'Solar City'?"
Plan would have city pay upfront costs of solar water heating systems

Halifax can become “Canada’s solar city,” says Richard MacLellan, the city’s manager of sustainability. MacLellan has brought forward a bold plan: the city will not only pay all the upfront costs for homeowners to install solar water systems, but will also figure out all the bureaucratic hassles, arrange government rebates and negotiate with the contractors who install the systems.

MacLellan thinks the city could help install between 500 and 700 systems a year, and that it wouldn’t cost the city a penny, and won’t cost homeowners any upfront money. In fact, the city might make money on the program.

See: http://www.thecoast.ca/RealityBites/archives/2010/11/05/can-halifax-be-c...