Drumbeat: November 15, 2010

Petrobras aspires to be world's biggest oil producer

Petrobras aims to be the world's largest oil producer as soon as 2015, according to the Brazilian energy group's chief financial officer.

A series of huge recent "pre-salt" finds off the coast of Brazil have transformed the fortunes of the company and catapulted Brazil into one of the world's leading energy and economic powerhouses.

In one of his first interviews with a British newspaper, Almir Guilherme Barbassa told the Guardian that Petrobras would be one of the biggest beneficiaries of new legislation that will grant the company a minimum 30% stake in each new discovery and will also be the lead operator in all new projects.

It means that "Big Oil" – companies such as BP, Shell and ExxonMobil – will have to play second fiddle to Petrobras for access to Brazil's vast reserves.

US Government Could Cancel Gulf Of Mexico Lease Sale, Oil Groups Say

WASHINGTON -(Dow Jones)- The U.S. Interior Department appears likely to cancel a March 2011 lease-sale in which energy companies would have bid for the right to explore for oil and natural gas in the Gulf of Mexico, according to lobbying groups that represent the oil and gas industry.

Industry groups believe the Interior Department might have to cancel "Sale 216" in the central Gulf of Mexico because it recently started to conduct an environmental review of the sale and this kind of review could take about six months to be completed.

Independence natgas hub in US Gulf shut for work

(Reuters) - Enterprise Products Partners said on Monday that its Independence natural gas platform in the Gulf of Mexico was shut over the weekend for scheduled maintenance.

"There's some scheduled maintenance going on at the hub. Work began over the weekend, and it's projected to last about five days," company spokesman Rick Rainey said.

Kjell Aleklett: World Energy Outlook 2010 – a cry for help

The International Energy Agency, IEA, was formed by the OECD nations to monitor the global energy market. Every year it publishes data and analysis on energy in its World Energy Outlook (WEO) report. In "The Oil Market Outlook" section of this year's report (WEO 2010) is a new subheading "A peak at the future?". This shows that the IEA is thinking about "Peak Oil".

20 Questions for 2011

6. Will oil continue to move higher in the face of possible peak oil?

International Energy Agency: Peak Oil Has Already Passed

The imminent arrival of peak oil, or the point in time when the maximum rate of worldwide petroleum extraction has been reached and enters into a continuous decline, has long been regarded as a fringe theory. As oil prices have crept up in recent years, the concept has gradually entered the mainstream--and now the International Energy Agency, an intergovernmental organization that offers energy analysis to 28 countries, has announced that peak oil passed us by in 2006. There is nowhere for our oil supply to go but down. So what do we do?

More economists thinking about Peak Oil

I'm sure I haven’t yet come to grips with the views expressed by commenters on my last post about economics and peak oil, but here is another paper on economics, Hubbert’s Peak, and peak oil. In short the authors model resource extraction scenarios in the manner that economists sometimes do, and conclude that the timing of the peak production will be determined by “above the ground” factors such as cost of production, oil prices and political constraints on access to resources rather than “below the ground” geological factors.

Motorists won't be giving thanks for gas prices

With Thanksgiving just around the corner, the price of gasoline is marching toward the high of the year.

The national average for a gallon of unleaded regular gasoline on Monday was just 3 cents shy $2.92 a gallon, the high back in May. Analysts expect more upward price creep before the long holiday weekend starts next Wednesday.

Model to accurately predict latent hydrocarbons

Scientists from Royal Holloway, University of London and The Spanish Research Council have revealed a new model that explains what happens as the continents thin as well as helping to more accurately predict the location of hydrocarbons such as oil and gas.

The scientists offer a new way to prospect and discover oil and gas.

Pickens's Fund Acquires Shares in `Good Buy' BP, Sells Transocean Holding

Billionaire oil investor T. Boone Pickens bought shares of BP Plc, the owner of the well that caused the biggest offshore U.S. crude spill in history, and sold his holdings in Transocean Ltd., which owned the drilling rig that exploded, according to a regulatory filing.

More gas drilling chemicals in Pa. disclosed

HARRISBURG, Pa. — Petroleum services giant Halliburton Co. said Monday it has begun publicly disclosing the identity of chemicals in solutions it makes to be pumped into the ground by Pennsylvania's booming natural gas industry.

A new Halliburton website provides information on the chemicals the company says are in its three most commonly used solutions in the state, where drilling crews are rushing to exploit the Marcellus Shale, the biggest known deposit of natural gas in the nation.

Eight Crew Members Kidnapped From Exxon Nigeria Facility-Source

LAGOS, Nigeria -(Dow Jones)- Eight crew members were kidnapped from an Exxon Mobil Corp. (XOM) facility in Nigeria late Sunday, a person close to the situation said on Monday evening.

The kidnapped crew were all Nigerian, the person told Dow Jones Newswires. It wasn't immediately clear if other crew members were at the facility at the time of the attack.

Chinese mine in Afghanistan threatens ancient find

The mine is the centerpiece of China's drive to invest in Afghanistan, a country trying to get its economy off the ground while still mired in war. Beijing's $3.5 billion stake in the mine — the largest foreign investment in Afghanistan by far — gets its foot in the door for future deals to exploit Afghanistan's largely untapped mineral wealth, including iron, gold, and cobalt. The Afghan government stands to reap a potential $1.2 billion a year in revenues from the mine, as well as the creation of much-needed jobs.

Electric car wave offers opening to startups

General Electric’s announcement that it will switch to battery power for half its huge sales and service fleet comes as good news for proponents of electric propulsion.

America Recycles Day urges greater U.S. action

Today is the 12th annual America Recycles Day, aimed at encouraging people to dump less trash in landfills.

EPA sets water pollution limits for Florida

TALLAHASSEE, Fla. – The Environmental Protection Agency has set legal limits for farm and urban runoff polluting waterways in Florida, the first time the federal agency has set standards for a state.

The EPA set the limits Monday after it settled a lawsuit with environmental groups last year. The numeric limits on runoff are designed to reduce pollution from sewage treatment plants and runoff choking lakes, rivers and other Florida waters with algae blooms.

The End of Cheap Oil: 'Peak oil' hit in 2006. The 'post-peak' world clearly does not imply the End of the World. But it does imply an extremely volatile one, whose dynamics will be difficult to predict

The implications of the International Energy Agency’s (IEA) new report, World Energy Outlook 2010, are stark. Its 25-year “New Policies Scenario” projects that it is most probable that conventional crude oil production “never regains its all-time peak of 70 million barrels per day reached in 2006.” In this scenario, crude oil production is most likely to stay on a plateau of around 68-69 million barrels per day.

So there you have it. We are now, in all likelihood, living in a “post-peak” world.

It's official: peak oil is inevitable

The IEA states in no uncertain time that Peak Oil is inevitable, but the timing of the peak will be determined by a combination of government policy and the strength of demand in addition to the more commonly discussed issue of resource constraints. It sees crude oil output hitting an "undulating plateau of around 68-69mbpd by 2020", while total oil production including unconventional oil and natural gas liquids is expected to peak at around 96mbpd after 2035, under the "new policies scenario".

The IEA appears to shy away from the wider implications of this shift, such as the potential for the much higher costs associated with unconventional oil production to reduce the amount of net energy represented by oil output, which could actually fall despite an apparent increase in volumes and act as a brake on the world economy. It cautions that "if governments do nothing or little more than at present, then demand will continue to increase, supply costs will rise, the economic burden of oil use will grow, vulnerability to supply disruptions will increase and the global environment will suffer serious damage".

Saudis Support Stable Oil Price

While many energy analysts are predicting a sharp increase in oil prices in the coming months as a worldwide economic recovery takes hold and demand from China and India increases, Saudi Arabia says it will work to mitigate that rise. Saudi Prince Turki Al Faisal Al Saud says his country has the capacity to play that role for some decades to come.

In his speech to energy industry representatives and academics at the Baker Institute for Public Policy at Rice University, Prince Turki Al Faisal Al Saud emphasized his nation's commitment to a stable oil market. He said the Kingdom of Saudi Arabia's ample oil reserves of over 264 billion proven barrels give it the power to offset sharp increases in demand.

"As the demand for oil continues to rise, especially in China and India, the kingdom has every intention of meeting that demand," said the prince.

Crude Oil Rises for First Time in Three Days After Japan's Economy Expands

Oil rebounded from its biggest decline in more than three weeks amid speculation that economic indicators from Japan and the U.S. will signal increasing demand for fuel.

Crude rose as much as 0.8 percent, following a 3.3 percent drop on Nov. 12, after a report showed gross domestic product in Japan grew more than forecast in the third quarter as consumer spending increased. U.S. data to be published today will probably show October retail sales rose for a fourth month, according to a Bloomberg survey of analysts.

Naphtha's Two-Year High Triples Europe-to-Asia Shipments

The highest Asian naphtha prices in two years are poised to spur an almost threefold increase in shipments from Europe as demand for petrochemicals in China soars and the country suffers fuel shortages.

Gazprom trims 2010 flow outlook

Russia's Gazprom, supplier of a quarter of Europe's gas, trimmed its outlook for 2010 gas production by nearly 1% today as weak economies cut demand for the fuel.

Behind Diesel Supply Shortage in China

Diesel supply shortage has recently emerged in China, and is quickly aggravating and spreading throughout the country. Behind the shortage lie in a string of evolving elements in diesel demand and supply, and essentially the inherent irrationality of the institution, industrial structure and pricing mechanism in the country.

STX OSV to Double Brazil Shipyard Capacity on Petrobras Oil-Drilling Plans

STX OSV Holdings Ltd., the biggest maker of oil-rig support vessels, plans to double capacity in Brazil as Petroleo Brasileiro SA works through the world’s largest oil-exploration investment plan.

Report: Few inspectors to check pipelines

SAN FRANCISCO — Increased scrutiny of how natural gas pipelines are being inspected in California has revealed that the state has only a small group of inspectors to check 110,000 miles of gas pipelines, mobile home park systems and propane distributors across the state.

Indian Oil Bets Profit Gain May Help Lure Investors to Record Share Sale

The government, which holds 79 percent of Indian Oil, plans to sell a 10 percent stake as part of an asset-sale program aimed at cutting the budget deficit. The refiner will also offer shares equivalent to a similar stake to reduce debt as it builds a new refinery and looks for possible ventures overseas.

Oil giant to leave Iran after end of contracts

Schlumberger, the world's biggest oil services company, has promised the US government it will pull out of Iran when its existing work contracts expire.

That will not be until at least 2013, but is still viewed by US officials as a significant win in the campaign to pressure Tehran over its nuclear programme.

E.ON Focus on Grids in $20 Billion Sale to Lure Funds

E.ON AG is likely to focus on selling power grids as it divests 15 billion euros ($20 billion) of assets, luring pension funds hunting for the steady, inflation-protected returns electricity lines offer.

Special Report: Was a Houston energy trader a one-woman Enron?

HOUSTON (Reuters) – By the standards of recent financial scandals, Stephanie Rae Roqumore's alleged $6.8 million natural gas trading scam may be small potatoes, but it raises some big questions.

How could a lone natural gas trader in Houston dupe some of the world's biggest energy companies for eight years, despite a veritable forest of red flags? After all, the overhaul of trading rules and credit practices in the wake of Enron's collapse was supposed to make it tougher, if not impossible, to perpetuate such a fraud.


FACTBOX - U.S. natural gas, power trading crisis timeline

Gunmen attack Nigerian Exxon Mobil facility

LAGOS (AFP) – Gunmen attacked an offshore facility operated by US oil giant Exxon Mobil off the coast of southern Nigeria at the weekend, the company said Monday.

The Nigerian subsidiary of Exxon Mobil said one of its offshore facilities "was boarded by unknown armed persons in the evening of Sunday," but gave no further details.

Why Venezuela's government is taking over apartments

Banking, agriculture, tourism, energy, construction and steel production have all been affected by the government's decision to intervene in private ownership over the past year. Banco Santander received $1bn (£620m) compensation. Others are still waiting.

But whereas in the heady days of widespread nationalisation in Venezuela, between 2005 and 2007, Mr Chavez was focusing on what he called "strategic sectors" of the economy, such as telecommunications and oil production, now the targets are more diverse.

After BP oil spill, thousands of ideas poured in for cleanup

HOUSTON — As oil spewed from the BP well in the Gulf of Mexico last summer, so did ideas on how to stop it and clean it up.

BP received about 123,000 ideas, 80,000 of which had to do with plugging the leak and 43,000 on ways to clean up the oil. The ideas came in crayon from 9-year-old boys, in shaky handwriting from 90-year-old men and from scientists, inventors and engineers — even actor Kevin Costner.

Electric vehicles not as easy as A123

The hot battery maker has a balance sheet problem -- lots of inventory of expensive EV batteries. It looks like the adoption curve for electric vehicles is flatter than anyone thought.

GM to unveil new Buick hybrid

NEW YORK (CNNMoney) -- General Motors will unveil a hybrid version of its popular Buick LaCrosse sedan this week at the Los Angeles Auto Show. But don't expect GM to call it a hybrid.

The new car, which uses a 4-cylinder engine and a lithium-ion battery pack, is expected to get 37 miles-per-gallon on the highway and 25 mpg in the city. Compared to the current 4-cylinder LaCrosse, the hybrid will provide roughly 25% to 30% better fuel economy.

Jordan: Committee recommends slashing green vehicle tax

AMMAN - A public-private sector committee on Sunday recommended reducing the special tax on hybrid cars from 55 per cent to 35 per cent.

Mexico's $80M boom industry: Bulletproof cars

A growing number of Mexicans — including many from the middle class — see bulletproofing their vehicles as a necessity and not a luxury.

Nader says the typical customer these days "is a regular guy that works, maybe he has a small business and he's been approached by criminals to steal his car."

"You'll see Hondas, small SUVs ... pickups," Nader said of some of the vehicles arriving at his business.

Pakistan: Black gold

Reports of huge reserves of coal buried under the sands of the Thar desert in Sindh have surfaced from time to time. Now something is finally being done to draw benefit from this resource, taking a big step towards meeting an energy shortfall that threatens to cripple us.

We didn’t ask Pakistan to hike power tariff: IMF

ISLAMABAD: The International Monetary Fund (IMF) has said that it has not asked Pakistan to increase electricity tariff as this is something the country has to decide itself. “The IMF has only asked Pakistan to solve the issues related to the energy crisis in consultation with the World Bank and the IMF,” it said.

Amid Montgomery's affluence, plight of suburban poor worsens in downturn

People have lost jobs and face more difficulty finding transportation in and out of the neighborhood, which is so remote that it has no bus service. At the same time, Montgomery County has cut funds for a taxi voucher program and an after-school program for kids.

Senior boom begins amid economic bust

Raised in affluent times and imbued with high expectations, the first Boomers now face the ironic prospect of longer yet crimped lives. Their homes and savings are worth less than a few years ago, and health care and energy cost more.

The Economy Is Not Coming Back

Peak oil deniers and advocates of abiogenic oil need to ponder why oil companies take so many risks to hunt for oil deep in the seas for poor and marginal results in oil supplies, all the while causing recurring ecological disasters, or engage in such environmentally-destructive projects as the Canadian oil sands -- one of the worst ecological projects in the entire world that is bound to destroy the boreal forest in an area the size of Florida, devour hundreds of million cubic meters of fresh water and 600 million cubic feet of natural gas every day, and dramatically increase the emissions of carbon dioxide while yielding a relatively low energy return on investment (EROI), or energy returned on energy invested (EROEI) -- that is, the amount of energy needed to produce energy. In other words, the world is using more and more energy to produce less and less of it at an ever faster-growing financial and environmental cost.

The Great Discount

There are great advantages to production at scale, most notably in discounts to consumers. This is what keeps the economy moving. The advantages taper off, however, with limits like peak oil, climate change, water shortages, deforestation, species extinctions, etc. Eventually, there is an end to the discounts furnished by nature. We seem to have reached the point where many of the hidden costs to the biosphere are coming due at once.

Andrew McIntyre reviews “The Rational Optimist”

This book should be considered a perfect foil for the pessimism of the Left, and an ideal primer for the economically illiterate. It would be an inspiring Christmas present for anyone floundering with notions of economic progress, who doubts man’s ability to respond to environmental problems, or for those worried by peak oil or climate change.

Energy: With “Peak-Oil” Passed, It Is Time For A Post-Carbon Age

Since the peak of 2006, we have entered, without much knowledge of it, a post-peak world. Unconventional sources of oil and gas- such as tar sands, oil shale and natural gas liquids- are far more expensive to extract from the ground and to process into usable petroleum products, and are also environmentally problematic. This means that over the next decade, oil prices will be more expensive, driven mainly by the rapid industrial growth in China and India. For the two new Asian industrial giants, the demand is projected to grow, according to the IEA, by 36 percent by 2035. At this point the price of oil will be over $200 a barrel. By around 2015, the IAE projects that we could have oil price above $100 a barrel.

Lead in reusable grocery bags prompts call for federal inquiry

Lead found in some reusable grocery bags is raising concerns that the toxin could pose environmental or health concerns to consumers.

Why environmentalism is a conservative concern

As the grandfather of modern conservative political thinking, Edmund Burke, put it: we are "temporary possessors or life renters" of this world and have a moral obligation not to squander our natural inheritance, lest we "leave to those who come after … a ruin instead of a habitation." Respect for the past and responsibility to future generations creates a duty to conserve our resources and protect the environment.

Lawyers, lobbyists, politicians scramble to determine impact of Prop. 26

Approved by voters 53% to 47% on Nov. 2, it is aimed at multibillion-dollar statewide issues such as a per-barrel severance fee on oil and a cap-and-trade system for greenhouse gases. It's also aimed at local ordinances that add fees on cigarettes to pay for trash pickup and on alcohol to fund education and law enforcement programs.

Turkey courts Japan after failure of nuclear talks with South Korea

Istanbul - Turkey is seeking a new partner in the construction of a nuclear power plant on the Black Sea coast after talks with South Korea broke down, Turkey's Energy Minister Taner Yildiz said Monday.

Turkey was now looking to start talks with Japan after balking at the conditions set out by South Korea for the construction of the plant, Anadolu news agency quoted Yildiz as saying.

Deal struck on $375 million wind power plant

ISLAMABAD: An energy-deficient Pakistan has entered into an agreement on $375 million wind power generation project to produce 150 megawatts of electricity by installing a plant close to Karachi, its largest industrial city.

In Greece's fallow fields, solar energy stirs

Last year, this entrepreneur and civil servant completed the 450,000-euro (618,000-dollar) solar farm in a discarded family vineyard, some 90 kilometres (56 miles) from the capital.

Though barely enough to power the local water drill, it is already helping his family supplement their income by selling electricity to the national grid. Papathanassiou hopes to repay his bank loans and break even in 4-5 years.

With agriculture in Greece facing a bleak future from rising costs and falling produce prices, thousands of farmers now want to follow his example.

India needs to stop free supply of water

New Delhi: India needs to end the free supply of water to resolve a water crisis the country is facing, representatives from both the government and the private sector said at the World Economic Forum’s India Economic Summit in New Delhi on Sunday.

Planning Commission deputy chairman Montek Singh Ahluwalia said the water crisis was a more serious problem than the energy crisis.

WEF India: thirst for water

In many areas of India water supply is dwindling quickly mainly due to the mismanagement of resources, structural inefficiencies and ineffective and unclear regulations.

Experts have said that the government must invest more in infrastructure and management. “The water demand (in India) will exceed supply by 40 per cent by 2030 if it’s just a business-as-usual scenario and if the government does not spend adequately on infrastructure,” said Bharat Sharma of the International Water Management Institute in an interview with Reuters. “You have little incentive to use the water efficiently.”

Moreover, industrial and human pollution have further entrenched this water supply crunch, rendering what water is available contaminated and unfit for washing or drinking, the main reason for India’s huge sanitation problem.

North Korean Defections Continue Amid Food Shortage

Sekitoleko says it would not take much additional outside assistance for North Korea to reach a basic level of self-sufficiency when it comes to food.

"If they can have the amount of fertilizer of 700k tons annually. If they can have the seeds - because until now, they do not have good high-tech seeds. And if they could have the fuel, plus the spare parts (for farm equipment) I'm sure they can produce enough food to feed their country," Sekitoleko states.

Q+A - Who's winning the climate science vs sceptics battle?

Most industrialized countries -- 19 of 22 surveyed by the Pew Research Center -- see global climate change as a serious or very serious problem. Brazilians show the most intense concern, with 85 percent calling climate change a very serious issue, followed by Turkey, Lebanon, South Korea and Mexico.

However, top greenhouse emitters China and the United States ranked near the bottom of the list in terms of the intensity of their concern about climate change, with 37 percent of U.S. respondents and 41 percent of Chinese considering it a very serious challenge. At the bottom of the list were Pakistan, at 22 percent, and Poland, 31 percent.

China's ecological footprint continues to grow

BEIJING (AFP) - The spread of consumerism among China's burgeoning middle class is behind the rapid growth of the Asian giant's environmental footprint, a conservation group said Monday.

Demand for construction, transport, goods and public services are the key factors behind ballooning carbon emissions, the World Wildlife Fund said in its annual "China Ecological Footprint" report.

Nigeria: Reinsurance - Recipe to Global Warming

In his paper titled: "Global Climate Change and Insurance Industry", emphasized that by the year 2050, the integrated assessment model predicted that between 6-30 per cent GDP might be lost to climate change, representing about USD100-450 billion, based on 1. 0 millimeter rise in sea level.

According to him, Nigeria is at high risks to low-lying extensive coastline that is highly populated with a heavy concentration of GDP, generating industry and infrastructure, with the northern parts of the country referred to as the Sahel region at risk of further desertification and droughts.

Yemenis abandon farms, seek food security in city

Yemen is grappling with an increasingly dry climate and a booming population. Harvests are shrinking as rainfall declines and groundwater dries up.

Farmers, 70 percent of the population, can no longer subsist on their own crops. Youths are flocking from the countryside to the cities in search of jobs to provide for their families.

“Food is not going from country to city here, but from city to country,” said Gerhard Lichtentaeler of the German development agency GTZ, adding water shortages had made it impossible to sustain farming in many areas. The water table is falling one to five meters a year due to over-extraction.

Climate change worsens plight of Iraqi farmers

BAGHDAD (Reuters) -Frequent dust storms and scarce rains are stifling Iraq's efforts to revive a farming sector hit by decades of war, sanctions and isolation.

Wheat and rice production has suffered from a severe drought in the past two years, due in part to rising temperatures, along with a dearth of water in the Tigris and Euphrates rivers.

The U.N. Inter-Agency Information and Analysis Unit (IAU) says water levels in the two rivers -- Iraq's main water sources -- have dropped to less than a third of normal capacity.

Roman Decadence and Rising Seas

Sea level is rising in relation to many of the world’s shorelines, and has been for decades. The main reason is that the volume of the ocean is increasing as a result of the melting of land ice and the warming of the sea itself. (Warm water expands, just as warm air does.)

Scientists once thought this volume increase had been going on, in fits and starts, for thousands of years. This widespread belief was often used as a debating point by climate-change skeptics, who argued that sea-level rise was nothing to worry about because it had existed throughout the history of human civilization.

But research in recent years has turned that notion on its head. The matter is not entirely settled, but some persuasive evidence points to the conclusion that the volume of the ocean was fairly stable for the last 2,000 years and began rising only recently, more or less in sync with industrialization. This is important because it suggests that sea level might be pretty sensitive to the greenhouse gases that humans are dumping into the atmosphere.

EB has this link:

Peak Oil : pourquoi le Pentagone est pessimiste [EXCLU]

It's that Le Monde guy:

Here is a new scoop I'm publishing today. It states that the crucial source for the Joint Operating Environments (JOE2008 and JOE2010) from the U.S. military is Matt Simmons's book "Twilight in the Desert". I'm afraid I don't have the time to translate into English.

This is Google translate for some of it:

Twilight in the Desert, the book indictment of a Texas oil banker suggesting that Saudi Arabia overstates its future capacity of oil production, is one of the decisive source of two recent reports from the Pentagon considering shortages of oil " severe "from 2012 till 2015 at least, I learned from the Department of Defense.

According to the analysis in Twilight in the Desert, the official figures published by the Saudi Aramco, the Saudi national oil company, greatly overestimate the actual amount of reserves that the first world power of oil is still able to extract from its soil. Therefore, according to Matthew Simmons: Saudi extractions will no longer increase and may even be about to decline sharply.

The staff of the U.S. military seems to indicate that it considers the fears of Mr. Simmons founded otherwise credible when they recognize that it rests on the prognosis of a "severe energy crisis" potentially"inevitable."

When did translate become a noun?

And by the way, what's this all about? The comfort of confirmation bias with our coffee?

When Google named their translation service Google Translate?

And I wouldn't call it confirmation bias, at least not in a comforting way. It's interesting that the Pentagon gave such weight to Simmons, but OTOH, it suggests their report isn't based on any new data.

but OTOH, it suggests their report isn't based on any new data.

Although if it was they probably couldn't publish that so might as well say they just based it on what Matt said :)

OTOH, it suggests their report isn't based on any new data.

Of course it was not based on any new data. Most of the SPE papers Simmons used for most of his data had been in the archives for many years. And the fact that Saudi has been vastly overstating their reserves has been know for at least two decades. What Simmons did was call attention to this old data which no one had paid much attention to before his book.

Ron P.

And the fact that Saudi has been vastly overstating their reserves has been know for at least two decades.

where are your facts ?

the popular view is that opec country reserves were increased during the ‘80’s to get higher quotas. that factor could provide a motive for increasing reserves, but does not offer any insight into whether opec reserves were understated before the reserve restatement or overstated after or neither or both.

if the motive of individual opec countries was to increase quota allocation, it does not appear to have been effective. only iraq had any increase in quota bracketing a reserve increase. uae’s quota decreased following a reserve increase in ’88.

opec crude oil allocations:


saudi arabia completed nationalization of assets in 1989. nationalization of aramco’s oil reserves was accomplished with payments to former aramco participants based on book value, giving saudi aramco a motive to understate reserves.

We have discussed this for years and posted the facts time and time again. I am shocked that you keep asking that same old question over and over again though the facts and reasons for disbelieving the Saudi and OPEC propaganda has been posted over and over again. At any rate, one more time just for you, here are just a few of them.

Saudi Arabia's Crude Oil Reserves Propaganda
At this TOD special thread you will find twenty to thirty other links to Saudi Reserves Propaganda.

Sadad al-Huseini - World's Oil Reserves Overstated By 300 Billion Barrels

The world’s proved reserves have been have been falsely puffed up by the inclusion of 300 billion barrels of speculative resources, according to the former head of exploration and production at Saudi Aramco, and this explains the industry’s inability to raise output despite soaring prices.

Well hell, the former head of exploration and production at ARAMCO says it! What more proof do you want?

The disconnect between oil reserves and production by Gail E. Tverberg

Out to shock the world over Saudi reserves

World: Clock Ticking On Global Oil Supply

Saudi Oil: Not as Much as They’re Saying

Enough or would you like me to post a dozen or so more?

Ron P.

Edit: I am saving the "permalink" to this post for reference the next time you ask; "where are your facts?".

Enough or would you like me to post a dozen or so more?

no, more opinions will solve nothing.

opinions, no matter how often repeated do not equate to facts. you said it is a fact.

reserves, can not under any circumstances be called a fact. once ultimate recovery is known as a fact the oil is already produced and no longer called reserves.

now, as to my post. have you offered anything to refute that:

1)if the motive of individual opec countries was to increase quota allocation, it does not appear to have been effective.


2)(that)saudi aramco (had)a motive to understate reserves.

i don't recall any discussion on 1) or 2), but if you are aware that these arguments have been refuted, i would certainly want to see them.

al-husseni has never claimed, as far as i know, that aramco's reserves are overstated:

from your citation:

Mr al-Huseini did not specify which countries had inflated their reserves

al husseini told aspo to look outside saudi arabia for falling capacity. that has been discussed within the last week.

i believe al-husseini is the correct spelling.

I am shocked that you keep asking that same old question over and over again

i am not at all shocked thay you keep repeating the same old opinion as fact.

Elwood, Saudi and other Middle East reserves are a closely held secret, all we have left to use is our common sense and what the experts can infer from the facts of production. Of course we have no way of knowing exactly what any countries reserves are.

But read Gail's article, link below. What Gail uses here is called "Common Sense" To assume that there is no connection between reserves requires a suspension of common sense.

The disconnect between oil reserves and production

5. Is there any evidence that the oil reserves for OPEC are overstated?

There is a great deal of evidence that this is the case.

There are six bullet points that states the evidence below the above quote. It would be foolish of me to take up space by cutting and pasting these bullet points when you can just click on the link and read them.

So if you want hard facts as to how much reserves Saudi has then they don't exist. So don't ask such a very stupid loaded question. But there are "facts" such as the SPE papers that Matt Simmons examined that clearly showed that Saudi is vastly overstating their reserves. These, and other things are the facts I thought you were talking about. Because the SPE papers written by petroleum engineers in the Saudi fields at the time are very much a fact.

But read Gail's essay and get back to me. If you don't read the paper then don't bother.

Ron P.

Saudi and other Middle East reserves are a closely held secret, all we have left to use is our common sense and what the experts can infer from the facts of production.

Ron, elwoodelmore did his own research:

i am believing 'twilight in the desert' less and less as i research the topic more and more. i don't see saudi arabia's capacity declining substantially for at least a decade.

i dont buy simmons recovery factor for ghawar arab d at all, for that would put ghawar at greater than 90% depleted.

After reading the series by Stuart Stanford on Ghawar, I think North Ghawar (northern 2/3rds) is in the range of 95% depleted today (not counting oil stained water#).

South Ghawar, developed about a dozen years ago (lower quality oil & tighter rock, ignored for decades for that reason) will produce 900,000 b/day for half a century or so. The production rate is designed for typical Aramco goal, maximum total recovery. Speeding up production is likely to leave more oil behind.

# After the water/oil interface hits the horizontal wells (perhaps 1 m below the cap rock), North Ghawar will evolve towards East Texas type production. East Texas still produces about 1.1 million b/day. Unfortunately, it is 99% water.

In other words, I see Ghawar, in toto, producing about 1 million b/day in the medium term. And sustaining that rate for decades.

How soon the medium term is depends on how much Aramco has pumped in recent years, and will pump in the near future.


i have read the series by stuart standford, euan mearns and joules burns.

in summary, i will believe saleri's statements over an analysis, admirable though it was, based on a cross section showing > 95 % water saturation in the swept zone, ,a fractional flow curve waved at ghawar and hysterical statements that ghawar is done. 95% water saturation in the swept zone would equate to a recover in excess of 90% of ooip.

i have never gotten a satisfactory explaination for how abqaiq can recover 70 % of ooip and ghawar can only recover 40%. the two are as similar as exists.

east texas is estimated to have recovered > 80 % of ooip.

North Ghawar cannot maintain current production rates once it waters out.

It has taken East Texas about a third of a century of straining oil stained water to get to 80% ooip. And the oil-water ratio was substantially decreased from the early years. More ooip still to be recovered.

As the water front hits, one horizontal well after another, the maximum production rate will drop, bit by bit. Still lots of ooip left to extract, but the rate of extraction will slow considerably.

My limited understanding of petroleum engineering is that the % oil in produced fluids takes a large step function down over a short time as the front passes and then declines quite slowly after that.


The super-secret Ghawar behemoth started producing in 1951 and supposedly peaked in 2005. In 2010 Saudi sources said it had produced 65 Gb and there was 71 Gb left.
It produces 5 mbpd (1.8 Gb/yr).

Saudi Aramco has stated that it has more than 71 billion barrels (11.3 km3) of proven reserves remaining.[citation needed]. In April 2010, Saad al-Treiki, Vice-President for Operations at Aramco, stated in a news conference reported in Saudi media that over 65 billion barrels (10.3 km3) have been produced from the field since 1951. Treiki further stated that the total reserves of the field had originally exceeded 100 billion barrels (16 km3)[8]


If Ghawar is 95% exhausted then it will be empty in 3 years and Saudi production will drop by half in three years.
Does that sound remotely even plausible?
So why would they announce that there is another 71 Gb in April 2010?

And the OPEC Death Watch continues.

I do not think any outsider fully understands how the leaders of KSA think. Based on what I know of psychology, social psychology, and economics, I think the Saudis are lying. But I do not know the EXTENT to which they are lying. For example, KSA claims (last time I looked) 4.6 m.b/d. excess production capacity. Rune Likvern (for whom I have a lot of respect) claims that true excess capacity is only about 1.5 m.b./day. I question those who claim that KSA has no excess capacity at all; I think that is unlikely (though possible).

Frankly, it really doesn't matter a damn whether Ghawar is a soon-to-be busted flush or not. There is no one even remotely suggesting that the old girl can increase production. In fact, other than mere ripples, no one is suggesting that any of the Grand Old Ladies of 50s/60s/70s oil fields can 'sustainably' increase production.

All this talk about Ghawar's production is about as much use as rearranging the deck chairs.... pointless.

sailorman, you may be the perfect poster to address this:

the koran alledgedly prohibits charging interest(or something to that effect). imo this is what leads saudi arabia to make decisions contrary to what public traded companies, with their worship of pv economics, might make.

pv economics often lead to operational decisions on a basis of other than maximizing recovery.

many on here have claimed, for example, that saudi aramco is lying because their depletion rate is low. is the koran responsible for an operational model based on maximum recovery i.e. a low depletion rate ? i dont know.

I don't think KSA bases its oil production decisions on the Koran. (Of course, I could be wrong.) IMHO the KSA bases its production and exploration and drilling decisions on the principle of profit maximization. This is what oligopoly theory predicts, and OPEC is surely an oligopoly, a cartel.

Study up on "oligopoly theory" and "kinked oligopoly demand curve." Easy to find with Google.

Remember that such prohibitions only apply to fellow believers. All is fair when dealing with unbelievers.


I think/guess that Aramco is slowing down production from North Ghawar. One of the new million b/day fields had five levels of reservoirs. All five went into maximum production, almost from Day One.

$90/barrel oil will reduce Ghawar production a bit.

In other words, it makes sense to produce most fields at maximum sustainable rates and stretch out Ghawar as long as possible.

My GUESS is South Ghawar is producing at 900,000 b/day and North Ghawar at around 2 million b/day ATM. Almost all the reserve production capacity in KSA is in the wells that have not watered out yet in North Ghawar.


I just read the statements from Saleri that I think you are referencing. Are they in a link on the page of statements from Mr. Abdul-Baqi that you posted below? What I read was a rather long article that appears to be from a talk they gave back in 2004 or 2003. He references exhibits in the talk, but there are none to look at in the article. Anyway, thanks for the link it had some interesting information.

The part I was most interested in was when he was giving some information on the Ain Dar/Shedgum part of Ghawar. It sounds like he showed a plot of oil production for this area for its entire history from 1951 to 2003. (Again the presentation exhibits are not available at the link and the talk is dated.) He then must have shown plots of reservoir pressure and producing water cut, which he points out are both stable or relatively stable. He said the water cut was 36%. Finally he goes on to say that the OOIP for this area was 68 billion barrels and that the reserves are 41 billion. He specifically states that the recovery efficiency from these reserves is 60%. Therefore, I am assuming that the reserve figure he is giving are for the ultimate recovery from this portion of the field. In other words the 41 billion includes oil that has already been produced (aka. burned up and gone forever) and is not reserves that still existed in 2004.

I could not find any mention of the actual cumulative oil that was produced from 1951 to 2003 in his talk. He did mention that the production from Ain Dar/Shedgum was 2 million barrels a day and that production was and had been mostly flat. Does anyone besides Saudi Aramco know the cumulative production number? Two million barrels a day for 52 years would be nearly 38 billion, and that would mean they are nearly out of reserves. Obviously they did not produce 2 million BPD from the very start, but he does make a point that they produced the field very steadily so maybe 30 billion is a good estimate for cumulative production as of 2003. Since then they have had another 7 years of production or roughly 5 billion barrels up in smoke. Where does that leave their reserves?

Of course he also mentions that he thinks the eventual recovery factor will be more like 75% than 60% and that this will yield another 10 billion barrels. However, the main point for the peak oil discussion is how much longer can they produce at 2 million BPD before they start on decline? Obviously they will not produce at 2 million barrels per day up until they reach 75% recover and then all the recoverable oil will be gone. My feeling is that that day will be pretty soon if it has not already happened. Of course you would have to have the information such as cumulative production and current water saturation's, etc. to make an educated guess.

I guess that brings us to the main question. Why do you believe the statements of Mr. Saleri over the admirable work of Stuart, Euan and Joules? Sure Mr. Saleri tells a good story and he obviously has all the data, but why do they keep it so secret if they really want people to believe them????? Wasn't that the crux of Matt Simmon's argument? That he thought that their reserve numbers are important enough that they should at least be audited? If they want the skeptics to believe them then show us the data.

Finally elwood, I have read many of the great articles that Stuart and others have put out and I do not remember any hysterical statements that Ghawar is done. Do you have a link and a quote? It has been awhile since I read them, but I seem to remember something about OOIP of around 110 Billion BO and estimates of current recovery already being very high. In fact it seems very in line with the information in the link you provided to Mr. Saleri's statements.

the saleri slides are here:


simmons, etal claim about a 40% ultimate recovery of ooip for ghawar and that is about what reserves were based on before the nationalization of saudi's reserves. saleri discussed this factor in his presentation, although briefly.

simmons and others have made the claim of the 40% recovery of ooip because, oh my god, 'it is a carbonate' and because that is about the average of all the giant oil reservoirs worldwide.

i have claimed all along that the recovery from ghawar will be closer to 65% of ooip because of my experience with other reservoirs with 1)good permeability 2) low oil viscosity and 3)moderately steep dip reservoirs, in other words, gravity segregation will result in a high recovery factor.

for examples of just this kind of recovery by waterflood, there is lost soldier and wertz fields in wyoming. not that great of permeability, low oil viscosity and moderately steep dip. two sandstone reservoirs(ten sleep) and one carbonate(madison) and 65- 70 % recovery from all three. east texas is another fine example of excellent recovery from a high permeability, low viscosity and moderately steep dip reservoir.

abquaq is the closest analog to ghawar there is - again 70% recovery.

that plus the fact that ghawar would be on its giant sized death bed if the ultimate recovery was to be 40 % of ooip, we are nearly there. if ghawar is near death, i just don't see how saudi arabia could be producing in excess of 8 million bpd. the numbers just dont add up.

i don't know why so many on here insist on that 40% recovery of ooip.

saleri also discusses the logic behind horizontal wells.

the hysteria comes from those who believe that ghawar will 'collapse' because of the horizontal wells. that would be what would happen in a totally homogeneous reservoir. i have always assumed that saudi aramco knows how, or will figure out how, to handle large volumes of fluid. arutinoff invented the electrical submersible pump before the bolchiviks drove him out of russia.

ooip for ghawar arab d is estimated in the 170 - 210 gb range. saudi aramco recently announced that ooip is more that that apparently(and this is my interpretation)because of modeling updates they had concluded that a lower porosity cut-off was appropriate(that statement should get the tod dennisons buzzing).

simmons seems to think saudi aramco was having trouble understanding reservoir simulation modeling. imo, it is simmons who is wide-eyed about reservoir simulation. a reservoir model is only as good as the history match that can be obtained. well, ghawar has 60 some years of history to match to, so i would assume they have figured it out by now.

other reservoirs with 1)good permeability 2) low oil viscosity and 3)moderately steep dip reservoirs,

South Ghawar fails 1 & 2 (at least in comparison to North Ghawar) and I am unsure about #3.

There is no controversy that South Ghawar is *BIG* (if separated from North Ghawar, second largest oil field in the world) and relatively untouched until around 2000.

The southernmost part of the field remains under development, with a final increment of 300,000 barrels per day on stream in 2006.

From memory, that was the third of three 300,000 b/day modern production developments. Some earlier vertical wells.


The first of three 300,000 b/day in South Ghawar

The Haradh Natural Gas and Oil Development lies 280km southwest of operator Saudi Aramco's headquarters in Dhahran, Saudi Arabia. The work, which began in December 2000, consists of a gas plant capable of delivering 1.5 billion cubic feet a day of sales gas to Saudi Arabia's Master Gas System and a gas oil separation plant (GOSP) capable of stabilising 300,000 barrels per day (bpd) of Arabian Light crude oil.


And a good looking 3D image of Ghawar



South Ghawar fails 1 & 2 (at least in comparison to North Ghawar) and I am unsure about #3.

the lower permeability and marginally higher viscosity will only mean that gravity stable displacement will be at a lower rate. saudi aramco has access to the most sophisticated reservoir monitoring and modelling tools available, i dont know any reason why aramco wouldn't have this figured out.

Thus the slow production rate of 900,000 b/day and my estimate of a half century or so at that rate.

Perhaps, by 2150, the south Ghawar recovery % of ooip will be comparable to that of North Ghawar, despite the tighter rock and lower viscosity. Perhaps (just supposing) 74% from North Ghawar by then and 71% from South Ghawar.


elwood, Thanks for the slides. That is awesome. I will go back and re-read the talk along with the slides and see if I can make some more sense of it (in my spare time).

From my experience I definitely agree with you that 40% recovery seems far to low for a field of that size that has been managed the way Saudi Aramco has managed it. After all it is the biggest field in the world. I am pretty sure they have put more engineering horsepower into it than Lost Soldier, although, Lost Soldier has been on CO2 flood since the mid 1980's. Elk Basin is also a good example of a high recovery field.

I must admit that I do feel that a time will come when Ghawar's production will "collapse", or in other words hit steep decline. I do not know if it is eminent, but based on experience from other fields we know that at some point the depletion level will reach a point that they cannot keep their production flat.

The Yates field in West Texas is a great example of this. Yates is one of the old San Andres reef build ups at the southern end of the Central Basin Platform. As I remember it I think the OOIP was roughly 4 billion BO. This field was initially developed in a gravity stable manner with both gas cap expansion and aquifer influx. Everything was great for the field for several decades and it produced flat at an allowable rate of 100,000 BOPD to 125,000 BOPD. Then one day the oil column got a little too thin and decline started. I think production fell by 50% in about five years. I worked there one summer during this time and the field dropped 2000 BOPD in the three months I was there. This was not due to a lack of attention because they had a large staff working on the field. Now I think that Saudi Aramco knows what they are doing and they have better technology and reservoir knowledge to work with, but at some level of depletion decline will happen and it could be pretty extreme because of how efficient the field has been produced up to this point. I think Cantarell is another example of this.

Anyway, thanks for the links.

yes, lost soilder is on co2 flood, as is wertz, but the recovery from co2 has been minor. from memory, > 60 % recovery from a peripheral waterflood.

yates field is an example of a waterflood attempt with marginal success, followed by marginal co2 flooding, and now i believe they are trying some manner of chemical flooding. that field was discussed a few weeks ago here on tod.


the reason for the less than stellar 'enhanced' recovery from yates was because of the success of pressure maintenance recovery by gravity drainage.

the yates field lore is that some of the leases recovered more than 100 % of ooip, because of displacement of oil from updip.

I spent about 15 years working Tensleep fields in Wyoming and a 60% recovery factor just from the waterfood and aquifer encroachment seems on the high side. Some of the better recoveries just from waterflooding I remember being in the range of 50%, and these were for the fields that had lighter oil and were less dominated by natural fractures. I think Elk Basin had somewhere around a 65% recovery factor, but it is very steeply dipping and they let the gas cap expand and did gas re-injection. Gas-oil gravity drainage is more effective than water-oil gravity drainage, and in many Tensleep "waterfloods" the main drive is actually gravity drainage and forced imbibition of water from the fractures into the matrix.

I also looked at the response from Wertz and Lost Soldier and met with some Amoco engineers who had worked on the projects because we were evaluating CO2 potential in other fields. Based on what I remember I would characterize the CO2 response as definitely more than minor. I know that one single well at Lost Soldier had a response from CO2 of something around 1000 BOPD. That is definitely a fractured reservoir response. Amoco started the flood in the mid 1980's as oil prices collapsed so they might not have made any money, but they did make some oil.

Finally, I also worked at Yates for a while and worked with many engineers and geologist that had worked it for years. I read the post you linked to and thought it was very good, but it is off a little on the details about Yates.

As I said in the previous post Yates was formed from a large reef buildup. (There are very detailed geologic studies on the field that I am sure you can find at the Texas BEG or AAPG.) The East side of Yates had the best reservoir properties and the bulk of the reserves. This side was developed under a gravity stable condition. They let the gas cap form. They re-injected gas into the gas cap and there was aquifer encroachment. The west side of the field I believe was the side of the reef that faced toward land and had poorer rock properties. They did try to waterflood this part of the field.

The production plot in the post you link shows that in 1985 the field started the major decline. This happened when the oil column on the east side became too thin and they could not keep up with all the water and gas they were coning in with the oil production. They kept adding extra surface compression and tried horizontal drilling in the oil column, but the decline continued.

Then in 1993 where the plot says steam and chemicals, what actually happened was that they expanded the gas cap on the east side of the field and started pushing the oil column down towards the WOC. This exposed more of the reservoir to gas-oil gravity drainage and they got a nice kick up in oil production for a while. Then in 1998 they could not push the gas cap any further and they probably even pushed some oil too far down into the water zone thus loosing some oil to previously 100% water saturated rock. Kinder Morgan bought the field in 2004 which was probably a very good acquisition based soley on oil prices since then. Anyway, Kinder Morgan started replacing the gas cap gas which had been mostly N2 with CO2 and started to see some of the positive immiscible processes of the CO2.

As for the chemical, polymer, and steam references in the post you linked, those all took place at one point or another, but they were never widespread and did not significantly effect production.

amoco repressured lost soilder and wertz prior to miscible co2 displacement. amoco's production response was in part due to the repressuring. from amoco's feasibility studies, a plot of wor -vs- cumulative prior to the co2 flood would indicate that maybe half the recovery was an actual increase in reserves and half was simply acceleration. recovery since the projects began is in the 10 % of ooip range, from memory.

yes, yates field did experience a rapid decline. and using that as a model applied to ghawar would mean that ghawar is already done for the 40% recovery case and that steep decline would begin in about 2026 for the 65% recovery case.

it is interesting what you say about imbibition. when i try to discuss that with many engineers, they look at me like i am from outer space or try to tell me i don't understand water oil relative permeability.

Peak oil is about flow rates, which are determined by the amount of investment, not the size of the reserves.

It seems to me that KSA peak flow is actually constrained with the current investment ...

peak using vertical wells was in ~1980,
peak using horizontle ~1998,
peak using max reservoir contact ~2005

and net exports peaked in 2005!

Who knows if CO2 flood will boost net export production some more?


IMO KSA would be stupid to invest as much as is needed to export all the world needs for pieces of possibly worthless paper, since they are literally dead without oil to export ... KSA is mostly a very hot desert, they are in a major food overshoot!

Peak oil is about flow rates, which are determined by the amount of investment, not the size of the reserves.

yes, and the saudis have managed their reserves and resources to extend flow rates for decades. and that is determined by the size of the reserves and resources.

KSA is mostly a very hot desert, they are in a major food overshoot!


many nations are in overshoot on many things. but one of saudi arabia's major exports is natural gas and natural gas by-products in the form of fertilizers and sulphur. maybe a barter economy is in your future ?

further diging, it looks like a lot of questionable data on yates. one resource claims 3 gb have been produced. this was the real wild wild west: leakage between zones and into the pecos river.

one source claims "thousands of barrels per day" were skimmed off the pecos river and that oil was collected in ravines and lakes constructed to contain the oil from blow outs. yeeeeeeehah !

satisfactory explaination for how abqaiq can recover 70 % of ooip and ghawar can only recover 40%

South Ghawar had, say, 40% of the ooip. A decade or so of conservative production has left 37% ooip. (NO production from the southern third till around 2000 or so).

North Ghawar had, say, originally 60% of ooip. Now down to 23% ooip. 62% of ooip in North Ghawar produced to date. Much of the remaining ooip will be produced as oil stained water.

Numbers in reality may vary a bit from the hypothetical, but there is no question that South Ghawar has LOTS of oil and it was not produced till three 300,000 b/day projects came on-line a decade or so ago.

If your argument is that population & economic growth and the pressure of depletion elsewhere will require Aramco to rework South Ghawar and abandon their conservative, maximize total production approach with South Ghawar, I could see that as a good argument.

But that will not keep North Ghawar from watering out and going into production of oil stained water.


gail's claims(with the exception of al-husseini's statement concerning opec reserves) are addressed, one and all, for saudi arabia here by saleri and abdul-baqi:


read the transcript, look at the slides. saudi aramco has very good reasons for maintaining a low depletion rates. saleri discusses in some detail saudi aramco's methodology and the basis for increasing reserves ca 1989.

the reference claiming opec's reserves are overstated does not work and i have never seen the 300 gb attributed to opec quoted by husseini. indeed your citation given above refers to world reserves.

i suspect that we are back to the 'they are lying argument'.

i have not formed an opinion about opec reserves. my opinion is that saudi arabia's reservers are understated.

simmons presents some facts, but goes off the deep end on analysis. reading simmons claims would lead one to believe that the saudi's just fell off a camel loaded with turnips.

some of simmons' arguments are less than coherent. the claim that saudi arabia's reserve additions are 'majical' doesnt square with what i have found about saudi's published reports of discoveries and reserve additions. i am still working on that part of the majical mystery.

and what about saudi's motive for understating reserves prior to '89 ?

and what about the timing of reserve restatements vs opec allocations ?

don't you want to address those arguments ?

OPEC discussed basing quotas on proven reserves but they never instituted that policy. However that is likely what started the vast reserves race but it had no effect on OPEC quotas. If it did then Algeria and Angola would have a quota one twentieth the size of Venezuela's. OPEC quotas appear to be based on past production patterns but the real method, like OPEC's true reserves, is a tightly held secret. The vast reserves now claimed by OPEC now seems to be based on nothing but prestige and possibly the hope that Western countries will not see to develop alternatives because they still have the stuff to last for many decades.

my opinion is that saudi arabia's reservers are understated.

That coming from a guy who says Saudi Arabia has 260 billion barrels of condensate reserves! Forget it Elwood, I will not be replying to any more of your post. Feel free to reply to any post of mine and I will duly ignore your reply.

Have a nice life.

Ron P.

That coming from a guy who says Saudi Arabia has 260 billion barrels of condensate reserves!

i have never stated that saudi arabia has 260 gb of condensate reserves.

I will not be replying to any more of your post.

thank you, that is very junior high of you.

i take it then, you can't address the fact that saudi arabia had a motive to understate reserves prior to '89 ?

Sorry, I lied. But now this IS my last reply but I just could not let this one fly.

And it was my mistake. You wrote:

i have never stated that saudi arabia has 260 gb of condensate reserves.

This is true. What you really said was:

up to 250 gb condensate in place in ghawar permian khuff and older rocks not big news ?


Yes, yes that would be very, very big news. My mistake, I was off by 10 GB... Sorry. ;-)

Ron P.

condensate in place does not equate to reserves.

No, but only a 30% recovery factor for that kind of in place number would be roughly equivalent to another Ghawar. That would still be pretty big news.

i have never even said that the condensate in place is 260 or 250 gb. what i have said is that condensate in place in ghawar permian khuff and pre khuff paleozoics could easily be 260 gb.

and hypothetically, that 30 % recovery is probably not to far out for a gas/condensate reservoir produced by depletion alone. the greatest potential is for gas cycling. the trouble is, how to cycle the khuff reservoir with a high and variable h2s content. the saudi aramco knows about this resource, whatever its size, but are behind the 8-ball on a development scheme.

apparently, saudi aramco is continuing the development of the pre-khuff resources which dont have the h2s, and a lower condensate content.

Thanks for all the comments elwood. I have no doubt that there are a lot of oil and gas resources left to be developed and these huge fields will be producing for centuries to come. However, I think the real problem with peak oil is just the scale at which the world is burning up oil on a daily basis. In fact, I think HAcland's post above is probably the most on point.

It first hit me about 10 to 12 years into my career. I was actually working in Rangely at the time and we were bringing on some pretty big projects (relatively for the Rocky Mountain area). I started thinking back at how much total oil I had developed in my career and then compared it to how much the world burned on a daily basis, and I was pretty shocked.

...if the motive of individual OPEC countries was to increase quota allocation, it does not appear to have been effective...

The larger argument here is a bit fruitless, but I call time on this logic. It is quite possible to have both: (1) each state increased its reserves declaration arbitrarily to grab more of the quota, and (2) in the end it just multiplied the total reserves declaration by some factor. They would simply decrease the production quota relative to reserves, in order that the quantity produced, and therefore the price, would remain about the same. There's no contradiction anywhere in that. (We're seeing a similar game in the world economy now - competitive currency devaluation. That game, too, can be played in earnest, and it, too, gets no one anywhere they need to go, once nearly everyone is playing it.)

(Also, let's be clear that immutable facts of the sort you just demanded are in short supply, simply because many of those facts are state secrets. There's little use in insisting that any discussion must be based on state secrets, unless, of course, someone is able and willing to overthrow the relevant states in order to reveal them.

let's be clear that immutable facts of the sort you just demanded are in short supply,

yes. a very good reason why one should never present as fact that which is opinion.

where are your facts ?

Lost somewhere between the point that Leanan was making and the mis-understanding of same.

I put it down to hard wiring.

Regarding Saudi Arabia, I think that virtually everyone has to agree that something changed in 2006. Following are Saudi annualized net oil exports versus annual US oil prices (EIA):

2002:  7.1 mbpd & $26
2003:  8.3 mbpd & $31
2004:   8.6 mbpd & $42
2005:  9.1 mbpd & $57
2006:  8.4 mbpd & $66
2007:  8.0 mbpd & $72
2008:  8.4 mbpd & $100

In 2006, Saudi Arabia was either: (1) Unable* to keep increasing their net oil exports, in an attempt to stop the rise in oil prices (which they pledged to do in early 2004**), or (2) They abandoned their decades long policy of maintaing stable oil prices and chose to voluntarily reduce their net oil exports, in a deliberate attempt to boost already rising oil prices.

It seems to me that observers have to choose Door #1 or Door #2.

I continue to find it curious that the Saudi stock market crashed at about the same time that the Saudis said that they were curtailing oil exports, because of a "lack of demand" even for light/sweet oil (early 2006).

In any case, as I have repeatedly pointed out, Peaks Happen, even in the best of circumstances, e.g. Texas and the North Sea, which were unable to increase their production (relative to their respective 1972 and 1999 peaks) in response to rising oil prices, in the 1972-1982 and 1999-2009 time frames respectively.

Frequently, the simplest explanation is the best.

*There is "voluntary" and there is "voluntary." It's possible that the only prudent thing for the Saudis to do was to curtail production, because of rising water cuts. To the extent that there is excess capacity worldwide, I suspect that it mostly consists of what Matt Simmons called "Oil stained brine."

**April, 2004:


Mr Al-Naimi said: "Saudi Arabia continues to be committed to OPEC's $22-28 price band. There are signs that worldwide inventories have begun to build but no one really knows for sure. I do not believe there is a fissure [within Opec]. There is dialogue. Opec in general is committed to the band," he said.

I'll take door number 1, because it's much more believable.

I continue to find it curious that the Saudi stock market crashed at about the same time that the Saudis said that they were curtailing oil exports, because of a "lack of demand" even for light/sweet oil (early 2006).

Wasn't it Simmons that stated in Twilight etc. that world oil production peak would probably coincide with Saudi peak? I think his rationale was that in the past the Saudi's had always been the swing producer that kept oil price stable, and once they could no longer fulfill that title, it would mark world oil production peak. Kind of seems like that's what happened. Add to that the IEA recently alluded to that same year, 2006, as peak? Hmm, I'm putting the pieces together here but, umm, well don't worry I'll get it. Maybe everybody will eventually get it.

Link up top: Saudis Support Stable Oil Price

Prince Turki also taunted those in the United States who call for energy independence, when, he said, interdependence is a more realistic and desirable goal. He referred to the recent Deepwater Horizon disaster as a consequence of seeking oil in risky environments in order to reduce oil imports.

"To literally go to the ends of the earth to retrieve oil is probably not the wisest long-term energy strategy, especially when a country like Saudi Arabia has so much oil that can be safely retrieved," said the Saudi Prince.

The prince criticizes the US for looking drilling for oil in deep water and says that is not the wisest long-term policy. Well hell… Aramco boosts drilling in seismically tough Red Sea

Aramco is seeking reserves in anticipation of global economic growth and increasing demand for oil. The Red Sea is two kilometres deep in places with a 7,000-foot thick salt sequence which can distort seismic images, according to the magazine.

In water two kilometers deep and under another 7,000 feet of salt! I believe that is a little tougher than drilling the areas of the GOM, one mile deep but under no salt! The prince is advising us not to drill in such “ends of the earth” places as the GOM but what they are attempting to do is one hell of a lot tougher.

But then what could we expect from Prince Turki Al Faisal Al Saud?

Ron P.

Pusher says "Junkie, don't worry, I got a good supply. Stay addicted."

Bully on schoolyard punches you in face and says "tough luck!"

America says "they tried to make me go to rehab, but I said no, no, no!"

Oligopoly theory says that a price leader in a cartel (KSA in the oil case) will tend to keep idle capacity and also to voluntarily restrict output to jack up prices. My suspicion is that KSA is purposely and voluntarily reducing their oil production to boost the price of oil from their old target ($75) to their new target, $90 per barrel. If I'm right, we will see gradual decreases in Saudi production--just enough to boost the price to their desired $90 level. Of course it doesn't help Saudi efforts in this direction when almost all members of OPEC are producing above their quotas.

Thus I think we will reach $90 a barrel and that prices will fluctuate around that target, just as they fluctuated around the old target of $75 for more than a year.

That may be true in general, but the issue is that if Saudi moves too fast in letting the price rise, the global economy explodes, and they get LESS money. I think KSA has been carefully managing the rise in prices, but I also think that if they had the oil to bring back the $50 barrel, much less the $30 barrel, they would. They are juggling revenue, reserves, internal and external demand.

Ultimately, as we all know, it's going to go up.

I disagree. Even if KSA truly had the 4.6 mb/day excess capacity they claim they would still aim for $90 oil. Why? Because, all variables considered, $90 per barrel maximizes their real net revenue.

Why on earth would they lower prices to $50 just to benefit OECD countries? No way could that maximize their revenue, either now or in the future.

JHK's latest CFN was just posted:


All about the pitfalls of frackin' for gas...

Here's the link to the 60 Minutes piece: http://www.cbsnews.com/video/watch/?id=7054210n

My local antiwar group used to vigil every Friday night from 2003 up to about a month after the 2008, election, six years.
We still meet once a month for potluck, a movie and a discussion.

Last month we watched "The End of Suburbia", the 2004 movie that introduced millions of people to peak oil and some of the personalities associated with it.
Topical documentaries usually age poorly, but they can still be interesting to revisit.

Kunstler was in great form, i must say. Stripped of the rococo language and the vanity, you can admire his keen intelligence and passion.

The one area of the documentary where we peak-oilers have proven to be poor prophets relates to the whole issue of natural gas.
All of the commenters in the film mistakenly thought gas would track oil in peaking and price...at least none of them anticipated the coming shale gas glut.
That aspect of the movie was a good reminder to us all to constantly challenge our assumptions.

Even the parts of the movie that were spot on- anticipating the peak and the financial crisis- made us feel more than a little uncomfortable, a little defensive.
We had to collectively look in the mirror and we didn't like what we saw.

Maybe the age of colonialism isn't over:

Scientists propose one-way trips to Mars

PULLMAN, Wash. – Invoking the spirit of "Star Trek" in a scholarly article entitled "To Boldly Go," two scientists contend human travel to Mars could happen much more quickly and cheaply if the missions are made one-way. They argue that it would be little different from early settlers to North America, who left Europe with little expectation of return.

They argue that it would be little different from early settlers to North America, who left Europe with little expectation of return.

Maybe if there were already people living on Mars and an established ecosystem, breathable air, running water, a habitable climate, abundant food sources.... We're really quite some way from peak idiocy aren't we?

Maybe this really is a "Marching Morons" scenario...

I can already imagine the sleazy timeshare sales pitches for vacation condos on the tranquil shores of the Mare Tyrrhenum or home on the range beneath the beautiful Olympus Mons right next to the Martian equivalent of Las Vegas... The next real estate bubble will be literally a bubble and when it pops you asphyxiate.

We could sign them up for no-doc liar's loans before they left (apparently there is no need to have a valid title for their new Martian properties), and then package those up for a whole new round of MBS! It would save the US economy!

I believe "The Marching Morons" scenario is correct. If present trends were to continue, then there would be a small bright minority running a society in which for the great majority the I.Q. was 75 or a little lower. Kornbluth, who wrote the story (or was it Frederich Pohl and C.M. Kornbluth; they often collaborated) was a great one for extrapolating present trends into the future about a hundred or two hundred years from the date of publication. For example, THE SPACE MERCHANTS by Kornbluth and Pohl is a hilarious extrapolation in which advertising takes over the whole society. Kornbluth and Pohl are two of my very favorite science fiction writers.

I think it was Frederick Pohl who wrote the story (for GALAXY magazine?) about the slave miners of shale for oil using pickaxes to extract the shale. Stories like that got me to thinking about Peak Oil by about 1953. My guardian was also worried about Peak Oil in 1949 and bought a tiny Crosley car. It is hard to get the timing of Peak correct, as we all know on TOD.

As we know now, present (or twentieth century) trends are now over. The era of expensive and increasingly scarce oil are now here. No doubt about it in my mind.

Don't forget about regression to the mean.

I know all about regression to the mean. What sociologists know (and most people do not know) is that there is a VERY strong tendency for people to marry others who are in their own social class. This seems to be a DUET, a Deep Universal Eternal Truth.

The "regression towards the mean" is somewhat flat IMO.

Your genetic "frame" which is your "genotypic" IQ shows no "regression towards the mean". If to parents with a "potential IQ" of 120 and 100 have a infinite number of offsprings, the average "potential IQ" of these offsprings will be 110 (if you do not consider that the cognitiv capabilities are more defined by the mother than the father because of the X chromosome).

Now this "potential IQ" transformes into phentotypic "end/real IQ" through the impact of the environment. If the overall socalistaion of the offsprings is half defined by the society with their - assumed - IQ of 100 and half by the parental environment (nutrition, cognitiv stimulation...) - with, assumed 95% usage of the "potential IQ" - their would be indeed be some "regression towards the mean" (resulting IQ of 102.25). This is because the avarage society IQ is some "benchmark" for the childreen and defines for example the number and scientific deepness of the available book, the public school system and so on.

But it is not that strong as some pretend when they claim that the IQ is "half nature/half nurture". E.g. genetic IQ=110, Sozialistation IQ=100, resulting IQ=105.

First of all the children wit high "potential IQ's" search for friends with high "potential IQ's" and so on. They read books instead off fighting in the mud.

Next the percentage amount which of your genotypic given frame is used is relativ stable in a given environment (say middle class family). Say it is 90%. Than with a "potential IQ" of 100 you get a phenotypic IQ of 90, with 120 you get 112 and so on. It does not chance at such a large extent, but of couse it depends especially on your parents and your neighborhood.

But the biggest problem is that the genotypic IQ is hereditary. So the offsprings with the "potential IQ" of 110 transmit this potential IQ again to theier offsprings and again and again. In the long run this genotypic IQ dominated everything.

In the end the society will follow the genotypic "potential IQ" because the society chances. More Morons means more wrestling TV and less science books (and science fiction books) until the day nobody can design a TV any longer - best hopes for the Asian gentotypic IQ :-)...

I agree with you.

If present trends cannot continue indefinitely, then they won't.

BAU will eventually go, and there will be some severe and abrupt discontinuities in real GDP per capita over the next twenty years or thereabouts.

A process of copying that contains errors that are not corrected or removed as copies of copies of copies are made down the generations will regress to only one mean: zero.

What is your point? Human genetics does not work that way. Everybody who has studied the subject knows that what you are describing is irrelevant.

The "Journal of Cosmology" is giving a bad name to cosmology. There is no feasible scenario in which this adventure could or should be funded.

The foot-pounds of energy required to move a slug from earth to mars make this a poor solution to our energy and overpopulation problems.

slug = Glenn Beck follower ?



Sidenote to Merrill:

If you would like to pursue a rail link to NYC to bring in food, etc. I can help you prepare something to give to Rep. Nadler, Port Authority, Staten Island Development, etc.

Face to face meetings with staff are best.

All you can do is plant the seed. Later, post-Peak Oil, they may sprout.

My contact is alan_drake at ju no period conn. (adapt to standard, this is to fool bots)

Best Hopes,


Several years ago, when I was working in a dead-end job with no future, had no significant other, no time or room or money for hobbies, I debated online about the practicality of a Moonbase, in which I said I'd happily work for free on a Moonbase, if only to give me a purpose in life: help create the seeds to ensure the continuity of Mankind and our biosphere (after all, we're pretty vulnerable, clustering in just a single habitat). Since you'd hardly be getting much stuff from down in the Gravity Well, you'd have to make your own entertainment (and the ping times in QuakeII would be appropriately astronomical). If NASA/ESA/whoever, had put the call out, there was nothing holding me back from applying for such a job, even if it was one-way, and, I suspect, a huge number of other potential candidates.

Now that I have a Partner, some spare cash, and some plans, I wouldn't go, but back then...

"So there you have it. We are now, in all likelihood, living in a “post-peak” world."

Due to natural gas liquids, and other non-conventional oil sources, actual overall supply may not drop significantly for about 10 years.

So, in 2020, the world will actually start to feel the real long term effects of peak oil.
However in the US, if we convert to natural gas cars and electric cars, we can survive on for another 20 years.

What do you think?

Three words: Net Oil Exports.

Westexas, I was reading "The Economy Is Not Coming Back " above and particular about EROEI. A declining EROEI, acting like stealthy peak oil or ELM, where production may remain static but oil available for non-oil related economic activity actually declines. As the effect of EROEI is similar to ELM I was wondering whether you've done any work on it?

...."the economy is not coming back".... nor should it, from the homepage forward:

This powerful essay addresses the shocking statistics ignored by politicians and the mainstream media on fossil fuels, carbon dioxide emissions, climate change and global warming, plastic in the oceans, and the demise of fishes, concluding that the economy should not come back if the ecosystems are to survive. http://www.swans.com/

I reached this conclusion years ago. It's been a tough pill to swallow, though I'm managing to choke it down with my daily ration of reality juice.

I have not seen any signs that the economy is coming back. It has been a bubble economy since the 90s. The FED makes you feel richer than reality.

In terms of global pollution, well all that carbon dioxide is not good. time will tell.

All commodities from the earth including sea creatures are being depleted at maximal rates leading to extinctions and shortages.

My parents are starting to believe in peal oil, but they still think something else will save us.

Yup, entropy drives out life and we're producing mountains of it by our unbridled activities. For the moment we can withstand the effects of the entropy we've produced, but the rest of nature hasn't been so lucky. I guess it is only a matter of time before our luck runs out and our life is extinguished too.

The entropy of the Earth's biology is 'reversed' by the input of photons.

When man figures that out, and lives within that solar budget....will that end your concern?

Use the passenger seats for passengers. There's your twenty plus years. Inflate your tires: there's a few more months.

The current fleet of planes, trains, trucks and automobiles cannot run on natural gas liquids. To just assume that natural gas liquids will keep us from feeling the peak, and eventual decline, of crude oil is a little silly.

According to Jeff Rubin we started feeling the effects of peak oil about two years ago.

It will take years to convert the fleet of cars and trucks to natural gas. And it will be extremely expensive, especially for people whose primary transportation is an old used car that they paid less than two thousand dollars for. And no one at the present time seems to be in any hurry to convert anything or to make any preparations for the decline in crude oil.

Ron P.

Most of the city buses in India run on NGL or CNG. There are a LOT of buses in India.
However, I suspect the natural gas glut would evaporate very quickly if this policy was adopted at a global level.

Conversion of cars to LPG is quite cheap in the UK. A lot less than the cost of a new car. Mostly less than $2,000. The big cost will be expanding the infrastructure to distribute and sell the NG.

If the US government mandated that all new personal vehicles met the best European fuel consumption levels ( up to 60 mpg, imperial, city, 80mpg highway) then the US could cut its oil consumption by a third a in decade.

Planes will stop flying. To be replaced by pigs by US government mandate.

Gas-to-liquids and coal-to-gas could, for a price, add to the liquid fuel supply. Of course, a tremendous ramp up would be needed - and ng and coal prices would climb dramatically. Any idea of what the price per gallon of these liquid fuels will be in 10 years? I'm thinking in the $150 - $300 range. This could put a lid on how high oil prices can go - long term.

This would only work until peak coal and peak ng is reached - but that might be a reprieve of 20 or so years.

People who paid $2000 for a used car will not own a car anymore.
They will have to ride with some wealthier friends.
I do not expect that planes, trains, and trucks will convert, but mainly personal cars to CNG or electic. As people will not be able to find or purchase gasoline for personal use.

Convert 200+ million vehicles in 10 to 20 years? And electrify all of the trains? While addressing the sad state of current infrastructure? As many other resources are in decline? While dealing with an onging credit/currency/realestate/banking crisis? Spearheaded by an ineffective, corrupt banking and political sector? With 60+ million baby boomers retiring and expecting their promissed entitlements?

Seems doable to me ;-/

Seems doable to me ;-/

If we had the government of China, it would be forced through an doable. But given the government we have, not at all likely.

New High Speed Rail Tunnels in Norway

I was aware of some expansion but in reading an article about a new 19 km twin tunnel between Oslo and Ski I found a sidebar with a list of other projects

One of the largest is a new 14km double track section that will replace a current 15km single-track service from Holm to Nykirk... This new section includes a 12.3km rock tunnel and a new underground station

The new route of 23km includes seven rock tunnels of between 110m and 4,700m long for a total of 14.5km, and will reduce travel time between Larvik and Porsgunn from 34 to 12 minutes... the new works will reduce journey times from Tønsberg to Oslo to an hour, compared to the current 90 minutes

A 60km upgrade of the Dovre Line from single to double track between the towns Eidsvoll and Hamar includes construction of four rock tunnels for a total of 7.8km

the new Asker Line to Drammen, which is due to open next year, includes a 5.5km long rock tunnel, and a 5km long shortcut, the Gevingåsen tunnel, is included on the Nordland Line

On the Bergen Line, planning has started for extending from single to double track between Bergen and the suburban town Arna, which will include the new 7km long Ulriken tunnel, and further plans for double track upgrade of the Østfold Line beyond Ski includes a new tunnel and underground station in the town of Voss

These rail tunnels will last centuries and Norway has more than enough hydroelectric power to run them forever.

for the Geologists

... TBMs through the hard Precambrian gneiss with dikes and layers of amphibolite and metadolerite

Translation ? - Hard granite


Norway is a nation of 4.8 million people and these capital projects appear to be paid out of non-oil tax revenue.

Impressive !

Best Hopes for Non-Oil Transportation, even in oil exporters,


PS: the 10.0 km Moffat Tunnel west of Denver is considered a "big deal" and major link in our rail system.


No serious discussion of a second tunnel.

Perhaps someone in the Norwegian Government in Peak Oil aware ? Their own peak is now well past, unless future exploration of the Barents Sea produces more oil than expected.

Unfortunately Alan, we don't have the Norwegian government or the Norwegian electorate. In the US, Republican governors are declining to use the limited high-speed rail funds in order to show fiscal responsibility. Politically, at least today, there is no hint that Americans can wrap their heads around what is needed, which is a dramatic reduction in usage of automobiles, with a dramatic increase in public transport. In past crises, American opinion has gone through dramatic shifts. Isolationism disappeared overnight after the attack on Pearl Harbor. I think it will take something that dramatic to change public perceptions. It is definitely a positive indication that a few countries are thinking ahead. We have to start somewhere.

...the 10.0 km Moffat Tunnel west of Denver is considered a "big deal" and major link in our rail system.... No serious discussion of a second tunnel.

And in a sane world, putting transportation infrastructure money to the best uses, no one will discuss a second tunnel. For obvious reasons (if you've traveled the Rockies), none of the main pioneer trails, the early railroads, or the Interstate highway system as originally planned crossed the continental divide going west from Denver. The final parts of I-70 in Utah were not completed until 1990, and the Glenwood Canyon section in Colorado until 1992 due to the difficulty and expense of building in that terrain. By contrast, crossing the divide at South Pass in Wyoming is a piece of cake.

The history of Denver includes multiple examples of enormous political effort being expended to get transportation links built across/through the Rockies west of the city. Arguably, the real reason I-70 west from Denver was approved was because the US Army insisted on a redundant route.

Redundant rail routes (see WY blizzards) make great sense.

Additional electrified rail capacity, in case diesel for trucking becomes a national security issue, makes great sense.

A far more likely strategic threat than any "national security" issue helped by building the Eisenhower interstate tunnel.


Drilling a second tunnel, capable of handling double stack "hi-cube" (9.5' tall containers) besides Moffat appears to be a one time expense. If it would help create a shorter, faster high capacity rail route for significant amounts of traffic, it would be a permanent benefit.

Look at the lengths of twin bore tunnels that small Norway is building through granite. That we find adding a single bore 10 km tunnel to be beyond our capacity to even consider speaks volumes for our future post-Peak Oil.

Best Hopes for Better Vision,


BTW, as we type, the Swiss are building an almost flat, almost straight rail line (two tracks, two bores) from Zurich to Milan, under the Alps. The two longest tunnels are 58 km and 20 km.

No argument that some redundancy makes sense, but if you have limited money to spend on rail upgrades, expansion of the Moffat Route is going to be pretty low on the list. In addition to the main tunnel, there are 40 shorter tunnels adding up to about four miles which would presumably also have to be expanded in order to gain the full benefit. Some of those tunnels are quite isolated, and expansion may be difficult. The Moffat Route bypasses the most populated mountain areas which tend to follow the I-70 corridor.

The US High Speed Rail Association, an advocacy group who really ought to know better, make the same (IMO) mistake when they draw a straight-line 220 MPH route from Denver to SLC. Easy to draw; very hard to build, and not particularly useful for anything except SLC-to-Denver. The Rocky Mountain Rail Authority, looking at regional needs, proposes a more southerly route that follows I-70. Once you start to the WSW, though, you face the same problem that the I-70 designers faced: from Grand Junction to SLC is some very tough going. Any regional rail system is going to extend north from Denver as far as Cheyenne, Wyoming. From there it's a much easier route to SLC across Wyoming.

limited money

I am asking for only three AIGs# or so. And the investment will pay for itself before completion.

Compared to keeping a dozen aircraft carriers, etc. etc. this will do much more for national security, at no net cost.


# An AIG is the amount of money required to bail out one insurance company.

I am far too familiar with the impracticality of the High Speed Rail supporters. They want to drag me in and I refuse.

When I talk about what makes sense, they start counting votes in the Senate and House.

My plans need political support, but they need to make economic sense as well.

Fortunately, 49 states would benefit from electrified railroads. And we can figure out something for Hawaii.



Do you have a chart or something that compares the efficiencies of rail (electric and diesel) vs other forms of transportation (trucks/cars/buses/airplane) for passengers???

I say this because a little homework shows the new high speed rail line in China (Shanghai to Beijing) converts to about 400 mpg/per passenger. A Boeing 737-800 is around 100 mpg/per passenger (or so i've read)...


My favorite was Strickland. Good, real world data but now retired. Download from here




Best Hopes,



The numbers look good. Sure shows just how efficient rail is compared to everything else.

According to xFacts.com, the US National debt will pass through $13.8 trillion sometime tonight. With more than $4 billion a day growth, we will celebrate the new year starting at $14 trillion. In addition to Freddie, Fanny FHA and FED debts, the Federal Government is holding 75% of residential mortgage debt that will undoubtedly add to the National debt if properly accounted for. SS and Medicare trusts, that fica taxes pay for, have not cost taxpayers anything to date , but will in the near future.
The debt ceiling at $14.3 trillion will be reached in March 2011 if properly accounted for. and if mark to market is applied to Federal holdings the US is over the debt ceiling today. As the printing presses are running overtime, and other countries are questioning the the US dollar's reserve status, dollar woes will weigh on the oil market if no real action is taken to reduce the Deficit and current account deficit soon IMO.

newman,as the USA has a sovereign fiat currency government debt is not necessarily an issue.

Some of the real issues are unemployment,an insane health "system" built around corporate profit,and a corrupt government controlled by big business and big finance.Do I really need to go on?

Until you and others like you get their heads around the bleeding obvious then the US is just going to dig a deeper hole for itself.But don't worry,you have Europe for company in your hole.Just ask the Irish,among others.But at least they have the excuse that they fell for the EMU scam.

thirra, As the current account runs at a $500 billion a year deficit, it is only a matter of time before financially stronger countries with higher growth rates choose not to finance the ever growing debt. As foreign ownership is at least 50% of the debt, the US runs a continuing risk of a dollar collapse. Even compared to Europe, the US National debt is the elephant in the room. Europe deals with its problems, the US is in denial not only to its finances, but to peak oil, global warming, and the growing vast chasm between the very rich and 80% of the population. Europe is light years ahead of the US on all aforementioned issues.

Yeah, right about that debt thing.

Monetizing half of the operations of the gov't isn't quite the same as debt, but it definitely has ill effects on those who save or are on fixed incomes.

I'd like to include that large expenditures on cheap imported crap, cheap imported oil, and pandering gov't largess play a role as well.

Eventually, it all will level out. We will be poorer, own less of our country, and once again sell resources to more advanced nations to make things that we buy. Unless we shift directions soon, that is.

Here's an interesting twist on the outsourcing situation. Today's local news included this tidbit:

Outsourcing firm picks NC for data center site

KINGS MOUNTAIN, N.C. (AP) - A company specializing in managing the high-volume computer operations of other companies is the latest to pick the North Carolina foothills for a data center.

The $75 million facility is expected to employ fewer than
20 full-time workers. Infocrossing is a subsidiary of Wipro Ltd., India's third-largest software outsourcer.

Here we have a company from India which is setting up an operation in the US...

E. Swanson

I have been thinking about our worldwide money system - it seems to me that its become trapped insofar as the Trillions of $ can never be transformed into energy making it more irrelevant or poison to anyone tied up in it

In economic terms, you are drawing a scenario for a rapidly rising price level. I do think (based on what I know of both economics and politics) that the U.S. will have inreasing rates of inflation in the near future.

However, I put the chances of a deflationary depression in the next two years at 50%. If we do have a deflationary depression, then the Fed will tend to hyperinflate to get out of the depression.

Of course, with oil past Peak, such policies will not help to get real economic growth going. Our future is one of real GDP decline. The rate of decline is unknowable at this time. Economics, finance, and oil production are part of a complex system. Anybody who asserts the contrary (IMO) does not understand the situation.


I'm puzzled as to why you feel that PO will inevitably cause deep economic decline.

Is it primarily because you believe it will restrict freight transportation?

It is not just oil. Look also at natural gas and coal; these are not far from their respective Peaks.

There is no substitute now and none on the horizon to replace fossil fuels. None. Nada. Nil. Zip.

My views are in close accord with those of John Michael Greer in THE LONG DESCENT. Get the book, read it, and then you will know where I'm coming from.

Alternatively, take some graduate courses in economics. Economics is not called "the dismal science" for nothing. Economics is harsh. We cannot escape scarcity, and in the case of fossil fuels, increasing scarcity over the next twenty years. Given political limits, I challenge you to draw a scenario of how we can now make a successful transition away from fossil fuels. We could have done it in 1970 or 1976, but now it is too late. Oil is depleting too fast for us to make a successful transition away from it now.

Given political limits, I challenge you to draw a scenario of how we can now make a successful transition away from fossil fuels.

It is technically and, I think, economically possible (with some real hurt at times during the transition).

Politically, only baby steps till we panic. At that point, with more than a little luck and a lot of prepositioning, we can start a serious transition.

Look at what <5 million Norwegians are doing now, as one good example.

Still a long shot, but a shot well worth taking.

Best Hopes for Making Things a Bit Better than They would have otherwise been,


Alas, we are not Norway, nor are we any of the Scandanavian countries including Iceland and Finland of course. I expect Scandinavia will do much better than the U.S. in the future. Half of my distant relatives are in Denmark; I wouldn't mind living there. My mother's parents emigrated from Denmark to North Dakota somewhere back around 1870 or 1880; I wish I could trace their ancestry. Come to think of it, maybe I can, though the names were very common: Nielsen and Christiansen.

Doesn't Norway have an influx of external cash from hydrocarbon revenue? They are intelligently investing the foolishness of other nations.

I believe we COULD do much better. I have yet to see that we WILL do much better at the national level. My biggest hope if for little guys making wiser personal decisions.

Norway is a major oil exporter, and has the highest gasoline prices in the world (depending on exchange rates, sometimes Sweden or Denmark lead).

They have invested a quarter trillion from royalties (after paying off the national debt).

It is my understanding that they keep the oil & gas money separate from the real budget (the oil windfall ain't going to last forever). And the rail improvements are paid out of the real budget.

There are some leaks (general taxes that apply to oil company projects) but this is not an oil subsidized rail build out. With a quarter trillion in reserve, any Norwegian gov't (city, railroad) debt gets very low interest rates even if not formally guaranteed.

Someone more knowledgeable correct me if I am wrong.

Best Hopes for Political Discipline and Politicians Doing What is Right,



If we assume, for the moment, that natural gas and very far from their respective peaks, how would that change your perspective? In other words, is Peak Oil in your estimation sufficent to cause a long-term deep economic decline?

Let me frame this question a little: I'm not asking out of ignorance - I have a deep background in the engineering and economics of this area. I'm asking because I see it differently, and I'm curious to pinpoint exactly where and why we differ. In that way, we might learn something from each other, rather than go around in conversational circles.

Suppose the conventional wisdom, USGS, EIA, IEA, CERA, is entirely correct. In that case I would be totally wrong about the timing of Peak Oil. However, I believe Rune Likvern, Darwinian, Nate Hagens, Westexas and other oil geologists and petroleum engineers who post on TOD.

In other words, IMO the conventional wisdom of the Authorities is entirely wrong.

On the other hand, I believe the majority opinion of the good posters on TOD is entirely correct.


I'm not questioning the general idea of Peak Oil. I agree with "the majority opinion of the good posters on TOD" that we are currently in an extended plateau of oil production which is unlikely to be substantially exceeded, and which could be followed in a reasonably short time by decline. I've been reading the information provided by the oil geologists and petroleum engineers who contribute, and I find the basic idea sensible.

But that's not what I was getting at. What I was getting at was an economic and (non-oil)engineering question: why should PO mean extended and deep economic decline? That seems to be a common idea on TOD. But, as you've noted, economics is a complex profession, worthy of respect and not something that amateurs should assume can be mastered by reading a few blogs.

I agree that good liquid substitutes for oil don't exist at the scale needed. OTOH, it seems clear to me that rail, EVs, EREVs, heat pumps etc, combined with wind, nuclear, solar, etc, can certainly replace the great majority of oil consumption, and that biomass and synthetic hydrocarbons can replace the small % amounts really needed for petrochemicals. Further, it seems to me that we have such a large surplus of energy at the moment (evidenced by single-passenger SUVs, single degree temperature control, casual international air tourism, thousand-mile salads, etc, etc) that it won't be at all hard to find the energy needed to invest in substitutes like EVs and wind power.

So, I was puzzled when you said you felt that there were no substitutes for oil, and that this would cause an extended and deep economic decline. I asked why.

You answered that part of your reasoning was based on what we might call "Peak NG and Coal".

So, I asked:

If we assume, for the moment, that natural gas and coal are very far from their respective peaks, how would that change your perspective? In other words, is Peak Oil in your estimation sufficent to cause a long-term deep economic decline?

Please read THE LONG DESCENT by John Michael Greer. IMO he has got it nailed. There is no point in my repeating his arguments here. Or you might try his blog--a very interesting one.


He really doesn't make arguments in support of the idea that PO will cause TEOTWAWKI. He just assumes it, and asserts it.

Greer is an interesting social critic and historian of ideas, but his lack of technical training and experience1 makes his energy analysis completely unrealistic. He simply assumes that fossil fuels are essential: he provides no evidence for this, or detailed information about energy (resources, depletion, substitutes, etc, etc). An examination of "The Long Descent" and his comments on The Oil Drum finds that his discussions of wind and coal are extremely superficial and entirely inaccurate.

Look in the index under wind: there are only two entries, both of them brief and superficial. If we look at the first, on page 17, we see that he mentions it in one overview sentence in the 2nd paragraph, and then moves away to a red herring, ethanol. The 2nd index entry on page 82 is similar - a single superficial, dismissive sentence. A search through the book finds nothing better.

He doesn't even mention electric vehicles - he apparently assumes that the only way to move a vehicle is with liquid fuels.

His novel contribution is speculation that an "inevitable social collapse" into a pre-industrial condition will happen gradually over a period of a couple of centuries ( http://www.oilcrisis.com/whatToDo/decline.htm ). Oddly, this idea eliminates the only vaguely plausible argument for social crash - that is, that it will be so fast that a transition away from fossil fuels will be impractical.

If you feel that Greer actually does provide an argument for this, and some evidence of some sort, please just point me to the page.


1I discussed this in detail here: http://www.theoildrum.com/node/6890/709260 . Greer replied (see the comments) that he has "training in the appropriate tech field back in the 1980s", but when asked for more detail he didn't reply. In his blog bio he describes himself as "the Grand Archdruid of the Ancient Order of Druids in America and the author of more than twenty books on a wide range of subjects". None of his books provide information on technical training or experience. The most detailed bio came from http://www.aoda.org/about/greerbio.htm:

Education: University of Washington B.A. in the Comparative History of Ideas.

Training: Order of Bards Ovates and Druids (OBOD) correspondence study program - three degrees of Bard, Ovate and Druid, certificate as a Druid Companion of the Order. OBOD's Mount Haemus Award for Druid scholarship."

Experience: philosophical/religious writing. No energy, or economics related education or experience. No quantitative or technical education or experience.

The trouble with organizations such as USGS, EIA, IEA, CERA is that they are working with databases which are highly unreliable, so they can draw almost any conclusion they want from them.

The USGS has a track record of being spectacularly wrong. When Hubbert first published his estimate of when US oil production would peak, the USGS was promoting an estimate of ultimate US reserves about 3 times as high as Hubbert's. As we all know, Hubbert was right on the money, and the USGS was wildly overoptimistic. One would hope the USGS would have learned from that experience, but their estimates of large oil reserves in remote places where neither they nor anybody else knows anything about the geology is not encouraging, and their practice of calculating unknown and unknowable numbers to an accuracy of four decimal places doesn't inspire confidence either.

The EIA doesn't really estimate production, it estimates consumption and just assumes that production will somehow keep up, which is far from being a safe assumption. The IEA is know to have been under heavy pressure from the US to not say what it really thinks. As a result people tend to interpret their category of "fields yet to be developed or found" as a secret code for "shortages".

In general they all have a track record of grossly overestimating reserves and production, so you have to take anything they say with a grain of salt.

PO will inevitably cause deep economic decline.

The economic model "we" are under is based on cheap energy.

That 'cheapness' is in the process of ending.

How exactly would the end of cheap oil not cause economic decline due to the breaking of previously invested in models?

The economic model "we" are under is based on cheap energy.

First, both the US and other developed countries got that way with "moderately expensive" energy, not cheap energy. Oil and electricity have been cheap in the US in the post-WWII period, but it was rather higher in years before that: oil and electricity cost much more, adjusted for inflation. The US, and other countries, succeeded quite well in growing strongly even when energy was much more expensive, whether it was coal or oil.

Wind power is quite affordable (if perhaps not quite as dirt cheap as US post-WWI oil and electricity prices), scalable, high-E-ROI, etc, etc. So are nuclear, and solar even if they aren't quite as cheap at the moment (coal is also plentiful and cheap, unfortunately), so I see no reason to expect energy to ever be more than "moderately expensive".

Second, fossil fuels aren't nearly as cheap as they seem. Pollution is an unrecognized, external cost. So are the military costs we're seeing currently of roughly $500M per year. Those pollution costs aren't sustainable (especially CO2), but unfortunately the military costs probably are (in fact, many corporate interests are quite comfortable with them...). Moving away from oil and other fossil fuels will actually be much cheaper in the long-run than BAU.

Finally, let's assume that Business As Usual involved spending about 5% of our economic activity (perhaps measured by GDP) acquiring energy. If the cost of acquiring energy doubles, then we have to dedicate another 5% to that activity. GDP might go down by 5% quickly, in case we'd have a deep recession. Or, it might happen over time - if it took 10 years, then we'd see a reduction in economic growth of .5% per year, for 10 years. After that transition was complete, economic growth would continue. So, a reduction in "net energy" has a significant impact, but it's not TEOTWAWKI.

"As the demand for oil continues to rise, especially in China and India, the kingdom has every intention of meeting that demand," said the prince.

"The Wizard has every intention of granting your wish, whippersnapper." "No I'm not a bad man, I'm a very good man, just a very bad wizard."

Retail sales came in better than expected. It was all cars, though, so it might not be a good indicator of holiday spending. (The Dow jumped anyway.) Denninger claims the increase was all "seasonal adjustment" - fudge factors, and the real number is down 1.5%.

Denninger also thinks the Empire State Manufacturing Survey is awful. He says it shows "margin collapse" - input prices are going up, but they cannot be passed on to the consumer.

Margin collapse. So THAT'S why I haven't been able to get my inexpensive bulk rifle bullets for most of this year now. Hornady Corp. can make the bullets still, but they cannot sell them at low bulk rates making it possible for distributors like Midway to package them up in bulk at special low prices. Lead has gone from .40 cents/lb. at the end of '08 to $1.20 today.........bummer:-(

Peak Bullets?

Somehow I don't think so...


Have you tried Cheaper than Dirt? I always go to their website when I want to purchase mass quantities of ammo. Often you get a U.S. Army surplus ammunition can or box free to go along with your order. They have never had shortages of ammo or bullets in my experience. Of course lead is more expensive than it used to be; almost all commodities are in a bull market, and QE2 has accelerated that trend.

By the way, I've given away or sold almost all my firearms and ammo. Living where I do now (Highland Park in St. Paul, MN) I feel no need for firearms, though if this situation changes I'll just buy a Mossberg 500 and another Ruger Mini-14. IMO, handguns are not very effective.

Oh, I'm talkin' about bulk component bullets, Don.
I decided to buy 1,000 from Natchez in Tennessee at the next best price. But dayum! These 55 grain FMJs have gone from about $56 per k to $110 per k in little over three years. Full retail price on them is now up to $140 per k!

Inflation is in our future. At one time I had well over 5,000 rounds of 5.56 FMJ in my ammo hoard. But I gave most of it away to people who needed ammo more than I did. Kept cool and dry, good factory ammo (I like Federal ammo especially.) will last for at least fifty years--probably more like seventy years.

When I was young with a 1911 Colt Automatic Pistol I used to reload because I burned so much ammo. But now I shoot just enough to keep up my proficiency. And I do not think the best handgun is as effective as my Ruger 10/22 with a full 30 round magazine of Thunderbolts.

My elsdest daughter has a sweet snubby Colt Detective revolver that shoots .38 Special+P. Maybe I should teach her how to reload. She is a darn good shot.

During my well-spent youth I briefly engaged in fast-draw competition. Now I gave my .44-40 Vaquero single-action revolver with Buscadero holster to my youngest daughter.

My middle daughter is proficient with a wide variety of fire arms--deer rifle, shotgun, .38 Special five inch barrel police model that I gave her.

My son's wife will not allow him to keep guns in the house. Sigh.

Retail sales came in better than expected. It was all cars, though, so it might not be a good indicator of holiday spending. (The Dow jumped anyway.) Denninger claims the increase was all "seasonal adjustment" - fudge factors, and the real number is down 1.5%.

The seasonal adjustment he referred to was for autos only.

Looking at the actual report (PDF), Table 1 on page 2 tells us the unadjusted numbers for all retail were:

September: $355,549 million
October: $363,390 million

Which is a rise of 2.2% - more than the headline, seasonally-adjusted number of 1.2%, I might add. Typical of Karl Denninger, he'll whine about a seasonal adjustment when it suits him, but he conveniently ignores it when it would show something contrary to his permabear picture.

Denninger is a financial journalist--not an economist. I question his competence to interpret economic data correctly. In other words, I think his misstatement is partly lying but mainly incompetence.

Denninger is perceptive and seems to have a knack for noting unusual fiscal occurrences. I consider his site like I do the news -- good source of information, but with an institutional bias.

30 days hath September....

so October has 3.3% more days than September which is one reason the unadjusted figures have to be adjusted. Not sure of the distribution of trading days etc. so it might not be exactly 3.3% adjustment in the dollar value.

tricky things, statistics.

Right: That is why you need economists to adjust and interpret economic data; oil engineers and oil geologists to interpret and adjust oil numbers and so on. Laymen just do not know enough about specialized fields to understand and properly use their statistics. Denninger is definitely a layman, when it comes to eonomic statistics. I wonder what his educational background is. BS in Business? In journalism? Something like that, probably.

You even need Ph.D. English majors to properly interpret the statistics of poetry. A M.A. in English is probably not enough.

You have to be kidding me. Adjusting for the number of days in the month is just logic, man. You learn this in grade school, or not even that. Anybody that gets a paycheck understands days in the month.

By your response, you must believe that "tydewi" is an economist. After all, no one else would be able to figure this out.

My main point is that Denninger is not an economist and therefore is almost certainly incompetent to interpret economic statistics.

Do you think that economists (who are very bright and very mathematical) could correctly adjust and interpret statistics in physics? I doubt it.

I once had a prof in advanced economic theory named MacFadden. He had a Ph.D. in physics, then switched to economics. He was very bright but found physics too boring. Several years ago he won the Nobel Prize in Economics, and that did not surprise me at all. I stumped him, however, with some of my questions about welfare economics and why welfare economics theory was wrong because it was not a good description of the real world. I was way out of the mainstream of economics even when I was a grad student.

won the Nobel Prize in Economics

There is no such a prize.

There is:
The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel

Calling Econonmics a "Science" is pure bunk however. But I guess when you have a pile of money and want to by respectability you can get your award called "science".

If there is a Nobel Prize in "Peace" there certainly can be one in economics. Neither "peace" nor "economics" is a science the way astronomy, physics, chemistry, and biology are sciences.

And of course Political Science is not a science at all. Neither is sociology nor cultural anthropology. Physical anthropology, however, is a science. How do I know? Because I know a lot of physical anthropologists and have read a lot in the field. However, I know way more about cultural anthropology than I do about physical anthropology.

If the Swedes or the Norwegians want to give a prize in Economics and call it "in memory of Nobel," I see nothing wrong with that. About half the recipients of the "Nobel" Prize in economics are really really smart. The other half are not so smart.

Note that there are also Nobel prizes in literature. You don't have to be a scientist to be a Nobel Laureate.

If there is a Nobel Prize in "Peace" there certainly can be one in economics.


There can not. Such was not specified in the will.

Alfred Nobel had written several wills during his lifetime, but the last one was dated November 27, 1895 - a little over a year before he died.
Nobel's last will left approximately 94 percent of his worth to the establishment of five prizes (physics, chemistry, physiology or medicine, literature, and peace) to "those who, during the preceding year, shall have conferred the greatest benefit on mankind."

I do believe literature is more important than economics. I spend a lot more of my time reading and talking about literature than I do reading and talking about economics. But so what if Nobel did not list economics? If it is O.K. with the Scandanavian royal families, it is O.K. with me. I have a lot of respect for those monarchs.

It was OK with the bank that sponsors the award apparently. The good old boys network is why people have issues with it.

The creation of the prize was an attempt for Alfred to buy respectability.

It worked.

The economic prize in his memory is attempting to do the same.

But so what if Nobel did not list economics?

That is why it can not be a Nobel Prize. There are only 5 Nobel Prizes and economics is not one of them.

I actually have some insight into the "behind the scenes". The World Food Prize wanted the same "Nobel" recognition as Economics when Norman Borlaug set it up. The story, as relayed to me, is that the Swedish Bank used "undue influence" to get use of the Nobel name and the successors to those that gave it were very unhappy with the decision. In part because of undue influence and in part because they considered economics "not worthy". So no more "Nobel" this and that.

A man I work with, Hans Herren, won the World Food Price in 1995 for preserving a staff of life food crop, preventing 200 million people from undergoing the trauma of famine and saving 10 to 20 million lives. Quite frankly, I think he deserves a prize with "Nobel" attached more than most of the Economics winners.

Hans now wants to help resolve the world's energy and environmental problems.

Best Hopes,


As usual, I agree with all your remarks.

Indeed, I think the only place where we disagree is on BART. I say it transfers income from the relatively poor to the relatively rich. Even worse, BART has greatly increased suburban and exurban sprawl in the San Francisco Bay area. I used to fly over Livermore in my Cherokee 235B, and it was all farm fields around the small city in the late 1960s. Then came BART. Now all the fields are covered with houses, in large part (IMO) due to the nearby BART station.

Unintended consequences.

Yes, no, maybe.

Look at farmland around any growing American city. There is a trend for greater density development close to the stations (greater land value due to the close access to the station) except where blocked by zoning.

Given that the upper half in incomes pay more taxes than the lower half, I am not sure that it was a net transfer of wealth.


Mainly it is upper-middle class and lower-upper class people who benefit from Bart, based on personal observation of the passengers, estimating the cost of their suits and attache cases and cars that they park in the lot by Bart.

Lower-middle class and working class people pay a lot of taxes but seldom ride BART. The poor are not allowed on BART, because the BART security forces don't want to make the rich folk uncomfortable.

By the way, Livermore is so far from San Francisco that relatively few drivers are willing to make that commute by car. The freeway is jammed. BART did NOTHING to relieve congestion on the freeways.

One myth about transit is that it is supposed to reduce auto traffic congestion.

Not going to happen.

What transit does do is provide an alternative to congestion. A bypass around it for those that chose to do so.


BTW, there are several BART stations in Oakland, plus Pittsburgh (CA), Fremont and other locales not usually associated with the upper class.

Fremont is now mainly upper-middle-class Chinese Americans.

I've talked to BART security guards. They take extreme measures to keep young Black males off Bart on the routes that are primarily for the lower-upper class and the upper-middle class white people.

not an economist and therefore is almost certainly incompetent to interpret economic statistics

Sorry. We live in a society of free speech.

Everybody is entitled to (and does) "interpret" whatever they see and hear in any damn way they please to "interpret" it.

You "interpret" this Denninger fellow as being "incompetent".
Fine. That is certainly part of your free speech rights to so "interpret" the situation as you see it.

Other people have equal right to "interpret" this Denninger fellow as being "competent".

I take no position on the competency of this Denninger fellow because I don't follow his writings.

Honestly, who gives a sh*t what the "numbers" are for "retail sales" as "seasonally adjusted"? They are all fictitious abstractions made up by a bunch of "accountants" and PR people who usually fail to account for much of anything, especially themselves.

Gasoline supplies in the greater New Jersey/New York area remain low while NE refineries go through planned and unplanned maintenance - plus the Colonial Pipeline can't transport any additional gasoline right now. The situation may possibly improve within a few days to a few weeks.


Middle class downsizes as its jobs vanish, move away:

I especially like this quote:

"The only way you generate wealth is you make it, you mine it or you grow it. Just exchanging things back and forth, services, it doesn't generate wealth. It just moves it, and I think there's starting to be a realization of that," said Bob Trouskie, a regional director for the Workforce Development Institute, a union-affiliated employment and retraining group partly funded by the New York legislature.

And, of course, you can usually only make things from what is grown or mined, which puts us on a firm biophysical footing for understanding what the economy is really all about. Whatever wealth you THINK you have, it's all just worthless paper in the end if it's not backed up by real physical wealth.

Sadly, something most (if not all) classically trained economists refuse to understand.


I think that the next few years can be described as "Produce or perish."

manufacturers of high quality durables will be in demand, no doubt, but so will fixers and tinkerers (who do not explicitly 'produce').

Perhaps you are the one who does not understand. Trade creates value. See any economics text book for the explanation of this apparent paradox.

Trade creates value.

Trade establishes what a value to someone else is.

Your claim sounds like the parasite class defense of the 70% of the trade in stocks is held for less than 11 seconds.

Have you studied Ricardo? Comparative advantage? That is how trade can potentially create great value. Nothing mysterious about it at all.

Never claimed any mystery.

It smacks of self justification of parasites. The parasite needs to suck so it can live. It can't help that you are its meal.

The eleven second holding period is appears to be a myth or a fabrication that is based on remarks one small company made to a group of students about their own activities.


But I am willing to predict that even now that you know this is inaccurate, you will keep posting it in comments, just like the "70% of carbon investments are wasted link" which you have jammed up here 100 times even after it has been shown to be biased and wrong.

What is it about 70%? Does that figure into the 9/11 conspiracy theories too?

Aha, but the implied correlation movement of stock prices is at > 70%, setting all-time records.

The figure below shows what happens when about 40% of the stocks would show this correlation (in green). The other 60% show independent variability or dispersion in the rates as per the original dispersive model of stock prices.

I don't think this makes the collective stock behavior any more complex. I think it makes it simpler in fact. Implied correlation actually points to the future in the stock market. Dispersion in stock returns will narrow as all stocks move in unison. It makes it even more of a toy, with computers potentially dictating all movements.

I find it fascinating and treat it more as an intriguing puzzle than anything else. I stay away from investments myself.

You seem to know what is going on so maybe you have some other ideas.

Electric vehicles not as easy as A123

For some reason I don't know, A123 seems to have had problems getting automotive clients. They lost GM to CPI (LG Chem). They got Chrysler but Chrysler then went bankrupt and pretty much scrapped their entire ENVI division. Ford also went with CPI/LG Chem. Think is 30% owned by Enerdel. VW has dragged their feet on electric but will probably go with some German maker. Nissan is with Panasonic.

I think A123 has a deal with Volvo but they are not producing an EV yet and they'll be small volume. A123 also has a deal with Fisker but again, they are not producing an EV yet and they'll be small volume.

So A123's real problem is a lack of supply contracts with EV makers. I suspect they were not offering the low bid. A123 probably has among the best quality but price is what is key right now since the EVs are already much more than gas cars and thus will struggle to compete until gas costs rise.

It would be critical for A123 to compare their batteries to LGs side-by-side in a series of test. I bet in reality A123s slightly higher cost is an improvement in performance over the lower bidder.

Cheap is not cheap always in the long run, but in today's markets people love cheap -- hence Wallmart's rise in popularity.

The popular American model for innovation is to do research in universities, spin out startups funded by venture capitalists, and grow the company from a small beginning to a huge success.

This works for software, some electronics, and some pharmaceuticals -- and it worked exceedingly well in some cases, which is why it is thought to be a really good way to innovate.

However, it really only works well for the types of products and services, like software, where the costs of scaling up production are minimal.

For industrial enterprises that require low cost manufacturing of fairly low value products, it doesn't work well. This is because a lot of investment is required to build capacity and improve manufacturing costs to get down the "learning curve" of decreasing costs with time and volume.

A large company, like LG Corp, the second largest Korean conglomerate, can price its initial production at what it thinks its long term price for mature production will be. And it can eat the losses while it builds volume and manages down costs.

A123 has received about $350 million in VC money and a similar amount of government grants and loans. Its sales to "commerical" customers have shrunk while its automotive sales have increased in the last quarter. Overall, though, product revenues have decreased YoY, as have watt-hours shipped. Clearly it is betting the farm on automotive. It is not clear whether it can build volume and customer relations while reducing costs before it burns through its cash.

Yeah, brute manufacturing strength may trump A123's technological advantage. Perhaps A123 will be bought out eventually. But I hope they can survive on their own. They really have some of the best battery technology available. They just need to figure out how to make it cheaply. They switched to a prismatic form factor but that is just a start. They really need to hone manufacturing to a well oiled machine.

A lot of innovation is happening in the battery space. The eventual winner may be a complete surprise - or a giant like GE. How fast battery technology can advance is an open question. No doubt the first generation of EV owners will find their car batteries obsolete within the life of their car.

No doubt the first generation of EV owners will find their car batteries obsolete within the life of their car.

Unlikely - they all died many, many years ago and the batteries they used are still common today. Those batteries were not competitive with the energy storage of fossil fuels, and neither are those of today. There will be EVs in our future, but they won't be used anything like how ICE vehicles are used today.

.. and though they seem to be out of favor at present, I'm still waiting to hear how long the Nimh packs in the RAV4 EV's end up lasting. They have performed pretty well for those owners, I've heard them frequently claim. Many at the EV NUT site are reporting 100k miles plus on these packs now.

They have toxins, but are recyclable, AFAIK.

Clearly it is betting the farm on automotive.

Certainly seems to be. I haven't checked lately, but a few years back they just weren't interested in selling in small volumes to individual tinkerers and 'backyard converters'.

So the Chinese snapped up that market instead.

Considering one can't really buy A123 batteries directly for your electric bikes - I don't see them as any better than the stirling cycle engine makers....they have a product that works but can't seem to be bothered to sell 'em. And if you can't buy it in a consumer world the item may as well not exist.

IEA Peak Oil Admission

I have been reading this site for a few years now. It has been my impression that the IEA are usually bullish on oil production and reserves. For them to admit to Peak Oil seems to me to be a huge deal. Does anyone on this board feel the same?

Rob, yes virtually all of us think it is a very big deal. The editors of The Oil Drum thought it such a big deal that they created not one but three special threads on the subject. And there has been many other posts on Drumbeats commenting on the sudden downgrade of the IEA's future projections. Below are links to the three special threads.

IEA World Energy Outlook 2010: Questionable Assumptions and Major Omissions

Objectivity of the International Energy Agency

IEA World Energy Outlook 2010 Now Out; a Preliminary Look

Ron P.

People on the board have noticed, but the general population does not even know what IEA stands for.
The real question is anyone doing anything different since the IEA made the new report?
Are companies making different purchases related to energy?
Are states doing anything new?


Here is something I’ve been wondering about for several weeks. If net oil exports are already decreasing, while Chinese imports are growing rapidly, and even US Imports have been increasing for the first 10 months of 2010, then there must be other countries that are importing MUCH LESS than they were just a few years ago. Does anyone have any good data about just which countries are losing out in the bidding for net oil exports?

Much of that nation by nation data comes out a year after the fact :-(

How much oil did Chile import 3Q 2010 ?


Yes; the country by country listings for oil imports seem to be several years behind. I spent over an hour with Google yesterday afternoon and the best listing I could find was from the CIA, for 2005 and 2006, well before the big financial crash.

Several European countries seem to be importing less oil now, but some of that may be due to their efforts to reduce consumption by developing more renewables, better public transport, etc.

I suspect that maybe the lingering electric power shortages in places like Pakistan may be because they just can't afford to import much fuel, either oil or coal, at current prices.

For the first 6 month germany is down 11%.

2009: 51,237,642 tons
2010: 45,621,827

Up to august ( last month available) the situation improved to some degree, I think due to offshore storage coming onshore and the explosion/fire in the biggest chinese import port, which diminished their import capacity. So I think that a double digit decline at the end of the year is possible. I do not have any data for europe, but I don´t think that they are much better.

"Yemenis abandon farms, seek food security in city"

Obviously the situation in Yemen is serious, but I believe we will see this trend develop in the future everywhere. Although the reasons may differ, the net result will be the same, people forced to leave the countryside and head for the urban conurbations.

Climate change, the current economic paradigm, resource shortages are all impacting rural areas. The forward march of progress has gradually reduced the resilience of communities in the countryside and left them vulnerable to even slight changes. Under the current economic system the young must leave to find work, the old must leave due to lack of services and care, those that remain must commute long distances to work, villages are also being gobbled up for holiday homes (which will be abandoned when travel becomes difficult) and what goes for an economy consists of the government putting money in and the corporations taking it back out promptly. The countryside has also been de-skilled, so people can't even revert back to a system that once worked.

People have lost jobs and face more difficulty finding transportation in and out of the neighborhood, which is so remote that it has no bus service.

(emphasis added.) That just seems soooo Washington/East-Coast-centric. Reality check: I wonder what percentage of the US population actually has useful access to transit service. It doesn't seem like it can be very high at all, and the Google isn't giving me any Big Picture links.

I wonder, even more, what percentage has access to useful service that runs evenings and weekends (rather than just one bus around 7:30AM and one bus at around 5PM, weekdays only.) It's not overly likely that you'll find a nine-to-five weekday-only job waiting tables, tending bar, etc. ...

And how many of those SO REMOTE places used to have rail access once upon a time in a country far, far away.

In Wisconsin, the places right along the major trunk routes radiating from Milwaukee had some access to passenger rail. Other places had a lot less or none at all. Generally that rail was useless for getting around locally; it only ever took them in the direction towards or away from Milwaukee, and not in any other.

Oh, and as I've said before, in the 1890s the railroad magnates operating in the Chicago/Milwaukee corridors were already getting antsy about competition from bicycles, never mind cars which at that time had zero economic significance. This ought to teach us something about why it is that the time when the railroads faded into insignificance as passenger carriers is indeed "far, far away" in the dead past. Such as, unless you have wall-to-wall ground-to-sky people, the waiting and expense rule them out except for very rare trips. In the mid 1970s, I had students who had never been more than about 25 miles from home until they went to the university. The old tradition wasn't so much that they traveled by rail, as that they didn't travel at all.

I routinely travelled by passenger rail in the early to mid 1950s--Oakland, CA. to Flagstaff, Arizona. Some of my fondest memories are of those many trips. The price was cheaper than driving a car roundtrip when all you wanted was a one-way ticket.

I've also travelled coast to coast on a Greyhound bus in the late fifties--nothing like as pleasant as the train travel. But it was cheap, way cheaper than air fare. By the late fifties there were fewer and fewer passenger trains running every year as flying and the freeways made passenger rail unprofitable in the U.S.

Of course you'll reject the notion that people who have expressed their independence by moving FAR out of town, and spreading those towns out to rediculous bedroom-community distances will naturally be suffering from this liability, and should NOT expect a Subway Station or 24 hour Town-Bus Stop to appear out by their mailbox, but that instead they will notice that friends who live 'intown' somewhere are able to get to shops and jobs while THEY are going broke trying to do the same.

TRANSIT ORIENTED DEVELOPMENT.. You can look at it like a friendly Big Brother who helps keep the family together and operating in a coordinated and cooperative way! (It's really just my way of giving us a nice secure One World Government who can make all those Tuff choices for me!)

That East-Coast-centric article was about some folks coping with the here-and-now, not living in a theoretical future where vast gouts of money have been spent to redo the entire built landscape according to the latest fashionable Master Plan From On High. If they try to move 'intown' near a subway stop, they'll also discover that there's no way they can afford the usurious apartment rents or condo mortgages. (Or if they can afford the area, they'll discover that it's one where they get mugged several times a year, and they can't afford the co-pays on the hospital bills.) Heads, they lose, tails, they lose.

What are you spluttering about now, Paul? Muggings and Slumlords! oh, The Humanity..

This 'Built Environment' that you genuflect beneath was also a Master Plan we were induced to accept from 'on high', it's fine if you don't want to rebuild it, so you get to just watch it crumble instead. The way it's built, it shouldn't take long.

Apparently, DesMoines Iowa wants to be the Upper West Side of New York..

Meanwhile, a growing number of Des Moines-area cities have encouraged biking and walking by creating more bike routes on city streets and off-road trails for commuting or recreation. And, the Metropolitan Planning Organization - which sets regional transportation policy - is launching a three-year study under a $2 million federal grant to better integrate city and county planning efforts. The goal: more sustainable transportation planning.

Des Moines has evolved over the past century from being a compact "walking city" to a sprawling urban region where transportation planning and zoning policies are dominated by the automobile.

Until the late 1880s, Des Moines was largely a city of pedestrians. People, homes and businesses were closely packed together. As the city grew, the demand for more convenient transportation was first met with horse-drawn trolleys shortly after the Civil War, and electric-powered trolleys in the late 1880s.

The streetcar actually led to urban sprawl with the advent of "streetcar suburbs" in the 1890s. Real-estate speculators, who also invested in streetcar companies, encouraged the establishment of communities such as University Place near Drake University, with their own neighborhood business districts within walking distance of homes. Des Moines also was linked by "inter-urban" trolleys to nearby communities like Valley Junction and Altoona, and to other Iowa cities, including Fort Dodge and Ames.

The trolley era was brief. Though Des Moines still had 100 streetcars in operation in 1940, the city soon made the transition to rubber-tired buses. After the Second World War, the automobile age began in earnest, and steel trolley tracks were paved over by streets and freeways.

...Municipal parking-lot requirements, for example, force urban sprawl by floating commercial developments on asphalt seas. That not only makes driving easy, but makes it essential. The same is true for subdivisions without sidewalks, or zoning regulations that put vast distances between retail businesses and homes.

A well-planned city should give people many transportation options. Over the past century, government policy has for the most part done just the opposite. There is evidence that the mood is ripe for a change, however, and, if that happens, then people like Alexander Grgurich won't be considered so unusual.

.. sure, but can you get a decent Blintz? (oh, try here.. Village Inn
1140 E Army Post Rd, DES MOINES, IA 50315 http://www.allmenus.com/ia/bloomfield/109339-village-inn/menu/ )

From the 2009 census 79.2% of US population lives in "urban areas".

So the vast majority of the US population lives in places where transit can work.

According to answers.com about 8.5% of the world's population owns a car. I doubt their answer is very precise, but clearly the vast majority of the Earth's population has figured out this problem which seems so intractable in the context of US habits.

My experience is that people in countries with many fewer cars and much less gas consumption than the US use minivans, shared taxis, feet, bicycles, etc. to close the gap between their "remote" locations and transit service. As peak oil starts to bite, I think the first thing that will happen is people sitting in the empty seats of existing cars, but formal/informal van pools and shared taxis could spring up pretty quickly, and as that market develops private and/or public bus service will incrementally grow also.

The definition of "urban area" in that link is so absurdly broad that almost any place with people in it qualifies, including plenty of places too small to support useful transit. (Sure, a small place can sometimes have a stop if it happens to be on a route from someplace that "matters" to someplace else that "matters", so you can surely find at least one somewhere that has a bus.) There is some info for specific cities, which seems to come out of specific projects.

But I wasn't finding find anything for the country as a whole; most places wouldn't have specific projects since they're not right on a major route, nor part of big cities. Something is probably buried out there somewhere, if one happens upon just the right search terms. (I wasn't looking for handwaving pie-in-the-sky theory, I was looking for actual data. The original article was about problems people were having in the here and now, not what "can" happen, with sufficiently vigorous handwaving, in some fantasized future.)

The definition of "urban area" in that link is so absurdly broad that almost any place with people in it qualifies, including plenty of places too small to support useful transit.

Yes, a better description of the Census Bureau number would be "non-rural". I was looking at the figures today for a different purpose. Four of the ten "least rural" states in the CONUS are in the West: California, Nevada, Utah, and Arizona. Three of the states in the second ten are also western: Colorado, Washington, and Oregon. New Mexico misses making that top 20 by one. Despite producing about half of all the fruits and vegetables grown in the US, California has the distinction of being the "least rural" of the 50 states.

Much of the West has been surprisingly, relative to its reputation, non-rural for a long time. The trend was cemented firmly in place by the federal government in WWII. The feds established a disproportionate number of military bases and national labs, and encouraged creation of large military production facilities, in the West (granted, there were sane reasons for doing so). At least arguably, this same process accelerated "sprawl" in a large way: the facilities were generally located on the outskirts of existing cities, and housing tended to follow. An example was the Denver Ordinance plant, which employed 22,000.

"Much of the West has been surprisingly, relative to its reputation, non-rural for a long time. "

The Feds own much of the land in the West, and they will not sell. So settlement and growth can only be on land that was once railroad land or what was homesteaded before the Feds decided to hoard the rest for themselves.

How much water is available on all that land the USG owns in the West?

Enough to support any large number of people?

Nellis Test and Training Range...Utah Test and Training Range...White Sands Missile Range....Barry Goldwater Training Range...Edwards Air Force Base...China Lake...

Grand Canyon...Bryce Canyon...Zion...Canyonlands....Grand Staircase Escalante...Arches

I don't think there is enough water to spread out or add millions of Americans in these areas.

If Albuquerque had the water (something akin to its own Central Arizona Project) then it would grow as big as the Phoenix metroplex.

But i doesn't, and it won't.

And that is a good thing.

Most of Nevada is owned by the U.S. government.

Water is often what stops urban and suburban growth. See for example the city of Santa Barbara, CA. It is one of the nicest cities in the whole U.S., in large part because sprawl has been limited both by geography but also and mainly due to a limited water supply.

I actually read the review of "The Rational Optimist" above. The author (of the book) at least gets that:

"But, central to all progress
has been the revolutionary discovery of
mechanical energy-carbon-from 1700

And fully admits that this is why we are able to feed, clothe, and keep warm several billion people. The author then aparently states that Peak Oil is nothing to worry about, because "the pessimists have always been wrong before."

re, the Rational Optimist. The other reasonably rational thing in the review was that if growth can't continue, it won't.
I don't mind reading that we can adapt. Al Gore's latest book was largely a description of how we can adapt. I hope the adaptations will allow 1920's style standards of living or better.
The thing that non-economists need to realize is that the market will eventually find the optimum solution. The thing that economists need to realize is that nothing in market theory says that the optimum solution will maintain our current standard of living.

In the 14th century, our species adapted by reducing its numbers through war and plague to a much more sustainable number. This was followed by a sustained period of material progress brought about by ocean voyages and fossil fuels. Another period like the 14th century is one of the more unpleasant future scenarios. Unfortunately, it is not the worst.

Here’s a different view: I remember an old photograph (circa 1930s) of a filling station with several men standing in front. Most of them are wearing suits. The sign says “GAS 25 Cents”. The notation said that not one man in that photo made 25 cents per hour. Of course none of the men (or families) had health benefits.

I get my peak oil reality check from the filling station every morning on my way to coffee with a bunch of old guys like me. This morning regular was $2.99.9. Of course diesel is higher because of the fuel oil/diesel split at the refinery. BTW: Fuel oil here is $3.49 with no road tax … you figure! Minimum wage in Nevada is $7.25 with health benefits and $8.25 with no health benefits. For the nit pickers:


This tells me that three bucks per gallon is about 22-26 minutes work at minimum wage. A rich (moderately so) friend makes about $150 per hour, so for him a gallon is a little over a minute of work. There are no lines at the filling station except Friday evenings where SUVs and trucks are filling up and fully half are pulling boats and/or trailers. Nevada is a state where you can have a 5th wheel trailer and it pulls the 18 foot boat. I believe the limit is 55 foot long.

This is a state with the highest foreclosure rate and unemployment rate in the country. In our neighborhood in a valley north of Reno a few homes are in “short sale” at about a third of what is owed when counting first and second and line of credit. Those people have left and the census showed that Nevada was losing population. Where they went, I don’t know.

We are over 5000 feet elevation so raising water is not a problem but if I were Alan, I might be concerned.


We are having some traces of weird weather but each time the anomaly is not as bad as it was in 19XX or 18XX so it is hard to get real excited about that. We did lose our apple crop this year to late frost but we still have dried apples and pie apples from 2009 but this year’s May frosts were not as bad as some years.

I have been aware of PO (circa 1951) for more years than many of you have lived. ELM is new of course but quite simply understood. Other peaks on a finite planet is understandable ...duh! All up, I think we are OK for a while. IMHO to have knowledge and no action is tantamount to stupidity.

We are certainly not rich as above. But just to be sure, we have a year of food, lots of ammo, a hand pump in the well, a large garden with area to expand ten fold, several tons of manures available, woodworking and welding skills and tools and some solar power which I will expand as we get the money. For the nit pickers, I am very much aware that our preparations for the ‘worst’ are not complete but way ahead of our contemporaries which like most of you haven’t even started a plan. Again, what is that; knowledge without action is what?

In almost every posting I agree with Todd. Since no one can accurately predict the future I believe it is best to hope for the best and plan for the worst. I apologize in advance if I stepped on your toes.

Hi Lynford,

Wouldn't it be great if we were neighbors? Boy, we share so much! I'm fortunate that my neighbors (there are three within a mile's drive from us (this is in steep mountains after all; you don't walk if it can be avoided) also share what we both believe in.


Someday I will head up your way. BTW: What is the password to safely drive up your road. :-)

Physicists "Convert Information into Energy"

The Interwebs rejoice as blogger hot air (BHA) becomes the energy play with the best potential since the Marcellus shale to power their iPads, creating a true perpetual motion engine for the new economy!


I wasted a lot of energy accessing that information, now I'm both more tired and more depressed >:^(

Re top-link: Petrobras aspires to be world's biggest oil producer

Petrobras aims to be the world's largest oil producer as soon as 2015, according to the Brazilian energy group's chief financial officer.


... Petrobras would be one of the biggest beneficiaries of new legislation that will grant the company a minimum 30% stake in each new discovery and will also be the lead operator in all new projects.

It strikes me that this is a way to guarantee that Petrobras won't be the "world's biggest oil producer," by 2015 or any year.

"Above ground factors" strike again?


what do you mean?

I suspect that he means that the terms for foreign investors will be prohibitive. As far as I know, governments and companies holding a 30% share of resources is not unusual. However, the loss of control may be more significant.

I do wish commenters would say what they mean, rather than hint.

Oil will run out 100 years before new fuels developed: study

WASHINGTON (AFP) - The world will run out of oil around 100 years before replacement energy sources are available, if oil use and development of new fuels continue at the current pace, a US study warns.

Researchers at the University of California, Davis (UC-Davis) used the current share prices of oil companies and alternative energy companies to predict when replacement fuels will be ready to fill the gap left when oil runs dry.


I see few flaws with the study mentioned above, but anything that might bring awareness to peak oil is welcome.


Nawar - “The researchers' calculations were based on the theory that long-term investors are good predictors of when new technologies will become commonplace.”…. "As a result, market forecasts of future events, representing consensus predictions of a large number of investors, tend to be relatively accurate." Granted I’m taking a risk since economics isn’t my field. But I wonder how these assumptions, upon which their entire analysis is based, fit the long term investor analysis of the shale gas plays given that they lost their butts when NG prices collapsed? And the long term investors who bid down the value of oil stocks by almost 50% when the economy crashed. And now they are bidding those oil rich stocks up as oil prices have rebounded. Exactly what time period of stock ownership did they use to run their model: when the stocks were undervalued or over valued?

There seems to be an even greater flaw that’s so obvious I wonder if I’m missing something: “The world will run out of oil around 100 years before replacement energy sources are available”. So after the world’s economies run out of the energy they need to survive the few survivors will continue on developing alternatives? And they will do this by knocking two rocks together? When oil runs out there will be the capex and infrastructure to continue the effort????

To be honest I would be more concerned that such reports hurt the credibility of the PO story then help it.

In a sense this is similar to the prediction approach called "wisdom of the crowds". If you ask enough people and then look for the mean or mode of the answer, that is a fairly reliable answer according to the theory. It works because the stock market and similar investments do play to the wisdom of the crowd (of investors) to some degree.

It just doesn't seem right for doing this though, especially with the implied correlation of the stock market right now. People are no longer investing in specific businesses, they are just investing in the stock market.

But before you pay attention to the wisdom of crowds, you have to have some understanding of who is in the crowd. When you choose to listen to subsets of crowds, you get a different message.

As I mentioned in the link below, public markets are a sunset of capital markets that are focused on more traditional industries, so one would expect this bias.


This study is the equivalent of asking a bunch of 45 years olds about their planning horizons, then asking them again in 25 years and concluding that everyone's planning horizon has shortened. This study is really poorly constructed and meaningless. No economic journal would have published it.

If you surveyed just venture capital funds, you would probably reach the opposite conclusion. Even if the smartest scientists did it.

Finacial speculators are notoriously bad predictors of future trends. The great majority go broke in a few years or even a few months. On the other hand, long-term value investors such as Warren Buffett have been pretty good at predicting the future of supply and demand for many products. But even Warren can get it wrong. Eight or ten years ago (I forget exactly when it was.) Buffett purchased a huge position in silver futures and waited for the price to go up. It didn't go up and he took delivery on car loads and car loads of silver. Wonder if he still has it in Berkshire-Hathaway's portfolio.

He was right of course that the price of silver would go up, as it has in 2010. But he was roughly ten years too early. On the other hand, if he held onto those carloads of silver bullion, he's sitting pretty right now.

I do not know if Buffett is Peak Oil aware. My guess is that he listens to the Authorities in the oil industry, USGS, IEA, EIA, CERA. He's pretty old now. On the other hand, he has nine people working at Berkshire Hathaway fulltime, and one might think that one of those nine would have discovered that the conventional wisdom on oil reserves and future oil production levels is all wrong.

He's pretty old now.

Why should that matter?

Because as we pass the age of eighty, we lose energy. Not necessarily intelligence but energy. At seventy I still have a lot of energy, but not as much as I had at age 60. Nowhere near as much as I had at age thirty. In my considered opinion, and based on the Terman Concept Mastery Test I think my intelligence peaked at age fourteen. Fortunately, the decline in my intelligence and memory has been slow. Very slow.

You do tend to deal with a lot of anecdotal information. Is that a common habit among economists?

Oil depletion analysis relies on aggregated information and the more that you can get the better, which is why I am sensitive to the isolated and cherry-picked anecdotes. In other words, these bits of info really can't prove anything and often just get in the way. Of course that is just my anecdotal opinion and YMMV.

Most economists and sociologists despise anecdotal information. I'm way way out of the mainstream in both disciplines. Anthropologists, however, do take anecdotal information seriously, and I have been heavily influenced by cultural anthropologists. My father studied fulltime as a graduate student in cultural anthropology from 1949 to 1956, when he died, just short of his Ph.D. in anthropology. His work has had a big influence on my thinking. It has never been published, unfortunately. He did his fieldwork in India and debunked the notion that India was going to rapidly industrialize in the 1950s.

See what I mean? You are the Energizer bunny of anecdotes.

Oh, I do love anecdotes. I have learned way more valid information from anecdotes than I ever learned from text books. I know a great number of people, and I listen carefully to them.

Agreed. An anecdote now and then is okay, but have some self-restraint.

In fact, have some self-restraint in posting in general. Don, you've been away awhile, and things have changed a bit in the Drumbeat. We try to keep it more focused now, and we also discourage people from hogging the bandwidth. Please try to stay on topic, and don't hog the conversation. 30-60 posts from you daily is too much. If you have that much to say, get your own blog.

....and Don, get some sleep now and then ;-)

Thank you, Leanan. I shall follow your advice.

Since warren bought into the railroads,


I imagine that he understands Peak Oil.

Then why does not Buffett buy oil companies?

He bought COP in early 2008 and dumped it after the fall in oil prices.


Rockman, I agree with your first paragraph, I also don't share the view that markets are efficient; as a matter of fact I have done a couple of investor presentations in the past explaining why markets are generally inefficient (they are efficient at times for temporary periods), this is why I don't agree with their methodology of using stock sectors market caps as an indicator of their long term potential; I guess the only thing they accomplished is stating that fossil fuels present a larger portion of the global stock markets vs renewable energy; which is a given; since fossil fuels do represent a massively larger proportion of the world economy in comparison to renewables, thus naturally they should represent a larger portion of the stock market (especially if they believe that markets are efficient).

However, I don't agree with your second paragraph, I don't think that they are claiming the world will go on, they are just stating that there is a significant gap between the time when oil will run out and the possible replacement with a renewable alternative; I don't think they have an idea of how this gap will be filled. They are just coming to the same conclusion discussed here; oil will run out and as of yet there is no viable alternative to take over.


N - I agree about the second P. Just poor framing on their part I suspect. I'll occasionally throw out a somewhat odd opinion to just stir the conversation up some.

This study appears badly flawed. It looks at "pure plays" in alternative energy -that's silly.

If we look at EVs, we see that the first pure-play, Tesla, is growing very slowly. OTOH, GM and Nissan are producing much larger volumes of EVs and EREVs. Toyota, the biggest car company in the world, will join them soon with a plug-in. It's very likely that large, old companies will dominate EVs in the future.