Drumbeat: November 25, 2010


Tom Whipple: The IEA’s new peak

For two weeks now the peak oil portion of cyberspace has been abuzz with commentary on the International Energy Agency’s (IEA) newly released World Energy Outlook 2010. Without missing a beat and without much explanation, the world’s leading compiler of everything about energy has gone from denying that conventional oil production will peak in our lifetime to saying it happened four years ago. Will wonders never cease! The Agency, of course, did not predict an immediate cataclysm, as it managed to conjure up enough undiscovered, undeveloped, lousy quality, and very-expensive-to produce oil to keep the world sort of growing for another 25 years. Needless to say the conjuring was met with much derision from those who believe they can discern the possible from the impossible.

Before getting into the implications of all this, it is well to remind ourselves that, in the case of this particular publication and set of forecasts, the IEA has a nearly impossible mission. Although in theory independent of the 28 national governments that support the Agency, in reality it has many political masters none of which are as yet ready to grapple with the myriad of problems that will occur when their peoples recognize that significant economic contraction is the only possible course ahead.

Into the even deeper

COMPARED with the flotilla of oil and gas platforms in the North Sea, the waters west of the Shetland Islands are virgin territory. But as the British oil and gas industry declines—production in 2009, at 2.5m barrels of oil equivalent (boe) per day, was just over half its 1999 peak—the remote region has become its last frontier.


Two dead after oil tankers catch fire on Iraqi border

At least two people have been killed after some 20 oil tankers caught fire on the Iraqi-Jordanian border.

Twelve others were wounded in the blaze after a tanker exploded while unloading oil, and subsequently set 19 others ablaze, a Jordanian official said.

A preliminary investigation suggested the initial fire was "accidental due to an error during the unloading of the oil", she told the AFP news agency.


Flurry of Rig Orders Marks End of Two-Year Drought

Since the start of October, drilling companies have ordered at least 17 new rigs, a wave of spending that signals optimism that oil prices will remain high and that producers will continue to demand the latest advances in equipment as they tap increasingly hard-to-reach offshore reservoirs.


Putin says EU energy laws hurt investment

MOSCOW (Reuters) - Russian Prime Minister Vladimir Putin warned on Thursday that European legislation aimed at liberalising energy markets could hinder investment and undermine future cooperation with the European Union.

The European Union agreed in March 2009 to liberalise energy markets by splitting giant utilities, ensuring that small gas suppliers can get unhindered access to European infrastructure and compete on an equal footing with the dominant players.


Pemex plans oilfield operator auction

Mexico's state oil company Pemex will launch its first auction of oilfield operating contracts in February 2011, the company said.


Mexico takes step towards opening oil sector

MEXICO CITY (Reuters) - Mexico took a major step towards opening up its jealously-guarded oil sector to foreign companies on Wednesday with the approval of a new contracting model that lets private companies operate oil fields.

Private investors have been barred from the oil sector since its 1938 nationalization and Mexico's move to ease restrictions is a rare piece of good news for western oil firms who in recent years have faced increased barriers to investment in the most promising places in the world for oil exploration.


Command economics: for China, not all it's cracked up to be

The drumbeat these days is that command economies, specifically China's, are tough to beat. Beijing simply formulates and executes a plan of action, absent messy public debate. That is the narrative, for example, on carbon emissions reductions - China, it is said, is on an inexorable Big Green Push as part of a new path of economic development. But is it?


China’s energy drive: back on track

Beijing has set an ambitious target to reduce the intensity of energy use in China - and so desperate is the desire to meet it that in one town in Hebei thousands of traffic lights were shut off for more than a week this year.

Now, after months of similar extreme power cuts, Beijing’s bureaucrats are able to breathe a sigh of relief: it looks like China is back on track to meet the goal of reducing energy use per unit of gross domestic product by 20 per cent from where it was five years ago.


Ecuador takes control of Petrobras assets

Ecuador took control of the local operations of Brazil's Petrobras today after the company refused to sign a new service contract, said Wilson Pastor, Ecuador's Minister for Oil Policy.


Morgan Stanley Buys North Sea Forties; Two Russian Ports Raise Shipments

Morgan Stanley bought a cargo of North Sea Forties oil from Royal Dutch Shell Plc. Russia’s two largest ports will increase crude shipments next month.


Lithuania oil terminal signs Gazprom Neft deal

(Reuters) - Lithuania's state-owned oil terminal Klaipedos Nafta said on Thursday it had signed a deal with a trading subsidiary of Gazprom Neft to export fuel oil.

Loadings from Gazprom Neft, the oil arm of Russia's gas giant Gazprom, will amount to a minimum of 10-15 percent of the terminal's projected annual capacity of 7.1 million tonnes, Klaipedos said in a statement.


Gazprom says rerouting South Stream through Romania makes sense

MOSCOW (Itar-Tass) -- Gazprom has recognized the feasibility of re-routing the gas pipeline South Stream through Romania's territory, as follows from the company’s statement.


Power crisis looms without lower use

Bangkok and other densely populated cities could face massive power outages in the near future if Thais do not start saving energy now while opposing construction of huge new power plants.


New planning process will not slow nuclear - minister

(Reuters) - A major change to Britain's planning process under the new government will not delay the permitting of nuclear power plants, energy minister Charles Hendry said Thursday to ease fears of nuclear developers.


Japanese scientists to solve world's energy crisis, with sand

A team of Japanese scientsts believe they have developed a way to provide 50 percent of the world's energy needs from one source by 2050 -- by building solar power plants in the Sahara desert.

Deserts contain abundant silica, the raw material for silicon, and the scientists' plan, called "The Sahara Solar Breeder Project," involves building silicon-manufacturing plants powered by the sun, which can then breed into further plants and more power.


How sustainable is renewable energy?

The success, to date, of fossil fuels being able to meet energy demand any time required has led to a feeling of society wide unrealistic entitlement. This translates into a belief that whatever we want we can always have whenever we want it. This of course is leading to problems as it patently can no longer be maintained. It also has lead to the development of quite unrealistic expectations as to how far renewables can replace fossil fuels.

Renewable energy is being tagged on to a massive existing demand led fossil fuelled energy system that has historically grown and grown. Attempts at demand reduction and increased efficiency seem to deliver slim savings and these are often cancelled, for example, by people choosing higher comfort levels or just doing higher milage in their more efficient cars.


An Alternate History of the Energy Crisis

U.S. Secretary of Defense James V. Forrestal was terrified. The year was 1948 and diplomats worldwide contemplated what might occur if nations recognized Israel as an independent state.

If the United States recognized the soon-to-be nation, Arab nations might cut off what would become crucial oil shipments, he feared. The crimp in turn could imperil the Marshall Plan, which in turn could provide momentum to the communist juggernaut.

"The nation could be forced to convert to four cylinder cars" within a decade, he predicted. (The quote has been cited in several books, including "O Jerusalem" by Larry Collins and Dominique Lapierre.)

Opel Pandas on the streets of Baltimore! Men surely didn't take a bullet at Anzio for that. In the end, the U.S. recognized Israel, the oil embargo of 1948 didn't occur and Detroit dragged its feet on fuel economy for decades.


Peak Oil: Apocalypse or Promised Land?

I found it rather hard to tell what point of view Erik Curren is actually arguing for or against in "Peak oil risks becoming an apocalyptic cult." But it seems to be don't tell people the truth as they might ignore you, or even worse, laugh at you. So, let's browse through the sections of Curren's article.


New at the library

At the center of the novel is 11 year old Jasper Copeland, the son of Union Grove’s doctor, who runs away from home after committing a cunning act of revenge. Having put forward a shocking yet eerily convincing vision of the world’s future in his acclaimed nonfiction book “The Long Emergency,” James Howard Kunstler now seamlessly weaves hot-button issues such as the decline of oil and the perils of climate change into a compelling narrative of violence, religious hysteria, innocence lost and love found.


John Michael Greer: No time for lullabies

First, and to my mind the most crucial, is the need for dissensus. It’s impossible to know in advance what particular set of tools and skills will be the one best suited to squeak past the mess taking shape around us – and by this I mean to include both the short-term mess defined by the implosion of America’s debt economy and its overseas equivalents, and the long-term and even more daunting mess defined by the head-on collision between a civilization and technostructure predicated on limitless expansion and the hard limits of a finite planet. Green wizardry, as I’ve already discussed here, is only one option, and even within green wizardry there needs to be plenty of room for different paths, new inventions, local traditions, and a good helping of outright eccentricity.


'When Oil Peaked' argues for alternative energy sources — soon

Fans of John McPhee's 1981 book "Basin and Range" will remember Kenneth S. Deffeyes, the longtime Princeton professor who helped guide the reader through what was then called the "New Geology." "Deffeyes," McPhee wrote, "is a big man with a tenured waistline. His hair flies behind him like Ludwig van Beethoven. He lectures in sneakers."

Deffeyes doesn't lecture anymore — he retired in 1998 — but his hair still tends to get unruly.

Likewise, the findings in Deffeyes' latest book might cause oil executives — even those not affiliated with BP — to go gray overnight.


Crude Oil Trades Near a One-Week High After U.S. Jobless Claims Decline

“Oil has established a new trading range between $82.50 and $89.50 as the demand side gets a little stronger,” said Christopher Bellew, senior broker at Bache Commodities Ltd. in London. “A lot of the strength today can be attributed to short-covering before the U.S. holiday.”


Oil to Enter Backwardation `Rapidly' on Rising World Demand, Barclays Says

Oil markets are poised to enter backwardation, with prompt-delivery prices higher than those for later supply, as demand for crude increases, according to Barclays Plc.

“Global spare crude capacity has fallen this year and is likely to end the year at only a little above 5 percent,” a team led by Paul Horsnell, head of commodities research at Barclays Capital in London, wrote in a report dated Nov. 24. “We expect a more volatile and backwardated market to emerge rapidly.”


Gold and oil part ways

NEW YORK (CNNMoney.com) -- Gold and oil prices have been joined at the hip in recent months, but that all changed in the days leading up to Thanksgiving.


OPEC is central bank for world's oil, says UAE official

The UAE's envoy to OPEC today compared the organisation to a central bank for the world's oil supply.

"Whenever the market is running short or is oversupplied and prices are going through huge volatility, they call on OPEC to step in and make the right adjustment or intervention," said Ali al Yabhouni, the UAE's OPEC governor. "OPEC is acting as a central bank."


ANALYSIS-Indonesia struggles to hold down oil imports

SINGAPORE (Reuters) - Indonesia's crude imports will keep rising over the next few years as its economy rebounds and a delay in getting peak output from the giant Cepu field defeats efforts to cut dependence on overseas crude.

Indonesia's need for crude imports for its simple refineries will feed competition among top Asian buyers such as China and India for sweet grades as regional supplies from matured fields dwindle while strong dated Brent prices may curb arbitrage flows from the Atlantic Basin.


Oil pipeline bypassing Hormuz is completed

Construction of a pipeline from Abu Dhabi's largest oilfields to Fujairah, allowing crude to bypass the Strait of Hormuz, has been completed.

The pipeline to the Arabian Sea promises greater security in the event that the narrow waterway is closed, and promises to help cut the costs of exporting oil from the UAE.


Shell restoring Nigerian oil output, fixes pipeline

LONDON (Reuters) - Royal Dutch Shell Plc said on Thursday it was restoring production of Nigerian crude oil after repairing a pipeline damaged by oil theft in Africa's top exporter last week.

Shell's Nigerian venture on Friday had declared force majeure (FM) on Bonny Light exports -- freeing the company from contractual deliveries due to actions beyond its control -- after the pipeline was damaged.


China to build more gas reserves in 11 areas

China has recently decided to build a number of natural gas reserve facilities in 11 areas, namely Pingdingshan and Wenliu in Henan Province, Changchun in Jilin Province, Liaohe in Liaoning Province, Daqing in Heilongjiang Province, Ordos in Inner Mongolia, Yanling in Hebei Province, Huai'an in Jiangsu Province, Qianjiang and Yingcheng in Hubei Province, and Anning in Yunnan Province.

At present, China has altogether four gas storage projects that are newly built or still under construction, located in Tianjin, Beijing and Jiangsu, which are slated to start operation by 2012.


China to develop unconventional gases in 10 years: Woodmac

(Reuters) - China will start developing unconventional gas sources within 10 years to fuel its massive economy, possibly bringing down global liquefied petroleum gas prices, a senior energy consultant said on Thursday.

The expanding country faced with flat to declining production of normal gas sources in 20 years aims to do geologic tests and approve projects within a decade for resources such as shale gas, said Gavin Thompson, China gas research director with the UK-based consultancy Wood Mackenzie.

Those developments could impact world liquefied petroleum gas prices as China demands less, a change welcomed by other Asian countries that still depend on it, Thompson told Reuters.


China Unconventional Gas Development Faces Unique Challenges, WoodMac Says

China, the world’s biggest energy user, will take a different course from the U.S. in unconventional gas development because of “unique” geological, technical and commercial reasons, consultant Wood Mackenzie said.


China to Meet Five-Year Energy-Saving Target by Year-End, Daily Cites NDRC

China will likely meet its five-year energy-reduction targets by the end of the year after energy consumption per unit of gross domestic product declined by 3 percent in the first three quarters on a year earlier, China Daily cited Xie Zhenhua, vice chairman of the National Development and Reform Commission, as saying.


Enbridge's planned rate hike fuels anger

Enbridge Gas announced on Tuesday plans, that If approved, would cause residential customers to see their delivery fees rise by as much as 27 per cent.

The largest commercial, institutional and industrial customers would see delivery costs jump by 180 per cent.


Gas prices not following routine

After gas prices rose dramatically in 2008, A.J. Bryant said he got used to paying more at the pump and budgeting accordingly.

Thus, he said he hasn't noticed that gas prices in Jackson and elsewhere are in the unusual position of being higher now than during summer, when prices usually reach their peak each year.


Russia to cut oil exports via Kozmino Q1 '11-sources

Oil traders said Russia may have to re-route come oil flows from the West to the East, as from January 2011 it will need resources to feed a spur that links Russia to China.


Russia Energy Min against higher oil products tax

(Reuters) - Russian Energy Minister said on Thursday he does not support the idea of an increased oil products export duty in order to plug the country's budget deficit.


Korea fund buys stake in Canada oil sands developer

CALGARY, Alberta (Reuters) - Osum Oil Sands Corp, a small privately-owned oil sands development company, said on Wednesday it will sell C$100 million ($99 million) worth of its shares to Korea Investment Corp, marking the sovereign wealth fund's second investment in Canada's oil sands.


Developing nations embrace stronger oil standards

Developing countries are embracing an initiative to develop international health and safety standards for the oil and gas industry, with Gulf states among the most enthusiastic supporters.

The finding has emerged from a study commissioned by the Offshore Petroleum Industry Training Organisation (OPITO) to explore how the globalisation of the industry is affecting its safety requirements.


Three Dead After Gas Leak at Oil Refineries Haifa Plant, Israel Police Say

Minister of Industry, Trade and Labor Binyamin Ben-Eliezer said he had warned about the plant’s safety risks and called for it to be relocated.

“The facility is like a nuclear bomb and I have for years warned about its dangers,” Ben-Eliezer told Israel’s Army Radio. “If we arrive at the conclusion that the facility poses a threat to life, we will shut it.”


E-mails show struggle to guess size of Gulf spill

WASHINGTON -- The Obama administration struggled behind the scenes to determine how much oil spilled in the Gulf of Mexico from a BP well this year and defended estimates that for months were inaccurate, according to thousands of government e-mails.


Feinberg paying oil spill claims faster than BP did

NEW YORK (CNNMoney.com) -- Kenneth Feinberg said that he would get checks out quickly to economic victims of the BP oil spill, and so far, he has been sticking to his word. Thus far, Feinberg's Gulf Coast Claims Facility is paying out claims faster than BP did.


Section of Gulf of Mexico closed to shrimpers after tar balls found

The National Oceanic and Atmospheric administration said yesterday that it had closed 4,200 square miles of federal waters in the Gulf of Mexico to royal red shrimping after a commercial shrimper discovered tar balls in his net.


Chevrolet Volt's official MPG: 60 mpg (sort of)

NEW YORK (CNNMoney.com) -- The U.S. government has finally decided what fuel economy figures to put on the Chevrolet Volt, General Motors said Wednesday.

The final figure is 60 miles per gallon, but because it can run on electricity, gasoline, or a combination of both, the EPA fuel economy label is going to look a little different from the ones used on other cars.


Power Premium Shrinking as France Converges With Germany

The extra cost to buy French electricity compared with Germany’s is shrinking as the European Union moves toward a single power market for the continent.


Most recommended: Energy saving device

Designed like a standard extension socket, this gadget can detect the change in power when you switch your television on or off. Put your TV on standby as normal using the remote and the smart socket will wait a few seconds before switching it off completely. It will also switch off other devices like set-top boxes and DVD players at the same time.

IntelliPlug also includes a remote sensor, so when you want to switch the TV back on, you just hit the standby button and the system will restore power to all your devices.


Demand and supply in the post-peak oil world

An inter-governmental agency is bound to be cautious. But last year, the IEA almost doubled the oil fields’ depletion rate to 6.7 per cent. The rate of 3.7 per cent assumed in 2007 was changed after a study of 800 fields. Robert Hirsch, who led a study on peak oil for the US Department of Energy, considers a 4 per cent decline catastrophic. He believes that US administrations have discouraged the research into ‘peak oil’ after he delivered the bad news.

Further, IEA expects Saudi production to rise five million bpd or 50 per cent. Energy investment banker Matthew Simmons, who died in August, suggested that Saudi production could be tapering off soon. British geologist Colin Campbell has contended that true oil reserve figures would set off panic on the stock markets, ‘that at the end would suit no one’. So we have forecasts of oil prices much above what the IEA is predicting.


Economic growth: a zero sum game

Understandably growth, growth and more growth is the mantra of politicians, economists and media commentators the world round. However, what if future growth is just not possible? The recently released World Energy Outlook (WEO) from the International Energy Agency (IEA) did not go so far as to say that future growth is no longer possible, but it does suggest that at the global level future economic growth is now a zero sum game. In short, China and India’s gain is the OECD’s loss.


Ag plan gears up for education process

Small scale farming in the West Kootenay cannot compete with the massive farming operations in California where most of our food is imported from, says one of the authors of a coming Area Agricultural Plan.

Russell Precious said what exists currently in the West Kootenay is not abundant enough, nor priced competitively enough to persuade people here to buy local.

However, with education and the advancement of peak oil, what is grown here could become more affordable — in economies of scale — and more desirable, he explained.


Westinghouse Expects Additional AP1000 Nuclear Reactor Orders From China

Westinghouse Electric Co., owned by Toshiba Corp., expects additional orders for its third- generation AP1000 reactors from China after selling four units three years ago to the world’s fastest-growing nuclear market.


The world's largest wind farms

Driving out of the dusty little town of Sweetwater, the climb up to the High Plain reveals a few small clumps of wind turbines, the odd row of them, nothing special.

I've seen plenty of wind farms and I wonder if I'm the victim of Texan bragging: the claim to host five of the largest wind installations in the world.

But the higher I get, the further I can see and soon there's an extraordinary vista: ridge after rolling ridge crowded with thickets of turbines.


How to prevent an Arctic Cold Warhttp://www.gulf-times.com/site/topics/article.asp?cu_no=2&item_no=400663&version=1&template_id=46&parent_id=26

Russia, the United States and Canada, among others, have vital interests in the Arctic region. Russia can benefit enormously if it safely develops northern energy and mineral reserves, much of which lie in shallow water on its continental shelf. Moscow’s emerging Arctic strategy gives great weight to protecting this resource.


EU May Ban Some UN Offsets to Stop `Windfall' Profits

The European Union proposed banning some credits linked to industrial-gas projects in its carbon program from the start of 2013, limiting the options available to the continent’s emitters to cut pollution costs.


Japan says extending Kyoto pact is "meaningless"

TOKYO (Reuters) - Japan opposes extending the Kyoto Protocol binding only rich nations to limit carbon emissions and will fight for a broader deal even if it finds itself isolated at U.N. talks, a senior official said on Thursday.


Small islands seek 2011 deadline for climate deal

(Reuters) - Small island states want U.N. climate talks in Mexico next week to set an end-2011 deadline for agreeing a new treaty as a step to slow the rise in sea levels, a spokeswoman said.

Many other nations, including the United States, fear that setting a time limit may be counter-productive after the U.N.'s Copenhagen climate summit failed to meet a 2009 deadline for a binding deal.


If you're in the U.S. : Happy Thanksgiving! For everyone: happy fifth anniversary of peak oil.

I'm thankful for all this sugar in my petri dish! We shall feast on this bounty forever! Ignore the doomsters who worry about rising alcohol levels and declining sugar supplies! Long live yeast!

Blessed are the yeast, for they shall ferment the Earth.

[ i.mage.+]

Yea, they shall surely rise to the occasion.

Very Punny!!

And Yeast-us Crisp said onto his disciples, go ye forth onto the many Petri Pilate dishes of the world and spread my genetic code words, for ours is the leaven raising glory and the bubbling solution to that which ales the world.

[ i.mage.+]

Re: Chevrolet Volt's official MPG: 60 mpg (sort of), up top.

What I love about the attempt of the EPA to do the impossible is that it dramatically demonstrates what I have been pointing out since I began commenting on TOD:

Different forms of energy can not be compared. The EPA should simply state that the Volt uses 34 kwh per 100 miles in electric mode and gets 37 or whatever mpg when in ICE mode. As for the Leaf, the EPA should just forget about MPG since the car doesn't even have an ICE.

This common sense solution seems to be unacceptable, just as evaluating each form of energy according to its own standards is unacceptable among energy analysts including most who post at TOD.

For some reason energy analysts insist on comparing things that are different. They can not resist comparing a BTU of gasoline to a BTU of ethanol for example. One is renewable, one isn't, but they do not care. One depletes, one doesn't, who cares. One has blood on it, one doesn't. Doesn't matter.

In other electric car news, Toyota is trying to divert attention from the Leaf and the Volt by allowing test drives of its still in development/testing 2012 plug in Prius:

http://www.autosavant.com/2010/11/24/review-2012-toyota-prius-plug-in-hy...

Most cars trips are short. Some people will use little if any liquid fuel.

That is why plug-ins are a big advance over hybrids. I would like to see flex fuel engines in them of course.

The problem with plug-ins here in cold north Iowa where we just had an ice storm is how are they going to be heated in the electric mode? Electric heaters and defrosters for all the windows are going to consume a lot of battery power thereby reducing mileage dramatically in winter around here.

The local Toyota dealer has seven 2010 Prius cars in stock and they do not seem to be moving much anymore. They use to fly off the lot. But now they sit there becoming more obsolete by the day. Early adopters evidently got one and now buyers are hesitant to buy into a dated technology.

Cars seems to becoming more and more like computers.

I suspect they are waiting for the 2012 Plug-in Prius which should appear on the lots fall of 2011 or in less than a year.

It is tempting to go for one of those 2010s moldering as they sit there especially if you could get a good deal in January on a -20 degree day.

"The problem with plug-ins here in cold north Iowa where we just had an ice storm is how are they going to be heated in the electric mode? "

And not just electric cars. While driving to work through yesterday's record cold the 1.6 L engine could barely keep up with heat losses to ambient. Either the heater core isn't big enough, or the engine just isn't putting out enough heat.

It also dawned on me that the Volt is set up backwards. I'll need to run the engine in the morning when it's coldest, and then I could come home on the battery in the evening. Which means the plug-in part of the system is not very helpful. Granted this is only for four or five months of the year, but given the price premium, you need to show a "profit" every month to make it viable.

Couldn't the car be programmed to heat it's self up an hour before your drive while it was still plugged into the grid?

Possibly; but preheating won't keep it warm on the way in.

What would help is if you could tell the computer that there is a 28 mile drive ahead, and to have the battery at 100% at the end of the trip. And then to use normal rules for the return trip.

Then tomorrow repeat that routine. I should be able to program a routine commute into the car for optimal efficiency, including the need to run the engine in the morning for space heating purposes.

Interesting that nobody has mentioned insulation.

When you think about it, most cars are just metal>outside air. Put some insulation on it and you can substantially reduce the heat flow, particularly if you take care to deal with wind chill. You just get it up to temp before you setoff (via plug-in), and then use body heat and waste heat to keep it there.

That would also help the flip side, keeping cars cool when the sun is beating down. Here however you need to give the glasswork some UV rejecting treatment as well.

Such insulation needn't be heavy, and if you are smart you could potentially combine insulation properties with the ability to act as a form of 'air bag shield' in the event of a crash.

But triple glazed windows would wreck the optics....

I've never understood why cars are modelled on glasshouses. Only the driver needs a clear view around, and somehow van drivers don't crash. You could 1/2 the glass in a car for me. Cooler in Summer.

When you think about it, most cars are just metal>outside air.

There is usually some crushable foam layer on the inside. Granted this is engineered 100% to minimize occupant injuries during a crash, and 0% to optimize the costs of heating/cooling. Of course insulation cuts into interior volume, and might hurt the way the vehicle "shows".

Interesting that nobody has mentioned insulation.

I just last week had to work on the window regulator inside My Subaru drivers door. There is no room to spare now, would have been impossible with just a quarter inch insulation. Roof insulation-yes, doors with parts inside that may need repair-no.

What would help is if you could tell the computer that there is a 28 mile drive ahead, and to have the battery at 100% at the end of the trip. And then to use normal rules for the return trip.

They don't want to confuse people with a technical task, "just drive it normally, don't worry about the details"
On my commute by Prius, I go over a largeish hill, before reaching the bottom the battery becomes fully charged, and the vehicle spills energy by turning on "engine braking". If I had a button I could push a mile or two before the crest of the hill "use all the battery power you possibly can for the next two minutes, cause anything NOT used now is wasted", I could avoid that. So the problem is common with any twomode with storage sort of system.

In the UK's freezing weather I used to put a fan heater in the car (I only had outside parking) while I got ready to leave in the morning. Nice and toasty with no problems of Ice and frost on the windscreen. A built in, garage connect, heater could have a dense ceramic block to store heat for a short while.

NAOM

yes that's a good idea especially if the car is plugged in inside a garage. In that case I think it would make sense to always have the car warming/cooling when it is plugged in. Another thing they could do is improve the insulation on cars to reduce necessity to heat and cool. Another option I would like is to have the steering wheel electrically heated so that it is nice and toasty warm on the hands.

Nero-

Good thinking. I agree completely. If you've ever used a new 4wheeler, they usually always have electrically heated grips so your hands stay toasty. If it was a cold morning, the car cold be programmed to start heating 30 minutes before you had to leave, so the interior would be a nice toasty 70F when you climbed in. You'd need minimal amt of heat to maintain that if your commute wasn't too long. I wonder if they could (or do?) fill all the body panels with a foam insulation (it can be applied as a liquid and it expands/hardens)? Metal is a horrible insulator.

I used to see adds for interior preheaters. For many years JC Whitney sent me their catalog of after market vehicle stuff. This sort of stuff has existed for decades in lowtech form.

A quick google search turns up this

http://www.aes2.co.uk/carheat.htm

Preheat your car's engine to normal operating temperature, de-mist and defrost the windows and preheat the car's interior...
all with the engine switched off !

This one uses the fuel from your tank. But there's no reason it couldn't be electric.

You could also keep it in a heated garage overnight, which I would strongly recommend for something as finicky as EVs are likely to be.

The problem arises when you actually hit the road and find yourself temporarily "off the grid". The car will cool down pretty fast - particularly if you are commuting uphill into a blizzard, both ways.

Sorry, it's an old joke about walking to a country school in the "good old days". It's only half a joke because you usually were walking uphill into a blizzard only one way. Unless you were unlucky and the wind changed direction while you were in class. Just speaking from personal experience.

I'll need to run the engine in the morning when it's coldest, and then I could come home on the battery in the evening.

This seems like it would be an easy add-on to the control software for the system. Some combination of ambient temperature, cabin heat demand, rate of drain on the batteries, ought to be sufficient to get the car to run the gasoline engine almost from the beginning on those really cold winter mornings.

The good thing about software-based control systems is that it is straightforward to use dozens/hundreds of sensors and make the control logic arbitrarily complicated. The bad thing is that it's a really hard problem to adequately test such systems. GMC says that 70% of the staff hours for developing the Yukon hybrid's drive train was designing, coding, and testing the control software. Including the entertainment and navigation systems, some new luxury cars are running on the order of 100 million lines of code worth of software. As a point of comparison, the new Boeing 787 runs (excluding entertainment systems, so this is an apples-and-oranges comparison) about 6.5 million lines of code.

I spent much of three decades telling the executives at telecom and cable companies, "It's all about the software," but I'm still staggered by how much embedded code surrounds me.

The good thing about software-based control systems is that it is straightforward to use dozens/hundreds of sensors and make the control logic arbitrarily complicated.

Well, there is also the concept in programming of parameterizing some algorithms. Meaning: be able to have, say, a control file where you tell the program what you want for some variables.

So, as software run systems evolve, it makes sense that a 'power user' (pardon the pun) would be able to make settings for their vehicle such as:

1. Run the engine, manual override EV mode.
2. Run using factory settings
3. Run EV mode until battery depleted
...etc....

I am a TLAR engineer. Simply put a switch on the dash. RUN ENGINE ON-OFF The computer between your ears is best for your particular needs. I programmed in 'C' for a number of years and the concept that programmers are smarter than other people is a myth created by non-enlightened programmers.

While driving to work through yesterday's record cold the 1.6 L engine could barely keep up with heat losses to ambient.

Sadly, most cars have no insulation, even a hybrid, so they operate in the ICE BAU that the engine has 'plenty of heat' to heat the car... if it has a fuel-burning engine.

If cars started to be better insulated, then a smaller engine could possibly keep the cabin warmer....

It is tempting to go for one of those 2010s moldering as they sit there especially if you could get a good deal in January on a -20 degree day.

Several companies are making Prius Plug in Conversion kits. Maybe you could get the dealer to convert it as an incentive for one of these 2010 models.

The first thing I would do with one of those is another KISS solution. Put a switch and big relay in the battery line. BATTERY CHARGE-RUN. With lithium batteries you will have to use a special charger of course. Leave the charger at home since you have an ICE on board when away.

The problem with plug-ins here in cold north Iowa where we just had an ice storm is how are they going to be heated in the electric mode? Electric heaters and defrosters for all the windows are going to consume a lot of battery power thereby reducing mileage dramatically in winter around here.

The electric vehicle manufacturers have admitted that using the heater in an electric car can reduce the range by up to 50%. The EPA has certified the Nissan Leaf for a range of only 73 miles, and if you cut that in half, you have a range of only 36.5 miles. Be sure to carry a down jacket and a good pair of snow boots in the trunk.

Also, about three-quarters of Iowa's electricity is generated by burning coal, so it's unclear what you would gain in reducing greenhouse gases.

Rocky-

Tell me it isn't so?! Iowa does have a lot of wind potential and so do its neighbors. I do agree that these electric cars are going to be a very tough sell up here. Hopefully they push them hard between May and Sept!

I'd take a Leaf in a heartbeat, if it wasn't so expensive. Drop the price $10K and sign me up.

I'm not sure about your 50% figure. I've been told it is more like 5%.

Here's why: Ev'ers can use a hair dryer for a heater. The maximum amperage draw on a hair dryer is around 12 amps maximum (80% of 15 amps or you will likely trip your GFI 15 amp circuit breaker) over time. My wife's hair dryer has a rating of 1875 Watts or 15.6 amps at 120 volts which would be okay for a 20 amp circuit (80% of 20 amps is 16 amps). The Leaf and Volt have EPA usage of around 34 and 36 kwhr per 100 miles, respectively. If a person drives at 50 mph, that's 18 kwhr of usage vs 1.875 kwhr or roughly 10% but if you use the 12 amps at 120 volts, that's 14.4 kwhr or roughly 8.4% and this should be about maximum.
(MPG fuel sticker for Volt ref:
http://i.i.com.com/cnwk.1d/i/tim/2010/11/24/Volt_label_2.JPG?tag=mncol;txt)

As an experiment, can you take a hair dryer into your car and let us know how well it heats the cab with the settings on low, medium, and high?

This is my first comment ever on TOD, so Peter you are the lucky one!

I would advise being very careful when considering using a hair dryer as a heater. Hair dryers get very hot after only a few minutes of use. They don't appear to be designed for use longer than a few minutes and if the fan slows down or stops due to failure the heating element is going to melt the exterior of most hair dryers most likely resulting in a fire.

A fire in a bathroom is one thing ... but a fire inside a car inside a garage with quite likely other fuel sources in close vacinity ... this is much more interesting

I understand your concern and if not properly engineered, what you say could eventually happen. Many EVs that have been converted have several safety backup systems such as emergency disconnects, DC circuit breakers, fuses, etc. The heater needs to be addressed from a safety point of view.

I live in a mild climate and do not have the ambient temperatures to test in a frigid place like North Dakota, Wisonsin, etc. in the winter. I was curious to hear what the commenter's result were after testing.

My main thrust was to dispel what appeared to be disinformation being passed around as fact. I read a comment where someone said the Chevy Volt could travel 400 on electricity when GM has repeatedly stated that the range for electric only is 40 miles.

Are you located in a part of the country where you could give it a try?

Haha! I am in Perth, Western Australia where todays temperature was 35degC and the main concern here is how to keep cars cool so that your hands don't burn on the steering wheel when your car has been left in the sun for more than half an hour. Occasionally we get a frost in mid-winter.

I've been reading TOD for a few years now and find the topics very interesting (as I work in the O&G industry) The commentary is very informed and with a wide spread of data.

Peak Oil is scary though .... and I am concerned that the US will eventually be facing of with China for oil supplies ... in addition to the global impact on food supplies.

The problem with plug-ins here in cold north Iowa where we just had an ice storm is how are they going to be heated in the electric mode? Electric heaters and defrosters for all the windows are going to consume a lot of battery power thereby reducing mileage dramatically in winter around here.

Well, it didn't seem to bother the people in Svalbard, Norway, the world's most northerly town, where Nissan tested their EV system for six years!

http://www.nissanusa.com/leaf-electric-car/news/general/nissans_pursuit_...

Preheat the car and yourself before driving, and for the short trips the EV is intended to do, it, and you, will be fine.

.. and a couple other options..

Motorcycle Riders have heated Duds that they can wear, that plug into the bike's power. I would think this will be a good deal more energy efficient than trying to heat the space, and then getting that heat through your clothes..
http://www.racerpartswholesale.com/product/4904/PowerletHeatedGarments ($125 vest - 100 watts)

And then, there's the Amundsen approach, if I may, which is to get a pedal-powered electric vehicle, so you can get some exercise and generate your own danged heat! (Windshield Management would be one additional design project to figure out.)

those are more viable in a car then on a bike. i have a set and they become near useless once the temp drops bellow freezing since the heated parts can't keep the blood warm enough for the non heated parts to prevent freezing while at speed on the bike. this includes the hands and feet which are of course the vital parts of your body for control. yes there are heated gloves but they all only have heating elements on the back of the hand or palm none going to the fingers. it relies on heating the blood going to the fingers to keep them warm which does fail to work once the ambient temp reaches 32f.

Odd, I've generally found this to be the exact opposite of my experience. I commute on my DL650 year round so long as there isn't any snow/ice on the road. In January and February it's not uncommon for the temp to be around 0F at 430 in the morning when I leave for the gym. It's about a 10 mile ride to the gym and then after that another 20 miles to the LNG terminal.

I've found an electric jacket and gloves to keep me plenty warm even as low as zero degrees (F). I also wear a baclava under my helmet to keep my neck warm. My legs do get chilly on the way to the gym but that's ok as long as my torso and hands are warm.

After moving about 10 tons worth of iron, I'm plenty warm for the ride from the gym to my office and usually don't bother to hook the electric gloves back up. I have an Aerostitch Airvantage jacket that inflates and is ridiculously warm once I blow it up. I wear a hi-viz Roadcrafter suit as my outer layer. The most annoying thing is trying to get into all those clothes that early in the morning.

+10

Now everyone else, go write Paradigm Change 1000 times on the blackboard... with chalk.

Oh, and if it really is that cold in Iowa and other places then wet down the roads and have people ice skate to work and leave all vehicles parked or stay home and do something else. After all there are plenty of people who seem to enjoy riding snowmobiles and I haven't yet seen one that was heated.

That a carefully constructed and babied prototype worked in the conditions it was specifically designed for is not necessarily an indication that a consumer product designed for general use will work well under harsh conditions. It's hard to tell, but the distance from Ny-Ålesund to Svalbard looks to be well beyond the winter battery range of even the modern cars, so one would infer that they used a special battery. So yes, the EV will probably be good for short trips. The early adopters will have to report back on how short, in the real world.

"Babied Prototype"? - The article states it ran for SIX years WITHOUT access to service people, and the Li-Ion batts showed only slight degeneration for their time in service, well within projected amounts.

The Prairie EV, with no Nissan support or maintenance, served as the daily transportation from the base research station to the town and airport and, most importantly, while conducting meteorological observations. Zero emissions vehicles are critical for such use in order to not contaminate the research data with CO2 emissions.

"The Nissan EV became a symbol of our pledge at the International Arctic Research Village that the environment would not be damaged by the execution of research activities," recalls Dr. Hajime Ito, Chair NySMAC. "VIPs visiting our village were welcomed at the airstrip by the Prairie EV, which transported them to town without the slightest noise or exhaust gas. It was also an excellent vehicle for scientific purposes, such as the observation of wild animals, which you could approach without sound or smell."

Whether their batteries used a 'novel' LiIon chemistry is nice to speculate about if you're devoted to doubting their statements, but it's just conjecture until you've got something to show.

Well, we're only told that a special "cylindrical" cell was used. Can't "show something" if it's all proprietary, as it would have been that long ago. So it's like oil production, it's not possible to know absolutely, but you can certainly make reasonable estimates. And despite wishful thinking on your part or anyone else's, it still seems sensible to estimate that this was essentially an expensive, one-off (or very-few-off, I see no point in quibbling over whether they built three or thirty) prototype not likely representative of an everyday mass-produced consumer product. So I think the folks from northern Iowa are well justified to be rather skeptical at this point. Let the pompously posturing Hollywood stars and other folks with vast sums of money burning holes in their pockets take this thing down the learning curve - it's not the first time.

I think its fair to say that the Leaf, on which Nissan is betting big part if their future, is likely to be much more carefully constructed than that Prairie test vehicle - that is why you do test vehicles - to work out what needs to be constructed better.

The Leaf has 24kWh of storage. If you run one kW of heat, and that is a good amount of heat for a small car, then you reduce your range by 4%.
If you want to run more heat, then yes, you will lose more range - that's part of the deal with going electric, and anyone who buys without knowing that, shouldn't be buying.

of course, one benefit is that you don;t have to worry about the engine not starting in cold weather!

That said, I too am happy to have the movies stars etc do their money on the first generation of these, the EV's will get better, and cheaper.

I am personally of the opinion that a small, two seater EV is the way to go (like GM's original EV-1). Given the main use for these things is city cars, not family vehicles, two seats is not a huge disadvantage, and the car can be made smaller and lighter, which means less batteries and less power are needed, and the car will be cheaper. It will also have less volume to heat and cool.

Platts and the Wall Street Journal report that the diesel crisis in China is expected to improve, mainly because they solved their problems the easy way - imports of diesel into China have picked up substantially.

The Secret Cargo of the Athenian Success (a VLCC) may also be on its way to China on December 4 to help out. http://www.theoildrum.com/node/7125/745170

Unipec, Gunvor import gasoil into China to meet shortage

Singapore (Platts)--25Nov2010/806 am EST/1306 GMT

Chinese trader Unipec is planing to move another 220,000 mt of gasoil into China in December to meet the ongoing diesel shortage in the country, a source familiar with the matter said Thursday.

The trading arm of Chinese refining giant Sinopec bought a total 220,000 mt of 0.2% sulfur gasoil and 10 ppm sulfur gasoil in Singapore and Taiwan, the source added, declining to reveal exact volumes of each grade.

http://www.platts.com/RSSFeedDetailedNews/RSSFeed/Oil/8222875

* NOVEMBER 23, 2010, 11:08 P.M. ET

Shell, Unipec May Ship Asian Diesel To Hong Kong -Shipbrokers

MR-Sized Diesel Shipments Into Hong Kong
=============================================
Vessel Date Load Port Charterer
=============================================
Nanjing TBN Nov. 23 Shanghai Unipec
Dai Viet Nov. 27 Japan Shell
CSC Auspicious Nov. 28 Singapore Shell
Ocean Moonbeam Nov. 30 Japan Unipec

http://online.wsj.com/article/BT-CO-20101123-717471.html

Meanwhile distillate supplies in the US midwest have fallen rapidly in recent weeks, to very low levels.

http://www.eia.gov/oog/info/twip/twip_distillate.html

A possible solution albeit not immediate is LNG on trucks and boats. Yesterday the Drumbeat has an interesting Reuter's article, suggesting that Chinese companies are working on LNG as an alternative to diesel. I wonder if this can scale and where the supplies of NG will come from.

I wonder if this can scale and where the supplies of NG will come from.

http://www.economist.com/node/14009121?story_id=14009121

Mexico is sending watery oil/products to China, as China appears to be in a rush to buy oil and products anywhere it can find it.

Does anyone have some insight as to why oil from Mexico would contain 2% water???

Asian Fuel-Oil Premium to Increase Fivefold in Survey: Energy Markets
By Yuji Okada - Nov 25, 2010 11:06 PM ET

Lower-quality shipments into Asia from other regions is increasing amid the shortage. Cargoes from Mexico contained more than 2 percent water, while imports from Venezuela had about 0.8 percent of water, Imaizumi said. Water content should be no more than 0.5 percent, according to recommended levels set by the International Organization for Standardization.

‘Another Trigger’

“An increase in cargoes with high water content or high metal content was another trigger for the backwardation,” Imaizumi said. “These off-specification cargoes require blending with other fuel but blending material is also getting tighter now in Asia.”

http://www.bloomberg.com/news/2010-11-26/asian-fuel-oil-premium-to-incre...

(Uptop) Re: fifth anniversary of peak oil (Deffeyes' website)

I'm somewhat surprised that Deffeyes doesn't get more credit for his prediction, at least in Peak Oil circles. While he did make an erroneous observation about a 2000 peak, he never backed away from what his model showed, i.e., a conventional peak between 2004 and 2008, most likely in 2005, and he thought that slowly rising levels of unconventional production would not be be sufficient to keep global crude production increasing. So far at least, he has been right on all counts.

After showing a large increase in crude production, in response to rising oil prices, in the 2002 to 2005 time frame, global crude production has been at or below the 2005 annual rate for going on five years now, with all five years showing an annual oil price in excess of the $57 that we saw in 2005, and with four of the five years showing year over year increases in annual oil prices. This lack of a production response to rising oil prices is similar to what we have seen in other post-peak regions, such as Texas, the overall Lower 48 and the North Sea. The only real difference between the historical analogues and global production now is that globally we are seeing an unconventional component that was not a factor in the historical peaks.

(Uptop) Re: "When Oil Peaked" (Deffeyes) argues for alternative energy--soon

The reporter trots out Michael C. Lynch to counter Deffeyes' points. Of course, there is no mention of Lynch's sorry track record. An essay from last year:

http://www.huffingtonpost.com/joseph-romm/michael-lynch-who-predict_b_26...
Michael Lynch, Wrong on Oil Prices for Over a Decade, is Wrong About Peak Oil (August, 2009)

Michael C. Lynch, circa 1996:

“... the ongoing technological revolution in the industry, combined with managerial improvements and a more friendly fiscal environment in oil exporting countries, will keep real oil prices flat for the next two decades.”

When I debated Lynch in 2006, and when I confronted him with historical examples of regions that had peaked, e.g., Texas, he basically responded with Cornucopian Denial--he asserted that Texas, whose output regulated the price of oil for about four decades, was not a place where he would choose to drill. In other words, regions that have shown production declines don't exist where Lynch lives, on Fantasy Island.

Excellent judgement by Deffeyes, yet reporters let Lynch get away with saying vague things like "There are already several million barrels a day of idle capacity", which when your really look at that statement, doesn't really mean oil output can be stepped up.

I am sure there is "idle capacity" in Texas and Alaska, but how is that going to help us?

You would think five years past PO there would be a growing awareness of the effects of PO, and there is some, but mostly folks still just blame OPEC, speculators, and the oil companies - for any shortages or rising prices.

Charles - Perhaps you're joshing. I don't know about Alaska but there is no idle production in Texas. Operators are doing everything possible to squeeze out oil as fast as possible. This includes some actions that probably won't return a profit. Even with NG prices being so low most operators are selling as much as possible as fast as possible. We just put a NG well on line a couple of months ago. And when we get a service company lined up (they're too busy right now to do our job) we'll spend some more money to get the production rate up.

As always: cash flow is King in the oil patch.

Sorry, I didn't explain myself very well. You're right that cash is king in the oil patch.

Pushing the Facebook "Like" button.

I'm somewhat surprised that Deffeyes doesn't get more credit for his prediction, at least in Peak Oil circles.

Especially considering he was a close colleague of the master himself, Hubbert. Not only is he a big admirer of King, he adheres to his formulas and that paid off with an accurate prediction, which your right, should be given more credit.

Deffeyes was off. Using EIA data, the period Sep '07 to Aug '08 was the 12 month period of peak oil production.

The average daily production in 2008 exceeded the 2005 average up until about the last half of December 2008.

Clearly, if there hadn't been a sharp recession, 2008 would have been the peak year.

What persuades me that we're probably at Peak Oil is the plateau* we've been on since 2005. *(not at the previous rates)

I'm not overly impressed by the debate that gets into the minutea of exactly when, as I've been of the opinion for some time that it'll probably only be with a decade's hindsight that we'll be able to call "PEAK" with any confidence. Whilst it's clear that there has been a small increase in EIA all liquids. It looks to me that there's a decreasing trend in the EIA crude using a rolling 12 month average, a decreasing trend broken by the 2008 price driven spike. Although the series is too short given the it's slope (-17.7 per month) for me to be confident. Give it some more years.

2008 could have been a contenda'. But it lost. You don't get to change the definition of year to any 12 month period.

Using EIA data, the period Sep '07 to Aug '08 was the 12 month period of peak oil production.

A narrow band or better known as a plateau began in 05, not 08. In fact, oil prices continued to climb from 05 thru 08 as suppliers failed to meet demand to bring the price down. Don't you remember Bush jr. asking the Saudi's to increase flow in 07? Their answer essentially was, 'what you see is what you get'. Also, exports have been falling ever since 05. Sure you're not counting all liquids vs. crude? I think Deffeyes is talking about crude.

Clearly, if there hadn't been a sharp recession, 2008 would have been the peak year.

But there was a sharp recession, and 2008 wasn't the peak year. "Woulds" don't count. Deffeyes was "right enough."

It's also becoming more and more clear that the recession was prompted by the spike in oil prices, which was induced by constrained supply, which was the result of the failure of supply to grow to meet demand: i. e. Peak Oil.

It's also becoming clear that Hubbert himself was more right than people give him credit for. His original prediction was that world oil would peak around 1995, but after the oil embargoes of the 1970s, he modified that prediction to say that the peak would be pushed back, "7,8, 10 years," meaning about 2005.

He's even on tape saying it, for chrissakes.

Re: Deffeyes, of course 2005 production was also suppressed because of the hurricanes.

Re: Hubbert, in 1956 he said that while the timing of the global peak is difficult to predict it would probably occur within 50 years, i.e., by 2006.

RE: Agriculture in West Kootenay

http://thenelsondaily.com/news/issues/ag-plan-gears-education-process-8451

Let's read the article carefully: The main article says something about agriculture, with a picture of a combine. The there are other news stories, on the same page, just next to main article. Slocan is a village/township town in the area.

"Slocan mayor's husband arrested in grow operation bust in August has court case adjourned until January".

You see, there is an excellent high quality cash crop grown in Kootenay's, satisfying needs of consumers in British Columbia and Pacific NorthWest already.

Growing food with agroforestry in North Central Washington - Pretty close to the Kootenay of British Columbia. This is a playlist of 6 videos about agroforestry and small farming. I did these early October. Whispering Pines series was established almost 30 years ago and illustrates how with a gravity irrigation system an oasis can be created in this shrub=steppe semi desert. Okanagan and Leaping Sheep sets are now producing food for farmers markets and specialty buyers in region.

Here is another playlist showing same or other similar projects last May. Included is a video discussing 'getting started in Agroforestry'.

Any who know Michael Skeeter Pilarski - these are his projects.

Rich

Bloomberg's article: 'Backwardation in the crude markets':

Post- the 2008 price spike the trend in oil prices has been lower. Credit availability along with demand has collapsed. Here's an interesting chart from EconomPic to put this in perspective:

Note the blue line on the right ...

As deleveraging continues, fuel will be rationed by physical availability as there will be insufficient business activity (growth) to generate the required credit to allow rationing by price. Fuel will be 'cheap' but fewer will have the means to afford it. Because of declining cash flow in the production cycle, regions will run out of fuel as was the case in 1973- 74. There will be no replacement without starving another region. The foregoing is both consistent with what has been taking place across the world's economies to date and is also consistent with deflation.

The declining ability of customers to pay reaches into the future as well. The underlying inflation assumptions are based on extrapolation of commerce growth since the 1940s. Damaged balance personal and business balance sheets dent the nation's ability to generate credit. More valuable money vanishes from circulation along with inflationary assumptions. It really is different this time!

The energy- compounding spiral will probably emerge as backwardation in the oil futures market: where the price of fuel declines relative to the risk- free price - which includes the cost of 'carry' or storage and transfer over time. Currently the oil markets are contangoed - the forward month- contracts are priced higher than the front month - and are presumably somewhat higher than the carry expenses plus interest costs.

This would represent a 'volatility premium' granted to those who make themselves swing producers, either by having spare capacity in the ground or in floating storage.

Inflationary assumptions die hard. If backwardation appears in the oil markets it will suggest that the forward purchasing power of oil consumers is collapsing. Since much of the world's purchasing power resides in inflationary hotbeds such as India and China which (presumably) hold large dollar- and foreign currency reserves. Backwardation would be a very strong overall deflationary signal. Can inflation (in one country or area) coexist alongside deflation? The answers are 'yes' and 'irrelevant'. Backwardation in the crude market would indicate that both the money- value of crude and of (Chinese) products derived from crude are falling. It would reinforce the value of currency. Traders are betting that dollars priced in oil will become more valuable.

It also would mean that the emerging countries' consumption would collapse alongside the US's and Eurozone. Backwardation in crude is a very strong deflation/recession alarm. The last time crude futures were 'backward' was in Autumn of 2008.

Putting in some water and canned goods might not be a bad idea, either.

Mish had this video link of Euro-sceptic Nigel Farage (UK Independence Party) at the European Parliament:

http://www.youtube.com/watch?v=4CEu2sy2Z_0

So which places will be the first to feel the pinch of supply crunches and shortages?

Yours is indeed a very interesting comment. I have noticed the empty storefronts all around and I know the oil that used to go to shipping goods, customers, workers, to those establishments is now going elsewhere. This is a process that doesn`t stop and doesn`t take a break. All over the world, the markets never sleep although people do.

Circling the drain....we are really just hovering while waiting for the thermodynamically inevitable to occur.

In the US, Missisipi, Montana, South Carolina, Oklahoma and Louisiana used to be the most vulnerables states to oil price increases, according to the Natural Resources Defense Council in the recent report “Fighting Oil Addiction: Ranking States; Oil Vulnerability and Solutions for Change"
All over the world, we have to focus our attention in GDP produced with a barrel of oil and people dependency, the most "oil" vulnerables countries all over the world are:

Iceland (gone bankrupt)
United States (... bankrupt?)
Ireland (going bankrupt)
Greece (gone bankrupt)
Spain (going bankrupt)
Japan
Germany
Italy (going bankrupt)

.............

OT: Montara

Oilers might be interested that the enquiry into the Montara blowout offshore NW Australia reported this week, here. The finding on cause is eerily familiar:

...hydrocarbons entered the H1 Well through the 9⅝” cemented casing shoe and flowed up the inside of the 9⅝” casing. The Inquiry finds that the primary well control barrier – the 9⅝” cemented casing shoe – failed.

G.