Drumbeat: December 10, 2010

Oil demand to hit highest level ever

NEW YORK (CNNMoney.com) -- Worldwide oil demand hit its highest level ever on the back of explosive growth in the developing world, according to preliminary figures in a recent report.

But the world's thirst for the hot commodity is unlikely to lead to the price spike witnessed in 2008 -- largely due to oil field investments made during the last bubble, analysts say.

Globally, oil demand hit 88.3 million barrels a day in the third quarter of 2010, according to preliminary numbers released earlier this week from energy consultants Wood Mackenzie. That tops the previous quarterly record of 88 million barrels a day, reached in the fourth quarter of 2007.

EIA outlook pegs US natgas output at record high

(Reuters) - A recent natural gas outlook by the U.S. Energy Information Administration pegged domestic gas production this year at a record high.

In its December Short-Term Energy Outlook released on Tuesday, EIA said it expected marketed natural gas production in 2010 to be up 2.11 billion cubic feet per day to 62.09 bcf daily.

U.S. natgas rig count falls 13 to 948-Baker Hughes

NEW YORK (Reuters) - The number of rigs drilling for natural gas in the United States slid by 13 this week to 948, oil services firm Baker Hughes said on Friday.

The gas-directed rig count, which had gained in the previous two weeks, hit 992 in mid-August, its highest since February 2009, when there were 1,018 rigs drilling for gas.

Deutsche Bank Raises Coal Forecasts on Market Shortage

Deutsche Bank AG raised price forecasts for thermal coal by as much as 17 percent on expectations that a shortage of the fuel will widen over the next two years.

Export power-coal prices at Richards Bay, South Africa, a market benchmark, will average $118 a metric ton next year and $140 in 2012, Daniel Brebner, a London-based Deutsche Bank analyst, said in a report dated today. That’s up from previous estimates of $110 and $120 respectively, he said.

Why China's oil producers love Latin America

Adam Waterous, head of Scotia Waterous, says that there are three main characteristics of the region that are attractive to Chinese acquirors.

The assets tend to be heavy on oil, relative to gas, and Chinese buyers are seeking oil.

Second, the oil plays in the region tend to have been "underexploited" relative to other areas of the developed world, leaving plenty of potential upside.

Saudi Aramco to Supply Asian Refiners Full January Oil Volumes

Saudi Arabian Oil Co., the world’s largest state-owned oil company, will supply full contractual volumes of crude to Japan and South Korea for loading in January, according to refinery officials in the region.

Mexican oil may not be worth it

But is this new regime enough to lure the major oil companies to come down to Mexico? While it does make it more amenable to them, it is certainly not ideal. After all, they still won't own the oil. That means that they won't be able to book the oil to their reserve base -- a major drawback since oil companies are judged by the public markets in large part by their ability to replace their reserves. Not owning the oil also means that they won't be able to control where it goes. This is important for logistics and trading purposes, which is a major profit center for some oil companies, especially BP.

Does Oil Flow Both Ways in Mexico?

Mexico isn't part of the Organization of Petroleum Exporting Countries. But by starving its oil industry of funding, and curbing supply that could moderate prices, it sure helps out. Can it now work the other way?

Latin America Fuel Theft Serious Problem

RoseAnne Franco, Latin America upstream research analyst at Wood Mackenzie: Crude and oil product theft is a serious problem that robs Latin America's major hydrocarbon producers of millions in lost revenues. Foremost, the level of oil and fuel product theft tends to correlate with the level of state capacity and the reach of organized crime.

Riyadh 'preparing for Naimi's exit'

Saudi Arabia is weighing up candidates to succeed long-standing Oil Minister Ali Naimi in a Cabinet reshuffle that could happen in late February or early March next year, two Saudi officials familiar with the situation have claimed.

Ecuador 'bids to lure Opec players'

Ecuador may try to tempt fellow Opec producers into its play this weekend after seizing licences held by Petrobras, Noble Energy and a number of other companies that refused to alter the terms of their contracts.

US to Accept Comments on Shell's Alaska Plans through Dec. 23

The U.S offshore-drilling agency said on Friday that it would accept comment through Dec. 23 on Royal Dutch Shell PLC's (RDSA) plans to drill in the Beaufort sea off the coast of Alaska, giving the public a chance to comment on the controversial plan.

Shell slams Nigeria claims

Anglo-Dutch supermajor Shell today angrily denied media reports that it had infiltrated key Nigerian government ministries, giving it access to politicians' every move in the oil-rich west African nation.

Who needs domestic oil production? We can just get more from OPEC

One of the sad truths about the Obama administration is the indifference they have for producing energy domestically.

The administration has given us another piece of evidence of their hostility toward energy production. On page 69 of a new proposed drilling rule, the administration argues that we don’t need to worry that their permitorium will reduce oil production in the Gulf (and destroy good paying jobs) because we can always get more oil from the oil dictators at OPEC:

Report: Some Oil and Gas Commission Appointees are Energy Execs, Lobbyists

At least nine members of the Interstate Oil and Gas Compact Commission are oil and gas industry lobbyists or executives, according to an investigation by ProPublica.

The Interstate Oil and Gas Compact Commission is a 38-state agency charged with conserving domestic oil and natural gas "while protecting health, safety and the environment," according to the commission's website. Members of the commission include governors of the oil and gas producing states, as well as representatives and associate representatives appointed by the governors.

The search for oil

Demand for oil is driving exploration in ever more unlikely frontiers. Are the benefits worth the risks?

Peak planning

A variety of analyses pinpoint "peak oil" as either having just been reached or predict its imminent arrival. Regardless, a 50% reduction in oil production is expected by 2050, so the society inherited by our grandchildren and great-grandchildren is likely to be markedly different from our own.

Exactly how continues to be a matter of some debate, with those portraying a world shackled to petroleum-related technologies predicting gloomy scenarios lived out in energy-impoverished, "self-sufficient" communities.

Others have greater faith in the creative capacity of humankind to overcome such limits in ways as yet unknown.

Security of Supply

This is our reality - we’re living on a relatively small planet with a finite amount of reserves and a growing human population.

Broad spectrum peak commodities is a cause for concern over the longer term.

In the shorter to medium term there are several concerns in regards to global resource extraction we need to consider.

John Michael Greer: The future's further shores

Last week’s post on the future of the peak oil movement seems to have been timely. In and around the unraveling of global economic and political structures that accounts for a growing share of the evening news – Eliot’s “cracks and reforms and bursts in the violet air” have plenty of equivalents just now – quite a few figures in the peak oil scene have begun reorienting themselves to a world in which the coming of peak oil has stopped being a preoccupation of the fringe and become one of the simple and inescapable realities of our time.

This is not to say that all these reorientations are well advised. Sharon Astyk, for example, has proposed aligning the peak oil movement with climate activism; in the abstract, this is a logical idea, but in the real world it’s an invitation to disaster. The climate change movement has science solidly on its side, to be sure, but it’s proven hopelessly inept in dealing with the decidedly unscientific worlds of public relations and politics; climate activists have time and again allowed their opponents to define the terms of the debate, and relied on the prestige of science to make their case at a time when that prestige, already at a low ebb, is continuing to wane. Their opponents have not exactly been slow to take advantage of these missteps.

Contest for Specially Signed Copy of The Witch of Hebron

When I met up with author Jim Kunstler a few months ago, I had him sign a copy of his latest novel, The Witch of Hebron, for a reader of this blog. As many of you know, this is the follow-on book to Jim's "post-oil/debt-bubble/Savior State" novel World Made by Hand.

Jim inscribed the book "To the lucky reader of the splendid blog Of Two Minds." Why lucky? Because there is a contest. The winner gets the specially inscribed book, and the runners-up will have to make do with a signed copy of one of my books.

Real economies and the illusions of abstraction

Charging interest for lending money was frowned on by our ancestors and considered a sin in Christian, Judaic as well as Islamic and other religious traditions. This view survives today in Sharia finance where lending at interest is shunned in favor of requiring the investor or creditor to share risks of any enterprise with the entrepreneur.

Generations of scholars since Aristotle’s treatises on “just prices” have examined the myths and human experiments in creating money and systems of exchange, from mutual fund manager Stephen Zarlenga’s The Lost Science of Money (2002) and Prof. Margrit Kennedy’s Interest and Inflation Free Money (1995) to lawyer Ellen Brown’s Web of Debt (2007). In my Creating Alternative Futures (1978), I posed the question: Is there any such thing as profit without some equal, unrecorded debt entry in some social or environmental ledger or passed on to future generations? My answer was “yes,” provided all costs of production were internalized and thermodynamic, not economic, measures of efficiency were calculated.

NRG Energy to break ground on New Mexico plant

PRINCETON, N.J. (AP) -- NRG Energy Inc. said Friday it will expand into New Mexico by year-end, breaking ground on a new solar power facility near Santa Teresa.

The company said it plans to invest as much as $21 million in the project and will sell the energy the plant generates to El Paso Electric Co. under a 20-year agreement.

Lighting up the subcontinent

New renewable energy schemes in India promise an end to power cuts, but only if they receive international support.

NASA: 2010 Meteorological Year Warmest Ever

The 2010 meteorological year, which ended on 30 November, was the warmest in NASA's 130-year record, data posted by the agency today shows. Over the oceans as well as on land, the average global temperature for the 12-month period that began last December was 14.65˚C. That's 0.65˚C warmer than the average global temperature between 1951 and 1980, a period scientists use as a basis for comparison.

IKEA workers get wheels. (Assembly required)

NEW YORK (CNNMoney.com) -- Employees of the Swedish furniture retailer IKEA can now go to work in two-wheel style.

All 12,400 U.S. IKEA employees walked away from work this week with a silver mountain bike, a gift the company says is a big thank you to workers for a great year.

...IKEA said it hopes the bikes will help employees by supporting a healthy lifestyle and providing "everyday sustainable transport."

The Beekeeper Next Door

Nationwide, hives are being tucked into small backyards and set alongside driveways; even the White House has installed some. Beekeeping classes are filling up quickly, and new beekeeping clubs are forming at the same time that established ones are reporting large jumps in membership.

Infographic of the Day: Happiness Comes at a Price

What drives all that happiness and woe? As you might have guessed, the economy has a lot to do with it.

...But here is where The Happy Planet Index starts looking a bit grim. The flip side of being rich and content is that you're devouring resources at the same time. Amorphous things such as a fulfilling job and bright economic prospects come at a profound cost to the planet. As we get rich, our carbon footprints swell, and our damage to the planet increases.

Oil Gains a Second Day After China's Imports Rise, U.S Jobless Claims Drop

Oil rose for a second day in New York on signs that Chinese demand will withstand measures to slow the economy and that U.S. consumption is recovering.

Futures narrowed their weekly decline after China said November crude imports surged and the International Energy Agency raised its 2011 oil demand forecast for a third month. A U.S. government report yesterday showed jobless claims dropped more than forecast. China’s central bank said it will raise the amount the nation’s lenders must hold as reserves from Dec. 20.

Gas prices on track for unseasonable spike

Motorists, brace yourselves for a lump of coal this holiday season: higher-priced gasoline.

Nationwide, a gallon of regular unleaded gas averaged $2.977 on Friday and more than $3 a gallon in 20 states. That's up nearly 10 cents the past week and 34 cents higher than December 2009, AAA spokesman Troy Green says.

China November Crude Imports Jump by 26% as Refiners Boost Fuel Production

China, the world’s biggest energy user, increased net imports of crude oil by 26 percent in November from a month earlier as refineries ramped up processing rates to ease a diesel shortage.

OPEC May Have to Act if Oil Gets to $100, Secretary General Says in Quito

Oil prices of $100 a barrel may indicate "something wrong with fundamentals" in the market and lead OPEC to act, said Abdalla El-Badri, the organization’s secretary-general.

Gold, Copper, Oil, Corn Will Extend Gains Next year, Morgan Stanley Says

Commodities including copper, gold, crude oil, corn and soybeans will extend gains next year as emerging markets drive global demand while supplies tighten, Morgan Stanley said.

Natural Gas Prices May Rise Next Year on Lower Production

Natural gas prices may rebound next year as producers cut output for the first time in six years amid record stockpiles and an expanding U.S. economy.

A 20 percent drop in prices this year will contribute to a decline in drilling for the fuel sold to factories, power plants and homeowners, the Energy Department said in its monthly Short- Term Energy Outlook on Dec. 7. Output will average 62.01 billion cubic feet a day in 2011, down from a record of 62.09 billion this year, the department estimated.

With oil prices around $90, recovery is over a barrel

The "recovery" gained another enemy this week when the price of oil hit $90 a barrel on Tuesday (it was trading around $88 this morning). Higher oil prices translate into bigger costs for American households and the many petroleum-based products they use. This benchmark has long been seen by many economists as a point when oil prices start to harm the U.S. economy. They also are one of the biggest wild cards in the Federal Reserve's bet that deflation -- or at least disinflation -- are the big dangers, rather than inflation.

Beware $90 oil

With high unemployment, weak consumer spending and falling home prices, what else could possibly slow America's economic recovery? Oil prices.

IEA Raises 2011 Global Oil Demand Forecast for a Third Month, Citing China

The International Energy Agency raised its 2011 global crude oil demand forecast for a third month on consumption gains in North America and China.

Crude use worldwide will average 88.8 million barrels a day next year, about 260,000 barrels more than its previous forecast, the Paris-based adviser said today in its monthly Oil Market Report. Increasing demand could put pressure on OPEC to boost supply early next year, the IEA said.

IEA and OPEC differ on need for more oil supply

(Reuters) - Two of the world's most influential oil forecasters gave contrasting outlooks for 2011 on Friday, with the consumer's watchdog anticipating robust demand and producer group OPEC saying supply was adequate.

OPEC Compliance With Output Quota Was Stable at 54% in November, IEA Says

OPEC’s compliance with record supply cuts was little changed last month as production declines in five of its member countries offset increases in Saudi Arabia, Qatar and Iran, the International Energy Agency said.

IEA Says OPEC Oil Capacity to Dip in 2011, Rise After

OPEC’s oil production capacity will dip next year then rise steadily through 2012 to 2015, according to a monthly report from the International Energy Agency.

The daily production capacity for all 12 members of the Organization of Petroleum Exporting Countries is forecast at 35.50 million barrels for this year, 35.22 million barrels for 2011 and 36.94 million barrels for 2015, the IEA said today.

IEA: Risk Of Chinese Overheating After "Astonishing" Oil Growth

PARIS -(Dow Jones)- Citing "astonishing" year-on-year growth in Chinese oil demand in October 2010, the International Energy Agency warned Friday that the Chinese economy was in danger of overheating and said food prices have risen more steeply than reflected by official Chinese statistics.

"The strength of China's oil demand is consistent with other indicators suggesting that the economy is in danger of overheating," the IEA said in its monthly Oil Market Report. "Not only does GDP growth continue to hover around the 10% mark, but inflation is also creeping up."

Nomura Says IEA May Be Overestimating Outlook for Non-OPEC Crude Supplies

The International Energy Agency may be overestimating the outlook next year for oil supply excluding crude produced by the Organization of Petroleum Exporting Countries, according to Nomura International Ltd.

IEA Predicts 18-Month Delay in Development of New Fields in Gulf of Mexico

The International Energy Agency forecast the development of new oil fields in the Gulf of Mexico will be delayed by 12 to 18 months, more than previously estimated, because of restrictions after the BP Plc spill.

Chevron hikes spending 20 pct in search of growth

Chevron Corp , the second-largest U.S. oil company, will increase spending by a fifth to $26 billion in 2011, with 85 percent going to exploration and production as the industry seeks out new sources of growth.

Sinopec Agrees to Purchase Occidental's Argentina Unit for $2.45 Billion

China Petrochemical Corp., Asia’s biggest refiner, agreed to buy Occidental Petroleum Corp.’s Argentine oil and gas unit for $2.45 billion, signaling the country’s appetite for energy assets shows no sign of easing.

BG Group announces update on Tupi and Guará fields, Santos Basin, offshore Brazil

BG Group today announced an update on the Tupi and Guará fields in the Santos Basin, offshore Brazil. The update relates to the first two Floating Production, Storage and Offloading (FPSO) vessels on the Tupi field and the first FPSO on the Guará field.

Russian foreign minister doubts NATO sincerity after Baltic leak

Russian Foreign Minister Sergei Lavrov has expressed concern over NATO's integrity after the revelation of the military alliance's plans on defending the Baltic states against Russia.

The latest batch of U.S. embassy cables released by WikiLeaks shows NATO drew up plans in January to defend the Baltic states of Estonia, Latvia and Lithuania against any possible attack by Russia.

WikiLeaks cables: Oil giants squeeze Chávez as Venezuela struggles

Venezuela's tottering economy is forcing Hugo Chávez to make deals with foreign corporations to save his socialist revolution from going broke.

The Venezuelan president has courted European, American and Asian companies in behind-the-scenes negotiations that highlight a severe financial crunch in his government.

Sanctions Against Iran

Sanctions are ultimately self-defeating as a means for achieving political coercion and persuasion. They are based on a flawed assumption that the affected party will make decisions based on a limited cost-benefit analysis. At the very most, they can be expected to elicit a temporary and tactical retreat by Iran – perhaps making it suspend enrichment for a few months or agree to more intrusive inspections. What they singularly fail to do is to persuade Iran to make any strategic decisions regarding its nuclear program. With peak oil having already arrived, the world needs access to Iranian hydrocarbon reserves more than ever: this is a country with the fourth and second largest oil and gas reserves, respectively. Applying sanctions because of some perceived fear of a threshold nuclear weapons capacity makes little real sense.

Shell could lose 80% acreage in Nigeria: WikiLeaks

LAGOS - Royal Dutch Shell said last year if Nigeria's oil reforms went ahead as planned the company could lose 80 percent of its offshore oilfield acreage, according to U.S. diplomatic cables obtained by WikiLeaks.

U.S.: Chevron must keep pipeline closed

SALT LAKE CITY, Dec. 9 (UPI) -- Oil giant Chevron Corp. may not reopen its troubled east-bench pipeline in Utah because it is unfit for life, property and the environment, a U.S. agency said.

"Other areas of this pipeline could experience" a leak similar to the Dec. 1 spill that spewed 500 barrels of crude oil at Red Butte Garden and Arboretum in the foothills of the Wasatch Range in Salt Lake City, the U.S. Pipeline and Hazardous Materials Safety Administration said.

N.Y. Objects to Release of Multistate Fracking Rules

A regional regulatory agency that oversees the Delaware River watershed issued proposed regulations on Thursday for natural gas drilling that are intended to bring some uniformity to various rules governing the controversial type of gas extraction that combines horizontal drilling with hydraulic fracturing.

More new cars get 40 mpg, but 'cheap' gas keeps buyers away

Automakers are offering more conventional cars that cross the 40-miles-per-gallon threshold in highway driving, but relatively low gas prices continue to hold off buyers.

Feds pull high-speed rail funds from Wisconsin, Ohio

(CNN) - The Obama administration is pulling back $1.2 billion in funding for high-speed rail projects in Ohio and Wisconsin after the governors-elect in both states vowed to kill the proposed train lines.

Transportation Secretary Ray LaHood announced that he would re-direct the funds to other states, with California set to receive the largest sum.

12 Fastest Growing Economies of 2011

Not surprisingly energy continues to play a key role. We expect this trend to continue with the advent of “peak oil” and the continuing upward trend in oil and natural gas prices. Countries like Qatar and Azerbaijan with their huge natural gas and oil reserves will continue to boom.

Medgrid to Study Developing a Mediterranean Power Grid for Solar Energy

A group of utilities, grid operators and equipment makers plans to study developing a network spanning the Mediterranean Sea to link Europe to North African solar-energy projects.

Medgrid, to based in Paris, will carry out feasibility studies during three years for a grid that may start importing electricity to Europe by 2020, it said today in a statement.

U.S Renewable Energy And Energy Efficiency Export Initiative

This week the US launched its latest salvo in the renewable energy title fight. U.S. Commerce Secretary Gary Locke today joined seven other U.S. government agencies in launching a coordinated effort to promote renewable energy and energy efficiency exports – the Renewable Energy and Energy Efficiency Export Initiative.

A Primer for the Post-Carbon World

"When it comes to controversial issues, population is in a class by itself. Activist working to reduce global population growth are attacked by the Left for supposedly ignoring human-rights issues or glossing over Western over-consumption. They are attacked by the Right for supposedly favoring widespread abortion and promiscuity. Others think the problem will be solved by technology.

One thing is certain: The planet and its resources are finite and it can not support an infinite population of humans or any other species. A second thing is also certain: The issue of population is too important to avoid just because it is controversial."

Thus begins a fantastic, and chilling, chapter entitled "Population: The Multiplier of Everything Else" by WIlliam Ryerson of the Population Media Center in a must-read book entitled The Post-Carbon Reader. edited by Richard Heinberg and Daniel Lerch. Heinberg is well-known for popularizing the Peak Oil concept and is Senior Fellow-in-Residence at the Post Carbon Institute.

American Energy Policy IV: The Price of Transition

Take a look at the following presentation about our energy future as seen by a very influential professor at Penn State, Dr. Frank Clemente. His vision of the future reveals the true impact of overpopulation. The study focuses mainly upon Coal and Clean Coal Technologies. It's a shock. What he says about natural gas from shale is quite a shock, too. He writes off any renewables as largely a waste of time. He sees nuclear power as a "ship that already sailed". He doesn't say too much about oil, since Peak Oil has already happened.

Peak oil needs to be investigated along with alternatives

I find the environmental movement to be something of an enigma. On one hand, I believe that the majority of believers in global warming and smart growth are people who sincerely care about the environment, but on the other hand I’m convinced that the environmental movement has far more to do with money and politics than with the environment. Nothing represents that dichotomy of thought quite as much as the theory of peak oil.

The Earth-Buster Sale

We do this every year and it’s not a bad life. But this year I do feel like singing “If You Don’t Know Me By Now.” Because there is – you noticed? - a dispiriting return to the corporate Christmas by many consumers. The myth of the single oil-based economy still glories in its unstoppable ads. On the international level there wasn’t a leader who explained during the recession that there was an alternative to it. Obama sure didn’t.

The rebirth of the rebirth of distance

Directly relevant to Rubin’s express concerns is the frequently cited Death of Distance, a book by Economist editor Frances Cairncross, originally published in 1997 and revised in 2001. It initially focussed upon the impact of the telecommunications revolution.

For a while after the 2008 financial crash, it looked like Rubin’s dire predictions (that the spiralling oil price would resurrect the spectre of distance by increasing the transport costs of imported goods) had been at best premature.

Carolyn Baker: Transition: The Sacred, The Scared, And The Scarred

All of this leads up to a statement by Rob that I find appalling: “I get a sense from how Michael builds his case in his article that he has drawn together all the very worst forecasts of everything and used that to underpin his case for ‘Deep Transition’.” Yet in just a few sentences below, Rob admits that he finds the facts regarding climate change “terrifying.” He then states: “I don’t think that one needs to exaggerate threats and try and terrify people into a sense of urgency. The facts are motivating enough on their own. Indeed there is lots of research showing that bombarding people with terrifying information is far more likely to lead to a Flight/Fight/Freeze response than to constructive engagement. It is rarely an effective approach to engaging people in my experience.”

This reveals a reality that for me is profoundly disturbing among some members of Transition initiatives, namely, an unwillingness to deeply analyze the meaning of the word “transition.”

11 reasons for S.F. to get jolly

Pat Villano's "The Peak" is part of the "Peak Oil" art show at City Hall.

Oyster Creek Reactor to Close by 2019

The Oyster Creek nuclear reactor in New Jersey will be shut down by 2019, at least 10 years before its license expires, in a deal with state environmental regulators that will allow it to operate until then without building costly cooling towers, its owner said on Wednesday.

Toxic Soil Shows Rigors of Nuclear Cleanup

RICHLAND, Wash.—Officials at the federal government's Hanford nuclear cleanup site here met Thursday to discuss the discovery of dangerously radioactive soil, in the latest example of how unexpected challenges have beset nuclear cleanup efforts nationwide.

The contamination discovered last month here in eastern Washington state under a disused research building is so radioactive it could kill on contact, said Don McBride, a radiation expert with the federal contractor cleaning up the building.

France Suspends Solar Energy Developments for Less-Than-Expected 3 Months

France suspended solar-energy projects for a less-than-expected three months as it studies potential subsidy cuts and measures to limit growth in the industry after a surge in developments.

Age of sail boats inspires green solutions

London (CNN) -- With its long hull, towering masts and expansive sails, it resembles a schooner from the 19th century. But fitted with a series of high-tech features, this so-called "sail ship" is designed to cut carbon emissions on the high seas today.

Climate-Change Funds Shift Focus From Wind, Solar

The poor performance of some sectors aiming to slow climate change is pushing money managers to cast further afield for investments that both carry green credentials and are likely to post better returns.

Some renewable-energy stocks, such as those in solar and wind industries, have fallen spectacularly in recent years, belying hopes that they were poised to break out.

E.P.A. Delays Tougher Rules on Emissions

The Obama administration is retreating on long-delayed environmental regulations — new rules governing smog and toxic emissions from industrial boilers — as it adjusts to a changed political dynamic in Washington with a more muscular Republican opposition.

India's Call for Binding Climate Commitments Sparks Outcry

India’s call on all nations to agree to binding commitments to battle climate change sparked an outcry from an opposition politician and environmental group that called it a policy reversal.

Africa: Region Urges Release to Copenhagen Pledged "Fast-Track Funds"

Addis Ababa — Africa's negotiating team on climate change has called for urgent release of the $30 billion "fast-track funds" pledged at the 2009 Copenhagen Climate Conference to help continent grapple with global warming.

China, India hold out over cuts

CANCUN, Mexico: Nations locked in climate change talks yesterday were looking to build an agreement with wriggle room but with enough momentum to carry forward the fight to reduce carbon emissions.

Russia to pull out of Kyoto deal

Russia opposes the renewal of the Kyoto protocol and will not sign an extension to the climate treaty, Russian envoy Alexander Bedritsky said on Friday.

"Russia will not participate in the second commitment period of the Kyoto protocol," he told the UN climate change conference in Cancun.

Israeli forest fire sign of climate change: study

Israel's worst-ever forest fire earlier this month confirms predictions on the impact of global warming in the Mediterranean basin, according to one of Israel's leading climate experts.

"The fire disaster in the Carmel Mountains near Haifa is a taste of the future," Guy Pe'er, co-author of Israel's National Report on Climate Change, said on Wednesday.

Greenland Ice Sheet Flow Driven by Short-Term Weather Extremes, Not Gradual Warming, Research Reveals

ScienceDaily — Sudden changes in the volume of meltwater contribute more to the acceleration -- and eventual loss -- of the Greenland ice sheet than the gradual increase of temperature, according to a University of British Columbia study.

The new OPEC Monthly Oil Market Report is out today with their November production numbers. Total OPEC production was down 43,000 barrels per day in November. However total OPEC production for October was revised downward by 60,000 barrels per day. So total OPEC production was down 103,000 barrels in November from the unrevised October numbers.

Before the revision of the October production numbers October was the high for the year. But now February production is still the highest for the year. November production was down 95,000 barrels per day from that February high. Since that February high the big gainer has been Nigeria, up 190,000 barrels per day. However Nigeria was down 63,000 bp/d in November due to rebel attacks. Saudi Arabia is up 97,000 bp/d since February. The big losers since that February high have been Angola, down 233 kb/d and Iraq, down 179 kb/d.

OPEC production numbers are on page 42 of this report, or page 44 of 79 if you are looking at the PDF page counter. The OPEC production numbers are crude only. They do not include condensate or NGLs.

Ron P.

The IEA's Highlights of the latest Oil Marker Report is out this morning.

Global oil supply rose by 0.4 mb/d to 88.1 mb/d in November, largely due to increased non-OPEC production, notably from Canada, Kazakhstan and Brazil. Non-OPEC supply now averages 52.8 mb/d in 2010 and 53.4 mb/d in 2011, representing growth of 1.1 mb/d and 0.6 mb/d, respectively. OPEC NGLs output is seen averaging 5.3 mb/d this year and 5.8 mb/d in 2011.

The IEA has has non-OPEC production higher by 600,000 bp/d next year while the EIA has non production dropping by 280,000 bp/d next year. The gap widens. But here is where the IEA differs from OPEC's own numbers as well as those of Platts and other OPEC watchers.

OPEC crude oil production in November inched higher, by 45 kb/d to 29.2 mb/d. Effective spare capacity stands at 5.6 mb/d. The ‘call on OPEC crude and stock change’ for 2011 is raised by 100 kb/d this month, to an estimated 29.5 mb/d, on higher demand projections.

Platts has OPEC production down by 70,000 bp/d in November and OPEC's "secondary sources" as they report in their own Oil Market Report has OPEC production down by 43,000 bp/d. But the IEA has OPEC production up by 45,000 bp/d. I wonder why the IEA numbers are so different from everyone else’s.

Anyway, most of the IEA and OPEC articles listed above by Leanan are derived from this report and the OPEC Oil Market Report linked above. Except some are from the IEA full report which only paid subscribers get. We will have to wait two weeks to read that one and in the meantime must be satisfied with only the highlights.

Ron P.

We should not forget that the IEA oil production figures in the OMR contain bio fuels

IEA corrects oil statistics containing bio fuels

And then there's this:


It would be nice to see just conventional oil broken out of this data. Anyone have any sources? Rembrandt, where are you?

According to Charles Krome bigger and heavier can be more fuel efficient than small and light.

What you do is calculate how much gas it takes to move a given car a mile, than (sic) divide that number by the car’s curb weight. What you’re left with is a measure of how much fuel it takes to move one pound of that vehicle one mile.


Here is a concept that ranks right up there with EROEI and EPA mpg ratings for electric cars.

Not only are things that are different being compared but the poorly defined abstraction efficiency is being used to measure concrete objects in such a way that few care about. In the real world what matters is price, a car’s usable interior space, body style and vehicle mileage.

The Krome Score sounds mathematically correct and logical. That is until he starts comparing things that are different, i.e. the Fiesta, Focus and the Edge. Ignored are the utility of each vehicle and anything else that relates to efficiency from the view of actual purchasers.

Clearly, the Focus is a more efficient package, since it’s delivering the same fuel economy even though it’s bigger and heavier than the Fiesta, right? And, by that kind of standard, a porky full-size sedan with even lower EPA numbers might actually be more efficient than either.

It may be more “efficient” for someone who needs a hatchback for bulky stuff to buy the Fiesta rather than the Focus sedan which gets the same EPA mileage rating. Cars go down the road carrying people and things, not empty as implied by the Krome Score and EPA mileage ratings.

On the other hand, the Krome Score may explain the popularity of pickup trucks and SUVs.

The hypothesis of the Krome Score is that technology can overcome at least partially the problem of the amount of energy required to move weight since the larger heavier vehicle uses less fuel per pound per mile. The implication being that Peak Oil is not the problem it first appears to be because we can use technology to reduce the fuel needed to move a pound one mile thereby increasing fuel efficiency (using less fuel to do the same work). The fact that the vehicles are different body styles and that the Edge uses more fuel overall is given less importance than the Krome Score.

I don’t buy it, but some will. Some believe that numbers don’t lie and that logic doesn’t matter much.

Maybe people do buy vehicles by the pound and see mileage on a per pound basis. I don’t. I still prefer small cars even if they are less “efficient", but then I like ethanol which many think is not “efficient".

The Fiesta is more appealing to me than the Focus or the Edge, but ain’t playing with numbers, abstractions and comparing things that are different fun?

Pigs in a mud hole couldn’t get more enjoyment.



Does this guy figure aerodynamics into the equation?

"Compare" is a tricky word. It doesn't work at extremes of similarity or difference.

But for most objects,ideas, etc. we compare them precisely because there are some similarities and some differences.

You do a disservice to yourself with your rather shallow understanding of vocabulary, and because of this I doubt you are going to find many here sympathetic to your arguments.

rather shallow understanding of vocabulary, and because of this I doubt you are going to find many here sympathetic to your arguments

"x" is venturing beyond his usual apples&oranges ethanol rant and really going on thin ice. Trying to use arguments in the abstract to counter what he considers an abstract idea doesn't cut it. He is essentially philosophizing on a par with understanding whether you can explain the color of magenta to a blind dog. There is no common point of reference so all we are doing is tilting our head and going "huh?".

I suggest he does his own formal mathematical argument or reference some study that proves his point. After all he does say that "The Krome Score sounds mathematically correct and logical."

Just because a metric can be calculated does not mean it has utility. Consumption per empty weight is a ludicrous measure.

Quite so. If we want to see how an industry that IS really concerned about fuel consumption, measures it, we only need to look at the airlines.

They have three measures ;
Fuel per available seat-mile
Fuel per available ton-mile (for air freight)
And Load factor, or occupancy, the % of seats actually filled.

Airlines would tell you that measuring in terms of the weight of the vehicle itself is not only silly, but backwards, as a heavier plane needs either more fuel for the same passengers, or can carry less freight, which means more fuel per ton carried.
Airlines are quite efficient in term of pax-miles, as their occupancy is usually 70-80% or so.

If you look at the occupancy of a 7 passenger SUV, when it is commuting with 1.1 people, the fuel per pax mile is awful, but fill it with seven people and it is quite good.

Energy being expended on the vehicles mass is a "parasitic loss" to the system and is to be minimised. You can say you are moving more weight down the road, but unless that is cargo weight it is useless.
That is why bicycles are as light as they are- when you are providing the energy yourself, you don;t waste it on an extra heavy vehicle - car are no different.

And Load factor, or occupancy, the % of seats actually filled.

Surely it would make a difference if the airplane was full of seven year olds on a school field trip rather than full of morbidly obese coronaries-in-waiting on their way to a Glutton Fest?

Do airlines have an average weight per passenger in their equations?

They should start charging by the pound since they treat passengers now like freight anyway.

Dividing by the weight of the vehicle doesn't make any sense. By this metric the ideal vehicle for commuting to and from work by yourself would be a fully loaded semi!!!! Multiplying by the number of people in the vehicle makes much more sense. The purpose of cars is to move people around. I have a van and it gets 17 mpg. I argue that it is more efficient at moving people around than the vast majority of Priuses. My van would get 102 people-mpg. A Prius with 2 people in it would get 100 people-mpg (assuming 50 mpg for a Prius). A city bus getting 10 mpg with 25 people on it would be getting 250 people-mpg.

Right on!

... and a Prius with 4 people would get 200 people-mpg. 5 people would be 250 people-mpg. Talk about cherry picking your data.

Point well taken about efficiency. But then you try to use your point to prove the validity of your usual rant about comparing different things. Like everything, a bit of judgement and commonsense is required. People buy giant vehicles without regard to efficiency or miles per gallon. And then where I live, they leave them running while going into the Post Office. What I should do is simply drive them away-- perhaps off a local cliff.

Screw efficiency. We would be better off by encouraging or facilitating less mobility. My relatives "care" about the environment. But then they spend much of their time traveling all over the country and world to visit each other and "experience" the delights of new places. I tell them I am staying home to partially balance their footprint. They laugh but do not take the point. I am the family curmudgeon.

"I am the family curmudgeon."

You and me, both, t.

Could we start a family curmudgeon club?

Good point. Although my guess is that the SUV is fully insured and the rest of us will end up buying the owner a new one after you send them off that cliff :)

Had a couple inches of snow fall yesterday. The backroad to an expensive subdivision was very slippery. Just before a steep hill we came up to a BRAND NEW Suburban deep down into a ditch (very marshy). We are talking fully loaded $50K truck. It was up to the hood in mud. Hours later the tow truck was still trying to get the guy out. Moral of story? SUV drivers are morons.

Well, if they can afford to leave huge V8s running while they go shopping (isn't it illegal to leave a car running unoccupied in the US by the way?) then obviously the $3.00 fuel is of no consequence. Many responders to the relevant article seemed to think this price was horrific.

My wonderment concerns the fact that so many people say they NEED the utility of a six litre truck. Can this really be true. They must have managed perfectly well doing much the same stuff with smaller cars fifty years ago: or am I being confrontationally naive?

We all make excuses to justify our wastefulness I suppose, but, like you, I'm sure most of us try to do something. Unfortunately many people appear to relish visibly consuming and wasting all manner of junk - wear it as mark of pride almost. What to do about them?

Typical older model ten wheeler dump truck-the kind with two axles at the back - came equipped with a six to seven liter gasoline engine or a somewhat larger diesel engine and could haul a ten to fifteen ton payload legally.

I have driven many such trucks personally-they are slow off the line or on long steep upgrades but can maintain a steady sixty or seventy mph easily on a level road, fully loaded.

People who actually use small trucks for commercial purposes want fast powerful trucks because they are more pleasant to drive, and actually cheaper to operate in some cases, when wages and other expenses are taken into account;for instance, we downsized from a full size six liter farm pickup to a newer four liter compact pickup and thereby cut our per mile fuel consumption by about a third-but sometimes we have to make an extra trip with the smaller truck, which more than wipes out the fuel savings for a week or even a month.

We could easily get by with a pickup with two or three liter engine,
but the fuel savings won't justify the cost of trading until our present truck is worn out.

Besides the four liter is a hoot to drive-it is quite capable of smoking a tire and embarrassing lots of cars advertised as "sporty" at a traffic light. ;)

We could easily get by with a pickup with two or three liter engine,

Especially if it was a diesel, like GM, Ford, Toyota and Nissan and even VW offer in their compact/medium pickups in the rest of the world except N.America

The 2.2L, 4cyl Nissan 720- series with 6x8' drop side tray we had on my farm could do almost anything except pull a plough. It was built to work and that it did. It wasn't the greatest/fastest/most comfortable truck to drive, and that meant you didn;t drive it unneccessarily - that was why it was so popular for corporate fleets!

I don;t have problem if people want to buy a vehicle that can do the occasional burnout, but it burns me up that you can't buy a utility vehicle here that is *just* a utility vehicle. In the future I think more utility and less frills will be the way to go.

Spot on Paul, I use a 2.5litre Land Rover Defender similar to this for my heavy duty work:

I use it for forestry work. It allows me to drive off-road up to the tree I want in the forest with a 3.5tonne trailer, cut it down, cut it up, load it and haul it out of the forest and home. So for a few litres of diesel I can do a days work and have 2 to 3 cubic meters of fire wood stocked and drying at home (nearly a months home heating). If a 2.5 litre engine can do this it is difficult to see why people need a 6 litre engine to do the shopping.

A 3.0 litre "compact" pickup with a utility trailer will carry a larger payload than a 6.0 litre BAT will, and is much more easily loaded. How many large "light duty" trucks even have a 4'x8' bed any more?

I often work with contractors, and make a lot of site visits, and most of the time the only thing the BAT's are hauling around is themselves and a few tools; nothing that I can't haul with my tiny but scrappy 1.3L Daihatsu Rocky and my utility trailer.

The number one driver behind vehicle choice is status. We're roasting our planet from vanity.

Most Americans are morons who wouldn't know "utility" if it hit them square on the head.

I am surprised at how rational people who understand basic math and logic try to find some some justification for the actions of others.

You can only understand behavior when you finally admit that it is completely and utterly irrational.

Giant pickup trucks and SUVs are specifically tax- subsidized by the IRS which is why they are so popular.


Efficiency has nothing to do with the purchase of these vehicles.

"When we remember we are all mad, the mysteries disappear and life stands explained."
- Mark Twain

Visit Dakota Square Mall in Minot, ND in January and see how many people leave their vehicles running in the parking lot...sometimes for over an hour or more, say, when at the movie.

I could never bring myself to do that...

Fuel use per unit of vehicle weight is, indeed, a silly metric, as Paul Nash quite well elucidates. But when you equate its utility to EROEI, you are of course way off base, though those who've been here awhile know that you don't want to grok or admit that EROEI is one of the most important metrics we have, as little appreciated as that is by too many. I'd guess that willful misunderstanding may have something to do with your advocacy of net energy flat ethanol.

So the best vehicle would be one with the world's most efficient motor surrounded by huge slab of aerodynamic lead.

Does that make sense to anyone?

Have been bothered for a while with the concept of storing energy from renewable sources.

Just stumbled across Professor Seamus Garvey's 1000ft wind turbine project (http://www.youtube.com/watch?v=JDxIEdkE-Bo&feature=channel).

However, the most interesting part for me was the proposed methods for storing potential energy via large, underwater compressed air tanks with a claimed 90% efficiency:


Can anyone offer any input into the feasibility of a large-scale implementation of this type? Are there obvious limiting factors? Any guestimates to timescales involved?

Mongo like!

Now this is something I can get on board with! Very neat idea, really hope it works. So here's a thought? Why doesn't our esteemed government give this chap, say, £20,000,000 to run with the idea. Or maybe £50,000,000. Or if the Treasury is feeling particularly generous how about a mere £100,000,000. But then again, wait. What am I thinking. Silly me! Then that money won't be available for all the fraudsters in the Glass Towers in the City of London.

Seriously. This is the sort of project which should have a team from the Treasury on the next train to Nottingham with Her Majesty's cheque book in hand. What's £20,000,000 in the big scheme of things? There should be no reason that good solid science and engineering projects like this should have to wait a single day for funding. The funding can be made on the condition that it is repaid to the Treasury if/when the project becomes commercial and entices private capital to the party.

Come on Cameron. Give this man a few million to play with.

I have to say I agree. I can understand, but not condone, the effort to continue to push money into ageing sectors for historical/political reasons but I just hope that enough is diverted into the areas that will really be effective at keeping the wolf from the door.


How has the weather been? Has London set and record low temps the past week to 10 days?

I'm in Brighton & Hove on the Sussex coast overlooking the English Channel so can't speak for London but it has been bloomin' cold here. Gas boiler working overtime! The snow has gone though which is good. The local Co-op (food supermarket) ran out of every vegetable after just two days snow. I guess that the central depot was further north which had snow for longer. All the other shelves were looking very bare too. If it had gone on for longer there would have been literally nothing in the store. It is truly frightening how quickly JIT supermarkets can be stripped bare if there is a slightest break in the chain.

It is supposed to be quite a 'mild' weekend but then much colder next week. Oh joy. Thank God I signed a three year fixed price gas supply two years ago because another energy company just jacked its prices 5% today.

Still, the thing to do in London if one is cold at the moment is have a jolly good riot! That gets the blood pumping and helps to show how much you value the democratic process. Especially if you decide to urinate on the Cenotaph.

The poor royal family. Its tough having to prepare for Wills wedding and then having young neo Nazi Harry fighting the terrorists in their country so he doesn't have to fight them at home.... It saddens me.

I'll have to dig around. I know London has some VERY old weather records so I was interested in if any of those were broken this month.

If you want to find English records which were broken then look no further than Adelaide in Australia!

(if you need to ask, then you wouldn't care!)

It is well recorded that the River Thames froze solid for weeks back in the 16th century - the little ice age.

We have been nowhere near cold enough for that.

Perhaps the rioters were just showing their utter contempt for our society, all of it, and what it has become. The government and their establishment cronies demonstrate nothing but contempt for the public. But this is political, so inappropriate here! Sorry.

But yes, gas is expensive, so we need to economise, and plan for a different energy future. And who will do that? Back to the previous paragraph I'm afraid...

t reminds me of the riots we had back in the early eighties. It is simple nihilism. Unstructured anger. The kids see no glittering prizes ahead of them, and wonder where their next iPhone will come from. It will pass, for now.

Interesting to see impact of short term weather disruption. How can stores run short of veg after just 2 days of snow (panic buying?) but, more importantly, why should it affect the savvy individual? This is the third winter where the UK has seen weather related disruption, seems we should be learning some lessons

Compressed Air Under the Sea sounds like a great concept.. of course it would be material-intensive.

I couldn't tell if he meant inflatable bladders that held the air.. it seemed he was indicating pressure-tanks, which would be very expensive for the kind of volumes you would need.. but then flexible bladders could be pretty challenging, too, but they might be effective at relatively lower pressures, as it is the gravity pressure in the water around the container, and not just the container walls that is holding the energy in storage.

I would think the anchoring of these could be pretty intense as well. Be quite a sight if one were to bust loose..

Compressed air has been used for quite some time, check this out:

The World's Only Operating Hydraulic Compressed Air Plant

I keep toying with the idea of harnessing one of our small streams with a home built version.

Don in maine

Holy Moly!

There are some incredibly simple, elegant ideas out there!

Now I just have to print this one out and read it a few more times to get the concept a little more clear in my heavily distracted head.

Thanks, Don! I'm worried for the world, but Maine doesn't worry me nearly as much!


I've seen one of these in operation and they work if you have plenty of water. Folks took some 12" corrugated plastic pipe, some tees and elbos and set it under an old millrace. They used it to cool a yurt, and it put out a remarkable volume of cool, low pressure, low humidity air, filtered by mountain creek water. The lowered relative humidity seemed counter-intuitive until we did the math. Higher pressures are possible with enough head and flow.

They also had what they called a tramp, or hydraulically driven water pump, and this little thing pumps water, compresses air and more ......

While much higher outlet pressures are possible, the 25 mm (1 inch) pump can lift about 1500 litres of water daily to a height of 20 metres, using 2 to 3 metres drive head and 20 litres a minute inlet flow. The pump will operate when totally underwater. It can be made to supply compressed air or to provide a direct mechanical output to drive other devices, and can also act as a suction pump. Made with an eye to the needs of developing countries.

...... elegant uses of a good water resource. Location, location ....

I hear you.

One of the many reasons I'm happy to be here.. and we get some of the Hardier NY and Beantown castoffs, but many will steer clear due to the coolness..

Chuckle, Hey Bob, up here we don't even consider where you are to be part of Maine. It's another world way down there. ;>

Don in (the real) Maine

I sure do realize that, Don.. I'm not allowed to forget it! ..but I'm still gunning for getting more rail-track up to you all, for when the ruds have made us more separate than ever.

For now, I can still pretend I've just moved wayyy uptown, and the Second Avenue subway will put a stop in here before too long!

Best Hopes for a decent Falafel in this icebox!

Bob (Raised in Bethel.. but the Penobscots and the Professors at Presque Isle still call me an 'invasive species')

Very interesting! Thanks for the link. How remarkable that it's been in continuous operation for over 100 years with little maintenance.

That jarred a memory. I have a book from 1935 "Five Acres and Independence". He talks about hydraulic water pumps in the book. Similar concept. Found this reference: http://journeytoforever.org/at_waterpump.html

Great Book, Dover Press, M.G. Kains "A handbook for small farm management" I'm on my second copy, destroyed the first one with use. I can lay my hands right on it and refer to it often.

Don in Maine

but they might be effective at relatively lower pressures, as it is the gravity pressure in the water around the container, and not just the container walls that is holding the energy in storage.

You're right - the water pressure would help to keep costs down in terms of the strength of the material required to withstand the air pressure. He was talking about there only being 4/10ths of a bar difference between the inside and outside of the containers once they are deep underwater.

If you look at the third video in my list above you can see that he's definitely talking about inflatable containers.

I would think the anchoring of these could be pretty intense as well. Be quite a sight if one were to bust loose..

I did think about this too - although if far out at sea the risk of human-related catastrophe would be relatively minimal. I guess it remains to be seen exactly how reliable these things could possibly be constructed.

but then flexible bladders could be pretty challenging, too, but they might be effective at relatively lower pressures, as it is the gravity pressure in the water around the container, and not just the container walls that is holding the energy in storage.

Think alveoli in the lungs of a scuba diver at depth the depth really doesn't matter it is the pressure differential that does, if the lungs contains gas at ambient pressure they are fine, if you suddenly decrease the external water pressure, you will rupture the alveoli leading to gas embolism. That could happen by suddenly rising from thirty ftsw to the surface or 130ftsw to 100ftsw. So his idea works at very high pressures and depths. He was definitely talking about air bladders being used at depths of 500 ftsw or greater where the water pressure alone is about 200 psi . Expensive high pressure steel tanks aren't needed to store the air. The individual bladders are not that big so anchoring them to counteract lift shouldn't be an insurmountable problem either.

I really like his idea!

I think underground would be better -- the density gradient will make anchoring the bag problematic. Pressure equalization at depth does not mean density equalization, and until you get high enough to liquify or solidify the delta is big.

A big enough bag to make a difference will have massive buoyancy. Recall the floating 100-ton TopHat 1 for the BP well.

Maybe a salt-dome as used for gas storage would better suffice?

Thanks, Fred. With your underwater experience, what sorts of fabrics/laminates could you imagine being used for such a thing? (I really want to know for the sake of my 'flexible hulled sea-kayak' idea, but for now we can pretend it's for undersea CAES!.. :} )


jokuhl, Check this out

Klepper Folding Kayak Video Demonstration


I'm actually thinking about a Kayak that works like a fish, not a collapsible.

(You'll hear about me in the papers when I get eaten by a Shark that thinks I'm a tuna!)

I liked the vid, though. I really liked the last line, where the mom, alone on the beach as they paddle away says, 'The water calms them both down (Dad and Son). That's a good thing!'

I've got the frame for one of the collapsibles, but don't know if I'll ever rebuild the thing. In the Video he said the skin was I believe 'Hypalon', same thing as the insulators on some solar cabling, isn't it?


I've owned and sold two Klepper folding kayaks in my time with full sailing rig. They are the ultimate in quality. The Atlantic Ocean has been crossed at least twice by Klepper folding kayaks. They are unbelievably seaworthy. The sailing rig is a bit tricky at first, but if you know how to sail you can master it. In my opinion you can survive a Cat 5 hurricane in a Klepper; they really are that good.

Now you're just hurting me, Don. I have to officially want one now. I'll be lucky if I can convince her to get me a decent scythe for Christmas..

Meantime, I've got a good book on building an aleutian Kayak.. so if the 'Great New England Tsuname' gives me plenty of warning, and the book is even a little seaworthy, I think I have a shot!


Fun idea. I'm not sure exactly what the deal is with the two bladders.... if you're feeding air back and forth between them, you're not using the pressurized air. Perhaps that was just for efficiency in cycling the bags multiple times?

The notion of using flexible bags might be better done with steel and concrete, with an open bottom, so there is minimal flexing. Looking at the gigantic turbine, the heavy weights that are supposed to do the pressurizing will seemingly cause the center of rotating mass to shift around quite a bit, so I wonder what consequences that'd have for the axle used.

I'll note that one could get the same result by simply winching down an enormous spherical buoy using mechanical gearing, and having it turn generators when allowed to rise. This would be a lot more efficient in principle, though don't ask me to build it. Alternately, the container could be inflated on the surface and winched down, and the high-pressure air bled off when it's at depth for power.

Always entertaining to play with ideas like this. One could also use mountain ranges to construct huge tracks upon which brobdinagian masses are hauled uphill by wind energy, as a very efficient storage mechanism. The problem with all such large engineering things (other than "will they work") is that they won't be built, because they don't really fit into the infrastructure we have; and once that infrastructure fails, we are unlikely to be able to do such stuff.

But I'll formally announce here that Mountain-range energy storage using enormous masses powered by wind will be constructed; I'll call it the Sisyphus Express and hereby invite people to contact me to invest. Can green grants be far behind?


Maybe we should build giant tanks in the shape of the lost mountains in the lower Appalachians, and use those for our pumped storage.. there's a little poetic injustice in there someplace.

I like the sisyfus name, in spite of my inclination to jump in and help push. See? Sisyfus should have just knocked an email off to Hephaestus to help him build some windmills that would roll the boulder up for him.. then they could sit on their butts at the Lodge, sell tickets and grow some moss on their tails! They'd have a couple dozen centuries of fun before Senor Quixote would become a threat to their scheme.

Fun idea. I'm not sure exactly what the deal is with the two bladders.... if you're feeding air back and forth between them, you're not using the pressurized air. Perhaps that was just for efficiency in cycling the bags multiple times?

That's exactly the purpose, as he states in one of the videos. The bags are only prototypes and they wanted to see how they were hold up to several thousand cycles of inflation/deflation. So, rather than waste energy compressing and decompressing, for the purposes of testing they will switch the air between the two.

ah, thanks, thought I'd watched all the links but missed that explanation. Which does make good sense. I like the guy's attitude and ambition and he's clearly bright, he'd be a fun neighbor.

Professor Garvey's 1000ft wind turbines aren't likely to fly (so to speak). He claims that the large radius is required to allow the weighted pistons time enough to compress the air as they move with gravity during the blade rotation. Trouble is, a 1000 ft (300m) long blade will be almost impossible to build, given present materials. The wind loads at the root of the blade are going to be massive with a lever arm that long. As a result the weight of each blade will be astronomical and the only place that these may be deployed is over the ocean. Moving the current generation of wind turbine blades over land is an impressive operation. I passed a convoy of 3 trucks, each towing one blade, being hauled on the freeway a year or so back. If they were any larger, there would be no way to move them over land.

The professor may not have thought out the aerodynamics either. The design might result in a poor conversion from wind energy to power to turn the blades, since the blades would be fixed pitch. the rotational speed is limited by the requirement that the speed at the tip of the blades can not approach supersonic, else the aerodynamics gets dicey. That may be the reason the design picture includes 6 blades. It might be much easier to build a smaller diameter system using hydraulic pumping of a fluid, with less piston displacement and higher rotational speeds. Interesting, but messy, if the hydraulic fluid were to leak. Electricity is so much easier to move, so why not stay with that, even though storage is difficult...

E. Swanson

The professor may not have thought out the aerodynamics either.

That's possible, although his expertise does appear to be in machine vibrations and rotordynamics and the University of Nottingham is a respected establishment so I would have expected him to be reasonably thorough in his research (http://www.nottingham.ac.uk/Engineering/People/seamus.garvey)

I think they are in the testing stage of scale-model prototypes (http://communications.nottingham.ac.uk/News/Article/Cheap-and-green.html) so hopefully we'll hear some results soon.

He also mentioned that it will be cheaper to implement the system with wave-farms. I can see a wave powered piston system being quite effective, especially around the UK. The bit that is fascinating is the method of storing the compressed air.

IMHO no research like this should ever be underfunded. A lot of projects which might have failed in their original plan end up spurring further research and the outcome is completely unexpected. That is why research is so expensive and in credit-constrained world private enterprise is unlikely to fund something so experimental. This is exactly the reason why government needs to provide funding for science and engineering R&D because no one can say whether the projects will be commercial or not. Imagine what a country like Britain - with our heritage of engineering and science, still with world class universities - could do if the government provided funding of, say, £20 BILLION per year for purely experimental work? That's the sort of cash I am talking about. And imagine if there was a line item on every worker's pay slip each week/month telling that citizen exactly how much they have contributed to the Science & Engineering Fund? I believe that it would be politically easy to explain and readily accepted by the populace. Any grants made would be under agreement that the government would be repaid if the project turned out commercial.

This would be highly productive government expenditure. Scientists and engineers would flock to the country. Regions where the research would take place would prosper and we Britons would have something to be truly proud of and give us hope for the future. In stead of the last item on the evening news being about the closing prices on the stock market there could be a round up of news and results from the Science and Engineering Fund.

Chrickee, why stop at £20 Billion?

The bit that is fascinating is the method of storing the compressed air.

This is the bit that caught my eye too. It doesn't have to be limited to his wind turbine but could be applied to other forms of renewables. There isn't always water available to pump up hills but there's usually a fair bit of air lurking around, even in arid areas. It doesn't take a huge amount of imagination to envisage either on-land rigid structures or, as someone mentioned above, underground storage tanks. I guess the question of safety would be more pertinent on-land, but surely worth investigating?

I'd really like to get an idea of how much energy one of these bags could store.

I guess the question of safety would be more pertinent

When you are dealing with anything at high pressures always think of failure modes.

Things like cars powered by highly compressed air are very likely to rapidly leave the scene of an accident if the accident causes the storage to develop a leak.

Storage under water in bladders where the water provides/balances the internal pressure would seem to have relatively benign consequences in failure mode.

could do if the government provided funding of, say, £20 BILLION per year for purely experimental work?

Funny you mentioned that figure. I did a very rough back-of-an-envelope calculation and came up with some interesting figures:

1. He claims the bags can be made for £50 per cubic meter. Each bag would hold 750m^3 (larger than the prototypes) so cost = £37,500

2. Each 750m^3 bag would store 160 GJ = roughly enough to power 3 US family houses for a year.

3. Say wanted to power all US houses for a year = 300 million people / 4 people avg per house = 75 million houses --> 75 million houses would require 25 million energy bags to last them a year.

4. Needing storage for a year is probably unrealistic, the maximum time without a source of energy from renewables would be, say, a week at most? So can reduce the above figure by a factor of 50 = 500,000 energy bags.

5. 500,000 energy bags @ £37,500 each = £18.75 billion

So, less than £20 billion to create enough storage for all houses in the US. Of course, I think this only takes into account the construction of the bags, I doubt it includes installation, power transfer etc. etc. Also, I don't know how abundant the materials are that would be needed for the construction of so many bags. But then, if we manage to add millions of automobiles to the roads each year you would have thought that 500,000 bags would be within the realms of possibilities.

Still, at least this gives some idea of the orders of magnitude that we'd be talking of. Food for thought.

Won't this process cause more sea level rise? ;-> It also occurs to me that there will be some local warming of the seawater, although this may be welcomed in the British Isles about now. I'm sure the fish will love it!

Ack! You're right. Another quick numbercrunch and it seems they would be displacing roughly the volume of water in Sydney Harbour :-)

Which, incidentally, would mean a global sea rise of about 1µm. Or, if you prefer analogies, about half the height of a typical E. coli bacterium.. :-O

So if Necessity is the Mother of Invention, what does Desperation give birth too?

This sounds like just another desperate, errant Hail-Mary pass in the twilight of the industrial pigstye.

Mother Nature says, "The Industrial Way of life is non-negotiable - it is ending. Get over it."

This sounds like just another desperate, errant Hail-Mary pass in the twilight of the industrial pigstye.

Well, if the numbers compute then I wouldn't say it was desperate at all. In fact I'd go so far to say the opposite - it's just the kind of thing that needs more attention. The 'Industrial Way of life' may well be drawing to a close but hopefully we can transition to a more enlightened state rather than devolve to a previous state.

The 'Industrial Way of life' may well be drawing to a close but hopefully we can transition to a more enlightened state rather than devolve to a previous state.

I think we need to differentiate between the current industrialized model of civilization based on cheap fossil fuel, one which I agree is ending, and a new paradigm of industrialization based on sustainable practices of agriculture, resource extraction, energy generation and resource usage based on better planning and design that places a much higher emphasis on recyling wastes and materials.

Industry sectors and classification

There are many other different kinds of industries, and often organized into different classes or sectors by a variety of industrial classifications.

Industry classification systems used by the government commonly divide industry into three sectors: agriculture, manufacturing, and services. The primary sector of industry is agriculture, mining and raw material extraction. The secondary sector of industry is manufacturing. The tertiary sector of industry is service production. Sometimes, one talks about a quaternary sector of industry, consisting of intellectual services such as research and development (R&D).
Source Wikipedia

I don't think we will be going back to whale oil, ox carts or living in caves in fear of saber-tooth tigers.
We will adapt or transition if you will to a completely new and hopefully more enlightened paradigm.
TPTP who cling to the remnants of their old paradigm will either finally see the light or they too will be swept away. The times they are a changing again. There are tipping points and black swans ahead, to be sure but some form of new system will ultimately emerge. Of course some of us may not be around to reap the benefits. That's life, enjoy it while you can.


We will adapt or transition if you will to a completely new and hopefully more enlightened paradigm.

You're right FMagyar, I'm afraid it will be a case of 'evolve or perish'. Of course this is happening all the time on a slightly subtler scale; I just hope that mankind bridges the gap to transition to a society that may one day truly have a chance of leaving the planet permanently. But there I go.. away with the fairies again :-)

We've had discussions about compressed gas storage schemes here before, and IIRC there are always issues of loss associated with compression heating effects. Compress the gas, the gas heats, the heat dissipates, some of the energy is lost. There will always be losses when you try to store energy - how large would such losses be in a system like this?

how large would such losses be in a system like this?

I can't find any sources apart from what he says in the video, but he talks about around 10% energy loss for the stored energy. I don't know if this is 10% lost in total from initial generation in the turbine to storage to re-capture through the turbine again or just from storage to re-capture.

A 90% efficient electrical energy storage system? Wow! What do you think - does that sound reasonable to you?

I don't do video, as I think topics like these are best discussed using text that one can read carefully while bypassing non-verbal communication techniques. Therefore I was pre-disposed to call it snake oil, and that feeling has not changed much.

I appreciate it sounds unlikely, although I'm fairly convinced of the author's credentials.

I will try to dig up some hard facts. I know he was comparing it the current best known storage methods which he said were only 80% efficient maximum and that this was a big step forward. But again, the figures will speak for themselves once released.

ia - While digging see if you can catch any cost estimates for the container system. Thanks in advance. I can't speculate on air staorage but it sounds like the same problem we have with NG storage: the cost of building a large/strong enough storage system is too great and kills whatever economy is created by the storage. That's why folks have propane or LNG: storage NG in a gasious phase is just costly. With the excpetion of saltdome storage: a huge storage volume created at relative low costs.

Just had a very quick rummage. Some comments made by Prof. Garvey on ABC's Science Show (http://www.abc.net.au/rn/scienceshow/stories/2010/2952227.htm):

- "I can show that materials for the bags pan out at less than £50 per cubic metre."

- "750m of water gives you 7.5 MPa, not 20 MPa. The stored energy density at that level is between 33 MJ/m3 and 65 MJ/m3 depending on how much you reheat the air recovered from store and whether you reheat it between expansion stages. The lower figure is extremely conservative and it involves expanding the air “isothermally” at about ambient temperature. Let’s take 40 MJ/m3 as a reasonable energy density. I agree with your approximate volume calculation so the stored energy in one bag would be around 160 GJ."

- "Your question about efficiency exposes a major gap in understanding. Efficiency, in mechanical engineering, is the ratio of power out to power in. In the case of wind turbines the “fuel” is free. If you think about it sufficiently, you will realise that we need only begin to worry about efficiency when we have either put up so many wind turbines that the wind itself is slowed down (that will never happen!) or that there is no space for more (that might happen one day but several generations of wind turbines will have come and gone before then).

However, since you ask the question, the efficiency is actually very good – closely comparable with the direct-generating wind turbines for energy that does not pass through storage. Moreover, the marginal losses of energy associated with putting energy through storage are between 9% and 13% - better than any other mass energy storage system. You noted correctly that compressed air tends to become hot. Careful management of heat is indeed crucial to the success of these systems when energy is stored."

So those are the claims - still no direct evidence yet but you heard it from the apparently scientifically sound horse's mouth.

Again, to re-iterate with the efficiency, as renewables could be capable of producing more energy than we require it's not as critical than if the fuel was a finite source. Nonetheless he does claim remarkable efficiency which can't hurt his cause if it turns out to be the case.

Edit: He also seems to be a fan of David Mackay, and in my books anyone that favours numbers over adjectives makes them worth considering :-)

So, back of envelope calculation: 160GJ = 44,444 Kwh. Which would be roughly annual electricity use for 3 x single-family US homes?

Yeah, his position is that efficiency of storage does not matter because the fuel is free, so you just put up more to cover your losses. So if the losses were 50% you would put up twice as many. Apparently he believes the costs of the infrastructure and maintenance are insignificant? It's hard to take someone who makes such a claim seriously.

But of course that's not a problem as he claims that the total storage and recovery losses are 9 to 13%. I cannot tell if this includes "careful management of heat" or not. Clearly however the world will beat a path to his door, as a 90% efficient storage system would be revolutionary.

Keep in mind that the storage system does not change the characteristics of the generator. You still need enough storage capacity cover the intermittent nature of wind. How much storage capacity (relative to generation capacity), even if 90% efficient, would one need to allow a system to go to say, 30 or 40% of generation?

I don't believe they have to create enough storage to fill all the gaps.. it's just storage.. you could apply it to fill what gaps it can, you use it as a peaker source, and sell that power when the price is right. Suggesting that this has to turn a windfarm into a 24/7 baseload plant is a strange demand to bring in here. As ever, solutions in this realm aren't failures just because they cannot replicate our current Fantasy of perpetual power..

He did mention heat recovery, so it seems clear that this is in his sights..

I suggested no such thing. May question was about what would it take to move wind content to 30 or 40% of generation, and I asked that because IIRC in the first video that I did watch he stated that having wind content of more than 20% was problematic without such storage. If that was the problem he was attempting to solve then I think it's a fair question to ask how much storage you'd need to do that.

While he did mention "managing" heat, I did not read anything how that would be done - heat loss will be determined by the temperature difference between the gas and the ambient surroundings and the thermal resistance. If you leave the gas in the tank long enough the heat of compression will be gone. There will still be energy stored, just not as much.

You can store hydroelectric energy by pumping water back uphill into the storage reservoirs; you can store natural gas by injecting it into depleted gas fields - and I know of a number of depleted gas fields that are being used for this purpose. Both are probably more than 90% efficient.

However, storing wind energy is more problematic. If you have a hydroelectric dam, or a natural gas supply and a depleted gas field handy, you can use it for this purpose. If you don't, it's much more difficult.

Regardless, it's more efficient to just shut down the hydroelectric or gas turbines when the wind is blowing, and start them up when the wind dies, rather than build some kind of storage facility.

You can store hydroelectric energy by pumping water back uphill into the storage reservoirs

Because water is (nearly) incompressible, you don't heat it to any degree by compressing it (which your pump does), so you don't worry about thermal loses. I have my doubts about the volumetric cost of the air storage containers (particularly ones that need to be thermally insulated), although in some places maybe you have an abandoned salt mine, so maybe then you can make the economics work out.

Pumped storage more than 90% efficient? Measured from the energy that runs the pumps to what you recover at the output of the generator on the return trip? I'd eat my hat if it were even close to 90%.

Moreover, the marginal losses of energy associated with putting energy through storage are between 9% and 13% - better than any other mass energy storage system. You noted correctly that compressed air tends to become hot. Careful management of heat is indeed crucial to the success of these systems when energy is stored."

Now I'm thinking about the physics, if I compress some gas, I get 60% into kinetic energy of the molecules (heat) and 40% as stored mechanical energy. Its worse if its nor a perfect gas, which is the best you can do. If I let the high pressure tank cool down to ambient temp, don't I lose that 60%? So I think you got to maintain the high pressure tank at a temperature equal to the temperature the low pressure tank would reach by adiabatic compression. So
I'm assuming these pressure tanks must be insulated well enough that we don't lose much thermal energy in between the storage and release phases. Is that a reasonable thing to do, asuming we want to wait say a day or two, and not just a few minutes?

Note, wind energy, particularly offshore isn't cheap enough to throw much away in storage, doubling
gen capacity to accomadate say a 50% storage loss doubles the cost. So I think low storage loses are an economic requirement.

If I let the high pressure tank cool down to ambient temp, don't I lose that 60%?

You're right, you do. I'm not sure what his solution is for this - he does talk about 'careful management of heat' but doesn't explain any further.

As far as costs are concerned he was claiming that his new type of wind turbine would dramatically reduce the cost/power ratio when compare to traditional turbines - so I guess he thought that coupled with the storage it would be viable. Of course if there are better cost alternatives to his storage and his turbine proves successful then I can't see any reason why the new turbine shouldn't use the alternative methods.

You're right, you do. I'm not sure what his solution is for this - he does talk about 'careful management of heat' but doesn't explain any further.

Pretty much has to be insulation. The large size of the things works to their advantage in terms of heat exchange, so insulation could probably be done pretty effectively. This would fall off with time, but if you were mainly using it over periods of a day or two, you could get a lot of the energy back out again.

Compress the gas, the gas heats, the heat dissipates, some of the energy is lost.

If the compression ratio is high, the efficiency is very low. As the compresion ratio near 1:1 the efficiency could be pretty good. Presumably if he has two bladders at different dpeths, say one is at 200psi, and one is at 150, then the ratio is only 1.3, so the roundtrip efficiency wont be too terrible (I would guess maybe 40% for perfect gas law). When we were talking about compressed gas for cars the compression ratio was 20:1 3000psi to 15psi), so the loses are ridiculous.

Presumably if he has two bladders at different dpeths, say one is at 200psi, and one is at 150, then the ratio is only 1.3

I think the 2 bladders have confused some people - there are only 2 for prototype purposes, to reduce energy wastage during the testing phase. In reality each bag would operate independently with the pressure difference being around 4/10ths of a bar between the inside and outside (but the outside will be perhaps 60 bar, depending on the depth underwater).

Have you seen this?

The Combined Renewable Energy Power Plant shows how, through joint control of small and decentralised plants, it is possible to provide reliable electricity in accordance with needs. The Combined Power Plant optimally combines the advantages of various renewable energy sources. Wind turbines and solar modules help generate electricity in accordance with how much wind and sun is available. Biogas and hydropower are used to make up the difference: they are converted into electricity as needed in order to balance out short-term fluctuations, or are temporarily stored

A possible future bulk storage option is to use electricity to make methane, but it makes more sense just to save natural gas when it is windy and then use it when it isn't!

When I was in Germany recently I saw a lot of decentralized relatively small scale energy plants that combined various mixes of solar, wind, hydro and biogas. My sister works for SAP in Germany and they have been involved with developing software for controlling smart grids and integrating electricity production from such plants into the main grid. The Germans are far along in the paradigm change curve. Interestingly enough I just got an email from my sister the other day and she was telling me about a special TV program on peak oil that was shown on German and French TV recently, they happen to live near the French border and get French programing as well. Europe seems to get it... When will America get with the program? If she doesn't, the rest of the world will definitely pass her by.

When will America get with the program?

America is hung up on left/right political cum culture war, plus the effects of our conversion to
a kleptocracy. I think this precludes getting it because at least one side in the political battle see's it as helping the enemy. While the kleptocrats, just want to maximize their fossil fuel rents, so they spend major PR resources to make sure we don't get it.

Link up top: IEA and OPEC differ on need for more oil supply

OPEC has yet to be convinced fundamental strength rather than speculation is at the root of price strength.

Its Secretary General Abdullah al-Badri on Thursday said the group wanted a more balanced market before it would increase supplies, even if prices reached $100.

OPEC says these high oil prices are due to speculation, not demand and they will not increase production even if oil prices reach $100 a barrel. And we are left to speculate why they are saying such things. I think I know but the IEA says OPEC has 5.6 million barrels per day of spare capacity so the real reason just could not be that they do not have the oil. Or could it?

I am curious, what would a more balanced market look like? Just how would we know it was more balanced?

Ron P.

OPEC seems to be saying that increasing its oil production won't make any difference because it's speculators, not supply and demand that's driving up the price. You'll be hearing quite a bit of this type of logic on the downslope of peak oil.

IMHO, there is some truth in the claim that speculation is driving oil prices higher. The big question is, how MUCH higher are oil prices than they would be in the absence of speculation? My guestimate is that roughly 10% of the current oil price is accounted for by speculation. Thus, my conjecture is that in the absence of speculation, the current oil price would be around 79 dollars a barrel rather than the current 88 dollars.

Could speculation alone drive prices up to $100? I doubt it but cannot categorically rule it out. Speculation is driven by borrowing ever more money as the price of the oil (or house or stock or silver) is driven ever higher, and so a lot of momentum can build into producing a spike in oil prices. But speculative bubbles always burst, sooner or later.

With all that spare capacity just sitting around and waiting to flow, why don't they just open a valve or two and deflate this bubble before it really gets going? They kept saying the same thing last time as oil ran up to $147/bbl, and when the economy dropped then they got $30/bbl oil. Wouldn't it be better for them to stop the bubble quicker and not have so much fluctuation in prices? That is if they really have the extra 5.6 million BPD of spare capacity or anything close to that.

jim - Just my WAG but one reason they might not want to hurt speculators is that tthey might be one of the big speculators. Be tempting to play the futures game when you have the swing vote on price movement.

Well lets just say the ability of OPEC to achieve some sort of tight pricing regime based of withholding production is highly suspect.
Simply because the logistics of reducing and increasing oil supplies results in a significant lag. Is a really big slow moving hammer.

The fairly narrow trading range we have seen for the price of oil cannot be coming from simply supply moves on the part of OPEC.
On top of that OPEC has stated that its members are not in adherence with quota's. They claim about 50% compliance. To get a narrow
price band using physical then requires that the cheating itself be coordinated.

Physical oil and real spare capacity could be playing role but I've never seen anyone explain how they could get such a narrow price band using physical alone. One reason I don't buy into the price target claims. Price banding would require a significant speculative position to be held to smooth the effects of changes in physical delivery. Then your left with wondering just what the exact mechanism is and what role is played by the required financial moves. When potentially significant amounts of money become involved its hard to say whats going on.


How do you account for the remarkable price stability of oil over almost the last two years? First it was stable around the announced Saudi price target of $75 per barrel, and now it seems to be surprisingly stable close to the new announced target by KSA of $90 per barrel.

In other words, if Saudi speculation in the markets has nothing to do with this remarkable price stability, then what does?

Using Occam's Razor, the simplest explanation is that the Saudis (and perhaps a couple of other OPEC countries) are manipulating markets to attain the target price announced by the price leader, KSA.

It looks like a cartel, it walks like a cartel, and it quacks like a cartel. Hence I think it is a cartel and that it behaves exactly as oligopoly theory says it will. In other words, OPEC has an incentive to restrict output to drive up prices and thereby maximize profits. Saudi Arabia is willing and able to cut back on production of oil to make up for other exporters producing over their OPEC quotas.

Note that after the price spike in 2008 to $147 per barrel (which spike was solely due to speculation) the Saudis did in fact increase production considerably--but they overdid it and drove prices way way down. Again, speculation accounted for much of that rapid price decline in oil but of course could not keep the price down.

You are so right that it is tricky to maintain a target price by changing production, but that does not mean that the Saudis are not trying to do exactly that.

Using Occam's Razor, the simplest explanation is that the Saudis (and perhaps a couple of other OPEC countries) are manipulating markets to attain the target price announced by the price leader, KSA.

Occam's Razor implies that it is the simplest explanation. I am curious, are you implying that Saudi is doing something other than holding oil off the market? Of course that was the very purpose of creating OPEC, to manipulate the supply of oil and by doing so, manipulate the price of oil.

That is not to say that OPEC will not one day reach their very own peak and can no longer control the supply, therefore no longer control the price. Some believe they are there now. I think they are very close. I do not believe OPEC has more than one million barrels per day of spare capacity. No more! And that will be gone in about a year to a year and one half.

Ron P.

Recently, Rune Likvern estimated Saudi excess production capacity for oil at 1.5 mb/day. In a comment you replied that you agreed with that number. Has Saudi excess capacity declined by thirty-three percent in recent weeks? I seriously doubt that.

The Saudis know all about Peak Oil. What would make the most sense for them to do is to keep restricting production more and more to
1. keep prices up where they want them and even more important to
2. make the oil last longer (perhaps much longer) than it would if they produced flat out.

I think it is a huge mistake to underestimate the sagacity of the Saudis. If KSA, which has a multigenerational perspective (to some degree) decides to cut its production to half production capacity, that might very well maximize the the present value of their reserves.

Hence, I assume that the Saudis are trying to maximize their utility, which means they certainly do not want to produce flat out. Long-term profit maximization for an oligopolist means restricting production voluntarily, and I think that is what the Saudis are doing now and have been doing for some time. So as not to annoy the U.S. too much the Saudis do not cut their production too drastically during a U.S. recession. The U.S. is the sheriff of the Middle East oil-producing region, and everybody knows that. But after Peak Oil the bargaining power of Saudi Arabia increases vis a vis the U.S. KSA knows that we are past Peak Oil; they are not dumb at all.

Don, I think 1.5 mb/d is the very upper end of Saudi possible spare capacity. .5 mb/d would be my estimation of the low end of their spare capacity. But I could be wrong. If I had to guess I would say that OPEC has less than 1 mb/d of spare capacity. The UAE and Kuwait each have about .1 to .2 mb/d and Saudi has about .5 or so. Yes they could have 1.5 mb/d but I seriously doubt it.

I don't remember agreeing that Saudi had 1.5 mb/d of spare capacity but I might have. That would be the very upper limit that I would believe however. And we all, I hope, have the privilege of changing our minds when we believe the facts have changed. I have always done that. What do you do?

But you still did not explain how Saudi is "manipulating" the price of oil. Are you calling just holding back production, that they could produce, as manipulation. If so then I agree with you. After all, as I said above, that was the very reason OPEC was created, and they made no secret about that.

Ron P.

I suspect but cannot prove that the Saudis are using the futures market to stabilize the spot price of oil. If this is not the case, then why have there been so few abrupt movements in the price of oil since 2008.

Occam's Razor once again: I think the simplest hypothesis is that the Saudis are big players in the futures market. Note that big price fluctuations are harmful to Saudi Arabia's long-term best interests. What they logically want is slowly increasing oil prices--and that is what they are getting. Mind you, they are not wizards: They did not prevent the 2008 oil price spike nor did they prevent the irrational crash down in oil prices. I suspect, but cannot prove, that KSA is intervening more now than a few years ago to stabilize oil prices around a gradually increasing trend.

There are some things you just cannot prove--even though you have good reason to believe that they are true.

I suspect but cannot prove that the Saudis are using the futures market to stabilize the spot price of oil.

Errr... okay, just how are they doing that. They buy massive amounts of contracts, that makes the price tick up. Then what? They are holding massive amounts of contracts... how do they unload them without causing the price to tick down just as much as they ticked up when they bought the contracts?

Occam's Razor once again: I think the simplest hypothesis is that the Saudis are big players in the futures market.

If you could control the price of oil by playing the futures market then some of the big funds and ETFs could set the price of oil to whatever they desired. They don't because they can't. It is easy enough to say that the Saudi's are big players in the futures market but that is not enough. You must explain how they can control the price by being big players. It is easy enough to say that they buy futures causing the price to go up. But then you must explain how they can unload those futures without causing the price to go down just as much.

Occams razor says that is impossible. The simplest thing is that you can bid the price up by buying lots and lots of contract. But then you must, at some time, unload those contracts. Unloading massive amounts of contracts will surely depress the market.

And it is an ongoing thing. The lion's share of contracts are always in the near term contract. Today, 281,630 contracts were traded in the January contract and 103,032 contracts, less than half, were traded in the February contract. If the Saudis are manipulating the price of oil then they must do it with buying and selling the near term contract. Which means they must get in and out in an average of two weeks or less. After all if they keep the price up then they must buy every day. But then before the end of the month they must sell. That would cause the price to crash! If they bought all month long to keep the price up then the price would crash on expiration day as they unloaded all those contracts they bought all month long.

That is what happened on September 22, 2008. Suddenly everyone who had sold contracts that month, thinking the price was too high, was forced to buy back their contract, causing the price to rise over $10 at the close. The opposite would happen if you were long lots and lots of contracts. Suddenly you must unload and the price would crash.

It simply cannot be done Don. I have explained why it cannot be done. But if you believe it can be done then you must explain how it is done! Please! I have been hearing this story for years but no one has ever explained how it can be done yet. Please give it a shot!

Occam's razor says it is simple. So show me the simplicity. To my mind it would be so impossibly complicated that it would be impossible. But I await your very simple occam's razor explanation.

Ron P.


Keeping the price up is hard. Keeping it down and having the physical for delivery is a hell of a lot easier.

I see no reason why you cannot intervene financially in the crude market shorting it every few days to cause a large price swing down.
Then follow through if needed with physical delivery below the "market" price.
Heck look at the price movements this week. Or look all through the year. Someone periodically pulled the rug out. And of course they had to back it with physical.
As long as someone with enough money and enough oil is hell bent on selling it as cheap why can they not set the price of crude ?
They would be doing against a market that was naturally rising in price.
With holding crude to support prices in a naturally falling market is a hell of a lot harder. The only example I can think of is the Diamond market but that was a fully controlled market. I don't know of a single market even close to the scale and diversity of the oil market that allowed a single producer to set prices in a falling market. Esp given the reported storage levels globally. Look what the Hunt brothers had to do to corner the silver market and the eventually got wiped out.

Hell OPEC's track record is abysmal.

After 1980, reduced demand and overproduction produced a glut on the world market, causing a six-year-long decline in oil prices culminating with a 46 percent price drop in 1986.

So for six years prices fell and steeply and OPEC failed to stop the price slide. Today they can twiddle prices within a ten dollar range at 70-80 right at historical highs before we hit the obvious price spike ?

Not only did the Saudi's supposedly prop up the price of oil but they managed to do it as the US reported record oil inventory levels.
And we had 100's of millions of barrels of crude and products in floating storage for a long time.
They are supermen !

And now even as US inventories remain high not only are the supermen they are Gods as they decide they are happier with 90-100.

I see no reason why you cannot intervene financially in the crude market shorting it every few days to cause a large price swing down.

Memmel, just today 281,630 contracts for 1000 barrels each was traded in the January contract on the NYMEX. That is 281,630 longs and 281,630 shorts. It would take at lease 10,000 contracts going short to influence the market. That would be contracts for 10,000,000 barrels of oil just today. And that much again Monday, and that much again Tuesday and so on. No one has that much oil. And all NYMEX deliveries must take place at the Cushing hub. That much oil never trades at Cushing. And imagine the oil you would need on delivery day when the contracts expired. Hell Saudi Arabia does not have that much oil.

NYMEX Light Crude Oil

No, it simply cannot be done. That is one cannot possibly control the price of oil by trading futures contracts on the NYMEX. No one has that much oil if they expct to make delivery. And no one has deep enough pockets to actually buy or sell enough contracts to influence the market. And it would be obvious if they did.

Another point. If you total the contracts traded for all months, just today, then 524,765 contracts for 1,000 barrels were traded. That comes to 524,765,000 barrels of oil. That is 7 times as much physical oil as was traded in the entire world. And that is just on one exchange.

Bottom line, no one, absolutely no one person or country can control the price of oil by trading futures because no one has that much oil or that much money. And if they did have that kind of money and actually tried it, it would be glaringly obvious what they were doing. No one is doing that because it would be all over the media in just a few days if they did.

It is not done because it cannot possibly be done.

Ron P.

I suspect but cannot prove that the Saudis are using the futures market to stabilize the spot price of oil. If this is not the case, then why have there been so few abrupt movements in the price of oil since 2008.

Don someone has to be. Its impossible for us to have such price stability otherwise. Given the nature of crude production the supply chain level etc its impossible for someone to manipulate production at the wellhead and achieve prices stability. Cannot be done.

Next fairly quickly any moves in the futures market to sustain a price band would have to result in some crude available for immediate delivery.
Not just in the US market but across numerous markets. This has to come out of storage. No great conspiracy its simply a fact.

Now you can accuse the Saudi's of being able to pull off such a feat. I disagree if oil supply and the futures markets across the world where manipulated to obtain a narrow price band then the direct manipulation was in the futures market and from storage.

The Saudi's may well be adjusting production output to ensure that any sale of crude is replenished but they have plenty of time to do so.
Not only would they not be at the point if you will they cannot be at least on the physical side.

Regardless of what the real situation is or how its down maintaining a stable price band based on intentionally withheld spare capacity on the part of the Saudi's implies a fairly broad manipulation of the market.

I happen to think that forming such a cabal amongst all the industry players is ridiculous. It can't happen.

Thus my conclusion that the swing storage had to have been provided by various governments. The only way I see to pull this off is via collusion between consumer governments and the Saudis.

I have no problem with someone explaining how I'm wrong. However its well past time that the claim that OPEC was able to manipulate prices to stay within a narrow band using production alone was critiqued.

Sure you can move to also claim futures involvement but you still have to deal with the physical oil delivery.

Perhaps you could argue that the Saudi's could influence the futures market sufficiently to control prices for three or more months to allow physical delivery to be adjusted. Fine but one has to imagine and attempt to effectively corner the oil market like that would have eventually resulted in others figuring out what was going on and doing a squeeze.

Plenty of routes are possible and as always I could be wrong. Remember also that other OPEC members where not in perfect adherence with quota. I've obviously got no doubt that prices where managed I think thats obvious but not even your OPEC cartel could have pulled it off.

In my opinion it would take some serious work to do and if so no way in hell was it done because OPEC wanted a 70-80 price range.

Saudi Arabia is simply the Iraqi Information Minster on this one.

Memmel, I think you misunderstand Don's position. He is not saying Saudi is controlling the price of oil with oil. Not by holding it off the market or flooding the market if they think the price is to high. I think that is feasible though you seem to think not. But such actions by OPEC cause long term movements in the market, never short term movements, say within a month or two months. No, manipulating the actual physical oil market can only cause very long term trends like the one in the late 80s. Then OPEC flooded the market and it took years for the price to recover. And in the early part of this decade they held their product off the market and it took several years for the price to rise but eventually it did.

No, Don is saying they are doing it entirely with the futures market. They are controlling the price, he says, by the use of buying and selling of futures contract on the NYMEX, or the ICE or the OMAN futures market or the Tokyo futures market or the...

Incidentally, only a very tiny fraction of oil actually traded is the result of a trades on any futures exchange, about 2 percent or less. The vast majority of oil is contract trades. True, they use the various exchanges as benchmarks to set the price but there is never a one to one ratio of benchmark to contract trade.

Ron P.

Ron I don't think Don meant only with futures I'm sure he meant in addition to controlling production. He's held that position for a while.
This is the first time he has stated that a futures position would be needed in addition to production changes.
Its safe to assume thats his position from previous posts even if that one did not explicitly say it.

Sure as long as your a swing producer you could control the market both ways simply I think trying to keep prices up is substantially harder than keeping prices down. Keeping them both up and in a narrow trading range even harder.

I'd certainly love to debate someone willing to take the position that the Saudi's are withholding production and keeping prices high regardless of what mechanism they propose. The narrow price band suggests strongly that a financial position is also involved.

And I'm really really interested in someone explaining how they managed to do it as US storage levels hit historical highs and 100's of millions of barrels of crude where floating around offshore.

In fact I'd love to see and authoritative article on the Oildrum explaining how everything we have been told is fact is the truth and how a 70-80 price band results.

Or its just crazy olde me posting on the drumbeat that thinks everyone else that believes this is off their rocker.

Perhaps its because the implications of the opposite that prices where held down not up is a tad uncomfortable ?

I think KSA is using the futures markets to reduce volatility in daily price fluctuations. For the longer term, I think Saudi (and probably one or two other OPEC members) are voluntarily reducing production to boost prices to the target level set by the Saudis.

By the way, it looks now as if 2010 oil production and consumption will exceed the 2005 level. Could it be that we are at Peak Oil right now? Or could it be that Skrebowski is correct and that Peak will probably be in 2014?

Don, please see my reply to Memmel just a few posts above this one. There I explain exactly WHY it cannot be done.

Ron P.

Brent Blend volume is about 135,000 barrels/day, but the market for Brent Blend is used to price about two thirds of the 88 million barrels/day oil market.

So it is easy to see how supply and demand in the very thin market for Brent can be used to manipulate the world price of oil.

The same argument applies to WTI. A very small market, subject to easy manipulation, is being used to price much larger contract volumes.

Brent Blend volume is about 135,000 barrels/day, but the market for Brent Blend is used to price about two thirds of the 88 million barrels/day oil market.

Not quite 88 million barrels. What is sold on the ICE or NYMEX is crude oil and only about 73 million barrels per day is produced and sold, not 88 million. The other stuff, NGLs and such, is not priced by the barrel though it is counted in barrels. NGLs have a different pricing structure altogether.

You are correct more contract traders use the Brent benchmark than the NYMEX but there are other benchmarks as well. And the exchange price is never firm, all contracts are negotiated.

See "Crude oil estimated contract prices" here: This Week in Petroleum Please notice that none of them are nowhere near the WTI price or the Brent price. Though they are closer to WTI price because they are all below the WTI which is also below the Brent.

Ron P.

Merrill way to much crude is traded at premiums to these benchmarks. And there are several. No way can they be be manipulated up or down much past what the true spot price is for oil. You would have all kinds of divergences start occurring in contracts based off them.

Thats not to see we have not seen some interesting divergences. Historically WTI trades at a premium to Brent that been reversed basically ever since it seems someone has entered the market to smooth prices financially. Plenty of other spreads have become interesting.

TAPIS is shall I say interesting :)


Have fun I don't know of a site that allows you to easily map all the crudes but its doable off the data there.
Plenty of very interesting moves lately that don't fit historical norms. However on the same hand the basic supply
of light sweet crudes to keep the market basically correctly priced has to be there IMHO. That discounts a lot of OPEC
production. Bonnie Light from Nigeria is really the only high volume price setting crude. And of course the king of crudes
TAPIS. I think plenty of others could do a much better job than me explaining the role of light sweet crudes in setting the
market prices for crude oil. Heavier Sour or both crudes are not and never will be market makers.

A general and I think excellent and correct discussion of crude pricing.

Now if you happen to read my long post I think the oil market can be manipulated however its one hell of and undertaking and is not nearly as trivial as you make out. But not impossible as Ron claims just uncomfortable.

Now as far as the Saudi's go if they cut their heavy sour production then it would definitely show up in the various market spreads.
Remember its the light sweet grades that are the market makers. You would get some pretty crazy spreads between the heavier oils and esp sour oils and light sweet. Some of the data is interesting but not indicative of this in my opinion. This leaves Arab Light and Arab Ultra Light as potentially market moving crudes and to some extent Arab Medium.


If they cut production to support prices then why on earth not raise the premiums before now ? I have a hard time believing that they cut production and yet simply allowed their pricing to follow market movements.

Thats just Saudi Arabia its claimed that the cuts where adhered to by all of opec its hard to believe that this is true without all kinds of much more interesting movements in the spot market for various grades of crude. Esp since many of the OPEC crudes are of relatively low quality or low volume. With the exceptions of Bonnie Light and Tapis.

I could of course simply not see it but ok four million barrels of what types of oil exactly ?

All I see is a market that was reasonably well supplied with light sweet crude at a relatively constant price. Thats OPEC members cutting production. Where did these fountains of light sweet crude that suddenly burst forth to calm the markets come from ?

And just to repeat if you really want to read the tea leaves about oil then take a hard look at Tapis.


In my opinion its telling quit a different story from WTI.

You don't need to even be that good at technical analysis simply look at the five year scale in the link. Its clearly setting up for a much bigger price move than it did before the last price spike.

Tapis has always been a much better indicator of basic demand in my opinion than any other oil.
Most of the time all other oil tend to follow Tapis not the other way around. It is sensitive to sharp corrections in the benchmark crudes obviously but once you take that in consideration then as I said its telling a very interesting story.

Rockman does not have any rocks between his ears.

I am still waiting-after visiting and posting here for over a year for somebody to explain step by step how speculators can control the price of oil-unless they happen to be players in production and distribution.

How is it that speculators are supposed to be abler to situate themselves between the producers-who are all large business enterprises and mostly vertically integrated to a considerable extent, with competent accountants and marketing staff on their permanent payroll?

I can of course see speculation causing minor variations in price in either direction for short periods, but for the life of me I can't see how anybody can swallow the idea that speculation accounts for a large part of the price of oil-unless as Rockman says, the speculators happen to be one and the same as the producers and processors.

I can swallow Don Sailorman's ten percent estimated current speculation premium easily as he notes that bubbles always burst-meaning the price component due to speculation will average out eventually.

Based upon OPEC's comments, I "speculate" that oil prices will go higher. Therefore, I further "speculate" by buying oil futures. Which came first, the chicken or the egg? Others may "speculate" that OPEC is lying or doesn't know what they are talking about. When the speculators start speculating that prices will go down, will OPEC refuse to cut production because they don't believe in responding to "speculation".

Mendacity rules everywhere.

Don, I am sorry but I just cannot buy that. I have been hearing for the last six years that speculators are the ones to blame for high prices yet no one has ever explained how this is possible. Speculators are surely responsible for short term swings in the market of any commodity futures contract. But it is impossible for speculators to hold prices at a high level. If you think it is then please explain how this is possible. I have been asking this question for years but no one has ever explained how speculators are responsible for long term trends in the market.

Well over half the trades on the NYMEX are in the near month contract. The average contract is held only a few hours. Enough market buy orders can cause an uptick in the oil price but the vast majority of those contracts are sold before the end of the day, causing an equal amount of downward pressure.

Holding a long or short contract has absolutely no affect on the market. It is only when a contract is bought or sold that it affects the market. But the main point is that speculators can and do cause just as much downward pressure as upward pressure. You must remember that speculators are just trying to guess which way the market will move after they have made their trade. Sometimes they guess that the market will move up and sometimes they guess that the market will move down. They are right about half the time.

Commodity speculation is a zero sum game... minus commissions. That is why nine out of ten speculators lose money. Any game where the house gets a cut out of every bet placed cannot create many winners in the long run. Most speculators lose money and they cannot possibly affect the long term trend in the market!

NYMEX weekly price chart

Oil has been above $80 a barrel for ten straight weeks now. It has been in a relatively tight trading range since June of 2009, on average, inching slightly higher each month. That is what is called a general trend. Speculators could not have possibly held prices that high for so long. Impossible! But if you, or anyone else for that matter, thinks that speculators can hold prices that high for that long, then please, please, explain how that is possible.

Ron P.

I think speculators can drive up costs as long as it is in an increasing spiral -- for every seller getting out, there are more jumping in, and those taking physical delivery get caught up in the game...but ONLY if the supply is tight, else some producer would produce more at a profit and some speculator would end up selling at a loss at the backend.

This would say that speculation amplifies shortages, and arguably provides value by providing an early price signal to the consumer markets.

Of course, the converse would be true during a decline, as speculators lose their hats selling into a surplus, which rapidly turns into undershoot for the producers as well.

If speculation does indeed amplify, with obvious delays in the chain, you have all that is required for oscillations and instability if the time constants are too short. Perhaps that is why one tends to see "volatility" and then massive underdamped swings, with subsequent blaming of speculators?

for every seller getting out, there are more jumping in...

No, for every one seller there is one buyer and vise versa.

and those taking physical delivery get caught up in the game...

Only hedgers either take or make physical delivery. Speculators never take or make physical delivery. It is a myth that a speculator caught holding a long contract at expiration must take delivery. Likewise a speculator caught holding a short contract would never be expected to make delivery. All expired contracts are settled by the clearing house, usually for cash. Only hedgers who bought the contracts expecting to take or make delivery do so. Even then the vast majority of their, the hedgers contracts, are settled for cash after the close. They then use the cash to buy the physical oil.

but ONLY if the supply is tight, else some producer would produce more at a profit and some speculator would end up selling at a loss at the backend.

Literally thousands of traders end up selling at a loss. Remember sometimes up to half a million contracts are traded daily just on the NYMEX. And the NYMEX is just one of the several exchanges around the world. That is half a million contracts for one thousand barrels each, or for 500,000,000 barrels of oil. That is over six times as much physical oil as is actually traded in the entire world. A tight market has no effect on the number of contracts traded because these are just virtual contracts with no absolute connection to the physical oil. The amount of physical oil is limited but the amount of contracts that can be traded is unlimited.

You have not even come close to explaining how speculators can affect the long term trend of the market.

Ron P.

Agree. every buy is a sell. The total NET of all contracts outstanding is zero. it always is, regardless of the open interest. Longs+Shorts=0
Physical speculation can influence the price but I don't see how paper barrels which by definition net out to zero can have a persistent impact on price.


As long as you have the physical oil for delivery you can play the futures market since you know when and what your going to deliver.
Takes a lot of crude to do so I'd guess at least 100 million barrels in storage close to markets around the world, but if you had it you could readily play the futures market to hit a price range. And make a crap load of money in the process.

Why you would be allowed to do so is a different issue.

Memmel, I really don't think so. Only a very tiny fraction of futures contracts actually end up with delivery. Around one to two percent of those that are in effect at expiration. And those that do are the result of hedging. That is an oil producer sells his oil in advance guaranteeing him a profit in case of price collapse. But he locks himself out of any huge profits in case the price should rise. Or a buyer of oil buys oil well in advance guaranteeing that he can buy the oil at a fair price. But he locks himself out if the price collapses. That is he still has to pay the price he agreed upon earlier. Hedging guarantees a fair price but prevents any windfall profits. Hedging is a step down the risk/reward ladder. It is the opposite of speculating.

Speculators who buy and sell massive amounts of contracts every day never take or make delivery of the actual physical product. What I am saying is you do not need lots of oil to play the futures market. All you need is deep pockets and the ability to take losses until your winning streak kicks in.

Ron P.

I agree that commodities trading is a zero-sum game (actually a negative-sum game because of commissions).

Speculation cannot drive up prices INDEFINITELY. I thought I made that clear in my remarks: Speculative bubbles always burst. However, speculation can drive prices up for a long time. Consider the example of the housing market in the U.S.: Speculation financed by ever-expanding amounts of easy credit drove house prices far far above levels based on what people could afford, based on their incomes. But so long as prices rose, more could be borrowed with more home equity loans, and rising prices kept raising homeowner's equity--so they borrowed more on the strength of years of rising house prices.

Today the speculators in oil or in silver are using a lot of borrowed money to place their bets. As the price of oil and silver rise, they can borrow more money to buy more oil and silver contracts (or silver bullion).

To understand speculation, a study of social pyschology is much more useful than a study of economics. I'm a big fan of the symbolic interactionist approach to social psychology and had two famous profs (Herbert Blumer and Tamotsu Shibutani) who helped me to learn about collective behavior. Collective behavior (including crowds, mobs, riots, booms, panics, and social movements) includes speculation in financial markets. Thus, I make no claim to superior knowledge based on what I learned in economics and finance. My special insight (if any) is based on my long-time study of symbolic interactionist social psychology.

Don, the housing bubble cannot even be remotely compared to the futures market. A speculator in the futures market holds a piece of paper, or actually only computer entry, for only a few hours on average. He holds nothing physical whatsoever. An owner of a house holds the physical property for months to years. So comparing the average holding time for each, perhaps a thousand to one, and use that to measure the time of the spike or swing in prices.

A housing swing of years would equal a price swing in futures of a few days at most.

But of course that is no comparison because as I said the two simply cannot be compared. A speculator in the housing market actually holds the physical product where the futures speculator does not.

I understand speculation and I do understand the psychology of the mind of the speculator. There is little difference between a speculator and a Las Vegas gambler. They are both playing a zero sum game minus the house's cut.

Today the speculators in oil or in silver are using a lot of borrowed money to place their bets. As the price of oil and silver rise, they can borrow more money to buy more oil and silver contracts (or silver bullion).

No, that is simply not the case. A speculator must have a percentage of the contract price, in cash, in his account. It is usually less than 10 percent. And if his equity in the contract he bought or sold goes down, he gets a margin call. If he fails to meet the margin call he is cashed out immediately before all his equity, (margin deposit), is gone.

Of course you can say that he can borrow from a bank, deposit that loan in with his commodities broker, then buy or sell futures contracts with that. Some people actually try this trick but that is what bankruptcy courts are for because that is where they always wind up. Ditto for the casino gambler who borrows from the bank to play the tables... or horses.

My special insight (if any) is based on my long-time study of symbolic interactionist social psychology.

I have read a lot of psychology but I am sure not nearly as much as you have. However I was once a commodities broker, albeit for a very short time. However I did have to pass a three hour Series 3 exam to get my broker's license. But I have studied the futures market for years. I know exactly how it works. Few people do. There are many myths about the futures market, like the one that if you fail to close out your contract before it expires you will be forced to take delivery, or make delivery if you were short. Another myth is the unsupported belief that speculators can affect the long term trend of the spot price of the commodity.

Ron P.

You are correct that the comparison of the U.S. housing market and the oil market is a questionable analogy, but the big point is that both are examples of speculation in action.

I know a lot more about speculation in stocks and bonds than I do about the futures markets. When you borrow money to buy a stock (on margin) and the stock rises, then you can borrow more money based on that rise in equity to buy more of the stock. Speculators do this all the time.

Alas, too much of our economy resembles a casino. When my youngest daughter becomes Empress Jill the First of the Empire of the United States, I shall advise her to outlaw all lending to buy stocks, bonds, or commodities.

Fairly abrupt movements in the price of oil in the absence of significant news that reflects changes in fundamentals of demand or supply, such as today's, reflect pure speculation. Speculators could drive oil prices down $10 a barrel or up $10 a barrel. Of course, speculation does not drive long-term trends in the oil market--or in any other market. But when I say long-term I'm talking ten or fifteen years, though the spectacular speculative blow-off periods are much shorter-term than that.

I think but cannot prove that the Saudis are manipulating oil markets to some extent to minimize large fluctuations in the price of oil. If they are doing this, it is a good thing, in my opinion.

When you borrow money to buy a stock (on margin) and the stock rises, then you can borrow more money based on that rise in equity to buy more of the stock. Speculators do this all the time.

The current margin on equities is 50% of the purchase price, with a minimum account equity of $2,000. You cannot borrow the first 50% you can only borrow the rest. Thus the broker is protected. The stock can drop 50% and he can still get his money back. Though you will get a margin call long before that of course.

With futures it is entirely different. The margin required varies but it is always far less than 50%. It is usually less than 10% but it varies depending on the volatility of that particular commodity futures market at the time. But the remainder is not borrowed because the speculator never holds the actual physical commodity. So there is no need to borrow anything.

In equities the money must be borrowed because the seller must be paid in full. Not so in the futures market. The seller owns nothing but a paper contract with an obligation to buy at a given price on a given date. Ditto for the buyer, he just owns the other end of the contract.

So you see Don, the futures market is completely different in that respect. You never borrow money when you buy or sell futures. However in some farm commodities that have daily limits you can end up owing a lot more than your initial margin deposit. If a commodity, say wheat, is locked limit down for days, or limit up if you are a seller, and you cannot get out, your margin can disappear and you can end up having to sell your house to pay your broker. You must sign an agreement when you open your account saying you will be responsible for all liabilities in the event you are locked out and cannot unload your contract.

Oil has no limit and you can always get out of your contract, but occasionally, but very, very rarely, it moves so fast that your margin deposit is completely gone before your broker can deliver a margin call or can get you out. In such an event you are responsible for all losses that your margin deposit failed to cover.

Fairly abrupt movements in the price of oil in the absence of significant news that reflects changes in fundamentals of demand or supply, such as today's, reflect pure speculation.

Well, not exactly. When the price of any commodity moves suddenly in any direction it requires hundreds of traders, or one trader trading hundreds of contracts. (There are very few, if any, such speculators around. Only hedgers buy that many contracts and they are very careful not to buy them all at once.) Such moves are never made without a reason. The reason may be just a rumor, true or untrue, but it is still a reason. Hundreds of speculators never, in unison, just decide to go long or short. If they do then they have a good reason, or what they think is a good reason.

Speculators could drive oil prices down $10 a barrel or up $10 a barrel.

I have never seen a sudden movement anywhere near that large. Over days or weeks perhaps but never in a single session. It would create tens of thousands of margin calls and cause the market to freeze up. And if and when it does move from say $70 to $80 there would be a reason, a very good reason. Traders watch other markets around the world. When they see Brent moving on the ICE, they anticipate a similar move on the NYMEX and place their bets. If WTI does not make a similar move they get out quickly.

I think but cannot prove that the Saudis are manipulating oil markets to some extent to minimize large fluctuations in the price of oil. If they are doing this, it is a good thing, in my opinion.

Yes the Saudis can do this but only by manipulating the amount of oil they put on the market. If they hold back production prices will go up and if they dump a lot of oil on the market prices will go down. The only way to manipulate the market is to manipulate supply. Or, if you could manipulate demand but I know of no way of doing that.

Ron P.

What Don is missing is that for everyone that is long an oil contract there is someone short a contract. I know you have mentioned this before, but it just never seems to get through.

That is what makes the oil futures market different from the housing or equities markets. There is not somebody short a house for everyone that is long a house, nor is there someone short a stock for everyone long a stock.

I have never seen a sudden movement anywhere near that large.


From the EIA (Closing price, WTI, $/bbl):

19 Sep 2008 (Fri): $104.05
22 Sep 2008 (Mon): $122.61
23 Sep 2008 (Tue): $107.85

And later on in the week:

26 Sep 2008 (Fri): $106.77
29 Sep 2008 (Mon): $96.29

The sharp spike on 22 Sep 2008 is particularly interesting. Maybe related in some way to the impact of hurricane Ivan (landfall 16 Sep 2008). I have not seen a detailed explanation for that single-day $16/bbl shift in closing price on 26 Sep 2008.


That large spike on that date was someone caught in an immense short squeeze. I think it was the expiry date of the contract.

Thanks for the explanation abundance, the 22 was the expiration date. And that was the futures price, I seriously doubt if any oil traded at that spot price. I would like to see what the last trade actually was. The closing price is set about 15 minutes after the close and is effective for all trades traded "at the close" or expired without being closed before the bell.

And I stand corrected. I simply did not remember that spike. Still don't. That should be something one would remember. Or I would think so anyway.

You can see the spike if you go here and then change the year to 2008.

Twas not likely the hurricane but the squeeze. And the hurricane was Ike. Ivan did make landfall on September 16, but in 2004. Ike made landfall on Sept. 13, 2008.

I had just moved to Pensacola three months earlier, in June of 2004. Ivan wrecked my boat. It also blew a tree down on my roof and poked a hole in it. But the insurance covered everything... then some. I was one of the very lucky ones in that regard however.

Ron P.

Thanks for the info AC and Ron.

And I, too, stand corrected. I have too many hurricane names and dates swimming around in my head! :oD

(Yes, I remember Ike--along with all that IKE (integrated kinetic energy)).


Hundreds of speculators can and do change their price expectations on a dime. John Maynard Keynes explained this very clearly in his famous 1936 GENERAL THEORY book. Speculators care nothing about fundamental changes in supply and demand. What they care about is what other speculators think. And beyond this, they care about what the other speculators believe a third circle of speculators thinks about the prospect for future price changes. Keynes mentioned the dynamics of how this can cause violent price fluctuations based on nothing, or based on nothing more of a rumor about a rumor. Rumors are part of collective behavior, and rumor drives the speculation process as much or more than hard news does.

Speculators roll over in bed all together. Speculation tends to increase the volatility of markets. When markets are not as volatile as one would expect, based on history, there has to be an explanation.

Don - I've resisted jumping into the speculation over the control of future markets...just too far from my rocks. But I'm wondering if the debate is more about controlling the price of the futures vs. the actual price of oil being sold. The entire discussion has been about the changes in future prices. As an oil producer my world is much simpler. I have a limited market of crude buyers. When my oil tanks are full I check the price posting of the buyers. I can either sell my load at the best price I find or I can shut my wells in (and lose revenue) or I sell. My decision isn't based on the futures market but by what the buyers are willing to pay.

Of course, this is where it starts getting more complicated. What factors are affecting the buyers' position? I would think the larger the inventory a buyer has the more attuned his decision process is connected to futures. OTOH crude buyers sell to refiners. Refiners probably are that much more connected to the futures market. But it’s difficult to envision the feed backs. And this gets back to the feeling that folks are talking past each other a bit in the debate: the price of future contracts vary second by second but my oil sales don’t. I sold my oil from one tank battery last week for $76.42. It’s sold and it matters not what the future market is doing today WRT my price of oil. It didn’t matter if oil futures were selling for $10 more/bbl. I had one choice: sell at $76.42 or shut my wells in and lose cash flow while waiting for a better price that might not ever develop. Thus is makes the question re: what “oil is selling for” somewhat nebulous IMHO. What are futures priced at? What did I sell my crude for? What did my buyer sell the crude for to the refiner (or another crude buyer)?

And then there’s the question of impact: regardless of the answers to those questions what is gasoline/heating oil/etc going to be selling for when my crude reaches it final utility? Regardless of what prices changes occurred along the way the product will sell for what the market will bear. At that point what I sold my tank for won’t matter IMHO. In that sense I see the futures market as a world unto itself with little influence on what producers (at least the smaller ones) sell crude for. OTOH the KSA may be a much different matter.

I wish somebody would write a book that deals with the issues you raise. If you ever write your memoirs of your life in the oil business, I'd like to read them.

Because I'm not an oil man, there is much that I do not know about how the "bidness" actually works. Your comments over the years have been of the very greatest value in my trying to fill in the holes in my knowledge about the oil industry.

I am convinced that speculation does temporarily move not only futures prices but also (to some extent) spot oil prices. Oil delivered in a month can be, under certain circumstances, a good substitute for oil delivered tomorrow. I do not see how it would be possible for fluctuations in futures prices not to affect spot prices.

The big question, the one on which Westexas and I disagree, is whether the Saudis are voluntarily holding oil off to market so as to drive up oil prices and also long-term profits. I cannot prove the Saudis are doing this. Westexas cannot prove that the KSA has little or no excess production capacity. We end up with conflicting models to explain what data we have.

Don - Us only in the production bidness pay very little attention beyond the well head. For us the oil traders/refiners/retailers exist in a different world. From a producer's status there is no spot market...just the daily posting when we decide to empty our tanks. That's where I think the discussion gets muddled. There has to be a fed back loop but the further the trail from the gas station to the well head the more difficult to establish cause/effect/impact.

I'm not sure how very different the different positions really are. Reminds me of the parable of the blind men and the elephant: we describe different parts of the system and see different factors and their affects. And then we interpret the different parts of this "animal" we sense and then try to formulate a grand theorem. Perhaps it's not an achievable goal...or just to complex to develop in this forum.

I think your parable about the blind men groping different parts of the elephant is precisely right. Each of us tends to focus on only one of (or at most two or three)the parts of the "elephant." Also, with oil, we know some parts are lies (e.g. the proven and probable oil reserves of Saudi Arabia as announced by that country), but we really do not know the magnitude of the lies. When it comes to oil reserves of various kinds, the best we can come up with are SWAGS.

If we could get really accurate data on production, changes in amounts of oil in storage, and actual transaction prices, then I think we could bring the elephant into much clearer focus. There is so much missing (reliable and valid) data that the best picture we can come up with is a fuzzy jigsaw puzzle with several large pieces missing.

We end up with conflicting models

Westexas cannot "prove" that the KSA has little or no excess ...

The big question, the one on which Westexas and I disagree, is whether the Saudis are voluntarily holding oil off the market


You don't have to model your models as "conflicting".

And Westexas doesn't have to "prove" 100% that his model is 100% right.

How about assigning Probabilities of Plausibility (Pplause (Model_j)) to your models?

Here are some things to consider:

1. What is the probability that KSA is one giant, well controlled monolith rather than a collection of individual citizens just like every other country?

2. What is the probability that KSA, as a nation populated by many individuals, can keep secret for very long their ability to produce more, but they are "holding back" from the greedy managers of their businesses as well as from the ELM portion of their large youth population because they are driven, unlike any other human being on this planet, by a clear vision of the far off future and an incredible ability at self-control?

3. What is the probability that KSA, unlike any other nation on Earth, is immune to ELM dynamics even though it has an exponentially growing population?

4. What is the probability that KSA, unlike USA lower 48 and many other places on Earth, can defy the general trends of the Hubbert curve?

In science, no model is ever 100% definitely right.
But some are closer to 99% probably right
while others are closer to 1% chance if at all of ever being right.

[ i.mage1.+]

[ i.mage2.+]

[ i.mage3.+]

[ i.mage4.+]

September 29, 2008 was the day that TARP was voted down in the House of Representative (it was later passed that Friday). On that day, just about every market took a nosedive on fears of massive economic downturn, it was the largest single day point drop in the Dow in history. It's not surprising that oil prices would fall a lot on recession fears.

Yes the Saudis can do this but only by manipulating the amount of oil they put on the market. If they hold back production prices will go up and if they dump a lot of oil on the market prices will go down. The only way to manipulate the market is to manipulate supply. Or, if you could manipulate demand but I know of no way of doing that.

Certainly in the end any real price move is based on physical. I like to use three months as the sort of natural time scale for physical oil.
This gives you time to load more tankers and off load more or cut back. Physical contracts are 30-60 day affairs. I think Robert mentioned at least a 30 day forward view at the refinery. This trickles back up the chain so its impossible to get a real physical change in oil supply in less than three months from the time it starts.

Now movements out of storage esp in the Gulf Coast can be much faster obviously if the storage is owned by speculators. Remember we had a lot of storage at sea for a long time. Response time of this could be days or weeks. You still need to get a pipeline allocation and make delivery but its a lot faster.

And of course the US has had very high storage levels for a long time or at least reported high storage levels. Any price banding or ranging in the US would have been entirely controlled by the storage situation in the US. Too much oil was stored locally by US companies for the Saudi's to control prices over any reasonable span.

Even if you believed everything given US storage levels you would need collusion between US companies storing oil and the Saudi's to ensure a tight price band.

I'd argue no matter how you slice and dice it to achieve some sort of high price band when physical storage was literally overflowing would require a massive conspiracy.

I see absolutely no way that its possible for the Saudi's to manage production and achieve a stable price band at no point in the chain does this seem feasible esp given reported storage levels. Way way to many lags between when a well is cranked up and when refined products are finally burned to allow manipulation of production to have some sort of fine grained control of prices.

Reg T is 50% but you can get portfolio margin which is a whole lot more - think 600 to 700%


Additionally, for every home owner you don't have somebody who owes a house as is the case in futures trading.

Speculators are surely responsible for short term swings in the market of any commodity futures contract. But it is impossible for speculators to hold prices at a high level.

Ipso Facto. Short term maybe, but not in the long haul over years of trading. But here's a greater question: Why would an investor purposely decide to purchase something above the value he/she figured it had? Afterall, all risky investment is speculative. The investor speculates there will be greater demand for the commodity they are investing in at a later point in time providing a potential profit. Name one risky investment that doesn't require speculation. If I buy a simple stock, I am speculating it will increase in value due to any number of possible reasons. There is no certainty of a profit, only speculation of profit.

The price of oil rose from a production plateau in 05 to a height of 147 in 08, and then from a low of 35 worked its way back up to the current 80-90 range. Based on how far the economy has rebounded, and in spite of much lower real estate values and less construction, lower stock market indexes, the current price of oil commensurately fits into the 05-08 oil price range, without the need to add in the idea of speculation as a basis for price justification. In other words the price fits with the idea of supply and demand.

Now supply may be purposely constrained by OPEC to achieve a certain price level, or they may actually not have much spare capacity, but that is another question for another debate.

But here's a greater question: Why would an investor purposely decide to purchase something above the value he/she figured it had?

Earl, an investor would never, ever, do such a silly thing. A speculator just might do such a thing however if he/she thought the price would rise in the next few minutes to few hours.

Speculators are not investors and investors are not speculators. You should never confuse the two. Speculators are gamblers pure and simple.

Ron P.

Speculators are not investors and investors are not speculators. You should never confuse the two. Speculators are gamblers pure and simple.


Stocks are Wall Street’s ultimate sucker bet.

It's a gamble per that article. How about this defintion of Speculation from the website linked below it:

An investment that is very risky but could yield great profits; "he knew the stock was a speculation when he bought it"


The word speculation is linked at the hip with any form of gambling. When my wife and I were speculating on what stocks to buy, she remarked it was gambling. I agreed. If you don't think investing in stocks or anything else that can go down and lose money or go up and make money is a gamble, then you've got a scoop.

The only investment that isn't a gamble are ones that guarantee a certain return, and as long as they are legit, then they are not a gamble. Everything else invested in, oil, corn, stocks, etc. is a gamble.

The only investments that are not speculative are the ones you can't make any money from. If there's any chance of making money, there's also a chance of losing money

Even US government bonds are speculative to some degree. You're speculating that the US government is going to pay you back, which is not a certainty. There's a finite risk that they might default on their debts.

On the other hand, the most profitable investments are the riskiest ones. If you can afford to lose all the money you invest, you can make a fortune if things turn out right.

All investments are speculation but all speculative plays are not equal. Stocks are of course a gamble but over the long haul they have outperformed every other investment available to the general public. The worst 25 years in the stock market outperformed the best 25 years in the bond market.

Derivatives, futures, options and such, are nothing but pure speculation, a crap shoot pure and simple. You can rant until the cows come home about the speculative nature of the stock market. But past history proves it was the best place to put your money over the long haul. It outperformed even the real estate market.

So when I say speculation is totally different from investing, I speak a truism, not withstanding the fact that you can lose money in the stock market, because you surely can. But more money has been made in the stock market than any other venture that the investor can easily place his money.

Look at it this way. Derivatives are a zero sum game minus commissions. The stock market is not a zero sum game. The market has always, over the long run, gone up. Some have lost money but far more have made money. Well, those that were in it for the long haul anyway.

Let me paraphrase Winston Churchill. The stock market is a very speculative way to invest your money. It's just that all other forms of investment are far more speculative and far more likely to cause you to lose your shirt.

Of course the collapse will put an end to all that. But then all good things must come to an end.

Ron P.

There is a clear and distinct difference between "speculation" and "investment." The best statement of this distinction I've ever found is in the book by Benjamin Graham, THE INTELLIGENT INVESTOR. These distinctions have been adopted by investors as astute as Warren Buffett--the most successful investor of all time.

It takes about 500 words to satisfactorily explain this distinction, so I am not going to do it here. All I'm going to do is to recommend (any edition) of THE INTELLIGENT INVESTOR. The big book SECURITY ANALYSIS by Graham, Dodd, and others shows how to put the principles of investment into effect. IMO, it is unsurpassed to this day. It does not matter much which edition you get; they are all good.

One thing I like about Benjamin Graham is that he has no use for Modern Portfolio Theory (MPT). IMO, MPT is nothing but a series of mistakes, though it is the conventional wisdom in finance today.

Historically, has OPEC used inventories or price to determine production? With US oil inventories still above the 5 year average one might argue that increased production would simply lead to more off shore storage of oil. With a weak dollar the price of oil would generally increase even in the face of rising inventories. While price is key, actual inventories of crude should be the basis to determine future crude production.

Honestly, I am amazed at the level of inventories in the US given the huge growth in China imports. In the event OPEC were to increase production to weaken oil prices, where would we store it?

I made a number of research posts on US inventories and Chinese demand over the last week.

To summarize, most of the 'excess' or 'above average' US oil inventories are located in or near Cushing, OK and are of medium quality. This won't be much help to the NE quarter of the US or the west coast if, for example, they suddenly run low on gasoline supplies and need high quality oil quickly to refine into gasoline.

Saudi Arabia has made some special deals with Japan and Korea to store extra oil in those places, but I don't think there was much if any oil stored yet under those programs.

Its Secretary General Abdullah al-Badri on Thursday said the group wanted a more balanced market before it would increase supplies

"Balanced market" are empty words.

Apart from the different numbers from different sources what is important is how OPEC members stick to their target.

From Bloomberg news:

Production slipped 80,000 barrels, or 0.3 percent, to an average 29.05 million barrels a day, according to the survey of oil companies, producers and analysts. October output was revised higher by 120,000 barrels. Production by members with quotas, all except Iraq, dropped 80,000 barrels to 26.7 million, 1.855 million above their target.

IMO to get their real spare capacity you have to lower their exaggerated (?) claims with almost 2 mbd. It would be interesting to know how much less oil production of each OPEC country is compared to when oilprices were above $100.

Dubai to raise utility bills from January 2011

Slab tariffs will rise about 15 percent, according to the head of the council, while an additional charge will be leveled according to fluctuations in oil and gas feedstock prices.

The increases only affect non-UAE residents, Emiratis will continue to receive water for free, and pay a nominal tariff of 7.5fils per kWhfor electricity.

"Non-UAE resident" is a euphemism for migrant worker.

"Non-UAE resident" is a euphemism for migrant worker.

I think that explanation obfuscates rather than clarifies. To most readers a migrant worked is a poor laborer forced to lead a nomadic existence, probably in pursuit of agricultural work or other manual labor.

The non-UAE residents may have been born there and intend to stay. They can be far better paid than many locals and can get mortgages, which is not the case for the typical agricultural worker. In fact, I think that if you own your home you are by definition not a migrant.


There are 1,500,000 Indians working in the UAE.


The Indian Diaspora makes up a good proportion of the working class in the Gulf Cooperation Council (GCC). In 2005, about 40% of the population in the United Arab Emirates were of Indian descent.

The Gulf Cooperation Council (GCC) states include Saudi Arabia, Kuwait, Bahrain, Qatar, United Arab Emirates and Oman. NRI population in these GCC countries is estimated to be around 6,000,000 (2006–2007), of which over 1,500,000 stay in the UAE

The UAE has one of the most unusual population growth charts. Look at all the imigrants that came in the 60's and 70's. Apparently they closed the door in 1981. But natural increase is still very high.



Immigration is not something that can be "undone."

I love how the political classes always treat immigrants like they are single, 25 year old men who will never have children or grow old.

It's like all the childish nonsense in America concerning illegal immigrants from Mexico. They are de facto citizens, and their children are, of course, de jure citizens.

If America was a functioning republic and not a bankrupt Empire, we would have a robustly monitored border with Mexico, and there would be very little immigration in either direction, and it would almost all be legal.

The point is, the utility bills of the privileged are being subsidized by the foreign laborers (and the term "migrant" laborer is the one I saw used most frequently by the media--not sure why you found it obscure, or felt the need to express your opinion on that matter).

Indian president opens counseling centre for workers in UAE

The UAE has repeatedly been criticised for the poor living and working conditions of foreign labourers, most of whom are from south Asia.

Go beyond cancelling kafeel system: ILO 'Protect migrant workers in GCC'

In 2010, there are estimated 15 million migrant workers in the GCC countries. In fact, in Qatar and the UAE, 90 percent of labor work force comprise expatriates, the survey showed. The ILO study found that various low-paid, dangerous and demanding jobs were mostly performed by foreigners, while high
ly paid government jobs are reserved for their locals.


The Prime Minister’s Science, Engineering and Innovation Council (PMSEIC) has released two independent scientific reports on climate change and the nation’s food and water security.

A key recommendation of the PMSEIC energy-water-carbon report was to implement consistent principles for the accounting and pricing of water, energy and carbon emissions into the atmosphere.

Reports can be downloaded here: http://www.chiefscientist.gov.au/

The interview with ABC TV is here:

Chief scientist launches sustainability reports

Not a single word on how food supplies depend on oil supplies as shown by Prof. Aleklett's slide presentations in several Australian Capital Cities just recently.

His program is on this site:

This one in Sydney

Have a look at slide 40:

It is unbelievable that top Australian scientists can be so ignorant of the oil supply situation in their own country as shown in these graphs:

Debbie, speaking of food security.

In 2007 our Emergency Management Association did a preliminary study on our state's food production and distribution. As a rural resident, I was not sure if this was good news or bad news.

In the event of an emergency, now that the State knows where the cows and grains are stored, do you think they will leave anything for us rural folk or do you think they will send it all to the cities to keep them from rioting?

Also, what do you think of underground bunkers for storing cows and goats (we've already hid the chickens in the forest so they should be safe for now ;)?


From "Peak Oil Needs to be Investigated...." (Up Top)

"And if oil is abiotic in origin instead of from fossils, it could mean that we might never run out."

What ARE these people drinking?.. and here I'm trying to find just some Absinthe to experiment with.


Iggy - I've found the best way to respond to the abiotic crowd is to fully accept their idea and just say: "Great!!! And exactly where we we be drilling to find all this endless supply of oil?" I've yet to receive one answer to my question.

Some simple math and a Gedanken experiment should suffice.

If there is abiotic oil, then it must be (a) continually produced or (b) in a giant subterranean vat or (c) a combination, generating new oil from base vat compounds into near-surface oil.

If (a), then over the long term leakage to the surface must equal production, with some modest quantity in-transit or in traps in the ground. Since we can estimate the surface leakage and have a pretty good measure of oil in accessible ground, it is obvious that the abiotic production rate is small, else the crustal deposits wouldn't take 100M years to fill and the seas would be awash with tar. For the yearly abiotic production to be a useful fraction of our consumption, the production history would need to be short, which would match nicely with a 6,000 year old earth. Drill, baby, drill!

If (b), then we simply need to find this vast subterranean repository. It is obviously not near the surface, nor tightly coupled to existing deposits, else these would not run out. We know much greater depths have serious thermal and pressure issues, so there is likely a point at which we'd find only nat gas (or diamonds) instead of oil. Which would still be nice. Drill, baby, drill!

The only plausible abiotic solution is a champagne-bottle solution (c), where we've uncorked the oil reservoirs from the top, which have capped the leakage and suppressed production for eons, and now that we're drawing oil off the top the abiotic mechanism below can get busy again. In this case our existing reservoirs might slow down, but would produce almost forever at a lesser rate, as the abiotic engine drew from its reservoir of carbon compounds and produced new oil. All this requires is that the North Sea and Texas be run by idiots who have not realized that their reservoirs are recharging, and it's time to uncap some old wells.

Since Rockman has said that he's successfully drilling in old fields, then (c) is obviously correct. Drill, baby, drill!

With respect to the abiotic issue, if you compare the earth to a cracking tower, you have the same principle of applying less and less heat as you go higher from the original heat source. However, with a cracking tower, you start with crude and end with light volitiles but with the abiotic theory, you start with light volitiles and end up with crude near the surface of the earth.

If the abiotic theory is correct, what would cause short length hydrocarbon strings to become long length hydrocarbon strings (crude oil/asphalt/tar)? Neither the pro- or anti-abiotic crowd is "correct" until that question is answered.

Can anyone point to a reference where this has been given some plausible explanation?

Water is abiotic. Think I will go and just open the spigot and let it run.

From Peak oil needs to be investigated along with alternatives

Regardless the reason, standing in their way are millions of Americans like myself that don’t believe in peak oil or global warming, and find it perplexing when other countries are near our shores pumping oil, while our government doesn’t permit our producers to explore the same areas because of the risk of environmental damages.

I, like the others, believe that we need to be developing alternate energy sources that are safe, abundant, and inexpensive to use. We just don’t believe that we are ready to make a drastic change to technologies that are great in theory but as yet unproven in use, especially when it will reduce one of the most important factors needed for economic development and the survival of civilizations - individual mobility.

A believer, not a thinker.

Why would someone who doesn't believe in peak oil or global warming "believe that we need to be developing alternate energy sources?"

Systems of rational thought require logical consistency. Systems of belief? Not so much.

Here are two C-Realm podcast interviews on EROI that KMO does with Dr. Charles Hall (very well known on TOD) of SUNY-ESF.

Podcast #235 - Depletion and Frakking http://kmo.livejournal.com/473551.html

"KMO talks with Charles Hall about Peak Oil, economics, technology and the potential of natural gas to fill the energy shortfall long enough for us to adapt to diminishing energy from petroleum. Karl Klein expresses his concerned about proposed hydrofracking in upstate NY. Charlie weighs in and KMO shares excerpts from a Kathy McMahon talk and from Battlestar Galactica."

Podcast #234 - It's about Stuff http://kmo.livejournal.com/472976.html

"KMO sits down with Charles A. S. Hall for an explanation of biophysical economics. If all wealth comes from the land, why do we think of economics as being about money and labor rather than about energy and "stuff?" Prof. Hall details the unworkable assumptions of neoclassical economics and brings an ecological focus to the study of labor, capital, and economic activity."

Back to snow shoveling in Upstate NY...

- Rev Karl

KMO has gone from a world of magical thinking, to actually interviewing guests with chewy and reality based ideas.
I had given up on his podcasts.

The Coming(?) Gas Mileage Tax

Ok, there have been a bazillion posts on improving gas mileage and EVs. What no one has discussed is the infrastructure and its maintenance that is payed for by gas taxes. Clearly, reduced gas purchases reduce the funds available for these purposes. Governments are not going to sit still and watch their budgets fall - they are going to re-coupe those funds. How? My guess is by slapping an additional registration fee on vehicles based on EPA mileage estimates; the less you have to buy, the more you have pay.

What y'all think?


I think that we should have done this forever ago. Therefore I think that we won't do it until it's far too late. Oh, wait, it's already too late...

Edit: Sorry Todd, I read your comment too quickly. What I think we should do is tax vehicles on on an inverse sliding scale of MPG.

It will likely start out as yet another case of not trying to address an issue until it is way past too late... once it dawns on the masses that in their relentless drive to "cut taxes" they are suddenly destroying a car every couple years by driving on bombed out roads. There will be an outcry of course then for gov't to take care of them after they've spent decades telling the gov't to leave them alone. Of course the gov't will be powerless to do anything about it due to years of neglect so it will simply be morphed into incorporation by the marketing depts. of the auto companies to boost sales of SUVs and other heavy duty "equipment": "With the Current State of America's Roads You'd Be Crazy Not to Drive the NEW Ford Pulverizer !"

I drive a Subaru because I'm expecting the roads to go to hell over the short period of time into the future that I'll probably still be able to afford fuel. Figured it was the best compromise between something that still gets reasonable mileage and would be able to handle moderate degradation of the roads.

That has actually been discussed here quite a bit.

It's worse than you think. What states actually want to do is install a GPS tracker in every car, and force you to pay per mile. By tracking you everywhere you go.

Ohh - doesn't that sound like a peachy-keen idea. No opportunities for other uses of THAT data are there?

A mileage tax would be implementable without a GPS, just need a device that tabulates miles driven. The GPS would allow the government to charge more for the use of certain roads (say, interstates or roads that are parallel to transit or trains) or to do variable charges based on the time of day (charge more at rush hour).

just need a device that tabulates miles driven

An odometer perchance? Don't cars have these already?

Its already a requirement for garages to log the odometer once a year during the annual MOT test here in the UK. This data is entered into a Ministry computer system and wings its way off to the DVLA. So mileage is already logged. Three problems though:

1. Brand new cars are exempt from taking an MOT for the first three years. No reason though that they couldn't be obligated to attend a test center for mileage to be taken each year and a certificate issued. Just like the MOT certificate they would need this 'mileage certificate' when purchasing the annual Road Fund Tax.

2. Mileage alone gives no indication of where the car was driven. Good to privacy concerns at bay but bad if, say, Manchester wanted to grade their roads according to price t'would not be possible without a gps system.

3. One could always disconnect the odometer or do a Ferris Bueller and run the car backwards ;)

Yes. Would have better said: need a device or process that reports mileage to the taxing authority.

Does the US have a Federal/State fixed road tax? In the UK motorists must by a tax disk (see below) from the post office each year. It must be displayed in the bottom left corner of the windscreen and each year it is a different colour. Police and parking wardens always check to see if it is current and if you haven't paid your tax then you get a nasty fine and/or prosecuted. So this is the method by which you would ensure that all motorists report their mileage each year to the government who could then calculate your tax liability and send out. In order to obtain a tax disk the motorist would need to present an official certificate issued by the MOT garage stating that they had successfully logged their mileage.

At the moment I believe that Priuses etc are exempt from paying the static road tax as the tax is graded dependent upon how much carbon your car emits. The road tax at the moment is nothing more than a revenue for the government though. It certainly ain't high enough to discourage driving or car ownership and - although I have no proof - I would be amazed if it has had any real impact on the types of cars (carbon wise) on the streets.

The most effective way to limit miles driven is through fuel tax. Easy to implement (if not politically) and is a real disincentive once it gets over the pain threshold (which in the US you are no where near!). A better system would be to issue each citizen with a card which could be used through the Visa/Mastercard/Amex systems in petrol stations and would ration different bands of pricing. So for instance, one might get X many litres per month at one price and any more at a dramatically higher price.

We have a fuel tax, and some of the general fund goes to highways, too.

We don't have tax disks. The problem is we're a bloody huge country, in which there is a lot of resistance to the federal government.

The reason states want to track you with a GPS is that they only have the right to tax you when you're driving on their roads. If they just looked at the odometer, they wouldn't be able to tell if you drove that mileage in Oregon, or if part of it was in Washington or California (or even Canada). GPS will tell them just how much you used their roads.

A federal "disk" would make it easier, but here, that kind of thing is all handled by the states. Which means the rules and fees vary widely. Some states require registration and inspection stickers. Some don't require inspection.

For instance, Florida annual 'tag fees' are based upon the weight of the car.

In Mississippi it's an ad valorum tax (by value of the car that year).

In New Hampshire, you pay a fixed registration fee to the state each year (currently $43.20), and property tax to the town each year, based on Blue Book value of your vehicle. When you buy a new vehicle, you get hammered for a few years until the depreciation really kicks in.

In VT, where I used to live, you paid sales tax to the state when you bought your vehicle, but after that just a reasonable annual registration fee to the state.

Live Free Or Die!

The reason states want to track you with a GPS is that they only have the right to tax you when you're driving on their roads.

Fair enough, but rather than a complex system like GPS based one, why not just have more state fuel tax? If you are driving in state X, chances are you are buying your fuel there too. And live you live out of X, but are driving through, in which case you are likely to refuel somewhere, then you will also be paying the tax. It is simple, hard to avoid, does not involve electronic equipment or new government administered programs.

Some people may leave state X just because they don;t like paying more for fuel, so be it - chances are they are high fuel users and care little else about State X, and what state wants those sorts of people?

Fair enough, but rather than a complex system like GPS based one, why not just have more state fuel tax?

Basically, because they're looking forward to a future where vehicles don't use petroleum-based fuels at all. How do you pay for roads in an all-electric future?

That's just nonsense. They're not thinking any such thing. They're just afraid of offending all the SUV and pickup truck drivers.

I honestly don't think it's anything like that at all. Look at the states that are considering it. Minnesota and Oregon are on the forefront - not the red states you'd expect to champion SUVs and pickups. Heck, both those states are sort of on the cutting edge of peak oil awareness.

They are genuinely concerned about how to fund highways when cars no longer use gasoline, or use much less of it.

It has absolutely nothing to do with taxing mileage. All they would have to do, for that, would be to check the odometer and, as most new ones are electronic, that can be done automagically by the same system you would use for the GPS. Not electric cars either, same rule applies. What would the GPS be doing? Tracking the vehicle. It is simply a back door way to know where every vehicle is at any given time. There is simply no need for GPS mileage measurement. For tax purposes you only need to tax the fuel and you would hit the highest consumers and heaviest vehicles the worst anyway.


We have annual stickers that go on our license plates which we pay a fee/tax on annually. The price varies by vehicle age and I think vehicle model/type? This is done at the state level not at the federal level.

"We have annual stickers that go on our license plates which we pay a fee/tax on annually."

Same here in WA. The price varies by vehicle weight. And they overcharge motorcycles.

I'm aware of GPS. However, I doubt that it will ever fly but charging more for registration is simple - except for those who are against raising "taxes." Todd

Hey, just call it a fee, and it's all good.

Hey, just call it a fee, and it's all good.

California just passed prop 26, which requires a 2/3rds majority to raise any fee's. That basically means the state is precluded from raising either taxes, or fees. I think the only thing left is to go for fines. Certainly if they had radar (or laser) speeding cameras, they could catch the 90+% of drivers who are grossly violating the speedlimits. But, I suspect they are afraid of the political backlash....

Sounds like the only option then is to "fine" people for buying fuel!

The fair way of taxing motor vehicles would be to tax them according to the amount of damage they do to the road and the amount of space they use on the road.

The amount of damage done is generally regarded as roughly proportional to the fourth power of the axle weight. A typical 18-wheeler by simple calculation can be expected to do close to 8,000 times the damage (per mile driven) done by a typical car, SUV or light truck. Given that the average heavy truck is driven many more miles per year (the average car is driven about 15,000, the average heavy truck probably at least 100,000) the total damage done by a truck could easily be 50,000 times the amount done by a light vehicle.

If a light vehicle does 20 miles per gallon, and a heavy truck does 5 miles per gallon, the heavy truck pays four times as much per mile as the light vehicle in fuel tax. That sounds to me like an effective tax rate 200,000% higher on the car, or 99.95% lower on the truck.

What it amounts to is that for decades drivers of light vehicles have been subsidizing heavy trucks. If the taxes necessary for maintaining roads were levied in a fair manner in proportion to the damage done by each vehicle, shipping goods by road would cost so much that most of what is now shipped by road would be shipped by rail. This would reduce the damage to roads so much that the funding gap in road maintenance would disappear.

A fair tax would need to be levied on a mileage and axle load basis. But the applicable tax would be so heavily weighted towards heavy vehicles that leaving out all vehicles with loaded axle weights of (for example) less than 3000 pounds would have an insignificant impact on the amount collected but make the tax (and the necessary tracking devices) much more politically acceptable.

Yet another reason to expand rail freight.

Trucks are destroying the roads.

tollways know this and charge them more, but not nearly enough for turnpikes & bridges, etc.

California has a unique licensing process. Some years ago people who had small utility trailers complained that they only used them occasionally, they weighed almost nothing, yet were charged "exorbitant" license fees. So the geniuses in the California legislature consulted with their favorite lobbyists and concocted a scheme where NO TRAILERS were charged an annual fee including those in tractor trailer rigs. So the very heaviest, most road damaging, vehicles get off scott free. And motorcycles still have to pay an annual fee based on vehicle value.

Of course, trucking is given a free ride. We all pay for it and subsidize the inefficient use of diesel fuel. Another inefficiency hardwired into the laws.

The people that consume/use are not paying fair value for the road damage they inflict.

Because it's trivially easy for any car owner to block the GPS device's antenna from seeing the satellites, unless the GPS device was actually also connected to the car's odometer (highly unlikely, too hard to implement) then all one needs to do is cover the GPS antenna, go for a drive, then uncover the antenna again.

The GPS would think it had never left home. Alternatively the covering-uncovering process could just "shorten" a trip rather than eliminate it.

Everyday it seems Tainter is right, layers of complexity are being added to our society at an enormous rate (and oil-cost) as "solutions" to problems.

I wonder how far away we are from peak complexity?

Because it's trivially easy for any car owner to block the GPS device's antenna from seeing the satellites, unless the GPS device was actually also connected to the car's odometer (highly unlikely, too hard to implement) then all one needs to do is cover the GPS antenna, go for a drive, then uncover the antenna again.

And why would it be too hard to connect the GPS unit to the car's odometer? They'll just interface it through your car's computer system. If there are any questions, they'll just interrogate your car's engine management system to determine what you've been doing.

Alternative scenario: The regional car monitoring system reports your car has lost contact with orbiting GPS satellites. The police are automatically called out to your last known location. They arrest you and confiscate your car. The penalty is five years for "unlawfully interfering with a car monitoring device". You are sentenced to spend the five years under house arrest. A GPS receiver attached to your ankle reports all your movements during this time.

I might be late to comment on this topic. Just wanted to say tracking is used for some time now - people are just not aware of it.
check this news article:
rental car tracking

Having to install a GPS tracker in my car (well, actually I don't have a car, but if I had one) and pay taxes per mile would really be enough to make me WALK everywhere. I would not care how much time or trouble it took. I would just walk. AFter paying gas, maintenance, other taxes, buying the damn car in the first place....it seems like the GPS thing would just be the final straw.

A further sign of an economy that withered on the vine!!!

I think fuel consumption tax is better because it favors efficiency in the marketplace.

Large trucks should pay per axle to adjust for damage to the roadways due to their massive loads, however.

think fuel consumption tax is better because it favors efficiency in the marketplace.

Which is precisely why it will never happen!

Whose gas taxes?

The 18cents/gallon Federal, and 18cents/gallon California taxes, which ends up just being about 9% of the current US$3/gallon cost?

...or Europe, where the tax rate is almost equal the fuel cost, equating to a total of about US$7/gallon?

I still cannot figure out why the US federal and state governments cannot sell the populace on a 1cent tax increase, and do it quarterly, or biannually.

"The roads must roll!" --Heinlein

Just paid the equivalent of $7.28 per US gallon in the UK . . . and we have a 2.5 per cent sales tax rise on 2nd January 2011 and another 0.76pence per litre on the fuel duty on the 1st January 2011. Then on the 1st April 2011 we get another rise of 1 per cent above inflation (currently 3.1 per cent) . . . and that will be repeated on the 1st April 2012, 2013 and 2014. Bring it on . . .

Jacking the price up will reduce consumption and hence push the date for peak oil further out, no? And reduce CO2 emitted. What's not to like?

I did write "Bring it on . . . " I like, I like! : )

BG Group announces update on Tupi and Guará fields, Santos Basin, offshore Brazil

In light of the outstanding reservoir characteristics and high recovery per well, BG Group anticipates very low unit technical costs for this initial phase of development, amounting to:

capital costs of $5/boe; and
operating costs of $9/boe.

For those who like to put pre-salt oil in the same basket as tar sands and other extremely expensive sources, this might help change the paradigm a bit.

lobo - I'm certainly not one who compared DW Bz to the tar sands. Not even apples to oranges...more like apples to cow patties. I've done just a little work with the DW Bz reservoirs and they are truly amazing. OTOH I keep my optimism contained due to time factor more than the costs. In absolute terms the costs may be huge but it's not difficult for me to accept the relatively low cost per bbl. But the facilties, drilling, tie-ins, etc take many years. If they had all the capex and drill equipment in one place at one time it would have a huge impact. But I suspect as the fields come on line they'll do so in a staggered progression. And at some point, given the relative high depeltion rates DW projects are subjected to, the later developed fields will just be replacing the then depleting early fields. Don't have enough data to begin to guess when that point is reached let alone what the sustained production rate might be. Maybe in time DW BZ might sustain an increase of 10 million bopd. Or maybe just 2 million bopd. And it might take 10+ years before we can even get a handle on the numnber.

The article indicated only 2.2 billion BOE over the 27 years of the license. That only amounts to a little over 200,000 bbls a day. What's the significance of that, or is my math wrong?

That's the production figures only for three FPSOs (two in Tupi and one in Guará). As time goes by other FPSOs will be producing not only in these, but in a handful of other giant fields in the Santos Basin.

What's the significance of that? No one said it's gonna change the macro-situation much. Probably it won't, maybe it will (the exploration of the pre-salt is relatively new).

But to be able to drill from bellow the salt layer with a huge profit margin is definitely a big deal.

lobo/jj -- I think this chat brings me back to the parable of the blind men and the elephant. Each has a very different take on the nature of this "animal" which each one can only "sense" a portion. I'm very pro drilling (environmentally sound, of course). It decreases our dependence on imports, creats great revenue for our biz, the govt and private owners of mineral rights, generates a large number of good paying jobs, etc. OTOH none of that changes the unsustainable nature of BAU. As I watch the debates it's typically not difficult to see the character of that particular part of this "elephant" each has identified. Each of us feels a different emphesis that shows up as a disagreement. But those difference seem more based on priorities than the interpretation of facts.

On the other hand, these costs do not appear to include any cost for exploration, and no discount rate, as well as excluding transportation costs and some rather hefty taxes and other fees. They also make the assumption that predicted costs and production are accurate. Remember also that the quoted figures are barrels oil equivalent and about half of it is gas, which always seems to sell for less than its oil equivalent. In the U.S. gas is currently selling for about 28% of oil price for equivalent energy (the way BOE is calculated). The BG reference case is $70/barrel, but if gas is this much lower in Brazil they'll only get $19/BOE for the gas when the oil is $70. And their price is based on Brent crude, which has half the sulfur of Tupi.

What kind of risk is involved in a project of this kind, looking forward nearly 30 years? Is there any political risk? What is the storm risk? The first (and only) recorded South Atlantic hurricane struck Brazil in 2004: are we going to see more such storms in the future? What is the risk of something like the Macondo blowout? This is 2,000m water depth.

It does look as if this project will make a profit for the participants, though if they only get $19 per BOE for the gas the profit will be much less than it appears on the surface.

And their price is based on Brent crude, which has half the sulfur of Tupi.

You must be mistaking Tupi's oil for Campos Basin oil. Tupi's has less than 0.5% sulfur.

Power glitch hits Toshiba's flash memory production line

Toshiba could lose up to a fifth of the NAND flash memory chips it was making for delivery early next year, after a momentary power glitch caused its production line to halt. But the problem shouldn't have a long-term effect on chip prices, which could drop by more than half in 2011, according to analyst data.

The glitch occurred on Wednesday morning at 5:21 a.m., when problems bringing a substation online at a thermal-electric power plant caused a drop in supply voltage for 0.07 seconds, said substation-operator Chubu Electric Power.

The drop, while brief, was enough to cause major problems for Toshiba because its back-up power-supply didn't kick in. As a result, machines on the company's NAND memory chip production line in Yokkaichi, central Japan, stopped working.

this is why i think solar power does not have much of a future. that same plant to make flash chips and it's clean room environment is needed to make the better model solar panels. one little brown out and all the panels in the current batch being made have to be thrown out.

Yet here in the instance of this article the failure was due to fossil energy plants and a flawed and dated power grid. Solar has absolutely nothing to do with this particular failure.

Oh the shouts about how solar will ruin the energy depleted future ;-) Please.

As OCT says, I think your conclusion is a little extreme. They lose batches and have duds for all sorts of other reasons, too. Every bakery has to throw out a lot of bread.

Besides, a flash memory chip is a collection of millions of transistors, which all have to work.. PV has high purity requirements, but is a largely different animal in construction, since each cell is essentially ONE DIODE.

In any case, there ARE sources of consistent power available, such as geothermal and near large Hydro facilities. As power production becomes more affected by the presently unthinkable unreliablity of burnt fuels, the more dependable sources will attract industries like Wasps to Lemonade.. and once people are more familiar with rolling blackouts, the value of a little array on the roof that doesn't depend on miles of old wire, it just needs some light.. this will likewise be as appealing to the market as an opening front door is to the dog, so I'm fairly sure there will be PV factories near Niagara and Reykjavic one day.

Note that this was caused by a dual failure --
1. there was a 70 millisecond dropout of commercial utility power and
2. the backup power system did not kick in.

Note that the dropout was short - only about 4 cycles of 60 Hz power. But this sort of thing is common in commercial power.

However, the switchgear should have detected it and changed over to battery backup in the uninterruptible power supply. The unexpected failure is the second one.

Total CEO: OPEC Can Increase Production If Oil Keeps Rising

NEW YORK (Dow Jones)--OPEC has the spare capacity available to increase oil production, and will likely make some available to stop prices from rising above $100 a barrel, Total SA Chief Executive Christophe de Margerie said Friday.

"If oil goes back to $100, I'm sure OPEC will do something to stop it," de Margerie said at an event in New York.

Oil prices have remained relatively stable over the past year compared to other commodities, he said, adding that prices under $80 a barrel are probably too low to generate the investments necessary to create enough new supplies.

"$70 to $80 starts to be a little bit low to invest in those more difficult environments," de Margerie said.


His comments about the minimum price required to obtain some new production and new supplies are quite interesting.


I have had a quick search of the wikileaked cables for info on oil depletion in the gulf region.

Not found anything yet except for a mention of the fact that Oman has committed too much of its own NG to LNG export contracts and is running short.

(See cable 08MUSCAT174 for the details)

But others here might be better at thinking up search terms than me.

There's an online searchable index of the files that are already in the public domain at http://cablesearch.org

no results for "Ghawar" as a search string, sadly .. .

Re: Age of sail boats inspires green solutions

Just a note that the CNN story gives the incorrect impression that the B9 ships will be wooden-hulled, when in fact they will be steel-hulled. Masts and spars will apparently be high-strength modern materials. Their "sketch" looks like she'll be rigged as a three-masted barque, similar to windjammers. Some windjammers built in the early 1900s remained active into the 1950s, serving remote ports that did not have the fuel or water facilities required by steamships. Typical capacity for a windjammer was 2,000 to 5,000 tons (note the coffee-carrying ship obliquely mentioned in the article was carrying 5 tons). Average speed could be as high as 16 knots for transatlantic crossings. Windjammers regularly rounded Cape Horn in severe conditions.

Thanks all the same, but I'll use the Panama Canal as long as it is open. Rounding Cape Horn from east to west is a brutal experience for any sailing ship.

You can make sailing ships out of steel, or you can make them out of wood. Both are good. I favor wood for masts and spars, because I think we should get away from depending on materials made from fossil fuels. Hemp works fine for rope, though it will sink and it will rot if not properly cared for. A huge advantage that Manila hemp has over Dacron or Nylon rope is that you can easily tell by looking at it how worn the hemp rope is. Nylon often fails abruptly due to heat generated by movement on an iron cleat. Hemp does not fail abruptly. Dacron and higher tech materials can also fail abruptly.

There is much to be said for a gaff rig, maybe with a topsail. I think the evidence shows that the schooner rig is more efficient than a barque rig. 5000 tons is plenty for a sailing ship; you get into various hairy problems when you try to go much above 5000 tons. Also, you probably should not go to more than five masts.

I expect labor to get much cheaper and for fuel to become much more expensive. Thus sailing ships are likely to dominate the oceans by the end of this century. They need not be pure sailing ships. An auxiliary electric motor and a big bank of lead-acid batteries in the bilge make a lot of sense, with solar or wind-turbine recharging.

Don, Solar recharging makes sense but if you have wind you don't need the motor. Bill

Thus sailing ships are likely to dominate the oceans by the end of this century. They need not be pure sailing ships. An auxiliary electric motor and a big bank of lead-acid batteries in the bilge make a lot of sense, with solar or wind-turbine recharging.

The B9 ships will carry significant amounts of compressed biogas (methane). Just speculating, the real value of the engine may be that it lets the ship operate under power for passage through the Panama and Suez canals, and when entering or leaving port.

from bloomberg:

Saudi Arabian Oil Minister Ali al- Naimi said there is no need for an oil production increase at a meeting tomorrow of the Organization of Petroleum Exporting Countries....


then he adds:

“You guys really worry too much about prices,” al-Naimi told reporters as he arrived in Quito, Ecuador, for the producer group’s meeting. “They go up, they go down. What’s new?”

Talk about arrogance and idiocy; I think Naimi forgot that the whole reason behind OPEC existence is to control and sustain what they believe to be a reasonable price , and if I recall correctly when prices dipped in late 2008 OPEC ministers were running like chicken without a head announcing cut after cut to shore up the price! .. but hey "prices go up, prices go down, what's new!"?


Central heating oil price shoots up by 70pc
Millions of mostly rural households have seen their heating bills shoot up by 70 per cent in recent weeks because of a sharp rise in the cost of central heating oil.

While most of Britain's 26 million homes are linked up to the central gas mains, around two million properties – most in rural areas – use either oil or liquefied petroleum gas to fire up their boilers or cookers, such as Agas.

The average price of this oil has gone up by more than 70 per cent in the last three months, ten times the rate of increase endured by normal gas customers.

It is a jump in price that could add as much as £540 to some families' annual heating bills.

See: http://www.telegraph.co.uk/finance/personalfinance/consumertips/8194367/...

Might be time to Heat Electric.