Drumbeat: December 15, 2010

Rising oil prices, the recession and a new world order

The trade bargaining position of developed countries is expected to continue to worsen with the rise in prices of natural resources, so developed countries' economic growth will remain slow.

The discussion between Mizuno and Kayano resembles what Jeff Rubin, an economist with a Canadian investment bank, wrote in his book, "Why Your World is About to Get a Whole Lot Smaller."

Like Mizuno and Kayano, Rubin attributes the ongoing global recession primarily to the rise in oil prices. He urges those skeptical about such an assertion to analyze all the recessions in the post-war period. He says the fingerprints of oil clearly remain in all post-war recessions, and the current one is no exception. A rise in interest rates, which is responsible for the bursting of the real-estate bubble in the United States, was triggered by skyrocketing oil prices.

China warns of power and energy shortages this winter

SHANGHAI (Reuters) - Some parts of China could face an intermittent shortage of crucial coal, oil, power or gas supplies crucial for heating during the winter months, China's top economic planning body said in a statement on Wednesday.

Most of China's resource production bases, including coal and and oil, are either concentrated in the northern or western provinces, away from the key demand areas located in the southern and eastern region, such as Shanghai and Guangdong.

Prices edge up, inflation still at bay

Tepid rises in food and energy costs kept the rise in the overall index muted. Food prices rose a modest 1.5% for the year, while gasoline prices climbed 7.3% for the year. Though gasoline prices have been rising for several months, momentum is starting to wane -- the 0.7% monthly increase in gas prices was the slowest of the last five months.

AAA expects 3.1% increase in holiday travel

(CNN) -- Americans traveling to see family and friends during the upcoming holiday season will have more company on the roads and in the skies, according to projections by AAA.

About 3.1% more Americans will travel at least 50 miles from home compared with last year, the AAA said Wednesday. The group expects 92.3 million Americans to travel at least 50 miles from December 23 to January 2.

Pipeline project a new Silk Road

The significance of the signing of the inter-governmental agreement over the Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas-pipeline project on Saturday in Ashgabat cannot be underestimated. It is a unique Silk Road project that holds the key to resolving many complicated issues in the region.

The project is ostensibly about the transportation of the huge Caspian energy reserves to the world market, but it is also about the stabilization of Afghanistan, fostering of Pakistan-India amity, bonding of Central Asia and South Asia and the overall consolidation of US political, military and economic influence in the strategic high plateau that overlooks Russia, Iran and China.

Mexico arrests 2 Chinese execs on bribery charges

Mexico City – Two top executives of a Chinese company were arrested in Mexico on charges they tried to bribe employs of state-owned Petroleos Mexicanos to obtain discounts on the purchase of polyethylene, authorities here said Tuesday.

Mexico state oil monopoly Pemex reshuffles board

Pemex chief executive Juan Jose Suarez has been shaking up the company's top leadership as the company struggles to boost lagging oil output and deal with a ballooning pensions deficit.

China independents in exotic fuel imports to make diesel

BEIJING (Reuters) - Independent Chinese oil dealers have been importing an unusual fuel in recent months that can be easily turned into diesel to plug a domestic shortage, in transactions that could be legally contested.

Up to 700,000 tonnes (5.5 million barrels) of power kerosene, a fuel that can be turned to diesel after simple skimming or blending, have entered since August through southern and eastern Chinese ports, traders with close knowledge of the deals told Reuters.

Foreign firms ask for Saudi Jizan bid extension

KHOBAR, Saudi Arabia (Reuters) - Foreign engineering firms keen on bidding for deals to design the Jizan refinery are asking state oil firm Saudi Aramco for more time to submit their proposals, industry sources said.

The refinery is designed to process 400,000 barrels-per-day (bpd) of crude, sources said. It is part of Saudi Arabia's plans to boost domestic refining capacity from the current level of 2.1 million bpd.

Japan, Saudi Arabia sign 3-year tank lease to store crude in Okinawa

Tokyo (Platts) - Japan and Saudi Arabia Tuesday signed a contract allowing the kingdom to store its crude for commercial use in Japan in exchange for prioritizing the supply of crude to the Asian country in an emergency, Japan's Ministry of Economy, Trade and Industry said in a statement.

Barclays Survey Finds Higher E&P Spending in 2011

Global exploration and production (E&P) spending is forecast to rise 11 percent in 2011 to $490 billion from $442 billion in 2010, according to 402 companies surveyed by Barclays Capital for “The Original E&P Spending Survey” released Wednesday.

GOM Offshore Industry Faces Infrastructure Challenge

The deadly explosion of the Deepwater Horizon drilling rig in April set off a fierce battle over deep-sea oil drilling aboard huge, state-of-the art vessels. But that debate has largely ignored what many experts say could be a bigger threat: The troubled state of offshore infrastructure that remains in place long after wells are drilled.

Russian Deputy PM: Russian Cos May Take 25% Of Samsun-Ceyhan Pipe

ISTANBUL -(Dow Jones)- Russia's Deputy Prime Minister Igor Sechin and Turkey's Energy Minister Taner Yildiz announced a deepening of energy sector collaboration Wednesday, underlining the rapidly expanding economic and political ties between Ankara and Moscow.

Kenya: State strips oil marketers of fuel pricing powers

The Government has made good its threat to regulate retail prices of fuel by announcing maximum prices for petroleum products in the country.

South Africa: Fuel ’running dry’ at some Gauteng petrol stations

One fuel company said the shortage was caused by a recent power outage at two Durban refineries and operational changes at some inland plants.

Tenaska Awarded Texas Permit For Cleaner Coal-Fired Plant

Omaha-based Tenaska Incorporated has said the 600 megawatt power plant will use new technology to recover up to 90 percent of its carbon dioxide emissions. The emissions will be sold to oil companies that will then pipe it underground to help recover oil.

Book Review – Energy And Climate Wars by Peter C. Glover and Michael J. Economides

According to the authors, the book was written to give the reader a grasp on “the power politics of energy” or more specifically on the social ideology that increasingly influences and impacts you.

What is real, they say, is the threat on your energy security, but not for the reasons you believe (we’re running out of oil/peak oil, or that alternative energies will substitute for ‘dirty’ hydrocarbons). The REAL threats to your energy security are numerous one being alternative energy. In other words, our lifestyle as we know it (military, cars, homes, gadgets, etc.) is predicated on energy, energy that grew out of the Industrial Revolution. If we scale back on fossil-fuel based energy sources, oil, coal, natural gas, we are going to lose our way of life, our military will suffer, and ultimately, our energy security will be at risk.

Energy independence: Gas prices and plug-in vehicles

Pretty interesting plans coming out of California to create a very robust charging infrastructure to support electric cars. Such a plan it seems should help more and more early adopters plug-in. Obviously, you can’t have the chicken without the egg, and you can’t have viable, short-range electric cars without some place to charge them.

Low carbon: Where do we begin?

The Association for the Study of Peak Oil believes that world production of conventional oil is already declining. In the short term, total oil production will be sustained by oil from deep water and the northern polar region, supplemented by gas condensates. But the overall peak is probably only about five years away. Most of our transport planning is still based on the implicit assumption that we will always have cheap petroleum fuels.

The ethics of biofuels

In the world-wide race to develop energy sources that are seen as "green" because they are renewable and less greenhouse gas-intensive, sometimes the most basic questions remain unanswered.

In a paper released today by the School of Public Policy at the University of Calgary, authors Michal Moore, Senior Fellow, and Sarah M. Jordaan at Harvard University in the Department of Earth and Planetary Sciences, look at the basic question of whether these energy sources are ethical.

US ready to sign 123 agreement with Russia

With the completion of the congressional review, the way is clear for the Obama administration to enact a civilian nuclear energy cooperation agreement with Russia, according to lobby group the Nuclear Energy Institute.

It said that the US government is also now free to renew another with Australia. The bilateral agreements with the two nations will open the door for new nuclear trade, research and technology transfers.

A Detailed Look at Indian Point’s Environmental Effects

More than 90 percent of the striped bass that hit the protective screens in the Indian Point nuclear plant’s cooling system survive, but only 38 percent of the alewives do, according to a new environmental impact statement prepared by the Nuclear Regulatory Commission.

Refilling the Carbon Sink: Biochar’s Potential and Pitfalls

The idea of creating biochar by burning organic waste in oxygen-free chambers — and then burying it — is being touted as a way to cool the planet. But while it already is being produced on a small scale, biochar’s proponents and detractors are sharply divided over whether it can help slow global warming.

The New Class Warfare over Bicycles

In Vancouver the pro-car crowd criticizes the Hornby bike lane by claiming to stand up for small business.

In Toronto, after being sworn in as new mayor, Rob Ford declares an end to the "war on cars." He plans to block a light-rail line and to abolish a $60 vehicle registration fee. Don Cherry congratulates him for rising up against the "elite" and slams "bike-riding pinkos" who supposedly once ran the city.

Advice to students: understand money, localize

A coal industry CEO told students at a small Quaker boarding high school to prepare for jobs in coal mines and power plants, rather than study philosophy or become community organizers.

“We don’t need another community organizer,” said Bob Murray, the chief executive of Ohio-based Murray Energy, to “revolutionize the country.” Instead, he said, students need skills for jobs in the real world, and “I’m the guy that does create jobs.”

Dmitry Orlov: Fleeing Vesuvius (by sea)

This hefty tome was recently published by Féasta, Ireland's Foundation for the Economics of Sustainability. It contains two articles by me: the first is a text version of the presentation I gave at the Féasta conference in Dublin two summers ago, which you can read right on this blog.

My second article in this volume—Sailing craft for a post-collapse world—is a long piece that I wrote exclusively for this publication. It spells out the transportation options that will still exist once fossil fuels are no longer available, concentrating on sail transport. It pulls together pertinent information that is currently scattered across many academic disciplines, and is also informed by my personal experience as an ocean sailor and live-aboard who does all of his own maintenance.

Monbiot: These astroturf libertarians are the real threat to internet democracy

I first came across online astroturfing in 2002, when the investigators Andy Rowell and Jonathan Matthews looked into a series of comments made by two people calling themselves Mary Murphy and Andura Smetacek. They had launched ferocious attacks, across several internet forums, against a scientist whose research suggested that Mexican corn had been widely contaminated by GM pollen.

Rowell and Matthews found that one of the messages Mary Murphy had sent came from a domain owned by the Bivings Group, a PR company specialising in internet lobbying. An article on the Bivings website explained that "there are some campaigns where it would be undesirable or even disastrous to let the audience know that your organisation is directly involved … Message boards, chat rooms, and listservs are a great way to anonymously monitor what is being said. Once you are plugged into this world, it is possible to make postings to these outlets that present your position as an uninvolved third party."

Ecosystem Services: Pricing to Peddle?

We especially need more awareness of the trophic origins of money. Money doesn’t grow on trees, but it does come from the ground in a very real sense. The amount of money available for the purchasing of guns, butter, hogs or carbon sequestration originates from the agricultural and extractive surplus that frees the hands for the division of labor.

In other words, it is not the ozone layer that “generates” money for throwing at its priceless service. Nor does the North Pole “generate” the money for ecotourists to witness it. What generates money is activity on the ground – on the farm, in the forest, in the fishery – that gives everyone else their food, as well as the materials for their clothing and shelter. Everyone else is then free to work in the manufacturing or service sectors. With plenty of surplus, the economy can even support bankers, actors, and financial engineers who set up markets for trading carbon permits. That’s the trophic structure of the human economy.

Peak in oil demand will be the genuine wolf at the door

The post-First World War "gasoline crisis" in the US was followed by a 1956 prediction by M King Hubbert, a Shell geologist, that world oil extraction would start declining by the year 2000. Dr Colin Campbell, another geologist, wrote in 1989 that production was about to reach its peak - global output is now 16 million barrels per day (bpd) higher.

Of course, the boy who cried wolf was eventually eaten by one. But the current generation of doomsayers, often not oil professionals, have neither addressed reasons for so many incorrect predictions of apocalypse, nor explained why this time their warnings are any more credible.

Stuart Staniford: Prospects for a New Peak in Crude & Condensate

The bottom line is this: those people running around saying that the all-time peak in monthly oil production was definitely in 2005 or 2008 are running a considerable risk of having events make fools of them.

Oil slips below $88 on US crude supplies, dollar

SINGAPORE – Oil prices fell below $88 a barrel Wednesday in Asia after U.S. crude supplies fell less than expected and gasoline inventories jumped, suggesting demand remains sluggish.

...The American Petroleum Institute said late Tuesday that crude inventories fell 1.4 million barrels last week while analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos., had forecast a drop of 3 million barrels. Inventories of gasoline soared 2.4 million barrels and distillates added 2 million barrels, the API said.

Holiday strain: Gas prices put brakes on Christmas driving

The recent rise in gasoline prices may limit travel plans over the Christmas and New Year's holiday season for Northeast Mississippians, reflecting a national pattern.

Petrol's slippery customer is you, ACCC analysis reveals

You all think you are ripped off blind by the petrol companies. That the weekly price cycle pours liquid gold into their pockets.

Think again. If anything the motorist is ripping off the petrol companies. At least, she and he are getting their petrol very cheaply.

Hedge Funds Gain as Arctic Weather Boosts Nordic Power

Arctic weather, water shortages and halted reactors drove Nordic power prices to the biggest monthly gain in three years, boosting profits at hedge funds investing in European energy markets.

Consumer Prices in U.S. Likely Rose in November on Fuel Costs

The cost of living in the U.S. probably rose for a fifth month in November, led by higher gasoline prices that aren’t filtering through to other goods and services, economists said before a government report today.

Fuel price hike upsets people across India

The hike in price of fuels has upset citizens all across the country.

State-run oil retailers raised petrol prices at midnight on Wednesday by close to three rupees.

Justification of petrol price rise 'a lie', says Javadekar

BJP today rejected Finance Minister Pranab Mukherjee's justification of the hike in petrol price that it was due to rise in cost of international crude and threatened to hold nation-wide agitations on the issue.

"This is a lie. A litre of petrol costs Rs 26 to the government but it is sold to people at Rs 60. Even traders do not keep such high margins," BJP spokesperson Prakash Javadekar told reporters here.

Fuel price rise adds to inflationary pressures

While India is keen to ease its subsidy burden, lifting fuel prices in a country where hundreds of millions live in poverty could anger the governing Congress party's core voter base.

"When the price of fuel goes up, everything goes up. If the diesel rise happens, the general price rises across all goods could have a big impact for Congress in 2011," said Mahesh Rangarajan, a political columnist and professor at Delhi University.

TIMELINE - Fuel price policy and changes

REUTERS - The latest hike in petrol prices brings the overall increase at the pump to near 17 percent since deregulation in June, which prompted even government allies to protest and strikes which hit transportation.

State-owned Indian Oil Corp, Bharat Petroleum and Hindustan Petroleum will raise petrol prices by about 5.6 percent -- the steepest since June.

Australia: Electricity and other rises to cost families an extra $310

BASIC utility price hikes which will cost the average household an extra $310 next year have angered AdelaideNow readers.

The latest power sting, announced yesterday, will increase the average annual electricity bill by $140 or 12 per cent.

Beware the rock star business guru

When a slick and smiling Jeff Rubin appeared in a Harry Rosen ad earlier this year, it was clear that the former CIBC World Markets chief economist has become more than a practitioner of the dismal science. He is a brand. A rock star. An international guru with a best-selling book and a long list of corporations eager to pay very large amounts of money to hear him forecast the future.

Unfortunately, the future the guru sees isn't pretty.

Inflation and the “Commodity Supercycle”

In real terms, the 1973-1980 and 2001-2008 rises in the oil price were similar. The inflation-adjusted (IA) oil price exceeded its 1980 high in 2008, but not by much and not for long. As things currently stand, the IA oil price is near its average of the past 35 years, which contradicts the notion that the combination of "Peak Oil" and "Chindia's" growth is behind oil's upward re-rating.

Will Oil Inflation Destroy America Or Will 2011 Be The Year of The Rabbit?

The good news is that the Saudis are saying $70 to $80 is “Fair”. The bad news is they may change their minds and with oil knocking at the door of $90 and some OPEC malcontents muttering $100, they are starting to look a bit wobbly. Or even if they are “steadfast”, perhaps they won’t be able to pump enough oil to contain prices?

Hedging against Peak Oil Shocks

Key points in this Outlook:

• Increases in oil prices have frustrated consumers and led to calls for U.S. "energy independence."

• One of the best ways to combat rising oil prices is expanding domestic fossil-fuel production.

• This can actually reduce unemployment and create jobs in energy-producing states--and help steer the United States out of the recession.

Why You Should Consider Shorting Crude Oil Right Now (Hint: Record Long Bets)

Over the longer haul, many of us believe that oil is heading higher. If you subscribe to the peak oil theory, or at least some derivation of it, this trend is basically regarded as fact.

But for the shorter term, oil may be due for some degree of pullback. Speculative longs on the black goo is at an all-time high, according to our boy David Rosenberg.

Does China Face a ‘Peak Coal’ Threat?

China’s ravenous appetite for energy puts the country at risk of reaching a point of “peak coal,” when demand for coal will outstrip domestic production capacity, a growing number of experts believe.

China now consumes approximately 47 percent of coal produced globally but by most estimates has just 14 percent of global coal reserves. Meanwhile, demand has risen by about 10 percent per year for the last decade, putting the country on an “unsustainable” path, according to a recent report by C.L.S.A. Asia-Pacific Markets, a Hong Kong-based brokerage firm.

Saudi Aramco Sees Red Sea, Jalameed Gas Flowing This Decade, CEO Says

Saudi Aramco, the world’s largest state-run oil company, plans within this decade to produce natural gas at new fields in northern Saudi Arabia and off the Red Sea coast, Aramco’s chief executive officer said.

“We’ve done quite well, and in the last few years we’ve made some significant discoveries,” Khalid Al-Falih said in a Bloomberg Television interview on Dec. 8. “We have made discoveries in the north of Saudi Arabia in a place called Jalameed. We’re exploring very aggressively in the Red Sea.”

Reserves boost Qatar's World Cup plans

RAS LAFFAN // Qatar's possession of vast gas reserves is boosting the emirate's hopes of delivering a memorable and problem-free World Cup when, in 2022, it becomes the first Arab nation to host football's premier event.

South Korea to Raise Overseas Crude, Gas Output by 33% Through Purchases

South Korea, Asia’s fourth-largest crude importer, expects to increase production from oil and gas fields owned by its energy companies by 33 percent next year through the acquisition of overseas assets.

Production may rise to 409,000 barrels a day of oil equivalent next year from 308,000 barrels a day this year, the Ministry of Knowledge Economy said today in its 2011 policy plan. South Korea, which imports almost all its energy needs, shipped in 837.1 million barrels of crude and 25.8 million metric tons of gas in 2009.

South Korea's LNG Imports Jump 35% in November, Gaining for a Tenth Month

South Korea, the world’s second- largest buyer of liquefied natural gas, increased imports of the fuel for a 10th month as heating demand rose.

Exxon Has Room to Expand Papua New Guinea LNG Production, Bernstein Says

Exxon Mobil Corp.’s liquefied natural gas project in Papua New Guinea could add a third production line because of the possibility of finding more natural gas, Sanford C. Bernstein & Co. said.

Afghan government awards oil contract in first phase of revenue-generation plan

KABUL - The Afghan government on Monday awarded a small but potentially path-breaking crude oil contract, marking the first phase of an effort that U.S. and Afghan officials say could bring the cash-strapped government significant revenue.

Ghana to begin pumping oil for first time

ACCRA, Ghana – The West African nation of Ghana is poised to begin pumping oil Wednesday for the first time, kicking off a lucrative new industry expected to bring $1 billion annually to a part of the world where most people still get by on less than $2 a day.

But critics warn the country, one of the most stable and democratic on the continent, has yet to pass crucial legislation to avoid what is known in Africa as the "resource curse." In places like Congo and Nigeria, oil or mineral wealth has fueled conflict instead of boosting desperately needed development.

Ghana's Oil Wealth May Trigger Borrowing Spree, Raising Debts

Ghanaian President John Atta Mills says the country will learn from the mistakes of other African oil producers and save some of the revenue for future generations after production starts today. Government agreements to borrow more than $14 billion say otherwise.

China bid wins BP's Pakistan assets

KARACHI - British energy giant BP Plc is to sell energy assets in Pakistan to the United Energy Group Ltd (UEG), a Hong Kong-based investment group, for US$775 million, trumping offers from Pakistani energy companies.

The deal, agreed on Tuesday and expected to be completed in the first half of next year, is part of BP's ongoing divestment plan to help pay for the devastating Gulf of Mexico oil disaster earlier this year.

U.S. expected to file Gulf oil spill civil case

WASHINGTON (Reuters) – The U.S. Justice Department is expected to announce as early as Wednesday its first significant legal action stemming from the BP oil spill in the Gulf of Mexico, a federal government source familiar with the matter said.

Government issues guidance on offshore drilling rules

WASHINGTON (Reuters) – The Interior Department on Monday issued guidance about its new regulatory regime for offshore drillers, responding to complaints that confusion over the agency's new policies has delayed deepwater permitting.

NTSB: No external corrosion in CA gas pipe blast

SAN MATEO, Calif. -- A gas pipeline that ruptured and caused a deadly explosion in a Northern California neighborhood showed no signs of corrosion and wasn't dented or leaking, federal accident investigators said Tuesday.

The National Transportation Safety Board has yet to determine what caused the transmission line to rupture on Sept. 9, killing eight people and destroying dozens of homes.

EPA monitoring cleanup of Chicago area oil leak

LOCKPORT, Ill. – The U.S. Environmental Protection Agency is monitoring the cleanup of an oil leak from an underground pipe near in the Chicago area.

Oil sands report criticizes all stakeholders

Cutting through rhetoric that so often dominates debate over Canada's oil sands, a new report by a prominent academic group is a comprehensive snapshot of the failings and successes of all the industry's stakeholders and raises hope for a new era of oversight.

The peer-reviewed report, to be published Wednesday by the Royal Society of Canada, takes aim at oil companies, governments and environmental groups alike while recommending steps to improve environmental monitoring in the economically vital industry.

WikiLeaks: China Reselling Chavez's Cheap Oil

(AP) President Hugo Chavez's government has sold China oil for as little as $5 a barrel and was upset that China apparently profited by selling fuel to other countries, according to a classified U.S. document released by WikiLeaks.

The report about Chinese companies diverting oil was one of several newly released documents that also describe falling crude output in Venezuela caused by a host of problems within the national oil company Petroleos de Venezuela SA, or PDVSA.

In bid to break Taliban, US embraces more firepower

WASHINGTON (AFP) – The US military has dramatically stepped up air strikes and manhunts in Afghanistan in a bid to weaken the Taliban, reflecting a return to "counter-terrorism" tactics.

Dropping more bombs and carrying out more raids by special operations forces underscores a sense of urgency in the war effort, as the White House prepares to release a strategy review and commanders try to change the dynamic of a conflict mired in stalemate.

Venezuela opposition denounces Chavez as dictator

CARACAS (Reuters) – Venezuelan President Hugo Chavez moved on Tuesday to bypass parliament and govern by decree for one year in the oil-producing state, prompting opposition charges he was acting like a dictator.

Crude: The Incredible Journey of Oil (ABC TV DVD Review)

Ever thought about where the petrol in your car’s fuel tank comes from? That’s where the story of “Crude: The Incredible Journey of Oil” begins around 160 million years ago in the area now known as the Middle East, which was then covered by sea.

UK: Govt to offer grants for electric cars

LONDON (AFP) – The government on Tuesday launched state grants aimed at encouraging motorists to buy environmentally-friendly electric cars made by leading manufacturers including Mercedes-Benz and Toyota.

Billionaire unveils Russia's first hybrid car

MOSCOW (AFP) – Russian billionaire Mikhail Prokhorov on Monday unveiled a new hybrid car that is due to come on the market in 2012, a first in a country where motorists often show scant regard for the environment.

Firewood buyers can get burned by too-small cords

When it comes down to it, few people today know how much a cord of wood is, and while most wood sellers are honest, there are unscrupulous and fly-by-night dealers who sell wood in meaningless amounts.

Pickens Plan no longer features wind energy

Oil tycoon T. Boone Pickens' TV commercials blasted the airwaves in 2008 with his big idea to get America off foreign oil imports: natural gas and wind energy.

Two years later, let’s just make that natural gas.

Since the billionaire’s plans for the world’s largest wind farm fell apart in the Texas Panhandle, Pickens has edited his much-hyped “Pickens Plan” to focus primarily on his other big business interest: natural gas.

New wind power technology: Offshore, stealth turbines

NEW YORK (CNNMoney.com) -- Stealth technology for wind turbines is just one of the latest examples of advances in wind power that aim to make the renewable resource more competitive with fossil fuels.

Applying the stealth capability is an effort to solve a persistent problem with the massive turbines: ground-based radar stations mistake them for incoming aircraft.

To Conquer Wind Power, China Writes the Rules

TIANJIN, China — Judging by the din at its factory here one recent day, the Spanish company Gamesa may seem to be a thriving player in the Chinese wind energy industry it helped create.

But Gamesa has learned the hard way, as other foreign manufacturers have, that competing for China’s lucrative business means playing by strict house rules that are often stacked in Beijing’s favor.

Alstom Paying for Lost Years of Focus on Coal Rather Than Wind

Alstom SA is seeking to reverse the worst stock return of any major French company this year with a push into renewable energy as the maker of trains and turbines seeks to narrow the gap with German rival Siemens AG.

India selects 37 companies to build solar power plants

NEW DELHI (Reuters) – India has selected 37 companies to build solar power projects, as the country moves forward with an ambitious plan that seeks to significantly scale up production from near zero to 20 gigawatts by 2022.

Bid to revive rare Redditch apple tree

Alistair Waugh, who is involved in the Transition Redditch movement which aims to find local ways to tackle climate change and peak oil, said: "Every area of the country has its own distinctive fruit varieties.

"Many of these have grown out of favour because we no longer rely on that local supply of fruit. The range of fruit is shrinking all the time. As a result, our local varieties are rarely seen and tasted. I think it’s worth people growing them for the sake of heritage and to promote diversity in our orchards."

Wild Permaculture Forest Gardening on the BBC (Video)

The BBC seems to have gotten on a permaculture kick lately. Not long ago the broadcaster aired a beautiful and big thinking documentary about peak oil, agriculture, and one farmers' attempts to redesign her farm along permaculture principles. Now I've just come across a great video in which the BBC's very own gardening guru Alan Titchmarsh explores a stunning forest garden created by two of the pioneers of permaculture in Britain.

Renewing our focus on food

The challenge for Australia in coming decades is to assure its own food security in an increasingly food-insecure world. This will require renewed focus on science, technology, economics, food policy, consumer education and the national diet writes Julian Cribb.

Off-Grid Homes Considered ‘Weird’ Living?

When Gerry Cunningham started building his Southern Arizona zero-energy home in the 1980s, he likely never dreamed that, after his death this year at the age of 88, his solar-powered house would become famous not for its earth-friendly footprint, but as a contender for one of the nation’s weirdest homes.

Australia: Council fast tracking its energy change

Energy efficient buildings, roof-top Solar PV, and using renewable fuels are three ‘spearhead’ projects that have kick started Sunshine Coast Council’s transition to a clean energy organisation.

These three spearhead projects were highlighted following the adoption of the Sunshine Coast Energy Transition Plan 2010-2020, which details how the Sunshine Coast can begin the transition to a low carbon and low oil economy.

Full of high sentence, but a bit obtuse: 2010, in review

2010 was all about one question: how, exactly, does one balance economic opportunities with environmental responsibilities? It was a 'politic, cautious' year.

Effort Falters on San Francisco Bay Delta

Because of 160 years of farming and the construction of 1,100 miles of levees, delta lands have sunk and are now 3 to 20 feet below sea level. Mindful of how Hurricane Katrina devastated New Orleans in 2005, planners are also focusing on the possibility that a big earthquake or storm could break crucial levees and allow saltwater from the bay to inundate the delta, which could shut off a large source of the freshwater supply for months.

EPA Tussle With Texas Regulators Spreads to Gas Wells

The Environmental Protection Agency, invoking a special "endangerment order" under the Safe Drinking Water Act, today ordered a natural gas drilling company, Range Resources, to provide clean drinking water and other assistance to two North Texas homes whose wells, the agency said, had been contaminated with methane and benzene to the point of being at risk of an explosion.

Conservationists lose fight to protect Moscow forest from road

The new Moscow to St Petersburg highway will be built through an ancient forest outside the capital as planned, a top official confirmed today, despite environmentalists' outrage over the issue.

The controversy over the Khimki oak forest is not just about irreplaceable trees. The fierce dispute has showcased Russia's gravest social ill: the abuse of power and the dangers associated with trying to expose it.

Rosatom Agrees to Buy Mantra for $1.2 Billion to Gain Uranium in Tanzania

Rosatom Corp., Russia’s nuclear holding company, agreed to buy Mantra Resources Ltd. for A$1.16 billion ($1.15 billion), giving it the Australian-based company’s Tanzanian uranium assets.

Minerals found in consumer electronic devices help finance civil war in Congo

As you arm yourself with electronic gifts over the next few weeks, you probably won't think about the minerals your new cellphone, laptop or digital camera runs on. But no matter which company made the gadget, it's likely to be powered using tin, tantalum, tungsten or gold, all of which are mined in Eastern Congo, where profits contribute to financing the country's bloody war.

Japan cast as villain at U.N. climate talks

Japan found itself in unfamiliar territory at the just-concluded U.N. climate change conference in Mexico, having been cast as a major villain that blocked progress as delegates sought to strike a deal on new steps to curb global warming.

Britain Will Roll Back Margaret Thatcher's Energy Market to Cut Emissions

The U.K. will propose the biggest changes to energy policy in two decades tomorrow when the coalition government lays out plans to ensure aging power plants are replaced and climate targets met.

David Cameron’s government is likely to reassert state control over the market-based system introduced by his predecessor Margaret Thatcher when proposals are made to parliament. The regulator has suggested a “carbon floor” price to force up the cost of emitting greenhouse gases, encouraging investment in nuclear reactors and offshore wind farms.

Global warming and civilisation

Rich nations like those in Europe, the US, Japan and Australia are reluctant to slash their greenhouse gas emissions because emerging nations with high economic growth in the last 15 years, especially China and India, have not legally committed to reducing their carbon emissions. In the meantime, developing and poor nations are worried that cutting emissions could hamper economic growth they badly need to deal with unemployment and poverty.

Such rationales, from both rich and poor nations, are depicted in Garret Hardin’s “tragedy of the commons” story, which applies to almost all common-property resources.

Maps predict future floods for cities

Rising sea levels are likely to cause serious and regular flooding in Australian coastal cities by the end of the century, according to maps released by the Federal Government today.

The maps for low-lying areas in Melbourne, Sydney, Perth, Newcastle, the New South Wales' central coast and south-east Queensland show significant levels of inundation by the year 2100.

Sea level rise a 'challenging issue' that needs to be addressed: scientists

Sea level is rising, and California's coastal communities will need to prepare for the gradual inundation of low-lying areas, as well as increased erosion rates and damage from storms. Gary Griggs, professor of Earth and planetary sciences at the University of California, Santa Cruz, is working on a guidebook for local government agencies to help them make the difficult the decisions ahead.

"This is going to be a challenging issue for the next century," Griggs said. "In the short term, it's hard for people to see the urgency, because there are uncertainties about how fast this is moving in on us. But we need to start planning for it now."

Jeff Rubin: Cancun summit no solution to global warming

There are basically two ways to cut carbon emissions, and neither one of them involves global climate change summits like the one just held in Cancun, Mexico. The way I see it, you can either price carbon, or you can restrict growth.

What statistics can tell us about future world crude oil production rates

This is a great article from Michael E. Lynch. Note that this is not the "no peak in sight cornucopian" Michael C. Lynch.

The data suggests that over time, the output per well will continue to decline and at some point will be so low as to be uneconomical. As another point of interest, in the year 2000, the average output from a Saudi Arabian oilwell was 5,125 bbl/day. In 2009, the average was down to 2,817 bbl//day.

This analysis is merely a presentation of what can be determined by a review of statistical data over long periods of time. Putting aside the question of "peak oil", it is obvious that there is "peak economic oil" and the world is clearly moving in that direction.

Average Saudi production, per well, has dropped 45 percent since 2000. That is a rate of 5 percent per year. In 2000 most of the wells were still vertical wells but all the new wells have been horizontal wells, many of them multiple contact wells. But still the production rate per well is still dropping precipitously. We can assume, of course, that the rate per well in the new fields of Haradh, Shabah and Khurais is still very high. So what does this say about Saudi’s older fields?

The number of oil wells in the world was 807,172 in 2005. The average production per well, in 2005, was 89.64 barrels per day per well. Today we have 913,978 wells in the world but the production per well is 77.58 barrels per well. We are getting less and less oil from more and more wells.

And it should not be ignored that most of the new wells are horizontal wells in old fields. These wells extend the life of the field by sucking the oil right off the top of the reservoir, avoiding the oil tainted water that lies just a few feet below.

Ron P.

And of course, we see something quite similar in natural gas production. Current US NG production is close to the early 70's NG production rate, but the gas is coming from a much larger group of wells, and as Art Berman has noted, the shale gas wells have very high decline rates. Even the conventional reservoirs, which tend to be smaller than the older, larger fields that made up the bulk of the production in the Seventies, also have higher decline rates than what we had in the Seventies.

Ron - Excellent stat re: average production from Saudi wells. Folks can argue about real field decline rates and URR. But the 50% drop in average production from the KSA wells can't be argued. Assuming the numbers are correct I'm a little surprised the KSA released the info. And the addition of horizontal wells makes that stat even more meaningful: high rate but expensive hz wells have been used to keep the avg. up.

I'll make one picky little point that I'm sure you understand but others might be confused by: "These wells extend the life of the field by sucking the oil right off the top of the reservoir". They certainly increase a field's production rate and extend the high oil rate recovery period of a field's life. I assume that's the point you were making. But will they extend the (economic) life of the field? They might increase URR but that's not always a given. In some cases hz wells will cause more by-passed oil left in the lower portion of the reservoir. But not always...a very complex production model.

But more to the point: hz will more than likely shorten the commercial life of a field. High water-cut vertical wells obviously will drain a field slower that hz wells. But the nice bump up in production by hz wells is offset by the fact that a hz well, once the water level reaches the perforations, will become uneconomic to produce in a relatively short time. I've seen individual hz oil wells go from very profitable producers to non-commercial in just a few months. This compares to vertical completions that might remain commercial for decades at high water cuts. Since we don't have the details of the hz well distribution we can't be very specific on the timing but the dynamics are there: hz wells will generally shorten a field's commercial life. IOW the higher average production rates in the KSA fields due to hz wells will drop at a much faster rate some day thanks to those same hz wells.

Rockman, thanks for pointing that out. Obviously I worded it wrong. What I meant was that they extend the high production rate of the field and change the production profile. Where you normally, with vertical wells, would get a bell shaped curve, or something vaguely resembling a bell shaped curve anyway, they will now get something more resembling a flat topped curve with a shark fin drop off.

That will be because, as you explained, the horizontal wells drain the field much faster. You don't get more oil you just suck it out a lot faster. Thus the term "superstraws" was coined to explain the phenomena.

I believe that is what we are seeing right now in many countries. In the last few years, primarily the last two years, there has been a flattening of the decline rate in many fields. This has been because of infield drilling, with horizontal wells, in many old fields. We will soon see production from these fields drop as they hit the leading back edge of the shark fin.

Ron P.

Ron - A great shame that your shark fin curve gives the cornucopians some ammo despite the fact they are are firing blanks.

Ron, WT and Rock,

I know you guys are a lot smarter than I, but SAramco is a very well run outfit, at least by my standards, and it seems that it is possible that they might well be exercising better management of their reservoirs in a move to maximize profitability, e.g., oil is going to be sorth more in the future than now. Also, they have said that they are developing new fields, which are not fully producing, which are mostly heavy oil for which they do not have a fully developed market, and thus, the statistics may not be lying, but do not give the full measure of the truth. All of the very accurate info about production notwithstanding, it seems to me that the dramatic decrease in per well data may not tell us where KSA is, and that KSA may be more accurate in some of their statements than we wish to give them credit for.

All that having been said, I know I produce and sell everything I can, every day, but I do not have the financial strength to do much of otherwise - well, that and "The present value of a dollar today is a dollar, and tomorrow it is not." That quote was a quick summary of finance told to me by a retired prof from a well respected school, and I have to give him the attribution, for all it is worth - i.e., I did not come up with that on my own.

woody - I'm not a die hard believer in thrashing all the data the KSA throws out. The bigger problem IMHO is what they won't reveal. But back to my main point: the decline in the average production of wells in any field, trend or country is a very meaningful stat. I've never seen a mature area where it wasn't an absolute predictor of the end game. OTOH consider DW Brazil. Obviously it is decades away from falling into the "mature" category as the Middle East is today. Yes...there are significant oil fields left to develop in the ME. But there also significant oil fields left to develop in the USA. Just not very many and cumulatively not enough to offset the end game IMHO. Every field, trend, country will reach PO...just a question of when. Is the KSA there or close to it? Maybe...maybe not. Are many of the other OPEC countries at or close to PO? IMHO probably. Is the US or North Sea past PO? No debate there. Is the world at/close to PO? That's even harder to speculate but given how much global production is dependent upon ME production I would guess we're getting close...and by close I mean a decade or two. maybe even three. And IMHO, in the sense of being able to respond effectively to PO, that time frame equates way too soon.

BTW: WRT ARAMCO being a well run company...I don't disagree with that staement at all. But: the US oil companies were the best on the planet in the 50's and 60's. But that didn't prevent PO from hitting the US decades ago.

I don't think this is a very sound criticism, actually. Likely you saw the same phenomenon in other producing regions - if the EIA archived yearly well counts for states it would show up in Alaska and California, for instance. This wouldn't necessarily be a harbinger of a near term peak. It's an interesting phenomenon though - does drilling go into a "dogleg" like an HL curve? Whatever the implications it would be fun and informative to see what happens on charts. Perhaps this was hashed out here in the past - I remember ME well counts on graphs but it was hard to say what that portended - although of course many tried.

if the EIA archived yearly well counts for states it would show up in Alaska and California, for instance. This wouldn't necessarily be a harbinger of a near term peak.

Of course not. Alaska and California peaked years ago so nothing could bring that decades old peak up to "near term." That being said, it would be foolish to deny that drilling more and more wells and getting no more oil, only less and less oil from each well, is a sign of depleting resources. As Lynch puts it, it is simple arithmetic.

And one must consider that the new horizontal wells are far more efficient than the old vertical wells but you still get no more oil and in most cases even less oil. And when you further consider that many, in fact most, of the new wells are Multiple Reservoir Contact wells, that drives the nail even further into the coffin. That is each new well is equal to several old wells, but still the oil per well is declining.

Simple arithmetic!

Ron P.

I'm referring to revisiting past profiles of production and drilling in those regions to see if more wells anticipated decline in any meaningful way, ala Robert Rapier's analysis of HL, to see if it gave false positives. I bring up US states since the data may be there to utilize.

More wells aren't necessarily a bad thing; I'd warrant the inverse relationship to what we're talking about applied to fields like East Texas that were ridiculously overdrilled at first.

Well I don't have a history of wells drilled in Alaska or California and I don't know that this would give an indication of an impending peak but I suspect it would. And I would give ten to one odds that declining production from all wells, as we see in the world today, would give an indication of a post peak world or a world very near post peak.

Of course more wells are not a bad thing. Why would any oil company or country do a bad thing like drilling more wells if there were no advantage to doing so? No one in their right mind would spend billions on new wells unless there was an advantage, (good thing), by doing so.

KLR, we have the statistics, the question is: "What do they tell us?" What does it tell us when we have to drill more and more wells to get the same production, and in many cases get less production. "What does it tell us when the average production per well is dropping all over the world? You can play word games till the cows come home but basically it tells us that these fields are in decline and only the massive drilling of new horizontal wells, sucking the last barrels right off the top, is keeping production flat.

Simple Arithmetic.

Ron P.

Production could have been restrained by other factors - lack of suitable refinery capacity, for instance, which would create a temporary lag. Which is to say I just want to have more data to work with on the table; what might we have missed here? Perhaps all of this developmental drilling will maintain a plateau for a while; others have criticize holding up the experience with Yibal as applicable to all fields using MRC tech, too. Are they wrong? Has MRC been disastrous with every field it was utilized on?

I see how the EIA offers a spreadsheet for download on its Distribution and Production of Oil and Gas Wells by State page, with data for all states and years. You can view the number of wells for each state back to 1994 on the individual pages there, too. Will have to play around with these numbers later on.

Production could have been restrained by other factors - lack of suitable refinery capacity, for instance,...

Are you serious? All over the world? Anyway refinery capacity has been averaging around 85 percent in the US for several years now. And exporting nations does not worry about refinery capacity. World oil production is not held up by limited refinery capacity.

Perhaps all of this developmental drilling will maintain a plateau for a while; others have criticize holding up the experience with Yibal as applicable to all fields using MRC tech, too. Are they wrong? Has MRC been disastrous with every field it was utilized on?

Huh? What are you talking about? Got a link for that? I have heard absolutely nothing about MRC wells being disastrous for field utilization. They only suck the oil out much faster. They do not cause less production! How would that be disastrous?

The fact remains that production per well in Saudi Arabia has fallen 45% since 2000. They have cut back production a few percentage points but nowhere near 45 percent. And worldwide production, per well, has fallen from 89.64 barrels per well to 77.58 barrels per well in just four years. That is a drop of over 12 barrels per day per well. Worldwide refinery capacity maxed out? Give me a break!

Ron P.

World oil production is not held up by limited refinery capacity.

Ron, I think he referred to heavy oil. That is why KSA is delaying bringing heavy oil fields on stream.

I have heard absolutely nothing about MRC wells being disastrous for field utilization.

Did you miss something that ROCKMAN wrote yesterday ?

They might increase URR but that's not always a given. In some cases hz wells will cause more by-passed oil left in the lower portion of the reservoir.

It is interesting to note that more than half of all the holes in the ground are found in the US, wich also have the largest population of stripper wells (10 b/d or lower). I would be very greatfull for the the same data exclusivly for non-US wells. My guess is that statistic would reveal the same trend, just not as far progressed.

Looks like the UK and Europe are in for another period of colder weather. (The linked forecast map is for Friday, but I think the link will bring up later periods as time passes.) Anyway, one is left to wonder whether we are experiencing just a bit of unusual weather or, perhaps, seeing some real change in climate. We are only 2 weeks into Meteorological Winter...

E. Swanson

Its not just the UK that has been cold:

note that this is C not F.



This year was a little below average through 12/11, but this week will get most states to above average degree days except for New England, Pacific and Mountain regions.

Jeff Masters at Weather Underground talks about the cause of this - the North Atlantic Oscillation - which is in extreme negative mode (which traces back to loss of Arctic sea ice) again as last winter, on his blog today:

the strongly negative NAO is back again this winter. High pressure has replaced low pressure over the North Pole, and according to NOAA, the NAO index during November 2010 was the second lowest since 1950. This strongly negative NAO has continued into December, and we are on course to have a top-five most extreme December NAO. Cold air is once again spilling southwards into the Eastern U.S. And Europe, bringing record cold and fierce snowstorms. At the same time, warm air is flowing into the Arctic to replace the cold air spilling south--temperatures averaged more than 10°C (18°F) above average over much of Greenland so far this month. The latest 2-week forecast from the GFS model predicts that the Hot Arctic-Cold Continents pattern will continue for the next two weeks. However, the coldest air has sloshed over into Europe and Asia, and North America will see relatively seasonable temperatures the next two weeks.

(my emphasis)

I tried to post on Masters' Blog yesterday, but the comment did not appear. I took exception to Masters' statement:

A large difference in the pressure between Iceland and the Azores (positive NAO) leads to increased westerly winds and mild and wet winters in Europe. Positive NAO conditions also cause the Icelandic Low to draw a stronger south-westerly flow of air over eastern North America, preventing Arctic air from plunging southward...

The NAO is an index, calculated as the difference in sea level pressure between two locations, usually the Azores and Iceland. The index is an average, often calculated over a period of a month. Storm tracks moving over Iceland would result in lower pressure readings there, while storms moving further to the south would result in higher pressure over Iceland.

Masters claims that the NAO is the cause of the path taken by the storms. But, from physics, the atmosphere, being a fluid, can not "draw" or "pull", only exert pressure forces. The pulling force is gravity, which results in the densest air masses being pulled to the bottom of the ocean of air, such as happens with outbreaks of Arctic air in Winter. There are also shear forces to contend with, which result from differential motions between layers.

I think that trying to break the general circulation at the level of storms, i.e., low pressure areas, presents a flawed sense of cause and effect. In the case of the NAO, such would appear to be circular logic like this: storms tend to move over Iceland, producing a lower average pressure, thus making the NAO positive, which (according to Masters), is the cause of the storms moving over Iceland. I know that those who focus on weather seem to think this is reality, but I strongly disagree and I've complained to the Weather Channel and Accuweather when they say this...

E. Swanson

Oh good; I was wondering where the air was flowing north. There had to be some.

Is there a flow going North over Siberia as well?

Black Dog-

12Z GFS shows London hitting 13F... early next week.

But then the south winds come back and it says "bye bye" to the cold wx until next year.

The GFS 12Z Operational Run (the main GFS run) is a warm outlier though. The Ensemble Mean (and Control for that matter) doesn't want to hurl that low pressure up north (breaking the cold snap) via the UK the way the operational does. In fact the ensemble mean temp for London never really gets above 0C right though Christmas Day. In any case it's still pretty much at T+Fantasy that far ahead so I think it's anyone's guess whether the cold across the UK breaks before the end of 2010.

Edit: 12Z ECMWF (European model) just out. No break in the cold for the UK on its operational run before Christmas. The ECMWF has slightly better accuracy than the GFS but unfortunately only a very limited amount of its output is available for free unlike the GFS.

Link up top: Peak in oil demand will be the genuine wolf at the door

Of course, the boy who cried wolf was eventually eaten by one. But the current generation of doomsayers, often not oil professionals, have neither addressed reasons for so many incorrect predictions of apocalypse, nor explained why this time their warnings are any more credible.

That is misleading at best, and at worst dead wrong. Most of the original Peak Oil advocates, like Hubbert, Deffeyes and Campbell were oil professionals. Michael E. Lynch, in my post above, is clearly an oil professional and he, in that short article, clearly explains why the warnings are credible. To keep repeating that old saw: ”But they were wrong before therefore…” is just stupid.

But a number of major non-OPEC producers, notably Brazil and Kazakhstan, are set for major production gains. BG, the global oil and gas company based in the UK, is a partner in Brazil's giant Tupi field and estimates that development and production there will cost just $14 per barrel. If all-in costs of $14 per barrel for 5 billion barrels or more of reserves are not easy oil, what is?

Not so fast there. Apparently this guy has not heard the news. Brazil has greatly downgraded their expectations.

Petrobras Cuts Oil Production Growth Forecast by Half

Petroleo Brasileiro SA, Brazil’s state-controlled oil company, said production next year will rise by less than half a previous forecast as output at older fields declines.

Oh those older fields and their continuing decline rate. They will be the downfall of all those peak oil deniers.

Ron P.

Roderick Beck didn't mince words with his comment to the story. He begins .....

Robin, You’re extremely naive. ......

How can peak oil prediction be wrong when the approximate prediction of Hubbert was stated as such by Hubbert, when he openly acknowledged that oil production quotas (i.e. OPEC) could in principle shift the peak somewhat from the pure peak he initially posited (by a few years)?

You can stretch the peak some into the future but you cannot get the peak to grow infinitely.

So wrong is ill-defined at best. what then is the definition of right -- predicting the peak with nanosecond precision?

A visitor from Fantasy Island checks in. . .

Re: Peak in oil demand will be the genuine wolf at the door

This is by Robin Mills, who co-wrote, along with Peter Huber, "The Bottomless Well." Their thesis is that our total energy consumption will increase forever.

In any case, Mills has recently been taking a slightly more nuanced position than Huber, but I find it interesting that Mills apparently refuses to acknowledge that there are producing regions that are in decline because of depletion. Mill's position seems to be that virtually any region, absent political restraints on production and with the application of sufficient TFD (Technological Fairy Dust) will virtually never peak. Funny how Texas and the North Sea--which accounted for 9% of total cumulative global crude oil production through 2005--don't exist on the maps on Fantasy Island.

And one minor point. IMO, a production decline has not been truly reversed unless the calculated exponential rate of change, relative to a prior peak production level, is positive, i.e., if the rate of change calculation is still negative, then decline rate, relative to a prior peak has slowed, but it has not been eliminated.

And as Ron has pointed out, to the extent that a producing region can increase their production, they are doing so by increasing their depletion rate.

Of course, the boy who cried wolf was eventually eaten by one. But the current generation of doomsayers, often not oil professionals, have neither addressed reasons for so many incorrect predictions of apocalypse, nor explained why this time their warnings are any more credible.

This guy obviously hasn't been reading TOD, or read any peer reviewed papers by Aleklett, or read the latest IEA report.

This guy obviously hasn't been reading TOD, or read any peer reviewed papers by Aleklett, or read the latest IEA report.

He also must have slept through most of his Logic 101 course. Critical thinking is not exactly his forté, is it?

The Texas & North Sea production graphs showing their respective peaks:


Hubbert and Deffeyes, et al, concluded that the sum, of the output of discrete producing regions that show production peaks, will also show a production peak. Huber and Mills, et al, seem to address this issue by pretending that regions like the North Sea and Texas simply don't exist.

No, critical thinking is not his forte.

His article is sloppy and disingenuous. He conflates peak annual cumulative production (2005, to date) and peak monthly production (July 2008, to date). And also misrepresents the way the data has been presented by the Peak Oil watchers.

But this kind of rhetorical BS is what keeps people blinded as to what's coming down the pike at them. Forming a "most likely big picture scenario" requires homework, continuous homework. Too many people won't or can't put in the work, and later they'll pay the price. Of course, the government will demand that people like us here in the "Oil Drum", we who are taking steps to prepare, be the ones to bail them all out.

Meh. Anyone who starts with "They predicted the end of oil in the 1800's" is heavily biased and starting off with a logical fallacy. That's like some guy in the 1800's say "Man will never fly! Leonardo tried end failed! It won't ever happen.

Sorry deniers . . . just because it didn't happen in the past that doesn't mean it won't happen now. I know it is annoying for you but the issue MUST be re-examined all the time since every day we burn millions of barrels of oil and those are millions of barrels that will never be on the planet again.

And the whole 'peak demand' thing is another pseudo argument. As we all know, demand can never be larger than production . . . they are equal or made to be so by changes in price or production. And when you say 'demand is dropping' that is generally only because the price has gone up so high (or the economy cratered or both). If demand drops WHEN THERE IS NO INCREASE IN PRICE, then may you have a point. But I haven't seen that and I doubt we will unless there is some miracle breakthrough in cellulosic ethanol or battery technology.

The whole point of 'peak oil' is that it will be bad because peak oil will cause the price will go up. If price goes up and then demand drops, that is not evidence against peak oil. That is evidence OF peak oil. If price goes to $200/barrel and then you say "There is no peak oil . . . look there is a lots of oil available!" then you have completely missed the point. The real worry is price . . . peak is a means to that end. If the price becomes very high but there is plenty of oil available, that is a Pyhrric victory of the cornucopian view.

As we all know, demand can never be larger than production

Julian Darley talks about 'Desire'. It is a better word to describe this. The world might 'desire' 120 mb/d but we can only ever 'demand' what is actually coming out the ground.

Peak Desire is a long, long, long way off.

Demand is a curve. You can go along it (to the right or left) or it can shift one way or the other, but it is a curve, not a number.

If you are really trying to get literal, and it is obvious that you are, then demand is neither a curve or a number, it is a phenomenon, a fact, occurrence, or circumstance observed or observable. And it can indeed be expressed as a number or a curve.

Ron P.

How can demand be expressed as a number? How much oil does the U.S. demand? They will demand a different quantity at $0.01 per barrel and $250.00 per barrel. It's not just semantics, it's an important distinction. People say that "demand fell by X number of barrels" but that is only true if they are using fewer barrels at the same price, or at a lower price. If they are using fewer barrels at a higher price, demand hasn't fallen, we've just moved along the same demand curve.

I know you know all of this, I think it just gets confusing when people say "demand fell" because the number of barrels used was lower, without looking at the price.

Demand is a surface, since it changes with time.

That's quite a perceptive point. Demand is normally expressed as a curve on a two dimensional Price vs. Quantity graph, but if you add Time as the third dimension, it would be a 3-D surface.

This is a problem with conventional economics that is often missed, particularly in looking at a response to an oil price increase. You can solve for a new Quantity at the new Price, but this Quantity will change over Time because the PQ curve will shift down the Time axis.

This is not an Econ 101 topic, though, so I'll just leave it at that.

"Demand" is, strictly speaking (and we should speak strictly) a curve. "Quantity demanded" is a point; the point at which the demand curve and the supply curve intersect to give both a price point and a quantity point. Econ 101.

They will demand a different quantity at $0.01 per barrel and $250.00 per barrel.

Of course they will. Demand will always be higher the lower the price. Demand is just another way of expressing what they get at a given price.

Demand is a term economists use to express the observable phenomenon of products purchased. If demand is high then prices rise but if demand is low then prices drop. Price is the arbitrator that always makes sure that supply meets demand and vise versa.

I fully realize that you may not like that use of the word and you would like to change it. But you are out of luck, the word has very widespread use and you are powerless to change that fact.

There are lots of words that I don't like the accepted use of but I must live with those words nevertheless. One such word is "Produced" when used as in "Saudi Arabia produced over 8 million barrels per day of crude oil last month." Well no, they did not. They extract the oil from the ground they do not produce it like Ford produces cars.

I don't like it one damn bit but I still use it because I am powerless to change that custom. So Consumer just learn to live with it as I did.

Ron P.

The usage distinction between "demand" and "quantity demanded" in economics goes back at least as far as Alfred Marshall, c. 1880. This distinction clarifies many otherwise muddy issues. Journalists and laymen typically do not understand the distinction, because they did not do well in Econ 101.

Difference Between Quantity Demanded and Demand

In economics, demand is defined as the will to buy something that someone can afford.

Yeah, right, that's what I said.

Demand is what people will buy at the price they can afford and are willing to pay. That is they must want it first, then they must be able to afford it. That is, in effect, what I said earlier. As the price goes up demand goes down because people will only pay what they can afford to pay. Or they want it less because they think the price is just too high. However...

Words mean what they mean in general use. If a word, that is in fact not a word, is in general use long enough then it becomes a word. The term "OK" or "okay" was not a word until it became a word due to general use. Dictionary.com Related Words for : okay - all right, fine, hunky-dory, o.k., ok

I really don't care how you use the word "demand" it's really hunky-dory with me. ;-)

Ron P.

Sloppy usage reflects sloppy thinking. I cannot agree with your disregarding of the distinction between "quantity demanded" and "demand." By ignoring the distinction you get into ambiguities and absurdities.

I believe in dictionary definitions and also definitions as used in particular disciplines. Is it all right to speak of "mass" and "weight" as the same? Of course not. The fact that journalists misuse language does not thereby justify the misuse of language.

The fact that journalists misuse language does not thereby justify the misuse of language.

However if they use the word in that context, for many years, then that becomes the generally accepted use of that word. Academia may then rant and rave that this is not the correct use of the word but no one hears them. Everyone hears only how it is generally used by the media and the general public.

I fully understand that you disagree. However your disagreement cannot change the general accepted use of a word. I am very sorry about that Don. :-(

Ron P.

Please check your dictionary for the definition of "demand."

I accept the usage as stated in your dictionary.

IMO, you are the one rejecting dictionary definitions.

Are you arguing that if journalists use "mass" and "weight" as synonyms that therefore they are synonyms? I doubt that that is your position.

Are you arguing that if journalists use "mass" and "weight" as synonyms that therefore they are synonyms?

Naw, I really don't think they would do something that silly. I do however agree with the now general use of demand. How could I possibly do otherwise? I would be disagreeing with most every article posted on crude oil supply and demand if I did.

I agree with the use of "demand" in this article that just came out a few hours ago. In this article "demand" is used eight times. Crude Oil Supply Collapse

Was it sudden demand that just exploded or was there another reason for the big drop in supply.

It may have also have given the International Energy Agency an overinflated perception of demand.

Implied gasoline demand came in at a stunning 9.1 million barrels a day a huge jump for December and a stark contrast to the data that we are seeing from the independent MasterCard Survey.

Just this week they reported that gasoline demand was 1.3 percent below the same period a year which according to Bloomberg News is the largest drop in year-over-year consumption since Oct. 29.

Now considering the shape of the roads in most of the country, the spike in demand could have been motorists topping their tanks ahead of the snow storms which means demand will fall again.

Or the demand numbers were skewed as refiners scrambled to get rid of supply.

Either way we should see demand drop next week.

In almost every case above he is talking about numbers, demand expressed in numbers. That is the general use of the term "demand" as used in the oil business. That may or may not be correct but that is just the way it is. I am not going to argue with it, just accept it. After all there is nothing else I can do.

Oh by the way, it was a drop in imports that caused the sudden drop in supply last week, the largest since 2003, not an increase in demand. (Oops, did I use the word "demand" correctly here?)

Ron P.

Note the distinction in your quotes between "gasoline demanded" and "demand." I see nothing wrong in the usage in the passage that you quote.

Okay, scuse me, I was under the impression that you were agreeing with Consumer who says upthread that demand is a curve, not a number.

but it is a curve, not a number...

How can demand be expressed as a number? How much oil does the U.S. demand?

In the above examples, in which you see no problem, demand is expressed as a number, 9.1 million barrels, 1.3 percent and "the demand numbers were skewed."

Really sorry that I misunderstood you Don. I should have been arguing with Consumer not you. But now perhaps you can straighten Consumer out. Demand is a number, or quite frequently it is a number instead of a curve.

Sorry for my mistake.

Ron P.

Quantity demanded is a number. "Demand" is a curve. See my textbook, ECONOMICS: MAKING GOOD CHOICES, by Don Millman, 1996. I think it is still the best textbook for Econ 101--far more readable than the competition. By the way, have you looked at your copy of MAN, ENERGY, SOCIETY by Earl Cook yet?

No I haven't received my copy of the book. I ordered it on December 3rd and look for it every day in the mailbox but it has not arrived yet.

Total for this Order: $4.00
Delivery estimate: December 10, 2010 - December 28, 2010
Shipping estimate for these items: December 6, 2010 - December 7, 2010
1 "Man, Energy, Society"
Earl Cook; Paperback; $0.01

Sure hope it gets here before the 28th.

Ron P.

I don't really care if every journalist gets it wrong every time, demand is a function of quantity and price, and depicted as a curve with price on one axis and quantity on the other.

Just like I don't care if every journalist says that "peak oil" is when we run out of oil. How many times have we heard journalists say "some say peak oil is here, but others say there are still billions of barrels in the ground", as if those are competing ideas?

The problem with words being misused is that it provides a huge amount of wriggle room for people to intentionally lie and obfuscate.
This misuse of words can occur from the president (such as "I did not have sex with that woman" as technically oral isn't sex) down to advertisers using expressions such as "a quantum leap in technology" (most idiots think it means a massive improvement rather than the actual negligible).

The Census Bureau will hold a pre-release webinar Thursday, Dec. 16 prior to the Dec. 21 release of the first set of 2010 Census data.


Re: Indian petro price rise posts uptop:

The problem is likely to get worse. Auto sales in India are on pace for a record-setting year: Sales of passenger vehicles in October rose 38 percent from 12 months earlier, prompting automakers to say they may exceed a sales forecast of 2.4 million autos in the fiscal year ending Mar. 31. In fiscal 2001 just 615,000 cars were sold. Carmakers in India are benefiting from a $1.3 trillion economy that expanded 8.9 percent in the three months through September from a year earlier. Salaries may grow an average of 11 percent this year, the fastest rate in the Asia-Pacific region, according to human resources adviser Aon Hewitt.


Dans Macabre ad hoc Petrocollapse

A booklet, inspired by medieval Macabre tales, plays and murals, about the future of energy and it's unavoidable effects. "If advice ye ask of me, Learn Descent of Energy"

Thanks, that is so cheerful and inspiring!

Tis, the perfect gift for friends and family
Who with holiday cheer, will thank you kindly

For reading, 'Dans-Macabre-ad-hoc-Petrocollapse'
Will surely spark their last functioning synapse

As they slowly gaze past the rose's bloom
Their vision, will focus on that skull of doom.

As they realize they've finally run out of gas...
They'll surely raise, to your health, a glass!

Summary of Weekly Petroleum Data for the Week Ending December 10, 2010

U.S. crude oil refinery inputs averaged 15.0 million barrels per day during the week ending December 10, 71 thousand barrels per day above the previous week’s average. Refineries operated at 88.0 percent of their operable capacity last week. Gasoline production decreased last week, averaging 9.3 million barrels per day. Distillate fuel production increased last week, averaging 4.5 million barrels per day.

U.S. crude oil imports averaged 7.7 million barrels per day last week, down by 1.4 million barrels per day from the previous week. Over the last four weeks, crude oil imports have averaged 8.6 million barrels per day, 238 thousand barrels per day above the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 876 thousand barrels per day. Distillate fuel imports averaged 263 thousand barrels per day last week.

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 9.9 million barrels from the previous week. At 346.0 million barrels, U.S. crude oil inventories are above the upper limit of the average range for this time of year. Total motor gasoline inventories increased by 0.8 million barrels last week and are in the upper half of the average range. Finished gasoline inventories decreased while blending components inventories increased last week. Distillate fuel inventories increased by 1.1 million barrels and are just above the upper limit of the average range for this time of year. Propane/propylene inventories decreased by 1.9 million barrels last week and are in the lower half of the average range. Total commercial petroleum inventories decreased by 15.6 million barrels last week.

Memmel, where are you?

In Montreal freezing my ass off :)

But I'll be down in Irvine CA on business next week so a pretty big change.
Yes sometime even I have to do real work :)

Lets see what happens over the next several weeks esp with oil imports.

I guess its hard to buy enough oil at $88 when the world price, Brent, is at $91. 7.7 million barrels a day for imports can test MOL a lot quicker than most think.

Oil Futures Increase After Crude Inventories Drop the Most in Eight Years

Crude oil rose after a U.S. government report showed supplies plunged the most since 2002 as imports tumbled and refineries bolstered fuel output.

“The crude numbers are shocking,” said Andre Julian, chief financial officer and senior market strategist at OpVest Wealth Management in Irvine, California. “A near-term shortage of crude in the U.S. is forming. Prices could easily hit $100 by the end of the year based on this report.”

The question is: Why were imports down so much? Total imports, Crude oil and Petroleum Products, were 10,045 million barrels per day. That is 1,677 barrels per day below the previous six months average and below any week since the week ending March 7th 2003. We have had hurricanes and blocked ship channels that did not drop imports to such low levels before.

Ron P.

Also, total net imports were 7.793 million barrels per day. That is below any week since the week ending February 27th 1998.

On this trend the US will be from those pesky oil imports before 2018...

A few months ago we went through a heated discussion about what net exports and imports meant. It is not very hard at all to generate a situation whereby the net import peak closely aligns with the global production peak. The figure continues to bear this out.

Here is one part of the thread. It gets kind of heated.

If US is king and it imports a majority of its oil, then intuitively this should be the case. The daily fight for imports tells the tale on peak oil. I would need to think a while about the math.

I have a few equations in that link that garyp thought were worthless, so I would be curious what you think.

As long as the market for oil is true, then imports for a majority importer reflect the global supply of imports.

Your model assumes that oil does not suffer island effects, where supplies are trapped.

The only barrier to imports is the availability of imports.

I am busy with a student's thesis and my paper review ;-) But I will take a look since the weekend weather here is rainy.

Looking at the chart I would say it corresponds almost exactly with the peak in net oil exports. Come to think about it, that is exactly what it should do.

Ron P.

And since overall, exports have to equal imports then the rules of a zero-sum game state that a peak in exports will also define a peak in exports on the average.

But of course many developing countries, e.g. China & India, are showing increasing net oil imports, even as US net oil imports decline. Our thesis is that the US is on the path to "freedom" from our dependence on foreign sources of oil.

Another point to consider.

After being King, the US used oil rather inefficiently, so the competition in the developing world can suck away imports from the king, thereby shifting the net imports peaks for China and India a few years from the peak.

I have not looked at these graphs yet.

So depending on your relative economic efficiency (with respect to oil) your peak import year may be different.

So the subsequent peaks in net oil imports in the rising economies like China and India will intuitively indicate the decline in Worldwide oil production.

Get a math model that has a King (who is inefficient) and a rising star that is much more efficient and a generic source of exports.

That would be fun to see!

I know that the full solution requires a matrix describing export/import interactions between all the countries. The "king" might be pulled out of the matrix as a principle component.

Pollux - And inflation adjusted oil price at that time was $15.93/bbl compared to the $80+/bbl currently. That has to tell folks something about supply/demand. Doesn't seem to be that US demand has much effect on the market. In 1998 global demand 74,00 thousand bopd with current consumption today around 83,000 thousand bopd. So a 12% increase in global demand has increased the price of oil 4oo+%. Just my way of doing business but if I had any excess production capacity today I would go thru hell and high water to get it to market. But maybe that's just me.

If I had excess capacity today I would hold onto it and expand it over time. Oil will be worth more in the future--perhaps much more. As I've said before, if I were the economics minister advising Saudi Arabia I would suggest cutting production to half of capacity. That would tend to jack up prices--and most importantly, it would mean greatly extending the period of time that KSA could export large quantities of oil.

Why produce more? If you produce more, then you tend to drive down both price and long-term profits. I can see why Russia produces flat out, but IMO there is no reason whatsoever for KSA to do so.

you never replied to my last message re: Investing. Here is a cut and paste of it:

I am very familiar with Graham and Dodd. I use their principles all the time in evaluating companies. For the companies I listed as potential investments, check the free cash flow, check the leverage, check the debt and its rollover schedule, verify the book value. Buying an junior oil E&P at 1.2 times book, captialized at oil price of $25 per barrel and or MG at $2.50 per MCF and 25 years of reserve life is exactly what Warren would do. Or another example, buy a Cu-Au producer with the current metal value of their proven reserves equal to 20 times the market cap. (TVI Pacific is an example).

Here is the difference, I have no way of reliably estimating the Book value and discounted cash flows for technology and FIRE companies. Having worked on Wall street, ironically modelling complex derivatives such as CLO's MBS and CDO's, I can assure that my financial analysis is more than adequate to the task.

My examples to counter BH were limited by the availability of data at Marketwatch, I picked "All Data" and those were the dates that I was fed back. No cherry picking. I do not dispute the phenomenal sucess of BH, it *was* a great investment. By the way, your buddy Warren has been effectively bailed out. Well Fargo is insolvent, the 2nd lien book (where the counted negative amortization on their option-ARMs as income, nice trick eh? I think G&D would be unimpressed) is at least $400 Billion underwater and effectively worthless.

Don, of all people, considering your tenure here at TOD must realize that the old paradigms have changed. If there is any lesson to take from this web site, that is the one.

Here is one for you, Alexis Minerals, AMC.TO

No debt, currently producing 60,000 oz pa, in the process of developing a new 700,000 oz property trading at 60% of book value. Do your own due dilligence.

The world of post-Peak Oil is going to look a lot more like today than many posters on TOD acknowledge.

I am completely out of stocks and completely into TIPs. If I were to start dollar cost averaging to invest in stocks, I would first purchase shares of Berkshire-Hathaway Class B shares. Of course future performance will not be as good as past performance: Warren Buffett said that, and he was telling the truth. However, I think the Graham and Dodd approach to investing in stocks is still the most valid approach, and I do not know of anybody who uses that approach more cleverly than B-H. And when Warren Buffett dies, it won't make much difference to B-H investing policies.

Warren Buffett is sometimes off in regard to timing: He bought huge quantities of silver (and took delivery) several years ago, before the big runup in silver prices. Buffett is flat-out brilliant and makes most mutual fund managers look like the buffoons that they are.

TIPS are being hammered. Using the TIP ETF as an example, it yields 2.02% and is off 3 years of income in the past 8 weeks.

Look at TIPs over the past fifteen years; they have way outperformed the S & P 500 stock index. I'm not interested in month to month or even year to year fluctuations--I'm looking for long-term preservation of financial capital in real terms.

Stocks have been bad investments for the past ten years, and I think they will be worse investments for the next ten years.

I used to do quite well speculating in the stock market since 1962. Currently I'm not interested in increasing my wealth--just in preserving it.

The past 15 years have been a bull market in bonds. Even then, your nominal gains do not reflect the depreciation of the dollars they are denominated in. Wealth preservation goes far beyond nominal capital preservation.

A ex-office mate had a framed $1,000,000 bill from the CSA right next to a 5 trillion dollar Zimbabwe bank note on his wall.

TIPs are indexed to a measure of inflation. I know of no better or equal way to hedge against the risk of increasing inflation than by investing in TIPs. In my opinion, increasing rates of inflation are a huge risk--really the biggest risk in investing today.

I think that precious metals are overpriced. If and when they fall to half of present levels, I think they would be a good inflation hedge--but not at current prices. The current precious metals market reminds me of 1980 before the crash down in prices. Of course, silver could double again in price before the speculative bubble bursts, but, IMO, the bubble has been expanding for some time. When my hair stylist tells me about her buying of silver coins, I know that silver is heading for a big decline, sooner or later. Gold is even more overpriced than silver.

The CPI, which TIPS are indexed off of, is flawed measure of inflation. The single best inflation hedge is owning the cash flow from oil.

The price of gold is correlated with negative real interest rates, for example:


Gold is perhaps pricey relative to oil and silver. The Gold/Silver ratio is at ~45 vs natural abundence ratio of 16. The market price of silver is not reflective of its true scarcity. Gold is now trading as a currency not a commodity.

Compare gold when it was first freely traded, $38 per oz with the S&P at that time ~100, you can see that gold has blown away the S&P 500 over a 40+ year time frame.

The price of gold will crash one day--not too long from now. I have already ventured the prediction that the S&P 500 will go down by at least 30% by July 4, 2010.

You are correct that the CPI is a flawed index. Most economists believe that it OVERstates the rate of inflation; some believe that it understates the true rate of inflation. If I had my druthers I'd rather see TIPs indexed to the GDP deflator, which I (and most economists) believe is a better index of inflation than is the CPI.

How gold stacks up against the S&P 500 stock index depends a great deal on which year you use as your starting year. Gold earns no interest, and indeed, there will be storage fees if you hold much gold bullion. At least the S&P has a dividend yield, though it is miserably low now.

I'm bearish on precious metals. I'm bearish on stocks. I'm bearish on most bonds, i.e. the non-TIPs kind. IMO the bond market is going to be slaughtered over the next couple of years as inflation and interest rates rise.

Hence, if you share my beliefs, TIPs are about the only logical investment.

The price of gold will crash one day--not too long from now. I have already ventured the prediction that the S&P 500 will go down by at least 30% by July 4, 2010.

On this we agree at least about gold stock market I think has longer legs not because your wrong but because I think it has a lot more support then you give it credit.

Anyway here is my take on gold both gold and oil are alternatives to fiat. When all hell broke loose in the last financial crash oil sold off and fiat "won". However it has since performed well i.e its proven it is a true value vs fiat.

Gold is in the same boat its being treated as and alternative to fiat but it also has to go through its crash phase before its real value vs fiat is determined.

I've not consider investing in gold as I don't think its real value vs fiat is determined however after it crashes as I think it must I will consider it.

Everyone worries about the peak price of oil but I'd argue given whats happened over the last few years a long term investment in oil i.e price of oil vs inflation 10 years from now would be a winner. Perhaps we wont make it ten years but thats a different issue.

I think the same thing for gold even though I predict a crash I also think it will rise steadily from its next lows becoming a proven and robust alternative to fiat.

In the intern the next round of financial instability will send gold plummeting but not oil.

Stocks well dunno not so bearish just yet. Not that might not go a lot lower but I think the end is still a way out for stocks. On average of course they won't make any money but the big one is not this time but perhaps the next. Gold is whats going to get wiped off the planet on the next crash.

And its important obviously if oil proves resilient as it means I'm right that a real alternative to fiat has formed.

I've been following the gold market and I have to disagree here.

Saying gold is going to crash is kind of like saying art or diamonds or Cuban cigars are going to crash...maybe, but then there's always another buyer, somewhere, with more money, who appreciates the finer things in life.

Higher oil prices contain the seed of their own demise, whereas higher gold prices do not.

Worldwide, people of means are buying any gold that they can get their hands on, especially in Asia. Who gives them the means to do so? Central banks of course, who print money.

So the ongoing currency debasements around the world are very bullish for gold, not to mention fundamentals of supply and demand.

Only hard fiat money can make gold unattractive. But which large government is going to provide hard money? They all have unpayable debts. For any government to provide hard money, they would be looking at default, which would destroy their credibility, and with it, their attempts to provide hard money!

You should follow the interviews on King World News, which are fairly informative in my opinion.

I am quite confident that gold is going to leave everybody flabbergasted, as it has done so already.

When it comes to investing in gold I pay attention to authorities like James Sinclair (http://www.jsmineset.com/) and ignore everyone else. He played a major role in the 1971-1980 bull market in gold. Most people who talk about investing are just "Elmer Fudd investors" as Stewart Thomson (https://www.gracelandupdates.com/) so eloquently calls them :-)

James Sinclair has correctly called the bull market in gold since 2001. Astonishingly he made a prediction in 2001 when gold was $250 that it will hit $1650 by Jan 15, 2011. I don't know how he did that. He is calling for a major rise in the price of gold stocks - which as a group have performed poorly relative to bullion since 2006 - very soon.

My personal target is around $6000 per oz with intermediate crashes along the way. After that it will be on a plateau as a new currency tied to gold will replace the US $ as the world's reserve currency.

My opinion as we will see is that its the first price crash that matters for the viability of and alternative measure of wealth vs fiat. I think that we will see a high demand for fiat as liquidity dries up and this will crash the price of gold. Also if oil has now proven itself as a store of wealth part of the price pullback might be a re-balancing of gold vs oil. This of course would look like demand for fiat i.e hurting the price of gold but its really oil.

Then after that once gold bottoms and starts gaining again it will be as and established alternative to fiat the next time people need fiat they won't sell gold but other fiat investments.

I think the first price spike is a sort of test of the viability of the substance vs fiat.

When ?

Dunno the timing has a lot to do with when we have a liquidity crunch. 2011-2012 ?

My primary point is what I believe is happening is faith in fiat currencies as representing wealth is being destroyed.

Gold and silver have a long history in Chindia, the boom in those economies, their high savings rates and the shaky legs of other wealth preservation products (dollars, bonds, shares) means the PMs are on a long term growth (with dips along the way).
The Fed and Wall St with their stupid actions can only speed up the rise of PMs, oil and commodities.

Sorry for the delay in getting back....

Gold did crash, it happened already, twice. The first time it required short term rates of 15% and new oil fields coming on line. The second time was Post-Lehman when it hit $690 in the massive liquidation that followed. It was a generational buy. It is *the* alternative to fiat. The rest of the world will gladly trade thier fiat dollars and euros for it.

I quoted the performance of the S&P vs Gold for the longest available time frame for which gold was freely priced.

If Gold gets "wiped out", then there is no investment that will save you, you will be wiping your ass with Benjamins, TIPS and Apple stock certificates. It has been the ultimate store of value for nigh on 6000 yrs. It will cease to serve that purpose when humans no longer need a store of value.


All that being said, my clients typically have 25% high quality corporate debt or preferreds (preferably convertibles) along with hard assets, cash flows from energy and energy infrastructure. No sovereign debt, 10-20% cash to take advantage of oppurtunities.

Perhaps your right however I'd argue that gold had not even come close to its real long term price at that point so I'm not convinced that was golds big crash. I think its still in the future.
It could well be say 3000-5000 => 1000 or something like that. I'm not putting numbers on it.
Fiat money is a long way from dead we still have a lot of interesting times in store for us.

Here is a little known fact:

At the time of the gold spike in January 1980, the value of the gold held by the USA was sufficent to overback the currency in circulation by 20%, i.e there was $1.20 of gold per printed dollar. The ratio now is approximately 8%.

The price of gold will continue to rise until a new Bretton Woods agreement is hammered out. I agree that the price of gold will be affected by such an event. Only when there is one world bank and currency will gold cease to be ultimate counter party riskless asset.

I am more of an oil-bug than a gold bug. I have been since I read Twilight and started frequenting here almost 5 years ago. However, having a stack of kruggerands in front of me does provide a certain sense of security.

Hmm not sure we will make it to a single world currency. One of the most powerful aspects of national currencies is the ability to inflate. Look at the PIIGS for example. Also I don't see the need for fiat currency in a world with a flat to shrinking GDP. Perhaps more correctly I'm not sure they work.

I doubt China for example would be interested in a global currency. International trade will probably start dropping dramatically eventually lessoning the need for a fiat currency.

If had to envision anything I'd say gold would become the new international currency in such a world.
You just won't need that much and our gold resources are more than sufficient to become the international currency. Local currencies would effectively eventually be pegged to gold.

If needed perhaps silver and copper and oil could also become effective stores of wealth.

In the end it all depends on the economy I think that exploitation of natural resources is what allows certain economic policies to work not the other way around. The dollar worked as fiat for a long time because of the nature of the global economy not because fiat money is intrinsically better. If the fundamentals change well the financial system will be forced to adapt.

Obviously I see the true nature of our oil supply as critical to how the financial world changes not the other way around.

Indeed if you take it to the absurd say the US gives everyone 1 million dollars its obvious that financial policy cannot create wealth something far deeper allows the system to work. The reason why oil lies at the heart is complex but I hope you can see that if it ain't monetary policy in control then oil and food are the only other viable candidates.

Your concerns over one world currency are well founded, I agree and that is I why all my clients and myself own physical gold (and silver).

One of original oldtimers here at TOD, his name slips me, but he was from the oil patch, anyway he past away a couple of years ago. I learned of PBT and SBR from him. One of the most valuable things I ever learned.

At the time of the gold spike in January 1980, the value of the gold held by the USA was sufficent to overback the currency in circulation by 20%, i.e there was $1.20 of gold per printed dollar. The ratio now is approximately 8%.

This suggests a price of around $20,000/oz (assuming Bernanke does not go crazy and print many more $). You are even more bullish than I am :-)

The price of gold will continue to rise until a new Bretton Woods agreement is hammered out.

Correct! However it could suffer a few horrendous crashes before it finally reaches the top. My guess is that during one of those crashes most of the gold and gold related assets will be transferred from J6P to the banksters.

I agree that the price of gold will be affected by such an event.

After such as event the price will be on a plateau and gold mining companies will become like boring utility companies. They will pay a dividend based on their profits.

I am not predicting $20,000 gold. I am only putting into perspective the relative value. The inflation adjusted 1980 high is around $2300, depends on the deflator you use.

Got a long way to run yet. We're only in Stage 2. Chinese and Indians love their metals.
Gold Bulls’ Three Stages

Adam Hamilton September 3, 2004 3608 Words

The world of post-Peak Oil is going to look a lot more like today than many posters on TOD acknowledge.

Don, are you implying that peak oil will be almost without consequences?

Ron P.

Oh my goodness, NO! I do not believe the future will be just like the past. In my opinion, John Michael Greer got it right in THE LONG DESCENT. Sure, the economy is going to go downhill, but I do not believe in the myth of the apocalypse. The ones who I think are quite wrong are the fast-crash doomers.

I expect the next ten years to resemble somewhat the Great Depression, with high and rising rates of unemployment as we consume less oil and at higher prices. Deflation seems unlikely; inreasingly rapid inflation over the next ten years looks very likely.

Peak oil is a Singularity, we have no idea how people in the OECD will react to prolonged shortages of oil. People shouldered the burden in the 70s, but those were very transient affairs, and even then there were calls for military action in the ME. Keeping BAU going in an era of gas lines would be a snap to carry out, as documented by the IEA - there's a whole huge menu of ways to mitigate declining net imports for quite a long time, perhaps even decades. But will people settle for enduring mandatory carpooling? That's the big question for me. People are quite irrational, and react very badly to being inconvenienced, in the US anyway - other countries have stiff upper lips to fall back on, I understand.

I'm also on board with Greer, barring something very drastic happening to production - by which I mean not only C+C but also electric bicycles.

we have no idea how people in the OECD will react to prolonged shortages of oil.

That is not the question. The question is how will people react to being unemployed? How will people react to grocery stores not having any food on their shelves? And eventually... how will people react to the electricity going off all over the nation?

True, we really have no idea. We can only use our imagination.

Ron P.

Actually its not the question.

The question is how people will react to no hope.

Unless we see a disinformation push bigger and more effective than any political campaign, people will eventually realise that those peak oil weirdos were right, and that the high prices and lack of oil availability aren't some plot by the arabs, but are for real. The game changes and producers limit their production to sustain it. Traders take into account the end of growth and cut the future focus of the stocks - hitting pensions. Companies go to the wall, and nobody invests to start new ones since the future looks worse than the past.

Plans will look pathetic and hopeless. A true depression will sink over the world as the mother of all hangovers beckons.

You want to hope its not a fast crash, but if the decline rate is any more than a few percent, I wouldn't be putting money on it.

Hope requires a plan, and we HAVE no plan that maintains the standard of living of the majority.

Hope is relative. Take, for instance, the story of the poor kidnapped girl locked in the basement in Austria, actually the kidnapper's daughter, (see: http://www.foxnews.com/story/0,2933,352805,00.html). Her best hope was that her and her father's child would be healthy. In fact, the births of her incest-children were probably the highlights of her life while locked away.

Or take the story of the poor in India's micro-finance suicide epidemic

Mylaram Kallava, 45, hanged herself from the ceiling of her mud hut in the neighbouring village of Ghanapur after she defaulted on four micro-loans amounting to $840.

The loans were taken to pay for medical treatment for her 17-year-old daughter's appendicitis and her eldest daughter's pregnancy, which ended in a miscarriage.

But that is in India where they are not quite human yet, so it doesn't really count.

Ron, I don't see the supermarkets having empty shelves. Much more likely they will have stock but the customers will mostly be able to afford very little of it due to poverty.
There is no point rioting when the shelves are empty but there is a point of rioting (and looting) when your children are starving for what they can see but can't buy.

Didn't Buffett sell his silver at below half the current price in 2006? Not the sign of a brilliant trader.

Even the Oracle of Omaha has made mistakes. He learns from every mistake he has made; that is one reason he is so smart compared to other wealth managers.

Yes, the Orifice of Omaha made some huge mistakes.

He warned about the "financial weapons of mass destruction" and then bought Wells Fargo - a bank buried up to its neck in faulty derivatives. Then after taking the bailout money, he praises the bank bailouts, and says the public should be grateful.

He was the largest shareholder in Moody's, one of the fraud-based rating agencies, and then defended their fraudulant ratings practices because "the entire american public believed housing prices could not fall"... How pathetic that this "genius" tries to pretend he was as ignorant as the public.

Buffett went from being one of the most respected and ethical people in the world of finance to being just another one of the crime bosses looking only to save his own ass.

Check the numbers, e.g. S&P 500 vs. Berkshire-Hathaway B shares for the past ten years. After you have checked, you might want to revise your opinion of Warren Buffett. Money talks, B.S. walks.

Check the criminal activity he knowingly engaged in for the past 10 years, e.g. his Wells Fargo Derivatives Machine and Moody's Bargain Ratings Bucket Shop. After you have checked, you might want to revise your opinion of Warren Buffett. Money talks, Frauds walk, greed is good, yada, yada

Speaking of B.S., how are your TIPs doing ?

Don - I agree with you if you make the assumption you'll still control your oil in the future. Granted I'm offer that same old extreme possibility. But let's not forgot somewhere around 100 million folks died during a world war that had at least some basis in imposed commodity shortages and perceived economic assault. I'm not predicting this will happen but I'm not predicting OPEC can raise prices/deny access to oil as much as they want without potential serious percussions. I doubt you do either. From some of your comments I'll guess you've seen some of the uglier aspects of human nature up close and personal. I have and have no delusions about TPTB and their supporters developing such a strong moral backbone to preclude the possibility. In some quarter it's believed we are swapping (albeit inefficiently) blood for oil today.

Also I'm tainted by a history of 100's of millions of $'s of reserves in the ground turn into tens of millions in a shockingly short time. Some very painful memories. LOL

Yes, I have seen some of the uglier parts of human nature up close and personal, including the murder of a man in my front yard for $3.

Saudi has to tread a fine line. If they did not have to worry about U.S. military intervention, then I think the most intelligent production policy for them would be to produce at half of capacity. But they have to worry abou the Sheriff of the Territory, which is the U.S. Note that KSA kicked out the U.S. military some years ago, and the U.S. left without a whimper. With unending war in Iraq and Afghanistan, challenges in N. Korea and Iran, the U.S. military and naval forces are spread thin. I do not believe the U.S. military forces will intervene in the KSA so long as oil prices remain below $150 per barrel. Obama in particular is not going to engage in any new military enterprise, since the ones the U.S. is already in are so expensive. The U.S. Empire is being maintained with loans from China and from printing money. As the U.S. economy stagnates and eventually declines due to declining production of conventional oil, military options are constrained.

Of course, KSA knows all this. They are not going to shut their valves down to produce oil at one-half their production capacity, no matter how beneficial that policy would be to Saudi Arabia.

My guess is that the U.S. is soon (within six years) going to go bigtime into CTL production and probably also production of oil from shale, even though the EROEI is less than one for shale.

Don - I agree in the absolute necessity of the US expanding all alternative energy sources. But I also have serious doubts that the free market can move that way quickly enough for a variety of reasons I'm suspect you understand better than me. I also have serious doubts that our political leadership (both R & D) have the ability to drive that bus effectively either. It difficult for me to expect any serious movement until we have a full blown crisis at hand. And as implied above, I doubt that response will be of a kind and gentler nature. We have decades of recent history clearly showing our unwillingness to adapt at a more rational pace.

I have to smile sometimes when some of our good hearted TODsters offer some common sense efforts that could be undertaken. Like rationing, mandating radical changes in gasoline consumption, etc. TPTB don't have the nerve to raise fuel taxes $0.01 per gallon, Allen's choo-choo trains or reduce highway speed limts 5 mph. Granted such changes wouldn't have much beneficial effect in the grand scheme of things (except for Allen's ideas...maybe). But such actions aren't even in serious discussion. Along those lines I'd like to suggest a poll for all the TODsters out there: what is the US govt's current polocy to deal with PO? And I'm talking the policy they've presented to the American who have, albeit reluctently, agreed with? I know the temptation will be to offer some smart ass remarks (as I tend to do at times). But serious observations would be welcomed.

The main U.S. policy response to Peak Oil is to embrace the denial expressed by such agencies as CERA. For all intents and purposes, the U.S. has no effective policy whatsoever in regard to Peak Oil. The official belief is still that Peak Oil is nothing to worry about because:
1. Peak is still twenty years in the future;
2. Technology is advancing fast enough to prevent an energy crisis, because
3. The market will provide a solution to Peak Oil when it finally gets here.

Sensible people such as Alan Drake are voices crying in the wilderness.

Maybe it's better to have the policy guys shutting their eyes. Whenever they open their eyes, they seem to focus on marginal (or possibly even counterproductive) options like ethanol, or putting in high-speed trains (that are in no way high speed) to marginal destinations, or strangling stuff that seems like it might work (e.g. wind) in red tape. How in the world does one ever fix that?

It's Catch-22. Only massive intervention by government can solve the problem, but our current federal government is clearly worse than incapable (See recent tax agreement and subsidies for corn based ethanol). Here in sunny California I have some particle of hope in the state govt. Our soon-to-depart Republican govenor ("The Governator") actually didn't do to badly on the energy front. With the last election loosening up at least the budget stranglehold and the election of "Govenor Moonbeam" we may have enough counter-BAU to make some difference on the energy front and give some ideas to other states that have traditionally looked to us for environmental leadership. But California is broke, broke, broke.

That is absolutely the most optimistic thought I've had in two years....


Hate to burst your moment of optimism but the boys on Capitol Hill may have other plans.

Secret GOP plan: Push states to declare bankruptcy and smash unions by James Pethokoukis.

Congressional Republicans appear to be quietly but methodically executing a plan that would a) avoid a federal bailout of spendthrift states and b) cripple public employee unions by pushing cash-strapped states such as California and Illinois to declare bankruptcy. This may be the biggest political battle in Washington, my Capitol Hill sources tell me, of 2011.

That’s why the most intriguing aspect of President Barack Obama’s tax deal with Republicans is what the compromise fails to include — a provision to continue the Build America Bonds program. BABs now account for more than 20 percent of new debt sold by states and local governments thanks to a federal rebate equal to 35 percent of interest costs on the bonds. The subsidy program ends on Dec. 31. And my Reuters colleagues report that a GOP congressional aide said Republicans “have a very firm line on BABS — we are not going to allow them to be included.”

In short, the lack of a BAB program would make it harder for states to borrow to cover a $140 billion budgetary shortfall next year, as estimated by the Center for Budget and Policy Priorities. The long-term numbers are even scarier. Estimates of states’ unfunded liabilities to pay for retiree benefits range from $750 billion to more than $3 trillion.

Unfortunately, jjhman, your optimism is based on California benefiting from a glimmer of reason among its leaders. Yet Governor Moonbeam may be in for a rough ride ahead as the American right radicalizes.

To quote Napoleon, "There is no place in a fanatic's head where reason can enter."

Along those lines I'd like to suggest a poll for all the TODsters out there: what is the US govt's current polocy to deal with PO? And I'm talking the policy they've presented to the American who have, albeit reluctently, agreed with?

While it is not official US government policy on Peak Oil per se the JOE report should come close to at least forming the basis of such a policy should the government decide to start paying attention at some point.

U.S. Deparment of Energy Peak Oil Report Sits on Shelf Gathering Dust


The Joint Operating Environment is intended to inform joint concept
development and experimentation throughout the Department
of Defense. It provides a perspective on future trends, shocks,
contexts, and implications for future joint force commanders and
other leaders and professionals in the national security field. This
document is speculative in nature and does not suppose to predict
what will happen in the next twenty-five years. Rather, it is intended
to serve as a starting point for discussions about the future security
environment at the operational level of war. Inquiries about the Joint
Operating Environment should be directed to USJFCOM Public
Affairs, 1562 Mitscher Avenue, Suite 200, Norfolk, VA 23551-2488,
(757) 836-6555
Distribution Statement A: Approved for Public Release

The entire document is quite an interesting read, below the summary of the section on Energy. Caveat: Since this is a document approved for public release I suspect that there is probably a much deeper level of analysis and conclusions that are not for public consumption at this time.

Energy Summary:
To generate the energy required worldwide by the 2030s would require us to find an additional 1.4 MBD every year until then.
During the next twenty-five years, coal, oil, and natural gas will remain indispensable to meet energy requirements. The discovery rate for new petroleum and gas fields over the past two decades (with the possible exception of Brazil) provides little reason for optimism that future efforts will find major new fields. At present, investment in oil production is only beginning to pick up, with the result that production
could reach a prolonged plateau. By 2030, the world will require production of 118 MBD, but energy producers may only be producing 100 MBD unless there are major changes in current investment and drilling capacity. By 2012, surplus oil production capacity could entirely disappear, and as early as 2015, the shortfall in output could reach nearly 10 MBD.Energy production and distribution infrastructure must see significant new investment if energy demand is to be satisfied at a cost compatible with economic growth and prosperity. Efficient hybrid, electric, and flex-fuel vehicles will likely dominate light-duty vehicle sales by 2035 and much of the growth in gasoline demand may be met through increases in biofuels production. Renewed interest in nuclear power and green energy sources such as solar power, wind, or geothermal may blunt rising prices for fossil fuels should business interest become actual investment. However, capital costs in
some power-generation and distribution sectors are also rising, reflecting global demand for alternative energy sources and hindering their ability to compete effectively with relatively cheap fossil fuels. Fossil fuels will very likely remain the predominant energy source going forward.

There are many similarities in this report to the one recently also released by the German Bundeswehr

Nice catch FM...thanks. I had little doubt the DOD had some frame work to deal with PO. To a degree they are a creature unto themselves with good survival instincts. By the nature of their mission they plan for distant nightmare events. Above Don made a point about PO not coming to a head in 20 years or so and thus not an immediate problem in the minds of many. I think most here would agree that it is an immediate problem given the time it will take to make sensible adjustments. And that is probably the root of the problem. PO will not be a problem for me in 20 years as I probably won't be around. So from a purely self centered position there is no such thing as PO. Of course if I weren't so completely self absorbed I would see it as a serious problem for my 11 yo daughters as well as everyone else out there who'll have to deal with PO EVENTUALLY. TPTB are much more clustered around my age than that of my daughter. Our political calculus is solidly focused on the time frame of election cycles IMHO. As such PO is not a problem for our political leadership along with a great percentage of our population.

I think our best hope is for a point man to hit that PO trip wire and give us a heads up. Right now it looks like England might serve as our point man. Though there are nations out there today suffering from resource limitations they are not "like us". If we watch England slip into that not so slow decline a decade or so ahead of us then maybe, just maybe, we'll start making positive moves.

I think our best hope is for a point man to hit that PO trip wire and give us a heads up. Right now it looks like England might serve as our point man.

Yikes! Our best hope is the quick self destruction of England, serving as our wake up call... I do get your point. Though I have to wonder what our good friends across the pond might think of that pov? Given the recent riots in London I think they have plenty of reasons for concern. Personally, given that I have two, 20 something, nieces living in London I'm hoping there are other options on the horizon.

Strangely enough, I was looking to our former colony to be point man on that mission.

Oil consumption on your side of the pond is falling a lot faster than on ours... we have less of an ideological block to living with shortages... we still have rationing in living memory. We have a more compact country and more alternatives for transport.

However, we are just as broke as you.

For some reason, the image of Butch and Sundance hopping off the cliff just popped into my mind.

So which one couldn't swim? I always forget..

Sundance. But don't worry, the fall will probably kill us...

Thankfully you have "Top Gear" and export it to the US via BBC America.

FM - Yep...no one wants to be on point. I hope our Brit cousins avoid it but from what I gleem from the messages over there they are farther down the PO curve than we are. Consider that just two weeks ago we shipped a load of LNG from Texas to Englend. It's difficult to judge from this side of the pond if their politicians are more focused on the situation then ours. Going to be hard for them to ignore the facts if the Brits have a very cold winter/significant shortages this season.

You can see both sides in our current government - quiet acceptance and mandating solutions under other names (rail electrification, electric car grants, grants for insulation, higher power prices coming). Not a mention of PO except from industry groups - but at least several groups do talk about it.

On the other side of the coin - constant growth mantra, constant reflection on the cycles of our history of energy growth as if this reflects the future, the electric car future will just be a drop in replacement, growing reliance on LNG markets as if we are the only buyers (ignoring the fact that often we instantly resell it to Europe as NG).

I would say on balance though, we have many more ways to cope with change than the US and simply because the distances are smaller and the government is more pragmatic and powerful.

The UK Student Riots are a good sign of the times in my mind. People protesting about 'the idea' when no one protesting at the rally will probably be personally affected and those that are will not be for maybe 10 years and only if they have a job and can afford it anyway!

It is the rosy future denial they are fighting not anything tangible.

Equally those in power are of the age when things were different and appeals to fairness cannot be met - the future will not be like the past in some significant (but not apocalyptic) ways. In many ways it is pulling up the ladder after you and it cannot be undone without a time machine.


Thanks NCS. Gives some sense of the various attitudes/moods over there.

Government Policy is basically driven by what makes certain voters happy, as far as I can tell. Apparently, it is in nobody's (monetary) interest to try and implement serious peak oil policies. It just gets ridicule and mud-throwing.

Anecdotally, I was at a neighborhood meeting a couple of weeks ago, where the topic of discussion was how to fill a vacant lot (which would make an awesome urban farm) with condos. Never underestimate the anger of people out there whose homes have "lost value". They will do *anything* to "get the value back".

One person said something about "when the market comes back...", at which point I said "It's not coming back". Several people walked out at that point. People were pretty mad with me.

Locally, parking was recently privatised, with a concomitant increase in rates - one of the unstated reasons was to try and reduce traffic congestion by making parking too expensive, thereby moving people into transit.

Cool idea ? Nope ! Everyone is screaming about how miserable it is to pay so much for parking. But they refuse to take the train. They'll just vote in the individual who'll promise to terminate the parking meter deal.

I recall a certain CNN news anchor presenting a topic on how Minneapolis was introducing more bike paths. He came out with a sarky chuckle, indicating how silly that is. Something to do with wasted earmarks, IIRC.

I think government really has a pretty good understanding of what needs to be done, but also knows it isn't ever going to happen overtly. Seems to me, many actions are going to be covert. Sortof like guerilla gardening. Or feeding the dog her medicine in a spoonful of peanut butter.

Of course, I doubt that will save us.

One person said something about "when the market comes back...", at which point I said "It's not coming back". Several people walked out at that point. People were pretty mad with me.

Well it's obvious that it is all your fault spring_tides, of course they were mad at you. People don't have a clue do they? I've had similar confrontations and I don't ever say outright that the market isn't coming back, the worst I've done is asked people to imagine what might happen if it doesn't. People still react like I'm evil incarnate for even possibly contemplating such a thing. Sad.

I guess I lost my composure in that meeting...I've been trying for five years to "go covert". You know, plant a garden, take the train, weatherize your home, install a rain barrel...and on, and on, but no real visible change, except to see yet more cars on the road.

People just don't want to hear the truth if it conflicts with existing beliefs.

People just don't want to hear the truth if it conflicts with existing beliefs.

Which is why my buddies and I have a private "long lunch" every other week for discussion and information sharing and do zip outreach except when people share their view of the future without being prompted.

There have been many posts on TOD arguing for outreach. Frankly, I'm not interested in wasting umpteen hours of discussion or providing links to extensive articles (that take a lot of time and thought) because they aren't going to do crap. I seem to remember a movie line that says, "You all gonna die!"


I'm trying a last-ditch effort to create a sustainability group in my neighborhood. Even if it only ends up attracting a half-dozen people, at least we can try and form some kind of support structure. If that means the best we can do is a private "long lunch" every so often, it will be worth it to connect with likeminded people ;)

I really don't think people are going to do anything about anything until external circumstances force them to do so. Like gasoline back at $4. Or empty tanks.

I heard a news report this morning about how we are almost at the national average of $3 - unheard of for December ! Major hit to people's holiday shopping. Sigh....

The thing that concerns me is the apparent simmering anger just beneath the surface - watching the college kids in the UK riot over increased fees does not give me a good feeling about the national response in the US to measures such as rationing.

People yelling "Off with his head!" at Prince Charles ?

Just a bunch of south London yobbos. Charlie is not popular, too old school in some ways, too 'organic' and softy liberal in others. His sons, on the other hand, are clean shaven , modern, military hard men by image. Nothing soft or liberal about them. A lot of people want Charlie to abdicate when Liz pops her clogs.

Funny you should say that, but I remarked to someone yesterday that maybe he'd be passed by for the Kingship by one of his sons.
I can't recall a precedent for that in recent history.

Hi Spring Tides,

I would suggest that you look to the Transition Town model - sustainability is getting worn out by the rite wing nuts. They recently took over a meeting at Edmond, OK because of UN Agenda 21, which dealt with suggestions on working for sustainability. They so disrupted the meeting, organized to get input from citizens by the City that they cut the meeting short. Links: http://journalrecord.com/2010/12/09/editorial-a-lost-chance-opinion/
and http://www.edmondsun.com/opinion/x1822749011/Sustainability-not-as-dirty...

Those protests were a rather sudden change - I just stepped down as President of the Oklahoma Sustainability Network, and we had our last two Conferences in Edmond, with no problems or opposition. I loved working with other like-minded folks, but had moved to Dallas, so continuing was not practical. You might look at the OSN website at www.oksustainability.org. It might give you a look at what is possible. It has not been updated much this year due to my move, but has a new set of officers, including at least on web-savvy individual. The transition town model is easy to show folks, and easy to understand. It is very flexible, and being something new and defined, although amorphous, it is easier to get people to work with - and despite the name, it works well for small groups, neighborhoods and on a bigger scale as well.

I've been following Transition Towns very closely to see if that model might work here. There's a group not too far from me, actually :-

Transition, Rogers Park


I may stop in and see how they are doing.

I should say, not wanting anyone to think my post was sour grapes, that the existing OSN, as a mature organization is working well - and there is a transition town effort in OKC, which has good leadership and is moving along very well.

There are TT efforts, both large and small, and they need not focus on an entire community - that is why I would encourage looking at it for something new. People will have the requisite diverse set of interests, leading to a more comprehensive set of alternatives.

Good luck - it is very satisfying to get something started which will help you, your family, your community and others thrive. We cannot stop Climate Change, or even bring reason to the table, but we can get started without everybody else - if is inefficient, but it is a real start.

We do like a little joke, although mobs in London were always a bit coarse. He would be Charles III, and I always thought "Charles" was pushing it a bit name-wise. Charles Number I had a serious problem, and Number II, though smart, set a dubious moral tone, that the present guy's mama would not have approved of, one would have thought.

He might do what his grandfather did and take his fourth Christian name - George the seventh anyone? Maybe not a very modern thing to do though


I remember hearing quite awhile ago about English bookies favouring "George VII" over "Charles III" by a fairly healthy margin. It should be noted that Edward VIII (the husband of American divorcee Wallace Simpson) was known in family circles as David while his brother George VI (Elizabeth's father) was known as Bertie (short for Albert) before becoming king.

It is not uncommon for monarchs to change their handles upon ascending the throne. It is a perk of the royal prerogative.

Speaking from one of several countries that share the House of Windsor as head of state, Canucks are just as inclined as their British counterparts to pray fervently "health and wealth long to live" to the present Queen. She's doing a damn fine job ... with little indication of passing on anytime soon.

Much of the sentiment here - the Great White North being simultaneously (albeit contradictorily) loyal and ambiguous much of the time - probably mirrors fairly closely the general assessment elsewhere that Charles is too stogy, or too soft, or too liberal, or too flaky. His boys on the other hand are seen as photogenic hardened military men who fit the royal profile nicely.

Despite an otherwise "peacekeeping" self image, we on the western side of the pond, too, want our kings to fit the motto of several Canadian highland regiments, "a breed of manly men." After all, the king is the "alpha male" extraordinaire.

Meanwhile, until further notice, God save the Queen.

I'm trying a last-ditch effort to create a sustainability group in my neighborhood.

You are in the Twin Cities, right? What neighborhood? I just started a Transition group with a few other people in SW Minneapolis, and we have some meetings coming up. You are more than welcome to come.

I'm in Chicago - thanks for the invite, tho' !

Perhaps you can send me your info (email in my profile) - we can trade ideas.

I used to live at the edge of Rogers Park at the corner of Foster and Lakeshore. Nice area.

Let me know how a big city group goes...

I'm getting in some arguments on another thread behind the budget "compromise". I'm saying Obama will be toasted by 2 more years of 9% unemployment and $5 gas B4 the election. Does anybody see more optimistic numbers ahead than I do?

The govt program last year encouraging all citizens to start gardens and providing city dwellers with lists of farms desiring to co plant crops has been a decided success with 60% voluntary compliance. Govt cost minimal

Sorry, that's the Malaysian govt. My bad.

As California falls, so does....(fill in the blank)

I really hope I'm wrong, and I much agree with the comment upthread about the need for hope, but I'm betting (as literally as I can) that California hasn't seen nothin' yet. As we come to terms with a 28 Billion dollar deficit next year, we are going to be forced into austerity that will hammer our unemployment and homeprice situation. I only wish I could take more cash out against my house! The most troubling part of the package is that whatever happens is not some event that we work through....it will be a permanent shift. Will it simply be that every house in the burbs doesn't have 2 SUVs, or will it be more of a collapse of infrastructure. Dunno, dunno, dunno.

So...what actions? I'll go with "paralysis", but I'm not sure that counts. "If you choose to not decide, you still have made a choice"? -Rush.

I moved out of California for this reason, plus the fact peak oil will really hammer most of the cities. And there is the high rate of crime and drug usage. What will drug addict do when they can't get their fix? Will peak oil also stop drug imports?

A modern version of Tom Joad moving east? Remembering Steinbeck, California as a promised land was simply a tragic myth for newcomers without a stake. It will be like a tide receding.

if I were the economics minister advising Saudi Arabia I would suggest cutting production to half of capacity.

Don, that would leave KSA only a few mbd to export.

That would tend to jack up prices

Way too much, to $150-200/barrel or more. You know what happpens with the worldeconomy then.

"If I had excess capacity today I would hold onto it and expand it over time."

A dealer needs to feed the addict, just enough to keep them hooked but still at a level they can just afford. Basic business 101.

Don in Maine

These numbers are incredible. Unless there's some alternative explanation that I haven't considered, something very strange is going on here. Are we really being "outbid" by that large a margin? In an effort to avoid spiking oil prices are we really allowing inventories to be drawn off at such a rate? This would imply that supply is so tight that we can't afford to do anything but draw down inventories. I'm hesitant to declare the sky is falling, but this seems pretty serious to me.

Could also be that Oil Co. is trying to lower inventories for tax purposes, but that will not be clear until next year.

In the meantime, looks like 2008.

That would be a nice explanation - I don't know anything about how that works though (as far as accounting is concerned). That may also explain some mysterious LNG sendout requests we've had here over the past week...

The tax issue seems to be the excuse of the day per most widely quoted energy analysts. Granted this accounts for part of the downturn – I’ve said so myself for the last few weeks here. However the tax only applies on part of the unrealized gain, and only for major oil companies. So at best this would not even account for half of the fall.

Using my estimate of a minimum operating level of 290 million barrels for oil, if oil imports in 2011 dropped a relatively small amount of just 2%, it would only take 280 days to get to the MOL. While it is difficult to estimate US oil imports going forward, a drop of 2% is not difficult to envision.

Historically when supplies have run down in the US, the US essentially steps up its bidding for oil - which generally raises the price of oil. There seems to be some disagreement here as to what happens next after that – will the US, can the US actually pay more for oil without the economy falling to a lower level of activity? Without getting into a complex discussion, the acceptance of the world of vast sums of new dollars at face value, otherwise known as quantitative easing at the Federal Reserve, indicates that the US is still in the game. This partly offsets the competitive advantage emerging economies have by making efficient use of each marginal barrel of oil purchased, as compared to the US.

To explain drops in US stocks, and/or

1. China could be taking imports.
2. Imports may also be dropping due to crude oil production declines.
3. US stocks may also be dropping due to increased consumption.

OR Trifecta! all 3 are happening at once.

Do we trust Mastercard or EIA on gasoline consumption reports? Has anyone examined a plot comparing the two different predictive measures of US consumption?

These numbers are incredible. Unless there's some alternative explanation that I haven't considered, something very strange is going on here.

Hey, it's just one week's worth of data. Wait a couple of more weeks and see if the trend continues. If it does, then get excited. But it's way too early to do that right now.

Ron P.

Must be due to the Economic Recovery.

The question is: Why were imports down so much?

My somewhat educated guess:
1) Demand still weak from recession. Unemployed people don't drive to work or take vacations.
2) Despite Macando, the deep-water oil from the GoM has been a nice little uptick in US domestic production.
3) The North Dakota shale oil. Again, it is not a huge increase but an increase nonetheless.

When you add all those three together, you get dropping imports. Definitely a nice reprieve . . . but won't last forever.

Imports weren't down due to sufficient US native supply and lack of demand as you seem to be suggesting. The level of imports last week resulted in a drop of 15.6 million barrels of commercial petroleum stock. I think this is about the 6th week in a row now that total commercial petroleum inventory has declined.

Oil has been backing up in Alberta due to the ongoing Enbridge pipeline problems. So far it has been handled by oil refineries in the US taking oil out of inventory, and producing companies in Alberta putting oil into inventory. This will handle the situation until all the storage tanks in Alberta are full, at which point producers will start having to cut back production.

Enbridge claims it will have the problems resolved by the new year and they will move the stored oil to market, which means you should see a spike in US oil imports in the near future.

I don't think the US government is really paying enough attention to the integrity of the pipeline system or the consequences of a major outage. These pipelines were built to move Western Canadian oil to market in Ontario, with delivery to US refineries as a secondary market for the surplus oil. They go through the Northern US mostly because it's a lot easier to trench pipelines into Midwestern farmland than blast trenches into the solid granite of the Canadian Shield.

However, nowadays most of the oil goes to the US, with Ontario as a secondary market, and the volumes are much, much higher, and are increasing steadily.

Since the companies producing oil in Alberta are generally the same ones refining oil in Ontario, I'm sure they'll manage to keep their own Ontario refineries supplied with feedstock, but I'm not sure that they will show the same consideration to US refineries. However, the US refineries really don't have a lot of choice any more. If the pipelines from Canada are interrupted, the producers in Texas certainly don't have the ability to make up the shortfall.

Indeed . . . I made the mistake of jumping into the middle of a conversation. Yes, drawing down the inventory stock is clearly a huge explanation for the drop in imports.

But that said, I do think the other aspects I pointed out have also contributed . . . especially during those times when the stocks were not dropping.

Andre Julian's comment is amusing. There's not going to be any "shortage" of oil in the United States. Inventories on an absolute basis are huge, still above 340 mb. And this is in an economy that's got at least 15 million people unemployed (if not more) and is running along at many levels last seen 10 years ago. US oil inventories were lower than today throughout the 2006, 2007, and 2008.

I agree there's an oil shortage, however. It's just not a shortage in the OECD. The US can however attract oil supply to refine, using our spare refining capacity, to ship back out distillate to hungry Non-OECD nations.

Really, for anyone thinking there's an oil inventory problem for the US specifically, just look at a chart of US inventories the past decade. Then figure in our crumpled economy.


There is no doubt that as oil inventories plunged by the colossal amount of almost 10 million barrels that we are still in the midst of an import-related oil supply squeeze. This can mostly be attributed to the extraordinary demand of China for oil and products since the later part of November and continuing throughout December, which is taking away supply from the rest of the world. More simply, I have been calling this the ‘mini-spike’, for its effects on the price of oil (not to be confused with the coming ‘super-spike’, which will occur when multiple large countries realize at the same time they are short on supplies).

If there was any doubt that this large decline is real, please note that the EIA actually added (that is adjusted upwards) the oil inventory total by about 2.0 million barrels (although I have no idea as to why). Conversely, the EIA subtracted a similar amount from product inventories. If this sounds familiar, well it is, except is just about the exact reverse of adjustments made last week.

Oil import declines were mostly traceable to large declines in imports from Mexico and Canada. Import declines from Canada are due to the Enbridge pipeline problem, we have been discussing for this last week, and suspended imports are about 3 million barrels for the week. Note that Enbridge has already said that these backed up imports will be sent to the US over the next three weeks. The problem with Mexico is more serious, and as we specifically discussed here more than a week ago, Mexico shifted some its exports to China.

The EIA figures on gasoline demand are at odds with reports from MasterCard. The EIA says gasoline demand is incrementally higher than last week, and also last year, and MasterCard is reporting the reverse. There is a slight difference in these organizations’ statistical methods, so we’ll have to give it a few more weeks to see who is more correct there.

Helping distillate demand last week was the fact that last week's U.S. heating oil demand was well above seasonal norms, and with even colder weather this week mostly nationwide, distillate demand will stay strong.

Even though there were still ongoing pipeline allocations by the Colonial Pipeline system into the New York Harbor (that is pipeline shipments from the Gulf Coast for gasoline and diesel were already at maximum capacity), overall supplies of gasoline became much more evenly distributed across the country than they were a month ago. However distillate supplies in the Northeast have started to run back down, although nowhere near a shortage situation.

Going forward, there is finally some hope that overall oil imports will stabilize early in the new year back to levels we saw a few months back – around 9.0 mbpd – because shipping reports indicate the China oil import surge appears to be winding down in about two to three weeks. Still it’s not clear in the longer term if the US will be able to maintain a level of oil and product imports needed for economic growth – that is without paying even higher prices for oil.

Mexico's had their oil ports closed due to bad weather at least twice in the past couple of weeks. How long does that take to show up in the inventory report?

As best as I can determine on Mexico, I don’t think shipping delays accounted for more than 1 million barrels delayed for the week - if we consider the fact a large tanker departed for China during the week.

I would be cautious on putting too much reliance on the Mastercard report. After the Black Friday shopping season it was reported that credit card spending had declined by 50%, with debit taking up the slack. I would therefore assume that credit card fuel purchases are also decreasing.

It's supposed to measure all types of purchases, but perhaps their model is wrong, with so many people no longer using credit cards.

I'm not concerned by the drop in US inventories, and it's really to be expected given that the OECD has crossed yet another tipping point--over the past 2 years--that practically ensures that oil will be consumed by regions that can afford it. I guess another way to look at this is that the limiting factors now on OECD societies come via the tiered or staged loss of affordable oil in an overall context of debt deflation, and economic depression. That supply, in its most raw form, would swing away to Non-OECD regions where new users find ways to use smaller amounts per capita just seems inevitable. So it's no longer a question of the US not getting enough oil supply to fund growth, because oil in its present situation of static supply is no longer available--more broadly--to fund economic growth in the OECD. The oil economies of the OECD, in my view, are now roughly in liquidation. They would need both greater supply and significantly lower prices for a extended period of time to restart oil-economy growth.

Perhaps OECD economies can find ways to either maintain current levels of economic activity or from time to time experience new growth phases using other energy resources. I don't know, but I doubt it. The built environment in OECD nations, with the exception maybe of Japan, is still not ready to switch hard from cheap liquid fuels to the power sector.

For me, this is all part of the inevitable ratcheting down process where each new, lower level of economic activity in the OECD frees up incremental oil supply to the regions that can afford it. Namely the developing world--which itself is essentially running on coal, but now as new users of oil is uptaking higher priced supply without care or worry.


I am amazed that the markets have not reacted more sharply. WTI at $88.50 is almost unchanged on the day.

The inventory report really doesn't seem to have much impact these days. It's all speculators and the economy.

I wish people would get over this speculator myth. Sorry if you are referring to daily or weekly movements, but anything long term is just the economy.
Speculators magically appear and make lot's of money when the oil price is rising. When the oil price crashes they disappear and suffer no losses at all!

I meant what traders think. CNBC, CNN, etc., are all going on about how this is all because of "speculators."

Speculators are very real. However, the amount of blame put on them is greatly over-done. The speculators do fuel bubbles, sharp rises, sharp falls, etc. But in the big picture, they cannot control the market and only cause temporary and limited impacts.

U.S. expected to file Gulf oil spill civil case

at the same time

China bid wins BP's Pakistan assets

So US is suing a company, which is selling important assets to China, to raise money to defend itself and pay fines. Another win for China. We are just plain stupid. Western world's free market approach to oil allows China to keep buying oil assets everywhere. This oil is off the market and straight to China

at the same time

Rosatom Agrees to Buy Mantra for $1.2 Billion to Gain Uranium in Tanzania

So Uranium is off the market

At the same time

To Conquer Wind Power, China Writes the Rules

So West is shut out of wind business in China


Canuck - I had not thought about that. Too bad the US govt and BP couldn't cut a deal where they swapped their overseas production to cover their fines. Such a plan probably made too much sense to either side.

On the other hand US is suing BP (British), Transocean (Swiss) but is not suing Haliburton (the only US company in the mix, never mind the connections). So if they milk BP, then prevent Shell from buying what remains of BP, then there might be more room for Exxon? My cynical conspiracy theory mindset takes over.

But Chinese buying strategy is obvious. And they have big pile of our money burning their vaults (they can't spend it domestically, because of inflation), I read somewhere that they increased the required bank reserves to 18 or so percent. So is there a major shopping spree coming?

There's a major shopping spree already underway. The Chinese are buying up all the oil and gas assets world-wide that they can get their hands on. Their biggest problem is that India, Korea, and other countries are doing the same (although they don't have as much hard currency to throw on the table).

The US DOJ - Eric Holder AG, is totally clueless. They are simply wasting time and money with the lawsuit against BP. It means nothing, and will accomplish nothing other than put more money into lawyers pockets....

How would you be dealing with BP, if not with legal proceedings?

Let them keep drilling and filling your tank? Accomplishes nothing but putting more money into THEIR pockets (out of yours and mine), as they set us up for a few more spills and fires.

"South Korea, Asia’s fourth-largest crude importer, expects to increase production from (foreign) oil and gas fields owned by its energy companies by 33 percent next year".

And: "President Hugo Chavez's government has sold China oil for as little as $5 a barrel and was upset that China apparently profited by selling fuel to other countries".

Not a new revelation but just a few more ticks in the clock of various nations (besides China) locking up future production. A couple of years ago China locked in low future purchase contracts with Vz when oil prices were much lower. More important than China's ability to resell that oil at a nice profit is the fact they alone decide who gets to buy that oil. Thru future contract purchases and direct production acquisition China has removed a certain volume of oil from the future free market. At some point in our PO future they may own more oil than they need at that time. Who do they then sell that excess to? And that brings me back to my MADOR protocol (Mutual Assured Distribution Of Resources). Hopefully China will see a sufficient self-serving benefit of directing that excess to the USA. Keeping our country economically viable so we can continue making those interest payments on the our debt that they own will be a priority...hopefully.

BTW: the US govt owns no overseas oil production. And "US companies" like ExxonMobil et al are international companies and sell their oil where the profits are maxed. They are under no legal obligation to give US refiners, even their own, preferential treatment.

“More important than China's ability to resell that oil at a nice profit is the fact they alone decide who gets to buy that oil. Thru future contract purchases and direct production acquisition China has removed a certain volume of oil from the future free market.”

Not so sure if that is totally true.
Yes, China may own the oil they contracted from VZ but to whomever they sell it to is just substitution versus what they otherwise would have purchased on the free market, thereby freeing up that supply.
It seems that whether party X purchases from VZ or China is somewhat irrelevant assuming that party X has free access to global oil markets.


Peak - I get your point but that crude that China is buying from Vz isn't on the world market. It belongs to China. They may now chose to put it back into the world market and thus you're correct. But I was pointing to the day when there isn't enough oil in the market place for all the potential buyers. Then whoever buys that oil (if China is willing to sell) is accessing production that no one else has access to. Again, not sure if/when that situation will develop. But the potential is there IMHO.

I agree with you that in a supply constraint world there is no doubt that having control over oil, whether it is direct (like producers) or indirect (like China) is a powerful position to be in. The only risk China is taking is political/sovereign VZ risk.

“According to a February 2010 U.S. Embassy cable from Caracas, an unnamed official of the state-owned oil giant Petroleos de Venezuela SA, or PDVSA, told visiting U.S. economic officers that China was paying as little as $5 per barrel for its oil and then selling it elsewhere at a “sizable” profit.
The WikiLeaks document was posted to the website of the Spanish newspaper El Pais this week.
In addition to its story about diverted oil, El Pais also published documents suggesting Venezuela manipulated oil market statistics and was having trouble with quality of its production.”




The idea of "soverign risk" raises the spectre of China making military moves against Venezuela should they not honor commitments made by Chavez. Then does the US invoke the Monroe Doctrine to protect Venezuela from Chinese intervention?

I think too much significance is being attached to the oil supply contracts being entered into by China. If (when) push comes to shove and the the declining production curve is inflicting economic and social pain in the U.S., I consider it unlikely that the American public will care much about supply contracts. As the saying goes, when the only tool you have is a hammer every problem looks like a nail. The U.S. has a big hammer: the most powerful military (by far) in the world. The American public will insist that the hammer be used to secure an adequate oil supply. Any leader resisting that call will be promptly turned out of office. To think otherwise is, IMHO, naive. As Dick Cheney said, "the American way of life is not negotiable." If it gets bad, all those contracts negotiated by China may not be worth the paper they are printed on. This is not a solution, of course, except for a short time. But that will not matter.

I unfortunately agree....


That American military "hammer" is looking pretty ineffective to me. It certainly hasn't brought us a lot of Iraqi oil. It seems clear to me that it is infinitly easier to disrupt oil supply than to enable it. How much longer is the US going to be able to intimidate anyone with its military might? I don't think we'd try to intimidate China today.

How much longer is the US going to be able to intimidate anyone with its military might?

How much longer will it be able to afford it? 13.94 trillion in debt, adding 1.5T a year and will soon add another 858 billion to the next two years to give everyone a bonus in the form of various tax breaks. At some point the East will not buy our debt any longer and everything will get cut including defense. Either that or we will become something like NK and live only to support a huge military.

The Chinese have pointed out that they have their "nuclear option" - dump all their US debt, which would sink the US economy. The main problem is that this would cost them a lot of money, so they would only use it as a last resort. They have been more interested in making money than losing it in recent decades.

I heard a Canadian economist say yesterday, "Be prepared for the Canadian dollar to be worth $1.15 US in 2011". This was directed at Canadian businessmen, because manufacturers will have to sharpen up their pencils and cut costs to stay competitive, but it does indicate where the relative competitiveness of the two economies are going.

It's one of the drawbacks of funding a government by printing money, or "Quantitative Easing" as the US government calls it. It has often been used by other governments to fund losing wars in the past, usually with disastrous consequences to their economies.

Dumping US debt might cost the Chinese some money, but it appears that they could "sink the US economy" for less than we have spent in Iraq and Afghanistan.

If the Chinese were so foolish as to "sink the U.S. economy," the U.S. would probably retaliate by putting huge tariffs on Chinese imports to the U.S.--thereby sinking the Chinese economy. Massive retaliation is a great incentive to keep economic warfare at low levels.

One thing that surprises me is that despite large-scale manipulation of the yuan to keep it from appreciating against the dollar (which is a form of economic warfare) the U.S. has not yet retaliated against this action with high tariffs or quotas on Chinese imports. Perhaps a Republican administration will be less tolerant of the Chinese making economic war on the U.S. than are the Democrats under Obama.

One thing about balance of trade deficits or surpluses is that they do not go on indefinitely, though they can continue for ten or fifteen years. Fortuanately for the U.S., what we export to China is mainly things like grain or scrap metal, while what we import from China (with the exception of rare earths) is largely nonessentials that can be made most anywhere.

A "Doomsday Machine" is of no value if you actually use it.

After the 1997-98 Asian Financial Crisis, the Asian economies all have amassed foreign reserves so that they cannot be attacked by Western financiers and subjected to economic servitude by the IMF. China, being the biggest of these economies, has the largest foreign reserves, and I'd regard them as being largely defensive in nature.

At this point, the PIIGS are probably thinking that they should have adopted austerity measures early so as not to be in the desperate debtor nation position that they now find themselves in, now that the financiers of New York and London have declared war on the euro. Clearly, they are attempting to pick them off one after another in a repeat of the assault on Thailand, South Korea, Indonesia, etc in 1997.


PS -- after the assault on the euro countries, the dollar may be next.

"Currency Wars" -- the new Reality Series on CNBC

One thing that surprises me is that despite large-scale manipulation of the yuan to keep it from appreciating against the dollar (which is a form of economic warfare) the U.S. has not yet retaliated against this action with high tariffs or quotas on Chinese imports.

Well, there is the issue that it would be actionable under international trade agreements. China would go to the arbitrating bodies and get a finding that the US was breaking the rules, which would give it the right to retaliate. Then it would do something unpleasant like cut off the US supply of rare earth minerals and torpedo some major US industries. All perfectly fair given an unfavorable international judgement, the other countries would agree.

Perhaps a Republican administration will be less tolerant of the Chinese making economic war on the U.S. than are the Democrats under Obama.

Obama did try to bring it up at international meetings, but he didn't get much traction. The other countries pointed out that the US is quite obviously manipulating its own currency. If you're going to accuse someone else of playing dirty pool, you had better be playing clean pool yourself. Otherwise it comes down to a "their cheating is worse than our cheating" sort of argument, which goes over badly at international trade meetings.

Can someone explain why china has all this cash: are they robbing their citizens of fair wages for their labor?

It is disturbing to think about.

I guess China thinks they can rule the world like the US someday, but why alas do they build empty cities.

The other anomaly to consider is the massive influx of Chinese to the US for education and work in high tech industries.

Why come to the US if China is in the pole-position now?

I cannot yet get my hands around this yet.

The main issue I see is that the US is poorly positioned with its economy and suburban development to handle high oil. Furthermore, the US cannot compete with China's low/slavish labor force. Beyond the industries that China can use slave-type labor, China cannot compete. Also China does not have enough land to feed its people. That is a nasty problem.

Can someone explain why china has all this cash: are they robbing their citizens of fair wages for their labor?

They have an incredibly high savings rate. The nation saves 50% of its GDP. That is true of all three major economic sectors - household, corporate, and government. Furthermore that rate has been rising - the Marginal Propensity to Save (MPS) is more like 60%.

The poor, underpaid, downtrodden wage slaves of China are putting half of their incomes into savings, and as their wages increase, they are putting a higher and higher proportion of it into savings - and their wages are increasing fast.

In the 1980's they had a savings rate of around 30%, which analysts though was very high, but now it is over 50%, which is second in the world only to Singapore. There are over 1.3 billion people in China, which generates an insanely large pool of capital which has to be invested somewhere.

Note that the overall high savings rate results from the fact that savings rates in all sectors are high, including government. The idea of a government saving money rather than borrowing it is probably a conceptual leap for people in most countries.

While a lot of Chinese do go to US or other countries to profit of education and work in high tech, many are now moving back to China after a few years where they can get top positions they can't access in the US. This started about 10 years ago in science and now is going on quite strongly. Now China can even get top foreign scientists to work and teach in China.

...and yet top US students do not study in China in appreciable numbers, which means the US University & Research sector is fairly dominant.

I would judge top scientist by a scientist that can win a world renowned prize like the Nobel. When a Nobel prize winner moves to China, then things have changed. Since the best students and post-doctoral students are in the US, then locating in china is academic suicide. Let's face it.

In my neck of the woods, I have yet to hear of a major faculty member jumping ship to move to China. Once I hear of a colleague that does so I will be interested indeed to know why they moved there.

Well, The 2008 Nobel price winner in Medicine, Prof Montagnier just got recruted by the University of Shangai after being in New York and Pasteur Institute.
I know a couple of good Chinesecientist who decided to go back to China rather being stuck as eternal post-doc in the USA. They are good scientist but it is not enough to succed in the US where "networking" and communication skill are essential to reach the associate level.

I didnt know that. China now has one. How many Nobels live in the US?

But I might point out, none of his research was conducted in China. I guess they tried to buy him, much like the Yankees buy players from other teams. Maybe China can buy people that way. But they would need to improve the air quality I think for many more people to want to live in all that smog. At least that would be one of many thoughts in my decision to move their.

Facilities, student quality, post-doctoral quality, colleagues and supporting research as well as quality of life/environment. Most of this is not to the level needed for China to compete with the US for many years.

This ties into my lamentations about export declines. On a previous TOD article we learnt that 43 nations produce and export oil, 44 produce and import, and 173 import without producing oil. Oil exports peaked at 47 million b/d in 2005, and is now down to 45.

When production starts dropping, exports will take most of that drop. If then on top of that more and more oil is locked up in bi-lateral trading agreements, then we who live in any of those 173 oil-free consumer nations may see ourself without any oil at all in a matter of 10 to 15 years, if all things go wrong. Am I just a doomer, or is this a serious problem?

When production starts dropping, exports will take most of that drop. If then on top of that more and more oil is locked up in bi-lateral trading agreements, then we who live in any of those 173 oil-free consumer nations may see ourself without any oil at all in a matter of 10 to 15 years, if all things go wrong. Am I just a doomer, or is this a serious problem?

This is exactly the point that westexas keeps making and one that the Energy Export databrowser tries to make clear in data graphics. You are not "just a doomer". You have seen the picture that emerges when one connects the following dots:

  • production decline or production plateaus exist in major producing regions
  • increased consumption in many producing regions due to:
    1. population increase
    2. lifestyle change
    3. increased industrial output
  • bi-lateral agreements keeping future output off the global markets
  • higher productivity per barrel of oil used in developing nations

As Gregor points out in The Myth of Peak Oil Demand, we will continue to see unproductive use of liquid fuels priced out of the market in tranches.

How much is productivity enhanced by the fuel it takes to drive an SUV 40 miles each way to and from work?

What would a young entrepreneur in India or Malaysia do with that much fuel?

I think it's clear where the oil will go in the future -- to productive uses either in OECD nations or elsewhere.

Best Hopes for putting fossil fuels to productive use.


How much is productivity enhanced by the fuel it takes to drive an SUV 40 miles each way to and from work?

Let's do a little what-if exercise. Let's say the SUV is a Chevy Suburban which gets 10 mpg. It is traveling 80 miles per workday, and burning 8 gallons of fuel. And, let's say gasoline doubles to $6 per gallon. It would cost the owner $48 per day to get to and from work. And let's say his job is at Wal-Mart which pays its workers an average of $11.25 per hour. If he works 8 hours per day he will be making $90 per day and paying over half of it for fuel. And then Wal-mart cuts his hours because it is trying to reduce costs...

This is going to be reality for the average American working Joe in the post-peak-oil era. Actually, the unrealistic part is assuming he still has a job.

What would a young entrepreneur in India or Malaysia do with that much fuel?

Another what-if exercise. Let's say the young entrepreneur buys an Asian-built four-cylinder turbo-diesel minivan of the sort that you can't buy in the US, and loads it up with 20 passengers (including the ones on the roof). Let's say the van gets 24 mpg, and let's say the average passenger travels 12 miles round trip to work. The van will burn half a gallon of fuel to get 20 people to and from work, or 1/40 of a gallon per person. Assuming the same $6/gallon, the cost will be 15 cents per person. The young entrepreneur will charge 25 cents per person and be on his way to making his first million rupies or ringgits.

I use the example of the minivan with 20 passengers because I've ridden on them. This is how you travel in third world countries. Back to the Average Joe (or whatever he is called in India or Malaysia). How much does he make?

India, where offshoring has boomed over the past several years, remains one of the least-expensive destinations despite skyrocketing demand for its labor. Entry-level workers in India earn an average salary of $5,443 and midtier workers about $8,400, while experienced managers pull in roughly $13,100.

So, the guy who talks to you on the phone from Mumbai is making $25 to $35 per day, and after diesel fuel goes to $6 he will be spending 25 cents of it to get to and from to work.

I just thought I'd run this past people so the Americans in the crowd would begin to understand the economics of work in the third world. The people who say, "the US will outbid China and India for oil" are kidding themselves.

An offshored help-desk worker in India is hardly going to blink if fuel goes to $6/gallon - he uses almost no fuel. A Wal-Mart worker in the US will go bankrupt and lose his house because he can no longer afford to pay for his fuel, plus his mortgage, plus his credit card bills. And he can't sell his house because at $6 per gallon nobody wants to live 40 miles from the nearest Wal-Mart.

RMG, I have another example (from personal experience) that also might be of interest to the discussion.

There can be a worker that finds their annual raise in income is averaging 1%/year for 5 years, when the typical inflation rate is 3%/year.

So after 5 years, their buying power has reduced while their average expenses went up with a differential of about 2%/year.

What conclusions can be gleaned on 'how well off they are' after working until retirement, a retirement that might be only 60% of their peak income while working....

Which goes to make a person wonder what happens to "safety" if and when push ever really comes to shove. It's hard to see how we could go on spending $100 million or $1 billion "per life saved", as we now do in some activities (aviation comes to mind.) Surely, in the USA or Europe, those minivans would be breaking numerous laws. Are they doing so in Malaysia or India? Or do the authorities simply look the other way - except to come down hard in districts that have voted against them?

I'm not really clear how legal or illegal these overloaded minivans are, and nobody ever briefed me on the legal niceties. Certainly human lives are not worth nearly as much in third-world countries as in first-world ones, and safety standards are much more lax. People also tend not to obey the laws all that closely. Traffic laws are more in the nature of guidelines, the main signalling device is the horn, and the most important safety device is the religious statue on the dashboard. Seatbelts and airbags are for people who don't believe God is looking out for them.

It's quite common to see a family of four on a 1-cylinder motorbike. The father (in a suit and tie) is driving, the wife (in a sari) is behind him, they have one kid between them and one kid riding on the handlebars. In many countries there are helmet laws requiring the driver to wear a helmet, so the father is wearing a helmet, but the wife and kids are not. They're following the letter of the law, but the execution leaves a lot to be desired safety-wise.

However the per-passenger fuel economy is awesome, as is the air pollution from the 2-cycle engine.

In Venezuela the rule with buses is that the passengers must be in the bus (no hanging out the window, no swinging from the door frame. When it get to rush hour the rule is gradually broken, first an elbow or hip juts out the doorway, then as more people press in to the bus you start to get more overflow out the doors. The bus drivers and their assistants are interested in collecting as many fares as possible so they encourage passengers to climb on.

If the traffic police stop such a bus they are heckled by the passengers, other bus drivers and the frustrated drivers of private cars that can't get past the obstruction. Most traffic cops turn a blind eye.

All that said and done, the city buses mostly go through heavy traffic stopping every block to let people on and off. They don't get much speed for most of their route, and the passengers are quite hardy. Even the tottery little old ladies get by with the potholes and the blaring music and the crowding.

I had to learn how to twist and squeeze past people without stepping on toes or falling flat on my face. I still am much more clumsy than most of the locals even after 5 years of trying to adapt.

San Francisco cable cars often have quite a few people hanging off of them. http://www.terragalleria.com/california/picture.usca11128.html

Stuart Staniford post

The bottom line is this: those people running around saying that the all-time peak in monthly oil production was definitely in 2005 or 2008 are running a considerable risk of having events make fools of them.

I wonder how many contributors of the Oil Drum will be surprised when global oil production passes the 2008 high?

Some people on this site, who too confidently state that global oil production peaked in 2008 run the risk of blunting the real message.

When oil production in the next few months makes new highes, what will you say?

Is it not better to make somewhat broader statements which are less likely to be proved wrong.

i.e. The combination of increasing decline rates, rising consumption in oil exporting countries and surging demand in countries such as China will create a supply shortfall which see importing countries involved in an ever more desperate struggle to secure the oil they need.

jaz - I fully agree with you. I won't be very surprised if we see a very modest gain in rates beyond 2005-8. Check my chat with Ron above re: the impact of horizontal wells in KSA et al fields. OTOH I fully reject the notion that PO will present itself as occuring on any specific date, month or even year. There is a PP (peak plateau) that I'm somewhat confident began several years ago. During this PP we'll have downdips and updips IMHO with some of the updips exceeding previous rates. At some point the PP will began a general decline while still maintaining its undulations IMHO. When will that began? No idea...I'm not nearly that smart...I just occasionally pretend to be.

Because of things like inventory changes and weather, I think that the best metric for global C+C production is the average annual number. What is more interesting than the absolute annual peak is the fact that global crude oil production has, so far at least, failed to exceed the 2005 annual rate for four years and for 2010 to date (through the most recent EIA data)--despite the fact that annual oil prices have exceeded the 2005 annual price of $57 for five straight years, with four of the five years showing year over year increases in price.

If this is not a strong sign that global conventional crude oil production has probably peaked--and that slowly rising unconventional production has so far failed to keep total production increasing--what is it?

In any case, as you implied, from the point of view of importing countries the real problem is the supply of global net oil exports, and especially the supply of "Available Net Oil Exports," after developing countries like China & India take what they want.

Hi westexas

The Saudis have stated that they are doing all they can to increase production and others must do their bit and they now realise that oil prices must be in the $80-$100 range to encourage production from the most difficult areas if there is any hope of meeting growing demand.
They will try and keep their spare capacity as long as possible and if high prices slows down consumption increase then all the better.
As Rockman says no one can predict peak month there are too many variables.
I agree that the main consideration is not total oil production but available exports, that and how much spare capacity KSA thinks it needs to keep back.

Assuming of course that KSA's current spare capacity consists of anything more than what Matt Simmons called "Oil stained brine."

According to the EIA data for this year, 73,436 m/b/d is the average for 9 months. To beat 2005's 73,718 12 month average,the last three months would have to average 74,182 m/b/d to beat the 2005 peak. I personally think that is a stretch, but I have been wrong more than a few times in estimating world oil production.

It really doesn't matter. We are on the peak plateau and have been on that peak plateau since late 2004. If we break the monthly peak by a couple of hundred barrels per day, we will still be on that six year plateau. No big deal.

That being said, September 2010 C+C production was 73,596,000 barrels per day. July 2008 was 74,686,000 barrels per day or 1,090,000 barrels above September production. It just ain't blood likely that we are going to surpass that this year. And we will have to get a lot closer to that mark before we can say it has a reasonable chance of breaking it next year.

And how about that 2005 yearly average? That was 73,719,000 barrels per day. To hit that level this year then monthly production, for the last three months of this year would have to hit 74,557,000 barrels per day average for the three months. That is 961,000 barrels per day more than September production for all three months. I don't think anyone really believes that is going to happen. Also the EIA's Short Term Energy Outlook has non-OPEC all liquids up 400 kb/d for those three months and OPEC production is, so far, flat for October and November.

So the question is: Will it happen next year? I have no idea but the EIA says non-OPEC production will be down next year verses 2010. But if they are wrong and non-OPEC production is up .3 mb/d or so then it could happen. But it just flat doesn't matter. Even if it does inch slightly higher we will still be on that six year, then seven year, plateau.

A monthly peak, or even a yearly peak, inching slightly higher than the last one does not change the fact that we are at peak oil right now! We cannot confidently talk about being post-peak until the yearly average is well over one million barrels per day below where we are right now. That is we will not be post-peak until we are confidently on the down slope. Right now that is far from the case.

Ron P.

Ron, I agree it matters little. And I will just add two points that IMO matter more than which month or year peak occurs in. One, the net energy available to society is declining over time as we rely more on 'unconventional' oil. So while gross extraction may be flat, net energy is in decline. Two, each year of the plateau, there are about 75 million more people on the planet. So per capita oil available is clearly in decline, even if gross extraction is flat. Put the two together, and we are in a substantial decline of net energy per capita. That, really, is what matters, and is what is leading to the economic mess we are in. It will not be getting better.

Clifman, you forgot a third equation in the mix, net oil exports. While world oil production has been flat for six years, net oil exports have continued to decline. So we have net energy declining, oil production per capita declining and net exports declining. So put the three together and what does that say about per capita energy available for all importing nations.

Of course if one lives in an exporting nation then they can sit fat dumb and happy until... until they wake up and figure out what is going on. They will wake up and say something to the effect: "Wait a minute. The world oil supply is declining and we are still shipping our oil out of the country? Why don't wee keep most of it for ourselves?"

Of course many would say that they must eat so therefore they trade oil for food. To a great extent that is true. But if the price rises, because the supply is dropping, then they could hold a lot of their oil off the market and still collect a lot of money for what they do sell.

"Were we a rational society, a virtue of which we have rarely been accused, we would husband our oil and gas resources."
- M. King Hubbert

Any rational nation would husband their oil and gas resources. And there is nothing like a crisis in supply to start them on the road to rational thinking.

Ron P.

Absolutely. Rather than unfolding as anticipated by the PNAC, the 21st century will unfold as dictated by PCNAE, per capita net available exports...

Perhaps you or WT can help me think this through. Here is the link to EIA data on oil imports through 2009. http://tonto.eia.doe.gov/cfapps/ipdbproject/iedindex3.cfm?tid=5&pid=57&a...

In 2009, countries imported about 42 million barrels of oil per day. If net oil exports fell by ~25% to 32 million barrels per day, the top 15 oil importers, if they could maintain their import volumes would take up all the imports. Belgium is number 16 at 636,000 barrels per day. Given that ChIndia gets theirs, and politically, some slavik countries will get some of Russia's exports, I still think there's a lot of countries that take devastating hits before the US. Not that the US doesn't have a giant problem, we do. It's just that I don't think ChIndia is our first problem. They only become a problem after smaller, poorer countries are squeezed out.

In other words, in the short run, I think ELM 1.0 is our first problem.

Your thoughts?


Of course net oil exports is the largest problem, for importing countries anyway. As exports fall then importing countries must kill demand in order to meet supply. This is done with higher prices. As prices rise it is difficult to say who will be hit the hardest. But my guess would be those who have virtually no domestic production, like Japan and South Korea. Also many European countries produce little to no oil.

But rising prices hurt everyone. Every importing country would be driven into recession. This would help hold the price down but only at the expense of the economy.

This is where I disagree with Jeff Rubin. I don't think we will ever see $200 oil, and it is even likely that we will never see $150 oil. When oil reaches these lofty levels the economy goes into the dirt and oil prices are knocked back down. That is the way it will be from here on out. The economies of the world are only going to get worse.

Ron P.

"It will not be getting better"----

I think it will definitely be getting better!

Fewer stinkifying cars on the roads= better!
More abandoned parking lots where green grass is sprouting= better!!
Empty storefronts and office building discourage more new construction of more buildings= much better!!
People are too poor to buy lots of ghastly plastic junk=mucho mucho better!!
People give up on trying too hard to succeed, instead just trying to survive and help their friends, families, neighbors= much better
Unemployed people turn to the food/agriculture industries for jobs because "everyone has to eat"= quite a good trend

So actually things are getting much better, but it is happening "the long way around"---so it takes time to see the whole thing come to fruition.
In the long run climate change will be slowed down, also.

Of course there is suffering along the way, but life is full of suffering, I mean we're all human beings aren't we, so suffering is sort of our fate anyway, PO or not.

Of course there is suffering along the way, but life is full of suffering, I mean we're all human beings aren't we, so suffering is sort of our fate anyway, PO or not.

Of course there will be suffering along the way... but you left out the next two words: 'and dying.' But then everyone must die sooner or later. Problem is when there is no work and no food on the store shelves, and no money to buy food even if it were available, most people will die sooner rather than later.

FLEEING VESUVIUS Introduction: where we went wrong

I need hardly say that, just as the use of fossil fuels drove people out of manufacturing, it also drove them off the land. The use of fertilisers, tractors and sprays made each farm worker much more productive so less labour was required. In 1790, at least 90% of the US labour force worked in agriculture. In the year 2000, less than 1.4% did while still, producing enough to meet home and export demand. The average American farmer produced 12 times more an hour in 2000 than his predecessor did in 1950.

And all that fossil fuels brought the lack of fossil fuels must now take away, along with about nine tenths of the population.

Ron P.

But I have a pet theory about all this---unprovable, as the best pet theories always are! That is what makes them also ideal for the I-nets....

here is my theory in a nutshell: The people "in charge of it all"--ie powerful govt and business types--- are trying to make sure that everyone who had a hand in building all the junk that willl end up as waste products (cement overpasses, highrises, stripmalls, etc.) will be dead from old age BEFORE these waste products are recognized as such.

It is just too heartbreaking to see that all the "order"--(office parks, suburban subdivisions, freeways, etc.)one throught one was imposing on the landscape turns out, without oil to service it all and bring customers and supplies, to be the very most kind of intense and difficult DISORDER (entropy) imaginable.

Cut to: Mother Nature laughing her head off, doubled over clutching low tree branches to stop from tripping over her long grass skirt...."That's rich!", she giggles. "The fools! The idiots! They FELL for it! Give them a few gigabarrels of something gooey, someting oily and they'll DO ANYTHING!, even ruin their own planet!! Incinerators! Highways! 10 lanes to nowhere!!" Hahahahahahaha.

In order to avoid confronting this kind of existential evidence of one's terminal stupidity, I believe that everyone, acting collectively, with the most powerful acting the most powerfully (as is their wont), will AVOID anything like this. By making sure that collapse happens as slowly as possible. So that the people who confront the waste products as such will be the ones who did not generate it. "Back then, people did not understand about nature, did they?" "No I guess not, oh well...."

Paradigm shifts are generational I believe.

Everything will happen very slowly. We might not notice the population dropping because it happens slowly. That is what is happenig here in Japan at least.

Yes, it does indeed matter. I does not matter in the big oil production picture, but it does matter as far as the general public recognizing peak oil goes. To the public, saying the peak happened 5 years ago and hasn't been exceeded since is going to have a bigger impact than saying every couple of years we set a new record peak by a tiny amount. The reality is that the production numbers haven't changed much either way, but the perception by those who don't follow the actual numbers would be occasional new max production figures show everything is O.K.

To the public, saying the peak happened 5 years ago and...

The public is saying no such thing because the public, that is the vast majority of people, have no idea what peak oil means. And those who do know about peak oil are saying that it peaked in 2008, not in 2005. That is because oil is expressed far more frequently as "all liquids" rather than "crude oil" or "crude plus condensate". I don't like it one damn bit but that is just the way it is.

And no, it simply does not matter because no one will pay any attention to the oil supply until it starts to decline in earnest. My guess is that will be in just a few more years but when it does no one will care whether oil peaked in 2005, 2008, 2010 or sometime thereafter.

When the public, in general, becomes aware of peak oil well after the peak, the year of the peak will become academic.

Ron P.

About Off-Grid Homes Considered ‘Weird’ Living?, above:

Short article, but to the point:

The fact that the dwelling is considered an oddity is sad testimony to an antiquated home building archetype that sets man against Nature, rather than creating synergy between the two (I’m channeling Cunningham as I write this).

But perhaps not for long. In the coming era of Peak oil and heating/cooling bills from Hell, we may all want to learn to channel Cunningham. In fact, we must, if we want to insure that our home planet has breathable air, drinkable water, and soil capable of growing nourishing food. And what better way to do so than by starting with clean, renewable solar energy systems?

Am there, doing that. The article uses a common misconception; earth (dirt) isn't so much "insulative" as much as it is a moderator.Small point, I know. I've been dealing with the oddball/weirdness factor for a while now, though not as much as one might think. Of course, I'm not privy to what folks may be saying behind my back ;-)

Lately I'm getting a bit more positive attention about our home, how it's built and how it performs. When folks learn that the per-square-foot cost of building it was below the area average (including renewables and factoring in labor costs), their interest peaks. Then again, realtors scoff because it is "unusual"; doesn't fit into the norm. Finding a bank to approve a construction loan is problematic at best.

I submit that many (most?) of you are living in obsolete dwellings. Unfortunately most folks are more concerned with resale value and curb appeal than buying/building homes that make any sort of ecological sense. But as the article says: "perhaps not for long".

I submit that many (most?) of you are living in obsolete dwellings. Unfortunately most folks are more concerned with resale value and curb appeal than buying/building homes that make any sort of ecological sense. But as the article says: "perhaps not for long".

Hi Ghung,

You could be right, but I opted to buy a more conventional-style home in an older, established neighbourhood within short walking distance of all amenities because I didn't want to risk being stuck with a house I couldn't unload quickly should the need arise. I've seen homes languish on the market for several months and even years for whatever reason and I couldn't imagine going through that myself; realtors and home buyers have their prejudices and of course tastes do change, but it's one of the factors that has to be carefully weighed. Unquestionably, there are trade-offs, for example, the basement floor in our home is uninsulated and there's slab on grade construction at one end that continually wicks away heat; difficult if not near impossible to fix and it irks me to no end, but I live with it.

I know this house will never be independent of grid power, but that's also true of virtually every other aspect of my life. I can take steps to reduce my dependency and thus better insulate myself from rising costs, but if the lights go out and stay out, I'm pretty much dead in the water either way.


Paul, I'm not advocating so much for going off-grid as I am for form following function, especially in new construction. My advocacy is for homes to produce and retain as much of their own energy as the site and climate allow. As you know from your situation, many of our homes, most of our infrastructure in fact, are going to be a hinderance to progress as we are forced to power down. Your experience with lighting is certainly a case-in-point. I expect you'll be a busy guy for many years.

My hope is that new homes and newly remodeled homes will give energy savings top priority, following the passive haus example where appropriate. Passive solar heat and lighting, thermal mass, more insulation, thermal blinds and curtains, zoned heating/cooling (and passive cooling where possible) could all be incorporated into designs and codes.

"there's slab on grade construction at one end that continually wicks away heat; difficult if not near impossible to fix.."

I helped a friend fix this problem a while back. We dug around the exterior of the slab, built some simple forms and had expanding foam injected. He then added radiant floor tubing and poured a top coat of lightweight concrete on his slab, followed by tile. It required some retrimming, doors cut, and his counters are a bit lower, but they love the new zoned heating system. This DIY project only cost a couple of thousand, excluding a new boiler and storage tank, something they needed anyway. He sold the old copper baseboard heaters to recover a significant part of his costs.

You're absolutely correct, Ghung; we should be placing much greater emphasis on energy efficiency and, where possible, energy self-sufficiency, solar DHW being one example. But, in the process, we should ensure whatever we do adds real and lasting value to the property and not detract from it. Personally, I'm big on what's inside walls and down in the basement, but I'm more the exception than the rule -- the reality is that most potential home buyers place a far higher premium on "curb appeal". Can I choose to ignore that? Well, I do so at my peril.

Thanks for mentioning the work that you did with your friend. I thought of doing something similar, but it would mean ripping up flower beds and the back patio, as well as cutting into the side driveway. Our basement walls are fully insulated from the inside (R22), but there's no way to control the leakage through the concrete floor to the earth immediately below. I installed a raised tile floor using this product: http://www.dricore.com/en/eIndex.aspx and it helps, but it's not a perfect solution by any means. When it comes time to replace the driveway, I can fix the slab on grade issue (when the house was built, there was a below grade garage on this north side but that was removed and converted into living space many years ago).


" ...in the process, we should ensure whatever we do adds real and lasting value to the property and not detract from it. "

What is likely to happen is that what adds value will be redefined as energy costs rise and folks stay put in their homes rather than move every few years. The whole real estate industry 'buy-sell-move' bubble is proving to be unsustainable IMO, in the US anyway. Homes like the one in the article and like I've built were designed to live in for a lifetime rather than as commodities. Seems more appropriate to me.

At one time I helped promote R2000 construction for the Ontario Ministry of Energy and, for me, an R2000 home made *perfect* sense. A much better product in every respect (more comfortable, quieter, more careful attention to detail, etc.) and, furthermore, more economical to own and operate because even with the modest premium paid, the higher mortgage costs were more than offset by the reduction in utility bills (some Canadian banks even offered discounted rates and higher mortgage allowances for this reason); so lots of real, tangible benefits and dollar wise, you were further ahead. And yet, some thirty years later, they still haven't caught on with home buyers and these homes command no greater resale value. It's crazy, but then we're expecting a rational, thoughtful response from a process that's largely driven by emotion.


Dear Paul

Could you comment more about the Dricore? I've been thinking about tiling the basement floor with it as the concrete slab is uninsulated. How long have you had it down? Any problems? or things to be aware of? This is Regina: cracked concrete slab on flexible clay. Sigh. Next year we're working more on grading and I have to properly fix the rain gutters and downspouts first of all. Also raise and tilt away from the house a poured slab concrete path (what were they thinking?).

Thanks Paleo

Happy Holidays to you, your spouse and the furkids

Cracked slab on flexing clay sounds more like a rip it up, lay in good hardcore and a new slab. Anything else is only a put off job, the basic problem will just keep coming back.


Yah - I'm just trying to buy some time while we pay the mortgage off and I see if my job's as a hydroclimatologist in an agriculture area is permanent. Fixing the basement permanently is going to be painful and expensive: gut, rip up, repour, reinsulate and dry wall, fix some wonky plumbing, etc. Was hoping to have gotten the ground floor fixed up (need wall insulation there - there really isn't any, ie it's 50 years old and rotten and this is Saskatchewan), so we can move up there and then deal with basement. Nothing like a fixer-upper as a money pit, but it's near shops, work and downtown, design is practical, there's real wood instead of particle and chipboard, and the spouse feels it keeps me out of trouble.

I was brought up in a clay area, terminal moraine fines, you could take a spade full and put it straight on a potter's wheel. There was a brickworks near, bricks were almost as good as engineering grade (excellent pike in the pit too). That clay would tear houses apart as in demolish and rebuild being the cheapest option. If you try and be too clever with the floor you will just change the moisture content, it will move and destroy what you did. If you just want a cheap, quick stop gap how about a layer of slab grade polystyrene covered by flooring grade chipboard. That would be flexible to move with the base. Put in a layer of space blanket to cut down on radiated transmission. Just some thoughts.


Lightweight fiberous concrete may work. They have a self-leveling version that comes in buckets. Mix and pour. We've used it over wooden floors to level them prior to setting tile. It flexes a bit without cracking. We put visqueen (plastic) on the original floor so the new surface floats. It will raise the floor level about 2-3 cm (1"). I think it's made with a gypsum and concrete mix. If the cracks aren't too bad I would use this: http://www.homedepot.com/h_d1/N-5yc1vZ1xg1/R-100200213/h_d2/ProductDispl...

...and put down sheet vinyl. Quick, cheap, looks good.

Hi Paleo,

We installed DRIcore flooring back in 2002 shortly after it came on the market and it works great. Our biggest concern when we remodelled the lower level was mould and mildew and the potential for water damage should a drain back up or water leak through the foundation walls, so we didn't want anything to come into direct contact with the concrete. We also wanted a perfectly flat floor so that we could install tile and not run the risk of cracking (there are plastic levellers that snap on the bottom of the DRIcore tile for this purpose).

I recently partitioned our utility room into three separate spaces: an equipment room that houses the boiler, central vac, heat recovery, PBX and alarm systems; a central hallway with the washer/dryer stack and vanity; and a workshop/storage room. Here again, I installed DRIcore flooring so that we can lay down tile.

Again, the insulating benefits are probably modest, but at least you're not in direct contact with a cold concrete floor.

A very Happy Christmas to you and your family as well.


I only just really witnessed in the last couple years how driven Real Estate and Mortgage banking is on finding 'comps', comparable properties to base a selling price on. What can I say, I rented for the first 19 years after college?

I wonder how one could help move that into a system more built on Comparing based on Energy Use, Running Expenses, and the durability of the materials and construction? Probably when that's what buyers are interested in..


We ran into this 30 months ago when we sold our house. The alt. energy & efficiency retrofits we had performed on the house, which cut its FF energy use by 85% by one analysis, mattered not one whit to the real estate folk. What mattered was comps, and they had a heck of a time finding anything remotely comparable, given what we had done to the house. Oh, the organic garden we had established had zero market value also, although I'm sure whoever lives there in the years to come will appreciate it, and the passive solar heat and solar hot water as well...

The realtors claim that energy retrofits don't add "value" to the house - rather, they just enable it to sell faster than the competition.

Don't forget, a realtor is a salesperson who makes their living off commission - so the faster they can get to the deal, the better they like it.

Now, I know some realtors really do have the best interests of their clients at heart, but nevertheless, they are in it for the money, especially if they work for a firm.
At 5% or 6% commission, it is far less painful for them to get you to drop your selling price to get to a quicker sale. They only lose $500 or $600 for each $10,000 you drop your price.

So, there's really no incentive for them to push energy retrofits unless they think it will sell the house quicker.

You are always selling against the competition - people seem to value granite countertops and stainless steel appliances far more than solar panels. This is a marketing delusion created by builders, who have to keep coming up with better (cheap) bells and whistles to outdo their competitors. Built-in internet, surround sound in the bathroom, electronic gewgaws left and right. It's all packaging. A lot of homes today are in subdivisions where the houses are basically identical. Maybe just the number of rooms differs. In those cases, packaging matters, as a differentiator.

Also, the lenders, who basically use computerised systems to assess home values, since the majority of them are not your neighbors and often not even in your state, don't have a way to model real energy retrofits such as solar. They also do a poor job of evaluating the very diverse homes in older neighborhoods, where, like where I am, homes can be over 100 years old, and in very different states of repair/upgrade.

For example, a house two doors down from mine sold for 60% less than I paid, since there had been an old couple living there for 40 years, who never made any modifications. Now, however, the lenders "see" all our homes on the block valued at that price. I would have to pay for an appraisal to get that fixed.

The only way we can stop this "comp" nonsense is to go back to a system of local banks lending to local borrowers - they can far better appraise your home in its real context.

I work as a home energy auditor and can tell you that an 85% reduction in fossil fuel use is highly unlikely. Did you switch to solar hot water, solar electricity, and switch from heating with oil to wood. Were your wall cavities and attic void of any insulation before the retrofit? What did the SIR look like, or was the main goal just to get off fossil fuels? Numbers like these are near impossible to achieve. Reducing energy bills by 30 - 35% is a huge improvement but retrofits rarely go beyond that.
Definitely a good move to do an energy retrofit on any existing structure as they are all, old and new alike, capable of performing much better energy and comfort wise. It just bothers me when I hear about inflated savings like this. I'm sure the retrofits saved a bucket load of energy from fossil fuels but 85% was probably just a sales pitch.

A little OT with the new guidelines, perhaps, but I wanted to chime in: efficient does not equal sustainable.

I hope all will add true sustainability to their metrics in making future changes.

I wonder how one could help move that into a system more built on Comparing based on Energy Use, Running Expenses, and the durability of the materials and construction? Probably when that's what buyers are interested in..

They are obviously NOT interested in those factors or else they would be reflected in the house price.

Of course, like many here, I feel people SHOULD be more interested in those. But in the longer term, the market will eventually figure it out. As energy prices rise and the 'operating costs' of a house go up, those things will eventually become more important. But with the natural gas glut, I don't see heating efficiency being much of a selling point. Electricity is also pretty cheap. However, due to the California's steeply tiered energy rates, I suspect that homes with solar panels may eventually become desirable since they keep you out of those expensive tiers. And PV systems will become even more popular as oil prices rise thus bringing more EVs to the market. There is a big tie between EV buyers and PV buyers . . . because it makes economic sense. Although time-of-use metering helps, having a PV system gives people a great satisfaction in driving their EV with completely 'free' solar power (ignoring the PV system cost of course).

Middle East per capita steel output relatively low in terms of industrialization

Iran is the Middle East's leading steel producer and was ranked 20th in the world in 2006 when the country produced 9.8 million tonnes of crude steel. The same year it consumed 17.9 million tonnes of finished products. However, it has been importing ever increasing amounts of steel since 1994 when consumption first outstripped production and in 2006 it imported more than it produced consuming 17.9 million tonnes and producing only 9.8 million tonnes.

Iran's second major advantage is its access to gas. The country sits on the world's third largest natural gas reserves after Russia and Qatar. But the competition for gas supply is the biggest issue facing the industry. The growth in demand for power for electricity production and water desalination averages about 10% per year. As the region's populations grow and new power plants are built this will continue to heap pressure on limited gas supplies.

Re: The year of the rabbit?

Quote: "America is unique in the world in that it needs twice the oil to generate one unit of GDP, as anywhere else; and now that the financial engineers who kept the Smoke and Mirrors show on the road for so long, are out of business; if oil does start to blow, could that signal the end of an era? For the past fifteen years, any discussion about "Peak-Oil" has been countered with the argument - "don't worry your pretty little head… someone will pull a rabbit out of the hat".

If so, the only question that remains is will 2011 be the "Year of the Rabbit?" In my opinion, yes, it will but for the last time since it becomes increasingly difficult to fabricate "credible" cover stories.

Of course, the statement that the US needs twice the oil to generate a unit of GDP as anywhere else is inaccurate. Using CIA World Factbook numbers, and purchasing-power parity for the GDP figures, the US uses less oil per GDP dollar than Canada or Mexico. The figure is comparable for Brazil and Russia. And about 50% more than other large economies such as Germany and China.

There may be small economies that are twice as efficient as the US by this measure, but they tend to have outsourced a lot of energy-intensive work. Heck, New York City looks wonderful by this measure, but doesn't dirty its hands with energy-intense things like agriculture, cement, or steel.

Office walls are closing in on corporate workers

In the 1970s, American corporations typically thought they needed 500 to 700 square feet per employee to build an effective office. Today's average is a little more than 200 square feet per person, and the space allocation could hit a mere 50 square feet by 2015, said Peter Miscovich, who studies workplace trends as a managing director at brokerage Jones Lang LaSalle.

"We're at a very interesting inflection point in real estate history," Miscovich said. "The next 10 years will be very different than the last 30."

Less floor space should reduce energy consumption for lighting and HVAC. Elimination of storage space is an effective way to limit use of paper, which is energy intensive to make.

However, I've often wondered about the dichotomy of people spending 50 hrs/week in 75 square foot cubicles in order to spend limited time awake in overly large suburban homes.

Go to Japan. There cubicles are an unbelievable luxury. Imagine tiny desks lined up in a row, you are shoulder to shoulder with you co-workers and your boss sits such he can see all your monitors just by looking up.

Telecommute instead. I only go to the office on Mondays.

Lots of businesses are going to office "hoteling", where employees who are going in to the office reserve a cube for the day. This is especially good for sales, where the employees should be working with the customers, and not schmoozing with person in the next cube anyway.

US department of justice (DOJ) is sueing BP and other companies for the gulf oil spill.

The cost of this case and all lawyer fees will be passed on to the consumers of oil, and the taxpayers who pay the salaries of Eric Holder US attorney general, et al...

New rules and regs and lawsuits will raise the cost of oil drilling and oil too.

What a waste of time.....

Are LEDs are good replacement for high pressure sodium street lighting? Don't count on it.

Choosing between LED and HPS street lights
NLPIP recently performed a formal evaluation of existing street-lighting technologies to determine the best choice between LEDs and HPS.

The report concluded that, on average, the recommended LED streetlights could use up to 10% less power, however, their life-cycle costs were higher. The LED street lights recommended by the manufacturer representatives would cost more than twice as much to own and operate as the incumbent technology over the life of the streetlights, primarily because the LED street lights required narrower pole spacings to meet the recommended practice for illuminating collector roads, and the cost of the poles per mile dominated the life cycle costs.

See: http://www.ledsmagazine.com/features/7/12/11?cmpid=EnlLEDsDecember152010

Up to 10 per cent energy savings at up to twice the operating cost !?! Nein, danke !

Addendum: The City of Halifax is in the process of replacing its HPS street lighting with LED fixtures manufactured by a local firm, but I seriously wonder about the economics.

From a September 13th, 2010 press release, the opening statement reads:

"Through a 1.6 million dollar purchase of 2,137 LED street light fixtures from LED Roadway Lighting Limited of Halifax, Nova Scotia, the Halifax Regional Municipality is about to become the first major Canadian municipality to convert to LED street light fixtures."

Source: http://www.ledroadwaylighting.com/new-led-street-light-to-change-the-way...

Now I can whip-out a calculator with the best of 'em, and if I take $1.6 million and divide by 2,137, that puts the cost per fixture at $748.71. Then, presumably, we need to add in the cost of installation and the disposal of the old hardware. In theory, one of these 88-watt LED fixtures can replace a standard 150-watt cobra head that draws perhaps a total of 170-watts with ballast. On average, these fixtures operate 12 hours per day, so the potential savings are about 360 kWh per year -- i.e., (0.17 - 0.088 kW) x 12 hrs/day x 365 days/year = 359.16 kWh -- and at 10-cents per kWh, that's $36.00 per year. I just don't see how the numbers add up.



Page 19: Discomfort Glare: The average DeBoer rating of all the streetlights when simulated in an urban illumination environment was classified as "disturbing".

Since these things use about 9 kW/mile (Figure 7) and have a average lifecycle cost of $10,000 / year (Figure 8), perhaps we could use less of them.

The economics appear to be driven mainly by the shorter pole spacing for the LED lights.

The price of electricity was held constant at $0.10 / kWhr over the 27 year life of the fixtures.

Hi Merrill,

I certainly have no problem eliminating fixtures where possible or reducing illumination levels on roadways, but that can be a dicey issue for a lot of reasons including liability. Still, I'd like to shake the hand of the roadway engineer who effectively tosses his or her IES standards manual in the trash because they're a far braver soul than I.

With respect to electricity costs, I also noted that the cash discount rate was just 3 per cent. That strikes me as a tad low too.


While I agree that it would be legally risky for engineers or even city councils to deviate too much from the standards, this is something that cash strapped states could do to cut costs for their municipalities.

It seems that LEDs for residential use are dimmable. Could LED street lighting save energy by either dimming or shutting down some elements from 11 pm to 5 am?

If LED is only 7% more efficient then the sodium lights will continue.

I find street lights in general are hard on your eyes.

I am surprised how cheap sodium lighting is.

Why then are the traffic lights becoming LED? Is that a tungsten/halogen bulb?

Answer: LED traffic lights use 85% less energy than the traditional incandescent lights. ;-)

Traffic lights work differently from street lights; they need to be monochromatic. Usually they have been filtered incandescent, and of fairly low wattage, which is the least efficient kind. The filter throws away most of the light. The colored LEDS are monochromatic, so there's not the same need to generate light and throw it away. The red ones can be very efficient (30% or more); the green ones not so much; and the yellow ones tend to be the worst (but are off most of the time in most signals.) So LEDs can win compared to 1% or 2% efficiency from filtered low-wattage incandescent. In addition, they were supposed to last much longer than incandescents, requiring fewer maintenance stopbys, although, to judge from the many failed strings in traffic lights where I live, I'm not so sure. LEDs are assemblages of disparate materials, and the wild temperature fluctuations encountered outdoors are unkind to such things.

It may be a long time yet before LEDs can win decisively over HPS for illumination rather than signaling. And if they do win it may be more because of color; even LED light with only fair color rendition seems clearer than the dull hazy orange monochromatic glow of HPS.

Good point on the spectrum advantage of LED over regular bulbs. Doh. And I do this sort of thing all the time with a mercury/xenon lamp source.

One could get more light throughput with a wider tolerance filter (more bandwidth) but that sacrifices the color purity. Those used filter lenses must be dirt cheap on ebay. LOL. Yes they are 40% of the new price these days.

Up north, there can be a snow problem too on LED units. The heat from incandescent used to melt the snow. Not sure what the work around is other than -- oh crap! Maybe snow proof lenses on slants, but some product testing in snow -- sideways sticky snow is needed it seems.

Nothing like a real world test.

For LED and perhaps CFL (more recent ones) I feel the problem is the electrical engineering and manufacturing not the LED itself or the CFL element itself. If military-grade electronics parts were used and manufacturing practices were of similar quality then LEDs would be robust; cheaper components in the drivers cause failures.

..but they lower the unit costs with el cheapo stuff -- the winners in the long run are hopefully the good guys who did it right for a little more cost.

Apparently, the snow problem in 2009 was due to a heavy winter and the fact that street lights were not equipped with normal snow shields. Even an incandescent cannot beat the deep freeze. So snow shields are needed to prevent snow and ice buildup.


But the issue of snowstorms and LED traffic signal safety "is very much overblown," said Scott McMahan, writer and editor for LIGHTimes Online-LED Industry News (www.lightimes.com), a Web site that covers the LED industry. "The fact that LED traffic signals have been around for years all over the world, and we've only heard about this snow issue once in all those years — well, that says something. Non-LED traffic signals are out very frequently, and the amount of time that they are out is much more significant than the amount of time that the LED signals would be out," McMahan told GovPro.com


Doubt if you need military grade, just industrial or rather not-consumer. If strings of LEDs fail that is a degradation whereas an incandescent would be a total failure. If snow is an issue then add a heater, it will only be needed for part of the year and, even then, not all the time plus it can supply heat in a better controlled manner so less is needed so there would still be an appreciable saving over incandescent.


Yeah, grade just needs to be better than cheap ;-)

Basically I am trying to say that there is an issue with these great technologies involving the time the product lasts. Cheating on their longevity with cheap parts makes the per unit cost go down.

I wonder what are the good companies to trust?

I like the compact fluorescents but I feel quality is being traded away for cheap more so today than 5 years ago. So some units are not lasting as well in my hands.

It's not just cheap parts but cheapskate manufacturing. Atypical small LED will have a current spec of 20mA. If you run it at 15mA it will be a little duller but last ages. A lot of the companies trying to get into the LEDs for everything market will run it at 30mA to get a bit more light out of it and improve their product specs while keeping prices down, they will not last anyway near the life expected. I am seeing this in dissecting products. LEDs really like being kept in spec (remember that the LED manufacturer may put a little optimism into the current handling spec and what is specified IS the maximum anyway).

The street lights in my local area were changed from sodium to some sort of circular fluorescent tube, like a small, fat inner tube that gives off white light and keeps it going down not out or up - way better.

For CFLs my best experience has been with GE but the electric supply here can be brutal on lights. For my next house I want to put in a regulated lighting supply one way or another.


I think we agree. Rather my poor writing is getting in the way.

Say you need a resistor in the thing that dissipates 2 W but that is more expensive than one the dissipates 1 W -- so you cut a corner and throw in the cheaper component.

This is like you saw, driving a LED at 50% higher current to get more light -- using a cheap LED to make the product seem to be bright.

The trade-off is the length the thing lasts, and they are perhaps not being fair about that advertising.

Glad you say GE is good. Next time I go with them.


This seems to be a perennial problem with these "replacement" light sources - so often the "replacement" gives fewer lumens, has an unsuitable illumination pattern, or has some other unsuitable quality. Not a problem when can snooker ignorant individual "consumers", but tougher if your intended customer has a light meter and knows how to use it. Will the manufacturers ever learn?

I think this is trying to engineer a solution to the wrong problem, as I think street lights are mostly unnecessary.

Anyone commuting at night should have their own light source.

The nice thing about LEDs as they tolerate many on/off cycles, making them a good choice for traffic control lights, security lights, and such. Since they have no filament to burn out, they are also well suited to vibration environments, like on bicycles and vehicles.

I personally have an 80 lumen 2.5watt 120v LED light bulb on my nightstand, undergoing my personal testing. So far, it has delivered.

Yair...from the link above...it seems we used to run the old Model G John Deere on an "exotic fuel" huh?

U.S. Called Vulnerable to Rare Earth Shortages

The United States is too reliant on China for minerals crucial to new clean energy technologies, making the American economy vulnerable to shortages of materials needed for a range of green products — from compact fluorescent light bulbs to electric cars to giant wind turbines.

So warns a detailed report to be released on Wednesday morning by the United States Energy Department. The report, which predicts that it could take 15 years to break American dependence on Chinese supplies, calls for the nation to increase research and expand diplomatic contacts to find alternative sources, and to develop ways to recycle the minerals or replace them with other materials.

U.S. at risk of rare earths supply disruptions

a nice way to put it ...


From all indications it would seem the chances of a shortage are 100%.

Of course, all cars, planes, trains, spacecrafts, defense equipment and electronic products use rare earths not just "clean tech." Oil refining uses a lot of catalysts for example.

I think the rare earths are needed for clean tech is so overblown as being targeted to one single industry. Horse pucky. Rare earths are needed for the fossil and clean tech economy. Period.

Is the Tibet issue in China really about religion or rare earth metals? Anyone know? I think basically the whole tibet thing leads straight to rare earth mineral deposits.

I bet these mines start popping up all over the world. I doubt that rare metals are so unevenly distributed around the world, but I have not looked into it. Rare means diffuse and diffuse means lots of places.

what china does do is use very cheap wage labor and poor working conditions and no environmental controls to do the energy intense mining.

May be hard to match them there. We need to decide how much capital and cost is worth investing to create a supply at home if china continues to play hardball.

I also see China releasing minerals to flood the market and kill mining competition as competition comes on line. China loves to dump. It is one of its favorite, anti-competitive weapons.

Although China does have some of the largest and highest-quality REE deposits, it's true that globally the reserves are not so concentrated - hence the problem is not so much a long-term shortage or "peak rare earths" but a more immediate problem of supply chain bottlenecking, starting with mining capacity. REE's used to be mined in the U.S. and elsewhere until China became the dominant player as in so many other industries thanks to a combination of cheap labor, officials willing to look the other way as safety and environmental standards (and in many cases laws) were violated. For the short term the only mitigation strategies are recycling and conservation/substitution, as few operable facilities exist outside China today (the DOE report outlines the decline in U.S. production clearly).

The problem is also in no way limited to rare earths. The DOE report also outlines strategies for dealing with potential shortages of tellurium, gallium, indium and to a lesser extent lithium. No mention of near term peaks in platinum group metals but these are also important industrial materials and very difficult to find substitutes. It is my view that we are seeing the leading edge of a larger "peak minerals" (including fossil fuels) and the coming years will be characterized by increasing material scarcity and prices of all commodities, along with tremendous volatility, and hopefully much greater rates of (and more efficient) recycling and reuse of materials.

Yes, I see that bottle neck in supplies will happen since mines take a while to get up and running. Wow the West fell asleep at the switch. I guess the idea will be that China tries to manipulate the world and hopes no one gets mad at them in the process.

Is that a good foreign policy?

I thought China and the US were in Afghanistan for the rare earth metals

Afghanistan has them, but are they stable enough to gain access. The risk would be great perhaps when investment could go into a more stable local elsewhere.

I bet the US develops more soon. China dumped a bunch of REMs in 2002-2003 when the heard that molycorp was going to produce in the US. Good lord they play dirty.

Yes, but the Chinese are writing the contracts and the US are writing the obits.


Wow the West fell asleep at the switch.

Indeed - the sad part is that at one time in the U.S. we had a federal agency (the Bureau of Mines) with the responsibility to guarantee a secure supply chain for strategic minerals, including REEs, and a strategic reserve of stockpiled minerals to serve the needs of DOD etc. not unlike the role of the SPR for petroleum. This same agency, which had overseen a 99% reduction in mine fatalities over its tenure and invented many of the modern techniques used by the mining industry today, was abolished in 1995 thanks to political conditions not unlike those of today. The strategic mineral reserve was sold off (maybe to China, who knows) and much of the human capital involved in federal R&D efforts was lost (retired, since passed away, or also gone to China). So today we find ourselves starting from scratch and saying we were blindsided, much like the crew of the Deepwater Horizon was caught by surprise when the rig caught fire because the alarms had been intentionally dismantled.

Meanwhile the Department of Defense could no longer rely on domestic supplies of materials it requires and so would be caught in a supply shortage in a hypothetical conflict with another hypothetical superpower. This fact has caused no end of squirming in the pants for many defense hawks of late.

Rare Earths, Afghanistan, and American Power Viz China


Chinese Crisis in Rare Earth Metals – Afghanistan is Silicon Valley’s Savior


Dec. 16, 2010
China To Raise Duties On Some Rare Earth Exports


In some ways Afghanistan could be helped by this production if done right. Hope it works out.

Harrier jump jets flown by the RAF and Royal Navy have taken part in their last operational flights.

Last trip for one of Britain's iconic aircraft

After forty years these iconic aircraft are being retired to make room for the next generation of fighters.

Inside the F-35 Joint Strike Fighter

The United States is co-developing the F-35 with eight foreign partners -- Britain, Italy, the Netherlands, Turkey, Canada, Australia, Denmark and Norway. Together, the partners are projected to buy about 730 planes.

Lockheed Martin grounded the prototypes in October owing to glitches in its fuel sequencing software.

UPDATE 1-Lockheed Martin's F-35 fighter jet grounded

Despite its techno-wizardry, the F-35 may have to wait until 2013 for a next step in fuel efficiency.

USAF: Advent upgrade 'feasible' for F-35 engine

A top US Air Force technologist confirms the potential exists after 2013 to greatly improve the fuel efficiency of the F-35 Joint Strike Fighter engine by inserting a third bypass airstream.

Air Force Research Laboratory (AFRL) studies have affirmed the upgrade is technically feasible, albeit complex and expensive, says Larry Burns, programme manager for the versatile affordable advanced turbine engines programme.

By engaging the third bypass airstream during cruise, the engine can adapt the ratio of the airflow bypassing the core in flight. A higher bypass ratio reduces speed, but increases fuel efficiency dramatically during cruise flight.


The AFRL launched the Advent programme to achieve a step-change in the fuel-efficiency performance of turbofan technology, which had seemingly reached an innovative plateau more than four decades after it was introduced with the GE TF33.

For all the improvements wrought by technology (stealth, maneuverability, navigation, and simplified flight control), it seems innovation has its threshold. It seems "gadgetry" and "fuel-efficiency" move to the pace of different drummers.

F-35 Lightning IIs...previously known as Joint Strike Fighters....meh, Pffft!

all the following IMO:

- Short legs
- Unimpressive payload capacity
- Likely unimpressive resistance to detection
- Not very resistant to damage
- Probably will suffer from avionics overheating
- VERY expensive to buy, and not economical to operate

- A cash cow for Lockheed Martin fer sure...

Your tax dollars hard at work!

$12 million

$96 million to $200 million (depends on variation)

This is per plane and the F-35 is supposed to be the most expensive Military program ever awarded. $323 Billion, yes kiddies, that's $323 Billion!

How many houses could be super insulated for that? How many fruit and nut trees could be planted? How many solar water heaters could be placed in this country? How much rail, could be put in for transportation? Your fedgov has your best interest at heart? Right?

Choose wisely,
The Martian

Are you in the US by any chance?

It is probable that that country is an outlier in this respect. The money spent on the military is I forget but it's just enormous, something like the whole rest of the world's spending on military stuff put together.

It is part of the car-machine-techno culture over there.

Don't worry, that whole way of thinking and spending is on its last legs. The people in the military that enjoyed all that will have to stop eventually. But I agree that in the meantime one can't help but regret this kind of money spent on such things.

Trust me, U.S. MIC spending is not going to decrease one penny in nominal terms without a massive fight.

The masses have been sold the bill of goods that MIC budgets are inviolate.

The vast majority of the media is complicit and beats the drum while waving the flag.

The interests vested in our massive MIC budgets have deep pockets and have the SCOTUS green light to spend all the money they want to keep the gravy train running.

Most of you probably have little idea how much the DoD markets the 'economic value' of its bases to the local and state and federal politicians; News alert: 'Ice Station Zebra' contributed $400M to the local and state economy last year (Hint: the state in question is running a robust surplus presently)!

Each base has a robust military-civilian liaison committee where the basers confer honorary 'civilian commander' titles upon various local officials; these honorary and actual base commanders hob-nob all year long going to each others' luncheons, dinners, holiday parties, city and base anniversary celebrations, open houses, air shows, town parades, etc.

The townies offer military discounts and eagerly court the young enlisted with car loan 'deals', specialty business who cater to service members' insurance and stock market mutual fund 'needs'...and on and on.

The bad co-dependent band plays on, and we pee away close to $1T per year for all the MIC gravy (DoD, DoE, CIA, NSA, NGA, DHS, EIEIO, and all their contractors).

I greatly respect the Brits for having the courage to cut both military and non-military budgets.

Wow, I had no idea that there was that kind of network out there. But I shouldn't be surprised. Isn't there some way to counter it, indirectly at least? It sounds almost like some sort of quasi-criminal activity, a con-game of sorts, funneling huge gobs of cash on trumped-up claims (we must defend our country!!) out to people who have every reason (i.e. financial interest) to believe these claims and use quid pro quo to get a piece of the "action". Lord help us....and I say that as a secular humanist...

Quick, any journalists out there......uncover this horror!!! I think a lot of this activity (the military and local people in cahoots together) would be illegal in other countries. Strict separation of all interests should be maintained as much as possible. Gawd. Americans are supposed to be so rational...the whole country emerged out of the Enlightenment. This kind of partnership (which is a legal but detestable way to siphon off taxpayer cash and into the pockets of DoD plus their local friends) seems like something that is perfectly hindering attainment of clean government. It seems almost like a club or a religion (we like football, Christianity, cars, weapons, big business, etc.) murky, primal, emotional, wink-and-nod.
It should, strictly speaking, be illegal.

More bad news for the tar sand producers -- digging up sections of the Keystone pipeline (435 KBD). With the Enbridge pipeline rotting out, this pipeline is critical. It's hard to believe but it may have been built with defective steel.

Worries over defective steel force TransCanada to check oil pipeline

Almost half of the steel in the 30 inch Keystone pipeline came from Welspun and was manufactured about the same time the company provided defective steel on several other pipeline projects. As a result, the Pipeline and Hazardous Materials Safety Administration, the agency charged with oversight of the nation's 2.1 million miles of pipeline, ordered more tests, including on Keystone.

More on the pipe problems:

Investigators traced the problems to defective steel produced by several mills, but mostly by Welspun Power and Steel, a manufacturer based in India.

Great. They built the new pipeline using defective steel from India.

I would say it's more bad news for US consumers. The US Gulf Coast refineries it is intended to serve suffer a lack of alternative supplies now that Texas production is a fraction of its former level, and production in Venezuela and Mexico is in steep decline. Look for higher fuel prices to come to a station near you.


The proposed Keystone Gulf Coast Expansion Project is an approximate 2,673-kilometre (1,661-mile), 36-inch crude oil pipeline that would begin at Hardisty, Alberta and extend southeast through Saskatchewan, Montana, South Dakota and Nebraska. It would incorporate a portion of the Keystone Pipeline (Phase II) through Nebraska and Kansas to serve markets at Cushing, Oklahoma before continuing through Oklahoma to a delivery point near existing terminals in Nederland, Texas to serve the Port Arthur, Texas marketplace.

Fortunately, alternatives exist:

Alberta eyes rail to ship bitumen

The Stelmach government, oilsands developers and railway companies are actively pursuing strategies that will see raw bitumen shipped on rail lines from northern Alberta to the West Coast, where the product can then be shipped by tanker to lucrative Asian markets to be upgraded and refined.

Unfortunately that's options for Alberta producers, not American consumers

"We're talking about expanding our markets beyond the U.S. We've always said that we need to look at other options and we'll continue to look at other options. Rail is one of them," said Energy Minister Ron Liepert. "It's always been easy to ship south and that's what we've always done, but we have to look at being not so reliant on (shipping) south."

Currently, Alberta's oilsands exports are only shipped via pipeline to the U.S., where it's upgraded and refined to feed an insatiable energy appetite south of the border. But stinging attacks by U.S. environmental groups, an oilsands boycott by a city in Washington state and protests by 50 U.S. congressman over the $12-billion Keystone XL pipeline expansion to the Gulf Coast have Alberta and petroleum producers looking to move the bitumen bounty elsewhere.

Buyers for Chinese oil companies are rubbing their hands with excitement and waiting for the phones to ring.

China's oil demand increase 'astonishing', says IEA

China's demand for oil jumped by an "astonishing" 28% in January compared with the same month a year earlier, the International Energy Agency (IEA) says. The body added that demand for oil in 2010 would be underpinned by rising demand from emerging markets, with half of all growth coming from Asia.

The Keystone XL pipeline seems to be moving forward with a lot less resistance than the pipeline across the First Nations land. I expect both pipelines to be built since O&G interests call the shots in both countries but I would guess that security will cost a lot more in Canada to protect the pipeline since those First Nation folks are going to be really angry and Americans don't really move from the TV.

Does anybody ship oil by rail? It must cost quite a bit more than pipelines.

It's unusual to ship oil by rail, and it's more expensive than shipping it by pipeline, but it can be done. It has the advantage that the CN Rail line to Prince Rupert has been in use for more than 100 years, so it's hard to argue that it's some kind of new intrusion into First Nations rights.

I fail to see why the Gateway pipeline to Kitimat would have any more security concerns than the existing TransMountain line to Vancouver. In fact the route runs through considerably less populated areas.

Maybe people forget that the TransMountain line does run from Edmonton through Jasper across BC to Vancouver, crosses 98 rivers and streams (including the Fraser), and that oil from it is being shipped out of the Port of Vancouver to refineries in California and elsewhere. Vancouver is a considerably more hazardous port to ship oil out of than Kitimat, what with all the narrow channels, low bridges, and heavy boat traffic.

Kitimat is unusual in that it is a "Private Port" operating outside of Canada's national port system. It was deproclaimed as a Public Port by the Canadian government in 1998 and now operates unencumbered by government facility ownership or management, or by national union collective agreements. It is much deeper than Vancouver and has a lot more room to move the new Ultra Large Crude Carriers (ULCC) in and out.

The protesters in Vancouver probably didn't get the memo when Kitimat was privatized. They get left off a lot of important government mailing lists.

I didn't follow pipeline news when the TransMountain line was built. I wonder if the First Nations were so vigorously opposed to that.

Anyway, the former Baywatch star isn't too fond of oil movements either [grin]. I know the show was #1 in Australia but I don't know how much sway she holds up North.

Pamela Anderson takes up opposition to oil shipments out of Vancouver

Canada's sending oil to China is inevitable. The US does not have the will to improve efficiency to match China; therefore, China wins in the oil-efficiency tug o' war.

The ideal result will be that the us improves fleet efficiency, adds more rail and less truck, and comes to its senses a little sooner.

In some ways, the faster oil is shipped to China, the faster Americans can realize what is going on with the economy and oil production.

How hard are we pushing the land?

...the early returns are in, and despite uncertainties in the measurement, the signal is headed in a clear direction: up. From 1995 to 2005, global annual plant consumption rose from 20 percent to 25 percent of all plant production in those years.

As the human population continues to grow and more societies develop modern economies, this rate of consumption is increasing both as a whole and on a per capita basis globally, a NASA research group led by Marc Imhoff at NASA's Goddard Space Flight Center, Greenbelt, Md., has found.

...as the population grows and becomes more dependent on those managed systems and a long-range food and product distribution network, many populations would become more at risk to perturbations to those systems, such as drought. Already, some densely populated urban areas consume more than 30,000 times the nearby regional plant production.

Thanks for this link Seraph. I am going to save it and use it the very next time someone suggest that in a crunch we can all just go back to the land and live fat dumb and happy forever.

Ron P.


'Tax-cut and stimulus package hits snag in House'

But House liberals, upset with Obama and with being cut out of the negotiating process, have forced a vote on a different version of the estate tax.

That's it - a disagreement on the estate tax?! Not that all this money will need to be borrowed and added to the debt. Not that it includes tax cuts for the super wealthy, nothing else?

Did you know that if all the Bush tax cuts had been allowed to expire, the savings would have been 3.7 trillion vs. a projected 4T debt increase. The difference is .3T or 300 million farther in debt, which is minor in comparison. While the EU swallows a hard pill of austerity, the US gives everyone a bonus in the forms of various tax cuts.

Leno did a great bit on this tax cut giveaway. He ran a clip of the House press conference and added the price is right background with music added, then it finalized with everyone in America getting a Brand New Car!

It's such a joke, its laughable. But just imagine the pain down the line when the budget has to be balanced. How do you suddenly go from 1.4 trillion annual deficits + these new tax cuts to balancing the books? Where is it going to come from?

Right now the price of oil is remaining at 88 a barrel. When we hit the 4th of July next year it will be more like 90-110 and the economy will be slogging along like a beached whale. When this debt bubble finally hits hard like it did in Greece, everything will have to be cut to the bone. But the Repubs will not allow cuts in defense and Dems will not allow cuts in SS & Medicare, and that will mean - I don't know - what will it mean? I keep hearing we have the best govt. in the world - oh really. I don't think so, not by a long shot.

Oil price rising while debt increases will eventually collide and oh my, look out then.

Dick Cheney said, "Deficits dont matter." He won the debate. Now we sink on his ship.

Dick Cheney said, "Deficits don't matter."

Yes, I remember that. And, as VP, Dick Cheney had a lot of power because he ran the government when George W. Bush was out to lunch, which was pretty much all of the time.

That was when I moved my life savings out of US securities and put them in safer countries.

Deficits don't matter if you don't mind going broke. It's like living on your credit cards. It's not a real problem until the letter comes from the bank telling you they are repossessing your house, your car, and your furniture. Up until that point it's a lot of fun.

Deficits are going to increase because
1. The Republicans will not allow tax increases, and
2. The Democrats will not allow cuts in entitlement spending.

Increasing deficits mean inevitably more quantitative easing to finance the humongous deficits. Sooner or later (and probably sooner) this process of the Fed printing money to finance Federal deficits will result in increasing rates of inflation. In turn, this will cause both bond and stock markets to crash--and may lead to financial collapse after these markets crash and cause a return of the Greater Recession or the Greater Depression.

Chear up! These are the "good old days" right now in late 2010. I do all I can to enjoy each day, because I know hard times are in the future, when I may not be able to afford the gasoline to visit relatives and friends.

" ...this process of the Fed printing money to finance Federal deficits will result in increasing rates of inflation."

Hi Don. My knowledge of economics (beyond pure intuition) sucks. I've always understood that mass injections of funny money into an economy ultimately results in inflation. However, some disagree that this is the case in our current pre-depressionary situation. Nichole Foss has made some convincing arguments that long term deflation is our lot, as she discusses here: http://www.youtube.com/watch?v=VJtbxrk_v7c

Any comments you can give in response to her assertions would be appreciated. Thanks!

Any of you econ savy folks please feel free to weigh in. Inflation or deflation? Seems like a critical question.

IMHO, Stoneleigh is wrong. Several months ago I wrote on the Drumbeat that I thought the chances of a deflationary depression were fifty-fifty. The world has changed since then. We now have QE2 and the extremely inflationary tax agreement between Democrats and Republicans. I now put the chances of a deflationary depression at one in five; in other words, I think we dodged the bullet on that one.I

Stoneleigh agrees that in the long run we will have hyperinflation to wipe out the dollar. Where we disagree is the question of what comes first. Instead of deflationary depression, I see stagflation for the next few years, to be followed by first gradual and then rapidly increasing rates of inflation.

I was born in 1940, when a dollar would buy (very roughly) what it would a century before. The dollar today is worth roughly 4 cents of a 1940 dollar. In other words, the Federal Reserve System has been an engine of inflation since 1940. I think it will continue to be an engine of inflation in the future.

Mortgagees can always hope ;-) Thanks!

Don't forget cuts in MIC sending.

We should modestly increase taxes, and greatly decrease spending, entitlement programs, MIC, and other discretionary spending...all these types of spending should take a big haircut.

Due to political realities, all of the spending entities are vested interests. Because of this bitter reality, I think Federal deficits will increase, and the Fed will do more and more quantitative easing (printing money) to finance these increasing deficits.

And what is the probability that Republicans will agree to any tax increases whatsoever? Nil.

17 January 1961

Dwight D. Eisenhower - Farewell Address

"As we peer into society's future, we -- you and I, and our government -- must avoid the impulse to live only for today, plundering for our own ease and convenience the precious resources of tomorrow. We cannot mortgage the material assets of our grandchildren without risking the loss also of their political and spiritual heritage. We want democracy to survive for all generations to come, not to become the insolvent phantom of tomorrow. "

Problem is our minds are so shortsighted and the past is academic only to most.

Sad state of affairs. We are doing exactly what we were warned of.

And now there is another way to see how the 'peak oil' meme has entered our culture.

From: http://www.nytimes.com/2010/12/17/books/17words.html Google has made a mammoth database culled from nearly 5.2 million digitized books available to the public for free downloads and online searches. The digital storehouse, which comprises words and short phrases as well as a year-by-year count of how often they appear, represents the first time a data set of this magnitude and searching tools are available. It consists of the 500 billion words that are contained in books published between 1800 and 2008 in English, French, Spanish, German, Chinese, Russian and Hebrew.

Link to Google Labs Ngram Viewer

Check out: peak oil, limits to growth, oil crunch, permaculture

Also check out "hard work and thrift", "social security" and then "free lunch" and "jackpot".

Very telling.

What you have to do is enter : oil discovery

You can see the main peak around 1960 and other bumps around 1940.

The big peak around 1980 must be when everyone was freaking out due to the oil crisis.

If you do the same for coal discovery, the big peak is around 1890.

Natural gas discovery has a bump around 1950, with another peak around 1980 and some recent uptics.

EDIT: If you do oil discovery in British English, all you see is the peak at 1980+, indicating the North Sea discoveries which mainly occurred in the 1970's and the 1980's.

Web, that chart don't look right. All the charts I have seen show discovery peaking in 1965. What happened in the 1980 was there was a dramatic increase in world reserves due to OPEC Middle East nations upgrading their reserves with a pencil. Perhaps that is what this chart represents.

Ron P.

That's part of it. You have to take these indirect measures with a grain of salt. It is just counting references to mentions of "oil discovery" in various books. For all we know, it is looking at sentences like "Each year oil discoveries are shrinking". And if you enter oil discoveries instead of oil discovery you will see the peak in 1980 become relatively stronger.

You can do the same thing with Google timeline:

This actually looks better.

Heh, 'climate change' gives you a hockey stick...

"orgamsm" definately shows the rise and fall of the sexual revolution :)

I like "electric car", "f_ck" ;-), "geothermal", "wind power", "gasoline", "hybrid car", "pollution", "war for oil", "gold", "nuclear power", "biofuel", "railroad", "interstate", "canal", "horse carriage", "garden", "compost", "pitch fork", "fuel cell", "oil crisis", "price at the pump", "wood fire"

Wow our historical focus at the touch of a button.

Some things are coming back and some things are fading away, like you said on fossil fuel discoveries. Apparently the famous 4-letter word is rising in popularity still.

Hello all,

It's been a few months since I've checked in with TOD. It looks like there's been some website revisions/renovations. I'm looking for the series of Peak Oil updates which provided graphs of all the different agency/organizational peak predictions along with the up-to-date oil production numbers. these graph has a little "star" image where the "peak" was. Can someone provide me with a link to get to these series of posts?


Rembrandt hasn't been doing the Oilwatch Monthly since August; other obligations and all that. Use the Advanced Search (top left) to search either "Rembrandt" or "Oilwatch Monthly" to access previous posts....

...or look here:


No Oilwatch Monthly and drumbeat every other day. I suppose it's just more evidence that peak oil is upon us.

Thank you!


Who 'has' your mortgage?


Shifting gears to the foreign policy front...any estimates from the TOD crowd on how long we will be in the 'Stan with our military?


The U.S. will withdraw from Afghanistan in the summer of 2012 and declare victory. This has everything to do with the Presidential election cycle and nothing to do with events on the ground. Of course the Taliban is winning and will win back Afghanistan. Afghanistan is just as lost as Vietnam was lost in the Tet offensive of 1968--a military defeat for North Vietnm, but a strategic victory.

I would rather cut our losses than remain stuck in the sand for 30 years, and then cut our (by then incredibly larger)losses.

Just like Vietnam...unless we want to send about a million troops and basically wipe them natives all out and start over, there is no 'winning'.

We can notice that NV's victory did not precipitate a communist takeover of the free World.

A shame for the SV people for a while, for sure, but we are not the global savior.

We also note that we have ended combat ops in the Iraq, yet we still have 50,000 troops there...will this be for 65+ years, as in parts of Europe and Japan and 50+ years in the ROK?

And the same will happen when we 'end combat ops' in Afghanistan?

Will we then try our hand at occupying Iran and/or Pakistan, then cut our losses after 10-15 years in each of those places and again leave residual forces of ~ 50K in each of those lucky countries?

I recall that when playing 'RISK', when one spreads one's armies around the board too thinly, such forces are subject to be picked off.

At least our home front economy is solid, else we would risk bleeding ourselves dry.

Here is a flowchart of someone who took the trouble of following up on the entire process. You can save it to your computer and blow it up. It is quite interesting to say the least.



Yeah, that was pretty much my reaction as well.

The price of oil was in the 78-83 range for quite a few months, but now seems to have found a new price at 88.