Drumbeat: February 9, 2011

New drilling method opens vast oil fields in US

A new drilling technique is opening up vast fields of previously out-of-reach oil in the western United States, helping reverse a two-decade decline in domestic production of crude.

Companies are investing billions of dollars to get at oil deposits scattered across North Dakota, Colorado, Texas and California. By 2015, oil executives and analysts say, the new fields could yield as much as 2 million barrels of oil a day - more than the entire Gulf of Mexico produces now.

This new drilling is expected to raise U.S. production by at least 20 percent, or a million barrels per day, over the next five years. And within 10 years, it could help reduce oil imports by more than half, advancing a goal that has long eluded policymakers.

BG raises gas production targets amid reports of 'glut'

BG, the fast-growing oil and gas exploration company, dismissed predictions of a "global gas glut" as the group raised its production targets, sending shares to an all time high.

Chevron Sees Deepwater Drilling In Gulf Restarting Before Year End

HOUSTON -(Dow Jones)- Oil giant Chevron Corp. said Wednesday it expects the federal government to start issuing permits for deepwater drilling in the Gulf of Mexico, which will allow drilling to resume before the end of the year.

Aramco Confirms Lease of Japan Crude Storage Capacity

Saudi Aramco, the world’s largest oil exporter, expects this quarter to deliver the first cargoes of crude to storage tanks it leases from Japan Oil, Gas and Metals National Corp. on the island of Okinawa.

EXCLUSIVE-Saudi asked U.S. to stop oil lawsuits-Wikileaks

LONDON (Reuters) - Saudi Arabia in 2007 threatened to pull out of a multi-billion dollar Texas oil refinery investment unless the U.S. government intervened to stop state company Saudi Aramco being sued in U.S. courts for alleged oil price fixing, according to U.S. diplomatic cables seen by Wikileaks.

Deputy Saudi Oil Minister Prince Abdulaziz bin Salman Al-Saud at a July 8 meeting with U.S. embassy staff in Riyadh said he wanted the U.S. to grant Saudi Arabia sovereign immunity from lawsuits by ordering a Dept. of Justice statement of interest (SOI) on its behalf, one cable said.

Steve LeVine: Digging out the truth about Saudi oil

A senior Saudi Arabian oil official said in 2007 that the kingdom has 388 billion barrels of recoverable crude oil reserves, about 45 percent more than official public estimates. But about the same time, a retired Saudi Aramco executive met with U.S. diplomats in Dhahran, and asserted that the country's figures in general are wildly overblown, and that it is headed for a production peak around 2020, followed by a slow decline, according to new Wikileaks cables.

The issue is pivotal. Put simply, the price of oil -- the price you are paying at the pump, indeed the cost of everything in your home -- is wholly determined by what oil traders think Saudi reserves and production capability really are.

WikiLeaks: Saudi oil reserves exaggerated; decline inevitable

Oil industry analysts point out another variable: the use of alternative energy sources. A U.S. cable from 2009 says the Saudis want to develop renewable energy sources, including nuclear power, to meet the rapidly growing demand for electricity. That could have the effect of reducing the need to divert crude from exports to fuel domestic electricity generation.

The 2009 cable says analysts believe "a civilian nuclear program ... is the only possibility the Kingdom has to generate sufficient electricity to meet projected demand from economic and population growth and increasing affluence without wastefully burning large quantities of fuel oil."

WikiLeaks: Saudi Arabia has a serious oil leak

For Saudi Arabia, a decline in reserves and the capability to quickly produce large quantities of oil would devastate its standing in Opec (countries are given a production quota based on their proven reserves) and also in the Middle East.

Without oil, Saudi Arabia is just another desert country in the Middle East. More specifically, without oil, Saudi Arabia is no longer a country that can throw its weight around internationally, as was famously demonstrated in 2006 when Britain’s Serious Fraud Office squashed an investigation into Prince Bandar bin Sultan bin Abdul Aziz al-Saud and arms company BAE, for corruption. BAE allegedly paid the prince more than 1 billion in bribes over 20 years. The SFO killed the investigation on the order of the British attorney general Lord Goldsmith, who cited “national interest”. Tony Blair took “full responsibility” for the decision as well.

Wikileaks gives a boost to peak oil theories

I’ll leave the blog below in tact, but really I should point out that the reason the oil price hasn’t moved is that the person quoted in the Wikileaked cable, Sadad al Husseini, is a well-known peak oil theorist who has said this in public many times before.

Phil Flynn: Is This All They Got?

Still the concerns about Egypt and now pirates may play a pivotal role in prices. Also perhaps some verification on “Twilight in the Dessert” because of a Wikileaks document, quoted on the Guardian Newspaper stating that Saudi Arabia's oil reserves were overstated by 300 billion barrels. I can hear the peak oil believers all over the globe say, "See, I told you so".

Ex-Aramco Official: US Cable Wrong to Dispute Saudi Reserves

A former executive of Saudi Arabian Oil Company, known as Saudi Aramco, who was referenced in a leaked U.S. diplomatic cable saying the kingdom's oil reserves were overstated by 300 billion barrels, said he was misquoted.

Sadad al-Husseini, a former head of Saudi Aramco's exploration unit, told Dow Jones Newswires that he had "no doubt that the figures Aramco is publishing officially are actually right."

Saudi oil reserves could be 40% lower than estimated: US Embassy cable

The Maldivian economy is dependent on oil to such an extent that is spends a quarter of its GDP on it – US$245 million – mostly marine diesel. The 15 percent increase in oil prices over the past five months has led to the Maldives spending almost US$100,000 more on fossil fuels, per day.

Energy: WikiLeaks Says That Peak Oil Could Be Coming Soon. Is It?

So is the world really on the brink of peak oil? The trust is we still don't know—though Saudi Arabia's opacity about its reserves doesn't help us at all. Oil prices have been rising in recent months, in part driven by muscular demand from the developing world—especially China—which has been recovering from the recession much more quickly than the U.S. Predicting the future of fossil fuels is hard—new production techniques, like ultradeepwater drilling or hydrofracking natural gas, can suddenly extend seemingly depleted reserves, though at an environmental cost. Oil won't be going away any time soon—but it's not likely to be getting any cheaper either.

Saudi oil seen steady, kingdom's clients not asking for more

LONDON/SINGAPORE: Saudi Arabia will this week tell regular customers how much oil they will receive next month, and the signs so far are supply will be little changed as the leading exporter resists market pressure to produce more.

As oil has climbed to $100, well above Saudi Arabia’s preferred range of $70-$80 a barrel, the kingdom has said it is ready to pump extra oil but only if justified by demand. “We cannot put oil in markets that don’t need it,” Saudi Oil Minister Ali al-Naimi has said.

Industry sources said they have not requested increased supply and that demand from China has been constrained by refinery maintenance.

$200 a Barrel Oil? This Man Says, “No Way!”


That’s one man’s verdict on the chance of seeing oil prices top the $200 per barrel mark.

That man is Nansen Saleri, President and CEO of Quantum Reservoir Impact, and former head of reservoir management at Saudi Aramco.

Clinton, Bush to speak at CERAWeek

Former presidents Bill Clinton and George W. Bush will headline a March 11 forum during CERAWeek 2011.

The annual energy insights conference will be held March 7 to 11 at the Hilton Americas – Houston. This year’s theme is “Leading the Way: Energy Strategies for a World of Change.”

Enbridge offers B.C. First Nations additional pipeline benefits

Enbridge Inc. will spend hundreds of millions of dollars on communities affected by its controversial Northern Gateway pipeline, the company said as it provided new details on its efforts to win favour with British Columbia First Nations groups.

In addition to a 10 per cent equity stake, which it has offered to all aboriginal groups along the route of its $5.5-billion line, Enbridge is pledging to pour 1 per cent of pre-tax earnings into a community trust that is expected to receive $100-million over 30 years.

Fox Falsely Suggests Off-Shore Drilling Will Prevent High Gas Prices

The co-hosts of Fox & Friends and their guest, Fox Business host Stuart Varney, falsely suggested that domestic oil drilling could prevent gas prices from rising. In fact, economists and experts, including some in the Bush administration Energy Department, have admitted that offshore drilling would not substantially affect oil prices in the near future.

Book review: "The Tyranny of Oil" by Antonia Juhasz

In the tradition of Ida Tarbell's expose of Rockefeller and his predatory business practices, Juhasz argues that oil companies have once again started to become as big and powerful as Standard Oil was before its breakup. Indeed, culminating in the merger of Exxon and Mobil, many of the former components of Standard have now re-connected, leaving the world with just half a dozen large independent oil companies.

Juhasz also argues that their massive size has enabled the new oil behemoths to become as dangerous to American democracy as the court found Rockefeller's trust to be in 1911, particularly when it comes to squeezing out smaller competitors, strong arming their own retailers and running drilling operations and refineries that are dangerous to workers and to neighboring communities.

European governments enlist “green bonds” to battle climate crisis

Austerity is the new watchword in a Europe that’s encumbered with massive public debt. Governments are now turning to “green” bonds to cover the cost of transitioning Europe to clean sources of energy.

Toward an Efficient Energy Future

The answer does not lie simply in becoming entirely independent (i.e., generating all of the energy needed for the U.S within the U.S.), but rather in changing the way we receive, consume and manage our resources -- and getting the American public to understand the issues.

Corporate control? Not in these communities

The citizens of Mt. Shasta have developed an extraordinary ordinance, set to be voted on in the next special or general election, that would prohibit corporations such as Nestle and Coca-Cola from extracting water from the local aquifer. But this is only the beginning. The ordinance would also ban energy giant PG&E, and any other corporation, from regional cloud seeding, a process that disrupts weather patterns through the use of toxic chemicals such as silver iodide. More generally, it would refuse to recognize corporate personhood, explicitly place the rights of community and local government above the economic interests of multinational corporations, and recognize the rights of nature to exist, flourish, and evolve.

Mt. Shasta is not alone. Rather, it is part of a (so far) quiet municipal movement making its way across the United States in which communities are directly defying corporate rule and affirming the sovereignty of local government.

ANALYSIS - Somali pirates grow bolder, world response lags

(Reuters) - Hijacking oil tankers and using captured merchant vessels with hostage crews as giant motherships, Somali pirates grow bolder by the week, far outpacing a loosely coordinated global response.

Somali pirates seized their second oil tanker in two days on Wednesday, capturing a Greek ship carrying Kuwaiti oil to the United States after taking an Italian oil vessel.

"The piracy situation is now spinning out of control," said Joe Angelo, managing director of industry association INTERTANKO. "If piracy in the Indian Ocean is left unabated, it will strangle... crucial shipping lanes with the potential to severely disrupt oil flows to the US and the rest of the world."

Home heating assistance seen at record high

NEW YORK — High energy prices, high unemployment and a cold winter are prompting a record number of households to seek home heating assistance.

The National Energy Assistance Directors' Association will announce Wednesday that 8.9 million households are expected to qualify for financial help this winter, up from 8.3 million last winter. It's the third year in a row the number of households needing assistance has set a new high.

The chief reason is the economy, according to Mark Wolfe, Executive Director of NEADA. "We have this group who weren't poor before the recession, who are poor now and scrambling for whatever they can get," Wolfe says. "It's a tough situation."

Husky oil upgrader running at about half capacity

CALGARY, Alberta (Reuters) - Husky Energy Inc's Western Canadian heavy oil upgrader is running at 40 percent to 50 percent of capacity as the company makes repairs following a fire last week, a spokesman said on Wednesday.

The 82,000 barrel a day plant is expected to run at those rates until repairs are completed around the end of this month, Husky's Graham White said in am email.

BP plans Thunder Horse work, crude diff rises-trade

(Reuters) - BP Plc plans maintenance in March at its Thunder Horse platform in the Gulf of Mexico, traders said on Wednesday, which has helped to boost the crude's differential THH- in the U.S. cash crude markets.

Saudi oil reserves 'overstated' - WikiLeaks

The United States fears Saudi Arabia may not have enough oil reserves to prevent world prices rising sharply, according to cables from its embassy in Riyadh published on Wednesday. The cables, obtained by WikiLeaks, urge Washington to take heed of a warning from a former Saudi government oil executive that the kingdom's crude oil reserves may have been overstated by as much as 40%.

US diplomats reported that Sadad al-Husseini, the ex-head of exploration at Saudi oil monopoly Aramco, "disagreed" with Aramco's analysis that it had reserves of 716 billion barrels and that would rise to 900 billion barrels in 20 years.

Saudi oil reserves 'exaggerated'

Saudi Arabia may have overstated its crude reserves by as much as 40%, prompting US fears that the Middle East powerhouse may not have sufficient spare production capacity to keep the lid on soaring oil prices, according to confidential cables released by whistleblower website Wikileaks.

Bombs kill 7 in ethnically tense Iraqi city

SULAIMANIYAH, Iraq — A suicide bomber posing as a dairy deliveryman struck a Kurdish security headquarters Wednesday, setting off a series of rapid-fire attacks against the oil-rich Iraqi city of Kirkuk that killed seven and wounded up to 80 people.

Within minutes, two more bombs exploded nearby, sending dark plumes of smoke into the clear winter sky and ending a six-month lull in violence in a city rife with simmering ethnic tensions located 180 miles (290 kilometers) north of Baghdad.

Mystery Over Detained American Angers Pakistan

LAHORE, Pakistan — The case of Raymond A. Davis, a former United States Special Forces soldier who is being held in connection with the deaths of two Pakistanis, has stirred a diplomatic furor, sending the precarious relationship between the United States and Pakistan to a new low, both sides say.

Mr. Davis, 36, was driving in dense traffic in this city on Jan. 27 when, he later told the police, two Pakistani men on a motorcycle tried to rob him. He shot and killed both and was arrested immediately afterward by police officers who say he was carrying a Glock handgun, a flashlight that attached to a headband and a pocket telescope.

Iran prosecutor warns against opposition rally

TEHRAN, Iran — Iran's state prosecutor on Wednesday said the opposition should not stage its own rally in support of Egyptian protesters, warning of repercussions if it does so.

Riches, Fear Ensure Central Asia Stability

ALMATY, Kazakhstan — Central Asia’s authoritarian leaders, having crushed dissent during decades in power, are likely to use a mixture of oil and gas revenues, repression and cosmetic reforms to meet any threat of Egyptian-style protests.

Few in the strategic region, which covers an area twice the size of Saudi Arabia, expect their entrenched and aging leaders to succumb to the wave of public anger sweeping parts of the Arab world.

Russia's Putin wants independent gas producers to get access to pipelines

Russian Prime Minister Vladimir Putin on Wednesday ordered the government and the country's gas giant Gazprom to work on allowing access to pipelines for independent producers.

"I am asking the Energy Ministry and Gazprom to work on possible priority access to pipeline facilities for all independent producers," Putin told a government meeting on the development of the energy industry, adding that the decision must be taken quickly.

Russia's Medvedev speaks tough on disputed islands

MOSCOW — Two days ago, Japan demanded once again that Russia return several islands it has held since the end of World War II.

On Wednesday, Russian President Dmitry Medvedev made it clear he won't do that. In fact, he said Russia will send more weapons to the disputed islands to keep them secure.

Shell Discusses Asset Swap for LNG Role

Royal Dutch Shell may offer Gazprom assets in Asia in exchange for a deal to expand Russia's only liquefied gas export plant, part of talks on a wider global alliance.

Shell wants to add a third liquefied natural gas production unit at the $22 billion Sakhalin-2 venture north of Japan, raising output 50 percent.

Gazprom could reach pre-crisis gas production levels by end of year

Gazprom could reach the pre-financial crisis levels of gas production by the yearend, the Russian energy giant's CEO, Alexei Miller, said Tuesday.

In the pre-crisis year 2008, Gazprom produced 549.7 billion cu m of natural gas. In 2010, Gazprom produced 508.6 bcm, or 10% more than in 2009.

Teeny Janitors Attack Gulf Spill, Then Vanish

There are ocean bacteria called "methanotrophs." They hang around, usually in smallish numbers, but because they love chewing on methane, when the accident happened Kessler figures they got their chance to be fruitful and multiply — and multiply they did.

The Splendor of Cities

This is a point Edward Glaeser fleshes out in his terrific new book, “Triumph of the City.” Glaeser points out that far from withering in the age of instant global information flows, cities have only become more important.

That’s because humans communicate best when they are physically brought together. Two University of Michigan researchers brought groups of people together face to face and asked them to play a difficult cooperation game. Then they organized other groups and had them communicate electronically. The face-to-face groups thrived. The electronic groups fractured and struggled.

Visionary alternatives to boost food security

For the time being, fossil fuels are considered our most essential natural resource. But the long-term picture for demand and value of oil looks suspect. The use of energy alternatives will ultimately drive down what now seems like unabated interest in this commodity. Alternative sources will progressively serve a larger share of the market. From minuscule beginnings, exponential growth will eventually overwhelm the marketplace with alternative sources of energy.

Farmland will prove to be of greater long-term strategic value than oil and gas. The importance of this commodity gains increasing recognition with each passing day. Euromoney magazine went so far in December 2008 as to title an article "Agriculture: Farmland is the New Gold".

Jeff Rubin - Food: What’s really behind the unrest in Egypt

It’s more than coincidence the Arab world is convulsing with social unrest just as the United Nations Food and Agricultural Organization’s widely watched price index recently soared past the previous food price peak set in the summer of 2008. After all, didn’t those same prices ignite food riots throughout the world only three summers ago?

When 40% of your population lives on less than $2 per day, soaring food prices isn’t about cutting back on luxury spending. This is particularly telling when record prices include basic grains such as wheat, of which Egypt is the world’s largest importer.

Dignity, Bread and Liberty; the start of peak food revolutions

Prices in Egypt are up 17 percent because of a worldwide surge in commodity prices that has many factors, but speculation on Wall Street and big banks is a key one. The European Commission yesterday published a new version of a report on commodities, which acknowledged a link between speculation and price increases. A previous version of this report argued that there was no evidence of such link, but this clashed with Sarkozy's agenda for the G20. Hence, Michael Barnier redrafted the report.

Egypt, Inkblots, Agendas and Feeding 9 Billion

For many reasons going forward, building an energy menu that reduces, rather than exacerbates, environmental and geopolitical risks is about as close to a no brainer as anything can get these days.

And population absolutely matters. Condoms are indeed a green technology. But whatever happens with population policy (or climate and energy policy or Middle East policy), it’s clear the world would do well to end its protracted slumber party on agricultural research and development, which bears far too much resemblance to the longstanding bipartisan inattention to the need for intensified energy inquiry.

Armageddon time again, already?

Apocalypse, again? It seems like just yesterday that a broad-based commodity price spike set off food riots across the world and spawned innumerable disaster scenarios. The global economic recession punctured that bubble and inflation more or less vanished in the developed world. But suddenly, here we are again, only with destabilizing climate change and outright revolution added directly to the mix.

Drilling technology sparks new oil boom

Gary Williams recalls the last time the oil industry showed up in his tiny town of Waskada, Man. Crews punched holes in the prairie ground, then disappeared as suddenly as they arrived when those holes came up empty.

But that was 30 years ago. This time, it’s different. Armed with new drilling technology and eager to reap the rewards of oil’s high prices, companies are tapping complex geological formations, and the crude is flowing, adding Manitoba to Canada’s list of significant oil-producing provinces.

...The oil-drilling boom promises what one company executive calls a “quiet revolution” in the industry. It could reduce the U.S. appetite for imported oil – including, potentially, from the oil sands. And the technological breakthrough could put the brakes on future price increases by bringing new, relatively low-cost supplies to the market – not just in North America but around the world.

Oil Rises From Lowest in Eight Days Before U.S. Supply Report

Oil rose in New York from the lowest in eight days on speculation that the U.S. Energy Department will report a smaller increase in the country’s crude supplies than originally forecast.

Futures advanced as much as 0.8 percent after the American Petroleum Institute said yesterday inventories fell 558,000 barrels to 346 million barrels last week. The Energy Department will publish its numbers today. Before the release of the API data, analysts surveyed by Bloomberg News predicted the department will show supplies in the world’s biggest consumer of the commodity climbed 2 million barrels.

Qatar Blames Regional Unrest For Oil Price

Global energy markets appear to be reacting to the political unrest unfolding in Egypt and elsewhere in the Middle East, the Qatari oil minister said.

Qatari Oil Minister Mohammed al-Sada said oil markets were reacting to unrest in the Middle East by pushing the price of crude oil to more than $100 per barrel on some markets for the first time since the global recession hit in 2008.

Money for nothing

After demand crashed in 2008 and 2009, oil-producing countries were quick to decrease extraction and supply. They are yet to ramp up production. Although they promised to do so on January 24, which should moderate international crude prices, beyond a certain level, supply adjustments to demand become difficult. On the back of sustained demand, there is a peak level of production possible. This is called the 'peak oil' theory. Until then, prices rise. Only after the peak is reached does the price rise trigger a fall in consumption to the level of available supply.

Global Crude Oil Prices: Three Critical Issues to Watch

The global economy is highly sensitive to the supply of crude oil, at present the dominant form of energy used to power the gamut of domestic and industrial processes around the world. The current unrest in Egypt raised some degree of concern in major markets and sent Brent prices above the U.S. $100 per barrel mark for the first time since 2008. In 2009, a correlation was seen between global crude oil prices and attacks on oil and gas installations in Nigeria’s Niger Delta region. With the bitter aftertaste of the last economic crises still lingering, some analysts fear that spiraling crude oil prices may reverse the current – even if sluggish – global economic recovery.

WikiLeaks: Saudi Oil May Have Peaked Already

This won't come as a surprise to anyone who's been following the oil industry over the past few years. Matthew Simmons' Twilight in the Desert, which I reviewed six years ago, made a detailed case that Saudi Arabia's production capacity had pretty much maxed out already, and Business Week published an article three years ago based on internal Saudi documents that said much the same: the Saudis could pump 12 million barrels a day in short spurts but only 10 million barrels on a steady basis — and that's all there is. Production capacity just isn't going up.

Energy: OPEC and peak oil

As the oil price hit $100 a barrel, OPEC declared that it has spared capacity and the Guardian published a cable via WikiLeaks showing that peak Saudi oil is near.

Saudi oil reserves may be overstated by up to 40%, US cables reveal

LONDON: The US fears that Saudi Arabia, the world's largest crude oil exporter, may not have enough reserves to prevent oil prices escalating, confidential cables from its embassy in Riyadh show.

Saudi Oil Reserves and the WikiLeaks Chinese Whispers Effect

At first glance it looked like a story to shake the world: the WikiLeaks cable suggesting Saudi Arabia’s oil reserves -– the most bountiful on the planet -– may have been overstated by 40%.

It opened the door to a future in which oil would be depleted far more quickly than anybody believed -– raising the threat of sky-high prices and cut-throat competition for scarce resources.

But a conversation this morning with the man whose comments set off the furore, revealed a Chinese-whispers chain that ended up giving the apparent imprimatur of the U.S. diplomatic service to a misunderstanding over oil figures.

Wikileaks proves fears of oil crisis

The cables released by Wikileaks prove the fears of the US that the oil reserves of Saudi Arabia - the world’s largest oil exporter, are seriously overstated. It means that Saudi Arabia cannot deliver enough oil to prevent prices escalating. According to a number of experts the situation may present a serious threat for the global economy.

Crisis and the gas pump

Never underestimate Americans’ capacity for denial. The upheaval in Egypt reminds us of lessons that, despite decades of warnings, we have consistently sidestepped: the United States and the rest of the world will depend on oil for the indefinite future, global oil markets remain hostage to political crises that cannot be predicted or controlled, and we have not taken the prudent steps that would reduce — though not eliminate — our vulnerability to catastrophic 
oil interruptions.

Putin pressures Russian oils to pump, hold prices

ST PETERSBURG, Russia Feb 9 (Reuters) - Russian Prime Minister Vladimir Putin said the world's top oil producer must pump at 2010's post-Soviet peak level, but issued a stern warning on fuel prices and vowed more oversight of the oil trade.

Big Oil Bangs the Drum for Natural Gas

Oil prices may have stormed back into the headlines by crossing the ominous $100 a barrel threshold in recent weeks. But while this has happening the world’s largest oil and gas companies have been banging the drum for an altogether less newsworthy fuel–natural gas.

ExxonMobil, Royal Dutch Shell and now BG Group have been arguing that significant changes are afoot in the unglamorous world of natural gas that could have a big impact on patterns of energy consumption, carbon dioxide emissions and the balance of power in volatile energy markets.

Indonesia's first LNG receiving terminal to be delayed to 2012

(Reuters) - Indonesia's first liquefied natural gas receiving terminal near the capital Jakarta will begin operating in the first quarter next year, a delay from an expected September 2011 start, said chief economic minister Hatta Rajasa on Wednesday.

Russia Set to Boost Helium Production as U.S. Sells Stockpile

Russia, already the largest producer of crude oil and natural gas, is weighing up plans to become the biggest supplier of helium, the inert gas vital for medical scanners, welding tools and rocket fuel, as the U.S. sells reserves from storage.

Russia’s remote, undeveloped gas fields in eastern Siberia, are helium rich and could hold a third of the world’s remaining resources, said Vadim Udut, head of OAO Geliymash, a Moscow- based helium research company that advises gas-export monopoly OAO Gazprom. The country may build storage caverns, he said.

El Paso warns of cold weather effect on pipeline

A substantial amount of natural gas production is still offline.

Total U.S. marketed gas production was off about 6 percent on Monday, down from around 9 percent last Friday, said Matt Marshall, senior energy analyst with Bentek Energy in Evergreen, Colorado.

Iran finds way round petrol sanctions

In spite of stiffer sanctions, Tehran is finding gasoline on the open market, analysts say. It has diverted production from some of its petrochemical plants and, working through intermediaries, is paying a premium to Chinese and smaller international trading companies outside the reach of the US.

“Do the Iranians have enough gasoline to cope? They really do, they’re OK. They saw this coming a long time ago,” says Jamie Webster of PFC Energy, an energy consulting firm.

Pirates seize Greek tanker off coast of Oman

ATHENS, Greece – Pirates seized a Greek-flagged supertanker with 25 crew members off the coast of Oman on Wednesday, Greece's Merchant Marine Ministry said.

The Irene SL was sailing 200 nautical miles (360 kilometers) east of Oman with a cargo of 266,000 tons of crude oil and a crew of seven Greeks, 17 Filipinos and one Georgian when it was attacked, the ministry said. It earlier mistakenly identified one of the crew as Ukrainian.

Norwegian house ratifies Arctic border agreement with Russia

The Norwegian parliament on Tuesday ratified an accord reached with Russia on demarcating the two countries' maritime border in the Barents Sea, removing another hurdle to tapping suspected vast oil and gas reserves in the Arctic region.

S. Sudan prepares to be world's newest country

JUBA, Sudan — The mud-hut town of Juba has earned a promotion to world capital later this year. Only Southern Sudan needs far more than its own currency and a national anthem: Most of the roads here are dirt and even aid workers live in shipping containers.

...Juba is oil-rich but lacks the embassies and skyscrapers of other world capitals. There was only a mile or two of pavement here just a year ago, and the local archives are stored in a tent. Many, though, see great potential, and are excitedly looking forward to controlling their own destiny.

Suleiman Says Egypt Talks Are Alternative to `Chaos'

Egyptian Vice President Omar Suleiman said the dialogue he has opened with opposition movements is the only alternative to the “chaos” of regime change, as protests to demand a faster transition regained momentum.

BLM sued -- again -- over Montana oil and gas leases

Environmental groups have sued the Bureau of Land Management for not giving enough consideration to greenhouse gas emissions during the sale of oil and gas leases at sites scattered across Montana.

U.S. EPA releases draft plan for fracking study

WASHINGTON (Reuters) – U.S. environmental regulators issued a draft plan on Tuesday outlining how they will determine whether a technique for drilling natural gas harms supplies of drinking water.

Congress commissioned the Environmental Protection Agency to study hydraulic fracturing, or "fracking", after complaints that the process pollutes water. The EPA is slated to make public initial results of the study by the end of next year.

Buffalo, NY bans hydraulic fracturing

NEW YORK (Reuters) – The city of Buffalo, New York, banned the natural gas drilling technique of hydraulic fracturing on Tuesday, a largely symbolic vote that demonstrates concern about potential harm to groundwater from mining an abundant energy source.

The city council voted 9-0 to prohibit natural gas extraction including the process known as "fracking" in which chemicals, sand and water are blasted deep into the earth to fracture shale formations and allow gas to escape.

The ordinance also bans storing, transferring, treating or disposing of fracking waste within the city.

Tar sands are a blot on Canadian politics – as well as the landscape

The money to be made from Canada's tar sands has blinded its government to the risks to water, climate and the biosphere

Peak Oil

Optimistic estimations of peak production forecast the global decline will begin by 2020 or later, and assume major investments in alternatives will occur before a crisis, without requiring major changes in the lifestyle of heavily oil-consuming nations. These models show the price of oil at first escalating and then retreating as other types of fuel and energy sources are used.

Pessimistic predictions of future oil production operate on the thesis that either the peak has already occurred, or that peak oil production is imminent. The International Energy Agency (IEA) has theorized production of conventional crude oil may have peaked in 2006.

Fiat Currencies Are Worthless

The Energy Report: You've said you're bullish on uranium. Could you tell me your investment thesis there?

Kevin Bambrough: The investment thesis on uranium really stems first from the fact that I'm a believer in peak oil. The major oil discoveries were made in the 1960s and 1970s, and the world's major oil fields on most continents have already peaked in terms of production. Now, the discoveries are getting smaller and those that get headlines from time to time are really irrelevant compared to the scale of global consumption. We still get something like 50% of our energy from oil. That statistic?and the fact that the U.S. is a massive importer of oil and runs a substantial trade deficit - has led me to the view that energy prices in the U.S. will go up dramatically. Also, in looking at the cost of coal production, we don't properly account for the environmental costs. I don't think we've begun to come close to accounting for greenhouse gases or general pollution.

Deepwater Spill Was Just a Global Warming Fraud Excuse

The Obama Administration is exploiting the oil spill as an excuse to shut down domestic oil production, something the Hard Left has sought for decades.

That 70’s Show: Why Do We Want to Relive the Oil Crisis? (Rep. Dan Burton, R-IN)

Nothing has happened yet in Egypt to cut down on the availability of oil from the Middle East. Yet the mere increase in the risk of that happening has sent oil to $100 a barrel. If the situation in the region should escalate or spiral out of control and disrupt oil shipments through the Straits of Hormuz, the Suez Canal or both – even for a short time – the consequences for our economy and our national security would be devastating.

One on One: Jane McGonigal, Game Designer

Were you able to build such a game?
Yes. I created World Without Oil, which was a six-week simulation of a peak-oil scenario, where demand outstrips supply of oil. Players signed up for six weeks and were asked to imagine living in a world without oil and document the experience. We were able to convince 1,700 people to do that, and they created thousands of videos and blog posts explaining how they were playing the game and coming up with creative solutions to the problem.

How did that move into the real world?
When we had the real gas crisis in the United States a year later, the people who had played the game were able to implement their oil-saving techniques that they had learned from the game. We reached out to some of these people and found out that they had a strategy in place and coped better than their neighbors.

Fate of the World: New Environmental Computer Game

Oil Crisis: Mankind stands at the brink of two disasters: the specter of Peak Oil alongside that of climate change. Can you transition society from oil-dependency to a sustainable energy solution without causing major energy shortages or destroying the environment?

Some consumers resist 'green' light bulbs

Faced with a U.S. phaseout of incandescent light bulbs starting next year, some consumers are taking pre-emptive steps: They're stockpiling the bulbs.

UAE's nuclear power programme on track

ABU DHABI // The capital's nuclear programme is progressing well but must now begin to pay greater attention to areas surrounding nuclear fuel supply and disposal, and protection of facilities, said a review board set up by the emirate's Government.

Feds fast-track mid-Atlantic offshore wind energy

NORFOLK, Va. (AP) -- The government could issue leases for four new East Coast wind farms by year's end as part of a streamlined approval process designed to quickly identify the nation's most promising areas for offshore wind energy, the U.S. Department of the Interior said Monday.

Govt: voluntary rules for wind farm bird impacts

WASHINGTON – The Fish and Wildlife Service Tuesday proposed voluntary guidelines for onshore wind energy developers to avoid bird deaths and other harm to wildlife as part of the Obama administration's big push for renewable and clean energy.

Bird advocates who had lobbied for mandatory standards warned that the new guidelines would do nothing to stem bird deaths as wind power builds up across the country.

Vestas Sales Forecast Beats Estimate, Share Expands

Vestas Wind Systems A/S, the world’s largest wind-turbine maker, forecast sales will increase to a record this year after it gained market share in 2010.

We still don’t know when wind power will break even, admits energy minister

Ministers still do not know when wind power will pay for itself, the Government admitted tonight.

Energy Minister Charles Hendry told MPs governments had spent £2.2 billion supporting wind power over eight years - and it was impossible to predict when the energy source would prove profitable without grants.

Solar energy firms threaten legal action over feed-in tariffs

Solar energy firms are threatening to take legal action against the government after ministers said they could stop large-scale commercial "solar farms" from hoovering up a green electricity subsidy.

City Is Looking at Sewage Treatment as a Source of Energy

New York City’s sewage presents a daunting and costly challenge: it creates foul odors and often contaminates waterways.

But the city is now casting its sewage treatment plants and the vast amounts of sludge, methane gas and other byproducts of the wastewater produced by New Yorkers, as an asset — specifically, as potential sources of renewable energy.

Sustainable Food Policy Is More Than Chickens And Goats

“Colorado provides less than 1 percent of the food consumed in the Denver metro area,” said Katherine Cornwell. “That makes us very food insecure, were anything to disrupt the food delivery system.” Cornwell is Denver’s Healthy Eating Active Living program manager, under the auspices of the Department of Environmental Health. She is also a member of Denver’s newly formed Sustainable Food Policy Council (SFPC).

A "Life-Sized Lego Set" for Creating Self Sustaining Towns

The farmer-engineers of Open Source Ecology are bringing high-tech savvy to the age-old pastoral dream. Their Global Village Construction Set project is an ongoing sustainable design experiment that aims to develop plans for the forty machines necessary to build "a self-sufficient modern life from low-grade, abundant local resources." Things like a compressed-earth brick-making machine and a self-propelled tractor (which looks a bit like the Batmobile repurposed for plowing).

Obama's Big, Bold Bet on High-Speed Rail

Six weeks ago, I warned that President Obama's much maligned high-speed-rail program was becoming a " high-stakes gamble."

Well, the President just went all in.

India resists efforts to ban pesticide

India is the world's largest producer, exporter and user of the low-cost pesticide, which farmers across the rest of the country continue to use on tea, cotton, rice and other crops. Officials say a ban would jeopardize the country's food security at a time of rising demand and leave millions of farmers without an affordable alternative.

When The Water Ends: Africa’s Climate Conflicts

As temperatures rise and water supplies dry up, semi-nomadic tribes along the Kenyan-Ethiopian border increasingly are coming into conflict with each other. When the Water Ends focuses on how worsening drought will pit groups and nations against one another.

Global warming fix heats up hearing with EPA chief

WASHINGTON — The head of the Environmental Protection Agency is in for some grilling by Congress this year, so much so that a top House Republican joked that she should line up a permanent parking spot at the Capitol.

Proof Obama is not caving on regulation: The EPA

While Republicans scream bloody murder, the Obama administration is moving to limit greenhouse gas emissions.

Keep Courts Out of Climate Policy, G.O.P. Lawmakers Say

A petition from three Republican lawmakers is novel: all three lawmakers have expressed skepticism about the reality of human-caused global warming, yet in their brief they say that the political system, not the courts, should deal with the problem.

EU Climate Chief Says More National Carbon Registries Will Open This Week

The European Union will allow more national carbon registries to reopen this week and is looking at ways to stop “crimes against the system” after hackers roiled the market, EU Climate Commissioner Connie Hedegaard said.

Scottish and Southern gets ready to store carbon in North Sea

The proposed project will design and develop a full chain, post-combustion CCS facility which will be capable of capturing the CO2 from one 385 MW combined cycle gas turbine unit at Peterhead Power Station. Current plans are that the CO2 will then be transported via an existing underground pipeline to St Fergus for further compression and then transported via an undersea pipeline to an existing gas reservoir in the North Sea operated by Shell U.K. Limited that will have ceased production.

The rising oceans

Today there are more than 140 million people and a trillion dollars in infrastructure in the first one metre above high tide level around the world.

Engineers urge government to act now to 'climate-proof' UK infrastructure

Extreme weather events such as floods, droughts, heatwaves and more intense storms are expected to become more common as the world warms. This means vital infrastructure – including transport, sewage and water treatment, and electricity and communications networks – is vulnerable to severe damage. But the UK is unprepared for these effects, according to the leading professional bodies for engineers.

Re: Pirates seize Greek tanker off coast of Oman

That tanker was headed for the Gulf of Mexico, i.e., the US. The cargo is 266,000 tons of crude oil or 1.95 million bbls, which one might say has just been placed in "floating storage". That's a lot of oil to be removed from future US storage volume. If the price of delivered crude increases by $1 a bbl while the ship is "delayed", the cargo will be worth another $1.95 million. One might even think of a situation where the capture would allow the owner of the oil to declare "Force Majeure" and break what ever contract may exist, then send the cargo to the Brent market or to China for still more money...

E. Swanson

Meh, its only a tanker load - they spill that much up in Alaska when drunk.

No worries.

Summary of Weekly Petroleum Data for the Week Ending February 4, 2011

U.S. crude oil refinery inputs averaged 14.3 million barrels per day during the week ending February 4, 42 thousand barrels per day above the previous week’s average. Refineries operated at 84.7 percent of their operable capacity last week. Gasoline production increased last week, averaging 9.1 million barrels per day. Distillate fuel production increased last week, averaging 4.3 million barrels per day.

U.S. crude oil imports averaged 8.9 million barrels per day last week, down by 105 thousand barrels per day from the previous week. Over the last four weeks, crude oil imports have averaged 9.1 million barrels per day, 783 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 1.0 million barrels per day. Distillate fuel imports averaged 296 thousand barrels per day last week.

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 1.9 million barrels from the previous week. At 345.1 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 4.7 million barrels last week and are above the upper limit of the average range. Both finished gasoline inventories and blending components inventories increased last week. Distillate fuel inventories increased by 0.3 million barrels and are above the upper limit of the average range for this time of year. Propane/propylene inventories decreased by 3.1 million barrels last week and are below the lower limit of the average range. Total commercial petroleum inventories increased by 3.2 million barrels last week.

I see the EIA has completely redesigned the website and I can't find anything on it now!

Oh well with the aid of old bookmarks which still work I did find

Crude Adjustment = + 1 million barrels
Product Adjustment = 2.7 million barrels
Total Petroleum Adjustment = + 3.7 million barrels.

This is getting ridiculous. Perhaps Gail could contact the EIA and ask if they have an explanation for the huge amounts of petroleum turning up from apparently nowhere every week without fail.

Maybe the EIA is following the Fed's lead, and just as the Fed creates dollars with a few keystrokes, the EIA is creating barrels of oil.

The EIA weekly inventory report is being increasing distorted by what now are regular weekly ‘adjustments’ upwards in both oil inventories and product inventories. For example, almost 3 million barrels of products, apparently gasoline, were added to this week’s report – making it appear that there was a rather huge one week buildup. Similar adjustments have occurred in recent weeks. Please note that I have been following these weekly reports very carefully for 8 years and I have never seen such a systemic upward bias in ‘adjustments’ that we have seen in the last two months. It’s not yet clear how or why these adjustments are being made – perhaps someone can contact the EIA about this?

The increase in gasoline inventories may also be related to the closure of a refinery in the Caribbean; remaining extra supplies stored there may have been transferred to the US. Something similar to that actually happened a few years ago with another Caribbean refinery.

Getting back to the real world, based upon daily shipping reports, OPEC countries in the Persian Gulf region are not – repeat NOT – increasing oil shipments in February as was widely expected per media reports about two weeks ago. You may remember that those widely touted reports indicated that Saudi Arabia was planning to increase shipments by about 2% in February. Granted Mideast shippers appeared to have planned to hire about 2% more tankers in February, but lately actual shipments have appeared to have fallen below January’s level. My guess is that this occurred due to uncertainty about shipments through the Suez Canal, not to mention increased piracy.

On the other hand, shipments out of the Mediterranean and Black Sea are have increased in February, so it is still possible that OPEC may actually see an improvement in overall exports in February vs. January. That is also what oil tanker tracker, Oil Movements, said last week – at least concerning the first half of February.

In regards to the hijacked tanker today in the Gulf of Oman headed for the US, new readers to the TOD may not realize that overall shipments from the UAE (where the tanker sailed from) and KSA have been reduced considerably in recent years. Therefore the delay of 2 million barrels by the hijackers is significant.

I have never seen such a systemic upward bias in ‘adjustments’ that we have seen in the last two months. It’s not yet clear how or why these adjustments are being made

It may not be clear but do you have any theories?

So far, I have been unable to find anything that addresses this relatively recent reporting bias - but I'll keep looking. I am not the only one thinking the EIA figures are somewhat off: some oil traders are becoming skeptical that there is really as much gasoline around as the EIA says - see the link below.

Curiously, possibly as a delayed effect of the Alaskan pipeline shutdown, gasoline inventories along the West Coast are apparently in short supply - leading to a spike in wholesale prices there:

HOUSTON | Wed Feb 9, 2011 2:30pm EST

HOUSTON Feb 9 (Reuters) - Los Angeles wholesale gasoline jumped 4.5 cents on Wednesday after the U.S. Energy Information Administration reported a 907,000-barrel draw on West Coast gasoline inventory last week.

Unleaded ethanol-blend CARBOB gasoline for February delivery finished at a 17-cent-per-gallon premium to NYMEX March RBOB gasoline, traders said. Gasoline in Los Angeles
finished at 12.5 cents over March NYMEX on Monday


Is there a chance the government is pulling supplies from the SPR and calling them "adjustments"? This would create a downward bias on prices as supplies would appear to be coming from thin air.

Just a thought.

Withdrawals from the SPR are supposed to be announced. Though they haven't updated the inventory page since November. That's unusual, but I would guess it's related to the changes they've been making in their web pages in general.

As I understand it, the weekly inventory report is compiled by calling around, asking how much oil people have, then applying a statistical correction to come up with a total from a relatively small sample size. Four times a year, they do a more detailed survey, and there's often a big adjustment then. Traders also take it more seriously, because those quarterly reports are considered more accurate. In any case, there's a lot of room for "adjustments" without actually having to add physical oil. Also, they changed the way they sample last year, so perhaps they're still adjusting the new system.

I don't think it would be possible for the government to pull supplies from the SPR without it being known and reported. How would they do that? You can't drop oil from helicopters. ;-) They don't really withdraw oil from the SPR; instead, they announced that oil is available, and oil companies who want to borrow oil are allowed to. They repay it in kind later.

I don't think it would be possible for the government to pull supplies from the SPR without it being known and reported. How would they do that? You can't drop oil from helicopters. ;-) They don't really withdraw oil from the SPR; instead, they announced that oil is available, and oil companies who want to borrow oil are allowed to.

And if any oil of the needed grade being moved by pipeline from one SPR location to another for "operational reasons" actually ended up being mixed with similar grade produced crude and "borrowed" by say, BP, would we know? Although I'd have to assume that refinery chemists etc would have some idea that they were refining crude which had passed through the SPR.

I doubt you'd be able to do this secretly on a large scale but it seems to me it should be possible to think up a procedure for a controlled low level release without too much attention - give the quantity of genuine oil moving through the US.

That said the official story could well be true and the SPR is untouched but given the desperate attempts to keep BAU afloat, it would seem unlikely that clandestine SPR draws at calculated times wouldn't at least be thought about.

I don't think they move oil between SPR storage sites for "operational reasons." The sites were chosen because they were near refineries, and the pipelines connect to their local refinery, not to each other.

Even transfers between caverns within the same general SPR geographical location will require transfer via pipeline systems that interlink with these pipelines to refineries. Still without more details of the SPR pipelines I obviously don't know how practical "quiet" releases to compliant refiners would be.

Here's the current locations from Wikipedia



Bryan Mound - Freeport, Texas. 20 caverns with a storage capacity of 254 million barrels (40,400,000 m3) with a drawdown capacity of 1.5 million barrels (240,000 m3) per day.[4][5].

Big Hill - Winnie, Texas. Has a capacity of 160 million barrels (25,000,000 m3) with a drawdown capacity of 1.1 million barrels (170,000 m3) per day. This facility is planned to be expand by 250 million barrels (40,000,000 m3) with a new drawdown capacity of 1.5 million barrels (240,000 m3) per day.[5]

West Hackberry - Lake Charles, Louisiana. Has a capacity of 227 million barrels (36,100,000 m3) with a drawdown capacity of 1.3 million barrels (210,000 m3) per day.[5]

Bayou Choctaw - Baton Rouge, Louisiana. Has a capacity of 76 million barrels (12,100,000 m3) with a maximum drawdown rate of 550,000 barrels (87,000 m3). This facility is planned to be expand to 109 million barrels (17,300,000 m3) with a new drawdown capacity of 600,000 barrels (95,000 m3) per day.[5]

tow - The SPR facilities are operated by civilian contractors. Many of these contractors sit in ice houses on weekends drinking beer. There is no potential for "secret tanstfers" out of SPR site IMHO. There never have been, nor ever will be IMHO, secrets about field ops in the oil patch. The only question is how long will it take for the info to become widespread.

The only question is how long will it take for the info to become widespread.

I did say "quiet" though and "without too much attention" not really totally secret. Let us know if you hear any whispers then. Well other than nonsense speculation on TOD of course :-)

OK tow. I don't hang out in the ice houses anymore but I make some calls. But if there has been any big movements out of the SPR's I'm pretty sure we would have read about it in the Houston Chronical by now.

Even transfers between caverns within the same general SPR geographical location will require transfer via pipeline systems that interlink with these pipelines to refineries.

Are you sure? It was my understanding that they had their own pipelines for that, separate from the ones connecting to the refineries or the interstate pipelines.

"An intricate pipeline system connects the storage caverns at the Strategic Petroleum Reserve site on Bryan Mound."

Yes but by definition these internal pipelines must interlink ultimately with both incoming and outgoing crude piplelines or they could never get anything in and out in the first place :)

I also assume every section of every pipeline must be in use from time to time even if only for test runs to maintain certified operational status and other housekeeping reasons.

Yes but by definition these internal pipelines must interlink ultimately with both incoming and outgoing crude piplelines or they could never get anything in and out in the first place

But that's a very different story from having to use the outgoing pipelines to move oil from one cavern to another. It's like saying you have to use the Interstate highway to move something from one room in your house to another.

My point is simply that there could be a plausible reason for most staff operating internal pipelines for intra-SPR storage to see nothing particularly unusual about the initial transfer from a particular cavern, Of course more senior level management would be well aware they were routing crude elsewhere. It would just be a matter of finding plausible cover for the initial transfers that hide the true destination from as many as possible. Once you are into major pipelines I guess you are just a batch like any other on its way to a purchaser somewhere and unlikely to stand out. But I am only imagining here how I might attempt to do it. Not saying it is happening.

Theory: The current administration cannot tell the truth about PO, real reserves, the various cornucopian myths about oil, and that coal is not clean. Just as they cannot tell the truth about real inflation rates, real unemployment rates or real debt. If they did, there would be widespread panic, and the entire fabric of society would unravel.

Just as WSJ spins their economic story to benefit business, Congress and POTUS spin the economic and geophysical realities to do what they think necessary to hold everything together for a while. It is not intended as an evil thing... it is just what they do.

Remember the story of the Frog and the Scorpion.


Hi z,

re: "If they did, there would be widespread panic, and the entire fabric of society would unravel."

Or, at least, that's what they tell themselves.

In the first place, people would have to understand and accept it. One can tell the truth, but it doesn't mean people can hear it.

Second up, they don't have to be the ones to tell.

They can simply call for an immediate, scientific investigation, with an emphasis on how to deal with the impacts. www.oildepletion.wordpress.com

They can install a panel, which can continue to give advice as the crises unfolds. They can establish a clearinghouse for "best ways to cope." People are already doing this as self-organized groups. However, municipalities and state governments have no objective body to turn to for guidance. Example: cut out the airport expansions, promote bicycles. Take a look at infrastructure and how to maintain water and sewage. Is it possible for a region to do this? etc.

re: "evil." Well, to know the truth and to say something that deliberately obscures the truth...

A lot of suffering could possibly be prevented.

Remember the story of the Frog and the Scorpion.

So which is which in your story about POTUS, Congress, WSJ and the people?

Which is the frog in the warming water and which is the scorpion riding his back?

[ i.mage.+]

Actually there are many scorpions... POTUS, Congress and WSJ. The people are the collective frog, waiting to be stung as the water temp rises.

Another apt analogy might be, we the people are mushrooms that they, POTUS, Congress, WSJ et.al. keep in the dark, where they feed us manure. And, when our heads pop up, they cut them off.


We're basically living a lie and the truth could collapse the entire system. From the highest echelons to the lowest, telling the truth is seen as a sure way to lose everything they have. A kind of self-immolation.

We may not believe our own propaganda as such, but we dare not question it, otherwise we may be held responsible for what ensues. The "truth" is the Sword of Damocles which hangs over our civilisation and why so much time is spent burying it under a mountain of lies (eg. statistics).

And it all started, or at least went exponential after THE BIG LIE.


We're basically living a lie and the truth could collapse the entire system.

And therein lies hope.

Hi Burgundy,

re: "We're basically living a lie and the truth could collapse the entire system."

To expand my argument to the contrary:

1) The system will collapse without the truth. Agreed? Or, No?

Whether "the truth" collapses the system falls under the realm of probabilities.

It's not necessarily the case.

2) Also, some people already tell the truth. Or, as much of it as they can manage. (And we do see some strange combinations, as well, mix of truth and apparent departures from same.)

3) Thanks to "the truth" and people's hunger for it, humanity has learned a whole lot, including the things that we can document that point to the exact predicament we're in - the "global problematique."

4) These things that humanity has learned *could* in fact point the way towards a path and multitude of paths to cope.

Just ask Ron Darwinian. (Even he will say...) What is technically and technologically feasible is a better outcome. It's something else about humanity - the things many have written about (me, too, w. my own particular slant) - human psychology and cultures and sub-cultures (me writing about the oppression of females generally, as an example), the way humans organize themselves (or not) - this is at once "the issue" and the very place there lies potential for the better, less probable (I admit), outcome.

This is my argument that it's better to tell the truth.

It must be that human “ingenuity”, you know that stuff that’s going to save us all, finally showing up!

Brent finished at $99.82 today according to upstreamonline.com. The spread between 2/3 of the oil exported in the world and WTI is too large. The continuing adjustments by Washington plus their interpretation of inflation, plus reaching the National debt ceiling of $14.3 trillion in 23 days shows the power of Wall Street and Washington. But the day of reckoning is sooner than rather than later IMO.

See Brent Futures Front Month at https://www.theice.com/homepage.jhtml

Now at $100.86

They can make up paper barrels all they want. When physical crude doesn't show up at the refinery and gasoline doesn't show up at the gas station, its going to be really hard to hide.

The paper barrels will just be used to print the newspaper on and the newspaper will say all is well.

Problem Solved.

Maybe upstreamonline.com is the spot price? The BBC is showing Brent futures at $100.68 as I write this...

Yes, Upstreamonline says it is the spot price. Also note that it is the closing price at 4pm UK. If you look at the charts you will see that there was a big drop in all prices after the US inventory report (3:30pm UK). That low more or less coincided with the close of Brent Spot. Brent Futures then bounced up from the 4pm futures price in later trading. Brent currently at $101.94 on ICE.

Edit: Latest Chart from LiveCharts

Spot to spot. Brent spot closed at $101.74 while WTI spot closed at $86.71 or $15.03 below Brent.

Bloomberg Energy Prices

Ron P.


Is WTI available worldwide, or just in the US? I know Brent is the EU standard. What does Japan purchase? How is Saudi/Iranian/ME oil priced? WTI rates or Brent rates? What does China purchase? This double standard of pricing is getting weird. I thought WTI was the most desirable because it was light, low sulfur, and easy to process. Could you do a short discussion to review this for us?



Craig - thanks for giving me the opportunity to toss out my first smart *ss remark of the day: anyone anywhere on the planet can buy all the WTI they want. All they have to do is pay the cost to transport it from west Texas to where ever they are. It's not terribly expensive to transport oil in bulk but it does add to the final costs. A refinery in India might be able to buy WTI at Cushing for much less than it's paying its current source. But by the time it pays transport it will cost way too much. I don't have any dealings with international oil sales but I do know transport costs are figured into pricing. Imagine the cost to transport oil from Cushing to England: pay to ship oil to the Houston Ship Channel, pay for storage at the HSC, pay to load oil onto tanker at the HSC, pay tanker to haul oil to England, pay to offload tanker in England, pay for storage in England, pay to move oil from English storage to the refinery. There's at least seven businesses that are going to charge you something to get that WTI to you. And everyone one of them is just as evil as us guys exploring for oil. All we care about is profit...not helping the economies of the world prosper.

So it's not really a double standard. A refinery in England can afford to pay more for Brent than WTI because it costs so much less than WTI by the time you factor in transportation. As Rocky has explained so well: folks with oil at Cushing have to discount their prices because the transportation to Gulf Coast refineries (and thus everywhere else in the world) is limited. And remember what "limited" does to pricing: the folks who transport oil out of Cushing to GC refineries don't do it for free. And right now demand for shipping oil greatly exceeds capacity. Nobody has posted those numbers but it's not difficult to imagine that Cushing to the Gulf Coast transport costs are at an all time high...just me WAG.

The obvious question is why does the US import oil at all at $102/barrel if it is available at Cushing at $87/barrel? Shouldn't the US refineries first use up all the cheap Cushing oil before they start using expensive imported oil? Shouldn't that cause the WTI and Brent price of crude oil to equalize?

Why is this not happening? Instead we have a widening of the spread.

The only explanation I can think of is that the oil piling up at Cushing is of the "wrong" kind; not the kind US refineries can utilize.

I assume that WTI is quite similar to Louisiana Sweet in terms of quality, but there is a $15 differential between WTI and Louisiana Sweet. As several people have noted, if we had adequate pipelines, the spread between WTI and Louisiana Sweet would probably be close to the one dollar spread that we saw a year ago.

Note that the majority of global spot crude oil prices this morning are over $100, and WTI is the only index price in the 80's:


Incidentally, on a global basis, it would appear that 2011 is looking similar to the 2008 increase in oil prices.

s - Simple: oil is being shipped from Cushing to refineries as fast as possible. But the refineries need much more oil than is being deliverd (as has been the case in the U.S. for many decades). So the refiners import oil from overseas as needed and pay what ever it takes. Just like seats at the Superbowl: might be 500,000 folks willing to buy a ticket but you can't sell more than you can seat. You wouldn't buy Cushing oil if you have no way economic way to get it to your refinery.

It's not getting much press covergae but there is an ongoing effort to expand the pipelines so they can move more oil. But there is starting to be a real stink developing over eminant domain issues. In any case it takes a very long time(years) to permit, acquire right of way and build a pipeline. And none of that starts until the investors are certain there's a profit to be made. Until we started seeing a significant uptick in tar sand production no one was going to expand pipeline capacity on just the promise of new production.

Apparently you CAN sell a few thousand more seats than you actually have for a Superbowl!

OK landowners are pushing back on eminent domain for transhipment that does not benefit the US. Eminent domain has been growing in scope, and it's time to cut it back. It will be funny if lawsuits add another few years to Rocky's 2013 date.

If the pipeline companies had any sense, they would have build the Cushing-Gulf improvements first, under the auspices of taking US oil to US refineries. If it's viewed as Canada oil to Chinese ships, local support will be hard to maintain, especially if it bumps up local refinery costs by $10.

If the pipeline companies had any sense, they would have build the Cushing-Gulf improvements first, under the auspices of taking US oil to US refineries. If it's viewed as Canada oil to Chinese ships, local support will be hard to maintain, especially if it bumps up local refinery costs by $10.

Well, they will be taking US oil to US refineries, notably North Dakota oil to Texas refineries, but given the decline in onshore US production in recent decades, that will be a minor part of their business.

Shipping Canadian oil from the Gulf Coast to China would be a rather indirect thing to do. I think most oil going to China would be shipped out of Canadian West Coast ports, but there are some big pipeline projects needed there as well.

I don't know if people have thought about it, but those big Gulf Coast refineries may eventually go out of business if they can't get access to Canadian oil. They are positioned to process Mexican and Venezuelan oil, but production in those two countries has been dropping in recent years. US Gulf of Mexico production may start to drop soon, too, if the US government doesn't start issuing new drilling permits.

Rocky - Like you know: pipeline projects take a long time to pay out and make predicting future prices all the more critical and still all the more almost impossible. I suspect some of those companies who laid those big new p/l's to handle E TX and N La shale gas are wondering if they'll ever see pay out...especially if NG prices don't start rising significantly in the next few years.

BTW eminant domain issues have always been tough in Texas but after Gov Perry pushed thru the Trans-Texas Corredor project it has almost come down to armed resistance in some parts. ED has become the proverbial 3rd rail of TX politics these days.

eminant domain issues have always been tough in Texas but after Gov Perry pushed thru the Trans-Texas Corredor project it has almost come down to armed resistance in some parts. ED has become the proverbial 3rd rail of TX politics these days.

Good, there should be a price to pay for 'pushing thru' something.

The use of eminent domain to get a pipeline right of way seems to be unique to the US. In Canada, pipeline companies just apply for an easement against the properties.

Easements go back to the Middle Ages, to a time before the government built roads. People would just walk across their neighbor's property to get to their own property. If their neighbor objected, they would go to court and get an easement against their neighbor's property that allowed them to walk across it.

Pipeline easements are similar - they just allow the pipeline company to run the pipe across the property. If it's underground, once it is laid there is no impact on the surface (other than that they can't build on top of the pipeline).

If you look at the title for a piece of land in Alberta, there might be a dozen or more easements registered against it - oil pipelines, gas pipelines, power lines, telephone lines, water lines, sewer lines etc. etc. It sometimes freaks people out if they see all the easements on their property, but - do they want public services or not?

Not having public services is not an option. If a public utility wants to come in and run a line across their property to their neighbor's property, they will just get an easement and do it. There are no eminent domain issues involved. Of course, it helps that Canada never had a revolution, so the old Medieval rules still apply.

The unique aspect of this easement is whether there is actually a public benefit. The landowners argue not.

We have easements here, too. Generally, whoever is taking the easement pays the property owner.

Rules vary from state to state, but usually, eminent domain comes in when the property owners fight the easement.

We recently changed the eminent domain rules in Sweden. He who loses property thru eminent domain gets 125 % of the calculated market price instead of 100 %.

The idea had three parts, avoid over use of eminent domain, an apology for the intrusion in ownership rights and incenting people to not use all the available legal procedures for fighting an eminent domain decision and thus avoid delays for investments.

So far most everybody seems to be happy about the new rules althugh there still is a need for speeding up the legal procedures. The biggest complaints were from the greens since a land owner only got 90 % when a natural protection area were created due to a reasoning regarding tolerance for intrusions for the common good and when this were chaged to 125 % the yearly budgent dident yield as manny km2.

Eminent domain has been terribly misused, especially during our most socialistic period. One of my favorits where when our socialist government decided to sponsor a steel plant that never were built and needed gravel for the constructioning and decided that paying for eminent domain for a forest were a lot cheaper then buing the gravel beneath it and took the property. I am sure that such practicies are quite destructive for a market economy.

It's a patchwork of laws here, but in the northeast, we've done something similar. The various state and local governments came to the conclusion that it was actually cheaper to offer a generous payment than to fight it out in court, not to mention better for public relations.

The problem comes when the property owner is wealthy and doesn't need the money, or when the project being built is considered bad for the whole neighborhood (like a nuclear power plant). In those cases, extra money probably won't help. Gas/oil pipelines are often in that category, since there's a fear they'll leak or explode.

Texas has traditionally been a state where taking property is relatively easy. I've heard that taking property in Texas takes a couple of months, versus a couple of years in New York or Connecticut. Perhaps that's changing now, with the Texas population growing and the state getting more crowded.

Also, in the US, if you sell to a government entity, there are no income taxes on any profit.

I think paying up more money for buying land is a good thing anyway. It increases the acceptans for reserve creation from land owners. You know as well as I that forest owners have been cutting down pristine forests in order toprotect them self fromhaving to sell it to the government at prices below market value.

Ontario is very reasonable and civilized in use expropriation and right of way. I think Canadian name is better and more appropriate: Expropriation, not "eminent domain". I think old English thinking "my home is my castle" has a lot do with it. My impression is that the courts are standing on the side of an owner. You just do not hear much about it. e.g. There was a BIG deal about expropriating four houses to build a new highway intersection, and it is on the back burner. Or a new 4 lane highway had to blast through solid rock, to bypass a few homes.

The right of way rules are different. If something is Federally regulated, like cell towers, they can be build everywhere, without any recourse. But wind turbines must be 500 m from the nearest residential building, and not a chance in hell to expropriate for a wind turbine. Right of way - I think everybody is reasonable, as, RMG said, they are about public services.

To me it does not sound like a problem in Ontario. I don't know about rural, though.

The Swedish word is "expropiering" and a typical example is for the 130 kV power line for a new large scale wind power park or area with lots of wind power plants but not for the wind turbines themselves.

Until we started seeing a significant uptick in tar sand production no one was going to expand pipeline capacity on just the promise of new production.

Well, they did expand the pipeline capacity from Canada to the US, by 885,000 bpd in the past 12 months, with another 800,000 bpd or so coming in the next 12 months. However, I don't think anybody anticipated this spread between US prices and international prices. If they had seen it coming, they would have laid a lot more pipe in a lot of different directions - mostly in the direction of China.

I also don't think they anticipated the resistance of Americans to these new pipelines. They probably thought, "Well, there are about 70,000 miles of pipelines already in the ground in Texas, what's a few hundred more miles between Oklahoma and the Gulf Coast?"

It just occurred to me that Texas has enough miles of pipeline to go nearly 3 times around the world. It must be a rather badly trenched-up state already. And riddled with holes, as well.

Maybe they shouldn't have pitched it during football season. :)

I wonder if over time the pipelines that once carried OK crude to the Gulf switched to carry imported crude to mid-west refineries, and have switched back again to carry Canadian crude?

Eventually the pipeline will get built -- they'll just have to spread the money around. A good start would be to hire Williams or some other OK company to build and manage the line. There is a lot of ill will toward Texas sucking money and talent to Houston. There is probably some local state politics involved.

Tulsa refineries are upgrading. The process takes years, and gets delayed by price swings. I suspect they're refining as much as they can now, and shipping refined products. Probably they didn't foresee the spread, and likely would not have acted on a projected 2 year discount anyway -- refineries build for the long term.

Holly just bought up two local refineries, and they change their mix depending on economics:

The Tulsa Refinery primarily processes sweet crude oils into high value light products such as gasoline, diesel fuel, jet fuel and lubricants, however has the capability to process sour crude oils when economics dictate. For 2009, gasoline, diesel fuel, jet fuel and lubricants (excluding volumes purchased for resale) represented 26%, 29%, 10% and 16%, respectively, of the Tulsa Refinery's sales volumes.

The plan is to use the strengths of both refineries to process a wide mix of source crudes into a broad set of products:

The Tulsa Refinery west facility is located on a 750-acre site in Tulsa, Oklahoma situated along the Arkansas River. The principal process units at the Tulsa Refinery west facility consist of crude distillation (with light ends recovery), naphtha hydrodesulfurization, catalytic reforming, propane de-asphalting, lube extraction unit, MEK dewaxing, delayed coker and butane splitter units. The refinery's supporting infrastructure includes approximately 3.2 million barrels of feedstock and product tankage, of which 0.4 million barrels of tankage is owned by Plains, and an additional 1.2 million barrels of tank capacity that are currently out of service and could be made available for future use.

The Tulsa Refinery east facility is located on a 466-acre site also in Tulsa, Oklahoma situated along the Arkansas River. The principal process units at the Tulsa Refinery east facility consist of crude distillation, naphtha hydrodesulfurization, FCC, isomerization, catalytic reforming, alkylation, scanfiner, diesel hydrodesulfurization and sulfur units. Additions and improvements to the facility since late 2004 include a scanfining unit to meet 2006 gasoline sulfur content requirements, a new naphtha hydro desulphurizer unit in 2005, a new sulfur plant, modifications to the distillate hydro desulphurizer unit, a new tail gas unit installed on the new sulfur plant and the conversion of the reformer from a 17,000 BPD semi-regenerative reformer to a 22,000 BPD continuous catalyst regeneration reformer (thereby increasing its capacity, octane capability and yield of gasoline). The refinery's supporting infrastructure includes approximately 3.75 million barrels of tankage capacity on the refinery's premises, approximately 1.4 million barrels of which is owned by HEP.

We are integrating the Tulsa Refinery west and east facilities that will result in a single, highly complex refinery having an integrated crude processing rate of approximately 125,000 BPSD, primarily by sending intermediate streams from one facility to the other for further processing. Pursuant to this plan, high sulfur diesel and various gas oil streams will be sent from the Tulsa Refinery west facility to be processed in the diesel hydrotreater and FCC units, respectively, at the Tulsa Refinery east facility. Various heavy oil streams will be sent from the Tulsa Refinery east facility to be processed in our coker unit at our Tulsa Refinery west facility. Various other streams such as naphtha, hydrogen and fuel gas will be shared between the two refinery facilities.

With the Canada crude link, Tulsa may revitalize part of its oil industry. They'll be happy to see as much oil stuck in Cushing as possible, I imagine.

I'm sure that Tulsa oil refineries are laughing all the way to the bank, these days. We'll see how long the oil stays stuck in Oklahoma, but while it lasts its a lot of fun for them. I'd give them at least another couple of years of champagne and party balloons before the hangover starts.

If it pays for modernization and upgrades, they'll likely be well-positioned for another decade, since they supply lubrication products, asphalt, and motor fuels to the region. I'm sure the current windfall makes Holly execs feel pretty smart.

Nobody has posted those numbers but it's not difficult to imagine that Cushing to the Gulf Coast transport costs are at an all time high...just me WAG.

I think that it's not so much that it is expensive, it is that the companies who own the few existing pipelines have their own oil at Cushing, and their own refineries on the Gulf Coast. They're not much interested in carrying anybody else's oil when they don't have enough capacity to move their own. To get access to their pipelines, you might have to bring in the Mafia and kill a few people to get them to deal.

Well, that might be an exaggeration, but the business can get nasty at times. They wouldn't pass up an opportunity to screw a competitor.

As I remember,Tulsa is located on the Arkansas River and is America's furthest inland port serviced by ocean going vessels.Those refineries are on the riverbank.

So how long would it take those nearly empty shipyards in Miss. to weld up a few fuel barges ? Or have them made in China if we forgot how to make boxes. I reckon that would take thinking our way out of the box first.

Sorry, but this situation is just too silly for words. Emminent domain would probably have to be established over those prickly catfish.


Actually the port is on the Verdigris, and the refineries are on the Arkansas, which is not navigable. The points are only 10 or 15 miles apart, though, and connected by rail and highways. I'm not sure about pipelines.

This is actually a pretty good idea. I imagine there are oil barges that already exist.

Edit: I see there are double-hulled oil barges in widespread use. Capacity is millions of gallons, but you need a massive insurance policy. That's probably the deal-breaker if you're not a multi-national company.

Good point. But couldn't double walled barges be made?

Or double walled tank cars? Or tank trucks? Someone should figure out how this could be mannaged. I'm gonna put on my thinking cap, and come up with some impossibly complex theory like WestTexas' ELM and become wealthy and respected like him.

At $10/barrel price differential, it might still be profitable


Rocky - Good point: I've never seen a breakdown showing how much indepedent transport there is vs. integrated. I would imagine if any GC refinery that has its own dedicated p/l from Cushing is also laughing all the way to the bank.

We do not export crude* so WTI available in the USA only. However the futures price was once used as a benchmark by many foreign producers. I doubt that it is anymore however. Brent is not exported either however as Britain is a net importer. Understand these futures markets are just a benchmark for other producers. And that benchmark in just a kind of guide. No producer is under any kind of obligation to price their oil by any benchmark whatsoever.

WTI and Brent are both light sweet crudes. They are a benchmark for light sweet crude only. Other grades are discounted from these benchmarks. China, and everyone else purchases what their refinery will handle. Most new refineries will handle heavy sour crude or some variation close to that. Valero says they buy almost exclusively heavy sour crude because they get it at such a discount and their refineries can handle it.

The Middle East produces all grades but their production of light sweet crude is dropping while their heavier and sourer grades are increasing in production. And they sell their crude for whatever the market will bear and according to the grade. But their prices are a lot closer to Brent than they are to WTI.

*Correction, we at one time did export oil from Alaska to Japan. This was because it was much cheaper, for Japan, to have the oil imported to the US Gulf Coast or East Coast, then swapped for Alaskan oil shipped from Alaska. I doubt if they still do this but I really do not know.

As for shipping WTI overseas, of course this could be done but it is not. Why would any oil company ship cheap light sweet crude out and then buy imported light sweet crude for a much higher price?

Ron P.

I just read an article explaining that the Canadians were in fact doing just that.
Canada is a net importer of crude oil. They import the more expensive Brent, while exporting the cheaper domestic crude based upon WTI pricing.
This is why Canada's balance of trade is deteriorating.

I'm willing to hear from anyone who might know, why this information is wrong.

Canada is a net importer of crude oil.

Naw, that can't be true. Energy Export Databrowser says Canada is a net exporter of crude oil by about 1 million barrels per day.

Ron P.

(assuming the numbers are all up to date).

Canada is a net exporter. But yes as I understand it the western markets are not connected by pipeline to the east. The west exports oil to the US. The east imports oil from the middle east. If the middle east oil gets too expensive or unavailable I would expect significant political pressure to ship the oil east instead of south.

Canada is both an importer and an exporter of both crude oil and oil products. It is very difficult to figure out what is going on because of the very heavy two-way trade in both crude and products.

The situation is complicated by the fact that the big Atlantic Coast refineries import most of their oil from the Middle East, and export most of their products to the US. They are really just taking advantage of the fact that it is much easier to build oil refineries in Canada than the US - fewer regulations, and a distinct lack of NIMBY's in the Atlantic Provinces.

But, at this point in time, Canada is a very heavy net exporter of oil and products. At one time it was a net importer, but those days are long gone.

As noted from the link I posted below:

The Argus Sour Crude Index (“ASCI”) has been adopted as the benchmark price for sales of crude oil by Saudi Aramco (in 2009), Kuwait (in 2009) and Iraq (in 2010).

BlueTwilight linked further on to a graph of the Argus Sour Crude Index Price...

E. Swanson

Thanks Eric, it is interesting that this index is trading well above WTI. That is Argus sour is trading at over a $10 premium to WTI sweet! How is that possible?

Ron P.

The spread between 2/3 of the oil exported in the world and WTI is too large.

The spread between WTI and Brent, which is nearly $15 at this exact point in time, is driven by the growing amounts of Canadian (and to a lesser extent North Dakotan) crude flooding into the trading hub at Cushing, Oklahoma. The Canadians have built way too much pipeline capacity from Canada to Cushing, and it's having a drastic effect on prices there. There's not enough pipeline capacity to get it out of Cushing to wherever it's needed.

Of course, people did pose the question to pipeline execs at the time they started building these new pipelines, "Are you nuts?!!!", but the question remains unanswered. If they can get the pipeline execs on lithium and complete the pipelines from Cushing to the Gulf Coast, the price spread will go away, but in the interim the spread is getting wider.

A definitive solution (more pipelines) will come in 2013, at the earliest. A stopgap measure (moving crude by train) will come sooner, but I'm not sure the railroads are completely up to the job, yet. They're working on it.

Rocky, That's 2 m/b/d of oil. What about the other 10 m/b/d of oil that the US imports?

Rocky, That's 2 m/b/d of oil. What about the other 10 m/b/d of oil that the US imports?

Well, for the refineries that have access to the 2 mbpd of cheap Canadian oil, it's party time! Break out the Champagne! The difference in costs goes straight to the bottom line of the profit/loss statement.

For the others, running the 10 mbpd of expensive imported oil, life is not so good. Many of them may be sold or have to shut down in the not-too-distant future.

For consumers, it's not so good either. The price they will pay for fuel is the marginal price, which is going to be based on the Brent price.

I think your last two posts should be stickies. You reply to these questions couple times a day. Maybe make it a pre-emptive first post every day.

well i think it is about time for a key post on the subject because I'm bewildered by it.
I thought oil was a 'fungible' commodity, I thought 'arbitrage' existed to even out price differences between markets, I thought we lived in an 'open society' of 'free markets'.
How the hell can there be such a huge differential?
It is not just counter-intuitive, it confounds reason.
There is no way for hedgers to buy WTI and sell Brent, no resourceful market gamers able to exploit a difference like this?
Enterprising capitalists make gazillions on the yen carry trade and exploit minute differences in listed stock prices but can't smooth out a 15% difference in oil prices?

I thought oil was a 'fungible' commodity, I thought 'arbitrage' existed to even out price differences between markets, I thought we lived in an 'open society' of 'free markets'.

Oil is, in fact, a fungible commodity. However, there is a fundamental market inefficiency at the moment in that it is impossible to put large amounts of Canadian oil (which is cheap and available in large quantities) on a tanker and ship it into the international market.

The only export market Canadian oil can go to in large amounts at this point in time is the US. It is going to the US in such large amounts that it is depressing crude oil prices in the middle of the US. This creates a fundamental split in the market between "Landlocked" crudes such as WTI, Bakken, and Canadian oil; and "Waterborne" crudes such as Brent, Dubai, and Louisiana Sweet.

This market inefficiency is caused by lack of pipeline capacity to move Canadian crude (and WTI and Bakken) to tidewater. It will be rectified ASAP by the marketers, but the pipeline companies have to get government approvals and get the pipelines in the ground to do it. The earliest date they can do it is probably 2013.

Rocky, the truth is that I'm surprised the Canadian oil sands have made such a big impact in such a short time - what kind of numbers are we talking here in terms of production?

Is this significantly more or less than earlier average forecasts?

Do you have any thoughts on whether the production will be sustainable or even substantially increase in the near future?

Apologies for all the q's!

Canadian oil sands are currently producing about 1.3 million bpd of oil. Keep in mind that there is also conventional production, so the total crude oil exported to the US is around 2 million bpd. Keep in mind that Texas oil production is only about 1 million bpd.

I would say it's not so much that Canadian oil production is increasing so fast, but that it's not declining, unlike a lot of other producing countries. The international market is facing a situation where production is flat (and a number of major producers are in decline), while Chinese and other Asian demand is growing rapidly. Meanwhile US demand is flat.

So, the international market is being forced up by constrained supply and increasing demand, whereas the US market is much more in balance. In reality, the US is becoming disconnected from the world market because it has access to reliable and slowly growing Canadian supplies.

Things on the international scene, though, are not nearly as good. Things are going to get ugly, as if they aren't ugly enough already.

Canadian oil production will continue to increase, slowly, into the indefinite future. I give it 10 more years until Canada is producing more oil than the US (not that the US will be producing much oil by that time.).

Brilliant, thanks for the clarifications. Much appreciated.

I give it 10 more years until Canada is producing more oil than the US (not that the US will be producing much oil by that time.)

Could be about 4 mbd. Another possible scenario is that in ten years world oildemand is far down because of a worldwide economic depression.

I do seem to be having to explain this almost every day. The oil markets are not behaving in the same way they have in the past, and it is completely baffling a lot of people. The reasons are perfectly clear if you know what is going on, but most people haven't been paying attention to what is happening in the background, and missed the fundamental changes in the market.

The most fundamental issues are (and I'll just list them without comment):

1. China is becoming a major importer of oil from the international market, and,

2. Canada is becoming the major supplier of oil to the US market, as more and more of its oil sands are developed, and,

3. It is impossible at this point in time to move large amounts of Canadian oil to China.

You do an excellent job with your narrative, and for the most part I accept it.

But the clear implication from what you say is that, in effect, Canadians are taking a 15% 'haircut' on their oil right now due to their dependence on the US market.

Whatever the math comes out to, I am sure that represents a huge sum of money unavailable to Canadian taxpayers and to Canadian exporters.

They are in fact subsidizing the mother of all 'welfare queens'.

Alas, Canada like Mexico, "...so far from Heaven and so close to the United States."

Not really. The posters above dont say canadians do this happily; rather the supply is large in Cushing, thus lower price. Physical constraints, you know... heard of these? ;)

well, if they were unhappy about it, why are they entrusting pipeline upgrades to the US?
Canada has plenty of 'tidewater'.
As well as experience with pipeline construction, I would presume.
If the financial risk involved is really that daunting, I would expect a Chinese partner could be found that would be willing to invest in getting tar sand oil to the BC coast.
I am still unsatisfied with the 'all pipelines lead to Cushing' explanation for a 15% difference WTI to Brent.
However i admit i have no other plausible explanation. I was hoping to draw out the tin foil hats for their take on things, perhaps there is something we are missing here.

I would expect a Chinese partner could be found that would be willing to invest in getting tar sand oil to the BC coast.

Sinopec was recently outed as being a silent partner in the project. Normally, you wouldn't have heard about them, but they announced they were a participant, so I guess it's official. Enbridge would never have revealed them if they hadn't said so first. Non-disclosure agreements, you know.

Sinopec is also a partner with Total, the big French oil company, on its recently approved oil sands mine (the ninth mine so far), and in addition owns 9% of Syncrude Canada. Some of that oil going to Cushing is owned by the Chinese, but they're not proud, they're willing to take as much American money as you can afford to give them.

Canada already has a plan to move oil via pipeline to Kittimat, BC for export to China. The project has been on the books for awhile and at one point even had that Chinese partner you mentioned. (Petrochina). The project has encountered numerous delays however and Petrochina pulled out in the meantime. Things are still under "review" atm, so who knows when final approval will come and the actual building phase will begin, however.

Enbridge Northern Gateway Pipelines Project

That Wikipedia article is not overwhelmingly accurate - it is one of the less accurate ones.

PetroChina and Sinopec are different companies. While PetroChina is out of the Northern Gateway Pipeline, Sinopec is now in, and has also bought a half interest in the Total (the big French oil company) proposed new oil sands mine.

OTOH, PetroChina just bought a C$5.4 billion interest in Northeastern BC shale gas. I'm not sure where they're going with this, but odds are they are eventually planning to move the gas to China. An LNG terminal in Kitimat would be the obvious way to do it. It could be that they just decided to jump in on speculation while natural gas prices were low.

sid - That's one way to put it. Another is that the U.S. is subsidizing the Canadian economy by buying oil for which it has no other buyer.

Your welcome, Canada

I have this same thought whenever people mention how great the healthcare and lifestyle is in Canada or Norway versus the US. The US not only props up its own economy by borrowing, but all those nations whose resources it consumes. I don't think its wise to build one's economies on significant imports or exports of natural resources. It leads to complacency and smug self-satisfaction which is unwarranted longer-term.

Alternatively one can argue that the US is getting a USD 10-15 discount on oil versus world prices which should be supportive for the economy.
Thank you, Canada.....


Alternatively one can argue that if the U.S. wasn't buying the tar sand production the project might have been shut down or at least scaled back significantly and Canada would have lost all that income. Remember Canada is no more obligated to the U.S. to produce that oil than the Saudies are obligated to increase production. They are patch hands which means they are just as evil as their cousins down south...they are only in it for the profit. They are free to cut their oil production back anytime it makes good biz sense for them to do so. And if they don't then they must be content with the trade.

Needless to say both sides reap a benefit. Otherwise it would not be happening.

I believe that Canada is in fact obliged to sell oil to the US.
The NAFTA proportionality clause (605) forces Canada to export to the US a fraction (a kind of moving average) of all their production + imports and that percentage is actually quite significant.


Thanks Peak...I forgot about that. So now we can get a bunch of canooks PO'd about NAFTA. LOL

The interesting thing that it was Canada who wanted that clause in NAFTA (in 1988) because they wanted to make sure they had a customer for their oil..... Mexico does not have that clause btw.
How times have changed.


NO, there is no clause.

The close of proportional availability applies only to exports regulated by federal government. e.g. bulk water. If Canada sells one litre of bulk (river or lake) water to US, the US has a "call option" on this water according to some rules. Oil is private and regular free market rules apply.

Interesting. What you say is not what I thought you read. Do you have any links / suggested reading?


Here is a cut from a report by Polaris Institute. Highlights are mine.

NAFTA’s proportionality clause occurs first in Chapter Three on Market Access for Goods (Article 315) and again in Chapter Six on Energy (Article 605). The clause says that IF any Canadian jurisdiction were to take measures that reduced the availability of a good, such as oil or natural gas, for export to the United States, Canada would still be obliged to make available for sale the same proportion of the total supply of that good that was sold to the U.S. over the most recent 36 month period for which data is available. Total supply is defined as including production, imports and drawdowns from domestic inventory.

Here is NAFTA: go to article 605: http://www.worldtradelaw.net/nafta/chap-06.pdf

As you see, there is an if. The if is that government would have to tell a private company: you can not export to USA. China can outbid USA, build a pipeline (it will take a while because of environmental and First Nation issues.) The similar clause (315) would apply to maple syrup, cars and beaver pelts.

The clause is US "defense" against National Energy Policy from long time ago.

Thank you. I have an analysis which does not quite agree with the above. I will digg it up and revert tomorrow.
Actually, do you have an email I can reach you at? Mine is in my profile.


Here are some news about water (how to make bulk water exports more difficult)


Here is about NAFTA clause 605.


My highlight:

The Agreement (Article 605) repeats the clause in the FTA (Article 904) that allows governments to impose export restrictions on other parties on the grounds of: i) conservation of exhaustible resources; ii) supply shortages; iii) price stabilization; and iv) national security. In turn, these provisos were fashioned on those in the GATT agreements, although the definition of what constitutes a national security criterion is more lax under the GATT. Moreover-and this is critical-the definition of "national security" differs as between Canada and the United States, and as between Mexico and the other two parties. These aspects are mentioned below.

Article 605 in NAFTA also repeats the key energy caveat introduced in the FTA: if supplies were restricted to one of the parties under any of the first three reasons (conservation, supply shortages and price stabilization), the share of total supply available for export purchase may not fall below the average level in the previous 36 months. This was the contentious "proportionality" provision of the FTA-which put some flesh on the GATT skeleton-but did not constitute a supply obligation. [The relevant GATT provisions are a lot more vague, referring to general exceptions allowing the imposition of import and export controls in certain situations; see Articles XI:2(a) and XX(g), (i) and (j) of the GATT.] Until such time as the conditions that might invoke the proportionality clause become apparent, its significance will remain hazy.

It is true, though, that everyone wants to keep a secret about details of NAFTA.

So a hypothetical scenario: Now US imports 50% of Canadian supply (not production, but production + import +draw dawn from storage) of oil. It is now 2 Mbpd out of 4 Mbpd for sake of argument. Something blows up, Canadian production falls to zero. So Canada imposes a new law, "Oil Restrictions Act". A that moment Canada is obliged to make available 50% of Canadian supply of oil. 50% is based on last three years of data before invocation of the clause. Now Canada goes to markets, buys 2 Mbpd of oil: 1 for internal use (only one because of Oil Restrictions Act) and 1 for resale to USA. And this only if USA invoke the clause. And even then it is on market prices.

Overall, ain't happening.

I believe that Canada is in fact obliged to sell oil to the US.
The NAFTA proportionality clause (605) forces Canada to export to the US a fraction (a kind of moving average) of all their production + imports and that percentage is actually quite significant.

That's a common myth. "Canada" doesn't own any of the oil - the oil companies do, and under NAFTA rules they can sell it to whomever they feel like.

It could have been different back when the Canadian government owned PetroCanada, but now Suncor owns PetroCanada, so PetroCanada is under no restrictions.

The only restriction the Canadian government imposes on oil companies is that they sell their oil to the highest bidder, and the oil companies are quite happy about that restriction.

Which is why the OK situation has yet to be resolved -- not enough benefit for the middle man (and a clear benefit with the status quo).

It has not escaped the notice of Canadian politicians that Canada is taking a 'haircut' on the price of its oil, and that a lot of the money that is slipping through their grasp would have ended up in government treasuries due to the nature of the income tax system.

They are working on solutions, but this involves a lot of building of pipelines and port facilities, meanwhile keeping American politicians in ignorance of what is going on. Fortunately, keeping American politicians in ignorance is not that hard.

The Chinese are fully onside with respect to the whole agenda, but they know the importance of staying under the radar.

I keep hearing about this. Only, my impression was that the Canadian and Bakkan oils were not WTI grade. If so, then that would explain some of the price difference; only, my question remains as stated above in my request to Ron P. to relate Brent/WTI to world oil, esp. that delivered to such as Japan, Korea, China, etc., and the EU of course.

Maybe you have some insight into the general conundrum that I see here. How do tar sands oils stack up vs. WTI? Brent? ME oils (keep hearing about the sour crude not being amenable to most refineries today)? Etc., etc., stb.


my impression was that the Canadian and Bakkan oils were not WTI grade. If so, then that would explain some of the price difference;

Some of the Canadian and Bakken oils are actually as high quality as WTI. This represents a minor part of the supply, though.

Most of the Canadian crudes are now heavy and sour, and trade at a discount to WTI. This is reflected in their price. However, a lot of refineries these days have been upgraded so they are capable of handling heavy sour oil, and given a sufficiently large price discount, they will buy it in preference to WTI. A refinery which can get a large gasoline and diesel cut out of heavy sour oil is not going to pay much of a premium for sweet light oil.

On the international market - well actually a lot of the oil out there is really dreadful heavy, sour stuff that is not much better than tar sands oil. The refineries that can handle Mexican heavy oil or Venezuelan extra-heavy oil can also handle Canadian heavy oil - it's just that they can't physically get the Canadian oil to the refineries.

I wasn't being fair the other day when I blamed the current financial fiasco for the resource owners, primarily the people of Alberta, on the business acumen of Albertans. It is a complicated situation.

Still, it raise the matter of the old saw about what to do when you find yourself in a hole...

You might want to stop digging. But take a look around. You'll see a lot of action constructing the extractive infrastructure. This sector's profits are not affected by increased flow of the extracted product. The extractors themselves appear to be on a financially structured treadmill demanding capital employment. And so dig, dig, dig...

And the way out is more pipeline capacity. And then more?

It seems to me that there is about a zero chance that a pipeline through BC to the Pacific will be built, ever. The beneficiaries in BC are few indeed. On the other hand, expect a popular resistance army, of regulars and irregulars, larger than any seen to date in any battle in BC's history. Politicians in BC have enough concerns about unanticipated events, without generating more. On this matter, they will be assigning committees to kingdom come, or the trans-BC pipeline fantasy fades. Are any companies not tied to the Chinese regime signed up for the Kitimat pipeline project?

What price index is employed to determine the price of oil imported into central/eastern Canada? It would be ironical if Ontarians were enjoying the benefit of the failure of Albertans to capture the world price for their product.

All the ramping up of extractive capacity in the bitumen-to-oil business has not improved the capacity of the Albera government to serve the people of Alberta. BTO puts precious little into the public purse. Meantime, natural gas ain't payin' what it used to and the treasury has gone begging.

Albertans, mainly because capital can't afford to sit idle under the prevailing rules, are making up in volume what they are losing in price...

I'm waiting for the Wildrose Alliance (read: dogmatic free enterprisers and confused reactionaries led by opportunists not currently among the 'ins') to accelerate the hollowing out of Alberta.

On the other hand, they might be just the vehicle for the business class to impose a provincial sales tax, in a last desparate act to forge a stable and functional public sector, to maintain a functioning commercial arena, if for no other reason. The Nixon to China thing.

Albertans have pulled a straw into their north from the US. If you think about it from a national security viewpoint, apparently a common perspective at the control centre of the Empire, a bigger straw has a couple of benefits than a smaller straws: it increases energy security and strategically depresses prices within the predator state.

Oh well, why should Albertans care about selling a limited resource at low prices. With minimal value added. There's lots there. Yeah sure, natural gas and conventional oil aren't holding the kind of parties they used to, but this stuff is endless...and endless times $ adds up big time...doesn't it?

On the other hand, expect a popular resistance army, of regulars and irregulars, larger than any seen to date in any battle in BC's history

Being originally from the interior of BC and experienced the backlash against the Kemano completion project firsthand (and the fact it was stopped), I hear the old rabble-rousers and First Nations are in full battle mode in trying to stop this. Might even succeed, perhaps.

Both projects focused at a terminus in the Kitimat area... strange days indeed.

A refinery which can get a large gasoline and diesel cut out of heavy sour oil is not going to pay much of a premium for sweet light oil.

Aren't they also getting few extra percent on refinery gains? or at least is offsets increased refining costs?

Aren't they also getting few extra percent on refinery gains?

Well, that's true. Depending on processes, a refinery would get a large refinery gain on heavy oil. It could be significant in determining what kind of oil it wanted to process.

I say the "New site coming soon" sign yesterday, and was worried about what that would bring. I haven't had a chance to take a look.

The adjustments are another issue. Maybe I can figure out someone to write to.

I have registered to go to the EIA convention in April this year. I have made some good contacts there in the past.

Is the "Adjustment Issue" being caused by the WTI bottleneck somehow?

As has been pointed out above, the adjustments in inventory data over the last two months have a large upside bias. Maybe the inventories are overstated. The price differential between WTI and Brent cannot be explained for 10 m/b/d of imports as even Rocky sees this is a problem. As we have a sufficient inventory for now, Wall Street combined with Washington and a wink to IOC's can, for the short term, keep prices lower than the marginal price for the last barrel,ie, Brent. If they think Brent will not carry the "Egypt" premium for long, they may be able to fudge the inventory a while and not be caught short. If the "Egypt" premium does not go away quickly, or if prices go up, or the inventory numbers are bad, they risk an "oil shock" quick rise to Brent levels. This could injure the bond market, inflation expectations,already high, would strengthen, and equities would suffer.
It has been the mantra that gradual rises in crude oil prices are not economically harmful. If so, why would they risk an "oil shock" for a short term gain in a Government supported economy?
I guess that unanticipated consequences of risky policy moves is not high on Wall Street's or the
government's check list when dealing with market control issues.

Re: Ben Bernanke's "Extend & Pretend" Testimony

Bernanke is doing one of his periodic appearances in front of Congress. They were discussing using the pending extension of the debt ceiling as a means to force spending cuts, and Bernanke advised against such action, while of course agreeing that we need to cut spending (at some point). In any case, he said that if we can't extend the debt ceiling, then interest payments won't be made on existing debt. In other words, if creditors* don't lend us new money to make interest payments, i.e., we will send them part of their own money back, we will default on existing debt.

In banking circles, they call this "Extend & Pretend."

*Of course, when the Fed is now the largest single holder of Treasury debt, who needs foreign creditors?

What happens when the treasury can't pay interest to the Fed? Anyway, treasuries have been sinking fast lately. So, good luck to all who still have a bunch of treasuries.

The Fed lends newly created money to the Treasury Department.

But the premise here is that the debt ceiling has not been raised. What then?

I have studied this issue over and over but fail to remember what I learn. Basicly; the money creation system is so mind baffeling that my brain refuses to accept it, and I just can't memorize how it works.

But short story; when the music stop and you sitt with the hat (if you ever played that game), debts will be gone and replaced with *drumrolls* Hyperinflation!

Jedi, it is not really that baffling. Here is a short YouTube video, a piece of Chris Martenson's Crash Course, that explains it very well. However it has a flaw. This video gives the impression that the Fed prints greenbacks. That is not at all what Martenson is saying but unless you watch and listen close that is the impression you get.

Greenbacks are actually printed by the Bureau of Engraving and Printing, U.S. Department of the Treasury

Public Tours
You'll see millions of dollars being printed during a tour of the BEP. Our tours, which are located in our facilities in Washington, D.C. and Fort Worth, TX, feature the various steps of currency production, beginning with large, blank sheets of paper, and ending with wallet-ready bills!

Ron P.

He he, I have seen that particular video. I understand it. But my brain still coat itself in super lubricants every time I try to absorb the information. Maybe it is the denialism circuit doing its thing? I don't want to it to work like that, so my brain refuse to memorize it.

Ya know, that sounds almost like an oxymoron.

Especially when you consider that the Fed "creates" it by lending it. The Fed does not have the money they lend. They just lend it, and everyone says, "Great. Now I have money in my account." Meanwhile, there is no there there where it was created. Just some sort of black hole that the Fed pulls the 'money' out of, like a magician pulling the rabbit out of the hat.

Think about it. The Fed has no money. They create an account, and from that account, that has no money, they lend 'money' to the Treasury (or Bank of America, Wells Fargo, etc.). Now there is one account with negative money, and one with positive money. The Fed should be bankrupt... their accounts are in the red.

Later, the Treasury (meaning us taxpayers) pay back the 'money' with interest. The Fed skims off the interest and closes the bogus account. When Bernie Madoff did that, he went to jail! When will Ben be indicted?

Very confusing.


Think about it. The Fed has no money.

The Emperor has no clothes?


Really guys, I think you have it backwards. The government prints the debt, not the Fed. The government creates the debt out of thin air by printing it. They then sell these debt instruments to the Fed for real money, or fiat money as many like to say. It is the government that creates money out of thin air, not the Fed.

The debt must then be sold to someone. Well, the portion that the Fed does not keep must be sold. China, Japan, other nations and other banks then buy this debt from the Fed. The banks then resell the debt they to the general public, pension funds and such.

And the Fed is basically a group of banks. Federal Reserve System These banks do have money as all banks do. You guys should not start rumors that the fed has no money. True, like all banks, the money they have is depositors money and other member banks money, but it is money nevertheless.

Ron P.

The purchase of government debt by the Fed does not directly increase the money supply. The transaction is simply a swap of assets, that is reserves held by the member banks of the Fed in exchange for bonds issued by the US Government Dept of the Treasury.


The purpose of this is to drive down the cost of borrowing money throughout the system by soaking up the supply of debt instruments which then makes it more attractive to make certain investments which are stimulative to the economy.

This ultimate increase in lending does expand the money supply due to the classical multiplier effect much the same way the classical process the Fed uses via manipulation of the discount rate.

Close. Actaully, all banks create money out of thin air by lending it. Loans create deposits, not the other way around. The thing that gives them this magical power is not some sort of special law or conspiracy; it's just accounting.

When a bank makes a loan, it is expanding both sides of it's balance sheet at the same time: it creates an asset (the loan) on one side and a liability (the deposits) on the other. All the "money" is is a liability of the bank, denominated in dollars. The only thing special about bank liabilities is that the government accepts them at face value in exchange for it's liabilities (you can create "money" too, simply by signing an IOU - the onyl problem is that your IOU will not be as generally acceptable as a bank draft is). And since it's the government's liabilities that are the only thing it accepts in payment of taxes, those are the ones that count. (Ultimately, it's government liabilities that are at the base of the "money pyramid", that are acceptable everywhere as ultimate payment)

You are correct, however, that the government creates money, not the Fed. The actual process, however, is simpler: the government creates money by spending it into circulation. It then sells bonds to drain the reserves that are thus created from the banking system. The only reason it does this (the only actual reason, that is: the political reason is that people don't really understand the modern monetary system and think there is a funding constraint) is to maintain a non-zero interest rate. (excess reserves cause the overnight rate to drop to zero)

Here's a good paper on how it works (there are a few differences now, like the fact that the Fed now pays interest on excess reserves, but hte basic mechanics are the same):


Close. Actaully, all banks create money out of thin air by lending it.

Yes we all know that. At least I hope everyone is at least familiar with this aspect of the fractional banking system. After all we have discussed this about a hundred times over the years. But the banks must have money on deposit in order to create money. They can lend 90 percent of money on deposit. Then that money can be deposited and 90 percent of that lent out and so on. That is not what people mean when they say that the government just prints money out of thin air. They are talking about the debt.

The point I wish to make is that the Fed does not print money! They can create money by loaning money from the regional banks but they cannot create new money just to buy the debt.

Money, greenbacks, is printed by the Treasury Department not the fed. But this money is printed to replace old money that is destroyed or greenbacks that are ordered and paid for by the reserve banks. Greenbacks are never just printed for no reason.

The debt is just printed out of thin air! It has no backing other than the full faith and credit of the Federal Government. This creates money for the government but it enlarges the debt by the exact amount of the debt instrument sold.

Ron P.

"But the banks must have money on deposit in order to create money. They can lend 90 percent of money on deposit."

As I understand it this is not true. Imagine that I am a bank, and you come to me looking for a loan of $90, but I have no deposits. What I do, is give you a loan for $100, you deposit $10 with me, and voila, I have created the loan and deposit at the same time.

You have a $90 check and a $10 deposit, and you owe me $100 on the loan.

Consumer, I don't know where you got that story but it is horribly wrong. Banks must have money in order to lend money. They can lend out 90 percent of all moneys on deposit. But a lot more than that is created. You deposit $1,000. You still have that 1,000 but the bank can lend out $900. Then that money is deposited again, in some bank not necessarily the same one but then $810 of that money can be lent out again. Then that money is deposited and $729 of that money can be lent out again. By the 30th deposit a total of $8,576 has been created out of nothing.

Of course that is not the entire story. There is the story of interest and also the initial charter of the bank. But that is the very basic concept in a nutshell.

Ron P.

Wrong. While they do have to have 10% reserves, they can easily borrow any shortage they need on the Fed Funds market or from the Fed. The "Money Multiplier Model" you are quoting is a myth, based on a misunderstanding of the causes and effects involved. See the link I posted upthread for a more complete explanation.

Jimbarino I was quoting what Chris Martenson quotes. Money - How it gets created out of thin air This video, a very tiny part of the "Crash Course" is only 5 minutes long. It describes it exactly as I did. The 10% reserve borrowing scheme begins about half way through the video. But this is not the only place where the fractional reserve system is described.

I looked at your link. It is extremely long so I did not read it all but please quote the part where the part Martenson and I describe and what you called the Money Multiplier Model is wrong.

Ron P.

Here is the relevant part:

The Myth of the Money Multiplier

Everyone who has studied money and banking has been introduced to the concept of the money multiplier. The multiplier is a factor which links a change in the monetary base (reserves + currency) to a change in the money supply. The multiplier tells us what multiple of the monetary base is transformed into the money supply (M = m x MB). Since George Washington’s portrait first graced the one dollar bill students have listened to the same explanation of the process. No matter what the legally required reserve ratio was, the standard example always assumed 10 percent so that the math was simple enough for college professors. What joy must have spread through the entire financial community when, on April 12, 1992, the Fed, for the first time, set the required reserve ratio at the magical 10 percent. Given the simplicity and widespread understanding of the money multiplier it is a shame that the myth must be laid to rest. The truth is the opposite of the textbook model. In the real world banks make loans independent of reserve positions, then during the next accounting period borrow any needed reserves. The imperatives of the accounting system, as previously discussed, require the Fed to lend the banks whatever they need. Bank managers generally neither know nor care about the aggregate level of reserves in the banking system. Bank lending decisions are affected by the price of reserves, not by reserve positions. If the spread between the rate of return on an asset and the fed funds rate is wide enough, even a bank deficient in reserves will purchase the asset and cover the cash needed by purchasing (borrowing) money in the funds market. This fact is clearly demonstrated by many large banks when they consistently purchase more money in the fed funds market than their entire level of required reserves. These banks would actually have negative reserve levels if not for fed funds purchases i.e. borrowing money to be held as reserves. If the Fed should want to increase the money supply, devotees of the money multiplier model (including numerous Nobel Prize winners) would have the Fed purchase securities. When the Fed buys securities reserves are added to the system. However, the money multiplier model fails to recognize that the added reserves in excess of required reserves drive the funds rate to zero, since reserve requirements do not change until the following accounting period. That forces the Fed to sell securities, i.e., drain the excess reserves just added, to maintain the funds rate above zero. If, on the other hand, the Fed wants to decrease money supply, taking reserves out of the system when there are no excess reserves places some banks at risk of not meeting their reserve requirements. The Fed has no choice but to add reserves back into the banking system, to keep the funds rate from going, theoretically, to infinity.

In either case, the money supply remains unchanged by the Fed’s action. The multiplier is properly thought of as simply the ratio of the money supply to the monetary base (m = M/MB). Changes in the money supply cause changes in the monetary base, not vice versa. The money multiplier is more accurately thought of as a divisor (MB = M/m).

Failure to recognize the fallacy of the money-multiplier model has led even some of the most well- respected experts astray. The following points should be obvious, but are rarely understood:

The inelastic nature of the demand for bank reserves leaves the FED no control over the quantity of money. The FED controls only the price.

The market participants who have a direct and immediate effect on the money supply include everyone except the FED.

I understand the theory of money creation in fractional banking. What is the oxymoron is the Fed buying Federal Debt. The Fed is a money creator - and they use more than 90% of their 'reserves.'

The Fed creates money when they lend it to banks (the reason they were created in the first place) at the overnight window. In the past they have been lending it to the banks, who purchased Treasuries to pad their reserves with required top grade assets (so about 10% of their reserves are in Government bonds). Then they lend out 90%. What has happened since '08 is that the banks get the money at 0.25 % at the discount window; then they use all of it to purchase government bonds, paying a handsome 2.32 % for a five year bond; and with the least possible risk.

Problem: They need to go for shorter term b/c if rates rise, value drops and they end up losing principal. So, their net on the transaction is more like 0.62% earned at 0.25% coist, net 0.37%, again with zero risk. The oxymoronic part is that they borrow from the Fed to lend to the Gov't.

Then the Fed decided to cut out the middle man, and began QE!

So. money is created when the US borrows it; the Fed is the enabler in the equation. They lend the money to the banks, or directly to the Government (by buying the Government bonds). No money is created until the loan is made! As you said, lenders create the money.


Read it and weep.


Especially when you consider that the Fed "creates" it by lending it. The Fed does not have the money they lend. They just lend it, and everyone says, "Great. Now I have money in my account." Meanwhile, there is no there there where it was created. Just some sort of black hole that the Fed pulls the 'money' out of, like a magician pulling the rabbit out of the hat.

Its a lot like quantum electrodynamics where matter and anti matter particles are virtually created from nothing by being borrowed from the future and instantly annihilated in the present...


Interstingly, in his speech at the national press club (http://cfc.press.org/activities/programs/xmradio/2011_2_4_Bernanke.mp3) last week, he clearly stated

CBO's long term projections do not take into account likely adverse economic effects of high debt and deficits, but if Government debt and deficits where actually to grow at the pace envisions, then economic and financial effects would be severe

and twice stated

Our nation can not reasonably expect to grow its way out of our fiscal imbalances

The overall tone was one of act now with a [comparatively] reasonable rate of adjustment or be forced to act quickly due to financial distress. I was quite surprised to hear him clearly state that,

congress must reduce Government spending increase taxes and enhance longer term growth potential by reducing disincentives to work and save, by encouraging investment in skills of workforce as well as in new machinery and equipment, by promoting research and development, and by providing necessary public infrastructure

Given that, defaulting on our debt obligations would be one way of triggering a rapid and painful adjustment. Our congress is designed to work very slowly and time is needed for them to do what is necessary (as well as a lot of pressure to do what is politically self-harmful). Raising the debt limit is one way of buying (literally) the necessary time.

I recommend writing your congress critters and stating that you support both cuts in government spending and an increase in revenue. Painful as it may be, Bernanke also stated

primary budget deficit ( excludes interest payments) must be reduced to about zero

Rather blunt and straight forward.

These things are true, that The Bernank has stated; he's a smart man.
It's easy to see the issues.
But how did we get here?
We are where we are at because for the past several decades we have basically exported our own tax base to foreign countries (China and India, in large part).
We are now a "First World Superpower" with the cash flow needs of the same, with the tax base of a second tier economic power.

If anyone has any doubts as to what happens once a tax base disappears I invite them to come here to Philly. I will personally escort you through some neighborhoods in my own car and show you what a vanishing tax base means. There is no way to get out of this situation by raising taxes. It will be EXTREMELY difficult to cut spending. The tax base must be rebuilt/increased.

It takes DECADES to build up a tax base.
It will take decades to turn this back around.
We DO NOT HAVE decades.

Raise taxes on the wealthy. It worked during post WW1 and WW2. Spend money on infrastructure like rail, education, and power generation.

"congress must reduce Government spending increase taxes and enhance longer term growth potential by reducing disincentives to work and save,"

What? The biggest disincentive to savings is The Bernank's own Zero Interest Rate Policy.

The twit.

We don't need any more incentives to save. Investment creates it's own savings, as a matter of accounting. Excess savings only ends up as the buildup of inventories, and ultimately economic contraction.

But the government doesn't want us to save; gdp is a function of demand. Savings cut into consumption and demand. Further, how does all this increase incentives to work? While I think taxes should be increased, I am not under the illusion that this will increase incentives to work.

Congress must reduce wasteful spending. But there's the rub. Your pork barrel is my productive investment.

Well at this point you really don't need foreign creditors, nor do you need taxes, really.

The Fed prints money, and with that money it buys debt. It's ability to do so is infinite, and thereby the ability of the U.S. Government to extend its debt is infinite.

I must admit I have a hard time even contemplating this. Is this the endpoint of human affairs? An economy in which every last activity merely exists to service the interest on debt owned by a central bank?

Something about it doesn't seem right, although I can't quite articulate what it is.


You are right. As long as we can borrow from the next generation, and they do the same in turn, there is no limit in time or amount that can be borrowed from the future. It is the Ultimate Ponzi scheme (UP). You never run out of investors, you just go further into the future. This is similar to the invention of the financial derivative.

I think there are people in the FED and at the Treasury that understand: it's based on the ability to create money. What they need is a better way to get it out into the economy once it's created.

However, the worry is that when enough people learn about this gravy train, what will be their attitude toward money? Will it retain it's worth?

The worth of money is based on the men with guns that will come to get you if you don't pay your taxes, and the only thing the government will accept as payment is the money that it issues. As long as the government maintains it ability to collect taxes, it's money will always have value.


As Darwinian said, the Treasury prints the money. The Treasury is of course a branch of government. The Federal Reserve is a private entity with shareholders. Lazard, Morgan, Sachs, BOE, Rockefeller, Rothschild, comes to mind. The Federal Reserve is the third central bank in our nation's history.

The vast majority of debt backed money comes into existence from commercial banks as consumers ask for loans. It is not infinite at all- for once the consumer is tapped then the debt backed by debt system can no longer service the yield in that interest. The removal of the last vestiges of a gold backing in 1971 was also done to avert an implosion.

It must exponentially expand because of the interest attached to the money. All interest compounds. To service this there must be inflation greater than previous inflation or there will be inflation less than previous inflation which does not service the interest yield and things will be liquidated in an implosion.

The United States came into existence under this system of which the latest round was put in to place by the Bank Of England in 1694

"It must exponentially expand because of the interest attached to the money."

Please, not this old chestnut. The interest becomes income to the banks, who in turn pay it out to their creditors, employees and stockholders. A high rate of interest can affect the distribution of income between labor and capital, but you can have any rate of interest you want with no growth whatsoever.


And the "implosion" of 1971 came about because the U.S. went from a trade surplus nation in the aftermath of WWII to a trade deficit nation, and could no longer maintain it's gold convertibility under the Bretton Woods terms. Nothing to do with any supposed "exponential interest".

The Fed prints money, and with that money it buys debt. It's ability to do so is infinite, and thereby the ability of the U.S. Government to extend its debt is infinite....

Something about it doesn't seem right, although I can't quite articulate what it is.

The fact that it's not real?

I sometimes have trouble figuring out whether people are serious about this kind of thing, or if they really don't understand how money works, and believe you can finance a government indefinitely by printing money. The fact that some people believe you can do so is a real danger.

The problem is that every dollar you print debases the value of every other dollar in existence. If you print too many dollars, they all become worth nothing. The party is over, and all the balloons have burst.

That helps - but it also doesn't address the fact that you can "print" virtually anything you want, once you have the ability to do so.

Take food stamps. This is basically big government/big finance buying off the complicity of the people. Stay stupid and don't raise your voice, and you won't starve. But food stamps aren't dollars, per say.

So the endgame seems to me that basically everybody is reduced to the plantation eventually. There's literally nothing you can do short of revolution and creating a new currency, only for the cycle to restart at some point in the future.

You can't "print virtually anything you want". You can print food stamps, but you can't print food. You can't print gasoline, you can't print new cars. At some point the money you print must be able to buy something. If it is not matched by something which it can buy, then it's not worth anything.

OTOH, if it is matched by something which it can buy, then it's worth whatever it will buy. This is the fundamental basis of money.

"but you can't print food"

--Sure we can. Here is a new rosy, pundit report: Food production is up 38.6%. There. We just printed up some more food.

"At some point the money you print must be able to buy something. "

--One empty promise can always buy another.

I have a stack full of credit default swap instruments sitting in this big pile behind me. Which one would you like to buy?

--Sure we can. Here is a new rosy, pundit report: Food production is up 38.6%. There. We just printed up some more food.

Step back meet Mao Zedong, Mao Zedong meet step back... ;-)

That's all fine and dandy but I believe we also need some 'NEW' Right wing authoritarian scientific theories along with that...Perhaps a new and improved version of Lysenkoism applied to humans, I'm sure we could train humans to live on less food by exposing them to starvation diets...

Trofim Denisovich Lysenko (Russian: Трофи́м Дени́сович Лысе́нко, Ukrainian: Трохим Денисович Лисенко, Trofym Denysovych Lysenko) (September 29 [O.S. September 17] 1898 – November 20, 1976) was a Soviet agronomist who was director of Soviet biology under Joseph Stalin. Lysenko rejected Mendelian genetics in favor of the hybridization theories of Russian horticulturist Ivan Vladimirovich Michurin, and adopted them into a powerful political-scientific movement termed Lysenkoism. His unorthodox experimental research in improved crop yields earned the support of Soviet leader Joseph Stalin, especially following the famine and loss of productivity resulting from forced collectivization in several regions of the Soviet Union in the early 1930s. In 1940 he became director of the Institute of Genetics within the USSR's Academy of Sciences, and Lysenko's anti-Mendelian doctrines were further secured in Soviet science and education by the exercise of political influence and power. Scientific dissent from Lysenko's theories of environmentally acquired inheritance was formally outlawed in 1948, and for the next several years opponents were purged from held positions, and many imprisoned.
Source Wikipedia

We could also put any scientist who claims AGW is real in prison for life. At least it would be a short life.

I have thought a lot about this and here is what I believe is the answer...

The Fed prints money and the U.S. goes into further debt...the funds go overseas funding the expansion of emerging markets, China, India, Brazil, the Middle East etc...as demand for hard resources (especially oil and energy) expands and resources can not keep up with demand (since 308
million in U.S. (4% of world population) had been using 25% of the worlds energy and the same rate of consumption can not occur in the 5 billion people ((of 6.8 on the planet)) who now have cell phones)...leading to inflation in either all commodities prices or inflation in energy prices and recession/depression due to high energy costs holding down non-energy commodities prices...

It cann't go on forever because the debt is a transfer of wealth overseas. Also, other countries, esp. China will not fund our debt forever(and are already backing off) and the world will not accept inflated dollars for commodities without adjusting and raising prices.

Both ways...higher prices for energy and possibly other hard assets. Ponzi scemes do not work out in time. That said I still believe we can still do something about U.S. debt if there is the political will...but not enough to stem higher energy prices as that train has left the station.

We don't "owe" anything to the Chinese except a bank statement.

No, really.

Here is the flow: The Chinese sell us stuff, in exchange for dollars. They buy less from us than they sell (of their own free will, for their own reasons) and those dollars pile up their account at the Fed, called a "reserve account" (fancy name for what is basically a checking account). Just like you would move a large amount of money you had in your checking account earning no interest to a savings account, they move most of it into an another account at the Fed which earns more interest, called "Treasury securities". This consists of the Fed debiting the reserve account and crediting the Treasury account. When those Treasuries mature, the Fed will reverse the process. It's all ultimately just numbers in the Fed's computers.

Aha!, you say - but what if they want to put their money in something else? It still doesn't matter. only the Fed (or the Treasury, using it's Fed account) can alter the total amount of reserves in the system. If the Chinese decided to liquidate it's dollar positions by buying euros or by buying Nebraska farmland or stock in U.S. corporations, all it would do is move the reserves from one account at the Fed to another. You can't have a "run" on a central bank with a nonconvertable currency because there's nowhere else for the money to go. They could affect he value of the dollar, maybe - but if they tried to go heavy into the Euro, I'm pretty sure the ECB would respond by buying a lot of those dollars right back, since they don't want their echange rate to go way up and kill their exporters. So you'd have that "debt" transfered from one entity to another, but nothing would have ultimately changed.

There is no "transfer of wealth overseas", unless we export real goods and services. Everything else is just paper. Right now, China is transferring massive amounts of real wealth to us - and we think that by doing this, they are "winning"!

Would it be possible to add a Brent price graph to the right sidebar?
With much of the world's oil priced relative to Brent and the increasing depression of WTI due to tar sands oil, I would really appreciate it.



Brent is now getting on for $14 above WTI!

WTI $87.17
Brent $100.85

But out in the real world the price of oil is how much the producers can get the buyers to pay. That is supply and demand and absolutely nothing else:

This Week in Petroleum Estimated contract prices.

                                   This week
Week ending:    01/28/11  02/04/11 Last Year
Total OPEC      93.95     97.28     72.77 
Total Non-OPEC  89.79     93.60     71.63 
Total World     92.18     95.71     72.28 
United States   87.16     91.00     70.76 

As you can see the average US contract price is higher than WTI and all the other prices are lower than Brent. Also notice the almost $4 jump from last week to this week. They sell oil for what the market will bear. That has always been the case and unless we have rationing or price controls that is the way it will be.

Ron P.

But these contracts will include discounted grades of harder to refine crude. The Brent ICE futures price and the daily Brent spot seem to pretty much track each other within a small margin so there's certainly physical oil being sold close to the Brent front month price. As you point out average OPEC last week was $97.28 which was just a few dollars short of Brent. Spot prices for Tapis of course are even higher.

There is also a long history of what US refiners have paid for crude. I believe it goes back to the1970s. (I haven't checked through the new web site.)

The Saudis price their oil using the Argus Sour Crude Index. That index could better reflect the US situation regarding imports than does WTI, since the WTI price is heavily influenced by Canadian tar sands production...

E. Swanson

Argus Sour Crude Index Price is almost at $100 / barrel.

I forwarded the request to appropriate folks who can decide if it is doable, etc.

Never really sure which index it is, but is it just a matter of dumping this in?


Thanks Gail.


Chomsky's installment at The Nation: Peak Oil And Changing Climate

How Climate Change Became a 'Liberal Hoax'


edit: This is a private video............

Not sure what's going on here. Paywall?!

I have no problem viewing it.

Thanks! It seems they fixed it.

works just fine for me.

(maybe it is only AGW Deniers who are blocked? ;)

When Chomsky became the number one apologist for the Khmer Rouge I stopped listening to him. Although I suspect he has a point in this instance.

While one could interpret his views on US involvement in SE Asia as Chomsky being an 'apologist for the Khmer Rouge', if one gives a good, honest listen to what he was saying, it was about the unintended consequences of US imperial aspirations. That was my take.

"Forgive them, for they know not what they do" doesn't cut it for long. If we walk (run) away from Afganistan, leave a system of corruption, and all hell breaks lose there, spilling over into Pakistan, I suppose we will be complicit because 'we meant well and did what we could'.

Societies are a bit like dogs. If you beat the crap out of a dog, make him mean, and drop him off on the side of the road, blaming the dog when he mauls some kids isn't totaly honest. It's just easier to live with.

it was about the unintended consequences of US imperial aspirations.

I think it's more to do with numbers than anything. Chomsky has stated that he thinks the evidence shows that the Khmer regime was responsible for less than the officially reported 2.2 million deaths.

Wiki article: http://en.wikipedia.org/wiki/Criticism_of_Noam_Chomsky#Position_on_Cambo...

It goes to seeking clarity amid the propaganda. Isn't that what TOD is about?

Overstating oil reserves or body counts both have the same function: controlling perceptions to help achieve someone's agenda, modifying history to a certain point of view, manufacturing denial, maintenance of empire.

I didn't say I was critical of him for doing so :-)

Chomsky is this linguist who never bothered to learn languages. He also invented the bogus theory of a "deep grammar" common to all languages and if you just learn that, you can learn any new language in a kick. In the real world, languages don't work like that.

Anybody is entitled to an opinion. But who made Chomsky a spokeperson for PO/CC?

I can't recall Chomsky ever making such a claim. His theory was that many of the rules of human language are innate, and hence don't have to be learned. Not that learning "deep grammar" would enable you to easily learn other languages.

Anybody is entitled to an opinion.

Leanan you are correct re the deep grammar. Now, one can have an opinion about the correctness of the deep grammar theory itself, and one can debate it on its merits or lack thereof, but one thing the deep grammar does not provide is an easy in to learning languages (that is, by learning Chomsky's Deep Grammar, one is then able to learn other languages more easily). The latter notion would not be an opinion, that would be straight out ignorance of the concept, which suggests one really should stick to the stuff one actually understands when sharing ones thoughts with others.

While I tend to agree that it's better to know more languages than fewer (I believe Chomsky knows Hebrew however, I believe he spent time in Israel when he was very young), that has nothing to do with the academic discipline of linguistics. Again, before spouting words about which one has zero understanding, really, just pause, take a breath, and comment on something one does know about. Or just read and learn.

For the record, Chomsky's linguistics on a technical level are very dense, and extremely difficult to grasp, but he has written a few layman's books on the topic which aren't as hard to get. If you haven't even read those, you really can't have an opinion on the subject, at least not an opinion anyone should be forced to view or hear.

I found his theories interesting, but I have found his decades of work in the political commentary arena far more valuable, in fact, I think he basically just used the linguistics to pay the bills, same as I use my job to support me in what I really like doing. However, within that, the core notion that given the deeply fundamental importance of language in human culture, it would be somewhat odd if the brain had not developed innate abilities to speed the language process up is slightly strange. Sort of like if the liver didn't store sugars, but the body just relied on random locations of blood sugars to handle the biological problem. This doesn't say his deep grammar is right, it just suggests it wasn't that stupid a notion if one was thinking deeply on the subject of language, and especially noting the radical ease with which the young acquire language.

For the techies among you, the notion of a deep grammar is like hardwiring say sound or video codec decoding into a chip's circuitry, to increase efficiency and battery life, like for example Apple's iPhone/iPad does with h264 or mp3 or mp4, except it would lie one further layer of abstraction down, i.e., it would be a logic that permitted all codecs, not just one or two, to be processed more efficiently.

Personally, as someone who could be qualified to have an opinion on Chomsky's deep grammar, I don't really have one, because I never finished his more technical works, and so know I don't really know the stuff at a level where an opinion would be relevant to the discussion, though I did briefly debate entering into the field of linguistics, before I, arguably, came to my senses and went for more broad based focus.

Besides making it obvious that he is totally ignorant of Chomsky (whose first job at MIT was as a French instructor), JW is making a classic ad hominem. He might as well have said, "Chomsky's uncle ran a newspaper stand--so how can Chomsky know anything about anything?"

Of course, making ignorant attacks on someone's background is easier than actually listening to what they have to say and trying to form a cogent reply.

I would really like to hear from those who DID listen to it, what they thought of it.

Touché! Dispatched with aplomb. Well done sir!

Human beings are wired for language. With little instruction ("Say Mama!"), children sort out the sounds their elders make and join the conversation by age three or so. Workers in ports use pigeon to communicate -- a few mutually comprehensible words. But, exposed to the pigeon, children begin to systematize the words, creating a grammar, and winding up with a creole -- a new language. Deaf kids don't hear the sounds but have the capacity to communicate: Voilà! Sign language. Chomsky's predictions of deep grammar -- innate rules governing all language -- don't seem to have proved out, but one can see where he got the idea.

Workers in ports use pigeon to communicate

Well, some might still use carrier pigeons to transmit secret messages but I think you mean pidgin.
Normally I wouldn't care to pick such a small nit, however, since the topic at hand is linguistics and the acquisition of language I thought it might be appropriate to use the correct spelling just this once.

Not such a small nit. Thanks for the correction.

re: Farmland

There's farmland and there's farmland. I live in a state that was once primarily farmland. Now it is primarily trees. There is plenty of unused farmland here as anyone can see by walking through the woods and noting all the rock walls that once demarked the borders between farms.

Much of this 'farmland' is not connected to any roads.

This land could be had for cheap - the further away from roads, the cheaper.

I remember being surprised to learn subsequent to hearing about a 'buy a remote acre of rainforest for $100 to protect it forever' program, that land far from any roads in my own state could be had for about that price.

I wonder how much of this was once farmland.

Maybe farmland here can not compete with flat plains more suited to mechanized production, but I wonder how many cherry plots of land there are available for a song that would be excellent farmland were there no need to compete with modern methods of farming.

If bought for the value as a wood producing plot but with an eye toward eventual conversion to a great piece of farmland, it might turn out to be quite nice over the long term. It would have to pay for itself as a wood plot though, and the farmland bit would be like a long bet. If the value as farmland were completely discounted by the seller then it would be a long bet you could make without spending any money - you bought the land for the value as a wood plot, but selected it from other available wood plots by scanning historical records for past extremely successful farming operations.

I believe that timberland in the south eastern US has historically performed better than the stock market-I don't see any reason why this should not continue to be the case, over the long term, barring major changes in tax ppolicies and so forth.

I'm not sure about timber land returns in other parts of the country.

We are gonna be burning a lot of wood in popwerplants and home heating systems in the next couple of decades, as well as exporting timber to sellers of oil, rare earths,phosphate... to anybody with our dollars and a need for timber, or anybody with the stuff we want and brains enough to insist on a barter rather than dollars..

And forest land is still being paved over, divided into subdivisions, incorporated into parks, and in some instances, cleared for crops or pasture.The pressure is on , long term, on the wood supply.Wood will increasingly be used as a substitute feedstock in place of oil and metals.

I expect a good bit of forest land will be bought up by local govts in the future in order to protect the local water supply; the cheapest way to provide clean water is to own a good clean watershed where the land can be bought.

Bunker fuel is going to be very expensive of course, but the shippers don't want to deadhead back to Europe or Asia, and new boats can be designed to be far more fuel efficient, and all of them can slow down-a slow round trip isn't going to matter much hauling non perishables when there is a future glut of ships,and a dearth of cargo, as at present.

When I lived in northwest Arkansas, pecan trees were worth tens of thousands of dollars for timber. If you had a pecan tree on your property, you almost had to post a guard on it.

Yair...I'll try and squeeze in here. I am very interested in productive land and, as I have posted here before, I believe that here in Australia most of the seasonal food required for most of our cities and towns could be produced within a fifty to one hundred kilometer radius of the local CBD.

Much of this land is high value "life style" acreage and it is not used for farming because of the sheer unrelenting toil required to produce an income using 'conventional' small scale farming methods...for the kind of folks who buy such land it's just too bloody hard.

To this end we continue to develop completely new low input mechanised production systems that will allow viable food production businesses to be established if the crap should hit the blower.

We are working on a much simpler and less complex unit and will post details and a link when we have it up and running...the necessity of a day job to pay the bills is slowing down the progress.

Yair = Australian slang for Yes. It took me a while to look that up.
I could add to the Wikipedia entry but don't have verifiable information. :)
BTW, Have I said yet today that the Peak Oil wiki entry also sucks?

Hey, I thought he was talking like a pirate just for the hell of it. Why not?

Anonymity and idiosyncracy... they go together like peanut butter and bananas.

Yarrrrrrr, Matey....

HRH Prince Charles gets it. Pity his mother's government doesn't.


I cannot see how we can possibly maintain the growth of GDP in the long term if we continue to consume our planet as voraciously as we are doing,'' he told MEPs and business leaders.

We have to see that there is a direct relationship between the resilience of Nature's ecosystems and the resilience of our national economies.

If the fabric of the Earth's life-support system fragments, as it appears it may be starting to do; if those systems become weak or even collapse - essentially, if Nature's capital loses its innate resilience - then how long does it take for our economic capital and economic systems to lose their resilience too?

And by the way, it is quite a rare thing for the Prince to stick his nose into politics in such a brazen way. Well done, Sir!

I've always had a lot of time for Prince Charles. Pity he gets such a bad rap in the papers. He does a lot of good work that goes relatively unreported.

Edit: Blimey, didn't realise how anti-AGW the Telegraph readership is - just read some of the comments...

This comment has got to be my favourite. (Cassandra1963 @ 04:31 - sadly recommended by 10 people). Put away any sharp objects and enjoy...

Its actually very easy [to grow GDP infinitely] with a basic education in capitalism, its quite easy for a capitalist system to not only maintain but increase standards of living, you are making the basic mistake of every Marxist who fails to grasp market principles.

Commodities are in fact infinite, what makes them infinite is their relative value to those who wish to use them. A capitalist system is flexible enough to use any material to hand and the evolutionary nature of capitalism to transform materials into different things should the market need arise is a wonder to behold.

The basic mistake of the greens is to believe that we must encounter the finite resources brick wall when in fact free market capitalism is smart and flexible enough to go round and over and under and through it this supposed brick wall and the nature of industrial society means that new materials are forever being devised and soon what we cannot get here we will get from other planets.

Fear is the killer, fear of the future will get us in the end. The future beckons and is full of promise if we simply shed our childish fears.

I haven't laughed for so long in ages!

You might wish to save that post and run it thru your snarkinol still to refine it into good old sipp'n snark.

eh? say what?

That made the hairs on the back of my neck stand up.

Wow......Reading the comments section on any article related to limits to growth, or finite resources is like staring into the abyss. The hoopleheads will never get it. They demand a star trek future, nothing less will do. That free market can solve anything thinking did manage to get me to start physically preparing for a good old Rupert or Orlov style collapse. Quite motivating for the opposite reason as intended.

Fear is the killer, fear of the future will get us in the end. The future beckons and is full of promise if we simply shed our childish fears.

HAcland, that cassandra1963 really pinned back her cornucopian ears, scraped the ground with her hooves and barreled forward full steam ahead with every bountiful viewpoint conceivable. Gotta grin though when cornucopianism gets that blatant. Ha!

What is interesting is how this reader seems reasonably articulate. In fact you could imagine having an intelligent conversation with whomever it is.

It reads like propaganda, though. A communist in the good ole Soviet Union would say the same exact things, but about their system.

Part of the reason why I think we may be headed into a new dark ages is precisely because these dreams won't be realized.

People won't live forever. We won't be exploring the Moon and Mars. We won't have a new source of unlimited energy. Etc.

If this is true, and I think that it is, then the entire enlightenment/capitalist/secular progress narrative has completely failed.

And if this is the case, then there's nothing left for humans to do but retreat to the monasteries. The whole damn thing is a farce.

Honestly, comments like these make me cry. What's worse is that these view points are held but the vast majority and are most likely "non-negotiable". Kind of reminds me of the drug cartel policy of "plata o plomo", slightly adapted to "Almighty BAU or death"...or..."You'll take my SUV when you pry it from my cold, dead hands".

Well, that's life on 'The road less travelled', right?

A little lonely at times, and miles to go before we sleep.. but it might make all the difference.

Whenever I feel that there might be some hope for humanity, I just read the comments to an article like that and my faith in human stupidity is restored.

Sometimes I feel ashamed to be associated with the species.

I go stand by the side of a road, any road, and watch people drive by in their ridiculous vehicles, accelerating towards the next red light.

The comments section is too much for me to handle.

I go stand by the side of a road

Funny. I sometimes do the same thing.

Just stand by the edge (not too close) of a major highway.
Watch the massive trucks, SUVs and cars whiz by at 80+ MPH.

Feel the road vibrations as their tires rumble by.
Hear the whistle of the artificial wind they create.

Inhale the fumes wafting at me from that endless stream of rolling iron.
Think about the hundreds of gallons of fossil fuel they burn right now.

Place myself in the shoes of each passenger or driver.
What mental stream runs through it in their head?

Some have the radio blasting away a new hip hop rap raging against the system.
Some are yakking mindlessly on their cell phone, oblivious to the danger of steel blazing about them, fast and furious at 80+ MPH.

Some just stare straight ahead without a thought because the drugs and the system have robbed them of any option for rational reasoning.

And so it goes.

Very nicely phrased.

I usually just think about how doomed we all are when those people can't keep driving.

Challenges for biofuels -- new life cycle assessment report

McKone is the lead author of a report titled “Grand Challenges for Life-Cycle Assessment of Biofuels,” which was funded by a grant from the Energy Biosciences Institute (EBI), a partnership between UC Berkeley, Berkeley Lab, the University of Illinois, and the BP energy corporation. This report summarizes seven grand challenges that “must be confronted” to enable life-cycle assessments that effectively evaluate the environmental footprint of biofuel alternatives.

Australia blames mining for greenhouse gas rise

The climate change department predicted Australia's emissions will surge by as much as 24 percent by 2020 compared to 2000 levels, four percent higher than last year's projections.

"Growth to 2020 is dominated by emissions associated with the extraction and processing of energy resources driven by strong [Chindia] export demand," the department said in its annual emissions report.

"Fugitive emissions from coal mines and oil and gas projects, as well as direct fuel combustion emissions from LNG projects, account for almost half of the growth in Australia's total emissions from 2010 to 2020."


'Grain Prices Rally Toward 2008 Records on Shrinking World Supply'

Feb. 9 (Bloomberg) -- Corn, wheat and soybean futures jumped to the highest since 2008 after a U.S. government report showed smaller crops and rising demand are eroding global inventories as food prices surge.

"There is not one crop you can point to that is without supply problems,” Steve Nicholson, a commodity procurement specialist...

Before today, the price of corn, used to make livestock feed and ethanol, jumped 89 percent in the past year, wheat was up 81 percent and soybeans rallied 54 percent. Last week, rice futures reached the highest since 2008.

“Increased consumption around the world eroded stockpiles,” Roy Huckabay, an executive vice president at the Linn Group in Chicago, said before the report. “The current supply-and-demand imbalance looks to last for multiple years and has emboldened new investment money to flow into agricultural futures.”

Along with triple digit oil prices for some grades, and rising food prices, its starting to feel like 08 again. But maybe the economy is more solidly sitting in a lower groove than in 08, so no obvious downturn will occur.

Postal Service warns of default as losses mount

NEW YORK (CNNMoney) -- The U.S. Postal Service warned Wednesday that it may default on some of its financial obligations later this year after reporting yet another quarterly loss.

As I have said, high oil prices go with credit defaults. But the post office!

I guess our "forever" stamps would turn into "whatever" stamps.

The announcement of the forever stamps seemed like an end-game strategy even at the time. Now they will "all" be forever, according to recent announcement by the USPS... until, I guess, they're not. Paging Kevin Costner.

Why are all these canaries swooning?

Didn't they hear about the recovery?

The Post Office has massive expensive infrastructure overcapacity, and the Congress won't let it close uneconomic branch offices or discontinue delivery patterns that don't make sense.

They would be easily profitable if we didn't have the situation where they issue a statement "we are going to close the office in Outer Podunk" causing the 16 citizens of Outer Podunk to write protest letters to their Congressman who then threatens the Post Office with retaliation if they close the subject branch.

It's GROSS mismanagement enabled by a pseudo-government corporate structure that has never ever worked in human history.

Really, though...that's the only reason for the existence of the post service. To provide service for everyone, even Outer Podunk. Especially Outer Podunk.

Private carriers like UPS, Fedex, etc., can cherry pick the most profitable routes. It's the rural areas that are left without service. If we allowed the post office to do the same, there wouldn't be any need for the post office. We might as well shut them down and let the free market provide.

I mostly get junk I don't want from corporations in the mail. Some of it, like credit card offers, are absolute hazards to my financial health, since any bozo could pick them out of the mail or trash and send them in in my name.

I don't know what the answer is, but it looks to me that the PO is partly another story of corps using public serves to make money in unscrupulous ways.

The Internet is definitely hurting the post office. I suspect online bill-paying is especially bad for them - that was several pieces of mail a month, from every household in America.

I could imagine a day when the postal service becomes unaffordable, and they shut it down, letting private companies take over. Perhaps there would still be deliveries to Outer Podunk, but the cost would be much higher. Or maybe there would be "delivery deserts," just as there are "food deserts" in rural areas now - because Wal-Mart can't be bothered with Outer Podunk, and the distributors can't be bothered with the small operators.

As for credit card offers - opt out. If you're truly not interested, protect yourself, save some trees, and opt out.

To really maintain the original goal of the post office, they really should become an ISP. Lay fiber everywhere, build a node or two, and put it under the auspices of the post office. Citizens can opt for an email address that can be used for official federal correspondence. I'd use it, in a heartbeat.

Fantastic idea. But would it be better (or cheaper) to lay independant cable or require existing isps to service remote localities?

Why cable? Use fiber optics, it is faster and it goes light on the metals. Sure it takes a bunch of juice to refine silica, but it isn't as bad as copper ore-> copper or bauxite -> Aluminum or what have you.

Also fiber optics is safer. If you dump the feed on a fibre optic cable, it will not reach the target and everyone will just assume the cable is down. But you can easily listen to a copper wire without anyone noticing it.

You can listen in to fiber, too, only it's more expensive, and a LOT harder. The real key to security is encryption, and using a good enough encryption that the average cost to break the decryption is much greater than the value of any information being communicated. Data can be encrypted by the user, or by the transport equipment, or both, or neither. For the gov't it's generally not hard, though, since all it takes is a court order to snoop phones lines and a subpoena for data records -- unless you encrypt them yourself, and most people don't.

The real issues are the cost of laying cable. It cost a lot to lay the copper telephony cable that exists, and it'll cost even more to lay fiber now (though laying new fiber isn't much more costly than new copper). Basic comm reality (up to the limits of Shannon) based on the electrical characteristics and regulatory framework of telephone cable is that it's hard to get high speeds and long distances over copper, especially cheaply. Fiber is much faster, but costly. So the goal over time is to migrate fiber toward the customer, thereby shortening the copper loop and enabling higher data rates.

The evolution from dial-up modems to ADSL, then ADSL2+, to the latest VDSL and now fiber to the home follows this upgrade path. With each upgrade more fiber was trenched, and the network has gotten closer and closer to the end-user. In cities, the density is high and payback for fiber shared by many users is rapid (fewer miles laid, more subscriber served) even though costs per mile in the city are higher, so the progression goes pretty quickly. Getting the house is as much impeded by impact to homeowners (ditch down the back yard, trench to your house) as it is by labor and material, so the last few hundred yards tend to stay copper where feasible, and residential overbuilds are only now become commonplace.

In rural areas, the push for fiber goes more slowly, as there are more miles to cover and fewer users. Since there are fewer users served by each fiber, the terminating equipment is tending to get smaller as you get closer to the home, and where once you had big green pedastals on the side of the main road now you have little white boxes nailed to a pole down the neighborhood drive. The more rural you are, the slower the roll to your house.

One useful piece of the stimulus money is to fund fiber build-out in rural areas. I'm sure not everywhere will get covered, but its going to make a big impact. Some smaller towns will be fully plumbed for fiber, and many farming areas will at least get fiber pushed closer. A goal of 100mbs service per home won't be reached quickly, but almost everybody should be able to at least get ADSL.

Once most people can reasonably use e-mail and e-pay, first class mail will certainly drop. Probably those rural homes have the biggest market for on-line shopping, but I'm not sure how much of that will go to the USPS versus UPS.

Actually, over here in the UK the Post Office is an ISP. Perhaps not such a giant leap..

The Post Office recognized early on that the Internet would eventually eat their lunch. In fact, they recognized it back in the days of dial up services like CompuServe, AOL, and Prodigy, before Internet.

So they spent a lot of time in the early '90s worrying about how they were going to go into the email business. In fact, there was one fairly elaborate proposal for how they would provide "certified email" that was encrypted for privacy, and would provide guaranteed delivery with return receipts as an added cost service.

However, if they had succeeded, emails would now cost the same as a first class stamp. In fact, their revenue projections were completely wrong, because they were figuring that they could apply physical mail pricing to electronic communications. They has neither the business knowledge or the technical expertise to get into communications.

The whole thing was a distraction for them. They are really in the business of moving small objects from place to place, a specialized transportation business. The fact that the small objects often have writing, pictures, etc., and therefore are a medium of communication, is incidental to their core business.

Had the Post Office focused on its core business of providing transportation, instead of communication, they would have competed better with FedEx and UPS, etc, and they would be in a healthier position today.


That link shows WTI @ 86.95 and Brent at 101.80, which is a difference of 14.85!

I was joking in a post yesterday that the difference between the two prices could swell to 30-40 dollars over the next 2 years. Who knows, maybe it's possible with Canadian oil stuck in Cushing, OK. Once it gets pipelined to the coast for offloading, oh my will that be a shock to the system!

Not so sure it makes that much difference to the US end product price. Gasoline (RBOB) and Heating Oil are completely disconnected from WTI now and seem to more closely follow Brent. Although Nymex WTI is down 0.45% on the day, both Nymex gasoline and heating oil are up 1.1% as of now.

I was joking in a post yesterday that the difference between the two prices could swell to 30-40 dollars over the next 2 years. Who knows, maybe it's possible with Canadian oil stuck in Cushing, OK.

It's not that big a joke. Price spreads between oil in Western Canada and that on the Brent market are getting into the $30 range. It would be worse except that there is a lot of Canadian bitumen and heavy oil shut in due to a couple of recent upgrader fires.

I'm sure that this has traders running around in tight little circles trying to figure out how to get the cheap oil into the overseas market. The differential is big enough that they may start moving oil by unit train. Watch for it rumbling by on a railroad track near you.

Corn soars as US inventory forecasts drop

Corn jumped to prices not seen since the 2007-08 food crisis after the US government said inventories of the agricultural staple would equal their lowest level on record this year.

In its closely-watched monthly report on global agricultural markets, the US Department of Agriculture said on Wednesday that corn demand for production of ethanol and sweeteners would be undimmed by current high prices, upgrading its consumption forecasts.

That means stocks in the US – the largest exporter of the grain, controlling more than 50 per cent of the global market – will fall to 675m bushels, down 70m from last month’s estimate, according to the USDA. Relative to consumption, that equals the lowest level on record, set in 1995-6, when corn prices surged 160 per cent in little over a year

In the US: Expect to pay more at the pump and the grocery store. In the rest of the World: Expect more riots.

Also here

* FEBRUARY 10, 2011

China Lifts Farm Subsidies
Nation Encourages More Grain Output to Fight Food-Price Inflation

China made its first sizable imports of U.S. corn in a decade during 2010 and in total bought 1.57 million metric tons on world markets, an 18-fold increase from 2009. Wheat imports expanded 36% in 2010 to 1.2 million tons, and China's rice imports grew 8.6% to 366,171 tons.


If we consider the growing problem that large parts of China can no longer be farmed, it's just a matter of time before grain demand exceeds supply - and then it will no longer be just an issue of how high the price of food has gone.

That will probably trump worries about PO, unless some kind of war or embargo pops up in the next year or so.


That has been my contention all along, that China will once again be held in check by famine. It's a historical, recurring problem that was not close to solved with the recent one child policy.

Their current course of having millions leave the land only exacerbates the problem. Not only are there millions more urban mouths to feed, these are people who fed themselves in prior times, now requiring someone else to feed them. Chinese grain production, though modernizing, is still rather primitive, many plots too small for efficient production other than by hand labor, with wheat often stored in earthen jars, not elevators.

That has been my contention all along, that China will once again be held in check by famine. It's a historical, recurring problem that was not close to solved with the recent one child policy.

I think China's US$2.5 trillion in foreign exchange reserves will go a long way toward preventing famine in China. I think the Chinese will just buy all the grain they need on international markets, and people in other countries will starve instead.

Welcome to the 21st century. Hopefully you fastened your seat belt, because there may be some sudden turns you didn't expect.

Good article on Chinese agriculture in NYT quoted in full on The Automatic Earth yesterday (last article). Says pretty much the same as you.
BTW, Charles.
China is not necessarily primitive with regard to wheat/grains production. Depends how you view it. In parts of China traditionally favorable to agriculture, like the Yangtze delta, double cropping (dry crop of wheat in winter, rice paddy in summer) can produce an astonishing 12t per hectare of grain (4.8t/acre/year) year after year. 80% of that grain was being eaten by the villagers who produced it (I refer to studies from 2 decades ago). Use of machinery was minimal, but some N fertilizer was needed of course, but less pro rata than in high yielding 'western' grain production. They used much of the straw for cooking.

What good will US$2.5 be if the US says "we ain't paying" ?

If the US still has an excess of grain, and SA an excess of oil, then paper be dammed. Which would you prefer -
food or an LCD TV?

If the US still has an excess of grain, and SA an excess of oil, then paper be damned.

If no paper, then possibly direct barter of food and FF (oil) would work. Just would not be BAU, and it is my opinion those that have a stake in BAU will keep it going until they cannot.

Present day ability to pay rarely defines future distribution and allocation of foodstuffs. That has been the rule and will continue, 21st century or not. Wealth of nations will not change human nature, I fear they only compound it.

This year's fear of Chinese crop failures are yet premature. Future years will not be so easy. China is saddled with both an increasing population and a growing Golbi desert.

I think the Chinese will just buy all the grain they need on international markets, and people in other countries will starve instead.

Welcome to the 21st century. Hopefully you fastened your seat belt, because there may be some sudden turns you didn't expect.

Lester Brown gets some flak on this site, and probably deservedly so regarding his Plan B technofix optimism. But he has been warning of just this occurrence - China entering the global grain market - for at least a decade. So thanks to him I have been expecting 'some sudden turns'.

I especially appreciate his description of aquifer depletion, which plays a critical role in global food supply. Say an aquifer has a capacity (a fund, if you will) of 100 units, and it is recharged (a flow) at a rate of 10 units. Wells are drilled, and extraction begins at 1 unit per year. No problem. But extraction grows (exponentially as is the norm in human endeavor of late). As soon as extraction exceeds 10 units, disaster is in the cards, although it will not be seen immediately. But extracting more than the recharge begins to deplete the resource (sound familiar?). So finally one year the aquifer has a store of 20, a recharge of 10, and we are extracting 30. All the water we need. The next year? Not so good. Aquifers from Shangdong to Ogalalla are in this circumstance.

Stay tuned.

edit - Whaddaya know, here he is on the very subject - Food Bubble About to Burst. Not a great article, but does succinctly make the point on water.

(Hat tip to jmygann)

Like nobody would ban export of grain in a hard year, like Russia just did. Nuts. The international market will shrink to whomever produces a huge surplus, so domestic riots won't take place in the places that may need to shore up their only marginal surpluses. It is still not looking good for China.

Platts Survey: OPEC Pumps 29.57 Million Barrels of Oil Per Day in January

Crude Oil Output Up 300,000 b/d from December & Highest in More Than 2 Years

"The numbers out of Iraq are lending support to the declarations by BP that it is significantly increasing output at the Rumaila field," said John Kingston, Platts global director of news. "But it's not just that field, where production is said to be up by 150,000 b/d. The increase since August is more than 300,000 b/d, showing a more broad-based growth than just Rumaila."

Declines of 40,000 b/d and 20,000 b/d in Iranian and Nigerian production volumes partly offset increases totaling 130,000 b/d from Angola, Kuwait, Saudi Arabia, the United Arab Emirates (UAE) and Venezuela.

Strange then that oil tanker hire rates crashed in January and have not recovered.

Baltic Dirty Tanker Index

Gulf, The
Al Hilal Publishing & Marketing Group
February 9, 2011

Riding the wave

Tanker rates were averaging new lows in the first weeks of 2011, with a huge amount of new tonnage coming on to the market creating oversupply. In early January, the average day rate for VLCCs on the Middle East-Japan route dropped to around $18,500 per day in December, the lowest December figure for at least 10 years. By mid-January, the rates had fallen below the $15,000 a day mark.

[no link]

Gulf region countries are building up their large tanker fleet - somewhat regardless of economic conditions - apparently to maintain control and add 'value'. Some deliveries of new tankers have already been made in 2011, so it's not exactly clear just how much of the tanker rate drop is due to low demand and how much due to new tankers.

Note my other comments further above, Persian Gulf exports appear this week to actually be running at even a slower pace than in January - despite widespread predictions to the contrary about a KSA 'output' increase. Tanker demand elsewhere though has increased some lately, which is probably why rates have improved the last few days.

Strange then that oil tanker hire rates crashed in January and have not recovered.

maybe nobody wants to store $ 100 oil ?

Merge debates on foreign oil, transportation, says energy security council

The nation’s newest fan of mass transportation as a legitimate and vital national strategy is the gravitas-filled Energy Security Leadership Council (ESLC).

The panel of retired military leaders and corporate CEO’s has always cited foreign oil dependence as a threat to national security. In a report released today the council cites mass transportation, smart-toll pricing and new technologies as frontline warriors in the battle for energy independence.

...Their goal is no less that the transformation of the nation’s transportation policies.

In simplest terms, their proposals state: If a transportation system can reduce the consumption of oil, find ways to make it happen.

The leadership council is calling for a new transportation fund, fueled by the elimination and consolidation of duplicate programs, to finance metropolitan transportation systems that cut highway congestion within five years and promote alternatives to single-occupant vehicles.

From MediaMatters: Fox's Oil Man Eric Bolling: Short On Science, Long On Climate Misinformation

An example of jaw dropping ignorance and bias on display.

Followed closely by House Energy Committee Chairman Fred Upton Denies Human Role In Climate Change (VIDEO)

Facts? We don't need no Facts. We don't need no stinkin' Facts.

S - Just consider this one more step in desensitizing you to an even great onslaught of stupidity when PO starts to really generate great pain to the American people. Both R&D politicians will not only disavow global warming but some may start pointing out the environmental benefits of burning more coal. Remember above all else: our life style is not negotiable.

Have you read pastor David Wilkersons book "The Vision" from 1973? In it he predict that the economy will crash hard, and when it does, people and MSM will blame scientists and enviornmentalist for restricting industries acces to vital natural resources, thus impairing said scientists and enviornmentalists work efforts.

Makes me wonder if he read the Club of Rome report and quickly wrote down his book afterwards. It's good doomer reading anyway.

And yes, Wilkerson will be proven right on that one.

Don't forget that he foresaw the invasion of the illegal aliens in the same book...


I have no memory of that prediction. But if he did forsay that, he will be right again. Thats my bet anyway.

Regarding Wilkersons predictions; yet so far he has been verry good on quality (what) but totaly suck on quantity (when). But thats the first lesson you learn at prophecy school; don't say both what and when in the same prophecy.

Btw, when you wrote "aliens" I first thought you meant the kind that comes from Space. It was the word "illegal" that tipped me off.

I have a post by aeldric up on Our Finite World called Networked Resources, Declining Quality and Peak Oil

The Peak Oil argument focuses on the question “How much oil?” We spend a lot of time discussing the exact inputs for Hubbert Linearization and projections of Ultimate Recoverable Reserves, in order to calculate the moment of Peak Oil. Sadly, the question of “How much oil?” is a lot more complicated than it seems.

As I have said previously, theoretical discussions about oil reserves are pointless. In theory, the amount of oil available is an arbitrary number. Oil can be made from any organic source: coal, natural gas, biomass, or whatever. If enough energy is available, it can be made from CO2 and water.

This applies to ALL resources. Minerals can be extracted from sea water if access to energy is unconstrained.

Low quality is what is killing us, not low quantity. Alternately, we could argue that the constraint is low energy. If energy was cheap and unlimited, then recoverable resources would be unlimited. So we need to look at the availability of oil within a networked resource/energy extraction system, not just as an isolated resource.

Gail, do you have a source for determining the quality of oil and a time line of the oil quality?

E-3POD electric vehicle concept wins the Double Challenge Project

It's a car. It's a bike. It's the winner of the Double Challenge project sponsored by Citroen. It may look like a prop from the move TRON, but in actuality it is an ultra-compact electric vehicle. Somewhere between a motorcycle and a car this vehicle is light, aerodynamically efficient, economical and cheap to build.

Blessed are the wacky inventors! I'm glad folks are out there trying such a wide variety of approaches, particularly at this scale.

This one looks a bit over the top.. I'm inclined to a more boring style, like the basic Velomobile Bubble/ Crossed with a classic 1960s Pedal-your-own Firetruck.. but I'm a different kind of wacko..

I'm inclined to a more boring style, like the basic Velomobile Bubble/ Crossed with a classic 1960s Pedal-your-own Firetruck.. but I'm a different kind of wacko..

Me too, but upon first inspection it seems that the E-3POD borrows at least a little from the tadpole configuration and tilt steering of the recumbent trikes which are also common in the velomobile designs I've been looking at. I'd like an electrified, solar charged, Quest velomobile for now. What I'd really like to see is having them mass produced and price comming way down since right now they are a bit pricey... And while Im dreaming, I'd like to explore the possibility of making them mostly out of bamboo composites.

Clinging to BAU is for ossified losers who have no imagination and no compassion or respect for other lives and lifeforms!

Jeez, Fred, the Quest looks great (for over $15k, loaded, with the larger battery). Ouch! They do need to work on the price a bit.

How about something even more basic: SBU2.0. And if we want to go really fast, we put on our jumpsuit airbag.


Sure looks cool (what ever that means this week). But, it's not aerodynamic. The back end cuts off too quickly, so the drag on the rear isn't going to be much better than a motorcycle. Having 2 wheels up front, with the associated structure, isn't better than a 2 wheel motorcycle where the wheels are in line. One wonders what happens when the thing drives thru a water puddle or mud hole and the rear tire brings lots of water/mud inside the pod and slings it at the inside of the windshield. Then too, who wants to look at that fat rear tire directly in the front of one's view of the road? If this pod is intended for low speed use, why not go for a more traditional golf cart style approach. If one wants high speeds, the VW XL1 looks to be a much better approach...

E. Swanson

I would not be surprised if it was a design in the same sense as interior design.

Probably works great on a velodrome. But imagine a stick jumping in the wheel hoop and then jamming in the housing at speed. I am all for it but tend to see the failure modes, as is my habit.

what happens when the thing drives thru a water puddle or mud hole and the rear tire brings lots of water/mud inside the pod and slings it at the inside of the windshield

I am not a tecnofixer nor do I play one on TOD. But I can't help but be intrigued by things like this. My take on the design is that the wheel travels in a 'sleeve', and does not directly interface with the inside of the pod. That, at least, would be the only way this design would make sense...

And I googled this thing, but found only repetitions of the press release. Anyone got a link for the actual project with design details/specs...?

Looking at the pictures, it appears that there is no point at which the wheel is exposed in the interior.

The large wheel interferes with the forward view of the driver.

I'm sure it will work wonderfully on the perfectly paved roads we're sure to have in the future.

Does anyone have a link to any credible estimates of oil and NG reserves in the South China Sea?

Re: New drilling method opens vast oil fields in US

Within five years, analysts and executives predict, the newly unlocked fields are expected to produce 1 million to 2 million barrels of oil per day, enough to boost U.S. production 20 percent to 40 percent. The U.S. Energy Information Administration estimates production will grow a more modest 500,000 barrels per day.

For the experts at TOD, how much additional crude oil will the U.S. get and what will be the maximum extraction rate from horizontal wells and hydraulic fracturing in oil shale? Perhaps the 1 to 2 Mb/d estimates are the maximum production rate from the horizontal wells and the EIA's 500,000 b/d refers to the resulting increase in U.S. crude oil production (the production decline of existing wells included).

Without entering to any technicalities Within five years, analysts and executives predict..

Yup, just ask Yergin/CERA...

It would be interesting to see a key post on this topic to address your question with some measure of analysis, or at least informed opinion.

I am curious, I looked at the Energy Export Databrowser and it appears that the U.S. produced 7.196 M bbl of oil/day in 2009. I might be tired or something, but isn't 2M bbl/day more (~9M bbl/day) a 28% increase over ~ 7M bbl/day...not 40% as the article states?



I am curious, I looked at the Energy Export Databrowser and it appears that the U.S. produced 7.196 M bbl of oil/day in 2009. I might be tired or something, but isn't 2M bbl/day more (~9M bbl/day) a 28% increase over ~ 7M bbl/day...not 40% as the article states?

You're looking at all-liquids production. US crude & condensate production is currently in the 5.5 - 5.6 million bpd range (scroll to bottom). An additional 2 million bpd would be a 36% increase, but I presume the author of the article used a current production of just 5 million bpd, which *would* make 2 million bpd a 40% increase.

Thank you, that explains it.

I will try to read references more thoroughly next time.

Here's hoping for some more domestic oil production...it may buy us a little time to do a little better job at preparing for a our post-abundant-oil future which is coming down the pike...or that tiny spark of optimism might be the codeine talking...

I think the Energy Export Databrowser is showing liquid fuels production. Currently U.S. crude oil plus condensates production should be between 5 Mb/d and 6 Mb/d.

The line directly before the part you quoted says that the 1 to 2 million bpd estimate is from analyst and executives. The 500,000 bpd figure is a more conservative estimate from the EIA. It is just two different groups estimating the same thing.

My opinion is to be very skeptical that they ever get the total from these unconventional oil reservoirs up to 2 million barrels per day. Even the 500,000 bpd estimate is going to take a lot of drilling.

Another problem will be similar to the questions we have with world-wide production rates. What is really being counted? Is it lease crude and condensate, heavy oils, biofuels, etc.? With unconventional oil the question will be what fields count. Obviously the Bakken, Eagleford, and Niobrara, but what about the Spraberry? According to the EIA the Spraberry is the second biggest field in the US by reserves, but it is not really new and it isn't being developed with horizontal wells. (It just really crappy rock that was not economic at lower oil prices.) The current production from the Bakken and Spraberry combined is probably over 250,000 bpd, so 500,000 bpd does not seem that far away.

The current production from the Bakken and Spraberry combined is probably over 250,000 bpd, so 500,000 bpd does not seem that far away.

Let's suppose those numbers are possible. But think about where this oil is coming from. It's the uncoventional stuff that use to be uneconomical. Now it's economical, but what gets drilled after that stuff? In other words we are quickly moving down the ladder of the easy to get cheap stuff to the really tough stuff that requires a lot of money & energy to get to market. As we move down the EROEI ladder energy becomes more expensive, and standards of living go down with it. The fact this stuff is being tapped is an extremely bad sign, and is an equally bad sign that shale oil is also being tapped for NG.

I write this because some people are under the illusion this means we can just keep going with our usual BAU. Maybe for a while longer, but at some point BAU will need to transform into BFA (bottleneck for all).

Yes. I came to the conclusion a while back that only a lunatic would ramp up tar sands production, unless the real thing was going to be in seriously short supply.

And speaking of signs of desperation, posted a few days ago:

Wood Gas - the final frontier for the stupidest naked ape in the universe

If I recall correctly, the last time we stooped this low was inn Europe during the darkest days of WWII.

Next stop, Planet of the Easter Islanders (substitute stone cities for stone heads).

Next stop, Planet of the Easter Islanders (substitute stone cities for stone heads).

I was on a walk in the park the other day and stopped at a viewpoint. There was a couple sitting nearby and I couldn't help but overhear the young fellow describing to his companion the true story of a once prosperous people, living on a small tropical island, who for some reason cut down all their trees and suffered greatly for it.

As long as I live I will never forget her shocked, piteous response: "How could they be so stupid?!?" I chose not to say anything, despite the almost unbearable temptation, and quietly kept walking.

How indeed. As Jared Diamond observes in his book "Collapse", Rapa Nui probably still enjoyed a relatively high percentage of forest cover when some invisible threshold was crossed that effectively doomed the island to eventually become deforested. By the time the last of the dwindling scrub woodlands finally died out, perhaps due to a change in climate, it probably went un-noticed by a population already decimated by war and hunger that had long since lost the ability to hunt their staple diet of marine mammals using sea-going canoes carved from the largest trees.

Contrary to the notion of someone cutting down "the last tree", when the invisible threshold was crossed the people going through their mundane daily routines at the time probably had no idea that they had collectively just condemned the island to a barren, desolate future.

What invisible thresholds have we already crossed? Will some as yet unborn future generation cry out for us: "How could they be so stupid?"

How indeed.


Will some as yet unborn future generation cry out for us: "How could they be so stupid?"

If there is such a future generation, yes they will.

Way back in '68-'69 National Petroleum (Canada) had a spin off corporation, Permeator Corp., that held leases in the sands. The idea was that their permeation techniques would loosen up that oil (bitumen actually), and they could just pump it out. Permeator was part of a stock scam on the West Coast (Pacific Exchange) and some folks involved went to jail, or so I understood at the time.

So... the lunatics have been around for a good long while.


Re: Re: New drilling method opens vast oil fields in US

These methods aren't all that new. Hydraulic fracturing was not exactly a new technique when I started working in the oil industry some 40 years ago. Now that I'm retired, I don't think it's gotten any newer.

Horizontal wells aren't exactly new, either, although the technology has become considerably cheaper and faster in recent decades.

I think the people who are talking about an extra 2 million bpd in crude oil production in the US are possibly dreaming in Technicolor. The EIA's estimate of 500,000 bpd is probably more realistic.

However, we have to balance that against the fact that the US government hasn't issued any new drilling permits for the Gulf of Mexico recently, and given the fast decline rate of fields there, without new drilling GOM production is going to crash in the not-too-distant future.

There is no doubt that both hydraulic fracturing and horizontal drilling are not really new technologies. However, as you say the technologies have improved over time. I think the latest big improvement was combining the two. Ten years ago it would have been pretty rare to find someone hydraulically fracturing a horizontal well. About five years ago it started to become more common, but there was little done in the way of placing or diverting the fracs. Now they are drilling 8,000' laterals and placing 25 separate (at least they hope separate) fracs. That seems to be the big change to me and some of the results are pretty impressive.

However, I definitely don't think this is going to save us from peak oil, and I think the points about diminishing EROEI are absolutely true. I had also forgot about the lack of drilling in the Gulf of Mexico and I agree with you on that. It does seem to me though that people will be working harder and harder to produce oil for many years to come even after peak oil becomes proven.

By the way, I spent quite a few years working on old Wyoming properties with heavy sour crude, and I can guarantee you that there was a huge price differential to WTI when the Express Pipeline first came through.

Blue - Rocky offers some pretty good insight IMHO down below. All I'll offer is a couple of smal points. First, this will sound picky but we aren't producing any "oil shales" at the moment nor expect to in many years...if ever. I won't go into details now but research "oil shales" and you'll see. The Bakken is adding a good bit of oil but it isn't an "oil shale" but rather a shale that produces a lot of oil when it's drilled horizontally and frac'd. I know that sounds silly but the two different rocks (Bakken or Eagleford and the "oil shales") are a million miles apart in their potential to add to our domestic production. The MSM doesn't help because they constantly confuse the issue.

DW GOM oil fields have the ability to bump up domestic oil production by 100,000 to 200,000 bopd seemingly overnight. But it might take 4 to 7 years after discovery for them to open all those wells up in just a few weeks. But unlike Ghawar they won't be putting that production out for decades. Typically for less than 10 years and often much less. And do so at an every decreasing rate. Thunderhorse seems to be proving out rather disappointing in this regard. And as Rocky points out DW GOM exploration has all but stopped. But IMHO it will pick up someday. Not sure of that date but it will be not too long after gasoline goes to $6/gallon and feds demand that companies start drilling the DW GOM again.

Blue - Rocky offers some pretty good insight IMHO down below. All I'll offer is a couple of smal points. First, this will sound picky but we aren't producing any "oil shales" at the moment nor expect to in many years...if ever. I won't go into details now but research "oil shales" and you'll see. The Bakken is adding a good bit of oil but it isn't an "oil shale" but rather a shale that produces a lot of oil when it's drilled horizontally and frac'd

I think it is worth pointing that out every single time. Otherwise, I think the country is going to make some really bad policy decisions because Joe Six-pack will hear about the (ordinary crude) oil we are extracting from the Bakken shale and will hear about the trillions of barrels of 'oil shale' in the Rockies and then conflate them to think that we have trillions of barrels just waiting to be sucked out of the ground if it were not for those tree-huggers . . . and thus peak oil is not a real issue.

Yes . . . people are that stupid. Some 40% of the population still thinks Saddam had something to do with 9/11 because the Bush administration made an intentional campaign of mentioning Iraq & Saddam when ever they mentioned 9/11. When people want to believe something, you don't even need to say the lie . . . you just need to suggest the lie and they'll take over from there. People don't want to believe oil shortage is a problem. So if you mention oil drilled from the Bakken shale and that we have trillions of barrels of energy in 'oil shale' . . . the delusion will take over.



* Sees oil/gas output steady or lower in 2011
* Cuts 2012 output goal to 2 million boed from 2.06-2.16 mln
* Q4 adjusted EBIT up 18.6 pct to NOK 40.8 bln, misses view
* 2010 reserve replacement ratio 87 pct, vs 73 pct in 2009

memorable quote;

"Overall, a very disappointing report," said Trond Omdal, an analyst at Arctic Securities,

On the other hand REC, the Norwegian PV company did pretty well.


Revenues of NOK 4,874 million up 29 percent compared with third quarter 2010

EBIT NOK 1,134 million up from NOK 155 million in the third quarter
- Includes NOK 332 million in special items, mainly related to a cancellation fee received for a wafer sales contract
Higher FBR production and improved quality in REC Silicon
A stronger than expected market
- Increased average selling prices for polysilicon and wafer
- Sales of accumulated off-spec products

Chevron-Ecuador update:

Chevron is using every means possible to subvert the verdict.

Anyone see any similarity between Fate of the World and Evoke http://vimeo.com/9094186 and this posted on The Oil Drum April 3, 2009 here: http://europe.theoildrum.com/node/5145#comment-489891
and this description sent to Jane McGonigal in a little later in April 2009?

the following components:

- Huge, along the lines of MMPRPGs, but bigger than any before it. This needs to be international in scope since any solutions must also be.
- Participation of individuals from all levels of society, gov't officials and orgs, non-profits, NGO's... everything.
- Would be like an RPG or virtual reality game
- Would have real climate models attached, or at least data from models as part of the data/some form of integration so people can see climate effects as they happen in the game
- Would include energy decline reality
- Would include other resource constraints (water, fisheries, farming, etc...)
- Would include real-world economic data
- would allow for new models of governance, economic systems and societal structures to be tried and tested
- Perhaps multiple runs/games going simultaneously, much like Global Climate Models. Maybe individuals could start up their own runs and people could jump in if they liked the parameters set by the originator?
- Dummy nodes/agents coded to model the averages for given regions/cities/countries to get the numbers up as high as possible?

And posted here http://tinyurl.com/5venklm in May '09?


Yes, it looks like former TOD commenter ccpo wrote that. It finally occurred to me what the acronym ccpo stood for => climate change peak oil. Doh!

It's the similarity that stands out.

The Archdruid is in fine form tonight.

Underlying all the grand and sweeping fantasies of endless economic growth powered somehow by lukewarm sunlight and inconstant wind, I’ve come to think, lies the simple fact that the human mind never quite got around to evolving the capacity to think in terms of the huge amounts of energy our species currently, and briefly, has at its disposal.

That pretty much says it all. Our species outran itself.



Thus you don’t have to run out of fossil fuels to end up in a world of hurt; you just need to get to the point where rising demand crosses decreasing potential flow. Worldwide conventional petroleum production passed that point in 2005

I first found about "Limits to Growth" in 1971, from someone in MIT who actually help program the project explained the book. It's 40 years later and we still don't get it.

Underlying all the grand and sweeping fantasies of endless economic growth powered somehow by lukewarm sunlight and inconstant wind, I’ve come to think, lies the simple fact that the human mind never quite got around to evolving the capacity to think in terms of the huge amounts of energy our species currently, and briefly, has at its disposal. It’s one thing to point out that a planeload of tourists flying from Los Angeles to Cairo to see the Great Pyramid, back when political conditions in Egypt allowed for that, used more energy in that one flight than it took to build the Great Pyramid in the first place. It’s quite another to understand exactly what that means – to get some sense of the effort it took for gangs of laborers to haul all those blocks of stone from the quarries to the Nile, load them on boats, then haul them up from the Nile’s edge east of Giza and get them into place in the slowly rising mass of the Pyramid, and then to equate all that effort with the fantastic outpouring of force that flows through the turbines of a modern jet engine and keeps an airliner poised in the thin air 40,000 feet above the ground for the long flight from LA to Cairo.

From this point forward no one is to be allowed to graduate from any college or university without understanding this one simple point. To accomplish that they must of course be able to pass the physics class and be able to actually do the math. Then they must join their classmates and move a couple ton block of concrete across town on log rollers and then by means of pulleys and tackle and ramps and inclines lift it up and slide it into place place atop a concrete block previously placed into position by the last year's graduating class. No exceptions no ands ifs or buts! That goes double for all you MBAs, Economists, Political Science Majors, etc... Sigh!

I have huge respect for the archdruid, and his point about energy use flying LA to Cairo is perfectly fair. Can anyone numerate check the math? I almost certainly got it wrong, but my calculation came out at x10 energy needed to build the pyramid compared to the single flight. This of course in no way invalidates the point he's making!

To be fair I did not do the calculation myself. Though at least a simplified calculation for the energy required to fly a passenger jet is readily available from: Sustainable Energy - without the hot air by David JC MacKay


The energy required to build a pyramid needs to be dug into a bit more (no pun intended) I don't know exactly what information JMG based his calculations on. I did assume the JMG didn't just pull his figures out of thin air.

This might be a start: http://www.peter-thomson.co.uk/ancients/peoplepyramid.html

The great pyramid is built from aproximately 2 million blocks of stone.
Each block averages 0.9m x 1m x 1.2m
This stone has a density of 2.563kg/m^3 (160 lb / cu ft)
So each stone averages 2768 kg (2.5 tons)

Calculations follow...

That example is from Pierre Chomat's Oil Addiction: The World In Peril. He's perhaps best known for inventing the term ergamine - "energy slave."

As I recall, he doesn't measure the energy produced by workers in the strict physics sense. That is, the amount it takes to lift a stone block x meters. Rather, he uses the work of Buckminster Fuller, who measured it directly, using the work of conscripts. You can get an inkling of the idea here. There's a big difference between the work done by human hands vs. human legs.

I used this thought experiment at the beginning of my presentations on Transportation Cycling: I ask someone to volunteer to tell me how many MPG their car gets. Then I'd ask that person to imagine pushing their car the number of miles it would go on a single gallon of fuel. Then, the kicker, I ask how much you'd be willing to pay for the fuel to allow the engine to do that for you. Punch line: gas is WAY too cheap.

Of course, lukewarm water feels pretty darned good when its -5f outside.. it might not be 'enough'.. but I'd be singin' Dayenu.

"Of course, lukewarm water feels pretty darned good when its -5f outside.. it might not be 'enough'.. "

It feels really good for those of us who've made the 'adjustment', especially when we don't have to write the check every month. All it takes is an outing of one's pathological fear of austerity.

I love my solar hot water, esp. when delivered to our outdoor shower. Enveloped in those sun-warmed sprinkles, the outside air temp of even around freezing matters not. Twilight, starlight, moonlight - much better than some steamy ceiling. But I digress...

More about the electric power failure (82 power plants failed out of 550 total in Texas) due to the recent cold winter weather:


Ron Kitchens, a retired executive director of the commission, said the gas industry delivered the gas that was guaranteed by contract to its electric-power customers. But he said an unknown number of electricity generators had opted for contracts that allowed their gas service to be interrupted in exchange for cheaper gas. Without gas, the generators couldn't produce electricity.

Complicating the electricity outages, Kitchens said, was a "substantial loss" of gas production because producers were not exempt from the rolling blackouts that left thousands of Texans shivering in their homes as officials ordered power reductions to avert a potential statewide blackout.

A deadly embrace! Such is the frailty of interconnected systems with common dependencies. You can have strong embedded feedback loops and coupled faults and not even know it.

There is a lot to be said for keeping interconnections short and simple. Complex systems tend to fail in complex ways. Even simple systems sometimes do!

This is the main reason I believe the "slow collapse" crowd is wrong. If you have this kind of trouble now, how much more willyou not have when Peak Oil and Peak Coal isfar behind, maintaniance have lagged for decades, population have risen while grid expansions have notfollowed the same pace, and you are desperately short on cash?

There will come one day when a huge chunk of the grid goes down and never comes back again. When so happens it will likely spread tothe entire continent. Be that Europe or the US.

The speed of the collapse will be limited only by the spead of electro magnetism in copper wire.

That's assuming that interconnectedness continues until the end.

I think it's more likely that a chunk of grid goes down, and since there aren't a lot of people living there any more, and they aren't paying their power bills anyway, they just cut that section loose. The grid will slowly contract.

A form of deglobalisation. The grid becomes a series of islands that are less and less connected. This of course becomes a pain for all the distributed wind/PV farms that require the fully connected grid. Without the resilience of the distributed grid, the local grids become less reliable.

Oh what fun we have in store for us.

I expect that grids will revert to being more regional. Areas with more capacity (i.e. Pacific Northwest, Tennesee Valley) will have an advantage, especially if they impose better regulation on their area. This assumes a certain level of BAU. One would think that rural areas will be low priority, but since much (most?) production occurs in rural areas (by folks who live in these communities), this may not be the case. Some may choose to interupt the tranmission from their area and keep the power for themselves, or hold it hostage and dole it out for trade. Much depends on the 'state of the Union' going forward.

Assuming your scenario pays out, we will have another effect. For each apple I invest I get so much apple pie back. The bigger the pie maker, the more pie I get on my apple. When the grid slowly contract, economy of scale multipliers will contract with it. Hence, the output of the system will decline faster than the system itself declines. Now, the resources that comes out from the system will be the input to keep it running. So funds for maintainance will decline faster than the grid contract. And this will fuel a yet faster future decline. The contracting of the grid will simply accelerate.

Energy Agency warns of danger from high oil prices

PARIS (AFP) – The global recovery will drive oil prices dangerously higher this year, possibly to the level where they could push the economy into a marked slowdown, the IEA warned Thursday.

The prospect of rising inflation, driven by oil and other higher commodity prices, coupled with political instability in the Middle East is an added concern, it said.

OPEC's Monthly Oil Market Report is out today with the production numbers for January 2011. Below is the change for each OPEC member in thousands of barrels per day, crude only. (Does not include condensate.)

Alg. Angola Ecu. Iran Iraq  Kuw. Libya  Nig.  Qatar Saudi UAE  Ven.  OPEC
6     42    5	 -21  258   18	  2     -32   -3     72	   35	13    397

So now we know who could increase production and by how much. Angola was down 89 kb/d last month so they are just trying to recover from that hit.

I was a little shocked at Iraq's output. It will be interesting to see how they fare the rest of the year.

Ron P.

There was an unusually large import of Iraqi crude into the US in the week ending 21st January. It appears such a one-off large transfer occurs every few months. I wonder if this is related to storage in which case Iraq will be considerably down in February. We'll see. In any case US imports dropped back to more typical levels in the following two weeks.

Weekly US imports from Iraq of crude oil

  2011-Jan 	01/07  	71    	01/14  	210    	01/21  	731    	01/28  	265    	  	   
  2011-Feb 	02/04  	340    	

The deficit battles have commenced. The debt showdown looms:

Among 60 programs in line for elimination were the Corporation for Public Broadcasting, AmeriCorps and a $298 million Clinton-era program for hiring local police officers. Other planned cutbacks included nearly $900 million in energy conservation and efficiency programs; $1.8 billion from the Environmental Protection Agency; and $75 million from legal-aid programs. In a swipe at the administration, the bill would eliminate $5 billion in high-speed rail money.


Funny, I didn't see any reference to any DoD/DOE/FBI/TSA/NSA/CIA/EIEIEO cuts.

We don't need none of those stinkin' liberal programs anyhow :-/

Administration officials confirmed on Wednesday that the budget would propose to cut in half, to nearly $2.6 billion in fiscal year 2012, a federal program that subsidizes energy costs for low-income households.

The big reduction for the popular Low-Income Home Energy Assistance Program immediately drew protests from lawmakers and antipoverty groups, as have several other cuts the administration has previewed for community service and environmental programs.

No worries; frozen people generally don't vote.

I wonder what it would take to make the Congressional Washroom Faucets pop into a few sporadic 'flaring-off' events. Not to change anything.. just for the comic effect.. would make some great Youtube videos!

Where's Alan Funt when you need him?

I have long thought that LIHEAP funds would be much better spent on weatherization and other efficiency/conservation measures than on simply subsidizing heating bills. Rather late in the game, now.

Many beneficiaries are renters. Unlikely that landlords will upgrade their properties. Another conundrum.

Landlords that I know (as I am one, too) are trying to improve their properties.. I suspect the ratios are similar across the spectrum.. waste is just all around us.

Yes, the renter-owner issue is a classic 'market barrier'. But since we're talking about a gov't program, it could be structured so as to whittle down on the number of landlords who own energy hogs and refuse to upgrade them. Could be incentive or regulation, carrot or stick, or both. But basically, yeah, as long as they can fill those units as they are, they will, until they can't. We are collectively so short-sighted.

Landlords are not all evil. Most have notes on the properties, at a premium to personal home rates, and struggle to make any money at all, once discounting for empty properties, damages, repairs, and routine maintenance. Incentives for upgrades in many places are nil for landlords, and there is zero incentive from a renter. Those who are savvy enough to consider utility bills as part of the rent are few and far between; most want the lowest upfront-cost (low deposits) and low rent.

Like you say, if you want all landlords to upgrade, offer incentives or mandates. The first will cost taxpayers, and the second will raise rents for a while, at least. Neither will be popular. I personally support slowly increasing reqs for all appliances, windows, and insulation codes. Once it's a cost that all must bear, all will make the upgrades. As long as some can put it off, everybody pretty much has to. In the end, the landlord cannot and will not pay, so it's really up to the renter to pony up in the end.

In past years up here in Maine, we've had the insulating portion partly sacrificed to the benefit of the fuel-buying portion, while some of our Representatives have tried to decry the backward measures.

The fight goes on.

Right now, we're just trying to convince our new TeaParty Governor not to reintroduce 'Mold Your Own Lead Soldiers' into the toy stores. (That's an exaggeration, but not by much.)

Dishonesty is probably the most annoying trait of the Republican leadership. They pretend that they give a rip about massive federal overspending, and then they can't even come up with a piddling $100 Billion cuts in the current budget period.

News Flash:

The deficit is estimated at $1.27 trillion in 2011 -- down from a record $1.56 trillion in the current year. The deficit -- the gap between budget outlays and tax receipts -- was $1.41 trillion in 2009, more than triple the previous high of $458.6 billion in 2008

The Republican response??? (from the link)

Earlier in the day, members of the party’s conservative bloc used a closed-door party meeting to push the leadership to go well beyond its plans to trim about $40 billion from domestic spending and foreign aid this year, demanding $100 billion or more.


Representative Jeff Flake, Republican of Arizona, said Republicans should propose an across-the-board reduction if necessary to meet the $100 billion level. “We said we would do it, and so we should,” Mr. Flake said.

But Mr. Rogers and other Republicans warned that doubling the cuts could have substantial consequences for federal agencies, resulting in layoffs and furloughs of federal law enforcement officers and air traffic controllers, steep cuts in education and medical research programs and major changes at the Food and Drug Administration.

So, they promise $100 Billion in cuts, and the leadership actually attempts to deliver $40 Billion. Lets pretend they can actually come up with the $100 Billion in cuts... where do they propose to come up with the other $1.17 TRILLION (aka $1170 Billion) more needed in order to balance the budget? That would be about 12 times more money then they are currently scratching their collective heads to find in the current budget period. Personally, I'm still waiting for a specific and honest answer from a Republican, somewhere.

*cricket cricket*

And the Dems are somehow doing better, for having the increase from $458 to $1.56 on their watch?

I'm sure a good bit will fall off with stimulus winding down, but certainly that last trillion is going to be hard to find.

To fix this is going to require structural changes, including major cuts in entitlements, defense, and discretionary spending. And who knows, maybe even some higher taxes. I for one will not support an iota of new taxes before major cuts, as I do not personally believe the cuts will be made.

Before you go further, consider Runeshade's comment: "The deficit -- the gap between budget outlays and tax receipts -- was $1.41 trillion in 2009". Fiscal 2009 began on 1 Oct 2008, before the november election and 4 months before Obama took office. Obama and the Democrats had little input until the 2010 budget, which began on 1 Oct 2009. By then, the Great Recession was raging on Main Street.

Of course, one might also point out that the recession was the direct result of the Free Market Republicans, such as Phil Gramm and his repeal of the Glass-Steagall Act, a fact which the Republicans carefully ignore...

E. Swanson

Yes, and the home credit boondoggle started before that, with Clinton. And deficits started with Reagan. And spending cuts started with Newt, and not with the Dems during Reagan. And back and forth - my point is that both parties have a major role in big gov't, and both will need to give on BOTH sides of their sacred platforms.

Reps will need to reign in big business and miltary spending, and raise taxes. Dems will have to reign in the scope of gov't, and cut entitlements. Personally, I don't think things are bad enough yet for any of that to happen. They can both agree to spend on both sides of the aisle, and borrow via the Nat'l Debt, and so they do, and they will.

Until they can't.

Our situation came from 28 years of uninterrupted greed, beginning with the insane 'ideas' of St. Ronnie the Wrong! And continuing through George Herbert Walker Bush (I will give him one good mark - he did raise taxes!), that non-Democrat, "Teflon" Bill Clinton, and through the misguided meanderings of that misanthropic President, George W., "Shrub" Bush.

On electing Barack Obama, I thought that perhaps some level of rational response might result... only to be disappointed. The elections of 2010 were NOT an affirmation of Tea Party values. They were a rejection of everything political to date - Democrat, Republican, no matter. The Repubs got it in the primaries. Dems got it in the general election. What we wanted was that "change" thingie. Barack forgot about it, so we told him, fugeddaboudit.

Major cuts will happen. It will be the wrong thing to do, but no matter. They will happen. As will major job cuts in all levels of government, resulting in even higher unemployment. I look for UI rates in the high teens, on the 'official' charts, by EOY. Of course, there will be no stimulus, and the moneyed people have already purchased their Congressmen, so no tax increases for those wealthy people!

But of course, corporations will tell you that the people don't need to be employed to spend money. They actually believe there is no connection between layoffs and diminished sales. They will learn. They will fail.

All in all, though, it may not be a bad thing for the planet. If we are forced to cut back to sustainability now, there will be more left and we will have a slightly better life later. The longer we wait, the fewer resources (oil, gas, coal, soil, water, etc.) we will have to use for sustaining ourselves. And, the lower our standards of living will be. Done correctly, which means a major paradigm shift, and we can set up educational facilities. local based food suppliers, local retail (using traditional wholesale distributers), and local banks. B/c there will be little international trade or travel (remember, this is a mid to long term prediction), there will be less need for government. Fire, water, sewers,medical facilities, mass transit, and education will be about it... and b/c it will be local, used by and for the benefit of local people, there will be no greedy corporatists trying to take over, and the local folks will understand why they are being taxed, how they are being served (as opposed to serviced, which describes government today).

So... long term, after a significant die-off, best case scenario is a future where people work about 100 days a year, pay taxes commensurate with services received, are educated, feed themselves, and are engaged in a small community. There will be commerce, and of course some travel, resulting in mixing of genetic groups. It will not be a time of plenty, at least not in consumer goods. It will, ideally, be a time of sufficiency. Of "enough" being what is expected and is attainable. With careful planning, it could even happen.

In your dreams.


Henry Ford understood that people need to have money to spend it, why are so many of his supposed philisophical inheritors blind to that simple concept?

No, the Democrats currently aren't doing any better... but then again, they aren't the ones promising fiscal responsibility now are they? That was my entire point... the Democrats don't care about fiscal responsibility and make no bones about it, whereas the Republicans pretend like they care and pat themselves on the back when they reduce the budget by a tiny sliver of what is actually required.

Show me a Republican presidential candidate who pledges to actually balance the budget, with a credible plan for doing so, or a Republican who admits that our current levels of military spending are completely unsustainable and I'll give that candidate my vote. Until then, however, its just political theater... we aren't even 1/10th of the way to the first goal, not to mention actually paying down some of the ridiculous amount of debt we've taken out.

The IEA's Highlights of the latest OMR is out this morning.

World oil supply rose 0.5 mb/d in January, to 88.5 mb/d, on higher OPEC crude and NGL output. Non-OPEC supply was unchanged from December at 53 mb/d, as outages continued to constrain production. 2010 estimates remain at 52.8 mb/d, while the 2011 outlook is nudged up 0.1 mb/d to 53.5 mb/d on higher North American output.

Ron P.

Congress seeks to quash Obama and EPA over US carbon emissions.


"Politicians overruling scientists on a scientific question - that would become part of this committee's legacy."

Oil and gas firms hit by hackers


Once embedded, the hackers disabled internal network settings so they could get remote access to machines on the corporate networks. Via this route, sensitive documents, proprietary production data and other files were found and pilfered.

McAfee said the information stolen was "tremendously sensitive and would be worth a huge amount of money to competitors".

I walked in the room this am while Jim Chanos was giving his last segment on his two hr stint on CNBC. If I heard him right he's shorting several oil majors as he said they're selling assets to pay the divy.Can anyone expand or confirm his statement if true it might be saying volumes.

NBC is reporting that Mubarak will step down tonight.

CAIRO — Egypt's President Hosni Mubarak is to step down tonight, two sources told NBC News, amid widespread protests against his 30-year rule that have gripped the country.

Following an all-day meeting of the country's supreme military council, the army said all the protesters' demands would be met and a further statement was due to be made later Thursday, clarifying the situation.

Wow, that's a development. Al Jazeera appears to support the rumour:


Sources tell NBC News that Vice President Suleiman to take over as leader

Meet the new boss.......

My bet is that the 'revolutionaries' "won't get fooled again".

"Its record both on human rights and on repressing democracy was lambasted annually by both Congress and the State Department. But in secret, men like Omar Suleiman ... did our work, the sort of work that Western countries have no appetite to do themselves."

Hossan Badrawi, General Secretary of the governing party just said live on BBC News he would be "surprised" if Mubarak was still president tomorrow.

CNN now reporting that power will be handed over to the Egyptian Military, but this isn't a 'coup'.

What is it then? A military junta?

Hossan Badrawi said he was speaking officially on behalf of the NDP when he said it was time for Mubarak to "step-aside". BBC reporters analyzing the difference between "step-down" and "step-aside". When they replayed the interview they cut the end bit where he said he would be "surprised" if Mubarak was still president tomorrow. That was strange because that seemed to confirm "step-down" rather than some convoluted "step-aside" with him remaining titular president.

Badrawi claimed that the NDP had changed its position on Mubarak over the last few days.

Good to see the US's interest is winning out over that of the Brotherhood. Makes me wonder if Mubarek's meeting with the Brotherhood overstepped the military's tolerance zone?

The interesting question is who they will support for the transition gov't, and what near-term steps will be taken to appease the crowds. I imagine they will have an election soon, if not quite on schedule.

Ghung - I have no idea what the truth is but there are those who say the military power structure has controlled the country for many years. That HM was essentially a figure head but a figure head that agreed fully with the military's position. If true than HB will be replaced by another figure head that MIGHT be more palatable to the Egyptian people (my half cooked theory).

Egyptian state television now showing live pictures of the protests in the square for the first time. Announcement said to be imminent.

Edit: Mubarak says he is not going but staying on until September. Says foreign powers are trying to force him to go but he won't. No mention that the population want him to go. Says he will stay in Egypt until he dies. Oh dear...

tow - As the previous Egp. president discovered such conditions can develop very quickly...at around 2600 feet per second.

Yes. I wondered if his speech was also a challenge to the army to shoot him if they dare.

Recently appointed VP Omar Suleiman now talking on TV. See Suleiman: The CIA's man in Cairo for more details on him. Reporters on scene say crowd angrier than ever before. May be about to march on TV station with massive marches on official buildings tomorrow. Some predictions of a disaster tonight or tomorrow.

BBC now reporting army may be about to make a statement to the people.

tow - After hearing HB's speech on NPR driving in this morning the obvious occured to me: I'm not much of a historian but I can't remember one dictator who ever held power without the support of the guys with the most guns. So back to the same point: regardless of who is the "head" (Mr B or Mr. S) of the E. govt isn't it still the same power structure calling tha shots? IMHO the outcome of any "free and open" election process will depend soley on what the E. military will allow. Maybe their is a core in the miltary that welcomes such a transition. Or maybe there is a core in the military that won't hesitate to gun down several thousand civilians in the streets if that's what it takes to maintain BAU.

Every Communist must grasp the truth: Political power grows out of the barrel of a gun.

Quotations from Chairman Mao Zedong (The Little Red Book)(1964) - Chapter 5

And on the subject of revolution, Mao should have been an expert in the field.

"surprised" if Mubarak was still president tomorrow.

But I wouldn't be surprised if he gets to keep the 70 billion he lifted. Our specie has a lot more problems than just peak oil and climate change. Somehow over and over again the Marcos', the Ceacescau's and Mubarak's of the world end up ruling these undeveloped countries and never seem to have the slightest interest in the standard of living of their citizens. It just ends up being what they can squirrel away for their family. Then finally a populace in abject poverty realizes they have nothing to lose by revolting and a revolution ousts one despot, only to be replaced by another.

It's such a strange phenom that amongst people, the worst men become the leaders of countries.

You heard it first here yesterday in my EIA post (see further up):

OPEC is not - NOT - increasing February exports

OPEC to Reduce Exports as Winter Demand Ebbs, Oil Movements Says
By Grant Smith - Feb 10, 2011 11:30 AM ET

The Organization of Petroleum Exporting Countries will reduce oil shipments this month as demand for winter fuels in the northern hemisphere fades, according to tanker-tracker Oil Movements.

Loadings will slip to 23.79 million barrels a day in the four weeks to Feb. 26, down 0.6 percent from 23.94 million barrels a day in the period to Jan. 29, the tanker-tracker said today in a report. The data exclude Angola and Ecuador. It’s the first monthly decrease since the four weeks to Feb. 5.


Well I guess the widely expected 'stealth' increase by KSA, as reported two weeks ago by the Financial Times, is, well, quite invisible. More seriously, slower shipments out of the Persian Gulf region may be related to concerns about Suez Canal operations, plus confirmed piracy worries involving supertankers.

Charles, see my post upthread. OPEC did increase production quite a bit in January. The biggest increase was by Iraq but Saudi increased production in January by 72 kb/d. They may reduce production in February however.

Ron P.

Doesn't this just mean production is up but export isn't? Extra production was simply consumed internally? Or who is wrong?

The Oil Movements estimates Charles posted are for the month of February ( 4 weeks to Feb 26th to be precise - they publish the rolling 4-week average every week) based on tanker bookings not January (as the OPEC figures posted by Ron were for). In other words it seems there was an increase in exports in January (mainly thanks to Iraq and much of that extra ended up in the USA). That pulse is not sustained in February according to Oil Movements.

No that's not what it means at all. It means January production was up but February production may not be up at all. That's all it means, nothing more. Oil movements were up in February.

OPEC oil deliveries in mb/d, Ecuador and Angola not included. Each figure is for the four weeks ending on that date so there is overlap and all you can really get is the general trend.

1/1/2011	23.72
1/8/2011	23.80
1/15/2011	23.34
1/22/2011	23.60
1/29/2011	23.51
2/5/2011	23.55
2/12/2011	23.67
2/19/2011	24.16
2/26/2011	23.79

Ron P.


The Bloomberg report Charles quoted says "down 0.6% from 23.94" to 29th January. The table you posted above says 23.51 for that period. I don't note down Oil Movements reports habitually so I don't know what accounts for the difference off-hand. Perhaps updated figures?

I know Undertow but there are always two figures in the oil movements report, the four weeks ending and what they ended at the four weeks prior to that. I only track what they say they will be. The second number is, as you suspect, an update and does not necessarily match what they said they would be four weeks earlier.

Ron P.

Yes, thanks for the cumulative info, I believe that OM sometimes makes revisions that makes it difficult to compare to prior weeks - especially since we don't know what those revisions are, if any.

Iraq made an improvement in Janaury, which appears to be a combination of less pipeline bombings than December and some increased ability to turn out more oil. It's my wild guess that Iraq is more or less will hold at that level in February.

As far as the KSA goes, well OM only measures actual shipments, so it is possible that they could have increased production and stored it - but there is no information about anything like that.

However, in sum, there is no doubt that exports out of the Persian Gulf fell significantly this last week. In addition to worries about the Suez Canal and piracy, a holiday period in the Far East may also be impacting activity. Latest reports from the hijacked tanker indicate it is heading for the coast of Somalia, with crude that was intended for two Valero refineries along the Gulf of Mexico coast.

Holland slashes carbon targets, shuns wind for nuclear

In a radical change of policy, the Netherlands is reducing its targets for renewable energy and slashing the subsidies for wind and solar power. It's also given the green light for the country's first new nuclear power plants for almost 40 years.

Why the change? Wind and solar subsidies are too expensive, the Financial Times Deutschland , reports.

Holland thus becomes the first country to abandon the EU-wide target of producing 20 per cent of its domestic power from renewables. This is a remarkable turnaround from a state that took the Kyoto Agreement seriously and chivvied other EU members into adopting renewable energy strategies. The FT reports that instead of the €4bn annual subsidy, it will be slashed to €1.5bn.

So how did the crude oil component of this increase fare?
That's where the deepest truths lie.

Drilling just got a bit more expensive:


FOR ALL: A little off topic but too funny not to share. Mentioned a new coal-fired coal plant about to be built close to where I'm drilling NG wells. At lunch I saw a bumber sticker: "Stop the White Stallion Project". The one and same power plant. Now the funny part: was the sticker on the back of a Prius? Of course not. It was on the back of one of those giant gas-guzzling Escalade SUV's.

Only in Texas. Or maybe not. As we say in Texas: a Democrat's passion trapped inside a Republican's lifestyle.


Rise in oil demand beats expectations

Global oil demand rose more strongly than previously thought last year, with the world consuming an extra 2.8m barrels a day, 3.3 per cent more than in 2009, according to the International Energy Agency.
Oil inventories in rich countries have correspondingly fallen, totalling 57.5 days of forward demand cover in December 2010, the lowest level for two years.

Prices have risen from about $80 last October to $101.50 for a barrel of Brent crude on Thursday. Leading members of the Opec oil cartel, notably Ali Naimi, the Saudi oil minister, have attributed this increase largely to financial speculation.


But the IEA reported that Opec members, particularly Iraq, had responded to the tightening market by increasing supply. Last month, Opec production rose by 280,000 b/d compared with December, taking the cartel’s total output to 29.85m b/d, the highest for two years.

Iraq accounted for the bulk of this increase, raising its production by 210,000 b/d, the biggest monthly boost since Saddam Hussein’s invasion of Kuwait in August 1990. But analysts cautioned that Iraq suffered supply problems last autumn and the rise could be a temporary recovery.

I thought I'd share this. Here in Portugal, there are 4 main, free TV channels, channels RTP1, RTP2, SIC and TVI.

RTP2 is more focused on informational and cultural programming, where as the others, especially SIC and TVI focus on soap operas and soccer. Anyways, on RTP2 they have a show with is called "Sociedade Civil" which translates to "Civil Society", and it covers various topics affecting society in general. Unfortunately, it runs around 14h00 for an hour, so most people are working or eating lunch. Today the topic is a discussion on the use of cars vs. public transport and my girlfriend caught about the last couple of minutes. She told that one of the panel members, Afonso Paiva e Pona, Coordinator of the Energy Group for the Order of Engineers, was discussing the risk of a coming energy crisis. I didn't watch the whole thing, just the few minutes my girlfriend saw, and he was stating that everything had to be done to get through the problem of expensive and scarce fuel, things like electric cars, renewable energy etc. He also mentioned that, as things are, oil should cannot be totally dropped because of it's useful properties. He hopes that it's not too late. He talks about this around the 49.45 minute mark in the video (link below).

In response, another panel member, Susana Fonseca, president of the environmental group Quercus, mentioned that electric cars are important but switching the entire fleet to electric cars is not the answer. She stressed that there also has to be a big reduction in the number of cars parked in front of each door.

I wanted to share this because I was surprised that this subject was aired on MSM mentioning, an energy crisis, the reduction of car use and the need to use a wide range of solutions (no silver bullet). If I'm not mistaken, they're going to continue in another episode due to lack of time.

Unfortunately everything is in Portuguese and I could not find a transcript to put through Google Translate, but here are some links if you understand a bit of Portuguese.

The episode itself. It starts about after 7 minutes because they do a brief interview with an author.

The program's website and blog.

Thanks for the update. Unfortunately being a lazy English speaker myself I can't handle the Portuguese.

Is there any other similar discussion you know of in Portugal? Does the government have anything on the energy situation such as the UK back bench committee?

I'm not too sure, I'll have check it out. TOD user Luís de Sousa probably has a much better idea if there are governmental programs/groups that focus on energy and oil depletion, aside from ASPO Portugal.

But I sure hope there are a few. People need to start understanding the problem. Gasoline prices are heavily taxed here and I've had difficulty trying to justify that to people. The other day, a co-worker told me that like the air we breathe, gasoline, being so essential, should be freely or at least cheaply available.

I know that oil imports are down, fuels are up (regular unleaded was at 1.51 Euros per litre, about 7.75$/gallon) and people are restless. I've noticed that these high prices are slightly more tolerated than the spike of 2008, but patience is getting thin and they're barking up the wrong tree.

By the way, this was the same co-worker to also told me that the only way to get people to use transportation alternatives is to lower fuel prices so that there's more money to invest in public transport. Interesting times indeed :)

Earth economist: The food bubble is about to burst


That dropping water table bit in China and India is a harbinger of some bad stuff to come. Once there are tens of millions of water/food refugees it will put much greater pressure and demand on already depleted regions.

I guess it's another case of 'out of sight, out of mind'. People cannot see the water table, so when someone tells them it's dropping it's easy to be complacent. I suppose all that matters to most is the moment at hand.

When people are told the amount of oil in the ground is depleting faster than we are finding it by a ratio of 4 to 1, people just shrug their shoulders. Some even have cornucopian ideas about an even greater bounty below our feet. Ignorance is bliss, until reality bites.

Lettuce is sucking California's fruit basket dry


Of course, there was no mention of what happens as 48 cubic Kilometers is emptied beneath the valley. Subsidence? Earthquakes? Sink holes? No real research seems to have gone into this item that might move the polis.

Also, no discussion on percentage of deep well vs. surface water is used for agriculture there.

Also absent was a discussion of how many cubic km are present. Just speculation about, maybe by 2100, the end of subterranean water.

And, a comment that you, too, can have your own water in the Central Valley.

Drill, baby, drill!


Parts of the San Joaquin Valley in California are subsiding. There are problems with selenium and salt contamination in the ground water. Unfortunately the links are old from about 1995:
USGS: Ground Water Atlas of the United States - Segment 1 California Nevada: Ground-Water Quality

USGS Ground Water Atlas of the United States - Segment 1 California Nevada: Land Subsidence

Back to Khurais: Jungers Reflects on Change

“When we discovered Khurais, it was thought to be rather small, and we didn’t exploit it early,” he said. “It’s amazing what we didn’t see because we didn’t have the technology in those days.”

.......Unhindered by the pressure of private ownership with the attendant short-term financial reporting and fixation on quarterly earnings per share, Saudi Aramco has been able to make visionary and bold long-term investments in new technology, training and development, research, mega-projects and infrastructure,”


On the other hand, the observed 2005 to 2010 C+C production decline rate for Saudi Arabia and the observed 1972 to 1977 C+C production decline rate for Texas were almost identical, about 2.5%/year. We shall see what happens from 2010 to 2015.