Drumbeat: March 5, 2012

Deepwater drilling picks up again as BP disaster fades

HOUSTON — Nearly two years after an explosion on an oil platform killed 11 workers and sent millions of gallons of oil gushing into the Gulf of Mexico, deepwater drilling has regained momentum in the gulf and is spreading around the world.

The announcement of an agreement late Friday by BP and lawyers representing individuals and businesses hurt by the disaster represented something of a turning of the page, though BP and its drilling partners continue to face legal challenges.

After a yearlong drilling moratorium, BP and other oil companies are intensifying their exploration and production in the gulf, which will soon surpass the levels attained before the accident. Drilling in the area is about to be expanded in Mexican and Cuban waters, beyond most American controls, even though any accident would almost inevitably affect the United States shoreline. Oil companies are also moving into new areas off the coast of East Africa and the eastern Mediterranean.

Crude Oil Declines in New York After China Lowers Economic Growth Target

Oil traded near a three-day low in New York amid concern of slowing consumption in China after the country lowered its growth goal.

Futures were little changed after falling 2.8 percent last week, the first weekly decline in a month. China, the world’s second-largest oil user, will aim for economic growth of 7.5 percent this year, the lowest goal since 2004, Premier Wen Jiabao said today. Israeli Prime Minister Benjamin Netanyahu and U.S. President Barack Obama will meet today to discuss confronting Iran’s nuclear program, even as Obama asked Israel to help tone down “too much loose talk of war.”

Saudi Aramco Raises Oil Premium for April Sales to Asia, U.S.; Cuts Europe

Saudi Arabian Oil Co., the world’s largest crude exporter, said Arab Light crude sold to Asia will be priced at a premium of $2.80 a barrel to the regional benchmark for April loading compared with $1.55 for March.

Saudi Aramco, as the state-run company is known, raised the premiums for other light grades sold to Asia, as well as its Arab Medium crude, and narrowed the discount for Arab Heavy, the company said in an e-mailed statement today.

Gas prices hit $3.77 a gallon

NEW YORK (CNNMoney) -- The nationwide average for gasoline prices continued its march toward the $4 mark Monday, hovering at $3.77 a gallon, according to the motorist group AAA.

The average price of regular unleaded gasoline climbed three-tenths of a cent in the latest 24-hour period, marking the 27th straight increase, AAA said.

Oil price to fall, says Goldman economist O'Neill

The price of oil will fall in the next few months as fears over Iran fade, says Jim O'Neill, the Goldman Sachs economist who a decade ago invented the term "Bric" economies - for Brazil, Russia, India and China.

UK gas prices retreat as Asia lures Europe's LNG

London (Reuters) - British prompt gas prices fell on Monday as output from liquefied natural gas (LNG) terminals jumped and revised weather forecasts sapped demand, countering the impact of less frequent seaborne gas imports as Asia snatched more of Europe's share.

"With a resurgent Asia, it looks as if the UK, which is facing poor growth prospects, will either have to pay up or see increasingly more LNG diverted to Japan, for example," a trader with a major UK utility said.

Less U.S. Foreign Oil Reliance yet Higher Gas Prices

In 2005 and 2006, the U.S. imported 60 percent of its oil from foreign oil suppliers. In 2011, the U.S. imported 45 percent of its oil from foreign suppliers, according to the White House Twitter feed. That's a 15 percent reduction in U.S. reliance on foreign oil over the last six years, but gas prices have only increased.

According to the same chart, U.S. reliance on foreign oil decreased 3 percent from 2006 to 2008. As we all know, The Great Recession started in 2008, and from 2008 to 2009 U.S. foreign oil dependence dropped 5 percent. The remaining 7 percent decline happened on President Barack Obama's watch.

Oil price to hit new all time-highs, average USD 123 per barrel expected until March 2013

Brent crude rose to a new all-time high of USD 111 per barrel on average in 2011. Even when adjusted for inflation, this was higher than in 2008 and even higher than during the second oil shock of 1979/1980.

The Chicago Mafia and the Price You Are Paying For Gasoline

Overlooked, by and large, is the fact that Chicago is to commodity trading what Wall Street is to financial markets. The world's most significant trading exchange, the Chicago Mercantile Exchange Group (C.M.E. Group) is headquartered there, does its business there, establishes its policies there, and projects its power to influence institutions, the press and government from there as the world's leading and most diverse derivatives marketplace .It proudly brays that it is to the CME Group (www.cmegroup.com) and in turn Chicago, "is where the world comes to manage risk". It is an intrinsic part of Chicago's economy and culture. One could almost say as the C.M.E Group goes, so goes Chicago.

Well and good, while all the while we have in Washington a President whose very political formation was in sinews of Chicago politics, from his first elected office to his ascent to the White House. And the ties to Chicago continue to be strong if not even stronger than before.

Here's What's Driving the Current Global Gas Shift

In its February 15 report 'Resurging North American Oil Production', Citigroup's analysts claimed that the shale gas boom was set to morph into a shale oil boom. The report said: "The concept of peak oil is being buried in North Dakota, which is now leading the US to be the fastest growing oil producer in the world. The belief that global oil production has peaked, or is on the cusp of doing so, has underpinned much of crude oil’s decade-long rally (setting aside the 2008 sell-off)".

Only 14 days later however the US Energy Department, which in January cut its estimates for likely recoverable shale gas from the USA's giant Marcellus Basin by 66%, and nationwide shale numbers by 42% from previous EIA estimates, released its report on world oil market trends. This contained an array of peak oil-friendly facts and figures.

Forecasting a collapse

For a prophet of doom, Michael Ruppert looked remarkably cheery last week surveying the vegetable plots and chicken coop in his large sloping backyard in the Graton hills.

Nearly a year after moving to Sonoma County, the Southern California transplant says he's so delighted by his new environs he has to pinch himself.

But even in the sunny glow of a warm February afternoon, Ruppert's mind is never far from the catastrophe he sees looming.

$5 Gas, Iranian Poker, and the Peak of 'Peak Oil' Denial

Here in northern California gasoline is now retailing for $4.20 a gallon. Prices haven’t been this high since mid-2008. Forecasts for $5 per gallon gas in the U.S. this summer are now commonplace. What’s driving prices up?

Most analysts focus mostly on two factors: worries about Iran and increased demand from a perceived global economic recovery. However, as we will see, there are also often-overlooked systemic factors in the oil industry that almost guarantee us less-affordable oil.

Crude facts on why gas prices are spiking

Gas prices are likely to continue to soar before they level off or dip back down, according to one local analyst.

Rises in crude oil prices have yet to make their way all the way through the gasoline markets, said Dave Overstreet, public affairs director for AAA Washington in Bellevue.

Gas prices fueling anger of area folks

VANDALIA — With gas prices inching their way up toward the $4-a-gallon mark, the Olean Times Herald visited a gas station in Vandalia to find out how area residents are coping with the high prices at the pump.

Gas prices: If you can't beat 'em, join 'em

From oil stocks, to ETFs to futures, here are five investment options that might take some of the sting out of the $4 and $5 a gallon you're paying for gas these days.

Saudi Aramco Says Exporting Crude Oil Normally Amid Sandstorm in Gulf

Saudi Arabian Oil Co. is shipping crude normally today from terminals in the Persian Gulf, the world’s largest oil exporter said, even as sandstorms stop other kinds of cargo from leaving the nation’s main eastern port.

Rebels go on 'offensive' as attacks by Syrian regime spread

(CNN) -- After pummeling the western city of Rastan over the weekend, government troops turned their lethal attention to cities across the country Monday, opposition activists said.

At least seven people were killed, including three in Daraa, one in Aleppo, two in Idlib, and one in Hama, said the Syrian Network for Human Rights, an opposition activist group.

Obama Stresses Resolve on Iran Ahead of Netanyahu Meeting

President Barack Obama and Israeli Prime Minister Benjamin Netanyahu, heading into their meeting today at the White House, are emphasizing agreement over how to confront Iran’s nuclear program, even as Obama asked Israel to help dial back “too much loose talk of war.”

Japan near deal with U.S. on Iran oil, wary of China on defense

(Reuters) - Japan and the United States are close to an agreement on cuts in Japanese imports of Iranian oil that will allow Tokyo to avoid U.S. sanctions, and may conclude a deal this month, Japanese Foreign Minister Koichiro Gemba told Reuters on Monday.

But Gemba said the two sides might not make public the size of the cuts because of the possible impact on markets.

India’s top Iranian oil buyer plans to cut imports

NEW DELHI - India’s largest Iranian oil buyer plans almost to halve daily imports, industry sources said on Monday, becoming the latest Asian refiner to cut supplies from Iran as Western sanctions make trade with OPEC’s second-largest producer difficult.

India, China and Japan buy almost half of Iran’s estimated 2.6 million barrels per day of oil exports, but a raft of U.S. and European sanctions aimed at choking off funding for Iran’s nuclear programme are squeezing its oil supply lines.

Abu Dhabi and South Korea form oil partnership in the emirate

Abu Dhabi National Oil Company has signed a contract with South Korea to exploit three virgin oilfields in Abu Dhabi and explore across a huge swath of the emirate.

Korea National Oil Corporation (KNOC) and GS Energy, a Seoul-based company, will hold 40 per cent interest in the contract, which could start pumping its first crude within two years.

Centrica cleared to use more of own UK gas storage

(Reuters) - Britain's largest gas supplier, Centrica, received the go-ahead from the competition watchdog on Monday to start using more capacity at its huge subsea Rough gas storage facility in the North Sea.

The utility can with immediate effect use up to 25 percent of its own capacity at Britain's largest gas storage facility, up from 15 percent previously allowed.

Singapore says LNG imports can replace piped gas supply

SINGAPORE (Reuters) - Singapore's new liquefied natural gas (LNG) terminal will be able to handle sufficient imports of the fuel to cover all of the country's power needs, even if piped gas supply contracts with Malaysia and Indonesia are not renewed, a top energy regulator said on Monday.

Singapore depends on natural gas for around 80 percent of its power generation needs, with the bulk sourced from Indonesia and Malaysia under long-term contracts.

Iraq oil output over 3 mln bpd; first time in decades

BAGHDAD (Reuters) - Iraq's oil production has risen above 3 million barrels per day for the first time in more than three decades, it announced on Monday, and said it will sharply increase exports with a major new floating oil terminal beginning operations in three days.

"While I am talking to you today, the Iraqi oil production has exceeded 3 million barrels per day," Deputy Prime Minister Hussein al-Shahristani told a conference in Baghdad.

Iraq studying Kirkuk offers from BP, Schlumberger

BAGHDAD: Iraq's oil minister said on Monday he was studying offers from international oil companies, including BP and Schlumberger NV, to develop Kirkuk oilfield in northern Iraq.

Shell Nigeria Case Puts Court in Foreign Territory

Should corporations be held liable for acts of torture committed under their auspices? If that had been the only issue considered by the Supreme Court last week in Kiobel v. Royal Dutch Petroleum, the logical answer would surely have to be yes.

Shell oil rig set for landmark Alaska journey

Reporting from Seattle— Amid the tangle of towering steel, heavy cranes and overcast skies of Seattle's busy commercial shipyards, Shell Oil's massive Kulluk drilling rig is preparing to push off for the Arctic Ocean.

When it does, America's balance between energy needs and environmental fears will enter a new era. Barring unexpected court or regulatory action, by July the Kulluk will begin drilling exploratory oil wells in the frigid waters off Alaska's northern coast.

Legal Strategy Taken by Shell Is Rarely Successful

WASHINGTON — The oil giant Shell filed suit in federal court in Alaska last week against a dozen environmental groups, employing a rare — and rarely successful — legal gambit in an effort to pre-empt anticipated legal challenges to its plans to begin exploration in the Arctic Ocean this summer.

BP Case Shifts to Fines That May Top $17B

BP Plc (BP\) may face as much as $17.6 billion in civil pollution fines and possibly billions of dollars more in criminal penalties as its settlement with businesses and individuals harmed by the 2010 Gulf of Mexico oil spill shifts the focus to government claims.

BP Rises Most in Month After Gulf of Mexico Spill Settlement

BP Plc (BP/) rose the most in a month after Europe’s second-biggest oil company reached a $7.8 billion settlement with businesses and individuals over the 2010 Deepwater Horizon oil rig disaster.

Hard lessons from oil industry accidents

The energy company BP has agreed to pay US$7.8 billion (Dh28.64bn) to the largest group of plaintiffs over the 2010 Deepwater Horizon disaster, which killed 11 men and released millions barrels of oil into the Gulf of Mexico. Such accidents are a reminder in the energy industry that safety requires a delicate balancing act, experts say.

During a visit to Abu Dhabi, Lord Cullen, who led the inquiry into the 1988 Piper Alpha tragedy - when a North Sea rig exploded and killed 167 of 229 people onboard - recalled some lessons learnt from that North Sea disaster.

Surprises rolling down Keystone Pipeline

Surprise number one from the Keystone Pipeline is that the Keystone Pipeline XL isn’t just a pipeline, but a whole system of pipelines that would transport synthetic crude oil and diluted bitumen from the Athabasca Oil Sands in central Alberta, Canada to several locations in the U.S. Surprise number two is that this is not just a proposed system of pipelines, but, according to TransCanada, Phases 1 and 2 are already operational, opening in 2010 and 2011, respectively. Surprise three is that even after being rejected by President Obama, TransCanada hasn’t given up on the U.S. market for Canadian crude oil.

Polish Report: Shale Gas Extraction Not Harmful

A scientific study in Poland has found that shale gas extraction at one site produced some toxic refuse but that the waste was reused and didn't harm the environment.

The report was presented Friday by the Polish Geological Institute, which carried out its study last year when a company, Canadian Lane Energy, began test drilling near Lebien, in northern Poland.

Japanese Prime Minister Says Government Shares Blame for Nuclear Disaster

TOKYO — Prime Minister Yoshihiko Noda of Japan acknowledged on Saturday that the government shared the blame for the disaster at the Fukushima Daiichi nuclear power plant, saying that officials had been blinded by a false belief in the country’s technological infallibility, even as he vowed to push for the idled reactors to be restarted.

Mr. Noda spoke ahead of the one-year anniversary of Japan’s devastating earthquake and tsunami of March 11, which killed nearly 20,000 people in northeastern Japan, set off multiple meltdowns at the Fukushima plant and brought about a crisis of public confidence in the country’s nuclear program.

Shareholders to sue Tepco executives for $67 billion

TOKYO (Reuters) - Shareholders of Tokyo Electric Power Co Inc, operator of the crippled Fukushima nuclear plant in northeast Japan, are suing the utility's executives for a record 5.5 trillion yen ($67.4 billion) in compensation, lawyers said.

Surviving Without Indian Point: Is It Doable?

A future without the Indian Point nuclear power plant in Buchanan, N.Y., may be fine or dire, depending on your point of view.

Columbia University Law School’s Center for Climate Change Law gathered a few experts on Thursday night to discuss the pros and cons just as the plant is seeking renewal of its federal license amid strong opposition from New York’s governor, Andrew M. Cuomo, and environmental groups.

GM adds natural-gas option to big heavy-duty pickups

At long last, a Detroit automaker is finally waking up to the potential of natural gas -- a fuel that's clean, cheap and domestically produced. General Motors is announcing today that it will make 2013 Chevrolet Silverado and GMC Sierra 2500 HD extended cab pickup trucks that can run on both natural gas and gasoline.

Best of all, owners can easily switch between the two. The trucks use a Vortec 6-liter V-8 engine that seamlessly transitions between compressed natural gas and gasoline fuel systems.

Winds of fortune sweep West Texas

BP and other energy companies are funneling millions into building and operating wind farms in West Texas, helping to transform oil country into one of the nation’s leading hubs for green energy production.

Skylines dominated by nodding pump jacks are increasingly spotted with spinning turbines. Economies tied to the ebb and flow of commodity prices are finding stability in supplying the power grid.

With Reef Ecosystems, It May Be All or Nothing

The most strictly enforced no-take areas in the Mediterranean have the highest fish biomass, researchers found. But they noted no significant differences between areas that allow only limited fishing and those that permit unfettered access.

Striking Oil, Artistically, in Midtown

The two 25-foot simulated oil pump jacks bobbing up and down at the southeast corner of 46th Street and Eighth Avenue are actually a new sculptural work by the New York-based artist Josephine Meckseper. An initiative by the nonprofit Art Production Fund, “Manhattan Oil Project” officially opens today and will remain on view through May 6.

By introducing pump jacks, a familiar symbol of American oil-producing towns, into a context more typically defined by eye-popping electronic billboards and dazzling lights, “I wanted to show the consequences, or the flip side, of what we actually have to do to provide all of that energy,” Ms. Meckseper, 47, said in an interview last week.

Researchers challenge study on hydrofracking's gas footprint

(PhysOrg.com) -- A Cornell study's contention that hydraulic fracturing would be worse for climate change than burning coal is being challenged by another study, also by Cornell researchers.

Study finds climate-change link to region's recent wild weather

A new report by an environmental advocacy group shows our region has been particularly vulnerable to extreme weather events — driven by what it believes is climate change.

The report, compiled by Environment New York Research and Policy Center, shows our nook of the Northeast has had a high number of federal disaster declarations since 2006.

Do You Know Where Green Electricity Will Come From?

As a geologist, I can helpfully add that the rock record of 600 million years tells me that excess carbon dioxide has happened 5 times before - induced by volcanoes, or by continental configurations. Each time the results are strikingly similar - ocean death, extinction, and the top species vanish. That's us.

In the toolkit of remedies, we need something that's quick, will work with the equipment we have, and that can take the black out of convenient electricity. That something may well be a family of technologies going under the heading of carbon capture and storage (CCS).

China Says It Will Meet Five-Year Carbon Goal After 2011 Misses

China, the biggest carbon emitter, said it will meet its five-year projection for saving energy and curbing greenhouse gases through 2015 even after missing its 2011 target following a drought that reduced hydropower.

Developer may sue to trigger rethink on sea level rises

Lake Macquarie Council recently updated its recommendations for about 10,000 people living up to three metres above the average sea level. All their properties could be exposed to inundation and increased flood risks by the end of the century, according to guidelines developed by the CSIRO.

But a property developer, Jeff McCloy, said he was contemplating leading a class action suit against the council, which he said was ''falling for this unjustified, worldwide idiocy about sea level rises''.

Africa: Climate Change Exacerbates Scarcity in Already Food Insecure Regions

A recent report by The Consultative Group on International Agricultural Research (CGIAR), offers new insight into the threat that climate change poses to the livelihood of millions of farmers worldwide. The report, Mapping Hotspots of Climate Change and Food Insecurity in the Global Tropics, maps areas at risk of crossing "climate thresholds - temperatures too hot for maize or beans," by 2050.

These threshold models were compared against food insecure countries, defined as places where over 40 percent of children under the age of five experienced stunted growth as a result of malnutrition. When these two factors overlap, the model "reveals places around the world where the arrival of stressful growing conditions could be especially disastrous," says Polly Ericksen, a senior scientist at the CGIAR's International Livestock Research Institute (ILRI).

EIA Dec. NG data was released; below are 2011 annual totals.

Dry Production increased by 1.7 Trillion Cu ft to 23 trillion Cu ft.

Imports are down by 300 billion to 3.5 trillion Cu ft.

Gross total is 26.5 trillion Cu ft.

Exports are up by 370 billion to 1.5 trillion Cu ft.

Net total demand increased by 1 trillion Cu ft to 25 trillion Cu ft.

Electrical Gen. demand increased by 215 billion Cu ft to 7.6 trillion Cu ft

Arthur Berman and others cast a lot of doubt on the EIA natural gas production data though. If you compare with State production data, the EIA appears to be considerably over-estimating production and then bumping up estimated consumption to match. A claim made frequently by Matt Simmons as well.

The EIA responded to Simmons and others claims that, on review, they had indeed found a major flaw in their models which would likely result in substantial downwards revisions to prior production estimates. No such substantial revision has ever occurred. I believe Gail wrote them about it but received no reply.

Did China's oil production peak in 2011?

From http://www.reuters.com/article/2012/03/05/china-npc-commodities-idUSL4E8...

Crude oil production is forecast unchanged at 204 million tonnes in 2012.

"The target shows that China's domestic oil production has reached a plateau with 70-80 percent of the fields seeing declining reserves, while there have been no major new finds to give it a big boost," said Huang Xinhua, Singapore-based analyst with IHS Energy.

China's oil production according to IEA: http://omrpublic.iea.org/supply/ch_to_ts.pdf

Will China's coal production reach a plateau in 2012?

From http://www.reuters.com/article/2012/03/05/china-npc-commodities-idUSL4E8...

Raw coal output from China, the world's top producer and consumer of the fuel, is expected to rise 3.7 percent from a year ago to 3.65 billion tonnes, cooling from the 8.7 percent gain recorded in 2011.

From The Chinese Coal Monster - running out of puff (Euan Mearns; November 20, 2010)

What I imagine we will see happening is that Chinese production growth in 2010 will be significantly less than 10% and we will see a plateau develop within the 3.6 to 3.8 Gt range in the period to 2015.

It's interesting to consider what happened when a net oil importing country, with a track record of rapidly increasing net oil imports, hit a production peak--the US, in 1970.

From 1949 to 1970, US net oil imports increased from 0.32 mbpd to 3.16 mbpd, an 11%/year rate of increase (EIA, Total Liquids).

But then we peaked, in 1970.

From 1970 to 1977, US net oil imports increased from 3.16 mbpd to 8.57 mbpd, a 14%/year rate of increase.

In 1978, Alaskan production, because of the pipeline completion, went over one mbpd, and US consumption started to decline in 1979, and these two factors caused a decline in net oil imports.

However, note that it took 21 years to show a 2.8 mbpd increase in net oil imports, but after we peaked in 1970, net imports increased by 5.4 mbpd in only seven years. In round numbers, the seven year increase in net imports was equivalent to total US crude oil production in 2004.

Chinese net oil imports increased from 1.9 mbpd in 2002 to 5.0 mbpd in 2010 (BP, Total Petroleum Liquids), a 12%/year rate of increase, although the 2005 to 2010 rate of increase was somewhat lower, about 8%/year.

Here are the 2005 and 2010 numbers for China (BP):

Production - Consumption = Net Imports

2005: 3.6 - 6.9 = 3.3 mbpd

2010: 4.1 - 9.1 = 5.0 mbpd

If Chinese production were to decline back to 3.6 mbpd in 2015, and consumption continued to increase at the 2005 to 2010 rate of increase, the 2015 numbers would look like this:

2015 (What if): 3.6 - 12.0 = 8.4 mbpd (a 10.4%/year rate of increase)

If we extrapolate India's 2005 to 2010 rate of increase in net oil imports, their net imports in 2015 would be up to 3.4 mbpd, so, based on the above assumptions, Chindia's combined net oil imports in 2015 would be up to 11.8 mbpd, versus 5.1 mbpd in 2005.

If we assumed constant production by the top (2005) 33 net oil exporting countries and if their consumption continued to increase at the current rate, their combined net oil exports (GNE) would decline to 40 mbpd in 2015, versus 45.5 mbpd in 2005.

So--based on the above "What if" scenarios--Available Net Exports of oil (ANE*) would decline from 40 mbpd in 2005 to about 28 mbpd in 2015 (versus 35 mbpd in 2010). Based on the foregoing, the volumetric annual decline rate in ANE would increase from one mbpd per year from 2005 to 2010 to about 1.4 mbpd per year from 2010 to 2015.

EIA data: http://www.eia.gov/totalenergy/data/annual/pdf/sec5_7.pdf

*ANE = GNE less Chindia's net imports, BP + Minor EIA data, Total Petroleum Liquids

It would be interesting to add the US to China and India to see what's left for the rest of the world (ANE to ROW), going forward. I posit that there will be a point when these three countries are consuming enough of the GNE that the rest of the world will reject the dollar's world reserve currency status, effectively curtailing the US's ability to import oil. Just an hypothesis...

Did China's oil production peak in 2011?

It would appear that it did. The EIA had China producing 4,080,000 barrels per day in 2011, through November, and 4,076,000 bp/d in 2010. And the last 5 months of 2011, July through November, it seems to be headed lower. China is one place where the JODI production numbers and the EIA production numbers track each other very closely.

China C+C production in thousands of barrels per day. The last data point is November 2011.


Ron P.

Still, EIA predicts China's oil production to increase by 140,000 b/d this year and by 80,000 b/d in 2013:

2011: 4.29 mb/d
2012: 4.43
2013: 4.51


Roger Blanchard: How reliable are U.S. Department of Energy oil production forecasts?

How likely is it that the Department of Energy’s forecast will prove accurate?

To determine if their forecasts are generally accurate, it would be worthwhile to check their forecasts from the past to see how well they did. Unfortunately, I personally have never seen any media reports that attempted to assess the accuracy of U.S. DOE/EIA oil production forecasts so the prevailing assumption must be that they are accurate.

Is that assumption warranted? Let’s take a look at a few examples of U.S. DOE/EIA oil production forecasts from the past . . .

No individual or organization is always going to be right when it comes to projections of future oil production. What we should expect is that in general, an individual or organization should more often than not be within some reasonable range of the actual future production level. Unfortunately, the U.S. DOE/EIA’s projections are too frequently off by a substantial amount.

Some EIA data is very strange. Can someone for example explain these numbers of "OPEC Other Liquids":

Aug: 5.59
Sep: 5.63
Oct: 5.69
Nov: 6.52 (+830,000 b/d from Oct)
Dec: 6.67

Jan: 6.67
Feb: 6.44
Mar: 6.38
Apr: 6.35 (-320,000 b/d from Jan)


Forecasting of growth or decline rates is an art, not a science. This generalization is true not only of oil and gas but also of real GDP and national income figures such as per capita real disposable income. For example, on page one of today's "Wall Street Journal" there is an interesting graph which shows that the growth rate in U.S. Disposable Income per capita is still declining (at a rate of about negative 2% over the past year and a half) from 2008 highs. For all intents and purposes there has been no recovery from 2009 lows. To the best of my knowledge, not a single economist in 2008 or 2009 predicted such a feeble recovery from 2008 lows.

Meteoroligists cannot predict the weather with any reliability three weeks in advace. Indeed, 24 hour weather forecasts are not very reliable.

When dealing with complex or chaotic phenomena, it is simply impossible to get good forecasts. With respect to oil, there is no good way to forecast future production of oil, because there are so many political and other above-ground factors that influence production (amount of oil supplied), and also there is no way to accurately and reliably forecast the demand for oil, even one year in advance.

Since 2006, is there a single poster of articles or commenter on TOD who predicted that global production of oil would stay about the same from 2005 through 2011? I think not.

A 6 parameter best fit to Crude plus Condensate data from 1950 through the latest EIA data is something I've done every year for the last 8 years.
The actual annual production figures don't follow the analytical fit exactly, but fluctuate +/- 1 million barrals per year, or about 4%, around the smooth fit.

The period from about 2004 through 2016 has the best fit rising from about 26 million barrels per year in 2004, peaking at about 27 million barrels per year in the middle of that range and then declining back to 26 million barrels per year at about 2016. So a plateau from 2005 through the current year is consistent with this fit to historical data. Updating the fit each year with new annual data changes the best fit only slightly. While no mathematical fit gives guarantees about the future, it is better that WAGing.

Does your model also predict oil prices?

I assume you mean billion barrels per year?

Yes, billions of barrels per year. I'm glad that the typo was caught, especially by westexas.

Best, what does the fit say about 2016 to 2028?

edpell, Let me indicate some caveats before answering. If one did a "curve fit" for the world C+C data for 1950 through about 1984, a logistics
curve (which requires 3 parameters) would have done a pretty good job up until that date. However, the local peak which occurred in roughly 1979 - 1980 would have been followed by a decline in the fitted curve after that date. After about 1984 the world C+C started to climb again and no 3 parameter curve would any longer do a very good job of fitting the data. Suffice it to say, there were geopolitical events which make that understandable, with the middle east taking more control of their own resources, and C+C really becoming a commodity of a truly global economy.
So the fit now has 2 regimes and 2 overlapping logistics curves provide the best fit I referred to earlier. Those things understood, the answer to your question is that the 2 regime logistics fit to 1950 through 2011 data has the global C+C production falling from 27 billion barrels per annum to a little over 26 billion barrels by 2016 (which would still be on the "plateau" within the uncertainty of annual fluctuations), but by 2020 the curve drops to about 25 billion barrels, which is a drop of a little over 7% from the current 27 billion barrels (per annum). That is when one might expect to see a trend indicating whether or not the current fit and actual data seem to be tracking in any significant way.

Good work.

In early 2006, I introduced the "Export Land Model," and I suggested--based on (fairly crude) HL analyses of the top three net oil exporters at the time (Saudi Arabia, Russia and Norway)--that we were on the verge of a permanent net export crisis. Following is the concluding paragraph (which was slightly edited; my original version said that there would be a crisis, starting in 2006):

Hubbert Linearization Analysis of the Top Three Net Oil Exporters, January 27, 2006

As predicted by Hubbert Linearization, two of the three top net oil exporters are producing below their peak production level.   The third country, Saudi Arabia, is probably on the verge of a permanent and irreversible decline.   Both Russia and Saudi Arabia are probably going to show significant increases in consumption going forward.  It would seem from this case that these factors could interact this year produce to an unprecedented--and probably permanent--net oil export crisis.

Russian production has maintained a slight increase in production longer than I thought they would, but on the other hand they have shown flat to declining net oil exports, since 2007.

The combined overall net exports from the (2005) top three rose from 15.4 mbpd in 2002 to 18.6 mbpd in 2005. At this rate of increase, they would have been over 25 mbpd in 2010, but their combined net exports fell to 16.2 mbpd in 2010 (BP).

Following are the combined net oil exports from the top 33 net oil exporters in 2005, what I call Global Net Exports (GNE). Note the 2005 inflection point:

Sam Foucher and I then worked on some more detailed quantitative modeling (with Sam doing the mathematical heavy lifting), and following is a graph, based on data through 2006, that showed the combined production, consumption and net exports through 2006 for the top five net oil exporters (Saudi Arabia, Russia, Norway, Iran and the UAE), along with Sam's projections. The actual values for 2007, 2008, 2009 and 2010 are circled. The dashed lines represent Sam's 95% probability boundary estimates.

And of course, Kenneth Deffeyes predicted that global conventional crude oil production would peak between 2004 and 2008, most likely in 2005. He erroneously observed that we appeared to have peaked in 2000, but he never backed away from what his model showed.

HO has a good article on Future Russian production, on TOD yesterday.

"Voiceinyourhead" also had a excellent link on the erroneous initial estimates of the Yuzhnoye Khylchuyu oilfield and importantly, the difficulties of working there, second link.


To me, the Export Land Model was a work of genius - and foresight.

What is stunning is how simplistic, and obvious, the ELM observation is, yet how utterly overlooked "Net Export Math" is around the world. I'm having an ongoing discussion with a senior person in a multinational bank, about "Net Export Math," and he is absolutely stunned by the implications. A quote: "When are the Western countries going to wake up (to the implications of declining net oil exports)?"

Incidentally, I think that Nate found a paper, published prior to our work, that addressed net exports (which I wasn't aware of), and I first started paying attention to net exports because of some of Matt Simmons' work on increasing oil consumption in exporting countries. I constructed the ELM to answer a simple question: What happens to the net export decline rate, given an ongoing production decline and stable to increasing internal consumption?

"Simplistic" is probably not the word you want to use of your own theory, as it implies that it is so simple as to not be an accurate reflection of reality.

Alternately it can mean that it is so simple anyone wonders why the model is not several decades old.

Anyone who have done the math (as I have) on how financial "space" shrinks, when expenditures increase and income decline, already are familiar with this. We just replace money with oil in the same model. And that knowledge is at least as old as banking, meaning 1200-something.

As Jedi noted, the ELM is more of a mathematical observation than a theory: Given an ongoing production decline in an oil exporting country, unless they cut their consumption at the same rate as the rate of decline in production, or at a faster rate, the resulting net export decline rate will exceed the production decline rate--and this is the kicker--the net export decline rate will accelerate with time.

And because of the tendency to show accelerating net export decline rates, net export declines tend to be "front-end" loaded, i.e., initially slow net export decline rates correspond to huge initial depletion rates. In the case of the ELM, 60% of the post-peak Cumulative Net Exports (CNE) were shipped three years into a nine year net export decline period.

Of course, to buy into the ELM, you first have to buy into the idea that production in major oil producing countries will decline over time, which seems to be an unfashionable idea, and one not widely held (although a modified ELM could show what happens with increasing consumption, but stable production).

to buy into the ELM, you first have to buy into the idea that production in major oil producing countries will decline over time,

To believe that oil producing countries will decline over time is nothing but common sense. All producing countries will see decline in production, most already have. It is sheer nonsense to believe that oil will never decline.

However to buy into ELM one only needs to look at the data. Net oil exports peaked in 2005 and are now in steep decline.

Ron P.

Besides, there's two lines to ELM.

Production and consumption.

Even if production increases, if internal consumption increases faster you have declining exports.

So all you have to believe is that as resource rich countries gain in internal wealth they will use more of what they produce.

The inevitable declines in production just put the exclamation mark on the trend.

dohboi - Look up "simplistic' in the dictionary and you might find the picture of a geologist next to it. Might even bear a slight resemblance to me. LOL

Simplistic may be the right choice, but I still recall my first reactions when wt proposed it. Remember this was long prior to the Arab spring, the dominant game then was ruler's crush and then do what you want. That was really obvious in Africa at the time, it also seemed that with what we heard of the ME. It seemed a stretch to me then that with the upward trajectory on price, believed ever increasing with no end then, that exports might fall due to internal consumption. Internal consumption would vanish by the way of "demand destruction", and rulers would be more than happy to export as much as they could.

It's not turned out that way.

The concept of "net exports" is a good litmus test for people and institutions having abstract reasoning ability at all. It's an "ice cream meets forehead" level epiphany which should be obvious two seconds after one hears it, and one most people don't have, even those who have seemingly mastered the concept of "take-home pay".

The fact that the concept needs an advocate is telling. Kudos to westexas for dedication to duty, and lotsa luck to the rest of us getting anything actually complicated across...

Westtexas, Greenish,

Boats are simplistic :-) and Janaia and Robyn, gifted storytellers, have published their mini-documentary about sail transport in the Puget Sound, at Peak Moment TV:

Sail Power Reborn - Transporting Local Goods by Boat

“We are revitalizing an ancient form of transportation … using just the power of the wind and the tides … to move goods and people,” says skipper Fulvio Casali. In their CSA (community supported agriculture), the Salish Sea Trading Cooperative uses nearly no petroleum to transport organic produce and other goods from the north Olympic Peninsula to northwest Seattle.

The other story we're lucky to be featured in is Edible Seattle, our local food coverage magazine. Unfortunately The Wind at Our Backs: building a resilient community on the shores of Puget Sound article is hard copy only, but the writer did a quietly subversive gloss of us chatting over coffee about peak oil and defining what it is and why it matters. Just two women discussing a local issue, just like millions of other conversations held over the years at America's proverbial kitchen table. We even get a joking mention in of "zombies in the streets". :-)

Thank you to everyone at The Oil Drum--you've contributed to this! The quality of the hard data and candid threads mean I can talk about energy issues confidently and intelligently when I'm out in the community.

Westexas... I have a bone to pick with you...

In general, I am astounded by analysis of the Net Export model. It is a very good model.

However (Caveats) ,, I need to point out that there are feedback loops, the equations of which are based on UNQUANTIFIABLE values (italics omitted due to technological illiteracy) which are not contained within your models.

I have never seen these even attempted within your net export explications, and would like your opinions of them.

I have seen thrown around that Saudi Arabia needs $93 a bbl for break-even with minimal social unrest. This makes perfect sense to me.. However, instead of indefinitely rising oil usage based on projections based on change in year-over-year oil usage as a country, might the price of oil be bidded up to the point at which they sell, as opposed to consuming this resource (especially living in the sun-rich desert with the resources to actually convert, in a sustainable way, these photons into usable chemicals). Have you accounted for price in the feedback loops of consumption vs. exportation of net exporting nations? You very well may have.. but I would find your mathmatical models hard to believe, as they all quickly dwindle to zero. Without a price component, your net export model seems to more accurately predict an increase of export PRICE (see above) of oil than an actual likely export curve.

People will sell at a price that provides them with the quality of life they are looking for (or at least expecting). The exact net export curve (price varianced) will be based, in an energy sense, on the state of advancement on alternative energies (think solar)/alternative liquid fuels (think ammonium) that will allow that quality of life.

And the state of advancement of these applicable technologies (and sure they suck) are the unknown variables relative to export decline curves, that may have a substantial effect on exporting economies..

Basically, I think that Price will go way up before mass export rates go to literally zero, it should be an inverse log, at least, and that's before accounting for new empire based on exporting countries, and the payoff in the poorer ones to the rich who allow exploitation of the non-exporting countries.

I have been a lurker here for a long time, but I must admit that I have never looked up the entirety of your work on net exports, so it is possible that you have already accounted for these variations (variables? (feedback loops??)). But if so, I do not understand how net exports would continue to go straight to zero. It doesn't add up, but,

Keep up the good work,

First, a number of former net oil exporters have become net importers, e.g., the US, China, Indonesia (a founding member of OPEC), UK, etc.

Second, for the larger net exporters, I usually talk about the countries approaching zero net oil exports.

Third, and most importantly, you need to understand the inherent math behind these net export declines. Given an ongoing production decline in an oil exporting country, unless they cut their consumption at the same rate that their production declines, or at a faster rate, the resulting net export decline rate will exceed the production decline rate, and the net export decline rate will accelerate with time.

And here is a look at the five year rates of change, 2005 to 2010, for net oil exports from the (2005) top 33 net oil exporters worldwide:

The bottom 5 on that list can't be exporters for very much longer, can they?

Given an ongoing production decline in an oil exporting country, unless they cut their consumption at the same rate that their production declines,

It is easy to see that the oil consumption of a country depends heavily on whether oil products in that country is subsidised, treated neutrally or taxed. However, if the country is an oil producer or not should matter little in itself.

So I think stravinsky7 has a very good point. I would expect subsidies to be cut in producing countries as they get closer to zero net exports, and thus I would expect their per-capita consumption to get closer to the world average.

Norway's gasoline price is some $10/gallon now, btw.

Supporting your case - almost no one foresaw the housing collapse in 2008. Also, the FED tried numerous times to model the stock market - without success.

I would say it's exceedingly hard to forecast future price better than markets. If anyone could they could gather great wealth.

I'd say it's easy to make forecasts, hard to make good forecasts, and exceedingly hard to forecast better than markets. It's too bad Intrade doesn't have an active peak oil market. I've found Intrade to be a much better forecaster of political contests than opinion polls and pundits (tho I have no proof). For example, Mitt Romney has an 83% chance of winning the Ohio primary according to Intrade. Compare that to the evening news "tossup" prediction.

"almost no one foresaw the housing collapse in 2008."

I'm afraid I will have to totally dispute that. I and most of my friends (none of us economists) foresaw it, at least 2 years in advance. It was clear as crystal to me and to us that it was a bubble and would have to pop. We used to joke about it. I can't believe that people who actually had more inside information as to what was happening didn't foresee it as well. Oddly enough, the only one of my circle who didn't get it was a real estate person...

The real estate bubble was pretty easy to spot around here; the feeding frenzy actually became quite fascinating. I tried to warn a few of my friends, @2006, that they were either late to the gold rush or getting greedy. One now works at the super market deli counter. One acre 'view' lots that were selling for $350K have been foreclosed and sold off for under $20K. The nearby development, about 90 acres, is now my personal wood lot complete with paved roads; not a single home built there. The mountaintop lots are still listed at $250k/acre. Sure...

I knew absolutely nothing about economics, but I recall telling people often between 2006-08 that the real estate boom (quite bubbly in AZ) had to come to a bad end. T'wasn't natural!

Indeed, it wasn't natural. Suddenly, people believed money was free. For the first time in history, since money became the root of all evil (so people say), it was free for the taking and according to Wall Street, no-one would lose. There's many a dishonest Californian, New Yorker, Las Vegan, etc., who now sits on a nice pile of cash from flipping houses and managing to not buy the next house just in time. On the flip side there's many a broke honest person who tried to parlay their nest egg and carefully saved money into a semi-comfortable retirement only to lose it all into a toxic black hole.

Unfortunately, our financial system has crossed the event-horizon and there's not enough energy in the world to save it now.

in 2003-2006 I worked for a large investor and I prepared a number of presentations on the housing and mortgage bubble which were shown to senators and other (more senior) administration officials. We did this a number of times over a couple of years. When people in politics say stuff like "we never saw this coming" they are completely full of it. We sent a number of the presentations to all members of congress+senate on a couple of occasions.
People who could have made a difference simply chose to ignore the data and reasoning put in front of them because it was the easiest thing to do.


Many "see" a bubble, but predicting the top is the tough or impossible part. Also, talk is cheap - did you take any action to protect yourself or to profit?

When you're sinking to the bottom of the 99%, it's a lot easier to see the obvious and the wishful thinking of those more materially fortunate. I had no investments, but I made certain I didn't borrow against my mortgage as many people did at that time. And just kept living hand to mouth as usual.


INvestor BRad: "Also, talk is cheap - did you take any action to protect yourself or to profit?"

I think Dean Baker sold his house and became a renter. My wife and I thought long and hard about selling in 2005, but decided that over the long term it wasn't worth the trouble; anyway, we live in a dense urban neighborhood in Massachusetts, where the prices have held up pretty well.

Same around here. I think what most of us didn't appreciate was how deep and destructive it would be. We thought, sell now if you can, but we thought the downsides were reasonably containable. My house is just a few grand above its original sale price in 1999.

And on the flip side...a lot of people thought it would be a lot worse than it was. If you look back at the comments posted years ago here...there were some who were planning to take out a mortgage they knew they couldn't afford, figuring that so many homes would be in default that the banks wouldn't want to take the houses back, and the government would just let people stay in the homes for free.

There was a little of that, but not so much that you'd want to count on it.

That's true. Look at the Housing Bubble Blog, and several other similar sites. They existed for years before the peak, and were probably very profitable for their creators.

Me, I protected myself by not buying a house.

"almost no one [politician, economist or 'investor'] foresaw the housing collapse in 2008."

I made a slight change to your statement so it would be true.

Lots of folks with common sense saw it coming, and nobody would listen to them.

Well-known economist Robert Shiller made surprisingly accurate predictions of the housing bubble and crash in his book, "Irrational Expectations."

Yes, one of the few exceptions. "almost no one"... Most were telling us there was nothing wrong.

The correct title of the 2006 Robert Shiller book is "Irrational Exuberance."

Good name for the concept and the times.

The motivational limbic system, having efferent and afferent connections to the prefrontal cortex, influences our premonitions of the future. "Happy ideas” are neurochemically rewarded and reinforced in memory. Realistic appraisals are discarded and replaced by “feel good” ones. We are not quite as rational as we suspect and this explains much of the technological cornucopianism and ecstasy of religious contemplation. This trait works against anyone faced with real danger as the mind will gravitate towards a cognitive construct that leaves a sweet taste in the hypothalamus but fails to admit reality. We think, we plan and we imagine a nice outcome of transition gardens and peaceful poverty or perhaps a whole new generation of thorium reactors, not because it's likely, but because it feels good. To plan effectively , you must not dismiss uncomfortable conclusions by substituting rosier views.

Technological evolution conducted by semi-conscious apes with homicidal tendencies is the black swan we ride upon. The Cambodian killing fields, the Rwandan massacre, Rape of Nanking, and Holocaust were contagious treachery synchronized and condoned by “tribal” leaders and amplified by technology. It is my uncomfortable conclusion that the average human is capable of committing horrific acts if sanctioned by authority. I consider the episode at Abu Ghraib prison an example of contagious depravity sanctioned by authority. Likewise, the wanton destruction of life at Nanking and the Holocaust were planned and explicitly encouraged. Any utterance of genocidal intent from any national or tribal leader should be considered carefully and with the greatest gravity.

That we have nuclear and biological weapons trained on each other on the cusp of a significant and increasingly severe resource shortfall, does not instill confidence in the future but rather solidifies the expectation that once a critical mass of desperation is achieved, they will be used. Perhaps I am being irrationally pessimistic and should exuberantly fashion something more ecotopian to occupy my mind.

Hey Dopamine,

Perhaps I am being irrationally pessimistic and should exuberantly fashion something more ecotopian to occupy my mind.

I often feel like you do but at the end of the day even though most USians are pretty much f*cked and it's basically their own damn fault, there are a few bright spots out there to focus on. This guy is just down the road from me, I might even go and check him out... I could use something to keep me out of trouble on weekends.


I also spent some time recently on the southern coast of Brazil in ecologically structured fishing villages.
Apparently there are clauses in the Brazilian constitution that make such things, not only possible, but required by law, who knew?!

As for USians, they really need to open their eyes wide, get off their high horses and take back their country.
Unfortunately all they seem to be capable of doing anymore is buying bigger screen TVS so they can be told to consume more crap! Hmm, I wonder if the remotes can be incorporated into artificial reefs?

Back in the mid 1990s, I was working with an outstanding furniture maker, George. We used to have incredible conversations about a multitude of topics. Around this time, I had been thinking of the baby boomer population bubble, and the ever increasing price of real estate (I lived, at the time, in the so-called Central Coast part of California, an area well on it's way to being extremely expensive). I was wondering what would happen when the boomers began to retire, and would all want to sell their homes thus flooding the market. George had been thinking the same thing about stocks. Anyway, it's interesting to look back on that conversation, and what has been happening over the past 3 years. Maybe we were "right", but for the "wrong" reasons. I don't know. Still, for two guys casually chatting in a wood shop ...

almost no one foresaw the housing collapse in 2008

I can send you an MP3 from a church in the US, recorded 2007. The guy speaking mentions how a lot of people are going to suffer greatliy, given what is going on with houses and loans on such. Those who kept their eyes open knew atleast in early summer of 2007 what was going on, the information was floating about.

Yes I saw that. The EIA is predicting non-OPEC all liquids to increase by .77 million barrels per day in 2012, down from a prediction of a .9 mb/d gain last month. They made a similar prediction last year and gradually reduced it every month. Now they are saying that non-OPEC liquids were down by .02 mb/d in 2011.

But if you will notice they are predicting Norway to increase production in both 2012 and 2013.
Norway's predicted all liquids production in million barrels per day according to the EIA Short Term Energy Outlook.

        2010    2011    2012    2013
Norway  2.13	2.02	2.07	2.11

However Norway themselves say it just ain't gonna happen. According to their site they are predicting their crude only to be down by about 4.4 precent next year. Go here: Production figures January 2012 then click on: Background data for the figures can be downloaded here >> (You will need to do the math. I did and changed their January 2012 from predicted to actual production and they were still predicting a decline of 4.4 percent in 2012.)

When the EIA says that Norway will produce a whole lot more oil than Norway themselves say they will produce, then I would say we could take the EIA prediction with a grain of salt.

Ron P.

Thanks Ron!

Kazakhstan's predicted all liquids production is probably also too optimistic.

            2010    2011    2012    2013
Kazakhstan  1.61    1.65    1.80    1.94

From http://en.trend.az/capital/analytical/2000002.html

Kazakhstan adjusted its forecast for oil production volume for 2012 to 80 million tons compared to the planned 83 million tons, the country's Economic Development and Trade Minister Bakytzhan Sagintayev said.

This is the same amount as last year: http://www.reuters.com/article/2012/03/02/kazmunaigasep-idUSL5E8E20GM201...

Foreign oil companies control a significant proportion of the 80 million tonnes of crude produced in Kazakhstan last year.

The term plateau oil has now found its way into the oil supply lexicon:

Plateau Oil meets 125m Chinese cars

China’s manufacturing has been bouncing along near contraction levels through the winter. So what happens when it recovers? The unpleasant fact we must all face is that the relentless supply crunch - call it `Peak Oil’ if you want, or `Plateau Oil’ - was briefly disguised during the Great Recession and is already back with a vengeance before the West has fully recovered... (snip)

Be that as it may, Saudi Arabia has reportedly cranked up output to 11.5m barrels a day. If so, it may be near its feasible limits. No other country can step in. Which leaves us very naked as brinkmanship with Iran nears its denouement.

I don't believe a word of it. According to tanker trackers OPEC exports have been flat for four months.

OPEC crude oil deliveries in millions of barrels per day. The last data point is March 17, 2012.

OPEC Deliveries

Ron P.

Interesting. Does your chart include future dates because that's when the deliveries are scheduled to take place?

The OPEC gainers, I would guess, are Iraq and Libya -- certainly they are the most motivated to increase production. Is it possible that Saudi Arabia is actually easing production as Iraq and Libya grow?

SA wouldn't have to ease much to accommodate gainers, and I have to believe demand is tapering at today's price levels.

Yes, Oil Movements calculates shipments by tallying tanker rental agreements. Its figures exclude crude held on board ships as floating storage. The figures exclude Angola and Ecuador.

Ron P.

China alone will be adding 125m cars to its roads over the next five years, with auto production targets of 30m annually by 2016.

Monthly sales can be found here:

Gail's latest

Why High Oil Prices Are Now Affecting Europe More Than the US


Oil purchased by US refineries thus reflects a blend of WTI and Brent prices, and perhaps some lower ones as well. Based on Figure 3, it is clear that the current prices are far below the 2008 price peak, quite unlike the situation shown in Figure 2 for Europe, with Brent priced in Euros.

The preceding, one of the factors cited by Gail, is true, but the question is, what prices are consumers paying? US Mid-continent consumers are getting some benefit from lower WTI crude oil prices, but overall, I think that it is negligible*.

This morning, the price spread between Brent and WTI crude oils is about $17.

The crack spread is the gross profit per barrel between what a refinery pays for a barrel of crude oil and what they get from selling the refined products.

Here are the Bloomberg charts for WTI and Brent crack spreads. If you click on the five year option, you get an idea of historical trends:

WTI crack spread (currently about $30):

Brent crack spread (currently about $13):

Note that the difference between the two crack spreads is also about $17.

In other words, Mid-continent refiners are paying WTI crude oil prices, but basically charging Brent based prices for refined product.

Mid-continent product prices are lower than on the East and West Coasts, but you also have to consider factors like taxes and regional requirements for specific gasoline blends. However, the crack spread data speaks for itself, and it appears that the only real overall winners from the current spread between WTI and global crude oil prices are the Mid-continent refiners, who are doing quite well.

Therefore, what the Bloomberg data show is that US consumers are generally paying refined product prices that are based on global crude oil prices, and thus American consumers are almost fully exposed to global crude prices, which makes the daily MSM reports on WTI prices almost irrelevant, from a consumers point of view.

*I am building on numerous posts by Undertow on WTI crack spreads

I think the spread in Brent - WTI prices is a big reason East Coast refineries have been failing. They can't match the refined product prices that Midwest refineries can deliver, using oils priced off Brent. Prices of gasoline are higher on the East and West coasts than in the center of the country, and this is related as well.

I wrote a post a while back called Pipeline Fixes to WTI/Brent Spread Are Likely to Add New Problems related to this subject. In this post, I showed that refiners acquisition costs declined, when the WTI dropped below Brent:


I also showed that gasoline prices seemed to follow refiners acquisition costs. (I haven't updated this recently.)


As noted in my post, gasoline prices on the East & West Coasts are traditionally more expensive than in the center of the country, e.g., the gap between West Coast and Midwest gasoline prices in early March, 2008 (31¢) was similar to early March, 2012 (45¢).

Note that the average WTI crude oil price in March, 2008 was $105, and the average Brent crude oil price in March, 2008 was almost identical, $104.

On March 4, 2008, the closing WTI crack spread was $10 and the closing Brent crack spread was $12.

My point is that the current (early March, 2012) Bloomberg crack spread data (about $30 for WTI and about $13 for Brent) show that Mid-continent refiners are currently, on average, capturing all of the gap between Brent and WTI crude oil prices as refining profits. Therefore, US consumers are basically paying product prices which are linked to the global price of crude oil.

I am finally beginning to see some positive developments on the solar energy front in India.
By way of background: I have lived in the US for the past 25 years but am originally from India.
One of these friends in India owns a textile factory and and production has been suffering
severely due to the highly erratic power supply . He told me that he is now in the process of
covering the entire roof of the factory with PV solar cells. He did the math and found that the
cost of PV based solar power is significantly less than that from diesel generator sets. Whats
more, there are now a significant number of entrepreneurs who provide turnkey service installing
the solar cells. If things go well for my friend, I am sure that other factories in his area
will also move to solar power.

I myself am in the process of looking for a company to install some panels for my parent's
home. There are now rotating power cuts in most parts of the country. In Chennai where they live,
the power situation is not quite as bad as some areas but it promises to get progressively worse
as summer approaches. They currently have a set of lead-acid batteries with an inverter to supply power
when the power supply is interrupted. I plan to have solar panels to charge up the
batteries. I am now waiting for quotes from some installers.

Please let me know if you find something on the solar panel thing. I am looking for a place to buy some myself.

Out of curiosity - will these be grid-tied systems with battery backup?

How big are these typical PV/battery arrays? How many hours of run-time will the battery backup provide?

Michael Ruppert ... Nearly a year after moving to Sonoma County, the Southern California transplant

And not that long before he had left the US borders saying he'd never be back.

Well, as Leanan and others have suggested, we're coming to a time when we'll have to be open to changes of location, and often enough, revisions to those plans as we see how they're going.

We just moved my Dad from New Hampshire to an Assisted Living place 4 blocks from my home, where I'm also able to walk to my daughter's school, my wife's job, most shops, etc.. and yet, I have to keep reading the signs to see if new, wilder shifts aren't in the cards.

Hopes for Vigilance and Flexibility..

I have been looking into relocating but find that it will be very hard to do. The company I work for is doing well it seems.

Mental relocation is more important than physical relocation for most people.
“Do what you can, with what you have, where you are.” -T. Roosevelt

I don't think that really flies, right now, R4.

A LOT of people live in locations that are simply dead-ends.. particularly at the extremes of temperature and hydrology, but more subtlely those places that simply depend on imports for essentials that residents don't even know could be dire if they come up short.

I sure hope reaonable people in the Desert Cities and the coldest extremes have their ears to the rails and noses to the grindstones.. before they end up with their backs to the walls.

Yet they can't all move. If they did it would just make more of those places.

There are simply too many people, so the first "move" an aware person needs to make is to see the place they are differently.

Maybe where they are can only support 1/10th the population is currently does, how do you increase your odds of being in that 10%?

Maybe it can't support anyone, how do you open up your options to move successfully should the need arise?

The problem with EOTW plans is they have to be viable before the EOTW, too.

"Yet they can't all move. "

Well, as ever, 'You're not trying to outrun the Lion, just any one of the other gazelles..'

Or to be slightly less crass about it.. Everyone simply has to makes their bets and takes their chances.. snooze ya lose! Maybe it's your choice to move, maybe it's your choice to figure out how to live where you are.. but I'm far from sanquine about your quote that looks to suggest that mobility shouldn't be one of the critical options you are considering, even if it's hard.

Location, Location, Location. (that, and elocution..)

John Robb has posted something along the same lines today as being discussed in this thread.

What Makes a Home or Community Valuable

However, what happens when the global economy is depressed or suffers from financial shocks? Values plummet...

...They plummet because homes are valued as derivative assets. They derive their value from their connectivity to global economy. They don’t have any intrinsic value...

...over the vast majority of our history as civilized beings, our homes and our communities derived their value from how much food and energy they could produce. That changed only recently (by historical standards) as we became increasingly dependent on the global economic system. Due to this dependence, our homes became hollow decorative assets, devoid of any productive capacity. Our communities became black holes of consumption.

Not a million miles from my own view posted further down the thread.

Where we live is basically designated by economic efficiencies and our particular dependencies upon the System and not by resilience of location.

Basically as you are saying, changing circumstances will make many locations untenable, resulting in the need to relocate. Those early movers may be able to relocate successfully before the window of opportunity closes, as everyone can not move. If everyone attempts to do the same thing at the same time the system will collapse in the same way that everyone trying to sell shares at the same time collapses a stockmarket.

I guess the thing to take away from this is that locations as well as people have dependencies upon the existing system and will be taken down with it as it collapses. There are plenty of historical examples (eg. mining towns, etc.), but nothing on the same scale as our streamlined interconnected mono-economic global system. Where over 50% of the worlds population live in urban areas employed in non-productive make-believe economic activity and without the skills or assets to live in the real world without the aid of the failing economic system.

My point was supposed to be that it doesn't matter where you are if your mind isn't already in the right place, and if your head is in the right place then your physical location doesn't matter as much.

Obviously if you are in Phoenix and the water supply goes pear-shaped you've got big problems. But if you are in Phoenix and you know that you'll have big problems if the water supply goes pear-shaped, you might have a 55-gal drum in the basement so you aren't rushed into making an unplanned move. (Not that there are any basements in Phoenix, which is a shame).

Perhaps the Roosevelt quote diluted that message too much.

True enough.

Maybe it's like the nutrition thing. People CAN survive on Twinkies and Cigars and Diet Pepsi, apparently.. it becomes a matter of choosing

1)..just how many different dice you want to be rolling for your chances,

without forgetting..

2) That it's still smarter to be lucky than it's lucky to be smart.

That's one of the reasons that made me chose not to pursue a scientific career abroad after my PhD in biology. I am staying in France, thanks. All my relatives and friends are here, and the last thing I want is to be stuck in a foreign country because of career.

Of course, I'll know it was a good choice in a decade or more, but I'm still young, so I can NOW train myself to get a job in another field. Perhaps not the wisest of choice. In ten years, when I have a family, perhaps we'll head towards south hemisphary, can't make any guess now about that.

Not to mention that to have a good career in science, you have to be in large cities. There's no top laboratories in small rural towns... Anyway, I am no more interested in a "good career".

My partner and I are looking at land in Maine, you know, where there is water, as a way to hedge our current situation We live in Central Texas and another year like 2011 will definetly get more people thinking and some will leave. Some did last year.

I'm crossing my fingers that Maine's water and overall ecology will remain sturdy.

We're in a walkable city on the coast with a good water supply and a range of businesses and local food sources, and we have a few acres for a camp up in the hills with space for growing, and not-too-distant access to (hopefully renewed) railway, in case the roads are allowed to crumble out there..

A few choices at hand, and always on the lookout for a few more.

Well, as Leanan and others have suggested, we're coming to a time when we'll have to be open to changes of location, and often enough, revisions to those plans as we see how they're going.

Before I moved to rural France, I used to live in a city centre with my business premises and office walking distance away. A good rail network, bus services, pedestrianised centre, cycle routes, etc. I only used my car, a tiny fiat uno, for business purposes, school run (private school) and trips to the countryside, certainly much less than 10k miles a year.

But as you say, we have to be open to changes of location. It is certainly my contention that few people will be in a suitable place to weather the systemic failures in our civilisation and resulting changes. Where we live is basically designated by economic efficiencies and our particular dependencies upon the System and not by resilience of location. In my case I was 100% dependant and highly vulnerable to even a partially failure in the System (especially economic, but increasingly any event seemed to have an impact - economic, resource, energy, weather, you name it.). I found that my circumstances would be better if I relocated to a more resilient place to live. I'm sure I would have been bankrupt by now if I hadn't taken the drastic action I had and was luck to see things coming.

I don't believe I was unique in this and that practically everyone should consider their location before they even start planning for the future. It's probably the most important consideration in becoming more resilient to the increasing number of shocks and impacts we're going to have to withstand.

"Do you know where green electricity will come from? Up top.

This Prof. Haszeldine is wearing some very deeply tinted rose coloured spec's if he thinks we're going to be around in 30-60 years for all this "green power" to come to fruition.

That will change slowly. Our electricity now is less black because of switching from coal to gas; it will get a bit more so by replacing gas with nuclear, and by adding some wind and solar. But for the next 30-60 years we are committed to staying pretty dirty, because of the power plant equipment being built. The terrible problem is that fossil fuels are just so cheap, so available and so very convenient.

What ever happened to Obama "clean coal"?

Pickens must be paying him more than the coal companies these days.

Well I know you are just joking but everyone probably does not. So you should put a smiley face after such a comment. To suggest that Pickens is in a contest with the coal companies as to who can offer the President the largest bribe is only something a right wing, redneck, nut case could suggest. You don't want to be thrown in with that group.

Ron P.

Oh, no, the largest bribes come from Wall Street. Everyone knows that.

It has been undermined by low natural gas prices.

From today's WSJ (behind a paywall):

Natural Gas to Power Pickups

On Tuesday, Chrysler Group LLC plans to disclose it will build the first production-line pickup truck powered by natural gas. The auto maker is promising to build at least 2,000 heavy-duty Ram bi-fuel trucks that run on a combination of compressed natural gas and gasoline starting in June.

General Motors Co. on Monday plans to disclose it will offer bi-fuel Chevrolet Silverado and GMC Sierra 2500 pickups in the fourth quarter. The trucks will be built by GM and sent to a supplier that will retrofit them to use compressed natural-gas tanks.
Chrysler said its CNG-powered Rams can travel 255 miles on the fuel before automatically switching to an eight-gallon gasoline tank for an additional 112 miles. GM's pickups would go up to 650 miles using both CNG and gasoline.
Ford Motor Co. has been offering CNG prep kits for about a half-dozen vehicles, including the Transit Connect, since 2009. It will expand the offering to its large Ford 650 pickup truck in the third quarter.

It's bandwagon jumping time again, folks! Why not, America has 100 years supply of nat gas, right???

E. Swanson

I wouldn't be surprised if most of these shiny new RAMs are sold to natural gas utilities as fleet vehicles, along the lines of what Dodge is doing with their PHEVs.

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


Makes perfect sense to me. My Gas Boom Goes Bust post ended with the following predictions:

  • Natural gas producers and investors with poor hedge books and too much debt will end up in bankruptcy court.
  • ✓  Drilling operations will focus on liquids-rich plays only.
  • Jobs creation in the natural gas drilling industry will fall well short of expectations.
  • ✓  Several older coal-fired plants will close.
  • New wind power generation will fall — especially if the production tax credit is not extended.
  • ✓  Natural gas fueled fleet vehicles should become more popular.

I'd say we're on track to finish this checklist sooner rather than later.


Interesting analysis of unanticipated clean-up difficulties in the rural Kalamazoo MI spill of diluted bitumen from Alberta oil sands, and implications of same for the urban British Columbia coast and Vancouver Harbor:

Unlike conventional crude, diluted bitumen or "dilbit" is a mixture of unrefined tar that is often heavier than water and "diluent." This is usually a cocktail of volatile solvents like naphtha or natural gas condensate that allows the thick bitumen to be pumped through the pipeline.

The local residents and EPA responders near Kalamazoo quickly learned that bitumen and diluent do not stay together once released into the environment.

Volatile portions of the diluent containing toxic fumes of benzene and toluene began off-gassing in the area, impacting the health of almost 60 per cent of the local population with symptoms such as nausea, dizziness, headaches, coughing and fatigue. Clean-up crews were issued respirators to protect them from toxic fumes.

Local residents interviewed by the Tyee reported that even weeks after the Kalamazoo spill, they could still smell the fumes up to 50 kilometres away. The local health department went to door-to-door in the days after the spill to assess acute symptoms. They also instituted a voluntary evacuation within about one mile of the river to limit people's exposure to benzene fumes -- a known carcinogen.

As the lighter chemicals evaporated into the surrounding area, the bitumen portion began to sink to the bottom and become mixed with river sediments. Conventional clean-up equipment such as skimmers and oil booms proved useless in recovering the large amounts of submerged oil that now covers an area of river bottom estimated to be approximately 200 acres.

"This was the first time the EPA or anyone has done a submerged cleanup of this magnitude," Ralph Dollhopf, the EPA Incident Commander for the Kalamazoo spill told the local media.

"I would never have expected... that we would have spent two or three times longer working on the submerged oil than surface oil. I don't think anyone at the EPA anticipated that, I don't think anyone at the state level anticipated that, I don't think anyone in industry anticipated that."

In the absence of any previous experience in dealing with spilled Alberta bitumen, the EPA had to "write the book" on figuring out how to recover large amounts of oil that doesn't float.

Twenty months after the spill these expensive recovery efforts continue, and 30 miles of the Kalamazoo River impacted by the spill remain closed to swimming, boating, fishing or even wading for the foreseeable future. A recent video details the aftermath of the spill on local residents.

Enbridge now estimates that clean up costs of the bitumen spill will cost more than $720 million. The company exceeded their insured clean-up coverage of $600 million last fall and the clean up is far from over. Compared to other spills of heavy oil, this Kalamazoo bitumen spill has been colossally expensive. A study of historic oil spills in the U.S. reported the average clean-up cost for heavy crude of $18.95 per litre. The Kalamazoo spill has so far cost over 10 times that much and counting.

"unanticipated clean-up difficulties "

Unanticipated by anyone who benefited from tarsand development. Obvious as hell to anyone else.

Why is the story always the same? Those involved or benefitting don't see it coming, lots of others have no problem seeing the oncoming disaster. Housing bubble, oil spill, Nuke Plant disaster, whatever else, it's always "unanticipated, unforseen, etc. problems" that plenty of people anticipated or foresaw.

It's the CC-PP game: Commonize Costs, Privatize Profits. It works really well.


Privatize the gains, socialize the costs = success for the few. Time to sharpen the pitchforks, folks...

I have extras, if anybody needs a pitchfork. But let's don't forget the torches!

Apologies if this has already been posted:


Video: Inside Japan’s Nuclear Meltdowns

Hope this hasn't been posted:

Increased Use Of Enhanced Oil-Recovery Techniques Is The Top Technology Trend In Oil And Gas, Moving Some Wells To 40% or 45% Resource Use; Find Out More In This Exclusive Interview With Analyst Philip Weiss At Argus Research


Saudi Electricity plans big fuel oil power plant

Saudi Electricity (SEC) is looking for companies to build and operate a 1,700-megawatt (MW) independent power plant (IPP) running on fuel oil, the state-controlled utility said on Monday.

Saudi Electricity has an $80-billion investment plan to increase its power generation capacity by 30,000 MW by 2018 to meet power demand that is rising by around 8 percent a year.

ELM !!!

Pretty soon, these 8 percent increases are going to amount to real volumes. Has anybody looked at the consumption curve for SA lately?


Sometimes I feel like that guy in "2001 space odyssey", when he said, "Oh my God, it's full of stars".

Just put together some "Cowboy Integration" numbers for an email correspondent. An excerpt:

"Export Land Model" (ELM)
Production Declines at 5%/year, Consumption Increases at 2.5%/year, and therefore Net Exports show an accelerating rate of decline
CNE = Post-peak Cumulative Net Exports = 1,382 mb

ELM assuming a production peak in 2000:

Note that one can do "Cowboy Integration" by calculating the area under a triangle, and get a pretty good approximation for post-peak CNE (Cumulative Net Exports) by multiplying 365 mb/year X 9 Years X 0.5, (less 365 mb), which is 1,260 mb, versus actual post-peak CNE of 1,382 mb. However, if we want to estimate high, we can just multiply the peak net export rate times the number of years to zero, times 0.5, resulting in an estimate of 1643 mb (or 1,600 mb, rounded off to nearest 100 mb), versus the actual value of 1,382 mb.

Also, if we extrapolate the 2000 to 2003 rate of increase in the C/P ratio for the ELM (50% to 64%), it suggests that ELM would approach a 100% C/P ratio in 8.5 years, when it actually took 9 years. The rate of increase in the C/P ratio was 8.2%/year from 2000 to 2003, so we just take the natural log of (100/50) divided by 0.082, which gives you 8.5 years. This suggests (post-peak) CNE of 1,600 mb, if we round up to 9 years (as shown above), and round to the nearest 100 mb.

Key Point: In some cases, we can extrapolate the initial rate of increase in the C/P ratio to determine approximately when the net exports might approach zero (as the C/P ratio approaches 100%), and thus we can integrate the area under what tends to be a triangular shaped area to get a reasonable ballpark estimate for CNE.

Also, a rough rule of thumb is that about one-half of post-peak CNE are shipped one-third of the way into a net export decline period, e.g., ELM, Egypt, UK, Indonesia:


Some Applications:

Saudi Arabia Post-2005 CNE Estimate

I estimate that 2011 annual Saudi net exports (total petroleum liquids) will be 1.0 to 1.6 mbpd below their 2005 annual rate of 9.1 mbpd, as we are seeing a small change in the slope of the projected and ongoing net export decline. If we take a net export rate of 7.8 mbpd as a middle case estimate, then Saudi Arabia would approach zero net oil exports some time around 2028 (projecting the 2005 to 2011 estimated Consumption to Production ratios, total petroleum liquids, which increased from 18% in 2005 to an estimated 28% in 2011). The 2028 estimate is consistent with Sam Foucher's projections.

Using the same approach that we used for "Export Land," post-2005 Saudi CNE would approximately be: 3.3 Gb/year X 23 years X 0.5, which would be approximately 38 Gb. Post-2005 Saudi CNE are about 17.5 Gb through 2011, so based on this ballpark estimate, post-2005 Saudi CNE would already be about 46% depleted.

You can see how this estimate of about 21 billion barrels in remaining cumulative Saudi net oil exports differs "slightly" from conventional wisdom.

Global Net Export (GNE) Post-2005 CNE estimate

Our data table shows the C/P ratio for the top 33 net oil exporters in 2005 (GNE) increasing from 26.9% in 2005 to 31.1% in 2010, a 2.9%/year rate of increase. This suggests that GNE would approach zero in 45 years from 2005, or around 2050, suggesting post-2005 Global CNE of about 374 Gb, and it suggest that Global CNE will be about 50% depleted around 2020.

CANE (Cumulative Available Net Exports)

The ratio of Chindia's combined net oil imports to GNE increased from 11.2% in 2005 to 17.6% in 2010. This suggests that ANE might approach zero in 24 years after 2005, or around 2029, suggesting post-2005 CANE of about 175 Gb, and it suggests that CANE would be about 50% depleted by the end of next year, 2013.

P.S. Any corrections to my math are always welcome.

westexas, do you think oil production in Saudi Arabia peaked in 2005 or that we get a new peak this year, 2012?

According to IEA, http://omrpublic.iea.org/supply/sa_cr_ts.pdf, oil production in Saudi Arabia has increased by almost 2 mb/d since the beginning of 2009.

My two cents worth: I think that it is more likely than not that 2005 will be the final Saudi annual production peak, at least based on the BP data base (the EIA data seem to be at odds with several other data sources recently); however, I think that it is extremely unlikely that Saudi Arabia will ever again exceed their annual 2005 net export rate of 9.1 mbpd (total petroleum liquids).

Incidentally, as Charles Mackay (and Undertow & Ron) have so ably pointed out, there seems to be a disconnect between reports of increased Saudi production and reports of actual Saudi oil deliveries.

And by the way, as Ron has pointed out, an increase the the Saudi production rate (assuming that it is real), means an increase in the post-2005 CNE depletion rate. At the end of the day, that is the irony about all the discussions regarding fossil fuel resources--an increase in the rate of production (more accurately an increase in the extraction rate) means an increase in the rate that we are depleting a finite fossil fuel resource base.

How do you explain the fact that tanker trackers Oil Movements show that Saudi exports have not increased by any significant amount in the last 12 months once you smooth out the occasional surges?

The 10 week running average (as calculated by Darwinian) shows that OPEC tanker exports are running almost 0.5 mb/day below this time last year and would be even lower were it not for Libyan production returning

Why does all this Saudi claimed extra production never show up in tanker tracking? Why has no Saudi claimed increase since 2003 ever shown up in IEA crude oil import tracking into the OECD (excepting some output recovery after the 2008/9 market crash prompted OPEC voluntary cuts but not back to earlier levels)?

For example, imports to US from Saudi Arabia is currently 363,000 b/d higher than last year:


I also think Saudi exports to Asia (especially China) has increased over the last two years (but I don't have any data). Exports are also affected by ELM (higher consumption in Saudi Arabia).

You need to look at the OECD as a whole. If you look at just one country (especially the USA) it seems Saudi does occasionally increase shipments. If you look at the IEA (note: not EIA) import stream tracking for the whole OECD you find that Saudi exports have been reduced to other OECD countries to make up for this. Exports to the OECD from Saudi Arabia peaked in 2003 according to the IEA.

Saudi Arabia appears to follow a cycling pattern where they boost to one region and cut back to another. But if you add it all up, the annual shipped total has been declining since 2003.

As you say thy are supposedly shipping a lot more to non-OECD countries. That's not audited by the IEA of course. Everywhere that's audited, shipments on the whole are decreasing. Virtually everywhere that is not audited, reported shipments are increasing. Make of that what you will.

tow - "Saudi Arabia appears to follow a cycling pattern where they boost to one region and cut back to another." Could this be due to some initial development of the Mutual Assured Distribution Of Resources? IOW is the KSA starting to play favorites? Or as Kojak use to say: "Who loves ya, baby?"

If the Saudis change their favourites every few months then perhaps :-) I'm thinking, for the moment, they just rotate around their customer list, occasionally juggling in exceptional shipments for political expediency, which they can claw back quietly later.

To be honest, I haven't updated my spreadsheet of IEA import streams in quite some time though - the IEA don't make it easy as you have to copy multiple import stream tracking tables from multiple PDFs and add them all up. I'll update with most recent data when I get a chance and post updated graphs. But as we've been on a downwards trend since 2003 I can't see this having changed in recent months as tanker tracker data doesn't show anything substantial extra having been shipped for it to appear in IEA/OECD import data.

tow - "they just rotate round their customer list". That would make sense IMHO. P*ss off some folks for a short period and then make them happy. Sort of like musical chairs without someone taking a chair away. And as many of us suspect, the day is coming when the chairs start disappearing. Then p*ssed off will be a constant state for some.

I've just glanced at the latest IEA report with data through November 2011. For the month of November, compared to November 2010 shipments of "Saudi Light" were UP 150,000 bpd to North America, Up 80,000 to Europe BUT DOWN 240,000 barrels per day to Asia/Pacific. Or a net fall of 10,000 bpd since November last year.

Checking the last 2 complete quarters (Q2 and Q3) Saudi Light shipments averaged 2.63 mb/day against 2.56 mb/day for the whole of 2010. So maybe they managed to surge by 70k bpd - an effectively meaningless minimal increase I haven't processed all the figures yet for all grades/regions/time periods but that's what jumps out at me so far. As I say though the more you smooth out Saudi exports, the less apparent becomes any supposed export increase.

Saudi Light annual exports to the OECD now seem to be about 10% below their 2002 peak based on IEA data.

Saudi Arabia, by alternatively surging and cutting back (probably storage games IMHO) total exports while simultaneously cycling these bursts/cuts around their customer base, keeps the underlying picture murky.

The IEA figures for 2011 complete will be available to the public in a couple of weeks time so I'll chart the yearly comparisons then.


I don't follow the numbers like you or Ron or westtexas do, but I noticed a story the other day where China and India are importing crude, and exporting product, to a large degree.

"China will become a net exporter by 2015 and India, which already sells more than it buys, will be refining 70 percent more oil products by 2016, the shipbroker estimates. "


So if these analysts are right, crude exports from the ME may be shifting even more to Asia. The bucks are buying ships, inspite of the present tanker capacity glut. They expect longer haul distances for refined products.

doug - One specific example of this situation. Several years ago China cut a deal with Venezuela. In return for building several tankers designed specific to carry Vz heavy crude as well as building several crude specific refineries in China, Vz gave China a long term contract with escalating volumes. I think the current level is around 400,000 bopd going to China. I assumed China was just securing product for itself. But perhaps they saw it as much or more as an opportunity to supply the rest of Asia with product. Given govt support and labor conditions, China could certainly build and operate those refiners cheaper than anyone else.

Potentially ironic: China imports/cracks Vz crude that used to go to Gulf Coast refiners and sells the products to the US...or whoever the highest bidder might be. Consider the political leverage China would have over the US should they become a significant supplier of products to us especially as we see more stories about US refiners shutting down. Maybe just one more brick in that theoretical MADOR wall.

I think we are rapidly approching the point at which ELM no longer applies. Why? Because most if not all oil exporting countries need approximately all their real net export of oil revenues to keep their economies going and to prevent rioting or revolution in the streets. In other words, as oil export revenue declines, the government is more and more given powerful incentives to cut domestic oil consumption so as to maintain as much as possible the revenue from oil exports.

Different oil-exporting countries will reach the point where ELM breaks down at different times, but my guess is that all currently net-exporting countries will be vigorously trying to minimize domestic consumption of oil products so as to maximize net export revenues within five to ten years.

Rising oil prices over the past six years have enabled oil-exporting countries to increase substantially their revenue from net oil exports even while volumes of net oil exports from most oil-exporting stay the same or decline.

The timing of when the ELM breaks down largely depends on the rate of increase in global oil prices and how fast the production of oil in oil exporting countries declines.

I think we are rapidly approching the point at which ELM no longer applies.

I don't agree. For example, Saudi Arabia, Russia, UAE, Kuwait, Norway, and so on, still consume (much) less than half of their overall production. Meanwhile, oil prices are rising by around $10/year.

The average rate of increase in annual Brent prices was 1% per month from 2005 to 2011, or 12%/year (of course, actual values were above and below the trend line), while the annual net export decline rate for the top 33 net oil exporters was 1.3%/year from 2005 to 2010.

Assuming a similar net export decline rate for 2011, annual oil prices from 2005 to 2011 will have risen nine times faster than the rate of decline in GNE (Global Net Exports). Of course, then there is the Chindia factor. The 2005 to 2010 ANE decline rate was 2.8%/year

Because most if not all oil exporting countries need approximately all their real net export of oil revenues to keep their economies going and to prevent rioting or revolution in the streets.

One way to insure rioting in the streets of oil exporting countries woulb be to cut gasoline subsidies. Gasoline price per gallon in some countries: Global Gas Prices | Hybrid Sales

United States 	  	$2.62 	  	02/15/2010
Nigeria 	  	$1.67 	  	12/25/2009
Iran 	  	        $1.51 	  	06/28/2009
Egypt 	  	        $1.21 	  	05/06/2008
Oman 	  	        $1.17 	  	02/28/2007
Kuwait 	  	        $0.87 	  	09/06/2006
Turkmenistan 	  	$0.83 	  	02/18/2008
Algeria 	  	$0.79 	  	12/15/2009
Saudi Arabia 	  	$0.61 	  	07/31/2008
Libya 	  	        $0.57 	  	06/01/2008
Venezuela 	  	$0.19 	  	03/20/2009

These prices are obviously out of date but global gas pump prices seems to be something no agency tracks on a regular basis. Also many of these countries, like Saudi Arabia, use oil to generate electricity and to distill water. Raising that price would create a lot of unrest also.

Ron P.

Most oil-exporting countries have to import food. For example, if memory serves, Saudi Arabia has to import almost all their food. What will trigger riots and revolution quickest is not increases in the price of gasoline and diesel but instead is increases in the price of food, often combined with food shortages.

I think both history and sociology point to the price and availability of food as the key element in setting off riots or creating revolutions. Can you name a single country in which the rise in the price of gasoline has triggered a successful revolution? I can't. On the other hand, look at the granddady of revolutions--the 1789 French Revolution. When the queen of France was confronted by food riots, she is alleged to have said: "Let them eat cake." (Actually, that is a mistranslation: What is usually translated as "cake" is not cake at all but rather was a kind of bread.)


When the government abruptly announced on 1 January an end to subsidies that kept fuel prices around $0.40 (25p) a litre, it hoped to fix the country's many basic infrastructure problems. Crumbling power plants would be revamped, potholed roads smoothed and the education system fixed if the "cancer" – in the form of the $6bn fuel subsidy – was removed, said the president, Goodluck Jonathan.

Economists and multinational organisations, such as the International Monetary Fund, have long said such painful shock-therapy economics are necessary if Nigeria is to haul itself into the middle-income bracket. But the overnight doubling of prices at the petrol pump unleashed years of festering anger and the ensuing eight days of strikes brought much of the country to a halt.

The last I heard about Nigeria was that unions had threatened strike, what happened after that? Was Nigeria successful in reducing subsidies?

Since prices have risen much faster than exports are declining for many countries, exporting countries are able to increase revenues while keeping exports flat or in many cases reducing them.

2005: $55,
2006: $65, +17%/year
2007: $72, +13%/year
2008: $97, +19%/year
2009: $62, + 3%/year
2010: $80, + 8%/year
2011: $111, +12%/year

As long as prices increase at a faster rate than exports decrease, over time, I can't see ELM being a big problem for many exporters. This, of course, is temporary... until the real fun starts.

"I can't see ELM being a big problem for many exporters. This, of course, is temporary... "

Very temporary. If ELM takes your exports to zero in 7 years, then the price better be damn high in year 6, to cover your last barrel shipped.

Holder: US can legally kill Americans in terror groups

... The Fifth Amendment provides that no one can be "deprived of life" without due process of law. But that due process, Holder said, doesn't necessarily come from a court.

"Due process and judicial process are not one and the same, particularly when it comes to national security. The Constitution guarantees due process, not judicial process," the attorney general said.


The term kangaroo court is still in common usage by defendants, writers, and scholars critical of a court or a trial. The U.S. Supreme Court has also used it. In [In re Gault, 387 U.S. 1, 87 S. Ct. 1428, 18 L. Ed. 2d 527 (1967)], a case that established that children in juvenile court have the right to due process, the Court reasoned, "Under our Constitution, the condition of being a boy does not justify a kangaroo court." Associate Justice william o. douglas once wrote, "[W]here police take matters in their own hands, seize victims, beat and pound them until they confess, there cannot be the slightest doubt that the police have deprived the victim of a right under the Constitution. It is the right of the accused to be tried by a legally constituted court, not by a kangaroo court" (Williams v. United States, 341 U.S. 97, 71 S. Ct. 576, 95 L. Ed. 774 [1951]).

... just sayin'

Yeah, it is pretty dubious reasoning.

Of course the other side of the political aisle accuses this administration of "reading the terrorists their Miranda rights", so they are not much help. Ron Paul is the only principled person in this area it seems but he is cuckoo in other areas.

There's civil law, and there's martial law. This nonsense of trying to invent "terrorist law" is dangerous and unAmerican.

Air sampling reveals high emissions from gas field

... Led by researchers at the National Oceanic and Atmospheric Administration (NOAA) and the University of Colorado, Boulder, the study estimates that natural-gas producers in an area known as the Denver-Julesburg Basin are losing about 4% of their gas to the atmosphere — not including additional losses in the pipeline and distribution system. This is more than double the official inventory, but roughly in line with estimates made in 2011 that have been challenged by industry. And because methane is some 25 times more efficient than carbon dioxide at trapping heat in the atmosphere, releases of that magnitude could effectively offset the environmental edge that natural gas is said to enjoy over other fossil fuels.

versus Researchers challenge study on hydrofracking's gas footprint

A Cornell study's contention that hydraulic fracturing would be worse for climate change than burning coal is being challenged by another study, also by Cornell researchers.

Methane leakage today is probably less than 2 percent, they said, and there is no evidence that shale gas wells leak more than conventional wells.

Dueling NY studies over natural gas climate impact

Cathles said in an email Wednesday that he has received funding from sources including the Gas Research Institute and oil companies on projects over the years, but he and his colleagues received no funding from any source for their reply to Howarth.

For those interested in systems science and how it might be taught at the university level, I have posted two .pdf files and links from my blog at Question Everything. They are part I and II of a quarter-long 5 credit hour course that is open to all but freshmen at UWT. There are companion slides covering the application of systems science in analyzing a global predicament. Currently I'm using climate change since that is more generally known than is peak oil or declining EROI, but I will most likely delve into the connections of energy, carbon, and climate at some point.

I'm interested in feedback from those of you who have delved into systems science somewhere along the line. Also, note that there is a lot of material in these slides. I will surely edit them to pare down after I decide what to leave in and what to leave out. This is a rough draft.



Well done, but pretty abstract and high level stuff. I'd suggest (since not all students are geniuses) having the students first study a relatively simple system (maybe a geothermal heat pump) before jumping into complex abstractions. Simple systems should be mastered before complex ones.

This whole Peak Oil thing is quite intricate and full of unknowns. I hope your students don't have to face world wide depression from diminishing oil production that I'm afraid is coming within the next 10 years. They might be wise to take "survival 101" or "How to handle moving back in with your parents."


Thanks Brad. You are right that there is a conundrum re: teaching systems science to naive students. I have actually done something like you suggest, starting with simple examples and working upward. What I have found is that students are not really very good at learning specifics and then transferring what they learn in one context to another one. This is unfortunate, but is known from the psychology of learning. So an alternative approach is to start with the big picture and drill down with examples from multiple domains. This is what I will attempt with this course. It may not be any more successful.

There is a companion set of slides that I will be using to demonstrate the principles being applied. I considered peak oil/declining EROI but decided that I would scare them too much since PO is eminent whereas climate change seems more gradual. But you are right about what kinds of courses they should take to prepare. I might switch to using permaculture as an example since it is the application of systems science/thinking to sustainable living.

Great stuff, George. I wish you success, as it may be tough to counter the trend towards compartmentalized thinking these days, and hyper-complex systems made up of complex sub-systems made up of less complex systems ..... well, I'm sure you get my drift. Perhaps it isn't so much that students these days don't think systemically, but that our systems have become so complex and unpredictable that they overwhelm most folks innate ability to piece things together. They are so busy tackling smaller problems, they simply don't have the time, energy, and capacity to grok the whole. Systems analysis has become a specialty best left to specialists, it seems.

In addition to climate change, another candidate for a "systems review" may be economic growth and how unlimited growth in the Keynesian sense isn't possible from a biophysical standpoint. I came across this:

Uneconomic Growth Deepens Depression

Growth has filled the world with us and our products. I was born in 1938, and in my lifetime world population has tripled. That is unprecedented. But even more unprecedented is the growth in populations of artifacts — “our stuff” — cars, houses, livestock, refrigerators, TVs, cell phones, ships, airplanes, etc. These populations of things have vastly more than tripled. The matter-energy embodied in these living and nonliving populations was extracted from the ecosystem. The matter-energy required to maintain and replace these stocks also comes from the ecosystem. The populations or stocks of all these things have in common that they are what physicists call “dissipative structures” — i.e., their natural tendency, thanks to the entropy law, is to fall apart, to die, to dissipate. The dissipated matter-energy returns to the ecosystem as waste, to be reabsorbed by natural cycles or accumulated as pollution. All these dissipative structures exist in the midst of an entropic throughput of matter-energy that both depletes and pollutes the finite ecosphere of which the economy is a wholly contained subsystem. When the subsystem outgrows the regenerative capacity of the parent system then further growth becomes biophysically impossible.

But long before growth becomes impossible it becomes uneconomic — it begins to cost more than it is worth at the margin. We refer to growth in the economy as “economic growth,” — even after such growth has become uneconomic in the more basic sense of increasing illth faster than wealth. That is where we are now, but we are unable to recognize it.

Why this inability? Partly because our national accounting system, GDP, only measures “economic activity,” not true income, much less welfare. Rather than separate costs from benefits and compare them at the margin we just add up all final goods and services, including anti-bads (without subtracting the bads that made the anti-bad necessary). Also depletion of natural capital and natural services are counted as income, as are financial transactions that are nothing but bets on debts, and then further bets on those bets.

I haven't had time to follow the link, but it looks like Herman Daly's stuff. I have studied his work considerably in the context of biophysical econ. Thanks though.

It is Daly. He has a post on TAE today.

George, I run an commercial educational website for elementary school students - full of educational games. What I always amazed at is how what I think is easy is difficult for them. Instructions that I believe are easy and clear are oftentimes not understood. It's a matter of understanding your audience which you clearly have a good handle on.

On my site I get instant feedback by the amount of traffic - this is a great help. I agree that using Peak Oil as an example might be much too scary - you don't want to tell students a long period of zero growth may be coming - and good luck paying your student loans and finding a job!

"you don't want to tell students a long period of zero growth may be coming- and good luck paying your student loans and finding a job! "

Why not? It seems that, at this point, increasing clarity and awareness is paramount. If they can't get this stuff from an 'institution of higher learning', where then? They may at least want to change their major. We don't need to graduate another generation of kids facing a future of inviable service sector jobs (that are just as unlikely to allow them to repay their student loans).

Jeez, imagine being a conscientious career councilor who is peak oil aware, totally convinced of pending catabolic collapse and severe climate change, and your job depended on your not scaring the students.

There is this boy in my church youth group. Smart kid. Your typical geek. He reminds me alot of my self in my younger days. He is totaly nerded down on air-planes. His plan is to get heavily in debt on taking on an education to become a comercial airline pilot. I think he is smart enough to have a chance, and also he don't have eye sight problems. But he have heard my ranting on future oil supply and know what I think about that.

So he asked me if I thought his plan would not work or what? And that puts me in a possition of either crashing his dreams NOW and inform him that pilots may not be in a very high demand in the near future. Or not crush his dreams, and let him take up loans to pass an expensive pilot training progamme and see his dreams crash THEN instead.

I want more options.

By what I understand, it is hard enough to make a living as a pilot now. There is a surplus of young men that want to fly. But I guess China is hiring.

My paralegal sister (fluent in Mandarin) got a 4 month contract gig teaching English to mainland Chinese flight students at Falcon Field (in AZ) a couple years ago. It was the only significant work she found after returning to the U.S. in late 2008 (perfect timing) after spending 18 months in Taiwan on a student visa (thus eliminating her unemployment insurance eligibility after 12 years of continuous employment starting at age 14). She ended up going back to Taiwan to teach English there, for more money, with lower living exepnses, lower taxes, and government healthcare.

Anyway, point being the mainland Chinese are turning out pilots like an assembly line (all of these kids were recruited by regional airlines and had signed contracts to be trained by the company and then to stay with the company at lower than market pay for years).

There's always the military. If you qualify, they'll teach you to fly for free. And it's not all fighter planes, though those are the glamor jobs. There's a lot of military cargo pilots, flying planes not too different from commercial jets.


re: Pilot employment

Don't do it. Don't let him do it.

I have been a commercial pilot for most of my life. I now teach high school and will soon retire. It is going down...trust me. I see some future for specialty rotary, but the failure rate of helicopter pilots actually making it as a career is north of 90%. And yes, I know many fixed and rotary wing pilots still working. Wages are stagnant and security is in the toilet. Every company I have ever worked for has gone broke or has been downsized big time.


Two years ago I did teach a course (under this same number, TINST 401) about energy and biophysical economics. I did not hold back on explanations re: the consequences of peak oil and declining EROI. The results were interesting and mixed. Two students dropped the course because it was too depressing (I've seen both on campus so I assume they got over it). Four flatly refused to believe that there would not be some kind of technological fix. The majority (the other 12) were apprehensive and tended to hold onto a similar faith in technology. I did not push the envelope on that. I tried to explain the efficiencies/scaling issues with alternatives, but also allowed the door to remain open vis-a-vis breakthroughs.

In their final essays most of them expressed a grasp that a basic change in economic activity was on the horizon, but insisted that capitalism and technology would eventually win the day.

I suppose you could say that I was not a good teacher in that my explanations about logistic curves and resource depletion effects didn't sink in. In my own defense, however, I feel I was fighting against their strongly entrenched beliefs about how the world worked. One quarter of exposure was not enough to convince them otherwise.

On the other hand, they were exposed to the ideas and I hope they will be more attentive to global trends in energy and economics in the future. I actually found out recently that several of them are following my blog, so I guess they are at least thinking about the future with less than blind faith.

In the end I was relieved that I had not freaked anyone out. I worried quite a lot that I would be triggering some emotional problems that would lead to negative consequences. That didn't happen but I kept thinking, and still think, it could have. The problem here is not just to educate these naive minds about the predicament. We have to also offer them some kind of belief that there is something they can do for themselves to mitigate the consequences. That is the hard part. I have been pushing for formal courses in permaculture (from the systems science angle) that would provide them with knowledge and skills that might actually help them feel more empowered against a frightening and uncertain future. Most of my colleagues, sadly, look at me like I was proposing to teach that fairies dance on pin heads. It is an uphill struggle!


My wife is just about to sign up with the MOFGA/Portland Permaculture 'Perma. Design Certification Course', over numerous weekends through the next several months.. It means a lot more childcare for me, but I think it's exactly what she's been wanting to learn all her life, and pretty much exactly what My parents and since then Leslie and I moved to Maine for.

It's not only a vital course that many ought to get into, but I think it may be exactly the calling she has sought regardless.



I know most people on this site are convinced that a zero growth period is soon coming - but ours is a minority view. It's as if we have our own religion - and of course, every religion believes they are the only ones who know the truth. Perhaps best to expose students to all points of view and let them decide for themselves. I warned several of my cousins and friends that economic trouble was likely soon coming - their response was quite negative. Basically - why should they listen to me? I really don't have a good answer to that - am I a better expert than the legion of forecasters out there?

excellent material!


Koreans to develop Abu Dhabi oil fields

South Korea has signed a multi-billion dollar deal with Abu Dhabi National Oil Company (ADNOC) to develop three new oil fields.

The joint venture, under which Korea National Oil Corporation (KNOC) will take a 40 per cent stake with Adnoc retaining 60 per cent, is an attempt by the Asian powerhouse to secure oil resources, the country's leader said on Monday.

"We now have our own oil reserves in the Middle East," South Korean President Lee Myung-bak said in a statement.

Accident shuts down New Lenox pipeline

A key segment of Enbridge Inc.'s oil pipeline system in the U.S. Midwest will remain shut down for up to four more days after a deadly vehicle accident in New Lenox caused an oil leak and fire, likely squeezing supplies for refiners in the region, the company said on Sunday.

The shutdown of Enbridge's 318,000 barrel a day Line 14/64, part of a network that carries oil produced in Canada to Griffith, Ind., from Superior, Wis., is also expected to pressure weak prices for Canadian crude this week as supplies back up in Alberta, market sources and analysts said.

That was quite a "two car accident" that set the pipeline on fire:

Drag racing led to fatal pipeline crash in Will County, police say

The drivers of two vehicles were drag racing when they crashed into an oil pipeline in Will County early Saturday, triggering an explosion that killed two men, police said Monday.

Two men in a 2002 Ford Mustang were killed when their vehicle crashed into a crude oil pipeline. Three men in a 2006 Chevrolet Trailblazer were injured.

The Mustang and the Trailblazer were side-by-side just after 2 a.m. when the drivers went through the T-intersection at Moni and South Center drives. They barreled through a chain-link fence and hit the pipeline, causing a fiery explosion.

All three [survivors] were taken to Silver Cross Hospital. At the hospital, they told deputies the group of friends had been together and drinking alcohol at a nearby bar before deciding to race, reports said.

{sarc}It would have been so much worse if the model years of the cars had been different??{/sarc}

Old Bumper sticker..

"Friends don't let friends drive Ford."

Chesapeake responds to Rolling Stone article



Here's one thing that stood out for me in the Rolling Stone article:

McClendon knows how to tone down his politics and present a friendlier, less ideological face to the public. He secretly gave $26 million to the Sierra Club to fight Big Coal...

This sort of thing has gotten the Canadian government concerned about where the funding for some of the environmental opposition to oil projects is coming from. Unlike in the US, money donated for political lobbying is not tax-deductible in Canada.

American billionaires might get away with it in the US (the law is unclear), but it isn't legal in Canada, and hiding behind an environmental front organization doesn't help a bit if they get caught. They can be prosecuted for tax fraud and the environmental organization can lose its tax-exempt status.

Rolling Stone Responds to Chesapeake Energy on 'The Fracking Bubble'

Aubrey McClendon, the CEO of Chesapeake Energy, has a reputation for being a tough street-fighter, so his company’s response to my article in Rolling Stone is no surprise. (You can view the entire response here.) What is surprising is how weak it is. The company entirely dodges the article’s central point: that Chesapeake is highly-leveraged firm operated by a corporate gambler who engaged in complex scheme to profit off the illusion that America has a virtually unlimited supply of cheap natural gas.

... As to Chesapeake’s specific points:

The “reality” of 100 years of shale gas. This claim is a great example of the kind of misleading rhetoric that Chesapeake – and the natural gas industry as a whole – specializes in. The assertion deliberately confuses what geologists refer to as the “resource” and the “reserves.”

The credibility of Arthur Berman. As is often the case with Chesapeake, those who disagree with or criticize their work are dismissed as inconsequential. But Berman is a widely respected geologist and energy consultant; I highly recommend viewing a PowerPoint presentation he gave at Duke earlier this year.

Arthur Berman was one of the speakers at the 2011 ASPO-USA meeting.


I think Art's most interesting statistic is his estimate that the industry, because of rising overall decline rates, has to replace about 22 BCF per day of natural gas production per year, which would be the equivalent of about four Barnett Shale Plays--just to maintain constant production. So, this would mean that the industry needs the equivalent of 40 Barnett Shale plays, drilled and completed, over the next 10 years, in order to maintain constant production.

Chesapeake, KKR to invest in U.S. oil, gas fields

Under the deal, Chesapeake and Kohlberg Kravis Roberts & Co [KKR] will make an initial combined $250 million commitment to the partnership to buy mineral rights and royalty interests in U.S. drilling fields.

... Typically, oil and gas producers lease the mineral rights attached to properties where they want to drill for an upfront payment and a pledge to pay the owner a royalty, often around 15%, from proceeds of the extracted oil and gas. Chesapeake and KKR will seek to buy those mineral rights instead of leasing them, ...

Missing: The Saudi Export Increase

Ten days on, evidence of the widely reported 1 million bpd increase in Saudi exports remains as elusive as a Yeti siting on a crowded and warm summer beach.

In fact, even fewer tankers are arriving at the main Saudi port of Ras Tanuara than before, and the Saudis are also raising prices (see up top). Oil tanker tracker, 'Oil Movements', saw essentially a miniscule increase in OPEC exports last week.

Perhaps we would have better luck finding these missing oil exports by posting pictures of Saudi oil tankers on the back of milk containers.

Saudi oil exports surge, seeks to sell more

Fri Feb 24, 2012 12:56pm EST

Top oil producer Saudi Arabia increased exports sharply in the past week and is offering extra supplies to its biggest customers worldwide in what industry sources said appeared to be a bid to tame runaway crude prices.


Saudi Tankers’ Capacity Fell 33% in Week to Feb. 25, Data Show
By Alaric Nightingale - Mar 2, 2012 12:29 PM ET

The carrying capacity of oil tankers that docked at Ras Tanura, Saudi Arabia’s biggest crude-loading port, declined 33 percent in the week to Feb. 25, according to ship-tracking data compiled by Bloomberg.


LONDON: Seaborne oil exports from OPEC, excluding Angola and Ecuador, will rise by 10,000 barrels per day (bpd) in the four weeks to March 17, an analyst who estimates future shipments said on Thursday.


Always enjoy your posts Charles, thanks. Information like this is out there so why why oh why cant the brainless hacks of the media use it to enlighten?

Do you seriously expect "brainless hacks" to find anything, let alone crucial information?

Liam Demming in his "Heard on the Street" column of the WSJ writes, Oil Gives Economy Both Barrels (Behind paywall; search on title)

At some point, though, oil prices overwhelm everyone. Efficiencies take time to develop: The faster way to lower consumption is recession. In emerging markets, high oil prices stoke inflation and make subsidies unmanageable.

There are signs of this already.

. . .

The danger that the oil rally chokes off growth, and thereby sows the seeds of its own eventual correction, is clear.

California becoming more dependent on foreign oil

California is growing more and more dependent on imported oil - including crude from the volatile Persian Gulf - even as the rest of the country becomes less.

And if the standoff over Iran's nuclear program breaks into open conflict, that reliance could leave California vulnerable.

The Golden State last year relied on imports for almost 50 percent of its crude oil, according to preliminary figures from the California Energy Commission.

Never before has California, once the largest oil producer in the world, seen that level of dependence. As recently as 1997, half of all the oil used in California was pumped from the ground within the state's borders, or in federal waters just offshore.

Now, the state's oil fields produce 38 percent of the crude used in California refineries. Alaska supplies the rest of the domestic crude - just under 12 percent.

California now gets more oil from the Persian Gulf countries, mostly Saudi Arabia and Iraq, than from Alaska.

It's worth noting than AZ, NV, and OR get a substantial fraction of refined products from CA, given the dearth of refineries there. Also, Alaska still produces slightly more oil than CA, and that oil primarily goes to Washington state (which has zero oil production AFAIK, but almost all of the PADD 5 refining capacity outside CA). This is a PADD5 issue, not a CA issue.

PADD 5 imported 1336 kbpd of oil and products in 2011 of which 386 kbpd was from the Persian Gulf. Only 20.7% of U.S. imports from the Persian Gulf were received on the West Coast.

Washington State refineries are connected to the TransMountain pipeline that ships Canadian crude oil (and products) from Edmonton to Vancouver. The capacity of the TransMountain was recently increased to 300,000 bpd, and there is only one refinery left in Vancouver (Burnaby) with a capacity of 64,000 bpd. That refinery is in danger of closing because Washington State refineries are outbidding it for pipeline capacity.

There are no refineries in Oregon, so on the West Coast only the refineries in California are unable to import Canadian oil via pipeline. They are receiving imports of Canadian crude oil via tanker out of the Port of Vancouver, but this is still not enough to materially affect prices.

AZ and NV are getting product shipments from the Rocky Mountain State refineries which are running flat-out processing Canadian and North Dakota oil these days. The reality is that California is the only state on the West Coast that is fully disconnected from the cheap oil of the mid-continent area.

Proposed doubling of the TransMountain pipeline to 600,000 bpd. See Kinder Morgan investigates twinning Trans Mountain pipeline

Hamsterland floats in the arms of the pipeline, as in a dream, causing some locals to to think we are special, we are blessed because of our lovely shiny beady black eyes and that is why our town isn't a burned out wreck like other old industrial and logging boom towns.

Nah. Bellingham, Washington, is just cradled between Ferndale and Anacortes. We are on intravenous bitumen from the Alberta oil sands. BP Cherry point (Ferndale) had a bad fire last month and lost a lot of capacity. Gas is over $4.00 and rising.

Well, a fire and shutdown at a major oil refinery can cause quite a spike in gas prices. Hopefully, they will get the thing restarted soon.

However, according to Gasbuddy.com, the average price of gas in Washington state is $3.924/gal. versus $4.336 in California, so you in Washington are still getting a significant break on price.

OTOH, the price in Colorado is $3.235/gallon, which is $1.101/ gallon less than California.

I did some checking, and learned that there is only one (big) oil refinery in Colorado, and it is owned by the giant Canadian oil sands company, Suncor Energy. The Colorado price of gas is $46/barrel less than the California price, so it appears that Suncor is passing a lot of the lower cost of its oil sands production through to Colorado consumers. California consumers are screwed, however.

I live in Eastern Washington. The price has gone up recently, but it was like this:

Jan - 3.15 in Spokane
2.99 in Post Falls, Idaho
late Jan, 2.99 at one station in Spokane

All of Feb - 3.07 to 3.19 in Spokane depending on station

(my station)
March - 3.07
3.29 (Sunday)
3.49 (Monday)
3.55 (Tuesday)

I go skiing weekends in Idaho, and Idaho has been pretty much matching Spokane lately - this Sunday it was 3.29 to 3.39 everyplace.

Hopefully it'll start to go back down soon. My Suburban was filled at 3.07 - do I wait or do I top off?

Yair...RMG where does most of the trans Alaska oil end up...I assume it trades at something between Brent and WTI prices?


Alaska oil goes to refineries on the West Coast - in Washington State and California. I think that because it is a seaborne oil, that it would trade closer to the price of Brent than WTI.

Only landlocked oils trade at the WTI price, and if you could put WTI on a tanker, it would trade at the Brent price, too.

California imports crude from Canada via this path as well. There was also a recent article posted here about a test shipload to China from this (full) pipeline. Given that the pipeline reaches the water, I'm not sure how much price advantage Washington State receives. The Transmountain expansion would be a positive for PADD5.

Product movement from PADD 4 to PADD 5 has been fairly stable (on an annual basis) for the past 17 years and amounts to about 30kbpd. That's a few gasoline trucks crossing PADD borders. I'm betting this is just geography of remote areas. Vegas (and Mccarran Airport and Nellis AFB) gets its 'oil' from the old CalNev pipeline.

The only other significant domestic petroleum movement into PADD5 is from PADD3, via the product pipeline into Phoenix from TX. Total movement from PADD3 to PADD5 was 151kbpd in 2011. Neither the pipeline from CA nor the pipeline from TX can handle PHX full demand. A failure of the pipeline from TX a few years ago led to the price of gasoline in Phoenix doubling and gasoline tankers streaming up and down I-10 between Tucson and Phoenix.

Looking at the pipeline maps, I get the feeling that someone should build a products pipeline from PADD 4 (Rocky Mountain) to California.

Given their much lower feedstock costs from new Canadian and North Dakota production, the Rocky Mountain refineries could easily drive the California refineries out of business and take over the California market. The refineries in Utah and Colorado are best positioned to do this.

The environmental movement would oppose the pipeline construction, though ("Save our endangered sagebrush, creosote bushes, and tumbleweeds - and what about the jackrabbits, coyotes, and rattlesnakes?").

That is a nice thought for us in CA, but it is not likely, largely due to CARB requirements for the fuel blend. Unless the refineries in the rockies switched over to a CA blend, they would not be allowed to sell here.

The refineries could modify their processes to product fuel to California specs if they sold enough fuel their to justify the changeover. However, it does act to fragment the market because refineries won't do it for small volumes of fuel.

They don't need to, they just need to serve refined product markets currently supplied by CA which do not require CARBOB and are closer to the PADD4 refineries anyway.

Its official: UK petrol prices are now at their highest on record.


Nothing to do with this, of course......

Eurozone edges closer to recession
GDP in the single currency area fell 0.3% in the fourth quarter of 2011 in the first contraction since the eurozone left recession in 2009


Speaking of MADOR (Mutual Assured Distribution Of Resources) this snippet may support an interesting conversation I had Sunday: "We now have our own oil reserves in the Middle East," South Korean President Lee Myung-bak said in a statement."

Part of the MADOR concept is the acquisition of either direct ownership in physical oil production or some sort of contractual right to certain oil exports. Many know China has been conducting such efforts for well over 10 years. Essentially through ownership of in ground reserves and contract commitments an increasing amount of future oil production will not be on the open market. Granted that volume of oil removed from the market place should eliminate some of the price pressure but the primary goal of these efforts, IMHO, is not pricing but availability of oil.

The Mutual aspect is that those countries with the power to manipulate the Distribution will do just that in their favor. Now the conversation from last weekend as I logged one of my wells. A rep of one of our partners was in country by coincidence and decided he wanted to see a well drilling for the first time. Not sure exactly what his position is but he offered he was well inside the international banking community in the EU (Swiss/German maybe). Might have been total BS but he kept referring to developing efforts by various govts to lend support to private oil companies to acquire oil production rights as described in the S Korean situation above. Just like the US, many foreign govts aren't directly buying into oil production especially in foreign lands. Thus a little behind the scene sovereign support is helping these private companies efforts to tie up reserves. Bankers just love to lend money when a govt is backing the loan.

Again, this guy was one of those folks who loved the sound of his own voice (at one point I faked a phone call to escape his yapping. LOL) so I'm not sure how to judge the real magnitude of the situation he described. I doubt I would have even tossed it out for consideration had I not just seen the comment from the prez of SK owning an oil field in the Middle East. Just some food for thought.

How can someone own a resource without the ability to project power? China has the influence in such matters but South Korea?? The first whiff of a real oil crisis (odd/even number plates) and countries will nationalize their resources, so much for buying an oil field.

wi - Here's a hint: oil is titled just like your car. You can take someone's oil but you don't get a clear title. Now if you think the World court and the IMF are powerless you might not worry about the legality of such a move. But IMHO you would be in the minority around the globe. Lots of folks think they can break the rules and get away with it...like natioalizing production. Four years ago a country sent a Big Oil company a check for $650 million because they thought they could get away with taking their oil away. And who wielded the big stick to make this happen: the International Monetary Fund.

And you never saw a press release about the settlement, did you? No one did...sealed by mutual agreement. The only reason I know it happened is from a lawyer who worked for the Big Oil on the lawsuit. Also consider this: except for invading a ME country and taking over their oil field exactly how is someone going to force that oil into tankers destined for their country instead of SK? And China? That's a no brainer IMHO. China puts a small vessel with a 15 man crew between their oil and someone's mighty fleet: are they going to kill those 15 sailors to get the oil and not expect a very drastic reaction from China? I think some folks have too great an expectation of what the strong can get away with in the world today.

Yes but nationalization has happened quite a few number of times in the past and neither the IMF nor world bank nor world court of justice could prevent it. The only reason IMO some of the private oil companies got so big is because you have respective governments backing them esp USA. The smaller countries probably cannot do anything and neither can KSA as long as it's under US influence but if a country like Venezuela can do it so can others.

Look at what my govt did this week, banned all cotton exports(out of the blue). Bilateral agreements be damned. IMO when push comes to shove national and popular interests dominate business concerns and trade agreements esp in countries where capitalism isn't that strong.

Rock - Well the IMF and the WTO are powerful entities only when globalism and global cooperation is the best course of action for any country. If for instance international trade breaks down or you've got something which everyone else wants and can't easily get anywhere else then you can break the rules. Even if you're a small country, so long as one of the big blocs such as the EU, U.S. China etc has your back you can effectively do whatever you want with far fewer constrains, see Israel for example.

S - I had to read between the lines a bit but the way it was explained to me was that the IMF controlled the ability of countries, especially the smaller ones, to conduct any international trade. Essentially they all need a banker to carry on biz and if the IMF locked them out then those countries were out of all international biz. Simplistic answer but that's how I understood the stroke of the IMF. But that also doesn't mean the IMF uses a heavy hand with all the offenders. I'm told still a lot of politics involved.

Peak COTTON in India: India has halted all exports of cotton......
Since Oil/gas are required to keep cotton production at current levels, another peak oil related event in the world, but most people do not recognize the connection.

I can buy a whole wardrobe at Goodwill for $100. Another 5-15 years, I think clothes are going to be quite valuable.

India bans cotton exports

U.S. cotton futures jumped 4.5% -- the most allowed in a single day of trading -- to 92.23 cents per pound following the news.

"This India development really caught the entire cotton industry and traders off guard because it came with no warning," said Phil Flynn, senior market and commodities analyst with PFG Best.

There's no peak cotton yet, the decision is more political than anything else. Textile industry in India is very uncompetitive and finds it difficult to buy cotton at market rates, so the govt thought that this would act as some kind of incentive for them. Farmers are already protesting the ban. Agricultural productivity in India is quite low, there's still a lot of distance to go for peak cotton.

Indian farmers also cannot afford to purchase potash at market prices after their government dropped subsidies. The rupee has been very weak against the dollar this year so that doesn't help industry be very competitive on a global scale when buying inputs. Although the rupee is still weak, it has gained some strength this year so maybe the worst is over in that regard.


Natural Gas prices fell 13 cents today.

The Bakken natural gas just heats up the air, the fire from the natural gas towers 10 feet at a lot of wells; another good thing about oil, free heating of the atmosphere. Unplanned terra-forming.

Very high energy stuff, that Bakken Oil.

The scramble to secure oil reserves is another symptom of Peak Oil.

Greece should borrow some more money and buy an oil field. They'd be out of debt over night.

You know that when a stock price is being touted as undervalued that it is just a matter of time for it to lose some price gains.

Pump and dump. Especially gold. Why are people advised to buy gold via their IRAs? Why not buy the gold when it was 400? Looking to fleece those IRA bagholders, maybe? Fiat systems milk everybody dry.

Weimar Republic Ground Hog Day.

Millions of tons of coal are mined and burned to produce electricity because the good folks out there want electricity. Supply and Demand trumps everything. The ineluctable conclusion: No one to blame but themselves.

Do You Know Where Green Electricity Will Come From?

A methanol economy should be one new source, but the powers that be do not think "green" in the same way Greenpeace does.

There's an extremely active sunspot area 1429 which produced many x-ray flares over the last 24 hours. Ax it continues to grow and rotate more towards Earth, the chances of major earth directed CME increase.


CHANCE OF FLARES: Today, NOAA forecasters estimate a 75% chance of M-class solar flares and a 30% chance of an X-flare from big sunspot AR1429.The active region is slowly turning to face Earth, so if any such eruptions do occur, they are increasingly likely to be geoeffective. Solar flare alerts: text, phone.

AURORA WATCH: High-latitude sky watchers should be alert for auroras on March 6th and 7th. Sunspot AR1429 has hurled two CMEs into space since it emerged over the weekend. Neither cloud is heading directly toward Earth, but both could deliver glancing blows to our planet's magnetic field. NOAA forecasters say there is a 30% to 40% chance of polar geomagnetic storms during the next 24-48 hours.

Video of yesterday's action courtesy www.solarham.com at http://youtu.be/7jZQ8PLqPQM

Over the last 48 hours the region has produced the following so far: "C3.4,X1.1,C2.3,C5.8,C5.4,C7.8,C9.8,C4.6,C6.8,M2.1,M1.8,M1.3,M1.2,C2.4,C9.2,M1.0,C2.9,C5.3,M1.0,C2.8,M2.1"

BBC Horizons documentary on the solar cycle just broadcast. Well worth watching if you can.

Major flare currently at X5.2 and rising (Edit: seems to have peaked at X5.4) happening now. Region is rotating towards Earth. CME details not yet available.

A large Coronal Mass Ejection was generated by this flare and it is directed at earth. Impact forecast for Thursday 09:00 UTC

CME from previous flare impacted over the last few hours and A planetary K-index of 6 was reached


Space Weather Message Code: ALTK06
Serial Number: 275
Issue Time: 2012 Mar 07 0852 UTC

ALERT: Geomagnetic K-index of 6
Threshold Reached: 2012 Mar 07 0848 UTC
Synoptic Period: 0600-0900 UTC
Active Warning: Yes
NOAA Scale: G2 - Moderate
Potential Impacts: Area of impact primarily poleward of 55 degrees Geomagnetic Latitude.
Induced Currents - Power grid fluctuations can occur. High-latitude power systems may experience voltage alarms.
Spacecraft - Satellite orientation irregularities may occur; increased drag on low Earth-orbit satellites is possible.
Radio - HF (high frequency) radio propagation
Aurora - Aurora may be seen as low as New York to Wisconsin to Washington state.

Tomorrow's impact looks much more substantial. Today's was just a glancing blow. Definitely worth looking at the skies in the USA tomorrow morning from about 4am EST.

CERAWEEK: Total's Upstream Chief Says Peak Oil Is Around The Corner

Total’s view is unusual among big oil company execs. Even if they might agree with Total, oil execs are loathe to admit peak oil concerns publicly for fear that the countries that still hold large untapped resources (like Venezuela and Iran) will extract higher rents from drillers who want in.

I don't know what CERAWEEK is but it must be something CERA is sponsoring. Anyway that last sentence may explain why oil companies continue to deny peak oil when they obviously know better.

This article has a link to this report: High Friends In Low Places which has another Total executive talking about peak oil in February of 2011:

Total's Christophe de Margerie believes the world will soon run short of oil. To keep the crude flowing, he'll deal with despots and drill in deepwater just about anywhere.

Ron P.

CERAWEEK-Apache CEO says cheap natgas to bring more cutbacks

Depressed U.S. prices for natural gas will keep forcing dry gas producers to migrate to more-lucrative liquid-rich plays or curb drilling until the market rebounds, Apache Corp Chief Executive Steve Farris said.

"You're going to see a lot of folks lay down rigs," Farris told Reuters during IHS CERA's annual CERAWeek energy conference in Houston.

Global oil, gas industry has 'unprecedented' capital available: CERAWeek panel

... "There is a wall of money ready to come into North America from the national oil companies," said William Wicker, vice chairman for investment banking at Morgan Stanley.

Elaborating in a brief interview on the sidelines, Wicker noted that he was referring primarily to Chinese interest in both oil and natural gas plays, but declined to estimate the size of that wall in terms of investment dollars. He said political constraints are making Chinese entry difficult.

New from Congressional Research Service [CRS] ...

Rising Gasoline Prices 2012

Average national gasoline prices have increased by $0.46 to $3.78 per gallon between the end of December 2011 and the end of February 2012. This is $0.20 higher than the 2011 average annual gasoline price of $3.58 per gallon. In the first half of 2011, unrest in the Middle East and North Africa contributed to higher crude oil prices, which pushed gasoline prices higher. In early 2012, tensions with Iran are contributing to rising crude prices, which again are pushing up the price of gasoline.

Crude oil prices are the main determinant of gasoline prices. A key issue affecting crude oil prices in recent months has been uncertainties around supply stemming from tensions with Iran as new U.S. and EU sanctions come into place. Unrest in several small oil producers has also led to supply disruptions. Also, there are persistent concerns about the adequacy of global supply in the face of sustained demand growth in emerging economies. Recent refinery closures in the United States, Europe, and elsewhere may also contribute to higher gasoline prices, particularly in parts of the East Coast.

Many of the policies that may address rising gasoline prices are long term. Investments that produce or consume oil, such as new oil fields, pipelines, cars, or factories, are capital intensive and long term in nature. There are limited short term options available to policy makers to address gasoline price increases. This report briefly covers several short-term options that have been considered by policy makers:

Strategic Petroleum Reserve Release,
Gasoline Tax Holiday,
Relaxing Fuel Specifications,
Restricting Refined Products Exports,
Limit Financial Speculation,
Diplomatic Measures.

It is unclear what the price impact of these short term options would be, and they involve various policy trade offs. Potential costs may include national security, fiscal, and public health priorities.

Longer-term measures: Policy makers may choose to focus on measures that encourage efficiency, oil production, and alternative fuels. Pursuit of long-term measures in the absence of short-term measures, to the degree short-term measures may (or may not) be effective, may make it more likely that consumers will suffer from high gasoline prices for the time being. However, higher prices may also provide additional market based-incentive for investments by consumers and firms in efficiency, energy production, and alternative fuels.

There are limited short term options available to policy makers to address gasoline price increases. This report briefly covers several short-term options that have been considered by policy makers:

Strategic Petroleum Reserve Release,
Gasoline Tax Holiday,
Relaxing Fuel Specifications,
Restricting Refined Products Exports,
Limit Financial Speculation,
Diplomatic Measures.

Notice that there is NOTHING about Green Transit on the list of the Car-Myopic
policymakers! Yet since 2008 over 150 cities have had their existing Green Transit cut


The easiest short term thing to do is restore all those cuts which already had
Rails, trains, buses, and shuttles to provide at least the 2008 levels of service.
This would immediately create some Green jobs for conductors, bus drivers, transit engineers etc.
Next is expanding off peak service and connections on existing systems which are
sitting doing nothing despite capital investment in Rails etc.
Not that complicated unless you cannot see past the hood of your car...

orbit - I suppose it depends on how you define "short term". Your ideas are valid IMHO but can't do anything to lower fuel costs for the rest of this year. And I suspect that is the short term period the vast majority of folks are considering. Call short term 5 years or so and then your ideas have some possibility. But who in their right mind would worry about something that far off. LOL.

Iberdrola builds huge wind farm in US

Spanish energy giant Iberdrola has completed one of the world's biggest wind farms in the US state of Ohio, which will produce more than 300 megawatts of power, it said on Monday.

Finding solutions to Achilles' heel of renewable energy: intermittency

... “Most projections show that late in the 21st century, fossil-fuel shortages are going to bite hard,” Pickard says. “If you’re an optimist, you might say 75 years, and we’re going to be in trouble — real trouble. And once economical sources of fossil fuels approach depletion, we have no certain recourse except to renewables.”

What, then, can be done about the problem of intermittency? The Proceedings of the IEEE, the most highly cited general interest journal in electrical engineering and computer science, delves into the problem, focusing on schemes for rendering renewable energy reliable and dispatchable, particularly massive storage facilities for energy.

The entire IEEE Special Issue describing the major technological issues with renewable sources of energy, such as solar and wind power is available free at http://ieeexplore.ieee.org/xpl/tocresult.jsp?reload=true&asf_arn=null&as...

worst no energy, better intermittent energy, best continuously available energy

Intermittent is better than none. The only long term continuous are coal and nuclear?

Coal and nuclear are limited as well, nuclear less so than coal.

Note that we rarely see articles titled "The Problem of Coal and Nuclear--Base Load."

Being unable to scale DOWN power is as much a problem as scaling it up. You can't just keep pumping electricity into the grid if nothing is there to sop it up. So we end up with absurdly and disturbingly lit up night skies, mostly just to soak up excess base load.

But this is an old problem, so it doesn't get headlines and people forget that it is as big a problem as 'intermittency.' So nukes and coal are presented as problem free 'solutions' to the 'problem' of intermittency instead of being the kind of 'solutions' that cause more problems than they solve.

Hmm . . . I need to check it out. I don't think intermittency is as big of a problem as many think. I think it can largely be handled with combination of various measures:
1) Geographical distribution for statistical multiplexing . . . it is always windy somewhere.
2) Energy source diversity (a mix of tidal, solar, wind, geothermal, etc.
3) Some over-build out
4) Natural baseload such as hydropower & geothermal to handle lulls in solar/wind.
5) Storage (just some . . . this is not a good option since it is expensive). Pumped water storage and compressed air storage work. Concentrating solar power has some built-in storage.
6) Conventional back-stop such as natural gas peaker plants.

If the system is designed well, you should rarely need that conventional back-stop

I couldn't agree more.. just remember where you are, in the country where we will sell our souls to the devil to avoid having to Compromise or accept Half-measures on ANYTHING.

COMPROMISE is #2, and we're #1 !!

Hey Bob,

Speaking of half-measures, I was asked to take a look at the heating system for a small apartment at the back of a commercial building. Last month, the tenant paid $1,200.00 to heat this 1,100 sq. foot space. It appears that the heating contractor installed in-floor electric radiant heat by laying PEX on top of the existing slab, which was in turn covered by a new layer of concrete. As you might guess, there's no insulation underneath the slab and none around the parameter edge. When the building owner contacted the heating contractor to ask why the costs were so high they shrugged it off saying it was because there was no snow on the ground (and no wonder, it would have melted!). Now the landlord is worried that his tenant will move out at the end of her lease and that the place will become unmarketable. [BTW, $1,200.00 buys you about 8,500 kWh at current rates.]

I'm amazed that a heating firm would install such a system knowing full well that the operating costs would be out of this world.


Truly Classic.

If there was some technique for taking the oil industries Horizontal drilling equipement or maybe a miniature Coal-Seam Cutting Rig, and get a progressive foot-deep wall of foam down there, a couple feet under all that slab, then that thermal mass would be a treasure.

Sounds like how I started skiing.. Mom would laugh, saying I would be nosed straight down the mountain, full tuck, and full snowplow!

You had a typo up there that I'm just straining to pull a good double-ententre' out of.. 'the Parameter Edge' some kind of a boundary condition? .. I'm like Richard Dreyfus and his mountain of Mashed Potatoes, insisting that 'This means something!' .. then again, I still browse through Auto Parts stores sometimes, hoping to find a nice, nostalgic Fuzzy Paradox for my rearview mirror.



Just keep in mind that some of what you ask for is not practical and all of it is expensive...

Tidal power is very limited in practical applications, as is geothermal.

If we are looking to use hydro and geo (where it exists) as backup for wind, then they become peaking units, not baseload. That means a run of river hydro (baseload with no storage) is of no help with the intermittency issue.

Compressed air storage "works", but is very expensive, that is why it is not being built. Solar thermal - they way it is being done presently, is also expensive, the limited storage only shifts peak production by a few hours. That is better than nothing, but since solar is as still less than 1% of electrical production, this is not really a pressing issue.

The overbuild (of wind) can solve a lot of the problem, as Jeppen identified a week ago - but you do need a LOT of overbuild to get there. And then you will need a lot of overbuild of transmission too - all expensive.

To handle the intermittency of wind and solar , we need lots of backup - a very resilient system.
For the moment, rather than building things like CAES and solar thermal, I think we are better off to keep building wind (and solar and hydro, where possible). If all the NG (and the portion of hydro) currently used for baseload were used only for peaking, then we could build a lot of wind, with only minimal incremental expense for NG backup (since lots of it already exists.

That is the cheapest storage option we have, so lets use it, while we work on developing (not deploying) other options. A large scale deployment of solar thermal and CAES right now is not a good use of resources, IMO. We should keep working to develop other storage options, using the capital saved by not having to build more peaking, but lets not deploy them until they are really ready.

At the same time, there is lots of scope for exploring discretionary use of electricity - that is, store the work done by electricity (e.g. overcooling of cold storage buildings), and simple load shifting out of peak hours.

We should deploy the options that are practical today - and we have many. Those that are not practical can be further developed, but there is no point in deploying them until they are at least equal to our other options, and right now that gap is large, IMO

It looks like there may be a new storage contendor. Liquid air
Liquid Air Energy Storage

Highview Power's idea, is to liquify air, and use waste heat to recover roughly 70% of the energy. The claim is it should price out roughly between pumped hydro and CAES. I assume the requirement for waste heat means (at least initially), that it must be colocated with an existing thermal plant.

Brownley: New Data Show Radioactivity Still Lurks at Santa Susana Field Lab

Fifty-three years after a partial nuclear meltdown at the Santa Susana Field Laboratory site in the Chatsworth Hills, the U.S. Environmental Protection Agency has just released data finding extensive radioactive contamination still remains at the accident site.

... The findings are extremely disappointing especially because the site has already undergone two cleanup efforts by its owner, The Boeing Company, and the Department of Energy. Each declared the land fully cleaned.[Trust us. Would we lie?] "It looked like they would finally see the Santa Susana Field Laboratory site clean and free of the radioactive waste, and their worries about the unknown risks to their health and safety would be over. Now we have these findings of elevated levels of cesium-137, strontium-90, tritium, plutonium, and carbon-14 and other radioactive materials.

Santa Susana Field Laboratory was the site of rocket and missile testing, and munitions development considered too dangerous to conduct in more populated areas. In the late 1950s and early 1960s, at least four of the reactors were involved in accidents, the worst of which was a partial meltdown of the Sodium Reactor Experiment in an uncontained building. The meltdown continued for two weeks until officials were able to find the cause of the problems.

also Rocketdyne radiation is still abundant

Chevron Corp. says natural gas fire that killed 2 and destroyed rig off Nigeria has stopped

A natural gas fire that killed two people and destroyed a Chevron Corp. rig off the coast of Nigeria has stopped on its own, the company said Tuesday, ending an ocean inferno that burned for 46 days.

... no harm, no foul


Saudi Arabia May Be Tied to 9/11, 2 Ex-Senators Say

For more than a decade, questions have lingered about the possible role of the Saudi government in the attacks on Sept. 11, 2001, even as the royal kingdom has made itself a crucial counterterrorism partner in the eyes of American diplomats.

Now, in sworn statements that seem likely to reignite the debate, two former senators who were privy to top secret information on the Saudis’ activities say they believe that the Saudi government might have played a direct role in the terrorist attacks.

“I am convinced that there was a direct line between at least some of the terrorists who carried out the September 11th attacks and the government of Saudi Arabia,” former Senator Bob Graham, Democrat of Florida, said in an affidavit filed as part of a lawsuit brought against the Saudi government and dozens of institutions in the country by families of Sept. 11 victims and others. Mr. Graham led a joint 2002 Congressional inquiry into the attacks.

related Saudi Royal Ties to 9/11 Hijackers via Florida Saudi Family

Does this mean we get a 'do over' for that Iraq 'thingee'?

Of note is that this revelation, especially the story in the second link, got so little coverage in the primary media. It was a clear bug-out case where someone was warned in advance of something and ran for their lives:

The family apparently left with no advance planning, leaving behind almost all their possessions, abandoning three recently registered vehicles, including a brand-new Chrysler PT Cruiser, in the garage and driveway. As the Herald article explained:

“there was mail on the table, dirty diapers in one of the bathrooms … all the toiletries still in place … all their clothes hanging in the closet … opulent furniture, equal or greater in value than the house … the pool running, with toys in it….The beds were made … fruit on the counter … the refrigerator full of food. … It was like they went grocery shopping. Like they went out to a movie … [But] the safe was open in the master bedroom, with nothing in it, not a paper clip. … A computer was still there. A computer plug in another room, and the line still there. Looked like they’d taken [another] computer and left the cord.”

...all to "take advantage of a job opportunity overseas". Sure! Smells to high heaven.....

Phone records showed communication, dating back more than a year, that connected those in the house with the alleged plot leader, Mohammed Atta and his accomplices, including eleven of the other hijackers. Other records, kept by guards at the gated community, documented numerous visits to the house by a vehicle known to have been used by Atta, and indicated the physical presence in the car of Atta’s purported accomplice Ziad Jarrah. It appeared as if the Ghazzawi house was some kind of nerve center for the entire operation...

...These stunning revelations—said to be based on the work of the swarm of FBI agents who descended on the gated community in the fall of 2001—would surely have generated headlines worldwide if they had become known after 9/11. But the FBI, for reasons unknown, failed to provide the information to Congressional 9/11 investigators or to the presidential 9/11 commission, and thus it has remained a secret for the past decade.

In response to the Herald article, the FBI has issued a statement saying that the occupants of the house had been tracked down and interrogated, and were found to have no connections to the hijackers.

At least there's no statute of limitation for murder. Not that it'll ever come to that.

Canadian Pacific plans new Bakken rail terminal

Canadian Pacific Railway Ltd said on Tuesday it is developing a 35,000 barrels per day crude oil and condensate terminal in North Dakota's prolific Bakken shale prospect in partnership with U.S. Development Group.

The terminal in Van Hook, North Dakota, about 100 miles (160.9 Km) east of Williston, will receive truck and tanker shipments of crude oil and condensate from the Bakken shale prospect and ship it to markets elsewhere in the country, the companies said.

Canadian Pacific said the terminal will accommodate up to 15 crude unit trains per month, which can later be expanded to 30 unit trains per month.

US Development Corp has been receiving Bakken crude shipments at its 65,000 bpd terminal in St. James Louisiana for over a year. The terminal is ideally located near the Gulf Coast refining hub.

Rail transport has found a foothold in the U.S. Midwest as imports of Canadian crude soared in the past few years, along with domestic shale oil output. The Bakken shale prospect alone gushed at a rate of 470,000 bpd in December.

Industry analysts previously estimated crude rail shipments from the Midwest to the Gulf Coast could soar to 300,000 bpd this year.

EIA says OPEC Feb production falls to 30.57mln barrels per day


Very interesting! Production from OPEC Core (Saudi Arabia, UAE, Kuwait) and Iran is down 850,000 b/d between December and February.

                Dec 2011    Feb 2012   Diff 
Saudi Arabia    10.00        9.60      -0.40
Iran             3.55        3.40      -0.15 
UAE              2.70        2.50      -0.20 
Kuwait           2.55        2.45      -0.10

Total           18.80       17.95      -0.85          


US President Obama says concerned about oil production around the globe


interesting his concern is not just limited to the gulf as i expected when i saw the first few teaser words "Obama concerned..

That requires a sign-up. Can you paste the article into a TOD post?

Obama says concerned about global oil output

President Barack Obama said on Tuesday he is concerned about oil output around the world as gasoline prices soar and is looking to ease bottlenecks at U.S. refineries to help ease prices at home.

"We are concerned about what's happening in terms of production around the world, it's not just what's happening in the Gulf," Obama said at a White House press conference. He was concerned about oil supply outages in South Sudan and other places, he added.

SO when will the Great Orator start talking about Green Transit so people can get around without having to buy gasoline and burn oil??

Thanks Seraph.

Ha, read the comments under that article. There's only a few, but they're golden. Theres no such think as peak oil apparently. Obama is stopping the oil companies from drilling. Or the government is making too much from taxes. Or its all Wall Street speculators fault. Or we should be converting everything to run on natural gas immediately because America has a near infinite supply.

Posting the whole article would be a breach of copyright.


Agreed. Posting entire articles is not allowed here. Especially if there's a paywall.

You can paraphrase what was said in your own words.

Oil sands fuel a new manufacturing boom – in Alberta

They think big in Nisku, a sprawling industrial complex just south of Edmonton – and they think a lot about pipes...

In the pock-marked roads outside the café, truckloads of raw steel pipe rumble in, and intricately connected pipe modules roll out, most of them destined for the oil sands near Fort McMurray, 600 kilometres to the north.

It has propelled Nisku’s industrial park to its status as the second-biggest energy-focused park on the continent – behind a Houston location – and it’s all just a short drive from the site of 1947 Leduc strike, where the post-Second World War oil boom began in Alberta.

These days, it is part of the sprawling industrial region south of Edmonton that comprises thousands of hectares of industrial land, close to 3,000 companies and almost 30,000 workers – almost half that number in the Nisku Business Park alone.

When the oil sands are booming – as they are now – so are Edmonton and its hinterland. John Rose, chief economist for the city, says the rise of manufacturing jobs helped power Edmonton’s rebound from the 2008-2009 recession. Manufacturing jobs were up almost 50 per cent year-over-year coming out of the recession, before tailing off to lower double-digit gains. “The contrast with Ontario is quite startling,” he adds.

Libya: fears of disintegration as tribal leaders declare semi-autonomous region

Tribal leaders and militia commanders in eastern Libya declared the formation of a semi-autonomous region, raising fears that the country is witnessing the first stages of disintegration just six months after the fall of Col Muammar Gaddafi.

The goal is to revive the system in place after the Second World War under King Idris, when Libya was divided into three states: Tripolitania in the west, Fezzan in the southwest and Cyrenaica – or Barqa, as it was called in Arabic – to the east.

also Oil-rich Libya region pushes for semiautonomy

Talk about stating the obvious it has always been like that in Libya. It is a little known fact that the British were always sending out expeditions out from Egypt to shoot a few tribesmen who had been bribed by the Turks to cause trouble during the first world war let alone the second.You need a sociopath like Gaddafi or Saddam to let them know whose boss. eradicate the head thug and the whole thing breaks up and they are acting surprised.

Yes, we need a new colonialism to bring order to these tribal regions.

colonialism 2.0!

If this is what "the people" of Libya want then power to them.

They don't want to share nation. Who are we to tell them to? Let them split up the country. These people have a tribal tradition, and we will not manage to change with that. It is better that they have independent nations who live in peace and trade realtions with each other, than a civil war under one nation.

They don't want to share oil revenues.

Iran 'seeking to build nuclear weapon', warns David Cameron

David Cameron has warned that Iran is seeking to build an "inter-continental nuclear weapon" that threatens the west, as he urged Israel to allow time for sanctions to force the Iranians to change their strategic stance.

He was speaking after the cabinet was briefed for an hour by the national security adviser, Sir Kim Darroch, on the imminence of the threat to the UK posed by Iran.

It is the first time Cameron has made such an explicit warning that Iran could endanger UK security, and has faint echoes of the warnings from Tony Blair's government that Iraq could fire weapons of mass destruction with 45 minutes' notice.

"It's déjà vu all over again"

We got a 'pill' for that ...

Responding to the radiation threat

... “With the expanding use of nuclear power and unfortunate possibility of nuclear weapon use, there is an urgent need to develop and implement an improved therapy for actinide contamination of a large population,” says Rebecca Abergel, a chemist who leads the Bioactinide Group at Berkeley Lab’s Glenn T. Seaborg Center. “We are now in the process of demonstrating that our actinide-specific decontaminating agents are ready for clinical development.”

... actinides likely to be part of the radiation exposure from a nuclear plant or weapon, including plutonium, americium, curium, uranium and neptunium.

... Here - Take this 'Red' pill and sit over there with the rest of the blokes with the big 'X' drawn on their forehead.

Exxon in spotlight after Papua New Guinea landslide

A deadly landslide in the mountains of Papua New Guinea, near whereExxon Mobil is building a $15.7bn gas project, has raised new questions about the global energy industry's scramble for ever harder-to-reach resources.

The landslide tore through a quarry used by Exxon in January, killing at least 25 people in the poor South Pacific country, but it has stirred little international publicity, even though an expert report had questioned the safety of the excavations.

Less than a year before the landslide, an independent consultant, Italian firm D'Appolonia, found Exxon's quarrying operations did not meet the environmental and social standards demanded by the company's creditors and it concluded that workers had been under pressure to meet deadlines.

Africa is now leaving the 'Age of Air Travel' ...

Fuel scarcity: Passengers stranded as Arik Air cancels US flight …Passenger causes pandemonium at airport

The persistent scarcity of aviation fuel (Jet A1) has taken its toll on the domestic airlines as many of them have been forced to continually cancel both local and international flights.

... a source from the airline said the Jet A1 scarcity had reached an alarming level where virtually all domestic airlines had exhausted their reserves.

“This scarcity has been going for over a week now and we have tried to address it but to no avail. The oil marketers I learnt are not importing and the matter is serious. We’ve been forced to combine flights on the domestic scene but internationally, the story is severe. It’s really bad for us now,” she said.

Velvet Sky aircraft still grounded

Last week the airline cancelled all its flights for the rest of the week after suppliers refused to sell it airline fuel.

On February 24, BP applied to the Pietermaritzburg High Court for the provisional liquidation of the airline. BP claims Velvet Sky owes it R29 million for aviation fuel.

Aviation fuel scarcity causes Airlines to ground more flights

Wow, I wonder how long before we see events like this in the West?

Time to reintroduce this


Both speed and passenger capacity went up fast during the following one hundred years. The SS United States (illustration above), which was in service from 1952 to 1969, still holds the record for the fastest ocean liner ever built: she (ocean liners are female) crossed the Atlantic in 3 days and 12 hours, at a speed of more than 54 km/h. That’s 10 to 20 times faster than a sailing ship. Contrary to present cruise ships, ocean liners were built for speed. Nations were in a constant race to possess the fastest passenger ship.

3 days and 12 hours. The good ole days :)

Warming of 2 degrees inevitable over Canada

Even if zero emissions of greenhouse gases were to be achieved, the world’s temperature would continue to rise by about a quarter of a degree over a decade. That’s a best-case scenario, according to a paper co-written by a Simon Fraser University researcher.

New climate change research - Climate response to zeroed emissions of greenhouse gases and aerosols — published in Nature’s online journal, urges the public, governments and industries to wake up to a harsh new reality. “Even with aggressive greenhouse gas mitigation, it will be a challenge to keep the projected global rise in temperature under 2 degrees Celsius,” emphasizes Zickfeld.

Are Canadians worried about 2 degrees warming? 3 degrees? 4 degrees? It seems the big problem is that the big problems are caused to someone else with regards to whom pollutes vs whom suffers the worst of it.

Are Canadians worried about 2 degrees warming? 3 degrees? 4 degrees?

If their decision to exploit (dirty) tar sands is any indication, probably not. In fact, they may welcome higher temps which will reduce Arctic ice, providing easier access to oil & gas deposits.

The present Canadian government who have been in power ~5 years, won last year's election with less than 40% of the vote. With a first past the post system that can happen when there are 5 parties running. It's pretty safe to say that the other 60% of Canadians don't like the Conservative government.

And there is some indication that the Conservatives suppressed the vote and possibly electoral fraud.

Who's who in the election phone calls controversy
Complaints from across Canada about robocalls and phone harassment during 2011 election

Our Canadian Conservatives may have been taught a few tricks by their American fellow travelers.

aws, the antics and deflection tactics of the current Conservative government isn't sitting well with a lot of folks, particularly those who don't give a fig-newton for partisan politics but who care deeply about the integrity of the vote. This is the most partisan prime minister we've ever had and his obsession with doing away with anything that smacks of the Liberal legacy is working against him. The strategy of blaming the opposition and then citing bias of Elections Canada and then obfuscating the flow of information is not good optics, especially since the Conservatives tout themselves as captains of a tight and clean ship. Harper's own reputation of controlling every aspect of his government's message means that as suspicions of dirty tricks begin to filter through, his protests of innocence are ringing hallow.

The "Harper government" (which is causing more snickers than respect, who does he think he is?, Mr. Canada?, the Queen?) has shown itself to be uneasy with dissent. The ruthlessness with which he dismisses opposition is one thing when dealing with political opponents, it's entirely different if focused on the electorate. This calls into question the very legitimacy of his mandate.

Harper is known as a smart strategist, but his luster is losing a bit of its shine as of late. He has to be really careful with this one or he may go down with his entire agenda in tatters.

And you're right, aws, as he promotes a black-white vision of his government's program, vilifying opponents, he is hardening the position of the other side, which is the majority of Canadians. Every government in some ways operates out-of-favour with most, but previous administrations have at least attempted to speak on behalf of the whole. This is Harper's weak point. That does not bode well for securing consent for his long term economic, energy or international policies.

Melting permafrost will make a large part of Canada inaccessible. I think the effects on that country are most clear and extremely dire.

Melting permafrost will make a large part of Canada inaccessible.

Nonsense. Most of the country is inaccessible anyway, except by aircraft or canoe. Whether or not it has permafrost doesn't change that.

Actually, permafrost makes having large buildings nearly impossible because the ground under them is unstable. You have to drive pilings right to hard bedrock to provide a foundation for a large building. Otherwise the weight of the building melts the ice and the ground under the foundation turns into mud.

Canadian farmers trust regulated dairy industry

Canada's response to the "milk wars" in the United States in the 1970s was to establish a supply management system that both protects and restricts the income of its dairy farmers. A University of Illinois study examined how the government regulation affects farmers' perceptions and found a climate of trust despite the inefficiency in milk production it maintains.

... under the protection of the supply system, the government estimates what the demand of milk will be based on the population and past trends and allocates quotas to producers accordingly.

"Because farmers need to buy that quota, it's a really big investment in their dairy operation," she said. In order to maintain higher milk prices in Canada, the government restricts imports of milk and dairy products into Canada.

"Farmers may change their management practices because quotas are now the single largest capital investment, which restricts herd size," she said. "They don't have an incentive to export their milk because the price that they would get in the world market is much lower than the domestic market. It shows that government intervention and controlling an industry can change the way farmers do things. Once you establish a system and people are so invested in that system, it's going to be very hard to make any substantial changes even if it's clear that the program is inefficient."

My Uncle was a pig farmer. The only farmers in his area that made money were Dairy farmers. Everyone else mostly just scraped by.

I am more than happy to know my milk only comes from Canadian farmers, given the stuff farmers in other jurisdictions have to do to make money. Tainted milk in China and milk production improving hormones in the states are a couple of things that come to mind.

I'll take quality and food security over a cheap price.


These same supply management rules mean that it is almost impossible for anyone new, especially small, independent farmers, to get into the industry
Having to buy the "right to produce" from someone else is ludicrous. Having some bureaucrats determining how much production is "enough: is also ridiculous. It also tends to entrench the power of the processors/wholesalers/distributors, because there is no possibility of on new independents appearing to give customers an alternative. Sure, the current farmers get a guaranteed price, but the wholesalers get to make out like bandits, and the customers get soaked.

If these OPEC style rules work so well (for dairy, eggs and poultry) then why aren't they applied to all farm production - beef, fruit and veg, and wine?

Thankfully, they don't otherwise we'd have no farmers markets and still be drinking Baby Duck.

The most successful and innovative, and fastest growing, agricultural sectors in Canada are those that are not subject to these arcane rules. The sooner they are relegated to the dustbin, the sooner we will see an and to the corporate dominance of these sectors.

Ties That Bind Oil and Dollar Snap

... John Kilduff, founding partner of hedge fund Again Capital, says he has at times adjusted his firm's position in oil futures daily based on movements in the dollar, but began disregarding it in December as Iran tensions drove oil prices up and the pairing no longer held. Without the indicator to guide investment direction, his fund has trimmed oil holdings 20%.

"It's disconcerting, when a trade like that works until it doesn't," Mr. Kilduff says.

In recent years, the correlation between oil and the dollar often reached as much as minus-0.9. A reading of minus-1 would mean they move in opposite directions. A reading of 1 means two assets move the same way, while a zero means they have no connection.

North Sea Brent crude oil loading programme set at 100,000BPD in April, down from 116,000BPD in March according to a trade source