Drumbeat: February 20, 2013

2013 gasoline prices could hit record highs

After sending consumers into sticker shock the past month, how much more can gasoline prices climb?

Another 20 to 50 cents a gallon — a level that could propel the cost of gasoline, now $3.75 a gallon, to all-time highs, some experts say.

Gasoline prices typically climb from February to Memorial Day on expectations of rising consumption and costlier summer-blend gas. But so far this year, prices are surging sooner and faster than ever before — up 45 cents since mid-January.

Consumers in some metropolitan areas, such as Southern California, are already paying nearly $5.20 a gallon, up more than 75 cents since December lows.

WTI Crude Slips, Discount to Brent Narrows on Seaway Link

West Texas Intermediate dropped, while its discount to North Sea Brent narrowed after Enterprise Products Partners LP said supplies through its Seaway oil pipeline will increase.

Futures fell as much as 0.2 percent percent after advancing by the most since Feb. 11 in New York yesterday. Seaway volume will average 295,000 barrels a day from February to May, compared with 180,000 barrels last month, according to Enterprise. The Federal Reserve will release minutes of its January meeting today. U.S. crude stockpiles probably climbed a fifth week, according to a Bloomberg News survey before a government report tomorrow.

OPEC Seen Cutting by Morgan Stanley as Tanker Charters Slump

OPEC may be extending the longest stretch of production cuts since the 2009 global recession as fewer oil tankers are booked to ship Middle East crude to Asia, according to Morgan Stanley.

Hiring of supertankers from the world’s largest export region slumped 33 percent from a year ago, Fotis Giannakoulis, a New York-based analyst at the investment bank, said in an e- mailed report today. The 12 members of the Organization of Petroleum Exporting Countries already cut output for five months, most recently by 1.7 percent to 30.5 million barrels a day in January, estimates compiled by Bloomberg show.

Saudi Arabia ready to lift oil output

Saudi Arabia expects to raise its oil output in the second quarter to satisfy higher demand from China and feed economic recovery elsewhere, oil industry sources said.

The world's largest oil exporter kept production steady at about 9 million barrels per day (bpd) last month and sources say production has since hovered around that level because buyers have not asked for more.

Saudi Arabia cut production sharply in the fourth quarter of last year because of weak economic growth abroad and lower seasonal consumption during cooler weather at home. But exports are expected to rise again in the second quarter, driven by growth in Asia, one industry source said.

Shale oil fails to dent Middle East shipments

Will the US be able to say goodbye to its costly military involvement in the energy-rich Middle East because of the shale oil revolution at home?

The question is not only important for diplomats and soldiers, but also for the oil market, which for the past 60 years has become accustomed to the idea that Washington would patrol the world’s most important production region.

Gas prices at four-month high after 32 days of hikes at the pump

U.S. gas prices have hit a four-month high with 32 straight days of increases at the pump bringing misery to spring breakers and job hunters.

The Automobile Association of America said Monday that the national average for a gallon of regular is $3.73 -- 43 cents more than a month ago -- with prices topping $4 in California and Hawaii.

"It's become the perfect storm," AAA spokeswoman Nancy White said.

Norway Rebutted by Investors Amid Tariff Cut Backlash

Funds that have spent more than $5 billion on Norway’s gas pipelines are contesting the legality of a proposal to cut tariffs charged for shipping the fuel, arguing the government’s plan undermines the value of their investments.

The proposal, made public last month by Norway’s Ministry of Petroleum and Energy, constitutes a breach of contract, according to a Dec. 21 letter sent to the government by four companies representing 44 percent of Gassled, which owns Norway’s gas infrastructure. Owners of the four companies include Canadian pension funds, a UBS AG infrastructure fund and a unit of Abu Dhabi’s sovereign wealth fund.

Abe to Ask Obama for Shale Exports as Japan’s Gas Bill Soars

Japanese Prime Minister Shinzo Abe will ask U.S. President Barack Obama to allow shale gas exports as the world’s third-largest economy grapples with soaring energy costs after 2011’s nuclear disaster closed reactors.

The request will be made at a Feb. 22 meeting between Abe and Obama in Washington, said three Japanese officials, who declined to be identified because the information isn’t public. The bill for importing liquefied natural gas, combined with a weaker yen, prompted Japan to post a record trade deficit in January of 1.63 trillion yen ($17.4 billion), the Finance Ministry said today.

Japan’s top buyer cuts Iran crude imports

Tokyo: Japan’s top buyer of Iranian crude JX Nippon Oil & Energy has cut by 12 per cent the volume it plans to import under an annual deal, an industry source said, helping ensure the world’s third-largest oil consumer remains exempt from US sanctions on Iran.

The cut will reduce JX’s imports from the Opec-member by 10,000 barrels per day (bpd) from a year earlier to 73,000 bpd, said the source who has direct knowledge of the matter. That’s a loss of around $420 million for Iran for the full year at today’s prices, according to Reuters calculations.

China floods Iran with cheap consumer goods in exchange for oil

With the Islamic republic increasingly cut off from global markets due to sanctions, Beijing is in a prime position to benefit.

Total’s Tajik Move Aims for Gas From Same Basin as Turkmen Giant

Total SA’s move into Tajikistan, a former Soviet republic known for growing melons and cotton, aims to produce natural gas for export to neighboring China.

Energy Minister: Power supply critical on April 5

The postponement of planned maintenance on the Myanmar Yanada gas pipeline has not eased concerns of a power shortage in early April, with the Yingluck government warning of the need to cut electricity use during this critical period.

Energy Minister Pongsak Raktapongpaisarn said after meeting with energy officials on Wednesday that Total, the French operator of the Yadana field, had agreed to delay maintenance work on the pipeline, scheduled from the morning of April 4 to April 5, until April 14 as requested by Thailand.

Bulgarian government resigns amid growing protests

(Reuters) - Bulgaria's government resigned on Wednesday after violent nationwide protests against high power prices, joining a long list of European administrations felled by austerity during Europe's debt crisis.

Nigerian pirates demand $1.3 million for kidnapped sailors

(Reuters) - Pirates who kidnapped six foreign sailors from an oil servicing vessel off the Nigerian coast on Sunday are demanding 200 million naira (850.1 thousand pounds) for their release, police said on Tuesday.

One Russian, three Ukrainian and two Indian sailors were taken when gunmen stormed the Armada Tuah 40 miles (65 km) off the coast of oil-producing Bayelsa state.

Bomb attack causes fire in Iraq fuel pipeline again

(Reuters) - A bomb set fire to a pipeline carrying fuel oil from Iraq's largest refinery to a province north of Baghdad on Wednesday, the second attack in less than a week on the same pipeline, the oil ministry said.

Choice of oil geologist signals BHP shift

BHP Billiton’s decision to pick as it new chief executive a geologist with a history in the oil industry highlights not only the challenges facing the world’s biggest resources group by market value, but also where its future may lie - oil and gas, rather than metals.

Andrew Mackenzie, the 56-year old executive who will replace Marius Kloppers, worked for 22 years at BP before joining miner Rio Tinto in 2004 and BHP in 2008.

Iraq gives go-ahead for Iranian pipeline to Syria

BAGHDAD: Iraq has approved the construction of a natural gas pipeline across its territory that will connect Iran to key ally Syria. The move likely to strengthen Tehran’s influence over its neighbors.

E.ON fully opens new UK gas storage facility

LONDON (Reuters) - German utility E.ON has opened all eight gas storage caverns at its new Holford storage facility in Britain, the company said on Wednesday.

Two final caverns came into operation earlier this month, completing a seven-year construction and commissioning period at the site in Cheshire.

Petronas $700 mln credit facility for Bangladesh

DHAKA (Reuters) - Bangladesh Petroleum Corporation (BPC) has been granted a $700 million six-month deferred payment facility for oil from Malaysia's Petronas.

Under the deal, the first month will be interest-free and the next five payments will have a rate of 4.5 percent, down from the previous deal's 5.05 percent.

Peak Oil Will Be Fully Discredited When Peak Government Is Realized

President Obama recently nominated Sally Jewell to head the Department of Interior. Her bona fides include growing a business — Recreational Equipment Inc. (REI) — to nearly $2 billion in revenue last year. But in her new job, the question is whether Secretary Jewell will grow America’s vast, untapped domestic energy resources.

Jewell is now at the gulf between what is and what could be. The Interior Department is responsible for oil and natural gas drilling off the U.S. coast – which is to say, the agency is wholly responsible for the complete absence of new drilling off the U.S. coast.

America’s oil choice: Pay up, or get off

The oil industry has an important message for you, America: You’re not paying enough for fuel. And if you want to realize the fantasy of “North American energy independence,” you will have to pay more for it — a lot more.

Getting drivers to go along with this notion will not be easy, so the industry has couched this message in much more careful language.

Governments Must Cooperate to Restrict Buying and Selling of Oil as Production Declines

Decline in output from the world's oil fields is averaging 5% per year http://aspousa.org/peak-oil-reference/peak-oil-data/oil-depletion/, with some speculation that we may have reached the global production limit for conventional crude oil http://www.skepticalscience.com/Climate-Policy-Peak-Oil_U-Washington.html. Once the loss in output overtakes what can be provided from unconventional sources, it can be said that we have passed the point of global "peak oil". The exact timing of this will be known only to posterity, but its circumstance is widely perceived as an unquenchable and imminent disaster of planetary proportions, and the "End Times" movement, hard-line Christian fundamentalists, mostly in the US, are rubbing their hands in anticipation of such "proof" that God really did tell us 2000 years ago that the Tribulation would befall us, in preparation for the second coming of Jesus Christ, who would ultimately transform the Earth into paradise. A cynic might say that since these are mostly people who live in a nation that consumes vastly more energy, and has more cars than anywhere else on earth, such acceptance is really an act of inertia, and they would rather die than change their lifestyles to anything less energy consuming.

Global Peak Oil Production — Where to Invest and Profit

Let’s build upon last week’s long-term bullish case for crude oil. Much has been said about, “Global Peak Oil” production in the last few years, and probably for good reason. We know that U.S. crude oil production peaked in the early 1970s just as Mr. King Hubbert predicted back in the late 1950s.

But, is peak global oil production just around the corner?

Energy industry analysts believe that global oil production will peak sometime between 2015 and 2025. That sounds like a fairly broad range. However, the reality is that it’s a fairly short timeframe in geologic time that does not even register a notch, and it’s rapidly coming upon us.

Crude Oil Price BUBBLEOMIX Forecast 2013

Of course, you can’t pay the “right” price until the darn sellers break ranks and/or the hyperventilating hedge-fund managers reach for their brown-paper-bags. The problem is the way it works you get fired if you don’t hedge against a spike but if there is a bust well the way the bonuses are worked out, that doesn’t matter so much.

Whenever that happens (not if), what will happen next, as night follows day, is the red-line.

The trigger for that might be when the penny finally drops that U.S.A. will become energy independent sooner than anyone thinks. When everyone finally get’s their head around the idea that the biggest buyer in the world might leave the market-place, the sellers might well break ranks…it’s happened before, like did everyone stop pumping when the price hit $35 in 2009?

Illinois fracking rules could be strictest in the nation

Illinois legislators are expected to introduce a bill in coming days or weeks that would regulate hydraulic fracturing in the state.

Known as Democratic Rep. John Bradley’s bill, it is expected to be shaped by months of discussions that have taken place among environmental and industry leaders and legislators. Last year, legislation that started with support from both environmental and industry groups died after undergoing various permutations, including the addition of a two-year fracking moratorium.

Battle Lines Drawn for BP’s Day in Court

HOUSTON — Unless the Justice Department and BP reach a last-minute settlement, the British oil company will return to court on Monday to face tens of billions of dollars in civil claims from the 2010 explosion on the Deepwater Horizon rig in the Gulf of Mexico that could cripple the company for years to come.

BP Wins Approval to Cut Potential Fine by $3.4 Billion

BP Plc won approval of an agreement for the U.S. government to not count 810,000 barrels of oil captured before they became part of the 2010 Gulf of Mexico spill, reducing the potential maximum fine under the Clean Water Act by $3.4 billion.

The collected oil “never came into contact with any ambient seawater and was not released into the environment,” U.S. District Judge Carl Barbier in New Orleans said in an order yesterday.

A Strategy to Prevent the Next Fukushima

Among the most striking elements of the catastrophe at Fukushima Daiichi nuclear reactors in Japan were the hydrogen explosions that destroyed the upper parts of some of the reactor buildings. The hydrogen was released by a metal called zirconium in the overheated core.

Since that accident, whose second anniversary falls on March 11, researchers have been looking at a variety of ways to prevent a repetition. At the Electric Power Research Institute, a nonprofit utility consortium, scientists think they have zeroed in on one strategy: replacing some of the zirconium with a ceramic.

Swelling found in second battery on Japanese Dreamliner

Cells in a second lithium-ion battery on a Boeing Co 787 Dreamliner forced to make an emergency landing in Japan last month showed slight swelling, a Japan Transport Safety Board (JTSB) official said on Tuesday.

The jet, flown by All Nippon Airways Co, was forced to make the landing after its main battery failed.

Peer-to-peer car rentals set to debut at SFO

The way Rujul Zaparde sees it, there are two kinds of people in this world: those who’d let complete strangers drive their cars and those who wouldn’t.

As the CEO of FlightCar.com, a new peer-to-peer car rental company, Zaparde clearly believes there are enough of the former to build a viable business on. Set to officially launch at San Francisco International Airport (SFO) on Friday, the company promises to provide significant savings for both car owners and renters.

Home Solar Systems to Be an Option for Honda Customers

Automakers have long resorted to incentives like zero-percent financing, rewards points and rebates to inspire customer loyalty. Now Honda is offering a different deal: inexpensive home solar power systems for customers.

Through a partnership with SolarCity, a residential and commercial installer, Honda and Acura will offer their customers home solar systems at little or no upfront cost, the companies said on Tuesday. The automaker will also offer its dealers preferential terms to lease or buy systems from SolarCity on a case-by-case basis, executives said.

UN launches Africa plan to swap kerosene for solar

Nigeria could save US$1.4 billion a year and avoid using 17.3 million barrels of crude oil if it used modern off-grid lighting solutions.

That’s one finding of a new UN study into lighting in Africa, a continent that relies heavily on kerosene, candles and batteries to light homes.

Sewage Status Grows as Resource for Utilities to Skiers

United Utilities Plc and Severn Trent Plc, Britain’s biggest publicly traded water companies, are increasingly feeding human waste into tanks of bacteria whose methane emissions generate electricity.

Sewage-derived power supplies 22 percent of Severn Trent’s energy, almost double that of 2005. At United Utilities, it’s 14 percent. British utilities are shifting fecal matter to vats of bacteria that consume the waste, releasing biogas that’s burned to drive water treatment. The result is lower energy bills and surplus power sent to the grid that heat more U.K. tea kettles.

Supreme Court Appears to Defend Patent on Soybean

WASHINGTON — A freewheeling and almost entirely one-sided argument at the Supreme Court on Tuesday indicated that the justices would not allow Monsanto’s patents for genetically altered soybeans to be threatened by an Indiana farmer who used them without paying the company a fee.

The Deadly Opposition to Genetically Modified Food

Finally, after a 12-year delay caused by opponents of genetically modified foods, so-called “golden rice” with vitamin A will be grown in the Philippines. Over those 12 years, about 8 million children worldwide died from vitamin A deficiency. Are anti-GM advocates not partly responsible?

Europe’s Rift Over Overfishing and Subsidies

“We won a huge victory for sustainability two weeks ago with a huge majority,” Isabella Lovin, a Green party legislator from Sweden and a longtime critic of European fisheries subsidies, said by telephone. “You would expect the subsidies vote to go the same way. But I’m not sure we’ll have such a big victory when it comes to money.”

“My worry is that there is an unholy alliance of between the conservatives and the left,” she added, “one that wants to continue giving subsidies.”

Carbon Plunges as EU Delays Vote on Fast-Track Market Fix

Carbon prices plunged the most in more than three weeks after the European Parliament’s environment committee postponed a decision to seek fast-track approval for a plan to fix a record surplus of emission permits.

Emissions Trade in E.U. Is Sputtering

LONDON — President Barack Obama is trying to persuade the United States to adopt a cap-and-trade system to curb greenhouse gas emissions. But the European Union’s Emissions Trading System — the world’s flagship effort — is sputtering. European carbon permits, which traded at about €30 per ton a few years ago, are now hovering at about €5 per ton or less.

Keystone XL will have 'no impact on climate change', TransCanada boss says

The company that wants to build a controversial oil pipeline from western Canada to Texas said on Tuesday said that shutting down the oil sands at its source would have no measurable effect on global warming.

"You could shut down oil sands production tomorrow and it would have absolutely no measurable impact on climate change," he said.

New projections of 'uneven' global sea-level rise

Sophisticated computer modelling has shown how sea-level rise over the coming century could affect some regions far more than others. The model shows that parts of the Pacific will see the highest rates of rise while some polar regions will actually experience falls in relative sea levels due to the ways sea, land and ice interact globally.

Are Oysters Doomed?

Unlike other problems caused by CO2, ocean acidification is spurring some action, possibly because the effects are so visibly tied to the cause. “With climate change there’s often a schism between scientists and those who flat out don’t want to believe it,” says Green. “It’s hard to get a man to believe something if his job depends on not believing it.” But in this case, he says, it’s the people in the industry who are leading awareness. “Talk to shellfish clammers—the guys who dig—and every one of them is on board, especially the old timers. They have seen over the years the populations go from incredibly productive to virtually disappearing in many cases.” One bit of anecdotal evidence diggers have reported is clams with thinner shells—so thin, they say, that sometimes it’s not possible to fill bushel baskets to the top because the fragile shells at the bottom will be crushed.

Filipino super-typhoon an ominous warning of climate change impact

The five most devastating typhoons recorded in the Philippines have occurred since 1990, affecting 23 million people. Four of the costliest typhoons anywhere occurred in same period, according to an Oxfam report. What is more, Bopha hit an area where typhoons are all but unknown.

The inter-governmental panel on climate change says mean temperatures in the Philippines are rising by 0.14C per decade. Since the 1980s, there has been an increase in annual mean rainfall. Yet two of the severest droughts ever recorded occurred in 1991-92 and 1997-98.

Scientists are also registering steadily rising sea levels around the Philippines, and a falling water table. All this appears to increase the likelihood and incidence of extreme weather events while adversely affecting food production and yields through land erosion and degradation, analysts say.

From links above"

Saudi Arabia ready to lift oil output


OPEC Seen Cutting by Morgan Stanley as Tanker Charters Slump

Now these two headlines can't both be correct.

I wouldn't be worried about steep depletion rates, or even cheap oil disappearing any time soon. The tar sands are selling for under $40 a barrel, and they just discovered 233 billion barrels of oil in Australia. Hopefully we can use the remaining resource to develop alternatives.

Does anyone here know whether or not tar sands oil is sustainable at $40 per barrel?


"Does anyone here know whether or not tar sands oil is sustainable at $40 per barrel?"

As long as the BS keeps working.

It is quite funny. Without looking at the familiar names of the posters, those who say TAR sands are Americans, those who say OIL Sands are Canadians.

...and no one calling them BITUMINOUS sands ;)

Interesting observation.

(I replied to your Q on the prev DB.)

At $40/bbl, existing oil sands operations will continue to operate indefinitely, but companies will show little enthusiasm for starting new ones. It would take $80/bbl oil to make that happen.

Note, however, that the world price of oil is not $40/bbl but $118/bbl as indicated by the price of Brent in London. Oil sands production would get something closer to that if it could somehow get onto the world market. The high price of Brent is an indicator that the global supply situation is not nearly as good as some people would like you to believe.

It doesn't matter what the cost per barrel is for the tar sands - it's still the equivalent of saying "don't worry that the shower has stopped, the tap is still dripping in the sink".

And putting aside the fact that those 223 billion barrels aren't really oil, they are in one of the driest parts of the world. Three guesses as to what you'll need to help extract them. Yep, water.

And combined net oil exports from the seven major net exporters in the Americas in 2004, inclusive of rising net exports from Canada, fell from 6.1 mbpd in 2004 to 5.1 mbpd in 2011 (BP, total petroleum liquids).

And I don't recall an average Brent price of $112 in 2012 being called "cheap" before.

How can cost simply "not matter"? Cost is everything. I thought that was the basis of EROI. If the price of tar sands is that low, that might be indicative of a high EROI. And besides, tar sands are good because there's no discernible peaking pattern for them, at least as far as we can tell.

Could it be that "oil" from the tar sands is mostly bitumen, just about the lowest quality goo that can still be called oil?... Nah, that couldn't be it.

Keep in mind your $40/bbl is an incremental cost of production, i.e., what existing legacy operations can produce their oil for. That's what you will typically see in the disclosure statements. The cost to bring new production on from tar sands is more like $80/bbl, though that is just a guess.

Yes, I understand that it's at a certain price, which includes demand, but how in God's name can the tar sands only have an EROI of 5% when it's selling for much less than shale oil and conventional oil, which I've heard have EROI's of around 10%-15%? The tar sands oil doesn't have a higher or lower demand, because it's oil, regardless of where it comes from, so that doesn't explain it.

Western Canadian crude and WTI are selling at discounts to global crude oil prices because of transportation bottlenecks in the North American Mid-continent.

As noted above, Western Hemisphere net oil exports, from the seven major net exporters in the American in 2004, fell from 6.1 mbpd in 2004 to 5.1 mbpd in 2011.

Ah. That explains it. Thanks. I'm still not as pessimistic about the tar sands as many are, though. I think they have a better future than tight oil and shale oil, though.

Yeah, a better future releasing CO2. As do all the other FF sources. That makes me pessimistic about climate change/warming.

Exactly - every time someone gives a sigh of relief that we might be able to continue BAU a little longer, I give a shudder.

Ditto. A narrow focus on availability of fossil fuels sadly ignore all the negative impacts of their production and use. Tar sands are destructive on many levels.

FOR ALL: Something to remember: while the price of oil is obviously important a company's profitability is ultimately determined by what it cost to develop their production stream vs. the price of oil. Two tar sand companies could be selling their production for the same price yet one could be much more profitable than the other. Pubcos being involved can make the distinction even harder. A pubco might continue develop their tar sand reserves even if they are experiencing a zero return on the capex spent. They monetize the value of their effort through their stock valuation.

And as I just explained in another post a company may keep selling as much tar sand production as possible even if their current investment profile indicates the project will never recover the initial investment. At this point it’s a matter of generating a positive cash flow. I’m producing a NG well in La. that will never recover the capex spent on it. But the production cost is low so I make a nice net cash flow. What low prices cause is a reduction/slow up in expending new capex to add production. I’ve seen stories of tar sand companies pulling back on new projects. But that doesn’t mean they’ll stop current operations even if the positive cash flow is skinny. And for a pubco even if the net cash flow is zero.

Thanks for the explanation. *no sarcasm*

MM – You’re welcome. I hope it didn’t come off too preachy. Just one of my perpetual pet peeves. Since you’re the daily lightning rod (LOL) I’ll toss out some other personal observations.

The days of cheap oil are gone: I don’t recall any time in my 38 year history that oil was “cheap”. Times when it cost a lot less than during other times for sure. But when the world dove into a recession in the early 80’s a $20 bbl of oil wasn’t cheap because much of the world couldn’t afford to buy at that price which is why oil eventually bottomed out around $10/bbl. But a lot of the world still couldn’t afford to buy much $10 oil so would you classify that price as “cheap”? Maybe cheaper but not cheap.

Now the flip side: is $100/bbl oil “expensive”? In 2001 oil was selling for about $25/bbl and we were consuming 77 mmbopd. Today oil is selling for about 4X that much and consumption has increased to about 86 mmbopd. Based upon increased consumption the world can afford $100 better now than it could afford $25 oil 12 years ago. Sounds like $25 oil was more expensive than $100 oil today if you judge it by what the world can afford. There was a time when a 50 cent beer was expensive to me yet the other day I didn’t hesitate to pay $75 for a bottle of Islay scotch. So is scotch suddenly “cheaper than beer? LOL

Companies in a panic today to find hydrocarbons. Oi…is this something new? When I started in 1975 my first mentor explained in detail our PO future. We called it the “reserve replacement problem” but it was the same critter. I worked for public companies for most of my first 10+ years and without exception they were always in a panic mode trying to add reserves to their books. I saw countless pubcos go under 30 years ago because they couldn’t deal with the PO monster.

Another point that will be difficult for many to believe: oil/NG has never been easier to find then it is today. I won’t go into the tech details. But think of those first very expensive hand held calculators in the 70’s and compare them to your lap top today. The improvement in our exploration tool bag exceeds the magnitude of the change in computing tech. Our tools don’t limit us at all. The problem is the lack of new fields to find with our great tools. Which is a big reason the shales plays are so hot: they were found decades ago…no exploration required. Over thirty years ago me and every other geologist could draw a circle around all the Bakken/Eagle Ford wells being drilled today. All you had to do was ask where drilling would be focused if oil went over $100/bbl. We wouldn’t even need to envision horizontal drilling…folks would have drilled those wells vertically at $100/bbl. In 1976 I was looking at potential DW GOM fields on seismic when I was with Mobil Oil. We didn’t have the engineering tech to develop fields in that depth of water then but we knew they were posibly out there. So when prices/demand got high enough we spent the monies to develop DW drilling/production capabilities.

If anyone wants to find fault with anything I said please refer your complaints to MinneapolisMan. He seems to handle it well. I still tear up when folks disagree with me. LOL

" I don’t recall any time in my 38 year history that oil was “cheap”".

Compared to human labor? [sorry ROCK]

Ghung - No...cheap compared to good scotch.

Now the flip side: is $100/bbl oil “expensive”?

ROCKMAN, in my opinion oil is still not expensive. Albeit, it is not as inexpensive as it used to be.

Best hopes for adapting to the rising price of oil.

But gasoline was cheap in the 1950s and 60s wasn't it? Really, really cheap, even adjusted for inflation. Must have been marvellous. A golden age, never to be repeated.

1998 was the lowest inflation adjusted price.

In the USA during the 1950s and '60s "gas wars" were common; competition between nearby stations often drove the price below 10 cents a gallon for weeks at a time.


And they bribed you by offering you free glasses and stuff with each fill up.

I guess this chart missed the gas wars.

It is pretty obvious something fundamental changed about 1998.
From 1910 until then there was a pretty stable decline in gasoline costs thanks to improving technology and efficiency of scale.

All while demand was increasing, contradicting the simple notion that prices are set by supply and demand.

What changed in 1998? Google variations of "Easy oil over".

Edit: I tried to make that chart smaller, my first attempt was too small. I deleted and reloaded in photobucket, but when I preview in TOD, it never changed size. But it really did?

From Wiki: The General Motors EV1 was an electric car produced and leased by the General Motors Corporation from 1996 to 1999.[1]

That is amazing. Could they have picked a worse possible time? Nope. Right at the nadir of gas prices.

And then they massively compounded that error. Instead of sticking with the program and continuing investment, they bailed on it right before gas prices went into a steep and sustained price rise. Maybe we would have a $30K Volt today if they had stuck with program.

"Maybe we would have a $30K Volt today if they had stuck with program."

Yeah, the timing of the EV1 was a spectacular mess - but there was still demand for it. There was demand for the Toyota Rav4 EV's, too, and there's still a bunch of them running around because people could actually buy them rather than the lease-and-crush campaign of GM.

For anyone interested in a sub-$30k Volt I was rather surprised to find them showing up on Autotrader(dot)com with 15k - 25k mi for around $25,000. Extremely tempting. So they're already filtering through to the secondary market. Would be interested to know why though - whether they thought it was too small, weren't getting the benefit of plugging in, etc.

The EV1 with the NiMH was getting something on the order of 150 Wh/mi by the end of the program - which would give it a range of 140 miles-ish with the battery currently in the Nissan Leaf. I think a battery equivalent of the VW 1L could push consumption to 100-120 Wh/mi giving it a range of 175 - 210 miles with a Leaf-sized battery.

The question is whether anyone would buy a 2 seat vehicle...

The Twizy was the top-selling plug-in electric vehicle in Europe during 2012.[5] Since March 2012, a total of 9,020 units were sold through December 2012, with Germany, France and Italy as the top selling markets.

Now imagine that with a heater - and real doors! (and highway speeds and 200 miles of range)

One of the more curious things about a lower Wh/mi is that the Speed-of-Recharge increases. The current Leaf on L2 can charge at 3.3kW, which at 260-ish Wh/mi is 12.7mph. The Renault Twizy gets approximately 110 Wh/mi, so the same 3.3kW charger would yield 30mph. Half the consumption, twice the recharge speed. At L1 120V 12A (1.44kW) this gives the Leaf an SoR of 5.5mph and the Twizy 13.1 mph.

A theoretical "VW 1L-E" with 6.6kW L2 (what the 2013 Leaf will have), Leaf size 21kWhr (useable) battery, and 110 Wh/mi consumption would have a range of 191 miles and Speed-of-Recharge on L2 of 60mph.

And if fast-charge infrastructure shows up...

In addition, recharging via CHAdeMO takes much less time than charging at the AC Level 2 rate used by most electric vehicle supply equipment (EVSE), allowing the SCiB battery to reach 80% capacity in 15 minutes, 50% in 10 minutes and 25% in 5 minutes.

As far as the HEATERS in lightweight EV's go, I still suggest putting in Magneto-Pedals at each seat.

1) -let the occupants and driver heat themselves
2) -counteract some of the drawbacks of sitting
3) -put more INTO their batteries as a result, not take more out.

All while demand was increasing, contradicting the simple notion that prices are set by supply and demand.

And if prices, for those 88 years, was not set by supply and demand, what were they set by? You have presented nothing that contradicts the notion that supply and demand sets price. During most of those 88 years demand was increasing at the same time supply was increasing even more, causing a continual decline in price. Then in the 70s and especially the early 80 supply got really tight, causing prices to jump in the 70s and to really jump in the 80s.

The term "Easy Oil Over" simply means "The Supply of Oil is Tight". And when the supply of oil is tight, prices rise.

Supply and demand drives price. Short term swings in the price can be caused by any number of psychological factors. But the long term price is always determined by supply and demand and nothing else.

Yes, the easy oil is over and the marginal per barrel price is getting higher with each passing year. Meaning the supply is getting tighter and tighter. And that means the price will get higher and higher. Unless... unless of course, the economy get worse. This will mean fewer people can afford the higher price of petroleum products and this will drive the price down.

Ron P.

And if prices, for those 88 years, was not set by supply and demand, what were they set by?

At the start the price was "set" by the other products of its time - burning fluid (stuff you didn't wanna drink from distilling booze) and whale oil.

C – As Turnbull points out you can’t use absolute costs of anything and compare it across decades. There was a time was gasoline was very cheap regardless of the metric. I’ve always read the reason henry Ford et al went with gasoline instead of diesel was that there was almost no market for the gasoline portion of the refining output. Of course. Building a lot of gasoline fueled ICE vehicles ultimately changed that dynamic significantly.

But beyond inflation adjustments we need to look at the purchasing power at the time. Didn’t matter to my family what gasoline was selling for in the 50’s, 60’s or even half way through the 70’s: we didn’t own a car. But I did grow up in Nawlins and do remember electricity was too expensive to run an air conditioner. I don’t know how inflation adjusted electricity prices compare from then to now but it didn’t matter to us. Like I was kidding in another post: there was a time when a 50 cent beer was expensive for me. Now a $75 bottle of scotch isn’t “expensive”. It the late 90’s when oil was selling for $25/bbl it was still very “expensive” for many folks. Maybe a better term is affordable than expensive. But even with that metric it depends on who you’re referencing.

You have explained this before and it is quite enlightening. However, I do not understand why investors and analysts cannot see through the hype on reserves when those extracting those reserves are not worth the capital required. Same thing goes for negative cash flow.

With tar sands, I would surmise that companies are counting on a new pipeline to increase their prices. So it makes the situation just a tad more complicated. Things no doubt are looking up given Obama's recent choice of oil men golf buddies.

ts - I'm sure an honorable person as yourself will always have trouble grasping that there are a number of ways to make a lot of money in the oil patch that don’t require drilling very profitable wells. Remember the operator I once spoke of that drilled 18 dry holes in a row back in the late 70’s boom. He and his senior guys retired millionaires. Investing in the oil patch isn’t for sheep: there’s a waiting pack of wolves ready to skin them alive. Petrohawk sold their undeveloped Eagle Ford acreage for $12 billion. All on the up and up and sold to a sophisticated and knowledgeable operator. I’ve heard that the company developed a big case of “winner's remorse.”

BTW: just because an analyst is saying buy it does mean he isn't selling his own position to someone else.

I am not sure you're using EROEI correctly (if that is even possible). EROEI is not related to dollars but to BTUs.

Rgds WeekendPeak

To be fair, he did say just EROI, and while the jury is out on it I suppose, I would be happy to have both terms carry those respective meanings, since 'ROI' is already well established as a monetary term.

I don't agree with RMG that EROEI is a useless term. Maybe just useless for him. I do appreciate that the sales value of various energy sources will have a different dollar value due to their application, but as we most of us know, that's not the point or the implication behind EROEI.

I didn't say that EROEI was a completely useless term, I said it is of limited usefulness because it doesn't account for fungibility, as well as capital, labor, land, water, and other constraints. The oil industry doesn't use it because the basic concept is included in some of the indicators they do use.

The non-linear nature of the measure is also highly misleading for people who don't understand that it is non-linear. A good analogy is SPF factors for sunscreen. As skin specialists are constantly reminding people, SPF 100 sunscreen is not 10 times as good as SPF 10 sunscreen - in fact most people are better off saving their money and buying SPF 10.

Similarly, an EROEI 100 oil well is not 10 times as good as an EROEI 10 oil well and oil companies are better off drilling a large number of EROEI 10 oil wells rather than trying to find an EROEI 100 oil well, of which there are none left to be found.

OTOH, SPF 1 sunscreen is utterly useless because SPF 1 is the sun protection of human skin, and an EROEI 1 energy source is utterly useless because it consumes as much energy as it produces. Biofuels often get close to an EROEI of 1.

The region it is most useful, for both SPF and EROEI, is approximately 2 to 10 because that is where it makes the most difference. Outside that range, it doesn't really matter much.

Sorry I misrepresented your statement. You did and do seem to be dismissive enough as to say it's useless. The point is to understand what kind of information it is revealing.

It's usefulness is not, of course at all a function of those listening who can't understand the point. That's another problem entirely.

A bike is of 'limited usefulness' when what you need is a can opener, but is highly useful when applied as it was designed.

Of course, your example of an energy source with a 1:1 EROEI is exactly the point, while a source that was once 100:1, and has proceeded to get to 10:1 or worse is also the point, because it is informing us of a trend that we really need to be aware of .. and that is for me, almost ENTIRELY the point. Just because oil (sic) 'might' still be hovering above your particular cutoff point doesn't offer much to assuage the concern that the motion of that graph is completely clear. If Solar Hot Water or Windpower has only got an EROEI of 12, but will still by any reasonable expectation maintain that Level when Oil Production has shimmied its way down from 100 to 10 to 2 perhaps, then the 'Usefulness' of EROEI will be quite significant.

I think the cost of an energy source would be proportional to 1/(EROEI-1) if that source had to be produced using its own output. However if a 2:1 source can be produced using the energy from a 10:1 source the output can be sold at the 10:1 price and still return a 100% profit.

That is no cause for any warm and fuzzy prediction that a vast 2:1 source will continue to keep the price at current levels. As the 10:1 source becomes depleted the 2:1 price would go up, ultimately by a factor of 10.

My point was that a change in EROEI from 100:1 to 10:1 is not as significant as the big numbers imply because the EROEI function is not linear. In real physical terms, all it means is that the efficiency of energy production has declined from 99% to 90%. Either is acceptable in the real world and other factors are more important. However at an EROEI of 2:1 the efficiency is only 50%, meaning it is becoming very marginal, and at 1:1 the efficiency is zero, meaning the process is a waste of time and money.

As for fungibility, solar hot water and wind power are not interchangeable with liquid fuels. Nobody I know uses solar hot water to power their car or gasoline to heat their household water. Few people use wind power to propel their cars. Many people would argue that it is technically possible to do the latter, but I don't think they have looked at the EROEI of doing the conversion from gasoline powered cars to wind powered EVs. I don't really think anybody has because the results are just too depressing. The EROEI of it is so low that somewhere in the middle of it the world will run out of energy to make the transition.

Few people use wind power to propel their cars. Many people would argue that it is technically possible to do the latter, but I don't think they have looked at the EROEI of doing the conversion from gasoline powered cars to wind powered EVs. I don't really think anybody has because the results are just too depressing.

Oh ye of little faith. I'm not going to do EROEI calculations since as you point out, they are often pointless. But on a monetary basis it costs MUCH LESS to fuel an electric car per mile with wind power than it costs to power a current fleet average MPG car with with gasoline! I'll grant that EVs are more expensive up front but the cost of fueling them solar or wind is MUCH LESS than fueling a gas car per mile.

This is not pie in the sky stuff. Yes, there are issues . . . up-front cost of an EV, range, etc. But if you just assume that powering cars on wind can't be done cost-effectively because it sounds too good to be true, you are wrong.

And yet you're the one who rightly trumpets the Wind Farms that drive at least a part of your Calgary transit system. Funny that you choose to point at Solar Hot Water instead of the MANY forms of electric generation that are out there working as we speak, and helping to turn train wheels in any number of places.

Of course all these fuels are not simply interchangable.. who said they were? It's not simple, but in cases like that one above, it's at least possible, and with steadily diving 'efficiency' of the sources we've depended on for a century, the signs are very usefully warning us that we need to be figuring out how to do so.

I would be very eager to hear how a PV-EV , of which there are now steadily GROWING numbers (or by reasonable extension, a WIND-EV) stands up in BOTH EROEI and in overall utility compared to Gas Vehicles whose fuel depends on a transport chain that could get spotty for countless reasons, considering how both the PV and the EV can use their power to help support the home or business it's attached to, while being able to accept power from there or any of potentially millions of plugs and other sources around the country.

Electric trains run on electricity and electricity is fungible. One source is as good as another, and wind power works the same as coal, NG, or hydroelectric power. Calgary switched the electricity source for its electric trains from the other sources to wind power. The wind farm was already operating and looking for buyers, so it was a simple matter of signing a supply contract and throwing the switches.

Electric cars are not nearly as easy. Electricity is not interchangeable with gasoline - you can't simply sign a contract and plug your gasoline car into an electrical outlet. You have to change out the entire gasoline vehicle fleet for EVs, replace all the gasoline stations with charging stations, upgrade the electrical grid to handle the additional load, and increase the generating capacity to provide the power for all those cars. In the middle of the transition, you have two duplicated transportation systems, both of which are massive in scale. There would be a lot of abandoned and scrapped infrastructure at the end of it.

I haven't seen any studies of the energy investment required for EVs, but on the basis of a few back-of-napkin calculations, I have a feeling the EROEI on it is very poor. The fact that there have been no EROEI studies indicates to me that people are simply glossing over the problem, which is sufficiently serious that it could kill the electric car (again).

So it sounds like hearing a trustworthy EROEI evaluation of this would be the useful information that you would require to make this judgment, no?

Whatever your personal doubts about whether an EV could match up to a gas car would be answered by a proper pairing of these inputs to the returns.. and sure you can do it for monetary comparisons as well. But as ever, that is not why we look at EROEI. The utility value and price of different energy forms will change with their role in the marketplace and the availability of them to start with.. so just looking at cost gives us a Limited Utility in judging some of the core qualities of these sources.

At this point in time half or quarter electric vehicles are probably the sweet spot. By half, I mean a plugin hybrid, and quarter electric would be a standard hybrid. These do get on average substantially better mileage than pure ICE cars. With any luck vehicle fleets will contain an increasing percentage of such vehicles.

I doubt the embedded energy of an EV or near EV is much more than that of a similar sized ICE vehicle. And for the ICE vehicle, the embedded energy is considerably less than the energy consumed driving it over its lifetime. So this is a way to stretch things out as we exit the cheap oil age.

Now there are plenty of research projects on the creation of methanol -or other liquid fuels, from energy (in some cases sunlight) CO2 and water. I suspect this may be the route to having some volume of sustainable liquid fuels. At this point I think BAU-lite may be possible long term.

One of the reasons I am willing to bang on about EROEI relates to your comment on lifetime embedded energy, and where we can aim ourselves for long-term solutions with the most modest EI requirements.

It's hardest to get really useful numbers for them so far, but I have posed the question a number of times over the years here, just to see if anyone has tried to look into what kind of Energy ROI you get from such things as Solar Hot Water collectors scrabbled together from scrap materials, for the sake of the Glass, Brass, Aluminum and Copper in particular..(whereby their ROEI has already had at least one service lifetime of payback to their credit, and they don't lean on new raw material sourcing as a result) or for EV conversions, which can recycle the ICE hardware, reuse the carriage,etc.. and add in a very modest Motor that is often said to have an estimated lifetime of a Million Miles, and where the battery packs could still be changed out later to keep up with new developments without getting a whole new vehicle..

(EDIT: AND.. as with the suggestion to heat passengers in an EV by having them all start pedalling at their seats, the way you calculate the EROEI of all the personal labor put into building one's own vehicles and collectors, etc, is also highly complicated, but salient, since this effort, like the pains of parenting, are simultaneously tough (debits) and delightful, educating, empowering(!), exercising (hence, Credits) ... call it as you will.)

These are all essentially EROEI considerations.. and to apply it to TK's question yesterday, they go directly to a personal preference of my own, which is to point out the potentially extreme advantages in Net Energy gain or LCA when you repurpose existing local materials, as well as gleaning advantages from some or much of the Sourcing, Transport, Design and Engineering effort that went into providing your resource materials in the first place.

Of course, knowing the concept itself is still very Useful for countless other reasons as well, like those folks who would burn off half a tank of gas waiting in gas lines in NJ after Sandy, with the odds that they might not even get another Half a tank back to replace it with.

How many gas stations would exist if every ICE car owner was able to fill their tank at home, every night? Where would they be located?

To say that the existing system must be duplicated is overly pessimistic in my view, and the existing grid is under utilized at night, when most charging would initially be done. Didn't the U.S. D.O.E. publish a study concluding that the existing grid could handle widespread adoption of EV's?

Another issue is that there must be a certain baseload generated at night and that baseload is not fully realized. At least I believe that was the situation a few years ago when I did research on this issue. So, in essence there is electricity generated that is not being utilized. Therefore, initially, at least, there would not be an increase in fossil fuel burned as a result of charging the EVs at night. This, however, would change over time as coal and nuclear are phased out as fuels like natural gas are better at matching the actual load required.

Beyond that, there are those of us who are not interested in replicating the existing auto dominant transportation system anyway. If EVs were just required to fill a small niche of that system in the future, that would obviously obviate some of the concerns involved in simply using EVs as a substitute for ICEs. However, I assume that the dominant culture will do everything possible to simply replicate BAU by other means.

Written by Riban Conbajos:
How many gas stations would exist if every ICE car owner was able to fill their tank at home, every night? Where would they be located?

If one fills up his tank only at home, then the range of his vehicle is limited to the maximum round trip distance that can be traveled from his home.

Sure, if an EV owner only ever does, but that misses the point. Most people, most of the time, drive less than 30 miles a day. Charging at home has this day to day use covered. The more difficult task is solving the long road trip problem.

Take a look a this map of planned Tesla Supercharger stations.

A nationwide network of superchargers, based on this map from Tesla, can serve the entire country with around 100 locations.

A mere 100 charging stations, nationwide, to provide blanket coverage of long distance routes? Wow! Tesla is budgeting this as marketing, which is brilliant considering that Tesla owners charge for free. Tesla's intention is to power them with solar PV.

Moreover according to the authors of "Transport Revolutions: Moving People and Freight without Oil" Anthony Perl and Richard Gilbert, there are inherent losses in batteries for charging, holding the charge and discharging which are not present for what they call "Grid Controlled Electric Vehicles" i.e. trains. trolleys, lightrail powered by electricity directly from either overheard wires or a Third Rail.


Of course there is a large upfront capital investment for the electrification of Rail and its cousins. But the benefits in the long run should be enormous for the Green Transition from fossil fuels.

Costs don't matter in that at $20 or $220 a barrel, oil sands are still essentially a mining operation. You just can't ramp up high levels of production required by waving a magic wand and saying "the market will find a way".

True, at $20 a barrel almost no new production would come on-line and at $220 no stone would be left unturned. It still won't have a radical change on the scale of output from an "oil-mine" of tar sand. The infrastructure required is enormous.

You're right about the flow rate from the tar sands, they'll be digging that stuff up for decades to come. It's just damned hard to dig it out faster and faster.

Try not to get too hung up on EROI or EROEI. It is an important factor, but 74M barrels a day is a flow rate, plain and simple. If you can't maintain that flow, then you have drop in production.

True. I'm guessing the flow rate of the tar sands isn't that high? (I have no information regarding this, so I don't know.)

IIRC the world production from tar sands is around 2.5MB a day.

Useful, but in context, about three quarters of an hour of daily world consumption.

they just discovered 233 billion barrels of oil in Australia.

I think not. Kerogen is not oil.

Major shale oil deposit found in Australia

"Analysis presented in these reports indicates that the Stuart Range formation and the underlying Boorthanna and Pre-Permian formations are rich in oil and gas prone kerogen that may form the basis of a new liquids-rich shale play," Linc said in a statement...

Australia's bureau of resource economics estimates that imports of oil will increase by an average 2.1 percent per year in the decades to 2050.

And Australia estimates that their imports will increase every year between now and 2050 by 2.1 percent per year. Amazing! they have all that oil and still imports will increase every year. Something just don't add up here. ;-)

Ron P.

Sure, it's hydrocarbon that hasn't been cooked at high enough temperatures, but that doesn't mean that the process of refining kerogen into oil like they've been doing at the tar sands won't become cheaper and more economical as price rises.

"...cheaper and more economical as price rises."

Thanks for that ;-)

Yes, I know that the Australian "oil" isn't nearly as profitable as conventional oil, but there's no reason to believe that once price is high enough, more production won't be brought online that used to be unprofitable.

Given sufficient energy input and price support, there is virtually no limit to the volume of liquid hydrocarbons that we could synthesize from water and CO2. Given sufficient energy input . . .

For an alternative view of the global oil supply outlook, that explains current triple digit global crude oil prices, you can do a Google Search for: Export Capacity Index.

I can go along with you there. Increases in production from tight oil plays and the steady increase in tar sands production are both good examples of production ramping up when prices go high enough. But can we agree that when that happens, oil has become less cheap than it was before?

Well, what do you mean? Less cheap? The point of raising production is to reach an equilibrium price. If price goes high enough, production will increase, and the price will fall back down. The only way this won't happen is if production can't be ramped up, which is what peaking is. But there is no peaking with tar sands, as far as we know, so production can be ramped up over time, right? Are you talking about environmental costs?

And, yeah, sure, even if tar sand production increased, it couldn't make up for declination in other areas, but it's still one of the reasons why I think that we'll have really gradual depletion rates.

What do you mean by gradual ?
Let's do some envelope math here
Assume that a 'gradual' depletion rate is 1%. Applying it on the world conventional C+C of 75,000 kbopd over a 10 year period we get a net production of 67860 kbopd.
Now let's assume a more dramatic depletion rate of 3%. Using the same compound interest formula over a 10 year period we have net production of 55,540 bopd.
Using an even more dramatic depletion rate of 4% we get 50240 kbopd.

So for tar sands to make a difference at the end of a 10 year period the tar sands production will have to go from whatever it is today to
For scenario 1 (~3%) 67860 - 55,540 = 12320 kbopd or around 12.3 million bopd
For scenario 2 (~4%) 67860 - 50240 = 17620 kbopd or 17.5 million bopd

Even if you call 2% as manageable the corresponding numbers are 5.8 mbopd and 11.1 mbopd.

You think that is possible ? To keep things in perspective, Saudi Arabia produces 10 million bopd today. That's the magic of compounding.

According to this website http://www.energy.alberta.ca/oilsands/791.asp the production is expected to double from the current to 3.7mbopd in 2021. Even if we assume that the whole world will go into a decline rate of 3-4% only after 20 years time. The production still won't reach the levels needed to keep the things manageable.

Please check my math.

There is no certainty, with demand destruction, that tar sands would even be further developed. Most of the projects were shelved or delayed during the last oil shock. Even if you could manage a 5% annual gain, you couldn't stop a 5% annual decline in world supply for over 40 years.

I wonder about what coal might do? World consumption of coal continued to rise throughout the last oil shock. At a 1% annual coal increase, the world energy output would stabilize within 20 years with a return to current levels by around 2040 (assumes 5% annual oil decline starts now). This also assumes stable natural gas production through a 30 year recession.

That would mean more electrically driven freight and global trade being replaced by continental trade, but it might be a possibility if resource wars are avoided. That would not solve the emissions problem though.

I wonder about what coal might do?

The problem isn't an 'energy crisis', it's 'liquid fuels crisis'. As Robert Hirsch put it succinctly we have $50-100 trillion worth of gas guzzling equipment sitting out there and it will be rendered useless without oil. Generating electricity is actually pretty easy, we simply don't know what to do with it or how to store it.

All the coal in the world isn't going to help, maybe it will help KSA keep the lights on since they burn so much oil to generate electricity but it won't help anyone else. Electrification would take decades and trillions of dollars in investment, same with any fuel conversion technology. I am sure there will be attempts made but they will be done in an era of slowing growth where the government and people are short squeezed for any new investments.

WI - Thanks for the clarification. Looking forward then, at some point in the next few years, the situation would look something like this:

Rapidly declining transport capability leads to a steadily worsening global economy, probably triggering a more severe financial systems collapse. In the absence of wages and supply methods, food delivery becomes a major concern, especially if liquid fuels and finances are not available for planting and harvesting. This could lead in turn to a general collapse of law and order as starving unemployed masses take desparate action to survive. At least some states would possibly look to redirect civil unrest toward a scapegoat nation, or a resident ethnic minority, leading to a higher level of global warfare.

All this plays out for decades until/if a new stabilized energy sector can be established while AGW and other pollution factors damage the biosphere.

Worst case scenario being an amplified and extended replay of the Great Depression, World War II, and the Spanish Flu Epidemic set during a climatic extinction level event of unknown severity.

Is that about right?

Nope, I'm not referring to environmental costs. I think the differing assumption between us is in your assertion that price will fall back down. Conventionally it was always believed that commodity prices would fall in real terms, implicitly as new technology, approaches, human ingenuity etc. uncovered new resources. This appears to be the economic thought you draw from. Over the last 10 years however, oil has defied this conventional wisdom. Prices are escalating radically, total production has barely budged, and no great substitutes appear to be on the horizon, although many mediocre substitutes have stepped up, like tar sands.

Broadly speaking, I believe the conventional faith in falling commodity prices is being revealed to be a product of a peculiar era where humanity rode the rapidly increasing slope of the logistic curve. With production quantities increasing so rapidly, unit prices could always fall. But we're not on the steep part any more, and conventional economics has yet to catch up.

Well, I wasn't talking about costs of energy as a whole, but the price of oil from the tar sands, which can fall back down if production is ramped up, though I know it's difficult to. What do you mean by "mediocre substitutes?" True, tar sands are mediocre for our long-term energy needs, but there are many other alternatives like solar, wind, hydroelectric, nuclear fusion, algae biofuel, etc. I see no reason to fret about disappearing fuel. I mean, this has happened before: first, we fretted about forests disappearing. That never happened because we began to use coal and peat. Next, we thought coal and peat would run out. That never happened because we began to use whale oil. Then, after we thought whale oil was becoming depleted, we started pumping conventional oil. Now, we have unconventional oil, and next, we'll have clean nuclear and other clean energy sources. I'm sorry, but industrial civilization is a permanent institution. And it's really been around since the Tang Chinese, not just since the mid 18th century.

Now, we have unconventional oil, and next, we'll have clean nuclear and other clean energy sources.

Your thesis fell apart at the end there.

As you've just recently learned, the uncoventional Kerogen is not economic and the tar sands is really hard to scale up.

And nuclear power? I'm sure we'll continue using nuclear power but we've been witnessing a contraction of nuclear power in Europe and Japan.

We've been stuck at the current mix of energies for some 60+ years now. We are moving to renewables (as we should be) but it is costly. I'm not worried about running out of energy . . . there is plenty of energy out there for us to harness. The problem is the cost going up has crippled our economies. We humans have innovated great things and will continue to do so. But one wonders how many big new breakthroughs we will see going forward. There are now more scientists & engineers alive today than have existed in all history but the pace of big break-throughs has slowed. We are bumping up against the laws of physics and thermodynamics.

I never really thought that unconventionals could ever make an impact in the long-term, I was just saying that they could flatten depletion curves so that we could develop alternatives in order to elude an economic implosion. But even if we had an economic collapse, industrial civilization wouldn't come to an end. EROI and wether a civilization is complex enough to sustain such a source with high inputs is irrelevant, because EROI is really a sophomoric measure. It doesn't take into account the value of inputs and outputs relative to the economy. Subjective valuations are everything.

Part of the reason that some tar sands operations might seem kinda cheap is that a lot of the imputs still rely on cheap energy from high EROI sources elsewhere (eg, the middle east).


Somebody please help me here. EROEI is a concept involving recovery of energy sources as measured by use of energy in the process. EROI involves money or capital of some sort.

I believe that if EROI is high or low only impacts wealth. If EROEI is 1 or less there is no longer any reason to use the source being exploited. Even if you have an infinite energy source, it just makes no sense (from an energy useage viewpoint) to spend more than you can recover in energy.

Of course, some oil/gas may still be extracted at EROEI of 1 or less, for use in manufacturing of plastics, fertilizers, pharmacuticals, and so forth. Or even as a way of transporting or storing energy that would otherwise be unused. But for its energy value, no way.

Or am I wrong about that?


You are quite right that EROEI is of limited usefulness in evaluating a process. All energy is not fungible. If a process converts low-value energy to high-value energy, then even if the EROEI < 1 it might be worth doing if the value added is high enough. Examples are coal-to-liquid or gas-to-liquid.

It is also highly misleading because it exaggerates the value of conventional oil production. An EROEI of 100 such as you might find in a 1960s Arabian oil well is meaningless. It is only important when it gets into the range of 1:1. Then it tells you whether you are gaining or losing energy on a process.

EROI doesn't fundamentally involve money. It's synonymous with EROEI. Check wikipedia.

what about scaling up nuclear energy? I know it is dangerous and toxic but so is Peak Oil....you take away peoples energy and you will have a panic or collapse...you could scale up faster if you shorten certain restrictions etc...I am not advocating this at all but I see it as a possible scenario to peak oil...smaller nuclear plants and much more of them I am afraid....it seems like America will choose this to living smaller.

You can't fill your conventional car with nuclear fuel rod nor with electricity from a nuclear power plant. (However, you can use nuclear power to power EVs.)

I think an increase in nuclear will inevitably happen. It is already happening in China. I just hope it is done with a lot of careful planning and uses the lessons we have learned from Three Mile Island, Chernobyl, and Fukushima.

Maybe they will *finally* launch the old fifties vehicles into full production...



China is building nuclear, but many more coal-fired power plants, along with India.


You would need a lot, an absurd amount, of nuclear reactors to replace all the energy fossil fuels currently supply. I think its been calculated on this or a related site. Of course uranium ore is strictly finite too, and alternative fuels have never quite worked out. So America would have to live smaller if it tried to switch mostly to nuclear. And nuclear energy can't be scaled up as rapidly as fossil fuels can. They wouldn't allow the kind of rapid economic growth which America, and the world, has become thoroughly addicted to. But it looks like even fossil fuels won't allow that for too much longer anyhow.

David Goodstein, physicist at CalTech and a former long time vice-provost there, ran some numbers in his first peak oil book, Out of Gas: The End of the Age of Oil. According to him, the largest practical nuclear plant produces 1 Gigawatt of power. To replace the 10 Terawatts of fossil fuels we use would require 10,000 new Gigawatt plants: one a day for 30 years.

Is the 10 Terawatts a global number or USA ? - just curious...

Either way that calculation and the resultant total number / rate required is quite staggering.

That's global.

There are about 400 nuclear power plants in the world, 100 in the U.S.

The thermal power output of coal+gas+oil+nuclear worldwide is near 17 TW and rising. This is based on EIA's combined total use of all fossil fuels, giving a thermal output of 15 TW, and me roughing in a figure for 12.5% for nuclear on top of that. Wood burning, gas flaring, and food comes in on top of that.

Funny you should mention that. Just heard this on my NPR news yesterday. http://wpln.org/?p=45678

The Tennessee Valley Authority is taking steps toward building the country’s first small modular nuclear reactor in Oak Ridge. It would produce about a sixth the power of a typical large reactor.

Much more here:



But one wonders how many big new breakthroughs we will see going forward. There are now more scientists & engineers alive today than have existed in all history but the pace of big break-throughs has slowed. We are bumping up against the laws of physics and thermodynamics.

So far they have made up for that by making up things.

That is the way propaganda works ("break through").

They also have a plan to deal with the graphs of wrath, once they eventually show up:

A new report by the U.S. Army War College talks about the possibility of Pentagon resources and troops being used should the economic crisis lead to civil unrest, such as protests against businesses and government or runs on beleaguered banks.

“Widespread civil violence inside the United States would force the defense establishment to reorient priorities in extremis to defend basic domestic order and human security,” said the War College report.

The study says economic collapse, terrorism and loss of legal order are among possible domestic shocks that might require military action within the U.S.

(Will The Military Become The Police - 3). The fairy tales only work for so long you know.

That final phase won't be near as pretty as the propaganda phase of play pretend.

That is because they will no longer be dealing with the valentines, they will be dealing with the pitchforks.


This is an interesting blog by a Frenchman living in Greece. Photoshopping of people the police have beaten, protests everywhere and lots of guys in riot gear. Seems that their minimum wage is on the chopping block, as is many other things. The Greek people are getting raped by the EU, there's just no other way to say it.

Raped by the EU? Or raped by the Greek middle classes who "avoid" paying taxes?

Well, robbed by the Greek rich, upper-middle, and the politicians...and now sold as a sex slave by the EU.

In the end it won't be the police state against the noble angry masses. It will be factions of what's left of the present power structure against other factions vying for power.

Think of the warlords of the failed state to our south. As the economy collapses and the climate deteriorates many will be stranded in the US southwest. There will be plenty of young men with no prospects - fertile ground for those warlords to spread their control northward. Maybe one of them will gain enough power to challenge a weakened government, maybe it will be someone from a different power base.

The existing state will be picked apart from the edges and/or fracture internally. The police state you fear is too complex and expensive to survive the simple lack of availability of the resources that hold it together.

I'm sorry, but industrial civilization is a permanent institution. And it's really been around since the Tang Chinese, not just since the mid 18th century.

Exactly, and I think that is where we can respectfully agree to disagree. All of your examples of economic substitution are valid, but I don't believe in infinite substitution any more than I believe in the infinitude of any one resource. IMO, we are at a level and scale of demand globally that when we alight on a new resource to substitute for a depleting one, we encounter limits to the new resource quickly.

Your example of Tang China is interesting, because it is widely believed that in that and other civilizations there was essentially no economic growth until the 18th century. If you think the pre-18th century period is a valid regime of industrialization, maybe you and I agree on more than we think. :)

Part of the issue here is the difference in scope of analysis:

I'm sorry, but industrial civilization is a permanent institution.

I'm even sorrier, but unfortunately the old adage of past performance being no guarantee of future results can be applied in spades to that particular statement.

The Planet's been here about 4.5 billion years. To be clear, modern humans haven't been around all that long, maybe 200,000 years? Civilizations even less so, if you stretch the definition maybe 10,000 years. And industrialized civilization has so far been, but a blink of an eye. I wouldn't be crowing about it being a permanent institution just yet.


Removed: Snarky Dilithium Crystal reference...

Do some of you people just vehemently attack anyone coming on this academic publication that isn't part of the echo chamber? Why do you think that I don't acknowledge peak oil? I do, I just don't believe that some grandiose implosion that spans the entire globe is coming. Unconventional sources can smooth over depletion.

Sigh! No. Not really. I think that it would be fair to say that most people here have invested a great amount of time and energy (no pun intended) to understanding our predicament. It would be nice if those who disagree with the views presented on this site were to back up their statements with a little more evidence.

Our 'Beliefs' matter not one whit. Just the facts ma'am, just the facts!
Those facts, BTW, are pointing evermore strongly towards a grand implosion that spans the entire globe.
Both ecologically and economically.


Well said.

... there's no reason to believe that once price is high enough more production won't be brought online that used to be unprofitable."

But there is reason (and evidence) that economies can't afford that price; an upper limit at which economies can no longer support the costs of production (demand destruction).

No matter how you cut it Minneapolisman (say hi to the twin cities for me) if we are discussing tar sands in Canada or kerogen in Australia, its in the framework of endgame, peak oil. Either high prices will kill the economy or a reduction in flow rate will close the books on the oil age. These non-conventional sources are only coming into play because of price point, and that's a reflection of conventional production leveling off. Once conventional descends it won't matter how hard we work the gooey stuff, it isn't going keep flow rates high enough to support BAU for very long.

Well said - these are not signs that this can continue, they are signs of desperation.

Do some of you people just vehemently attack anyone coming on this academic publication that isn't part of the echo chamber? Why do you think that I don't acknowledge peak oil? I do, I just don't believe that some grandiose implosion that spans the entire globe is coming. Unconventional sources can smooth over depletion.

No animosity or judgement intended, really, but when you state: "I'm sorry, but industrial civilization is a permanent institution", it indicates that you are not a student of history, or perhaps are still in the denial stage of your Peak awareness.

All civilizations, industrial most of all, will fall. It's the (cyclical) nature of the beast.

The coming of another ice age will guarantee the fall of our civilisation - ironically, global warming will ensure that an ice age comes on much slower, when it does come.

I don't agree that that global warming will necessarily result in a delay of the return to Ice Age conditions. The Earth has been in a cycle of Ice Ages for about 3 million years. These past 10,000 years of so have been a warm period, called an Interglacial. The last Interglacial (the Eemian) ended roughly 120,000 years ago and that period was warmer than the present one. Perhaps that warming was a prerequisite for beginning the buildup of the ice sheets, which then grew to cover much of eastern Canada and parts of the present US...

E. Swanson

I think it is highly unlikely there will be another ice age until CO2 goes below 300ppm. I can imagine the speed of the transition might be faster or slower, depending upon how the dynamics works out. If the system runs like an oscillator, then the momemntum of cooling off after the anthropogenic heat wave might make it faster. OTOH, that might not be the way the system works.

Well, a massive warming will increase the amount of evaporation of water from the oceans, so this would act as a negative feedback to warming..

Water vapor is a greenhouse gas >> positive feedback.

Oh well.

Negative feedback if it blocks out sunlight in cloud form.

I'm familiar with the basics of the ice ages. I suppose if thermal runaway results in massive amounts of evaporation and cloudiness, then we'll see another ice age, but lack of sunlight and extreme storms would be killers here. Anyway, at least the area around the equator will remain liveable. :-)

I admit that there's a level of pessimism here, which didn't come without years of crunching these issues with open minds by many. Once one begins to fathom the scale of our collective predicaments and how they are inter-related, one may realize that the collective assessment being forwarded here is an honest one. While we rarely agree on how this all will play out, or what our responses should be, you'll find wide acceptance that more of the same serves only to dig a deeper hole, which a lack of bias, a bit of clarity and courage will reveal is quite deep. Humanity has drastically overshot its resource base and damaged its biospere. Finding and burning more fossil fuels only continues that process.

Al Gore has a new book "The Future" where he writes about the global collective and states that we are in a revolution that is changing who we are.

There is no prior period of change that remotely resembles what humanity is about to experience. We have gone through ...change before, but none as powerful or as pregnant with the fraternal twins - peril and opportunity - as the ones that are beginning to unfold.

He was interviewed in the current (Feb 28) issue of Rolling Stone Magazine and spoke about climate change, resource depletion, factory farms, and political decisions and programs that are decided by lobbyists. The story isn't yet on the web site.
Here's a link to a review in The Telegraph:

"Do some of you people just vehemently attack anyone coming on this academic publication that isn't part of the echo chamber?"

No, it's just that they have been debating and thinking about these things for years now here and have viewed the issue from every perspective and have come to a very definite conclusion on the matter. There are several articles and discussions of the possibilities of the oil sands in the archives. The quick summary of what they say is that they aren't promising as a long term solution.

The search terms you want to use are "Shark Fin" and decline rates. EROEI is also useful to find discussions on the oil sands.

It might seem like an attack, but it's not. It's just repetition of a conclusion hammered out already. If you think you're under attack, you should read the raging debates (always civil mind you, the mods are great here!) that have come to the conclusions you're hearing here.

From what you've written, I see nothing new that hasn't been discussed before.

I hope that this comment has been helpful to you in understanding the responses you've been getting and the tone of those responses. While there is an echo chamber-like quality to the discussion here (one of the reasons I view it somewhat skeptically), the discussions that have formed the choir have been very reasonable, wide-open, fact based, science based and convincing. As a result, those who remain here and discuss the issues, are very much a choir singing about the truth of the energy situation. It's simply not pretty or avoidable.

There is also a premium placed here on doing the numbers, and having an understanding of the magnitude the thing. Saying "I think tar sands will smooth out PO" may or may not be true, but that's a qualitative statement, and people around here want to see numbers. Nobody's picking on you personally, you just gotta do your homework before stating opinions that can look like wishful thinking.

Nothing to do with an "echo chamber", and frankly, I think that was a cheap shot.

The problem with large scale oil sands production in Canada is 1) removal of overburden or 2) steam-assisted gravity extraction in large quantities, which requires a lot of energy and water but the latest method provides it's own energy from the extracted oil.

FYI, Chinese companies are trying to break into the Canadian oil sands and meeting with some success : http://www2.macleans.ca/2012/08/08/our-chinese-oil-sands/

The problem with large scale oil sands production in Canada is 0) It's yet another source of CO2 emissions (Don't forget to include when it's burned) that is a major problem right now.

No, I meant a problem actually preventing large scale oil production from oil sands. Not sure if that addresses your concern.

Your ideas are being attacked, not you personally. Yes, every ideas or assertions are up for grabs on this site. If people don't agree with your ideas then they debate them. You are getting a lot of feedback today because you have chosen to issue an unusually large number of posts.

There are other people on this site who have very patiently put forth their ideas over a long period of time. They are tested rigorously, but if they are found to be well reasoned and supported by factual data they tend to eventually care the day. You have the same opportunity.

Do some of you people just vehemently attack anyone coming on this academic publication that isn't part of the echo chamber?

Who are these "some"? Because in any large enough group a small number can exhibit behavior different than the others.

I just don't believe that some grandiose implosion that spans the entire globe is coming.

No implosion, but the world is being effected by the higher oil prices. The 'rationing by price' is in effect, its just the poor taking it in the shorts. And odds are these poor are invisible to most TODers.

Unconventional sources can smooth over depletion.

Really? Then explain why the rationing by price is going on?

I just don't believe that some grandiose implosion that spans the entire globe is coming

Many people on this forum don't believe that either, there are pretty vehement arguments about how things are going to play out. If you followed the arguments here you wouldn't make that accusation.

I always find it interesting that people seem so disconnected from the severity of the situation a large portion of the world population lives in.

Starvation, malnutrition and disease are going rampant in large parts.

Here in Denmark almost everybody think everything is honky-dory - because nobody has experienced death and starvation. They utterly dont care about the people that are dying and dont see it as a problem that could expand - even though it has been doing exactly that. Those that are aware see it as a problem the poor people has put on themselves by getting too many children. They just forget that Denmark would be a hopeless place without external resources - and it is extremely overpopulated - we are just in one of the "power groups" of countries that can extort and wage war under false pretences upon poor countries to secure what we want.

Im sure that if US or Denmark experiences just a 1/10th of the problems facing the poor countries the panic reaction would be tremendous.

I think your vision is spot on. Here in the US portion of North America, we've not experienced serious social disruption since our War Between the States, as we Southerners call it. Our Northern States did not suffer the destruction visited on the South, memories of which still reverberate 150 years later. Our wars have been waged in other peoples' back yards and we've mostly been the winners in those situations. Our massive spending on our military and the industrial base which supports it have made us the King of the Hill, as it were. But, without fossil fuels, especially oil, that military might evaporates and we are back to fighting in the streets. If it comes to that, the shock to the minds of the citizens will be overwhelming, IMHO...

E. Swanson

That would be the "War of Northern Aggression" ;-/

But, without fossil fuels, especially oil, that military might evaporates and we are back to fighting in the streets. If it comes to that, the shock to the minds of the citizens will be overwhelming, IMHO...


Something already seems to be bothering poor old citizen Rush Limbaugh: "I am ‘ashamed of my country!", he said... just wait till the US is no longer able to afford keeping a military presence all over the globe.
I'm betting he'll have quite the conniption fit!

But please do take credit for Denmark's bold intentions in getting itself off fossil fuels...

50% of electric from wind by 2020 - off fossil fuels by 2050.

You are an example to the world! Go Denmark!


getting itself off fossil fuels...

The height of hypocrisy. "Example to the rest of the world" what BS.
On the back of peddling oil to the rest of the world. Good ole Danes, saints they are.

the process of refining kerogen into oil like they've been doing at the tar sands

Tar sands consists of a viscous bitumen, quite different from the kerogen that sometimes gets touted in the U.S. Green River shale, or the recent find in Australia. They haven't tried to make oil from kerogen since the 1980s.

They haven't tried to make oil from kerogen since the 1980s.

At least not commercially in the US. Shell is still playing around with their in situ process in Colorado, and has been buying water rights in that part of the country in case it eventually works out. Their announced next stage of testing will involve drilling deeply enough to be below groundwater, so that they don't need the expensive freeze-wall part of the system. China, Estonia, and Brazil all have ongoing small commercial oil production from kerogen, totaling about 6.5 million barrels per year. I believe all three are using conventional retort technology -- it works reliably if you've got enough water and don't mind the environmental issues.

I'm not an advocate -- quite the opposite. It's crappy stuff and you have to be pretty desperate to try to use it.

any idea how much a commercially viable operation would cost per barrel? I am guessing a lot more than current prices.

Myself, I don't think there will ever be meaningful commercial development of the Green River kerogen deposits. My reasoning goes like this.

Mining the stuff as a solid fuel, like much of Estonia's use, is a waste of time if there's still any sort of coal around. Even lignite is a lot better. Montana and Illinois are sitting on enormous sub-bituminous and lignite reserves.

Converting the stuff to liquid fuels requires large quantities of other inputs: water and waste-disposal space if you're retorting, electricity for Shell's in situ process, and so on. If you draw circles around the major demand centers in the US with radius equal to the distance to the Green River basin, you will almost certainly find something else in that circle that can be converted to liquid fuels with other input demands that are no worse, and quite possibly better, than kerogen -- natural gas to liquids, coal to liquids, biomass to liquids, and so on. I think that the relevant price for comparison isn't the price of oil, it's the price of converting those other things to liquid fuels.

If I were Shell, I wouldn't put a dime into kerogen research. My money would be going into catalytic conversion of methane and syngas into longer-chain hydrocarbons, and more efficient production of methane and syngas (or directly to useful-length hydrocarbon chains) from anything I could get my hands on cheaply. I'm not a chemist, but there seems to be a lot of exciting things going on with nano-scale particles, ionic liquids, etc.

I'll just chime in to say I agree with you.

Shell and Sasol are now talking about gas-to-liquids in Louisiana, natural gas is fairly cheap right now, and even coal-to-liquids is almost certainly easier than kerogen-to-liquids. From what I understand, kerogenic 'shale' is not even as good a fuel as cow manure.

As for unconventional oil smoothing out the decline, it already is - tar sands and biofuels are already widely used and are a major part of what's keeping BAU going. Biofuels in the US are often said to be iffy in terms of energy return, but if you look at them as an inefficient way of turning natural gas to oil (well, alcohol, which is mixed with oil), then it makes a lot more sense.

Biofuels in the US are often said to be iffy in terms of energy return...

The interior Mountain West in the US has 10-20 million acres of beetle-killed timber (western Canada, even worse). It's all going to burn sooner or later, most likely in catastrophic wildfires. The federal governments say that it costs too much to mitigate. Given a sufficiently efficient catalyst-driven conversion, in some sort of self-contained portable unit, it would be enormously better to convert as much of that to liquid fuels, or liquid-fuel precursors, as possible.

Some (most?) of it will rot before it burns. The energy content of my pine wood killed by bark beetles 10 years ago and that I did not preserve is degrading significantly.

it works reliably if you've got enough water

My gut feeling says that it's a lot bigger problem than one thinks. Alberta has the mighty Athabasca and maybe Brazil has the Amazon but other countries aren't so lucky. China especially isn't.

The Middle East, China, and parts of the U.S. In the U.S the Ogallala aquifer was heavily exploited for irrigation water during the 1940's and 1950's and used to this day. Of course, all large cities also have large fresh water use for watering the garden, bathing and for drinking water.


What about burning the kerogen to produce electricity? How would kerogen compare to bitumous coal for example?

From Wiki:

Oil shale serves as the main fuel for power generation only in Estonia, where the oil-shale-fired Narva Power Plants accounted for 95% of country's electrical generation in 2005.

Estonia has very high quality shale. That it it contains a lot of kerogen. The amount of kerogen in shale, or more correctly, in marl or marlstone, varies greatly from place to place. In most places it is too poor quality to use instead of coal. But the point is one cannot talk about shale, or marl, as if it were all the same. The amount of kerogen it contains varies greatly from place to place.

Also the stuff leaves far more residue than coal. The residue, or tailings, are actually greater in volume than the original marlstone before extracting the kerogen, or that is the case when using heat to extract the oil. I suppose that would be the case for burning it also.

Ron P.

Sorry. Should have said 'low quality hydrocarbons.'

but that doesn't mean that the process of refining kerogen into oil like they've been doing at the tar sands

You should probably read a bit more so you don't post such completely wrong statements with such confidence. Tar sands and kerogen are very different. If Kerogen were useful then there would be no oil problem due to Green River shale.

You should probably read a bit more so you don't post such completely wrong statements with such confidence.

So much truth in one sentence it had me completely cracking up. Good one Speculawyer.

With kerogen, they are always talking about it being economical if the price of oil goes a little bit higher. But that doesn't make it cheaper and I do not understand where you are coming from on that statement. Profitable oil from kerogen was touted as just around the corner in Colorado, where I live, forty years ago.

Brent oil price set a new January high at $112.96 which $2.26 higher than the previous record set in 2012. Cheap oil disappeared 13 years ago.

EIA Brent

But what if it's all just a short-term bubble? FACT SHEET

This is a one page fact sheet with links to the most comprehensive study of shale oil and gas ever published.

DRILL, BABY, DRILL Can Unconventional Fuels Usher in A New Era of Energy Abundance
By David Hughes Post Carbon Institute Fed 2013
Executive Summary (Three and ½ Pages)

Tight oil plays are characterized by high decline rates, and it is estimated that more than 6,000 wells (at a cost of $35 billion annually) are required to maintain production, of which 1,542 wells annually (at a cost of $14 billion) are needed in the Eagle Ford and Bakken plays alone to offset declines. As some shale wells produce substantial amounts of both gas and liquids, taken together shale gas and tight oil require about 8,600 wells per year at a cost of over $48 billion to offset declines. Tight oil production is projected to grow substantially from current levels to a peak in 2017 at 2.3 million barrels per day. At that point, all drilling locations will have been used in the two largest plays (Bakken and Eagle Ford) and production will collapse back to 2012 levels by 2019, and to 0.7 million barrels per day by 2025. In short, tight oil production from these plays will be a bubble of about ten years’ duration.

DRILL, BABY, DRILL Full Pdf (166 pages)

Be sure and read the executive summary if you do not have time to read the entire report. It is a real eye opener.

Ron P.

Thanks for linking Ron. The Shale revolution will prove to be a bust, a fantasy concocted by a delusional and failing civilization. It will make a few people rich but it will not stop the economic collapse that is waiting in the wings to end industrial civilization.

Goldman Sachs is predicting $150 oil for this summer. I do believe economic sparks are getting ready to fly. I believe by fall the industrialized economies will be ripe for a Lehman type moment. The cornucopians will be in for quite a shock...

I found these numbers interesting:

The very high decline rates of shale gas wells require continuous inputs of capital—estimated at $42 billion per year to drill more than 7,000 wells—in order to maintain production. In comparison, the value of shale gas produced in 2012 was just $32.5 billion.

If we take Henry Hub to be the proxy for the unit price of natural gas (~$2.75/mmBtu in 2012) it would imply break-even plus return at around $4/mmBtu, which is the ceiling price for nat gas under current market conditions. Break-even at this level is driven, IMO, by the ability to sell petroleum liquids associated with shale plays -- the break-even for a pure nat gas shale well is in the $6-7/mmBtu range, I'm guessing.

Enjoy the low prices of NG. They certainly can't last.

A $10/mcf price is still only ~$60/barrel of oil equivalent. The product is dirt cheap now. Works just fine in vehicles too: http://www.cngprices.com/

That "on the cusp of" statement can be more realistically explained as a simple spelling error... Just substitute "Devolution" for "Revolution". I'm pretty sure that any production bubbles will be as long lasting as the "Bubble Stuff" we used as kids.

ROCKMAN missed it or decided to pass up the opportunity, but PCI decide to fall on the side of new technology not price, as the catalyst for large scale, horizontal, multistage fracture wells. I'm going to go with price because as far as I can see it's not actually new tech. No doubt new tech has increased efficiency etc. which may be the point.

ALERT: Most bizarre statement of the day IMHO: “Jewell is now at the gulf between what is and what could be. The Interior Department is responsible for oil and natural gas drilling off the U.S. coast – which is to say, the agency is wholly responsible for the complete absence of new drilling off the U.S. coast.”

Current activity in the offshore waters in the GOM:

“For another week, there are no changes to the US Gulf of Mexico drilling rig supply and contracted count. With 76 out of 111 units under contract, the regional fleet utilization rate stands at 68.5 percent.”

So 76 rigs operating in the GOM constitutes a “complete absence”? Truly bizarro.

And: "The Gulf of Mexico deepwater rig count should surpass pre-moratorium levels by the end of 2012 and reach 45 to 50 rigs by 2014, according to Barclays Capital's September 2012 drilling permit report."

I think this article deserves some kind of award for worst Cornucopian piece of Crap of the year (so far at least, we have quite a ways to go and it may yet be a tough competition).

As Robert Rapier noted, the author misspelled Hubbert's name. Also, he characterized the kerogen deposits in Colorado as "Reserves."

wt - Dang...I think you beat me.

What's really scary is that the author is supposed to be well versed in the energy problem. Reading his short bio in the sidebar of the article, we find:

I am the founder and CEO of the Institute for Energy Research, a 501(c) 3 educational foundation with offices in Houston and in Washington, D.C. I am also adjunct scholar of the Cato Institute and of the Competitive Enterprise Institute; visiting fellow of the Institute of Economic Affairs in London; and honorary senior research fellow at the Center for Energy Economics at the University of Texas at Austin. I hold a BA and MA in economics and a PhD in political economy...

I am author of seven books on energy history and policy etc...

With all his supposed expertise, it's rather amazing he does such a poor job. Heck, he can't even get a link to his blog (MasterResource.org) to work correctly. That site looks rather like the "NOT the Oil Drum" blog...

E. Swanson

At least he's not shy about touting his qualifications as a propagandist. No noted affiliation with the Heartland Institute? Gosh ;-/

Ghung, is a former Enron affiliation good enough?

About Robert L. Bradley Jr

In 1995, Bradley left Transwestern to become director of public policy analysis at Enron, a corporate staff position. A primary job was preparing speeches for chairman and CEO Ken Lay, but Bradley also was involved in legislative and regulatory issues. It was here that he became very involved in the internal debate over global warming strategy and renewable energy. His criticism of climate alarmism and Enron’s “political capitalism” is evidenced by memos posted on the website, www.politicalcapitalism.org.

Holy smokes. Enron guy who was involved in legislative and regulatory issues? Basically, using the George Costanza principle, we should do the exact opposite of what ever he suggests.

Yup, the tip-offs in there are words like adjunct scholar and honorary. He is in the main a big-government basher, arch-libertarian, and energy policy is simply his club of choice. As long as he has expertise in the former, he sees no need for expertise in the latter.

Having some libertarian tendencies myself, I'd like to place a disclaimer out here. I've referenced in past posts some of the Austro-libertarian positions. The Cato Institute, who this fine gentleman is associated with (/sarc), has moved more and more under the influence of the Koch Bros, and more towards the corporatarian. I haven't looked lately, but if this piece of work is starting to be representative, please don't associate all libertarians with this sort of drivel.

Exactly. The Koch brothers aren't libertarian just because they call themselves libertarians. Just like Kim Jong-un isn't democratic just because it is in the name of his country.

Note the presence of Chip Knappenberger.... a serial AGW denier on the payroll of the Heartland Inst (at least the last time I checked)...

A new term has emerged that fits the bill for these clowns "Conspiratorial Ideation"

Edit: turns out he has not been on the payroll of HI... my bad, but here is a sampling of his stuff


Cato and CEI, always a guarantee that the author is a clueless shill.

I always find the existence of the Cato institute ironic and a bit hypocritical. If their ideas are so great then why do they need a subsidized think-tank? Can't their ideas just survive without subsidies in the free-market?

Their alleged "free-market" ideas are merely subsidized propaganda pushed by entities that will financially benefit from their policy prescriptions.

Much of modern politics runs on stereotypes instead of reality. Go to the comments section of any story about oil and you'll find lots of people posting about how we would have lots of cheap oil if it wasn't for Obama and his tree-hugging hippie Democrats. Never mind that oil production has increased more during the past 4 years than at any time in the last 30 years. Stereotypes are hard to kill.

Some of them say the U.S. would have more oil if it wasn't for Obama. I tell them that Obama is doing drill, baby, drill.

Blue – I know many folks won’t believe me. But you know I’m always surrounded by oil patch folks. I can’t remember anyone saying anything negative about his approach to our industry. Loads of negative comments about taxes and social issues. But as far as our activity we consider him one of our biggest supporters in DC. His refusal (so far) to approve the Keystone permit has made him a hero to Gulf Coast operators.

But you got to give him credit for all the citizens who think he’s an enemy of the oil patch. His machine can spin better than any I’ve ever seen.

Did you see my note to doug: President Obama has issued 400 drilling permits in the GOM after the Macondo blow out. We got him in our back pocket. It's to the industry's advantage for J6P to not understand this. One reason you hear some right wing stooges criticize him so publicly. Helps to keep the illusion alive.

Obama can stall about approving that little segment of the Keystone XL pipeline that crosses the U.S.-Canadian border until the last moment when all the other parts are completed without slowing construction. He is playing politics pandering to his voting base in the meantime.

Blue - And to emphasize your point for folks who haven't caught this stat before: Even after the POTUS refused to approve the border crossing section of Keystone, oil exports from Canada to the US reached an all-time high during 2012. If I were a tin-foil hat wearing conspiracy nut I would propose that the most vocal anti-Keystone voices are paid shills from the oil patch trying to give the left some comfort to keep them distracted from focusing on relevant issues. I believe the military term is a diversionary attack.

He must mean there's an absence of new rigs....rigs built last month. LOL

Following his other articles for Fortune, he hates all green subsidies, and is a firm believer in Colorado shale oil.

Edit: Rock, my comment was an attempt, a gentle nudge, that your link of current drilling in the GOM didn't really address the authors assertion of an absence of "new" drilling off the US coast. I assume he meant that since the Macondo mishap, there has not been any new leases drilled. I have no idea.

Doug – It was very specific. “For another week, there are no changes to the US Gulf of Mexico drilling rig supply and contracted count. With 76 out of 111 units under contract”. Perhaps you didn’t understand that under contract means there are 76 wells being drilled in the GOM at this moment.

Here’s a bit of overkill as to just how ridiculous his statement is. Folks use to talk about how stealthy Prez Bush was. He can’t hold a candle to Prez Obama given how he’s been supporting offshore drilling as much as any POTUS ever has.


“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.”

“President Obama…We’ve opened millions of new acres for oil and gas exploration, and approved more than 400 drilling permits since we put in place new safety standards in the wake of the gulf oil spill,” THATS 400 NEW DRILLING PERMITS IN THE GOM

BP has five rigs drilling in the gulf, making it one of the most active drillers there. That is the same number BP operated before the accident, and it plans to have three more rigs drilling in the gulf by the end of the year.”

Got that: BP, the cause of the worst environmental disaster in US history, has gotten permits from the President Obama’s agency to have FIVE rigs drilling in the GOM today.

"Last December, the Obama administration held its first offshore auction since the BP spill, granting leases for more than 20 million acres of federal waters

"By the Obama administration’s accounting, 61 drilling permits for wells in more than 500 feet of water were granted in the 12 months ending Feb. 27, only six fewer than were permitted in the same period in 2009 and 2010 before the BP explosion."

So millions of acres leased and numerous drilling permits issued. Took me all of 45 seconds to find this link. If this indicates the man’s inability to gather readily available info he should do the world a favor and keep quiet. Given how easily it was to document his gross inaccuracy I’ll assume he was intentionally trying to mislead folks who never bother to question what they read on the net.

So millions of acres leased and numerous drilling permits issued. Took me all of 45 seconds to find this link. If this indicates the man’s inability to gather readily available info he should do the world a favor and keep quiet. Given how easily it was to document his gross inaccuracy I’ll assume he was intentionally trying to mislead folks who never bother to question what they read on the net.

Yeah, that is what he is doing. How else is he going to keep all rank & file hating Obama if they knew that oil production increased more during his administration than any other in the last 30 years?

The overkill from the NYT story really put it down, and I really hate to be going to bat for such a shill as this Bradley, but I took new to mean new, and didn't see how the ihs link specifically ruled that out. I guess I should know, and I do know, that there's no way in hello a rig is going to be drilling the same spot 5 yrs later....that it HAS to be new.

But I keep looking for ways, avenues, alleys, the writer will justify/weasel the veracity of his statement:
"which is to say, the agency is wholly responsible for the complete absence of new drilling off the U.S. coast." Absence is even italicized, further highlighting the assertion.

It's hard for me to admit the lies are so deliberate. Going to Bradley's sources, linked in the article, some of these even contradict him. The cited Congressional Research Service report shows fed offshore production increasing in 2008,2009, and 2010. Or that offshore leases in 2011 total over 7061, with only 1651 producing, a total of 27.5 million leased acres not producing. Which to me kills his argument just as much.


Your repeated and unrepentant use of facts and actual experience to make your point has ruined our love affair with the mainstream and even the not so mainstream media. This has raised our stress levels accordingly because now we can't just blindly believe everything we read. Thanks a bunch for ruining the lives of those who are blissfully ignorant.

Ideology is fine but even some ideologues try to be somewhat fact based from time to time. Sadly, we live in a world of just making crap up.

ts - "Thanks a bunch for ruining the lives of those who are blissfully ignorant." Welcome to the club...and you're welcome. LOL.

I wonder how many TODsters believe me when I mention that PO (the reserve replacement problem) has been slapping me upside the head from my first days in the oil patch in 1975. I’ve had many companies shot out from underneath me as a result of their inability to deal with PO. During the first 10 years of my career I probably spent as much time trying to fudge pubcos reserve number to hide that PO dynamic as I did generating prospects. I’ve been replaced on projects because I wouldn’t stretch the truth as far as management demanded. Maybe if the general population had their bubble burst 35 years ago we wouldn’t be in the situation we’re in now. That peanut farmer tried but he as laughed out of office by politician who needed an ignorant public’s support. An ignorant public that elected folks who promised them BAU forever. And that still hasn’t changed IMHO.

Illinois fracking rules could be strictest in the nation

Not even close. Read the proposed rules and they aren’t as strict as those in Texas and especially La. have been for many years. Such as: ““Those close to the negotiations expect the law to contain requirements that all contaminated water be stored in closed tanks or, in emergency situations, in lined pits.”

And I saw nothing about tightening up the regs on disposal activity. Improper/illegal disposal activities have been repeated shown as the major source of frac fluid contamination. Just last week I posted a story about an Illinois disposal company that has been dumping untreated frac fluids (shipped from PA) into the environment. Nothing wrong with trying to pull Illinois drilling/frac'ng regs up to those in Texas but that won’t stop the primary source of the contamination IMHO.

If fracking does make it out of the Marcellus "sweet spots" to the edge of the play where I live; I will be watching those waste haulers like a hawk. That is definitely the weak link. Thanks for your repetition of the message, eventually sinks in.

Also a general rock licking question if you have a minute or two. Does the limestone formation above a shale play influence a well in any meaningful way? My property is on the east side of a fold in the Onondaga Limestone formation. It may be purely coincidence but it seems like nobody is drilling on the east side of that fold and the only well I have seen only produced 667 mcf/day now down to 17 mcf/day. It may be a decent well but I am having trouble finding data that will let interpret whether a well is decent or not. The well drilled nearest me produced 4317 mcf/day initially and now produces 2 mcf/day. I have had a hard time gauging the well but I know it was not a "monster" well. Would you classify that as a decent well? I already owe you some bluebell ice cream for your previous Marcellus Shale advice, maybe you can add this to my tab? I have really appreciated all the facts over the years, as you know it can be hard to divine the noise from signal when it comes to fracking.

I agree - thanks ROCKMAN for continually harping on the waste disposal aspect of this issue. I've passed it on to numerous activists who seem to be well-intentioned but totally ignore this aspect (and don't recognize it as probably one of the easier and potentially most effective means of regulating the entire operation). That being said - around my area of NY - on the fringe of the Marcellus - one of the main arguments against these operations are the ridiculous increases in traffic associated with intensive fracking & production efforts. I think the waste hauling kind of gets lumped in with that general complaint - but still probably doesn't get the scrutiny it deserves.

In my opinion New York State really needs to watch this because of the infamous shadiness of the waste hauling "industry" in the NYC / NJ area. I wouldn't trust these guys as far as I could throw them (and their trucks). Here's a shining example:


In fairness - it was one of the drivers who tipped off the EPA about the illegal operation. It is heartening to know that not everyone out there is just "following orders" to make a buck but actually do have the larger world in mind...

Cat - The real shame is that monitoring disposal is easier than figuring out what’s going on at the bottom of a 10,000’ hole that less than 10’ in diameter. I haul liquids of my leases for disposal all the time. In La. I have to report the contents, the volume and what company is hauling it and what company is disposing it. Both those companies have to certify to the state that my report is correct. And then based upon my certified report the state monitors the disposal company to make sure their operations are sound. That doesn’t a disposal company can’t cheat. But remember they are injecting the liquid into deep disposal wells. If the state catches them cheating they’ll no longer be able to do business in La. Thus that infrastructure becomes worthless to them. They could try to sell it at a very depressed price but in addition to losing their license they would be facing a big fine. In reality it would probably bankrupt the company.

How tough is La? If rain water collects on my drill site sufficient to interfere with my operation I can’t just pump it off my location. I have to have it hauled to a certified disposal site. This is for rain water. Imagine their attitude about the nasties.

As far as "following orders" remember a lot of oil field hands live in the country and often around production. They and their children (like my 13 yo daughter) drink well water every day. Many of us take polluters very serious and can be rather proactive. You probably saw my post where I helped bust two "midnight haulers".Very satisfying.

Mark – Couldn’t find any history of significant production from those limestones. As far as that well coming on at around 4 mmcfpd that’s not bad but not outstanding either. More important: how long did it take to fall to 2 mcfpd? With that I could make a very rough guess for total production. Do you know how deep it was drilled?

Thanks so much Rock, it is interesting stuff even though I don't want it in my neck of the woods. I will see if I can find the well log for that well and find more specific information. I do know it is only dry gas in Randolph County West Virginia from the well logs I have read. There is only one new drilling permit in the county for 2012 and that was permitted in June. I have decided not to move even if I get a well on my mountain, the math says my water should be fine despite the "Gas Land" movie hype. They got the coal already and the gas wont last forever with the decline rates we are seeing. Plus my house is at 3800' and the valley right below me is 2800', I figure with lateral drilling they can get the same gas that is under me from below and save a 1000' feet of well casing...

I will see what information I can dig up and I really appreciate your help.

I am beginning to be a bit more optimistic about the UK's chance of maintaining a 'happy motoring', oil dependent economy in the early stages of the descent.

While it is undeniably true that the North Sea is depleting fast, successive governments have (either wittingly, or unwittingly) prepared the country to compete with the world for more expensive and more scarce oil.

Our economy has - grudgingly - adapted to a high forecourt petrol price. Currently my local garage wants £1.43 for a litre. However, of that £1.43 fully 85p is tax, coming from excise and VAT at 20%. The actual crude oil is only about 50p.

The total amount of the government's income which comes from fuel tax is roughly 4% - £23 bln.

So, in a situation where we rapidly end up having to bid for the 400k-600k barrels of oil we don't get from the North Sea we could easily afford to pay a wholesale price of $250 per barrel if there was a concomitant reduction in fuel tax. The outcome would be that only a small increase - if any - would be needed on the petrol station forecourt, we would be able to out bid other countries who's economies have not been naturally tuned to high oil prices. Yes, the government would need to rebalance the tax elsewhere but in general the UK would not sink in the face of a real term doubling of oil prices.

So we may all moan bitterly about high petrol prices, but the silver lining is we - and our economy - is now perfectly adapted to any future oil shocks. At least as far as the price of a litre of petrol goes. All the other detrimental effects will still be there I guess.

I wonder how the US would fare? How much of the price of a litre of US petrol is tax?

I really hope so Hac, but I'm less optimistic.

I think in the short(ish) term you may be right. After that, with falling revenue from the North Sea and falling income from demand destruction at the pumps the economy just hasn't got anything to build on.

We've been "prepared" with the recent reports for a future price hikes in gas and electricity. Even to the extent of saying we'll have a 10% drop in generating capacity by April. I think that all of this is slowly beginning to sink in with the public. Once we have any sort of supply issue I expect a lot of panic to set in.

I must be in one of my more doomier moods today.

I agree. Euan Mearns had a very handy chart a few years ago showing the widening trade deficit and the amount attributable to increasing oil/gas imports. (Euan, do you have it updated?)

I guess the point I am making is that if there was a quick ramp up to +$200 we could easily ride it out, whereas other countries would be proper stuffed.

As for generating the sparks, we are in serious trouble. The only thing for it is a dramatic conservation program, again enforced through tax and/or price setting. Look at a house, come up with a formula for how much electric that household needs taking into consideration babies/old people, number of rooms, is it insulated etc. Then set one price for the number of kWhs that the house needs then a second rate for anything above necessary but still quite nice - like a TV and a hairdryer etc, then a punitive third rate for what society would deem is a waste of electric, such as a TV in every kid's bedroom etc. And make it hurt too. All this to be achieved by smart meter. Also, take away credit meters. Every household to pay up front. Since I changed to a payment meter I reckon I have used a third less, just because I am always looking at how much money I have left on the meter.

Just put a 60A breaker in a locked box at the service entrance.

but that would only mean they would be limited on rate of consumption not actual sparks used. they could put off some activities until, say the washer finished, but the total amount used would still be too much.

I like the idea though!

Energy is kilowatt*hrs. The circuit breaker limits the kilowatts. So pick the max energy you want to allow over a time period and select the breaker to give that limit.

It doesnt need to be a fixed current that you limit the momentary consumption to.

You can get adjustable versions - so you can perform an interative procedure until the consumption is where you want it :-D

But im sure some1 will be pretty pissed - and possibly yourself too - because you have to switch it on again - possibly quite a number of times.

A 15 amp breaker, just enough to run a microwave, would use well over $100 a month if kept loaded all 720 hours of a month.

Here in France you select which tariff you want when you sign up. Currently I'm on a 6kVA base tariff with a 30 amp breaker.

Burgundy, that 30 Amps is at something like 220 or 240 Volts, correct?

Whereas, I think Turnbull Fl. example is at 120 Volt.

Right, Mine is 15A @ 120V.

30A at 240V could give you $500+ worth electricity per month.

Please show your calculations.

He's right (I think)

30A * 240V = 7200 Watts = 7.2kW

30days * 24 hours = 720 hours

7.2kW * 720 hours = 5184kW-hours

Say 12 cents/KWH

so 5184KWH * $0.12/KWH = $622.08

Of course that is drawing full 30Amps of current (which you should not do on a 30 amp breaker) 24 hours a day, every day of the month.

30A * 240V = 7.2KW
7.2KW * 24 Hours = 172.8KWH/day * 30 days = 5184 KWH
5184KWH * $0.10/KWH = $518.4

HAcland, remember that peak oil/energy isn't the only problem we face and cannot simply be looked at in isolation to see a solution. Financial collapse is ongoing and the Government is on its knees and the Bank of England is going to be printing money like there's no tomorrow (which will make oil more expensive BTW). The Government cannot afford to take such a massive hit on its revenues, as it is already failing to live within its means and relying on the BoE to buy its debt. High oil costs are unaffordable and trying to hide the costs somewhere else in the economy doesn't work.

Energy and commodity cost will continue to rise and take an increasing slice of the household income. Eventually this will mean less money available to sustain other areas of the economy. With inflation above 3% well into the future and stagnant/declining earnings growth, households are being slowly bled to death without even realising it. They feel the pain, but have trouble understanding where its actually coming from.

The real trouble comes with the realisation that the economic usefulness of a human being is declining and at some point will be less than it costs to keep said human being in the lifestyle its become accustomed to.

Good point, Burg... there is no free lunch, and any increase (even if made up by reducing fuel tax) costs you elsewhere - increased tax on something else? So, if petro rises in price, and is purchased by consumers, those consumers will have to 'afford' it by reducing expenditures elsewhere. TV's, toys and other consumer goods?

The difference between the US and the UK is that in the US it would be seen more directly. The impact would be the same!

I also wonder about your comment that "the economic usefullness of a human being... will be less than it costs to keep said human being in the lifestyle its become accustomed to." I fear that it will be more like, "less than it costs to keep said human alive."

I may not see the ultimate consequences, since I am what you call a septegenarian My children and grandchildren, though, will likely have to live through some rough times. What we, collectively, decide to do today will determine how many of our offspring survive, and whether we continue to have a technological society.

I have trouble maintaining sanguinity at times.


Regarding my comment that the economic usefullness of a human being is declining. Strangely enough I came across this article which seems to actually show this happening in the UK.

Don't be fooled: record high employment is not all it seems

I hate to spoil the party, but the continued rise in UK employment – reaching another record high in the latest quarter – is yet to translate into meaningful GDP growth. More of us are working, yes, but with less output overall. If that's the case, isn't there something seriously wrong with the labour market?

Employment is increasing but the activity of those newly employed isn't producing any measurable economic output. Seemingly the experts are referring to it as the "productivity puzzle". I'm beginning to think that the problem is that the cost base of the economy is too high. The cost of maintaining a human being is greater than the economic output the human can produce. Systemically, austerity is the response to crush the cost base down to a level where economic activity can again become positive.

The fact that the governments and central banks are doing everything in their power to stop deflation in the cost base (ie. keeping asset prices elevated), they're going to make it much harder on the individual. Private sector wages are the only area that is effectively being allowed to be squeezed as government spending is ring-fenced, asset prices are elevated by financial bubbles and commodity prices are beyond local control.

Rough times ahead and that's without factoring in the biggest problem of all, namely climate change. I believe that by 2020 financial collapse, peak energy and climate change will be ripping apart the global economy and peoples' standard of living with it.

Yeah, that's my feeling as well. I've looked at data on the water use side, a separate issue from climate change from AGW, and it doesn't look that good. Particularly in the Middle East and China.

What's the reason for the 10% drop in generating capacity? First I've heard of that.

The coal fired plants have been working extra hard lately. Some were due to be decommissioned in 2016 but are being shut down early. I think they've just given up the ghost.

There is an EU directive on reducing pollution from coal plants (sulphur, particulates - nothing to do with CO2). I believe it came out in 2001 (certainly a while ago).

Power companies could upgrade plant, or opt out. Quite a few in UK 'opted out'. For opt outs, all plant had to close by 2015 - but also they were given a 'permitted' restricted/max hours of operation till that point.

With coal being cheap, due to exports from US, power companies are burning up 'permitted hours' at a max rate and all opt outs will close early - some nearly 2 years early.

US shale gas displaces coal, causes UK coal plant early shut down?

Thanks Griff,

That makes sense. I was going off an interview on Radio 4, and should have followed up on it.

I'm still disappointed at how much of our electricity generation is from coal. I just hope the gas supplies will cope with the intended demand.

In addition to which most of the UK nuclear reactors are rapidly reaching end of life with no new ones being built to replace them, the oldest serving station closes today.

My own view is that the seed of this problem was planted back in the 1980's when the electricity market was privatised without putting a capacity payment mechanism in place in order to incentivise new investment in plant.

Who would have thought ten years ago that the UK would be importing GW's of wind energy from Ireland.


My own view is that the seed of this problem was planted back in the 1980's when the electricity market was privatised without putting a capacity payment mechanism in place in order to incentivise new investment in plant.

The reality is Civilian Fission power demonstrated it could not deliver what was promised by many.

The risks of failure had outweighed the value of what it produced.

Like the 'keep going into space' boosters have pimped making giant sun catchers in space and beaming back power a reason for 'keep going into space', the Civilian Fission power pimpers are waving about global warming as a reason for having more reactors.

Claim a Hydrogen economy is what's needed and the same pro-nukers will claim reactors solve the problems of a Hydrogen economy.


Whilst I can agree that nuclear has very particular financing needs, Britains present problem is that not enough generating plants of ANY technology were built, mainly because the British electricity market did not incentivise the necessary investment, either in generating plant or transmission infrastructure.

The result is that Britain must now find at least £200 billion in order to have any hope of keeping the lights on through 2020.

Even then the British government envisage that they still end up importing up to 20% of their electricity supply from neighbouring countries.

The solution of "libertarianism" would be you buy solar panels and make your own and not worry about what The State does.

Europe can criticize the USA's much too low fuel tax as much as they want . . . and I agree with that.

However, their unequal treatment of gasoline and diesel is pretty damn stupid as well. It just creates a silly artificial distortion in the market. I guess they were trying to reduce personal car consumer consumption without hurting industrial and agricultural diesel consumption. But all they did was create a fleet of consumer diesel cars. If anything, diesel should be taxed more due to the particulates and the fact that it has a greater energy per volume.

spec. This chart makes the USA look like we don't tax gas very much, but you must also include our state taxes, because the consumer pays both state and federal taxes. In California only about 25% of the tax is federal the other 75% is state. My taxes at the retail level are 19.8%, and this does not include taxes at the well head, or on refiners profits.

I was pointing out several years ago that european governments had more scope than US to reduce tax and mitigate the rate of rise in fuel prices. Also that the way the tax was structured, any rise is crude prices resulted in a lower percentage rise in petrol prices (since quite a bit is flat tax) - which means prices could be much more stable.

All of this is good, except...

If you were managing this properly, you would ensure that the 'extra' tax you were getting from fuel was going into funding energy efficiency programmes - cutting your usage and dependence on FF. A sizeable percentage of that £23bn should be spent that way, so that if you cut back on tax you could cut back on the energy efficiency programme support at the same time in a balanced measure.

However, we are spending ~£100ms on energy efficiency and energy research - most of the tax goes to other purposes. Thus if the rise spikes, the government doesn't have the flexibility to cut the tax.

So unfortunately mismanagement has meant that they will rely on rationing and high prices to curtail demand - the only users who can expect to see stabilising forces are government users.

Fuel taxes are themselves efficiency policies, and probably the best one in fact.
Just compare European cars average mpg to US ones.
If anything these taxes should be increased (the volume based part)
If there is one policy making sense it is :
- volume based taxes on fossile fuels
- decreasing taxes on work.

I am beginning to be a bit more optimistic about the UK's chance of maintaining a 'happy motoring', oil dependent economy in the early stages of the descent.

I do admire your optimism HAcland!

Though, personally I don't share it. Granted I'm looking at things from the other side of the pond...
With due credit to westexas and Jonathan Callahan here's a page from an ELM for Dummies presentation I made for a few friends and family members recently. (I just can't understand why most of them no longer return my calls...)




From time to time the EIA updates its "Overview" of oil producing nations. The new "Overview" of Saudi Arabia just came out a few days ago.

Saudi Arabia - Overview

Saudi Aramco's CEO Khalid al-Falih warned that rising domestic energy consumption could result in the loss of 3 million barrels per day (bbl/d) of crude oil exports by the end of the decade if no changes were made to current trends...

Decline estimates for Saudi Arabian oil fields vary widely. One industry source (Platts Oilgram, 2006) estimated that the declines rates for existing fields could range from 6 to 8 percent annually, meaning that the country needs about 700,000 bbl/d in additional capacity each year just to compensate for natural decline. The Ministry of Petroleum and Mineral Resources maintains that decline rates in Saudi Arabia are closer to 2 to 3 percent per year. Saudi Aramco has stated that it will conduct additional drilling at existing fields in order to help compensate for the natural declines from the mature fields, and the kingdom is budgeting $20-$30 billion over the next 5 years to offset decline rates and maintain current capacity levels.

Ron P.

Ouch. Twice.

Loss of 3 million nice sweet crude on the export market in 6.5 years? No changes to the trend? What, stop giving your young, poor population access to fuel. Yeah, that will work. Sure they will understand.

So one report reckons 7% decline, KSA reckons 3%. Let's take 5% then. That compares well with other regions so is probably about right. That is a shed load of new oil production each and every year - 500,000 barrels. Good luck with that.

No, I don't think you quite understand. Saudi acknowledges an 8% decline rate. But they claim that with massive infill drilling they have managed to get that decline rate down to close to 2%. (Meaning between 2 and 3%.) They made that claim in 2006.

Saudi Arabia’s Strategic Energy Initiative:

• Without “maintain potential” drilling to make up for production, Saudi oil fields would have a natural decline rate of a hypothetical 8%. As Saudi Aramco has an extensive drilling program with a budget running in the billions of dollars, this decline is mitigated to a number close to 2%.

I don't doubt that they got their decline rate down somewhat with infill drilling with horizontal wells near the top of the anticline. It's just that these are "superstraws" that only suck the oil out much faster, greatly increasing the depletion rate. But sooner or later this very high depletion rate will take its toll. That just may be happening right now.

Ron P.

Thanks for that. Crickee. 8%?

For how long has this infill drilling being going on? Surely it will also mean that once they can infill-drill no more, the drop will be greater than 8%?

Yes when the water hits those horizontal wells at the top, it's game over. Of course that won't happen all at once, in all fields. And Ghawar is actually one long field with several sections that has different grades of oil and different porosity and permeability in each section. (Getting worse as you move south.) So the water will not hit all at the same time. But I would bet that Ain Dar and Shedgum are both under severe stress right now.

Saudi is, in my opinion, on the verge of massive declines. I don't know when they will hit but I would guess sometime within the next few years, possibly thin year.

I don't know when they began their infill drilling program but I think it was around 2000 or somewhere close to that.

Ron P.

If Ghawar collapses in the next 10 years, it will have a huge impact on the world. That said, every time I crunch the numbers I see that Ghawar won't empty out for another 20 years or so, if we assume that the publicly available numbers are reasonably accurate.

Wikipedia's references suggest that the field has about 100 billion barrels of oil, with 65 billion barrels of oil already produced, and a current production rate of 5 mbd. This leads to the field going dry in about 22 years, although of course the collapse must happen before 2035. Still, most people here suggest that there is no reason to trust Saudi's reserve numbers, leaving us in the dark as to when the collapse will actually occur. It's a frustrating ignorance.

Okay, as I tried to explain in my post above, Ghawar is not one single field, it is basically five fields Ain Dar, Shedgum, Uthmaniyah, Hawiyah, and Haradh. All will definitely not collapse at the same time. In fact, it will likely be 30 years or so before Haradh collapses, if then. Anyway the field will not go dry in 22 years as you suggest. The northern portion will peter out well before 22 years and the southern end well after 22 years from now.

Ani Dar was brought online in 1951. Haradh Increment III, the last section of Gharwar to be brought online, was brought online in 2006. That's a difference of 55 years. Of course Ain Dar, when it is all over, will have produced a lot more oil than Haradh, and a lot lighter and sweeter as well.

Ain Dar will likely collapse first, followed in a year, or two, or three or more by Shedgum. Or Shedgum could go first, who knows. But check the link I posted above and see just how different they all five are from each other. So it is not Ghawar but rather five different Ghawars.

I am of the opinion that Ain Dar and Shedgum are almost as depleted as Abqaiq, which even Saudi admits, is almost completely depleted.

I think it is impossible to crunch the numbers on Ghawar because no one knows what it is producing now or has produced for the last ten years. But the idea that it is currently producing 5 mb/d is just not credible.

And of course Saudi reserve numbers are massivly exaggerated. That is common knowledge among peak oilers but MSM is largely ignorant of that fact.

Check out The Oil Drum's Five Easy Leases: Ghawar's Discovery Wells.

Ron P.

Interesting. A delegation from ASPO-USA, including Art Berman and yours truly, met with senior EIA and DOE personnel in early December, and I gave them a draft of my paper on what I call the Export Capacity Index (ECI, or ratio of total petroleum liquids production to liquids consumption). I've also had some follow up email exchanges.

In any case, the Saudi ECI ratio from 2002 to 2011:

An extrapolation of the 2005 to 2011 rate of decline in the ECI ratio would put it at about 2.3 in 2020. Assuming, for the sake of argument, total petroleum liquids production of about 10 mbpd in 2020 (versus 11.2 mbpd in 2011 and a higher volume in 2012), this would imply net exports of about 5.7 mbpd in 2020, versus 8.3 mbpd in 2011.

WT--What was the reaction of the EIA folks? interest? feigned interest? surprise? disagreement?

I would classify it as disagreement + interest. To their credit, they were honestly interested in listening to the Peak Oil point of view, and I suspect that we may have had an impact, e.g., the EIA's new comments on Saudi consumption trends, and decline rates from existing wells. To quote one EIA analyst, after reviewing my paper on the Export Capacity Index concept, it was apparent to him that "We ignore consumption (in oil exporting countries) at our peril."

To quote one EIA analyst, after reviewing my paper on the Export Capacity Index concept, it was apparent to him that "We ignore consumption (in oil exporting countries) at our peril."

What never ceases to amaze me is that given their backgrounds, collective brain power and access to real data, that they haven't already figured all this out for themselves. Have they mostly just been in denial, does the nature of their jobs necessarily interfere with their ability to understand, or are they consciously obfuscating the truth... Perhaps they all wear those EIA issued, extra strength rose colored glasses, with double sized blinders.

If so when they saw your paper, the reality they must face has to be quite overwhelming...

Something that I halfway expected, but that still surprised me: As of early December, the EIA had never modeled global net exports, assuming generally increasing consumption in oil exporting countries. As I have previously noted, the ELM is not really a model, it's a mathematical fact. Given an ongoing production decline in a (net) 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 the net export decline rate will accelerate with time.

However, to be fair to the EIA folks, they are genuinely trying to do the best they can, to deliver the most accurate data they can, with a pretty limited budget. And as I said, I suspect that we may have had an impact on their thinking.

Incidentally, something to consider about the above extrapolation of the Saudi ECI data, showing a 6%/year rate of decline in the ECI ratio. It does assume a continuation of the rapid rate of increase in Saudi consumption (6.2%/year), but it also assumes a perpetual (but slow) increase in production of 0.2%/year.

2013 gasoline prices could hit record highs

Gas prices at four-month high after 32 days of hikes at the pump

I hope those Citigroup propagandists feel some shame and guilt. They've been pushing that 'USA to be energy independent' story for months and I'm sure a lot of ill-informed people went ahead and bought gas guzzlers in-part due to that propaganda. Now those gas guzzler buyers are going to struggle to fuel their gas-guzzlers and cut back on other spending thus hurting the economy.

But they probably feel no shame. They are just hoping that the 'USA energy independent' stuff helps whatever big bet they placed and then supported with that propaganda.

I have noticed a rash of articles noting the increase in gasoline prices and wondering what is the root cause since oil prices (measured by WTI) have not increased much in the same period of time. Of course, they add to the confusion by pointing out that US oil consumption has declined at the same time that US oil production has gone up, so "Why are prices going up?" they ask. I expect more of the same as the American public experiences cognitive dissonance on a grand scale. They hear about the US becoming self sufficient in energy, yet prices keep going up. Someone has to be to blame -- speculators? oil companies? Saudi Arabia? I expect all the usual suspects will be trotted out for a thorough lashing.

I have already encountered several "news" stories (CNN and one from the metro NYC area were most notable) where the gas price issue was discussed. Nary a mention of supply issues but you're right - the 'ole speculators got at least side-swipped if not a "thorough lashing".

The speculator excuse is just mentioned now as a knee jerk reaction - with absolutely no explanation or details or critical thinking related follow-up questions.

"Gas prices are high and going higher" - J6P sits up and takes notice...

"Some say it's due to speculation." - Talking head proclaims in a very serious tone

"Back to sleep" - J6Ps everywhere rest easy, assured this is all just the work of speculators speculating

I still do not understand why the speculators, with all their power, let prices go down in the first place. Or do they just like to jerk us around? Blessed be the speculators for they enable us to avoid the hard work of discerning reality.

Some say the moon is made with cheese. Some say the world is flat. Some say Elvis is alive. Some say the Obama was born in Kenya. Some say there is no global warming. Say say the earth is 7,000 years old.

See how easy that is. Just cut and paste every news article on rising gas prices so reporter doesn't actually have to do any actual research or, you know, thinking.

Human beings are generally very poor at math. How many of the commentors on those sites appreciate just how much energy it takes to push their one and a half ton vehicle to 60 miles an hour? They take it for granted. And all the unconventional fossil liquid fuels might only last 50 years. What then? Whenever I mentioned this to people the responses were either "I'll probably be dead by then, what do I care?" or "I'm absolutely sure the scientists will come up with something" [i.e. a science fiction energy source]

Whenever I mentioned this to people the responses were either "I'll probably be dead by then, what do I care?" or "I'm absolutely sure the scientists will come up with something" [i.e. a science fiction energy source]

I get the science ignorance one. People don't have a damn clue to how their iPhone works so they also have no clue about energy sources. It is ignorant but not mean-spirited.

But the "I'll probably be dead so what do I care?" . . . uh . . . don't you care about your children at all? :-(

"But the "I'll probably be dead so what do I care?" . . . uh . . . don't you care about your children at all? :-("

Begs the question: Do people who go childless have less concern about a future beyond their own? ...or... Do folks with kids have more concern about a future beyond their own lifespan?

This is a bit of a loaded question. In this question it is subtly implied that people who do not have children are only concerned with their personal well being and not of future generations. It is quite likely that people who do not have kids think differently to this but attaching the question to the quoted text makes it seem like all childless people always think this way. Not sure if that was your intention or did not see how you loaded the question. In any case, like many things in life there will be a range of reasons why people don't have kids ranging from totally self-centred to totally selfless. Ditto for people who decide to have children. As to which is more ethical that is a harder question to ask. I am inclined to think that it is acceptable for a couple to have children provided they do not have too many offspring.

The question I would ask, which is not often stated, is it ethical to desire a very long life if that means it involves expensive medical treatment which places a big burden on not only your immediate family but society in general? These costs will be significant and future generations have no say on whether these costs are something they wish to bear. I think when it comes to the ethics of life and death we have to consider both sides of the equation and not focus simply on birth.

I didn't like the question either. I think too many humans is the number one problems humans are facing. Therefore, I decided not to have children because I care about the future.

The question I would ask, which is not often stated, is it ethical to desire a very long life if that means it involves expensive medical treatment which places a big burden on not only your immediate family but society in general?

Per Dr. Oz advice:

Dr. Oz said that if you start using Dental Floss, you can add 6 years to your life, because flossing actually helps reduce heart disease! If you don’t floss, you can get gingivitis which can cause heart attacks.

monsta, we could encourage people to use dental floss (I do every night) and save the money on the doctor bills while still living longer. Six more years is a huge increase from a product so cheap and easy to use.

Best hopes for increased dental floss usage.

I think not having children is more ethical assuming one is convinced that future generations will live short, nasty, and brutish lives. If one believes that, it means one is having offspring that you know will be miserable or even suffer an early death due to deteriorating environmental conditions. Maybe there are many people who are selfish as well. But so what? It is not like we have too few children. I think it is more likely that one is having children for selfish reasons. Feeling the need to perpetuate one's specific genes seems like the ultimate selfishness.

Children are precious. Having fewer children makes them more precious and does not mean one does not love children.

Some people desire a long life. Others don't and even take their lives sometimes because they feel like they have lived long enough. Aside from the ethics, one cannot do very much about what one desires. It seems more ethical to limit births than deaths unless you believe that somehow not choosing to have children is taking human life.

If you are looking at this from a cost perspective, children cost a ton from birth to adult hood.

I'll parapharase Garret Hardin a bit. When ethical people chose to have less children all the forces of evolution work to make the population less ethical. Which makes the question of ethics more confusing. With 3 kids I'll admit to some cognitive dissonance, but it seems possible to have a logical debate on the merits of ethical people having more children.

What's ethical? Who gets to decide that?

I have no children, and will not have any. It was a decision I made 40 years ago, an ethical decision by my lights.

The Earth is full. In any case, I don't think that "ethical" is particularly heritable, in the evolutionary sense.

I suspect it doesn't matter what any of us think about it.

That kind of logic only applies to truly inherited traits, though.

Let's look at where the ethics of population-consciousness get inherited, which I would guess are not only at the family level, but at community and society scales and from peers, just as well.

As that goes, I would hope that people with lots or no children are all passing on a growing set of perspectives on rational family and society planning for population concerns. We need effective teachers, advocates and artists to build this into the culture's psychological genome.

I think there is no single answer. A childless person may
-Never met 'the right one'
-Is infertile
-Is homosexual
-Doesn't like kids
-Loves kids but realizes they didn't have the financial resources
-Too concerned about the dim future prospects and thus decided not to have a child

And those with kids probably have a whole different range of reasons too. So there is no simple answer to your question, it depends on the specific people.

"Why are prices going up?"

Kingfish, I heard that there was a refinery that was shutdown and others that were down for maintenance. I think there are probably other factors at play too.

Does anyone else know the causes for this higher prices?

Read the comment sections after such articles. It is scary and sad how clueless and angry people are. There are theories for blaming everyone . . . big oil, evil OPEC, greedy speculators, Obama not allowing any drilling (LOL), not enough refineries, Helicopter Ben, etc. Most of the answers are wrong to partly wrong.

But for a nation that often seems to pride itself on rugged individualism, they sure don't take any personal responsibility. Blame whoever you want but that is not going to help the problem. Very few comments ever suggest people buy higher mileage cars, use public transportation, or buy EVs. Using less oil is the one thing under their control and hardly anyone suggests it.

The US press continually refers to the price of West Texas Intermediate delivered at Cushing, Oklahoma as the World Price of Oil. This was a good proxy for it at one point in time, but pipeline limitations and market restrictions have rendered it obsolete.

Half of the oil refinery capacity in the US is on the Gulf Coast, so the price of international oil as delivered there by tanker and pipeline from anywhere in the world is the biggest determinant of average gasoline prices in the US. Most US oil cannot reach the Gulf refineries by pipeline, so the price Bakken shale oil sells for in North Dakota is completely irrelevant to gas prices in the US. The price that British North Sea oil sells for is a better indicator.

California is its own unique market for gasoline, again due to pipeline restrictions and its unique air quality laws, so it has its own unique price for gasoline (higher than elsewhere).

The US press continually refers to the price of West Texas Intermediate delivered at Cushing, Oklahoma as the World Price of Oil. This was a good proxy for it at one point in time, but pipeline limitations and market restrictions have rendered it obsolete.

Well, obviously not obsolete for purposes of readers of TOD!
I know, I know, TOD is run by volunteers, it is difficult to obtain and format a corresponding Brent price chart, but still...
It would be fun and informative to have a daily update on the price spread right here for those of us too lazy to surf around and find it for ourselves.

S – I suspect it has nothing to do with time management by our editors. I’m sure they know how readily available the info you’re interested in really is and figure we’ll do it ourselves if it’s of sufficient interest. Here’s a link. No need to surf...one click and not only do you know the spread today but see how it has changed over the years.


Bookmarked. Thanks!

BP Wins Approval to Cut Potential Fine by $3.4 Billion

As I commented at the time when they discarded the dirty, oil-encrusted LMRP that had been recovering oil from the Macondo BOP:

I hope they polish it up and give it an honoured place in the BP boardroom. At $4,300 per barrel, it's been saving them $70m in fines every day.


DK Energy Agreement, March 22 2012 (pdf)

The agreement supports the phasing-out of oil-fired boilers in existing buildings by:

  • banning installation of oil-fired boilers and natural gas boilers in new buildings from 2013,
  • banning installation of new oil-fired boilers in existing buildings in areas where district heating or natural gas is available from 2016
  • committing DKK 42 million in 2012-15 to fund the conversion from oil-fired boilers and natural gas boilers in existing buildings to renewable energy

The news stayed below the radar for nearly a near til an Austrian weblog broke it on February 14th. Article comments provide good insight into the context.

Leanan came close on May 18th: Denmark aims low with green energy policy


New from Congressional Research Service [CRS] ...

Federal Reserve: Unconventional Monetary Policy Options

... The Fed has made large-scale asset purchases, popularly referred to as “quantitative easing” (“QE”) that have increased its balance sheet from $0.9 trillion in 2007 to $2.9 trillion at the end of 2012. Currently, the Fed is purchasing $40 billion of mortgage-backed securities (MBS) and $45 billion of Treasury securities each month; because these purchases follow on two previous rounds of purchases, they have been referred to as “quantitative easing three” or “QEIII.” Unlike the previous rounds, the Fed has not announced when QEIII will end or its ultimate size.

Critics fear QE’s potentially inflationary effects, via growth in the monetary base. Inflation has remained low to date, but QE is unprecedented in the United States and the Fed’s mooted “exit strategy” for unwinding QE is untested, so the Fed’s ability to successfully maintain stable prices while unwinding QE cannot be guaranteed.

Prospects for Coal in Electric Power and Industry

Cars, Trucks, and Climate: EPA Regulation of Greenhouse Gases from Mobile Sources

The National Flood Insurance Program: Status and Remaining Issues for Congress

Government Assistance for AIG: Summary and Cost

Understanding China’s Political System

U.S. Military Casualty Statistics: Operation New Dawn, Operation Iraqi Freedom, and Operation Enduring Freedom

Critics fear QE’s potentially inflationary effects, via growth in the monetary base. Inflation has remained low to date, but QE is unprecedented in the United States and the Fed’s mooted “exit strategy” for unwinding QE is untested

85 billion a month without lifting a finger. No construction, natural resources sold, precious metals sold, just digitally move numbers. As John Conner as a kid says in Terminator II, "Easy money!" The problems are three fold; 1. The Federal govt. must be very desperate to have to resort to what can be best characterized as a form of cheating, 2. It risks high rates of inflation (or eventually hyper-inflation), and last but not least 3. Once hooked on about a trillion a year in free floating digitally generated money, how does the addict quit? Afterall, if it was needed to be done in the first place and oil is still just as high priced, then quitting is not really an option. Ever see the toll at a bridge go down? No, because they get hooked on that level of income. So how does the govt. after getting hooked on a trillion a year beyond all the other money being borrowed, imagine it can viably continue without it?

Keep in mind while helicopter Ben's fancy fiscal footwork routine continues with no end date, essentially meaning it's permanent unless it causes high inflation, this country is still spending a trillion more a year than it takes in.

Between QE's and borrowing, that's a TWO TRILLION DOLLARS a year addiction!!! That's equal to 6,000 dollars per man, woman and child in the US per year. How long do they really think this charade can be maintained?

Has anyone else noticed the desperate tone of O lately regarding sequestered funds? He knows any reduction in Govt. spending will have a knock on effect on the economy. Watch for increases in QE's as this process unfolds. The numbers are simple; the govt. has to do these things to keep us in the game. There is no going back now, as we are committed to QE's.

Well before you totally freak out over it, you need to consider that some economists think it is just fine. The Modern Monetary Theory (MMT) school of thinking has no problem with such deficits. In fact they think they are a good idea in order to get money moving in the economy and boost employment. I'm not so sure I buy into the theory .. . but it exists.

And look at Japan. They've got an even bigger debt to GDP ratio than we do. Is it a problem? Hyper-inflation? No, actually the value of the currency is relatively strong and they've taken intentional actions to weaken it in order to try to boost their exports.

I don't like the deficits. If I had control, I'd end the foreign wars, cut down on foreign bases, raise gas taxes, do the Toobin tax, trim some stuff, and get the deficit down a bit. Of course I'd never get elected on that platform. But I'm not freaked out by the deficits.

Well before you totally freak out over it, you need to consider that some economists think it is just fine.

The fact that some economists think it is just fine might make some of us freak out more, not less... >;-)

MMT bases money creation on output, not deficit spending, but like every economic theory it's based on bumktum, unproven and most likely false self serving political BS. It's science without the scientific method.

Japan has always had a trade surplus, only recently has it started to have a deficit. So it's not a good comparison in that way to the US.

Govt is borrowing at 30% of revenues per year, nothing to freak out about, but surely unsustainable.

But I'm not freaked out by the deficits.

Well, maybe you should be, considering interest paid on that debt does only that nothing else. Also, maybe you have missed the many posts by westexas regarding OECD countries running big deficits due to high priced oil. You also have to ask yourself what will happen to the economy if and when the R's force the books to be balanced? Because it probably means the economy will quickly go into recession. If you don't think that will happen, have you seen how overwrought O has been regarding sequestration? He's freaking out and the R's are not listening. It's quickly becoming time to pay the piper. I predict this year will have another step down similar to 08/09.

So you may not be freaking out (although I never said I was freaking out) but s may be ready to htf, and that may give you cause to reconsider your position on deficits & debt load.

I said I don't like them and I would cut them . . largely with military cuts. But again, look at Japan.

You also have to ask yourself what will happen to the economy if and when the R's force the books to be balanced?

LOL! Like that would ever happen. The only time the GOP ever gives a crap about deficits is when there is a Democrat in the whitehouse. Reagan, Bush, and Bush 2 ran up most of the deficit and then crashed the economy to boost them even higher. The R's can't stomach serious cuts. The austerity Ryan Budget grew the deficit for years and it got rejected. Naw, they'll just kick the can down the road some more.

I wouldn't mind some drastic cuts but it is not going to happen.

We'll see soon enough if the R's can stomach the upcoming cuts in 8 days. If so, there will be more cuts in the next 60 days. There's also renewed pressure to back off of QE's. It may not be long before we find out what this economy can do without special help. It will probably send the economy into a tailspin and then what does the govt. do to keep BAU alive? Should prove very interesting.

Not to mention the fact that debt based fiat currencies need exponentially increasing debts to maintain the mathmatically unpayable interest payments. Thankfully money isn't a finite resource.

Hell, why pay taxes at all? If it's OK to print a trillion a year, then 4 trillion should be 4 times better!


then follow both links and see the photons.

Germanic languages use the word steering instead of taxes.


You laugh but I've seen some MMTers think that would be OK. They feel the taxes are more for curing income disparity.

I'm not a fan of the MMT theories . . . I call it the magic money tree. But they raise some interesting points. And when compared to the Austrian theories with their Praxeology (or however it is spelled) where they reject empiricism & science . . . well, I'm not interested in faith-based economics.

Protesters block Cairo-Alex railway, road, due to fuel shortages

Trains between Cairo and Alexandria and road traffic on the Agricultural Road linking the two cities were brought to a complete stand-still on Wednesday morning by around 700 workers in the clay-brick manufacturing sector.

The workers were protesting what they claim to be a two month-long shortage of mazut, the fuel used to operate brick furnaces. "They are protesting the price raise for mazut and other fuels," explained the source.

Mazut is a heavy, low quality fuel oil, used in generating plants and similar applications. In the West, furnaces that burn mazut are commonly called "waste oil" heaters or "waste oil" furnaces. Mazut is much like Number 6 Oil, and is part of the products left over after gasoline and lighter components are evaporated from the crude oil. source

Mazut is a heavy, low quality fuel oil, used in generating plants and similar applications. In the West, furnaces that burn mazut are commonly called "waste oil" heaters or "waste oil" furnaces. Mazut is much like Number 6 Oil, and is part of the products left over after gasoline and lighter components are evaporated from the crude oil. source

Mazut is dirty and expensive and becoming scarcer all the time! Hmm, perhaps it is time the Egyptians brick makers re-acquaint themselves with Ra...


The Solar Fire P32 costs 7,500 dollar and can be used to make another Solar Fire P32

The Solar Fire P32 is composed of 360 small mirrors with a total surface of 32 square metres, focusing sunlight on a steam boiler above them. The steam can be used directly to purify large quantities of water, boil milk, produce edible oils, make charcoal, bake bricks, make paper, and so on...

...The Solar Fire P32 is - in the first place - aimed at developing countries and designed to be cost-effective compared to burning coal and wood, reducing deforestation and pollution, increasing energy autonomy, and providing an energy source at the scale of traditional practices and small industries. It has been built in Mexico, Cuba, Burkina-Faso, Mali, India and Kenya, but also in Texas, France and Canada. Obviously, the design could also be useful in the developed world, where the supply of fossil fuels might not remain as easily accessible as it is today.

That LowTech article links to this video, http://www.youtube.com/watch?v=8tt7RG3UR4c&feature=player_embedded , showing a solar furnace that can reach over 2500 celsius, both instantly incinerating a Hot Dog, and then in seconds (I don't think the vid was sped up.. the camera is handheld and seems natural speed) blowing a hole through what appears to be 1/8" steel plate.

(I don't think the vid was sped up.. the camera is handheld and seems natural speed) blowing a hole through what appears to be 1/8" steel plate.

Yep! Which is why I still think that changing our expectations and developing an alternative economic paradigm vs BAU, could at least in theory be viable with solar, wind and hydro alone. We could still use petroleum for the chemicals it provides but except for very limited cases, not for it's embedded energy as a major source of power. Granted that means a much wiser use of our limited natural resources than our currently wasteful practices.

The old wants vs real needs debate is something we all need to think more deeply about.

If one is interested in Heliostats - RedRok is a go-to site.


I'll "force ya" to go to his site to learn about the below projects.

* Teton Engineering Inc.
A Tracking Solar Concentratorfor for the home experimenter.
This concentrator, based on 1 square foot mirror tiles, is the first solar system I studied. It was, I think, the one presented in Mother Earth News many years ago.

* Sohara.
Directable Mirrors - A Better Way To Focus The Sun.

Fuel shortage fears as BP tanker drivers strike

MOTORISTS were today warned of possible fuel shortages as striking tanker drivers were poised to halt the delivery of petrol to BP forecourts across Scotland.

... The latest dispute comes less than a year after a strike by tanker drivers was narrowly averted after they voted narrowly to accept a peace deal aimed at ending a long-running row over terms and conditions.

Motorists were warned against panic buying at petrol forecourts amid fears that supplies could run dry.

Motorists were warned against panic buying at petrol forecourts amid fears that supplies could run dry.

Which, will immediately guarantee panic buying....

‘Russian Arctic shelf to be kept idle for Gazprom and Rosneft until 2020’

The Russian government has announced plans to partially suspend oil and gas production in Russia’s Arctic shelf. As almost 80% of the Arctic sections are potentially to be developed by Rosneft and Gazprom, the rest will be kept in status quo until 2020.

The newly published “Strategy of the Russian Arctic Zone Development and National Security until 2020” says the reserve fund deposits, around 20% of the Russia’s Arctic shelf, will be unfrozen in 2020 to make for dwindling crude and gas production in Russia.

Experts believe the move is mainly aimed at limiting private gas and oil companies’ access to the Russian Arctic shelf and maintaining the existing status quo in the area with the two state majors, Gazprom and Rosneft.

Report: http://www.government.ru/docs/22846/

Analysis of Russian Oil and Gas Reserves - International Journal of Energy Economics and Policy, Vol. 2, No. 2, 2012, pp.82-91

"around 20% of the Russia’s Arctic shelf, will be unfrozen in 2020 to make for dwindling crude and gas production in Russia."

Its possible it will be "unfrozen" by 2020 in more ways than one.

The coice of words are ironic, to say the least.

Gone in 30 seconds: Dozens of workers scramble to safety when 1,300-ton, £25million gas rig collapses in the Gulf (w/Video)

The accident took place in the vast South Pars gas field, located in the Persian Gulf between Iran and Qatar, last month after a crane broke during installation. It is thought that the water at the spot where the gas rig sank is over 260ft deep.

Iran has called for foreign help in raising the platform, a rare request by an industry isolated by international sanctions.

The equipment is one of four planned for phase 13 of Iran's South Pars gas field project, which covers an area of 9,700 square kilometres which is estimated to contain some 14 trillion cubic meters of gas.

Consortium aims to build megafloat / Oil and gas rig workers to live off Brazil coast

The government and a Japanese consortium, including shipbuilders and heavy machinery makers, plan to develop a giant floating structure off Brazil that can accommodate up to 200 offshore oil and gas rig workers.

According to sources, the government will also look at using megafloats in the future to develop resources in Japan's exclusive economic zones.

In recent years, large oil and natural gas reserves have been discovered about 300 kilometers off the coast of Brazil.

Drilling is scheduled to start after 50 offshore rigs are built by 2020.

Shell to tow Arctic drilling vessels to Asia for repairs

ANCHORAGE, Alaska -- In another costly setback for Royal Dutch Shell's controversial Alaska Arctic endeavor, both drilling rigs used offshore during last year's oil exploration season will be towed out of the water on massive vessels to Asia for further inspection and repair, Shell announced Monday.

The decision suggests the Kulluk and the Noble Discoverer -- Shell's only drilling rigs for the Arctic -- need major work and calls into further question whether Shell will be able to resume drilling in the Chukchi and Beaufort seas this year. Two federal investigations are under way into Shell's Alaska operations.

Arctic drillship on drawing board

Norwegian ship design and engineering outfit Inocean has developed a new drillship concept for work in Arctic conditions.

The vessel, dubbed IN-ICE and based on the company’s INO-80 concept, is winterised with its drilling equipment and other areas completely enclosed to avoid ice formation for work in extreme sub-zero temperatures.

I hear the new ship will be named EROI and that the last one was also named EROI, but will be a democrat rather than a republican.

Kansas state bill would force teachers to question climate change in class – HB2306 calls climate change ‘scientific controversy’

...The bill says instruction about “scientific controversies” should be objective and include “both the strengths and weaknesses of such scientific theory or hypothesis.” The only controversy identified in the bill is “climate science.”

... how about - Is the world flat? Pro or Con.

Kansas Lawmaker With Ties to Oil and Gas Industry Introduces Bill Opposing Sustainable Development

Yet another thing the matter with Kansas: A legislator on the committee that recently introduced legislation that would force teachers to misinform students about the science of climate change has introduced a bill to prohibit use of public funds to promote sustainable development.

Amazingly, he claims to be unable to see how his ties to the oil and gas industry could present a conflict of interest, as the Topeka Capitol Journal reports:

Rep. Dennis Hedke, a Republican, brought the bill to the House Energy and Environment Committee of which he is chairman. He said Tuesday he saw no conflict of interest in the fact that he is a contract geophysicist whose client list includes 30 regional oil and gas companies.

“I can’t see why,” Hedke said. “I didn’t think about that. It really never crossed my mind. I’d probably just say no.”


what are your thoughts about global warming?

Of course, it ought to be called planar warming.



RE: Filipino super-typhoon an ominous warning of climate change impact

The five most devastating typhoons recorded in the Philippines have occurred since 1990, affecting 23 million people. Four of the costliest typhoons anywhere occurred in same period, according to an Oxfam report. What is more, Bopha hit an area where typhoons are all but unknown.

The inter-governmental panel on climate change says mean temperatures in the Philippines are rising by 0.14C per decade. Since the 1980s, there has been an increase in annual mean rainfall. Yet two of the severest droughts ever recorded occurred in 1991-92 and 1997-98.

Scientists are also registering steadily rising sea levels around the Philippines, and a falling water table. All this appears to increase the likelihood and incidence of extreme weather events while adversely affecting food production and yields through land erosion and degradation, analysts say.

The "global" in global warming induced climate change is interpreted through exceptionalist eyes.

Which leads to an erroneous state of mind "it is all about US, rather than it is about all of us."

That may come back to do some haunting in the daze ahead:

The first post in this series took some time to explain that intelligence and sanity are not the same concept.

A person can be quite intelligent and quite insane at the same time, and so can civilization.

Some recent research efforts have resulted in scientific data that further complicate our concept of "intelligence."

Especially the concept that intelligence exists only in the conscious mind of humanity.

(On The Peak of Intelligence - 3). The graphies can be made by the good cops or the bad cops.

The graphs of life and the graphs of death are indistinguishable to as many as want them to be.

Re: Top Post: Are Oysters Doomed?

It is not only Washington's Willapa Bay and Taylor Shellfish experiencing massive larvae dieoffs due to ocean acidification, as noted in the top post story, the dieoff is extensive in Oregon's Whiskey Creek Shellfish Hatchery of Netarts Bay.


Together, Whiskey Creek and Taylor Shellfish, which also raises clams and mussels, account for most of the West Coast’s commercial shellfish production. Oysters are the biggest product, making up more than 80 percent of the Pacific coast shellfish produced and more than 60 percent of the revenue. According to industry and federal officials, the West Coast oyster industry generates about 3,000 jobs and has a total annual economic impact of about $207 million — significant numbers for their coastal communities.


From the end of the linked article:

Yet on a November morning, with the snow-capped peaks of the Olympic Mountains just visible through the fog, the landscape around Taylor Shellfish looks much as it always has: the sea, the mountains, and a shore lined with fir trees. But as Dewey understands, the green-gray water is changing in a way it hasn’t for eons — changes that will be with us well into the next century, and possibly longer.

“We have to find a way in our industry to adapt,” says Dewey.

I think that observation about their industry having to adapt just misses the point by about a billion miles!

Their industry or any other industry, business or any individual part of the entire economy for that matter, can not, and will not, be able to adapt in isolation. Everything is inextricably linked. We need to stop emitting more CO2 yesterday. There are still far too many of us insisting that we can continue what we've been doing. We can't. While some may claim that AGW is a hoax and many may not understand basic chemistry or that pH is measured on a logarithmic scale and what that means... It's hard to deny thinning oyster shells and dieing coral reefs all over the world.

We need to start a movement where people all over the world start murdering their cars and just saying no to the continued use of fossil fuels everywhere for whatever purpose. The truth is, there is no adapting!

The two billion people in the world who live on less than $2 per day have probably adapted. What if that were the future for millions of people who live in the U.S. I don't know if that is the scenario that will occur but people who say that future generations will adapt fail to think that through. I have personally adapted to many things in my life but that doesn't mean it was pleasant.

Just hand waving and saying we or someone else will adapt means one probably doesn't understand the problem or simply doesn't care about the problem even if the victims are one's own children or grand children.

We could adapt now but we choose to let others be forced to adapt later.

"Just hand waving and saying we or someone else will adapt means one probably doesn't understand the problem or simply doesn't care about the problem even if the victims are one's own children or grand children. "

No, it doesn't mean any of those things, and I don't understand why you say that. We (which includes you) are going to have to adapt. How does accepting that mean we don't understand? Or don't care? We are going to have to adapt. Capiche?

Unless you mean that you don't like the possibility of adapting, because it might be unpleasant, therefore, it will all be good and we won't have to adapt. Because we'll like, you know, unleash the infinite powers of engineering and BAU will march on Forevar!

We are going to have to adapt. Capiche?

Well, that's all well and good. We might even be able to adapt to riding a bike or taking mass transport to work, eating less meat, wearing sweaters indoors during winter, etc... However, pray tell, how do you adapt to dead oceans, dead rainforests, dead fields?

While I agree that adapting to the former may be slightly unpleasant for some, the later are probably game over for all.

Unfortunately I don't see that we still have a whole lot of time left for adapting...

Yes, exactly. Some will adapt, some won't.

My point was simply that it doesn't really matter how we'd like things to be at this point. Reality is real. You can't decide not to like it, and therefore it goes away. That was the impression that I got from the post I was responding to.

As far as dead oceans, dead rainforests, etc., well... I am an ecologist. you don't need to point it out to me. I grieve every single day. Deeply and sorrowfully.

I grieve every single day. Deeply and sorrowfully.

I share your grief! I live but a few miles from one of the few remaining staghorn coral reefs off the coast of Ft. Lauderdale and I still dive there. last year I was extremely privileged to be able to spend time in both the Brazilian Amazon and the temperate rain forests of the Pacific Northwest. Unfortunately not one of these ecosystems is doing all that well... the worst part is, most people think they are doing OK.

I don't think biologists and ecologists are in very good moods in the last few decades.

The context is that I have talked to people who say their children will adapt as if that means it will not be a problem. And I am not talking about biking, etc. That is something we should do now. I am talking about adapting to lack of food and water.

No, I never thought adaptation or mitigation could be the solution.

It still slays me that people believe we'll just shift North American food production north with climate change. Life is a response to the conditions it is in. Mollusks don't put down shells in acidic waters, our grains will no longer thrive when moved to forest podzols, no matter if the temperature regime is now similar to the past plains conditions.

And as you shift north, you shorten the growing season.

My point is that even if the temperature regime is changed, ie the new growing season is now lengthened, the highs and lows throughout the growing season are the same at 50+ degrees N latitude as they were at 35 degrees N previously, that somehow the precipitation mysteriously migrated north unchanged with the temperature, our grains are still not adapted to perform in the acidic forest soils which have have developed over eons throughout the north, not just North America.

Acidic environments are tough for our life forms of today. Just look at a forest lake or bog today, they are relatively lifeless, invertebrates have a tough time putting their exoskeleton down. It could change, but not at this speed. We are going though this geologically as fast the spring on a mouse trap.

our grains are still not adapted to perform in the acidic forest soils

It also does not help the Northern soils today that glaciers moved the previous topsoil to the south.

Not to worry. The impending Greater Dust Bowl in the Midwestern US will allow the wind to blow all that misplaced top soil back to Canada. See how easy it is to solve our environmental problem(s)...:-)

E. Swanson

doug fir,

There are other growing dangers to oysters and other sea life due to Oil-Qaeda:

Samples were collected every 50 nautical miles westward to Easter Island, then onward to Pitcairn Island, totaling 48 samples along a 2424 nautical mile straight-line transect. Eriksen selected the route based on an ocean current model developed by Nikolai Maximenko (University of Hawaii, Honolulu) that predicts accumulation zones for floating debris. The research team recorded increased density of plastic pollution with an average of 26,898 particles per square kilometer, and a high of 396,342 km/m2 in the center of the predicted accumulation zone. This confirms the existence of yet another oceanic ‘garbage patch.’

(New ... Garbage Gyre II). Plastics from oil are an increasing worldwide danger to sea life.

US oil production will soar in 2013. Can it last?

"Diminishing returns to scale and the depletion of the high‐productivity 'sweet spots' are expected to eventually slow the rate of growth in tight oil production," reads the EIA's Feb. 14 Short-Term Energy Outlook Supplement. "It is difficult to predict when that inflection point will bereached because it can be pushed farther into the future by increases in the number of drilling rigs and further technological change."

Well now the EIA is aware of the "sweet spot" problem. I wonder who told them? ;-) And they, just like the rest of us, are unaware of just when the those high production "sweet spots" will start to peter out. But at least the EIA has now acknowledged that there is a looming "sweet spot" problem. I wonder when MSM will catch on?

Ron P.

The key issue is that there will be a peaking in oil production from tight oil - not just a slowing of the rate of growth. The queen can only run so fast.

This is a political statement that they can point to to say "we told you so" when people start complaining that the 'oil independence' they were promised fails to materialise.

John Kerry comes out swinging on climate change; ominous sign for Keystone XL

WASHINGTON – In yet another potentially ominous sign for TransCanada’s Keystone XL pipeline, John Kerry used his first major address as secretary of state on Wednesday to make an urgent call for comprehensive action on climate change.

“We as a nation must have the foresight and courage to make the investments necessary to safeguard the most sacred trust we keep for our children and grandchildren: an environment not ravaged by rising seas, deadly superstorms, devastating droughts, and the other hallmarks of a dramatically changing climate,” Kerry said in a wide-ranging speech at the University of Virginia.

“If we waste this opportunity, it may be the only thing our generation — generations — are remembered for. We need to find the courage to leave a far different legacy.”

Obama Golfed With Oil Men As Climate Protesters Descended On White House

... "A golf outing does not policy make, but it's clear that folks in the oil industry have access to the president," Slocum said. "The president has made very clear his firm commitment to not just the oil and gas sector, but to expanding the oil and gas sector by increasing production, by, as he said, cutting red tape, and expanding offshore drilling."

Maybe I'll be proven wrong but I still think they will approve the pipeline.

A quick observation from Montgomery Street in Downtown San Francisco. The street features slow moving traffic and is lined with high rises for ten blocks or so. I walk the street and often am caught alongside slow moving large vehicles for several blocks. My feeling from the stench of their effluent is that this can't be healthy.
As the economy gets tighter and petrol gets dearer more folks are switching to grease and other things they can burn to save some money. I am surprised they can pass a smog test for starters but this whole "alternative fuel as progressive" thing seems like a smokescreen to me.
Our local government is very enthusiastic about certain forms of environmentalism but have long turned a blind eye to the externalized costs of our transportation system.
Does anyone else see this trend or am I just being too sensitive?
John in SF

An article about car pollution in China:
Car Emissions Contribute to Dense Smog in Beijing

And an amusing comment about the Chinese Smog. Professor Pan of the Chinese
Academy of Science doubts that photochemical smog formed in Beijing. The
conversion requires the presence of sunlight to form ground-level ozone. Beijing
has hardly any sunlight on foggy days. In fact Beijing's sky were charcoal grey
for most of January.
Toxic Compound Found in Beijing Smog
See http://english.cas.cn/Ne/CASE/201302/t20130219_99029.shtml

Yeah, amusing, I guess that's the right word ...

Well, 1/3 of SF doesn't even own a car, and it is a liability in much of the City.
But your point is well taken-- it makes them feel good.

You are correct about car ownership but some huge number of folks drive in and out or through every day. BART only facilitates a small fraction of these. And the vehicle emissions are more of an issue in some areas than others, that's for sure.
John in SF

But BART and MUNI move the equivalent of the entire population of the City everyday.
MUNI alone has ridership of 731,400 weekdays (2011).
I always leave my car in Marin, take the Ferry, and use public transportation.

As I San Franciscan, I say thank you with deep sincerity. There just isn't much room in San Francisco for a lot of outside cars. (Not really enough room for inside cars, either.) I think San Francisco needs to do a serious marketing campaign with the surrounding suburbs: "San Francisco loves you but not your car! Take public transit to the City." There are a lot of people that have transit phobia but not due to an actual bad experience. Having never ridden transit they just don't know how to do it.

I had a gig in North Beach, and finally gave up driving into the City.
I took the ferry, then walked for 20 minutes.
If it got late,I just crashed in The City.

The Making of a Natural Gas Glut

Wall Street drives the shale boom like it did the housing mortgage scandal: report.

By Andrew Nikiforuk, Today, TheTyee.ca

A former investment banker says the explosion in shale gas development, such as frenzied activity in northern B.C., was a financial mania largely driven by Wall Street bankers intent on capitalizing upon a record $46-billion worth of mergers and acquisitions that shook up the troubled industry in 2011.

In an attempt to meet unrealistic financial production targets (and please Wall Street), the industry drove natural gas prices to uneconomic lows in recent years, throwing the entire industry and its backers into panic mode, says Deborah Rogers in a startling new report for the Energy Policy Forum.

Deborah Rogers report was released along with David Hughes report and is at ShaleBubble.org.

Wonder how these reports will impact thinking in B.C. about the merits of the Montney and Horn River shale? There is an election coming up.

Oil Sands Mining Uses Up Almost as Much Energy as It Produces

Thanks to high global oil prices, industry can afford the large amount of energy needed to extract the oil and turn it into a usable fuel.

By Rachel Nuwer, Inside Climate News,Feb 19, 2013

The average "energy returned on investment," or EROI, for conventional oil is roughly 25:1. In other words, 25 units of oil-based energy are obtained for every one unit of other energy that is invested to extract it.

But tar sands oil is in a category all its own.

Tar sands retrieved by surface mining has an EROI of only about 5:1, according to research released Tuesday. Tar sands retrieved from deeper beneath the earth, through steam injection, fares even worse, with a maximum average ratio of just 2.9 to 1. That means one unit of natural gas is needed to create less than three units of oil-based energy.

-- snip --

The latest EROI values for tar sands were calculated by David Hughes, a fellow at the Post Carbon Institute, a non-profit devoted to issues such as climate change and energy scarcity, based in Santa Rosa, Calif. The institute released Hughes' findings on Tuesday.

Hughes' figures include the energy it takes to mine bitumen as well as to upgrade it to synthetic oil that can be put into a refinery. It also includes the liquefied natural gas used to turn it into dilbit (diluted bitumen) so it can flow through pipelines.

Hall, who wasn't involved in Hughes' study, thinks the EROI for oil sands would fall closer to 1:1 if the tar sands' full life cycle—including transportation, refinement into higher quality products, end use efficiency and environmental costs—was taken into account.

"Hall…thinks the EROI for oil sands would fall closer to 1:1 if the tar sands' full life cycle—including transportation, refinement into higher quality products, end use efficiency and environmental costs—was taken into account.” Not to sound too flippant but so what? We’ve touched on this point many times. Development of FF resources never has been based upon EROEI and never will. If a company decides there's sufficient economic incentive they’ll develop a resource. One more real life example: in my company’s first 2.5 years we spent $180 million drilling deep NG reservoirs. And then NG prices fell and in the last month we haven’t spent $1 drilling for NG. I still have an inventory of NG projects exactly like the ones we were drilling and their EROEI hasn’t changed at all. Yet they will not be drilled until the economics improve. If the folks producing/developing the oil sands are satisfied with the economics it matters not how good or bad the EROEI of those projects may be.

I know that's frustrating when one looks at the full system analysis but it is the reality.

Rockman, this particular article is completely misleading in quoting Dr Hughes paper. In the paper, Hughes actually puts the mean EROEI of producing bitumen from surface mines at 12.4:1 and the EROEI of in situ production at 5.0:1. The article uses his EROEI numbers for producing bitumen AND UPGRADING IT TO LIGHT OIL, and calls that, "Tar sands retrieved by surface mining/steam injection." It's not quite the same thing. It then reduces it even further through more dubious misquoting.

One of the assumptions it makes is that bitumen must be upgraded to syncrude before a refinery can process it, but the fact is that many refineries in the US can process raw bitumen if it can be delivered to the refinery. It is really not much different from Venezuelan extra-heavy. The main problem with bitumen is that it is too viscous to flow through pipelines, but that is being solved by blending it with lighter hydrocarbons.

An interesting new development is that MEG Energy is building a 3,000 bpd pilot plant for a process that won't upgrade the bitumen to light oil but will merely reduce the viscosity to the point where it will flow through pipelines. This will allow them to deliver bitumen (aka extra-heavy oil) to refineries throughout the US without the need for diluent. As an interesting sidelight, the process was developed by the US government. Thank you Uncle Sam.

Development of FF resources never has been based upon EROEI and never will.

I guess they can waste all the investor dollars they want on "developing" but when it comes to actual production the wanton waste should be legislated against, as is environmental destruction and pollution. Just because one type of fossil fuel BTU can be produced and purchased cheap to enable the production of a higher priced BTU doesn't make it sensible or ethical. How much addition CO2 is emitted? Especially with the tar sands. The path to hell is assured whil ever EROEI is ignored.

As I constantly like to point out to people, coal-burning power plants in the US emit 50 times as much CO2 as oil sands plants in Canada, and coal-burning power plants in China emit far more CO2 than the ones in the US.

It's important to know where the CO2 is coming from if you want to control it, and very few people do know - they only know what they read in the MSM, and that information is targeted at an audience with a grade 8 education.

Oil sands plants are a minimal part of the whole world CO2 balance and controlling their emissions will have an undetectable effect on world climate. Shutting down all the coal power plants in China and the US would have a major effect, but good luck on getting China to agree to it, and the US will mainly give lip service to the idea.

Shutting down all the coal power plants in China and the US would have a major effect, but good luck on getting China to agree to it,

I think the world needs to start instituting a carbon trade tax. Imported goods from countries that burn a lot of coal should be subject to a carbon import tariff. The problem is this violates various trade agreements .. . well those trade agreements need to be scrapped. It does no good for western countries to "reduce" their emissions in a way that doesn't actually reduce them but just sends manufacturing jobs to countries that burn a lot of coal. Just moving CO2 emissions to China doesn't move the ball forward.

But no one has the guts to do this.

I would not underestimate China. Any political system that can directly regulate the reproduction of its own citizens has guts. Violating or demanding a rewrite of trade agreements isn't without precedent for them either.

They have their own reasons for immediate change, toxic air pollution that can no longer be ignored and an economy that can not continue to grow much longer at its current rate without an unrealistic increase in world coal supply.

Thirty years ago everyone agreed that the US and the USSR could never agree to nuclear arms control and that the cold war would never end. I'm not sure it did entirely, but it is less of an issue these days due to Gorbachev showing guts more than Reagan's rhetoric.

If CO2 emissions are to be significantly reduced, it is Chinese action that will decide the matter. If Obama has a place in the decision, it will be in trade negotiations set for the world that the Chinese will agree to. That probably means tariffs that block India and other competitors from taking the same path China used to grow. Whether that is fair or not is less important than what ends the carbon escalation.

If you want to encourage the Chinese or the president to take real action then the protests need to be at the docks, the department stores, and the embassies. Protests in support of a real plan.

Takes on massy things with plenty inherent inertia here.

Cogniscient folk I'm aware of have been engaging in somewhat alternative activity up to now. Demo for instance mostly boiled down to providing technology demonstrations.

But cheers anyhow. Whatever the calice may contain.


The share of coal in electricity generation has come down by about four points this year from the eighty percent where it has been hovering at least since 1997. Here's the official data [1] and [2] (in Chinese).

Contains educated guessing of mine on minor sources not included above. Another tweak is that China Daily had slightly different figures a bit earlier on from another department if I remember well, though all of them show the coal share coming down substantially.

Part of it may be due to a rainy year, but the rest of it isn't due to price differentials like elsewhere, and my take right now is that the move is downward from here on. At a pace yet to play out.



Late in replying, had to get the kids to bed and various household chores out of the way first.

I get your point on the economics and that point should be applied to the tar sands. That $180 million you spent on drilling gas wells was predicated on a higher price than you ended up with. But your energy investment on those wells was front end loaded. I am assuming going forward that any production from those wells has fairly negligible costs in terms of EROI.

That's not the same for SAGD from the tar sands which is what much of the future production will be since they have mostly high-graded the easily mined stuff already. SAGD requires a constant and large flow of energy to get bitumen out of the ground. It gives me pause to the think that you have to inject One Thousand degree Celsius steam into the ground to get bitumen to flow out at a hundred Celsius (ref). That's going to use up a lot of natural gas. Given what we know about the decline rates of shale gas, I just don't see the price of gas staying low. So I don't see the costs of producing bitumen via SAGD remaining economical.

Half the homes in the U.S. and Canada heat with natural gas, those homeowners won't be happy when the cost to heat their homes spikes. They'll be mighty pissed when they discover that part of the reason that methane has become so expensive is that it is being burned in the tar sands to produce a product whose EROI is a dismal 2.9.

That's the wild card that deserves some attention. Tar sands production has largely occurred during a period of inexpensive nat gas. When the tar sands demand for gas starts to make it difficult for the average homeowner to afford to heat their home then the economic benefits that some Canadians may think the tar sands offer will certainly begin to be questioned.

And of course none of this discussion addresses the requirement that we reduce our CO2 emissions from energy to zero by 2040.



aws – I see the situation with SAGD identical to my NG drilling program. All other factors being equal the EROEI of SAGD doesn’t change much. But the economics can via lower oil prices (such as lower NG prices hit me) and also eventual higher NG for SAGD operations. These higher NG prices would certainly impact continued production of existing SAGD wells but I wonder to what degree. Maybe RMG can tell us how long a SGAD well produces. All SAGD pairs will deplete just like every other oil well: they drain a relatively small area. I suspect not very long. Just my wag but I would imagine on the order of 5 years or so of significant production. I haven't seen it stated but I assume SAGD wells have a decline rate just as my oil/NG wells. A SAGD may start producing X BOPD but as it depletes that rate eventually starts falling. Given that much (if not most) of the capex is also front loaded by the SAGD wells the LOE (Lease Operating Expense) of SAGD can handle higher NG prices to some degree.

But just like my NG drilling program if decreased oil prices or increased capex/LOE are projected many new SAGD projects will be tabled. And just like my wells the EROEI of those suspended SAGD projects haven’t changed much. But there is one big difference as RMG and others have pointed out: those oil sand reserves are already proven. All my NG targets were speculative. The oil sands development more closely follows a mining business plan than an oil/NG exploration plan. Those oil sand reserves won’t disappear if the economics turn sour and some development is delayed. They will still have some current value. My inventory of undrillable NG prospects has zero value since none of those reserves have been proven.

Which, although it saddens you, means the oil sand reserves will always be available to develop because they are not only proven but their EROEI will be little changed over time. Declining economics may slow their develop at times but they will always remain a portion of our energy base just waiting for the price to be right. And given how most here anticipate long term higher prices as we stumble down the PO path it means IMHO the oil sands (and coal) will always be a component in our little kabuki play.

I really dislike adding to your concerns but this is the reality as I see it. I may play my part in the procss but I see no reason to pretend, as many others do, that the situation is not what it is.

Rockman, that's a pretty good guess. The average lifespan of a SAGD well is indeed about 5 years. The decline curve is highly anomalous, though. Production starts out at zero when they start injecting steam, and then rises rapidly to a peak of, say, 900 bpd after six months before it starts to decline. The decline is usually linear rather than exponential, though, and rather gentle. After 4 years the production might be down to half- 450 bpd.

However, by that point they have recovered 60% of the oil-in-place and the economics start to get marginal. The key factor is steam costs since those stay constant regardless of production rates. They watch the steam/oil ratio closely and when it gets too high, they shut down steaming. At current NG prices they might continue steaming until production is really low, but there is no such thing as a SAGD stripper well. After steaming stops, the well does not stop producing right away but declines to zero on a more or less linear curve, and they get another six months or so out of it. As I said, a very unusual decline curve.

Then they recover a lot of the wellhead and subsurface equipment and run it down the next SAGD well they drill, which might even be on the same gravel pad since they drill up to 100 wells per pad. They don't scrap it until it's worn out.

A recent wrinkle has been to recover oil lost in the corners of the SAGD steam cloud. They realized that each horizontal well pair should be producing oil from a square box around it, but in fact the recovery zone is round cylinder. Because they drill them side by side on very close spacing, between each two SAGD producers, there is left an upper and lower triangle of hot oil that they could produce without steaming. So, toward the end of production they drill a horizontal well into each of these corners and recover the hot oil. By doing this they can push the recovery factor closer to 80% without any additional fuel costs.

Rocky - Different type of well then I used to but radial drainage is radial drainage. I also have a little bit of experience with heat flow from my fireflood studies. Makes me wonder: has anyone tried water injection to help transmit the heat further out? Been done on some ISC projects with some success. Economic limits just like when my water cut gets too high. Except disposing of water is cheaper than burning even cheap NG. Your corner shots are similar to the horizontals I'm about to drill: tap those areas where the vertical wells didn't sweep the oil.

Rockman, the injected steam condenses to water in the formation, so the objective of water injection has already been achieved. They really are trying to get the formation as hot as possible so adding cold water would be counterproductive.

An inhancement is to blend NG or NGLs into the injected steam to improve recovery. These are expensive compared to water, though, so it's hard to make the economics work. I haven't heard of any really positive results.

That's not the same for SAGD from the tar sands which is what much of the future production will be since they have mostly high-graded the easily mined stuff already.

I have a different perspective on it since I have actually read the reserve reports. The 170 billion barrels the Alberta government has booked as proven (or in their lexicon, "established") reserves IS the high-graded portion of the resource. There is a lot more there, and at current world prices, the economically producible portion is probably closer to 350 billion barrels. As the price rises, the economic portion grows. However, now that it has drawn a line in the sand, the Alberta government is not going to move it just because of price fluctuations. They are being extremely conservative in their estimates.

There have been tens of thousands of natural gas wells drilled right through the oil sands to reach the natural gas fields underneath them, and due to provincial laws, the government has all the drilling cores and well logs from all those wells sitting in its core lab. Doing a reserve estimate was a simple matter of pulling all the data from a statistical sample of the wells and determining the porosity, permeability, bitumen saturation, depth of pay, etc etc. It was a lot of work, but gives a very good picture of what is there. All that data is available on CD-ROM for $500 for anybody who is interested - eg oil company geologists.

Rockman could probably only dream of doing something like that where he is drilling, particularly with an oil field the size of Florida.

The virtues of being unreasonable on Keystone

By David Roberts at Grist

Maybe Keystone isn’t the right line. Maybe the next line won’t be the right one either. But the longer folks like Revkin hover over such fights at an ironic distance, never quite satisfied with this target, or that spokesperson, or this policy, or that strategy, the more they’re going to get blowback from people gripped by a sense that there’s not a lot of time left to **** around and at the very least we have to stop making it worse. The ranks of such people are growing. At some point, dithering over incrementalism in the imaginary center will come to be seen as a failure of moral clarity and judgment. I wouldn’t want to be the last person dug into that trench.

The situation calls for large-scale, rapid, systemic change. That kind of change doesn’t happen when wonks and bloggers agree on the perfect solution and achieve multiple PDFs. It happens when people put their asses on the line and fight. It happens when power shifts.

Blower Doors Have Become Essential

Use one to measure a building’s airtightness, to locate leaks, or to comply with a green building program

Posted on Feb 19 2013 by Erik North at GBA

Blower doors are spoken of in reverential tones in energy circles. Or at least they were a few years back. Now you can’t throw a manometer without hitting a contractor setting up a blower door. Which is a very, very good thing.

With the incorporation of air leakage standards into various housing codes, blower doors are becoming essential. In fact, I tell customers that a simple shorthand for whether your insulation contractors grok building science is whether they own/use/understand blower doors.

Waiting for transportation costs to increase....when?

I would like costs to increase so I can purchase locally produced products made on this continent.

Yesterday I had to purchase some keyed alike padlocks, here, on Vancouver Island. I went through the entire rack at a large hardware store. Obviously they were made of hardened steel with either brass or stainless bodies. Some were patently inferior with catchy names but I stuck with industrial looking familiar brands like Master, etc. I turned over every selection and found something like; Master Locks Millwaukee WI, made to specification in China.

So, the minerals are mined in NA, shipped to China and built to an American specification.....and then shipped back for our purchase. I have had it with this situation. Every Drumbeat talks about transportation costs and the demise of Walmart shopping. Yet the small city where I work just built a Walmart supercentre and is completing a Target. The downtown is dying a slow death. I want to buy a union made North American product and I can't find one.

A few weeks ago I tried to purchase some egg noodles not made in China by virtual slave labour. I found one brand made in Tawain at 3X the price. I bought it just the same. I tried to buy two laptops this year ethically made. Couldn't find a brand so purchased from a local dealer rather than buy from Staples.

We live a simple life, my wife and I. I am becoming more and more frustrated with this global economy, everyday. I need to buy a 50 lbs box of galv spikes. They used to be made in Vancouver. Anyone want to bet they are now made in China? With our steel and zinc? I have always believed that we could vote with our pocketbook, but even this is seldom possible. I just checked where my Crown Royal was made. Thank God......Toronto.

I have followed this site for years. Read it daily. Comment seldom. Always feel, "what's the point"? Lately 1/2 the comments seem to be about nuclear waste storage as if anything said about it will actually get the US Govt to get off its broke ass and clean up leaking Hanford or revive Yucca. My gas is 5.00+ per US gal and I can't even find a lock made on this continent or buy a decent pair of NA made steel toed work boots. My Levis are offshore for Gods sake.

The point of this rant...remembering Todd's famous outburt about how many joules will fit on the head of a pin ...wouldn't we be more effective linking sites where we could make more points and statements with every purchase? Sure, the obvious response is green energy premiums or offsets, but what about every-day products we need that every small purchase might send a message and influence business and society? Nevermind, there's also the plan to support family and friends and neighbours. Clearly, stopping GW and helping our neighbours has a moral imperitive soaked within. We should be tackling this with the full force and commitment of war....a war to save ourselves....our planet.

By the way....I pick 2014-2015, and it is Oil Sands not Tar Sands. (Smile people). I have too many friends suriving by working there to run it down.



I share your desire to see more products made in our own countries but I have come to the conclusion that many PO advocates predict the demise of Walmart, Disney World, etc more out of a personal dislike of those entities than a well reasoned analysis. I am no fan of big box stores and fully appreciate how they have devastated our traditional downtowns, but I see them continuing well into peak oil for one principle reason and it's not globalization, it's computerization.

Walmart is a technology company disguised as a retailer. They pioneered the model of complete computerization of every step in the distribution chain and all the other big box retailers have copied that model. This model delivers astounding efficiencies compared to smaller distribution channels and it allows Walmart and others to offer a wide range of products and super low prices. Just this weekend I was talking with the fellow who is responsible for creating the chips that run the IBM mainframes which, in turn, run Walmart's empire. The scale of their operations is unfathomable to me -- no small retailer could possibly match them.

But won't Walmart's model fail when oil prices go up? No. While PO will play a role in killing globalization (though it will take VERY high oil prices to make that happen, IMHO), it will not kill Walmart's model. They can apply their model to products made in the USA or Canada just as easily as to products made around the world.

What if people can't afford to drive to Walmart? Again, it will take very high oil prices to make that happen. I think most people drive less than 15 miles to get to a Walmart, so figure a 30 mile round trip as a high estimate. (I have three Walmarts within ten miles!) That trip would use one gallon of gasoline for a reasonably good mileage car. Even if gasoline prices doubled from $4 to $8, would that prevent people from driving to Walmart? And if they went even higher, people would just go less frequently and stock up more. In fact, the higher gasoline prices go, the more sense it makes to shop at a one-stop store.

What about the cost of delivering goods nationwide? Walmart's delivery costs will go up with the price of oil -- and so will everyone else's. Will my local bike store get a break on their delivery costs just because they are small? More than likely, the small local stores will be hurt even more than Walmart by high transportation costs.

What if PO causes a depression and people can't afford to shop at Walmart? If they can't afford to shop at Walmart, they sure has hell won't be able to afford to shop at the local stores.

But won't Walmart eventually die as the result of PO? Eventually is a long time. I expect Walmart will survive much longer than many of us would like. I also expect they will adapt quickly to a changing energy environment. My speculation is that Walmart will move from a centralized big box model to a model with smaller stores closer to towns (think Woolworths) and supplement their inventory with internet shopping.

OK, so when will we see more domestic products? Globalization has far less to do with the cost of oil than with currency manipulation and labor differentials. China has cheap labor and they intentionally keep the value of their currency low to make their products ultra cheap. They only way production will return to the U.S. is (1) U.S. labor costs decline and/or Chinese labor costs rise (this is already a work in progress), (2) currency manipulation ends (this is also in progress, but will probably only end when China can no longer afford to or is unwilling to buy U.S. Treasury bonds), and (3) factors such as corruption, intellectual property concerns, and other business issues make doing business in China more difficult (also in progress).

Yes, a time will come when Walmart and the rest of the economy will come crashing down around us as a result of Peak Everything, I have no doubt of that happening by mid century, but I also believe that Walmart will be one of the last actors standing as the curtain falls.

ps, I also share your feeling of "What's the point?" about commenting or even following PO on a day-to-day basis. I hold out no hope for community-based change or retrofitting our economy for resiliency. On the other hand, TOD and it's contributors have made a huge difference in my life, planning for my future and my son's future. Hard times are a comin', for sure, but we can benefit if only by having an understanding of what's going down. Besides, as Ron says, it's damn hard to keep your eyes off of it.

pps, If you have Netflix watch a move called Manufactured Landscapes. Trailer is on YouTube: Trailer

I've been a lurker and infrequent commenter on this board for many years, read TOD daily, though now more for entertainment than out of PO worry. You bring up something that I've wondered about from time to time - how much of TOD community consensus is really about impartially examining the facts and arriving at the conclusion that decline is inevitable due to oil production peaking vs. how much is it just individuals seeking a possible catalyst to bring society to a point where it aligns with their personal desires, and latching on to PO as that catalyst.

Funny because the only reason I actually found out about PO and TOD was back around 2005 when I was googling the internet for possible ways to the end of modern society, and PO came up. Before then I wasn't even familiar with the concept! Oh if I could only go back to that frame of reference again.

ty - “how much is it just individuals seeking a possible catalyst to bring society to a point where it aligns with their personal desires" I wouldn't worry about that. I would guess that 99.9% of the population doesn't even know TOD exists. We are legends in our own times...eh...I meant minds. LOL. A catalyst implies inducing some reaction...and that ain't happening from what I see. At least not on a significant level. We're just a collection of souls bobbing along in a lifeboat speculating how life would be had we not hit that iceberg. LOL. Bells can't be unrung and icebergs can't be unhit.

well Ty, you give two possible directions there.. one being some kind of impartial and honorable consensus, and the other, 'just individuals seeking a possible catalyst to bring society to a point where it aligns with their personal desires' ...

It seems clear to me that it's both, and a great many things in between.

Ultimately for me, this is a place I can have this (broad set of) topics discussed, where it's barely available to me in my daily life, as I have heard other posters say about as much in their Locus.

Consensus hardly seems applicable, as this herd of cats should never be expected to come to some kind of monolithic position.. it is a forum.

To whatever degree PO can be latched to any of our feelings about the way our society has developed, whether it's pollution and environmental degradation, or economic and political models, surely our relationship to dirty and clean energy, or in another frame 'enough and not-enough energy', will tie in very closely to finding avenues to any of our own dreamed-of visions of 'How it should be..' this is pretty much as I would expect it to be, and the regular forays into 'You're too doomer!' and 'You're too Cornucopian!' is a predictable display of the fairly dynamic spectrum of views that this crowd seems to contain.

Works for me. The main benefit of this particular 'coffee-shop of PO' is that it holds onto the edict of the Judge in 'Bonfire of the Vanities' .. "Please, Be Decent to each other."

There are two factors going on.

The first is that when most people get introduced to PO, the immediate reaction is to look to the substitutes, then the technology, then culture change. You arrive at a rough, general, consensus via a route that stops off at lots of different stops, but where you get forced to move on by the realities of the world we live in. If those intermediate stops could be made to work, there would be more people stopped there.

Second, there are the greenies, ex-hippies, etc. who hanker after the idea of the 'pastoral idyll' - but they to tend to get a kicking (not least from me) in that we don't have a population or structure that CAN get there, decline and fall or not. Put simply, these are people who haven't moved on enough by considering what would practically happen in a world of people with nothing to lose.

What most media types can't really get their head around is anyone who really sees where things will head WANTS to find a way to stay in the world we are. It's a nice place - the future looks much more unfriendly.

I still think peak oil is bad news for WalMart. Moreover, they've already been hurt by high energy prices, as they've stated in numerous earnings reports.

WalMart was a company built on cheap oil. Their innovations, like "rolling warehouses" and building huge stores out in the sticks where real estate is cheap, had low energy costs as built in assumptions. They've made some adjustments, greening their stores, but I'm not sure how much further they can go.

One reason high gas prices hurt them so much is their customers tend to have less money than most. They're already feeling the pain from that, at current gas prices. Heck, it affected their sales as far back as 2005. For you, the cost of gas to get there is negligible. That's not true for everyone.

If they can't afford to shop at Walmart, they sure has hell won't be able to afford to shop at the local stores.

Not true. Wal-Mart is losing out to dollar stores. They're small, local, and (almost) everything is a dollar or less. Often, this means you can't choose what brand you get, and the prices are kept low by putting less in each package. You end up paying more per ounce. But like they say...it's expensive to be poor.

As for Internet shopping...I'm not ruling them out, but they're pretty terrible at it right now. They can't tell what inventory they have their stores and what they don't. I think Amazon's going to eat their lunch.

Leanan- "Wal-Mart is losing out to dollar stores." That is so true. I drive to some rather isolated areas going to my wells and I’m constantly amazed at how many dollar stores have sprung up. Often in a strip center but sometimes in an area with little or no other sales outlets. Even in towns it’s true. My WalMart is 3 miles away. My dollar store is ¼ mile away and it’s a big one with lots of food items including milk and eggs. And there are 3 other dollar stores between me and that WalMart. The gas station/convenience stores have also taken a big hit.

More important: I can buy my Blue Bell ice cream at Walgreens which is half way between me and the Wal-Mart. I used to be a regular W-M shopper…2 or 3 times a month. Now I might drop in 2 or 3 times a year.

Yes, Dollar Stores have made big gains -- Warren Buffet is investing heavily in Dollar General -- 'nuf said. But at the expense of Walmart? I have my doubts that they have put much of a dent in Walmart's bottom line. The local super market, yes, that I can believe. In any case, I can't find much solace in knowing that the growth sector of retailing is the one offering yet another outlet for cheap Chinese-made goods. Not that I have any problem with Chinese made goods, just that dollar stores are not game changers in the sense of reviving local economies.

Wal-Mart Executives Sweat Slow February Start in E-Mails

Wal-Mart Stores Inc. had the worst sales start to a month in seven years as payroll-tax increases hit shoppers already battling a slow economy, according to internal e-mails obtained by Bloomberg News.

“In case you haven’t seen a sales report these days, February MTD sales are a total disaster,” Jerry Murray, Wal- Mart’s vice president of finance and logistics, said in a Feb. 12 e-mail to other executives, referring to month-to-date sales. “The worst start to a month I have seen in my ~7 years with the company.”

Walmart's E-Mail: Is Economic Collapse Imminent?

An e-mail sent by Walmart's vice president of finance and logistics Jerry Murray that claimed the chain's early February sales numbers were "a total disaster" has many questioning whether the national economy is getting ready to go all Great Recession Part II on us. For those inclined to seeing the retail sky falling, I say, "It's going to be okay (probably)."

Why is it going to be okay? He's counting on gas prices going down.

Right, Walmart is having trouble and that is because the economy is having trouble which is, in part, the result of PO (from a very macro view) but also the result of a lot of other stuff. (I know, PO is behind every problem, right?) I'm not suggesting that Walmart is invulnerable. I would say they are no more vulnerable than any other part of the economy, and probably a lot less so. Since Walmart is so big, they get the attention. But it's like when Walmart sneezes, local business catch a cold.

I guess my point is that I've heard so much about how PO is going to kill Walmart and usher in a new era of local economies and resilience and growing chickens in back yards (which I did until recently btw), etc. But I think that's all just a lot of wishful thinking. I hope it happens, I really do. But I just don't see it happening and Walmart having a bad February doesn't change that view.

As I said, I think Wal-Mart is more vulnerable because their business model is based on cheap energy, to a greater extent than most. That's not the same thing as saying backyard chickens will save us. I think most of us here understand that the population is now too high for everyone to go back to the way it was a hundred years ago, even if we wanted to.

I guess my point is that I've heard so much about how PO is going to kill Walmart and usher in a new era of local economies and resilience and growing chickens in back yards

Maybe you have, but I don't think you've heard a lot of that here. We have a wide spectrum of opinion here, but your depiction is rather more idealistic than we tend to here. (Resilience is the hallmark of that other site. ;-) I, personally, do not see the end of Wal-Mart as a particularly good thing. As someone else noted, is replacing Wal-Mart with a bunch of dollar stores really an improvement?

ALL business models in use in the industrialized world today are based on cheap energy. Walmart is no different from anyone else in that regard. If you tried to use a business model that didn't take advantage of cheap energy you would go out of business because you would not be able to compete on price.

The problem here is that we don't have anything to compare Walmart to (and here I'm using Walmart as a proxy for all big box stores). If we didn't have big box stores, we would have to have a whole lot of small box stores. The reason we don't have a lot of small box stores is because Walmart's business model is more efficient in every respect, including energy use. And this efficiency derives directly from their use of technology in every step of the distribution chain to minimize costs.

It's not enough to say that PO will hurt Walmart -- PO will hurt everyone. The question is who will it hurt worse? When you're running away from an angry bear you don't have to be faster than the bear, you have to be faster than the person next to you. Walmart's efficiencies will provide a competitive advantage in a high cost energy environment as much as it does in a low cost energy environment. AND I'M NOT DEFENDING WALMART -- I'm not a Walmart lover, employee, investor, or anything else. I fully understand how they (and their ilk) have frayed the fabric of our society and quality of our lives in many respects. But reality is reality and the fact is they are a highly efficient organization that is likely to withstand the impacts of PO much better than many give them credit for.

The things I have heard were not on TOD and I didn't intend to imply they were. But you don't have to go far from TOD to find it -- Kuntsler, Hopkins, Heinberg come immediately to mind. I think Kunstler is the most rabid in his determination to see Walmart's demise. And Disney World. And a long list of other things. I love JHK and agree with his overall view of things, but I think he underestimates Walmart's survival abilities.

In the longer run, Walmart will die. Nothing can survive the wrath of PO for very long. But don't think that the day Walmart dies will be a happy one. Because once they go, I fear there will be little left to replace it.

ALL business models in use in the industrialized world today are based on cheap energy. Walmart is no different from anyone else in that regard.

I disagree. Wal-Mart is more dependent on cheap energy than most. Their customers are lower-income than most, and therefore more sensitive to increases in gas prices. Their large stores cost a lot of money to light, heat, and cool. Their products come from China, to ports located far from their distribution centers, which are far from their stores, which are far from their customers. The "rolling warehouse" model is designed to save money on storage space and inventory, not on transportation. All this was a huge advantage when energy was cheap, but is biting them now that it's not.

The problem here is that we don't have anything to compare Walmart to (and here I'm using Walmart as a proxy for all big box stores). If we didn't have big box stores, we would have to have a whole lot of small box stores. The reason we don't have a lot of small box stores is because Walmart's business model is more efficient in every respect, including energy use. And this efficiency derives directly from their use of technology in every step of the distribution chain to minimize costs.

We DO have a bunch of small box stores. They're called dollar stores.

I think we're past "peak big box." Gas prices are only part of it. They're also being squeezed on the other end - by technology, in the form of online shopping. Wal-Mart, IMO, is no match for Amazon when it comes to technology.

Several yrs ago when wallmart announced the roll out of the neighborhood stores they said the ave. shopper was 28 munites from their store and they wanted to drop it down to 8 minutes and also build close to the dollar stores.

Their customers are lower-income than most, and therefore more sensitive to increases in gas prices.

Leanan, I think there are more people living on the edge that are just scrapping by than many people realize. Look at the number of people of food stamps (up roughly 50% in the last few years).

With the recent gasoline price increases the financial squeeze can only intensify.

Best hopes for those struggling with their bills.

"I think there are more people living on the edge that are just scrapping by than many people realize."

Met a guy at the 'Depot' yesterday in another dept.. plumbing.. said he'd been an Architect for 20 years.. had a bit of that dazed and shocked look that I think many of us are acquiring.

I told him to watch Casablanca again.. just to put a bit of classic perspective onto our situation.

..Denying a refugee entrance.
Rick "Your cash is good at the bar."
Banker "What? Do you know who I am?"
Rick: "I do. You're lucky the bar's open to you."

A Woman "What makes saloonkeepers so snobbish?"
Banker "Perhaps if you told him I ran the second largest banking house in Amsterdam."
Carl "Second largest? That wouldn't impress Rick. The leading banker in Amsterdam is now the pastry chef in our kitchen."
Banker "We have something to look forward to."

I have many friends now confiding about how much anxiety about family finances they are facing. Doctors, Managers, Designers.

Time to ramp up the contingency plans..

Carl "Second largest? That wouldn't impress Rick. The leading banker in Amsterdam is now the pastry chef in our kitchen."

LOL! From rolling in the dough to rolling the dough. Though I'm not too sure I'd want any of our current crop of bankers to be making my bread croissants...

At least it would be honest work!

"I told him to watch Casablanca again.."

As long as society doesn't go all Doctor Zhivago on us.. Watch that one again and explain to me why that isn't a plausible scenario.

Asterix in Switzerland

  • Caius Eucaliptus: Tu ne crains pas l'intervention des des médecins, ô Garovirus?
  • Garovirus: Je connais les médecins de la garnison...
    ...en groupe, ils sont plus meurtriers qu'une légion armée jusqu'aux dents!
  • Caius Rosix: Don't you fear the intervention of the physicians, o Macafix?
  • Macafix: I know the physicians of the garrison...
    ...in groups they are deadlier than a legion armed to the teeth!

(translation mine)

Unlike well herded bankers...
...where the reverse holds.


That's not the same thing as saying backyard chickens will save us.

With the number of guns available in USA it could soon turn to a war with the neighbours.

Written by Leanan:
I think Wal-Mart is more vulnerable because their business model is based on cheap energy, to a greater extent than most.

The companies who can move their products by rail and ship are the least vulnerable to increases in the price of transportation fuel. Those who persist in using semitrailer trucks will be the most vulnerable. Walmart's survival may depend on them figuring this out timely.

There are other factors of course. There are two Wal-Mart stores in the city where I usually shop. The manager of the older store allows his shelves to go empty frequently, stopped selling some products that I was buying (I guess, whose profit margin was small) and has been removing various services. His actions are compelling me to go to other stores including the newer, better Wal-Mart at the other side of the city even though I have to use more fuel to travel there. Basically the opening of a second Walmart in the city and the economic shock in 2008 decreased sales causing the manager to make (bad) choices to reduce expenses that are driving his customers away.

Has anyone noticed how Walmart is aiming to power its operations from renewable energy?

It is aiming for 100% of energy by renewables....!


" But I think that's all just a lot of wishful thinking. I hope it happens, I really do. But I just don't see it happening..."

I do, though it's a bit like watching paint dry. Not as much as I'd like to see, but many folks, especially the lower income and fixed-budget population are having to prioritize more, and realizing they can reduce consumption without taking too big a hit on their essential lifestyles. They are compelled to get to the discretionary side, a good thing, I think, though not so much for those who's incomes rely on pure consumption by others. This is what catabolic collapse looks like; a slow wearing away of things that don't matter so much, and many that do. Too bad our overall economy is so reliant upon consumption of non-essentials to pay for infrastructure, maintaining the commons, etc..

We, in the West, invested in too many of the wrong things for far too long...

We, in the West, invested in too many of the wrong things for far too long...

I couldn't possibly agree more!


How to Survive in the Brazilian Desert [03:47]

Many young people in the semi-arid areas of Brazil see the big cities as their only option for a sustainable future. ADEL provides education and skills for them to stay and become a successful rural entrepreneur in one of the toughest and driest agricultural environments on earth. ADEL is one of the winners of SAP's global competition "The Power of Small" that aims for supporting entrepreneurs strengthening local economies. (Nov. 2012)

We, in the West, invested in too many of the wrong things for far too long...

To be truly blessed, one must want the right things. -St. Augusta

We have become a divided country, between the have's and have nots. Generally speaking but not literally because there are many exceptions, the have nots shop at walmart. Dropping profits at walmart simply reflects the struggle of the have nots. I am an exception that shops there and the other day overheard a woman telling another woman she can't go home until she comes back with dog food because her dog hasn't eaten in 3 days. For the have nots there is income, but not enough to pay for everything needed, so hard choices are made like not feeding the dog or not having on the heater in winter, or eating twice a day instead of 3 times, etc.

As such I think this year we will have another big economic downturn similar to 08/09. We are due for another step down.

Walmart is undoubtedly very resilient true. That article has a point I find interesting though:

4.The nation's business leaders helped put many members of Congress into their seats. Those same companies should now remind representatives that paying the nation's bills, finding compromise on cutting the deficit and achieving immigration reform are all needed for private enterprise to flourish.

By "achieving immigration reform" I take it they mean letting in more people.

Dollar stores are basically just mini Walmarts -- they operate on basically the same business model. When I refer to local stores I'm actually referring to a thing that doesn't exist anymore. I can remember when you went to Main Street to shop and there were clothing stores, electronics stores, book stores, bakeries, hardware stores, etc. You get the idea -- stores that were owned and run by local business people serving the local community. Dollar stores fill an important niche, but they don't represent a comeback of general purpose shopping and they don't supply anything close to the variety of things people need to buy. I can offer just one example that I know well -- the city of Cohoes, NY -- they have a moribund Main Street with empty store fronts, but they have a Dollar Store on the next block and a Walmart five minutes away. How high would gasoline prices have to go to make it uneconomical to drive the five minutes to Walmart and bring back local merchants?

And I would rebut your argument that the cost of gasoline in negligible to me but not to everyone. I assert that the cost of gasoline IS negligible to pretty much everyone. When I see the way the majority, and I mean the vast majority, choose vehicles and drive them I can't conclude otherwise. And to the extent that cost of gasoline IS significant, all the more reason to spend a little of it going to a store where you can buy pretty much everything you need at the lowest possible price.

Of course high fuel prices have hurt Walmart -- it's hurt the economy as a whole. Nobody has been spared, so that isn't a statement that means a lot to me. And believe me, I would love to see a return to the Main Street of old -- I just don't see it happening.

Dollar stores are basically just mini Walmarts

And now MalWart has a small store model called Neighborhood WalMart. Lots of stuff - not stacked deep. 2 lbs $0.99 non-iodine salt - bought all 3 packages they had for food preservation.

But look at most of your local stores. Isles widened over the last 10 years and stocked with less. The local grocery store to look full moved the booze into the food area AND they have what used to be 4 isles blocked off with a row of shelves with bulky stock or empty store branded boxes on them.

Dollar stores are basically just mini Walmarts -- they operate on basically the same business model.

I think they have very different business models. Most notably, they are located where people are, not where land is cheap.

I also think you're wrong about the goods you can buy at them. They're more like general stores now than the trinket-sellers they used to be.

I can offer just one example that I know well -- the city of Cohoes, NY -- they have a moribund Main Street with empty store fronts, but they have a Dollar Store on the next block and a Walmart five minutes away. How high would gasoline prices have to go to make it uneconomical to drive the five minutes to Walmart and bring back local merchants?

That's not the argument I was making. I'm arguing that Wal-Mart is more dependent on cheap energy than the average company, not that the return of Main St. is imminent.

And to the extent that cost of gasoline IS significant, all the more reason to spend a little of it going to a store where you can buy pretty much everything you need at the lowest possible price.

Did you read the link I posted? Wal-Mart's prices are higher than those at Dollar General. Even if they weren't, if you can't save more money than you'd spend getting there, it doesn't make sense to go.

The business model is not what you sell but how you source and distribute it. Dollar Stores and Walmart both depend on cheap stuff from China and distribute it in retail locations that focus on low cost. Yes, Dollar Stores tend to be where people live, but they don't carry the broad range of products that people need -- in that sense Walmart is the true "general store". Can you buy jeans at Dollar Store? Or power tools? Or any number of other essential items you need every day?

I don't think you have any basis for saying that Walmart is more dependent on cheap energy than the average company. Yes, they use more energy in total because they are so big, but if you were to compare the energy invested in distributing each item, I am certain that the per-item energy requirement is lower than others. I have no numbers to base that on, but then you don't have any numbers to base your assertion on. So I guess we're both guessing.

But as to your last point about not being able to save more money than you would spend to get there, my question to you is, okay, where do I go? Where do I go to buy my jeans, shirts, tools, personal hygiene products, garden supplies, and many other items? Do I drive to from one specialty store to another? Is that going to save me money? Or should I walk down the stores on Main Street that don't exist anymore because they couldn't compete with Walmart? Tell me, if not Walmart, where?

Yes, you can buy jeans at Dollar General. Probably not power tools, though they have some hand tools. They have more than you think.

Where do I go to buy my jeans, shirts, tools, personal hygiene products, garden supplies, and many other items? Do I drive to from one specialty store to another?

You can get all those items at Dollar General. You can also buy online. There's almost nothing you can't get at Amazon.

I would like to challenge one statement you made, that Walmart relies on low land prices. Not true as evidenced by Walmart's long running attempts to get NYC to allow them to open a store there. Both K-Mart and Target have multiple NYC locations, but Walmart has been shut out for basically politically correct reasons. The cost of land is not the primary issue - even the worst NYC location is expensive by any definition. It's the profitability of the store that counts which has more to do with volume.

Sound like Dollar General is doing some interesting stuff, and it appears Warren Buffet agrees. Walmart recognizes this and is moving quickly to open their Neighborhood Market stores. And of course the internet will only grow in importance. How all this sorts out as time goes on is anybody's guess. My own opinion is that the big box stores will remain viable until people just can't get to them any longer or the economy completely collapses -- then they will be abandoned. How long will that be? Good question.

I don't think one store means all that much. I was talking about their general business plan. They do in fact have some stores in cities. That's not the key to their success, however.

Their key to success is their efficient distribution model. It has import distribution centers and distribution centers that are within one day's driving distance of their retail stores. They warehouse nothing. They own their trucking fleet, send full loads and route their deliveries efficiently. I doubt online shopping and delivery to the home can beat their efficiency.

Analyzing Wal-Mart's Distribution and Logistics System Feb. 11, 2012.

And also their renewable energy policy (e.g. on site generation) must be saving them huge amounts of operating costs? (see my post above).

Oh - and check out their page on their truck fleet:


"In 2011, we achieved almost 69 percent improvement in fleet efficiency over our 2005 baseline. Throughout our network, we delivered 65 million more cases, while driving 28 million fewer miles, by increasing our pallets per trailer and better managing our routes. The heavier loads have minimal impact on our fuel-efficient equipment, which includes an average tractor age of three years and the addition of more than 13,000 skirted trailers. Our network efficiency improvement equates to avoiding nearly 41,000 metric tons of CO2 emissions, the equivalent of taking about 7,900 cars off the road".

They are experimenting with truck transportation. But when they assert:

In the U.K., we view CNG as a leading sustainable fuel source of the future....

they appear hopeless because natural gas is not sustainable nor renewable as currently produced. If they use CNG in the U.S., then they would avoid paying tax that maintains the roads they use and continue for a few more decades until the world reaches peak natural gas production. This is a business-as-usual approach which according to the Limits to Growth model results in population collapse later this century.

I wonder why Wal-Mart is only installing sufficient grid-tied PV to power 30% of their store's electricity needs. They have enough roof area and parking lot space to produce 100%. They should be able to purchase in bulk to get cheep Chinese PV and good deals on inverters.

I understand this. What I'm saying is that "efficient" when energy is cheap is not the same as "efficient" when energy is expensive.

The "just in time"/"rolling warehouse" model works great when transportation is cheap and supply lines reliable.

No inventory is a big money saver when your biggest expense is paying for inventory and storing it. But that changes as fuel prices increase. If Store A needs two widgets on Monday, one on Wednesday, and three on Friday, you make three trips. No money wasted buying and storing the items before they're needed. But if fuel is expensive, maybe it's cheaper to build more storage space and make one trip a week instead.

Not everyone is able to order things online. I saw a statistic that 1/4 of all Wal-Mart customers do not have a bank account. Online purchases are extremely risky with online companies misidentifying legitimate purchases as fraudulent and wrecking people's credit ratings. After such an experience, some people never purchase online again.

I can not order items online at Warmart.com and have them shipped site-to-store because I do not have a telephone. I can not have things delivered to my house because half of the drivers can not located it and big trucks will not fit on my road. Amazon.com is only available for some people.

Exactly. Those are also the people who can least afford to drive 15 miles to Wal-Mart. They're the ones buying groceries at the dollar store.

I saw a statistic that 1/4 of all Wal-Mart customers do not have a bank account.

Why have one if creditors can "swoop in" and take your money from your bank account?

Besides, Wal-mart now offers banking-like services via their pre-paid debit cards. With said pre-pay card you can then go on line and buy stuff.

..or go to Dollar General and get a prepaid Visa card.

I think what you're missing is that you kind of need a computer and Internet access at home to buy online. Only 70% of Americans have Internet access at home.

If eventually the economy were to get so bad for Walmart to fail then I suspect they would be bailed out or nationalised. Walmart is a TBTF corporation. The one advantage this process of consolidation of companies has done is it has made it easier for large chunks of the economy to be centrally controlled should the whole economy go belly up. The government, through the army, could take control of Walmart, Monsanto and Exxon and between them they could maintain the whole food system through use of rations and SNAP cards. Now I do not see this coming our way any time soon but it could be seen as a solution if the economy is really in a quagmire say if the financial sector goes into TOTAL meltdown and world trade grinds largely to halting thus stopping Chinese shipments to the USA.

Or...by the time it happens, Wal-Mart will not be that important, because people will be shopping elsewhere.

Once upon a time, Sears going bankrupt would have been disastrous for rural America.

You can buy all that stuff online. Some energy savings from poorly heated and poorly air conditioned space. There are horror stories so not sure online any better than Wal Mart. Those at the bottom get screwed. I guess it also depends on where you live. Boulder, Colorado, near where I live, still has a thriving hardware store despite Home Depot and a lot of other stores to boot. They have kept Wal Mart out so maybe that is part of the explanation. But Wal Mart will soon open a so called neighborhood store in Boulder. Don't know what impact that will have. Boulder is very upscale as well so maybe that makes a difference.

Yes, many small towns were wiped out decades ago by Wal Mart. Drive through western Oklahoma some time. Totally dead main streets.

There is also the whole cultural and social argument about why local stores with local owners was better for small town life than absentee owners. But obviously low,low prices trumped that argument a long time ago.

The Dollar Store is the 15th largest food retailer in the country, and growing.


WalMart may be #1, and by a huge margin, but Criminy, these are not grocery stores in the usual sense. WalMart just got into food sales, and has blown past perhaps a century of tradition in a couple years.

Dollar Stores beats A and P and WinnDixie, selling high fructose corn syrup and flour packaged to last till the next millennium. $11.8 billion in '09 for classic junk food. Now watch WalMart emulate them, spinning off neighborhood "Wallies" selling cheap lipstick, socks and cellophane packaged food sticks.

WalMart just got into food sales, and has blown past perhaps a century of tradition in a couple years.

Actually WalMart opened its first "Super WalMart", selling groceries, 23 years ago.

Eaters, beware: Walmart is taking over our food system

It was only 23 years ago that Walmart opened its first supercenter, a store with a full supermarket inside. By 1998, it was still a relatively modest player with 441 supercenters and about 6 percent of U.S. grocery sales. Last year, as its supercenter count climbed above 3,000, Walmart captured 25 percent of the $550 billion Americans spent on groceries.

Ron P.

"perhaps a century of tradition in a couple years, decades."

When I wrote the above, I was thinking you'd call out the century, as the emergence of same owner large grocery stores, or even stores selling groceries and dry goods, is not that long.

Edit But the point is still valid. That one retailer made drastic industry changes in a very short time. Looking at A and P, they switched from coffee and teas to groceries about the turn of century, yet it was quite awhile before they changed to large stores of self service aisles.

To big to fail. Major food, consumable and commodity distribution companies are structurally essential for running the Country. If their logistical infrastructure were to go off-line the entire nation would basically implode, much more so than if the banks failed. If Walmart failed the Government would immediately bail it out or nationalise it.

You are right, these companies are going to be around for a long time. That's not to say they won't pull in their horns and close down non-profitable outlets or evolve to use their logistical know-how to better effect. I imagine they're going to invest heavily in automation.


You make some excellent points.

Look people, Walmart itself evolved to be a hedge against rising energy/labor costs, which is precisely why they pushed for Chinese assembled goods.

Manufacturing in China is one big hedge. And there's nothing to stop it. There is no other country on the planet, none, that has the workforce, culture, and discipline to manufacture at the scale that China does.

Jeff Rubin is wrong.

I hold out no hope for community-based change or retrofitting our economy for resiliency.

I do hold some for the latter in a relevant number of economies, but it hasn't grown over the course of the last year.

As regards the former, I guess that educating communities to a level of sufficient common understanding can be achieved within some polities, there are already a handful of such achievements around at present. But the majority of those that can afford a voice would indeed in all likelihood just scream and head straight to the rea. Hope can be placed here into the pain signal achieving its intended purpose, and hounding these folk to the physiotherapist when they come out of emergency care. Without minding some of the drums in this space, I think that it is a condition for which there are a number of proven cures out there and more of them being played with in the labs. Snake oil's available too.

No one really ran amok in 1973, but ya never know. One of the couple big guns around doing so could be pretty nightmarish. OTOH senses tend to complain when ya stare into a big gun, so chances are that the rest of us will swallow the reality check.

The one bit of great news for me from the 2008 burst is that those that don't get a say seem to have the resilience with them.

Also I'm still holding out sitting on the fence against hope for the force of reason to head off the bite of the event. An exploit not mentioned in the quote that I do count on are efforts to hammer policy into the tyrannies right now. That comes admittedly with a load of drawbacks and can be a reversable fix, but because our predicament is first and foremost a technological one and only epiphenomenically a social one, thats the one I'm hooked up to.


PS. Seen from across the pond some of the despair in here seems specific to perceived and existing conditions of the US polity. Said & diving for cover asap:)

PPS. Ya have to hope the gap won't appear at the moment when climate change hits the commons. The ship needs to be steered into the freak wave.

So, the minerals are mined in NA, shipped to China and built to an American specification.....and then shipped back for our purchase. I have had it with this situation.

I hate to shatter your illusions, but China is by far the world's largest producer of iron ore, producing nearly 20 times as much as the United States. The no. 2 producer is Australia, which is only a short trip by ore carrier away from China. Australia and Brazil account for 72% of world iron ore exports. China is also the world's biggest producer of coal, and again nearby Australia has huge reserves of the stuff.

See http://en.wikipedia.org/wiki/List_of_countries_by_iron_ore_production

And http://en.wikipedia.org/wiki/List_of_countries_by_coal_production

Meanwhile, America's historically important iron ore mines near the Great Lakes are mostly big holes in the ground now. Iron ore is not a renewable resource and when it's gone, it's gone for good. The relative decline of the US as a manufacturing power is driven as much by the depletion of its natural resources as it is by its high wages.

And, speaking of wages, they aren't that low in China any more. Companies are now starting to move manufacturing from China to places like Mexico to take advantage of lower wages there.

Iron ore is not a renewable resource

Just use the hole in the ground as a dumping site for used metal objects. Wait a few hundred years for it all to rust. Then you got your new deposit of iron-ore.

Paulo... I don't know about Canada, but: http://www.unionlabel.com has a nice selection of US made stuff, including Roundhouse denim products. I like their jeans and overalls. Not too pricey either.

Re: Hardware: A close friend and his brother inherited one of the larger US manufacturers of hardware back in the '90s and almost lost the company trying to keep manufacturing in the US. Don't get me started on the cheap crap sold at big box stores made in Asia. I cuss it every day. I got some Grade 8 bolts for my bush hog that sheared off almost immediately. Looking at the broken bolts, it looked like they stamped a cheap standard bolt with the grade, then anodized it. Very dangerous under certain circumstances. Same with most stainless I buy these days. Don't torque them down too hard...

Master Locks Millwaukee WI, made to specification in China.
I want to buy a union made North American product and I can't find one.

Alas, the photo op of Obama celebrating Master Lock production returning to Milwaukee is due to robots doing to production so while it'd be "American made", there is no robot union that I know of.

A few weeks ago I tried to purchase some egg noodles not made in China by virtual slave labour

Unlike a lock - you can make your own noodles. Why not see what you can make yourself and be able to store that labor for later consumption - like canning/preserving food or even making noodles?

Unfortunately any 'post PO' business philosophy has to be able to survive in this infinite growth environment - I would say they cannot. Where is your closest shoe repair man? Remember those?

For many years I have avoided Chinese products, but for the past 5 years or so I have discovered this is impossible in any relevant sense.

With the Shanghai 'cyber warfare' news I wonder about a few things, only half-jokingly:

  • Are the Chinese food contamination issues a bug or a feature?
  • Are all those export-quality Norinco Firearms likely to work when they are 'needed'?
  • Does your toaster have a Trojan horse installed to allow it to burn down your house on command from the Orient?

Enquiring Minds want to know.

With the Shanghai 'cyber warfare' news I wonder about a few things, only half-jokingly:

You forgot:

Is what is being reported actually true?

Archived. Thanks

There have been recent proclamations, mostly from conservative quarters, that President Obama has been a major obstacle to oil industry activity. And some of the left have applauded him for such efforts as not approving the Keystone border crossing. Most here should already know I’m an oil patch conservative and obviously don’t agree with all of the POTUS’s social/tax agenda. But that doesn’t stop me from offering the reality: President Obama has been the best thing to happen to the oil patch in a long time. Ok…OK...OK…not so much anything he has done per se. The rise in the price really gets the credit. But the POTUS has been just as willing to take advantage of that fact as the oil patch. We both have a great vested interest in increasing domestic oil production.

From Oct 2012:

The administration has issued more DW drilling permits in 2012 since 2007. Through Oct 2012 the govt has issued 89 permits for news wells in water depths greater than 500’. In 2007 a total of 106 permits were issued under the Bush administration.

Environment groups such as Oceana have asked the administration to stop issuing permits because the feel the new regulations aren’t sufficient to prevent another BP like disaster. The administration has refused those requests.

From Rigzone this last Monday: “The Gulf of Mexico is in the early stages of an extended growth cycle and is poised to remain one of the strongest offshore markets in the world in terms of deep water activity. Overall, rig count and exploration and production (E&P) activities are at pre-Macondo levels and look to continue on an incline for the next couple of years. The rig count for deep water rigs is forecasted to be the highest it has been in five years and even higher in 2013. In the first half of this year, the Gulf of Mexico is expected to have 46 competitive rigs with this number projected to increase by mid-2014 to just over 50 competitive deep water units.

And if anyone doubted the industry didn’t expect continued support from the current administration: In 2012 eight new build floaters entered the Gulf of Mexico with another eight expected to enter in 2013.Thus far, five new build floaters are forecasted to enter the 2014 GOM market. Investment levels in 2012 were expected to equal the pre-Macondo peak and push well beyond it in 2013. The govt has approved 332 deep water permit applications. In December 2011 the administration held its first offshore auction since the BP oil spill, granting leases for more than 20 million acres in federal waters. The leases are worth more than $330 million to the federal government with the potential to produce 400 million barrels of oil. And that $330 million in just the lease bonuses. If that 400 million bbl target happens that’s another $6 billion in royalty payments to the govt. Everyone, including the POTUS, loves that mailbox money.

And not just an increase in drilling activity: the installation of a forecasted 13 floating platforms by 2016 will provide the additional capacity required to push GOM crude production above and beyond its 2010 record. Over the next five years, a forecasted 49 deep water fields are expected to come online in the Gulf of Mexico.

And all of this has and will occur under President Obama’s watch. The right wing can whine about how little onshore development is happening on govt lands. But as they say if you want to learn the truth just follow the money.

Yep, that is all true. I just wish that such objective facts guided political discussions instead of the stereotypes that people irrationally believe despite massive amounts of contradictory evidence.

s - One might think George Soros et al would be airing TV spots highlighting everything I just offered. Pocket change compared to what they spent to help the POTUS get elected. Imagine how the right wing demagogues would freeze like deer in the headlights. But the left appears to be just as motivated to keep the facts from the public as the right. I know the POTUS will occasionally toss out a few little stats but nothing on the order of what I just offered. Imagine a screen shot showing the map of any New England state mimicking the size of the leases in the GOM that have been awarded to the oil patch during President Obama’s watch. Or a map of the GOM showing little flags for every one of those hundreds of drilling permits the POTUS has allowed. And then add big oil derricks representing all those new fields out there. Even better: a graphic showing oil spewing from the Macondo blowout with little drill rigs that are currently in the planning stage to offset the BP well. Yes: the reservoir that blew out is going to be developed. I know the company that has the offset leases. Have you heard anything about that in the MSM?

Imagine the impact on the American mindset that would have. An impact that apparently neither the right nor left wishes so see happen. How can we expect the public to understand situations if both sides of issues misrepresent the facts? A big reason why I get upset when the left vs. the right debates pop up. IMHO it's not a right vs. left battle but a citizens vs. the system (both L & R) battle. One of the most fundamental methods of winning a war: divide the enemy's forces. With the public being the enemy of the system. And I suspect the system (the politicians) has succeeded beyond their greatest expectations.

Imagine how the right wing demagogues would freeze like deer in the headlights.

You are a rugged cynical oil guy but even you have your naive side. Like that would stop them. They'd dismiss it as liberal propaganda and stick to the script. They have a base that thinks Obama is a Kenyan muslim. They think the DHS is stockpiling bullets which may be used to corral people into the FEMA concentration camps. Facts don't matter. It is what you can get your base to believe. Of course, this is back-firing on them now. They created a Frankenstein monster that they can't control. They went too far and the rapenut candidates can't get elected. Karl Rove is trying to move things back from crazy land . . . and what did the Tea Partiers do? Make a photoshop of Karl Rove as a Nazi. LOL.

But I agree that the Obama administration does not highlight this information as much as they could. Probably because they don't want to alienate the parts of the party that are fighting the Keystone XL Pipeline. But I don't think that is wise strategy . . . are those voters going to vote for the GOP instead? I guess they could vote Green party.

I make a point of not polling the TODsters. But I will this time: who was truly shocked to see how much support the POTUS has given to offshore drilling SINCE the Macondo blow out?

Naïve? HA HA. You give me a $1,000 graphic budget for maps/charts alla Ross Perot and turn me loose in the House for 1 hour and I’ll have both sides of the isle peeing on themselves and hiding their faces from the cameras. LOL. I wish I had time to create some of those graphics for the TODsters. I can clearly see them in my mind’s eye because I’ve done many such displays in the past. However impactful my words about the GOM might appear they would pale compared to graphics. Just imagine a map of the GOM with the 400 big red pins showing where wells have gotten drilling permits. And the a big black spout of oil at the Macondo location. And big yellow drill rigs showing there the 70+ wells currently being drilled are located. And a big caption: “ACTIVITY AUTHORIZED BY PRESIDENT OBAMA”.

Even a drunken half blind J6P would get the message. Picture me doing this show & tell in front of a bunch of environment protection organizations having a “Support President Obama” rally. How many would you think might start calling me a liar? If I did it in front of a RNC conference would my reception be any better?

His support for drilling in the GOM was obvious when his administration rubber-stamped permits for that purpose during the moratorium.

More or less of an unanswer to the question, but I felt badly about the usage of solvents adding insult to injury. Assuming they are as toxic as the docus over here claimed them to be which they likely are.

Sequel: Nervousness about oilmen with chemistry sets.

& hasten to add that the ones in here tend to display impressive geology skills.

Ta for asking.


MIT study finds fuel economy standards are 6-14 times less cost effective than fuel tax for reducing gasoline use

In a study published in the journal Energy Economics, MIT researchers have found that a fuel economy standard is at least six to fourteen times less cost effective than a fuel tax when targeting an identical reduction in cumulative gasoline use (20% by 2050)


Well, duh, MIT. Everyone knows this. The problem is that gas taxes are viewed as political suicide so politicians are forced into use other more clumsy methods of boosting auto efficiency such as CAFE standards.

CAFE will force the manufacturers to make more efficient cars before there is obvious demand. Gas tax might cause people to want to buy them, although at that point they may not be able to afford to.

How effective is all this at saving energy compared to providing actual alternative transportation that works?

From a comment to the article:

I don't know about Lee Iaccoca, but Ross Perot wanted a 5 cent per gallon tax every year for 10 years. By 2002 there would have been a 50 cent per gallon tax. I think Ross had that one right.

mrflash818, it seems a lot better to have a higher fuel tax. The customer will then have an incentive to demand higher fuel economy rather than being stuck with the car models that satisfy the fuel economy standards. The higher fuel tax provides an incentive to owners of existing cars to reduce demand too.

5 cents a year shouldn't hurt too much.

I think that a penny should be added every time the US average price drops 5 cents. Up to a maximum 5 times a year.

Turnbull FL., that would be a start.
I would go for a 10 cent increase each year for 5 years. It would bite in the wallet a little bit more but would have more of an impact on people's habits.

How about we raise the gas tax by a penny each month for the next 10 years. This would mean a relentless rise in gas prices for 10 years. Now I don't think it would ever make it that far . . . someone would get in office and stop it at some point. Hopefully not before raising it by at least 60 cents or so.

But just knowing that the gas price will go up for the next 10 years would cause people to make some wiser decisions. Because the sad part is that tax or not, the price of gas IS going to go up over the next 10 years. No, it won't be a steady rise . . . it will be a saw-tooth rise. But the long-term situation is that it will rise. And people need to realize that before they buy a big vehicle they really don't need.

s - Yep...good time for a fuel tax hike. Gasoline is selling at a higher price for this time of the year than ever before. Even in refinery rich Houston gasoline has gone up $.20/gallon in one week. I can almost hear the pitapater of little political feet running to the podium to propose an increase in fuel taxes. LOL. Sadly ironic, as you imply ("the price of gas IS going to go up over the next 10 years"), the situation should be a catalyst to do just that.

It's a great fantasy to imagine hundreds of political lemmings rushing off that increased motor fuel tax cliff because it’s the right thing to do. But it’s still fantasy.

Well yeah. As I posted above, I called gas taxes "political suicide". But such taxes are good policy nonetheless. Imagine how much worse things would be in Japan & Europe if they didn't have high gas taxes which forced them to build public transportation systems and housing stock that doesn't require so many cars. They would be in complete meltdown right now.

We've been able to get away with low gas taxes because we have been a major oil producer. But going forward, we may get into trouble if we can't afford the oil or when the supply starts dropping and prices go up. We'll have another round of home foreclosures as the prices of houses in far-flung suburbs drop because people can't afford to drive to their jobs AND pay the mortgage.

Since you bring it up;


The proposal is for a 10 cent a gallon tax increase. There is even a $25 tax on bicycles to make sure no ox in ungored, or at least untaxed.

Yes this is true, but there will never be a fuel tax in America because Americans don't govern anymore.

Even the most idealogical libertarian has to admit that government of some type is necessary. If government is necessary, then governing (making cost/benefit decisions and coming to consensus) is necessary.

But Americans just want the banks to extend infinite money to the corporations and hope things turn out ok. We don't really govern in the interest of the country anymore.