Drumbeat: March 4, 2013
Posted by Leanan on March 4, 2013 - 11:31am
'Peak oil' doomsayers proved wrong
Washington (CNN) -- Remember "peak oil"?Five years ago, some oil market speculators became convinced that the world was nearing the limits of oil production. Sometime soon -- the 2010s? the 2020s? -- oil production would begin a long steady decline.
Think again. World oil production continues to rise. Leading the oil renaissance: the United States. The International Energy Agency predicts that the United States will overtake Saudi Arabia and Russia to become (again!) the world's leading oil producer by 2017. If the agency's estimates prove correct, the United States and Canada together will become net energy exporters by about 2030, and the U.S., which uses 20% of the world's energy, will achieve energy self-sufficiency by the mid-2030s.
Predictions that the world would imminently "run out of oil" have been worrying oil consumers since at least the 1920s. They always prove wrong, for reasons explained by the great oil economist M.A. Adelman after the last "oil shortage" in the 1970s:
Oil reserves, Adelman writes, "are no gift of nature. They (are) a growth of knowledge, paid for by heavy investment."
Fracking to the rescue as US oil production hits 20-year high
The global energy crisis has been postponed yet again, so it’s time to forget about “peak oil”. Human ingenuity has saved the day again.Peak oil, the theory that we have passed the moment of maximum global oil production, was described 40 years ago by former Royal Dutch Shell geophysicist Marion Hubbert.
Essentially, Mr Hubbert said that once all the easily extractable oil had been pumped out of the ground, production would go into terminal decline. This increasing scarcity of oil would then cause energy prices to soar, plunging the world into an energy crisis. Peak oil devotees have argued that we passed that peak in the 1970s and the only way for the oil price was up.
However, the fracking boom that sent US gas prices plunging could be about to do the same for oil.
US oil production: Don't believe the hype
Oil production is headed back up, but it will peak below the 1970 high in the US or even the secondary high notched in 1985, federal estimates say. It can's solve worldwide oil depletion.
WTI Oil Futures Trade Near $90 a Barrel in New York
West Texas Intermediate traded near $90 a barrel, a level it has held above so far this year, after money managers cut bets on rising prices.Futures were little changed in New York after sliding to a 10-week low on March 1. Net-long positions in WTI dropped 16 percent, according to weekly data from the Commodity Futures Trading Commission. Services industries in China expanded at the slowest pace in five months in February, a survey of purchasing managers showed yesterday.
China ousts the U.S. as the world’s main oil importer
For the first time in almost 40 years, the U.S. has lost its top net oil importer position to China according to preliminary figures published by the U.S. Energy Information Administration (EIA).Although not set in stone yet, the news is considered by specialists as a “once-in-a-generation shift that will shake up the geopolitics of natural resources.”
Ophir Seen Luring Shell With Africa Gas Assets
Ophir Energy Plc, the U.K. explorer with natural gas assets in Africa, is turning into a takeover target for producers including Royal Dutch Shell Plc as its limited cash hampers the ability to develop finds on its own.
CNPC to Spend $2.4 Billion on Upgrades to Produce Cleaner Fuel
China National Petroleum Corp., the nation’s biggest energy company, will spend 15 billion yuan ($2.4 billion) to upgrade the quality of fuel it refines, General Manager Zhou Jiping said.
Mexico’s Pena Nieto Gets Nod From Party to End Pemex Monopoly
Mexico’s President Enrique Pena Nieto won support from his party to advance with his growth plan that includes ending a 75-year-old state monopoly on the oil industry.
Iran crisis may hit expansion plans of Indian refiners
Amid insurance woes, the US sanctions on Iran may well cast a shadow on expansion plans by Indian refiners.
Canada Condemns Pakistan’s $7.5 Billion Pipeline Project To Iran
John Baird, Canadian foreign minister issued a statement saying that the Canadian federal government got disappointed by Pakistan's decision to build the $7.5 billion gas pipeline to Iran to purchase Iranian resources through the pipeline."Canada is deeply disappointed by Pakistan's decision to build a new natural gas pipeline with Iran and to purchase Iranian resources through it," said John Baird in the statement Friday.
Libyan army restores order at gas complex, flows suspended
MILAN/TRIPOLI (Reuters) - Libya said on Monday the army had restored order at an energy complex near Tripoli after weekend clashes between militia guards, but that gas exports to Italy would remain suspended and oil production cut back for several days.Libyan officials said the national army and militias aligned with it had arrived at the Mellitah oil and gas complex, some 100 km (60 miles) west of Tripoli, on Sunday night. The locally deployed militias had ceased fighting but gas exports had been suspended on Monday for a third day.
Myanmar to open offshore oil and gas bids by April; violence could delay China pipeline
YANGON, Myanmar — Myanmar plans to put over 20 offshore oil and gas exploration blocks up for auction by April as the country pushes to attract foreign investment and expertise to help overcome an energy deficit that’s a legacy of gas export deals made by its former military rulers.Myanmar produces more than enough natural gas, which is its primary source of energy after biomass, to meet domestic needs. But it exports about 80 percent of the 1.2 to 1.4 billion cubic feet of gas it produces each day to Thailand under contracts signed by Myanmar’s old authoritarian military rulers.
Indonesia oil/gas contractors agree to export proceeds rule-c.bank
(Reuters) - Indonesia's oil and gas contractors have all agreed to comply with a controversial rule that forces them to put their exports proceeds through a local bank rather than directly offshore, the central bank said on Monday.The agreement follows protests by at least two energy contractors and a warning from the government that their shipments could be blocked if they refused to abide by the rule, being implemented this year.
Shell says may shut down key Nigerian oil pipeline over sabotage attacks
Lagos (Platts) - Shell's Nigeria unit may be forced to shut down completely its key Nembe Creek oil pipeline in the Niger Delta following repeated attacks on the facility by thieves siphoning crude, the chairman of Shell companies in Nigeria, Mutiu Sunmonu, said Monday.The sabotage attacks are "coming to a crunch [such] that rather than allow people to continue to attack my pipeline and devastate the environment, I may actually consider shutting in the pipeline completely," Sunmonu said in a statement.
Keystone report raises ire of critics
LINCOLN -- The U.S. State Department offered no recommendation for or against the Keystone XL pipeline on Friday in its release of a massive draft supplemental environmental impact statement.But the agency in charge of the environmental review of the proposed TransCanada project did draw quick and heavy criticism from opponents of the project with two points made in the executive summary released at mid-afternoon.
Environmentalists Step Up Opposition to Keystone Pipeline
Opponents of TransCanada Corp.’s Keystone XL pipeline say they intend to make President Barack Obama hear their concerns after a March 1 report helped clear a way for White House approval of the project.The pipeline drew a fresh wave of objections from groups including the Sierra Club, Natural Resources Defense Council and 350.org, when the U.S. State Department’s draft assessment said it won’t have a significant impact on global warming. Members of 350.org will confront Obama and Secretary of State John Kerry at all future public events, said Daniel Kessler, a spokesman.
Rig Owner Cites BP's Low Flow Estimates
NEW ORLEANS (AP) -- The owner of the oil rig that exploded in the Gulf of Mexico in 2010 says BP hampered efforts to stop the resulting gusher of oil by misleading government officials about how many barrels of oil were flowing each day from the damaged well on the Gulf floor.
BP Spill Judge to Hear From Explosion Survivor This Week
The judge presiding over the trial of BP Plc (BP/) for the Macondo well disaster is set to hear from a survivor of the fatal rig explosion that sent millions of gallons of oil pouring into the Gulf of Mexico, according to a witness list prepared for the case.
Exxon Mobil Begins Defense in New Hampshire MTBE Trial
Exxon Mobil Corp., on trial in New Hampshire for contaminating residents’ drinking water with a gasoline additive, will try to persuade a jury that federal law required the use of the chemical and that it didn’t harm anyone.
A Snapshot of Drilling on a Park’s Margins
The Anschutz Exploration Corporation has been drilling exploratory wells for hydraulic fracturing, or fracking, on the Blackfeet Indian Reservation, immediately east of Glacier National Park, for over two years.Now a subsidiary of the company, Xanterra Parks and Resorts, is bidding on a contract to operate all concessions in Glacier National Park for 16 years.
Fracking Under a Historic Farm
In its ongoing campaign to win over opponents of hydraulic fracturing, the natural gas industry has succeeded in persuading the owner of a historic Pennsylvania farm to allow gas to be extracted from beneath her property.
'Building New Nuclear: the challenges ahead' report published
Failure to build a new fleet of nuclear power stations in the UK could make it much more expensive to meet our climate change targets and Ministers must stop ‘crossing their fingers’ and urgently develop a back-up energy strategy, a report by the Energy and Climate Change Committee argues.
Obama rounds out cabinet with EPA, Energy picks
WASHINGTON (Reuters) - President Barack Obama will announce on Monday his intent to nominate air quality expert Gina McCarthy to lead the U.S. Environmental Protection Agency and nuclear physicist Ernest Moniz to head the Department of Energy, a White House official said.
Peak Car - Europe's car industry is on the wane
"Peak Car" is the term to use the industry experts when they discuss the issue of the future of the industry in Europe, it is based on a concept of the energy industry -. More precisely the concept of global peak oil, if peak oil, the highest point in promoting. is reached, the amount of world's oil production takes off necessarily, since the reserves of the raw material are simply getting smaller.(Translated from German via Google Translate)Analog argue the proponents of Peak Car. You ask the question whether the maximum car sales in Western Europe may already be history. Unlike the oil production here, the shortage is not on the supply side. Quite the contrary: there is a large excess capacity in production. On the old continent, depending on the estimate that up to 30 percent more than currently produced vehicles are in demand. It lacks not in cars, but at a sufficient number of car buyers.
India’s Only Electric Car Revamped to Woo Drivers
Long before the Nissan Leaf and the Chevy Volt were born, India had its own electric car, the tiny REVAi. The car ended more than a decade of production last year after selling less than 5,000 units worldwide. But underwhelming sales haven’t prevented its maker from raising the stakes: This year, Mahindra Reva is betting everything on its new electric four-seater hatchback, the E2O.
SolarCity is making solar power pay
Most of the taint is around solar manufacturing. Our business model is totally different. We're an energy company. We install solar systems for free, and we sell the electricity at a lower rate than you can buy it from the utility. So given the option of paying more for dirty power or paying less for clean power, what would you take?
Spill in China Underlines Environmental Concerns
HANDAN, China — The first warning came in the form of dead fish floating in a river.Then officials in this city got confirmation that a chemical spill had taken place at a fertilizer factory upstream. They shut off the tap water, which sent residents into a scramble for bottled water. In the countryside, officials also told farmers not to graze their livestock near the river.
COPAKE FALLS, N.Y. - WHAT could be a greener, more feel-good purchase than seeds? Aren’t the tiny plant embryos, huddled in the suspended animation of dormancy inside a simple paper packet, true innocence incarnate?I had held to that conviction for more than 25 growing seasons, dreamily lost, like other gardeners, in the annual onslaught of catalogs stacked on our kitchen tables in February and March. But those seeds may be far from innocent. It turns out that growing vegetables for their seed often involves more chemical use than growing those same crops for food.
In California, What Price Water?
At the moment, the seawater is being diverted from the ocean to cool an aging natural-gas power plant. But in three years, if all goes as planned, the saltwater pulled in at that entryway will emerge as part of the regional water supply after treatment in what the project’s developers call the newest and largest seawater desalination plant in the Western Hemisphere.
Drought Revives Interest in Reservoirs
Reservoirs are an “efficient way to capture storm water,” said Thomas E. Taylor, the executive director of the Upper Trinity Regional Water District, which wants to build a $270 million reservoir known as Lake Ralph Hall northeast of Dallas.Mr. Taylor said that reservoirs provide a reliable water supply, and added that many farmers have built minireservoirs on their land.
But environmentalists say reservoirs are unnecessary, expensive and damaging to the land.
Splash and grab: The global scramble for water
What we call land-grabbing is often more about access to irrigation. We urgently need to know how much is being purloined.
Carbon pricing needed to control airline CO2 emissions-study
BRUSSELS (Reuters) - Aviation pollution can only be stabilised by the middle of the century if a price is set on airline carbon emissions, research said, countering industry hopes that green goals can be met via technology improvements and biofuels.A European Union scheme to force airlines using EU airports to pay for their carbon emissions caused an international outcry, forcing the European Commission to propose a year-long freeze of its law.
Clearing Forests May Transform Local—and Global—Climate
Researchers are finding that massive deforestation may have a profound, and possibly catastrophic, impact on local weather.
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Watch this 12 minute video. It is about the real estate bubble to top all real estate bubbles. And when it burst it could bring down the Chinese economy which would have repercussions around the world.
China's Real Estate Bubble
China's economy has become the second largest in the world, but its rapid growth may have created the largest housing bubble in history.
Those who claim that China's economy can continue growth at the present rate either haven't heard the news or they are in denial. When their real estate bubble burst, and it will burst, it could throw China into a tailspin.
And what will this do to world oil consumption? It could cause their imports to drop by over 2 million barrels per day, causing world prices to collapse. Perhaps and perhaps not. Anyway it is food for thought.
Ron P.
Thanks, Darwinian, that's a very sobering, scary story. If there was any doubt that we are on the edge of the cliff, this eliminated it.
Correction: It WILL throw China into a tailspin.
According to available data, China´s current growth seems to have slowed to a little over 7% annualy... Which means, assuming that number has any meaning at all, that it´s economy is on track to double in ten years time. Is there anyone who is sane, that believes the planet can support the doubling of the Chinese economy within the next ten years? As I peer into my crystal ball I see the storm clouds of a double whammy gathering on the Chinese horizon. They are going to get hit hard with both ecological and economic collapse.
There is a reason I self identify as a doomer.
Cheers!
Fred
Not so sure of my sanity these days in the face of this kind of stuff, but for what its worth ... no, I can't see a 'double China' in 10 years.
Good health!
Phil
Demand For Ivory in China Drives Elephants to Brink of Extinction
They also do a pretty darn good number on rainforest trees both at home and around the world. To be fair they do have to stock all those upscale shopping malls in their 'Concrete Jungle Ghost Towns' with something, right? They sure as heck wouldn´t want to be caught dead (pun not intended) selling all that plastic crap they make for the US market to their own nouveau riche real estate speculators. Not to mention that they have to provide exotic fare in all those expensive empty restaurants serving 'ghost' sharkfin soup. /sarc
Not to mention the Far East demand for rhino horn and abalone.
Powdered rhino horn is rumoured to be good for a number of ailments, including cancer. In reality, it's made of the same stuff fingernails are made of.
Dried abalone is regarded as an aphrodisiac because of its resemblance to ladyparts.
South Africa fights a constant battle against poachers for both these items.
Large-tusked elephants have all been shot by trophy hunters. Only small-tusked elephants remain to breed. The era of magnificent bull elephants with gigantic tusks scraping the ground is over.
Why is it all right to kill your cows for their meat but not your elephants for their ivory? It seems to me that the evidence is very clear; if you want to preserve animals like elephants and rhinos allow them to be owned by private companies that can sell what they harvest into an open market. If we prohibited the sale of beef the population of cows would drop by more than 90%. The same is true when we prohibit the sale of other animal products.
This is an old drumbeat, but, briefly, there would seem to be many inherent problems when we commodify, or attempt to commodify, "everything". You can't, of course, do so, and in any case, while that might "save" the elephants, it won't do anything for the countless other species that are crossing the rubicon into extinction.
Economies seem to depend to a great extent on energy inputs. One can also grow an economy by increasing efficiency, but this is subject to diminishing returns. Given that fossil hydrocarbons are likely to become much more expensive over the next decade, a good policy for China would be to invest heavily in solar and energy storage technologies.
United States reduced by 25% and China doubles.... Can you see it now?
If at their current pace they're leading the charge of the extinction of elephants, rhinos, sharks, overfishing, and are at the forefront in the razing of the Amazon...I'd say a doubled China looks like a scorched Earth. The US can certainly stand to turn it down a few notches...but 1.2 billion people suddenly finding relative wealth? Toast.
Yeah, I'm happy people are being lifted out of poverty but the Chinese need to be a bit more responsible and drop the ancient superstition. Between bear bile, shark fins, tiger bones, Rhino horns, and other superstitious nonsense . . . the newly affluent Chinese are causing a lot of animal cruelty and environmental destruction.
Tell me about it, in my country half the people can't afford food but real estate in cities sells for more than that of New York. This appreciation has been going on for about 20 years now, I have kind of lost track of what's a bubble and what's not. I am not holding my breath for a 'collapse'
No kidding. Where I live (Bay Area NCAL), there is no longer any doubt that (a) we had a massive RE bubble, and (b) it "popped" 6 years ago. Despite that prices have *still* not fallen enough in many cities for a middle class family income to buy a so-so used house. Massive liquidity the Fed keeps pumping into Wall Street ensures that hedge funds and RE trusts have enough money to scoop up all the available for sale inventory with cash (now make up 50%+ of all house purchases).
There is no real estate bubble anyome. It has been replaced with a permanent 2-class society where only the very rich can afford property, and the rest of us are permanent debt serfs. Most of us just don't know it yet.
Amen, HARM. I make about the median income, but there's no way I could afford the median home here. The MSM keeps trumpeting every tick up in home prices like it's such great news, but for most young people (and I'm almost 45), it's terrible news.
I understand there are a lot of not-rich people who will depend on the value of their house to secure their future, but it definitely feels like a 2-class society. Those who have, and those who have not.
"thosse who have, and those who have not"
It has always been thus.
I live in the SF bay area also and had always assumed that when I got older I would take some money out of the house and move to a smaller place as I got older. The current plan is to die younger than I had previously thought. And as I get older (70 this year) dying younger seems like a better idea.
The time to sell out, and move to a cheaper place was 2005-2006. I did have a couple of colleagues do just that. They could move back and buy their old house lock-stock-and barrel for less than the profit they made selling it. Prices out in the far east periphery are under half of what they peaked at.
I think its a spectrum. I've been at about what I think of as the income cusp. Those higher on the income scale are surging ahead, those lower down are falling back. Where I'm at we just about break even. This is several percentile points below the top. Making the 1% would be almost impossible.
I read something the other day, about income mobility. It claimed it was actually higher under feudalism! I.E. in feudal days, a peon who demonstrated the right talents could advance -similar to today. But for the most part, -given our opportunity structure, kids usually reach about the same class as the parents.
As robots sitting at the point of going vertical in all jobs the idea I've had since they work for about 3.75 an hr.The robots should pay FICA they support the elderly while never growing old or collecting bennies.
Vaporlock, you might like this- the "first shot" fired in the coming Robot Wars:
On Feb. 24, local Waverly, Ohio, police received a report about a drunken man shooting a gun inside his own home. When they arrived on the scene, 62-year-old Michael Blevins refused to answer either the door or the phone.
Back-up arrived with a trained negotiator. The negotiator failed. They decided to send in a surveillance robot.
Read more:
http://www.businessinsider.com/michael-blevins-ndaa-man-shoots-robot-201...
The comments are pretty good too.
My comment over there would be the intro to Russia Today's 'Why You Should Care'. The robot 'doesn't give a darn about anything'.
Well . . . it is also the home to Cisco, Intel, eBay, Apple Computer, Oracle, Google, Facebook, and many other very successful technology companies so there are a lot of people with a lot of money.
True, but it's a mistake to assume that *everyone* who lives here is a Googleaire. Not even every resident of Mountain View or Cupertino is rolling in stock options. Even in such lofty zipcodes, average people still outnumber IPO kings --ordinary retail clerks, waiters, carpenters, plumbers, policemen, teachers, etc. who still need a decent place to live and cannot afford to buy anywhere near where they work. Sure there are affordable pockets waaaay out in the exurbs (think Tracy, Brentwood or American Canyon), but who wants to commute 3-4 hours a day?
Here in the south there's an area where average commute time is 30 minutes but some drive for 60 minutes. But when there's road work or a vehicle accident all bets are off. Minutes become hours, miles-long traffic jams.
Even for hightech workers few make any money off stock options. There are lots of even very skilled people working for wages. Those wages may be a bit higher because of cost of living effects.
Ron, I'd only caution that people have been pretty sure that the China's growth has been unsustainable for decades.
Unfortunately my work computer doesn't let me check out videos, so I can't comment directly on the link you posted. However, given that NGDP has grown at double digit rates for decades, a run up in real-estate prices shouldn't be a surprise. (http://www.themoneyillusion.com/?p=15888) This is a blog post by a monetary economist's site that I frequent; and tends to be consistent with my views. This post follows up on a widely reported (last summer) story about the massive vacancy rate in Beijing. The key point is that data out of China should be taken with a grain of salt,;that the context often gets lost in translation (yet gets repeated ala MSM and the "American Energy Independence") should add to that skepticism.
China is a very poor country (still poorer then mexico by most per capita measures), that has put up amazing growth numbers because they started from a horribly low base. Their government is incredibly inefficient but is incredibly less inefficient then they were 10 years ago. Resources have been misallocated and will continue to be misallocated, but in a system where Oil consumption per capita is a 9th of the US, and Energy (Oil Equivalent) per capita is about a quarter the level of the US, I can't see any scenerio where we "get back" any of that oil in the global market(to say nothing of when India's 1.1 Billion get on China's consumption pass, or when/if Africa's (nearly) 1 Billion get on India's conumption path).
Pwallmann, it is really too bad that you could not watch the video before commenting. If you did then I think you might dramatically reword your comments. Especially this one:
Yes, yes, don't believe your lying eyes when you watch this video. When the largest builder of homes in China, a Chinaman who is also the largest home builder in the world, says it's a bubble then I am inclined to believe him. He says that many developers are in debt and don't have the money to complete projects that have been underway for years.
This is leading to a debt crisis. The builders cannot repay the money they borrowed to build these homes, apartments, office buildings and entire cities. If these loans are not repaid then the whole economy could seize up.
The Chinese government, in an attempt to slow the bubble down, instituted a "one apartment" policy. Rich Chinese had been buying ten to fifteen apartments because they had no other place to invest their money. Now apartment prices are starting to plunge. And all those who invested their entire life savings in apartments are seeing their investment plunge. This is now causing civil unrest all over the country. And it could get much worse.
And the poor people are being uprooted to make room for new developments. These people will add to the unrest. And with China building from 12 to 24 new cities every year, there is a lot of uprooted poor people.
Do yourself a favor. When you get off work, go home and watch the video. Then tell me you still think the real estate bubble reports have been greatly exaggerated.
Ron P.
Ron,
Finally got a chance to watch the video. I'm certainly less impressed with it then you are. I spent November wandering around Chengdu, Chongqing, Guilin, Guanxi, and Changsha. The level of activity is staggering. That trip alone provided me with more anecdotal evidence then this video did. I'm not really sure what this video provided beyond that. Again, nobody takes a video camera to Pudong and says, here is a ghost city and it turned out ok. The Special Economic Zones and Industrial parks were and are, largely located outside of cities and would be labelled as ghost cities had they not kick started what, to me, is the most impressive development in human welfare.
Believe me when I say, I'm not endorsing everything that is China and the Chinese government. I'm incredibly impressed by the way they have managed the economy but would never wish it on anyone. They have, do, and will continue to massively misallocate resources. I'm not even predicting that their won't be a market correction (or a bursting of the bubble), I'm saying that the logic behind that reasoning seems flawed to me. Or perhaps, its the baseline chosen to reason from that seems flawed to me.
Stephen Roach had an article at project syndicate (http://www.project-syndicate.org/commentary/china-is-okay-by-stephen-s--...) discusses this. The OECD is projecting that an additional 300 Million (yes, basically the population of the US) will be added to China's urban population by 2030. In a country ticking a way at 7 or 8% growth, I'm optimistic that the overhand of this overbuild won't devastate the economy. McKinsey estimated that by 2025 China will have more then 220 cities with over 1 Million people, 23 with 5+.
If China can survive the 2008-2009 global debacle, when their reliance on exports was extremely high, I don't see any reason why we wold expect them to face a far greater calamity with a potential correction in the housing markets.
Here's hoping anyway!
Basically you are using the "weight of funds" argument, only with people not money.
Stock market boosters will tell you that the big insurance and pension companies have new money coming in all the time. It's a huge amount. They have to invest it, and the weight of funds will always drive the market upwards. Now look at a chart of stock movements. Sure, long term there is a steady upward trend, but there are an awful lot of downs.
If you can afford to sit and wait a long time, stocks are a good investment. But housing, which costs money to maintain, is a financial drain unless you can rent it out at a profit or flip it quickly.
Or live in it... I still think we're looking at this in a developed world context and shouldn't be. I have nothing beyond the anecdotal evidence I saw and in my discussions with people in China. But I suspect the vast majority of housing projects/purchases are not done by speculators (ie. they are not driving the price) nationally. Sure, there will be pockets, and certainly companies will overbuild, over leverage, and ultimately fail. Those that build appropriately, will profit accordingly. No different the any other market (fingers crossed on the continued march towards "any other market").
It would seem that it would work but for one thing...the people they expect to buy that housing that they built are dirt-poor. US$100,000 condo for someone making $2/day?
Having been there maybe you can clarify...do they have property taxes? It seems that the only way this thing hasn't come crashing down already is that they're not stuck paying taxes on their investment apartments or they'd be itchy to get out before taxes ate their nest egg while waiting for a sale.
Then there's the aspect that the prices on them have gone up 3X...it sounds a bit like Tulip Mania - who are they selling to? Each other in a giant Ponzi scheme race to the top? Is it just paper wealth that'll crumble like a $5,000 beanie baby when marked to market?
It's just such a weird situation that defies normal market conditions because it's not a normal market there (being heavily state controlled). If it were the US with that much un-sold real estate the prices would plunge dramatically - so in the face of that, how do theirs triple?
It seems probable that there will be a Wile E. Coyote moment when they look down and realize they're off a cliff.
I posted this link previously: but I'll do it again (http://www.themoneyillusion.com/?p=15888). It was basically following the sources on a claim last summer that 50% of Beijing's apartments sit empty. Then you get into what 'vacant' is defined as (in this case, if no one was home when the surveyor showed up, it was 'vacant', mis translations, all resting on the notoriously unreliable Chinese data.
So again, I don't know, when I read most doom/gloom or wildly optimistic numbers about China my default position is skepticism. Call it a baseline. The 60 Minutes Video just didn't add any new information to me. I'm not saying it is/will be wrong. I'm just saying that the argument put fourth was lacking in the rigor that I'd require to overturn (1) the benefit of doubt that I give to the Chinese government based on their past 30 years (both in their gradual liberalization, and in their handling of missteps) and (2) the impact of not only lifting hundreads of millions out of absolute poverty, but also their current rise into the middle class.
Most urban Chinese earn much more than $2/day. The average was about USD$5-6k/yr in 2011, or about $15-20/day in 2013. Salaries are higher in the major cities -- around USD$10k/yr in Beijing and Shanghai -- which suggests there will be significant numbers of people who could afford a USD$100k condo.
The Credit Suisse report linked above indicates that the high-end market is over-emphasized in those tier 1 cities, though, so it would not be surprising to see a shakeout there, moreso than in tier 2-3 cities.
Well, physical limits on a finite planet comes to mind... but perhaps that´s just me. Hint, the economy, Chinese or anyone else´s is a wholly owned susbsidiary of the ecosystem. No ecosystem, no economy.
http://assets.wnf.nl/downloads/chna_footprint_report_final.pdf
In general what is not sustainable, doesn´t continue for very long. Right now China is on an unsustainable path. Not that they´re exactly alone in that category >:-(
New Horizons for Rural Reform in China
How in God's name can anyone say things are going great in China. China is on the verge of ecological collapse and at the same time on the verge of economic collapse due to the real estate bubble. And China consuming twice as much as can be provided by its on ecosystem means it is wholly dependent on globalization. If globalization collapses then China collapses. If China collapses then globalization will soon follow.
We are a lot closer to world collapse than even most people on this list realizes.
Ron P.
Which simply means that it is already dependent for its survival on ecosystem services provided by other countries, many of which are themselves already in deep ecological overshoot.
I have to say, I´m firmly in agreement with Ron on this one and can´t for the life of me figure out how anyone can possibly argue that things aren´t so bad in China or that they might somehow find a way to beat the laws of nature.
Ecosystems are not perpetual motion machines. Resources can not be extracted from them ad infinitum. This is such a basic and fundamental truth that it boogles the mind that so many people even on forums such as this somehow fail to grasp it.
"Ecosystems are not perpetual motion machines. Resources can not be extracted from them ad infinitum. This is such a basic and fundamental truth that it boogles the mind that so many people even on forums such as this somehow fail to grasp it."
The Julian Simon worldview ('the only limited resource is human ingenuity') is baked into the cake of industrial capitalism, which is the system that butters most people's bread. So it is really, really difficult for most people, even intelligent educated people, to entertain the notion that it is utterly unsustainable in even the medium run. Therefore, the result is hard, implacable, denial. And that's where we're at.
Not very many people seem capable of really thinking ecologically. I don't blame them entirely - it is terrifying and deeply saddening.
China, Japan, UK, pleanty of countries overconsuming resources, Japan has been, pretty much since the war, now it imports 70% of its food. I even heard that the US consumes 20% of the worlds resources, so If everyone lived like the US we would only need 5 more planets. Not to say that the US is exceeding it's own carrying capacity, of course it has abundant natural resources and will be one of the last places on earth to collapse.
That's just the point! The level of activity is staggering all over China. And that activity, that construction, is building empty apartments as far as the eye can see. Either that or building shopping malls that have no tenants, or cities where no one lives.
So Pudong turned out okay, but what about the other 12 to 24 cities they are building every year?
And aardvark talked about what to do with empty apartments. Your reply:
Again, that's the flipping point! The apartments are empty. People can only live in one apartment at a time. The people are buying 10 to 15 apartments and hoping to sell them at a higher price. They all think they are an investment.
Why? Because just like in the USA in 2008, real estate prices had always gone up faster than the rate of inflation. And the people, just like in the USA, expected that would continue forever into the future. But common sense should tell people that nothing can continue to increase in price, year after year, at twice the rate of inflation. That is the very definition of a bubble.
Why is that so hard to understand?
Ron P.
If they've been buiding brand new cities at a 12-24 per year clip and have been doing that for years, and we only see video/photos from 4 or 5 "ghost cities" would that not imply that they are achieving a pretty high success rate?
I didn't mean to come across as flippant in my response to Aardvark. My point was to question what seems to be an implied narrative here: that driver of pricing in China is speculative real estate purchases. My point was, what if the driver is owner occupied purchases? In a developing country of 1.3 Billion people, of course you can find many instances of any circumstance you'd like (you could probably even find instances of incredibly efficient government even, believe it or not). Thats why I just wanted to point out that anecdotal evidence from China needs to be taken with a large grain of salt. And I am in no way saying that I am immune to this type of confirmation bias.
Sell, sell, sell: Chinese homeowners scramble to shift property before 20% capital gains tax hits
What's your iterpretation of this? Seems to pop the, bubble is about to pop bubble, but it also shows the capricious nature of the Chinese governement, and the resulting rules and regulations.
It seems to be an over-dramatic headline now I think about it. People rushing to get the paperwork done, not the start of a panic. Like the petrol queues here tonight, because the price of petrol goes up at midnight. (Oops. Went up seven minutes ago.)
From 2010 to 2025, it is estimated by the Ministry of Housing and Urban-Rural Development that 300 million Chinese now living in rural areas will move into cities.
It's easy to underestimate the scale of urbanization and development taking place in China right now. As the Credit Suisse report notes, even much of the existing housing stock in urban China is likely to be replaced over the next decade or two; combined with the massive scale of urbanization, there is likely to be demand for hundreds of millions of housing units in the next 15 years.
How many people?
Again, consider the scale -- a million people doesn't even represent 0.1% of the population. A million people buying 10-15 apartments each isn't going to account for more than about 5-10% of urban housing stock.
The Economist Intelligence Unit has compiled a lengthy report on the sustainability of China's real estate development; their executive summary starts thusly:
The report is available online (free signup required); you'll find it much more thorough than the 60 Minutes piece. It takes pains to repeat that this is not a bubble, and focuses on much the same reasons as the Credit Suisse report (urbanization and replacement of existing lower-quality housing).
Indeed, all major reports on this topic I've seen (CS, EIU, World Bank) are in broad agreement -- there is strong underlying demand for housing in China, but also a risk of modest short-term corrections. Available data suggests that a massive crash is unlikely -- hundreds of millions of Chinese are eager for new housing, providing strong underlying support.
Edit: this SocGen report provides somewhat of a counterpoint. It argues that the current rate of construction is faster than is required to keep up with urbanization and housing stock replacement, which would indicate construction rates will slow down in the next few years, but still remain high by world standards.
I don't know enough about the Chinese economy to take a position one way or another, but I am not sure that we can apply the lessons of the U.S. economy to the Chinese economy. While there appears to be a housing bubble, housing is not as dominant in China as in the U.S. In other words, they do not have a FIRE economy and actually produce billions of dollars of manufactured goods. In addition, the command part of the Chinese economy is much more significant than the U.S. For example, their response to the glut of cheap solar panels was to crank up government purchases of panels. They can and do react much more quickly to problems in their economy while the U.S. is gridlocked and in the thrall of the bankers.
As far as the bursting of the bubble goes in the U.S., that is a two edged sword depending upon whether you are a seller or a buyer. I have probably lost a lot of equity because of the burst, but on the other hand I recently bought a house which 5 years ago would have cost at least 30% more.
I think the main problem with the bubble burst in the U.S. was the drying up of credit. Due to regulations and fear, it is much more difficult to get a housing loan these days even with a perfect credit rating and adequate income. I experienced this personally. While the banks are rolling in funds, they are very parsimonious in loaning it to, you know, real people.
The Chinese apparently have made a lot of mistakes in allocating resources, at least in the short run. But whose to say the U.S. has done a better job? Look what our so called free market got us into. A near freaking depression. And for millions of folks, things are not looking much better this side of the trough.
My problem with the Chinese is that their relentless adhesion to the growth model while not thinking of the ecological implications. They had a fresh slate and chose to emulate the U.S. as far as devotion to the automobile and all its attendant infrastructure and problems. They had the benefit of hindsight and chose to ignore it.
This sounds too much like a "this time is different" type of argument. In every bubble there are always people who say this is not a bubble because this time is different due to reasons X, Y and Z. It has been proven time and time again however that such faith is misplaced when the bubbles do burst. At the end of the day if prices do not follow trends in rising incomes then the trend is unsustainable. Market prices must return to fundamental conditions of income and supply. Yes these bubbles can be sustained for a long-time through government intervention and the fallout can even be contained with the right policies but the market will not be healthy as there will still be the issue of plenty of housing stock but not many people living in them.
If we add resource limits then eventually all the debt used to accumulate or invest in this capital will go bad and then prices will have to return to their true market value. However seeing as generations of family savings are tied up in these properties the moment this market collapses is the moment those savings go up in smoke. Now just that event alone can spark a revolution. The government will do everything in their power (and then some) to extent and pretend but the unsustainable cannot be sustained so eventually people will have to face the music. The longer they postpone the market correction the bigger the fallout will be as more and more capital will be misallocated the longer this bubble is allowed to stay inflated or prevented from fully deflating.
"They had the benefit of hindsight and chose to ignore it."
Not entirely. Asian cities are way more compact than American cities. That makes a difference in energy use for thansport.
Step 1: Cut population growth with a one-child policy.
Step 2: Build lots of extra cities.
Step 3: Wonder what went wrong.
aardvark, are you suggesting that there is too much housing in China? I get the argument (although I largely disagree) that their is a "misallocation" of investment in the wrong type of housing, or the pricing on the housing is "incorrect" (again, I largely disagree), but I struggle to understand the too much housing argument. Is that what you mean? Haha, maybe I need to wait to see this video at home before commenting.
They interviewed Wang Shi.
Lesley Stahl: Is there a bubble?
Wang Shi: Yes, of course.
Lesley Stahl: There is a bubble and the issue is will it burst or not? That's the big issue--
Wang Shi: Yes, if that bubble - that's a disaster.
Lesley Stahl: If it burst?
Wang Shi: If it burst, that's a disaster.
http://www.cbsnews.com/8301-18560_162-57572185/chinas-real-estate-bubble...
Chinese families are sinking all their savings into real estate, buying 5 - 10 units per family, leading to a huge over-build of apartments which are too expensive for ordinary Chinese to buy.
If the government takes steps to curb prices, like limiting the number of apartments people may buy in any one city, there is unrest as people see the value of their investment plunge.
Wang Shi sounds like a pretty interesting guy! I guess I still give the government of China the benefit of the doubt. The ironic thing about China's situation is that the reforms that I believe are required to continue its current path, also act as a mitigant to a potential housing "bubble". Household debt is typically (in western countries) driven by a large over sized realestate purchase. China's vastly underdeveloped personal credit markets don't really allow this on a massive scale.
That Wang Shi might be highly overleveraged is a completely seperate question from whether Chinese households are overleveraged. Might Wang Shi, and similiarly large scale developers, going bankrupt cause a country wide meltdown? I don't think so, but it is certainly plausibe.
Geeze, you are digging yourself deeper each comment. That is what this video was all about. China's vastly underdeveloped personal credit markets are exactly what is causing the bubble in apartments. China does not allow them to invest in anything outside China and they regard the stock market as too risky. This only leaves them real estate to invest in. As I said earlier, many are buying 10 to 15 apartments and there is no one to sell them or rent them to. So they set empty.
Massive over investment in real estate is exactly what is driving this bubble. While builders are doing it with borrowed money, this borrowed money is being supplied by the wealthy people in China who invest in these massive building schemes. And the vast majority will lose every penny of their investment.
China is not doing anything to mitigate the current real estate bubble. And it is a real estate bubble, not just a housing bubble. China did pass a "one apartment" rule and that caused prices to plunge. But as the video shows, they are finding a way around that rule.
No one is going to buy those apartments. No one is going to rent those mall store spaces. No one is living in all those empty cities. This is a bubble that makes the US housing bubble look like a Sunday picnic.
Hey, watch the video. And watch this one also, it is only 1 minute and 38 seconds long.
"Doomsday" scenario for China It explains that the Chinese are investing in realestate because they have no other place to park their money. And they will likely lose it all.
Ron P.
Ron, I'm no China expert, but I'll stand by my statement for now. My point is that if people aren't buying apartments on credit, when they lose their value, they don't pose systemic risk. As in, without leverage, a "bubble" bursiting isn't the end of the world. As mentioned, I don't doubt that many developers are highly leveraged. Are we disagreeing on semantic grounds, or are you saying that inviduals buying real estate are highly leveraged?
No, individuals buying real estate are using their life savings, not borrowed money. They will lose it all and this is creating civil unrest.
But the developers are all using borrowed money, and they are all going broke and will not be able to pay their loans off. Classic bubble. The bursting has already started. The builders are abandoning their projects already. Watch the video.
Ron P.
I'm not necessarily disagreeing with your assessment that there has/will be massive misallocatoins in the Chinese economy (call them bubbles if you will). My point is that we're looking at it through the wrong lense. I'd also say that, yes the ghost towns are crazy to consider, but the ghost cities that filled up don't make for to good of a story (ie. survivorship bias).
1) Having an asset go from $100,000 to $25,000 has a much different impact on the economy when its paid for in cash, rather then paid for by credit. The effect is multi tiered. But at the least, it goes from something that might lead to civil unrest to something that when aggregated has the potential to destablize an entire economy (the whole sub prime and derivitive story).
2) We're looking through the lense of a very rich country growing at 2 or 3% for decades rather then a very poor country growing at 10% for decades, and now likely around 7-8% with a government focused on strengthening the consumer sector (as mentioned above, this lack of financial liberalization has limited the scope of personal debt, and the resulting derivitive packages that greatly increase the systemeic risk of said debt). That type of growth coupled with financial liberalization may plausibly see a further run up to prices in the real estate market.
All in all I'd say that I'd take a friendly wager on China achieving 7%+ GDP growth in each of the next 3 years. I'd extend that to 5+% in each of the next 5 years.
pwallmann has a very good point. There is a huge difference between losing an investment (a real asset) financed by equity and that same investment financed by debt. In the first case although it may be painful, if prices go down you still have control over a real asset. If the real asset is financed by debt which cannot be serviced chances are you lose control over the asset.
Friends of mine, one in HK and another one across the water in Shenzen both own property which has financing. From what I understand the rule in both cities is that the downpayment is a function of the sales price. If I recall correctly if a property sells for less than 500k(ish) USD you can borrow up to 75%. Between 500 and 1mm you can only borrow either 50 or 25%, and above a certain number you have to pay cash.
That is not to say there isn't a chance that the prices of certain assets won't go down at some point but to apply a simple CTRL+C / CTRL+V between the US, where NINJA loans and other very low, no, or even cash out financing options existed and even were encouraged and China is quite a stretch.
Rgds
WeekendPeak
Well a bad equity investment can lose 90-99% of its value. Since you can dump your loan onto the bankster, that's about as bad as losing on a leveraged loan. I've heard of some RE going negative. The first time I heard about this, was a to be housing development near Colorado Springs, the cost of roads/water/utility hookups etc. by contract was to be split evenly among the home owners. Only they got very few takers, the few who did buy had liabilities for the infrastructure higher than the value of the house/property!
And if you really have 10-15 apartments -you can't live in them all! And if they are in a ghost city where no one wants to live (no jobs there!), you're doomed.
Think of all those empty apartments as tulip bulbs. You already have a tulip bulb. You don't need another five or ten. The reason you are buying them is because you think one day someone will come along and offer to buy your tulip bulbs for more money than you paid for them.
A.K.A The "greater fool" theory.
And inevitably, the supply of wealthy fools will run out one day.
Meanwhile you have to pay interest on loans, pay for levies and security, pay for wear and tear, and repairs due to vandalism and theft, rats and insects. The money you pay out to maintain property you don't live in and can't rent out, is money that is no longer available to purchase consumer goodies.
To be honest, I'm not sure where all the money goes to, but investing capital in something unproductive has got to have bad consequences for the economy. Look at Spain post-property boom.
What you are implicitly touching on is a scope of analysis issue.
Although one can argue that nobody "needs" 5 apartments' chances are that for every person owning 5 apartments there are 100 who own zero apartments, yet they "need" one. I'm putting "need" in double quotes because to me the difference between need and want is somewhat nebulous.
It's true that most people don't purchase assets with the intend to lose money between the time of purchase, the carry and the time of sale in a multi-generational society, assuming that apartments are purchased with equity (so it is more of a balance sheet rearrangement where cash is swapped for real estate than pure spending) the chances losses are likely to go down with an increase of their horizon of analysis.
If, however, the apartments are debt financed the horizon shrinks and if asset prices decline excrement may hit the ceiling mounted rotating device for those people.
Rgds
WeekendPeak
Maybe, AFAIK the US is pretty unique in that you can leave the keys in the letterbox and walk away from your mortgage, so there is not the impetus to sell/walk away n China. A falling market requires desperate sellers. This was the case with subprime where the sellers were banks, in China the sellers are the investors, and why would they sell at a loss? In this way the 'bubble' could be a factor in a larger scale recession if there were to be one, but it cannot be the cause per se'. As they say on the film, buyers keep lining up to buy new apartments, so clearly no distress as things stand today.
I agree with your inference that this is not a collapstrophy, but I'm not sure why you assume that chinese property speculators havn't used leverage? I bet they are mortgaged up to the LVR or at least have used leverage to purchase property. It's property speculation 101.
Well . . . they are not losing their life's savings . . . they are just getting a bad deal on a house/apartment. And unlike the Americans that are actually losing their homes that they sunk a lot of money into, these people will at least have those houses/apartments to live in (even though they won't be worth what they paid for them).
Well, that is one way of recycling the trade account deficit . . . just burn up the money in bad investments.
Perhaps you missed the bit near the start of the video where the analyst explains that many of these apartments have been bought by three generations of the same family: grandparents, parents, children pooling their money. It's their pensions.
This is not just one generation losing its life savings, it's potentially three at once.
Speculawyer's point still stands - they may at some point own an apartment which is worth less than they paid for it but they still own a real asset which provides utility.
Rgds
WeekendPeak
They're buying 10-15 apartments as speculation, not "an apartment". Not so much utility if there are some millions of unused apartments as it is.
but how many people are actually buying that many apartments? A large enough number for it to be relevant?
We humans have a tendency to gravitate towards extremes and we tend to extrapolate linearly.
Simply because there are some people who buy 10-15 apartments does not mean, or even imply that many, or a majority of people do so. Even the 60 minute piece doesn't say or allude to that.
Rgds
WeekendPeak
I have no idea - I was mostly restating a point that a poster upthread had said, as I understood it, and that the respondent seemed to have missed.
Ron, Here's a study by Credit Suisse:
(https://doc.research-and-analytics.csfb.com/docView?language=ENG&format=...)
While I read it awhile ago, and I'm not entirely familiary with the methology. Page 4 gives a good visual on the US "Bubble" vs. the Chinese "Bubble".
I guess my point simply is, what would cause a collapse now that couldn't have been said 5 years ago? 10 years ago? 15 years ago? (and people have been predicting this collapse all along).
Their section on Demand Drivers is interesting:
#1 indicates that there is a significant amount of money being pushed into real estate by government policy, but #2,3 indicate that there is a substantial level of underlying demand. Prices may be inflated and/or inventory too skewed towards the high end, especially in tier 1 cities like Beijing and Shanghai, but it seems like there is a reasonable floor under prices due to the real demand.
Moreover, fixating on the excesses in Beijing and Shanghai is apparently somewhat misleading:
Given buying patterns in China -- 50% down payments are typical -- it seems likely a price crash would not propagate and concentrate in the same manner the US crash did. It would reduce the net worth of the buyers, of course, but would be unlikely to wipe them out in the way it would a heavily-leveraged buyer.
Darwinian, that sentence alone is all the proof that you need that it is a bubble.
Best hopes for defusing the bubble gently.
Seems like a pretty loose definition of "proof" almost the way many in the MSM pronounce the increase in American oil production as proof of the import independence to come!! I kid.
Good point.
When MSM pronounces that American Oil production is about to skyrocket into stratosphere we ridicule it but when they say that China is about to crash we take them on face value. I think some folks should take off their 'doomer glasses' off for at least a minute. Yes China's real estate is in a bubble and so is India's and no one's denying that someday values will come down but people are making a mistake when they expect a 2008 like event every few years, the bubble may collapse in ways that we still don't know about.
Japan collapsed too but they did it over many years, the SE economies collapsed as well but they recovered again. Asians in general save a lot of money, it's part of our culture, savings rate can sometimes be as high as 40%. This tends to cushion the blow somewhat.
You said it. Why would anyone take the MSM at face value? It's all politics, everyone has an agenda to push. But there are these little psychological abilities like confirmation bias, and cognitive dissonance to play with. It's all part of the phiatic dialouge where various phrases come with an emotion, and in this case China = dictator communist and must have a terrible economy and they are going to get it.
There tends to always be this background hype that China is about to crash, phrases like hard landing, Chinese protests, Arabic spring in China etc. Yet China has the most popular government on the planet.
I notice this tendency to filter all information according to preconcieved emotions everywhere. I am suprised to see it here, given that there is somewhat of a consensus that the MSM has got it worng on issues related to oil. yet somehow when it comes to China or Iran, the MSM is right on.
One more thing I can deduce from the video is that the Chinese govt is willing to tolerate the 'bubble' word and is perhaps even encouraging it given that a Chinese Real Estate mogul is using the word on a western MSM channel. I haven't seen this attitude from any of the elected democratic governments in their bubble days.
yes, well the UNelected Fed Chair Alan Greenspan called it "irrational exuberance"! I suppose that passes for frank talk in the US corporate media lol
As a frequent visitor of China for the past 10+ years, I would like to assure folks that the average Chinese family (my colleagues there) does not own several homes. Most Chinese own only the home that they are staying in. The luckier ones might own a second home for speculative purposes. Most of the younger Chinese in cities like Beijing or Shanghai would also complain that they have been priced out of the housing market.
There are multiple narratives on why the extra cities exist by the 'conspiracy' crowd.
The most reasonable ones are about how 80% of the population lives on the coasts and any kind of big ocean wave problem will need the survivors living somewhere.
Meanwhile on the Ocean news front:
http://enenews.com/officials-large-release-of-methane-off-los-angeles-co...
The algae explanation makes no sense. Growing algae release oxygen, not methane. You could get hydrogen sulfide from a vast immediate algae die-off, but that is unlikely and would be more likely happen in fall than spring if at all. Even then, getting methane due to floating rotting algae is extremely unlikely in deep water. I believe there are methane clathrates off the California coast. There are also plenty of hydrocarbon deposits. If it is methane clathrates, that is a little scary.
When did that 60 minutes video originally air? I ask because this is not a new story.
It originally aired March 3rd, 2013. Of course it is not a new story. This story started years ago and the bubble gets a little bigger each year. And here is another very short video about it: "Doomsday" scenario for China
And here is another one, about 1 minute long: China's real estate quandary
Both these segments were likely supposed to be part of the original but got cut because they did not have time for them.
Ron P.
Thanks Ron. Looks like it may be coming to a head then, and if it does go south we will probably have another economic step down. Hold on folks!
Getting a Chinese property mogul to admit there's a bubble is new.
This Australian TV production uploaded April 11, 2011, is pretty good: China's Ghost Cities
The CBS video and the Australian one I linked to both rely on the views of Gillem Tulloch, founder and managing Director of Forensic Asia. He is the person behind the "64 million empty apartments" factoid.
I tried to find another expert opinion. Tom Miller, writer of China’s Urban Billion: The Story Behind the Biggest Migration in Human History was interviewed by the Wall Street Journal. They didn't specifically ask him about ghost towns, unfortunately*. He seems to be a believer in the Chinese leadership's urbanization policy, but he points out two problems:
- China’s household registration system (hukou), which legally ties migrant workers to their rural home and bars them from receiving most urban benefits.
- China is unlikely to abandon the principle of collective ownership of land, which prevents individual farmers from selling the land they farm.
*Miller addresses the issue in his book. See Chapter 5. Ghost Towns in the Desert: How China builds its cities .
Yeah, right.
If you think of American urbanization, the farmer was able to sell his land and use the proceeds to establish himself in the city. Also, he had a big family, so one member would come to the city first, then assist the rest of the family to urbanize when he was financially able to do so. I don't see that happening in China.
Lastly, I viewed a few YouTube videos of empty developments in Ireland and Spain. It is depressing. In Spain, gangs from Northern Africa and Eastern Europe are stripping the apartments where the police don't bother to go. In Ireland vandals are destroying empty houses. There's a tragic insert of a young couple who took a £175,000 mortgage and had to move out after six months because of vandalism in their empty development. Two schoolteachers who've had to declare bankruptcy and defer starting a family because they can't afford to pay off a mortgage and rent at the same time.
What this tells me is you mustn't fool yourself -- if you build a dwelling and no one moves in, you are in trouble. If the whole country does so, it is in trouble. It's like General Motors -- they counted sales to dealers and thought they were doing okay, but it is sales to the ultimate consumers that counts. Sales of properties to investors are disguising the real problem that there are no buyers at the prices they are asking. Meanwhile all that capital has been tied up in unsold apartments and cannot be freed for more productive investment.
At least China is taking serious efforts to prevent their best farmland from being "developed" into suburbia. Which you can't really say for America. People might point to all the empty land in America or China, but unfortunately theres relatively little high quality farmland. A lot of it in America or Canada or Australia has been converted into suburbs because its flat, well watered and close to established towns and cities. At the moment you can produce food cheaply on poor quality farmland thanks to massive fossil fuel inputs but what happens in a serious resource depletion scenario?
Oh come on. We are turning Detroit back into farm land. ;-)
Everyone has their eyes on housing bubbles in China, but the Northwestern European bubble hasn't got as much attention.
The Dutch mortgage loans are 110% of yearly GDP - higher than in any other developed country. The households' debt in relation to income is highest in the whole European Union, and housing prices have already fallen by 15% since the peak of 2008.
A burst Dutch would hit one of the stable nucleus countries of the Euro zone and start a financial avalanche. Because the Dutch banks have a large share of mortgage loans in their portfolios and have lent a large part of this on the international bond markets this causes collateral effects, especially within the EU. Securities thought secure suddenly aren't. It could have a domino effect in Europe, and thus the world.
The Dutch only seem to be the most extreme case in Northwestern Europe, many others aren't that far behind. Look at external debt by GDP to get some sort of idea: http://en.wikipedia.org/wiki/List_of_countries_by_external_debt
You´d figure that the Dutch, of all the people in Europe would have learned something from their own history.
http://upload.wikimedia.org/wikipedia/commons/a/ac/Tulip_price_index1.svg
Humans rarely really learn from history as a collective. I say that as a Dutch...
Well a Chinese property bubble burst would delay the global oil supply/demand crunch for quite a long time.... Take a big chunk of Chinese demand out of the market, and even [or especially] if the shock waves lower the whole global economy, we may find that the world is again adequately supplied from conventional sources despite their continued decline for a long grim time. At a lower, but still expensive for the new world economy level.
Leaving the those thigh high in expensive unconventional investments exposed to the cold North Dakota winds...
I tells ya, this baby has more surprises in it yet!
I saw this and it must be even more surreal walking these empty streets/mall/towers. The scale dwarfs the U.S. bubble so the financial outcome should be worse. Imagine homeless displaced peasants wondering the lunacy of it. ( But maybe not since they lived thru Mao's cultural rev.)
But the medicine will be the same as the fed prescription.
It's hard to imagine these buildings never being occupied: just when and by whom?
I know what I would do in the dark of night if someone confiscated my home to build a housing development. I sure wouldn't be scavenging bricks. Despite the repression, there would be ways to 'get some back'. I cannot understand how this continues? I know the reasons others will respond with, but I still don't understand how it will continue.
Paulo
I have a beef with that 60 Minutes spot, but it is probably about half right. In listing my concerns, I'm not "defending" China, so now that the disclaimer is out there:
1. China decided to be somewhat capitalist (some argue it is perfect capitalism since it is totalitarian) and capitalism works by pumping and dumping or blowing up bubbles and winning before or after the pop. That vacant concrete is pretty much exhaust fumes from their command economy's engine.
2. China is about 14 countries in one, and as long as they can feed or otherwise distract the rural folk and the dwellers of city states, they can hold it togther (see USA).
3. I like original reporting, and CBS didn't do any here. They established the fact that new laws restricted demand for some assorted hundreds of thousands of square feet of concrete. They did not support the fact this is an economic risk for the government and people of China. If anything, they can wave a magic wand and start over, we have to remember that it's a pure command economy whenever they want it to be.
4. Glass houses. China's urban poor can go home and live on a bowl of rice a day. Will they? I don't know, but if we're dooming out, let's do so over countries who are 5 or more generations off the farm.
5. Anyone who says "Chinindia" is making a mistake. Just like China and India are multiple countries rolled up into one, putting the two together glosses over significantly different approaches to somewhat simmilar problems with growth, resources, energy, etc.
I just figured someone should point out that while interesting, the CBS spot was weak on substance, kind of like trying to explain TME or PO or AGW in 12 minutes of airtime, four of which are dedicated to b-broll and reporter nodding. It's worthy of a few hour-long documentaries to accurately summarize coastal and industrial China alone.
The key question, in the context of the global market for exported oil, is how did China & India's oil consumption respond to more than a quadrupling in global crude oil prices from 2002 to 2011:
http://i1095.photobucket.com/albums/i475/westexas/Slide2-6_zps4d059c52.jpg
My guess is 2011 to 2021 chart will show similar patterns, with 2021 to 2031 less likely to show similar patterns, but time will tell. Based on the 2005 to 2011 data, China's net oil imports would double in about 8 years, while India's net oil imports would double in about 12 years.
Westtexas, I have seen you mention your upcoming paper on here a few times. Have you completed it yet? I'm really looking forward to it.
Here is a link to the link and discussion, on a prior Drumbeat:
http://www.theoildrum.com/node/9867#comment-949430
An alternative point of view regarding Chinese real estate:
http://dealbook.nytimes.com/2013/03/04/chinas-push-to-cool-down-housing-...
China’s Push to Cool Down Housing Raises Questions
http://blogs.wsj.com/chinarealtime/2013/02/27/top-china-analyst-i-aint-a...
Analyst: I Ain’t Afraid of No ‘Ghost Cities’
Well that's just fine except, if you watched the video, these apartments cost about 45 times the average annual wage of these "urban poor". Do you think the owners are going to give these apartments away? No, of course because they have their hard earned money invested in them. Will the government confiscate these apartments and give them to the "urban poor"? Not unless they are willing to return to the days of Chairman Mao Zedong.
The folks that come up with these simple solutions have just not thought them out very deeply.
Ron P.
Two different people putting out equal amounts of energy or effort in the work they perform can net wildly differing amounts of monetary compensation. The weird system allows this.
Small Energy = Large Energy
(Near-)Nothing = Something
Then, the system allows each person to turn around and buy real estate.
Maybe the first person can buy an island, while the other can buy only a sandbox.
In China, some with more money are buying lots of stacked rabbit-hutches.
I've never liked the term, energy-slave.
You are correct, Ron. But since these apartments were bought mostly with cash the owners will not be forced to sell. So we may have stagnant real estate in China for the next 10 years but possibly no crash.
Yep. It could be that this will just mean a crash in the construction biz. The unoccupied units will just sit around until there are people with enough money to buy them. Instead of spending money on themselves or leaving the money in the bank, the newly rich in china bought real estate. Yeah, it may lose some value and sit idle but since it is not leveraged, there will not be a huge financial sector crash. There will just be a diminution of wealth for the rich. And that is one of the better ways for a crash to play out instead of having poor people thrown out on the street homeless and entire financial sector imploding.
This is very similar to the situation in India. Rich people buy a lot of real estate for cash and just sit on it. Even when it fails to appreciate they don't sell. They cannot be compelled to sell because there is no leverage. Thus real estate experiences periods of stagnation and slow growth but it has very little impact on the financial sector or the overall economy.
I think most of you guys are putting these people into the wrong category. The vast majority of them are not rich, they are people with new wealth but are far from being rich. They are like the average American investor who puts their money in the stock market. But no one trust the Chinese market, with good reason, and they are not allowed to invest outside China so they put all their money into real estate.
And if these people lose all their money it will very likely bring on a crash. It will cause a crash in the real estate market and a crash in the construction market. Construction will suddenly stop causing 20% of the Chinese workforce to become unemployed. Then there are the suppliers to the construction market, that industry will crash as well. This will likely lead to a Crash of the entire Chinese economy.
All crashes have their consequences.
Ron P.
No, I get it. They are upper-middle class and have some extra money. And they are taking that money and buying real estate. But the fact that it is not leveraged makes it very different since they are not compelled to sell if it sits unoccupied since they are not paying loan payments. (Of course, I wonder about association fees, utilities, insurance, and property taxes . . . but those may all be pretty low.)
And in some perverse ways, if it stagnates and it loses value that could be good for the economy . . . because those people won't feel rich and thus will have to continue working hard because their investment tanked.
I think there is a problem but the facts that (1) there is still a lot of growth happening in China such that more people are moving up to be able to afford these units; and (2) there is not much leverage means that the crash won't be quite as bad.
But developers and construction biz . . . they'll have a crash/slow-down.
What causes a crash is when leveraged buyers are compelled to sell. If most apartments are sold for cash then the buyers cannot be compelled to sell. The apartments are in strong hands. Hence there will be no crash. Since people don't have anywhere else to put the money they will continue to buy apartments. The price could stagnate or go up slowly for many years. But I don't think China will experience the kind of real estate crash we saw in Florida, Arizona and Las Vegas.
What causes a crash, or will cause a crash in China, is when all those leveraged construction companies default. And it is starting to happen right now. Construction is 20% of the Chinese economy. And all those empty shopping malls, they are owned by large companies that could go bankrupt. All those empty office buildings are also owned but not owned by private investors.
The Chinese real estate bubble is more than just apartments, construction is the growth industry of China. And when, not if, the Chinese real estate bubble burst it will have devastating effects on all China.
Ron P.
Well, what is 'rich' and what is 'poor' anyway? If a world is being impoverished by a certain kind of "rich", what kind of rich is that?
As for crashing economies, so be it. The sooner, the better. The world can't support China's, etc.'s (or more accurately, the oligarchies' desires for) growth, or they need to grow in resilient/regenerative/sustainable ways. Let's see how large-scale centralized fossil-fuel/growth/debt-based governments fare.
China's governgang can look at those ways and maybe smooth out the gradients. Here's to Tiananmen Square.
Puzzle. How come they don't put their money in wind and solar? Needed, profitable.
Because they would have to buy stock in Chinese companies, or invest in the Chinese stock market.
Chinese Stock Market -- Buy In or Buyer Beware?
Well now you know. The Chinese just don't trust the Chinese stock market and with good reason. And they ar not allowed to invest outside China.
Ron P.
Sounds right. Thanks. Can't trust those filthy capitalist communists.
I've not seen more than the teaser video, but what jumps out at me is what is the maintenance cost of these units-sewage, heating, electric, elevators, etc. From the comments, the majority of people are just off the farm, and probably not used to continuous heating, urban sanitation, others.
How do you live in an urban building on the 15th floor when there's no one to oversee the building issues? When the hi-rise is only at 40% occupancy?
There is a certain logic to this. As China's population moves up to the middle class, more & more of these people will be able to afford better housing and may aspire to purchase such apartments. These people now buying apartments probably know many older people that owned apartments and had them appreciate in value. I doubt they are just wildly thinking they will go up in price, they probably know many people that earned a lot of money on appreciating realty.
But the same was true in the USA. If you bought at the right place & the right time, you made a bundle. An average blue collar worker that bought a typical middle-class home in a place like Palo Alto ended up owning a home worth more than a million.
The question is will it continue? And I don't see how it can continue indefinitely. They've been making a lot of their wealth exporting to the West. But Europe and the USA just can't afford to keep buying more & more of their products anymore. And the coal, iron ore, oil, cement, and other raw material inputs are getting more & more expensive. And the west will probably stop tolerating their mass piracy of intellectual property.
So I think it is a bubble but it might not be as much of a bubble as many think. Many people will work their way up to the middle-class and be able to buy some of that housing stock. If they are able to slow down further building, continued improved standards of living may allow them to afford many of those homes over time. But THAT MANY homes? I dunno.
It was Chindia (only one in). Or sometimes expanded to the BRICs (Brasil, Russia, India, China), which is shorthand for the rapidly developing world (which includes some smaller countries as well). So, if you are talking about increasing demand for goods -including globally traded commodities, its a perfectly reasonable reference.
The 2005 to 2011 rate of increase in China's net oil imports was 9.1%/year (BP). It's useful to compare this to US data in the post-World War II period.
From 1949 to 1977, US net imports increased at 12%/year (EIA). In 1978, production from Alaska began to come on line in large volumes (crossing the one mbpd mark for the first time, in 1978), and then US consumption began to fall, because of the spike in oil prices after the Iranian revolution.
Note that from 1949 to 1970, the rate of increase in US net imports was 11%/year, but after US crude oil production peaked in 1970, the rate of increase in net imports increased to 14%/year, from 1970 to 1977.
So the current rate of increase in Chinese net oil imports is less than both 1949 to 1970 and 1949 to 1977 rates of increase for the US. Of course, the key lesson is the sharp increase in net imports after production peaks, and China is showing signs of a production peak or plateau. Even if the rate of increase in Chinese consumption slows, this may be more than offset by flat or declining domestic production.
+1 (or whatever number is appropriate). nicely nuanced.
rgds
WP
Darwinian,
Say it ain't so ... where is Uncle Sam gonna borrow money to finance the MOMCOM habit ... if China can't lend any more?
China stopped buying them a while ago so the Treasury is now buying them.
China buys (or not) US treasuries not because it thinks that USTs per se are good investments but because it chooses to manage its exchange rate vs the USD. Buying USTs by China is a means to and end - a controlled exchange rate. What the reduced buying activity may hint at is that the trade surplus denominated in USD is less than it was previously.
The US does not need to sell anyone treasuries to finance deficits - the goverment is an issuer of currency so if it chooses to it can simply issue more (turn on the printing press).
Rgds
WeekendPeak
What is actually happening is that the Ben Bernanke is financing the Govt. QEx+1 is creating the market for UST's. If you look, annual purchases are around the same as the deficit, not that the Fed buys directly mind you, they buy on the "open" market, giving the Goldman Sachs the opportunity to frontrun and skim some profit.
Rome wasn't built in a day. There was a reason for that.
The burst of the Chinese real estate bubble will be felt all over the world.
There are numbers available: 64.000.000 apartments are empty.
To be fair, you must expect some empty apartments in a healthy housing market. There will always be apartments waiting for a buyer.
How many is reasonable? I would say 5%.
There are roughly 1.3 billion Chinese. At four to an apartment that's 325 million apartments. If 5% are unsold that's 16 million empty apartments in a healthy economy.
64 million empty means something is wrong.
And China's population is only just over 51% urban. There has been a massive drift from the countryside but not into 'spec-build' apartments it appears. EDIT Not sure about these numbers - 700M people squeezed into how many apartments? 64 million newly built and empty would be more than huge?
Occupancy rate should never be expected to be 100% but here are the real problems...
The people that need housing are poor and can't afford to move into these things.
And
There are no jobs there.
Would you move to a city that you couldn't afford to move to, where there's no place to get food and there are no jobs to work at? These aren't just empty apartments...they're empty cities which includes apartments, stores, all empty.
4 to an apartment? In China? With a one child policy? OECD average is 1.6 rooms per person. As far as I can tell the 64mm figure came from aerial photographs, so probably as accurate as any other assumption. Unsold and empty are different terms btw.
The last sentence in the video sums it all up. I recomend everyone to watch this.
If a contraction in the world economy brings down oil prices it is very clear that the supply will go down as marginal producers have to suspend operations. Lower production would mean that we would need to bring even more new production on line to offset the natural depletion that we have to fight each and every year. This means that if we take your argument to the proper conclusion you are supporting the Peak Oil position. The global supply of crude will peak and there will have to be a demand side response to deal with it.
Iraq to Cut Basrah Light Crude Exports to 35 Cargoes in March
That's a drop in exports of 410,000 barrels per day. This is very significant, a bombshell if Iraqi oil production actually drops by that much. If true, it likely means that the great Iraqi oil boom was nothing more than a lot of hot air.
Ron P.
Link up top: Fracking to the rescue as US oil production hits 20-year high
That statement is grossly misleading. It is misleading to the point of being an outright lie. Both Libya and Angola are producing every barrel they possibly can and exporting every barrel they have to export at a price of around $110 a barrel. That statement implies that Libya and Angola have had to massively cut back oil production and exports due to so much oil being produced by the US.
The cutbacks in imports to the US has not hurt them one iota, they have simply shipped their oil elsewhere.
Ron P.
More likely the author is a moron. He is just looking at U.S. imports and thinks we are the world.
Fracking to the rescue as US oil production hits 20-year high
Once again we hear from someone ignorant of time lags in the oil patch or is intentionally trying to be misleading: “However, the fracking boom that sent US gas prices plunging could be about to do the same for oil.” It would nice if he added the fact that the boom was started by much higher NG prices than we currently have. And that the lower NG prices as a result of increased frac’d gas shales (along with some NG associated with the oily shale plays) combined with the recession driven demand destruction that killed most of the gas shale drilling…a 70% drop in rigs. Drilling which has yet to recover much even with the recent rise in NG prices.
Chatting with another TODster yesterday it occurred to me that I was too close to a subject and wasn’t explaining an issue in simple terms. The old losing sight of the forest for the trees.
Re: some cornucopian delight that the sudden increase in oil production via than shales is an indication that PO is a non-existent problem. Like many here I’ll get wrapped up in decline rates, sustainability questions, true economic value, etc. In reality the oily shale boom is one of the best indicators of PO we have IMHO. It’s obvious connected to the current high prices. Of course, the cornies can always pull out that perennial boogie man, the invisible speculator, to blame for the current high oil price. But even with that cause of higher oil prices it still leaves those prices as the key motivator in shale drilling.
The oily shale boom and the increase in production is not a counter argument to PO but a supportive symptom of PO. Obviously the shales wouldn’t be undergoing any significant development were prices not so high. And if you accept the reason for the high prices is the POD (Peak Oil Dynamic) the link between increased oil shale production and PO is clear. One could also make the case that the DW GOM oil development is also a symptom of PO. Granted the DW plays have been developed for a while they still represent the industry’s understanding that the POD was upon us and could justify those huge capex projects in anticipation of high prices. The long lead time (again something our author apparently doesn’t recognize) from DW prospect generation to first production is on the order of 10 years. Thus projects created in the late 90 are had to be based upon anticipated prices from 2005 on. Turns out that was a good call. Despite the constant hum from the Big Oil PR machine that there is nothing to worry about perhaps management had different expectations.
This concept also supports the idea that while the oily shales may have their ups and downs as long as the POD exists the high prices should perpetuate their development. IOW it's PO that drives these plays. At least until all the viable locations are all drilled up. And then? What will be the next plays that require much higher than current prices to justify development?
Let me try to dumb it down to a sentence.
Current market prices can't fund continued development of oily shales so we've got to bait investors into losing money.
If I am to guess, my guess would be that the Shale Oil of western Colorado or the bitumin of Venezuela would be the next "Big Play". From what I have read, Shell is the major player in the western Colorado Shales but that there are a lot of problems in developing the plays.
For instance, the Shell permit limits water extraction to 3 barrels of water for every barrel of "kerogen converted to oil" oil. From what I have read, there is not enough water on the western side of the Continental Divide to water the projects. Shell wanted to take 8% of mean high water from the Yampa River. (http://en.wikipedia.org/wiki/Yampa_River) I think mean high water is about 25,000 cu ft/ sec. That would be about 2,000 cu ft/sec or the average flow of the river while extreme low flow is 66 cu ft/ sec. Shell would have to dam a "wild river" to retain enough wwater.
Also, the current method creates fires underground with some nasty residues. The fires are needed to drive the "wax" at 700 to 800 degrees to an extraction pipe where it is converted to an oil or oily like substance. The heat also fracs the shale as it moves along the trend. The problem has been that the kerogen is not uniformly dense in the trend.
I read the quality of the oil is not that good but we know there are a lot of facts that are not true.
For those of you who know something about the Colorado Kerogen Shales, are my concepts of the situation anywhere near true?
Peter - A couple of points I suspect you're aware of. First, Venezuela heavy oil won't help the US become anymore oil independent than the Canadian oil sands will. Neither belongs to the US and that oil will have to be bought on the open market just like all our imports. OTOH I suspect Vz production will eventually increase as the govt there evolves. How much of that increase comes to the US or to China (who already has long term purchase contracts in place) is another question.
As far as the western "oil shales" I would wait until someone produces at least one bbl of commercial oil from the play before I would start counting those chickens. Shell Oil is free to speculate what they might be able to do in the future but so far they haven't made one penny of profit after tens (if not hundreds) of $millions in capex spent. Oil has been bouncing around $100/bbl for quite a while and we don’t hear much other than a Shell semiannual “We’re still working on it” press release. And, of course, a few cornucopians making wild projections.
BTW in case you're not aware: doesn't matter if the feds lease any of the acreage or not: there are hundreds of thousands of acres owned privately that can be leased any time someone writes a check.
Hi Rockman,
Thanks for the repy. I agree with your energy non independence statement. I think the only way for the US to become energy independent is for electric cars and bikes to take off before the wells really deplete. It still begs the question on how we will maintain our asphalt roads and make tires, etc. There are a lot of smart and hard working people out there.
I once saw a picture where a blown up outdoor water faucet was jammed into a picture of the Green River formation. A drop of "oil" was coming out of the tap. I had to laugh. If all of the dark strata was oil, how come the formation was not empty by now of "oil"? The sad part is that people believe this stuff and don't question to find what's real and was it not.
I live near Colorado's 1 Trillion barrels of oil shale and have been following this subject for decades.
Oil shale is just "immature source rock." If we called it by its proper name, there'd be 100x less hype about it.
Really, it's not a topic for energy analysis so much as energy comedy. Here's one riff I wrote about it recently:
What is this stuff we call oil shale, and why has it been “just around the corner” for a century?
Let's try a redneck experiment.
Winter's coming, and I'm willing to pay $1,000 to the first Coloradan who decides to heat their house with oil shale. I'll deliver it in October, free of charge.
Such an experiment would teach you a lot. First, you'd learn that there's three times more energy in a pound of split pine or recycled phone books or cattle manure or Cap'n Crunch than in a pound of oil shale.
Next, you'd learn that 85 percent of oil shale is inert mineral matter. This means that on a cold winter day you'd have to shovel about 700 pounds of rocks into your oil shale furnace and remove 600 pounds of ash.
If, during the course of the winter, you burned 40 tons (about what you'd need), come spring you'd have 36 tons of hazardous waste, enough to fill three dump trucks.
I'll pay for the dump trucks, you deal with the EPA.
------
Steve Andrews and I wrote an earlier more detailed somewhat less tongue in piece you can find here: http://www.resilience.org/stories/2005-12-04/illusive-bonanza-oil-shale-...
--------
All that said, here's a quick snapshot: The Estonian company Enefit has proposed to begin producing oil shale in Utah, at a rate of 25,000 b/d with 7 years. A small startup, Red Leaf Resources, with backing from French giant Total, hopes to pile oil shale in large stacks, 100 feet high, and heat it with natural gas, then collect the drippings. They propose to do this soon, within a year or two, but a turnover of top staff has this forecast up in the air. (I personally think you'd get more oil by stacking turkey carcasses in this fashion, but hey I'm a skeptic.)
Another startup, AMSO, also with backing by Total, hopes to develop an in situ method in Colorado, as does Shell. Shell has preference rights to 1 Trillion dollars of federal oil shale if they can unlock it. That company has spent close to $1B on this venture in the last ten years without much to show for it.
Anyway, the bottom line is the research goes on. Oh, Exxon also has a long-range research project here. They want to drill horizontal wells, fill them with an electrically conductive pellets made from pet coke, then electrify the frac'ed well bores, thus heating the kerogen for some years up to 700 F when it will begin releasing oil and nat gas.
I should write a post on all this, and do it with a straight face. Certainly, oil shale's ability to attract investment is a symptom of the peak oil dynamic. Global production--in Brazil, China, Estonia--is about 30,000 b/d right now. The money behind Red Leaf, including Murdoch, and Genie Energy, has a contract to produce oil shale in Israel. This would be a good stock to short, in my view.
The Jordanians are also interested in oil shale, as are the Moroccans. Enefit is trying to export its expertise to these countries, but has come under fire at home for pissing money away. http://checksandbalancesproject.org/2013/01/31/icymi-world-leading-firm-...
Why is Total backing all these possibly doomed efforts to heat immature source rock? Look at the company's declining production of crude, or Shell's for that matter, or Exxons. There's a reason why the majors now report all their production in barrels of oil equivalent.
That way you get to hide the crude decline, disguise it with a frosting of increased nat gas production. Tasty cake, but not for Wall Street.
The Enefit process is also planned for usage in Morocco (which has quite some oil shale) by San Leon Energy. They are looking for a 5000-10000 bopd plant. Total and a few others are around in the area as well.
I think the opex for the Enefit process is supposed to be $50-$60/barrel. Not sure about Capex. Probably quite hefty. We'll see in the coming years I suppose.
Can't imagine them pouring money in a sinkhole but who knows.
I live in Colorado as well and was around in the 70s when companies starting getting "serious". LOL. Another comparison I read a few years ago showed, with numbers, that you would be better off using potatoes for fuel than oil shale. I think that was in High Country News. The only way to deal with Oil Shale is comedy, otherwise it is just way too painfully stupid.
When they say barrels of oil equivalent do they mean equivalent in price or equivalent in energy content. I'm guessing the latter. And since they use that term in financial reports, I wonder if that is fraudulent? But then again, there is probably some footnote saying 'energy equivalent'. But that is still pretty misleading because most people probably don't understand at all.
For example, if they can get away with that with their natural gas reserves, how long until they start counting oil shale with their magical barrels of oil equivalent? Will that be considered fraud? Heck, I have a glass of water next to me with quite a bit of barrels of oil equivalent if perform fusion on the hydrogen in it.
Definition of 'Barrel Of Oil Equivalent (BOE)'
A term used to summarize the amount of energy that is equivalent to the amount of energy found in a barrel of crude oil. There are 42 gallons (approximately 159 liters) in one barrel of oil, which will contain approximately 5.8 million British Thermal Units (MBtus) or 1,700 kilowatt hours (kWh).
That includes NGL's.
This is the same in the mining industry. Many companies are reporting either Gold or Silver Equivalent ounces. This means if they have say 400,000 oz of gold production plus some copper and silver... they increase it to 500,000 gold equivalent oz.
This is nice on paper, as it makes the investor actually think they are producing 500,000 gold oz, but they are not. This is a very silly way to account for commodities.
However, it does not stop them from doing so.
http://hubbert.mines.edu/news/Youngquist_98-4.pdf
It is becoming increasingly clear to me that the US "shale oil revolution" is developing into a full blown resource bubble, and the US media is broadcasting to the world that this is the end of limitiations on oil production and the future is bright for oil guzzlers.
It has all the earmarks of a resource bubble or mania. Journalists are extrapolating exponentional curves out to infinity and beyond, ignoring all negative indicators, and indulging in the usual hyperbole that bubbles excite. Any naysayers are ignored or slandered. The herd mentality has developed in a major way among the MSM, as it often does.
Those of us who worked in the oil industry for a long time have seen a lot of these bubbles come and go. Every major oil discovery seems to set off hysterical speculation that this is the beginning of a new age of oil production. Then reality sets in and the bubble bursts.
As Rockman and I have been mentioning over and over, there is nothing new about hydraulic fracturing. It was an established practice when we entered the oil industry all wet behind the ears. It is about 35 years older now that we are grey and need new joints. Horizontal drilling is not new, either. As we keep pointing out, we could have developed these plays 30 years ago if the price of oil had been $100/bbl back then.
The most realistic article above is: US oil production: Don't believe the hype. It predicts that the "shale oil revolution" will put another peak in the US oil production curve - but probably lower than the 1985 secondary peak caused by the Alaska discoveries. That would make it tertiary peak, but production will start to decline immediately after the third peak and we will be back on the downslope again.
As I have often said in the past, "Don't buy a car with more than a 4 cylinder engine". In fact, try to find a place to live where you don't need a car at all. Nothing has really changed, we are still on the oil depletion downslope, it's just that there are a few hills on the road. Don't let people make you believe they are mountains.
And CitiGroup continues to blow the bubble. I'm still wondering what the big bet they made is.
Almost every time you see these cornucopian articles, you can find a quote from a Citi person in them.
http://finance.yahoo.com/news/7-oil-falls-chinese-economy-174356999.html
Those kinds of comments drive me nuts (citi's not yours, speculawyer).
You can't have "long liquidation" without "short liquidation", because for every long position there is a short position.
I hear the "speculation" argument pretty frequently but don't quite understand it. Let's see how futures (trading) works. Derivatives (and futures are derivatives are fundamentally different from stocks, bonds and other "real" assets in that for every long position there has to be short position.
On day one there is no WTI contract for a given month. When a speculator buys a futures contract the only way s/he can do this if another speculator sells it. The total of longs and shorts is always zero, and so are the profits. One future contract's holder gains are another future contract' losses.
Let's assume the speculator has significant capital and can rent a couple of crude carriers to buy physical oil and hold it for a while. Let's say a VLCC holds 500k bbls (which is the same as 500 future contracts btw) and rents 10 of them and fills them. Although s/he may be driving the price up a bit when it comes time to sell s/he will drive the price down by the same amount.
The only way that I can envision speculation drives up prices is because it increases price volatility which increases the required rate of return of those who actually extract the stuff. This is because the extraction business is an NPV business and the higher the volatility of your expected cashflow the higher your required return will be. That would increase the hurdle for projects the investor would want to invest in. Although real, it is a long, long term effect and not something which is likely to explain day to day / week to week price volatility.
Rgds
WeekendPeak
Tain't necessarily so, WP.
Selling short is accomplished by a transaction with your friendly broker. You sell securities you do not own, and pledge them as security on the loan for the purchase, usually with a 15-20% equity requirement (satisfied by your long accounts, or a cash payment). After a stipulated period of time, you must go long to satisfy your promise to deliver the security. If the price dropped in the meantime, you made money (less any interest and transaction fees paid to the broker); if the price goes up or stays the same you are in the hole.
I personally think it is dishonest to sell what you do not own; and, I have known friends who have lost big time doing it, for which I say good on 'em, it is richly deserved.
In accounting terms, there must be a debit for each credit to balance the broker's books. It just does not have to be in kind.
Craig
You don't sell future contracts short. Short selling is a concept related to either bonds or stocks, not to futures. You just sell a futures contract - you don't borrow it from anyone. When you buy/sell a future it will be indicated if it is an opening transation (initiating either a long or a short position) or a closing transaction (reversing the opening position). In futures trading there is no "uptick rule" because that would mean that the other side of the transaction would have a "downtick rule".
And the only way you can sell it is if somebody else is willing to buy it, whether that "somebody else" is another (retail) customer of a futures broker or if the broker acts as principal (something which is indicated on your trade confirm) is irrelevant to the net position of outstanding futures contracts, which is zero.
I don't think it matter who is long and who is short. If you buy a futures contract and your broker choses to be short the net position is still zero. As futures contracts in the US generally clear through the CME, and both parties have to submit their trades in order for the transaction to actually occur and post margin the net postion is always zero.
Rgds
WeekendPeak
No, WP is right in this case Craig. He is talking futures contracts and you are talking equities. Apples and Oranges. Equities are the real thing, a piece of the company. Futures are not a piece of anything, they are a wager, a bet, on which way the commodity will move, nothing more. If you bet that oil prices will rise then someone else must bet that oil prices will fall. For every long contract there must be a short contract. You cannot liquidate one without the other.
You can borrow equities from your broker, that is you can borrow 100 shares of stock, 100 pieces of a company, or more if you wish. Equities have interstice value, they are a "share" of the company. They are something you can "borrow". But you cannot borrow a long or short contract from anyone because they are nothing but a wager, a bet on which way oil will move.
That's why they are called "derivatives". They have no interstice value, their value is "derived" from the underlying commodity.
Ron P.
I think Ron's spell-check changed "intrinsic" to "interstice".
Yeah, thanks. That has happened to me before. Your spell-checker corrects your spelling but inserts the wrong word. Anyway I think I got my point across.
Ron P.
You guys use spellchecker?
I don't what Ron is using that will replace a word without him knowing.
With FF any unrecognized word will be red underlined. Just right click and pick the right word.
Of course sometimes my spelling is so bad it can't even figure out what I want. For those cases I have found that Google search suggestions works very well.
Recent examples: justification, authoritative.
Hey, I saw it... okay. I just did not pay attention that it picked the wrong word. I just don't think it's that big a deal. And this will very likely not be the last time that I pick the wrong word.
Ron P.
Besides, there could be no mistaking what you meant! We waste entirely too much time picking nits.
Craig
Management consulting company Accenture has a different view:
https://www.accentureacademy.com/~Blog/The_Energy_Conundrum/view.aspx?Go...
Also, see : http://www.supplychainquarterly.com/topics/Energy/scq201005energy/?utm_m...
4? My current car has 3. If I buy another it will have 2 or 1 or none.
Top tech companies plug into renewable power
There's a joke about the cloud there somewhere.
There's some more info from Wired Magazine about Apple's Maiden, NC project including a comment from competitor Amazon that the on-site power generated will only supply a fraction of the facilities needs.
Greenpeace complained about the acreage that was cleared and how the local power(Duke Energy)is mostly from coal fired plants but conceded that Apple's trying. $500 Million for the data center and $1 Billion over the next decade? Trying to stay competitive.
Wired:
http://www.wired.com/wiredenterprise/2012/04/apples-secret-data-center/
Since Deregulation of the Grid was botched, we have this mixed-up workaround know as NET metering, Large consumers take advantage of Low PV Prices. Lots of action behind the meter.
Strikes me as more malinvestment, but Apple has so much cash they can do whatever they want. Surely these companies understand that without baseload electricity from coal, gas, and nuclear, there is no internet. So they can have their data farms powered by hydro or solar or wind, it's not going to make one difference if everybody else has no electricity to transmit it.
C'mon. Obviously they know all about that. But being able to say that you can provide a good percentage of your net energy requirements is useful. They trade PV power they generate during those peak day-time hours in exchange for grid electricity at night (when there is excess capacity).
Peak Oil predictions "alway prove wrong"
Predictions that the sun would set were also wrong at 1:00 PM, 2:00 PM and 3:00 PM....
"always prove wrong"
They better hope so, since according to the linked article below, the IEA says that conventional crude oil is peaking even as we speak:
"According to the IEA, the projected increase in oil production from 84 mbpd (million barrels per day) in 2011 to 97 mbpd in 2035 will come “entirely from natural gas liquids and unconventional sources” -- largely shale oil and gas -- while conventional oil output will begin to fall from 2013."
http://www.middle-east-online.com/english/?id=57302
And the only problem with natural gas liquids is that most of it can't be turned into transportation fuel. And if the latest "expose" by EOG is any indication, most of the stuff coming out of the "unconventional" Eagle Ford is so light that ALL you can use if for is either gasoline or diluent, in which case then, if the IEA is correct, then world diesel-kerosene-jet fuel production is now also peaking even as we speak.
Birol says something interesting on youtube.
Birol basically says BAU is foobar. http://www.youtube.com/watch?v=iKkISqOCnVA
His last words in the interview were: "I think it would have been better if governments had started working on this problem ten years ago..."
Ironically even 5 years ago the IEA was telling all of us not to worry about Peak Oil!
JV: foobar? Or 'FUBAR'?
"The International Energy Agency... is a Paris-based autonomous intergovernmental organization" ~ Wikipedia
With the keyword being 'intergovernmental'...
Big centralized governments appear to be in a real pickle, between more than a few rocks and hard places.
Insofar as we have glimpsed finance's vulnerabilities/sensitivities in 2008, big centralized nation-states may be more sensitive/vulnerable than some might think.
Also, insofar as those "in the know" are speaking of 'government delusion', this effect may be symptomatic of this pickle. It seems less a delusion and more a double bind, a deer caught in the headlights of its own runaway train.
- Re-localize and you're dead.
- Hemorrhage the cheap oil and you're dead.
- Economic austerity; the public revolts and you're dead.
- Decentralize/Alterative energy and you're dead.
- Grind growth to a crawl or less and you're dead.
- Etc.
It's possible that peak government and/or large centralized government decline and/or collapse may arrive much sooner than many realize.
That said, it's helpful to offer these quotes again:
Er.. excuse me, my slang is not so good.
There have been cases where individual beings have been able to sway the course of history, but so far my readings on them have shown a severe negative impact (i.e, butchery followed by rebound). John Maynard Keynes said "gentlemen, in the long run we are all dead" which is certainly correct.
Yes, I more or less agree with what you say. Although, curiously there has been a move to austerity and
conservatism particularly in Europe (in more ways than one), has been for a while already.
You mentioned Matrix, personally I think Koyaanisqatsi better represents your comment.
That Birol interview has gotten @2550 hits in 22 months. Justin Beeber (sp?) gets maybe a million hits in a day. Nuf said about BAU and FUBAR.
However.. (ahem..) he does take a respectable stab at offering a working definition of BAU for the porpoises of his remarks anyhow, which is to say in effect 'a condition in which no great policy changes have taken place'.
I do think it's important to understand and try to make clear the assumptions behind that mischievous acronym ('BAU') when we are using it, since for some it's just such a notion of 'things as they stand at the moment', and can imply with it the understanding that changes and surprises will also come, but I can't incorporate them all into this discussion.. while for others, it has clearly become the icon for 'Modern life as we know it.', and saying an 'end to BAU' means a complete and utter revolution in all that we know and love.
In short, I hear it now as shorthand that has gotten a bunch TOO short.
Predictions of collapse can only ever be right once - something these people seem incapable of understanding.
As I say, it's playing Russian Roulette - saying "not dead yet" is not a positive statement if you continue playing.
If you want to understand peak oil, please study the Mexican case...
About "Our oil problem is not that 'we're running out.' Our oil problem is that we're producing so much of the stuff that we are changing the planet's climate." I think greens made a mistake with the climate apocalypse. The challenge are energy prices (greens do not talk about it) and pollution --but real pollution, not imaginary, I mean, CO2 is not the "stuff"...
It's interesting that in the David Frum article, Frum attributes Mexico's problems to mismanagement, while completely ignoring the collapse of Cantarell field. The collapse of that field, from 2 mbd to 0.5 mbd, almost entirely explains the failure of the Mexican oil industry. They might have been able to slow the decline with better investment and regulation (or the absence of regulation, or whatever ideology you prefer), but the loss of 40% of their production in just a few years is impossible to shrug off. Frum doesn't even bring this up, because the collapse of a supergiant field is incredibly scary. This will inevitably happen to another supergiant field, and then things will get really interesting.
PEMEX didn't try to slow the decline at Cantarell, they *accelerated* it. Fifteen years ago, knowing a crash at Cantarell was inevitable, they build the world's largest nitrogen injection plant and increased production rates at Cantarell.
It made sense in a strange way. If you want to cut all the trees in a forest down, why do it slowly. Cut them at once! Don't jack around.
All that nitrogen injection capacity, or much of it is now being diverted to nearby field KMZ. So we can expect a similar outcome there.
PEMEX inviting in foreign investors: this is predictable outcome of peak oil dynamic.
They waited too long to move, but who hasn't.
Indeed, as far as I know Cantarell is the only field that uses massive nitrogen injection although I assume just a few types of oil fields benefit from it. If N2 injection increases total recoverable oil then it can extend the life of current fields.
N2 injection is immiscible injection - it does not reduce the viscosity of the oil and make it flow more easily so N2 injection does not improve the recovery factor. It just enables the same amount of oil to be produced faster, but OTOH the production decline at the end is steeper.
OTOH, CO2 injection is miscible injection - CO2 mixes with the oil, reduces the viscosity, and enables more oil to be recovered. That is why it is used extensively in places like Texas where there is CO2 available. Presumably the Mexicans did not have CO2 available so they used N2 instead.
Mexico's N2 injection program at Cantarell was inherently foolish because they simply produced most of the oil from the field back when prices were low, and now that prices are high, production has collapsed.
PEMEX's failure was not in failing to stop the collapse of production at Cantarell, it was in failing to predict the the collapse in production at Cantarell and taking measures to mitigate it.
It was quite easy to predict in advance, and PEMEX had all the data they needed, so they should have known what was going to happen. I think the failure was at management level - failing to believe what their reservoir engineers were telling them in favor of making the politics look good.
Mitigating the crash would have been a two-step process:
1) Throttling Cantarell down to a much lower rate of production, e.g. 1 Mbpd rather than 2 Mbpd to give them more time to bring other fields on-line, and
2) Bringing other fields on-line to replace Cantarell as it goes off production.
PEMEX does have other fields which are huge in size, but complex in nature - more like North Dakota's Bakken play. PEMEX is probably the last company you would want to develop them.
In the US and Canada, typically the big new oil fields are developed by the big, integrated oil companies, but as they wind down, they are sold to the independent producers who have less overhead, and once they get too marginal for the independents, they are sold to to the mom-and-pop operations who have almost no overhead at all. This means at each stage of its development, an oil field is being managed by the size of company most appropriate for its production.
PEMEX is huge, and it can only handle one size of oil field - huge. Once a supergiant oil field is past its prime, PEMEX is like a whale out of water trying to manage it, or develop lesser oil fields.
I do have sympathy for those who oppose any increase in the burning of FF’s. But those feelings don’t change some basic facts about the Keystone p/l.
“We do not have a single study conducted by our government on what a worst-case scenario spill of at least 150,000 barrels would look like on the Aquifer or our rivers or on private farm and ranch land,” Kleeb said.” AFAIK there’s no reason for the feds to make such a study. First, they have no authority over the p/l other than the very short section that crosses the border. And, as has been pointed out many times, the US sections of Keystone are currently being built and will carry that oil whether the feds grant the border crossing permit or not. The oil has been transported via other methods across the border at all-time record volumes. It’s coming across via rail, trucks and the existing p/l’s that already cross the border. And when the southern section (already approved by the states) is completed there should be an uptick in those alternate transport methods. I understand how Keystone can be a flash point for those folks. But so much attention to it compared to the hundreds of thousands of miles of existing p/l’s that carry oil and product across every state in the country. P/l’s built decades ago with lower specs than those proposed for Keystone.
They are correct that the Canadian oil sand do contribute to AGW. Just as all hydrocarbon consumption does. And they will continue to do so whether the border crossing permit is signed or not. They’re certainly free to expend their energies fighting the permit but IMHO that capital might be better directed towards efforts that have some chance of improving the situation.
I have seen articles that state that the pipeline will increase the price of oil and gasoline to the midwest since more of the tar sands oil will now bypass the midwest and go directly to the gulf for export. I hope I got that right. I believe it was an NRDC article but I do not have the reference. Even if the probability of a negative environmental impact is low, I am not sure why the U.S. should lift a finger to help Canada export their oil. And would they also be exempt from U.S. taxes in the process?
In any event, even the State Department acknowledges that the total GHG from tar sands from mine through final emissions is greater than other methods of obtaining oil. While this is probably true, I agree that there are other fossil fuels like coal that one should focus on. There has been progress as far as power plants but coal exports, especially to China, probably far outstrip tar sands in terms of impact.
If this is not approved, which is doubtful, I guess they can build a really big pipeline across the border and call it a truck tunnel. LOL.
Of course tar sands are more carbon intensive than easy petroleum, but that is not the point, as Rockman has been saying, and as the McKibben-Qioxote windmill tilters refuse to acknowledge. The point is that, barring something that could make a difference, in Rockman's apt terms, on the demand side, those tar sands are getting burnt, KXL or no KXL. What fool doesn't know and admit that?
If anything, the KXL would probably make a very marginal positive impact on the overall GHG situation, due to the (I assume) comparative greenness of pipelines over dozens and hundreds of diesel locomotives.
It's saddening and maddening to have this tempest-in-a-teapot pass for climate and energy politics...
While, arguably, McKibben is tilting at windmills, responsibility for the view that the pipeline makes a difference is also shared by the industry itself in Canada. So, if there are a lot of people who do not understand this situation, it is understandable. McKibben and others are actually using the industry's statements to argue against the pipeline.
Yes, all this is obvious to many here in no small part because of the efforts of people like Rockman. But frankly, it is still not clear that the absence of the pipeline will have no impact. Does this justify all the effort devoted to stopping the pipeline? Well, maybe not. But again, it is no wonder that people are confused when I have read articles from industry itself which state that certain operations are going to close down without the pipeline.
But the main objective of my post was to ascertain whether or not this pipeline will actually damage the economies of the midwest and will have no real benefit for the United States.
It is symbolic, not biophysical, approach to the problem.
Reformist politics would not be involved with a biophysical solution, but we haven't crossed that line, and I hope we don't.
Stalling the Keystone pipeline would only affect the economies of the Midwest insofar as it will reduce the "crack margins" and therefore the profit margins of the Midwest oil refineries. These refineries currently get much cheaper feedstock from Canada than the ones on the East, West, and Gulf coasts which do not have access to Canadian oil. However, they are not passing the savings on to consumers but selling gasoline at the same prices as the coastal refineries. The excess profits go to the shareholders.
If the oil could make it to the Gulf Coast, it would trade at about the same price as Venezuelan Extra Heavy or Mexican Heavy. The Gulf Coast refineries want it because their supply of Venezuelan and Mexican oil has declined in recent years. It might enable them to increase their production and cut their prices somewhat.
However, gasoline is a fungible commodity and highly transportable, and at this point in time the price is primarily determined by the price of North Sea Brent and OPEC crude oils. Don't look for the price of Canadian oil to affect it.
The real hazard for the US is that Canada will start exporting the oil to China instead. See the article above China ousts the U.S. as the world’s main oil importer. The US government does not seem concerned about this due to the current "shale oil" hype being promoted in the US, but I'm far less sanguine than they are about how the future is going to unfold for oil supply.
This commentary would seem to agree with you: both sides agree that the oil sands are going to get consumed eventually, one side just thinks your better off going to Hell slower than faster.
"Trains will move tar sands oil, if the Keystone XL doesn't"
http://www.marketplace.org/topics/sustainability/trains-will-move-tar-sa...
ts – This is where the conversation gets tricky. To the company building the p/l they are going to charge a fee to transport the oil to Cushing via the section already under construction. A p/l makes its profit by charging a relatively small amount per bbl and make up for it by through putting a large volume. With the delay of the border crossing section of the oil may have been permanently redirected towards other end users. OTOH if the oil sands continue to be developed the entire Keystone p/l may reach max capacity in the not too distant future.
The producers/buyers have to pay to transport that oil. Typically a p/l is the cheapest and most reliable method. But from all I’ve read the border crossing section of the p/l won’t have nearly as much impact on pricing (the common complaint from Canadians) as the expansion of the p/l system from OK to the Texas coast. An expansion that has gone on as fat as possible even without the border crossing permit.
As far as the question asked about the effect of Keystone on the economy it depends on whose economy you’re talking about. Canadians sell their oil at a higher price: good for their economy. Midwest refiners lose some crack spread: bad for their economy. Midwest consumers, who were paying relatively high fuel prices even though their refiners were getting cheaper oil: not much change to their economy. Gulf coast refiners if the Canadian oil gets to them cheaper than their current supplies they may increase their crack spreads just like the Midwest refiners: good for their economy. Gulf coast oil producers: the Canadian oil puts downward pressure on the prices they receive: bad for their economy. Eagle Ford oil producers: getting WTI prices more or less but they are getting more p/l access to coastal refiners and thus were anticipating higher prices. Not sure when the Canadian oil starts flowing big time from Cushing I’m not sure what will happen to EFS oil prices. Citizens of Texas: if Canadian oil causes lower prices than they lose income from severance taxes. And if cheaper oil reduces some drilling they lose jobs. Not good for their economy.
Lots of differently economies effected to different levels.
ts – The question I have about McKibben et al is whether they understand they’ve lost battle (the development of the Canadian oil sands) before they fired their first shot. As you know the US imported more oil from Canada in 2012 than ever before. And much of that from the oil sand fields. If they really believe that stopping the border crossing section of the KPL will deter development of those reserves then they have totally separated from reality IMHO.
OTOH they may understand the situation quit well and have other motives with respect to winning the war. The war being the reduction in the burning of all FF’s. A war in which they won very few battles so far. They’ve already lost the Canadian oil sands battle. They’ve lost the DW GOM oil development battle with over 400 new drill permits issued by President Obama since the Macondo blow out. They’ve lost the battle to limit the amount of coal the US exports. They appear to have lost the battle to stopping the export US NG to foreign countries instead of leaving it here in the ground unburned for at least some period of time. They lost the battle over new coal fired plants being drilled around the world in particular with China’s very aggressive construction program. They never had a shot IMHO at winning the battle over increasing US motor fuel taxes as a method to force conservation. They may have won some small delaying skirmishes over frac’ng but I think those smiles will be short lived: the states really want that money.
As I said I really do have empathy for how frustrated they must feel even if I’m not 100% signed onto all of their efforts. They truly are David fighting Goliath with one huge exception: they don’t even have a sling shot. Just words…words that Goliath doesn’t care to respond to other than offering a little lip service.
Hi Rockman,
If the part of the Keystone XL that crosses the US-Canadian border is not approved, doesn't that make it more expensive to transport that oil to the US?
If that is correct, doesn't that reduce the profits of the oil sands producers?
Assuming the answer is yes, doesn't that tend to reduce the rate at which the oil sands are developed?
If the answer to all three of these questions is yes, then the reason some people oppose the Keystone XL is because it will tend to slow down the rate at which the oil sands are developed. It is essentially a stall tactic.
DC
But aspiring social movements always lose when they start out or become unprincipled. And latching onto KXL while taking delivery of brand-new cars and barely mentioning the national infrastructure for petroleum use is highly unprincipled. It's like SNCC c. 1961 trying to combat segregation by demanding that Woolworth's shorten its business hours. You don't fight to slow down an injustice. You dig at its roots. People aren't dumb, and can tell the difference.
Meanwhile, a conspiracy-oriented mind could wonder whether McKibben isn't a Democratic Party cat's paw. His efforts are certainly greatly helping to confine climate politics to side issues.
Now, there's a real stall tactic, intended or not.
Bill McKibben is definitely a genuine activist although he does shy away from confronting Obama for fear of encouraging the Right. On Auto Addiction issues he sent me a mail last year when I raised this issue and said Middlebury College and Vermont are trying to restore Rail service. But personally I think it is a big mistake not to make Auto Addiction the basic thrust of a campaign since it is the root cause of US Oil Addiction. McKibben seems to think Green Transit is ancillary whereas I think it is fundamental. Look at the NY / NJ response to the gasoline shortages during Hurricane Sandy. Instead of providing more Green Transit options which would require much less gasoline to begin with (if ANY for electrified Rail!) they are promoting the expenditure of at least millions of dollars for generators for gas stations! Huh?
My neighbor is a bus driver who said the buses were NOT guaranteed fuel!
I should think that would be a priority.
But it will take a while for all concerned to kick Auto Addiction.
Including Bill McKibben.
A group from North Carolina took bio-ethanol (non-corn) buses to the DC Rally. Understandable Amtraks horrible schedules might not accommodate their schedule. So they were using Green Transit not private cars...
DC – More of a guess then what I can prove but I doubt the cost differential between pipelining the oil and the alternate transport methods is that great. Given those alt methods were employed during 2012 when more Canadian oil was shipped to the US than ever before would indicate to me that transport costs aren’t a critical economic factor in the development of the oil sands. We know the production capex is rather high so they dominate decisions along with expectations of future prices.
Another thing: I don’t pay to have my oil shipped anywhere. At least not directly. If I sell a bbl of my Texas crude for $98/bbl (LLS price) it’s barged to Lake Charles. My crude buyer pays for that barge transport as well as the tanker to haul it to the barge terminal. Obviously my buyer takes those costs into account when he strikes the purchase price. That may be a big factor in who is transporting the Canadian oil: if one crude buyer has a transport cost hedge he can use that to outbid other buyers.
So that’s a question for RMG: when we see reports that the Canadian oil sand producers are getting $X/bbl is that at the tank? IOW when we see the oil sands producers getting $85/bbl that may not have any transport cost deducted from his check...it’s built into the price. And that’s where there’s a lot of competition amongst the crude buyers. Perhaps a lot of folks don’t realize that many operators don’t sell oil directly to the refinery. Not once in 38 years have I ever sold oil to an end user. There are companies, like Plains Resources, that do nothing but buy oil and resell to other oil brokers and directly to end users. That’s the complicated issue when looking at the situation in Canada: there are a lot of folks making a lot of money transporting oil. And for a number of them the last thing they want to see is that border crossing section of the KPL built.
When it comes to oil production there are lots of fingers in the pie. Most of the general public probably isn't aware of that.
Hi Rockman,
When I quote prices for Western Canadian Select, it will likely be f.o.b. Hardisty, Alberta which is a delivery point, pipeline hub and storage facility much like Cushing, Oklahoma. It would probably cost $5/bbl to deliver it from there to the US Gulf Coast by pipeline, or $20/bbl by railroad.
The oil sands producers have to pay to ship it from their production site to Hardisty, and the buyer has to pay to move it from Hardisty to market.
At this point in time, WCS is trading at $64 f.o.b. Hardisty, WTI is trading at $91 f.o.b. Cushing, and Brent is trading at $110 f.o.b Sullom Voe, an island north of Scotland. That's a $27 discount for WCS vs WTI and a $19 discount for WTI vs Brent for a total discount of $46 for WCS vs Brent. There's a lot of money to made moving oil around, which is why the oil producing and transporting companies are so excited about Keystone XL.
Bingo, 78. This is the only reason I can really see for all the hullabaloo. If not a pipeline, then there's a lower received price, and hence less incentive to keep developing or to proceed as far in the development of the tar sands. Otherwise, why do the Canadian O&G companies even care?
It's all about their bottom line, and I for one get awful tired of the Canadian whining. Stranded resources are everywhere, whether it's the stranded natural gas they use for almost free for production, stranded wind of another area, stranded coconuts in the South Pacific, high freight I pay to get a better price on livestock, you name it.
Make Your Car Pay for Itself by Renting It to Someone Else
My neighbour just had to pay big bucks to restore her apartment she'd rented out. They had trashed everything, to the extent of ripping the wires out of the walls.
Never, never, never, would I rent my motor vehicle out. People are just too damned disrespectful of other people's property.
I won't even let other people drive mine. Too many bad experiences. Sorry.
I have a 1986 S-10 I'd be willing to loan, as long as they promise not to pressure wash it. Too many parts come off with the dirt.
Deep Carbon: Quest underway to discover its quantity, movements, origins and forms in Earth
S - I'm not a geochem guy but what little I've seen there's been no problem telling the difference between organic and inorganic NG. But it still doesn't matter to me or other exploration geologists. Regardless of where the NG originated we still have to find where it has accumulated. Thermodynamics limits where NG can exist. We also need certain types of rocks to trap it. Even the regime of those nasty old shales is well known.
So we're still back to the same problem regardless of the origin: we gotta find where it's hiding. And we're quickly running of places to find unknown accumulations. Which is the second half of the punch line the abiotic folks tend ignore.
Hard to tell if this is a good faith effort to end the 'debate' or some wing-nuts wet dream of a ten year tenure to reproduce the Laputian [... of Gulliver's Travel fame] blind pursuit of science without practical results.
Examples: At the Grand Academy of Lagado, great resources and manpower are employed on researching completely preposterous schemes such as extracting sunbeams from cucumbers, reducing human excrement to its original food, learning how to mix paint by smell, and uncovering political conspiracies by examining the excrement of suspicious persons. - lotsa this in D.C.
S - That's the thing about debates...you need at least two folks to have one. Why would I debate anyone about the abiotuic issue. My concern is finding NG where it has acumulated. As I proclaimed long ago: I fully accept that all NG has an abiotic source. And that doesn't change the task before me or how I go about it.
Mr. Rock:
This is just for my education, not to start an argument. But is this a rhetorical statement or do you think NG is inorganic? I have assumed it is overcooked biotic petroleum presumably mostly from algae. I also know there is 'coal bed methane' which also implies biotic origin.
My rhetorical question - does anyone think coal is not biotic in origin?
Bryan
Hate to speak for Rockman, but I can tell you that he was not being literal. He just meant he would not argue origins (and he knows FF are almost if not altogether biotic). His job is to find it and get it to market.
Craig
Edit: add: and, make a profit while doing so.
Methane can be either biotic or abiotic. Decaying vegetable or animal matter can create methane. There is also methane on Titan and on other planets and their moons. That methane is obviously abiotic. But longer polymers are all of biological origin. And, though I cannot prove it, it is extremely likely that all methane found on earth is of biological origin. Farts are mostly methane gas and they are definitely of biological origin. ;-)
Most methane gas that comes from deep reservoirs on earth started out as oil or much longer polymers. Heat from the depths then cracked into shorter polymers including propane, ethane and methane. It all started out as algae.
Ron P.
I'm no chemist here, but the way I understan things, adding heat to long organic chains break them down into shorter bits, not the other way.
Mr. Bryan – “But is this a rhetorical statement”. Nope. It’s what we geologists refer to as a smart *ss statement. LOL.
But if I ever had the opportunity to “discuss” the subject with an abiotic advocate that is exactly the position I would offer. And after we gave each other a big hug I would ask them where they suggest I should look for all that abiotic NG. And how would they respond? Easy: you look at all the places where NG could exist (can’t exist at very high temp) and specifically where it could be trapped (a porous rock). IOW look for it in the same places I would be looking for organic NG.
That’s the absurdity of the abiotic origin of NG. We don’t hunt for were NG or oil is created. We hunt for where it accumulates in circumstances from which we can produce them. There has been speculation that there may be huge abiotic NG accumulations on some moons orbiting certain planets in our solar system. So? If you ever engage an abiotic believer just agree with them and then ask where we should be looking for those reserves. The conversation should come to a grinding halt.
Thanks to all of you for confirming my closed-minded theory.
However, Rockman, you could confirm the abiotic origin by simply extending one of your holes to the ~50 km depth. I predict you will be successful, then there will be a 'bottle rocket' effect as the high-pressure NG pushes out all the abiotic petroleum core.
Bryan
I am sure that the ratio of carbon isotopes, c12, c13, (c14), in those deposits can help to settle that argument.
Slump Cuts Our Fuel Use More Than Green Concerns
Who Pays For The Greening Of Germany?
Please Socialize the costs before you leave.. just leave the profits, they're ours!
Thank you for your corporation!
Indeed, in recent years ever more industry has been getting a free pass to enjoy the lower wholesale prices as a result of the Energiewende and retail power users pick up this tab. Last year, due to the lower feed-in tariffs, the surcharge as a result of the additional renewable energies only increased by only 0.19 Eurocent, yet the total surcharge increased by 1.62 Eurocent. Most of this increase is due to more industry excemptions.
Could it be that the BBC author has as usual not understood the different aspects:
1) Most of the FITs are finaced by private consumer, that is correct, however this "only" contibutes with 20% to the elctricity price. (5.5 cents out of 25 cents per kWh). Industry lives well with lower electricity prices, the costs are covered by provate households.
2)OTOH The interesting aspect of German and Austrian PV and wind investments (modules, windmills)is that most money come from private housholds, German wind power is owned >50% by farmers. Many villages have now tax revenues, can improve infrastructure. :-)
Therefore, the author completely failed to put the statements in the correct context. Private households not only pay they also earn.
"The largest amount that goes on investment in renewable energy comes from private households," says one of the country's leading energy economists, Professor Claudia Kemfert of the German Economics Institute in Berlin.
"More than 50% of the investment in solar and wind-turbines comes from these households."
RE: Look Carefully at Those Seeds from DB up top …
Evolution of locally adapted seeds is an example of Epigenetics at work. Example: Land of the Lost: biodiversity in our food supply
or Epigenetic contribution to stress adaptation in plants
and Scientists Uncover Mechanism by Which Plants Inherit Epigenetic Modifications
and the corporate response has been ... Reviewing F. William Engdahl's "Seeds of Destruction" - Part III
Given the failure of the rebuilding effort in Iraq, I wouldn't worry too much about traditional farming practices being swept away. Agribusiness-style farming requires roads, heavy equipment, heavy equipment maintenance, large corporations to buy GMO seeds on credit, irrigation infrastructure, etc. etc.
This was published in February but doesn't seem to have been posted on TOD.
Wind farms will create more carbon dioxide, say scientists
The Telegraph is ground zero for every possible, imaginary or otherwise, argument against wind power in the UK. The rural elite there are as batty as Tea Partiers in the US.
Let's see now; they've pissed away most of the North Sea Oil [at around 10 bucks a barrel], dug up the coal long ago, are stuck with a scarily ancient nuclear fleet that needs billions to just be kept safe, need to keep the Russians nice to buy gas from - assuming they will be able to afford it with their rapidly contracting economy.
And what is the Telegraph obsessed with? Stopping the scourge of renewables, especially wind power, and pretending that Scotland belongs to England yet England is nowhere near Europe...
Also the modelling, and recent experience, is suggesting that global warming, Climate Change, makes for a colder wetter UK not a milder one requiring less energy for heating!
God Save The Queen.
We do see quite a bit of the rural elite 'battiness'. They get most uptight though with fellow land owners who sell out; usually with those lesser types of farmers who aim to make an extra return on the odd field while still grazing the sheep safely beneath a turbine. (I have some friends, however, who are not in it for business returns, but see it as a commitment to a better-resourced long term future.) The batty fervour is not just about a rural idyll for ex-city types, though that is one issue. Some residents have long been used to making the rules for areas under their command, and it seems are disturbed to lose some of the 'say-so'. Others have used financial clout to buy into well-mannered estates. None like to see their interest and position challenged. But consider it a clash and a competition between land-owning business interests. (The battle goes all the way up to the infighting at the top of our political system.)
When I attended uni in Wales in 2009-10 there was great rural opposition to wind turbines near the coast, but it was because the company or companies involved were to send the electricity to England.
Studies show that there is much less resistance against windturbines when locals are invited to invest in local turbines and thus share in the profits. It's not only good to get approval but also to break the unhealthy monopolies in hands of the big utilities. Democratisation of energy is a good development. In Germany are even plans to allow locals to invest in powerlines for the same reasons as is done with windturbines.
Is Nature obsessed with stopping wind farms?
These two guys literally wrote the book.
Anyway, it is not the turbines themselves, it is the access roads needed to get machinery in to build the turbines. Since peat is like a wet sponge and can't support much weight, they have to dump stone on the peat to make roads. The roads sink over time, cutting off water percolation and allowing the peat to dry out and oxidize.
You can't tut-tut about tropical regions destroying peat for oil palm plantations then do it yourself. That is morally wrong.
I think peatlands are probably the most underrated wildlands worldwide. The oil sands development makes the same sort of excuses - "it's wasteland anyway, we're making it better". The British Isles have a long history of draining them for farmland, cutting them for fuel, and otherwise exploiting them, so what we're talking about here is remaining peatlands.
Peatlands, swamps, and other wetlands tend to not get the same type or numbers of defenders as a pretty forest or a similar. Yet they are just as valuable, in many cases more valuable.
As I understand it, leaf litter etc in forests gets recycled, so once they are mature forests reach a maximum carbon holding capacity and stay there.
Peat bogs on the other hand accumulate carbon indefinitely because the vegetation does not decay in the acidic water and nothing eats it.
I don't know the details in the Scottish case, but clearly peatlands are a big and vulnerable carbon store. Not all windy uninhabited sites are good places to put WTs.
Most all developments in peat lands are a CO2 source.
So in essence this is a call to put windturbines up in sensible places. Sounds fair to me, assuming their calculations and assumptions remain standing upon scrutiny.
Since when is a peat bog an "upland"? Gads, what's the lowlands look like?
http://www.forestry.gov.uk/forestry/Uplandbog
Quite common in Scotland & Ireland.
There tends to be more rain at higher elevations, so often swamps will develop there. Here in Hawaii, the wettest place on earth is a swamp on top of a mountain in Kauai - Mt. Waialeale. There is a decent sized one here in Oahu as well that I have always meant to hike up to but somehow never have.
Lowland peatlands in the UK are long since gone to lakes (after being dug up for fuel in the Middle Ages) or farmland.
'Peak oil' doomsayers proved wrong
Wow. Just wow. The really sad thing is that David Frum is supposed to be one of the 'smart' conservatives that believes in science.
Tomatoes? Really? So apparently we can just 'grow' more oil then in Sacramento valley? It is my understanding that the price of oil has increased MUCH FASTER than inflation because of high-demand and oil depletion. I can buy canned Tomatoes for 75 cents at the local store.
And if Tomatoes get expensive, I can eat corn, soybeans, carrots, celery, etc. What are you gonna replace oil with? Can you fill your car with natural gas? Please, give it a try, Mr. Frum. Or put some coal into your gas tank. Good luck with that.
Wow. Way to paint a world wherein farming and food distribution as we know it has collapsed due to a lack of diesel as such a happy thing!
So David Frum . . . how are we going to move beyond oil altogether? How will we power our ships, airplanes, and trucks?!?! Do you have a clue? No you don't! You are not a scientist or an engineer. You are just a political hack positing magical thinking. Why do you think we've been burning oil for 150+ years? Because we still haven't been able to figure out a better/cheaper way of doing transportation. And people have been trying for that entire time.
It is true that Frum is one of the more rational, reasonable conservatives. That is the really funny part of this article. And then he dumbs it down to talk about tomatoes as if we are all witless children. Well, most of his audience probably is witless.
This actually seems to be a rare occasion when most of the comments are calling him out. Pehaps folks are getting more savy about these things, not buying into the MSMs cornucopian repetition. There may be hope yet..... nah, forget I said that ;-/
Read most of the comments about Frum over at CNN, but as things deteriorate rapidly in the Comments section, a reply seems a bit of a waste. Congrats Ghung for firing the first shot across Frums bow :).
At this point, with most of the variables considered, from massive population overshoot to China's bubble soon to burst (welcome to the club China...); I'm just trying to be Amused, as the Great Warrior, Philosopher and Comedian George Carlin recommended after many years of wise observation.
From Frum down to the cute blonde (at least much better to look at than Frum, IMHO) on the warm and fuzzy American Petroleum Institute "public service announcements", TPTB seeks to reassure and console us that its all good! But (and I've said this before in various ways I'm sure, surly curmudgeon that I am); somebody, somewhere among that same tableau of TBTB knows that there is no choice but to maintain the appearance of BAU (Plan A), and clings desperately to it knowing full well that there is no Plan B...
Thanks, Nessus, but I wasn't the first. There were some good comments before any of mine. I guess I pushed the right buttons, got voted up. Westexas and others made some great contributions, and I hope we, the better informed, can do more of this; challenge the crap being forwarded by the 'better connected'. Beats preaching to the choir, I guess. Still, a lot of bargaining going on.
"First you find'em. Then you get their attention. As soon as you get'em a little comfortable with it, you scare the sh@t out of 'em..."
...at least I think that's how it goes.
Frum is not at all a dummy, but he is also connected in no way to the Canadian oil industry. He has an MA in History from Yale and a J.D. in law from Harvard, and has spent most of his career in Toronto and Washington, both of which are geographically closer to Cuba than to Calgary. He is not the sort of person you would want to take technical advice about the oil industry from.
In other words, he doesn't necessarily know anything about economics, oil, geology, ecology, or climate. Although he could. So there's that. George Bush has an B.A. in history at Yale and an MBA at Harvard. But he seems to be a half decent artist.
Frum is Canadian so perhaps he's been reading the Canadian press where they probably whine about having so much oil and being unable to sell it for more than $50/barrel or whatever because it is stranded in Alberta.
But man, that article is giving people the wrong impression.
A recent copy of Canadian Business had the headline "What Happens When America Doesn't Need Our Oil" on the cover page. Apparently its a buyers market for oil and if we don't get pipelines in place real soon to deliver our oil to the US and Asia, they'll have already made deals with other suppliers and won't need our oil! If their understanding of the current supply/demand dynamics of oil is so far off base, I really have to wonder how many other stories they print are just bunk.
That this article could be written by a mainstream journalist (conservative or otherwise) and be featured on the CNN website is just breathtaking. Clearly the author didn't bother with any fact-checking or inquiry from someone with an opposing viewpoint. As an engineer I am used to the hand-waving "just make it work" crowd, but this article goes much further. Mr. Frum actually envisions some magical future fueled by our myth of progress. I'm reading John Michael Greer's new book right now, and this really matches well with his insights.
Back in the 1990s Neal Howe and William Strauss published two books on generational theory, the second of which was entitled The Fourth Turning. It focused on a time around 2005 to 2008 when the various generational cohorts: Silent, Boomers, GenX, Millennials, etc., would move to new positions in society (as in Boomers retiring, Xers reaching senior management, etc.) Howe and Strauss then predicted a great turning point in history comparable to the Great Depression/WWII, the Civil War, or the American Revolution and stretching to 2023-2025 before reaching resolution. All our social contracts would be wiped out, and a very different future would emerge. The prediction seemed far-fetched at the time, and the possible scenarios they offered did not ring true, but now it all seems much clearer.
Liberal or conservative won't matter in the end. The cheerleading over the cliff is going to be bi-partisan.
I've considered that some of these absurd articles may be published simply to stir the pot, see what comes up. It may be more effective than surveys for determining the mindset of the unwashed masses, whether or not they're buying the BS being put out. This one, and the responses, may motivate the likes of the Kochs to redouble their efforts to cast their spell of black magic on the populace. All we can do is keep our end up ;-/
speculawyer,
No doubt Frum has lost his cognitive moorings.
It is bound to happen in a culture that has likewise lost its moorings.
If we want oil now we go out and take it from ... just about anyone.
Amnesia has a lot of layers.
Our government and the epigovernment seem to have moved the goal posts so that "running out of oil" means running out of places to plunder oil.
Graphing that is not very easy ... for honest folk anyway.
Why do most posters here focus so much on gross oil production? It's really the net that matters. Is it the lack of data?
I assume that net production is falling because no one claims it's rising. Of course, my assumption may be wrong. The peak oil crowd needs to call the cornucopians on their lack of analysis and see some evidence as to why NET energy from oil extraction is rising.
Nano Good question but I suppose it is because we don't get our statistics in net energy. Only if it were so.
Nono: I can't figure out what you are asking. Please define Net Oil.
If you are referring to net exported oil, we have posts frequently on that, under the acronym of "ELM" or Export Land Model.
If you are referring to net by energy use in extraction, the acronym is EROEI or EROI, energer return on energy invested or energy return on investment.
If you could clarify, it might help. Thanks.
Craig
I think he may be referring to net oil = gross oil - oil used to produce oil.
Yes, a lot of diesel is used for fracking trucks, off-shore rigs, those monster trucks in the tar sands, etc. But it is probably not that much such that two numbers probably only differ by a small amount.
But anyway, the better metric to look at is price. The price will reflect the 'net oil' situation.
I think there are a number of ways to approach this. Use EROEI (paging Mr. Charles Hall), use the cost of a new well, or a new rig. Say what it costs to get a gallon of gasoline--acquire the land, build the well, get the labor, refine the product. Simply put, we may have a quadrillion (ok not really) barrels of oil. But if it takes 500 trillion to extract it, so what?
Spec- Not as much as many might think. If he is only talking about the fuel bill I sign those invoices all the time. I might drill a well that produces a modest but profitable amount of oil…200,000 bbls. And I might burn 50,000 gallons of diesel to drill the well. So that’s over 8 million gallons of oil. So a ratio of around 160:1.
Of course, the math isn’t that straight forward. About 25% of bbl of oil cracks to diesel. But the other products have value. And obvious there’s the always difficult to estimate sunk energy input into all the equipment plus the casing.
I’m not familiar with frac’ng fuel consumption by I may spend 40 days burning diesel while drilling the well and a frac crew might only be running 5 to 7 days with most of that time not anywhere close to full horsepower.
The Canadian oil sands? A very different animal. I’ll let others offer their thoughts.
I think 'net oil' refers to the point that there are now so many extra heavy oil sources in the mix, that we could actually carry many of them with nets now. Pipelines will soon be passe'..
(I don't disagree with your plea, Nano, I just don't know how one would come up with those figures, considering how challenging it has been to even get really reliable production numbers. I can't imagine that producers would broadcast anything as baring or embarassing, to couch the expletive a bit.. as what you're asking for. )
Bob
Has Holocaust history just been rewritten? Astonishing new research shows Nazi camp network targeting Jews was 'twice as big as previously thought'
http://www.independent.co.uk/news/world/europe/has-holocaust-history-jus...
This didn't actually surprise me much. My late grandmother on my mother's side was a teenager in Nazi Germany. There were camps everywhere, notably they was a labor camp in town that my grandmother got caught bringing extra food to. As the daughter of the grocer and butcher, she was lucky to be born into a somewhat high status in the town and so was sent off to work in a hospital instead of a worse fate.
Oh, and they also burned all the remaining Jews in town when they found out the allies were on their way, in the last stages of the war. There's a memorial in the cemetery.
Everyone knew. It was everywhere. It should be remembered, though, that Jews were not the only victims. Intellectuals, homosexuals, Roma, Polish people... The sheer breadth of the Nazi's hatred is astonishing. It was the logical endpoint of ethnic nationalism, which continues to be a threat today, as witnessed in Rwanda, Bosnia, etc.
And with the democrat vs republican split in the USA where are they on the ethnic spectrum disorder? The human beings I know are caring & civilized. But when I read 'codgerville' I'm disturbed - I think some people might actually believe this stuff. So what happens in a 'Rwanda' moment when the weapons of choice are assault rifles? Good Luck with restuffing that particular can of worms.
Bryan
The Holy Grail of Grid Parity
Analysts at Deutsche Bank have predicted that the global solar PV sector will transition from a subsidised market to a sustainable market within a year, citing the arrival of “grid parity” in a number of key markets, unexpectedly strong demand and rebounding margins.
The Deutsche Bank team said key markets such as India, China and the US are experiencing strong demand and solar projects are now being developed with minimal or no incentives.
http://reneweconomy.com.au/2013/deutsche-sees-sustainable-global-solar-m...
DHS Built Domestic Surveillance Tech into Predator Drones
Ark. Police Photograph License Plates, Store Data
Robot Warriors: Lethal Machines Coming Of Age
"General Atomics": My one-time employer. We were making gas cooled reactors back then, 1971-79. I guess if at first you fail, try something completely different.
From Up-top:
That is a landmark moment. One many are probably not aware of.
Best hopes for lower oil imports in the US and China.
Foiled!! Not number one in yet another statistic.
Hess to Offload Hetco to Focus on Exploration, Production
A look at per capita oil consumption based on most recent IEA data, "The Pain in the UK, France, Italy and Spain." Charts and graphs! (Other country per capita oil consumption covered: US, Germany, Japan, China, Greece, Ireland, Denmark, Sweden, Austria, Finland and Switzerland.)
http://karenlynnallen.blogspot.com/2013/03/the-pain-in-uk-france-italy-a...
One question I'm wondering about: if UK per capita oil consumption is plunging and their VMT is falling right along with it, why were they just about the only country in the EU last year to have increased new car sales?
Hi Karen,
I left a comment on your blog post that possibly explains this puzzle. Briefly, it seems likely that after a couple of years of trying to get new jobs, many older male ex-managers have given up trying to get employment and have "gone into business for themselves", helped by an income tax credit. Of course they need new cars "because clients expect it". And they get the 20% VAT back. (A depressingly common rookie's mistake, doing things "to get the tax back"...)
Oil is mainly consumed by working-age, working people. In nearly all European countries the working-age population is falling, either in absolute terms or as a percentage of the population. This explains most of the decline in per capita consumption in Europe.
Hi Greg,
Thanks for the link you left in your comment. The self employment scenario may indeed explain some new car purchases in the UK. Kind of sad, though, that people struggling with much reduced incomes would go out and take on heavy new debt. (Ah well.)
As for aging populations, long term this demographic change will indeed decrease oil consumption, but it doesn't explain a twenty percent drop in oil consumption in a mere three years. Larger, faster forces are at work.
In Ireland, the collapse of the construction industry accounted for much of the fall in consumption.
What's interesting about Ireland is that even with their huge drop in oil consumption, the Irish are still consuming more oil per person than the populations of Italy, France and Spain. In particular, they are consuming close to 20% more oil per person than the UK.(Of course, in 2010, they were consuming close to 35% more oil per person than the UK. Both nations have dropped significantly.) I'm wondering if the higher oil consumption at this point is due to fewer trains/less transit available?
The main reason Irish fuel consumption has remained high is due to the large numbers of "one off housing" in the country, about 30% of the population live in individual houses dotted all over the country usually in rows along country lanes between towns & villages.
All of these people are 100% dependent on cars for everything and because of the disperse nature of the housing & the fact that most jobs are in distant towns, everyone drives to work. 100-120km (each way) daily commutes are not uncommon.
Despite the dispersed country houses Ireland USED to be legendary for its bicycles...
Perhaps that will return
Dublin is the only Capital City in Europe that doesn't have a Subway or Underground -even Lisbon has an Underground. The queues after 5 PM at the Tramway and Bus stops are staggering, and no, you hardly see any bicycles around any more.
> Larger, faster forces are at work.
Faster, indeed. The Very Serious People in the EU have absolute faith in the idea of growth through austerity. In simple words: if nobody buys anything from anyone, we'll all have higher incomes.
In earlier times, the rising tide of European population growth would eventually overwhelm the undertow of this lunatic faith. But now population and faith are both acting in the same direction. The tide ebbs, and the undertow sucks.
Austerity. Otherwise known as "living within one's means". Yes, clearly lunatic.
Well, no, the idea of living within ones means is not 'lunatic' but the idea that doing so will create growth probably is. In fact, it's probably the idea of growth itself that is 'lunatic'. Exponential function and all that.
Yeah, I'm no economist but even I can see that economic activity driven by debt pulled in from outside the system is fake and will go away when the debt intake ends. But of course no politician can survive without promising growth, even if they understand the reality.
Protesters Storm Southern Iraqi Oil Field
Spanish Solar Energy: A Model for the Future?
I read the entire link. Unfortunately, it provided no numbers. Don't know what people think so can't draw any conclusions. Maybe someone will read the book and report back.
I would love to see a very clear explanation of where the various boundaries and assumptions differ between Hall's latests analysis and ones like the NREL studies that get presented.
Has he done keyposts on it at TOD? I seem to remember that.. (but no time to research it.. making dinner for the wee one. A little help anyone?)
I wrote a blog post on it (which I actually submitted in a slightly different form to Gail a while ago, but was rejected).
http://connectrandomdots.blogspot.com/2012/07/test-post.html
Some of the wording is not perfect - working on it.
Rgds
WP
Here's a starting place: http://www.theoildrum.com/node/3800
Thanks, WP and Clif;
Boy, that Charles Hall post (and series) sure had some memories in it! Some unique characters I miss, and some I don't so much miss.
I appreciated Hall's comments there.. but I'm eager still to see an outside summary comparing the diff't EROEI approaches.. am looking at 'Random Dots' now. (I often jump on dessert first!)
again, thanks.
Global Warming Will Open Unexpected New Shipping Routes in Arctic, Researchers Find
Trouble is that the report over-looks the inconvenient fact that most people will be dead by mid-century due to the same climate change.
Well maybe the few survivors will be sailing around the tropical waters of the Arctic. If anything can actually float in the gaseous waters that is.
I wonder what the reaction of people would be if they were told they'd all be dead in 37 years due to a meteor impacting the Earth. Of course there is no meteor, just climate change, but with the same end result. Of course 37 years maybe optimistic, given that sudden abrupt climate change has previously seen temperature changes of up to 8c in as little as a decade. 2c to 4c is enough to wipe most of us out and given the time lag it's just a matter of when not if.
Hard to handle that kind of realisation. Makes everything else seem tame by comparison.
Burgundy - This reply is not a reflection on you. I agree that methane will be a problem going forward, however ...
Just as climate denier massage data Malcolm Light (the author of Global Extinction within one Human Lifetime as a Result of a Spreading Atmospheric Arctic Methane Heat wave and Surface Firestorm) can swing the pendulum in the opposite direction.
1. The article you cited is NOT a peer-reviewed journal article, though its formateed to look like one. Its an opinion piece
2. This chart http://www.esrl.noaa.gov/gmd/webdata/iadv/ccgg/graphs/ccgg.BRW.ch4.1.non... taken from ...
Carbon Cycle Gases Barrow, Alaska, United States Time Series (select CH4 from the drop-down menuunder data type)
http://www.esrl.noaa.gov/gmd/dv/iadv/graph.php?code=BRW&program=ccgg&typ...
shows that the verified methane levels have not budged much in the 3 years since Light wrote his paper.
3 - Light trucated his data by starting his graph in the late 90s to avoid the fact that methane had also spiked in the mid 80s
4 - He used preliminary unverified CH4 results even though NOAA indicates that they should be interpreted cautiously
Well that's a relief Seraph, I'll cross that one off the list. It was an article I'd just come across before reading your post.
There seems to be more and more articles appearing that imply very large temperature increases in relatively short time spans. We see the effect of the changing temperature gradient between the Pole and the Equator on the Jet Stream and consequential weather events. So it does seem that change is becoming both faster and more severe, even to the untrained eye. What's your take on it? What do you think we are going to see between now and 2050?
The reason I ask this is that my own view of climate change has, well, changed. Originally I saw climate change as the most devastating threat we face, but one which would hit last. Slowly building up in intensity and scale over many decades with the principle problem being that we would be unable to respond effectively to it due to the financial and energy crises. But recently climate change seems to have taken on a new, more threatening and more immediate persona than before. A real game changer near term even if only half true.
For example catabolic collapse would be off the table as time compression would force a fast collapse scenario.
There are indications that climate change is here, as seen in recent examples of local extremes. Here's a story from today's NYT:
Report Blames Climate Change for Extremes in Australia
E. Swanson
Climate change has always been here as the average weather defines climate. When the average weather changes so does climate. That is the simple part. The hard part is noticing it before it's right in your face, or willingness to notice it.
But statistics are pretty unforgiving. Nowadays on average 10% of the globe suffers extremely warm temperatures (> 3 sigma above normal) whereas a few decades ago this was about 0.13%.
Hate to put a damper on your "sigh of relief" Burgundy, but data obtained from various Ice Core and other correlating samples, seem to indicate that the last 10,000 years of so have been "unusually stable". Evidence for complete climate reversals occurring in as little as 12 years or so have been seen during geologic history. The Climate Change Deniers would have you think that such events are as unlikely as a Sinkhole Opening Up Under Your Bed...
I came across this which doesn't help much either:
Seems we should all be watching the Arctic for signs of impending trouble. The Arctic environment seems to suppress the natural breakdown of Methane and shallow seas allow more methane to enter the atmosphere. Methane releases also can have a dramatic local warming effect, removing ice cover and causing further methane releases (also there's the influx of warm water into the Arctic too). Basically if we see abrupt and rapid warming in the Arctic we can expect serious trouble. Is that what we've been witnessing in the Arctic over the last few years? Are we seeing a tipping point in the rear view mirror?
I don't know, I'm getting the feeling that I've severally underestimated the speed of change and a feeling of dread that the exponential function may make an unwanted appearance.
I really don't see methane releases as having a dramatic local warming effect. With a half life of 10-12years in the atmosphere, mathane should be considered to be (nearly) well mixed. While concentrations locally might be several percent higher than otherwise, this doesn't turn out to cause much of a forcing. The methane forcing -and its sensitivity to a relative change in concentrations is several times lower than for Co2. The main effect would be after it becomes globally mixed where it contributes to the global temperature.
Yes, but the warming potential of methane is high during the first 12 years and some 100+ times more potent than Co2 during the same period. Also it is but one of the many positive feedback systems at play in the Arctic.
As I understand it our current problems are not coming from global warming, but from rapid warming of the Arctic. The weather events we're witnessing are from Arctic warming, not global warming. So the immediate threats we face, in particular to farming, is the product of local warming. That's the revelation that made me sit up and take notice.
The Arctic is warming 6 times faster than the global average. So potentially global weirding (the effects aren't necessarily the same as global warming) are going to happen 6 times faster than we thought. And as we're already witnessing the effects, it means local (rather than global) abrupt climate change is under way. A precursor to global climate chaos if you like.
We're in trouble now, in ways we didn't anticipate. It's not going to happen in the way we thought, its not a linear progression building up globally and slowly over decades. Its probably going to happen stepwise in rapid non-linear phases. It changes everything, we've failed to understand our predicament and the real threat, consequentially its sneaked up on us and caught us by surprise and unprepared.
Consider, though, that after its' half life, methane oxidizes into CO2 and water. The CO2 then lingers its customary life, as the rest of the methane gradually becomes CO2, which itself lingers on into the years, thus adding CO2 even as methane decomposes.
If only CO2 had such a short half life, eh?
Craig
This won't help matters but is a very good overview http://www.aip.org/history/climate/rapid.htm
It is unlikely that the methane firestorm will happen because the clathrates will most likely remain stable. Of course Japan is starting to poke at them for fuel and who knows if humans will activate a chain reaction...
That said, unknown catastrophes are very likely, as evidenced in the rapid climate change link above.
I'd point out that natural, non-man made climate change will be just as deadly to widespread human civilisation. The ice ages will come and go if humans are around or not.
Noone doubts that nature, which produced us, can toss us around and take us back out of the game in great and terrible ways. The issue is why would we do the same to ourselves and each other, if we could see that this is happening?
It's the same as things like 'Civil Rights'. They are not given to us by nature overall, these are our own stated intentions for how we collectively agree to hold and help one another.. but there are some who will justify uncivilized acts, hiding behind nature's precedent, instead of choosing to see that even our cultural ties, bonds and commitments are just as much a part of our 'nature' as a species as are the celebrated weaknesses, fear, anger, greed, lust etc.
In other words "Timshel".. thou mayest. The choice is ours to act on our own behalf, and not just shrug our shoulders and pretend that we have no choice in the matter. Ron and others may chime in that there is nothing to be done, and people cannot affect change from large movements.. but you can judge for yourself whether there are example that challenge that conclusion.
I wonder what the reaction of people would be if they were told they'd all be dead in 37 years due to a meteor impacting the Earth.
At least the bigger bastards than me won't be around?
Not entirely unexpected, as per this 2010 presentation by rear-admiral and chief-oceanographer David Titley in 2010:
http://www.youtube.com/watch?v=CBBEyJVj5MY
Iceland the Singapore of the 21st century?
They vastly underestimate the rate at which the arctic is melting. Some of the stuff they say may be happening by mid century, happened last year. The climate models they base their calculations are an order of magnitude low on the melt rate from 2000-2010. What they analyse as the ice situation for September 2040-2055, is what the ice actually looked like last September.
Seraph,
Actually that was predicted by James Hansen in a paper circa 1980 when most of us did not know global warming from our favorite baby blanket.
Each and every warning has been ignored, and when reality hits our fan we will exclaim "nobody could have seen this coming."
The Cost of Energy
Strange, it appears that EDF wants a price guarantee between 100 and 140 £/MWh (initial negotiations started at 165 £/MWh!). I also wonder how nuclear is going to halve it's new-built price in 30 years when prices of new nuclear apparently are only going up and risky capital is harder to get. Some wishful thinking going on there?
LOL at those 'Cost in 2040' figures. Those are just some WAGs. I'd love to believe that we will drive down costs like that but I just don't see that happening.
Officials: “Large release” of methane [+ hydrogen sulfide] off Los Angeles coast — Unusual concentrations detected by haz-mat crews
What You Need To Know About Obama’s Energy Secretary Nominee Ernest Moniz
In other words, he's an optimistic cornucopian who is very good at saying what the establishment wants him to: toss the plebes a bone or two about "squeezing down" on carbon, even as we develop every last source of carbon on this planet to its maximum extent.
Of course we would never expect the following men to become energy secretary:
http://www.youtube.com/watch?v=ImV1voi41YY
http://www.youtube.com/watch?v=3vLZr09kD34
C. Gregiore of WA state was thought to have a strong shot at EPA, taken by McCarthy. I wonder if Gregiore was overlooked in part because she wanted a cleanup, or at least some attention, to Hanford.
http://blog.seattlepi.com/seattlepolitics/2013/03/04/obamas-epa-energy-p...
"C. Gregiore of WA state was thought to have a strong shot at EPA"
Not a good choice if you are on a budget. She firehosed money everywhere, especially at education, then was shocked when she couldn't find any evidence it did any good.
Thats probably a budget black hole. The more you spend the bigger your estimation of the problem becomes. Can't blame DC for not wanting to touch it.
"Can't blame DC for not wanting to touch it."
Exactly. And the reason for my wonder about Gregoire. The mess will remain. McCarthy is being presented as the pragmatist who might tackle coal and power plants.
http://www.nytimes.com/2013/03/05/us/politics/obama-names-2-to-fill-epa-...
Study Confirms 60 Percent Loss of Forest Elephants in Africa
So barking depressing.
I read, recently, that 100 million sharks are being killed each year for the shark fin soup crowd et al.
All that will be left is a bunch of know-it-all/know nothing, fat, shaved monkeys.
I am an ecologist, and a life-long environmentalist.
It's over. We are going to eat the planet. There are just too many people. The world is full. Appetites are insatiable.
We have the answer to Toto's longstanding question. No, we are not smarter than yeast.
My sentiments exactly Sgage. We are destroying the planet, but not because we are no smarter than yeast. Yeast is flora, we are fauna. We do have brains yeast does not. However our brains evolved during our hunter-gatherer days. We evolved to prepare for the next few days, weeks or months. And later as we moved north, our brains evolved to prepare to survive through the winter, or until spring brought a new bounty of food.
But our brains never evolved to look deeper into the future. What might happen even five years from now does not concern our hunter-gatherer brains. That is way too far into the future. Natural selection never looked that far into the future. No adaptation ever evolved caused us to look further into the future than the next spring.
Ron P.
And yet, apparently, you, me, and many others think differently that most of those who have evolved in the way you say they have. That is what I am interested in.
On the other hand, age is changing my perspective. It is important to focus on the now and the beauty around me, to not take it for granted. In part, that is because I have concluded that nothing will be done to ensure a livable future.
Tstreet, there are always exceptions. Pick any human characteristics and you will find it in varying degrees in everyone. Take empathy, or conscience, if you will. It can be plotted on a bell curve. The vast majority will have normal empathy for their fellow man. They will pity the child or poor but not to the extent of devoting their lives to helping them. Then some, one percent or so, will be so empathetic that they weep at the slightest sign of suffering. And at the other end of the spectrum you will find the total psychopaths, people totally without a conscience.
So there are bound to be a few of us who can see further into the future, see what we are doing to the planet. Others who see everything in terms of human welfare and cannot see what we are doing to the planed at all and only look at what is happening today, or at most a short time into the future. And the vast majority fall somewhere in the middle. And unfortunately the middle are a pretty myopic bunch, able to plan a year or so into the future but not much further.
Folks like you and I are fortunate, or perhaps unfortunate, that we see further and understand that we are destroying the planet.
Ron P.
True enough. Though there might be another way to gage this. Not all models of social change require consensus.
And one of those human traits is mimicry. Thus, organized well, a few might move the many.
And as Boulding said, "If it exists, then it is possible."
"No adaptation ever evolved caused us to look further into the future than the next spring."
They're not classic biological adaptations but language, culture, and history enable greater foresight. Examples in our shared history include thrift, planting orchards and woodlots, and spacing children.
Our cultures have and will change, and while not sfaik encoded in dna will still be selected/winnowed, e.g. dependance on fossil fueled ego supports will be selected against.
"It's Over"
More proof:
http://www.motherjones.com/tom-philpott/2013/02/king-corn-gobbles-climat...
'Mad Max' accused of destroying Namib desert
shale gas output decline:
http://www.scienceworldreport.com/articles/5358/20130304/shale-gas-outpu...
There is an FAQ at the end of the article.
rgds
WeekendPeak
An article claims, "For the first time in almost 40 years, the U.S. has lost its top net oil importer position to China". This means that in 1972, the USA was not the top importer (which makes sense, since we were producing near our peak), but it also implies that 1972's top importer was China (which seems unlikely). Does anyone know who WAS the top importer of oil before it was the USA?
Japan? Germany?
Using Bp Statistical Review 2012 data and a calculator, the answer is Japan. Between 1967 and 1971, they were the only country with a total known consumption exceeding US imports.
Pretty funny segment on CNBC this morning, as they talk about the Dow Jones Index hitting a new record high. It looks like the previous high was in October, 2007.
One of the themes this morning is about how oil is a non-issue now; there is plenty of oil out there. Of course, the Brent price in October, 2007 was $82, versus the $111 to $112 annual price that we have seen for the past two years. The previous record high annual Brent price (prior to 2011) was $97 in 2008.
I wonder if the rise of the stock market is mostly a function of people moving money into keogh's and Ira's. Where else are they going to get a decent increase in value than the irrational 'group think' throw the money into the same agreed upon kitty? But that doesn't mean it's necessarily a good idea. It may only mean there isn't much of a chance of increasing wealth other ways, but what goes up must come down. And of course the super wealthy will get the best advise and pull out before it crashes and the small time employees will get caught holding the bag. When will they ever learn?
Car Buyers Take Out Bigger Loans, Set New Record
I think this is terrifying. The gas-guzzler bubble is growing. I'd like to think that people are buying Volts, Leafs, Prius, and other fuel-efficient cars but I know the sales statistics tell otherwise. These people are buying expensive not very fuel efficient cars on long loans. 65 months . . . that is over 5 years! What will the price of gas be 4 years from now? I dunno . . . but what if it is near $6/gallon? If that happens, the value of these gas-guzzlers will plunge because people won't be able to afford to fuel them. People will be upside down in their car loans and face the grim choice of paying a loan that is larger than the value of the car or letting the Repo man take it. Either way they'll be spending less on other things hurting the economy. The auto biz will suffer another crash as the used market will be filled with lots of cheap gas guzzlers and a larger percent of the new car sales will be the fuel-efficient models with notorious low profit margins.
Gas guzzler bubble growing.
Not to worry -- if the gas-guzzler bubble bursts I'm sure the Feds will bring in another car buy back program!
Well, that program was pretty small and didn't impact the market significantly. And I doubt there will be another one considering the government finances will probably also be in terrible shape.
I just checked Chrysler Canada's website and the default term if you were to finance through them is 96 months at 5.99 per cent.
I'm now debating whether I should replace my 300M Special, which still runs like a fine-tuned, Swiss-jewelled clock. When I purchased it back in April, 2002, Chrysler was running its "0" promotion: "0" dollars down, "0" per cent interest for sixty months and "0" payments for ninety days. I would have happily paid cash, but the terms were too good to pass up.
Cheers,
Paul
Yeah, I was going to point out that the AVERAGE loan was 65 months . . . thus, many of them are LONGER than that. Buying a fast-depreciating item that suffers wear & tear and is dependent on a fuel source with a highly-volatile price with an long-term upward trend using a long loan sounds like a really bad idea. Yet people are doing it. This will not end well.
People in China are also buying lots of cars . . . but at least they are largely buying fuel efficient cars and are paying cash.
The Peak of Suicide
In the U.S.A. suicide is the number one cause of injury related death.
For both civilians and soldiers (enemies kill fewer American soldiers than Americian soldiers do).
When will the Pogo principal peak?
Peak suicide ...
I don't think we are close to that peak yet.
BTW, that statistic is partly good news . . . with seat-belts, stringent crash tests, anti-lock brakes, air-bags, impact absorbtion barriers, stability control systems, center-brake lights, etc. we have significantly reduced automotive accident deaths. But I do worry that those regulations have gone a bit far pushing automobile prices outside the reach of many people now.
Yep,
The suicide rate among military is radically high.
Civilian suicides have been rising 4 times higher since 2008 and there is some speculation that it is tied to economic problems.
I would say that we can test that hypothesis (if the economy turns around at the mainstreet level) by watching the suicide statistics.
If they drop along with economic recovery, then I think they have a valid hypothesis.
Edit: The U.S. rate dropped each year from 1993 to 2001, when it began to climb again. In 2010 it was the highest it has ever been (Source).
Doesn't include 2011-2012.
A view of the other blade of the supply-and-demand scissors:-
Oil demand could peak within five years
Another .... who doesn't understand what 'demand' is. The world is full of brainless parrots.
Explain, please. What is demand?
Demand is how much people will buy at a certain price. If price is 1 then demand will be higher then if price is 10.
If you have 100 sandwiches at $5.00 each and you have 100 starving potential customers lined up but who can only afford to pay $4.00 for a sandwich there is zero 'demand' for your sandwiches... capiche?
Exactly.
There's supply, there's demand, and there's PRICE.
And of course, there's the price of goods and production.
It's not magic.
FM – And if you sell me all your 100 sandwiches at a wholesale price of $3.50 each I can ship them via my Key Lime conveyor belt and resale them to those hungry 100 folks with $4 each. A nice profit for me. Unless the sandwiches get hung up at that dang Subway bottleneck in OK.
ROCK, Tell ya what, make it $3.60 ea. and you´ve got a deal! >;-)
Yes but, no but.... If you're the owner of 100 sandwiches that you want to sell at $5 each but, have potential customers that can only pay $4 for each, aren't you effectively in a deflationary situation. Zero demand = zero income.
Are you better off having 100 moldy, unsold sandwiches in your possession and no cash or, dropping the price, having $400 in your pocket and 100 new friends?
Of course, this precludes the possibility of shipping the sandwiches to better off customers elsewhere..
Since we are on the sandwiches thing a more wise thing for both the sandwich maker and the clients would be if the sandwiches were cut in half and sold for $3. At least the sandwiches would keep on coming.
Wrong. There *is* demand for your sandwiches, period, as witnessed by the customers lining up. A price is not a fixed thing, the seller does not HAVE to sell those sandwiches at $5. If the seller can't find others to buy the sandwiches at $5, he will lower the price to $4, so that the people who do happen to have $4 can afford them. The seller faces either a choice of selling them for $4, and maybe not making as much money as hoped (or even losing money, maybe $1 per sandwich for a total loss of $100), or letting the sandwiches go unsold altogether and rot, at which point he is guaranteed to lose $500 (100 sandwiches x $5 each).
If the sandwiches cost more than $4 to make, they'll never be made if the seller knows that the top price the market will stand is only $4.
Exactly. Something price-fixers never seem to figure out until too late.
Wrong. 'Demand' in the economic sense is how much of a good/service people are willing and able buy AT A GIVEN PRICE, not how many people want that good/service.
Of course the seller can lower his price. This sets a new demand/price point. If he has to set the price below his cost of goods, he may sell a lot of sandwiches, but it's a one-off - he's out of business.
You are confusing 'demand' with 'desire'. In economics parlance, demand is always in reference to a price point. That's why you can talk about things like 'price elasticity' and such.
sgage - Exactly. A personally painful example: NG prices. In the case of the 100 sandwich seller there are 4 other guys just down the street with 100 sandwiches each to sell. All the sandwich makers thought they could sell all the sandwiches they wanted at $5 each…or more. Since it cost them $4 to make each sandwich a nice profit would follow. And there are 500 hungry folks out there but it would be difficult for all of them to pay $5. But some could afford the $5. But those that would have difficulty offer the sellers $3.50 each. And, as has been pointed out, if a seller tries to hang on for desire to push buyers to pay more than $4 they could end up with moldy product. Because desire does not produce demand unless the price is right.
But even worse: the lack of sales could drive cash flow so low that one might have to close his sandwich shop. Then the other sandwich makes could offer him $2 for his inventory. Thus they have additional sandwiches to sell at a profit (and thus converting more desire to demand) while not having to make more sandwiches to supply demand. And the sandwich making industry will then cut back on production widening the gap between supply and DESIRE to the point where demand set prices rise. It also good to remember that in addition to those 500 hungry folks there another 500 hungry folks who can’t afford a $4 sandwich. But thanks to the bust in sandwich prices they can now afford a sandwich if it cost less than $3.50. Of course, with sandwich makers selling inventory cheap and cutting back on production eventually that cheap sandwich inventory will be depleted due to demand prices dropping to capture more desire. And thus the cycle repeats. Except some of the sandwich makers realize there is a huger demand for pizzas (read: oil). A desire that is willing to pay a profitable price for a pizza and thus creating a great demand for pizza. After all, you gotta eat something. And since many of the sandwich makers have only enough cash flow to buy pizza making supplies they cut back on their orders of sandwich making supplies.
And this is exactly what has been happening in the NG market. After the NG shale boom several years ago prices collapsed as a result of decreased demand (decreased ability to pay higher prices) and increased supply. That led many NG producers to sell their inventory below what they spent to develop them. IOW they had to drop prices to capture the desire that couldn't afford those high NG prices. A desire that has always been there. And some actually sold some of their inventory in bulk in order to generate enough immediate cash flow to survive. Which is exactly what Chesapeake did: they sold proven conventional (read: long life) NG production in N Texas in one of the worse NG liquidation markets in decades. But they needed the capex to develop their oil shales.
An interesting side note: the other folks on Main Street watching events unfold for the sandwich makers starting betting with each other how much the sandwich makers would eventually sell their wares for. Some bet more than $4 while others thought less so they took that bet. Needless to say that if there is an uptick in sandwich price some folks will blame those damn sandwich price speculators for driving up the costs.
"An interesting side note: the other folks on Main Street watching events unfold for the sandwich makers starting betting with each other how much the sandwich makers would eventually sell their wares for. Some bet more than $4 while others thought less so they took that bet. Needless to say that if there is an uptick in sandwich price some folks will blame those damn sandwich price speculators for driving up the costs."
And all I wanted was a lousy sandwich! LOL...
All oil experts/pundits/reporters should be required to sign an affidavit affirming that they have read and, er, digested your post before being allowed to pontificate.
And damn those sandwich price speculators!
sgage - And what many folks don't understand is that the sandwich and pizza makers don't really care there folks starving that can't afford to buy their wares. They aren't in the people feeding business. They are in the food selling business. And many of the current buyers don't care either as long as their bellies are full.
Sandwich speculation is a bit different from speculation using futures on, say, oil prices. Sandwish speculation has a significant (time) decay curve where as time passes the value of the sandwich goes down, and even can get to a point where the value is negative because you have to pay to get rid of the moldy thing.Even if you freeze the things (which brings with it negative carry caused by power consumption to keep the freezer going and depreciation on the freezer itself) the quality will decrease over time albeit at a slower rate.
As an aside, the EROEI of said sandwich would be negatively impacted by freezing it, and could even become negative to the point where you run into the famous Sandwich Sharkfin Effect!
Rgds
WP
WP - A valid point but I think you're talking about the sandwich spot market. Remember that the sandwich price speculators aren't speculation on what the existing sandwiches will sell for but what price sandwiches made in the future will sell for. And just like the oil futures market those speculators are making a bet on how much 10,000 sandwiches will sell for in 30 days even though only 500 will actually be made. Just as (last time I saw the number) future bets on about a billion bbls of oil are made daily despite the fact that just a tiny fraction of that oil will ever actually be produced.
And, of course, a sandwich maker may actually take some of those bets. He might bet his sandwiches will sell for less in a month. If they do he makes less money on his actual sales but makes up for some or all of that lost revenue with his winning bet on the future price of his sandwiches. Of course, his sandwich futures broker makes money on the commission whether the sandwich maker loses money or not. The broker could care less what the sandwiches sell for. All he wants is a lot of bets made so he puts out a daily "study" indicating where he thinks prices might go. He doesn't care if a player bets on higher or lower prices just as long as he bets. Just like a stock broker that doesn’t hold positions.
We need to end this discussion. I just finished breakfast but the chat is making me hungry.
It's a strawman that demonstrates why we need clear-headed economic analyses of these issues. Long before the price of sandwiches goes beyond the means of most people they will have switched to pizza. Back when sandwiches were cheap at $1 each researchers will have demonstrated how their conversion to pizza could be done on a large scale at an additional cost of only $0.10 each. This caps the pizza price at $1.10, so who cares when sandwiches become unaffordable!
You might give 'clear-headed economic analysis' a bad name, Dak, if you're suggesting that there actually IS an Oily equivalent to nice cheap pizza slice.
Alternatives there are, but cheaper AND suitable ones? .. well that's why we're here, right?
Haagen Dazs ice cream in 500 ml tubs are about $7.25 Canadian. Even on sale, it is found to be less than worth it. So, some time ago, I decided to make my own ice cream. I do a nicer job at a fraction of the cost. So, I switched from a tub of Haagen Dazs ice cream to a couple of eggs, some milk, sugar, sometimes cream, sometimes flavorings like vanilla extract or additions like cocoa/baking chocolate, and a small amount of time and energy for the process.
LOL! A most excellent typo! It brings us full circle to wishing on sands...
Nope! You are confusing´'demand', which is an economic term with something entirely different.
There may be a want, a desire and even a 'need' for my sandwiches. However at $5.00 a sandwich there is zero 'demand' for those sandwiches from people who simply can´t afford to buy them. Unless ROCKMAN manages to buy them from me at $3.60 a pop and resells them to those folk for $4.00 they go hungry!
dup
Better Place: what went wrong for the electric car startup?
The piece goes on to mention "unexpected difficulties" in getting battery swap stations built. Ironic, considering Shai Agassi was a Systems Integrator before starting Better Place: he is supposed to be expert in project management.
It's a pity; I like the Better Place model. As a consumer I think it's much better not to have to buy $10,000 worth of fickle, temperamental battery--let the battery be Somebody Else's Problem.
Well as a person into EVs, I'll tell you why it didn't work . . . they could not even get EV fans on their side. The EV biz has been filled with fraudsters, scam artists, and companies that go bust. So people are wary.
The Better Place system required purchasers to make a huge up-front investment of like $20K or more for a car and then then be locked into a long-term contract with them to pay for 'miles'. They were trying to used the cell phone business model where you get the car at a subsidized price and pay a per-mile cost. With Better Place, you had to have an enormous amount in trust in them. Trust that they will continue to exist in order for your vehicle to keep working, trust that they will continue building infrastructure according to plan, trust that they will not raise prices on you, etc.
So . . . would you make a $20K purchase for a brand new technology from an unknown start-up company that must continue to exist in order for your car to keep working? I certainly wouldn't . . . and hence they crashed & burned.
Batteries are "fickle, temperamental"? Anyway, warranties work fine for that.
Part of that "fickle, temperamental" is -if abused. If the battery is someoneelses problem, why not abuse it?
Good points. Better Place's system suffered from network effects. It needed an implicit government guarantee, which I think Agassi thought he had got. It also needs a competitor, which it hasn't got.
It'd still be a better system if it could be magicked into place, though, because it knocks about 25% off the purchase price of the vehicles. The sticker price is the one that matters to most people.
> Batteries are "fickle, temperamental"? Anyway, warranties work fine for that.
Perception is reality in sales. And how's the warranty working for Boeing? (Boeing's very public battery problems are going to be a Big Problem for EV sales for years to come. Perception is reality in sales.)
We already have system that does that . . . loans. (Or leases). Better Place just moved the payment into the monthly service fee . . . how is that any different than a loan? It isn't.
Well I'm sure Boeing's battery supplier is more than willing to provide them with replacement batteries. Boeing's problem was not so much the battery (which may have been faulty) but the battery pack design which packed the batteries too close together thus allowing a cascading failure. There may have also been a problem with the charging system but it still has not been determined. Boeing has decided to stick with Lithium Ion batteries. The issue will be resolved and forgotten.
And to Boeing's credit . . . how many planes have crashed due to this problem? Zero! I think not enough people are pointing out this very important fact.
The curious case of the Arctic camel
They need to keep in mind that the continents also move.
Not that much in 3.5 million years.
The Bactrian Camel lives in the steppes of Central Asia and the Gobi desert, which get very cold. It doesn't surprise me that some species of camel in the past lived even farther north.
CNBC reporting Hugo Chavez is dead.
So what happens now? I guess the successor government will continue along with Chavez's plans for a while. But undoubtedly there will be some changes. And what happens next election?
http://www.businessinsider.com/what-happens-when-hugo-chavez-dies-2013-3
Start Planning For The Death Of Hugo Chavez
The venezuelan government had time to plan for that situation, they are fully prepared. Maduro will do the job, there won't be any inside fighting. If Maduro fails to manage the country's problems everything is possible but without any doubt he will win the next elections - for the people of Venezuela those elections will still be hold in the presence of their former leader.
Yeah, by holding the elections within 30 days of Hugo's death that would seem to guarantee a win for Hugo's hand-picked successor.
I wonder. There may not be inside fighting, but I suspect that both Chavez's supporters and the opposition will be energized by his death.
The media paint the Venezuelan government very often as some kind of soft dictatorship. Fact is that during the last decade, after the failed coup, there was generally civilized and democratic conduct in the whole country. So we might hear and see very different and opposed reactions in the next days and weeks but I'm convinced Venezuela will stay on its democratic path. In that sense, and only in that sense for me, as I have more sympathy for the bolivarian movement than antipathy, a victory of the opposition might be healthy for the whole political system and the civil society. But for now I see Nicolas Maduro as the next president.
I just read about his land reforms and the reduction in poverty and inequality under Chavez.
He may have been loud and made a lot of rich people angry, especially with nationalization of the oil industry and land reform, but he did the job. As far as I'm concerned, anyone who brings the poverty rate down like he did is a hero.
I never looked into too much before - I realized after the US-backed failed coup and the subsequent media reactions that something was not right, but I had never really read more deeply about it.
The man was a hero. Egotistical, overreaching, whatever, I don't care. He improved health, welfare, and education for the vast majority of citizens. That is a very, very hard record to beat. I hope whoever follows him can keep it going down that path while avoiding the worst aspects of Chavez.
Certainly the poorer half-plus adored him. But there has been an ongoing class war, and I think that itself is destructive. I hope his successor can tamp that down. The fact that they were trying to create/spread a preposterous rumor that someone the US gave Hugo his cancer isn't a good sign.
All kinds of things could happen, and whatever happens, half the Venezuelan population won't like it. The key question is what happens to the Venezuelan oil industry? If the Chavistas win the next election, which seems likely, nothing much will change -- fuel subsidies will stay in place and oil production will gradually drop as legacy fields decline. This is long term bad news for the Venezuelan economy and will eventually lead to unrest and protests.
If the opposition somehow ekes out a win, then foreign oil companies may be allowed back in Venezuela and oil production may actually increase after a multi-year delay. But before this happens, the poor fraction of the population will likely stage massive protests if they perceive any loss of entitlement.
Either way, I'm expecting major unrest in Venezuela -- you often get this after a strongman disappears from view.
The polarization in the venezuelan society is certainly a problem difficultly to overcome. But I think it's a myth that foreign oilfirms could boost production there. The easy oil peaked years ago and the bitumen of the Orinoco area is difficult to produce. In fact Venezuela incremented the production of that extremely heavy oil and held the production stable in recent years though some agencies didn't show that in their data. But the discrepancy between EIA and IEA concerning Venezuela always seemed politically motivated to me.
As has been ventilated on this site before, there is a very strong bias from mostly US citizens towards referring to Chavez using terms like strongman. From my readings, primarily on this very site, of people with a more balanced view, he is a populist leader who rose to power by pandering to the poor.
My point of view is very heavily influenced by the Jamaican experience in the seventies. We had our own Chavez in the name of one Michael Manley who was elected in 1972 and started a series of socialist like reforms many of which remain in place. I remember as a teenager listening to Manley's speeches. He was a gifted and charismatic orator who connected very well with the less privileged by engaging in heavy anti-capitalist, anti-imperialist, anti-colonialist, anti-establishment rhetoric, giving the less privileged the view that they were owed something by their "oppressors" and generally connecting the word "profit" with evil. He was no friend of the business class (1%) and was loathed by most them including overseas (American) interests who viewed him pretty much the same way as they view Chavez.
One of the problems Manley faced was that he was elected just before the seventies oil crisis. Up to then, Jamaica had seen robust growth in bauxite exports but, not much in the way of earnings so, Manley's administration imposed a significant levy on bauxite mining, part of the reason for the ensuing decline of the Jamaican bauxite/alumina industry. The administration sought to use the bauxite levy to cushion the country from high oil prices using subsidies. They also nationalized the municipal bus service, the railway company and the electricity utility after the owners of these enterprises claimed that price controls were precipitating losses and they could not continue operations. They had frequent confrontations with private sector interests that led to what Manley claimed was sabotage of his administration and it's programs. It was claimed at the time that the opposition assisted by the US CIA and local private sector were largely to blame for the armed violence that accompanied the 1976 general elections. (starting to sound familiar yet?). Manley's party failed to win the 1980 general elections after another violent campaign.
The opposing party was seen as much more friendly to US free market ideals but, was forced to put up a façade of concern for the poor in order to get enough support to win an election. Even then, by 1983 there were calls for Manley's opponent to resign leading to the calling of a surprise "snap election", giving Manley's party no time to organize and campaign in time for the election. Manley's party boycotted the election leading his opponents to govern the country with no opposition until 1989 when the constitutional deadline for the next general election ran out.
With the very small percentage of the Jamaican electorate that are wealthy, programs and projects that "ease the burden on the poor" are very popular. Oil prices have been the thorn in the side of Jamaican administrations for as long as I can remember (the 70s) and in 2007 the fallout from rising oil prices led to the defeat of Manley's party. Manley had considerably softened his socialist rhetoric leading up to the 1989 general elections and remained rather subdued till he resigned in 1992 for health reasons and died in 1997. His successors, while holding power for ten years after his death, were no match for his charisma and oratory. Despite that, his party still trounced their opposition after only one term in the 2011 elections, the failure of the supposedly more capable JLP administration to prevent economic fallout from the 2008 recession, playing a significant role in generating a feeling amongst the electorate that the JLP administration was a failure.
The result is that since 1972, the populist party formerly led by Manley (PNP) has formed the administration for 27 out of the last 40 years with 6 years out of their opposing party's (JLP) 13 being a result of questionable constitutional tactics in 1983. The PNP only lost a general election twice in the last 40 years, with elections constitutionally due every five years or so!
Hence my opinion that entirely possible that, Chavez is popular, constitutionally elected leader despite how the obviously biased US media empire chooses to portray him.
Alan from the islands
Sun Electric is currently offering monocrystalline PV panels-16% efficient at $0.38/watt by the 40 ft container.
Furthermore they can configure a grid tie 6Kwe system with 18 Kwh of storage (3 hours at full rated power) at $2/watt including
combiners, distribution panel, grid tie inverter, etc.
At this system cost, the LEC for the power is $0.087/kwh.
This compares favorably with retail rates in the US for electrical power.
Today, March 2012, Solar PV produces domestic power, with storage, cheaper than grid power.
It has happened. Today.
INDY
They're also running a big clearance sale; panels and BOS stuff. Place a bid and they'll accept or counter. They're usually pretty flexible on this stuff. They have Outback FM60 charge controllers (luv those) and several brands/types of inverters. If you want/need just one or two panels, offer them $0.40/watt, see what they say. Most are grade "B" panels, a little off-spec, but still have certifications. I've had good luck with "B" panels. Many are over spec, producing over 105% of their rating.
Does the 2 bucks include labor? You did not mention it.
Most likely not, and also doesn't include racking. Still great price.
Unfortunately I fear this may not last.
Yingli financial report shows future of PV
In the long term this cannot be good for the market. There may be players who are reasonably good at controlling manufacturing cost, who would be able to sell panels at fairly low costs and NOT make a loss. However some of these same players may not be able to compete with these Chinese juggernauts who, are willing to sell at a loss for one reason or another. One sinister reason could be, to kill of their competition so that they have more pricing power in the market.
Predatory pricing
I get the feeling that I should be "going long solar panels"! (did I get that right?) Of course as with all speculation, timing is everything!
Alan from the islands
How does this compare to the price of sandwiches?
Fresh sandwiches are not available below cost, however as they approach their "best by" date they can be had for steep discount, since the vendors would rather sell them cheap than dump them . ;-)
Alan from the islands
Just went to a Permaculture screening of the film Edible City, about a number of gardening initiatives starting in urban areas, focusing in particular on Oakland and the Bay area.
http://ediblecitythemovie.com/about/
Vimeo Link: http://vimeo.com/42085836
Some encouraging activities and teaching going on.
In the discussion after, a neighbor who runs a cooperative food growing and catering/restaurant operation called 'Local Sprouts' talked about lately having joined a city task force that meets monthly called
'The mayor’s initiative for healthy sustainable food systems'
http://www.portlandmaine.gov/healthysustainablefood.htm
by our first elected mayor in several decades.
Jonah, of LOCAL SPROUTS has now even had meetings with the city Arborist about some of the Forest Garden ideas in Permaculture, and how these could be applied to underused public spaces in our city, and the Arborist is all excited, saying 'We've been talking about doing that sort of stuff forever, this would be great!'
Permie events are always great, because there's ALWAYS good food at them. My daughter handled the Rabbit Slaying pretty well, I have to say. Maybe this is the way we need to get PO out there.. make sure there's always some free yummy food! Heavy on the sauce, lighten up on the preaching.
It takes about 1.5acres to grow enough food for a year, for a decent diet, for one person, not including energy for cooking etc. So thats about the population density of a healthy, local sustainable food movement. Permies have great ideas, but they either tend to consume a lot of FF and rely on BAU, or they require a greatly reduced population.
I'll watch the movie, but I'm not expecting to see anything new. Pleanty of hype and excitment, and maybe the odd community that can grow most of it's vegetables, during the summer months.
Describing the food system thats feeding the greater part of the planet as broken, is clearly debateable. The food system is working great in most places, I can travel the world and eat what I want, when I want it, for a price. Whats happened is the population has grown beyond the ability to be fed sustainably, so it's being fed unsustainably, for now,
Boy, aren't you just trotting out some hackneyed figures? You've been doing that a lot lately.
This 1.5 acres is a useless averaging, given the variety (and the much-NEEDED variety, I might add) of foods and how they are grown, and Permaculture has been contradicting that set of Tractor-based calculations for decades now.. while the point is overflown by the millions of acres that are sitting as abandoned parking lots and empty factories and stores.. Many of the foods that our schoolchildren are most deprived of actually grow in much smaller spaces than the bulk cereals that those acreage figures are derived from.
"The food system is working great in most places," - know anyone with diabetes, heart disease, add adhd *, stroke, bone-loss, tooth decay, morbid obesity? We have a huge pile of nutrition related epidemics even here in the RICH USA.
"I can travel the world and eat what I want, when I want it, for a price."
Well Lucky You. or something that rhymes with that. Please, pay some compassionate attention to the MANY people around you that are Nowhere Near as fortunate, and take a look at WHAT THEY EAT, and WHO GETS PAID for the food they buy. Then, add to that the cost to the rest of us for dealing with countless health crises, financial troubles and social problems that grow from it all.
The film points out the urban areas 'Food Deserts' with no access to nutritious foods.. just the Ring Dings at the 7-11.
Numerous studies since the 50's have shown the direct correlation between Attention/Classroom Behavioral issues, plus the consequent social costs of such undermined school histories, with artificial food colorings, preservatives and other additives.
Put down the Ring-ding, Smeagol.. and watch the bloody thing before you try to make any more feckless statements about it.
I am actually interested in this subject, and for a decent diet, with room for a poor harvest, average soils and average experience 1.5 acres plus land for the all important external energy source.
http://www.permies.com/t/12422/community/Amount-land-person watch the youtubes by people who are actually growing their own food, they are experts and struggle. I have done some gardening myself, and it's not easy to even get enough vegetables during the summer, but I'm still learning how much area I need to plant. A LOT.
What I am pointing out is that the population has gone way beyond the ability to be fed sustainably. After watching the film, I noticed they failed to even mention the problem. Sure pesticides are bad, and fertilisers are bad, and monocrops are bad, but unless you adress the reality that cities need these things, then you miss the point.
So you claim millions of acres just waiting to be farmed. Heres the stats from the film 200 hectares in Oakland or 500 acres (the film claimed 400 acres but 200 hectares is a lot closer to 500 acres.) I have NFI what the population of Oakland is but I'm betting even if you plowed over the whole 500 acres you'd still struggle to give everyone one meal a year.
I watched it, a far better film is; the future of food BBC. The last part is just cornocupian nonsense, but that is the 'obligatory hope' section where they feed the optomisim bias.
This is a good news story...
"VW commits to slashing fleet emissions to 95g/km by 20202
http://www.businessgreen.com/bg/news/2252574/vw-commits-to-slashing-flee...
"Europe's largest auto manufacturer said it was on track to deliver average fleet emissions of 120g/km by 2015, meaning it will exceed the EU's legally-binding targets by 12 grams, and would now set an even more demanding emissions target for the end of the decade".
and
"Greenpeace campaigner Sara Ayech also argued that the new targets demonstrated that it was possible for mainstream auto manufacturers to slash emissions in a relatively short time frame.
"Fifteen years ago, the only petrol car which got 95g of CO2/km was built by Greenpeace," she said. "By the end of the decade, this could be the industry average, with half the new vehicles on our roads being significantly cleaner than that. This target can be met without tricks and loopholes, saving consumers £400 a year on fuel costs by 2020, and the industry could halve total CO2 emissions from cars in the EU by 2025.""
+/- 12 hours post-chavez the lights are on, the internet is connected, the streets are quiet but business continues as usual. There has been information broadcast about the schedule for elections. Over the next month or so we will see if the PSUV (political party Chavez belonged to) fractures or remains whole and in about 3 months we will see what course the population chooses to follow electorally. I would not expect any changes in PDVsa (state oil company) or the foreign oil companies contracts untill after this
TED Talk Video, March 2013:
Allan Savory: How to green the desert and reverse climate change
Have you read about Russia's attempt to "green the desert" by using water from the Aral Sea for irrigation?
http://www.columbia.edu/~tmt2120/environmental%20impacts.htm
http://news.bbc.co.uk/2/hi/asia-pacific/678898.stm
Boy, what a touchy back and forth in the comments.. helps put it into the spectrum of this sort of work, just the same. Makes me that much more confident that Joel Salatin and Permaculturists are working in about the right directions.
Thanks for the link.