## Drumbeat: March 23, 2013

Last month, the standard-bearer for those arguing the U.S. will soon be awash in domestically produced oil testified before the House Energy and Commerce Committee. Daniel Yergin, Chairman of Cambridge Energy Research Associates, told Members of Congress in his prepared remarks, "Owing to the scale and impact of shale gas and tight oil, it is appropriate to describe their development as the most important energy innovation so far of the 21st century" and "the unconventional oil and gas revolution has already had major impact in multiple dimensions. Its significance will continue to grow as it continues to unfold."

Yet the Energy Information Administration (EIA) and independent analysis confirm that far from the "energy revolution" of the century, the increase in domestic oil production represents a temporary bump in production that will be short-lived. If we recognize the probability the impressive increases we've seen in shale gas and "tight oil" production are of limited volume and duration and set policies accordingly, we can reap great benefit; pretend these increases herald a new and ever-increasing permanent condition and we risk setting ourselves up for an avoidable economic contraction when the expected drop in production occurs. Geologist David Hughes, a 32-year veteran of the Geological Survey of Canada, recently conducted a detailed examination of the years-long performance of 65,000 shale gas and tight oil wells. The results were telling.

WTI Oil Rises, Narrows Discount to Brent

West Texas Intermediate crude rose, narrowing its discount versus Brent to the lowest level since July, on signs that Cyprus is moving closer to a deal to stave off financial collapse and as the U.S. economy improved.

WTI capped a third weekly gain and the euro increased against the dollar as a Cypriot lawmaker said talks are going in the right direction to avert the island’s financial collapse. U.S. jobless claims dropped to the least in five years last week, based on the four-week moving average, the Labor Department said yesterday. Brent lagged WTI’s rally as German business confidence unexpectedly fell.

Indian Oil Corp, the country's biggest refiner, raised diesel prices by about 1 percent from Saturday in line with the flexibility given by the government, it said in a statement.

U.S. oil demand in February fell to the lowest level for the month in 20 years as gasoline rose to the highest price for the time of year, the American Petroleum Institute reported.

Total petroleum deliveries, a measure of demand, dropped 4.1 percent from a year earlier to 18 million barrels a day, the lowest February level since 1993, the industry-funded group said in a monthly report today. The retail price for regular gasoline, averaged nationwide, rose to $3.786 a gallon on Feb. 26, the highest for the month in AAA data going back to 2004. “There is the price effect,” said John Felmy, chief economist at the API. “Consumers are being very cautious.” The long cold winter that shows no sign of ending as we head towards the end of March means that the UK is very close to running out of its own gas supplies and could be forced to buy more expensive imports from Norway and Russia. However, the government has strongly denied that the UK will run out of gas supplies despite reserves being down to just 1.5 days of gas. A spokesman for the Department of Energy & Climate Change said: “Gas supplies are not running out. Gas storage would never be the sole source of gas meeting our needs, so it is misleading to talk purely about how many days’ supply is in storage. LONDON (Reuters) - Britain's wholesale gas prices surged to a record high on Friday after one of its main gas import pipelines shut down unexpectedly, exposing the country's vulnerability to foreign supplies. Britain is already grappling with a potential gas supply crisis as a late blast of winter depletes stored reserves, coal power plants close and pending maintenance in Norway threatens to further squeeze supply. Ethanol slumped against gasoline on speculation that this month’s price increase will boost the appeal of Brazilian imports. The price difference, or spread, expanded 1.69 cents to 51.85 cents a gallon. U.S. refiners imported the biofuel in the week ended March 15 for the first time since Feb. 22, a report from the Energy Information Administration showed. The number of energy rigs in the U.S. declined this week to the lowest level in almost two years, according to Baker Hughes Inc. The total rig count fell by 30 to 1,746, the Houston-based field-services company said on its website. The count was the lowest since March 25, 2011. Oil rigs dropped by 17 to 1,324. Natural gas rigs declined by 13 to 418. (Reuters) - The Senate easily passed on Friday a symbolic measure approving the Canada to Texas Keystone XL oil pipeline, a move backers said showed strong support for a bill that would give Congress power to green light the project later in the year. The amendment to the budget plan, sponsored by Senator John Hoeven, a Republican from North Dakota, passed 62 to 37. TORONTO -- An online game funded by Ontario taxpayers that shows the bombing of a gas pipeline and drew criticism from the premiers of Alberta and British Columbia is being reviewed. TV Ontario, the province's public broadcaster, spent money to create the game "Pipe Trouble" to accompany a documentary about the pipeline debate in British Columbia. Billionaire Kjell Inge Roekke, who controls half of Det Norske Oljeselskap ASA (DETNOR), warned cost overruns and production delays may limit the company’s ability to fund the development of Norway’s biggest oil find in decades. “Late start-up of oil production at the Ivar Aasen field may have significant consequences for the funding of the Johan Sverdrup development,” Roekke said in a letter to Aker ASA (AKER) shareholders today. “I’m convinced that the development of Ivar Aasen will be more expensive than budgeted, and that production of first oil will occur later than planned. I probably should keep quiet, but I can’t.” (Reuters) - Mexico state oil monopoly Pemex said Friday that February crude oil production and exports were down, compared with the previous month. Pemex produced 2.555 million barrels per day (bpd) of crude oil in February, a slight decrease of 0.3 percent, compared with the previously month. Meanwhile, crude exports in February averaged 1.22 million per day, down 5.4 percent, compared with January shipments. We have been drilling in the Gulf of Mexico for a long time, yet somehow, exploration and production companies are still finding more oil. Cairn India Ltd., which pumps crude oil from the nation’s biggest deposit on land, started its first commercial sales of natural gas from the area and activated a new oil field to revive lower-than-expected output. The explorer will sell as much as 5 million standard cubic feet a day of gas from its blocks in Rajasthan initially, according to a statement issued today. Cairn India also started Aishwariya, an oil field in the western state, with a capacity to produce 10,000 barrels a day, or 6 percent of its output from the region. Royal Dutch Shell Plc ended curbs on crude exports from its Bonny oil terminal in Nigeria after repairs were completed following a leak on its Nembe Creek pipeline, a company spokesman said. Force majeure, a legal step that protects a company from liability when it can’t fulfill a contract for reasons beyond its control, was lifted from 4 p.m. local time on March 19, Precious Okolobo, a Shell spokesman said by phone today from the southern oil hub of Port Harcourt. “Investigation showed that the leak was caused by a failed theft point on the pipeline,” he said. China agreed to double oil supplies and supported construction of a natural gas pipeline from Russia under “breakthrough” agreements during President Xi Jinping’s first state trip abroad. OAO Rosneft, the world’s biggest traded oil producer by output, will borrow$2 billion from China Development Bank Corp., backed by 25 years of oil supplies, under accords signed yesterday in the Kremlin. The Russian company also offered China National Petroleum Corp. access to Arctic resources, and OAO Gazprom said it plans to conclude a 30-year gas-supply contract to China by year-end.

Despite the warm words, Moscow is concerned that its far more populous, faster-growing neighbor could pose a threat, something that has not made for easy deals between the world's biggest energy producer, Russia, and its biggest consumer, China.

Xi's visit produced an agreement for Russian state giant Rosneft to gradually treble oil supplies to China, but the sides are still short of a deal on the supply of pipeline gas to China, thwarted for years over prices.

New natural gas suppliers to Europe won’t affect Russia’s status quo due to existing infrastructure and flexible pricing, the president of Russian oil giant Lukoil told RT in an interview. He also revealed country’s Middle East expansion plans.

PARIS/SAN FRANCISCO (Reuters) - Total and its partners have committed $10 billion to a development off the coast of Congo, expected to produce 140,000 barrels of oil equivalent per day by the time full output is reached in 2017, the French oil company said on Friday. The Moho Nord joint development is one of a string of African projects that Total is banking on to help it boost its oil production by 25 percent over the next five years, with growth accelerating after 2015 to top 3 million barrels of oil and gas a day for the first time. Being a patriot, I gave the former Saudi oil minister the benefit of the doubt. I understand that people holding official posts normally would follow a general and careful outline. But Sheikh Yamani left his post and he became an oil analyst when he opened a consulting firm outside Saudi Arabia. So, at that time he was an independent consultant. But after the American invasion of Iraq in 2003, the former Saudi oil minister declared on international TV networks that the American invasion of Iraq will improve the oil capacity production in Iraq and the price of oil will fall below$ 10 a barrel. Well, later on, the price of oil increased to reach a historic $150 a barrel. Again, what happened to the two most important words in oil production and exploration — security and stability? To this day, Iraq is neither secure nor stable. So, the question now is: Why Saudi Arabia that is the most important oil producing country in the world doesn’t have an oil industry think tank? Or do we have any? Afghan water and energy minister and former warlord in western Herat province of Afghanistan Mohammad Ismail Khan on Saturday called on the Afghan government to prevent signing any deal that makes the Afghan nation dependent to foreign countries. Mr. Ismail further added that the presence of coalition security forces-led by United States of America proved to be helpless in bring security and stability in Afghanistan during the past 12 years. Hubbert predicted that world oil supply would peak around 2000 (many observers now agree that it actually peaked in 2004). But even today, few people in government or the corporate media have been warning the public about the implications for the economy. This dearth of coverage is partly because the oil-producing countries and the oil companies do not want to publish or confirm data on the amount of oil reserves because if the world has hit "Peak Oil" and is sliding down slope to scarcity, such a message could spark a panic in the markets or a rush to investment in alternative energy and fuels that would be damaging to the bottom line of fossil-fuel industries. It would also shine a bright light on America's misguided strategy for keeping the oil flowing and prices low. Vehicle sales are often seen as a more accurate measure of consumer sentiment than retail or home sales. They show that tax cuts don't seem to be hampering Americans yet. A Royal Dutch Shell PLC (RDSA, RDSA.LN) executive tasked with managing a controversial multi-billion-dollar oil exploration program in the U.S. Arctic Ocean that failed to complete any wells in last year's short drilling season is to leave the company by "mutual consent" later this year. According to a Shell spokesman, David Lawrence, executive vice president responsible for exploration activity in the Americas, is to leave Shell mid-year. The spokesman didn't give details why Mr. Lawrence, who joined Shell in 1984, was leaving the company. Prior to his current post, Mr. Lawrence worked in exploration, development and strategy. Abe's push for a nuclear future means his party learned little from 3/11. That's why the Tepco lawsuit is as important as it is timely. Its allegations that company officials lied about radiation levels U.S. military staffers faced while assisting in relief efforts 24 months ago is pushing Tepco back into the headlines and onto the hot seat. The plaintiffs seek more than$2 billion in compensation, says Stars and Stripes newspaper.

Few would quibble with Abe's determination to revive Japan's economy. If Abenomics succeeds, it will add fresh dynamism to a world in need of growth engines. But that may come at a big price in the long run. The slower Japan moves to reduce its reliance on reactors, the more its 126 million people will be at grave risk when the next giant quake occurs -- and it will.

Oregon might not get an earthquake for half a century, but Peter Mulder is fortifying his basement anyway.

Mulder, a retired banker from Portland, Ore. has six months' worth of food, 50 gallons of water, tools, medicine and liquor stockpiled underneath his house. Every few months he changes the water, takes an inventory and adds more items.

"If you have a major quake here, a lot of the Portland area is just not prepared, and stores would be emptied in a matter of days and they wouldn't be restocked for weeks," Mulder says. "It's not a question of if, it's a question of when."

TORONTO, ONTARIO--(Marketwire) - With Earth Hour taking place this evening, BMO Bank of Montreal reminds Canadians to review their household energy usage as a way to reduce their environmental footprint and help manage their household utility expenses.

According to a BMO survey, the majority of homeowners (51 per cent) cite utility costs as the biggest financial surprise after they move in.

Remember that time when the world generated all of its energy, transportation fuels, and chemicals from renewable sources? Me neither, but that doesn’t mean the technologies enabling that disruptive future are pipe dreams. To be honest we have no idea what technologies will take center stage in 20 or 30 years. Heck, virtually no one -- and that includes the mighty Energy Information Administration -- foresaw the shale oil and gas boom just 10 years ago.

Apparently my article last October documenting the growth of renewables in Germany while nuclear generation continues to decline got under the skin of pro-nuclear bloggers.

So at the request of a reader, I am updating my charts on the electricity mix in Germany from 1990 through 2012. These charts are from public information, easily accessible with rudimentary German.

(Phys.org) —President Barack Obama wants U.S. scientists to pursue an "all-of-the-above" strategy in developing new sources of domestic energy. Agricultural Research Service agronomist Paul Adler is providing complete cost-benefit breakdowns for using switchgrass pellets instead of fuel oil to heat homes and businesses in the Northeast.

This month, New Jersey declared victory in its war against the Asian long-horned beetle, an invasive, hardwood-eating insect that arrived on the shores of New York City in 1996, most likely on wood pallets. The beetle has since surfaced in a total of five states and, by tunneling through tree trunks, has threatened some of the nation’s most common tree species, including maples, London planes, birches and poplars.

The lawyers will be as busy as bees. The long-running row over insecticides linked to declines in bee numbers is going to court. Beekeepers and activists are suing the US Environmental Protection Agency (EPA), saying it should have banned neonicotinoid insecticides.

OGDEN, Utah — Spencer Glauser, who started hunting as a boy perched on his father’s shoulders, is an unabashed coyote hater. “One’s too many” to have roaming the mountains and encroaching on towns, he said.

Mr. Glauser is not alone in his aversion or in his desire to do something about it. Last year, the Utah Legislature enacted a “Predator Control” incentive program as a way to jointly curb coyotes and safeguard their occasional prey, the mule deer. Under the law, the state now pays civilians to hunt coyotes.

Call them American strategy's Odd Couple. Working together, the U.S. Coast Guard and Air Force could be the best defenders of U.S. policy in the Arctic Ocean, a theater that will expand and contract each year and where threats will — cross your fingers — remain modest in scope. Light combat forces patrolling the sea under the protective umbrella of land-based fighter cover may well be enough to manage events in northern waters. Ergo, it's worth thinking ahead about the material and human adaptations necessary to help such an Odd Couple fight together.

Think you’re living green and saving the planet? Park the Prius and put down that grass-fed beef hot dog for a minute and make sure. We talked to some experts on the matter to get the scoop on what’s truly earth-friendly -- and what just makes you feel like you’re personally responsible for the end of global warming. Answer these questions, and the Earth wins.

OSLO (Reuters) - Stresses on water supplies aggravated by climate change are likely to cause more conflicts and water should be considered as vital to national security as defence, the United Nations report said on Friday.

About 145 nations share river basins with their neighbours and need to promote cooperation over a resource likely to be disrupted by more frequent floods and heatwaves, it said.

After my column on Wednesday about how the nation’s natural gas boom is helping reduce emissions of heat-trapping carbon, I received a bunch of e-mail arguing that gas obtained by hydraulic fracturing could, on the contrary, worsen climate change.

The main reason is that fracking wells — where water, chemicals and sand are pumped at high pressure into horizontal shafts to fracture shale rock deep underground — leak.

BRUSSELS (Reuters) - Fewer United Nations climate summits and more incentives through carbon pricing could speed up international efforts to slow the pace of global warming, a draft European Commission paper seen by Reuters says.

How you ask the question skews the results when it comes to public opinion on global warming, finds an analysis of hundreds of polls. The public mostly agrees on global warming's reality, it says.

Fifteen years after the Kyoto protocol was signed and just months after being extended, a true global carbon trading marketplace may finally be within the world's grasp.

It is as though a line of dominos has suddenly appeared, awaiting the slightest push to set off a chain reaction. When the dominos begin to fall, the world will suddenly have a powerful and effective tool to reduce carbon emissions, one of the most environmentally destructive aspects of modern human activity.

Anyone in EU - especially outside of Germany - who leaves a lot of money in the bank is asking for trouble. http://www.zerohedge.com/contributed/2013-03-23/liar-liar-banking-system...

except Sweden as well. They continue to pay down their national debt - @ 1% of GDP/year.

In fact, the northern tier of the EU is in fairly good shape.

Alan

If one ignores the massive private debt that we in the northern countries have.

Your name suggests that you are Islandi (Icelandic), a northern nation with it's own problems.

Alan

Swedish name as well. Uncommon though, compared to Johansson, Svensson and Andersson.

No doubt derived from the ancient days when Swedes spoke Old Norse (aka Icelandic).

I have worked in Iceland and, for some reason, I was not so much an útlendingur.

I found that the Íslendingur think the Svii are OK, nice people, but don't trust the Noregur !

Best Hopes for Peace in Scandinavia,

Alan

No-one trust normännen. But there is no worry, the border between Sverige and Norge is probably the most stable and peacefull nationals border in the world.

EDIT: Accedentally wrote "now worry", when I should have written "no worry", wich leaves room for missunderstanding...

to infer that henriksson is icelandic is the same as
suggesting that alan is your father's name

The financial system is collapsing (has been since 2008), there is nowhere safe to leave money. It is no longer a viable way to store wealth. As the financial system collapses it destroys money, wealth and trust. Dependency on the financial system will basically mean ruin as peoples' financial wealth simply vanishes overnight.

Of course governments, et al, are going to attempt to keep people in the financial system by whatever means.

Edit:
(from ZeroHedge) Russian Billionaire In Exile Boris Berezovsky Commits Suicide - The First Cyprus Casualty?

Fiat is not a store of wealth. Gold, Silver, platinum, and fertile bottom land are. Also hard goods if you can store them, I think hardware nuts and bolts etc, a nice little hardware store that beats confiscation by inflation.

Move fiat currency to harder currencies that are backed by hard commodities if you can't hold those commodities directly and for any reason need to hold fiat.

==============================

BTW here is a video 'Seeds of destruction' Jeff Smith:

A trifle monotonous and some questionable statements, but you decide. I eat out of my garden and buy local meats, and do not care for soy products even when grown organically.

What about soap? I just scored 120 bars of Ivory for $12 at the little Saturday flea market out on the highway. Stopped for boiled peanuts. Ivory isn't my favorite soap, but the whole case fit nicely in the big vanity in the guest bath with room to spare. Who knows; I may be able to trade soap for a chicken or something someday. At least basic hygene doesn't have to suffer ;-/ You must have beenu following me in 2006 when I bought several cases of ivory soap for almost that very reason, trade goods and so chickens for soup? Started using it up myself when my panic subsided, I finally used up the last bar a couple months ago and it was a good deal at the time but not if I look at your 120 bars for 12 dollars. BTW I like ivory because it floats is made out of animal fats not petroleum and I find if it is used to wash ones hair it works better than any other thing I have tried. I don't end up smelling like I had just left a bawdy house. The guy had all sorts of stuff he got buying the contents of a storage unit, including disposable diapers (don't need those yet), feminine products (good for field-dressing wounds, but if things get that bad...), and a bunch of diabetic supplies, some he couldn't resell (legally, like syringes), including blood sugar meters, etc, and blood pressure cuffs (including electronic; I have a couple of those from my wife's former business). I would have gotten more stuff, but I only had twenty dollars and 'needed' boiled peanuts. Never ran into boiled peanuts, as far as I know. What is their fascination for you? What I am into right now is Curry Leaf ground with cumin added to olive oil and some bouillon and used to finish potatoes in. I boil the potatoes just to the firm point and then fry them in the oil and curry leaf mix. Would that be something to try with boiled peanuts? Boiled peanuts are a traditional snack in South Carolina, North Carolina, Georgia, northern Florida, Alabama, and Mississippi. They are an acquired taste, but according to southerners, they are totally addictive. Roadside stand I passed up today, (Now I'm sorry) adds some cauliflower and broccoli. Boiled peanuts are a traditional snack in South Carolina, North Carolina, Georgia, northern Florida, Alabama, and Mississippi. They are an acquired taste, but according to southerners, they are totally addictive. I grew up in South Carolina and I have to correct this notion. I eat boiled peanuts all the time and never had any problems with addiction to them ;-> As Mark Twain said, "it's easy to quit smoking - I've done it a thousand times". ;-) The mention of quitting smoking reminds me of one of the most amazing things I ever read--that even the father of psychoanalysis, Sigmund Freud, could not, and would not, stop smoking even as every new operation for his mouth cancer cut away more and more of his jaw. If I remember correctly, he was still smoking right up to the end. According to Wikipedia, his wish to be euthanized was finally granted by his doctor. http://en.wikipedia.org/wiki/Freud,_Sigmund Boiled peanuts have a long tradition in the SE US, and were often called Goober Peas around the US Civil War period. Southern soldiers would dig raw peanuts from the fields and boil them with salt. While the southeast grows a lot of peanuts, the best boiling peanuts are generally considered to be from New Mexico. Really good boiled peanuts need to be slow-boiled for a couple of days (best over a wood fire to get a smokey flavor), have just enough salt to be almost too salty, and have an 'al dente' texture; not too mushy or hard. They taste very different than roasted peanuts or peanut butter (or anything else). While some may say it's an aquired taste, my observation is that aquisition is sudden and generally universal. Some peanut boilers add cajun spices or hot pepper to jazz them up a bit. My friend adds some wood ash to enhance the smokiness. Generally a seasonal snack at roadside vegetable stands and flea markets. Sold by the "scoop", best eaten hot, but always good. (Boiled in the shells, BTW.) Think I'll have some now. Y'all c'mon down!. What kind of curry leaf do you use? Sounds delicious. Boiled peanuts would be great with that, sort of like currants or chic peas, or maybe throw in some Ramps ;-/ "What kind of curry leaf do you use?>/i>" It comes in a plastic bag from a local East Indian store, If that is any use to you .lol 'Ramps', maybe that was what I was picking in the interior of B.C. many years ago. Very nice but did not exactly taste like onions which I thought I was picking. Ate them with fresh caught trout in the spring there one year. I always wanted it when I was a kid -because it floats. But, my dad worked for Colgate, and Ivory was from arch rival Proctor and Gamble. So I never got to bathe with floating soap...... Okay, but what is stopping you now? It still floats and I presume you still bathe? One thing, for anyone that paints or uses oil based paints, if you wash your brushes with Ivory liquid soap it does not form a gel like petroleum products do. So it does not clog the pipes. I alla time felt sorry for the janitor of the art school I attended, as those sinks were eternally stopped up. For the life of me I cannot figure out why everyone doesn't go out there and buy at least one, 1 oz, gold coin. It is not that they can't afford it. After all people are still buying cars, taking vacations, buying smart phones, subscribing to cable TV, etc. I think it is the normalcy bias. Things have been stable for a long time and people cannot imagine something different. I have one coin dealer within my range, and he is a crook with 35% markups on silver coins, who does not sell American Gold Eagles and who is always out of coins when the price dips low. He advertises one price online and charges a higher price when purchasing them. You can buy online. Monex is reputable, but may have a minimum. ...or you can shop here. Put it in a safe deposit box in a local bank,, or bury it in the back yard ;-/ And if you have an associated metal mass like an outdoor freezer or are running an electric line where you bury it that is all for the better. I buy from a local dealer who charges a 4% premium over spot for gold coins and bars. He only takes cash or cashier's checks. Looks like the 18 month sideways correction in the price of gold has come to an end. The next rise will take it above$3500.

"I have one coin dealer within my range, and he is a crook..."

You repeated yourself ;-) One of my brothers is a fairly serious numismatist, and you should hear him talk about coin dealers...

For the life of me I cannot figure out why everyone doesn't go out there and buy at least one, 1 oz, gold coin

Because it's not useful 'right now'. It's more of a liability and trying to sell a bunch of them will bring the authorities to your doorstep.
It's instructive to recall that during previous high inflation events in South America, people didn't trade in gold coins, it sure preserved your wealth at the end of the fiasco but for day to day expenses you still needed cash or better yet dollars.

I don't understand your "...authorities to your door step" remark but otherwise you are correct. Gold and hard assets will preserve your wealth when the current financial system collapses and we transition to something different. I think most people are interested in how their sports team is doing, watch a lot of TV, etc and just give a lot of attention to these issues. Even the well educated Ph.D.s in my company didn't know much about what is going on in Cyprus.

A lot of these people are going to be impoverished by the end of this decade. I tried to convince a very smart Ph.D. to buy gold when it was around $800. He laughed at me and compared gold to beanie babies (a passing fad of the nineties). I never brought up the topic again. I don't know about US but here they take your PAN number if you try to buy or sell gold coins. Any large transaction in gold is directly reported to Income Tax authorities. Of course it doesn't stop all the crooks from buying gold but it does effect salaried workers like me. I assume western countries will also have something of that sort, after all electronic surveillance took it's baby steps there. Actually forget all that, if you try to buy a car in full cash here, you must report to the R.T.O (Transport Office). The system has complete control over you. Here in the US buying gold is like buying TV or anything else. Just pay the jeweler cash or a cashier's check (called demand draft in India). Tax authorities are not involved. I think talking about destruction of the current system is too difficult for most people to fathom....people in power and positions of influence don't get there because they are wary and cautious preaching sustainability. Our current system is a consumption based system those that consume the most move up the ladder in all positions...think of a leader saying that we are at peak oil they will be beaten down in no time...an affair would probably be less damaging. Not to mention that major media has 3 stories a week of how we are awash in oil in the U.S....most people only have to hear a story twice and then they store it in their memory as truth- the political machines have figured this out. I live in a tiny house in an affluent area that is supposedly progressive...but have been mocked for living this way----My highest energy bill is$80 and my lowest is $30...I have a Jotul wood stove and burn a cord of pine,fir and wood that most people want to throw into the landfill. I live in the Northwest and wonder how much smaller this area would be without cheap energy...In my state we used to grow 80 percent of our food now it is less than 20 percent...just as the desert areas may not be able to sustain without cheap energy I think some of the Northern climates may not be able to sustain populations...I think you could see a lot of people moving to adjust to decreasing energy supplies. Gold coins are the archetypal "get out of the country" tool - only really useful if you need a small, easily transportable store of value that's freely convertible. However, the question before that one is "where would you go?" If you don't have an answer to that question, then you don't know if you need gold coins, silver coins, precious stones, or something else. I'd suggest, for a TSHTF type scenario, other physical goods are likely to be a better investment - say, buy a solar panel, rather than a gold coin. It's the type of thing that would be in demand, would have practical value, can actually generate (sic) you money now, etc. Backup plans are fine, but they are supposed to be ... backup ... to more foreground, workable plans. And it may never be all that useful. A case of Ivory soap could be a better investment, or maybe 100 gold plated tungsten coins. The whole PM thing has been debated on various forums for years and years. Most of it comes down on how a person views the future. My own position is that people should not buy PMs. Why? There are any number of reasons but here are a couple: 1) PMs are useless for daily commerce. 2) PMs cannot be currently traded without going through a dealer. 3) Money available for PMs should first be used to secure ones future by first buying hard goods (tools, land, etc.) or paying down debt. 4) Although it is argued that PMs have "intrinsic value", that is debatable in many circumstances. It might be useful to look at how a "real" person would deal with someone who offers PMs in trade for something. That person is me. I have what you need to survive a collapse. You can see it here http://www.theoildrum.com/node/4979?nocomments (A Trip to Todd's) OK, you show up and say "Todd, man, I'd like to trade some of these PMs for some food and firewood. Actually, what I'd like to do is give you a lot of PMs and move here to share what you have." So, what is my response? "You can put your PMs where the sun doesn't shine." Why would I turn down an opportunity to "enrich" myself? The answer is simple: As far as I am concerned PMs aren't worth anything to me. They do not, in and of themselves, make my life better or easier. Further, I would have to find someone else to trade them to to achieve anything of value. But, if most other folks are like me, I'm stuck with them and I've, essentially, given away the farm. It is often argued that PMs are a "store of value". Good luck if the government decides to control the market (as it has suppressed the market for years) or simple confiscates them. And, if you think this can't happen, you aren't connecting the dots. Todd Todd, I agree with everything you said and you are probably the best guy out there to weather a 'collapse' but PM's do have a use, just that like everything else it's only 'one' tool out of many out there and it all depends on the context (a.k.a the kind of collapse you are facing). My grandpa found plenty of uses for PM when we had to leave our house in the middle of the night and shift to another country. The problem is that people are not used to systems thinking, they think, oh I have gold, what could happen to me ? Well what if you get robbed. Then they think, but I got guns, what if you run out of ammo or they confiscate your gun ? Moreover you don't want to be the only guy with a gun when things go south because you will stand out and neither do you want to live in an area with crackheads full of guns because then your life will be a Mexican standoff. Then you might think that I've got everything right here, I've got my land and my garden, I don't need any gold. Well what if it doesn't rain and you have to move, what then ? I think it's good to have a little bit of everything, as Heinlein used to say, "Specialization is for insects". Reading this thread, it's easy to spot those who have little or no experience buying and selling gold and silver. I have two dealers within 30 miles who are always happy to convert PMs to cash, and will even tell me to wait when they expect to be able to offer me a better price in the near future. Both are numismatists who also deal in bullion grade metals, and buy 'scrap': sterling, jewelery, etc.. They charge 6%-15% commission over spot, depending on the nature of the metal and the market. I've never lost money on a sale of gold or silver. I never, ever, go to pawn shops or jewelery stores with a sign that says "We Buy Gold". My buyers never ask for an identification for bullion transactions; only for jewelery which may be stolen. They are also savy enough to limit the transaction amount. There are professional and discrete dealers who will protect your privacy while ensuring the legality of all transactions. Best to keep all transactions relatively small. Since the dealer has no idea what you may have originally paid fo bullion, the onus is on the seller to report and pay taxes on capital gains. Saying gold and silver has no "real" value, that PMs aren't "currency" or a store of wealth are ignoring thousands of years of history. While it's possible for governments to confiscate PMs, they can just as easily reach into your bank account or inflate the value of currencies. They can take your real property as well. I don't want to give folks the impression that I buy and sell on a regular basis; it's just something I've dabbled in. I posit that, considering the direction our fiat/debt based economy is headed, having a moderate cache of precious metals is at least prudent, along with lots of beans ;-/ ghung, I've been down this PM discussion road a thousand times and I'm really uninterested in going down it again. Sorry, but PMs have no 'intrinsic" value. They have "value" because we say they have value. Other societies have considered other things to have equal "value" from beads to shells to bird feathers. Don't see them around much these days. Here's a question to ask yourself: "It has hit the fan and there were no alternative energy systems/parts available and they never will be available again. Would you willing to sell you AE systems for a paper weight? I'm not trying to be smart about this. This is a serious question. As far as selling PMs, sure you can sell them now but will you always be able to sell/buy in them in perpetuity? Maybe you trust the system/BAU to continue to function but I don't. We'll have to see how it all plays out. Todd Todd, I agree that the PMs have no intrinsic value. But none of the paper currencies and paper assets have intrinsic value. Not everyone can live like you with a lot of land, farm, etc. The world, especially outside US or Canada, doesn't have enough land for that. Not everyone has the skills or the inclination to live in a rural area and work on a farm. The choice is not between buying a farm vs buying gold; it is between buying some gold vs leaving all your money in a bank account. Not everyone has any substantial amount of money in the first place, either. I have given a lot of thought to the issue of PMs. Finally I decided that really it depends on one's skills and inclinations. Someone who can work at something constantly in demand (even if this must change, or the location changes, etc.) may be able to avoid storing lots of value. Others may be really skilled at storing things, food, clothing, metals, whatever, but may not be out there doing something else. So if you are good at something, even if that is storing and trading PMs, maybe that is the thing to try. In fact, I think that focusing on one's best skills and professional passion could be one good way to find jobs, profits, a salary, and a career at any time, even when the economy is not good. There is something to choosing a job based on passion, skill and feeling fo the job. There will be advantages based on intuitive perceptions and insights. Written by Todd: As far as selling PMs, sure you can sell them now but will you always be able to sell/buy in them in perpetuity? Maybe you trust the system/BAU to continue to function but I don't. We'll have to see how it all plays out. I think you do not appreciate the need for diversification to protect assets from unforeseen events. You seem to have put all of your eggs in one farm basket. I hope you do not trip. "You seem to have put all of your eggs in one farm basket. I hope you do not trip." That comes off as a jealous statement. Of anyone who's ever spoken about how they're set up on this site - Todd has, by far, done the most to be self reliant and minimize external needs. Grows his own food, redundant water supply, shelter - the basic necessities of life. If anyone has a "bug-out bag" they'd better look at themselves in the mirror and make an honest assessment of where they think they're going (and how far they'll get with only what's on their back). Chances are, they're bugging-out to someplace in their mind that looks like Todd's homestead. When someone asks to trade gold you're going to have to wonder if they're getting pyrite, 1k - 24k gold, gold plated lead, etc. Why not carry diamonds? Whenever talking about gold I have to point out - if you were on a desert island with food but with no water...and you were offered A)1,000 pounds of gold, or B)1,000 gallons of water...which would you choose? If you choose the 1,000 pounds of Au then you're taking a gamble that within 4 to 7 days you'll be found...and a gamble on top of that, that whoever finds you won't just kill you and take it. With the water you have well over a year to survive and wait for rescue or devise a raft, etc. There's a very slim chance you'll be killed for your water - but you might have to share it until you get to civilization. Gosh, Todd, I think you know where I stand on the collapse prep-o-meter, and that I've built more resilience and redundantcy into my plan than most here. Having a bit of precious metals in one's doomo-portfolio is just another type of resilience. I'm sure that, if our currency collapses or inflates out of sight, our local govt. would be happy to accept gold or silver for a property tax payment rather than a goat or chicken. This isn't an all-or-nothing plan like many have; it's about having options going forward. You can no more guarantee that gold will be worthless, than I can guarantee it'll save my families a$$. Convert all of one's assets into gold or silver? Of course not. But there are documented examples of when those who had a bit of PMs survived while those who had none didn't. I chuckle every tine this topic comes up. I just keep thinking off all those reports you hear about excavations finding the clay pots full of roman coins, happens all the time. I guess they didn't help the folks who buried them very much. Don in Maine While of course, we'll never find the ones that DID help their owners.. it does sort of skew the discovery results. Buried treasure: the owner died with some unused assets. Thieves die with debt taking from others. I can determine which posters have savings and which do not based on their notions of how to manage money. 1) PMs are useless for daily commerce. In the case of hyperinflation or just plain collapse of trust in fiat, what are you going to carry about to buy or sell a cow in the next village? Clever lad Jack sold his cow for magic beans but still ended up with a goose laying golden eggs. 2) PMs cannot be currently traded without going through a dealer. When the time comes to use them to trade, there will be a market, though maybe a black one. (I think silver would be a better medium for daily trading). 3) Money available for PMs should first be used to secure ones future by first buying hard goods (tools, land, etc.) or paying down debt. Yes one should be solvent and have bought goods before their price increases in a crises situation, but if one can not buy everything one will need, beforehand, then you need a store of value for later purchases. Magic beans or PM's. 4) Although it is argued that PMs have "intrinsic value", that is debatable in many circumstances. Their intrinsic value is that they have no counter-party risk as does, currently, the fiat in a Cyprus bank. Good luck if the government decides to control the market (as it has suppressed the market for years) I see nothing better than buying goods that are artificially price suppressed. China an Russia have been doing that for years with gold. My 2¢ The needs and goods for sale/barter are so diverse, that a currency has to evolve. In occupation Germany it was American cigarettes. In some federal prisons today it is freeze dried herring (no one wants to eat it, the commissary sells it for$2 or so).

A 1 oz gold coin is simply TOO big ! Before the California Gold Rush (and resulting inflation), the US Mint coined just less than a half oz gold coin ($10) as the largest, along with$5. $2.5 and$1 gold coins (and a few $3 gold coins). (Back then,$1 was pay for a good farm hand for a day of hard work - except during harvest when pay would increase to $5 to$8/day).

Silver dimes, quarters and halves seem more desirable as means of exchange. Larger transactions could be either piles of silver coins or a gold coin. One can haggle with a pile of silver coins (add $2, etc.) but 1 oz gold coins are "all or nothing" although side goods can be added as lagniappe. Would Todd sell a half dozen eggs, or 4 lbs of potatoes, for a quarter ? He might ask for 35¢, a silver dime & quarter. I would counter with 20¢ (two silver dimes). He would then counter with 35¢ and add a bar of ivory soap. Best Hopes, Alan US Gold Eagles are minted in 1/10, 1/4, 1/2, and 1 ounce denominations. IIRC Canadian Maple Leaf coins are minted as small as 0.05 (1/20) oz. Many folks like silver in older US coins like the Morgan silver dollars and older silver half dollars. These also have 'collector status', though many are only worth the silver they contain; goes to confiscation risk avoidance. However, 1 oz bullion coins take the bulk of the gold. Many nations only make the 1 oz version. Mintages for US Gold Eagles (I think these do not include the pure gold 1 oz "Buffalos") Best Hopes, Alan I once bought a tenth of an ounce coin as a present, but the premium was quite ridiculous. I consider ounce silver a better way to go for smaller change. Small gold coins: http://www.mint.ca/store/buy/gold_coins-cat120004 Told the person that it was either the start of his gold hoard, or he could trade it for fiat and take the wife out for a quick Wiemar burger and fries. Small gold coins: http://www.mint.ca/store/buy/gold_coins-cat120004 Todd, what will you pay the tax man when he come knocking at your door? Without currency how will you purchase an inverter when it breaks beyond repair? American silver and gold eagles are official U.S. currency. Is the idea that you will be able to use a single gold coin for barter in the future? Prisoners in Nazi concentration camps used gold fillings to barter for extra rations, so.... A great example of urban renewal and energy efficiency : NSP fired up by building’s green award Nova Scotia Power’s new corporate headquarters on the Halifax waterfront has been recognized for its energy-efficient features. Earlier this month, the Canada Green Building Council officially designated the$53.4-million building with platinum certification from Leadership in Energy and Environmental Design.

The rating is the highest of four levels in green building construction, and Nova Scotia Power now has the first office building in Atlantic Canada to earn platinum certification.

[...]

The building includes features like harbour heat pumps that use water from Halifax Harbour for heating and cooling, chilled beams to decrease energy use and increase thermal comfort, rainwater that is collected and recycled, and daylight sensors to reduce or eliminate unnecessary lighting.

Those features provide up to $650,000 in annual savings on energy and water use. But more work remains to make the building still more energy-efficient, Currie said. Years ago, I worked in the office building directly across the street from this former coal-fired power plant. When it operated, there were times when the smoke and ash would literally rain down upon you (no pollution controls and a relatively short stack). It was a filthy, disgusting eyesore and I'm glad to see turned into something quite remarkable. Cheers, Paul For information, below two Jean Laherrère papers (from February 2013, and in preliminary versions) : Oil and gas forecasts 1900 2100 : http://tribune-pic-petrolier.org/wp-content/uploads/2013/03/oilgasprodfo... Overall summary graph for liquids : And on IOCs production and their forecasts : http://tribune-pic-petrolier.org/wp-content/uploads/2013/03/IOCprodforec... Not a hage fan of those kind of hugely-drawn out graphs. I think a better summary is this sentance, from the paper you linked: The crude oil + NGL will peak for the world before 2020 at 82 Mb/d, for NOPEC now at 47 Mb/d and for OPEC in 2020 at 36 Mb/d He then gives the chart above, where he includes biofuels, "refinery gains" and other gimmicks, but his basic position does not change. I like his gutsy position on what he calls "NOPEC", which means he throws cold water on the notion of the U.S. tight oil and the Canadian unconventional production capabilities covering and exceeding losses elsewhere in 'NOPEC'. Still, I think there are things that ought to be considered in parity to this. The only country that is growing very fast is China, but that is driven by a fixed-asset boom, basically ordered by the government. Their banking sector has increased by 50% each year over the previous year three years in a low over the last 3 years. That is huge - and unsustainable. India grows, but largely because it is still a very poor country with very small pockets of affluence. Poor African countries also have high growth rates because urbanization is still so underdeveloped in both cases. China has a much more stable middle class. Nevertheless, we may see both China and India go below 5% growth and even 'settle' at 3% before this decade is out due to the increasing and encroaching 'energy tax' that won't go away and will continue to eat away. There's only so many massive debt binges the Chinese can allow each year before their bubble pops, too. This would change a lot, especially in the consumption forecasts. And then we have stuff like electric cars. In 2-3 years we will have electric cars that cost not much more than average gasoline cars for the masses. It'll take time to change the vehicle fleet, but even 5 years will do a lot to reduce petroleum use. Of course, if that electricity is generated by coal plants, it doesn't do much for the climate in the long run, but it would soften the oil situation remarkably. Also, as we're likely to adapt away from oil given that we have a plateau for another 7 years or so and the initial fall(4-5 years after peak) will be relatively mild, if Laherrès chart is right, also contributes to some time. I don't think it will be frictionless, to be understated, but his chart is a good argument for a more measured approaching sans the doom-and-gloom types. I'm gravitating more and more towards Staurt Staniford's position, that Peak Oil will not be as dangerous(but still very impacting) as many of us thought in the beginning. Climate change will probably be much more dangerous to us in 2030 than the oil situation. "Climate change will probably be much more dangerous to us in 2030 than the oil situation." As if we can seperate the two, and the convergence of many other factors, all feeding on each other and our abilities to respond. It's this unavoidable synergy which keeps my little mind-jury debating how severe and time compressed the collapse of industrialism will be. Just as the result of these things is greater than the sum of it's parts, so, too, will be the difference. Exponentials work in reverse, and cascade failures aren't something dreamed up in someone's dissertation. We've been testing the limits of all of our systems for longer than most realize. "As if we can separate the two..." That's what I keep saying. It's "silver bullet" mentality - as in "what's the one thing that will save us." There is no one thing! There's not one thing that will kill us either - it's LOTS of things! And synergies and cascading failures are definitely on the table. Peak Oil, Peak Coal, Climate Weirding/Change, acidifying oceans, collapsing fisheries, depleting fossil aquifers, reduced agricultural yeilds, farmland loss, pollution, overpopulation...combine with social dynamics: War, religious fundamentalism, military adventurism/nation building, politics, fear, ignorance, economic collapses. Choose one? They add together... Would say his position is simply being one of the only one to still run modeling based on available data, and then consider the results provided. And one thing I get from the results is the tremendous "dissonnance" we are currently in, between official agencies forecasts and data driven bottom up analysis. As to peak oil being dangerous or not, we clearly are entering uncharted territories... (Stuart is more looking at production values on a rather short timescale) Climate change more dangerous ? I don't know.. Yves – You’ve probably seen me rattle on about the POD: Peak Oil Dynamic. It covers much more than the timing of PO production: politics, military adventures, ELM, China/India, shale booms, frac’ng controversy, EV's, Keystone pipeline battles, Macondo blowout, etc. And increased coal consumption. And that easily pulls climate change into the POD IMHO. To me it’s not a question of which factor is more dangerous. It’s the combined dynamics that has us heading down a dangerous path. In another life I was lectured about the dangers of heading down a predictable path…much safer to break new ground. Which, unfortunately, doesn’t seem to be where we’re heading. Keep going that direction and we’re bound to get zapped. Rock, yes I basically agree with you, and don't want to "minorate" climate change at all, and for instance deforestation might also increase due to PO. One of the strange thing being that the more "PO dynamics" kicks in, the less it is identified as such in a way ... Yves – “…the less it is identified as such in a way.” Exactly…that unfortunate inability of many to see the whole picture and connect the dots properly. Just had a great mental image: a prism. We’ve all seen the effect: whole white light enters the prism and is broken down into its components of different wave lengths. Now two images. The first with the PO timing aspect: June 2005 (or any other date you want to use for the timing of PO) passes through the prism and is split into just a few components such ss frac’ng oily shales, ELM, etc. Now look at the POD passing though the same prism and you see a huge number of components including your deforestation which happens when forks can afford to buy other fuels. Another ugly light ray coming through would represent the lives lost and suffering brought about by military adventures to protect oil producing regions. A lovely ray of light representing the incomes (salaries, royalties, production taxes, corporate profits, etc.) generated by all the new drilling activity due to high oil prices. An ugly light ray representing the Macondo blowout. Another very lovely ray representing Rockman’s paycheck. LOL. But when you look at all the various POD wavelengths you notice the ugly ones far outnumber the nice ones. And that there are not sharp lines between the different components but always a gradation linking one to another to some degree. Focusing on just a few of those ray paths won’t allow a clear view of the situation. Trying to fix a few of those rays won’t resolve all the problems. Increasing production from the shales won’t solve the AGW problem. Just as increasing the number of wind turbines in the US hasn’t decreased our military exposure in the Middle East or decreased the number of DW GOM drill permits (400+) issued since the Macondo oil spill. Our lives are dominated by the POD. And not the date, whatever it may eventually be proved to be, of the global PO. And to leave you on a lighter note: it appears many in the US are looking at the POD though a beer goggle and not the prism goggle. And sadly the closer it gets to closing time it seems for many the view is getting more distorted. But eventually the morning comes and they’ll roll over and see the reality of their decisions. Except the “coyote ugly solution” won’t be an option. Man, that sounded like an acid trip. Brilliant!! ts – “acid trip”. LOL. But to carry the analogy further I grew up in a rather drug infested environment. Seen more than a few “talked down”. And the really frustrating part: once sober and agreeable to never doing it again they almost always repeated those bad habits. Similar to how J6P responds to an energy shock: “Gotta do something now!!!”. And then they either come up with a poor response: take a “shorter trip” next time, blame the parents. Or no response because the moment has passed and things aren’t so bad now. I’ve seen very few junkies end up in a good place. If we break down the 2002 to 2011, 9 year, decline in the GNE/CNI ratio (ratio of Global Net Exports* to Chindia's Net Imports) into three segments, it looks like this: 2002 to 2005: 11.0 to 8.9, rate of change of -7.1%/year 2005 to 2008: 8.9 to 7.0, rate of change of -8.0%/year 2008 to 2011: 7.0 to 5.3, rate of change of -9.3%/year At the 2005 to 2011 rate of decline in the GNE/CNI ratio, in about 17 years, around 2030, the ratio would approach 1.0, and China & India alone would theoretically consume 100% of Global Net Exports of oil, leaving zero net exports available to about 155 net oil importing countries. While we all agree this scenario--GNE equals CNI--can’t actually happen, the brutal fact remains that the rate of decline in the GNE/CNI ratio has accelerated in recent years. In other words, we are headed (so far at least), at an accelerating rate of decline, toward an economically non-survivable point of impact. It’s as if the passengers on a commercial airliner were calmly discussing dinner plans, oblivious to the fact that the pilot is steadily pushing the stick forward, putting the aircraft into an ever steepening dive. *GNE = Top 33 net exporters, BP + EIA data Cairn Energy hasn't given up on finding oil in offshore Greenland despite 11 apparently dry holes. They're going to try again in 2014. Cairn optimistic about offshore Greenland drilling prospects Looks like some common sense is beginning to creep into the media. Though the Huffington Post is not exactly mainstream, since it is entirely a web publication, they have been publishing a few common sense articles lately, along with the usual Pollyannaish garbage. In late February, the EIA reported that "Saudi Aramco's CEO Khalid al-Falih warned that rising domestic energy consumption could result in the loss of 3 million barrels per day (bbl/d) of crude oil exports by the end of the decade if no changes were made to current trends." The New York Times reported that Chinese consumption by 2020 could be almost two-thirds greater than it was in 2011, resulting in a 6 million barrels per day (mbd) increase. Thus, viewed in context evidence indicates that U.S. domestic oil production could max out as early as 2017 and then begin a slow decline -- just as Saudi Arabia could be exporting 3 mbd less and China could be needing 6 mbd more. The consequences to the U.S. economy of such a confluence could be drastic. How about that, US tight oil peaking in 2017 and China increasing consumption right in the face of Saudi Arabia doing the same thing, therefore decreasing their exports. The Export Land Model has found its way into the Huffington Post. But of course they don't call it that. Hey, what if this news gets around to larger members of the MSM? Any chance of that? Ron P. "could be drastic" They have a sense of humor as well. " They have a sense of humor as well." It's not really "they." The author here is Lt. Col. Danny Davis, who wrote one of the first studies on PO by a serving US officer ("On the Precipice," July 07) and has written other excellent pieces since then re. energy security (in Armed Forces Journal, etc). Davis also took the bold step (again, as a serving officer) of publicly questioning the official line re. progress (or lack thereof) in Afghanistan. Davis is a careful, thoughtful analyst. I'm pleased to see that he's tapping into the equally careful, thoughtful analyses of Dave Hughes. (They both have retained their sense of humour, thankfully.) If HuffPo wants to do something really bold, they could assign someone to carefully examine Hughes' entire study on unconventional fuels (Feb. 2013, 178 pgs) and then report on its implications. Hey hey Rick, Can you link those reports please? I'm having a hard time finding them. Thanks, Tim Maj. Danny Davis, "On the Precipice," July 2007 is indeed hard to track down. Various sources offer it but you have to accept their program/application which may have risks. Davis' study (37 pgs) was published by ASPO-USA but it's not listed on their website and there is no Search feature. (Perhaps someone from ASPO-USA could please help with this so that Davis' report can again be available... the previous link does not work.) If all else fails I can e-mail you the PDF. Armed Forces Journal had a energy issue 5 years ago (May 08) which included an article by Maj. Davis but I see that their Past Issues link will not work, so I can't offer you that one, either. I should also mention that Davis was scheduled to present at ASPO-Washington in 2010 (as part of the panel on security implications re. oil supply) but he got stuck in Afghanistan and was unable to attend. David Hughes' recent study on unconventional fuels (Feb. 2013, 178 pgs) is reviewed here, with link to original study: http://www.postcarbon.org/article/1531617-fracked-gas-won-t-solve-energy... US tight oil peaking in 2017 I am on record as predicting that North Dakota crude oil production in December 2013 will be very slightly lower than December 2012. I give myself only a 50% chance of being right. But it is coming, and sooner than 2017 IMHO. Alan I agree that North Dakota will peak before 2017 but I don't think it will be this year. I am predicting the North Dakota peak will be in 2015 or 2016 at the latest. Ron P. So... Is there a convenient way to go short against Bakken Oil Stocks? Lloyd An unconventional way would be to short the railroads carrying the crude. They have had a huge run-up, and those that are most heavily dependent on that revenue stream will be hit hard when oil there peaks. Likewise the pipeline companies. The North Dakota Department of Mineral Resources agrees with you (PDF). Pretty much anyone who builds a simple depletion model and assumes a sane number of new wells drilled agrees with you. The only people who seem to forecast that it can grow beyond that point are financial types: Citigroup and the IEA in particular. I include the IEA in that bunch because their model still estimates economic growth first (at levels that their sponsors are willing to tolerate), then estimates how much oil will be required to generate that growth, then allocates that level of production across various sources. Jean Laherrere just posted me the following: Ron you wrote: I agree that North Dakota will peak before 2017 but I don't think it will be this year. I am predicting the North Dakota peak will be in 2015 or 2016 at the latest. my guess is mid 2013 based on the number of rigs shifted by one year at less than 800 000 b/d He also posted a PDF graph attachment showing ND production, ND rigs and ND rigs shifted one year. However I seemed to have mastered everything about posting graphs except how to get a PDF file into photobucket. I keep getting "invalid file type". Sorry. If anyone can assist me here it would be appreciated. Ron P. Open the PDF and take a snapshot. Save as JPG. Hi Ron, this graph ? : (Jean just forwarded it to me) Note : just saved as jpg from a pdf viewer (the default macOS one) Yes, that's it, thanks. I don't have a Mac but I will figure it out. Ron P. In Windows you can do a print screen (PrtScn), then paste into a graphics program (Paint works, but I prefer a photo editor). Save it as a jpg (or whatever) then crop out the chart. Or you can search for a free screen capture utility like Greenshot. For Linux I use "KSnapshot". Jean Laherrere is not bad company to be with :-) I wonder what the reaction will be when"the Great Black Hope" disappoints. Alan Awash in Misinformation: America's Domestic Tight Oil 'Bump' This is the best analysis that I have seen of the situation in some time. It is useful in that it quotes a reputable geologist, David Hughes, who has some creds in the fossil fuel forecasting area as a result of his 32 years working at the Geological Survey of Canada. The GSC has always struck me as more conservative and less politically driven than the US Geological Survey. I particularly noted this phrase: two out of 21 plays account for 81% of tight-oil production. So, it is just the Bakken and Eagle Ford plays have accounted for nearly all of the uptick in US oil production in recent years. And, note that it is only the North Dakota portion of the Bakken that is contributing to the uptick. Production in Montana, which has a big portion of the Bakken, is actually lower than its peak in 2006. The estimated tight peak oil date of 2017 is something of a line drawn in the sand, but it is a useful from a planning perspective. Personally I am not motivated enough to analyze data from 65,000 wells to confirm it, although I have done that sort of thing for oil companies in the past. I just want to confirm that, despite what the MSM would have you believe, a (tertiary) production peak in US production is coming soon, and it's not a good time to invest in Bakken oil shares - or the Eagle Ford for that matter. Rocky – I’m with you: way to much data to mine just for the fun of it. I’m especially grateful that he quantified how little all of our other shale plays have contributed to our current situation. That was in part what I was trying to show by my long post: there are a lot of shale formations in the US and abroad. But just because there’s a number of shales containing hydrocarbons doesn’t mean there are huge untapped reserves out there just waiting for the next boom to begin. This list includes what are considered the major shale hydrocarbon formations in the U.S. Some very familiar and others not: Antrim Shale, Barnett Shale, Caney Shale, Conesauga Shale, Floyd Shale, Gothic Shale, Haynesville Shale, New Albany Shale, Pearsall Shale, Eagle Ford Shale, Marcellus Shale. And here’s a list of other small shale plays being developed throughout the United States and Canada that may be even less known by TOD and the public: Baxter, Niobrara, Mancos, Mancos, McClure, Cane Creek, Hovenweep, Lewis, Pierre, Palo Duro, Woodford, Chatanooga, Huron, Utica, Horton Bluff, Excello, Mulky, Gammon, Mowry Jackson, Clearfork, Cline, Cotton Valley, Chainman, Klein, Wolfcamp, Tuscaloosa, Atoka, Holdenville. And then down the pyramid to hundreds of other shale formations just in the US that aren’t included in the previous list of minor plays. The vast majority of the sedimentary rock section is composed of shale. And the vast majority of the shales have no proven hydrocarbon potential. As long as oil prices stay high some of the shales will garner significant interest. The Marine Tuscaloosa Shale has been targeted recently by Devon et al. Hundreds of$millions invested and yet no MTS boom. But as long as the pubcos are desperate to add reserves and prices stay high they’ll keep poking holes. They either do that or wither on the vine and disappear.

Not to defend Yergin, because his predictions have been terribly wrong for over a decade, but it is probably a correct statement that fracking these tight formations has been the "most important energy innovation so far of the 21st century." Oil production in the US has turned up sharply for an entire presidential term for the first time since LBJ was in office. That is pretty significant.

So whether it peaks soonish and declines, I don't think anyone here could have predicted in 2005 that US oil production was about to turn back up for several straight years. I have likened this to when the Alaska pipeline came into operation. US oil production turned up for a few years before resuming its decline.

The century is young so this may have to be judged in retrospect but another possible candidate for energy innovation is the amazing decreases in the cost of solar panels during this century. I think that took a lot more innovation than the increased usage of an established technology that resulted because of an increase in prices. Yergin is oil centric so no surprise that he would pick fracking as the most important energy innovation.

I guess it partly depends on the meaning of "innovation". However, given the standard dictionary definition, I see nothing innovative about fracking. Maybe it was the biggest surprise but not biggest innovation.

Further, I think that a truly important energy innovation would be able to prevent a tertiary decline in oil production after a relatively short time. This is what appears to be happening. Although, of course, we shall see at least those of us who are alive by then.

At the end of the day, peak oil is here or is coming and the truly innovative and big thinkers will be thinking what we do after the peak not what we do to extend the peak for a few more years. Yergin clearly does not fit into that category.

Robert – I was going to make a similar observation but didn’t get around to it. He’s correct except as usual he phrases the situation incorrectly. As ts points out hz drilling and frac’ng are not “important energy innovations” of the 21st century. It was rather thrilling to have a front row seat to watch this “important energy innovation” of the last century lead to the development of the hottest drilling play in the country: the Austin Chalk carbonate shale in Texas. Similar to another “important energy innovation” of the 20th century, the DW GOM oil production which began over 30 years ago.

The great turnabout of the 21st century IMHO has been the widespread utilization (due to higher oil prices) of hz drilling/frac’s…an “important energy innovation” developed last century. An “important energy innovation” applied in trends that were well known in the 20th century but were previously uneconomic to develop. IOW the “important energy innovation” of the 21st century has been high oil prices. But innovation still seems a poor choice of words IMHO.

The same could have been said about the hz development of the shale gas trends a few years ago: another application of an “important energy innovation” developed last century. Of course, due to falling NG prices that application of another “important energy innovation” of the last century didn’t survive to the end of the first decade of the 21st century.

Don't know yet if this means much, but it just might:
Ras Tanura Oil-Tanker Capacity Seen Declining 13% in Latest Week

The implied capacity of vessels calling at the world’s largest crude-export complex decreased to the equivalent of 6.94 million barrels a day, compared with 7.94 million barrels for the week ended March 9, according to signals gathered by IHS Fairplay, a Redhill, England-based maritime research company. The data may be incomplete because not all shipping transmissions are captured.

A million barrels per day drop is significant, but that is only for one week. They could make it up in other weeks. Tanker trackers had OPEC exports down only slightly for the four weeks ending April 6th. But it will be interesting to watch this and see if there is significant news coming out of Saudi Arabia.

It is interesting to note that of the 48,600,000 million barrels that left Ras Tanura that week, 1,650,000 barrels Saudi shipped to itself. This was probably offloaded at the Red Sea port city of Jeddah. No pipelines run to Jeddah since the city sits at the foot of the Hijaz Mountain Range.

Ron P.

Once again the cornucopians offer the “new” silver bullet that will save us from PO: the Deep Water GOM oil trend. From up top: “We have been drilling in the Gulf of Mexico for a long time, yet somehow, exploration and production companies are still finding more oil.”

Yes…all true. And has been true for every oil play on the planet: the trend is discovered and then development begins. And over time fields are found until the last economically viable prospects are developed. And our DW (> 1,000’ water depth) GOM oil trend is no different. And actually not a new opportunity: the first field, Cognac, was discovered in July 1975…over 38 years ago. Through 2005 more than 150 DW fields have been discovered and developed. In the last 13 years an additional 30 fields have been discovered. So more than 180 DW fields discovered to date and everyone heading for depletion from the first day it starts producing. And the great majority of production spent within 7 or 8 years. The vast majority of offshore oil production now comes from the DW trend. The shallow shelf plays have long pasted their prime.

As pointed out before the better prospects tend to be developed early on. Thanks to higher oil prices (and not a “new play”) the less perspective DW prospects are being developed. But like every other trend in the history of oil/NG development every play comes to an end when all the viable projects are tested. There will be more DW GOM fields discovered. But their hay day has past IMHO. Developing tech to drill in even deeper water won’t change that fact: once we go too far from the continents there are no sediments deposited that will accumulate hydrocarbons. IOW the vast majority of the world’s seafloor has zero oil/NG potential. Always has and always will regardless of the price of oil.

But,... but,... but, what about abiotic oil?

Craig

zap - I already explained it to you: all the DW oil is of abiotic origin. We have found the great Black Hope!!!

Rockman, you ask why Exxon gave up in Poland, can't find your contribution any longer, so the answer here.

The shale gas they found consisted IIRC of 60% nitrogen and in addition had a quite high concentration of SH2. Is a high nitrogen content common?

Another aspect of the affair was that the Polish government had to reduce the amount of resources by one order of magnitude (slippery comma I heard :-)).

U – Thanks. That explains a lot. I wonder how common those concentrations are in that one trend as well as others. That is a rather high N2 content. But the N2 and H2S can be removed at a cost. But what hurts the economic viability is that we it comes to selling NG you’re selling Btu’s. So such a well producing 5 million cubic feet per day is delivering less than half that amount of energy. This is another qualifying aspect that folks don’t tend t focus on when they discuss the potential of “the shales”. The potential varies greatly from one shale play to another due to a variety of factors. As just discussed in another post the vast majority of shale formations have no hydrocarbon potential. For instance 80% of the production from shales is from two formations…the Bakken and Eagle Ford. And the Bakken isn’t a pure shale reservoir.

And the reduction in the volume predicted may still be grossly overstated. Having X trillion cuft of NG that’s economically viable to produce is different than having 0.1X cuft that can’t be produced economically.

Science is a systematic approach to mapping reality that must be accomplished to create effective tools for resource extraction and metabolism. Tools built upon a fuzzy model of the world are like slipshod enzymes, their substrates just don't fit. Certainly science facilitates the engineering discipline which creates our tools and infrastructure, but why can science not elucidate the neural and systematic reasons for our foray into a destructive and lethal mode of growth? What are the repercussions to finding our carnival-land existence nothing more than a temporary condition resulting from uncontrolled usurpation and consumption of the natural world. Unlike a metazoan malignancy, we have used our tool engineering ability to tap into the exergy of fossil fuels, that has made us highly toxic and rapidly lethal in an unprecedented fashion. Whether you believe this or not, it could probably never become part of the regular discourse in a society populated by organisms evolved to maximize reproduction and/or wealth accumulation and only recently given free pass by evolution to thus damage themselves irrevocably.

Once the evolution of information-using mental faculties and ability to manipulate the environment with dexterous hands was in place, a whole new world of opportunity opened for us. We can create and build a tool to eat practically anything – and we do, resulting in exponential growth. The exponential growth will collapse as we use the last of the easily accessible energy. The living forever part will collapse when the medical research and hospital industries can no longer find solvent customers for their unprecedentedly complex operations and products. In the long run, if the patient (ecosystem) lives and humans are still around, they will still be malignant (still going at the environment with tools), but if the dearth of resources makes tool-using intelligence superfluous, then those abilities are likely to fade away and humans will once again no longer have the advantage of malignancy in the ecosystem. Our numbers will remain in balance. Even our outrageously expensive medical care is not enough to satiate our desires to live beyond all limits, and we can add the expense of religion that guarantees an eternal life to those whose souls can be pried from their aging organic infrastructure. I am especially humored by our efforts to metastasize into space to spread the cancer as we continue to eat everything in sight on our own planet and scream for ever higher rates of growth.

Civilization is a cancer, not some fortunate organization of humans that happens to have stumbled onto a long-concealed treasure trove of resources, there’s a difference. But never mind, being a cancer is quite advantageous and it feel good too, until the glucose stops coming, and we’re almost there - some of us. Too bad so many will never experience what others relish - the childish, carefree, and reckless release of energy into a million frivolous conduits in pursuit of a never-never land that can never be.

What is interesting to me is how the northern peoples, who were forged a long time ago in scarcity, turned out to be the best at exploiting fossil fuels to their maximum extent and spreading their civilization across the globe. In doing so, they have gotten used to the opposite of scarcity...abundance.

This advantage is now dissipating, but in reality we are simply moving back to how things were for a long time in human history. This is why I have anxiety about America's future. It is not that we will be worse off than others, although you can make that argument, but that we have further to fall.

Poverty can be a humbling experience but not so much if those around you are humble too. Maybe the best thing that can happen for America is a walk back to it's roots?

Traveling in Mexico we were looking for a spot to rest our heads and came across a Mexican and a well off Yankee talking on the beach. He was bragging full speed about his boat out in the water and when I asked the Mexican if there was any problem with staying the night there, the American took over and said no that was not possible.

The Mexican on the other hand stood up and said "no problem, there is a Palapa that has been deserted, stay there as long as you wish".

We became friends, the sailor sailed on, alone I guess.

Hey hey energyblues and also Dopamine,

Easy money is bad for you. Benjamin Franklin said "To be thrown upon one's own resources, is to be cast into the very lap of fortune; for our faculties then undergo a development and display an energy of which they were previously unsusceptible." The Fremen from Frank Herbert's Dune were peerless warriors because they lived in the most marginal and 1. inhospitable climate. Flannery O'Conner's A Good Man Is Hard to Find culminates in this quote: "She would of been a good woman," The Misfit said, "if there had been somebody there to shoot her every minute of her life."

The reasoning is straight forward. If one's survival depends on some skill then one gets good at that skill or perishes be it hunting or social organization and norms. In northern climates one needs to plan for the winter on pretty marginal terrain. This hones society on the level of individual skills and larger social constructs. Well honed skills, of coarse, give rise to easy living. Especially if said conditioning gives rise to a new adaptation which allows the descendants of some highly disciplined society access to ridiculously easy living in the form of stores of millions of years of fossilized sunlight. Selection pressure goes right out the window and hard won victories breed spectacular failures.

Good clean fun.

Complex societies existed in warm areas while in the temperate parts people were still hunter-gatherers. It is because of fairly recent events, historically speaking, that the cold areas in Europe have had such a grip on the world, and it could definitely have turned out differently.

A think a lot of that "advantage" came from the need to overcome the seasonality for your northerners. You have to do at least midterm planning, growing and storing enough from the summer to survive the winter. Then after a summer of hard work, there is not much to do during the winter, so one can get busy on crafts and industry, including making tools that will allow the short summer season to be productive enough to create the large seasonal surplus.

Other aspects that flow, from this more difficult environment, are likely a lower equilibrium population density. Also it is hard to do labor in the heat, and perhaps that leads to greater productivity father from the equator.

Winter is when the heavy work got done. Tree felling and firewood chopping.

Maybe, but he food came from the warm weather.

In the long run, if the patient (ecosystem) lives and humans are still around, they will still be malignant (still going at the environment with tools), but if the dearth of resources makes tool-using intelligence superfluous, then those abilities are likely to fade away and humans will once again no longer have the advantage of malignancy in the ecosystem.

But why? I am reminded of Bruce Chatwins's book, The Songlines, where he explores the Australian Aboriginal beliefs about how humans dream the world into existence.
In a sense, we moderns have already dreamed the world into existence. Look at our food, even something as natural as an apple, say a HoneyCrisp, developed to have just the right balance of tartness, sweetness and crispness, it is something that we collectively dreamed into existence. I look out my window and even way out here in the rural landscape I see rhododendrons and azaleas and daphnes, useful only for the sensual visual and olfactory joy they give to humans and yet these plants and their other horticultural cousins dominate the landscape, at least the understory.
My companion animal and my domestic waterfowl- dreamed into existence by human creativity. I'm willing to grant you poetic license to consider them an appendage to your 'malignancy', but the metaphor beaks down.
So why can't we dream of a world where we get our populations under control, where we 're-wild' huge portions of the continental land-masses and dramatically reduce ambient atomospheric CO2?
Why can't we dream that world into existence? If even 'nature' is no longer natural, why should we consider ourselves slaves to our own fallen nature? Your cancer metaphor is a little too Old Testament for me.
There's no inherent reason long-term technologically advanced sustainable human civilization cannot co-exist with natural ecosystems on a sustainable basis sharing the planet. If it hasn't existed yet and does not exist now it is because we have not yet dreamed it into existence.

I think the issue is that, so far at least, the worlds we have dreamed into existence have been compatible with our base instincts. The world that is needed for out survival is not consistent with what we have evolved to hold as fundamental values, i.e. rapid reproduction, instant gratification, dominance over naure and all other species.

Solar Powered Tractor

This is a home-brew solar-powered tractor with a forklift motor substituted for the original gasoline motor, 8 lead-acid batteries, and a roof with solar panels.

It looks to me like these batteries would have (being generous) the energy equivalent of 1/4 gallon of gasoline. But, if the tractor gets the 7 X improvement in energy efficiency that I see with our electric cars, that would be close to 2 gallons of gasoline equivalent. It looks to me like he needs more solar; it would take at least 2 days of full sun to charge the batteries. A solar shed with more panels for charging would be better.

Rather than doing all his fields at the same time, a farmer might need to do part of the fields each day over a more extended period, but that could work.

That's a fun rig. Good to hear he's selling it to build a better one.

His Vids brought me to this one, http://www.youtube.com/watch?v=9YmbFtJlZpU , the latest by Steve Heckeroth, who's been doing modest sized E-tractors for a while now.

This one has Lithium Batts and a 20hp motor that he feels gives him performance of a gas or diesel rig up to three times that HP.. also, it's charged from an 8kw thin-film array that he says powers his whole homestead.

Hi jk, thought of you and your employer when I saw this on Greentech Media:

"But, if the tractor gets the 7 X improvement in energy efficiency that I see with our electric cars"

Be careful about making this leap - one of the biggest parts about the efficiency of electric powering cars is that the costs of carrying excess power is low. For example the Tesla top model makes over 400 HP and Leaf around 100 HP - but use nearly the same Wh/mi. However, if the Tesla were to use that extra power, its consumption would rise - but just having it does not. Since cars often operate at a small percentage of their total power - the efficiency gain is dramatic. Tractors tend to have a high duty cycle and so are using maximum power a greater percentage of the time - so the difference will be less dramatic.

How long will it pull a double bottom plow? Fords were pretty useless for field work. Note the wheel spin in the video.

Plowing and cultivating with the 8N Ford Tractor

How far would my Ford Ranger get hauling 2 tons of gravel in its bed? Silly question, isn't it?

Rather than doing all his fields at the same time, a farmer might need to do part of the fields each day over a more extended period, but that could work.

This statement suggested that with some modification of field work schedule, the electric tractor could be used for field work. Which is probably true, if your equipment and fields are small enough. I was wondering how small? And will it pull a 2 x 14 plow at all?

Rather than doing all his fields at the same time, a farmer might need to do part of the fields each day over a more extended period, but that could work

I was thinking that it was a statement by someone who does not know much about farming.

So much of farming is weather dependant. You need to do things when you need to do them and sometimes the weather only gives you a small window of opportunity. It is why during some times of the year, like hay baling, the work can be 20 hours a day.

That electric tractor cannot run off those solar panels, it would need the batteries charged overnight for the claimed 1+1/2 hrs light work. By using the batteries for the full charge and only an hour and a half, you will destroy them in a year.

"By using the batteries for the full charge and only an hour and a half, you will destroy them in a year."

Poor application for PbA altogether - the high load on a small reserve exacerbates the Peukert effect as well as deep discharge. Lead-acid is really only good for well-maintained low-load-to-reserve stationary power.

"You need to do things when you need to do them and sometimes the weather only gives you a small window of opportunity. It is why during some times of the year, like hay baling, the work can be 20 hours a day."

Too many bad memories of hours on end of 100% exertion trying to get the hay in before it got rained on and ruined.

This is partially a problem of monoculture and large acreage to few farmers. If the land were planted with different crops that didn't all get ripe at the same time, and smaller acreage tended by a larger number of farmers it'd be less of an issue.

...excepting that every WWII submarine ran on PbA batteeries when submerged, and alot of mining equipment has/does as well. Forklifts?

Submarines don't have to worry about weight and it was probably all they had at the time - when you're desperate you'll make do. Wasn't it you who were talking about the need to bypass dead cells?

Submarines in WWII

"In World War II they were basically surface ships that could travel underwater for a limited time
...
High surface velocities and long ranges were attained with strong diesel engines, but these rates were severely reduced underwater, where they relied on electric motors powered by relatively short-lived storage batteries."

Not really aware of any mining equipment that does except the little slow speed shuttles...? Forklifts are not really heavily stressed perhaps 10 - 15 horsepower and use a teensy fraction of that during most of their operating cycle - the extra weight is useful for ballasting against the load they're picking up.

You're not really winning me over with those examples - can you imagine the advantage if US subs had been equipped with high power, high density NiMH?

I recall that Swaziland developed a cheap walk-behind tractor for peasant farmers. It didn't sell. It took too much of the farmer's time.

Instead, farmers paid contractors who drove giant double-wheeled John Deeres and who worked twenty hours a day in the ploughing season. They would plough a field in an hour or so.

As Hide_Away says, when you gotta plough, you gotta plough.

Well, the primary factor in how "green" one is is the level of income one has. Environmentally conscious high-income earners who do their utmost to save the planet do far worse than the low-income earners who couldn't give a toss about what happens to the environment. So, one should perhaps consider this reform: a maximum income. 2800 euro a month seems like a good start since that's the upper income bound of the academic, though it could perhaps be lower than that if the expense of education could also be brought down. While the good life has been associated with a high income, that needs to somehow be reconsidered in the face of limits to growth. And one has to wonder whether how much truth this money fixation has actually had to it, given that the subjective perception of happiness has not increased since the 1970's, and a significant minority of the population are taking anti-depressive medication.

My preference is stability of income. We don't need a lot to live on, but we need to know it will be there, otherwise, to be on the safe side, we must get 'more' but where does 'more' end, and what. precisely, is one willing to do to get that 'more'?

Oh father, dear father, please don't send me back to Iraq, we don't need their oil for a good life like that!

http://www.forbes.com/sites/jamesgruber/2013/03/23/japan-is-the-real-cri...

'Forget Cyprus, Japan is the real crisis'

Great article and well cited reasons why Japan should be looked to as the economy in the worst shape from a debt perspective, and their intention to QE their currency to higher inflation as a way out deflation.

Also, scroll down to a graph showing money velocity in the US which is at a historic low.

Perk,

Just taking a stab at this, but I think it's going to be hard for any central bank or government to stimulate any meaningful inflation, though the linked article, and many others like it, have been worried about this for some time.

The problem, as I see it, is that inflation needs to be understood in term of particular asset classes. In order for anything to inflate there needs to be a lot of money (all fiat/paper at this point) chasing after too little asset. U.S. stocks circa 1998/98, U.S. housing circa 2005 are two that come to mind. These assets classes inflated into bubbles while the CPI remained relatively tame. It's still relatively tame, but as an example of my idea in current time you have gasoline, diesel, and heating oil as an asset class which is inflated today (though in this case for more basic supply/demand reasons, it is still high amounts of money chasing small amounts of asset). I'd say the medical industrial complex is another place where this analysis applies today.

The kicker, though, again IMO, is that actions of the central banks/governments which are intended to place money out into the markets as credit (for business loans) are instead being routed to the rather shadowy derivatives markets, which are still largely global and opaque. In order for there to be general inflation that money needs to find it's way into the real world. If it did so we'd see overall inflation (lots of dollars chasing few assets), but so long as the money flows into the greatest inflationary bubble of all time, derivatives, I think we won't see too much in the day to day markets which most folks are familiar.

Certainly not a scientific economic theory on my part, just my observations over the last few years. Just a thought to add to the pot.

The kicker, though, again IMO, is that actions of the central banks/governments which are intended to place money out into the markets as credit (for business loans) are instead being routed to the rather shadowy derivatives markets, which are still largely global and opaque.

Yes, part of that article is about how US banks are not lending out QE and instead investing as you describe, and this may go a long way to explain why inflation has not so far occurred (via QE's). Whether the same will happen in Japan is anyone's guess.

While I agree that it is clear and publicly stated that FED money is going into the derivatives market,i.e. Mortgage Backed Securities, I don't think these securities are as shady or as opaque as they were prior to the bubble breaking in 2008. This approach is a useful tool for lowering interest rates but that is different than simply giving a loan to anyone without documentation like was down in the lead up to the housing bubble bursting. From personal experience, loans are not being given out without extensive and even redundant and painful documentation requirements. If anything, mortgage companies are going too far in the other direction as far as being conservative.

Anyway, the assets that are being pumped up now are both stocks and bonds. That is why I think the current or soon to be bubble is actually scarier than the last stock bubble since nothing is safe and everyone will be crushed simultaneously.

However, I am not pretending to predict when this most recent bubble will collapse. I have learned the hard way over the last few years that a bubble can go higher than what some people think is reasonable.

Agreed some of the more recent reforms have shed some light into some of the recesses of the derivatives markets, and the Fed's activities are somewhat more transparent now, but I think that at best one comes up with about, let's say, some $20-$25 trillion, when trying to account for all the U.S. bailouts and QEs to date which the Fed has undertaken. So let's just guess at another $20-$25 trillion by the other central banks of the world. I'm just kind of extrapolating from Nomi Prins' It Takes a Pillage and other sources.

Even $50 trillion is a very small fraction of the global derivatives market. I don't think anyone has a good grip on it's real nominal value, but a common figure seems to be about$500 trillion. Give or take a hundred trillion or so.

That's an awful lot of money with little supervision. That is the realm of not just legitimate banks and institutional investors, it is also the realm of shady hedge funds and criminal organizations. It is the area where a lot of activity occurs which is still in the shadows to a large degree. It's where The Whale got in trouble on behalf of JP Morgan. It's still a largely unregulated black hole.

So far as stocks and bonds as inflationary asset bubbles, I'm with you there. Where, and exactly how, and certainly exactly when, the next major financial tremor will start, and how far it will spread, is anyone's guess, but I think it's safe to say it ain't gonna be pretty. Personally I think that is more of a threat of precipitating the collapse than either PO or AGW at this point.

Actually, it is 1000 trillion with real claims on about 140 trillion.
Someone is going to get burned.

One of the questions brought up in the DB yesterday was: what are the energy differences between the different crudes, for instance between condensate and light sweet crude?

At first, I assumed this would be an easy thing to answer since once you know the API of a crude oil, you SHOULD be able to determine its energy density, since the equation for API is API=141.5/SG-131.5, where SG(specific gravity) is the relative density to water at 60 deg.F).

In other words, the API is just a comparison of the density of an oil to the density of water, distorted by a couple of odd numbers. And since there is a strong correlation between the MW of an oil and its energy content, and since the energy content of every oil is surely known, how hard should it be to find such a graph?

Well, I was wrong—despite searching all over the Internet I could not find a single graph of the relationship between energy content and API “gravity”. It isn’t that there aren’t a lot of API values published for an endless number of different crudes, it is just that there are never any heat content values published for those same specific crudes.

However, I did find a site that gives BTU values and API values for wide range of Fuel Oils, from Grade 1 (API max. of 45) through Grade 6 (minimum API of 8). The link below is to that site:

http://www.foodtechinfo.com/Why_Gas/Fuel_Oil.htm

And by searching very hard I was able to fill in a couple more points at the higher API end of the graph with, for instance, 3 different heating values for gasoline at an estimated API 60 and an API of 80 for C5 pentanes, which I understand would be the lightest MW component in Condensate.

So below is this graph which attempts to simulate the relationship between API and heat content for Crude Oils, but constructed using Fuel Oils instead (I am assuming the people who know more about this will correct me if I am wrong):

Keeping in mind (as I understand it) that WTI is around 39 API , and that Brent is around 35 API, and that gasoline is around 60 API, then also from my understanding, API’s between 45 and 75 are considered condensates. Using the equation from the graph, this suggests that increasing the average API of US crude from, say, 40 API to 50 API would decrease the average energy content of US crude from about 142,000 BTUs to about 135,700 BTUs, for a roughly 4.4% decrease in energy content.

Of course, the problem is, we don’t know how much the average API of US crude has actually changed.

That's a nice graph. Guys at work could do this in their sleep for nat gas, but we don't do energy of blends past C9s routinely.

Some energy values (may be dups of what you've found):

Here is great list of crudes and their API values:
http://en.wikipedia.org/wiki/List_of_crude_oil_products

Elsewhere on Wikipedia - Heat of combustion:

At a constant volume the heat of combustion of a petroleum product can be approximated as follows:

Q_v = 12,400 - 2,100d^2.

where Q_v is measured in cal/gram and d is the specific gravity at 60 °F (16 °C).

Specific heat:

The specific heat of a petroleum oils can be modeled as follows:[21]

c = \frac{1}{d} [0.388+0.00045t],

where c is measured in BTU/lbm-°F, t is the temperature in Fahrenheit and d is the specific gravity at 60 °F (16 °C).

In units of kcal/(kg·°C), the formula is:

c = \frac{1}{d} [0.4024+0.00081t],

where the temperature t is in Celsius and d is the specific gravity at 15 °C.

Yes, I did look a a couple of those pages, epecially the Wiki page, but again the problem was that I couldn't find both an API and a heat of combusion for specific crudes.

However, I will say tha that the Wiki list of crudes is fascinating from the standpoint that at least 10 of them are considered condensates. Eagle Ford isn't alone.

Thank you for these posts!

What I am most interested in is that it appears quite likely that we have seen virtually no post-2005 increase in global 45 API and lower gravity crude oil production.

Following are C+C production numbers for the 12 OPEC countries and crude oil production numbers for the same countries (compiled by Ron Patterson). The difference between the two would be estimated condensate production.

OPEC 12 (2005):
C+C: 31.8 mbpd
Crude: 30.7
Est. Condensate: 1.1

OPEC 12 (2012):
C+C: 32.9* mbpd
Crude: 31.1
Est. Condensate: 1.8

Implied increase in OPEC 12 condensate production: 0.7 mbpd

*Based on first 11 months of 2012

Let's assume that the OPEC 12, accounting for 44% of Global C+C in 2012, are representative of global C+C production, which would imply that the global increase in condensate production from 2005 to 2012 was on the order of 1.6 mbpd (pretty much accounting for the 1.7 mbpd increase in global C+C production). Given the large increase in US condensate production from liquids rich gas plays, this is probably a conservative estimate.

In other words, it appears quite likely that virtually all of the post-2005 increase in global liquids production is coming from natural gas sources and biofuels. So, if Peak Oilers are delusional wackos, why was there no material increase in global crude oil production for seven years, despite a doubling in global crude oil prices?

One should also subtract out the solid oil production (API below 11) as well IMHO.

Alan

Many modern refineries can process 11°API oil into products, notably the ones on the US Gulf Coast. A lot of Venezuelan and Mexican oil is of about that density, and much Canadian oil is even heavier.

The interesting thing about it is that a refinery can take 100 barrels of extra heavy oil and turn it into 110 barrels of much lighter products. However, the US government will account for the extra 10 barrels as "refinery gain" and credit it to US oil production, even though the oil actually comes from Canada, Mexico, or Venezuela.

Yes, but I am not so sure any more that it is so much an attempt to credit the refinery gain to US production (to deceive, so to speak) as it is to account for US products refined. Because if you think about it, crude+refinery gain is just products, so from the EIA's standpoint it may be more about showing where the products come from. Anyway, just a thought.

Also, I don't know if this is true, but read someplace that some refineries are now so complex that they can turn virtually all of the crude, even the heaviest, into gasoline. So making gasoline is no problem. HOwever, as I understand it, refineries are not molecular weight builders, they are molecular weight reducers, in which case it becomes almost impossible for a refinery to produce much diesel from condensate. Anyway, that is the thought that has occurred to me, which is why I thought looking at diesel prices might be an indicator of refinery problems in making diesel

If US crude has steadily been getting lighter, then one might see it in the API of crude going into US refineries, and in fact there has been a slight increase in API of ALL oil going into US refineries, as per link below:

http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=MCRAPUS2&f=M

However, from a basic plateau level of 30.01 in Jan. 2009, the API has only risen to 31.32 as of Dec., so only a pretty small increase in API of just 1.31, which from the chart above isn't a big increase to the right. However, this is API of all crude, including imports, and higher heavy crude from Canada could be softening the impact of increased condensate for the US.

One other possibility might be to look at diesel prices vs. gasoline prices, since it probably isn't as easy to make diesel from condensate as gasoline. And as the plot below shows, there might be something here, since diesel prices not only continue to run ahead of gasoline prices, put are much steadier. Of course, some of this could be a higher world demand for diesel. So as usual, it is hard to detect small changes from all the noise.

Wt – Actually one could argue that higher oil prices have led to increased NG production. As you know I’ve been chasing conventional NG targets. But not just any NG fields: only those with a high condensate yield. Dry gas reserves have never been viable in our biz plan. A well producing 5 million cf per day nets me about $12,000/day. A well making 5 million cf per day that has a 50 bbl condensate yield per million cf nets me$26,000/day. And that’s getting only $80/bb for the condensate. An even bigger factor in condensate increases has to be the huge increase in LNG production in foreign fields. We’ve had many NG fields produced with 100% of the gas flared in order to just recover the condensate. As NG prices rose it gave even more incentive to develop such formerly stranded NG and condensate reserves. Most of the conventional fields left to develop are primarily NG. And those with high condensate yields would be the focus. Exact numbers of this transition to lighter oils may be a difficult to compute but the dynamics leading a higher average gravity seems indisputable. The only significant counterbalance maybe increased development of heavy crudes in Venezuela and elsewhere. But again what is interesting is that the price signal--Brent going from an average of$55 in 2005 to $111 plus in 2011 and 2012--certainly produced an increase in production of liquids derived from natural gas and in biofuels production, but apparently no material increase in 45 and lower API gravity crude. So, why no material increase in 45 API and lower "Black Gold, Texas Tea?" Methinks that the "Peak Oil is Dead" celebrations might be a tad premature. Actually, if you think about it, it can almost certainly be argued that we are producing even LESS API-45-and-lower crude from the standpoint that it is now known that a lot of what is being passed off as crude is mostly condensate, ala Eagle Ford. I mean, if even the RRC couldn't tell, how would any other agency know? For instance, RBN Energy blog for 2/20/2013 stated: "The “official” score keepers of the Eagle Ford production data are the Texas Rail Road Commission (RRC). The latest RRC statistics tell us that January to November 2012 Eagle Ford production averaged 340 Mb/d of crude and 72 Mb/d of condensate or 17.5 percent condensate. Most observers including the RBN team believe that these numbers do not reflect reality." As it turns out, we now know (thanks to EOG) that it was more like 70%. So maybe, in the end, there isn't any way of actually knowing what is really happening, at least not from the official numbers. Elmo – Here’s the complication. Essential whether the liquid hydrocarbons produced from a well are classified as oil or condensate isn’t determined by the gravity of that liquid but by the classification of the well. Two wells may produce a liquid hydrocarbon of the save gravity but if one well is classified as an oil well then tit’s liquid production is classified as oil. If it’s a gas well then it’s classified as condensate. From an official TRRC hearing: http://www.rrc.state.tx.us/meetings/ogpfd/ogpomisc/documents/03-42323.pdf Oil & Gas Docket No. 03-0242323 Page 3 “There is no statewide rule with a specific definition of “crude petroleum oil”, apart from the explanation of what shall not be construed as “crude petroleum oil.” According to the Texas Natural Resources Code § 86.002(1) “ ‘Oil’ means crude petroleum oil.” If a well produces less than one barrel of oil per 100,000 cubic feet of gas the Commission classifies it as a gas well. If the well produces more than one barrel of oil per 100,000 cubic feet of gas the Commission classifies it as an oil well and the gas produced from it is considered casing head gas under Rule 79.” And to cloud the issue more: BTW a PVT is a pressure vs. volume vs. temp analysis “If a well fails the requirements on Form G-5 to be considered a gas well, an operator may present evidence from a PVT (pressure, volume, temperature) test conducted on the produced hydrocarbons. If the PVT test shows that the hydrocarbons in a reservoir at that time comprise more than 100,000 cubic feet of gas per barrel of hydrocarbon liquid, the Commission may administratively classify the well as a gas well for a certain period of time. If, due to pressure depletion, the reservoir later contains less than 100,000 cubic feet of gas per barrel of liquid, the Commission will administratively reclassify the well as an oil well.” The Eagle Ford wells are classified as either oil or gas wells depending on the gas/oil ratio. While some wells may be classified as oil wells and thus their production counted as “oil” they may have the same gravity as wells classified as gas wells and thus producing condensate. Understanding how the TRRC works is not for amateurs. LOL. There are consulting companies in Austin make a good living helping even experienced operators to work their way through the TRRC regs. The classification of a well as an oil well vs. a NG well is not a trivial matter. It has very significant implications I won’t go into right now. Understand that 70% of EOG's EFS production may be classified at condensate but another operator's EFS wells may only be producing 30% condensate and 70% "oil". All depends on how those wells are classified. Hi TODers, Was this article discussed on a previous DB? (I didn't see it when I searched. Actually, I don't see where the original study is available either, so perhaps I'm asking too soon...) Comments? QUOTE: a new study finds that it is technically and economically feasible to convert New York's all-purpose energy infrastructure to one powered by wind, water and sunlight (WWS). The plan, scheduled for publication in the journal Energy Policy, shows the way to a sustainable, inexpensive and reliable energy supply that creates local jobs and saves the state billions of dollars in pollution-related costs.ENDQUOTE I guess they don't count the cost of manufacturing all those EVs? I believe that it is technically feasible, but I don't believe it is economically feasible and I don't believe people would put up with what I would expect to be quite a few more grid disruptions from all of that intermittent power. I am acquainted with Mark Jacobson, by the way. I find him to be a very reasonable person, but on the face of it this looks like pie-in-the-sky. Quebec has 25 GW of undeveloped hydro. Build them with more turbines and add turbines to existing dams (Canadian hydro has 10% more capacity factor than US hydro). Add lots of wind (on & off-shore), solar PV and pumped storage AND significantly increase energy efficiency, and I can see NYS going fossil free. Alan " I don't believe people would put up with what I would expect to be quite a few more grid disruptions from all of that intermittent power." New York is a major part of the Eastern Interconnection, they don't (and won't) have their own grid as Texas does. New York is as connected at the energy hip to surrounding States and Canada as Germany is to its neighbors, even more so. While the State may dream of becoming a net WWS producer, even enough to provide much of their transportion, they're still part of a bigger scheme. At least they seem motivated. Aniya – Yes but it seems to make the case for economic viability by spend the capita we currently use for energy to instead build out the alts. Rather simplistic and meaningless IMHO if that a correct characterization. Obviously we can’t simultaneously stop paying for the existing energy sources and convert to alt sources. Over many decades a transition in such a direction could be made. But you can’t give up fossil fuels on Day 1 and use that money to start building the alts on Day 2. I have scanned the paper looking for the estimated capital costs, but I haven't seen it. Have you come across a number? Obviously, that's the rub. The capital costs are going to be way up there. Thanks. The "costs" (perhaps better to think in terms of energy/fuel, labor, material input and transport - at least, it seems more to the point than money, which can be printed...although I suppose that's what y'all mean...) are the real issue, it seems, plus the future costs (maintenance) and feasibility (anything not already covered in costs. like perhaps the requirement for a functioning FF infrastructure in order to...manufacture, install, maintain...?) Anyway...I need to look up to see if these are the same authors that wrote the Sci Am piece, which I believe Gail (?) responded to in an article. Last quarters GDP growth was basically zero, yet the stock market seems to think only good times are ahead. For instance, the Index 500 has now surpased those 2 earlier Mount Everests of 2000 and 2007. http://finance.yahoo.com/echarts?s=VFINX+Interactive#symbol=vfinx;range=... Meanwhile, the end of the 1at quarter is almost here, although we won't get the first estimate of this quarter's GDP until the end of April. Yet already things are looking a little shaky. For instance, this week Fed. Ex. reported a big drop in earnings and revenue as customers seem willing to go slower and longer as long as they can save some money. "FedEx (FDX) stock fell around 7% Tuesday after the company reported Q3 earnings for the fiscal year ending May 2013. Reported EPS fell 28% year over year during the quarter despite revenue growth of around 4%. Continuing weakness in the FedEx Express segment due to shifting customer preferences for slower and lower yield offerings more than offset growth in Ground and Freight segments." And the same with Darden Restaurants: "Darden Restaurants' (DRI) third-quarter net income dropped 18 percent, as it dealt with soft sales at Red Lobster". Me thinks the cost of gasoline may be sucking more money out of peoples pockets than analyists want to believe. In a previous Drumbeat, I made some comments to the effect that the attitude of native people actually living in the oil sands region toward oil development was somewhat less negative than native people living outside of it. Here's an example of a native tribe in oil sands country. Fort McKay aboriginals take ‘good with the bad’ of the oil sands Jim Boucher, chief of the Fort McKay First Nation near Fort McMurray, hasn’t been shy over the years about taking to task oil sands developers over their environmental practices. But Chief Boucher also highlighted his band’s financial successes from the oil sands, which transformed the Fort McKay First Nation into one of Canada’s aboriginal business powerhouses, and expressed gratitude for its strong relationship with industry. The 700-member community, 65 kilometres north of Fort McMurray, owns the Fort McKay Group of Companies LP. With$100-million in annual revenue, it employs 4,000 people — aboriginal and non-aboriginal — and provides services to many of the top oil sands developers.

The Fort McKays could be oil barons in their own right. Their reserve in the heart of the Athabasca oil sands basin sits on top of two billion barrels of oil.

For the Fort McKay nation, involvement in the oil sands began in the mid-1980s and had to do with the loss of its traditional way of life, based on hunting and trapping.

Under pressure from activists not unlike the environmental organizations that are now seeking to shut down the oil sands, the European Parliament implemented a ban on fur imports that devastated the economy of the people of Canada’s North.

“The market for our furs dried up. Prices dropped. So all across the country, and in Northern Canada, aboriginal people lost a livelihood,” he said. “We had a choice: Going on welfare, or work. And we felt that it was necessary for us to get into the mainstream economy and fully participate so that our people would have an opportunity to make a living.”

The Fort McKays, of Cree and Dene lineage, started with a janitorial contract, ploughed profits back into the business, and now provide a vast range of services in heavy equipment operations, warehouse logistics, roads and grounds maintenance, bulk fuel and lube delivery, environmental services and land leasing operations.

For the Fort McKay band, the next big leap is to become an oil sands producer, and it periodically reviews its options. But its preference is to wait until technology has progressed so the environmental impact can be held to a minimum.

“Right now our intent is to leave that to the future generations,” Chief Boucher said. “It will be their legacy.”

Bottom line: Their traditional way of life having been destroyed by the environutbars of Europe, this Indian band switched to a less traditional lifestyle of heavy equipment operations and warehouse logistics, with becoming a major oil sands producer an option for the future....

Rocky – “Right now our intent is to leave that to the future generations”. Except, of course, for the $100 million per year the 700 members of the tribe now receive from the oil sands. But I don’t begrudge them that…great to see it going to them instead of the govt. If only our tribes had such a deal. The Comanches, Kiowas and Apaches are doing very very well with their casino operations.....I call it "the red man's revenge". What they are leaving for future generations is the 2 billion barrels of oil under their reservation. They would have to strip mine the entire area of the reservation to recover it and that doesn't appeal to them. However, future generations may disagree with them, or technology may improve, so they are leaving their options open. The thing about owning the mineral rights is that they can stop development by just not leasing it to anybody. They are quite okay with strip mining the white man's land, though. They are even willing to operate the power shovels and dump trucks to do that. Their traditional way of life having been destroyed by the environutbars of Europe A "traditional way of life" that scales with exponentially increasing demand is an oxymoron but, hey, applying brakes anywhere in the system is just for environutbars. Exponentially increasing demand for fur coats in Europe? I am talking about fur trading here, which has been the economic mainstay of native people in northern Canada for centuries since Europeans arrived, and was important to them even before that since they used to trade furs among themselves. Fur bearing animals are a renewable resource as long as you don't trap too many of them. The EU has largely wrecked this trade because of their prohibitions on imports of fur from wild animals caught using traditional methods - despite the fact there is still a huge fox and mink farming industry in Europe. It's all very selective in its thinking. Everybody has to be civilized like us, or else. They apparently don't know or don't care that the native people in northern Canada don't have any other way to make a living. They can still hunt and fish for food, but that doesn't pay for ammunition for their rifles or fuel for their fishing boats. The Europeans only care about the poor defenseless furry animals and don't give a rat's backside for the people. Fortunately the Ft. McKay tribe lives in the middle of the oil sands and has its new vocations of "heavy equipment operations, warehouse logistics, roads and grounds maintenance, bulk fuel and lube delivery, environmental services and land leasing operations" to replace fur trapping. When I was working up there, they were just getting started providing janitorial services to oil companies, but it seems to have gone very well for them since then. Thanks for sharing that article RMG. It jibes with a book I just read. Kid wanted to be a trapper. (Now I was raised to believe this was about the most evil thing one could do, along with being a rancher or an oilman, or else republican, religious or in the military, but that's a whole 'nother story) Poor defenseless fuzzy animals! Anyways, he did trap full time for a number of years... until the fur market collapsed. Just as your article mentioned. PETA and the anti fur movement reduced the value of fur hugely. Since this guy was an educated american kid, he just went fishing and hunting more and gave up trapping. Great example of unintended effects, or even blowback. Disemploy the trappers, and what do you get? In this case oil sands services. A good argument for humans acting with humility. Forming my own ideas about what's evil or not, and how to get along in this world, has been a satisfying and disillusioning experience. Multiply by 7 billion to cover the lot of us. Trapping can be sustainable and part of a healthy interaction with our planet. Just not by very many people. Trappers settled/opened up our continent. Ought to at least give them a little credit. I eat meat. I fish a lot. Not being a hypocrite matters to me. I don't wear fur coats however. According to Trapping Today, the North American Fur Auction in Toronto saw sharply increased prices based on a lot of interest from China, Korea, Hong Kong, etc. Perhaps it is time to get into the business again. New highs were achieved for Fisher, which saw the traditional buyers having to compete with Chinese retail manufacturers for the first time. Prices increased 50% to 70% over February 2012 levels. The average price was$156.67 with the Top Lot sold for $350.00 Close to 100,000 Can/Am Sables also saw an incredible price increase over last February of 55% to 60%. Again, the traditional buying markets of Russia and Greece had to compete with Hong Kong/China, which dominated this sale. However, Russia and Greece still took their fair share of all of the goods offered. The average price was$144.29 with the Top Lot sold for $650.00. Some Drudge Report headlines: Cyprus faces last-ditch chance to save economy... Limits ATM withdrawals... Pain mounts for big bank depositors... Brits advised* to withdraw their money from Spanish banks... *By UK Independence Party Around 70 per cent of Cypriots are employed in the financial services and banking sector, a number that dwarfs the 20 per cent working in tourism. “People are worried not just because they could lose their savings but because they could lose their jobs too,” said Ioanna Constantinou, 24, who works in the financial services industry in Nicosia, the Cypriot capital. “I think a lot of people will be out of work soon and looking for jobs. The young people, especially, will go abroad because you can’t live with this level of uncertainty,” said Miss Constantinou, who like many Cypriots attended a British university. “The banking sector is finished, we have lost all credibility – who is going to want to bring their money to Cyprus now?” The system that these people depended upon has suddenly failed them and now they stand alone looking into the abyss. I think we should all take note as this is our future too. After talking to Japanese officials in Tokyo over the last few days, I have the strong impression not only that they are ready to fight, but also that they expect to win, and furthermore that conflict may come at any moment. "They are sending ships and even aircraft into our territory every day. It is intense provocation. We're making every effort not to be provoked but they are using fire-control radar. This is one step away from conflict and we are very worried," said a top government official. Wow! The World's three biggest economies going to war with each other. Move over Cyprus (or should that be North Korea). In fact between Japan's own failing nuclear industry (and economy), North Korea and China things are looking a little unfavourable in that region. So many threats and fault lines, it will be near impossible to see the knock out blow coming. Because China, Japan and U.S. could all shoot missiles into each others' countries, I am thinking the U.S. would be afraid to intervene. Cyprus focus moves to Brussels as agreement remains elusive The main question surrounds the future of the island’s largest lender, Bank of Cyprus. If unsecured deposits (above 100,000 euros) at all Cypriot banks are taxed then large savings at Bank of Cyprus are likely to be taxed between 20 and 25 percent. If the levy is not imposed on deposits at other lenders, the haircut for Bank of Cyprus customers will be much larger. The option of a full bail in of Bank of Cyprus depositors is still on the table. As with the Popular Bank of Cyprus (Laiki), which is to go through a resolution process, the full bail in option could lead to deposits above 100,000 euros being lost. The only compensation for unsecured depositors will be shares in the “good” bank that will be created by a possible merger between the "healthy" Laiki and Bank of Cyprus entities. When asked by Kathimerini how the Cypriot economy will survive if all company and personal deposits above 100,000 euros disappear from the country’s two biggest lenders, the EU official said: “Unfortunately, Cyprus’s choices are between a bad scenario and a very bad scenario.” An update from Sec. Salazar. I figured I should post the story since the MSM might not care to highlight President Obama’s support of the oil industry. The Department of the Interior last week held a 38 million acre oil and gas lease sale for the Central Gulf of Mexico that drew$1.2 billion in high bids. A total of 52 companies submitted 407 bids on 320 tracts, covering more than 1.72 acres. The sum of all bids received totaled $1.6 billion. I’ll save you the trouble: 96% of the tracts offered received no bids. And many of those were in the Deep Water trend. There certainly are fields left to be discovered. But there have been over 170 fields developed in the Deep Water trend alone and less than 5% of the tracks in this latest sale received even one bid. The shallow water shelf is well past its prime representing a small percentage of current offshore oil production. The DW GOM gets some of the credit for our uptick in domestic oil production. How much help we should expect in the future is questionable IMHO. This sale builds on a number of recent offshore lease sales, including a November 2012 sale that made more than 20 million acres available and a sale last June that made more than 39 million acres available. I’ll do the math for you: that’s about 100 million acres of federal leases offered by President Obama to the oil patch in less than 12 months. Adding that to the 400+ offshore drilling permits approved by the POTUS just since the Macondo oil spill those suggestions from the R’s claiming the president is standing in the way of US energy development are truly laughable IMHO. The president may not have approved (yet) the border crossing section of the Keystone pipeline. But the US has imported more oil from Canada on President Obama’s watch the ever before in history. An interesting side note: the feds have raised the minimum bid for Deep Water tracks to$100 per acre. I don’t recall the last time I got an onshore lease from a private landowner for less than $150 per acre. And one could compare that to the$3,000 to $5,000 per acre prices paid for some Eagle Ford Shale leases. BTW the typical royalty on fed lease is 1/6. Onshore private leases typical carry a royalty closer to ¼. And those onshore private leases are burdened even more by severance tax. For instance a company drilling an oil well on a private lease in Louisiana with a 25% royalty will also pay the state about 12% severance tax. So the operator gets 63% of the oil produced while that same company would get more than 80% of the same oil from a fed DW lease. Heck of a deal, eh? And to think some folks say President Obama and the govt aren’t friendly towards of the oil patch. Ha…I say…ha! ... covering more than 1.72 acres. left out a "million" there RM. http://www.boem.gov/Oil-and-Gas-Energy-Program/Leasing/Regional-Leasing/... one can see the bidders, prices, etc. if interested... Was surprised to see Eugene Island tracts, (they've been poking holes around that for a long time), but at only$52/acre for some.

Mississippi Canyon tracts went for anywhere from $3,360 to$107 / acre.

Uh Oh!

Based on a letter to clients over the weekend, it appears Dutch megabank ABN Amro is changing its precious metals custodian rules and "will no longer allow physical delivery." Have no fear, they reassuringly add, your account will be settled at the bid or offer price in the 'market' and "you need to do nothing" as "we have your investments in precious metals."

Yeah, we've got your investments...right here.
Love one of the comments:- "It puts the paper in its wallet. If it asks for gold it gets the hose again."

http://www.zerohedge.com/news/2013-03-24/another-gold-shortage-abn-halt-...

While Northern european politicians point the finger at Cyprus, the fact is that the IMF and the ECB have been in collusion as regards this whole bond/banking fiasco. Here is Karl Deninger's most recent take on the situation:
"
The latest...

A senior Cypriot official suggested late on Saturday that his government was not close to an agreement with the troika over a range of measures aimed at securing a 10-billion-euro bailout for his country.

“We are not in touching distance of an agreement,” the official, who preferred to remain anonymous, told the Cyprus News Agency.

Of course it's all the IMF's fault. And the ECB's.

Well, yes.

But the fault isn't now, that they're being "inflexible" and "ratcheting up the demand."

It was months and even years ago -- remember that when Greece was forced through its restructuring it was known at the time that Cyprus banks held Greek bonds, and it was further known that they were pledged to the ECB.

So the real question remains as it has since this entire charade began: Why is it that after refusing to haircut those bonds at the time Greece restructured it is now Cyprus' responsibility to deal with this when the ECB and EU generally knew damn well those bonds were not worth crap and yet did nothing about it?

I continue to be amazed that the government of Cyprus doesn't throw this straight back into the ECB's and IMF's face and tell them: "You knew damn well these instruments were worthless -- or nearly so -- a year ago, and in fact knew this was going to be the outcome a year or two prior to that! You were the ones who in fact demanded and got the restructuring in question. Yet you intentionally took, at par, worthless paper. You weren't tricked, you took it willingly and intentionally. It's yours.

NOW EAT IT."

Let the ECB decide -- either swallow or destroy their claim to a "monetary union." Let them make the choice; if they cut off the banks then they will precipitate an exit from the Euro, but the fact of the matter is that if you certify that something is good paper by accepting it while knowing full well it's trash you're just as responsible as is the party that tendered it to you, especially when you, as the recipient, caused it to become trash!

And while they're at it Cyprus should level criminal indictments along with letters of Marque and Reprisal against the entire body of the ECB and IMF."

http://market-ticker.org/

Cyprus bailout: Deal reached in Eurogroup talks

Eurozone finance ministers have agreed a deal on a 10bn-euro bailout for Cyprus to prevent its banking system collapsing and keep the country in the eurozone.

Reports suggest the deal will include a levy on deposits of more than 100,000 euros in Cyprus's two biggest banks.

The levy on deposits in Laiki (Popular) Bank - the country's second-biggest - could be as high as 40%, reports say.

The European Central Bank had set a deadline of Monday for a deal....

...All deposits under 100,000 euros will be secured. But for those with deposits of more than that amount in the country's two biggest banks - Laiki and Bank of Cyprus - the deal will come as a bitter blow, our correspondent says.

The percentage to be levied on large deposits in the Bank of Cyprus will be resolved in the coming weeks, Mr Dijsselbloem said.

One key element of the deposit tax, demanded by the IMF, is that it not require a parliamentary vote.

[bold mine]

Doesn't seem very 'democratic'. So much for a sovereign*, constitutional Cyprus.

*A sovereign state is a political organization with a centralized government that has supreme independent authority over a geographic area.[1] It has a permanent population, a government, and the capacity to enter into relations with other sovereign states.[2] It is also normally understood to be a state which is neither dependent on nor subject to any other power or state.

Money rules...

Reports suggest the deal will include a levy on deposits of more than 100,000 euros in Cyprus's two biggest banks. The levy on deposits in Laiki (Popular) Bank - the country's second-biggest - could be as high as 40%, reports say.

This will not go down well with Russia.

I remember reading somewhere that a state owned Russian bank would lose 1.2 billion euros and that was under the original deposit confiscation plan. Under the current agreement I assume that loss would now be far greater and possibly in the region of 3.8 to 9.6 billion euros in the worst case.

As Russia was deliberately targeted by the EU (and Germany in particular) I don't think it will go down well with Russia at all. It seems to be a very overt, provocative and belligerent act against Russia and I don't really understand why. Obviously there is something else going on below the surface which is creating tension between the EU and Russia. Syria?

Interesting geopolitics in the eastern Mediterranean. Our UK Channel 4 TV's economics guy Faisal Islam was in northern Cyprus (Turkey) yesterday standing by a stack of large pipes that will bring Turkish drinking water the 50 miles to the island. He took the opportunity to point also in the opposite direction to drilling rigs that will bring gas ashore to the Greek part of the island (the bit with the banks and the off-shore gas reserves). The Israelis were / are to be part of that latter development. Turkey has very recently made up with the Israelis.
And for good measure the Brits still have their big airbase on the Greek side. And the Russians still have a significant naval base in Syria. Hard to know where to place your money these days! Any bets?
And when is a Euro not a Euro? When you have it in the wrong country?
http://www.channel4.com/news/cypriot-president-to-meet-eurozone-minister...

EDIT Postscript. But we are OK up here in the north west Atlantic despite Spring having been postponed for a while yet.

UK gas supply pressure eased with arrival of tanker from Qatar

Only two days' worth of gas supplies in storage late last week as cold snap increases demand for heating and electricty

This sounds like a lot of bad mojo. If wealthy depositors cannot trust EU banks/govt's not to steal their money, they will probably transfer it to foreign offshore banks like the Caymen Islands, which will reduce EU bank funds and the situation just gets worse.

It might even be worse for some customers. Depending on which half of the bank they fall under they might lose everything but the guaranteed 100,000.

Not a good day to be a millionaire in a dodgy bank.

Careful U.S investors can spread their cash among multiple banks using a device call a CDARS 'Certificate of Deposit Account Registry Service - CDARS'.

Using CDARS is as simple as finding a participating bank close to you (local bank) and depositing your money with the bank. The local bank then spreads your money across several banks, ensuring that the amount of money in each bank is never above the FDIC limit. As part of the CDARS program, the consumer conducts business with only the local bank and receives one single statement that contains information for each account.

The price for this is a slightly lower (if possible) interest rate. Keeping a lot of money in any institution is unwise in normal times. These are not normal times.