Wednesday Open Thread

Cheers...and here's some stuff to chew on:

Schlumberger: US Oil Demand 21.642M B/D, Highest Ever in Week. (link) Update [2005-12-15 0:6:13 by Prof. Goose]: Link fixed!

Exxon: Oil demand to rise 50%...Energy industry can supply what's needed, company says. (link) Syriana talk. (link)

John Robb (Global Guerrillas): "Clear and Hold?"  The current US approach in Iraq is to clear areas of insurgent activity and hold them to prevent their return. This is a redux of a 20th Century counter-insurgency method called oil spots (a variant is strategic hamlets). (link)

US News and World Report (not necessarily a peak energy publication!!): The Big Chill, A winter fuel crisis of high prices and shortages could darken homes and factories. (link)

The Big Chill
A winter fuel crisis of high prices and shortages could darken homes and factories
By Marianne Lavelle
US News

Oliver Ryan, Fortune
Richard Rainwater made billions by knowing how to profit from a crisis. Now he foresees the biggest one yet.

The first link takes you to a story in US News discussing what may be a very bad winter, with commentary by Mike Ruppert (From The Wilderness).  Ruppert is on the outer edges of conspiracy land regarding 9/11, but he dead on right regarding Peak Oil.

The second link takes you to an article on the Energy Bulletin, from Fortune Magazine, which discusses Richard Rainwater's take on Peak Oil.  Rainwater is buying copies of Jim Kunstler's book in bulk and handing them out to friends.  Rainwater hopes that Jim is too pessimistic about Peak Oil, but Rainwater seems to be following Jim's recommendation to move to a small town (which by the way is precisely what Mike Ruppert is also doing).

Interesting story.  Rainwater reads a lot of energy blogs, so he's probably stopped here; however, I would doubt he's typed any comments since he doesn't do e-mail - he's a phone guy.

His problem is Simmon's problem and our problem - timing is everything. If the winter passes and oil prices drop into the 30's or lower, we'll be lumped in with the evangelicals who think Armageddon is just around the corner.

In his last Forbes 400 listing, Rainwater said, "Natural resources and oil have been good to me, but the big money to be made in those sectors is all over."  It's interesting how fast he's changed his mind.

The Fortune article quotes Rainwater as saying, "I wait for the blowup, then invest."  Any guesses on what he's thinking of doing, since he's already "long oil and liquid."

The Big Chill
A winter fuel crisis of high prices and shortages could darken homes and factories
By Marianne Lavelle
US News

I understand that high prices could push some people to lower their thermostat but I don't understand the rationnal behind shortage predictions. If you look at this week crude inventory:

It looks pretty healthy to me!

You're looking at oil.  It's NG that's in short supply
Ok but NG doesn't look that bad either:

Working Gas in Underground Storage Compared with 5-Year Range:

Well, I'm not the expert here, but aren't crude stocks somewhat irrelevant to a heating crunch?  Isn't refining capacity the limiting factor?  We burn fuel oil, not crude. Also, a relatively  small percentage of heating is accomplished with oil.  When it comes to heating, natural gas is the bigger concern, and North America is already in decline there, so that's where the shortage concerns come in.
Check the DOE/EIA page at for lots of information on distillate stocks, refining, imports, etc.  A quick scan of the numbers and graphs on that page seems to show that we're in slightly better shape now than we were a year ago, thanks in no small part to imports and what appears to be a relatively quick refinery recovery.

In general, I think Khebab has a good point, though--there's certainly a track record of people seeing higher prices and jumping to the conclusion that shortages and chaos of Biblical proportions are just around the corner.

The season I'm concerned about is next winter, not this one.  Between Iraq, China, India, the Caspian Sea basin, and another hurricane season, there are just too many unknowns for my comfort level.

Re:  Crude  Oil Inventories

As best that I have been able to tell, no one tracks crude oil inventories on the basis of quality.  For all we know, 100% of the recent build in crude oil inventories has been in heavy, sour crude oil stocks.  This would account for the considerable spread between light, sweet crude and heavy sour crude prices.

Goldman Sachs sticks by their prediction of $105/bbl plus oil, and that we're entering a 'super spike' phase that will last for years.

And in somewhat related news, the soaring price of NG has ConocoPhillips (#3 US energy company) and Burlington Resources (a leading NG supplier) in full on merger talks.,,13129-1922817,00.html

Can anyone explain the discrepancy between the Energy department and API numbers as posted at USA Today?  Hopefully the link works. 2FD%2D8132%2D451E%2DBE7D%2D96587BC10F72%7D

If not some quotes from the article.

"The Energy Department reported that distillate supplies fell only 100,000 barrels in the week ended Dec. 9. Separately, the API said they fell 3.54 million barrels. January heating oil rose 1.1 cents to $1.8475 a gallon on the New York Mercantile Exchange."

"Also, the Energy Department said weekly crude supplies rose 900,000 barrels, while the API said they declined 1.94 million barrels. Crude futures gained 8 cents to $61.45 a barrel."

"Gasoline stocks increased 1.8 million barrels, according to the Energy Department, while the API said they rose 412,000 barrels. Gasoline futures added 0.41 cent to $1.65 a gallon."

These are some pretty big differences.  A person who believed in conspiracies might think the U.S. government was padding the numbers to keep things looking good.

Err....shades of Michael Ruppert's postulated "Plunge Protection Team" at work?
Don't look behind you, but its another Peak to worry about.

Peak phosphorus


Current fertilizer production and use consume limited resources and harm the environment. At current extraction rates, reserves of phosphate rock that are economically recoverable with today's technology will last less than 100 years, and the reserve base will last less than 300 years

And give a link to:

Now there's a good reason not to use it in Iraq.  We're running out.
The downside is - if the USGS is "right" about the limited nature of phosphate, higher energy costs will collide with industrial demand and change the "economically recoverable" timeframe.  


Tom Whipple mentions Stuart and TOD in the Falls Church News-Press:

Can't find that Schlumberger demand link, PG. You have a title on that one?

But while I was over there I found IEA Sees World Oil Demand Growth Recovering in 2006. Recovering?
The Paris-based energy watchdog for the Organization of Economic Cooperation and Development forecast a 1.79 million barrel a day increase in world oil demand in 2006 - a 2.2% increase on the year.
Apparently, the world's been in a slump.
Here's the correct link to the SLB story on oil demand:

Thanks Mike.

That's not going to lower prices anytime soon, eh?
Compared with a year-ago, core-four demand was up 2.8%, or 442,000 b/d.
Nor have higher prices this year cut demand significantly. The only thing that did that was a hurricane or two (or three...). I'm getting that "inelasticity" kind of feeling again.
I think the resumption of demand growth will eventually wake people up... the only thing that stopped growth dead in its tracks were sudden spikes in prices due to an event.

People get used to paying price increases and move on to griping about other things. Clearly price isn't high enough yet.

Kunstler's feeling very pessimistic today.
So, victory [in Iraq] in any conventional sense that Americans understand this word is out of the question, and the President's use of it is his biggest blunder since the "mission accomplished" stunt of 2003. The [current] Iraq elections may succeed in establishing a legitimate government -- but then what? Will it govern for a month and a half and fall apart? The eventual likely outcome, as everybody knows, is civil war in Iraq, and perhaps a widening conflict with Iran on one side, Syria on the other side, and Saudi Arabia left to the Jihadistas. Elsewhere in the world, things will continue to blow up.
I'd like to disagree ... but civil war in Iraq seems just about inevitable to me too. And of course, the US has no exit strategy other than one of the "tail between legs" variety. We'll declare victory and leave. But when? I'm thinking the 2006 elections may re-prioritize things a bit.
(Following are excerpts from the Fortune article on Richard Rainwater, who turned $50 million that the Bass brother had into $5 billion.)

 "This is a nonrecurring event," he says. "The 100-year flood in Houston real estate was one, the ability to buy oil and gas really cheap was another, and now there's the opportunity to do something based on a shortage of natural resources. Can you make money? Well, yeah. One way is to just stay long domestic oil. But there may be something more important than making money. This is the first scenario I've seen where I question the survivability of mankind. I don't want the world to wake up one day and say, 'How come some doofus billionaire in Texas made all this money by being aware of this, and why didn't someone tell us?'"

 In August a friend gave Rainwater a copy of The Long Emergency, a dystopic view of the future written by ex-Rolling Stone writer James Kunstler, otherwise known for his passionate dislike of suburbia. Taking peak oil as a given, Kunstler argues that Americans have been "sleepwalking" through the end of a "100-year fossil fuel fiesta." The problem, he points out, is not that the world will run out of oil tomorrow, but rather that the lack of growth in oil production will wreak havoc on a global economic system predicated on perpetual expansion.

Rainwater doesn't completely buy into Kunstler's doom and gloom. "It's the Z scenario," he says. But at the same time, he worries that Kunstler isn't wrong enough, and he's been buying extra copies of the book and passing them around to the many titans of capitalism who are his protégés.

"I just want people to look out. 'Cause it could be bad."

I was going to make this into a separate post all on its own, (something like "Another ultra-rich investment sage jumps on the Peak Oil Bandwagon" but you guys beat me to it. Between Matt Simmons, Tom Petrie, Boone Pickens, and Richard Rainwater, who is going to be next.  When Warren Buffet jumps aboard, Wall Street will have a melt down.
You should still do that post, Bubba.
YES! "It's the economy"... Clinton's motto.
  It will be interesting to see,in a somewhat morbid way ,the reactions of the people who had the power to change ,or at least modifie the awful consequence,and destruction,of peak.I feel we still have time to cushion the worst of the impact on society,but only if we act now,with the same intensity and drive that got us on the moon

 My fear is of the same evil powerbrokers who are too busy looting the tresury,enriching their freinds,and smashing the social safety net in hopes of createing their ideological dream.

   I know there exists  wealthy elites that have the knowledge and power to literaly save our nation from the insanity of our current administration...

But finding one with the wisdom of T. Roosevelt..there is the problem

Hello Oildrummers, I'm one of the authors of the dKos Energize America plan. I was suprised it was discussed here, (why, I don't know, sometimes I am the dummy alluded to in some of your comments). Anyway, I cruised through your comments, some I agree with, others, not so much (like the breeding thread, I think that would be a hard sell, or perhaps if we taxed ED drugs 500% it would help). Where I could use help is in finding consensus forecasts of NG prices. At the moment I'm using the EIA, but the current price is already above the tables I'm using. I'm in the school of avoiding growth in NG consumption wearever possible, but if it will be abundant and cheap through LNG imports (which I doubt) it does provide some "cleaner" options. The EIA'a price forcasts don not support my position well, so if you've got any ideas, please let me know. Thanks, I fyou have ay other questions about the dkos plan, I'll try to answer then as best as I can. btower Any other imput would be appreciated.
Yup, preview is your friend.
I have a question.

Why did you call it "Energize" America?

Aren't we actually trying to "Re-energize" America?

The "Re-" prefix rhymes with Renewable.

The "Re-" prefix tells "them" its time to do something new, a "Reform" (Although I now loath that word given that Karl Rove has hijacked it, i.e. tort "reform"= letting the bad guys get away with doing bad, clean sky reform= letting more pollution into the air, tax reform= making the poor slobs pay more)

The "Re-" prefix tells "them" its time for a Revolution in the way we deal with energy problems.

Take a look at piece on "persuasion" and the importance of a single word.

As for NG (=methane =CH4), burning this stuff is not "clean". It still puts CO2 into the air AND it diverts scarce resources into building an LNG infra-structure instead of a sustainable infra-structure.

Conoco-Phillips-Burlington obviously owns a lot of Congressmen

(P.S. for those who already saw Syriana, what was the name of that "big" company? Remember? What kind of tanker did the militants try to blow up? Remember? It wasn't about crude. Its was about L-N-G.)

As far as the "re" goes, I'm not the "Message Strategist" of the group, but the discussions re. "re" went along the lines of it suggested re-hash, re-do, re-peat etc..  We wanted to create and energize not attempt to re-create something which doesn't exist at this point.  Blah, blah, blah... like I said words are not my strong point.  

No disagreement on the "unclean" nature of NG.  However, the majority of the proposed expansion of electric gen capacity in the near future is slated to be NG.  It is cleaner, less CO2, less Mercury, less SO2 per unit of output than straight coal.  In addition many of the proposals for distributed generating capacity and cogen facilities are NG based due to easy scalability, ease of meeting emissions regs and feedstock supply.  I'm not advocating for a switch to NG, primarily for economic reasons, but if it will be abundant and cheap in the future it must be considered as part of any energy plan.

LNG scares the pants off me.  I used to work in Boston Harbor, the Coast Guard clears all traffic in the harbor before the LNG tankers come in.  If that were to blow in the harbor the destruction would be unbelievable.  

LNG scares the pants off me.  I used to work in Boston Harbor, the Coast Guard clears all traffic in the harbor before the LNG tankers come in.  If that were to blow in the harbor the destruction would be unbelievable.

One of the MSM channels actually did a story on that from the terrorist angle --about how shorefront Boston will be taken out if one of the LNG ships blows.
It is interesting in a scary way that many Congressmen are pushing for more use of LNG in this country. You can't run a non-pressurized pipe clear across the ocean. Too bad.
I seem to remember something about problems with transportation of harvests out of LA when Katrina hit. Something about the Mississippi River being blocked. Anyone heard anything about this?
Ag commodity prices are recovering, but the midwest got hit pretty hard, prices dropped close to 20% in the Chicago markets.  The low prices combined with the fuel spike led some farmers to just leave the crops in the field.  The ports are back in action to a point, but three weeks down hurt the market.  
I don't see how anyone can predict the price of oil.  It's all speculation.  The printing presses are running in overdrive right now and all that money must go somewhere.  I'm guessing that those who are touting these high prices will benefit financially if the speculators figure oil is "the next big bubble".
I thought it was going to be gold and silver, but that has run out of steam.
Money is being added to the economy at over 8% a year, but somehow inflation is at 2% a year.  This is IMPOSSIBLE!  Where that 6% goes is the next bubble.
Watch around March of next year, when the FED discontinues the M3, this also happens to be the same week that Iran starts selling oil in Euro's.  Crash or hyperinflation, or both, that is the question.
Interesting.  Where does the 8% figure come from.  Can anyone offer an explanation?
Presumably M1 money supply growth, but M1 is a very narrow definition of money supply, M2 or M3 are probably more reasonable measures, they are growing at over 10%:

It's well worth spending several weeks reading the FSO site, lots of very useful information and explanations on financial and economic matters:

Also wise not to believe US economic statistics too much, especially: NFP (non farm payroll) jobs and other employment stats, CPI and other inflation measures, GDP. There is a series of articles explaining why here:
Do follow the links under the heading "A Primer On Government Economic Reports" top right of page.

The real joke is GDP, specifically the "GDP Deflator" which is a measure of inflation used to adjust the GDP statistic. It may surprise you that it is even lower than Core CPI! A fair rule of thumb might be: if official US GDP is below 2% increase then the US economy is actually in recession (if calculated properly).

I'm glad you posted this, as I too have been quite skeptical about US gov economic data. From what I have read, and from my own gut feel, I believe that such data has little or no credibility. All of these CPI indices, inflaters, deflaters, etc., have been politically manipulated to make the Powers That Be look much better than they really are.

Compare the official CPI of 2005 vs say 1969.  Then compare the price of a full-size car of each era (e.g. a 1969 Chevelle vs a 2005 Chevy Malibu) and see if the two ratios even closely resemble each other. A typical magazine in 1969 was about $0.50, but today it is over $3.00, a six-fold increase. Don't even let me get started on housing prices! Yet the CPI consistently shows an inflation rate the very poorly relfects reality.

I don't think this is by accident.

One should totally ignore US government economic statistics. They are about as reliable as reports of progress in Iraq.

I would say better not to ignore the US govt stats but to be aware of how they are distorted. They still have access to more data than anyone else and do process it in a reliable way.

The distortions are definitely not by accident. One of the prime movers for distortion is to reduce social benefits, that started well before the current US administration. It's quite surprising how much oppression and disadvantage that 'plebs' will tolerate before they rebel, but when they do I will be there with them.

Some odd specifics on CPI variants: the housing element is rent based and the underlying dynamics mean that when house prices increase the CPI is likely to reduce; when oil prices increase the core CPI is also likely to reduce. Watch the CPI measures when the house markets drops a lot soon and when oil prices drop (ooops, that last one doesn't happen, lol).

Real inflation for most US consumers, is running at between 5% and 8%, my guess.

Thanks for the links, I will do some research - economics, YUCK!  I'd rather have a root canal, but what the hell, one has to be prepared...

So I'm wondering if this is an attempt to have a different inflation rate externally vs. internally, or at least the appearance of it.  It would seem that inflation would be good externally, as it would effectively reduce the enormous debt we've been running up.  An economic weapon.  And if the perception internally was that inflation was not too bad, then the effects might also be blunted - for a time.  Could this possibly be the charade they're trying?

Feel free to laugh - as an Engineer I routinely poke fun at economists, so I deserve it!

You are not alone! Try these for some sanity on inflation in a global economy:

and especially this, which I think is a seminal article:
(I have some respect for Jim Willie's economic analysis)

I have a very sad truth to tell you, Twilight: many economists, most non scientists, belive what is convenient to believe; generally scientists and engineers ask why, but too many of them don't ask hard enough. 90% of the population question little. They laugh in ignorance and in fear.

Short term, the price of oil is going to have a large chaotic component.  However, I think we all know that over the intermediate to long term, the price of oil is only going up. Regardless of inflation or deflation, the value of oil and NG are going to increase relative to other commodities.

What concerns me is that the rates of return of investments based on carbon fuels do not account for the coming price escalation of carbon fuels relative to other resources.  This makes coal or NG-based power investments look better compared to power system investments that are not directly tied to carbon price escalation.  These would be solar, wind, biomass, and nuclear.

(Information on CERA conference)

CERAWeek 2006, CERA's 25th Executive Conference and related events, will be held February 6-10, 2006, in Houston, Texas. As CERAWeek will be held one week earlier than usual this year, we urge you to register now to reserve your place at the Executive Conference.

Register to attend at

The following speakers have been confirmed since our last update:

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  • Hon. Samuel W. Bodman, US Secretary of Energy
  • Hon. Fernando Canales Clariond, Secretary, Secretaría de Energía, Mexico
  • Omar P. Abbosh, Global Managing Partner - Utilities, Accenture
  • Robert Dudley, President and CEO, TNK-BP
  • John D. Gass, President, Chevron Global Gas
  • Jim Hoecker, Partner, Vinson & Elkins, L.L.P.
  • Hal Kvisle, Chief Executive Officer, TransCanada Corporation
  • Alexander Landia, Executive Partner and Global Gas Lead, Accenture
  • Rebecca Roberts, President, Global Power Generation, Chevron Global Gas
  • James E. Rogers, Chairman and CEO, Cinergy Corporation

They will be joining our previously confirmed featured speakers:
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  • Hon. Mani Shankar Aiyar, Minister of Petroleum and Natural Gas, Government of India
  • Hon. Joseph T. Kelliher, Commissioner, US Federal Energy Regulatory Commission
  • Jeroen van der Veer, Chief Executive, Royal Dutch Shell plc

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We look forward to seeing you in Houston.


CERAWeek 2006 Team

9:00 - 9:30 AM
Welcome and Opening Address
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* Tuesday: OIL DAY
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* Thursday: POWER DAY
I think I want to sign up for the Fryday brainiac session
i hope everyone noticed that the headline CPI figure this month (for the first time in recent memory) was NOT the core rate, but the overall rate. the headline reads " cpi plunges 0.6 percent" ....usually they report the core rate , because it excludes.."volatile food and energy costs"....ooohhh, it's volatile!!....because energy costs have been making even the worked over, lying statistics of the BLS look bad...but in november energy costs were the total CPI was trumpetted....if you have kept a close watch of your budgets , you would surely know that inflation is 6% or more...hedonics, substitution, and other obfuscating methods are used to reduce the cpi into lala land. it's your goverment, they lie, it's their job.
Sneaky aren't they.
Nah, luverly n cuddly, jus like Dick Cheney