Weekend Open Thread...

Keepin' it real, as always. I will be updating the weather predictions periodically below.

I mentioned a couple days ago (in the CAFE thread) that GM has extended it's fire sale (PLEASE buy something so we can have jobs) until the end of September.  Also notable is they are adding "most" 2006 full size pickups and SUV's to the list of eligible vehicles.

Apparently China has some smarts we could use:

Hefty taxes to be imposed on gas guzzlers in China


Saturday, Aug 27, 2005,Page 12

Alarmed by high world oil prices and sporadic shortages of gasoline and diesel fuel in big cities this summer, China's leaders are drafting plans to impose steep taxes on cars and sport utility vehicles with gas-guzzling engines.

The taxes would add as much as 27 percent to the price of vehicles with big engines, notably sports cars and SUVs, auto-industry officials and people advising the government on the plan said. At the same time, taxes may be cut slightly for models with the smallest, most efficient engines, though the details of these cuts are still under discussion, they said.

Awesome! The feebate concept!
Related, I guess:

Big 3 Muscle Cars are back.  In case you just can't live without 400 horsepower in your coupe.  

No mention whatsoever of mileage in this article...

If high gas prices continue, and if congress feels pressured to "do something!" ... what crazy plan do you think they'll come up with?
invade Iraq
Perhaps not exactly in the spirit of "keepin' it real", nevertheless I think the community needs to be aware of this authoritative report that the Peak Oil problem is much worse than we thought:



By Dick Siegel

Washington, DC-A secret report presented to President Bush from his friends in the oil industry contains a stunning revelation: the world supply of oil will be completely used up in just six months....

LOL that is so funny.
Don't overlook the news headline below the fold:

Canada Digging Trench to Separate From US
GM has extended it's fire sale (PLEASE buy something so we can have jobs) until the end of September.

What?? You want us to buy from a company that conspired to trash the US light rail system?

I'd assumed that "Ben" was exuding sarcasm in his note...
Yes, I don't work there and I'm long past buying their contraptions.  It just struck me as odd timing that they add in next years SUV's to the pricing scheme; when it seems only a short while ago that SUV's were about the only thing GM could sell without deep discounting.


Perhaps they're trying to offset the opinion that no one is buying a new SUV. Many people these days work, and you hear around the water cooler who has a new car and what it is. Never mind that we all know only hippies buy priuses, but if the sale is actually getting enough people to buy, suddenly there's an image that no one has bought an SUV.

Additionally, this extended sales was likely planned in advance, and a good technique is to sell off the low hanging fruit first. The sale brought in people, some of whom decided to buy an albatross er, and SUV at full prices regardless. Some looked at SUV's, kicked the tires and said maybe later. Now there's an extended sale, and even some SUV's are on sale. Do you think they're going to get any tire kickers back? And since SUV's are high profit for them and still the going rage, I'd imagine there's no shortage of people who were brought in but bought full price SUV's.

Some news from northern europe:
I found two very interesting articles in yesterday's internet version of the Norwegian business newspaper DN (http://www.dn.no/forsiden/article577964.ece http://www.dn.no/forsiden/energi/article579634.ece). They are about the production decline from the Norwegian oil fields were apparently 21 of 44 fields is declining more than 15%. The articles are in Norwegian but I will try to give a summary of them.

  • On 30 of 44 fields has the production been smaller than last year
  • Most of the oil field have past "plateau-production" (or peak...)
  • The peak of Norway was in 2000
  • The estimated production for this year was 2.8 mbd, but it's highly unlikely that the average production will reach that high this year. The average this year is 2.6 mbd with an exceptional bad June (average 2.2 mbd)
  • 21 fields has a decline of more than 15%

A decline rate of 15% is really a lot! I wonder of CERA is calculating with this numbers in their estimates?              
At present CNN has a live audience chat, talking about oil prices among other things. Hopefully the Boston Bureau chief of some news org, one of the panelists, isn't being held up as some sort of expert.
Fuel surcharge watch.

I'm curious if anybody has seen other examples of fuel surcharges popping up.  UPS is now adding one to boxes you ship, for example.

I received an overnight package a few weeks ago (not UPS, but don't remember who it was) and there was a $10 fuel charge.

And I had it shipped instead of driving five hours to pick it up, cost me about the same but hopefully they already had a driver on the route so the incremental fuel cost of my three pound package was negligible :)

Got a freight bill last friday 08/26/05 for over $744.00 U.S. and $106.00 of that was in a surcharge. (OUCH)!
Below is the text of the first, as far as I'm aware, scam Nigerian email- this time trying to get you to send money to buy discount oil! Usually they are about lottery wins etc but seems there is now a 'market' for those wanting cheap oil? Beware- don't send your millions to Mike expecting to get several million barrels of oil in return.

Dear Sir
We represent the seller that has existing and current Allocation from Nigerian National Petroleum Corporation for lifting crude oil.

  1. PRODUCT: Bonny Light Crude Oil
  2. ORIGIN: Nigeria
  3. QUALITY: NNPC standard export specification
Technical specifications:-
Specific Gravity (API) 37
Density at 20 degrees, CG.CM, max 0.85
Basic Salt Water (BSW) 0.6 % Vol
Color Dark Brown
Salinity PTD ATO, 10% BS&W 47 max
Acid Number 0.39
Reid Vapor 6.52 max (PS)
Water & Sediment % max 1.0
Iron, wt ppm 1.0
Vanadium, wt ppm 2.0
Nickel, wt ppm 4.0
Pour Point below 400 deg. F
Sulphur Content, % wt 0.14

  1. QUANTITY: 2-4 million barrels per month for 12 months +- 5%
  2. LOADING PORT: Bonny Terminal, Nigeria
  4. DELIVERY: F.O.B or C.I.F. delivery basis at the Buyer port of discharge

  6. Price, Credit Period & Currency:
The price to be paid shall be based on the loaded quantity of Crude Oil for each shipment based on standard barrels and under "Dated Brent" as in the Platt's Oil gram Report.

The applicable currency in respect of payment for the Cargo shall be United States Dollar (USD). The price shall be calculated on the three (3) days average mean quotation, one day before the date of loading, the day of loading, and the day after day of loading.

The Discount to the Buyer shall be US$5.00 Dollars per barrel gross below DID Brent / Net US$3.00
Dollars to buyer, US$1.00 to buyer side agent, US$1.00 to seller side agent.

10. Payment Terms:
The payment will be in US Dollars and made by irrevocable, confirmed, transferable, revolving (SBLC) issued or confirmed by a top rated World Bank in favor of the Seller in the amount in US Dollars corresponding to the total value of each shipment. SBLC issued will be valid for forty five (45) days.

11. Vessel Nominations, Shipment & Procedure:
I. After LOI from Buyer and FCO from Seller. Buyer Issues ICPO With Full Banking Details and BCL.
II. Seller Issues Full Styled Contract with Buyer & Seller Full Banking Coordinates.
III. Seller
Buyer Sign, Seal This Contract And Exchange The Singed Copy By Electronic Mail. The
Electronic Signed Copy By Both Parties Is Considered Legally Binding And Enforceable.
A.: Within two (2) banking days, Buyer Bank sends to Seller Bank, through
Confirmed, non-transferable, Revolving (according text added on this contract)..
B.: B.: Within two (3) banking days, Seller Bank posts 2 % PB no-opetative (as per annex B) to activate
Buyer Standby Letter of Credit no-operative. And send a copy of NNPC POP (ABUJA) via Fax or email.
C.: Buyer bank activate the SBLC on 100 %.
IV. Seller within six (6) banking days will register contract on SHELL SCREEN LLOYDS LONDON in name of the Buyer.
V. Seller Nominates the Vessel and Gives to the Buyer: Ship Name, Call Letters, Captain Name and a Copy of the Aspatankvoy Charter Party.
VI. Seller Delivers Crude Oil.
Be of interest please send down your phone number and let discuss the next step foward.

Best Regard
Mike Jones
United oil agency
Yours faithfully

An interesting post I found at EnergyBulletin.net http://www.energybulletin.net/8416.html
by James Howard of the UK.

This author (and I don't know his background) has gathered some information which shows that the poorest countries are being hurt now by peak oil.  He postulates that the poorest economies are not able to obtain oil at current market prices.

This does 2 things - one it permanently prevents these countries from expanding their economies.  They will never again be able to buy oil, because prices will always go up. And two it free up oil for the rest of the market, masking how close we are to the peak (or that we have even passed the peak).

The second point is an interesting look at how markets may deal with peak oil.  The most wealthy (individuals or nations) will not be aware of a peak as long as they can outbid someone with less money.  You basically get someone elses supply at their expense.

He finishes the article with a statement of "compete for oil or concede to peak oil and change now".  Both scenarios lead to huge changes in way of life.

He runs

which is where I usually go for information on the European activities - though he also covers the rest of the world.  It is a site well worth bookmarking


It is obvious that the poorest countries will be hit most. They can of course buy oil also in the future, but less. If the US cuts its oil consumpiion to half it will only mean that the Americans would use as much oil than an average European. Even so large a cut will be just an inconvenence compared to what a 50% cut would do in Africa or India...

But rising oil prices will also hit countries with a deep trade deficit. Just try to figure what this will mean for the US. During the '70s-'80s oil crisis the US was in definitively more advantageous position than now. Its oil imports were far smaller than now. The OPEC countries redirected their oil dollars mostly back to the US. The US oil companies had a greater share of oil markets and could bring back as profits much of the oil money. The US was not deeply indebted as it is now.

Who will be most able to compete for the oil? China, most likely, with its huge trade surplus. Other Asian countries, too. We might see some surprises and the structure of the world ecnomy might change (it is already changing).  

This is demand destruction. I seem to remember a few economists talking about this rosily, as after there's enough demand destruction, price will go down, and problem solved.

In the article the parent linked, it mentioned a shortage of foreign currency was preventing Eritea from buying oil. I'm wondering if that actually was a shortage, or it it's rather that they're too poor to afford any. Additionally they're at war with a neighbor who used to supply them oil. So that might not necessarily be demand destruction.

But for Indonesia (an oil exporter; this greatly helps to prove the point that oil is perfectly fungible... er, I mean move along citizens, nothing to see here) and the Philippines seem to be seeing worse demand destruction.

But that is almost assuredly going on in the US and Canada already. While the lower classes here are much better off than in Indonesia, one has to travel more for jobs here, and in most cities public transportation doesn't service that much of an area. Without transportation, and as of yet still limited telecommuting possibilities, the poor in these two nations get hit harder than the rich.

But that's the nature of demand destruction; it hits the poor first, (and of course poorer nations have more poor people as well as different relative "poor" standards. But remember that it's the rich who are the policy makers. While they might be affected, and will hear the pleas of the masses, GWB might think that $200 crude oil might not be too bad of a thing. "If they have no bread, let them eat cake."

a point to note: as of last month Indonesia is now the only OPEC cartel member that is a net oil IMPORTER.

And this month they reduced their output forcasts by 5.4%.

From the standpoint of 3rd world countries, biodiesel may well make the most sense.  Their fuel consumption is miniscule compared to the rest of the world, so they don't need to make that much to begin with.  The process doesn't involve a lot of expensive technology from the west, and there are no patent of IP issues that could get in the way.  Labor costs in these countries would also be favorable to growing the fuel.

The real question is feedstock.  Tropical countries could grow either Jatropha which does well in arid climates, or palm kernel.  Cold weather properties might not be ideal, but if these are tropical countries they wouldn't have severe problems in that area to begin with.

Yes, the 3rd world countries should use their farming land for growing fuel instead of food. So that the rich countries could use a little more real oil. By the way, many of them are already doing just that. They only avoid the net energy loss by using their biomass directly: burning it or for feeding horses or oxen. To be fair, some use biomass obtained as by product of other crops for making ethanol. But this is quite limited.  

It doesn't have to be an either/or thing.  The assumption is their requirements are extremely small so that the acrage required isn't that large, and thus that they have enough land to grow both.  Clearly this will depend upon the country - some might be able to do this (i.e. have sufficient land), others won't.

I haven't run any numbers, so I don't know if this even works.  I guess one would pick some country, figure out how much fuel they have used in the past, and then see if this is feasible.  It would be helpful to be somewhat aware of what local conditions are really like too, and that part I really don't have a handle on at all.

How much the west gets isn't relevant to the argument.  If 3rd world countries are priced out of the market, then the west already gets it all.

Katrina hits category 4 status...



Does anyone know what's up with Peakoil.com?

Haven't been able to log on since 6 am. It's now 10:30.

I've been waiting for OPEC to speak up - they've been very silent after all the noise they made as price moved from 40 - 50 and then 50 - 60+ the first time around.

http://go.reuters.com/newsArticle.jhtml?type=businessNews&storyID=9490997&src=rss/businessNe ws

OPEC worried about high oil prices-chief

"We are becoming increasingly concerned at the continuing high level of oil prices, which does not properly reflect the underlying fundamentals of the market," Sheikh Ahmad al-Fahd al-Sabah said in an English language statement in Kuwait City.

"OPEC will be exploring various options for the September meeting which will hopefully contribute to moderate prices," added Sheikh Ahmad, who is also Kuwait's energy minister.

He said existing spare capacity in OPEC countries, together with new capacity additions early next year, will be more than adequate to cover demand growth throughout the winter this year and in 2006.

Much of the new capacity to be added from OPEC and non-OPEC nations is in terms of lighter crudes which is needed by the market, Sheikh Ahmad noted. [PROVE IT: OPEC itself has made its reference basket heavier and more sour. So far in 2005 non OPEC majors are delivering less oil of any quality, not more]

*"Furthermore, demand is starting to slow down as a result of high prices," he said. * [NO: demand GROWTH may be slowing but not demand itself]

"He said existing spare capacity ... will be more than adequate to cover demand growth..." And: "demand is starting to slow down as a result of high prices." Yes, all that was a very polite way of saying that the prices (especially for light sweet) will and should be so high that the demand will meet the supply. In that case the spare capacity will be more than adequate. The sheikh is a perfect Arab gentleman. This about light crudes capacity was just a code. The informed audience knows what he means: "...prices, which does not properly reflect the underlying fundamentals of the market." Yes, to the point. The prices are way too low.

Sheikh Ahmad al-Fahd al-Sabah has right. OPEC and non-OPEC countries produce more than ever before in world history. In this sense there cannot be any oil shortage. They do their share. The ever rising demand is the problem. OPEC can meet demand next year if the demand doesn't increase. After that...