DrumBeat: November 14, 2006

[Update by Leanan on 11/14/06 at 1:43 PM EDT]

Permits issued for controversial oil shale tests

BLM OKs, though Colorado, USGS and activists have concerns

DENVER - Companies hoping to tap an estimated 100-year supply of shale oil locked in rock formations under Colorado, Utah, and southwest Wyoming have won federal approval for experimental extraction projects.

The decision comes despite comments from state and federal agencies and environmentalists that threats to air and water were understated or not adequately analyzed.

Not since the 1980s have companies been as interested as they are now in extracting oil from the rock, which has historically been a laborious and expensive process.

Bush's only big ally on warming shifts stand

Australian prime minister now willing to look at carbon trading

SYDNEY, Australia - Australia’s leader said Tuesday he wants to consider an international carbon trading system to fight global warming, signaling a shift toward a part of the Kyoto agreement that he has steadfastly refused to ratify.

Russia faces gas shortfall, leaked report claims

Russia's future as an energy superpower has been called into question by claims that it will not produce enough gas next year to satisfy both foreign and domestic demand due to years of under-investment.

Russia boasts 26.6 per cent of the world's gas reserves and Gazprom, the state-controlled energy giant, is the world's largest producer of gas.

But a leaked report from Russia's Energy Ministry says gas is not being extracted as quickly or efficiently as it should be and next year, for the first time, there will be a small shortfall.

Bodman Concerned Russia Slow to Develop Oil Reserves

U.S. Energy Secretary Samuel Bodman expressed concern Monday that Russia, an important non-OPEC oil producer, was developing its oil reserves at too slow a pace.

Not a proponent of the "peak oil" concept that postulates world oil production will soon reach its peak, Bodman said he was increasingly concerned that global oil reserves weren't being developed at a pace that could comfortably keep up with growth in global oil demand.

Blair faces revolt over C02 targets

Tony Blair faces a major Commons revolt over his refusal to commit Britain to annual cuts in the amount of carbon dioxide released into the atmosphere.

The opposition parties and more than 200 Labour MPs have demanded that the Climate Change Bill, which will be announced in this week's Queen's Speech, include a promise to reduce C02 emissions by 3 per cent each year.

"No greater legacy" for Bush than climate deal: UK

Report to offer climate change evidence

NAIROBI, Kenya - A long-awaited report by an international scientific network will offer much stronger evidence of how man is changing Earth's climate, and should prompt balky governments into action against global warming, the group's chief scientist said Monday.

No magic bullet for carbon pollution, says IEA chief

NAIROBI - The world's economies have no alternative to boosting energy efficiency and lowering carbon emissions to tackle global warming, as clean energy lies decades away as a mainstream source, the head of the International Energy Agency (IEA) has said.

France nuke waste shipment reaches Germany

GORLEBEN, Germany - A shipment of reprocessed nuclear waste arrived at a German storage site early Monday after a more than two-day journey from western France disrupted by protesters.

Surviving the Future: Peak oil piques interest at Boston conference:

There were beards and dreadlocks, jeans and business suits, academics, environmentalists, entrepreneurs and others concerned about what the future will look like at the end of cheap oil.

The Second Annual 2006 Boston World Oil Conference was the draw, attracting 500 people, including college students and senior citizens worried about the future of their grandchildren.

A Green Future

Some critics of the sustainability movement assert that the issue will be rendered moot when fossil fuel prices revert to previous low levels. The historical pattern, such critics assert, is for fuel prices to settle back to affordability. For that and other reasons, several leading institutions, including some full university systems, have yet to adopt sustainability resolutions. Critics seeking to stall green initiatives are playing a dangerous game. It is risky to predict fuel prices based on past history. Several researchers, for example, believe that the world has reached peak oil production, which means that wider recognition of a finite supply could lead to stockpiling, hoarding, even wars — all developments counter to the what-goes-up-must-come-down argument.

Byron W. King - 2006 Boston ASPO: The Canadian tar sands

Forgive me if I call them tar sands, dear readers. I know that the marketing people want to call them "oil" sands, because it is better for the real estate values. After all, would you rather have oil on your land or tar?

U.S. politicians not ready for the future

Another problem is Iraq, Peak Oil and the future of the dollar. These three interwoven problems threaten America’s economic future like nothing else.

We have to ask ourselves if the invasion of Iraq was the first currency war. Was it for oil or against the Euro? And will Peak Oil become the death knell for the American century and our industrial civilization?

Post-election compromise, or a tin ear in Detroit?

Since the late 1980s, in the aftermath of the 1985 oil price crash, Detroit and Congress have seemed joined at the hip in a mutual suicide pact. Detroit promises to pound out larger and faster vehicles, and key members of Congress swear they will sideline any effort to tighten fuel efficiency standards.

Jim Kunstler: Democrats and 'Energy Independence'

The day after the impressive Democratic election victory, Senate Majority Leader-to-Be Harry Reid declared that a top priority for the new congress would be policy leading to "energy independence" for America. The time of jubilee will certainly come, but not in the way Harry Reid thinks it will - nor in the way the rest of the country imagines this idea.

U.S. Power Industry Deregulation Flawed, Buffett Says

Warren Buffett's nuclear ante

A cursory history of the world's attempts to control nuclear weapons would essentially encompass two chapters: Before Sept. 11, 2001, and after Sept. 11, 2001.

Pump fiction: Prop 87 - The right outcome for the wrong reason

Malaysia's biodiesel output can double by end-2007

Will Mexico be ready when oil runs dry?

From a 2004 peak output of more than 2.1 million barrels of oil a day, Cantarell is down to 1.8 million b/d today, and will continue to diminish in the coming years. And its waning only seems to underscore the challenges facing the country's monopolistic state-run oil giant, Petroleos Mexicanos.

El Paso Says Repairs Underway to Damaged Pipeline

Nato fears Russian plans for ‘gas Opec’

Nato advisers have warned the military alliance that it needs to guard against any attempt by Russia to set up an “Opec for gas” that would strengthen Moscow’s leverage over Europe.

A confidential study by Nato economics experts, sent to the ambassadors of its 26 member states last week, warned that Russia may be seeking to build a gas cartel including Algeria, Qatar, Libya, the countries of Central Asia and perhaps Iran.

GE, Hitachi to join nuclear-power businesses

BOSTON/TOKYO - U.S. conglomerate General Electric Co. and Japan's Hitachi Ltd. said Monday they planned to pool their nuclear units in a $2 billion enterprise they hope will capture more contracts as power suppliers gear up to build a new generation of plants.
I believe gas prices are poised to turn up as inventories have been pulled down. It was just a matter of time before someone cried foul, and it was none other than Jamie Court, my "favorite" consumer watchdog. From the Sacramento Bee:

"There was a political motive to keep gasoline prices low," said Jamie Court, president of the Foundation for Taxpayer and Consumer Rights in Santa Monica. "Now that the election's over, we're going to see prices going up. ... Oil companies are going to go back to artificially shorting the market."

Shouldn't a basic understanding of economics be required before criticizing an industry? Court has made these claims before - that oil companies were "artifically" shorting the market. But it seems he doesn't have to provide evidence of his claims; he just makes them.

I wrote a short essay last night on Court's history of making claims like this:

A Case Study in Cluelessness

It's easily answered by the majors.  Just release the refinery margins for Aug-Oct vs May-June.
How would that answer it? Margins were better in May-June, because prices were higher. Supply and demand.

What answers the question is to look at refinery utilization versus supply. If supply was falling and refinery utilization was down for some unexplicable reason, then you have an actual suspect.

I am watching the gasoline-middle distallates spread.

This is subject to manipulation by a handful of refiners.  Refine a mix biased towards gasoline (lean on diesel) despite market signals and this will affect "pump prices".  Other reifners go in the opposite direction, but are limited by constraints in operation.

Thay can claim some issues with very low sulfur diesel production to explain their actions.

Impossible to prove, but I have NEVER seen such spreads !


This is subject to manipulation by a handful of refiners.

Actually, it would take a good deal more than a handful, and they would have to work together across multiple companies.

However, I am not saying that governments can't manipulate prices. They can. By not filling the SPR, you can lower demand and put downward pressure on prices. By toning down the rhetoric on Iran, you can calm the markets and put downward pressure on prices. Both have been done, with the likely intent of keeping prices down. But no oil company has the stroke to do this.

In theory, if Exxon-Mobil, Shell, Chevron-Texaco and BP shifted their refining mix towards gasoline when the market demand was for more diesel/av fuel/home heating oil, it could dramatically widen the delta between those products (note VLS diesel has limited capacity for that large product segment).  Those 4 oil companies have enough refining capacity to tilt the spread between gasoline & middle distillates world-wide.

Over time, other refiners would compensate and the spread would narrow despite uneconomic behavior by the named four.  But several months would be required by the rest of the industry.

The recent spread was astounding IMHO !


In theory, if Exxon-Mobil, Shell, Chevron-Texaco and BP shifted their refining mix towards gasoline when the market demand was for more diesel/av fuel/home heating oil, it could dramatically widen the delta between those products (note VLS diesel has limited capacity for that large product segment).

But since distillate inventories are reported on a weekly basis, such a move would be quite transparent. I think most refiners would love to make more distillate, but they have contracts with gasoline customers that must be satisfied.  

Funny you mention that.

Here in San Diego, Diesel fuel is 10-15c more than premium gasoline.   Diesel is $2.70 or so and regular unleaded $2.25.

That's very unusual in my observation.

From landline magazine here is a report of how some in the fuel business have left truckers steaming:

Fires still burning on hot fuel issue http://www.landlinemag.com/todays_news/Daily/2006/Nov06/111306/111406-01.htm

Since August, The Kansas City Star has done an excellent job covering an issue that makes truckers' blood boil - the issue of oil companies manipulating the temperature of fuel at the pump to overcharge consumers.

The OOIDA Foundation contributed to the original series by Star reporter Steve Everly, who brought the issue to the mainstream.

Petroleum fuel expands and contracts in hot and cold temperatures, so about 100 years ago, a standard was put in place to measure fuel volumes at its optimum temperature of 60 degrees Fahrenheit.

As Everly pointed out, with support from OOIDA Foundation's John Siebert, American consumers are being cheated out of between $1.2 and $1.7 billion each year as companies manipulate fuel temperatures.

It's all legal, at least for now, Everly stated in his series.

The latest story, published Sunday, Nov. 12, was called "Loophole enhances `hot fuel' profits."

The story focuses on how the same oil companies are also using the manipulation of fuel temperatures while paying federal fuel taxes - meaning they are buying low and selling high in a "legal loophole."

The companies may continue to profit from hot fuel, but neither the Star nor OOIDA are backing down from informing people that the practice is unethical.

"The nation's truckers take fuel-tax issues personally," Siebert stated in the article, which can be found by clicking here.

Nah, it was a bunch of people right here at TOD. Who were very suspicious that you vanished as soon as prices started to rise.  ;-)

Unfortunately most people (including most educated people) seem to prefer living in their dumbfounded bliss of conspiracy, and evil master plots.

I have found that when dicussing the realities of fuel / oil / gas prices, most people do not understand the supply and demand dynamic, they assume it's due to Bush, or big oil.  You even see this rhetoric in the senate and house, now whether it's to gain votes or these people actually believe this I don't know.

Ignorance is bliss... I used to know nothing of Peak oil.

Unfortunately most people (including most educated people) seem to prefer living in their dumbfounded bliss of conspiracy, and evil master plots.

When there is evidence of 'evil master plots' like:
http://www.google.com/search?hl=en&sa=X&oi=spell&resnum=0&ct=result&cd=1&q=b urning+of+the+german+parliament&spell=1
Burning of the Reichstag
Price fixing Lysine
Lavon affair   Egyptian, American and British-owned targets in Egypt were bombed
Operation Northwoods

(I would go further back in history of other 'evil master plots', but my history knowledge is lacking, and the list could get quite long)

What are you offering as a solution so the past 'evil master plots' don't happen in the future?   I've advocated open, transperant government and corporations...not like it will happen however.   What is your solution, beyond calling others 'dumbfounded bliss of conspiracy,'?

You got it all wrong eric. Enron got a bad rap. Imagine thinking you could staff a whole corporation with persons who had no ethics. That no one would blow the whistle. Imagine that the entire business press would laud a thoroughly corrupt organization as the best corporation in the world.
That could never happen.
Imagine that politicians and regulators at every level would grease the skids for a corrupt conspiracy like Enron.
No that could never happen.
Imagine that one corporation with basically no non-fictive assets could rig the electric markets in the state of California and steal billions and do it in broad daylight. And buy a new governor to halt investigation.
No eric that could never happen you've been wearing the tinfoil hat way too long.
Imagine that years after all was in the open the conspirators would still find defenders and enablers.
And the news media would feed any suggestion that Enron was being picked on and that the sweet old (rich) men who fleeced us all were being prosecuted unfairly.
eric blair you are so out of line thinking corporate America is not the tooth fairy.
Spot on Oldhippie.

People at Enron could never have gotten together in smoke filled rooms and around conspiratorial roundtables to plot and put together fictious corporate entitities named after raptors, not with all those lawyers, accountants and government oversight beaureacracies watching over them. No way. It's impossible that so many people can join in to form a conspiracy of fools and no one would squeal --for years and years.

And it could have never happened at WorldCom either.

Nor at Adelphia.

Nor at countless other places.

And no way that "they" could be conspiring to backdate stock options with everyone watching over their shoulders!

Only a blithering village idiot could conceive of such conspiracies (ha ha ha) being cobbled together day after day, in this, the bestest and noblest government in the whole world that money can buy off!

The proof is in the ad hominen attack verbage.
Make sure to never be confused by the facts.
Reality is not what it seems.

Hi Robert-
   Did you have a successful hunt?

I personaly think the Neocons and big oil would have lowered the price of oil if they could in order to inflence the elections, its just the market is too damn big for thheir leverage to work. The united States uses approximately 1/4th of world production-about 22 million bbl/day. The national oil companies of the world produce and sell 80% of the world production, most of it from countries overtly hostile to the Neocons. The Majors own 40% of the US gasoline market./ There was no huge draw down in stocks during the last couple of months or marked decrease in purchase of oil or increase in the amount of refined products sold.
   If anything happened during the  election cycle to chcycle to change prices at all it was OPEC's announced  attempt to restore high prices by shutting in production.  , and this didn't work. I think the market is just too big.For manipulation on the scale to work a company or angel would have to be ready to risk billions of dollars with the knowledge that if word of the manipulation got out they would very probably get huge punishment. The risk is too big for the return.
  But I also think that public perception isn't going to change. I bet more than half the people in the US beleive the conspiracy theory, its more conforting than the truth which is that  prices are out of anyones control..So look for a bunch of flack and possibly punative legislation aimed at the Majors-a Windfall Profits Tax.
  My best hunch for the real reason for the price decline is 50% a slowing economy and 50% the collapse of Amarynth made the hedge fund yahoos pull in their horns. The speculation premium has decreased a lot.

it was OPEC's announced  attempt to restore high prices by shutting in production.  , and this didn't work.

Well, the cutbacks only began two weeks ago, and reduced shipments are only now arriving, or not arriving, at ports. we'll see if they are successful in managing western stocks by year end.

Did you have a successful hunt?

I did. I made a 400 yard shot on a moving target to get a medium-sized 4x4. I will be eating venison at every meal until I leave for Scotland.

I personaly think the Neocons and big oil would have lowered the price of oil if they could in order to inflence the elections, its just the market is too damn big for thheir leverage to work.

I think that's exactly right. I have heard very high-ranking oil executives who fret that prices are too high, and this will hurt the economy and ultimately come back to hurt the oil companies. But they don't have the power to just go out and lower prices.

I made a 400 yard shot on a moving target to get a medium-sized 4x4.

You shot a SUV ??
Or a deer with 4wd ??

Triff ..

I confess, that thought crossed my mind, too.  

I always will remember,
'Twas a year ago November,
I went out to hunt some deer
On a morning bright and clear.
I went and shot the maximum the game laws would allow:
Two game wardens, seven hunters, and a cow.
First belly-laugh of my day.  (I'm a fan too.)
Maybe a sign post?
Much more efficient !  High EROEI :-)

Hunt the hunters and take their prey !



I am used to hunting whitetails, and in whitetail terminology it was an 8 point. But in mule deer and elk country, they typically refer to them as a 4x4, 5x4, etc., or they just call a 4x4 a 4 point.
I think he is saying...8 point buck.

Never heard NxN used before but if so it makes sense.

I think I would prefer a tender doe myself. I really don't hanker much for venison but they ate so much of my garden this year that I need some payback.

Hear Hear.  They ate most of my potato, tomato, and eggplant leaves.  Since when do they browse on supposedly-toxic  nightshades?
payback indeed
gluttonous beasts
I've a 6.5 foot electric fence that I'm going to raise to 8 feet this winter. expensive but effective I hope. also, I grew about 2000 sq. feet of alfalfa this year. it sorta work as a trap crop for the bastards
I heard of several people in an Austin suburb who put out a string hammock as a trap.  When a deer became entangled, bring out pistol, shoot, skin & butcher.  Exception to discharge of firearms  in this special case.

Excellent EROEI !


but remember he is talking about big wyoming  a 4wd with a gun rack is standard equipment
What was the gallons/pound ratio for your venison?  Maybe not a fair question for something that's 90% recreation.  It might be theoretically possible to hunt without a motor vehicle in my area, but one would need a lot of time.  
I probably walked around 10 miles a day. But you are right, it is more of a vacation. But I think my EROEI was probably pretty good, because I will end up with over 200 pounds of venison.
Compared to the gallons that go into the manufacture of two hundred pounds of beef, I'd say you're doing very well.

If you play your cards right, the royals might take you our for a little stag hunt at Balmoral.

claims before - that oil companies were "artifically" shorting the market.

At one time there were claims of market manipulation of the lysine market.   At one point in time people claimed Enron was  creating artifical sortages in the electricity market.  

And employees of ADM and Enron said 'nope, baseless charge'.  Guess what?  Courts have found the charges to be true.

At one point in time people claimed Haliburton got a better deal because the Vice President used to be the leader at Haliburton.  (this has not been proven as 'true' in a court of law, but memos have been released supporting the claim)

How do you know what the bosses do behind close doors?  Do you believe that the leadership class within the (oil) corporations wouldn't enmgage in price manipulation if they felt they could get away with it?

Eric Blair,
  Note that I said the Majors and the Neocons would manipulate the market if they could, I  just don't think its possible. If the Saudi ruling family can't do it I doubt its possible. They've been tryng to restore high prices since the drop started unsuccessfully.
Note that I said the Majors and the Neocons would manipulate the market if they could, I  just don't think its possible.

I do not know if the manipulation is possible, but I do know that price gouging has happened in the past.  And many times the gouging has been tied to 'a conspiracy of men'.   And sometimes people who have the mantle of government power have been tied to the plot.

If people want claims of conspiracy to go away, calling every mention of a theory about a conspiracy "unforunded" or the people "raving nutters" isn't going to do it.  Somehow society needs to be re-worked so the past history of actual conspiracies can't happen.   About the only thing untried is open transparency.  

Besides, what's more positive...asking for open transperancy or pointing at the 'lizard aliens are controlling the world' belivers and calling 'em "raving nutters"?

Pointing conspiracies behind every tree without evidence isn't doing a very good job building credibility or preventing future conspiracies.
Keep up and I'm quitting oil exploration to go into the tinfoil hat manufacturing business! Both the lysine market and the California natural gas markets are magnitudes smaller than the world oil market. Natural gas can't be easily stored without years of planning and lead times and can't be transported without new pipelines.
  Lysine is insignificant.
The other arguement about market manipulation is people can't keep their pie-holes shut.A manipulation of $10/bbl or more on 82 million bbls/day would require the collusion of hundreds if not thousands of people. Don't you remember how fast the rumors came out about Enrons and El Paso's manipulation of the California market?

So what do you think, will Reynolds Heavy Duty foil help me pick up the vibes best, or just the generic from the grocery store? Enquiring minds want to know!

That fact that others have manipulated other things before does not in any way provide evidence that someone is manipulating something now.

All it shows is that people will manipulate markets if they can do it. I don't think any one is claiming that humans wouldn't try to manipulate the oil market if they could.

Using your logic, one could argue that everything is being manipulated because the lysine market once was. You are going to need some evidence if you want to win this argument.

You are going to need some evidence if you want to win this argument.

How should such evidence be obtained?  Obtained by me?

A very high bar you have set.  And I have no desire to play 'jump the bar to convince Jack' game.   Plus, I'm not arguing there is a conspiracy or that the theory ABOUT a conspiracy is correct.  I'm asking both sides (there is a conspiracy/no there is not) to consider the middle point of calling for open and transparent operations of both business and government.   Which is more likely to happen than theories about conspiracies to stop being made and others calling people with theories about conspiracies raving nutters.

If there was a memo that said 'On date X we shall violate law X to effect a price change' - as determined in a court of law, there would still be people who would claim that there was no price fixing.  Or the decision was politically motivated.  If the government was to use its power to obtain documentation and 'nothing was found' (becasue there WAS nothing) you'd have people saying 'see?!?!  that proves there is a conspiracy between the government and the oil companies'.   If there were docuemtns that COULD be seen as a conspiracy, but eventually declared 'not enought to take to trial' more cries of 'See?!?!?  Conspiracy!!'

Create a world where there is trust and honesty and there shall be no soil for a conspiracy and therefore theories about conspiracies to take root.    Until such a world exists, there will be charges of collusion that may very well be valid.

How should such evidence be obtained?  Obtained by me?

You could start by spinning a realistic possibility of how this would be accomplished. The account would need to be consistent with what we have actually seen in the weekly EIA statistics.

Also, you mentioned "gouging" above. In your opinion, what constitutes gouging? Can you give me a definition that is fairly objective, so I can apply it to multiple situations?

You could start by spinning a realistic possibility of how this would be accomplished.

My interest is putting forward the idea that 'if you want to put an end to conspiracy theories, call for open and transparent actions by governement and corporations'.   Proving or disproving one theory or another can be a quagmire.  

History is fiull of theories about conspiracies that have been 'proven' to be 'true'.  

My position is a lack of shock/suprise if the theory of 'gas prices were pushed down in the interest of the election' and I have that view because of past 'proven conspiracies' (either by court decisions or piles of documents).   If you don't want 'conspiracy theories' to be given any room to grow, open and transparent actions go a long way to denying theories of conspiracies fertile soil to grow in.

My interest is putting forward the idea that 'if you want to put an end to conspiracy theories, call for open and transparent actions by governement and corporations'.   Proving or disproving one theory or another can be a quagmire.

But if there is no evidence of conspiracy, and you can't even come up with a hypothetical of how the conspiracy would be pulled off, on what basis do you suggest that a conspiracy is taking place? With such a burden of proof, I could claim conspiracy about anything and everything.

The oil and gas reporting requirements are pretty stringent. Inventories and utilization are reported on a weekly basis. If someone was withholding product in order to influence prices, it would be very difficult to do that without it being very obvious.

Again, I am not suggesting that the market can't be influenced. The president of Iran has made his country a lot of money by doing it. Saudi Aramco is big enough to do it. But no U.S. oil company is big enough to pull it off. They watch the markets go up and down; they don't cause them to go up and down. Otherwise, the industry would not be cyclical.  

on what basis do you suggest that a conspiracy is taking place?

The past has had them, why should the present be devoid of them?   Why should large firms 'in control' of a key resource be trusted?  

If you are wanting to not have 'theories of conspiracies' then promote open transactions.   Weekly reporting is a start - and notice how you have used what open data there is to support your beliefs.

I do notice you have this limit on your analysis

"But no U.S. oil company is big enough to pull it off. "

Why should large firms 'in control' of a key resource be trusted?

That's the whole point. No large firm is in control. You are making presumptions that all of Big Oil is one large firm.

Weekly reporting is a start - and notice how you have used what open data there is to support your beliefs.

I guess I don't understand your point. Would you have preferred that I didn't use open data to support my point?

I do notice you have this limit on your analysis

Of course, because Saudi Aramco could in fact manipulate the market. They are doing that right now by announcing production cuts. But Saudi Aramco dwarfs all U.S. oil companies.

Mr. Rapier, sir, just because the big oil companies are or at least seem to be in competition doesn't mean that they can't cooperate when it suits their fancy, or their bottom lines.  Executives of large US corporations have been charged and convicted of price fixing in the past, so that part of your reply is simply invalid.
Executives of large US corporations have been charged and convicted of price fixing in the past, so that part of your reply is simply invalid.

What is invalid is an implication with absolutely no hint of evidence to back it up. Collusion is a very serious affair, and oil companies have been investigated again and again for this. The latest investigation happened after Katrina, and once again they came back with "no collusion." So, if you have reason to believe otherwise, I would contact the FTC right away.

Robert...I was the suspicious one the day after the elections.  I've thought about how it could have been done
and wondered why stations owned by oil companies couldn't just decide to take a lower profit margin at any point in time.  Maybe it's 50 cents over cost one month and a dime over cost the next month.  It's their profit, can't they mark it up as they want?

The problem is if the large chains owned by large companies lower price, so do the Independents to match.

Can you tell me how retail price of gasoline is set?  I ask this in all seriousness since I don't know much about it.

At one time there were claims of market manipulation of the lysine market.

Yes, by a company that had the lysine market cornered. That is not the case with oil companies. It would take massive collusion to pull something like that off.

It would take massive collusion to pull something like that off.

And perhaps such would be found in an investigation.  Perhaps not.   So far, the lack of moral people whistleblowing with leaked memos supports your position.  But without a feeling of a sinking ship, why should the rats desert, why should anyone 'leak'?

Remember that the PetroDollar is important.   Important enough for a good part of the reason the US Military exists.  Oil is the lubrication of the engine of trade, not to mention a feedstock.

And political power is important enough to have and keep to have less than moral people take actions that lead people who have it to say "If the people knew what we had done, they would chase us down the street and lynch us."

When billions, trillions, or perhaps whole economies at stake, what actions are 'too massive'?   If there was lawbreaking, odds are someone will want to step forward to have others fitted for the legal noose.   But without the threat of a legal noose, who would step forward?

And perhaps such would be found in an investigation.  Perhaps not.

The collusion issue has been investigated again and again. In the article I linked to, the California Energy Commission pointed to the legitimate reasons for the price increases.

So far, the lack of moral people whistleblowing with leaked memos supports your position.

You presume that such memos exist. How can there be any whistleblowing from moral people when no actual wrongdoing has taken place?

You presume that such memos exist. How can there be any whistleblowing from moral people when no actual wrongdoing has taken place?

Again, why would anyone come forward if there is no threat to their lifestyle?  (Freedom, having money, not being dragged in front of CONgress, taking the 5th and then being the talk of the cocktail party)

"What gets us into trouble is not what we don't know, it's what we know for sure that just ain't so."
--Mark Twain

It is difficult to get a man to understand something when his salary depends upon his not understanding it. - Upton Sinclair

Eric, one other point against a conspiracy. If one were to occur, it would have to involve the people at the top of Exxon and Chevron. These guys are the ultimate players in the beaurocratic game-they have pensions and stock options worth hundreds of millions of dollars. If they manipulated prices and got caught they would loose all that money, risk their freedom and the positions of respect they have earned in society. Do you really they're going to take that risk for the sake of a lame duck president and his crew of halfwits running congress?
  I know that the old money families at Exxon helped young George get the Republican nomination. That was legitimate political activity, freedom of speech and all that.In our system the Farishes, Elkins,Smiths, Alkeks, Blaffers, Fondrens and Rockefellers can attempt to control politics and politicians through making political donatons, and it often works, hence Bush's global warming stance is the same as Exxons. Do you really think they would let Exxon loose billions by cutting oil prices? Many of those families own a heck of a lot of royalties personaly, it would cost them literally millions.And they'd risk their family fortunes for young George controlling congress?
  I went to school with a number of the members of those families at St. Johns and Lamar in Houston. Yes they are incredibly rich and self-satisfied and think God is on their side. But most of them are not stupid, and it would be incredible stupidity to risk 10 cents on a deal like that, let alone billions of dollars.
oilmanbob -

I don't think it is necessary to have blatent illegal collusion between the heads of the major oil companies in order for them to attempt to exert downward pressure on prices. The reason why outright collusion isn't necessary is that they all had a common interest in keeping Republican control of Congress. So rather than a conspiracy, in the narrow legal sense of the word, if it did occur, it would more likely be various actions taken independently due to theconfluence of similar self-interests. Nothing illegal about that.

While I think it is absurd to think that Big Oil can control prices at will, neither do I think it impossible for a producer of a product to influence the price at which his product sells for within some  narrow range, particularly if it is only for a short period of time.

This can be done through a combination of increasing supply and lowering profit margins. When this is done internationally, it is sometimescalled 'dumping', as was done when the Japanese dumped huge amounts of low-priced steel onto the American market during the 1970s.

 While I don't know claim to know enough about the current gasoline situation to say this actually HAS occured, I don't see why it would be theoretically impossible for Big Oil to do a similar sort of thing with gasoline in the run-up to the election. Again, not total price manipulation, but a gentle downward pressure for a short period of time.

There are probably various other little things that can help keep supplies up, such as deferring scheduled refinery maintenance and construction outages until after the election, and in general making extra sure the nothing happens to redude gasoline output.

I would imagine that to demonstrate that Big Oil has put some downward pressure on gasoline prices in the run-up to the election, one would (as a minimum) have to compare gasoline consumption, gasoline inventories, total refinery gasoline output, and gasoline profit margins for say the period May thru July with the period August through October. But even if one did that, the picture might not be all that clear, as many other factors probably come into the picture, such as the role of speculators, etc.

It gets down to the old Means, Motive, and Opportunity. While I don't think there can be much debate about whether Big Oil has the motive to keep prices low before the election,  the means and opportunity are much more difficult to detemine. So, it don't think there will ever be evidence of price manipulation that would be convincing enough to be admissible in a court of law.

Do you really think they would let Exxon loose billions by cutting oil prices?

Besides, it is a basic ingredient in the blood of any 'Big Business' mogul or mogul-to-be to maximize profits. Trying to cut prices against a market of rising prices would absolutely go against the grain of these people. A totally ephemeral connection to possible advantages if it helps so-and-so get elected just doesn't seem like enough incentive to go against the grain.

I disagree...it is a question of losing short term profits and retaining a governing body that is "friendly" to their activities and could benefit them in the long run vs. keeping prices were they were and risk having a governing body that could tax and regulate them more stringently.

Many, many companies have sacrificed short term gains for long term investments.  Why wouldn't the big oil companies?

And rich people have done extremly stupid things.  A good example is the Hunts turning $300 million into $20 million by trying to corner the silver market in the seventies.  Or Ken Lay approving accounting shenanigans to hide the true nature of Enron's books.  Or Dennis Kozlowski {spelling?] at Tyco. etc.. etc..  
Robert is right, you have to have a corner on the market.  For that reason, this sort of thing hapens all the time in the pharmaceutical industry.  Drug companies pay generic manufacturers to keep the generic off the market.  Another classic situation is how AstraZeneca spent 10's of millions of dollars creating legal road blocks to prevent a generic prilosec from coming on the market.  I don't know the exact numbers, but say they spent $10 million dollars on lawyers a year to keep yielding $50 million in profit, netting $40 million.  If the generic had come on the market, their profit would have dropped to $25 million.  this is not really a conspriacy, however, it is more properly termed a monopoly, something that cannot happen in the oil industry.  The Lysine market is even narrower than the prilosec market.

Phineas Gage, MD

It is unfortunate that consumers and health care providers have largely ignored these shenanigans by Big Pharma.  I attribute it mostly to the general complacency spawned by moral hazard.

Providers can do more by informing their patients about cost effective alternatives to expensive "new" meds.  A good example is what I consider the scam of advertising to get patients to switch from Prilosec to the more expensive and newer Nexium.  Many docs I know had no idea that these two meds were essentially identical - Nexium being just the enantiopure version of the racemic formula in Prilosec.  

Buyers and providers beware!

Phineas Gage, from VT or brain doc?

You know Robert you make a lot of noise about supply and demand and how oil markets work, yet you can't answer fundamental questions about the market, for example how much is traded on spot market vs long term contracts. Here's another, oil is around $60 a barrel, what's the average price globally for getting the average barrel out of the ground these days, is it more than $10?

If one was around California in the year 2000, you witnessed right in the open one of the greatest manipulations of markets in history -- electricity. The whole time the electric industry, traders, and economists were making up great theories and lecturing about supply and demand and markets.

So, continuing your defense of "markets" which are so opaque to be unverifiable is no different than the "conspiracies" others see in market manipulation. The fact that you work for the oil industry and go around babbling Econ 101, in a industry which has never run anything like that, only makes it all the less convincing.

I'm getting a little tired of the manipulation topic. I don't know what ppl expect from RR. There is no proof of significant manipulation, and he doesn't see how it could be done to the scale ppl are saying. You ask his opinion, you get it. As far as I'm concerned, prices will rise dramatically in the near future anyway due to what the topic here is - the onset of peak or plateau oil and rising demand - regardless of any manipulation. And prices needs to rise for society and markets to respond. Laws won't do it.

If ppl want to believe that the oil cos are engaged in massive manipulation, then fine. They can't prove it, and I can't disprove it, so it is simply a matter of faith that is not subject to a decisive refutation. RR is simply giving his observation and opinion and clearly no one will change their minds here.

I was in California in 2000, and the electricity problem was quite clear, not a secret or subtle at all. Very different from the current oil situation - in my opinion. But this manipulation hinged on technicalities in the stupid deregulation laws that made such manipulation almost inevitable in a tight situation - the laws absolutely enabled the process. By this, I am NOT defending Enron or other cos that took it to the next, felonious level once they got going.

And for many oil markets there are no laws. It in fact wasn't pretty clear in California, go back and look at the newspapers, the idea that the markets were being manipulated was for much of the time crushed under the avalanche that CA had a supply problem. I was smack in the middle of the fucking thing

It's actually important in trying to change energy to understand the history of energy industry and how it really works today. People who go around spouting Econ 101 as the basis for the oil industry are just as fantastical as those who claim it's run by little green men.

I'm all for $5 a gallon gasoline, but I want as much as possible of that money to go into alternatives -- fuel, transport, planning. I want as little as possible of it to go to the oil companies, and I don't want to hear them and their supplicants crying about how its anti-market.

Basic agreement, esp on where oil dollars ought to go.

It did take a while to clarify just how extreme the manipulation was in California, at first it was just sniffs, but the suspicion was from the beginning in my area.

You know Robert you make a lot of noise about supply and demand and how oil markets work, yet you can't answer fundamental questions about the market, for example how much is traded on spot market vs long term contracts.

That's a bit disingenuous, don't you think? After all, I went to the trouble to track down one of our traders and try to get an answer for you. However, I did tell you that I think that the volume that trades on the spot market is pretty low relative to long term contracts. But why don't you just take the trouble to find out for yourself? Spot volumes are publicly available. What got consumed is publicly available. Figure it out.

Furthermore, as I told you, while the relative amount that trades on the spot market may be low, all of the contracts that I am aware of are tied to the spot market. In other words, the contract may be Price = 85% of NYMEX plus $3. Actual contracts are structured like that. So when the spot goes up, refiners pay more for their crude.

What is the exact point that you are trying to make? That when the spot price jumped, that refiners on long-term contracts were getting a real bargain?

That's a bit disingenuous, don't you think?

Not in the least, I asked a question never got an answer.

My point is simple, you put forth a bunch of things that may or may not be fact. In this last post you state, "I think," "all contracts I'm aware of." This is conjecture not cold hard data and most of the babbling that goes on here about how oil markets work is conjecture.

What's the % of all oil contracts tied to the spot market? If you have long term contracts tied to spot price, that makes no sense.

The whole thing is too opaque to get much of handle on. You on the otherhand, based on no data continually spout great economic cliches about how it works and try to make the fool of anyone who says there could be great market power wielded at times, despite the fact that the history of the oil industry is filled with it.

I'm not trying to get into an arguement about how it works, because the markets are not transparent enough. But on this issue your economic propaganda compared to hard data makes your arguements unconvincing at best -- that is my point.

There's a lot more powerful forces than Robert Rapier spewing the same lines. And by the way, I do agree with much of your analysis on ethanol.

Not in the least, I asked a question never got an answer.

You did get an answer, just not the one you wanted. I told you that not that much relative volume trades on the spot market, but I couldn't track down an actual number. As I said, if it is important for you to know, you can track it down yourself.

My point is simple, you put forth a bunch of things that may or may not be fact.

Not true at all. My argument is based on rising and falling inventories. That is not disputable. If you want to dispute my argument, start disputing it instead of just throwing out a bunch of insults. The EIA data is public information. Point to something that is inconsistent with my argument.

What's the % of all oil contracts tied to the spot market? If you have long term contracts tied to spot price, that makes no sense.

That is certainly the dumbest thing you have said. Every oil contract I have ever seen was structured that way (and I have seen more than a few). It protects both sellers and buyers from price fluctuations. I certainly would not enter into a long term contract that wasn't tied to what was taking place in the overall market, and whether you wish to accept it or not, most contracts are structured in this way. And in fact, I am not the only person who has pointed this out to you.

Again, watch the inventories. That will generally tell you which direction prices are headed. Apparently, you believe that this argument is based on "no data."

I'll try this again, "all contracts I'm aware of" and "I think" are not statements of fact. Lets try this "all the contracts I'm aware of" what % of the global oil market is that? And I'll ask another question, which I'm asking to someone who is advocating a position, what % of  global oil contracts are publicly available?

I'll repeat, it defeats the purpose of long-term contracts to have them tied to the spot price. If you're pumping oil out of the ground at ten dollars a gallon and have long term customers who know that and they don't tie the price down to something you can both live with it, well you know what that is Robert? that's a dysfunctional market. Thats where the supplier or someone has a whole lot of power.

Inventories are part of the equation, but if you don't look at the way the whole market is set up and disregard the power of the oil companies and national players in the market, that's either greatly naive or simple propaganda.

"All contracts I am aware of" is not a statement of fact? My sample size is not small. I have never seen a long-term oil contract that was not directly tied to pricing fluctuations in the marketplace (although I have seen some gas contracts in which you could lock in price). I am sure it happens (locked-in pricing), but it is the exception.

And I'll ask another question, which I'm asking to someone who is advocating a position, what % of  global oil contracts are publicly available?

I don't know that anyone would make their contracts publicly available, and I doubt that such is even legal. If you want to talk about collusion, having your competitor know exactly what you are paying for oil would certainly pave the way for that. It would give you unfair guidance on your pricing decisions.

I'll repeat, it defeats the purpose of long-term contracts to have them tied to the spot price.

No. The purpose of long-term contracts in this business is to secure suppliers, not prices. If you secure a supplier, the smart thing to do is to tie the contract to the market, because even if oil prices rise and you pay more, gasoline prices will rise along with it and protect your margins. But if you locked in a price, and the spot price fell, well you would be in the red pretty quickly. It just doesn't make good business sense to lock in a price, unless you are very, very confident that prices are going higher. Even then, if you are wrong you will probably lose your job.

If you're pumping oil out of the ground at ten dollars a gallon and have long term customers who know that and they don't tie the price down to something you can both live with it, well you know what that is Robert?

If you are pumping oil out at $10 a barrel, and your customer wants to pay you $20, I am going to tell him to get lost. I want to charge the market price, not some fixed price that may end up causing me to lose my shirt. Because remember, as oil prices go up, so does the $10 it takes me to pump the oil out of the ground.

Have the last word. I have said all I need to say on this issue.

Ah that's mighty magnanimous of you Robert, but I can guarantee  the question of how oil markets function isn't going to stop here.  

My sample size is not small.

I'll draw attention again to the fact that you have yet to put one real statistic on the table, you sound like the Sauds, "We're in the business, believe us." No thanks.

But if you locked in a price, and the spot price fell, well you would be in the red pretty quickly. It just doesn't make good business sense to lock in a price, unless you are very, very confident that prices are going higher. Even then, if you are wrong you will probably lose your job.

Riiight, remember, this new volatility in the oil market is relatively recent and that for the majority of its history the oil industry has faught price volatility. In fact much of the law on the books helped suppliers control the price, a relic of the New Deal's deflation fight. What you know about that Robert? Or what would Mr. Rockefeller say?

If you are pumping oil out at $10 a barrel, and your customer wants to pay you $20, I am going to tell him to get lost.

Indeed, that's why the oil companies haven't been able to make any money. So, how about another try at a real statistic, like how much does the production and transportation price of a barrel go up out of Alaska, or Saud, or even better the average globally. Oh wait, most of that's proprietary, we should just believe the oil industry and their employees.

If you are pumping oil out at $10 a barrel, and your customer wants to pay you $20, I am going to tell him to get lost.

Woops, I pulled the wrong quote above. I wanted to say about this, you just proved my point how its a dysfunctional market and the suppliers have too much power, that would be the oil companies. Good Night.

You have to define "relatively recent" to give your quote on oil price volatility any meaning at all. Do yuo mean since the price started to rise in the last few years? Last ten? Since 1970?

I think that during the career of everyone in the world buying oil now, it has been volatile.

Oil producers (OPEC) have been trying to control the price of oil pretty actively for much of the last few decades. It doesn't seem to have smoothed prices much.

Well the "recent volatility" has been the last six years. Which was preceded by a decade and half of the lowest prices in history, which had been preceded by the great volatility of the 70s, which had been preceded by a pretty smooth couple decades as a result of the New Deal laws that looked to quash deflation. In the 30s, the Federal Government worked actively with Big Oil as they did with many corporations to give them pricing power, so that they could stop deflation.

Looked at since its beginning there have been periods of price volatility in the oil industry. It's founder John Rockefeller sought monopoly to end the great price volatility of the early period caused by "ruinous competition." An idea he held with Mr. Morgan. Mr. Rapier's "It just doesn't make good business sense to lock in a price," is against everything Big Oil has always worked for, none the less he throws it out as a guiding light.

Mr. Rapier ignores all this and throws out a bunch of Econ 101 and trading room cliches about how markets work to which he has no data to back up. That's propaganda. My point is that the oil "markets" are complex but even more, they're opaque, its hard to know how exactly they operate today and saying that they run like mythical open markets based simply on supply and demand, inventories, or whatever else is just as ludicrous as saying five guys in a room control the price.

Mr. Rapier's misinformation is pushed by big corporations all the time to fight any change and it's not helpful for anyone who think we need to change our energy system. As J.K. Galbraith wrote,  "The continuing survival of classical (economic) beliefs protects business autonomy and its income and serve to obscure the economic power exercised as a matter of course by the modern enterprise by declaring that all power rests, in fact, with the market."

Mr. Rapier ignores all this and throws out a bunch of Econ 101 and trading room cliches about how markets work to which he has no data to back up. That's propaganda.

Bull. I have pointed to correlations between inventories and prices. It is common sense that if the gasoline inventory continues to be pulled down, either 1). Imports must make up the difference; 2). Prices must rise to slow demand; 3). We start rationing product; or 4). We just keep going like this until stations start to run out of gas.

I can't make it any simpler for you, and I won't keep addressing your claims that I don't have data to back up my claims. The data I have used is publicly available to anyone who has access to the Internet. You have access to the Internet. If you wish to refute my argument, instead of throwing out a bunch of generalities about the opacity of the markets, pick some data from the EIA that seems to support your argument that something fishy is going on. After all, if you wish to continue to make these implications, the very least I should expect is for you to offer some data to support your argument.

Thanks for your helpful advise Robert, I'll start with Saud's numbers on reserves and work my way up.

Just a small point, we're interspersing gas and oil pricing. But if someone wanted to talk about how gas prices are set, they would start with monopolistic or at least oligopolistic control of refineries, the laws behind that etc. By the way, it was nice for example that the oil companies went around the world extracting crude and not building refineries, but what would that have to do with the price of gas?

Anway, looking at how gasoline or oil is traded at the end is an extremely limited understanding of pricing in oil and gas markets, but it doesn't stop people from extrapolating extravagant claims. But this is the energy business.

It seems like you are confusing "high prices" with volatility. These are two completely different things.

At some point, I will download an oil price time series and compare volatilities over different periods of time. It will take about 5 minutes.

If someone want to point me to the best times series, please do.

In the meantime, I stand by my comment that oil has always been a volatile commodity.

Websters - vol·a·tile: characterized by or subject to rapid or unexpected change "a volatile market"

So tell me Jack what's your definition of volatility. Did you call and bet on it in 1999 and that's why you have time to spend on the oil drum? Is +600% in five or six years not "rapid" or "unexpected enough to be defined as volatility?

Or how about in the 70s - 80s where in little more than a decade it goes up 1000% and down. Or maybe the 30's where the price bascially deflated to nothing. Got corresponding "high price" periods I missed?

Please your definition of volatility?

I'll draw attention again to the fact that you have yet to put one real statistic on the table, you sound like the Sauds, "We're in the business, believe us." No thanks.

If you choose to believe I am being deceptive with the information I share here, then we have nothing else further to discuss. If I had known this, I wouldn't have bothered to look for the information you requested on spot versus long-term contracts. After all, you have shown that you can deftly dismiss that with a hand-wave and a "why should I believe you?"

Trust but verify Robert, every time I've asked for verification of your facts you waffle. I understand how opaque the oil industry is, if you'd aknowledged that instead of keep trying to spread you'r view based on the fact you'r an "insider" with limited info, I'd have a greater appreciation for what you'r saying, though I'd still disagree with a lot.
Trust but verify Robert, every time I've asked for verification of your facts you waffle.

Give me a single example of where I have waffled. I have told you bluntly what I know. I have told you what I do not know. You have chosen to accept the parts you want to, and reject the parts you want to, while demanding a burden of proof that can't be achieved even in theory. I simply can't produce all of the oil contracts in the world for you to pore over. What I can do is tell you a little bit about my sample size. I have tried to find information out for you in good faith, and in turn you have indicated that I am not to be trusted and I am waffling. I am frankly sorry I ever responded to any of your posts.

The argument that I put forth here was in no way based on inside information. It was based on the fact that inventories are falling, and therefore prices must rise or imports must pick up. Demand has picked up as prices fell. All of the information I used to make my argument is publicly available. I don't know what else I can do for you.

The idea that suppliers don't have pricing power is ridiculous, we have laws that codify exactly that. My point that I keep trying to make is neither you nor I have the information available to understand completely how oil markets work, yet you insist the limited information you have whether it's publicly available or what you know from inside explains how the markets work based on simplistic notions of supply and demand. That has never been the exclusive or at times the main way price is set in the oil industry.

For example, if all contracts are tied to the spot price, and I have hard time believing that's true, maybe it is though you nor I can prove it, but if it is true, that's just completely unacceptable pricing power. It ain't Supply and Demand 101. That's how they gamed the CA elecricity market by forcing everyone to adhere to the spot price.

That people want to be suspicous about the price of oil dropping a third before an important election, they have every right to be. A step in the right direction, and it's long over due, would be to haul the oil companies before the Congress and get them to open things up a little, so that we can all have a little better understanding on just how oil markets works and can maybe start talking from a little agreed upon common knowlege.

That you continue to insist to stand at a certain point and then claim from there you can see how everything works is your choice. I reject it fairly strongly and for those who want to shoot the ground upon which you choose to stand, it is only fair game.

RR, I found your data on contracts useful & informative.  Thanks for the effort :-)

Airlines (Southwest being the most famous) sign long term, fixed price (last year was $39/barrel avg for SW from memory) deals for crude oil, diesel, av fuel, and related products.  SW sells the contracts at spot and buys av fuel at the different airports.

So far, over $1 billion saved for SW.

do you know who takes the other side of these contracts ?

Without oil production, it would be hard to cover these contracts.



Southwest was very smart in locking in those prices before it was obvious to others that prices were going to rise. The other side could be held by producers who wanted to lock in a price, speculators, or someone who has the opposite exposure (ie. needs to sell oil in the future). Presumably that was the market price when they bought them and markets were fairly liquid. Lot's of people were willing to enter into the transaction.

I don't think anyone is willing to take on contracts at anywhere near those rates now. Southwest's forward contracts are essentially a one time gain. They won't be able to do it again.

About three months ago, Thai Air announced that they had only hedged 5% of their forward fuel exposure. The read at the time was that they were cheap and foolish. While the assessment might have been right, Thai has done very well by being unhedged over that timeframe.

Good post!
While I generally agree with RR on the underlying reasons for the price drop in gasoline before the elections, there are IMO plenty of other reasons for demonizing the oil companies. Generally they are the same reasons for demonizing many large corporate entities, and if you don't know these reasons, you simply have not been paying attention.

So, while a windfall-profit tax might seem silly to some, one could see it as a backhanded way of redressing other issues, such as some of the big tax breaks recently awarded to oil companies (that they didn't even ask for, but were, I'm sure, just glad to get).

Then there are environmental issues...
I could rant on, but won't.

Many reasons to "angelize" corporations too: iPods, Viagra, Flights to Tahiti, Gardasil, the computer you use for your rants etc. I love corporations, especially the oil producing ones.
Well, yes, we are all beneficiaries of an economic system that exploits resources in unsustainable ways. Maybe 'demonizing' is too strong a word, but corporations badly need lots of public oversight and badly need to have their basic exploitation/cost externalizing ways changed so that they can benefit the public without trashing the planet.

Too big a subject for a small post, but you probably get the gist of what I'm saying.

I don't have the figures in front of me but it seems that C&EN (Chemical and Engineering News) had ROI figures of something like 8% for petroleum companies and ~20% for big pharma.  If people want to shit on someone for maxining out ROI, try big pharma comapnies.
  You can say that there was a political motive to keep the hurricanes low this season. They caused the overbloated reserves in the first place. And since the surge in hurricanes was controlled by global warming, does that mean that the global cooling is upon us?


Today's http://www.urbansurvival.com/week.htm
(de-nile, not just a river that flows with oil in a channel lines with money, it flows with rainfall too.   George Ure has said somedays back "the difference between a recession and depression may just be crop failure")

Evidence of Climate Change

I think I mentioned that in February of 2007, the UN will have a new 5-year study on climate change out. Might have mentioned it to Peoplenomics subscribers...anyway, there's some prequel stuff out today that is worth reading from the A.P.  A few highlights:

    "-World temperatures have risen to levels not seen in at least 12,000 years, propelled by rapid warming the past 30 years.

    -Greenland's ice mass has been melting at what NASA calls a "dramatic" rate of 41 cubic miles per year, far surpassing the gain of 14 cubic miles per year from snowfall.

    -The levels of oceans, expanding from warmth and from land-ice runoff, have risen at a rate of about 2 millimeters a year between 1961 and 2003, and by more than 3 millimeters a year in 1993-2003. "

Curiously, while scientists seem to agree that a further increase of 1 or 2 degrees (F) in global temperatures would cause HUGE changes (rising sea level, freak weather, etc) most investors are curiously ignorant of climate change.  "Aw, it's just a bunch of environmental hooey," goes the thought process. Except, of course, in places like Australia where a 1,000-year drought is already expected to cause a 'rural depression' and Kenya where drought is taking hold. But don't let me take the fizz off your option expiration week here.

In fact, the science is being rejected in Australia where the Reserve Bank is now rejecting the 1,000-year claims and is downplaying the significance of the drought.  This seems to me to be a new high water mark in denial - as banksters claim expertise at weather.  This is just marvelous!  Of course, if the banksters didn't deny climate change, that might upset the investment apple cart, and we can't have that now, can we?

Lets put ocean rise into perspective.

  • 197 million Sq. Miles: Earth surface area
  • 141 million Sq. miles: Ocean surface area
  • 56 million Sq. miles: Land surface area above sea level
  • 1 foot of sea level rise requires 29,750 cubic miles of continental ice pack
  • 1 meter of sea level rise requires 97,600 cubic miles of continental ice pack
  • 1 cubic mile of water equals about 1.11 cubic miles of continental ice pack
  • 14 million Sq. miles surface area of Antartica
  • 1 million Sq. miles N. Hemisphere land area under ice pack.
  • 3mm/a equals 9 inches of ocean rise per century

27 net cubic miles of Greenland ice melt per year requires 10 years to contribute 3mm of ocean rise.

So from this data it is easy to see that 1 meter of sea level rise requires 10 meters of ice pack melt. Ice pack melt over ocean surfaces does not contribute to sea level rise.



I'm not sure of your point. First of all, 9 inches is a very significant rise. But more importantly, it's not just Greenland but Antarctica plus thermal expansion of the ocean water and additional melting elsewhere.
I was simply pointing out some numbers. And I should have noticed that 9 inches is really 11.8 inches because I was well aware that historical records show slightly less than 2mm/a or about 7 inches per century of ocean rise.

Yes thermal expansion can be a significant amount, though we are not sure of the oceans mass and also the thermal expansion has a gradient associated with pressure. So it is dependent on what depth of the ocean is warming the most. A few degrees at the surface have a much greater effect than a few degrees in the deep ocean.

 To put the 3mm/year in perspective:

 - The difference between tides at Alaska is about 30 feet, 3000x as much and not over century but over just couple of weeks.

 - Most Sea waves exceed the century's long increase several times a minute.

 - Lowest Holland place is 50 feet (66 centuries ahead of sea rise ) below sea level. They feel safe, with most of the land 4 centuries of rise below sea level. Few decades ago Netherlands reclaimed tens of thousands square miles of Flevoland from sea, now densely populated and farmed.

 - The "Sinking" of Holland oupaces the sea level rise in most of Holland, some places sinking 30 times faster.

 - Sinking rate of Venezia, New Orleans, Shanghai and other places far outpaces rate of sea rise.

 - Water actually contract while warming between -2degC and 4degC.

 - Most of sea water is at or around 4degC where it neither expands or contracts with temperature.

 - Atmosphere holds over 3000 cubic miles of water

3mm/a is 11.8 inches in a century.  25.4mm/inch
You are right forgot to clear my calc it was still showing my error.
Estimates of glacial melt can explain nontrivial amounts, but not all of the observed sealevel rise.  I think we need a better accounting for where it's coming from.

I just think getting that will be difficult, when you need an accurate model of all global shifts in the depth and density of the earth's crust.  

The point is that the status quo ante where sea level rise held at 1.5 or 2mm per annum is gone. Thermal inertia appears to be gone. I said "appears". You can see what you want to see, but some of us see global warming as very threatening.
On a very slightly different tack, the notion that Australia is in a thousand year drought creates the impression that next year is year 1001 and the status quo ante reappears. Possible. Cassandras can be made to look foolish by one good week of rain. Or a first world country could collapse in the next few months. So surprised doomers are not on this one.
I suspect the 1000 year drought is like the 100 year flood plain in Houston it floods about every 5 years.
The below quote is from Darwinian of a few days ago.

"Okay, you guys just arm yourself with the Bible, good will and the willingness to negotiate and see what happens."

My reponse below is also to any that are trying to say negative things about anyone on the forum. We are all in this together and being gloomers is not going to help much.  I am a DOOMER but I am not a Gloomer.  It will happen, it will be bad, but so what, get out there and do something. ... my post

You know, you seem more pessimistic all the time. I am a Christian and I know we will not get out of this life alive.  So where do we stand that is all that much different???

 AW you say that I can't be a christian and get out of this life like you a non-christian can.  See above.

 You think I won't try to stop the madman from harming the little children and you got another think coming.  but if the madman wants to take me out, his aim better kill me in the first shot.

 I have literally died twice in less than One year.  Death has no meaning for me at ALL.  I have been on the ground with literally a cop over me within the last week, I was without fear.  I only wanted to let them know how to treat the thing that was killing me.   I survived by keeping a cool head and letting the people with the EMS treat me and they had the odd habit of asking me If I wanted to be in treated at the hospital when I got there.  LIKE DUH dudes.

 Sure the life will be hard, duh like what part of Life is easy now.  My dad who is 70 works 40 to 50 hours a week.  Cause though he could retire the edge on bills are a bit high and he is easily bored.  I have damage to both my legs from the first bout of Blood clots, and I can still do the things I have said I can do.  The Pressure Hose allow me to be up the 20 hours a day I like and not worry about it too much.  If the hose goes, I just have be down for 8 to 10 hours straight, every 2 days.  Still giving me the 5 hours or less per day sleep timing.  I cat nap, I have always been a cat that way.  I have eagle sight and there are few places a sniper can have a clear view of this house.

 My dad was a sniper in the Army, and an explosives expert, and I am the pyro king of the family, I can make things with chemistry he can't.  Life is full of choices.  Do not limit me by your choices, only limit yourself.

 That last line goes for everyone on this forum.

 Stop limiting me or others when you think I or they can not do what you can not do.

 I can live in the wild with just a loin cloth, heck, I can live in the wild without the loin cloth.  You limit me by saying that I can not do something.   American Indians would laugh at most of you folks when you tell me that I can not last more than a few days without The internet. or TV or whatever you think I need.

HAhaHA I laugh along with them at you too.

Charles E. Owens Jr.
Author at Large aka Dan Ur
The Bear and the Cat and the Eagle guy.
My getting out there and doing something.

I send a general mailing about once a day or once every 2 new posts whichever is greater.

Didn't you post this exact same comment yesterday? It doesn't seem like it has much to do with TOD.
I'd like to suggest that we let what happens in Vegas stay in Vegas, so to speak.  Don't bring old arguments into new threads.  Keep them where they started.  If you must continue them, continue them there.  
Pleasse, pleeease, pleeeease!
Three times the charm I always say and the mind of a mad man is warped and not at all prefect.  I am never more warped that when i spend time on here typing to people who just don't seem to listen to some of us that listen to the noise of the machine and here the here in the here.   OIL CEO where are you when I need you????

Leanan, then I have to say to you the most surprising thing .......... Ditto.

Peru's Liquid Hydrocarbons Output Down 5% in October Due to Protests

Peru's total production of hydrocarbons liquids in October this year fell 5% to 3.3Mb from the same month in 2005, largely due to protests from indigenous communities, state hydrocarbons promotions agency Perupetro reported on its website.

...Gas production in October also fell 6.9% to an average 211Mm3/d as a result of lower consumption by thermo plants and maintenance works carried out on local firm Aguaytia Energy's block 31C, news agency Andina reported.

This seems to be a trend we're seeing more and more of.  You can't even call it NIMBYism, really, because the people protesting are not the consumers of the energy in question.  

The profoundly locals are tired of having the rest of us treat their profoundly locale as a commons (Nigerian Swamp Trolls are another good example).

I think this trend will continue until the US of A follows the former Soviet Union (hopefully relatively peacefully, unlike our first attempt with that damn Republican President in the War Betwixt the States).

I bet Canada abandons NAFTA before they make their citizens suffer for the sake of the gluttonous US...  

And eventually some Energy/Water/Other Resource Rich States in the US might eventually grow tired of Demand from Needy Washington (Federal) and the Nipple-seeking states with Unsustainable Metropolises.

Matthew Simmons wrote a paper in the 90s arguing that oil prices could be manipulated by a few speculators.


Interesting. I wonder if he still believes this is possible?
CERA's at it Again

DJ CERA Report Slams Peak Oil Theory As 'Flawed'
(Dow Jones 11/14 11:00:06)

 By Masood Farivar

  NEW YORK (Dow Jones)--Peak oil, the controversial theory that global oilproduction is at or near its peak, is flawed and misleading and underestimates the role of technology and supply growth, Cambridge Energy Research Associates said in a report released Tuesday. "Put simply, the case for the imminent peak is flaw," the report said.In the report, CERA, a leading energy consultancy and a long-standing critic
of Peak Oil, acknowledged that the world's oil resources are limited and that production will eventually slow down.  However, instead of a reaching a peak, it said, a "plateau will occur - butnot tomorrow, and supply will not 'run dry' soon thereafter. We hold thatabove ground factors will play the major role in dictating the end of the age of oil."

Not again.  

Why'd they decide to pop out of their box today?  And I love how they're identified as "a long-standing critic of Peak Oil."  

The jist of the CNBC sound bite on
the CERA estimates of nearly 4 Trillion
barrels of crude ( includes unconventional
sources of course ) .... was PO ?? No worries !!
Maybe a long plateau with the emphasis on long ..


Why'd they decide to pop out of their box today?  

Lead article on Page 1 of WSJ "C" section yesterday was on Peak Oil. Maybe repsonding to that?

Perhaps to keep the 'Markets' calm until after the holiday season?

Let's see which is the theory - Peak Oil or an undulating plateau for 30+years (CERA)?

One has been proven in the past...the other one hasn't.  

It's all about population!

Perhaps CERA released their report to counter Khebab's analysis yesterday...Naaaaa...that would be conspiratorial!!
Whenever CERA makes front page news, I always interpret that they think they have to "defend" their view.  The louder they try to defend, the more likely I think they're nervous.
I love how CNBC, in announcing the latest CERA report, named Yergin the "most trusted" energy analyst. How many times does your forecast have to be inaccurate before you lose the "most trusted" status?  

I also you have to love the logic that because people have claimed peak before and were wrong, peak will never occur.    

I also you have to love the logic that because people have claimed peak before and were wrong, peak will never occur.

I am only aware of one case where the peak was called to soon. Namely by Hubbert who in 1971 called for a peak between 1995 and 2000. And if not for the fall of the Shah of Iran, the oil embargo and the Iran-Iraq war, he probably would have been right on the money.

Weren't we supposed to have $38 oil this year?    I want my $38 oil!!!    

Sorry...couldn't resist.

I have a question for the people that see the big picture:  

This is a change of direction for him, since he isn't saying that oil production is going to grow without end,  he is saying it is going to stay the same(for an inordinately long time - 3.74TB - right).

So is he admitting we cannot grow - at least?

Since in a plateau oil consumption has to remain the same roughly - mitigated somehow.    

My problem is that would indicate that economies cannot grow then,   and that is the problem.

It's all about population!  

Daniel Yergin has been remarkably consistent in his views that there will be no near-term peak (i.e. before 2030), and that the peak, when it comes, will be a multi-decade undulating plateau and not a sharp peak. In early 2004, in an op-ed piece for the New York Times titled Imagining a $7-a-Gallon Future (paid TimesSelect subscription required), he writes

Yes, oil is a finite resource, and fear of running out has always haunted the petroleum industry. In the 1880's, John Archbold, who would succeed John D. Rockefeller as head of the Standard Oil Trust, began to sell his shares in the company because engineers told him that America's days as an oil producer were numbered.


Those who don't believe a shortage is imminent do not deny that a peak will eventually be reached. They just believe that it is much farther off into the future.


''You can certainly make a good case that sometime before the year 2050 conventional oil production will have peaked,'' said the head of exploration for a major oil company. He and others believe, however, that oil production will simply plateau, and then farther into the future begin to decline.

So, no, today's press release and report is most definitely not a change of direction for Daniel Yergin or CERA. Rather, he and his firm are doubling down on their no-near-term-peak argument.

As for your second point, no, he is not saying we can't grow, either.  Rather, he is saying there is plenty of time for substitutes to become sufficiently available to allow energy consumption, and thus economic growth, to continue.

I tend to agree with Khebab that his exit strategy will be to increasingly focus on the "above-ground" factors which are limiting oil production. Indeed, he wrote an article titled Ensuring Energy Security for the March/April 2006 issue of Foreign Affairs.

What really angers me (not just pisses me off) is that people like DY and CERA are, in essence, molding public policy.
Yes the change and more so the timing is interesting.  Publically we stand for 'x' assertion however caveat, caveat, caveat...

I highly recommend a public response as a signed statement from the TOD community.

Weren't we supposed to have $38 oil this year?    I want my $38 oil!!!

 Sorry...couldn't resist.

   Well, back then $38 was 46 Euro. Now 46Euro is $58, which is what you have for oil today.. So you actially have oil for $38 of year 2002 dolars.

    Sorry...couldn't resist.

How Fun!

Unfortunately it just good news for the EURO since Oil is still priced in USD.  

So oil is still $58 USD, maybe only 46 EURO.    

Let's not play the currency game,  it makes the US stock market look bad...not fair.  

It's all about population!

It's a little bit more complex than that. The dollar oil price is just a measuring stick, it does not influence the level of the oil price. Oil prices don't track the dollar, they have their own independent supply and demand determined price.

If you use the Euro to buy actual US dollar assets you gain the full benefit of the excahnge difference as the dollar asset price has stayed the same, do the gain in the Euro is pure gain.

Oil is not a dollar based asset. Part of the increase in the price reflects the weak dollar.

So yes, the weak dollar makes it cost more for US dollar economies to buy oil and less for Euro economies, but that has nothing to do with the dollar price of oil. It would be the same for buying japanese assets and they aren't priced in dollars.

We hold that above ground factors will play the major role in dictating the end of the age of oil

That's their exit strategy, their forecast will be wrong but not because of peak oil.
It's a bit similar to the 'peak population' curve that we are headed for. When it is evident that 'peak population' has occurred, the pessimists can point to it as vindication of their arguments for overshoot and dieoff. The optimists will point to it as the benign demographic transition in progress.
"That's their exit strategy, their forecast will be wrong but not because of peak oil. "

I think you're right khebab.  They will blame the Symptoms instead of the Cause of the symptoms.

They ignored or didn't recognize the inevitable and unavoidable Symptoms of peak oil.  When their test-tube world forecasts fail they will blame that which they overlooked or ignored.

Not just CERA.  I think that TPTB, pundits, etc will blame a decline in oil extraction on anything they can think of, rather than geology, for many years after the peak.  This is analogous to the denial of, e.g., major unemployment, that was happening several years into the Great Depression.  And of course we've heard from Westexas about the denial of oil decline in Texas for many years after the peak there, even today (35 years).
"... will blame a decline in oil extraction on anything they can think of, rather than geology, "


They ignore what history and biology tell us about "above ground factors" when resources become scarce.  

The truth is "above ground factors" like geopolitics and resource hoarding etc are inevitable and they simply ignore this reality and instead use it for an excuse for their failed pRojeCtionz.

Their model of the world is a test-tube fantasy universe that has no bearing on reality.  


Complete press release is here:

Peak Oil Theory - "World Running Out of Oil Soon" - Is Faulty; Could Distort Policy & Energy Debate

A summary and link to the press release is also featured prominently on their home page today - http://www.cera.com

The report referred to in the press release is Why the Peak Oil Theory Falls Down: Myths, Legends, and the Future of Oil Resources, by CERA Director of Oil Industry Activity Peter M. Jackson. Apparently the report was released today. I did not look hard for the report but it is probably not free.

Correct Model for Post-2030 Oil Supply is Undulating Plateau

They still think the peak will be in 2030.

I'm reminded of a Simpsons episode where a con-man insists that his plan isn't a pyramid scheme because he uses a trapezoid.  Likewise, CERA doesn't believe in PO, they believe in undulating plateau oil.  
I think I'll start my own consulting company and come up with a geological formation to use as my metaphor.  Then I can say "You fools, it isn't peak oil, it's "glacial moraine oil," or "laccolith oil.""
It's not a Peak.
It's a trapezoidal approximation.
What impressed me most about the CERA report summary is it made reference to a plateau followed by a slow decline. This seems a tacit agreement that total liquids production is at a capacity ceiling. In other words, WestTexas and Khebab are wrong, but their figures are right??? Also, no mention of future costs and demand destruction. Maybe those are in their report behind the pay firewall, and I'm not planning to pay.

Even if CERA is right and peak liquids doen't happen untill mid century, shouldn't we start planning a fossil fuel depleted future now? 40 years seems not very long to transition the economy of the world.

What impressed me most about the CERA report summary is it made reference to a plateau followed by a slow decline. This seems a tacit agreement that total liquids production is at a capacity ceiling.

Are you interpreting what they're saying as "we're entering the undulating plateau regime now, which will last until 2030?"

I didn't interpret the report that way. My interpretation is "up and to the right until 2030, then a several decade undulating plateau (above-ground factors permitting)."

I noticed that they did not put out any annual production numbers, but if you assume a 1-2% increase for the next 25 years, that puts annual production at around 110-140 mbd.

Another point I noticed was that they went into considerable detail arguing that the tail would be a gradual decline, not a precipituous dropoff. For example:

[Hubbert's] 1956 analysis could never have incorporated the impact of giant discoveries in Alaska and the deepwater Gulf of Mexico, and therefore couldn't have predicted the production profile for the U.S.  As a result, total cumulative U.S. production between the high point in 1970 and 2005 exceeded Hubbert's predictions by the equivalent of more than 10 years of US production at present rates.

Hubbert-posited post-peak reservoir decline curve assumptions are rebutted by observation that the geometry of typical oilfield production profiles is often distinctly asymmetrical and does not generally show a precipitous mirror-image decline in production after an apparent peak, even without the application of new technology or enhanced oil recovery techniques.  As a result, in the US Lower 48 where Hubbert came closest to accurately forecasting a peak, oil production in 2005 was some 66 percent higher than projected by Hubbert, and cumulative production between 1970 and 2005 was some 15 billion barrels higher, a variance equal to more than eight years of US production at present rates.

And yes, there was no real mention of the costs or economics of extracting and refining all this oil.

The difference between Westexas/Khebab and CERA is staggering.

Worldwide oil production will rise by more than 50 percent to about 130 million barrels a day around 2030 before output plateaus, the report said.

Global Oil Output Won't Peak for 25 Years, Yergin's Group Says

Is there any transparency at CERA (any at all?) which would allow us to compare Kehab's Types 1-3 depletion predictions against CERA's Type-infinity growth predictions?
Even if CERA is right and peak liquids doen't happen untill mid century, shouldn't we start planning a fossil fuel depleted future now? 40 years seems not very long to transition the economy of the world.

It is classic neo-cornucopian argument that continually puts off any reckoning on environmental or resource issues until conveniently far into the future.

For definitions, a cornucopian is someone, like Julian Simon, who literally believes (or believed) there are no limits. A neo-cornucopian will agree that there are limits, but that we haven't come anywhere close to these limits yet, so don't worry, be happy.

Cal: What is interesting (mathematically) is that the Yerginizer needs to more than TRIPLE the global oil reserves to push the peak out 21 years from ASPO's estimate. At least in terms of a peak year, the cornucopians and the doomsters are starting to inch together (albeit slowly).
Everybody should read Albert Bartlett's articles to understand the prospects (or lack thereof) of sustained exponential growth in the rate of consumption of a finite resource.  One of his simple-math (but nonintuitive) results is that the initial size of the resource pool does not affect the time-to-depletion much, as long as the exponential growth in consumption rate continues.  In reality, the 7%/year growth rate in the 50's and 60's has slowed down a lot, starting with the 70's oil shocks.  But growth is still there, now accelerating again thanks to China and India.  Bartlett reflected on his original message from a 20-year perspective here

Moreover, even if we had a plateau of oil supply for a while, that would be fatal to the growth-based monetary system.  If we ramped up coal use to compensate, that would be fatal to the climate, and won't put off the End Of Growth for long, as the same arithmetic would make the "200 years" of coal reserves into just a few decades.

See also Bartlett's "The Massive Movement to Marginalize the Modern Malthusian Message"

"This is the fifth time that the world is said to be running out of oil," says CERA Chairman Daniel Yergin.

I wonder how many times we have to roll the dice until we finally stop being "lucky"?

Yergin still engages unsupportable attacks typical of a politcial commercial.

To say that we are here to discuss how oil supplies will 'run dry' soon, is not just a vast overstatement, but outright lie.

Has he no shame or integrity?

I'm contacting the WSJ about this.

Hopefully the Yerginites will go the way of the Intelligent Designers and become nothing more than a religious fringe movement.
Alas the "Intelligent Designers" are still a growing industry!
And as the following of the Derelect Designer grows, so grows the following for the The Second Helping of christ-godz.

I think christ-godz is also believed to be on his way (right after the 12th Imam) according to the Radical Evangelicals of Islam...

I wonder if Yergin takes this sort of thing into account in his projectionz?  Do godz appear on Danny's drawingz boards?

"What follows is the full text of President Ahmadinejad's letter to the German Chancellor.

... In my letter to President Bush, I spelled out a long list of contemporary global problems.

Where are the roots of these problems?

How long can they continue?

Do you not think that the main root lies in the fact that some of the rulers and powers of today have distanced themselves from the teachings of the divine prophets, the teachings of Abraham, Moses and Jesus Christ (peace be upon him) and the Prophet Mohammad (peace be upon him) ..."

Shame or integrity...

He has many bills and many masters likely.    

This is not the message of a purist,  the books are cooked.

It's all about population!

The msnbc site has a link to the video of the interview with our buddy Dan
they just put the story on the cover of MSNBC.
Thanks for the video link.

"We are not going to run out tomorrow."

Now I feel comforted.

Interesting article about micro CHP systems, or gas-fired combined heat and power units which generate up to 4 kW electricity and heat your house at the same time. Efficiencies up to 90%--better than getting your electrons from the grid. Pricey, though: $13k-$20k installed. Can a homeowner get payback before natural gas becomes scarce?
CS Monitor ignored the whispergen

$13K for a whispergen is far cheaper than the $25K a few years ago.

At one point there were in England for $5K.  

This is interesting.  

But at Home Depot you can order a NG generator (16KW or bigger) installed for about $6K CAD(could be more/less elsewhere).

16,000 Watt (LP) / 15,000 Watt (NG) Home Standby Generator
 (This price in USD)

But,  I personally won't invest in too much NG hardware as I think Peak NG(in NA) is probably a more volatile problem in the short term.  

It's all about population!

The idea behind CHP is you get some electrical power in the burning of fuel for heat.

The Home Despot option isn't heat and power, its all about power.

"Can a homeowner get payback before natural gas becomes scarce?"

This is the critical question.  

This system is an example of Fuel Twitching - switching to and fro between non-renewable energy sources as prices between resources fluctuate.  

It is a momentary band-aid efficiency measure but not a viable solution for the masses for the future.  

The trucking industry is trying to adjust to higher fuel prices.

Some suppliers are trying to improve the aerodynamic efficiency of heavy trucks:


And the main industry trade association in the US is seeking mandated speed limiters (governors):

Plutonium found in Iran waste facility

VIENNA, Austria - International Atomic Energy experts have found unexplained plutonium and enriched uranium traces in a nuclear waste facility in Iran and have asked Tehran for an explanation, an IAEA report said Tuesday.
Maybe the IEA should have a talk with the North Koreans about Iran's traces of plutonium.

North Korea's plutonium pile attracts Iran

...The belief that Iran and North Korea are talking about plutonium stems from a recently reported offer of oil and gas from Tehran in exchange for nuclear technology.

The discovery by the International Atomic Energy Agency (IAEA) in 2004 that North Korea had sold an estimated 1.7 tons of uranium to Libya established a precedent for the sale and showed how hard it is to stop, diplomats say.

The Americans were aghast to learn last year that while engaging in disarmament talks, North Korea had made enough plutonium to amass a stockpile of about 43 kilograms, perhaps as much as 53kg. For the first time since the nuclear crisis began in 1994 it has sufficient fissile material to sell some to its ally while retaining enough for its own purposes...

( I wonder if the "small" nuclear test by North Korea was small for good reasons - to conserve and to sell .... and I wonder what Iran means when it says Israel will "disappear Soon")

Unsurprisingly, this is an old story from about 2/3 months
ago.  It reads like the usual shrubco/neo-con slander to demonize for war propaganda.  Plutonium is availabe today
only as a result of uranium fission 'breeder' reactors,
and since Iran has no operating ones, they can't have any plutonium!

Plutonium is availabe today
only as a result of uranium fission 'breeder' reactors,
and since Iran has no operating ones, they can't have any plutonium!

Since the IAEA measured plutonium in Iran, some aspect of this reasoning must be incorrect.

Unless they are breeding plutonium or bought some from someone else...
*OIL DEPLETION CONFERENCE, LONDON 7th NOVEMBER* Link to presentations - will stay live for two weeks. http://www.energyinst.org.uk/index.cfm?PageID=1106 There are some great presentations here. Have fun! But stay polite:)
Link to presentations - will stay live for two weeks.


There are some great presentations here.

Have fun! But stay polite :)

Thanks Euan:
Thanks so much!

Everyone should at least read Skrebowski's update with great graphics and comments. Bottom line is he thinks 2010-2011 for the peak, but realizes there are enough unknowns for some error. A very solid presentation, in my opinion.

The depletion/decline rate issue is especially perplexing, and he does a nice job looking into this.

Over on TOD Europe - Chris Vernon has a review of 4 of the talks and some interesting discussion.  I'm doing a piece on the IHS energy talk that should hopefully get posted later this week.


I've invited two of the talks as guest posts:

Michael Smith
Christopher Smith

Great pictures and charts in both.

Again, thanks and excellent information. I also appreciated your comments in the thread. It is increasingly difficult for me to understand the minds of these "modelers" showing increasing North Sea production, CERA and their projections - do they really believe what they are saying? I
My Google alert for peak oil stories came up with this link on the WSJ.   Titled "Dead Dinosaurs", the blurb reads:

"Ever since oil prices started falling from their peak levels this summer, investor interest in the idea of peak oil has declined as well.

But peak oil isn't about the economics of oil but the geology of it. "Price is a very murky window with which to figure out what's happening with oil supply," says Ken Deffeyes, a retired Princeton geology professor and leading peak-oil proponent.

Peak-oil theory says that when half of the world's oil has been pumped out ..."

The rest is behind a pay-wall.  Anyone have access?

This was discussed right at the top of yesterday's DrumBeat.  Sounds like it was a fairly brief blurb.
Oops, sorry.  I read your headlines and decided I didn't have time to check comments yesterday.
Don't fret.  I wasn't chiding you.  I don't expect everyone to read everything - especially not the comments, which are often rather wild and woolly.  I was just pointing you to the previous discussion, which included the graph that came with the article, IIRC.
Unfortunate times for Iraqi academics.  In the largest mass kidnapping to date, today gunmen abducted as many as 150 Iraqis from the Ministry of Education.  Apparently, many were later released but around 50 are still missing.

Dozens kidnapped in raid on Iraqi ministry

Iraq ordered the closure of all its universities this morning after up to 150 scientists and staff were kidnapped from the offices of the Higher Education Ministry in Baghdad.

The country's education minister immediately informed parliament that all universities across the country would be shut until improvements in security were provided.

Iraq's academics have been increasingly targeted in recent months, most recently with the killing of a university dean and a prominent Sunni geologist.

At least 155 education professors have been killed since the invasion of 2003, while hundreds more have fled the country.

Academics are believed to be singled out as they are often secularists whose views are considered increasingly threatening as Islamic fundamentalism spreads in the country.

Has anyone heard of this company before?  They rent a solar panel system to you for a fixed per KWH price based on your current utility KWH rate.  The rate is fixed by contract for up to 25 years.  Interesting concept.


Citizenrç REnU program packages solar power for you in a simple and smart way. Plainly put, the Citizenrç Corporation pays for, installs, owns and operates the solar installation. You don't have to worry about maintaining the equipment or any of the other concerns that come with making an investment into solar power. All you are required to do is pay for the electricity generated from these panels, at a fixed rate that is at or below your current electricity price, for up to twenty-five years. Just take a look at some of the benefits that our customers will receive:

-No upfront investment, no need to become a financial expert to justify your investment.

-No waiting for rebates.

-No headaches with the city and the utility; let us handle the engineering, procurement, and construction.

-Performance-based contract means you only pay for what is delivered. And since the solar power you generate will reduce the need for electricity from your power company, your net payment should always be equal to, or less than, what you're paying now.

-Hassle-free operating and maintenance; it's handled by the experts.

-Actual hedge against future utility price increases: you can "lock in" your rates for the electricity generated from the solar system at your home for a period of up to twenty-five years, far longer than the guaranteed rates offered by other electricity providers.

Similar program here in Wisconsin:
CEC fulfills its mission to promote the conversion from fossil fuel-based energy systems to renewable energy systems through two separate campaigns. The first involves large scale installations for which CEC retains ownership. It is from these ventures that the bulk of CEC capital is produced. The second is private residence solar water heating system installation.

CEC owns and operates multiple large scale renewable energy systems on behalf of its members. They are housed by varied facilities from schools, YMCA's, and hospitals, to correctional institutions, multi-unit housing, and industrial and commercial facilities. The renewable energy that is produced is metered and sold to the respective recipient on behalf of CEC members. Ownership is retained by CEC for the duration of a 20-year contract, during which time the respective facility purchases energy units from CEC.

CEC also sells private residential solar water heating systems directly to homeowners. As a cooperative which purchases equipment and goods in bulk, we are able to enjoy the benefit of lower priced goods and products. This savings is then transferred to the homeowner, who may otherwise have paid much higher premiums for the same service without the assistance of CEC. In addition, we help sort through the paperwork which must be completed to obtain valuable rebates from the state. A complementary CEC membership is gifted to all homeowners who install heating systems through the coop.

Wow.  So how are they planning to make any money?  I expect that electricity rates will increase in the future, so why would they want to lock in today's rate?  At today's rates it will take many years to pay back for the cost of the installed system, let alone for them to make a profit.  And they'd need a huge upfront capital investment, for a rather slow return - and without the promise of greater savings in the future, since they lock in the rate.  It all sounds too good to be true.  What's the catch?
If you go to the main company page (upper right hand corner select the drop down for "corporation"), you will see that they are using solar to become essentially a utility company.  Instead of centerally located generation, they are using distributed generation.  They own the solar panels and you sign a long term supply contract with them at the current utility market rate per KWH.

Just like other regular electric utilities, they have segmented their business into generation, transmission, and distribution.

They also own their own manufacturing plant for PV.

"Our initial manufacturing plant - an integrated wafer/cell/panel line - has a designed PV production capacity of 500 MW per year. The Company expects the plant to be commissioned in Q3 of 2007 at 20% capacity, then scaled-up to 100% in the subsequent 15 months."

Very cool and very ingenious.  The only competitive threat I see is if there is a break through with low cost PV that makes the "rental" model unnecessary.  

The best part of owning the solar panels outright is that you reach a break even point in which all KWH generated going forward are free.  You loose that with the rental model.

"The best part of owning the solar panels outright is that you reach a break even point in which all KWH generated going forward are free.  You loose that with the rental model. "

Many customers do not want to take on the "risk" of the initial investment.  Or they simply can't afford those up-front costs.

Sometimes the company will give the customer the option of buying the system outright at a later date.

The best part of owning the solar panels outright is that you reach a break even point in which all KWH generated going forward are free.  You loose that with the rental model.

I pay about $20 / month for my KWH.  A PV system (including panels and grid-tie inverter) that would produce that much electricity (about 2000 KWH per year, thus needs a system size of about 2KW peak) would cost (retail, installed) about $20,000.  So the simple payback time is 1000 months, or 83 years.  Even if it costs them only half that much (wholesale, plus they get the government incentives) it's still over 40 years.  And that's using a discount rate of zero, which would be fine by me (especially if future electric rates are higher) but not for a corporation (especially if they lock in the current per-KWH rate).  I still don't see how they can make money on this.

vtpeaknik - I'm by no means an expert on this subject but I do know this is viable on large-scale projects for solar hot water systems.

But the pricing for electricity is highly variable and for solar PV it again seems uneconomical at the residential scale. I do know there are utilities paying at least 22.5 cents/KWH for PV-generated electricity.  Maybe at bulk-purchase costs and higher prices per KWH it is economical.  

Maybe a niche market for now but that nich may grow dramatically in the next few years.e

There are probably many models like this and each may vary in it's approach.

In general, an energy audit is done first.  If the audit shows the alternative energy system can produce a monthtly savings over utility-supplied energy it becomes feasible.

If the savings are high enough (e.g. 5-10% or better) the company (or coop or whatever) splits this monthly savings with the customer based on some fixed rate (e.g. the customer's monthly bill drops $1000 so they pay X% of that to the company/coop/whatever).

In this case, as prices of the utility-supplied energy go up, the amount of money saved using energy supplied by the alternative energy unit increases, and the fixed percentage of that savings that the company/coop/whatever gets increases.

This is essentially a "utility" model and is an excellent idea.
Or, to use their own words:

PV is poised to make a significant entrance into the global energy mix. On the other hand, even though the technology has matured and proven itself in several applications, the principal reason for its negligible presence is that it has not been financially feasible in the major market segments like residential grid-connected solar power systems. The cost of PV for a residential application is presently between $8 and $10 per watt. Considering that a residential customer typically needs a 5 kilo-watt system, the upfront cash layout for the average Joe is approximately $40,000 to $50,000 – a sum that is not easily come by. Even after substantial renewable incentives from the State and the Federal government, the cost of electricity still amortizes out to about 21.5 cents per kWh. That is between two and three times the average cost of electricity – a cost premium that is a significant barrier and the main reason the PV market is still in its early adoption stage.

The present situation of the PV industry is the reason that Citizenrē is entering the scene. Citizenrē believes that photovoltaics should play a much more important role in our nation’s energy infrastructure, more than one fifth of one percent, and has actually laid the ground work to make that possible. The no up-front investment fixed price contract that is on par with present-day electricity costs is the mechanism that will push PV to the forefront. Without the primary financial barriers Citizenrē knows that we are at the edge of an epoch and that it is uniquely positioned to trail-blaze the commercialization of photovoltaics.

So how does it work financially for them?  Pennies from heaven?

First of all they own the manufacturing of the PV panels used, so there is no margin to pay for the cost of acquiring the cells.

Second, they own the cells and equipment sitting on people's houses, so unlike residential users, they capitalize the equipment on the balance sheet and depreciate it.

Third, as a business they are eligible for alternative energy credits (Federal and State) that are not available to residential users.

Forth, I suspect that in states that still have regulated electric utilities, the company will petition the state utility oversight commission to build a rate case to have the cost of generation (solar panels) added to the base rate KWH that everyone pays for in the state.  This is currently how regular utility companies pay for the building of new power plants and  I don't see how this would be treated differently.  

It is possible that the combination of all three items above subsidize the KWH rate low enough that they make a margin between their cost of generation vs. current market rates for customers they sign up.

Last week The Oil Drum carried some references to Christopher Mockton's article in the Telegraph debunking global warming. People wondered if he could be refuted. George Monbiot does so in this article.


"As for James Hansen, he did not tell the US Congress that temperatures would rise by 0.3C by the end of the past century. He presented three possible scenarios to the US Senate - high, medium and low. Both the high and low scenarios, he explained, were unlikely to materialise. The middle one was "the most plausible".

As it happens, the middle scenario was almost exactly right. He did not claim, under any scenario, that sea levels would rise by several feet by 2000. But a climatologist called Patrick Michaels took the graph from Hansen's paper, erased the medium and low scenarios and - in testimony to Congress - presented the high curve as Hansen's prediction for climate change. A memo sent in July from the Intermountain Rural Electric Association, a US company whose power is largely supplied by coal, revealed that Michaels has long been funded by electricity companies. "In February this year, IREA alone contributed $100,000 to Dr Michaels." Michaels, it says, meets periodically with industry representatives to discuss their activities in countering stories about climate change.

Pat Michaels's misrepresentation of Hansen's claims was picked up by Michael Crichton in his novel State of Fear, and somehow transmuted into an "error" of 300%. Monckton gives no source for his claim about Hansen, but Crichton's novel features in his references. The howlers go on and on. There is scarcely a line in Lord Monckton's paper which is not wildly wrong.

Yet none of this appears to embarrass the Sunday Telegraph, which championed his findings this week in a leading article. I think I know what the problem is. At a meeting of 150 senior journalists last year, who had gathered to discuss climate change, the chairman asked how many people in the audience had a science degree. Three of us raised our hands. Readers cannot expect a newspaper editor to possess a detailed understanding of atmospheric physics, but there should at least be someone who knows what science looks like whom the editor consults before running a piece."

I don't know whether it was mentioned before, but Monckton's article was also critiqued by RealClimate.

Cuckoo Science

I believe the Telegraph will be hosting a response from Al Gore in this coming Sunday's edition.

I've been reading ToD for a while now and not yet posted a comment, however I came across this earlier tonight and thought it was worth posting:

Dagestan oil expert killed in Russian capital

Text of report by Russian news agency ITAR-TASS

Moscow, 14 November: Zelimkhan Magomedov, the 50-year-old general director of the National Oil Institute and a native of Dagestan, has been killed in the south-west of Moscow this morning. He "was shot around 1000 Moscow time [0700 gmt] at 7 Ulitsa Kedrova [street]," the Moscow prosecutor's office said.

He was killed with two shots in the head, a law-enforcement agency source had said earlier.

"A criminal case has been opened under the article [of the Russian Criminal Code] 'contract killing', Svetlana Petrenko, a representative of the Moscow prosecutor's office said.

Igor Trofimov, prosecutor of the south-west administrative district, is now at the scene of the incident.

I wonder if he had anything to do with the leaked report mentioned in today's Drumbeat...

There was a global warming documentary on The History Channel tonight.  It turned out to be real "doomer porn."  Their talking heads predicted that climate change would result in the carrying capacity (yes, they used that term) of the planet being reduced from an estimated 8 billion to only 2 billion.  (Perhaps coincidentally, 2 billion is also the estimated carrying capacity of the earth without artificial fertilizers.)  

So how do we get there from here?  Six billion people have to get off the planet, they said, and the mechanism would be warfare.  (And I thought they were going to say "spaceships"...)

actually i find it quite mild.
it only mentions wars as the population remover. not famine, or disease.
Warfare! I guess they are in the "last man standing school" of peak oil survival.