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DrumBeat: May 31, 2006
Posted by threadbot on May 31, 2006 - 9:12am
Now for some wise words from the readers of The Oil Drum...
“He that will not apply new remedies must expect new evils, for time is the greatest innovator.”
—Francis Bacon, Essays
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My plan to reduce US Oil consumption by 10% in 10 to 12 years (and more after that) using mature existing technology.
A bad hyperlink and two phrases need changing.
But I am impatient to give out the draft link.
http://www.lightrailnow.org/features/f_lrt_2006-05a.htm
Any thoughts ?
Miami has it's plans and funding in place to put 90+% of the population within 3 miles of a station. It will just take 25 years with 50% FTA matching.
Denver likewise has a funded plan for 117 miles of light rail & commuter rail.
Salt Lake City (that noted hotbed of liberal activism) will have a vote soon to triple taxes so that they can build their 30 year plan sooner.
San Jose is desperately trying to figure out how to get BART down to them with available funds.
Northern Virginia is likewise trying to figure out how to pay for a 24 mile extension of DC Metro to Tysons Corner and Dulles airport and a bit beyond.
Maryland would like an extension of DC Metro's Green Line to BWI airport.
New Orleans has a wish list a mile long, but we are broke.
Seattle wants to extend their light rail line, now under construction, both north and south.
Like wise, Phoenix has its' first 20 mile Light Rail line under construction and funding for much more over 20 years.
St. Louis has hopes and plans. So does San Diego, Houston, Sacremento, Portland, New York City, and many more cities.
Increase FTA funding from 50% to 90% (that was fed matching % to build the Interstate highways) if a city follows the federal process and 75% FTA matching if they "just build it" and I can assure you, with VERY high probability, that you will see an explosion of new Urban Rail. All of the above plus others that are not now on the map (Kansas City, Cincinatti and Tampa come to mind) will be built. As oil problems persist and increase, the pace will increase.
The Canal Streetcar Line in New Orleans came in at %150 million rather than the budgeted $160 million. Late from original estimate but a month earlier than revised date.
Latest Dallas expansion came in under budget and there was a big fight on whether to use the extra $ for three more LRVs (rolling stock) or expand an overbooked Park & Ride lot. They bought the LRVs because they needed the extra seats and said that potential pax could take the bus to the station instead of Park & Ride (heresy in Dallas !.
Minneapolis and Los Angeles Gold Line Phase I came in under budget with extras to equal being exactly on budget.
The Cross Country Line in St. Louis is the most over budget light rail line that I am aware of. Some Rapid Rail (subway) projects have come in way over budget.
The link to the lightrailnow site is greatly appreciated. It makes a lot more sense than the overblown Energize America thing that was seen a week or so ago.
In general, there is too much hype about speed -- bullet trains and maglev, etc. That's fine for long intercity runs such as., New York - Chicago, Chicago - NW coast, Miami - New Orleans -LA. That's OK but it's for the longer term. (if there is a longer term).
I'm gratified that there are many projects already moving for local area transit, such as you and others have listed. Much more is needed. For Downtown - suburban - satellite towns, the objective should be: convenient and dependable access, get where you want to go in a reasonable time, safely and with comfort.
There are many millions of commuters and shoppers who will migrate from SUVs and older cars when these systems become available. Only by having public transit in place can we expect a "soft landing" as the oil crunch tightens.
-- Mort.
Mayor Candidate Terry Kilrea's anti-LRT website is here.
Comments, Alan?
I have not followed the developments closely, but before Katrina, there was debate on whether to tunnel though downtown or take the surface route. That alone would explain the uptick in prices.
IMHO, tunneling was the better option. Faster service (>lower costs, higher revenue long term) and keeps people out of the weather (>higher ridership).
But if bad cost estimation was the cause, then your authority needs some help.
In any case, Ottawa should approach TTC (Toronto) for expert help (they used to be great, now just "good"). Perhaps hire some retired TTC folk.
I hope you are correct. Certainly oil will drive rail hard. However, in California a high speed rail line for passengers between Frisco and Los Angeles has been delayed and delayed (again this year). It is/was to be routed through the Central Valley and take two hours between those two cities.
EnergyBizinsider has an article today on rail and coal shipments (sorry, I do not have a link but contact me if you want the entire essay):
The rail industry's return on investment has risen from 2 percent in the 1970s to 7 percent today. With the industry's improved financial condition, the rail companies are investing an average of $6 billion a year in infrastructure and equipment.
Rail operators say that it takes billions to upgrade their systems. And these investments are risky because it takes time to go through the regulatory and construction processes. And by the time any improvements are made, the entire economic scenario could change. That's why they advocate tax credits as a way to lessen their risks.
When diesel prices climb higher it starts to look real cost effective to widen a hole to run every piece of equipment cheaper, than to continue to pay higher and higher prices for diesel.
You could get real detailed and determine the cost per foot of a tunnel. Using that we can get a total cost. That's all the sunk cost there is. Once it's built, it costs little more to maintain. So if the ton mile cost to me starts getting really high due to petrol prices, then why not sink the cash now to use a new tunnel indefinatly?
In the end what is a better option to move freight across the country? It's surely not steam.
But this is relatively easy to do, digging down rather than blasting up.
Laying a 3rd rail (electric) in the tunnel can be an option. Few people will wander into a railroad tunnel (just not healthy). Little if any liability if they die once inside (it happens occasionally).
It's my understanding that it takes a mile to stop a train going 60 mph with full brakes, Why couldn't they just pull down the contact bar, and coast through the tunnel. At just about any speed they should be able to make it to the other side before coming to a full stop. Either that or add an engine (electric locomotive) to the end of the train.
Occasionally, a train comes to a stop in the middle of one of these sections, and can't get started again, but it doesn't happen often.
Folks say that dual-voltage locos can use third rails inside tunnels and overhead wires outside. That works for me.
Why reinvent the wheel ?
I agree that the US rail system should be electrified, regardless how much it costs. A cheap way to built high-speed rail lines is to run them along existing freeways, either in the median or by taking out a couple of lanes. The overpasses are already in place and the guideway is already graded and curved for relatively high speed. I can't understand why Jeb Bush doesn't like that idea.
Locomotives can use wires over the track except for tunnels. They could also use a third rail like Chicago's and New York's subways. (of course, lawyers will enter a holding pattern by tunnel entrances like the vultures they are)
http://www.ftd.de/karriere_management/business_english/77705.html
What is ironic about this, and it is a good article about the state of things, is that rail just about died completely in the USA thirty years ago. The creation of CSX was getting somebody off of life-support. Rail has made an incredible comeback in the last 20 years in this nation, though passenger service is still lagging, that is quite good.
And now Rail is the future. . .
P.S. this thread has been very good on rail - thanks to AlanfromBigEasy!
However, a comedian I saw recently may have framed the real problem with light rail best: "Women are the real cause of high gas prices because if you ride the bus or the light rail you can't get laid." Sure, gross overstatement and oversimplification, but the bottom line has some merit--as long as it is a desirable status symbol to drive your Escalade to work, even though you could ride the light rail for less money and time, people will still strive for the gas-guzzler. That attitude is what needs to change...
Asking women to stop being attracted to symbols of the ability to secure resources is like asking men to stop being attracted to young women with the 70/30 hip-waist ratio thing.
The reality is a true Powerdown requires women to be attracted to dumbasses who can't work well with others as these are the type of guys who fail in their ability to acquire resources.
In other words be attracted to men like George W. Bush, a guy who has completely failed in all attempts to make money on his own. (make money = pull energy out of the environment.)
Ladies of TOD, are you willing to make the sacrifice?
Best,
Matt
Someone else here put it best, we're going to do exactly as we're doing until we can't and then we won't.
10,000 years from now when some new form of human(s) have evolved due to all the radiation and pollution that will get unleashed as we slide down the backslope of the global energy production curve, the cheerleaders will still be fucking the football players and the "hippies" (for lack of a better word) will still be waiting for the great "paradigm shift" to happen.
Best,
Matt
bados
"The term Götterdämmerung is occasionally used in English, referring to a disastrous conclusion of events."
http://en.wikipedia.org/wiki/G%C3%B6tterd%C3%A4mmerung
The FIRST NERD: I bet the caveman who invented fire on demand by friction or banging flintrocks together was very popular with women. "Hey Grok, get your rocks off over here. I am cold and want to snuggle by a warm campfire."
Bob Shaw in Phx,AZ Are Humans Smarter than Yeast?
Sadly, that guy's descendants (he has many, I'm sure) are busy working for weapons makers figuring out better ways to blow stuff up. That is the descendants of his that are part of our tribe.
If there in that other tribe, their busy helping people figure out how to blow themselves up.
Best,
Matt
(A lot of peak oil philosophy, by the way, is asking men to take on women's roles and styles of concern, and the reason women don't seem much interested may be they are already doing it.)
- Interestingly, Ive been approached in last month by two women who just want my sperm as a donor and are willing to sign legal contract saying I have no obligation whatsoever - I think our Darwinian impulses, refined and intensified through natural selection, are not at the 'cognitive' level, but rather deeper at the feel good neurotransmitter behavioral level - to assess these proposals is probably unique in our history (I am strongly leaning towards not doing it, primarily for the weirdness of it, but it was certainly flattering)
- I think the energy subsidy of 57 boe for the average american has promoted equal rights in more in one or two generations than any period of pre fossil fuel history. I expect Peak Oil will reverse much of that. It has been scientifically shown that women are slightly smarter than men and men are better (slightly) spatially but other than that pretty cognitively equal. However, men are on average bigger and stronger. Those traits in an energy constrained world will tend towards doing more physical labor, and our more traditional roles of the past may reassert. Huge energy avialaibity has been a great equalizer in western society. And of course, when I say 'on average' I mean it in the same way that men are taller than women, 'on average'. The two distributions overlap but the mean is higher for men (on height).
I have no doubt won numerous new friends with this post, but its just my opinion and felt like voicing it.Regarding your second point: where would Amelia Earhart have been without fossil fuels? Probably back on her family's farm in Kansas churning butter and pumping out kiddies. Read somewhere she was pretty handy with a shotgun though so maybe she would have been out hunting also.
Best,
Matt
Men are "superior" to women in cultures that are under population pressure. Because the number of females determines the fertility of a population. One male can keep several females pregnant, but one female can only have one baby a year, no matter how many mates she has. Farmers usually want to increase the size of the herd, so they kill the males and keep the females.
But historically, our herd has been too big. Killing the females helps control population size. And obviously, it's a lot easier to do that if females are perceived as being weaker, less intelligent, less valuable, less human.
Sexual inequality is what allows female infanticide. which has been the traditional method of birth control through much of human history.
Breastfeeding has been a much more important form of birth control.
Once people took up agriculture, the population exploded, both because farming supports higher population density and because it resulted in more closely-space births.
The foraging lifestyle is actually quite good, but it requires such a low population density that the dieoff would have to be quite severe. I don't see things getting that bad.
To have not made money on his own he is the leader of the most powerful nation on earth and I'll wager he has a bigger house than you. He obviously can work with others he got elected. How many people make money on their own. I make good money as a medic, but without a medical director I can't work. Lawyers depend greatly on their staffs don't they. Since the dawn of time we have been communal. Hunting and foraging and farming in groups. It is hard for one person to do anything alone. My fiance does not care what car I drive...and honestly I don't want to share my DNA with someone that shallow.
The quarter back types fill the same Alpha Male slot you claim and George Bush has. Thats why chicks dig powerful men...back in cave man days they got bigger better shares of the hunt if they gave it up to the best hunter. How is your command presence? Can you inspire people to do great things?
My "command presence" is probably average to above average. Once the Peak Oil NYC folks post the speeches (mine included) from the Energy Solutions conference you can judge for yourself.
Best,
Matt
I've thought about your link between BTU's and $ and think it is post hoc. If I quit work and sit at home this does not help powering down. I still eat consume etc. If enough people do this then there will be a collapse as nothing gets done. If I direct my time energy and money toward sustainable/ecological decisions then less of my money promotes fossil fuel consumptions and I still work. Why is Powerdown so neccesary to you? If (big if and difficult to make happen) everyone recycled and had garden plots and made small decisions every day to benefit the enviornment/future, we would lower our consumption of nonrenewables significantly. Maybe I am not understanding your logic (I would not want to understand something which my paycheck depends on)
Matt
amen bro.........
I'm sure the cost would rise as you go farther out, but you would need a real estimate of what the average track mile will cost and then we need a total cost once we know how much track is currently there. Not to mention there are 8 different classes of tracks. Are we electrifying all of them? If so, we need to prioritize these.
Next what would it cost to retrofit a fleet of engines that shouldn't be scrapped? I think the over all plan is doable, and it's big enough to make a lot of people think it can't be done. This is the challenege that we should embrace and tackle. 10 years does seem short even at a breakneck speed due to the lack of power plants to support this. I think the powerplants will be the limiting factor intially and would last for a long time. I think starting now we could start to become self sufficient in more like 20 years.
Brookville is the only US manufacturer of small locos (GE & EMD (former GM) make the big ones). Their VP of engineering, Larry Conrad, has told me that they could rework many diesel electric locos into all electric locos and would welcome the work. How many, how fast ? Add $$ and the answer will come out.
He did remark that all electrics were simpler than diesel electrics.
I have heard (~2002 data) that it costs $2 million/track mile to string overhead wire. I don't think this # included power supply stations. Recent copper price increases have undoubtably increased that #.
Tunnels are "interesting" from a cost POV. Locos can switch from overhead to 3rd rail "on the fly" but 3rd rail has voltage limitations. A soluble problem IMO.
I would talk to SBB when you get serious. They definitely know what they are doing ! Also some of the Japan Rail people (I know the foremost US expert on Japanese rail).
I can contact someone that worked on Amtrak's electrification of NEC New Haven-Boston line. No doubt done with the efficiency and cost effectiveness for which Amtrak is noted.
And Black Mesa and Lake Powell (a 78 mile single track electric rail line in AZ) is worth a phone call.
The Russians are going crazy electrifying today. Much could be learned from them.
It is my understanding that there are differences in design philosophy for Swiss vs. Japanese vs. Russian overhead.
I will agree that this is a total picture that probably won't come to fruition. Wouldn't it be easier in many cases to simply add new tracks in high density areas rather than run lines into far flung places? If we made this a 20 year project it might get done under $1 Trillion, but I doubt it with inflation over those 20 years. It would take a lot of gov't money and a lot of pain for the people to want this.
AFAIK, UP & CSX share three tracks coming out of WY coal fields that they beat to death and are looking at the possibility fo a 4th track.
UP is clogged from Los Angeles to El Paso and is in the middle of double tracking that line.
Los Angeles to Omaha Nebraska is double tracked (some triple I think) and is clogged and being beaten to death.
San Francisco to Los Angeles is at capacity.
Electrifying just these four lines (which adds a bit of capacity) would electrify a very good % of UP's total ton-miles and save a lot of fuel. Only 4,000 or so route miles.
Then look at other options (Phoenix-Tuscon spur, Montana coal fields line, El Paso- Houston-New Orleans, Omaha-St. Louis-Chicago and so forth) that are worth doing in the first wave.
Start with the biggest "bang for the buck" first and then work down from there.
If, in 10 year, UP has electrified 22% of their route miles carrying 3/4 of their ton-miles, so be it.
I wonder about the economics of electrifying a short line that carries 4 or 5 trains a week. But leave those questions till MUCH later.
Just one Iraq War cost aught to do it...
Switching between 3rd rail and overhead power supply takes place all the time in UK, for example the thru Thameslink services between Bedford and Gatwick Airport which use overhead wires north of the Thames and 3rd rail south of it. Not least the high speed Eurostar services still use 3rd rail power supply between Fawkham Junction and Waterloo pending completion of the final section of the Channel Tunnel rail link next year. For 90% of the distance to Paris / Brussels they use overhead wires as route is on new high speed dedicated track but Eurostar trains have to use c150 year old routes for the final section into London until 2007.
I sense a bit of irony on this one. That line is [almost?] exclusively used to haul coal to the Navaho Power Plant in Page.
Alan, you have undoubtedly thought long and hard about the advantages of electrified rail. It certainly seems like the optimum answer where transportation by ship or barge is not available. ... but a real world question: Wouldn't just moving long haul freight from trucks to railroads get us most of the way there?
One other comment: I had a long discussion with a friend of my brother who was deeply involved with the Salt Lake City Trax. For fairly obvious reasons I remember the exact date --- the evening of 12/31/1999. I thought the SLC light rail was a good idea but would never really work until it became a much more extensive network than was actively being pursued. Goes to show that I am not exactly a visionary. I think that you are and I appluad you for your reasoned advocacy. :-)
In my other paper on Light Rail Now (hyperlinked in the 10% reduction paper) I talk a bit more about that. I also talk about a pax & freight semi-high speed rail network.
Yes, Black Mesa & Lake Powell is 100% coal. They decided that ir was cheaper to go electric on their captive shipper.
Thanks for the compliment :-)
"Wouldn't just moving long haul freight from trucks to railroads get us most of the way there?"
Just entails a 4X or 5X increase on what we are doing right now. That is not a "just". That is a whole lot!
Compounded annual growth of 5.7% + economic growth (or shrinkage) for ten years will "get you there".
On a global basis, this is a modest rate of growth (see China) needed for the goals of my paper.
On one side, some of the shift has already happened since 2002. On the other side, the traffic patterns of multimodal shipping are different from coal, grain, lumber, steel, etc. and they require much more capacity at multimodal transfer centers.
Some bottlenecks will appear and will take time and $ to remove. However, most of these bottlenecks will be track that has been torn up in the last 30 or so years. Opening up the bottlenecks will just require putting back what was torn up.
As one example, Union Pacific used to have double tracks between Los Angeles and El Paso. To save on taxes and maintenance, they went to a single track decades ago. Today, they are adding track back as fast as possible.
AFAIK, years ago they had some single track bridges along the LA-EP route with double track on both shores. They are looking at building a second bridge in those spots.
It might seem like a minor quibble, but I'd ditch the `6000 princes in luxury' comment. You want the audience to remember the other statistics you've mentioned and you also risk offending prospective investors in American Rail, be they the princes themselves or pals thereof.
I don't disagree with the comment at all but it did poke me in the eye.
I hope the US moves in the direction you suggest. My fear, however, is that Americans will chose instead to maintain surburbanism and private vehicles at all costs. I think as gas prices continue to rise, americans will actually start to chose conservation. They will accomodate rising fuel prices through conservation without seeking any long-term fix. Although gasoline consumption is considered "inelastic", I think Americans could decrease their driving by 10% without too much pain. Some may switch to a 4 day work week, others will vacation closer to home, many will learn to consolidate car trips. A renewal of the 55 mph speed limit would decrease liquid fuel consumption by at least a few percent. Over ten to twelve years, we can probably improve our measly 22 mpg average fuel efficiency by at least 10% (that would only be 24 mpg). My point is that I think Amercians will continue the current set-up as long as possible and not move toward long-term fixes. This may delay the real pain by 10 or 20 years but when it comes, it will be even more devastating.
The above scenario assumes the post-peak decline will be 2 or 3% per year. If it is, then conservation will be able to accomodate the decline for some time (and also allow us to avoid long-term solutions). If there is a brisker rate of decline, then TS will really HTFb.
On the bright side, a large # of US cities want more Urban Rail. Perhaps a minority of Americans personally want it as well. But if we build, quickly, what cities and that minority want, (and electrify our railroads) then we have an insurance policy against the day that, as you put it, TSHTF-b.
Very few reasonable people are against more Urban Rail and electrifying our freight railroads as part of the solution.
And I easily admit, these two steps are only part of the solution (although I think of them as silver .22s amongst the silver BBs :-)
UP could buy from the local utilities or even generate it's own. Easiest to sell idea is to just buy power. UP would only take a few % of local needs except in remote West.
Amtrak runs a 50 kV AC line above the overhead contact wire from Boston to DC. They used to own their own power plants ,but these are almost gone.
Land based wind turbines are limited by the size of cranes that will fit onto rural roads and bridges. A railroad can carry a much larger crane than a road can. An isolated branch line on the Great Plains could support a string of large wind turbines, set up and serviced (new blades every decade or so) by a humongous crane. One crane would service thousands of wind turbines. Probably better if this branch was not electrified, but it could also serve as a electrical trnasmission corridor.
Throw in a few pumped storage units and UP could be a major generator that supplied it's own needs + a surplus to sell 95% of the time.
Again, Step 1, just buy the electricity.
What do you think about an increase in the Weekly Petroleum Status Report of tomorrow?
The imports of gasoline, 1.6 MB, are sustainable?, or are temporaly...
In Japan the refinery capacity is low (by maintenance). The global capacity, can support this?
And the summer season is here...
I think, can the oil touch 90$??? , and my answer is YES, later in August.
Since the markets didn't know where this destruction price would be, a lot of players made bets on higher prices (remember the activity in the $100 call market? and the "superspike" comments). The backwardation that existed in 2005 flipped to contango, so there's a negative roll "yield" now. Going forward, "longs" are fighting that roll yield AND demand destruction.
This is similar to the comments made by McClendon of CHK about demand destruction in the natural gas market over $8 -- a few conference calls ago he said that demand disappeared over $8.
My thinking is about what happens if building permits go from 2.0 million back down to 1.5 million (1999, 2000, 2001 levels)? A half-million less houses would start. That would certainly affect demand.
Ah, here we go...
So yes sales are up, but in the winter how much will they be driving? I owned an 04 gsxr750 for those who know what that is. Beside the fact that nothing on the road could touch me I was getting nearly 40~45 mpg and this at cruising speeds around 80 mph. I loved it even though it was premium gas. Now I couldn't enjoy that benefit except maybe 6 mos out of the year, hence the reason I got rid of it. I will say I was thinking more along the lines of a true motor cycle, rather than a vespa so I stand corrected. Vespa's probably do make a lot of sense for many people.
I can image cities enacting "no car" zones eventually. Delivery trucks would have hours, but the rest of the time would be all scooters, bicycles, Segways, touk touk taxis, public buses, etc.
Service, delivery & gov't vehciles allowed.
No gasoline usage is sustainable, by definition, period. Well, except if we use 2 trillion barrels every 300 million years or so.
To get the electricity that he says we'll need, I think that CSP aka Stirling Engine technologies will provide the answer -- and you can see my calculations posted here on TOD with this link. Consentrated Solar Power
The fact that SAIC and Boeing are working on these also leads me to believe that something good will happen. A company called Stirling Energy Systems is under contract to construct an installation that is more than all other U.S. solar projects combined.
Keep bugging them to release their mean time to failure data. That might shame them enough to get off their ass and start doing it right. I hate to see a great opportunity to do something important in solar energy being trashed because of what seems to me to be blind stubbornness. I would love to be proven wrong here.
Joseph Miglietta On E85
It is in response to my recent essay on E85. I don't plan a formal rebuttal, but will get around to posting something in the comments section (although he has already received one substantive rebuttal in the comments).
As soon as I get a bit more time, I am going to pull together an essay comparing Brazil and the U.S. With all of the talk about the "Brazil miracle", I think it is time to inject a dose of reality into the situation.
RR
Lets take the commonly used 8:1 EROI number in the media. To me that means they start with 100 MJs and produce 800 MJs. I believe what they are doing is starting with 100 MJs, getting 50 MJs of electricity from the sugarcane bagasse, and producing 400MJs of ethanol. The 8:1 arises because they reduce their 'input' from 100MJs to 50 MJs because they feed the bagasse back in to the process loop. These numbers are not precise but are illustrative. Is this your understanding as well?
thanks.
p.s. Hawkeye Holdings, the nations third largest ethanol producer, filed for a $350 million IPO today.
I have an essay on Brazil ready to go. I am about to put it in the queue here.
Maybe I need to file an ethanol IPO. My business plan is that if I raise enough money from the IPO, I might think about building an ethanol plant.
RR
The last time oil was at 22 dollars per barrel was in February of 2002 and the last time it was at 28 dollars per barrel was in September of 2003. Prices opeaned in January 2005 at about $42.50, and has never been lower. By late February of 2005 prices were in the low 50s.
http://futures.tradingcharts.com/chart/CO/M
I don't mean to nitpick but I do wish people would check their data before posting their guesses. I know this is not your data Mike, but the folks at IPS should be more careful.
Not only is this true but it will give a boost to the economies of the selling states. Usually what is bought is not top of the line, but often the older stuff just one generation behind the latest.
Also on Iran and the ethnic tensions, see Christian Science Monitor:
Ethnic Persians make up a little more than half the total population of 69 million, but there are sizable minorities - in addition to the Azeris there are ethnic Arabs, Baluchis, and Kurds, for example. Some of these groups, furthermore, practice Sunni Islam instead of the Shiite branch of Islam, the state religion. The Iranian Constitution guarantees the rights of ethnic and religious minorities, but in reality the central government emphasizes the Persian and Shiite nature of the state.
http://www.csmonitor.com/2006/0530/p09s02-coop.html
On the Iranian note I have been wrong in some earlier posts. Iran does indeed have some refinery capability, which tells me I should listen more to my common sense than what I read on the NET!
Gareth Smyth, The Financial Times:
A leading Iranian parliamentarian on Sunday warned President Mahmoud Ahmadi-Nejad he would need to spend an extra 5bn Dollars this year to pay for subsidies on sales to motorists of imported petrol and diesel to avoid politically sensitive rationing.
Kamal Daneshyar, head of the parliament's energy commission, told Reuters the government needed to withdraw the money from the Oil Stabilisation Fund (OSF), which collects windfall oil revenue for contingencies and investment. He later told the FT this was in addition to the $2.5bn (€2bn, £1.3bn) already allocated in the budget for the year March 2006-March 2007.
But the allocation of OSF funds to maintain subsidies would fly in the face of Mr Ahmadi-Nejad's promises to maximise spending on capital projects, especially in Iran's regions.
Current government spending is already due to rise 20.5 per cent in the current year, according to Iran Economics, the leading Tehran monthly. With inflation put officially at 13.5 per cent, this represents a significant increase in real terms.
The fiscal pressure over petrol imports results from the antiquated state of Iran's refineries and subsidies which keep the price for motorists at 9 cents a litre.
Despite having the world's second-largest proven crude oil reserves, Iran imports around 40 per cent of its petrol. So while rising global oil prices boost Iranian coffers and are celebrated by Mr Ahmadi-Nejad, the subsequent rise in imported petrol prices has become a domestic issue.
Little progress has been made on a $15bn plan to revamp five existing refineries, build three new ones, and so increase production over five years from 40m litres a day to 92m litres.
Does anyone know how many high tech weapons China is selling to the rest of the world? I would think they'd be developing their defense industry aggressively since it allows them to stock their own fort as well.
My guess is that China and Iran are happy weapons for oil trading partners. I also doubt Iran will buy many weapons from the US.
http://www.stltoday.com/stltoday/business/columnists.nsf/davidnicklaus/story/57BC537F8B87D2AE8625717 100107E21?OpenDocument
Iran is right there with Venezuela on buying weapons from not USA! But Saudi Arabia and the Gulf States are good to the USA.
China does have an export trade of fighters mostly to 3rd world countries, and mostly improved Mig-21's. Small fast patrol boats - a few for export, guns, artillery, and some tanks. Think inexpensive here, which is a lot of appeal to Africa for example.
Actually the trading patterns on weapons are quite interesting. So, for example, Pakistan and China have a long standing arrangement involving fighters and tanks. They do joint design work too. China actually has the biggest tank with the biggest gun in the world, though I am sure its electronics are not up the USA standards. And this is because India lies between them and don't forget China and India still have a disputed border - fought a war over it in the 1960's. India got crushed in it.
And Iran and North Korea, well, mini-subs, missiles, and nukes are a well trodden trade trail between them.
The temptation is sure there. That means that buyers will look for a more "trustworthy" arms dealer like China who doesn't overdo the computers. The alternative is to have the planes and stuff reprogrammed by a third party, like computer geeks from India. It's the equivalent of getting a "hot rod chip" for your car's computer. And you eliminate the repo code.
Does anybody have any advice to give someone who has, unexpectedly, inherited some working interests in oil wells?
They would be, mostly, in the Smackover region.
Are there resources out there for getting a non-oil person up to speed on how to evaluate this type of thing? (Risks, value, etc.)
The Oil Drum being the first stop, of course.
For selling the interests first get the division order from the oil company that purchases the oil and write a letter to each of the other participants and see if they would like to purchase the interests. The operating agreement probably gives the lease operator the right of first refusal. You might also see if the operator will trade the working interest for overriding royalty which bears none of the costs but gives a share in the production.
You might also have him/her give me a call at 409.392.7497 or email me bobebersole2004@yahoo.com.
Her biggest fear is they go into decline and end up being a financial drain and she can't unload them. Though they are profitable, right now.
I personally don't see the possibility of many more wells being plugged unless prices fall substantially-below $30.00 a barrel. Almost any well will continue to ooze a couple of barrels a day-$4200 a month at today's oil prices-and if the Operator knows his business and keeps his costs down should make a little profit. I've got several reentries I'm working on because I expect prices to double by 1988 with the halfwits we have in Washington. But, who knows, maybe Antartica will melt and become one giant oilfield or Santa Claus will bring us all 10 Trillion Barrels for Xmas! Five cent a barrel oil again.
Best,
Matt
Best,
Matt
How ironic, the inheritance that bankrupted the heirs.
Wonder how one refuses an inheritance? Sigh. Talk to an attorney?
Thanks. I do appreciate the feedback.
"Insert generic attorney reference here"
Best,
Matt
Interesting. I'm curious. How did you come up with that valuation?
Everyone:
I want to thank everyone for such wonderful comments in this thread. You folks are great!
Cheap properties might sell to result in a 24 month payout [probably a screaming buy if there a no undisclosed issues -- there usually are]. Expensive properties -- the sky is probably the limit but for a reasonably motivated seller for a property with no upside maybe twice that in terms of months to payout? I suspect that Bob and many other's have a better feel for the market a present that I do.
Ultimately what is is worth is either the value of the stream of revenue earned prior to abandonment net of expenses [which will only be visible in the rear view mirror] ... or whatever the market will bear in a buyout. If I were in your friend's position, and the operator and the property itself were solid, I wouldn't be in a hurry to sell, but there are obviously many factors to consider.
For instance, let's say you have you're getting a check for $10K/month and your paying out $6K/month. Is that high? Or, low? Or middlish?
Any rules of thumb?
Net revenue will fluctuate upward or downward in proportion to the posted price multiplied by the percentage remaining for the producer after the royalty payment to the mineral rights holder and the state severance tax. Most of the stuff I am involved with this works out to roughly 75 cents on a dollar of reveue from a dollars change in the posted price. [BTW the posted price is a general information item -- oil quality, transportation issues and negotiation can result in prices higher of lower than the posted price.
What this means is something that you can compute at various oil prices by holding the monthly costs level and changing only the price conponent of the revenue stream.
Being a long term bull on prices, I wouldn't expect this well to start to deliver a negative cash flow anytime soon, but I know nothing about the expect rate of decline etc. As described above it isn't that difficult to compute a break even point. This would be a good starting point in answering your own question.
On last thing. Don't rely completely on monthly costs as occasional rework / major repairs / the annual property tax [aka "ad valoreum" tax in Texas as mentioned by Bob] etc must be included to get a true picture of costs. BTW, as is obvious to readers of this site, depletion / decline is real, but based on geology some production can continue for decades with only minor declines. It simply depends. Hope that helped.
However, bear in mind that all trusts are not created equal. Canadian Trusts are often chartered to explore and produce new prospects, so they have more potential upside, but also more potential risk. Canadian trusts are also subject to withholding that makes them less attractive for IRAs.
Read the terms of the trust as they are are specific to that trust. For example, IIRC Prudoe Bay does not convey rights to the natural gas that will ultimately be produced nor does it grant continuing rights to revenue from oil after production drops below a specified level.
Having said that, my general advice is to examine the decline curves, the water cut and the history of operating costs of your production. Also determine how other wells in the area have produced over time from the same formation. Analogous situations are often helpful. ollectively these things will tell you a lot about what you need to know the prospects for continued production ... but as Bob indicated, you should also see if there is any upside in the form of zones that may be productive that have never been perforated or which were abandoned in favor of a more productive option in times of lower prices.
On to a lighter note. :-) .... Most of the bad things that can happen have probably happened to me. Road wash outs, lightening strikes, casing collapses, salt water spills, oil spills, grass fires, wind damage to power lines, damage to pumps and engines due to pumper negligence, and even a river shifting course leaving an idle well bore [bought as part of a package] several feet out in the Canadian River.
It is hard to generalize, but the salvage value of the casing, tubing, rods, pump and pumping unit, and tanks generally exceeds the plugging and remediation cost. Accordingly, that particular concern would not be high on my list of potential difficulties.
One other thing of considerable importance: Check out the operator. Try to determine if they are solvent, in any event make certain that they are carrying the insurance specified in your operating agreements. Also, although working interests do not generally equate to partnerships, flakey or insolvent co owners can make the whole a deal a lot less fun.
OPEC's spare oil capacity may triple by 2010...
"Yes, yes, yes, yes, and what if the core is made of cheese? This is all best guess commander. That's all science is, is best guess..." (sorry famous quote from a movie)
As it could also go the other direction as they spend $100 billion on exploration and production projects...
Anyone...Anyone..Bueller...
We my as well get excited about oil shale and tar sands while were at it! Hocus Pocus
DD is the nasty forced conservation, Unemployed people drive far less, Closed factories use less energy. Dead 3rd worlders use no oil at all.
Other people mix conservation/price elasticity with the nasties and call them both Demand Destruction.
A skeptic might say this is true...from 100,000 bpd to 300,000 bpd....
The drought in the southwest affected nuclear power plants, because water levels dropped so much their intake pipes were left high and dry.
Well, that is why Price-Anderson exists...to shield the corporations from the libality.
Other ways the water can rise (then fall):
- Ice shelf collapse
- Tital wave from earth crust shift
- Meteor hit
- The loose rock on that island falls into the sea. (40 foot waves in Boston is what could happen)
Then you have the gov. backed flood insurance.http://www.guardian.co.uk/international/story/0,,1786227,00.html
It's not the heat, it's the stupidity.
They want us to BULEIVE the rapture will happen. And they want us to live with this thought all our lives so that we are, well controllable.
Getting to something real is not in the interest of the faith.
Best,
Matt
I don't think it is the real christians causing problems. Just as it is not the "good" moslems. Fundamentalism tastes bad in every flavor. Not a lot of extremists bhuddists out there though....
Matt
They only take this laissez faire attitude with regard to trivial matters, like the fate of the whole planet.
(And of course, those who stop the "them who hate our freedoms" from also getting nukes. That's just basic Rapture 101. Needs no repeating.)
Thought you folks might be interested. Beck is pretty right wing. Interesting to see where he takes this.
Best,
Matt
I hope they put Mike on. You see the big difference between Mike and me is Mike's crazy, albeit in a good and absolutely necessary way. Here's how and why:
Imagine we're back in the caveman hunter gather days. Somebody runs into the cave and says, "holy mother of god there is some gigantic beast out there and I think it's fixin to eat all of us!!! Hey Matt, you want to go out there and check it out?"
My response would be "hell no bitch. I'm staying right here where it's safe."
Mike would go check it out.
Best,
Matt
I wouldn't even have to change clothes.
Best,
Matt
There are different types of peak oil activists. There are those who secretly wish to be dictator and are simply using the fear inspired by this issue to turn themselves into a local "shot-caller." For them, a spot on CNN would further their (personal) agenda for obvious reasons. Then there are those who wish to get jobs as policy analysts. A CNN spot would help them too as it would make them look "respectable."
Me? I simply want to make enough money so I can finance an apocalyptic religious cult . . . I mean "multicultural eco-commune" out in the woods. For me, it's best I keep my head relatively low. In American culture, you're not something to be worried about until you're on televsion.
Best,
Matt
http://www.msnbc.msn.com/id/13039234/
Is Canada really the largest supplier of oil to the US? I thought Venezuela had that honor.
Canada: 2,118
Mexico: 1,642
Saudi Arabia: 1,556
Venezuela: 1,521
Nigeria: 1,119
US Oil Suppliers (Mb/yr)
Canada 584
Mexico 584
S.Arabia 548
Venezuela 475
Nigeria 402
Iraq 256
Angola 110
UK 110
Algeria 73
Kuwait 73
(Source: US DoE and ASPO)
http://www.theoildrum.com/classic/2005/05/where-do-we-actually-get-our-oil-and.html
I was just listening to Chris Matthews, and he had the same response I did to the news item regarding Iran, i.e., the US will negotiate if you drop your nuclear weapons plans. Chris said that it sounds like an ultimatum, and I agree. It kind of reminds me of the ultimatum to Hussein that he had to leave Iraq within about 24 hours or so.
Good way to know if Bush is really, really crazy--he attacks Iran on June 6, 2006--6/6/6.
Iran dismissed the offer as "a propaganda move."
In his State of the Nation speech to parliament,, he (Putin) announced that Russia was planning to make the ruble "internationally convertible"
http://www.opednews.com/articles/opedne_mike_whi_060523_vladimir_putin_and_t.htm
The whole obsession with bourses and and currency plots is grasping at straws. In the greater scheme of things this news is super trivial (a stage just above meaningless).
All this comment about Iran and Russia "dumping the dollar" is a triumph of wishful thinking over logic or understanding of global markets.
I remain convinced that you and the other bourse cultists are clinging to this out of faith. If you could put together any argument that didn't have its only fact wrong, I am sure you would have done so.
Presumably these countries want to hold a diversified portfolio and do hold a lot of Euros. So there are in fact PetroEuros. On the day that the oil exporters want to hold more Euros than dollars - which may happen - there will be even more PetroEuros than there are Petrodollars.
But this is all based on a decision by countries regarding what currency they want to hold assets in, not the currency symbol before the oil price.
The term Petrodollar is in wide circulation because of the prominence it played in the economic problems of the 1970s - as well as the obsession the conspiracy minded have with this issue.
http://www.econbrowser.com/archives/2006/01/strange_ideas_a.html
I would go back and find all the links but it is late night where I live and I am going to bed. I'll be happy to pick this up again.
If a transfer of dollars is required for oil, it only requires the participants to hold dollars momentarily. It is the long-term holding of dollars, not the price of a commodity that underpins the dollar.
Who is BCR?
I was pretty sure that once I posted a link and waved a tiny bit of evidence they would scurry off and take their attacks to other threads where they can try to shut down anyone who doesn't buy into their little doom fantasies - which they have done.
I'm still willing to debate this issue with anyone who wants to base the discussion on facts.
I asked a few posts ago who BCR is but now guess it is one of the nicknames for Bush, Rumsfeld, Cheney. If so, you are wrong about my opinion. After the third grade you don't judge what people think of others by how many nicknames they can make up for them.
Did you read the Econbrowser link, or do you prefer not to hear an educated discussion on the Iran Oil Bourse? Bet I can guess.
There is NO ONE who is addressing this issue. We've got a Fed that monetizes the debt through caribbean intermediary banks by "unconvential means" that Bernanke promised to use. Then we are lied to about how bad it really is. We've never been in this state of total denial in the face of looming financial crisis. Now tell me, as a country do you want to be the first to get out of the way or the last one holding the bag?
When the UK was gathering together $1 billion in US $ to redeem (yes, once upon a time major nations did not have tens and hundreds of billions of greenbacks lying around) the US found out and stopped converting $ into gold.
The U.S. government is a far greater threat to the dollar and the Iranian or Russian governments.
It's just like the opening scenes in one of those vigilante movies, where the good guy hero has all these awful things happen, so as to justify all the awful things he's about to do.
I'm starting to wonder if the Russians might not really want us to do Iran, at least if doesn't get too out of hand. We and the Iranians get beat up, the price of oil goes through the roof - could all be benefit for them. If it wasn't for the oil price issue, I'd bet much of the rest of the world wouldn't mind seeing us go at it either - no one much likes either of us anyway.
And the Iranians would have to be fools to negotiate seriously with the Bush administration (no sign of that). Certainly they noticed how things went down next door, and how real could an offer of negotiation be that begins with "first you totally capitulate, then we talk"
In May 2006, Minister of Economic Affairs and Finance Davud Danesh-Jafari said the Oil Ministry has a two-month deadline for presenting the Articles of Association of the Iranian Oil Bourse. Danesh-Jafari said that the Euro had not yet been finalized as the legal tender of transactions in the oil bourse, and the final decision about that depends upon the Oil Ministry's proposed IOB Articles of Association
It's supposed to be opening on the island of Kish. Meanwhile the Russians are planning a market denominated in rubles.
link :-
http://news.yahoo.com/s/afp/20060601/sc_afp/scienceagriculturericeirriclimate_060601042104
http://news.bbc.co.uk/1/hi/business/5036004.stm
How much longer can Ford and GM do this when they are already losing money so fast? Do they think people expect current oil prices to be a temporary glitch and something like this will tide them over if they buy a gas-guzzler? Look like desperation to me. I read lat year that some analyst expected an even chance of one of the "big three" going under by the end of the decade. At this rate it might be two.
I guess that they do think this. However, it doesn't matter much in terms of the offer. I am sure they immediately hedge any oil exposure they get. So the $1000 gas offer costs them $1000 plus (very small) transaction costs regardless of price direction.
So they question becomes: Does anyone out there really "expect current oil prices to be a temporary glitch"? And the answer is obviously yes, a lot of people do. Oil futures markets are deep and am sure Ford is having no problem finding people willing to take the other end of their forward contracts.