DrumBeat: June 2, 2006

Now for some wise words from the readers of The Oil Drum...
CNN is doing a weeklong series next week.  It's about how high fuel prices are affecting people in the heartland.  Farmers, small business owners, consumers, etc.
Here's an article from Financial times that contradicts itself.


The probablility of a June rate increase, as measured by the Feds funds futures, fell to 46 per cent from 68 per cent just before the employment data, and 80 per cent earlier this week.

"Despite the decline in the unemployment rate, the data really does suggest that the door is wide open for the Fed to pause," John Canavan of Stone & McCarthy said.

Then it goes on to say...

In a Reuters poll at the end of last month all but one of 60 economists forecast a quarter point rise. But buoyant sentiment and inflation data have pushed the money markets to factor in a higher chance of a 50 point move.

So which is it?  Is there less than a 50/50 that the rates rise, or is the market expecting a 50 bp rise?  That passed an editor?

Aside from this the bottom line is bad.  If the Fed really does stop raising rates, the dollar will fall harder guaranteed. In addition we are starting to enjoy some real inflation that is hurting.  It's only going to get worse due to unchecked inflation without a rate increase.  Having said that, the FED has made it public policy to fight inflation.  

The only way to fight it is to increase int rts and in turn try and protect the dollar but you harm employment.  So what do you fight - inflation, a weak dollar, or full employment?  They can't just pick one in the real world, so I say this gets hyper bad.  There's too much imbalances to control and it's got to stop at some point.

I think (and hope) that the FED will keep increasing the rates by 0.25.

Two reasons:

  1. The official inflation is low, but the real inflation is known to the FEDs
  2. What I find more important is that I think that the real goal of FED is fighting the inflation in its braoder sense - that is reducing the mind-boggling internal debt, or achieving that "soft landing" eveyone talks about. Therefore FED is establishing a moderate but firm rate increase pace so that everyone can make the necessarry plans and efforts for debt reduction.

Of course nobody is talking about this 2 points, as even hinting on them could lead to a market panic. Missing the rate increase in June would be a signal that corporate pressure is overcoming the financial discipline pressure. With energy prices potentially rising in the summer, with a still overheated economy and a nationl currency under serious credibility crisis, this could be an invitation for a full-scale financial collapse in the months to come.
I doubt they stop raising rates.  I really don't give any credence to much of the MSM.  There is little research done and even FT has reporters saying two contradictory things in the same article.  I would love to see a 50bp increase.  

I agree that we are heading for a financial speed bump.  Question is how big is the bump.  Can we see to the other side?  Maybe not, and in that case it's the worst case...a wall.

What the Fed wants is high inflation combined with a strong dollar. The problem is how to bring this about.
I don't think the Fed WANTS inflation, but it will be totally unavoidable due to them just ignoring the problem and helping to sweep the details under the rug.

As a private bank how does inflation help you?  Your assets (debts other people owe you) become worth less each and every year, so why would I really want that?  I must be missing something.

There is too much debt in the US economy (it is at a record level). Because the level of debt to GDP is so high, a deflationary collapse is always a threat and would actually occur should the Fed follow a stable monetary regime. The rate of monetary growth needs to continually be raised as the debt grows in relation to the size of the economy which will service the debt. The trick is to keep expanding the money supply (which is inflationary) while keeping the dollar from collapsing. Very tricky. But you make a good point: it is not impossible that the Fed could decide to raise rates and let the chips fall where they may (but unlikely).  
All this is true.  However there lies a bigger problem.  We are literally in a game where the point is to print more money to pay for old debts.  You think they won't raise rates?

Inflationary monetary policy works in a classroom, it generally stops there.  The fed can't control inflation.  They try and alter it, but they can't pick what it should be.  Inflation has decimated the real returns on Wall Street.  It's great to say it's avg historical return is above 10%.  That's great, but once you factor in inflation, the money made is eaten by it.  

There is little the Fed can do now to stop inflation.  It's nearing 10% annually.  So they should stop raising rates and just let it get worse?  I highly doubt they will really let that happen.  If they Fed follows public policy (which is to control inflation) then they will be raising FF rates.  Please convince me otherwise.

You might be right about the rates going up. It is hard to be confident one way or the other.
You're right, but when financial plans have to be made you have to decide what you think they will do.  I just can't see them suddenly turning their back on inflation especially when that's all they talk about most times.

Secretly they may not mind either way because as a private bank they will make plenty of money regardless.

Actually a weaker dollar works great for the FED as it effectively reduces external debt and stimulates the economy. My version is that they will try to prop it up on the levels around the current ones and go for a slow but steady dollar decline.

But they will try to avoid a major dollar collapse by all means - if this ever happens the reprecursions will be horrendous. No more cheap credit for abroad, no more inflation export and cheap labor from China, no more American empire buying everything and everyone in the abroad with the money it actually borrowed from the very same people.

That's true.  But as the dollar declines due to various macro economic factors (twin deficits, etc.) what incentive is there to continue to hold it?  I keep harping on this one more problem idea.  I truly believe that we're not going to see one big woosh and here comes the $hit to the fan.

If a stable country realizes it is in their best interest to completely minimize FX exposure by drawing down their US reserves almost entirely.  The value will drop farther (billions more pumped into the system).  Now at this even lower point another country starts feeling nervous and they too dump it.  It's just like a bank run and to think it can't happen is plain idiotic.

It's only going to be a matter of time before many countries realize it's not in their best interests to keep holding dollars.  Yeh we need them to trade, but after they've been recycled, let's get rid of them!

If we think a little further down the road it's easy to see us in some type of stagflation for some time.  We are going to have to convince the world that this is a hiccup and we'll be alright.  How do you think that's going to go?

But as the dollar declines due to various macro economic factors (twin deficits, etc.) what incentive is there to continue to hold it?

Methinks that the key variable here is time. Just like with inflation if you inflate your debt slowly enough, if you make some short-lived upturns here and then, you may avoid a total bank run (OK, at least for a while). The dollar has already declined some 30% for the last 6 years, but the decline was slow enough for the dollar holders not to panic. Therefore I expect a similar trend to continue or at least to be maintained by whatever is needed.

IMO, the only thing that stands in the way of a dollar collapse currently are the central banks of Europe, Japan and China, which (along with the FED of course) doubtlessly are aware of this danger and are prepared to counteract it by all means. I can even speculate that there are plans for coordinated efforts should such thing start to happen.

I'm sure you're right.  There should be planning, but I'm curious as to what could really be done.  The answer to 9/11 was to flood the market with cash.  It worked short term, but the liquidity that stuck around for the last 5 years has put such a long term hurt on us, that we should ask if it was the right thing to do.

Then again if they didn't do that we would have corrected back 5~6 years ago and things would be different.  I bet we would have wasted less enegy though.  Speaking of the dollar decline it broke the $84 price floor that everyone keeps talking about.

I pulled this from itulip.com

Soon credit spreads will widen and liquidity we shrink even more.  If you have not noticed, the Yen carry-trade died and global money supply has fallen below nominal GDP.  If you think that extremely low default rates will support tight spreads, recall that our nation's all-time low default rate was during the second quarter of 1997, which was on the eve of our worst default cycle since the 1930s. High default rates are symptoms of economic malaise, not its cause. During these periods, quality credits and high quality stocks bests low quality securities, which reverses the trends seen since December 2002.  Stocks smell The Devil.

I don't know how to verify the Yen carry trade ending, but I'll take Eric Janszen's word for it.  Bush has touted that the highest % of home owners ship has been attained under his leadership.  Yet the devil in the details says that it's only because all of those who SHOULDN'T have gotten a house, got one with a big fat AMT loan.  People really have little financial sense, so the bankers bilked them.  Should we expect different?  Those houses are being repo'd and will be available for discount soon at a subdivison near you.  

Point: We have to be near the edge of the cliff, or at least the mole hill we've built.

I keep some of my :cash: in GIM.  Almost all sovereign debt.  In Yahoo discussion board is a graph of currency exposure over time.  Just a few % in US $.

4 cents dividend every month, closed end fund with about a 1% discount (been higher in past).

Just for your review.

If central banks around the world are going to diversify out of the U.S. dollar, an interesting question is where will they put their money? It seems likely that some portion of the money will go into gold. Even if there is a deflationary collapse (not likely, in my opinion) gold will probably hold up reasonably well, as people may seek a safe haven. If there is inflation, we may see a repeat of the 1970s, except that gold could go much higher.
Someone posted a gold article detailing the argument between is gold money or a store of value?  With 6.5 Billion people on the planet how many have to assume that gold is worth more than my fiat money to make me want gold too?  There will be demand for gold.

Markets are irrational.  Gold is the worst.  According to many models is follows a random walk and you can not predict the price necessarily like a security with pro forma cash flows.  So instead many times you have to hold on to your fundamentals and wait to be proven right.  That can be a problem though as you may be right about the end point, but wrong about when.  Many times it's about playing the people.  In the case of the dollar, I think it's a high stakes game of chicken as many around the world are starting to get nervous about the worlds largest economy.

In regards to precious metals, there was a very strange announcement by NYMEX today.


The New York Mercantile Exchange, Inc. today announced that the COMEX Division has eliminated price fluctuation limits for all COMEX contracts beginning with the NYMEX ACCESS® session on Sunday, June 4 for trade date June 5.

This change was made in order to better facilitate the core functions of price discovery and hedging provided by COMEX products.

This is one of those announcements, like the M3 reporting announcment, that only makes sense if something very, very funny is going on.  If I had a little more tin foil in my hat, I would say that this means that the PTB are going to crash the market for PMs in order to eliminate their shorts, then scoop up all remaining gold and silver in storage.  Eliminating the price limits would allow this to happen almost instantly and prevent the general public from participating.  I am sure, however, that thinking is insane and they are really making the change "in order to better facilitate the core functions of price discovery and hedging", whatever the hell that is supposed to mean.

Keep an eye on gold and silver Sunday at 7 when the ACCESS trading starts.  It might be interesting.

Smoke? Mirrors? Adjustments to published statistics [not that they haven't done about all they can with this angle.]?

The best opportunity for obfuscation at least the short term is for Democrats and Republicans to vociferously acuse each other of things that both groups are fully complicite in. Phoey.

The game will end when the Chinese want it to until. Until then "pary hardy dudes and dudette."

BTW, this particular glob of "S" will IMO "HTF" before peak oil becomes an immediate concern for the mainstream. In that respect we may actually owe Greenie, Rubin, Clinton and Bush II and almost every Senator and Congress Critter except for Ron Pual a debt of gratitude for creating a longer transition period from a lonwer base toward a post peak state.

Important points. You are probably correct on many of them. I'm not sure if they are smoke, or mirrors, or just our variable rose-colored glasses. The hoi polloi must take some credit. I think you mispelllled 'Phooey' :)
Look at the inflation data this spring. Another quarter point rise would almost be an admission that these increases are just for show. I don't expect a quarter point to help much which is why these rumors of a half point keep turning up. I think the Fed is priming the mental plumbing of the business community that such an increase is coming. They have to get a handle on the inflation or it risks running out of control.

Carter may have been right about energy usage but his fiscal policies were a mess. I don't want to see 18% interest rates and 15% unemployment numbers again.

The high interest rates really were Volker's cure. A five to eight percent real interest rate on top of a horrendouc inflation rate choked the life out of tke then existing inflationary freight train.

Debt levels were lower then. Real interest rates that high would change the game for good if the Helicopter Ben wanted to go that route now. Based on his extreme fear of inflation [and maybe honest money] the chance of extreme action to choke off inflation by that boy is IMO beyond remote.

The unemployment rate is calculated differently now than during Carter's term. Comparing apples to apples, the current rate would be approx. 12%. This is one of the reasons GWB's numbers are so low. Iraq is one thing, but he wouldn't have 30% approval with an actual 4.6% unemployment rate.
OK. Here's your chance. I'm interested in seeing this. So prove it. You can use numbers and words. Should take you between 250 and 2000 words. Lay out your case. The way I understand it - you say it is 12%. That would put us up there with France.

I am actually tilted towards your thinking. I just want to see it layed out. Easy.

I guy has written books on it. Google "shadow statistics" or something like that. I think his name is Williams. I am sure you are aware of the artificiality of the current "unemployment" rate (manner in which it is calculated.)The US guv also publishes a more accurate unemployment number in their report. Only the headline number gets reported by the media. After you do the leg work I am confident we will agree. We actually had more than a few posts on this a few weeks ago.  
Williams appears to think that the "household" survey is more accurate than the "payroll" survey -- and the household survey currently says 4.6% unemployment.

To get the higher unemployment numbers, it looks like you have to add in people who are probably living on welfare, and say they want a job, but can't find one -- which is exactly what I'd say if I was living off welfare.

From the article (remember that thhe FT is a UK paper):

<block>[T]he possibility of a 50 basis point interest rate increase by the European Central Bank grew.</block>}

From the article (remember that thhe FT is a UK paper):

[T]he possibility of a 50 basis point interest rate increase by the European Central Bank grew.
Eight expat oil workers kidnapped from Nigeria rig

LAGOS (Reuters) - Gunmen abducted eight foreign workers in a night-time raid on an oil rig off the coast of Nigeria on Friday, raising new security fears after a series of militant attacks that cut output from Africa's top oil producer.

Some 20 to 30 attackers fired shots as they boarded the rig from four speed boats but no one was injured, security sources familiar with the situation said.

I'm sure the market will react with an upward spike to this news.

Thank you for these nice graphs. Like Stuart you have a gift for graphical presentation of data.

I am still wondered by the bimodal distribution. If I remember it correctly you've explained that this is due to a bunch of newly discovered fields in the 80's, as shows the offset of decline in ca 1989.

But in such a case how do you perform an HL ?

 If you look at total North Sea, it's a perfect linear HL progression, which indicates that the North Sea is now about two-thirds depleted.  As I have previously mentioned, the North Sea peaked at almost exactly the same point as the Lower 48, 29 years after the Lower 48 peaked.  
Below is a HL plot on the Nort Sea production performed by westexas:

It is often said that 33 of 48 oil producing countries have peaked.  Yet the only HL charts I ever see for countries that have peaked are for the lower 48, Alaska, and the North Sea.  Do you know of, or have produced yourself, HL charts for some of the other countries that are past peak?  
Most countries have peaked but they are not necessarily big oil producers (ex: Romania, Indonesia, etc.). I tried once to apply the HL technique on Norway (4th exporter) which has clearly peaked and also on Saudi Arabia, Iran and Russia:

 The 4 Biggest Oil Exporters

IMO, the HL model works best in regions that have produced a lot of oil, around two mbpd or so, for a fairly long time period, around 20 years or so.    
Khebab, the most interesting chart of your set is the one for Russia. Looks like they went out and drilled some new reservoirs in the late 1990s. Thanks for the great analysis.
As a (plant) nurseryman who knows little about oil beyond the dipstick on my tractor...I have a question...All the graphs look roughly similiar.  On the second "peak" of the two represented.  I assume that the majors were discover first and as they declined the newby's (or increased extraction due to new tech.) came on line creating the second peak and here is my question.  If we were to view your graph from the back side would we see the dramatic rise in production as these (assumed here) fields came on line that mimic's the original finds.  Is the curve the same(roughly) on any field at any time? (wait)  I guess so that I don't sound ignorant I have a hard time with the second(twin) peak- ecomonic conditions, new extraction technology?  The graph looks like Mt Saint Helens and looks odd.  Care to enlighten me?  Last question- Are the down slopes of these production graphs as steep as the upslope?
A couple of days ago, a question was raised about the ability of railroads to handle more traffic.

One bottleneck has been Los Angeles/Long Beach ports (as well as serving that megapolis).  By the end of 2008, Burlington Northern-Santa Fe will have double tracked the entire Los Angeles-Chicago route and by the end of 2007, Union Pacific will have double tracked most of the Los Angeles-El Paso line (1/2 CA, 3/4 AZ, 100% NM).

The capacity of a double track line is far higher than a single track line (where trains take turns going in opposite directions).  

CSX & UP share a line into thw WY coal fields that is triple tracked, and that line is being extended.


You'll be happy to know that we are already looking into electrifying the rail.  There are many obstacles as you can imagine, but from an operational standpoint we wil only electrify the lines that would have the highest payoff first.  

I've got good and bad news as well.  The bad is that the sunset corridor really didn't start production until 2004.  However they are moving far faster than 50 miles a year.  While I don't have a real number, after discussing this with guys with intimate knowledge (100 yrs combined), they all agree that even a double track will not move only 50 miles a year.  That's just far too slow.  We've got a lot of tie gangs and they are suppose to be some of the best.  Not that it matters, but there has been like a 3 year service record attained with zero injuries.

Very good information on electrifying.  You might forward to several within the company your "discovery" of my -10% Reduction paper and wonder if UP might want to get behind this politically (lobby for it).

Make taking freight by rail patriotic.

Also, I ran accross map for 2004-2007 UP doubletracking and all of New Mexico goes from single to double track plus sections in CA & AZ.

Could there be hope for us all?
Funny :) but really, how much energy do we actually need? What percentage of the current ussage should be enough to keep us alive?
No. I think the point is better made by Bob Shaw's signature line.
It isn't about frogs. It's about Saccharomyces.
Chevron's executive acknowledges Middle East has peaked.

"We do know that the Orinoco is underdeveloped," said Mr. Nelson, 49, a geologist from California with 27 years' experience developing heavy-grade oil. "And the resources in the Middle East are at their midpoint."

For Venezuela, a Treasure in Oil Sludge

Sorry, it was a dup.

It was posted by westexas.

What struck me about this comment was the casual acknowledgement that the Middle East has peaked.  The NYT writer also talked about world oil production "threatening to decline."
Inquiring minds want to know.  Is Saudi Arabia preparing us for falling production, using the story that they are cutting back voluntarily because the market is "oversupplied?"



CARACAS --  Saudi Arabian oil minister Ali Al Nuaimi said on Thursday that the global crude market is "oversupplied and over-priced"

I noticed that little snippet too.  I asked myself how the largest producer could really back up this statement.  I don't think they intend to back anything up because no one is going to make them.  They wield power and they know it.  It's classic do as I say, not as I do.

Who cares what they tell people, life is a stage remember?

westexas, my thoughts exactly. Let us wait until OPEC reduces quotas to account for the 'oversupply', then we can be certain production is falling.
If you owned the horse, the saddle, and the spurs [metaphorically the position theSaudi "royalty" appear to be in] wouldn't you go whever you wanted to go.

That OPEC would actually want lower prices seems to be remote given the logistical difficulty [or maybe impossibility] of effective substitution. Based on this line of reasoning I am left with no option but to agree with your fundamental conclusion that the Saudi's public pronouncement do not necessarily reflect their intentions.

Quite a combination. Logic is so twentieth century.
This story about Western Oil Sands is interesting. Here we have an oil sands company diversifying into oil...in Iraq. A lot of folk are baffled by the move. It seems like the company is trying to grow, but can't find any interesting assets that involve tar sands in western Canada.

Maybe it's as simple as the Iraq deal just being really sweet (but obviously risky). However, this move makes me nervous about tar sands development in general.

Maybe it's the fact that natural gas is becoming hard to find.
I got a feisty response in my blog on my Brazilian ethanol essay:

Comments on Lessons from Brazil

Unfortunately, "boodog", an apparent ethanol propagandist, also appears to be mathematically challenged. He has also been trolling in my E85 thread:

Comments on E85

I suspect it's one of my two ethanol antagonists from TOD. The responses have all the earmarks: Lots of bluff and bluster, backed up with pseudofacts.


(Just repeating here to get Robert's attention)


Have you read this paper "Sugar cane residues for
power generation in the sugar/ ethanol mills in Brazil

I have not read it, but will print it out and do so. This looks like just the sort of analysis I have been looking for.



There seem to be a lot of ethanol enthusiasts over at Green Car Congress who need a dose of reality.  If you have the time, perhaps you could wander over there occassionally and play skunk at the ethanol picnic.

You probably don't watch Imus in the morning, but this morning he was berating Friedman for blasting GM's gas rebate strategy. Imus was complaining because GM has done such a great job pushing all those 12 mpg SUVs and big trucks that use ethanol. Imus knows nothing about ethanol and sadly none of the MSM does either.

How do we bring this information you have developed up a notch so that this country won't go down the stupid road with dreams of energy independence derived from ethanol?

As you have pointed out, Hillary seems as clueless as everyone else. Or is she just pandering?

The foundation of our energy strategy needs to be radical and maximum conservation first.  Whatever needs we have left over can then be filled in by what makes sense.

As long as we believe in ethanol and other similar dreams, we will not make the necessary changes to be an energy self sufficient society that is not burning up the planet.  Even assuming the best case scenarios of EROIE, ethanol still kills, especially when you're getting 12 miles per gallon in your E85 Suburban.

Part of the problem, is that ethanol is all about saving oil.  The energy security people ignore coal and other inputs because they are not perceived as a security problem. As long as it is all about security and independence and not about the environment and heating up the planet, then ethanol seems to make sense.  

Unfortunately, Bush didn't go far enough when he said we are addicted to oil, as if that were the only problem.  More importantly,  we are addicted to fossil fuels.  

IMO elections (referring to your Hillary comment) have become a carefully calculated marketing strategy these days.  "Marketing experts" have precise statistics and the use of phone polls to the point of calculating how many votes a candidate will get based on a certain subset of  campaign platforms.  Right now ethanol plays into that in this country in a big way, helping to gain numerous pivotal votes.  Again, the caucus system needs reformed in the US, and a big part of the ethanol story relates to the Iowa caucus.  
Another way to say this is that it would be political suicide for a politician to speak out against ethanol in 2006.  Now, down the road that could change, when more people become educated about this subsidized food burning program.  More populated areas of this country will revolt against subsidizing a fuel mandate that is hurting all of us more than helping us.
The Iowa causus wouldn't have so much influence if the party leaders weren't in such a rush to have a nominee. The campaigns used to last months. Now there is such an obsession over the appearance of unity that candidates are pushed to throw in the towel after the first few primaries.
Hillary does not lie convincingly ... but it is not for lack of practice.

My assumption is that as she is reading her fuly scripted positions [she needs to learn how to use a teleprompter] she is ALWAYS trying to appeal to the maximum number of soccer moms.

Short article here on lack of transmission lines for a wind farm in Minnesota. I'm not at all surprised that a utility company would balk at spending the necessary money for infrastructure development. Has this been happening elsewhere that anyone knows of?
ERCOT added a line into West Texas (not to be confused with WesTexas) just to handle increased wind from there.  Not sure which utility built it.

Under Texas deregulation, utilities that add or expand needed tranmsission lines (hence the ERCOT planning) get enough money for carrying wind or other power that it is a profit center.

That is the simple solution in MN.  Give the line owner enough $ to make it worth their while.

West Texas.
I'll write a post about this later, but chew on this email I just received from MoveOn.org:

The results are in. We're proud to announce the MoveOn member choice for our new, positive agenda:

  1. Health care for all
  2. Energy independence through clean, renewable sources
  3. Democracy restored

These three goals were nominated, debated, and overwhelmingly selected by more than 100,000 people in local house parties and then online. Most groups would say this is a far too risky way to make such a big decision. But it's this grassroots consensus that makes this agenda different--and powerful.

So what's next? This month, we'll launch a major campaign for a clean energy future, starting by breaking the vise-grip of big oil in Washington with our "Oil Free Congress" initiative. Expect hundreds of local events, advertising, national media attention and accountability at the ballot box--and that's just for the first of our 3 new goals.

Of course, we won't let up in our work to end the war in Iraq, and we'll still respond to immediate threats in Congress. But our new agenda will focus our long-term work, offer voters a positive, inspiring reason to support progressives on Election Day, and push Democrats to think big and fight hard.

Let's be clear: we've chosen big goals here, and seeing them through won't be easy. There are powerful interests who prefer things the way they are, and we'll never match them in sheer dollars or backroom deals.

Our strength lies where it always has: the voice, energy, and creativity of 3 million MoveOn members. If we're going to make health care a right, power America with clean energy, and restore our democracy, we're going to need as many likeminded folks on board as we can get. So today, we're turning to you to help build the team.

I just hope it's not going to call for an ethanol pump in every garage! I hope CONSERVATION is the main aim.

<rant>   As a progressive in the oil patch I resent being stereotyped by the progressive community. We deserve a voice too, and the industry in the US does not have a unified voice. The Majors, the multinaionals are overrepresented because of their money, but they are basicially beaucrats in huge organizations.  They love foreign imports because they make money from the imports and really could care less about the world.
   The majors have never(at least in the last 60 years) made much money from US production, they have always acquired the production by purchasing independent oil companies.
   The real problem is corporatocracy. Too much influence by corporations, just like in Nazi Germany. It was plain in the last election with Kerry and his ketchup money and Tom Delay and the Republican fundraisers shaking down the rich CEO's.
  This oversimplification and stereotyping is one of the biggest problems in our society, surely our willingness to examine strategies of dealing with the necessity of change at TOD shows this.  
As a progressive in the oil patch I resent being stereotyped by the progressive community.

Ditto. I get tired of constantly having to defend what I do for a living. In our society today, people need oil. That is reality. They may not like it, but that's the way it is. I help fulfill that need. And for that, I have been berated, cursed (by a state representative), and accused of favoring the war in Iraq.


For what it is worth, I would like to say that the voices oil production experts play a vital role in boosting the credibility of the PO message, and I very much appreciate the information and analysis that you provide.  
How about breaking the vise grip of big coal, of big corn, of big ethanol, of big natural gas.  Oil is not even close to the full  or the big picture.  People are obsessed with oil. Meanwhile, they are being fleeced by the ADM and Peabody's of the world.

And all we hear about is cars while our homes are killing the planet.

Kunstler's new Eyesore of the month is available.


It involves the dessication of a quaint old barn by covering up all the archtectural detail by wrapping it completely in vinyl siding.  I've often wanted to do a study to determine what percentage of garage spaces in America are actually occupied by cars.  In my experience, many (and maybe most) garage spots get overrun with the storage of useless crap and people end up parking their precious cars outside bc/ they run out of space to store their worthless junk.  How ironic.

Beyond the eyesore aspect of it, another look at Vinyl siding comes out in a film called "Blue Vinyl", which explores the PVC and related products, how noxious the mfg process, how dangerous to homes when it's burnt(releases HydroCloric acid gas), and the overall power of this particular industry.  Worth checking out..


"With humor, chutzpah and a piece of vinyl siding firmly in hand, Peabody Award-winning filmmaker Judith Helfand and co-director and award-winning cinematographer Daniel B. Gold set out in search of the truth about polyvinyl chloride (PVC), America's most popular plastic. From Long Island to Louisiana to Italy, they unearth the facts about PVC and its effects on human health and the environment.

Back at the starter ranch, Helfand coaxes her terribly patient parents into replacing their vinyl siding on the condition that she can find a healthy, affordable alternative (and it has to look good!).

A detective story, an eco-activism doc, and a rollicking comedy, BLUE VINYL puts a human face on the dangers posed by PVC at every stage of its life cycle, from factory to incinerator. Consumer consciousness and the "precautionary principle" have never been this much fun.

The DVD version of this program is recorded on DVD-R which is not compatible with some older DVD players. See the new DVD page for more details.

Emmy Awards nominee (Best Documentary, Best Research)
Excellence in Cinematography Award, Sundance Film Festival
Epic Award, The White House
Best Documentary, Bermuda Film Festival
Audience Award, Philadelphia Festival of World Cinema
Audience Award, Santa Cruz International Film Festival

I second that recommendation on Blue Vinyl.  I saw it when it was on HBO; very funny, ala early Michael Moore, and also scary and informative.  I'll never look at vinyl siding the same way again.

Continuing our conversation from May 30's drumbeat....

You brought up an interesting point about the role of imports/exports in the food market.  In terms of a reduction in exports of food as we begin to produce less, I think it could go two ways.  One is that our capitalistic system will allow the highest bidder to buy food, so we very well may starve some people here to pay for others around the globe.  As a farmer I am going to sell to the highest bidder.

If you get an agent to negotiate a forward contract on my sale price now and add in a currency covenant to hedge against a currency loss (a given) a farmer would only worry about how much money he can make.  Do farmers really want to know WHERE there food goes?  I mean sure as a matter of curiosity, but do they dictate who gets it?  They could, but the majority of farmers would seek their own best self interests and thus would be more income for their families.

However at some point, the government would probably get involved once the people realized this bigger picture.  At that point the gov't may institute some form of protectionism measures.

One last thought about the starving people here in this event.  The prices that foreigners would be willing to pay, would spur the competition back at home to farm.  There are swaths of lands in Mexico that were destroyed by the agri business of the USA.  The majority of Mexicans stopped farming because it was so cheap to buy the super cheap american food.  However if the people of Mexico begin outbidding Americans for american grown food, the locals in Mexico are going to want some of that money so they will start competing.

This is the basis of globalization, and it's too bad that so many people who are hurt by it and not taken care of seem to think it's so bad.  I wholly believe in international trade, but I do think that those who are harmed by globalization should be re trained by our gov't to do something else.  

I could go so far as to say too bad you should have learned to go to school and better yourself and you wouldn't have had to worry that your call center job got farmed out to better qualified Indians who have computer programming degrees that work for less than you.  However I think the real solution is for anyone who was directly harmed by globalization (no room for political b.s., but it would happpen I know), then you should have access to near free schooling to retrain yourself to do something more valued in this worldwide economy.  There are so few people who understand the bigger picture and so many who don't even care to understand.  People seem to wait for someone to bail them out and the gov't is most happy to do it most times.  Why aren't people rioting because the taxpayers gave our airlines billions of dollars and yet they are mostly all still entering bankruptcy?  That is a bunch of money we literally threw away.  Things are disasterously out of control.  So what kind of gov't is this?

I mean c'mon do you really think it's all that bad that you can get cheap bannanas year round?  They don't grow in abundance here, so if it were not for trade where do they come from?

Each country in the world needs to have at least one paddle in the water -- the "energy exporter" paddle or the "food exporter" paddle ("both" is obviously better). The countries with neither will be at a significant disadvantage (unless they are self sufficient in both). We all in TOD know the countries with the "energy exporter" paddle, but what about the "food exporter" paddle? Maybe we'll need to have a TGB, "The Grain Bushel", website?

If you take out an atlas and look for the places that are "green" and have a "mild" climate then you've found the world's food. My National Geographic Atlas calls some of these places "temperate wet", for instance. Add a little fertilizer and bingo! -- It is interesting to me that the U.S. is a food exporter, and it also has 26% of world phosphorus production (a fertilizer ingredient). I also find it interesting that a country like Japan is at a disadvantage in this regard.

The big incentive is to figure out how to farm with little fossil fuel and nat gas. If that can be done, then the "boat" will paddle a little more in the "food exporters" direction.

I just noticed this, perhaps it has been mentioned:

News Flash: We're Running Out of Oil. Get Used to It.

By Warren Brown
Sunday, May 28, 2006; G02

There is no cheap gasoline.

Accept that.

Now get on with your Memorial Day weekend and summer travels, and have a good time.

I'm serious.

End the silliness. Stop worrying about whether gasoline will go up to $4 a gallon. It will. In some California communities, the price is already there. Stop running around all over the place wasting time and the gasoline you have looking for fuel a few cents a gallon cheaper. What's the point? You save 10 cents and lose 10 minutes. You can always find another 10 cents. What about the 10 minutes?

And while you're at it, stop listening to those goofy TV news reports about "price gouging," or "finding the cheapest gasoline," or about worried consumers switching to hybrid cars. It's all ratings hype that has little to do with reality.

Take the hybrid car thing. Gas-electric hybrids constitute barely 1 percent of the nearly 17 million new cars and trucks sold in the United States. They are a marginal percentage of the fleets of Toyota Motor Corp., Honda Motor Co. and Ford Motor Co., the three major car companies that make them. Hybrid battery and related technologies are changing so quickly, the hybrid vehicle you buy today might not be the one you'll want to keep tomorrow.

There is also the matter of fiscal common sense. I've grown weary of people who owe more on their current car than it's worth asking me about the feasibility of trading in their automobile for something more fuel-efficient. Doing that is neither feasible nor sensible. Here's why:

Presumably, your goal in getting a less fuel-thirsty car is to save money. But how can you save money by wasting it? Do you think a dealer is going to give you the new car free? Do you think a bank or financial company is going to forgive the debt on your current car? Do you believe the bank or other financial institution will allow you to roll that existing car debt into a new auto loan at an annual percentage rate that is disadvantageous to the lender? Are you serious? Get real!

Here is the hard truth:

Oil is running out.

It probably will not disappear before many baby boomers and their immediate progeny run out of life. But it will disappear.

Every oil company knows that.

Every major automobile manufacturer knows that.

Every politician who got a decent score on a scholastic aptitude test knows that.

President Bush and Vice President Cheney and all their aides know that.

Oil is running out, and it is running out as global demand for available energy resources is growing rapidly. That means per barrel prices and pump prices are going up and will stay up.

All influencing externalities -- global terrorism, political unrest in oil-producing nations such as Nigeria, refinery disruptions caused by Gulf Coast storms, the odd and often suspicious behavior of oil futures markets -- are important. But not one of them changes the essential fact that oil is running out.

So, stop wasting your time worrying about pump prices. If you don't have enough money to hit the road and buy all of the hamburgers and trinkets you want, sacrifice some of the hamburgers and trinkets. If you are in a vehicle that uses lots of gasoline, look at how much you owe on the thing and do the math. You might be better off keeping it and driving less. Ever consider using the Metro?

Do you have a recreational vehicle, a motor home? I love those things! My fellow RVers love them. You know what? High fuel prices, or not, we're still going to roll this summer. We're just not going to roll as far and as long as we used to roll, but we're going to roll!

And when we get back, we're going to put pressure on Congress to do something real for the American people. Enough of this meaningless showmanship of putting the Federal Trade Commission on the dock in search of "price gouging" that no one ever really expected to find. That's just a ruse. We want something real. We want a national energy policy that deals firmly, fairly, sensibly with the reality that oil is running out.


Weird article. "We all have a bad cough, but let's keep smoking.  After summer vacation, we'll have the government do something about lung cancer."

I ran into a couple of elderly RVers a couple of weeks ago who were having to wait on a pension check to get gas for their vehicle. Pray for them, cause Exxon preys on them.
oilmanbob -

These are probably part of the same bunch of obnoxious retirees that proudly displays such cute bumper stickers on the back of their humongous RVs as: "We're Spending Our Grandchildrens's Inheritance and Loving It."

I don't know why so many old geefers (at my age I should refrain from calling anybody a geefer) are so enthralled with the idea of piloting one of these cumbersome land barges from one tacky overcrowded campground to the next. For me it would be a form of punishment.  I guess some people just can't sit still and enjoy the simple pleasures of just being alive in pleasant surroundings.

Over the years I've traveled a great deal on business, and for the most part, I hated it. Many people I know have physically moved their bodies from one point on this sphere to many other points on this sphere, and because of it feel that they are sophisticated, worldly,  and 'well rounded'; but mentally and spiritually, most of them have really gone nowhere.

Well, at any rate, I wouldn't be too bullish on companies that make RVs (or large power boats, or personal aircraft). A toy ceases to be a toy when using it becomes painful.


What would happen if these folks DIDN'T travel? Well, they would probably have the time to look around at their lives and realize their marriage sucks, their kids are dysfunctional, they hate their jobs, they're 30 pounds overweight, etc. . .

What else would there be to notice for many folks? I think the travel is a form of anasthesia



I agree completely. Travel as escapism. And, they think they're "experiencing" things or becoming "well rounded" but they're only doing that latter thing literally. They'd "experience" more at home by getting in shape, starting some kind of a garden, spending some time watching birds and bugs and see more real nature paying close attention to a tree trunk or a pond at home than they'd see on a bus tour etc to Yellowstone. And, they travel around and thus keep from having to actually get to know anyone, they can feel like they have lots of friends because they've met zillions of ppl superficially, but don't even know much of anyone in their own town.

I totally disagree. And I am much younger than most of you guys. I don't care why people travel - that is their right. I think it is good that they do. You're talking about traveling like it is communism. Current retirees are to a large extent responsible for putting us where we are today. But they don't determine our future. We do.

So today Iran rejected yet the latest parley proposed to them, and China and Russia are on board, seemingly, to apply sanctions including "refined petroleum products."

I got the following off a defense blog and it does not mention the problems with the Azeri's over the last two weeks. The Islamic Revolutionary Guard Corps (IRGC) are the religious military wing of the military (a sort of 4th service). I think of them as the SS and/or SA of Iran, high on religion:

Iran struggling with U.S.-backed insurgencies in its western border areas

NICOSIA -- Iran appears frustrated over the Arab and Kurdish insurgency in the western part of the country.

Officials said Teheran has failed to quell the insurgency in both northwestern and southwestern Iran, along the Iraqi border. They said Arab and Kurdish separatists, financed by Britain and the United States, have maintained a stream of attacks against Iranian government targets in the region.

"There has been a proliferation of conspiracies," said Iranian deputy parliamentary speaker Mohammed Reza Bahonar.

[On early May 24, protests erupted in Teheran's two major universities, followed by clashes between students and police. About 40 officers were injured by stones hurled by students from Teheran University protesting the dismissal of professors.]

Bahonar said the government has lost control over the provinces along both the Iraqi and Afghan border. He said parliament could transfer security for these provinces to the Islamic Revolutionary Guard Corps.

"It has been almost proven that security actions alone cannot solve the problems," Bahonar said. "There should be a combination of security and intelligence work, and the disciplinary force of the country should use its capabilities to the best advantage."

Teheran has blamed the United States and its allies for fomenting unrest along Iran's borders. Iran has several large minorities, including Azeris in the north, Kurds and Arabs in the west and ethnic Afghans in the east.

In the east, Teheran has sought to block the flow of heroin from Afghanistan, which has helped create a huge drug problem in Iran. Al Qaida has also used the drug route.

Officials said the Supreme National Security Council would soon explore the use of the IRGC and Basij in border areas. The Basij has already been trained for border security.

Yes, AIPAC is certainly hyperventilating at the moment.
I would recommend taking a deep breath and waiting a bit to see how much of this unity is real.  You can pretty much assume that much of what is being reported is deceptive in some way.  

Also, I have little doubt we're playing a part in stirring up trouble in those areas inside Iran (think of the reaction if it were reversed!).  That could be a real problem for Iran, but it can also mean that the local support for it might be pretty thin, at least as compared to something genuine.

If I had to bet, I'd wager on both the reports of unity on sanctions with China and Russia, and the disintigation of Iranian ethnic areas, being overblown.  I'll have to see if I can find the actual agreement - if it has no teeth and it isn't enforcable, then it won't mean much.


Diplomacy can be so boring. This little step, that little step, and each step is carrying a "message."

The important thing is Iran did not reject this parley out of hand. I was wrong in the first post on that part. And this is good. I sincerely hope real discussions begin, but between Bush and the Iranian President, there is an immense gulf.

Actually if the roles were reversed . . . we do have millions of illegal immigrants here now. We should go back to the old days and if you get to Ellis Island you can register and be included relatively quickly. 5-10 years is silly, unless you have a great deal of $$ or recognized talent.

As to if Iran had tons of people stirring up stuff in the USA - they only wish they had the capability. And there maybe some cells already here. . . . As Mel Brooks said, "It is good to be King." But more importantly we are part of the established order on the planet. Iran is part of the not established order. To promote Iran (or Venezuela) opens the planet to revolutionary activity. If chaos follows, will we be able to reduce GHGs and oil depletion?

"There has been a proliferation of conspiracies," said Iranian deputy parliamentary speaker Mohammed Reza Bahonar.

Has he been posting on TOD under another name?


I don't know if you are aware of the following website:


It is a map of the world indicating trouble spots and quite addictive.

At the top of the map you will see a nuclear icon flashing over Thule Island in Greenland, if anyone here understands the Maygar language could they provide a translation, please?

For some reason they are flagging an old event, the 1968 crash of a B-52.   A brief description of that incident is described on this page:

It was an incident that has stirred up over time:

I don't do Magyar, but it refers to a B-52 with a nuke lost in Greenland in 1968. I can't find any new news about it though.

See here for more (from 2000).

Google turned up a list of US nuke accidents for your weekend reading pleasure: http://www.milnet.com/cdiart.htm

..Magyar, not Maygar, should've stuck with Hungarian.

The website has provided an English translation now. Seems a B52 bomber armed with 4 Hydrogen bombs crashed into the sea a week ago.

Long time lurker...First post here...
Has any info on EEStor been posted ?
They claim to have a patented device (hyper-capacitor) for electrical storage. If they can make this thing, it is interesting to say the least...52KW hours storage in a 320 pound, 1 cubic foot device, unlimited recharges, 6 minute recharge time, non-toxic, for $2K-3K.

Here is an article:

Here is their patent:


There was a discussion on ultra-capacitors on energyresources a while back. From what I remember, not being an engineer, the critical limiting factor in a capacitor's ability to store energy is amount of surface area. Research is, I believe, going on in using nano-tubes or similar structures to vastly increase the surface area available for solid-state electricity storage. So I guess it is feasible that these guys have a design that does something like this. At any rate, it is probably well within the realm of technological possibility.
It appears that China got the memo on the need to conserve oil.

From today's Global Economic Forum over at Morgan Stanley ( http://www.morganstanley.com/GEFdata/digests/20060602-fri.html ), a piece by Stephen Roach, "A Commodity-Lite China". A relevant excerpt:

"A second factor likely to be at work is commodity conservation -- in effect, retrofitting China's commodity-guzzling production platform with more commodity-efficient technologies. Oil has been singled out for special attention in this regard. China's newly enacted economic plan contains an explicit target of reducing the energy content of Chinese GDP by 4% per year through 2010 -- or fully 20% over the five-year planning horizon. For a nation that currently consumes twice as much oil per unit of GDP as the rest of the world, this goal appears eminently achievable. The Chinese do not have to reinvent the wheel in terms of developing alternative energy technologies. Instead, "all" China needs to do is to begin replacing its existing production technologies with energy-efficient alternatives already in place elsewhere in the world. This is hardly a costless endeavour, but for a nation with the highest saving rate in the world and the largest reservoir of foreign exchange reserves, China can certainly afford to earmark a small portion of those funds toward oil conservation efforts."

Now, if we could just get that memo translated from Chinese into English, and placed on the relevant desks in the U.S.

One can always hope, I suppose...

anybody hear about problems with BP's Thunder horse platform in the GOMEX?...this from briefing.com:
Crude oil prices closed up 3.4% at $72.70 a barrel, getting a last minute push according to traders amid reports that BP plc (BP 71.97 +0.89) found undersea leaks to its huge Thunder Horse production platform in the Gulf of Mexico.

...i googled thunder horse and found no news, so it may be too new to be covered yet.
I've been watching as oil has climbed all day.  This would be something.
Interesting split as oil climbs and (my local) gasoline trails downward.  If that continues I guess it will build the case that recent prices were indeed influenced by refinery shortages or ethanol effects.
How have diesel prices gone relative to gasoline in the last few days ?

June 1 was "ultra low sulfer day" for diesel at the refinery.  I meant to fill up my old Mercedes 240D, but I have not driven it since May 29th.

For me, pretty steady since a 5/15 peak, others slipping very slightly:


well...i finally found something, and it appears to be nothing. reuters reports the following:
Oil major BP is still targeting a second-half of 2006 start-up of its giant Thudner Horse oil field in U.S. Gulf of Mexico despite the discovery of two leaks in a subsea manifold during commissioning testing, a company spokeswoman said. "While conducting pressure testing with the subsea system we detected two leaks in one of the manifolds," said Ayana McIntosh-Lee. The manifold testing was conducted using water and no oil was spilled, Lee added.

...so, the briefing.com reference was probably a futures trader(s) with an overly active imagination....nevermind!
I haven't seen this posted yet:

High fuel prices hit US automakers in May

Some excerpts:

DETROIT, United States (AFP) - The Big Three US automakers' reliance on trucks and sport utility vehicles (SUVs) to drive profits hit another pothole in May as consumers switched to more fuel-efficient passenger cars and cross-utility vehicles.

"We have seen the mid-size sport utility market collapse and I don't think that is going to change," Healy told AFP. "This is liable to have a big impact on profits because... the margins on the car side are much smaller."

Healy said he expects demand for full-size pickups to remain relatively healthy, since few alternatives offer their flexibility.

Ford Motor Co. took the offensive Thursday by offering vehicle buyers a 1,000-dollar gift card for gasoline (petrol) for a year along with zero percent financing.

Ford's incentive follows a gasoline "price-cap" deal rival General Motors Corp. offered some customers in Florida and California that gave new car buyers pre-paid gasoline cards that compensate them when pump prices exceeded 1.99 dollars per gallon.

That deal did little to boost GM sales, however.

GM posted Thursday a 16 percent decline in demand in May from a year ago, ending at 345,157 units. Passenger car demand was lower by 19 percent at 129,905 units, while truck sales were off by 13 percent to 215,252 units.

"This was a challenging month for us," Paul Ballew, GM's director of global market and industry analysis, told reporters on a conference call.

He said demand for some traditional truck-based SUVs, particularly the Chevrolet Trailblazer and GMC Envoy, were running at nearly half the pace of a year ago.

The story was similar at Ford, where sales were off 1.9 percent from May 2005 at 278,546, after strong car sales were unable to offset a steep drop in demand for trucks and SUVs.



C-Span 2 ran twice tonight Hugo Chavez's speech opening the meeting of OPEC. I got to listen to most of his long speech, but it was not up to Castro's standards of 5-6 hours. I recommend you listen to it.
Yeah, I saw this last night flipping through channels before bed. Anyone have a link to video archive? (Who am I kidding? - audio is fine - and transcript best, since we get to quote The Man).

I'll throw this out there, and I know this is a good place because there is serious respect for Chavez here - he has made  huge mistakes with his oil/foreign-policy. You want comparison? Try Hitler and a two-front war. The dictum, "Power corrupts, and absolute power corrupts absolutely," applies almost exclusively to totalitarian nutbags. I have always marveled at Hugo's ability to convince so many seemingly intelligent people that he is anything but another...

I don't think he really was on C-Span. The MSM and PTB never would have let people hear that.
I listened (On Point on WBUR) to part of a discussion on slavery with the author of "Inhuman Bondage" today, and now am thinking of parallels between slavery and Peak Oil/fossil fuels.

About 7 minutes into the show, Jack Beatty comments that in 1860, slavery accounted for what in today's economy would be about $9,000,000,000,000, a majority of the national economy.  Yet, in just a few years after 1860, slavery was abolished and the economy transformed.  This seems like a close parallel, economically, to where we are today with fossil fuels. The fact that the US survived abolition gives me strange hope that we will not totally blow the transition away from fossil fuels.

Reflecting further, I think that there are equivalent moral dimenensions too.  While racism and oppression operate with slavery, complacency and selfishness operate with fossil fuels. While slave holders were blind to the humanity of the slaves, we are now blind to the raw deal that is our legacy to the future. Somehow, at a fundamental level, we do not appreciate how our technology and industry is allowing us to trade present comfort for future destitution. I think that in order to really deal with Peak Oil/fossil fuels/Global Warming, we need to develop a moral sense of stewardship for the future  equivalent to what the abolitionists felt against slavery.

Some modern quantitative studies have shown that globalization is more efficient (cheaper for the slave owner) than slavery ever was. Slavery was like owning a car, modern globalization is like leasing a car. The modern "slave owner" has made the third world slave responsible for all his feeding, medical problems,etc.in return for a very few dollars a day for hard (sometimes high quality) work. The minute the slave stumbles, he is gone. The current system is far more "productive" and allows first world shoppers to feel morally superior.