DrumBeat: September 2, 2006

[Update by Leanan on 09/02/06 at 11:38 AM EDT]

Saudi Aramco Buys First-Ever Fuel Oil Cargoes

SINGAPORE, (Reuters) - Saudi Aramco, a major fuel oil exporter to East Asia, has imported its first-ever cargoes of the residual fuel, taking a total of around 160,000 tonne for August and September deliveries, to meet peak summer utility demand amid a depressed global market, traders said on Friday.

..."This is the first time ever that Aramco has actually bought fuel oil. It's a case of optimisation -- the market has been poor and they have cut back on their own production due to depressed prices in the face of peak summer demand," a Singapore-based Middle East trader said.

[Update by Leanan on 09/02/06 at 9:27 AM EDT]

A solution to the energy crisis?

A new website entitled Fair Price Energy includes some interesting proposals for moving forward with sensible energy policy in America. While the author admittedly offers no entirely new ideas to the discussion, the combination of policies and the clear presentation merit a look.

Iran: OPEC unlikely to change output soon

Pleasant surprise: Gas prices down for holiday. It's a 'tank-toppers delight' for U.S. motorists this Labor Day. But a Big drop in gas prices unlikely.

Peak Oil Passnotes: Lull What Lull?

EtopiaMedia has an audio interview with David Roth, Democratic Congressional nominee for California's 45th District. He discusses peak oil, among other things.

'Localvores' celebrate food

The Other Crisis

Oil is an issue today -- how much is available and what it costs. I hear a lot of moaning and gnashing of teeth because we might have to actually cut back on our vehicle use or trade in the Hummer for a fuel-efficient vehicle, but no one is talking about the impact further price hikes and scarcity will have on food. Too scary, I guess.

Is the NYMEX Oil Market Being Manipulated?

US Army Contemplates Redrawing Middle East Map to Stave Off Looming Global Meltdown

State row over Western Australia's natural gas reserves

A row has erupted between Canberra and Perth over Western Australia's natural gas reserves. The Premier, Alan Carpenter, has declared that he wants to keep up to 20 per cent of his state's gas in WA to provide the state with cheap fuel.

Chad: Deby seeks to reduce political isolation

N'DJAMENA, Chad - President Idriss Deby's decision to expel two international oil companies and take more control over oil revenues marks the latest effort in Chad's seemingly never-ending attempts to rewrite the rules governing the country's young oil industry.

Pakistan: Focus on Thar coal for power generation

ISLAMABAD, Sept 1: The government has decided to develop the Thar coal for power generation on a priority basis to overcome energy crisis following confirmed estimates that its reserves were equivalent to at least 850 trillion cubic feet (TCF) of gas — about 30 times higher than Pakistan’s proven gas reserves of 28 TCF.
Does anybody know who's behind http://www.oilpeak.com/ ?
This site is online for at least over a year now.
There is a promise that more information will follow soon, but the content doesn't seem to change at all.

Nice posters though, they are nice on the wall of my office!



Mark Cook
1629 Cedar Street
Niles, Michigan 49120
United States

Re:  "The North Sea Conundrum

Most of us have seen this article, in which the Royal Bank of Scotland, described the North Sea production situation as a "Conundrum."  They are confused as to why production continues to fall despite new drilling.

Of course, anyone who has visited this website and reviewed the Hubbert Linearization (HL) method is not confused.

The Lower 48 and the North Sea could not be more different.  The Lower 48 peaked in 1970.  It's primarily onshore, some big fields and a lot of small fields.  Jump forward to 1999, when the North Sea peaked.  The North Sea is offshore, primarily big fields (because of the economics).  The North Sea operators also had much better technology.

The common connection?  Both regions peaked at about 50% of Qt.  The "Y" P/Q intercept for the North Sea suggested a more rapid decline rate, and that is precisely what the EIA crude + condensate production has shown, now down 30% (in June) versus the 1999 peak.

Khebab and I comapred the Lower 48 to the world and Texas to Saudi Arabia.  Based on the HL method, the world and Saudi Arabia, in 2005, were where the Lower 48 and Texas were at when the peaked.  We basically confirmed Dr. Deffeyes' data, and we predicted that Saudi Arabia was on the verge of a production decline.

I have gotten some grief over using Texas as a model for Saudi Arabia, given that most of the Saudi's production comes from a few large fields. Well, isn't that also true of the North Sea versus the Lower 48?  And didn't both of those regions peak at 50% of Qt?

Texas peaked later than the Lower 48, as a percentage of Qt, probably because of Texas' status as a swing producer.  The same thing is true of Saudi Arabia versus the world. However, Saudi Arabia is extremely exposed to the apparent decline from its biggest field.  Ghawar accounted for more than half of Saudi production (in 2005), while the East Texas Field accounted for only about 7% of Texas production (in 1972).

But the bottom line is that world and Saudi production have both been down since December--while oil prices have been trading in a price range that is 15% to 30% higher than December.  

IMO, this isn't a drill; I think that it is the real thing.

"Cut thy spending and get thee to the non-discretionary side of the economy."

Go North young Man!Go North! And be sure to take your burmuda shorts.
Do we have an example of HL correctly predicting the peak when the production graph is quite erratic?

Lower 48 and North Sea seem like ideal cases.

Looking at some of Stuart's work, I'm less certain about HL in the ME.


It is clear that when most of the oil produced is destined for export to distant nations, production tends to follow erratic patterns.  i.e.  It is much more susceptible to factors other than the one that gives HL its theoretical underpinnings: production is mostly affected by remaining URR. (the number of fish left in the pond determines your catch today -- to use Deffeyes analogy).

If HL misses the ME peak by a decade or more, it will be judged to have been a sloppy tool since, on the time scale of the oil age, a decade is a significant chunk of time.

"If HL misses the ME peak by a decade or more. . ."

Of course, as we predicted, Saudi oil production is declining, and the Stuart's HL plot of Kuwait fits the new lower estimate of URR.

It should be obvious that in the linearization, taking a great big leaping extrapolation off that little linear area has got to be a rough approximation at best. Stability analysis confirms that. Probably the linearization estimate of URR is only good to a factor of 2 or so (with probably a larger error bar on the downside than the upside). K is maybe uncertain by 50%.

That's from Stuart's article on Kuwait.  A factor of 2 is a very big deal.  i.e. URR could be twice as big as HL predicts.

I'm not arguing against your conclusions since I don't have an alternate model.  Just pointing out that there is evidence HL is considerably less predictive in the ME.

"Just pointing out that there is evidence HL is considerably less predictive in the ME."

Actually, the evidence, the decline in production since December by the top exporters, especially Saudi Arabia, supports HL method.  Stuart is expressing an opinion that the method has errors (depending on where a region is along the linear plot), but the evidence, e.g., the US, Texas, Russia, North Sea and now the world and Saudi Arabia support the accuracy of the method, especially at or beyond 50% of Qt.

The key point is that the world and Saudi Arabia have shown strong linearization patterns for quite a while--which makes the predictions much more accurate.  Both regions are at or past the 50% of Qt mark.  The HL method was 99% accurate in predicting post-1970 Lower 48 cumulative production, using only production data through 1970 to predict future production.

I would go back to my example of the Lower 48 versus the North Sea.  The two producing regions could not be more different, but they peaked at the same stage of depletion.  We find the big fields first--that is why we can compare the Lower 48 to the North Sea to the Middle East and ultimately to the world.

I just attempted to contact (email) The Herald about that article, specifically to contact that author though I tried in a convoluted way.  I pointed him to the works of Hubbert and Deffeyes as well as suggesting he contact you for more specific information.  I doubt it'll make it through, but who knows.  Maybe "we" (theoildrum community) should start something of a campaign to send letters to news agencies that cover these issues and don't quite "get it."  Perhaps it'll plant some seeds out there.
Why the RBoS can't comprehend the NS decline is certainly odd. It's about as difficult to comprehend as falling off a log in a class five rapid.

But the KSA's oil production potential may still be a little more enigmatic due to production manipulation as the OPEC swing producer. While I don't dismiss the HL method to project future decline rates or the URR for the magic Kingdom, this 'market manipulation' may affect the precision of HL methodology. But it looks like we are going to find out the answer the hard way.

BTW, I really did appreciate all the time and expertise that was involved in a previous thread on ethanol by WT and others.


I've done my own fits to various data sets and I agree with westexas. However depending on which data set you use, the peak year moves around from 2006 to out past 2010. In all cases I get basically a period of flat production over about 10 years. Given that production has been flat from mid-2004 I suspect we've in that flat spot now.

Over the next 10 years I expect GTL and CTL projects to get major backing. Hopefully they'll get up and running after we start to move off of the 10 year flat and into about 3 MB/day decline per year. Biofuels might able to contribute a bit after 10 years of development as well (maybe at the 10% level).

However there are huge poential efficiencies to had even with our current fleet of autos. Petrol consumption dropped 5% in Australia over the last year.

I guess the huge question is will $70 per barrel be sufficient to induce 5% savings per year or will prices need to increase further?

I kind of suspect $70 will continue to drive demand destruction at 5% per year since Oil prices have been flat since April despite a decrease in world exports.

If $70 drives 5% demand reduction per year I suspect the world economy will continue to thrive over this phase of the transition period.

>Over the next 10 years I expect GTL and CTL projects to get major backing. Hopefully they'll get up and running after we start to move off of the 10 year flat and into about 3 MB/day decline per year. Biofuels might able to contribute a bit after 10 years of development as well (maybe at the 10% level).

GTL only makes sense for stranded gas but its unlikely that GTL production could offset very much oil. Since North America now has less than 8 years of Natural Gas supplies we will likely be forced to import Liquified NGas soon.

The issue with CTL projects is that they are extremely difficult to scale up to the point where they can produce > 2 mb/d. The efficiency to convert syngas into petro fuels (diesel & gasoline) isn't very good either)

>I kind of suspect $70 will continue to drive demand destruction at 5% per year since Oil prices have been flat since April despite a decrease in world exports.

While higher prices in the US, Austrialia and Europe force consumers to cut back. Countries like India, China, etc have subsidized prices. This of course prevents the higher oil prices from impacting consumption.

>If $70 drives 5% demand reduction per year I suspect the world economy will continue to thrive over this phase of the transition period.

The US, Europe and Austrialia are now in a transitional phase as the housing boom comes to an end and moves into a housing bust.

"However depending on which data set you use, the peak year moves around from 2006 to out past 2010. In all cases I get basically a period of flat production over about 10 years."

How did you arrive at a flat period?  Gaussian curves are second order, to get a flat spot you'd need a fourth order polynomial...?

Getting a Hotel at the ASPO USA Conference is not a problem!!

A few days ago I posted that I was having problems getting a reservation at the ASPO USA Conference in Boston. It turns out it was my fault. The association has reserved blocks of rooms at several of the nearby hotels and if just call the hotels and ask for a reservation they say they are booked up because of the blocked out rooms. Anyone wanting to make a reservation should make sure you check out the Hotel and Travel Page at the Website for instructions and a list of hotels. You also get a discount for checking in through the association this way.

BTW they have asked that, if at all possible, attendees walk or use public transportation to get to the Conference.

There are a lot of great speakers and it should be very interesting.

It pays to register early, as the fees will increase shortly.


Inflation or Deflation?

A few weeks ago we had a discussion going here about if inflation or deflation was more likely in the future.

This article out today adds a new perspective to it:

My understanding is that the inflation of the 70's was a combination of rapidly rising wages AND rapidly rising prices. Looking at the chart in this article, we seem to be missing one of these pieces today :o(

  • Inflation is best described as a net expansion of money supply and credit.
  • Deflation is logically the opposite, a net contraction of money supply and credit.

This article from a few days ago is also about deflation and also has some interesting bits on oil prices:


Greg in MO

There is no conundrum.  In the mid 20th century resource abundance and concentration of manufacturing in the developed west led to a virtuous cycle.   Everyone in western society - rich, middle class, and poor - got richer.  By richer, I mean that they could afford more energy per capita, more finished goods, and more services.

In the 21st century, the opposite is true.  Resource scarcity and concentration of manufacturing in Asia has led to a situation where all westerners who depend on their labour for a living - from waitresses to hair stylists to doctors - are getting poorer.  (The older generation of middle class just received a final one time benefit from the housing bubble.  The true investing class has done well - so far - at preserving wealth by investing in commodities and Asia.)  Of course, what I mean by poorer is how much energy, goods, and services can you buy with your labour.  The US and UK in particular are failing states due to decades of bad investment.    Rising poverty in the west is an inevitable outcome regardless of how much green paper might be printed.

The future is clear:

  1. The buying power of a westerner's labour will continue to fall (Asia might squeeze out another decade or two of rising living standards).
  2. Whatever the nominal value of the S&P 500 might be, the true buying power of the shares will fall.
  3. Whatever the nominal value of western housing, it will fall relative to the prices of food and energy.
  4. Whatever interest rates do, long bond holders in western currencies will find that the cash they receive at maturity will not buy as much goods and services as the cash they used to buy the bond.
  5. Commodity costs measured in western labour terms will continue to rise.  What I mean by this is that the hours a labourer has to work to buy 40 litres of petrol or a week's worth of groceries will continue to rise.

Notice I did no make any predictions regarding prices of anything in any of the fiat currencies.  The private banking cartel that owns the reserve banks of OECD nations can create surplus or scarcity of their fiat currencies at will.  However, the bias is to increase the fiat currency supplies, as that levies an invisible tax on the economic system payable to the banking cartel.  All sorts of ingenious methods to do this are available, including governments buying up foreclosed properties, stocks, or bonds with new fiat currency.  What cannot be done is to create more fossil BTUs/capita or more arable land/capita.

I would add to your list the purchasing power of people on pensions, or receiving any type of government program, is likely to drop (or even disappear altogether). If there is not enough to go around, those who are not working are likely to fare worst.

While we're at it in this fine analysis, let's add some more whammy.

Talking only about the diminishing buying power of western labour fails to paint the whole picture: 40-50 years a move began from the manufacturing base towards a service industry. A vast amount of US/EU jobs, likely a majority, are now in some sort of "service".

The problem is that these jobs can only exist in times of abundance, when they are "covered" by other jobs that actually produce "real" goods. They are non-productive from a strict economical point of view. They do not change matter/energy from low- to high-entropy, simple as that. At present, Chinese factories hide the weaknesses of our system, but cracks are already beginning to show. And without mass-scale low-cost transport it's over.

In other words: unless a new domestic manufacturing base is created in record time (right, based on which resources?) a large chunk of those now working service jobs will no longer have any labour at all, or the buying power that comes with it.

And a lot of what's left in domestic manufacturing depends on raw materials that have to be shipped/trucked in from all over the globe, and turned into products that have to be transported over long distances as well.
Our food travels 1500 miles field-to-fork on average, and a quick look in your living room and wardrobe will tell you where the rest comes from.
I can imagine that activites like scavenging in rubbish tips and appliance repair being the hot 'service' industries in 5 ~ 10 years.
Re:  Desperation in the Auto/Housing/Finance Sector

Ford is accepting very low credit scores for their zero interest financing deal on 2006 verhicles.

A local Ford dealership is advertising that they will roll up to $12,000 in negative equity from an old car into the new loan,and they are advertising up to six year loans.

I can't imagine a worse move than going heavily into debt on a vehicle right now, unless of course one bought a large suburban home (mortgage) at the same time--but IMO the prevailing message that most Americans are getting is that high energy prices are just temporary.  The Good Times will return soon--continue buying and financing large homes and autos.

It must suck to have $12,000 in negative equity ... but converting an interest bearing loan into a zero interest loan might be nice.  IOW, let's hope these folks use the opportunity to downsize and get out from under a too-expensive car.
I see an astonishing number of Ford Explorers, Lincoln Navigators and Aviators, and spot one Hummer regularly.  (I also see a growing number of Priuses.)  If people refinanced to retire the guzzlers with the upside-down loan balances and get out from under unpayable fuel bills, so much the better.
I'm doing some work in an Irvine California office park.  There are so many Priuses in the parking structure it's funny.  I actually have to use my remote to make sure the one I'm walking toward is really mine.

Apparently (as one friend tells it) it was the car pool stickers.  He said one guy in his office got one, told the glories of the morning commute, and then 3 or 4 more people went out and got them.  I don't think the stickers are a really great idean ... but apparently they did move hybrids in California.

The downside is that it's people with the economic flexibility that reap the benefit.  People who can buy a new car to save minutes on the morning drive.  It would be much nicer if a penalty/rebate program helped everyone on the economic spectrum while increasing fleet MPG.  But, we as a society don't have the guts for a broad low-MPG penalty.

Twice, recently, the person in line in front of me at the drive-through ATM has accidentally left his receipt hanging out of the, "money-machine."  Both of them were driving large SUV's: one an Escalade, the other an Explorer.  The guy in the Escalade had a total of $12 left in his bank account, the guy in the Explorer, $19.  


For some reason that rminds me of a boss I had.  He once said, "you don't understand anything about buisiness ... (barely pausing) ... ah, can I borrow $20 for lunch?"

Lots of Prii around here, with stickers but seeing more without. It's weird because there are a LOT  of new or almost new SUVs around but lots of prii too, around here.

However - I saw an older Toyota pickup truck today, one of the smaller ones they'd call a mini-truck now, with stickers on the back about Kyoto and global warming, and as I parked my Prius behind it, I thought: This guy sure has me beat, it's paid for, it's probably a stick, and he probably drives it like Mr Smooth.

For some reason I am reminded of the time I bought a 1000$ subwoofer for my home cinema, and got a strange look as I paid in cash.
BTW, SAT, doesn't it worry you that the prevailing conventional wisdom now seems to suggest lower oil prices ahead?  (Rgarding your prediction for short term oil price weakness.)

Ben Stein, on Fox this morning, was recommending that investors buy AMR (American Airlines) because oil prices are headed down, way down "for at least two years."

If prices do indeed go down, we will miss another opportunity to start weaning ourselves off oil by pursuing conservation and alternatives.  This will take the pressure of the politicians to come up with meaningful solutions.  The only thing that really matters to most people is prices.  
Agree 100%. I have been concerned about this for some time. I am also worried that if oil production ticks upward, it will provide ammunition for the naysayers and we will lose some momentum that we need if we are going to influence changes in the right direction.
Don't both of those also argue against the worst case - a fast production decline?

If we get the "slow squeeze" scenario prices may back off a bit, production may climb a bit, but prices will trend higher and drive an ongoing transition.

At least with buying low-mileage SUVs one doesn't run the risk of owing more than the orginal cost of the vehicle. That's not the case of option ARMs (adjustable rate mortgages). A good many holders of these mortgages seem not know that their debt total increases if they only pay the monthly minimum. Or as the article below puts it: "Most of these borrowers aren't paying down their loans; they're underpaying them up.


SEPTEMBER 11, 2006


Nightmare Mortgages  
They promise the American Dream: A home of your own -- with ultra-low rates and payments anyone can afford. Now, the trap has sprung


The First Wave

After prolonging the boom, these exotic mortgages could worsen the bust. They also betray such a lack of due diligence on the part of lenders and borrowers that it raises questions of what other problems may be lurking. And most of the pain will be borne by ordinary people, not the lenders, brokers, or financiers who created the problem.

Gordon Burger is among the first wave of option ARM casualties. The 42-year-old police officer from a suburb of Sacramento, Calif., is stuck in a new mortgage that's making him poorer by the month. Burger, a solid earner with clean credit, has bought and sold several houses in the past. In February he got a flyer from a broker advertising an interest rate of 2.2%. It was an unbeatable opportunity, he thought. If he refinanced the mortgage on his $500,000 home into an option ARM, he could save $14,000 in interest payments over three years. Burger quickly pulled the trigger, switching out of his 5.1% fixed-rate loan. "The payment schedule looked like what we talked about, so I just started signing away," says Burger. He didn't read the fine print.

After two months Burger noticed that the minimum payment of $1,697 was actually adding $1,000 to his balance every month. "I'm not making any ground on this house; it's a loss every month," he says. He says he was told by his lender, Minneapolis-based Homecoming Financial, a unit of Residential Capital, the nation's fifth-largest mortgage shop, that he'd have to pay more than $10,000 in prepayment penalties to refinance out of the loan. If he's unhappy, he should take it up with his broker, the bank said. "They know they're selling crap, and they're doing it in a way that's very deceiving," he says. "Unfortunately, I got sucked into it." In a written statement, Residential said it couldn't comment on Burger's loan but that "each mortgage is designed to meet the specific financial needs of a consumer." <snip>

OK ..... so he went from a $600 a month apartment to a $1600 a month mortgage? Plus taxes, repairs, condo fees and city assessments, insurance etc?

The guy's an idiot .... if you go from your $600 a month rented granny cottage to a $1600 a month loan, of course you are increasing your monthly "nut" by $1000 a month! (Actually more than that, with all the fees etc) that should be very obvious, but I don't disbelieve the article's figures, I see people going to 2X the monthly expense to "own" and then wondering where all their money goes and why their credit card debt got so high all the time, all I have to do it listen to the mutterings around me at the local coffee shop or in the bank....

Fleam--You're missing the point.  It is not that his monthly expenses have increased a $1,000, it's that because of rising interest rates, his $1600/month payment isn't decreasing his principal.  His interest is now $2600 a month although he only has to pay $1600.  So the excess is being added to his principal.  So if his principal balance was $400K last month, it is now $401K (okay, unfortunate choice of example number).  And his interest increases each month with the increased principal in addition to the increased rate so his principal increases even more.  This is actually very similar to what's happening with the U.S. and the national debt.  As interest rates rise, our interest payments increase (from $320 billion in 2004 to a track for $420 billion in 2006) adding to the deficit thereby adding to the debt thereby adding to the interest cost thereby adding to the deficit ad infinitum.  
As this housing nightmare unfolds I am becoming more and more glad that I got a fixed-rate mortgage on a house who's payments are about the same as my old apartment was. What some of these people who took out ARMs with $1600 a month minimum payments were thinking I don't know.
"What some of these people who took out ARMs with $1600 a month minimum payments were thinking I don't know."

They are thinking about taking cash out of their houses.  Unless they can refinance every year and take out 20-30K, they quickly go bankrupt.  

Of course, their actions over the last 5 years have just ensured that the eventual bankruptcy will be even more spectacular.

Yeah, I don't believe we are going to get a fast production decline, for one because I believe much  higher prices are going to moderate demand. I don't think the market is going to fix the problem, but it will make the decline slower than some here believe (IMO).
As we've all discussed before "the market fixes it" can mean a lot of things to a lot of different people.

The people who got laid off at Navistar (Ford supplier) recently got caught in a market "fix."

RR... Your fist sentence seems a little confused. I think we don't get a fast production decline (at least initially) because of geology, not prices. Hubberts model predicts we will have a period of very gentle declines before it starts to accelerate. I think that the price doesn't drive the supply in the way you imply, rather the geology drives the supply (barring small/occasional political disruptions). The price is then set by the market in such a way that demand matches the supply. This works very differently depending on where you are on Hubberts curve:

In the first half of the age of oil, the supply is plentiful and so prices have to be fall and be kept low so that demand is stimulated upwards to meet the available supply. During this era we saw that oil was cheaper than coke and cheaper than mineral water - too cheap really. In this way we become almost reckless in our wastage of oil. IN OTHER WORDS THE PRICE IS SUPLPY DRIVEN.

However in the second half of the age of oil, the way the market works changes, because oil is now scarce. Assuming oil is available, demand for oil will very likely grow - it always has, so the point is that the market HAS TO create higher prices in order to generate demand destruction such that the level of demand moderates to match the available supply. The price of oil needs to be much higher in this era. THE PRICE IS NOW DEMAND DRIVEN.

We are currently in a transition between these two market systems. If we have a economic recession it is possible we tip into scenario one for a short period of time, but as time goes by we will be increasingly in scenario two. So I think geology tells us how much oil we will have and the market tells us how it needs to be priced.

If you think price drives supply then you are actually denying the role of Hubberts model, ie the role of nature and geology. I think most of us here are working from the point of view that the supply is more or less driven by geology and Hubberts model. I believe that oil supplies will fall moderately initially because of geology regardless of price.

Well said. I do believe that at some price or when it appears that decline in oil extraction from the earth is not reversible, alternatives will emerge.

Oil, as long as it is a major fuel source will have its price capped by alternates and/or conservation.

Geology tells us how much oil we will have and the market tells us how it needs to be priced

I beg to differ. It is our Wealth of Tunnel-visions Corporations who tell us how much oil we should burn in our cars, how much asphalt we should lay down in our parking lots, and also how much this oil thing is to be "priced" --and they do so by refusing to account for external costs like pollution and Global Warming and military expenditures and opportunities bypassed for developing more sustainable ways of life.

  • What does The Market tell us about how many cigarettes we need to smoke and how it "needs to be" priced?

  • What does The Market tell us about how much crack cocaine we need to snort and how it "needs to be" priced?

  • Should we keep this list going about the wisdom of "The Market" and how we need to listen to its dictates instead of being a bit more intelligent in handling our affairs?
I believe that oil supplies will fall moderately initially because of geology regardless of price.

Not regardless of price, which was my point. If oil prices tomorrow went to $300 a barrel, we would be awash in oil. We would pull down supplies at a much slower rate. I believe this will happen as we start down the other side of the curve. I believe we will see significant demand destruction, which will slow the rate at which we pull down supplies.

You are missing the point... if oil went to 300 usd we would be awash with oil because demand would get crushed. The supply wouldn't change much at all - thats geology. But the market would instantly bring the price of oil back down to re-stimulate demand to match the available supply. So the price is a function of supply and demand. The supply is not a function of price (apart from some really small tweaking at the edges by OPEC).
You are missing the point... if oil went to 300 usd we would be awash with oil because demand would get crushed. The supply wouldn't change much at all - thats geology.

But if demand gets crushed, we are going to pump less oil. I understand what you are saying, but I don't think it is as simple as that. I think demand destruction will slow down how much oil we produce. It won't be a smooth curve; we will have periods where demand slows due to price, so we pump less, and demand picks back up and we pump more.

Apart from OPEC which has tweaked at the edges it has never really worked like this. Actually I had read that some producers had tried to produce more in periods of weak prices to make up the revenue shortfalls. Generally, I think it is reasonable to produce as much as you can. We have generally burned through oil almost as quickly as we could produce it. Just think about it - if there is loads of money buried in your back garden would you just leave it there for a rainy day. I think most people would dig it up as quickly as they could and either spend it or invest it. The producers of oil are incentivised to do the same. So assuming people behave generally rationally, you are only restrained by geology - the pressure in the fields - hence oil production often follows hubberts curve fairly well. I accept the curve won't be smooth, but these are the anomolies, not the trend. I really think the most sensible model is as follows:

  1. the supply is produced as effeciently as possible - Hubberts curve. Occasional geopolitical/accidental disruptions add noise to the curve but don't alter the underlying trend.

  2. the market will set the price such that demand is stimulated or destroyed so that it meets the available supply. In the ist half of oil demand needs to be stimulated, in the second half demand need to be destroyed.

The good news however is this:  The high gasoline prices have driven research, and great advances have been made in small volume and one off vehicles, showing that many things are technically possible that no would have even believed only a few years ago.  What we can hope is tht the confluence has began, and the cat is out of the bag:
We CAN get HUGE efficiency gains, and without giving up much by way of good engineering and design.

I frankly think the prices should stay just around $3,00 per gallon.  I would happily pay $3.00 to $3.50 per gallon for the rest of my natural life and feel like I was getting by with THEFT.  That's as low as gasoline needs to go.

Roger Conner  known to you as ThatsItImout

You're right, WestTexas.  Suddenly, I feel like i'm a lot more bullish on oil than a lot of people.  All i'm predicting is a fairly-moderate, short-term pullback to $57 by mid-November.  Like I've said before, I bet when we get there, most other people will be predicting a continued collapse to the 40's. Not me.  After this short-term pullback, which, IMO, is just a typical short-term pullback characteristic of all long-term bull markets, I expect prices to rebound within six months or so to a new higher-high, and that means prices above $80 by mid-2007.  And up we go.  


What about the meme that oil prices were just part of a general commodities rally after all?

(you've probably commented on that, but I forget, sorry)

That's the way it's happened so far.  Over the past 4 years or so, commodities have pretty much all risen in tandem.  I'm expecting them to pullback in tandem in the short term, and then to continue rising in tandem for another 10-15 years.  

As far as oil, you could make the peak oil argument that oil may rise far higher and far faster than other commodities, since it is peaking while other commodities are not.  But I think you could make an equally strong argument for oil actually lagging other commodities for a while, since the U.S. consumes a greater proportion of the world's oil compared to other commodities, and since the coming economic slowdown will be U.S.-centered.        

"But I think you could make an equally strong argument for oil actually lagging other commodities for a while, since the U.S. consumes a greater proportion of the world's oil compared to other commodities, and since the coming economic slowdown will be U.S.-centered."


I've done a (literal) back of the envelope calcuation on the actual decline in net oil exports by the top 10 net oil exporters (based on 2004 EIA list of exporters).  

I had to estimate consumption, based on the total liquds number in the 2004 EIA list, and then guess the consumption increase (5% per year?).  I just decided to use the total liquids consumption in 2004 as the current crude + condensate consumption.

Through June, it looks like the estimated net exports by the top 10 are falling at an annual rate of 9.2%.  If we exclude Russia's production and consumtion, net exports from the other nine are falling at an annual rate of about 9.6%.  Russia's total production is barely down since December, while the production by the other nine are falling at an annual rate of 7.4% through June (6% including Russia).

I am deeply suspicious of Russia's recent production numbers.  Why do you think that I am so suspicious of their recent (May/June) production numbers?  Anyone?  Anyone?

In any case, this does fit my estimate that net exports by the top 10 net exporters are falling three to four times faster than world oil production is falling.

As of June, world oil production (crude + condensate) is down by about 2.5% on an annualized basis.  I estimate that net exports by the top 10 net oil exporters are down 9.2% on an annualized basis.  So, production by the top 10 net oil exporters, through the first half of 2006, is falling 3.7 times faster than world oil prduction is falling.

There are some huge wild cards for the second half of the year, among them are:  the reported production collapse at Ghawar; the known production collapse at Cantarell; the reported decline in the Burgan Field and the sorry state of affairs in Iraq.

BTW, in regard to the Saudi story that Leanan posted above (about the Saudis having, drumroll please, to import petroleum products, for the first time ever), does the following paragraph from the story make any sense whatsoever to anyone:

"This is the first time ever that Aramco has actually bought fuel oil. It's a case of optimisation -- the market has been poor and they have cut back on their own production due to depressed prices in the face of peak summer demand. . ."

I posted on this below, before I read this post. No, nothing about this story makes any sense. There is no possible excuse for buying oil for utilities, (power generation), when you are supposed to be sitting on the world's greatest cache of oil. Why on earth would anyone do that?

In the article I posted below, I commented that we often burned naphtha in the power plant. My son, who has been in Saudi Arabia since 1991, told me they have quit doing that. They are re-injecting the naphtha into the heavy crude reservoirs. This lowers the viscosity and, they hope, will increase the total amount of oil they can pump from the heavy crude reservoirs. Now this doesn't make the oil any lighter, that is it does not change the molecular structure of heavy oil, but it does change the viscosity and hopefully make it drain from the reservoir a little better.

Of course this oil will have a much higher naphtha content and will just have to be refined out again. But naphtha can only be removed by the refinery. What may happen is they ship this naphtha diluted oil out and the suckers that buy it will be getting diluted oil without knowing it. But that is just a thought of mine, I am not sure if such a thing would really happen.

Ron Patterson

Well, there is a reason to do this: you think the other producers are insane, stark mad, to sell oil at only $70 per barrel.
From memory, early this year they stated that they had millions of gallons in tankers floating aimlessly off the coast, with no buyers. Then they had to cut 2006 production because of no buyers. No word on the fate of those tankers. They still there? A few weeks ago they claimed that production in 2007 would have to be cut because, while there now will be buyers all of a sudden, they don't want to buy Saudi oil, it will all be non-OPEC that satisfies the market next year. Never seen an explanation for that shift.
And then this....

A sharp drop in quality towards heavy crudes may explain some part of it, but there obviously is a far more likely explanantion.

With a couple ships I could see someone doing some trading to make a few bucks.  Who knows how it works.  It could be a million different things.  Heck, maybe they want the unloaded ships there so they can load them up with a higher profit liquid and ship them out again.  Combine the two stories above, buying shiploads, and shipt floating around with no buyers ... maybe somebody put together a deal.
The commericals are buying big time into this slaughter with the speculators beginning to capitulate. I say we are at worst 3 weeks away from a rally. Whenever commercials cover with such a frenzy a bottom is usually approaching.
Plus everyone is negative, all analysts have been saying oil prices have peaked for now. These same idiots kepts saying $80 was a when not if a few weeks back.

It would be interesting to do some calculations, based on your, "Export Land," way of looking at things, to figure out how many years before peak oil, peak exports would be expected to occur.  For oil importing countries like the U.S., the year of peak global exports will be as important, or more important, than the year of peak oil.  For example, if we hypothesize that oil will peak in 2015 at around 105 million barrels of production per day, and that oil consumption in the big oil producing nations will continue to rise at the present rate,  in what year would oil exports peak on a global scale?  Also, what would you expect the years between peak exports and peak oil to look like?


On second thought, maybe it doesn't make sense to expect that there would be a significant time-lag between peak exports and peak oil, since oil production would have to be rising very slowly for exports to have peaked, but not production.  After all, the top ten exporters that you mention still account for a pretty minimal proportion of global consumption.  But wait a minute, doesn't that call into question the significance of the whole, "Export Land" idea in the first place?  Oh, hell, I think i'll go watch some football.  Someone figure this out and post on it.  I'll check back in the morning.  


SAT, don't get me wrong, I wouldn't dare speak for Jeff, but a quick guess says that if the top-10 net exporters are tanking today by 9.2%, you may not have to wait long for the Peak Export. It might have happened during a football game you were watching. Last year.
Could be right... but, with us, asia increasing consumption, and china ready to begin filling their spr - maybe waiting for a price dip - which would soak up maybe 100mmb. Hard to see falling prices unless the world begins producing more oil. Maybe it will, maybe not, certainly flat for nearly 2 years.

Meanwhile, prices are soft because us commercial storage is high, the market forgetting that 12mmb are from the spr, not being refilled but maybe it will be if prices continue soft.

oh god I wish you could have photographed the guy getting into his escalade with your camera phone and then I would have scanned the photo and his receipt on to the net! Absolute hilarity!
"Twice, recently, the person in line in front of me at the drive-through ATM has accidentally left his receipt hanging out of the, "money-machine."  Both of them were driving large SUV's: one an Escalade, the other an Explorer.  The guy in the Escalade had a total of $12 left in his bank account, the guy in the Explorer, $19."

For an autocentric perspective:

Escalade 13 / 17:  @$3/gal, $12 in bank account...roughly 52 miles city and 68 miles highway left in bank account

Explorer 16 / 21: @$3/gal, $19 in bank account...roughly 101 miles city and 133 miles highway left in bank account

For a Prius 60 city / 51 highway:
$12 @ $3/gal: 240 miles city / 204 miles highway
$19 @ $3/gal: 380 miles city / 323 miles highway

>Escalade 13 / 17:  @$3/gal, $12 in bank account...roughly 52 miles city and 68 miles highway left in bank account

But. how many miles left on the Credit card is the real question. The good news is that I believe that many Americans may dump there McMansions and downsize into a new line of ultra tiny homes. Escalades and Explorers may just become the new american McMansions.

"But. how many miles left on the Credit card is the real question."

It is indeed.

"The good news is that I believe that many Americans may dump [their] McMansions and downsize into a new line of ultra tiny homes."

There's a problem in your "good news," unfortunately.  McMansions (and SUV's) don't just "poof" into thin air and give you your money back (and put the resources back) so you can go get something smaller.  They have to go to someone else.  There's a sunken cost and a longevity involved, so the deed is done.

Rent out rooms.  Is there an index indicating year over year changes in suburbanites offering to rent a room in their house, for instance?
Maybe you live in an exceptional area, but most suburban town governmnets look askance at renting to lodgers.
I think (?) roommates are OK everywhere.  It's when you try to add a separate entrance, mailing address, etc., that you get in trouble.
Not necessarily.  There are areas where it's illegal for unrelated people to live together.  Or there's a limit on how many unrelated adults can live at the residence.

In many cases, this is to protect the neighborhood (and hence property values) from "undesirables": immigrants who live 15 to an apartment, frat rat college students, etc.  Sometimes, the underlying issue is "morality."  They don't want unmarried people living together in their town.

America land of the free...
I don't know of things like that in Europe, though there are probably some here and there.

I have a feeling such laws will be ignored or rescinded when TSHTF.  

In the old days, taking in a boarder was the classic way to make ends meet.  Now, it's a joke.  There's a commercial where an upper middle class guy finds out his son got accepted to an Ivy League unversity.  He's horrified, because of the expense, and immediately starts trying to raise money: pawns his watch, recruits a boarder, etc.  But his wife saves the day: she gets a loan.

Oh, gawd.  At least, thanks for the laugh.
that was pretty funny.
It must vary all over.  In California "planned communities" have rules that their members seem to like.  Older neighborhoods seem to be less structured.  But I've never encountered a "no roommate" rule out here.  FWIW, here's the "rooms and shares" list for Orange County, CA:


See, this is poor anecdotal stuff, SAT. I was hoping would stay clear of this stuff. You might be a good trader, but you would make a shitty New Yorker writer.

First, what do you drive?

Second, what were you doing at a drive through ATM?

Third, why were you reading your predecessors bankslips?

Fourth, why do you remember the exact cars they were driving?

Fifth, How many people do you follow through ATM's looking for their bankslips allday?

Sixth, why are you so bored you can't pay attention to your own goddamn business?

Seventh, Do I need to go on? I'll give you a clue. When you are done answering number six, You can answer number 7.

Extra Credit (don't bother answering until your are done with one thru six) - Of all the bank receipts of cars in front of you that you have "checked out" what was the highest amount you've ever seen?

I don't think the claim was made that all SUV drivers have less than $20 bank balances, which would make those questions important.

If this is just an observation "in the wild" that there are SUV drivers (inc. Cadillac SUVs) with sub-$20 balances, it is valid as that ... an observation.

It does reinforce what we know ... that there are some folks out there without a clue, living life by the patterns they see in their desired peer group.

They obviously are not following a pattern set by their bank balance.

When we discuss the oil situation we look for evidence.

Do we have any evidence that these chaps have only one bank account?  Honestly, what is the point of this discussion?

I can give you the averages:

Meet the typical American family.

It has about $3,800 in the bank. No one has a retirement account, and the neighbors who do only have about $35,000 in theirs. Mutual funds? Stocks? Bonds? Nope. The house is worth $160,000, but the family owes $95,000 on it to the bank. The breadwinners make more than $43,000 a year but can't manage to pay off a $2,200 credit card balance.

And I can give you my personal opinion that it's whack to have any account with $18 in it.  Why bother?  Close it and use your other account.  I mean, if you have to freaking drive to that bank, the one that has essentially no money in it ... what's up with that?

There is good reason to have an account with a balance that fluctuates to near zero and up.  For many people it is likely to be their operating account, with low transaction costs and low interest.  Savings are kept in another account with high transaction costs and high interest.

I see the point of discussing average incomes, bank rip-offs, the stupidity of gas guzzlers etc etc.

I don't see the point of a moralizing discussion which tells us nothing of any certainty about the alleged sinners.

How about this moral generalization - people who leave behind their recepts, and don't file or dispose of them properly, are often the same people with $18 balances.  It makes a perfect set: drive a car beyond your means, empty your checking account, don't look back.
I keep one local account with the minimum amount in it.  Bricks and mortar banks have higher expenses than Internet banks, so I keep most of my money in Internet banks.  But you still need cash sometimes.  And I don't want to pay ATM fees, so I still have a local account.  I just don't keep much money in it.

It also serves as the account linked to my PayPal account.  PayPal has a reputation for taking money from your bank account, because of supposed "disputes" or because of outright fraud by PayPal employees.  They won't get much if they do it to me.

"Why are you so bored that you can't pay attention to your own goddamn business?"

You're right.  I apologize.

"The downside is that it's people with the economic flexibility that reap the benefit.  People who can buy a new car to save minutes on the morning drive.  It would be much nicer if a penalty/rebate program helped everyone on the economic spectrum while increasing fleet MPG."

That's what the used car market is for :)  They'll eventually make their way down to lower income people when they get a little wear on them and the rich people need something shiny and new.  Hopefully they'll hold together long enough for that cycle.  The more stuff something has and the more complex something is (electronics, transmission...), the more likely it is to crap out..and the Prius has a lot of complex stuff to go wrong in its old age.

Re: Fair Price Energy

We will never, and that is never, solve this in the present system.

There is no substitute for energy. The whole edifice of modern society is built upon it...It is not `just another commodity' but the precondition of all commodities, a basic factor equal to air, water and earth.
E F Schumacher 1973.

Jay Hanson has written extensively on the subject, and countless others have toyed with the concept.
Energy, in all its forms, of which oil is the most powerful and least replacable, is not a common resource or commodity, and should not be treated as such. It has to be thrown out of the belief-based sphere of market supply and demand. You can apply that so-called mechanism to decide if you prefer khaki's or jeans to wear, but not to the very entity that allows the production of these articles. You will inevitably end up butt-naked.

The value of energy should be calculated in energy, not the distorted "value" of money. Money has no value: it can be, and is, issued for free, even as debt. Tomorrow there can be twice as much money, but an equal, or diminishing, amount of energy.

That means that down the line all energy goes to the highest bidder. We are in the immoral process of applying that notion to water and air, inviting disaster in through the front door.
When you need money to drink clean water and breathe clean air, and we're getting there fast, the growth system will have reached its apex, and start killing us off in large numbers, peak oil or not.

Basic human needs should not be traded in dollars or yuan. That goes for food, water, land, shelter, and also, or most of all, for energy. No activity, no life, is possible without it.

"Basic human needs should not be traded in dollars or yuan. That goes for food, water, land, shelter, and also, or most of all, for energy. No activity, no life, is possible without it."

This is basicly what I have writen here :-
Low Energy Life - Time Line at the bottom of the page.

2020 (Assuming we get it right !)

  • Life is a weird, hybrid mix of 19th and 21st century technology and skills.
  • Most people are multi-skilled.
  • Most people are self-employed even though a few still work in large companies.
  • Energy, Water, Food and knowledge become the new currencies.
  • Some countries made it OK and some don't. Cuba thrives and N.Korea doesn't.
(I have only just started this so its hopelessly incomplete !)
Basic human needs should not be traded in dollars or yuan. That goes for food, water, land, shelter, and also, or most of all, for energy. No activity, no life, is possible without it.

IMHO, this is a left cornucopian view.  That is, that all 6 billion of us will wheather peak oil just fine if we tame the market.  The problem is is that a lot of people are going to die in the next 20 years no matter what anybody does to ensure "Basic Human Needs".  The ideal solution is the one in which the least people die because the society has been able to radically reorganize itself to function in a low energy environment.  With socialism, this can be done Cuba style or more disatrously, North Korea style.  I am still looking for a capitalist model of dealing with oil depletion and I would guess the only model so far is South Africa under apartheid sanctions?  All three of these models are still imperfect because they had goods produced by cheap oil arriving from abroad but it's a start.

"The ideal solution is the one in which the least people die"

That is a value judgement, admittedly a fine and very popular one.  However there are other opinions.  Other people prefer a solution where their tribe survives and the other tribe gets killed/dies out, leaving the survivors with twice as much stuff.  Even a minority of people preferring this solution makes the least people dying plan most unlikely.

Thereisi no capitalist (as in eternal growth) model for dealing with peak oil. Neverending growth will in time, always, of necessity, gobble up all resources, including people.
No mention in my post of peak oil, other than it's true "peak oil or not".
This always strikes me as a very specific linking between economic growth and energy intensity.

Those who believe in a crash, must of necessity believe that growth and energy intensity are inseparable ... but if that ain't true, then there are other ranges of possibilities.

Hasn't capitalism, in past ages, operated at very different levels of energy intensity?

Hasn't capitalism, in past ages, operated at very different levels of energy intensity?

not different, just ever increasing.
the ever-growing capitalism that is

work requires energy
more work requires more energy
growth requires energy
more growth requires more energy

think thermodynamics:
you can't get out of the game
you can't win
you can't break even

ps energy intensity is a bit of a vague term.

Energy intentensity, in the US anyway, has been dropping for about 3 decades, and is now well below where it was in the 70s.

To an economist, energy intensity is a ratio like BTUs of energy consumed per dollar of GDP.

We are using more energy, but are being more efficient in that respect. So I'm not quite sure what that initial assertion is worth.

ok so energy intensity is a useless and distorting term in the argument
that out of the way, there is no question that the total amount of energy consumed has steadily, make that exponentially, increased
efficiency, like conservation, will always be wiped out by growth

That last part is probably true, seems to be.

But, for instance, the conservation of the early 80s proved to very significant. We've all seen global oil production charts that show that it was only within the last ten years that we passed the high-water (or high-oil mark) of 1979.

I don't agree that there are any immutable laws of societal or economic thermodynamics that dictate certain doom.

What keeps me up at night is that we have an infrastructure on many levels that is fragile and that is built for a very different set of conditions than those that will prevail in coming decades. We have a ignornant, materialistic, and aggressive populace existing a physical space that has seens tens of trillions of dollars in investment and much of that will prove worthless if we see a steep dropoff in oil supply (along the lines of westexas' claim). We are seeing climate change that is starting to leave the models in its dust (e.g. rapidly accelating growth in atmospheric CO2 concentrations; not mention massive, unprecedented drought in the Amazon, and so forth). Each degree of temperture rise decreases grain yeilds by 10%. 2 degrees is what establishment climate scientists are using as a goal, but it is profoundly unrealistic.

Basically, we have constructed a very complex entity--our globalized society--over the past few hundred years, but over the past few decades especially. What we're seeing now is system failure. It is happening all around in all different ways. Everything from the ecological collapse of the oceans (see the recent 5-pt LA Times series) to the disintegrating American middle class, to the discombulated and pathologically aggressive elected government of the USA, to peaking oil production (whether for logistical or geo reasons), to massive upsurges in fundamentalist affliation around the world, to building suburban mcmansions that are only meant to last 20 yrs... shit is coming unravelled. And anyone with even a passing familiarity with various forms of systems theory knows that this is what system looks like when it starts to fall apart.

It's hideous to watch, and to be ahead of the curve enough to see it when--in theory--the very worst of it can still be prevented.

Personally, I think the only hope for us right now is to institute a centrally-planned series of national public works efforts to stabilize and reposition our energy infrastructure. Something along the lines of massive public works projects in the US in the 30s, or--better still--Britain in the early 40s.

Upgrade the grid. Do a massive revamp of homes and commercial buildings to increase energy efficiency by 50% or more. Build and/or retrofit electric vehicles the way tanks and planes were built in WW2. Lay down rail in and between american cities, stripping all rights of appeal from private landowners. Build dozens of nuclear plants, wind farms, and solar farms. Have at least 10 million people working in the effort. Completely revamp the federal budget to make it possible.

This, I fear, is the last possibility to stave off collapse.

What keeps me up at night is that we have an infrastructure on many levels that is fragile and that is built for a very different set of conditions ... We have a[n] ignornant, materialistic, ... populace

Over the last few decades America has drifted away from being a manufacturing center to being a "New Economy" in which MBA's prevail over scientists. We have a massive populace "educated" in the ways of the theoretical management class. All chiefs, no in-the-trench realists.
Ok i started out a while back saying that a fair price of energy should not, can not, be calculated in dollars, as issued in an econmy founded on the idea of perpetual growth. The reason is that there's a finite amount of energy/matter and an infinite supply of money, which leads to disaster. People's basic needs, which also include water, air and land, are not commodities like gold and soilver, and should be protected, kept outside of the money system, and available to everyone. Well, that's my idea, at least. I like people.

What you describe in this nice long litany are simply the consequences of the growth system, the neverending and accelerating conversion of high-entropy to low-entropy matter and energy, pollution, waste. No-one ever mentioned societal or economic thermodynamics, ain't no such thing. Still, because infinite growth in a finite system inevitably puts us face-to-face with the limits that thermodynamics describe, there is a link, though it remains purely physics. The production of waste is inevitable linked to the use of energy, being smarter about its use will not work. Growth trumps efficiency.

You can't create energy, and once you've used what you have, it's unavailable for your further use. Plus, in the process of using it, you have produced waste. An organism cannot survive in a medium of its own waste, is how Daly and Townsend phrased a corollary of the 2nd law.

Ergo, an economic system that relies for its continued existence on growth, in other words an increasing use of energy, cannot continue to exist indefinitely, and will thus indeed lead to certain doom, for the majority of the population of your specific organism. You run out of useful, high-entropy, matter/energy, and are left in a system replete with waste, low-entropy and useless to perform work.

There may be bacteria or algae or cockroaches who feel fine in that new medium we created, but for (almost all of) us it's over.

You've got entropy in the wrong order.  When a given input, say water behind a electricity generating dam, has a high potential to do work (turn the turbines), it has low-entropy.  The same water at the bottom of the dam has a higher entropy, though we should not think of entropy as some kind of physical quality; it is more of an index.
Do you happen to have a link to that LA Times series? Thanks.
do a search on the LA Times site for Troubled Oceans
that should do it. if not, ask again
it's scary, mind you, an ecosystem being thrown back in time millions of years
we've had a few posts talking about jellyfish being the only seafood left soon
that comes from that series
ok so energy intensity is a useless and distorting term in the argument

;-), I think that is a too obvious way to throw away a conflicting idea.

In the US, economic production is energy-fat, th ere is a huge margin for economies.

Western Europe uses about half as much energy per unit of GDP. Why would that be unattainable?

There may well be structural reasons... more energy required to heat and cool because of climate differences... but is that really a big factor?

Americans tend to fly a huge amount to do business. This is because their market is generally the whole of the USA.Most Euro companies are doing most of their business within their own country (though this is changing). Most of the flying can be eliminated with only minor inconvenience.

I don't think energy intensity has to enter into it, really.

What it comes down to is what Kenneth Boulding said:  "Anyone who believes exponential growth can go on forever in a finite world is either a madman or an economist."

You cannot keep growing forever in a finite world, but that is what capitalism requires.  

It doesn't have to be oil you run out of.  It could be water, or arable soil, or iron ore, or nitrogen.  The thing is, energy allows you to make substitutions for things that are scarce.  So energy is the shortage that really matters.

What if, as I think I've asked before, we increasingly trade bits over the network, and swap bits in out bank accounts to make payment?

That adds to GDP, right?

(Obviously we can't all trade bits, but many of us already do (I do), and that creates "growth" (as well as a lot of needless "complexity") at a very low incremental energy cost.)

I'm not really sure what you're asking.  

It's possible to have a steady-state economy, but it won't remotely resemble this one.  And getting from here to there will cause a great deal of pain and unpleasantness.  

An economy without growth will require a stable or declining population.  Otherwise, there will be a lot of people who can't get jobs.  Since the only way a new job, house, etc., becomes available is when someone else dies.  

Kind of like being in academia...  ;-)

I'm looking at this implied equivalence between energy growth and economic growth.  Some of us have discovered ways to make money while using less electricity.  That seems to suggest that an entire economy could head in that direction.

There are of course whole industries who make money by reducing other people's reliance on energy or other goods.  FWIW, one of my past employers sold a "report warehouse" product.  It was really a server that sucked up reports that had been printed in the past, and presented them on-screen to users who already had PCs.  In at least one case we slashed a company's paper use by $1,000,000.  How many trees and how much upstream energy did we save by not making all that paper?

You're talking about increasing efficiency.  The problem with that is there's hard physical limit to how much you can increase efficiency.  Eventually, you'll hit it, and then further growth will be impossible.

And it's subject to Tainter's declining marginal returns.  The estimates I've seen are that 50% of the efficiency increases since the '70s oil crisis are due to actual improvements.  The rest is due to "offshoring" - using the energy overseas and importing the products.  

Obviously, we did the easy things first.  We have slipped a bit on fuel economy (those darned SUVs, and the death of the 55mph speed limit).  But other than that, it won't be easy to make further improvements.  We plucked the low-hanging fruit in the '80s.  

Isn't it a big red flag for cult thinking when good news can so easily be turned into bad?  We increased efficiency, saved trees, ... but cult theory says it will never be enough, so it won't.

This is a recurring theme in doomerism, that theory trumps practice.

Isn't it a red flag when rather than addressing someone's arguments, you accuse them of "cult thinking"?
Nooow I've got all my stuff ready and I'm heading out the door,  As a last pre-ride thought, yes it might be a red flag.  It all depends on whether the shoe fits.

If this is an "oil" site, and the case can be made realistically for collapse etc. based on oil decline, we are on target.  On the other hand, if every oil discussion ends up stalling ... until something else, like references to Tainter, complexity, and diminishing returns, can be used to make the case ... then this is a Tainter site.

My dad like a 1930's cartoon in which an infant shocks his parents from his highchair, saying "I say it's spinach, and I say to hell with it."

then this is a Tainter site.

No, it's just that Tainters' diminishing returns are RELEVANT to discussing the impact of oil depletion.

Until you have read AND undertstood Tainter YOU are irrelevant.
I bet we will have a few more arguments, I relish that in advance.

Go for your ride fresh air may help clear the mold from your neurons and the malice from your tongue.

I'm pretty sure I'm cranky without mallice ... and I think I've come to the idea that if I must read Tainter, then this isn't a peak oil problem after all.  Deffeyes, Simmons, Tertzakian, etc., don't refere to these Tainter arguments.  They are a new subject.

Of course, if TOD is determined to be a doom cult clubhouse, then by all means ... add Tainter to the sidebar.


Let me guess if your wife came home and announced she just got a credit card with a limit of $100,000 and an interest rate at 28%, you'd see it as good news and bash anybody pointing out the obvious flaws with this arrangement as "financial doom and gloom cultists!"

I am extremely conservative in my financial affairs, and am as frustrated (and frankly amazed) at the current negative savings rate.  If that somehow proves to be smart, I'm afraid I'll lose out.  I'm not doing (or recommending) that.
"Let me guess if your wife came home and announced she just got a credit card with a limit of $100,000 and an interest rate at 28%, you'd see it as good news and bash anybody pointing out the obvious flaws with this arrangement as "financial doom and gloom cultists!" "

The trick there is that you need like, ten of them...then you get a cash advance on them all and dissapear off to some remote island where a dollar goes a long way and live like a king. ;)

(I feel slightly cranky this morning, but I'm going for a mountain bike ride now.  Did someone drop a quote a day or two ago about taking time to enjoy the nature you want to save?  I'll do that now and see if it lightens my mood.  And I'll think about these questions on the nasty climbs ;-)
"Obviously, we did the easy things first.  We have slipped a bit on fuel economy (those darned SUVs, and the death of the 55mph speed limit).  But other than that, it won't be easy to make further improvements.  We plucked the low-hanging fruit in the '80s."

We've slipped more than a little bit on fuel economy and have done a pretty good job unplucking fruit there.  There's new fruit on the tree.

It does occur to me upon reflection that we might have reduced GNP as well.  We saved that company $1M, but only foolishly charged $20-40K.  Whoops.
"An economy without growth will require a stable or declining population."

I believe you might more accurately state your contention in this way:

An economy without growth in the rate of consumption of materials or energy, nor any inefficiency in the present use of materials and energy, will require a stable or declining population.

And of course therein lies hope for the avoidance of tragedy as the hydrocarbon era ends.  According to current trends, as determined by the changing structure of the population (aging almost everywhere), the population will peak somewhere around 2075 (P. Longman).  There is tremendous inefficiency in the present use of materials and energy, as manifest for example in  a pandemic of bulging bodies.

Are we smart enough to finesse the passage through the population peak?  I would argue that we certainly have the potential.  Self-proclaimed darwinians claim otherwise.  True Darwinians such as E.O. Wilson hold the same view as I do.

The concept of energy intensity, which is defined as the amount of energy consumed for a given level of GDP, is as useful as is the GDP metric.  You can make up your mind on that.

Capitalism, which is one of the two economic models chararcteristic of the industrial era, has to date always demanded and had a rising energy consumption and an improving quality of energy.  Capitalism, by definition, involves growth.  We shall see if growth can be leveraged from a decline in both the quality and quantity of energy.

The Soviet style communism was based on the same growth model.

Growth can not be leveraged from decreasing energy quality and quality. You can try with higher quality/less quantity, but with oil gone that's pretty much out. Lesser quality/higher quantity: coming soon to a world near you. To maintain growth, simply keep adding. Don't be surprised if EROEI turns nasty on you. And don't forget: sustainable growth is an oxymoron.

The principle stands, no matter what. Sometimes the simplest things are the hardest.

Doesn't the market just require exchange?  It would starve if everyone had enough "stuff" in their closets to last the rest of their lives ... but that's never been the case.  So we trade our labor and our stuff for other stuff.

In many nations that goes on for decades even as "growth" declines.

Commerce will always exist.  Capitalism, not so much.  They are not the same thing.
So, when growth slows Capitalism suffers a semantic defeat?  That's not so bad, is it?
It's more than a semantic difference.  Far more.  
I've got John Kenneth Galbraith in my corner, with the idea that we don't actually live in a Capitalist society now.  This is something post-Capitalist.

(Saw a nice answer from him on this recently, CSPAN, don't have a link.)

((A recorded segment, obviously))
Perhaps other economic models can be operated without an emphasis on growth, but capitalism as it is currently designed requires continuous growth to survive.

Also, it is interesting to note the rise of a civilization along with its energy consumption. According to Tainter (Chapter 4) the complexity of a society increases in direct proportion to the amount of energy available to it. More energy, more complexity. And vice versa. Eventually a point is reached where the Law of Diminishing Returns kicks in and more costs are required for every additional increase up the ladder of complexity. Interesting stuff, and I think it directly relates to our current society.

The market is good at exploiting what is cheap and plentiful.  That's great, until we hit the well-known externalities.

I'm afriad that many folks here make the implicit assumption that the market will make the same decisions, and attempt the same kinds of growth when oil becomes expensive and rare.

They don't seem to have an open mind to other kinds of less energy intensive forms of economic growth.

No, I don't think that's it.  I think, as Toil also pointed out, that you are confusing the free market with capitalism.  They aren't the same.  Markets existed even in the steady-state economies of the ancient world.  Even when usury (charging money for loans) was considered a sin as evil as murder, there were still markets.  

That aside...I don't think we'll be able to lift ourselves up by our bootstraps without cheap energy.  One of the reasons usury was so frowned upon in the ancient world was that it was considered "unearned money."  You did not do any work or produce anything to get it.  The solar-based economies of the time could ill afford to support people who didn't work.    

And I think we will be headed back that way.

I think I've been using the word "market" to counter the word "capitalism" a bit in these threads.  Just because ... well if "capitilism" isn't "the market" then setting up "captialism" to fail is a straw man.  Who the heck cares if captialism, as a semantic definition survives?

But above I was really talking about growth, and the continued presumption that increasing energy prices, and increased energy scarcity, means not just less growth but zero growth.

That's a big assumption to hang one's hat upon.

Just because ... well if "capitilism" isn't "the market" then setting up "captialism" to fail is a straw man.  Who the heck cares if captialism, as a semantic definition survives?

I think you're underestimating the pain and disruption the end of capitalism would cause.  It would be a global financial collapse that would make the Great Depression look like nothing.

But above I was really talking about growth, and the continued presumption that increasing energy prices, and increased energy scarcity, means not just less growth but zero growth.

In the long run, it will be.  

I'll go further: eventually, we will be faced with negative growth.  And I think it will be in most of our lifetimes.

I love making exactly that comment at these "Smart Growth" conferences.

cfm in Gray, ME

How do we make the "no growth" argument without invoking Tainter mumbo-jumbo?
To escape Tainter "mumbo-jumbo" (which you CANNOT qualify in any way since you DON'T knwow it)
  • You don't pay attention to odograph mumbo-jumbo and handhull of others, they know who they are...
  • You keep growing and try at any time to cherry pick the BEST of every FINITE ressource or opportunity, for energy, metallic ore, arable land, clean water, you name it...
  • You find out as time goes by that only the POOREST and MOST EXPENSIVE ressources are left.
  • You don't switch to ALL RENEWABLE ressources.
  • You die because though "something" is left of every ressource it costs MORE to gather than the value you can reclaim from it, EROEI < 1.
But you don't have to die if you are not a stubborn idiot or PR troll.

If you switch to renewable ressources AND don't grow such as not to erase the ressources CAPITAL you need for ongoing operations you can keep going until the sun itself dies, not quite eternity but not that bad...

I will be humble enough to admit the possibility that I am a stubborn idiot, but tell me, why does a google-advanced search, to look at the ASPO site for "Tainter" show no hits?

Your search - tainter site:http://www.peakoil.net/ - did not match any documents.

The copy and pasted URL carried a lot of grunge with it.  To reproduce my humble effort, go to the site below, put "tainter" in the search box, and "http://www.peakoil.net" in the box labeled "[only] return results from the site or domain":


Best wishes (I wish Leanan and you all the best, I just think you suffer an unnecessary pessimism).

I will be humble enough to admit the possibility that I am a stubborn idiot,

I would rather say a stubborn PR troll and not so idiot since you are trying ONCE MORE to use a diversion:

If you find that you are being worsted, you can make a diversion - that is, you can suddenly begin to talk of something else, as though it had a bearing on the matter in dispute, and afforded an argument against your opponent.

to evade a conclusion which you CANNOT escape otherwise.
  • Did not you ASK "How do we make the "no growth" argument without invoking Tainter mumbo-jumbo?"
  • Does my argumentation makes ANY reference to Tainter?
  • Does my argumentation SHOWS that "no growth" is mandatory in a FINITE setting of ressources?
  • Do you understand the argument?
You may not be an idiot but you are certainly a piece of shit!
And it shows MORE and MORE!

I really thought we could have a friendly conversation.  If you are going to answer my "best wishes" like that though, I'm going to hold back.

The answer to your bullet list didn't seem that earth shattering.  I didn't feel like I had any stunning contribution.  It is just that it contains some things that are recyclable and/or restorable (minerals, land, water), and some things that are truly use-once (fossil fuels).

The pronouncement that we "can't" move to "ALL RENEWABLE resources" confused me.  In what time frame?  Who is we?

Remember that I think we have fossil fuels for the foreseeable future, and that beyond that it's incalculable anyway.

Remember that I think we have fossil fuels for the foreseeable future, and that beyond that it's incalculable anyway.

An opinion: "I think".
A "diffuse" (I would say meaningless) wording: "the foreseeable future".

No more "brass tacks"?
No more "good models"?

You seem to withstand insults pretty well today.
Your newly developed "humility" ?

Still you can't resist a little weaseling, it feels sooo good :

Who is we?

Yeah! the mysterious "WE"...

The good reserve of uncertainty I've had in the last few months might come from a peculiar combination of humility and hubris - humility to know I don't have the answer, hubris to think that I've worked it out, and put a boundary on the unpredictable!)

In case it doesn't translate across the Internets, I am laughing out loud as I read that last sentence back ;-)

Also, maybe I'm misreading you, but this part didn's sound that bad ... for some meanings of the word "grow":

If you switch to renewable ressources AND don't grow such as not to erase the ressources CAPITAL you need for ongoing operations you can keep going until the sun itself dies, not quite eternity but not that bad...

Easy does it.  TOD excels at providing a relatively flame-free environment for disparate data, views, and opinions.  Please do what you can to keep the dialogue above scatalogical levels.

Please do what you can to keep the dialogue above scatalogical levels.

I already answered that kind of critiscism :

Je ne puis rien nommer si ce n'est par son nom;
J'appelle un chat un chat, et Rollet un fripon.
Translation: I can call nothing by name if that is not his name. I call a cat a cat, and Rollet a rogue.

You should use the RIGHT TERMINOLOGY, lest you forget whom you are talking with.

The end of GDP "economic" growth is a red herring if you're worried about social collapse.  GDP is a measure of throughput.  A country's GDP should not be confused with standard of living or physical capital.  That's like confusing turnover with profit for a company.  Many economists and politicians seem pretty innumerate though.

Most of an economy's input is from non-renewable resources or fixed-sized flows. Wanting increased GDP is like wanting your car to use fuel more quickly.  With apparently infinite available resources, revving the engine can help you accumulate capital more quickly.  With limited inputs/flows, you create more capital by improving efficiency, reducing obsolescence, recycling outputs and combining resources more cunningly.  I believe this can still be achieved with the profit motive and existing businesses if incentives are adjusted.

What people really want is better quality of life.  Part of that comes from physical capital and infrastructure (functioning sewers and roads), most comes from social capital (low crime, personal development, community) which has a huge scope for improvement. Neither is necessarily dependent on high energy or resource throughput.

Growth assumptions are built into most monetary vehicles, but that is not necessary for business.  Islamic countries seem to manage without usury.  Western financial systems and institutions may collapse or need rethinking without GDP growth, but commerce can thrive given any reasonable medium of exchange.


I think it is fairly widely agreed among historians that serfs during the period of European feudalism worked less days per year, than the average American worker today. By working, I refer to 'working for the man'.  Vacation from 'work' obligations were provided by a plethora of religious holidays and festivals. These of course often also served to facilitate the success of markets in that time.  Today, Labour Day, millions of North Americans are working, proportionally, I suspect many more that worked the festival day markets of yore.

I bring this up to make the point that more costly energy, e.g. recently stored solar in bio-mass, doesn't necessarily mean more work.  The amount of work is related to the amount and type of consumption.  If we choose to get by on 2200~ calories per day, including a couple of ounces of meat, to live in a dry and warm place that because of its size per person, construction and location (not necessarily geographic zone, it could be partly underground for instance), and to produce and consume a great deal more acoustic music, stories and friendship, then work, as in 'working for the man', can decrease per person in the future.  

Despite these comments, I think we would agree that individuals will do more physical work in the future, e.g. ride bikes, climb stairs, farm labour, whatever.  Damn good thing, too.

Hopefully, indeed necessarily in my opinion, people will do more mental work as well.

we have a confusion about the word "work", which in physics has a different meaning from that in daily life

I used the physics one

"but capitalism as it is currently designed requires continuous growth to survive."

There is no design for capitalism which does not require continuous growth.  The best definition of capitalism is provided by Karl Marx, and I don't think the U.S. Chamber of Commerce would disagree: M > C > M1  

Through the process of commodification, capital (represented by money) continually expands.  Stop the expansion and you have recession/depression.  If the recession/depression becomes permanent, then the legitimacy of the system (capitalism) collapses.  We had a peek into how this works during and after the great depression of the 1930's.  The system was then saved by the development of mechanisms (involving a great deal of state interventionism from social welfare programs - redistribution of income/spending - to highway building and other public works - redistribution of opportunity), which facilitated the consumption (transformation) of available energy and the expansion of capital.

I don't disagree with the comment that the Soviet model was also growth based, which is why some observers call it state capitalism.  For a number of reasons it failed more quickly and good riddance to it.

A system which both minimizes the rate at which entropy rises in the bio-sphere and maximizes the potential for spiritual growth, can not involve the necessary expansion of capital, nor can it stifle the human impulse for creativity and exchange.

The way out of the predicament we are bequeathing our progeny must allow for the exercise of the market mechanism and the means for entrepeneurial creativity.  

We can only begin by working with the tools we have.  In this kit, there will be for years and years to come artifacts of capitalism, including social democratic mechanisms, and some of the command economy model.  Aspects of mercantilism and feudalism linger even today.

I think it extremely important for people to understand that capitalism does not own the market mechanism.  It is a social good, which existed long before capitalism emerged with industrialism.  It will survive capitalism, if we do.

I think it extremely important for people to understand that capitalism does not own the market mechanism. It is a social good, which existed long before capitalism emerged with industrialism. It will survive capitalism, if we do.

Very insightful!
I don't think very many people understand that.
We will NEVER get rid of the market, as soon as you have trade you have a market, even without money and only barter.
By "trade" I mean any kind of mandatory reciprocity in exchanges.
WHICH kind of society could run without any trade?

I saw recently a snappy little line (wish I could remember where):

"Asking capitalism to stop growing is like asking a person to stop breathing."

- sgage

There are excellent models, and a long historical and philosophical chain, currently expressed by people like Wendell Berry, Thom Hartmann and the Zapatistas - there's a range for you - and it's certainly broader than that. The whole horse, not just the worker's two hands. In the late 1700's the anti-federalists, the Populists in US in late 1800s. Nor is it sensible to lump Cuba and North Korea as "socialist" vs "capitalist". You limit yourself by thinking left right; that doesn't cut in any sensible direction.

cfm in Gray, ME

The best model is Switzerland.  In WW II, they endured a six year 100% oil embargo with ~10 months oil in storage.  By 1945, they were down to 1/400th of US oil use per capita.

In the 1920s they made the strategic decision to electrify their railroads and preserve their city trams.  Electrified rail + bicycles + shoe leather preserved a decent quality of life in an industrial Western democracy.

In 1998, Swiss voters approved a 31 billion Swiss franc, 20 year program to improve their excellent rail system.  Transferring freight from heavy truck to rail was the most important of several goals for this program.

BTW, 31 billion CHf, adjusted for currency & population, is equal to the US voting $1 trillion for better rail when oil was ~$13/barrle.

I just finished reading the article linked to today's thread,  'US Army Contemplates Redrawing Middle East May to Stave off Looming Global Meltdown."

Scary stuff! I suggest everyone here also have a look at it.

If anyone here believes that the people who run the US have learned any lessons from the debacle that is Iraq or from Israel's latest misadventure in Lebanon, think again.

Well, to be precise, they HAVE learned lessons, but only the wrong ones: the reason we haven't succeeded in the Middle East is that we haven't tried hard enough so we must redouble our efforts. These people still have faith in the ability of the US to 're-engineer' whole countries for the benefit of US interests and global stability. The notion that our very attempt to 'fix' things is part of the reason they are broken in the first place never enters their heads.  

They also seem quite comfortable with the idea that the US will be involved in a perpetual low-level armed conflict in the Middle East and elsewhere as part of  some sort of Clash of Civilizations epic struggle.

While the article is one man's opinion, the fact that it appears in an official military publication implies at least tacit approval on the part of the Pentagon.

I sometimes think that the Bush regime wouldn't be foolish enough to attempt to 'do' Iran at a time when things in Iraq are getting worse by the day. But when I read stuff like this, I realize such a notion is naive on my part.  They ARE plenty foolish enough. Thus, I would be very surprised if a massively destructive air attack is not launched against Iran well before Bush leaves office. The repercussions of such an action are too awful to contemplate.


Should be ......Middle East Map ........., not Middle East May .....

Some comments from Forbes on Fox (GOP TV) this morning regarding Iran. . .

"If we don't do something, Israel will."

"The big worry is not that Iran gets the bomb, it's that Iran will use the bomb against us."

(Speaking to the sole contrarian) "So you would not have done anything to take out Hitler in the Thirties."

(Contrarian speaking) "So do we just nuke Iran?"

(off camera speaker) "Yes"

On a show a few weeks ago, one of the talking heads on GOP TV suggested that Hugo Chavez planned to use oil as a weapon of mass destruction--implying that shipping oil to China instead of to the US is the equivalent of using a nuclear weapon against the US.

westexas -

Recent US propaganda notwithstanding, I think the real reason the US desperately wants to prevent Iran from acquiring nuclear weapons is not that US is afraid Iran is going to attack the US, but rather that a nuclear-armed Iran would be virtually impossible to attack and occupy.

A nuclear-armed Iran would essentially be inoculated against military intervention by the US or Israel, just as a nuclear-armed North Korea is essentially imune from the threat of invasion by the US and/or South Korea. These days, if you don't have nuclear weapons (or be closely allied to one who does, as in the case of Japan), you're a second-class power.

A nuclear-armed Iran would totally ruin the Grand Plan of the Bush regime to redo the Middle East to a configuration it thinks will be more favorable to the US and Israel.

I also think that the argument saying that 'if we don't take care of Iran, Israel will' is a flawed argument. That threat could easily be eliminated by the US making it clear to Israel that if it does attack Iran the US will not defend it against a counterattack and furthermore will immediately cut off all aid to Israel.  The fact that those threats have not and will never be made shows that the US and Israel are fully complicit in the steadily growing movement toward war with Iran.

I wish someone would post frequent updates on TOD with regards to the status of the Iran-Pakistan-India pipeline, the massive Chinese and Japanese investments (or potential investments) in Iran with respect to LNG, foreign investment in Iranian oilfields, etc.  Not only are these issues extremely relevant with regards to peak oil, they are also, IMO, the reason behind U.S. military designs on Iran.  Does anyone here honestly believe that this has anything to do with nuclear weapons?  It's all about the oil and gas.  


SAT I'm getting to like you more and more. Of course it is about the oil. It has always been about the oil, and it will be until it's gone, or we are. I don't see much US interest in upseating other tyrants in the world who don't happen to be sitting on oil. I do believe there was a small component of Bush wanting to take out Saddam because he tried to kill his father. I say that because i would have, but it was probably a minimal factor.
     I think you underestimate to some degree the amount that the increase or decrease in oil prices pulls the other commodities as opposed to them just going along together.While there is plenty of copper ore left, or nickel ore left, etc. there is little high quality ore left and the remaining ores require, you guesssed it, more energy to extract. Ala they will lockstep by being dragged up and down.
    I believe the electric car is about to explode on the US scene due to the recent advances in commercial production of high performance batteries. To what extent do you think that could affect US oil pricing if the entrepenurial might of the US finally flexes it's muscles and starts to replace the fleet?
 Perhaps a more interesting question is what would it do to the economics of ethanol. As oil use fell so would price, unless production fell faster, but in any case liquid fuel use would drop and the need for a boondoggle like ethanol would diminish.
     Even with the advances in battery production you mention, I'm pessimistic about the ability of companies in the US or elsewhere to mass-produce electric cars in sufficient quantities to replace much of our current fleet of gas-guzzlers.
     It would take a considerable amount of energy to build new automobile manufacturing plants, or to retrofit existing auto factories to go electric, say nothing of the costs and materials used to make each car (metal and other materials combined with many barrels of oil / energy used per car, all this times the hundreds of millions of existing cars to replace).
     This makes me think that electric cars will in the future have, at best, a small showing on the international stage.

     Do you have a link to an article detailing the advances in commerical battery production? I would be curious

   Sailman, We do not lose the production of oil off a cliff. There is some decline profile which wins out. Our need to resolve the ever increasing prices and the economic effect that will have, will provide enormous incentive. Are we not smart enough to figure out how to retrofit some of the existing fleet with electric motors?  What if the ramp up only replaces 5% per year. Coupled with conservation, and increased use of positive eroi  biofuels and a decline rate of 5% or less we might squeek through with some semblence of a intact society. I don't think we have yet the incentive or the will, but I now think it is technologically feasible. I did not 6 months ago. From a battery standpoint look at A123 in Watertown Mass, or Toshiba. Look under nanotech Lithium ion batteries. Then, for new thin film solar commercial activity pair that up with Innovalight, Konarka, Miasolé, and HelioVolt. Also, In December, Honda Motor said it will enter the thin-film business and mass-produce cells by 2007. also check out http://www.treehugger.com/files/2006/02/south_africa_pi.php These cars could be recharged at home with solar priced at what these companies are claiming. Just need a spare battery pack.
(just needed someplace to drop this...ran across it and thought it was interesting...)

Hybrid velomobile - a formula for success?


It's probably too "reality-based" to mean anything, but Baktieri's assertion that Iran's real reserves are only 35 billion barrels (vs. the official number of 140b) is enormously interesting.

Keep your eye on Venezuela. The US media -- most recently the WSJ in a front page story -- has been slowly deseminating the idea (with some urging, no doubt, from high-level sources in govt) that Venezuela's supposed "underproduction" of its resources, and its "unreliability" as a petroleum supplier to the US are reasons to consider it an enemy.

When things get really dicey, we're going after Venezuela. It might be 6 or 8 years, but if we're not completely broke we're going in.

This Iran business is simply sheer, unbridled psychosis. It is so stupid, so mind-bendingly deranged, so dangerous, and without reasonable hope of positive outcome that I can't help but thinking there's some much deeper story going on here. (Like things are being driven by fundamentalist whackos who want to see a doomsday showdown in the M.E.)

For an excellent reason to start thinking along these lines see:
http://www.rollingstone.com/politics/story/11412417/the_low_post_gop_hitches_2006_hopes_to_apolalyps e_horsemen/print

The thing that pisses me off is that the Dems and others respond to the assertions as though they were reasonable. THIS IS LUNACY! is what they have to say.

Iran is not building up their military. They spend 1/4 as much on their military as Saudi Arabia, a Sunni adversary, and 1/2 as much as Israel (which also happens to have several hunded nuclear weapons and ballastic missiles with at least a 3000 miles range.)

Apparently they've only got 35b barrels in the ground. Less than SA and Iraq and maybe Kuwait.

And somehow THEY are a danger to become a regional hegemon?

And after thirty years of a stable -- if somewhat dispicable -- regime populated by a very comfortable elite, this country is somehow going to commit suicide, elect to become a radioactive glass parking lot by attacking the US or Israel?

I mean it's so stupid it makes my head hurt. Why are people even responding to this madness?

The best model I've heard for US actions is the "red giant" phase of empire. We're burning out, but some internal physics pushes us to expand at all costs first, exhaust our remaining fuel before collapsing into a white dwaft.



Is it this meaning or a neologism for "daft dwarf"?

I can't tell if you're serious or not but I'm pretty sure he meant "white dwarf" which is a star which has exhausted it's fuel, does some crazy shite and winds up a "tiny" white core which eventually cools off.
I can't tell if you're serious or not

I am not always serious, that wouln't be fun!
Sorry if you feel uncomfortable with this.

It's good to see the political discourse on the boob tube has seen an intellectual uptick or two since I quit watching a few years back
Barring oil pipeline construction, there is no way to divert Persian Gulf oil from the US to China except to tell tankers to change course. And for both destinations, the tankers must cross the Straits of Malaca, where the US Navy has a strong presence.

Iran's oil weapon consists of shutting the Straits of Hormuz altogether, not of diverting the output from the Straits. It comes at the price of shipments of refined product not going into Iran anymore (they don't have enough refining capacity.)

A scary scenario, to be sure, but not the one you're thinking of.

Since you're reading scary stuff today anyway:

British Troops Mobilizing on the Iranian Border

Maybe he's got it all wrong - I'm sure it's just a big mistake.

Take a look the ongoing collapse in UK oil and gas production.

As I said before, what if the Neocons believe Richard Duncan's prediction for a net dieoff of 2.1 million people per week starting in 2008?  

Note that world population is currently increasing (we think--it's possible that a dieoff has begun in some poorer countries) at a rate of about 1.4 million people per week.


A different take on what the Brits are doing on the Iran/Iraq border.  Here is part of the article:

"And where are Her Majesty's Hussars now? Six hundred of them have dispersed into guerrilla bands in the wilderness, where they will survive on helicopter drops of supplies while they patrol the Iranian border. The ostensible reason behind this extraordinary operation is two-fold, said the doughty Burbridge: first, to find out if the Bush administration is up to its usual mendacious hijinks in claiming that the evildoers in Iran are fuelling the insurgency among the happily liberated Iraqi people; and second, to do a little more of that Iraqization window dressing before finally getting the hell out of Dodge completely, beginning sometime next year, according to reports across the UK media spectrum.

Of course, the good major didn't put it quite like that. "The Americans believe there is an inflow of IEDs and weapons across the border with Iran," he told the Post. "Our first objective is to go and find out if that is the case. If that is true, we'll be able to disrupt the flow." The second aim is training Iraqi border guards, he added.

Yes, a few hundred men wandering through the wasteland, dependent on air-dropped rations, will certainly be able to seal off an almost 300-mile border riddled with centuries-old smuggling routes. And modern-day Desert Rats rolling up in bristling Land Rovers to isolated villages where Shiite clans span both borders will no doubt be gathering a lot of actionable intelligence from the locals. And of course it is much easier to "train Iraqi border guards" on the fly in the wild than at a long-established base with full amenities and, er, training facilities.

In other words, the British move makes no sense - if you accept the official spin at face value, i.e., that it's an act of careful deliberation aimed at furthering the Coalition's stated goals of a free, secure, democratic Iraq. But those in the reality-based community will see it for what it is: a panicky, patchwork reaction to events and forces far beyond the Coalition's intentions or control."

Seems like Ruppert has it right. He says if we invade Iran, that would be cataclysmic. So, do the war gamers. I doubt this has anything to do with nuclear weapons.
Ruppert is a good hearted man, but has an innate excess of optimism.  Ruppert also thought that the internal enemies of the neocons (patriots in the CIA and military) would pull off a counter coup in 2004.  Finally, Ruppert thought he would be significantly safer in Oregon than California.  I subscribe to FTW as some of the content is good, but would not trust Mike's instincts regarding war with Iran.  IMO, the fact that the US is weak and weakening makes an attack on Iran within the next two years more likely rather than less.

The History Channel in Australia/NZ will broadcast this 11 September a movie asserting that BushCheneyRumsfeld and the neocons were behind 9/11.  Whatever one might believe about recent history, the fact is that the ground of international opinion, even in Australia, is shifting against the US regime.  Never underestimate what a cornered rat might do.

While the article is one man's opinion, the fact that it appears in an official military publication implies at least tacit approval on the part of the Pentagon.

Not necessarily.
Loonies are allowed in the military too.
On "principles" the proposed redrawing makes sense, it is DOING it which doesn't.
I posted the original article on Wednesday August 23, 2006 at 7:50 AM CET without getting much comments.

From the link about Australian gas

ALAN CARPENTER, PREMIER: Don't be misled. There is no change of policy. There is no sovereign risk. This is the best place in the world to invest.

When we start getting different states fighting over their sovereign control over energy sources, whoa. That challenges the entire WTO and globalization structure. At least for large entities like US and Australia, with diverse regions and state structure... FSU, FUS, FAU.

No sovereign risk, I promise. Invest!

cfm in Gray, ME

conserving Western Australia gas

Notice the interesting parallel between the US and Australia; it is the states, not the federal government who 'get' PO. The  state govts are talking about a joint cap-and-trade scheme going behind the back of the feds.  The national govt is too preoccupied with supporting Bush, Big Coal and the Global War on Terror to think about PO and GW.

The Fair Price Energy proposal is a straight cost-internalization scheme.  This is all good, but one nation can't do it alone without exporting all of its energy-dependent industry.
The Great Housing Crash of '07

At dissidentvoice.org, Mike Whitney does not pull any punches. Well, one: he refuses to use the word conspiracy, maybe he's aware of the Chimp's claim at exclusiviry.

....according to the Fed's own figures, "the total amount of residential housing wealth in the US just about doubled between 1999 and 2006, up from $10.4 trillion to $20.4 trillion."

UP $10 TRILLION IN 7 YEARS! That is the very definition of a humongous, economy-killing equity monster. In other words, the Fed knew the actual size of the bubble and chose to steer it towards the nearest iceberg without warning the public.

New Orleans was just a dress rehearsal for the new world order -- 300 million Americans reduced to grinding poverty while the economy explodes into sheets of flames.

Right.  Whatever.

Not all of us in the U.S. are in this situation, no matter what the dark hopes of this author portend.

From the same article:
New Orleans was just a dress rehearsal for the new world order -- 300 million Americans reduced to grinding poverty while the economy explodes into sheets of flames.
Gotta love that imagery!
it was so over-the-top, at least from a literary perspective, I had to laugh. (That's not to say I think it is inaccurate, quite the contrary.)
dead on
but no conspiracy
A friend of mine calls this a "mixed matador."
US housing traditionally increases around 6%/year, twice the overall inflation rate but less than avg interest rates since the seventies. Going from 10.4 to 20.4 in ten years is an avg compounded rate of 10%, higher than normal.  So the bubble is 4%/year over seven years - a correction may be due, but not back to the level of 1999.  Also, population has increased 7% over the period, more than the increase in housing stock.

The costs to build homes has increased enormously over the period, especially post katrina/rita. The current slowdown/cost reduction will completely shut down home building, so demand will come back in a year or so.

>The costs to build homes has increased enormously over the period, especially post katrina/rita. The current slowdown/cost reduction will completely shut down home building, so demand will come back in a year or so.


  1. Everyone that wanted a home already made a move. Credit was easy

  2. Banks used capitalization of mortgage debt so that they could offer loans to anyone with a heart beat. The have pushed most of the loans on to the GSEs which didn't bother to check the debt they acquired from the banks. The GSEs have not properly securized debt as the believe that the values of homes would never fall.

  3. All lenders that held onto mortgage debt used credit swaps or financed long term mortgages (Aka 30 year mortgage) with out properly accounting for long term interest rates. For instance back in late 2004 and early 2005 lenders were offering 30 yr fixed at below 5%. The Fed rate is already above 5% today

  4. Consumers used homes as ATM machines to suppliment there income after the internet bubble popped. The used home equity loans to purchase new cars, vacations, whatever. Since we are now on the down size of the housing bubble easy credit will be very difficult to find.

  5. Asset bubbles are far more difficult to recover from than stock market bubbles. This is because Assets like homes are difficult to trade in for cash to buy goods and services. With holding exceptions caused by regulation, stocks can be coverted into cash on any business day. To convert a home, car, or other assets takes considerably longer.

  6. 40% of the S&P stocks consist of financial companies that sell mortgages or are indirectly linked to mortgage debt. 10% to 20% of the US GDP is directly or indirectly linked to housing construction.

  7. Boomers are now approaching retirement. Now that the house bubble is go, They will need to tighten there belts to begin saving. A large number of US companies are likely to dump their pension plans and layoff older workers to cut medical insurance costs.
Actually, credit is still very easy, and will continue to be so if the feds have anything to do with it. Note that bernanke promised to drop cash from helicopters if needed to ward off deflation. He will also drop interest rates faster than they were raised if the economy tanks.  Never fight or underestimate the fed.

Boomers will certainly affect the equation. Areas in the northeast might see falling prices indefinitely as boomers move to traditional retirement regions, while sunbelt areas will recover soonest. California is questionable... very high price increases encourage boomers to sell and retire to cheaper places, eg nevada, arizona, oregon, washington and florida. However, CA population continues to expand faster than the US population as a whole.

Doubling in ten years is about 7% per year, compounded, not 10% per year.
You're right; the period in the article was seven years, which is what I meant, not ten yeears, as I wrote.
On the Climate Change front, we now have a suit filed before the Supreme Court demanding EPA enforce the law,
WASHINGTON - August 31 - Today a vast coalition of the Sierra Club, states, cities, political leaders, other environmental groups, and utilities filed opening briefs with the Supreme Court in the most far-reaching global warming case to be heard by the nation's highest court. The Court's decision in the case, Massachusetts et al. v. Environmental Protection Agency et al., could have a potentially decisive impact on federal, state, and local efforts to tackle global warming. The Sierra Club, the twelve states involved, and the numerous other petitioners have taken this case to the high court to force EPA to comply with the Clean Air Act's provisions requiring it to regulate any air pollutant that "endanger[s] public health or welfare."
Sorry for posting another ethanol article, but I need someone to help share my misery as I read this in today's Omaha W-H:

Nebraska gaining on Illinois in ethanol

  Nebraska is poised to overtake Illinois as the No. 2 ethanol-producting state, Gov. Dave Heineman said Friday.
  Nebraska has more ethanol plants in planning stages or under construction than any other state, Heineman said in a ceremony to proclaim September as biofuels awareness month in Nebraska.
  "Look out, Iowa, we're going to pass you by, too,"  Heineman said.
  In 2005, Iowa led the nation in ethanol production, Illinois was second and Nebraska third.  All three states are rapidly expanding ethanol capacity.
  "Nebraska is poised to do some good things,"  Heineman said.  "We can be a leader."
  Mark Jagels of Davenport, Neb., immediate past president of the Nebraska Corn Board, said Nebraska's 12 ethanol plants employ nearly 600 people and have created 1,250 indirect jobs.
  Ten more plants are under construction and about 20 more are being planned, Jagels said.
  Heineman said that soy biodiesel, a product that replaces some petroleum in diesel fuel with an alternative fuel from soybeans, is at a stage in development where ethanol was 10 or 12 years ago.
  "But I think soy biodiesel will move quicker," he said.

This comes after it was publicized about a week ago that discussion of investing in a proposed wind farm didn't have enough interest, and had fallen through.

"Nebraska is poised to do some good things,"  Heineman said.

Yeah, like deplete their aquifers. Then what are they going to do.

But the hype rolls on. This morning, I noticed this ad on my blog:

Ethanol from waste materials is here. Bluefire is leading the way.

You would think the would learn to be careful with these claims, after Xethanol's hype was exposed. And I can't begin to note the irony that ads for ethanol production routinely show up on my blog.

I note on Bluefire's homepage they claim:

Could ethanol be the answer to America's oil addiction? As Dan Rather reports, Brazil has already weaned itself off imported oil using ethanol. Many in America also are placing their bets on the alternative fuel.

On the other hand, they claim to have run a pilot plant turning biomass into ethanol for 5 years. But the question is not whether one can produce ethanol from cellulose. The question has always been, can you do it economically, and with an attractive energy return?

Oh. Dan Rather said it.  Say no more.
How many hits are you getting on your blog these days?
I am averaging about 300 a day. That's OK, given that I only started it about 6 months ago. But The Oil Drum gets more hits than that in an hour.
The Oil Drum gets more hits than that in an hour.

Hits don't mean much, it's the number of visitors who is significant.
From my own estimates each TOD thread gets between 200 and 700 visitors for one or two days then dwindles to nearly nothing, 10 to 20.

"I am averaging about 300 a day."

And one of 'em is me :-)  I really value your way of presenting your case with... wait for it... actual data!

Seriously, you do a fantastic job!

- sgage

From iTulip's Energy and Money

Sorry if it's familiar, it made me wonder what changed so many minds, in so little time, to make ethanol what it is today. Market efficiency? Energy eficiency?

The economic use of ethanol

Statement of Senator John McCain on Amendment to Prohibit Extension of Ethanol Subsidies Mar 11, 1998:

"Mr. President, enough is enough.  The American taxpayers have subsidized the ethanol industry, with guaranteed loans and tax credits, for more than 20 years.  Since 1980, government subsidies for ethanol have totaled more than $10 billion.  The Finance Committee amendment to ISTEA, if not stricken, would give another $3.2 billion in tax breaks to ethanol producers.

"Current law provides tax credits for ethanol producers which are estimated to cost the Treasury $770 million a year in lost revenue, and the Congressional Research Service estimates that loss may increase to $1 billion by the year 2000.  These huge tax credits effectively increase the tax burden on other businesses and individual taxpayers.

"...the Department of Energy has provided statistics showing that it takes more energy to produce a gallon of ethanol than the amount of energy that gallon of ethanol contains.

"Finally, let me quote Stephen Moore, of the CATO Institute, who puts it very succinctly in a recent paper: `...[V]irtually every independent assessment--by the U.S. Department of Agriculture, the General Accounting Office, the Congressional Budget Office, NBC News and several academic journals--has concluded that ethanol subsidies have been a costly boondoggle with almost no public benefit.'  

"So why do we continue to subsidize the ethanol industry?  I think James Bovard of the CATO Institute put it best in a 1995 policy paper: `...[O]ne would be hard-pressed to find another industry as artificially sustained as the ethanol industry.  The economics of ethanol are such that, for the industry to survive at all, massive trade protection, tax loopholes, contrived mandates for use, and production subsidies are vitally necessary.'"

Sorry if it's familiar, it made me wonder what changed so many minds, in so little time, to make ethanol what it is today. Market efficiency? Energy eficiency?

Political efficiency. The early primaries for the presidential elections are held in Iowa, the capital of ethanol production. If you want to get elected, you better get behind ethanol, because perception is reality.

yeah, the questions were rhetorical, of course

and your logic underlines that McCain wouldn't dare hold the same speech today, even if nothing has changed in the claims he makes

This article, about Saudi Arabia buying fuel oil, simply does not make any sense. Why would Saudi Arabia buy oil to meet summer utility demand?

SINGAPORE, (Reuters) - Saudi Aramco, a major fuel oil exporter to East Asia, has imported its first-ever cargoes of the residual fuel, taking a total of around 160,000 tonne for August and September deliveries, to meet peak summer utility demand amid a depressed global market, traders said on Friday.

I spent 5 years in Saudi Arabia, 1980 to 1984. The first two years were spent at Gazlan Power plant, a 16,000 megawatt plant near Ras Tanura. The plant was primarily a gas-fired plant. But the boilers were also equipped with oil injectors. We could burn raw crude almost as it came from the ground. (The water first had to be removed.) But after the water was taken out, we could burn the stuff exactly as it came from the ground. We could also, and often did, burn naphtha. In short, we could burn just about anything except coal.

Don't ask me about the sulfur dioxide this would dump into the atmosphere. At the time it simply never occurred to me to ask about that. Had any of the sulfur been removed. I don't know but I doubt it.

At any rate the other power plants in Saudi, as I understand it, were similar to Gazlan. Though the utilities in question are on the West Coast instead of the East where Gazlan is, it would still be cheaper to ship or pipe the oil across than to buy it from somewhere else.

Ron Patterson

"This article, about Saudi Arabia buying fuel oil, simply does not make any sense. Why would Saudi Arabia buy oil to meet summer utility demand?"

I commented on this briefly up the thread.

But let's assume that Richard Heinberg's report (that Ghawar is crashing) is correct.

What if they have drawn down their inventories as much as they dare, and what if they can't cut back on exports any more without having to invoke Force Majeure in regard to existing delivery contracts?

Conclusion:  they effectively cut back on exports by importing refined products, which allows them to "truthfully" say that they are meeting the export obligations.

As I said before, "How do you know the Saudis are lying?"

this is crazy news
the chicken little in me is thinking about coming out of the closet
It was "Saudi Aramco" not Saudi Arabia but I don't know if that makes any difference.

I think this story is much bigger and scarier than it seems.

It was "Saudi Aramco" not Saudi Arabia but I don't know if that makes any difference.

No, it does not make any difference. Aramco is the national oil company of Saudi Arabia. ARAMCO originally stood for "Arabian American oil Company" before Saudi bought out the four American partners in the company.

As I said before, "How do you know the Saudis are lying?"

Note, smart ass comment.

They are talking!

End, Smart ass comment.

Usual use, "Their lips are moving"
No Force Majeure before US elections.
If the assumptions of most on this thread are correct, 2 more months of Ghawar cratering will not be concealed past early November.
What is interesting is this isn't talking, at least in the sense that the world's presumed swing supplier appears to be buying oil, regardless of reason.

Of course there could be a number of reasons, but it would also be possible to note how Texas and its controlled market started to change when it lost the role of the market's swing production.

This is a quite interesting point - at what point does the 'market' no longer actually mean what it used to - as the amount declines, the market also declines - force majeur makes it sound so all God given, and out of anyone's responsibility.

The world's apparent swing producer seems to be buying oil to make a few bucks to cover extraordinary demand. Because the market is collapsing, even if the price isn't, which leaves tankers just drifting storage platforms overfilling European storage. Or something else entirely, of course.

As a diversion - there was a story of a man who actually made money at some point in the 1800s by bringing coal to Newcastle. It was during a miner strike, and he made a fortune apparently. I wonder how much wealth is waiting at the end of the Saudi rainbow, buying oil to sell to the world's premier oil production address. Interesting how the right pump doesn't know what the left pump is doing.

And you can even imagine Escher like diagrams, with the Saudis making exponential leaps into forever by producing oil to sell to themselves when oil is cheap.

Of course, another way to look at this is what is a couple of hundred thousand barrels in a place producing millions a day. Maybe this stuff is really easily misplaced when you are swimming in over-capacity, and have tankers with different cargoes just floating around. You know, a clerical error or something.

It also confirms another trite truism - the oil market is not very predictable in terms of price and supply/demand - and it will likely be harder predict in the next few years, as new factors lead to gyrations. Sounds like the Saudis are practicing for this future.

The Other Crisis

These days, "Other" is not nearly specific enough.

A key question is whether we are talking about crude oil, crude + condensate or total liquids.  

The all time record Russian production was in 1989 (11 mbpd plus, I think total liquids).  However, production was right around 11 mbpd for 11 years centered on 1984, five years on both sides of 1984.

Based on the HL model, Russia should start declining this year.  We shall see.   But as I outlined above, I estimate that net exports from the top 10 net oil exporters, through the first half of 2006, are falling at an annual rate of 9.2%.  The Russians themselves are admitting to a slight decline in net oil exports, year over year.

The reuters article smells like a feel good
hit piece from the MSM. It gives the impression
Russian monthly production will increase from now on,
not to worry.
I wonder what the Gipper would think of the Russians
having the world by the oil cajones? .
Probably rolling in his grave.
Did you see the throw-away line on the last page - "while Saudi Arabia takes a breather with several million bpd of spare capacity"?!
Hello TODers,

Awhile back, a fellow TODer was considering the storing of 40 gallons of gasoline at his house.  My advice was basically DON'T DO IT--much too dangerous.

I suggested he shift to bicycling, car-pooling, mass-transit, and/or purchasing a small motorcycle or scooter, and keeping one paid-off vehicle for moving large loads or a full carload of people when the need arises.

This started me thinking about the squirrel in all of us; our genetic desire to hoard and protect our nuts as best we can.  Can we harness this innate desire postPeak to our advantage?

POSTPEAK SPECULATION: Hell's Angels gas-stations!!!

Recall my recent posting where even the Governor was refused from purchasing gasoline at a regular customers only gas-station in the '70s energy crunch.

How about a nationwide chain of motorcycle and scooter only gas-stations that employed rough-looking, tatooed bikers as armed guards and cashiers?  They would not have to worry about being robbed, nor refusing a car-owner who pulls in wanting a fill-up.

When the postPeak time arrives where gasoline prices rise faster than the opportunity costs of storage, or if rationing arises-- two-wheeled enthusiasts can safely hoard fuel by mutally pooling their efforts into these Hell's Angels brand gas-stations.

Remember the agonizing waits of hours in long gasoline queues--everybody hated doing this.  Motorcyclists especially, because they had to just sit there for long periods, inching along, exposed to whatever weather was happening at that time [blazing sun, freezing rain, or snow].  

Most riders mitigated this necessary waiting time by using their pickups in the queues, and filling extra 5-gal jerry cans to be stored at home for their bikes.  Of course, this was a dangerous fire-hazard and sub-optimal: gas-thieves just loved stealing conveniently packaged and already filled gascans from a homeowner's backyard.  Other bikers [concerned about home safety], would just siphon gas from their vehicles to their bike's gastank as the need arose.  But this won't postPeak work if: thieves have stolen all your vehicle's gasoline overnight, as has personally happened to me years ago [Dirty Bastards!!!!!].

Thus, I surmise two-wheeled riders would gladly pay a small safety & convenience premium to quickly fill-up because their rides get superior MPG compared to the typical SUV & HUMMER.

The membership rules could be very simple at a Hell's Angels station:

First: two-wheeled customers only.  Scooters, motorcycles, even bicycles with kicker motors would be welcome.  No purchases by 4-wheeled cages allowed!

When rationing is imposed: a member will fillup his vehicle at a normal gas-station, then drive to the Hell's Angels station.  He/she will then transfer whatever amount of gasoline they wish to this station's tank and be given a credit for this gallon amount.  A typical pickup can hold 25-35 gallons: if the pickup owner is not going to be using his vehicle much, or if the govt. rationed amount is small-- it is not unforeseen for the owner to transfer most of his fuel to the Hell's Angels tank.  You automatically become a preferred customer because it is your fuel contribution that makes it so!

If you do not own a vehicle, but own a two-wheeled ride, for a small fee you can become a preferred customer whereby you can prepay for your fuel, and the nationwide chain will use their purchasing power of all the riders to get you the best discount/gal they can, then store the fuel for you.  Discounted nuts--who could ask for anything more?

If rationing has not kicked in yet, but you feel gas prices are going to rise fast: you can safely store cheap fuel for yourself by the method outlined above.  In short, you create your own beneficial gasoline futures market strictly for yourself.  Anytime you need a fill-up: you only pay for the overhead storage costs because you have already paid for the fuel.

Now the question arises on fuel storage times before the gasoline goes bad.  Your fuel credit is tracked by computer nationwide and can be audited by you on your home-computer.  You are free to purchase gas at any Hell's Angel station nationwide.  Once you exceed your previously stored quantity you then pay the going market rate for gasoline until you get home to replenish your gas credit again.  To do this, each Angels' gas-station would purchase some quantity of gasoline as a reserve for roving bikers passing thru.  This should be sufficient so that the gas is used by all before it goes bad.

Okay, this is just a brief overview of this concept, but it offers many fire safety, theft prevention, and availability advantages for future postPeak bikers.  It could also spur millions of people to get out of their cages and enjoy the savings and thrills of having their knees in the breeze.  Just another idea of mine to help mitigate the decline.

Bob Shaw in Phx,Az  Are Humans Smarter than Yeast?

First: two-wheeled customers only.  Scooters, motorcycles, even bicycles with kicker motors would be welcome.  No purchases by 4-wheeled cages allowed!

Hey, what about those who use motor trikes, like the beauty below?


Hello Woilf,

Beautiful, awesome trike!  Yeah, trikes would be allowed too!  My girlfriend had a VW 1600cc trike for about 4 years until she developed problems with her 'shifting' foot--she got pretty good at popping wheelies!  I sold my 1500cc Suzuki Intruder cruiser back in early 2003 when I learned that I was going to be laid off soon.  Then summer '03-- I first learned of Peakoil.  I just recently purchased a used 600cc Honda Silverwing scooter--excellent mpg and built-in storage, but still has plenty of power and acceleration for freeway jaunts when required.

Bob Shaw in Phx,Az  Are Humans Smarter than Yeast?

Awesome! One day, I may get a motor-trike. Haven't had the need yet. Gotta get rid of the wagon first, I suspect.

Here's another winner:

This beast does warp 9! (Faster than the cops' radar guns ;o)


What about the Earthmarines?  What will they be driving?

Hello Consume More,

They will probably be the very last to drive Hummers with the obligatory .50 cal gunmount.  The motorcycle shops and mfgs are more likely to band together to finance these gas-stations in my above post, not the Hell's Angels.  But it sure makes for interesting imagery in the reader's mind!  Heh, heh, LOL!

Bob Shaw in Phx,Az  Are Humans Smarter than Yeast?

Isn't 7.62 a better gun? It can fire so much faster. Barrel doesn't overheat as quickly, and it is just as deadly. Why do modern MBT's carry coax 7.62's rather than 12.7's?

The next step up seems to be 20mm, which is basically light artillery.

Hell, why not just go for a Nuclear Rifle
Nice one. Cost is the primary factor keeping me out of the market presently. I'm still paying off the yacht. King Fahd said I was getting a deal - it has been everything, but. I know Sailorman will disagree, yet I think a boat is a big hole in the ocean you throw money into.
i am looking for a good but reasonably priced three wheeled pedal bike that can carry some stuff other then the person riding it.
happen to know of one?
Hello TrueKaiser,

If looking for used: I would try Craigslist or Ebay.

Thinking about storage of gasoline or diesel fuel long term does not seem viable. I have read that gasoline does not store well past 18 months. Diesel fairs better and can be stored for about 4 years if stabilizers are used. I just googled to some manufacturers of fuel stabilizers and treatments that claim to be able to improve fuel shelf life up to 15 years.

Totoneila, didn't you mention that ethanol can be stored indefinitely if moisture absorption is prevented?. Long term storage issues are important, especially considering peoples natural inclination to 'store their nuts'.

Hello Oilfall,

Nope, wasn't me that mentioned anything about storing any fuels, much less ethanol.  Sorry, not my area of expertise.  But I have used STA-BIL, with good 3-5 month results, to keep gasoline from going bad when I had a boat years ago.

I like the "Fair Price Energy" website's 2-tax system of modeling the price of fuels, but have these two thoughts...

The site proposes giving each "taxpayer" a rebate, but that really means everyone gets the rebate because parents will put $2000 in a bank account under their kid's name, spin of $10 of interest each year, and then the kid will file taxes.  Similarly, entrepreneurs will set up bank accounts for the homeless (and dead people) and split the windfall with them.  Probably a better idea would be to give each taxpayer a large rebate on their taxes including a rebate on what they paid in social security and other regressive taxes.

If you think manufacturing is moving oversees now (where labor is cheap and laws are lax), just think about the shift when the USA adds high-cost-of-energy to the list of difficulties in manufacturing in the USA.  Perhaps the USA needs to also add the two energy taxes to goods imported to this country;  foreign goods manufactured abroad in countries with high energy taxes could substituted that countries taxes for our own.

carbon tariff on Chinese imports

I agree with this provided there is domestic carbon penalty system. Make it a flat 15% until the Chinese implement their own scheme. Spend the revenue on other tax breaks.  I know it breaks every rule in neoclassical economics not to mention trade agreements. The idea is not to hurt China but to play ball by curtailing emissions.

Der Spiegel English edition has a great article on...

Sorry - I don't know how to do make that box thing.


Torture and Poverty Are Part of Life in Equatorial Guinea

It has the makings of a modern-day fairy tale, the story of a country transformed from a pariah state into an oil paradise. But the reality is that Equatorial Guinea, almost unnoticed by the rest of the world, is experiencing a modern-day tragedy, a story of the dark niches of global politics in times of oil and terror.

Z, for boxes, use the blockquote tags underneath the Post Comment window, under HTML formatted
But the reality is that Equatorial Guinea, almost unnoticed by the rest of the world, is experiencing a modern-day tragedy, a story of the dark niches of global politics in times of oil and terror.

CBS 60 Minutes has reported somewhat in depth on this tragedy. And on the strategy behind such tragedies: Production Sharing Agreements (PSAs) between oil corporations and corrupt rulers.

Eq. Guinea gets about 12% of the value of the oil produced from its oilfields; all of which go to prop up the corrupt "elected" leader.

PSAs were behind the Bush-Chalabi misadventures in Iraq, I believe. Regime change means changing the leader to one who will sign such agreements with oil corporations.

This thread so far has taken me  through all my peak-oil emotions -- hope, fear and a strange desire to cower in a corner somewhere.

But, as always, excellent stuff ...