DrumBeat: September 27, 2006

[Update by Leanan on 09/27/06 at 9:35 AM EDT]

US oil reserves up for 1st time in 3 yrs

US proved crude oil reserves last year rose for the first time in three years and natural gas reserves had their biggest annual increase since 1970, the government's top energy forecasting agency has said.

Crude oil reserves jumped 1.8 per cent in 2005 from the year before to 21.757 billion barrels and natural gas reserves soared 6.2 per cent to 204.4 trillion cubic feet, according to the federal Energy Information Administration.

Proved reserves are the estimated amount of supply that economically can be recovered using known drilling technology.

Two of the four largest US oil-producing areas, Texas and California, increased their crude oil reserves while reserves were lower in the Gulf of Mexico and Alaska.

[Update by Leanan on 09/27/06 at 9:35 AM EDT]

Oil price very low, action needed: OPEC chief

Oil prices are very low, harming investment in the industry and something must be done to steady the market, OPEC President Edmund Daukoru said on Tuesday.

To Peak Oil, Or Not To Peak Oil

We have been struck by the number of bearish reports and comments emanating from analysts, fund managers and assorted pundits with regard to oil, gas and other commodities. Just prior to the release of the FOMC statement on September 19, we heard a well-respected Chicago floor trader gush about how the oil bubble had burst, and how the Fed wouldn’t need to hike interest rates any further. Hearing that, we were tempted to rush out and trade in our 35 miles per gallon Honda for a gas-guzzling SUV as we watched prices at the pump plummet.

Of course we wouldn’t buy an SUV, but hearing statements like that makes you wonder what all the talk of peak oil has been about over the years.

Michael T Klare: Cashing in on the fear factor

Oil Disputes Raise Tension Among Southern Sudan Factions

A simmering conflict is threatening to start another war in Sudan. This time, it is as much about oil as it is ethnicity. Unequal distribution of oil revenues, bungled oil contracts, and differences in ethnic power sharing are creating new fault lines in an already divided country.

China's Oil Deals With Iran, Myanmar Put It at Odds With U.S.

Fighting the wrong war

George Bush's battle to control the world's oil supply has cost billions of dollars, much more than it would have cost to discover new sources of energy.

Rising Risks for Europe's Power Utilities: Bigger investment needs, conflicting objectives, and supply-security concerns are making for an uncertain future.

Shell seeks to partake in Turkey pipeline project

Report: Russian Fuel Going to Iran Plant

ussia will ship fuel to a controversial atomic power plant it is building in Iran by March under a deal signed Tuesday, news agencies reported, as Tehran's nuclear chief met with a Russian security officer at the Kremlin.

Greenspan: Junk Sarbanes-Oxley, Raise Gas Taxes

Setting America free

Divergent political camps in the United States have found common ground in support of "energy security" and "energy independence". As high gasoline prices and intensifying conflicts in the Middle East focus attention on US dependence on petroleum imports, progressives and conservatives are organizing to reshape US policy based on their own views about what the terms "energy security" and "energy independence" mean.

Interior Dept. criticized over unpaid royalties: Lawmakers say agency should collect as much as $2 billion from companies.

Big Oil moves ahead on human rights, slowly

America’s Atomic Future

Changed climate will cook elderly people

When the great heatwave of 2003 struck Paris, it left 14,802 people dead; 30,000 people died throughout the rest of Europe. It was, according to Britain's chief scientific adviser, Sir David King, the worst natural disaster on record.

Sixty per cent of those deaths occurred in nursing homes, retirement homes and hospitals.

Gas-Guzzlers in the Capital: Governor, lawmakers don't exactly practice what they preach.

Economists on climate change: do we care?

Will the spending needed to prevent global warming cost the world more than just sitting back, or even enjoying the possible financial benefits of a hotter planet?

Economists are divided over that cold financial calculation in the week ahead of a major report on the issue to be presented to ministers of the world's leading nations.

White House said to bar hurricane report

A government agency blocked release of a report that suggests global warming is contributing to the frequency and strength of hurricanes, the journal Nature reported Tuesday.

[Update by Leanan on 09/27/06 at 11:08 AM EDT]

Summary of Weekly Petroleum Data for the Week Ending September 22, 2006: Oil tumbles as gasoline supplies surge.

[Update by Leanan on 09/27/06 at 2:25 PM EDT]

The Arctic: Oil's last frontier
Twenty five percent of the world's untapped reserves could lie near the North Pole, but politics could prove harder to crack than the ice.
My few morning links.

First, a security/Iraq compendium from a usually non-political source:

Just in case you were feeling secure

Then some more directly energy related:

Texas is more hospitable than Mass. to wind farms

Decline in Gas Prices Isn't Buoying Detroit

Apologies if they're repeats.

Another story about theft and the high price of copper:

Copper thieves get killed cutting into power lines

At least seven men in five states have been fatally electrocuted since July while hacking through power lines to steal wire made of copper, which has been commanding near-record prices, police say.

"It is a growing problem with the rise in the price of metals," says Lt. Shea Smith of the Greenville County Sheriff's Office in South Carolina. Smith says one thief died Aug. 30 and another July 7. Both were found with wire cutters and other tools that suggested their intent. He says at least 30 more copper thefts have occurred in the county so far this year.

Nationwide, police report copper thieves stealing wires from air conditioning units, exposed pipes from underneath homes, vases from graveyards in Sumter, S.C., and bells from a church in Yonkers, N.Y.

This is actually a fairly common problem in much of the (misnamed) third world. I've even read stories about southern african companies unable to lay line faster than it was being pulled down by "bandits."
That's why cell service is more reliable there than landlines. GSM antennas powered by localized generators. No copper to steal.
Ah, but those batteries! When Charlie went through down here a couple of years ago and knocked the power out (8 days at my house) we were without cell phones - seems the phone companies had not been checking their backup batteries on there towers and good majority of them were simply dead! So with the copper not available - what's a generator and battery worth?
Not in my neck of the woods it's not. I can barely even get a signal. I've been looking at some of the antenna units that are offered for picking up a signal from a local cell tower and broadcast the amplified signal to an area around the house. Anybody here ever see these in action?

Bruce in Cumberland County Illinois

Oops! My bad. Looked up what a GSM antenna was. Are the worth the investment?
More reliable THERE, as in Africa.
Copper thieves cause havoc

Thieves targeting the copper in power lines in the Truckee River Canyon have stolen wire, damaged 50 power poles, caused power-outages for about 700 customers and sparked a brush fire over the weekend.

Karl Walquist, spokesman for Sierra Pacific Power, said thieves are knocking down poles to get to the valuable copper in the currently unused wire. The thefts, he said, have likely been going on for months.

Detroit weighs curbing scrap metal theft

Thieves have even stripped cemeteries for sprinkler heads, manhole covers from city streets and copper tubing from outdoor condensers on home air conditioners.

Copper the new addiction

Over the past several months thieves targeted local cemeteries, mausoleums,and even youth football fields.

Red-hot copper

When Leon Black had the utilities switched on at a Lansing rental property he owns, he got a big surprise.

"The guy came to turn on the power, and he said, 'You've got water running everywhere,' " Black said

This is a major issue for railroads - theft of copper ground rods and batteries may go unnoticed until it is needed- making the whole system unreliable.
One of the silver linings in Peak Oil is that the end of the automobile age makes entire categories of crime infeasible. No more kidnappings of adults, for example. Career street robberies in the city? Once again sure to become a rarity. And drug smuggling will also be a great deal more difficult.

The question is just how much havoc criminals will wreak before they lose their wheels.

"Proved reserves are the estimated amount of supply that economically can be recovered using known drilling technology"

So yes, higher price does increase reserves. It is still doubtfull if it increases the flow of oil. IMO, it doesn't

It is just silliness to say global production is not related to URR.  That correlation has been with us for three decades.  And it continues today.  As we watch URR grow in the new millenium, so also has extraction.

2003 - 79.8-mbd
2004 - 83.2-mbd
2005 - 84.5-mbd

A new quarterly record was set in 2006Q1 of 85.17-mbd

A new monthly record was set in July 2006 of 86.23-mbd

Just the facts, ma'am.  IEA facts.  It is time for the peaksters to realize that they have been misled by lotsa hype that never measured against on-the-ground production/refining escalation.  And the best (2010) is yet to come ...

The conclusion you draw does not follow from your premises. All you have demonstrated, if we begin by accepting IEA numbers, is that we have not yet reached peak (at least not as of July 2006). Yes, there are those who believe we have already peaked, but I'd be surprised if that's more than a small fraction of us. And your 2010 "teaser" just happens to be when ASPO thinks we will peak. It's not clear at all that you have demonstrated anything about peaksters, hype or production "escalation."
And after 2010?

Before then, it seems a bit wild to say that it's the 'peakster' side that has been misled by hype. In the meantime, Stuart's graphs, and Khebab's, use the same IEA numbers. Whether they are facts, jury's out. That's why they use multiple data sources. And the overall picture looks pretty flat to me.

Then why is oil above $60 a barrel instead of $20?
There is no correlation between price and a commodities hubbert curve.  ASPO's Colin Campbell recognized that in a 2002 newsletter.

And there is no correlation betw price & URR or betw price & extraction rates.

The correlation is between price rises and price drops vs excess capacity at any given moment in time.

The correlation is between price rises and price drops vs excess capacity at any given moment in time.

I agree with that - so how do we measure excess capacity - you got any charts?

See the second chart in our monthly extraction/stocks report: http://trendlines.ca/economic.htm#USAReserves ... it's from EIA.
How do you reconcile the chart, which suggests world surplus capacity of 1 mbpd, with the statement in the caption that OPEC has 3 mbpd surplus capacity?
IEA defines spare capacity as production that can be brought on stream for a minimum of six months.  I don't know EIA's def.
Freddy, I think you're wrong in your conclusions, I believe we are at or near peak, but I truly treasure your work! Keep it up, we all need someone to introduce reality in all of this. Thanks for caring, you make us all feel warm and fuzzy about the future, sort of like four fingers of scotch and 30 mg. of valium.
That four fingers thing sounds really good...takes your mind off all that doomer stuff.  

Could you provide some evidence to show that Freddy is wrong in his conclusions? A counter-argument, let's say, with numbers?

The Eia will be out with their July numbers Monday or Tuesday. We will see how close he is then. But you can be sure that July will not be a record high, nowhere near December of 05.

Of course there has been a considerable divergence in the IEA numbers and the EIA numbers since December. The IEA numbers are still right up there or are higher than December while the EIA numbers are down by almost a million barrels per day.

Somebody is lying.

If the guy relaxes with four fingers of scotch and 30 mgs of valium. I think it is a miracle he can type. Asking for evidence seems a bit much given this context. ;)
Oh, but I wasn't expecting an immediate answer. There's always the morning. Who knows what amazing results can be produced by coffee and and a few cigarettes.

Or, alternatively, as Keith Richards once said,"What's a morning?"

Good points. And after reading further down in the thread, I think the 30mgs of Vs could do Dave some good. Hide the scotch though.
Dave's OK. He's on our side(I think). We are in a pretty good position. We're dug in with flanks covered. Air superiority.

It's been a good day. As long as we can keep Odo(or, Auto, as I like to call him) awake.

Just don't let me hide the scotch. I might hide it down my throat.

oilceo, I was an English major in college, and I'm fairly right brain oriented. Math and statistics aren't my big strengths, but I have great intuition and faith in Khebab, with a layman's understanding of exponential growth.

However, I understand the world's growth in useage yeilds a demand level of around 185 mmbpd in 30 years being needed. If it were possible to raise production that much, then how come production seems nearly flat? Why do the Saudi's not produce more oil? How come the US oil companies can't replace their reserves except with natural gas?

  But, besides all that Freddie really pissed me off about two or three months ago, and I hoped to return the favor. While I don't have the long memory for slights of the ladies of our species (watch out for Paris, she's gonna remember and get even!) I do remember long enough to get in a gig or two.

My real, no joke best hunch says that oil prices dropped when the 30 something guys in the hedge fund biz swapped out of energy futures in the wake of Amarynth. The rise in the Dow and the S&P results from them redeploying their funds in a safer place. The same reason interest rates are low in spite of the Fed-the Hedge Fund Cowboys are huddling in a safe refuge while they figure this stuff out .

But we'll all figure this out with perfect 20-20 hindsight in a couple of months, or we'll all be sitting barricaded in our homes while hordes of ravening zombie S.U.V. owners clamor around trying to suck our gastanks dry.    

I hear you. I appreciate the long, thoughtful response as well. Hutter is a guy who get's a lot of flack. He pisses a lot of people off. He used to piss me off when I was a newbie.

But he knows what he is talking about.

When I say he pisses people of, what I mean is, it's not really what he is doing - it is how you read him.

It is you that is being pissed off.

Take a look at yourself. You are angry not at Freddy but at the fact that you have no numbers to refute what he is saying.

Self-hatred is good is this case. We should not try to denigrate others, but rather provide numbers and argument for a counter-offensive. Self-hatred provides us with a possible motive to do that.

For without these numbers and argument it is difficult to see how Freddy is wrong.

It's not always the numbers - sometimes its the logic. Even if his numbers are correct, does that refute the very idea of a peak? It only means Dec 05 was not the peak.
Again Freddy!  If they are off 5 years <PO> who gives a rats ass.  This is a really big problem.  
"If" being the key word in your argument. It's not in Freddy's.

That's the problem here. You are talking past his points. You assume he's wrong amd you are right before actually debating.

Take a closer look.

I give a rat's ass. Probably much more. I'd also rather have Freddy analyzing numbers for me(when I don't have time to do it for myself)than anybody else here.

Well...with the possible exception of Stuart, but he doesn't post here anymore.

I do hope Stuart isn't gone for good.

Seems to me the difference right now is simply between IEA and EIA as long as we're looking at this too short time frame of the last 2 years. One shows modest increase, one shows flat. Either could represent a peak/plateau or not. My problem with Freddy is that he never addresses the arguments brought up here in terms of field decline or other specifics. He presents IEA numbers and then talks of the modelers he presents on his website, but doesn't go beyond that. It winds up as a parallel, sometimes belittling argument between individuals each playing with their own toy.

But I don't really want to enter this fray anyway, and he is right that in the past peakers underestimated the production potential of the world. That may or may not be the case again.

BTW, I don't think you will get very much further with numbers than we have already. Too many variables simply not known. What will the Ghawar decline rate be, Cantarell, Burgan? Will damaging hurricanes come later this fall or next year? Will Khurais actually produce? Is the rest of Saudi declining fast? Will Thunderhorse produce this decade? What finds & declines remain in Russia?

All of these don't have certain numbers to attach, and the possibilities are enough to throw the peak several years one way or the other.

Only hindsight will be 20-20. In the meantime we each make our best guess based on our interpretation of the most likely scenario. It does seem, as Freddy has stated, that the models are doing some converging, but there is still a ways to go before the mist clears.

You ask some excellent questions. They can be answered in several ways.

We can answer them based on what we want to believe. What we want or wish the numbers to be based on our undeniable forecasts of how the future must be. Curve-fitting.

Or we can base them in retrospect on the actual numbers.

Or we can try to forecast them in some sane manner based on our experience from how numbers in similar situations in the past actually worked out, using statistics, etc.

I prefer a combination of the last two options.

One of my mottos has been,"Always expect the unexpected."

I would have no problem with the scrutiny that is afforded Hutter here, if it were only applied to everybody else in an equal manner. Certainly we can find persons and statements more deserving. Freddy does his homework.

I have reached my personal suspicion (I won't use the word conclusion) about what is going on with peak oil. I have read essentially all the Stuart, Hutter, westexas, Khebab, Deffayes, Laherrere, Simmons, Yergin and multiple other writers/contributers here and elsewhere. Some make sense to me, others make little sense to me. I do think their efforts provide a lot of good information, that we do know a lot but with wide error bars. However, while I could lay out a defense of my position, I could never prove it or pursuade others who chose to look at the same data differently. I have become fatigued and mostly want to protect my family.

Good evening to you ... and thanks.

Don't get me wrong. I've always read your stuff and tend to agree with you, as I do here. I just want a free and open debate based on facts. Cheers. Keep up the good work.
Freddie does in fact do his homework, but he picks and chooses his sources to support a conclusion which he reached in advance of researching the statistics. More of a political than a scientific attitude.
  He's also consistently an asshole, rude and insulting. This does not necessarily invalidate his position, but I  responded to this in a purposefully insulting manner. I have a strong streak of asshole too, and sometimes I react a little too quickly. I apologise to this forum for showing it sometimes.  
  One data point does not make a trend. IMHO the jury is still out on peak oil, it may have happened about the beginning of the year as WestTexas thinks, it may be about 2010 as Robert Rapier and ASPO think, or it may even be in 30 years as Freddie and Exxon think. I am not emotionally involved in a position, I truly hope Freddie is right because we all need to make changes in our lives and political decisions and more time is better for humanit6y in general.
  My personal belief is the true root of this problem is humanity's overpopulation. My grandparents were all born in a world with 1 billion people or so, which was the population of the earth for around 2,000 years. This seems sustainable, and I'm pretty sure we've surpassed this ands a consequence are running out of resources and adversely affecting the whole world and risking a population crash.
  I have a srong belief that we each need to take personal responsibility for our own actions and do what we can to help the rest of the earth. That translates to conserving as much as possible and stopping reproduction of people in our personal relationships. I had one child then got a vasectomy.
  As far as drinking and dope, I don't do it except for a small amount of marijuana. And about 20 years ago I realised that in order to have self esteem I had to do things that I liked myself for doing, that I needed to focus on my own behaviour rather than that of others. And thats what I violated in trying to piss Freddie off. So anyrate, Ihope this explains a little.


Hello Freddy Hutter,

Thxs for the info update, much appreciated by me.  But, IMO, we need to be discussing and planning for the next fifty to one hundred years for the children of the world.  I think all TODers agree detritus entropy needs to be mitigated somehow by a paradigm shift to a less FF energy intensive lifestyle until biosolar powerup is a widespread success.

Recall my earlier posting whereby I suggested that tremendous benefits will accrue to an FF-exporting country that exerts maximum effort to adopt early biosolar living for its citizens.  Now I have never been to Russia, nor do I claim to have widespread understanding of Putin's power to leverage change.  But if he, and his successors, can basically dictate and impose a beneficial lifestyle change, facilitated by the tremendous inflow of capital flows from FF exports: it will greatly serve the Russian citizenry postPeak.

IF I was Putin, I would go whole hog to inform the population about Peakoil through the Russian MSM and the education system. I would explain how minimizing internal energy needs to keep FF exports as high as possible would be wildly profitable in the future.  In short, he might have the power to tell his people that Peakoil Denial is unacceptable; the country is headed in a new biosolar powerup direction, and punishment will be severe for those that resist planned detritus decline of MPP.

I would explain the need for mass-transit and walkable cities in the context of a typical Russian winter of sub-zero cold.  It makes no sense to replicate the American suburban sprawl of car-dependent lifestyles throughout Russia if mass-transit and RRs can be easily enhanced and financed.  Overall goal is to eliminate the need for snowplowing and/or de-icing of roads, but a much easier effort of just shoveling sidewalks leading to plentiful mass-transit stations that would not be affected by weather extremes.  If a diehard Russian carowner wants to take the time to deal with tire-chains and deep snow-drifts in the bitter cold, when a warm subway ride is just a short walk away--that is his choice.

Same with the material distribution infrastructure--optimize away from delivery trucks running in all directions over black ice roads when weather-immune underground and/or overhead conveyors and RRs could swiftly distribute the goods instead.  Putin could probably dictate earlier storage of larger inventories of essential goods to get away from JIT delivery problems during the winter too. Consider my earlier posting on a pricing floor on natgas to force conversion to stored fertilizer and/or insulation--Putin could easily dictate that requirement throughout Russia.

I think it would be great if he could dictate that pedal bicycles or battery-powered mopeds would be the primary way to see the summer countryside once one leaves the RR depot. For the winter vacationer it could be required use of cross-country skis and/or horse-drawn sleighs.

Same with housing:  Putin should dictate a massive retrofit and/or rebuild of all buildings to the highest eco-tech standards possible to save wasteful burning of FFs.  Why repeat in Russia what Kunstler is constantly warning us about in our current lifestyle?  Does Putin have the power to dictate a modicum of sq. footage per Russian--imagine how much energy Russia could save if no new eco-tech house or apartment in Russia was larger than 1200 sq. feet, with most much smaller?

Does Putin have the power to dictate to his country's engineers and designers to get this societal shift done ASAP?  If he does, then he not only does Russia a tremendous favor, but he will automatically force the world to adopt similar efficiency savings.  IF Russia can live a very comfortable lifestyle at the Bangladeshi equivalent usage of two cups of detritus/capita/day by max-leveraging biosolar powerup to maximize their export power, then it forces the rest of the world to try and match this efficiency level.  Otherwise Russia, as a swing producer, will keep consolidating much of the planet's wealth from those still stupidly dependent upon extravagant detritus exported by Russia.

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

You have nothing to thank Freddy and his acolytes for. All they produce is transparent nonsense and hollow rhetorical ploys. Your own contributions are far more valuable.
However, your suggestions about how to reorganise Russian society, while in some instances very worthwhile, are not likely be realised. Russia is also a  plutocracy, and while the presidency fortunately has considerable powers to safeguard national independence, they will not be used to override wholesale the demands of capital.
Another story on that mud volcano:

Families on Java island to be relocated

JAKARTA - Indonesia will resettle more than 3,000 families whose houses have been swamped by mud surging from a gas exploration site and will dump the sludge into the sea to avoid more destruction, the government said Wednesday.
I like this part of the mud volcano story:

Earlier Wednesday, protesters dumped a truckload of the mud outside the offices of Welfare Ministry Aburizal Bakrie to demand he do more to help the some 10,000 people displaced. Bakrie's family owns Lapindo.

"This is out of control and not enough is being done to stop it," said Emmy Hafild, executive director of Greenpeace Southeast Asia, the environmental group that held the protest. "Bakrie should not run away from his responsibilities."

Police did not try to stop the protesters from pouring about 1,540 pounds of mud on the sidewalk outside the ministry. Some of the demonstrators carried a banner saying "Stop your mud Mr. Bakrie or your mud will stop you!"

Bakrie, one of Indonesia's wealthiest businessmen, has been quoted as saying the mud flow was not his responsibility.

This guy Bakrie doesn't seem to see the irony in the fact that he's the "Welfare Minister"...  That's gotta be one messy sidewalk, though.

It is a natural phenomena. It goes with the territory: living in a highly tectonically active belt. It is the downside of living on one of the most fertile (volcanic) soils on the planet. It is toxic now,in a thousand years the crops will be really tasty.

This perfectly natural phenomena would have happened without drilling anyway. It would have worked to surface under its own pressure.

Its time people got a bit real about what the earth can do compared with what mankind can do.

Shit happens when you live in an active subduction zone.

There was another mention a couple of days ago on TOD to energy storage technology by EEStor, and I've been pondering the implications of this. It is presumably based on some sort of supercapacitor (or ultracapacitor). The technical challenges to using something like this to power a car must be daunting, but hopefully we'll see what they come up with.

Just as daunting, however, is the infrastructure needed for the intended use (personal transportation). In the CNN article referenced above, a claim is made for potentially charging a vehicle with $9 worth of electricity in 5 minutes. Examining this datum, in the least, clarifies the difficulty of replacing liquid hydrocarbon fuel with anything else for this purpose.

Assume 10 cents/kWh for electricity. This means that $9 worth has a total energy of 90kWh. To charge in one hour, you need 90 kW of power. Even more scary is that to charge the thing in 5 minutes, you need to deliver around 1 MW of power over that time. To "fill up" 1000 vehicles at once requires it's own nuclear power plant (GW). Apparently, there would be banks of similar capacitor storage devices at the charging stations, but they would eventually have to get there power from somewhere.

The other puzzle is, how do you even make the connection to the car? Power is amps times voltage. Starting with 1 MW, divide by any rational voltage, and tell me what wire is going to carry that current. I'm rewiring my house, and you need a beefy 6-gauge wire assembly to handle 50 amps, for example, an electric range. Any ideas?

The underlying issue is that the energy density (36 kWh/gallon) and the ease of transfer (e.g. pumping gas into your car at MW rates) of liquid fuel is hard to match.

I did a similar calc once that a one-minute charge was supplying a gigawatt or so.

FWIW, Clean Break has a new post on EEStor (seen in its rss feed):


Unfortunately that server seems to be wacked right now.

Recently, I've been getting two types of e-mails/comments about EEStor. One is from those who are itching to get more details about the company. All I can say is that I post the details as I learn them on this blog. I have no special insight beyond that. The other type of e-mail/comment is from engineer/science types who believe EEStor is a scam and seem to think that just talking about the company and its claims amount to some kind of crime.

For the record, I have my own healthy dose of skepticism with regards to this company and its claims. That said, I do think the jury is out until we learn more. This isn't a publicly traded company, so I'm not concerned that shareholders are getting ripped off. If a venture capitalist wants to invest in EEStor, then they'll have to do their own due diligence. If they get burned, well, that's their fault.

The point of the charging times this guy is claiming is that the bottleneck in recharging such a car will be in the grid, not the car.
Ultracapacitors and high voltage systems in cars bring safety concerns to mind. For a few years now, certain car manufacturers have been discussing boosting electrical systems to 40 volts to manage the growing electrical loads, especially in luxury cars. There's been opposition from first responders, who worry about a rescuer at an accident scene taking a serious shock from a short circuit or from cutting into the vehicle's wiring.

As it is, rescuers get specific training on responding to an accident scene involving a hybrid. The power supply in a Toyota Prius is 50kW at 500V, so 100 amps at 500 volts. If a rescuer cut into that improperly, he could receive a lethal shock. Short-circuiting an ultracapacitor might even be explosive.  

Mr. Khosla has been much in the news lately. In the upcoming issue of Wired, he again repeats the claim that it is twice as efficient to produce ethanol as it is to produce gasoline. However, when I pointed out his error, he said "energy balance is a silly question." He repeated this in a recent CNET News article, when the journalist asked about the exchanges here on The Oil Drum. So, it is a legitimate issue if he is claiming that it is more efficient to produce ethanol, but silly when someone points out that this isn't accurate.

Then, last night a reader sent me a copy of an article in WSJ. I don't have a link, but here are some excerpts:

Venture Firms Ignite Bitter Fight With Push for California Oil Tax

Oil companies "are ripping us off," says Mr. Khosla, who earned much of his wealth as a Kleiner Perkins partner and now runs Khosla Ventures. "There are cheaper alternatives to oil that they don't want us to have."

Right. Cheaper alternatives that they don't want us to have. That must explain why Shell is funding cellulosic ethanol producer Iogen, and almost all oil companies have alternative fuel ventures. Furthermore, as I have pointed out before, if ethanol is cheaper to make as Khosla has claimed, and yet the price is consistently higher than for gasoline, just who is ripping off whom here? Since ethanol producers are earning much fatter margins, it seems that they are doing more ripping off in this case.

Opponents argue that the measure would choke off oil companies' interest in developing new California fields, which could reduce property-tax revenue and lead to greater U.S. dependence on foreign oil. Mr. Khosla calls such arguments "scare-mongering." He says the tax, which will last a maximum of 10 years, likely wouldn't be in effect long enough to affect long-term production plans.

There is one thing you can say about Mr. Khosla. He never lets facts get in the way of his claims. I recently asked Ana Unruh Cohen, who helped write the legislation, the following two questions:

What happens if the proposition doesn't raise as much money as anticipated? Who pays the difference, and how?

She responded:

The royalty stays in place until the 4 billion is raised. The authority can borrow against that 4 billion to start funding programs immediately.

So, "a maximum of 10 years", eh? It would appear not. Of course this wouldn't be the first time Mr. Khosla has been guilty of exaggerating claims in order to argue his point.

It's a pitty all the discussion and effort you put in it had so little results. Well, not for you or I, but for Khosla. He can now definitely be labeled a cornucopian.

LOL @ "who is ripping whom off?"

Coleslaw must be auditioning for a regular spot on Fox.
Kudos for you, RR, for pursuing this.

Imagine if the world took Hirsh's advice  "the world should be spending $1 trillion per year developing alternative energy sources -- including tar sands, oil shale and gas liquefaction..." alone with other scams like ethanol "research" that would make people like Khosla truly rich.

I am reminded of the book "Cadilac Desert" which came out in the late 70s, filling in the sordid story of an out-of-control federal pork program that had already dammed every decent hydro site in the country, and was increasingly pouring vast quantities of concrete wherever there was a congressman who needed to provide jobs. Jimmy Carter threw all his power and prestige into trying to derail this machine, and the machine ran him over. Carter never recovered from this defeat.

The author, Marc Reisner, did an update in 1986, and disclosed that the dam program had suddenly died. Why? Because Reagan's tax cuts made this massive pork project untenable, and it fell apart.

So, Bush's bankrupting of the US treasury will have one unintended benefit; it will prevent future presidents from pouring hundreds of billions into destroying the Four Corners area in the vain hope of getting oil from shale oil. And it will greatly hobble federal attempts to subsidize Khosla's pipe dreams.  

If an energy idea is worth doing, investors will make it happen. If it's their money, they'll proceed with what works. Governments proceed with projects based on who wants money, not what works best.

My old line is to fund research, but not production.

IMO the big scams are on the production side.

There's oil shale in the four corners? I grew up in NM and don't recall that. I thought it was up in the Green River area in WY and CO. I know there's coal in NW New Mexico (and natural gas and uranium).

You are correct. Shale oil is along the Green and Colorado Rivers in east central Utah, west central Colorado, and sw Wyoming.

There are large deposits of coal centered around the four corners states, AZ, NM, CO and UT. There is a great deal of overlap.

Either of these would be greatly impact the water resources of the Colorado river basin, which includes all the major SW urban areas.

I greatly fear that as oil gets scarse, the rest of the country will act on Jimmy Carter's old recommendation and declare the entire area a "national sacrifice area" and go at it.

Robert -- doesn't Khosla really boil down to this?

$ $ $ $ $ $ $ $

Hypocrisy and lies in the worship of Mammon is nothing new.

best, Dave

It seems inevitable that we will be seeing a lot more of him in the near future. And Robert, you may well be dragged into that. Make sure you don't get pulled into playing his game. He's prepared, you helped him do that, he now knows much better what questions will be asked.

Sowing doubt and confusion will be a big part of his message. He's looking to get support from people who don't know the issues. If it boils down to his opinion vs yours, the most optimistic message wins. That's politics, and politics is the name of the game.

He jumps easily from positive EROEI to "silly question", no problem. That's how he plays, and most people are none the wiser.

I expanded on this a bit:

Dr. Jeckyll and Mr. Khosla

As I said at the end of the essay:

I harbor no personal animosity toward Mr. Khosla. I even support a number of his ideas. I just want to push him toward a more fact-based debate. I am very concerned about our energy policy, and making false or exaggerated claims in order to push a certain agenda is not my idea of how we should get to the root of which policies we should pursue.
Just a minor suggestion: It might help sway some people who are just learning about this topic if you didn't do the "Dr. Jeckyll and Mr. Khosla" thing.  That's perilously close to name calling, and it just invites people who disagree with you to resort to similar things.

You're arguing from facts, so the higher the standards of the exchange, the better for your side.

Just a minor suggestion: It might help sway some people who are just learning about this topic if you didn't do the "Dr. Jeckyll and Mr. Khosla" thing.  That's perilously close to name calling, and it just invites people who disagree with you to resort to similar things.

I actually considered a different title, but I wanted to clearly convey that he appears to have two completely different opinions, depending on who he is speaking with.

Priming the Pump -or, Gas Price Manipulation

People have been arguing lately about whether or not the price of oil is being manipulated. I have long thought that its not oil prices that are being manipulated but rather gas prices. Though like most people, I couldn't figure out a plausible scenario for how it could be done. But this guy, has come up with a fairly plausible one.

A couple of quotes:

Goldman Sachs [on July 12] tweaked the composition of their "benchmark" Goldman Sachs Commodity Index [GSCI].

Prior to Goldman's revision of the Goldman Sachs Commodity Index in July, unleaded gas accounted for 8.45% (dollar weighting) of the GSCI. Now unleaded gas is only 2.30%.

What this means folks, is that hedge funds and institutional money that "TRACKS THE INDEX" were FORCED TO SELL 75% of their gasoline futures to conform with the reconstituted GSCI. And if anyone hasn't noticed the timing of the price of the gasoline price collapse...just in time for November's Mid Term Elections!

If this doesn't make too much sense, I apologize. I am more than a bit hungover this morning. This is what I get for going out to bars on a weeknight! (Oh well, at least there were some cute girls there.)

How about a world suddenly awash in oil and oil products!
Latest numbers out today - unleaded gas up 6.9 mil barrels - crude up per API and distilates as well. If people quit buying - then they have to cut the price.
Every week it looks so much more like the 70's and the PO BS that went on then.
Prediction - just like the 70's - OPEC abandons their quotas and start pumping like crazy - flooding the markets with more oil than anyone can use.
Sure wish someone could find some charts an graphs from the 70's to see if the patterns match.
Ding, ding, ding! We have a winner.

You hit the nail on the head. I have been watching inventories build, and this is why gas prices are in free-fall. Supply is outpacing demand, and that situation is not sustainable for very long without prices starting to fall. When they fall to the point that margins shrink toward zero, you will see refineries start to cut back on production.

Of course there will still be a large segment who believe that the real reason for the free-fall is a secret phone call between Bush and the heads of the major oil companies.

Someone posted this link a few weeks ago.  It's pretty sobering reading.  You really have to wonder if we are in the early stages of a long anticipated--and dreaded--ferocious deflationary cycle.    


An excerpt from today's post:

A housing report from the New York Sun. "Veteran real estate broker Deanne Esses said eight people in her Upper East Side office on Madison Avenue are leaving their jobs for alternative careers. Those eight represent 20% of the office's sales staff."

"That's only the beginning. Ms. Esses said she thinks more New York City brokers will be leaving the scene. `Business here is just not quiet; it has dropped dead over the past few weeks,' she said. `At the same time, there's a flood of inventory on the market. We run open houses, we run advertisements, but nothing works. There are no buyers, and without buyers, there are no sales.'"

Another winner here too - there are more and more signs that the economy is slooooowing down. Mortgage aps were down 4.9% last eek even though rates are down. Consumers have leveraged themselves to the hilt - the toxic ARMs and Payment Option Arms are coming home to roost big time. Easiest place to cut back fast is driving the gas guzzler SUV.
As they say, perhaps the simplest explanation is the best.  A lot of Americans probably can't afford to buy gas, almost at any price.  We have been running a national negative savings rate for over a year.  A lot of households have probably just flat run out of money and credit.  They literally can't borrow any more money to maintain their SUV/Surbuban lifestyles.

Some West Coast stories:


"Brian is a Bay Area mortgage broker. `Michael' is his client. The payment on Michael's new home is $4,200 a month, but he only earns about $4,000 a month. He was only able to get the loan because his broker used 'stated income' to inflate his paycheck."

"Brian (the broker) said, `I put on the application that he made $13,000 a month, which was unverified ... That's the definition of a stated income loan. You state the income.'"

"One broker, `Dennis,' works for a mortgage company where he says a whopping 85 percent of loans are stated income. He says out of that 85 percent, they all have inflated numbers. `All of them, because that's why you're going stated.' Dennis added."

"But if it leads to getting their piece of the American dream, homebuyers must be happy, right? Not according to Beverly and Dwayne, two Bay Area homeowners. `Right now I'm living from paycheck to paycheck. I'm struggling with putting gas in my car just to get to work,' Beverly said."

Why on earth would he agree to a $4,200 monthly payment when he only makes $4,000/month?  I've heard of "house-poor," but that's ridiculous.
Deflationary cycles, like low tides, show what was previously hidden.
A rising tide (or river backwater) raises all boats(or barges)...

and as the tide/backwater then falls you see it just left a whole lot of cheesy trash on the banks. The boats are gone on downstream then to catch the next tide.

No one ever goes and cleans this trash up. They don't like to go near the moccasins or get their paws dirty. Those who try to farm in this litter are amazed. There is little of  value in plastic diapers,foam dinnerware and dirty tinsel.

Westexas- See if you can get a copy of C. Schwab "Investing Insights" Sept 21.(free subcription with paid investment services) Lead story "Housing ARMed and dangerous".  Article gives solid data that doesn't paint a rosy picture.  So much has been sown - time to reap! <sigh>
I've been reading those housing blogs for about a year.  I'm one of the people who has dropped links to them here at TOD in the past, but not the only one.

FWIW, one of the most disturbing things, and the most obvious signs of the impending bubble, was that mortgage companies have been lowering loan requirements steadily over that time.

But you're right, buyers need to be involved too.  Assuming that this is not some special case, and that they guy didn't expect some other windfall (a risky thing in itself) ... he seems to be a last-minute tulip buyer.

too much "greed" and not enough "fear" on his part.

...and how many people have borrowed against thier "increased equity" to spend it on stuff.  Has the latest economic boom been built on "fluff".  Peak debt was a header a while back wasn't it?
FWIW, somebody threw a number at me today ... that 7% of consumer spending (current spending?  last year's spending?) comes from home equity.
Because the realtors and lenders gave him solid assurances that his house would be worth 20% more within 2 yrs and that equity would be available to draw on. "You can't lose."

I had arguments in the past with realtor friends who firmly believed this and would propagate the myth.

This doesn't excuse the individual who took the risk from personal responsibility.

This is very weird. Every loan I have ever gotten had to backed up with pay stubs.  I can only guess he intended to flip it.
A lot of the mortgage disaster stories of late make that same claim: stated income, as in not checked with IRS records or much of anything else, is enough to get the home.
Theres a reason for this!  When Fannie Mae started buying up all the mortgages, banks flat didnt care about the quality, they wanted fees.  So they made it as easy as possible to qualify for them.  They flipped the portfolio to fannie mae and fannie mae assumes the risk.  This is how fannie mae now owns at least (probably more) $4T+ of the $12T in home assets.  WEll not owns since it's really debt.

So when these people start defaulting, how much will it take?  Deeath by a thousand cuts?

Let's take it one step further: why did Fannie Mae start buying up everything?

Was there a profit motive? Or, can we be more sinister, and was it an effort to facilitate handing out mortgages with every purchase of a box of Tide?

"an effort to facilitate handing out mortgages with every purchase of a box of Tide? "

I think it is called "Spreading the risk" or maybe collecting "Financial Cannon fodder."  

If I remember correctly, it was Feb 2002 that Greenspan gave a speech to bankers at a San Fran (I think?) convention in which he actually told them to lower their lending standards to let "the little guy" get a piece of the ameriKan dream.  Of course that was before the multitude of rate cuts had gained any traction and Greenspan was desperately seeking pallbearers.

We've hit Peak Financial Fodder and now there are not enough Fools being born every minute to sustain the charade.

Ah a way to insert $ into the economy...

As home prices flatten, a multibillion-dollar piggy bank running dry

But lower gas prices could be salvation:

Lower gas prices may take some of the sting out of the end of the housing boom. After peaking just over $3 a gallon in mid-July, gasoline prices have fallen to an average of about $2.38 as of this week - with further prices drops expected. In some parts of the country, pump prices have fallen back through the $2-a-gallon mark.

The savings to consumers have been sizable. American drivers save some $3.8 million a day for each penny in the drop of a gallon of gasoline, according to oil analyst Peter Beutel. That means consumers have saved more than $3 billion from falling pump prices in September alone.

Assuming 20mpg and 12,000 miles per year, that's about $39 per month.  .72/20mpg=$.036 savings per mile.  $.036 times 12,000=$432 per year.  $432/12=$39.  Some piggy bank.
Notice that the lower figures are only projections! Don't exclude the possiblity of another headlong plunge into the rate-cutting well by Bernanke.
I wonder if this was an ARM that reset?
Hard to say, but from reading the article...it sounds like they planned to re-finance right away, but got burned when interest rates went up and the property value did not.
Try reading this one.

Make sure to read # 7 if nothing else.

Eight Market Spins About Housing by Perma-Bull Spin-Doctors...And the Reality of the Coming Ugliest Housing Bust Ever....


Stated income loan is a euphemism for "loan based on lies".  Interesting concept; not used when I was growing up or for most of my adult life.
"Ding, ding, ding! We have a winner.

You hit the nail on the head."

So RR, you agree that "Peak Oil is BS" and there is no difference between this decade and the '70s?

I guess that means I should go out and buy that Hummer after all!

No, I agree with:

Latest numbers out today - unleaded gas up 6.9 mil barrels - crude up per API and distilates as well. If people quit buying - then they have to cut the price.

That is exactly correct, and what I have been arguing here for some time.

RR: Historically speaking, the USA is not awash in crude oil.Current inventory is 324.8 which is:

down 20% from 1991 (390)
down 14% from 1983 (370).

Note: current US oil consumption 37% higher than in 1983, 25% higher than in 1991.Current inventory level is approx the same as 2 years ago and the trend is clearly downward.http://www.apachecorp.com/Explore/Explore_Features/20060828/Topic_Report_Oil_Inventories_and_Prices/

Historically speaking, the USA is not awash in crude oil.

The more key issue at the moment is that we are awash in gasoline. That is putting downward pressure on gas prices. But we are pretty high on crude inventories compared to the past few years. Check recent inventories with respect to current inventories. You will see that we are pretty high. Comparing to a spike in 1991 is not really representative. Also, if I am not mistaken, prices started to collapse following that inventory build in 1991.

What still confuses me is the very low level of finished gasoline stock while blending components are on a clear rise. So I don't know if it is really correct to see the USA drowning in their gasoline stocks. Right, even the finished gasoline stock increased last week because of healthy finished gasoline imports. But can the imported gasoline levels stay that high (total finished gasoline imported is down this year over last year by about 20%) ? Or is there really an opportunity to import more at todays price level meaning that there is a lot of spare capacity for imports ?
I just checked gas imports per EIA
Jan thru Sept 2005: 260,071,000 Brl's
Jan thru Sept 2006: 314,587,000 Brl's
It don't look down 20% to me.
But that are the imports of total gas imports, not finished gas imports. I made an error however, total imports of finished gas for jan through Aug 2006 are down 6% from Jan to Aug 2005 (I cannot yet include September because the month isn't finished yet isn't it PaulusP ?).
RR: Looking at the linked graph and comparing to historical consumption, the USA currently has a lower crude oil inventory in terms of days of supply then at any time during the period 1982-1998. If we are somewhat awash, certainly not in comparison to the pre 1999 years.
I did a joint presentation with the head of research at Simmons & Company on Monday.  The gentleman with Simmons & Company had a great presentation, and he  had a very interesting slide, showing the rising sulphur content and falling API gravity of overall crude oil production.  The net result is a higher percentage of heavy, sour crude.  

As Apache pointed out in the post up the thread, no one tracks inventories on the basis of quality--light, sweet versus heavy, sour--but the spread between light, sweet and heavy, sour prices is quite a bit higher than in the past.

I have thought for a long time that building inventories of heavy, sour crude are obscuring flat to declining inventories of light, sweet crude.

Oh, that's right, that question still lingers: any chance the SPR is being filled with heavy sour, much cheaper, more available, and very politically useful?
Right now it's not being filled at all.
One would think that there would be clear specifications for input into the SPR.

Does anyone know if the process is publicly documented?

We should be able to put this speculation to rest one way or the other.

Is there a good article or something that explains the refining techniques and problems revolving around refining high sulphur oil?


OECD, which includes the US, crude stocks are at at ten year low as consumption is at at ten year high, and down 1 day's coverage, my guess is 50mmb, from last year.  So, in fact we are consuming more than we are getting out of the ground.  Regarding the US, commercial stocks would be about the same as last year if spr loans made last fall were repaid.
So, please explain to me if we have ample supply, the price of crude for the November contract is currently at $61.70?  

It's not really following the supply/demand scenario right now because I would expected a large fall in prices today.

The inventory report came in at 0.1 MM bbl draw of crude, compared to an expected draw of 1.7 MM bbl. That (and the gasoline build) means that supply is outstripping demand, which is the main reason prices have been falling.
But today...they haven't been falling...they've increased.  And with all this abundant supply of crude and refined product that the US possesses, why are we even above $60 a barrell.  Shouldn't this signal to the world that supply is not a problem.

There is no longer a terror premium, threat of hurricanes, there is geopolitical stability, the DOW is close to a record high...everything is peachy king.  

So, why the heck is oil not at $20/barrell?

The funny thing is, I just got out of a meeting where everyone was asking the same thing: Why on earth is the market up today? The only thing anyone could come up with was that OPEC has threatened to cut production, but someone pointed out that the market was up prior to this.
I think we all just need to admit that there is no information that we all have access to that explains the price moves.  I'd love to blame BushCo, but it could just be that the investment players decided to buy back into crude on a whim.
It appears that OPIS doesn't really know what's going on either in the market. From today's report:

Floor traders turned a blind eye to the bearish DOE statistics and flooded the trading pits with buy paper that sent crude oil up nearly $2. But the gains today could probably be more tied to euphoria in the financial markets and other commodities.

Gasoline also charged higher today even though stocks were up sharply buoyed by a sharp rebound in gasoline and components imports. This afternoon's big move to the upside was tied to reports of upcoming downtime at Sunoco's Philadelphia refiner, which could not be confirmed. In addition, and possibly even more telling is that commodities across the board had a strong day. Financial markets are having a solid day today as well, with a little less than an hour left in trading the Dow is making a run at an all- time high.

To expect further declines, you have to be banking on a severe US recession coming soon and spreading its contagion over the globe. Rightly or not, traders have turned away from those fears in the last couple of sessions. So no further declines for the oil price.
"`Business here is just not quiet; it has dropped dead over the past few weeks,' she said."

It usually take a month or two for stats to catch up with reality. I wonder if the bottom is falling out of the markets, even as we speak? (or read, I should say)

No facts, no figures, just a gut instinct:

1)    The Hurricane season never really took off this year, so no further damage to the GOM Infrastructure.
2)    Last years emergency buy-ins from Europe and SPR releases did not happen this year.
3)    Nigeria, though still hot did not become a nightmare (Unless you happen to live there)
4)    The KSA is still the KSA and not an Islamic republic
5)    Americans and Brits got hammered by high energy prices in the Winter both for heating and travel.
6)    Americans and Brits are looking at credit card statements and reigning in. (post summer vacation statements, and new school uniforms and course fees etc)
7)    Americans are facing a housing crash and theoretically disposable income (credit) is lessened. This is passing through quickly to all sales of all types of goods. Especially major transactions, like houses, cars etc.
8)    The Q405, Q106,Q206 Belt tightening is hitting now.

People are cutting back, feel less chirpy, spending less on fripperies.

Fuel consumption falls, inventory builds, no pinch points occur.

Why should not oil fall in price? ... for now.

It may even continue falling, (giving more ammo to the PO deniers), until, one day, the amount of supply cannot ever be ramped to meet a sudden surge in demand. Because of inexorable depletion of available flows of oil (forget reserve increases. ''Reserves'' are a wine cellar in somebody elses house)

It does not mean PO has gone away.  I have always been a strong believer in the bumpy plateau. Increasingly combined with sighs of relief followed by screams of terror, just like a roller coaster.

`'At first it is all `'oohs and aahs'' and then it is all running and screaming''.
-    Jurassic park. :-)

But I heard yesterday that the Conference Board's consumer confidence index was up this month!
I am thinking about buying stock in Alcoa - tin foil sales between now and Nov 7 should go thru the roof ;-)
Question: are inventories building because of falling consumption or because of increased gasoline production?
Or gasoline imports?

http://www.eia.doe.gov/pub/oil_gas/petroleum/data_publications/weekly_petroleum_status_report/curren t/txt/wpsr.txt

Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged nearly 1.5 million barrels per day, the fifth highest weekly average ever.

Which is nothing new.
The Energy Information Administration (EIA) estimates that roughly half the growth in U.S. gasoline demand since 1995 has been met by imports, primarily from Europe and the Caribbean.

But is seasonally adjusted gasoline consumption down? Before the recent price drop, people were commenting on how high prices were NOT affecting consumption in the short term. Earlier this year, Kaibab concluded that prices were not affecting consumption that much (google cache).

It should also be noted that the recent gasoline price swing is much larger than the oil price swing would seemingly warrant. Again, the reason might be the increase in imports of finished gas from Europe.

Here is comparison data going back a few years:

It seems that consumption patterns are more affected by seasons and restricted availability (70's shortages and rationing) than price swings. $4/gallon? $5/gallon? Maybe that would do it, but who knows. But it stands to reason that if you have consistent demand (with an increasing slope) and you are near the production limit (oil peak?), wild price swings will be the norm.

I have a slightly more recent page on oil inventories:

Weekly Petroleum Status Report

Or gasoline imports?

http://www.eia.doe.gov/pub/oil_gas/petroleum/data_publications/weekly_petroleum_status_report/curren t/txt/wpsr.txt

Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged nearly 1.5 million barrels per day, the fifth highest weekly average ever.

Hmm crude oil supply does not seem to have changed much.
I think refineries are finally not a bottle neck.

So this leaves demand destruction, we are probably already starting into recession it will just take a while to tally the numbers.

I wasnt around, but I thought it wasn't until the 80's that gas fell?  Or was it the late 70's?  I also remember the reason for quotas being abandoned was b/c of Reagan and his deelings with the King in SA.  Reagan asked for him to pump as much oil as possible to flood the market and the Russians couldnt make money from their oil and USSR collapses.  This obviously didnt happen until the 80's, so I'm a bit confused.
tate, its not you that's confused, but beechdriver. He seems to have forgotten that the US did peak in the 1970's. He also seems to think that short term market fluctuations some how disprove geology. Go figure.
You didn't notice the OPEC abandoned their quotas a year or more ago?
OPEC quotas haven't been real for two decades.  You mean to say we were reminded last year.
The quotas maintained oil prices the first 4 yrs of this decade. Their quotas, although exceeded, were in place and  clearly worked. The best evidence for this is how their production increased up to 2005 as they abandoned their quotas and used their excess capacity. About half the production growth since 2000 can be attributed to producing this excess capacity, which had been restrained from the market before by the quotas system. If you were watching the news and oil business during that time, as I was, it was clear that prices would have bottomed out in the years 2000 and 2001 if all had been produced. All the oil experts were expecting the quota system to break down and prices to go to the mid-low teens or lower (instead it remained in the high 20s most of the time). This didn't happen, as was repeatedly commented on, due to the surprising adherence to the quotas by OPEC. As noted, the producers did cheat as you can see from the old data, but they witheld a lot from market at the time. This was demonstrated in various ways, including the ME's ability to completely cover the lost Venezuelan production during the strike by using withheld capacity. They couldn't do that now.
Thanks for the history lesson.  No I wasn't paying attention back then, I was too worried about high school.
What a cordial reply!  
No I wasn't trying to be a smart ass, I was at work.  Seriosly I was being general about Opec quotas, and you're spot on so I'll add this new knowledge to the shelf.

Aside, I remember the strike you were talking about and how it caused a temporary spike, but it did moderate as SA came online.

I was actually sincere in my post, didn't think you were being a smart ass. People don't often respond in a positive way to a dissenting argument and I appreciated your being open to what I said.

Glad to have you and your contributions on board even if we don't wind up agreeing!

I would point out that gas prices didn't start to collapse until September, just in time for 1). The end of summer driving season; 2). The beginning of winter blends; and 3). A hurricane season that was much milder than was forecast.

In order to evaluate the validity of the scenario that you posted, I would have to know 1). How much money was "tracking the index"; 2). When selling actually took place; 3). How big an overall percentage this represented.

I asked the same questions yesterday, didn't really get much of an answer, lots of conspiracy theory rant. Seeing that Amaranth at a certain point held some 20% of gas futures is a bit of an indication perhaps. The graph below seems to show selling was almost immediate.
From yesterday:

I left in Kirby's words about the elections on purpose, and it works wonders, for conspiracy rants, doesn't it, but had I removed them, there would have been simple facts, or call them claims if you like:
  • Goldman Sachs revised its GSCI index on July 12
  • This forced hedge funds and institutions to sell 75% of their natgas futures
  • Gasoline prices started dropping soon after

Any serious comments should address these points. Everything else is just rant. Is it like he states, or not?
  • What is the value of those 75%?
  • Is it enough to influence the market to the extent the graphs seem to indicate?
  • Are there other factors, for instance other investors that have sold?

I have seen numerous theories about dropping gas prices, but none as clear and transparant as Kirby's. And that's why I posted this.
I can't comment on the GSCI, though it is at a minimum intriquing.

I can say that I doubt that George was involved in any phone calls with the heads of Chevron-Texaco, Devon, or for that matter Exxon, except of course to invite the former CEO to report on the "Peak Oil Theory".  George does other things.  Like read his lines.  Lately he's been traversing the country reading lines about how peace is breaking out in Iraq and the Middle East and how terrorism is on the run.
Karl, Dick and various lesser lights do phone calls.

If I wanted to take maximum advantage from a small and ultimately only marginally significant production test in the ultra deep GoM, which I conducted in the spring at the site of a two year old discovery, on behalf of a political formation, which I annually fund in the millions of dollars, I would wait until after Labor Day to make my announcement.  I would have flunkies throw out big numbers, since I know that most journalists stopped doing math as soon as academically possible and are challenged by notions such as probability.  I know from years of experience that I will be able to leverage the traditional end of driving season and winter gasoline trends.  I also know that the economy is slowing and that a slowing economy puts downward pressure on energy prices.  And of course I pray that God send the hurricanes somewhere else.  

Thus, as always, winners try to make their own luck, and count on some real luck for good measure.

One thing about conspirators is that they are sensitive to the possibility that they themselves will be victims of an opponent's conspiracy. Which is why George was given lines of outrage to read in 2000 about Bill abusing the SPR for political ends.

So Robert, you are not the only person to realize that gasoline prices are not set in 2006 by political or corporate edict.  But that doesn't mean that political operators and corporate heads don't conspire to influence short term pricing. What's at stake for some is access to multi-million dollar retirement packages unimpeded by windfall profit taxes and the like.  And for others possible prosecution for war crimes and corruption.

The conspiracy to fabricate a case for war on Iraq was not immediately apparent.  But in time it has become plain for most to see.  And in time I don't doubt we will begin to see the gameplan for retaking Congress in 2006.

Looka like you were drinking for more than one night.

See yesterday's Drumbeat for a lot more about Kirby and Goldman Sachs Commodity Index.

Ah the secret phone calls - "tweak it" ;-)
I posted this on Monday and didn't get any comments.

This is Rob's original article.


Does anyone have any good info on centralized farming and risks.  I'm writing a proposal that is due today and I'm having problems finding what I actually want to talk about.

I want to get at the risks associated to concentrating farming in the US and the supply chain risks associated to year round demand for bannanas.  I've found several articles on google scholar, but I can't really find any good stuff on the risks to agriculture and the larger consequences such as how GW, and depleted water tables are affecting growing.

Any help would be appreciated.

Maybe you can try to look for centralized farming in the sovjet era, "kolchoz" IIRC.
If you have access to the journal Nature, check VOL 418 (8) AUGUST 2002 for a series of articles with probably some good references.
It would be helpful if you were more specific, tate. For one thing banana's and US farming seem a tad disconnected.
There is soil depletion, ever increasing chemicals use, water depletion, US ag in the hands of 5 families, subsidies, pervasive spread of corn syrup, GMO crops and the money behind them, government interests, exports, crops vs livestock, it's a long long list.
I hate when sarcasm does transfer.  I was using bannanas as a product that isn't indigenous (i dont think) to the US, but we love the crap out of them. If not for other countries selling them to us, we wouldnt have them.  I just want to point out that these wont be here in the quantity or price that they currently enjoy.  

US AG in 5 families hands?  Can you point me where to find that info?

I'm trying to focus on risks associated to centralized agriculture and the supply chains necessary to make it possible.  I'm including depleted water tables which I will segway into Global Warming as the biggest threat.  I've also got some terrorist stuff to fill in some white space.  I'll make the necessary connections to failure of crops and what thay does to US food price levels.  I've got Plan B 2.0 on hold at the library.  Isn't this the book all about the agricutlure problems coming?

I was using bannanas as a product that isn't indigenous (i dont think) to the US

Well, there's Hawai`i, which is part of the U.S.  Bananas aren't strictly indiginous, likely being brought over by the ancient Polynesians, but they do grow there, and have for a long time.

Leanan, you make me think of a question I saw asked the other day, I think meant to make people be silent and wonder:

"Why does Hawaii have an Interstate Highgway System?"

Because we pay our taxes, dammit, and we deserve our share of the federal funding for highways.
Effective Congressmen (yes, all men) and Senators.
Because by definition Interstate Highways connect two or more Military installations/bases
They don't have to connect military bases (though the ones in Hawai`i do).  They are supposedly to have military and/or civil defense uses, though.  For example, overpasses on Interstates must be high enough for missile carriers to pass underneath.  

"Interstate" refers more to the funding than the highways.  The funding is pooled among the states.

Wondering why you(wahine?) spell Hawaii with the accent symbol or whaterver it is.

In the four years I was in Hawaii I thought the correct way to say it was Havahhhh eeee nnnaaahhh(phonetically that is).

Aloha nui nui

and No huhu...

airdale--Oahu and Pearl City Tavern(is the monkey bar still there?)

No, it moved here ;)
Wondering why you(wahine?) spell Hawaii with the accent symbol or whaterver it is.

That is considered the correct way to spell it these days.  From Wikipedia:

In Hawaiian-language newspapers published from 1834-1948, the spelling "Hawaii" was used. However, in texts written mainly for Hawaiian-language pedagogy, especially since 1950, the modern Hawaiian-language spelling used is Hawaiʻi, with an apostrophe or other similar character, such as an opening single quote, written between the final two vowels. The character represents a consonant, the glottal stop, in the Hawaiian language. Although not used and not needed by native speakers of Hawaiian for over 100 years, its use is appropriate in modern written Hawaiian.
Well you did answer the question but you basically dodged the real question.

Actually I dont' care one way or the other since at this the zanax I was just prescribed makes it moot anywy. When last I was in Hawaii (Ohau) TPTB decided to make it a state. At theim time I was sitting at the merry go round bar right on Wakiki Beach and while totally drunk I was at least lucid enough to realize that this was being shoved totallyh down the last few remaining true natives throats.

Now another paradise ruinded by the offal we call capitalist and entreapenurs of this great and stupid land of the 'haole round eyes'. So it goes. Soon at last it ends.

I did enjoy my time there 1957-1962 before it was despoiled.

I had once upon a time decided to return for  visit but knowning how it had changed I decided to keep my memories intact.

More of our world destroyed. What is next? ALL OF IT, and FAST AS POSSIBLE. Glad I will be exiting in 10,15 or so
If fact judging from the stange event this morning on the road that seperated my brain from my phsical body it may be even sooner. Funny , I almost welcomed it and did in face  refused the 9/11 ambulance.  I am wish skip the upcoming dieoff but somehow I would love the see the beginning , so as least I can say 'told you so"






The desire (and ability) to trade is not a phenomenom related to the Oil based economy.

Back in the 1800's they used to harvest Ice in New England, store it in large ice houses, and ship it down the coast (sail based transport) to points as far away as Cuba and Jamaica throughout the summer.

Point being - oil is not required for distant areas to trade goods.

While I won't disagree, they were shipping ICE because it was scarce and thus worth it.  If we are really getting out there, and talking about sail boats doing the shipping; how many will it take to ship enough bannanas to the 300M+ people in the US?  I would think bannanas aren't high on the list, therefore my point is not that you won't have the ability to buy, but becuase of increasing scarcity the price will rise and become a luxury food item.  

The bannanas are like a whole paragraph maybe, of my 6 pages I need.  The real focus is the problems with american agriculture in terms of depleted water tables and GW.  I'm also trying to find the source for stats on how many calories of energy it takes to farm 1 calorie and how many miles the average food travels.  The high use of fertizlizers based on NG, would also be helpful.  I've got 50+ page of articles and acedemic papers and only a handful have any real meat on these issues.

People around here talk about it all the time, but I don't know where anyone gets their info to substantiate it, so maybe I'm calling BS on some, but I would love to get that info to help me out.

google "pimentel", plus maybe "dieoff", the site has a lot of Pimentel papers
he is the one who said it takes 10 calories to grow one

"patzek" has written a lot on it too

Eating fossil fuels by Pfeiffer is still online at FromThe Wilderness.com, ver useful for numbers

Downloaded and printed!  Thanks for the pimentel tip!

True that bananas will probably be low on the list.  But if they're scarce, that means you can charge more for them, making it more plausible that someone will round up the capital to try and get some delivered.

Then I guess it becomes a matter of if there's a market for them at the price it costs to get them here.

It's crazy to think that they are grown far away (Ecuador, Costa Rica, Columbia), shippped to the US, and still cost less then 20cents each.

Containerization AND super cheap labor.  I've read essays and how Starbucks is so dominant and part of it stems from their efforts at tying up the bean market at the farms with sweet incentives to grow exclusively for them.  They pay slightly above market rates, but barely.  

You should read Lester R. Brown. Perhaps google him. He wrote Plan B 2.0. Lot's of stuff in there about agriculture, water tables, global warming.

Kinda makes me feel like a realist.

Tom Anderson-Brown

Tate, about that ownership issue:

Families: Perdue, Cargill are privately held, Tyson as well I think. It's been a while since i focused on it, got to dig.

Recent mergers:

Hefferman: Concentration in US agriculture

Concentration af Agricultural Markets-PDF

The Corruption of American Agriculture-PDF

"For every $1 of profits earned by ADM's corn sweetener and ethanol operations, taxpayers contribute $10 and $30 respectively."

AWESOME LINKS!  I knew some people around here had the goods.  These are from MO authors and schools.  Nice to know they are contributing somehow.  I think it might take a while to get through the 53 pages of the first one though.  

I've got both Lester Brown books reserved to be picked up asap.  This should be a snap now that I've got the knowledge to draw from.

Besides Plan B: Rescuing a Planet Under Stress and a Civilization in Trouble, Lester Brown also wrote
Outgrowing the Earth: The Food Security Challenge in an Age of Falling Water Tables and Rising Temperatures

Both of these are downloadable in pdf chapters.

I reserved the latter book.  Thanks for the direction.
US AG in 5 families hands?

Continental Grain

Read "The Merchants of Grain"
Can't remember now who wrote it though ..

Triff ..

My bad  .. Cargill ..
We're getting somewhere, but not quite where we want.

Those are companies, not (all) familes

Cargill is not a family, it's owned by a McMillan family.
Continental aboviously is not a family.
Bunge may be.

The book mentions 5 companies and 7 families. Can't find a proper review just yet.

We'll keep searching.

Closing in, a 1988 article by Brian Ahlberg:
(the article tells a lot about these firms' political influence, good information, but no space here)


The world's grain trade has long been dominated by a handful of privately held corporations, historically referred to as the Big Five. The five have recently been joined by a large public corporation, Mitsui/Cook of Japan, to form the "big league" firms--or Big Six--that handle about 85 percent of the world's grain trade.

Completing the original Big Five after Cargill and Continental (based in New York and run by the Fribourg family) are: Louis Dreyfus, controlled by the French family of that name; Andre/Garnac, likewise named after its Swiss family owners; and Brazil's Bunge and Born, which is controlled and operated by the Hirsch and Born families.

Seven families and one Japanese conglomerate essentially run the international grain trade.

And some more on Cargill, the biggest of them all:
(Now Cargill/Monsanto, not unimportant, see GMO seeds)

Cargill is often its own best customer. Not only does the company mine phosphates and produce nitrogen for fertilizers sold to grain farmers, it also designs seeds for the grain it will later buy and sell.

And after grain passes through the appropriate portions of Cargill's vast system of elevators, terminals, barges, trains and ocean vessels, it most often ends up being fed to animals--another specialty of Cargill, which is heavily involved in both feed grain processing and the slaughter, processing and packaging of beef, poultry and pork. Cargill has grown outside of agribusiness as well, acquiring salt-mining, steel-milling and even oil pipeline interests.

In 1987 Forbes magazine ranked Cargill the country's largest private corporation for the third year in a row. (A company is considered private either because it has too few shareholders to file reports with the Securities and Exchange Commission, or simply because it does not offer public stock.) According to a 1986 company prospectus,

Cargill's $2.6 billion in shareholder equity was divided among fewer than 50 descendants of the original company founders--many still living in Minnesota and named Cargill or MacMillan--and fewer than 450 current members of management. The company offers no public stock.

Cargill's annual sales in excess of $32 billion make it 50 percent bigger than the second largest private U.S. firm, Safeway, which enjoyed $20.3 billion in 1986 revenues. Cargill is more than twice as large as third place Continental Grain. All three are exceptional: only 106 of the country's approximately 7 million private companies had 1986 sales over $1 billion, according to Forbes.

The country's 10,000 public companies, by comparison, are much larger. The combined 1986 sales of the top 400 publicly traded companies amounted to more than five times those of the top 400 privates. Cargill's sales, nonetheless, would have placed the company at number 8 among 1987's Fortune 500 largest industrial corporations--between AT&T and Texaco.

Wow, excellent data!  Thanks for the finds and I've printed everything out suggested.  I'll probably dig into it over the weekend.  This should be interesting.
With its recent acquistion of Georgia Pacific Koch Industries in Wichita, Kansas is now the largest private corporation in the U.S. surpassing Cargill.  Koch which made their money due to patents for oil extraction, pipelines, and production has recently divested a chunk of those type of assets including a large chunk of oil sands land in Canada my guess is they needed some cash to fund the acquistion.
As for ADM and Bunge both are publically traded and I believe the families own less that 20% still significant but not as much as in the past.  You get to the third or forth generation and most of the trust fund babies just want to live the life of leisure and not getting their hands dirty with running these companies.  For what its worth I have worked with both ADM and Cargill of and on for 30 years and find the people at Cargill to conduct their business with the highest level of integrity.  
This is about the spinach problem in the US. Hope it helps.

The Truth Behind the Spinach Scare: Cheap Beef

Nat Gas in free fall again today - right now down 0.22 to $4.31.
Anyone out there in the utility industry know what the price point is for Nat Gas that would make it cheaper to use than coal for electric production?
Yeah, they dont need to store nat gas.  I bet it costs more to store some of it than simply selling now.  It's not warm/cold all over the country.  We've been resting the AC, but it's still warm during the middle of the day.
I am so glad that I did not lock in my Nat Gas rates. I would have been screwed royally. Wasn't it M. Simmons who was telling everyone they needed to lock their rates?
Simmons had a good idea, just a little early. Now lokks like a great time to lock in your rates as I suspect they will be headed north after November 7. Of course, I could be wrong about that, the advice is generally worth what you pay for it.
I am so glad that I believe in being in things for the long haul, not the extremely short term.
I must post about the threat to one of my favorite places in the world, the Lockwood Valley/Mt. Pinos area in the Cal mountains north of LA.  The Day fire has spread into Lockwood Valley today, very sad.  I lived for a couple of years at Pine Mountain Club, on the side of Mt Pinos with a view of a valley that is the San Andreas Fault.  Hmmm...  But anyway, Mt Pinos has an easy drive to a large parking lot at around 8200' elevation where all the area amateur astronomers gather on new moon weekends.  I have spent many wonderful nights there, I'm back in NH now and I miss it.  There are a sometimes over a hundred scopes set up, and some big stuff, 25", sometimes up to 36" scopes.  Mirror diameters.  You have to climb up 10ft. on a stepladder to get to the eyepiece.  In the dark.  Peering at the universe...
So I hope they get that fire out.  The parking lot is surrounded by lovely old pine forests, with a little meadow that is the prettiest thing you've ever seen.  There are some past astronomer's ashes scattered there.  I hope it's spared.
I have a question, what % of oil is sold on spot market as opposed to be locked into long term contracts?

From the article Economists on Climate Change

Robert Mendelsohn, professor at the Yale School of Forestry and Environmental Studies, argues that such negative costs may still be less than the benefits.

He sees a net global warming bonus in the near-term, as higher farming yields in northern countries offsets damage elsewhere, especially in Africa.

"In that sense it doesn't make sense to spend money right now," Mendelsohn said, adding that beyond 2050 and a 2 degrees celsius rise the damage and need for action grows.

He added that he does not cost species extinctions and health effects, and only crudely measures the cost of island inundations.

Mendelsohn probably puts killing off Africa in the plus column because northern whites are simply worth more. David Neiwert writes in "The Rise of Pseudo Fascism" that we are not in the grips of fascism because there is no overt violence. There is no overt violence in killing off the inhabitants of a continent (or several); they just can't compete.

cfm in Gray, ME

Climate change models have long predicted a 'supercooling' Antarctic stratosphere

Ozone hole could reach record size

Dr Paul Fraser from the CSIRO says the lowest temperatures ever recorded in Antarctica's upper stratosphere this winter - minus 85 degrees - are the cause.

"It's certainly the coldest we have ever seen and it requires very cold temperatures to get very significant ozone depletion," Dr Fraser said.

"So on the basis of the very low temperatures that we have in and above Antarctica at the present, that's one possibility indicating that this year's ozone hole could be the biggest ever."

Even as the chlorine level goes down in the stratosphere, there is increasing water concentration and a decreasing temperature trend in high latitude southern hemisphere winter.  This is leading to an increase in polar stratospheric cloud formation (the ice cloud part requires T < 188 K).  This is yielding a larger surface area for heterogeneous formation of chlorine monoxide.  But eventually the chlorine decline will overwhelm this effect and the ozone will return to normal.

Some of the models show that we are going to experience an ozone hole recovery stall due to the effect I outline above.  But the key is chlorine and that is showing a persistent decline.

who ownes the west, oil and & gas leases:


As was suggested yesterday, low natural gas prices might cause some major producers to shut in production.

Chesapeake just announced shutting in production of 6%

Chesapeake is a mid-sized independent, not a major, Nate. The thing that surprises me is that Chesapeake is highly leveraged (has a heck of a lot of money borrowed) and I wonder if their bonds and production payments are in danger.
  Chesapeake just paid $10,000 an acre for a lease on the Dallas-Fort Worth International Airport. Wonder how long they have to start drilling? Anybody know the terms more exactly?
Chesapeake is the 5th largest producer of US natural gas behind BP, COP, XOM and CHV.
they also employ 10% of the land rigs in the US, which is why this news is a big deal
Nate, you're right, Chesapeake is huge domesticially, and I expect they will cut back on their "unconventional " gas. I'm worried about exploration while the US business has a sea-change. That's how I make my living.
  What it really shows is how the Majors have abandoned onshore production. They've been selling off production for years as they can't support office towers full of accountans on stripper production, and they see the politics as too difficult.
   Howsomever sir, pipelines make the decision on how much gas they will buy, not producers on how much they will produce. Take or pay contracts ended about 25 years ago and nearly bankrupted the pipelines. I wonder if this cut is general? I haven't heard.
Why oil is back above $63?
khebab, to correctly answer that, Id have to know why it went below $60 in the first place.
Hmmm...excellent question...and a jump even though we are "awash" in crude and refined products.

Wonder if the hedge funds that were investing in NG have now decided to get back in the crude oil game.

The demand destruction question is the biggest mystery to me. I realize that there was a temporary pullback in gasoline consumption last September, but EIA's weekly report shows that consumption increased of 3.8% versus a year ago, which seems excessive and inconsistent with the growing body of anecdotal evidence suggesting that an economic slowdown is underway. I presume this figure will be revised, but even if it's cut in half, it still reflects an economy that is growing, not contracting.

Query: why are all these gasoline imports flooding into the USA when demand is supposedly declining and refineries are operating at nearly full capacity?

Huge build in inventories versus predictions of petroleum imports dropping by 6% in 2006, theories of declining gasoline demand versus a galloping increase reporterd by EIA, I fear my head may never stop spinning.

I have a feeling that SAT is probably getting in good a laugh at the expense of the rest of us.  What the hell, I'll take it anyway.  
From This Week in Petroleum Sept. 27, 2006:

A Brief Note on Year-Ago Demand Comparisons

EIA supply data for the four weeks ending September 22, released earlier today, showed that gasoline product supplied (a proxy for demand) was up 3.8 percent compared to the same four-week period last year. However, it is important to remember that last year's demand data were significantly affected by Hurricane Katrina, making demand this year seem greater in comparison than it would otherwise. Thus, any oil demand comparisons to last year over the next few weeks may seem somewhat larger than typical or expected, due to the effect last year's hurricanes had in dampening demand temporarily.

If you can find the increase (decrease) in demand from 2005 to 2004 for the corresponding week in September, then calculate the increase (decrease) in demand from 2004 to 2006, then annualize that, you might get a better idea of the underlying increase in demand. My guess is that there will be a decrease from 2004 to 2005 due to the hurricanes, and when that is combined with the 3.8% increase reported today, you will get an annualized increase somewhere in the range of 1-2%.

From today's This Week in Petroleum (Sept. 27, 2006):

Over the last four weeks, motor gasoline demand has averaged nearly 9.4 million barrels per day, or 3.8 percent above the same period last year.

From last year's This Week in Petroleum (Sept. 28, 2005):

Over the last four weeks, motor gasoline demand has averaged over 8.8 million barrels per day, or 2.8 percent below the same period last year.

From 2004's This Week in Petroleum (Sept. 29, 2004):

Motor gasoline demand over the last four weeks has averaged nearly 9.2 million barrels per day, or 1.6 percent above the same period last year.

This shows a rise in demand from 9.2 to 9.4 mbd, or about a 2.2% increase over two years which corresponds to a 1.1% increase per year. Note that this is less than the 1.6% increase reported from 2003 to 2004, so a very tentative presumption is that demand growth is decelerating.

Well, OPEC has had enough, they are starting to talk the talk.

From Bloomberg :

OPEC President Edmund Daukoru wants action to be taken to prevent a further decline in the crude oil price, Reuters said, citing an interview yesterday in Abuja, Nigeria. The group agreed this month to leave its members' production targets unchanged. Prices also rose on signs that an Energy Department report today will show that U.S. oil supplies fell last week.

I wonder what it will be when they are going to walk the walk.


Lowest in the country I do believe....$1.80

That is good. Kroger here in NE Atlanta is at $2.06 point 9 today.
I just hear a radio announcer announcing it at $1.98 in my city of STL.
Re: Greenspan's comments
  Big Al is a retired Guru. Unless a prophet is killed in his prime or physicially asends to the heavenly realms, most of his later pronouncements are ignored. Too bad the slut didn't speak out for energy security and higher taxes when he still had a little power.
you're too tough. everybody remembers the blue dress, but you might have forgotten he did propose a gas tax.  Had he spoken out a bit less he might have gotten elected. Maybe other politicians have noticed the results of his efforts.

Below is a graph of weekly spot oil prices from January 2001 to September 15, 2006. The recent price decline, while large, still doesn't impact the overall trend very much. And when displayed like this you see the year over year price increases very clearly. What sounds like a good deal today was yesterday's misery. Also note that the price drops are common at this time of the year in the past and that future increases should be expected late next spring and early summer. If the changes remain of the same magnitude as prior changes this would place next summer's spot prices in the high $70 to low $80 range.

The big variable will be the impact of the megaprojects all due to start coming online this year through 2010. So far there is no sign that these projects are doing more than offsetting current declines. Growth is non-existent. According to the latest Oil Market Report from the IEA, global demand remains between 84 and 85 mbpd. The current drop in price should test the cornucopians nicely. With lowered prices should come increased demand. If there is excess capacity, then prices will stay down but if not, we'll enter another round of Westexas' bidding cycles. Since I see no evidence of increased capacity, I will continue to expect another round of bidding wars to again drive oil up through the late fall into early winter.

did you do that yourself? if so, how?
Looks like a document created from Open Office's Excel equivilent.  It can do some pretty nice graphs, and whatnot.
Open Office's Spreadsheet component. Open Office is a very nice office suite and it's free. You have the option of donating if you choose, which I recommend. You can make a donation that makes sense to you economically while supporting access to software that lets you work without dozens of legal restrictions tied around your neck. Plus the saved documents tend to be far smaller than M$ bloatware documents.

OpenOffice.org, an open source multilingual, multiplatform office suite.

Just use the "3-D area chart" option in Excel. Or equivalent in OpenOffice Calc. I couldn't find 3-D effect in Calc. GreyZone might be able to help with that.
Two accurate statements about oil prices:

Oil is down about 20% from recent highs.

Oil is up over 500% from the 1999 low of about $10.  

The 1999 low occurred just when the Economist Magazine predicted the onset of permanent $5 oil prices.  An excerpt from a Golden Oldie, the 1999 Economist article follows.  Note that oil prices are currently more than 1,000% above the Economist Magazine's predicted lower range for "Normal" oil prices.


Yet here is a thought: $10 might actually be too optimistic. We may be heading for $5. Thanks to new technology and productivity gains, you might expect the price of oil, like that of most other commodities, to fall slowly over the years. Judging by the oil market in the pre-OPEC era, a "normal" market price might now be in the $5-10 range. Factor in the current slow growth of the world economy and the normal price drops to the bottom of that range.
A little memory is a good thing. I heard somebody from The Economist on NPR's Morning Edition. He was handing down the received wisdom. I was only half-listening, but I only counted 3 or 4 mistakes in what he said as I was browsing the New York Times. For example, he told me that Saudi Arabia is the biggest producer in the world -- it is Russia -- and then told me all about their spare capacity. But I couldn't find that spare capacity or any weapons of mass destruction either. I looked all over the house and even went outside. No spare capacity anywhere I looked. Perhaps it is elsewhere. Like on Saturn's moon Titan but I didn't look there.

All things considered -- no pun intended! -- his performance wasn't too bad, really, for somebody from The Economist. To be fair, he did say that supply & demand remained tight. Give that man a Gold Star.

Oh, look! We're almost at $63/barrel today. Looks like $60 was the bounce (floor) price. I hope SAT got the "buy" signal.

I had thought it might go down further based on what appeared to be a herd-like bearish frenzy. Nope. Oh, that wacky oil market!

I think that oil prices bounced because oil traders saw Khebab's logarithmic oil price chart.  Only half kidding, after spending some time with some investment banker types, I think that Khebab's stuff--and The Oil Drum in general--are pretty closely followed.
I've gotten e-mails from financial analysts working for some prestigious firms. They could not comment publicly but agreed with my view (originally from Stuart) that oil prices have not been in a bubble.

Lots of people read The Oil Drum. We just don't know who if they don't comment or contact us confidentially. Khebab's work is outstanding, of course.

I did make some remarks about the timing of this oil price crash -- it has seemed suspicious to me on the eve of an election. Manipulating the markets has a long and inglorious history. But again, people have short memories, as the great John Kenneth Galbraith used to emphasize. It would be easy, for example, to create a hedge/pension fund stampede out the oil markets by getting a few big players to withdraw. Most humans are malleable and go whichever the wind is blowing. Therefore they are subject to manipulation.

But in the end, the fundamentals will win out the way they always do. And the fundamentals support the peak oil position. From here on out, as the years pass, they always will.

Our buddy Mike Lynch was on CNBC this afternoon predicting that oil prices would fall to $45 within 90 days.
he must have been reading tea leaves from his tea cup.
Almost in time for Christmas. Not the lower price, but rather when the latest turkey will be done.
Like I was saying further up, none of us (I assume) have enough data available to understand why prices are going up and down in the short term, not even Robert.  It could be many things; hedge funds, collusion amongst companies, mass hysteria, a butterfly flapping it's wings in the Tropics.

The main question I keep going back to and need to ask the Cornucopians to explain is...Why is oil still over $60 in the absence of any bad news?

Is it merely because Saudi Arabia says they don't want crude to go below $60?  Why $60 if they are going to have so much EXTRA capacity in the future?  The ONLY reason I can think of is that the cost of extracting that oil has gone up.

I'm sorry, I can't help it...

Re: data available to understand why prices are going up and down in the short term, not even Robert...

No disrespect to Robert -- who, to my knowledge, has not written about oil prices. Do you even fucking read what I write?

-- Dave

What do you mean Robert doesn't talk about oil prices...wasn't he the one saying he was in meetings discussing that very thing?

Do you even fucking read what I write?  Is this addressed to me or Robert?

BTW for those that care...oil has boinked up over $63 tonight.  Gasoline almost up to $1.54 (add $0.50 for retail here in Missouri).
There is no way that a person could attentively read everything written on TOD without being totally obsessive and/or making it a full-time occupation.  Even just to skim everything can quickly become unjustifiably time-consuming in light of the other demands on our time that we all have.

Just consider that INDIVIDUAL THREADS regularly attain the length of short books (150+ pages if you were to print them out), especially when they get beyond 300+ posts.

Sorry - this was meant to be a reply to Dave's post, not Dragonfly's.
I'm glad I bought in on Monday, then. Only a small portion, but still...thanks Dave and TOD.
Speaking of lots of people reading TOD, this article appears to have been a fleshed out version of what we've been discussing here for the last several days.  I guess people are checking us out.

Gas is down - go back to sleep
by Kelpie Wilson


Looks like the respected Mr. Tom Whipple has been brushing up at TOD as well:

The Peak Oil Crisis: The Perfect Storm


Oh, I still think we'll get another lower-low or two before we hit bottom.

It's the equities market that's been giving me headaches.

I've believed for a number of years that the market's performance has ultimately been tied to the price of oil.

I know that the DOW is near record, but I also view it as a dinosaur. I usually like to average it with the S&P, Nasdaq, and certain Russel combinations to get a more balanced picture.

I personally believe that we need to have oil sustain below $50 for a while before we see sustained upward movement in the market. No predictions. Just a gut feel.

Biden Measure Barring Permanent U.S. Bases in Iraq

Yesterday, House and Senate conferees accepted an amendment to the FY07 Defense Appropriations Bill proposed by Senator Joseph Biden (D-DE) that bars the construction of permanent U.S. military bases in Iraq and American control of Iraq's oil, a key step toward the measure's becoming law.

Although Biden had successfully attached the provision to three different pieces of legislation in the past, until yesterday, it had never been reported out of conference committee. The bill is likely to be taken up by both houses of Congress this week.[..]

According to a recent University of Maryland poll, 80 percent of Iraqis (and 92 percent of Sunni Arabs in Iraq) believe that the U.S. intends to have a permanent military presence in their country, thereby contributing to the violence against American military personnel.

Haven't seen the exact wording that bars US control of Iraq oil. Sounds interesting. Did see this though:

IRAQ: Law to allow Big Oil takeover

"We need to change the way we run the oil sector in Iraq. We need to engage with the major oil companies who will bring in investment as well as technology", Barham Saleh, deputy PM [of the] Iraqi government, told journalists on the sidelines of a September 10 US-led International Compact for Iraq conference in the United Arab Emirates

Needless to say, the Biden amendment runs counter to many of the plans that are on the table. It seems the political battle will be over the difference between "enduring presence" and "enduring access". Hey, you don't like the word permanent? No problem! What's in a name?

Still, this gem is worth quoting:

Iraq's US/UK Permanent Bases : Intentional Obfuscation

In the summer of 2005, a Kuwaiti firm was `awarded' the $592 million contract for the new US embassy in Baghdad, to be completed by 2007. Built to withstand attack, this Ozymandius on the Tigris, composed of a cluster of 21 buildings, will have "a gym, swimming pool, barber and beauty shops, a food court and a commissary. In addition to the main embassy buildings, there will be a large-scale US Marine barracks, a school, locker rooms, a warehouse, a vehicle maintenance garage, and six apartment buildings with a total of 619 one-bedroom units. Water, electricity and sewage treatment plants will all be independent from Baghdad's city utilities. The total site will be two-thirds the area of the National Mall in Washington, DC." It will be the largest US embassy in the world.

Define permanent, or temporary.  1 year?  10 Years?  50 Years?

Language such as that leaves so much available in the way of loopholes.

Also language such as that is extremely short sighted and completely idiotic.  And I'm not picking on Biden just because of that, I actually liked his suggestion of splitting Iraq into 3 provinces.

But what happens if tomorrow, the Chinese become aggressors to the Middle East.  What if we then need "permanent" bases in Iraq, similar to the arrangement we had in Europe to counter Soviet aggression?  Langauge like that is symbolic at best, and bad law at worst.

Just a wild-hair guess, but I think "permanent" can be defined as the moment the Iraqi oil fields decline to stripper production
I think replacing "permanent" with "enduring" is the tell-all one. It lasts, but not forever. And the next step is replacing "enduring presence" with "enduring access". We're there, but we're not really there, we could be there though. And absolutely not to stay. It's a pretty clever use of words, but of course, if you're the GOP, and certainly when you're in The White House, you can afford the best PR people in the world. Words can be spun to convince you that black is white.

It does leave me wondering what the meaning is of "Operation Enduring Freedom." How long they intend that to last. Not permanently, I'd guess.

And the 14 permanent bases ALREADY built there... those going to the Iraqis then?
It's all in there somewhere, there were 100-something, they got rid of a few, but will stay in more than just those 14 for the foreseeable future. They still have palaces and whatnot, but will withdraw at some point to these fortresses (2,5 times normal strength, I understand), which will hold 10's of 1000's of troops.
I try to keep the posts at an acceptable length.
Balad Airbase is home to 20,000 US troops, 1000s of civilians, 250 aircraft and Combined Joint Spec Ops Task Force.  15 square miles in size, Balad is one of the busiest airports in the world serving 27,500 aircraft a month!.  With named streets, a Burger King, Pizza Hut, Subway, cyber cafe, rec center, full movie theater, indoor/outdoor pools and even mini-golf, Balad is one of 4 designated US Super Bases in the Iraq theatre.

So I ask again...  When exactly will the Iraqis be given this facility?

Hello TODers,

Mexico update time.  As desperately poor as the average Oaxacan is, nonetheless, detritus panic is setting in as social polarization is rapidly culminating, as evidenced by this Reuters article.  Stratfor suggests the current Oaxacan Gov is asking for lame-duck Presidente' Fox to use the Federales' to crush the resistance to restore his former ruling Gov power. It boils down to whether Fox has the cojones to solve the issue, or whether he just wants to pass the whole stinking mess to Calderon when he takes office in Dec.

And as usual, our US topdogs can't resist stirring up the Mexican hornet's nest.  Consider SOS Condi Rice's choice words:

MEXICO CITY - The office of President Vicente Fox on Wednesday took offense at U.S. Secretary of State Condoleezza Rice's suggestion that Mexico looks ready to embrace bipartisan politics, saying it wasn't up to her to voice such opinions publicly.

During the Wall Street Journal interview, Rice indirectly endorsed Calderon, saying Mexico "had a very close election where the loser - you know, admittedly, the good guy won in a sense, but the loser wanted to take it to the streets."

"And he got," she said, "it looks like he's gotten encircled and contained."
The poor Mexicans won't be happy to read this, but the Bankers' Alliance will be.

A final note: indigenous tribes took over a dam and cutoff the water supply to the downstream cities in Veracruz State, but heavy rains flooding the rivers may have blunted the impact of this political action for now.

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

Hello TODers,

One final Mexico addition before I go to bed.  Platts says Pemex faces dilemma over calls for new refineries in Mexico:
....... With crude production having reached a plateau, or perhaps even a decline in future, "there's no two ways
about it," he says. Any increase in refining capacity that could bring Mexico close to self-sufficiency will inevitably lead to a drop in crude exports "and nobody seems prepared to admit that."
Bob Shaw in Phx,Az  Are Humans Smarter than Yeast?

Hello TODers,

I hope they were able to warn some people.
SYDNEY (Reuters) - A strong earthquake with a magnitude of up to 7.0 near the remote Samoa islands group in the South Pacific had generated a tsunami, the Pacific Tsunami Warning Center said on Thursday.

"Sea level readings indicate a tsunami was generated. It may have been destructive along coasts near the earthquake epicenter," the Hawaii-based warning center said on its Web site (www.prh.noaa.gov/ptwc/).
Bob Shaw in Phx,Az  Are Humans Smarter than Yeast?

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