DrumBeat: May 19, 2006

Now for some wise words from the readers of The Oil Drum...
I have written a Peak Oil Primer for OmniNerd.com. I have been working on it for a month. It is highly referenced (77 references!), and written from an objective viewpoint. I present both sides, and run down all of the potential alternatives. The article is:

What You Need to Know about Peak Oil

Have a look and tell me what you think. On "Web Based Resources" at the end, The Oil Drum and LATOC are both listed. In hindsight, I should have gone into more detail on tar sands. In the case of each alternative, I tried to present the pros and cons. By the time I got around to tar sands, I was rushing a bit and didn't really go into the cons. I didn't realize that until reading back through it after publishing. That might leave the impression that tar sands are a greater hope than they really are, but that was not my intent.


There is an excellent discussion of tar sands over on peakoil.com somewhere.  Originally Khebab called my attention to it; perhaps he or Leanan or someone else can get the exact link.  I think you might perhaps find it worthwhile to incorporate some of those ideas into your primer.
For some reason, the graphs get cut in half when I fire it up. But apart from that,  it puts it all neatly in a nutshell.
I really think that we should consider all energy, globally. If we don't do that, people may think that Peak Oil is only a technological problem: how to transform natural gas, coal and other fossile fuels to gasoline. We have that technology, so let's invest to that, have some government subsidies, and live happily ever after. Or, (green) people may think that no problem, we have biomass, so make ethanol and drive like before.

Only if we consider the total global energy supply and understand the volumes involved here, people can understand what is the real problem. All fossile fuel supply is tight. Also coal is depleting badly. The may be a lot of it left, but much of best coal is gone and the rest has lower EROEI - much of it lower than one, ie. it is not possible get net energy from it.

Tar sands and extra heavy are low EROEI fuels. What does this mean? If we have oil with EROEI of 20, this means that to produce 20 barrels net we much produce 21 barrels gross (1 barrel goes to the energy input needed in the production). But if we have very heavy oil, the EROEI might be just 2. To produce 20 net barrels we have produce 30 gross barrels (10 barrels as energy input). Now also the CO2 emissions are 50% higher in the latter case. Production volume will rise also 50% to get the same net output. This would be utterly destructive and in the end not feasible. You will be producing only lots of C02 but no net energy. The absolutely worst scenario.

I don't think nobody wants to try this "EROEI heroism" - a desperate push to produce more fossile fuels with heavy governments subsidies - but in the end with negative net energy gain. The Soviet Union tried just this - and collapsed. Don't think that the American leaders are so much smarter than the Soviet leaders. The Soviets didn't understand this, because it is not easy to see. How many American politicians understand the concept of decreasing EROEI?

I think I agree on the whole idea. But I don't quite agree on using EROEI on discarding every technology. I believe EROIE is a very important issue when you consider using bioproducts for energy, because you mostly have to grow your primary energy source first. But it could be less important in considering the use of other energy sources. Indeed, EROEI of CTL might be negative or slightly positive but that doesn't really matter as discussed in the previous thread by Robert Rapier.

This is because in converting coal to liquids for example (fischer tropsch for black coal, bergius process for brown coal), the energy you need comes 90% from the primary source and 10% from other sources (mainly electricity). You still need fuels for mining and transporting your primary source or your endproduct. If the spread of price between your primary source and your endproduct is wide enough, you can begin considering the process economically.

This doesn't mean it will be feasible. Clearly the process is very expensive to run not only because of energy input from other sources, but also because of costs involved in catalyst management and high maintenance costs of the plants in the first place. Then you should consider transportation costs, construction costs of the plants.

Another limitation could be the surge of, the price of the primary sources could because of mining problems and scarcity to begin with. Totoneilla and Pr Goose have already tried to draw our attention to the importance of exponantiallity in trying to understand some of the problems induced by peak-oil. I believe that the real problem lies here. EROEI serves in this case to show how spoilfull these processes are but a negative EROEI isn't in first approximation an absolute limit.

You can produce fuels with EROEI less than one, ie. with negative primary energy gain. It has been done in reality - in the Soviet Union and North Korea. Do you really want that? It is not the money, but the energy.

Producing synthetic fuels (os mining coal or pumping oil) at EROEI one is in essence transforming one energy form to another. That's OK in principle. But Peak Oil means also diminishng energy supply - not only diminishing supply of one energy form. The lost energy must be compensated by producing more of some other kind of energy - coal, natural gas, nuclear etc. If you can do that you can then transform it to liquid fuels. If the transformation takes more energy than it gives, you must produce still some more energy to compensate that.

This has been discussed here already earlier. If we have to compensate the energy lost by a 10% decrease in the oil supply by coal, the US coal production has to grow a lot, may be 20% - 30% (oil is more energy intensive than coal). If you have to convert coal to gasoline, it takes energy and so more coal to provide that. So increase the coal production still some more. Now the US coal production grew 1.9% in 2005.

Tar sands and extra heavy oil are like coal. You must increase the production immensely to gain the necessary net energy.

Profitability is not the issue. You can have fat government subsidies and tax deductions - the Soviet government did just that. So they got more coal with a very low EROEI. They argued just like Neuroil and thought that it didn't matter as long they got their coal. But it did matter. Producing that coal just ate away other energy resources. They tried to beat the EROEI - but it took them.

In fact the Americans could easily do with much less gasoline than  they use today. People naturally think how awkward it would to live now driving considerably less - with everybody else driving like before and the social and urban structure being like today. But as soon as everybody has to drive less the necessary changes start. They start absolutely. Then everybody wants public transport - and it will come. They don't need it now, so just wait.

But everything will go smoother if there are people how know what to do. People who can tell not to panic and try to commit EROEI suicide or start new wars to get the oil,  but arrange things better in the new conditions. I think here is enough to do.  

Hi TI,

I just want to make clear that I agree with most (if not all) of what you write, at least with your global conclusions.

My considerations about the EROEI parameter just tried to show that it is not always very well defined (or in fact computed differently by various authors).

  1. In fact some consider the energy invested as the total amount of energy requirements for a certain process, regardless of the source. In that cas you have to compute the total value of energy inputs (X BTU's in primary source, Y BTU's of electricity, Z BTU's of fuel and other energy sources) and compare this to the N BTU's of the final energy source. So EROEI would be (X+Y+Z)/N. This value can also be viewed as the ratio of energy recieved versus energy dissipated.

  2. Others only want to consider the energy from other sources you have to "import" in order to make your reactions work. In this setting, EROEI is (Y+Z)/N, Y,Z,N beeing as in 1.

I think both values are important. Of course we all agree that if EROEI in the second case is <1 then our process doesn't work at all, neither thermodynamically nor economically, unless you have a cheap largely available energy source (which don't have any more). I think your answer refered to EROEI in this setting.

But take the example of XTL as discussed by Rober Rapier. In this case the energy for the reactions comes most predominantly from the primary source, in fact 85% in the case of coal. Only 15% of the energy requirements stem from other sources, 10% from electricity, 5% for mining and transporting coal, in the case of an in-situ fischer-tropsch plant. I this case, EROEI as computed in my second example, is largely >1 but this number is misleading as the reactions still dissipate a lot of energy because of the waste of the primary energy source. Some of this energy dissipated could be used for the generation of electricity but the waste is still huge. This accounts also for the high CO2 emissions of the process. The EROEI as computed in my first example is <1. You can however get more fuel from this process than you input.

In order for CTL and XTL to work, for some time at least, we should experience a very slow decline of oil production in the coming years. It seems that these techniques are very expensive. The construction of plants will exceed the price of a refinery. Operation requires a lot of catalyst, price of which is increasing, a lot of brain-power (price of which decreases :(  ), and heavy maintainance. To bring these plant up, economy should be working fine in order for these heavy investments to be made. The environmental toll will probably be disastrous. If oil declines faster, I think we won't ever be able to bring these techniques to work.

Not to be nitpicky, but an EROEI of 20 implies that you need to produce a little over 21 barrels of oil to get 20 barrels out.  One barrel of oil will be used to produce the 20 barrels of oil but than 1/20 of a barrel of oil will be used to produce the 1 barrel.  Thus you actually need to produce 20 + 1 + 1/20 +1/40 + ... to get 20 barrels out.  
Actually your sequence should be
                1 + 1/20 + 1/40 ....
not 20 + 1 + 1/20 + 1/40 ....
EROI of 20 is one barrel to produce 20 barrels.
I wish my Greek philosophers knowledge was much better (an arrow does not hit a target because after each unit of time it is one half nearer the target, so the arrow never actually hits the target because of decreasing fractions keep on going to infinity) as this is the same argument put forward. In real life, I would not like to rely on a philosopher's hypothesis to protect me when an arrow is shot at me from a long bow.

However, carrying on with your thought experiment, what happens if I use an electrical generator (powered by coal) to power the pump to get the first bit of oil out of the ground, which is then used to pump more oil out of the ground.

I normally think of Peak Oil as simply "the oil peak". Same thing of course. Most PO-unaware people don't know how we switch "oil peak" or "oil max-out" as Peak Oil. PO is the way I made my screen name "Mad Max-Out". It also takes into account my thingy with running an Austraulian accent during drinking ethanol. :)

The oil peak of course is all the same ominous as Peak Oil. Just today, I had to slightly move my car due to a third party complaint. I parked my car on an obtuse angle to take into account a motorcycle user, no doubt useing it to save gasoline. The problem is that in his parking space he leaves the arse end of the car out like a stretch limo to accomodate that bloody bike.

By parking on the angle, I would have an easier time during departure to work. But a Jeep owner was inconvienced by my angle-parking procedure. So, I get to modify my parking procedure, no big deal. I guess I will have to extricate myself from the passenger side. No worries, mate!

Natural gas producers warn of costly future

WASHINGTON - With the price of natural gas at its lowest level in more than a year, the industry that supplies this mostly domestic fuel has a message to consumers: don't get used to it.

Following a warm winter that sapped home-heating demand, U.S. natural-gas inventories have bulged to record springtime levels, and that has caused prices to plummet roughly 60 percent since their mid-December high. Many analysts anticipate a further swelling of inventories in the months ahead and say prices are susceptible to another 20 percent decline.

...But the Natural Gas Supply Association, which represents companies that produce the fuel, warns there is no guarantee that the nation's supply cushion will look so comfortable by the end of summer -- let alone next winter, when consumption typically peaks.

Why do the NG producers continue to overproduce and have their production just put back into some underground  storage someplace?  Why overproduce and drive down the price?
Presumably because they want to make money now rather than later.

And storage has always been part of the natural gas system.  We store gas produced in summer for use in winter.

The problem we are facing is that we're using more and more natural gas in summer, raising the possibility that we may run out in the winter.  

"Why overproduce and drive down the price?"

Odd isn't it that energy producers can "control' oil prices but not natural gas prices.

But if they sold less at a higher prices now they could earn much more in the long run.
Producers have bills to pay, so must produce all the time. When oil went down to $10/barrel in 1998, all producers continued to produce as much as they could in a desperate attempt to avoid bankruptcy, something that many of the smaller us e&p companies did not avoid.

Natural gas is different from oil in two fundamental ways - first, the north american market is mostly isolated from the rest of the world, so both supply and demand is local. The weather, traditionally cold or warm winters, but increasingly hot or normal summers, have a major effect on demand.
Second, the pipelines from the major producing areas are not sufficient to supply the major consuming regions even during a normal winter, much less in a colder than normal one. For this reason, each region must store large quantities in underground caverns to meet seasonal demand. The caverns are supposed to be full by late fall to meet winter demand. The concern last winter was that, with lesser supply available following the hurricanes, there might be insufficient ng in storage to meet winter need, so utilities bid against each other to fill their own caverns. This activity has nothing to do with greedy suppliers, who did indeed enjoy the higher prices, but entirely resulted from worried utilities. The warm winter, combined with pride-incuded cutbacks by major industrial users (eg fertilizer makers and brick/glass manufacturers, who temporarily laid off thousands of workers) resulted in much less consumption than expected at the onset of winter.

As an aside, the hundreds of natural gas producing companies have been in an absolute frenzy in renting drilling rigs and drilling for gas as fast as they can to meet the nations's need for ng, to the extent that over 85% of all us rigs are drilling for ng and only 15% are drilling for oil, in spite of record world oil prices. Of course, if ng falls sufficiently in price while oil remains elevated, some of these rigs will switch back, which could result in higher ng prices in the future.

Hello TODers,


Seems like a ringing endorsement of Westexas & Khebab's exporting theory, with the additional twist of further politically driven exporting constraints to importing countries [especially the US].

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

From Tom Whipple's column:

"As the world approaches oil depletion, the United States carries an especially heavy burden. We have blundered into a dependency on imported oil that approaches 70 percent of our consumption and can only end in disaster. The US position as the world's current military and economic power has built up a reservoir of resentment and ill will around the world. Issues range from support for Israel to growing tension between militant Islam and other cultures, to unfair exploitation of foreign resources.

"Thus, the American lifestyle faces a double-edged problem: worldwide oil depletion and soon the inability to import oil at anywhere near the current rate. When world oil depletion arrives and oil supplies start to dwindle at anywhere from three to eight percent a year, the rate at which oil ceases to be available to the US economy will be higher-- perhaps much higher."


Excerpt from the Fortune article on Richard Rainwater:

Some possibilities that Rainwater foresees:



Will look into it this evening and give my comments.

I was just reading the XTL thread. Apart from the obvious GW implications which are terrifying (I live in Holland)I was a little surprised that the viability was not really discussed. OK, at present it is technically and economically possible.

But how many XTL plants needs to be constructed before what date to soften the pain of a lack of oil? Do we have enough raw materials and engineers for the plant construction? If you plan to construct a plant today, by how much will you overrun estimated costs by the time it's finished? Is it still economically viable then? And can we arrange for XTL to be scalable in respect to availability of raw materials and engineers, to replace oil production loss?

Basically, I mean to say that I don't beleive we will be able to switch to XTL for LTF on any significant scale, so the GW implications may not be as big as suggested by some in the previous thread.

After all, we don't need XTL for runaway GW if Lovelock's right......

I can tell you what I think oil companies believe. They might be wrong, but they believe they are bringing on enough GTL capacity to meet the anticipated demand. So, when they look at declining fields, existing production, and anticipated demand, they believe they have the market covered. I personally believe demand will continue to outstrip supply, keeping prices very high.

In the long run, if oil companies raise their projections for long-term oil prices, they will build more GTL plants. But they have to anticipate the demand 10 years in advance, so there is a danger of some serious supply/demand imbalances as GTL plants come online.


> Danger of serious supply/demand imbalances ast GTL plants come on-line.

Having a "backbone" of electrified transportation (see my proposed steps) would significantly increase our elasticity of demand (see recent German & French 6% drops in gasoline use because they had a non-oil alternative vs. US ~flat demand)  AND reduce the negative economic impact of supply falling short of demand.

Going large scale GTL means an economic roller coaster.  My proposals would "flatten" that roller coaster quite a bit.

I'm not so sure that the oil companies believe they have it covered with Gas-to-Liquids, although GtL and Tar Sands are their biggest contributions to long-term new supply. I've been working for Shell for five years, but you can see what the big bosses are saying in public speeches here:


In the last year or two, these speeches have tried to raise awareness of how big the energy challenge is. Naturally they talk up the big projects in Qatar Gas-to-Liquids and Tar Sands, and research scale work on Oil Shale and Biofuels. However, stated calmly enough to avoid scaring anyone (especially the markets), but firmly enough to encourage Governments to provide the funding, they are effectively indicating that we need global 'Manhattan' scale investment and projects to meet increasing demand.

The other point that most of the oil majors are publicly making is that they need greater access to OPEC and other 'closed' producing countries, who they say will be unable to meet demand without the new technology and investment that the majors can bring. Whether we believe that will help is another matter entirely - the OPEC myth of abundant oil potential is just as strong inside the industry.


(I live in Holland)

Incidentally, I used to live in Dusseldorf. We made trips into Holland on a regular basis. Definitely one of the friendliest countries in Europe (after they realized we weren't Germans). :)


Hi Robert,

Before moving to France, I also lived in Düsseldorf, now some 27 years ago.

Have you returned there ? I've been back over there last year and noticed quite some changes : all coal-fired plants have closed. The nuclear plant of Kalkar is still working, but a lot of windgenerated electricity is now supplied to an increasign amount of the Ruhr-industry.

The most efficient CTL plant of the 1944 era was based in Essen near Düsseldorf. It seems the germans haven't moved back in that direction, probably not only because of bad memories but they seem inclined to more sustainable energy.

There is however a trend in french and german policies toward heavily increasing biodiesel and ethanol, because of the strength of the agricultural lobby (heavily subsidised). I regret this because it already begins to compete with agriculture for food.

I lived there from 1999 through 2001. I worked for Hoechst in Oberhausen, where I believe Fischer-Tropsch was invented. There are still a lot of interesting reminders there from WWII, and some of the old timers would tell me stories.

One day, as I was coming through the plant entrance, one of the guards handed me a piece of paper. I got to my office, and translated it into English. It said "Please remain in your offices from 11:00 until further notice as we have uncovered an unexploded Allied bomb behind the cafeteria." I asked my boss about this, and he said it happens all the time. He once told me, "Think about what it would have been like during the war, for an operator working out in a unit." Talk about your dangerous jobs.


not to derail the topic, but from what i understand. people are still finding un-expoloded shells at the rate of about once a week or so on some of the rivers in germany.
Here in western Russia, people who find such things don't tell the police. They add them to their stash. Sometimes the shell and the finder don't make it.
As the German boss said to the Geordie on Auf Wiedersehen Pet, "Of course it's one of yours. It doesn't work"
I contrast the capital and operating costs to build enough "XTL" plants to supply 10% of US oil use (2.15 million b/day) versus my proposed alternative; electrifying US freight rail and inducing half of truck freight onto rail, building lots of electric Urban Rail (streetcars, light rail, subways, commuter rail), building electric trolley buses (run mainly off overhead wires, not batteries), and encouraging transportation bicycling.

I would like capital data for "XTL" to compare to my proposals.  ($2 million/track mile to electrify at 2003 copper prices).

Over time, my proposals will save significantly more than 10%, new XTL plants will not organically grow in volume.

My proposals have expected lifetimes in centuries, XTL plants typically have a 30 to 50 year life spans (local resource depletion + wear and tear + technological obsolence).

My proposals will cost less to operate (by far !) than XTL plants.

And my proposals are environmentally benign vs. ongoing environmental disasters !

WHY are not the better alternatives considered more seriously ?

I would like capital data for "XTL" to compare to my proposals.  ($2 million/track mile to electrify at 2003 copper prices). _Do your trains go back in time to 2003 to retrieve the copper, if so buy me some gasoline.

explain organic growth in reference to rail.

My proposals have expected lifetimes in centuries, XTL plants typically have a 30 to 50 year life spans (local resource depletion + wear and tear + technological obsolence).__We can't predict 20 years out how can you be sure your train system won't be sitting unused like Blain in stephen king's wastelands

My proposals will cost less to operate (by far !) than XTL plants.__XTL plants are capital investments to generate profit. Your rail proposals are socialist institutions....this is not a criticism of social programs just an observation.

And my proposals are environmentally benign vs. ongoing environmental disasters !___I'll give you this one.

WHY are not the better alternatives considered more seriously

Alan you look at the world through rail colored glasses.  XTL plants solve the problem of the automotive gas industry.  You are trying to solve mass transportation.  THEY are trying to solve a different problem than you.

The 2006 price will be higher/mile due to increased copper prices, but still "affordable".

Organic growth comes from the fact that the ultimate carrying capacity of a double track rail line is quite high.   Just add rolling stock and more power. (Electric freight ultimate capacity is higher than diesel freight due to better braking & acceleration).  The joint Union Pacific/CSX line to the coal fields of Wyoming is AFAIK, triple tracked to deal with the demand.  It may be quadrupled tracked in the future or electrified to increase capacity.

The four track NYC Lexington subway is the only US subway line at saturation; 600,000 pax/day.  A 20 lane freeway does not carry half as many people.  The two track DC Red Line is getting closer to saturation at over 300,000/day (data from memory).  Rail can grow in use, once built, until it hits saturation.

I am unfamilar with King's novel, but I will point out that it is fiction.  NYC subways are 100 years old, I used daily a line open since 1834 and electrified since 1890s (and will use again in a couple of months).

When Miami finishes their 103 miles of elevated "Subway in the Sky", I am confident that 95% to 100% of it will still be in use in 2140, barring a major social and economic collapse (in which case XTL plants will also be idled).

Our rail freight lines pay dividends and make money today.  The US railroads have said in the past that they did not electrify (and tore up many double tracks) because of property taxes.  Zero taxes on their diesel, high taxes on the electrical infrastructure alternative.

Only one US city over 100,000 does not offer city bus service, Arlington Texas.  It is a de facto given that cities will have mass transit in some form or other.  Urban Rail offers much more and better mass transit at typically less than half the marginal unit cost.

In 1970, 4% of DC commuters used the city bus system,  Today, over 40% use mass transit.  Yet the operating subsidy, inflation adjusted, is comparable.  Washington Metro covers over 80% of their costs from the farebox + ads.  The old bus only system did not cover a quarter of their costs that way.

If one factors in the externalities (land lost to freeways & low value parking lots, medical and lifetime disability costs of auto accidents, pollution and related health costs) there is no doubt that DC Metro is MUCH cheaper than the sprawl alternative.

DC Metro also provides a non-oil altrnative to keep the federal gov't going in a severe oil supply interruption, fulfilling a national defense role.

The same could be said on an enlarged national electrified rail freight system and every US city (except Las Vegas, which does not supply an essential good or service :-)

Simply on the grounds of socialized National Defense (yes it is a social function), my proposals should be weighted against XTL plants.

The DC Metro is an excellent example of what can be accomplished. I lived in DC carless, pre-Metro, and rode the old buses everywhere. I visited DC last summer and was very impressed at how much easier and quicker I could get around the area!
I don't know about rail and capacity and all that. But I do ride an electric train from time to time - the MAX light rail in Portland, Oregon. Somehow it seems like the way they designed it, it doesn't have a very high capacity. Maybe you know about that? I would like to understand what are the impediments to improving the capacity of the MAX light rail. Those trains can get extremely crowded at peak hours, so capacity does seem to be limiting ridership.
The two ways to add capacity to a rail line (light or not) is to run service more often (higher labor costs) or run longer trains.

Longer trains require longer stations and I (from having ridden Portland a couple of years ago) think Portland still has some room left.  (Also, more seats per train, one possibility is to make cars single ended with an operators console & cab on one end only, adding about 8 seats on the other end plus more standing room).

When in DC I noted a subway station ad that the Orange Line will go from 6 to 8 car long trains.  Unfortunately, the DC stations can only handle 8 car trains.

More trains and longer trains require more cars.  Portland like most agencies needs more, BUT the feds are VERY tight on providing matching money for more rolling stock.

One more way to encourage auto use :-(

I had a gentleman who must be in his 70's stop by and give me an earful about MAX. He told me about a superior method he rode much earlier near the Boing airfield= eletrified busses.  We already have the streets and rail (steel on steel) is most effcient but we need to get going faster than the time it would take to destroy buildings and what not for stations and all the other things that go with light rail.  Given that rescources are going to get more expensive then the bus idea has the best ROI.
It seems that, intentionally or not, you are saying that "the market" is not working in our long-term favor, and that a knee-jerk reaction against anything that can be labeled "socialist" is dooming us to not do what needs to be done.
Read my post completely...Alan ask why these things are not considered.  Coal to gas is an endeavor of great capital by oil companies. Rail is a public works project.  I think rail is good but it requires the government to do  it.  I am not labeling it "socialist" as an insult, and it is a correct label.  The military is a socialist industry provided by the government and much industrial money lobbies and drives war.  I merely answered Alans question of why....
Hello AlanfromBigEasy,

Your last sentence: WHY are not the better alternatives considered more seriously?

Alan, your arguments for railroads and other forms of mass-transit make a hell of a lot sense to me--I really wish scads of politicians would be emailing you for advice-- the best way to start mitigation is to start rebuilding RRs, trolleys, and other forms of efficient transportation.  Even the corp. executives of the 'Iron Triangle' should be reading your posts.  Have you received any positive feedback from any influential personalities besides what you have accomplished locally in Nawlins?

Keep plugging away--I am pulling for you to make a bigtime breakthrough to national visibility--maybe Roscoe Bartlett will put your ideas in front of Congress!

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

Saudi FM says oil market situation is "weird"

Saudi Foreign Minister Prince Saud al-Faisal pledged to work for lower oil prices and said it was "weird" they had risen so high with a surplus of crude available on the market.
What if he is right? What if the current price is higher than the supply/demand ratio would suggest? I don't see anything strange in such situation at least in the short run.
May be the Saudi surplus is just very heavy oil that nobody cannot really use.
I think he means to say there is a global surplus of production vs demand at this price of oil. Naturally the prices should have fallen to reflect this, but now the expectations for the increased demand form USA, the fears about Iran etc. are allowing the price to maintain its heights. I would also suggest that PO may be also starting to become a part of the MSM, in which case we here are doing a good job in bringing forth the mitigation efforts :)
He blames it all on "refinery problems."
"Refinery problems" are a code word for unusable heavy and sour oil.
I don't buy the refinery or excess supply arguments - the heavier oil grades are trading in the vicinity of $55/barrel, which hardly seems to me to indicate a "surplus" on the market.
Of which the Saudi's have in prodigious amounts, and would like to get someone, anyone, to buy.
They say so, without ever producing any evidence.
TI - Well put. It is clear that refinery problems can increase the spread between oils and increase the price of high quality oils. However, this should reduce the value of low quality oils and leave the average about the same.
Everything is supply and demand except for very short term spikes, eg following 9/11. Every barrel of oil produced is bought by somebody that wants the barrel more than the money. The 1-2m barrel "surplus" is heavy sour saudi oil that saudi wants more than the market is willing to pay - the refineries that can handle that crude are busy processing crude from eg venezuela, and (in this case) the citgo facilities, owned by venezuela, are fully committed to venezuelan crude.
So, imo there is no $15 fear factor, except to the extent that refineries do not want to be caught with insufficient crude in the event that something goes wrong with their crude supply, eg hurricanes. And, if the world was producing more than buyers wanted at this price, we would see tankers wandering around without takers and/or every possible storage location jammed full. And, while it is often said these days that us supplies are around 15mb higher than a year ago, this would not be true if the refineries paid back the 15mb loaned to them from the spr last fall.  The truth is, the spr is today's swing producer.
I suspect Bush's invasion of Iraq and his assumed bombing/invasion of Iran has made a major contribution to oil price increases. My guess is that Shrub has personally added $20 to the price of oil over the past couple of years through his thoughtful behaviour in the Middle East.
And yet more pipelines blown up in Pakistan:

QUETTA, Pakistan (Reuters)- Suspected tribal militants blew up two natural gas pipelines in Pakistan's troubled southwest province of Baluchistan overnight, officials said on Friday.

One pipeline was blown up at Goh, around 9 km (6 miles) from Sui, the town where the main production plant for Pakistan's largest gas field is located.

The second was attacked an hour later on the Loti gas field supplying the Sui plant.

Baluchistan, Pakistan's largest but poorest of four provinces, is home to the country's largest gas and oil reserves.

...Baluch militants resent local resources being used to benefit other regions and have stepped up attacks in recent months on gas pipelines, rail links and government buildings and army bases in the province.

Hello TODers,

Sadly, Zimbabwe seems to be using a new tactic to cull their 'undesirables'.  After knocking down their little shanties, Pres. Mugabe's milgov troops forcibly load the poor, sick, and enfeebled on vehicles, then dump them miles from the city in a rural area.  Those that survive the foothike back into the city then try their best to play 'cat & mouse' until caught again.  Lather, rinse, and repeat until society is cleansed.  Thus, using fossil fuels to make humans burn up the last food calories in their bodies is a very efficient way to reduce population headcount.

Imagine in the future when Phx and Las Vegas institute the same policy: a quick ride about 30 miles into the summer Sonoran Desert and 115 F temps with no shade-- nobody will survive the hike back.  Using fossil fuels to induce dehydration and heatstroke is vastly more efficient than starvation.

I would prefer we start early mitigation, because nobody knows how long the Hubbert Plateau will last.


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

Does this mean you're leaving Phoenix?
Hello Leanan,

Unfortunately, not yet as my mother is still living [but I hope she lives forever], and then I doubt if I will have adequate financial heft to relocate to an biosolar enclave that offers a chance at survival.  My girlfriend, of 20+ years together, is in absolute denial--she refuses to discuss these topics at all.  Therefore, we will probably be early US victims when it all starts to unwind.  Such is life--like the Zimbabwean headline says, "Destitutes Are Not Entitled".

Basically, I think many of these forum postings are the 'canaries' singing that things are going badly, but the world at large is ignoring our sad songs.

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


This is easily the most offensive thing I've seen on this site to date.

If you're kidding, let me make this painfully clear: IT WASN'T FUNNY.

If you're using exaggeration or irony or whatever to make a point: IT DIDN'T WORK.

If you're serious, then you live in a very different world than I do, and one that I'm glad I won't ever see.

Bob lives in Phoenix.
I cannot help but recall Sinclair Lewis's masterfull cautionary tale: "It Can't Happen Here."
Hello LouGrinzo,

Thxs for responding.  No, I was not kidding-- without meaningful and early mitigation, I really believe at some future collapse point: this will be a normal occurence. I am certainly not advocating for this 'solution', but if we are capable of handing infected blankets to Native Indians, as we have done in the past, future deranged leaders are certainly capable of inventing new atrocities.  Please consider the full trajectory of historical inhumanity.

Your being offended is a subjective emotional moment, the elite topdogs don't think that way--Hell, they don't think properly at all-- otherwise huge leadership for mitigation would be already underway.

Consider that Zimbabwe was, at one time, recognized as the breadbasket of Africa.  The UN or the US could have deposed Pres. Mugabe years ago to head off the calamity, and then educated the people to voluntarily have one child and build biosolar sustainability.  Instead, they purposely ignored the problem to let it fester further, and the IMF bankers were glad to cash Zimbabwean repayment checks even as people were already destitute.  I have googled and posted on Zimbabwe for several years in the Yahoo energy forums trying to warn people.  Thankfully, Matt Savinar's LATOC is regularly carrying the message to others.

The MSM would much rather talk about Brad & Angelina,  McCartney's divorce, and the latest American Idol, than really give us the news that we should be hearing.  They are, IMHO, seriously undermining American security and future sustainability.  Sadly, we will reap what we have sown.

Lou, if the US does not practice meaningful mitigation, how would you expect our future leaders to treat 100 million destitute Americans?  I would like to read your hypothetical future scenarios.  Don't forget to include detritus entropy, pop. Overshoot, and the normal range of human response to crisis.

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

The internet has split the audience allowing the MSM to supply drivel to the drivel seekers, while the net incubates sources of real useful information and opinion.
Not fond of Swift then?
Many things like this have already happened in the world you live in, Lou.  How did the milgov handle the less-well-off citizens of NOLA?

One could also say that continuing to burn fossil fuels for private profit while ignoring climate change is doing the same horrible thing in a more indirect way, but on a much larger scale.


The "milgov" can't be blamed for a disaster you can outwalk.  If you live in a bowl and someone says it will be flooded in 3 days....leave.  If you are mayor of a city in a bowl and (the previous years disaster drill was a CAT3 hurricane, the determination of which was levee failure) a CAT5 hurricane is 3 days away order evacuation.  If you are a Governor of a State with this problem show some leadership.  

The "milgov" you speak of is not nearly as responsible for NOLA as the people that did not evacuate. The corrupt local government that let the levee's fall into disrepair.  The savages that looted their own neighborhoods and shot at Police and EMS.  The Police and EMS who abandoned their posts or looted themselves.

Federal policy did not cause this...people along every link in sosieties chain did.  New Orleans should blame themselves first.

  1. We did not have "3 days", we had 44 hours from the time that the ball dropped (more than a 3% chance of hitting New Orleans) till the highways closed.  The ball dropped at 10 PM Friday, just about as bad a time to start an evacuation as one could hope for.  (One does not evac for a 2% or 3% chance)

  2. Texas had 100+ hours warning, it took them over 24 hours to get some fo their contraflow working (US 290 I think).  Texas killed 40 people in their evac (not needed, as 90% of evacs are).  23 burned alive because they waived all safety regulations on evac buses and an unsafe bus caught on fire and 17 from heat exhaustion in their cars.

According to WWL radio, traffic began to back up at 2 PM Saturday, traffic into New Orleans was blocked at 3 PM and the various contraflow lanes started between 3:55 and 4:15 PM.

The last radio broadcast I heard was at noon to 1 PM Sunday. The Mississippi Gov asked for both sides of I-59 (previous agreement was contraflow lanes for New Orleans and regular for MS Gulf Coast) because he could not get his people out.  Blancio agreed and, with a 1 hour delay due to logistics, would divert east I-10 from New Orleans to I-12 and around the north side of the lake to I-55.  I-12 would close some hours later than the I-10 East beidge and the last cars out could still make it via I-12 then I-55 rather than I-59.

Blanco deserves an A+ for making contraflow work like clockwork.  It could have been improved by a few minutes here and there, but that is how close it was to perfection.  Virtually everyone locally agrees on that point.  Texas deserves a D- to F.

Reality was very few more vehicles could have gotten out in the VERY short time that we had.  I listened to Nagin's plea "to not evacuate an empty seat" and took 3 people without cars with me to Birmingham, dropped them off and went to KY.

An order earlier would not have gotten more cars out, except possibly 2% or 3% more.

More later on some of your misconceptions.

This a stale thread and I will not waste my time writing something none will read.  So no "rest of rebuttal" for OilRig  Medic.
Of course the comment was not serious.  It was obviously irony, and I'm sorry if you did not take it as such.  Unfortunately, we live in difficult times, and sometimes we hear of things that are unspeakably dreadful.  It is possible that we may see unspeakably dreadful things arrive here at home, and neither of these thoughts are pleasant.  Humor, even bitter miserable humor is sometimes the only way to deal with such thoughts.  Indeed, as my favorite author Kurt Vonnegut has often said, the only response to some horrific events is to laugh or cry.  Please be respectful of individuals who choose to laugh in the face of bleak events.  I doubt the comment was meant to make light of this terrible situation.  Rather it is a common response for dealing with something that can otherwise only be perceived with deep pain.  If very black humor can wake people up to the realities of these situations, than I see nothing wrong with it.  For myself, I use such humor frequently, but it is never meant to offend.  
This started a while ago. They call it "taking out the trash".
Hello Smekhovo,

Yes, that is the sad translation.  To get an gut-wrenching taste of how badly people will treat others in order to get a crust of bread please read:


by Tadeusz Borowski, #119198
Or consider the thousands of Jewish slaves forced to build the Roman embattlements against Masada--how they must have despaired--more tears than sweat!


Of course, you are probably already familiar with Aleksandr Solzhenitsyn's "The Gulag Archipelago".  I suggest the '3 Days of the Condor' scenario will be just as debilitating to the average worldwide citizen as these three brief examples.  The historical list of cruelty is endless.

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

Check out this article on the effects of global warming on water supplies in Asia. The gist of it is that the glaciers on the Tibetan plateau are apparently melting (and evaporating) at a very high rate, threatening the flow of many major Asian rivers currently providing the water supply for hundreds of millions of people.


gw implies not just more rain but more snow too. I doubt many rivers dry up.
not in all areas though. many will get drier like the article shows.
Handy linear thinking...
GW ALSO implies a redistribution of effects/phenomena in space AND  time

Sure, more snow may fall, but if it all melts in spring, or more falls as rain... what then for summer?  I believe the current thinking is that glacier melt provides a more reliable, consistent base flow through much of the summer... after the spring snow melt.  If the balance of water storage as ice/snow in winter vs melt in summer changes then the seasonality/timing of discharge in river systems will change. This may well effect the timing of other ecological processes downstream. IF the extra water falls not as snow but as rain (after all - it is getting warmer no?) then you can antcipate an increase in flooding.

An interesting discussion on the possible effects of water supply disruptions is emerging in theories about the collapse of Angkor Wat (Science 10 March 2006:Vol. 311. no. 5766, pp. 1364 - 1368) Some quotes:

"When a low-density city collapses," Fletcher says, "it takes out the entire region".

The water infrastructure "became so inflexible, convoluted, and huge that it could neither be replaced nor avoided, and had become both too elaborate and too piecemeal."

IE Prior investment hindered their adaptive management to a changing situation...

There's a website that I haven't seen anyone on TOD discuss that the quants out there might want to check out - http://www.eia.doe.gov/pub/oil_gas/petrosystem/us_table.html .  This site lists production and well numbers distributed by well size for the US, and is extremely interesting from the depletion standpoint.  

For just a hint of what's there, I broke the wells down into 4 size categories:  Strippers (less than 15 bbl/d), small (15-100 bbl/d), medium (100-1600 bbl/d), and large (>1600 bbl/d).  For reference, in 2004 large wells were roughly 25% of all oil production, small + medium about 55%, and stripper wells 20%.  Decline rates for the categories 1990-2004 were:
Stripper:  1.6%/year
Small:  3.6%/year
Medium:  3.7%/year

Now, consider the period 2001-2004.  Decline rates:
Small:  4.9%/year
Medium:  6.6%/year

And finally, year over year 2003-2004:  Decline rates:
Small:  6.9%/year
Medium:  9.4%/year

What appears to be happening is that folks are pushing their small+medium wells harder and harder in response to the recent high prices, and those wells are depleting ever more quickly. For the time being, this is being compensated by the addition of large wells in the deep water GOM that mask that depletion.  However,  the net result of this is that the US is relying ever more on a relatively few large wells for its oil production.  Of course, these big wells themselves deplete at a roughly 10% or better rate per year (this can be confirmed by comparing 1995 data to 1990 for large wells, prior to the beginning of deepwater).  The shocker is that as of right now 80% of the US oil supply depleting at something on the order of  8-10% per year!  If only we had data like this for all countries (sigh)...  

If we did, I suspect we'd be panicking....
Yes we would. I was thinking about the big picture in terms of how history will see this decades later.

I start to believe that the 9/11 attacks will be the marker of the beginning of the end for the hedgemoney of the U.S. and it's super power status.  I mean really if we weren't attacked anyone propose what happens next?

I just feel like history will look at the 9/11 attacks as the start of the collapse.  Following that incident, the liquidity in the market exploded and has never looked back, in addition to financing two wars in under 5 years.  I mean when you are monetizing debt, if you were to really somehow figure out the math of it, we have to be increasing our national debt exponentially, rather than the $3.5T or so that Bush has added.

hedgemoney as hegemony - one of the best freudian slips I've seen lately.
And I actually looked at it with and without the D and didn't want to look it up...
Here is a sobering reality of what people really did go through during our "Great Depression."  There is some hard stuff to read and comprehend.


We were better prepared then than we are today, less vulnerable, more adaptable, less resource dependent.
Great find, Tate.  Very good article.
An idea occurred to me at lunch based on my flippant comments from yesterday.  In response to worldwide recognition of Peak Oil, and the requisite mitigations necessary, etc., etc. --
    What if the Japanese and Chinese would actually cancel U.S. debt in exchange for the U.S. greatly reducing stockpiles of nuclear weapons?
So in a micro application....would they simply burn the paper?  Would we know that nearly $2T USD would be destroyed and removed from the system?  

Not to mention doesn't that make us worse off?  Russia still has them and they are increasingly wielding their political clout w/fossil fuels.

I haven't totalled up all the holders of the bonds, but you get my point. Once our bond market has, let's say, a mini-crash, then our politicians will be looking for a quick fix -- plus the uranium can be burned anyway, can't it?

The Dems will likely be in control, after the lurch to the left that I predict, and all the baby-boomer, I-was-anti-nuke-before-you fifty-somethings in control of politics would seem like likely candidates for trading 80% or 90% of our nukes to mitigate run-away stag-inflation? It would also allow the holders of our bonds, who have been rooked, a face saving way out the door, sort of.

Interesting social take on a dire economic outlook.  Maybe we wont be able to vote before it crashes according to LaRouche. He pegs the meltdown in Sept of this year.
wont be able to vote before it crashes
That's actually a better scenario isn't it? (1) crash, (2) vote in the Dems, (3) peak oil hits MSM, (4) oh my god whaterwegonnado?, (5) deal-to-destroy the nukes to save mankind (i.e. ourselves) from hyperinflation, (6) oh yeh, peak oil, whaterwegonnado?
You've just come up with the simplest solution to all of this...let's get to work!
Make that giving me those nuclear weapons, and you've got yourself a deal, wai ren :-)
wai ren :-) Have we met?
Hello Wstephens,

That is a truly brilliant idea, Kudos!  Hopefully that will come up at the upcoming G8 Conference.  The big question is: will the elite worldwide 'humanimal wolves' be willing to hunt with no nuclear teeth?

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

hunt with no nuclear teeth?
So far, what we see is a tendency towards energy hoarding. This is being followed by "that's not fair, keep exporting!" whining. The effects so far appear to be mainly in out of the way places (Bangladesh demonstrating was it?).

Once net exports get lower, we'll be at the critical juncture. So what would we do with nuclear weapons at that point? Hunt what? It's not exactly clear to me -- especially once people in the developed world realize peak oil. "Isn't uranium more valuable as a fuel than a bomb?" we will say.

So it seems that we could possibly get a (Dem speak) "global conversation of international organizations commited to a multi-lateral worldwide solution implementing cooperation of international scope regarding mitigation of currency and security issues" -- i.e. disable our nukes for dollars. Debt problem solved.

Then the only thing we're left with is the actual peak oil problem. But survival focuses the mind doesn't it? Rail lines get extended again, Arizona gets plastered with CSP Stirling engines, George Olah builds methanol plants, etc.

I work for the largest RR in the states.  They are investing a lot more than prior years in capital spending.  However I haven't been able to get into the #'s to determine if it's simply replacing old equipment or new lines being reestablished or built.

I also see them switching to coal fired engines, but I've talked to some old timers and they tell me some stories of a powerful steam engine that lost luster once diesel became standard.  If it's true, then the RR would have no problem getting new engines built in a limited time frame.

I've read that even though we have gone back and ripped up a ton of track, that RR's still hold the "right of way" to summarily kick anyone on the property out with compensation and start laying track again.  Anyone know about this?

Tate423 -

Are you serious about switching to coal-fired RR engines....of the Casey Jones variety?

Since the demise of the Baldwin Locomotive Works about half a century ago, there has been no company in the US capable of manufacturing traditional steam locomotives that I'm aware of. Aside from being terribly polluting, their energy efficiency was only about half that of a diesel locomotive.  They were also far more expensive to build and maintain.

Unless there is some high-tech modern version of the steam locomotive that I'm not aware of, I just don't see this happening in the US.

I would think that if the RRs wanted to switch to coal, they would do in indirecly by building more electrified rail lines and running more electric locomotives.

I'm only passing hearsay.  I want to know myself also.  Like you said if you know of no new steam tech, then it wont be happening.
No way they go back to steam engines with 10-15% efficiency at best.
The enviro wackos would scream bloody murder the first time they saw one belch a ton of black smoke when they clean the flues.
Don't forget - they tore up all the infrastructure for steam: water towers - coaling towers and steam shops.

BTW - if they wanted to experiment with steam again there are a lot of late model locos preserved in running condition or close. Some examples are the NKP Berkshires (2-8-4) #765 and #769. The NW class A 2-8-8-4 #1218 in Roanoke and the UP Challenger, etc, etc.

Sorry, but this deal from the point of view of Japan and China will look like peanuts for pure goal:

  1. You do not say "completely dismantling our nuclear arsenal", just "reducing it". Mind you, what is left would be more than enough to turn these countries to lifeless deserts.
  2. China has nukes by itself, so they don't have a reason to tremble too much from our nukes. The real reason countries want nukes is not to use them, but to have the potential to use them. Thanks God.
  3. Japan would actually get sick if it hears about such "deal". We are their ally, and have taken some security obligations towards them. How would you react if your sole protector suggested to desarm itself and damand that you pay him a load of money for that?!?

I have another suggestion, that IMO has a great chance of passing and can save the world great deal of problems:

  1. USA abandons the enforcement of the US dollar as an international reserve currency. A new international currency is established under the surveilance of UN, which becomes de facto a World Central Bank.

  2. In exchange China, Japan and other net exporters (creditors) agree to gradually exchange their central bank reserves with the new currency under a fixed discounted rate - thus avoiding the collapse of the US dollar, but effectively reducing the USA debt. The US debt transforms into a debt towards the World Central Bank to be repaid under fixed favourable terms.

  3. The euro, yuan and the other currencies will be traded against the global currency on markets also under the jurisdiction of the UN.
Sorry, that should of course read:
this deal from the point of view of Japan and China will look like peanuts for pure gold.
You don't understand -- I don't think that there is any "pure gold". The point I'm making is that since the U.S. can never pay off this debt, then the debt is worthless. And since excess nuclear weapons are also worthless the politicians can exchange "worth" for "worth" to save themselves the embarrisment that we've spent ourselves into oblivion and they've financed it. This is the kind of deal politicians make.

Re: your proposal

I believe in CRIC. (1) Crisis, (2) Response, (3) Improvement, (4) Complacency. Politicians and the public have essentially no history of dealing with problems before a crisis occurs. Crisis must occur first! Example: Katrina/New Orleans. Politicians are constantly borrowing from the future to provide pork-barrel today. This builds up until it can't go on any longer, and boom! Crisis! (Incidentally, I believe this is how Rainwater described investing in his interview. Buy stuff after crashes. This works until a TRUE paradigm shift actually occurs.)

Wow... $2 trillion being worthless hat to be a quite pleasant news for the people of China & Japan that had to break their backs for them in those factories. In fact just hinting them this idea might turn what you say into a grave reality overnight, crashing the whole world economy along the way.

Here I're reaching to your CRIC methodology... I thought our whole discussion, your initial proposal included was an attempt to go exactly the opposite way of CRIC :) If we wait for a financial/energy/whatever meltdown to make us change our ways than we are in really deep sh*t. Hope I'm wrong, but the crisises of the future promise to be far more devastating than the previous ones...

ooops too many typos here have to learn to type slower, sorry
Isn't there a truism here? The bond market will not crash if China & Japan continue to exchange their efforts for our gov't paper. The market will crash if the buyers stop buying. The trouble until now for them is that if they'd let their currency rise too much against the greenback then labor demand could outflow to Mexico, Philippines, etc. (from China), or to Germany, Taiwan, Korea, etc. (from Japan). A "Nash Equilibrium"? They are stuck.

Again, there is no reason to believe from historical evidence that politicians will take on a difficult problem until they are forced to do so by circumstances. I was just suggesting a way out once the crisis occurs. A way out that could actually accomplish something. And if we could do this after a mini-crash, instead of the real thing, then we've really accomplished something. If we roll over peak oil AND have to pay back our debt at any where near par value then we deserve what we get! I do not doubt that the politicians will try to find a way to declare bankruptcy without actually admitting that that's what they are doing.

The "they are stuck with us as their main customer so they cannot let their currencies appreciate" argument is not as strong as it was. As the yen appreciates and the dollar falls, Japan has an increased ability to outbid the USA for needed oil. To a certain extent the rules of the game have changed. Weakening one's currency to gain a competitive advantage drives up your oil costs, which offsets the advantage.  
Just a follow-up: Politicians in the USA are pressuring China to revalue the Yuan upwards. They have failed to mention to the US public (or they don't understand) that this will drive oil prices higher and gasoline higher for the US consumer. More accurately, the US public is stuck.
The US housing bubble continues to deflate, as the economy teeters on the precipice.

"Home foreclosures soar, with Georgia leading the way"

So we've got foreclosure's rising, bankruptcy cases are also rising, unemployment is trending back up, & the dollar just continues to slide.  I could add more like the national outta control debt, or even the unfunded entitlement programs but that would make it all the more depressing.

This article points out something that is disturbing.

loans made since 2003 have been something other than the traditional, 30-year, fixed-rate agreement that homeowners in earlier years used.

Those are going to really hurt as they are renewed at higher and higher rates. Not to mention those who are actually equity negative.  Rents are going up as these people are pushed back in renting.

More on a related vein:

"Mortgage rates return to four-year high.
The 30-year fixed rate ticks up to 6.60 percent while markets try to 'decipher' economic reports."

I am acutely aware of the incredible energy value in oil, and have been looking for how to convey this message to others, especially to illustrate the challenge of using biofuels and oil shale to replace oil. One useful statistic I have just seen in a great Australian book (Living the Good Life, by Linda Cockburn) makes a profound point:

It took 26 tonnes of prehistoric plant material to yield 1 litre of petrol, which could power a fuel efficient car for 8.5km. And planet earth provided (for free) all the additional heat and pressure to process all that material as well.

Corn, Sugar Cane, Switch Grass and Oil Shale may be better starting materials than our prehistoric plant material, but the numbers must be broadly similar. And we have to provide all the processing energy as well.

26 tonnes to drive 8.5km (or 5.3 miles) - Oil is precious stuff!


Yes, oil is precious stuff.  The moral here is learn to use it sparingly and concentrate on substitutes, however less efficient they may seem at first blush.  Product development works wonders, and it's cheaper and less wasteful of that precious oil than going to war over sources.  Example: Iraq.

This caught my eye. In what world is 11.8 litres per 100 km "fuel efficient"? There have been fifty years of cars that consume only half of that. They might be smaller, less luxurious and have manual transmission, but they are there and they have been there. I kind of frown at anything that consumes more than eight or nine litres per 100 km.

Or maybe I'm just being European.

OK, there is Abu Dhabi in the Arabian Emirates with quite big oil and gas reserves. Nevertheless, this Emirate invests $ 100 millions in a Clean Technology Investment Fund. This is some old news, however of interest, you can read it here. I found it today in a german newspaper beside some other news about heavy investments in the oil wells there.

Question: This doesn't fit together. A place with - officially - so much oil reserves invests in renewable energy? Any ideas?

They're scared and they know what's coming.  

I mean what is easier, to get 300 Million people in the same thinking, or a powerful family that decides for a country?  You would think that all that money and not to mention power, would give you some insights that everyone else chooses to ignore.

I think they understand the basic problem that there will be an end and they should invest SOME of the money into diversifying energy infrastructure.  I mean it's sunny ALL the time right?

My father rode a camel. I drive a Mercedes. My son flies a jet plane. His son will ride a camel. - Arabian saying.

Oh, they know very well what is coming.

I agree with you. The sheiks in Abu Dhabi obviously look more ahead than their neighbours. Indeed, their reserves in sunlight will last much longer.

I presume this investment is not taken seriously by other OPEC members.

marotti, berlin (no sun here anymore, just dusk) :-)

Berkshire Reveals Stakes In ConocoPhillips, GE

OMAHA, Neb. (AP)--Berkshire Hathaway Inc. (BRKA, BRKB), billionaire WarrenBuffett's investment company, disclosed stakes in ConocoPhillips (COP), GeneralElectric Co. (GE) and United Parcel Service Inc. (UPS) as part of regulatory filings detailing the company's $45.8 billion stock portfolio.

The documents filed with the Securities and Exchange Commission Monday are thefirst to mention Berkshire's holdings in ConocoPhillips because Berkshire had sought confidential status for its investment in the company, which was initiated last year.

Berkshire held 9.6 million shares of ConocoPhillips, worth about $559 million,on Dec. 31. Omaha-based Berkshire nearly doubled that investment by March 31 when it held 17.9 million shares worth about $1.1 billion.



There's a snippet about the SEC refusing the allow the "Oracle of Omaha" to conceal trading that exceeds 5% of the oustanding shares.

I doubt any thing changes though.

House rejects drilling off coasts

Copyright 2006 Houston Chronicle Washington Bureau

WASHINGTON - The Republican-led House shot down proposals Thursday to lift bans on drilling off the Atlantic and Pacific coasts, as well as the eastern Gulf of Mexico.


This won't matter much longer.  The time frame alone is too small.  We will peak before the bits strike black gold even if they started working on it today.  I mean even if Congress lets them drill, how long does it take for THAT production to come online?  Does anyone think it would have a meaningful effect anyway?  

I've read most projects are near a decade time frame.  So even if we wait a few more years, eventually the money talks and we will open up whatever is necessary.  In addition I'm sure ANWR will open up with the opening of these coasts.

In the end though I think one thing is becoming polarizing and that's the people want SOME kind of change.  The choices all blow, but I truly feel the people of this country are going to give Dem's control of Congress.  I know I'm tired of Bush and I supported him at one time.

I thought I read somewhere that it would take less than 2 years to get natural gas out of the eastern gulf near florida, if opened up, but U.S. east/west coastal would take longer perhaps.
Hello Wstephens,

Perhaps longer if hurricanes and other severe events [GoM Loop Current eddies, earthquake in CA] consistently rip up the infrastructure.  Imagine if a 100 miles of CA or FL beaches get coated just once with black goo--it will then be shut down for another twenty years.  If Cuba has an 'accident' on their future rigs in the Florida Straits--we will militarily confiscate their oil wealth under the pretense of environmental protection.

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

I've come across a quote in the following article, in which I read a very interesting quote:

"Commodity prices are about 50 percent higher than they would be if they were based on the fundamentals of supply and demand, as a surge of investment sent prices for metals and energy to record highs, Merrill Lynch & Co. said yesterday. "

So who is wagging who here?  Is speculating driving up oil as well as metals?  Or is oil driving on the speculating?

See, this is why I was asking for an econ primer!

I think, properly understood, futures speculators are selling price insurance to the market (else suppliers would deal directly with consumers). So it doesn't make sense to me to say that so-called "fundamental" prices should be lower. That doesn't recognize that the price risk to the market may have risen -- perhaps due to constraints (peak oil)? Other insurance works the same way.
Yes, the benign use of speculation affords the opportunity for suppliers to hedge, and therefore offer price insurance to the suppliers.  But the malignant reality is that speculators can drive prices well beyond what they should be.  

The real question, then, is:

Have the values of commodities "fundamentally" increased between 50 and 100 % over the past few months (peak oil? inflation/devaluing of the dollar?)?  Or is this increase primarily speculative?

If the dollar rebounds slightly this week, as the futures contracts come down, then is it possible that the volatility is more financial then energy-related?

I agree the "fundamentals" of the commodities have usually not changed in the short term (supply/demand, so to speak), just the "price insurance" has changed in the short term. But you must understand that the futures markets are not the same as off-exchange deals which might use 12-month strip prices or other "basis" discounts.

Temporarily prices can move because the amount of insurance available is in short supply. Ponder, for instance, that you cannot buy flood insurance without a grace period for coverage. Nobody sells that insurance on short notice! The price insurance that the markets provide in any given short period of time may be constrained -- peak speculators!

An interesting side observation of this is that the speculators that make the most money, are the ones who have bought when the market needed a buyer and/or sold when the market needed a seller. Thus, we should praise the most profitable speculators rather than villify them. Think about it.

They are called specialists and they do brisk, I MEAN BRISK, business.  They are set up as LLP's, so you can imagine the fat cats.
Not that this will "teach" econ, but read this article on gold and its price over the last few decades.  I don't care what any Investment Co says, gold has been deflated and artificially depressed for a very long time.

When you adjust it for inflation all these years, it's finally catching up in terms of price.




First, I'm in the "useless jewelry metal" camp for gold. Why? Because the world contains so little gold, it appears to me to be pro-cyclical -- when times are good, no one hoards, and the value falls -- this is "stimulative", if you're using it as a currency. Conversely, when times are bad, gold is hoarded, and the value spikes -- this is "restrictive" of the cycle. These behaviors are exactly the opposite of what you'd want. If all the gold in the world flew off the face of the earth into space today, what difference would it make? Not much.

Second, gold *is* probably "cheap" now, inflation adjusted. But if it doesn't return to currency status then it will be dis-hoarded at some point in the future, causing the price to crash.

Third, my preference would be to use copper in a monetary fashion -- it would be counter-cyclical. When times are bad, copper consumption falls (less cars, houses, computers, etc) which would be naturally re-flationary -- stimulative during the down part of the cycle. Of course, conversely, when times are good, there is big demand for copper, and it gets more scarce, the price tends upwards, and is naturally self-regulating against the cycle. Ever heard of "Dr. Copper"?

Plus, and this is a big one, it is very hard to hoard copper -- I could literally put a ton of it in my garage and still not have accomplished much hoarding. If I put a ton of gold in my garage then I'd better hire a security guard -- that I really trust! It's not that the price of copper couldn't be manipulated (ref your article link), but it would be very hard I would think.

I noticed today that the proposed Enbridge Gateway project (an 1150 km pipeline running between an inland terminal near Edmonton and a marine terminal near Kitimat, British Columbia), will run things both ways - that is, 'oil' from the tar sands to Pacific rim and western U.S. markets, and 'condensate' from various worldwide sources to the tar sands project.  Given that the Mackenzie pipeline will, if built, also primarily feed the tar sands project, it seems they envision this project eating up a tremendous amount of 'condensates'.  You can read about this project at the National Energy Board site: