147. THE DEBT VIRUS HYPOTHESIS

Many peak oilers are opposed to the current economic system because it must grow to function, and they fear growth. In their view, human beings are yeast in a petri dish, and if we keep growing, we will overshoot and die-off, suffocating in our own waste. Therefore growth must be stopped, and the only way to do that is to somehow restructure the economy.

It is true that the economy must grow, but the economic system is a complex thing, so let's take it one step at a time. Why is it that the economy must grow? Heinberg blames it on the monetary system, more specifically, "debt money" and interest:

The mania for growth is not merely a personal pathology, or even a problem of economic ideology; it is structurally embedded in most national monetary systems. Currently, most money is loaned into existence by banks and is thus based on debt and implies a commitment to pay interest on that debt. If the economy does not grow, new money will not be created to pay interest on existing loans; those loans will thus be defaulted upon, and a crash will occur. It is essentially impossible to achieve a static or controllably contracting economy with a debt-based currency. Therefore, if we are to achieve a reduced-scale, steady-state society, we will need to change our monetary system to one that is not based on debt and interest.Source

This theory -- that new money must be loaned into existence in order to pay interest on existing loans -- is called the "Debt Virus Hypothesis" (DVH). It was popularized by Jacques Jaikaran in his 1995 book Debt Virus: A Compelling Solution to the World's Debt Problems. (As a point of human interest, we should probably note that Jaikaran is not an economist or a banker. He's a plastic surgeon from Texas, who was involved in the right-wing "Republic of Texas" movement and arrested for tax fraud. Source.)

Succinctly put, the DVH says this: When bankers create new money by issuing a loan, they only create the amount loaned, not the interest. So where does the new money to pay the interest come from? It can only come into existence through a new loan being made, and therefore the monetary system requires endless growth to avoid collapse.

But something is fishy here: Why does the money to pay the interest have to be "new" money? Suppose the bank loans out $100 and wants $110 back ($100 + $10 interest) . Why can't the $10 be "old" money -- i.e. money which is already in the economy and is idle at the moment?

The fallacy of the "Debt Virus" hypothesis is that it assumes, nonsensically, that all of the billions upon billions of dollars already existing in the economy cannot be used to pay a newly created interest obligation. It says that money for paying a particular interest obligation must be specially created. It sets up a false 1-to-1 correspondence between particular sums of money and particular debts. The fact is, the self-same $10 bill can be used to pay off any number of debts; today it pays my interest, 15 minutes later it pays yours. It's not a zero-sum game where me paying my interest somehow shuts you out from paying yours.

At this point, a defender of the DVH might say: "But you can't pay interest with money that's already been created! It was loaned into existence!" This is just a red herring.

The fact that money was loaned into existence doesn't prevent anybody, in any way, from using it to pay interest. It's simple really; I'll show you how it's done. My buddy Earl calls me up and says: "Hey, you remember that $100 you owe me?" I write him a check off my account, it clears, and he uses it to pay interest on his mortgage. Voila. Earl just paid off interest with money which was loaned into existence -- i.e. the money I took out of my checking account. Earl paid off the interest with "old" money, and no new money needed to be created. Kind of mind-boggling, ain't it?

Even more amazing is the fact that that $100 just keeps on going... The bank uses it to pay interest on one of their loans from another bank, and that bank in turn pays it out to Grandma Peasoup as interest on a CD, and she uses the $100 to pay interest on her mortgage.

For an even more astounding demonstration of this magic, suppose we have a billion broke hobos lined up, starting with Abe, Bob, Cliff.... and ending with Yordo and Zeke (there's a lot of Mikes in the middle). Abe takes $10 out of his pocket and loans it to Bob, provided that he pays back the $10 plus $1 in interest. Bob says okay, and makes the same loan to Cliff, and of course Cliff makes the same loan to Dave etc. etc. until Yordo loans the money to Zeke.

Total indebtedness at this point: $10 billion
Total interest due: $1 billion

Wow! Where in the hell are these guys going to come up with that kind of cash? Between them they've only got a couple thousand, and there's no way a bank is going to loan a bunch of penniless hobos billions of dollars. But some bank has to. Right? According to Heinberg, somebody somewhere has to loan a whole new $1 billion into existence to pay the hobo interest. Is all hope lost?

Nah... Zeke just takes a swig off his flask, pulls a buck out of his wallet and pays off the 11$ he owes to Yordo, Yordo does the same with Xavier etc. etc. until Bob pays off Abe. It's like a big zipper. Isn't that fucking incredible? We just paid off $1 billion in interest with 1 measly buck.

More info on the DVH

--by JD

146. PAUL EHRLICH

Paul Ehrlich is a Stanford professor, and one of the original die-off blowhards from the 1970s.

Paul Ehrlich: Doomer jackass extraordinaire
To give you an idea of how stupid doomers can be, let's take a little trip down memory lane with some memorable Ehrlich quotes from yesteryear. (As you can see, there's an uncanny resemblance to the breathless hype of today's crop of peak oil doomers):

The battle to feed humanity is over. In the 1970s, the world will undergo famines. Hundreds of millions of people are going to starve to death in spite of any crash programs embarked upon now. Population control is the only answer. -- Paul Ehrlich, in The Population Bomb (1968)

I would take even money that England will not exist in the year 2000. -- Paul Ehrlich, 1969

In ten years all important animal life in the sea will be extinct. Large areas of coastline will have to be evacuated because of the stench of dead fish. -- Paul Ehrlich, Earth Day 1970

Before 1985, mankind will enter a genuine age of scarcity... in which the accessible supplies of many key minerals will be facing depletion. -- Paul Ehrlich, 1976 Source

Population will inevitably and completely outstrip whatever small increases in food supplies we make, ... The death rate will increase until at least 100-200 million people per year will be starving to death during the next ten years. -- Paul Ehrlich in an interview with Peter Collier in the April 1970 of the magazine Mademoiselle.

By 1985 enough millions will have died to reduce the earth's population to some acceptable level, like 1.5 billion people. -- Paul Ehrlich, 1969

By 1980 the United States would see its life expectancy drop to 42 because of pesticides, and by 1999 its population would drop to 22.6 million. -- Paul Ehrlich, 1969 Source

The lesson to be drawn from this? Don't listen to pompous peak oil misanthropes who think they can see the future. They can't.

The folks at overpopulation.com have it right:

Ehrlich summed up his approach to overpopulation with a flourish worthy of the great totalitarian dictators of the 20th century,

"A cancer is an uncontrolled multiplication of cells; the population explosion is an uncontrolled multiplication of people. Treating only the symptoms of cancer may make the victim more comfortable at first, but eventually he dies -- often horribly. A similar fate awaits a world with a population explosion if only the symptoms are treated. We must shift our efforts from treatment of the symptoms to the cutting out of the cancer. The operation will demand many apparently brutal and heartless decisions. The pain may be intense. But the disease is so far advanced that only with radical surgery does the patient have a chance of survival."

Based on the evidence of the past 25 years, this would have been a horrible "solution." The world turned out to have a case of the flu, and Ehrlich recommended the equivalent of bleeding the patient. Source

This is a very good reason to be skeptical of all peak oiler "solutions" -- such as the extermination of non-contributing members of society promoted by ASPO (see 29. COLIN CAMPBELL "LETS THE MATTER REST"), or the military dictatorship promoted by Jay Hanson (see #145 below). They'll try to tell you that they need brutal, draconian powers because the alternative is so much worse, but the "alternative" is just a fiction they dreamed up. Paul Ehrlich said we needed to go fascist in the 1970s or billions of people would die. Well guess what: We didn't do anything and billions of people are eating better than ever. He was wrong, and should pay the price for it. He needs to be taken out back, gagged, tarred and feathered for attempting a fascist putsch by false scaremongering.

-- by JD

145. THE JAY HANSON SOLUTION: MILITARY JUNTA

Jay Hanson is fruitcake-in-chief of the peak oil die-off movement. He is founder of the website "dieoff.org", and is well known for his theory that we are all going to die from peak oil because human beings are genetically stupid. Jay has been on the cutting edge of peak oil for years, and, like the true-blue American he is, is now advocating that we forget about "rights", and install a military dictatorship in the U.S.:

I would like to engage as many of you as possible in a FRIENDLY analytical
discussion about "realpolitik" (practical politics). In order for this
discussion to bear fruit, posters are going to have to set aside
"ideologies" and beliefs about "rights". We might as well start thinking
about life without current ideologies and rights, because sooner-or-later
they will be replaced by a military dictatorship -- it's just a matter of
time.

From a strictly analytical standpoint, our society has the potential to feed
and water it's people on a tiny fraction of the recourses is presently
requires. For example, the food sector of our society tries to fatten
people up, while the medical sector tries to deal with the health problems.
Why not simply eliminate restaurants and advertising by the food sector?
The US today is composed of a hundreds-of-thousands-of-special-interests all
burning resources trying to pull society in different directions.

While a drastic (by a factor of 1000?) reduction is resource consumption can
not eliminate an inevitable world war sometime in the future, it could delay
that war by decades. Moreover, if a military dictatorship is inevitable
anyway, I believe that the sooner the better.

Consider the following two basic types of political systems: "process"
politics and "systems" politics.

As the name implies, process politics emphasizes the adequacy and fairness
of the rules governing the process of politics. If the process is fair,
then, as in a trial conducted according to due process, the outcome is
assumed to be just -- or at least the best the system can achieve. By
contrast, systems politics is concerned primarily with desired outcomes;
means are subordinated to predetermined ends.

The time has come to replace our current system of "process" politics with a
new "systems" politics. It must be administered by most-qualified entity we
have: the Joint Chiefs (and obviously many more details I haven't considered
yet).

Considering the alternatives, what do the rest of you think of this idea?
(Remember to be PRACTICAL. Forget about "rights" and "ideologies".)

JaySource

Peak oil is a hall of mirrors, isn't it? On the one hand, you can join up with Dick Cheney and the cynical status quo crowd who want to run the country as a military dictatorship. Or you can join up with the hip, green, counterculture peak oil people like Hanson, who want to run the country as a military dictatorship.

--by JD

144. YOUR BUDDY: THE SPACE HEATER

There's been a lot of angst lately about the U.S. natural gas situation. Talk about "going over the cliff"... old people freezing to death in their homes due to expensive gas or fuel oil etc. Matt Simmons is predicting an oil price spike to $330-$650 per barrel, and a gasoline price spike to $12.50-$25.00 per gallon for the winter of 2005-2006Source. All the peak oil pundits say: The U.S. is in big trouble if this is a cold winter. Yep, it's enough to make you shiver from both terror and cold.

But never fear. Today I'm going to talk you through some revolutionary technologies from Japan which will help you reduce your natural gas bill to damn near nothing.

First of all, you're going to want to turn off your furnace. I know how Americans heat their homes, and it's fucking ridiculous. Two or three stories, piping hot, every room, all the time, even when nobody's home. You're not going to want to do that anymore. The furnace is your enemy, and the spawn of Satan, so turn it off.

Next, you're going to want to purchase one of these miracle machines:

Your buddy: the space heater
These bad boys come in all sorts of styles and variations. Mine has 3 settings (350, 700 and 1050 watts), and costs about $30. Basically, you just plug it in, put it next to where you're sitting, turn it on and presto, you're warm.

Now you may wonder how effective these units will be in the cavernous rooms found in American homes. Good point, but the Japanese have another techno-fix -- sliding doors which they call fusuma and shoji:

My apartment, for instance, is very small, but it has no less than 4 sets of sliding doors, so I can close off a small area, and just heat (or cool) that area while I'm in it. Strategies you might want to use in the U.S.: set up the room where you hang out (TV, internet etc.) in a large closet, or the smallest room in the house; or go over to Home Depot, and improvise a little blocked off space of your own.

Now you've got a small space with the drafts sealed, and your space heater can really keep you toasty. It may seem a little weird at first, but this is actually adventurous living on the "new frontier". Think of your little room as your "space capsule".

Here's a couple of other tips: Don't leave the heat on when you leave the house. And don't leave it on while you're sleeping either. Instead you're going to want to invest in one these high-tech energy-conservation systems:

The Thick Blanket
This will keep your head warm while the furnace is off:

The innovations don't stop there. This is an amazing Japanese device for totally eliminating natural gas use in clothes dryers (yes, that's my underwear):

Japanese natural gas conservation system
Now, wash your clothes in cold water, and you're basically natural gas free. I personally only use natural gas to cook and shower, and I could eliminate the cooking part in a couple of hours by buying an electric range.

--by JD

143. ALTERNATIVES TO CARS AND AIRPLANES

The vast majority of journeys are less than 400 miles; in fact most journeys are less than 5. In Britain, for example, 72% of car journeys are less than 5 miles, where cycling, buses or battery cars could replace journeys. Better still 50% are less than 2 miles where walking and cycling could replace virtually all journeys – indeed this is the reason why cars are a wasteful form of transport, they promote laziness!Source

And weight gain, costing health authorities billions.Source

Most other journeys are intercity journeys and for all but the ones that are over 400 miles or over large bodies of water, high speed rail (with speeds up to 220mph for conventional rail and 300mph for maglev) is a perfectly good replacement for the car and airline in many cases. Indeed time is money. The time savings between city centres and the ability to work while travelling (with access to internet wi-fi) is a powerful draw in Europe and Japan. Power can be taken from hydro, nuclear (the norm in France) and even renewable sources, bypassing the need for liquid oil transport.


French TGV: powered by nuclear
High speed lines have very little difference in construction to highways - apart from they take less space. Typical maximum gradients are 1 in 28 (3.5%). France, Japan, Germany, Belgium, Italy, The Netherlands, UK, Korea, Spain and China have already built lines. Spanish railways refund your ticket if their AVE high speed train is more than 5 minutes late, but then 99.82% arrived on time in 2000. Source

-- by Wildwell

142. U.S. MILITARY KEEN ON COAL LIQUEFACTION

In the last few months, Montana Governor Brian Schweitzer has been promoting the idea of liquefying Montana coal to bolster U.S. liquid fuel supplies. The U.S. Department of Defense is interested in this idea:

The military can help turn a proposal to convert Montana's vast coal supplies into liquid fuel from a dream into a marketable reality, a top U.S. Department of Defense official said Wednesday.
Coal-based synthetic fuels could replace the fuels the military uses to power its tanks and jet engines, Ted Barna of the Department of Defense said.
Not only would they give the armed forces a secure domestic supply of fuel to use, they burn cleaner and would be better for the environment as a result.
"It is hard to build a M1 tank that can pass the same emission (standards) as your Ford Bronco," he said.
[...]
Nazi Germany used coal-based synfuel to power its military aircraft during World War II when that country was shut off from oil supplies.
The high price of synfuel has kept it from enjoying wider use. But now that oil has shot up above $60 a barrel, it has suddenly become a cheaper alternative.
The nation's armed forces consume 4 percent of the fuels used in the nation, Barna said. The problem is more than half of the nation's oil comes from foreign nations, and that may rise to as high as 75 percent in 2025. Source: Bozeman Daily Oct. 20, 2005

Roughly estimating from the given figures, it would appear the DOD needs about 800,000 barrels/day, and the facilities to liquefy this amount of coal could likely be built for less than $80 billion. That's a lot of money but then again, the DOD budget for the U.S. in 2003 was about $400 billion.

I think the lesson to be drawn from this is that the U.S. military will be well supplied with fossil fuel for the forseeable future (i.e. at least the next 50 years). Direct involvement by the military/government in building coal liquefaction projects would be standard procedure. That's how all previous liquefaction facilities have been built, in Nazi Germany and Apartheid South Africa. (As the South African lawyer said: "oil is absolutely vital to enable the army to move, the navy to sail and the air force to fly, it is likely that a South African court would hold that it falls within the definition of munitions of war".) Once the military has a secure coal-based fuel supply, it is difficult to dislodge.

The collapse of the Federal government won't be happening any time soon. If the military is still functioning, so is the government. --by JD

141. WASTEFUL VS. EFFICIENT TRANSPORT

Oil's greatest effect has been on transportation. Without doubt this sector has been changed the most by cheap, readily available oil. Around 70% of oil goes directly to the transportation sector and nearly 50% is used by cars. So, apart from looking at alternatives fuels, it's worth just taking off those car-based rose coloured spectacles, and look at what's been happening around the world.

As it turns out cars are a hopeless machine for moving around cities (or even going to them) – by virtue of flow, parking and accidents and not all that good at energy efficiency. (See 58. EXTERNALITIES OF CAR USE.)

Imagine the race between the hair and the tortoise, while that 1.5 ton 11mpg personal monster appears to be an example of sexy consumerism, in the real world those that can get to work quicker, more easily and using less energy are ultimately going to win the race.

Traffic congestion, already costing Americans $63.1 billion a year, is only getting worse, according to a new report from the Texas Transportation Institute (TTI). Factoring in today's rising fuel prices adds another $1.7 billion per year.

[...]

• Annual delay per peak period (rush hour) traveler, which has grown from 16 hours to 47 hours since 1982,

• Number of urban areas with more than 20 hours of annual delay per peak traveler, which has grown from only 5 in 1982 to 51 in 2003,

• Total amount of delay, reaching 3.7 billion hours in 2003, and

• Wasted fuel, totaling 2.3 billion gallons lost to engines idling in traffic jams.Source

No wonder politicians have tried to solve this, and there are two schools of thought: Build more highways or encourage people onto mass transit. The first option sounds tempting (assuming you have the space) and sits well with oil companies, car makers and all the pimps of the highway lobby. And there is a great deal of political opposition to alternatives.

The absolute maximum highway capacity is 2,000 vehicles per hour (VPH) on grade separated freeways per lane, with various diseconomies of scale using on ramps as they fight for space down to less than 2,000 VPH for the whole highway (source). If those 2,000 vehicles have one person in them, they are extremely inefficient at getting people around in urban areas.

This compares to new rail lines in China moving 100,000 people per hour (source), with a 99% punctuality record (source).
Then you start feeding in the stats of an impending oil crisis and moving away from car based traffic in cities looks even more tempting. Some cities were built before cars or in topographically restricted areas - So mass transit has had to be the way.

The city of Hong Kong (China) has a population of 6.7 million and spreads out over Hong Kong Island and Kowloon. There is just no other way to get about. Fast, efficient mass transit means that less than 10% of households own a car(source).

Hong Kong has a metro system, owned and managed by the Mass Transit Railway. Kowloon-Canton Railway Corporation (KCRC) operates the extensive train network. Hong Kong Tramways run a tram system with double-decker vehicles. Peak Tram (a cable car on rails) operates between Central and Victoria Peak. There is a light railway system, The Light Rail Transit (LRT), within the northwest New Territories (comprising the northern part of the Kowloon peninsula and Hong Kong's outlying islands). Four companies operate bus transportation in Hong Kong; Citybus, New World First Bus Ltd, Kowloon Motor Bus (KMB) and New Lantao Bus. Also, because of the nature of the region, there are many ferries connecting the islands to each other and to the mainland.Source

And funding?

The Jubilee line extension in London was a missed opportunity. The £3.5 billion cost was a fraction of the £13bn Land value increases that come about as a result of its construction.Source(pdf)

Land Value Transfer (LVT) and property development to pay for mass transit already is happening in Hong Kong.

-- by Wildwell

140. HENRY GROPPE DOESN'T BUY SIMMONS' SAUDI COLLAPSE THEORY

Henry Groppe is a highly regarded oil forecaster who is famous for making a number contrarian predictions about oil and gas markets which later proved true. Groppe is also in the camp which disagrees with Matt Simmons' overheated collapse rhetoric. From the Resource Investor:

Groppe finds himself sort of in the middle in terms of the prevailing views on the future, both optimistic and pessimistic. He stated that, "Matt Simmon's view is that we're just on the verge of seeing very significant depletion decline rates and total world oil production will then decline precipitously and were approaching the end of the world economy as we've known it. Major oil companies take the view that it will be relatively easy to continually expand oil production, specifically, they all agree that world oil production can be expanded 50% in the next 25 years and we disagree very strongly with both of those viewpoints. We think there will be a flattening of total oil supply and the high prices needed to constrain consumption to match that available supply."Source

-- by JD (Thanks to popmonkey for the link.)

139. PETROLEUM ENGINEER FLAYS SIMMONS FOR SCARE MONGERING

As noted earlier, Matt Simmons has been previously debunked by Ali Daneshy, director of petroleum engineering at the University of Houston. Daneshy is on the record stating that Simmons (an MBA banker, with no technical background or expertise in petroleum engineering) is spreading misinformation about the dangers of water flooding in the Saudi oil fields (see #119). Simmons' views have also been disputed by Sadad Al Husseini, a geology Ph.D. who was formerly the head of Saudi Aramco's exploration department (see #89).

Now another petroleum engineer, Jim Jarrell of the Ross Smith Energy Group, has weighed in with an attack on Simmons' technical errors and scare mongering. From the Resource Investor:

Peak Oil Promoter Flayed for Saudi Reserves Scare Mongering
By Tim Wood
14 Oct 2005 at 03:47 PM EDT
St. LOUIS (ResourceInvestor.com) -- Jim Jarrell, a petroleum engineer and president of Calgary based buy-side research firm, Ross Smith Energy Group, has put himself in the way of an onrushing consensus.

Jarrell recently issued a report mockingly entitled, "Another Day in the Desert: A Response to the Book, Twilight in the Desert". It's a powerful critique of the petro pessimism presented by the book’s author, Matthew Simmons.

The book has played a signature role in propelling Peak Oil issues out of hobbyist discussion groups and onto Fortune 500 boardroom agendas. That's because Simmons is widely acclaimed as an expert with deep experience in the industry. With high oil prices currently lending inferential support to Peak Oil pundits, it has achieved remarkable consentience in the investment community.

Jarrell's acid-washing of Twilight in the Desert does not confront the Peak Oil hypothesis directly. Even so, his analysis of Saudi oil reserves being more plentiful and of adequate quality very clearly undermines some mainstays of Peak Oil.

Jarrell tackles three central issues that Simmons used to support his claim that Saudi Arabia is not the last best hope of oil gluttons - Are Saudi oil reserves grossly overstated?; Can Saudi production rates collapse? Are the Saudis exploring enough or not enough?Source

I'll refer you to the article for details. -- by JD

-----
Note: I have contacted Tim Wood, the author of the above article, and Mr. Jarrell's article is currently only available to paying customers of the Ross Smith Energy Group.

138. WHY CALL IT "PEAK OIL DEBUNKED"?

QUESTION: "If you believe in peak oil, why do you call your blog 'Peak Oil Debunked'?"

I have discussed this issue before, but here I will tackle a lingering question/criticism from the comments:

Big Gav says: "Maybe you should call it "dieoff debunked" or "collapse of industrial civilisation debunked" - then the rest of us might not consider you a pariah."

This is a good ploy. "Oh yeah, those wacky Mad Max, run for the hills, industrial collapse, dieoff doomers. We don't have anything to do with those goofballs."

Actually, you do have something to do with them. Buzz over to The Oil Drum, the peak oil voice of reason, and the links are there for everyone to see: Savinar, From the Wilderness, dieoff.org, Richard "Olduvai" Duncan. Why do you link to them if you guys are the moderates? Why are you all buddy-buddy with them?

In fact, I'll take it a step further. I think there's scads of you 'moderates' who think just like Heinberg. You actually do believe in the die off, you just think it's going to take a little longer. The decline curves in Limits to Growth are burned indelibly into your mind. You respect the ideas of Catton, and Paul Ehrlich. Industrialization and population are the problem, and we have to limit ourselves and powerdown, or we are screwed.

That's why I don't want the peace pipe from you Gav. I'd rather stay a pariah. If I changed my blog name and started shrieking out warnings, people might get the impression that I'm on your team. But if you are anti-industry, anti-technology, anti-science, anti-progress and anti-growth, I'm not on your team, and "Peak Oil Debunked" is just the right name. It draws a clean line between me and the sites that link to dieoff.org as a valuable learning resource.

I'll tell you what Gav: When the "moderates" stop linking to dieoff.org, I'll change the name of my site.

Now, it may be that a newbie pops in here, reads the first post and blows peak oil off. That's a risk I am prepared to take. If they blow it off, at least they won't get indoctrinated by the short-term die-off people or the long-term die-off people like Heinberg. They'll just go on believing that technology can solve the problem. That's okay, because that's pretty much what I think too. We're going to go through some gut wrenching social/infrastructure changes, but technology, industry and the human mind will solve the problem. There will be a techno-fix.

The term "Peak Oil" itself is misleading. It makes you think that "oil" is the problem, but it isn't. The problem is cars and sprawl and waste in the first world, and that's what we should be talking about, not the minutiae of Saudi Arabian geology. It's like junkies trying to solve their problem by analyzing maps of the poppy fields in Afghanistan. So I think "Peak Oil Debunked" is a good name. -- by JD

137. PEAK OILER DOGMA

-- by Antimatter

The assertion that new technologies, EOR etc only increase production rate but not URR is taken as gospel.

Ditto for the assertion that reserves growth is solely a function of conservative SEC reporting rules in the US.

Chevron does a nice little PR campaign (willyoujoinus.com) - peak oilers say "Chevron says peak oil is here!"

ExxonMobil forecasts that non-OPEC production will peak around 2015. In their forecast, NGLs, tar sands and other unconventional liquids turn this into a plateau and OPEC boosts production resulting in no peak till 2030. Somehow, peak oilers say "ExxonMobil says oil will peak in 2010!!"

The WoodMackenzie report that found some oil companies spent more on exploration than the value of the oil they discovered is often cited. Never mind that that study was based on $20 oil, and a later report from WoodMac showed that at $40 even the poorly performing companies had done very nicely indeed.

Sudden dips in production from country x,y,z are seized upon. Witness the thread a month or so ago entitled "MEXICAN OIL PRODUCTION CRASHES!" when production was shut in due to a hurricane. A similar thread on Norway was started when production fell sharply, complete with much hand wringing. Turns out the official reason, fields shut down for maintainace for longer than expected, was true, and production rebounded a couple of months later. Naturally, this went unnoticed.

Many peak oilers deride economics, then point to the high price of oil as proof that peak is here.

Posts full of errors such as confusing source rocks and reservior rocks are greated with backslapping and approval when they fit the groupthink view.

An OPEC official announces that members are free to produce flat out. This has happened a couple of times at least. Peak oilers freak out and compare it to the Texas Railroad Commisions statement in 1970 allowing producers to pump flat out. This is followed by "the peak is here!!!". The possibility that OPEC may expand capacity is evidently not considered.

Events are taken out of context. For example, Saudi Arabia announces they are doubling their active rig fleet to 110 rigs vs 50 or so. Peak Oilers say "they are desperatly drilling holes as fast as possible to offset exponentially increasing declines". This lacks context. As we speak, 2179 rigs are churning away in North America alone for much lower returns. It should be no suprise that this occurs after they reveal ambitious plans to increase production to meet surging demand, after churning out crude for decades without drilling many new wells.

Every possible piece of news is taken as evidence The Peak Is Here, whilst Campbell/ASPO shifts the peak back (again) to 2010 and Jean Laherrere's liquids peak of 2015 stays steady.

136. WILL DECLINING EROEI CAUSE COLLAPSE?

-- by JD

The peak oilers say the EROEI of oil is increasing. It is taking ever increasing amounts of work to produce a barrel of oil. In the early days of oil you could stick a straw in the ground and collect oil flowing out under its own pressure. But now we have to harvest low grade oil from sources like the tar sands -- mining it like coal and cooking it in huge vats. We're putting in more work per unit of energy returned.

In some ways, that is true, but it's not necessarily a danger signal. Look at the step from hunting/gathering to agriculture. Jared Diamond makes a good case that hunting/gathering had a higher EROEI than agriculture:

Are twentieth century hunter-gatherers really worse off than farmers? Scattered throughout the world, several dozen groups of so-called primitive people, like the Kalahari bushmen, continue to support themselves that way. It turns out that these people have plenty of leisure time, sleep a good deal, and work less hard than their farming neighbors. For instance, the average time devoted each week to obtaining food is only 12 to 19 hours for one group of Bushmen, 14 hours or less for the Hadza nomads of Tanzania. One Bushman, when asked why he hadn't emulated neighboring tribes by adopting agriculture, replied, "Why should we, when there are so many mongongo nuts in the world"?

[...]

One straight forward example of what paleopathologists have learned from skeletons concerns historical changes in height. Skeletons from Greece and Turkey show that the average height of hunger-gatherers toward the end of the ice ages was a generous 5'9" for men, 5' 5" for women. With the adoption of agriculture, height crashed, and by 3000 B. C. had reached a low of only 5’ 3" for men, 5’ for women.Source

This is very strange, because the peak oiler theory is that decreasing EROEI leads to contraction or collapse. Diamond's evidence, on the other hand, suggests that a dramatic drop in the EROEI of humanity's first and most important energy source (food) led not to collapse, but to a massive explosion of growth.

It's intriguing to carry the analogy over to modern petroleum production. The original wildcatters were hunters, and big oil fields were their prey. But now the game is getting thin, and the hunters are turning into agriculturalists. The tar sands in Alberta are a petroleum farm. We're moving beyond the hunter/gatherer stage of oil; now it's about hunkering down and laboring in the fields.

135. THE BARTER SYSTEM

-- by JD

Economics is another side of peak oil doom. The doomers (and even some moderates) are frothing extremists about the current economic system. They hate and ridicule economists, and believe them to be preachers of a false religion. They scoff at the free market. They also hate the so-called "fiat" or "debt" money system. I will be addressing these topics in more detail in future posts, but today I would like to focus on the barter system. This is often proposed by simplistic doomers as the best way to get out from under the current regime of "funny money". Here's a typical doomer soundbite:

Malthus wrote:

The only exchange system than can exist in peak energy and post peak to me is barter. You are making assumptions that money is neutral which it is not, especially when it has no intrinsic value, people will revert to grain based money or something like it.

There's no denying that barter is interesting and has its place. Large companies and countries use it, and the Internet has provided an added stimulus, with ebay-like websites that allow people to barter long distance. I have a hippy friend in Colorado who likes the barter lifestyle, and pays rent by refurbishing the houses he lives in. He likes it because he can dodge taxes and stay off the government's radar screen.

Malthus, however, isn't talking about a pluralistic monetary culture, where barter is a complement to the fiat money system. He is referring to a society which has banished the evil pied piper of "funny money" for good. Could such a society really exist?

Certainly a state of barter could occur under extraordinary circumstances, but I don't believe the barter system is stable. Barter is inconvenient and inefficient. Here's a good description:

This early form of barter, however, does not provide the transferability and divisibility that makes trading efficient. For instance, if you have cows but need bananas, you must find someone who not only has bananas but also the desire for meat. What if you find someone who has the need for meat but no bananas and can only offer you bunnies? To get your meat, he or she must find someone who has bananas and wants bunnies....The lack of transferability of bartering for goods, as you can see, is tiring, confusing, and inefficient. But that is not where the problems end: even if you find someone with whom to trade meat for bananas, you may not think a bunch of them is worth a whole cow. You would then have to devise a way to divide your cow (a messy business) and determine how many bananas you are willing to take for certain parts of your cow.Source

Even if society collapses to such a degree that barter is necessary, society cannot keep collapsing forever, and thus will restabilize at some point. When stability is reached, people must conserve energy and increase their efficiency, so they will streamline the barter system by adopting a more divisible convenient money surrogate like gold (which is better than grain because it doesn't degrade, and thus is closer to abstract money). Once the switch to gold is made, the logic which drove our ancestors to create fiat money will drive the same change again. Gold will lead to fiat money by the usual route. That transition itself will be partly driven by the need to conserve energy. Hauling gold (or any commodity) around to do transactions requires real physical work.

Imagine a whole country going shopping every day with a cow or grain or gold currency. Just one day of that would require a huge, wasteful, unnecessary expenditure of muscular energy. People will tire quickly of having to "lug" their money around. The last thing you would want to do in an energy poor world is buy big-ticket items with "grain money". You know, like: "Hey man, I brought your money over. It's parked out front in that convoy of horse drawn wagons."

No, it's much easier to just deposit the grain or the gold in a storehouse somewhere, and exchange the receipt, or the deed. And there you go: fiat debt money is back in business.

134. PEAK OIL HYSTERIA

-- by Wildwell

Peak oil hysteria can be measured on a parallel scale to:

1) Car ownership and car dependency
2) Planning regime and geography of a nation

The most worried people are those that live a lifestyle that requires the use of a motor car and see little or no alternative for the foreseeable future. It's notable that Europeans are more 'laid back' abut the issue and so on.

This does not mean that there isn't a problem; merely the perceived problem is less in the minds that don't follow daily fuel rises and so on because of a need to go about their daily business. A typical commuter in London, Paris, Madrid, and Tokyo would just not notice the problem using electric trains, buses and having little to with agriculture.

In the United Kingdom, London centric news is reported first. There can be major problems in rural Wales, but this would not show up on the radar in London, simply because it doesn't figure in the minds of people who take electric trains, deal in IT or many service industries and have large incomes. Indeed, sales of SUVs in London have doubled in the last 12 months, despite record oil prices - proof of the relative disposable income of some sectors of the population.

British telecom recently ran an ad in a Transport professional's magazine looking at their view of the future. It described 'Green webs'

The ad starts 'Sustainability, and the management of scarce resources' are becoming increasingly key issues that will shape the future'. It goes on to describe how 'Green Webs' will manage travel, transport, energy, water supply, recycling and industry supply chains. Later it talks about a staggered rush hour, efficient mobile devices and networks. Essentially it talks about the 'Information age' and mentions things will change because of oil rising above $100 a barrel and how highly production of food localised will be done using robotic machines. The point of the ad is that transport is about to go through an IT revolution with real time capacity allocation, yield management, tracking and automation - spreading the load and maximising resources.

http://www.transporttimes.co.uk/files/TT003_7OCT05.pdf

The ads run from page 12

132. RUPPERT MILKS HIS FOLLOWERS FOR MONEY

Mike Ruppert* is the Oral Roberts of peak oil. Everybody is out to get him, so he's been forced into the unfortunate position of having to milk his followers for cash to pay his rent, bills and moving expenses. The really scary part is that he's going to (yikes!) go silent if the checks aren't forthcoming. Lord, let's hope it doesn't come to that. That'd be almost as bad as the 900-foot Jesus taking Oral "home":

I have loaned all of my father's life insurance back to FTW to keep it serving you through the sabotage, back taxes and court cases. I have not taken a paycheck since March. Yet every FTW employee has always been paid on time and we are current with our creditors. But it is now getting difficult for me to pay my rent and personal bills.

Seeking refuge in a foreign country remains a less-desirable option if things get worse but it is one that I cannot rule out.

Presently, Denial Stops Here is in the final stages of editing and music mixing. I do not have enough money to reproduce it to sell. I do not have enough money to relocate FTW and its staff. The one thing I can do is to sell my car to finance the DVD, but that would pose other serious problems. I have traveled to participate in two events in Washington this year at my own expense.

We’re running on fumes at FTW and we have been forced to reach out for help again.

In 2000, FTW subscribers responded almost overnight with $11,000 to keep us going after a business plan to resurrect suppressed books was torpedoed by a high school classmate who had worked for the National Security Agency leaving me on the hook for several thousand dollars.

In 2003, thanks to you, FTW raised more than $130,000 in five weeks to pay for a series of full-page ads which ran in major newspapers around the country and really upset some major politicians and special interests. FTW will be eternally grateful to a wonderful man, Jack Gubanc, who made that first ad in the Washington Post possible. Jack showed us what kind of support we had out there, and we sadly mourn his recent passing. Rest in Peace, Jack.

We need that much again and more. It’s not just me that has to move. We have four staff members with families and we need to secure office space in our selected community before leaving here.

If you read FTW regularly, and if you have read Crossing the Rubicon you understand how critical it is that we get out of Los Angeles now. You know that – before this descending curtain of repression and collapse sinks any lower – we must release our new DVD. There is no more time.Source

------------
*) See 91. LET'S MAKE A DOOM DEAL, 115. MIKE RUPPERT, PEAK OIL STOOGE, 116. DALE ALLEN PFIEFFER WISES UP)

131. UPDATE ON LUNAR SPACE POWER

I have previously discussed a number of space power technologies which will allow humans to tap massive, non-polluting, non-depleting power flows (see #5, #33, #51, and #104). In the mid to long term, it is these technologies which will allow humans to escape the fate of overshoot/die-off like "yeast in a petri dish".

At the moment, Lunar Solar Power (LSP) has the best potential, and the groundwork is being laid. NASA has reprioritized, and late last month announced that the next milestone will be a return to the moon by 2018:

Still, the new plan is "a significant advance over Apollo," he added, describing it as "Apollo on steroids." Among other differences, the new lander is larger, can put twice as many people on the moon, leave them there potentially for months instead of days, land them anywhere on the lunar surface instead of just at the equatorial region and leave the orbiting spacecraft without a crew onboard.Source

Michael Griffin, the administrator of NASA, envisions the new moon mission as taking the first steps to harvest extraterrestrial resources and energy:

Possibly, one of the most useful (resources) we will get from the moon is liquid oxygen. It can be extracted fairly easily from the lunar soil. If shipped from the moon to other storage depots, it will have very high value because it is half of the propellant needed for any exploration or any other rocketry activity over the next few decades. It is also reasonable to think about manufacturing solar arrays on the moon and then beaming that power around the Earth/moon system so that every spacecraft we build doesn't have to carry its own power system. Another reason we should return to the moon (first), is that we are not ready to go to Mars for a variety of engineering reasons. And the use of the moon and space station provide the best avenue for solving those problems.Source

The LSP Concept (click to enlarge, Source)

The Space Review has a new interview with David Criswell, the father of LSP. This bit on the economics is interesting:

Dinkin: What is the minimum money scale for a viable lunar solar power (LSP) project that would cost the same as Earth generated power?

Criswell: When LSP approaches 100 gigawatts electricity (GWe) of capacity and has delivered in excess of 500 GWe years (GWe-y) of energy the LSP energy will drop below the cost of electric energy from conventional systems. This will likely require the order of $400 to $500 billion.

This is a bit over one year of the Department of Defense’s (DoD) budget or about three years of global expenditures on exploration and development of oil and natural gas to maintain about 85 million barrels of oil per day production. A 20-terawatt-electricity (TWe) LSP is the equivalent of 1,000 million barrels of oil per day.Source

130. HEAVY CRUDE REFINING CAPACITY

We keep hearing that sweet, light crude has peaked, and the new stuff coming online is heavy, sour crud that refineries can't handle. This is yet another myth. The world has a great deal of heavy refining capacity, as you can see from this article (dated Nov. 17, 2004) found by SilentE:

In a year that has seen oil prices reach record highs, it may seem odd that producers have been offering discounts to get rid of the stuff. But that has been happening with crude oil known as "heavy sour," which is different from the "light sweet crude" whose per-barrel price is most often quoted as the price of oil.
In fact, more than three-fourths of US refinery capacity can process heavy sour, which typically sells for a few dollars less than light sweet crude because it is not as easily refined. And this year, as Persian Gulf producers have flooded the market with additional supplies of the heavier sour crude, the sweet and sour price gap has grown even wider, reaching $17 to $18 the last week of October.

That's good news for US refiners, which are considered to be in a better position than those in other countries to take advantage of the discounts. Indeed, earnings announcements by US refiners are singling out the cheaper sour crude as a major reason for their growing profits.
"This has resulted in excellent refining margins," said Curtis Hyatt, an associate director for the Cambridge Energy Research Associates, an energy consulting firm. But it's unclear how much, if any, of the savings from the cheaper crude oil have benefited US consumers.

"I haven't seen anything that the savings have been passed through to consumers," said Tyson Slocum, research director for the energy program at Public Citizen, a public interest group in Washington.
Beyond improved refinery profits, the discounts are highlighting the growing role of heavy sour in meeting demand for petroleum products. Light sweet crude such as West Texas Intermediate is needed by a majority of the world's refineries. But the sweet crude is estimated to constitute only 30 % of the world's reserves. The heavier sour crude oil accounts for the balance.

Worldwide, OPEC estimates that 45% of refining capacity can use heavy sour oil. Refineries, for a hefty price, can be upgraded to handle heavy sour. Still, few expected in 2003 that refineries would soon have to scramble to find light crude.
Such a scramble occurred this year when OPEC took most of its surplus oil production out of mothballs to try to moderate rising oil prices and meet rising demand. Most of the added oil was medium and heavy sour, which did not help greatly in some regions. In Asia, for example, where China's growth is driving demand, OPEC estimates that only 30% of refineries can process heavy sour oil.

So, light sweet crude such as West Texas Intermediate remained in relatively short supply, putting more pressure on the price. In contrast, plenty of sour crude was on the market, which triggered additional discounts for it. At one point this year, a barrel of Arab Gulf Dubai heavy sour crude produced in the United Arab Emirates was $18 less than a barrel of West Texas Intermediate, the US benchmark. As the price of light sweet crude has dropped, that gap has narrowed, and it dipped just below $13.
But the gap is farmore than is historically normal -- it was about $4 a year ago -- and OPEC has clearly been irked by accounts of record prices for Texas sweet crude while its members have gotten far less for their sour crude.

"Not withstanding those headlines marking benchmark price levels, another major but less widely reported market characteristic is the increasing gap between light sweet and heavy sour grades," according to OPEC's Monthly Market Report for October.
Light sweet crude has its advantages. Light oil, compared with medium and heavy, is more easily refined into a high percentage of high-value products such as gasoline. And "sweet" oil contains less sulphur than sour does, and sulphur must be removed to meet environmental regulations. As a result, heavy sour costs more to refine, meaning its producers must offer it at a discount off the price of light sweet crude.

When the price gap widened between sweet and sour crude, US refineries were better able than most to take advantage of the gap. Refineries along the Gulf Coast, which account for about half of the country's refinery capacity, are considered the most sophisticated in the world. Venezuela, which is a major producer of heavy sour oil, became partners in some of those refineries to ensure a market for its oil.
"We're probably in a better position than most to handle these heavy oils," said Joanne Shore, an analyst for the Energy Information Administration. In addition, California refineries have been upgraded to handle heavy sour crude, and most of those in the upper Midwest are also thought to be capable of handling heavy sour crude.

Another indication of the country's increasing use of lower-quality crude oil is that the Strategic Petroleum Reserve, which is meant to help the United States in case of a major disruption in oil supplies, is two-thirds sour crude and one-third sweet crude.
So given that tilt toward lower grades, is it misleading to use the widely reported price of West Texas Intermediate, a US benchmark for light sweet crude? Analysts say no, in part because oil is a worldwide market and sweet crude is a crucial part of it. In addition, sweet crude is needed by many US refiners.

The wide difference between sweet and sour crude prices is important to most US refineries. Valero Energy, the country's third-largest refining company, in a recent filing with the Securities and Exchange Commission, said a "significant" percentage of the oil it used was sour crude, and the difference between sweet and sour crude prices affected its profitability.
Premcor, another US refining company, reported third-quarter earnings of $145 mm, dwarfing the $60 mm it made in the same quarter a year ago. Premcor singled out the use of sour crude for its contribution to those profits.
"Margins have been enhanced by what appears to be a longer-term widening of the differential between light low-sulphur crude oil and heavy high-sulphur crude oil," Thomas O'Malley, the company's CEO, said.

It can cost hundreds of millions of dollars to upgrade a refinery to process heavy sour, but the current discounts for sour crude are making such investments look good. However, there are concerns that the costs of converting more US refineries will be much harder to recoup if the discounts return to levels of just a year or two ago. Hyatt, of the Cambridge Energy Research Associates, said the wider price spreads between light and heavy crude should last through at least next year. But any reduction in worldwide demand for oil or more supplies of light sweet crude, which may be possible from Russia and Africa, could cause the price spread to narrow.
"If that happens, the shift would not be permanent," he said.

But longer term, the ability to use heavy sour crude is an issue that's expected to confront the refining industry because of the vast reserves of the oil. OPEC, whose members already have large amounts of sour crude to sell, think the time is now to upgrade more facilities worldwide -- and even in the United States -- to add more flexibilityin handling different types of crude.
The US refinery system could use the additional flexibility, according to OPEC. Though much of the industry can refine sour crude, refiners have no excess capacity to adapt to growing demand and the United States is importing about 10 % of the gasoline it needs. It is further pressed by the need to produce several "boutique" gasoline blends to meet environmental regulations in different parts of the country.
As S.A. Kermati, a petroleum products market analyst for OPEC, summed it up: "The situation is very fragile, especially for a market which is leading the rest of the markets."Source

129. WHERE'S THE RELOCALIZATION?

One of the rarely examined postulates of the peak oil catechism is that increasing oil prices will cause the economy to relocalize. Expensive crude will pull the rug out from under globalization, and everything will have to be made closer to home because fuel costs will make it too expensive to ship goods long distance. This myth was conclusively refuted in #55, but some of my readers are too stupid or obstinate to understand that reasoning, so allow me to take a different tack.

Crude oil prices hit a low of $10 in 1998, and increased 7 times (600%) to a high of $70 in August of 2005 (click on images to enlarge):

Source
Meanwhile, imports from China ballooned from US$ 5 billion to 20 billion:

Source
And Walmart kept right on growing, as usual:Source
The latest stats on Walmart:
Revenue: $300 billion
Quarterly revenue growth (yoy): 10.20%Source

So where's the relocalization? Oil prices shoot up by 600% and there isn't a shred of evidence of any relocalization whatsoever.

Indeed, the latest news from the auto industry is the impending bankruptcy of Delphi, and the need to move auto parts manufacturing offshore due to high U.S. labor costs:

"I think under any circumstances, Delphi will have to downsize its domestic operations and probably increase its offshore operations," he said.
[...]
"You have to go where the costs are lowest, and at the moment the costs are lowest in India and China," Munson said.Source

The sad reality is that relocalization is a fantasy. High oil prices have no effect whatsoever on trade volumes, just as the calculation in #55 shows. Anybody who thinks otherwise needs to produce even a single real-world case where a product has been relocalized due to high fuel costs.

128. FREDDY HUTTER'S ACID TEST

Freddy Hutter is a longstanding critic of Colin Campbell, and the publisher of an outstanding peak oil resource called Trendlines. He had a great post at The Oil Drum this morning, and I hope he doesn't mind my reproducing it here for wider consumption:

Next time u are at a doomster site, look for dates...

In what year will the globe be down to 1 billion?

In what year will we bulldoze the suburbs and use the salvage to rebuild in the city cores?

In what year will North Americans no longer have cars?

Heinberg came to Vancouver last year and told us we should start building massive manufacturing plants in the West for shoes, etc 'cuz soon China and other nations will not be able to find or afford fuel for tankers or freighters. Tell us Richard, in what year will that momentous crossover occur?

In what year will the Antarctic be ice free and similarly, in what year will NYC be under nine metres of water? The Hadley GCM Model says only 26cm (about 10 inches) by 2100!

When "they" start giving time lines, it opens up their rhetoric for challenges. That is the acid test of a good site.Source

127. PEAK OIL: TOO GOOD TO BE TRUE

In my opinion, this is the best argument against peak oil causing the collapse of modern civilization: it's too good to be true. The idea that we could be magically released from the stifling, inane rat race which governs our lives is appealing -- so appealing in fact, that we should be very suspicious of it.

The post-peak utopia is not going to arrive for the simple reason that it is a utopia.

Read the above sentence again, and let it sink in. Both the hard doomers and the softer relocalization peakniks like Heinberg deceive themselves by failing to fully appreciate the weight of that statement. They are allowing their hopes and their dreams to color their sober judgment.

Here's a case study, killJOY from peakoil.com:

I don't hate America, but I do hate the government. I can't wait for it to collapse.

Naturally, killJOY is damn sure that peak oil will collapse the government. By an amazing coincidence, reality is going to obey his wishes.

My thinking is that the government is not going to collapse, because it's too good to be true. Think about it carefully and see if you don't agree. It's a very strong argument -- a sort of wisdom, something an old man would say to you.

I get skeptical when people start talking about the "good side of peak oil" -- like my friend bart who (understandably) longs for: "healthy, delicious food; beautiful, hand-crafted tools and homes; satisfying relationships and communities. "

It's a chapter out of Sigmund Freud, Civilization and its Discontents. Industrialism, crass consumption, debt-based fiat money, the rat race, the gubmint, environmental devastation... Whatever your peeve with the modern world is, peak oil is going to wipe it off the face of the earth, and lead us (after the "Tribulations", of course) into the New Jerusalem.

It's a form of wishful thinking, and that's why the rejoinder "too good to be true" is such a good argument. It's like cutting the Gordian Knot. It's an argument without arguing, and it's effective.

Look at killJOY. He said " I can't wait for the government to collapse" months ago, and it's gotta be demoralizing now, what with Colin Campbell pushing peak oil back to 2010. Waiting for peak oil to lay waste to industrialism, globalism and government is like waiting for Godot, or Jesus. He never comes. What makes you think you're so special -- that you'll live to see The Endtimes?

It's like a child with a lottery ticket, telling his mother. "I'm gonna be the winner, Mom! I Just know it!!"

There's no argument to prove to the kid that he's wrong. He's just having a hyper, emotional response, and you have to help him calm down. You can't reason with him about it, because he'll just keep confabulating.

The best approach, of course, is to tell the kid: "You're not going to win. It's too good to be true."

The message: You're over-excited, son. It's better to calm down. The world doesn't work neatly like that. It's messy, and sloppy, and full of friction and tenacity and delay. The "good guys" don't win.

126. NUKE THE TAR SANDS 2

In #19 NUKE THE TARSANDS, I described the old idea of detonating a nuclear device to melt the oil out of the oil sands in Alberta. There's another way to achieve the same end: build a nuclear reactor on site, and use it to replace natural gas as the heat source.

This is an old idea, and Total revived it a couple of weeks ago.

Total May Use Atomic Power At Oil-Sand Project (WSJ, behind subscription wall)
PARIS -- French oil giant Total SA, amid rising oil and natural-gas prices, is considering building a nuclear power plant to extract ultraheavy oil from the vast oil-sand fields of western Canada.

This comes as oil prices -- driven even higher by Hurricane Katrina and now the threat of Hurricane Rita -- are removing lingering doubts about the long-term profitability of extracting the molasseslike form of oil from sand, despite the fact that the output is much more expensive to produce and to upgrade than is conventional crude.

At the same time, prices of natural gas -- which oil-sands producers have relied on to produce the steam and electricity needed to push the viscous oil out of the ground -- have risen 45% in the past year. That is prompting Total, which holds permits on large fields in Alberta that contain oil sands, to consider building its own nuclear plant and using the energy produced to get the job done.Source

Natural gas prices are skyrocketing, and the economic advantages of this approach are getting too big to ignore:

The gas which does the heating can account for 60% of operating costs, so rising gas prices can devastate the economics of the projects.

Gas in Canada could cost $10 per million cubic feet (mcf) by the end of the decade; a study by Atomic Energy of Canada concluded that nuclear power was cheaper when natural gas cost just $4.5 per mcf. That means a $1bn (£560m, E820m) annual saving for the main oil sands operators Suncor, Nexen, ExxonMobil, Shell and Total.Source

With that kind of money at stake, the big players are well aware of it:

CALGARY, OTTAWA -- Total SA's murmurings about using nuclear power to fuel oil sands production in Alberta have opened debate on a topic many big-name players in the industry have been mulling quietly for several years.

While there already was a public study in 2003 that indicated nuclear power made economic sense for the Fort McMurray region, the controversial subject has mostly been discussed behind closed doors.(Source: Globe and Mail (9/23/2005)

It's not clear whether this technique will actually be used. The only other option is to generate heat by burning the oil itself, and that would be a carbon emission nightmare. One thing is clear, however: the oil sands will be produced. It's just a question of whether we're going to do it the dirty way (and waste vast amounts of the oil in the process); or do it the clean way with nuclear. Environmentalists need to get their head around that. The option where we don't produce the oil sands is a utopian dream. It's not on the table.

"There is no environmental minister on earth who can stop the oil from coming out of the sand, because the money is too big," said Canada's environment minister, Stéphane Dion, in an interview.Source

125. THE FIVE PHASES OF THE FOSSIL FUEL ERA

The cross-over points where production of one fossil fuel exceeds another are an interesting structural feature of energy production. There are 5 of these points, and they delimit the five phases of the fossil fuel era.

1) The Age of Coal: First there is only coal, and its production rises alone. This phase begins in the early 1800s, and continues until around 1965, as can be seen in the following chart (click to enlarge):Source(pdf)
2) The Age of Oil: Oil rises and exceeds coal. This is the point in the above chart where the green line (oil) crosses over the black line (coal). The cross-over happened in the mid 1960s and marked the beginning of the Age of Oil.

3) Natural gas rises and exceeds coal. This is happening right now. According to the DOE's Annual Energy Review 2004 (p. 299), world coal production in 2002 was 99.69 quads, while world natural gas production was 98.7 quads. In the following graph, this second cross-over point is the point where the green line (gas) crosses over the yellow line (coal):World Energy Consumption by Fuel Type, 1970-2020Source
4) The Age of Natural Gas: Oil peaks and falls, and some time later, natural gas exceeds oil. This will mark the beginning of the Age of Natural Gas.
5) Oil keeps falling, and coal exceeds oil.
6) The Second Age of Coal: Natural gas peaks and falls, and some time later, coal exceeds natural gas, marking the beginning of the Second Age of Coal.
7) Decline: Coal peaks, and the fossil fuel era enters its final phase.

124. FISCHER-TROPSCH ARCHIVE

For obvious reasons, I am interested in the history of coal liquefaction in Nazi Germany, and I happened upon this interesting abstract for a history seminar by Dr. Anthony N. Stranges, Professor of History at Texas A&M University:

GERMANYS SYNTHETIC FUEL INDUSTRY 1927-45
Germany has virtually no petroleum deposits. Prior to the twentieth century this was not a serious problem because Germany possessed abundant coal reserves. Coal provided for commercial and home heating; it also fulfilled the needs of industry and the military, particularly the navy. In the opening decade of the twentieth century, Germany's fuel requirements began to change. Two reasons were especially important. First, Germany became increasingly dependent on gasoline and diesel oil engines. The appearance of automobiles, trucks, and then airplanes made a plentiful supply of gasoline essential. Moreover, ocean-going ships increasingly used diesel oil rather than coal as their energy source. Second, Germany's continuing industrialization and urbanization led to the replacement of coal with smokeless liquid fuels that not only had a higher energy content but were cleaner burning and more convenient to handle.

Petroleum was clearly the fuel of the future, and to insure that Germany would never lack a plentiful supply, German scientists and engineers invented and developed two processes that enabled them to synthesize petroleum from their country's abundant coal supplies and to establish the world's first technologically successful synthetic liquid fuel industry. Friedrich Bergius (1884-1949) in Rheinau-Mannheim began the German drive for energy independence with his invention and early development of high-pressure coal hydrogenation or liquefaction in the years 1910-25. A decade after Bergius began his work Franz Fischer (1877-1947) and Hans Tropsch at the Kaiser-Wilhelm Institute for Coal Research (KWI) in Mülheim, Ruhr, invented a second process for the synthesis of liquid fuel from coal.

By the mid-1930s IG Farben, Ruhrchemie, and other chemical companies had started to industrialize synthetic liquid fuel production, resulting in the construction of twelve coal hydrogenation and nine Fischer-Tropsch (F-T) plants by the time World War II ended in 1945. Several breakthroughs contributed to the success of coal hydrogenation the most significant of which were the sulfur resistant catalysts and the two stage liquid-vapor phase hydrogenation that Matthias Pier (1882-1965) at BASF (IG Farben) developed in the late 1920s. For the F-T synthesis the cobalt catalysts that Fischer and his co-workers prepared in the 1920s-30s were crucial to its success.

Because of synthetic liquid fuel's high production cost the industry benefited from the financial incentives Germany's Nazi government offered beginning in December 1933, and because liquid fuel was crucial to Germany's war effort the synthetic fuel industry became a major part of Adolf Hitler's Four Year Plan of 1936. As the war dragged on, the synthetic fuel industry, like many German industries, experienced serious labor shortages, and to avoid any loss of production and slowdown of the war effort some of the plants used forced labor that the German government provided.

Of the two processes hydrogenation was the more advanced and contributed much more significantly to Germany's liquid fuel supply than the F-T synthesis. Coal hydrogenation produced high quality aviation and motor gasoline, whereas the F-T synthesis gave high quality diesel and lubricating oil, waxes, and some lower quality motor gasoline. The two processes actually were complementary rather than competitive, but because only coal hydrogenation produced high quality gasoline it experienced much greater expansion in the late 1930s and war years than the F-T synthesis, which hardly grew at all. F-T products were mainly the raw materials for further chemical syntheses with little upgrading of its low quality gasoline by cracking because of unfavorable economics.

Hydrogenation also had experienced greater development because brown coal (lignite), the only coal available in many parts of Germany, underwent hydrogenation more readily than a F-T synthesis. In addition, the more mature and better developed hydrogenation process had the support of IG Farben, Germany's chemical leader, which had successfully industrialized coal hydrogenation beginning in 1927. A historical analysis of the invention and industrial development of the two synthetic fuel processes during several decades of German social, political, and economic unrest follows.Source

Apparently, Dr. Stranges is one of the world's foremost authorities on the history of Nazi coal liquefaction. He is currently working on a website archive of primary sources on this topic called the FISCHER-TROPSCH ARCHIVE. The description of the archive is as follows:

Purpose: There is a large body of documents from the 1920's through the 1970's which are important for researching the history and development of the Fischer-Tropsch and related processes. The purpose of this site is to make these documents available in electronic media.

123. MORE RACIST CONNECTIONS

Richard Heinberg has this to say about the political dimensions of peak oil:

So we're entering a period of potential political turmoil where we may see governments shifting from one extreme to the other with nobody really having the ability to address the issues and with both sides being motivated to hide what the real issues are. Nobodies going to want to say, well this is all the inevitable result of industrialism itself, it's the way of life that our parents and grandparents and we ourselves have adopted, a way of life based on resource extraction and growth that has produced these problems. Nobody's going to want to say that, you know there are people on the left that are going to want to point the finger at rich individuals and the greedy corporations, and the people on the right are going to be pointing their finger at the leftists and foreigners and terrorists and saying we'll just need to invest more money in police and military and intelligence gathering and so on, and none of these solutions will help the least bit. I'm afraid that political and economic and energy capital are going to be squandered, not in solving the problem but in hiding the problem. So what we really need is actually a whole new form of politics. An ecological politics, a politics of reality. Now who's talking about this? Very few that I have seen. I think the marxist and most of the anarchists are pretty much avoiding the issue. There are a few people who are mostly scientists, people like Virginia Abernathy who wrote the book "Population Politics" and David Pimentel a professor up in Ithaca, New York, people like that are aware of the issues but these are scientists, they're not political leaders. It's going to take a different kind of political leader to raise these kinds of issues and it's difficult because people don't want to hear the bad news.Source

We've already seen in #106 that Abernethy is on the board of The Occidental Quarterly, a white nationalist publication. The Southern Poverty Law Center is keeping an eye on Abernethy, and dug up this interesting interview material:

The Center for New Community, an antiracist group based in Chicago, reported that PAN director Kathy McKee in July brought in Virginia Abernethy, a retired professor who is tied closely to the Council of Conservative Citizens (CCC; see Communing with the Council) hate group.

Although Abernethy denied being a supremacist, telling the Arizona Daily Star that she was merely a white "separatist" who preferred to be "with my own kind," she was immediately denounced by the Federation for American Immigration Reform (FAIR). FAIR, which helped pay to gather signatures for the referendum but later broke angrily with McKee, described Abernethy's views as "repugnant."Source

David Pimental is a name you will encounter often when you dig into peak oil. He is often cited as the authority who "proved" that ethanol has an EROEI<1. His calculation of the world's carrying capacity ("a population of 1 or 2 billion could be supported living in relative prosperity") is often cited by environmentalists to support the peak oil die-off theory. Oil has allowed human population to boom, overshooting carrying capacity by almost 4.5 billion, and therefore 4.5 billion people will have to die as we return to sustainability in the post peak oil period. The doomers regard this as inevitable, because Pimental proved it.

Now, it turns out that, in 2004, Pimental ran for the board of directors of the Sierra Club on an anti-immigration platform.

The candidates—Lamm, Cornell University entomologist David Pimental, and retired Foreign Service Officer Frank Morris—all say curbing immigration will lessen domestic pressures on the environment and the economy. But what really has alarmed the Sierra Club's leaders is that right-wing Web sites, some with nativist pro-white views, have noticed the fight and have been urging readers to become Sierra Club members and support the immigration-reform candidates.

To make matters worse, some of the candidates' views on immigration—which evolved after discovering population as an environmental issue—are almost identical to positions espoused by right-wing, anti-immigration activists or white supremacists on their sites. That confluence is just too explosive for a centrist, national organization like the Sierra Club, which is why the Club's senior management is so alarmed.

"I don't think that Lamm, Pimentel and Morris are racists," Executive Director Carl Pope told the Los Angeles Times. "But they are clearly being supported by racists."Source

Here's some frank commentary from one of Pimental's supporters:

Homo Jew Threatens Takeover Of Sierra Club Board
Anti-Immigration Environmentalist Fight To Keep Morris Dees Out
1/15/2004 12:12:45 AM

Montgomery, Alabama -- Bisexual Jew Morris Dees, backed by the stable of young, homosexual and Jewish men and woman at the Southern Poverty Law Center, is struggling to takeover the board of directors of the Sierra Club as a clique of anti-immigration activists around VDARE struggle to bring the Sierra Club into conformity with the hopes and aspirations of millions of Americans.Source

Virginia Abernethy writes for VDARE, which is run by Peter Brimelow, whose worldview runs along these lines:

He described the role of race as "elemental, absolute, fundamental." He said that white Americans should demand that U.S. immigration quotas be changed to allow in mostly whites. He argued that spending tax dollars on anything related to multiculturalism was "subversive." He called foreign immigrants "weird aliens with dubious habits."

He worried repeatedly that his son, with his "blue eyes" and "blond hair," would grow up in an America in which whites had lost the majority.

At one point, he wrote that if one enters an Immigration and Naturalization Service waiting room, just like entering the New York subways, "you find yourself in an underworld that is not just teeming but also almost entirely colored."Source

122. COLIN CAMPBELL: WRONG AGAIN

The pope of peak oil, Colin Campbell, is legendary for a long string of incorrect predictions of the peak oil date. For example, as we saw in #53, his 1991 prediction called for oil to peak in the early 90s at a level of 60mbd, and decline to about 50mbd by 2005, and then to about 40mbd by 2010. In fact, we are currently producing about 84mbd in 2005. If you want all the evidence on Campbell's piss-poor track record, see CRYING WOLF: Warnings about oil supply, by Michael Lynch.

True to form, ASPO yesterday released the October 2005 Newsletter(pdf), in which Colin Campbell changed his peak oil forecast from 2007 to 2010. This is the fourth time Campbell has extended his forecast date, and he is now predicting world oil production of 85mbd in 2010 -- more than twice the 40mbd he predicted in 1991.

Let's face it: Colin Campbell's credibility is in the toilet. His methods are totally bogus, as Lynch has so frequently pointed out. This is a clear vindication of the open, verifiable methods of Rembrandt Koppelaar (see #86), as opposed to the opaque methods of ASPO which claims to have a "secret" database underlying its predictions, although no one outside of ASPO has ever seen it. (Personally, I think they're lying, and don't even have a database, but that's just my opinion.) It also creates a bit of a conflict within the peak movement because Deffeyes is still calling (ridiculously) for a peak on Thanksgiving Day 2005.

So what happened? Here's Campbell's explanation:

A detailed revision of the deepwater evaluation has been made on the basis of new information covering the world’s fields, which have been modeled individually. The new evaluation suggests an Ultimate recovery of about 52 Gb with a peak of 12 Mb/d in 2011, up from 3.5 Mb/d in 2005. This has an impact on the overall model, as illustrated in the Table on Page 2, shifting the peak of All Liquids from 2007 to 2010. Anyone familiar with this forecasting will know of the many uncertainties and difficulties, but it seems best to advance step by step reporting progress as it occurs, remembering always that it is subject to change.Source

Campbell blew it on the deepwater. He probably figured it out after reading Koppelaar. It turns out that West Africa is the new "oil Dorado":

The whole of the coastal sweep of West Africa has become an “oil Dorado”. Sao Tomé, in the Gulf of Guinea and the second smallest country in Africa, is just one example of the region’s potential. Off the coast of this tiny nation lies 24 billion barrels of black gold and some oil industry experts have even described it as a second Kuwait. Oil interests from across the world have now flocked to the nation.Source

24 billion barrels is another North Sea. And here doomers have been telling us there aren't anymore big finds -- that Prudhoe Bay and the North Sea were the last of it.

Yup, Lynch has been vindicated once again, and the doomers have a lot of egg on their face over this one. Oh well. They never let their idiocy get in the way before. Guess we'll just have to put off euthanizing the retarded for a few years (see #29.)

Oh yeah... and I hope all those survival rations you hoarded after reading LATOC will keep until 2010. You might want to check the expiration dates. LOL.

121. HYDROPONICS

Hydroponics is the science of growing plants without soil by bathing their roots in a nutrient solution. It holds great promise of increasing the carrying capacity of the earth, and reducing the footprint of human agriculture. This is because:

1. Hydroponics eliminates the need for soil and the labor involved in soil building and care.
2. It greatly reduces the need for pesticides since many pests can simply be quarantined out of the structure.
3. It requires extremely low levels of water and fertilizer use compared to conventional agriculture.
4. It enables massive increases in yield per acre.

Today, tomatoes are at the leading edge in hydroponic agriculture:
Average U.S. yields for greenhouse tomatoes (which includes both hydroponics and soil-based forms of controlled environment agriculture) are 484 metric tons/hectare. Average U.S. yields for field tomatoes, on the other hand, are 32 metric tons/hectare (Source(pdf, P. 4)). "By providing all the plant's nutrients via hydroponics and regulating the environment, yields can be very high, as much as 15 times greater than field production per year"(Source: same as above, P. 69).

This is not a hypothetical technology. Greenhouse tomatoes are a real-world industry:

In 2003, in the United States and Mexico, the greenhouse shares of total fresh tomato production were 9 and 8 percent, respectively, but are likely higher now. In Canada, greenhouse tomatoes now completely dominate fresh tomato production, with an 89-percent share.(Source: same as above, P. v)

California has even gone so far as to legally define a greenhouse tomato as hydroponically-grown:

In September 2004, the State of California adopted a definition requiring tomatoes labeled as greenhouse to be grown in "a fixed steel structure using irrigation and climate control, in an artificial medium that substitutes for soil" This means that any tomatoes labeled as greenhouse and marketed in California must be grown hydroponically.(Source: same as above P. 6)

120. GASOLINE SUBSIDIES

At the end of last week, Indonesia saw some small, sporadic protests as President Susilo Bambang Yudhoyono reduced petroleum subsidies:

Indonesia drastically hiked fuel prices much higher than expected on Friday despite two days of nation-wide street protests, including clashes between police and scores of students in Jakarta.

President Susilo Bambang Yudhoyono, speaking before the increases were unveiled close to midnight, urged Indonesians to accept a "bitter" policy that he said was vital to rescue Southeast Asia's largest economy.

Earlier, riot police fired tear gas and warning shots into the air as they clashed with students in Jakarta. It was the first sign of real violence among protests that hit numerous cities ahead of the price increases on Thursday and Friday.

Mines and Energy Minister Purnomo Yusgiantoro told reporters the government-set price of gasoline had nearly doubled to 4,500 rupiah (44 U.S. cents) a litre; diesel rose 105 percent to 4,300 rupiah a litre while household kerosene, used for cooking, almost trebled to 2,000 rupiah a litre.Source

Notice that the price of gasoline is still absurdly cheap in Indonesia. The same is true in Iran:

Despite higher oil revenues, Iranian budget deficits remain a chronic problem, in part due to large-scale state subsidies on foodstuffs, gasoline, etc. Expenditures on fuels were estimated at $4.7 billion in 2004, and the country's parliament (the Majlis) has rejected measures to raise consumer prices. To the contrary, in January 2005, the Majlis decided to freeze domestic prices for gasoline and other fuels at 2003 levels. Currently, gasoline costs less than 40 cents per gallon in Iran, far below market cost.Source

Gasoline subsidies are a widespread phenomenon, and the following map gives an overview of the situation (click on the image to enlarge):

The map comes from an exhaustive German report called International Fuel Prices 2005(pdf) reporting fuel prices surveyed worldwide in November 2004. Some interesting highlights:

• In US cents per liter, the cheapest gasoline in the world is found in Turkmenistan (2), Iraq (3), Venezuela (4), Iran (9), Libya (9) and Myanmar (12).
• The most expensive gasoline is found in Hong Kong (154), Finland (154), UK (156), Norway (161), Netherlands (162) and Iceland (164).
• For comparison, gasoline in the US during the survey period was 54.
• The cheapest diesel is found in Iraq (1), Turkmenistan (1), Iran (2), Venezuela (2), Libya (8) and Yemen (9).
• The most expensive diesel is found in Denmark (135), Sweden (137), Switzerland (137), Liechtenstein (137), Norway (144) and the overwhelming champ the UK (160).
• For comparison, diesel in the US during the survey period was 57.

Subsidies for fossil fuels are massive, world-wide. The phenomenon has two faces:

Policies in OECD countries mainly support energy production while developing countries subsidize energy consumption. While this report hasn't listed every single last subsidy, the global total is still impressive: about $350 billion yearly for subsidies to energy production and consumption in the early 1990s - roughly two per cent of world GDP. Since then subsidies may well have been reduced by as much as $100 billion because of reforms that substantially raised domestic energy prices in Russia and China.Source

The total elimination of all these subsidies is a worthy long-term goal which free marketeers, peak oilers and environmentalists can all agree on. The potential positive impacts are substantial:

Studies by both the World Bank and the OECD indicate that getting rid of energy subsidies would raise real incomes globally by three-quarters of one per cent, although the gains would be unevenly distributed. Most developing countries would be better off; in particular, the former Soviet Union and Eastern European countries would benefit, with an expected increase in income of 20 per cent. The major exception would be China, where the deterioration in terms of trade might result in an average real income loss of just below one per cent per year. According to the Bank and the OECD, the other losers would be energy-exporting countries, with an estimated decrease in real income of five per cent annually. However, a specific study of three such oil exporters - Algeria, Iran and Nigeria - concludes that bringing domestic oil prices up to world levels would generate $69 billion annual income. That's because removing energy subsidies would improve the efficiency of domestic oil use, resulting in savings of between 10 per cent and 18 per cent of current production, which could then be sold abroad.(Source: same as above)