418. IRAQ MOBILIZING

This will be an interesting factor to watch going forward:

Iraq aims to increase oil production by up to four times: minister

ISTANBUL — Iraq aims to increase its oil production by up to four times with the development of 10 new fields to be auctioned later this year, Iraqi Oil Minister Hussein al-Shahristani said Tuesday.

The minister spoke after a meeting with oil companies in Istanbul to present the new fields and the terms for the tender, which will follow a first-round bidding in June that saw investors snub all but one of eight contracts on offer.

Iraq expects production from the new fields slated for auction "to be several million barrels per day", Shahristani said.

"So combining the fields of the first and second round, Iraq should increase its production to at least three to four times of its current production," he said.

Iraq, which has the world's third largest oil reserves, is yet to catch up with output levels prior to the US-led invasion in 2003, hit by deadly unrest and tensions between Baghdad and the oil-rich autonomous Kurdish region in the north.

Iraq currently produces around 2.4 million barrels per day, with oil accounting for some 85 percent of government revenues. It exports some two million barrels per day, most of it from the fields of the southern province of Basra. Link

Four times current production would put about 8 or 9 million barrels a day of new oil exports on the market.

JD

417. US NATURAL GAS GLUT CONTINUES

From Rigzone:

Natural gas prices after rallying on surprisingly strong labor market news have retreated in recent days as the prospect of full storage suggests the industry will be forced to curtail production unless demand picks up. At the end of July, natural gas in storage was almost 3.1 trillion cubic feet (Tcf), or about 25% above the 5-year average for volumes at this time of year. Estimates of full storage capacity range from 3.7 Tcf to 4.1 Tcf. At the date of this report from the Energy Information Administration (EIA), there were 10 weeks left to the storage injection season meaning that without a strong pick up in gas demand or a collapse in production, domestic gas producers are facing the eventuality of all having to curtail their production. When that happens, we should expect a meaningful drop in natural gas prices.

Production continues to climb:

Futures prices are now as low as they have been since 2002:

by JD

416. CERAMATEC SODIUM-SULPHUR BATTERY

Interesting new battery with tremendous potential:

In a modest building on the west side of Salt Lake City, a team of specialists in advanced materials and electrochemistry has produced what could be the single most important breakthrough for clean, alternative energy since Socrates first noted solar heating 2,400 years ago.

The prize is the culmination of 10 years of research and testing -- a new generation of deep-storage battery that's small enough, and safe enough, to sit in your basement and power your home.

It promises to nudge the world to a paradigm shift as big as the switch from centralized mainframe computers in the 1980s to personal laptops. But this time the mainframe is America's antiquated electrical grid; and the switch is to personal power stations in millions of individual homes.

[...]

Inside Ceramatec's wonder battery is a chunk of solid sodium metal mated to a sulphur compound by an extraordinary, paper-thin ceramic membrane. The membrane conducts ions -- electrically charged particles -- back and forth to generate a current. The company calculates that the battery will cram 20 to 40 kilowatt hours of energy into a package about the size of a refrigerator, and operate below 90 degrees C.

This may not startle you, but it should. It's amazing. The most energy-dense batteries available today are huge bottles of super-hot molten sodium, swirling around at 600 degrees or so. At that temperature the material is highly conductive of electricity but it's both toxic and corrosive. You wouldn't want your kids around one of these.

The essence of Ceramatec's breakthrough is that high energy density (a lot of juice) can be achieved safely at normal temperatures and with solid components, not hot liquid.

Ceramatec says its new generation of battery would deliver a continuous flow of 5 kilowatts of electricity over four hours, with 3,650 daily discharge/recharge cycles over 10 years. With the batteries expected to sell in the neighborhood of $2,000, that translates to less than 3 cents per kilowatt hour over the battery's life. Conventional power from the grid typically costs in the neighborhood of 8 cents per kilowatt hour.

Re-read that last paragraph and let the information really sink in. Five kilowatts over four hours -- how much is that? Imagine your trash compactor, food processor, vacuum cleaner, stereo, sewing machine, one surface unit of an electric range and thirty-three 60-watt light bulbs all running nonstop for four hours each day before the house battery runs out. That's a pretty exciting place to live.

And then you recharge. With a projected 3,650 discharge/recharge cycles -- one per day for a decade -- you leave the next-best battery in the dust. Deep-cycling lead/acid batteries like the ones used in RVs are only good for a few hundred cycles, so they're kaput in a year or so.

Link

by JD

415. 16,000 MILE ICE CUBES IN THE YEAR 1833

Lately I've been reading A Splendid Exchange: How Trade Shaped the World by William Bernstein, a fascinating book which details the history of world trade from the days of Sumer to modern times. This book will definitely disabuse you of the naive notion that peak oil (or anything else) is going to put an end to world trade, and return us to the good old days of rural autarky. The fact is, there never were such days. The human impulse to trade is innate and unstoppable, and has been a core driver of events throughout the course of human history.

There are lots of interesting stories and data points in the book, and I'll share more as time goes on, but I found this bit particularly amazing:

On September 5, 1833, the American clipper Tuscany appeared at the mouth of India's Hooghly River, took on a river pilot, and headed upstream to Calcutta. The news of its arrival was swiftly related upriver, throwing that city, whose name is synonymous with sweltering heat, into a state of excitement. The Tuscany carried a new and priceless cargo: more than a hundred tons of crystal-clear New England ice. (P. 332)

This turned out to be one of the most lucrative routes in the international network of the world's original ice trader, Frederic Tudor:

In 1833, fellow Boston-based merchant Samuel Austin proposed a partnership for selling ice to India, then some 16,000 miles (26,000 km) and four months away from Massachusetts. On May 12, 1833 the brig Tuscany sailed from Boston for Calcutta, its hold filled with 180 tons of ice cut during the winter. When it approached the Ganges in September 1833, many believed the delivery was an elaborate joke, but the ship still had 100 tons of ice upon arrival. Over the next 20 years, Calcutta would become Tudor's most lucrative destination, yielding an estimated $220,000 in profits.

It's pretty far-fetched to think that a manageable adjustment like peak oil is going to kill the 1,500 mile salad when 16,000 mile ice cubes were a thriving and profitable trade almost 200 years ago, in the pre-fossil fuel period.

by JD

414. THE DECLINE OF TRANSOCEANIC TRADE?

Recently Jeff Rubin has been talking up the end of globalization due to peak oil:

Jeff Rubin, a former chief economist with CIBC World Markets, told the Georgia Straight that in the coming years, “triple-digit” oil prices will make it far more expensive to ship goods here from Asia.

“Trade is going to become more and more regional than transoceanic,” he predicted.

The following quick calculation shows a serious problem with this viewpoint.

First, some fuel-efficiency statistics:

A tractor-trailer truck averages 90.5 net ton-miles per gallon.
A 100,000 dwt ship averages 1034.4 net ton-miles per gallon.

From Shanghai to Vancouver is about 6000 miles, so it takes about 6 gallons of fuel to move a ton that distance. By truck on land, that same 6 gallons will only move a ton about 543 miles. In addition, the labor costs of trucking are huge compared to shipping, because each truck needs a driver, while a gigantic ship only needs a skeleton crew.

Conclusion: High oil prices will destroy trade between Alberta and Vancouver before it destroys trade between Shanghai and Vancouver.

The relevant metric is not the percentage of fuel costs relative to total transport costs mentioned by Rubin. That ratio is high for shipping precisely because shipping has such low labor costs per ton.

The relevant metric is the comparative values of net ton-miles/gallon of different transport modes.

The reality is that it costs less to ship a container between China and Felixstowe, England than it costs to send it by road from Felixstowe to Scotland. Source

If it will be uneconomic to manufacture goods with low margins, like clothing and consumer products, across the oceans, it will be even more uneconomic to manufacture them within Canada, for exactly the same reason. Moving the products from, say, Vancouver to Alberta or Saskatchewan will take as much fuel (or far more) than moving the same products from China. In addition, you have the problem of high labor costs of trucking and manufacturing in Canada.

It's interesting to note that agitation against globalization and calls for relocalization are more than 300 years old, and arose long before the era of oil, or even coal. For example, English clothing interests were calling for protectionist legislation against cheap fabric imports and loss of jobs to India in the year 1681:

"into India throwsters, weavers, and dyers, and actually set up there a manufacture of silk... importing them ready made and dyed in England is an unspeakable impoverishment of the working people of this kingdom who would otherwise be employed therein and to the ruin of many thousands of families here." (Alfred C. Wood, A History of the Levant Company, p. 104)

Port cities along the pacific rim will continue to thrive, as port cities always have, due to the ease of trade.

If anyone is going to get clobbered by price inflation, it's the people in deeply landlocked rural areas like Saskatchewan. This will be due to: a) the high expense of moving goods to them, and b) the highly dispersed layout of rural communities, where you have to drive 20 miles to the supermarket etc. If you're driving more than 3 miles to the supermarket, that drive itself consumes as much fuel per item as transporting the same items halfway around the world.

by JD