Peak Oil Debunked

427. PEAK OIL SNOOZE-ATHON CONTINUES

2010-06-25T03:38:00.000-07:00

Hi everyone.
I've been on a long vacation from peak oil because it's so boring and irrelevant to daily life, but today I'd like to pop back in for an update on the situation.

Has anything happened? Not really, if by "happened" you mean any of the things the doomers predicted.

I first began writing on peak oil 6 years ago, in the summer of 2004. Matt Savinar was predicting imminent TEOTWAWKI, and telling folks to run for the hills. Now, 6 years later, I can go out on the street, and nothing whatsoever has changed since 2004. The streets are still clogged with cars going on mindless journeys. People are sleeping in their cars with the engine running to power the air-conditioning. Oil is at $75 and it's not going anywhere. Food prices and availability are completely normal. Plastic Hello Kitty paraphernalia is as plentiful and cheap as ever. Peak oil continues to be a ridiculously over-hyped non-event, just like I always predicted. I thumb my nose at it with impunity. LOL.

The Oil Drum doesn't even bother with new posts anymore. Just recycled versions of the same old "oil spill" post, flopping over and over like a flat tire, wump wump wump. Quite a comedown from the heady days of A Nosedive Toward the Desert in 2007.

Yup, peak oil is yesterday's party. The IEA is yawning and predicting oversupply of oil until 2015. Lucky us. Five more years of "topics for discussion" from Gail the Actuary
Source

Matt Simmons' ongoing nervous breakdown continues to blossom in fascinating ways. Last week he predicted a mass evacuation of gulf states:
"We're going to have to evacuate the gulf states," said Matt Simmons, founder of Simmons and Co., an oil investment firm and, since the April 20 blowout, the unflagging source of end-of-the-world predictions. "Can you imagine evacuating 20 million people? ... This story is 80 times worse than I thought."Source Yah, that's some funny stuff. I think Matt Simmons is about 80 times more mentally unstable than I thought.

Matt "Bozo" Simmons

More hysterical bullshit from Matt Simmons:
"Mexico's ability to export oil will be over by the end of 2009."
(Spoken prediction made at 35:50 of the interview available here)
The reality:
Mexico exported 1.59 million barrels of crude per day in May 2010.
Source

Speaking of the mentally ill, Mike Ruppert predicted that a nuke would be used on the gulf oil spill in a week to 10 days. That was a month ago. LOL.
"I predict that US Continuity of Government provisions will be activated and that FEMA will, before end of summer, be placed in complete control of the Southeast United States… limited martial law." Source

Colin Campbell, the pope of peak oil, recently caved and became a peak demand believer.

"I have changed my point of view about future prices," said Campbell, who used to think the peak in conventional oil production, which he believes happened in 2005, would lead to a relentless price surge.
Instead, the record rally led to a peak in demand in the developed world.
"Peak oil drives prices up in the first place. It has its own mechanism. We're sort of at peak demand right now," Campbell told Reuters from his home in the village of Ballydehob, West Cork. "I think presently the price limit is about $100."Source

Good job Colin, you ridiculous dumbass. You would have figured that out a long time ago if you had the sense to read Peak Oil Debunked.

Hey, and whatever happened to the much-ballyhooed Export Land Model (insert scary organ chords)? And Jeffrey Brown's 2005 prediction:

"As I said last year, I expect that by the end of 2006 we will be in the teeth of a ferocious net oil export crisis."Source

Stay tuned folks. I've got a few more doomers to scalp before I'm finished.

by JD

426. LOCAL FOOD GUZZLES MORE FUEL THAN LONG-DISTANCE FOOD

2009-10-03T19:59:00.000-07:00

We're all familiar with the classic Kunstler rap:

The age of the 3000-mile-caesar salad will soon be over. Food production based on massive petroleum inputs, on intensive irrigation, on gigantic factory farms in just a few parts of the nation, and dependent on cheap trucking will not continue. We will have to produce at least some of our food closer to home.Source

The logic seems to be straightforward. It takes more energy to transport food over long distances than short distances, so peak oil will drive a shift to local agriculture.

So what does local agriculture look like? Here's a representative quote by Megan Quinn of Community Solutions (a somewhat delusional group promoting Cuba as a model for peak oil response) on the structures of local food:

Now, local food systems look very different from conventional food systems. We're not going to have local food supermarkets. So what are the distribution mechanisms of local food systems?

Well, a variety of structures is a good way to go. We have on-farm and in-town vegetable stands operated by farmers, farmers' markets, fairs, CSA or Community-Supported Agriculture farm subscription programs, cooperatives, and direct sales from farmers to consumers, to name a few. Importantly, there is a human element in local food systems. Direct relationships are developed between those who grow the food and those who eat it. We should embrace that.Source

This all seems reasonable on the face of it, but as I noted in the previous article GOING RURAL FOR PEAK OIL: BAD IDEA, close analysis shows that farmer's markets, vegetable stands, CSA and direct sales are all incredibly inefficient in terms of fuel because they require long drives in lightly loaded vehicles. Local agriculture, as it exists today, is basically a highly energy-intensive form of cat herding. This comes through vividly in a revealing quote from Jeff Rubin's book Why Your World is About to Get a Whole Lot Smaller:

And if you have ever been to a farmer's market and have seen the fleets of Land Rovers and sleek Volvo wagons heading home with their cargos of organic cavolo nero and free-range Berkshire pork...

Farmers Market: Plenty of Parking is a Must

The inconvenient truth is that inefficient gasoline guzzling lies at the very heart of the local food model. And, as we've seen, this totally defeats the purpose of local food :

In the worst scenario, a UK consumer driving six miles to buy Kenyan green beans emits more carbon per bean than flying them from Kenya to the United Kingdom. Source

A number of studies have reached similar findings: local food is more energy intensive than long-range food. See:

Long haul food can produce lower carbon emissions than local produce
Food that Travels Well: Why Imported Produce may be Better for the Earth than Local
Food Mile Myths: Buy Global

Here's a quick calculation to give you a feel for the problem. Suppose Joe Sixpack gets in his 20 mpg vehicle, and drives 4 miles to pick up a pack of hot dogs at 7-11. This will consume 0.4 gallons of gas per pound of hot dogs (1 pack = 1 pound).
Now, a semi truck gets about 90 net ton-miles/gallon, assuming that it makes the return trip empty. So a semi can deliver a load of hot dogs (20 tons) coast-to-coast and return empty on 1333 gallons. That translates to .03 gallons per pound.
In other word, Joe Sixpack will burn 13 times as much fuel, per dog, driving to 7-11 than the semi which brought those dogs 3000 miles across the country.

Interestingly, a livestock farmer named Bob from Schoharie, New York -- who is actually involved in the local food business -- echoes these concerns. He confronts this every day in the real-world context of marketing his product:

In fact, local food currently uses much more fossil fuel, especially in distribution, on a per pound basis. This is so painfully the case that one example will suffice, my own.

I drive seventy miles round trip to the farmers market on Saturdays. Some people drive more, some people drive less. I think that on average, my mileage is not untypical, but the average might be closer to fifty miles. This market season, on a bad day, I would sell ten pounds of meat (an amount that does not cover the cost of gas to get there). On a good day, I would sell forty to fifty. One of the biggest farmers market meat sellers in our area that I am aware of probably sells about 200 pounds a week.

Lets take a good day for me:
Miles per pound — 70 (miles driven) divided by 50 (pounds of meat) = 1.4 miles per pound

Gallons of fuel per pound — 70 (miles driven) divided by 12 (miles per gallon) = 5.8 (gallons of fuel) divided by 50 (pounds of meat) = 0.116 gallons per pound

Industrial:
Miles per pound — 1500 (avg. miles driven) divided by 40,000 (pounds of chicken on a tractor trailer) = 0.0375 miles per pound

Gallons of fuel per pound — 1500 (avg. miles driven) divided by 5 (miles per gallon) = 300 (gallons of fuel) divided by 40,000 (pounds of chicken) = 0.0075 gallons per pound

I would have to sell 750 pounds of meat every week to match the gallons per pound efficiency of industrial distribution. That is fifteen times more than I currently sell, and 3.75 times more than the biggest seller in our area that I am aware of.

Stop perpetuating this myth!Source

Isn't that amazing? Industrial is at least 3 times more efficient than the highest volume local sellers, and that's not even including the monstrous waste of the buyers driving 50 miles round trip to buy a bag of local food!

That cracking and crumbling sound you hear in the distance is the accepted wisdom.

Bob takes the argument further in a post titled Pound-Gallons, Not Food Miles:

In the early 2000s, a report from the Leopold Institute popularized the phrase “food miles.” The research detailed in that report showed that locally produced and distributed food uses less fossil fuel than industrially produced and distributed food because it has fewer food miles in it. Since the publication of that and subsequent reports this idea has become dogma and the phrase “food miles” has become a part of everyday language. The problem with the Leopold paper is that the comparison they did was for fully loaded local, regional, and national trucks. In reality, local, especially, trucks are not fully loaded, they are often mostly empty.

Awhile back I got some flack for a post and a follow-up post in which I argued against this food miles dogma and claimed that local farm and food systems, as they really exist today, do not use less fossil fuel than the industrial one. I still believe the argument I made in those two posts. I also still believe that it is important to find ways to decrease, on a per pound basis, which was the basis of my comparison, the fossil fuel consumption of local farm and food systems, especially in distribution. I would like to propose that we abandon the concept of food miles in favor of the more revealing and accurate “pound-gallons,” a horribly ugly phrase, I admit. What matters in terms of fossil fuel consumption is not how many miles the food has traveled, but how many gallons of fuel are in each pound of food. (Pound-gallons can also be used to compare fossil fuel consumption between industrial and local food production as well [eg, tractor use]) The food miles framework is very misleading. The reality is that there are substantially fewer pound-gallons in 40,000 pounds of produce trucked 1500 miles (0.0075) than in 200 pounds of produce trucked 50 miles (0.021). At 550 pounds of produced trucked 50 miles, the local pound-gallons and the industrial pound-gallons would be equivalent. (See the link to the first post above to see the math)

Once we adopt pound-gallons and abandon food miles, we see that we have a long way to go before local farm and food systems are using less fossil fuel, especially in distribution, than the industrial system. We need to get substantially more produce on each truck and/or transport that produce substantially fewer miles.

The situation is exactly the opposite of the common wisdom. The 25 mile farmer's market salad is actually more fuel intensive than the 3000 mile Caesar salad.

by JD

425. GOING RURAL FOR PEAK OIL: BAD IDEA

2009-09-26T18:18:00.000-07:00

I've often thought that moving to the country is one of dumber things you could do in response to peak oil.

My reasoning for this is simple: people in the country have a massive dependence on cars and gasoline. For example, my brother used to live on a ranch in the extreme boondocks of Idaho (the area was only electrified in the 1980s) and he and his wife had to drive about 100 miles to go to the supermarket. That's an extreme case, but the general principle is very true. The country has incredible sprawl, and you have to drive really long distances to take care of your daily business. Urban dwellers like myself, on the other hand, don't have to drive at all. My supermarket is a 3 minute walk from my front door. It seems obvious to me that country people -- at least those who aren't making good money from serious agriculture or some other business -- are the ones who will get it in the neck first from peak oil.

If you think about it, it's just a straightforward extension of Kunstler's logic. If the suburbs/exurbs are going to die because they're too oil dependent, then surely the rural areas will die even quicker because they are even more oil dependent.

Of course, savvy people/companies who are already making money on farm operations will continue to profit from food production, and will have the earning power to remain in the country. They belong there. Likewise, if you don't have to work or you're wealthy, then moving to a rural area may be a great response to peak oil. I'm not talking about such people. Or, if you can be an extremely self-sufficient subsistence farmer, and perhaps squat on some land, then my critique doesn't apply.

But if you're a working person who needs income to live, support a family, or build up a doomstead, it seems to me that going rural is jumping from the frying pan into the fire.

Here's some articles from summer 2008 that spell it out in painful detail:
Rural U.S. Takes Worst Hit as Gas Tops $4 Average
Rural drivers feeling rise in gas prices more than their urban counterparts
High Gas Prices Hit Rural Poor Hardest
Rural Residents Struggle with High Gas Tab
Fuel prices rocket in rural areas

Pops is a rural doomsteader from peakoil.com, and he and I had a little exchange which is relevant this topic:

Pops:
We'll further diversify our meager income by planting some U-Pick berries on a couple acres and going as whole-hog into market gardening as time allows next year, direct selling grass fed beef and eggs and some value added (jams, jellies) and homemade stuff at the farmers markets and roadside.

JD:
Just curious, but how much driving is involved in these businesses? For example, how far would people generally drive for your U-Pick berries? And how far do you and your customers generally drive to a farmers market? Do you keep your beef chilled or frozen? Do you use a generator at the market?

Pops:
I talked to neighbors who have blueberries they are about to retire from and they said people mainly come from the small town about 5 miles away but some come 40 miles from Springfield or Joplin. They bring their kids and grandkids and a picnic lunch and have a "Farm Experience". With the farmers market people show up with their straw hats and organic cotton shopping bags to be seen by their Green peers. I could make a little money today at the little market on our square but to do any good we'll need to drive to one of the bigger towns — our roadside stand can only make $50 or $100 a week and that's only a few weeks per year.

Smallpoxgirl -- another peakoil.com doomer -- talks in a similar vein about driving from Seattle to Olympia (60 miles) for a farmer's market.

But these long drives totally negate the purpose of local food:

We have found that if a customer drives a round trip distance of more than four miles in order to purchase their organic vegetables, their carbon emissions are likely to be greater than the emissions from the system of cold storage, packing, transport to a regional hub and final transport to customer's doorstep used by large-scale vegetable box suppliers.Source

Another study gets the same results:

In the worst scenario, a UK consumer driving six miles to buy Kenyan green beans emits more carbon per bean than flying them from Kenya to the United Kingdom.Source

The same point can be seen another way. Suppose a family buzzes out to Pops' farm and picks 10 pounds of berries. Driving an average US vehicle, they'll burn 4 gallons of gasoline for a round trip of 80 miles. (Incidentally, that gasoline will weigh about 2.5 times more than the berries purchased.) Now, a commercial aircraft gets roughly 70 miles per gallon per passenger, and a passenger would be roughly equivalent to 20 boxes of berries (each containing 10 pounds). So for 4 gallons, you could send a passenger 280 miles, and a passenger is 20 boxes of berries, so you could send a box of berries about 5600 miles by air. In other words, driving 80 miles by car to buy 10 pounds of berries uses the same amount of fuel as shipping them 5600+ miles by air. And it just gets worse the less you buy. With a 5 pound box, you're talking 11,200 miles -- about half the circumference of the earth. In other words, the only thing more fuel intensive than the 3000 mile salad is the 25 mile farmer's market salad.

*****

Doomers really can't help but grant my point...

smallpoxgirl:

I totally agree with you though about the degree to which rural America is dependent on petroleum. People in Montana think nothing of a 100 mile round trip commute or of driving 8 hours round trip to go to the mall. It always impressed me how independent the people where I lived were WRT snow cleanup. It could dump a foot and the next morning everybody would be out with a loader or a snow plow cleaning it all up. In one sense they're very self sufficient, but all that equipment runs off petroleum. Take away the gasoline, and that area would be totally uninhabitable in the winter. To a large extent it's this sort of fake independence. They're more self sufficient in terms of being able to use different technologies and manufactured materials without the aid of a specialist, but they're just as dependent if not more so on the extractive and manufacturing industries in far away places keeping them supplied.

Toby Hemenway, a doomer who went rural and then realized after 10 years that it wasn't such a great idea after all:

Our isolation also meant we were burning a lot of gas. A simple drive for groceries was a 40-minute round trip. Fortunately we both worked at home and had no children, so we could go for days without using the car. But the odometer was whirling to higher numbers than it ever had in the city. A couple of families had moved off our hill because they were exhausted by two to four round trips each day down our steep, potholed gravel road to work, school, soccer practice, music lessons, and shopping.

We cherished our decade-plus in the country, but eventually the realities began to pile up. There wasn’t a local market for the work we did. Community events left us saddened by the gulf between our way of life and theirs. And we were still tethered to the fossil-fuel beast, just by a much longer lifeline of wire, pipe, and pavement. That the beast looked smaller by being farther away no longer fooled us.Source

More real-world info on how rural areas get mauled by high gas prices:

Soaring gas prices are a double-whammy for many rural residents: They often pay more than people who live in cities and suburbs because of the expense of hauling fuel to their communities, and they must drive greater distances for life's necessities: work, groceries, medical care and, of course, gas.

Meanwhile, incomes typically are lower in rural areas, making increasingly high gas prices an especially urgent concern. Rural households also are more likely to have older, less fuel-efficient vehicles such as pickups, the Federal Highway Administration (FHWA) says. The average age of a vehicle in a rural household: 8.7 years, compared with 7.9 years for an urban vehicle.

Rural residents do more driving, too — an average of 3,100 miles a year more than urban dwellers, the FHWA says.

A May survey by the Oil Price Information Service (OPIS), a fuel analysis company, and Wright Express, a company that collects data on credit card transactions, found that people in rural areas spend as much as 16.02% of their monthly family income on gas, while people in urban areas of New York and New Jersey spend as little as 2.05%.Source

During the last bout of high oil prices, there was some reporting about gas stations closing in rural regions (Fears for rural filling stations, Rural motorists running on empty as pumps close) forcing people to drive long distances for gas. As you would expect, this can turn into a nasty EROEI situation. Here's another report in the same vein...

When the only gas station in Allen, Neb., closed last summer, a gallon of gas cost $2.56, according to prices posted on two abandoned pumps. Since then, Allen's 411 residents have been driving 11 miles to Wakefield or 28 miles to South Sioux City to fill up.

Allen's grocery store went out of business last August, forcing people to shop in South Sioux City or 21 miles away in Wayne. Doctors, dentists and other essentials also require a road trip. The nearest movie theater is in Wayne.

"You have to leave town for about everything," says Jerry Schroeder, an insurance agent who has lived in Allen for all of his 57 years.Source

Still more on people getting savaged by high oil prices in the country (from High Gas Prices Threaten to Drain Small Towns' Populations):

These days, they're also cussing and shaking their heads about the price of that gasoline. People are doing that everywhere, but in small towns such as Leeton, population 619, it's even more of a gut punch because nearly every working adult commutes to jobs elsewhere.

These days, there had better be a really good job on the other end of that trip.

Don Campbell's daily commute to Kansas City - about 100 miles each way - costs him roughly $866 a month at $3.90 per gallon. But he's a union iron worker and says he can make the math work.

Most of his neighbors can't. For them and thousands of other small-town residents across the country who drive long distances to jobs that pay little more than minimum wage, the high cost of gas is making that daily commute cost-prohibitive.

So much so that economists predict that over the next few years, the country could see a migration that would greatly reduce the population of Small Town America - resulting in a painful shift away from lifestyle, family roots, traditions and school ties.

Perhaps the worst threat of all is a vicious cycle of depopulation. High gas prices cause commuting to work/the doctor/school/shopping to be too expensive, so people leave the rural towns/counties and move to larger cities. Govt. revenues decline (people fleeing) while govt. costs rise (gas for the cops, school buses, ambulances, inspectors, garbage collection etc.) Then merchants pull out and gas stations pull out, because there isn't enough population to support them. Govt. services get erratic. More people get fed up and leave etc. etc. Next thing you know, your rural "community" isn't there anymore.

by JD

424. OIL AND FOSSIL FUEL DEPENDENCE: LEADERS AND LAGGARDS

2009-09-22T23:50:00.000-07:00

Lately, I've been fooling around with the figures from the 2009 BP Statistical Review (BSR) -- in particular the data for "Consumption by Fuel". I've made some surprising discoveries which I'd like to share with you. First, a note of caution: The BSR has some problems with completeness. For example, we know from EIA power generation stats that the Philippines produced 8.5 TWh from hydro, and 9.7 TWh from geothermal in 2007. This closes matches the BSR figure for hydro in 2007 (1.9 million tons of oil equivalent (mtoe) = 8.4 TWh). However the BSR only lists power consumption in 5 categories: Oil, Coal, Gas, Nuclear and Hydro. It neglects non-hydro renewables, and this distorts the data for nations which generate considerable power from non-hydro renewables (e.g., the Philippines, Iceland, Sweden, Brazil, Denmark, Canada and Finland). Another issue is that the BSR is not comprehensive, and only provides data for larger nations. In the future, I'll try to calculate a more accurate picture from EIA data, but for now, let's look at the results from the BSR.

First are the Top Twenty nations in terms of low oil dependence. I define oil dependence as the percentage of total energy consumption deriving from oil. For reference the oil dependence of the world as a whole in 2008 was 35%. Percentage of energy from other sources is also given so you can see how these nations achieved such low oil dependence. The winners are:

Now, the Bottom Twenty in oil dependence:

The next category is where we separate the stallions of the future from the nags of the past. The following are the Top Ten countries in terms of low *fossil fuel* dependence. That is, the countries are ranked by the percentage of their total energy which comes from fossils fuels, lowest first. Note, however, that these figures may be considerably skewed because the BSR does not include non-hydro renewables, as noted above. For reference, the fossil fuel dependence of the world as a whole in 2008 was 88%. That said, the winners are:

There are numerous losers in FF dependence. Countries with a FF dependence of 97% or higher are: Singapore, Saudi Arabia, Kuwait, UAE, Turkmenistan, Qatar, Denmark, Belarus, Algeria, Poland, Iran, Netherlands, Bangladesh, Ireland, Thailand, Indonesia, Greece, South Africa, Uzbekistan, Kazakhstan, Malaysia and Australia.

by JD

423. MIKE RUPPERT, THE "PROPHET"

2009-09-19T08:27:00.000-07:00

Just when you thought he'd checked himself into a good psychiatric facility....

Mike Ruppert roars back as the star of a new feature film "Collapse".

Owen Gleiberman posts a rave review from the Toronto Film Festival:

I said in my first post from Toronto that you could feel the anxiety of the economic crisis in any number of the films here. Yet even as I wrote that, I could never have guessed I’d end up seeing a movie that would tap into those anxieties with the power and terror of Collapse. It’s one of the few true buzz films of the festival (by the time I got to it, I’d heard a dozen people talking it up), yet the movie, which is 82 minutes long, consists of nothing more than an on-camera interview with Michael Ruppert, a former Los Angeles police officer who became a rogue investigative reporter and author.

A bluntly unassuming and rather plain-looking man in his late fifties, Ruppert sits in what looks like a brick bunker and talks about where he thinks the United States is now headed. It is not a pretty picture, but it’s not a naive one, either. Ruppert has more than a perception — he has a welter of facts, a restless and skeptical intelligence, a grasp of history that is professorial in the best sense, and an ability to slice and dice the platitudes of mainstream media. He’s like Noam Chomsky as a gripping pundit of doom. The drama of the movie, and it’s intense, is that even if you want to argue with him (and you will, since he’s predicting very bad things), you can’t dismiss what he’s saying.

He starts out with a trump card of credibility. In 2006, Ruppert predicted the economic crisis — I mean, he really saw it coming. We’re shown clips of him from that year, and there’s nothing vague or abstract about his statements. He glimpsed the whole house of cards in prophetic detail: the sub-prime mortgage crisis, the inevitable breakdown of a system built, like a gold-leaf castle in the air, on leverage. His astonishingly acute foresight seizes your attention, and so you’d better believe that you’re sitting up and listening as he starts to talk about “peak oil,” the term that’s used to describe the fact that the majority of oil reserves on the planet have, in all likelihood, already been depleted, and that the remaining supply will now perpetually be in decline. (He cites reports that the Saudis have resorted to off-shore drilling — infinitely more costly than on-shore — as evidence that they’ve begun to see the bottom of their wells.)

Now for the reality check...

Mike Ruppert, September 21, 2005:

While I had serious doubts about America's ability to recover from Katrina, I am certain that - barring divine intervention - the United States is finished; not only as a superpower, but possibly even as a single, unified nation with the arrival of Hurricane Rita.Link

Mike Ruppert Jan. 9, 2009:

*I can pretty much bet that as many as 50-75 new Executive Orders will be announced within 72 hours of the inauguration.

*I wouldn't be at all surprised to see a couple of days with 700+ point losses in the Dow over the next ten days to two weeks.

*Reports have suggested that China may dump half of its $1.4 trillion dollar holdings within the next two months.

*As I correspond with a number of key friends and researchers around the world we have all concluded that it may be just a matter of weeks (yikes!) before we start seeing major disruptions in everyday life.

*Soon it will be necessary for me to look at topics which we've mentioned in passing. These include civil unrest, camps, emergency communications and preparedness as the threat of societal breakdown becomes imminent. It's time to start doing that.Link

Mike Ruppert, Nov. 25, 2008:

-"The end" of the U.S. economy by March or April.
-Gold $2000 an oz. by March
-People starving and screaming for food by August
-Conditions 10x worse than The Great Depression by August
-Oil above $100, gas above $3.00 by Summer.Link

Mike Ruppert, Sept. 13, 2005:

"I predict we will soon see a national draft, and Canada will not harbor U.S. deserters as it did during Vietnam, as it is now a virtual U.S. colony." Link

Mike Ruppert, April 25, 2009:

"Now, with the swine flu outbreak just developing, it is clear that the dieoff has begun..." Link

Astonishingly acute foresight... LOL. Ruppert is a complete wingnut "truther" with a long history of BS predictions, extreme paranoia and mental health issues.

Update 9/28/09:
Mike Ruppert found guilty of sexual harassment, hit with $125,000 fine.

The state labor board has ordered author and conspiracy theorist Michael C. Ruppert, to pay more than $125,000 to a former female employee he was accused of sexually harassing.

State Labor Commissioner Brad Avakian, ordered the former Ashland businessman to pay Lindsay Gerken $2,713 in lost wages. Avakian then tagged on $125,000 in damages for the woman's mental and emotional suffering for an award of $127,713.

[...]

Avakian said Gerken was fired a week after Ruppert asked her to have a sexual relationship with him and she refused.

The most startling incident occurred when Ruppert came to Gerken's office door "wearing only his underwear and a smile," according to a BOLI release.

[...]

In an interview Thursday, Ruppert did not deny he presented himself to Gerken in his underwear.

[...]

"At the trial it was evident that one person was telling the truth, and another was not," he said. "All of (Ruppert's) businesses have failed and creditors a mile long are after him."Source

It's also worth mentioning that Delmart "Mike" Vreeland -- a primary source for Ruppert's conspiracy theory screed Crossing the Rubicon -- has been sentenced to 336 years in prison for pedophilia:

A Douglas County man has been sentenced to 336 years to life in prison after he was convicted of luring two boys into performing sex acts and making child pornography by giving them drugs and money and promising them a drum set.

Forty-two-year-old Delmart Vreeland was convicted in 2006 of 13 felony charges, including inducement of child prostitution, sexual assault, sexual exploitation of children and distribution of cocaine. Earlier this year, he was convicted of six habitual criminal counts.Source

by JD

---------
Major hat tip to Andrew Ryan for keeping tabs on Mike and compiling most of this material. Hopefully he'll check in soon with more material for this article.

422. RENEWABLES STATUS REPORT FOR 2008

2009-09-10T03:13:00.000-07:00

REN21 has released its Renewables Global Status Report 2009. This table shows the scorecard, as of the end of 2008:
The wind build is amazing if you think of it in terms of EV fuel.

A typical EV efficiency value is 5 miles/kwH, while ICE cars run about 20 miles/gallon. That gives us an equivalency of about 1 kwh = .25 gallons of gasoline. The world is adding about 30 GWe of wind capacity per year, and wind has a capacity factor of about 30%. So the wind installed last year should produce roughly 87.6 Twh/year (roughly equal to the total annual electricity production of the Czech Republic). Converting that to gasoline, we get 1.4 million barrels /day. In a few years, the wind increment will double to the equivalent of 3 million barrels/day, so that windmills worldwide will be adding EV fuel equivalent to Canada's total oil production every year (or Saudi Arabia's oil production every 3 years). And windmills don't deplete!

EVs really can really be a game changer if you think about. Windmills are a very efficient and clean source of vehicle fuel, and they can definitely come on a lot faster than oil is depleting. No wonder the Saudi's are getting worried.

Here's a sampler of other interesting graphs from the report...
A phenomenal surge in wind in the last 10 years:

Solar PV growth:
Renewable power capacity:
China excels in yet another area:
Did someone say "The End of Growth"? LOL:
Here's a figure that will knock your socks off: The US alone invested $24 billion in wind in 2008.

by JD

421. OIL DRUM CENSORING ARTICLES

2009-09-06T07:34:00.000-07:00

It seems this article by Lionel Badal was too hot for the Oil Drum to handle. I have to admit it's a little bizarre to see the Oil Drum suddenly so eager to paint the IEA in a good light. Is Gail a traitor to the cause of PO? Has TOD has been co-opted by moles from BAU and Team Yergin? The whispering has begun: "TOD has a hopelessly rose-colored view of OOIP and Alt resources..." Stay tuned...

P.S.

This article was originally submitted to The Oil Drum[27] (one of the leading Peak Oil news webpage). While the editors initially accepted to publish the article, at the very last moment they changed their mind. In other words, an article on Peak Oil was censored by… The Oil Drum (TOD). The reasons why?

“I know there are at least a few people who think we should be putting the IEA in as favorable light as we can. So I have decided not to run it…” (Gail the Actuary, Editor, 2 September 2009).

However, to be fair with TOD, some of their members did not support this action:

“Sorry to hear about what's going on regarding your article and TOD… 1) this is something that TOD should publish, and 2) this kind of censorship, as you point out, isn't something that we should take any part in.” (Jeff Vail, 2 September 2009).

At the end, they wouldn’t accept it. If even TOD starts to censor information on Peak Oil…

To put it in the words of Steve Connor, Science Editor of The Independent, “What an odd thing for Oil Drum to be worried about -- so much for the independent journalism of the internet.”

*****

As you can see, the article was accepted by The Oil Drum, but then (at the very last moment) cancelled…

From: Gail Tverberg [GailTverberg@comcast....
Sent: 01 September 2009 15:52
To: Badal, Lionel
Subject: Re: article on Peak Oil and the IEA

My current plans are to put it up tomorrow. Since it involves a
European issue, I may put it up late tonight, so it is up for your
morning tomorrow.

BUT:

From: Gail Tverberg
Date: September 2, 2009 9:04:27 AM EDT
To: "Badal, Lionel"
Subject: Re: article on Peak Oil and the IEA

Lionel,

I have your post ready, but after thinking about it, I started worrying. The IEA folks are in a terrible position. I worry that we will make things even worse for them. The result could be people losing their jobs, or even suicide.

I know there are at least a few people who think we should be putting the IEA in as favorable light as we can.

So I have decided not to run it, at least not for now. Nate pointed out to me that it is well documented, so from that point of view it is not a problem.

I should have thought this through better before.

Gail

Update 9/8/2009:
The above text criticizing the Oil Drum has now been deleted from Badal's article. A thread on TOD's handling of this article (at TOD) is here.

by JD

420. MATT SIMMONS: THE BUFFOONERY NEVER ENDS

2009-09-03T06:14:00.000-07:00

Man, this is some funny stuff... our old buddy Matt Simmons is pulling the fire alarm again. Seems there's some crackpots out there making unfounded predictions about natural gas production!!!

"In the 40 years I've followed the industry I've been continuously amazed at the tangent people are willing to go off on without any data, or by getting the data wrong," Simmons said. Link

Oh, the irony...

Matt seems to have forgotten that in 2003 he himself predicted* that a natural gas cliff -- a veritable natural gas armageddon -- was a certainty in the US by 2005. And yet here we are, 6 years later, swimming in a glut of natural gas, with production at a historic high last reached in 1974.

Simmons' credibility is shot, but he just keeps blustering on, oblivious.

The disappointing part is the guy who interviewed Simmons. Doesn't anybody do any research? I could name you five Simmons predictions that have imploded off the top of my head. And soon, we've got the much-ballyhooed Simmons-Tierney bet where he's fixing to lose $5,000 to a cornucopian disciple of Julian Simon, and be exposed in the New York Times as a laughing stock.

It's becoming ever clearer that Simmons is a buffoon who really can't get anything right. His instincts are bad. He has an intemperate personality. He tends to get over-excited and let his mouth get away from him. He's sort of like the "Joe Biden" of the peak oil community.

You wanna see what I mean? Listen to Simmons in this interview. He talks like someone who's been up all night smoking crack -- and I'm not exaggerating.

********

*)For your reading enjoyment, vintage Simmons from the summer of 2003:

Simmons: As you know, I have been talking for some time about the natural gas cliff we are experiencing.

[...]

Well, I know you understand it, but people need to understand the concept of peaking and irreversible decline. It's a sharper issue with gas, which doesn't follow a bell curve but tends to fall off a cliff.

[...]
Someone's going to be left holding the bag big time. If natural gas consumption surges in ten days of excessive heat then it would require almost a complete shutdown of industrial consumption to compensate and protect the grid. As I have been reporting for years now, there isn't going to be enough gas to run those plants, let alone new ones.

[...]

Pray for no hurricanes and to stop the erosion of natural gas supplies. Under the best of circumstances, if all prayers are answered there will be no crisis for maybe two years. After that it's a certainty. Source

by JD

419. SORRY FOR THE GLITCH!

2009-09-01T17:53:00.000-07:00

Some readers noticed that I was briefly branded as a malware site by Google yesterday. The site is back to normal now, but let me explain. It seems I had a hot linked jpg of a Cadillac on a page from 4 years ago, and that jpg was being hosted by a malware site. I deleted the link, and was certified A-OK by Google this morning.

Sorry for the inconvenience, and I hope you'll stay tuned. I've got some good new posts in the oven which I'll start posting later today.

As always, thanks for reading and supporting Peak Oil Debunked!
JD

418. IRAQ MOBILIZING

2009-08-25T17:36:00.000-07:00

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.

417. US NATURAL GAS GLUT CONTINUES

2009-08-20T17:24:00.000-07:00

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

2009-08-17T21:28:00.000-07:00

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

2009-08-11T04:44:00.000-07:00

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?

2009-08-05T15:35:00.000-07:00

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

413. OIL SHOCKS DO NOT CAUSE GLOBAL RECESSION

2009-07-30T15:20:00.000-07:00

As noted in the previous article, peak oil doomers constantly say that oil shocks (or high oil prices) inevitably cause economic recession. They produce graphs showing the coincidence of recessions with oil price spikes, and suggest that the historical record is unequivocal.

For some countries, like the US, their point is very true. However, consider the flipside: when the US is getting bled to death and recessing due to high oil prices, countries like Saudi Arabia and Russia are swimming in cash and growing like never before. The money that is sucked out of the US economy is diverted to and spent by oil exporting economies, and the result is a net wash in terms of global GDP. The global GDP doesn't care who spends the money, or where it is spent, or what it is spent on. In fact, there is no simple logical reason why an oil shock should cause global growth to halt or reverse -- a fact which has been noted by economists.

The actual statistics on world growth bear my point out. Here is a graph of world oil production from 1978 to 1994 (a period I like to call "The Big Glitch"; figures from the BP. Stat. Rev. 2007). Note that there was no net growth in oil production in the 14 years from 1979 to 1993.

This was a period which began with a huge oil shock, and some of the highest real oil prices in history (click to enlarge):

And yet world real GDP grew the entire time (figures from the World Bank's World Development Indicators Database):

This is further supported by the following Table of global real GDP 1950-2001 (P. 233, The World Economy, Angus Maddison; click to enlarge). Note that an oil shock has never caused global growth to even halt, let alone reverse:

If declining oil production and high oil prices cause recession, why didn't the world economy recess during the Big Glitch? The world economy grew steadily without any net growth in oil production for 14 years.

In fact, in the 1979-1993 period, the world produced far less than it would have produced in a 14-year production plateau:
And yet world growth continued, unimpeded. The peak oilers tell us that a plateau will have devastating effects on economic growth, because the economy can't grow without growth in oil production. And yet that did not happen during the Big Glitch, even though far less oil was produced than would have been produced in a plateau. On the global level, something is very wrong with their theory that oil shocks cause recession... what is it?

by JD

412. THE MYSTERY OF CHINESE GROWTH

2009-07-16T17:24:00.000-07:00

This morning, I was looking at the Nikkei Shimbun (Japan's leading economics daily), and noticed the following graph of China's GDP growth since 2000:

This is very interesting if you reflect on it. After all, we are told by many popular peak oilers that:

High oil prices always cause recession.
The current recession was caused by the run-up in oil prices prior to July 2008.

Notice the vertical axis on the graph. Even at its lowest point, the Chinese growth rate never dipped below 6%. China never even came close to a recession, despite the highest real oil prices in history.

How is that possible? If cheap oil is so critical to economic functioning, why doesn't an oil crunch stop growth in China?

by JD

411. REALITY CHECK FOR "ACE"

2009-07-15T03:44:00.000-07:00

Today's a good day to review one of the oil production forecasts made by the Oil Drum's primary forecaster, Tony Eriksen aka "ace". (Quick question: How narcissistic do you have to be to call yourself "ace"?)

On August 6, 2007, ace published the following prediction on the Oil Drum:

World C&C production continues to retain its May 2005 peak and is forecast to decline by 1%/yr until 2009. The decline rate steepens to 4%/yr until 2012. The main reason for the end of the total liquids plateau in 2009 (Fig 1) is that the C&C production decline rate changes from 1%/yr to 4%/yr in 2009.

The graph of this forecast is as follows. Notice in particular the steep increase in the decline rate to 4%/yr which ace forecasted to begin right now, in the Summer of 2009 (click the graph to enlarge):

Now, let's compare this forecast with the actual results to date (from the latest Oilwatch Monthly):

As you can see, the first part of the forecast was not very accurate. Ace stated that there would be no new peak after 2005, but in fact a new peak was set in July 2008. Furthermore, production did not decline by 1%/yr from May 2007. In fact, there was a sharp increase in production, until the steep drop due to the recession.

However, those points are all pretty minor. The funky part of ace's forecast starts about right now, in July 2009. As you can see in the graph, he is predicting that world C&C (conventional crude) production will now begin a shocking and unprecedented nosedive, and decline by 4%/yr until 2012. (Compare this with the 1.3% C&C decline forecast by Kjell Aleklett.)

Current C&C production is roughly 72 mbd (EIA, April 2009). So here's ace's forecast for the next few years:

Summer 2010: 69 mbd
Summer 2011: 66 mbd
Summer 2012: 64 mbd

Those are horrendous declines. The total crude production of Saudi Arabia gone, in just three years. So stay tuned folks. Either oil production, or ace's credibility, is going to swirl down the toilet in the next year or two. I'm betting on the latter.

by JD

410. MORE ON THE IMPORT LAND EFFECT

2009-07-12T02:10:00.000-07:00

This is a continuation of the previous post 409. THE IMPORT LAND MODEL examining the relevance of the Jeffrey Brown's Export Land Model (ELM).

According to the ELM, growth in oil consumption by exporters will rapidly reduce available exports. However, as I showed in the previous article, total 2008 consumption growth of all major exporters was about 486 kbd, while the 2008 drop in oil consumption by the US alone was -1,262 kbd. This means that increased consumption by exporters was completely swamped by decreased consumption by importers. Indeed, the drop in consumption by the US alone in 2008 eliminated roughly 2.5 years worth of the ELM effect. I call this the import land effect.

This effect is getting larger. Examining the Weekly US Petroleum Products Supplied from the EIA, I compared average US fuel consumption for Jan. 1-July 4, 2008 with the corresponding period for 2009. The results:

2008: 20,504 kbd
2009: 18,831 kbd

As you can see, US consumption is down by about -1,673 kbd in 2009 over 2008. This makes a total drop in consumption of roughly 3,000 kbd in two years -- an amount sufficient to wipe out the ELM for about 6.2 years.

And keep in mind: so far I am only considering consumption shrinkage in the US alone. When we figure in the structural drop in consumption in the OECD, which peaked in 2005 and will show a large consumption drop for the 4th consecutive year in 2009, it's likely that importer demand shrinkage is going to wipe out 8 or more years of consumption growth by exporting countries.

So Jeffrey Brown's 2005 prediction

"As I said last year, I expect that by the end of 2006 we will be in the teeth of a ferocious net oil export crisis." Source

is set to recede even further into the future.

The problem is that Brown's ELM calculates available exports like this

Available exports = Production by exporting nations - Consumption growth by exporting nations

when in fact, it is calculated like this

Available exports = Production by exporting nations - Consumption growth by exporting nations + Consumption shrinkage by importing nations

and the third term is currently swamping the second term.

by JD

409. THE IMPORT LAND MODEL

2009-07-09T00:33:00.000-07:00

I've previously discussed the statistical gimmickry of Jeffrey Brown's Export Land Model (ELM). The problem can be quickly summarized like this: Suppose you have a fuel tank which is running down at a rate of 1 liter per hour. Ordinary people with common sense would say that the tank is being drawn down at a constant rate. Similarly, mathematicians would call this a simple linear decline at a constant rate. Jeffrey Brown, however, claims that the draw down is occurring at an exponentially accelerating decline rate. I kid you not. If you're curious about how this amazing feat of smoke and mirrors is achieved, here is a detailed explanation.

Today I'd like to talk about another gimmick of the ELM. Veterans who have read a lot of Brown's writing will have noticed that he always focuses on a few carefully selected examples: Indonesia, the UK and of course "Export Land" (the fictional country he uses to illustrate the model). He never seems to bring it all together, and give a coherent picture of the net export situation for the entire world. There is a good reason for this. When you look at the big picture, the ELM "crisis" appears in a very different light.

Consider the following table, showing oil consumption growth in the world's top 20 exporting countries (click to enlarge):

The first column gives the exporter, the second column gives growth in consumption from 2007 to 2008, and the third column gives average growth in consumption for the past 3 years. The figures in black come from the BP Stat. Rev. 2009, and the figures in blue come from the EIA. All figures indicate thousand barrels per day (kbd).

The first striking thing is how small these numbers are (with the possible exception of Saudi Arabia and Russia). For example, consumption in Mexico only increased by 13,000 barrels per day in 2008, and an average of only 35,000 barrels per day over the last 3 years.

For comparison, the US consumed 19.4 million bd in 2008. That's 1500 times the size of consumption growth in Mexico in 2008. Mexico's growth in oil consumption is literally one tiny piss-ant oil field a year. And Mexico is very representative of oil exporters in general.

So the idea that oil exporting nations are ravenously chewing into the developed world's oil supply is completely at odds with the facts.

In 2008, total world oil exports were around 40 mbd, and total growth in oil consumption by exporters was about 490 kbd. So growth by exporters in 2008 only consumed about 1.2% of the pool of available exports. Graphically, it looks like this:
According to the ELM, that little blue sliver is the bad guy. But try overlaying US oil consumption on the same graph for a size check:
Let's not fool ourselves about who's really sucking down all the oil, and needs to cut back. It's not the oil exporters.

And that leads me to the most interesting point.

On April 5, 2006, Jeffrey Brown (aka "Westexas") made the following prediction:

"As I said last year, I expect that by the end of 2006 we will be in the teeth of a ferocious net oil export crisis." Source

This turned out to be totally wrong in an interesting and unexpected way. The reason is that oil consumption in the US dropped by -1,262 kbd in 2008. This means that the decrease in consumption in the US alone cancelled out about 3 years of consumption growth by all exporting countries. Similarly, Japan's consumption has been dropping by about -166 kbd per year for the last 3 years, totally compensating for consumption growth in Saudi Arabia, the largest exporter consumer. There are also a number of other nations where oil consumption is steadily declining.

So instead of seeing a decrease in available exports due to rising consumption by exporters, what the statistics actually show is importer consumption dropping faster than exporter consumption is rising. I call this effect the "Import Land Model".

Given Brown's prediction it's a very paradoxical outcome. But it's also very satisfying. Clearly we should continue in just this vein: cancelling out exporter consumption growth through conservation and efficiency in the OECD.

by JD

408. KJELL ALEKLETT: 0.5% PER ANNUM POST-PEAK DECLINE

2009-07-06T01:33:00.000-07:00

A few weeks ago Kjell Aleklett, President of ASPO International, visited Australia and gave a presentation which included his forecast for oil production in 2030:

Professor Aleklett addressed the NSW electric car task force and the Federal Government's Bureau of Infrastructure, Transport and Regional Economics yesterday. He had earlier warned a Senate committee that the International Energy Agency had wildly overestimated oil production, lulling nations such as Australia into a false sense of security.
Rather than oil production rising by 20 per cent to 101.5 million barrels a day in 2030, he says production is likely to fall 11 per cent, to just 76 million barrels a day.Source

A fall of 11% to 76mbd means that Aleklett is using a figure of roughly 85.4mbd for the current production level. (In other words, he is using the term "oil" to mean liquids in this context.)

Running the numbers, we find that Aleklett is predicting a post-peak liquids decline rate of 0.5% per year. He is predicting that liquids production 21 years from now will be roughly 90% of what it is today (76/85.4 = 89%). This rate of decline is extremely mild and easy to cope with. Indeed a decline of 11% in liquids fuel production is substantially less than the 14% decline which occurred over the course of only 4 years in the early 1980s (a time I like to call The Big Glitch).

For reference, here is Aleklett's forecast from P. 40 of the pdf of his presentation (available here, click to enlarge):

Aleklett also foresees a mild decline rate for conventional crude (i.e., C&C, not including non-conventional, NGL etc.) The most recent production figure for conventional crude (EIA, March 2009) was 72 mbd. So Aleklett forecasts that conventional crude 21 years from now will be 77% of what it is today. That translates into an annual decline rate of 1.3% -- again, very mild.

These facts show that Kjell Aleklett, President of ASPO international, is basically in agreement with my own well-known prediction from Dec. 2007:

JD's Prediction: World C&C production will decline at an average annual rate of 1% for 15 years after the world C&C peak.

Don't let doomers pull your leg. They love to talk about extremely high post-peak decline rates, but the top people, like Kjell Aleklett, don't buy it. For more information on the principle of slow decline, please see:

317. STRONG ARGUMENT FOR A SLOW DECLINE and
323. LARGE BLOCKS PLATEAU FOR DECADES

by JD

407. THE OIL DRUM PIMPS RACIST PUBLICATION

2009-07-03T17:44:00.000-07:00

[Note from JD (2009/7/5): The situation described in this post has been resolved somewhat, as described by the update at the bottom. The Oil Drum is no longer pimping a racist publication. They are now pimping an article from a racist publication, without indicating where it came from.]

Today, the Oil Drum is featuring an article by pseudo-scientist Richard "worldwide permanent electrical blackouts by 2007" Duncan, and the intro by Nate Hagens begins like this:

This is a guest posting of Richard Duncan's latest "Olduvai" update, which is also featured in the Summer 2009 issue of The Social Contract Quarterly www.thesocialcontract.com.

The uninitiated may not know what is going on here, so let me explain. The "Social Contract Quarterly" is not a scientific journal. It's a rag published and edited by overt white supremacists.

Let me be clear:
The Oil Drum, an ostensibly scientific and reality-based website, is directing its readers to a white supremacist publication and website.

Here's the Southern Poverty Law Center on "The Social Contract":

The Social Contract Press
Petoskey, Mich.
www.tscpress.com

With a strong focus on immigration, The Social Contract Press (TSCP) sells books from its on-line bookstore and publishes a quarterly journal, The Social Contract. TCSP says it favors lowering immigration levels merely "to reduce the rate of American's population growth, protect jobs, preserve the environment, and foster assimilation."

But it publishes a number of racist works, including a reprint of the "gripping" 1973 book, The Camp of the Saints (see Fear and Fantasy), a French racist fantasy novel about the obliteration of Western civilization by dark-skinned hordes from India. The novel, like the race war fantasy The Turner Diaries, has become a key screed for American white supremacists.

The Social Contract is edited by Wayne Lutton, who recently the joined the editorial advisory board of the newspaper of the white supremacist Council of Conservative Citizens (CCC).

At a 1997 CCC conference, Lutton said Third Worlders "have declared racial demographic war against us. ... Why are their populations exploding? Because ... our people have exported medical technology and we feed them.

"Had we left them alone, many of them would be going extinct today."

The Social Contract has published articles by James Lubinskas of the racist American Renaissance magazine; Brent Nelson, who like Lutton is on the advisory board for the CCC's periodical, and Sam Francis, current editor of the CCC tabloid.

John H. Tanton, publisher of The Social Contract Press and founder of the Federation for American Immigration Reform, was instrumental in a 1996 effort to add an anti-immigration plank to the Sierra Club platform, a move that nearly split the environmental group permanently.

To editor Lutton, America essentially is a white man's country. "We are the real Americans," he declared in 1997, "not the Hmong, not Latinos, not the Siberian-Americans. ... As far as the future, the handwriting is on the screen. The Camp of the Saints is coming our way."Source

John H. Tanton, publisher of the "The Social Contract" has said that unless U.S. borders are sealed, America will be overrun by people "defecating and creating garbage and looking for jobs."Source

Here's a photo of Wayne Lutton Ph.D., editor of "The Social Contract" (2nd from right), at a meeting of white supremacists on June 11, 2004. Note the confederate flag in the foreground:

Update 2009/7/5:
Nate has now removed the link to The Social Contract, and added the following response to Peak Oil Debunked:

[Editor's Note: Some have noted that this article was first published by a controversial organization; TOD protocol for guest essays is to include the original source of the piece. It was not my/our intent to direct people to the site or to endorse its content, just like we don't endorse any other site's content or any particular world view. Let's focus the discussion on the essay itself; and debate it on its own merits please.]

This still does not address the underlying problem: If Richard Duncan is a legitimate scientist, whose work we should debate as legitimate science, then why does he publish his work in a rag published by low-rent racists instead of, say, the Proceedings of the National Academy of Sciences, or Nature, or Science, or one of the thousands and thousands of other reputable, peer-reviewed scientific journals?

The answer to that is clear: Duncan can't publish his work in reputable journals because he's a pseudo-scientist moron who (among many other things) predicted worldwide permanent electrical blackouts by the year 2007.

There's is no need to "discuss" Duncan's tripe. All we need to do his wait, and compare his Fig. 5 (shown below) with reality over the next 5 years.

The figure Duncan is graphing - energy consumption per capita (in barrels of oil equivalent, or "boe") - has been steady at about 56-60 boe/c since 1990 in the US (as calculated from the BP Stat. Rev. figures for energy consumption, and census figures for population). As you can see Duncan is predicting that this figure will fall to about 48 boe/c in 2012, and to about 36 boe/c in 2015. These are ridiculous drops - in short, a repeat of his mentally retarded prediction of worldwide permanent blackouts by 2007 - and will be exposed as such in about 3 years. Stay tuned for a thorough tar and feathering.

by JD

406. ORLOV NYC EVENT CANCELED

2009-07-02T04:43:00.000-07:00

Camrade Orlov has now posted a mea culpa for his recent numerical blunder.

(BTW, my recent expose DMITRY ORLOV CONCEDES HE'S AN IDIOT is now on the front page of Google for "Dmitry Orlov". As usual, Peak Oil Debunked powers through the seas of doomer bullshit, straight to the top of the charts.)

Reading the comments to that article, I was amused to see that Dmitry had a presentation (tickets: $20-30) scheduled in NYC for July 11, 2009, but it was cancelled due to poor ticket sales. Apparently only 18 people in the entire NY metropolitan area (population 8.3 million +) expressed any interest. LOL

For reference, here's the comments:

"I just found out that the event in NY is cancelled. A couple of days ago I called Local Energy Solutions to find out why my check was not cashed, and I've got a reply that the event might be postponed or cancelled because there was not enough response."

"Wow. Only 18 people bought tickets for the talk? I was expecting "sold out" and hundreds of people bustling in an auditorium, not "cancelled"."

"Can't believe the NY event is off !"

Clearly the event was nuked due to pathetic turn out. True blue americans can smell a rat a mile away.

by JD

405. SUPPLY CRUNCH RECEDES

2009-06-30T17:14:00.000-07:00

For the last few months the peak oilers have been terrorizing the newbies with the "looming supply crunch" due to lack of investment. Much of this was based on comments earlier this year by the IEA:

"Currently the demand is very low due to the very bad economic situation," [Nobuo Tanaka, the IEA's executive director] said. "But when the economy starts growing and recovery comes again in 2010 and onward, we may have another serious supply crunch if capital investment is not coming."

However, this one has now bitten the bag like so many other peak oil scares over the years:

IEA sees global oil supply crunch risk recede
Jun 29 2009

The world may escape an oil supply crisis for the next five years because a slow recovery from the economic downturn would hold down growth of demand, the International Energy Agency (IEA) said on Monday.

Yet another case where the peak oilers relentlessly hype an anticipated threat, and provide no reporting at all when the threat evaporates.

And in related news, the IEA just cut 3 million barrels per day for demand for the next four years: So Much for Chinese Demand (hat tip to Eric J. Fox)

by JD

404. 100 YEARS OF NATURAL GAS

2009-06-23T16:55:00.000-07:00

Rigzone reports some very important news:

The amount of natural gas available for production in the United States has soared 58% in the past four years, driven by a drilling boom and the discovery of huge new gas fields in Texas, Louisiana and Pennsylvania, a new study says.

The report, due to be released Thursday by the nonprofit Potential Gas Committee, concludes the U.S. has more than 2,000 trillion cubic feet of natural gas still in the ground, or nearly a century's worth of production at current rates. That's a 35.4% jump over the committee's last estimate, in 2007, of 1,532 trillion cubic feet, the biggest increase in the committee's 44-year history.

Boone Pickens puts that volume in perspective:

The 2,074 trillion cubic feet of domestic natural gas reserves cited in the study is the equivalent of nearly 350 billion barrels of oil, about the same as Saudi Arabia’s oil reserves.

For those who aren't up on the history: this is a case where the "peak oil community" has egg on its face about an inch thick. In Aug. 2003, Matt Simmons stated that natural gas armageddon for the US was a certainty within 2 years. Now, here we are 4 years later, swimming in veritable seas of the shit. Read the history, folks. The man is a stooge.

While we're at it, let's also recall that the entire "peak oil community" bought into the "natural gas crisis" hook line and sinker:

Matt Simmons, Dale Allen Pfeiffer, mobjectivist, Julian Darley, Culture Change, dieoff.org, LATOC, Post Carbon Institute, Energy Bulletin, The Oil Drum etc. etc.

And the crisis never came. In fact, the result was exactly the opposite of that predicted.

This huge surge in NG supplies is very important, and very good news. As Robert Rapier says: "It also appears that we have enough natural gas available that civilization isn't going to end any time soon due to lack of energy supplies."

by JD

403. DMITRY ORLOV CONCEDES HE'S AN IDIOT

2009-06-19T04:55:00.000-07:00

Still on vacation, but I couldn't resist this one. A couple of days ago, Dmitry Orlov posted a new presentation on his website, well-larded with his usual asinine assertions about the imminent end of industrial civilization etc. etc.

The funny part is that much of it is based on this concept:

François Cellier has recently published an analysis in which he shows that at roughly $600/bbl the entire world's GDP would be required to pay for oil, leaving no money for putting it to any sort of interesting use. At that price level, we can't even afford to take delivery of it. In fact, at that price level, we can't even afford to pump it out of the ground, because the tool pushers, roughnecks and roustabouts that make oil rigs work don't drink the oil, and there would no longer be room in the budget for beer.

And so, the actual limiting price, beyond which no economic activity is possible, is certainly a lot lower, and last summer we seem to have experimentally established that to be around $150/bbl. which is something like 25% of global GDP.

Scary stuff, except the figures are totally bogus.

$150 oil would not constitute 25% of the world's GDP.

The world consumed 84 million barrels/day in 2008 (from the BP statistical review 2009). At $150 per barrel, that comes to $12.6 billion a day, or $4.6 trillion per year.

The CIA Factbook 2009 gives world GDP for 2008 as $69.49 trillion.

Therefore sustained $150 oil would only account for 4.6/69.49 = 6.6% of world GDP, not 25% as Orlov fraudulently states.

Similary, if oil rose to $600 a barrel, that would cost roughly $50 billion/day, or $18.25 trillion per year.

Clearly $600 oil cannot consume the entire world's GDP because

$18.25 trillion < $69.49 trillion

It would take something a little closer to $2240 per barrel to consume the world's GDP.

*****

You can see where Orlov screwed up if you compare his comment with the original analysis by Cellier. Here's the quote from Orlov:

François Cellier has recently published an analysis in which he shows that at roughly $600/bbl the entire world's GDP would be required to pay for oil, leaving no money for putting it to any sort of interesting use.

Here's the source quote from Cellier:

This means that, if ever the price of energy should rise to a level of $0.37/kWh, we would spend our entire GDP just on the procurement of energy. This corresponds to an oil price of $590/barrel.

Notice the little switcheroo there boys and girls?

The really funny part is that he delivered this presentation at some cheesy doomer jamboree called The New Emergency Conference and NOT ONE PERSON bothered to check his figures. Then he posted the presentation on his blog, and it was commented on by more than 40 fawning idiots, and NO ONE bothered to check his figures. No critical thought was anywhere to be seen. Nothing but wall-to-wall brown-nosing: "Fabulous, Dmitry." "What an absolutely amazing and thoughtful essay." "Marvelous" "Brilliant!"...

I submitted a comment pointing out Orlov's mistake on his blog. However, Orlov heavily moderates the blog, and buried the comment by not posting it. Apparently the facts are not welcome at ClubOrlov.

This incident really speaks volumes about sycophancy and gullibility in the peak oil community.

2009/6/20 update:
Orlov has now formally conceded that yours truly gutted him like a fish, and his figures are complete bullshit (Read down in the comments. Orlov calls himself "kollapsnik". Hat tip to LoneSnark for smoking him out.):

Orlov:

Some people have pointed out that I misquoted François Cellier:

"François Cellier has recently published an analysis in which he shows that at roughly $600/bbl the entire world's GDP would be required to pay for oil..."

Here's the analysis: http://europe.theoildrum.com/node/5388#more

Please substitute "energy" for "oil" and $590 for $600.

Orlov:

I said "oil" whereas I should have said "energy". [...] I don't care about arithmetic very much at all.

2009/7/2 update:
Another (more formal) apology from Kamrade Orlov.
Reading the comments to the blog article, I was amused to see that Dmitry had a presentation (tickets: $20-30) scheduled in NYC for July 11, 2009, but it was cancelled due to lack of interest. Apparently only 18 people in the entire 5-borough area expressed any interest. LOL

by JD

402. ON VACATION

2009-05-17T06:40:00.000-07:00

After about 5 years of posting on this topic, I've decided to take a vacation due to peak oil burnout. Life is short, and I'd like to do some interesting things besides the day-to-day grind of the peak oil community. Of late, I've found little to stimulate my interest in the peak oil media, and in fact, I find peak oil commentary to be mind-numbingly boring and repetitive. How many Kunstler or Heinberg screeds do you really need to read? They're all the same. Endless rehash of the same leftovers, day after day, like dogfood...

Just to be clear: I'm not taking time off because "the world is falling apart" or any other doomer nonsense. In fact, I find it amazing how little impact "peak everything" has on my daily life. My firm conviction, as always, is that peak oil will occur in extreme slow-motion, and that's why it will be fairly easy to weather and adapt to. It's also why it's a little silly to follow it obsessively on a daily basis.

Anyway, thanks to all my staunch readers for your support. I'll be back, just not as often, so I hope you'll pop in from time to time.

I'll leave this thread open to post ideas, news or suggestions for other sites debunkers might enjoy.

401. WRONG TOMORROW

2009-04-02T04:09:00.000-07:00

Short post today. I just want to call everyone's attention to a new site called WRONG TOMORROW. The site is self-explanatory, and all the regulars here will quickly perceive its value. It's accountability time for the tidal wave of self-styled "prophets" now infesting the Internet. Spread the word, and let's give Maciej a helping hand in this important work.

400. MORE ELECTRIC TRUCKS

2009-03-21T03:51:00.000-07:00

Five years ago, when I first got involved with peak oil, electric and hybrid trucks weren't even a concept. A little over a year ago, when I first posted on the subject they still seemed fairly exotic. Now, in 2009, an amazing amount of progress has taken place, and the technology for both EV and HEV (hybrid EV) trucks is rapidly filtering into the mainstream. It's becoming increasingly clear that peak oil will have little impact on tasks such as local trucking, garbage collection, and grid maintenance. Peak oil is simply occurring too slow compared to the rate of truck innovation and dissemination.

EATON
Eaton is a manufacturer of hybrid drivetrains for medium and heavy-duty trucks. Just a couple of days ago, President Obama spoke at the preview of a PHEV utility truck made by Eaton, EPRI and Ford:

The plug-in hybrid truck is the first of five “boom and bucket” trucks based on a Ford F-550 chassis that will be provided by Eaton, EPRI and Ford to public and private utility fleets in the United States for use and evaluation. In addition to fuel and emissions savings while the truck is on the road, additional energy savings are available by utilizing the electric side of the system to power the ancillary systems and tools when the truck is stopped at a work site.Source

ATCO, an Alberta electric utility, is also introducing an HEV utility bucket truck Source. American Electric Power, a mid- and southern US electric utility has 4 International Durastar hybrid bucket trucks with Eaton drivetrains, and 18 more on order Source. A Michigan beer distributor recently purchased 15 medium-duty International DuraStar hybrid tractors made by Navistar with an Eaton drivetrain Source. Kraft is adopting the Durastar hybrid for transport of frozen foods Source. Honda is testing a Class 8 hybrid diesel truck made by Peterbilt (Paccar) and Eaton Source.

BALQON
The heavy-duty electric trucks being used in the Port of Los Angeles, which I described 6 months ago are now in full production. The assembly line is finished, and Balqon will first be producing 20 units for the Port of LA Source. Note that Balqon's Nautilus E30 Class 8 heavy-duty EV truck, and their Mule M-150 7-ton medium duty EV truck, are both equipped for fast-charging Source. Balqon is using AeroVironment's PosiCharge fast charge system for the Port of LA trucks Source.

SMITH ELECTRIC VEHICLES
The Smith Newton 7.5 to 14 tonne all-electric commercial truck from Smith Electric Vehicles, which has been in use in Europe for 3 years, will soon be rolled out in North America Source. Smith's UK customers include: Babcock Airports, Continental Landscapes, TK Maxx, BSkyB, DHL, TNT Express, Openreach, Sainsburys, Royal Mail, CEVA Logistics, Scottish & Southern Energy, Crown Records Management, Translinc, yoyo and Balfour Beatty Source.

MODEC
UK manufacturer Modec offers trucks in a number of styles, with a range up to 100 miles, maximum speed of 50mph, and payload of 2 tonnes. They have sold 150 vehicles since production started in 2007. Customers so far include: Tesco, UPS, FedEx, M&S, Network Rail, Speedy Hire, Stadsdeel Amsterdam Oud Zuid, CenterParcs, Hildon Water, Stadstoezicht Amsterdam, CESPA (Madrid), Deret Group (France), and UK Local Authorities (Modec vans) Source.

FORD
Ford has announced a tie-up with Smith Electric Vehicles to market a fully electric version of its Transit Connect panel van in 2010. Ford will provide the chassis, brand and marketing, and Smith will integrate the EV technology Source.

EVI
Electric Vehicles International is a new player, which apparently has a significant marketing presence in Mexico. It is now offering the customizable eviLightTruck in 3 configurations -- Class 3, Class 4 and Class 5-6 -- for the US market Source.

UPS
In May of 2008, UPS ordered 200 HEV trucks with drivetrains made by Eaton (the largest HEV order in the industry to date), and 300 CNG trucks Source. In October, they ordered 7 hydraulic hybrids, and in November, they announced an order of 12 EV trucks produced by Modec, for deployment in the UK and Germany in early 2009 Source.

UPS currently has the largest alternative fuel fleet in the parcel industry, with more than 1,500 compressed natural gas, liquefied natural gas, propane, hydrogen fuel cell, electric and hybrid electric vehicles Source.

RYDER
Ryder is offering the RydeGreen medium-duty hybrid truck based on Navistar and Eaton technology. "According to International®, the truck has the potential to provide up to 30 to 40 percent improved fuel efficiency in standard in-city pick up and delivery applications."Source

KENWORTH
In early March 2009, Kenworth (a Paccar subsidiary) received a large hybrid truck order from Coca-Cola Enterprises:

The Kirkland company, a division of Bellevue-based Paccar Inc. (NASDAQ: PCAR), said Coca-Cola Enterprises ordered 150 T370 diesel-electric tractors and 35 T370 hybrid trucks. Kenworth officials didn’t disclose the value of the order but the fuel-efficient trucks are reported to cost around $100,000 each.

Last year, Coca-Cola Enterprises of Atlanta (NYSE: CCE) ordered 120 hybrid delivery trucks from Kenworth. Officials at the distribution company said those hybrid trucks resulted in a 30 percent improvement in both fuel efficiency and greenhouse gas emission reductions, compared with standard delivery trucks.Source

Another good source on this topic is the PESWiki for electric trucks. The Wiki gives an extensive list of firms, large and small, producing electric trucks.

by JD

399. FAST CHARGING

2009-03-16T04:52:00.000-07:00

Last week, MIT announced the development of a new type of fast-charging lithium battery:

MIT breakthrough promises lighter, fast-charging batteries

Scientists at the Massachusetts Institute of Technology (MIT) have developed a way to charge lithium ion batteries in seconds, instead of hours, that could open the door to smaller, faster-charging batteries for cell phones and other devices.

[...]

The breakthrough by Cedar and graduate student Byoungwoo Kang is the development of a reengineered surface material for batteries that allows lithium ions to move quickly across the surface of the battery and channels the ions into tunnels. A prototype battery built using this surface material can be charged in 20 seconds or less, compared to 6 minutes for a battery cell that does not use the material, MIT said.

The surface material is not new but is manufactured in a different way. This means batteries that use the faster-charging surface material could be on the market within two to three years, the statement said.

The above is just one approach. A number of fast-charging technologies are already practical and being rolled out. This was also announced last week:

Nissan to trial fast charge electric car network

Pilot project in Arizona promises to charge batteries in less than 15 minutes

The prospect of electric cars that can be recharged within 10 to 15 minutes moved a step closer last week with the announcement of a new pilot project in Arizona.

Car giant Nissan announced that it has signed a partnership with electric vehicle charging technology firm ECOtality and Pima Association of Governments, which represents the Tucson, Arizona region, that will see the three parties work together on rolling out a charging network.

ECOtality said that it would aim to have parts of the public recharging infrastructure rolled out by 2010, in readiness for the US launch of Nissan's zero emission vehicle. Nissan added that under the agreement it would then make a supply of electric vehicles available to the regions public and private fleets.

The Minit Charger fast-charge technology from ECOtality subsidiary eTec was developed in 1996, and 4300 stations are currently in use for fast charging forklift trucks. You can see a video of the Minit Charger in action here.

Toshiba also has an entry in this area, the SCIB (Super Charge Ion Battery):

Toshiba gears up for fast charging battery

Toshiba is to ramp up production of a new type of Lithium Ion battery that can charge to 90 percent of its capacity in a few minutes and is highly-resistant to short circuits.

The Super Charge Ion Battery (SCiB) is a Lithium Ion battery based on proprietary technology developed by the company and is targeted at both industrial and electric vehicle applications and consumer laptop computer use.

Production of the battery, which has been in development for several years, has already begun for the industrial market at the relatively low volume of 150,000 cells per month.

Toshiba will increase that to several tens of millions of cells per month at a new factory it plans to build in Kashiwazaki in Niigata prefecture in north west Japan, it said last week. Construction of the factory will begin in late 2009 and production is scheduled to begin a year later, said Hiroko Mochida, a Toshiba spokeswoman.

Initial production at the factory, which represents an investment of several tens of billions of yen (several hundred million US dollars), will likely be aimed at the industrial and electric vehicle markets although the same lines will be able to make SCIBs for laptop computers, she said.

At September's Ceatec show in Japan Toshiba demonstrated a laptop running on an SCIB. The battery will keep its performance through up to 6,000 recharges -- more than ten times that of typical Lithium Ion batteries -- meaning a laptop should be able to run its lifetime on the SCiB without need to replace the battery. Due to its design it is also much less likely to catch fire or short circuit if crushed or damaged.

Toshiba is collaborating with Schwinn on a fast-charging electric bicycle powered by the SCiB:
New Schwinn fast charging electric bicycle

In September 2008 Schwinn Bicycles announced a strategic collaboration with Toshiba Corporation that they think is going to dramatically improve the uptake of electric bicycles around the world. Schwinn presented the results of this collaboration at the recent Interbike International Bicycle Expo in the form of the Tailwind.

The Tailwind incorporates Toshiba’s new Super Charge ion Battery (SCiB) technology. The SCiB technology will enable Tailwind owners to recharge their battery in 30 minutes through a standard electrical outlet or as little as five to seven minutes through a commercial charger. By comparison, it takes four hours or longer to fully recharge the battery of most other electric bicycles.

Here's a fast charging battery technology for buses:

Proterra claims electric vehicle batteries can recharge in 10 minutes

Battery recharging times remain a major obstacle for electric vehicles. But perhaps not for long. Proterra claims that its new all-electric buses can recharge in as little as ten minutes.

Last week the company demonstrated one of its buses in San Jose (see the video below). Seattle and San Francisco are also considering buying the Proterra's buses.

More info on Proterra here.

Last week, it was also announced that the Tesla will have 440V fast-charge capability, similar to the Minit Charger specs. Apparently Nissan's upcoming TBD all-electric car will also have the ability to fast charge in 26 minutes.

It would seem that fast charging technology is already here.

by JD

398. ELECTRONICS STORES SELLING TRANSPORTATION

2009-03-13T06:56:00.000-07:00

Here's an interesting new wrinkle I hadn't thought of. The US electronics/appliance retailer BestBuy is planning to market an electric motorcycle, The Brammo Enertia:

Best Buy is getting into motorcycles – think Geek Squad in mechanics' coveralls.

The consumer electronics store chain is going to start selling the Enertia electric motorcycle made by Ashland, Ore.-based startup Brammo at five of its West Coast stores in May, CEO Craig Bramscher said Friday.

In time, Bramscher envisions the $12,000 Enertia, as well as Brammo's upcoming lighter-duty and heavier two-seater models, being sold across Best Buy's chain of 1,200 U.S. stores, as well as some of its 1,500 or so stores in Europe and its 270 stores in China.Source

Here's the photo and the specs:

Top speed: 50+ mph
Recharge time: ~3 hrs
Range: 35-45 miles
MPG equivalent: 276
Price: US$ 12000

This one's a little pricey, but even today it has dozens of hungry competitors, many at much lower prices. It makes you wonder: are conventional car manufacturers and dealers yesterday's news? Why wouldn't electric manufacturers and retailers muscle in on scooters and other LEVs (Light EVs)? After all, they're just another electrical appliance. Just as we can expect electric companies to behave more like (or be taken over by) oil companies in the coming post-oil EV era, perhaps we should expect existing electronics/electric firms to play an increasing role in vehicle manufacturing and retailing. It's like I said a while back: electric scooters are going to be the next ipod. We'll be stamping them out by the millions, in 8 trendy colors.

by JD

397. DEFFEYES CRAPS OUT AGAIN

2009-03-11T03:45:00.000-07:00

Interesting news today from Robert Rapier. Official EIA stats now show that 2008 set a new record for annual oil (crude + condensate) production.

Which means that Ken Deffeyes has crapped out once again, adding yet another flub to his long and sorry list of blown predictions. I've gone into depth about this before, but here's the recap. When we last left him, Ken had erroneously predicted peak oil for:

2000
2003
2004-2008
2004
Nov. 24 2005
Dec. 16 2005
Nov. 2005-April 2006

In early 2007, Deffeyes waffled once again -- this time backwards, to May 2005.

The US Energy Information Agency publishes monthly estimates of world oil production at www.eia.doe.gov/ipm/t11d.xls. (Microsoft Office Excel Workbook) Of course, we hope that their estimates are not politically biased. Their current posting shows May 2005 as the month of greatest world oil production. Earlier, I estimated that the peak would be in December, 2005, but May will do. I'll take it. I'll take it.Source

As you would expect, this latest adjustment also turned out wrong. According to the very spreadsheet Ken references, the May 2005 level 74.241kbd was surpassed in July 2008, reaching 74.831kbd. Naturally, he had nothing to say about this on his website. For him, making predictions is like a bear shitting in the woods. Just kick some dirt over the last one when it starts reeking, and grunt out the next one.

Of course, there's always the old standby: "We'll see who gets the last laugh, JD. Someday Ken's going to be right." Actually, I would dispute that. My current conjecture is that oil will never peak as long as Ken Deffeyes is making predictions. That's how truly rank his predictions are. But whenever Ken finally shuts up and oil actually peaks, it's not going to be Ken who is proven right. We're all going to be proven right. Me, Mike Lynch, Daniel Yergin, CERA... literally everyone (aside from the mentally retarded) concedes that oil will peak. So on that glorious day when we're all proven right, I say we all go out for a rousing mutual backslap and group hug!

More broadly, we should note that Ken, like many peak oilers, has been trying to stack the deck by restricting his prediction to conventional crude. The reality is that Ken's "peak" is being swamped by flows of unconventional liquids such as tar sands and (most importantly) NGL, as you can see in the IEA figures for total liquids:

A while back, Ken liked to talk about the "Cornucopian Cemetery", where cornucopians go when they admit that oil has already peaked. We have a similar feature here at Peak Oil Debunked. I call it the Peak Oil Prophet's cemetery. It's where you go after your 9th incompetent prediction of the peak oil date craps out.

Hey Ken. Your ride is here.

by JD

396. NUCLEAR POWER UPDATE

2009-02-27T18:44:00.000-08:00

(Image from M. King Hubbert's 1956 paper "Nuclear Energy and the Fossil Fuels")

Kentucky House panel approves nuclear bill

The Tourism Development and Energy Committee of the Kentucky House has approved a bill that could lead to the lifting of a 25-year-old moratorium on the construction of nuclear power plants within the US state.

Georgia lawmakers OK early recovery of nuclear costs

The Georgia House voted Thursday to let Georgia Power Co. begin charging customers for a planned nuclear power plant five years before it is due to go into service.

The bill, which passed 107-66, already has cleared the Senate and now heads to Gov. Sonny Perdue for his signature.

It would allow the utility to recover $2 billion in financing costs for the $14.4 billion expansion of Plant Vogtle near Augusta. Georgia Power plans to charge ratepayers $1.30 per month for the plant in 2011, when construction is due to begin.

The charge would continue to increase by that amount each year until 2016, when the first of two new nuclear reactors is scheduled to begin operating.

Iran tests first nuclear power plant in Bushehr

Iran began testing out its first nuclear power plant on Wednesday in the southern port of Bushehr, the New York Times reports.

Iranian officials say that fuel rods made of lead were used in place of nuclear fuel in order to test the 1,000 megawatt, Russian-built nuclear plant, according to the ISNA student news agency.

Deputy head of Iran’s Nuclear Energy Organization Mohammad Saeedi told reporters that the fuel rods contained lead instead of the usual uranium.

Meanwhile, Sergei V. Kiriyenko, the head of the Russian nuclear agency which helped built the power plant, said that the plant was “nearing its final stages before launching,” during his visit to Iran and that the construction was finished.

Russia supplied Iran with the nuclear fuel to build the plant under arrangements of the International Atomic Energy Agency (IAEA), which is the same UN agency that monitored the nuclear plants in North Korea’s Yongbyong.

According to an IAEA report released last week, Iran is planning on loading fuel during the second quarter of 2009.

Most Asean members want nuclear power

Most of the members of the Association of Southeast Asian Nations are amenable to tapping nuclear power to promote alternative sources of energy, an official said yesterday.

They expressed support for the idea even as they prepared to sign an agreement today that will allow governments to sell their oil to neighbors at “friendship” prices.

“Nuclear energy is being seriously looked at, but we are still very much at the preliminary discussion stage, at the technical working group level,” Asean Deputy Secretary General Pushpanathan Sundram said in an interview during the Asean Business and Investment Summit.

“There are some that are opposed to it, while others are pushing for it,” he said.

Those in favor of creating or reactivating nuclear plants are Thailand, the Philippines, Vietnam, Laos, Malaysia, Myanmar and Indonesia.

After a 20-year ban, France helps Italy embrace nuclear energy

Twenty years after banning new nuclear plants, Italy is turning to France to restore its nuclear program.

On Tuesday, Italy’s Prime Minister Silvio Berlusconi signed a cooperation deal with President Nicolas Sarkozy for the construction of four power plants in Italy.

Italy shut down its four nuclear plants following a 1987 national referendum that rode a wave of fear and outrage over Russia’s Chernobyl reactor meltdown. Now it is joining a growing number of European countries – including Germany, Slovakia, and Bulgaria – that are returning to nuclear energy due to concerns both about carbon emissions and about the reliability of energy supplies from Russia.

Workforce education for a nuclear energy revival

A rapidly growing demand for more electricity – from cleaner energy sources – has nuclear power poised for a revival in the United States.

The Nuclear Regulatory Commission (NRC) expects companies in the energy industry to apply in the next two years for construction and operation licenses for more than 30 nuclear power plants.

To respond to the demand for more expertise in the field, the Ira A. Fulton School of Engineering at Arizona State University is launching a graduate-level program in nuclear power generation.

Wisconsin regulator says nuclear should be an option

Wisconsin Public Service Commission Chairman Eric Callisto told attendees at an energy conference Monday that he believes legislators will end the state's ban on new nuclear power plants. But Tia Nelson, co-chairwoman of the Governor's Global Warming Task Force, called nuclear energy a "distraction" from efforts toward conservation and energy efficiency.

Oklahoma nuclear power bill advances in committee

Oklahoma lawmakers signaled their interest to go nuclear, approving legislation that would streamline the state's regulatory process and provide new incentives to build a nuclear power plant.

Toshiba wins US nuclear plant projects

Japan's Toshiba Corp. said Wednesday it had won a contract to build two nuclear plants in the United States that are scheduled to start generating power in 2016.

It is the first such contract a Japanese company has won overseas, covering the projects entirely from engineering and procurement to construction of the nuclear plants, the company said.

Under the contract, Toshiba America Nuclear Energy Corp., a US-based Toshiba subsidiary, will build two Advanced Boiling Water Reactor (ABWR) nuclear power plants in Texas.

The plants, the first ABWRs to be constructed in the United States, will have an output of approximately 1,400 megawatts each, the company said.

Two new nuclear power stations planned for Cumbrian coast

Two new nuclear power stations could be built on farmland in west Cumbria, as well as those already predicted for the Sellafield site.

A German energy firm has revealed plans to build reactors on coastal sites near Egremont and Millom. These are separate to plans for reactor development on land around Sellafield.

W.Va. lawmakers propose nuclear power ban repeal

Some West Virginia lawmakers hope to add nuclear power to the state's energy portfolio.

A bipartisan group of senators has introduced legislation to repeal a partial 1996 ban on the building of nuclear power plants.

"A ban is inconsistent with West Virginia's claim that it is an energy state," said Sen. Brooks McCabe, the bill's lead sponsor.

Algeria to erect nuclear Power plant

The Algerian government has announced its plans to erect the first ever nuclear power plant by 2020, Energy and Mining Minister Chakib Khelil has said.

Minister Khelil said Algeria will also build new plants every five year after the erection of the fisrst station.

The Minister said Algeria has already signed civil nuclear agreements with Argentina, France, China and the United States. “Algeria presently has two experimental nuclear plants in Draria, in the suburbs of Algiers and another one in Ain Oussera, near Djelfa about 300 kms from capital Algiers,” he said, stating that further negotiations were underway with Russia and South Africa.

Jordan, Russia sign nuclear deal

Russia, which is helping Iran build its first nuclear plant, inked a preliminary cooperation deal with Jordan on Thursday to pave the way for producing nuclear power in the energy-poor kingdom.

Under the agreement, Russia will help Jordan, which imports around 95 percent of its energy needs, build power and desalination plants as well as research centres, Jordan Atomic Energy Commission head Khaled Tukan said.

"A final agreement will be signed in Moscow by the end March," Tukan told state news agency Petra after signing the deal with Nikolai Spassky, deputy director of the Russian Federal Agency for Nuclear Energy.

Yucca Mountain is Dead! Long Live Fast Breeders?!

The Obama administration's new budget essentially kills the Yucca mountain radioactive waste repository project. The original goal was to build a facility in which to safely store high level radioactive wastes from America's 104 nuclear power reactors. Anti-nuke environmentalist ideologues have long opposed the Yucca mountain facility. Their goal is make nuclear power impractical by blocking the waste disposal stream. But perhaps they've outfoxed themselves. nukepower

The new budget promises that the Obama administration will “devise a new strategy toward nuclear waste disposal.” Well, there is already a strategy that will work, using fast breeder reactors to burn up waste and simultaneously produce more reactor fuel.

Now Even “Greens” Are Turning To Nuclear Power

Nuclear power has new converts, according to top UK environmentalists, as they made public their belief that this energy source is still required.

Many have long opposed nuclear power because of the risk of weapons proliferation, as well as the difficulty of waste disposal.

In spite of worries about nuclear power, global warming is seen as a more serious hazard.

Nuclear is seen as an improvement over new coal-fired power plants.

Britain will have a key energy gap over the coming years.

Coal burning power stations and ageing nuclear power facilities will shutdown and the government is obliged to reduce carbon emissions by 80 per cent, not later than 2050.

Therefore, many environmentalists are converting back to nuclear power.

In a momentous piece for the Independent newspaper, a member of the Green Party, a past head of Greenpeace, and Lord Smith, Chairman of the Environment Agency and a prominent columnist, made known their coversion to supporting nuclear energy.

India Targets 6,000-MW of Nuclear Power in 2009

The agreements with AREVA and TVEL come at a time when three reactors in the country are set to commence production. Units 5 and 6 at the Rajasthan Atomic Power Plant (2 X 220 MW), Unit 4 at the Kaiga Power Plant in Karnataka (220-MW) and one unit at the Koodankulam Power Plant in Tamil Nadu (1,000-MW) will go live this year. The steady supply of fuel is expected to boost atomic power production from the existing 17 facilities to about 6,000-MW by the end of 2009, with the reactors expected to operate at about 90 percent of their combined installed capacities.

NPCIL is also embarking on a joint venture with NTPC Limited (New Delhi) to establish new nuclear plants in India based on indigenous "fast breeder reactor" technology. Five other reactors with a production potential of 2,660-MW are already under construction. The Atomic Energy Commission recently said that India would have 20,000-MW of nuclear power by 2020.

German State Calls for Extension of Nuclear Power

Germany’s largest producer of wind- powered electricity, the northern state of Schleswig-Holstein, should extend the use of its three nuclear power plants, a government minister said.

A mix of energy, including nuclear power, is the most sensible way to guarantee energy security and cut carbon-dioxide emissions, said state economy minister Werner Marnette, a member of Chancellor Angela Merkel’s ruling Christian Democratic Party.

The minister’s comments renew the debate over atomic energy ahead of German federal elections later this year and follow Sweden’s Feb. 5 decision to scrap a ban on new atomic plants.

“It’s essential that we allow our three nuclear plants to keep running or we won’t have enough energy,” Marnette said today in an interview in Husum. “Of course, we have to work on the security issues as well as the problem of waste.”

Tender for Armenian nuclear power station

The Armenian Government has announced a tender for holding a competition which will identify which company should undertake the construction of a new nuclear power station in the country. In 38 days the tender commission will announce the winner of this tender, who will then hold the competition and thereby identify the most appropriate power station constructor.

China may help Vietnam build N-reactor

A Chinese firm has started talks to help Vietnam in building its first nuclear power project to reduce electrical shortages in the country.

China Guangdong Nuclear Power Group (CGNPG), one of the two main nuclear power plant operators in the country, announced Monday it was in talks with Vietnam to help the country construct its first nuclear power plant.

According to a report on the website of the Shenzhen-based company, Vietnam plans to build two 1,000-mW reactors in Ninh Thuan Province on the lower central coast.

Vietnam plans to build nuclear power projects with a total capacity of 4,000 mW by 2021, a CGNPG executive who declined to be named said.

Manitoba town pushes for nuclear reactor

The town of Pinawa, Man., may be in line for a nuclear renaissance.

The town of 1,500, 110 miles northeast of Winnipeg, is in discussions with Atomic Energy of Canada Ltd., to possibly build a nuclear power plant on the site of AECL's Whiteshell Laboratories.

Dale Coffin, a spokesman for AECL, said it's very much in the early discussion stage but said the idea of putting up a nuclear power plant in Pinawa is a good one.

``From our point of view, Pinawa is already a licensed site, there are already experienced people working there, abundant water near by and it's close to the United States and transmission lines,'' said Coffin. ``There are some very positive features there already.''

Third reactor at North Anna nuclear power plant debated

About 100 people turned out last night to argue for and against plans to build a third nuclear reactor at Louisa County's North Anna Power Station.

The U.S. Nuclear Regulatory Commission is evaluating the potential environmental impact of a third reactor at the nuclear power plant near Mineral. The agency used last night's meeting to gather public comments.

Sweden lifts ban on nuclear power

Nuclear power received a significant boost today when the Swedish government announced plans to overturn a near 30-year ban on atomic plants as part of a new drive to increase energy security and combat global warming.

Ministers said they would present a bill on 17 March which would allow the construction of nuclear reactors on existing sites and introduce a new carbon tax as part of a programme to cut carbon emissions by 40% on 1990 levels by 2020.

Kuwait eyes nuclear power with French help - paper

Kuwait is considering developing nuclear power with the help of a French firm to meet demand for electricity and water desalination, the country's ruler said in remarks published on Wednesday.

"A French firm is studying the issue," daily al-Watan quoted Emir Sheikh Sabah al-Ahmad al-Sabah as saying, adding that the oil-rich Gulf Arab state would only put nuclear power to civilian use and according to international laws.

Nuclear power would "save a lot of wasted fuel in electricity and water desalination plants", he said, giving no further details. The emir did not specifically refer to any French firm in his published remarks.

by JD

395. OIL BULL FALTERING?

2009-02-24T06:00:00.000-08:00

Since the crash started in summer 2008, the general view in the peak oil community has been that the current low prices are an anomaly, and that prices will soon return to their upward trajectory. A number of voices are starting to question this view. The main issue seems to be this: Is the economy going to actually recover any time soon?

It reminds me of an inconsistency I often noticed when oil prices were skyrocketing. Many doomers were simultaneously claiming that: a) the economy was dying, and b) oil prices would continue to go through the roof. Something had to give, and as we all now know, that turned out to be claim b).

Now we've got the same contradiction all over again. Naturally the doomers are jazzed that the credit crisis is sending the economy into a death spiral, but at the same time they keep talking about oil prices soaring "when the economy comes back". It doesn't add up. If the financial crisis is a death spiral, the economy isn't going to come back for a long time. I keep wondering, are they just in denial, hoping for their oil portfolios to come back?

Consider the Asian Financial Crisis of 1997. That was peanuts compared to what we've got happening now, and it knocked the price of oil down to $10 a barrel -- equivalent to only $13 a barrel in 2009 dollars. It would seem that oil has a lot more room on the downside.

The Wall Street Journal Blog is starting to wonder:

With already tottering demand getting even weaker, oil bulls are having second thoughts. Barclays Bank, which for months has warned oil prices will rebound because of supply shortages, slashed its 2009 forecast for Brent crude to $61 from $70.

Another skeptic says the unthinkable in Your Oil Stocks Aren't Coming Back:

Remember when Intel (INTC), Microsoft (MSFT), Dell (DELL), Lucent (ALU), Yahoo (YHOO) and Cisco (CSCO) ruled the markets? There was an era, roughly 1997 to 2000 when those stocks actually mattered. They were important companies doing big things in terms of providing the technology needed for the next century’s communications and internet build-out. And then, they just didn’t matter anymore. Once the dot com bubble burst, every bounce or rally in these names was basically a selling opportunity…for 8 years and counting! See the above chart for a notion of how frustrating it must have been to stay positive on NASDAQ tech names.

It took a long time for people to get it through their heads that these stocks had seen the best valuations and prices that they would ever see. Investors couldn’t imagine a world where these stocks would no longer be important, but with each passing quarter and year, these NASDAQ Generals diminished in stature and market cap.

I believe that this story is repeating itself in the oil patch. Market participants seem to be in a state of disbelief that Chesapeake (CHK), Transocean (RIG), National Oilwell Varco (NOV) and ConocoPhillips (COP) aren't important anymore. These stocks may have have seen the best levels they will ever see, at least for a long time.

Traders talking about "dumb money" in the oil markets:

Flynn expects oil prices to eventually drop well below $30 a barrel in coming months as manufacturers cut operations and millions of laid off workers stop commuting to work.

"We're getting ready for a tailspin, but you just don't know what's going to happen," Flynn said. If it weren't for the new federal stimulus package and promises of further OPEC production cuts, "we'd probably already be there."

Trading on the Nymex has been erratic because of a influx of "dumb money" entering the market, analyst Stephen Schork said. Amateur investors are flocking to energy funds that have bet crude prices will eventually spike again.

"They're looking at the fact that crude went to $150 a barrel a year ago, and its in the 30s today," Schork said. "They think it's going back up."

More in the same vein from Rigzone (hat tip to OilFinder):

Oil Cos' Bet on Swift Price Rebound Has Its Risks
Major oil companies are trying not to repeat the mistakes of the last price slump in the late 1990s, when cutting back on investment left them ill-prepared to meet growing demand in later years. This time they promise to maintain investment through the current price dip, but the risk is growing that a prolonged slump could stymie their plans.

If the years ahead follow the pattern of the last major recession in the early the 1980s, where global oil demand shrank during the downturn and remained well below production capacity for years, even as the recovery accelerated, prices may stay low for much longer than current expectations. Steady as she goes may be their mantra for 2009, but oil chiefs may be on course for some tough choices in 2010.

[...]

We are barely six months past the last peak in the oil price, but OPEC already has 8 million barrels a day of spare oil production capacity after big output cuts, said the group's Secretary General Abdullah Al-Badri. The group is very concerned about the impact the economic downturn will have on the medium- and long-term oil demand, he said.

OPEC's spare capacity looks likely to grow. Thanks to investment in the boom years, the world's productive capacity should grow faster between 2009 and 2012 than it did from 2003 to 2008, said a report from U.S.-based consultancy Cambridge Energy Research Associates.

Companies May Face Massive Cash Outflows

If companies do not reduce their upstream investment at all during the current economic downturn, CERA said spare capacity could reach 10 million barrels a day by 2013. "This would be an unprecedented margin and would tend to undermine the oil price," the consultancy said.

by JD

394. CONSERVATION STIMULATES THE ECONOMY

2009-02-14T23:28:00.000-08:00

Many newcomers are confused about what we stand for here at Peak Oil Debunked. So today I'd like to describe our basic position, and how we differ from the more pessimistic mainstream of the peak oil community.

The main difference is that the pessimists focus obsessively on the supply side. They are committed to the idea of societal breakdown or collapse, so they constantly fret about supply, like Dave Cohen:

Here's the main point: Can anyone, anywhere, point to a large new secure supply of crude coming online anywhere in the next few (5) years that solves the supply and demand equation in that time frame and beyond? I think not.

When the IEA draws some crazy curve which says world demand is going to be 121mbd in 2030, pessimists like Dave really take it to heart. They genuinely think that the world is going to need that much oil. That is why they are pessimistic. The world will need 121mbd, but it's unlikely that amount will be forthcoming, so the system is going to breakdown.

That's the doomer view in a nutshell, and it's nicely captured in a recent graph from the Oil Drum, which Gail Tverberg uses to terrorize the wide-eyed newbies in her presentations on peak oil:

Note that Gail and her fellow pessimists are very careful to never question the unexamined doomer assumption, i.e. to ask: "Is all that oil really necessary?"

I, on the other hand, am an optimist. I believe that most oil is wasted and conservation is actually quite easy. I don't believe we need most of the oil we are using today, so the failure to meet the 121mbd target is not really a big deal. Like I wrote back to Dave:

The error in your ways is that you are thinking only in terms of supply side solutions. You think that the failure to meet demand is a terrible problem. It's not. Most oil demand is for frivolous, wasteful uses (like single person commuting in the U.S.) It's a form of addiction, and demand destruction isn't a bad thing, it's "healing" or "getting better".

To answer your question: The large new supply of secure crude is going to come from conservation, i.e. U.S. commuters riding two-to-a-car instead of one-to-a-car etc.

It is patently obvious that vast amounts of oil are being wasted, particularly in first world countries. The Hirsch Report itself admits (P. 24) that "67 percent of personal automobile travel, and 50 percent of airplane travel are discretionary". This means that 6.3 million barrels per day (roughly equal to the oil production of Iran+Iraq) are used in discretionary auto/air travel in the US alone. That's huge: 30% of US oil consumption, and 50% of US oil imports. And it's being wasted on non-mission-critical, optional travel. Or consider commuting. The average commute in the US is 16 miles Source. Which means that, in a pinch, half the population could easily commute to work by bicycle. Those with longer commutes can conserve, while still maintaining functionality as usual, by car pooling, or driving a hyper-efficient vehicle, like the Veken hybrid scooter, which is available today for less than $3000, and gets 180mpg (you can see a video here. More info here). On top of that, you can count numerous other demand-side measures, like telecommuting, telepresence, or even gasoline rationing with tradeable credits. You could very easily draft a plan to eliminate half of US oil consumption (10mbd, or 1 Saudi Arabia) simply by trimming waste and lifestyle.

Of course my point here is true, and it carries a lot of force. In fact, I've never met a doomer who didn't immediately acknowledge the validity of this point. There is no genuine "need" for people to commute to computerized desk jobs 100 miles away in 6000 lb. single-occupant SUVs. You don't even have to think about it; it's patently ridiculous. We waste staggering volumes of oil on frivolous lifestyle bullshit.

So the optimist solution is to gradually (or quickly, if need be) eliminate all this waste, and switch over the remaining essential part to alternate power sources. For example, the classic case would be a commuter who switches from a single-occupant 12mpg SUV to a 180mpg hybrid scooter, and then to an ∞ mpg electric scooter driven by solar or nuclear. Radically reduce oil use to the minimum necessary, and then substitute. That's the optimist solution in a nutshell.

Of course, the doomers are fully committed to horror and mayhem, and have a pre-packaged rebuttal to this solution too. They say that conservation and efficiency are poison to our economy because the economy is based on waste, and eliminating waste will send the economy into a death spiral. It sounds plausible the first time you hear it, but if you think about it carefully, you'll see the fallacy.

Consider the classic example: Jane was driving an SUV that got 12mpg. Then she purchased a hybrid scooter for $3000, which gets 180mpg. Assuming $5/gallon gas (due to post-peak conditions), car travel costs $.42/mile and scooter travel costs $0.03/mile. So when she rides her scooter, she's saving about $0.39/mile. At the scooter's top speed of 40mph, she's saving $15.60/hour. She's making as much money driving her scooter as she would working a well-paying second job. She'll pay off the moped in a few months, and after that it's all gravy. Lots of extra money in her pocket is hardly a negative for the economy. That money will get spent somewhere, and the people providing those goods and services will benefit.

This is the key point: Whenever you conserve oil, you also save money, and that money gets spent or invested, stimulating the economy. Unlike money spent on oil, which generally flows out of the country, money saved by conserving oil is far more likely to be spent in a way which stimulates the domestic economy and employment.

A recent study of efficiency efforts in California bears this out:

• Energy efficiency measures have enabled California households to redirect their expenditure toward other goods and services, creating about 1.5 million FTE (Full Time Equivalent) jobs with a total payroll of over $45 billion, driven by well-documented household energy savings of $56 billion from 1972-2006.
• As a result of energy efficiency, California reduced its energy import dependence and directed a greater percentage of its consumption to in-state, employment-intensive goods and services, whose supply chains also largely reside within the state, creating a “multiplier” effect of job generation.
• The same efficiency measures resulted in slower growth in energy supply chains, including oil, gas, and electric power. For every new job foregone in these sectors, however, more than 50 new jobs have been created across the state’s diverse economy.
• Sectoral examination of these results indicates that job creation is in less energy intensive services and other categories, further compounding California’s aggregate efficiency improvements and facilitating the economy’s transition to a low carbon future.

So there you have it. Conservation is the easiest and best solution to peak oil, and it's highly beneficial to the economy. Careful examination shows the pessimist argument to be based on a series of fallacies.

by JD

393. GLUTS AND MORE GLUTS

2009-02-06T05:02:00.000-08:00

The oil glut continues...

Crude Oil At Sea Frustrates Efforts At Price Stability

Every time the oil market attempts to ignite a rally, an upsurge from the sea of crude stored on waterborne tankers snuffs it out.

The accumulation of oil held in "floating storage" gained speed in December, as available space in traditional onshore storage hubs dwindled due to the onslaught of excess supplies in the market. This floating storage is now among the biggest impediments to oil prices recovering any of the ground lost over the last six months. Companies are quick to sell cargoes at the hint of a turnaround in the oil market, unleashing a flood of oil onto a near-saturated landscape.

More oil is being produced than recession-stricken economies need, and oil prices have fallen as the extra crude fills storage terminals worldwide. Crude futures prices are down more than 70% from all-time record highs hit in July 2008. Light, sweet crude oil for March delivery on Tuesday settled 46 cents, or 1.1%, lower at $40.32 a barrel on the New York Mercantile Exchange.

The oil sitting at sea adds an extra layer of uncertainty about the extent of the supply overhang, which traders say must be whittled down for oil prices to rebound.

Tankers carrying up to 2 million barrels each are not counted in government inventory statistics, but can deliver their cargoes anywhere in the world. Ship trackers estimate that up to 80 million barrels may be on the water, or more than twice the amount kept in Cushing, Okla., the largest commercial storage center in the U.S.

An LNG glut seems to be brewing as well. Hate to be repetitive, but whatever happened to that imminent cliff in natural gas that Matt Simmons was hysterically squealing about 6 years ago? With rising domestic production from shale and other unconventional natural gas plays, and now a surge of LNG, we seem to be swimming in the stuff.

Natural gas glut could hit U.S.

As many as seven massive natural gas export terminals are expected to start up overseas this year, expanding worldwide capacity by 20 percent and flooding markets with new supplies of the key power plant and heating fuel. Dozens of new tankers capable of carrying natural gas in a liquefied form are slated to hit the seas.

Just as these new supplies come on line, worldwide demand is expected to drop as the global recession deepens.

Operators of these new facilities are unlikely to cut back production, however, so shipments of liquefied natural gas will most likely head to the deepest markets with the greatest amount of natural gas storage capacity — the United States.
‘Counterintuitive’

“It’s completely counterintuitive,” said Murray Douglas, a global LNG analyst with Wood Mackenzie in Houston, who is predicting U.S. LNG imports will grow 30 percent to 456 billion cubic feet this year and to more than 1.1 trillion cubic feet by 2013.

“We don’t believe Asia and Europe will be in a position to absorb this new production, and the U.S. is the only market that can take it, that has a large amount of storage.”

The wave of imports might even be strong enough to challenge growing domestic natural gas production from various shale formations, including the Barnett Shale near Fort Worth and Fayetteville Shale in Arkansas.

“This can put pressure on U.S. gas prices and could delay the full development of some of the new shale projects,” Douglas said.

Other analysts, including Houston-based Waterborne Energy and Raleigh, N.C.-based Pan Eurasia Enterprises, agree that an American gas import surge may be coming.

Even the Department of Energy updated its LNG import predictions for 2009 recently to include the possibility of such a surge.

And thanks to OilFinder for some more detail:

Surge in US Crude Stocks Blunts OPEC Cuts

OPEC cut crude oil output by nearly 1.3 million barrels a day in January in an attempt to tame the growing supply glut that is anchoring prices near $40 a barrel.

But as the Organization of Petroleum Exporting Countries tightened the taps, crude oil inventories in the U.S. were growing by 700,000 to 900,000 barrels a day. That growth rate, the most seen in the month of January in 85 years, and the highest in any month since at least October 2002, is a serious setback to OPEC's efforts.

[...]

Biggest Surplus Since 1990

That helped U.S. crude oil inventories balloon by the highest level in years. Crude inventories climbed by at least four times the average January rate over the last five years, which is the biggest rise in the month since 1924, EIA data show.

At 346 million barrels, crude stocks are the most since July 2007, when they topped 351 million barrels.

Crude stocks are sufficient to cover more than 24 days of current refinery demand, compared with a five-year average of 20 days, and the highest level since 1995.

What's more, crude stocks are likely to continue to gain. The EIA expects refinery runs in February and March to average 400,000 barrels a day below current levels.

Jan Stuart, economist at UBS Securities, said he expected refineries to slash operations to be below 70% of capacity on occasion in coming months, compared with an 83.5% rate in the Jan. 30 week. That implies a cut in crude runs of about 2 million barrels a day from current rates.

U.S. crude oil stocks haven't peaked in January in 55 years, data from the EIA show, a further indication of likely gains in coming months. Incentives for refiners to bulk up stockpiles are still in place, even as inventory at Cushing, Okla., the delivery point for the Nymex crude contract, stands at record levels.

[...]

by JD

392. BOOK REVIEW: "THE MYTH OF THE OIL CRISIS"

2009-01-24T21:11:00.000-08:00

[This post is by Ari, my co-blogger at POD. --JD]

The Myth of the Oil Crisis (MotOC) is a very recently published book (2008) by Robin Mills on the subject of oil, natural gas, and more broadly, energy. As the title suggests, Mills tackles the notion that we are on the brink of an “oil crisis,” known online largely by the monicker “peak oil,” from which the world will never recover. If Campbell and Laherrére are the professionals that gave the peak oil movement its credentialed weight (by being professional geologists), then Mills is perhaps the antithesis for the “debunking” movement. While the book is flawed, it presents a broad optimistic view of energy reserve availability and potential for development and supply of those reserves in the foreseeable future. What makes the book most important, however, is that Mills demonstrates, using easily accessed sources, that the imminent peak arguments are highly flawed and irrational.

Robin Mills is, according to his biographical blurb, “an oil industry professional with a background in both geology and economics. Currently (as of 2008), he is Petroleum Economics Manager for the Emirates National Oil Company in Dubai. Previously, he worked for Shell.” Mills is a fairly impressive person, even not including his graduate degree from Cambridge University (in petroleum geology), Then again, so are many of those who currently write about oil depletion from the “peak oil” side. What makes Mills different? For one, he's relatively young (born in 1976). But more importantly, he is someone who is currently in the thick of the oil business in the Middle East itself. Unlike many “peakniks,” Mills actively participates in the energy production business as I write this review. He is not some “armchair analyst” like many of us, and has more of a “veteran view” than many others seem to demonstrate.

Mills sets the stage by placing the oil commentators into five camps (examples chosen by me): The Geologists (Campbell, Laherrére, Deffeyes), The Economists (Odell, Lynch, CERA), The Militarists (who are actually made up of the militarists, media, and mercantilists), the Environmentalists (Greenpeace et al.), and the Neo-Luddites (Heinberg). It is important, I believe, to note that “The Geologists” doesn't refer to petroleum geologists, per se, but because they worked at some point in their careers as professional geologists. Mills notes that they can also be referred to as “Malthusians,” which is a fairly fitting appellation. Some may object to the rather broad categories that Mills uses to group the various commentators, however. After all, some actors clearly align with more than one camp. Nonetheless, it serves as a useful way to group the widely divergent views of the oil commentary community.

Mills' book's greatest strength is its ability to deconstruct the most frightening of the peak prophecies and show how they are either incorrect, or at the very least, misguided. He is thorough in demonstrating, through both data, and clear, well-sourced arguments, how the extreme pessimists of the energy commentary community are generally incorrect in their arguments and assumptions. He even demonstrates how Hubbert, commonly hailed as a sort of “peak oil prophet” (words mine), was hardly as accurate as he is shown to be. In fact, Mills scrutinizes Hubbert in the fourth chapter, entitled “Half-Full or Half-Empty?” Hubbert, despite his supposed accuracy, was actually fairly inaccurate on a lot of important issues, as Mills demonstrates in the following bullet points:

Hubbert actually proposed 1965 as his most likely peak date (US oil production); 1970 was a fallback if secondary recovery proved to be more successful than he expected (as it did)

Although arguably correct on the date of the peak, he was wrong about its height: total annual US production in 1970 was 20 percent (emphasis mine) higher than he expected...

He forecast that world oil production would peak between 1995 and 2000 at 33 million bbl/day. The true figure was 75 million bbl/day in 2000, and it has continued to rise subsequently.(MotOC pg. 42.)

Mills also demonstrates that the Hubbert curve, despite being seen as a sort of sacred truth of petroleum geology, fits many countries' production curves rather badly (notably the UK and Iraq) (pp 40-41.) He also-- rather adeptly, in my opinion-- demonstrates that peakniks are extremely pessimistic relative to nearly every other professional estimate of reserves. In fact, where Campbell says that the world has a total endowment of around 2000 billion bbl of oil, even the second most pessimistic estimate (Bentley) gives the world over 3000 billion bbl of oil-- that's a significant difference! Moreover, both Campbell and Bentley are over 1000 bbl behind the most conservative “non-peaknik” estimate of over 4000 billion bbl by CERA (supposed "Pollyannas," no less!). A key difference, Mills notes, is that everyone but The Geologists allows for significant reserves growth. An example of this is the reserve growth of around 69 billion bbl from the 2000 USGS review to its 2005 self audit, which amounts to nearly half of Campbell's YtF (yet to find)! If nothing else, the book demonstrates rather clearly that the peaknik community is beset in all directions by an institutionalized form of pessimism that rarely follows reality.

Another strength of Mills' book is the credence he pays toward economic factors. He shows, throughout the book, that economic factors play a significant role in energy production. One of the often ignored (or derided) factors in energy is the capital needed to keep it running smoothly. The Geologists see geography as the ultimate factor in deciding energy availability, but they are far too willing to ignore the fact that even assuming you have a powerful physical limitation in place, you cannot drill oil if you lack rigs and manpower. Unfortunately, we live in a world today where the physical and human capital needed to run the oil industry has become significantly scarcer than in decades past-- this is largely a consequence of the previous decades of incredibly cheap oil. These same low prices drove OPEC to reduce production as well, which allowed oil commentators (Simmons, for example) to say that Saudi Arabia is in a state of decline. Unfortunately for Simmons, KSA was merely responding rationally to low prices by reducing production. The reader will see a lot of this kind of debunking throughout the book. For some, it will be interesting to see the shriller voices of energy commentary dismantled. For many readers of this blog, however, it will be a rehashing of what has been said here by JD and others. Nonetheless, it is important stuff, and Mills does a good job of taking out some of the more pernicious fallacies with sound economic thinking.

Other topics that Mills deals with are unconventional oil, backdating (one of the more irritating traits of The Geologists), natural gas, geopolitics, demand, and finally the environment. I am glad to say that he does a good job of dealing with unconventional oil (it's not as impossible to produce as some say), backdating (basically, contemporary reserve growth is moved back in the past in order to make it look like we ain't finding more!), natural gas (energy of the future, he argues), and demand (not necessarily going to grow exponentially forever.) I was less impressed with his environmental arguments, mostly because I think he arrives from a strange foundation (The Stern Report). Regardless of my misgivings with his use of what I see as an unnecessarily alarmist paper, I believe it is a positive step to see petroleum executives treating CO2 emissions as a serious issue.

However, like I said at the beginning, there are problems with MotOC. For one, it is somewhat too technical for most laypersons to read without some difficulty. Mills does a commendable job with explaining the terminology as best as he can, but I sometimes found myself flipping to the glossary to relearn terms that I had forgotten from previous chapters. I also found myself occasionally having to reread sentences to figure out what Mills meant because he occasionally inserted sentences of length and complexity that would make Proust weary. While this is fine for an academic market that is used to dealing with long, convoluted prose, the book seems to be marketed more broadly toward a “well-educated” market. While Mills' sometimes awkward prose is not an overly serious issue, it does detract from the experience.

Overall, however, I recommend this book to the “armchair energy analysts” and anyone else who is interested in the topic of energy markets. It may not be groundbreaking for those of us who read this particular blog on a regular basis, but it is a useful text in the sense that it puts a great deal of important data at your fingertips, as well as giving a great deal of insight into the market itself. It is a challenging read, but it is definitely worth the time spent. I doubt it will turn any “doomers” or “peakniks” into optimists, but it will definitely put a lot of things into context for both “debunkers” and those sitting on the fence about the future. It is also, in my opinion, a good text to recommend to friends who stumble on to the “peak oil” scene for the first time, if only to give them insight into how flawed most of the doomsday arguments really are.

by Ari

391. GEOTHERMAL UPDATE

2009-01-13T06:17:00.000-08:00

Video on EGS (Enhanced Geothermal Systems) featuring incoming US Energy Secretary, Steve Chu:

Yukon Energy cranks up search for geothermal heat source

Yukon Energy Corp. will spend about $285,000 this year to try to find an affordable source of geothermal power, the utility says.
The utility is contributing the money towards a research project to study the Yukon's geothermal potential.

Tata Power to set up geothermal, solar plants in Gujarat

Mumbai: Tata Group company Tata Power Monday said it is looking at the possibility of setting up a geothermal power plant and a solar power plant of 5 MW each at a suitable location in Gujarat, a move that will strengthen the renewable energy portfolio of the company.

Baoshan energy park uses geothermal pumping system

HANGING food above cool water in a well used to be one of the most popular ways to keep it cool in summer, and so did blocks of ice for ice boxes in the days before refrigerators that ran on electricity.

Now that old approach - using the constant temperature of underground water - is again being used today for air conditioning.

The idea of the small well has been enlarged to more than 10,000 square meters in northern Shanghai's Baoshan District.

In an energy conservation center in Baoshan, you can see a line of round holes in the wall of the conference hall.

It's air conditioning for the Shanghai International Energy Conservation and Environmental Protection Park.

On Campus: Geothermal energy coming to University of Wisconsin-Madison

Drilling began last week for a geothermal heating and cooling system for the future Wisconsin Institutes for Discovery — the first research facility at the University of Wisconsin-Madison to use the economical energy source.

The system, which uses the relatively constant temperature of the earth to regulate building temperature, will provide an annual 10 percent savings on energy use.

Warm up to geothermal heating-cooling

Geothermal heating and cooling is becoming a hot topic in the Great Falls area for people thinking about building new, larger homes.

This heating system leans green but costs at least one-fourth more than a conventional heating and cooling system, according to Ron Walker, service manager at Central Plumbing and Heating in Great Falls.

Diggingdeeptobringpower to the people

FROM MPs to famous novelists, everyone is warming to the idea of geothermal energy, says Environment Correspondent KELLEY PRICE

There is massive potential in the Tees Valley because ground source heat is ideally suited for off-gas houses - Adam Woodhead, Geocore

CHANNELLING heat from the earth for electricity has been pioneered in countries such as Sweden and Germany for years, but while the technology may not be new, it’s suddenly a hot topic among the green crusaders.

Redcar company Geocore has seen its turnover treble in the last two years, since it branched out into borehole drilling for ground source heat pumps.

Their national client list reads like a who’s who of famous names and places - including Labour MP Clare Short and the author behind the Hollywood hit Golden Compass, who both had their London homes fitted with the carbon-saving system.

At the other end of the geothermal spectrum, a £32.5m pioneering project has been launched in the South-west to create seven geothermal power stations - and similar deep drilling technology to access heat from hot springs is likely to be used at Weardale, which has been identified as having the ideal strata.

Japan geothermal projects pick up after 20 years: report

Several Japanese firms will kick off new projects to build geothermal power plans this year for the first time in nearly two decades, the Nikkei business daily reported on Saturday.

Mitsubishi Materials Corp, Electric Power Development Co, or J-Power, Nittetsu Mining Co Ltd and Kyushu Electric Power Co will lead the way, and the government plans to step up support for geothermal power station development, it added.

With active volcanoes scattered around the country, Japan is well-placed to tap geothermal energy as a power source and the attraction of a domestic source of energy is also fuelling the drive, the newspaper said.

Maryland Elementary School Installs Geothermal System

Lincoln Elementary School in Frederick, Md., is the latest educational institution to use geothermal energy for its heating and cooling needs.

Gazette.net reports that the newly modernized 86-year-old school is the first public school in its county have a geothermal system. The installation is part of the school's green design, and school officials hope to use the geothermal system as part of their effort to achieve certification in Leadership in Engineering and Environmental Design.

Geothermal energy put to test at schools

Some school districts in Arizona are considering geothermal energy to reduce utility costs. Earlier this month, the Cave Creek Unified School District governing board approved the drilling of a test well at its high-school campus.

K.M. Drilling, a Camp Verde firm, will drill a 250-foot test well on Jan. 10 on the campus at Cactus Shadows High School at no cost to the district. Corgan Associates, a Phoenix architecture firm, has spoken with the Paradise Valley Unified School District about a similar project.

Utah startup hits geothermal jackpot

Within six months of discovering a massive geothermal field, a small Utah company had erected and fired up a power plant — just one example of the speed with which companies are capitalizing on state mandates for alternative energy.

Anticipation of new energy policies has sparked a rush on land leases as companies like Raser Technologies Inc., based in Provo, lock up property that hold geothermal fields and potentially huge profits.

Raser's find, about 155 miles southwest of Provo, could eventually power 200,000 homes.

The company said it will begin routing electricity to Anaheim, Calif. within weeks.

Ormat gets loan for Kenya geothermal project

Ormat Industries Ltd. (TASE: ORMT) subsidiary Ormat Technologies Inc. (NYSE: ORA)has obtained a $105 million ten-year loan for its Olkaria geothermal project in Kenya. The refinancing is for the 48-megawatt Olkaria III geothermal power plant in Naivasha, in the Rift Valley in Kenya, owned by Ormat Technologies unit OrPower 4 Inc.

Ormat financed the $150 million construction of Olkaria I and II, as well as the drilling of wells, from its own internal sources. Phase II, completed in December 2008, added 35 MW to the project, bringing it to the target capacity of 48 MW. The electricity generated is sold to Kenya Power & Light Company under a 20-year power purchase agreement.

Geothermal heating in action

At the General Theological Seminary in New York City, thoughts, if not eyes, are meant to be cast heavenward. But the oldest Episcopal seminary in the United States also is looking deep underground for a way to heat and cool its buildings.

Earlier this year seven wells were completed that drilled into schist rock formation hundreds of feet below Manhattan island to tap an underground river that flows at a constant 65-degree temperature year round. By circulating that water to the surface, several of the seminary’s handsome 19th-century buildings are being cooled in summer and heated in winter. When the project is completed, 20 such wells will heat and cool the entire campus.

Prospects for Canada’s geothermal industry continue to heat up

We may be living in uncertain economic times, but firms working in the geothermal industry are optimistic that the buoyant sales growth they have enjoyed during the last year will continue, although some flattening of the sales curve may be in store.

“Preliminary reports indicate that the geoexchange industry is growing at between 40 per cent and 260 per cent depending on the region,” said Ted Kantrowitz, vice-president of the Canadian GeoExchange Coalition. “In Ontario, I think the highest profile report has been that heat pump sales have grown about 200 per cent this year.”

Commissioners Look at Jail and Justice Center Geothermal Plans

Mower County Commissioners got to check out plans for the new jail and justice center's geothermal field. County leaders say they want to make sure the energy source would be big enough if the county adds on to the jail and justice center.

Local authorities warm to geothermal energy

The idea of harnessing the heat stored deep underground as a source of renewable energy appears to be gaining ground in Switzerland. Earlier this week the Geneva authorities announced plans for a CHF200 million geothermal project to provide natural heat and energy to thousands of homes. Meanwhile, the city of St Gallen has set its sights on building the country’s first geothermal power station.

Anatomy of an energy-efficient building

The new business and teacher education building at Mesa State College will be the most energy-efficient building on the Western Slope within the next year, according to Xcel Energy.

[...]

Eggleston said the building’s geo-exchange ground-heating system was the deal-maker for the distinction because it supplants boilers and forced-air heating systems such as furnaces to heat the building using the Earth’s natural heat.

[...]

The geo-exchange ground-heating system, built under the field adjacent to the building, sucks temperature from the soil and pumps it into the building. At the time of design, the system was estimated to pay for itself in saved energy costs in 15 years, said spokeswoman Dana Nunn, but it may be sooner because energy costs have gone up.

The Environmental Protection Agency estimates systems such as these can reduce energy consumption by more than 70 percent over heating with conventional air-conditioning systems.

Mesa State included a campuswide geo-exchange system project to submit to the state Legislature that would cost $5.49 million.

by JD

390. THE EROEI OF GARDENING SUCKS

2009-01-07T02:25:00.000-08:00

The blowhards of the peak oil community are strongly in favor of gardening as a solution. There are a few problems with this. For example, if you're unemployed, where are you going to get land to garden on? If you already own land, and it's paid off, then you're a rich person, and don't need any help. The people who genuinely need a solution (at least in today's financial crisis) are unemployed people, foreclosed people and poor people, and they don't have any land. And they can't get any land because they need a job to get money to obtain the land. And, as we saw in the previous article, the peak oil community takes a very dim view of net job creation because that would inevitably involve growth.

But let's put those concerns aside for a moment. Let's suppose that you're unemployed, but you just happen to have a quarter acre of idle land lying around. Since this is a fantasy, let's also suppose that you're completely unencumbered by other tasks, and have all the costly organic seeds, shovels, hoes, wheelbarrows, hoses, books and other capital you need to start your own little "local agriculture" shangri-la. First, you'll need to trench the land with a shovel, work in the organic compost, and plant your corn crop. Of course, this will all be done by hand, because dependence on modern energy sources is unsustainable. Watering, hoeing, weeding, pest control, harvesting, shelling and milling will all return to the wonders of a "world made by hand". Here's the unit you'll be using to grind dried corn into meal:

Oops... That looks a little too high-tech and fossil-fuel intensive. Too much embedded eMergy. Plus you'd have to ship it on a diesel-fueled truck to your tent. So you (or more likely your wife) will end up using one of these state-of-the-art "green" units for maximum sustainability:

Okay. You've completed your first cycle of agriculture in harmony with Gaia, and you've got your crop in. How much do you have? Well, let's look back at historical yields (bushels/acre) from the "made by hand" days. This chart is from the USDA (click to enlarge):

I'm figuring we're going to have to go back to at least the 1930-40s to get bona fide made-by-hand yields, but let's be generous and say 50 bushels/acre. You know, maybe you got lucky and turned out to have a green thumb.

You'll have to toss out varmint damage and the disturbing freak show oddities like this one:
But let's suppose you bag a solid 10 bushels. How much value did you clear? Well, corn prices at the moment are about $4 a bushel, so damn if you didn't clear a whole $40 worth of corn for 5 months of backbreaking work! A sum you could have made a lot quicker and easier by working a single 6 hour day at McDonald's:

$6.55 an hour: He's lovin' it

Of course, we're assuming that you're grinding your own corn, so let's do that comparison too. A typical bushel of corn weighs 56 pounds (25.4 kg), so your total harvest -- in terms of corn meal -- will be 560 pounds. The current rate for bulk corn meal is about $15.80 for a 50 pound bag. So your corn meal, which took months to grow and weeks to grind, is worth a grand total of $177. Wow! That's equivalent, by the way, to 3 days of work at a minimum wage job.

Don't get me wrong. I actually enjoy gardening, and used to grow big gardens myself. Gardening is fun, and a good way to get some fresh air and exercise. But the reality is this: it doesn't even come close to making economic sense. If you calculate all your costs -- land, materials, equipment, the value of your time -- and compare them to the value of your output, you'll come out massively in the red every time.

Gardening is basically a bourgeois fantasy, pushed by dilettantes and intellectuals who are well-off enough to indulge in it as a hobby. It's not a genuine solution for the average person, or the poor. Intensive gardening will make those people even poorer, not better off.

by JD

389. GROWTH = JOBS

2008-12-31T18:11:00.000-08:00

Through many changes, one thing stays constant in the peak oil community: opposition to growth. Colin Campbell, Kunstler, Heinberg, virtually the entire staff and readership of the The Oil Drum... They all believe that growth is insane, and have vehemently and incessantly attacked it for years.

I think it's high time that we followed this anti-growth agenda to its logical conclusion.

On the surface, an anti-growth site like The Oil Drum seems to be comprised of very smart, rational people who have the best interests of the public at heart. But is that really true?

Well, there's no doubt that the title of this post is true: Growth = Jobs. So a strong case can be made that anti-growth advocates are very much not in the public's corner. The logic is straightforward:

Anti-growth advocates (The Oil Drum, Heinberg etc.) are in favor of a halt in growth.
A halt in growth will cause massive unemployment.
Therefore, anti-growth advocates are in favor of massive unemployment.

To illustrate, here's a piece of standard anti-growth boilerplate from a peak oiler, corrected to reveal the subtext:

~~Infinite growth~~ Employment has been so hard wired in the brains of so many, that it will be hard for most to imagine themselves out of having ~~never-ending growth~~ a job as an eternal goal.

Not quite so convincing, is it? Anti-growth rhetoric tends to be very smug, particularly since it ignores the central brute fact: there is nothing crazy or stupid or deluded or denialist about trying to keep people employed.

If anti-growth advocates were honest, they would admit that a massive depression (i.e. reversal of growth and shrinkage of the economy) is precisely what they are advocating. Some have already made that connection on the climate front:

Will the Downturn Save the Planet?
Many climate change skeptics and eco-fundamentalists will welcome the economic crisis, although some more openly then others.

[...]

On the other hand, eco-fundamentalists, many of whom define themselves as anti-capitalist, realized that the contradictions inherent in the market system made a major crisis, possibly a slump, inevitable at some point. Unlike Marxists, though, many welcomed this prospect, since they despaired of any other way to tackle climate change apart from economic collapse, which they think could result in a big reduction in greenhouse gasses. Whether they are correct in that assumption is another matter.

Professor Paul Crutzen, who won the Nobel prize for his work on the depletion of the ozone layer, was quoted by the Reuters news agency on October 7: "It’s a cruel thing to say… but if we are looking at a slowdown in the economy, there will be less fossil fuels burning, so for the climate it could be an advantage… we will have a much slower increase of CO2 emissions in the atmosphere… people will start saving [on energy use]."

Cheer up: You're not unemployed -- you're stopping the growth insanity and saving the planet

This line of thought occurred to me when I was reading about Obama's projected stimulus package, so I asked the folks at the Oil Drum about it:

My point is this: if you genuinely believe that we must stop growth because it is killing us (a view which I believe I can fairly ascribe to the vast majority of people on the Oil Drum), then how can you, in good conscience, support measures which are aimed at reigniting growth, such as Obama's upcoming stimulus package and similar packages in other countries?

The responses fell into a few basic types:

1) Don't get pinned down. Change the subject.

2) The dead-end doomer:

"We are GOING to be living in a contracting world, whether we like it or not. My preferences are irrelevant, this is reality and we had best face up to and adjust to it, the sooner the better.
Yes, a great many people will suffer terribly. That is going to happen and can't be helped. Futile attempts to hang on to the past and sustain the unsustainable will not help them, only hurt them even more." WNC Observer

3) Fessing up

"I, for one, am completely in favour of shrinking. Growth would condemn billions of people around the world especially in the poorer parts of Africa and Asia to a continuous life of strife, misery, and violence that is today much worse than the worse Long Emergency scenarios.

The only smart growth is shrinking. That increases the share of the commonwealth available to eash person and decreases the footprint each of us puts on Gaia's neck. We are a heavy burden and we are killing her. And nether can we live without her." Dryki

4) Waffling

"(1) Are there sectors that need to grow--yes.

(2) Are there obese sectors or ancient sectors that need to decline or die--yes.

(3) Is the human economy in its totality too large relative to the planet--yes.

Therefore, any stimulus plan needs to increase 1 and allow 2 to decrease so that total economic scale is reduced." Jason Bradford

[JD: Jason pays lip service to the Obama stimulus -- perhaps because he realizes how far outside the mainstream he'll go if he opposes it. Nevertheless, he adds the condition that economic scale must be reduced -- i.e. that the economy must continue to recess and shed jobs.]

*****

"I could support a stimulus package aimed at reinstating a growth economy if it's primary side effect was to invest in renewable energy and to restructure society to be less energy intensive and more socially cohesive.

What better way to kick-start the economy than spending a trillion dollars on wind power, upgrading the electric grid, developing adaptive (electricity) demand infrastructure, building and electrifying light rail systems, (small) electric or hybrid cars, etc. etc.

Of course the stimulus would fail, as we descend the energy slope, but it would be less painful. The US (and UK, and many other economies) are inevitably going to collapse. Better to use whatever credit the government can still control whilst it still has any, to build for the future." RalphW

5) Little pleasures:

"I happen to have my own boring list of what those are, things like reading, music, art, science, sailing, being with my loved ones, teaching, learning, watching sunsets, drinking good wine etc.. etc..

Not one of the things on my list requires growth." FMagyar

*****

Ludi (responding to my statement "If you're in favor of a halt to growth; you're in favor of unemployment."): "Yep, sure am! I don't work much and I do pretty well (lower middle-class/working class).

Reduce the need to earn, I say. Leisure is wonderful. I spent two hours of my leisure today cutting brush with a handsaw. I'm exhausted but happy."

The Oil Drum pretends to be a community of rational, serious people who will guide us to a better future. I think the evidence points to exactly the opposite, at least if you regard employment as an important feature of that future. As you can see, anti-growth advocates believe that: a) increasing unemployment can't be reversed or even halted, or b) unemployment should be actively boosted by reducing the size of the economy. Meanwhile, their perspective on being unemployed is "art, music, sailing" and learning to enjoy your "leisure".

These views are totally at odds with the need of vast numbers of people to survive and better their lives by obtaining and keeping jobs.

If anti-growth advocates mean to make a serious contribution, they need to cut the self-righteous rhetoric, and address the reality of growth=jobs head on.

by JD

388. OIL PRICES DROP, CONSERVATION CONTINUES

2008-12-25T02:42:00.000-08:00

[Note from JD: This is a guest post from Ari, a new contributor here at POD.]

One of the big fears of falling gas prices was that people would hop back into their cars and start driving again. It makes sense, one supposes, that as the cost of a good goes down, then people start consuming it more, right?

Well, life isn't that simple.

The one thing that people often ignore is that consumer decision making is not based only on simple "single variable equations." We don't walk into a store, pick up one item, and decide to buy it solely because its price goes up or down in a specific span of time. We comparison shop. Transportation, despite its being a relatively inelastic good, is not immune to this economic behavior.

And lo and behold, people appear to be comparison shopping, even as gas prices fall.

The Road Less Traveled

Like never before, Americans' travel habits have a special place in our national conversation. The combination of gas price fluctuations, economic stress, energy concerns, and public financing woes have transformed transportation issues from inside baseball to front page news and water cooler conversation.

A primary cause for this attention has been the major shifts in travel patterns. Americans have simply been driving less, when considering both historic growth rates and the most recent annualized measures of vehicle miles traveled (VMT).1 At the same time driving has declined, transit use is at its highest level since the 1950s, and Amtrak ridership just set an annual ridership record in 2008.

Not convinced? Here's more anecdotal evidence of this trend:

Cheap Gas Pulls Few off Bus, Metro

Even before it was costing us $75 a week to fill our gas tanks, as it did this spring and summer, we had already started to change our driving habits in ways unexpected years ago," said John B. Townsend II, AAA Mid-Atlantic's Manager of Public and Government Affairs. "Despite the fact that gasoline prices have been in a freefall since mid-July, consumption is still declining. Last week, U.S. gasoline consumption was lower than it was the same week a year ago."
"People who began to take public transit in 2007 with the rise of higher gas prices are sticking with it now that prices have dropped back down to their lowest level since early 2005, Townsend said.

Delawareans Stick with Public Transit

DART bus usage has backed off a bit since gas prices fell to near $1.50 in recent months, but remains strong. DART buses logged 850,260 fares in October, well up from the 746,731 rides during the same month a year earlier. But it's down from a high of 912,789 rides in July, when gas prices were sky-high.
SEPTA train use on the R2 line, which runs through Delaware, increased from 96,671 rides in October 2007 to 110,020 rides this October. Ridership in October was higher than it was during the summer: in July, riders took 105,768 trips on the line.

"What we believe is when people find out it does work for them, they continue to use it," said Darrel Cole, a spokesman for the state Department of Transportation. "There's nothing better than sitting on a bus, sitting on a train, being able to get work done while someone else drives for you."

Gas Prices Fall, but Ridership Still Rises / During Summer Many Found Public Transit was the Way to go, Groups Say

The nation's public transportation systems saw the largest quarterly ridership increase in 25 years as more Americans shunned their automobiles even as gas prices began to ease, according to industry figures to be released today.
Subways, buses, commuter rail and light-rail systems saw a 6.5 percent jump in ridership from July to September, according to the Washington-based American Public Transportation Association. During the same quarter, Americans drove 4.6 percent less on highways.
The average price for a gallon of gas peaked at more than $4 in mid-July, then began falling.
They may have tried public transportation to get away from high gas prices, but many have since found it works for them," association president William W. Millar said. "I think this year has been a real turning point for the public's attitude toward public transportation."
Riders made 2.85 billion trips on public transportation during the third quarter, up from 2.67 billion trips a year ago. There have been gains in every quarter this year from 2007. Last year's 10.3 billion trips were the most on public transportation in 50 years.

As Gas Prices Fall, Transit Still Popular

Gas prices have plummeted during the past several weeks, but commuters do not appear to be returning to their cars, according to transit officials in the region and elsewhere, who say ridership is still increasing.

Transit officials attributed much of the ridership increase earlier this year to skyrocketing gasoline prices. But despite falling pump prices -- from a national average of $4.11 a gallon in July to $1.82 yesterday -- transit ridership is setting records in some parts of the country, officials said.

For the four months ending in October, Metrorail ridership in the Washington region was up 5 percent over the same period last year, senior planner Jim Hughes said. Preliminary data indicate that November rail ridership is up about 3 percent.

Gas Prices Drop, Bus Ridership Stays Steady (requires log-in)

"Gas prices may have dropped dramatically in the past few weeks, but Windham County residents who discovered the benefits of riding the bus when the cost of gas was high are sticking to their new routines.
Local public transportation like the Brattleboro Beeline and Connecticut River Transit has not seen a decline in ridership.
"We haven't so far, but prices did just drop," said Gary Fox, executive director of Connecticut River Transit.
"If people are going to look at making that kind of switch, maybe it just hasn't happened yet, but I don't think it will," he said.
Fox said there was an increase in people trying public transit when fuel prices were sky-rocketing.
With prices dropping, he thinks it's likely that spike will stop, but not likely that he will lose current riders."

Public Transit Use Up Over Last Year

This is an interesting article because it shows how a poor economy can affect transit in ways we don't often hear:

Commuters who jumped onto buses and trains when gas prices soared stayed on board when prices started falling this summer, but transit operators fear the poor economy will erase the gains.

Ridership on public transit increased 7% to 2.85 billion rides in July, August and September compared with that quarter last year, a report to be released today by the American Public Transportation Association shows. Gas prices began to fall in July after reaching a high of $4.16 a gallon.

"As gas prices rose, more and more Americans made the choice to ride public transit," says William Millar, the association's president. "Now, even though gas prices are falling, Americans tried public transit and many find it convenient."

And yes, some (maybe even most) of this has to do with the economy-- that is clear-- but if the Brookings study is any indication, then we may be seeing a shift in transportation habits in the long run. It's hard to say with any certainty (after all, prediction is a thorny business!), but it is interesting that a good with supposedly highly inelastic demand remains significantly down despite a price decrease of nearly 50%. Like most other "models" that the peak oil community has presented us, oil demand models are overly simplistic and do not account for enough variables. In other words, they have low predictive skill.

More than anything, however, this demonstrates that people are ADAPTIVE. Unlike those silly cartoons on YouTube that show people driving SUVs up and over a cliff to PEAK OIL DOOM, people react to signals and will change behavior fairly quickly. In just a few years, people have started using transit again in numbers that haven't been seen for almost a half-century! Unlike peak oil doomsters, who say that NOTHING WILL STOP DEMAND FROM INEXORABLY RISING, reality demonstrates that people consciously, and rather quickly, change behavior.

Surprise surpise.

by Ari

387. WORLD PHOTOVOLTAIC (PV) PRODUCTION 1990-2007

2008-12-21T23:09:00.000-08:00

Here's an interesting graph from the PV Status Report 2008.

No "limits to growth" there. I'll leave the extrapolation of this exponential growth curve as an exercise.

by JD

386. SOLAR POWER UPDATE

2008-12-18T04:21:00.000-08:00

Glimpse of the Future: Ota Solar City, Japan

SunPower Completes Smaller Solar Deals With Wal-Mart, Horizon Power

SunPower has deals with Wal-Mart and Horizon Power to install solar systems that are under a megawatt each.
The company recently completed installing a 554-kilowatt solar power system at the Wal-Mart store in Hanford. The system is expected to generate about 15 percent of the store’s electricity and reduce between 7,000 to 8,000 metric tons of GHG emissions per year.

L.A. pursues solar-power surge

Los AngelesMayor Antonio Villaraigosa has unveiled an aggressive solar power plan that aims to encourage the installation of 1,300 mW of solar power throughout the city and surrounding areas of Southern California by 2020.

Christened "Solar LA," the plan addresses solar power systems on residential, commercial, and municipal properties. The plan includes a requirement for the city's municipal utility, the Los Angeles Dept. of Power and Water (LADPW) to install 400 mW of solar power on city-owned property by 2014. By 2020, the utility will be required to procure an additional 500 mW of utility-scale solar power through contracts with third-party developers, with the option to purchase the systems after about eight years of operations.

Solar-powered marina planned in Fort Pierce

Ecocove, a Treasure Coast-based company, plans to build a 20-slip marina on the Fort Pierce Inlet that is thought to be the first of its kind in the state.
The complex would operate on solar power, and any excess electricity could be sold to the city's electric utility, the developers said.

Petrobras mulls solar power to increase well recovery

Brazil's federal energy company Petrobras is mulling plans to use solar power to boost oil recovery, BNamericas reports.
"Our idea is to replace hydrocarbons burn for solar power," according to Luiz Tadeu Furlan, energy efficiency manager at Petrobras' gas and energy department.

Alcatraz Cruises Launches Nation's First Hybrid Ferry Boat

Hornblower Hybrid Is Model of Alternative Energy Innovation
Representatives from the National Park Service, Mayor Gavin Newsom's office, NOAA and Save the Bay were among the 85 people to enjoy a breakfast gathering aboard the nation's first known hybrid ferryboat.
On Friday morning, December 12, at Pier 33 in San Francisco, Alcatraz Cruises, the National Park Service concessioner of ferry service to Alcatraz Island introduced the Hornblower Hybrid, a wind, solar and diesel powered hybrid vessel.

Conergy Asia-Pacific to develop Saudi Arabia's first large-scale solar power plant

Conergy Asia-Pacific (a regional subsidiary of Hamburg-based Conergy AG) has been awarded a contract for a 2-megawatt solar power plant for Saudi Arabia's King Abdullah University of Science and Technology (KAUST).

Amid Gloom, Solar Power Finance A Ray of Sunshine

In the booming new market of solar power purchase agreements (PPAs), near-term growth shows modest gains and the long-term outlook is exponential. These are the findings of a new report from AltaTerra Research entitled, Financing Growth: Will Solar PPAs Shine in Dark Times?[...]
"Any growth is a boon for any industry under the current financial conditions,” says Guice. “While growth may not be astronomical, as the solar industry has become accustomed to, gains have been made, and that’s more than a lot of other industries can say.”

Solar power catches on at airports

A hangar at Bob Hope Airport in California has followed the example of other airports by building solar panels in order to ease energy costs.
The rooftop of the $17 million Hangar 25 which is operated by charter flight operator Avjet, has enough solar panels to power lights, forklifts and tow vehicles.
San Fransisco Airport has already invested $5.5 million on the construction of solar arrays on its buildings which can generate enough power to run the entire airport during the daylight hours.

Water Department basks in solar project's success

Hillsboro Water Department has found another use for its Evergreen Reservoir site - power generation. Solar panels installed and brought on line in July have already produced 53 megawatt-hours of power.
Electricity generated by 570 panels is transferred back to the grid and offsets a significant share of the power needed to operate the reservoir's pumps. This sustainable energy source results in substantial money savings for the Utilities Commission and its customers.

Hybrid solar plant will power 11,000 homes

Florida Power & Light Company is gearing to switch to large-scale solar use with a new plant planned for Indiantown.
Billed as the world's first hybrid plant, the Martin Next Generation Solar Energy Center is set to be fully operational by 2010.
It combines natural gas with energy from the sun, instead of relying solely on fossil fuels to generate electricity, officials said.

Duke Wants to Rent Rooftops for Solar Power

North Carolina businesses, homeowners and schools would be able to rent their rooftops to Duke Energy Carolinas for solar power installations, if the utility's plan wins regulatory approval.
The energy company is proposing to invest $50 million over a two-year period in as many as 425 solar energy arrays atop the rooftops of homes, schools, stores and factories — or on the ground at those properties — to establish a solar distributed generation program.

Up on the Roof, New Jobs in Solar Power

MOVE over, Joe the Plumber. Spencer the Solar Panel Installer is here.[...]
Even in the recession, Mr. Bockus has been putting in plenty of overtime for his company, Akeena Solar, which is based in Los Gatos, Calif., and has offices elsewhere in California and in Colorado and the Northeast.[...]
Mr. Cinnamon is now the chief executive of Akeena, which has about $40 million in annual sales and employs 220 workers in seven states. Despite the recession, he estimates that his solar panel installation business will increase 40 percent from last year. [...]
GERRY HEIMBUCH, vice president for operations at the Solar Center in Rockaway, N.J., estimates that his company hires a new solar panel installer every month. Many good candidates have come from the sluggish homebuilding industry.

First Solar Reaches Grid-Parity Milestone, Says Report

First Solar has made it to grid parity, according to at least one analyst.
A 12.6-megawatt system installed by First Solar (NSDQ: FSLR) for Sempra Generation showed that the system can produce electricity at below the price of conventional power in the United States, said Mark Bachman, an equity analyst at Pacific Crest, in a research note Tuesday.

Chevron completes solar power project at Milpitas schools

Chevron Energy Solutions said on Monday that it has completed a districtwide solar energy system for the Milpitas Unified School District that is expected to supply 75 percent of the district’s annual electricity needs.

California growers going solar

Abundant sunshine not only grows crops, but now it powers the operations, too
For more than 70 years, California's abundance of sunshine has enabled the Lundberg family to grow rice in the Central Valley north of Sacramento.
Now the sun is helping the family churn out myriad rice products, from chips to cakes to pasta.
Lundberg Family Farms, which bills itself as the nation's largest producer of organic rice and rice products, is among a small but growing number of California growers and processors turning to solar power to help them run their operations.

California plans 80 solar projects, but environmentalists raise concerns

The first solar thermal facility in California in nearly 20 years recently opened in Bakersfield, and is one of at least 80 solar power projects planned in the state. State officials say that they expect renewable energy to transform California's electricity system. However, critics warn that the plants could create environmental problems because of power towers and high-voltage wires.

SFPUC Approves 5-MW Solar Project

The San Francisco Public Utilities Commission (SFPUC) has approved a new contract with Recurrent Energy to generate 5 megawatts (MW) of solar power atop the recently seismically-retrofitted Sunset Reservoir. The project, which is expected to be completed and generating solar power for the City in 2010, will be California's largest solar photovoltaic system and the nation's largest municipal solar project.

Huaneng to build up China's largest solar PV demon project in Yunnan by 2010

Huaneng Group, parent company of Huaneng Power International, Inc. plans to build up a 166 MW on-grid solar photovoltaic (PV) power generating project in Shilin of Southwest China's Yunan Province by 2010, which will be the largest solar PV project in China.

by JD

385. ELECTRIC CAR UPDATE

2008-12-15T05:43:00.000-08:00

It's amazing how quickly electric cars have gathered momentum. When I first got involved with peak oil in the summer of 2004, they weren't even on the radar screen. And when my blogging partner Roland wrote a couple of pieces on the subject for POD three years ago in 2005 (171. ELECTRIC CARS, PART 1 and 172. ELECTRIC CARS, PART 2), they were still an exotic niche topic. Now, three years later, the field is exploding, and there's a major scramble for position by carmakers all over the world, large and small. Indeed, it reminds me a lot of the early "wild west" days of the personal computer industry.

This is a key part of the shift away from oil, but I've found the coverage of it pretty spotty and inconsistent at sites like the Oil Drum. (Apparently, they're too busy posting Malthusian fruitcakery, like this piece by some university egghead demonstrating that agriculture itself is unsustainable. LOL.) So I've decided to produce some newsfeeds myself to balance the pessimistic slant at the Oil Drum and peakoil.com etc. These feeds will be a regular feature of POD, and will focus on different aspects of how people are actually SOLVING the peak oil problem. Today's topic: Electric cars. (Note: If you need a few laughs, compare the current news with Savinar's utterly bogus "proof" of why electric cars won't help, here.)

BYD to Introduce China's First Electric Car

A Chinese auto maker plans to unveil the country's first homegrown electric vehicle for the mass market, at least a year ahead of similar efforts around the world.

On Monday, BYD Co. plans to show reporters in Shenzhen the new F3DM, which runs off batteries that can be charged from a regular electrical outlet. BYD began marketing the F3DM this month to cab operators and other potential fleet customers, and plans to have it in showrooms by the end of this month, said Henry Li, a senior company executive. BYD plans to sell the car in the U.S. market as early as the second half of 2010.

(Note: BYD is partly owned by Warren Buffett.)

Ex-Chief Says Intel Should Power Cars

Former Intel Corp. chairman Andrew Grove is pushing the world's biggest maker of microprocessors to consider a new venture -- becoming a manufacturer of advanced batteries for plug-in electric cars.

Evonik, Daimler to make batteries for electric cars

German industrial conglomerate Evonik and carmaker Daimler have joined forces to develop and build advanced batteries for electric cars, the partners said on Monday.

SAIC to develop electric cars

Shanghai Automotive Industry Corporation (SAIC) Group and its subsidiary SAIC Motor plan to invest 2 billion yuan ($292 million) to develop electric-gasoline and electric cars. [...]

SAIC Group is China's largest automobile manufacturer in terms of sales.

Maui to test electric vehicles

Maui Electric will test electric vehicles through a new agreement with a California company.

Gov. Linda Lingle, Maui Electric Co. and Phoenix Motorcars announced Tuesday the plan to test all-electric vehicles and an electric vehicle infrastructure on Maui.

Japan taps Better Place for electric car charging

Japan's Ministry of the Environment announced a program on Tuesday to test electric vehicles and a network of charging stations, some supplied by auto start-up Better Place.

San Francisco plans to be electric car capital

San Francisco Bay Area cities promise to build the electric car capital of the United States, announcing a plan to put battery-powered automobiles on the road in 2012.

Electric car venture unveils charge stations in Israel

California-based electric car operator Better Place unveiled in Israel on Monday its first charging stations as part of a network it hopes will replace gasoline-powered engines worldwide.

Mini E Electric Car Arrives in NYC

The fanatical Mini groupies at MotoringFile have confirmed that the first Mini Es have arrived from Europe for distribution in the U.S.

REVA Electric Cars May Soon Be For Sale in Israel

BDO-I2I is looking to bring Indian-made electric cars onto the Israeli market. REVA Electric Car Company and consulting firm BDO-I2I are still finalizing the details, but there are reports imports could start before the end of January.

FedEx Delving Into the World of Electric Cars. Chooses UK-Based Modec for Initial Order of 10 Delivery Vans

Adding to its green fleet of more than 170 hybrid electric delivery vans worldwide, FedEx has decided to try out fully electric vehicles as well with a small group of 10 London-based test trucks.

Ford accelerates electric-vehicle plans

Ford Motor made electric vehicles a centerpiece of a turnaround plan presented to Congress on Tuesday, saying that it will introduce an all-electric van for fleet use in 2010 and a sedan in 2011.

Daimler plans serial production of electric cars: report

Daimler AG has decided to start the full serial production of several electric cars, weekly WirtschaftsWoche reports Sunday, citing people from within Daimler.
In an advance copy of a report from Monday's magazine, WirtschaftsWoche says that according to internal planning documents, the carmaker aims to deliver an electric version of the Smart to dealers in 2012, followed by electric versions of the Mercedes Benz A- and B-class models several months later.

Electric Cars for Military Bases in USA

Environmental Leader relays a Gannett’s Army Time article, which states that the US Army plans to order 400 electric vehicles from sources like Columbia ParCar Corp., Native American Biofuels International, and other manufacturers in 2009. Quantities are expected to rise to 4,000 in FY 2010, and may total 10,000 by the time the program ends.

Electric car maker seeks to fire up assembly line

Porteon seeks $15 million, bristles at the attention given to Asian automakers
After three years of quietly designing prototypes, Porteon Electric Vehicles Inc. wants to raise $15 million to begin production of a lineup of electric cars.

Michelin Develops Revolutionary Active Wheel for Electric Cars

Is this tire really the "Holy Grail of Eco-Transportation," as Treehugger believes? Maybe. Time will tell if the electric engine inside the Active Wheel from Michelin will catch on and further drive down the cost of electric vehicles.

Electric Car Conversions See Increase

Despite gas prices creeping down, a local man who converts cars from gasoline engines to electric motors says he's seen a spike in business.

Tesla Schooled By Tango In Electric Car Drag Race
[Highly recommended. The video is hilarious.]

In what may be the first ever drag race between production electric cars, the geeky Tango electric cruiser edged out the trendy Tesla Roadster electric sports car.

Companies in Europe plan electric car infrastructure

Automakers in Europe plan new business models for electric vehicles and plug-in hybrids before 2011.

The business models will eliminate the need for gasoline stations. Energy will be supplied by utility companies. The automakers also will need to take into account the life span of batteries, which will depreciate and wear out quicker than the cars themselves.

Toyota Motor Corp., Daimler, Renault-Nissan, Volvo, and General Motors are among the carmakers that plan to bring plug-in hybrids and full-electric cars to market in 2011.

When that happens, carmakers, utility companies, and battery suppliers will need to be ready to take over the role of energy suppliers from oil companies. This will require a restructuring of energy supply arrangements and infrastructure.

Enel, smart launch electric vehicle initiative in Italy

Italian utility Enel and smart, a Daimler Group brand, have launched the e-mobility Italy initiative aimed at spreading the use of electric vehicles supported by a specially tailored infrastructure providing intelligent and safe service.

Fuji Heavy Shows off Spacious Electric Vehicle

Fuji Heavy Industries Ltd exhibited "Plug-in Stella Concept," a new electric vehicle, at the G8 Hokkaido-Toyako Summit (See related article).

Fuji Heavy Industries brought five of the vehicles to the site of the summit and showcased them to government officials and journalists from all over the world. The company plans to commercialize an electric car in 2009.

Mitsubishi to start electric car production

While many car companies are still trying to perfect their electric cars, Mitsubishi Motors Corp has forged ahead with its i MiEV electric car that is set to enter production next year [2009].

Unveiled to the media yesterday ahead of this week’s International Petroleum Technology Conference, the i MiEV electric car does not look much different from the 660cc petrol-powered “i” car on which it was based.

The original “i” car’s engine and fuel tank have been replaced by an electric motor drive system and lithium-ion battery pack.

Mitsubishi Motors Malaysia Sdn Bhd chief executive officer Keizo Ono said the i MiEV was not a concept car but one ready for mass production.

The electric car will go on sale in Japan next year with launches planned in the US and Europe markets in 2010.

Chrysler's plan to beat the Chevy Volt

Chrysler is pinning a huge part of its future on a plan to produce a full line of electric vehicles, at a reasonable cost to both the carmaker and the consumer.

While General Motors is moving ahead with its Volt electric midsized car, Chrysler says it already has plans in place, not just for electric cars, but also for minivans and even off-road vehicles.

by JD

384. THE GROWING GLUT

2008-12-10T03:46:00.000-08:00

A number of new analyses suggest a growing, long glut:

Oil analyst Philip Verleger claims that OPEC needs to reduce output by at least 7 million barrels a day to balance supply and demand:

Just how daunting is OPEC’s challenge to rein in falling oil prices? Beyond its control, if economist and oil-market analyst Philip Verleger is right.

Mr. Verleger, a former Carter administration official, academic, and energy-industry consultant, says OPEC can forget about tiny production cuts of 1 or 2 million barrels when it meets later this month in Algeria. The cartel needs to wipe out at least 7 million barrels per day of oil production to bring oil markets close to balance, he says, according to Platt’s The Barrel.

And that’s not likely to happen, which spells even more happy times for oil bears, Mr. Verleger says: “Since cuts of such magnitude are out of the question, one should expect prices to come under further downward pressure.”

His thesis? Global demand for oil has cratered much, much more than the spreadsheets used by groups like OPEC and the International Energy Agency. Mr. Verleger says global demand in December dropped to 81.6 million barrels a day, compared with 86.8 million barrels a year ago. That’s dramatically uglier than OPEC’s most recent diagnosis of oil demand, which put fourth-quarter global demand at 86.2 million barrels per day, up from 85.9 million a year ago.Source

Stocks are definitely rising. The oil market is currently in a "super contango", and crude is piling up not only in monitored storage like Cushing, OK, but in tankers parked at sea:

Royal Dutch Shell Plc sees so much potential in the strategy that it anchored a supertanker holding as much as $80 million of oil off the U.K. to take advantage of higher prices for future delivery. The ship is one of as many as 16 booked for potential storage instead of transporting crude, said Johnny Plumbe, chief executive officer of London shipbroker ACM Shipping Group Plc.

Oil Storage

The tankers, if full, hold about 26 million barrels worth about $1 billion, more than the 22.9 million barrels sitting in Cushing, Oklahoma, where oil is stored for delivery against Nymex contracts. U.S. crude inventories rose 11 percent this year to 320.4 million barrels, according to the Energy Department.

“All the market operators keep placing oil in storage,” said Francisco Blanch, head of global commodities research at Merrill Lynch & Co. in London. “Even though the contango is steep, it could get steeper.”Source

More broadly, a new report from the World Bank called Global Economic Prospects 2009(pdf) declares that "Like earlier commodity booms, this one has come to an end." and states:

The strength, breadth (in terms of the number of commodities whose prices have increased), and duration of the current commodity boom have prompted speculation that the global economy is moving into a new era characterized by relative shortage and permanently higher (and even permanently rising) commodity prices. This outcome does not appear likely. Over the next two decades, slower population growth and weaker (though still strong) income growth are projected to cause trend global GDP growth to ease (figure O.3) and, with it, the demand for commodities.

According to Andrew Burns, Lead Author of the report:

Over the longer term, the supply shortages that contributed to the sharp rise in commodity prices are expected to ease. Demand for energy, metals, and food should slow due to weaker population growth and an expected reversal in China’s high demand for metals as investment rates there decline.Source

Now that things have settled down, the commodities price spike/collapse of 2008 is looking more and more like a mundane rerun of the commodities price spike/collapse of the late 70s. Except this time we had a whole army of chicken littles, pumped up by the steroid of the internet, to loudly worry and moralize about it 24 hours a day. Six months ago, we were all going to die because we were running out of everything. Now the same stuff is piling up in overflowing tankers, silos and warehouses.

Peak everything. Honestly, how butt stupid did you have to be to buy into that? How likely is it that mankind was running dry of every single natural resource, at exactly the same time? Not too likely, as we've seen. The only thing that was really peaking was financial overextension and hype.

-- by JD

383. THE FALLING COST OF PRODUCING OIL

2008-12-04T23:27:00.000-08:00

Peak oilers are a restless bunch, working round the clock to turn anything and everything into another reason why we're doomed. You'd think that a massive $100 dive in the price of oil, and an ever-growing glut of the substance, would shut them up for five minutes, but no such luck. First we were doomed because of high oil prices. Now it turns out we're doomed because of low oil prices. Yup, the latest doomer talking point is that the plummeting price of oil will make it uneconomical to produce the "expensive" oil, so we're in big trouble.

This view has a couple of problems. First of all, if the price is dropping, that means there's no demand for the expensive oil. Ergo, it's no big deal if we don't produce it. In fact, it's better all around if we don't produce it because that will: (a) save more oil for later, and (b) reduce pollution and CO2 emissions.

Second, and more important, is the erroneous assumption that "expensive" oil is somehow inherently expensive, and that high costs will stay high as the price of oil drops.

In fact, high oil production costs have been driven primarily not by geology or EROEI, but by the same bubble dynamics that made the price of everything go up. Numerous projects were cancelled in the last year or two because the industry was overheating. Rigs, steel, white collar expertise, manual labor, materials, shipping -- everything was too expensive, and project budgets were ballooning out of control. Now that the bubble has popped, construction costs will come back down to earth. The smart players will do their project construction now, at bargain basement prices, and reap the benefits in the next cycle of high oil prices. That's the secret to riding the oil wave: build when costs are low, and pump when prices are high.

The peak oilers are fretting as if oil prices going down the toilet is some kind of new phenomenon. They still haven't caught on: oil is a cyclical business. Always has been for the last 150 years. As previously noted, the grizzled veterans have seen it all before:

"We're a cyclical business," David J. O'Reilly, chief executive of ChevronTexaco, the second-largest American oil company, said in a telephone interview, "and at the high end of the cycle it makes sense to get the company in good shape and strengthen our balance sheet. "History tells us that what goes up also goes down."Source

Consider the oil sands. In 2006, the average cost of producing a barrel of oil in Alberta was 32USD. Here's the breakdown (click to enlarge):

Up through the summer of 2008, costs in Alberta skyrocketed due to the fever of speculative bubblenomics:

"Labour shortages and increased material costs have created a hyper-inflationary environment within the oil and gas industry in Alberta. With the sheer number of oilsands projects, together with the future Arctic pipelines and conventional oil and gas developments in Alberta, labour demands in Canada will be pushed to their limits," he said.Source

The "high costs" we keep hearing about were actually driven by hyper-inflationary conditions, and are now coming down. Contrary to the naive view, production costs are not fixed. In Alberta, the primary drivers of high costs are steel and labor:

Five years ago [i.e. 2003], the capital cost of building a project that mined bitumen and processed it into high-quality crude was around C$40,000 per barrel of production, reckons Andrew Potter, a UBS Securities analyst. The same project today could cost C$180,000 per barrel, or around C$18 billion for a typical 100,000 barrel-a-day development.
Soaring raw material prices, notably for steel, have played a big role. Oil sands will likely find some relief here: Steel prices have slumped three-quarters from summer highs as major consumers - China in particular - rein back demand amid fears of a global economic slowdown. But the main culprit is labor.Source

Steel is already down the toilet, and wages aren't set in concrete, particularly in a time of deflation and surging unemployment. The only reasonable conclusion is that the cost of producing in the oil sands is (or will soon be) rapidly dropping, together with the price of oil.

And that's when the smart firms kick into gear:

The collective impact of project delays may work out rather well for companies that still decide to push ahead.

Through its affiliate Imperial Oil Ltd. (IMO), ExxonMobil is still sticking to schedule for the C$8 billion Kearl oil sands mine.

"[While] some of the other oil sands projects may be slowing down or whatever, that could actually provide some benefit to us in respect to lower cost, both for raw material and services," David Rosenthal, ExxonMobil's vice president of investor relations, said on a conference call Thursday.Source

And (hat tip to OilFinder):

6. Is there a benefit for Hyperdynamics to have a lower oil price?

My Answer:

Yes. I don't think the price will drop to lower levels than we have seen in years past and so I will take it either way at the moment. Actually, I would prefer the price of oil to stay lower until we make a discovery, and then I would like it to go up for the benefit of Guinea and our shareholders. I know this is a capitalistic statement and I apologize to any Socialist reading this. The lower the price of oil, the easier it is to secure some of the critical resources necessary to do the exploration work, such as drilling rigs. Moreover, we can secure the resources at lower costs. Obviously, if the price of oil is $147 per barrel, drilling rigs are receiving a premium and are working continuously. A lower price of oil could actually allow us and our partners to obtain a rig sooner and at more reasonable cost. This is especially true for us due to the economics of our prospects. The potential volumes in our prospects can make up for much of a lagging price of oil.Source

It reminds may of a famous saying by Konosuke Matsushita (founder and former President of Panasonic):

好況よし、不況さらによし

Good times are good. Bad times are even better.

by JD

382. MASSIVE RAILWAY BUILD IN CHINA

2008-11-17T23:36:00.000-08:00

It's nice to read about a country which doesn't spend all of its national energy saving financial players, and endlessly griping in the blogosphere. Confronted with the current economic problems, the Chinese roll up their sleeves and get to work. The figures in this very interesting article will blow your mind:

China has long had plans for laying 120,000 km worth of railways by 2020, but as the global economic slowdown begins to bite, it looks as though the money will be spent faster than planned to help speed flagging economic growth in China.

In September and October, the Ministry of Railways announced eight new railway projects in various parts of the country. Their investment has added up to 405 billion yuan, equaling 78 percent of the total investment that China poured into railway construction from 2003 to 2007.

In the past five years, the total investment for the railway infrastructure was 522 billion yuan, Minister Liu Zhijun told a working conference in January.

The start-up of the eight railway projects in a short period of time is the beginning of a railway construction boom.

The ministry's planning department chief Yang Zhongmin says about 3.5 trillion yuan will be invested on railway projects in next three years.

At present, 150 railway projects are under construction, involving an investment of 1.6 trillion yuan, he says.

Converting the figures (at 6.8 yuan to the dollar) we get: $60 billion in new rail projects announced in Sept/Oct, $77 billion spent on rail in the last 5 years, $515 billion to be invested in the next three years, and 150 rail projects under construction worth $235 billion.

Damn! That's my kind of bailout. It makes you wonder why the US can't do something like that. Assuming that they wanted to, are the Americans even capable of rolling out a large rail project? I'm thinking: probably not.

It's clear that China is paying attention, and making the moves they need to make to thrive in the 21st century. Meanwhile, the US is blogging up a storm on all the doom sites. It seems that much of the angst about TEOTWAWKI (The End Of The World As We Know It), is really more about TEOAAWKI (The End Of America As We Know It).

by JD

381. EXPORT LAND MODEL: DUE DILIGENCE AUDIT (PT. 1)

2008-11-04T23:22:00.000-08:00

The Export Land Model (ELM) is a concept widely promoted by Jeffrey Brown of the Oil Drum. It describes how rising consumption by oil producing nations, combined with peak production in those nations, accelerates the decline in net exports. I won't rehash the basics here, so if you need to get up to speed, please see Brown's article here or Wikipedia etc.

To begin, let me be clear that the ELM is a genuine effect which merits serious attention. On the other hand, Mr. Brown has a well-documented history of bluster and exaggeration, so this post will be the first in a series of posts which audit the ELM. The purpose will be to separate the facts from the hype.

First, let's look at the standard chart which Brown uses to illustrate the effects of the export land model:

Fig. 1: The illustrative model

For greater clarity, let's also look at the table of figures this graph is derived from (click to enlarge):

Table 1: Table for the graph in Fig. 1

Now let's make a couple of observations:

1. The danger of the ELM is that it accelerates the decline in net exports. How large is that accelerating effect? Not that large. In the illustrative case shown in Fig. 1 and Table 1, the ELM causes net exports to drop to zero in 9 years. If we eliminate the ELM by stabilizing consumption at 1mbd, net exports drop to zero in 13 years. The accelerating effect of consumption is quite moderate.

2. In his remarks on the model in Fig. 1, Brown writes: "the net export decline rate in a given year accelerates with time, from an initial year over year change in net exports of -12.5% to a final year over year change in net exports of -47.6% (last year of net exports)"Source. This is technically true (despite the error in Brown's math). However, it is extremely misleading and an abuse of statistics. Yes, the year-on-year decline rate rapidly increases, as shown by the far right column of Table 1, which indicates the year-on-year % decline in the "Net Exports" column. Note, however, the column labeled "Decrement" in Table 1. This shows the actual amount of exports lost in each year due to the ELM effect. As you can see, the lost amounts actually *decrease* in size as the years go by. Far from being a decline at an "accelerating rate", the decline is actually less steep than an ordinary linear decline (where a fixed amount is lost each year).

Brown is basically making a mountain out of a molehill. Any linear decline can be painted as an "accelerating decline rate" using Brown's gimmick. Suppose, for example, you have a gas tank filled with 10 gallons, and you use one gallon per hour. Then the hour-on-hour decline rates are: 1/10, 1/9, 1/8, 1/7, 1/6, 1/5, 1/4, 1/3, 1/2, 1 (= 10%, 11%, 13%,14%, 17%, 20%, 25%, 33%, 50%, 100%). Voila: an ordinary linear decline can now be fraudulently painted as "decline at an accelerating decline rate".

Brown uses this statistical chicanery to produce the following diagram:

Fig. 2: The horror of "accelerating decline rates"

As noted above, the same sort of diagram can be produced for an ordinary fuel tank running down at the mundane linear rate of 1 gallon/hour. In the last two hours the decline rates are a horrifying 50% and 100%, respectively, and the "exponential decline rate" for the entire 9 hour draw-down is a hair-raising 22% per hour!

The bottom line is that all this talk/graphing of "accelerating decline rates" is misleading nonsense. As I've shown, the ELM results in a net export decline which is sub-linear (i.e. less steep than a linear decline).

3. Now, look again at Fig. 2. In the accompanying article, Brown points to this graph as evidence that things are even more dire in the real world because the "accelerating decline rate" of export land UK is far worse than the illustrative ELM in Fig. 1. There's one problem, though. The UK is not an example of the Export Land Model. Here's the ELM figures (in kbd) from the BP Stat. Rev. 2008 for all years subsequent to the UK's production peak in 1999:

As you can see, UK consumption was essentially flat during the period. This is also clear in the graph:

Brown himself acknowledges this in Fig. 2 where he gives a consumption increase rate for the UK of +0.2%/year!! Clearly the UK does not follow the ELM, and it's rapid decline to zero exports over 6 years was not due to the ELM. So why did Brown choose the UK to illustrate the horrors of the ELM? Personally, I would call it a lack of integrity. Brown is always looking to goose the doom level with scary advocacy numbers, so he cherry picked the UK as an example -- undoubtedly because it's a country with an alarming decline rate, and he hoped to fraudulently associate that rate with the ELM model.

4. Brown's theory was heartily adopted by the oil bulls (encouraged by a generous helping of the usual exponential bluster from Brown himself, i.e.: "From this point out I think we'll see a geometric progression in prices… you know, $50, $100, $200, $400, whatever. The only question now is how short the periods will be between prices doubling again”. -- Jeffrey Brown, June 5, 2008 Source). This, predictably, resulted in further cascades of bogus ELM hype:

Underscoring Brown's concerns;

* On April 15, 2008 the Russians, the world's second largest oil exporter announced that their oil production appears to have peaked, with production in the first quarter of this year declining for the first time in a decade. If they have indeed peaked then, based on the ELM, the world could lose Russia’s current ~7 million barrels a day in exports within 6 to 9 years.Source

Compare this with the facts. According to the BP Stat. Rev. 2008, oil production in Russia in 2007 was 9978kbd, and consumption was 2699kbd. Consumption growth in Russia was -0.9% in 2007 (over 2006), and has been very sluggish for the last 10 years, as you can see from this Table:

Even assuming that Russian production declines at a rate of 5% per year (which is highly unlikely considering the country's size and diversity, see 317. STRONG ARGUMENT FOR A SLOW DECLINE and Hubbert Theory Says Peak Oil is a Slow Squeeze), consumption would need to rise at 10-18% per year for exports to decline to zero in 6-9 years, which is completely preposterous given Russia's recent consumption growth.

Using more realistic figures for Russian production decline (-3% per year) and consumption increase (+1%, which is probably on the high side given Russia's rapidly declining population), Russian consumption doesn't exceed production until the year 2039.

As you can see from the above, a clear of understanding of the Export Land effect is going to involve a comprehensive analysis of the complete export situation worldwide -- not gimmicky analysis of cherry-picked examples. I will describe my results on that front in Part 2.

(Part 2: 409. THE IMPORT LAND MODEL)

by JD

380. A TRIP DOWN MEMORY LANE WITH MATT SIMMONS

2008-10-22T04:36:00.000-07:00

We like to wax nostalgic from time to time here at POD, and I thought you might enjoy an amusing little nugget from July 14, 2008. It features our old buddy Matt Simmons making yet another astute call on the oil market:

To help you put this in context:

The commentator's remark toward the end of the video that "commodities are cyclical" triggered the usual subthread of ridicule over at The Soiled Rump, and of course that has long been a staple of PO rhetoric. The peak oilers believe that, aside from some negligible superimposed noise, PO will cause never-ending price escalation, and bring an end to cycles. For example, here is Robert Rapier rejecting a journalist's comment that oil is cyclical:

Journalist (in an article called "What Goes Up Must Come Down"): The length of the cycles may vary, but in the end, oil, too, is a cyclical business.

Robert Rapier: Encouraging signs that we are reducing our consumption, but I think the author misses the mark with that last statement. Oil has historically been a cyclical business. This will change when supply growth can no longer outstrip demand. This is going to be the case when oil production peaks, and all signs indicate to me that the erosion of excess capacity is driving the current surge in prices. Unless we have enormous demand destruction (and how is that going to occur other than through very high prices?), or there are a couple of Saudi Arabia’s hiding in the Arctic and soon to be discovered, I can’t easily see supply getting far ahead of demand. That is what would be required to continue the cycles - an oversupply situation.Source

This has been consistently rejected by the grizzled old veterans who run the oil business:

"We're a cyclical business," David J. O'Reilly, chief executive of ChevronTexaco, the second-largest American oil company, said in a telephone interview, "and at the high end of the cycle it makes sense to get the company in good shape and strengthen our balance sheet.

"History tells us that what goes up also goes down."Source

I think we're going have to step up to the plate and admit it here folks. Any company which greenlighted its projects according to peak oil theory (i.e. assuming high oil prices) is now getting seriously reamed. The grizzled old veterans were right. Oil is a cyclical business.

So why do the peak oilers keep getting this wrong? My answer is the same as always: Peak oil theory has a systemic bias which prevents its adherents from clearly understanding the demand side.

by JD

379. TWILIGHT IN THE DESERT, MY ASS

2008-10-11T07:14:00.000-07:00

Matt Simmons has been wrong about virtually every important trend he has tried to call.

He was wrong in his shrill predictions about US gas "going over a cliff". He predicted a catastrophic drop in US natural gas production by summer 2005. That never transpired, and in summer 2008 US gas production is *rising* at a rapid clip. Details

He also predicted a near term collapse in Saudi oil production (Twilight in the Desert: The Coming Saudi Oil Shock) which never transpired. The book was released in June 2005, and in the last 18 months, Saudi crude+condensate production has steadily risen, reaching a high of 9,700mbd in July 2008 (EIA stats, Table 1.1c). Historically, that's an extremely high level. The last time Saudi crude+condensate production was that high was almost 30 years ago, in October 1981 (see EIA, 2008 Monthly Energy Review, Table 11.1a Link).

Simmons staked his reputation on the claim that Saudi Production was going to collapse, and it did exactly the opposite. No wonder he's having a nervous breakdown and promoting bizarre schemes like mowing the bottom of the ocean with "underwater lawnmowers":

“Call it seaweed, if you want,” Simmons said. Whatever you call it, Simmons said the world must start harvesting this micro algae using what he called “underwater lawnmowers.”

Simmons acknowledged that any plan for large scale harvesting of micro algae likely would be strongly opposed by environmentalists. His blunt message to them: "Get over it. We’ve already destroyed the fish stock."Source

Simmons' consistent view has always been that high prices will not temper demand, that demand will continue to follow optimistic IEA forecasts even if supply massively undershoots that level (economic gobbledygook like "In seventeen years the world’s demand for oil may well be more than 50 percent greater than it is today, while production capacity may well sink to 1985 levels."Source), and that prices are going to go through the roof. Which, of course, is completely at odds with the actual situation of falling demand and prices. The man is overwrought and out of touch: on Sept. 22, 2008, as the price of oil was nosediving to $33, his comment was: "There really is no roof on oil prices at this point."Source

-- by JD

378. WHY ROBERT HIRSCH IS DEAD WRONG

2008-10-02T04:32:00.000-07:00

I can't count the number of times that pessimists have told me: "It's too late to address peak oil. Read the Hirsch Report. If we wanted to mitigate peak oil, we needed to start 20 years ago."

That's the classic peak oil sound bite. You're left with the impression that "mitigating" peak oil is a horrendously complex process which will take decades upon decades and trillions of dollars. And granted, that is an accurate depiction of Hirsch's view, and explains why he thinks the problem is so ugly, and we are in such deep trouble.

Robert Hirsch: Taking himself way too seriously

On the other hand, it's always good to question authority, and we can learn an important lesson by examining exactly what Hirsch means by "mitigation".

Here's the fine print, from the Hirsch Report:

Nevertheless, this analysis clearly demonstrates that the key to mitigation of world oil production peaking will be the construction a large number of substitute fuel production facilities, coupled to significant increases in transportation fuel efficiency. The time required to mitigate world oil production peaking is measured on a decade time-scale. Related production facility size is large and capital intensive. (P. 6)

Let's break that down. Note that conservation plays no role whatsoever in Hirsch's "mitigation". None. Zero. His idea of "solving" the peak oil problem is to build horrendously expensive, highly polluting facilities for producing substitute liquid fuel (CTL, GTL, heavy oil) so that everyone can continue driving their current vehicles in a completely business-as-usual fashion.

(Incidentally, as I've noted before, 30% of Dr. Robert Hirsch Ph.D's "mitigation" plan depends on Venezuela (of all places) ramping up heavy oil production from 0.6mbd to 6.0mbd in 10 years. Which is probably the most butt-stupid peak oil plan ever put to paper. The US is not going to maintain business-as-usual by ramping up heavy oil production in Venezuela, for a whole host of reasons Hirsch is apparently too senile and poorly informed to notice.)

Hirsch frankly concedes that his plan only addresses the supply-side, and intentionally ignores all demand-side conservation measures:

Our focus is on large-scale, physical mitigation, as opposed to policy actions, e.g. tax credits, rationing, automobile speed restrictions etc. (P. 25)

This oversight seriously calls into question his claim that it will take 20 years to "mitigate" peak oil. It's as though we were considering solutions for an obese person, and Hirsch is telling us it's going to take forever because we won't be considering options like dieting and exercise.

The IEA takes a more reasonable approach. It sees conservation as the backbone of any rapid response to oil shortages. In an excellent report called Saving Oil in a Hurry (pdf) they list a whole range of low-cost, quick-implementation policy options for cutting oil consumption:

Employer trip reduction
Area-wide ridesharing
Public transit improvements
HOV lanes
Park and ride lots
Bike and walk facilities
Parking pricing at work
Parking pricing: non-work
Congestion pricing
Compressed work weak
Telecommuting
Land use planning
Smog/VMT(Vehicle Miles Traveled) tax
Public appeals to reduce consumption without price effects
Public appeals to reduce consumption with price effects
Ban on motor sports events
Ban on driving by car to large scale events
Speed restrictions
Ban on driving every second Sunday
Ban on driving every second Weekend
General ban on Sunday driving
Restriction on use by administrative degree (public authorities set days on which drivers are banned)
Restriction on use by registration number (on each weekday two final registration numbers banned)
Implementation of fuel supply ordinance (rationing) (P. 27)

Hirsch completely ignores all this. He is strictly an old-school oil-luvin', business-as-usual "drill, baby, drill" extractionist. Which is not totally wrong, of course. I also support CTL, GTL, and drilling (under the right circumstances). I agree 100% with Hirsch that we must continue growth and industrial development. The difference is that I believe in conservation first, then extraction. Hirsch believes in full-bore extraction without any conservation at all.

Many people have the mistaken notion that we need to build something, or invest in something to mitigate peak oil. That's why it's "too late". We need coal liquefaction plants, and GTL, and higher mileage vehicles, and drilling in ANWR, and mass transit, and nuclear plants, and electric cars, and etc. etc. Granted, all those things are important, and will come into play as the solution evolves. But the bottom line is this: peak oil can be almost entirely mitigated without any money, time or equipment at all.

I will be taking this theme up in greater detail in future posts, but for now, I'll just sketch an outline so you can see what I'm talking about.

The IEA conservation measures are great, but they're barely scratching the surface. They mention car pooling as a very low-cost, high-impact measure, but how about extreme car pooling, a la Afghanistan?

Imagine Afghani style car-pooling during every rush-hour, in every city in the US. Pickups packed with people and their bicycles. What you would have is incredible efficiency and fuel savings, with no up front investment cost, using only existing vehicles. Note that I'm not saying that we will adopt Afghani style car-pooling (I very much doubt it will get even remotely that bad). But we certainly could make it happen if we needed to, and all-in-all it wouldn't be that big of a deal.

On page 1 of the Hirsch Report, Hirsch says "Improving fuel efficiency will take 10 years..." Which is a load of ridiculous horseshit. You can double or triple your fuel-efficiency in one day by car pooling, or sleeping at work, or riding the bus. You can increase your fuel efficiency to infinity by just getting off your butt and bicycling. Lots of US cities have bus systems, and they can be packed to the gills. If you live out in the country without bus service, make your own. Pack it to the gills. Do "shopping-pooling" where one person with a big truck or SUV buys for everybody. Set up a little private shuttle bus that gathers people for a daily ride to shopping, or into town.

The home-heating oil problem in the Northeast can be addressed with a similar strategy. Five or six seniors, who are each getting reamed to the tune of $3000-4000 a winter on their heating oil bills, get together at the senior center, and decide to move into one house for the cold season. Call it "housepooling". Now, they're all saving large sums of money, which they can invest in insulation, wood/gas heating, or (ideally) a ground source heat pump etc. Similar concepts apply to intracity travel. If you're too far away, move! There's not a law of nature which says that people are bolted down to the locations they're in, or that they have to live one to each house.

Literally, everywhere you look, the problem can be massively mitigated by some no-cost quick-fix requiring no investment, no money, no new equipment, and only minor tweaks in cultural behavior.

Consider this interesting factoid that Hirsch himself provides on P. 24 of the Hirsch Report: "67 percent of personal automobile travel, and 50 percent of airplane travel are discretionary". Wow. Using the oil consumption figures from P. 23, this means that 6.3 million barrels per day (roughly equal to the oil production of Iran+Iraq) are used in discretionary auto/air travel in the US alone. That's huge: 30% of US oil consumption, and 50% of US oil imports. And it's being wasted on non-mission-critical, optional travel. So here's a simple solution to the early phases of peak oil: skip the discretionary travel. Total cost of solution: $0. Total time required: 0 hours. Total new equipment needed: None.

If it comes to that, is it going to be fun? No. It's going to be uncomfortable, and there's going to be a lot of unhappy campers. On the other hand, it's clearly ludicrous to think that our civilization is going to collapse due to the reduction or elimination of luxury. The point is that we do have a "Plan B". It's called conservation, and it can be scaled up immediately, at any time, and at very low cost. Hirsch's claim that we need 20 years to mitigate peak oil is nonsense.

by JD

------
*) Postscript: On 10/6/08 at The Oil Drum, Alan Drake wrote:

At ASPO-Sacramento, I approached Robert Hirsch about possibly writing an "Alternative Hirsch Report" and he basically called be an idiot (in more polite words), appealed to authority (his) and said it could not be done in less than 50 years. It is a daunting challenge, but I may go ahead, with my own resources, and write the "Alternative (Green) Hirsch Report".

For obvious reasons, I posted a link to this article. The link, and Alan's original comment, were deleted by the TOD staff.

377. PEAK OIL: WHO CARES?

2008-09-19T03:57:00.000-07:00

It's official. Peak oil is a loser. It blew a tire on the curve, and lost the TEOTWAWKI 500 to the ongoing US financial meltdown. Valiant efforts are being made at the peak oil sites to maintain interest and somehow blame the collapse on oil, or at least find some flimsy connection... to no avail. The PO community is looking increasingly like the village idiot who warned everybody about the tornado, just before the big flood hit.

Now that most of Wall Street has been vaporized, peak oil isn't going to be the hot cottage industry it once was. The groupies will now shift to the real rockstars of the global collapse blogosphere -- the finance doomers. Pity the poor peak oil sites... viewers melting away like the Greenland icesheet, page views slumping like WaMu stock...

Amidst the carnage, we can single out one man for some well-deserved kudos. That would be Mike Lynch, who called oil "the mother of all bubbles" on April 21.

THE OIL BUBBLE

Nice job, Mike. I'll take you out for some octopus balls if you're ever in Osaka. Of course, the peak oilers adamantly refuse to admit that oil was a bubble. They stand ready to defend peak oil at all costs, even if nobody else gives a shit anymore. When Jerome a Paris carefully explains why his "Countdown to $200 oil" series is still relevant, even though oil prices fell off a cliff, and the US banking system imploded, the peak oil die-hards will dutifully nod their heads and hit the +1 button.

Of course sane regular Joes like you and me know what's up. We know for a fact oil was a bubble because we looked at the fucking picture.

Indeed, the 2008 oil/commodity bubble was brought to you by the same greedy jerkoffs who brought you this fiasco:

THE DOT COM BUBBLE

And this monstrous foul-up:

THE US HOUSING BUBBLE

With the US economy swirling down the toilet, I'm guessing it's going to be a while before peak oil gets sexy again. In the meantime, we should probably address the real underlying problem: the out-of-control casino of greed-crazed vermin we euphemistically call the "financial system".

by JD

376. NITROGEN USE EFFICIENCY (NUE)

2008-09-08T04:06:00.000-07:00

One of the most far-fetched peak oil scares is the idea that peak oil is going to cause mass starvation because fertilizer is dependent on oil. This isn't even remotely true, and if you're new to peak oil, this article has all the info/links you need for a more realistic understanding: PEAK OIL AND FERTILIZER: NO PROBLEM.

Generally, the peak oiler alarmist approach is to look at the fertilizer problem (and everything else about peak oil) strictly through the lens of supply, i.e.: We need natural gas to make fertilizer, and when gas starts running low, we're going to be in big trouble. Even that statement is wrong (because fertilizer can be made from coal, or hydropower, or nuclear), but it also ignores the potential for innovation on the demand side, which is where the real action is at the moment.

For example, Arcadia Biosciences has developed nitrogen-efficient crops which provide the same yields with 1/2 to 1/3 the fertilizer:

...farmers can reduce the overall amount of nitrogen required by employing new biotechnologies, such as the nitrogen use efficiency (NUE) improvements offered by Arcadia Biosciences. By engineering crops to overexpress a gene that allows roots to absorb more nitrogen, Arcadia scientists have shown that "it's possible for NUE crops to produce the same yield with half as much fertilizer," president and CEO, Eric Rey, says. "In canola, we saw a two-thirds reduction."

Seeds bearing the technology have already been licensed to agricultural giants Monsanto Company and Dupont's Pioneer Hi-Bred International in the case of canola and corn, respectively—and even grass seed from Scotts Miracle-Gro Company may one day employ it. Although field trials over the last four years have proved the genetic changes effectiveness, further testing and government approval means that such crops will not be grown before 2012.

"It's a big economic benefit for farmers if they use only half as much nitrogen as well a big beneficial impact on nitrogen runoff into waterways," says Rey, who hopes that this product will be adopted as quickly as herbicide-resistant crops, which only took five years from introduction in 1998 to become nearly 70 percent of the corn grown in the U.S., and is now nearly 90 percent. "A reasonable expectation is that there would be a dramatic reduction, maybe by 2018."Source

The Chinese recently announced a nationwide release of genetically-engineered rice, and are working with Arcadia to develop nitrogen-efficient rice:

China says short world grain supplies have persuaded it to release biotech rice nationwide, ensuring the broadest-ever use of genetic engineering in a food crop. Chinese plant breeders say biotech crops are certain to produce higher yields, forestalling the need to finance costly rice imports for China’s billion-plus consumers.

[...]

The Chinese have already developed genetically engineered rice strains with bred-in pest and disease resistance. They’re also experimenting with new nitrogen-efficient rice that needs only half as much fertilizer to get top yields. The new rice thus costs much less to grow, and emits far less greenhouse gas per ton of rice produced. They also say biotech rice “escapes” will not be a problem, since they’ve pre-programmed the rice to be hyper-sensitive to a particular herbicide.Source

This is a hot area, and Monsanto is also in the game:

Monsanto is developing corn that will yield better under normal nitrogen conditions, or to stabilize yield in low nitrogen environments. Last year, the company’s nitrogen trials demonstrated a 5 to 15 percent yield increase across limited nitrogen environments. Across three locations in Illinois and Iowa in 2006, Monsanto’s lead N utilization gene showed no yield drop-off as the N application levels decreased from 180 pounds per acre to 40 lbs./acre. Just recently, Monsanto and a company called Evogene announced a collaboration to improve nitrogen use efficiency in corn, soybeans, canola and cotton. Source

Conclusion: The peak oil "fertilizer crisis" continues to recede into the distance like the silly fantasy it is.

by JD

375. HEAVY DUTY ELECTRIC TRUCK

2008-08-26T04:53:00.000-07:00

The Port of Los Angeles has partnered with the Balqon Corporation, a US manufacturer of electric trucks, to develop the world's most powerful electric truck. This monster electric tractor is capable of hauling a fully-loaded 40-foot cargo container (weighing 60,000 pounds), at a top speed of 40mph and maximum distance of 30 miles. Here's the video:

According to the data sheet, these electric trucks can operate with "fuel" costs 75-90% less than similar diesel vehicles. The Port has approved the production of 20 of these trucks for use as "hostlers" (tractors for moving containers within the port) Source, and ordered five more for on-road use Source.

This truck conclusively debunks the myth that large trucks and machines (like farm equipment) cannot be driven with batteries. The technology is clearly well-developed and practical. Combining these large trucks with the mid-size electric trucks we have already discussed in #320, there are clearly no significant barriers to swapping all local freight traffic to electric trucks.

Here, of course, the America-centric doomsquad steps in with the usual rejoinder: "Uh huh. Give me a call when you can get one of those toys to go from LA to Chicago, asshat. LOL." The answer to that is straightforward. It's a different kind of electric truck called an "electric train", developed about 120 years ago:

by JD

374. NATURAL GAS "CLIFF" BENDS THE WRONG WAY

2008-08-11T23:57:00.000-07:00

In the early days of peak oil fever, 2003-2004, Matt Simmons and many other fearmongers were adamant that U.S. natural gas production was about to "fall off a cliff". In fact, in an Aug. 21, 2003 conversation with peak oil loony Mike Ruppert, Simmons categorically stated that a U.S. natural gas crisis was a certainty within two years:

Simmons: As you know, I have been talking for some time about the natural gas cliff we are experiencing.

[...]

Well, I know you understand it, but people need to understand the concept of peaking and irreversible decline. It's a sharper issue with gas, which doesn't follow a bell curve but tends to fall off a cliff.

[...]
Someone's going to be left holding the bag big time. If natural gas consumption surges in ten days of excessive heat then it would require almost a complete shutdown of industrial consumption to compensate and protect the grid. As I have been reporting for years now, there isn't going to be enough gas to run those plants, let alone new ones.

[...]

Pray for no hurricanes and to stop the erosion of natural gas supplies. Under the best of circumstances, if all prayers are answered there will be no crisis for maybe two years. After that it's a certainty.Source

The "natural gas cliff" scare has been very influential, and parroted by virtually every groupthink chump in the peak oil space:

Matt Simmons, Dale Allen Pfeiffer, mobjectivist, Julian Darley, Culture Change, dieoff.org, LATOC, Post Carbon Institute, Energy Bulletin, The Oil Drum etc. etc.

So... here we are, roughly 3 years after Simmons' "crisis" was supposed to have come and gone. What actually happened? Did U.S. gas production fall off a cliff?

Yup, it fell off a cliff alright, IN REVERSE. Here's the money shot from the EIA:

It seems a funny thing happened on the way to the "cliff" (from the EIA):

Natural gas production in the Lower 48 States has seen a large upward shift. After 9 years of no net growth through 2006, an upward trend began that generated 3% growth between first-quarter 2006 and first-quarter 2007, followed by an exceptionally large 9% increase between first-quarter 2007 and first-quarter 2008.Source

Dry gas production continues to set records
Gross withdrawals continue to set records
U.S. Feb natgas production jumps 10 pct yr/yr -EIA
Natural-Gas Prices May Fall Next Year On Supply Surge
NGSA: No natural gas shortage in the US
Aubry McClendon: OKC soon to be world's natural gas capital

It's kind of funny, isn't it? The earnest, diaper soiling scaremongers in the peak oil community totally blow the call, yet again. Why? Because they don't understand the magical powers of TECHNOLOGY.

by JD

------
Big hat tip to Oil Finder for sniffing out this phenomenon (and links).

373. COMMODITIES OFFICIALLY IN BEAR MARKET

2008-08-06T04:35:00.000-07:00

Lots of interesting developments which I will be posting on shortly, but its hard to ignore this week's major shift in sentiment. Oil is back to $120, but that's just one aspect of a broader sell-off:

Aug. 5 (Bloomberg) -- Global energy and raw-materials stocks fell into bear markets after plunging oil, gold, copper and wheat prices spurred declines in last year's best-performing industries.
[...]
"Commodities prices have hit a choking point,'' said Nader Naeimi, a Sydney-based senior investment strategist at AMP Capital Investors, which manages about $108 billion. "With further evidence of slowing growth there'll be ongoing pressure on mining and resources stocks.''
[...]
"The perception that the global economy is slowing is damping demand for commodities,'' said Park Sehick, a fund manager at Hanwha Investment Trust Management Co. in Seoul, which holds $1 billion in equities. Commodity prices "will keep on falling from here,'' he said.Source

Sign of the times: GSCI index now down 20% from its high on July 3, 2008

Deutsche Bank heads for the lifeboats:

Deutsche Bank has called the top of the commodity cycle. The uber-bulls of the oil, food and metals boom have advised clients to take profits before the downturn engulfing most of the global economy works its inevitable effects.

Oil will slide back towards its "marginal production cost" of $60 to $80 a barrel; gold will slump to $650 an ounce as the dollar recovers against the euro; copper, lead and tin will slowly halve in price; grains will calm down as harvests in Australia and the Eurasian Steppe return to normal.

The report comes on cue. The CRB commodity index fell 10pc last month, the steepest one-month drop since the onset of the Volcker crunch in 1980. Most raw materials have been slipping for months. Crude was the last to turn after peaking at $147 early last month.

Deutsche Bank says this year's oil surge has been a quirk. Misjudging demand, Saudi Arabia cut output by 400,000 barrels a day (bpd). Several upsets hit the non-Opec bloc of Russia, Norway, the UK, and Mexico. Rebels caused mayhem in Nigeria. Global supply is now creeping back into surplus.

The Saudis are adding 500,000 bpd. Deepwater projects are coming on stream off the US, Mexico, China, and Africa. The Caspian is cranking up a gear. Non-Opec will add 2.2m bpd over this year and next, says the International Energy Agency.Source

by JD

372. SPECULATION FIGHT: JUST WARMING UP

2008-07-30T04:09:00.000-07:00

Recently, the CFTC released an Interim Report arguing that speculation has not systematically driven the rise in crude oil prices. In the Oil Drum camp, this was greeted with a wave of high-fives and honking of party horns, as if it marked the end of the speculation debate. The debate has not ended, however. In fact, it has hardly begun, and will continue and intensify for a number of powerful, common-sense reasons:

1) The speculation issue is not limited to crude oil. It involves agricultural futures markets as well. Farmers and grain elevators are facing punishing margin calls, inability to market their crops, inability to capture futures prices, and failure of futures to converge with cash prices Source1, Source2, Source3, Source4.

Here's Tom Buis, president of the National Farmers Union: "There's something wrong. I have doubts whether the CFTC is the place to rectify the problem - it may warrant congressional intervention. When regulators say a problem doesn't exist, despite the fact farmers cannot market their commodities that sounds an alarm." Source

These problems in agricultural markets have become so bad that the CFTC has been forced to call hearings in April and July to deal with irate farmers, grain dealers etc. And the people complaining are not denialist newbies grasping at the straw of "speculation" to avoid facing peak oil. They are long-time futures market insiders -- people who've been in the market for decades. They say the problem is a massive influx of speculators from Wall Street. Should we tell the farmers to shut up because the speculation debate is over? Tell them they're in denial? That it's all in their heads? Obviously not. Rampant commodity speculation is causing severe problems in a broad range of markets, and common sense says we should dig down and get to the bottom of it. There is no reason whatsoever for allowing Wall Street to turn critical markets for food and energy into casinos for rich people.

2) The issue isn't: did speculation singlehandedly cause the run up in oil from $10 in 1998 to $145 in 2008? Clearly, supply and demand are the foundation of the trend. Everyone agrees with that. The issue is: how much cheaper can oil (and other commodities) be if index speculators are forced to liquidate their rolling long positions? Even a $10 or $20 benefit could be worthwhile.

3) Here's the Interim Report on the topic of index investors:

Commodity index funds have grown significantly during the past few years, bringing significant long positions to commodity markets. In the futures markets, these funds have typically been long-only funds, buying near-term futures contracts and rolling their positions into more distant months as the delivery month approaches. Commodity index funds are often utilized by pension funds and other large institutions that seek commodity exposure to diversify existing portfolios of stocks and bonds and this exposure is provided by swap dealers. Although commodity swap dealers' gross positions have grown significantly, swap dealers' net positions decreased substantially between 2006 and June 2008. (Figure 12) This suggests that flows from commodity index funds have been offset by other swap dealer activity and thus have not necessarily contributed to the recent price increases in crude oil.

Across all maturities, the aggregate position of swap dealers in WTI crude oil futures contracts was only marginally net long as of the end of June 2008 and was net short on average during the first five months of 2008. This means that swap dealers' futures positions, on balance, were poised to benefit more from a fall in crude oil prices than from a rise in crude oil prices.
(P. 23-24)

So the argument is this: The long positions held by index investors are being offset by the short positions of someone else in the market and thus have "not necessarily" contributed to rising prices.

But if you look at it that way, every participant in the futures market is being offset by his or her counterparty, so no one does/can contribute to a price rise or fall. It's very much like saying that a bubble can't form in the stock market because for every buyer of a stock, there must be a seller, and thus the downward pressure of each seller cancels out the upward pressure of each buyer. In short, it's a piece of sophistry.

As I said above, the important question is: how much cheaper will oil be if index speculators are forced to liquidate their rolling long positions? As I showed in 360. WHEN INDEX SPECULATORS SELL, the experiment has already been done once, and the results were very interesting. In 2006, index speculators were forced to sell $6 billion worth of rolling long positions in gasoline due to a rejuggling of the composition of the GSCI, and gasoline prices fell $0.82 in four weeks.

The simplest way of settling this issue is to take a pass on the spin and Wall Street smoke screens, and do the test empirically. Force the index longs to sell without rolling, and see what happens. The CFTC says index longs aren't affecting prices at all, so nothing will happen. What have we got to lose?

4) It's interesting how a generally leftish website like The Oil Drum immediately pimps for banks, hedgefunds, speculators and other Wall Street interests on the speculation issue. In a way, I think they see speculation as a sort of stealth carbon tax... "What's wrong with index funds and other long-only investors keeping oil prices at an elevated level? That's exactly what we wanted to do anyway! It's like a carbon tax, only better, because the NASCAR stooges can't object to it."

Another way to look at it, I suppose, is that commodity speculation is the last hurrah for the banks. You know the swap dealers we keep hearing about? It turns out that these are the same large banks who brought you the mortgage crisis. They're like vampires that have to suck the blood of some financial bubble, and at this point, their commodities businesses are the only profit center left standing. This is likely a major reason why the Bush administration is so keen to paper over the issue, and let the commodity speculation fest continue.

5) Many defenders of speculation say something like this: "The people who are investing long in oil and other commodities are only trying to preserve the value of their money against inflation. You can't blame them." And that's all true. However, if it's okay for one person to change their money into commodities to protect it against inflation, then surely it's okay for everybody to simultaneously change all of their money into commodities. We can't blame them right?

Unfortunately, that scenario isn't an investment strategy anymore; it's a full-scale loss of confidence in paper currency, which would be an unmitigated disaster for everyone. We simply can't have everyone changing their money into wheat or petroleum products and holding it as a money surrogate.

If it's not okay for everybody, then it shouldn't be okay for a privileged elite.

6) Eliminating index speculators from commodity markets is not an "anti-market" move. It's simply a restoration of futures markets to the smoothly functioning Ronald-Reagan-approved free-market state they existed in for decades before the index fund pig wallow of the 2000s.

7) Some people claim that futures markets are just a form of gambling that doesn't actually affect real world prices -- rather like people betting on a basketball game who don't affect the outcome. If that's the case, there's really no good grounds for not regulating speculation. Governments routinely regulate gambling.

Further reading:

Commodity Speculation Fight Only Just Beginning
The industrialised world, which has the power to substantially reduce commodity speculation if it chooses to use it, is ultimately disadvantaged by high commodity prices. If the blow represented by rising demand and severely constrained supply can be softened then it is not hard to argue that it should be. Free market diehards may disagree, but sometimes free market principles have to be sacrificed for the sake of realpolitik, or maybe just commonsense.

CFTC Official Seeks Independent Study On Speculators In Markets
A Commodity Futures Trading Commission official said Tuesday that billions of dollars in speculative investment are having an impact on futures markets, but Commissioner Bart Chilton is calling for an independent study to determine just how much.

Chilton said Bush administration officials have continuously downplayed the role of speculators on oil and agricultural futures but that an independent evaluation is needed to take political spin out of the assessment.

"I've got to believe that $250 billion (in new speculative investment over recent years) is having some ... impact" on futures, Chilton said in a written statement.

by JD

371. SURGE IN US GASOLINE AND DIESEL EXPORTS

2008-07-29T18:20:00.000-07:00

This is an interesting phenomenon:

A record 1.6 million barrels a day in American refined petroleum products were exported during the first four months of this year, up 33 per cent from 1.2 million barrels a day over the same period in 2007. Shipments this February topped 1.8 million barrels a day for the first time during any month, according to final numbers from the Energy Department.Source

One contributor to the recent drop in crude prices has been the rise in US gasoline and diesel stocks due to falling demand:

These rises in stocks are even more impressive when you consider that, so far in 2008, US product exports are running at 1.6 million bpd -- up by 312,000bpd over 2007 (Source: EIA). Stocks continue to build even though large volumes of gasoline and diesel are being exported.

by JD

370. MORE SLACK IN DEMAND

2008-07-25T00:02:00.000-07:00

The latest Weekly Petroleum Products Supplied stats from the EIA show another massive drop in U.S. oil consumption. Here's the figures:

July 20, 2007: 21,006kbd
July 18, 2008: 19,903kbd

That's a year-on-year drop in U.S demand of 1,103,000 barrels/day. Huge. Roughly equal to the production of a super-giant oil field, or a small producing country like Qatar, Indonesia or Azerbaijan.

Now, there's a lot of confusion on what this means for oil prices due to the classic doomer/oil-bull soundbite:

If we burn less, India and China will burn it up, no problem.

The less we use the more China will use. China and the other emerging economies set the price of oil now, not the US.

Let's look at the figures, and see if that theory holds up. I've compiled the following Table from the BP Statistical Review 2008. For the most important regions and countries, the Table gives the average annual increase in oil consumption (in 1000s of barrels per day) for the periods 2003-2007 and 2005-2007, as well as the increase in 2007 over 2006. This Table should give you a better feel for the size of demand growth under business-as-usual conditions. (Click the table to enlarge)

As you can see from the Table, US consumption has been approximately flat over the past few years, so the steep recent drop in US consumption is a net negative for world demand growth.

A 1.1 million barrel/day drop in US demand is gigantic -- literally enough to wipe out all growth in oil consumption for the entire world, which at the moment is running at about 0.9mbd. (The current IEA forecast for 2008 demand growth is 0.89mbd. Source: July 10 OMR)

There is simply no way for China and India (who combined have average annual growth of around 0.5mbd) to overcome a 1.1mbd drop in US consumption. They simply can't grow that fast.

To conclude this post, here are some links with interesting detail on the current oil situation in China:

BEIJING, July 22 (Reuters) - China's crude oil imports from Iran in June halved from a year ago to its lowest monthly level in 18 months, contributing to the overhang of crude stored offshore in Iran, official customs data showed on Tuesday.
Iran shipped 1.176 million tonnes, or 286,000 barrels per day (bpd), of crude to China last month, 50 percent less than in June 2007, data from the General Administration of Customs showed.
This is also well below the 400,000 bpd of term volumes officially contracted for this year, and the even higher 465,000 bpd average imports of Iranian crude for the first quarter.Source

*****

BEIJING (Reuters) - China's worsening power woes are all but guaranteed to trigger a surge in imported oil, just as they did in 2004 during the worst crisis in decades, right?

Wrong, say experts and industry sources. While the theme is familiar, the circumstances couldn't be more different, suggesting that oil bulls looking for a reason to push crude beyond $150 a barrel will need to look elsewhere.

[...]

China appears to be well-stocked with foreign fuel after 8 months of steady inventory builds that caused diesel imports to surge 9-fold in the first five months this year.Source: Unlike 2004, China oil demand unmoved by power woes

by JD

369. OIL FLAT, GROWTH CONTINUES

2008-07-24T00:25:00.000-07:00

Great graphic over at the Oil Drum today:

It comes from the new CFTC report which finally and conclusively proves that futures market participants have no effect whatsoever on prices in the futures market.

The folks at TOD had their own nefarious reasons for posting this, but what caught my eye is how global growth just keeps on trucking, even without growth in oil. Which is a little odd considering that no less a figure than Colin Campbell, the Pope of Peak Oil, has called oil "the principal driver of economic growth"Source.

by JD

368. OPEN THREAD

2008-07-18T05:43:00.000-07:00

To everyone: I've deleted this post because my reasoning was shoddy, and it didn't hold up to scrutiny. Please accept my apologies. I will do my best to ensure that Peak Oil Debunked keeps a higher standard in the future.

There were some good links in the comments which I will post here:

Juan: WITH ALL THE TALK ABOUT PEAK GLOBAL OIL SUPPLY, WHAT ABOUT PEAK OIL DEMAND?

Interesting video showing how supply and demand curves interact in peak oil:

Brother Cadfan:
Goldman Sachs obviously aren't liking the decrease in oil price over the last few days!
Link

Otherwise, feel free to use this as an open thread.
JD

367. TELEPRESENCE

2008-07-09T16:54:00.000-07:00

My model of peak oil is the biological process of succession. As Joel E. Cohen writes in his classic "How Many People Can the Earth Support?":

Different species have different requirements for a given element, as Liebig knew. Consequently, when one element is limited in a community of species, population growth typically does not grind to a halt; rather, a species that is less constrained by that limiting element replaces another that is more constrained in a process called succession.(P. 242)

The technological/industrial analog of this process is becoming increasingly obvious in many areas. As oil prices rise, truckers are getting hit hard, but rail and barges are booming. SUV sales are plummeting, but electric and gas scooters are on the rise. Fishermen are suffering, but aquaculture is thriving. It seems that for every "species" (i.e. industry) that is withering under high oil prices, there is always a less dependent corresponding industry that is surging to fill the vacuum. The dinosaurs are dying, but scurrying little rodents are rapidly breeding in their vacated niche.

Another good example is the rise of telepresence as an adaptation to the decline in airlines and business travel. Cisco has developed a new system called "TelePresence" described in this video (and many others on youtube):

This product is growing at a phenomenal rate, and saving Cisco very large sums of money:

Charles Stucki, vice president and general manager of Cisco Telepresence Systems, said the teleconferencing technology is their fastest-growing new product in the company's history.

Of the companies that have implemented use of this new technology, Hsieh said it has likely paid for itself multiple times over just in travel cost reduction.

Cisco CEO John Chambers, said Cisco has cut its own global travel budget by $180,000,000 over the past year using the aforementioned technology.Source

And that is just one company and one application. A similar technique is being developed for use in medicine:

Clearly this technology has a bright future, and is only going to get better. It's also going to save massive volumes of wasted transport fuel. It inspires the imagination -- a futuristic world where people are even more mobile than they are now, even though no one is actually moving.

by JD

366. FUTURES PRICES DETERMINE PHYSICAL OIL PRICES

2008-07-02T21:15:00.000-07:00

A number of high-profile economists, like Paul Krugman, have recently been making the argument that trading in oil futures can't really influence the price of physical oil because it doesn't remove any oil from the market. Here's a classic statement of this argument by Jon Birger, a staff writer from Fortune:

Here's a suggestion: The next time a Congressional committee wants to hold a hearing on how "speculators" are driving up oil prices, each committee member should first be required to demonstrate - preferably in their opening remarks - a basic understanding of the mechanics of futures trading.

Even better, they should be required to explain in detail how it is that investors who never take delivery of a single barrel of crude - and thus never remove a drop of oil from the open market - are causing record high oil prices.Source

I will now provide that explanation, and in the process show that both Krugman and Birger are grossly misinformed about the way physical crude is actually priced in the global oil market.

Most crude oil is traded based on long-term contracts, and the prices in those contracts are set by a system known as "formula pricing". In this system, the price of delivered crude is set by adding a premium to, or subtracting a discount from, certain benchmark or marker crudes, namely: West Texas Intermediate (WTI), Brent and Dubai-Oman. Generally, WTI is used as the benchmark for oil sold to North America, Brent for oil sold to Europe and Africa, and Dubai-Oman for Gulf crude sold in the Asia-Pacific market (Source1, Source2).

Originally, the benchmark prices were spot prices, but over time problems began to arise due to the depletion of the benchmark crudes:

In the early stages of the current oil pricing system which emerged in the period 1986-88, crude oil was priced off the spot market quotations of these benchmarks (namely dated Brent, spot WTI and Dubai) as assessed by oil reporting agencies such as Platts and Petroleum Argus. In the last few years [i.e. since the early 2000s] however, there have been some serious doubts about the ability of the spot physical market to generate a price that reflects accurately the margin of the physical barrel of oil. One of the main problems is that very little actual trading occurs in these crudes which makes the process of price discovery very difficult.Source

The rapidly declining size of spot markets for the benchmark crudes led to chronic problems with speculators cornering those markets with a technique called the "squeeze":

Low volumes of crude oil available for spot trading make price discovery problematic and increase the vulnerability of markets to squeezes, distorting prices and undermining market confidence. A squeeze refers to a situation in which a trader goes long in a forward market by an amount that exceeds the actual physical cargoes that can be loaded during that month. If successful, the squeezer will claim delivery from sellers who are short and will obtain cash settlement involving a premium. It is true that all markets are prone to squeezes and in the last few years there have been occasions on which the Brent market was subject to successful squeezes. But it is also true that it is easier to squeeze thinner markets.Source

The Brent spot market in particular was plagued by frequent squeezes in the early 2000s, and this is well attested to by numerous sources here, here(pdf), here, here, and here etc.

Here's an interesting tidbit on the subject:

Dated Brent, which acts as a price marker for many international grades, is physical crude traded on an informal market, rather than a regulated futures exchange. This lack of regulation poses problems for oil producers and consumers seeking a fair price, said Robert Mabro, director of the Oxford Institute for Energy Studies and a leading Brent expert.

"There are regular squeezes in the Brent market," Mabro said. "In the trading community, people are fed up. This general view that you can do whatever you like in an informal market is okay, as long as you regulate the market a bit. But if it's a free-for-all, you're back to the cowboy age."

A typical Brent squeeze involves a company quietly building a strong position in short-term swaps called contracts for difference, or CFD's, for a differential not reflected in current prices. The company then buys enough cargoes in the dated Brent market to drive the physical crude price higher, which boosts the CFD differential, Mabro said.

The company may lose money on the physical side, but it's more than compensated from profits on its offsetting paper position in the short-term swaps market, Mabro said.

"The whole trick is to collect more money in CFDs than you lose on the physical squeeze," Mabro said. "People seem to do it in turn. It depends on who's smart enough to move in a way that nobody notices until it happens."Source

To deal with this problem, many key oil exporters shifted away from the spot market, and began to use futures prices as the benchmark in formula pricing:

The declining liquidity of the physical base of the reference crude oil and the narrowness of the spot market have caused many oil-exporting and oil-consuming countries to look for an alternative market to derive the price of the reference crude. The alternative was found in the futures market. When formula pricing was first used in the mid-1980s, the WTI and Brent futures contracts were in their infancy. Since then, the futures market has grown to become not only a market that allows producers and refiners to hedge their risks and speculators to take positions, but is also at the heart of the current oil-pricing regime. Thus, instead of using dated Brent as the basis of pricing crude exports to Europe, several major oil-producing countries such as Saudi Arabia, Kuwait and Iran rely on the IPE Brent Weighted Average (BWAVE).¹¹ The shift to the futures market has been justified by a number of factors. Unlike the spot market, the futures market is highly liquid which makes it less vulnerable to distortions. Another reason is that a futures price is determined by actual transactions in the futures exchange and not on the basis of assessed prices by oil reporting agencies. Furthermore, the timely availability of futures prices, which are continuously updated and disseminated to the public, enhances price transparency.

[11] The BWAVE is the weighted average of all futures price quotations that arise for a given contract of the futures exchange (IPE) during a trading day. The weights are the shares of the relevant volume of transactions on that day. Specifically, this change places the futures market, which is a market for financial contracts, at the heart of the current pricing system.Source(pdf)

As you can see, Krugman and Birger are profoundly confused about the way the international oil markets actually function. Futures aren't a paper bet on the direction of prices determined by some independent process. Futures themselves *determine* the price of most physical oil traded today. The futures price (+ or - the differential) literally *is* the price of oil.

-----

Further information on this topic is available in The Oil in the 21st Century: Issues, Challenges and Opportunities, Ch. 3 "Origins and Evolution of the Current International Oil Pricing System" (P. 41-100) and in Petroleum Refining: Separation Processes, Ch. 3 "International Oil Markets" (P. 77-114)

by JD

365. MASSIVE DROP IN U.S. DEMAND IN APRIL

2008-06-30T21:43:00.000-07:00

On Monday (6/30), the EIA reported a gigantic drop in U.S. oil demand. And the figures are for April -- way back in the good ol' days when crude prices ranged between $110-$120.

EIA revises down U.S. April oil demand by 4.2 pct

WASHINGTON, June 30 (Reuters) - U.S. oil demand in April was 863,000 barrels per day less than previously estimated and down 811,000 bpd from a year earlier, putting petroleum consumption at the lowest level for any April month in six years, the Energy Information Administration said on Monday.
The lower oil demand was due to rising fuel prices and a faltering U.S. economy that has cut into petroleum use.
U.S. oil demand in April was revised down 4.2 percent from the EIA's early estimate of 20.631 million bpd to the agency's final demand number of 19.768 million bpd, and was 3.9 percent less from 20.579 million bpd a year earlier.
The final numbers were included in the EIA's monthly petroleum supply report and are always different than the initial estimates in the agency's weekly petroleum report.Source

The size of this drop (down 811,000bpd, year-on-year) is massive. Indeed it's almost enough to wipe out total worldwide growth in oil consumption from 2006 to 2007 (990,000bpd, according to the BP Statistical Review 2008). It is enough to wipe out two years worth of consumption growth from China:

So it strains credulity in the extreme to say Chinese demand is behind the run-up in prices since March. The drop in U.S. consumption in one year (April 2007 to April 2008) was more than twice the rise in Chinese consumption from 2006 to 2007 (325kbd, according to the BP Statistical Review 2008). In other words, the April drop in U.S. consumption wiped out one year's worth of growth from China (325kbpd), Saudi Arabia (149kbpd) and India (168kbpd) combined, and then some.

Furthermore, Chinese demand can't be fingered for price rises in April because Chinese imports were down year-on-year, as I noted earlier:

A decline in China's oil imports in April, the first year-on-year drop in 18 months, also raised questions over demand. China is the world's second-largest oil consumer after the United States. [...] China's April crude oil imports fell by 3.9 percent from a year ago to 3.47 million bpd, and were also down from the record of 4.07 million bpd in March, official Chinese data showed.Source

There's been no serious decline in supply. We're on the same old plateau, and in fact the IEA reports that supply was up considerably in the 1Q 2008:

Put it all together, and the "demand outstripping supply" theory of the feverish price action since March is emanating an extremely fish-like odor. U.S. demand down by a whopping 0.8mbd year-on-year. That's the elephant in the room now.

Update and more detailed info on this topic here.

by JD

364. THE OTHER "PEAK OIL"

2008-06-26T04:24:00.000-07:00

We all know the classic image of peak oil. This graph of U.S. production says it all:

The peak oil community is obsessively focused on images like this. Peak graphs are presented for every country, like a slide show, and after viewing the whole series, you're damn lucky if your eyeballs haven't turned white and coagulated from raw anxiety.

But that's just one side of the story. Today I'd like to show you a different series of peak oil graphs -- the ugly stepsisters who don't seem to get any attention. These are the graphs of peak oil consumption. Figures and images come from EIA country profiles. Take a deep breath, and fasten your seatbelt for a rude awakening to the realities of "peak oil".

Figure 2: Japan Oil Consumption Has Been Declining Since 1996

As you can see, "peak oil" occurred in 1996 in Japan -- 12 years ago -- and was an entirely demand-driven phenomenon.

Figure 3: Israel Oil Consumption Has Been Declining Since 2001

Wooh baby, that'll turn your hair white... Israel "went over the cliff" in 2001, and is now down 16% from it's peak level.

Figure 4: Germany Oil Consumption Has Been Declining Since 1998

The decline of Denmark has an interesting dual-peak structure. It's down 34% from its primary peak in 1980, and 20% from its secondary peak in 1996:

Italy peaked in 1995 and is now down 14%:

Savinar says a 10-15% drop will put your economy in the hospital -- shatter the economy and reduce the population to poverty. Apparently Italy didn't get the memo.

Sweden hit its final peak in 1996:

It's such a shame because these graphs hold the important clues about peak oil. Yet they get almost none of the airplay. The fact that oil production will peak is just a truism -- a statement of basic logic. The fact that a country can reduce it's oil consumption without duress is like a miracle... something to really think about and learn from.

by JD

363. PEAK DEMAND

2008-06-20T17:14:00.000-07:00

Lots of recent signs that we are hitting peak demand (with a salute to our wise and prescient friend, Benny "peak demand" Cole ;-)...

The US Department of Transportation reports that vehicle miles traveled (VMT) has begun its terminal decline:

The FHWA's “Traffic Volume Trends” report, produced monthly since 1942, shows that estimated vehicle miles traveled (VMT) on all U.S. public roads for March 2008 fell 4.3 percent as compared with March 2007 travel. This is the first time estimated March travel on public roads fell since 1979. At 11 billion miles less in March 2008 than in the previous March, this is the sharpest yearly drop for any month in FHWA history.Source

Here's the graph:

As you can see we're having a "Hubbert Peak" in demand.

Meanwhile CERA is reporting peak demand for gasoline:

Gasoline demand in the United States may have reached its peak, as rising prices lead consumers to make long-term decisions that will weaken demand in the years to come, according to a new analysis by Cambridge Energy Research Associates (CERA), an IHS Inc. (NYSE: IHS) company.

The report, Drivers Turn the Corner in the United States, conducted by CERA’s global oil service predicts that U.S. gasoline demand will likely decline in 2008 for the first time in 17 years. If petroleum prices stay at or near their current levels, 2007 could prove to have been the peak year for U.S. gasoline demand.

"Americans are now driving less and demanding greater fuel efficiency from their vehicles when they do drive," said Aaron Brady, CERA director, global oil. "Automakers are responding by accelerating the shift in their model mix. Both short- and long-term signals are all pointing toward decreasing future demand."Source

MasterCard reports a big drop in U.S. gas sales:

During the week leading up to the Memorial Day holiday, the traditional start of vacation season, Americans pumped 5.5 percent less gasoline than a year ago as average prices hit a peak $3.84 a gallon, MasterCard Advisors said in a report.Source

Demand in the UK is sagging:

Gasoline demand in Britain dropped 7 percent below year-ago levels in April, with diesel use down almost 2 percent, according to government figures released on Wednesday.Source

Gasoline demand in Japan has declined for the last two years:

Japan's Ministry of Economy, Trade and Industry reported on Thursday that gasoline demand declined for a second year in 2007 on rising oil prices, urging refiners to export record amounts of fuel.

Sales of gasoline slipped 1.7% to 59.8 million kiloliters in 2007, while exports of all refined oil-products climbed 27% to 28 million kiloliters, exceeding the prior record of 22.3 million kiloliters posted in 1975.Source

And the trend is continuing. The most recent May 13 Oil Market Report from the IEA reports (P. 6) gasoline demand for March 2008 down (year-on-year) by -8% in Germany, -4% in the UK, -14% in France, -10% in Italy, -9% in Spain and -14% in Japan. Similarly, diesel was down -4% in Germany, -6% in France, -4% in Italy, -10% in Spain and -10% in Japan. And those are the figures for March, before oil prices really went vertical.

Anyway, lots of good news. The fear factor of peak oil drops considerably if demand peaks before oil does.

-- by JD

362. MORE SURPLUS OIL PROBLEMS

2008-06-15T04:17:00.000-07:00

Inconsistencies are appearing in the "not enough oil" theory of the recent price rise. We've previously seen that Iran has been accumulating unwanted oil in tankers, as reported by Bloomberg:

June 2 (Bloomberg) -- Iran, OPEC's second-largest oil producer, increased the number of tankers idling in the Persian Gulf to at least 14, indicating it may be storing more crude, ship-tracking data show.

Iran has at least 14 very large crude carriers, or VLCCs, floating near Kharg Island, a loading facility. In April, there were 10, holding at least 20 million barrels of oil, people familiar with the situation said at the time. Shipbrokers also reported that Iran hired three more tankers, which have been near Kharg Island for at least two weeks.Source

Now the surplus crude problem has expanded to Kuwait and Saudi Arabia:

Kuwait and Iran on Wednesday joined Saudi Arabia in slashing the price of their heavy crude exports to the deepest discounts in at least nine years, seeming to support OPEC's view that the world has enough of its supplies.Source

It turns out that we've got a heavy oil glut. The physical oil is being discounted, to make it move.

Saudi oil minister Ali al-Naimi said last month Saudi Arabia had boosted oil output by 300,000 barrels per day and would achieve 9.45 million bpd in June to meet rising demand and to compensate for lower output from other producers.
The kingdom's state oil company Saudi Aramco is due to inform refiners how much crude they can lift in July later on Wednesday or on Thursday, refinery sources say.
But refiners expressed little interest in additional crude supplies, especially if these were of the heavy type.
"We just asked for full term volumes, not for extra volumes," one trader with an Asian refiner told Reuters. "Supply is not tight anyway. Heavy sour crudes are under pressure this month."Source

So it's clearly a distortion to call the current situation an "oil shortage". It would be more accurate to call it a shortage of refining capacity. Why is there a refinery shortage? Well, in the U.S., this will give you a clue:

Refiners faced with rising prices for premium grades of crude oil are rushing to expand their ability to process less expensive, dirtier crudes, but their efforts face concerns about pollution and global warming.

Several expansion projects in the U.S. are being slowed by worries that the processing of heavier crudes produces more air pollutants and greenhouse gases that contribute to climate change. While environmentalists have long been critical of heavier crude, government officials responsible for signing off on expansion projects are echoing that unease and demanding countermeasures to reduce the amount of pollution.Source

Yup, NIMBYs and global warming activists are jacking up the price of oil. "Not enough oil" is just the cover story. LOL.

-- by JD

361. JAPANESE NUCLEAR FIRMS PREP FOR SURGE OF GROWTH

2008-06-12T18:17:00.000-07:00

As expected from Day One of this blog, peak oil continues to drive a strong resurgence of nuclear power.

Toshiba expects 33 reactor orders by 2015

Japan's Toshiba Corporation expects orders for at least 33 nuclear power reactors by 2015, and plans to expand all its nuclear businesses over the period to 2020, according to the company's president.

The predictions were made earlier this month in Strategies for Growth 2008, the company's outline of the business directions planned for all its divisions. In a question and answer session, the company said that 33 units could be a conservative estimate, adding "we believe it is possible that the number of orders might increase." The Toshiba presentation does not say where it expects the orders for 33 units to come from but highlights the US, China, South Africa and the UK as countries with plans for new projects and where it is making sales efforts. The company plans to more than double its current annual sales target for the nuclear division, to ¥1 trillion ($9.6 billion) in 2020. Source

=====

MHI tools up for surge in construction

Mitsubishi Heavy Industries (MHI) has announced a major project to increase capacity at its Kobe shipyard, where it will double capacity for large nuclear power plant components.

Akira Sawa, head of the company's nuclear power division, announced his major goals at a briefing attended by reporters for the Japan Atomic Industry Forum's Atoms in Japan publication.

According to Atoms In Japan, the company will double capacity for forging reactor pressure vessels and internal reactor components with the aim of boosting its share of the global reactor business. It should be able to produce all the major components (reactor vessel, main coolant pumps, steam generators, steam turbines and generators) for two nuclear power units per year. It will be hiring 1000 more employees for its nuclear division, taking the total to around 5000 by 2013.

Already, MHI's Futami plant in Kobe can produce vessels for two-, three- and four-loop pressurized water reactors (PWRs), including a 590 tonne model for the 1538 MWe APWR. After the upgrade the plant would be expected to handle even larger components. At present, the largest reactor in the world is Areva's EPR at 1650 MWe, and in future the largest could be expected to reach 1800 MWe and require a correspondingly larger pressure vessel.

Sawa said his company expects to gain 25-30% of an export market of 130 reactors by 2030. His figure represents a target market that does not include the 12 units forthcoming in Japan, or the 20 and 110 light water reactors to be built in Russia and China respectively by that date. Russian and Chinese planners are preparing domestic facilities for their own needs as well as for export.

In total, MHI is to invest ¥40-50 billion ($380-470 million) in its facilties at Kobe and Takasago. Source

by JD

360. WHEN INDEX SPECULATORS SELL...

2008-06-10T04:52:00.000-07:00

As noted in #357, Michael Masters sparked a whirlwind of debate by pointing out the role of long-only index speculators in pumping commodity prices.

With oil prices as high as they are, this topic is still hot, so let's look at a specific example where index speculators liquidated a large position, and see what effect it had on the market. It occurred in 2006, and I learned about it from this article by Mack Frankfurter:

In addition to the issue of index funds accumulating long positions and thereby imputing an upward bias to commodities, there is another opportunity for market manipulation with respect to the construction and rebalancing of prominent commodity benchmarks such as the Goldman Sachs Commodity Index (GSCI).

As reported by the New York Times on September 30, 2006 Goldman Sachs significantly readjusted in August of that year the GSCI's gasoline weighting. Index products tracking the GSCI, and representing an estimated $60 billion in institutional investor funds, were forced to rebalance their portfolios resulting in an unwinding of positions. Originally, unleaded gasoline made up 8.75 percent of the GSCI as of 6/30/2006 , but this was changed to just 2.3 percent, representing a sell-off of more than $6 billion in futures contracts.

As a result, gasoline fell 82 cent in the wholesale market over a four-week period, an unprecedented move; and crude oil, which in July 2006 traded over $79 per barrel for August delivery—at the time an all-time record—subsequently fell to around $56 by January 2007.

Many at the time argued that these moves were due to fundamentals, but… it should also be noted that the U.S. was in the midst of mid-term elections with Republicans facing a major fight to retain control over both Houses. According to a Gallup poll at the time, 42% of respondents thought that the Bush administration “deliberately manipulated the price of gasoline so that it would decrease before the elections.”

While the notion of a president single-handedly having the power to muscle a global market is highly questionable, the downturn in prices was welcome news for the then ruling party. Subsequently, Goldman Sachs sold its index business to Standard & Poor's including the GSCI commodity index family.

Unsurprisingly, the visibility of the GSCI brought Goldman Sachs unwelcome attention, especially given the coincidence of its former chairman's appointment as Secretary of Treasury, and an unscheduled GSCI rebalancing that forced a dramatic sell-off in the gasoline and crude oil futures market.

I find this extremely interesting. Institutional investors were forced to liquidate their unleaded gasoline futures due to a change in the composition of the GSCI, and gasoline dropped 82 cents in a month.

The New York Times article Frankfurter refers to is online here: Change in Goldman Index Played Role in Gasoline Price Drop.

Goldman Sachs, which runs the largest commodity index, the G.S.C.I., said in early August that it was reducing the index’s weighting in gasoline futures significantly. The announcement did not make big headlines, but it has reverberated through the markets in the weeks since and some other investors who had been betting that gasoline would rise followed suit on their weightings.

“They started unwinding their positions, and those other longs also rushed to the door at the same time,” said Lawrence J. Goldstein, president of the Petroleum Industry Research Foundation.

This information strengthens my view that institutions/individuals investing in commodities through index products should be strictly regulated.

by JD

359. HYBRID SCOOTERS

2008-06-05T07:01:00.000-07:00

Scooter sales are surging according to a new article in the New York Times. Make that another industry getting a big shot in the arm from peak oil:

In the first three months of 2008, scooter sales were up nationwide by 24 percent compared with the same period a year earlier, according to the Motorcycle Industry Council. And that was before gas starting hitting $4 a gallon. A continued rise in fuel prices could accelerate sales further. The increase in gas prices in summer 2005 correlated with a jump in scooters sales of 64.5 percent during the summer months compared with summer 2004. (Sales in the entire motorcycle category went up also, but by only 16 percent.)

This guy is starting to understand "peak oil". Get a scooter and quit worrying about it.

Scooters are winning converts, and not just for the romance of Vespas. Last August, Chris Casal, a 32-year-old elementary school teacher who lives in Brooklyn Heights, bought a scooter for his commute to Williamsburg, in part because of concerns about gasoline prices and parking. Since then, he estimates he has driven his car only 15 times and usually only when it was cold or less than 20 degrees outside. Even though he lives only five miles from work, it is a 45-minute trip by subway or a 12-minute drive.

“Because I know I am going to get a gallon, gallon-and-a half max,” Mr. Casal said, he no longer worried about gas prices. “That’s the first time in my life I’ve ever not cared what the price of gas was.”

Check out this 3-wheeled hybrid scooter from Piaggio:

This machine has an unbelievable fuel efficiency of 170mpg (=71km/liter), and will be available later this year (Source). This particular model is quite expensive, but that's not important. Cheaper competitors will flood the market when demand justifies it. The important point is how incredibly fuel efficient personal transportation can become in response to higher oil prices -- with off-the-shelf technology that is ready to roll, today.

by JD

358. JAPAN: BECOMING A POST CAR SOCIETY

2008-06-02T06:28:00.000-07:00

This is a great trend, and a model for the future. People losing interest in cars... Why do we need oil again?

Favorite quote from the article: "Having a car is so 20th century."

Suda reflects a worrisome trend in Japan; the automobile is losing its
emotional appeal, particularly among the young, who prefer to spend
their money on the latest electronic gadgets. While minicars and
luxury foreign brands are still popular, everything in between is
slipping. Last year sales fell 6.7 percent—7.6 percent if you don't
count the minicar market. There have been larger one-year drops in
other nations: sales in Germany fell 9 percent in 2007 thanks to a tax
hike. But analysts say Japan is unique in that sales have been eroding
steadily over time. Since 1990, yearly new-car sales have fallen from
7.8 million to 5.4 million units in 2007.

Alarmed by this state of decay, the Japan Automobile Manufacturers
Association launched a comprehensive study of the market in 2006. It
found a widening wealth gap, demographic changes—fewer households with
children, a growing urban population—and general lack of interest in
cars led Japanese to hold their vehicles longer, replace their cars
with smaller ones or give up car ownership altogether. "Japan's
automobile society stands at a crossroads," says Ryuichi Kitamura, a
transport expert and professor at Kyoto University. He says he does
not expect the trend to be reversed, as studies show that the younger
Japanese consumers are, the less interested they are in having a car.
JAMA predicts a further sales decline of 1.2 percent in 2008. Some
analysts believe that if the trend continues for much longer, further
consolidation in the automotive sector (already under competitive
pressure) is likely.

Japanese demographics have something to do with the problem. The
country's urban population has grown by nearly 20 percent since 1990,
and most city dwellers use mass transit (the country's system is one
of the best developed in the world) on a daily basis, making it less
essential to own a car. Experts say Europe, where the car market is
also quite mature, may be in for a similar shift. Source

by JD

357. SEN. LIEBERMAN: INDEX SPECULATORS IN THE CROSSHAIRS

2008-05-30T18:32:00.000-07:00

In case you missed it, Sen. Joe Lieberman chaired a hearing last week looking into the role of passive, long-only index investors in pumping oil and other commodity prices. Details on the hearing are here: Financial Speculation in Commodity Markets: Are Institutional Investors and Hedge Funds Contributing to Food and Energy Price Inflation?

I watched the video and learned volumes. Highly recommended for those who want to know how index speculators are inflating commodity prices. If you want the short version with the cites, read Michael Masters' testimony here(pdf). No one disputed Masters' analysis, including the Chief Economist of the CFTC, and the Chairman of the Commodity Markets Council. Masters' authoritative testimony also sparked a broad response in the media and financial blogosphere, and this article is a good start if you want to follow the action.

Today the New York Times DealBook blog posted an update:

But the billions that institutional investors have poured into these index funds managed by Wall Street banks could disappear. Mr. Lieberman is in the “early early” stages of creating a bill that would bar institutional investors in investing in commodities, a person close to the senator told DealBook. The bill would seek to amend the ERISA Act, making investments by institutional investors in the commodities market taxable.

Pension funds like Calpers, the massive California public employees fund, have diverted increasingly more of their capital into the commodity space as other markets have done poorly amid the credit crunch. Calpers invested $450 million in commodities last year, its first foray into that space. In a board meeting in February, the pension fund agreed to invest .05 to 3 percent of its $240 billion fund in commodities by 2010.

If institutional investors, like Calpers, are forced to divest its commodity positions, the market could go into a tailspin, crushing the positions of many of the banks that hold long positions. One of the investment banks’ more profitable businesses these days could be turned on its head.

The bull run in commodities has been influenced by many factors, but Congress believes that Wall Street bears the blame for a large part of it. With gasoline prices on the rise and the election looming, they appear to have full power to not only close the oil casino, but burn it to the ground.

It's very interesting how we've gone, in the space of a few short weeks, from "speculators have no effect" to "legislating against speculators is dangerous, it could crash the market". Commodity profiteer newsfeeds like Resource Investor are also getting very emotional about Lieberman's proposal -- a good sign that Joe is on the right track.

My view: Let's go full-steam-ahead with this legislation. Run the experiment, and see what happens. What's there to lose? The futures markets functioned fine for decades without index investors. Let's clear out the riff-raff, and return the futures markets to the people they were built to serve: bona-fide producers and commercial hedgers.

by JD