The Energy Standard

Kyle Bass on European Debt Restructuring

2011-11-16T09:49:00.000+02:00

The most important point of this video comes between 5:15 and 6:00.

The more important point from the point of energy is this:

There is NO way that oil production can grow at the speed required by the world credit market interest rate payments to be covered by real (non-financial) economic growth.

As Jim Puplava put it: Brent oil barrel price is the new global and automatically rising federal funds rate. It will cut off all economic growth every time it goes above $120-$140 / barrel (in c. 2008 dollars, as you have to keep inflation in mind).

The world economy is toast. There is no way around it.

No amount of extra credit can solve this.

Only debt restructuring (i.e. default) will solve the economic issue.

The limited flow rate of energy guarantees that no other options is available.

And the more this issue is pushed into the future with temporary emergency measures, the bigger the debt that has to be written down will be and the faster the oil flow rate decline will be (it's increasing day by day).

And thus, harder the landing.

Brace yourself for impact in this slow-motion train wreck and try to position yourself to the last cart on the train.

Peak Oil, ERoEI, Maximum Power Principle & Markets

2011-11-10T10:01:00.001+02:00

Excellent 13 minute Q&A with Nate Hagens, who understands the way we use oil, the coming supply crunch and how financial markets work.

For a more detailed discussion of some of the concepts discussed, check the the presentation A Framework for Supply and Demand on a Full Planet (35 mins).

Nate Hagens on Oil, Bond Market, Stocks and Economy on going forward

2011-10-22T14:45:00.002+02:00

Conventional oil peaked in 2005. All liquids from ground are on a +/-5% plateau. Each extra barrel required for economic real growth costs more. This squeezes the real world economy. This is the lesson of net energy return falling.

Solution?

Globally -- long and slow crash, via economic turmoil.

Communally : know your family, your neighbours and the locals. Pull together.

Personally: scale down, get better psychologically, physically, financially and spiritually.

Increase your resilience to shocks and outages.

Stay safe.

Why Economics is Wrong

2011-04-29T22:04:00.000+02:00

An excellent 20 minute talk from William Rees at the Institute of New Economic Thinking conference on how Economics is completely wrong modelling human ecological production.

If you don't understand it, watch it twice. It's really that important.

And if you're an economist and refuse to believe it, pick up some of the following for your reading list.

A Safe Operating Space for Humanity (Nature, 2009)
Towards a Green Economy: Pathways to Sustainable Development (UNEP, 2011)

Oh, why is this on an energy blog? Because economy drives energy usage and energy resources are a crucial part of our ecology. It's all connected. Thinking within the constraints of old academic domains will not lead to one really understanding the big picture.

Wesley Clark : We have a plan to take over Arab and African Oil Countries (since 2001)

2011-04-01T11:13:00.000+02:00

Non-violent civil uprising in Egypt is already failing as the US jackals have taken over along with the Egypt military. This is merely a geostrategic move as Egypt is not important for it's oil reserves (it's a net importer).

However, the same cannot be said of Libya, Lebanon, Syria, Iran, Iraq, Afghanistan and Somalia.

"The Truth is about the Middle-East - had there been no oil there, it would be like Africa. Nobody is threatening to intervene in Africa."

- Wesley Clark (retired general of US Army)

Nothing new here, this was already leaked in 2002, but a good reminder of what the playbook was and is.

Naomi Klein : Gambling with Risk with No Exit Strategy

2011-03-31T15:44:00.000+02:00

Cost-benefit analysis works, until it stops working. After that, it offers no consolation, no idea of risk, no idea of backup, no idea of how to recover.

And as Nassim Taleb has so eloquently put, modern risk analysis is not just wrong, it's stupid.

Fossil Fuels in 338 Seconds

2011-03-23T14:10:00.000+02:00

Do you want a really quick introduction to fossil fuels, energy use, economics, ecological issues and global warming?

Here it is - 200 years of past and guesses about the next 100 years:

Well worth watching.

A Comedic Diversion

2011-03-14T12:33:00.001+02:00

Watch it before it's taken down by the copyright police:

Mar. 11, 2011 Clip - Wage Against The Machine

If it's not up anymore, try looking for the Real Time with Bill Maher show from March 11, 2011 (episode 205).

4 and a half minutes well spent.

Peak Oil Politics - Why Important Decisions Are Not Made

2011-03-12T11:00:00.003+02:00

The following video excerpt from the 2007 Oil shock simulation is a good reminder of why important peak oil related conservation, energy infrastructure, military or energy transition decisions are not made, even though the issues are understood fairly well:

Oil Shockwave documentary segment

In the end, it all boils down to political popularity, policy realism and geo-political military issues.

Keep the oil flowing, at all costs.

Thus, do not expect US to start solving the peak oil issue any time soon - at least not without a crippling crisis first.

Perhaps the second oil price spike will do it. Or the third. Or the fourth...

Oil production Spare Capacity in 1 slide

2011-03-10T20:04:00.000+02:00

Steve Kopits

Since the revolutionary spirit started spreading to Libya, markets have been very nervous about oil.

The official line has been that there's c. 5 million barrels of spare capacity within OPEC, so even if the whole of Libya production went offline, it would not cause a crisis.

And from that the discussion has exploded to all directions mainly from people who do not have an inkling of an idea what the supply/demand issue is.

So, Steve Kopits (Douglas-Westwood consulting) to the rescue. He sums up the situation in this one slide of his recent 'Oil, The Economy, and Policy' presentation:

So, there you have it. Oil shock by end of 2012 or shortly thereafter. Even if Libya and the rest of the Arab nations keep producing with very little hiccups.

John Fullerton : World too reliant on fossil fuels, local productions brings resiliency

2011-03-10T18:49:00.001+02:00

John Fullerton (The Capital Institute), formerly from JP Morgan, now understands that infinite growth is impossible in a finite world. He now talks about resilient (lower efficiency) systems, local production, fossil fuel free local production and avoiding ecological crisis.

Here's Mr. Fullerton talking about these issue in a short 4 minute interview clip courtesy of Institute of New Economic Thinking.

So yes, even brain-washed bankers can get it. They just need to let go of dogma and look at science. The truth prevails in the end, even though it might take a bit of time.

One can watch the rest of the interview pieces on Youtube.

If Middle East goes, so goes the world...

2011-03-07T21:46:00.000+02:00

From Spiegel:

The OPEC spare capacity is officially 4.X Mb/day, but that is unlikely to be true and the crude qualities within OPEC are not all directly interchangeable for the European refiners.

A combination of any two countries from the above map is enough to wipe out the whole spare capacity.

Even if oil is in a parabolic trading move right now and likely to come down for a while, it doesn't meant the the problem will be over.

Until the unrest in ME starts to cool down, the prices will be fluctuating a lot.

Traders market, you have been warned.

MyWorld 2050 - GIGO in action

2011-03-06T17:21:00.001+02:00

The UK Propaganda Department of Energy and Climate change has released their energy policy toy, called MyWorld 2050.

The idea is to let people play around with energy supply, like fossil fuels, nuclear and alternatives, and then match this with the demand coming from industry, housing, heating, transport and travel.

The goal: get to 80% CO2 reductions by 2050.

You can try the model yourself at the MyWorld 2050 web site.

Now, some issues that the model behind the game doesn't lay bare:

There is extremely low probability that oil will flow at 50% of current levels in 2050. There just are not enough resources, drill holes, tankers and manpower.
Not using fossil oil creates a liquid fuel problem, which the model suggests one fix with biofuels. The problem is that the model assumes we can burn the rest of the developing world's (who have all the money, btw) food for fuel. And the model further assumes this will reduce CO2 emissions and be net energy positive. The premises behind that logic are faulty.
Clean coal and gas power are supposed to give a 15 point CO2 cut. Eh, where exactly do we have clean coal? And oh, the North Sea gas is mostly in decline by 2025 (remember the model is originally for UK).
Hydrogen cell powered cars. Sigh, that's like selling second order financial derivatives on a lollipop you have already eaten. Most sane thinkers thought we we past that already.

What the system does underline, is that it is impossible to not to have a liquid fuels problem, unless one goes all out on biofuels overseas in developing nations. What the system doesn't tell is that there is no arable land left to do this, unless we take it from food production or burn down the rainforests.

And all this is done with extremely low demand scenario, where people will be living in 16C temperature homes and travelling very little privately, doing mostly car sharing and public transport.

Good luck selling that scenario to the ignorant masses at large.

The more technically minded can download the 2050 Pathways Excel spreadsheet (Office 2010 format, thank you DECC idiots) that reveals some of the thinking behind the model.

Why The Economist doesn't understand energy

2011-02-27T19:32:00.022+02:00

The following image is from The Economist which argues that the use of energy is being reduced as measured by Energy intensity of the economy (percentage of GDP).

An astute reader of energy physics and economics should understand the obvious failings of the above diagram for any argument about energy intensity of economies:

The graph measures energy use per GDP unit, whilst including all of the financial GDP. However, financial GDP is pure speculative money, consuming very little energy, but also contributing very little to society. Further, using USA as a proxy for most OECD countries, financialization of the economy has been growing steadily for several decades now. It should be cleaned from the GDP to get a more meaningful measure of 'energy use per unit of GDP in the real productive economy'.
The energy consumption is based on figures from BP, which does not account for grey energy imports. Grey energy imports have been rising for all OECD and lately even for developing countries. They can account for up to 25% to 30% of total energy consumption. If not included, the figures can be seriously skewed, especially for developed industrial countries within the OECD.
The correction to GDP figures (PPI 2009 level) has probably been done using CPI figures. We know from energy consumption figures, growth of monetary aggregates and statistical corrections done in the CPI calculations (i.e. hedonistics) that these figures are unreliable: they are likely to understate the inflation, thus overstating economic growth in real terms.

However, the most obvious and glaring misuse of the following graph to argument in favour of energy not being a problem for economic growth is thinking that GDP growth solves energy consumption growth. Make no mistake, absolute energy consumption is and has been going up (the only exception years being those of deep recessions). The energy consumption growth has just been relatively slower than the skewed GDP figures The Economist used above.

After all these minor statistical quibbles, the main problem is not the relative scarcity of energy sources to economic growth, but absolute consumption growth and absolute limits. Anybody with a half an hour's worth of reading in ecological economics should understand this immediately.

If energy consumption per capita as a % of GDP was the only problem, then we could avoid the rolling energy crisis by nationalizing everything and raising hourly wages for everyone by controlling prices. This would show up as increased GDP, near zero inflation and the amount of relative energy consumption to GDP would to go down.

That’s the theory anyway, if one is stupid enough to believe the misleading propaganda from The Economist.

Think for yourself. There is no substitute for it.

Over 100 years of Global Temperatures

2011-02-24T12:15:00.000+02:00

Climate Change Visualization from 1880 to 2010 by NASA

Shell on Energy Transition Predictions

2011-02-20T18:54:00.000+02:00

Four minutes of optimistic scenarios that come with a warning:

Jeremy Bentham (Shell)

"We are entering, what I believe is an era, of volatile transitions and intensified economic cycles."

Oil Industry Insider: Peak Oil 2015-2016, $300USD oil by 2020

2011-02-17T13:07:00.000+02:00

Charles T. Maxwell at Aspo

Charles T. Maxwell, a veteran and a highly respected long-time expert of the oil markets, was recently interviewed for the Barron's Magazine on oil supply. He had this to say on the supply of oil:

"[Oil production] will be a little bumpy in 2015, 2016, 2017 and 2018. But by 2020, the first signs will become very evident that we can't go any higher than that in production."

A bumpy plateau by 2015, basically. As for the decline, he's optimistic about the production not starting to decline until 2020.

And more on oil price:

"Then it goes to $95 in 2012 and $115 in 2013. The following year, 2014, we see the price going to $140 a barrel, followed by $180 in 2015. And then, by 2020, it's at $300, or roughly $225 discounted back to the present."

"By 2020, I'm looking for about $300 a barrel, which is closer to $225 a barrel in today's dollars."

As for the impact on the economy, he's much more optimistic:

"Strangely enough, I don't think that it would bring the economy down. Rather, it is the suddenness of change that does that."

"On a more gradual scale, and giving the effect of inflation its due, we will probably simply walk away from two-tenths or three-tenths or four-tenths of a percentage point of potential gross-domestic-product growth, which we will give up by being caught in this energy vise. But the world economy will advance, and it won't be brought down by this."

It is needless to say that The Energy Standard views Maxwell as a hopeless optimist. The world needs them, but they are rarely right. Here's hoping he's right this time around.

Israel understands Peak Oil

2011-02-14T21:57:00.000+02:00

Mr. Shaul Zemach, Director General, Ministry of National Infrastructures talks about the ramification and mitigation of Peak Oil:

And what does Finland do?

Utter silence...

Prophets of Doom

2011-01-30T14:29:00.000+02:00

History channel presents an interesting one hour documentary about what we may be facing. Including The Oil Drum's excellent Nate Hagens. Missing the first 10 minutes of the document:

Max Keiser on Peak Oil

2011-01-27T12:46:00.002+02:00

No, don't leave this page yet. Although this segment is nominally produced under the name of Max Keiser, the content is actually good with comments from Udall, Hirsch, Kunstler & Schindler (EWG).

Issues covered are: depletion of peak oil, markets, role of energy in economy, EVs & politics. 12 minutes. Well worth it.

Favourite takeaway: "There will be no quick fixes."

Peak Oil & Climate Change

2011-01-24T09:08:00.000+02:00

The Nation magazine recorded a series of interviews with various experts on the subjects of Peak Oil and Climate Change. Below is a teaser including such names as Richard Heinberg ("Peak Everything"), Bill McKibben ("The End of Nature"), Dmitry Orlov ("Reinventing Collapse") and Noam Chomsky, just to a name a few:

Go to the VideoNation youtube channel to listen to the full interviews being released now and in February 2011.

II Interlude

2010-12-21T08:26:00.002+02:00

Happy Holidays!

Hans Rosling - Global Health in 4 mins

2010-12-04T23:52:00.000+02:00

Hans Rosling is our Hero:

However, it's a pity he doesn't understand the correlation AND causation between energy surplus and life expectancy.

Energy surplus means prosperity, economic growth, welfare society, less manual labour, hygiene, scientific breakthroughs, safety nets and system shock buffers.

When the energy goes into decline, much of that will go into reverse.

Most Important Lecture on Growth & Sustainability

2010-11-24T18:48:00.005+02:00

The following lecture video of Geoffrey West (Santa Fe Institute) is crucial for understanding the process, laws and limits of socio-economic growth like human societies.

In case the embedded video does not work, you can watch the video off Yahoo Labs page at : http://labs.yahoo.com/node/274 .

In the words of Geoffrey West, "This system is destined to collapse."

Some math is included in the presentation, but not crucial for understanding the argument.

A Musical Interlude

2010-11-21T22:13:00.001+02:00

Why Material Scarcity is an Issue for Energy scarcity

2010-11-07T21:03:00.000+02:00

Dr André Diederen (TNO) has researched the issue of minerals scarcity and it's relevance to energy security and geopolitical stability.

Below you will find a three part presentation my Dr Diederen on the issue titled

Materials Scarcity, Managed Austerity and the Elements of Hope

Unfortunately the audio is of quite bad quality, so here's a taster of the main points in the presentation.

Most inside the earth is not producedable. Flow matters. Not stocks

Resources are not Economic reserves. Only economic reserved matter.

Metals scarcity => Wind Energy scarcity.

Scarcity for Other Alternative Energy Production Systems.

Solution: Simplify (less exotic materials) and compromise performance

Summary: Performance Maximization is Dead. Frugal Optimization is Back.

In short, there is a systemically positive feedback loop with very negative consequences between the energy and materials scarcities.

If you are a materials-wisened inventor with understanding of basic and rare earth metals, you better get started if you haven't already. Time to optimize & save.

Talking sense about Finance Bubbles, Energy, Oil & Transition

2010-11-01T13:07:00.005+02:00

Nicole Foss of the excellent Automatic Earth blog gave a presentation recently about a Century of Challenges.

It's only available as an audio stream/mp3 file on the net, but very well worth listening to, if one is trying to wrap his/her brain around the double-headed monster that is Energy Transition & Financial Crisis.

Download the mp3 file of the presentation : Making Sense of the Financial Crisis in the Era of Peak Oil (77 MB)

Here's a short preview of five minutes. To get the slides, one can also buy a right to view the whole video at the Automatic Earth / Post Peak Education site.

Oh yes, file this under 'analytical & doomish crystal-ball gazing'.

Can Oil Production Meet Rising Global Demand?

2010-10-29T08:50:00.000+02:00

You've heard it from the geologists, from the oil engineers and the people studying energy systems.

Now, it's time to hear it from (for) the policy wonks.

Can Oil Production Meet Rising Global Demand?

The video, all one and a half hours of it, contains multiple testimonies on Capitol Hill about Peak Oil and the coming oil crunch.

Will this have an impact?

Hardly, as the Department of Energy and Military Peak Oil Reports show, people who need to know already know. People who don't know, this is too difficult a subject emotionally for them to grasp.

Also, if you view the audience in the Q&A session there are no congresspeople and certainly no senators.

If you only view one snippet, start at 00:45:00 with Bob Hirsch. Runs for about 10 minutes. Well worth the time as a good summary, if you are new to the subject.

Question Economics Growth

2010-10-24T19:48:00.000+02:00

From the everl-abundant and constantly-giving source that is TED:

Tim Jackson 'Economic Reality Check'

"So we're caught in a kind of trap. It's a dilemma, a dilemma of growth. We can't live with it; we can't live without it. Trash the system or crash the planet. It's a tough choice."

Chavez understands Peak Oil

2010-10-04T16:18:00.000+02:00

Whether you like him or not, Hugo Chavez is still in control of Venezueala, even after the latest election. Moreso, he appears to really understand Peak Oil, which is one of the reasons he appears to be hanging onto Venezuelan oil.

Real News reports:

The mistake Chavez did? Buying all-in to the Peak oil in 2008 and thinking that no other reason except constant demand fall could factor for the high prices.

Well, come 2008, financial crisis, reduction of the speculative and hedging positions in the oil markets as well as abrupt reduction in demand, and the price plunged.

Lesson? Even if you discount the future, don't discount it too deeply too soon.

The Bet that Ruined the World: Simon vs. Erlich

2010-09-28T17:53:00.000+03:00

"World Energy Systems are a Mess"

2010-09-28T17:52:00.000+03:00

New book on Peak Oil by Hirsc, Bezdek & Wendling out in Oct, 2010

Robert L. Hirsch, who authored one of the first studies into the mitigation of the effects of Peak Oil, has written a new book on what the decline of oil production means and what will be the likely high level effects of that.

While many books on Peak oil have concentrated on what it is and why it is happening, only a few have tried to analytically tackle the high level view of what are the possible consequences. Some take the effects for granted, while others linger in doom-and-gloom scenarios of total civilization collapse.

Thus, the new book 'World Energy Mess' is a welcome overview for those who have not keenly followed the depleting liquid fuel production issue for the past years.

What is the summary of the authors then? Shortly:

Within next 2-5 years world liquid fuels production will begin to decline most likely
There are no quick fixes to remedy this downfall in production
Societal adjustments will be dramatic, sweeping and pragmatic rather than just or optimal

For the technically minded, they forecast the start of decline (end of plateau) by 2012-2015, with an aggregate overall decline rate of 2-4% p.a., worldwide GDP reduction for next 10years after the peak (perhaps in the order of -20% to -30% combined). His quick list for preparation are listed in his ASPO-USA interview: interest bearing annuities, gold, close to markets/mass transit, fuel efficient transport. Sounds very reasonable.

In an interview with a French journalist, Mr Hirsch also states that all of Bush and Obama administration are aware of peak oil, but that Department of Energy has been actively discouraged not to research or to talk about the issue any more.

Coming Soon to a Theater Near You

2010-09-28T17:50:00.000+03:00

To understand the Finance Crisis of 2007-20XX, you need to see this movie.

Easy oil over - time for prices to go up

2010-09-19T15:26:00.000+03:00

"With the age of easy oil over, and the consequent higher costs of new supply, the challenges of matching supply and demand are not likely to decrease." - Andrew Gould, Schlumberg

Andrew Gould, CEO at Schlumberg

One of the biggest oil service companies in the world, Schlumberg, is forecasting good business for it's own operations in the coming years.

Why?

As explorations and reserves are dwindling down, the oil supply has to be produce from an ever increasing number of wells from ever increasingly difficult places like deep-water wells.

Most big international oil companies do not have the equipment and expertise on this and rely on companies like Schlumberg to actually produce the oil out of the ground. The same is also true increasingly for the national oil companies, that have to turn more and more towards international oil service operators in search of skilled manpower.

All this is good if you want to invest in oil service sector. However, Schlumberg's oil service CEO also reminds us that the oil price has to go higher for the industry to manage the costs of finding and producing the oil that the world requires.

Yes, it is possible that Mr Gould is talking his own book, but he also has one of the most realistic views onto what is actually needed to produce the oil.

Bending the Curves - Johan Rockström

2010-09-12T15:03:00.000+03:00

Johan Rockström (Stockholm Resilience Centre) @ TED

What are the planetary boundaries?

What are the pressures on the planet earth?

How much are we consuming resources?

How much time do we have to change?

18mins.

Doom Porn #2 - Collapse by Michael C. Ruppert

2010-09-05T14:13:00.003+02:00

"Think for yourself"

The Energy Standard doesn't do regular doomish scenarios and gloom-doom-mongering, but doom-porn has it's uses. It forces us to think the unthinkable.

So, with that said, here's a link to Michael C. Ruppert interview movie by Chris Smith:

Disclose.tv - collapse an interview with michael ruppert 1of 6 Video

Click to follow to the site for the other pieces. And yes, consider buying, renting or loaning the movie and shaking up your friends and colleagues. It's great for stimulating conversation.

World oil peak / plateau delayed to 2020-2025?

2010-09-02T14:11:00.000+02:00

What has been the effect of the financial crises and the consequent worldwide recession on world oil peak timing? The reasoning is that as the oil consumption has been marginally reduced due to worldwide recession and slow/fearful recovery, the amount of reserves saved has been considerable.

This saving of reserves and potential consumption capacity may be partially offset in time by the fact that a lot of new oil production projects have been postponed due to lack of funding and lousy economic prospects (i.e. lower price of oil and higher uncertainty).

So what is the overall effect of reduced consumption and postponed production?

There has been no thorough bottom-up studies of this, but in a recent interview (part 1, part 2) oil expert Michael R. Smith from Datamonitor (previously Energyfiles Ltd.) gave his guesstimate of things developing as we go forward:

"I feel the peak/plateau period is much delayed because of the recession. Currently I am looking at around 2020 - perhaps as late as 2025. But of course it is dependent on what happens to the global economy (and the environment) between now and then. When I first started forecasting in the late 1990s, I had a production plateau beginning around 2016. Over time, supplies got tighter and tighter and oil prices started to rise, and the plateau moved nearer to around 2012. Now it has moved out to 2020, showing how uncertain this modeling can be because so many technological, financial, political and social variables are at work. The fluctuation points to volatility of course which is a signal of tight energy supply. If there is a new surge in economic growth and China and India continue to grow and mop up oil supplies, then it will move back to 2016 very quickly." - Michael R. Smith of Energyfiles Ltd / Datamonitor, in an interview with ASPO USA, 8/2010 [emphasis added]

So there you have it. If we grow, the peak moves towards us quickly as demand grows.

If the world muddles along slowly, the peak could take another 10 years or more, but not a lot of new capacity would come forward and if oil prices stay relatively stable, neither would alternatives.

Also, the faster we ramp up the production/consumption, the faster the decline is likely to be.

So, fast evolving crisis in c. 2016 or slowly evolving adjustment in 2020+?

Certainly the latter, but everybody wants the economy to grow faster.

And if it does, another price crunch is just around the corner.

What is 21st century enlightenment (video)

2010-08-29T09:17:00.001+02:00

Some positive thoughts for darkening times:

"Never doubt that a small group of thoughtful,
committed citizens can change the world.
Indeed, it is the only thing that ever has"
- Margaret Mead

Food = Energy

2010-08-26T12:18:00.000+02:00

A Blast from the Blast - "Enough Energy to Melt Glaciers"

2010-08-16T12:04:00.000+02:00

An Ad from LIFE magazine in 1962 (courtesy of Ms. Marx)

Summer reading

2010-07-28T16:00:00.000+03:00

"As an Anglo European white guy from a very long line of white guys, I want to thank all the brown, black, yellow and red people for a marvelous three-century joy ride. During the past 300 years of the industrial age, as Europeans, and later as Americans, we have managed to consume infinitely more than we ever produced, thanks to colonialism, crooked deals with despotic potentates and good old gunboats and grapeshot.

Yes, we have lived, and still live, extravagant lifestyles far above the rest of you. And so, my sincere thanks to all of you folks around the world working in sweatshops, or living on two bucks a day, even though you sit on vast oil deposits."

- Joe Bageant, "Waltzing at the Doomsday Ball"

Lloyd's insurance warns on Peak Oil

2010-07-14T11:15:00.001+03:00

And so the chorus grows:

Lloyd's adds its voice to 'peak oil' warnings

"One of the City's most respected institutions has warned of "catastrophic consequences" for businesses that fail to prepare for a world of increasing oil scarcity and a lower carbon economy."

That's from the Guardian (UK).

The actual report released by Lloyd's of London in co-operation with Chatham house has more interesting snippets inside it.

Businesses which prepare for Peak Oil transition will prosper - the rest will go down
Low cost [liquid] fuels are gone
Asia is now part of the global energy security mix
Global oil supply crunch and price spike coming
Energy infrastructure is vulnerable
Just-in-time production/warehousing will have to adjust
Big business opportunities in transition

This is the "easy oil is gone, but we will transition through a rough patch" type Sunday matinee scenario for the whole family. All the really disruptive parts are left out or between the lines.

Yet, some of the graphs are quite telling:

So much for that Middle East spare capacity...

$200USD barrel of oil by 2016, anyone?

Peak Oil risks + Financial risks + Climate Change risks = ?##%&&!!

So, finally the insurance market is ready to start taking into account the consequences of peak oil, even if the scenarios are quite cautious - almost optimistic.

Seeing the Future via advertising

2010-05-30T22:31:00.000+03:00

A BP advertisement from 1999.

What does collapse of sovereign debt do to Oil prices?

2010-05-26T12:23:00.000+03:00

Financial Historian, Niall Ferguson, talks about collapse of empires and fiscal crises:

And there's also a set of slides to go with the lecture:

FiscalCrises&ImperialCollapsesferguson201005

Now, considering that energy and commodities in general have become one of the biggest financial plays in the business, how do sovereign debt defaults alter this picture?

What happens in the investment world, when:

- countries can no longer grow the way they used to (i.e. consume less oil)
- more money escapes sovereign debt instruments and is looking for good profits (oil derivatives)

No easy answers here, but it does appear as a reasonable assumption that as markets try to discount the coming wave of defaults, more money will be flooding into commodity derivatives - at least as long as the music in the markets keeps playing.

And that possible mega-spike in commodity prices will be the final straw that breaks the back of the sovereign debt camel.

But before there, we still have this one extra round of deflation fighting to be dealt with. Hence, oil prices plummeting with almost everything else, except US government debt.

Once that is dealt with - with more printing - up we go.

Crack up Boom, anyone?

A Musical Interlude

2010-05-09T12:47:00.000+03:00

We interrupt the regular transmission with a musical interlude.

Don't take Max Keiser too seriously though.

Anne Korin on Strategic Role of Oil in the World

2010-04-30T14:34:00.000+03:00

This is a must view for anybody interested in Energy Security related policy wonkiness:

Click the image to go to the web page. Embedding doesn't work.

Anne's part starts at minutes 6:30. Feel free to jump straight to that and skip the other talking heads.

Hedging Peak Oil

2010-04-16T10:00:00.000+02:00

What does BlackRock - the world's largest hedge fund think of peak oil?

This one picked from their 2010 investment presentation:

Hey, at least they have two different scenarios and you get more than 4 years to prepare. It's unfortunate that they take the other fossil flow rates from the IEA data as is. They are surely to be just as wrong as the oil rates have been.

US military: massive oil shortages by 2015

2010-04-13T16:03:00.001+02:00

This is starting to sound like a broken record already, but now it's the turn of US military Joint Forces of Command who have prepared a study for military leaders to warn about coming oil shortage:

By 2012 oil production surplus capacity could disappear
By 2015 shortfall of oil could reach 10 million barrels per day
This would slow down economic recovery
... which in turn would exacerbate geopolitical tensions
... which could turn into resource grab wars

So much for biofuels replacing the shortfall, eh?

There is a further gem in the reporting of the study by Guardian:

"US military says its views cannot be taken as US government policy but admits they are meant to provide the Joint Forces with 'an intellectual foundation upon which we will construct the concept to guide out future force developments.'" - Guardian

That is, "please don't take this seriously, but be prepared for it to be the official stance any time now". Just so that you know.

US Dept of Energy : Oil Crunch 2011-2015

2010-04-01T09:19:00.000+02:00

This is starting to look like a coordinated news campaign or a real wake-up:

"A chance exists that we may experience a decline of world liquid fuels production between 2011 and 2015 if the investment is not there"

- Le Monde on interview of Glen Sweetnam, the oil market expert of US Energy administration

The situation is simply the following:

Many major oil producing regions are heading to a temporal investment related production peak or final oil flow peak by 2015

New discoveries and new producing fields are not there to offset the decline

The major additions from unconventional oils and biofuels (esp. US ethanol) are in serious doubt

So called 'above the ground factors' (i.e. politics, pricing, market issues) are making the flow of oil even harder to predict

So everything written here and elsewhere for the past 5+ years is coming to pass.

Except now it is becoming official. Currently it is confined to being mere political 'scare talk', but when it becomes fully priced in the markets, you can consider $80/barrel oil extremely cheap. And by then, it'll be way too late.

Petrobras - Global Oil Peak (incl. biofuels) 2010

2010-03-25T10:00:00.001+02:00

Ah, those magnificent Brazilian sub-salt oil finds that heralded the end of peak oil. Never mind the fact that they would at best postpone the global oil peak roughly 90 days or so.

Well, now the Brazilian oil company Petrobras' CEO, Lucio Pementel, is throwing more fuel to the fire by saying the world oil production will peak this year (via TheOilDrum).

Due to reduced demand from the Great Financial Crisis v1.0 (v. 2.0 coming soon to an economy near you), the supply-demand crunch should not hit us until 2013 or 2014 in their projects.

So again, that pesky 4 years of extra breathing room is there. At best. If we are lucky.

... because two economists have calculated that the demand has not peaked and that demand projections by the big three (i.e. IEA, EIA and OPEC) are underestimated by roughly a third.

Oops!

... and the news just keep on coming in : 'Peak Oil is here'

2010-03-23T15:30:00.001+02:00

University of Oxford researchers from the Smith School are next in line in their 'The status of conventional world oil reserves — Hype or cause for concern?' in Energy Policy.

In summary, they state:

conventional oil is peaking
biofuels cannot fill the gap - not enough land for food and biofuel production
unconventional oil is way too CO2 intensive - need an alternative
not enough investments into alternative liquid fuels

In a related interview the founding director of Smith School, Sir David King, warns (again) about shortages and oil price spikes in coming years.

The question is not any longer whether the cat is out of the bag, but for how long can the mainstream politicians control the information and keep the masses calm.

Never mind, keep the music playing! Economy is recovering, unemployment is decreasing, house prices are bouncing, car sales are booming and oil consumption is....

Uh-oh, guys - no need to worry, right? Right?!

2010-03-22T21:04:00.002+02:00

First, FEASTA releases a report titled 'Tipping Point: Near-Term Implications of a Peak in Global Oil Production' earlier this month. It basically states:

Peak Oil will reduce economic growth
Our money system is based on credit
Reduced economic growth cannot service the debt load
Globalized Just-on-Time supply chains are highly vulnerable to supply shocks
Global trade rests on cheap and uninterrupted oil supply
Our IT infra is dependent on constant resupply - interruptions are bad
Food system is fossil fuel dependent throughout
Initial Peak Oil collapse will start by money starting to chase real goods
There is at least 16 times as much funny money as there is goods or services in the world
Things fall apart; the center cannot hold

In short. We are fukked.

But not to worry, politicians to the rescue!

UK Energy minister, Lord Hunt himself, is meeting up with industrialists in London to quell fears about oil supply disruptions.

Thank god for the smart politicians and their tremendous foresight! Phew! All is saved. God save the Queen.

The countdown has begun...

Jeremy Rifkin gets peak oil (per capita) & peak globalization

2010-03-12T15:18:00.000+02:00

Jeremy Rifkin, who wrote a was at Google for the Authors@google talks to talk about his new book 'Empathic Civilization'.

Jeremy Rifkin: The Empathic Civilization (50 mins)

"The entire economic engine of the industrial revolution turned off at 147 USD a barrel.

Our fossil fuel energies are sunsetting.

The entire infrastructure of this civilization is embedded in the carbon deposits of the Jurassic age. Our agricultural food is grown in petrochemical fertilizers and pesticides. Almost all of our pharmaceutical products are still fossil-fuel based. Most of our clothes... The entire construction infrastructure of civilization is fossil-fuel-based. Our power, transport, our heat, our light, our logistics, our supply chain. What we are seeing is the sun-setting of these energies and the life support of the infrastructure built from them.

That's what we haven't yet come to grips with." - Jeremy Rifkin

Highly recommended.

Kuwait Researchers - Conventional Oil Peak 2014

2010-03-11T13:43:00.000+02:00

A new paper titled 'Forecasting World Crude Oil Production Using Multicyclic Hubbert Model' in the journal Energy & Fuels by Ibrahim Sami Nashawi, Adel Malallah and Mohammed Al-Bisharah of Kuwait University and Kuwait Oil company shows a new analysis of World oil peak production for conventional oil. Their estimate for peak of conventional oil is 2014. Their implied world production decline rate is somewhere in the vicinity of 2.6% p.a.

World Oil production peak and cumulative estimates

Conventional is important, as it accounts for roughly 80% of the world's oil production. No known alternative, whether unconventional, biofuels or natural gas liquids can fill the gap left behind by conventional oil depletion.

Four years to peak is also significant, as we know from previous studies that a proper precautionary crash course mitigation program for peak oil would take roughly 20 years. That is, 20 years before the peak, which is now forecast to be within four years by the Kuwaiti researchers.

"Forecasting is not accomplished by consulting a crystal ball or a mystic of some sort, but by appraising the past, inspecting present conditions, and projecting these into the future based on the best available information."

Their decline rate, while optimistic by historical accounts, is a sigh of semi-relief. If true, it'd mean a much less of a downslope of production loss than imagined by many other authors. This would give the world more time to adjust in an ordered manner. However, based on the decline rates of real fields in the world, driven by the best technology, their estimate of seems fairly optimistic. If the true decline rate is three times as high as it seems likely, it remains very unlikely that any society, except the oil exporting nations within yet-to-peak faction of OPEC have any time to structurally adjust to the change.

Why is this information still not on the front page of every newspaper on earth? Because it is bad news, it's abstract, it can always be denied due to commercial/geo-political reasons, and people just do not understand the ramifications of oil peak.

For people writing about oil depletion finding supportive research can always feel rather schizophrenic. One one hand it is easy to feel vindicated about years of work of trying to get others to understand. On the other hand it is evident that people still do not get it and would rather just stick their head in the sand. This implies that on the average we all deserve what's coming to us.

Yet, four years is a long time. One can still do a lot of things personally in that time, even though it is very unlikely to change the big picture for all of us. It can also whizz by in an instant, depending on the choices one makes.

If you knew for sure that you had roughly four years before the slow decay really starts to kick in and turn a lot of good things into mush, then the only relevant question remaining is this:

What would you do if you had 4 years to prepare?

Dennis Meadow's on Growth, Collapse and Peak Oil

2010-03-04T11:06:00.000+02:00

8:30 - good for a cup of tea and some brain teasing

"How can Societies expect [growth] when we face [oil decline]... and what policies do we have in order to be peaceful and equitable... It's possible if we prepare, but if we deny the problem then we will never manage.

- Dennis Meadows

Bill Gates & Energy - Less than Half the Real Story

2010-02-18T21:52:00.003+02:00

This should be a last wake up call to even those who don't get the fact that energy will be our multi-decade challenge - peak oil or no peak oil. We need energy miracles to combat the challenges of population growth, poverty reduction, CO2 emissions and dirty energy:

He also reminds us that the combined total battery capacity of the whole world (including your ipods and cell phones + those batteries inside all Priuses) would hold:

10 minutes. Even if we'd get an order of 10 times improvement in batteries (100 minutes) and replaced them all, it still isn't enough. We need an order of 100-200 preferably. That's a tall order, ask any battery researchers.

Then Mr Gates moves onto nuclear power - not the usual type reactors, but what he calls a travelling wave reactor.

Nothing too ground-breaking about it - it's a variation of the old breeder ideas: burn all the fuel, not just the first 1% of it. We should really have had these 60 years ago, but better late than never. It's mostly an engineering challenge to get it working, no fundamental physics issues involved.

He also breaks down the population growth, economic growth (service demand), energy efficiency (energy/service unit) and greenhouse gas emission reduction efficiency (emissions/energy unit) into a useful simple high level equation:

Watch the whole video to get a better idea.

What Gates did not mention, and I'm sure he gets, but is too tough cookie to throw at the over-optimistic TED crowd is this.

Electricity counts for c. 14% of total world energy demand. The rest is pretty much all fossil fuels and wood burning.

Of that 86% of rest, almost third is liquid fuels, which is what the world runs on. The world runs on trade. The trade runs on wheels, ships, trains and planes. And they almost exclusively run on oil.

Now, the real equation that Gates should be looking at is this:

Total Energy utility = EROEI x Scaling Factor x 1/Price x 1/Infra x Emissions/Joule x ROI/time x availability/geography x Liquid Fuel Replace Factor x 1/Ecosystem depletion

Whatever energy systems we build, it needs to give out more energy than what it consumers - and do it rapidly. Unlike most nuclear plants that start returning net energy after 10+ years (starting from construction).

It also needs to be able to be scaled to a Exajoule scale. Biofuels, tar sands need not apply. It also cannot be a flux or a flow, because there just isn't enough storage capacity.

It needs to be relatively cheap to invest, require very little new infrastructure to build and emit very little emissions per joule generated over total lifecycle (including all the new infra, investments, etc).

Then it needs to generate economic payback rapidly, much more than new oil fields, or tar sands, or wind. It needs to beat all those, to take over the minds of energy investors. Remember, investors do not care if the investment destroys the environment or if it's an EROI loser - all they care is about Return On Investments. So any newcomer must beat oldtimers on that equation as well.

On top of this, it needs to be widely and generally available all over the world: in rich countries and in poor countries - south and north - east and west. Otherwise, esp. if it's fuel based - it'll just be the new spice to replace the old spice and wars will be fought over it. Wars are mostly net energy losers, huge greenhouse gas emitters and certainly do not reduce overall poverty.

Then last, but not least, it needs to be able to replace liquid fuels - without speeding up the ecosystem depletion and reducing the carrying capacity. Now, that is a really tough challenge. In this test, all current biofuels in production fail and so do unconventionals. Electricity is not liquid. The infrastructure change needs are huge.

Any way one looks at this equation, the challenge is not easy. And Bill's travelling reactors don't solve even 1/4th of the equation.

Yet, all engineering challenges are hard initially - and very systemic - sometimes wicked. Regardless of these, they do get solved, even if only in part.

Sometimes in part is better than nothing. The ideas presented in the video are certainly more worthwhile than building old dumb-style reactors.

Here's hoping the equation (or it's variation) gets solved and in time - as the challenge on the other side is reduction and potential powerdown. And that, would be a real challenge for poverty reduction and the current population levels.

WSJ wakes up - how long till the rest catch up?

2010-02-12T18:51:00.000+02:00

"Get ready for a new global "crunch"--the rapid depletion of oil resources. Government and industry need to act now". - Wall Street Journal, 11.02.2010

Many people must have choked on their frapuccino yesterday, checking in dismay whether they were really reading Wall Street Journal or not.

Yes, they were.

Richard 'Virgin' Branson is also publicly voicing his opinion on the same issue: oil crunch in the next 5 years. Of course, Branson avoids the Peak issue, he merely talks about the coming supply/demand crunch. IF the economy recovers by then.

Now, it could all be a cynical ploy to pump more money into energy sector, alternatives, oil sands, nuclear and what not.

After all, business people are eager to ride on a bandwagon if there's money in it.

And this it how it should be: accepting the risks, noting that something must be done, rolling up the sleeves and doing something.

Yes, it is highly possible that whatever that something done eventually ends up to be - that it will not be enough.

But anything is better than nothing.

Wild guess, how many years till the reality of the scale, enormousness of IEA's investment requirements forecasts and basic understanding of exponential decline rates sinks in?

Give it two years, max. Unless there's a W second dip in the global economy, in which everything else becomes a secondary sideshow and is easily forgotten.

Here's hoping for the best and fearing for the worst.

The Real Energy Outlook

2010-02-10T15:19:00.003+02:00

IEA and EIA - perhaps along with BP - may get the most media exposure for their energy outlooks, but one company dares to show some of the more inconvenient estimates in it's outlook. That company is ExxonMobil. It goes without saying that they have a vested interest in things happening as they lay it out, so one is advised to approach their Outlook for Energy - A View to 2030 with caution.

With that said, here's a short sampling of their scenarios with some comments.

So much for that hybrid & plug-in electric car revolution...

Commercial trucking taking the biggest chunk of oil demand growth

Renewables growing the fastest, but still being dwarfed by the fossils...

Fossils dominating even in electricity generation

Fairly optimistic assumption on efficiency growth...

Yet not overly optimistic on CO2 emission cuts.

Of course, the whole point of these scenarios is to make us think and also reflect our own assumptions of the world and energy. The backing of all this in the outlook is : "Don't worry, there's plenty of oil, gas and coal - where it all came from" as well as "we may not stop greenhouse gas emissions, but at least we'll be ever so more efficient in our economic growth".

Remove just one piece in this puzzle - constant growth of supply flow of oil - and the whole assumption falls apart.

It'll be an interesting next 20 years, that's for sure.

What would Sarah Palin write on her hand?

2010-02-08T15:07:00.000+02:00

Click the image to find out.

Jeff Rubin on Next 10 Years of Oil

2010-01-18T09:43:00.004+02:00

"Prediction is difficult. Especially about the future."
- Niels Bohr

With that quote, here's a prediction from Jeff Rubin, former chief economist at Canadian CIBC World Markets, who did his own study and understood peak oil. He also wrote a book, 'Why Your World is About to Get a Whole Lot Smaller: Oil and the End of Globalization' which is recommended for business types, who get bored by too much numbers or complex scientific analysis.

Publish Post

Toyota - New Concepts & Peak Oil Admittance

2010-01-17T22:12:00.004+02:00

@ the tradeshow of a dying industry, Detroit Auto Show, Toyota USA launched new car concepts, including this:

Toyota FT-CH concept car

It's small (shorter than Yaris), efficient (more than Prius), meant for the young growing population and cheaper (emerging Asia, here we come).

At the same time, they gave this press release:

"Within the next 10 to 20 years, we will not only reach peak oil we will enter a period where demand for all liquid fuels will exceed supply."
- Jim Lents, Toyota Motor Sales (USA)

Well, well, what do you know.

Who would you you trust to tell you about Peak oil?

An oil company who's incentive is to lie about it as long as possible, so you won't start transferring to alternatives.

Or a car company, who knows that the first to reach alternative power sources, will reap potentially big benefits.

They are both biased, so take your pick.

However, Toyota didn't tell where all the energy for their battery electric and fuel cell hybrids would come from.

We can venture a guess with a high likelihood of being correct : C O A L.

Get ready for it, because that's what we are going to get. All other sources (wind, solar, natural gas, hydrates, unconventionals) are just too expensive, too slow to build, don't scale, in scarce supply or are geographically not as distributed.

IEA - Oil peaks by 2020 if no mega-discoveries

2009-12-11T13:27:00.008+02:00

So, here it is then - the next step in slowly admitting to Peak Oil by the IEA. This time via the Economist.

“The output of conventional oil will peak in 2020 if oil demand grows on a business-as-usual basis.”

- Fatih Birol, IEA chief economist

So, we have gotten from the "No peak ever" to "Plateau by 2050" to "Plateau by 2030" to "Conventional oil peak by 2020".

The question is, will it stop there, or is the forecasting trend going to continue to "Conventional Peak by 2015"?

Of course, they are still playing by the non-conventional + biofuels playbook, as if those are going to be able to be scaled to fill the shortfall in conventional oil. That remains doubtful.

However, recently Jeremy Gilbert (ex-chief petroleum engineer at BP) did suggest that there might be some more oomph left in the enhance oil recovery. Hence, even though demand is likely to grow and there are no new discoveries, the world could squeeze more out of the remaining reserves.

The idea is something like this graph, posted by Shox @ TOD:

This however requires that the service companies and national oil companies get enough of profit and future incentive to invest in new EOR technologies and make the required breakthroughs. The physics as well as the economics however, are against them. One thing is for sure, it is not going to be easy, even if it was to succeed.

The downside (there is always a downside)? With new and improved EOR techniques the cliff-dive after the plateau would be likely to be even more rapid, more like falling off a straight cliff than a mere 6-8% yearly decline.

That's the nature of the underlying geological constraints. No amount of money can fool that. Energy could, but it would be stupid to waste several barrels of oil worth of energy to get out each remaining one barrel of oil.

Some assorted Oil Graphs

2009-11-25T15:27:00.000+02:00

What happens if we have to use too much of our money to buy oil?

What happens to oil decline rate if peak comes later?

Why does the price of oil keep going up?

Where is the expected oil demand growth going to come from?

What happens to oil price as oil production spare capacity shrinks?

What happens to oil demand in the greatest recession?

Sometimes a picture - even not so good one - is worth a thousand words. So, let's try some:

Acknowledging and Estimating Peak Oil

2009-11-23T13:51:00.004+02:00

Two videos from Aspo-Usa about peak oil, by experienced oil geologists.

First, Acknowledging the Reality of Peak Oil. Are we coming around to it? If not, why?

"Peak Oil is happening as we speak."

Four petroleum geologists discuss how we cannot meet demand in the coming years with current oil field projects coming on-line. Peak Oil Reality - Production and Depletion.

"If you don't talk about them, you will never fix the situation."

An Economic Diversion - A Keynes-Minskyan model of Economic Growth

2009-11-12T10:44:00.000+02:00

Steve Keen's excellent Debtwatch blog recently features a video broadcast of his recent lecture about "Debt and Economy - How do we Pay for it all?".

If one wants to understand economics more than the Friedmanian neo-economic liquidity pumping model, and how it links with economic growth based on energy availability, then this video is highly interesting.

World Energy Outlook 2009

2009-11-11T08:00:00.000+02:00

The yearly report from the OECD energy watchdog International Energy Agency is out. It is called World Energy Outlook.

Here are some key points of interest from the exec summary (full report still under scrutiny):

Coal use expected to grow enormously - oil & gas as well

Problem is - we don't know where the oil & gas are!

Sine financial crisis investments in finding & developing oil are shrinking

So we will use LOTS more coal resulting in LOTS more CO2

So the only option is to go on a huge efficiency binge

So, if you are an investor and something like the above comes to pass (unlikely, but possible), keep on piling on oil till roughly 2015 as we'll get our next oil crunch by then, unless the economy goes south again. After 2015, start piling up on efficiency plays and lots more on coal. Biofuels will be a crutch, but will probably fail royally sometime before 2020-2025 due to thermodynamic stupidity.

More when the final report is out and fully analysed.

Who let the cat out of the bag?

2009-11-10T09:22:00.005+02:00

Guardian has the scoop:

Key oil figures were distorted by US pressure, says whistleblower

Exclusive: Watchdog's estimates of reserves inflated says top official
The world is much closer to running out of oil than official estimates admit, according to a whistleblower at the International Energy Agency who claims it has been deliberately underplaying a looming shortage for fear of triggering panic buying.
The senior official claims the US has played an influential role in encouraging the watchdog to underplay the rate of decline from existing oil fields while overplaying the chances of finding new reserves.
The allegations raise serious questions about the accuracy of the organisation's latest World Energy Outlook on oil demand and supply to be published tomorrow – which is used by the British and many other governments to help guide their wider energy and climate change policies.
A second senior IEA source, who has now left but was also unwilling to give his name, said a key rule at the organisation was that it was "imperative not to anger the Americans" but the fact was that there was not as much oil in the world as had been admitted. "We have [already] entered the 'peak oil' zone. I think that the situation is really bad," he added.

Uh-oh. Reuters, AFP, Telegraph and many more are carrying the same story.

Embrace for impact. Today is going to be really interesting. Expect a thunder of denials.

In related news, as IEA's yearly World Energy Outlook is now coming out, FT has the scoop on the oil price rally of 2008 and the financial crisis.

Did oil cause the latest recession? IEA weighs into the debate
A feature in the draft executive summary of the IEA’s World Energy Outlook, which will be published tomorrow, revisits this argument and comes to a rather worrying conclusion.

It starts out keeping in line with the prevailing view: the run-up in oil prices from 2003 to mid-2008 played “an important, albeit secondary” role in the global economic downturn that took hold last year. Higher oil prices made oil-importing countries more vulnerable to the financial crisis, it says.
So a strengthening belief from the IEA in the contribution of oil prices to the latest recession is especially noteworthy. We will find out on Tuesday if the final draft provides more clarity on the agency’s view.

Well, we already knew as much, but it is always comforting to get the 'official confirmation', so to speak.

These two news put together might go some way explaining the apparent discrepancy in current consumption decline and price increases of longer dated oil futures:

Oil at $100 Doesn’t Compute as OPEC Output Pace Grows (Update4)
OPEC is increasing output at the fastest pace in two years, adding to near-record inventories and threatening speculators betting on $100 crude with losses.

The number of options contracts to buy oil at $100 by March almost quadrupled in October and increased another 5.9 percent so far this month. As traders piled in, OPEC boosted production 4 percent, or 1.1 million barrels a day, since March amid the worst global recession since World War II.

Saudi Arabia’s King Abdullah has targeted $75 oil as a fair price for consumers and producers and has the capacity to increase pumping by about 50 percent, or 4 million barrels a day, enough for all of Brazil. The prospect of more supply comes with inventories in industrial countries already the highest since 1998, when oil collapsed to $10.

“It’s not in OPEC’s interest to see $100 oil,” said Stephen Schork, president of consultant Schork Group Inc. in Villanova, Pennsylvania. “They know that it’s the speculators that are the main driver in sending prices higher. At some point this market will implode, because this isn’t sustainable.”

So, either the speculators never learn (perfectly plausible) or they know something the majority does not know. The dirty details are all in the decline rates and the shape of the peak.

Speculation or not, prices have pushed higher and volatility is killing hedging for commercial users of oil like airlines. Clearly this cannot mean good for the fledging 'recovery'.

Now that economy is officially 'recovering', it's time for oil to step back into the limelight.

Don't say you weren't warned already a year ago.

The ride's only starting.

Heinberg - The Bigger Picture of Energy Depletion

2009-10-30T16:36:00.000+02:00

Video education series continues.

This is required watching for anybody wanting to understand energy-economy-prosperity links and the overall picture of our predicament. Videos 10 minutes each.

91 - 86 - 90

2009-10-28T16:24:00.000+02:00

8 minutes:

The numbers apply to other countries beyond USA. 86Mbd is incidentally the same amount of oil flow that many drilling engineers and now many oil analysts are saying is the ceiling.

Doom Porn #2 - Michael Ruppert & Collapse

2009-10-24T14:01:00.003+02:00

Michael Ruppert is a controversial figure and it is advised to take anything he says with a hefty dosage of salt. With that said, he can be an effective conveyor of doom porn and once one gets past the emotional reaction, it is possible to peek into possible worlds - even if highly improbable.

Peak Oil Studies Galore

2009-10-22T20:36:00.004+02:00

While the rest of the world worries about the strength of this recovery (of gluttonous over-consumption), the researchers have been busy. Looking at something that might kill the recovery for several years, if not decades to come.

Peak Oil Report - Bristol City Countil

"An increasing number of experts and commentators warn that the era of cheap oil
is over and that an oil crunch is likely within the next decade. An oil crunch would fundamentally threaten the way our city operates with challenges to transport, healthcare, food distribution, social cohesion, public services and other sectors."

Heads in the Sand: Governments Ignore the Oil Supply Crunch - Global Witness

"The priority recommendation is the need for international recognition of the underlying fundamental problems that equate to an imminent oil supply crunch. It is hard to see how efective solutions can be developed until there is widespread recognition of the problem."

The Global Oil Depletion Report - UK Energy Research Center

"we suggest that a peak of conventional oil production before 2030 appears likely and there is a significant risk of a peak before 2020. Given the lead times required to both develop substitute fuels and improve energy efficiency, this risk needs to be given serious consideration."

Translation: get off yer arse and start working towards solutions!

Preparing for A Post Peak Living

2009-10-19T17:48:00.000+02:00

Three videos, c. 10 mins. Each. Highly recommended for newcomers or as a refresh on Peak Oil and it's potential effects:

Preparing for a Post Peak Life - Part 1 - The Story of Oil

Par 2 - Rebuttals

Part 3 - Impact and Response

News to Laugh About

2009-09-17T13:47:00.004+02:00

Energy and climate crisis reading can be a grim affair - with a good reason. Still, it's sometimes useful to laugh a bit. With that in mind, here are some recent news articles that should create laughter in those who've done their homework.

EIA Stunner: By year's end, we'll be 8.5% below 2005 levels of CO2 - Halfway to Climate Bill's 2020 target (Celsias)

This is great news! Now let's remember how we got that reduction: deepest worldwide depression since the 30s, a complete crash of worldwide shipping, more than half of the airlines stumbling towards bankruptcy, more than hundred million new unemployed, and near complete stop in new industrial investments. What was the response to all this: PRINT MORE MONEY to boost the economy. How bad do you think we're going to have to have it, till we get to our reduction target (-80% by 2050)? Any politicians willing to put that on their agenda. Thought so.
Stern: Rich nations will have to forget about growth to stop climate change (Guardian)

"At some point we would have to think about whether we want future growth. We don't have to do that now.". Not now, tomorrow. No need to worry, carry on BAU. Yeah, riiiiight. Where did one hear that before? Thankfully USA's industry doesn't need to become 100% carbon-emission neutral by 2050 (not 80% cut, but 100% cut). Fortunately there are enough carbon permissions in the world to be sold, so that developing worlds can increase their carbon emissions. It's nice that the economists don't have the discount rates all wrong for their cost calculations. Sigh, we're so relieved. Thank God there's always tomorrow.
World's climate could cool first, warm later (New Scientist)

Oh, the irony. This happens and some peppy and over-enthusiastic conservative from Competitive Enterprise Institute of America becomes the next Anti-Gore and declares AGW solved and get's a faux-Nobel prize on economics. The world is saved, yet again.
OPEC says oil not to blame for climate change (Reuters)

Is there anything to be added to a declaration that is almost a parody of itself?
World Bank spends billions on coal-fired power stations (Times)

Hellooooooo! What did everybody expect? That they stop funding profitable energy enterprises? That we stop using coal and the last man turn off all the lights?
Official: Global oil peak soon!

First it was 'Never!'. Then it was 50 years from now. Then 30. Then 20. Now 10. BTW, some smart analysts, oil companies and banks are already saying "Now". Hey, let's all wait for the announcement "Oil Peak was 20 years ago" and see how much time we have to prepare after that.

If all of the above seems a bit harsh, mean or even unfair, that's because it's supposed to be. That's really the only way to laugh about this all. And that's what we all need every now and then.

Petropolis - Tar Sands from Above

2009-09-15T09:55:00.004+02:00

Check out a trailer / slideshow for a documentary 'Petropolis', which shows the size and scale of the burgeoning Alberta tar sands industry.

We've got plenty more of this coming in the future as we move from crude and condensates to non-conventional oil sources, including tar sands and oil shale.

Looks pretty nice, doesn't it? Surely the future dystopian steampunk movies will be shot on location in abandoned Alberta open pit tar sand mines.

A new proposal: change McCain's 'drill, baby drill!' to 'Mine, baby Mine!'

Dennis Meadows on Limits to Growth & Solving Problems

2009-09-14T14:34:00.003+02:00

Most people who talk about Limits to growth have never read the book that started it all 37 years ago. Most people who deride it, have not understood the arguments (or read the book) and are guilty of straw man argumentation. So, why not let Dennis L. Meadows one of the authors of the original book spell it out again in his commemorative lecture for the Japan Prize in 2009.

There are a few gold nuggets in his speech about our predicament and our ability to solve difficult problems that have a changing evaluation horizon. Short version: doesn't look good in the short term, but in the long term things might turn ok.

Doom porn #1 - Dan Miller - A Really Inconvenient Truth

2009-09-10T11:40:00.007+02:00

Starting off with the much asked for doomer porn series is Dan Miller with his talk titled "A Really Inconvenient Truth". Apologies in advance to Dan Miller, who is by no means a doomer nor is his intentions to frighten people. Just tell it like it is and then work to find the solutions - both of which he's doing himself.

With that said, here's an hour worth of inconvenience for all of us on why IPCC estimates are actually the best case scenario and why it's unlikely that we'll end up in the best case scenario, but in something far worse.

What does this have to do with energy? Energy is food we eat (meat), mobility that moves us and our globalized stuff around (oil), our buildings (embedded energy) and thus, greenhouse gas emissions. Once oil and natural gas start going, what's left is coal and that's far, far dirtier in terms of climate change than the previous two. And that's the good stuff. Wait till we get to tar sands and oil shale. All of which won't be enough to mitigate the fall, but will still be burned and thus released into the atmosphere with no abandon.

This is why peak oil is such an important issue. It brings climate change related issues fast forward from the future to today - or actually, yesterday. We should have solved this stuff 15 years ago. We more than likely don't have till 2020 to start fixing, certainly not till 2050.

As you watch the video, ask yourself:

How do I feel?
Why do I feel like this?
Is there anything I can do to this emotion?
Is there anything I can do to stop the things causing this?

Are we close(r) to a tipping point?

2009-09-08T16:05:00.004+02:00

Tipping points have been discussed for the past years in many different contexts. There are those optimists believing in consciousness/awareness tipping points in humans around the planet - finally resulting in decisive and synchronized action on all the issues we face.

Then there are the scientists, who actually study the issue of tipping points and try to figure out if we can predict them with any useful likelihood before they actually happen. A case in point is a recent paper by Scheffer et al in Nature: “Early Warning Signals for Critical Transitions” (Nature, 3 Sept 2009, 461: 53-59).

"Complex dynamical systems, ranging from ecosystems to financial markets and the climate, can have tipping points at which a sudden shift to a contrasting dynamical regime may occur. Although predicting such critical points before they are reached is extremely difficult, work in different scientific fields is now suggesting the existence of generic early-warning signals that may indicate for a wide class of systems if a critical threshold is approaching."

In short: systems science based on computational models combining findings from physics and other natural science have uncovered that the climate and financial system may be heading for chaotic times.

In plain English: the shit just might the hit the proverbial fan soon.

Of course, it may just be millenial madness and a preliminary finding that turns out to be a fluke.

However, the squealing of the systems is clearly audible as we speak:

It's the same old story - on repeat.

When is it time for you and me to stop flying, stop driving that big car, stop eating meat, stop consuming like it's end of the world? If your first reaction is an excuse, a refusal or a denial - don't fret, it's only human and it will pass.

Still, it is fare to ask what kind of wake up signals do we require? Al Gore once again asks the same question (from 8:30 onwards).

"Didn't you notice the entire North Polar ice cap was melting? What were you all doing? Watching the American Idol?" - Al Gore, August 2009

So let's all turn on the TV, tune out. We all dare ourselves.

The absurdity of oil wars

2009-08-27T13:14:00.002+02:00

"A singular absurdity of the 21^st century is that the nation that spends more on defense than the rest of the world combined needs to hire mercenaries to fight wars against enemies who have no defense budget at all." -Commander Jeff Huber, U.S. Navy (Retired) writes at Pen and Sword

Why is the US defense budget so big? Tip: it ain't to because we hate them for their freedoms.

Why is US in Iraq? Tip: if one says 'dem terrorists', one should be legally declared an idiot and incapable of analytical thought.

Why are US and UK (and the rest of us) in Afghanistan? Hint, it surely ain't women's rights and stopping the narco trade.

What is the energetic pay-off of fighting oil wars? Tip: war's a gas guzzler!

Is there no end to this folly? Tip, Obama ain't the second coming of Jesus. Same doctrine, same foreign politics, same oil dependence.

Wake up. Smell the coffee. Ignore the bullshit.

Denial of reality and why doom porn has a role

2009-07-22T13:38:00.005+03:00

Roughly half of American's (read: USA) don't believe in anthropogenic global warming. Most don't know what peak oil means. More than half doesn't even believe in evolution. Even those who believe in the science of climate change, are willing to do very little about it themselves.

While figures in Europe and especially Asia are certainly better, they reveal a similar pattern. People either deny reality or accept the facts, but not the consequences. That is, they go on living their lives merrily, as if business as usual is possible from here till eternity. You know, like you and I do.

What are the reasons for this?

In addition to the biological decision mechanisms of our mammalian and reptilian brains, which is nicely explained in the Nate Hagens video lecture a couple of posts down, the reasons could lie in the fact that to think the unthinkable is hard. If one abandons the safe confines of 'current prosperity forever' type of thinking, the realities are pretty grim.

Let's take an example. UK is coming out with their own carbon emission cut plans. How are they going to achieve them? Not by directly cutting emissions, but by buyin offsets from the poor nations. However, in order for the poor nations to be able to sell enough offsets to UK (and to US, continental Europe, Japan, etc) they'd have to cut 125% of their own emissions.

Now, one doesn't have to be an Einstein to understand that either the coming global gap and trade of carbon offsets is a total scam, or there will be a few billion less people on this planet in order for the numbers to make any sense.

That is the reality. No amount of tinkering with 20% less emitting cars is going to help any, when the system is based on growth and nobody is actually willing to downscale to a smaller economy (reason: monetary systems would crash uncontrollably as credit would start to contract in a deflationary spiral).

Thus, we get promises, smoke screens and assurances that everything will be right.

So, we believe in the fairy tales, because the reality is just way too grim to think about:

The earth passed it carrying capacity in mid 80s. We are in consumption and population overshoot. Overshoot is followed by an undershoot.
Fossil fuels support 85% of the world population. We are nearing the moment of combined fossil fuels peak.
The world agricultural and ocean fishstock production per capita is already shrinking. The likelihood of a serious worldwide food shortage increases almost every year.
We are constantly increasing our greenhouse gas emissions, while the probable date for irreversible catastrophic climatic change is almost here or perhaps already in the past
We are hell bent on growing our economies: producing and using up more - even when we know biodiversity is collapsing, pollution is increasing and people are not happier than before.
There are no technological fix-it-all solutions to peak oil, deforestation, climate change, groundwater depletion, soil erosion, biodiversity collapse or overpopulation. All solutions require that there are less of us, we consumer increasing less every day and work in an economy totally different than what we are used to.
Historically when civilizations have faces similar organizational issues around resource starvation, they have always collapsed. Not a single existing counter example exists of voluntary powerdown. Only the nations overtaken by others and forced to live below their previous means have been able to prune down. The rest: collapse, disorder, breakdown of civilizations and then eventually - near extinction.

See? That's why thinking about reality is hard. Resist the temptation to click the close button on your browser window and stop to think about your own reaction: why do you and we the people at large do not want to think the inevitable?

Because it means that most likely within your life-time, by the time you are ready to retire, there won't be any welfare, retirement, consumption, easy days, nice beach vacation air-destination holidays, 12 000 km all-the-year-around strawberries, $5 mp3 players from China, disposable diapers, throwaway seasonal clothing, or pretty much anything you take for granted when you look around. It'll be all gone, or pretty much ready to go in the next 20 years.

And your children? That's the hard part, isn't it? What kind of a life do you think they'll be living when 7-9 billion people will be fighting over the last bits of diminishing and still extractable resources, producing soil, potable water and energy?

What do you think happens to the natural pecking order within societies, when the majority of people - instead of machines - have to take care of the daily food production of the rest? When you remove most of the 100-300 energy slaves each of us enjoy today by burning coal, gas and oil in their various forms - what follows?

One doesn't have to be a great fan of disaster movies to understand that various conflicts and non-peaceful resolutions to various scarcities might be highly likely. Or do we honestly believe that all the people with starving children will just go meekly into the night?

Painful, isn't it?

That is precisely why doom porn has a role.

Because it brings pain backwards from the future to the present day. It shows what can be. It forces us to think about the unthinkable.

In the words of Herman Kahn:

"We must appreciate these possibilities. We cannot wish them away."

Not thinking about the unthinkable doesn't make it less likely. The reality is what it is, whethere one likes it or not.

Next post (coming soon) - "Doom porn for all".

Umbrella View of Resource Depletion and Human Behaviour

2009-07-19T15:32:00.001+03:00

Stolen from TOD - an excellent overview of human thinking, evolution, energy and economy.

It's an hour of your time, very well spent.

The Slavery of Oil - Francois Collier

2009-06-24T10:54:00.003+03:00

An excellent article on energy use, GDP, wealth and energy expenditure by a system modeler Francois Cellier:

The Slavery of Oil
http://europe.theoildrum.com/node/5388

Short snippets:

"As energy becomes more expensive, we may soon experience a situation where we spend our entire GDP and more just to procure the energy needed to maintain our life style. This claim is what I wanted to verify."

Last year as oil went up to $147/barrel, the procurement of oil alone started to near 12% of GDP. Oil is black gold and will be more so in the future. Even if price tanks this year to $30/barrel, it will multiply in years to come.

"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."

$590 of 2009 dollars sounds a lot. Still, many analysts have already flashed estimates of $300/barrel (inflatated) dollars. Even inflation adjusted that would be near $200-$250/barrel in a few years. So, roughly 30-40% of GDP.

"Why are the Norwegians spending more energy than the Swedes? There is no good reason for it. They do it, because they can."

This is a good reminder. If you have energy, you will waste it, even when it's expensive, as long as you can make for the additional expenses by selling surplus to others at a higher price. High oil prices only increase consumption in the oil exporting nations, as Middle-East countries so effectively demonstrated us in the past years.

Finland would probably be slightly below and to the right of Sweden. That is, less wealthy, but wasting more energy. Is that something to be proud of? Is that a good position to start from, once we start on a global liquid energy diet?

Lots of more good stuff in the article and in the comments below. Be sure to look at Euan Mearn's related follow up article at TOD also, titled "The Financial Return of Energy Invested".

Images for the Age

2009-04-20T08:22:00.004+02:00

Click for larger versions.

Study. Understand.

Cars without Oil - Can it be done?

2009-04-16T13:11:00.006+02:00

One of the recurring themes here and in other oil depletion blogs is the problem of cars. There are about 800 million oil powered motor vehicles on the roads of the world. That number is estimated to go up by a few hundred million by 2020 - even if the economy doesn't recover to BAU levels.

This poses many questions from the point of view of peak oil:

Assuming near and sharp oil peak, where is the energy going to come from to power the cars?
If not oil or brain dead bio-fuels, what is the fuel & and the energy carrier?
Who's going to build the new cars?
Which country is going to adopt this new system - requiring massive investments in infrastructure?
Car fleet replacement rate is c. 2% p.a. - how long time will the transformation take?
Who's going to fund all this massive investment?
Can it be made economic to compete with ICE cars?
Will it cut down our CO2 emissions?

Well, looks like Shai Agassi's (ex-SAP/Oracle) new company Better Place is asking exactly these questions and trying to answer them.

Below is Agassi's presentation from TED on the issue. Very good points and worth spending 20 minutes on, even if you don't share his optimism about replacing the worlds cars in a decade or so. Also, it is a very good showcase of rhetoric - enough data points to convince, emotions to draw you in, morality to remove defenses and hope to make you believe.

We need more people and examples like this. What can you do?

G-20 money might be enough, but oil will NOT be

2009-04-07T10:45:00.002+02:00

Kjell Aleklett of ASPO and professor of physics at Uppsala University puts the G20 stimulus trillions into perspective for the whole world::

"The world’s wealthiest nations, the G20 group, have decided to light a fire but have forgotten a very important detail – to check whether there is sufficient fuel to enable the fire to burn.

During the last 20 years we have had global economic growth of approximately 3% per annum. Fuel use in the form of oil has increased, on average, by half of this rate, i.e. 1.5% per annum.

[W]e show that oil production from those fields that are currently in production will decrease by 6 percent per year during the next 5 years. This means a decrease in the rate of production by 18 million barrels per day after 5 years. The G20 nations want to increase oil use but the forces of Nature say that there will be a decrease.

The same nations that now require increased oil consumption will meet in December with the world’s other nations in Copenhagen. They will then discuss what measures they can take to reduce oil consumption.

What the G20 group should discuss is what investments will be required for this transformation of the energy system to become reality."

So where does it end? Will the next boom be cut-off by another oil crunch, leading again to a new bust, as the newly minted money and debt evaporates? The cycle begins anew, until we hit the oil ceiling again? Repeat ad infinitum?

"Why this is not the 1980s" - Matt Simmons Interview

2009-03-19T14:03:00.008+02:00

Very interesting 43 minutes, going back 16 years and comparing the oil price dips of the 80s and 90s to that of last year.

If you are to understand why this is not the 80s in regards to oil, you need to see this.

Video of the day - Natural World - A Farm for the Future

2009-03-11T20:37:00.002+02:00

Source: http://video.google.com/videoplay?docid=4152340418943461860

Rebecca Hosking investigates how to transform her family's farm in Devon into a low energy farm to prepare for Peak Oil. Lot's of good stuff on farming, food production and oil dependency.

Tidbit of the day - Drinking Oil

2009-03-09T19:59:00.003+02:00

"From start to finish, bottled water consumes between 1100 and 2000 times more energy on average than does tap water.

U.S. bottled-water consumption in 2007 required an energy input equivalent to 32 million to 54 million barrels of oil. Global energy demand for bottled water is three times that amount.

To put that energy use into perspective, Gleick says to imagine that each bottle is up to one-quarter full of oil."

" - Gleick & Cooley, Environmental Research Letters, 3/2009

Banks of the World

2009-02-20T19:10:00.000+02:00

You've been warned. Twice.

Link Round up for Q1/09

2009-02-20T16:32:00.003+02:00

Shamelessly stolen from Energybulletin, PeakOil and The Oil Drum.

Total Oil - World Oil Production Near Peak

"The world will never be able to produce more than 89m barrels a day of oil, the head of Europe's third-largest energy group has warned.

Meanwhile, Mr de Margerie now expects a faster decline in production at older fields, such as those in the North Sea."

IEA warns again on Oil Supply Crunch due to lack of investments

"Currently the demand is very low due to the very bad economic situation," he 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."

OPEC: Oil industry capital investments have collapsed due to crisis

"Investments in the oil industry in the Gulf region have faced a major contraction due to the global financial crisis which could endanger the future of the industry."

Crisis slowing investments in renewables

"Economic slowdown and the recent collapse in oil prices is slowing investment in alternative energy, needed to wean the world off dependence on hydrocarbons, the International Energy Agency (IEA) said"

Sir David King predicts century of Resource Wars

"Future historians might look back on our particular recent past and see the Iraq war as the first of the conflicts of this kind - the first of the resource wars.

Unless we get to grips with this problem globally, we potentially are going to lead ourselves into a situation where large, powerful nations will secure resources for their own people at the expense of others."

Are We In The Post-Peak Era?

"Due to the factors (Russia, the tar sands, etc.) explained above, it will no longer be possible to replace over 2 million barrels of lost production each year after 2010 as production follows the general decline shown in Figure 1. Thus if OPEC capacity gains do not exceed losses outside the cartel, world oil production peaked in July, 2008."

Water running out for oil, coal and tar sands production

"Water is increasingly moving from an operational issue to one of strategic significance, according to Thirsty Energy: Water and Energy in the 21^st Century, a new report by the World Economic Forum and Cambridge Energy Research Associates (CERA), an IHS company (NYSE: IHS). The report warns, “Energy’s share of water is likely to be squeezed in the future in many parts of the world.”

The big picture matters. Everything else is mere noise.

Need a primer? Here's one

2009-02-15T12:32:00.002+02:00

The Crash Course in 38 minutes with American style over-simplification. You can't get easier than this.

Click image for Windows Video streaming version or download a Quicktime video.

Ignore the presentation if it rubs you the wrong way. Understand the contents and its meaning.

Tidbits for February 2009

2009-02-15T11:51:00.002+02:00

US, UK and Europe are bankrupt

Everybody seems to know that US is toast, printing money to finance debt that they can't ever imagine to repay back. UK is crashing down the twin black hole of energy and financial debt which together will make the 70's look like a picnic to them.

But Europe? The home of the old steady bundesmark? Yup. Bankrupt. Overleveraged, over-debt-ridden, over-illiquid and soon over-insolvent. As in nobody has enough of money to bail out all the European banks. At least none of the Europeans. Good luck going to the Republic of China with a hat in hand.

Time for a Reality Check

"Reality check: The "stimulus" that President Obama will sign Monday is a band-aid.

But European banks may be in far worse shape.

The problem revealed in the report is an estimated write-down by European banks in the range of 16 trillion pounds, or about $25 trillion dollars!

The euro is going to get a lot weaker if bank problems are even half of what the report says they are."

So what, if the economy is slowing down a bit and we'll end up nationalizing all the banks through debt that our grandchildren will pay? Let's just print money!

At least we'll have cheap oil from here to kingdom come!

Um... well, no.

Oil party over

Christophe de Margerie, CEO of oil company Total and one of the most publicly outspoken peak oil aware oil execs gives us the future:

"The capacity that the oil industry has to go to 93-95 million barrels per day is already over. There will be a shortage of energy in the medium to long term."

Ok, so the Party's over. What now?

Well, that has got to be a good sign for the environt and for the climate in particular? No.

CO2 hits new peaks, no sign global crisis causing dip

"Atmospheric levels of the main greenhouse gas are hitting new highs, with no sign yet that the world economic downturn is curbing industrial emissions. Levels of carbon dioxide, the main greenhouse gas from human activities, rose to 392 parts per million (ppm) in the atmosphere."

So much for that stabilization at below 380ppm. Nobody really believed in that to begin with, it was all pep talk. Get ready for the next rounds of pep talk at 480ppm. I'm sure it'll be of great relief to all the Australians.

Are we beginning to see the larger picture emerging here?

As proclaimed earlier, this is not a doom blog, but a realist one. World will recover, economies just as well. One way or the other people will muddle through.

So, nobody knows anymore what 'one' or 'the other' actually entails in the future. We will recover, but how?

To automatically assume that we can - or more importantly that it makes any sense - to get back to Business As Usual, is pure insanity. Or actually, just very human. We're not very good at foreseeing disruptions in semi-linear continuations.

Expect the unexpected and keep on keeping in action and you'll be ready for anything.

Do more, as self-delusional talk is rapidly approaching it's end of shelf-life.

OPEC: Stop speculating on oil

2009-01-28T14:35:00.002+02:00

The oil futures market participants can be roughly divided into two groups: 1) those who use oil commercially and need to have an insurance against too big price changes (i.e. hedging), and 2) those who want to make money purely by guessing where oil prices are going to go next (i.e. speculating).

Both serve a purpose, but the ordinary Joe only cares about the credit card charge at the pump and the price of an airplane ticket.

Now OPEC, that once mighty cartel of oil producers, is saying that the world (read: US) should curb oil speculators.

According to OPEC, speculators are not only responsible for the fast price hike last year ($147/brl), but also the abysmally low prices last year ($32/brl). OPEC is now saying through it's secretary general Abdalla el-Badri, that this cannot go on. Speculator must be stopped.

You can easily guess the market's reaction to this plea.

Everything from almost violent denial to manic laughter by all of the banks, brokers and traders - all of whom reaped gazillions of profit/losses last year by playing the market. They claim speculation is sacrosanct.

And fundamentally they are right. There's nothing wrong with it - in fact, the efficient market hypothesis calls for speculators, in case you still happen to believe in such a fairytale hypothesis after the fall of 2008.

So, OPEC might be onto something here.

Consider the situation in not too near future: the reserve buffer between maximum production flow and demand has diminished to almost nothing due to world oil production nearing peaking. There are still some reserves on the ground, but require huge investments. Speculators can influence the market either way, and help amplify supply-demand based huge price drops or spikes - at least for a while.

Nobody wants to invest in that scenario. So, the flow of oil diminishes. And the world faces a starvation of energy, and if continued, a true starvation of food.

Now, this scenario would be merely amusing if it only were hypothetical.

Because, depending on whom you ask from, that's exactly what's happened last year. Oil price spiked, then crashed, now all investments are postponed and the likelihood of steady oil-flow to support economies (once we get out of this current financial mess) is drastically reduced.

Now, whole opuses will be written about the previous oil bull market and who was the culprit for the rise and the fall. The average joe? The energy hungry Asians? Evil speculators?

Nobody knows for sure and nobody will ever find out.

What is clear is that the speculators did not help in balancing the spike in either direction.

That is what this is all about: should speculators allowed to play the market of the world's most important single commodity for the potential detriment of the most of the world?

Who wins if this is allowed to continue?

Surely not you or me.

Unless you are speculating on the oil market, which is btw - looking more and more enticing as each day goes by.

So, because the world is unlikely to curb any speculation - hop on and play the game. At least you'll have somebody to curse at, next time you're at the pump and the price has shot through the roof.

Why is Israel bombing women, children, UN, churches, hospitals?

2009-01-19T20:13:00.004+02:00

Gaza civilians running for their lives from Israeli army incendiary cluster bomb grenades

The recent blatant violations of various international laws and regulations by Israel may seem non-news to most, but this time the situation was different.

They bombed UN run schools, Christian church run hospitals, women, children, practically anything that moved. And yes, using incendiary phosphorus weapons (look them up on international conventions of war).

Seems rather odd, even for the Israeli army.

And it didn't stop there. A recent big secretive shipment of weapons from US to Israel was outed by Reuters last week. Then came the news, that Israel IDF troops were posing as Hamas soldiers on the war zone. Then the psy-op leak that Israel recruits bloggers to start spreading zionist propaganda on the net.

Clearly something 'big' was happening. But what?

Well, the news is now out:

Huge gas reserves discovered off Haifa

"A historic natural gas reservoir found offshore from Haifa is poised to meet Israel's natural gas demand for about 15 years and reduce the country's dependence on gas imports from Egypt and offshore from Gaza.

Preliminary estimates indicate that the Tamar field might contain over 88 billion cubic meters of gas."

Unfortunately for Israel, this posed a bit of a problem:

The $4 billion opportunity off the coast of Gaza

"In 1999, after paying the Palestinian Authority an undisclosed sum, BG, along with its partner, Consolidated Contractors Corporations, acquired the concession to survey for natural gas in 1,000 square kilometers of the Gaza Marine area.
This posed a serious problem for both Israel, which obviously was not going to pay a portion of the money to Hamas, and to BG, which was banned by its government from negotiating with Hamas. The Post reported that had Israel and BG reached an agreement on the sale price of the gas, they would have found an alternative arrangement for the transfer of funds to ensure they did not end up funding terrorism.
Today, the estimated $4 billion worth of gas off the Gazan coast is still sitting, untapped, at the bottom of the Gaza Marine gas field. Hamas has not backed away from it claim that it is the rightful owner of the gas, even saying it deserves more than the 10% of the royalties from the sale of the gas, as originally negotiated between BG and the PA.
Removing Hamas from power in Gaza and reinstating Fatah will be almost impossible. However, according to newspaper reports, cabinet ministers have been told that some Hamas leaders in Gaza are desperate for a cease-fire and would be willing to settle on almost any terms stipulated by Israel.
Removing any claim that Hamas has to the money from the sale of the gas would allow Israel and BG to proceed on negotiations, which were relaunched in late 2008 between BG and government representatives, without the threat hanging over them from Hamas that the money belongs to it."

So, attack Gaza, keep on killing civilians until Hamas agrees to whatever terms Israel wants. Gas secured, money secured. Israel wins, while EU and esp. gas-starved UK remain conspicuously silent all through the ordeal.

Now, why wander off from our Peak Oil related path to bring you sad news like this?

So that you, dear reader, understand what runs the world, and how it is run.

It is not money. It is energy.

It is not run by rules and regulations shared by me and you. It is run by might makes right.

And the people running the show are willing to do ruthless and brutal deeds to get their hands on secure, locally accessible, fairly inexpensive and risk-free fossil fuels. In fact, they are willing to play really risky games to get it - at the cost of just as many lives as it takes.

So, if you think that a couple of thousand Palestinian civilians matter none when 88 billion cubic feet of natural gas are at stake, then do consider the situation when we will be fighting over the remaining barrels of oil.

The picture will not be pretty, that is guaranteed. We'll be looking at much worse images than the charred remains of UN run schools left behind by IDF 'smart weapons'.

Think about that the next time you ponder the 'righteous war' principles of United States in Afghanistan and Iraq, the historic Falkland war of UK, destruction of Chechnya by Russia, fighting in Somalia, insurgency in Nigeria, or the situation in Gaza.

Just pray they won't find any oil or gas near your borders, because if they do, you are fucked.

Video for X-mas

2008-12-23T19:00:00.002+02:00

Charlier Hall explains energy and Jim Hansen explains investing - both in regards to Peak Oil. Video from ASPO-USA 2008 via Peak Moment TV.

Video: George Monbiot interviews Fatih Birol of IEA

2008-12-18T13:57:00.008+02:00

More at Guardian.

OPEC cuts, Markets confused, Prices fall

2008-12-18T11:09:00.003+02:00

The oil market has become a comedy of sorts. Every minuscule price movement is explained by some temporally correlating event with very little regard to causality.

Hence we get what we got yesterday with Opec's Algeria meeting and announcement of record production cuts. Alphaville blog from FT has the run down.

In short, OPEC announced record cuts. Conveying the message didn't go down too well. Markets were confused: what was the total magnitude of cuts? When will they start to really come into effect? Home much will the excess oil storage now accumulated last? Will the production quotas be honored by the members? What about Iraq's 'special circumstances' that enables it not to adhere to any quotas? Can they pick up the slack?

Thus, the price of oil kept falling and is yet again below $40/barrel, when producers know they need roughly $60-$65 pb to keep on investing.

Either markets are really confused and there will be a huge spike when we get out of the financial mess (not any time soon, mind you), OR we will have an interesting next year, when the cuts and capacity unwinding come into effect and slowly start squeezing the market. There is one more alternative: this will the biggest unwinding in the history of the world ever - everywhere. Markets will not recover in 2009, some not even 2010. Oil consumption and prices will stay low for a decade - as will economic growth. This is not a pretty scenario, but one that each one of us must entertain for now. It does have its upsides as well (emission reduction to mention one).

Currently, IEA/EIA inventories are still growing. And why shouldn't they: it'd be foolish not to fill inventories at these prices. Anybody who's looked at the production data and wants to plan ahead more than a few months, knows this much.

However, once the inventories and reserves are filled and IF demand picks up again, which it usually does at these price levels, get ready for some wild price action again.

When? Nobody knows.

IEA: Global Oil Peak in 2020

2008-12-15T08:25:00.003+02:00

Uh-oh... this was unexpected. The party line has been broken:

"Global oil production will peak much earlier than expected amid a collapse in petroleum investment due to the credit crunch, one of the world's foremost experts has revealed.
Fatih Birol, chief economist to the International Energy Agency, told the Guardian that conventional crude output could plateau in 2020, a development that was "not good news" for a world still heavily dependent on petroleum.
Three years ago the Paris-based organisation still denied there was any fundamental threat to the world's petroleum economy."

What is the party line in the rapidly sinking UK?

"The government does not feel the need to hold contingency plans specifically for the eventuality of crude-oil supplies peaking between now and 2020."

Oh, how you will learn the might of the reality. George Monbiot's take on the situation is blunt:

"Around 2020. That casts the issue in quite a different light. Birol's date, if correct, gives us about 11 years to prepare. If the Hirsch report is right, we have already missed the boat."

I'm afraid both Monbiot and IEA are optimistic. Oil will peak way before 2020, unless we continue in worldwide depression for the next 10 years.

Godspeed. We're all going to need it.

Simmons & Hirch : Steps away from a disaster

2008-12-14T17:13:00.001+02:00

The always interesting Financial Sense podcast series recently ran an interview with Matthew Simmons & Robert Hirsch (Dec 13, 2008). Here are their quick bios for the gentlemen interviewed:

	Matthew R. Simmons Chairman, Simmons & Company International
	Dr. Robert L. Hirsch Senior Energy Advisor at MISI & consultant in energy, technology and management

Some highlights from the interview:

IOCs now understand they can't run their operations profitably on $40 USD oil
OPEC might cut 2Mb next week in a panic
Massive pressure on oil trading firms (Glencore, etc) due to CDS, causing squeeze on futures positions
It is becoming increasingly clear that the sustained peak of oil production happened in 2005
Industry is now in panic and starting to unravel
If oil industry starts downsizing, we will quickly lose 20% of supply. This is the worst possible scenario
We are unwinding supply now as fast as we have ever done
Supply destruction is moving faster than demand destruction [actually demand adjustment]
China's oil imports have not fallen, their import growth rates have fallen. They imported record rates in October and only slightly less in November
Shell was buying oil on the sport market when oil fell to $40 and tried to store it in tankers (due to futures contango). Problems is, there are no tankers left
People do not understand the magnitude of daily oil flows - spare tankers represent such a drop in the bucket it does not matter at all
Forget that term quick fix. There are no quick fixes. Fix is a minimum 10 year fix
You have to get off the inventory liquid mind set - think volumetric flow rates. Well educated people do not understand this
Fatih Birol (IEA) is flying around the world telling political decision makers that the Game is Over. Cheap oil is gone.
Most optimistic IEA scenario oil production will fall to 25Mbpd by 2030, IF we spend a fortune mitigating natural decline rates (9 Mbpd
14% of our oil is coming from the 10 largest oil fields. Average age of top 20 oil fields is 59 years. They are very old, mature and near decline.
We need eight new Saudi Arabias worth of oil to meeting growing oil demand in the next 10 years. Everybody knows that is impossible
When you talk about several Saudi Arabias worth of not yet found oil, you have to understand that it is not possible. This oil does not exist.
Idea that renewables will solve our problems is just plain wrong.
Mexico's export capability will end by 2010. This will have a major impact on Mexico and US, which imports a big part of its oil from Mexico.
Brazil's major findings are hard & expensive oil, taking 10-20 years to start understanding what is there. We have never been at these levels, you can't believe how complicated this production is.
Five years from now our oil production will be down up to 20%
We just don't have the technical population needed to pull this off: more people in overalls than in three piece suits.
Skeptics: just put your head in the sand, you deserve to get suffocated
The scale of changes needed is just mind boggling. We need totally new investments, on a massive scale, at a speed nobody has ever done
We entered a phase where we are in a very serious trouble and will be for a long time.

A deeply sobering interview. All this financial alphabet hoopla is masking the biggest short range civilization threat we currently face and is in fact, making the financial issue worse, which in turn is making the energy problem worse. Positive feedbacks, anyone?

Keep your eyes on the prize. Everything else is just noise - a distraction at most.

Standard News Roundup for Dec 2008

2008-12-13T18:44:00.001+02:00

Your daily dose of standard bad news.

Fatih Birol (IEA): If Global economy rebounds, we may see a very tight oil market and priced higher than $147 last July. I don't think we are far from a worst-case scenario. We need to invest now.
MasterCard SpendPulse study: US gasoline demand has risen back to the earlier 2008 levels due to cheaper gasoline. All this in a recession that has been going on for months now.
Nobua Tanaka (IEA): The Era of Cheap Oil is Over. Volatility is here to stay.
Heritage Foundation: In a recent simulation run by US top energy scholars and policy experts, the price of oil was modeled in a global energy crisis, which IEA is now predicting. The price of petroleum spiked quickly from $127 to $244 in just a few days. Rise caused a rapid slowdown in economy. If that sounds familiar from this year, get ready for more of it in the years to come.
ASPO Australia: Sydney and other big cities must start preparing for peak oil now. They call for a moratorium on new motorway construction.
Tyndall Centre for Climate Change: CO2 emisions are soaring, we have exceeded even the worst of IPCC predictions in the past years. The previous stable level of 380ppm has been breached. We can't stabilize emissions to 450ppm. Be prepared to cut emissions by 80% by 2030.
Industry Task Force on Peak Oil (UK): Virgin, Yahoo, Fosters, Scottish Energy, Statecoach, and several other UK companies as part of the Industry Task Force on Peak Oil warn about the importance of oil and end of 'easy oil'. Modern cities will be hard places to live in, without oil infra delivered supplies and plentiful cheap oil.
Arnaud Chaperon (Total Oil): In the Future, energy demand will be constrained by tight supply. Oil will peak in the next decade.
James Hansen (NASA): In the case of Arctic Sea ice, we have already reached the point of no return.In the case of the Arctic, that could mean a complete disappearance of ice in the region during the summer months. Such eventuality would then further magnify global warming. Positive feedbacks are starting to kick in.
Nature Magazine via Science News: Wetland soil permafrost is releasing methane in way not previously anticipated. This throws another spanner in the works of previous stabilization scenarios for climate change. Methane is about 20 times as powerful as a greenhouse gas as CO2. 20% of land surface area is permafrost. There is a lot of methane down there.

So yes, let's pump more liquidity into the system. Let's turn interest rates negative. Let's bail out everybody. Let Fed/ECB/BoE start their on F-Bill lending. Hell, just accept Monopoly(TM) money now as legal tender.

We need to spend, spend, spend! That's the salvation, right? Right?

"Reality is that which, when you stop believing in it, doesn't go away."
-Philip K. Dick"

US Auto Bailout

2008-12-13T15:35:00.003+02:00

Congress is playing hide & seek with the TARP money. They don't want to give it to Detroit. Not yet.

Treasury's TARP money is down to 15bn left. The big 3 auto makers need more. Approval for more money needs to go through congress.

Catch a pattern?

It'll take more than 18 months for GM to start producing real cars, instead of battle tanks and they are hemorrhaging at a rapid rate. Add a serious deflationary spiral on top of that, coming crash in auto-loans and almost complete stop of auto exports.

No amount of pumping will save the US car makers in their current form or with minor tweaks.

At best they'll start recovering in 2 - 2.5 years time, just in time for the next oil price break out and worsening availability crunch.

The future of US automakers? As the brits said about theirs: good riddance.