DrumBeat: March 14, 2007
Posted by Leanan on March 14, 2007 - 9:03am
Topic: Miscellaneous
Crude Addiction - an interview with Samsam Bakhtiari [PDF]
If you believe a number of growing voices on the subject, our industrialised, oil based global economy teeters precariously on the verge of a spectacular crisis. If you believe the peak oil theorists, 2006 marks the year of peak oil, the global peak of crude oil production.For the peak oil set, the theory is simple. For six generations, the world has gorged on a ready supply of cheap oil. This fundamental commodity has proven to be in abundant supply – augmented in times of high demand by the seemingly endless supply of sweet light crude pumped effortlessly from the mega oil fields like the Saudi Arabian Ghawar field. Those days are gone, the theory contests. A new era with a different set of rules means there will be nothing like business as usual.
Such views belong to a small but growing league of global oil experts like the Tehran based Dr Ali Morteza Samsam Bakhtiari.
World population may reach 9.2 billion by 2050
The world’s population will likely reach 9.2 billion in 2050, with virtually all new growth occurring in the developing world, a U.N. report said Tuesday.According to the U.N. Population Division’s 2006 estimate, the world’s population will likely increase by 2.5 billion people over the next 43 years from the current 6.7 billion — a rise equivalent to the number of people in the world in 1950.
What happens when the world population hits 7 billion? How about 8 billion? Or 9 billion, as the United Nations is predicting? Hospitals without life-support machines. Grocery stores without refrigerators. Shopping malls, office towers, and neon gone dark. Printers and fax machines that don't hum. Trains that don't run, phones that don't ring, computers that don't blip or announce new e-mail. . . . because there is no e-mail; there is no Internet. The global grid is down. And where it's still up and running, it's pockmarked with dead zones that have made the whole network slow to a crawl. Even the electronic stock tickers on Wall Street have flickered out.
OPEC's campaign to boost oil prices by constraining supply has worked. As oil ministers meet this week, signs are mounting that the group will soon have to begin pumping more crude.
Foreign Energy Firms Pay Bolivia $30M 'Under Protest'
Brazil's state-owned Petrobras, Spain's Repsol YPF and French oil major Total paid Bolivia some $30 million in accord with La Paz's so-called nationalization of its natural gas reserves, but the companies said they were forking over the money "under protest."
Shell Eyes Developing Iraqi Gas Fields - Iraqi Official
Royal Dutch Shell PLC (RDSA) has expressed its willingness to the Iraqi government to invest in Iraq's gas fields and to set up a pipeline that would connect these gas fields to Europe via Turkey, a senior Iraqi oil official said Tuesday.
Chevron reviews possible expansions at refineries
Chevron Corp. said Tuesday that it was considering expansions at several refineries, including two in California, but was abandoning plans to build a natural gas import facility off the coast of Baja California.The nation's second-largest oil company also said it expected to spend $19.6 billion on infrastructure and development projects this year, with three-quarters of the money going toward oil and natural gas exploration and production in places such as the Gulf of Mexico, northwest Australia and the deep waters off West Africa.
Can you imagine a world of zero waste? Cities and towns across the world - and a surprising number of companies - have adopted that goal.
'Green fuel' from seaweed could help solve energy crisis
The new technology unveiled by the firm at an international conference on marine biotechnology that opened on Sunday in Eilat, allows the industrial cultivation of seaweed through the use of carbon dioxide emissions from power plants.
Capitalism Put on Trial, Buffett Eats: New Nonfiction
Deep Economy: The Wealth of Communities and the Durable Future by Bill McKibben (Times, $25). In a vein similar to Barber's, McKibben offers a clear-eyed reassessment of the meaning of growth, arguing that it's no longer making the world wealthier but instead is "generating inequality and insecurity" and "bumping against physical limits, like climate change and peak oil, so profound that continuing to expand may be impossible or even dangerous."
OPEC likely to keep output levels steady
OPEC is unlikely to change output levels when oil ministers of the 12-nation organization meet Thursday, senior Kuwaiti and Libyan oil officials suggested Wednesday — comments that reflect producer satisfaction with present prices.
Constructive engagement with NY Times?
Overall, the thrust of the article is much of what we have come to expect from a lot of the mainstream media: don't worry, we have plenty of oil left, and we will use technology to recover a great deal of what has heretofore been regarded as unrecoverable, especially now that high oil prices make enhanced recovery more attractive. The phrase or paraphrase "running out of oil" is used in a couple of different places, one a quote from Yergin at CERA. This tends to perpetuate the seemingly purposeful and continuing obfuscation of the critical significance of getting just half way to running out - the Peak Oil phenomenon.
Selective reporting does not disprove peak oil
It is simply amazing how often journalists and editors can dutifully report the facts as told to them by their sources without bothering to try and understand the larger picture. Specific data, cited as “proof” for a particular theory could in fact be evidence for the complete opposite conclusion if the entire data set was examined.
Peak oil: What the media don’t want you to know
For each isolated example they provide for a production increase in an old field, it’s easy to list multiple examples of fields that have had more dramatic decreases in production. As an example, the Prudhoe Bay field has declined ~1,250,000 b/d in less than half the time it took the Kern River field to increase ~75,000 b/d. While it took the Duri field ~20 years for production to increase ~135,000 b/d, production from the Cantarell complex (Mexico) is likely to decline ~1,700,000 b/d in an 11 year period (2004-2015).
If the examples provided in the NYTimes article are so dramatic, one has to ask the following questions: Why has California’s oil production declined ~500,000 b/d since 1985 in spite of the Kern River field exhibiting its dramatic increase? Why has Indonesia’s oil production declined ~600,000 b/d since the early 1980s if Duri is such a miracle? Why has Texas’ oil production declined ~2,500,000 b/d since 1972 even as the estimated ultimate recovery for the Means field doubled?
Britain aims for CO2-limit target dates
The British government proposed bold new environmental legislation Tuesday that would set legally binding, long-term limits on carbon emissions — a move it hopes will prompt the United States, China and India to follow suit.
Survey: Climate change seen as threat
A survey on climate change conducted in more than a dozen countries found that a majority of people in nations including South Korea, Australia, Iran and Mexico — but not the United States — view global warming as a critical threat.
Hydrogen Is Already Having An Impact On The Automotive Market
Despite commercial deployment being at least two decades away, hydrogen powered vehicles are already having an impact on today’s automobile market. This is one of the conclusions of a report published this week by Cambridge, UK based analysts CarbonFree. The report highlights examples of automobile manufacturers and energy companies experimenting with hydrogen powered automobiles to add a shade of green to their existing brands. However, CarbonFree warns it would be difficult for incumbent players to commercialise these next generation vehicles without cannibalising revenue from existing products.
Idaho’s Bounty: Linking regional farmers and buyers
Spurred by concerns about "peak oil," dissatisfaction with industrialized farming methods, and a growing demand for local produce, about 40 organic farmers and ranchers, entrepreneurs and community leaders met in Hagerman in late February to establish the "Idaho's Bounty" food cooperative. The co-op organizers plan to link regional growers and food producers from the Magic Valley and Hagerman with Internet-based food shoppers in the Wood River Valley.
Oil and Gas Industry Prefers Personal HPC Capacity, Says Microsoft
But the most interesting part of the day, perhaps, was a report that Microsoft commissioned by Gelb Consulting Group that indicated that companies in the oil and gas industry believed that their ability to discover oil and gas reserves and thereby help their companies increase production was being hampered by limitations on access to high performance computing resources.
UPI Energy Watch: Putin calls for setting up state-controlled shipping firm, Gazprom, Egypt to strengthen gas cooperation, Iran mulls India's request to boost gas supplies
I went around some neighboring towns here in upstate New York to look at the real estate yesterday. I was impressed by how uniformly crummy everything was... In the old houses priced above $300-K, the rotting sills and delaminating surfaces are plain to see. Of course, the buildings are worth something, but my guess is less than a third of the asking price by any realistic valuation. But at least these things were made of materials generally found in nature. The new houses were all glue and vinyl, and of course they were mostly built in places dissociated from any town itself, meaning the hapless owners will have to own multiple cars to live there and make multiple trips per day — not a good prospect for the years ahead.
On the NYT article and the responses:
Part of the genius of Craig Bond Hatfield's articles in the 90s (duly ignored by the media and TPTB) is his emphasis on "oil production rate." One of his titles alone is brilliant: How Long Can Oil Supply Grow?
Not that it ever made a difference in how people listen...
With the stock market tanking today... the BBC has this today.
"European stocks have joined a global sell-off, after concerns about the US economy and mortgage industry hurt markets in Asia and dented Wall Street."
Isn't that exactly what we were talking about on this blog yesterday.
It's likely not the truth, but sometimes I swear this blog is haunted by very powerful people who are starting to take cues from the overiding sentiment.
Perhaps it's more a case of this blog reflect wider sentiment about the economy and such, and that is now creeping into investors in the equity markets.
Like someone said here yesterday, it definitely appears as though the equity markets are signaling a major downturn in the economy. We'll see if that causes some demand destruction, because if it doesn't and SA doesn't respond, then it could be a very tough 2008.
More from the mortage front: "The Fading American Dream"
Scary math: More homes, fewer buyers
Record foreclosures in fourth quarter
Aaachooo! Markets are catching subprime flu.
http://biz.yahoo.com/ap/070314/world_markets.html?.v=16
Lets see you are the Fed what are you going to do?
1) Drop rates to stimulated more debt? (Is this even an option at this point).
2) Increase rates because the Chinese are looking for a higher return on thier money than they are getting from US treasuries?
3) Print more $, get helicopter Ben into his flight jacket.
hmmm...
If there is a recession/depression, demand will plummet, which should counteract the inflation we've been seeing. The feds will then be able to drop interest rates and try to juice the system.
At least that's what I'm hoping. I'd love to be able to refinance down to a 15 year mortgage at 4.5%.
We'll see if the feds have a surprise rate cut this meeting.
Garth
Not this meeting, but the next maybe...if these proceeds with speed, then yes this year, but the FED is hung up on inflation at least in their comments.
Inflation won't be counteracted because by lowering rates, they make money cheaper which causes inflation. Econ 101 - Rates go down, MS goes up. Money supply increases by definition are inflationary.
http://thefinancedude.blogspot.com
Creating new money makes money cheaper, and they do it by creating debt via fractional reserve banking and by printing new money. Everything else is a side effect of that.
The feds don't give a damn about inflation....they just want you to think they do. They are fearful of foreigners bailing out of US debt instruments --- which is essentially everything: US Bonds and Treasuries and the US Dollar. What they haven't been telling you is that foreigners have already been bailing from our bonds in record numbers and many countries have announced diversification out of the US$.
The worst of the inflation will hit food/energy/medical. I expect deflation to hit everywhere else. The fed has created this financial pickle and they won't be able to fix it. I expect they will continue to create massive amounts of new money to try and stimulate the economy while holding interest rates higher for longer than anyone expects to try and keep the foreigners invested in the bubble.
Because of peak oil, I expect this will be the last boom/bust cycle that the fed creates in the US for a very long time. And guess what, the boom part is now over.
And the Tresury Dept. has just accused North Korea of counterfeiting U.S. Currency identical to the real thing.
A Cover for our own flooding the market?
You mean the Super Bill? Those have been talked about for at least a decade now. Nothing new really.
http://en.wikipedia.org/wiki/Superdollar
This bit is fairly new:
Like these, maybe?
The source is interesting - the FAZ is roughly (very roughly) the German version of the Wall Street Journal, and is proably the most pro-American major media outlet (not that many Americans are likely to understand that - the FAZ doesn't feel the need to hide reality to spare the feelings of torturers and kidnappers, for example). It is also the hometown newspaper, so to speak, of the European Central Bank and the Bundesbank.
With such stories, you never know where the hall of mirrors leads - as the FAZ, like any major newspaper, is one player in never-ending games.
But still, if there was a German newspaper you would expect to dismiss such a story if printed in any other German source, it is the FAZ, which makes the sourcing alone notable.
Thanks for the perspective. I had been inclined to dismiss this since I didn't have a clue about the reliability of the source. I'll be interested to see where this leads. If the story has legs, you would expect others to pick it up.
I guess they started feeling bad about all those drugs making it into the country so they started printing money instead....oh wait...they still are. Must be making some nice coin. I take it this is used to pay warlords and such, but where do the bills show up when they are detected? I mean these are those notes that make it past all but the best scanners, right?
http://thefinancedude.blogspot.com
Go back to econ classes because fractional reserve banking does not make money cheaper it increases the velocity of the money and how many times it spent. Money is a commodity and it has a price just like everything else and that price is called a discount rate or interest rate.
I agree fractionally reserve banking is egregious, however let's get the facts right.
http://thefinancedude.blogspot.com
Yes, it increases the velocity of money. But it also increases the money supply. Increasing the money supply decreases the value of the money in circulation, hence the devaluation of the dollar. That's what I meant by making money cheaper. I just used the wrong term --- it should have been dollar devaluation.
"If there is a recession/depression, demand will plummet, which should counteract the inflation
we've been seeing."
There's no fundamental law that says we can't have both depression and inflation, although as someone down the threat notes, inflation won't be uniform. Wages and salaries won't inflate nearly as much, for example.
And another one...
As rates soar, 2.2 million Americans risk losing homes this year
Yes, she should have known better, but the mortgage brokers bear some responsibility, too.
"It's likely not the truth, but sometimes I swear this blog is haunted by very powerful people who are starting to take cues from the overiding sentiment."
I would say that this blog is frequented by a lot of really smart people who haven't drunk the kool-aid. Most of the problems happening have been there, plain as day, for years. The amazing thing is that so few people see them or think they'll be affected. The US *will* inflate its way out of its debt problems, there *will* be recession (maybe at the same time), oil prices *will* rise until demand is reduced, demand *will* be reduced, the US way of life *will* be renegotiated.
The only questions are how bad the problems will be, how soon, and whether people will go quietly. It looks like we'll get some important clues this year. Frankly, I think the recent stock market dips, the current state of oil inventories, and the malaise in the housing markets are all preliminary answers, with the one caveat that everyone forgets - the way inflation is calculated, increasing rents mean higher inflation. Since many people losing their houses will become renters, housing market collapse is not as deflationary as many people think. The 70s started with the housing market tanking, moved to a recession with inflation, then had even higher inflation. Welcome back.
Not that I want to get to deep into this. But the US is a huge debtor nation now with no savings this was not true in the 1970. A inflationary monetary policy under the current conditions could easily trigger hyper-inflation.
We have already been in a very inflationary time with low interest rates and loose lending. Japan's attempts at hyperinflation to counteract their own deflation is one of the reasons we are here today. Throwing more fuel on the fire so to speak will just make us crash harder. The global economy needs to deflate and become more efficient and most of all balanced.
We need to take the red pill and get it over with.
But we won't.
That's why the fed quit reporting M3 last year. A few intrepid analysts have been calculating M3 using all of the tools the fed used. They calc that the fed has been creating new money at a rate of around 10% per year -- approximately the same as it has been since 2001. But the past few months has not only seen that rate increase, but the rate of increase is also increasing. They have no intention of halting the money parade.
The clincher is that not only will they continue, they will do so exponentially. That's the only way to keep the wheels from coming off.
And then after a while the engine will blow up. But you still have the wheels.
But those wheels will be wobbly when there isn't enough fuel to propel them....
They'll be utterly useless without an engine.
But rather than admit the engine failed, they will find a scapegoat. And rather than accept cold, hard facts, the public will accept the emotional release provided by persecuting said scapegoat.
Ghawar Is Dying
The greatest shortcoming of the human race is our inability to understand the exponential function. - Dr. Albert Bartlett
The scapegoat will likely be China, since that is who they've been trying to blame for a while,,,
Here is a site which recalculates the US M3
http://www.nowandfutures.com/key_stats.html
The M3 rate of change has dropped from just above 12%/year in Jan 2007 to about 11.5% in the first week of Mar 2007. As the M3 rate drops, the Fed will cut interest rates probably before June 2007.
and another site which keeps track of the bad home mortgage lenders - total today is 38
http://ml-implode.com/
And John Williams of Shadow Government Stats calculates M3 is going the other way....up.
Thanks for that info!
Here is the John Williams' link:
http://www.shadowstats.com/cgi-bin/sgs/data
John Williams is showing a small drop in his M3 rate in 2007 so far. You're right that M3 rate has been going up from early 2006 to late 2006.
I also agree with his alternate CPI which measures the GDP annual growth rate as negative which means that the USA has been in a recession since 2005.
The US Gov't measures CPI in its own way to reduce benefit payments and give the illusion that the US economy is not in a recession.
Helicopter money drop is starting....
http://globaleconomicanalysis.blogspot.com/2007/03/1st-helicopter-drop-n...
So If you were a f#ckin idiot and bought a McMansion and some Bimmers, WE THE TAX PAYING PEOPLE will take care of you. Does this not REAK of socialism?
Disinflation will be the name of the game. Peak oil is going to be a harbinger in this volatile market. Why dont we elect people who can use common sense? My bad we don't elect people, we are witnessing the reincarnated political machine. It never left, it merely starting hiding better.
http://thefinancedude.blogspot.com
So Tate,
All I have to do is default on my mortgage and the government will pay it off? What happens if I continue to pay my mortgage off?
The people who didn't have the brains to know they couldn't afford their mortgage payments are getting bailed out while I'm dishing out my hard-earned money to Countrywide! WTF?!
Tom A-B
I can't believe it. I really can't. And how are you going to distinguish one sad story from the rest? This is nonsense. If you're politician supports bailing people out from our money, please get rid of them! Find anyone who has some common sense. I though these guys have economists in their pockets. I know any economists worth a damn will tell you bailing out banks only serves to increase the problems...we just got out of this mess not 15 yrs ago!!!!!!!!
STOP BAILING THEM OUT AND LET THEM FAIL....BETTER MANAGED BANKS will step up. And you know what....I dont give a damn about anyone who got into the mess. People need to start taking some G'damn responsibility in this world and stop finding someone else to blame.
True story- During highschool my daughter got on a rant at the dinner table.
"I've decided what I want to do...."
"Oh really what is that?"
"I want to be a stupid person!"
"WHAT!!!"
"NO SERIOUSLY stupid people don't have to get good grades or do thier homework...because they are stupid and that is what stupid people do. Stupid people are let off the hook all the time. Like DUH! They are stupid what do you expect from them - nothing! because they are stupid.
"However, if you are smart and the teacher knows it, then you don't get any slack and you better get your homework done because they know you can do it."
"So I want to be a stupid person too...because its easier"
Just WTF do you say to that ?...?....?(She is right you know) I'm sure I turned a shade of purple while my meter pegged.
She is in college now - studing to be a math major - should have went into finance to loan money...
sounds like it's much easier....:(
Del: IMHO, intellectual prowess means very little in the 2007 financial economy (with the exception of investing ones own capital without inside info). Salesmanship and cunning is all she needs (probably that's what she meant by stupid).
I think she was frustrated because we held them to a higher standard, we consider B's to be low grades. School came first. Everything else is second- sports, phone calls, etc.
I think her frustration was that kids didn't try and were not expected to, while still graduating. This seemed unfair to her at the time. She felt that the other kids could do better...
Salesmanship and cunning are very important I agree. Looks help too!
This serves as more confirmation on what has happened to public schools since they have homegenized learning and reduced gifted programs. I was fortunate enough to be in I guess one of the last groups of people in those clases. I stuck with them until middle school because I didnt want to be ostercized anymore.
Way better results....then I was in the tops of regular classes and that made me popular. I moved and it all vanished. Looking back on it, at least I had the early formation because now I could give a rat's ass what anyone really thinks when it comes to judging etc and I still kick ass at school.
http://thefinancedude.blogspot.com
It's a good story, D;
She sounds smart, actually. Just noticing an ancient, American disconnect. We have some huge issues in this country conflicting people about 'being smart', knowing you're smart, doing the smart or the 'right' thing. You're not only expected to 'keep it up' by those parents and teachers who identify you as a smart kid, but you're also targeted in any number of ways by your peers, who carry on this culture-wide low self-esteem about their own intelligence, and so anyone who dares to hold theirs up and be smart is in some ways, not all, ostracized by it. You're a brain, you're full of yourself, you're a ween, Geek, Teachers Pet, you're showing off, you're trying to make the rest of us look bad, you're insulting 'your people' by going yuppie, forgetting how to 'be real'.. It can be really insidious, and can be masked with a sort of backhanded set of compliments.
There was a PSA some years ago talking about schools, with tight shots of a little kid running down a hurdling course, his jumps tying in with the narration about our kids doing well at school. Then the camera gives you a wide enough shot to show that this, I guess 8 year-old is being asked to hop over hurdles that are about 6 inches high.
American. Stubbornly Ignorant, and Proud! Like a Rock!