DrumBeat: April 1, 2007

RBS chief economist on peak oil

After the peak, according to this theory, there will be a steep decline in production; crude oil prices will rise sharply, and there will be a shortfall of oil, which will wreak havoc on the global economy.

But this theory, like many Mel Gibson movies, is pretty implausible stuff - to an economist, at least. That's because it neglects to take into account the importance of technological progress and the adaptability of the market.

Food, Climate Change and the Coming Energy Crises

Across the water, the easy complacency which surrounds the supplyof food was severely tested in September of 2000 when after just a few days of a nation-wide truckers’ strike, many parts of the UK found themselves facing what has become unthinkable in modern times: a shortage of food. Once the deliveries stopped arriving, it was only a matter of days before the shelves were emptied. Since little food was produced locally, it quickly became apparent that there really was no other source of food available. Modern farming and globalised systems of trade have created a situation in which we are perilously vulnerable to political and environmental factors quite beyond our control. Unless we start taking this issue seriously and make dramatic changes to the way we think about and produce food, we are facing the increasing likelihood of food shortages and yes, famines, even in the most developed and ‘modern’ parts of the world.


Marseille oil port workers vote to end 18-day strike

Workers at France's Fos-Lavera oil hub in Marseille voted yesterday to end their strike on its 18th day as it threatened to shut down refineries and cause a regional fuel shortage, a trade union official said.


April Uranium Price Outlook: US$110/Pound

Nuclear energy provides about 16 percent of global electricity needs and about 20 percent of electricity needs in the United States. The scarcity of available uranium inventory has caused prices to soar over the past six years by more than 1100 percent. The spot uranium price has more than doubled over the past year and continues to rise strongly in 2007. According to industry watchers, the uranium supply shortage could soon reach a ‘crisis’ stage.


Ethanol makers slam report

A group representing biofuel manufacturers disputes a report that suggests the federal government’s massive investments in ethanol won’t dramatically reduce greenhouse gas emissions.


Energy-South-Africa: Fuel in the Car at the Expense of Food on the Table?

...Sugrue wrote in a paper titled 'Towards A Southern African NGO Position On Biofuels': "In Southern Africa maize could be a major feedstock for biofuels, yet it is the staple diet of more than 80 percent of the population and all of the poorest citizens."


Climate change ‘could create 200m refugees’

EQUATORIAL lands that are home to hundreds of millions of people will become uninhabitable as food and water run out due to climate change, scientists will warn this week.


Firms fail to adapt to climate change

Companies and public bodies in Britain face expensive repair bills, penalties and even litigation because they are not adapting infrastructure and business plans to the threat of climate change, the government's UK Climate Impacts Programme (UKCIP) has warned.


Poor Nations to Bear Brunt as World Warms

The world’s richest countries, which have contributed by far the most to the atmospheric changes linked to global warming, are already spending billions of dollars to limit their own risks from its worst consequences, like drought and rising seas.

But despite longstanding treaty commitments to help poor countries deal with warming, these industrial powers are spending just tens of millions of dollars on ways to limit climate and coastal hazards in the world’s most vulnerable regions — most of them close to the equator and overwhelmingly poor.


U.S. Churches Go ‘Green’ for Palm Sunday

Slightly more expensive than the average palm, eco-palms are the rage in churches across the United States because of the social and environmental benefits they represent. They are collected in a way that helps preserve the forest, and more of the sale price ends up in the pockets of the people who cut them.


Soaring costs threaten TransNet

Soaring construction costs already are threatening the completion of San Diego County's $14 billion, 40-year road-building program one year before it starts receiving cash from a countywide sales tax, transportation officials say.

Since 2002, construction costs have nearly doubled and they are rising three times as fast as sales tax revenues, said Richard Chavez, principal transportation engineer for the San Diego Association of Governments, a regional planning agency, last week.

Jack Boda, the association's director of mobility management, said in the same interview that the escalation reflects fast-rising prices worldwide for steel, asphalt and cement - the main building blocks of freeways, railroads and bridges.


Americana in Montreal

For instance, two delegates from Saudi Arabia gave a presentation about "sustainable development" in their country. They spoke of the explosive growth rates of 3-6% a year in their cities. And they spoke of the huge economic opportunities available to foreign investors to meet the demands of this growth. At the end of their talk I asked where all the water would come from to feed these cities, and they admitted to the audience that Saudi Arabia is facing extreme challenges due to their underground aquifers emptying at alarming rates. They said this is not a problem though, because water will be supplied by desalination plants, plants that do not exist yet and that would be fuelled by natural gas. This is in no way "sustainable development," not by my definition (which is "capable of continuing indefinitely").


Farmers market or super-mega-grocer? Your decision could change our world

To say it plainly: Deep Economy should be required reading for every economist and economics student in the developed world; for every elected official on the local, state and federal levels; and for everyone else as well. The book articulates the profound environmental and human costs caused by dominant and rutted economic behaviors while counterbalancing these sober realities with real-world examples of sane and successful "economies that are more local in scale."


Judge advances global warming lawsuit

A federal judge has advanced a lawsuit against the government over its funding of overseas projects that environmental groups claim contribute to climate change.

The lawsuit, filed by environmental groups and four U.S. cities, claims that the overseas projects will harm the U.S. environment because the effects of global warming will be felt at home, and seeks to require the same environmental reviews that are required for domestic projects.


Climate draft charts extinctions

A key element of the second major report on climate change being released Friday in Belgium is a chart that maps out the effects of global warming, most of them bad, with every degree of temperature rise.


Exxon: 12-yr wait on China energy project to pay off

ExxonMobil said a 12-year wait to start a $5bn refining and chemicals venture in China will pay off because the Communist government will free the world’s fastest-growing gasoline market and ensure profits.


Russian company to build Saudi pipeline

A subsidiary of Russia's national energy company has signed a $100 million contract for construction of an oil pipeline in Saudi Arabia.


Campaigns save energy with hybrid cars

This year's presidential candidates are trying to get good mileage out of getting good mileage. The candidates, who do a lot of talking about the need for greater energy efficiency, are not just asking who walks the walk but also, who drives the hybrid?


Global warming could bring hunger, melt Himalayas

Global warming could cause more hunger in Africa and melt most Himalayan glaciers by the 2030s, according to a draft U.N. report due on Friday which also warns that the poorest nations are likely to suffer most.


Sydney's blackout hailed a success

Organisers behind a campaign that saw Sydney impose a one-hour blackout to focus attention to global warming hailed it as a success for taking the equivalent of nearly 50,000 cars off the road.


Malaysia's Petronas to search for oil off Myanmar

Malaysia's state energy firm Petronas will launch an oil exploration survey off the southern coast of Myanmar, state media said Saturday, amid growing foreign demand for the country's vast resources.


Brazil's Lula Doesn't Get What He Wanted from Bush: End to Subsidies and Tariffs

The Camp David meeting, this Saturday, March 31, between American President George W. Bush and his Brazilian counterpart Luiz Inácio Lula da Silva produced optimistic statements and vague promises, but no concrete results for Brazil, which wanted an end to the tariff charged Brazilian ethanol in the US market. Neither there was any hint that the United States will reduce soon its farm subsidies.


Worries over global warming to boost ‘shift to renewables’

Three decades after former US President Jimmy Carter experimented with solar panels on the White House roof, grim UN warnings about climate change may kick-start wider global use of renewable energy.

Just two cents:

I'm glad to see discussions that are devoid of tempests in teapots and advanced trollery.

It's been a pleasure to peruse TOD recently.

(In spite of overall developments world wide...)

Yes...Bendeasy..its nice to read without the trolls but I suspect from several posts that one of the reknown banned ones has his camel's nose back under the tent flap and with a new ID. At least he has dropped the part about pleading for a mass dieoff and how we all deserve it. I could be wrong but its extremely hard for a hard core troller to change his stripes completely.

Still as you say...very pleasant.

Russia predicts lower oil prices for 2007-2009. Wonder why.

Russia cuts oil export duty to $156.4 per ton from April 1

Russia has cut the oil export duty by $23.3 to $156.4 per metric ton from April 1.

A decline in oil prices that began late last year and has continued into 2007 has prompted the government to adjust crude price and economic growth forecasts and cut oil export duties.

The oil export duty is adjusted every two months and is based on Russian Urals oil blend prices on world markets.

The previous crude export duty set February 1 stood at $179.7 per metric ton.

The Finance Ministry earlier said the oil price forecast for 2007 had been reduced from $61 to $55 per barrel, and the forecasts would also be reduced from $56 to $53 per barrel in 2008, and from $52 to $50 in 2009.

>Russia predicts lower oil prices for 2007-2009. Wonder why.
Simple: oil companies want more money and less taxes.

Regards

They have not been successful steering the Putin administration up to now (e.g. Yukos) so why are they all of the sudden able to set the agenda? The more plausible explanation is that, just like in the west, the cornucopian analysts set the agenda.

My guess is that the Russian governmnet now own most of the industry and then it matters little if they get the money thru taxes or profit. But the non government and foreign owned oil companies need lower taxes to invest in new production to get at new hard to develop oilfields.

I put something together that you TOD people may like. Here it is:

www.newworldeconomics.com

Hope you like it.

Are you a "gold bug?"

I found the article interesting but a bit disjointed.

The notion of cutting back consumption is a good one.

Your illustration of heating the house in Maine is a bit thin, though. Lots of pain can be involved in the economic dislocations caused by changes in petroleum prices.

You seem to also assume a certain faith in the "Markets" that all do not share....?

I think that this faith has become the key unexamined premise of "economists" in our world today.

It may very well be that we have perpetrated the greatest market failure of all time because of unexamined premises.

I like reading John Gray ("Straw Dogs" and "False Dawn") to counter current economic thought.

Just some thoughts in response.

Are you a "gold bug?"

One doesn't have to be a 'gold bug' to look at the present money system and claim flaws. The 'gold bugs' have many more years of "working" systems to draw conclusions from is all.

Any system has flaws.

Yes Sir: The cost of extracting resources rises in tandem vis a vis some set bench mark. The bench mark is not some notional value such as the dollar or the euro. The real bench mark is the societial cost which includes labor, energy, pollution and many other factors. If the societial cost rises to extract oil, the effort will detract from extracting other resources causing a decline in supply of those resources thus a rise in price. Your charts give a nice simplified picture of this. I think what a lot of folks forget is that economics is a study of a vast system not just a single item.

a couple thoughts on your article:

Your concluding paragraph about using 10 times less to heat a house is a great message. This is what must eventually happen on a grand scale.

About that first chart: Oil measured in "real money" is a meaningless gimmick that may be fun to stare at, but has little real value. Oil and gold are both real assets and alternative stores of value compared to our paper dollar. However, comparing the two as if there is some fundamental linkage that must always be maintained is ridiculous.

Of course both will rise together as the value of paper dollars fall. There is no causal relationship between the two. One is energy, necessary for life, economy, and industry. The other is a curiosity with little practical use, aside from storing some value. Oil is used, and destroyed, and must be replaced. Gold is mined and accumulated. They are only similar in that they are part of a large family of non-dollar assets that will definitely rise as the world loses confidence in the worthless paper money the US keeps printing.

All of your other conclusions and graphs are well presented and form a good coherent message about oil prices. The link to gold is just a distraction.

> "real money" is a meaningless gimmick

I generally agree that gold is a "barbarous relic" as a monetary standard -- liquidity governed by mining output? geez.

That being said, there may be some merit to the idea that the world's savers (Asia and other exporters) will gravitate to gold (or other precious metals) at some point for lack of a better place to hide. It's been suggested that those savers have sought US/Western investments because local investments have not traditionally had the desired levels of investor protection. What a weird world we live in.

Most of the real gold bugs in the US are old and discredited, but what about Asia? Are there "gold-money" newsletters out there in languages that I don't understand? That I believe is an interesting question.

During the 19th century, on the gold standard, we had no inflation. During the 20th century, using fiat currency, the dollar lost 95%+ of its value to inflation. WHich one do you prefer?

The "liquidity by mining output" statement makes no sense to anyone that understands how a gold standard works. Professor Antal Fekete has written numerous papers on real bills and self-liquidating credit under a gold standard. (See www.financialsense.com). There is absolutely no problem financing production under a gold standard. (Which is what I assume you meant by liquidity).

Over the last 100 years the Fed has gone to a lot of trouble to discredit the gold standard, since it is the natural enemy of a fiat currency. FIat currencies allow governments to spend without any voter restraint (other than worrying about creating excessive inflation). The gold standard on the other hand limits government spending to what can be raised by taxes and borrowed against future tax income.

Why would anyone therefore (other than a banker that is) NOT support a gold standard? In today's world, you could use electronic debit cards linked to your gold account just as easily as cards linked to your fiat dollar account, and you could spend .001 oz of gold on a cup of coffee as easily as you would $2.50. The difference is that under the gold standard you can sleep at night not worrying about the bankers printing additional money and devaluing the notes in your pocket.

The general misunderstanding and ignorance of how a gold standard works/has worked in the past is beyond belief.

Francois.

When someone deflates the value of paper money by, for instance, the CPI without inflating the amount of paper money by the T-Bill rate then they haven't been completely honest about the value of paper money. This mistake is repeated ad nauseum by gold bugs. Paper money has NOT lost 95% of its value to inflation. The gold standard is self-discrediting. The gold bugs are "beyond belief".

Francois? You still concious?

I found the April 1 article to be very thought provoking; it also seemed well organized to me. I'm going to contemplate what you wrote and read some of your other pieces.

Bush 41 Offical admits Peak Oil Possible and Rail Needed

However, I would observe that railroads do have a trump card. Unlike their partners in trucking and aviation, if at some point in the future permanent oil shortages are a serious threat, rail can convert to electricity generated from an alternate source. The rail mode already carries its freight and passengers nine times farther per gallon of fuel than do the highway modes.

pdf warning
http://www.du.edu/transportation/documents/GilCarmichaelspeechtoTheTrans...

Best Hopes,

Alan

OK Alan, is the line about Bush 41 an April fool's joke?

Alan -- the PDF was quite good. Thanks!

The elder Bush appointed better quality people than his son does. It shows in the results.

True. I wondered if there was a specific comment from Bush 41, but I guess the author of the PDF was a Bush 41 appointee....?

Yes, head of the Federal Railroad Adminstration.

The elder Bush appointed better quality people than his son does. It shows in the results.

Don't think you can say that:

1)They started this idiotic war and stationed American troops across the Gulf.

2)Most Bush II people served in Bush I.

2)Their insistence that Saddam had to go, not UN backed, destroyed the country with sanctions carried out by the hapless Clintons, and left it ripe for his ne'er-do-well son to stumble into.

3)Neither Bush I, Bush II, the Clintons or any of the rest of the DC establishment did fuck-all about oil for 3 decades except spend over $10 trillion on a now completely clear to all failed military policy trying to secure the remaining world oil supplies.

I think it would be helpful for us all to admit the complete failure of our entire political class on this issue and ask instead how we change it.

“I think it would be helpful for us all to admit the complete failure of our entire political class on this issue and ask instead how we change it.”

That assumes we have a say. We never had a say.

The entire political class failed because the voters failed to elect good people. The voters failed to keep themselves informed so the candidates with the most corporate money to spend on commercials won elections. Carter caved in to the Commitee for the Present Danger (Cheney, Wolfowitz, Perl, et al.) Reagan never considered any solution other than the military. Clinton completely failed to address the dismantling of the Cold War Military-Industrial Complex. This was all the result of people selling their votes to the highest bidder.

Now I try to vote with my money –it works for the top 1%.

voting is over-rated. hire a lobbyist.

Not the voters problem. This is the way the machine is designed to operate and it is operating fine.

Has anyone else read Alf Hornborg's "The Power of the Machine"? It applies a thermodynamic analysis to the global economy. Makes sense out of Vail's article on Nigeria and my wondering why we seem to suck so much out of "the periphery" that the states fail into banditry. How it is that the periphery exports low entropy to the center in exchange for high entropy "waste", subsidizing the core at an effectively astronomical interest rate [think Africa and IMF policies].

The Wal-Mart trucks bringing trash into Maine are little different than the Casella Waste trucks hauling trash from out of state to Maine's incinerators. The low entropy export from Maine is electricity and Nestle's bottled water.

Oil - and the energy that runs our social machine - is central to his arguments.

cfm in Gray, ME

Hey Alan, I read that a Midwest company is looking into compressed gas storage for wind turbine leveling.

Any details or links ?

I went the link and got a blank screen. I went through Energy section of site and found nothing at first glance. More details ??

Alan

you can try www.isepa.com

(about the stored energy park)

What elwood said. I like the concept (aside from the fact that I used to work in the gas industry) because there is an awful lot of used compression equipment that could be converted in a crash program.

Regarding the article on hybrid cars the candidates are or are not driving:

I note that Edwards said in his last campaign that he and his wife were buying a Honda Insight. Guess that didn't happen. Kudos for buying a hybrid Ford Escape this time, but did he just buy that recently?

Richardson apparently made a feeble attempt to go hybrid but now has a monster SUV to drive him around.

Forget Giuliani, who drives a Cadillac Escalade.

McCain drives a Cadillac CTS. Screw that.

Romney has a Ford Escape hybrid.

Obama is into the E85 solution, but drives a monster SUV and admits he often can't get E85, anyway. I would write him off as clueless, for now. Of course, the ethanol enthusiasts here will strongly disagree.

Clinton seems to be trying, since she and Bill got the secret service to get them a hybrid Escape.

No one seems to drive a Prius or a Honda civic hybrid. The Prius is about as roomy as an Escape, so I find the decision to get an Escape a little lame. Guess it's a made in America thing.

Gore isn't running for now, but I still am having trouble understanding how he can be using so much electricity in his mansion in Nashville. Yes, I get it that he has greater needs than us average schmucks, but it still doesn't seem to compute.

I have been an Edwards supporter going back to the last election. Finding out about his new digs which will have a 10,000 square foot main house and a 17,000 square foot "recreation" center, gave me pause. Unfortunately, I don't see much to choose from if one is considering the lifestyles of the various politicians who are running and have a chance.

I guess I am left with figuring out who is likely to do the most with respect to energy security and global warming regardless of their personal lifestyle choices. I guess this pretty much makes me a one or two issue candidate. C'est la vie, but I think these two issues will make or break our nation and the planet for the next century and beyond.

Politicians in big SUVs are still appealing to the masses who also -- still -- drive and adore big SUvs.

I think that there is a security thing going on here as well.

Maybe they will choose armored troop carriers soon.

Gore isn't running for now, but I still am having trouble understanding how he can be using so much electricity in his mansion in Nashville. Yes, I get it that he has greater needs than us average schmucks, but it still doesn't seem to compute.

I would like to know how much energy Gore is using as well. Is he using the electricity for heating, instead of natural gas? I wonder how drafty and volume-efficient his mansion is. And how does he control the energy that the secret service agents that live there use?
And the other thing that is confusing is whether this is his energy bill or actual use of energy. Apparently, the "green" energy he uses costs much more, so his use may be exaggerated.

It is really hard to find good info on this with all the propaganda floating around.

Right, Gore is using too much electricty so let's swift boat the sonofabitch and elect Dick Cheney in 2008!

Ron Patterson

Bleeve me: I feel your pain.

If Americans want to take their fate back into their own hands then it is time they should let go that pacifier called the MSM. Election time propaganda stunts would have no effect if people bothered to inform themselves.