My guess, they will cut exports, no tanker attack (yet), gas prices at about 3.15 on Friday
-Stop the Iran war-

Heating Oil
Gasoline/Diesel
Jet Fuel
Plastics
Lubricants (let's stay serious here folks)
Fertilizer
Conversion to Electricity (Utilities)
I'm sure there are many others...

Please includes thoughts on substitutability with other methods/end products and how scaleable they are.

http://www.msnbc.msn.com/id/11103509/

(These comments are by a Dallas Morning News Columnist, William McKenzie)

http://dallasmorningviews.beloblog.com/

Bush State of the Union: getting religion on energy?

Here's one potential big deal in the president's State of the Union speech: A Nixon-goes-to-China on energy issues.

A senior White House aide I spoke to over the weekend says the president will focus on new energy technologies, which means alternatives to oil production. The aide cited a Fortune article touting energy alternatives. He also noted how Richard Rainwater, once Bush's Texas Rangers' partner, now champions the peak-oil theory. That's the line of thought that says the world's hit its top production capacity for oil. From here on out, oil's downhill.

I haven't had time to run down Rainwater's beliefs, but, if this is true, that's a huge shift. Rainwater had bet heavily on oil when it was selling at low prices. He looked crazy, but he was considering how demand was growing in China and the Far East. It turns out he was right, which makes his voice on peak oil particularly significant.

It will be even more big-time if Bush starts getting religion on energy alternatives. A Texas oilman who gets behind them could outdo a red-baiter like Nixon going to Peking.
2:38 PM | William McKenzie (More) | Respond | Permalink

http://static.flickr.com/30/93125220_bafc1d7155_o.png

This link takes you to a plot of Russian production showing the predicted production curve, based on Hubbert Linearization (HL) versus the actual data.  Note that only the data points circled (through 1985) were used to construct the model.  The data plot was put together by Khebab, who may not share my views on Russia.

The HL method--using only data through 1985--predicted that Russia would produce 61 billion barrels (Gb) in the 19 years after 1985.  In reality, Russia produced 57 Gb.   Actual production was 93% of predicted.  I think that it is significant that actual production is 4 Gb below the HL prediction, given that everyone is so mesmerized by the recent increase in production.

Currently, it appears that production is about 5 million barrels per day (mbpd) above where it should be based on the HL plot, but 5 mbpd is 1.8 Gb per year, so we could actually see a year or two of rising production before production reverts to the curve (assuming that it will).   For what it's worth, my bet is that Russia will start a steep decline no later than next year.  If Russia is going to revert to the curve, if it started right now it would probably require a decline rate of about 11% per year.  Note that production growth year over year is slowing, from 11% to 9% to 2.7% last year.

Note that if Russia had followed the curve, and if current production was LOWER at about 4.5 mbpd (instead of about 9.5 mbpd today), total cumulative production would have been 4 Gb HIGHER than current cumulative production.  I suggest that you read that again.  

Russian production has just been rebounding from the post-Soviet collapse in production and as cumulative production gets closer to where it should be, year over year growth is slowing, which is what happens before production starts falling.

I guess my basic question is if the HL method was 93% accurate in predicting the incremental cumulative production from 1985 to 2004, why are we so distrustful of the predicted production in the next couple of decades?   The model predicts that production in 20 years will be down to about one mbpd.

I concede the point that lightly explored basins in Russia will add new production, but I suspect that it will be as Alaska was to the US--it helped, but it did not reverse the long term decline.  Also, it takes a long time to add significant new production facilities.   IMO, the math is clear.  The only long term trend for the vast majority of existing Russian production is down--and down sharply.  

This plot reinforces my concern that we are facing an immediate crisis in net export capacity.   What if the Saudi plot is 93% correct?

For December 06:

Expected price: about $70/bbl

50% price range: $59 - $80/bbl

Markets see a 25% chance the price will be below $59, 25% for $59 - $70, 25% for $70 - $80, and 25% for above $80.

I also tried to estimate what the chances are for a price above $90, and it is a little hard to judge due to thin trading, but it looked like around 12% or 13%. I.e. you can get about 7 to 1 or 8 to 1 odds if you want to bet (via buying a call option) that the market is going over 90 this year.

'However, he says it is also part of a compromise. The Americans and the Europeans had been pressing for formal referral - a move that would normally lead to sanctions - but settled for the less formal option of "reporting" Iran's activities.

Iran is expected to face more criticism at the special IAEA board meeting in Vienna on Thursday. But analysts say the powers will wait until the regular board meeting in March to put their planned resolution into effect.

A US diplomat told Reuters news agency: "This is the most powerful message we could have hoped for."'

If the West bothers to play by the rules, after a
referal to the Security Council, there would be
a resolution calling for the imposition of
sanctions  -but it has already been pointed out
that sanctions are unlikely to have much effect
on Iran, which has plenty of land border for the
movement of whatever goods it might need from the west
and does anyone really think Russia and China are
going to stop trading because the US demand it?

If the US decides not to play by the rules (and
it didn't with respect to Iraq) then all hell
could break loose any time after March.

http://www.washingtonpost.com/wp-dyn/content/article/2006/01/27/AR2006012701258.html

sure hope it comes up as a hot link, but from here it may not.  

There is an interesting article in 321Energy.com that addresses price of oil to amount of US dollars in circulation.

http://321energy.com/editorials/casey/casey013106.html

    "Since the younger Bush took office, the U.S. has been frantically printing money to stave off recession and keep the bloated American economy from collapsing. Fiat dollars have made their way around the world and now constitute the major foreign currency holdings of most countries. Central banks in China and Japan hold an estimated combined total of $1.3 trillion. With the modern equivalent of printing presses going flat-out, the world supply of money has almost doubled since 2000, from less than $2.5 trillion to just below $4.5 trillion.

    Interestingly, as money supplies have increased, so too have oil prices. While there are certainly other factors at work, it is hard to ignore the correlation between the doubling of the money supply and the rise in crude."

..or the increase in price of just about everything not found on a Walmart shelf.

and..

    "The other implication is that real supply-and-demand problems may not yet be fully priced into the oil market, even with crude at $65. In fact, the ratio of the oil price to world money supply currently sits near its historical average (represented by the green line). That is, crude is not overly expensive, given the amount of money in the world."

This could mean that we aren't even at the point where real production problems are evident and the cost is still $60 plus. Inflation seems to be the growth hormone jacking the price higher. And we haven't even experienced significant, world altering production problems yet.

"The [American] empire has entered the phase of desperation, like a vampire who sees dawn approaching and realizes that he still has not sucked enough blood.
...
The United States invaded Iraq for oil; it doesn't care about democracy or life. They are desperate because their reserves of gas and oil are running out."
-Hugo Chavez, President of Venezuela
Read this article

How can you not love this guy? Viva Chavez!

requiescat in pace

I shall miss quotes like this

"So you can look at the system and say it's got a lot of problems to it, and sure it does. It always has," Greenspan told the JEC last week. "But you can't get around the fact that this is the most extraordinarily successful economy in history."

Looks like Lovelock's prognosis for Gaia has prompted other scientists to come out of the closet and say what they have been previously reluctant to say. I would expect that 2006 will be the year of "awakening" re. the terminality of the environment and resources.
Reed
---------------------------------------
Britain
The Times January 31, 2006
Analysis

Report shows scientists' real fear
By Peter Wadhams

THE report Avoiding Dangerous Climate Change brings out very clearly just how fast scientific worries about climate change have accelerated, propelled by a new fear -- the "tipping point" when change becomes irreversible.
We have already reached one such point in that we cannot go back to a system with no climate change. We know that carbon dioxide continues to act climatically for about 100 years, so if we went back to the Stone Age tomorrow we would still experience another century of warming.

But there are further tipping points where subsystems break down; for example, the Gulf Stream slowing because less cold water is sinking at high latitudes. Eventually a point is reached where the whole climate-regulating system breaks down, producing changes that can never be reversed.

Just recently, for instance, it was realised that as carbon dioxide levels rise the oceans become more acidic and that this will destroy plankton, especially plankton with shells, which absorb and reduce carbon levels. The Intergovernmental Panel on Climate Change (IPCC) concluded in 2001 that the rate of global warming is about one third faster than previously suspected.

It predicted that by the end of this century there will be an average warming of between 2C (3.6F) and 5C, with devastating consequences.

The next IPCC assessment is due, and the new fear is that runaway change could soon be upon us, whatever we do.

Peter Wadhams is Professor of Ocean Physics at Cambridge University

Good point.

Funny how quickly events in the past month have transpired against the 'what me worry?' economic punditry don't you think?

Heck, a couple of weeks ago, CNBC and similar MSM channels couldn't find an 'expert' who wouldn't parrot the Fed line of a signalled pause concerning interest rates increases.

Whoops!

Three guys - a Canadian farmer, Osama bin Laden, and an American engineer are together one day. They come across a lantern and a genie pops out of it.  "I will give each of you one wish, which is three wishes total" says the genie.

The Canadian says, "I am a farmer, my dad was a farmer, his father was a farmer and my son will also farm. I wish that all the farmlands of Canada will be forever fertile."
Pooooof! In the blink of the genie's eye, the land in Canada was forever made fertile for farming.

Osama bin Ladin was amazed, so he said, "I wish for a wall around Afghanistan, Iraq and Iran so that no infidels, Jews or Americans can come into our precious state."
Pooooof! Again, in the blink of the genie's eye, there was a huge wall around those countries.

The American engineer was curious so said "May I first ask a question? Please tell me more about this wall".
The genie explains, "Well, it's about 5000 feet high, 500 feet thick and completely surrounds all three countries.
Nothing can get in or out. It's virtually impenetrable."

The American engineer responded, "My wish then is that you fill it with water up to about 4000 feet."

In a poll conducted for the University of Maryland's Program on International Policy Attitudes between June and August last year, fully 74% of Chinese citizens said they agreed with the statement "the free enterprise system and free market economy is the best system on which to base the future of the world." The Philippines, at 73%, and the U.S., at 71%, were second and third. The poll, which surveyed 20,791 people in 20 countries, seems like a pretty good snapshot of current sentiment, as such things go.

http://online.wsj.com/article_email/SB113867761847560684-lMyQjAxMDE2MzM4MTYzNzE3Wj.html

http://www.plan59.com/av/av119.htm

The big question I always have is "when"?  

As I read the posts at TOD, and I contemplate slow squeezes and projected maximum productions, I keep thinking that any system that is pushed close to its capacity will begin to experience losses.  As you drive along a freeway that is starting to get too crowded, you may be able to see that if everyone maintained lane discipline and worked in a unified manner, that the speeds and throughput could be much higher.  But it won't happen - someone wants go 20mph faster, someone is on the phone, another has a malfunctioning vehicle, etc.   Perhaps it's just entropy.  But I expect that these losses will manifest in trying to achieve and maintain maximum oil production too.  Politics, wars, hurricanes, what have you will prevent us from getting to what might be done if everything went like clockwork.  My suspicion is that this is not accounted for - but then I don't really know how it could be quantified, and even if it could it would be tough to incorporate 9other than by fudge factor).  

The effect would be to exacerbate the problems we face, and make the answer to "when" be "sooner".  Anyone else have any thought on this?