The Oil Drum

People think, "I won't have to go to Florida anymore. Florida will come to me." People should realize that warmth doesn't mean Florida. It means New York is underwater. It may be that certain places like Siberia are more comfy, but it also means that they have no water. If people say, "Why should I be worried about global warming?" I think the answer is, "Do you like to eat?"

Global warming is suddenly really...er...hot.

Re:  Watching the Import Numbers

Last week,  average daily oil imports into the US rebounded slightly to 10.1 mbpd, but the average for March, 2006 (9.9 mbpd) was down about 4% from the average for March, 2005 (10.3 mbpd).  

There is always the possibility of statistical variations, but the concerns that Khebab and I have about net export capacity are based on the Hubbert Linearization (HL) method--which accurately predicted 99% of the post-1970 cumulative Lower 48 oil production.    Therefore, if the HL method is screaming problems ahead for net export capacity, and if average daily imports into the US for March are down about 4%, year over year, I think that we need to sit up and take notice.

I predict explosive increases in oil prices.

The "Export Land" Model:

 A critical point to keep in mind is that an exporter can only export what is left after domestic consumption is satisfied. Consider a simple example, a country producing 2.0 mbpd, consuming 1.0 mbpd and therefore exporting 1.0 mbpd. Let's assume a 25% drop in production over a six year period (which we have seen in the North Sea, which by the way peaked at 52% of Qt) and let's assume a 10% increase in domestic consumption. Production would be 1.5 mbpd. Consumption would be 1.1 mbpd. Net exports would be production (1.5 mbpd) less consumption (1.1 mbpd) = 0.4 mbpd. Therefore, because of a 25% drop in production and because of a 10% increase in domestic consumption, net oil exports from our hypothetical net exporter dropped by 60%, from 1.0 mbpd to 0.4 mbpd, over a six year period.

Note that car sales in Russia are up 15% year over year.

http://www.sbs.com.au/whatson/index.php3?progdate=01:04:2006

(Scroll down to 2013 - La Fin Du Petrole.)

More than 80% of the global economy relies on petroleum. What would happen if the world's oil supply dried up overnight? Directed by Stéphane Meunier and starring Hippolyte Girardot, Gwendoline Hamon and Helena Noguerra. 2013: Oil No More is a doco-drama based on the idea that oil companies, having vastly overstated their oil reserves to keep their value high, are faced with a wave of terrorist attacks aimed at jeopardising oil supplies to the West. Reluctantly, they have to own up with the fact there's only two years of supply left. Interviews with scientists, economists, environmentalists and Green politicians alternate with dramatisations following the life of greedy stock broker Paul. He has invested 90% of his company's shares in oil and watches with glee as the price of petrol skyrockets, until his professional and personal life are directly affected as a disastrous recession takes hold of the oil-dependent world. Also stars Nicolas Sarkis (Editor-in-Chief, Pétrole et Gaz Arabe), Jacques Attali (President, Planet France), Yves Cochet (Representative for Paris Green Party) and Jean-Marie Chevalier (Lecturer, Paris-Dauphine University, Director of C.E.R.A). (From France, in French and English, with English subtitles) CC WS

I think the latest energybulletin post is worth discussing:

http://energybulletin.net/14442.html

Basically points out that Peakoil Doomers should rightfully be seen as the 'ghost of Xmas future' and not as the Grim Reaper incarnate; that only a full disclosure of possible Peakoil ramifications can be the best motivation to generate historic political and social change.

I heartily agree with this author's assessment of looking at the worst, then encouraging the best.  It is much too easy to continue the habits of the easy-motoring status quo, the need to develop a constant awareness that civilization is only three meals deep is, by far, the best way to achieve Powerdown.

Bob Shaw in Phx,AZ  Are Humans Smarter than Yeast?

A confluence of various issues.  Lack of rail capacity (Kunstler) * Consolidation of rail industry (Corporate mergers and monopolies) *  Coal displaced by consumer goods(!) as cargo  (Overconsumption)  *  Coal is not fungible  (Stuart?)  *  Wall street likes tight capacity --> higher prices  (Corporate capitalism?)  *  Flooding damaged tracks, adding to problem  (Climate change?)  *  100 more coal burning plants in the works as nat. gas fades!!  (End-of-the-world AWKI)  *  And...Conrad Burns greasing the rails!

Ultimately, I'm afraid this helps confirm that yes, the American Way of Life IS non-negotiable!  We will not change until we really really really HAVE TO.

Here's a taste from the introduction:

As globalization has spread, two opposing views of its future have emerged. The first scenario is
the belief in continued globalization, not just globalization of greater reach but also of greater
speed and strength. The second scenario is the opposite worldview of de-globalization. This
viewpoint often takes its cues from the environmental movement, which claims that resource
constraints of a finite globe will arrive shortly, making current global economic relationships
tenuous.

It's worth a read. I invite your comments.

Making A Living On The Farm

Many times, non-farm citizens wonder: "Why can't farms be the size they were in the early 1970's, and why can't family farms be successful at that size?" According to the 1974 USDA Census of Agriculture, the average farm size in South Central Minnesota was 261 acres of cropland, 25 dairy cows and 23 sows in a farrow-to-finish swine enterprise.

According to the MnSCU Farm Business Management (FBM) Summary of actual farm records for 2000-2004 in South Central Minnesota, the average net returns were $45.75/acre for corn, $38.30/acre for soybeans, $11.63/hog marketed, and $461.81/dairy cow . . .

With respect to energy:

This data points out why we continue to see farm sizes grow, why farmer operators are looking to diversify their farm business by adding livestock enterprises, why farm operators are looking to investments in ethanol, biodiesel, wind energy, etc. to supplement farm income . . .

From the Energy Bulletin article that Khebab and I coauthored:

Proposal: Replace the Payroll Tax with an Energy Tax

Some have argued that the suburbs are dead; the suburbanites just don't know it yet. It's probably more accurate to say that the suburban commutes are dead; the suburban commuters just don't know it yet.

We recommend that the United States abolish the payroll tax (Social Security + Medicare tax) and replace it with either a liquid transportation (petroleum) fuel tax or an overall (nonrenewable) energy tax.

The majority of American households pay more in the payroll tax than in the income tax. This would be a tax cut for most households and it would a massive tax increase on those who are profligate in their use of energy. No matter where one lives, the cost of goods would go up, but if you lived close to where you work, your effective tax rate would go down. Of course, those who persisted in long commutes would pay the price.

There would of course be very powerful forces opposed to this idea--the housing industry; auto industry; airlines; trucking--the list goes on. But the fates of these industries are sealed. It's not a question of if they will contract; it's just a question of when. The sooner it happens, and the sooner these industries start emphasizing energy efficiency, the better off we all will be.

A high gasoline tax does not necessarily equate to a lower standard of living. Norway, with the highest gasoline tax in the world, has the highest standard of living in the world, perhaps partly because their car ownership per 1,000 people is about half of what it is in the US.

There would be some other benefits. As we turned to walking, biking and mass transit, our health would improve. There is pretty much a linear correlation between obesity rates and total miles driven (here in the US, we are the world champs in both categories). In addition, since this is in effect a consumption tax, everyone who now avoids paying Social Security taxes would no longer be able to avoid paying them.

However, the primary reason for implementing the proposal is that it would cause an immediate and massive across the board push for greater energy efficiency and it would unleash enormous free market forces against profligate energy use.

Something's going on. Price goes up to U, there's a little profit taking, price goes down to D. Prices goes up to U1, where U1 > U. Profit taking lowers price to D1 where D1 > D. And over and over. At least that's my take on it. And the primetime driving season isn't even here yet.

Go to TFC Commodity Charts and look at the weekly chart. For some reason, they won't let me link it in here. Folks, we're headed toward $70 for sure sometime soon.

And I'll add that the displayed upward zig zag can not possibly reflect reactions to Nigeria, Iran, or other geopolitical events which in and of themselves follow no such pattern.