Jubak: More Peak Everything! (and an open thread)
Posted by Prof. Goose on April 18, 2006 - 6:16pm
Topic: Supply/Production
Tags: everything, metals, minerals, oil, peak oil [list all tags]
Jubak uses a nice discussion of peak oil to explain "peak metals" in this article:
Call the theory Peak Metal. The price of gold and other metals, and related stocks, will keep rising as finding new sources gets harder and more expensive.[...]But I find the mechanisms that Peak Oil theory has developed to explain the direction of oil prices and the operation of the oil market immediately applicable to the metals sector.
Of course! I have posted on this before: consider first gold-mining at Sutter's Mill in Cali-- picking big nuggets out of the stream by hand. Nowadays, it takes 50-100 tons of ore being very, very energy intensively processed to get just one ounce of gold! Extrapolate to all other minerals--rising energy prices will eventually shut down most mining operations for any earthen minerals.
Bob Shaw in Phx,AZ Are Humans Smarter than Yeast?
Thxs for the reply. You maybe roughly correct in ounces per ore tons, but you also have to consider the 'total picture' of how much non-gold overburden and non-economic gold ore has to stripped away to get to the gold ore 'paydirt' underneath. The following link has a nice chart showing we might have passed peak gold in 2000:
http://www.gold.org/value/markets/supply_demand/mine_production.html
Excerpt:
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Grades vary enormously with ore bodies. Generally, the largest South African underground operations run at between eight and ten grammes per tonne (i.e. eight to ten parts per million), with more marginal South African operations grading between four and six grammes per tonne. At a grade of 10 grammes/tonne, therefore, it takes more than three tonnes of ore to produce one ounce of gold. Many of the world's operations are open pits, which tend (generally) to be of lower grade than the underground mines, running from as low as one gramme to three or four grammes per tonne. While this low grade is instructive in that it shows how rare gold is in the ground and gives an idea of how much rock has to be shifted to produce the metal, production costs are a more important parameter in determining the quality of an operation and these are a mix of both grade and operating costs.
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http://www.nodirtygold.org/pubs/20TonsMemo_FINAL.pdf
This article conservatively talks about 20 tons to make a 1/3 ounce gold ring, and it does not figure any of the tons of overburden removed first.
Bob Shaw in Phx,Az Are Humans Smarter than Yeast?
The challenge of Peak Oil is finding a replacement fuel that can support our massive transportation infrastructure, and scaling up the replacement in time to prevent a serious shortfall.
The major problem of nuclear waste is what to do with it.
link to editor's notes
Welcome back ;-)
http://groups.yahoo.com/group/energyresources
The essential deal was that nets containing a material (can't remember what) would "attract" and concentrate naturally occuring uranium in sea water. Therefore, ERoEI would be "low."
Jim Jubak's analysis makes sense to me. The same kind of factors that limit oil production - basically, that we got the easy stuff first - are present in mining industries too. And he notes that mining industries are both more conservative in their pricing estimates and have fewer new technologies to work with in trying to increase production, compared to oil companies.
In short he sees Peak Metal as a manifestation of the same kinds of effects that are driving up oil prices, as a robust world economy puts unprecedented strains on commodity production. And for the reasons above he sees the run-up in metal prices as likely to be even stronger and more persistant than for oil.
Your Quote: "Seeing Peak Metal as only a manifestation of Peak Oil is like seeing everything as a nail because all you have is a hammer. Not everything is about oil."
Sir, I respectfully disagree in regards to peak minerals. It could be argued that we would have passed Peak Minerals decades ago if we had not discovered petroleum to mechanize machinery. In the olden days, sailing ships use to sail to hand-harvest guano from caves and ancient bird nesting places. Please google Guano mining. Here is a link to get you started:
http://www.caves.org/pub/journal/PDF/V60/V60N2-Frank-History.pdf
Not many humans are willing to shovel 100 tons to get one ounce of gold.
Bob Shaw in Phx,Az Are Humans Smarter than Yeast?
Same thing with uranium. We found the crappy stuff first and the good stuff in 1970 and onwards. Eventually we will run out of high grade uranium ore and then the EROEI will go down.
The DC Petrocollapse Conference -- www.petrocollapse.org
Surviving Peak Oil: Economic Doom or Transformation?
Culture Change and Sustainable Post-Petroleum Living
********
Sponsored by Culture Change -- http://culturechange.org
You are invited to attend!
All Souls Unitarian Church
16th and Harvard Streets, NW, Washington D.C.
Columbia Heights Metro Station
Saturday, May 6, 2006 9 am - 7 pm
Speakers at the DC Petrocollapse Conference will include the most widely read peak-oil author, Richard Heinberg. Experts on peak oil, small-scale agriculture and alternative energy will discuss "petrocollapse," the imminent failure of the petroleum infrastructure to continue to provide the myriad goods and services that our consumer economy has grown accustomed to. Multimedia presentations and multiple films will demonstrate solutions to the audience. Heinberg, Jan Lundberg and others will perform music including oil-satire songs. Films will include DC premiers of "Our Synthetic Sea" (plastics pollution in oceans) and "The Power of Community: How Cuba Survived Peak Oil."
At The Petrocollapse Conference we will ask
- What are we facing now as the economy prepares to hit the wall known as resource limits? Will growth suddenly implode?
- What will be the effects of Peak Oil (a geological phenomenon) and petrocollapse (an economic and social phenomenon) on food supply and other services we depend on?
- What other mitigation strategies are possible?
- What is the role of the market in determining how severe the effect of shortage stemming from geological depletion will be ?
- Upon upheaval, deprivation, and a restructuring of social relations in a "new" local economics system, will we choose to create a sustainable culture?
DC PETROCOLLAPSE CONFERENCE SPEAKERS WILL INCLUDE:*Albert Bates Global Ecovillage Network; author
*Diana Leafe Christian Communities Magazine
*John Darnell, Ph.D Energy advisor
*Richard Heinberg Author, The Party's Over and Powerdown
*Michael Kane From the Wilderness publications
*Jan Lundberg Oil industry analyst; http://culturechange.org
*Jenna Orkin Moderator; World Trade Center Environmental Org.
*Joel Salatin Organic Agriculturalist, http://polyfacefarms.com
*Mark Robinowitz http://Oilempire.us; author, Permatopia
*David Room Post Carbon Institute; Global Public Media
YOU ARE INVITED TO ATTEND!
Please register online via PayPal at http://petrocollapse.org/register.html
The registration cost of $100 will pay for lunch and attendance at a special noontime press conference.
We have scholarships, work exchange arrangements, and "sliding scale" discounts available for students, activists, and those who can't afford the $100 registration cost. Send us an email with the details of your situation, and/or what time or energy you may have for volunteer activity for the conference. Send to conferences@culturechange.org
Please contact the registration coordinator -- Ethan Genauer -- if you have any problems registering, or for more details, by email at : ethan@culturechange.org
For more information, see http://petrocollapse.org and the DC PetroCollapse Conference press release below[/b]
*
***MEDIA ALERT -- FOR IMMEDIATE RELEASE
DC Petrocollapse Conference: May 6, 2006
All Souls Church, Unitarian 16th & Harvard, Washington, D.C
A conference on the effects of peak oil and the growing global energy crisis will take place in Washington, DC on May 6th at the All Souls Church, Unitarian from 9 A.M. to 7 P.M. Speakers include peak-oil author
Richard Heinberg.
Conference organizer and speaker Jan Lundberg is a former oil industry analyst who ran the market research firm Lundberg Survey. Lundberg, who quit serving the oil industry so he could put his knowledge to use to protect the environment, says "M. King Hubbert, who developed the theory of peak oil, observed that we do not have an energy crisis but rather a culture crisis. This fits with the theme of the Washington DC Petrocollapse Conference that there is no technofix for our energy dilemma. Society will have to bring about a closer level of community and rediscover what local economics are about."
The May 6th conference will feature Richard Heinberg, the most-read peak oil author (The Party's Over, and Powerdown). Films and music will be also offered as part of a varied program to stimulate discussion and action by attendees. Heinberg and Lundberg and others will perform music including oil-satire songs. Films will include premiers of "Our Synthetic Sea" (plastics pollution in oceans) and "The Power of Community: How Cuba Survived Peak Oil."
Lundberg says the Petrocollapse Conference asks, "What we can do in advance of the social upheaval and chaos that may produce a 'national New Orleans,' to prepare or mitigate? What will the future look like during and after a transition to non-petroleum living?"
For more information, see http://petrocollapse.org
Is this a mandatory attendence conference for Congress and other MilGov officials? If not, I hope the Joint Chiefs of Staff summon a small force to make these politicians attend. The recent postings on the military analysis of Peakoil shows that they understand the situation much more than the politicians.
Bob Shaw in Phx,AZ Are Humans Smarter than Yeast?
I know that, personally at least, I'm hiding the effects of $3/gal gasoline by putting it on the credit card. I suspect that many other sheeple (I'm one) are doing the same thing. We're sticking our heads into the denial hole and pretending the end-of-cheap-oil problem is still not yet here.
The debt will just accumulate and accumulate. Then one day, these two knee-cap busters from the credit card company will show up at my door.
You are absolutely right.
Eventually, it all comes home to roost
(TSHTF later, if not sooner, but it still hits)
But I'd like to point out that tech and financials didn't lead the gains today as one might expect if interest rates were the only thing on investors minds. Energy and mineral stocks were bigger winners. BTU up 10% on very bullish earnings news! Glory! Coal stocks aren't supposed to do that. If this keeps up much longer I might be able to afford to retire before the crash.
I am puzzled as to why the statement to suggest that interest rate hikes are soon to end came from the Fed at this time. My guess is that it is jawboning--but jawboning exactly what, I do not know. WAG, maybe they are concerned about weakness in the housing market and are afraid of being blamed for a crash in housing prices.
To announce a probable end to monetary tightening in light of increasing inflationary pressures is exeedingly odd, to say the least.
Any ideas from economists or other Fed watchers/interpreters on this topic?
I would agree with your guess Don, although I don't think their words will prevent a housing market crash or prevent them getting the blame for it. Once the housing market starts to slide in earnest (and I'll be amazed if it isn't this year), Bernanke will be riding a tidal wave of bad debt.
There is a marked movement to gold though, it's clearly shown up in the last six months but it wasn't hard to predict. I knew we were setting up for $600 gold when we broke out of the triangle last July/August. I had advised a friend to hurry up and buy last July when gold was hovering around $435 just before the breakout, it went up $10 the next day and never looked back. He bought just before that rise and he still can't believe how well he has done.
The stock market has actually gone down in gold terms and in $ terms if you adjust for inflation. In 2000 it took 39 ounces of gold go buy the Dow, today it only takes 18 so the Dow has dropped by 50% against gold.
The standard economic analysis is that oil just does not have that overwhelming an impact on today's economy. Oil only accounts for about 4% of total economic spending in the U.S. Here's a post from Econbrowser in which JDH describes the economic case:
http://www.econbrowser.com/archives/2005/09/energy_theory_o.html
And even though oil has gone up by a factor of five or more since its bottom in 1999, the economy has continued to do well, providing concrete evidence that high economic growth and high oil prices can coexist. Recent economic reports have continued to be very positive. In addition there may be recognition that today's oil prices are not as high as they seem when adjusted for inflation, and that we saw much higher prices back in the 1980s. (Of course, we went into a recession that time so this cannot be too terribly reassuring.)
As far as gold, I think it is generally seen as a hedge against economic and political uncertainty, and that its climb is largely a result of the current high level of international tensions. It doesn't imply any serious concerns about the health of the U.S. economy.
Bond yields and other factors have also been moving favorably and imply reductions in the threat of inflation, which is further helping the economy. And of course the news from the Fed on interest rates spurred today's big run-up.
All in all, the markets see a healthy and robust economy which has not been slowed by high oil prices, with inflation in control and good unemployment and growth numbers, and apparently hope and expect these trends to continue.
That being said, I am still curious. If for example I have $100 a week after my bills are paid, and I used to spend $25 of that on fuel, but now spend $40, I have to spend less somewhere else. I have to buy one less CD, or eat out one less time, etc. So that would seem to limit companies growth potential.
Yes, you have less money to spend - but the person you bought the gas from has more money to spend! Those effects largely cancel out when you look at the economy as a whole.
Now, you might say, we're buying the gas (ultimately) from Saudi Arabia, Russia, etc., so how does their spending benefit America? Two answers. First, the U.S.'s biggest oil supplier is actually - the United States! Over 8 MBPD. The next two are Canada and Mexico, for another 4 MBPD, and of course both those countries are huge markets for American goods.
But secondly, even for oil money that goes to Venezuela or Saudi Arabia, the world market is all inter-connected, and the spending from those countries eventually benefits the U.S. (and more generally, world) economy.
This is not to say that rising oil prices are actually good for the economy, because they do reflect decreased availability of a valuable resource. But rather, the impact on the economy is due to the decrease in consumption, rather than changes in price. Price changes largely shift money around but leave economic growth alone. Consumption changes are more likely to have significant economic effects. But as noted in my post above, the impacts should be relatively small on a percentage basis.
First of all, the 'person' you buy the gas from does not have more money to spend. Gas stations are pass-throughs, and for the most part don't profit significantly from oil price increases. The refiners may, but that's a different story unless the gas station chain is owned by the refiner.
If the oil comes from outside the U.S., or worse, if the refined product comes from outside the U.S., ultimately the extra money goes elsewhere and negatively impacts the trade deficit. While the U.S. may be the biggest single provider of our oil, most of what we use comes from outside the U.S., and since the trade deficit factors directly into the GDP calculation, it is nonsense to claim that it's a wash or that the economy stands to gain overall.
And yes, the Saudis may reinvest the money in American securities. So that just means that they will own us outright.
I think sometimes we do not look beyond our noses. The world economy, especially in the 3rd world, is to a large degree booming. We know about the story of China and India, and the former just had a surprisingly strong 1st quarter 10.2% growth rate, but even smaller nations like Vietnam, Pakistan, Indonesia, Egypt are having strong growth, and that does not include places like Australia.
That to a large degree is allowing the markets to rise and profits to be had, inspite of the price of oil.
So inspite of Mr. I-make-$18,000-a-year in Missouri and have a wife and two kids and how the heck can I fill my gas tank, they end up being a relatively small part of the total equation.
From that standpoint, people have money (this is a rich society) and have to put it someplace. They can take low interest rates and worry about real inflation ... or they have to choose between the stock market, real estate, gold, etc.
The problem is ... when each of those might be in a bubble condition ... which do you choose? I think people reinvest in a bubbled stock market, hoping that it won't pop.
(And of course a huge machine translates government generated data into stock brokerage marketing materials.)
This only applies if you accept the USG's own figures on how the economy is doing. IMO there is ample evidence to suggest that the USG figures are spun fairly radically in the positive direction. One can find alternative calculations of GDP, CPI etc that give a very different picture.
Why do you think the M3 is no longer reported by the Fed?
That number is just the public sector debt.
Got milk money?
Got $28,000 spare change in your pocket?
Well guess what fellow Americans, that's what you owe just for Uncle Sam's use of the ole' credit card.
Look here to read about the growing "trade deficit" due to increasing oil prices.