DrumBeat: June 20, 2006

Update [2006-6-20 12:38:9 by Leanan]: Saudi ambassador: World oil prices could triple
WASHINGTON, June 20 (Reuters) - World oil prices could triple if the diplomatic standoff over Iran's nuclear program escalates into a military conflict, Saudi Arabia's ambassador to the United States said on Tuesday.

"The conflict itself ... will shoot up the price of oil astronomically," Prince Turki Al-Faisal said at a press conference. "We think military conflict would be counterproductive in Iran."

"The whole Gulf will become an inferno of exploding fuel tanks and shot-up facilities," Al-Faisal said.

Update [2006-6-20 15:1:6 by Prof. Goose]: Same quotes, a bit more of an in-depth story at USN&WR.
Update [2006-6-20 11:2:53 by Leanan]: Worldwide oil consumption seen soaring
WASHINGTON (Reuters) - World oil demand should soar from this year's almost 86 million barrels per day to 118 million bpd by 2030, even though higher fuel prices will cut back some petroleum usage, the U.S. government's top energy forecasting agency predicted Tuesday.

Much of the growth in global oil consumption over the next quarter century will come from the non-industrialized nations in Asia, where the strong economies of China and India will gobble up more barrels, according to the Energy Information Administration, the statistical arm of the Department of Energy.

"Much of the world's incremental oil demand is projected for use in the transportation sector, where there are few competitive alternatives to petroleum," EIA said in its annual long-term international energy supply and demand forecast.

Update [2006-6-20 9:23:14 by Leanan]: Saudis to Supply Oil to China Strategic Reserves

BEIJING - China is in talks with Saudi Arabia over importing oil to fill its planned strategic reserves - building on an April meeting between their two heads of state, Chinese and Gulf sources familiar with the situation said.

A deal would see large volumes of Saudi crude imported by China, although the first shipments would be unlikely to take place before the end of this year, a senior Chinese industry official told Dow Jones Newswires.

Update [2006-6-20 9:52:42 by Leanan]: Mother Jones has an interview with Michael Klare called The Permanent Energy Crisis.

From Global Public Media: an interview with Donald Fournier, on Oil Depletion and the U.S. Army. Some interesting info on how much energy the Army uses.

The San Francisco Chronicle has an article on how America was changed by the interstate system: The Interstate Highway Systeam at 50: America in fast lane with no exit.

Whether we'll be able to maintain it is another story: Blame oil prices for those potholes:

WASHINGTON — Drivers, be prepared for some bumpy roads.

Asphalt prices are skyrocketing as costs for oil, a key component of the paving material, are near records. In some parts of the country, there are asphalt shortages.

..."Some roads are going to continue to get worse and worse, and eventually some will be converted to gravel whether we like it or not," says Dirk Rogers, highway superintendent in Brown County, S.D.

Free Market News is printing more and more articles that seem to accept peak oil:
The commodity boom currently underway in all areas is due to shortages. Shortages are the result of different circumstance depending upon the commodity. Different commodities will be examined but all stem from a common thread and will only be amplified by its shortages: Energy.
More on energy and population... Cut fuel use and curb population:
...there is near-total silence about the role of global population growth and the need for population stabilization. Serious discussion of population stabilization was absent from international climate meetings in both Kyoto and Montreal, and from almost every other public forum.
EV World has an interview with Basil Gelpke, on his new 90-minute documentary on peak oil, A Crude Awakening: The Oil Crash. The 15-minute interview is downloadable in MP3 format.

In Chile: Lawmakers Promote Wind, Water Energy to Ease Gas Shortage. Argentina has cut natural gas shipments to Chile by half. The article has some interesting information on how mining has been affected.

In Iran: Ahmadinejad laments waste of energy. They export oil, but they import gasoline. President Ahmadinejad is encouraging conservation, pushing public transportation...and nuclear power, of course. He points out that if Iran uses less, they can export more.

And researchers are working on alternative jet fuel. The solution may be decades away, but they are working on biodiesel fuels for commercial aircraft.

Given that Pacific Ethanol is down 30% in 2 weeks and 50% in a month, I wonder if Keithster has any more investment advice for us? Is there another bubble he recommends that we all hop on?

Looks like some investors are finally starting to wise up. You are going to have a tough time profitably making ethanol that far outside the Midwest - unless of course you charge $6/gal for it. There is a reason that they position ethanol plants within 50 miles of corn supplies.

RR

Someone here at TOD turned me on to The Truth About Cars.  They had an article yesterday:

Alternative Fools: E85

... nope, it doesn't look like ethanol is getting a totally free ride.

Someone e-mailed me that article last night. That guy must read TOD. :) It combined elements of my E85 article with the article on Brazil, and even mentioned what you had stated that inspired the E85 article: It makes far more sense to roll out E10 everywhere than to push for E85 everywhere.

RR

That guy is great. Thanks for reminding me. I have to bookmark  that site.
Oil CEO,
I just caught your comment back at the oil shale thread. I left a reply for you. Amazed!
I was just reading that article and ran across the phrase "186 million Brazilians" and thought to myself, "Gee that's an awfully big number."

I assume by now everyone has heard the Bush joke that spawned that thought...

Here is a bit from today's OPIS report:

While ethanol continues to grab the public interest as it is seen in national headlines and mainstream media spot values continue to rise for the blending component. And while West Coast ethanol values are strong they pale in comparison to prices being seen on the East Coast.

Spot ethanol on the East Coast today was seen trading from $5.50-5.75/gal and based on current RBOB values in the New York Harbor the huge price of ethanol is adding some 29cts to the price of finished gasoline, based on a 10% blend.

I guess ethanol does have a useful purpose after all. It is going to force us to conserve even faster due to it being mandated. Of course I don't think this is what the administration had in mind when they mandated it. The good news is that the amount we require in our gasoline will increase over the next few years, which will drive prices ever higher and force us into conservation mode.

RR

Per my understanding, only pollution non-attainment areas (polluted cities) have to add ethanol.  So Baton Rouge & Houston see a price hike due to ethanol, New Orleans and rural areas do not.  California got at exemption from the ethanol requirement.

Correct ?

This is true, but there are a lot of non-attainment areas, especially in the northeast. California did get an exemption, but I read that a lot of producers already had contracts in place to supply or purchase ethanol. Give it some time, and ethanol will probably start to disappear from California markets.

RR

Well, I should add that this WAS the case. Per the new energy bill, a certain percentage of ethanol is mandated into the gasoline pool period. I don't know how this breaks down though (i.e., if it will mostly be in the non-attainment areas).

RR

And Iowa.
And Minnesota. I think they are trying to go to 20%. Perhaps the Minnesotans will meet the mandate for the rest of the country, and we won't be forced to buy the stuff. :) They will be paying $5/gal for ethanol and getting worse gas mileage, while I continue to avoid the stuff like the plague.

RR

An interesting announcement from BP and Dupont I have not heard of biobutanol before so does anyone know what it is and how this relates to the ethanol debate?
I had not heard of it before but there is a good explanation here. The claims for it are that:-

It runs on present gasoline vehicles unmodified at equal or greater mileage.
It is much less prone to absorption of water removing the need for special storage tanks and pipelines.
Can be made from the same feedstocks as ethanol at greater yield.
Produces useful amounts of hydrogen as a by-product.
Is cheaper to produce than ethanol.

All these claims are from a company promoting its patented process to make the stuff and extrapolating from a pilot plant  so due caution is needed in accepting these claims.

This Link References RR's numbers on lines 13 and 22

Pure Energy Systems
http://peswiki.com/index.php?title=Directory:Butanol&curid=3716&diff=20327&oldid=20318
"Butanol as a biofuel (http://www.lightparty.com/Energy/Butanol.html) - Butanol solves the safety problems associated with the infrastructure of the hydrogen supply. Reformed butanol has four more hydrogen atoms than ethanol, resulting in a higher energy output and is used as a fuel cell fuel."

I suspect this might be a familiar site to some of you here, is it responsibly run?

Bob Fiske

Butanol is potentially a better motor fuel than ethanol. I did write an essay on bio-butanol a couple of months ago:

Bio-butanol

Butanol has some significant advantages over ethanol, and probably has a better EROI because it is a less polar molecule than ethanol. Of course, we still won't be able to produce enough to make much of a dent in our oil consumption.

RR

More discussion on BP/Dupont bio-butanol at Green Car Congress.
Not sure if this has already been posted elsewhere, but...

Even the Wall Street Journal has come against the current ethanol hype. In an editorial in the 6/17/2006 Weekend edition of the WSJ they discuss why imitating Brazil won't work for the US, and they also cite research by Cornell's David Pimental and Berkeley's Ted PatzekCornell's that indicates that it takes more than a gallon of fossil fuel to make one gallon of ethanol.

Here is a link:

http://online.wsj.com/article/SB115049715522182863-email.html

Even the Wall Street Journal has come against the current ethanol hype. In an editorial in the 6/17/2006 Weekend edition of the WSJ they discuss why imitating Brazil won't work for the US...

Ah, they are just riding on our coat tails:

Lessons from Brazil

:)

and they also cite research by Cornell's David Pimental and Berkeley's Ted Patzek Cornell's that indicates that it takes more than a gallon of fossil fuel to make one gallon of ethanol...

Sadly, any article mentioning Pimentel is immediately discounted by ethanol proponents. They consider him discredited, so when he is cited they don't believe the article is reliable.

RR

Do you think that he has been discredited?  He and Patzek certainly have not changed their views.  Are we supposed to believe that the ethanol lobby and the USDA has more credibility
No, I don't believe he has been discredited. I think he did use some outdated data that left him open to criticism. But I think his methodology was correct.

However, if you want to make any headway with an ethanol pumper, best to avoid Pimentel's name. That is the quickest way to have them dismiss your arguments out of hand. That doesn't mean they are correct in doing so, but my objective is to have them listen to my arguments.

RR

I heard about Unity08 from that recent Tom Friedman article (now up at EnergyBulletin.net.  I guess they are some attempt at a web-based, grassroots, 3rd party.

I just looked in far enough to find an energy post.  It looks fairly real:

http://www.unity08.com/node/50

Energy Bulletin appears to be having technical difficulties. :-P
Uh Leanan, you might want to get on over to peakoil.com.
They're aware of it.
Keep those servers patched ;-)
I think it's futile with open-source code like phpBB.  

They've bought VBulletin, which should be more secure.  It's still in beta, though.  Not sure when the rollout will be.

What exactly happened over there?
Isn't it obvious?  I don't think it's fixed yet.

The site is still usable.  You just have to scroll past the image (or AdBlock it with Firefox).

I think they fixed the minor technical difficulties an hour ago or so.
Well, I'm still seeing it.  Must be a propagation issue.  :-P
I think I see what you mean.  They got it off the front page, but the forum index is still defaced:

http://www.peakoil.com/forums.html

Oh, you're right.  I was just looking at the front page.
The only way to have a trulty effective third party is to allow fusion voting like we have here in NY. For instance, a party can endorse a major party candidate and have them run on both lines. Then the count for that party becomes a tool they can use to influence policy. The Working Families Party is doing that, effectively replacing the "Liberal" Party.

Frankly the Green Party is totally inept and unrealistic. I would support a "Sustainable Party" that brought together balancing the budget/trade deficits, energy independence and many other concepts of responsible economic and environmental stewardship...

Yeah, I think it's something more to keep a casual eye on that something to have real hope for.

(wish i'd closed my parenthesis above)


The problem with a lot of 3rd parties is that they focus on running a presidential candidate.  This lets them vote and complain when things don't turn out the way they want, but they never have to deal with the complicated issues of governance.

Maybe they should instead run for city council, school board, or mayor first.   Those races are winnable in some areas.  Once they can establish some credibility, then they can be taken more seriously on a national level.

The way the American political system is set up, third parties are a waste, they cannot win a national or statewide election.  And the effect they have had has, in my opinion, been entirely negative.  Undoubtedly, the presence of Nader on the ballot cost Gore the election, and does anyone remember 1980, when John Anderson got about 10% of the vote, most of which came at the expense of Jimmy Carter, and ended up putting Reagan in the White House.

But the fate of Jimmy Carter is also illustrative of why an elected form of government inherently cannot deal with unpleasant, long-term issues such as Peak Oil.  Carter, of course, however timidly, had started saying that we would have to conserve, and use less.  Politicians do not get elected promising less availability of goods, services, energy, whatever; you have to promise that, if elected, more, not less goodies will be available.  The underlying problem is that elected government is necessarily short-term and political, rather than administrative, and it is impossible to devise any policy without its being distorted by all the well organized and financed special interest lobbies that infest any policy discussions at the governmental level.  Fusion voting, ranked-choice voting like we have here in San Francisco are just gimmicks, tinkering with a dysfunctional system.  And the proponents of such gimmicks aren't generally interested in dealing with such issues, they just see these devices as something that will help get them elected.  Elected governmental systems are all about winning, not seriously dealing with issues that require a response of conservation and facing the fact that less rather than more (of whatever) will be available for general consumption.

Unfortunately, our current system is so well entrenched that it cannot be replaced until it collapses under the weight of its own contradictions and dysfunction.  Peak Oil will probably be the catalyst that sends it crashing down; at this point I expect the USA will break apart into anywhere from half a dozen to 15-20 separate nation states, each of which will then have an opportunity to set up a more long-term thinking and functional form of governance.  Unfortunately, this means that on the national level we will be unable to effectively address such issues as Peak Oil in any proactive manner as any successor governments will be dealing with it after the fact, and be absorbed in reacting to the unravelling of a society and economy based on the impossibility of eternal "growth."

Antoinetta III

Regretably, I think you will find if you do a study of history that in times of economic distress you have a very significant rise of dictators. Take a good look at the 1930's!
If I were to have to give a guess at a scenario, it would be some significant event or series of events (ie nuclear terrorism, wide spread rioting, etc..) followed by declaration of martial law, followed by suspension of constitutional rights, followed by "temporarily" suspending elections due to the "situation". I do not think it makes any difference which/what party is in power at the time. Anyone who remembers FDR's attempts to pack the Supreme Court back in the 1930's will be convinced that the Democrats are just as capable of grasping at "power" as the Republicans.
Most right wing dictators tended to be originally elected to power and most left wing dictators generally gain power through overthrow of the existing government, so I would probably guess that you would have a good likelyhood of a right leaning dictator in the USA & Europe.
With the population problems I fear that there will be a major likelyhood of dramatic events of genocide taking place at some time after the arrival of absolute dictatorships in the USA or Europe.
My guess at a time frame is 2012 to 2016. Elections in one of those two years will never happen if things go down hill as many think.
Hope I am wrong, but with some luck I will die of old age before it gets that bad. Just glad I don't have any kids to leave behind.
Interesting interview of a commodity analyst this morning on CNBC's Squawk Box (sorry I did not find any link). Demand for corn is increasing rapidly due to the strong increase in Ehtanol production. Corn inventories are expected to get really low in the next few years. Problem is that corn is used in many other products and there are concerns that it could be another source of inflation!
Talk about a paradox that is waiting to destroy itself.  The agribusiness cost efficiencies have been wrung out and inflation is taking hold EVERYWHERE.  I know demand for food will not relax, unless the US collectively diets~Yeah right.
Giving an opportunity to get rid of subsidies and letting the market do the prioritizing while using the tax money where they realy do something good.