The Oil Drum writers: Where are they now?

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The Last Post

This post is by from The Oil Drum - Discussions about Energy and Our Future

Click here to view on the original site: Original Post

The Oil Drum (TOD) was an internet energy phenomenon that ran for over eight years from April 2005 to September 2013. The site was founded by Prof. Goose (also known as Professor Kyle Saunders of Colorado State University) and Heading Out (also known as Professor Dave Summers formerly of the Missouri University of Science and Technology).

The site took off with the advent of Hurricane Rita in September 2005 and resulted in the first 200+ comment event, indicating that there was demand for a site where concerned citizens could gather round a camp fire to discuss events impacting their energy supplies and ultimately, their well being. In eight years, >960,000 comments have been posted. Two other energy linked disasters, the Deepwater Horizon blowout and the Fukushima Daiichi reactor melt downs would see readership soar to >75,000 unique visits per day.

These pages have hosted over 7,500 articles covering every aspect of the global energy system. It was not unusual for a post to attract over 600 comments, many of which were well informed and contained charts and links to other internet sources. The site would become known for a uniquely high level of discourse where armchair analysts of all stripes added their knowledge to threads in a courteous, and ultimately pro-social way that energy experts at hedge funds, corporations or universities might not have the freedom to do. It is this emergent property of smart people sharing knowledge on a critical topic to humanity’s future that will be missed.

The site was built on twin backbones that would often pull the readership in opposite directions. Drumbeats, edited by Leanan (who remains anonymous to this day) provided daily energy news digest and a forum for debate. And articles, written by a legion of volunteer writers, that strove to provide a more quantitative analysis of global energy supplies and the political, social and economic events that lay behind them. All the content would not have been possible without the tireless efforts of Super G, our site engineer, who maintained and updated software and hardware as the site grew and evolved for over eight years on a voluntary basis.

In the course of 2013, a decision was made to archive The Oil Drum and the main purpose of this Last Post is to provide some direction to new and future readers of the vast content it contains. The main contributors are listed below along with links to where their writings can be now be found. If you are looking for content there are two main options. The first is to look for author specific content where clicking on the live hyper linked name of the contributor will take you to a page giving access to all the content produced by that author. The second option is to use the Advanced Search facility at the top left of this page. Simply enter a few key words and this will return a page of the most relevant articles.

Editorial board

Arthur Berman (aeberman) Arthur E. Berman is a petroleum geologist with 35 years of oil and gas industry experience. He worked 20 years for Amoco (now BP) and 15 years as consulting geologist. He gives keynote addresses for energy conferences, boards of directors and professional societies. He has been interviewed about oil and gas topics on CBS, CNBC, CNN, Platt’s Energy Week, BNN, Bloomberg, Platt’s, Financial Times, The Wall Street Journal, Rolling Stone and The New York Times.

He was a managing editor and frequent contributor of, and an associate editor of the AAPG Bulletin. He is a Director of the Association for the Study of Peak Oil, and has served on the boards of directors of The Houston Geological Society and The Society of Independent Professional Earth Scientists. He has published more than 100 articles on petroleum geology. He has done expert witness and research work on several oil and gas trial and utility commission hearings.

He has an M.S. (Geology) from the Colorado School of Mines and a B.A. (History) from Amherst College.

Nate Hagens is a well-known speaker on the big picture related to the global macroeconomy. Nate’s presentations address opportunities and constraints we face in the transition away from growth based economies as fossil fuels become more costly. On the supply side, Nate focuses on biophysical economics (net energy) and the interrelationship between money and natural resources. On the demand side, Nate addresses the behavioral underpinnings to conspicuous consumption and offers suggestions on how individuals and society might better adapt to the end of growth. He will be writing at

Nate has appeared on PBS, BBC, ABC, NPR, and has lectured around the world. He holds a Masters Degree in Finance from the University of Chicago and a PhD in Natural Resources from the University of Vermont. Previously Nate was President of Sanctuary Asset Management and a Vice President at the investment firms Salomon Brothers and Lehman Brothers. Nate is the former President of the Institute for the Study of Energy and Our Future (non-profit publisher of The Oil Drum), is current US Director of the Institute for Integrated Economic Research, and serves on the Board of the Post Carbon Institute. Nate also served as the lead editor of the Oil Drum for several years.

Rembrandt Koppelaar has since 2010 been a Research Associate at the Swiss Institute for Integrated Economic Research (IIER), where he works on modelling of costs of resource and energy flows. Since June 2012 he combines this with a PhD research position at Imperial College London, to contribute to a spatial simulation of the resource flows of an economy at a micro-level using agent-based approaches. He joined the Oil Drum in 2006 first as a contributor and later as an editor, triggering by his concern in oil depletion. An interest that also led him to establish and become President of the Association for the Study of Peak Oil & Gas Netherlands from 2006 to 2010. He is author of the book “De Permanente Oliecrisis” discussing the end of cheap oil and its consequences (Dutch language, Nieuw Amsterdam publishers, 2008). Rembrandt holds a BSc and MSc in economics from Wageningen University, the Netherlands.

Brian Maschhoff (JoulesBurn) earned a B.S. in Chemistry from the University of New Mexico and a Ph.D in Chemistry from the University of Arizona. He has worked at several academic institutions and government laboratories, and currently engages in a wide variety of scientific and technical pursuits including web-based education, data visualization, and research on salmon recovery. His research on the oil fields of Saudi Arabia is also posted at Satellite o’er the Desert. He also blogs at Picojoule, and he might eventually be found @joulesburn on Twitter.

Euan Mearns has B.Sc. and Ph.D. degrees in geology from The University of Aberdeen. Following an academic career in Norway and a business career in Scotland I took time off work in 2005 to help care for two sons and two dogs and to allow my wife’s career to blossom. In 2006, wondering why the oil price and the value of my oil stocks kept going up I stumbled upon the The Oil Drum that provided unique insight, at that time, into The Earth energy system. Feeling the need to put something back I submitted a couple of articles and have since written roughly 100 posts and hosted many guest posts from worthy authors.

In 2009 I was appointed as Honorary Research Fellow at The University of Aberdeen and teach occasional courses there. For the last 7 years, writing and editing articles for The Oil Drum has consumed a fair portion of my time, but I have in return learned a huge amount. I also continue to work as a consultant for the oil industry. The focus of my interest is the importance of energy to society, society’s response to the infrastructure and secondary impacts of energy provision and the political response. I plan to continue writing about Energy, Environment and Policy at Energy Matters.

New post, 8th October: UK North Sea Oil Production Decline
New post 18th November: Marcellus shale gas Bradford Co Pennsylvania: production history and declines
New post, 28th November: What is the real cost of shale gas?
New post, 9th December: OPEC oil production update July 2013
New post, 18th December: OECD oil production update July 2013
New post, 3rd January: Global Oil Supply Update July 2013
New post, 6th January: The Primary Energy Tale of Two Continents

Paul Sears was born in the UK, and did a Ph.D. in chemistry at Cambridge. Since first coming to Canada on a post-doctoral fellowship at the University of Western Ontario in 1973, he has worked at the University of Toronto and in the Canadian Federal Government in Ottawa. Most of his work since the mid 1970s has been on the supply and use of energy in one form or another. His interest in the limitations to oil supply dates back to about 1962, when he was at school watching a promotional film from an oil company. The subject of the film was oil exploration, and this caused him to wonder about the dependence of our society on oil and the limits to supply. Other interests are canoeing, kayaking, skiing, hiking, camping, keeping planted aquaria and learning Mandarin Chinese. Sadly, Paul Sears passed away on September 13, 2012. You can read an obituary here.

Dave Summers who writes under the pen name, “Heading Out”, comes from a family that for at least nine generations has been coal miners, and he started his working life, as an Indentured Apprentice, in 1961 shoveling coal on one of the last hand-won coal faces in the UK at Seghill, after a few weeks supplying that face with the help of a pit pony. With bachelor’s and doctoral degrees from Leeds University in the UK he moved to Rolla, Missouri and Missouri University of Science and Technology (then UMR) in 1968. He was named Curators’ Professor of Mining Engineering in 1980 and for many years directed the Rock Mechanics and Explosives Research Center at MS&T. His main work has been in the developing use of high-pressure water for cutting, cleaning and demilitarization. As one of the quiet revolutions that has crept into industry during his career, his research group worked in nuclear cleanup, rocket motors, and surgical applications as well as developing tools to cut, drill and mine more mundane rock, coal and metals. The team carved the half-scale Stonehenge out of Georgia granite, using only water, and later cut Edwina Sandy’s Millennium Arch from Missouri granite, both of which are on the MS&T campus. They also used the technique in a demonstration excavation that resulted in creating the OmniMax theater under the Gateway Arch in St Louis.

He retired from the University, and was named Emeritus in 2010, and lives quietly with his wife Barbara, with occasional commutes to visit their children, located on the two coasts very far from rural America.

In 2004 he began to write a blog, and in 2005 teamed with Kyle Saunders to jointly found The Oil Drum, a site for “discussions on energy and our future.” He now writes on energy, the applications of waterjets, a little on the use of the 3D modeling program Poser, and occasionally on climate matters. His blog, where the Tech Talks continue, can be found at Bit Tooth Energy. He again thanks all those who have contributed to The Oil Drum over the years and wishes them joy and prosperity in their futures!

Dr. David Archibold Summers has written numerous articles, a textbook, Waterjetting Technology, and jointly holds several patents, the last two of which have been licensed and deal a) with the use of waterjets to remove skin cancer and b) for high speed drilling of small holes through the earth.

Gail Tverberg (Gail the Actuary) became interested in resource limits and how these affect insurance companies and the economy more generally in 2005. She began writing about this issue while working as a property-casualty actuarial consultant at Towers Watson. In 2007, she took early retirement to work specifically on the issue of oil limits.

Between 2007 and its suspension in 2013, Gail worked as a contributor and editor at She also started her own blog,, where she continues to write on a regular basis. Her writings include Oil Supply Limits and the Continuing Financial Crisis, published in the peer-reviewed journal Energy in January 2012. She has spoken at at many conferences on subjects related to oil limits, including both academic and actuarial conferences. She now plans to write a book, tentatively called “Discontinuity Ahead: How Oil Limits Affect the Economy.”

Gail worked for CNA Insurance prior to joining Tillinghast (which eventually became part of Towers Watson) in 1981. She has a BA in Mathematics from St. Olaf College and an MS in Mathematics from the University of Illinois, Chicago. She is a fellow of the Casualty Actuarial Society and a member of the American Academy of Actuaries.

Her Twitter feed is @gailtheactuary.

Chris Vernon originally graduated with a masters degree in computational physics before working for ten years in the field of mobile telecoms specialising in radio network architecture and off-grid power systems in emerging markets. He subsequently returned to university to take an MSc in Earth system science and a PhD in glaciology focusing on the mass balance of the Greenland ice sheet. Chris is a trustee at the Centre for Sustainable Energy, works for the UK Met Office and maintains a personal web page.

Selected contributors

Big Gav studied Engineering at the University of Western Australia in Perth. Since then he has travelled widely and worked in the oil and gas, power generation, defence, technology and banking industries. He has been blogging about peak oil for almost 3 years at Peak Energy (Australia) and is probably the most prolific example of a techno-optimist in the peak oil world. He may be alone in thinking that peak oil represents a great opportunity to switch to a clean energy based world economy, rather than the trigger for the end of industrial civilisation.

Jason Bradford is currently a Farm Manager in Corvallis, OR and a Managing Partner for a sustainable farmland fund, Farmland LP. Most of his writing for The Oil Drum occurred while he lived in Willits, CA, where he was instrumental in the founding of Willits Economic Localization, hosted a radio program called “The Reality Report,” and was a board member of the local Renewable Energy Development Institute. He also founded and ran a small farm at a local elementary school with a lot of community support and the backing of The Post Carbon Institute, where he is currently a board member. His brief but enjoyable academic career began at Washington University in St. Louis and the Missouri Botanical Garden (MBG), where he taught courses in Ecology and from which he received a doctorate in Evolution and Population Biology in 2000. After graduation he was hired by the Center for Conservation and Sustainable Development at MBG, and between 2001 and 2004 secured grants from the National Science Foundation and the National Geographic Society for multi-disciplinary research on issues related to species extinction and ecosystem function. His “aha moment” came during this research period where the connections between environmental decline, resource consumption, economic growth, belief systems and institutional inertia led to a dramatic change in the course of his life’s work.

He continues to blog at Farmland LP.

David Murphy is an Assistant Professor in the Geography Department and an Associate of the Institute for the Study of the Environment, Sustainability, and Energy, both at Northern Illinois University. He serves also as an Environmental Policy Analyst for the Environmental Science Division at Argonne National Laboratory. Dr. Murphy’s research focuses on the intersection of energy, economics, and the environment. Recently, his work has focused on estimating how the extraction of natural gas in the Marcellus Shale has impacted the provision of ecosystem services from the local environment. In addition, he researches how the energy return on investment from oil is related to oil price and economic growth. Dr. Murphy’s work for Argonne National Laboratory addresses the environmental impacts associated with energy development.

He tweets: @djmurphy04

Robert Rapier works in the energy industry and writes and speaks about issues involving energy and the environment. He is Chief Technology Officer and Executive Vice President at Merica International, a forestry and renewable energy company involved in a variety of projects around the world. Robert has 20 years of international engineering experience in the chemicals, oil and gas, and renewable energy industries, and holds several patents related to his work. He has worked in the areas of oil refining, natural gas production, synthetic fuels, ethanol production, butanol production, and various biomass to energy projects. Robert is the author of Power Plays: Energy Options in the Age of Peak Oil. He is also the author of the R-Squared Energy Column at Energy Trends Insider. His articles on energy and sustainability have appeared in numerous media outlets, including the Wall Street Journal, Washington Post, Christian Science Monitor, The Economist, and Forbes.

Jeff Vail (jeffvail) is an energy intelligence analyst and former US Air Force intelligence officer. He has a B.S. in engineering and history from the US Air Force Academy and a Juris Doctor from the University of Denver Sturm College of Law. His interests are in global energy geopolitics and the the "rhizome" theory of social and economic organization. He is the author of the political anthropology book A Theory of Power and maintains a blog at

Jérôme à Paris is an investment banker in Paris, specialised in structured finance for energy projects, in particular in the wind power sector. After graduating from the Ecole Polytechnique in Paris, he wrote his Ph.D. in economics in 1995 on the independence of Ukraine, with a strong focus on the gas relationship between Ukraine and Russia, and he worked on financings for the Russian oil & gas industry for several years after that. He is the editor of the European Tribune, a community website on European politics and energy issues. He has written extensively about energy issues, usually from an economic or geopolitical angle for the European Tribune and for DailyKos where he led a collective effort to draft an energy policy for the USA, Energize America.

Rune Likvern After Rune’s first time seeing The Oil Drum (TOD and Institute for the Study of Energy and Our Future; ISEOF), in 2005 he created an account as nrgyman2000 and later got an invitation to become part of the staff of volunteer writers at what was then TOD Europe. In 2008 he started to post under his real name.

He is a Norwegian presently living in Norway and holding a masters degree from what is now the Norwegian University of Science and Technology. For more than two decades he was employed in various positions by major international oil companies, primarily Statoil, working with operations, field/area developments (in the Norwegian sector of the North Sea) and implementation (primarily logistics) of Troll Gas Sales Agreement (TGSA) which is about natural gas deliveries to European customers. This was followed by a period as an independent energy (oil/gas fields assessments, cash flow analysis, portfolio analysis etc.) consultant and as VP for an energy hedge fund in New York. In recent years he had a sabbatical to do more in depth research, reading and participating in discussions about energy, biology (what makes human {brains} what they are and why), and not least financial and economic subjects in several global forums as well as some advisory work.

Presently he is looking for gainful employment/engagements.

He also posts on his blog Fractional Flow
(primarily in Norwegian, but some future posts are planned for in English).

Phil Hart studied Materials Engineering at Monash University in Melbourne before spending five years with Shell UK Exploration and Production, based in Aberdeen, Scotland. He worked on two new North Sea oil and gas field development projects followed by a stint with the Brent field maintenance team as a corrosion engineer. In late 2006, Phil returned to Melbourne and was for a while an active member of the Australian Association for the Study of Peak Oil. He provided many briefings to government, business and community audiences and is still available for presentations around Melbourne and Victoria. Phil now works primarily in the water industry but consults as required for The Institute for Sensible Transport as well. He is also a keen astronomer and night sky photographer:

Luís Alexandre Duque Moreira de Sousa (Luís de Sousa) is a researcher at the Public Research Institute Henri Tudor in Luxembourg and a Ph.D. student in Informatics Engineering at the Technical University of Lisbon. Luís created the first Portuguese language website dedicated to Peak Oil in 2005 (; in 2006 he would be one of the founders of ASPO-Portugal and later that year integrated the team that started the European branch of The Oil Drum. Since then he has continuously written about Energy and its interplay with Politics and Economics, both in English and Portuguese. Luís is a regular presence at the collective blog European Tribune and writes on the broader issues of life on his personal blog AtTheEdgeOfTime.

The House That Randy Built

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One of the nice aspects of the 7+ years I have been involved with The Oil Drum has been attending conferences and meeting with some of my cyber friends, who by and large figure among the nicest bunch of folks I ever met. In 2007 I attended the ASPO meeting in Houston and it was then that I met Randy Udall for the first time. Well you know what some Americans are like – you meet, you chat a while, discover you get along, down a couple of beers and before you know it you are invited to go visit. And so it was with Randy Udall….

The house that Randy built, sunk low in the Colorado terrain, provides shelter from winter storms and from exposure to summer sun. Photovoltaics, solar hot water (on the roof) and a single wood burner (chimney) provides all the energy needs.

Three years later, my wife and I had a trip planned to the States to go visit Dave Rutledge (another cyber mate) at his mountain lodge in New Mexico and I thought it would be cool to visit Randy en route. We exchanged a couple of emails, he warned that his wife Leslie was cautious about some of his friends coming to stay and that his son once claimed that the family lived in a “mud hut” and by now I was wondering if this was such a good idea. But plans were made and we went to stay with Randy in Colorado for a couple of days in August 2011; on arrival, any trepidation melted away.

A “mud hut”, not quite. The stucco exterior finish covers thick foam insulation that in turn covers compressed earth (adobe) blocks. This provides protection from winter cold and summer heat, and thermal inertia from the large temperature swings prevalent in this part of the world.

At first sight Randy’s house did indeed have the feel of a “mud hut” but upon entering the reality of a beautifully and lovingly crafted passive house unfolded. I was astonished to learn that Randy had designed and built every inch of this house himself, including the manufacture of every compressed earth brick and the hammering in of every nail – in neat serried ranks.

I wish I had recorded the vital statistics but the mass of bricks was carefully calculated to provide thermal inertia, keeping the house warm in winter but cool in summer. I was also very surprised to learn that all of the insulation was on the outside of the masonry structure which is the opposite of the way we build our houses in the UK. South-facing windows collect wintertime solar energy and the adobe block walls and brick floors soak up much of that heat energy, keeping the home warm through cold nights. During the summer, just opening the windows at night cools off the massive floors and walls, helping the house stay cool during hot days. Putting the insulation on the outside of the exterior walls is the only way to make this adobe wall strategy work effectively.

The house was set low in the terrain, providing protection from winter storms and from the worst excesses of summer heat. Outside you find a large solar PV array, providing a surplus of electricity and solar hot water arrays on the south facing roofs providing all the hot water required and, if my memory serves correctly, some interior heating during winter time.

The rather plain exterior gave way, inside, to simple, beautifully crafted, elegance.

Every timber cut and every nail hammered by one man. This is a masterpiece that will hopefully endure.

Inside, beautiful craftsmanship provides simple but elegant living space to match the view of Mount Sopris that dominated the surrounding landscape. Not many of us leave a lasting legacy. Randy has left memories of a wonderful and thoughtful teacher and a house that will hopefully stand as a testimony to his passion for sustainable living for centuries to come.

The view out of the front window wasn’t that bad either. Mount Sopris (3,952 m /12,965 ft) offered Randy and his family fantastic walking, climbing and ski mountaineering opportunities.

Renewable energy and renewable transport. I am seldom pleased with the pictures I take, but there is something about this one I really like.

On the second evening of our visit, we dined with the local mayor and downed a few glasses of red. Randy may look pensive but he is actually looking at his lap top, has my credit card and is planning a road trip for us through Mesa Verde and Grand Canyon en route to New Mexico, one of the best trips my wife and I have ever made. He knew this area like the back of his hand.

To some, this house and lifestyle may seem fabulously exuberant. But the house, in fact, was built for a relatively tiny amount of money with most of the cost coming by way of blood, sweat, tears, knowledge and love of a vision for the future. These Udalls lived a simple life with a very strong sense of community involvement.

Most folks who read these pages will already know that in June of this year Randy died aged 61 of natural causes while hiking alone in the Wind River range of Wyoming, hunting for wild trout. The tragedy here is that he was snatched from his family and the sustainable living community he championed 10 to 20 years prematurely.

Thank you to Leslie Udall for consent to publish this article and to Steve Andrews for some useful editorial comments.

Twenty (Important) Concepts I Wasn’t Taught in Business School – Part I

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Twenty-one years ago I received an MBA with Honors from the University of Chicago. The world became my oyster. Or so it seemed. For many years I achieved status in the metrics popular in our day ~ large paychecks, nice cars, travel to exotic places, girlfriend(s), novelty, and perhaps most importantly, respect for being a ‘successful’ member of society. But it turns out my financial career, shortlived as it was, occurred at the tail end of an era ~ where financial markers would increasingly decouple from the reality they were created to represent. My skill of being able to create more digits out of some digits, (or at least being able to sell that likelihood), allowed me to succeed in a “turbo” financial system that would moonshot over the next 20 years. For a short time I was in the 1% (and still am relative to ‘all humans who have ever lived’). Being in the 1% afforded me an opportunity to dig a little deeper in what was really going on (because I quit, and had time to read and think about things for 10 years). It turns out the logic underpinning the financial system, and therefore my career, was based on some core flawed assumptions that had ‘worked’ in the short run but have since become outdated, putting societies at significant risks.

Around 30% of matriculating undergraduate college students today choose a business major, yet ‘doing business’ without knowledge of biology, ecology, and physics entirely circumvents first principles of how our world really works ~ my too long but also too short summary of the important things I wasn’t taught in business school is below.

The Blind men and the Elephant, by Rudyard Kipling

Business as usual as we know it, with economics as its guide and financial metrics as its scorecard, is in its death throes. The below essay is going to appear critical of finance and the nations (world’s) business schools. But it is too, critical, of our entire educational system. However, physicists, plumbers and plowmen do not have the same pull with respect to our cultural goals and narrative that financial folk do – as such an examination of the central assumptions driving society is long overdue. But before I point out what I didn’t learn in MBA school, I want to be fair – I did learn things of ‘value’ for the waters I would swim in the future: statistics, regression, how to professionally present and to facilitate meetings, and some useful marketing concepts. Of course, like any 20 something student, 1/2 of the value of graduate school is learning to interact with the group of people that will be your peers, and the relationships and contacts that develop. Plus the placement office was very helpful in getting us jobs as well.

The culture at Salomon Brothers impressed me the most and I landed in their Private Investment Department, where we were basically stockbrokers for the uber-rich – as a trainee I wasn’t allowed to call on anyone worth less than $50 million (in 1993). After Salomon shut our department down I went to a similar job at Lehman Brothers. At Lehman I increasingly felt like a high paid car salesmen and after 2 years quit to go work for a client, develop trading algorithms on commodities and eventually started my own small fund. But increasingly, instead of trading or trying to grow my business I found myself reading about oil, history, evolution and ecological issues. It really bothered me that ‘externalities’ were not priced into our goods or profits. One day, on a hike, it struck me that what I was doing felt spiritually hollow and despite it ‘paying the bills’ I began to realize I was more interested in learning about how the world worked and maybe doing something about improving it. In 2002 I gave my clients their money back, embarked on basically a 2 year hiking trip with my dog, and a car full of books. Eventually I would obtain a PhD in Natural Resources, but like many of you my real degree was obtained on this site, interacting with the many and varied people I met and continue to call friends and mentors. I am continuing to work on, or at least think about, making the near and long term future better, despite the tall odds, while living on a small farm in Wisconsin. More on this below.

In the years that have passed, modern society has become a crazy mélange of angst, uncertainty and worry. Many of us intuitively recognize that we’ve constructed a ginormous Rube Goldberg machine which for a number of reasons may not continue to crank out goods and services for the next 30-40 years. We blame this and that demographic for our declining prospects – the Republicans, the environmentalists, the greedy rich, the lazy poor, the immigrants, the liberals, etc. We blame this and that country or political system – evil socialists, heartless capitalists, Chinese, Syrians, Europeans, etc. We watch TV and internet about the latest ‘news’ influencing our world yet are not entirely confident of the connections. But underlying all this back and forth are some first principles, which are only taught piecemeal in our schools, if at all. Below is a short list of 20 principles underpinning today’s global ‘commerce’. I should note, if I was a 25 year old starting business school, eager to get a high paying job in two short years, I wouldn’t believe what follows below, even if I had time or interest to read it, which I probably wouldn’t.

20. Economic ‘laws’ were created during and based on a non-repeatable period of human history

I found a flaw. I was shocked because I’d been going for 40 years or more with very considerable evidence that it was working exceptionally well.” Alan Greenspan testimony to Congress, Oct 2011

Click image to enlarge.

The above graphic shows a three-tiered time history of our planet, starting with the top black line being geologic time. The tiny black sliver on the far right, is enlarged in the second line, and the sliver on its far right is again enlarged on the bottom line, where the last 12,000 years are shown. We, both our environment, and ourselves, are products of this evolutionary history. Our true wealth originates from energy, natural resources and ecosystem services, developed over geologic time. Our true behavioral drivers are a product of our brains being sculpted and honed by ‘what worked’ in all 3 eras of this graph (but mostly the top 2). The dark line on the bottom is human population, but just as well could be economic output or fossil fuel use, as they have been highly correlated over this period.

The economic ‘theories’ underpinning our current society developed exclusively during the short period labeled ‘A’ on the graph, on a planet still ecologically empty of human systems and when increasing amounts of extraordinarily powerful fossil energy was applied to an expanding global economic system. For decades our human economies seemed to follow a pattern of growth interrupted by brief recession and resumption to growth. This has made it seem, for all intents and purposes, that growth of both the economy and aggregate individual wealth was something akin to a natural law –it is certainly taught that way in business schools. The reality is that our human trajectory –both past and future – is not a straight line but more like a polynomial – long straight stretches, up and down, with some wavy periods in the middle, and ultimately capped. Our present culture, our institutions, and all of our assumptions about the future were developed during a long ‘upward sloping’ stretch. Since this straight line period has gone on longer than the average human lifetime, our biological focus on the present over the future and past makes it difficult to imagine that the underlying truth is something else.

Evidence based science in fields like biology and physics has been marginalized during this long period of ‘correlation=causation’. This oversight is not only ubiquitous in finance and economics but present in much of the social sciences, which over the past 2 generations have largely conflated proximate and ultimate explanations for individuals and societies. In nature geese fly south for the winter and north in the spring. They do this based on neurotransmitter signals honed over evolutionary time that contributed to their survival, both as individuals and as a species. “Flying north in spring” is a proximate explanation. “Neuro-chemical cues to maximize food/energy intake per effort contributing to survival” is an ‘ultimate’ explanation. In business school I was taught, ‘markets go north’ because of invention, technology and profits, an explanation which seemed incomplete to me even though it has appeared to be valid for most of my life. Social sciences have made great explanations of WHAT our behavior is, but the descriptions of WHY we are what we are and HOW we have accomplished a vast and impressive industrial civilization are still on the far fringes of mainstream science. Economics (and its subset of finance) is currently the social science leading our culture and institutions forward, even if now only by inertia.

19. The economy is a subset of the environment, not vice versa

If people destroy something replaceable made by mankind, they are called vandals; if they destroy something irreplaceable made by God, they are called developers.
Joseph Wood Krutch

When you have to classify the very capacity of the Earth to support life as an “externality”, then it is time to rethink your theory. –Herman Daly–

Click image to enlarge.

Standard economic and financial texts explain that our natural environment is only a subset of a larger human economy. A less anthropocentric (and more accurate) description however, is that human economies are only a subset of our natural environment. Though this may seem obvious, currently anything not influencing market prices remains outside of our economic system, and thus only actively ‘valued’ by government mandates or by some individuals, not by the cultural system as a whole. A landmark study in NATURE showed that the total value of ‘ecosystem services’ -those essential processes provided to humans by our environment like: clean air, hydrologic cycles, biodiversity, etc. if translated to dollar terms, were valued between 100-300% of Global GNP. Yet the market takes them for granted and does not ascribe value to them at all!!! Part of reason is that the negative impacts from market externalities aren’t immediate, and with our steep discount rates (see below), the near term ‘benefits’ of GDP outweigh ‘abstract’ costs at some unknown future date.

Mankind’s social conquest of earth has brought with it some uncomfortable ‘externalities’. We are undergoing a 6th great extinction, which is no wonder given that humans and our livestock now outweigh wild animals by almost 50:1. Our one species is appropriating over 30% of the Net Primary Productivity of the planet. (One can ask, how can we use 30% of sunlight yet have 50x the weight of the other vertebrates and the answer, as we will see below, is our consumption of fossil carbon). A short list of deleterious impacts not incorporated into prices/costs includes: air pollution, water pollution, industrial animal production, overfishing (90% of pellagic fishes (tuna) in ocean are gone), nuclear waste, biodiversity loss, and antibiotic resistance. Perhaps the most ominous is the threat of climate change and ocean acidification, where humans, via burning large amounts of fossil carbon, are impacting global biogeochemical systems in profound and long-lasting ways.

Since GDP, profits and ‘stuff’ are how we currently measure success, these ‘externalities’ only measurement is the sense of loss, foreboding and angst by people paying attention. Such loss is currently not quantified by decision makers. In the past, only when there was a ‘smoking gun’ e.g. in the case of chlorofluorocarbons, DDT, unleaded gasoline, did society organize and require rules and regulations for the externalities, but these examples, as serious as they were, were not anathema to the entire human economy.

18. Energy is almost everything

Without natural resources life itself is impossible. From birth to death, natural resources, transformed for human use, feed, clothe, shelter, and transport us. Upon them we depend for every material necessity, comfort, convenience, and protection in our lives. Without abundant resources prosperity is out of reach.
— Gifford Pinchot Breaking New Ground (1998), 505.

In nature, everything runs on energy. The suns rays combine with soil and water and CO2 to grow plants (primary productivity). Animals eat the plants. Other animals eat the animals. At each stage of this process there is an energy input, an energy output and waste heat (2nd law of thermodynamics). But at the bottom is always an energy input. Nothing can live without it. Similarly, man and his systems are part of nature. Our trajectory from using sources like biomass and draft animals, to wind and water power, to fossil fuels and electricity has enabled large increases in per capita output because of increases in the quantity of fuel available to produce non-energy goods. This transition to higher energy gain fuels also enabled social and economic diversification as less of our available energy was needed for the energy securing process, thereby diverting more energy towards non-extractive activities. The bottom of the human trophic pyramid is energy, about 90% of which is currently in the form of fossil carbon. Every single good, service or transaction that contributes to our GDP requires some energy input as a prerequisite. There are no exceptions. No matter how we choose to make a cup, whether from wood, or coconut, or glass or steel or plastic, energy is required in the process. Without primary energy, there would be no technology, or food, or medicine, or microwaves, or air conditioners, or cars, or internet, or anything.

A long term graph of human output (GDP) is one highly correlated with primary energy use. For a while (1950s to 1990s) improvements in efficiency, especially in natural gas plants, complemented energy use as a driver of GDP, but most of these have declined to now have only minor contributions. Since 2000, 96% of our GDP can be explained by ‘more energy’ being used. (For more data and explanation on this, please see “Green Growth – An Oxymoron”). Some resource economists have claimed that the relationship between energy and the economy decoupled starting in the 1970s, but what happened was just an outsourcing of the ‘heavy lifting’ of industrial processes to cheaper locations. If one includes energy transfers embedded in finished goods and imports there isn’t a single country in the world that shows a disconnect between energy use and GDP. Energy it turns out, not dollars, is what we have to budget and spend. Quite simply, energy is the ability to do work. How much work, we’ll see below.

17. Cheap energy, not technology, has been the main driver of wealth and productivity

Click image to enlarge.

The chemical potential energy available from the burning of things (e.g. wood) is rather astounding when compared with the energy which we supply our bodies in the form of food, and the fossil fuels of coal, oil, and natural gas burn even hotter while also being much easier to store and transport. We quickly learned that using some of this heat to perform work would transform what we could accomplish in massive ways. One barrel of oil, priced at just over $100 boasts 5,700,000 BTUs or work potential of 1700kWhs. At an average of .60 kWh per work day, to generate this amount of ‘labor’, an average human would have to work 2833 days, or 11 working years. At the average hourly US wage rate, this is almost $500,000 of labor can be substituted by the latent energy in one barrel of oil that costs us $100. Unbeknownst to most stock and bond researchers on Wall Street, this is the real ‘Trade’.

The vast majority of our industrial processes and activities are the result of this ‘Trade’. We applied large amounts of extremely cheap fossil carbon to tasks humans used to do manually. And we invented many many more. Each time it was an extremely inefficient trade from the perspective of energy (much more energy used) but even more extremely profitable from the perspective of human society. For instance, depending on the boundaries, driving a car on a paved road uses 50-100 times the energy of a human walking, but gets us to where we are going 10 times faster. The ‘Trade’ is largely responsible for some combination of: higher wages, higher profits, lower priced goods and more people. The average american today consumes ~60 barrel of oil equivalents of fossil carbon annually, a ‘subsidy’ from ancient plants and geologic processes amounting to ~600 years of their own human labor, before conversion. Even with 7 billion people, each human kWh is supported by over 90kWh of fossil labor, and in OECD nations about 4-5 times this much.

Technology acts as an enabler, both by inventing new and creative ways to convert primary energy into (useful?) activities and goods for human consumption and, occasionally, by making us use or extract primary energy in more efficient ways. Even such services that appear independent of energy, are not so- for example, using computers, iPhones, etc in aggregate comprise about 10% of our energy use, when the servers etc are included. Technology can create GDP without adding to energy use by using energy more efficiently but:

a) much of the large theoretical movements towards energy efficiency have already occurred and

b) energy saved is often used elsewhere in the system to build consumption demand, requiring more and more primary energy (Jevons paradox, rebound effect). Technological improvement thus does increase efficiency, but higher levels of resource consumption and a larger scale of resource extraction offset this advantage.

Despite the power in the Trade, its benefits can be readily reversed. Firstly, if we add very large amounts of primary energy, even if it is inexpensive, the wage increases/benefits start to decline. But more importantly, and has been happening in the past decade or so, as energy prices increase, so too do the benefits of the “Trade” start to wane. The graph to the right (source, page 18) shows that as the price of energy doubles or triples the benefits of this ‘Trade’ quickly recede. This is especially true for energy intensive transportation, like air travel, and for highly energy intensive processes, like aluminum smelting, cement manufacture– fully 30% of US industry falls into this category. The ensuing reduction in ‘salary’ from large energy price increases can only partially be offset by efficiency measures or lean manufacturing moves, because the whole ‘Trade’ was predicated on large amounts of very cheap energy. This is why the mainstream media touting increased oil production or the growth rate in solar/wind is missing the larger point – what matters are the benefits derived at the various cost points of energy extraction/harnessing. Even with large amounts of gross energy, if it is too costly, it is much less helpful or worse, the infrastructure, trade arrangements and expectations built upon continued $40 oil and $0.05kWh electricity will have to be changed. Basically, the benefits to human societies from the mammoth bank account we found underground are almost indistinguishable from magic. Yet we have managed, over time, to conflate the Magic with the Wizard.

16. Energy is special, is non-substitutable in the production function, and has an upward sloping long term cost curve

“Oil is a renewable resource, with no intrinsic value over and above its marginal cost… There is no original stock or store of wealth to be doled out on any special criterion… Capital markets are equipped to handle oil depletion…It is all a matter of money”, M.A. Adelman, Professor of Economics, MIT Source

Physics informs us that energy is necessary for economic production and, therefore growth. However, economic texts do not even mention energy as a factor that either constrains or enables economic growth. Standard financial theory (Solows exogenous growth model, Cobb Douglas function) posits that capital and labor combine to create economic products, and that energy is just one generic commodity input into the production function – fully substitutable the way that designer jeans, or earrings or sushi are. The truth is that every single transaction that creates something of value in our global economy requires an energy input first. Capital, labor and conversions are ALL dependent on energy. For instance, the intro text by Frank and Bernanke (2d ed., 2004, p. 48) offers explanations for increased productivity: …increased quantity of capital per worker, increased # of workers, and, “perhaps the most important,…improvements in knowledge and technology.” Nowhere in standard economic literature is there even a hint that the “improvement” in technology they refer to has, historically, been directly linked to the progression of displacing solar-powered human and animal muscle with larger and larger quantities of energy from oil, coal, and gas. Though energy is central (in that even more difficult ore grades require more overburden to extract, requiring more diesel fuel, etc), energy is not the only key limiter – other minerals and metals are finite and deteriorating in quality and cannot be (easily) replaced.

Since energy seemed the same as any other commodity economic models assumed that energy and resources would follow the same decreasing cost curve we have come to expect from gadgets like toasters and coffee cups, where the technology, outsourcing of parts to their lowest cost countries, and efficiencies of scale have generally formed a declining cost over time. For a while, energy too followed this curve, but given that high quality resources are finite, and require high quality processed resources themselves to extract and refine, eventually the cost curve of energy and other key minerals and ores, begins to rise again. This ‘dual view’ of energy vs regular everyday products is a key failing in economic texts. But for most of the past 60-70 years however this omission was perhaps understandable, as there WAS a continuing supply of cheap energy so its worth seemed to be just the dollar price of it. For most, this is still the dominant worldview – dollars are more important than energy.

Historical cost curves for oil, coal and natural gas for Europe – Graph source: Rune Likvern Click to enlarge

15. Energy has costs in energy terms, which can differ significantly than dollar signals

“It is appropriate to conclude that, as long as the sun shines brightly on our fair planet, the appropriate estimate for the drag on the economy from increasing entropy is zero. William Nordhaus

“ The laws of economics are like the laws of engineering. There’s only one set of laws and they work everywhere. One of the things I’ve learned in my time at the World Bank is that whenever anybody says “But economics works differently here”, they’re about to say something dumb. Lawrence H. Summers

“ … the world can, in effect, get along without natural resources … at some finite cost, production can be freed of dependence on exhaustible resources altogether…. Nobel Laureate Robert Solow

In nature, animals expend energy (muscle calories) in order to access energy (prey). The return on this ‘investment’ is a central evolutionary process bearing on metabolism, mating, strength and survival. Those organisms that have high energy returns in turn have surplus to withstand the various hurdles found in nature. So it is in the human system where the amount of energy that society has ‘to spend’ is that left over after the energy and resources needed to harvest and distribute that energy are accounted for. Finite resources typically follow a ‘best first’ concept of resource extraction. As we moved from surface exploration based on seeps to seismic surveys showing buried anticlines, to deep-water and subsalt reservoir exploration, and finally to hydro-fracturing of tight oil formations , the return per unit of energy input declined from over 100:1 to something under 10:1. To economists and decision makers only the dollar cost and gross production mattered during this period, as after all, more dollars would ‘create’ more energy flowing through our economies. Net energy can peak and decline while gross energy continues to rise, and indeed can go to zero when there is still plenty of gross resource remaining. Everything we do will become more expensive if we cannot reduce the energy consumption of specific processes faster than prices grow. Yet, financial texts continue to view economic activity as a function of infinite money creation rather than a function of capped energy stocks and finite energy flows.

Left chart – western Majors price needed for cash flow break even in yellow, overlayed on OPEC vs non-OPEC crude oil production. Source IEA, Goldman Sach 4/13 report ‘Higher long term prices required for troubled industry’. Right curve total oil production from Western Majors – source

Irrespective of the dollar price tag, it requires about 245 kilojoules to lift 5kg of oil 5 km out of the ground. Similar biophysical costs apply to every energy extraction/harnessing technology we have – but they are all parsed into financial terms for convenience. After all, isn’t it dollars (euros, yen, renminbi) that our system is trying to optimize? But these physical input requirements will not vary whether the number of digits in the worlds banking system increases or shrinks or goes away. Though fossil fuels are our primary source of wealth, they were created a long time ago, and in drawing down their bounty we have not needed to pay the price of their generation, only their extraction. And, despite enormous amounts of sunlight hitting the earth everyday, real (and significant) resources need to be expended in order to harness and convert the sunlight into forms and at places where it can be used.

There is an enormous difference between ‘gross’ and ‘net’ which manifests in financial sphere via costs. Irrespective of our choice of nominal statistic measuring GDP (wampum or dollars or digits or gold), an increasing % of them will be allocated to the energy sector. If our objective is just to increase GDP, we can just keep growing gross energy by locating and exploiting deeper and deeper pockets of fossil hydrocarbons, but eventually our entire food, healthcare, entertainment infrastructure will be to provide for a giant mining operation. Few media outlets (none actually) handicap the new surge in gross USA oil production by a)capex requirements going up faster than oil prices, b) the enormous increase in diesel use in the shale plays and c) the higher API gravity oil (42 for Bakken, 55 for Eagleford) which exaggerate energy content per barrel between 3.5% and 10.7%. Under current trends, the implications of energy depletion is we will move from energy costing less than 5% of our economy to 10-15% or more. In addition to the obvious problems this will create, we will be using lower quality energy as well. As oil has become more expensive, we are increasingly going towards coal and wood to replace it. Already, in countries with a large drop in ability to afford (e.g. Greece) are cutting down forests to heat their homes in winter.
Net energy is what societies should be focused on, and most don’t even know what it is.

14. Money/financial instruments are just markers for real capital

Some material things make my life more enjoyable; many, however, would not. I like having an expensive private plane, but owning a half-dozen homes would be a burden. Too often, a vast collection of possessions ends up possessing its owner. The asset I most value, aside from health, is interesting, diverse, and long-standing friends. Warren Buffet – The Giving Pledge

Some of my ‘real capital’: Natural capital – my backyard with trees, sun, water, Social capital Here 2 of my dogs, but equally my friends, contacts and family relationships, Built capital Our house, with solar hot water, chain saws, an aloe vera plant, and a deck, and Human Capital My health and skills (identifying edible mushrooms), my fathers health and skills (he’s a doctor, and can grow vegetables, etc)

Growing a big bank account is like fat storage for animals – but it’s not, because it’s only a marker for fat – its caloric benefit stored for the future is intertwined with a sociocultural system linked to monetary and credit marker. In business school, (and on Wall St.) we were taught that stocks going up ~10% a year over the long run was something akin to a natural law. The truth turns out to be something quite different. Stocks and bonds are themselves ‘derivatives’ of primary capital – energy and natural resources – which combine with technology to produce secondary capital – tractors, houses, tools, etc. Money and financial instruments are thus tertiary capital, with no intrinsic value – it’s the social system and what if confers that has value and this system is based on natural, built, social and human capital. And, our current system of ‘claims’ (what people think they own) has largely decoupled from underlying ‘real capital’.

13. Our money is created by commercial banks out of thin air (deposits and loans are created at same time)

Though societies require ‘energy’, individuals require money in order to transact in the things energy provides. What is money anyways? I certainly didn’t learn in business school (or any school for that matter). Quite simply, money is a claim on a certain amount of energy. When our economic engine kicked into gear in the early 1900s, money (not energy or resources) was the limiting factor. We had so much wealth in our natural resource bank account that we needed ways of turbocharging the broader economy so productive ventures could be undertaken by anyone with skill, products or ambition. It was around this time that banks came into existence – to increase the flow of money to match the productive output of our economies only made sense – too little money and we couldn’t produce the ‘power’ needed by a hungry world. Creditworthy individuals/businesses could now obtain loans from commercial banks who were required to keep a small portion of their assets on reserve with a central bank, yet one should always take care about possible risks, says Doyle Salewski, a Bankruptcy attorney in Ottawa. And it worked fabulously well. Correlation=causation and all that.

We were taught to view credit creation as a series of consecutive bank “intermediations”, where some initial deposit rippled through the banking system and via a multiplier, created additional money. E.g. banks are unable to create credit themselves, but are just passing on some wealth already created. This is true for about 5% of money coming into existence. The reality for 95%+ of money creation is profoundly different. The standard concept of lending describes a transfer of an existing commodity to its exclusive use somewhere else. However, this new credit extended by banks does not remove purchasing power or claims on resources from anywhere else in the economy. Since banks are capital constrained, not reserve constrained they lend when (ostensibly) creditworthy customers have demand for loans, not when they have excess reserves. As such the ‘fractional reserve banking’ system taught in textbooks and demonized on the blogosphere is not the proper description. I didn’t learn this until 2007 or so. Banks do not lend money, they create it. And this is why the focus on government debt is a red herring. All of our financial claims are debt relative to natural resources.

**(Edit – This new paper by Bank of England states precisely what I did just above -banks are not just intermediaries as taught in textbooks)

12. Debt is a non-neutral intertemporal transfer

The left graph, shows the disconnect between GDP and aggregate, non-financial debt. In every single year since 1965 we have grown our debt more than we have grown our GDP. The right graph shows the inverse – how much GDP we receive for each new dollar of debt – declining debt productivity. Source: FED Z.1 2013, NBER

(Note: I use the terms credit and debt interchangeably, though creditor and debtor are opposites)

Of the broad aggregate money in existence in the US of around $60 trillion, only about $1 trillion is physical currency. The rest can be considered, ‘debt’, a claim of some sort (corporate, household, municipal, government, etc.) If cash is a claim on energy and resources, adding debt (from a position of no debt) becomes a claim on future energy and resources. In financial textbooks, debt is an economically neutral concept, neither bad nor good, but just an exchange of time preference between two parties on when they choose to consume. (* we were taught in corporate finance, because of the deductibility of interest, choosing debt over equity is preferred in situations with taxes – but in the real world, when capital markets are open and credit is flowing, if a CEO has choice between financing a project with equity or debt, he/she will almost always prefer debt. And so they do.) However, there are several things that happen when we issue debt/credit that cause the impact of the convention to be much different than in the textbooks:

1) While we are issuing debt (especially on a full planet) the best and easiest to find energy and resources deplete making energy (and therefore other things) generally more expensive for the creditor than the debtor. People that choose to save are ‘outcompeted’ by people who choose to consume by taking on debt (source: Fesenmyer Cousino Weinzimmer). At SOME point in the future SOME creditors will get less, or nothing. (the question now is ‘when’ and ‘who’)

2) We increasingly have to issue more debt to keep up with the declining benefit of the “Trade”, lest aggregate demand plunge.

3) Over time we consume more rather than adding productive investment capacity. This lowers debt productivity over time (debt productivity is how much GDP we get for an additional $ of debt, or the ratio of GDP growth relative to debt growth). If an additional dollar of debt created a dollar of GDP, or anything close, it would be more or less like the textbooks claim – a tradeoff in the temporal preferences of the creditor and debtor. And, when debt productivity is high, we are transforming and extending wealth into different forms of future wealth (energy into productive factories etc). But when debt productivity is low (or approaching zero as is the case now), new debt is really just an exchange of wealth for income. This is happening now in all nations of the world to varying degrees. E.g. since 2008, G7 nations have added 1 trillion in nominal GDP, but at a cost of increasing debt by $18 trillion – and this doesn’t include off balance sheet guarantees.

Debt can thus be viewed two ways – 1) from a wealth inequality perspective, for every debtor there is a creditor – a zero sum game, 2) all claims (debts) are relative to the energy and natural resources required to a) service them and b) pay off the principle. (So, think 2 Italians: Gini and Ponzi.)

11. Energy measured in energy terms is the cost of capital

The cost of finite natural resources measured in energy terms is our real cost of capital. In the short and intermediate run, dollars function as energy, as we can use them to contract and pay for anything we want, including energy and energy production. They SEEM like the limiters. But in the long run, accelerating credit creation obscures the engine of the whole enterprise – the ‘burning of the energy’. Credit cannot create energy, but it does allow continued energy extraction and much (needed) higher prices than were credit unavailable. At some point in the past 40 years we crossed a threshold of ‘not enough money’ in the system to ‘not enough cheap energy’ in the system, which in turn necessitated even more money. After this point, new credit increasingly added gross energy masking declines in our true cost of capital (net energy/EROI). Though its hard to imagine, if society had disallowed debt circa 1975 (e.g. required banks to have 100% Tier 2 capital and reserves) OR if we had some natural resource tether – like gold – to our money supply since then, global oil production and GDP would likely have peaked 20-30 years ago (and we’d have a lot more of the sub 50$ tranche left). As such, focus on oil and gas production numbers isn’t too helpful without incorporating credit forecasts and integrating affordability for societies at different price tranches.

An example might make this clearer: imagine 3,000 helicopters each dropped a billion dollars of cash in different communities across the country (that’s $3 Trillion ). Citizens that get there first would stuff their backpacks and become millionaires overnight, lots of others would have significant spending money, a larger number would get a few random hundreds stuck in fences, or cracks, and a large % of the population, not near the dropzone, would get nothing. The net effect of this would be to drive up energy use as the new rich would buy cars and take trips and generally consume more. EROI of the nations oil fields wouldn’t change, but oil companies would get a higher price for the now harder to find oil because the economy would be stronger, despite the fact that those $3 trillion came from thin air (or next to it). So, debt went up, GDP went up, oil prices went up, EROI stayed the same, a few people got richer, and a large % of people got little to nothing. This is pretty much what is happening today in the developed world.

Natural systems can perhaps grow 2-3% per year (standing forests in USA increase their volume by 2.6% per year). This can be increased via technology, extraction of principle (fossil carbon), debt, or some combination. If via technology, we are accessing energy we might not have been able to access in the future. If we use debt, we are diverting energy that would have been accessible in the future to today by increasing its affordability via handouts/guarantees and increasing the price that energy producers receive for it. In this fashion debt functions similarly to technology in oil extraction. Neither one is ‘bad’, but both favor immediate consumption on an assumption they will be repeated in continued iterations in the future.

Debt temporarily makes gross energy feel like net energy as a larger amount of energy is burned despite higher prices, lower wages and profits. Gross energy also adds to GDP, as the $80+ per barrel oil extraction costs in e.g. Bakken Shale ends up being spent in Williston and surrounding areas (this would be a different case if the oil were produced in Canada, or Saudi Arabia). But over time, as debt increases gross energy and net energy stays constant or declines, a larger % of our economy becomes involved in the energy sector. Already we have college graduates trained in biology, or accounting, or hotel management, working on oil rigs. In the future, important processes and parts of non-energy infrastructure will become too expensive to continue. Even more concerning is that, faced with higher costs, energy companies increasingly follow the societal trend towards using debt to pull production forward in time (e.g. Chesapeake, Statoil). In this environment, we can expect total capital expenditure to keep pace with total revenue every year, and net cash flow become negative as debt rises.

In the last 10 years the global credit market has grown at 12% per year allowing GDP growth of only 3.5% and increasing global crude oil production less than 1% annually. We’re so used to running on various treadmills that the landscape doesn’t look all too scary. But since 2008, despite energies fundamental role in economic growth, it is access to credit that is supporting our economies, in a surreal, permanent, Faustian bargain sort of way. As long as interest rates (govt borrowing costs) are low and market participants accept it, this can go on for quite a long time, all the while burning through the next tranche of extractable carbon and getting reduced benefits from the “Trade” creating other societal pressures. I don’t expect the government takeover of the credit mechanism to stop, but if it does, both oil production and oil prices will be quite a bit lower. In the long run it’s all about the energy. For the foreseeable future, it’s mostly about the credit

But why do we want energy and money anyways?

Continued in Part II

So, What Are You Doing?

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It’s September and we still have 7 more ‘final’ posts in the queue (myself, Joules, Jerome, Jason, Art, Dave Murphy, and Euan…) and will run them every 2 days until finished. Leanan will post a final Drumbeat later this week where people can leave website links contact details, etc.

For 8 years we read about what people think about energy related themes. I thought it would be a good idea to use this thread to highlight what people are actually doing in their lives given the knowledge they’ve gleaned from studying this topic, which really is more of a study of the future of society.

What do TOD members plan to do in the future? Herding goats, fixing potholes, creating web sites, switching careers, etc? I’ll go first. Feel free to use my template or just inform others what you’re doing. This might be interesting thread to check back on in a few/many years…..(Please no posting of energy charts etc. and let’s not respond to others in this thread, just a long list of what people are doing w/ their time).

Ere we scatter to the ether, please share, anonymously or otherwise : what are people doing?

The Exponential Legacy of Al Bartlett

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Dr. Albert Allen Bartlett, emeritus professor of physics at the University of Colorado, died September 7, 2013 at the age of 90. It is coincidental that, in the year that he “officially” retired from teaching (1988), I first heard his famous lecture Arithmetic, Population, and Energy (although I don’t recall if that was the title at the time). I was in my last year in graduate school, and his talk was one of the keynote presentations (or perhaps during dinner) for a scientific conference. It was seemingly out of place given that the subject of the meeting was surface chemistry and physics, but it most certainly became stuck somewhere in my mind for reasons other than its novelty.

Most scientists are transfixed on interesting scientific details, some with relevance to technological problems, and perhaps buzz-worthy enough to attract funding. There has never been much money in solving problems with no real technological solution. I became reacquainted with this talk in 2006, probably via a link on The Oil Drum. TOD was by its nature dealing with limits to growth (of oil, if nothing else), and over the last few years, we have discussed the various ways in which we could perhaps keep the oil flowing or replace it with something else. Perhaps the implications of exponential growth was kept in the back room somewhere, like an embarrassing relative, while the latest “game changing” solution was bandied about. But we need to continually remind ourselves that, while important, finding the next energy source or improving efficiencies the keep the economy growing are not long-term solutions for a finite planet.

Below are some more reflections on Prof. Bartlett’s legacy, from ASPO-USA (where he had long been on the advisory board) and from the University of Colorado.

Albert A. Bartlett: Ode to a Gentle Giant

Dr. Albert Allen Bartlett enjoyed 90 years of rich life on this earth; moreover, thousands of people have enjoyed and been touched by Al’s life.

He is of course most widely known as a tireless, eloquent, and supremely caring voice for charting a sustainable path for humanity. With seemingly endless determination, he applied his training in math and physics and skills as a master teacher to focus attention on a simple but paramount idea–on a finite planet, “growth” is unsustainable. “Sustainable growth is an oxymoron”, is how Al is sometimes quoted.

His most reknowned quote, however, is “the greatest shortcoming of the human race is our inability to understand the exponential function”–referring to the accelerating rate exhibited by anything growing as a constant percentage increase.

Al developed a now-famous lecture that illustrated the power and importance of this mathematical phenonomenon, and reportedly delivered that lecture more than 1700 times over the following decades. That one man would be compelled to devote much of his career to the understanding of a basic, unassailable fact of life speaks volumes about the world we live in, as well as Al’s great character.

ASPO-USA is proud to have had Al as a longstanding member of our advisory board, and I was exceptionally fortunate to be acquainted with him in his latter years. While the nature of our relationship was professional, what I will always remember is the warmth, humility, and quiet joy that he brought to his work and his relationships with his colleagues and students.

For those that dare to concern themselves with the monumental issues that concerned Al, there is a risk of gloominess creeping into our outlook on life and humanity. Al is a beautiful reminder that need not be the case.

The note that Al wrote to us after he visited his doctor was filled with the peace and happiness of a man who had understood long ago what was important in life and had lived his own life accordingly. We should all be so blessed, and some of us were also blessed to know Al.

In honor to Al, inspired and informed by his life and his friendship, we re-commit ourselves to continuing and building on his legacy.

Click below to view Al’s famous lecture – Arithmetic, Population, and Energy:

Jan Mueller Executive Director, ASPO-USA


CU-Boulder campus mourns death of longtime, celebrated physics professor Al Bartlett

excerpted from here

“Al Bartlett was a man of many legacies,” said CU-Boulder Chancellor Philip P. DiStefano. “His commitment to students was evidenced by the fact that he continued to teach for years after his retirement. His timeless, internationally revered lecture on the impacts of world population growth will live beyond his passing, a distinction few professors can claim. And we can all be thankful for his vision and foresight in making the Boulder community what it is today.”

Bartlett was born on March 21, 1923, in Shanghai, China. He earned his bachelor’s degree in physics from Colgate University and spent two years as an experimental physicist at the Los Alamos Scientific Laboratory in New Mexico as part of the Manhattan Project before earning his graduate degrees in physics at Harvard. He then started his teaching career at CU-Boulder.

When Bartlett first delivered his internationally celebrated lecture on “Arithmetic, Population and Energy” to a group of CU students on Sept. 19, 1969, the world population was about 3.7 billion. He proceeded to give it another 1,741 times in 49 states and seven other countries to corporations, government agencies, professional groups and students from junior high school through college.

His talk warned of the consequences of “ordinary, steady growth” of population and the connection between population growth and energy consumption. Understanding the mathematical consequences of population growth and energy consumption can help clarify the best course for humanity to follow, he said.

The talk contained his most celebrated statement: “The greatest shortcoming of the human race is our inability to understand the exponential function.” A video of his lecture posted on YouTube has been viewed nearly 5 million times.

This year, the world population is about 7.1 billion and the CU Environmental Center announced a program this summer in which 50 student and community volunteers received training in exchange for a commitment to give Bartlett’s talk at least three times in 2013-14.

Before his death, Bartlett requested that any memorial gifts be made to the University of Colorado Foundation Albert A. Bartlett Scholarship Fund, in care of the Department of Physics, 390 UCB, University of Colorado Boulder, Boulder, CO, 80309.

Of Milk Cows and Saudi Arabia

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Under the desert in eastern Saudi Arabia lies Ghawar, the largest oil field in the world. It has been famously productive, with a per-well flow rate of thousands of barrels per day, owing to a combination of efficient water injection, good rock permeability, and other factors. At its best, it set the standard for easy oil. The first wells were drilled with rather rudimentary equipment hauled across the desert sands, and the oil would flow out at ten thousand barrels per day. It was, in a sense, a giant udder. And the world milked it hard for awhile.

However, this article isn’t just about a metaphor; it is also about cows, the Holsteins of Haradh. But in the end, I will circle back to the present and future of Saudi oil production.

I registered on The Oil Drum over seven years ago, and one of the subjects that fascinated me was the oil fields of Saudi Arabia. There was much discussion about the largest of these, Ghawar, and whether it might soon go into steep decline – taking the world with it. About that time, an application called Google Earth added some features which enabled users to mark up the globe with their own placemarks and such, and I set out to find Ghawar (or at least its footprints) in the vast sandscape that is the Eastern Province. Starting with published maps which could be overlaid atop the satellite imagery in Google Earth, I found some initial wells…and then a lot more…and kept going. An article authored by Saudi Aramco engineers showed well locations in northern Ghawar, and I noticed that many wells which I found yet were not on the map. I deduced that these were wells drilled after the map was drawn, and their locations seems to indicate intensive drilling in the center of the field, which was previously bereft of wells. I began publishing some of these findings on the blog Satellite o’er the Desert and was invited to contribute to The Oil Drum.

In my Google Earth-enabled virtual travels around Saudi Arabia looking for oil wells and such, I have come upon many strange sights. Some of these are of natural origin yet can only be appreciated from a satellite’s perspective, as is the case for this tidal pool located near a gas oil separation plant for the Safaniya oil field:

Figure 1. My favorite Google Earth view, near Safaniyah oil field, Saudi Arabia

There are many crop circles scattered about eastern Saudi Arabia — by which I mean circles of crops watered by central pivot irrigation (as opposed to circles of crops flattened by aliens). A line of such circles cuts across the southern tip of the Ghawar field, seemingly following the course of a dry river bed.

Figure 2. Irrigation along the southern fringe of the Ghawar Oil Field, Saudi Arabia. Arrows indicate location of features of interest.

Located on this line, just to the west of the field periphery, are three rather symmetrical structures:

Figure 3. Symmetrical objects of interest near Ghawar oil field.

Each of these is about 250 meters in radius. It took me awhile to discover what these were, as at the time, crowdsourced mapping was just getting started. It so happens that they are part of a huge integrated dairy operation, one of the largest in the world. Fodder crops are grown in nearby circles, cows are milked with state of the art equipment, and the milk is packaged and/or processed into cheese and other products before being shipped. All of this happens in the northernmost fringe of the Rub’ al Khali desert, one of the most inhospitable places on earth. Start here to browse around Saudi Arabia’s Dairyland on your own using Google Maps.

Turning Black Gold Into White Milk

Here is a glossy PR video describing the operations:

Although the original intent was to locally breed cows more suited to the Saudi climate, it seems they had to import them. Here is another video describing the transport of cows from Australia. A bit different than a Texas cattle drive.

They Built It, But They Didn’t Come

Answering why and how these dairy farms came to be located here reveals some interesting history of Saudi Arabia. Although great wealth of the country results from its abundant store of fossil fuels, the necessity of diversifying the economy has long been recognized. The lack of food security was always a big concern. In addition, there remained the nagging problem of what to do with the Bedouins, nomadic peoples who resisted efforts to be integrated into the broader Saudi society. And since they now had it in abundance, they decided to throw money at the problems. What could go wrong?

As related in the book “Inside the Mirage” by Thomas Lippman, a problem with Saudi agriculture is that most of the private land was owned by just a few people, and they were wealthy aristocrats, not farmers, and there wasn’t much local knowledge of modern large-scale agriculture in any case. One of the proposed solutions was to create huge demonstration projects by which modern techniques of farming could be learned and applied. As for labor, the goal was to provide individual farms, housing, and modern conveniences to the Bedouin, who would settle down for a life on the farm. The largest such project was the al-Faysal Settlement Project at Haradh, designed for 1000 families. It didn’t work out as planned, though, because the Bedouins never came:

You know of the Haradh project, where $20 million was spent irrigating a spot in the desert where an aquifer was found not too far from the surface. This project took six years to complete and was done for the purpose of settling Bedouin tribes. At the end of six years, no Bedouin turned up and the government had to consider how to use the most modern desert irrigation facility in the world.

(From a 1974 Ford Foundation memo)

Eventually, the Saudi government partnered with Masstock, a Dublin-based industrialized endeavor run by two brothers. The Haradh project became the largest of their operations in Saudi Arabia at the time. Eventually, a new company called Almarai (Arabic for “pasture”) was created which involved Prince Sultan bin Mohammed bin Saud Al Kabeer. In 1981, a royal decree created the National Agricultural Development Company (NADEC) for the purpose of furthering agricultural independence, and (for reasons I haven’t discerned), NADEC gained control of the Haradh project. Almarai went on the become the largest vertically integrated dairy company in the world, and Al Kabeer is a hidden billionaire.

As a side note, NADEC sued Saudi Aramco a few years ago as a result of the latter using some NADEC property for Haradh oil operations, and a lower court ordered Saudi Aramco to vacate. The web links to those reports have disappeared, and one wonders how the appeal went. Separately, NADEC has reportedly obtained farmland in Sudan. Food security.

Speaking of Cash Cows

A half decade ago, much of The Oil Drum’s focus was on possible problems with Saudi Arabian oil production. Was the flow from Ghawar tanking? Were all of their older fields well past their prime, and were their future options as limited as Matt Simmons suggested in Twilight in the Desert? My analyses and those of others here seem to suggest a rather aggressive effort to stem decline. With further hindsight, it is clear that Saudi Aramco was caught a bit off guard by decline in existing production. But over time, they were able to complete several decline mitigation projects as well as many so-called mega-projects with many million barrels per day of new production. With each project, the technological sophistication has grown – along with the expense. The Khurais redevelopment, which is reportedly producing as expected, features centralized facilities for oil, gas, and injection water processing. Water goes out, and oil comes back.

Figure 4. Left: map showing Saudi oil fields, Right: Khurais Project pipeline network (source: Snowden’s laptop)

The most recent project, the Manifa field redevelopment is a logistical marvel. These have so far proven to be very successful projects (even though Manifa is not fully completed). But if one looks for the impact of the projects on their total output, one comes back somewhat underwhelmed. In the following graphic I show Saudi Arabian production with the theoretical (zero depletion) and official (as reported directly by Saudi Aramco) production capacities.

Figure 5. Saudi Arabian crude oil production increases from megaprojects since 1996, compared with actual crude production (source: Stuart Staniford). Cumulative increases are superimposed on the Saudi Aramco reported baseline value of 10.5 mbpd capacity in 1995. Blue dots denote values obtained from references 1, 2, 3, 4, 5, 6

Here are some conclusions one might draw from the above (including the references):

  • Saudi Aramco has generally been self-consistent when reporting spare capacity and total capacity in light of actual production
  • Production capacity increased subsequent to startup of megaprojects. However, the net production capacity increases were uniformly and substantially less than the planned increments. In total, 5 million barrels per day of production was added, but capacity increased by only 2 mbpd.
  • It is most unlikely that reported production capacities accurately reflected what was producible at any point in time, given the reported values as correlated with the timing of the increases from the megaprojects.
  • However, actual production did not generally increase immediately after projects were completed, indicating that production capacity was not completely exhausted beforehand. But there was certainly an impetus to add a lot of production quickly.

The gap between what might have been (red staircase) and what is reported as production capacity (blue dots) is explained by considering the net of two competing developments: 1) depletion of legacy fields (Ghawar etc.) as they are produced, and b) mitigation of this depletion by drilling new wells in these fields. Since Saudi Aramco does not release data for individual fields or new vs. old wells, we are left to speculate on the relative magnitudes of these. On the plus side, the 5 mbpd from the new projects will (hopefully) deplete less rapidly than older fields. On the minus side, only 2 mbpd capacity was added – and they have exhausted all of the major fields in the pipeline. On the double minus side (for the world, anyway), only 1 – 1.5 mbpd of actual production was added since 1995, and (according to BP) all of that increase went into internal consumption. So after nearly 20 years, though total world crude production (and population) has increased, Saudi Arabia exports the same amount of oil as before. And yet, there is still a lot of hydrocarbons under Saudi Arabia. And it seems they already realize the need for more, as there are reports of planned increases from Khurais and Shaybah totaling 550 kbpd by 2017 to “take the strain off Ghawar”. I feel its pain.

Addendum: According to this news report, oil has not actually flowed yet from Manifa. The new Jubail refinery has reportedly no received any Manifa oil as of yet:

The refinery is configured to run on heavy crude oil. But two industry sources said the refinery had not received any of the heavy crude expected from Aramco’s new Manifa field and that it was running instead on light crude. Aramco said in April that it had started production at Manifa.-Reuters

Still the One?

Despite all of the negativity emitted above, it is also evident that Saudi Arabia has had and will continue to have a role as the primary provider of spare capacity which can be deployed to buffer variability in world demand. It can do this because Saudi Aramco, the largest oil company in the world, can effect oil prices by virtue of what it can put on or take off the world market. Contrast the Saudi production profile with that of the United States, shown below.

Figure 6. United States monthly crude oil production (source: EIA)

Aside from some minor month-to-month fluctuations and some notable downward spikes caused by Gulf of Mexico hurricanes in 2002 (Isadore), 2004 (Ivan), 2005 (Katrina and Rita), and 2008 (Gustav), production follows a smooth trend. Especially noteworthy is the contrast between Saudi and US production subsequent to the economic downturn in 2008, when oil prices collapsed: Saudi Arabia throttled back while the US kept pumping. Any individual producer in the US had little incentive to hold back oil. However, with the increased importance of Shale plays (Bakken and Eagle Ford) to US production, this might change the dynamics going forward. Since these wells deplete rapidly, any decrease in drilling caused by low prices will also throttle demand (although with a time lag).

The Hungry Cow

The other new “above ground factor” is the problem of growing internal consumption in Saudi Arabia, of just about everyting including oil. To air condition all of those cows, it takes a lot of electricity (and currently oil). And all of that milk feeds a growing, young population. But that milk is bound to get more expensive, since the aquifers from which those massive dairy operations get their water are being rapidly depleted.

Milk consumption in Saudi Arabia reached 729.4 million litres in 2012

The Kingdom has already depleted 70% of these sources of water and must now turn increasingly to desalinisation which when factored into the cost of producing fresh milk is very expensive. Experts have estimated that it takes between 500- 1000 litres of fresh water to produce 1 litre of fresh milk if one takes into around the irrigation required to grow the Rhodes grass or Alfalfa required to feed the cows.

It seems Saudi Arabia has cash flow problems, although it is hard to imagine why, given that they are currently producing as much oil as ever at $100/barrel. For one thing, their population keeps growing:

Figure 7. Saudi Arabia population growth (source: Thanks, Jonathan!)

and they need to spread around some money to maintain political stability. Their energy use is out of control, as is their water consumption. And for those segments of Saudi society into which much of the oil revenue flows, consumption is a happening thing. And nobody really knows where the all money goes.

Saudi Aramco is overseen by the Petroleum and Mineral Resources Ministry and, to a lesser extent, the Supreme Petroleum Council, an executive body. The company pays royalties and dividends to the state and supplies domestic refineries. Revenues go to the Finance Ministry, but the amounts are not published. There is no transparency in the national budgeting process, and it is unclear how oil revenues are used.

Environmental impact assessments are required, but the results are not made public. Laws and decrees concerning the extractive industries are published and include guidelines for the licensing process in sectors other than upstream oil, but do not contain details on fiscal arrangements. Saudi Arabia has no freedom of information law.

Some ends up in London, where some Saudi tourists spend the entire summer. Of course, this was true in 2002 (and oil was $26/barrel then).

But they do seem to have money to throw around to garner political influence (note that the US does the same with money that it doesn’t have). And they have grand plans for looking beyond their petro-heritage:

Best hopes for wise spending.

Au revoir. Au lait.

IEA Sankey Diagrams

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The International Energy Agency has taken its share of abuse from The Oil Drum over the years for its rather optimistic forecasts. But it deserves a hearty shout-out for an invaluable resource it has on its web site: Interactive Sankey Diagrams for the World.

Sankey Diagram showing world energy flows (Click for larger view)

As long as you understand what a Sankey Diagram is, not much more introduction is needed here. You can look at individual countries, consumption patterns as well as production, and more. Click on individual flows and graph over time.

World energy use for steel production (Click for larger view)

One curiosity, though:

The world oil imports (2295) and oil exports (2218) don’t match in the top graphic. “Statistical difference”?

As with data from the BP Statistical Review series, there might be occasional quibbles with the numbers. Also, I’ve seen prettier Sankeys. But if you’ve been wondering what to do with all of your time after The Oil Drum goes on hiatus, there you go.

My Last Campfire Post

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I checked my user profile for this site and discovered that as of today I have been a member for 7 years and 37 weeks. Wow! So much has happened to me and my family over those years and a lot of it was shared on The Oil Drum. For reasons I’ll explain, I haven’t been around much lately. My most recent article was over three years ago.

My first writings for The Oil Drum were over six years ago as guest posts through Nate Hagens, and then as a staff contributor for the “Campfire” section of the site. I am not an energy expert so my role wasn’t about modeling depletion or providing context to the energy news of the week. What I did was consider the broader relationships between energy, resources and society, and explore the implications of more expensive and less energy to our consumer-oriented economy and culture. The most complete and succinct example of this role is probably my “Beware the Hungry Ghosts” piece, which includes this passage:

Several religious traditions describe what are termed “hungry ghosts.” These sad beings have insatiable appetites, with tiny mouths and huge stomachs. Modern society creates hungry ghosts among the living. We “have” more than ever, but are constantly bombarded with messages that it is never enough. The poor go to dollar stores, the middle class spend hours at Bed Bath and Beyond, the rich buy ever larger yachts, and city planners are always looking for more land and water in which to expand their urban sphere. Wants have become indistinguishable from needs. I anxiously walk among our nation of hungry ghosts, asking myself what these addicts will do when they can’t get their fix?

What many of us found at The Oil Drum was a place to share our anxieties with those who share our anxieties. I am not being dismissive of this at all! Many here have points of view that place us outside of conventional wisdom, and this can be socially difficult. Where else can we go to have conversations that may be impolite, misunderstood and dismissed by the hungry ghosts we live among?

A fine example of thinking profoundly differently is in Kurt Cobb’s essay “Upside Down Economics” in which he gives a visual representation of U.S. GDP from the perspective of an Ecological Economist:

Figure 1

Many of my articles framed topics from an Ecological Economics perspective, where the economy is a subsidiary of the planet and functions by extracting resources and depositing wastes. Essential resources like energy, mineral ores, food and fiber can only be easily ignored when they are inexpensive to buy and reliably available. Many of us are alarmed because we see existential threats to the bottom of a top heavy pyramid and would like those situated higher up to pay attention and look below.

At the bottom of Cobb’s chart you see the economic sector “Agriculture & Forestry.” That is where I currently work, and where much of my writing here was about. I didn’t just explore the food growing sector, but also the so-called Food System, that includes transportation, processing and warehousing, retailing and end-use. Classic statistics discussed, and that devoted readers of The Oil Drum can probably rattle off at any cocktail party, include:

The U.S. Food System consumes several fossil fuel calories for each food calorie eaten.

The typical grocery store has about three days supply of goods on its shelves.

Each U.S. farmer (plus machines with fuel) feeds 100 people.

Figure 2. Graphic used in the post “Ecological Economics and the Food System

Two additional posts, “Save it for the Combine” and “Energy Descent and Agricultural Population” perhaps best capture the sense of the transformative change fossil fuels made in agricultural production and labor inputs, and offer some perspectives on adaptation to lower fossil fuel availability.

Figure 3. The percent agriculture population is plotted in relation to per capita energy use.  Nations with abundant use of exosomatic energy tend to have less of their population involved in agricultural production, presumably either because they can afford to import much of their food or employ labor saving devices in food production.  For example, only about 1% of the US labor force is involved in farming.  Data comes from the Energy Information Administration (EIA) and the United Nations Food and Agricultural Organization (FAO).  Original article containing figure is here.

The Campfire series was not only about exploring heterodox ideas, it was also meant to be a place where practical advice was shared. Many of us wanted to go beyond the talking stage and “do something” about the information and analyses presented on the site. This brings me to why I haven’t been writing here lately.

I went to the 2008 ASPO meetings in Sacramento not only to learn, but to network and hopefully meet someone who could help me with something. I wanted to farm at a significant scale to practice and demonstrate a form of agriculture that needs much fewer external inputs and is thus adaptive to our times. I met my eventual business partner (and TOD member) Craig Wichner in Sacramento. We were able to introduce our company, Farmland LP, at ASPO 2009 in Denver, where I gave two talks that eventually became posts (here and here). Over the past four years Craig and I have taken a heterodox idea and turned it into something substantial: Farmland LP currently owns and manages 6300 acres of cropland in California and Oregon.

So, I’ve been pretty busy. I am still writing on my company website but most of my posts are news related to the business. On occasion I do develop articles that look at the big picture and do in-depth analyses, such as “ The Many Benefits of Multi-Year Crop Rotations” and “Google Earth, Rotational Grazing and Mineralization, Part 1 and Part 2” but I won’t have time for more of that sort of writing until we are done with planting this fall.

This brings me to the end of my last Campfire post. In customary fashion I will pose some questions and ask readers to share their experience, wisdom, frustrations, and final thoughts for The Oil Drum.

Did any of you follow similar paths to mine, whereby the information and critical thinking shared on this site led to significant changes in your life path? (I never thought I’d be a farmer when I grew up.)

What barriers to making the changes you wanted did you encounter? Did they stop you from going on or did you overcome them somehow? (My wife gave me the foundation I needed to do this work. She had the income-earning job and the patience to allow me time to explore. Thank you Kristin!)

The Economic and Political Consequences of the Last 10 Years of Renewable Energy Development

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I’ve been privileged to be an editor of TOD over the past several years, and am glad to have been invited to do a final post as the site moves to an archive status.

When I started writing about energy on the blogs in 2003/2004, I was writing mostly about Russia, gas pipelines and gas geopolitics. There were so many conspiracy theories abounding on topics like the Turkmenistan-Afghanistan-Pakistan pipeline or (a bit later) Russia vs Ukraine pipeline conflicts that I felt the need to put out a different version, given that I knew the inside story on many of these issues – and that got me invited to contribute these to TOD as well. In the meantime, my job (which was, and – full disclosure – remains, to finance energy projects) slowed moved from oil&gas work to power sector transactions and, increasingly, to renewable sector deals, and I started writing about the wind business, in my mind from the perspective of a banker wanting to make sure that these projects could be paid back over periods of 15 or 20 years.

While my work is now almost exclusively focused on offshore wind in Northern Europe, I still do not consider myself a ‘wind shill’… but it does give me a different perspective on the debates currently going on about energy policy in various places, and on the changes to the power sector caused (among others, by renewables) that are underpinning such debates, and I thought it would be a useful complement, together with Big Gav‘s overview of the clean energy sector, to the other articles more traditionally focused on the oil&gas side of things.

I’ll focus on Germany, where the transformation has been most advanced (and even has brought a new word to us: the Energiewende), and where the consequences of high renewable penetration are most visible.

A lot of rather unusual things have been happening in the Germany power sector lately, from negative prices, to utilities closing down brand new power plants and, naturally, a ferocious debate as to whether to cut support for renewable energy (as has already been done in Spain).

I’ve long described renewable energy producers as a price takers (i.e., they don’t influence market prices in the short term and have to “take” market prices as set by other factors, unless shielded by specific regulatory regimes), but we are getting to the point, in a number of places, and in Germany in particular, where the penetration of renewable energy is such that it has a real macroeconomic impact on the prices of electricity, both at the wholesale and the retail levels, and thus on the way power markets run, and on the politics surrounding them. There’s the additional factor that apparent spending on renewables is targeted by governments at a time of austerity in Europe, egged on by hardly disinterested utilities.

It is worth going through what’s been happening in some detail.

:: ::

In the good old days, wholesale prices of power followed the price of natural gas, as gas-fired plants are the producer of the marginal kWh most of the time. This is still the case in the USA, and it looks like this:

Source: neutroneconomy

Retail prices tend to follow the average wholesale cost, plus a slice for distribution costs and taxes which can vary quite wildly from country to country:

Source: eurostat

But we’ve seen prices diverging across markets over the past two years, as shown in the following graphs:

  • gas prices diverging sharply across continents (notably as a result of the gas shale developments in the US and increased demand for gas in Japan following the Fukushima disaster, while European prices remain largely indexed to oil):

  • Source: Fidelity

  • wholesale power prices diverging from gas prices:

  • Source: Die Welt, via gwpf

    Note: the lines above represent long term break-even prices for, from the bottom, nuclear power plants, coal-fired plants and gas-fired plants

  • retail prices moving in the opposite direction to wholesale prices, and increasing:

Source: wikipedia (DE)

German wholesale prices have been trending down over the past several years, despite the closure of close to half of the nuclear plants of the country, and despite the persistently high natural gas prices on the continent, while retail prices have been going up, including due to contributions to pay for guaranteed fixed prices to renewable energy producers (the “EEG” component in yellow in the last graph).

The fall in wholesale prices means that most traditional power plants are not economical at current levels, as the second graph above shows.

There are some temporary factors to the current situation. One is the general economic woes of the eurozone, which are pushing demand downwards and thus prices as well. The other is the temporary higher use of coal-fired power plants, which itself comes from a combination of short term factors:

  • cheap imports from the USA (where coal use has been displaced for a while by cheap gas in power generation) made coal more profitable than gas, and
  • regulatory incentives mean coal plants have (under the (the Large Combustion Plants EU directive) a limited number of hours to run and operators have every reason to use these up quickly, and especially if the plants are profitable, or less unprofitable than gas ones (UK coal plants have the additional incentive that a carbon tax will be imposed on them from April 2013).

These factors have made it possible to claim that Germany was increasing pollution and carbon emissions because of wrongheaded policies (depending on your stance: closing nuclear plants or pushing renewables), but this looks like a temporary arbitrage between coal and gas.

:: ::

The real long term story is that the power spot markets are being completely upended by the increasing penetration of renewable energy. In Germany, new renewables represent around 50% of the overall installed capacity, and already provide close to 20% of all power generation (split in 2012 in 3 almost equal parts between wind (7%), biomass (6%) and solar (5%)), up from almost nothing 15 years ago, and on many days now they provide 50% or more of total output:

Source: Paul Gipe

This reduces demand for mid-load producers and peakers over more and more periods throughout the year. As the graphs below shows, on good days in the warm season the PV capacity almost eliminates altogether the need for intermediate load; in winter, wind takes over (in aggregate, although not with as regular a daily profile):

Source: DoDo on European Tribune


This was the slice of demand served by coal-fired and gas-fired plants and they are simply not being used as much as they used to, and certainly not as much as their owners expected.

And prices are being squeezed down not just for these producers, but for everybody else as well, in particular during the peak day time hours which used to be the most profitable for all power plants (because baseload plants also receive the more expensive peak hour prices even if they did not bid at such prices). This means that existing capacity is less and less profitable – not just the peakers or intermediate plants, but also the nuclear and other baseload workhorses of the system. Thus the few highly publicized plant closures, and the ongoing utility complaints about lost revenues. Moreover there currently is no business case to invest in any kind of power plant (other than renewables under specific revenue regimes), which utilities use to argue against renewable support.

But here’s the thing: preventing new renewables will not eliminate the current existing capacity, which means that the economics of the sector will not recover even if no new renewables were built… The wholesale market as it was designed 20 years ago (de facto based on gas-fired plants of various efficiency targeted at different points of the merit order curve setting up the marginal price) is irreversibly broken. The system is now dominated by plants with very low marginal cost of production (but high upfront investment), which means that spot prices are systematically too low for everybody – you can’t invest in plants with high upfront investments (like nukes), and you can’t invest in plants with high marginal running costs (gas-fired plants) unless you are betting on persistently low gas prices into the future. That may explain the push for shale gas in Europe, but who believes that shale gas will bring low prices? Even in the US prices are trending up again (and forward prices even more so).

:: ::

In the meantime, retail prices have kept on increasing, and the fact that the contribution of the support regime (in Germany, the “EEG-Umlage”) to retail prices has become visible has made it a target of lobbyists and thus a political topic, despite the fact that retail prices increases have been caused, to a large extent (and in particular until 2009) by increases in gas prices.

This leads us to an hidden truth: a large fraction of the massive increase in renewable energy production is not paid for by consumers, but by incumbent producers who see their revenues decline as the price they earn per MWh goes down. Utilities, which see their margins on the retail side increase, but have very little renewable energy production capacity of their own are caught between two conflicting trends, with their upstream business losing profitability, but their downstream business earning more. IPPS are suffering, but have less voice. Unsurprisingly, utilities are focusing public attention only on the first part, and are naturally blaming renewables – not hesitating to point fingers at their support regimes as the cause of rising power prices, in the hope that these regimes will be weakened. They claim they are victims of unfair competition from “heavily subsidized” sources which have priority over them and can dump power with no worry for consequences into the network. They use a mix of real arguments and weaker ones to push against renewables:

source: Goldman Sachs, via Zero Hedge

  • one of the true arguments is that the cost of supporting solar PV has become larger than expected and faster than expected. Just 5 years ago, a number of countries had tariffs in the 500-600 EUR/MWh range, and regulators were surprised by the volumes that managed to be installed – and capture the advantageous prices levels. when they dropped the price support for new projects, they were again surprised by how fast the industry was able to match the lower prices through new technology (and a brutal price war). The result has been an amazing drop in the price of solar panels (-80% in just a few years, as shown above), bringing them close to grid parity, and a rather large (multiple GWs in Germany, Italy, Spain) stock of solar PV capacity which is entitled to very high tariffs for many years, at a visible cost to consumers;
  • in some places, the regulatory regime allowed producers to capture the best of both worlds – the higher of the fixed tariff or the market price (whether wholesale or retail), thus preventing the network, and the public, from benefitting from the “cap” that a real fixed tariff would have provided;
  • in Spain, retail power prices were kept artificially low for political reasons), and the the gross cost of the fixed tariffs was not absorbed into the general cost base of the network and instead explicitly imposed on utilities, which used that as an obvious argument against renewables (even though a good part of the price increases were linked to increased gas prices before the merit order effect acted on wholesale prices); the government’s U-turn on tariffs, which imposed negative tariff changes on already operational projects, alienated the utilities further (as they had, contrary to what happened in Germany, become significant operators of renewable capacity and lost money in the process) and created a precedent that also scared off lenders and investors and put the sector in disrepute;
  • in Germany, the renewable energy surcharge applies only to retail consumers, and large sections of industrial users (but not all) are exempted. That means that the gross costs is borne by a smaller fraction of the overall consumers, and that some industries are complaining that they are being treated unfairly. Meanwhile, those benefitting from the situation (the bug consumers who benefit from lower wholesale prices and do not pay the surcharge) are staying silent so as to avoid attracting attention (they failed – this quirk is likely to be corrected soon);

But what is not true is that wind has contributed in any meaningful way to retail price increases (most of Germany’s wind capacity was installed before 2008 and the EEG component is all but invisible at that date), and not has offshore wind (which is indeed more expensive, but very little of which has been built to date). When you look at average costs, one sees that onshore wind is largely competitive on wholesale markets (and yes, that does take into account grid access and balancing costs – there is enough experience with large wind penetration in various networks to know that it can be done and that it has no meaningful impact on costs), that solar is already competitive against retail prices in many markets (the famous “grid parity”), and that other technologies are somewhere in-between. Offshore wind is still more expensive, but is expected to come down in price by the time it will reach significant capacity:

source: Goldman Sachs, via Zero Hedge

Note that these average costs of production, always include very political assumptions about the cost of money, and the future price of gas, to apply to such projects. The discount rate (at the time of investment) is the main driver of the cost of wind or nuclear whereas the cost of gas-fired power is only an estimate, based an assumptions about the cost of gas in the next 20 years. And that also means that the price of power from a wind farm or a nuclear plant is largely fixed and known once the plant is built, while the cost of power from a gas-fired plant in the future is essentially unknown. The cost of money is a fundamentally political decision (derived from investors’ estimates of macro risks like inflation, of regulatory risks applying to the sector, and technology risk); the consensus on future gas price estimates is also influenced by many factors, including long term projections by public bodies like the IEA, the US EIA or private firms with their various agendas.

As an aside, the more renewables you have in the system, the less it is possible to take out the regulatory support regime, because spot prices tend to go towards zero – which makes investment in renewables (or in any other kind of power generation assets, for that matter) impossible. So “grid parity” is an illusory target, in a sense, because it is a moving target. Technologies with high variable costs (all fossil-fuel plants) cannot compete at any price when there is enough zero-marginal cost capacity in the system, and technologies with high upfront investment costs need comfort about price levels over a long period as they need such prices on a constant basis to amortize the initial investment. This is why the UK government is working on a “contract for differences” (essentially the same thing as a fixed tariff) for new nuclear plants.

:: ::

Altogether, the reality is that the consumers and the utilities is paying for a few expensive years of early solar PV technology (to the tune of a few cents per kWh, ie a few hundred euros per year and per household), and now the utilities are bearing almost in full the further impact on the system: they are no longer making (much) money on their current fleet – not on gas-fired plants, barely on their coal-fired plants, and they don’t have much renewable energy capacity. They are stuck with a capital stock (including recent plants), which is increasingly uneconomic in today’s markets, caught between high fuel prices and lower power prices. And that is the result of strategies over the past 10-15 years that willfully ignored policies to promote renewables pursued pretty consistently across Europe, and the likely impact they would have on power prices (the infamous “merit order effect” – which I discussed in detail at least 5 years ago, and which was already the topic of academic papers before that).

So it’s not like they had no warning and no notice… In a sense, utilities have been consistent: one of their past arguments was that renewables would never reach critical mass and thus were not a serious solution to reduce carbon emissions. And they surely did not take recent investment decisions (mainly to build base-load or mid-load gas-fired plants) with the scenario of heavy renewable penetration in mind, otherwise they would not have been so surprised by the current situation…

:: ::

Utilities do make a legitimate point when they underline that the system still needs their capacity (because renewables are not available on demand, and do not provide the flexibility required in the very short term), and that this needs to be paid for (and, at some point in the future, existing capacity will need to be replaced, and they need to be able to make a business case for that, which is not possible today).

In the previous regime, where power prices were determined by gas prices, it was possible to pay for the flexibility in the form of price spikes that gave the right signal for mid-load and peaker gas-fired (or oil-fired, or hydro) plants to be used, and their frequency of use was relatively predictable over a year, allowing for a sound business model to be implemented. Now, with plenty of renewables, the price signal is completely different. There are many more periods of very low prices when renewables flood the system (and this is particularly the case in places with lots of solar, as it is available during the day, ie when demand is stronger and thus prices used to be higher). This has two consequences: gas-fired plants get much less use than in the past (and less than their business plans expected), and baseload plants like nukes or big coal-fired plants get lower prices during periods when they were cashing in more money. The latter earn less money (but still run); the former now run a lot less than expected , which has income implications but also consequences for gas consumption and storage – patterns of use become very different, moving from the usual “once a day” pattern (a few hour at peak demand times), to short bursts several times a day (as renewables drop out), or very long periods of use over multiple days when renewables are not available at all.

Given that the penetration of renewables will continue to change every year, it has become really hard to identify the business model to use for flexible plants – and even harder to know what it will be in 1, 5 or 10 years from now. These flexible plants will be needed, at least to some extent, and they need to be paid for, and that cannot really happen with today’s regulatory regime (and as noted above, stopping support regimes for renewables won’t change that now: the existing stock of wind and solar is already big enough in several countries to keep the current market arrangements broken). One solution, thankfully being considered in several markets, and which already exists in places like California, is to put in place a capacity market, where plants make themselves available for rapid changes in output, without actually producing anything most of the time, and get paid for that availability: ie a market for MW in addition to the market for MWh.

:: ::

The politics of this transition are messy. You can have articles saying (without any real argument) that “Too much green energy is bad for Britain at the very same time that you have record cold weather, with critical weakness in the gas supply infrastructure and wind actually coming to the rescue… (in the UK last March).

People are presenting capacity markets as another subsidy to renewables, whereas system security has always required a significant margin of unused capacity for safety: power demand varies from 1 to 2 or one to 3 every day, peaks can be more or less intense depending on weather, and even large plants can go offline on a scheduled or unscheduled basis. That safety margin was simply paid for in a different way, either by imposing capacity buffers on utilities, or through spot price peaks that were high enough to pay in a few hours for the peaker plants which are otherwise idle most of the time. There’s naturally a lot of talk that policies to develop renewable have failed, being costly (only partly true, as shown above, and increasingly less so as time goes by), ineffective at reducing carbon emissions (not true, each MWh of renewable energy has, by and large, replaced a MWh generated previously by fossil fuel plants) and damaging to the system (obviously not the case). But the cat is out of the bag: once renewable energy reaches a critical mass, its impact on power systems is pretty much irreversible and no amount of lobbying by utilities is going to get them their previous business model back: wind turbines and solar panels are there and they will keep on cranking out zero-marginal-cost MWh for a very, very long time…

So utilities would be well advised to focus their lobbying on fixes to the system that actually solve problems (like capacity markets, or maybe new rules on grid access for “must-run plants), and to not cut the tree on which they are sitting (killing the support regime for offshore wind, the only sector in renewables which is “utility-scale” and where they have been able to take a leading share, and the only sector of the power sector where they can actually make money these days…)(I note here again, for full disclosure, that I work in the offshore wind sector and appreciate that this may sound rather self-interested).

The politics of power prices are rather volatile, and people have little sympathy for the big utilities, which are typically seen as profiteers anyway, so the focus on the high retail prices could end up damaging them more than it impacts renewable energy producers. Energy is a rather complex topic, not really suited for soundbites, and it is easy to confuse people or say outright lies without getting caught right away. But, by and large, Germans still support the Energiewende – both the move away from nuclear and the support for renewable energy – and are willing to pay for it. And for areas like Bremerhaven, all the manufacturing activity linked to wind and offshore wind is rather welcome.

:: ::

In summary:

  • Renewable energy is reaching the scale where it has an impact on the overall system; the effects are irreversible, and highly damaging to incumbents;
  • The net cost to get there has been relatively low, and largely paid for by utilities, which have constantly underestimated the ongoing changes, even as they were both (wrongly) dismissing them and (relatively ineffectively) fighting them;
  • there are legitimate worries about the way to maintain the fleet of flexible plants that was required in the past and will continue to be needed in the new paradigm, but can no longer pay its way under current market arrangements; the solution is not to fight renewables (it won’t make the existing fleet go away) but to ensure that the right services (MW on demand) are properly remunerated;
  • the shale gas revolution will have a limited impact in this context (it had almost none in Europe, other than via some cheap coal exports from the US for a short period), and does not change the economics of gas-fired plants to the point that they can be competitive in a system dominated by renewable energy production capacity;
  • more generally, the future for gas suppliers is bleaker than for gas turbine manufacturers – there will be a need for a lot of gas-fired plants but they won’t be burning a lot of gas (they will be selling MW rather than MWh);
  • overall, a future with high renewable penetration is not only possible but increasingly likely, and it’s a good thing.

Part of the wind power series.

The Last Drumbeat

This post is by from The Oil Drum - Discussions about Energy and Our Future

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Is the idea of peak oil a false projection or impending reality?

The world has recently been exposed to many optimistic estimates on the future of oil production and the media has eagerly picked up these projections. International Energy Agency estimates that by 2020, the USA is projected to become the largest global oil producer, to the extent that it is to become a net oil exporter by 2030. These perspectives are offered as an alternative to the pessimistic Hubbert curve projections that imply we are at, or near, maximum global production of oil. But if you dig into the rationales for this optimism, it is based principally on two concepts. There are new developments in the oil industry, specifically directional (horizontal) drilling and fracking, principally in the Eagle Ford play of Texas and the Bakken region of North Dakota and Montana. And, stated less frequently, the addition of other fluids to what is called oil, most importantly natural gas liquids, which are expected to increase as a result of fracking for gas. In fact, there has been little, if any, increase in the global production of conventional oil since 2005, and most of that has been in the USA.

Don’t Place Your Bets On Peak Oil Demand Just Yet

For some reason, the oil market is always spoken of in hyperbolic terms. A pending dispute between two nations can double oil prices within a matter of months. Or peak oil worries set in and prices will skyrocket as production declines. Today, the new theory is that we are at a point of peak demand, and the decline in OECD demand will lead us to a more rosy energy outlook on the horizon.

There is one thing that we should all give pause to before immediately reacting to news like this: demographics. The sheer size of the global population and the disparity in global economic wealth make the concept of peak oil demand much more difficult to realize than we can possibly imagine.

Another Peak Oil Fad

For 70 years, environmentalists have predicted the world would see diminishing supplies of oil after reaching a peak in production. The peak never occurred and the peak oil fantasy has been put to bed, at least for the foreseeable future, by the emergence of large quantities of unconventional oil as the result of fracking.

Now, environmentalists are suggesting there will be a demand peak instead of a supply peak, where supply outstrips demand.

“Resiliency: How to Survive Peak Oil and Climate Change.”

Speaker and author Steve Hallett from Purdue University presents a provocative and humorous talk combining the research from his two books, “Life Without Oil: Why We Must Shift to a New Energy Future” and “The Efficiency Trap: Finding a Better Way to Achieve a Sustainable Energy Future.”

So Long, Farewell

Remember Peak Oil? Before fracking opened up vast amounts of gas and shale oil, before the protests against the Keystone XL tar sands pipeline, before BP’s Deepwater Horizon blowout, peak oil was one of environmentalists’ chief concerns. Greens said that, at some point soon, crude oil production would decline, forcing a spike in petroleum prices that would fundamentally alter life as we know it. The prediction was at once a warning and a hope: We had to prepare for an era of oil scarcity, and in those preparations lay the groundwork for a less consumption-driven lifestyle.

The Fossil Fuels War

Only a few years ago governments, corporations, and energy analysts were fixated on the problem of “the end of cheap oil” or “peak oil,” pointing to growing shortages of conventional crude oil due to the depletion of known reserves. The International Energy Agency’s 2010 report devoted a whole section to peak oil. Some climate scientists saw the peaking of conventional crude oil as a silver-lining opportunity to stabilize the climate—provided that countries did not turn to dirtier forms of energy such as coal and “unconventional fossil fuels.”

Today all of this has changed radically with the advent of what some are calling a new energy revolution based on the production of unconventional fossil fuels.3 The emergence in North America—but increasingly elsewhere as well—of what is now termed the “Unconventionals Era” has meant that suddenly the world is awash in new and prospective fossil-fuel supplies.

Michael Lynch: Shale Gas Production And High Decline Rates

In a classic movie scene, a skeptical Sigourney Weaver asks Ghostbuster Bill Murray what the instrument he’s using actually does and he hesitates, then responds, “It’s technical.” This is an old ploy that has been used in public policy debates for many years; the famous physicist Vanevaar Bush, when asked during World War II to justify his budget for research would respond by drawing schematics on a board, causing the Congressmen to quickly terminate the discussion.

This practice is common in many energy debates as well, including the controversy over the impact of hydraulic fracturing of shales. The two technical buzz words/terms often thrown up are ‘decline rates’ and ‘energy return on energy invested’ (EROEI), which are cited as suggesting that conventional petroleum supplies are, or will soon be, declining. Peak oil advocates were quick to seize on these concepts, but those who are merely pessimistic about supply still bring them up.

American energy booming despite Obama’s policies

Fossil fuel production on private lands has increased by 27 percent since 2003, according to the EIA. But on government lands, fossil fuel production is down 15 percent since 2003, including a 4 percent drop in 2011 alone. It is Obama’s policies that are directly causing these drops in public land energy production. Immediately after taking office in 2009, Obama canceled 77 leases for oil and gas drilling in Utah. Then in January 2010, Obama issued new regulations further restricting energy development on all federal lands.

Crude Drops as U.S. Weighs Syria Attack

West Texas Intermediate crude fell the most in two weeks as the U.S. considered limiting the scale of military strikes on Syria.

Futures dropped 1.2 percent. The Senate Foreign Relations Committee passed a resolution authorizing the “tailored” use of force. It was the first test of congressional support for President Barack Obama’s plan to attack Syria in response to the alleged deployment of chemical weapons against civilians.

“As the market begins to expect a more limited involvement for the United States in Syria and a more limited potential expansion of the conflict, it’s taking some of the premiums off the top,” said Jason Schenker, president of Prestige Economics LLC, an Austin, Texas-based energy consultant.

US WCoast Products- Gasoline soars on refinery problems

HOUSTON (Reuters) – Gasoline soared in West Coast refined products spot markets on Wednesday as traders said a San Francisco Bay refinery was having problems recovering from a malfunction earlier in the week.

Fracking Boom Seen Raising Household Incomes by $1,200

Surging oil and natural gas production brought on by hydraulic fracturing is lifting the U.S. economy by lowering energy costs for consumers and manufacturers, according an industry-funded report.

In 2012, the energy boom supported 2.1 million jobs, added almost $75 billion in federal and state revenues, contributed $283 billion to the gross domestic product and lifted household income by more than $1,200, according to the report released today from IHS CERA. The competitive advantage for U.S. manufacturers from lower fuel prices will raise industrial production by 3.5 percent by the end of the decade, said the report from CERA, which provides business advice for energy companies.

“What really surprised me was how powerful an impact it is having to such a broad base of the economy,” John Larson, vice president of economics and public sector consulting for IHS CERA and lead author of the report, said in an interview. “It makes it to me a story that all Americans really need to come to grips with and understand.”

Africa’s richest man plans refinery, plants worth $9 bn

Africa’s richest man announced plans Wednesday to build a refinery as well as petrochemical and fertiliser plants worth some $9 billion, promising to reduce Nigeria’s dependency on imported fuel.

Malaysia’s Najib Raises Fuel Prices to Trim Budget Gap

Malaysia raised fuel prices for the first time since 2010, joining neighboring Indonesia in curbing subsidies that have stretched government budgets and threatened investor confidence.

Iraq to provide oil assistance to Jordan worth $25m

AMMAN: Iraq has announced to provide oil assistance to Jordan worth $25 million, media reported.

The spokesperson for Jordanian minister of state for media affairs, Mohammed Al-Momani, said the Iraqi council of ministers has decided to offer the assistance in the form of crude oil, Jordan news agency PETRA reported.

Venezuela’s leader blames right-wing saboteurs for power outage

CARACAS, Venezuela — With parts of Venezuela still dark after a mysterious blackout that left the capital and 17 states without electricity, President Nicolas Maduro laid the blame on opposition sabotage as his government scrambled to respond to the power failure.

The power shutdown began midday Tuesday after an apparent failure in high voltage transmission lines in Aragua and Guarico states, which led to total outage in several of the country’s most populous areas.

Senate committee approves Syria attack resolution

WASHINGTON — The Senate Foreign Relations Committee voted to authorize President Obama to use limited force against Syria Wednesday, after adopting amendments from Sen. John McCain designed to urge Obama to “change the military equation on the battlefield.”

What’s the evidence of Syrian chemical weapons attack?

But despite all the talk about conclusive intelligence, questions remain. A declassified report by the White House does not divulge all details of the evidence the United States is looking at. And it remains unclear what the “streams of intelligence” cited in the report may be and how they were collected.

Russia insists there’s no proof. Russian President Vladimir Putin said he wants to see evidence that would make the determination “obvious.”

Jeff Rubin: Will Syria Bring an Oil Shock?

Is the Middle East about to deliver another oil shock to the global economy? The U.S. military has targets picked out in Syria and President Obama is trying to convince Congress that America needs to intervene. If the U.S. does go ahead with tactical strikes against the Assad regime, oil markets will be caught in the middle. The size of the repercussions, though, is an open question.

History, both recent and more distant, offers a sense of what to expect when the world’s most important oil producing region destabilizes. Syria’s oil production, in terms of physical supply, is inconsequential. What’s more of a concern is how Syria’s neighbours react to any military intervention by the U.S. The Middle East is home to roughly a third of global oil production. The world depends on a steady stream of cheap crude flowing from the region in order to keep the global economy running smoothly.

Impact of war on stocks and oil

NEW YORK (CNNMoney) – The threat of U.S. military action in Syria has put pressure on stock prices and sent oil higher. But if history holds, the actual start of an intervention would quickly reverse those moves.

Libya PM warns time running out for oil protests

TRIPOLI: Libya’s patience with protesters who have halted its onshore oil output is running out and action against them nearer, Prime Minister Ali Zeidan said yesterday.

“The government has been patient,” Zeidan said. “To preserve national unity we saw fit to use all peaceful means to resolve this issue but at some point we may reach a point in which the state should exercise its role seriously to stop this.”

Oil industry executives say Zeidan’s shaky central government risked widening violence that could descend into civil war if it uses force to recapture oilfields.

Medvedev Confident On Russian Gas Role

Russia is unconcerned about natural gas exports from the United States driving down the price European consumers pay for Russian gas, Prime Minister Dmitry Medvedev said in an interview with Germany’s Handelsblatt.

Owen Paterson echoes David Cameron’s claim that fracking boom can bring down energy bills

Owen Paterson, the Environment Secretary, has held out the prospect that a fracking boom in the UK would lower energy prices – just a day after leading climate change economist Lord Stern dismissed a similar claim by David Cameron as “baseless”.

Taqa seeks green light on Kurdish oil production

Abu Dhabi National Energy (Taqa), the state utility, is seeking approval to pump 30,000 barrels per day from its field in the Kurdish region of Iraq.

Although the amount would be a fraction of the capacity of more developed fields in the Kurdish area such as Taq Taq and Tawke, plans for extra output add urgency to the semi-autonomous region’s case for exporting oil without the involvement of the Iraqi federal government.

Rupee’s Plunge Prompts Refiner to Embrace Iran

India is increasing imports of crude oil from Iran as policy makers risk flouting U.S. trade sanctions in their scramble to halt the slump in the rupee.

Nigeria: Delta youth shut down oil firm’s operations

Youth in Utagba-Ogbe, Ndokwa West Local Government Area of Delta State on Tuesday shut down the flare and drilling rig of Midwestern Oil and Gas Company, grounding its activities.

Six blue chip companies: Midwestern Oil and Gas, Energia, Pillar Gas, Agip, Sterling Global and Platform Petroleum are said to be producing “over 159 barrels of crude oil per day from the community.

Turkmenistan starts pumping natural gas from vast South Yolotan field

Turkmenistan began pumping natural gas Wednesday from a vast field near the Afghan border that will help it more than double exports to China in the coming years.

Chinese President Xi Jinping joined Turkmenistan’s President Gurbanguli Berdymukhamedov for the start of gas production at the South Yolotan field in the former Soviet republic in Central Asia.

Chesapeake New York gas lease deal expected next week

NEW YORK (Reuters) – Chesapeake Energy Corp will finalize an agreement next week to drop about 12,000 acres of land leased for energy drilling in New York state, as a moratorium on fracking continues into its sixth year.

ConocoPhillips Continues to Plunge Deeper Into the Gulf

By all accounts, the most recent lease sale in the Gulf of Mexico was a disappointment. The latest auction by the Bureau of Ocean Energy Management attracted the second-lowest amount of bids in 30 years. However, for ConocoPhillips the latest auction saw the company wade even deeper into the Gulf as it came up as the high bidder after offering $30.58 million for a tract 200 miles off the coast of Galveston, Texas.

Kenya on fast track to join world’s exporters

Kenya is ready to join the ranks of oil producing nations, with shipments slated to begin in 2016.

This means Kenya will become the first oil exporter in east Africa.

World panel rules for Conoco in Venezuela oil case

Venezuela failed to fairly compensate ConocoPhillips for its seizure of three crude oil projects in 2007, according to a ruling from a World Bank arbitration panel.

The International Centre for Settlement of Investment Disputes in Washington concluded in a ruling issued Tuesday that Venezuela “breached its obligation to negotiate in good faith.”

The panel has not yet determined what Venezuela owes ConocoPhillips.

PetroChina Sued Over Failure to Disclose Corruption

PetroChina Co. was sued by an investor who claims the oil producer violated U.S. securities laws by failing to disclose corruption that exposed it to government investigations and penalties.

Regulators Still Probing JPMorgan Over Market Manipulations

Through multiple sources familiar with the matter, Reuters learned that U.S. authorities are in the midst of a criminal investigation aimed at discovering whether several employees of JPMorgan tried to impede FERC’s probe.

In particular, the Federal Bureau of Investigation and prosecutors from Manhattan U.S. Attorney Preet Bharara’s office want to determine if those employees — including three individuals who operated out of a Houston office — gave regulators all the information they needed to investigate the bank’s power market deals, the sources told Reuters.

Fracking Practices to Blame for Ohio Earthquakes

Wastewater from the controversial practice of fracking appears to be linked to all the earthquakes in a town in Ohio that had no known past quakes, research now reveals.

New Drilling Rules Reflect Old Problems

The Bureau of Land Management (BLM) is at a fork in the road to America’s public lands. One path offers outdated, inadequate rules — the path that the agency has been following to regulate oil and gas drilling for more than three decades. Down the other path are requirements for oil and gas producers to use today’s best-available practices to protect America’s clean air, clean water, wild lands and human health. That path would lead toward a future where oil and gas resources are more responsibly developed, in ways that reduce threats to public health and the environment and respect the quality of life in local communities.

Japan’s radioactive water leaks: How dangerous?

TOKYO — New revelations of contaminated water leaking from storage tanks at the tsunami-ravaged Fukushima Dai-ichi nuclear power plant have raised alarm, coming just weeks after Japanese officials acknowledged that radioactive water has been seeping into the Pacific from the plant for more than two years, The government announced this week that it would contribute 47 billion yen ($470 million) to build an underground “ice wall” around the reactor and turbine buildings and develop an advanced water treatment system. A look at the problem, and the potential risks to fish and the humans who eat them.

In Eastern Tennessee, The Future Of Electricity Generation Takes Shape

TVA, which brought electricity and running water to much of the Southeast in the decades following the Great Depression, is facing many of the challenges that big utilities across the country face, and it has responded (or has been forced to respond) by beginning to phase out its coal-fired units in favor of gas-fired generation at modern combined cycle plants, including one at the John Sevier power station in Rogersville, Tennessee. In 2011, the TVA signed a landmark agreement with four states, several environmental groups, and the U.S. Environmental Protection Agency that calls for the retirement of 18 units at three power plants, including the huge Johnsonville Fossil Plant in Tennessee, the Widows Creek Fossil Plant in northern Alabama, and the Sevier plant. Two of the four units at Sevier have been idled, and the other two will either be equipped with modern emissions control equipment, converted to biomass-fired generation, or retired by the end of 2015.

Is USA’s love affair with the automobile over?

Driving in America has stalled, leading researchers to ask: Is the national love affair with the automobile over?

After rising for decades, total vehicle use in the U.S. — the collective miles people drive — peaked in August 2007. It then dropped sharply during the Great Recession and has largely plateaued since, even though the economy is recovering and the population growing. Just this week the Federal Highway Administration reported vehicle miles traveled during the first half of 2013 were down slightly, continuing the trend.

Auto sales rebound to pre-recession levels

DETROIT (AP) — For the U.S. auto industry, the recession is now clearly in the rear-view mirror.

New car sales jumped 17 percent to 1.5 million in August, their highest level in more than six years. Toyota, Ford, Nissan, Honda, Chrysler and General Motors all posted double-digit gains over last August.

Chart: 2/3rds of Global Solar PV Has Been Installed in the Last 2.5 Years

If you want to understand why people so often compare deployment trends in solar photovoltaics (PV) to Moore’s law in computing, consider this statistic: two-thirds of all solar PV capacity in place worldwide has been installed since January 2011.

Let’s put that into perspective. It took nearly four decades to install 50 gigawatts of PV capacity worldwide. But in the last 2 1/2 years, the industry jumped from 50 gigawatts of PV capacity to just over 100 gigawatts. At the same time, global module prices have fallen 62 percent since January 2011.

Grid Expansion Delays Won’t Derail Germany’s Energy Transition, Analysis Finds

LONDON — Expanding Germany’s transmission grid in order to accommodate increasing amounts of renewable energy will be a crucial element of the nation’s effort to meet its 2020 climate targets. But new analysis suggests that even if grid updates are heavily delayed, the nation could still successfully add large amounts of renewables, albeit with slightly higher costs.

A Bet on the Environment

Called Mosaic, the company functions like a virtual renewable energy bank, soliciting investments for solar projects and making loans to be paid back, typically, over about 10 years. Mosaic collects a fee on every loan. It is similar to the crowdfunding platform Kickstarter, a Web site that matches creative ventures with financial supporters. In the case of Mosaic, with a minimum of $25, investors can earn a return.

“Our goal is to build the No. 1 investment platform for clean energy,” Mr. Parish said. Mosaic, he added, allows investors “to not just be passive consumers but to be creators, to be owners, to collaborate to make things happen.”

Thousands of Fish Killed by Waste From Chinese Plant

HONG KONG — Thousands of dead fish floating along a 19-mile stretch of a river in Hubei Province in central China were killed by pollutants emitted by a local chemical plant, provincial environmental officials said Wednesday.

Young Students Against Bad Science

Your parents may have had to walk uphill, both ways, to get to school. But as ideological warfare threatens the teaching of climate science and evolution in many schools, it is clear that today’s students face their own obstacles on the road to a respectable science education — and some are speaking out.

Why New Approaches Will Strengthen African Nations

Africa is poised for the world’s next green revolution. Across the continent, there has been a renewed commitment from governments, nongovernmental organizations and the private sector to move agriculture from a development challenge to a business opportunity. As a result, countries such as Nigeria are moving to once again become net exporters, rather than importers, of agricultural commodities. Agriculture has become one of the most powerful engines for Africa’s economies, many of which have experienced rapid growth over the last decade.

Safeway stores to pay $600K fine for clean air violations, agrees to reduce greenhouse gases

SAN FRANCISCO — Grocery retailer Safeway, Inc. will pay $600,000 and has agreed to a nationwide reduction of greenhouse gas emissions from refrigeration equipment at its 659 U.S. stores under terms of a settlement released Wednesday.

The U.S. Environmental Protection Agency and Department of Justice said the settlement with the Pleasanton, Calif.-based retailer is the largest ozone protection case ever reached under the Clean Air Act.

World Bank to insist projects it funds include steps to curb air pollution

The World Bank is planning “aggressive action” to help developing nations cut emissions of soot and other air pollutants blamed for causing climate change, in a shift also meant to protect human health and aid crop growth.

Barack Obama should practise what he preaches about climate change

Grand speeches on fighting global warming are meaningless if US keeps blocking EU’s efforts to cut carbon emissions.

Finnish study on climate change: Procrastination over mitigation measures could prove costly

Forecasts about global warming and its consequences are shrouded in uncertainty. Research scientists maintain that the risks associated with climate change are high, but are unable to estimate accurately how easily temperature reacts to changes in the levels of carbon dioxide. According to Tommi Ekholm, Research Scientist at VTT Technical Research Centre of Finland, who has modelled the costs of climate change mitigation measures in his recent doctoral dissertation, it is because of this uncertainty that we need to accelerate measures to mitigate global warming rather than hold back.

Keystone Delays Seen Giving Time for Climate Concessions

A decision on whether to approve the Keystone XL oil pipeline may slip into next year, giving opponents time to marshal efforts against it while offering President Barack Obama a chance to wring concessions from Canada.

Arctic Drilling Risks Threaten Inupiat Traditions

Earlier this summer, I walked along the spit of land where the Chukchi Sea meets the Beaufort Sea at the top of Alaska. As our group looked out at pack-ice sculpted by wind and water currents, our local guide told us about the Inupiat whaling crew captained by his grandmother. Such crews use small sealskin boats, and when he was a young boy, he sat at the back, but as he grew in seniority, he moved up toward the front where he could shoot the harpoon. The community hosts games to strengthen people’s hunting skills, and whenever one of the 40 whaling crews gets a bowhead, they work together to pull the whale ashore and share the riches.

These traditions have nurtured families and sustained Inupiat culture for thousands of years. Even today, the traditions provide one of the community’s main sources of food for the year. But these traditions depend on healthy oceans, plentiful bowheads and predictable migration routes, all of which are threatened by proposed oil and gas drilling just offshore.

Lessons From the Yellowstone Fires of 1988

While even little children know that Smokey Bear can spot a fire before it starts to flame, whether to douse that fire or let it burn out on its own is hard for even the best trained grownups to get right.

Each strategy has its own peril.

Wildfires and Climate Change

SAN FRANCISCO — The huge wildfire scorching one of America’s most beloved national parks, Yosemite, has rained ash on San Francisco’s water supply and jolted the nation.

Experts say this is just a foretaste of major fires to come, in the United States and much of the world.

Why Climate Change May Be Responsible for the Horrors in Syria

Syria has been convulsed by civil war since climate change came to Syria with a vengeance. Drought devastated the country from 2006 to 2011. Rainfall in most of the country fell below eight inches (20 cm) a year, the absolute minimum needed to sustain un-irrigated farming. Desperate for water, farmers began to tap aquifers with tens of thousands of new well. But, as they did, the water table quickly dropped to a level below which their pumps could lift it.

In some areas, all agriculture ceased. In others crop failures reached 75%. And generally as much as 85% of livestock died of thirst or hunger. Hundreds of thousands of Syria’s farmers gave up, abandoned their farms and fled to the cities and towns in search of almost non-existent jobs and severely short food supplies. Outside observers including UN experts estimated that between 2 and 3 million of Syria’s 10 million rural inhabitants were reduced to “extreme poverty.”

As promised, here is a list of other peak oil forums and blogs, submitted by users. (Last updated: September 7, 2013)


TOD Registry – Tell fellow TOD members where they can find you in the future.

● ASPO-USA: The Energy Xchange

The Doomstead Diner

● Facebook: Peak Oil Group

Llamedos – a LATOC successor site

Malthusia – left-leaning peak oil forum

The Oil Age – Another LATOC successor site


● The Post Carbon Institute: – Formerly

● Reddit: r/peakoil, r/energy

Silent Country – yet another LATOC succesor.

The Oil Drums

● Other Yahoogroups of possible interest: AlasBabylon, EnergyResources, RunningOnEmpty2

Personal Blogs:

● Ugo Bardi: Cassandra’s Legacy

● Big Gav Peak Energy and Our Clean Energy Future

● Alan Drake: Oil Free Transport

● Engineer-Poet: The Ergosphere

● Heading Out: Bit Tooth Energy

● K. McDonald: Big Picture Agriculture

● Glenn Mcananama Streetsblog

● Matt Mushalik: Crude Oil Peak

● Leanan: The Blog At the End of the World

● Ron Patterson: Peak Oil Barrel

● Robert Rapier: Energy Trends Insider

● Stuart Staniford: Early Warning

● Gail Tverberg: Our Finite World

Swan Song Wish List

This post is by from The Oil Drum - Discussions about Energy and Our Future

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I began posting on TOD in 2008 when I was a PhD student working with Charles Hall on basically everything energy but focusing specifically on the connections between EROI (energy return on energy invested) and the economy. Most of that work is summarized in a paper I published in 2011 called “Energy Return on Investment, Peak Oil, and the End of Economic Growth.” Since graduating in 2010, I have continued my work on EROI but also branched out into the field of ecosystem services and environmental policy as a faculty member in the Geography Department of Northern Illinois University and as a policy analyst at Argonne National Lab. And although I have not posted much in the past two years (mainly due to time constraints of the jobs and two young children) I have remained an active reader on TOD and other energy sites.

I wasn’t really sure about a topic for my last post on TOD, vacillating between economics, energy, and/or EROI. I wanted to cover a variety of topics that have become important in my research but that were not necessarily closely related. So I decided to just list them out, a sort of wish list of things that I think most people in the energy space don’t, but should, understand. This list is hardly exhaustive; frankly, they were the items that came to me over the past couple of weeks so I encourage readers to add their own wish list items into the comment section as well. I hope you enjoy the list and thank you so much to TOD and all the readers/commenters for a great, and educational run!

Follow me on twitter: @djmurphy04

1) I wish that peak oil people knew that the actual date of peak oil is irrelevant.

What we care about is the increased prices, increased volatility in prices, geopolitical changes, and all the other impacts that come along with a tightening global oil supply. These changes occur not when the production of oil peaks, but when supply is unable to keep pace with demand, which is basically what happened from 2004 – 2008 and is still the case today. These impacts are already being felt, and they are all the validation of the concept of peak oil that I need.

2) I wish that economists understood the laws of thermodynamics and what they imply about the importance of energy in economic growth.

Economic growth, measured as an increase in GDP, is fundamentally a thermodynamic process, and is therefore bounded by the laws of thermodynamics. For all the economists out there – here is how the laws of thermodynamics limit economic growth, in its most basic iteration. GDP is the sum of the final sale of goods and services in a nation for a given period of time. The production of goods requires, at a very basic level, materials and the energy required to manipulate those materials into a final product. Or, in the case of services, energy is expended directly in the execution of that service. Both goods and services, in other words, require energy. To grow the quantity of goods and services, then, the energy used to produce those goods and services must also grow. Of course efficiency improvements can produce more goods and services with less energy, but efficiency improvements are also bounded thermodynamically, so they can only do so much (not to mention the rebound effect…). At some point energy use will have to grow as well. As a result, increasing GDP requires increasing energy production.

Once we realize that economic growth is tied to energy we can begin to understand why GDP cannot grow forever.

3) I wish that politicians would realize that GDP is an awful measure of well-being.

The rationale behind using GDP as a measure of well-being is so simple that it confused me the first time a read it. Here it is, in a nutshell. The goal of neoclassical economics is to maximize utility, or human well-being, and one can get the highest utility when one can satisfy all of her/his particular wants and needs. To satisfy wants and needs in a free market requires one to purchase goods and services, which itself requires money. So how can we ensure that one can purchase all the goods and services necessary to satisfy her/his wants and needs? Simple, we grow income levels (i.e. GDP per capita). As long as incomes are growing we assume that people can satisfy more and more of their wants and needs and overall well-being is increasing. (If there are any economists searching for a more academic description, please seek out the work of John Gowdy, who says more or less this same thing but uses words like Potential Pareto Improvement and such.)

But GDP is an awful measure of well-being because it measures only the final private goods and services sold in the economy, and omits a whole host of others that are crucial not only for our survival but for our well-being. Conversely, GDP also includes items that we would scarcely consider as contributing to well-being.

Take Hurricane Katrina, for example. That one storm caused well over a hundred billion dollars worth of damage, yet all the materials bought for reconstruction and services rendered to emplace those materials added to the nations GDP. Would anyone really every say that Katrina was a good thing, or that we would really like to have another one? No, of course not. But if we simply looked at GDP numbers, especially in the local state economies, we might conclude that it was.

Many of the items ignored by GDP are public goods and services, and some of those could be considered ecosystem services. A few of the more recognizable services are: climate regulation, fresh water provisioning, and storm surge mitigation. Let’s take fresh water provisioning, for example. Say you have a house with a water well which provides all of your drinking water needs for free. Lets just say that an industrial operation moves in on your neighbor’s property and spoils the well, forcing you to buy bottled water. Guess what, you are now contributing to GDP and increasing your overall well-being! Examples like this are manifold.

Aside from these ecosystem services, there are myriad other services that also go unvalued in GDP but nonetheless play an important role in human well-being, such as housework, value of volunteer work, higher education, crime rates, divorce rates, income inequality etc.

All of these examples are real issues that factor into ones overall well-being yet are not factored into GDP.

So if not GDP, then what? There has been much research in the area of alternative macroeconomic indicators, the most popular of which is probably the Genuine Progress Indicator (GPI). The GPI calculates a more comprehensive value of well-being by factoring in many of the items I mentioned above. For example, the State of Maryland now calculates the Genuine Progress Indicator ( and tracks it alongside the state GDP. Vermont is pursuing a similar endeavor. What these indicators are showing us, as does the peer-reviewed literature on the subject, is that while the GDP has been growing steadily over the past 40 years, the GPI has been flat for most OECD nations. (1)

Transitioning to GPI or some other similar metric at the federal level could also go a long way at decoupling energy and the economy. Think about it, many of the example services I listed above require very little if any energy consumption. If we truly want to be a post-industrial economy, than we need post-industrial metrics by which to measure economic success, and GPI might be such a metric.

4) I wish that the polemic rhetoric around fracking would stop.

Fracking has risks, but so does conventional oil extraction, driving a car, hockey, and everything else in life. The question is one of risk-reward; does the utility that society receives from natural gas outweigh the potential environmental (and other) risks involved in its extraction? And since the environmental risks involved are determined by local factors, such as local geology and hydrology, there is no universally correct answer. Some areas with particularly valuable aquifers or sensitive environmental areas may want to avoid drilling altogether, while other areas may not.

That said, groundwater systems are complex and often span across county and even state boundaries, making regulation a difficult task at the state level. It is therefore incumbent upon the EPA to take an active role in not only producing best management practices to avoid problems before they occur, but also in assigning liability and fining culpable parties when mistakes are made. In addition to these cross-boundary hydrological issues, budget cuts have depleted state environmental agencies leaving them more or less unable to regulate this industry by themselves.

Lastly, and maybe most importantly, we must create legislation with the following in mind: water is a basic need for survival; natural gas is not.

Minor Item

5) I wish that energy analysts, particularly those at the EIA and other energy database managers, knew that:

Conventional Oil ≠ Shale Oil ≠ Oil Sands ≠ Natural Gas Liquids ≠ Ethanol

They do not have the same costs, in either energy, dollar or environmental terms, nor do they even contain the same energy content. Please do not sum their production together and call it simply “oil”. Thanks!

1. Cobb C, Goodman GS, Wackernagel M. Why Bigger Isn’t Better: The Genuine Progress Indicator – 1999 Update. San Fransisco, CA, USA: Redefining Progress, 1999.

Drumbeat: September 01, 2013

This post is by from The Oil Drum - Discussions about Energy and Our Future

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Egypt says preparing timetable for energy debts

(Reuters) – Egypt is preparing a timetable for repaying arrears on debts it owes to foreign oil companies to encourage them to continue investing in the country, the Petroleum Ministry said on Sunday.

Egypt owes at least $5 billion to oil companies producing oil and gas on its territory, with half of it overdue, according to corporate reports issued earlier this year.

The government, seeking to avoid public unrest, has delayed oil payments as it struggles to meet soaring energy bills caused by high subsidies on fuel products. Some of the debts were accumulated even before Mubarak was ousted.

WTI Falls a Second Day as Concern Eases on Syria Strike

“The premise that oil supplies would be threatened by what will probably be a limited attack by cruise missiles on Syria, a country that’s not an oil exporter or conduit, is specious,” said Stephen Schork, president of the Schork Group Inc., an energy advisory company in Villanova, Pennsylvania. “The Syrians have very limited capabilities and the Iranians have no interest in reducing shipments because they need the currency.”

Gasoline Falls as Crude Slips While Summer Fuel Demand Wanes

Gasoline fell as crude declined after British lawmakers refused to join the U.S. in a military strike against Syria and as the end of the U.S. summer driving season approaches.

Futures sank as much as 1.2 percent as the U.S. lost the support of Britain yesterday in acting against Syria and its suspected use of chemical weapons, lessening concern of an imminent strike that might embroil the Middle East and disrupt oil supplies. U.S. gasoline demand dipped to a five-week low in the seven days ended Aug. 23 and in June was the lowest for that month since 2001, government data show.

Gulf Coast Ship Rate Nears 4-Week High as Exports Surge

Charter rates for tankers from the U.S. Gulf Coast to Europe surged to the highest level in almost four weeks as a boost in exports from the Gulf Coast reduced the number of available tankers.

FGE: US gas price sensitive to LNG exports

The future price of natural gas in the US depends greatly on development of LNG exports, the outlook for which remains unclear, says Facts Global Energy (FGE).

No Atlantic Hurricane by August in First Time in 11 Years

August is about to end without an Atlantic hurricane for the first time since 2002, calling into question predictions of a more active storm season than normal.

Required reading: The end of oil

Higher oil prices reverberate around the world, pushing up the price of petrol, affecting food prices and weakening economic growth. But some experts say that current high prices reflect a deeper, more worrying reality: the world is running out of oil. Are we really at “peak oil”? And how can we prepare for a post-oil future?

The Current Oil Scare Is A False Information Scare

The scuttlebutt (talk around the water cooler) says that an impending war with Syria will endanger the world’s oil supply. Many people are assuming that this is because Syria’s oil will go offline to the rest of the world. This is a mistaken impression. Syria’s oil production is only estimated at about 50,000 bopd. All of this is refined domestically. It is true that prior to sanctions it produced about 370,000 bopd (about 0.4% of the world’s oil supply). However, the sanctions have been in place for some time (since 2011 – 2012). Plus Syria only exported 150,000 bopd before the sanctions. In other words Syria is not now supplying the outside world with any oil; and it has not been for a year or more. In fact Syria is a net importer of oil products. A war in Syria by itself would have NO IMPACT on the world’s oil supplies.

‘Acidizing’ could rival hydraulic fracturing in oil exploration

Fracking hasn’t unleashed an oil production boom in California, at least not yet.

Could acid?

Companies trying to pry oil from a vast shale formation beneath Central California have been pumping powerful acids underground to dissolve the rock and free the petroleum within.

And there are hints that the process, known as “acidizing” a well, may work better than hydraulic fracturing in California’s Monterey Shale, estimated to hold 15.4 billion barrels of oil.

First Take: Obama’s decision a risky precedent?

Defying expectations that a U.S. military strike was imminent, Obama stunned nearly everyone by announcing that, while he had decided that the United States should take action to punish the Syrian regime for using chemical weapons against its own people, he would seek congressional authorization before moving forward.

Could Syria strike back if United States, allies, attack?

(CNN) — As the United States and its allies debate military intervention in Syria, the nation’s president, Bashar al-Assad, has warned that Syria will “defend itself against any aggression.”

Meanwhile, Prime Minister Wael Nader al-Halqi struck a similar note Saturday, saying the Syrian Army “is on maximum readiness and fingers are on the trigger to confront all challenges.”

China partners with U.S. oil firm in Egypt

NEW YORK (CNNMoney) – China’s Sinopec and Houston-based Apache announced a long-term partnership Thursday, continuing a trend of U.S. firms selling foreign assets to focus on the domestic oil boom.

Iraq Aug oil exports rise to average 2.579 mln bpd

BAGHDAD (Reuters) – Iraq’s oil exports rose to an average of 2.579 million barrels per day (bpd) in August, the oil ministry said on Sunday, due to increased shipments from southern oil fields which have helped it move closer to a year-end target.

Exports were higher than in July when Iraq exported 2.324 million bpd on average. OPEC’s second-largest producer wants to export 2.9 million bpd per day by the end of the year.

Dubai’s ENOC loses deal to fuel U.S. military jets

DUBAI (Reuters) – The U.S. military has not renewed its contract to buy jet fuel from Emirates National Oil Company (ENOC) in the United Arab Emirates (UAE) because other suppliers made cheaper bids, the U.S. Department of Defense said.

Mexico march

Thousands have marched in Mexico City, protesting over the proposed reform of state oil company Pemex.

India could save $8.5b by buying extra Iranian oil, says minister

NEW DELHI: India could save $8.5 billion in foreign exchange spending on crude oil imports in 2013/14 if it relied more on supplies from Iran, which is able to accept payment in rupees, India’s Oil Minister M. Veerappa Moily said.

Iran oil minister orders energy contract overhaul – Shana

DUBAI (Reuters) – Iran’s new oil minister has ordered the revision of energy project contracts to make them more attractive to foreign investors, a National Iranian Oil Company (NIOC) executive told oil ministry news service Shana.

Iran’s long insistence on paying contractors with oil made projects unattractive to foreign investors long before Western sanctions made it almost impossible to work in the isolated Islamic republic.

Iran Puts West in Check With Oman Gas Deal

The Iranian government announced this week it secured a long-term natural gas agreement with its maritime neighbors in Oman. Iranian President Hassan Rouhani vowed to lead the country as a moderate when he was sworn in to office in early August. The Iranian Oil Ministry vowed to move the country’s oil and natural gas industries closer to the international community and the gas deal with Oman was touted as a breakthrough in a deal first discussed in 2007. Officials there vowed to move quickly on infrastructure developments. Either Iran is trying to show it’s serious about engagement or its just window dressing as usual for the Islamic republic.

Electricity Utilities Must Evolve or Die: Are They Up to the Task?

It’s a tough time to be an electricity utility in Europe. A confluence of factors, including the rising use of renewable energy, falling wholesale market prices, and the growth of distributed generation and energy efficiency are eroding traditional utility market shares and sending profits into free fall.

While European energy policy priorities have exacerbated several of these factors, current trends in Europe may simply preface broader revolutionary forces under way across much of the global electric power sector.

South Africa’s Sasol helps Louisiana to lead America’s gas-to-liquid race

Sasol, an energy and chemicals giant based in Johannesburg, plans to spend up to US$14 billion to build the first commercial plant in the United States that will turn natural gas into liquid fuels.

Facing Fire Over Challenge to Louisiana’s Oil Industry

For the generations since Mr. Long’s third cousin Huey P. Long was the governor, this state has relied on the oil and gas industry for a considerable part of its revenues and for tens of thousands of jobs. In return, the industry has largely found the state an obliging partner and staunch political ally as it has fought off curbs on its business.

Now, however, a panel of state appointees, created after Hurricane Katrina to be largely insulated from politics, showed just how insulated it was by upending the agreement.

Toll in Vizag refinery blast climbs to 23

Hyderabad (IANS) The toll in Aug 23 blast at the Hindustan Petroleum Corporation Ltd (HPCL) refinery in Visakhapatnam rose to 23 with four more injured succumbing to burns at various hospitals Sunday.

Why Fukushima is worse than you think

While the amount of radioactivity released into the environment in March 2011 has been estimated as between 10 percent and 50 percent of the fallout from the Chernobyl accident, the 400,000 tons of contaminated water stored on the Fukushima site contain more than 2.5 times the amount of radioactive cesium dispersed during the 1986 catastrophe in Ukraine.

So, where has this huge amount of highly contaminated water – enough to fill 160 Olympic-size swimming pools – come from? In the aftermath of the 2011 earthquake and tsunami, the reactor cores of units 1, 2 and 3 melted through the reactor vessels into the concrete. Nobody knows how far the molten fuel went through the containment – radiation levels in the reactor buildings are lethal, while robots got stuck in the rubble and some never came back out.

Fukushima radiation levels spike, company says

(CNN) — There’s been a sharp spike in radiation levels measured in the pipes and containers holding water at the crippled Fukushima Daiichi nuclear plant in Japan.

But the company in charge of cleaning it up says that only a single drop of the highly contaminated water escaped the holding tanks.

Tokyo Electric Power Company said it is confident it can provide safety for workers dealing with the problem.

Tepco reports leaking pipe, four hot spots

Tokyo Electric Power Co., manager of the stricken Fukushima nuclear plant, said Sunday it halted a highly radioactive water leak from a pipe connecting two storage tanks by patching it with tape just a day after stumbling upon a lethal radioactive hot spot.

Chubu Electric eyes April rate hike

NAGOYA – Chubu Electric Power Co. is considering raising household electricity rates 5 to 8 percent next April to offset losses caused by the shutdown of its Hamaoka nuclear plant, sources said Saturday.

A manhattan project for solar energy?

Naples Daily News guest commentator Hy Bershad recently wrote, “One hour of sunshine over the entire state of Florida contains enough energy to provide power to the entire state for one full year.” Columnist Ben Bova added, “Our planet Earth receives more energy from the sun in one hour than the entire human race consumes in a whole year.”

The challenge, of course, is to harness it economically. And it’s a big challenge.

Futurists David King and Richard Layard think we should take the challenge seriously. Writing in the Financial Times, they propose a massive international project “to enable bulk electricity to be produced more cheaply by solar power than by any fossil fuel.”

Fighting Pest, Farmers Find Strange Ally: A Drought

Texas’ drought has left crops parched across the state, but the lack of water could have unintended benefits, in the killing-off of boll weevils, for South Texas farmers.

Frontiers launches a new open-access journal in Energy Research

Frontiers, one of the largest and fastest-growing open-access scholarly publishers, now part of the Nature Publishing Group family, has launched its Frontiers in Energy Research journal today. In Frontiers in Energy Research, scientists from around the world can join together to examine how new energy systems can be integrated in the economic and social fabric of our world.

Silver Lining in China’s Smog as It Puts Focus on Emissions

HONG KONG — Jiang Kejun may be one of the few Beijing residents who see a ray of hope in the smog engulfing the city. A researcher in a state energy institute, he is an outspoken advocate of swiftly cutting China’s greenhouse gas output, and he says public anger about noxious air has jolted the government, which long dismissed pollution as the necessary price of prosperity.

Why Hasn’t the Free Market Solved Climate Change?

One of the great mysteries of contemporary capitalism is the fact that as a system it appears absolutely incapable of responding to the crisis of climate change. Why can’t a system that made the automobile into an accessible mass consumer good provide us with clean and efficient mass transit, or at the very least electric cars? Why are we still burning coal, the energy source that drove the Industrial Revolution over 200 years ago? Where are all the new green enterprises leading the way into a low-carbon future?

The oceans are acidifying at the fastest rate in 300 million years. How worried should we be?

The world’s oceans are turning acidic at what’s likely the fastest pace in 300 million years. Scientists tend to think this is a troubling development. But just how worried should we be, exactly?

A case for cap and trade

Fortunately, there is a bipartisan way forward.

The model for RGGI was actually the national program started in the first Bush administration. It was aimed at achieving an environmental goal — cutting emissions of sulfur dioxide, a component of acid rain — through the power of the market rather than the regulatory hand of government. Yes, the government set caps on emissions, but then created a system that allowed companies to buy and sell pollution credits. They could choose whether to pollute, up to a point, or to reduce their emissions and sell their credits to make money. As the emission limits fell, the credits became more and more valuable, making investment in cleaner technology more attractive.

A Carbon Tax That America Could Live With

Among economists, the issue is largely a no-brainer. In December 2011, the IGM Forum asked a panel of 41 prominent economists about this statement: “A tax on the carbon content of fuels would be a less expensive way to reduce carbon-dioxide emissions than would a collection of policies such as ‘corporate average fuel economy’ requirements for automobiles.” Ninety percent of the panelists agreed.

Could such an overwhelming consensus of economists be wrong? Well, actually, yes. But in this case, I am confident that the economics profession has it right. The hard part is persuading the public and the politicians.

‘We are fighting for survival,’ Pacific islands leader warns

Pacific islanders will challenge world leaders this week to act on climate change, warning that their low-lying atolls are close to becoming uninhabitable because of rising seas and increasingly severe floods, droughts and storm surges.

“The Pacific is fighting for its survival. Climate change has already arrived,” said Christopher Loeak, president of the Marshall Islands, which will host the Pacific islands’ annual summit, attended by most of the world’s largest emitters of greenhouse gases, including the US, China and the EU.

Banks Put a Price on Earth’s Life Support

LONDON – It is not easy to put a value on an intact forest, a clean river, or unpolluted air, but that is what a group of the world’s biggest banks is attempting to do.

They have agreed that the present economic system uses and often destroys the environment without paying to do so. And that, they say, is not sustainable.

Reminder: There will be one last Drumbeat posted sometime in the next week. It will include links to other peak oil-related forums and blogs. If you would like yours included, send me the link in an e-mail. Or post it yourself in the comments, once the post goes live.

Tech Talk – A Dickensian Situation Revisited

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Back in March 2005, I posted my first offering to the new site that Kyle and I had agreed to call “The Oil Drum.” Now, some eight years later, this will be my final Tech Talk to appear on the site, and it is perhaps appropriate to go back to that first post and make a couple of comments on how it panned out. It read as follows:

When I was young I was fascinated by a small china statuette that my grandparents had of Mr Micawber. He is a character, and a sympathetic one, in Charles Dickens’s book “David Copperfield”, in the course of which he goes into debt. His explanation of his financial condition can be compared to the coming world experience as we now live through Hubbert’s Peak. You might, in today’s phraseology, call this the Money quote:

‘My other piece of advice, Copperfield,’ said Mr. Micawber, ‘you know. Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery. The blossom is blighted, the leaf is withered, the god of day goes down upon the dreary scene, and – and in short you are for ever floored. As I am!’.

In this case, consider that our expenses, i.e. the world use of oil, went up last year to around 83 million barrels every day (mbd). (A barrel is 42 gallons). Now as long as our supplies (income) can match this outlay then we are in happiness. This was, in relative terms, where we ended last year.

However this year our expenses are going to go up. It is a little difficult to predict exactly how much but current predictions are for this to be around 2 mbd. Let us equate this to the old English sixpence (which was back then worth about a dime. Twenty pounds being worth about $100).

If we follow the Micawber example – if our income, world oil supply is equal to or greater than our expenses, then we can stay happy. But here is the rub:

When world oil production is just about as high as it can be (non-OPEC countries are now producing just about as fast as they can) and OPEC spare capacity is down to around an additional 1.3 mbd, then our income this year will likely not be much above 85 mbd, if it gets there. (In a later post I will explain why it probably won’t).

So we are at the point where, within the next few months, income and expenditures will be in balance (Micawber’s twenty pounds). Except that the industry being a big one there are always things going wrong. In the latter part of last year for example we had:

• the hurricanes in the Gulf that closed down about 0.5 mbd of production for several months

• oil production in Iraq, which should be around 3 mbd, but because of pipeline bombings etc dropped below 2 mbd

• there were frequent threatened strikes on the oil platforms in Nigeria

• and Russian production declined more drastically than had been anticipated

Some of these are still with us, some have been resolved. And other problems, such as the complete employment of the world tanker fleet, have yet to make an impact. But any one can drop supply.

Yet while our supply (income) is about at a peak (twenty pounds), our expenses (demand) are still going up by this sixpence a year. So that some time this year expenses will have gone from twenty pounds to twenty pounds and sixpence. A number of economists had been predicting that there would be a reduction in the rise in demand to keep us below that figure, but it is already clear that they do not adequately recognize the considerable needs in China and India that drive this increase (and they only have to read the papers to see it).

The big question is when will we reach the point that we cross over the balance point? Right now with the Saudi Arabian government saying that they can increase production by up to 1.5 mbd, one might think we could get through to just about the end of this year. Unfortunately, some of us are a little cynical about that number, and I’ll explain why in another post.

One final gloomy thought – production in other countries (such as the UK) is falling, and the countries that used that supply must find another source. And if we are now at the peak of production, then our income cannot increase above twenty pounds and and may indeed fall back below twenty pounds, while our expenses will continue to increase to twenty pounds and sixpence. It is not the absolute size of the market that will now drive, but the relatively small fluctuations that take us out of balance.

The result is misery, and we are forever floored.

Looking around it is reasonable to note that we don’t see the level of misery that, from reading that post, one might have expected to happen. We have gone through a major recession, yet demand has, overall, increased and production has risen to meet that demand. Yet looking at how this has been met is instructive.

Figure 1. Changes in liquid supply sources from 2000 to 2040 as anticipated by Exxon Mobil, with lines added to show 2005 and 2013. (The Outlook for Energy: A view to 2040)

I have added lines to show the situation in 2005, when the piece was written, and for this year. It is worth noting that using the definitions that Exxon Mobil give, conventional crude and condensate production has indeed declined since I wrote those words. And if one includes Oil Sand and Deepwater, then production has remained fairly stable at the levels back in 2005 and will (according to EM) likely stay so into the projected future.

The three sources that I had underestimated in terms of production growth were in Biofuels (which is now at around 2 mbd), the growth in Natural Gas Liquids (which for OPEC alone is now projected to reach 6 mbd by next year up from around 3 mbd in 2005, and the growth in tight oil. This latter development, particularly with the use of long horizontal wells that are artificially fractured and injected with a slick-water suspension of a proppant, has been very successful in developing resources which were otherwise at best marginally economic. However, the relative contribution that this is expected to make in overall supply is not that great, and I expect that, because of the high decline rates in individual wells, that this will only contribute on the margin of the problem.

When I began writing at The Oil Drum I was concerned that there was a lack of understanding of the impact that reservoir decline rates would have on long-term supply. As larger fields are depleted, so the world turns to smaller fields and these drain more rapidly, so that more and more are needed. (The Red Queen situation that Rune Likvern and others have so aptly described.

Deepwater resources have proven to be more difficult to bring on line than originally estimated and thus, for example, in the case of Brazil OPEC now anticipates that the production from the Lula field (originally Tupi) will only offset declines from wells in the rest of the country, with perhaps only a gain of 10 kbd overall from the addition of the 100 kbd expected from wells now coming on line. And thus, while this is a resource getting more attention (there are expected to be 60 Deepwater rigs in the Gulf of Mexico by 2015) the slow pace of development may not fill the increasing gap left as conventional oil production continues to fall, as Exxon Mobil suggest.

In retrospect, therefore, I was wrong in anticipating a relatively immediate impact from an anticipated imbalance between oil supply and demand. But, within the time frame, the price of oil has risen and the future looks no happier than it did back in 2005. The threats have changed – we seem to be in a quiescent period for major Gulf Hurricanes, for e.g. – but the threat of growing and spreading turmoil in MENA makes it less certain that we can count on much increase in production from Iraq, among others. Russian production rebounded more than I expected, but whether that can be sustained is still in doubt. The hope at the beginning was that the threat would spur increased looks into alternate sources of liquid fuel. But while there was a flurry of activity into biofuels, (and I myself saw algal work that held a great potential, though funding has now disappeared for that effort) there is less of a feeling of urgency in the air. Wind and solar sources have reached a point where they are no longer novel, and there is not much else in the near term that holds much potential.

Oil production takes money and resources, but most critically, it takes time. Without that investment, particularly in viable alternatives, the oil “income” (supply) will likely soon start to fall short of the oil “expenses” (demand) and as Mr. Micawber so aptly said “we are forever floored.”

When these posts began, technical blogs such as TOD posed the potential for mass education in a way that had not been seen before. Readers have been kind in regard to the quality of the posts themselves. But the contributions from those interested, and those in industry who took the time to comment and debate, ended up making this much stronger than the initial words in any post. Expertise came in many forms and informed me as well as the rest of the readers in what turned into a wonderful opportunity for many people to understand some of the complexities of supplying the world with hydrocarbon energy. I was thus able to help bring a little understanding of the energy business to vastly more folk than I had in the entirety of my academic career.

I will always be grateful to Kyle for giving me the opportunity to make this contribution, and to his efforts which led to its great success. I can illustrate that with some numbers – as an academic I took persuasion to allow my class size to rise much above 20, and at Bit Tooth Energy I see about 300 readers on a typical good day – Kyle had us above that number in a very few months, and at its peak TOD was handling 200 times that number. The site would not have continued too long as it grew in size without the indefatigable SuperG, who kept the site up under wide ranging pressures, and took care of the technical side of the house. Leanan brought in and kept us readers, and provided many of the topics that we needed to create the posts on site, and Gail kept me going with encouragement and support in more difficult times. Nate orchestrated the closing posts and that was not easy.

The folks Kyle brought in to build an international forum were formidable and highly productive, and so to them, and to all of the gentle readership I say again a heartfelt “Thank You!”

(Heading Out – Dave Summers in the mundane world – will continue to write Tech Talks at Bit Tooth Energy, though he writes on a wider range of topics at that site).

Campfire: Towards Homo Sapiens – A Movie Script

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For a few years, on Saturdays, hosted a “Campfire” discussion – with a focus not on charts and graphs, but more on the social science glue connecting the many subjects revolving around energy, the environment and society. Rather than a place to discover correct answers, the forum was intended to be a sandbox where folks interested in the broader implications of our human ecosystem could interact with peers in a cross disciplinary conversation. This sort of “systems overview” has been one of the strong points of the eclectic mix of commenters who helped make TOD unique. We had a weekly Campfire here for a couple years because the dialogue was so diverse and high level.

Before we break Camp, I still hope there will be more insights from the assembled gurus and thinkers who hang out here. Below I provide a brief outline of homo sapiens history in several ‘Acts’ and then ask theoildrum readers how it could play out. Folks will disagree on specifics, yet it is clear that our current trajectory is unsustainable. The latin name for our species – homo ‘sapiens’ was perhaps ill-chosen, for given the behaviors accompanying our current moon shot in consumption and population, we are proving to be more clever than wise. We have turned into problem solvers as opposed to visionaries – or at least, our visions have limits measured in human lifespans, or perhaps election cycles. With so much focus on the near term, we’ve lost awareness of the brighter beacon – despite the fact we are at the material and energetic apex of industrial civilization, throughput and science, we have no real ethic, no blueprint, for the long-term trajectory of our species and our planet’s ecosystems. Scientific evidence shows existential risk for the species, seas, forests, and carrying capacity, being alarmed is the only non-sociopathic response. But will that alarm suffice to steer us away from disaster? How might various things happen in the real world of path-dependence, luck, and emergent effects? And the larger question – to what end are these precursor events happening today?

“Say, How about we turn the site into an Archive?”

Below the fold, following a short history of homo sapiens, I invite oildrum readers to share their visions of what a (more) sustainable human system might look like, not now, and not in the next 20-30 years from now, but in the year 2100 or distant future.

History of evolution and homo sapiens on earth. click to enlarge
For those who prefer animations:
Heres a good one, and another (endure commercial).

All readers here know about the rise of Homo Sapiens. I’ve written a lot about it over the years. It’s a long story and I’ll give a Clifs notes version below, but with a twist.

Act I – Life, Mammals, Primates, Hominids, Homo Sapiens…

Longer ago than most of us can easily grasp, the Earth was formed and for billions of years geological processes dominated. As soon as the planet cooled, life emerged from the chemical soup. There were other equally extraordinary events which changed the world, and probably involved a strong element of luck. One was the evolution of photosynthesis, which gave the earth an atmosphere with free oxygen and caused a huge dieoff of anaerobic species. Another was the joining of two dissimilar single-celled organisms which created hybrid cells with both nuclear and mitochondrial DNA. These hybrid cells could do something special: extract solar energy from the free oxygen and store it as the molecule ATP, where it could be almost instantly available for a new race of fast, reactive critters: the animals. They were, by their very nature, tapping the energy of stored sunlight. At this juncture, there were no heroes, only the seeds of such.

For a very long time, organisms were simple – primitive ‘brains’ moved organisms toward the light or towards food. Millions of iterations of dynamically accessing energy and nutrients was ample fodder for evolving more complex organisms. About 200 million years ago, mammals came on the scene and about 65 mya, primates. And about 6-7 mya, hominins diverged from the other great apes. By 200 kya, we were down to 3 species of hominid, of 12 that had walked the planet. By 30,000 years ago, one remained. Us.

Act II Eusociality, Agriculture, Fossil Carbon Bank Account…

About 190,000 years after our species became anatomically modern, whether due to climate or laziness or chance, bands of humans stopped picking berries and chasing game and began to domesticate agriculture about 8,000 BC. This had important physical and social implications. It set the stage for certain positive feedback loops – wealth accumulation, surplus accumulation, valuation of such surplus, and the resultant social stratification that comes from such surplus. (whether related or not, the size of the brains of our movies main character peaked roughly 20kya, and they’re now about 10% off that peak. Nobody knows why, some speculate that it might be due to ultrasociality – that humans began to outsource certain decisions and kinds of cognition to the ‘cloud’ (larger society)).

Compared to other species our movie star shared the planet with, he was awe inspiring, to be feared, extremely intelligent, but perhaps not altogether wise. Our “intelligence”, (neocortex) evolved to serve, not lead. It was not intelligence directing the characters of this movie, but instinct. The instincts that our hero had developed on the Pleistocene, when game was scarce and physical dangers abounded, were carried with us as sort of an ‘executive secretary’ reacting to whatever social and physical conditions our hero would face in more modern environments.

For thousands of years, populations expanded, finding new niches with fertile soils and robust ecosystems full of natural resources to extract. Biological systems require some entropy gradient to exploit, generate and store useful energy and human systems were no different. For a long time we lived off of the stored carbon in soils and the old sunlight stored in trees coupled with the daily ecosystem services of the time. Let me repeat that, for a long time we lived off of the stored carbon in soils and the old sunlight stored in trees coupled with the daily ecosystem services of the time. . Physically and mentally, the characters in this movie living 500 or 1000 years ago or even 10,000 years ago were little different than we are today. But there would be one major difference….

One metaphoric day our unsung hero dug a hole in the ground and out walked thousands of slaves made from fossil carbon (Labeled ‘A’ in above graph). These slaves didn’t talk, didn’t eat, didn’t complain, but because they were so cheap – essentially free – their power was increasingly applied to all areas of society in large amounts to replace tasks that humans used to do manually and invent many wondrous new things they had never been able to do. To our hero, these fossil slaves were so tireless, so powerful, so omnipotent in increasing food, novelty, comfort and trade that they became indistinguishable from magic. From this point thru at least the end of Act II, the motion picture “Towards Homo Sapiens” had moved from black and white, to technicolor. Steel plows gave way to tractors gave way to gargantuan specialized machines. Fires gave way to coal burning fireplaces gave way to microwaves and fancy outdoor grills. Etc.

Our clever hero had previously puzzled out how to make neat things happen by setting fire to wood, and now this new black stuff burned hotter and longer and was lighter to transport than wood. Clever clever man!!! Clever man and his extended phenotype learned to fly higher than the birds, race faster than the fastest cheetah, dive deeper than the greatest whales, and increasingly to claim all that was formerly theirs for himself. Indeed, Clever Man came to think, after a time, that it was his cleverness and not the magic slaves which made the miracles happen (period B in the graph). Did he not direct the slaves and tell them what to do? Magic was handy, but cleverness was the ultimate resource! Yes, technology did some amazing things, but mostly was a vector for producing both novel and ‘useful’ ways to use more magic and use it faster. The heroes designed automobiles that used 100x the energy of walking but got us there only 5x faster, etc. Technology was thus more of an enabler, than a driver of productivity and wealth. After all, there is no permutation of wood and glass that would take our hero to the moon, but successful space exploration in the 1960s laid a psychological foundation that presumed dilithium crystals would only be a matter of iterations. But, without fossil carbon a race of Einsteins could never have made Sputnik, or even Wally World. Our hero, blissfully unaware of such trivia, marches on, confident that technology will turbocharge his sneakers, should any hurdle arise.

Eventually our hero and his conspecifics started reaching a point of declining returns to magic. It turns out the fossil helpers weren’t exactly ‘free’ but some portion of the magic had to be reallocated to get the rest of the magic in a form assimilable by humans. The magical equivalent of a rising rate mortgage. Around mid-20th century, this % started to increase. For a while, just digging more holes was the answer, because we could drill faster than the magic cost increased. But soon the cost was rising enough to slow the acquisition of magic… unless something was done.

All along our hero and his tribe had created monetary chits which represented claims on magic. Since the planet was largely ’empty’, most of the time these monetary chits, whether shells, coconuts, pieces of paper, or electronic digits, were in the ballpark of fair representation of what underlying technology and resources could service. But, as more and more magic was required to retrieve the stored magic, the clever humans invented a sleight of hand. Credit – or an agreement to switch consumption between two people at two times, was not magic itself, but could be created ‘poof!’ effortlessly, it did temporarily widen the spigot that distributed real magic all around. It disguised the limits by hiding their effects, slowly raising the level of magic but eroding its largesse. After 30-40 years, this dynamic also had exhausted itself, and central tribal chiefs tried their hand at it for a time. When this sleight of hand also became less effective, humans changed to diverting the magic towards those in power, leaving fewer tricks and treats for the toilers of the species. Finally, they turned to rule changes, definition changes, and language changes, all in an effort to keep the nominal magic spigot, and hence societies overall living standards, ostensibly intact.

But the sleights of hand would only last a short time into the future. Alas, being clever was turning out not to be the same as being “sapiens”, and it began to be clear that using the energy slaves was history’s biggest monkey trap. For everything which had allowed humans to prosper in the first place – the land, the forests, the wildlife, the seas and fisheries, the stable temperate climate of glaciers, gentle weather and monsoons – was progressively used, broken and diminished in the pursuit of novelty, stimulation, and a one-time orgy of human biomass. And, near the end of Act II, this biomass was itself coming directly from buried carbon: the protein in the bodies of homo sapiens was increasingly fixed in factories by haber-bosch rather than nitrogen from soils and bacteria. Every calorie of food eaten contained around 10 times the embedded fossil energy than the solar input. Clever man had bonded with the fossil slaves in a profound way en route to a 10 billion population, and the implications were not fun to think about. So most didn’t.

Fossil carbon and its associated magic had also replaced and subverted mankinds culture itself. Decrees from societies Wizards were easily accepted in true cargo cult fashion, as people gradually lost awareness of the distinction between magic and reality. Perhaps because they were naive, or perhaps because the magnitude of change required to bring a happy ending to the movie was too overwhelming to consider, pablum, novelty and greed became operative memes. Marketing and commercials assured that consumption and stuff was more important than empathy and fiduciary. Keeping up with the Joneses, near the end of Act II, required resource throughput, and extra rooms to hold ones possessions. Though frequently within sight, and almost within reach, our hero never quite caught up with Jones. Had he done so he might have been shocked to find that Jones was an idiot.

Many Cassandras spelled out the dangers facing our heroes and the planets species in aggregate and called the modern way of life a broken system. But the only events that would confirm their warnings were exactly the events that they were warning against. Furthermore, from a thermodynamic and evolutionary perspective, where organisms and ecosystems self-organize in order to access an energy gradient, the human system of throwing more and more scarce magic at an increasingly complex infrastructure with increasingly less benefits didn’t appear broken at all – in fact it was working perfectly! From the perspective of the collective hive, our leading heros did not want a minority with crazy ideas to be able to swerve society away from the rich feeding grounds of yet unoxidized fossil carbon. The crazy minority in this film would remain as such. (Except for the ecologists and biologists in that minority who were stone cold sober). As to biodiversity and environmental externalities, well….no ecosystem puts a price on resources until they’re gone. A hypothetical “sapient” hominid might; but Homo sapiens is, again, mostly just clever; and used this cleverness to do stuff which is not necessarily wise.

As they approach the end of Act II, in a strange numerical twist, homo sapiens, 200,000 years after becoming a distinct species were adding 200,000 distinct new young of their species every 24 hours, a number greater than the entire wild populations of all the other great apes combined (orangutans, gorillas, bonobos, chimpanzees). At this time, circa 2013 total biomass of humans and their livestock outweighed the sum total of wild vertebrates by a ratio approaching 50:1. Depending on the boundaries, the movies hero and his friends were using between 20 and 50% of net primary productivity of the planet (and many times that in past productivity, stored in fossil carbon). The fossil slaves, still powerful and plentiful, were starting to ask for stiffer pay raises. And, although they were deaf and mute and therefore invisible to most everyone benefiting from them, some humans started realizing that the slaves had been breathing and pooping all along. Though many were concerned about this, the infrastructure and living standards built around them was so complex and vital that continued breath and poop seemed a necessary price to pay. A fossil magic finger trap. Our hero did possess the technology to build a bridge to the future using 2nd derivative magic – like wind and solar, but the bigger the bridge, the fewer that could cross. Virtually no one wondered how much magic would be left in 100 years or 1000 or how our descendants would carry on. Going into Act III of the movie “Towards Homo Sapiens”, instead of paying it forward, our heroes and heroines were fully sucking it backward.

Act III – Myriad Limits to Growth 2013-2100

Act III will be a defining moment in the movie Towards Homo Sapiens – so far the movie has been an amazing documentary, but we as yet don’t know whether it turns out to be in the science fiction, horror, drama or comedy genres. We can all guess that during Act III, some melange of disaster, discovery, war, peace, invention, sacrifice, triage, breakthrough, maturity, and awareness is likely, but if possible I’d like to skip Act III for this Campfire discussion.

In Production

Everyone watching this movie has at least three things in common: 1) they come from an unbroken line of ancestors back to proconsul in the trees 17 million years ago and from smaller mammals before that, and from simpler organisms before that: each of us is something immensely old, the fragile direct result of life’s first quickening billions of years ago, and the lucky descendants of beings lucky enough to reproduce. 2) all of our ancestors had enough resources to mate and successfully raise young and the neural machinery that allowed their success is still with us, and 3) we will all die in this century (spoiler alert for Kurzweil devotees). All of these things influence our behaviour and how we envision the upcoming acts of the movie “Towards Homo Sapiens”. We are related to our ancestors, created by them, executing the adaptations which allowed them to reproduce. Our focus on the present, aversion to situations, statements or actions that put our status at risk, penchant for being hijacked by novel but irrelevant stimuli, strong cognitive biases that tell us our own view of the world is the correct one, etc. all contribute in unique ways to hamstring our ability to properly navigate a viable future trajectory. But we also have built in wiring to be pro-social, cooperate, experience empathy and follow cultural cues of ‘what is acceptable or respected’ in our environment. The movie script is not yet written.

The very thought of humans being alive in 200,000 years (which would put us now at the 1/2 way point) seems a bit like science fiction, yet why should it? Before releasing the carbon slaves and becoming addicted to their largesse, there was no a priori reason humans would not go forward much longer than that, in large numbers on a healthy planet. Yet currently we assign essentially zero value to such a future, because we don’t believe in it -not most of us, not really.

Act IV – The Year 2100 and beyond

For purposes of this campfire, let us ignore the upcoming Act III and focus instead on the distant future, when all of us reading this today, and our children will no longer be a factor in our thinking. In my experience we are all too focused too on the next 10-20 years -its natural, because we will live it. But if that is our focus people will bicker about the impossibility of such and such due to X and Y reasons. There will be high representation at the poles of ‘just use UN population of 9 billion’ or ‘we will go extinct’. If we instead focus imaginations on the distant future we might come up with some creative ideas of what humans could aspire to and accomplish without being overpowered by the near term constraints. We may not yet be sapient, but neither are we idiots. The actors in this movie – us -, right now, face the ultimate intersection of nature (focus on present, consumption, novelty, status) and nurture (science, cultural evolution, ability to envision and plan for the future). Dark – light – in the middle. we can’t KNOW the future. It’s a probabilistic world – and we can still influence the probabilities. A thriller for sure.

Some Campfire questions:

Do we even care about people in the year 2100? Should we?

How is human society organized in 2100?

What is the population and energy throughput per capita relative to today?

What is the energy mix? How do we interact with eachother and other species?

What are the goals and aspirations of young people?

What is desirable, or undesirable about where we have arrived in 2100?

What does the rest of the earth look like? What webs of life predominate? What is the world’s largest animal? What self-aware animals are left besides humans?

What will They think about those who lived 100 years earlier? Gods, devils, saints, fools? Will they remember us at all?

What part of the bottleneck is behind us, and what is still ahead?

Same questions, but for 12,100? That is, a ten thousand years in the future; sounds like a long time but it’s not all that long in human history.

Be as general or as detailed as you wish. Answer any set of my suggested questions or come up with your own in same spirit. It will be probably be a more productive discussion if we focus on what ‘should’ or ‘could’ happen, as opposed to what ‘will’ happen, but all input that improves the silence is welcome.

“And they had this stuff, and it could do the work of a THOUSAND men!….”

Speak, friends.

Modeling Bakken Oil Production: The Oil Shock Model Explained

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This is a guest post from WebHubbleTelescope. Here he provides a simplified explanation of his Oil Shock Model as applied to oil production from the Bakken formation. Previous contributions to THe Oil Drum from WHT can be found here and here.

My premise for participating was that I wanted to see how far I could get in understanding our fossil fuel predicament by applying the mathematics of probability and statistics. There were enough like-minded individuals that it turned out to be a productive exercise, and I found that even the contrarian and cornucopian viewpoints could add value.

This was an ongoing process and I documented my progress with occasional posts on TOD and regular posts on my blog I treated the process as an experiment and as I collected more pieces of the puzzle, I realized that I had collected enough information to aggregate it into a more comprehensive format.

This work eventually went into an online book, which is available via Google Books at the link below, which you can also download as a PDF for a Kindle:

After I finished the book (which incidentally I titled The Oil ConunDRUM as a nod to The Oil Drum) the mobjectivist blog went dormant. I essentially treated that bog as a lab notebook, and I considered that notebook was complete and finished as a historical record of what went into the book. So everyone that mourns the closing of The Oil Drum has to remember that progress marches on, and something else will spring from the analysis and research that went on here.

In passing, and as a short note to what one can do with some of the research that went into The Oil Conundrum book, I thought to consider explaining how we can apply the Oil Shock Model to projecting future Bakken formation production rates.

Several TOD commenters have asked for a simple and intuitive definition for how the shock model works, and it has always been a challenge to express it concisely. In mathematical terms, it is simply the application of the convolution function to a model of the statistical flow rate operating on the reserve potential of the reservoirs of interest.

The problem in casting it in this stark a mathematical form has been that the concept of convolution is neither intuitive nor readily available to the layman. For example, the Excel spreadsheet application does not have a convolution function in its toolbox of statistical operators. This is odd considering that the great statistician William Feller once remarked that “It is difficult to exaggerate the importance of convolutions in many branches of mathematics.”

The best intuitive explanation that I can come up with is that a convolution (in the oil production context) is a “sliding” summation of extraction applied to reserves.
Thus, the convolution algorithm automatically keeps track of older reserves as well as new reserves as the total production accumulates with varying levels of extraction over time. Whether this is completely intuitive to the layperson, we can always remember that a convolution is largely a cookbook accounting exercise and once the form of the two inputs are known, a simple algorithm can be applied to obtain a result.

For modeling the Bakken ala the convolution-based shock model, the inputs are two time-series.

  1. The forced input is the time series of newly available wells.
  2. The response input is the time series of expected decline from a single well.
    The convolution function takes the forced input and applies the response input and generates the expected aggregate oil production over time.

DC at his blog has used this approach to good effect in modeling historical and projecting future Bakken production. I apply a slightly different response function than DC and get this shock model output:

Month #714 on the time series is essentially up-to-date, so that this is a modeled profile of the past 60 years of Bakken activity, using the historical monthly well numbers as input (from

The two curves correspond to (1) the actual production data and (2) that which is modeled after applying the convolution-based shock model to the well build-up, assuming a fairly rapid decline response per well. The decline after month 714 would show what would happen if no new wells were added. That of course won’t happen, but it illustrates the Red Queen effect that Rune Likvern has argued on these pages. The Red Queen hypothesis is that production will continue to increase as long as a fresh supply of new wells with nominal reserve potential comes on line at a good pace.

As a detail, where DC and I differ is in how we apply the response model for the average well. I have been applying a diffusional model based on the physics of flow, whereas DC has been using a hyperbolic decline model which is favored by reservoir engineers. Not much of a difference between the two, apart from gaining an understanding of what is actually happening underground, which is likely an initially rapid diffusional flow followed by a the long tails of a diffusional decline.

As a caveat, the model would likely work even better if the North Dakota Department of Mineral Resources had kept a cumulative total instead of an active count in their PDF table —
but as is the case with most of the data, you use what you can get.

The take-home point is that analysis approaches do exist outside of the insider oil patch knowledge-base. Us mere mortals can formulate and apply these simple models to at least try to get a handle on future fossil fuel supplies. That was the objective that I had when I started my blog and followed along with TOD as we watched crude oil production plateau the last 9 years.

Doing this work on applying probability and statistics to the energy predicament has opened up other possibilities which I have since pursued. Recently I have started up another blog on general environmental modeling called This has an associated interactive modeling web server called the Dynamic Context Server, which builds up from a semantically-organized knowledge-base of land, water, and atmospheric information.

I have incorporated the shock model as one of the functionalities in the server and intend to maintain other capabilities to make it useful for environmental model activities, such as wind, solar, and transportation simulations. Comments and collaboration opportunities are welcomed.

As you can see, The Oil Drum is only a start to the on-going energy transformation that we are going through.

Drumbeat: August 30, 2013

This post is by from The Oil Drum - Discussions about Energy and Our Future

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Fuel Supply-Demand Deficit Widens Without Iran, EIA Says

Excluding Iran from the global oil market increased the shortfall between worldwide supply and demand, the U.S. Energy Information Administration said.

Global petroleum use averaged 2.2 million barrels a day more than output in July and August when Iran is excluded from the calculations, the EIA, the Energy Department’s statistical arm, said in a report today. Iran can help reduce the deficit by 1.5 million barrels a day as the country’s production outpaced demand, the EIA said.

Global Crude Oil Market Is Adequately Supplied, IEA Says

The global oil market is adequately supplied and doesn’t require the release of emergency stockpiles, according to the International Energy Agency.

The agency is monitoring the market and “stands ready” to respond if there’s a major supply disruption, the Paris-based adviser to 28 energy-consuming nations.

WTI Drops for a Second Day as U.K Lawmakers Reject Syrian Action

West Texas Intermediate fell a second day as U.K. lawmakers rejected a motion for military action against Syria, reducing the prospect of an imminent strike and easing concern of disruption to Middle East exports.

Supply picture signals limited upside for oil prices, analysts say

As fears over Syria eased on Friday and oil prices edged back from recent highs, most industry watchers think further upside is limited with one saying it could be time to take profits.

According to Richard Martin, managing director at IMA Asia, the supply picture for crude oil remains intact, which means the rally in prices is unlikely sustainable.

Will oil price rise choke off stock rally?

NEW YORK — A barrel of oil for $150. Ouch. It’s not out of the realm of possibilities if the USA’s expected military strike at Syria reverberates through the Mideast, sparking a larger supply disruption in the volatile oil-producing region.

That market call, authored by Michael Wittner, an oil analyst at Société Générale, received its fair share of attention on Wall Street, where anxiety is running high as geopolitical risks rise.

Gold, oil: Syria is playing a small, tenuous role

SAN FRANCISCO (MarketWatch) — Syria does not rule the outlooks for gold, silver and oil.

These markets have other just-as-important factors in place that will dictate what direction they take next, analysts said.

For oil, the rally has a lot to do with the conflict and ongoing unrest in other parts of the Middle East, but the global economic recovery plays are a large part of the market too.

How Syria conflict could hit oil markets: best and worst cases

Western military strikes on Syria present a complex set of possible outcomes, and all of them make problems for energy markets to one degree or another. But some scenarios are worse than others.

Saudi Oil Output to Stay Near 10 Million Barrels a Day

Saudi Arabia, OPEC’s biggest producer, will probably keep crude production in September at similar levels to this month and July, a person with knowledge of the kingdom’s oil policy said.

The world’s biggest crude exporter produced 10.03 million barrels a day in July, and taking into account inventory movements it supplied 9.9 million barrels a day to the market that month, the person said, asking not to be identified because the matter is confidential. Output won’t vary much unless market conditions change, the person said.

Ras Tanura Oil-Tanker Capacity Seen Falling 19% in Latest Week

The combined carrying capacity of oil tankers calling at Saudi Arabia’s Ras Tanura fell 19 percent in the week ended Aug. 24, vessel-tracking data compiled by Bloomberg show.

The implied capacity of vessels calling at the world’s largest crude-export complex declined to the equivalent of 7.79 million barrels a day from 9.61 million barrels for the prior week, according to signals gathered by IHS Fairplay, a Coulsdon, England-based maritime research company. The data may be incomplete because not all transmissions are captured.

Motiva Port Arthur Said to Perform Minor Repairs on Hydrocracker

Motiva Enterprises LLC’s Port Arthur, Texas, refinery is performing minor repairs on a hydrocracker that caught fire Aug. 17 and expects to restart it, along with the plant’s largest crude unit, in a week or so, a person familiar with the work said.

Irving FCC Restart Sends N.Y. Gasoline to One-Week Low

New York spot gasoline dropped to the weakest level against futures in a week as Irving Oil Corp. restarted a unit at its Saint John, New Brunswick, refinery.

Irving’s Saint John plant returned a 70,000-barrel-a-day fluid catalytic cracker to service yesterday after an unplanned outage Aug. 23, according to a report by Genscape Inc. The 298,800-barrel-a-day refinery exports over half of its refined products to the U.S. Northeast.

China announces a 3% rise in fuel price amid rising tensions in Syria

China announce a 3 percent increase, or up about 0.17 yuan per liter, in fuel prices today after crude oil prices rose on the international markets amid rising tensions in Syria.

TABLE-China retail gasoline, diesel prices since 2009

BEIJING (Reuters) – China will raise its retail ceiling price for
gasoline by 235 yuan ($38.4) per tonne and that of diesel by 225 yuan from
Saturday, the National Development and Reform Commission said on Friday.

India May Block Higher Gas Price for Reliance, Document Shows

India will seek to prevent Reliance Industries Ltd. (RIL) from benefiting from a doubling in natural gas prices by capping rates at its biggest fields, according to a draft proposal seen by Bloomberg News and confirmed by two government officials with direct knowledge of the matter.

Forties Crude Cargo Heads to Asia for First Time in Three Months

A very large crude carrier has been chartered to load North Sea Forties crude on Sept. 21 to Sept. 23 for South Korea, the first shipment to Asia in more than three months, according to reports from shipbrokers.

North America’s shale boom a threat for GCC fertilizer producers

North American shale gas threatens to erode a core market for the Arabian Gulf’s fertilizer industry, warned an industry association.

GCC members export half of their fertilizer production abroad, and North America is their second biggest market after Asia with orders totalling 1.7 million tonnes a year.

Those trade flows could shift against the region’s favour as North American competitors take advantage of cheap raw materials unlocked by fracking, said the Gulf Petrochemicals and Chemicals Association, an industry group based in Dubai.

How Much Recoverable Oil Do We Have?

Oil’s availability is of course of immediate concern to every driver, especially at a time when gasoline prices are high once again. The much greater concern, however, is whether we are reaching a limit where oil can no longer be recovered at prices consumers are willing to pay.

If something like that turns out to be true—a scenario that generally goes by the name of “peak oil”—then long-term economic growth may be constrained across the industrial world. At the same time, to look at the brighter side of the picture, long-term carbon emissions may be lower than previously projected.

As it happens, expert opinion is radically divided on this key issue.

Heresy of the week: The spectre of peak oil still looms over us

Huge sums are being invested in new extractive technologies, but it remains to be seen whether these efforts can shift oil prices downwards or whether such investment depends on oil prices remaining high.

Meanwhile, it’s worth remembering that conventional oil production will continue for some time to come. In particular, major oil fields in countries like Saudi Arabia and Iran have yet to be exhausted. Thanks to high oil prices they provide their owners with a fat profit – and a means of funding the slaughter of Syria’s unfortunate people.

China Oil Giant Sinopec Buys into Strife-Hit Egypt for $3.1 Billion

SHANGHAI – Chinese oil giant Sinopec (IW 1000/333) is entering Egypt despite the country’s political strife, announcing Friday it is buying a $3.1 billion stake in an existing operation as China scours the globe for energy reserves.

US says Iran can’t access oil money

WASHINGTON: The US government has concluded that nearly half of Iran’s monthly earnings from crude oil exports are accumulating in accounts outside the country because of sanctions that restrict Tehran’s access to the money.

The estimates, provided to The Associated Press by a senior US official and never released before, are the latest indication that new sanctions imposed in February are deepening Iran’s economic distress and making it increasingly difficult to access billions of dollars in vital oil revenues.

Chevron Nigeria withdraws from Olokola LNG project

IBADAN — Chevron Nigeria has withdrawn from the Olokola LNG project intended to exploit Nigeria’s vast gas reserves after it failed to become operational.

The CMD of CNL, explained that the business decision to withdraw from OKLNG is based on a review of our investment portfolio, the lack of progress on the project and a reprioritization of resources to focus on growing domestic gas supply, Deji Haarstrup, Chevron’s general manager, policy, government and public affairs said.

East Timor makes new pitch on stalled Woodside gas project

Reuters) – East Timor is offering to invest $800 million to build a pipeline to take gas from the Timor Sea to the tiny nation, as it makes a new pitch to resolve a dispute with Australia’s Woodside Petroleum over how to develop huge fields in the area.

East Timor has insisted for a decade that a liquefied natural gas plant to process gas from the Greater Sunrise fields should be built on its shores, bringing with it much-needed development. Woodside says the plan is uneconomical and wants to use a floating LNG plant.

North Dakota saves for the future with today’s oil riches

A savings account North Dakota created to preserve a portion of its oil and natural gas tax dollars for the future has exceeded growth estimates in its first two years and could swell to $3 billion by the time state lawmakers decide how to spend it.

Turkish energy minister fires back over Taqa power project delay

The Turkish energy minister has fired back at Abu Dhabi National Energy (Taqa) over delaying an investment decision on a US$12 billion coal megaproject over what he called “political reasons.”

Low-priced electricity

Officials of Korea Electric Power Corp. monitoring the daily peak-time power usage should be breathing a sigh of relief as the heat wave begins to recede. Yet, they cannot afford to lower their guard, because the possibility of rolling blackouts cannot be ruled out during the next several weeks.

On the contrary, blackouts can strike the nation during off-season maintenance, as they did in September 2011. An unseasonable heat wave, when put together with a breakdown at one or two power plants, is a good recipe for a blackout.

Missouri town escapes crushing electricity contract tied to coal-fired plant

More than 200 cities, towns and utilities invested in the $5 billion plant in southern Illinois in the early to mid-2000s, hoping to protect against electricity price swings and save money in the long run. Peabody Energy developed the project – which it billed as a state-of-the-art power plant next to a high-sulfur coal mine – and eventually sold 95 percent of it to eight utility consortiums in nine states, though most of the cities are in Ohio, Missouri, Illinois and Indiana.

But construction cost increases, lower natural gas prices and other factors erased the project’s competitive advantage in the short term and left some of the cities with power that’s far more expensive than current market rates.

China slaps oil firms over pollution

BEIJING – Environmental regulators have taken the unusual step of blocking China’s two biggest oil producers from expanding their refining capacity after they failed to meet targets for reducing pollution.

The penalties for PetroChina and Sinopec are a fresh blow to China’s state-owned oil industry following this week’s announcements that four senior executives are under investigation for unspecified offenses.

Explosion, Rig Fire in Eagle Ford Shale East of San Antonio

A drilling rig explosion was reported in Petersville, Lavaca County in rural South Texas Wednesday evening.

There were no reports of injuries in what was being described as a “well control incident and fire,” and all personnel were safely evacuated, K Leonard, manager of public relations for rig operator EOG Resources Inc. told Rigzone.

Inspections Target Fracked U.S. Crude Shipped by Rail

U.S. rail-safety regulators began a “Bakken blitz” of inspections of crude oil tank cars this week as they seek to prevent a railroad disaster in the U.S. similar to July’s fatal inferno in Quebec.

Inspectors from the U.S. Federal Railroad Administration and Pipeline and Hazardous Materials Safety Administration are examining rail cars moving crude from North Dakota’s Bakken region, Cynthia Quarterman, PHMSA administrator, told reporters today during a break in a Washington meeting to discuss U.S. rail safety risks.

BP, Louisiana Officials at Odds over Restoring Coastline

The Gulf Coast Ecosystem Restoration Council held a meeting Wednesday discussing the current status of coastal restoration projects, which are being funded by civil penalties in the wake of the Deepwater Horizon incident.

The council approved an initial comprehensive plan laying goals for ecosystem and economic recovery within the five Gulf of Mexico states that was affected by the Macondo oil spill in 2010. The governors of those states – Texas, Louisiana, Mississippi, Alabama and Florida – serve on the GCER council with federal officials. Council members also promised that the first projects could be approved by June 2014, the beginning of the next hurricane season.

BP accuses Louisiana leaders of ‘political grandstanding’ over oil spill

BP and one of the US Gulf states most affected by pollution from the Deepwater Horizon blowout in 2010 have become embroiled in an acrimonious slanging match over the oil company’s clean-up record.

A senior BP executive has accused the leaders of Louisiana of “political grandstanding” and making “patently false assertions” about the environmental record of the group since the oil spill in 2010.

Greens use Keystone XL backers’ words to undermine pipeline

(Reuters) – Environmental groups on Thursday used statements by supporters of the proposed Canada-U.S. Keystone XL pipeline to undermine the argument that Canada’s tar sands will be developed without the project, so the impact on greenhouse gases will be the same.

A report put together by more than a dozen green groups compiles statements by industry and government officials, financial analysts and green groups to argue that the 830,000 b/d oil pipeline is essential for the development of the tar sands, and would in fact increase greenhouse gas emissions.

Fracking brings climate debate closer to home

For the first time in decades, prosperous, well-connected people in this country are having to face the reality of fossil fuel extraction, and they don’t like it one bit. Some of us have long been arguing that oil, coal and gas do far more harm at every stage of production than most forms of renewable energy. Now the fracking companies have obligingly chosen to demonstrate it.

Road rage: States get creative to fund highways

Yet with cars becoming more fuel efficient, and miles driven declining — 2.938 trillion miles traveled in 2012 compared with 3.031 trillion in 2007 — federal and state fuel tax revenues are increasingly insufficient to build new roads and maintain existing ones. Electric cars, a favorite of President Obama, use no gasoline at all, so their drivers do not pay for road use.

In the future, roads will need another stream of funding. Although residents don’t like tax increases, some states are taking matters into their own hands and creating their own sources of revenues for roads.

Tesla success helps push green car program back in gear

You can’t argue with success.

Tesla developed an electric car and paid back a nearly half billion dollar loan nine years early. Now the government is reviving the controversial automotive loan program that helped Tesla — with $15 billion still available to kick-start the development of electric and other alternative powered vehicles.

Bike shops: The new Starbucks?

While more people are riding bikes—cycling in New York City alone has more than doubled since 2005, with at least 500,000 residents biking—fewer are buying new ones. Unit sales fell 5% in the first half of 2013, with revenue down $88 million compared with the first half of 2012. And recently added bike-sharing programs in cities like Boston, New York and Chicago have put a dent in shop-based rentals. Bike shop locations have decreased by nearly a fifth in the past decade. Now, the $6 billion U.S. bicycle market is trying to lure new customers, especially women and families, with extras ranging from poetry readings to open-mic nights and even weddings.

China to raise subsidies for clean power generation

China will raise subsidies for cleaner forms of electricity from September 25, the state planning agency said on Friday, in a move that could help thermal power plants meet the country’s tough new air pollution standards.

China’s power plants have lobbied the government for more subsidies, saying they cannot afford to install new equipment to cut emissions because fixed power prices do not allow them to pass on the cost to consumers.

Graph of the Day: China’s future generation mix

China – already the world’s second largest electricity market, largest carbon dioxide emitter, and consumer of half the world’s coal – is on course to more than double its power market in size by 2030. But with increased awareness of environmental pollution, a potential price on carbon emissions and increasingly competitive renewable energy alternatives, how will it meet the challenge?

Cheap Corn Deters Buyers in U.S. Sugar-for-Ethanol Plan

A glut of corn has damped interest by biofuel makers in a U.S. government program to sell surplus sugar for ethanol, potentially decreasing its effectiveness in propping up sugar prices.

Building a Drought-Proof Farm

At Brown’s Ranch, just east of Bismarck, N.D., the community has gone 70 days with less than half an inch of rain. Yet Gabe Brown, the owner of this 5,400-acre farming and ranching operation, is looking out on a deep green field of sunflower, vetch, corn, clover, buckwheat, savannah grass and other crops.

“It’s not how much rainfall you get,” explains Brown. “It’s how much you can store.”

The soil on Brown’s land, thanks to some innovative, soil-enhancing farming techniques, holds about three times as much water as a conventional farm. This makes his farm more able to withstand hot, dry weather or soak up heavy rainfall. This means less water is wasted — and it also means that Brown, who received a 2012 Growing Green award from NRDC, doesn’t need to rely on federal crop insurance to cover his losses in times of drought or other weather extremes. All the insurance he needs is in his soil.

GOP Hearings On Climate Change May Threaten Entire Green Economy

The most important part of any financial analysis is understanding the risks that a firm, industry, sector or economy faces. The markets are defined by “Black Swan” events where previously unknown risks emerge and overnight the markets are down 10, 20, 30% or more. 1929, 1987, Long-Term Capital Management, Barings Bank and of course 2008 and the mortgage crisis. In hindsight, all the warning signs were there, the markets simply didn’t recognize them until it was too late.

Because of that I always try to identify and discuss risks in my articles, and one risk I always try to highlight is the political risk embedded in the green economy.

Greg Hunt not giving the full story on climate research

Opposition Climate spokesman Greg Hunt has cited CSIRO research to defend the Coalition’s “direct action” policy on climate change. Mr Hunt says the research shows emissions can be reduced by 20 per cent over 40 years using nature, soils and trees. ABC Fact Check takes a look at what the research is saying.

Gulf Coast marks 8th anniversary of Hurricane Katrina

In New Orleans, a group of elected officials, community activists and religious leaders gathered Wednesday to urge rebuilding of the state’s coastline and called attention to the impact of climate change, according to The Times-Picayune.

The group, part of an interfaith prayer breakfast, said climate change has touched off rising sea levels, disappearing coastline and more frequent storms, according to the news organization.

As Floods Ravage Sudan, Young Volunteers Revive a Tradition of Aid

“We saw that the heavy rains and floods were going to impact the lives of many, and we felt we had a social responsibility to help people,” said Muhammad Hamd, 28, a Nafeer spokesman. “The idea came out of a discussion on Facebook among friends.”

A “nafeer” is a Sudanese social tradition that comes from an Arabic word meaning “a call to mobilize.” The group’s formation was all the more important because the Sudanese government was slow to respond, some critics say.

Healthcare Needs to Lead the Fight Against Climate Change

As people continue to learn more about climate change, they are beginning to realize that it fundamentally is a health issue that will affect everyone in the world.

How climate change is damaging to health depends on where people live. If they live in Beijing or Baton Rouge, climate change looks like air that’s so thick and poisoned they can’t go outside their homes. If they live in the Midwest of the United States, climate change looks like extreme weather that rages through communities and heat waves that destroy crops and cause heat exhaustion. If they live in New York City, climate change looks like a massive hurricane, which flooded streets, trapped people in their homes without power, and shut down hospitals.

Greenland has its own Grand Canyon deep under ice, study says

Running from deep within the island’s interior north to Greenland’s northwest coast, the canyon measures at least 470 miles long, six miles across at its widest, and up to 2,600 feet deep – reaching its widest and deepest points near the coast. The Grand Canyon, by comparison, is 277 miles long, 18 miles wide, and 6,000 feet deep.

The portrait points to how little scientists know about what lies beneath the world’s great ice sheets. It also could help researchers understand how the ice sheet and melt water are working together to feed outlet glaciers along a coast where glaciers have been thinning at an increasing pace within the past decade.

Special report: Experimental climate fixes stir hopes, fears, lawyers

(Reuters) – Last year the Haida, an indigenous group in Canada, set out to increase their salmon stocks and save the planet. Helped by American businessman Russ George, a group of villagers dumped 100 metric tons (110.23 tons) of iron dust from a boat into the Pacific Ocean.

They wanted to see if the iron would cause a bloom of algae that could promote fish numbers and absorb the greenhouse gas carbon dioxide from the atmosphere.

Instead, in March, they were raided by Canadian officials for illegal dumping at sea.

Mutually Insured Destruction

To fully grasp how our changing climate affects their downside, the insurance and reinsurance industries need new ways of modeling risk — systems that look at what’s happening now rather than what happened decades ago. That drive is leading insurance wonks to join forces with climate scientists, who might have found a solution.

What The Oil Drum Meant

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The popular peak oil blog The Oil Drum (TOD) began in early 2005. I joined as a contributor in mid 2005, later becoming an editor, and I left the site in early 2008. TOD continued in the meantime, at least up until now when the current editors have decided to transition to an archival format. They don’t feel the quality and quantity of post submissions justify continuing. They asked a number of us old-timers to comment on the significance of TOD, and these are my reflections.

I start with the chart above. It shows, from 1950-2012, world oil production annually (red curve, left scale), and real oil prices annually (blue curve, right scale). I show in green boxes two regions of major disruption, and between them two regions of relatively calm behavior (in white).

The orderly region from 1950 to 1973 was characterized by very rapid growth in oil production that was achieved at very modest oil prices (around $20/barrel in 2011 dollars).

Then in 1973 came the Arab oil embargo, followed in 1979 by the Iranian revolution and then the Iraq-Iran war. These events caused a series of sharp but relatively short-lived contractions in the global oil supply. The result was huge price increases, and a permanent change in the way the world used oil.

After the dust settled in the mid eighties, oil production resumed growing fairly steadily, but never again at the frenetic pace of before the seventies – from now on society was more concerned with fuel efficiency and grew oil consumption more slowly. Prices fell into the $30 range, and remained there, give or take, for the next couple of decades. This was the second period of stability in the oil markets since WWII.

Then, in late 2004, global oil production largely stopped growing and entered a rough plateau. Prices began to shoot up, reaching well over $100/barrel within a few years, and largely staying there to this day (making allowance for a sharp downward fluctuation during the great recession).

There sprang up a large debate about the meaning of these events. The Oil Drum in particular I believe came to function as a central node in this debate, and one of the best places to hear a range of views that were based on a close analysis of the available data. The reason TOD is now coming to a close is that the need for this particular debate is over, at least for the time being. The data have spoken.

One extreme in this debate was what came to be known as cornucopians, epitomized by Daniel Yergin of the consultancy CERA. He made a long series of predictions that oil production would resume growing and prices would fall any day now. This was most famously satirized in a graph by Glenn Morton:

Obviously, this didn’t happen. Oil production has not risen rapidly, and prices have not returned anywhere close to the pre-2004 idea of normal.

Another extreme in the debate were “doomers” who believed that global oil production would begin to fall very rapidly, very soon, because peak oil was upon us. “We’re all gonna die” was the logical implication. One such forecaster was TOD contributor Ace who produced a series of forecasts like this one which showed oil production beginning a precipitous decline as of the date of the forecast:

The same piece forecast oil prices to rise rapidly and steadily and pass $200/barrel by the end of 2012. That didn’t happen either.

I’m not sure anyone predicted the last eight years perfectly (including me). Still, on the whole, the various “moderates” in the debate came closest. What has actually occurred can best be seen in this graph which shows monthly oil production from a variety of data sources from 2002 onward:

The green curve is the EIA’s estimate of the production of “crude and condensate” – C&C – which is a fairly narrow definition of oil that largely measures liquid hydrocarbons that flow out of the ground. The other curves show various estimates of “all liquids”, which adds things like biofuels and “natural gas liquids” – compounds like propane and butane removed from natural gas production. These aren’t really oil, but can substitute for it to varying degrees and so are often counted with it.

The crude-and-condensate curve is bumpy, but does slope upward slightly. The all liquids curve slopes up more, reflecting the fact that global natural gas production has increased steadily. High oil prices and government policies also induced a biofuel boom after 2005.

Thus we seem to live in a world in which, although traditional sources of oil are declining in many places, high oil prices (around $100-$120) are able to bring out enough low quality sources of hydrocarbon to offset this decline and just a bit more. Examples include oil fracced from very tight rocks in North Dakota, and tar sands production in Canada. These sources are difficult enough to bring on line that prices have not crashed, but are sufficient to prevent global oil production from actually declining. Clearly, we have not passed peak oil yet, and it’s not at all clear when we will.

In the meantime, the situation has gotten quite dull. I compile graphs of oil production every month, and it’s gotten somewhat akin to watching paint dry; every month, it’s pretty much flat, and I tire of saying the same things over and over again.

On the other hand, we certainly don’t live in the pre-2004 world any more. Oil prices are high, and there seems little prospect that they will ever fall below $100/barrel for any sustained period. If for no other reason, Saudi Arabia needs an oil price somewhere around there to balance its budget, and they are always in a position to force the price to stay above that threshold by modest decreases in their production.

Furthermore, the situation remains very vulnerable to disruption. Whereas in the eighties and nineties there was large amounts of spare capacity in oil production, nowadays there is little, and perhaps almost none. Any disruption in any sizeable oil producer will cause a large price spike – as we saw in 2011 when a revolution in Libya, which produced less than 2% of the world’s oil, caused a sizeable price spike.

As I write, Libya, Tunisia, Egypt, Syria, Lebanon, Iraq, and Iran are all subject to varying degrees of economic and political turmoil. We in the west are apparently about to bomb the Syrian government, as an interesting experiment to see what that does to the stability of the Middle East.

I assume at some point a large oil producer will descend into turmoil and then there will be a large price spike, and that may kick the global oil market out of the current meta-stable state. However, there is no telling when that might happen. In the mean time, oil production slowly creeps upward, and oil prices are around $100-$120.

One final point worth making: while global oil production has not peaked, oil consumption by the developed OECD countries almost certainly has. Since China, India, the Middle East, etc are all growing their consumption rapidly, and global supply is almost stagnant, OECD consumption must decline, and it has been:

I do not expect OECD consumption of oil to surpass its 2005 peak.

Drumbeat: August 28, 2013

This post is by from The Oil Drum - Discussions about Energy and Our Future

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Fuel Fraud Costing Europe More Than $4 Billion in Lost Taxes

“This criminal activity is undermining the fabric of the legitimate petroleum industry and the state, at a time when economic challenges have never been so great,” said Tom Noonan, chairman of the Irish Petroleum Industry Association and chief executive officer of Maxol Group, a Dublin-based oil retailer. “Illegal activity has been allowed to grow to such a large scale unimpeded.”

…Europe’s black market is adding to hard times for refiners as the lowest demand in two decades saps returns, according to the International Energy Agency. An average 11.6 million barrels a day of crude was processed from January through May in the region’s richest economies, the lowest level for any corresponding period since 1989, the Paris-based IEA said in a report on July 11.

Refinery margins, the profit from turning crude into fuels such as diesel and gasoline, were about $4 a barrel in Northwest Europe last week, according to data compiled by Bloomberg. That compares with $8 a year ago and a peak $20 a barrel in September 2008, the data show.

WTI at Two-Year High on Concern Syria Unrest Will Spread

West Texas Intermediate crude surged to the highest price since May 2011 on concern that conflict in Syria may spread and threaten oil supplies from the Middle East. Brent climbed to a six-month high in London.

Oil jumps as Syria conflict heats up

LONDON (CNNMoney) – Once again, a Middle East conflict is pushing oil prices higher.

Oil prices rose roughly 3% Tuesday and continued advancing by nearly 1% Wednesday, as the U.S. government and its allies consider a military strike on Syria following the country’s suspected use of chemical weapons.

The conflict has left investors reeling, with global stocks selling off and investors rushing to safer havens, such as Treasuries, which are backed by the U.S. government.

“In a world when you don’t know what to do, you buy government bonds,” said Steen Jakobsen, chief investment officer at Saxo Bank.

Oil Diverges From U.S. Stocks Most Since 2011 on Syria Concerns

Oil and American equities are moving in opposite directions by the most in almost two years amid prospects of military intervention in Syria.

As Oil Reaches $111 a Barrel, Are Gas Price Spikes Next?

The Syrian crisis drove oil prices to $111 a barrel. The crisis may well be worse if the U.S. strikes government installations there with drones. If Bashar al-Assad’s government reacts with more actions against civilians, the cycle of action and reaction could last for weeks, and perhaps beyond. The question of how oil could press gasoline prices higher, an issue that has been dormant for months, should cause anxiety again.

Good news for drivers

“My sense is that crude oil prices have already ‘baked in’ some of the upheaval that we’ve seen in the late second quarter and through the summer in the Middle East and North Africa,” said Tom Kloza, chief oil analyst at GasBuddy.

“Some of the violence has had an impact on crude oil production (Libya has struggled with about half their usual exports thanks to demonstrations at export terminals), but much of the strength in overseas crude is based on a ‘worry premium,’ ” Kloza said by email.

Japan crude stocks near 3-yr low as refiners cut capacity

TOKYO (Reuters) – Commercial crude oil inventories
in Japan fell to the lowest in 35 months last week, industry
data showed on Wednesday, as refiners slashed capacity to meet
government rules aimed at boosting efficiency.

Japan is at risk of losing its status this year as the
world’s third-biggest fuel consumer, as consumption has been
dropping due to lower demand from a declining and ageing

Iraq to Cut September Basrah Light Crude Exports to 20-Month Low

Iraq will reduce daily exports of Basrah Light crude from the Persian Gulf in September to the lowest in at least 20 months, according to a loading program obtained by Bloomberg News.

The Middle Eastern producer, the largest in the Organization of Petroleum Exporting Countries after Saudi Arabia, will ship about 52.86 million barrels, or 1.76 million barrels a day, from the Basrah Oil Terminal, according to the plan. This is the lowest since at least February 2012 when Bloomberg started tracking the data and compares with 2.09 million a day this month.

Reaching “peak bashing” of peak oil

The discussion of the death of peak oil has ramped up along with the increased hydraulic fracturing and horizontal drilling into tight sands and formations across North Dakota and Texas. In fact, even people that think peak oil will correlate to significant problems for society shy away from the term. But just as it is becoming more difficult to define what “oil” is in energy databases (it is now popular to report “liquids” that have vastly different life cycles and energy densities), the definition of “peak oil” seems to be in the context of the penholder (or typist).

TransCanada Keystone XL Defeats Obstacle to Pipeline Leg

TransCanada Corp. won a state appeals court ruling allowing it to lay the Keystone XL pipeline across a family farm in northeastern Texas, eliminating one of the last obstacles to completion of the southern leg of the Canadian tar-sands line.

India in crisis mode as rupee hits another record low

The threat of a military strike against Syria by western powers has further unsettled investors and sent oil prices soaring. The timing could not be worse for India, which is the world’s fourth-largest oil importer, bringing in on average nearly 3 million barrels a day.

Even before the spike in oil prices, investors were worried about India’s $88 billion current account deficit, which reflects the nation’s tendency to import many more goods than it exports and leaves it heavily reliant on foreign capital.

China Expands Inquiry on Graft to Oil Industry

HONG KONG — The Chinese Communist Party’s drive against corruption moved into the powerful and politically delicate oil sector this week, as the authorities announced that four executives of the state-owned China National Petroleum Corporation were under investigation.

Western intervention looms after reported Syrian chemical weapons attacks

Damascus, Syria (CNN) — Warships armed with cruise missiles plow the waters of the eastern Mediterranean Sea. Cabinet-level officials hold a National Security Council meeting at the White House Tuesday night.

And U.S. officials all but tell U.N. inspectors in Syria to get out of the way.

Libya Oil Output Tumbles as Protests Spread Westward

Libyan oil production fell to one-eighth of its capacity as protests over pay and allegations of corruption spread to fields operated by Eni SpA and Repsol SA, executives at the state oil company said.

Protesters yesterday stopped production at Repsol-operated Sharara and Eni-operated El Feel, or Elephant, fields in western Libya, according to National Oil Corp. Director of Measurement Ibrahim Al Awami. Output from the North African nation slumped to about 200,000 barrels a day, compared with 640,000 in August and its optimal capacity of 1.6 million, NOC Chairman Nuri Berruien said today in an interview from Tripoli.

Attacks kill at least 65 in Iraq, many more hurt

BAGHDAD (AP) — A coordinated wave of bombings tore through Shiite Muslim areas in and around the Iraqi capital early Wednesday, part of a wave of bloodshed that killed at least 65 people and wounded many more, officials said. The blasts, which came in quick succession, mainly targeted residents out shopping and on their way to work.

In addition to the bombings, the death toll included seven Shiite family members killed when gunmen raided their home and shot them as they slept.

To cut natural gas costs, Chesapeake pumps up royalty deductions

(Reuters) – As the natural gas industry struggles to cope with depressed prices, Chesapeake Energy Corp has begun shifting a much larger share of transportation and marketing costs to the owners of Pennsylvania land it leases.

The largest natural gas operator in Pennsylvania’s Marcellus shale formation, Chesapeake started this year to take much heavier deductions from royalty checks it sends landowners to help pay to gather, compress, market and transport natural gas, in most cases cutting compensation by more than half.

Turkish energy minister fires back over Taqa power project delay

The Turkish energy minister has fired back at Abu Dhabi National Energy (Taqa) over delaying an investment decision on a US$12 billion coal megaproject over what he called “political reasons.”

This week Taqa said it would not make a final investment decision on the coal mining and power plant development, expected this summer, until 2014 because of “spending priorities.”

At $20 billion, is Tesla worth more than GM, Ford?

Tesla Motor’s spectacular stock price climb has hit another milestone. In topping $167 a share, the young automaker has passed a $20 billion market cap.

That’s impressive for a company that sells only a single model from a single factory, a luxury car out of price reach of most consumers — with all the limitations that currently go with owning an electric car.

Poland starts shale gas extraction

Shale gas extraction has begun at a test well in northern Poland, a first for the EU member, a minister said in a newspaper interview on Wednesday.

The firm Lane Energy Poland, controlled by US energy giant ConocoPhilips, has been extracting about 8,000 cubic metres of gas per day since July 21, deputy environment minister Piotr Wozniak said.

Enbridge gets OK for 1st Ind. oil pipeline segment

GRIFFITH, Ind. (AP) – Federal regulators have given Enbridge Energy approval to begin installing the first segment of the company’s planned replacement of 60 miles of crude oil pipeline in northern Indiana.

The Times of Munster reports the U.S. Army Corps of Engineers recently cleared the way for work to begin on a pipeline section running between the Indiana-Michigan state line and LaPorte.

Keystone Seen as No Local Job Starter Along Prairie Route

Balcom, 44, knows most of the workers building the Canada-Nebraska pipeline will stay at a catered “man-camp” seven miles away and won’t be hoisting brews under the stuffed mountain lion that adorns his bar. On their days off, they’ll probably travel to places such as Deadwood and Spearfish an hour-and-a-half drive south that offer gambling and other attractions, he said.

“I can’t think of anybody who would be hugely disappointed if it didn’t go through,” Balcom said. “It’s kind of a deal right now where we could take it or leave it.”

Texas Earthquakes Tied to Extraction in Fracking

A recent wave of small earthquakes in and around the Eagle Ford formation in Texas was probably the result of extracting oil and in some cases water used for hydraulic fracturing, according to a study.

Clusters of small-magnitude seismic events between November 2009 and September 2011 were “often associated with fluid extraction,” according to the study scheduled to appear this week in the online edition of the journal Earth and Planetary Science Letters. The study follows previous research that links earthquakes to the disposal of drilling wastewater by injecting it underground.

Japan Nuclear Watchdog Casts Doubt on Tepco Water Leak Reporting

Japan’s nuclear regulator may downgrade the severity of the radioactive water leak at the Fukushima Dai-Ichi plant because operator Tokyo Electric Power Co. may have overstated the extent of the problem.
“We need to look into this issue more,” Shunichi Tanaka, chairman of Japan’s Nuclear Regulation Authority, told reporters today. “It’s up to us to provide accurate data to the nation.”

Japanese agency labels radioactive leak ‘serious’

TOKYO (AP) — Japan’s nuclear regulator on Wednesday upgraded the rating of a leak of radiation-contaminated water from a tank at its tsunami-wrecked nuclear plant to a “serious incident” on an international scale, and it castigated the plant operator for failing to catch the problem earlier.

The Nuclear Regulation Authority’s latest criticism of Tokyo Electric Power Co. came a day after the operator of the Fukushima Dai-ichi nuclear plant acknowledged that the 300-ton leak probably began nearly a month and a half before it was discovered Aug. 19.

Renewable Energy Provides 14% of US Electrical Generation During First Half of 2013

WASHINGTON, D.C. — According to the latest issue of the U.S. Energy Information Administration’s (EIA) “Electric Power Monthly,” with preliminary data through to June 30, 2013, renewable energy sources (i.e., biomass, geothermal, hydropower, solar, wind) provided 14.20 percent of the nation’s net electric power generation during the first half of the year. For the same period in 2012, renewables accounted for 13.57 percent of net electrical generation.

UN ruling puts future of UK wind farms in jeopardy

Plans for future wind farms in Britain could be in jeopardy after a United Nations legal tribunal ruled that the UK Government acted illegally by denying the public decision-making powers over their approval and the “necessary information” over their benefits or adverse effects.

The new ruling, agreed by a United Nations committee in Geneva, calls into question the legal validity of any further planning consent for all future wind-farm developments based on current policy, both onshore and offshore.

Kansas drought update: some counties improve, others in emergency status

The good news is that some of us are no longer are in the direct throes of drought.

The bad news is that many Kansas residents still are.

Gov. Sam Brownback has updated the Drought Emergency, Warnings and Watches, placing 25 counties in drought watch, 20 more in warning status and 37 in emergency conditions.

USDA Climate Report Published, Public Invited to Comment

WASHINGTON – The Climate Change Program Office of the U.S. Department of Agriculture’s (USDA) Office of the Chief Economist today released and requested public comments on the report Science-Based Methods for Entity-Scale Quantification of Greenhouse Gas Sources and Sinks from Agriculture and Forestry Practices. The report is the work of 38 scientists from across academia, USDA and the federal government, who are experts in greenhouse gas (GHG) estimation in the cropland, grazing land, livestock and forest management sectors. The report has undergone technical review by an additional 29 scientists.

Yosemite wildfire grows, threatens reservoir, power station

Yosemite National Park, California (CNN) — The numbers are staggering and the prospects are scary as a still-growing California wildfire menaces Yosemite National Park and San Francisco’s water supply.

Get rich in the ‘Age of Megafires’: 2014-20

SAN LUIS OBISPO, Calif. (MarketWatch) — New investment strategies, dead ahead. Not just for America’s 95 million investors. But for the climate-change deniers like Big Oil and the Koch brothers. The trigger: “megafires” destroying treasures like our national parks. Time for a “mega-wakeup call.”

Act now, because the climate deniers will soon do a megashift and stop denying. Got that? Denialism will soon stop. End. So get out in front of this historic shift.

California wildfires further strain federal budget

WASHINGTON (CNNMoney) – Federal agencies are scrambling for money to fight devastating fires in Northern California and elsewhere.

Last week, the U.S. Forest Service said it exhausted its funds — close to $1 billion — budgeted to fight fires, and it needed to pull another $600 million from other programs, including some aimed at fire prevention.

Now, the Department of Interior is close to exhausting its $368 million in fire suppression funds by mid-September, according to budget staff at the National Interagency Fire Center in Idaho. As of last Friday, that agency had spent $301 million.

Chinese Workers—in Greenland?

China is growing. Greenland is melting. So it’s only natural that thousands of Chinese workers may end up near the Arctic Circle to build a vast iron ore mine later this year.

Greenland, a Danish protectorate with a mostly Inuit population of 57,000, is courting foreign investors to tap mineral resources that have become more accessible as rising temperatures shrink the island’s ice cap. In one of the most ambitious projects, London Mining wants to spend $2.3 billion to build a mine in southwestern Greenland that would tap a 1 billion-ton iron ore deposit—a project the company hopes will be financed and built mainly by the Chinese.

How the Arctic Ocean could transform world trade

China, the world’s largest trading nation, suffers from several strategic weaknesses related to its all-important shipping routes.

The “Malacca dilemma” results from China’s dependence on the Strait of Malacca between Indonesia and Malaysia for over 80 percent of its oil imports. This leaves the country’s energy supply vulnerable to interruption.

Energy As a Metric of Sustainability

This post is by from The Oil Drum - Discussions about Energy and Our Future

Click here to view on the original site: Original Post

Under what conditions will a technology be able to survive the energy contraction associated with the depletion of fossil fuels? Which types of technologies are sustainable in a world that can only make use of resources that it is producing on its own rather than relying on resources that it inherited from the past? This article, co-authored by Dr. Rodrigo Castro of the University of Buenos Aires, proposes emergy as a physically sound metric of sustainability. Without taking emergy into account, long-term energy analysis may lead to erroneous conclusions with potentially catastrophic consequences.

At The Oil Drum, many contributions have addressed the ERoEI, energy returned on energy invested, as a measure of energy efficiency. It is evident that a technology that consumes more energy than it produces (ERoEI < 1) is not sustainable in the long run. It is also quite obvious that energy resources with a low ERoEI value must be more expensive to produce than resources with a high ERoEI value. However in the short run, it may sometimes be profitable to even produce energy with an ERoEI < 1, if the production of this resource is being subsidized by a local government using tax revenue.

Some readers of The Oil Drum have interpreted the ERoEI as a measure of sustainability. They expect energy resources with an ERoEI of 1.03 to be sustainable, whereas resources with an ERoEI of 0.98 are predicted to be unsustainable. Unfortunately, this interpretation is incorrect. The reason is that the ERoEI only accounts for the energy used in the production of energy itself, but not for the energy that had been previously used up to create the infrastructure and equipment needed to make said production of energy possible. It takes a whole lot of energy to produce an oil platform, for example. New oil platforms can and will only be produced as long as there is enough surplus energy available to do so.

The crux is thus the hidden energy that is “contained in” (has been used up in the production of) equipment used for the production of energy. Every good sold or service provided on this planet contains hidden energy. This type of energy has been coined emergy [4]. We frequently read about gray energy. Gray energy is emergy traded across (national) borders.

Charles Hall, the prime promoter of the ERoEI (sometimes also abbreviated as EROI) as a metric for energy efficiency, knows about the problem. For this reason, he suggested to consider a technology with an ERoEI < 5 to be unsustainable. Where does this factor of 5 come from? No one really knows, including Charlie. It is simply a safety margin introduced to account for all of the hidden energy cost not included in the computation of the ERoEI. Yet the hidden energy cost may vary from one technology to another. One technology may be perfectly sustainable with an ERoEI value of 2, whereas another may not be sustainable at any ERoEI value (e.g. if it relies on the extraction of a non-renewable raw material). It is thus important to be able to quantify the hidden energy cost of different energy producing technologies.

These same concepts apply not only to the production of energy, but in fact to the production of all goods, including e.g. food. In the Middle Ages in Britain, soils were only being used for agriculture if the so-called harvest factor (the amount of grain produced divided by the amount of seed grain planted) surpassed a value of 1.6 [3]. Otherwise the soil was not used for agriculture. The safety margin of 1.6 accounted for the loss of harvested grain to different types of pests and the need to appropriate some of the grain for consumption.

Many of our readers may consider gray energy irrelevant to the discussion at hand. In the context of the peak oil debate, we are looking at the world as a whole, and in a global context, gray energy does not exist; it is a zero-sum game. All gray energy imported into one country is true energy used up elsewhere.

It is said that China has meanwhile surpassed the United States in terms of energy consumption. China is claimed to now consume more energy (in absolute terms, not per capita) than the United States. This is however incorrect. China has become the largest energy user, but not the largest energy consumer, because China produces lots of goods for export. Much of the energy used up in China is being exported to Europe and the United States in the form of gray energy. China has become the largest net exporter of gray energy on the planet.

Why is gray energy (emergy) important even in a global context?

Japan, a nation with a high population density and few resources of its own, is currently producing a large percentage of the automobiles driven all over the planet. Will Japan still be able to export (e.g. plug-in hybrid) vehicles after the energy contraction? Will Japan not rather use its limited energy resources to satisfy the needs of its own populace than producing goods for export?

The issue here is that the export land model, another favorite topic at The Oil Drum, does not only apply to energy trade, but to trade of all goods, because of their hidden energy (emergy) cost.

Unfortunately, all of these factors influence the sustainability of any energy production technology negatively, as it is not sufficient that the ERoEI of a technology is high enough. For a technology to survive the contraction, enough energy and all other material necessary for the production of said technology need to be available locally where and when the production is supposed to take place. In a post-contraction scenario, the lifecycle of all engineered equipment should be considered in terms of the energy required for its maintenance, clean disposal, substitution, and potential recycling.

In developing countries, energy is the main means through which industrialization can take place, hopefully leading to the abatement of poverty. Here the concept of “needs” changes noticeably. Which energy technologies should be considered as locally beneficial to lift average welfare to a level that can be sustained? It seems to be clear, within an energy contraction scenario, that mimicking the path of industrialization followed in the past by developed countries can only lead to failure in the long run. Therefore, possible balances between development and sustainability should be carefully studied in order to maximize development without neglecting physical constraints. In so doing, ignoring the concept of emergy may lead to unpleasant surprises in the future that could turn out to be irreversible in a post-carbon era.

How can the emergy of a technology be quantitatively assessed at regional or global scales attaining the required levels of comprehensiveness? Which modeling tools may support such an endeavor? These issues are being discussed in two forthcoming articles [1,2].


[1] Castro, R., F.E. Cellier, and A. Fischlin (2013), “Eco-bond Graphs: An Energy-based Modeling Framework for Complex Dynamic Systems with a Focus on Sustainability and Embodied Energy Flows,” Proc. SESDE 2013, Intl. Workshop on Simulation for Energy, Sustainability, and Environment, Athens, Greece, September 25-27, 2013.

[2] Cellier, F.E. (2013), “Emergy Tracking – Safe Transition from a World of Exponential Growth to one of Sustainability,” Proc. SESDE 2013, Intl. Workshop on Simulation for Energy, Sustainability, and Environment, Athens, Greece, September 25-27, 2013.

[3] Müller-Herold, U. (2013), personal communication.

[4] Scienceman, D. (1987), “Energy and Emergy,” in: Pillet, G. and T. Murota, eds. Environmental Economics – The Analysis of a Major Interface, Geneva, Switzerland: Roland, Leimgruber, pp. 257-276.