Peak Oil News

In Part 1 of this article, we reviewed the rising demand, falling production, falling imports, and consequent shortages of coal in China. This week, we'll consider the export side of China coal, prices, and some ways to invest in the China coal crisis. China's Falling Coal Exports As of June, with prices at stratospheric levels, China's coal exports had grown 84 percent over the previous year, to 6.99 million tons. (Bear in mind that this was happening even as blackouts enveloped the country.) But then as international prices fell in early July, exports fell by a third from June volumes. Now, with thousands of factories temporarily shuttered for a lack of grid power, there is an enormous amount of pent-up demand for coal. So much demand, apparently, that China is not only planning to increase both production and imports, but also to further curb coal exports deliberately. China announced two weeks ago that it would impose an export tax of 10 percent on thermal coal, and raise the export tax on coke to 40 percent. It also raised taxes on coking coal. "The move will greatly reduce exports on the spot market. Besides the term contracts, there will be very little exports," said Judy Zhu, an analyst at Standard Chartered Bank in Shanghai. Since China exports over half of the world's coke, and since coke and coking coal are essential elements in making steel, we should expect higher prices worldwide for both the fuels and for steel. Rising Prices As international coal prices shot ..

It's only a matter of time. That was my answer the last time I was asked whether the ban on offshore drilling would be lifted. Granted, crude prices at the time were moving past $140 per barrel. We all know what came next. Prices dropped sharply, as low as $112.88 per barrel last week. This morning, I was asked the same question. Since oil prices are no longer in record territory, has my answer changed? Not a chance. Can you blame me? Just take a look at the hole we've dug for ourselves. On a global scale, fossil fuels still make up approximately 86% of the world's energy supply. Although U.S. demand has fallen off recently, the fact is we still consume roughly one quarter of the world's 85 million barrels/day production. Our massive thirst for oil, however, isn't the scary part. According to the EIA , the U.S. imported about 10 million barrels of crude oil per day in June. Even though Canada is still our single largest source for crude oil, over 55% of our crude imports were from OPEC. Naturally, OPEC's interest is in higher oil prices. That makes perfect sense, considering the oil cartel controls about 40% of the world's oil production. I also wouldn't count on the organization to sit idle, twiddling their thumbs. When OPEC gets together in Vienna on September 9, the group only has two options: either maintain or cut current production. If we listen to OPEC's numbers, the oil markets are oversupplied by a million barrels per day. In order to defend higher oil prices, OPEC h..

When the Supreme Court ruled in Massachusetts v. Environmental Protection Agency that carbon dioxide was a pollutant, the implications were clear. Rather than waiting for the Congress and President to agree on federal climate change policy, presumably built around an economy-wide cap & trade system or a carbon tax, the Court told the EPA that it had all the authority it needed under the Clean Air Act to order emitters of greenhouse gases to cut back--regardless of the wider repercussions. Now a lawsuit filed by the Attorneys General of New York and eleven other states seeks to force the EPA to implement this ruling on emissions from US oil refineries. But unlike a comprehensive approach, such a selective effort would greatly worsen the nation's energy security, while having very little impact on overall US greenhouse gas emissions. The US emitted a net 6.2 billion tons of CO2-equivalent greenhouse gases (GHG) last year. Reducing those emissions has become a high priority, and pending a federal response along the lines of the Boxer-Lieberman-Warner cap & trade legislation that failed to pass the Congress earlier this year, the states have largely taken the lead. New York's suit to force the EPA to implement the High Court's ruling on CO2 as a pollutant is just one example of this trend. But in singling out oil refining, the states have chosen a target with enormous negative leverage on US imports of petroleum products--and thus on US energy security. Moreover, oil refining con..

While Congress and the Presidential candidates are busily debating far-reaching energy proposals, the existing tax credits for wind and solar power and other renewable energy are still slated to expire at the end of the year. The uncertainty about their continuation is apparently beginning to slow down new installations and may be putting some of those vaunted "green collar" jobs at risk , at least temporarily. Although a broad consensus supports their renewal, the hang-up is over funding. I'd like to offer an alternative that at least makes policy sense, if not political sense. Its appeal will be limited by the reticence of both sides of this debate to be seen explicitly raising the price Americans pay for energy. I've lost count of the number of times the Senate has missed extending the Renewable Electricity Production Tax Credit (PTC) and the Solar Investment Tax Credit (ITC) this year. Six? Seven? One of the latest such efforts was S.3335 , the "Jobs, Energy, Families, and Disaster Relief Act of 2008". Voting against something with that title must have felt like voting against motherhood and apple pie, although the bill should more accurately have been designated the "Renewable Energy and Comprehensive Pork Act of 2008," including as it did such diverse provisions as a "Seven Year Cost Recovery Period for Motorsports Racing Track Facility," "Provisions Related to Film and Television Productions," and my favorite, the "Modification of Rate of Excise Tax on Certain Wooden A..

TwinCities.com By Rod Dreher Has the world already reached peak oil, a time of permanently high oil prices and shortages that will profoundly change our way of life? The answer, I think, is likely yes, but the proximity of this catastrophe is not the most important question to ask. Oil is a finite natural resource; sooner or later, the supply will peak. Jeroen van der Veer, chief of Royal Dutch Shell, earlier this year predicted 2015 as the year the world reaches peak production. John Hess of Hess Corp. said: "An oil crisis is coming in the next 10 years. It's not a matter of demand. It's not a matter of supplies. It's both." Whether peak oil is already here or on its way, we'll have to deal with it. The more important question, then, is this: Are we ready for the inevitable? The answer, I'm convinced, is no. And our unreadiness is not for lack of information; it's moral and philosophical. Put plainly, it's because we Americans do not recognize limits. We live in a fantasyland whose borders go far beyond the oilfields, whose psychological geography is critical to map out a future our nation is blindly headed for. Andrew Bacevich, the retired Army colonel and conservative academic, describes us this way in his forthcoming book "The Limits of Power": If one were to choose a single word to characterize (what it means to be a 21st-century American), it would have to be more. For the majority of contemporary Americans, the essence of life, liberty and the pursuit of happiness cen..

NJVoices By Bill Wolfe Demand growing. Supply shrinking - Get used to higher prices Although I think they got the story wrong (i.e. by attributing the problem more to underinvestment in exploration and political restrictions on access to supplies, than to a decline in recoverable supply, or peak oil), according to the NY Times business page: "In 1994, the top five oil companies spent 3 percent of their free cash on share buybacks and 15 percent on exploration. By 2007, they were spending 34 percent of their free cash on buybacks -- in effect, propping up their share prices -- and a mere 6 percent on exploration, according to figures compiled by a team led by Ms. Jaffe and Ronald Soligo of Rice University. As a result, some experts warn that supplies will fall short of the demand over the next decade, perhaps sending prices well above today's levels. At a recent conference in Madrid, Christophe de Margerie, the chief executive of the French company Total, said the world would be hard-pressed to raise supplies beyond 95 million barrels a day by 2020. Only a few years ago, forecasters expected 120 million barrels a day by 2030, a level many analysts now view as unrealistic."

This was posted in May 2007 and is worth reposting today given the new context of tense relations with Russia and worries/suspicion/empty talk about "energy weapons." The original post is built as a discussion an an Economist article about Russian gas ( A bear at the throat ) published in April 2007. Back then, " it took legitimate (if often poorly informed) worries about Russia's sometimes blustering behavior on the energy markets to peddle the usual insane crap that market liberalisation is the only solution to promote energy security. " Today, the focus seems to be more on the geopolitical threat the Russia represents, but the conclusion is still, of course, about the incompetence and failure of continental Europe - this time not to liberalize, but rather to 'stand up' to Russia's bullying. Below, the original post, with some additional comments written today in italics and [between brackets]). [Last year] I spoke at a debate on Gazprom at IFRI, a French think tank. That conference was organised after the publication of two quite different articles about Gazprom: Gazprom as a Predictable Partner. Another Reading of the Russian-Ukrainian and Russian-Belarusian Energy Crises by Jérôme Guillet Gazprom, the Fastest Way to Energy Suicide by Christophe-Alexandre Paillard The titles give a hint that the papers start from pretty different positions - as you can see in the executive summaries of each that I am posting below, [ but they in fact reach fairly similar conclusions, w..

Warren Buffett is nothing if not a disciplined investor, and he explains that his visit to the Alberta region was for information gathering only, something that he will file away and may use a few years from now. As he explains near the end of the interview, he's now gained knowledge on cost aspects of the business, but the biggest wildcard remains the longer term price of oil. Note that he already holds $1.5 billion worth of ConocoPhillips stock, which claims to have the "largest position in Canadian oil sands". It's mentioned that they visited CNQ's new project as well as an unnamed SAGD (steam assisted gravity drainage) site. Since COP has a joint venture with Encana (ECA), and since Encana has SAGD sites in production, my guess would be that they visited an Encana site. CNBC: Buffett/Gates Energy Tour . Link: http://www.cnbc.com/id/15840232?video=829077555 http://www.conocophillips.com/NR/rdonlyres/31989B77-23F9-40A7-BB42-3D56B4A01420/0/UBSAustinMay22wnotesupdatedfor1Q08BPReseg.pdf

Over the past few months, the renewable energy industry has struggled to maintain investor confidence as Congress continued to drop the ball on the renewable energy production and investment tax credits. They're set to expire at the end of the year. And if that happens, renewable energy stocks are sure to fall. Now before you draft your hostile e-mails about how renewables should be able to compete without subsidies, I call your attention to the billions in subsidies the oil industry receives every single year. I can assure you, NO form of energy generation exists without some form of subsidies. And if you don't believe it, take a look at this 2007 article written by my colleague, Chris Nelder. It spells out the whole dirty secret that no one in Washington wants to admit about fossil fuel subsidies. U.S. Renewable Energy Tax Credits...by way of Stupidity! Last Saturday, Nancy Pelosi signaled her willingness to consider opening more coastal areas to oil exploration. If this happens, it could certainly enable a bipartisan effort to get those tax credits extended through a long-awaited compromise. Now don't get me wrong. Opening up offshore drilling is a bad joke with an even worse punch line. If we started drilling today, we'd have a very small flow of new oil coming online in about a decade. This would be well after the global peak of production, and provide little relief to the average Joe trying to get a tank full of gas. Of course, some have suggested that had we just done..

Oil market speculation is back in the news, because Vitol S.A ., one of the world's largest oil-trading firms, has apparently been re-classified as a "non-commercial" market participant by the Commodity Futures Trading Commission ( CFTC ). That marks them as a speculator, this year's scarlet letter. Before we pass judgment on the influence of such firms on the price of oil, and thus on the petroleum products consumers buy, it's worth considering what we really mean by speculation, and how this might be distinct from the activities of the participants that the CFTC deems "commercial", i.e. those conducting futures, options and swap transactions in conjunction with their physical production or consumption of various forms of energy. More importantly, we should evaluate whether speculation is an important enough factor in the oil market to merit distracting us from the urgent pursuit of solutions that would expand energy supplies and shrink demand. As big as they are, Vitol hardly fits the profile of the kind speculators that stand accused of driving up the price of oil and everything connected to it to unprecedented levels. Vitol has been trading oil since the 1960s , and I did my first deal with them in the 1980s, when I traded petroleum products for Texaco's West Coast refining and marketing subsidiary. I got a much better sense for just how large a player they were in the physical markets for oil, feedstocks and refined products when I traded international products in London..

NYTimes.com By Jad Mouawad Oil production has begun falling at all of the major Western oil companies, and they are finding it harder than ever to find new prospects even though they are awash in profits and eager to expand. Part of the reason is political. From the Caspian Sea to South America, Western oil companies are being squeezed out of resource-rich provinces. They are being forced to renegotiate contracts on less-favorable terms and are fighting losing battles with assertive state-owned oil companies. And much of their production is in mature regions that are declining, like the North Sea. The reality, experts say, is that the oil giants that once dominated the global market have lost much of their influence — and with it, their ability to increase supplies. “This is an industry in crisis,” said Amy Myers Jaffe, the associate director of Rice University’s energy program in Houston. “It’s a crisis of leadership, a crisis of strategy and a crisis of what the future looks like for the supermajors,” a term often applied to the biggest oil companies. “They are like a deer caught in headlights. They know they have to move, but they can’t decide where to go.” The sharp retreat in all of the commodities’ prices over the last month, about 20 percent, reflects slowing global growth and with it reduced demand for more oil in the short term. But over the next decade, the world will need more oil to satisfy develop..

In spite of the hub-bub about greenhouse gas linked warming, there are a number of scientists who are convinced that solar activity is a much larger factor. [Some scientists even suggest carbon levels rise after the earth heats up as a consequence, not before/as a cause.] Sunspots are one measure of solar activity, and there is a roughly 11 year cycle in sunspots, as well as some longer ones that we have not nailed down exactly. The current sunspot cycle is delayed, and it's possible this is linked to the bout of cooler weather we are experiencing. There are scientists who are raising questions about the longer term solar cycle, suggesting that perhaps we are in for a lull in sunspots, and a bout of long term cooler weather. Some have pointed to the example of the Maunder minimum , which was a long period with little sunspot activity where the earth cooled fairly dramatically for those living through it. While it's too early to draw conclusions, I'm keeping an eye on this story and on the sun's sunspot activity at Spaceweather . According to NASA, it should be picking up this fall. Note that longer than average cycles (above 11 years) are apparently associated with short periods of cooling. I also note that today we have a sunspot appearing, after a lull. If you really want to go out on a limb, there are some (I think Charles Nenner, though I could be mistaken) who link sunspots with general human activity, and further stock market performance, I'd assume due to some geo-magn..

Perhaps I should say "Man bites pandering politicians." This is great, and amazing. A new poll showing that Americans are smart enough to figure out that windfall profits taxes on oil companies, SPR releases, and gas tax holidays are not going to fix the energy problem. Who'd have thunk it? Coming soon: Obama on an offshore drilling platform, and Pelosi air kissing Rex Tillerson. (Maybe she ought to kiss-kiss the guy from Devon, he's actually better at finding resources.) The Wall Street Journal: Voters Want Everything on Energy . Quotes: "Voters are telling us they want everything," said Neil Newhouse, a Republican who conducts the poll with Democrat Peter D. Hart. Mr. Hart said the results indicate that the current energy debate between Republican presidential candidate John McCain and his Democratic rival, Barack Obama, "is not the fight that the American public cares about." The poll found greater levels of skepticism among voters about releasing oil from the Strategic Petroleum Reserve -- an idea advocated by Sen. Obama and many congressional Democrats -- and suspending the federal gas tax, an idea championed by Sen. McCain. Less than half of those polled thought those ideas were a step in the right direction. "What these voters are saying is that there needs to be a whole new way of looking at our problems, and that they don't want the same old fights and the same old divisions," Mr. Hart said. After weeks of criticizing expanded drilling, Sen. Obama has said he could s..

It's been a long time since I've done an Canadian oil sands post. These stocks have been clobbered along with everything else, but these are huge resources that will be producing for a long time. These projects aren't without issues, as it's carbon intensive, needs natural gas input as well as a large amount of water, and makes apparently one hell of a mess, so they need to get the environmental stuff done right. The classic oil sands stock is Suncor, SU, but Bill Gates and Warren Buffett took a tour of the latest oil sands project, the Horizon project by Canadian Natural Resources, CNQ. Other oil sands names include: Canadian Oil Sands COSWF Imperial Oil IMO Nexen NXY Encana ECA ConocoPhillips COP Husky HUSKF ExxonMobil XOM Shell RDSA Devon DVN Marathon MRO Opti-Canada OPCDF Because of the size and longevity of these resources, combined with the long term questions about reliable oil supply and peak oil, I have seen Suncor referred to as the "Microsoft of oil", with potentially 50 years of earnings growth ahead of it, as well as comments about oil sands stocks being "stocks to pass on to your grandchildren". I'm looking forward to see what Warren Buffett has to say in his CNBC interview on Friday. Financial Post: Buffett and Gates tour Alberta oil sands . CNBC: Oilsands Stock Soars After Warren Buffett and Bill Gates Visit Alberta Projec t.

Suburbs of Moscow, July 2008. You don't have to be able to read Cyrillic to understand the red sign (photo by the author). [break] Russia has changed beyond recognition from the dull times of the years after the fall of the Soviet Union, when I heard it described by an American acquaintance as "the most foreign country I know". At that time, Moscow was a grey city covered in dirty snow. It had no shop windows, few lights, no restaurants outside those of the hotels. Walking along the streets, you would see people dressed in black, looking like they had nothing to do. There were plenty of beggars and of drunken men staggering along. Things have been gradually changing. This July, I have been back to Moscow for a week and I found a city full of flowers and with shops, restaurants, malls, and everything that you expect to see in European cities. The traffic is heavy; the old Ladas are still there, but there are plenty of new cars, including SUVs. Beggars have disappeared, a few drunkards can still be seen, but the city is full of young people evidently in good health, well dressed, and looking happy. The cities around Moscow that I saw during my trip don't look so shiny, but it is clear that the wealth that has concentrated in Moscow is gradually spilling out to the rest of Russia. According to Wikipedia, Russia is now the 7th country in the world in terms of GDP adjusted for parity purchasing power. In 2006 the average Russian salary was equivalent to $640 and by now it is sure..

Old King Coal is about to be a much merrier old soul. After a stunning 60 percent gain for the sector in the first half of the year, and then a correction almost all the way back down, my research suggests that we're about to see another breathtaking run for the group. Curiously, it seems to have much to do with the Olympics. As was widely discussed in the press, China severely cut its use of fossil fuels, particularly coal, right around June in an all-out effort to clean up the air for the Olympics. What has not been discussed much at all are the global implications of that cutback on the energy markets, and how the resurgence of Chinese energy consumption after the games spells higher prices for grid power and many other commodities...and profits for coal investors. This week, I take a methodical look at China and coal, and what it means for the US. Demand With coal powering 80 percent of its electricity supply, China is both the world's largest coal producer and its largest coal consumer. China's demand for coal rose 9 percent last year. This year, the Coal Sales and Transportation Association of China anticipates that the nation's requirements will rise another 5.3 percent, to 2.76 billion tons. (By comparison, US consumption of coal last year was less than half that, at 1.1 billion tons, according to the EIA's July 25 Quarterly Coal Report .) The reason is simple: About two-thirds of global coal consumption is used to fuel electric power plants, and most of the rest is ..

I started looking at this yesterday. Among names that are seeing some buying: MMR HK GDP CLR HERO It's nice to see insiders jumping in here, though sometimes they are a bit early. It looks like energy stocks may finally be finding a floor, after a solid month+ of a thorough thrashing. Wall Street Journal: Oil, Gas Insiders Bet Energy-Stock Bull Is Primed to Resume Run . Quotes: Oil and gas insiders are betting big that the historic run-up in energy stocks isn't over. Since energy stocks crested and retreated in early July, an unusually large number of directors, officers and large stakeholders have pumped money back into their own companies -- a sign, analysts say, that the boom is primed to resume.

Using wind for electrical energy generation, shifting natural gas to a transportation fuel, reducing oil imports 50% in 10 years, yada yada yada. Ok, kidding about the yada yada yada, I've just featured Mr Picken's ideas a number of times now. It's an extremely important issue, this is one guy with a decently sized plan that seems worth shooting for, so I'm personally for it. Without any kind of plan (say, like the situation we find ourselves in right now..), we're liable to be as *&^%$# as the peak oil doomsters think. On the oil price prediction of a roughly $100 floor for oil prices, he believes OPEC will actively try to support a floor around that price, which sounds correct to me. Bloomberg: Pickens Says Crude Oil Isn't Likely to Drop Below $100 .

Weakening demand appears to be the main oil market driver these days, with the US having just tallied its 12th consecutive monthly decline in gasoline demand, year-on-year. For the moment, at least, good old supply and demand have displaced imminent Peak Oil and a perceived commodity bubble as the dominant narrative. If we needed further evidence of that, the market's collective yawn at Russia's threat to the Caspian pipelines passing through Georgia ought to serve nicely. But how much of the recent decline in consumption is attributable to the price elasticity of demand, and how much to the weakening US economy? The answer is of more than passing interest, signifying whether we're likely to see a bounce in demand once the pump price catches up with the 20% decline in the price of West Texas Intermediate crude oil since the 4th of July. The US average retail gasoline price has fallen for six weeks and currently stands at $3.74 per gallon. Barring an unexpected oil-price rally or a major refining problem, unleaded regular prices beginning with a "4" should soon disappear at all but the most expensive stations, even in California. Perhaps this is just a case of the August doldrums, but the price of oil is currently stuck in a range that defies the principal explanations for its behavior earlier this year. With the market clearly responding to fundamentals, its path from here will depend heavily on whether consumers continue to drive less , and that depends on the relative impor..

Crunchy Con By Rod Dreher Everybody go over to The American Conservative's site and read their new issue, all of which is available for free in PDF form. I want to draw attention to two articles of special note, neither of which is linkable, but both of which can be read on the PDF version of the magazine. The first is an optimistic, hopeful take on peak oil and the Long Emergency. The author is Brian Kaller and his view is that peak oil need not be an apocalypse, but could easily turn out to be a return to an older, and in some ways better, way of life. Here's Kaller criticizing people who portray peak-oilers as wild-eyed lunatics: The simpler truth is that peak-oil converts are often young people reviving the personal habits and self-sufficient skills of their grandparents' generation, thinking seriously about their tap water, transportation, income, food, heat, and electricity, and realizing how little would survive the end of fossil fuels. They anticipate that population trends, climate change, and other problems will compound the crisis, creating what Kunstler has called the Long Emergency. While others are preoccupied with the hot-button lifestyle issues of the moment, they are planting gardens, buying foreclosed farms, learning traditional crafts, taking crash courses in survival skills, and soberly preparing while silently counting down. But Kaller also criticizes peak-oil proponents who prophesy a Mad Max world of anarchy and hardship, saying that their maximalist p..

gantdaily.com By Bethany Parker Unprecedented summer gasoline prices are squeezing Americans' wallets and also expanding their vocabularies, as terms like "peak oil" gain common usage. Peak oil, economists say, is the point at which oil production maxes out: The easily available reserves are gone, and the cost of extracting and refining the remaining stuff exceeds the price it fetches on the open market. After the peak, the theory goes, production starts to fall. Experts worry that if such a decline in production happens too rapidly, it could outpace the development of viable energy alternatives, resulting in a drastic spike in prices. Others believe that peak oil is a myth, that we could never drain the world's oil supply to the point of such a crisis. Tim Considine, a former professor of natural resource economics at Penn State, falls somewhere in the middle. "In any geographic area, it's a natural phenomenon for oil to peak at some point," Considine said. He pointed to the United States reaching its own oil peak in 1971. From the late 19th century until that year, the United States was the world's largest producer of crude oil, he noted. But in 1971, U.S. oil production peaked at 10 million barrels per day, and it has been dropping ever since, to a current level of 5 million barrels per day. "The peak oil theory looks at the U.S. experience and believes the world will peak also," explained Considine. "The biggest question is when." Some economists predict the peak has alr..

I think Tom Petrie might be right - a natural floor might be around $80 to $90 for oil. But I think we don't get there because of the winter (which I suspect will be cold) and because the market is still going to leave a bit of a premium in the mix for the vagaries of the world. Note the interesting headline flashed, but not discussed: "Practical peak oil becoming broadly recognized as looming issue" CNBC: Crude Heading Down to $80 a Barrel: Merrill Executive . Quotes: "I think it's pretty clear demand elasticities have been triggered in a way that will take prices lower," Petrie said. "I do think $80 to $90 is probably where the floor is."

This is a guest post by Adam Dadeby ( Adam1 ). Adam is currently studying towards an MSc in Renewable Energy and the Built Environment with the Centre for Alternative Technology in Wales, UK. What is EROEI? Energy returned on energy invested (EROEI or EROI) is a concept that mirrors the financial metric, return on investment (ROI). In order to make an energy gain or “profit”, energy or work must be consumed or exerted (Cleveland, C.J., 2001, p.1 1 ). The energy gain or profit often referred to as “net energy”. EROEI is usually expressed as a ratio, or occasionally as a percentage. EROEI can also be represented diagrammatically in simplified form (Fig. 1). Figure 1: EROEI (Charles Hall, Pradeep Tharakan, John Hallock, Wei Wu and Jae-Young Ko, Advances in Energy Studies Conference, Porto Venere, Italy, September 2002) 2 The energy referred to in EROEI can be energy to run technology, such as liquid fuels for transport or electricity for lighting. It can however refer to energy in a form that can be taken in directly by living organisms: food. [break] How widely is EROEI-analysis currently used? EROEI is understood by some of those campaigning on environmental issues, mostly those who focus on fossil fuel depletion issues. The concept of EROEI has been defined by Cleveland, Costanza, Hall & Kaufmann, (1984) 3 and Odum (1996) 4 . However, within society’s key decision-making mainstream – financial markets, governments, parliamentarians and those advising them within ..

F. Scott Fitzgerald once said, "The test of a first-rate intelligence is the ability to hold two opposed ideas in the mind at the same time, and still retain the ability to function." By that measure, the currently debate over energy policy in the Congress looks truly impressive, incorporating a number of such "opposed ideas." A prime example is the arguments against expanded domestic oil and gas drilling, many of which look equally applicable to increasing our production of ethanol from grain. In particular, if expanded drilling can be dismissed as not worth the effort or associated trade-offs, based on a curiously-low DOE projection of future production from US oil resources currently off-limits to drilling, then the US grain ethanol program should be subject to the same criterion. However, in the absence of any single, all-encompassing solution to our energy problems, can we afford to reject any of these options, or worse yet, to pit them against each other as though they were somehow mutually exclusive? We need fewer such contradictions, if we are to make real progress in reducing our geostrategic and financial exposure to oil imports. Start with the energy contribution of that off-limits oil. I find it extraordinary that the DOE's estimate of 200,000 barrels per day from this resource has been so widely accepted without question--mainly by those, the extent of whose expertise concerning oil generally begins and ends with the business end of a gasoline dispenser. But set ..

The August 2008 edition of Oilwatch Monthly can be downloaded at this weblink (PDF, 1.34 MB, 26 pp). In this edition I have added more demand, oil stock and production revision data. Figure 1 - OECD crude oil stocks from January 2002 to June 2008. A summary and latest graphics below the fold. [break] Latest Developments: 1) Conventional crude production - Latest available figures from the Energy Information Administration (EIA) show that crude oil production including lease condensates increased by 580,000 b/d from April to May. Due to the recent downwards revision of historical crude oil production statistics and the 580,000 b/d increase, the long held May 2005 record of all time high crude oil production has been broken in May. The new record is 74.48 million b/d. 2) Total liquids production - In July world production of total liquids increased by 890,000 barrels per day from June according to the latest figures of the International Energy Agency (IEA). Resulting in total world liquids production of 87.84 million b/d. Average global production in 2007 was 85.41 million b/d according to the IEA. In 2008 an average of 87.08 million b/d has been produced from January to July. The US Energy Information Administration (EIA) in their International Petroleum Monthly puts average global 2007 production at 84.44 million b/d and average productin in the first five months of 2008 at 85.49 million b/d. 3) OECD liquids demand - OECD liquids consumption in May 2008 was 46.14 million b/d..

Mary Sawaya has seen a 50% increase in business over the past five years. She sells work boots and Carhartt overalls in Kemmerer, Wyoming. But the work boot market hasn't always been so bullish. According to Sawaya, "About 10 years ago, [the energy industry] was in a slump. And then when Williams Field built their second plant and [Enterprise Products Partners LP] came in, and all this oil and gas cycling came through ... our business went way up." Job growth in Wyoming has been the strongest in the nation over the past few months. The state's budget surplus is a whopping $571 million. A recent local news report claimed the state and its citizens have benefited from the sale of coal, oil, and natural gas. But, the report claimed, "Natural gas has really been the biggest money maker in the past couple of years. It's boosted the whole state, but especially the towns that are really close to the energy fields." Notice she didn't say oil fields. Before I get into the clean energy stocks associated with this energy boom, let's take a look at some of the market forces behind the push... Natural Gas: The New Transportation Fuel No, it's not oil that's fueling this modern day boomtown—it's natural gas. You see, many of the world's largest oil fields, including those from which the U.S. gets large amounts of imports, are in decline. This is a fact that is not going away. In fact, Cantarell, Mexico's supergiant and a large source of American imports, declined 28% last year. At t..

huffingtonpost.com Peak oil is the point at which worldwide oil production is reached. Once the oil supply peaks, petroleum extraction will decline, prices will increase and oil will become unobtainable. In 1956, M. King Hubbert, an American geophysicist employed by Shell Oil, predicted that the United States oil production would peak between 1965 and 1970 in his theory on peak oil. Scientists have developed a myriad of peak oil forecasts. Some believe that the oil industry already peaked while others claim that it will happen within several decades. Currently, researchers struggle to find techniques to harvest oil from remote areas in order to prevent the peak oil crisis. A selection of articles on peak oil: * Benjamin Kunkel's article on the impending peak oil emergency for GQ . * National Geographic article on the world oil market, "when will the peak hit?" * National Geographic article, which discusses the surging oil demand's limit. * Reuters article on how peak oil will obstruct world development. * Financial Week author Patrick Mcveigh's opinion piece on how the slump in fuel demand will offset peak oil. * Financial Times' preparation for the age of peak oil. * Time Magazine's Lisa Abend reviews the OPEC World Petroleum Congress. * Time Magazine's Justin Fox discusses the future of the oil industry. Peak oil RSS: * A compilation of recent peak oil news reports. * A database of peak oil news, resources and articles. Peak oil related links: * The Association for the Stu..

physorg.com By Bethany Parker Unprecedented summer gasoline prices are squeezing Americans' wallets and also expanding their vocabularies, as terms like "peak oil" gain common usage. Peak oil, economists say, is the point at which oil production maxes out: The easily available reserves are gone, and the cost of extracting and refining the remaining stuff exceeds the price it fetches on the open market. After the peak, the theory goes, production starts to fall. Experts worry that if such a decline in production happens too rapidly, it could outpace the development of viable energy alternatives, resulting in a drastic spike in prices. Others believe that peak oil is a myth, that we could never drain the world's oil supply to the point of such a crisis. Tim Considine, a former professor of natural resource economics at Penn State, falls somewhere in the middle. "In any geographic area, it's a natural phenomenon for oil to peak at some point," Considine said. He pointed to the United States reaching its own oil peak in 1971. From the late 19th century until that year, the United States was the world's largest producer of crude oil, he noted. But in 1971, U.S. oil production peaked at 10 million barrels per day, and it has been dropping ever since, to a current level of 5 million barrels per day. "The peak oil theory looks at the U.S. experience and believes the world will peak also," explained Considine. "The biggest question is when." Some economists predict the peak has alrea..

Falls Church News-Press By Tom Whipple For those who aren't ready to buy into the concept of world oil production going into decline in the next few years, there is a less worrisome subset making the rounds known as "peak oil lite." Those adopting this outlook have rightly noted that gasoline is selling for unheard of prices and don't subscribe to the idea that evil speculators, evil oil companies, or evil OPEC is the cause of this unfortunate happenstance. They also correctly recognize demand for oil, especially from China, India and oil producing states, has outstripped the ability of the oil industry to increase supplies fast enough. Notably absent from peak oil lite, however, is the notion world oil production has not increased appreciably in the last 3 or 4 years and is poised to start dropping very soon. Thus "peak lite" believers readily acknowledge there is a supply/demand problem pushing up prices, but do not go so far as to internalize the serious consequences of declining world production. A good example of peak lite appeared last month in a front-page Washington Post series on the current world oil situation. After many years of writing around the problem, the Post finally bit the bullet and tackled the coming storm head on by examining "the economic forces that have unhinged oil prices." In the first story, entitled "This time it is different," the Post concludes that, unlike in the 1970s, the problem is "world demand increasing faster than supply." No argument ..

The last few weeks have really had me scratching my head and wondering, "What the hell is going on here?" The markets have been behaving exactly the opposite of what any rational read of the facts might suggest. As we have predicted repeatedly in these pages, the fallout from the mortgage crisis has continued for the top names in finance: USB, Merrill, JPMorgan, AIG, Goldman, Wachovia, Morgan Stanley, HSBC, Citigroup, and on and on. Not just writedowns, but buying back their crap securities, raising more capital, and generally fighting for their survival. Meanwhile, the losses of Fannie and Freddie have been socialized, with a massive taxpayer-funded bailout. And how did the markets react to this terrible news? The financials boomed, rising about 15% since the bottom on July 15, with some players like Merrill Lynch rising 32% in the first five trading days of the rebound. With a hallucination of confidence in the health of the US financial system restored, the dollar charged back up, while European and Asian markets took their hits. The action in oil has been likewise counter-intuitive. The loss of approximately 1.5 million barrels a day of oil supply from the world market due to the conflict in Georgia caused a mild one-day uptick in its steady decline from a peak of $147 to $113. In a normal world, such a cut in supply would be enough to pack another $20 or more onto the price of oil. If the Saudis were to suddenly cut 1.5 mbpd of production, you can bet it would have a hu..

"Are energy prices on the verge of turning around?" I've been asked this question nearly every day since early July, after oil prices have fallen from over $147 per barrel. And as expected, the cost of natural gas dropped right alongside crude oil. After reaching as high as $13.75/Mcf, natural gas has tumbled more than 40%. However, we can't put all the blame on crude oil. Today, the Energy Information Administration (EIA) released their Short-Term Energy Outlook . According to the report, U.S. domestic natural gas production increased 8% in 2008, yet consumption only grew by 3%. I hope that growth in production doesn't come as a surprise to my readers. The fact is that unconventional natural gas basins have been heating up for a long time. I can remember being ridiculed for even hinting at the potential success in the Barnett shale . I believe the exact words were, "The Barnett shale is not the answer. There have been an overabundance of failures in the area and there are much better areas for development." The success of horizontal drilling in the Barnett formation has made several other shale basins across the U.S. more attractive for producers. The Marcellus Formation Without question, one of the hottest unconventional plays in the U.S. is the Marcellus shale formation. As you may know, the Marcellus formation stretches across New York, Pennsylvania, Ohio, Maryland and West Virginia Earlier this year, the amount of natural gas reserves came into question by two professor..

Ryanair and the Italian government at odds with each other. This Ryanair advertising shows Italy's ministry for reforms, Mr. Umberto Bossi, in an occasion where he was expressing his disagreement with the words of the Italian national anthem. In the text, the Italian government is accused of "supporting Alitalia's high tariffs", "supporting the frequent Alitalia strikes" and "not caring about the Italian passengers". Ryanair is understandably angry at the preferential treatment that the Italian government is reserving to Alitalia, Italy's national air carrier. Alitalia is in danger of bankruptcy and has been recently saved by a hefty injection of public money. [break] An airline is a small economic system that uses fuel derived from oil in order to carry on activities that generate profits. If oil is too expensive, profits disappear and, eventually, the system must disappear, too, bankrupted. Low cost airlines have appeared during the period of relatively low oil prices that ensued after the first oil crisis, in the 1980s. Can these airlines exist with oil over $100 per barrel? A country is larger than an airline but it, too, needs fuel for its economic activities. And, if deficits run too high, countries can go bankrupt as well. Italy's industrial economy had its moment of maximum growth in the 1950s and 1960s; in a period of low and stable oil prices. Can Italy's industry exist with oil prices over $100 per barrel? At TOD, we have been discussing economic collapse for a lo..

This is a guest article by Jeremy Wakeford. Jeremy is an economist specializing in energy and sustainable development and is Research Director of ASPO South Africa. South Africa has been in the news a lot recently because of its electricity supply problems throughout 2008. Most South African electricity comes from coal-fired power stations. Jeremy discusses the role of coal in South Africa's energy mix, long-term trends in production and consumption, and how underground coal gasification might help solve South Africa's energy problems. [break] Can and should our dependence continue? South Africa’s energy economy is overwhelmingly dependent on coal. The fossil fuel provides nearly three quarters of total primary energy, supports almost 90 per cent of electricity generation, and provides feedstock for close to a third of the country’s liquid fuels via Sasol’s coal-to-liquids process. Coal is also used directly as a fuel by certain industries (e.g. steel production), and indirectly as feedstock for Sasol’s petrochemical products. In addition, roughly a third of the nation’s annual coal output is exported, generating an important source of foreign exchange earnings. There are two major risks inherent in this heavy dependence on coal: one is the finite nature of its supply, and the other is its contribution to global warming. This article takes a broad look at some of the key issues concerning the outlook for coal in South Africa, including demand, supply, prices and en..

For the last several years, the oil market has focused on the risk of a new conflict in the Persian Gulf, evolving from earlier fears of a direct US/Iranian confrontation to recent worries that Israel might attack Iran's nuclear program. I suspect that little of that oft-cited "risk premium" was devoted to the chances of a shooting war breaking out in the Caucasus, virtually on top of a key oil export route from the Caspian Sea. Yet here we are, with Russia intervening Friday on behalf of one of Georgia's breakaway regions, South Ossetia, and bombs apparently falling near the Baku-Tblisi-Ceyhan Pipeline (BTC) that carries oil to the Mediterranean from the giant " ACG " oilfields of Azerbaijan. If the pipeline, which suffered an unrelated fire last week, were forced to shut down for an extended period, about 1% of the world's oil production could go off line, at least until some portion of it could be re-routed. The market shrugged off this prospect initially, with WTI falling $5 to end last week at $115. I would be surprised if the reaction this week proved quite so blasé. Georgia was occupied by Russia for nearly 200 years prior to the collapse of the USSR, and the Caucasus is at least as strategic today as it was in the time of the czars, considering its role in the transit of the hydrocarbon resources of the Caspian Sea region. Prime Minister Putin, who appears to be calling the shots in this matter, likely regards Georgia as a rightful part of Russia's sphere of influenc..

The New Yorker By Elizabeth Kolbert The town of Fort McMurray occupies a set of irregularly spaced hillsides on either side of the Athabasca River, in northern Alberta. It has a dozen check-cashing joints, a roughly equal number of hotels, and a gaming center called the Boomtown Casino. It also has a museum, which is devoted to the region’s most important resource, the Alberta tar sands. Exhibits include an eight-foot-long rotor, half of a hundred-and-fifty-ton truck, and a pump of Brobdingnagian proportions. Near the entrance to the museum sits a black mound covered by a clear plastic dome. A sign invites visitors to scratch around in the mound with a little retractable rake, then lift up a flap and take a sniff. Tar sands look like dirt and smell like diesel fuel. The tar sands begin near the border of Saskatchewan, around the latitude of Edmonton, and extend, in three major deposits, north and west almost to British Columbia. All in all, they cover—or, more accurately, underlie—some fifty-seven thousand square miles, an area roughly the size of Florida. It is believed that they were pushed into their present location seventy million years ago by the uplift of the Rocky Mountains. For the most part, the tar sands consist of quartzite, clay, and water. The other ingredient—the “tar”—is a mixture of very heavy hydrocarbons known as bitumen. Bitumen can be used as a sealant—supposedly the word “mummy” is de..

I have been gently chided on the internets for not doing any Countdown diaries since the oil prices have started going down. While the giddiness and glee demonstrated by many in the traditional media and elsewhere invites little but ridicule, as demonstrated by this graph below, prepared for the Oil Drum, some serious questions have been raised and deserve answers. So, beyond the semi-glib answer that nothing much has in fact happened in the oil markets in the past month (after all, the recent decline is still smaller, in percentage terms, than several others in the past couple of years), here are a few points worth making. An installment of the Countdown to $200 oil series [break] "It was speculation and the bubble has popped" "Such small variations in demand or supply cannot explain such price changes" "What about the Iran war premium - that's speculation right?" "Demand is down (in the US), prices will go down back to normal" "Asians will reduce their demand too" Many don't agree with my assertion that speculation has little or nothing to do with the run-up in oil prices, and consider that the brutal price increases, followed by just as brutal price decreases, cannot be explained by fairly small changes in supply or demand figures. Let me try to explain again why, in today's conditions, small variations have precisely such consequences. In a market where supply is plentiful, balancing the market will be done by supply adjusting, ie the price will be such that just the req..

Has green lost its luster? Of course not. Yet that seems to be the attitude of more than a few. Sure, solar stocks have been battered over the past few months. But didn't the Dow (Index: DJI) go from over 13,000 to below 11,000 in the same time? Indeed, it did. And hasn't Exxon Mobile (NYSE: XOM) gone from nearly $95 to to about $75 in the same time? Indeed, it has. Even the incessantly-talked-about Transocean (NYSE: RIG) is down 15%. . . in just the past two months. So for renewables to be dismissed as bad investments by bulls of other energy sectors is not only wrong, it's quite hypocritical. Indeed, with the world's largest oil fields being depleted—some by as much as 15% per year—and natural gas facing a similar long-term plight, we're going to need all the energy we can get. And there's plenty of money in all of it. But you must realize, new oil discoveries, and even arctic and offshore drilling, are certainly no catholic cure. In fact, the amount of oil they're providing—and could potentially provide—is absolutely not enough to offset rising demand and oil field depletion, not to mention that oil is increasingly more expensive to extract. This is an often overlooked aspect of new oil finds. Yes, there's money to be made from the remaining oil and the companies that refine the ever more heavy and sour crude. And I'm not against making that money. But to think that there will be no serious energy transition to include a large share of renewables c..

Last Sunday's New York Times carried an interesting article on the implications of high energy prices for the sustained globalization of supply chains. The reporter described how rising shipping costs were forcing manufacturers and retailers to rethink fundamental aspects of their business models, ultimately threatening the continuous expansion of world trade. Higher oil prices are responsible for much of the rise in freight rates, particularly for products carried by sea and air. Marine and aviation fuels are taxed very lightly, so they are more sensitive to changes in oil prices than motor fuels. But while airlines are hoping--perhaps in vain --for long-term fuel price relief from biofuels, cargo ship operators are likely to experience more competition from other uses for bunker fuel, and may need to seek solutions involving more exotic energy sources. Earlier this year, I mentioned an idea for deploying small, high-tech sails to reduce the fuel consumption of cargo ships. But if world oil supplies fall seriously short of meeting potential demand in the years ahead--an easy prospect to imagine, given the rate at which Chinese and Indian consumers are buying automobiles--ocean freight lines may need to look elsewhere for their primary energy source, not just for ways to supplement it. In 2004, the residual fuel burned by ships and power plants accounted for 1 out of every 8 barrels of global oil demand. If competition for crude oil increases, refiners may be more interested ..

Falls Church News-Press By Tom Whipple As world oil production has never peaked before, there is no historical basis for making informed judgments as to what is going to happen. All we know is that some six billion people, living in some 200 economies on this earth are soon going to be confronted with getting by on less than the 86 million barrels of oil per day (b/d) that we currently consume. The outcome of the interaction among all those people, all those countries and all that oil is too complex to foresee with any clarity. It has long been recognized among those studying the peak oil phenomenon a severe, lengthy, worldwide economic setback could reduce the demand for oil to such an extent that peak production could be lost in the chaos. Other scenarios involve oil prices rising to such level that demand drops significantly, which would be followed by a major drop in prices, followed by increased demand and rising prices, and the cycle continues. In the last three weeks, world oil prices have dropped steadily so they are now nearly $30 a barrel below what they were in early July. Now this decline could be the result of those pesky speculating hedge funds selling short the oil futures contracts. It could be the $4 gasoline keeping an increasing number of Americans off the roads, or even the Olympics, which forced Beijing into a two-month shutdown of a sizable piece of its economic activity in an effort to clean up the air. Incidentally, China's imports of petroleum produc..

This is a guest article by Dudley Stark, Reader in Mathematics and Probability in the School of Mathematical Sciences, Queen Mary, University of London. Bentley introduced the following model of oil production on page 204 of Global oil & gas depletion:an overview , and it is dicussed in the book The Last Oil Shock by David Strahan. This posting is meant to explain his model and some results I obtained for it. Consider the following oil production curve: It rises quickly to it's peak at time t=1 and decreases slowly until no oil is produced at time t=6. The idea is that the natural pressure of the oil field causes rapid production initially, after which decline is more gradual. Before and after the peak the curve is linear, so it looks like a triangle. [break] Suppose the next oil field looks the same as the first one, but oil production begins one unit of time later and the total amount of oil produced is only 75% of the oil in the first field. It looks like this: Adding the production of the two oil fields together gives this production curve: If you do this eight times, each time shifting the start of production by one time unit from the previous oil field and also making the amount of oil produced 75% of the previous oil field, you get a curve like this: It is starting to look like a plausible oil production curve. Note, however, that it is not too realistic because, for one thing, the curve is linear in between integers. In my paper Peak Production in an Oil Depletion Mo..