Peak Oil News & Discussion

$100 a Barrel Oil

2007-11-10T06:02:00.000-05:00

Oil is almost $100 a barrel! It's been rising for years, more than doubling in the last few years, and the increases seems like they will never end.

I haven't updated this blog in a while, but updates will be posted soon, and hopefully I will be more reliable with my posts from now on.

Peak Oil Mentioned in Yahoo Article

2007-07-09T19:42:00.001-04:00

This little blurb appeared in a LiveScience.com story I saw on the fron of Yahoo.

"Separately, other scientists have argued that a looming peak in oil production could potentially generate conflict on a global scale as industrialized nations fight over dwindling petroleum supplies in an era of soaring demand."

http://news.yahoo.com/s/livescience/20070709/sc_livescience/globalwarmingcouldfuelwar

The majority of the article was about how global warming could fuel water wars, etc.

The Peak Oil Crisis: Preparing for Depletion

2007-05-31T21:19:00.000-04:00

Falls Church News-Press

By Tom Whipple
May 31, 2007

News on the gasoline stockpile situation was delayed this week due to the Memorial Day holiday. As gasoline consumption figures over the long weekend won’t be available until the middle of next week, we may get a better insight into prospects for this summer then. While waiting, however, it seems like a good time to start thinking a bit about the years ahead and what we should be doing to get ready for them.

There are two areas of energy consumption we, as individuals, can do something about: transportation and buildings. The cost and availability of our food is something that few of us have much control over. If food becomes too expensive, then we simply reduce or forego eating out; reduce our use of prepared, packaged, and expensive foods; or even reduce the quantity we consume until the costs of food meet our budget.

Commercial use of energy to make and distribute things will be sorted out by the market – here again, there is little most of us can do to effect change other than generally reducing consumption either because we are trying to save the world’s resources, or, more likely, we simply can’t afford to pay what stuff is going to cost.

Unaffordable gasoline will affect each of us differently depending on how dependent we are on our automobile and what our alternatives are. In the U.S. we have something on the order of 210 million cars and light trucks in service and, even if the resources are available to replace a fleet of this size, it will be many decades before they can be replaced with vehicles that use little or no gasoline. Worldwide, the situation is even worse.

It probably won’t be too long before we figure out whatever supplies of motor fuel are available will be better spent on growing and distributing food and maintaining vital-to-civilization systems such as water, sewers, electricity, and communications rather than being burned in private cars. For the immediate future though, unaffordable gasoline will be coped with through a combination of increased public transit and a lot more ride sharing.

Soon, there will be lots of room for changes in public policy as we tackle the job of reworking our transportation systems. For now, we are not ready to think seriously about changes, for the reality of imminent oil depletion is not widely recognized. Another three or four dollar increase in gasoline prices should do the trick.

Buildings, however, are another matter -- be they offices, factories, commercial space, or homes. In the developed world, most use prodigious amounts of energy. Although our electricity and natural gas bills currently are not increasing as fast as gasoline prices, price increases for other forms of energy won’t be many years behind. Unlike a gas guzzler which can be parked, used infrequently, or scrapped for a more efficient vehicle, few of us will have the opportunity to replace our buildings for more efficient ones.

A couple of hundred years ago most homes were heated and lit by wood plus a little candle wax. That’s obviously not going to work anymore. My guess is that most people’s access to firewood, if any, would be sufficient for a couple of days or, at best, a couple of weeks. For awhile, there will be a rush to huddling around electric heaters, but just as natural gas, oil, propane will soon be too expensive to for many to afford, large amounts of electricity will not be far behind. We are going to have to transition to solar and maybe a little wind energy to control our personal climates.

One of the redeeming features of our current living and work place arrangements is that we waste prodigious amounts of energy in heating, cooling and lighting them, so that there is a lot to be saved. We all know by now that eliminating incandescent bulbs and moving first to compact fluorescents and then, as they become more affordable, to LED’s most of the lighting costs in homes and offices can be eliminated.

Equally big jumps in household efficiency can be achieved by disconnecting clothes dryers and going back to clothes lines. Pulling the plug on the central air would be the third big energy saver.

Given the trends in fossil fuel availability, it is clear that our goal will have to be zero net energy for all our inhabited buildings. This means that the preponderance of the energy used in buildings will soon have to come from the sun, wind, water power, and perhaps a little biomass and will not be delivered in by pipe and power lines or in trucks.

The course from our current building stock to highly efficient ones will be long and difficult. Starting on this course is not difficult or particularly expensive. Plugging air leaks, adding some more insulation, and perhaps improving the window and doors is a good place to start provided one knows what to do, where to start and is physically and financially capable of taking action in the face of rapidly rising energy costs.

Later steps on the way to zero net energy buildings, such as major insulation and window upgrades, solar heating and electric panels, new heating and air conditioning equipment will be very expensive and perhaps unaffordable for many in an inflation-wracked world of depleting oil.

It is at this point that governments at all levels will need to get involved. First they must recognize that the bulk of our inhabited buildings will need to be overhauled to be useful in a world of very high priced energy. Cost/benefit ratios for steps to improve the efficiency for nearly every existing building need to be worked out.

Building codes will need massive overhaul to prevent further construction of buildings that are premised on cheap energy and that will have a very short useful lifetime. Construction of sub-divisions that do not take into account optimum sun angles should come to an immediate halt. Obsolete laws and covenants that frown on efficiencies from clothes lines to solar panels must be abolished as soon as possible.

There is much to be done and the time is growing short.

http://www.fcnp.com/index.php?option=com_content&task=view&id=1340&Itemid=35

The Peak Oil Crisis: Alarms Are Sounding

2007-05-17T10:10:00.000-04:00

Falls Church News-Press

By Tom Whipple
May 17, 2007

Across the world alarm bells are starting to clang. Above every gas station, a large sign is proclaiming that prices are on an unstoppable climb towards un-affordability. In Paris, the International Energy Agency has announced that the demand for oil is likely to exceed the supply later this year, unless, of course, OPEC steps up production. In the Middle East OPEC spokesmen reiterate time after time that all is well, there is plenty of oil, and there is no need to increase production.

In Ottawa, a parliamentary hearing on energy security broke up in turmoil last week when a distinguished professor pointed out that, unless Canada stopped selling 60 percent of its oil to the US, Canadians would soon be “freezing in the dark.” In Nigeria, Chevron is evacuating hundreds of employees to forestall the possibility that they too will be hauled off to the swamps as hostages in an increasingly bitter insurgency. The Chinese just announced that their April oil imports were 23 percent higher than last April’s. Iraq, Saudi Arabia, Venezuela -- everywhere you look – there are unmistakable warnings of troubles to come.

These, however, are issues for later. Right now, on the top of every American’s agenda should be the question of whether we are going to get through the summer without shortages and gas lines— opinions are mixed.

First, all seem to agree that gasoline prices, which set new highs last week, will continue to rise. Even the Director of the Energy Information Agency, whose job it is to put a rosy spin on adverse developments, told a Senate Committee earlier this week that retail prices will go higher heading into the vacation season because not all of the recent rise in wholesale costs has been reflected in what consumers pay at the pump. So far high prices, which are approaching $4 a gallon in some places on the West Coast, seem to have done little to dampen demand although they may be cutting into WalMart sales.

Since significant cuts in US gasoline consumption don’t seem to be in the cards, at current price levels, then we are back to refinery output, gasoline imports, and our stockpiles to see us through.

Two years ago, before the hurricanes put so much stress on US refineries, they were being operated at 95 percent of capacity. We got through last summer by importing 1.5 million barrels of gasoline a day during May from foreign refineries. According to a senior EIA oil analyst, 800,000 barrels a day of US refining capacity is still shutdown. This translates into about 400,000 barrels of lost gasoline production each day or nearly 3 million barrels a week.

Last week the situation eased a bit. Although US refineries are still operating below 90 percent of capacity and processed only a trivial 30,000 barrels a day more of crude than in the previous week, our refiners managed to squeeze our more gasoline, so that production increased by 200,000 barrels a day to 9.1 million. The “good” news, however, is that gasoline imports jumped to 1.5 million which resulted in the first significant (1.7 million barrel) increase in our stockpiles in many weeks. However, 1.2 million of the 1.7 million barrel increase was on the isolated West Coast. The increase in gasoline stocks east of the Rockies was only 500,000 barrels last week – way lower than necessary to forestall problems later this summer.

The questions now become: Will this increased supply, which is based on imports of foreign gasoline be sustained over the summer; and are the stockpiles already so low that they will not be sufficient to meet the increased demands of the summer driving season which starts in about two weeks? Last year the demand for gasoline jumped from 9.1 million barrels a day in the spring to 9.6 million during the summer months. Unless very high prices start reducing demand for gasoline we will be looking at new highs this summer.

Earlier this week Matthew Simmons, of Twilight in the Desert fame, suggested that prospects for an uninterrupted summer of driving may be worse than government spokesmen have been letting on. Simmons notes that gasoline stockpiles at refineries are “works in progress” and that millions of barrels of gasoline moving across the country in pipelines and barges are not available for delivery to your gas station. Therefore, the drop in inventory that has taken place this spring is from local bulk terminals that supply your gas stations. In this case, the drop in “useful” stockpiles may be on the order of 30 percent and we could be very close to the point where shortages will develop.

Where does all this leave us? The short answer is, in an increasingly grim situation. When respected analysts say our gasoline situation is beyond the tipping point and that at least some of us are likely to be sitting in gas lines before Labor Day, we should heed the warning. Looking at the broader, worldwide picture, the situation is equally grim. When the normally staid International Energy Agency starts issuing a stream of dire warnings about shortages or much higher prices before the year is out, we should start thinking about a markedly different future.

http://www.fcnp.com/index.php?option=com_content&task=view&id=1284&Itemid=35

The Peak Oil Crisis: The Summer Ahead

2007-05-12T15:54:00.000-04:00

Falls Church News-Press

By Tom Whipple
May 9, 2007

Last week they began kidnapping foreign workers at an alarming pace —22 foreigners kidnapped in 36 hours— and overran offshore platforms and production ships. On Monday, the strongest militant group issued a chilling ultimatum. “All foreign and local nationals working with multinational oil companies and their contractor should vacate Ijaw territory (the oil producing region) immediately.” “All foreign embassies should withdraw their nationals from our homelands.” “Nothing can protect them --- No more hostages taking -- Any national caught shall be summarily dealt with.” By the way, these guys have a good track record for doing what they say they are going to do. The next morning, three major oil pipelines were bombed, shutting down another 150,000 barrels per day of oil production. Total production shutdown by the insurgency is now on the order of 900,000 barrels per day. The insurgents have demonstrated that they have the capability of shutting down most, if not all, of Nigeria’s oil production.

Should this happen, we might find our imports running a million barrels a day short this summer, unless we can outbid the Chinese. Replacing this much lost Nigerian oil production will be very expensive at the gas pump.

If we get through the stockpile and Nigerian situations, then it will be time to consider the situation in Venezuela. In case you missed it, President Chavez managed to expropriate about $30 billion worth of oil company processing facilities last week and is currently negotiating the terms under which the oil companies will remain in Venezuela. The negotiations do not seem to be going well and there seems to be a good chance one or more of the foreign oil companies will pull out and head for the courts. We have been importing about 1.4 million barrels of oil a day from Venezuela, which the government would gladly sell to China or nearly anybody but the US. The speed with which a breakdown of relations between Chavez and the oil companies will affect US oil imports is difficult to predict.

As the interaction between oil production and a hurricane is unknowable until a few days before it strikes, there is not much useful to be said other than that the oil companies are working hard to mitigate damage from future hurricane strikes in the Gulf and forecasters are predicting a banner year.

The future of Iraqi oil exports depends on the course of the insurgency. The US is currently getting about 400,000 - 500,000 barrels per day from Iraq, and so long as each of the insurgent groups gets to steal a share of the oil or revenue, nobody seems inclined to kill the golden goose. As there seems to be very little in Iraq not susceptible to being blown up, the current situation must be satisfactory to all concerned. Sooner or later, however, somebody will become discontented and precipitate a drop in production.

Finally, we will have to watch the slow-movers – declining Mexican production (we get 1.5 million barrels a day from there), lower Saudi production, and even the continuation of frenzied growth in China. All these seem destined to add a few, or a lot of, cents at the pump before the year is out.

So there you have it, from unusually low gasoline stocks in the spring to frenzied Chinese economic growth later in the year -- all seem destined to play a role in how much money you will be leaving at your favorite gas pump later this year.

http://www.fcnp.com/index.php?option=com_content&task=view&id=1241&Itemid=35

Post Peak Oil: Effects on the Stock Market and World Economy

2007-05-09T21:04:00.000-04:00

The Daily Reckoning (Australia)

James Howard Kunstler
May 10, 2006

Whenever somebody complains about “the lies that George Bush & Co. told to get us into the Iraq war” (as Frank Rich did in The New York Times recently), I wonder how those lies compare to the lies that the American public tells itself every day - for example, that America could get along without oil from the Middle East, or that hybrid cars will save Happy Motoring, or that the United States can have an economy without producing anything of value.

Meanwhile, the Dow Jones index went up over a hundred points the same day that 32 people were massacred on a university campus. And bear in mind that the massacre did not occur late in the day but literally around the same time that the New York Stock Exchange rang its opening bell - so that as the body counts mounted through mid-day, the stock markets only went higher! Then, the rest of the week, while the cable news Mommy-Daddies went through the familiar rituals of bewildered hand-wringing, and NBC released the trove of farewell videos sent in by shooter Seung-Hui Cho between killings, the Dow piled on another 250 points to close at an all-time record high just under 13,000.

Could the financial markets be more detached from reality, from life on the ground (or in a free-fire-zone classroom) in this nation?

Doug Noland over at Prudent Bear.com is right: we’ve entered a euphoric phase of financial arbitrage capitalism with extreme Ponzi overtones, a pyramid scheme of revolving credit rackets and percentage spread plays completely abstracted from any reality of fruitful activity. The reason we don’t even call “money” by its former name anymore is precisely because we realize at some semi-conscious level that “liquidity” is not really money. Liquidity is a flow of hallucinated surplus wealth. As long as it flows in one direction, into financial markets, valve-keepers along the pipeline, like Goldman Sachs, Citibank, or the hedge funds, can siphon off billions of buckets of liquidity. The trouble will come when the flow stops - or reverses! That will be the point where we will rediscover that liquidity really is different from money, and if we are really unlucky we’ll discover that the U.S. dollar is actually different from real wealth.

Noland and others recognize the severe distortions in the finance sector, and they are surely correct to flag the implied dangers. But even these clear-eyed observers survey the disturbing finance scene without factoring the global energy situation. In a nutshell: world oil production seems to have peaked about 10 months ago. Being just past peak, there is still a huge amount of oil going into world economies. But being just past peak oil we are now seeing how complex systems proceed toward instability and breakdown when the underlying energy flow turns toward contraction.

The situation in finance is particularly sensitive and acute because an overall contraction in available energy means the end of industrial expansion (a.k.a. “growth”) at “normal” rates of three to seven percent annually. More to the point, it means that certificates, contracts, deals, plays, and rackets pegged to the expectation of growth will lose their legitimacy. Meaning, stocks, bonds, collateralized debt obligations, hedges - anything that represents the hope and expectation for more-of-anything - will no longer be understood to represent real value.

The current euphoric hysteria should therefore be viewed as a form of disorder in its own right. The players in the markets are making their moves based on misunderstood signals. They think the world is awash in energy and prosperity. They believe Cambridge Energy Research Associates (CERA) and Ben Bernanke, the Chairman of the United States Federal Reserve. They believe that the mortgage fiasco and the associated imploding housing bubble are just a couple of temporary zits on the handsome face that Wall Street presents to the world. In the background, though, feedback loops are aligning to rock the systems we depend on for daily life in the real world. Capital will become unavailable. Food will grow scarce. Trade will be interrupted. Mobility will be constrained. And an awful lot of pissed-off people will be poised to fight over the table scraps of industrial civilization.

I got a letter last week from a reader complaining bitterly that the stock market hasn’t crashed and blaming me for predicting that it would. He didn’t say, but I hope he hadn’t been out there on a shorting spree. In case any of you haven’t noticed, 2007 is not over yet.

The markets have been on an extraordinary run. The Dow finished 23 out of the last 26 days on the upside - some of them pretty way on the upside. This is the biggest U.S. stock market up-streak since a 19 for 21 streak in July of 1929, prior to the October crash. Bill Fleckenstein points out a similar run on the Tokyo exchange - 32 upside trading days out of 38 - just prior to its 1989 tanking.

While this kind of behavior seems ominous, I’m not claiming it necessarily has predictive value. One can say that the financial markets per se are running in an impressive state of structural distortion and imbalance and that systems way out of balance do not stay that way forever. But I risk more opprobrium by stating the obvious.

I think the persistence of this gross imbalance can be accounted for in large part by the current global energy situation. The world is at peak energy, peak oil especially, and the world runs on oil. Peak is peak. The most. There are about 84 million barrels of oil a day flowing around the industrial economies of the world. It is running a lot of activity.

Now, I happen to think that oil production probably peaked about a year ago, but we are still so close to it that the net available energy remains immense. Even if 2007 averages out to 83.5 million barrels a day instead of 84 million, it will still seem like a lot. Markets may be dumber than we think. All they see is a vast amount of cheap energy for manufacturing plastic salad shooters, for powering tourist jet charters to Cancun, for running Wal-Mart, Walt Disney World, and Taco Bell. All that energy is here right now.

Among the many tragic elements in the human condition is this tendency toward short-term thinking, the inability to imagine how our arrangements will work in a time that is not right now.

Interestingly, the main effect of post-peak oil on markets and economies is that it will produce shocking instabilities in complex systems dependent not just on the energy itself, but on the expectation for continuity of the energy. Financial markets are especially sensitive because they operate on sheer expectations. The Dow Jones doesn’t manufacture salad shooters, or haul tourists to the Mexican beaches, or build suburban houses. It just relays a dumb signal that says “we expect more” and investors respond. The trouble will start when the signal changes to “we don’t expect more.” That moment will be when the recognition of peak oil galvanizes the public’s attention. It will manifest as a simple societal binary switching mechanism. When that happens, the markets will exhibit the dumb herd behavior that they are famous for.

Of course, I have argued previously that the stupendous run-ups of market indexes themselves represent a kind of instability (those distortions and imbalances), as do also the supernatural flows of “liquidity” and I would stick to that observation. After all, if the world is “high” on oil - and I would argue that it is zonked out of its mind - then it would naturally spring way up off the diving board before swan-diving into the empty pool below.

Me, I’m keeping my eye on things like the production figures coming out of Mexico, the North Sea, and the Kingdom of Saudi Arabia. They’re all sliding down. Mexico is especially interesting because it is our Number 3 source of oil imports and its production is crashing so hard that a couple of years from now it may not be able to send us a single drop of oil. What do you think of that? Maybe the Walton family will buy Iowa so they can keep Wal-Mart running on ethanol.

Meanwhile, U.S. oil refineries are running above 90 percent production capacity to keep up with the gasoline demand for Happy Motoring. The stress on these complex operations is unprecedented. It gives them no slack time for routine repairs. The results are liable to be interesting, too, between the Fourth of July and Labor Day.

Regards,
James Howard Kunstler
for The Daily Reckoning Australia

http://www.dailyreckoning.com.au/post-peak-oil/2007/05/10/

The Peak Oil Crisis: The Perfect Storm

2006-09-28T12:19:00.000-04:00

Falls Church News-Press

By Tom Whipple
September 28, 2006

Events move quickly these days. Two months ago oil was north of $78 a barrel and, nationwide, gasoline was above to well above $3. The Middle East was threatening a conflagration and another exciting hurricane season was in the offing. Even the concept of peak oil was starting to get some scattered but serious attention in the media.

Now here we are at the end of September. The price of crude is down nearly 25 percent. Gasoline is down 75 cents a gallon. The press is full of stories of a great new oil find in the Gulf that could show the way to a cornucopia of oil. The Dow is pushing an all-time high, and financial analysts are predicting lower inflation and solid growth in the year ahead. Finally, those who don't want to believe in peak oil are loudly proclaiming, "I told you so."

What happened? Is imminent peak oil still in the cards? Just where is reality?

The first thing to remember is that the price of oil has had a great run-up in the last five years. Way back in 2002 oil was circa $20 a barrel. Although there are many factors that go into the price of oil, they sort of group into three general categories: 1) Underlying supply and demand for the product including genuine hedging; 2) Technical factors that stem from the nature of commodity speculation: overbought, oversold, charting, stop loss orders, margin calls, etc.; 3) The sum of all the speculators' ideas as to whether the price will go up or down— the fear factor. All of these factors are present all of the time. The eternal argument is over how much of the current price is due to which influence.

Every jump in the price of oil earlier this year brought forth remarks about the "fear factor." Speculators were constantly afraid something so bad was about to happen that the price of oil would soon be over $100 a barrel so the current price was a great bargain.

A couple of months back this was not a bad idea to have. The forecasters were talking about a third year of giant hurricanes tearing up the Gulf. The Iranians were firing off missiles and muttering about closing the Straits of Hormouz. In Nigeria, a foreign oil worker a week was being dragged off for ransom. Israel and Hezbollah were hard at each other and were threatening to trigger a wider war. It would have been hard for a speculator not to conclude that at least one of these looming problems would result in higher oil prices.

But then the great pendulum of events reversed. One by one the fears began to melt. Diplomacy quieted much of the Middle East. The hurricanes of 2006 curved towards Europe where they harmlessly watered the fields of Ireland. Nigeria turned quiet. Chavez kept threatening, but the speculators no longer listened.

Fear factor after fear factor diminished into a perfect storm of good news. Week after week the good news for oil prices kept coming. US stockpiles continued to build. Cooler weather reduced the use of natural gas for air conditioning. A giant oil find was made in the Gulf of Mexico. Even the US economy cooperated by showing some signs of slowing, thus raising the specter of reduced demand for oil.

As the price fell, the normal technical factors of speculating came into play. The bulls bailed out. Margin calls were made. Overcommitted hedge funds went bust.

Now what does all this have to do with peak oil? The short answer is, so far, very little. Naturally, higher or lower prices will affect demand and therefore exacerbate or mitigate the supply situation. Tight supplies already are reflected in the base price of oil before we get to the speculative factors. This is how we got from $20 to $60 a barrel. If the price stabilizes in the neighborhood of $60 after the speculative premium is wrung out of the market, then we will have some idea of where simple supply and demand for oil prices the product.

Behind all the good news for oil prices, however, depletion of the world's finite oil supply continues at 85 million barrels per day, day after day, after day. Bad news for the future of oil production continues to come out, but it is lost in the shuffle or not recognized for its importance. Many now hold that the good news of a great new oil find deep beneath the Gulf of Mexico is, in reality, bad news. If ultra deep-sea oil, which is very expensive and may take many years to exploit, is all we have left, then we are close to the end of cheap oil.

During the last few weeks, slippages in major oil exploration projects have came to light. Of particular note is the BP's great Thunderhorse platform, which seems to have developed metallurgical problems associated with extracting oil from great depths. If this turns out to be a generic problem, then the new frontier of ultra deep-sea oil wells may be a while in coming.

The bottom line remains that peak oil is still very real and, if anything, the news from recent weeks suggests the peak may be moving closer rather than receding.

An interesting sidelight to the last few weeks has been the paranoia surrounding rapidly dropping gasoline prices. According to a Gallup poll, 42 percent of Americans, mostly Democrats, believe that the administration is deliberately manipulating gasoline prices to improve their chances in the November elections. As noted above, there are numerous factors that are more than adequate to drive down prices to current levels. Prominent among these factors is the normal drop in demand between the summer driving season and the winter heating season.

In 2005, gas and oil prices experienced a similar drop after the spike caused by the summer hurricanes.

Therefore, the message of the last few weeks is not to confuse lower gas prices with any lessening of the threat from peak oil. The peak is still out there and is moving inextricably closer. In the meantime, enjoy low gas prices while they last. OPEC is already wildly signaling that its members can't live with oil below $60 and that production restrictions are coming shortly.

For readers who are seriously concerned about the imminence and consequences of peak oil, the US branch of the Association for the Study of Peak Oil, ASPO-USA, is holding a World Oil Conference in on 26 and 27 October. For more information or to register, their website is www.aspo-usa.com.

http://www.fcnp.com/index.php?option=com_content&task=view&id=285&Itemid=33

The Peak Oil Crisis: Hyping Jack No. 2

2006-09-14T12:20:00.000-04:00

Falls Church News-Press

By Tom Whipple
September 14, 2006

The story broke the morning after Labor Day, when the Wall Street Journal ran a front-page piece reporting that Chevron along with two partners had announced the results of a major oil production test in the Gulf of Mexico. The partners Chevron, Statoil, and Devon Energy ran the test on a well known as Jack No. 2 that was drilled last year in the Lower Tertiary zone of the Gulf of Mexico. This zone is about 80 miles wide, 300 miles long and is located about 175 miles off shore. The well was unusual in that it went to a depth of 28,000 feet and the drilling began under 7,000 feet of water.

Released details of the test noted that a number of technical breakthroughs had been achieved. By using the latest technology, Chevron was able to discern and drill into promising geological structures that had previously been hidden below a layer of sound-absorbing silt. The test, which achieved flow rates of 6,000 barrels per day (b/d), established that oil could be extracted at acceptable rates from very deep deposits. It also set several records for extracting oil under conditions of extreme pressures and temperatures.

Although no formal estimate as to the size of this particular find was announced, background briefers spoke of the possibility that the zone could contain from 3 to 15 billion barrels of oil in scattered deposits. If this speculation were to prove true, it would put the Lower Tertiary in a class with Alaska’s Prudhoe Bay and increase domestic US oil reserves by 50 percent.

The news of this great “discovery” naturally was replayed by nearly every newspaper and TV network in the country. Katie Couric ran a segment about the discovery on her first evening news show. Most reporting emphasized the possibility that the US might have found another 15 billion barrels of oil in its own backyard, but tempered the jubilation with the news that the find would have no immediate impact on gasoline prices.

A few, mostly financial journalists, took the announcement as an opportunity to disparage the idea of imminent peak oil. These writers are aware that should world oil production go into decline within the next decade the world’s economy would be in a lot of trouble, not to mention the credibility of those who make a living by forecasting decades of growth ahead. Therefore, they eagerly accepted the dubious premise that this one test proves that plenty of oil can be found by drilling deeper so long as oil prices remain high enough to support the costs of ultra-deep oil production; advanced technology is used to the fullest; and environmental restrictions are lifted. Several pronounced peak oil a dead issue.

As the week wore on however, knowledgeable geologists and petroleum engineers began to question all the euphoria. First they noted that the Jack No. 2 test was not conducted on a single oil field that might contain 15 billion barrels oil. Rather, it was one test of a well in a zone that extends for hundreds of miles under the Gulf of Mexico. Whatever producible oil the zone contains will likely be found in numerous smaller deposits.

A number of wells have already been sunk in the Lower Tertiary. Some were dry holes and a few struck oil bearing rock, which may have the potential to produce oil profitably. So far, only a handful of these exploratory wells have struck deposits of light oil, which may be possible to produce. Others have struck thicker oils that may be impossible to extract from extreme depths at acceptable rates.

What seems to be turning up in the deeper waters of the Gulf are a series of smaller oil fields — some of which may someday be profitable to produce and some of which probably won’t. Extrapolating this situation to a major new discovery that will delay the onset of peak oil is clearly a reach.

To extract oil from 20,000 feet below the surface, where the pressures run to 20,000 pounds per square inch (psi) and the temperature of the oil is in the order of 200 degrees centigrade, is going to be a major technical challenge. Wells drilled to these depths will cost in the range of $100 million each. To drill and set in place the production equipment for The story broke the morning after Labor Day, when the Wall Street Journal ran a front-page piece reporting that Chevron along with two partners had announced the results of a major oil production test in the Gulf of Mexico. The partners Chevron, Statoil, and Devon Energy ran the test on a well known as Jack No. 2 that was drilled last year in the Lower Tertiary zone of the Gulf of Mexico. This zone is about 80 miles wide, 300 miles long and is located about 175 miles off shore. The well was unusual in that it went to a depth of 28,000 feet and the drilling began under 7,000 feet of water.

Released details of the test noted that a number of technical breakthroughs had been achieved. By using the latest technology, Chevron was able to discern and drill into promising geological structures that had previously been hidden below a layer of sound-absorbing silt. The test, which achieved flow rates of 6,000 barrels per day (b/d), established that oil could be extracted at acceptable rates from very deep deposits. It also set several records for extracting oil under conditions of extreme pressures and temperatures.

Although no formal estimate as to the size of this particular find was announced, background briefers spoke of the possibility that the zone could contain from 3 to 15 billion barrels of oil in scattered deposits. If this speculation were to prove true, it would put the Lower Tertiary in a class with Alaska’s Prudhoe Bay and increase domestic US oil reserves by 50 percent.

The news of this great “discovery” naturally was replayed by nearly every newspaper and TV network in the country. Katie Couric ran a segment about the discovery on her first evening news show. Most reporting emphasized the possibility that the US might have found another 15 billion barrels of oil in its own backyard, but tempered the jubilation with the news that the find would have no immediate impact on gasoline prices.

A few, mostly financial journalists, took the announcement as an opportunity to disparage the idea of imminent peak oil. These writers are aware that should world oil production go into decline within the next decade the world’s economy would be in a lot of trouble, not to mention the credibility of those who make a living by forecasting decades of growth ahead. Therefore, they eagerly accepted the dubious premise that this one test proves that plenty of oil can be found by drilling deeper so long as oil prices remain high enough to support the costs of ultra-deep oil production; advanced technology is used to the fullest; and environmental restrictions are lifted. Several pronounced peak oil a dead issue.

As the week wore on however, knowledgeable geologists and petroleum engineers began to question all the euphoria. First they noted that the Jack No. 2 test was not conducted on a single oil field that might contain 15 billion barrels oil. Rather, it was one test of a well in a zone that extends for hundreds of miles under the Gulf of Mexico. Whatever producible oil the zone contains will likely be found in numerous smaller deposits.

A number of wells have already been sunk in the Lower Tertiary. Some were dry holes and a few struck oil bearing rock, which may have the potential to produce oil profitably. So far, only a handful of these exploratory wells have struck deposits of light oil, which may be possible to produce. Others have struck thicker oils that may be impossible to extract from extreme depths at acceptable rates.

What seems to be turning up in the deeper waters of the Gulf are a series of smaller oil fields — some of which may someday be profitable to produce and some of which probably won’t. Extrapolating this situation to a major new discovery that will delay the onset of peak oil is clearly a reach.

To extract oil from 20,000 feet below the surface, where the pressures run to 20,000 pounds per square inch (psi) and the temperature of the oil is in the order of 200 degrees centigrade, is going to be a major technical challenge. Wells drilled to these depths will cost in the range of $100 million each. To drill and set in place the production equipment for one of these fields may cost on the order of $1.5 billion, or more, as the cost of oil production equipment is inflating rapidly.

Add to this the problem of what to do with very hot oil and the associated natural gas as it comes flowing to the top of a well 7,000 feet under the Gulf and 175 miles from shore. The decision to attempt production from these ultra-deep fields will not be taken lightly by the oil companies involved.

Although there are no geopolitical problems or nationalistic governments involved in producing oil from the Gulf of Mexico, the fields are right in its center — out where the Category 4 and 5 hurricanes really get wound up. On top of this there are questions of how much oil can be extracted from an ultra-deep field with extreme pressures. Although the recent test produced 6,000 barrels a day, for a month, a knowledgeable old geologist opined that he would like to see a test run for a year or more before committing billions to a whole new regime of oil production.

Assuming that producing oil from the Lower Tertiary turns out to be economically and technically feasible, will new production from the region have anything to do with delaying peak oil? The answer is an emphatic NO.

Knowledgeable observers who have commented on the issue agree that even if all goes well, it is unlikely that more than 300-500,000 b/d of production could come into production from all the possible fields in the Lower Tertiary over the next five to seven years. In the meantime, the world will have burned another 150 to 200 billion barrels of oil and US production from existing fields will decline from the current 5 million b/d to somewhere around 4 million b/d.

This suggests that it will take some spectacular and unlikely gains from new production to offset the natural decline currently underway in the US. Of still greater concern is production from Mexico’s giant 2 million b/d Cantarell oilfield, most of which is exported to the US. Creditable reports suggest that Cantarell is entering very rapid depletion and may be producing at a fraction of its current level five years from now. It would be virtually impossible for this level of new production from the Lower Tertiary to come online in the next five years.

So long as the world continues to consume some 31 billion barrels of oil a year, there is still nothing in sight that can forestall imminent peak oil.

http://www.fcnp.com/index.php?option=com_content&task=view&id=223&Itemid=33

Peak Oil Forecasters Win Converts on Wall Street to $200 Crude

2006-09-14T11:59:00.000-04:00

Bloomberg

By Deepak Gopinath
August 31, 2006

Aug. 31 (Bloomberg) -- On a sweltering Tuesday in mid-July, in the fields outside Pisa, Italy, Willem Kadijk scribbles notes as a ragtag troupe of doomsayers predict the end of the Oil Age.
With his shaved head, jeans and sandals, Kadijk, 48, blends into a crowd gathered under a white tent to hear of the coming calamity. The death of cheap, abundant crude, the forecasters warn, might unleash war and plunge the world into a second Great Depression.

That's not the prophecy of some apocalyptic cult. Kadijk, a hedge fund adviser, had flown from Amsterdam to attend a conference on a geologic theory known as peak oil.

Proponents of this controversial idea say global oil production is now at or near its zenith. Once the flow crests and starts to decline -- and some geologists say it already has -- oil will no longer be able to slake the world's growing thirst for energy. The result will be the oil shock to end all oil shocks. The price of a barrel of crude will spiral to $200 -- and keep rising. To the peaksters, today's energy crunch is nothing next to the pain that will follow.

``Peak oil is a reality,'' says Kadijk, a senior equity salesman at Kepler Equities, an Amsterdam-based brokerage. He plans to start a fund to capitalize on what he sees as a looming crisis for the world's fossil fuel-based economy and the ultimate bull market in oil.

As energy prices soar and violence convulses the Middle East, the peak-oil movement -- an unlikely alliance of geologists, physicists, oil industry consultants and environmental activists -- is winning converts. Peak-oil ideas are bubbling up from scientific journals and offbeat Web sites, much the way warnings of global warming did a decade ago. For the first time, the peaksters have begun to grab the attention of Washington and Wall Street.

Congressional Caucus

U.S. Energy Secretary Samuel Bodman, former boss of Boston- based Cabot Corp., an oil and chemicals company, has asked the National Petroleum Council, which advises him, to investigate whether oil supplies can keep pace with demand. The U.S. Government Accountability Office, the nonpartisan congressional watchdog, is due to release a study on peak oil this November. Rep. Roscoe Bartlett, a Maryland Republican, has formed the Congressional Peak Oil Caucus to sound the alarm.

``The world has never faced a problem like this,'' Bartlett says.

Everyone agrees we'll run out of crude eventually. Oil, after all, is a finite resource: The Earth holds only so much of it. The controversial issue is when a global peak will occur -- and what will happen then.

Colin Campbell, a British geologist who popularized the peak- oil theory in his book ``The Coming Oil Crisis'' (Multi-Science Publishing Co. and Petroconsultants SA, 1997, 210 pages) says world production of conventional oil, the kind that comes from gushing wells, is reaching its apex.

End of Oil Age

Society isn't prepared for the consequences, Campbell, 75, says. It's too late to develop alternative sources of power, such as solar cells, nuclear reactors and windmills, to fill the oil gap before energy prices soar, says Campbell, who has a doctorate in geology from the University of Oxford and more than 40 years of experience in the oil industry.

``We have come to the end of the first half of the Oil Age,'' Campbell says.

Nonsense, says Russ Roberts, a spokesman for Exxon Mobil Corp., the world's largest oil company. Exxon Mobil, which has reaped record profits as the price of oil has surged, has taken out ads dismissing peak oil in U.S. newspapers such as the New York Times.

The Irving, Texas-based oil giant says the peaksters are being alarmist. In all, the world probably has 4 trillion barrels of oil left, four times the amount we have used so far, the ad says.

Time to Think

``The world is nowhere near running out of oil,'' Roberts says. Exxon Mobil geologists believe global oil production will keep rising through 2030, he says.

Cambridge Energy Research Associates, whose chairman, Daniel Yergin, is a leading peak-oil critic, says production will reach an ``undulating plateau'' sometime in the future.

``Our outlook goes to 2020, and we see no evidence of a peak,'' CERA geologist Peter Jackson says. ``Eventually, we will start to see a decline. There is still time to think about alternatives.''
Predictions of an imminent oil famine are as old as the industry itself. When production at the first U.S. wells, located in western Pennsylvania, began to decline in the late 19th century, some people predicted the country would soon run out of oil. Then crude was discovered in east Texas, whose oil fields yielded so much black gold that the Texas Railroad Commission capped production to support prices.

Peak Moment

In the past, Campbell or his disciples have forecast the oil peak down to the year or even the day only to push back the fateful moment. In 1997, Campbell said it would occur in 2001. Now, he says total production, which includes oil from deep-water wells and fuel derived from natural gases, will reach its height sometime after 2010.

Kenneth Deffeyes, a geologist and professor emeritus at Princeton University, first pinpointed Nov. 24, 2005, as the peak- oil date and then revised it to Dec. 16, 2005.

Campbell says the exact day or year isn't important. What matters is that peak oil is coming, and soon. Almost a century and a half after the first U.S. wells were drilled in Titusville, Pennsylvania, production has begun to decline in more than a dozen countries, including the U.S., according to the BP Statistical Review of World Energy. Production at the giant Cantarell oil field in Mexico is likely to decline 8 percent this year, according to Mexican state oil monopoly Petroleos Mexicanos.

U.S. Addiction

At a time when U.S. President George W. Bush has urged the country to break its addiction to foreign oil, the fact is, the U.S. is becoming ever more dependent on overseas crude. U.S. oil production peaked 36 years ago, in 1970, at 11.3 million barrels a day. Since then, output has fallen 39 percent, to 6.8 million barrels a day, or 8 percent of the world total, in 2005, according to BP.

Investors have started to listen to the peaksters. Billionaire Boone Pickens says he's a peak believer. So does Peter Thiel, who co-founded PayPal Inc. and now runs Clarium Capital Management LLC, a $2.1 billion hedge fund firm. Pickens, Thiel and other investors are positioning themselves to profit from what they say will be the biggest oil squeeze of all time.
Even some oil companies and industry veterans sound nervous. Chevron Corp. has run a series of full-page ads in U.S. newspapers that highlight surging oil consumption and declare, ``The era of easy oil is over.''

Chicken Littles

Thierry Desmarest, chief executive officer of Paris-based Total SA, told the World Gas Conference in Amsterdam in June that global oil production would peak in 2020. Matthew Simmons, whose Houston-based investment bank, Simmons & Co., trades oil and gas stocks, says Saudi Arabia's production may decline soon.

Alex Cranberg, chairman of Denver-based independent oil company Aspect Energy LLC, calls the peaksters Chicken Littles -- misguided souls who think the sky is falling.

In fact, Cranberg hired two people to dress in chicken costumes and hand out fliers dismissing peak oil at the conference Kadijk attended in July.

Like many oil-industry vets, Cranberg, 51, says market forces and technological advances will ultimately cure our energy ills. As oil prices rise, companies will be more willing to hunt for crude and extract it. They'll invest in expensive deep-water wells and new technologies to wring more oil from existing fields. Consumers will start conserving energy. Even now, stock market investors and Silicon Valley venture capitalists are pouring billions of dollars into companies developing ethanol, solar power and other alternative sources of energy.

$3-a-Gallon Gas

More and more, however, the peaksters are drowning out everyone else, Cranberg says. ``You can't turn around without seeing or hearing these ideas,'' he says. ``I think they are gaining.''
You don't have to be a geologist to understand why. The price of crude has tripled since 2000. In the U.S., $3-a-gallon gasoline has sapped consumers' confidence. Nearly half of Americans believe the economy is doing poorly, according to a July 28-Aug. 1 Bloomberg/Los Angeles Times poll. Fifty-nine percent of Americans expressed a negative view of Bush's handling of the economy.

``If oil was still at $20, no one would be talking about peak oil,'' says Manouchehr Takin, senior petroleum upstream analyst at the Centre for Global Energy Studies, a London-based consulting firm.

High oil prices are only part of the story, however. The world is straining to feed its energy habit. Today, we consume 85 million barrels of oil a day, according to the U.S. Energy Information Administration (EIA). By 2030, the world will devour 118 million barrels a day, as China and India emerge as economic superpowers.

Big Question Mark

No one knows for sure how much oil the world has. That's a big question mark because the peaksters say production will max out once half of the oil has been pumped. So far, we've extracted about 1 trillion barrels in all. In 2000, the U.S. Geological Survey estimated global resources at 3 trillion barrels, enough to push peak production out to 2037, according to the EIA. Campbell puts the total lower, at 2.5 trillion barrels.

Oil is certainly getting harder -- and more expensive -- to find and extract. Oil discoveries plummeted to 5 billion barrels in 2005 from 90 billion barrels in 1964, according to Campbell.
``Discovery is in long-term decline, and spending more money won't increase it,'' says Chris Skrebowski, editor of the London- based Petroleum Review, an industry journal.

OPEC's Stash

Oil companies have to find enough crude to offset dwindling production at existing fields, which can decline by more than 8 percent a year, and to keep pace with rising demand. Most of that increase will have to come from members of the Organization of Petroleum Exporting Countries, which are often cauldrons of discontent, war and terror.

The cartel's members -- Algeria, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates and Venezuela -- together sit atop 75 percent of the world's reserves and account for about 42 percent of total production, according to BP.

OPEC countries are hardly paragons of economic and political stability. Most of the terrorists who attacked the U.S. on Sept. 11, 2001, came from Saudi Arabia. The war in Iraq has hurt that country's ability to pump oil. Bush says Iran is trying to develop nuclear weapons. In Venezuela, President Hugo Chavez has said he wants to diversify oil exports away from the U.S.

In its 2005 Energy Outlook, Exxon Mobil says the combined production of non-OPEC countries will peak sometime from 2010 to 2020. OPEC will be able to fill the gap, the report says. OPEC produced about 30 million barrels a day in 2005; by 2030, OPEC would have to churn out 47 million barrels a day -- almost 57 percent more than it did last year -- to satisfy the world's needs, the report says.

Meeting the Call

``We believe the resource base will support this increase, assuming that investments in development are made in a timely fashion,'' the report says.

OPEC countries will invest a combined $100 billion in the five years through 2010 so they can increase output, OPEC spokesman Omar Ibrahim says. ``We are set to meet the extra call on OPEC to 2030,'' Ibrahim says.

Yet even now, OPEC nations are struggling to keep up. Since 2000, OPEC has gradually lost the spare pumping capacity its members can use as an emergency reserve to moderate prices. The cushion has dwindled to about 1.5 million barrels a day from 6 million barrels a day, Takin says.
What's more, neither the peaksters nor oil industry executives know for sure how much oil OPEC has and how much it can actually produce. OPEC countries haven't been transparent about their reserves or production capacity, says Mike Rodgers, a partner at PFC Energy, a Washington-based oil industry consulting firm. ``OPEC is the big unknown,'' he says.

Overstated Reserves

Many energy analysts believe OPEC nations began overstating their resources in the 1980s, when the cartel linked members' production quotas to the size of their reserves, says Mamdouh Salameh, an independent oil economist. In the late '80s, cartel members raised their reserve estimates by a combined 300 billion barrels even though none of them had actually found much more oil.

In his 2005 book ``Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy'' (John Wiley & Sons, 448 pages, $24.95), Simmons says the Saudis have pumped so much oil so fast that the country's biggest oilfields face declining output.

``Saudi Arabia is keeping everything in the dark,'' Simmons, 63, says.

Saudi officials have dismissed peak-oil theorists and suggestions that their country is running on empty.

Saudi Assurances

``We currently manage approximately 260 billion barrels of oil,'' Abdallah Jum'ah, CEO of Saudi Aramco, the government-owned oil giant, said at an oil and gas conference in June. ``We continue to expand our reserve base, and conservatively estimate our additional potential of recoverable oil to be in the range of 200 billion barrels. At Saudi Aramco's present production levels, that means we will have well over a century's worth of oil to produce.''

Herman Franssen, former chief economist at the Paris-based International Energy Agency, says some OPEC members, such as Iran, Iraq, Kuwait and Venezuela, may be reluctant or unable to produce more oil even as prices soar, largely for political reasons.

``We may never see the volumes of conventional oil production that we see in official forecasts,'' says Franssen, who's now an oil industry consultant in Chevy Chase, Maryland.

Sadad al-Husseini, who spent 35 years working for Saudi Aramco, says Saudi Arabia's reserves are sound but that Kuwait, which says it has reserves of 101.5 billion barrels, probably has half that much. Iran, with official reserves of 132.5 billion barrels, has likewise overstated its reserves, says Husseini, who was an executive vice president at Saudi Aramco before retiring in 2004.

Assume the Worst

``Even with high prices, it will be very difficult for world production of conventional oil to exceed 90 million barrels per day within the next 10 years,'' he says. That's millions of barrels a day short of what the EIA says the world will need in 2015.

Political leaders, business executives and investors should assume OPEC won't be able to satisfy future demand, Rodgers says. ``From an energy-security point of view, if you believe in a non- OPEC peak and OPEC is not being transparent, we have to assume they don't have it,'' he says.
The precarious balance of supply and demand in the oil markets became even clearer in early August when London-based BP Plc announced it would temporarily shut down its Prudhoe Bay oil field on the North Slope of Alaska because of pipeline corrosion. The news drove already-high oil prices up more than $2 to almost $77.

Alaskan Decline

Prudhoe Bay, the largest oil field in the U.S., is part of the peak-oil story. The field was discovered in 1968 and came onstream in 1977. Since then, it has yielded more than 11 billion barrels of oil.

Yet even before the August mishap, this vast field had begun to die. Its output has fallen 73 percent to 400,000 barrels a day from a height of 1.5 million barrels a day in 1989.
Prudhoe Bay is following the life cycle of oil fields across the U.S. and around the world, a phenomenon known as the Hubbert Curve, which takes its name from M. King Hubbert.
Fifty years ago, Hubbert, then a geologist at Shell Oil Co.'s research lab in Houston, postulated that U.S. oil production would follow a bell-shaped curve.

At the 1956 meeting of the American Petroleum Institute in San Antonio, Hubbert predicted that total annual U.S. output would climb steadily, level off sometime between 1965 and '70 and then decline after about half of the country's reserves had been depleted.

Hubbert's Peak

The U.S. reached what geologists now refer to as Hubbert's Peak in 1970. Hubbert died in 1989 at the age of 86.

It wasn't until the late 1990s when Hubbert's ideas, which had percolated for decades in academia and oil circles, began to reach a wide audience via Campbell, the British geologist.
Now in his eighth decade, Campbell is a grandfatherly man with a shock of gray hair. He hardly comes across as a doom- monger. He works out of a two-story house in Ballydehob, a village on the western edge of Ireland.

Campbell spent 40 years exploring for oil for Amoco Corp. and other companies. He helped Amoco search for oil in Ecuador and then, during the 1980s, led its exploration in Norway. He later joined PetroFina SA, the oil exploration company now owned by Total.

After retiring from PetroFina in 1990, Campbell joined forces with Jean Laherrere, a retired French geophysicist who had spent 25 years working at Total, to analyze production profiles for the world's countries.

Campbell says he and Laherrere, now 75, looked at their data and concluded global oil production was approaching its zenith. In 1998, they co-wrote an article for Scientific American magazine titled ``The End of Cheap Oil'' that helped popularize their cause.

Coming Crunch

``The world is not running out of oil -- at least not yet,'' Campbell and Laherrere wrote. ``What our society does face, and soon, is the end of the abundant and cheap oil on which all industrial nations depend.''

In 2000, Campbell founded the Association for the Study of Peak Oil and Gas, an informal organization for fellow travelers. Now known as ASPO International, the group has sponsored five annual conferences, including the one in Pisa in July, which drew more than 230 people. It's now run by Kjell Aleklett, a physics professor at Uppsala University in Sweden. Twenty independent national ASPO groups have sprung up around the world, from Australia to France, to the U.S.

Many peaksters are driven by a moral imperative to spread the word. Campbell says he's a scientist, not a social or environmental crusader. Even so, he says he's worried that oil has harmed human society and the planet. Since the Oil Age dawned, nearly 150 years ago, the Earth's population has soared six-fold, he says.

Man Alone

``Man is the only animal that uses external energy,'' Campbell says.

Asked why he has championed the peak-oil theory, Laherrere quotes Antoine de Saint-Exupery, author of ``The Little Prince'': ``We don't inherit the Earth from our ancestors; we borrow it from our children.''

Activists have jumped on the peak-oil bandwagon and added their own, often strident, voices to the debate over the future of oil.

Jim Kunstler, a writer-activist who lives in Saratoga Springs, New York, says peak oil will ultimately destroy suburbia and plunge the U.S. into a violent dark age of feudalism.

``The question is, Can we run our shit the way we are running our shit?'' Kunstler, 57, says. In 2005, Kunstler wrote ``The Long Emergency: Surviving the Converging Catastrophes of the Twenty-First Century'' (Atlantic Monthly Press, 320 pages, $23), which warns of the havoc to come.

Dieoff.com

Lifeaftertheoilcrash.net, a Web site run by lawyer and peak- oil entrepreneur Matt Savinar, warns, ``Civilization as we know it is coming to an end soon.'' The site sells peak-inspired books and products, including an investor's guide to peak oil.

Another site, dieoff.com, says wars over oil and other natural resources will eventually erupt and millions of people will be wiped out.

Stephen Andrews, a Denver-based energy consultant who founded ASPO-USA in June 2005, says the alarmists have hurt the peak-oil movement.

``The peak-oil tent has different voices -- some shrill, some more sober -- reaching different conclusions from the same facts,'' Andrews, 59, says.

Andrews has attracted more-sober voices to the movement. Last November, Denver Mayor John Hickenlooper helped co-sponsor a two- day peak-oil conference organized by Andrews.
``I think the people most exuberant about peak oil underestimate how much unconventional sources of oil will help flatten the peak, but to say that there is no peak is shortsighted,'' Hickenlooper says.

Crash Program

The world would have to embark on a crash mitigation program 20 years in advance to prevent peak oil from hobbling the global economy, says Robert Hirsch, a senior energy program adviser at San Diego-based research and engineering firm Science Applications International Corp. ``And I consider myself an optimist,'' says Hirsch, 71, who included his findings in a 2005 study on peak oil for the U.S. Department of Energy and estimates such a program would cost the world $1 trillion a year.

Some investors and analysts see lots of opportunities in a post-peak world.

Charles Maxwell, senior energy analyst at Weeden & Co., an independent research firm based in Greenwich, Connecticut, says high oil prices will spur companies to invest in unconventional sources. Few people, however, realize how much such projects will cost or how long they will take to come onstream, he says.

Take the Canadian oil sands. This region in Alberta holds 175 billion barrels of oil, according to the Canadian Association of Petroleum Producers (CAPP), the world's second-largest reserves.

`Really Big'

``It's big. It's really big,'' Neil Camarta, senior vice president for oil sands at Calgary-based Petro-Canada, says of the region. ``It can keep America going for 25 years.''
The oil sands hold vast stores of bitumen, a tarlike substance that is mined, rather than pumped, and then processed into oil that can be refined. The process is expensive -- and getting more so. Rising operating and capital costs have driven the price of mining and upgrading bitumen to as much as $40 a barrel, Camarta says.

By 2020, Canada's oil sands will yield 4 million barrels a day, almost four times what they do now, according to CAPP. That sounds like a lot until you realize that 4 million barrels is just over a third of what Saudi Arabia produced per day in 2005.

Pickens, who built Mesa Petroleum Co. into one of the world's largest independent oil and gas producers, says he sees trouble -- and opportunity -- in peak oil. Pickens, who collected a degree in geology from Oklahoma State University in 1951, has called for the construction of more nuclear power plants and the promotion of alternative energy. He says he's invested in the Canadian oil sands.

Pickens's Picks

``I'm a disciple of Hubbert,'' Pickens, 77, says. ``I think we've peaked and we are going to see an undersupply of oil.''

Clarium Capital's Thiel says he began thinking about peak oil in 1999. As the Internet bubble grew that year, Thiel, 38, says he started to wonder about other risks that investors might be ignoring and seized on the uncertain future of oil.

``Energy will be systematically undervalued until peak oil is priced in,'' Thiel says. He's bought shares of Calgary-based EnCana Corp., which has invested in exploration and new production, and of oil services companies like New York-based Schlumberger Ltd. and Houston-based Weatherford International Ltd., which stand to profit as explorers hunt for oil and drill wells. Thiel says he's leery of U.S. oil majors, such as Exxon Mobil, because they may become targets of new taxes once the government wakes up to peak oil.

Thiel himself says the peak will come by 2008 -- if it hasn't already. ``Geology will trump technology,'' he says.

Coal, Uranium

Eric Sprott, CEO of Toronto-based Sprott Asset Management Inc., says he became a peak-oil convert after hearing Campbell speak in 2004. Sprott, who helps manage 3.6 billion Canadian dollars (US$3.2 billion), says the bull market in energy has only just begun. He's invested 36 percent of his firm's assets in a variety of areas that could benefit from peak oil. His flagship hedge fund returned 41 percent in 12 months ended July 31, he says.

Sprott's investments include St. Louis-based Arch Coal Inc. and Brisbane, Australia-based Macarthur Coal Ltd. His oil and gas picks include Halifax, Nova Scotia-based Corridor Resources Inc.; Denver- based Delta Petroleum Corp.; and Houston-based Ultra Petroleum Corp. He has also invested in Australian uranium companies Energy Resources of Australia Ltd. and Paladin Resources Ltd.

Midnight Ride

Meanwhile, the peaksters aren't about to let up. They'll convene in Boston on Oct. 25-27 to sound their alarm at a conference called ``Time for Action: A Midnight Ride for Peak Oil.'' The title is a reference to the American patriot Paul Revere, whose horse ride in 1775 warned Massachusetts colonists that British soldiers were advancing. The battle that followed, at Lexington and Concord, marked the beginning of the American Revolution.

It was just 84 years after Revere took his ride, on Aug. 27, 1859, that Edwin Drake struck oil in Titusville, ushering in the Oil Age. Exxon Mobil says the era of oil isn't about to end. In one of its ads, the company says, ``Oil is a finite resource, but because it is so incredibly large, a peak will not occur this year, next year or for decades to come.'' The ad depicts a man looking through binoculars at a snowcapped mountain whose summit is hidden by clouds.

Campbell says the illustration actually drives home the point Exxon Mobil is trying to avoid. ``Even though it is obscured by clouds, we know there is a peak,'' Campbell says. His investor followers are betting he's right.

To contact the reporter on this story: Deepak Gopinath in New York at dgopinath@bloomberg.net .

http://www.bloomberg.com/apps/news?pid=20601109&sid=arur.i7moHMs&refer=news

Chicago Tribune Discusses Peak Oil

2006-08-13T01:46:00.000-04:00

The Chicago Tribune talked about Peak Oil and quoted Matthew Simmons in an article that was part of a series in which the reporter tracked the gasoline in a station back to its original source, along the way discussing America's ridiculous dependence on oil. Here is the excerpt:

"I truly think we're at one of those turning points where the future's looking so ugly nobody wants to face it," said Matthew Simmons, an energy investment banker in Houston who has advised the Bush administration on oil policy. "We're not talking some temporary Arab embargo anymore. We're not talking your father's energy crisis."

What Simmons and many other experts are talking about is a bleak new collision between geology and geopolitics.

Below ground, the biggest worry is "peak oil"--the notion that the world's total petroleum endowment is approaching the half-empty mark, a geological tipping point beyond which no amount of extra pumping will revive fading oil fields. Peak oil theory is controversial. Many think it alarmist. Yet even Big Oil is starting to gird itself for possible fuel shortages: Chevron, the nation's second-largest oil company, has bluntly declared that "the era of easy oil is over" and is warning energy-hungry Americans that "the world consumes two barrels of oil for every barrel discovered."

Aboveground, things look little better. Most of the world's petro-states, aware that crude supplies are growing increasingly valuable, have limited drilling rights to their own oil companies.

In the meantime, humanity's thirst for petroleum continues to run wild. Producing nations are pumping at maximum capacity. Yet the competing energy demands of America and rapidly industrializing China and India now threaten to outstrip global oil output. China has displaced Japan as the No. 2 oil importer, after the United States. Chinese oil imports are projected to double to 14 million barrels a day over the next 20 years. Many credible analysts foresee a new "energy cold war" as the U.S. and China square off over the planet's last reserves."

http://www.chicagotribune.com/news/specials/chi-oil-1-story,0,7163057.htmlstory?coll=chi-homepagepromo440-fea

The Peak Oil Crisis: Portland Takes the Lead

2006-08-13T01:38:00.000-04:00

Falls Church News-Press

By Tom Whipple

The Middle East , home to a third of the world's oil production, is coming unglued in so many ways and in so many places that it is nearly impossible to track. One would have to be a complete fool, however, not to recognize one of the manifold costs of all this chaos is going to show up on that big sign over your neighborhood gas station— shortly.

The roots of these conflicts go back two thousand years. They are not going to be settled in our lifetime or many lifetimes. There is very little any of us can do except to prepare for the consequences. As yet, with exception of Sweden , none of the major world governments have officially recognized that a decline in world oil production with potentially devastating consequences is imminent.

In the US , it is politically unthinkable for a government confronted by Iraq , Hezbollah , Iran , global warming, and numerous other woes to openly acknowledge peak oil and all that it implies. From time to time, they have dropped hints — "Energy Independence," "Advanced Energy Initiative," need to drill more, "addicted to oil" — but the administration has yet to openly acknowledge that one of the greatest crises the country has ever known is just over the horizon.

This total abrogation of responsibility by the federal government has led to a handful of local governments to start considering action on their own to prepare for what is sure to come. The furthest along is Portland , Oregon . In May, the City Council passed a resolution establishing a peak oil task force "to assess Portland 's exposure to diminishing supplies of oil and natural gas and make recommendations to address vulnerabilities."

The twelve "WHEREAS's" in Portland 's resolution (#36407 should you want to Google it) are a thing of beauty, for they make the case for an imminent and dangerous peaking of world oil production in a succinct and convincing manner. The City's planners have clearly done their homework well.

The charges to Portland 's peak oil task force are also worth noting:

1. To acquire and study current and credible data and information on the issues of peak oil and natural gas production and the related economic and other societal consequences;

2. To seek community and business input on the impacts and proposed solutions;

3. To develop recommendations to City Council in this calendar year on strategies the City and its bureaus can take to mitigate the impacts of declining energy supplies in areas including, but not limited to: transportation, business and home energy use, water, food security, health care, communications, land use planning, and wastewater treatment; and

4. To propose methods of educating the public about this issue in order to create positive behavior change among businesses and residents that reduce dependence on fossil fuels.

And there, in a nutshell, is a plan. At this stage, the plan may only be to study peak oil and its local consequences, but you have to start somewhere.

At last count, there were 87,576 governments in the United States (one federal, 50 state, 38,976 general-purpose local governments, and the rest special-purpose local governments such as school boards). Thus far, only Portland seems to be planning in public for peak oil.

Last week Portland 's government released a 93-page briefing book prepared by the city to acquaint their new task force with the basis for the City Council's concerns and to amplify on the guidance given in the resolution. The report discusses 14 areas that will be impacted by loss of cheap oil and gas and asks the task force to assess which are most relevant to Portland .

The areas of concern discussed are: Transportation, Land Use, Local Economy, Housing, Food, Public Services, Population shifts, Social Services, Health Services, Education, Electricity, Manufacturing, Retail and Communications.

In preparing this list, the City of Portland have done us all a big favor for they have moved the thinking about how to cope with the post-peak oil world forward another step. The message in the Portland report is that while we are all going to face peak oil, the effects on every one of those 87,576 governments is going to be slightly or a lot different.

Areas with sprawl will face massive commuting problems as gasoline becomes unaffordable, but in New York City , so long as the subway works, most people could care less. While feeding New York City may one day become a giant problem, rural America will continue to grow food way beyond what they consume. We are going to need 87,000 different solutions to mitigating peak oil.

As individuals, there is little most of us can do to keep oil flowing in the face of turmoil in the Middle East and nothing any of us can do in the face of peaking world production — other than to conserve.

There are however, still 87,575 governments in the US that, thus far, are doing absolutely nothing (at least in public) to prepare for peak oil. The chances are excellent that you live in one or more of them. Some day soon, each of these governments is going to have to face the consequences of peak oil. The sooner we can get governments thinking about it, they better off we, our children, and our grandchildren are going to be when that day comes.

http://www.fcnp.com/622/peakoil.htm

Reaction to Peak Oil Starts Close to Home

2006-08-13T01:34:00.000-04:00

Cowichan Valley News Leader (Canada)

By Pete Keber

Last month the Cowichan Valley Regional District overwhelmingly rejected a motion on peak oil.
That is a most disappointing development, since this issue threatens our way of life and our very existence.

The reasons given for turning down the motion are simple. It is a global issue that is not within the purview of the CVRD. The majority at the CVRD feel there is nothing that they can do about it.

This demonstrates a total lack of vision, and a failure to understand the consequences of ignoring this issue.

Other municipalities in North America comprehend the problem and are moving towards finding measures that they can undertake to mitigate the consequences at a local level.
In an e-mail I sent to the board recently, I suggested several steps that they could take to start the ball rolling here in the Cowichan Valley. I also went into more depth on what peak oil actually is.

For the uninitiated, peak oil occurs when approximately half of the world’s conventional oil supplies have been used up. At that point it is close to impossible to increase production any further. This happened to the United States in 1971.

It has never been able to pump as much of the black gold as it did that year, despite increased drilling, significant discoveries in Alaska and the Gulf of Mexico and continual advances in technology. Since then, another 53 to 55 of the major oil-producing nations have experienced peak production.

Is it not then reasonable to infer that this will happen on a global basis as well? Although it is helpful to know when that will happen (many experts believe global peak could occur between now and 2012), it is more important to do whatever we can now to lessen the impact.

There are two big arguments against peak oil advocates. The peak of oil production has been predicted several times in the past and it has not happened. The second counter is that recoverable reserves have continued to grow every year despite declining discoveries.

The first argument is not based on science, merely past failed predictions. A stopped clock…well you know the saying. How can we keep on increasing reserves if we are not discovering more than we are pumping?

In the 80’s the major Opec producers virtually doubled their stated reserves on paper with no major discoveries to back them up. This was to get around the new quota system.

Since then, those reserve numbers have stayed at the same levels despite extracting billions of barrels without replacing those barrels with new discoveries. Additionally, many major oil companies understated their reserves due to SEC requirements, than increased those reserves when they became provable.

Expectations that new technologies will increase the amount of oil being produced from oil fields has also helped to boost reported reserves. There may be phantom barrels in those reserves and there are limits to what technology can produce from finite fields, so all these numbers must be viewed with some suspicion.

We are not addicted to oil. We are addicted to convenience. A steady supply of cheap oil that has provided us with that convenience.

The thing is, we don’t care if it is oil or something else that ensures that convenience. The overarching problem: there is nothing on the horizon that can replace that gooey tar to guarantee a continuation of our gluttonous ride. Maybe nanotechnology can create a clean-burning alternative, but I wouldn’t hold my breath since that would contravene the first law of thermodynamics.

What will happen when peak oil occurs? My guess would be nothing immediately, but as shortages really start to hit escalating prices will impact the poor and developing nations. There will likely be scrambles by nations to secure their oil supplies and regional conflicts over resources. Whoa. That is already happening. Things can only get worse. The conflicts may spread to North America.

So what can we do? We can be a lot more conscientious about our vehicle use to start. North America consumes more than 25 per cent of the world’s oil supply with only five per cent of the population. We could reduce our consumption by 50 per cent if we set our minds to it without seriously limiting our lifestyles. Notice, I said limit and not change.

Either we change our style of living or wait until we are forced to. It is our choice. We can also lobby the CVRD to make peak oil mitigation a policy in the Cowichan Valley.

Pete Keber is a south Cowichan resident.

http://www.cowichannewsleader.com/portals-code/list.cgi?paper=9&cat=48&id=702791&more=

The Peak Oil Crisis: Recognizing the Peak

2006-06-21T22:45:00.000-04:00

Falls Church News-Press

By Tom Whipple
June 15, 2006

It is conventional wisdom among students of peak oil that worldwide peak oil production will not be recognized, and certainly not "officially" certified by some organization or other, until some years after the event has passed. The exception to this, of course, is if some natural or man-made catastrophe shuts down a lot of oil production in a manner not likely to be restored for many years.

Without such a catastrophe, recognition of peak oil will be gradual, with month after month of volatile production statistics trending downward. At some point, even the most optimistic prognosticator will be forced to admit it is unlikely that world production will ever again climb above the highest production record previously achieved.

The world is currently producing somewhere around 84-85 million barrels a day of oil. Pessimists say the current production rate is beginning to look a lot like a peak. Maybe another million or so a day, but that’s it. Moderates on the issue will allow that another five million barrels per day looks possible and see a peak around 90 million barrels a day. Until recently, the optimists were talking 120 million barrels day, 20 or 25 years down the line, but numbers like this are appearing less frequently

Currently, there is a fair sized discrepancy regarding total world oil production between the world's two major production compilers, the International Energy Agency in Paris (IEA) and the Energy Information Administration in Washington (EIA). The IEA says we are currently producing 85 million barrels a day while the EIA says it’s closer to 84 million.

Now, I am not privy to the methodology used by these two agencies to compile their worldwide production statistics each month, but even from the outside, some problems are obvious. There is a distinction between those countries that make every effort to publish accurate and timely production statistics and those who, for a variety of reasons, want to give out a false (usually higher) impression of their actual production.

In the former category are North America , Europe , Russia and China and countries where most production is carried out by the major international oil companies. Here the statistics are, given the complexities of compiling such data, reasonably timely and accurate. Corrections are made promptly when new information is acquired. Production numbers from these countries shows that they jump up and down on a month-to-month basis. Old wells dry up; new ones are drilled; equipment breaks down; storms or extreme temperatures appear. By their very nature, oil production numbers are volatile. It is the trend that counts.

Then there are a group of countries where a state run oil company controls production and the local government feels it is in its interest to keep a tight reign on any official release of production statistics. The most prominent of these are Saudi Arabia , Venezuela and Iran , although a couple of other Middle East producers, such as Qatar and Kuwait , do not appear to be particularly forthcoming.

The non-cooperating countries are easy to spot, for their purported production remains the same month after month in the tables produced by the major compiling agencies. Rock steady production numbers means that even organizations with major resources behind them cannot come up with better numbers (at least that they can publish openly) and are forced to make educated guesses or go with the previous month's production number.

In a number of cases, the IEA and EIA are forced to use the estimates of "tanker trackers." These are private organizations maintaining contacts in the major oil exporting nations who simply note whenever a tanker leaves, where it is supposed to be going, and how heavily loaded it appears. As most of these ships are hard to miss, one can assume that counting departing tankers is about as an effective way as any of tracking country's exports.

In response to many complaints about the production data, a database called the Joint Oil Data Initiative was set up about a year ago. This is a public online database to which all producing countries are supposed to submit their production statistics. A quick perusal of the web site shows that it has many critical gaps and that the concept still has a ways to go.

You may wonder why we should really care if a country's production is going up, going down, or remaining flat. The answer of course is that, until recently, it really didn't make much difference to anyone, but the Saudis, if they produced 8 million, 10 million, or 12 million barrels of oil in a given day. If they didn't fulfill demand for their product, somebody else would. As long as there was sufficient oil to fulfill demand without forcing up prices too much, that was all that mattered.

As the worldwide oil supply and demands tightens however, the need for timely accurate production statistics becomes increasing important— so much so that at some point, timely and detailed knowledge of world energy supplies may become a matter of critical importance.

The reason behind this assertion is simple. As oil depletion nears, we are all —from the highest levels of governments to the individual citizen— going to have to make many, many decisions as we rearrange our lives and our livelihoods in response to cope with life in a world with declining availability of oil and all deriving from it.

To get through this transition, good and timely information as to when and how fast the energy situation is changing is going to change will soon become vital to all of us.

http://www.fcnp.com/615/peakoil.htm

The Peak Oil Crisis: One Year in Review

2006-06-11T11:38:00.000-04:00

Falls Church News-Press

By Tom Whipple
June 8, 2006

As the world oil situation is rather quiet at the minute, it's a good time for a review. The price of oil continues to bounce around $70 a barrel and shows no sign of moving very far in either direction until the next big development occurs. The Iranians are busy trying to decide how much they really want an atomic bomb (or at least the ability to make people think they have one). The wrong decision by either side could impact world oil supplies and prices for years to come. Finally, the Nigerian militants have managed to abduct and probably ransom a group of foreign oil workers from an exploration platform 40 miles offshore.

The most obvious-to-everybody development in the past year is that the average US price for gasoline has managed to climb by 77 cents a gallon. So far the economic damage has been well below what many observers had thought $3 a gallon would do to the economy. However, there are signs of trouble ahead. Sales of large SUVs are on their way down, inflationary numbers are starting to appear, and Wall Street is having bad days. While for many people $3 a gallon is something one gets used to, many others are rapidly on the way to maxing out their credit cards or hocking the family heirlooms to get to work.

The other hard-to-miss events of the past year were the big Gulf of Mexico hurricanes. Whether you believe in global warming or not, the waters in the Gulf and mid-Atlantic have gotten a lot warmer in recent years resulting in two consecutive seasons in which Gulf oil production was badly torn up. Last year's hurricane season resulted in the permanent loss of some 200,000 barrels a day of oil production. While no one knows as yet if this year's hurricanes will do damage comparable to the last two years, all the climatological prerequisites for another bang-up hurricane season are in place. Gulf oil and natural gas production has grown into a mighty big target.

During the past year, a pair of internal company documents were leaked in Mexico and Kuwait . The Mexican document suggests that production from the giant Cantarell oil field from which the US imports 1.6 million barrels a day is about to collapse catastrophically. In the case of Kuwait , the leaked study claims that the country's oil reserves may only be 25 to 50 percent of the official number. In the meantime, Kuwait has announced that production from their giant Burgan oil field has started to decline.

The status of Saudi oil production, which many believe to be the key to any further growth in world oil production, remains a well-guarded state secret. Here too, however, there are tantalizing hints of trouble ahead. Riyadh continues optimistic claims about future production capabilities and has embarked on major new onshore and offshore drilling projects, paying top dollar to lease the required equipment. For most of the last year, Saudi oil production has been steady at 9.5 million barrels a day at a time when world oil prices and presumably demand has increased. Recently a firm of "tanker trackers" announced that it looked to them as if Saudi production had dropped to around 9.1 million barrels a day in April and May. The number for April has been confirmed by the Saudis who claims they simply can't find buyers for their oil.

It may be perfectly true that the Saudis can't find a market for some of their oil. A lot of it is difficult to refine and a growing share of the world's oil consumers simply can't afford the going rate these days, even as the richer countries continue to grow nicely. A number of outside analysts are saying that it is just about time for Saudi production to go into decline, perhaps catastrophically. In a year or so, we should know who is right.

Also, keep in mind that stopping Saudi oil production is still Al Qaida's top objective. They failed in an attempt to blow up a key chokepoint a few months back, but they are still out there and not getting any friendlier.

We all know where the Iraqi situation is going and that it is only a matter of time until oil exports, which are doing nicely at the minute, are drastically reduced or come to a complete stop. The Iranian situation is in limbo at the minute. Decisions in the next few weeks should settle whether exports and further oilfield development continue or the situation deteriorates into any of several possibilities that will increase to price of oil or perhaps markedly reduce the amount of oil coming out of the Middle East .

A major phenomenon of the past 12 months has been the scramble for secure oil supplies that has been taking place around the world. The Chinese have been particularly active in seeking out new deals and signing contracts for oil. Close behind China in the search for bilateral agreements have been the Japanese and the Koreans who are faced with the problem of growing industrialized economies and no indigenous oil. There appears to be a trend getting underway from market-based oil sales, where “he who pays the most gets the oil,” to a situation where exporters are selling to customers under direct bilateral agreements.

Thanks in part to the hurricanes, US oil production thus far in 2006 is down by 400,000 barrels a day (7.3%) as compared to 2005. Our net imports of crude and finished products are up by a comparable amount. This means that roughly two thirds of US oil consumption is now being imported and therein lie the seeds of a problem more serious for the US than the peaking of world oil production: peak US oil imports.

Let's face it, during the last year, the popularity of the US around the world has not been doing too well. Many see a way to do us real harm through cutting or slowing our access to oil. Nationalism is on the march in many places. A few countries led by Venezuela are saying that as soon as they can figure out how to stop exporting oil to the US , they will.

It is gospel that when an exporting country goes into depletion they will keep supplying the domestic market first so that their exports will drop much faster than their total production. Moreover, we are starting to hear talk about cutting back on exports just to save it for another day. The message of rapidly rising prices is that an exporter can earn growing revenues and keep more of his oil safely in the ground too, simply by slowing exports. The only obstacles to deliberately slowing exports are long term contracts, other trade relationships, security guarantees, and the fear that they could end up like Baghdad .

So what does the past year tell us? First of all, world oil production has moved up very little. While new wells and new oil fields continue to be drilled, this increased production has been largely offset by hurricane damage, insurgencies, and general oil depletion. The year of peak oil production will be determined by the balance of how fast the drillers can open increasingly more expensive and difficult to drill wells vs. mother nature, insurgents bent on closing down production, and increasing rates of world oil field depletion.

The US and other industrialized countries, most of which are, or soon will be, major importers, are facing the double whammy of rapidly reducing supplies of oil available for import. In the meantime, and for the moment, the worldwide demand for oil, even in the US , continues to increase.

http://www.fcnp.com/614/peakoil.htm

Invest in Silver, Oil

2006-06-05T16:30:00.000-04:00

Over the last few days, I have been looking into various investments I could make.

Invest in the silver ETF (Exchange Traded Fund), which runs under the symbol SLV, or in the oil ETF which runs under the symbol USO.

The silver ETF works like this:

The investment firm/bank buys a certain amount of silver, and stores it. They then sell "shares," equal to 10 oz bars of silver. Instead of having to physically store it somewhere, you own the silver on paper. The value of one share is the spot value of an ounce of silver x 10.

The oil ETF doesn't work exactly the same, but runs in a somewhat similar manner, based on the price of a barrel of oil.

Or, you could just go to your neighborhood coin dealer or jeweler and buy the physical bullion itself.

With inflation, Iran fears, and a weakened economy, now is the time to invest in the energy sector or in precious metals.

Silver is extremely undervalued, based on what I have read.

"Today, for less than $20, anyone can get into the silver speculation game. On top of that, silver is easy to buy and somewhat liquid. All you have to do is find your neighborhood coin dealer and start trading.

My question is: Do you understand silver? Do you know why silver is a good investment? Do you also know why it's a bad investment? If you don't know the answers to these questions, I would recommend that you stick with what you understand.

Although not a silver expert, I'll share with you the reasons why I'm bullish on the asset:

1) Silver is a consumable precious metal. Unlike gold, which is hoarded, silver is used industrially. For years, before digital photography, it was used in film for cameras and movies. Today, silver is used extensively in electronics.
The reason this is a good fundamental reason to get into the metal today is because silver stockpiles are dwindling, so its price is driven by supply and demand.

2) It's a precious metal. Silver has been used as real money for centuries. We humans have an ancient fascination with this metal, as we do with gold. For years, I have visited gold and silver mining sites all over the world. That's something that has always amazed me, regardless of whether I was in China, South America, Mexico, Africa, or Canada.
I still remember standing on a mountaintop in Peru, doing my due diligence on a gold mine and looking at tiny caves dug into the side of a mountain. The caves were the mines of ancient Incas who were seeking gold, long before the Spaniards came and stole their wealth and country from them. Standing on a 14,000-foot mountain, where I could hardly breathe, I wondered what motivated those ancients to live in such an arid and hostile environment and delve for gold. Then I realized I was there for the same reason, only centuries later.

3) The primary reason I'm in real estate, oil, gold, and silver is because the U.S. dollar has become the peso the world. It's becoming more and more worthless as the U.S. is the world's biggest debtor nation.
Just how badly is the U.S. borrowing money? According to the Treasury Department, America's first 42 Presidents (from George Washington to Bill Clinton) borrowed a combined total of $1.01 trillion from 1789 to 2000, Between 2000 and 2005, President George W. Bush has borrowed $1.05 trillion -- and he's got a few more years left to go.
I'm not confident that our political leaders have the guts to do what's required to put the U.S. back on a sound economic footing. This is not to blame either Republicans or Democrats. I blame Americans for wanting their Social Security cake and Medicare ice cream, too. It's the entitlement mentality that grips the U.S., from the President on down, that needs to be changed. Too many Americans have come to expect the government to solve our personal problems (see "Why Many Aren't Securing Their Financial Future").
So if you think America's politicians and citizens are willing to make the changes necessary to strengthen the U.S. dollar, then don't buy silver. But if you're like me and don't expect us, as a nation, to take our medicine, then short the dollar -- and the way you short the currency is by going long on gold and silver.

4) Equities (stocks) and commodities (gold, copper, oil, and silver) are counter-cyclical. On average, equity prices go up for 20-year periods, and commodities go down. Then they reverse directions. Looking back in time, equities (stocks) began their run-up in 1980 and imploded in 2000. In 2000, commodities began their run-up, and equities headed down. In other words, around 2016 to 2020, start getting back into stocks and out of commodities.

5) A silver exchange traded fund (SLV) was launched on Apr. 28. That means silver, the commodity, can be traded as a paper asset. This makes silver easier for the masses to buy. They don't have to take delivery of the physical metal. Millions of pensions can now hold silver as a paper asset. The ETF will have to actually buy the silver and store it for the investor. This should add to the scarcity of the metal, which should reduce supply and increase prices.
So that's a simple explanation of what I understand about silver -- and why I'm bullish. I'm not buying silver because the price is going up, I'm buying it because I believe I understand why its price is rising.
I could also be wrong -- but at under $20 an ounce, silver is a good buy, in my opinion. I believe it's the last great affordable investment for the masses. And when the masses find out, another bubble will inflate and, of course, at some point burst." (Excerpt from http://finance.yahoo.com/columnist/article/richricher/4027)

More links:
http://www.gbtg.net/mnn/silver-v-gold.htm
http://www.marketwatch.com/News/Story/Story.aspx?guid={9E4F204C-FD45-40D4-B648-AD5953F5264D}&print=1&siteid=mktw
http://en.wikipedia.org/wiki/Silver_as_an_investment

I'm not an expert (obviously), but I have enough common sense to get in the game while I still can.

Good luck.

The Peak Oil Crisis: Dividing a Growing Pie

2006-06-02T23:53:00.000-04:00

Falls Church News-Press

By Tom Whipple
June 1, 2006

In recent weeks, there has been a spate of stories about oil-producing countries either nationalizing their oil industry or unilaterally announcing new contract terms for international oil companies (IOCs) operating in their countries.

As the price of oil increased rapidly in recent years, exporting nations that had foreign oil companies operating within their borders looked at the unprecedented profits being earned by IOCs and began asking, “Why aren’t we making that money; it’s our oil?”

This is not a new issue. Nearly 70 years ago the Mexicans asked the same question as they nationalized their oil production. In the decades after World War II, most Middle Eastern producers took control of their own oil resources, either peacefully as with Saudi Arabia or accompanied by turmoil as in Iran and Iraq .

The current wave of nationalization/renegotiation began in 2004 when the Russian government moved to bring its giant Yukos oil company, that had been in private hands since the collapse of the Soviet Union , back under state control. This of course was an internal matter for the Russians.

This year has seen more pressure on the IOCs as Venezuela, Bolivia, and Ecuador either announced nationalization, in the case of Bolivia’s gas fields, or new contract terms that would bring the government more control and a greater share of the profits.

Last week the spotlight swung back to Russia when Moscow floated the notion that it should have 51 percent ownership in three of the biggest foreign oil projects in Russia — Shell's Sakhalin-2 field, Exxon's Sakhalin-1 and the Kharyaga license held by Total. The Russians claim these projects are all behind schedule, over budget and short on Russian involvement.

Although there has been no movement as yet, there is speculation other oil producers with a significant foreign oil company presence will be either announcing or asking for contract renegotiations.

The reason the foreign companies are present at all is because they alone have had the resources and technical expertise to find, produce, and market the oil. In many cases, the host government’s major function is to collect and spend the revenue check. Now, the tightening world oil supply and spiraling prices have brought a whole new dynamic to the revenue sharing question.

Most of the relationships between producing nations and the IOCs go back many years if not decades. Production and revenue sharing contracts were written back in the days of $10 or $20 a barrel oil. Contracts usually provided for the IOCs to make all the investment in return for some share of the profits. If the deal were for a 50-50 split, and the oil sold for $10 a barrel, then each partner might make a couple of dollars a barrel after a expenses.

The problem came when the value of oil quickly rose to $70 a barrel with little increase in perceived expenses. Then the IOC and the host government could each be making $30+ per barrel. From the host government’s point of view, the question became why should the IOC that was satisfied with a couple of dollars per barrel profit be entitled to a profit of $30 or more.

The question shifts to one of how much leverage the producing government has to demand more of the revenue pie. This, of course, requires a careful analysis and a lot of luck on the part of the government seeking a bigger share of the revenue. Given that most oil companies are making money, in some cases a lot of money, from their foreign operations, it is obvious that they have a lot of give. Naturally, they want to continue profitable production contracts and they already have made multi-billion investments in their projects.

In many cases, there are other factors to consider besides the profitability of the IOC. What other economic or political relations does the host government have with foreign oil importers? Should the government feel that its national security rests on good relations with Washington or some other importer, then it is going to be reluctant incur the problems of breaking existing contracts in hopes of gaining more revenue. The size and potential for a nation’s oil production would enter the equation. If oil production is minimal by world standards, an IOC could easily close up shop and leave the host country on its own.

Another new factor in the equation may be technically competent countries such as China , Japan , and South Korea who are becoming concerned about the future of their energy supply. In many situations, these countries would be more than happy to assist exporting nations with their oil production in return for access to the product.

Yet another complicating factor is that most new oil production is coming from deep-water fields these days. Finding and producing oil from beneath deep waters is a difficult task that requires huge investment, many years of effort, and much technical expertise. Losing access to the money and know-how of the IOCs is something a country that wants to continue in the oil production business should not take lightly.

Much debate is taking place as to whether recent grabs for a bigger piece of the profits will pay off in the longer run. Venezuela , which is currently producing about 2.7 million barrels a day but has large reserves of hard-to-produce heavy oil, is the most interesting. Having unilaterally announced major increases in their share of the revenue and control over heavy oil production, Caracas is awaiting a response as the whether the IOCs will acquiesce in the unilateral breaking of long-term contracts.

If the IOCs pull out or reduce their efforts in Venezuela , at stake are US imports of 1.6 million barrels a day plus long-term access to large quantities of geographically close heavy oil. If there is a break in the oil relationship, both countries are likely to suffer for an indefinite period.

Most observers hold that Bolivia and Ecuador have made mistakes in breaking their contracts with foreign oil companies. Their production is relatively small and they lack the capital and expertise to increase production without outside help.

Are any other nations likely to succumb to the lure of more pie and seek revisions to existing contracts? In reviewing the list of major producers, most such as China, Mexico, Norway, Canada, and Saudi Arabia either do not have production sharing agreements or are unlikely to get into the contract-breaking business.

There are others in the world such as Nigeria and Angola who might be tempted but in these cases other overriding factors could come into play.

As oil depletion sets in and the price of oil moves up, pressures on producing nations to get all they can, while they can, will increase. In this situation there is much opportunity for miscalculation. This would probably come in the form of the IOCs either pulling out of a country under pressure or a reluctance to make major new investments while under threat of expropriation. In either case future oil production will suffer and the day of peak oil will move a little closer or worldwide depletion will be a little faster.

http://www.fcnp.com/613/peakoil.htm

The Day After Peak Oil

2006-06-02T23:49:00.000-04:00

atlanta.creativeloafing.com

By John F. Sugg
May 31, 2006

Will we die in our cars or retool our communities?

You know that place alongside I-85? Or was it I-75? Maybe State Road 400? Could have been I-20.

Well, it doesn't really matter what stretch of concrete because the environs are all the same. Mass-produced cul-de-sac subdivisions are surrounded by cookie-cutter malls, all laced together with endless ribbons of car-clogged roadways.

Sprawl. We know that. Been there, got the "sweltering on the expressway" T-shirt. But to understand what sprawl really means -- for your future -- we need to connect a few dots.
We have sprawl because ... well, because of gasoline. The internal combustion engine created in the last century this phenomenon called the suburb. Hundreds of millions of Americans suffer from the mass delusion that they live (sorta) in the "country" because they have a 3,000-square-foot, incredibly-cheap-construction manse and bit of grass, and their subdivision boasts a name like Fox Run or Oak Creek. Those not intoxicated with gasoline fumes have noticed that such names are historical markers recording what once was on the land before it was bulldozed.
As industrial and commercial urban centers became noisome and noxious, the car allowed people to move into the burbs. The commuter was born (and is slowly dying), with the interstate as an umbilical cord.

So, if a gasoline glut giveth sprawl, will paltry petroleum production taketh it away?

You haven't heard a lot in the mainstream press about something called "peak oil." The Atlanta Daily Newspaper of Declining Circulation -- whose marketing and news orthodoxy is that sprawl is splendid -- has mentioned the term only four times. Ever. Those items include one letter and, oh, one column from the pro-sprawl, pro-more-roads Georgia Public Policy Foundation. That column labels peak oil as a "belief" that's foisted on the public by "snake oil" salesmen.

"That's really stupid," says Richard Heinberg, author of two books on peak oil, and a guy who practices what he preaches. He's converted his California suburban home into a mini-farm where he raises food on once-manicured lawns. Through solar panels, he has cut his energy bill by 80 percent.

"The public policies that encourage sprawl are insane," Heinberg says. "Peak oil isn't a hypothesis. It's an observation. We're writing history, not predictions. And policies that don't recognize that are creating a tragedy that our children and grandchildren will pay for."

Sometime in the next 30 years, the world will have exhausted oil supplies to the point where production will rapidly diminish. A 2005 U.S. government study (clearly ignored by Bush & Cheney Inc.) called the Hirsch Report concluded that peaking "without timely mitigation" will result in "unprecedented" social, economic and political chaos.

How do you mitigate the affects of peak oil? As the Hirsch Report underscores, the old blather about "market forces" doesn't apply. True, rising prices will eventually prompt conservation and promote the search for alternative energy. But that won't happen soon enough to skirt disaster. The study found it will take 20 years to recalibrate American society for a future of diminishing oil. If we've already hit peak oil, which might be the case, we're facing two decades of horrendous crisis. Or, if the peak is still 20 years off, we'd better start preparing today.

Many cities -- Portland, Ore., San Francisco, Bloomington, Ind. -- have passed peak oil resolutions that call for sensible public policies.

In Georgia, meanwhile, our Republican leaders are headed in the opposite direction. Last legislative session, they slipped a transit-killing poison pill into the state budget. And rather than vetoing that anti-commuter provision, Gov. Sonny Perdue is backing a new wave of road building funded by "public-private partnerships," which means the public will bleed billions and "private" pals of legislators will cart away the money.

Jim Kuntsler, a peak oil author who lives in New York, says Georgia's policies are creating "a public realm that has been reduced and impoverished into a universal automobile slum."
There are smart people who live here, and they're thinking about the problem. Joe Allen heads a community improvement district at the aging Gwinnett Place Mall. He's picked up on the themes of transforming sprawl into new cities, places where people can work, live and play with minimal reliance on cars.

"We have a great infrastructure here," Allen says. "It needs dusting off and a new direction. In 1984, the mall forever changed the face of the area. New concepts that transform this into an urban center will again change Gwinnett for another 20 or 40 years."

Gwinnett County's planning director, Steve Logan, quips, "I've long seen all of those huge parking lots as a way to land-bank property for future use. We'll see sprawl areas congeal and intensify. Five-dollar-a-gallon gas will make it happen a lot faster."

The idea is to carve out scores of cities in metro areas -- real centers of commerce and housing. Instead of 90 minutes in the car, you spend nine minutes strolling to your office. Or, if you commute, it's a couple of miles on a trolley or train, not 30 miles in the SUV.

What's at stake is the future. Good public policy is the key. Kunstler calls for programs to rebuild America's train system. Others favor jacking up gas taxes and using the money for transit -- a good idea if provisions are made so that the burden won't disproportionately fall on the poor.

In the near term, reconfiguring suburbia into new cities -- like the plans for Gwinnett Place -- could transform sprawl into communities. While we're at it, we should retool the nation's agriculture and retailing -- returning to local farms and neighborhood shopping. It's a better way to live -- and we could escape the worst of the day after peak oil.

JOHN.SUGG@CREATIVELOAFING.COM

Get involved

http://atlanta.creativeloafing.com/gyrobase/Content?oid=oid%3A81309

Pricey Gas? That's Reality

2006-05-30T15:28:00.000-04:00

www.alternet.org

By James Howard Kunstler
May 30, 2006

It's actually kind of funny to hear Americans complain these days about the cost of gasoline and how it is affecting their lives. What did they expect after setting up an easy-motoring utopia of suburban metroplexes that make incessant driving inevitable? And how did they fail to register the basic facts of the world oil situation, which have been available to us for decades? Those facts are as follows: oil fields follow a simple pattern of production and depletion along a bell curve. Universally, when an oil field gets close to half the amount of oil it originally possessed, production peaks and then declines. This is true for all oil fields in the aggregate, for a nation and even the world.

In the United States, oil production peaked in 1970 and has been declining ever since. We extracted about 10 million barrels a day in 1970 and just under five million barrels a day now. Because our consumption has only increased steadily, we've made up for the shortfall by importing oil from other countries.

There is now powerful evidence in the production figures worldwide that we have reached global peak oil production. The collective nations of the earth will not make up for this by importing oil from other planets.

Contrary to a faction of wishful thinkers, the earth does not have a creamy nougat center of oil. Oil fields do not replenish themselves. Also contrary to the prevailing wish, no combination of alternative fuels will allow us to keep running the interstate highway system, Wal-Mart, Walt Disney World and the other furnishings of what Dick Cheney called our "non-negotiable way of life."

People who refuse to negotiate with the circumstances that the world throws at them automatically get assigned a new negotiating partner: reality. Reality then requires you to change your behavior, whether you like it or not. With global oil production peaking, we are now subject to rising oil prices, as markets are forced to contend with allocating a resource heading in the direction of scarcity. Oil prices are only likely to go higher -- though there is apt to be a ratcheting effect as high oil prices depress economic activity and thus dampen demand for oil which will depress prices leading to increased consumption which will then kick prices back up, and so on. The prospects for more geopolitical friction over oil also self-evidently increase, as industrial nations desperately maneuver for supplies.

Mainly though, the danger lies in the resulting instability of the super-sized complex systems that we depend on daily.

Trouble with oil will spell huge problems with how we grow our food, how we conduct trade, how we move around and how we inhabit the terrain of North America. These systems are going to wobble and eventually fail unless some effort is made to reform their scale and their procedures. For example, Wal-Mart's profit margins will disappear as higher diesel fuel prices hit its "warehouse-on-wheels."

Now, in the face of this, you'd think that the national leadership in politics, business and science would prepare the public for substantial necessary changes in the way we do things. What we are seeing across the board, though, is merely a desperate wish to keep the cars running by any conceivable means, at all costs. That is the sole target of our focus. Our leaders don't get it. We citizens have to make other arrangements.

But we must. We have to live differently. We're going to have to re-inhabit and reconstruct our civic places -- especially our small towns -- and we're going to have to use the remaining rural places for growing food locally, wherever possible. Our big cities will probably contract, while they densify at their centers and along their waterfronts. Our suburbs will enter a shocking state of economic and practical failure.

We cannot imagine this scenario because we have invested so much of our collective wealth the past 50 years in the infrastructure for a way of life that simply has no future.

We'd better start paying attention to the signals that reality is sending or we will be living in a very violent, impoverished and demoralized nation. And we have to begin somewhere, which is why I suggest we start by rebuilding the national passenger railroad system. It would have a significant impact on our oil use. It would put a lot of people to work on something meaningful and beneficial to all ranks of American society. The equipment is lying out there rusting in the rain, waiting to be fixed. We don't have to re-invent anything to do it.

The fact that we are not even talking about such solutions shows how unserious we are.

James Howard Kunstler is the author of The Long Emergency, just released in paperback by The Atlantic Monthly Press.

http://www.alternet.org/audits/36746/

Interesting Video Online

2006-05-25T16:19:00.000-04:00

Go watch this video. Made by an artist named James W. Johnson. It is short, free, slightly humorous, and makes a good point.

http://www.jameswjohnson.com/movies/vids/post-oilman.htm

End Times

2006-05-23T17:16:00.000-04:00

Los Angeles Times

By Dan Neil
May 21, 2006

If Al Gore's documentary "An Inconvenient Truth" has a single message, it's that global warming is bad—very, very bad. Floods, droughts, famine, disease . . . a miasma of End Times calamity caused by the burning of fossil fuels.

Even at that, Gore is—at the risk of paraphrasing—a candy-assed optimist, according to James Howard Kunstler, author of "The Long Emergency: Surviving the Converging Catastrophes of the Twenty-First Century."

Whereas Gore and other prophets of climate change believe we still have the time and means to avert the worst consequences of anthropogenic global warming—hybrid cars, solar panels!—Kunstler argues with hellish persuasion that we are basically toast. Why? The entire edifice of American civilization—from our mega-scale methods of food production to our great repositories of national wealth, that is, the equity invested in our sprawling suburbs—is propped up, trembling as if balanced on matchsticks, on cheap oil. And there is no substitute for cheap oil.

But wait, I say, when I get him on the phone at his house in Saratoga Springs, N.Y. What about plug-in electric vehicles and pure electric vehicles, not a few of which are, here in California, being charged by DIYers' solar panels? What about wind power, biomass or wave power? Kunstler emits a well-practiced harrumph.

"When confronted with these ideas, people generally go through . . . what was her name? . . . Kubler-Ross' stages of grief," Kunstler tells me. "You're still in the bargaining phase." Nothing, no deliverance of technology, he says, could possibly replace the cheap energy we get from oil, and even if it could we would have to surmount the "incredible passivity" of the American people narcotized by decades of abundant petroleum. Kunstler derides the belief that alternative energy will save us as Jiminy Cricket-like wishing upon a star.

When I ask him about the TerraPass program at the University of Pennsylvania's Wharton School (drivers pay a fee proportional to the size of their cars to offset their cars' carbon impact), he goes bananas. "What do I think? I think it's [colorful intensifier here] stupid!" he fairly shouts. "There's not going to be a [ditto] Wharton School!"

So, that would be a nay, then?

Kunstler, 57, has emerged as the most dire and articulate proponent of a school of thought known as Peak Oil, the idea that the world has or will soon reach maximum oil production, after which oil becomes scarcer and more expensive to extract. There's nothing theoretical about it. Like global warming, Peak Oil—a bell-curve description of oil reserves first outlined by geophysicist M. King Hubbert—is widely accepted by serious people. Discoveries of new oil topped out in 1964. The world consumes about 27 billion barrels of oil a year. At current pace, the world's estimated 1 trillion barrels of oil reserves will be gone within a few decades, but as a practical matter, extracting every drop from sources like Canadian oil shale would be impossible, since the effort would consume more energy than it produces.

"After peak," writes Kunstler, "all bets are off about civilization's future."

As gas prices in Southern California hover near the $4-per-gallon mark, Kunstler's book—recently released by Grove Press in paperback—seems a lot less fanciful than one would hope. What happens when gasoline reaches $10 or even $20 per gallon, as it almost certainly will, according to Kunstler? The social ecology of suburbia will collapse, and the nation's endless capillary networks of tract homes, with their lawyer foyers, pools and bonus rooms, will become vast ghettos inhabited by gas-less and immobile squatters. The food production system will likewise crumble, resulting in famine and death.

The collapse of industrial agriculture is just one of many ways that "peakniks"—adherents of Peak Oil—contend that these events will precipitate a die-off of humanity (though, in an unusually sanguine moment, Kunstler says he prefers the term "die down" because humanity will live on, despite its reduced circumstances). In the absence of any large-scale organizing feature—federal government itself being a manifestation of cheap oil—America will descend into neo-feudalism, where plowmen will be a lot more useful than IT directors. Put another way: It'll be Amish with guns.

I'm not convinced that the post-oil era will play out quite so apocalyptically. Yes, America wastes a lot of energy, which means it could conserve that energy before having to plow under the suburbs for farmland. Just for an example, the Department of Energy estimates that new full-spectrum LED lighting could reduce electrical consumption by about a third by 2025. With sufficient national will, America could convert to a nearly all-electric automotive fleet in a decade, putting our mobility onto a more sustainable, renewable footing.

But we've got some major infrastructural remodeling to do. Can we do it? Can we negotiate a soft landing? The first step, of course, is getting people to understand that, just like the once-derided case for global warming, Peak Oil is real, to see that train a'coming. Then to act decisively, resisting both a sense of futility and the urge toward anarchy.

It's a matter of hoping Al Gore is more right than Kunstler.

http://www.latimes.com/features/printedition/magazine/la-tm-neil21may21,1,4476344.story?coll=la-headlines-magazine

Raise gas tax $3 a gallon to promote fuel efficiency

2006-05-23T17:11:00.000-04:00

Chicago Sun-Times

By Lester R. Brown
May 20, 2006

Now that the $100 tax rebate proposed by the Senate Republican leadership as a response to rising gasoline prices has been discarded, it is time to get serious. Any effective response to climbing gas prices must recognize a geological reality -- namely, that the earth's oil reserves are shrinking.

The amount of oil pumped has exceeded new discoveries since 1980, and the gap is widening. In 2004, for example, the world pumped nearly 31 billion barrels of oil while discovering fewer than 8 billion barrels of new oil.

Instead of encouraging gasoline use with tax rebates or gas tax holidays, we need a way to reduce gasoline use. We need a higher gas tax, but the only way to get a tax rise large enough to wean us from imported oil is to offset the rise with a reduction in the tax on income.

The gas tax boost should be substantial -- a rise that will send a strong, clear signal to consumers -- and it should be gradually phased in. A gasoline tax hike of 30 cents a gallon per year for the next 10 years would send the right signal. This eventual increase of $3 per gallon would be offset every step of the way with a reduction in income taxes.

A $3 per gallon tax on gasoline in addition to the existing federal tax of 18 cents is a lot, but our economic future is at stake. Such taxes are not unheard of. Motorists in Germany pay a tax of $3.76 per gallon, French drivers pay $3.46, and in the United Kingdom the figure is $4 per gallon. Prices at the pump in these countries typically range between $5 and $6 a gallon.

A number of countries in Europe have been lowering the tax on income and raising those on energy. Sweden, now the leader, is in the middle of a 10-year shift of $1,100 per household from income taxes to energy taxes. Sweden's plan is to be oil-free by 2020.

A planned long-term rise in the price of gasoline would enable automobile owners and manufacturers to plan intelligently for an oil-short future. It would encourage motorists trading in older cars to look for more fuel-efficient vehicles, including the highly efficient gas-electric hybrids. And it sends the right signals to manufacturers, enabling them to shift to more fuel-efficient vehicles over time.

The shift to gas-electric hybrid cars offers another option. If we add a second storage battery and a plug-in capacity to hybrids it will enable us to do our short-distance driving, such as the daily commute or grocery shopping, almost entirely with electricity. Cars could be recharged at night when the demand for electricity is low.

If we build not merely hundreds of wind farms but thousands of them to feed cheap electricity into the grid, then we can do our short-distance driving with wind energy. The wind electricity equivalent of a gallon of gasoline costs roughly 50 cents. Wind energy is inexpensive, inexhaustible, and it is ours.

Rising gas prices also will encourage investment in public transportation, enabling us to reach the levels of convenience and reliability of systems in Western Europe and Japan. They also will facilitate creation of the increasingly popular bicycle- and pedestrian-friendly transport networks. And higher gas prices are already mobilizing billions of dollars of investment in the production of alternative fuels, such as ethanol.

There is also the pressing question of who gets the revenue from oil price increases. It is in the interest of oil-exporting countries to raise the price of oil as high as possible without causing a global economic recession or depression. If we let OPEC keep raising the price, the increases will end up in OPEC treasuries.

If we shift taxes, however, more of the additional money spent on gasoline will end up in our treasury, and individuals will benefit from lower income taxes. Higher U.S. gas taxes will also reduce the global demand for oil, making it more difficult to raise the price.

A world where oil use is climbing is totally unprepared for the peaking and subsequent decline of world oil production. Whether peak oil comes this year, next year, or 10 years from now, we need to be ready for it. The adoption of a 10-year tax shift as outlined above would accelerate the shift to alternative energy sources, and help re-establish U.S. leadership in building a sustainable energy future.

Lester R. Brown is president of the Earth Policy Institute.

http://www.suntimes.com/output/otherviews/cst-edt-ref20a.html

The Peak Oil Crisis: A Frenzy in Washington

2006-05-05T13:57:00.000-04:00

Falls Church News-Press

By Tom Whipple
May 4, 2006

Last week the peak oil phenomenon reached a turning point when official Washington began to realize it has a problem. The problem, however, is currently being framed as high-gas-prices-going-into-the-next-election rather than worldwide oil depletion. Thus the first round of solutions being proposed ranged from the bizarre to unachievable.

The fun started on Sunday of last week, right after oil has reached a new high of $75 a barrel, when Senator Arlen Specter said the US should back a plan to tax away the excess profits of the oil companies. The senator opined that that the US has allowed too many oil companies to merge so that we have reduced competition and higher prices.

On Monday, Presidential spokesman Scott McClellan revealed that the President had directed the Energy and Justice Departments to investigate "illegal manipulation of gasoline markets" and that the President would unveil a set of plans the next day to deal with high oil prices.

On Tuesday morning, the Washington Post weighed in with a story on how the President and congressional Republicans were beginning to feel the heat from high gas prices and were starting to fear what the electorate would do next November. After consulting various energy experts, the Post concluded that anything the President or Congress could do to increase the supply of oil or reduce demand would take years to have an impact.

Later that day, the President appeared before the Renewable Fuels Association to announce his plan for dealing with $3+ gasoline prices. In addition to the previously announced efforts to root out illegal price gougers and oil company collusion, the President said he would temporarily suspend the requirement to replenish the Strategic Petroleum Reserve with oil that had been borrowed after the hurricanes last fall. As this replenishment was occurring at the rate of roughly three-tenths of a percent of daily US oil consumption, few observers thought it would make a noticeable difference. Even the Wall Street Journal had the grace to note that the effects would be "mostly psychological."

The President also directed the EPA to waive clean air rules in areas where the transition to the clean air additive ethanol was causing gasoline shortages. He asked Congress to roll back about $2 billion of the $10 billion worth of tax breaks they had given the oil companies last year and give increased tax breaks for hybrid purchasers.

The commentators immediately noted that these measures would do nothing to bring down gas prices, but they sounded so good the price of oil dropped right after the President's speech. In a burst of candor, and to his credit, the President said, "energy experts predict that gas prices are going to remain high throughout the summer, and it is going to be a continued strain on the American people."

After the President had his say, it was Congress's turn to weigh in. At various times during the week, they proposed a 60-day federal gas tax holiday, a $100 federal tax rebate check, and reworking of the accounting standards pertaining to inventories so that oil companies, and every other kind of company, would have to pay higher taxes. All of this was accompanied by numerous press conferences and photo ops staged at gas stations.

By the end of the week, the demagoguery of all this was apparent to nearly everybody and, one by one, the proposals sunk of their own weight or threat of presidential veto. The $100 rebate came in for the most scorn with liberals and conservatives both seeing it as nothing more than an effort to buy votes. The proposal did, however, have a couple of interesting features. The rebate was tied to oil drilling in the Arctic Wildlife Refuge so that the Democrats would have to vote against it just before the election. It also had a provision that the $100 check would go to families with an income of $218,000 or less -- causing some to wonder if this might just might be a new definition of the poverty level.

There were other proposals including one to raise automobile fuel efficiency standards. The President insisted however that increasing fuel efficiency only be done in the context of a complete overhaul of the standards system so as not to harm the US automobile industry too badly. Nothing is simple anymore.

On Sunday, Energy Secretary Bodman appeared on “Meet the Press” to explain why gasoline prices had increased by 60 cents per gallon in the last month. The secretary sees high gas prices as fallout from President Bush's successful efforts to build a stronger economy and the "inability of suppliers to make the flows equal to demand." The secretary foresees tight oil supplies as continuing for the next two or three years when either supply will catch up with demand or the administration will be out of office and high gas prices will be somebody else's problem.

Absent from the week's torrent of words was any mention of peak oil or even a hint the beginnings of worldwide oil depletion just might be at the root of the gas price problem. Many serious commentators, however, noted a gap was opening between supply and demand due to vigorous world economic growth. Widespread appreciation of this point is, of course, a step in the right direction.

Sadly, one searches in vain for any mention of conservation as a first, inexpensive, step towards mitigating the problem. It is clear that the country, the media, and our leaders in Washington have a ways to go before we are discussing the real issue and real choices. Someday, the historians will note that in late April 2006, a national discussion of oil policy, however surreal, began in earnest.

http://www.fcnp.com/609/peakoil.htm

Peak Oil and the Political Economy of Terrorism

2006-04-26T09:57:00.000-04:00

The Baltimore Chronicle

By Mathew Maavak
April 24, 2006

Wars are dictated by the primacy of economics, while ideologies serve to rouse the masses.

Crude oil has breached the $70 psychological barrier again. This time, however, it will not be a one-day seduction by the stormy Katrina.

The causative culprits are aplenty.

Terrorists have taken out 25 per cent of Nigeria's sweet crude since late February, and the daily joust between Washington and Tehran is providing splendid returns to those who had invested in oil stocks. For these savvy investors, there will be enough gas in the tank during the peak summer driving season.

Then there is that 10.2 per cent growth registered by China, announced very conveniently before President Hu Jintao's scheduled meeting with his US counterpart George W. Bush. China's booming growth can only be greased by a harder-to-pump oil. The alternatives are stark. If the Chinese bubble gets pricked, the global economy suffers, US corporations may need higher tax cuts—or even subsidies—and Americans will finally need to trim their bellies.

That would be Hu's sales pitch but Bush may opt for a more risky oil prospecting venture. This time, the failed former Texan oilman may succeed, and ignite enough fires in an energy-strained world.

It is high noon for those prospecting for maximum oil returns. Even the types not usually associated with Wall Street, rocket science and deficit spending are glued to Bloomberg's running crude oil tickers by the minute.

The objective is the lucky strike. Peak Oil is forming a strategic fit with Peak Terrorism.
For a synoptic glimpse into the future, read this excerpt from New York Times' April 16 article headlined "Blood and Oil":

Just as things seemed to be calming down in the delta region of Nigeria after a spate of kidnappings and insurgent attacks, the militant group calling itself the Movement for the Emancipation of the Niger Delta—MEND—announced last week to all who would listen that it was planning new violence against oil facilities in the region. Apparently unconcerned about tipping its hand to the authorities, MEND even gave a date for the start of its new campaign: April 25.

That date is perfect! These guys are more financially savvy than stuffed suits who have hedged their future in a world where oil never existed. D-Day in the Niger Delta is just 72-odd hours before the UN Security Council meets to unleash a little fission over Iran's nuclear enrichment program.Crude oil at $80 per barrel on April 28? Who knows?

If a rag-tag bunch of militants in Nigeria are accurately reading the tea leaves in an oil-brimmed cup, imagine what Al Qaeda and the pan-global martyrs of terror have in store.

There is a greater lead-filled premium now for oil-related and economic targets. In a business-speak twist, collateral damage can be applied to the unlucky rejects in a fire-sale transaction.
You can bet your every last dime that terrorists are ready to throw their explosive spanners into the machineries of global trade. They know the drill. There is tremendous potential here to cause pandemonium and cross-border tensions. Targeting energy infrastructures will be far more efficacious and less opprobrious than the indiscriminate slaughter of civilians.

Why assassinate politicians or shoot a GI when mobs—deprived of their daily bread—can do more in aggregates and derivatives? In layman's terms, we are talking about riots, sit-downs, union strikes, looted stores and political mayhem. Economic targets offer the best returns with fewer risks. Stock markets will be depressed, inflation will set in, bankruptcies will proliferate, and people will starve.

The concatenation of financially-induced social upheavals has been witnessed before—across continents—during the currency crisis of the late 90s. Unless checked, wars are the inevitable culmination. There are no IMF prescriptions for dwindling oil reserves, busted pipelines and electricity blackouts.

Call this the political economy of terrorism, but apart from Iraq and Palestine, terrorists will increasingly focus on the conveyor belts of finance and trade. There is no shortage of targets for disgruntled elements worldwide. There are Maoist guerillas in Nepal, ethnic insurgents in Burma, Al Qaeda-inspired militants in Islamic nations and assorted purveyors of violence in every nook and corner where there are power plants, ports, retail stores, trading depots, factories, banks and transborder pipelines. Mundane industrial structures—particularly those connected to oil—have attained more value-added targeting than shoppers at a marketplace. A suicide bomber might as well "walk the last walk" into a minor, provincial bank than into a crowded souk. Planting midnight bombs at ATMs in a major city entails little or no bloodshed, though it may douse seasonal fire sales the next morning, not to mention the lack of change for lunch. (Ever noticed the anticipatory or frustrated month-end file of workers at ATM kiosks short on notes?)

A little inconvenience can go a long way in disrupting normal routine, and no nation can provide complete protection for these mundane cogs of human activity.

Terrorists switching to the political economy side of their trade can expect other windfalls. Destroying the perceived icons of (Western) imperialism elicit less disgust—and perhaps sympathy—than the televised butchering of individuals. Suicide bombings that shred innocent limbs at a discotheque and net relayed beheadings of infidels reek of bestiality. Why kill a Daniel Pearl when you can play Che Guevara?

But is this happening?

There were strong hints emerging since February.

The Niger Delta attacks offlined production amounting to 550,000 barrels per day, rendering the affected Royal Dutch Shell installations immobile till today. What was untouched was probably left for April 25. Almost simultaneously, violent protests in the Ecuadorian province of Napo forced state oil firm Petroecuador to halt supplies through its Trans-Ecuadorean pipeline.

Both incidents raised US crude oil futures by $1 overnight. The price has since risen by more than $10 dollars—a safe median figure used by commentators without an MSNBC or Bloomberg ticker on their offline notebooks.

In Iraq, while bombs routinely kill civilians, little has been noted of pipeline sabotages stretching from Kirkuk to Bayji to the Turkish border. Restoring normal output may take up to a year.

And that's a big hypothetical "if" with Iraq in a state of disintegration. Think of the hundreds of thousands of miles of exposed pipelines around the world, and the cumulative number of years needed to repair them. If Iraq's oil and its pipelines can energize the current sectarian war, couldn't that be replicated in places simmering with ethnic and social tensions? Expect authoritarian governments to manufacture terrorism for the perpetuation of power. If you regard the USA PATRIOT Act as draconian, you haven't seen the world yet!

Any bomb anywhere can be pinned on "terrorists" and sifting the real from the manufactured would be next to impossible with censorship laws established to prevent the transmission of coded communications. Sounds familiar?

It would pose no barrier to the Real McCoys, however. Terrorists - separated by ethnic, ideological and religious motivations but united by calculated anarchy - have learnt their economic primers on the go. It is the most potent weapon in this age of Peak Oil.

Neither the brotherhoods of anarchy nor coded messages are needed to set action time. The daily business headlines will do.

In Sync

While oil traders were still risk managing the outage from Ecuador and the Niger Delta, militants in Saudi Arabia attempted to blow up the world's largest oil processing complex in Abqaiq on Feb 24. If they had succeeded, there would have been a double digit increase in the price of crude in 48 hours. It could have also precipitated social anarchy in a land seething with repressed anger against the Al Saud monarchy. Under such a scenario, repair works at Abqaiq would be next to impossible, oil would shoot to above $100 per barrel, and a vortex of violence would spiral to engulf much of the world. Remember, society is only three meals away from anarchy.

As tensions rise by the day over Iran's nuclear enrichment program—and it's not only Iran—pipelines and economic targets are easier pickings vis à vis heavily-guarded political, military and constabulary bastions. Call this risk management on both sides. Governments will prioritize security for the levers of governance and power; terrorists will probe and prioritize valuable, less-guarded targets to trap security apparatuses in a game of musical chairs. This will leave a gap for political targets sooner or later. It's an old trick with new destructive possibilities in a world peaked of oil.

Terrorists can also conflate ideological mileage with financial aggrandizement. This was demonstrated during the days leading up to the Sept 11 attacks. Unusually heavy transactions were noted on airline stocks in the hours and days leading up to the fateful incident. The yet-to-be-proven suspects were Osama bin Laden and Al Qaeda. This gives a new twist to the maligned practice of "insider trading," and it ingeniously raises capital for further terrorist ventures. Non-ideological players like organized criminal gangs and state actors would have taken note. Each day, violent arts permeate our airwaves, are regurgitated on news clips, and are headlined on our dailies. The real dangers of terrorism can be manipulated and faked by the religious devotees of Mammon, and blame can fly in all directions.

Terrorists, after all, are the dernier cri bogeyman of our times. They can—advertently or not—create political and financial capital for powerful entities. The terrorism shill also provides a Trojan Horse for state actors to destabilize a hostile nation. In this high-octane world of dwindling mineral resources, "terrorism" might be the spark—and later a sideshow—for outright inter-state conflict. Wars are dictated by the primacy of economics, while ideologies serve to rouse the masses.

The most tindery powder keg right now is Iran. It's not just hedge fund managers and investment gurus who are bracing for the worst, or the best, depending on one's philosophy. There is money here for Armani-clad entrepreneurs and coups de grace for ski-masked individuals.

If Iran burns, or if neighboring Iraq descends further into anarchy, expect scattered strikes against oil installations, ports and power plants the world over. There will be more trouble in Nigeria and Ecuador. Hotspots will get hotter with conflicts spreading far and wide. With so much happening, renewed conflict in little-known Chad—among the five poorest nations in the world but one with a billion in crude reserves—may not blip on our media radar.

The Ides of March have passed and it has left us with bad omens for the coming months. The game of energy geopolitics is taking new turns and uncertainties, including the option of a tactical nuke attack on Iran's Natanz, Isfahan, and Bushehr complexes. If Iran gets hit, the anti-American Venezuelan President Hugo Chavez may deliberately divert oil supplies to nations like China, depriving the US of 15 per cent of its oil imports.

There are other, albeit highly unlikely, variants to this game.

Al Qaeda may bomb targets within Iran, and blame it on the United States, or it could sink a few tankers in the Straits of Hormuz and blame it on the Persians. Neither the United States nor Iran need to fight in a best-case scenario—if an extraneous culprit can be identified and a standoff reached in time. A Straits of Hormuz blocked by sunken tankers either way will immediately reduce global oil supplies by 20-25 per cent per day. Perhaps more, depending on which estimates you have been reading.

The United States, after all, has the largest strategic petroleum stockpile in the world, and its powers would be aggrandized through this energy buffer. Is that good news? Well, should US soldiers die in a Middle East artificially contrived and subverted by Britain? Cut a deal with Tehran! After all, Iran might have been a US partner today if not for Winston Churchill. The CIA only stepped in later, in 1953. The tussle started over the Anglo-Persian Oil Company, which no longer exists by that name, but the bone of contention has gone on to include tactical nukes.

Like changed names, the United Kingdom's role in global subversion has been well-masked by Uncle Sam's schoolboy misadventures.

Trust the Brits to ramp up their global terror machine again and expect Uncle Sam to receive the annual rogue superpower award. Expect a scramble for oil worldwide, providing targets of opportunities to militants, criminals, and state-sponsored terrorists. When this happens, the current national and international structures would be blown out of shape.

Within this nightmare world, ordinary folks would gladly welcome some order, or a New World Order. That plan was readied long back—lock, stock and barrel. Long before the United States of America came into being!

Welcome to the year when the artifice of civilization begins its slide into a natural state of barbarity.

http://baltimorechronicle.com/2006/042406Maavak.shtml

Gas Breaks the $3 Barrier

2006-04-22T10:12:00.000-04:00

Sacromento Bee

By Dale Kasler
April 21, 2006

Prices are near September record, with no relief near.

The dreaded $3 gallon of gas became reality across California on Thursday.

The statewide average price jumped 3 cents to $3.02 for a gallon of self-serve regular, the highest it's been since the post-Hurricane Katrina gas crisis, according to AAA. That's within 3 cents of the record set last September.

Sacramentans were paying $2.90 a gallon. Motorists were paying an average of $3.12 for self-serve regular in Santa Barbara, a record for the city and the highest among the 25 metropolitan areas surveyed daily by AAA.

Prices are expected to continue rising, although it's not clear when and where they'll peak. Oil prices have shot up because of violence in Nigeria and the possibility of war in Iran. On Thursday, after briefly hitting a record $72.49 a barrel, prices eased off after Shell announced it will resume oil production in late May at a key facility that was damaged by Katrina.

Oil closed at $71.95, down 22 cents, on the New York Mercantile Exchange.

Even with that lull in crude costs, analysts expect gas prices to keep going up for the foreseeable future. A nationwide shortage of refining capacity will put upward pressure on gas prices even if crude prices fall. Gas prices will likely peak in late spring or early summer.

Rising energy prices are making economists increasingly nervous. Last fall, when prices shot up after Katrina, economic output slowed down across the United States.

The latest spike "is certainly not a recession-making event, but it could have an effect on some industries in California," said Howard Roth, the state's chief economist.

Among them is tourism.

"Absolutely. Everything from airline fuel to Mom and Pop taking the kids on vacation," said Gary Carr of PKF Consulting, a hospitality consulting firm.

But Sean Comey, spokesman for AAA of Northern California, said he thinks tourism will hold up pretty well. While gas price spikes do prompt motorists to conserve somewhat, it's unlikely that Californians will cancel their vacation plans, he said.

"Most people, despite the high gas prices, tend to think a driving vacation is a good value," he said.

Meanwhile, farmers are feeling the effects.

"It's huge, it's absolutely huge," said Joe Martinez, a Yolo County almond farmer whose diesel fuel costs are increasing. Diesel hit $3.05 in Yolo on Thursday.

Martinez, president of the county Farm Bureau, said higher oil prices will also mean costlier fertilizer, plastic piping and other inputs. "Farmers have to eat any increased costs," he said.

http://www.sacbee.com/content/business/story/14246095p-15064038c.html

The Peak Oil Crisis: Politics After the Peak

2006-04-22T10:02:00.000-04:00

Falls Church News-Press

By Tom Whipple
April 20, 2006

There is little doubt the effects of peak oil will someday soon radically change the political landscape in America—and nearly everywhere else for that matter. It is still a little too early to say when oil depletion will start appearing in political equations. If we have a particularly bad summer as some suggest, then "gas prices" could feature prominently in our November 2006 mid-term elections. If predictions of peaking within the next couple of years are correct, then energy policy likely will be a major factor in the 2008 presidential election. If peaking slips a bit then it is almost certain that the 2012 and 2016 elections will be fought over nothing else.

From the vantage of April 2006, it would be folly to speculate on the details of elections taking place months or years from now. A new "Peak Oil Party" could emerge to lead us out of the darkness (literally) or the same old Republicans and Democrats, retooled for the post-oil era, could compete for our votes. America could emerge from a decade or two of converting to new lifestyles as a new and stronger democracy, or the demise of the oil age could be too much of a strain for our current political arrangements. However, there is a lot of recorded history around for insight and human nature being human nature, a few general observations might be in order.

One of the most disturbing things I have read recently pointed out how hard it is for people to radically change a way of life. The writer noted how in 1860 when the South was threatened by abolition, an entire generation picked up arms and marched off to endure terrible sufferings in order to protect a way of life from which few benefited directly.

Equally disturbing is how a significant portion the German middle class embraced the Nazi Party after their economic well-being was wiped out by hyperinflation.

Given the love affair that Americans, and everybody else in the world that can afford one, have with cars, giving them up is going to be the collective trauma of a lifetime. Polls tell us a vast majority of car owners say they will drive to their last dollar or until there simply is no choice.

From a political point of view, such a strong emotional and lifestyle attachment is fertile ground for demagoguery. The Congress already has summoned the oil executives to lecture them before the cameras about high gasoline prices. Various states have passed anti-price gouging bills to make it look as if they are doing something. The administration has declared an "Advanced Energy Initiative" which throws a few million dollars at a problem that will require trillions. The trivial increases in CAFÉ standards for SUVs will someday appear as laughable as battling an ocean with a sword.

We are starting to see scattered instances of peak oil tax demagoguery. At a time when government should be rapidly increasing energy taxes to slow consumption, some politicians are calling for the elimination of gas taxes so their hard-working constituents can afford to drive as they wish. At a time when gasoline prices will soon be thought of in round dollars —$3, $4, $5 gas— rather than cents, eliminating a few pennies of tax will soon be recognized as pointless.

The ultimate absurdity will be the price cap. If anyone wants to bring transportation in a country to a complete halt, simply decree that motor fuel can't be sold for more than "X." Osama Bin Laden couldn't come up with a better idea if he tried.

As some point however, the silly season will end, the body politic will come to recognize that hearings, tax cuts, price caps, and drilling in national parks are not the remedy for peak oil. Whenever that day comes, congressmen, legislators and governments will start look for real solutions: massive conservation and a transition to sustainable fuels and lifestyles. The real question then is whether this will happen soon enough to avoid causing damage that will set the transition back many years and increase the hardships. Will an administration —the current, the next or the one after that— have a change of heart mid-term, or will an election have to be fought over remedies for peak oil first?

Any poll taken today will show Americans are worried about "dependence on foreign oil" but are not yet ready for hardships, such as serious reductions in driving to achieve this goal. For an administration committed to not rocking the boat while tossing in a sea of other troubles, it probably will take a mega-development in the oil production world that quickly spikes gasoline prices into the $6-$7 range to force a change.

The bellwether for change will be the imposition of a strictly enforced nationwide 55 mph speed limit. Until such an inexpensive and effective oil conservation measure is passed, our politicians are still listening to the call of a bygone age rather than preparing us for the next.

Before the oil age comes to a complete close, let's hope someone rehabilitates Jimmy Carter as one of the most prescient Presidents ever to hold the office. Congress might even rename an airport for him— just before it is shut down forever.

http://www.fcnp.com/607/peakoil.htm