Back to the showHe may have to keep thinking it over for another month ...As you go further back in time (newest stuff on top, older below), fewer links actually work. So it goes ... 


Current event news

The problem is that The Reuters energy conference has generated lots of interesting material. Why nukes may not work for in situ oil sands recovery. q.v. A refiner explains why ethanol doesn't make sense. q.v. The problem with the wind tax credit. q.v. Relative advantages and disadvantages of national oil companies compared to the privately owned international majors. q.v. Future natural gas prices to remain high. q.v. OPEC's views on climate change versus economic growth. q.v. Why US refiners aren't expanding capacity. q.v.

The North Sea continues to yield new oil, even if in general decline. q.v.

California acts to keep out LNG. q.v. Isn't state regulation preempted?

Big-time Spanish solar. q.v.

The Emirates buy into Canadian oil sands. q.v.

Is Congress trying to steal Iraq's oil? q.v.

Gun boat diplomacy is alive and well. q.v. It's not going to work, but what the hell...nothing works these days. q.v. Just what are they up to and how scared should we be? q.v.

Darfur: It's the oil stupid, qv1 qv2 or is it? qv3 qv4

CO2 emissions are growing dangerously fast.  According to a recent National Academy of Sciences report, "Between 2000 and 2004, worldwide CO2 emissions increased at a rate that is over three times the rate during the 1990s—the rate increased from 1.1 % per year during the 1990s to 3.1% per year in the early 2000s." q.v.

Incheon Korea plans to construct world's largest tidal plant. q.v. Koreans are also constructing the world's biggest solar facility. q.v.

New energy legislation introduced in House. q.v.

Some background on US involvement with highly enriched uranium. q.v. So what happened to the missing 8,000 kg - enough for 300 weapons?  With bookkeepers like these why worry about Iran...

The US intelligence community has decided that global warming has strategic implications. q.v.

Oil geopolitics: China and Russia ascend, US declines? q.v.

The real story about Iraqi oil production: several billion dollars may be missing. q.v.

Industrial sector response to sharply higher energy costs: the need for greater energy efficiency. q.v.

Brownouts in the Balkans: it seems likely that there will be serious electricity production problems this summer. q.v. And in the US? Should be ok. qv1 qv2 Mandatory power pool reliability standards go into force in June.

In case you were worried, the Egyptian petroleum sector had a good year. q.v.

What Exxon wants you to know about energy policy. q.v. Not so random sample: "Windfall profit taxes have been proven to reduce domestic supplies and undermine capital investments."

Kuwait may have a major oil find. q.v. And China certainly does. q.v. But who knew the Chinese were building refineries for provincial use in southern Algeria? q.v. While at it, note with whom Vietnam is working as it develops gas in offshore areas that China claims. q.v.

India draws closer to a deal for transporting Iranian gas. q.v.

Even though Pete accepts the validity of the anthropogenic cause of global warming, there are other points of view. Here's one worth considering.

US oil and gas drilling indicators hit record levels. q.v.

Are the nuances real or just a function of whatever the last guy at the keyboard was feeling? That is, should we really take seriously the apparent assertion made in the US-EU summit communiqué that US energy policy now gives equal weight to controlling climate change and securing energy supplies? q.v. Or is that even what the statement is implying? Ah to be an international civil servant....

Is the Iraqi oil law reasonable? q.v. [from Petroleum World]

What the State Department  is doing about climate change, according to Claudia A. McMurray, Assistant Secretary of State for Oceans, Environment and Science. q.v.  Doesn't sound like much to Pete except the usual child-like faith that technology will save the day some day soon.

Electric bikes. q.v.

Time and tide powers the big apple, at least in miniscule part. q.v.

Brazil's lessons for US energy policy are not what you think. q.v.

What are the implications of  peak oil for climate change policy? q.v. Getting by on 450 ppm CO2 in the atmosphere may be possible if all that stuff about carbon sequestration proves true.

Head of the European central bank on credit derivatives. q.v. So should we be getting scared or not? OK, banks are out transferring the risks of corporate default to someone else, but to whom? Probably to everyone's favorite inside the beltway uncle and/or the proverbial Belgian dentist.  Perhaps we'd all get a little more sleep if Mr. Trichet were a bit less hazy on the details. After all, if we all wake up some morning and the $26 trillion has gone missing, it would be nice to think he and Ben Bernacke had at least some glimmer of an idea of where to go to look for it.

Planting more trees is not going to solve global warming. q.v. "We find that global-scale deforestation has a net cooling influence on Earth's climate, because the warming carbon-cycle effects of deforestation are overwhelmed by the net cooling associated with changes in albedo and evapotranspiration. "

Two EIA analysts on why gasoline prices are so high, and the situation in the US refining sector. q.v.

The Russians find a new way to service their largest customer. q.v.

Large solar plant opens in Portugal. q.v.

Money for free for energy projects? q.v. Pete's all for it. While at it, why not cancel a few trillion of debt ineptly incurred for past energy projects.

Saudi stock market drops 6%in day. q.v.

Projected growth of the US light diesel vehicle market segment. q.v.

 Interim progress with gas hydrates. q.v.

Is the land of the SUV ready for the Chinese Flybo? qv1 qv2

Hitting big oil in China. q.v.

Pete still says it can't be done in useful amounts but American Electric Power claims to be on the verge of starting to sequester carbon, sort of . q.v.

The fifth train of RasGas, LNG from Qatar via Exxon, is ready to rumble. q.v. All that talk of energy independence was fun while it lasted, and the nice thing is that the political class still has no idea that it's coming or even what it is so they do keep prancing on.

Pete warns you in advance about a few stray, uh, anglo-saxonisms in the title of the following article but thinks that it is something worth reading. q.v.

Quick guide to credit derivatives. q.v.

China is beginning to realize about ethanol, while the US plunges ahead. q.v.

Mining coal in China - no one's idea of fun. q.v.

Detailed outlines of a possible Chinese energy policy. q.v. Even more Chinese energy news. q.v.

Quick tour of Russian energy stocks. q.v.

Europe to place a higher priority on energy security. q.v.

Uh oh, the DOE's gone back to being trivial. q.v. Wasn't anyone paying attention?

Team Goldman Sachs tries the big sell on China. q.v. Being capitalist roaders is harder than you thought, and you aren't doing that good a job, so let us bring in the boys from NYC to bring you the real thing. Anyone buying?

The state of Wyoming gets cut in big time on federal royalties. q.v.

Quick official explanation of the problems with subprime lending. q.v. Well, sort of.

Has anyone else noticed how EIA range forecasts are getting to look like Bollinger bands on steroids? Sure the future is hard to predict so why not allow for all conceivable futures rather than be tied down to just one? q.v.

Foreign capital flows drying up? Attract some more... q.v.

A crime is a crime is a national security breach. q.v.

How secret is critical energy infrastructure information? Not very. Being a grad student will do, please just not a terrorist grad student. q.v.

Just how kosher are key US government statistics?  There's a good case to be made that there are more than a few problems. q.v. 

A little light reading for the Plunge Prevention crowd. q.v. For the uninitiated, try the executive summary, but note the warning from the report itself, "A central and recurring theme to every aspect of this Report is, in a word, complexity. Indeed, there is literally nothing about the subject matter of the Report that is simple, straightforward and one-dimensional." Not a good start for plunge prevention....

DOE finishes a well off the Alaskan north slope intended to assess methane hydrate potential. q.v.

Quick recap of Russian interest in a world natural gas cartel. qv1 qv2. Also, Russia's delay in building Iran's Bushehr nuclear plant. q.v.

Gazprom's deal with Moldova. q.v.

Are the Saudi's ready to branch out a bit from the US security relationship? The Iran Times reports that Prince Saud made favorable comments about buying Russian tanks and possibly accepting Russian help with nuclear power. Meanwhile Iran's security chief, Ali Larijani, was in Riyadh explaining what his country was doing with nukes and the role the two countries might play in Lebanon. Why is this happening? Here is one possible explanation, from the Khaleej Times.

On the European majors: BP said to be afraid to develop in Iran, while Royal Dutch goes ahead. q.v. OK, US sanctions are stupid and hurt the US most of all, but why the uneven enforcement?

Quick, coherent rehash of the 'oil explains it all' argument about what the US has done in the middle east. q.v.

One of the first test wells has been drilled to assess the extent of the North Slope methane hydrate resource. q.v.

Two interesting reports on the extent and rate of Texas natural gas depletion. qv1 qv2

We all know there is much to be concerned about regarding recent changes in the climate.  To get a feeling for it, try this interview with one of the foremost Australian experts, Tim Flannery, who regards the recent IPCC report as rather tame. q.v.

Russia and OPEC. q.v.

According to news accounts Europe need not fear a cartel in natural gas, said Algerian Energy Minister Chakib Khelil.

Appraisal of Chinese ambitions in Africa. q.v.

Analysis of Russia's energy policy: the view from Moldova. q.v.

Quick history of the European Union. q.v. Twenty five countries and still growing...

Two MIT professors explain in a mere hour and a half what will and won't work to address global warming. q.v. [requires real player]. While at it, consider the most recent IPCC report. q.v. Or maybe you like convincing divergent views. q.v.

Engineering biosurfactants to aid enhanced oil recovery. q.v.

Shell ignores Washington's silly rules about Iran, q.v.  Quite right too; the capacity for facing one more embarrassment in Washington may be used up. 

Russia takes another one? q.v.

 


Background - US Petroleum Demand and Supply

 

Retail Petroleum Product Demand Has Remained Pretty Constant ...While Prices Have Fluctuated Considerably
Does the price even matter? Talk about inelastic elasticity....

Source: EIA


The Inconvenient Truth

Source: EIA

Despite Mr. Gore's award winning film, an inconvenient truth is that US carbon emissions are going to rise rather than fall. In part the reason is that the US has more coal to burn than other fuels, and in part because the consumption of non-fossil fuels, like nuclear and wind, is expected to remain constant. Having environmental groups bless increased coal consumption, as happened in the private equity deal for Texas Utilities, is not going to help. But the real inconvenient truth is that having them and Mr. Gore dis nuclear power effectively precludes a solution to global climate change.


Larson Thane Takes a Look at the Big Energy Picture, Yesterday and Today

As we watch our energy bills climb we all wonder if we will have different energy sources in the future. Will our houses be lit with solar energy? Will our cars run on hydrogen? Will we wear silver colored jumpsuits and fly to work in nuclear powered jets? It is hard to know what the future will hold but it is possible to make some fairly good forecasts based on current trends. However, before we get to the future of energy, let’s look at the past and present. 

In figure 1 [to the left], we see the energy mix for the United States from 1949 to 2005. This shows us the energy sources that we use to make everything work from our cars and trucks to our factories and houses. This is the fuel that we put into our jets, use to heat all of our buildings, and keep our armies ready to protect our country. The y-axis is in quadrillion BTUs (known as quads), which for those of you who are not familiar with units of energy, is simply a whole lot of energy. One of the first things we notice is that petroleum has been pretty important for the last 60 years and that the consumption of just about all energy is growing. In 1949 the United States consumed just about 32 Quads of all energy including oil, gas, coal, wood, and every other source of energy. Today our total energy consumption is just about 100 quads. In other words, over fifty-six years, our energy use has tripled. Although figure 1 can tell us a lot, I think that figure 2 is even more illuminating.

In figure 2 [next below], the y-axis is no longer in quads but in the percent of total energy usage. Another way of thinking about this, is it tells us what percent of the whole each energy source plays or how important each one is. While in figure 1 we mostly see that energy use has grown over time, figure 2 tells us that some energy sources have become more and less important.

We see that oil was most important in 1977 but is now less important overall because so much of it is now imported that we have tried to switch to other energy sources whenever possible. Yes, we use a lot of oil for our cars and trucks, but we no longer use much to generate electricity. We see that natural gas peaked in importance in 1971, and never really recovered. Although we have built a lot of natural gas fueled power plants in the past few years, we also retired a lot of old inefficient gas fired power plants and we use less natural gas in our factories since they have moved overseas. Hydroelectric dams have been a solid source of electricity but they have not gained in importance because there are not too many rivers left to build dams on. What may surprise many is how coal has gained in importance after a period of decline. The 1950s and 1960 were a time in which oil and gas grew in importance at the expense of coal because they we such easy and clean fuels. However, after the energy crises of the 1970s, coal regained its importance while oil and gas waned. Coal is not an easy fuel to burn cleanly so we leave it for the huge power plants that generate our electricity. We make electricity from many different sources such as wind, solar, biomass (plants and wood) but coal is by far the most common way to make electricity. Even California gets much of its power from coal. The Californians just let other states build the plants and they import it by means of huge wires strung across the desert. If coal were banned tomorrow, California would not be able to function.  

What about solar and wind power? Isn’t it unfair to not include these important energy sources? The truth is that they are not important and they were not included on the first two charts because they would be lost at the zero line along the bottom.

Figure 3 [next below] gives us a closer look at 2005. In the grand scheme, solar and wind power combined are about as important in providing energy to the United States as by pet cat. My cat sure is cute, but he can’t pull cars across highways or heat houses in the bitter cold of February; neither can solar and wind power. Yes, a lot of wind turbines have been built and many companies like to trumpet that they are green because they have some solar panels on their roofs but that is mostly empty advertising. Companies are also allowed to imply that certain brands of soft drinks will make you irresistible to the opposite sex. In spite of all the hype, solar and wind combined only provide 0.2% of the energy consumed by the U.S. I could say more about these green energy sources but I will save that till the next energy report.

Let’s look at each energy source:

Petroleum

While petroleum has had its ups and downs, it is still the most important energy source today. Mostly we use it for transportation. It makes our cars run, it gets nearly all of our consumer goods from the factories to our houses, it gets us to work and back, and it operates most of the farm machinery that grows our food. If we were to run out of oil tomorrow (or if a big war were to interrupt the shipments we depend on), we would have a terrible time getting enough food or the consumer goods that we are used to. In short, our economy would be in serious trouble. The problem with oil is that domestic supplies have been running dry since the early 1970s. We have made up for that loss by importing more and more from foreign countries. Today, if we count both crude oil and finished products such as gasoline and heating oil, we import about 70% of our petroleum.

Natural Gas

Most of us know natural gas as the stuff that we use for cooking and heating our houses. However, that is only about one quarter (23% to be precise) of what it does. A larger share, in fact three tenths, is used for making electricity. The largest use of natural gas is by industry where it is used to heat all sorts of materials during manufacture of goods and as a feedstock for chemicals such as fertilizer and plastic. Natural gas is considered to be one of the cleanest fuels and many environmentalists would like to see it replace other fuels such as oil and coal but it is becoming scarcer in the United States and thus much more expensive.

Coal

Isn’t coal the stuff that people used in Victorian England? We may vaguely remember that our parents or grandparent used to heat their houses with it but what good is it today? Coal is a mostly invisible fuel because it requires large facilities to burn it cleanly so we don’t usually see it being used. However, without coal your life would be completely different. If you want to know what it would be like if there were no coal, go down to your basement, shut off half of the circuit breakers, and don’t ever turn them back on. More than half of the electricity in the U.S. comes from coal and today that is what it is best for; however, we may find other uses for it in the future. Two percent of coal is used to make steel (actually a product called coke which is used to make steel), and about 5% is used in industry.

Biomass

The word means a bunch of living stuff. Biomass is wood, plant waste, and occasionally it refers to animal products such as fat, manure, or garbage. Industries such as paper manufacturers do not throw away their valuable wood and paper scrap but often burn it for heat or power. Biomass (mostly corn) is also fermented into alcohol and added to gasoline. At 2.8% of energy usage in the United States, biomass does not do all that much but it is slightly more important than hydroelectric dams (2.7% of energy consumed) and vastly more important than wind power or solar

Geothermal

The word ‘geothermal’ means ‘earth heat’ which is a pretty good description. There are some places where magma lies close to the surface of the earth such as Yellowstone Park. In these regions, water can be pumped underground where it gets hot enough to drive a generator and make electricity. It is a decent energy source, but not very important because there are not all that many regions where magma lies close to the surface of the earth, and pumping cold water underground tends to cool these areas down so this energy source is limited.

Wind and Solar

I have already put these energy sources down but that is not completely fair. I own several solar calculators and I love them because I never have to replace the batteries. I could list the many reasons why solar and wind can never replace oil, gas, coal, or nuclear energy but I won’t. Suffice it to say that there are very good reason why these two energy sources combined only make up 0.2% of energy usage. It is not an evil plot by the oil companies or mean spirited politicians; these energy sources simply are too problematic. If you want one good reason why I cannot see them powering our country, it is because the wind is often not blowing and some places have almost no wind at all. As to solar power, there are cloudy days and the sun tends to go down at night just when we want to turn on some lights.

Nuclear Power

Nuclear power sure is frightening. It makes radioactive waste and you can become exposed without even knowing it. However, cars are also frightening and kill many more people each day than nuclear power plants. If you think about it, there is a long list of things that we love to do on a regular basis that are more dangerous than nuclear power plants. Perhaps the story of Prometheus gives us a good lesson about this sort of power. Prometheus stole fire from the gods for humanity and he was forced to pay a terrible price. Isn’t that how it is with any technology? The more powerful it is, the more damage it can do when we make mistake. That being said, do we want to give up other powerful and dangerous things in our lives like cars? Do we want to give fire back to the gods because it can sometimes burn us? If you want to know what life would be like without nuclear power, go down to your basement and shut off one fifth of your circuit breakers. Without nuclear power, our country would be much darker and colder.

Hydrogen

Is there a reason that hydrogen is not included in the charts above? Yes, it is because hydrogen is not an energy source. It is a fuel that does not occur in nature but must be made from actual energy sources such as natural gas, coal, or nuclear power. In addition, people who once heralded hydrogen as a future energy source are now beginning to realize that in addition to the fact that it is not actually an energy source, it is very difficult to handle. Hydrogen is expensive to make, hard to transport, hard to store, and hard to stuff into vehicle fuel tanks. 

This has been a brief overview of the current energy situation, but the future is even more interesting. In the next report, we will be looking at which energy sources will become more important in the future and which ones will wane.


The Rest of the World Starts to Drive

Source: IEA


Ancillary Matters

Source: OFHEO

No one really knows when housing prices will recover. Nor for that matter does anyone know that much about OFHEO, an obscure regulatory agency responsible for riding herd on Fannie Mae and Freddie Mac, the two government sponsored enterprises responsible for keeping the housing finance markets going by buying up and repackaging mortgages.  In the good old days, this obscurity didn't matter: homeownership percentages continued to rise and debt represented by the repackaged mortgages remained very popular among all holders of financial assets.  Unfortunately, the managers of the two government corporations got into the entrepreneurial spirit big time, and in order to bump their pay, started to invest more and more public funds in their own product, which is fine on the upswing but perilous in times like these when mortgage repayment is an issue.  The trouble was that unlike the private banks that otherwise would have bought their product, they didn't have an accounting system capable of telling them what they owned, nor adequate risk management practices to hedge their exposure. So now two absolutely essential pillars of the US financial establishment look out of whack.  As J. Lockhart, director of OFHEO put it recently:

The housing finance system is extremely large with well over $10 trillion in mortgages outstanding -- Fannie and Freddie represent 40 percent of that total. One comparison I like to make is when you add Fannie’s and Freddie’s outstanding debt and mortgage-backed securities ... to the FHLBanks’ debt outstanding of $900 billion, the total equals $5.2 trillion, which is bigger than the $4.9 trillion publicly held debt of the U.S. ... Unfortunately, Fannie Mae and Freddie Mac lost sight of their mission in the late 1990s and early 2000s and used their GSE status to grow out of control. Both companies misapplied accounting rules and manipulated earnings while neglecting to build adequate accounting systems, internal controls and risk management disciplines. Even though these Enterprises are listed on the New York Stock Exchange they have not been able to put out current financial statements for four years and it may take them another year.

Unfortunately, OFHEO did not have the tools or resources to help prevent the problems. And their role in today’s housing market is particularly important. The housing market is currently in a state of transition. House price appreciation, as measured by OFHEO’s House Price Index (HPI), has decelerated dramatically from the rates of the last few years. OFHEO’s latest data suggest that house prices grew only 3.5 percent on an annualized basis from the second to the third quarter of 2006. [see chart above] This rate pales in comparison to the unsustainable quarterly rates of 17.7 percent and 14.5 percent we were seeing in 2004 and 2005. Virtually all other indicators suggest a far different landscape than we have seen in recent years: inventory levels are way up, housing starts are down, mortgage activity has declined, and mortgage delinquency rates are on the rise.

As you know more than most, navigating these waters are difficult for even the best run companies. The Enterprises, with their significant operational deficiencies, will be even more challenged. The growing uncertainty associated with future house price appreciation will make it difficult to manage credit, as well as market risk. We need a strong regulator to ensure that they are adequately managing their risks and to make certain their capital buffer is sufficient to weather market conditions.

Mr. Lockhart's warning is worth considering carefully. The current situation is, at best, troubling.


Same Old Same Old

Graph of Annual Percent Changes in Change-Type Price Indexes for Value Added

Just in case you thought declines in the dollar had restored equilibrium to US external accounts: they haven't.


OPEC's Dominance

Source: OPEC

The simple reality is that OPEC has got what everyone else needs.  The real issue is whether the network of state-owned operating companies that supply OPEC's crude can be trusted to find enough of it and bring it online with sufficient speed to avoid disruptions in the coming decade.


A Strategy for the Transition Away from Petroleum Reliance

Source: Peter Balash, National Energy Technology Laboratory

Simple enough, just have the electric grid running more nuclear power, and plug-in the hybrid electrical vehicles, allowing petroleum to peak and decline with minimal disruption to the transportation system and related infrastructure. Works wonders for greenhouse gases too. Note that Mr. Balash's presentation, Alternate pathways to reduced petroleum consumption and greenhouse gas emissions, is not the official policy of NETL nor DOE. And that's ok because a lot of the hydrogen stuff would be a waste, but the HEV part looks pretty good.


US Oil Imports by Source Country

Source: EIA


Background: Twenty in Ten

The administration proposes that its energy plan will cut gasoline demand 20% in 10 years.  The graphic above, from the Energy Economist, shows the long term history of gasoline consumption in the US.  It looks like a worthwhile objective but will not be easy to achieve.


Whoops. President Doubles the Wrong Reserve

Note to president: there's no point in doubling the size of the strategic petroleum reserve. It works fine as is for the limited protection it affords.* No matter how crazed your policies have made the Arab world, a larger oil reserve is not going to help. The reserve that is needed in the US is a natural gas reserve, now that your administration is ready to import large quantities of natural gas from all over the world and not just from the relatively sane Canadians.

And while at it, why not have a look at what is happening to grain prices. It would be a shame if another legacy of your administration was to allow alternative fuel demand (that is, ethanol) to drive food prices.

Did anyone actually signoff on the statement, "The President's Plan Will Help Confront Climate Change By Stopping The Projected Growth Of Carbon Dioxide Emissions From Cars, Light Trucks, And SUVs Within 10 Years?" [emphasis in original].  As always, it is good to hear that "America is close to technological breakthroughs that will decrease our oil dependency, protect our environment, and help us confront the serious challenge of global climate change." Whatever they may be, sure hope they breakthrough soon.

*True, 97 days of net oil import coverage is better than 55 days, but the real damage is primarily economic damage to our trading partners due to vastly higher energy prices.  The consequences of physical shortages are much more acute for natural gas supplies in a bad winter when, as now, there is no reserve of any kind.


Quick Guide to Islamic Subgroups

Source: Congressional Research Service


Background - Recent Norwegian Oil Production

Source: Norwegian Petroleum Directorate


Natural Gas & Diminished Expectations

[A second report © Larson Thane] In the last energy report, we looked at how U.S. natural gas production peaked in 1973 and has never recovered to its previous level. While gas production was able to grow in the 1990s due to the lingering effects of the Fuel Use Act, the previous decline has resumed and has not been able to recover since 2001. The fuel use act, which forbade much gas consumption, led to severe demand destruction and gave the illusion that natural gas was going to be permanently cheap and abundant. It was this legislation, which allowed gas production to show a short-lived recovery in the 1990s. Sadly, even the best laws of man cannot overcome geological realities as will be seen below.

The low prices and rising production of the 1990s led policy makers and statisticians to believe that there was far more gas available than was actually contained in the earth. This was the time when numerous gas power plants were built with the idea that they would eventually be able to replace coal power generation. Nearly everyone in the energy business began to believe that coal was a relic of the Victorian era that would soon become as obsolete as silk top hats and bustles. The government through its statistical office (The EIA) reflected gas’ ascendant position in its annual reports.

Figure 1

In Figure 1, we can see The EIA’s forecasts for gas production as published from 2000 to 2007 (some odd years have been left out to make the chart easier to read). In 2000, the forecast was for steeply rising gas production to feed all of the new power plants and the numerous other uses that people envisioned for clean, cheap, and abundant gas. As we now know, gas peaked in 2001 and shortages caused prices to skyrocket but it takes a while for people to realize when the party is over. In 2002, all of the gas power plants going in and the enthusiasm for environmental laws led the EIA to revise their forecasts for gas upward.

Gas was believed to be such a great fuel that the country should burn as much as possible. Although some people, led by economists without any technical or geological training, wanted to believe that resource depletion is impossible, the truth began to leak out. In September of 2003, a group of the top oil and gas experts in the nation known as the National Petroleum Council and whose purpose is to make recommendations to the U.S. Department of Energy, released a report titled “Balancing Natural Gas Policy” in this report, they clearly stated that North American natural gas production had “plateaued” this was a gentle way of saying that natural gas, neither Canadian nor domestic, was not going to meet the nation’s expectations.

Figure 2

Let no one believe that this message was ignored. If we look further at Figure 1, we can see that the government forecasts for gas production became progressively more pessimistic. There is still a lingering hope that somehow gas production can be increased, perhaps though opening up regions currently off limits to drilling or through some miraculous technology that causes unconventional gas to flow easily. However, the black line that shows actual production has demonstrated that so far no miracle has materialized to make earlier optimistic forecasts come true.

The government’s job is to find solutions and the first attempt at solving the gas crisis was imports. Since the National Petroleum Council had already stated that neither Mexico nor Canada would be able to save us, hungry American eyes turned to more distant shores. Since it is too difficult to build gas pipelines under the Atlantic or Pacific, gas from remote countries such as Qatar or Russia must be chilled until it condenses into a liquid and is loaded onto specialty tankers. This Liquefied Natural Gas is simply known as LNG in the industry. LNG was to be America’s energy savior. Around this time, Alan Greenspan began to talk enthusiastically about LNG and the EIA also jumped on the bandwagon.

In Figure 2, we can see government LNG import forecasts published from 2000 to 2007 (actually they are published in December of the previous year). As before, some odd years are left out to simplify the chart. The 2000 and 2002 forecasts both predicted that LNG imports would remain low because it was assumed that there would be no problem with increasing domestic gas production. However, after the experts of the National Petroleum Council spoke in 2003, the forecasts abruptly changed. The 2004 forecast predicted that vast quantities of LNG would be shipped from the Russia and the Persian Gulf to keep our gas power plants humming. It was a relief to know that our long trusted Allies in the Persian Gulf and Russia were going to protect America’s vital energy security.

While it might be nice to place American national security in the trusted cities of Moscow, Riyadh, and Doha, in the past few years, it has become clear that Europe and Asia also want the limited quantities of LNG available. As gas production in Britain declines and Russia shuts off gas pipelines at their political whim, Europe and Asia have driven up the price of LNG far higher than most people thought possible. If we look further at Figure 2, we see that the EIA is beginning to revise their LNG forecasts downward. Even more startling, if we look at actual LNG imports, we can see that they have been far below the forecasts for the past two years. We must face the fact that there are many countries in the world that want to import natural gas as LNG but there is not enough to go around.

Furthermore, some of these gas-consuming countries are more desperate than the U.S. and are willing to pay higher prices. Finally, since LNG is a very cold liquid, it is difficult to ship, so the farther it must travel, the more expensive it is. The US is far from all of the really promising LNG producers, so Asia and Europe have a competitive advantage over the United States. Although LNG will continue to be shipped to the United States, it will not be able to meet the EIA’s forecasts. Some other energy solutions must be found. Fortunately, the energy industry has been preparing for the eventuality for decades and has a number of alternatives that can be developed in the coming years.

Do not think that industry and the government have been ignoring these issues. Perhaps they have been moving too slowly and perhaps they have been too optimistic in their press releases but this seems to be what we want from them. We want them to act only after extensive thought, and we want them to tell us that everything will be fine. While there is much in industry and government that is still being withheld from the media, we can get a clue to some of the discussions, if we look at a hearing before the U.S. Congress’ Committee on Energy and Commerce held on December 7, 2007 and titled “Understanding the Peak Oil Theory”. Here we see that industry, the Department of Energy, and the Congress are all aware of energy depletion issues. Some are more concerned than others and some want to act more slowly than others, but would we expect anything less from a country that embraces diversity in thinking?

There are voices that even now are calling for an “Apollo Mission” or a “Manhattan Project” for energy. They want to see bold and decisive moves to develop new energy sources. Any student of history should know that these great projects are seldom if ever put into motion until a catastrophe falls upon us. The terrible strike on Pearl Harbor was required to implement the great war projects such as the nuclear research in our deep deserts. It was the unprecedented humiliation of Sputnik that gave us the will to pursue Apollo. What will be required to really convince the United States that new energy sources are needed? What will force Americans to conserve, to drive smaller cars, to use public transportation? If we are to believe the people that testified before Congress in December of 2005, we will likely find out before too long. It would have been nice if we had been able to be more prepared but we can be given some credit. Industry and government have many great ideas waiting to be brought forward. In future reports, we will look at some of these options.


Saudi thinking on events in Iraq and the schism within Islam. q.v. By the way, some time ago Pete ran a mention of the anti-Saudi book by Gerald Posner (see p. 13 of the archives).  It seems various senior Saudis issued comments on the book that Pete never reported but which in fairness should be considered carefully. q.v.

The looming battle over European electricity competition problems and ownership unbundling. q.v.

Does paying for premium gasoline deliver any real benefits? q.v.

EIA's latest attempts to assess the benefits and costs of various greenhouse gas emission cap and trade schemes. q.v.

Movies worth seeing: Who Killed the Electric Car? [Netflix] Strangely unbalanced and overly partisan tale of GM's EV1, an electric car leased temporarily to movie star aficionados to placate the California Air Resources Board, and then withdrawn. After an hour or so, the film gets around to plug-in hybrids and sketchily details the reasons why they're better than hydrogen fuel cell vehicles.

Project on Government Oversight's guide to the MMS royalty fraud controversy. q.v.

Forecasts that Iran may actually require nuclear power. q.v. Chronology of the Iranian nuclear program. q.v.

Editorial commentary on events in Venezuela. q.v.

Should Europe worry about gas supplies in view of the Russia - Belarus dispute? q.v.

Does federal oil and gas leasing policy need to be revised? Probably. See the presentation made by Laramie Energy at a recent conference. q.v.

While the US has been out alienating. destabilizing, and dividing but not conquering, the Chinese have been out buying up a sizable portion of the remaining supply of world oil. q.v.  Too bad Exxon has finally decided to ape BP's bogus greenishness, advertising its corporate priority as, "We're working to reduce emissions for 6.5 billion people." How, by not having enough oil?

According to Dow Jones, the president of OPEC, Edmund Daukoru of Nigeria, indicated that cartel members aren't rushing into other currencies, but they are concerned about the value of the dollar. To some extent OPEC members can compensate for the reduction in dollar purchasing power by adjusting output quotas. He called for the dollar to be "firmed up."

Breakthrough in using coiled tube micro drilling for shallow gas? q.v.

Russia swallows another international oil major's big project. qv1 qv2 Looks like the role of private equity in owning oil reserves just go a whole lot smaller.

So who else is following Iran's footprints and going nuclear? q.v.  Presumably this one will be ok, after all it seems only fair Sunni and Shia should both get to play. Or maybe not....

EIA has issued a preliminary version of its long-term forecast. q.v.

DOE ups strategic reserve to 1 billion bbls. q.v. Nice thought but wrong commodity: the US needs a natural gas reserve, not a bigger oil reserve.  China, who does need to get going with their oil reserve, should not be competing with DOE to add oil to storage.

If the US pulls out of Iraq, will the Saudis move in?   q.v. Who'll get the oil revenues q.v. and for how long?

More on the plunge prevention team (or plunge protection, if you prefer) q.v. Sending Paulson, Bernanke, and Bodman to China should tell you something....But if everyone knows the dollar is going to be allowed to slide, is everyone supposed to wait politely and let it happen in small increments?

DOE will use advanced burner reactors to get rid of  the transuranic zoo. q.v.

Uh oh, another oil-rich central bank governor mulling over whether to dump the dollar. q.v. Interesting how the arguments in the middle of the paper don't seem to be reflected in Sultan Bin Nasser Al-Suwaidi's conclusions. And what do the conclusions mean anyway? When in doubt, duck.

DOE turns on the financial pumps to subsidize more climate change. q.v. Chalk up another billion to the children's debt. If it's such great technology, why subsidize it?

Text of the Iranian president's open letter to the American people. q.v. Needs a bit of wordsmithing and a quick pass by the spin control folks - zionists in the banking system are not the problem. But it is right about a few things.

Interesting reading on the long-term natural gas situation from the Thane Report. q.v. [pdf]

Five members of the Stanford faculty discuss energy policy sensibly. q.v. There's much worth considering.

Stuff you should know if you're interested in how Washington really works, such as what aspects of bank operation the feds can and cannot preempt states from regulating. qv1 qv2

Before his stellar career in plunge prevention, (see below) Pete used to write Jeremiah-like  cautionary tales on all the bad things about to happen to the economy. He no longer dares, not because his stripes have changed, but because he was wrong: the bad part never actually happened, however right he might have been in theory. The game just continued on as it has for many years, getting weirder and weirder.  Now he refers you to others. q.v.

The Belgian dentists own so many dollar denominated assets, says an IMF study, q.v., that "for every 10 percent decline in the dollar, U.S. equity markets, and U.S. bond markets, foreign wealth losses would amount to 4 percentage points of foreign GDP. Foreigners are also exposed through their positions in dollar-denominated bonds issued by foreign countries; bringing these holdings into the analysis puts the total wealth loss at nearly 5 percentage points of GDP—or roughly $1.2 trillion in foreign currency terms of financial wealth."

Warning: the electricity system is going down slow. q.v.  NPR's audio report on the coming crunch in electricity. q.v.

Burning ice, or recent studies dealing with gas hydrates: Mineral Management Service & NETL.

Pete used to think that the only agency with an understanding of what energy policy had to be was the Federal Reserve. These days, the agency that most affects future energy policy is probably Treasury. Click here to watch Secretary Paulson's overview speech (Windows Media Player).

OFHEO is not exactly an acronym most people know. But it oversees both Freddie and Fannie, and they oversee trillions in mortgage debt, and a noteworthy portion of that is voodoo mortgage debt, so what OFHEO thinks is worth considering.  And much of what it's president has to say is that it lacks the legal power to do its job. q.v. Better listen  sooner rather than later, because both of its charges have balance sheets bigger than all reason, and show signs of getting weaker. And the problem with that is that much of the banking system's Tier 1 capital is made up of their paper, which the fed has / hasn't (hasn't but really has) guaranteed.

Billions in the [Williston Basin] Bakken? q.v. Pete suggests you read this one with at least a few grains of metaphoric salt.

More delay on bringing the gas cap south. q.v.


Europe's New Energy Action Plan

...has been released. qv1 qv2 It provides a slate of some 75 measures geared toward energy efficiency that are intended to produce reductions of 13% in 2020 from today's usage levels.  How this will be done is not exactly clear, especially if one views the accompanying video q.v. [requires Real Player and high school French] which Pete thought the best part of the exercise. It has an unmistakably surreal quality reminiscent of Antonioni's Red Desert, regrettably without Monica Vitti, and no doubt indicates just how different European taste in government videos may from US tastes. Still, Pete reckons it will be hard to drop even a tenth of a smidgeon of energy demand if the video shows new European approaches to energy conservation.

In addition, the Commission promised action to remedy antitrust problems caused by overly concentrated market structure among the energy industry. q.v. That sounds like a good idea.


Just How Green is Big Carbon?

We all know US climate change policy is to change the climate, and for the worse.  Nasty business and all that, but there it is -- big, big money is at stake, far larger than anyone can imagine, and no one is going to be able to stop or even materially restrict carbon use, however well intentioned.  Sure, there are some staffers deep in Nancy Pelosi's closets standing by, ready to jump to life with novel emission trading schemes, big buck subsidies to the old-line greens, and so forth.  But it is all a sham.  Stop burning carbon, or cut it in half, and we can talk about saving the Holocene. But the public can't stop using petroleum and natural gas (note that demand has fallen hardly an iota despite $70 oil).  They couldn't even if they wanted to and they don't want to.  If playing games will help you feel better, then play away. Just don't pretend regulatory games are better than really doing something, like replacing coal plants with nuclear plants and mandating plug-in hybrids.  Any carbon trading scheme necessarily has to have loopholes large enough to drive a thousand of the Schwarzenegger family Hummers through. If in doubt consider 42 USC 13385, which is only the starting point for figuring how much past self-certification of voluntary reductions must be taken seriously when passing out the emission trading rights.

So how is Big Carbon going to try and PR the problem away? Lee Raymond of Exxon knew it was impossible to sell hydrocarbons and with a straight face tell the public that they were helping the planet. But his competitors and, now apparently, his successors, believe they can game the image thing. So now with Raymond out, Pete suggests off to the left that Exxon may be taking its first tentative steps along the BP "I'm green and I'm proud" route, with only Policy Pete and a few others laughing out loud. But as G. Cowan says in response to Pete's observation, "'Green means 'nonthreatening to public oil and gas money.' It doesn't mean clean or sustainable or any of that hoo-hah; if it did, nuclear would be green, rather than, as all agree, the least green thing ever. So your reference to 'BP's bogus greenishness' is in error. BP is green, green, green; in C. S. Lewis's words, 'green as poison.'" As the oil patch gets ready for the new Democratic congress, perhaps it can go forego colorful claims.

The comments drew an interesting response from Bob Ehrlich, who, unlike Pete, actually has oil patch credentials:

Enough all ready! The public energy policy is a shambles on both right and left. Let's not unduly punch the demos. after almost 8 years of republican obscurantism. Give Ms. Pelosi a chance to develop her own obscurantism.

On a more serious note, we (the world) will certainly burn all of the relatively low cost hydrocarbons that exist. Big Oil would not be developing the deep Gulf of Mexico at todays crude prices. IMHO we need $80+/ bbl for them to get a reasonable return on their investment.

Aside from the carbon dioxide problem, the US is by far the greatest importer of hydrocarbons in the world. As we import more, our balance of payments deficit grows larger than other countries-just due to our consumption of hydrocarbons.

It seems to me that we can set aside the moral arguments for the nonce, and say it is in our national interest to reduce (or slow the increase) our consumption of hydrocarbons. Attempts at conservation along with shifts to non-hydrocarbon sources will neither "solve" the world-wide problems of CO2 / climate interactions, nor will it over the middle and long term keep a lid on oil and gas prices. However it can lessen the political leverage of the big oil producers and provide major economic benefits for all of us.

The Republican administration and big oil have muddied the waters in this regard. The management of EXXON should try to increase their reserve base and stop promoting science fiction. They and their ilk have done much more to damage US energy policy than your demonized liberals.


European Petroleum Imports

Source: European Commission


The Near Term Outlook for Oil

Source: EIA

[Pete apologizes for the incorrect chart that first appeared here]

Note that the price of oil more than doubled over the period, without affecting demand growth appreciably. Just how high do prices have to rise before demand levels off? Or is the decline in demand just delayed, since no one would choose to return to 19th century energy consumption patterns if given a choice. Instead of using less, consumers delay the inevitable by the mass maxing out of available credit, transferring the problem into the housing sector, where the available collateral can be found? This may account for some of the rather desperate measures the overseers of housing finance are starting to issue in order to reduce subprime lending. q.v.  But it is not a small problem. q.v.


World's Biggest Oil Consuming Nations


Unproductivity, or Stripper Nation

Source: EIA


History of World Oil Supply Disruptions

Source: IEA


Background - US Petroleum Stocks

Source: WTRG Economics, Energy Economist


Net Energy Givers and Takers, Or Why Everyone Should Be Grateful to Wyoming

What if net deficits were not permitted?

Source: Wyoming State Geological Survey Coal Section (see page 28)

No one doubts that energy resources are unevenly distributed but just how unevenly sometimes seems hard to believe.  The chart shows for each state the difference between production and consumption of energy. A few comments: (from Matt Simmons) 'This is a powerful graph.... It once again highlights how fragile our energy resources have become. To see Texas, California and Louisiana as net energy importers is a gasp. 50 years ago, California was as important oil producer as Texas was;' (from Randy Udall) 'On an annual basis, any state in red is short at least 3 quads. That's about 120 nuclear reactors per state, or 3 Tcf of natural gas, or 600 million barrels of oil, or 1,500,000 railroad cars of coal. Will we continue to share happily? For how long?'

The paper itself is well worth reading.  The authors examine what would happen if the US took energy independence seriously and had to turn to the various alternative fuels to make up the resulting deficit. The paper provides a series of pretty convincing arguments why most of the proposed alternative fuels wouldn't be satisfactory. It includes a series of compelling maps that quickly illustrate which states are and are not players in each alternative technology.  Fortunately, word of global warming has not reached Wyoming, so the authors are unconstrained in suggesting coal would be a major replacement fuel, which is not surprising given their affiliation. 


So What Would the Democrats Do About Energy?

House democrats offer the Progress Act (based on a slick acronym too silly to spell out), which in turn offers:

Not terrible but relatively lame, if you ask Pete. How strange to still have John Dingle involved with energy policy. It was Dingle, thirty years ago, who stopped the energy policy that would by now have halved US greenhouse emissions and halved foreign oil dependence. He did it thinking he was protecting Detroit, but as we now know all too well, it didn't work. Detroit is once again in ruins from being left alone to get it wrong. It would be nice if Dingle, Pelosi, and Steny Hoyer didn't screw it all up in the democrat's second big chance. Many trillions under the bridge since those days, much of it misspent....


Background - U.S. Residential Natural Gas Prices by State, 2005
(Dollars per Mcf)

Figure 2 is a map of the U.S. showing the residential natural gas prices by State for 2005. Different colors are used to designate the price ranges. For more information, contact the National Energy Information Center at 202-586-8800.

Source: EIA


Russian Natural Gas Supply Outlook

Urengoy is fading faster than Pete thought ...

Source: IEA


Another Year of Ineffective Climate Change Policy

Can we get away with another year of the intensity con wonders Pete...

Source: EIA

...came and went.  Unfortunately, no one in the US noticed.  However, the rest of the world was paying attention.


Quarterly Oil Company Profits

Pete has grown tired reporting oil company quarterly profits. They remain of near record size. q.v. The problem is a flaw in the capital allocation function: the price mechanism provides so much money that should be spent sharply increasing production, but as the companies have only a limited slate of exploration possibilities, many large companies such as Exxon are forced to give more than half of the misallocated capital back to shareholders either as dividends or supporting the stock price. This removes the capital from the energy economy at a time when, if it is not available for new e & p, it should be redirected to cover the cost of demand reduction and true alternate sources of supply. Fortunately, this severe distortion in the system that can be cured by tax policy.


UK Oil and Gas - Beginning of the End for Net Exports?

The following bullet points and the accompanying charts are taken from a United Kingdom government report, Energy Trends and Quarterly Energy Prices q.v.:

Oil

Natural Gas

[Pete's other note: remember that the UK tends to export its very high grade North Sea crude, and import lots of lesser crudes from the Middle East and elsewhere.]

 


Surprise, Surprise - The Saudis Are Even Richer

The International Monetary Fund has toted up the most recent numbers and, yes, the Saudis are doing very well:

Source: IMF

The current account surplus is running is so big that it equals a third of Saudi GDP, and the government spending balance equals a further 17% of GDP, which separately and/or combined is absurdly large.  The corresponding US deficits are both running about 7% of US GDP. Notice that gross official reserves doubled in 3 years, which gives the royal family even more leverage should they wish to threaten changes in reserve composition.  Since oil is paid for in dollars and the Saudis  peg their currency to the dollar, the market can't equilibrate by bumping the value of the Saudi riyal.  For instance, while oil prices increased seven fold from 1999 to 2005, the Riyal/Dollar exchange rate remained fixed at 0.2670. Since the US is spending a lot of effort trying to get the Chinese to loosen up a bit and let their currency float at least a bit, maybe the same message should be preached to the Saudis if the US really wants markets to work. In all events, keep those petrodollars recycling....


Annals of Plunge Prevention (2) - Plunging Ahead

[Click here for recent background speculation on plunge prevention]  However improbable Pete's ascendance to the top wrung of the plunge prevention ladder may have been, he soon settled in to the work.  It took a year or so, but the market undid the damage caused by his initial efforts q.v., and was again hitting daily new peaks.  Those who had chosen him were quick to forgive his early bumbling, writing it off as bad luck coupled with inadequate ship-to-shore communications on Long Island Sound, which could hardly be blamed on Pete. They needed someone for the work, and he was their guy.  Continued....


EPA on Mercury Exposure Among Women of Childbearing Age

Distribution of concentrations of mercury in blood of women of childbearing age, 1999-2002

Source: EPA

The principal source of the mercury problem in the US is from coal.  EPA's conclusions follow:
  • EPA has determined that children born to women with blood concentrations of mercury above 5.8 parts per billion are at some increased risk of adverse health effects. About 6 percent of women of child-bearing age had at least 5.8 parts per billion of mercury in their blood in 1999-2002.
  • Current research indicates that there is no safe level of methylmercury in the blood within the range of exposures measured in the human studies of the health effects of mercury, which were as low as 1 part per billion. About 48 percent of the women of child-bearing age in the United States had at least 1 part per billion of mercury in their blood in 1999-2002.
  • The graph shows reported concentrations of mercury in blood from the National Health and Nutrition Examination Survey. These figures are for total mercury, which includes methylmercury and other forms of mercury. However, most of the mercury in the blood of participants in the survey was methylmercury, so the measured concentrations are a good indication of methylmercury concentrations.
  • The National Academy of Sciences (NAS) and EPA have determined that 58 parts per billion of mercury in the blood of pregnant women corresponds to approximately a doubling in the risk of poor performance on a specific neurodevelopmental test. The NAS and EPA also have concluded that 32 parts per billion of mercury in the blood of pregnant women corresponds to approximately a doubling in the risk of abnormal performance on a range of neurodevelopmental tests. Data from the National Health and Nutrition Examination Survey showed no measured blood mercury concentrations greater than or equal to 58 parts per billion in women of child-bearing age. A small percentage of women (less than 1 percent) have blood mercury concentrations greater than 30 parts per billion.

Summer Natural Gas Demand

Source: EIA

The utilities are using more and more natural gas to meet summer loads.  This is a mistake.  Natural gas is far too valuable to use for electricity production.  It made sense in the old days when there was a year round surplus, and all winter loads could easily be met.  And even though this year's record utility demand did not come at the expense of the necessary build up for winter peaks, it is only a matter of time until the two competing demands conflict enough to produce a serious problem. It is not necessary to ban it all together, but to phase natural gas-fired electricity production out over time with either carbon taxes and/or mandatory proof of alternate fuel capability.


Exxon on the Obvious: Forget Energy Independence

Exxon reminds those who will listen that no matter how much lip service is paid to energy independence by the political class in the election season, there is no prospect of even moving in the general direction of energy independence ever again. q.v. At best, you can hope for diversification among suppliers. This may not be much, but it eludes the current crew in charge of US foreign policy. If you thought imported oil was fun, wait until half your natural gas arrives in ships.

Khalid A. Al-Falih, Senior Vice President, Saudi Aramco, expressed similar views on energy interdependence recently. q.v.

Pete, who's more rabid than most, reminds you and Exxon and Saudi Aramco that energy independence (and, what the hell, the only known cure for global warming) is in fact still sort of a possibility, but only if we're willing to go balls to the wall breeder reactors pursuant to an all-electrification strategy. Pete is, but you're probably not....And James Carville?
 


Quick Guide to European Natural Gas Supply

Source: EIA

For all those arrows dropping down from the north, see the outlook for Russian natural gas, above.


Algerian Gas Export Trade Continues to Expand

All the gas you want, for a long, long time?

Source: EIA

Most of the natural gas exports now go to Spain and France by pipeline. But Sonotrach has been in the LNG export trade since the 60s and expects to open a major new LNG train in 2007. Plus, plans are underway for construction of a 4,500 mile (!) pipeline out of Nigeria to Algeria to make that gas more easily available to world markets.


Background - Increasing Natural Gas Storage

Source: EIA

As a large portion of marginal US natural gas supplies begin to come in from the Caribbean and the Middle East, it is essential that working storage increase. But the increases shown above really just track increased demand, and are not analogous to a strategic reserve.  Such a reserve needs to be created.

 

Background - Who Has Crude in Sub-Saharan Africa

Source: EIA


Winners and Losers

Hello Angola!

Source: EIA


Background - The Drop in Oil Prices

How low will it go before OPEC tightens up?

Source: OPEC


Pete's Ace Reporter in Pinedale, WY - 1

Actually, Pete's ace reporter on unconventional gas and unconventional everything else, Cody McHubart, is not yet in Pinedale, so far as Pete can figure.  He's stuck in Laramie where he's been roped into a playing a role in one of the crews building a huge pipeline that will transport all that gas from Wyoming to the West Virginia border. He has the interesting habit of arriving each day at the job site by bicycle (a strange European fold-up thing known as a Cobra):

A) I ran the Cobra the 4 mi. S. on 287, to the Yard, and lined up with two young white boys and three Mexicans. I got there @ 6:05A, so that was not the Problem, and near all of them Big Dogs was a'passin me on my tiny bicycle, so much that I set my mind to reclaimin my RePuTAtion, once I rolled into that Yard (by the by, I been readin as to how All them Detroit Merican Idiots, what Ran our auto industry on nuttin but Hi-$ S.U.V.'s, '

Big-Assed Pick-Ups, for eversolong, and now they are drinkin dirt, Toyota/Honda's dirt, BUT, you sure as Christ would never know nothin was Wrong with the Pick Up market in N. America from gazin once @ the Associated Yard, @ dawn; why, they ain't One of Them Dogs, a come from all over the country, what'd be seen Dead w/o @ least 350 horses, 'n a good many of em is rolling duals), and you know the Sayin: "If You Want to Run with Them Big Dogs, You Can't Go Pissin Like No Puppy!", & like I was tellin you yesterday, my Mind is just Full-On, of late and soose I rolled up to the cluster-F of portocrappers to dump my morning coffee, and jumped off Cobra and said, to the whole cluster of them, sort of not really staring @ this grey and Long haired Freak a'tryin to take on Wyomin, for Chrissakes, on no bicycle! I says; "I jess Hates given Ussama Bin Ladden that diesel money, if I can aVOID it". An I waled into the portacrapper, reputation EnHanced!

Soose, Gary Vahn is the Union Steward, for the General Laborers, but he stands about six six, and talks with one of them Texas Drawwwls, and He Don't say, "stew ward", nah, he says 'stewrt'; and you got to Respect them Texans, especially the ones what are in they fifties like us, and This Man is up here cause Times, well, for a Gas Pipe Man, they just don't git a whole lot better. Nopes. Why, for drillers and any form of what-nots, comes to Oil and Gas, if them R's run the table, and open up anywhere where they don't have an Old Faithful type Landmark, or the Kennedy Grave perhaps, for drillin, and on top of dat, the price of both oil and gas is nea its all time peak, why...what is not to like about Life in them days? So Gary is All heart and honesty. HE is pledged to give the first two jobs to two fellers what been there three mornings in a row, but he wants us all back tomorrow, except that a friend of his down in Cheyene, is looking for a crew to do somethin probly pretty ugly to a Refinery down there, and Gary tells us that we could probly work that, and come back and still get on The Intrega line.

I scootch up to the U. of W. library, to see some O&GJ's, with what could be my last day of freedom, and the catalog takes me to a mislabeled # where there is a thing called: Piple and Gas Journal. In the fourth issue I scour, about back in June, the editorialist takes to task Those Rat Bastards in the O & G industry, who are beating the drum against the increasing obviousness of Climate Change. I pinch myself, twice, and think: can this be Happening? Young blond twenty-lows, a'totin three churned-out toddlers and bits-readers, @ the PL, PLUS, a job payin a Livin Wage, wherevr you look, PLUS, GOD damn, an official house organ of the petroleum extraction game, berating industry leaders for being so morally cheap as to sell out the f***in Planet for mere dollars?

I mustah died, 'n gont a heaven.

So, on the subject of WHY any reasonable collection of Manhattan Fools, would divy up enough nominal $ to buy a half years worth of TCF's, I reckon it is a slit thing twixt Greed, and utter stupidity. Warren Buffet don't move Billions around, nor hundreds of millions, based upon some WIRED thing he gleans from watchin twelve data screens, twelve hours per day. That just ain't the man's style, mind you.

I recall being given the assignment, @ the Seco Fandango, to try to talk some Manhattan money youngster off of a possible nasty annoucement about a SMUD bond, before the election, in '88. You think, well, them Lords of the Ivy League, Master's of the Universe Types, as Tom W. calt them. They MUST be hip. But, they cover a lot of territory, and it is all but an abstraction and a blurr to them, and the guy thot that ALL of SMUD's borrowin was for Ranch-fixin, but SMUD was building up Roseville, cause Hewlitt Packard and 3M R&D had just come to town. When I stressed to him, that allot of the foreign (meanin NYC) money was buyin POLES, and TRANSFORMERS, geese, you guys don't have any anxst bout dat! Do you?" He backed down. Sensin blood in the water, and well...let us be frank, here, I was absolutely Manic, trying to make up for Chemma in five weeks, and it was, as all elections, all or nuttin, in about six days out, by then. So I was not all that Restrained with my penchant for metaphor, and verbal nastiness, and tonal too, and I just was too far back on that learning curve of how to master internal insanity, to give a shit, and said: "Jeese, and here I always thot you guys were Hip!" And he scuttled off, reckonin, correctly, that it OUGHT to have bee enough that he pissed backwards on the substance, without the excess of me pilin tones on, after the whistle.

Got to jump to what could prove to be me last feast @ the Soup Kitchen.


Europe and North America: Comparison of Primary Energy Supply in 2003

The two regions are surprisingly similar in the types of primary energy they use, but note the quantity difference.

Source: IEA

How Well Have Poor Countries Fared Under Higher Oil Prices?

Coping with much higher oil prices...All goes well so far.

Source: IMF Survey

The simple answer, according to the International Monetary Fund, is not too badly, at least as measured by the number of countries lining up for additional aid. But the report was prepared using 2005 numbers. As the authors note, ".... with world oil prices continuing to rise substantially above the average price for 2005, a number of low income oil importers could face more serious pressures. In particular, they may have little scope to further compress the volume of petroleum imports without dampening growth. At the same time, if countries do not adjust, and higher imports of petroleum products lead to a loss of reserves, their financing needs could increase. For example, assuming an average oil price of $66.50 a barrel in 2006 and no further reduction in oil import volumes (as well as a reversal in capital flows to low-income oil importers, consistent with projections in the IMF’s World Economic Outlook, April 2006), average reserves would be expected to fall by an additional 0.5 percent of GDP, or 1.3 percent of GDP in total. If such a scenario came to pass, more countries might turn to the IMF for financial support. " Yes, they might.


Background - Natural Gas Demand Continues to Fall 

 

Nominal Natural Gas Prices by Sector ($ per Mcf) Sector Demand

Source for both: EIA


What Has the Energy Policy Act of 2005 Done for Us Lately?

Quite a lot, according to the Senate Energy Committee:

27                                New ethanol plants that have broken ground

500 million                  Gallons of new annual ethanol production online

1.4 billion                    Gallons of annual ethanol production online by end of 2006

401                              E-85 pumps installed 

25                                New nuclear reactors planned                        

25,000                         Megawatts of electricity will be generated by 2020 if all 25 plants are built

15 million                    Households can be powered by the electricity from the 25 plants

0                                  Airborne emissions will be generated by the 25 plants

116,871                       New hybrid vehicles purchased since Jan. 1, 2006

1.34                             Billion cubic feet/day of new Liquified Natural Gas (LNG) capacity online

9.7                               Billion cubic feet/day of new LNG capacity approved by FERC

5                                 New LNG terminals or terminal expansions approved by FERC     

30                                Emergency fuel waivers granted following Hurricane Katrina

2,000                           Megawatts of new wind power online          

493,000                       Homes that can be powered by new wind power

3 billion                       Dollars in economic activity spurred by new wind power production

7 billion                       Pounds of CO2 emissions avoided by new wind power production

4,200                           Megawatts of new wind power slated to be online by end of 2006 

1 million                      Homes that can be powered by new wind power by end of 2006

100                              Percent increase in CA and NJ applications for photovoltaic systems          

2,000                           Megawatts of new geothermal power under development   

30                                Percent increase nationwide of solar thermal collectors installations

15                                New efficiency standards implemented for large appliances

50,000                         Megawatts of energy saved by 2020 because of the 15 new efficiency standards

80                                600-watt power plants won’t be needed because of the new efficiency standards

120                              New coal-based facilities in various stages of planning

2 million                      Barrels of oil daily that can be replaced by clean, synthetic fuel from coal by 2025

5 trillion                      Cubic feet of natural gas that can be replaced by coal fuels by 2025

55,000                         Coal miners expected to join workforce over next five years

Source: US Senate

Allow Pete to summon up the aphorisms: to be taken with just a few grains of salt; the devil is in the details, etc. etc.


IEA View of Long-Term European Prospects

Source: IEA


Background: Greenhouse Gases in Asia

Taiwan, the bad boy of Asia

Source: EIA

Needless to say, Taiwan didn't sign the Kyoto protocol.


Recent Trends in Oil Production and Prices

Roger Blanchard reports as follows:

While the price of West Texas Intermediate oil was above $70/barrel for much of the first half of 2006 and the average price of all oil grades was about $27/barrel higher than the average during 2004, global liquid hydrocarbons production declined more than 100,000 barrels/day (b/d) compared to the first half of 2005, according to U.S. Department of Energy/Energy Information Administration (US DOE/EIA) data.  For comparison purposes, global liquid hydrocarbons production increased 3.43 mb/d in 2004 and 1.47 mb/d in 2005.  Much of the global liquid hydrocarbons production increase from 2003 to 2005 was due to OPEC, which increased production 3.66 mb/d as excess capacity was brought on-line.  Now there is little or no excess capacity to bring on-line.

 Many new oil projects have come on-line globally in the last few years and many will come on-line in the next 5 years.  Unfortunately, many of the world’s large oil fields are declining rapidly and the price of oil has virtually no impact on the rate of decline for those declining fields.  Increases in production from new projects are largely being negated by production declines from old fields.

 As an example of the rapid decline of giant and supergiant oilfields, the Prudhoe Bay field produced nearly 1.6 mb/d in 1988.  Since 1988, production from the field has decline at about 10%/year.  Prior to the partial shutdown of the Prudhoe Bay field this summer, it was producing about 0.33 mb/d, excluding satellite fields.  Even though there have been numerous fields developed on the North Slope of Alaska since 1988, Alaska’s oil production has declined from 2.02 mb/d in 1988 to ~0.8 mb/d this year (before the partial shutdown of the Prudhoe Bay field). 

 Many other oil producing regions are also seeing rapidly declining production.  Last year, North Sea oil production declined about 490,000 b/d.  In the first 6 months of this year, North Sea production was down another 420,000 b/d.  North Sea oil production has declined from 6.3 mb/d in 2001 to ~4.5 mb/d this year.  About two-thirds of Mexico’s oil production, ~2 mb/d, comes from a complex of fields called the Cantarell complex.  Production from the Cantarell complex has started to decline with an expected decline rate in coming years of 10%/year or more.  For the April/May/June period, Mexican oil production was down about 100,000 b/d in 2006 compared to the same period in 2005.  Even the megagiant fields in the Middle East, Ghawar (Saudi Arabia) and Burgan (Kuwait) are experiencing serious production problems which limit the ability of Saudi Arabia and Kuwait to increase production.  Optimistic economists fail to appreciate the impact of declining production from large old fields when projecting future global production.


Fake and Real Energy Policy

Anyone with even a rudimentary understanding of how Washington works soon grasps that there is more going on than meets the eye. With energy policy there has to be because what meets the eye is so depressingly hackneyed and wrong that only an assembly of idiots would offer it as a real policy. Therefore, since, by definition, Congress is not such an assembly, current US energy policy must be a fake policy and there must be, somewhere lurking in the shadows, a real policy that actually makes sense and is likely to work.*

Fake US Energy Policy

from DOE's On the Road to Energy Security: Implementing a Comprehensive Energy Strategy q.v.

Real Policy and / or Reasons Why The Fake Policy is Wrong

1. Diversify America’s energy supply by:

  • promoting alternative and renewable sources of energy

  • encouraging the expansion of nuclear energy in a safe and secure manner

  • increasing domestic production of conventional fuels, and

  • investing in science and technology

2. Increase energy efficiency and conservation in our homes and businesses

3. Improve the energy efficiency of our cars and trucks

4. Modernize our electric power infrastructure

5. Expand the Strategic Petroleum Reserve

[Pete finds this a somewhat sparse comprehensive national energy policy, even for people with no gift for the subject, but so it goes]

1. Diversify and increase America's access to foreign sources of petroleum supply
  • There are no alternatives to oil and natural gas, including hydrogen and ethanol, that the public will find satisfactory once fully understood, other than nuclear power which remains politically unacceptable through ignorance and misinformation. The need to address global climate change through wider use of nuclear power is very real.
  • There is no real prospect for increasing domestic production of conventional fuels at acceptable price levels. 
  • Much science and technology funding is wasted on quixotic chimeras favored by particular political groups.

2. Only lip service has been paid to increasing energy efficiency and conservation. Huge real investment and unpopular new land use policies are required.

3. Ditto

4. The power grid requires modernization but only because the misinformed mishandled deregulation.

5. There is no need to expand the Strategic Petroleum Reserve at home, but US trading partners need their own protection and US consumers need a natural gas reserve as imports from unstable regions begin.

*As may be obvious by now, a belief in fake and real policies is also a sign of insanity, and we all know Pete's a little frayed around the edges.


Where the Gas Will Come From, Or There's A Pinedale In Your Future

Source: USGS

That's Pinedale, WY: the focal point of the southwestern Wyoming basin.  Good Dick Cheney country to look at q.v. and the gas is from sandstone formations so tight that even Cheney'd seem laid back in comparison. q.v.  Most of it is federal land leased to oil companies. qv1 qv2  The Pinedale anticline and the Jonah field q.v. attract lots of interesting players. q.v. But the game is a restricted one: existing BLM regulations prevent access to almost 2/3 of the gas (apparently from wells spacing requirements designed for conventional structures). q.v. So one of the first parts of the game is to figure out how to do this for an unconventional formation by reducing the downhole spacing of the wells. q.v. Of course the danger is that if gas prices keep falling, it will no longer be economic to drill several multiples of the number of holes to get the same Tcf of gas. Playing big in Pinedale: Questar, Ultra and in Jonah, Encana.

 


Background - Main Oil Exporters

Time for Russia to look into an OPEC membership?

Source: EIA


Pricing Oil in "Yergins"

Jeffrey J. Brown writes with the following suggestion:

In an infamous 11/1/04 Forbes Magazine column, Daniel Yergin predicted a long term oil price of $38 per barrel (commencing around 11/1/05).  I have therefore previously suggested that we price oil in "Yergins" with One Yergin = $38 per barrel.

Yergin's assertion was that rising oil production would bring the price of oil down.  In fact, the opposite has happened.  Oil prices have gone up to equalize supply and demand, because of falling oil production worldwide, led by an estimated current annual decline rate in net exports from the top 10 net oil exporters of about 9% per year (12/05 to 6/06, EIA--crude + condensate).

When discussing oil prices, it might be useful to compare them to Yergins' long term index price.  Since December, 2005, oil prices have traded in a range about 50% to 100% higher than Yergin's long term index price.  Currently, light, sweet oil is trading about 75% higher than his long term index price.  

By the way, Matt Simmons' book on Saudi Arabia, in which he predicted that the Saudis may be peaking, was published in May, 2005.  Since then, the Saudis have admitted to about a 6% decline in production (8% annual decline rate since December).  For the first time in history, Saudi Aramco imported refined petroleum products in August, 2006.

With change in "Hutzlers"?* So why is Yergin still the PBS pundit, thinks Pete?

*The US government economist who got both oil and gas prices so wrong for so long.


Background- Main Oil Trade Flows

Venezuala sends more of its crude away from the US than Pete understood ....

Source: OPEC


Perspective on US Natural Gas Reserves

U.S. Dry Natural Gas Proved Reserves (Billion Cubic Feet)

Decade Year-0 Year-1 Year-2 Year-3 Year-4 Year-5 Year-6 Year-7 Year-8 Year-9
  1920's           23,000        
  1930's 46,000       62,000     66,000 70,000  
  1940's 85,000 113,800 110,000 110,000 133,500 146,987 159,704 165,026 172,925 179,402
  1950's 184,585 192,759 198,632 210,299 210,561 222,483 236,483 245,230 252,762 261,170
  1960's 262,326 266,274 272,279 276,151 281,251 286,469 289,333 292,908 287,350 275,109
  1970's 290,746 278,806 266,085 249,950 237,132 228,200 216,026 207,413 208,033 200,997
  1980's 199,021 201,730 201,512 200,247 197,463 193,369 191,586 187,211 168,024 167,116
  1990's 169,346 167,062 165,015 162,415 163,837 165,146 166,474 167,223 164,041 167,406
  2000's 177,427 183,460 186,946 189,044 192,513          

The message for the last decade: proved gas reserves aren't declining, they're increasing.

Figure 2. U.S. Producing Natural Gas Reserves by Region 1985 - 2004, Wet after Lease Separation, Trillion cubic feet at 14.73 psia and 60 degrees Fahrenheit.  Need help, contact the National Energy Information Center at 202-586-8800.
 

Source: EIA

 


...Although oil has dominated the world's energy portfolio for the past century, natural gas has become an important contributor to the global energy industry. While overall global energy demand is expected to increase by 50 percent over the next 20 years – demand for natural gas is projected to increase nearly 70 percent. ...

--David O'Reilly, Chevron

Congressional catamites: Pete wishes he has something more to say about the current fun and games between pages, political pederasts, rampant bribery, and congressional 'leadership,' something  beyond his usual sigh, but he doesn't. He was surprised though when printed little black and white government  warnings began to show up on each of the arterial roads off the beltway, warning drivers they were entering a corruption zone. Time to turn over a new page?

The case against Chavez. q.v. "Never has been Venezuela under the claws of such a greedy and immoral group....The Chavez’s regime is, so far, the worst and the most mediocre. "

Have a look at the fate of the opposition to the Kazakh government. q.v. (Kazakhstan's Fallen Opposition). Oh well, Europe, it's only oil....

According to the Wall Street Journal, some companies, such as Chesapeake Energy, are responding to much lower natural gas prices by starting to shut in a portion of their domestic gas production.  Chesapeake will reportedly shut in about 6 %of  US production, which is the same as the proportion of production they had not hedged.

Saudis decide against switching away from the dollar; UAE will switch 10 %. q.v. Saudi plans for supplying Asia with oil. q.v. Nawaf Obaid's plans for increasing Saudi spare production capacity. q.v.

US natural gas storage facilities are full to overflowing.  How much is too much? q.v.

China starts drilling not far from the Florida coast. q.v. Has the US missed another one? But see this also.

Statoil from Norway is also in on the act. q.v.

 EIA's listing of magazine listings of world oil and gas reserves. q.v. Why is this entrusted to magazines and oil companies?

EIA's analysis of domestic trading of greenhouse gas reduction credits. q.v.

The congressional research service on US/Saudi relations. q.v.

GM's genetically engineered E. Coli produce microdiesel, which is a variant of biofuels with better processing characteristics and lower land use requirements. q.v. At least biodiesel is better than ethanol. q.v.

Horsing around? BP won't bring the giant offshore platform Thunderhorse back on line for another 18 months. q.v. But OPEC says the delay may not be enough to keep it from having to ration production. q.v. Bad year for BP....

Invest in Russia? Whoops, looks like the state is still the state and all that money the international majors put into Sakhalin may be worth a whole lot less after Mr. Putin finishes.

Everyone knows PP is strongly pro-nuke. But what is this business about paying the nuclear utilities $2 billion to help palliate the stings and arrows of an outrageous regulatory system? q.v. Why is this a legitimate policy approach?

Going to jail for energy reporting. q.v.  And speaking of making public excellent photos of Exxon's critical energy infrastructure, try these. q.v.

Solution to greenhouse warming? q.v. Ha!

Take a look behind the scenes, as the US government starts to restrict  the rest of the worlds financial links with Iran. q.v. In view of the need to recycle petrodollars as quickly as possible, is this a good thing?

Which is more significant to the US economy, energy price spikes or productivity changes? According to a new Fed analysis, the latter. q.v. Which may explain why the world hasn't fallen apart following the recent spike.

On Kurdish ownership of Iraqi oil. q.v.

NOAA's quick guide to US weather disasters. q.v.

Pete recommends Senator Bennett's power point presentation on world demographics. q.v.

Chinese/Iranian energy ties. q.v.

Whoops. Bad luck Georgia, your natural gas prices just doubled. q.v. More fun and games with Russia as Europe's largest natural gas supplier. q.v.

Just in case you thought Iraq could be divided into ethnic subzones .... q.v.

Better lead acid batteries are possible. q.v.

Depressed about climate change? Try this. But don't worry, Exxon knows best...

Pete's no environmentalist, but is this how NEPA is supposed to work? q.v. Someone will write up a plan just before the petroleum starts flowing, since the whole thing is a bit of a joke.

China hits lots of deep gas in Xinjiang province. q.v.

Exxon to sell Sakhalin gas to China. q.v. Too bad, Japan?

Getting rid of mandatory green purchases under PURPA. q.v.

Recent developments in nuclear waste storage. q.v.

State of play in Iraqi oil policy. q.v. “If you don’t understand what’s happening there, follow the dollar sign. There is a 6,000 b/d difference between the level of production for exports and the level of actual exports. It goes into the pockets of warlords, organized crime and political parties.”

Turmoil in the tar sands, or why developing Alberta is like using caviar to make fake crab meat. q.v. Nick Nicolaisen writes is as follows, " I'm just sitting here shaking my head at what fools we've become.... " [From a recent Washington Post article} ...The miners have created a marvel of human industry that takes a spongy muck once considered worthless and converts it into oil for gasoline, diesel and jet fuel. But the price of that alchemy is high: Each barrel of oil requires two to five barrels of water, carves up four tons of earth, uses enough natural gas to heat a home for one to five days, and adds to the greenhouse gases slowly cooking the planet, according to the industry's own calculations...."

Gazprom decides to go it alone in developing the enormous Shtokman gas field. q.v.

How should world reserve assets be allocated between currencies, and should the allocation be disclosed: thoughts of the BIS head. q.v.

Hallucinated wealth and peak oil. q.v. Watch out below!

How much credence should be given reported energy commodity prices? Usually quite a lot, but not always. q.v. Shame on Dominion Resources and all the other game players.

Greenspan on the advantages of Canadian energy, the problems of Russian energy, and a great deal more. q.v. Plus a little bit of nonsense: "There is a possibility ... that the United States may finally be weaning itself off petroleum products..." There is a similar possibility that former fed chairmen merely fade away quietly, but don't bet on either one.