A Curious Tendency Toward Doom

...Peak Oil catastrophism is largely a manifestation of our primary cultural myth: that all things end with suffering, death, and then resurrection. Belief in apocalypse is programmed into western civilization. Given our heritage, “the end is nigh” is the nearly unavoidable personal and collective response to times of uncertainty and rapid change. _Pattern Literacy

Peak oil predictions go back at least to the 1850's. Predictions of "the end of oil" have been with us as long as oil itself.

Peak oil has a longer history than you think. Although the models that define the American peak oil hypothesis were first advanced in the 1950s, predictions of the imminent depletion of American oil reserves can be found much earlier. In fact, one of the earliest known warnings that the United States would run out of oil was released on Jan. 19, 1922, when the U.S. Geological Survey warned the public that only two decades of oil remained in the ground, if present consumption patterns held steady. _Motley Fool

King Hubbert is the originator of modern peak oil models, but most of Hubbert's real world predictions are proving wrong.

Most people acknowledge that the Earth's supply of petroleum is finite, and will one day become too expensive to extract. The problem, to many people, seems to be in timing the peak.

Modern history of peak oil predictions (Wikipedia)

But the issue of peak oil is secondary to the issue of peak affordable energy. Modern societies are slowly shifting much of their energy load to electrical power sources, which can be generated by multiple forms of energy besides oil.

Newer, safer, more scalable, reliable, and affordable forms of nuclear power would be the obvious goal of rational societies, in the pursuit of an electrical energy future. But ample supplies of natural gas, coal, gas hydrates, bitumens, kerogens, and eventually advanced biomass, could supply careful societies with power and heat for centuries to come.

The question seems to revolve around the issue of "liquid fuels," for powering airplanes, ships, trains, and other transportation vehicles. And yet we know that with the assistance of high temperature gas-cooled nuclear reactors (HTGRs) -- already well along in the design and development stage -- the world's massive supplies of gas, coal, hydrates, bitumens, kerogens, and biomass can be converted affordably into high quality liquid fuels, chemicals, polymers, lubricants, fertilisers, and other useful substances.

The problem, though, is neither "peak oil," nore "peak energy." The problem is "peak ingenuity," or the shortage of good ideas and the will the implement them.

For readers who have freed themselves from "the apocalyptic compulsion," and who are honestly looking for a path out of the apparent abyss, take a careful and open look at The Ultimate Resource.

As long as human minds remain free, solutions to problems can be devised. Whether governments and other powerful interests will allow problems to be solved, or not, is another question. Many of those governments and powerful institutions are led by people who are in thrall to the apocalyptic instinct.

But we will do what we can to find pathways to a more abundant future. Nobody said it would be easy.

Modern Commodities Markets are Badly Distorted

Adapted from an earlier posting on Al Fin


Dian Chu suggests that under the modern regime of commodities pricing, very few people know what the true market price of oil -- and other commodities treated as "asset classes" -- is.

The only real market principles are based upon who is using the product, i.e., who needs the commodity to actually take or provide physical delivery. I know what a novel idea, actually using futures contracts the way they were originally intended. But this is something that modern societies must enforce through necessary market reforms. You would find out real quick what the true market price is for many of these necessary commodities by making players take or provide physical delivery. _EconMatters

You might look at modern oil markets as hundred billion dollar casinos, where everybody's a winner -- as long as they control the spin of the wheel.

Prices are not determined by the fundamentals in a manipulated market they are determined by oil being an “Asset Class” which is code word or a euphemism for giant Casino in New York instead of Vegas.

...The price of oil, and as such gas is determined not by supply and demand factors, but by whether Goldman Sachs (NYSE: GS) or Morgan Stanley (NYSE: MS) or J.P. Morgan (NYSE: JPM) puts $400 million on Black or Red, the literal Oil Roulette game of the big banks... If Goldman Sachs puts $400 million on Black prices go up, if they put $400 million on Red prices go down, as simple as that, this is actually how the price of oil is determined, nothing more and nothing less. _Dian Chu

In a simpler world of fewer trades, where commodities futures can be monitored closely by a conscientious overseer, manipulating the market would be more difficult. But in the modern, ultra-high volume speed-of-light trading by the giant banks with minimal oversight, the smart money bets on the smart manipulators.

...lets just abolish the SEC and the CFTC, as they are completely useless. Furthermore, since all markets are ripe with manipulation, essentially the wild-west; why not reduce government costs by cutting funds to these two agencies entirely. They serve no real purpose when markets are corrupted everyday with Fake Orders, Dark Trading Pools, High Frequency Trading Algos, and the like except to further government costs & bureaucracy while strictly providing the illusion of fair markets. These organizations are a complete joke, and have been for decades!

... _Dian Chu

If you combine Dian Chu's reasoning above with Andrew McKillop's thinking featured in this Al Fin Energy article, you may begin to see a pattern developing.

Even in an era of relative oil oversupply, markets can be tweaked so as to bring oil prices further upward -- until it is time to let them drop again.

It is difficult to deny that global oil markets have become the equivalent of casinos, with all the big players standing around the wheel, placing bets and exerting small bits of control over the ball, here and there, now and again, over and over again.

As for US government oversight, fuggidduhbowdit! The Chicago outfit only wants to make sure that it gets its piece of the action.

More from Dian Chu here:

Physical-delivery-needed-in-agriculture & Energy Markets

But don't hold your breath waiting for any meaningful reforms that might make these markets more transparent and less manipulable. The big players will always give themselves the upper hand if at all possible.

There are many indicators suggesting that big governments and large intergovernmental agencies are happiest when managing a world where information and data transparency is limited to persons or entities on the top, politically and economically.

This has generally been the case in Asia and Europe (and for the UN, World Bank, and IMF), and is becoming increasingly the case in the US under the Obama administration, also known as the Goldman Sachs administration.

Black Carbon More Important to Climate & Melting Ice than CO2?

A new and detailed study published in the Journal of Geophysical Research - Atmospheres, reveals that black carbon and black soot are far more important to global climate than had been previously admitted by most leading climatologists.

More on the implications of this report from WattsupWithThat and NextBigFuture.

It is likely that black soot and black carbon are far more responsible for melting glaciers and polar ice than is CO2 -- although the largest cause of melting polar ice and glaciers is natural variation in chaotic climate cycles and natural variation of winds and ocean currents.

But if polar bears needed to blame one particular thing for being forced to swim longer distances in a bad year, they should probably blame black soot from China and India.

Other significant anthropogenic influences of climate besides black soot include land use changes, shown in the image above. Over the long run, both land use changes and black soot emissions are likely to have far greater effects on glacial and polar ice than CO2. Why?

For one thing, we can do more about black carbon emissions than we can about CO2 emissions. For another, there are several powerful negative feedback apparati in nature that compensate for anthropogenic CO2 production. That is not nearly the case for black soot production. For yet another, the very wide range of estimated CO2 sensitivity on climate forcing as much as tells you that scientists have not got a precise handle on the actual importance of CO2 on climate.

As you can see from the graphic above, global temperatures have been stuck on a plateau -- at the same time that atmospheric CO2 levels (and climate model temperature predictions) have been rising. The perceived disconnect between atmospheric CO2 and global temperatures may be exaggerated by natural climate cycles, of course.

But if you add the combined anthropogenic climatic effects of CO2, black soot, and land use changes together, you have to wonder what kind of natural cycles would be necessary to bring "global warming" to such a screeching halt?

More on the AGU study:

The study, a four-year, 232-page effort, led by the International Global Atmospheric Chemistry (IGAC) Project, is likely to guide research efforts, climate modeling, and policy for years to come, the authors and other scientists familiar with the paper said.

The report’s best estimate of direct climate influence by black carbon is about a factor of two higher than most previous work. This includes the estimates in the 2007 Intergovernmental Panel on Climate Change (IPCC) Assessment, which were based on the best available evidence and analysis at that time.

Scientists have spent the years since the last IPCC assessment improving estimates, but the new assessment notes that emissions in some regions are probably higher than estimated. This is consistent with other research that also hinted at significant under-estimates in some regions’ black carbon emissions.

The results indicate that there may be a greater potential to curb warming by reducing black carbon emissions than previously thought. _GCC

Climatology is still just a baby science -- not ready for prime time. And yet the IPCC wants to control the redistribution of $trillions worth of resources from the developed world to the emerging and third worlds. Purely as a humanitarian gesture, no doubt. After all, who would want the hassle of channeling all of those trillions of dollars, if they did not have the best interests of humanity at heart?

A sober reminder about the chaotic underlying nature of climate:

A paper titled "Global Warming: A Geological Perspective," published in Environmental Geosciences, and summarized below in Arizona Geology, should be required reading for all climate scientists. The paper notes that if

"the temperature increase during the past 130 years reflects recovery from the Little Ice Age, it is not unreasonable to expect the temperature to rise another 2 to 2.5 degrees Celsius to a level comparable to that of the Medieval Warm Period about 800 years ago"

and that

"Climatic changes measured during the last 100 years are not unique or even unusual when compared with the frequency, rate, and magnitude of changes that have taken place since the beginning of the Holocene Epoch. Recent fluctuations in temperature, both upward and downward, are well within the limits observed in nature prior to human influence."

Sadly, most climate scientists fail to study or understand the geologic history of climate, which has led to countless false claims that today's climate is unnatural, extreme, unusual, or unprecedented. __ Source __ via __ GWPF

Summary paper PDF with more

Note that the paper referred to above was published in 1999 in Environment Geosciences, at the peak of confidence in catastrophic global warming. If the words were true then, they are triply true now that temperature trends have flattened, and multiple causes of warming unrelated to CO2 have been described and verified.

Popular climate alarmism and CO2 hysteria resemble the mood manipulation one sees in Hollywood blockbusters, where the soundtrack works together with scripting, acting, and clever camera angles to ratchet up audience panic to a fever pitch.

Such mood manipulation on a society-wide scale requires large numbers of useful idiots, gullible clowns, and power control freaks inside government, academia, and media. No surprise here, that is simply how things are managed in a settled regime -- between revolutions.

Toshiba Planning 4S Fast Neutron Reactor for Alberta Oilsands in 2020

An undisclosed Alberta oilsands operator is working with Toshiba to install a 10 MWe 4S nuclear reactor underground to use for in situ oilsands production by the year 2020.

The 4S reactor is a sodium-cooled fast neutron reactor operating at high temperature, capable of providing high temperature steam for steam assisted in situ oilsands production for 30 years between required refueling.

In situ oilsands production is generally cleaner and more profitable than oilsands mining.

In situ oil sands production means extracting bitumen from underground by drilling wells into the reservoir, as with conventional oil and natural gas production. This distinguishes in situ recovery from surface mining, which requires removing topsoil and other overburden and creating a large open pit mining area.

Steam-assisted gravity drainage (SAGD) is a specific form of in situ extraction. Nearly all bitumen is too viscous or thick at ambient reservoir temperature to flow on its own. It must be thinned, either through heating or by diluting it with solvents, or both. SAGD recovery involves drilling pairs of horizontal wells, one placed above the other in each pair. Steam is injected into the upper well. The steam heats the reservoir, thinning the bitumen which can then drain threw gravity to the lower well. The bitumen-water mixture (along with solvents, if applicable) is then pumped to surface.

Another common form of thermal recovery is cyclic steam stimulation (CSS). CSS or “huff-and-puff” uses vertical wells that alternate as both steam injectors and bitumen producers, creating a cycle of injection, heating and recovery from each vertical well. _Alberta Oilsands

Nuclear reactor production of steam -- particularly using a high efficiency reactor such as the 4S -- should also help profit margins. This will be particularly true as the cost of natural gas begins to climb inexorably higher with the projected greater number of uses for gas.

The firm [Toshiba] has completed a basic design for the reactor and has already started approval procedures for construction in the United States. After getting the official go-ahead from the U.S. government, Toshiba will then undergo safety checks in Canada.

Currently, oil sands are mined using boiler-generated steam. However, as this method requires natural gas to fuel the boilers, it is necessary to transport the gas as needed. Also, carbon dioxide emissions from burning natural gas is seen to be a problem.

By contrast, the planned small reactor would not require refueling for up to 30 years after construction or release any carbon dioxide. Furthermore, nuclear reactors would also be cheaper should the general price of natural gas increase.

... constructing a small reactor costs between 50 billion yen and 100 billion yen, less than 20 percent the cost of building a regular reactor. This would make the new reactor easier to introduce in frontier areas. Therefore, Toshiba has been working in Alaska and municipalities in northern Canada to introduce its small reactor as a small-scale power station. _Yomiuri

Oil production is a potentially high-profit area, which should help to provide a good return on investment in a timely manner. Once the reactor has proven itself in such applications, getting approval for a much wider range of applications should become easier.

Similar schemes using even higher temperature reactors -- such as high temperature gas cooled reactors -- could be used to produce the abundant oil shale kerogens found in the Green River formation of the US mountain west.

The use of nuclear process heat for production of unconventional hydrocarbons used as fuels, chemicals, polymers, and other materials, is likely to become routine as newer, safer, more affordable and efficient reactor designs are developed and approved.

High temperature reactors should be able to convert oilsands (Canada), heavy oils (Venezuela), kerogens (USA), coal (US, Australia, China etc.) and biomass (worldwide) to high quality hydrocarbons at costs very compatible with conventional oil production by the mid- to late 2020s, as long as the US government does not continue to stonewall new nuclear designs.

US Oil Production Ramps Up and Up

US oil production continues to climb, introducing an odd shape to the traditional "peak oil graph" that has long been touted by energy doomers.

USEIA

These continuing increases in crude oil production are having profound effects on U.S. petroleum balances. A large portion of tight oil production consists of light, sweet crude oil. As previously noted by EIA, growing production has led to reduced imports of light, sweet crude oil on the U.S. Gulf Coast, the leading U.S. refining center. Without sufficient pipeline capacity to move all of the growing midcontinent production to the Gulf Coast, prices of these crudes, such as West Texas Intermediate (WTI), have declined compared to coastal grades such as Louisiana Light Sweet (LLS), reflecting the increased cost of moving the crude using marginal modes of transportation such as rail, barge, and truck. _USEIA

Until the US can reinstate rational energy policy -- including the necessary new pipeline infrastructure -- expect big windfall dividends for rail, barge, and tanker truck transportation.

Real Clear Energy

The graph at left shows how production has risen dramatically over the last decade from zero to almost 900,000 barrels a day, even though only two major reservoirs have been developed. The trend line splits the nine major fields by color coding. The Bakken – the cream-colored portion – has been by far the most productive, but the Eagle Ford in Texas is now starting to show results as well. The other seven fields have not yet entered full-scale production.

Most of the fields, but not all, are located on the map at the right. The Granite Wash is in western Oklahoma and Spring is in West Texas. The Monterey Shale, in central California, is believed to be the largest reservoir in North American, with four times the potential as the Bakken. (Why does California always get the best of everything?) The Woodford is not on this map but is beneath eastern Oklahoma, Texas and Arkansas. The Niobrara is at the juncture of Nebraska, Wyoming and Colorado. The Spraberry, also not shown, is in West Texas (which usually managed to be more productive than California). And the Austin Chalk, of course, is around Austin.

This vast potential of tight oil is the reason why the International Energy Agency and others are talking about the US achieving energy independence and even becoming an exporter by 2030. If the fields at the bottom of the graph begin to develop at anything like the rate of the Bakken and the Eagle Ford, the US is going to have a lot of oil. _RealClearEnergy

With increased production for both onshore and offshore US fields, the near to intermediate term outlook for US oil production is positive. As long as US pipeline infrastructure is underdeveloped, US oil prices will remain lower than international prices, with a concomitant energy dividend to US industries and the US economy.

The Obama administration has attempted to mandate green energy, and has carried out de facto wars against coal, nuclear, and offshore oil. The main reason that onshore tight oil production has thrived so quickly and thoroughly, is that it caught the Obama administration by surprise, before it could be suppressed.

As US oil & gas production continues to climb, expect rising environmental opposition -- at least some of it financed by overseas interests. Always follow the money, in business, politics, and in the faux environmental industrial complex.

Monterey Shale Rivals Earlier Shale Giants

Monterey Shale

California's Monterey Shale deposits may contain more oil than North Dakota's Bakken and Texas' Eagle Ford -- two giant US shale deposits that have just begun to change the face of global oil production.

California's energy problem sits in Sacramento, in the form of a lefty-Luddite green dieoff.orgiast state government / faux environmental industrial complex. Sacramento is the enemy of California's energy future.

Running from Los Angeles to San Francisco, California's Monterey Shale is thought to contain more oil than North Dakota's Bakken and Texas's Eagle Ford -- both scenes of an oil boom that's created thousands of jobs and boosted U.S. oil production to the highest rate in over a decade.

In fact, the Monterey is thought to hold over 400 billion barrels of oil, according to the U.S. Geological Survey. That's nearly half the conventional oil in all of Saudi Arabia. The United States consumes about 19 million barrels of oil a day...

Several oil companies have put together research teams to work on the Monterey, said Katie Potter, head of exploration and production staffing at NES Global Talent, a company that recruits oil industry professionals.

If the Monterey takes off, Potter said the impact on jobs in the state would be huge, saying the shale boom has already created 600,000 jobs nationwide over the last few years.

... _CNN

Governor Jerry Brown along with the Sierra Club, would like to stop California's energy boom before it can begin. But they are making many enemies among the grass roots by doing so, and if they cannot find a way to compromise their faux environmental dogma for the sake of California's fiscal health, there will be a reckoning.

US Fracking Boom Sends Peak Oil Believers into the Denial Zone

US states such as Texas, North Dakota, Ohio, Pennsylvania, Louisiana, and more are taking advantage of a huge economic boost coming from the US fracking boom.

One of the biggest secondary economic effects of this fracking boom is the growth in US manufacturing directly related to the relatively low US gas & oil costs.

"Low natural gas prices provide an additional competitive advantage to US producers in many industries, including chemicals, steel, copper, aluminum, cement, and other energy-intensive industries," FitchRatings states. _Platts

For their part, true believers in peak oil doom have descended into full fledged denial mode. Many of the doomers are bravely declaring that US tight oil & gas are mere "flashes in the pan," and will play out entirely "any day now."

The reality is saying something much different, with US natural gas prices falling roughly 30% between 2011 and 2012. Prices of crucial commodities do not fall that drastically in the face of an obvious and impending supply shortfall.

But resource scarcity doomers have never been known for their skill at reading price signals, or other important indicators. In their world, it is all about the circular jerkular belief reinforcement, boosted by the echo acoustics of the choral chambres.

...natural gas spot price fell 31% last year. This drop in natural gas price may be a major reason why our economy has been performing better than many expected. The EIA reported that average wholesale prices for natural gas fell significantly throughout the United States in 2012 compared to 2011. The average wholesale price for natural gas at Henry Hub in Erath, Louisiana, a key benchmark location for pricing throughout the United States, fell from an average $4.02 per million British thermal units (MMBtu) in 2011, to $2.77 per MMBtu in 2012. This was the lowest average annual price at Henry Hub since 1999. Of course today the markets focus will be on the reports. Buckle up!

The American Petroleum Institute reported whopping builds in products and not as much as I expected on crude. The API reported crude stocks up by 2.4 MLN BBLS The surge came in gasoline were we saw a 7.9 Million barrels and distillate stocks 5.9 Million barrels. In Cushing Oklahoma the oil delivery point stocks rose by 332,000 barrels. Refinery runs dropped weekly crude imports up 1.2 million barrels. Heating oil stocks UP 537,000 Barrels to27.16 million barrels per day. _Phil Flynn

Remember: Everything you think you know, just ain't so. While that aphorism may contain a bit of hyperbole, if you keep it in mind you are not as likely to fall into the deep black holes of denial where doomers tend to dwell.

Wind Turbines Overrated: More Danger than Help

Big wind turbines do not produce nearly the power that is claimed, do not last nearly as long as projected, and generate far higher lifetime costs than is acknowledged by their big money promoters and politically-connected investors.

The implementation of at least 20% wind energy will have major impacts on the US electric power system and will require trillions of dollars.

However, it appears the capacity factors of wind energy projects are much less than estimated by project developers. As a result, the capital costs and environmental impacts of implementation would be much greater, because a greater capacity of wind turbines and transmission systems would be required to generate the same quantity of energy.

Recent studies of IWT useful service lives in Denmark and the UK indicate these lives are about 15 - 20 years, say 17 years, instead of the 25 years typically used by IWT project developers to obtain bank financing, federal and state subsidies and "Certificate of Public Good" approvals. Instead of 2 replacements in 2 x 25 = 50 years, there will be 3 replacements in 3 x 17 = 51 years, i.e. a 50% greater replacement rate.

As the above US IWT build-out proceeds, almost all of the existing 52,000 MW of IWTs will need to be replaced during 2012 - 2029, plus the new IWTs built during 2012 - 2029 will need to be replaced during 2029 - 2046, etc.

The increased capital cost of IWT build-outs and replacements and the impact of the lesser CFs will greatly add to the US levelized cost of energy.

Unless other developed nations handicap themselves in the same manner (which appears increasingly less likely, based on COP-18 in Dohu, Qatar, in 2012), the US will be at an even greater economic disadvantage than at present. _Willem Post

Germany plans to increase its dependence on the intermittent unreliables to 40% by 2020 -- a mind-bending leap into the great energy and economic unknown. But greens in California are poised to make exactly the same bad bet on the unreliables as Germany. Go figure.

10% dependency on big wind and/or big solar is pushing it. Anything more than 10% is a recipe for disaster.

Germany Undergoing Contortions to Make Energiewende Work

Big wind and big solar are hopelessly intermittent and unreliable forms of energy production. But Germany has rashly committed itself to supplying 40% of its power from the intermittent unreliables by 2020. As a result of this giant leap of faith, German energy planners are scrambling for ways to convert big wind and big solar energy to more reliable forms of energy that can be stored, and used whenever needed.

P2G Electricity to Methane Scheme

As seen in the diagram above, a new €3.3 million project aims to produce methane from wind and solar generated electricity, using alkaline electrolyser stacks.

Once the hydrogen has been produced it passes through a methanisation process. The resulting methane can be injected directly into the natural gas grid, thus allowing for renewable energy storage on a timescale of months or more. The gas contributes to decarbonising the grid, and can be used for electricity generation or to fuel natural gas vehicles. _FuelCellToday

Here is more information about an earlier, preliminary research project to prove the concept:

The Centre for Solar Research Baden-Württemberg (ZSW) has inaugurated a research facility to convert solar power to methane. The methane is then added to the natural gas grid.

The project uses solar power to electrolyse water in a pressurised alkaline electrolyser, producing hydrogen and oxygen. The hydrogen gas then undergoes methanation, and with the facility able to produce up to 300 cubic meters of renewable methane per day, it is the largest of its type in the world. _FuelCellToday

More information from ZSW (in German)

Needless to say, the concentration of CO2 in the Earth's atmosphere is vanishingly small (0.04%) -- making atmospheric CO2 far too rare and expensive as a CO2 source, for an industrial-scale project. This being the case, it is clear that the project will have to use concentrated CO2 effluent from a hydrocarbon-burning power plant, cement plant, or other industrial scale plant.

And as it happens, Germany is burning much more coal lately, as a result of its impulsive decision to shut down its nuclear power plants. All of which brings up a very good question: "If Germans want to produce methane from CO2 and H2 from the electrolysis of water, why not use nuclear power as your source of electricity?" Nuclear power is cheaper, more reliable, and more potentially abundant than the intermittent unreliables -- big wind and big solar.

Perhaps the answer to the question is that the Germans are not actually serious about all of this, but are merely posturing for the energy and environmental media -- and for green oriented voters and power blocs.

That would be a shame. Germany is in dire need of competent people who are willing to take a serious approach to present and future electrical power needs.

Global Oil Oversupply vs. Global Oil Markets

Oil prices have been relatively stuck recently, with no apparent rational relation between the real world and oil prices.

Andrew McKillop takes a look at why oil prices appear to be in a non-responsive limbo over the past few weeks:

Following the 12 December OPEC meeting it took around 15 days, stretched by the holiday season, for the message to sink into the minds of traders: by 1 January 2013 prices were at $111.11 per barrel for Brent and over $91 for WTI. The unreal logic is that OPEC is by its own admission pumping more oil than the world needs - so prices must rise!

The logic is in fact double-stage: if oil prices are pushed up and stay high, OPEC will maintain output, and in a certain hard-to-specify period inventories will grow enough to make the already plain fact of oversupply even plainer. At that unspecified time interval forward from now, prices will fall.Talk about what constitutes the "reasonable price" for oil is rigorously and always talk only: at OPEC meetings no figures are ever mentioned. The trader and analyst community supplies the numbers - but these range from below $50 a barrel to around $120 a barrel.

The net result is directionless markets tagging along behind the incoming news on growth (and recession) outlooks, currency trends, CPI and purchasing manager forecasts, non-oil energy news, and of course the always intriguing subject of Arab Spring, Syrian civil war, al Qaeda in the Middle East and in Sahel Africa, and other material from the Indiana Jones collection.

We therefore have an interesting entry scene to year 2013 oil trading, with current supply/demand most surely and certainly out of balance, with too much supply. To be sure, the Mid East geopolitical scene can unwind at any time, and winter cold can storm across the northern hemisphere - both of which can bolster prices. By late January however, we could expect the accumulated set of problems for overpriced oil to start taking their toll. _Andrew McKillop

Markets can be much like herds of cattle or sheep. Made up of hundreds or thousands of relatively dim-witted beasts, they can usually be easily herded and arbitrarily kept in artificial "holding areas" for varying lengths of time.

But when the "stampede" signal hits the herd, the herders and herd owners had best be prepared to cash in quickly, before the losses start to pile up.

Another piece by Andrew McKillop, looking at the larger stage of global Ponzi Scheme economies

If McKillop and all the others are right -- those who point out the insubstantiality of modern economic foundations -- the underpinnings of the global economy are far less substantial than we are being told by "our betters" in government, the media, academia, and the punditry. What that means for intermediate and long term oil prices, will be left as an exercise for the reader.

Approaching California's Green Energy Wasteland Catastrophe

The California government's firm commitment to intermittent unreliable forms of energy is taking the state into an economic, energy, and employment wasteland, from which it may take several decades to recover.

RCE

California residents already pay nearly three times the rate as many other states and that figure is headed straight up as well. All this will weigh heavily on the California economy. Businesses are already responding by moving out at a very rapid rate...

...electricity prices are headed straight up. This is because wind and solar are still far more expensive than fossil fuels and nuclear. These costs are often disguised in that wind and solar can be produced at zero marginal costs when the wind blows or the sun shines. But these sources must be constantly backed up by gas, coal and nuclear, which become more expensive to run when they can only sell their power intermittently.

All this is driving business out of the state. As The Wall Street Journal reported last week, several states have now opened full-time recruiting offices in California hoping to lure away businesses. Chief Executive Magazine ranks California last in the country for its business climate. Taxes and regulations are often mentioned but the “high cost of doing business” – which includes electricity prices – always a major factor as well. _RCE

California's badly structured energy policy is reminiscent of its disastrous immigration policy combined with its catastrophic policy of public employee compensation packages -- all of which are combining to create the perfect storm of catastrophic collapse for California government.

Particular counties and municipal areas may be in a good position to weather the coming storm. But most of the state will be devastated.

Fracking Declared Safe in New York State Report

¶ ALBANY — The state’s Health Department found in an analysis it prepared early last year that the much-debated drilling technology known as hydrofracking could be conducted safely in New York, according to a copy obtained by The New York Times from an expert who did not believe it should be kept secret.

The analysis and other health assessments have been closely guarded by Gov. Andrew M. Cuomo and his administration as the governor weighs whether to approve fracking. Mr. Cuomo, a Democrat, has long delayed making a decision, unnerved in part by strident opposition on his party’s left. _NYT

New York needs fracking in order to put its failing pension programs back in the black. Long suffering NY taxpayers could use a bit of economic support from the new industries which fracking would bring to the Empire State.

This is very good news. Contrary to green fears that fracking is a mortal danger to both humans and the environment, this report finds exactly the opposite, arguing that fracking “can be done safely within the regulatory system that the state has been developing for several years.” With the environmental concerns largely settled, the ground is now set for New York to claim its share of the energy revolution and the jobs and industry that come with it. _American Interest

We expect freelance propagandists such as Josh Fox, and Hollywood propagandists such as Matt Damon to play fast and loose with real world facts and realities. But for a respected politician such as Andrew M. Cuomo, governor of NY State, to conceal crucial information about an industry which could bring new prosperity to his state -- such dubious behaviour points toward an undue political influence on the part of green activist groups, cronies, and other influential and highly partial individuals.

North America Riding High on Shale; Now It's the World's Turn

The US and Canada are experiencing a significant economic, energy, and environmental bonanza, due to the shale boom. Now it is the rest of the world's turn to learn from North American experience.

Countries embarking on shale gas development worldwide stand to benefit from lessons learned in US shale gas operations and water management, according to a recent report from Accenture. Operators, meanwhile, could cut both costs and water use in unconventional plays worldwide by collaborating with regulators and sharing infrastructure with other operators in the same basin, said the Accenture report, “Water and shale gas development: leveraging the US experience in new shale developments.”

Accenture analyzed how countries with proved shale gas reserves, specifically Argentina, China, Poland, and South Africa, can look toward experience gained in US water regulation and management to develop shale gas economically and sustainably.

“Successful oil and gas operators will be those that understand the local water challenges, leverage the learning from the US plays, and develop the right water sourcing, use-reuse, treatment, disposal, and supply chain strategy,” said Melissa Stark, managing director and Clean Energy lead for Accenture's energy industry group.

“One key opportunity for new geographies where infrastructure is a challenge is to explore sharing the development of infrastructure, water treatment facilities, and the development of the local supply market.” _O&G Journal _ via _ GWPF

Key Findings of Accenture report & link to full report PDF download

The tight gas & oil revolution is likely to help a score of nations around the world to boost their energy and industrial infrastructures -- at least for a matter of decades.

China, Argentina, Russia, Australia, and parts of Eastern Europe are likely to be the earliest beneficiaries to join North America in experiencing the bonanza. Africa, central Asia, and large areas of coastal regions and continental shelf may also display significant new tight oil & gas.

The evolution of oil production in both conventional and unconventional deposits will reflect the overall economics of global oil demand and supply.

The tight oil & gas boom was the result of small private concerns pursuing unpopular theories of production. Big oil and governments had almost nothing to do with this huge boom coming about.

The neo-Malthusian doomer psychology of imminent catastrophic energy depletion has influenced the thinking of policymakers in both government and industry for several decades now -- to the detriment of rational planning and development.

The rumour that doomers are partial to eating lead-based paint chips should perhaps be investigated more closely.

Europe Exhausting Itself Running from Boogeymen

Europe's high energy costs are driving increasing numbers of industries and large employers overseas. Most of Europe's high energy costs are caused by Europe's reflexive flight from inexpensive energy of the hydrocarbon and nuclear varieties.

High energy costs are emerging as an issue in Europe that is prompting debate, including questioning of the Continent’s clean energy initiatives. Over the past few years, Europe has spent tens of billions of euros in an effort to reduce carbon dioxide emissions.

“We embarked on a big transition to a low-carbon economy without taking into account the cost and without factoring in the competitive impact,” says Fabien Roques, head of European power and carbon at the energy consulting firm IHS CERA in Paris. “I think there will be a critical review of some of these policies in the next few years.” _NewYorkTimes

Carbon dioxide is boogeyman #1 for the European greens who control much of the continent's energy policy. But Europe's ineffectual attempts to reduce carbon emissions amount to suicidal self-flagellation and self-strangulation. It is all grand theatre, with the end result being self righteous self-immolation.

Boogeyman #2 is nuclear power. Germany is the poster boy of sacrificial self-castration in this regard.

The changes have been rapid. Nuclear power supplies 17 percent of the country’s energy needs, down from 23, while renewables have climbed from 20 to 25 percent in just months.

...Despite technological advances, wind, solar, hydro and other green energy sources still remain an unprofitable investment in a fair market. The way to encourage their exploitation is through a set of feed-in tariffs, a policy where energy companies are forced to buy electricity from green generators at a price set by the government (which is usually legislated to remain the same for two decades).

The German government has passed the cost of the payment from the energy companies to the consumer... This week, energy companies announced that the charge would go up by 47 percent for next year. The average Germany household will now pay €250 a year to sponsor green energy producers, four times more than in 2009. _RT

But green energy is expensive and unreliable. Which means that big industries whose profit margins depend upon the use of inexpensive energy, must move overseas -- and take their good paying jobs with them.

On Dec. 19, Voestalpine, an Austrian maker of high-quality steel for the auto industry, announced that it would build a plant in North America that would employ natural gas to reduce iron ore to a kind of raw iron that would then be used in the company's European blast furnaces.

...Energy-intensive industries like chemicals and steel are, if not closing European plants outright, looking toward places like the United States that have lower energy costs as they pursue new investments.

BASF, the German chemical giant, has been outspoken about the consequences of energy costs for competitiveness and is building a new plant in Louisiana.

“We Europeans are currently paying up to four or five times more for natural gas than the Americans,” Harald Schwager, a member of the executive board at BASF, said last month. “Energy efficiency alone will not allow us to compensate for this. Of course, that means increased competition for all the European manufacturing sites.” _NYT

Europeans have unwittingly handed their futures over to saboteurs in high places. Green government officials and their advisors are pushing European economies over a cliff, for the sake of faux environmental fear mongering. They are running from the energy boogeymen, and in the process are destroying the economic futures of their people.

Europeans are no longer living in a democracy, but are being controlled by a non-representative quasi-feudal system known as the European Union, based in Brussels. And the EU is essentially in thrall to the faux environmental power interests.

With such suicidal leadership, it is no wonder that demographic projections show most European populations rapidly withering away.

The future of Europe rests in the hands of her people, although Europeans have not been noted historically for understanding that fact. And there is very little time.

A Graphic Look at the Global Shale Revolution

Hindu

The real impact stems from its effect on the oil market. Shale gas offers the means to vastly increase the supply of fossil fuels for transportation, which will cut into the rising demand for oil — fuelled in part by China’s economic growth — that has dominated energy policymaking over the last decade.

...The major geopolitical impact of shale extraction technology lies less in the fact that America will be more energy self-sufficient than in the consequent displacement of world oil markets by a sharp reduction in U.S. imports. This is likely to be reinforced by the development of shale oil resources in China, Argentina, Ukraine and other places, which will put additional pressure on global oil prices.

The second factor is the potential to use natural gas for transportation. Some analysts suggest that this will only be a realistic prospect for fleet and long-haul road transportation. But they are overlooking the immense advantage that natural gas has as a transportation fuel in America and Europe, which have both developed a natural gas infrastructure in urban areas that takes piped natural gas into homes, offices and supermarkets. Once gas is cheap and widely available, it is possible to consider dealing with the “last mile” problem of providing home refuelling kits so consumers can fill up natural-gas powered cars in their own garages.

The incentives to develop shale oil and natural gas are very great. But so far, the United States has only experienced the first stage of low natural-gas prices and the reimportation of energy intensive industries such as chemicals and steel because of low gas prices. The next stage of the shale revolution’s impact is going to be felt as major stimulus gets under way from lower oil prices. More broadly, the shale revolution will grant the United States a greater range of options in dealing with foreign states.

For the Europeans, the shale revolution is also largely positive. A greater variety of gas supplies from liquefied natural gas originally destined for the United States has been dumped in European markets; by 2020, shale gas in the form of liquefied natural gas is likely to begin arriving in Europe in significant quantities, and there is also the prospect of some domestic shale gas becoming available. Europe will also benefit from the second stage of the shale revolution as oil prices come under pressure. _Hindu

Another Global Perspective

Every continent has shale oil & gas deposits. Even Russia has rich shale and tight rock petroleum -- but it will need North American technology to develop the resource. The same thing is true for China and much of the rest of the world. North America developed the technology and continues to refine it at a rapid rate.

Basic Fracking, Far Below the Water Table

While faux environmentalists whine about tectonic risk and the risk of polluting the water table and aquifers, the reality of the technology is leaving these green lefty-Luddites in the dust. The greatest environmental risk regarding shale oil & gas fracking is the risk of not taking advantage of the clean energy resource.

Big Wind Farms Dying Early and Often -- The Wind Power Scam Benefits Wealthy and Politically Connected Developers

A new study by University of Edinburgh researchers finds that wind turbines break down and wear out much more quickly than wind developers and wind proponents claim. As a result, large wind farms quickly turn into huge blights on the landscape -- wind farm graveyards.

Instead of a lifespan of up to 30 years, as wind proponents claim, wind turbines were found to have a useful lifespan of less than 15 years!

The analysis of almost 3,000 onshore wind turbines — the biggest study of its kind —warns that they will continue to generate electricity effectively for just 12 to 15 years.

...The study estimates that routine wear and tear will more than double the cost of electricity being produced by wind farms in the next decade. Older turbines will need to be replaced more quickly than the industry estimates... _Big New Study of Wind Farm's Failures

In the US, wind farm graveyards are accumulating, and no one seems to know what to do about the unsightly disgraces.

Faux environmental greens like to rave about the grand future of big wind energy, but the reality paints a much darker picture.

Without extremely generous government supports, no one would dream of building a wind farm -- they are simply not profitable in terms of power production. And without harsh government mandates which force utilities to buy and use wind power -- whether it is in the economic interest of utilities to do so or not -- wind projects would die rapidly, before being born.

Wind is not really about helping the environment -- because big wind energy famrs cause much more damage to the environment than it could ever relieve.

Big wind is actually all about graft and corrupt payoffs, back and forth between politicians and wealthy wind developers, and the hypocrisy of big money green faux environmental gangs.

Poland and Czech Republic Begin to Defend Against Bitzkrieg of Deutsche EnergieWende

Germany's celebrated Energiewende was meant as a public display of enlightenment on the part of Germany's government. But instead, it is creating headache upon nightmare upon the promise of a future economic devastation, for Europe's largest economic power.

Germany has been using the power grids of neighboring countries as "dumping grounds" for unwanted over-production from big wind and big solar energy developments. But Poland and the Czech republic are tired of having their crucial power grids destabilised by an arrogant and militant German irresponsibility. They are installing switching systems to block the dangerous green energy at the border.

[If] Germany’s neighbours act in self-defense, no one can blame them. The blocking of energy at their borders, however, are fragmenting the single European market for electricity. They also turning Germany into an electrical island within the European energy network, with unknown consequences for the security of supply.

And they cause even more forced shutdowns of wind farms in Germany, which means additional costs of at least one hundred millions Euros.

Germany’s federal government took the nuclear phase-out decision without any consultation with their European partnerns and irrespective of any implications for neighbouring countries. The green decision was rushed through without regard of transport capacity. For their short-sighted, self-centered and actionistic energy policy the German government is now paying the price. _Die Welt_via_GWPF

Greens are like children who never took the trouble to learn the dangerous consequences of their impulsive and impassioned actions. When greens gain control of public policy, the consequences are apt to be particularly dire, if there are no mature adults in the vicinity.

If the actions of Germany, Obama's US, Gillard's Australia, etc. are any basis to judge, things are apt to get a bit out of hand, long before any adults show up on the world scene.

For North America, Wind is a Waste of Money

A new report from the American Tradition Institute clearly spells out why big wind is a tragic waste of resources for North America. Even using very generous estimates and assumptions, the report nevertheless reveals that big wind costs at least 2 - 3 X more per unit of energy than more reliable forms of power such as coal, gas, and nuclear.

A fascinating new report by George Taylor and Tom Tanton at the American Tradition Institute called “The Hidden Costs of Wind Electricity” asserts that the cost of wind power is significantly understated by the EIA’s numbers. In fact, says Taylor, generating electricity from wind costs triple what it does from natural gas. That’s because the numbers from the EIA and wind boosters fail to take into account a host of infrastructure and transmission costs. First off — the windiest places are more often far away from where electricity is needed most, so the costs of building transmission lines is high. So far many wind projects have been able to patch into existing grid interconnections. But, says Taylor, those opportunities are shrinking, and material expansion of wind would require big power line investments. Second, the wind doesn’t blow all the time, so power utilities have found that in order to balance out the variable load from wind they have to invest in keeping fossil-fuel-burning plants on standby. When those plants are not running at full capacity they are not as efficient. Most calculations of the cost of wind power do not take into account the costs per kWh of keeping fossil plants on standby or running at reduced loads. But they should, because it is a real cost of adding clean, green, wind power to the grid.

Taylor has crunched the numbers and determined that these elements mean the true cost of wind power is more like double the advertised numbers.

ATI Hidden Costs of Wind (PDF)

He explains that he started with 8.2 cents per kWh, reflecting total installation costs of $2,000 per kw of capacity. Then backed out an assumed 30-year lifespan for the turbines (optimistic), which increases the cost to 9.3 cents per kwh. Then after backing out the effect of subsidies allowing accelerted depreciation for wind investments you get 10.1 cents. Next, add the costs of keeping gas-fired plants available, but running at reduced capacity, to balance the variable performance of wind — 1.7 cents. Extra fuel for those plants adds another 0.6 cents. Finally, tack on 2.7 cents for new transmission line investments needed to get new wind power to market. The whole shebang adds up to 15 cents per kwh. _Forbes

The report is far too generous to big wind in the real world. The actual lifetime of a big wind turbine is closer to 20 years than 30 years. During that short lifespan, significant funds must be spent for upkeep and replacement of expensive parts that are prone to breakdown.

There exist many other costs of wind power which remain largely hidden and otherwise unaccounted for, due to the underlying irrationality of forcing utilities and ratepayers to accomodate an inherently unreliable form of energy. As we discover how exorbitantly expensive big wind is turning out to be, and how unnecessary the faux environmental turn to the intermittent unreliables -- more and more taxpayers and ratepayers are likely to grow restless and more difficult to contain and control.

Germany, Spain, and California may well serve as test cases -- examples of government instigated high dives by entire societies into the shallow pool of intermittent unreliable energy. As the dependency on unreliable energy grows, the hidden costs to societies become more difficult to hide. Watch and learn.

“Because wind is an intermittent source of electricity, it needs appropriate amounts of fossil-fueled capacity ready at all times to balance its large and rapid variations,” said Tom Tanton, Director of Science & Technology Assessment at ATI and a co-author of the report. “Those primary fossil plants then operate less efficiently than if they were running full-time without wind, meaning that any savings of gas and coal or any reductions in emissions are much less than simple calculations would indicate.” _ATI

Sell at $115 bbl; Produce at $15 bbl; Profit of $100 bbl

...certain oil fields in places like Iraq and Saudi are still pulling oil up at a cost of about $10 per barrel.

This $100 oil malarkey is a function of an explicit cartel (OPEC), dangerously unregulated commodity oil trading in global investment banks and the background noise of those who think oil will soon be extinct. _IrishExaminer

Oil production costs vary wildly from one region of the world to another -- even from one adjacent oil field to another adjacent oil field. Profits for some producers are much higher than for others. Let's look at some comparisons of production costs:

The first table comes from the USEIA.
EIA:

Costs for Producing Crude Oil and Natural Gas, 2007–2009
2009 Dollars per Barrel of Oil Equivalent¹

	Lifting Costs	Finding Costs	Total Upstream Costs
United States – Average	$12.18	$21.58	$33.76
On-shore	$12.73	$18.65	$31.38
Off-shore	$10.09	$41.51	$51.60
All Other Countries –Average	$9.95	$15.13	$25.08
Canada	$12.69	$12.07	$24.76
Africa	$10.31	$35.01	$45.32
Middle East	$9.89	$6.99	$16.88
Central & South America	$6.21	$20.43	$26.64

¹5,618 cubic feet of natural gas equivalent to one barrel.

Source: Tables 10, 11 and 12, Performance Profiles of Major Energy Producers, 2009.

Last reviewed: November 1, 2012

The next table comes from the IEA:

Oilfields                   Estimated Production
 /source                        Costs ($ 2008)
 Mideast/N.Africa oilfields         6 -  28
 Other conventional oilfields       6 -  39
 CO2 enhanced oil recovery         30 -  80
 Deep/ultra-deep-water oilfields   32 -  65
 Enhanced oil recovery             32 -  82
 Arctic oilfields                  32 - 100
 Heavy oil/bitumen                 32 -  68
 Oil shales                        52 - 113
 Gas to liquids                    38 - 113
 Coal to liquids                   60 - 113
 
 Source: International Energy Agency World Energy Outlook 2008
 

Bakken oil & gas producer GEOI:

Net Oil and Gas Production, Average Price and Average Production Cost

The net quantities of oil and gas produced and sold by us for each of the three fiscal years ended December 31, the average sales price per unit sold and the average production cost per unit are presented below.

		Year Ended December 31,
		2008			2007			2006
Oil Production (MBbls)			743			392			184
Gas Production (MMcf)			2,962			1,648			577
Total Production (MBOE)*			1,236			667			280
Average sales price (net of hedging):
Oil per Bbl		$	82.42		$	67.20		$	54.61
Gas per Mcf		$	8.12		$	6.19		$	6.83
BOE		$	68.96		$	54.74		$	49.92
Production cost per BOE**		$	27.46		$	23.67		$	20.37

*	Barrels of oil equivalent have been calculated on the basis of six thousand cubic feet (Mcf) of natural gas equal to one barrel of oil equivalent (1 BOE).

Notice that as the price of oil goes up, the cost of production per barrel also goes up -- due to automatically increased tax rates. Also notice that the cost of production given by GEOI is much lower than the $60 to $80 per barrel prodution cost usually quoted for tight oil.

This graphic is a big picture comparison of different regions and countries. Better technologies for tight oil, oil sands, and other unconventional oil production, are pushing production costs down -- while prices seem to be stuck on an undulating plateau.

Clearly the Persian Gulf countries are sitting in the best seats in terms of watching the oil money flow in. Russia is not doing too badly either -- if not for corruption in high places, stripping away oil profits for wasteful personal consumption by cronies.

The best North American oil producers are enjoying a profitable season, and are happy for it. Even if oil prices drop to $60 a barrel, many of the North American producers will be able to keep producing long enough to wait out the slump, and catch the ride back up.