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It will be announced today that Dr. Steven Chu, Director of Lawrence Berkeley National Laboratory, is President-elect Barack Obama's choice for Secretary of Energy. Dr. Chu shared the 1997 Nobel Prize in Physics for his work on laser cooling and trapping of atoms. Prior to becoming director of LBL, he was a professor at Stanford University and also worked at the former Bell Laboratories in New Jersey. For a more complete overview of his work, there is this autobiography or a rapidly-updated Wikipedia entry.

Reaching deep into The Oil Drum archives, commenter Step Back pointed to an audio presentation of a talk and interview with Dr. Chu in July 2005 at the Commonwealth Club in San Francisco, CA.:

• Real Audio
• MP3

Here is one excerpt:

So, I would say among America's most serious concerns, you could consider national security, which is now intimately tied to energy security and access to energy, the long term economic competitiveness of the United States, and the dangers of global warming.

And I believe that this energy issues is at the center of all of these concerns, and thus I think it's the single most important problem (societal problem) that science has to solve. If you compare it to other things we invest heavily in - for example,investments in medicine, cures of heart disease, stroke, cancer - if we don't solve those problems, it would be tragic. But life would go on as we know it. If we don't solve this problem, life could really change.

This could be a very interesting choice.

This post introduces what we are calling TOD:Campfire. Each Wednesday night going forward, we plan on highlighting a post/essay on what you, the TOD community, is doing about peak oil, and resource depletion in general. Topics will relate to wide boundary issues surrounding energy descent, including local food production, small scale energy production, experiments in living with less, or just general information and ideas to be shared with the online community.

The main fare on this site are empirical posts that highlight specific data surrounding energy depletion. The discussions that follow do not readily provide a forum for readers with special expertise in real skills or ideas not easily condensable into graphs or charts. We intend this once-weekly forum to be akin to a summer night sitting around a campfire, dreaming, hoping, and tossing around ideas that might bring about positive change. The types of discussions we would like to foster are where there are no right or wrong answers, just shared experiences, advice and wisdom. We have a wonderfully talented volunteer staff, but our expertise does not stray too far outside the analytical. Therefore we invite you, our readers, to submit guest posts that might be of educational interest to our online community. Next week we will kick this series off with a guest post from TOD commenter 'Wyoming'. Please use the thread below to suggest future post ideas or general comments. Email us at editors@theoildrum.com if you have an article you think would be appropriate to share.

This series has been considering the role of suburbia in a post-peak future. One necessary, though generally ignored, element of any analysis of suburbia is a consideration of the value of decentralization per se. The decentralized mode of suburbia presents problems (greater energy requirements for transportation), and advantages (greater potential for individual self-sufficiency), but what about the economics and politics of decentralization itself?

This post will argue that, when measured from the perspective of the median participant, decentralization offers a superior structure for both economic and political organization, a structure that may prove far more sustainable in a post-peak world than our current, centralized, hierarchal patterns of organization. Suburbia, not as a model for material consumption, but as a legal and social lattice of decentralized and more uniformly distributed production land ownership, has the potential to serve as the foundation for just such a pioneering adaptation—a Resilient Suburbia.
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There are many efficiencies gained through centralization and specialization (of both place and activity, or, as Jaques Ellul termed it, “technic”). These two principles combine to lay the foundation for most of “classical” economic theory. These efficiencies, however, also produce externalities—side effects that are generally unrecognized and unaccounted for when weighing the value gained by centralization and specialization. I’ve termed these “ ">anti-economies.”

When weighing civilizational choices, it is also important to consider the dueling perspective of the median vs. the mean. A policy that grows overall wealth in an economy (raising the mean wealth) does not necessarily increase the wealth of most people within that economy (which is best measured by the median wealth). Is an overall richer society comprised of one super wealthy Tiger Woods and 100 destitute peasants preferable to an overall poorer society comprised primarily of a “middle class” at some level of wealth above destitute peasantry? How do we weight the value—from the perspective of economics, politics, sociology, sustainability, etc.—of equality of distribution versus overall wealth distributed? This is a question that is critical to any consideration of the value of decentralization, and represents a lens through which we must view the relative value of suburbia and its alternatives, their present failures, and future potential.

While, to some extent, the economics and politics of centralization cannot be separated, there are clear economic benefits to centralization and specialization. Great cities from New York and London in the present to the Hanseatic free cities or Phoenician trading bases of the past demonstrate this well.

If the economic advantages of urbanization are so clear-cut, what are its economic disadvantages? First, as an expression of hierarchy, a boundary analysis of cities must include their constituent hinterland—the region that produces the raw materials for urban production and consumes the services and products produced in the urban core. In our increasingly globalized world, this hinterland is also global—for example, the Vietnamese factory worker churning out products designed by the downtown LA design firm and financed by New York banks, or the peasant farmer’s income impacted by the cheap, subsidized grains produced on industrial farms and exported through the ports of major US cities. (Which comes first: the masses of urban poor dependent on government and aid organizations or the flight of farmers from small plots where they cannot compete with subsidized western agricultural exports?)

In addition, peer-polity competition for control and coordination of this hinterland makes the hierarchal model of urbanization fundamentally growth-driven, and therefore unsustainable. Cities are peer-polities, competing with each other to coordinate and control the economic activity of the largest possible share of a limited hinterland. If one city were to focus on a sustainable, no-growth approach to this game, it would be out-competed by others more concerned with near-term growth and intensification. This is natural selection among polities. Cities, by virtue of their necessary participation in the global peer-polity “eco-system,” are forced to adopt unsustainable practices—or they are out-competed in the game for near-term survival by those who do. Where a superficial sustainability-consciousness exists, its effects are generally limited to token measures within the city’s political jurisdiction, rather than the relevant and vastly larger economic reach to its effective hinterland.

It is also important to consider the “success” of urbanization through the mean/median lens. Urbanization, and the industry, trade, and centralization of economic activity that it supports, certainly increases the mean wealth within its bounds, but what does it do to the median wealth? Further, if the requisite hinterland is included within the bounds of our analysis, does urbanization even increase the mean wealth within that boundary, or does it simply affect an increasing concentration of wealth? These are the structural disadvantages of the urban form. Do they outweigh its advantages? We simply don’t have the data to answer that question definitively. What we do know is that, especially within American and European cities, the environmental damages and marginalization of the “hinterland” population largely falls outside our borders, onto the fragile ecosystems and massive poverty of the second and third worlds. This civilizational accounting failure represents a massive subsidy to urbanization—perhaps the greatest subsidy in history, and one that is incredibly damaging and short-sighted.

No matter how energy-efficient cities may be (especially when compared to presently extant alternatives like suburbia), they are most fundamentally the manifestation of hierarchal structures engaged in peer-polity competition—a mode of human organization that, I believe, is at its core the root of humanity’s unsustainability (because it drives our demand for growth) and it is, itself, undesirable (because it emphasizes the mean at the expense of the median, marginalizing the vast majority of participants).

Not only are there distinct, structural disadvantages to the urban model, but there are also nascent advantages of decentralized, non-hierarchal organization. The potential for distributed manufacturing is one example. The potential and advantages of decentralized innovation is another. 2000 small farmers each trying to develop a better system will develop and evaluate more theories than a single, equivalently-sized industrial farm, and the dispersed effort will also develop more locally-appropriate solutions. The advantage of decentralized innovation is particularly apparent in military innovation—the decentralized innovation laboratory of insurgents in Iraq, for example, has equaled or bettered the worlds single largest, centralized R&D facility (the US military-industrial complex), despite dramatic differences in funding, personnel, education, and other resources. Localized self-sufficiency and increased liberation from the peer-polity competition additionally frees innovators to focus on producing quality of life for the median, rather than intensifying the empire of the mean. The mindset of the 20th century was that physical aggregation was necessary for the hierarchal coordination of complex economic activities. The mindset of the 21st century may be that physical distribution excels, and is even preferable, when pursuing non-hierarchal, open source, and emergent coordination of complex economic activity.

There seems to be a nearly endless stream of skeptics who claim that physical proximity (e.g. the city) is necessary for the kind of complex economic activity that underlies our quality of life. Usually, in my opinion, these theories rely on an outdated or misinformed understanding of economic coordination. These doubters seem broadly unfamiliar with advances in open-source, distributed manufacturing; of platform-driven systems; of the potential for tying vernacular resource bases into global networks of open-source innovation. They usually focus on the services and amenities that cities can provide to the privileged few, while ignoring at great moral hazard the concomitant impact of these structures on the vast majority of its citizens—those that live beyond political borders but well within the economic hinterlands. Others point to the opportunities for interaction in urban areas—while it is certainly possible to see and interact face-to-face with more people in an urban setting on a constant basis, the attractiveness (or horror) of this situation seems far more closely tied to individual personalities and psychological adaptation than to any fundamental economic advantage of cities. Both evolutionary psychology and modern commerce suggest that cities may actually be counter-productive in these functions.

Dunbar’s number, for example, shows that human interaction functions best with group sizes of roughly 150--the norm in our ontogeny, and something that does not depend on the human density of cities. Additionally, cities may be liabilities when considering the theory of weak networks--the notion that the most powerful way to leverage humans’ limited capacity to form connections is to form several very strong, very close connections, and then several extremely distant and weaker connections. Cities present an environment more susceptible to tight-group isolation (though they don’t force such an arrangement), whereas the reliance by more distributed settlement on fairs (historically) and the internet (in modernity) may actually tend toward more powerful structure to coordinate economic activity.

This is not meant as a dispositive proof of the superior economic potential of distributed systems, but rather as food for thought—we tend to assume without questioning that cities are necessary and desirable for economic functioning, all the while ignoring significant evidence that this may be the result of little more than inertia. When readers wish to discuss a complex niche topic with other interested parties—a classic analogue for economic coordination—they are generally better served by a highly distributed virtual community (such as The Oil Drum) than by the kind of permanently physically collocated group one would find in a city. My guess is that even a well-connected individual in a “flagship city” like New York would be hard pressed to find the quality of discussion on a topic such as Peak Oil equal to what exists daily on this site. This same advantage spreads from agriculture to Medicine, to military theory--just one anecdote: go to the physical epicenters of military theory, such as the Army War College or one of the service academies, and you will fail miserably to find face-to-face discussions of the caliber you can find daily at John Robb’s blog between people from all over the world.

Additionally, highly centralized and specialized economic structures tend to require a great degree of “middle men” to effectively coordinate complex economic activity on a large scale. As a result, a huge majority of “workers” are not actually performing “end production,” but rather are performing some kind of coordination, command, or control activity. This is generally referred to as “Span of Control”—on the simplest level, one person can only effectively command so many subordinates. Historically, militaries have settled on a span of control of 5 (only 3 of which are operational). This leads to massive “middle management” in large-scale organizations. A similar effect exists in economics—while a massive dairy farm may reap significant economies of scale, it also tends to involve large behind-the-scenes forces performing management, compliance, legal, finance, marketing, transportation, human resources, and other non-milk-producing functions.

Open source networks of innovation have the potential to fundamentally replace this mode of economic coordination in a manner that eliminates the need for this middle-management. Every producer a part-time innovator/theorist, and every innovator/theorist a producer. This might sound like a hippy fantasy-world to some, but it is happening right now from commodity coordination by individual peasant farmers in Africa (via cheap, disposable cell phones) to a revolution in insurgent tactics in Asia. Ask yourself, do you actually make anything? Do you even know anyone who actually makes anything? Or do you and most of your associates engage in one of these “coordinating” functions? If this is the “efficiency” of our current, city-centric economic structure, it looks more like a target of historic opportunity to me.

Finally, the same structural tendencies of our economic systems have dramatic effects on our political systems and the course of our civilization. Centralization and specialization are the opposites of self-sufficiency and independence. When we centralize production of something we require, as individuals or communities we become dependent on the system that provides continuing access. We’ve been so indoctrinated to the benefits (and hidden from the externalities) of these interlacing networks of dependency that we rarely realize the degree to which we have ceded our own potential for sovereignty. The implications are striking.

U.S. gasoline use to decline most since 1979-80 WASHINGTON (Reuters) - U.S. gasoline demand is expected to decline more sharply this year and next than in any other two-year period since 1979-1980, the federal Energy Information Administration said on Wednesday.

Hit by high pump prices in the first half of 2008 and the weak economy, America's gasoline consumption will decline this year by 320,000 barrels per day, or 3.4 percent, and another 50,000 barrels per day, or 0.6 percent, in 2009, the Energy Department's analytical arm estimated.

In its weekly review of the oil market, the EIA said although the U.S. economy grew in 1979 and 2007, the number of vehicle miles travelled declined in both those years in response to huge increases in fuel prices. [break]

Russia Looks to Join OPEC’s Plan to Cut Output MOSCOW — Faced with falling oil prices, Russia is preparing to announce that it will work with OPEC in coordinating a reduction in output, the minister of energy said Wednesday.

Earlier this fall, a Russian official floated the idea of storing oil, rather than exporting it, to help the Organization of the Petroleum Exporting Countries stabilize prices, but this is the first time that the Kremlin has offered to reduce output.

GOP senators voice opposition to auto bailout Republicans revolt as House begins procedural votes on the loan package Image: Republican Senators

Petrobras’ Chief Says Pre-Salt Viable After Oil Slide (Bloomberg) -- Petroleo Brasileiro SA, Brazil’s state-controlled oil company, can make money on its so-called pre-salt offshore fields after oil fell about 70 percent from a July record, Chief Executive Officer Jose Sergio Gabrielli said.

The company has several options for development of pre-salt fields such as Tupi, and will have no problem meeting its investment plans, Gabrielli told reporters in Rio de Janeiro. Tupi, a 5 billion to 8 billion barrel field announced last year, is the largest discovery in the Americas since 1976.

Eco-criminals get their own most-wanted list WASHINGTON - The government is starting a different kind of most-wanted list — for environmental fugitives accused of assaulting nature.

These fugitives allegedly smuggled chemicals that eat away the Earth's protective ozone layer, dumped hazardous waste into oceans and rivers and trafficked in polluting cars.

And now the government wants help in tracking them down.

Back at Junk Value, Recyclables Are Piling Up The economic downturn has decimated the market for recycled materials like cardboard, plastic, newspaper and metals. Across the country, this junk is accumulating by the ton in the yards and warehouses of recycling contractors, which are unable to find buyers or are unwilling to sell at rock-bottom prices.

Ordinarily the material would be turned into products like car parts, book covers and boxes for electronics. But with the slump in the scrap market, a trickle is starting to head for landfills instead of a second life.

China crude imports slump in November BEIJING (Reuters) - China's crude oil imports in November hit their lowest this year as the country's giant refiners reined in buying due to brimming storage and weakening demand amid a spreading global economic recession.

The world's second-largest oil user shipped in 13.36 million tonnes of crude last month, or 3.25 million barrels per day, official customs data showed on Wednesday, a 14.6 cut in daily volumes from October and 1.8 percent down on November last year.

The lower import figure came despite diving crude oil prices and renewed efforts by China to build strategic stockpiles.

Oil jumps 8 pct as Saudi cuts supplies NEW YORK (Reuters) - Oil prices jumped 8 percent on Wednesday on signs that OPEC kingpin Saudi Arabia has slashed supplies to customers for January as the economic crisis continues to slow demand.

Saudi Arabia told major customers it was reducing supplies substantially next month in a move that could bring the kingdom's output below its implied OPEC target of 8.47 million barrels per day.

"There are quite severe cuts -- they are going to be seriously cutting back," a trader with one major customer said.

CIBC cuts WTI crude oil price forecast (Reuters) - CIBC World Markets lowered its forecast for West Texas Intermediate (WTI) crude oil prices for 2009 and 2010, citing near-tern demand concerns, and cut its price targets on several oil and gas companies and trusts, including TriStar Oil & Gas and Enerplus Resources.

"It is our opinion that oil prices are unlikely to make a significant recovery in the face of a deep recession," CIBC said, in a note to clients.

CIBC cut its WTI crude oil price forecast for 2009 to $50 per barrel from $70 per barrel, and for 2010 to $65 per barrel from $80 per barrel.

Dodd: Automakers should consider making buses Among the caveats included in a 31-page bill to provide General Motors and Chrysler access to $15 billion to stay afloat through March is a requirement that they study the feasibility of making public transit vehicles.

Senate Banking Committee Chairman Chris Dodd included the provision after broaching the idea to business leaders of General Motors, Chrysler and Ford during a hearing last week where they presented their proposal for a $34 billion bailout.

The Connecticut Democrat noted during the hearing people aren't buying cars right now, but many municipalities and states are eager to boost mass transit.

Climate change experts 'lose faith' in renewable technology Support for renewable energy technology to fight global warming is weakening in the face of worldwide economic problems and the true scale of the carbon reductions required, a survey published today has suggested.

Figures presented at the UN climate talks in Poznan, Poland, show that climate experts have less faith in alternative energy than they did 12 months ago.

The survey shows less support for wind energy, solar power, biofuels, biomass and hydrogen energy as technologies with "high potential" to reduce carbon levels in the atmosphere over the next 25 years.

There was also less support for carbon capture and storage, new nuclear build, small-scale hydropower and natural gas stations as viable ways to hit targets for reducing greenhouse gas emissions.

Oil-rich Iraqi region may vote on self-rule BAGHDAD - Iraq's election commission will run a petition drive to see if there's enough support for a referendum to decide whether the oil-rich province of Basra will become a self-ruled region, officials said Wednesday.

Lufthansa lowers passenger fuel surcharge FRANKFURT, Germany - Airline Deutsche Lufthansa AG said Tuesday it would lower its passenger fuel surcharges as the cost of oil has fallen.

Time for OPEC to wake up and see the crisis On the geopolitical front, the Saudis supposedly want lower oil prices to curry favour with the incoming Barack Obama administration. Lower crude oil prices support the U.S. economy and undercut three of the United States' most intransigent foes: Iran, Russia and Venezuela. Those three countries require between US$70 and US$90 per barrel to balance their government budgets, compared with US$50 per barrel or less for Saudi Arabia and its conservative Persian Gulf allies. In return for pushing for lower prices, the Saudis want the United States to exert sufficient pressure on Israel to force a fair two-state agreement with Palestine.

...The real reasons for OPEC not cutting its production ceiling at the Cairo meeting are much more mundane, according to my source. First, OPEC was concerned it would lose credibility if it was to agree to new cuts and it later found compliance to the 1.5 million barrels-per-day (bpd) cut announced at the Oct. 24 meeting was poor. Reuters has since estimated that OPEC-11 production was down a solid one million bpd in November compared with the previous month.

Second, despite not wanting lower crude oil prices, Saudi Arabia was willing to live with prices at about US$50 per barrel for a few more weeks to pressure the cheaters within the cartel into greater compliance with previous cuts.

Venezuela Debt Rating Outlook Cut to Negative by S&P (Bloomberg) -- Venezuela’s debt rating outlook was lowered to negative from stable by Standard & Poor’s amid concern President Hugo Chavez will be reluctant to cut spending as oil revenue plunges.

S&P maintained Venezuela’s foreign debt rating at BB-, three levels below investment grade. Oil, which has fallen 69 percent from a July record, accounts for about 90 percent of the South American country’s exports and about half of fiscal revenue.

Fission, Fusion and Nuclear Waste Creating commercially useful power with fusion, in which small atoms are combined to produce energy, always seems to be decades away — and too costly. But physicists at the University of Texas at Austin have come up with a reactor design that would provide a second purpose for fusion: destroying long-lived nuclear waste arising from the splitting of atoms — or fission.

Gas demand firms as prices keep dropping NEW YORK (CNNMoney.com) -- Gasoline demand rose on a year-over-year basis for the first time in eight months as prices at the pump declined for the 83rd day in a row.

Demand ticked up a modest 0.3%, year-over-year, for the week ended Dec. 5, according to Tuesday's MasterCard Advisors' SpendingPulse report, which tracks national retail sales. The last time demand showed a year-over-year bump up was the week ended April 18, when it rose 3.1%. The report includes all sales, whether they are cash, check or by credit card.

Russia signals it might join OPEC crude output cut Crude oil rose after Russia signaled it may coordinate a production cut with OPEC next week to end the five-month, $100 slump in prices.

Energy Minister Sergei Shmatko said Russia will announce proposals for cutting output by Dec. 17, when the Organization of Petroleum Exporting Countries meets, Interfax reported. The group, source of more than 40 percent of the world’s oil, may trim production by as much as 2.5 million barrels a day next week, hedge-fund manager Boone Pickens said Tuesday.

Saudis Try to Re-Invent the Internal Combustion Engine Clearly the Saudis are concerned about the future of their primary export. They see the western world coalescing around new technologies for transportation that minimize, if not eliminate, the role of oil. That vision is clearly not consistent with the best interests of the Saudi royals.

So the Saudis are working to change both the reality and the image of oil. It therefore makes perfect sense that the Saudi’s would host Lesley Stahl and her crew for a tour of their gigantic new fields, their super-high-tech production technologies, their western-style liberal social mores (within Saudi Aramco), and…yes, their very-high tech R&D efforts to improve the way oil works so it will burn cleaner and more efficiently.

Tentative deal reached on auto bailout WASHINGTON - House leaders have scheduled a test vote on a bill to provide government assistance to the financially ailing auto industry.

The Democratic leadership is sufficiently confident of the prospects that such a bill could successfully be brought to the floor that they scheduled a procedural vote for later today.

Survey: Oil may lose top rank as cheapest energy Over the next 20 years or so, oil and natural gas will lose top ranking as the world's most affordable energy sources, according to a survey of energy executives released Wednesday.

Deeper wells in more inhospitable places, both political and geological, have altered presumptions of doing business in the oil patch.

Nearly three out of four executives and managers surveyed last month by Deloitte LLP said oil and gas is the cheapest available energy sources for now, though only 23 percent believe that will be the case in 25 years.

...The sampling revealed a growing concern about the sustainability of oil and natural gas in the coming years. Future sources of fossil fuels, the cost of producing them and the price consumers will pay are some of the biggest uncertainties facing the industry.

Global LNG Supply to Surge to 2012, Crunch Later A 50% surge in global liquefied natural gas production capacity over the next three years, at a time of shaky demand, may make for a buyers market in LNG for a few years but the supply crunch will return later, an executive from BG Group plc said on Wednesday.

"We are about to see a supply surge ... It is really unprecedented," Elizabeth Spomer, BG North America's senior vice president told the CWC World LNG Summit in Barcelona.

Cheaper crude: who wins, who doesn't It's been an amazing year for oil — the biggest, fastest run-up in the price of a barrel was followed by the greatest, quickest decline.

Gazprom Neft May Allow Foreign Partners to Develop Arctic Oilfield Russia's Gazprom Neft, the oil arm of gas export monopoly Gazprom, is considering attracting foreign partners to develop a major Arctic oil deposit, a Gazprom Neft official said on Tuesday.

Gazprom Neft Deputy General Director Boris Zilbermints told a conference that foreign companies may be considered as partners in developing the Prirazlomnoye field in the Barents Sea.

Russia looks to Bolivia-Argentina gas pipeline - Medvedev MOSCOW (RIA Novosti) - Russia is ready to take part in a project to build a gas pipeline linking Bolivia and Argentina, President Dmitry Medvedev said on Wednesday.

Speaking after talks with his Argentine counterpart, Cristina Fernandez de Kirchner, Medvedev said: "We have the opportunity to develop cooperation in the gas sphere, including in the construction of a gas pipeline to link Argentina and Bolivia."

Iran to participate in Iraq's oil projects TEHRAN (Xinhua) -- Managing Director of Iran's Oil Industry Investment Company Ahmad Nasiri said that Iran would participate in Iraq's oil projects, Iran's semi-official Fars news reported Wednesday.

"Iran will cooperate with Iraq on nine oil wells drilling programs in north Baghdad," Nasiri was quoted as saying.

Global financial crisis setting in for shipping The turbulence from the global financial meltdown is finally crashing down on the shipping industry, which appears to be increasingly headed for the docks because fewer companies are ordering goods to transport.

Thanks to a backlog of orders, shipping was initially immune when the world's economy started its downturn in September. Now, those orders are running out, as is time for what has been a boom industry in recent years.

Kenya: Piracy might cause shortages, warn oil importers Even as the push to match local pump prices to falling international crude oil prices gathers momentum, oil importers in the region are warning of uncertainty in the market due to increasing piracy along the Somali coastline.

Corporate Colonialism and the Politics of Economic Integration In October 2008, Grain, an NGO which ‘promotes the sustainable management and use of agricultural biodiversity’ released a report titled ‘Seized! The 2008 land grab for food and financial security’. The report documents two ominous trends which have the potential to drive food prices up further and spell the end of small-scale farming.

The report explains that governments of countries which have a shortage of arable land, or with high population growths, are resorting to buying up or leasing farmland abroad in order to secure necessary food production. The report also points towards corporations and private investors who are looking towards investing in foreign farmland as new sources in revenue in the midst of the financial crises, as an alternative to meagre returns on the crumbling paper asset model. The result is fertile agricultural land becoming increasingly privatized and concentrated in fewer hands, which could ‘spell the end of small-scale farming and rural livelihoods’ around the world.

Energy crunch may offset recovery, experts predict When crude prices hit unprecedented highs last summer, followed closely by gasoline and diesel, consumers reacted by driving less and conserving more.

Then prices began an equally dramatic fall to levels not seen since 2004, exacerbated by the growing global recession.

However, increasing delays in new production projects could create an energy crunch and choke off an economic recovery when demand rebounds, Richard Jones, deputy executive director of the International Energy Agency, said Tuesday in a presentation at Rice University’s James A. Baker III Institute for Public Policy.

"We believe these developments have diverted world attention from energy security and climate change," he said. "In times of economic hardship, it’s all too easy to lose sight of longer-term concerns."

World oil demand to fall for first time in decades WASHINGTON (Reuters) - Global oil demand will contract for the first time since the early 1980s as world economic growth slows to a near standstill, the U.S. government said on Tuesday.

The forecast for 2008 and 2009 is bad news for energy companies and oil producing nations that depend on robust prices, but could benefit cash-strapped consumers by sending gasoline and heating costs lower, according to a U.S. Energy Information Administration report.

Weak economy to ease energy costs for consumers WASHINGTON (Reuters) - One bright spot in the current economic slump is that Americans will get a break when filling up the pump next year and heating their homes this winter, the U.S. Energy Information Administration said on Tuesday.

The EIA said in a report that it expects U.S. regular unleaded gasoline to average $2.03 a gallon in 2009, down significantly from the 2008 average of $3.27 and off earlier forecasts of $2.37 for next year.

"A fall in gasoline prices allows consumers to spend less on fuel and more on something else," said Jerry Taylor, a senior fellow at the Cato Institute.

"So in that sense, falling gasoline prices are akin to a tax cut in that a tax cut allows consumers to spend less on government and more on something else."

Refiners rush to store cheap crude NEW YORK (Reuters) - A big discount in oil prices for prompt delivery is leading U.S. energy companies to fill up their storage tanks at a time of the year they normally run down stockpiles for tax purposes.

The trend could spell bloating inventories in the world's largest energy consumer into the new year, keeping pressure on prices that have already slumped more than $100 a barrel since July as economic turmoil hits consumer demand.

Total Says Economic Woes Won't Delay 2009 Start-ups PARIS -(Dow Jones)- The economic crisis will not cause French oil major Total SA (TOT) to delay any exploration and production projects due to start in 2009, the company's head of exploration and production said Wednesday.

There will be "no changes ... not to the production start-ups that should happen in 2009 time-frames," Total's Yves-Louis Darricarrere told reporters on the sidelines of an event organized by the company to discuss the theme of peak oil.

"In a general way we are maintaining our investment program," he said.

Coalition of all parties needed to promote living within our means In their book, government is bad: long live their 'free market' god, whose prophet was Milton Friedman, and whose faithful followers were Margaret Thatcher, Ronald Reagan and George W. Bush. All three promised to show the world the way back to freedom and prosperity; all three said that government was the problem and privatization the solution!

Now with the collapse of 2008, economists are switching gods: John Maynard Keynes is king of all whose bible says that massive government intervention can put us back on track.

But is it too late for that also? Both assume that, because population, resource extraction, and available energy grew throughout the 19th and 20th centuries, the economy can continue to grow in perpetuity. That was never possible. Yet the people in power still think that all they need to do is come up with the right mix of money, market forces and government regulation, and, pronto, all will be well again. No one considers that Earth's supplies of fossil fuels, topsoil and water are limited, and that someday soon the lack of these resources will drastically reduce economic activity.

To me, what old-school Harper and new school Obama are trying to do looks like an exercise in futility. Welcome to a ring-side seat watching the battle between the Ottawa-based free marketers and the new-to-the-game Washington state controllers over who is capable of restoring perpetual growth. I bet that neither can win, because we have reached a significant physical obstacle to growth -- peak oil -- that spells ruin to all economic philosophies that fail to take this new reality, of living in new times, into account. New times call for co-operation, for getting on board together, for unity and consultation.

Factory prices slide in November LONDON (AFP) – The price of goods leaving factories dived in November owing to a sharp drop in crude oil prices, official data showed on Monday.

Russia's oil company interested in developing Iran's oil fields TEHRAN (Xinhua) -- Gazprom Neft, Russia's fifth largest crude oil producer company and the oil arm of gas export monopoly Gazprom, has expressed its interest in developing oil fields in southern Iran, Iran's satellite Press TV reported on Wednesday.

Kazakhs to draw up reduced spending plans Kazakhstan will draw up contingency spending plans in line with a potential drop in global oil prices to $25 per barrel, the Central Asian nation's prime minister said Wednesday.

Plummeting commodity prices and an economic downturn prompted by severe exposure to foreign borrowing has forced energy-rich Kazakhstan to drastically reduce growth forecasts for the coming years.

Oil: From Bubble to Bust - And Back Again? A blind monkey throwing darts would beat the average investment bank oil analyst, whether forecasting weekly inventory levels or the future oil price.

At the peak of the historic investment bubble in oil futures back in July, they were falling over themselves to predict $170-200 oil in 2009. Now it's $25. Everyone from central bankers to the CFTC and leading economists (or 'misleading' economists as people like Paul Krugman should be labelled) claimed the price was based on fundamentals.

They were wrong then, and they'll be wrong again.

Indian crew jailed over SKorea's worst oil spill SEOUL (AFP) – A South Korean court on Wednesday jailed the Indian captain and chief officer of a Hong Kong supertanker after ruling they were partly to blame for the country's worst oil spill, court officials said.

The Case for Making Bigger Cars Ironically the Big Three might be better off if they stuck to what they're good at: gas guzzlers. Why is Ford (F) the healthiest of the three? There's one big reason: the F series pickup truck. And the brightest of GM's (GM) dim bulbs is Cadillac, a marque which has never been known for its fuel economy.

Detroit knows that it needs to get smaller. If it's going to downsize, it should stick to what it's good at, rather than try to compete with Japanese and European manufacturers on turf it conceded to them decades ago.

Pickens "anxious" over wind farm project financing NEW YORK (Reuters) - Texas oil tycoon T. Boone Pickens said on Monday he is "anxious" for his company's multibillion dollar plans to build a giant wind farm in Texas as the economic crisis chokes off project financing.

Mesa Power LLC is planning to build the world's largest wind farm in the Texas Panhandle, but financiers for the project have disappeared in the economic downturn.

"Where's the money is the question. I don't know how we'll do it. I'm anxious to see what Obama comes up with. There is no money to finance a wind project now," Pickens told reporters at a briefing in New York City.

"I'm a little anxious."

American Lung Association Announces Support of Pickens Plan The American Lung Association, a leader in the fight for cleaner air for decades, announced its support of the Pickens Plan at a press conference today with Mayor Michael R. Bloomberg and T. Boone Pickens, the legendary American business leader and philanthropist. Developed by Mr. Pickens, the Pickens Plan focuses on reducing America's dependence on foreign oil by investing in renewable energy, such as solar and wind power, and using America's vast resources of clean natural gas for fleet transportation.

T. Boone Pickens Named 'Texan of the Year' Famed business pioneer and innovator T. Boone Pickens has been named Texan of the Year by the Texas Legislative Conference, the well-known annual statewide forum that is marking its 43rd year. The announcement was made by Advisory Committee Chair and State Rep. Edmund Kuempel.

Congress should expand Yucca Mountain capacity: DOE WASHINGTON (Reuters) - Congress should expand the capacity of the planned U.S. nuclear waste dump at Yucca Mountain in Nevada and delay a decision on whether to commission an additional dump site, the U.S. Energy Department said in a report released on Tuesday.

"Unless Congress raises or eliminates the current statutory capacity limit of 70,000 metric tons of heavy metal, a second repository will be needed," Energy Secretary Sam Bodman said in a statement.

Better Control for Fusion Power Nuclear fusion could prove an abundant source of clean energy. But the process can be difficult to control, and scientists have yet to demonstrate a fusion plant that produces more energy than it consumes. Now physicists at MIT have addressed one of the many technological challenges involved in harnessing nuclear fusion as a viable energy source. They've demonstrated that pulses of radio frequency waves can be used to propel and heat plasma inside a reactor.

'Sweden cleanest, Saudi Arabia dirtiest' Poznan, Poland - Sweden does the most of any country for tackling emissions of greenhouse gases, while Saudi Arabia does the least, according to a barometer published on Wednesday by watchdogs at the UN climate talks.

But the annual "Climate Change Performance Index" placed Sweden only fourth on its list, for no prizes were allotted for the top three places.

Polluters' windfall: Carbon into gold BRUSSELS: The European Union started with the most high-minded of ecological goals: to create a market that would encourage companies to reduce greenhouse gases by making them pay for each ton emitted into the atmosphere.

Four years later, the carbon trading system has created a multibillion-euro windfall for some of the Continent's biggest polluters, with little or no noticeable benefit to the environment so far.

Not waving but drowning: Island states plead at UN talks POZNAN, Poland (AFP) – Dozens of small island nations threatened by climate change have taken their case to the UN talks here, saying rising seas are already lapping at their shores and may eventually wash some of their number off the map.

Obama vows to end global warming 'denial' after Gore talks CHICAGO (AFP) – President-elect Barack Obama said Tuesday his administration would brook no further delay in tackling climate change after discussing global warming with former vice president Al Gore.

Sitting between Gore and his vice president-elect Joseph Biden following the hour-long meeting, Obama told reporters: "All three of us are in agreement that the time for delay is over. The time for denial is over."

Scientists try to mitigate climate change effects POZNAN, Poland – Scientists studying the changing nature of the Earth's climate say they have completed one crucial task — proving beyond a doubt that global warming is real.

Now they have to figure out just what to do about it.

Matthew Simmons has received quite a bit of press in the past week, after his Ocean Energy Institute floated a proposal to build a $25 billion, 5 GW wind farm in the Gulf of Maine.

Offshore wind farms have a number of advantages over their land based equivalents - they are less hazardous to wildlife, have fewer objections raised on NIMBY concerns and winds are generally stronger over the oceans than they are over land.

Ideally, offshore wind farms will be far enough away from land to avoid being seen from the shoreline, eliminating any residual objections from local residents. Current offshore projects tend to site turbines in waters less than 20 metres deep - going further offshore would mean locating them at depths of 50 meters or more, which is too deep to build supporting towers or trusses down to the sea floor at an affordable cost.

A solution to this problem is floating platforms - one of the key elements of the Ocean Energy Institute proposal. In this post I'll look at some of the work being done to develop floating offshore wind power platforms in order to enable these sorts of schemes to become a reality.
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Floating Wind Turbines

According to a 2006 report by the U.S. Department of Energy, General Electric and the Massachusetts Technology Collaborative, offshore wind resources on the Atlantic and Pacific coasts of the United States exceed the current electricity generation of the entire U.S. power industry. NASA has also been investigating ocean wind strengths worldwide, using the QuikSCAT satellite.

Researchers at MIT and elsewhere have been investigating the feasibility of "tension-leg" platforms for wind turbines, a technology that oil companies have been using for deep-water rigs. The structures would be assembled at a shipyard and placed on large floating cylinders that are ballasted with high-density concrete (to keep the structure from tipping over) and then tugged out to sea. Once in location, steel cables would be attached to the platform, anchoring it to the sea floor.

The MIT researchers claim that large turbines located far offshore could eventually generate cheaper power than both land based wind farms and near-offshore ones (even taking into account the increased cost of longer underground electricity transmission cables). Part of the cost advantage is the higher capacity factor achieved due to more consistent offshore winds - potentially averaging between 40 percent and 50 percent compared with 30 percent or less with land based turbines.

Some offshore wind farms could also have advantages in terms of proximity to large coastal cities compared to wind farms in remote areas, which require grid transmission upgrades to transport the power to places where it is consumed. Floating offshore wind farms also avoid bottlenecks in the supply of marine construction equipment such as pile drivers and cranes that may hamper rapid expansion of shallow offshore wind structures (however they may instead compete for some resources with offshore oil exploration and production, which could be problematical in the short to medium term).

A number of companies are active in the area of floating offshore wind technology - primarily Blue H Technologies, StatOil Hydro and SWAY.

Blue H Technologies

Blue H Technologies is a Dutch company that launched their first test platform at Tricase off Italy's southern coast late last year. The company has also announced plans to install another test turbine off Massachusetts.

The Blue H test platform in Italy is a tension-leg platform - a conventional offshore oil and gas platform design that floats below the surface, held in place by chains running to steel or concrete anchors on the seabed. The platform is located 10 km offshore and hosts an 80-kilowatt wind turbine which is mounted with sensors to record the wave and wind forces experienced by the equipment.

Blue H is now constructing a commercial wind farm for the Tricase site, which will have an installed capacity of 92 MW.

Blue H's design is unusual in that the turbine has a two-bladed rotor rather than the conventional three-blade design used elsewhere in. Technology Review has quoted Martin Jakubowski, Blue H cofounder and chief technology officer, as saying that "the noise and jarringly high rotation speeds that made two-bladers a loser on land are either irrelevant or a plus offshore" and that the fast rotation is "less susceptible to interference from the back-and-forth swing of the platform under wave action" and means less torque, resulting in a lighter structure (Blue H's 2.5-megawatt turbine will weigh 97 tons - 53 tons lighter than the lightest machine of the same power output on the market).

Tech Review also quotes Jakubowski as estimating that Blue H's wind farms will "deliver wind energy for seven to eight cents per kilowatt-hour, roughly matching the current cost of natural gas-fired generation and conventional onshore wind energy".

StatOil Hydro

Norwegian oil and gas producer StatoilHydro and Germany's Siemens (a major wind-turbine producer) are partnering in a project to build a commercial-scale floating wind farm about 10 kilometers offshore from Karmøy on Norway's southwestern tip.

StatoilHydro initially plans to operate a 2.3 MW wind turbine atop a conventional oil and gas platform, and is hoping for this to be operational in late 2009. Unlike the Blue H design, StatOilHydro is using traditional wind turbines.

The company believes floating wind farms are the way of the future, with a company spokesman saying that there are a declining number of sites available onshore and in shallow waters and citing regions without a shallow continental shelf like California, Japan and Norway where traditional offshore wind is not possible.

StatOilHydro says that deepwater wind power will be expensive in the initial stages but that the economics could eventually rival those of conventional wind power.

If deep offshore wind power in the North Sea proves to be successful it would become a major component on the planned European Supergrid, which backers hope will link up the region's power networks and allow a much higher proportion of renewable energy in future (possibly entirely fossil-free, as it will need to become eventually), including solar power from Spain and North Africa, wind from the North Sea and Ireland, biogas from central Europe and tidal power from the UK.

SWAY

SWAY, based in Bergen, Norway, plans to field a prototype of its floating wind turbine in 2010. SWAY's platform is basically a spar buoy that can rise and fall gently with wave action, requiring less anchoring than the tension-leg platform. The buoy, mounted on a column nearly 200 meters tall, is held in place by a 2,400-ton gravel ballast. A three-bladed turbine is used, but, unlike conventional onshore turbines, it faces downwind rather upwind to better accommodate heeling of the tower, which may make it more effective in rougher waters than alternative designs.

The Simmons Plan

The cost estimated for Simmons' plan is $5 billion per gigawatt — more than double the amount that T. Boone Pickens’ now delayed wind farm in Texas is supposed to cost.

This seems high if the cost savings expected by the companies mentioned above eventuate, with the StatOilHydro experiment probably being the best guide, with the North Sea facing similar weather challenges to those experienced off New England.

Winter winds in the Gulf of Maine carry as much as eight times more energy as summer breezes, meaning maximum power is available during periods of greatest demand. About 80 percent of Maine residents use oil to heat their homes. The average family uses about 1,000 gallons, or 3,785 liters a year - when prices are around $4 a gallon ($1 a litre) this consumes about one-tenth of the average family's annual income, leading Simmons to declare "If we don't do this, we're [eventually] going to have to evacuate most of Maine".

Seen in that light, even an expensive offshore wind farm is better than the alternative.

As an added bonus, construction and maintenance of the structures will bring valuable job opportunities to a region hard hit by the decline of the fishing industry.

Related Posts :

The Oil Drum - Alternative Wind Power Experiments - SkySails and Airborne Wind Turbines (Peak Energy)

The Oil Drum - Offshore Wind

The Oil Drum - Energy from Wind: A Discussion of the EROI Research

The Oil Drum - Tapping The Source: The Power Of The Oceans

Cross-posted from Our Clean Energy Future.

Oil and OPEC: Can the Cartel Possibly Cut Production Enough? Just how daunting is OPEC’s challenge to rein in falling oil prices? Beyond its control, if economist and oil-market analyst Philip Verleger is right.

Mr. Verleger, a former Carter administration official, academic, and energy-industry consultant, says OPEC can forget about tiny production cuts of 1 or 2 million barrels when it meets later this month in Algeria. The cartel needs to wipe out at least 7 million barrels per day of oil production to bring oil markets close to balance, he says, according to Platt’s The Barrel.

And that’s not likely to happen, which spells even more happy times for oil bears, Mr. Verleger says: “Since cuts of such magnitude are out of the question, one should expect prices to come under further downward pressure.” [break]

Iran’s crude output may fall 25%; exports will cease: report SINGAPORE: Iran, the second-largest crude producer in the Organisation of Petroleum Exporting Countries, may reduce output by as much as 25% and cease exports because of ageing fields and a lack of foreign investment.

Platts Survey: November OPEC Oil Output Fell to 31.38 Mil. Barrels Per Day LONDON /PRNewswire/ -- Platts -- The 13 members of the Organization of the Petroleum Exporting Countries (OPEC) pumped an average 31.38 million barrels per day (b/d) of crude oil in November, according to a Platts survey of OPEC and oil industry officials just released. This is a decline of 880,000 from the October level of 32.26 million b/d.

Excluding Indonesia, which will leave OPEC at the end of this year, and Iraq, production from the 11members bound by output agreements fell by 950,000 b/d to 28.16 million b/d from 29.11 million b/d, the survey showed.

Pemex to Add Nitrogen at Chicontepec to Boost Output (Bloomberg) -- Petroleos Mexicanos, the state-owned oil company, will inject nitrogen into the Chicontepec field to increase output at the onshore deposit as it seeks to offset a faster-than-expected decline at its largest field.

The nitrogen injection will help the field produce 500,000 to 600,000 barrels a day of crude by 2021, the company, known as Pemex, said today in a statement e-mailed to the Mexico City stock exchange.

Report outlines issues with Iraqi energy security, systems LOS ANGELES, Dec. 9 -- While Iraq's oil industry will continue to face problems with security in 2009, the country's crumbling production and pipeline systems are more likely to disrupt crude exports, according to a report by London-based Exclusive Analysis (EA).

"Notwithstanding an overall improvement in security, the situation in the country is still extremely fragile, and progress over the next 12 months is at significant risk of being reversed by a variety of factors," the report said.

Canadian oil firms wait on job cuts CALGARY, Alberta (Reuters) - Global economic turmoil and skidding oil prices have yet to cause Canadian oil companies to resort to large-scale job cuts but harder measures will be coming if the industry's prospects don't improve.

They are struggling with low oil and natural gas prices and stubbornly high costs for big projects, but Canada's big oil producers and oil sands developers have so far shied away from cutting staff.

The Real Estate Crunch Comes to Russia Now that the global economic crisis has hit Russia with full force, real estate prices are finally tumbling. And if recent trends are any guide, the mother of all crashes may be in the offing. "The property market in Russia is on the brink of collapse," says Valery Koltashev, head of economic research at the Institute for Globalization & Social Movements, a Moscow think tank. "Property prices are very severely inflated, and demand is obviously slumping."

Pelosi: "car czar" could be named this week, Volcker eyed WASHINGTON (Reuters) - A presidentially appointed "car czar" to oversee the restructuring of struggling U.S. automakers could be named as soon as this week if Congress approves an industry bailout, House of Representatives Speaker Nancy Pelosi said in an interview aired on Tuesday.

Pelosi told NBC's "Today Show" that she favored former Federal Reserve Chairman Paul Volcker, recently appointed by President-elect Barack Obama as his top adviser on steering the economy out of recession, to oversee restructuring of the industry.

Lester R. Brown: A Wartime Mobilization There are many things we do not know about the future. But one thing we do know is that business as usual will not continue for much longer. Massive change is inevitable. Will the change come because we move quickly to restructure the economy or because we fail to act and civilization begins to unravel?

Saving civilization will take a massive mobilization, and at wartime speed. The closest analogy is the belated U.S. mobilization during World War II. But unlike that chapter in history, in which one country totally restructured its economy, the Plan B mobilization requires decisive action on a global scale.

Climate Change Threat: Developing Countries Lack Means to Acquire More Efficient Technologies BOULDER—Contrary to earlier projections, few developing countries will be able to afford more efficient technologies to reduce greenhouse gas emissions in the next few decades, new research concludes. The study, by researchers at the National Center for Atmospheric Research (NCAR) and the University of Colorado, warns that continuing economic and technological disparities will make it more difficult than anticipated to reduce greenhouse gas emissions, and it underscores the challenges that poorer nations face in trying to adapt to global warming.

Global warming aided by drought, deforestation link Irvine, Calif. — In the rainforests of equatorial Asia, a link between drought and deforestation is fueling global warming, finds an international study that includes a UC Irvine scientist.

The study, analyzing six years of climate and fire observations from satellites, shows that in dry years, the practice of using fire to clear forests and remove organic soil increases substantially, releasing huge amounts of climate-warming carbon dioxide into the atmosphere.

Failing water scheme leaves Beijing high and dry When the scheme was launched, Beijing's mayor promised the water in plenty of time for the Olympics that took place earlier this year. Then the project was postponed to 2010. But last week, Chinese officials set a new completion date of 2014.

Now the whole project is in serious doubt. The eastern route, using the ancient Grand Canal, is held up because factories are polluting the canal. The western route, tapping the Yangtze headwaters in Tibet, has not been started. Officials also blame pollution for the latest delay to the middle route - a canal stretching more than 1200 kilometres from the Danjiangkou reservoir on the River Han. They say more treatment plants must be built to bring the water supply to a high enough quality.

OPEC needs big supply cut to stem oil's slide LONDON (Reuters) - OPEC needs to make a large cut in supplies at a meeting next week, its third reduction since September, to prevent further falls in oil prices as world demand slumps due to slowing economies.

The 12-member OPEC should cut output by at least 1 million barrels per day (bpd) at the December 17 meeting, OPEC delegates and analysts said. Some even suggest the minimum reduction should be 2 million bpd.

"The whole world economy is in turmoil," Shokri Ghanem, Libya's top oil official, told Reuters. "We think this needs substantial action."

OPEC to Cut as Much as 2.5 Million Barrels, Boone Pickens Says (Bloomberg) -- The Organization of Petroleum Exporting Countries, supplier of more than 40 percent of world oil, will cut output by 2 million to 2.5 million barrels a day, billionaire hedge-fund manager Boone Pickens said today.

Marseille Oil Port Workers’ Strike Cuts Output From Refineries (Bloomberg) -- A strike by workers at the Fos and Lavera oil terminals in the French port of Marseille is forcing refineries to lower output because of difficulties getting crude and exporting refined products.

“The situation is deteriorating,” Jean-Louis Schilansky, president of the Union Francaise des Industries Petrolieres, or UFIP, said today in a telephone interview. Reduced refinery operations and vessel delays are costing the oil industry about $1 million a day, he said.

Petrobras May Pump Pre-Salt at Cost Below $40/Barrel (Bloomberg) -- Petroleo Brasileiro SA, Brazil’s state-controlled oil company, may be able to produce oil from its pre-salt fields in a pilot program for less than $40 a barrel, the company’s investor relations manager said.

BP May Boost Spending in China by `Several Times,' CEO Says (Bloomberg) -- BP Plc, Europe's second-biggest oil company, may increase its investments in China by ``several times'' to benefit from rising domestic energy demand even as the global economy slows.

``I want to see BP expanding its current investments in China by several times over the medium term,'' Chief Executive Officer Tony Hayward said in a speech posted on the Web site of the company's China unit yesterday. BP has invested more than $4.6 billion in the world's fourth-largest economy, he said.

Richard Heinberg - Transport: Time to Think Outside the Metal Box Congress is reluctantly preparing to help GM, Ford, and Chrysler with a bailout package of loans, but only on condition that the industry restructure itself and start making more sensible vehicles.

But the reality is that there won't be enough investment capital available to help the automakers retool comprehensively. Nor will there be enough customers to make new fleets of SUV super-hybrids profitable to build. People without jobs or credit don't buy new cars.

It's about time someone started thinking about the implications. Up until now the US road vehicle fleet has had a 15- to 17-year turnover period. That's about to become 25 years to forever.

Saudi Arabia's Oil Equation OPEC has a math problem.

When demand for oil is rising, members of the Organization of Petroleum Exporting Countries take extra portions from the expanding output quota pie. But when it falls, as now, they are supposed to share the pain of lower production even as oil prices are declining, a double blow to cash flows.

As the organization's biggest member, much of the burden of managing all this rests on Saudi Arabia.

Yet it also must consider its customers and long-term demand.

2 New Reports Indicate China’s Water and Soil May Be Too Far Gone to Support a Growing Economy Two new reports – one from the Chinese government, the other based on criteria developed by the United Nations – should be enough to scare every government, economist and investor in the world about the future of the Chinese economy, currently the one global bright spot.

The underlying question raised by these reports is this: How can a nation’s economy grow when its soil is rapidly eroding and its water is rapidly becoming so polluted that it isn’t just unsafe to drink. It’s even unsafe for fishing, farming and factory use.

In short, how can a nation’s economy grow when its ecosystems appear on the verge of collapse?

Buying into food’s impact As the intersection of water, energy, environment and population demand tightens global food markets, studies are showing that what we eat can have much more environmental impact than driving or powering our homes. But how do we know what food purchase choices to make? Is an organic banana produced in northern NSW and trucked down Australia’s east coast a better option nutritionally and environmentally than one produced by conventional means in the Philippines and shipped to an Australian market? The answer is not as clear-cut as you might think.

U.N. sees surge in North Korean hunger UNITED NATIONS (UPI) -- A United Nations report issued Monday projects about 40 percent of North Korea's population will be in dire need of food in the next few months.

If the prediction comes to pass, it will mean about 9 million North Koreans will go hungry because of a shortage of cereals. The assessment by the U.N. Food and Agriculture Organization and the World Food Program says agricultural production will fall short despite favorable growing conditions because of shortages of fertilizer and fuel.

Oil price drop casts cloud over Pemex reform While Mexican legislators were discussing legislation to increase oil exploration and production last July, Mexico’s crude oil mix hit a record $132.71 a barrel. The government’s coffers were filling at breakneck speed and, with a few exceptions, there were smiles all round.

This month, with the reforms in place and following a presidential pat on the back to Congress for a job supposedly well done, prices have plummeted; the Mexico mix at the end of last week was down to $30.52 a barrel.

KYRGYZSTAN: Poor hit hardest by rising food prices, energy crisis OSH/BISHKEK (IRIN) - "No electricity, no life", says Asan Kojomkulov, 58, an unemployed resident of Kyzyl-Bairak village near the southern Kyrgyz town of Osh. "There are regular blackouts every day; it is very difficult to manage without power."

Impose license fee on King County cyclists With governments at all levels hurting for revenues but faced with huge infrastructure bills, Times columnist James F. Vesely argues it's time to impose a license fee for bicycles. Cyclists have benefitted richly from projects that have blazed trails throughout the Puget Sound but have not had to pony up themselves.

Gleanings from Fatih Birol’s presentation of the WEO 2008 to the Council on Foreign Relations Birol’s talk was fairly dry, understated and nuanced. His slides were essentially the PR set you can download from the IEA website. He stated right up front that the Business-as-Usual reference scenario projection for energy consumption to 2030 was unsustainable. But the compelling reason he gave was because BAU would cause a 6-degree global temperature rise, not because oil supply shortfall challenges might make those levels of consumption unfeasible.

Too late? Why scientists say we should expect the worst Anderson, an expert at the Tyndall Centre for Climate Change Research at Manchester University, was about to send the gloomiest dispatch yet from the frontline of the war against climate change.

Despite the political rhetoric, the scientific warnings, the media headlines and the corporate promises, he would say, carbon emissions were soaring way out of control - far above even the bleak scenarios considered by last year's report from the Intergovernmental Panel on Climate Change (IPCC) and the Stern review. The battle against dangerous climate change had been lost, and the world needed to prepare for things to get very, very bad.

New Novel Predicts the Collapse of Civilization TAMPA, Fla. -- December 9, 2008 -- The Noah Countdown by B.T. Post is a psychological thriller about a global energy crisis that threatens the human race with extinction.

The Future of Energy If the plans being laid for the economy and the environment work out the way President-elect Barack Obama's advisers hope they do, the future of energy can be summed up in one word: electricity.

That one word covers a lot of policy twists, however: What will the economic downturn mean for initiatives to cut down on greenhouse-gas emissions? What will the recent drop in gasoline prices mean for efforts to boost alternatives to fossil fuels? Can the electrical grid handle increased demand? How do you smooth out the highs and lows of power generation? Where will all that power come from?

Kunstler: People Get Ready The broad American public voted for "change" but they thought that meant a "changing of the guard." Out with the feckless Bush; in with the charismatic Obama... and may this American life now continue just as it ever was. The change actually coming will be much more than they bargained for, namely our transition from a wealthy society to a hardship society. The sharp break is a product of our years-long failure to reckon with the energy realities of our time. We're still confused about that, but it's hard, otherwise, to ignore the massive disappearance of capital, asset values, livelihoods, domiciles, comforts, and necessities.

All I want for Christmas is an energy policy The world's energy system is at a crossroads. Current global trends in energy supply and consumption are patently unsustainable - environmentally, economically, and socially. But that can - and must - be altered; there's still time to change the road we're on.

The Classic Post-Bubble Bounce Actually, James Kunstler has it right for the long term. Many of these big schools have grown so big due to cheap money and cheap energy. Now they have to pay for the upkeep in an era of long-term rising costs for energy. Just heating the physical plant at Michigan State of the U of Minnesota at Duluth will eventually become a prohibitive expense. How about salaries for profs who teach just about any course in a field with the word "-Studies" as part of the name? Can you define the concept of "uselessness" in the era that's coming? At some point, it's just welfare for PhDs with no other visible means of support. And what will the US economy do with all of the "marketing" majors when the whole concept of globalization begins to crumble. Market what, pray tell? And to whom?

Cheap-oil era is over It would seem fairly logical that an organization responsible for tracking the global oil industry would as a matter of course, indeed of its very nature, take a close look at actual oil supplies every year, but this in fact has not been the case. For almost its entire existence, the IEA has quite unbelievably looked at demand and assumed supply would be there to meet it.

So after their first real inventory of global oil supplies, extrapolated from 800 largest oil fields, the IEA's conclusion? Mr Tanaka put it quite succinctly, "The era of cheap oil is over." And despite some of the report's optimistically shaded opinions, a closer look at the World Energy Outlook 2008 leaves a rather more ominous conclusion. Not only is the era of cheap oil over, but the era of oil as a yoke on future economic growth has begun.

Study lists benefits to tapping off-limit US resources WASHINGTON, DC -- Development of US oil and gas resources that Congress has kept off-limits for decades could generate more than $1.7 trillion of government revenue, create thousands of new jobs, and enhance the nation's energy security by significantly boosting domestic energy production, a new study suggested.

The study by ICF International, which the American Petroleum Institute commissioned, concluded that developing offshore areas covered by congressional moratoriums until recently, along with resources in the Arctic National Wildlife Refuge and a small portion of currently unavailable land in the Rocky Mountains, could increase US crude oil production by as much as 2 million bbl a day by 2030, offsetting nearly a fifth of the nation's crude imports.

Natural gas production could increase by 5.34 bcfd, or the equivalent of 61% of the expected gas imports in 2030, the study added. It also estimated that development of all US oil and gas resources on federal lands could exceed $4 trillion over the life of the resources.

Charts Predict: Oil Will Be Trading Wasteland for 5 Years The price of oil could stay in a tight range below $50 a barrel for the next five years, after retesting recent lows, Paul Day, deputy head of research from MIG Investments, told CNBC.

"We expect oil to probably trade in a range between $36 to $47, possibly for five years," Day said.

Shtokman gas field partners push for tax breaks MOSCOW (RIA Novosti) - The operator of the Gazprom-led Shtokman gas condensate project in the Russian section of the Barents Sea asked on Tuesday for tax exemptions as a precondition for investing in the development of shelf deposits.

ANALYSIS - China sugars the pill of oil market revolution By allowing the limited liberalisation of domestic gasoline and diesel prices and shifting to a much bigger consumer tax, Beijing sent a clear signal that consumers -- not its refiners -- would be required to bear more of the future cost of fuel, making the world's No. 2 oil consumer more sensitive to prices.

For oil markets counting on China's growing demand to help offset contracting consumption in the industrialised world, the reforms may give one more reason to think twice before bidding U.S. crude back toward its record $147 high. U.S. crude fell last week to nearly $40, its lowest in almost four years.

Nigerian economy could collapse in a few months The Nigerian economy is predicted to collapse in six months if oil prices continue to fall at the current rate and if the country’s currency, the Naira continue to devalue against the dollar, reports claim.

Petrobras delays strategic plan; receives investment offers LOS ANGELES -- Brazil's Petroleo Brasilerio SA (Petrobras) continues to review its 2009-13 strategic plan, with no deliberation taking place yet at the board level, according to an official report.

Even as the company firms up its plan, however, government officials claim to have no concern over funding, especially as substantial offers of finance are coming in from other nations such as China and the UAE.

The way forward: Fighting global poverty I have mentioned before but because it is a very important fact for human survival I will say it again. We depend totally on oil and where a minor shortfall according to the Peak Oil, Life after oil crash Website, between demand and supply of as little as 10 to 15 percent, is enough to wholly shatter an oil dependant economy and reduce its citizenry to poverty.

Therefore we are all now living on borrowed time and where we have to understand this fully, its implications for our children's sake and where we have to find alternatives quickly.

Powering Africa's future Africa is a continent of darkness and is desperately in need of power.

Only one in three of Africa's 700 million people have electricity - and in the countryside only one in ten has light at the flick of a switch.

For many people, solar energy is the most obvious route for a continent blessed with abundant sunshine. However, some countries are already heading in the nuclear direction.

Peres: Iran leaders cannot feed their kids uranium for breakfast President Shimon Peres said Tuesday that the global economic crisis and falling oil prices would retard Iran's nuclear program, adding that Iranian leaders could not feed their children "uranium for breakfast."

As the World Economy Sinks, So Does Global Shipping The Baltic Dry Index, which measures world shipping charges for raw materials, has plummeted from a high of 11,793 in May to 672, its lowest level since soon after the index was established, in 1985. Daily-rental rates for the largest Capesize category of carrier have plunged from $234,000 just two months ago to $2,320, a fall of a staggering 99%. Jeremy Penn, president of the London-based Baltic Exchange, cautions that bulk rates are prone to fluctuation and have been hit particularly hard this time by the skittishness in financial markets, as the necessary letters of credit for commodity purchases have grown more difficult to come by. Still, Penn says, the recent drop in bulk-cargo fees is unprecedented, citing declining worldwide demand, particularly as the economic slowdown reaches China. "The violence of the drop (in rates)," he says, "is more extreme than anything we've ever seen before."

Barack Obama's coal conundrum Barack Obama has pledged to overturn George Bush's policies by pushing for deep cuts in greenhouse gas emissions.

But he inherits an energy system dependent on a heavily polluting fuel - coal.

China to spend 150 bln yuan on railways in coal region BEIJING (Reuters) - China plans to spend more than 150 billion yuan ($21.8 billion) over the next six years to add some 2,000 km of railway track in the coal-rich region of northern Shanxi province, the Xinhua news agency reported on Sunday.

The construction projects are expected to help boost domestic demand and counter the impact of the global financial crisis, said Zhang Baoshun, Communist Party Secretary of the Shanxi provincial committee.

India quakes over China's water plan BANGALORE - Even as India and China are yet to resolve their decades-old territorial dispute, another conflict is looming. China's diversion of the waters of a river originating in Tibet to its water-scarce areas could leave India's northeast parched. This is expected to trigger new tensions in the already difficult relations between the two Asian giants.

Task force to study city's energy supply Email Story The city is forming a community task force to study how peak oil will affect Hamilton.

Council approved $35,000 to set up the Community Energy Collaborative to explore the city's energy supply vulnerabilities. The task force will look at economic, social and environmental sustainability and urban planning.

Obama to meet with Gore to discuss climate change Washington - President-elect Barack Obama will meet with former vice president Al Gore in Chicago on Wednesday to discuss global warming, Obama's transition office said in a statement. The two men, along with vice president-elect Joe Biden will "discuss energy and climate change and how policies in this area can stimulate the economy and create jobs," spokesman Nick Shapiro said.

Deal secured on ambitious EU renewables law EU governments and the European Parliament have agreed a far-reaching new directive to boost EU renewable energy use to 20% by 2020, following a compromise struck with Italy over a controversial 'review clause'.

How we can cut our emissions Car sharing schemes can make a real impact in terms of reducing your and your neighbour's emissions. Cycling is also a great option. Think how the town would be with only half the traffic or even less and what side effects could be such a benefit. We could turn car parks back into gardens or orchards, for example. With peak oil making driving ever more unaffordable in the future, a low energy and low emissions town could be an even better place to live.

Insurers seek funding for countries at risk of global warming Poznan, Poland - A UN agreement to fight global warming should include financing to help insure countries most at risk from natural disasters attributable to climate change, insurance firms said Monday. Insurers made their appeal during this year's main UN climate conference, where some 190 countries hope to agree on the blueprint for a year of talks meant to produce a global deal by December 2009.

Science paves way for climate lawsuits People affected by worsening storms, heatwaves and floods could soon be able to sue the oil and power companies they blame for global warming, a leading climate expert has said.

Myles Allen, a physicist at Oxford University, said a breakthrough that allows scientists to judge the role man-made climate change played in extreme weather events could see a rush to the courts over the next decade.

The newsmagazine 60 Minutes aired an extended segment on Saudi Arabian oil last night. The topics addressed were the amount of oil remaining in the country and their strong desire to sell it. The message from Oil Minister Ali Al-Naimi and Saudi Aramco officials was, not surprisingly, that they have decades of oil left and they are happy to sell it to a world which really doesn't have any alternative. While the presentation included the usual mix of superlatives and exaggerations to go with some great visuals, there was little real new information revealed. It is well worth viewing, however, as much to to hear what wasn't said (or asked) as to hear what was. [break] The video can be watched below, or you can read the transcript. Part 1 Part 2

There are a lot of little things to pick apart, from misconceptions about what peak oil means to the oxymoron of Saudi Arabia developing a more fuel-efficient engine so that the world will consume more (or is it less?) oil. I will let readers do most of the deconstruction, but I found one short clip of the video somewhat intriguing. In the discussion about Shaybah (about 4:30 into the first half), an animation of horizontal drilling is shown.

The geology shown is not that of Shaybah, but rather of Zuluf, an offshore field with it's own set of problems. It is not easy to read, but the text indicates that either 60% or 80% of the remaining reserves reside in the Khafji sand stringers. This says more about the future of Saudi Arabian oil than all the steel in Khurais. While it is impressive that this oil can be retrieved using improved technology, this statement from Saudi Aramco CEO Abdallah Jum’ah has more stretch than one of his limos:

Jum'ah says that with this technology, they're able to recover ten times more oil than before.

Fear not.

Why are gasoline prices so low? And why do they continue to drop? The recent drop in oil prices has truly been extra-ordinary. Gasoline prices are down almost as spectacularly, and the price of diesel is down is well. If we look at the graph, it doesn't look at all like anything we have seen before. What is happening, and where is this headed?

Figure 1 - EIA Graph of West Texas Intermediate (WTI) Crude Oil Prices, through 12/2/2008

I am becoming more and more convinced that the drop in gasoline prices has a huge amount to do with all of our credit problems (which in turn are related to limits on the oil supply). These credit problems are causing more and more defaults on debt and more and more bankruptcies. These defaults and bankruptcies have a double impact on oil prices--partly from reduced demand, and partly from distressed sellers disposing of futures contracts at low prices, because they are easy assets to sell.

We often hear that "soon" oil prices will hit a bottom, and start shooting back up again. I am less and less certain that this will be the case. Instead, I am concerned that we may on a relentless path to a point far below the point where energy companies can expect to have any chance of making money. We may be on a path toward more and more bankruptcies and defaults of all types--energy companies, owners of commercial real estate, homeowners, financial institutions, auto makers, airlines, and many more. If this is the case, there will be a huge strain on governments, and some may find it necessary to default on their debt.

In order to ultimately get past this crisis, it may be necessary for governments to establish new currencies in which debt is severely limited, and at the same time unwind the debt in the existing currency. I expect that a huge amount of derivatives of all types will need to disappear as well, so that financial assets start bearing a close relationship to physical resources.
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Supply and Demand

Most of us who have taken any economics courses have some idea of the expected workings of supply and demand.

Figure 2 - Graph from Wikipedia. Caption says The price P of a product is determined by a balance between production at each price (supply S) and the desires of those with purchasing power at each price (demand D), along with a consequent increase in price and quantity Q sold of the product.

The theory is that in a competitive market, price will act to even our supply and demand imbalances. If supply is too great, price will drop, and more users will find themselves able to purchase the products and use them at the lower price, bringing supply and demand back into balance again.

Is oil priced too high, or is credit too unavailable?

I think what we have happening now is a mixture of (1) supply and demand of the physical product, and (2) credit issues, both of which are focusing on commodity prices of all types--oil, natural gas, coal, copper, corn, and many others. With respect to supply and demand of the physical product, when the US was busy building huge numbers of houses to keep the economy going, and workers around the world were buying many new cars, there was a great deal of demand for these commodities. Once we started building fewer houses and cars, less oil was needed for manufacture and transportation. This type of physical supply and demand is what we expect to underlay a curve of the type shown in Figure 2.

The second problem is debt, and it doesn't work as nearly as rationally. Debt, and the repayment of debt, works as long as there is a growing economy, because with the growth, there are funds for a reasonable percentage of debtors to pay back their debts with interest. When a government senses that the economy is not growing as fast as it would like, it can encourage more and more debt, to try to keep the economy going. It seems to me that since 2001, we have had a considerable amount of government encouraged debt, to try to get the economy to expand faster than its natural rate.

It is not entirely clear what the impact of the growth of credit on real GDP is. One estimate might be that an additional dollar of debt adds an additional dollar of real GDP. One could debate whether this relationship is correct, but clearly there is some impact. Using total debt amount estimates from economagic.com, this is a rough calculation of real GDP, without the inclusion of debt:

Figure 3. Calculation of US Real GDP, adjusted for growth in credit. Click for larger image.

Figure 4. US Real GDP, adjusted for growth in credit. Click for larger image.

Based on the calculation shown in Figure 3, and graphed in Figure 4, there has been no real growth since 2000. Instead, we have been seeing more and more debt-based pseudo-growth.

Without real expansion, debt will eventually start to unwind--there start to be too many defaults. The debt probably would have started to unwind on its own, because of the slowed growth rate, even apart from the oil price increases. The increases in oil and food prices between 2005 and mid 2008 helped prick this debt bubble, but the underlying debt set the stage. The underlying issue that slowed the growth rate was limitations on resources. These resources are not becoming more abundant, so it seems to me that it will be virtually impossible to get the real growth to increase again to the point where it again makes sense to have very much debt. I would argue that it probably never made sense to have the level of debt that we have had in the past few years.

So what does this have to do with the supply and demand curve? Oil prices can be expected to keep dropping, as long as there is more and more credit imploding, resulting in fewer people being able to buy products made with oil. Given the huge amount of debt outstanding, and the lack of growth to make this debt "repayable", more and more defaults seem likely.

We can ask ourselves, "At what price of oil (or of gasoline) will credit stop imploding?" since the answer to that question will tell us when the price of oil can be expected to start rising again. I believe the answer is, "Whenever governments can figure out a way to get the economy to start growing fast enough so that debt (and its repayment with interest) 'works' again." I would argue that governments will never be able to make this happen. We have reached a point where resources (oil and other finite resources) are in such limited supply that the best we might be able to hope for is a level economy for a while. More likely, we are going to see decline. Because of the lack of growth, we are at a point that we need to unwind the debt we have, and learn to live without the vast majority of it.

What does this mean going forward?

To me, Figure 1 is truly scary. If the price of oil and other commodities continues to drop, we are likely to see more and more energy companies going bankrupt. Some of these may be large--we have heard rumors about the financial problems of Glencore, a large privately owned international trading company. The economies of Texas and Louisiana are likely to take major hits, as will Russia and some Middle Eastern countries. Even with the low energy prices, many of the problems the US has are likely to continue (too few houses and cars being built to "pump up" the economy, declining prices on homes and commercial property, and many workers laid off).

The amount of debt we have outstanding is extremely high. The debt shown in Figure 3 is not really all of the obligations of the US public and US government, since it excludes things like Social Security and Medicare liabilities. According to one web site, the amount of debt Americans have outstanding is $53 trillion, plus unfunded governmental promises (including Social Security and Medicare) of $64 trillion, and plus trillions of dollars of related to derivatives. Not counting the derivatives, this amounts to $386,091 per person. I don't know whether these numbers are precisely correct, but it is clear that with limited resources and a declining economy, there is no way that amounts similar to these amounts are going to be paid in full.

I am sure that the Bush and Obama administrations and other administrations around the world will try to fix the problems, but I fear many may not be successful. If they somehow are successful, the current oil price collapse may lead to a rebound, but it is likely that we will still have to face the need to unwind our debt later, even if we somehow make it past our current crisis.

I don't know whether it is necessary to go through a full economic collapse and restarting process, to get past all of this debt. I find it hard to imagine that governmental leaders will sit down, look at the situation rationally, and start thinking about how to unwind the debt. But eventually, and I fear, sooner rather than later, we will need to get rid of most of this debt, and start over again with a monetary system that is more closely tied to resources and discourages debt. It is possible that forward-looking leaders could even start the new monetary system before the old one is phase out. The new monetary system might, for example, start out as more of a rationing system for food and energy products, and eventually be expanded to cover other products as well.

I am afraid I don't have all of the answers. My problem is that when I see a trend line based on oil prices pointing almost straight down, and I can't see a good reason for prices to suddenly start rising, I start worrying that the consequences of the current price collapse could be far worse than any of us on The OIl Drum have been talking about.

These are a few of my recent posts that are related:

Impact of Credit Crisis on the Energy Industry - Where Are We Now?

An Overlooked Detail-Finite Resources Explain the Financial Crisis

Jeff Rubin: Oil Prices Caused the Current Recession

Oil Prices - A Little More of the Story

Why are oil (and gasoline) prices so low?

Oil rises on talk of auto bailout, stimulus NEW YORK (CNNMoney.com) -- Oil prices rebounded from a nearly 4-year low Monday as U.S. automakers neared a deal that would keep them out of bankruptcy and President-elect Barack Obama pledged to stimulate the economy of the world's largest oil consumer.

U.S. crude for January delivery rose $2.90 to settle at $43.71 a barrel after settling at $40.81 Friday, the lowest close since Dec. 10, 2004. [break]

OPEC's 'Surprise' May Disappoint The cartel tells the world it's planning a surprise cut, but this could backfire.

Americans Forget High Oil Prices Too Quickly For some years now I've been having an ongoing email debate with CNBC anchor Joe Kernen with respect to oil prices and oil supply and demand. Being a believer that worldwide supply will simply not keep up with worldwide demand, I have been a strong proponent of US energy diversification away from oil. Joe has strongly disagreed and said that the high price of oil was mere speculation. Back when oil topped $90/barrel and I told him it would go much much higher; he said poppycock and suggested that we should get two barrels of oil for $90.

Friday I got an email from Kernen declaring victory. Oil hit $45/barrel and that was his "two-for". He implied that "Einstein" (me) was wrong and that peak oil believers were badly mistaken. I wrote back and told him that after four years it was about time he was right on something, as even a clock is correct twice a day. Didn't get a reply to that one.

A race to the bottom In the past, academics, particularly from the US, denounced the gold standard for its policy straitjacket that precipitated bank failures in Europe and huge unemployment in the 1930s. Yet, without the policy-fetters-imposed gold standard, global fiat money printers have managed to create a banking and financial crisis.

Further, we do not know how in the world of climate change and vanishing hydrocarbon reserves rapid growth can be sustainable. Even a cursory reading of the International Energy Agency’s World Energy Outlook 2008 is a must for all of us. IEA, by no stretch of imagination, is in the camp of “peak oil” theorists. Yet, they are quite bemused about how the world appetite and habit for hydrocarbons can be met given emerging supply constraints and environmental considerations. In a way, the current slowdown is a welcome break from the oil price of $140 per barrel. Yet, policymakers are acting as though they cannot wait to have it back.

BP Shuts Line From Indiana Refinery, Starts Repairs Bloomberg) -- BP Plc said it can’t estimate how long it will take to repair a pipeline taking refined products from its Whiting, Indiana, refinery to Michigan. The line was shut down Dec. 5 after being struck in a fatal vehicle accident.

BP, Europe’s second-largest oil company, is assessing the damage caused by a fire that occurred after the accident and can’t estimate how long the pipeline will be shut, Scott Dean, a company spokesman, said in an interview.

Alaska divided over who will transport its natural gas It is finally official - as of December 5, Alaska handed the Alaska Gasline Inducement Act licence over to TransCanada. The deal is for construction on a $30 billion (Dh110.19 billion), or more, pipeline transporting natural gas from Alaska's North Slope southward.

But don't hold your breath.

Clean energy appears out of reach for years Will clean tech save us by 2025? Will it end our dependence on global-warming fossil fuels by then? Not very likely, says the U.S. government's National Intelligence Council. "All current technologies are inadequate for replacing the traditional energy architecture on the scale needed, and new energy technologies probably will not be commercially viable and widespread by 2025." So says the council's just-released report, "Global Trends 2025: A Transformed World."

...Despite its skepticism that high-tech will ride to energy's rescue, the report offers some reason for optimism: "Despite what are seen as long odds now, the greatest possibility for a relatively quick and inexpensive transition (from fossil fuels) comes from better renewable generation sources (photovoltaic and wind) and improvements in battery technology."

In the main, however, the report throws cold water on the expectations of the more idealistic clean-tech advocates. Yes, the world will be moving away from oil by 2025, it says, but in its place expect more natural gas, coal and nuclear energy. And any technology-driven improvements will take longer than you think.

Chesapeake Gains 24% in Pre-Market Trading After Cutting Budget (Bloomberg) -- Chesapeake Energy Corp., the second- biggest independent U.S. natural-gas producer, gained 24 percent in pre-market trading after saying it will cut spending and plans to build cash resources because of a plunge in prices.

ANALYSIS - Policy muddle sets Nigeria oil delta on knife-edge LAGOS (Reuters) - Nigeria needs to strike a delicate balance between military muscle and political negotiation in the Niger Delta if it is to protect Africa's biggest oil industry from a fresh spate of crippling attacks, analysts say.

A campaign of sabotage over the past three years, in which militants have blown up pipelines, attacked flow stations and kidnapped foreign oil workers, has cut crude oil production in the world's eighth biggest exporter by around a fifth.

Report: Metrolink Most Dangerous Rail System in U.S. LOS ANGELES -- By some measures, Metrolink has the dubious distinction of being the most deadly commuter rail system in the country, a Daily News investigation has concluded.

About $1.2 billion generated after the passage of a Nov. 4 sales tax measure will be channeled toward improving Metrolink safety, however.

The Philippines: Two-year ethanol supply may take a while to feed demand LOCAL supply of ethanol to feed demand for the mandated blend of the alternative fuel at the pump is likely to be available only two years from now, an official from Chevron (Caltex) Philippines, Inc. said.

Russian oil output to fall after 2020: national energy ministry Moscow (Platts) - Russia's energy ministry believes that the country's oil production will stabilize at 535 million mt/year (10.7 million barrel/day) by 2020, after which it will start falling, a ministry's official said Monday.

Under the basic scenario of the draft energy strategy until 2030, the country's oil production will reach 500 million mt/year in 2010, 530 million mt/year in 2015, 535 million mt/year in between 2020 and 2025, and 530 million in 2030, said Vitaly Bushuyev, the general director of the ministry's institute of energy strategy.

"We need to be prepared for [the decline in output]," Bushuyev told an energy forum in Moscow, adding that international oil prices were likely to fall after 2012 to "the level of minimum profitability of the oil business."

Oil, Copper Advance After Obama Promises Public Works Spending (Bloomberg) -- Oil, copper and corn rose after President-elect Barack Obama pledged the biggest U.S. public works program in about 50 years to revive the economy.

Commodities rebounded from last week’s losses on speculation spending on roads, bridges and repairing school buildings will boost raw material demand and engineer a recovery in the world’s largest economy. Obama said that his economic plan would create or preserve more than 2.5 million jobs.

Cost of gas is approaching a five-year low CAMARILLO, Calif. - The average price of U.S. gasoline fell 22 cents a gallon during the past two weeks, bringing it to its lowest level in nearly five years, according to a national survey released Sunday.

Saudi deepens oil supply cuts to some in Asia, Europe TOKYO/LONDON (Reuters) - Top oil exporter Saudi Arabia will make even bigger oil supply cuts to some of its Asian and European customers next month, industry sources said on Monday as the kingdom stepped up efforts to halt the steep slide in prices.

While most Asian refiners appear set to receive steady supplies next month, news of the reduced allocations helped push oil prices up six percent on Monday and suggested Riyadh is not waiting for OPEC's Dec. 17 meeting to tighten crude oil exports in an effort to keep oil from falling below $40 a barrel.

Libya to Seek ‘Substantial’ Oil Production Cut at OPEC Meeting (Bloomberg) -- OPEC, the supplier of more than 40 percent of the world’s oil, should make a “substantial” output cut when it meets next week to boost crude prices, Libya’s top oil official said.

“The market is in upheaval, all the countries are stepping in to protect their markets, their industries, OPEC should do the same for the oil market,” the chairman of Libya’s National Oil Corp, Shokri Ghanem, said in a phone interview from Tripoli today. “Everyone at OPEC agrees that the market needs support, I think that our action should be substantial.”

Australia gas project deferred on demand worries SYDNEY, Dec 8 (Reuters) - Development of the Reindeer gas project off Australia's west coast was deferred indefinitely on Monday after a proposed key customer failed to commit to a sales contract, one of the A$850 million ($550 million) project's partners, Santos Ltd said.

Santos, citing "adverse changes in the global economic outlook," did not say who the customer was, though sources said it was Hong Kong-based steel-to-property conglomerate Citic Pacific Ltd, which is seeking shareholder approval for a $1.5 billion bailout plan.

The resources boom that fuelled prosperity is now a bust The term "energy crisis" is more commonly associated with dwindling supplies, soaring prices and threats of rationing.

Not at the moment. Instead, the sudden and dramatic fall in oil prices in the past few months has sent shockwaves through the boardrooms of those companies that were relying on a commodity super-cycle to prop up their overstretched balance sheets.

Gas: Make it cost more We're concerned about the dropping price of oil. Sure, it's great for consumers. We, too, like seeing change after we fill our tank with gas. Most experts think the price will continue to decline and some are speculating that a barrel of oil will drop to less than $25 and gas at the pump may go below a dollar a gallon.

The problem is inexpensive oil will not help this country kick its addiction. The fact is high fuel prices help society heal, moving to healthier energy choices.

Will Obama raise fuel taxes? The incoming Obama administration has made clear improving energy efficiency is also one of its highest priorities. The president-elect's future national security adviser, General James L. Jones, has been working on energy issues for an affiliate of the U.S. Chamber of Commerce since retiring as NATO's supreme allied commander in Europe. He made clear in a recent interview improving energy security would be one of his central objectives, marking an unusual extension of the adviser's traditional role. The incoming administration faces several related challenges, however...

Can Obama Really Afford His Infrastructure Program? Price of Asphalt, CO2 Cost From Cement, Raise Doubts On Saturday President-elect Obama pledged the biggest road and bridge construction program since the 1950s. But has anyone in Washington asked Wilson County, Tennessee road superintendent Steve Armistead about the price of asphalt these days? For that matter, has anyone thought about how much more cement is likely to cost when that industry has to pass through costs associated with its carbon dioxide emissions?

Carolyn Baker: Obama Revitalizes Disaster Capitalism: The Shock Doctrine Receives a Make-over Since many months before the November election, Truth to Power has been researching and informing readers regarding the fundamental underpinnings of Barack Obama's agenda and his likely appointments in the areas of economic, foreign policy, and energy issues. Not only have I written several pieces on the topic, so have a variety of other researchers. In reviewing our reporting, what has remained consistent and therefore validates it, is Obama's adherence to neoliberal, globalist policies couched in the rhetoric of "change" but offering no substantial departure from the ultimate strategies of imperialism, corporate capitalist supremacy, and almost total ignorance (or ignore-ance) of the energy and environmental suicide perpetuated by endless growth.

Local food cooperative searched by state PITTSFIELD TOWNSHIP — An Ohio Department of Agriculture agent seized food, electronic devices and documents from a Pittsfield Township organic and natural food cooperative believed to be unlicensed, according to a search warrant filed yesterday in Lorain County Common Pleas Court.

...On Monday, ODA enforcement agent William Lesho confiscated hundreds of pounds of processed beef and large amounts of lamb, turkey and other perishable products in addition to office files, a computer, two cell phones and other electronic devices, according to the search warrant inventory. The items were taken to establish the Stowers' ownership in any property, records of hidden wealth or illegal income and anything that would establish illegal activity, according to the search warrant affidavit.

Obama says will pursue carrot/stick Iran policy WASHINGTON (Reuters) - U.S. President-elect Barack Obama said on Sunday he was prepared to offer Iran economic incentives to stop its nuclear program, but he also warned that sanctions could be toughened if it refused.

A Gift to Planet Earth and Humanity A miracle has occurred. Many were beginning to contemplate a survival strategy because of the dual hammer of Peak Oil and Global Warming. But a funny thing happened on our way to doomsday. It is appearing that we are getting a reprieve, and, ironically, the gift is this serious, but fixable, economic collapse.

Little city is at center of a great debate Pipes link the Great Lakes with massive oil reserves in friendly Alberta. They may bring jobs, energy and pollution. And it's all happening as the century of oil gives way to the century of water.

Wind over water: Some see giant wind farms on horizon for the vast, breezy Great Lakes Wind power has already established a beachhead on Wisconsin soil - you can see 88 Danish-built windmills stretching 400 feet into the sky just east of Lake Winnebago. They're capable of squeezing enough juice from the airstream to power 36,000 homes, according to We Energies.

Similar blades are spinning along U.S. Highway 41 in Fond du Lac County. And they're whirling near the Lake Michigan shoreline in Kewaunee County.

And now it looks like at least one might be headed for scenic Madeline Island.

Is Solar Losing Its Shine? Investors shouldn't become fixated on oil as the source of the investor doom and gloom in solar energy. There are many clouds over the industry, not just falling oil. JP Morgan Securities issued a recent report that blames the swoon in solar on reduced solar subsidies in Europe next year, higher borrowing costs, increased competition, and pricing pressure at all levels of the solar photovoltaic industry.

Solar isn't immune to the global credit crunch, as lack of financing for solar projects and capital to fund manufacturing capacity expansion casts a shadow on the industry. Solar energy companies are also dealing with rocketing prices for silicon, the basic substance for photovoltaic technology and a material that until recently was experiencing a worldwide shortage and major price increases.

Runway protest strands passengers Flights have been disrupted and passengers left stranded at Stansted airport after a climate change protest caused the runway to be closed.

Ryanair has cancelled 56 flights and told passengers to re-book, but it has warned that availability is limited in the coming days.

Fighting climate change: mass or direct action? Can the people of the world make global warming history? Ed Miliband, the UK's minister for energy and climate change certainly hopes so.

Talking to the Guardian, he has called for a mass movement, like the 2005 Make Poverty History campaign, that will force the world's leaders to agree to a meaningful global climate deal at UN talks in Copenhagen at the end of 2009.

BP, EBay, HP Demand ‘Deep, Rapid’ Greenhouse-Gas Cuts (Bloomberg) -- BP Plc, Hewlett-Packard Co., Shanghai Electric Group and 137 other companies from around the world urged delegates at United Nations climate talks in Poland to commit to deep and rapid cuts in greenhouse-gas emissions.

The recession shouldn’t be used as an excuse to delay investments needed to slash emissions and help fight global warming, the companies said in an e-mailed statement today.

I was invited last Monday to a seminar organised by the French government as part of the presidency of the EU on the theme of energy security. A lot of heavy hitters speaking: former IEA boss Mandil chaired the whole process, current IEA boss Tanaka spoke, as did the CEOs of E.ON, Total or Dow Europe, various high level EU Commission members and EU ministers. Here are some notes of what I found interesting in the first part of the conference (I missed the second half, but part of it was a summary of the first part for ministers, and the other part was ministerial speeches).

No media was authorised at the meeting, so this is an exclusive summary, which the organisers in the French ministry of industry have kindly allowed me to post.

[break]

Tanaka spoke first, to provide a summary of the WEO: he called it "shocking but interesting" (his exact words) which I found notable (and a hint maybe of the internal conflicts that the IEA faced on the topic). He flagged the "serious investment issue" the world faces, as well as the risk of a serious supply crunch when demand comes back after the current crisis. He strongly supported the idea of a stimulus package focused on sustainable energy, calling a "Green New Deal" an excellent thing.

One insightful point he made is that with respect to security of supply, non-OECD countries matter more and more, and thus focusing only on ourselves (the rich countries) is not good enough. After mentioning the increased reliance on imports, and mentioning the importance of fighting climate change, he concluded by saying the the "era of cheap oil is over", and that we have to get used to expensive energy.

The Ruhrgas/E.On CEO said he welcomed the new focus on security of supply, and went on to talk about the importance of the new pipelines from Russia (Nordstream and Southstream). He underlined that Russia needs security of demand just like we need security of supply to make investments. He emphasised his company's massive investment in renewables, noted his support for nuclear, as well as the need to keep on using fossil fuels (he qualified coal by pushing CCS).

De Margerie, the Total CEO, had some hard-hitting words, saying that he was tired of the mindless alarmism he sees too much of, which is not focused on the real problems. So he blasted Nabucco once more (a pipeline without gas), told people to stop worrying about Ukraine, about terrorism in general - although he said that Somalia was a very real issue, or about the energy weapon - on the other hand, Hormuz was a real issue for him. He said that beyond the lack of investment, he was worried in the medium term about the increasing scarcity of resources, about low prices making exporting countries just as difficult to deal with (because of internal problems) as high prices, and about a need for importers to talk to exporting countries and to actually listen to what they have to say ("even the Russians and the Saudi have legitimate preoccupations sometimes. . ."). He noted that it might be smart to remember that some exporters are also large consumers and thus do not behave in the same way (and he suggested that helping them use less energy might be a smart thing to do).

Two heads of TSOs (transmision system operators), that of France and Poland, talked about the need to strengthen the networks, and noted that the main obstacle was social (the absolute hostility of local populations to high voltage lines). The head of Dalkia (a utility focused on heat and industrial energy sevices, part of Veolia, the French group), noted how hard it would be to reach the EU's objectives, giving concrete examples from his business, under today's rules and regulations. He saw biomass as the main large scale route to reduce fossil fuel use, with housing efficiency having a large potential, but not at today's prices. The head of Dow chemicals just protested against rules that would make his production uncompetitive and push him out of Europe. A professor talked about Russia more specifically, in a generally non-confrontational way, noting that our attempts to reduce demand or to diversify sources are seen as a threat by Russia, which might be tempted to diversify its clients, that Ukraine is mostly a non-issue, but that the problem of whether Russia has enough gas to provide more to Europe will be a problem starting as soon as 2012 (old fields maturing, domestic demand growing, and new fields not yet online).

Mandil, summing up the first half of the day noted 5 points (which he was going to pass on to ministers in the afternoon session, which I missed):

1. Keynes is back, and a Green New Deal focused on the electricity grid seems like a good thing to everybody.
2. Energy efficiency is the first priority for all, followed by renewables, nukes, CCS, cogen and R&D.
3. The regulatory framework is not good enough yet for objectives to be met, and must be improved.
4. Nobody has asked for the European Commission to do less on the issue, quite the opposite: coordination is a key buzzword.
5. Let's not cry wolf too much - the real issue is medium term investment.

I managed to grab him at the end of the session (we've bumped into one another at several energy conferences, so he knows me), and suggest that he add the coming resource shortages in the medium term that were hinted at by several speakers (de Margerie, the guy on Russia, and Tanaka) - he told me once again that he did not believe it to be the case, and that it had not be said (it's just an investment shortage) so he would not talk about it.

Overall, a pretty interesting morning, with much less ideology than I have seen at earlier European energy conferences.

This is a guest post by Hank Weiss of the University of Pittsburgh. Hank is an affiliate of Dan Bednarz, and was instrumental in setting up Health After Oil, where this article was previously published.

“You cannot have well humans on a sick planet” – Thomas Berry

The U.S. presently spends an estimated 16 percent of its gross domestic product (GDP) on health care, compared with 8 to 10 percent in most other major industrialized nations. The Centers for Medicare and Medicaid Services (CMS) projects that growth in health spending should continue to outpace GDP over the next 10 years [The Commonwealth Fund, January 2007]. But can this really happen in an era of energy and resource limitations? What are the ramifications to health care and sustainability if it cannot?

From an energy perspective, health care buildings account for 11 percent of all commercial energy consumption, using a total of 561 trillion Btu’s of combined site electricity, natural gas, fuel oil, and steam or hot water.[EIA] Health care facilities are the fourth highest consumer of total energy of all building types and have an energy intensity (Btu/square foot) that is the second highest among all commercial building types.[EIA] Many medical products, few of which are designed to be recycled, are petroleum based; including gloves, syringes, IV and dialysis tubing, tablets, gels, ointments, antihistamines, and many antibiotics and antibacterial medications. None of these energy estimates accounts for the huge energy and material costs for the manufacture and transportation of goods, services, personnel and patients that enable these energy intensive facilities to perform their myriad and complex functions.
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In the United Kingdom it has been estimated that as much as 5% of all transport need is generated by the National Health Service.[1] In 2001 the U.S. National Household Transportation survey reported that on average, each U.S. household makes about one trip a week for medical or dental visits and that each trip is about 10 miles in length [personal communication, Center for Transportation Analysis, Oak Ridge National Laboratory]. While this represents only 1.2% of all vehicle miles traveled it does not include the miles traveled by medical staff to work nor doctor related travel by public vehicles, nor travel by the staff, support services and vendors that keep modern medical systems functioning.

With healthcare costs already growing exponentially from the demand for more and more complex services and drugs, compounded by; 1) inflationary increases due to the sectors heavy use of energy and transportation, 2) a rapidly aging population needing greatly increased services, 3) a falling proportion of workers to support the retired population, 4) 45.7 million uninsured and increasing poverty [Income Poverty and Health Insurance in the US: 2007], 5) increases in lifestyle caused diseases, 6) decreasing public health expenditures as a proportion of federal health dollars (see figure 1), 7) a growing reverse “brain drain” to oil wealthy countries, then throw in energy and economic declines - we face an almost unimaginable crisis in health care funding and delivery that will make today’s debate over who pays for the uninsured quite moot. It is very difficult to foresee how the current U.S. health care system can survive the confluence of all these pressures for increasing services at increasing costs at a time of decreasing resources. We must soon decide, even more so than is done today (either implicitly or explicitly), who will get what kinds of services and who will not.

Figure 1. Source: University of Illinois.

The challenge is how do we construct a much lower energy health system without major negative impacts on health status? The “Peak Health” crisis will likely bring government deeper into paying and managing this large sector of the economy as many private health care providers fail to adopt or go broke trying. It may even be the driving force that eventually leads to a true universal health system; a model many other industrial democracies have used for a long time. But it is not yet clear what that future U.S. health system will look like in different phases of the transition; though there are many examples of less energy intensive medical care systems to choose from (see below).

While some observers have suggested alternative health care modalities may come to the fore or that a much greater focus on prevention and community level primary care will be necessary[2], in all likelihood what will emerge will be something different from anything we see today. Parts may be familiar though; borrowing and melding what can work from many traditions while building upon elements of modern medicine that can make the transition. It is hoped that whatever form(s) of health care do emerge are built upon a perspective of evidence-based preventive measures and treatment so that we don’t move to something novel or trendy just because we hope it will work. But clearly, believing that all of the best available disease care can be affordably provided to every person is a pipe dream policy doomed to failure in an era of resource and energy limitations and one that we can already begin to see in the failures of growing costs, large numbers of uninsured, and pockets of increased health disparities between rich and poor.

The fundamental positive relationship between energy use and health status is not well appreciated; overshadowed usually by a focus on the direct and positive wealth and health relationships (Wealth = Health) discussed recently by Hanlon and McCarteny and many others.[3] But from an energy perspective, we know that Energy = Wealth; therefore to a great extent, Energy = Health. This is demonstrated by plotting per capita energy use against the key public health indicators of longevity and infant mortality.

Striking associations are evident for each (see figures 2 and 3 below). Yet there are nation specific exceptions along these continuums that may offer insights as to how positive public health indicators can be maintained at very favorable levels with considerably less energy input. This opens up the vital need to define how this is done and which of these may be imported to the U.S. in part or in whole to reduce health energy and resource expenditures while maintaining high public health indicators.

Figure 2. Selected countries with life expectancy at or above US levels with much lower national energy use (source, Gapminder).

Figure 3. Selected countries with infant mortality rates at or below US levels with much lower national energy use (source, Gapminder).

The relationship between sustainability and health can also be explored through the interaction of the built environment and land use on health. Looking at the picture this way suggests areas of potential gains in preventing injuries and many “lifestyle” diseases (see Fig 4 below). But there remain potential risks to health from sustainability lifestyles that are not often considered. Transitioning to sustainable living requires changes in lifestyles with attendant increased and decreased health risks.

Figure 4. Original source: Active Living by Design, University of North Carolina.

Planning for and managing these risks will be a critical aspect of moving to sustainable economies and environments. Examples of increased or potential risks already of concern with increased energy costs include pedestrian and bicycle injury, scooter and motorcycle injuries, as well as things like gardening injuries (as people grow their own), wood chopping related injuries (as people in NE switch from fuel oil), and fires (due to gas hoarding, emergency use of space heaters and wood stoves). Also there are concerns (documented in some similar economically distressed settings) over increased violence and suicides due to job losses and increasingly difficult economic circumstances, especially for those already living on the economic edge. Mental and behavioral health issues will be important concerns in the transition to sustainable communities.

All too often, sustainability plans and efforts do not include health expertise or health planning input, components and considerations, yet health status is consistently among peoples most important concerns. If we cannot ensure and document adequate health status and care in the emerging efforts at sustainable environments, communities and lifestyles, we will lose a fundamentally important incentive for individuals and governments to adopt them.

[1] Material Health: A mass balance and ecological footprint analysis of the NHS in England and Wales, Best Foot Forward Ltd, 2004.
[2] Jeffery, Stuart. How peak oil will affect health care. Published Jun 16, 2008, The International Journal of Cuban Studies.
[3] Hanlon, P. and G. McCartney, Peak oil: Will it be public health’s greatest challenge? Public Health, 2008. 122(7): p. 647-52.

The singularity: The fantasy and its effect ...There is the perception that technological progress is speeding up. But is it? After one hundred years, we are still dependent on the internal combustion engine for almost all of our land and much of our sea transportation. We were promised miracle cures for genetic diseases a decade ago, but they haven't arrived. After a half a century of research, we expected fusion reactors to be in place. But the latest international project promises to bring us commercial fusion power only by the mid-21st century. In truth, it is not altogether clear that we will ever be able to master fusion energy. Our main fuels by far remain fossil fuels, 86 percent by energy content. And, these fuels are heading toward depletion faster than anyone anticipated as the world economy and population grow, and as more and more people want access to high-energy lifestyles.

In reality, technology sometimes progresses in fits and starts, and sometimes not at all. Joseph Tainter, author of "The Collapse of Complex Societies," suggests that we may have reached an era of diminishing returns for technology and for the complexity it fosters. Complexity, Tainter explains, can increase the power and reach of a civilization. But increasing complexity will also eventually have diminishing and even negative returns to a society thereby endangering its very cohesiveness. He cites Roman and Mayan civilizations as examples. [break]

Oil price could fall to $US25 a barrel, analysts say CRUDE oil prices have collapsed to just above $US40 a barrel as the global recession deepens in the United States, Japan and across Europe.

Some analysts are even tipping that prices could go as low as $US25 a barrel next year if the global downturn hits hard in China and OPEC doesn't drastically slash its production levels.

Any optimism that oil prices had stabilised at around the $US50 mark have evaporated in the past week as it becomes clear the US, Europe and Japan, which collectively consumed almost 50 per cent of the world's oil in 2007, are entering their first simultaneous recession since World War II.

China is responsible for only 9 per cent of global oil demand.

Iran lets 'private' Iranian firms trade oil Iran, the world's fourth-largest oil producer, is permitting local private firms and not just foreign companies to enter the trade in Iranian crude, officials said on Sunday.

Deputy Oil Minister Akbar Torkan referred to two Iranian entities now permitted to carry out the business and said it was part of a drive to boost the private sector. But he told Reuters the state would still control crude production.

Iran set for a year of living dangerously Iran enters 2009 with economic woes to the fore and plummeting oil revenues set to restrict President Mahmoud Ahmadinejad's public spending in an election year marked by continued international tension.

Chavez Says Venezuela Economy to Face Difficult Years Bloomberg) -- Venezuelan President Hugo Chavez said his country’s economy will face difficult years ahead as the world financial crisis expands and demand for oil, Venezuela’s principal export, wanes.

Venezuela is prepared to confront the crisis and should restrict spending to strictly necessary items while saving as much as possible, Chavez said in comments on state television.

Arabs urged to pursue petrochemical projects Gulf states and other Arab oil producers need to push ahead with costly petrochemical projects to diversify their economies despite the ongoing global financial crisis, according to an official study.

Although the tightening in the world credit markets could hamper the implementation of some of those projects, Arab states could still resort to the equity option by inviting more foreign partners into such ventures to secure funds, said the study by the 10-nation Organisation of Arab of Petroleum Exporting Countries (Oapec).

More than 160 US, NATO vehicles burned in Pakistan PESHAWAR, Pakistan – Militants torched 160 vehicles, including dozens of Humvees destined for U.S. and allied forces fighting in Afghanistan, in the boldest attack so far on the critical military supply line through Pakistan.

Sudan confirms troop build-up in oil region KHARTOUM (Reuters) – Sudan's government on Sunday confirmed it had moved troops to a volatile energy-rich central region, telling state media it wanted to halt "feverish attempts" to attack the area by Darfur rebels.

The deployment into South Kordofan raised tension in the province that contains key oil fields and borders some of Sudan's most sensitive areas, including the western Darfur region, southern Sudan and the contested town of Abyei.

New US military report on global warming raises worry WASHINGTON - A new US military report has come under scrutiny for asserting that the scientific data on what is causing global warming is "contradictory" - a position one leading specialist said indicates the government still hasn't fully embraced the urgency of climate change.

...A section of the 56-page report on climate change and natural disasters prompted criticism yesterday from some leading specialists who said that spreading the inaccurate perception that the causes of climate change remain an open question could result in government agencies not taking the issue seriously enough.

Shell consortium to pull out of UK wind project LONDON (Reuters) - British oil major Royal Dutch Shell Plc confirmed on Sunday that the company and its partners have withdrawn from a major UK wind energy project.

The consortium of Shell, Scottish Power and Denmark's Dong Energy have abandoned the Cirrus Array project off the Northwest coast after denying a month ago that it had exited the project.

Repsol Boss Snubs The Russians Spanish oil and gas company Repsol's chairman, Antoni Brufau, said last week he would resign if the company did not remain Spanish, independent and private: "If these conditions are not met, I will no longer head up the company." The statement appears to underscore Spaniards' unhappiness about a possible sale of a substantial stake in the company's to Russia's Lukoil.

India: Commuters flock to fill up their petrol tanks CHENNAI: N Chokalingam is a very happy man. As he oversees dealings in the Bharath Petroleum outlet at Nanandanam, this manager’s face breaks into a smile. “Look at the vehicles streaming in. Sales are definitely going to increase,” he says.

The outlet that sells an average of four kilolitres a day had sold five kilolitres before Saturday evening. “There will definitely be a 25% increase and people will stop rationing of fuel,” he adds. With petrol prices and diesel prices decreasing by Rs 5 and Rs 2 respectively, most petrol bunk dealers in the city echo Chokalingam’s view.

Oil’s fall pinches Latin nations BOGOTÁ, COLOMBIA — During the five-year bonanza of rising oil prices, resource nationalism took hold across Latin America, and energy-producing countries boosted spending, raised taxes on foreign oil companies and salted away billions in petrodollars.

But with the onset of the global economic crisis and the collapse in oil prices, Venezuela, Mexico and other regional energy producers are feeling the squeeze.

If prices don’t rebound soon, the countries will be forced to cut spending on popular programs or dig into their reserves. Governments also will probably see slowdowns or cancellations of energy projects ranging from explorations to biofuels plants.

"The old assumptions are out the window," said RoseAnne Franco, a Latin America analyst at PFC Energy in Washington. Lower prices "are forcing a very strong readjustment for all concerned.’’

List of delayed Gulf oil-refining projects grows The list of delayed Gulf oil-refining projects is growing as demand for fuel shrinks rapidly throughout the industrialised world.

John "Nuke Bailout" Bryson must NOT be Secretary of Energy John Bryson will forever epitomize the bailout of the nuke power industry and the horrific catastrophe of electric utility deregulation, including the contrived energy crisis that cost Californians tens of billions of dollars and allowed them to be robbed by the disgraced Enron.

Lipstick on Baltimore I suspect that market forces would have worked to keep the cities and suburbs in balance, that they would have fostered the co-existence of multiple modes of transit between them, which in turn would have kept center cities and surrounding towns both distinct and compact, both internally walkable and efficiently linked by road and rail. Instead, the federal government catered to the fantasy that no one should ever have to walk again anywhere. In turn the built environment transformed into a place where no one can ever walk. A byproduct of all this is that the land between distinct urban zones that used to be devoted to local food production (“farms”) have been gleefully paved over to cater to the auto-dependence fetish.

Think tank: A high energy solution - Cliff-top reservoirs could meet all of our power needs Ireland has many high cliff areas, so my proposal would be to build vast reservoirs on top of these cliffs and use wind power to pump salt water to them from the ocean. These reservoirs can be thought of as energy-storage areas.

The principle is simple: during times of high-wind activity, turbines would provide the energy to pump the sea water from the ocean, thus filling the reservoirs. In times of peak-energy demand, the reservoirs could be emptied.

Will solar power ever be as cheap as coal? “Solar power is the energy of the future – and always will be.”

That tired joke, which has dogged solar-generated electricity for decades due to its high cost, could be retired far sooner than many think.

While solar contributes less than 1 percent of the energy generated in the United States today, its costs are turning sharply downward.

Ancient skills 'could reverse global warming' Ancient techniques pioneered by pre-Columbian Amazonian Indians are about to be pressed into service in Britain and Central America in the most serious commercial attempt yet to reverse global warming.

Trials are to be started in Sussex and Belize early in the new year, backed with venture capital from Silicon Valley, on techniques to take carbon from the atmosphere and bury it in the soil, where it should act as a powerful fertiliser.

The plan is to scale up rapidly into a worldwide enterprise to reverse the build-up of carbon dioxide, the main cause of global warming, in the atmosphere and eventually bring it back to pre-Industrial Revolution levels.

In China, OPEC’s nightmare comes true China’s decision to link domestic fuel prices indirectly to the international crude oil market, subject to a price cap, while hiking the consumption tax on petrol and diesel and phasing out a variety of road tolls and other fees shows Saudi Arabia’s worst fears about high prices are demand destruction are starting to come true.

It seems likely to confirm the kingdom’s determination to see prices stabilise around $75 per barrel, well below recent price peaks, and far below the level sought by some other OPEC members, as well as international oil companies and advocates of alternative energy.

Crude’s collapse oiled the Bank’s wheels T Boone Pickens, the legendary US energy investor, said oil would never again go below $100 a barrel and his view was echoed by many lesser lights. Some journalists went out of their way to deny a speculative element in the spike, even as some investment banks continued to pump up the oil story and funds poured into commodity-index futures. Arjun Murti, Goldman Sachs’s energy strategist, said the price could reach $200 in the second half of this year and plenty of rival banks pushed the rising oil story. Jeff Rubin, chief economist at CIBC World Markets, was also a $200 man.

Peak-oil enthusiasts explained every price rise as further evidence that global production had reached its maximum. Weekly rags spouted “sell your house, buy commodities” nonsense. I hope nobody did.

How Will Temporary Decline in Oil Prices Impact Energy Sector? Oil prices have fallen off a cliff recently and everybody’s breathing a sigh of relief as prices tumble at the gas pump. Late last week I read on Bloomberg that Francisco Blanch, a commodity strategist at Merrill Lynch, is forecasting a market bottom in the $25 range and a 2009 average price in the $50 range. The relief is welcome but I have enough experience in the oil business to know that we’re merely experiencing that pleasant calm that comes when the eye of a hurricane passes overhead. This is no time to go out and buy a gas-guzzler!

Is an Oil Rebound Imminent? I’m not about to call an oil bottom but there certainly are some signs that suggest the bottom is drawing near. I remember thinking oil was going to bottom at 95, then 60, and here we are at 40 and all the peak oil enthusiasts are saying we are going to rebound just as fast as we have collapsed. Here’s my take on where we stand.

Regulators give environmental OK to LNG plant BALTIMORE (AP) — A proposed liquefied natural gas terminal near Baltimore cleared a key regulatory hurdle Friday when the Federal Energy Regulatory Commission concluded it would not be too harmful to the environment.

More consolidation likely in oil industry HOUSTON -- Big Oil is set to spend billions on new exploration in 2009, but in addition to ocean beds thousands of feet below the water's surface, major producers are surveying the balance sheets of vulnerable companies in the sector.

North Sea oil firm up for sale Oilexco has been caught out by a dwindling cash pile, a large cost base and a heavy reliance on the capital markets to fund an aggressive drilling programme. It needs to make nearly $600m in debt and rig-contract payments in the next year alone, according to company filings. The oil price, meanwhile, continues to plumb new lows, hitting $39.57 last Friday.

Brazil’s new oil reserves still buried in doubts BRASILIA: Despite tumbling oil prices, Brazil’s government insists it will develop massive offshore oil deposits, but critics say geological hurdles, regulatory uncertainty and depressed markets could delay the country’s hope for a fast track to oil wealth.

Libya could buy up to 10 pct of Eni - ambassador ROME (Reuters) - Libya would be interested in buying up to 10 percent of Italian oil giant Eni, the North African country's ambassador to Italy said in an interview published on Sunday.

Detroit has run out of road. The car's future lies in Europe The world is near peak oil production. Energy prices will be volatile, but this summer's top figure is a forerunner of what is to come. Cars and, with them, concepts of how mobility is to be created have to change. That, in turn, demands a new role for public leadership. Governments, consumers and companies must agree a new vision and then it must be regulated and legislated for.

It was telling that as Detroit's CEOs were suffering humiliation in Washington, Germany's BMW was unveiling a battery-powered Mini E two years before GM's Volt hits the streets - and with treble the range. If anything, the German love affair with the car trumps America's and its car companies try to resist regulation no less aggressively. But European political systems are less open to being completely bent by corporate lobbying and regulation is seen as more legitimate.

Argentine automakers to sell at cost, protect jobs BUENOS AIRES (Reuters) - Argentine automakers will sell basic models at cost through state-subsidized loans in a plan to protect jobs in Latin America's third-biggest economy from the global economic slowdown, government officials said on Saturday.

Private schools, parents feel pinch Parents this year have seen their investment portfolios dwindle, food prices spike and gasoline costs seesaw wildly.

As the economy worsens, households with children in private schools are digging deeper to pay thousands of dollars in tuition. Lower Shore private schools say requests for financial aid are up, and they're bracing for potential drops in enrollment when parents sign next year's contracts in the winter and spring.

How a 24-year-old secret technology can save the planet Now, suppose Hansen skipped the climate science lecture and simply told world leaders that there's now a new technology available for generating electric power. It's cheaper and cleaner than coal, produces minimal waste and generates power 24/7. The fuel supply is virtually inexhaustible and is safer than coal. The technology uses as fuel the long-lived "waste" from today's reactors, and you can build a plant anywhere you can locate a coal plant.

What world leader could resist such a pitch?

Melting ice may slow global warming Collapsing antarctic ice sheets, which have become potent symbols of global warming, may actually turn out to help in the battle against climate change and soaring carbon emissions.

Professor Rob Raiswell, a geologist at the University of Leeds, says that as the sheets break off the ice covering the continent, floating icebergs are produced that gouge minerals from the bedrock as they make their way to the sea. Raiswell believes that the accumulated frozen mud could breathe life into the icy waters around Antarctica, triggering a large, natural removal of carbon dioxide from the atmosphere.

Native hunters say climate affecting herds POZNAN, Poland — Chief Bill Erasmus of the Dene nation in northern Canada brought a stark warning about the climate crisis: The once abundant herds of caribou are dwindling, rivers are running lower and the ice is too thin to hunt on.

Four harsh truths about climatic change Scientists are really scared. Their observations over the past two or three years suggest that everything is happening a lot faster than their climate models predicted. This creates a dilemma for them, because for the past decade they have been struggling against a well-funded campaign that cast doubt on the phenomenon of climate change.

Given the recent run-up in energy prices, subsequent spike in foreclosures resulting in a full blown credit meltdown and financial crisis, I thought it would be interesting to check in with American home buyers and see what the latest data said about their motivations to buy. Not surprisingly it's a mixed bag. There are a lot of good intentions out there for shorter commutes, energy efficient homes and other environmental features. But often these are overcome by the lure of getting more "home for the money" far away from mass transit options and having a detached home in the suburbs.

[break] One of the big reasons is the supply side. Land use policy is typically a local community decision with some state input and little to no Federal government role. Local communities can decide everything from where to install utilities, what type of use (residential, commercial, industrial, etc) a particular parcel of land has, how many homes per acre, where to widen roads, the height limits in different areas and of course whether or not to fund a mass transit system in the first place.

If the Obama administration wants the next wave of home buyers and developers to make better decisions about what types of homes to demand and supply, they will need to wade into the arena of community land use decisions.

According to a new survey of home buyers by the National Association of Realtors, Commuting Costs and Energy efficiency were of primary importance in selecting the homes and apartments they eventually purchased.

Commuting costs factored greatly in neighborhood selection, with 41 percent of buyers saying they were very important and another 39 percent saying transportation costs were somewhat important. “Since fuel costs began rising in the latter part of the survey period, it’s reasonable to assume they’ve become even more important to home buyers since,” Yun said. “We’ve heard from our members that commuting costs are playing a bigger role in buyers’ decisions.”

Environmentally friendly features also were important, cited by 90 percent of buyers. Heating and cooling costs were of primary importance, followed by energy efficient appliances and energy efficient lighting.

However, does this mean that the era of the single detached suburban home is over? Far from it.

Seventy-eight percent of all respondents purchased a detached single-family home...Fifty-five percent of all homes purchased were in a suburb or subdivision.

Based on a Zip Realty Survey on housing features that would eliminate a property from consideration for a buyer, the most frequently cited features are Lack of Garage (72%), Low Square Footage (52%), Small Yard or Lack of Outdoor Space (41%).

Local community land use policy is most often shaped by NIMBY concerns of current residents wanting to avoid any development that might place strains on their police, education, social service budgets or that might increase traffic congestion. Rarely are high minded ideas of creating more efficient living arrangements or denser mixed use areas in presently residential-only areas of single detached houses.

When you are in a hole like the current housing and financial crisis, the first move should be: Stop Digging. Stop building new subdivisions of automobile dependent residential only development.

My view on a good peak oil aware land use policy is that suburban communities are going to have to make a simple choice:

1. Urbanize to become much more efficient with energy on a per capita basis

2. Ruralize to maximize production of food and energy (solar, wood, etc)

Federal and State governments have a major role to play in resetting the incentives around land use. Since roads are often created and maintained with state and federal money rather than local, this could be the lever that best makes sure that Suburban sprawl does continue.

Funding formulas for road projects versus mass transit could be dramatically reset to favor communities that have higher percentages of people that commute by other modes than automobiles. What if a community had to spend a minimum of 20%-35% of their state and Federal transportation dollars on mass transit? Or what if any community that received transportation funding from state and federal sources had to prove that they have a plan to reduce vehicle miles traveled (VMT) by single occupant vehicles or increase the average efficiency of cars on the road?

Similarly, I think there should be incentives around food production that could also stimulate the incentive to ruralize or at least get more people to start backyard gardens--what if you could write-off any purchase of seeds and non-landscaping garden equipment? The basic idea would be to reward higher production of either lower energy intensive crops or biomass for heating fuel. I'm sure others could come up with lots of ideas.

On the demand side, the nationalization of Freddie Mac and Fannie Mae also allows the Federal government to put into place better calculations of the impact of transportation and energy costs into how much mortgage they are willing to extend to new home buyers in urban vs. suburban areas. Urban areas tend to have much, much lower transportation and energy expenses--if those are factored into a 30-year mortgage loan decision, there could be a 20-30% increase in the loan amount depending on if the home/apartment is located in an urban area versus a suburban one.

But I think a good start would be to have state and federal governments help communities make better decisions regarding their long term land use policies, instead of the current short sighted and NIMBY driven policies that encourage the over production of inefficient and low production suburban housing. Long term planning at the local level is something that is only done when it is forced upon it by an external entity to get funding. State Governors and the new Obama administration can stimulate this planning by tying Federal funding to it.

And maybe the next crop of home buyers will have more choices of much more efficient urban homes or more productive rural homes.

‘Aramco will cut costs, not delay projects’ KUALA LUMPUR: Saudi Arabia’s state-owned oil giant will be looking to cut costs rather than delay or abandon oil projects amid the fall in global oil prices, a senior company executive has said.

“Construction is one area where we can reduce costs – steel prices are down 60%, for example,” Abdulla A Al-Naim, vice president for Petroleum Engineering and Development at Saudi Arabian Oil Co, told Dow Jones Newswires. [break]

Kuwait''s income projected to fall as result of record drop of oil prices KUWAIT (KUNA) -- Kuwait's oil returns are forecast to drop to KD 19.9 billion if the prices of the crude remain at the level of USD 40 per barrel, Al-Shal consultancy said in a report released on Saturday.

Total income will also fall to KD 20.9 billion, with a possible surplus of KD two billion.

The crisis and opportunity of peak oil and peak coal - Interview of Richard Heinberg by Dr. Helen Caldicott In this engrossing discussion with Dr. Helen Caldicott, Richard Heinberg explains the situation of Peak Oil, and reminds us just how reliant our society is on the finite resources of oil, coal and gas. We are reaching a state where the depletion of these fossil fuels will force us to undergo a major transition to low-energy and re-localized societies with food grown and products made close to home. Heinberg describes how transportation will need to change - currently oil is responsible for 95% of transportation technologies in the United States.

Peak oil still relevant? More than ever. Before the Thanksgiving holiday we got an email from William M., a reader of our newsletter, asking, "Why if oil supply is decreasing and demand is increasing is the price collapsing? What is happening? Is Peak Oil therefore a myth?"

Iran OPEC Gov: Inadequate Invest In Oil Will Bring Supply Bottleneck-Report TEHRAN -(Dow Jones)- Iran's governor to the Organization of Petroleum Exporting Countries said Saturday that a decline in investments in oil production will lead to tightened oil supplies and a crude oil price rise in the future, the semi-official Isna news agency reports Saturday.

"Inadequate investment in the (oil) production sector will be a factor in an oil price jump in the future," Mohammad Ali Khatibi said, according to Isna.

Industry says investment will continue in Gulf drilling, despite declining fuel prices Money will likely continue to flow into drilling the deepest regions of the Gulf of Mexico, even as the energy industry cuts costs to deal with a global economic downturn, according to analysts who spoke Friday at an energy economics forum in downtown New Orleans.

The deepwater of the Gulf, which refers to areas more than 1,000 feet under water, is thought to hold some of the largest reserves of untapped fuel in the world. Some estimates indicate that there are still 40 billion barrels of oil left to be found in the Gulf, more than enough to feed the United States for five years. But companies are having to travel farther offshore to tap those resources, which require more time and expensive technology to produce than fuel unearthed from shallower waters.

Peru’s Surging Natural Gas Business Peru's phenomenal economic growth in recent years has boosted the country's prominence in Latin America. It has also caused more than a few headaches for government planners, as energy demand has expanded faster than expected. Inadequate transmission and natural gas pipeline capacity has further exacerbated the problem, putting Peru under threat of power outages and forcing generators to increase imports of high-cost diesel.

If the government is to be believed, the problem will be short lived, as projects are underway to increase generation and transmission capacity and expand natural gas pipelines. But the current energy crisis will have long-lasting consequences, as it has forced the country to rethink how best to take advantage of its newfound natural gas wealth. It's becoming increasingly clear that Peru will not expand its natural gas export program beyond the one liquefied natural gas project that is on track to start operations in about a year.

The U.K.’s Gas and Power Worries The United Kingdom, like many other regions, has seen its energy prices rise dramatically over the past few years. And along with that have come increasing worries about the security of its energy flows, with some forecasters even predicting power shortages this winter. This article reviews the situation’s underlying causes, with suggestions for improvement.

Zimbabwe: Bicycles, new attitudes critical in fuel crisis For instance you are driving to work and the last drop of fuel, in your tank is sucked up, the vehicle shudders and the engine stalls, you curse the inanimate creature and the inevitable lack of response makes you fume all the more, futile your plaintive eyes unable to elicit help from other motorists. You lock the car and hitch a lift to work to be greeted by the boss with a grunt and telltale furrows on his face in which is encoded a message over manhours lost.

Then you stretch your lunch hour scouring the city for fuel and sneak back to work via the route leading to the toilet. Then you stealthily, your heart throbbing, productivity virtually on its knees, probably abscond early via the way to the toilet, to take care of your car in case, if left at night, some thieves come by.

Rail efficiencies I am troubled by the various claims I've seen over the years regarding energy consumption and CO2 emissions per passenger-mile for trains/streetcars versus automobiles versus airplanes. Environmental organizations and sustainability advocates routinely assert that energy consumption for passenger rail is much "greener" than driving or flying. But Tables 2.13 and 2.14 in the Department of Energy's Transportation Energy Data Book #27 indicate that existing Amtrak intercity passenger rail is only 25% more efficient than the fleet average for cars; furthermore, Amtrak is only 18% more efficient than air travel!

Energy Goals a Moving Target for States In hopes of slowing global warming and creating “green jobs,” Congress and the incoming administration may soon impose a mandate that the nation get 10 or 15 percent of its electricity from renewable sources within a few years.

Yet the experience of states that have adopted similar goals suggests that passing that requirement could be a lot easier than achieving it. The record so far is decidedly mixed: some states appear to be on track to meet energy targets, but others have fallen behind on the aggressive goals they set several years ago.

AP Interview: OPEC head predicts output cuts ALGIERS, Algeria (AP) — Oil markets should brace for a surprise decision on output cuts when OPEC meets Dec. 17, the cartel's president said Saturday, suggesting that reductions could be deeper than expected.

"A consensus has formed for a significant reduction of production levels" by the 14-member Organization of Petroleum Exporting Countries, OPEC President Chakib Khelil told The Associated Press.

The OPEC head would not discuss how deep the output cut would be, but said it could be "severe," and noted that some analysts are predicting cuts of as much as 2 million barrels per day.

An output decision that startles markets would help bolster plunging oil rates, Khelil said.

"The best way is to surprise them," he said. "I hope it (the decision) will,"

Drastic Oil Price Fall May Push Big Oil To Pare Spending HOUSTON -(Dow Jones)- Rapidly falling oil prices are prompting large oil companies to review 2009 capital programs, shifting analysts' expectations of companies' future spending.

...Some analysts suspect that companies need extra time to trim their capital budgets, a move that could translate into a slowdown of investment in both current and new oil capacity. This could potentially further restrain global oil supply and halt or at least slow the slide in prices, though the effect often happens with a lag.

Cheap U.S. fuel oil prompts switching from natgas NEW YORK (Reuters) - A collapse in U.S. East Coast residual fuel oil prices over the last month has made it the fuel of choice for many utilities and industrial firms seeking to avoid relatively expensive natural gas.

U.S. winter chill to bolster heating fuel demand NEW YORK (Reuters) - Winter is shaping up to be the coldest in years for much of the United States, spelling potentially robust demand for heating oil and natural gas.

The outlook could put a floor under crude oil prices, which have dropped more than $100 since July due to an economic crisis that has slashed consumption of transportation fuels like gasoline and jet fuel.

If the Oil Runs Out...: Will mankind find a solution before it is too late? Just over a century ago, man eagerly grabbed hold of this tasty treat. Since then, he has built his entire global economic foundation upon oil. It is the lifeblood of modern civilization, with more than 80 million barrels consumed worldwide every day. It is cheap, easy to acquire, addictive, and allows many of life’s conveniences to exist. Without it, life for many of the earth’s over six-and-a-half billion inhabitants would be radically different. Day in, day out, human beings are dependent upon it more than any other resource—and yet most rarely think about it.

But, like the case of the monkey and the coconut, there is a catch. Man may soon find himself with a rapidly dwindling supply of oil—and eventually none at all. Will he choose to keep his fist clenched around the black liquid until it is too late—and bring about catastrophic upheaval? Or will he overcome seemingly insurmountable odds and let go—thus avoiding disaster?

Oil Prices Have World's Meanies Over a Barrel Go ahead, celebrate. Let the SUV warm up in the driveway extra long tomorrow.

And rejoice over the potentially catastrophic economic misfortune being delivered to the doorsteps of some really nasty regimes around the world.

Future-Proof Design A perfect storm of change is gathering on the horizon. Climate destabilization, peak oil, population growth, and the acceleration of consumption in the developing world point to dramatic increases in energy, food, and materials costs. As population and demand for resources grow, key life-support resources like productive soil, fresh water, and fisheries continue to decline. How will libraries help their communities and campuses cope with looming global challenges that may require dramatic shifts in the way we live? How will library operating budgets accommodate future dramatic increases in utility costs and meet local financial challenges? How can you “future-proof” your library?

UK Industry on Peak Oil: Virgin, Yahoo and Others Raise the Alarm While some in the business world have recognised and spoken out about the threat of peak oil – from Shell CEO Jeroen van der Veer’s prediction that energy depletion could hit us in 7 years, through to oil banker Matt Simmon’s warning that the energy crisis could dwarf the financial crunch soon - in general the silence from corporations on this issue has been deafening. This is a particularly puzzling state of affairs when you consider how dependent our entire economy is on cheap oil. But there are signs that things are changing – a report, which Matt posted about last week, from the newly formed UK-based Industry Taskforce on Peak Oil and Energy Security, has now been launched at the London Stock Exchange. The video above shows the kind of heavy hitters involved in this initiative - including Richard Branson of Virgin - as they aim to raise awareness of the threat, and what can be done to counter it.

Betting against the crowd can be profitable, but it's no picnic A year ago, some Malthusian brokerage reports stated that food has become the new oil weapon, because of its coming scarcity. Farm exchange-traded funds proliferated. Today, all are down and food inventories are piling up.

In the same spirit, the Club of Rome warned in the 1970s that resources are limited and so we must allocate them via central planning, socialist-style. A Stanford professor made a famous bet that resource prices would be lower 10 years thence, because initially rising prices would increase supplies. He won the bet.

Last year, oil was supposedly running out. Three-hundred-buck oil was bruited about, and a guy called Matt Simmons (spiritual son to Malthus and the Club of Rome) made a career of it. Today, oil is one-third its peak price; there's so much of it you can't get storage; and OPEC members bicker over who will cut production first.

Tories pledge protection for embattled oil sands OTTAWA - The Harper government pledged to protect the oil sands sector from economic uncertainty as it challenged opposition parties yesterday to explain how their proposed coalition would regulate pollution from the western Canadian industry.

BP budgets more than a billion in Alaska ANCHORAGE, Alaska — BP is budgeting $1.2 billion in capital expenditures for Alaska in 2009, a 33 percent increase from current year spending, according to the outgoing president of the local subsidiary.

But the company also expects a 10 percent drop in drilling at Prudhoe Bay next year.

Kuwait may scrap new refinery project Kuwait may scrap a project to build the country's fourth refinery with a capacity of 615,000 barrels per day, which has faced opposition in parliament, it was reported.

UN defends carbon-trading scheme from US criticism The GAO found that the cap-and-trade scheme sucessfuly created a working carbon market, “but its effects on emissions, the European economy, and technology investment are less certain.” The report noted that the use of carbon offsets can “undermine the system’s integrity” because there is no way to ensure that the projects invested in would not have been built anyway, or that they will last long enough to reduce the amount of emissions that they are expected to reduce. Carbon offsets, the report concluded “involve fundamental tradeoffs and may not be a reliable long-term approach to climate change mitigation.”

Yvo de Boer, executive secretary of the UN Framework Convention on Climate Change, said that, while the program can certainly be improved, the fundamentals of the system were sound. Mr. de Boer, who is attending the UN climate summit in Poznań, Poland,

Yes you can change the climate, Mr Obama YOU have promised to help Americans suffering from the financial crisis, to tackle global warming and to bring about genuine change. Well, there is a way to achieve all these goals.

Global Climate and Global Power Something I didn’t get to go into, but is on my mind these days, is the possible political shake-up coming in part from how we respond to climate disruption. 2030 is a good target point for this issue, since I’m fairly confident that by then we’ll have seen some significant changes in how we govern the planet.

This scenario most likely to make this apparent is one in which we embark upon a set of geoengineering-based responses to the climate problem (not as the sole solution, but as a disaster-avoidance measure), probably starting in the early-mid 2010s. These would likely be various forms of thermal management, such as stratospheric sulfate injections or high-altitude seawater sprays, but might also include some form of carbon capture via ocean fertilization, or even something not yet fully described*. Mid-2010s strikes me as a probable starting period, mostly out of a combination of desperation and compromise; geo advocates might see it as already too late, while geo opponents would likely want to have more time to study models.

Save Our Slopes, say top skiers in climate change SOS POZNAN, Poland (AFP) – Some of the world's top skiers and snowboarders Friday urged governments locked in UN climate talks to curb greenhouse gas emissions, saying that global warming was threatening their sport.

Climate change is old news: Scientists predicted global warming more than a century ago Irish scientist John Tyndall first speculated that human-induced global warming might be possible back in 1861 and Nobel Prize-winning chemist Svante Arrhennius had confirmed climate change (with laborious pencil and paper calculations rather than the shortcut of computers) by the end of the 19th century. And a little magazine called Scientific American published an article on the phenomenon back in 1959 that holds up today.

Even back then, the rudimentary outlines of the much-maligned "hockey stick" were visible, showing human-induced warming temperatures over time, despite the fact that U.S. geochemist Charles Keeling had only begun his annual measurements of carbon dioxide (CO2) levels in the atmosphere in Hawaii a year earlier. And the outcome was clear: average global temperatures would rise much the way that a closed car heats up in the sun.

Although lately I find myself struggling to find enough time to write, one of the stories I hope to write is a post covering the top energy stories of 2008. Around that theme, Platts just put up a request for reader input on the top oil industry stories of 2008. Their poll runs until Christmas:

Rank the top 10 oil industry stories of 2008

Below is the way I would rank the Top 10. I had an easy time ranking the top five, but then it was more difficult to sort them out. [break]

My top 10 oil industry stories of 2008:

1. Crude prices soar in 1H, WTI tops $147, Brent right behind
2. Prices collapse below $50 in 2H as demand retreats
3. Ethanol's struggles: VeraSun bankruptcy, others barely profitable, spreads collapse
4. Push begins to lift offshore drilling ban in US; Obama and McCain differ on approach
5. Capital crunch and low prices lead to deferred investment
6. Shale gas supply in US surges, a new factor in supply/demand balance
7. Credit crunch slows activity for once free-wheeling traders
8. Diesel surges, gasoline/naphtha plunge; traditional cracks skewed
9. Russian oil output to fall in 2008, first time in a decade
10. Brazil subsalt finds continue to lift nation's upstream prospects

A couple of options that weren't on the list (I placed them in the suggestion box) were:

Peak oil becomes fashionable, then unfashionable again

Obama elected; potential major impact on energy policy

Feel free to share your own input. What other stories do you consider to be Top 10 material (not limited to the oil industry)?

According to the IEA World Energy Outlook 2008, p. 261:

Output of natural gas liquids — light hydrocarbons that exist in liquid form underground and that are produced together with natural gas and recovered in separation facilities or processing plants — is expected to grow rapidly over the Outlook period. Global NGL production is projected to almost double, from 10.5 mb/d in 2007 to just under 20 mb/d in 2030.

One can see from IEA's chart of World Oil Production by Source that the growth of natural gas liquids, or NGLs, is being depended on as a significant contributor to total world oil production:

World Oil Production by Source, Reference Scenario, shown as Figure 11.1 on page 250 of IEA WEO 2008.
In this post, I will document that there is good reason to believe that the IEA WEO 2008 projections in the reference scenario overshoots the likely world production of NGLs by as much as 35 - 50 % by 2030.

One way of estimating expected NGLs is as a ratio to natural gas production, representing the wetness or dryness of gas. One would expect this ratio to decline over time, based on what normally has been observed from fields, areas and regions with good quality data. Instead, the IEA is forecasting that this ratio will increase in the future.
[break]
NOTE: All diagrams are clickable and open in a larger version.

INTRODUCTION

In the oil and gas industry, there is a broadly used parameter that expresses the “dryness/leanness” or “richness/wetness” of natural gas. In this post, I document that this parameter is expected to change to dryness/leanness over time, based on an extensive analysis of actual data on fields, areas and regions. I also show that the IEA WEO 2008 forecast to 2030 implies the opposite result--namely that the shift will be toward richness/wetness.

The parameter measures volumetric NGL’s content per volumetric unit Nat Gas produced, in this post expressed as barrels per standard cubic meter (Bbl/Scm).

FIGURE 01 The diagram above shows the projections of NGLs production to 2030 split between Non OPEC (green area) and OPEC (red area) from IEA WEO 2008. The same diagram also shows the projections to 2030 from IEA WEO 2006 for Non OPEC (yellow line) and OPEC (light green line).

While projections on Non OPEC NGL production has literally remained unchanged from WEO 2006 to WEO 2008, OPEC production has been projected to grow an additional 4 Mb/d (an increase of close to 50 %) by 2030.

Normally the fields that are “richest/wettest” (that is requiring least Nat Gas to yield a barrel of NGL) are developed first from a portfolio within a region, inasmuch as these also normally give the highest return on investment. NGLs, depending on their composition, have a volumetric energy content that is 70 - 75 % of crude oil.

FIGURE 02 The diagram above shows the projections on World Nat Gas production (blue area) from IEA WEO 2008 towards 2030. The red line shows the projections from WEO 2007, and the dark red area is actual World Nat Gas production as reported by BP Statistical Review 2008.

The reason why the Nat Gas projections from WEO’s are shown is because NGLs are produced from Nat Gas. Thus, Nat Gas production and NGL production are strongly connected. NGLs, as defined by IEA, are exempt from the OPEC quota system. This is IEA's definition of NGLs, from page 544 of ANNEXES of WEO 2008:

Natural gas liquids (NGLs) are the liquid or liquefied hydrocarbons produced in the manufacture, purification and stabilization of natural gas. These are those portions of natural gas which are recovered as liquids in separators, field facilities or gas processing plants. NGLs include, but are not limited to, ethane, propane, butane, pentane, natural gasoline and condensates.

Regarding natural gas liquids (NGLs), the IEA says the following (Chapter 11, p. 261):

Output of natural gas liquids – light hydrocarbons that exist in liquid form underground and that are produced together with natural gas and recovered in separation facilities or processing plants – is expected to grow rapidly over the Outlook period. Global NGL production is projected to almost double, from 10.5 mb/d to just under 20 mb/d in 2030. This increase is driven by the steady rise in natural gas output (see Chapter 12). The bulk of the increase comes from OPEC countries, where gas production (to supply local markets and new LNG projects) is projected to expand quickest. OPEC NGL production almost triples, from 4.7 mb/d in 2007 to over 13 mb/d in 2030. The Middle East accounts for four-fifths of this increase. Non-OPEC NGL production increases by about 1 mb/d, to close to 7 mb/d in 2030 (Figure11.11). These projections assume that the average NGL content of gas production is constant over the projection period.

Figure 3, below, shows what happens when we compare the IEA's projections of NGLs (from Figure 01) with their projections of Nat Gas (from Figure 02).

FIGURE 03 The diagram above shows the derived World NGL/Nat Gas (expressed as Bbl/Scm) ratio derived from IEA WEO 2006 (grey circles connected with a grey line) and IEA WEO 2008 (red circles connected with a red line).

Figure 3 indicates that the world average Nat Gas “richness/wetness” based on IEA WEO 2008 is expected to grow by approximately an additional 30 % relative to IEA WEO 2006, in the years to 2030.

The diagram also shows the development in the World’s NGLs (exclusive of Condensates) to Nat Gas ratio based upon data from the US Energy Information Administration's International Petroleum Monthly and British Petroleum's (BP) Statistical Review 2008. (Since this data is exclusive of condensates, it is on a slightly different basis than the IEA's forecast.) This ratio showed moderate growth until the mid 90s, but has remained flat in recent years.

WHAT HISTORICAL DATA SHOWS

In this section, I document how NGL/Nat Gas ratios have changed over time for areas and regions. I also provide a more detailed look at NGLs production in OPEC and what might reasonably be expected based on information in the public domain about current developments.

THE SLEIPNER AREA (Norway)

The Sleipner area consists of the following producing fields: Sleipner East and West, Gungne and Loke. The Sleipner area consists of several fields that are classified as Nat Gas/Condensate fields. Sleipner East started to flow in 1993 followed by Sleipner West in 1996. To increase liquid (NGLs and Condensates) recovery from the fields, some of the Nat Gas is recirculated. This technique is also applied on other Nat Gas/Condensate fields.


FIGURE 04 The diagram above shows the actual production of NGLs and Condensates (light blue and dark blue areas plotted against the left y-axis) and Nat Gas production (white circles connected by a red line plotted towards the right y-axis).

Figure 05 below illustrates that the NGLs production is now declining faster than Nat Gas production.

FIGURE 05 The diagram above shows the development of the NGL to Nat Gas ratio for the Sleipner area. It also illustrates the rebound of the NGL/Nat Gas ratio as Sleipner West started to flow in 1996. The Sleipner is made up of rich Nat Gas/Condensate fields.

Note how the NGL/Nat Gas ratio has declined with time. In other words, production has become dryer, or leaner, over time.

NPD data at year end 2007 gives the Sleipner area a Reserves divided by Production ratio or R/P of 4,0 for natural gas, and of 1,3 for NGLs. The low R/P ratio for Nat Gas suggests that Nat Gas production from the Sleipner area soon will enter into a steep decline. Inasmuch as the R/P ratio for Nat Gas is higher than the R/P ratio for NGLs, this suggests that the Nat Gas will become increasingly drier, i.e. yield less NGLs from each volumetric unit of Nat Gas produced. Another way to put it is that NGL production will fall more steeply than Nat Gas production in the future.

THE NGL STORY FROM NORWEGIAN CONTINENTAL SHELF (NCS)

FIGURE 06 The diagram above shows the actual production of NGLs and Condensates (light blue and dark blue areas plotted against the left y-axis) and Nat Gas production (red line plotted towards the right y-axis) from NCS (Norwegian Continental Shelf).

Figure 6 illustrates that the NGLs production in NCS declines faster than the Nat Gas production, which is projected to grow in the years ahead.

FIGURE 07 The diagram above shows the development of the NGL to Nat Gas ratio for NCS.

Figure 07 illustrates how the NGL/Nat Gas ratios increased as more fields were brought on stream, until it “peaked” in 1995 and has been in general decline since. This ratio may wobble around a little as more fields starts to flow, but the general trend with time is towards “dryer”/”leaner” Nat Gas. For NCS, this ratio rebounded again as the Åsgard and other fields in the Halten area were brought on stream earlier this decade.

What future development can be expected of the NGL/Nat Gas ratio for NCS?

NPD data on estimated remaining recoverable reserves from producing and sanctioned fields on NCS at end 2007 results in the following R/P numbers for NGLs and nat gas;

• NGLs; R/P = 14,3
• Nat Gas; R/P = 25,7

NGLs are produced mainly from fields classified as Nat Gas and Nat Gas/condensate fields, thus the above R/P numbers suggests that the NGL to Nat Gas ratio will decrease with time for NCS, i.e. the Nat Gas will become “drier”/”leaner”.

Figure 7 also shows the present NGL/Nat Gas ratios for the Troll and Ormen Lange fields. These fields are what are considered as “dry”/”lean” Nat Gas fields. With time, as the other fields deplete, the NGL/Nat Gas ratio for NCS can be expected to approach the ratios of Ormen Lange and Troll.

OPEC NAT GAS AND NGL PRODUCTION

Since the IEA WEO 2008 projects strong growth in NGLs between 2007 and 2030, I will take a closer look on NGLs and Nat Gas production within OPEC.

FIGURE 08 Actual and IEA WEO 2008 projected development of Nat Gas production for OPEC.

Note that the above chart uses an approximation to OPEC production, rather than the precise list of countries. The diagram does not include developments of Nat Gas production for Angola, Ecuador, Indonesia and Libya. Among these countries, Indonesia and Libya are listed in the BP Statistical Review 2008 with a total of 4,5 Tcm at end 2007. On the other hand, the chart includes data Middle Eastern countries which are not OPEC members. These differences should be small, and partially offset.

Figure 08 indicates that IEA WEO 2008 expects strong growth in Nat Gas production from OPEC. OPEC had more than 51 % of the World's proven Nat Gas reserves as of end 2007, and just above 18 % of the World's production.

Strong growth is forecast in the Middle East to come from Iran (South Pars) and Qatar (North Field), which now is estimated to hold approximately 35 Tcm combined or 20 % of the Worlds reserves. Reserves in the Middle East have a high H2S (above 100 ppm), CO2 (above 2 %) or a combination of these two nuisances. H2S and CO2 must be removed to meet buyer’s sales specifications which adds to development costs.

FIGURE 09 The diagram above shows OPEC actual NGL production together with IEA WEO 2008 NGL projection towards 2030 (blue areas) plotted towards the right y-axis. It also shows actual (black line) and IEA WEO 2008 projected development of Nat Gas production for OPEC (red dotted line) plotted towards the left y-axis.

In Fiugre 09, above, note that NGLs are forecast to grow faster than Nat Gas until 2015, and thereafter have a slower growth.

FIGURE 10 The diagram above shows OPEC actual NGL and Condensate production (plotted against the left y-axis) against actual Nat Gas production (red line) plotted against the right y-axis for the years 1980 to 2007.

In Figure 10, note how Nat Gas has grown faster than NGLs in recent years, suggesting that the average OPEC Nat Gas is becoming leaner/drier.

From 1979 to 1987, OPEC cut back total oil production of 11,8 Mb/d, due to recession and increased output from Alaska, the North Sea and Western Siberia. In the same years, output of NGLs within OPEC continued to grow. As NGLs are not part of the OPEC quota system, this would suggest that OPEC members had good incentive to develop fields yielding NGLs for additional income outside the quota system.

FIGURE 11 Additional NGL to Nat Gas ratios and further projections derived from IEA WEO 2008 for OPEC, Non OPEC and the World.

Note that IEA shows a decline in NGLs to Nat Gas ratios with time. The reason this ratio continues to grow for the World is that OPEC’s relative share in World Nat Gas production is projected to grow. The general trend for the NGL to Nat Gas ratio for Algeria (green line), Saudi Arabia (yellow circles connected with black line), OPEC (red circles connected with red line) and OPEC - (Algeria and Saudi Arabia) is downward with time, that is “drier”/”leaner” Nat Gas.

As of 2007 Algeria and Saudi Arabia had around 30 % of OPEC’s Nat Gas production and close to 50 % of OPEC’s NGL production. For Saudi Arabia the high NGL to Nat Gas ratio suggests a high portion of associated Nat Gas. For Algeria, the recent uptick in the NGL to Nat Gas ratio seems to be associated with the start up of Algeria’s third and fourth largest Nat Gas/Condensate fields In Salah and In Amenas.

It is in this context that the derived projected increase in the NGL to Nat Gas ratio for OPEC (light green circles connected with red line) from IEA WEO 2008 becomes interesting. A closer look on projected growth in OPEC’s near future Nat Gas production reveals that much will come from North Field in Qatar and South Pars in Iran. Data on the website to StatoilHydro, who is partner in South Pars 6 - 8 (South Pars is listed to have 28 phases), suggests an initial NGL/Nat Gas ratio of 0,0011 Bbl/Scm. Data from SHELL’s Pearl GTL, project which is fed from North Field, suggests a NGL/Nat Gas ratio of 0,0024 Bbl/Scm. The GTL process is fed almost pure methane, which is also true for the LNG plants for Qatargas. Other sources list South Pars to have a NGL/ Nat Gas ratio of 0,0015 Bbl/Scm.

This data suggests that an average NGL/Nat Gas ratio of 0,002 Bbl/Scm can be expected for North Field/South Pars. This ratio is close to the current ratio for OPEC - (Algeria and Saudi Arabia), based on Figure 11.

In Figure 12, below, I show the IEA estimate of future NGL production together with my estimate of future NGL production. My estimate assumes that IEA's estimates of future Nat Gas production are correct--a rather large assumption. In making my forecast, I also assume the NGL/Nat Gas ratio for OPEC current Nat Gas production will remain unchanged at its current level of 0,003 Bbl/Scm until 2030. I also assume an average of 0,002 Bbl/Scm for new Nat Gas from OPEC, based on the discussion above and the IEA WEO 2008 projection on Nat Gas until 2030. I will leave to the readers to decide if the assumptions used above should be considered conservative or about right given the documentation provided earlier in this post.


FIGURE 12 The diagram above shows actual production of NGL (light blue area) and Condensates (dark blue area) for OPEC, as this has been reported by EIA in International Petroleum Monthly. The dark red line shows the IEA WEO 2008 projection (from the reference case). The grey area shows production at 2008 levels, while the green area shows the growth in NGL’s from OPEC applying the assumptions prior to this diagram.

As the diagram illustrates, my forecast using the stated assumptions comes close to the NGL projections for OPEC made in the IEA WEO 2006 reference case.

The question is: What made IEA revise the NGL/Nat Gas ratio in their WEO 2008 ?

WHAT DOES IT TAKE TO MEET THE IEA WEO 2008 PROJECTION IN 2015?

Between 2007 and 2015, half of the growth in OPEC Nat Gas production is projected by IEA to come from Iran and Qatar (South Pars and North Field) which suggests an average NGL/Nat Gas ratio of 0,002 Bbl/Scm, based upon data from several of the companies that are involved in these developments.

In order for IEA's forecast to be accurate, this would require that the other half in Nat Gas production growth from OPEC between 2007 and 2015 come from fields with an average NGL/Nat Gas ratio of 0,012 Bbl/Scm, which is 6 times “richer”/”wetter” than Nat Gas from North Field/South Pars. 0,012 Bbl/Scm is close to double the “richness” of present Saudi Arabian production, ref Figure 11 above. Anyone in the oil industry would testify that Nat Gas/Condensate fields with such a high liquid ratio, (0,012 Bbl/Scm), would be fantastic.

As NGLs (inclusive Condensates) are not part of the OPEC quota system, there would be a huge incentive within OPEC to develop such Nat Gas fields as quickly as possible.

FOR THOSE OF YOU THAT WANTS MORE DATA ON NGL/Nat Gas RATIOS

FIGURE 13 The diagram above shows some more developments on NGL to Nat Gas ratios.

Note that the ratio for NCS is presently at about the world average; further the US ratio has remained almost flat throughout the last ten years. Data from EIA for the USA at the end of 2007 gave an R/P ratio for Nat Gas of 12,2 and NGL of 11,0 suggesting a slight decline to be expected in the future. For the United Kingdom Continental Shelf (UKCS), the ratio has been below the world average, but recently shown a little growth, now believed to be due to increased exports of “rich gas” from NCS.

The diagram suggests that Nat Gas outside OPEC, USA and the North Sea is much drier/leaner than the world average derived from IEA WEO 2008. Note that the Russian giant Shtockman field (presently scheduled to start to flow in 2013) is a very dry gas field.

Methodology

The analysis presented in this post has strictly adhered the IEA WEO’s definition (ref. above) of NGL’s, if not otherwise stated. It has also used the IEA WEO 2008 projections of growth in Nat Gas production for the world and groups of countries. This analysis has not considered the possibility that the IEA WEO 2008 Nat Gas projections, to which the ratios are applied, may be inaccurate.

From here, I will leave it to the readers to add comments and/or suggestions.

SOURCES:
[1] IEA WEO’s 2006, 2007 and 2008
[2] EIA International Petroleum
[3] EIA, U.S. Crude Oil, Natural Gas, and Natural Gas Liquids Reserves. 2007 Annual report, October 2008.
[4] BP Statistical Review 2008
[5] DTI/BERR/DECC, Energy Statistics, Oil and Gas
[6] NPD, Annual resource accounting and Production Data
[7] SHELL, webpage data on PEARL GTL project
[8] Qatargas, webpage and various annual reports on LNG projects
[9] StatoilHydro, webpage on data for South Pars and In Salah, In Amenas
[10] Wikipedia on data for North Field and South Pars

Return to $1 gas? Energy prices evaporate COLUMBUS, Ohio – Oil prices hit four-year lows Friday as employers cut the highest number of jobs in 34 years. The continuing decline in prices is so dramatic and so sudden that it is raising the prospect that gas prices could soon fall below $1 a gallon.

...On Friday, light, sweet crude for January delivery settled at $40.81 a barrel on the New York Mercantile Exchange, down by nearly $3 per barrel. Prices fell as low at $40.50, levels last seen in December 2004.

Gasoline futures for January delivery tumbled to 90 cents.

For gas prices to get close to a $1, oil prices probably would need to fall another $10 a barrel — something that would have impossible to fathom during first part of this year as oil prices soared near $150 per barrel. [break]

Driving tax, border tolls among suggestions for funding R.I. road and bridge repairs PROVIDENCE – A tax on every mile that residents drive is one of several suggestions from the state panel charged with finding money to repair Rhode Island’s ailing transportation infrastructure.

The Blue Ribbon Panel on Transportation Funding – in a draft report the 12-member panel discussed at its meeting yesterday – also proposed levying a $3 toll on all cars and a $6 toll on all trucks entering the state; imposing tolls on all bridges between Aquidneck Island and the mainland; raising the passenger-vehicle registration fee, now $60 every two years, to at least twice that; and raising the state gasoline tax by as much as 15 cents per gallon.

Iraq appeals to oil companies for investment BAGHDAD (AP) -- Iraq launched its first public campaign Friday to attract investment from international oil companies, rolling out a red carpet - literally - for executives from as far away as Russia and Japan.

The oil minister said his country is now safe for business and desperately needs help in rebuilding its devastated oil infrastructure.

IEA Cuts 2009 Global Oil Demand on Slowing Economy (Bloomberg) -- The International Energy Agency cut its global oil demand forecast for 2009 because of the world economic slowdown.

The Paris-based agency reduced its demand forecast by 170,000 barrels a day from its November estimate to 86.37 million barrels a day, analyst David Martin said in a phone interview today as the agency issued an update to its July’s Medium-Term Oil Market report.

The forecast for 2013 demand has been lowered by 2.9 million barrels a day to 91.25 million barrels a day from a July estimate of 94.14 million barrels a day, Martin said.

Deepwater Rig Rates Jump as Shortage Trumps Oil Drop (Bloomberg) -- Rental rates for deepwater drilling rigs continue to surge as a worldwide shortage of vessels used to search the oceans for oil outweighs the biggest drop in crude prices in a quarter-century.

Many oil majors skip Iraq oil expo BAGHDAD (AFP) – Many major global oil companies have stayed away from the first Iraq Energy Expo which opened in Baghdad on Friday, amid uncertainty about plans for oil production partnerships.

ConocoPhillips of the United States and Russia's Lukoil and Gazpromneft are among 40 exhibitors, but BP, Exxon and Total are absent although they say they want to return to Iraq after being thrown out by then dictator Saddam Hussein 36 years ago.

Shell Said to Plan 10-Day Repair of Pernis Refinery Fire Damage (Bloomberg) -- Royal Dutch Shell Plc is planning to keep a gasoline unit at its Dutch Pernis refinery, Europe’s largest, shut for about 10 days of repairs following yesterday’s pipeline fire, a person familiar with the situation said.

Petrobras CEO says oil price no hurdle to subsalt SAO PAULO (Reuters) - Petrobras Chief Executive Jose Sergio Gabrielli said on Friday the price of oil was not an obstacle to developing massive oil deposits that are difficult to access deep beneath the ocean floor.

The finds of potentially more than 50 billion barrels of light oil below a thick layer of salt could turn Brazil into one of the world's top oil producers.

Russia pledges to build natural gas pipeline by 2015 BELGRADE, Serbia — Russia today pledged to complete a strategic natural gas pipeline through Serbia by 2015 — despite the global financial crisis — paving the way for its immediate purchase of Serbia’s state energy monopoly.

Arctic pipeline faces 1-year regulatory wait TORONTO (Reuters) - A regulatory panel weighing a proposal for a C$16.2 billion ($12.5 billion) pipeline to ship gas from Canada's Arctic will not complete its report for one year, spelling another in a long list of delays for the embattled project.

Hydrogen: The Emerging, Clean Energy Commodity The world is sorely in need of a cost effective replacement energy carrier that can serve as a fuel for motor vehicles, aircraft, and all types of water transport. Moreover, this fuel that will power the future must be pollution free. All things considered, hydrogen does appear to fit that urgent need better than any other option. If that is so, it is fair to ask why hydrogen has not had a more prominent place in the public dialogue surrounding the world’s energy future.

...In an attempt to set the record straight, what follows is an examination of eight key claims often presented by detractors as evidence of the false promise of hydrogen.

Young People Choose Cars Above Greener Transport Options Young people find the prospect of driving cars more attractive than other modes of travel that are kinder to the environment, according to research conducted by a researcher at the University of the West of England.

...The study concentrated on the views of young people aged between 11 and 18 years and the findings found an overwhelming desire by young people to drive.

Exxon Underscores Importance of O&G to Meet Global Energy Demand ExxonMobil today published "Outlook for Energy: A View to 2030" in which the corporation predicts that global energy demand, due to population growth and economic expansion, will increase by an average of 1.2% per year. Even considering the significant strides the petroleum industry is taking to become more energy efficient and resourceful, the world's energy demand is expected to grow by 35%, or to the equivalent of 310 million barrels per day by 2030, according to Exxon estimates.

Although the energy perspective has shifted toward tapping into alternative and renewable energy sources to quench burgeoning consumption while reducing "carbon footprints," Exxon underscores that oil, gas and coal will continue to power the majority of the world's energy needs, meeting close to 80% of the world's needs through 2030. Exxon acknowledges that alternative and renewable methods, such as nuclear, wind and solar power, as well as low-carbon- and biofuels, will also rapidly develop over the next couple of decades as effective energy resources, but that traditional hydrocarbon resources will remain the most abundant and affordable.

Solving the economic and environmental crises In a speech to the Confederation of British Industry two weeks ago, the CEO of Royal Dutch Shell, Jeroen van der Veer, predicted that the current financial crisis would be a problem for a couple of years, "but the energy challenge will be a problem for at least 50 years."

He cited three reasons for the worsening energy crisis: an increase in global population from six billion to nine billion people by 2050 who will demand greater electricity and transportation; insufficient oil and gas resources to fuel this demand; and increasing greenhouse gases.

Gazprom, Serbia to sign energy deal by end Dec BELGRADE (Reuters) - Russia's Gazprom will sign a final agreement on the purchase of Serbia's oil monopoly NIS by end of December, Gazprom's Chief Executive Officer Alexei Miller said on Friday.

Serbia's top officials signed an initial a deal with Russia last January giving Gazprom's oil arm, Gazprom Neft, the control of the majority stake in oil monopoly NIS in exchange for Serbia's inclusion in the South Stream pipeline.

Unrest Costing Nigeria 397,697 B/D in Oil Output Unrest in the Niger Delta, the heart of Nigeria's oil industry, is costing 397,697 barrels of lost production a day, the Department of Petroleum Resources said Friday.

Some 113 oil fields -- operated by Royal Dutch Shell PLC, Chevron Corp., Mobil Producing Nigeria, a unit of Exxon Mobil Corp., Elf Petroleum Nigeria Limited, Canada's Addax Petroleum Corp. and the Nigerian Petroleum Development Company -- are shut due to security, community and operational issues, it said.

Pernis cat cracker to stay down for days-source AMSTERDAM (Reuters) - A catalytic cracker at Royal Dutch Shell's Pernis oil refinery in Rotterdam will stay shut until the start of next week at the earliest following a fire at the plant on Thursday, an industry source said.

The unit, used to make gasoline at Europe's biggest oil refinery, was shut down for safety reasons after the fire broke out at a nearby pipeline carrying heavy diesel oil.

Fiji: State urged to remove fuel surcharge The interim Government has been urged to intervene and remove the Fiji Electricity Authority fuel surcharge.

Can Obama keep energy promises? President-elect Barack Obama has vowed to make energy and environmental issues a priority during his presidency. Through his comprehensive New Energy for America plan, he pledges to invest in alternative and renewable energy, end America’s addiction to foreign oil, address the global climate crisis and create millions of new jobs through green initiatives.

But can Obama really keep his promises?

Going hungry in the 21st century As world leaders grapple with the global financial crisis, another equally threatening international disaster is unfolding - and begging for a co-ordinated international solution. The most acute food shortage in more than 40 years has, according to the World Bank, already left 800 million people "food insecure". Australia and other major food exporters are being called on to boost production.

Unlike recent food shortages, it is not confined to sub-Saharan Africa and is not temporary. Food supplies are declining in Africa, south Asia, Central and South America and the Caribbean. Food riots brought down the Haiti Government this year. Over the past 12 months China, Thailand, Vietnam, Cambodia, Egypt and others have temporarily banned rice exports to preserve local supply.

Carbon: The Biochar Solution Burn almost any kind of organic material — corn husks, hazelnut shells, bamboo and, yes, even chicken manure — in an oxygen-depleted process called pyrolysis, and you generate gases and heat that can be used as energy. What remains is a solid — biochar — that sequesters carbon, keeping CO2 out of the atmosphere. In principle, at least, you create energy in a way that is not just carbon neutral, but carbon negative.

And the benefits only begin there. When added to thin and acidic soil of the kind found in much of South America and Africa, char produces higher agricultural yields and lets farmers cut down on costly, petroleum-heavy fertilizers. Subsistence farmers seeking better soil have traditionally relied on slash-and-burn agriculture, which generates greenhouse gases and decimates forests. If instead those farmers slow-smoldered their agricultural waste to produce charcoal — in effect, slash-and-char agriculture — they could fertilize existing plots instead of clearing more land. This in turn would reduce emissions in the atmosphere, and so on in a virtuous circle of environmental renewal.

Richard Heinberg: Memo to the President-elect on Energy Realism and the Green New Deal Our continued national dependence on fossil fuels is creating a crippling vulnerability to both long-term fuel scarcity and catastrophic climate change.

The current economic crisis requires substantial national policy shifts and enormous new government injections of capital into the economy. This provides an opportunity for a project whose scope would otherwise be inconceivable: a large-scale, coordinated energy transition away from fossil fuels and toward renewable energy.

This project must happen immediately; indeed, it may already be too late. We have already left behind the era of cheap and plentiful fossil fuels, with a permanent decline of global oil production likely underway within three years. Moreover, the latest research tells us we have less than eight years to bring carbon emissions under control if we hope to avoid catastrophic climate change. Lacking this larger frame of understanding and action, a mere shift away from foreign oil dependence will fail to meet the challenge at hand.

FACTBOX - Global energy investment hit by financial crisis (Reuters) - The growing financial crisis and plunging energy prices have forced companies to scale back spending and delay projects, with expensive ventures in the Canadian oil sands hardest hit.

Below is a list of energy projects that have been delayed or scaled back in recent months, as well as other related news.

Saudi price rise surprises Asia Singapore: Saudi Arabia's unexpected increase in its official crude oil selling price (OSP) differentials to Asia next month could keep refiners away from the spot market or force deeper discounts for rival grades as runs are kept low on weak demand.

Japan refiners to be stirred, not shaken, by merger TOKYO (Reuters) - The merger of Japan's biggest and its sixth-largest refiners has resurrected hope that a long-awaited shake-up of the shrinking industry is nigh, but the scope of future activity may disappoint investors.

Hope of an integrated oil major emerging from the sector is likely to be dashed by top oil producer INPEX's reluctance to get dragged down by the refining business at a time of collapsing global margins; investors betting on more refining deals may be stymied by piecemeal sales or strategic Gulf investors.

Grand Theft Nautical The tanker, owned by Aramco, the Saudi oil company, was carrying enough crude to supply New England with fuel oil for 10 days — in the winter. It is seven times the size of the Titanic and longer than the Chrysler Building is tall. How, then, could a dozen pirates in two puny boats armed with rifles and a grenade launcher board a ship this size?

Quite easily — as I found out after spending weeks on a nearly identical ship on a passage from Saudi Arabia to Singapore five years ago.

Why electric cars have stalled Facing technical challenges and a weak market, many of Silicon Valley's electric-car startups are changing direction.

Climate change a worry for doctors Climate change will bring to Australia an increased burden of heat stress, injury from fire and storm, social disruption and mental illness; in the developing world it will bring famine, water shortage and dislocation of populations with calls to Australia to assist resettlement. The coming disruption of ecological services that provide humanity's life-support system is likely to have far-reaching health impacts on food and water resources and on the spread of infective disease.

Some Carbon Candor: A climate guru rebukes his mates on cap and trade. Liberal interest groups, think tanks, lobbyists, bloggers and other nuisances are inundating the incoming Obama Administration with advice, but James Hansen recently managed to say something interesting. Namely, the famous NASA scientist had the nerve to expose some of the global-warming fantasies widespread among children and politicians.

Economists raise doubts about alternative-energy spending WASHINGTON — Prompted by public concern over the economy and energy costs, President-elect Barack Obama and Democrats in control of Congress are touting a two-for-one solution: spending billions of dollars on alternative-energy programs to create jobs and help lift the nation out of recession.

But some economists, such as Vincent Reinhart, a former Federal Reserve Board official now at the American Enterprise Institute, caution that funding energy projects could help the economy less than other forms of spending.

Even Obama's new budget chief, Peter Orszag, has expressed doubts. In his previous job as head of the Congressional Budget Office, Orszag wrote a report in January saying that some forms of alternative-energy spending "are totally impractical" for stimulating the economy and others "could end up making the economic situation worse" by adding to the federal debt.

Oil industry adjusts to lower prices Houston – Oil's swan dive from a record high of $147 a barrel last summer to a trading price of $46.10 Thursday, the lowest level in nearly four years, has rattled America's energy industry. But it hasn't flattened it – so far.

What the price drop does mean is that some oil-patch wildcatters have packed up their drill bits as the rush for new domestic exploration has cooled since summer.

"Six months ago everything was roses, and nobody in this business had any inkling that oil prices would decline virtually $100 a barrel," says Alex Mills, president of the Texas Alliance of Energy Producers. Now, he says, "some people have already pulled back on their drilling programs."

'Lowest breakeven price of Oil is $30 a barrel' Based in Calgary as BMO Capital Markets’ oil and gas analyst for Canada, Mark Leggett shares his home province with what’s called Canada’s “trillion-barrel tar pit.” Alberta’s oil sand deposits reportedly contain about 1.7 trillion barrels of bitumen in-place, comparable in magnitude to the world's total proven reserves of conventional petroleum and second in volume only to Saudi Arabia. The catch? It costs up to $25 per barrel to extract oil from oil sands, compared to $2 to produce Saudi crude—numbers that don’t work well with oil at $50 a barrel.

India cuts petrol, diesel prices - oil minister NEW DELHI (Reuters) - India has cut petrol prices by 10 percent and diesel by about 6 percent, the oil minister, Murli Deora, told reporters on Friday.

China to link retail prices to global oil price BEIJING (Reuters) - China will indirectly link its retail fuel prices to international crude prices for the first time under a reform that will take effect from Jan.1, the country's top economic planning body said on Friday.

Iraq's Kurdish oil impasse rumbles on BAGHDAD (Reuters) - Iraq's oil minister on Friday again denounced oil contracts signed by Kurdish authorities with foreign firms as illegal, signalling that a bitter feud over oil in the semi autonomous northern region is far from over.

"We are in serious discussions with the (Kurdish Regional Government) about several issues, but the position on the contracts that were signed without the approval of the central government remains unchanged," Oil Minister Hussain al-Shahristani said during an energy conference in Baghdad.

"Those contracts (have no) standing with Iraqi law."

Russia's Gazprom seeks state aid to fund power projects, cites difficult borrowing conditions MOSCOW (AP) — Russia's state-run gas giant Gazprom said Friday it will ask the government for 100 billion rubles ($3.58 billion) to help fund capital-intensive power projects next year, the state-run RIA-Novosti news agency reported.

The bulk of the money is needed to fund the development of TGK-1, a power utility in the northwest of Russia, Gazprom deputy chairman Valery Golubev was cited as saying in St. Petersburg.

OPEC to Cut Output If Prices Remain Below $60, Khelil Says (Bloomberg) -- OPEC, the supplier of more than 40 percent of the world’s oil, will reduce production if crude prices remain below $60 a barrel, said the group’s president, Chakib Khelil.

“If prices remain at the current low level, OPEC will decide an important reduction,” Khelil said in an overnight interview with Algerian television, cited by the state-owned Algerie Presse Service. “If prices go above $60, it is possible that the reduction will be less important.”

Russia Weakens Ruble Defense After Record Drop in Crude to $39 (Bloomberg) -- Russia weakened its defense of the ruble for a fourth time in a month, pushing the currency near a three-year low against the dollar, as the price of the nation’s crude oil fell by a record this week to less than $40 a barrel.

South Africa drops planned nuclear plant owing to cost Eskom had planned to build the plant as part of a strategy to reduce the country's reliance on cheap coal. South Africa has an energy shortage, which temporarily closed down the vital gold mining industry in January. It already has one nuclear plant.

The government said Friday it supported the decision. It said the projected fall in energy demand associated with the global downturn should ease supply pressure.

New York Commuters Take to Bikes, Can’t Find Spot to Park Them (Bloomberg) -- It costs Jamie Fisher about $25 for parking, $8 for tolls and another $8 for gasoline on days that he drives from his home in Bergen County, New Jersey, to his job in midtown Manhattan.

When he bicycles the 50-mile (80-kilometer) round trip, the only cost is convenience. Once Fisher reaches his office at Fifth Avenue and 56th Street, he can’t bring his $8,000 bike into the building.

“The first 25 miles aren’t a problem -- it’s the last 150 feet,” said Fisher, 41, vice president of energy and derivatives for MF Global Ltd., the world’s largest broker of exchange-traded futures contracts. “No matter where you bike from, once you’re in the city, finding a safe place to put your bike is impossible.”

Proposed fee on smelly cows, hogs angers farmers MONTGOMERY, Ala. – For farmers, this stinks: Belching and gaseous cows and hogs could start costing them money if a federal proposal to charge fees for air-polluting animals becomes law.

Climate change, drought to strain Colorado River SALT LAKE CITY – Seven Western states will face more water shortages in the years ahead as climate change exacerbates the strains drought and a growing population have put on the Colorado River, scientists say.

"Clearly we're on a collision course between supply and demand," said Brad Udall, director of the Western Water Assessment at the University of Colorado.

UN says poor nations need $130B for climate change POZNAN, Poland – The U.N. climate change organization has said the world's poor countries will need $130 billion dollars a year by 2030 to help them adapt to global warming and curb their carbon emissions.

The U.N. says rich countries need to increase their payments over the next 20 years to six times the funds available now, which is about $21 billion.

Climate history may explain empires' fall CHICAGO (Reuters) - An analysis of rings on a stalagmite from a cave near Jerusalem reveals a drier climate in the region at a time in history when the Roman and Byzantine empires were in decline, scientists reported on Thursday.

The International Energy Agency expects coal production to nearly double by 2030 in their World Energy Outlook 2008 if no large scale governmental intervention occurs. In this post, I analyse the likelihood of this happening from the perspective of available coal reserves.

My conclusions are that if we look at a global level, taking coal reserve data at face value, the global IEA reference scenario for coal production to 2030 is possible. However, when focusing on China, the country that now produces 41% of all coal, the scenario is unlikely to occur because China possesses insufficient coal reserves to sustain production to 2030 at the level expected by the IEA. Only in a highly optimistic case, if China's coal reserves are more than double those currently known, will China be able to sustain coal production as expected in the IEA reference scenario.

Based on available coal reserve data and scenarios (EWG 2007; Tao and Li 2007), it is much more likely that China will reach a plateau in coal production somewhere between 2015 and 2025. The implications of this are significant, because it will be extremely difficult, if not impossible, to substitute other energy sources for coal on the vast scale needed for Chinese growth. The quality of reserve data is poor, however. Better reserve data is needed, particularly for China, to have certainty with respect to these findings.

In a follow up post, I will take a look at the short term prospects to 2015 for coal production, imports, exports, and prices in relation to the World Energy Outlook 2008.
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Introduction

According to "common wisdom", coal is an abundant energy resource. The amount of coal underground is expected by most energy experts to be sufficient to sustain coal consumption until at least the end of the 21st century. Recently, doubts have been raised about this view by two independent studies analyzing the quality of coal resource/reserve data, as well as potential for future coal production (EWG 2007; Kavalov 2007). These reports make it clear that the quality of coal data is very poor and does not support the view that coal consumption can continue to grow in the second half of the 21st century. More importantly, obtaining sufficient coal could become problematic for coal importers in the next two decades due to coal export constraints. For the details on these reports, see an earlier post by Chris Vernon published on the Oil Drum.

In this post, I take an in-depth look at the coal production scenario of the IEA's World Energy Outlook 2008, building upon the research of EWG (2007) and Kavalov (2007). I do not make a distinction among the different types of coal (Bituminous, Sub-bituminous and lignite) in most of my analysis, as this makes the analysis easier, and I think that it will not change the picture to a significant extent.

The Reference scenario for coal from the IEA WEO 2008

In order to understand a scenario, we need to know how it has been constructed. The IEA looks at future coal production from two perspectives: the availability of the resource and the price of coal in different coal producing markets. Since the formulas used in the IEA model have not been published, I cannot tell in detail how the reference scenario has been created. The following snippet is the only piece of information available:

"The coal module is a combination of a resources approach and an assessment of the development of domestic and international markets, based on the international coal price. Production, imports and exports are based on coal demand projections and historical data, on a country basis. Three markets are considered: coking coal, steam coal and brown coal. World coal trade, principally constituted of coking coal and steam coal, is separately modelled for the two markets and balanced on an annual basis." (IEA World Energy Model 2008)

From that piece of information and some personal experience with economic models, my guess is that model uses separate coal reserves and average price levels for each coal producing country. Based on the demand model that I described in an earlier post, coal production likely occurs in the model in the location where it is most cost effective to produce. Production likely also considers constraining import/export factors, leading to an expected pattern of coal production and trade. I expressly state that I could be wrong here, since no formulas are available. In any case, the World Energy Model of the IEA leads to the following reference scenario in the World Energy Outlook 2008:

Table 1 - World Primary Coal Production in the IEA WEO 2008 Reference Scenario

As we can see from the table, the scenario shows continuing growth in coal production until 2030 in nearly all regions of the world except Europe. Average annual coal production growth on a world-wide basis between 2006 and 2030 is expected to be 2%.

What is written in the IEA WEO 2008 about coal reserves?

The International Energy Agency (IEA) uses coal reserve data from the World Energy Council's (WEC) survey of energy resources. This is the only public source of coal reserve data in the world; other publications with coal reserve data in the public domain always use data from the WEC Survey of Energy Resources. An example is the widely used BP Statistical Review of World energy 2008*.

The IEA uses the WEC coal reserve data without questioning its validity:

"Coal is the most abundant and geographically dispersed fossil fuel. Proven reserves at the end of 2005 were 847 billion tonnes (WEC, 2007)...Current reserves are more than adequate to meet projected growth in coal demand through to 2030 in this Outlook." (IEA WEO 2008, page 127).

In my opinion, the unquestioned use of WEC data by the IEA is a core problem of the coal analysis in the World Energy Outlook 2008. Most of the data provided by WEC is of poor quality and outdated (EWG 2007). This is a result of the manner in which the WEC collects its data. It is collected by member committees of respective WEC member countries. Members of these teams are in nearly all cases not experts in the field of coal reserves/resources. They rely on asking institutes within their respective country to provide useful data, which is subsequently forwarded to the editors of the survey of energy resources. Furthermore, every individual committee uses its own definitions of reserves and resources (WEC 2007, page III, 1 and 2).

The effect on coal data can be assessed by looking at the individual WEC reports. I have compared the data on coal reserves from the WEC Survey of Energy Resources 2001, 2004 and 2007. Earlier editions are not available digitally and have thus not been included. In the Survey of Energy Resources, 68 countries are reported to have coal reserves. Of these countries, a total of 39 have had unchanged reserves since the 2001 WEC Survey of Energy Resource (which contains reserve data as of the end of 1999). In addition to these 39 countries, another 8 countries show unchanged reserve data from the 2004 to the 2007 survey. I made a table of the reserves for all 68 countries, together with each country's latest known reserve year, which can be viewed by clicking this link. The top-15 coal reserve holding countries, which account for 96% of all coal reserves, are shown below in Table 2.

Table 2 - WEC Survey of Energy Resources 2007 Coal Reserve Figures in Million tonnes (Top 15 coal reserve countries) - " target="blank">click for large version

The table of the top-15 has five anomalies that make it clear that the coal reserve data is of very poor quality:

1)The lack of a reserve updates from the 2nd largest coal reserve holding country, Russia. According to the WEC report this is due to confidentiality issues over Russian coal reserves. WEC has chosen to retain the latest Russian reserve figures available which date back to the end of 1996.

2)The lack of a reserve update from the 3rd largest coal reserve holding country, China. No valid reason is given as to why the figures from 1990 have been retained. One argument is given to support the original data in the WEC report, but this argument leaves a lot to be desired. It is a reference to a paper that was presented at the 11th Session of the UN committee on Sustainable Energy co-authored by Professor Huang Shengchu, vice-president of the China coal Information Institute. In this paper the same reserve figure of 114.5 billion tonnes was published as the one published by WEC in 1992, which according to WEC "indicates a degree of continuity in the official assessments of China's coal reserves and supports the retention of the level originally advised by the Chinese WEC Member committee in 1991" (WEC 2007, page 26).

3)The large 38.9% downward revision in the 5th coal reserve holding country, India, in the 2007 Survey of Energy Resources versus the 2004 edition. This is a result of reporting reserves on a recoverable basis instead of reporting in-situ coal resource data (WEC 2007, page 2).

4)The lack of a reserve update from the 6th largest coal reserve holding country, South Africa. In the Survey of Energy Resources it is stated that the South African Department of Minerals and Energy has initiated a comprehensive survey to re-evaluate coal reserves but that no information was available as to the progress of this study. Hence the WEC member committee had to revert to using a number from the latest report from the Department of Minerals and Energy which dates back to 1987. This figure has been adjusted by WEC for all the coal produced since then.

5)The large downward revision in the 10th largest coal reserve holding country, Poland. The revision is due to a change in the type of reserves reported. Poland now reports only the ultimately recoverable amounts in developed deposits; previously reserves from all known coal deposits were reported.

These fives anomalies in some of the largest coal reserve holders in the world make it clear that there is a need to worry about the quality of coal reserve data. Better data is needed as coal reserves could very well be much lower than currently reported. The IEA, however, does not share this concern over data quality:

"Coal is the most abundant and geographically dispersed fossil fuel. Proven reserves at the end of 2005 were 847 billion tonnes (WEC, 2007). . .Current reserves are more than adequate to meet projected growth in coal demand through to 2030 in this Outlook. However the rapid increase in demand in recent years has seen the global reserves-to-production ratio fall sharply, from 188 years in 2002 to 144 years in 2005 (WEC, 2007 and 2004). This fall can be attributed to the lack of incentives to prove up reserves, rather than a lack of coal resources. Exploration activity is typically carried out by mining companies with short planning horizons, rather than by state-funded geological surveys. With no economic need to prove long-term reserves, the ratio of proven reserve to production is likely to fall further." (IEA, WEO 2007, page 128)."

While the IEA does note that the Reserve to Production ratio is dropping sharply, mainly due to increasing demand**, this is not seen as a potential limitation to coal production. A favorable impression of future prospects is given by stating that a lot of coal is left to be explored. This is a hollow statement in the sense that these amounts left to be explored are not quantified by the IEA in any manner. Interestingly, this opinion is in stark contrast with that from the World Energy Council which states in its Survey of Energy Resources 2007, "After centuries of mineral exploration, the location, size and characteristics of most countries' coal resources are quite well known. What tends to vary much more than the assessed level of the resources (in other words, the potentially accessible coal in the ground) is the level classified as proved recoverable reserves (that is, the tonnage of coal that has been proved by drilling etc. and is economically and technically extractable). (WEC 2007, page 13)." As I am not an expert on the topic of coal exploration I cannot judge the value of either statements. I do know that some large coal fields are still being found. A large coal field of 23 billion tonnes of total resources has been uncovered in China since last year (China People Daily's Online).

What I can say based on current (poor) WEC 2007 reserve figures is that the IEA WEO 2008 reference scenario appears to be a scenario that holds some merit. In this scenario, humanity will have used up 50% of all coal reserves by 2040, and 60% by 2050 (shown in figure 1 below). The remaining reserve percentage is calculated by adding historic coal production to current WEC reserve statistics. This is done based on the assumptions that no new coal fields will be discovered, that the current reserve figures are accurate, and that reserves will not be added due to technological improvements. While we know that all three of these assumptions are incorrect, such a scenario at least tells us that coal production will not outlast the 2nd half of the 21st century without significant increases in reserves, if coal usage continues to grow.

Figure 1 - World Coal Production in blue with 1850 - 2007 (Historical), 2007 - 2030 (IEA WEO 2008 Reference Scenario), 2030 - 2050 (Extrapolation of IEA WEO 2008 reference scenario) and in red the reserves remaining measured in percentage of original amount of reserves.

The shape of coal production

In order to get a better understanding of the long term production of coal, we need to study the expected production path of this resource. This is one of the the big questions that remains unanswered by the IEA. What will be the shape that coal production takes on a country level and a world level? The IEA just makes a forecast that ends in 2030 without any production shape analysis.

When looking at historical data from the United Kingdom, Germany and Japan, we see a very similar shape for coal production on a country level (Figure 2 below). Coal production reaches a plateau when around 30%/40% of coal reserves have been produced. The plateau lasts for several decades, after which a quite steep decline sets in. I have not studied the underlying economic and geological factors of this shape in detail. My hypothesis is that a physical limitation to coal extraction per time unit occurs due to logistics and energy/economic costs. In the beginning of extraction on a country level, more coal mines can be opened up and it makes economic sense to do so. After several decades the better coal grades in easily mineable coal seams have been depleted, and it becomes more difficult to extract more coal per unit of time out. The costs become too big to increase production; thus a plateau sets in. This is a simple hypothesis that needs to be explored further.

Figure 2 - Coal production in the United Kingdom, Japan and Germany from 1815 until 2005. Source: Uppsala Global Energy Systems Group

In case of the three examples shown above, the decline around 1960 began due to factors affecting the energy market. Between 1957 and 1960, there was an oversupply of coal as demand for coal decreased. The oversupply was caused by a combination of mild winters, several years of low economic growth, an increase of efficiency in the industrial sector, and a shift from coal to oil due to a favorable price difference (Messing 1988). The steep decline of production in Japan, Germany and the United Kingdom after 1960 continued because it became more economic to import coal than to produce it at home. Later on, after 1970, natural gas began to be substituted for coal in the electricity market.

The specific factors at play in these three examples should lead to caution in duplicating this particular shape of production to other countries and the world. In the coal studies that analyze the potential for future production, in my opinion, the duplication of a bell shaped curve with a long plateau is done too readily, without sufficient analysis.

I think that the IEA should work to develop a sound analytical framework for the expected production shape of coal, especially because the geographic spread of coal could cause several important producing countries to run out of coal long before 2050 if usage continues without interference. The first country that is most likely to reach a plateau in coal production is China. This occurs because 41% of all coal production in the world came from the country in 2007.

China - the key to knowing the long term future of coal

Relative to its current production, China appears to possess sufficient reserves. China has 13.5% of total global reserves according to WEC statistics, which implies that the country extracts 2% of its reserves each year. However, China's coal extraction is growing rapidly at 12% on average in the past five years (18% in 2003 dropping each year since then to 7% in 2007). If the 2007 growth rate of 7% continues, China will be extracting 5% of its reserves per year by 2017.

According to the IEA World Energy Outlook 2008, this will not become a problem. The growth in Chinese coal production is expected to slow significantly, averaging 2.8% between 2006 and 2030, with growth continuing until 2030. If current WEC reserve figures are accepted at face value, it becomes clear that this scenario is not possible, as shown in Figure 3 below. The red line in the figure shows the percentage of reserves remaining based on adding historic production to the WEC reserve figure, and subtracting the reserves produced in the WEO coal production reference scenario for China from this number each year. As can be seen, China will have used up around 50% of its reserves by 2020, and 80% by 2030, in the IEA reference scenario for Chinese coal production.

Based upon empirical data from Germany, UK and Japan as shown above, it is much more likely that China will reach a plateau in coal production somewhere between 2010 and 2020. Again, I have to state as earlier, this is based on the assumptions that no new coal fields will be discovered, that the current reserve figures are accurate, and that reserves will not be added due to technological improvements. While we know that all three of these assumptions are incorrect, it at least becomes clear that the IEA Reference scenario for China is not possible without a very large increase in Chinese reserves.

Figure 3 - Chinese Coal Production in blue with 1980 - 2006 (Historical), 2007 - 2030 (IEA WEO 2008 Reference Scenario), and in red the reserves remaining measured in percentage of original amount of reserves.

In the WEO 2008, the IEA does not state what assumptions were made in arriving at their scenario for Chinese coal production. However, some information is given in an earlier report, the World Energy Outlook of 2007. In the 2007 edition a more detailed look was taken on China and India, including Chinese coal production and consumption. Regarding Chinese coal resources and reserves the following is stated:

"China’s remaining coal resources are second only to Russia’s, totalling 1003 billion tonnes (General Geological Bureau, 1999). These resources have been defined by exploration and mapping, but only 115 billion tonnes can be regarded as proven reserves, yielding a reserve-to-production ratio of around 50 years at current production levels. More recent assessments conclude that proven reserves could be as high as 192 billion tonnes (Barlow Jonker, 2007). A prospecting programme is currently under way to prove up more resources, using revenues from the competitive tendering of mining rights."(IEA WEO 2007, page 334)

The reference to Barlow Jonker in the piece above quoting 192 billion tonnes, as a potential figure for proven reserves, is the only piece of information that the IEA gives to support their Chinese coal outlook. Barlow Jonker is a daughter company of Wood Mackenzie. The report the IEA refers to is Barlow Jonker's China Coal Fourth Edition report from 2007 which is available at an unknown price (probably more than $10,000 dollars) through Wood Mackenzie's China coal market service.

From Barlow Jonker's statement of capability we learn the following about this report:

"Barlow Jonker’s ‘China Coal 4th Edition 2007’ is the most complete review of China’s coal industry available on the market. The 3 Volume Study covers China’s coal geology, coal production, transport, consumption and trade. Containing over 500 pages of information and 60 maps it is THE essential reference guide to all involved in and impacted by China’s 2.3 billion tonne coal market.

Vol I ‘Industry Overview’ provides over 250 pages of information on China’s entire coal chain from detailed reviews of each province’s coal geology, to government policy, coal transport, consumption, and trade. It contains Barlow Jonker’s own expert opinion and analysis of a range of drivers shaping the industry and forward outlooks.

Vol II ‘Key Producers’ has been expanded and contains detailed mine data sheets (including cost estimates) on 66 of China’s largest coal producing companies that collectively control over 500 mines together producing over 1,000Mtpa. Also included are data on 230 new coalmine projects with combined new production capacity of over 800Mt. The level of detail, presentation, and analysis of this data exists nowhere else.

Vol III ‘Coastal Consumers’ is a new addition to the Study examining coal demand in China’s coastal provinces – the key region impacting on the international seaborne market. It contains data and analysis of each province’s coal demand, including power stations and coke producers. It is essential information for exporters to China, as well as all those impacted by China’s involvement in the international seaborne market." (Barlow Jonker 2007)

The report sounds like a worthwhile piece of information, but it is inaccessible due to high costs. Since we cannot read the report, no judgment can be made regarding the validity of the 192 billion tonnes coal reserves figure. However, what is possible is modeling Chinese coal production with a figure of 192 billion tonnes. Even better, to make my life easier, there already is a study in which Chinese coal production is modeled using a similar coal reserve figure. This analysis has been conducted by Tao and Li (2007) from China Northeastern University. In this study a coal reserve figure of 186.6 billion tonnes is taken that comes from the Chinese Ministry of Land and Natural Resources as of 2002. This figure is inserted in a bell shaped production formula after Laherrere (2000) by means of Stella modeling software. Their results show that Chinese production will begin to plateau around 2025, and the eventual decline sets in around 2035 (green curve in Figure 3 below).

A similar study to that of Tao and Li, based on much lower reserves, has been conducted by the Energy Watch Group (2007). This study concludes that China could reach a plateau in coal production already around 2015, if reserve figures are lower then WEC suggests (blue curve in figure 3 below). The EWG uses a coal reserve figure for China of 95.5 billion tonnes, which is the result of subtracting production since 1992*** from the WEC reserve figure.

The International Energy Agency reference scenario for Chinese coal production almost exactly matches the Tao and Li (2007) scenario until 2025. After that, the two forecasts diverge, with the IEA expecting continued increasing coal production in China until 2030 (purple curve in figure 3 below), while Tau and Li forecast a Chinese coal production plateau.
Figure 3 - Chinese coal production scenarios after Energy Watch Group (2007), Tao and Li (2007), and IEA WEO (2008).

The difference between the scenarios caused by doubling the reserve estimate is striking. If the Energy Watch Group scenario plays out, the world will be in significant additional trouble soon (on top of the current problems), since it is unlikely that China's growth boom can continue when Chinese coal production plateaus at the beginning of the next century. There are no energy sources that can grow quickly enough to substitute for China's appetite for more energy in such a short period of time, including the import of more coal. (I will come back to this in the third part of this series.) On the other hand, if Tao and Li's scenario plays out, there probably still is sufficient time for China to prepare for substitution of coal by other energy sources around 2030. In any case, the IEA scenario appears to be unfounded even if we look at a very optimistic coal reserve figure for China.

One of the first issues that needs to be sorted out to get a better grasp at future coal production is the actual state of Chinese coal reserves. As I was writing this post, I investigated whether there are other sources of data for Chinese coal reserves outside of the public domain that are not as expensive as Barlow Jonker's coal assessments. The only source that I found was China Coal Resource. This company gathers coal data based on an extensive resource/reserves classification assessment including grade quality, production location, and coal seam depth and thickness. The details could be found earlier here, but this section has been put into the subscriber part as of last week unfortunately. Subscriptions for one year to this data cost $700, which is a very affordable price. Furthermore I am informed by the company after inquiring that the reserves data has just been updated to reflect the latest data as of September of this year. All in all it looks like quite a promising source of data that could shed a great deal of light on China's coal production, and with China the entire world.

Conclusions

In this post I analyzed the likelihood that the IEA WEO 2008 reference scenario for coal production can happen from a coal reserves perspective. My conclusions are that if we look at a global level and take the coal reserve data at face value, the data is supportive of the global IEA reference scenario for coal production to 2030 which shows on average coal production growth of 2% per year between 2006 and 2030. Beyond this scenario, further growth of coal production into the 2nd half of the 21st century is unlikely to happen without a significant increase in reserves.

However, inasmuch as 41% of coal production is now located in China, looking at whether coal production can match up with global reserves no longer makes sense. When looking at Chinese reserve data, it is not likely that the IEA reference scenario for Chinese coal production can occur, because the coal is simply not there based on current reserve figures. Only in a highly optimistic case, assuming China's coal reserves are more then double those currently known, will China be able to produce the amount of coal that the IEA expects in their scenario. Based on the available coal reserve data and scenarios (EWG 2007; Tao and Li 2007), it is quite likely that China will reach a plateau in coal production somewhere between 2015 and 2025. The implications of this are significant because it will be extremely difficult, if not impossible, to substitute other energy sources for coal in the quantities needed to maintain China's growth in consumption.

In order to be able to better assess the likelihood of a Chinese coal production plateau occurring and to study the effects of this on coal production on a global scale, better data and analysis of coal reserves in general, and for China specifically, is a necessity.

References

Barlow Jonker 2007, Statement of Capability, Barlow Jonker, Sydney
EWG 2007, Coal: resources and future production, Energy Watch Group, Ottobrun
IEA WEO 2007, World Energy Outlook 2007, IEA Publications, Paris, ISBN 978 92 64 02730-5
IEA WEO 2008, World Energy Outlook 2008, IEA Publications, Paris, ISBN 978 92 64 04560-6
Kavalov 2007, Coal of the future: supply prospects for thermal coal by 2030-2050, JRC Institute for Energy, Luxembourg, ISSN 1018-5593
Laherrere 2000, The Hubbert curve: its strengths and weaknesses, Oil and Gas Journal
Messing 1988, Geschiedenis van de mijnsluiting van Limburg, Martinus Nijhoff, Leiden, ISBN 90 6890 213
Tao and Li 2007, What is the limit of Chinese coal supplies - a stella model of Hubbert Peak, Energy Policy 35, pages 3145-3154
WEC 2001, 2001 Survey of Energy Resources, 19th edition, World Energy Council, London
WEC 2004, 2004 Survey of Energy Resources, 20th edition, World Energy Council, London
WEC 2007, 2007 Survey of Energy Resources, 21st edition, World Energy Council, London

Notes

*In the BP Statistical Review of World Energy 2008 it is stated that the coal reserve data shows proved reserves at end 2007. This is incorrect as the data is until end of 2005, as stated in the original source of the data, the Survey of Energy Resources 2007 by the World Energy Council.

**While the IEA states that the drop in the reserves to production ratio from 188 years in 2002 to 144 years in 2005 is solely due to demand, this is not the case. Coal reserves dropped from 909 billion tonnes in 2002 to 847 billion tonnes in 2005 (WEC 2007; WEC 2004), a difference of 62 billion tonnes. In the same time period 16.6 billion tonnes of coal have been produced (BP 2008). If coal reserves would not have been revised downwards due to other factors than the amount of coal produced, then reserves would have been 892 billion tonnes instead of 847, and the R/P ratio in 2005 would have been 151 instead of 144 years.

***The Energy Watch Group subtracts Chinese production since 1992 from the WEC coal reserve figure for China, as this was the year in which the last Survey of Energy Resources by the WEC was published that contained new data on Chinese coal reserves. However, WEC normally publishes in their report data that is two years old (the 2007 report showed end 2005 data, the 2004 report end 2002 data etc.). I think it is likely that the 1992 report published end 1990 data. Since I have not been able to find the 1992 report I cannot confirm that this is the case. The Energy Watch Group has assumed that the 1992 report published 1992 data.

The Peak Oil Crisis: July 2008 – A Month To Remember Most students of the subject at first thought that world oil production was going to peak for geological reasons --- the inability to find and produce enough oil to keep our annual consumption of 30 billion barrels increasing. In recent years, "above ground" factors such as wars, nationalistic governments, and failure to invest have become the popular reasons for constraints on increasing world oil production among those who for one reason or another do not like the geologic (running out of reserves) argument.

While all these factors are contributing to the likelihood that from here on out less and less oil will be produced, it seems that the initial decline in production will come because the world economic situation has deteriorated so much that we simply don't need 87.9 million barrels a day (b/d) of oil anymore. [break]

Oil Falls Below $44, Lowest Since January 2005, as Demand Drops (Bloomberg) -- Crude oil fell below $44 a barrel to the lowest since January 2005 and gasoline futures dropped below $1 a gallon as the recession in the U.S., Europe and Japan cuts fuel consumption.

Prices may dip below $25 a barrel next year if the contraction spreads to China, Merrill Lynch & Co. said in a report today. U.S. fuel demand during the four weeks ended Nov. 28 was down 6.2 percent from a year earlier, an Energy Department report showed yesterday.

“We’ve got the U.S, U.K., Europe and Japan all in recession for the first time since World War II, and the oil market is reacting,” said Chip Hodge, a managing director at MFC Global Investment Management in Boston, who oversees a $5 billion energy-company bond portfolio.

Oil crunch warning from Solarcentury The premature peak of oil will result in the world’s third largest crisis ever, according to Jeremy Leggett from energy company Solarcentury. He took delegates at the Soil Association conference this month through the recently published Peak Oil Taskforce report entitled ‘The Oil Crunch: Securing the UK’s energy future’.

“This outlines the kind of things that can be done if you take a proactive approach,” said Leggett. “The drop in oil production will contribute to the crisis, but will not be the only variable. The oil industry is following the same cultural failing as the financial sector has.

Energy Investing: Scenarios for a Turnaround What changed is the near-onset of peak oil and the related fact that when oil demand from developing economies ratcheted up, production could not be expanded as rapidly. So for a while in 2007 and 2008 oil demand ran ahead of available supply, a market condition that required a super-high price of oil in order to “destroy” some of the demand. During that time we saw the oil price behave not as a function of the marginal cost of production but as a function of the marginal requirement for reducing demand.

Let the Good Times Roll Obviously, the collapse of fuel prices means an end to all the nonsense about "peak oil" and the need to develop a so-called "green economy" for the future, right? Oil will now be cheap and plentiful until — according to ExxonMobil and the American Petroleum Institute — the end of time. And we no longer have to worry at all about the environment.

Iraq rescinds Kurdish oil export deal BAGHDAD (UPI) -- Iraqi Oil Ministry officials said Thursday an agreement to allow Kurds to export oil was rescinded due to disagreements over royalties and future contracts.

The agreement between Oil Minister Hussain al-Shahristani and Kurdish Region Prime Minister Nejervan Barzani fell apart on Kurdish demands to write future oil deals and over the collection of royalties, Azzaman News reported.

Reports of Gazprom cancelling power sales disputed MOSCOW (Reuters) - Media reports on Thursday claimed Russia's Gazprom was set to cancel share sales of its electricity companies, though a source in the firm told Reuters no firm decision has yet been taken.

Nippon Oil to merge with Nippon Mining Nippon Oil Corp., the nation's largest oil distributor, and Nippon Mining Holdings Inc. will merge their operations next year to become the world's eighth-largest oil company, the firms announced Thursday.

Obama Drops Big Oil Tax as Prices Plunge The plan was for a windfall-profits tax on oil over $80 a barrel. But even though oil is under $50 now, some are upset that the issue is being dropped.

Small Players Vie for ‘Green Car’ Loans Tesla Motors, a privately held company in San Carlos, Calif., has applied for $400 million in two loans. One would be used to develop an advanced battery and power train for the company’s electric car — currently Tesla makes an electric roadster with a $109,000 price tag. The other loan would be to develop a lower-priced midsize sedan, the “Model S,” using the same technology.

Another application has come from XP Vehicles, based in San Francisco, which is seeking $40 million to develop two electric cars, a two-seat runabout and a four-seat mini utility vehicle.

David Strahan: Pipe dreams You can imagine the internal contortions when an old friend was once memorably described as a 60s liberal with Catholic guilt. I got the same impression of grinding gears while reading the International Energy Agency's latest long-term forecast, the World Energy Outlook 2008, published last month. In many respects, the IEA's analysis of threats to the oil supply is bloodcurdling, and yet the agency maintains that global production can keep rising for at least two decades. The rich nations' energy watchdog is clearly alarmed, but seems afraid of its own bark.

The IEA's annual forecast has become steadily darker in recent years, but this time the deterioration in its outlook is dramatic. Only a year ago, the agency was predicting that global oil production in 2030 would reach 116m barrels per day, up from around 84mb/d, but now it has slashed that to 106mb/d.

US Stripper Wells More Important than OPEC? US stripper wells will be the key to determining oil prices over the next couple of years rather than OPEC. Bernstein analysts Ben Dell and Neil McMahon made that argument in a presentation today. “It is quite interesting that OPEC is turning into a largely irrelevant organization,” McMahon said. From what we have seen of late he certainly has a point. OPEC has met three times this fall and is scheduled to confab once again on Dec. 17 in Algeria. It has announced 2 million barrels per day in cuts. Yet the price has now fallen more than 60% to the dreaded mid-$40s per barrel.

Instead, McMahon says the serious, market-impacting production cuts of the next couple of years are likely to come in North America, and especially from small stripper wells that produce only 15 barrels per day or so. Those amount to a hefty 85% of U.S. onshore wells and account for about 18% of such production. These wells require care and feeding and are the easiest to shut down when prices fall. Bernstein figures that as much as 1.3 million barrels per day could eventually come off the market.

Oil May Fall Below $25 Next Year, Merrill Lynch Says (Bloomberg) -- Crude oil may dip below $25 a barrel next year if the recession that’s slashing fuel demand around the world spreads to China, Merrill Lynch & Co. said.

Global oil demand will contract in 2009 as economic growth slows to its weakest since 1982, Merrill Commodity Strategist Francisco Blanch said in a report today. In October, when oil was around $100 a barrel, the bank predicted that prices may slide to $50. Crude traded at $45.30 in New York today, the lowest since February 2005.

“A temporary drop below $25 a barrel is possible if the global recession extends to China and significant non-OPEC cuts are required,” Blanch said. “In the short-run, global oil demand growth will likely take a further beating as banks continue to cut credit to consumers and corporations.”

Energy Department, change is coming: DOE is expected to get shaken up under Obama's administration, playing a central role in its plans to move the economy to a greener future. NEW YORK (CNNMoney.com) -- President-elect Barack Obama's pick for energy secretary will likely lead the department through a new era with a sharp focus on renewable energy, but who'll lead a revamped agency is far from clear.

Despite what some may think, the current Department of Energy isn't really about wind or solar power. It's not even about coal, oil or gas. Mainly, the agency is about nuclear - nuclear weapons to be exact.

Norway Bumps Up '09 O&G Investment View to $20.34B Norway's statistics agency raised on Thursday its forecast for 2009 investment in the country's oil and gas sector by 9.6 percent to a record-high 145.5 billion crowns ($20.34 billion) but trimmed its 2008 estimate slightly.

The 2009 estimate for investment in the sector, which contributes a quarter of Norway's GDP, is up from a forecast of 132.8 billion given in September.

"The increase is mainly due to higher estimates (for investment) in fields on stream," Statistics Norway said in a statement.

Financial crisis a distraction, says Nobel winner LONDON (AFP) — The global financial crisis is distracting attention from other pressing issues such as high food and energy prices, and environmental damage, Nobel peace laureate Muhammad Yunus told AFP Wednesday.

The Bangladeshi economist warned that not addressing those other issues would lead to a "much bigger crisis ahead" that would have political and financial implications.

Richard Heinberg: Economists Without a Clue Prepare to observe the spectacle of the two great economic paradigms of the twentieth century crashing to the ground, locked in mortal combat.

John Michael Greer: Taking Evolution Seriously Back in 1904, sociologist Max Weber proposed that the modern period was witnessing “the disenchantment of the world” – a process which traditional mythic ideas that wove meaning into human experience were being replaced by the alienating and dehumanizing worldview of materialist science. There’s some truth to Weber’s thesis, but I’m not sure he anticipated the inevitable backlash: the Procrustean stretching and lopping of scientific ideas in the popular imagination that has turned many of them into substitute myths.

West Australia Gas Users Say Outage Report Backs Supply Concern (Bloomberg) -- An Australian Senate committee report on Apache Corp.'s gas plant shutdown off Western Australia underlines the need for greater security of supply and competition, a group of gas users in the state said.

The report on the Varanus Island outage from the Senate economics committee shows the need to diversify the state's supply beyond the North West Shelf by developing smaller fields near the state capital of Perth, Stuart Hohnen, chairman of the DomGas Alliance, said today in an e-mailed statement.

Forget about renewable energy in Israel, Infrastructure Ministry says We can forget about renewable energy in Israel, according to National Infrastructure Ministry Director General Hezi Kugler.

...At this stage, renewable energy is a luxury: the stimulous plan seeks effective programs that can generate positive income, not consume subsidies, Kugler explained.

Roadmap for a Changed Landscape: Consolidation and Integration in Solar PV The financial storm the world is going through might turn out to be positive for solar power. By speeding up consolidation, the current crisis could end the current fragmentation and facilitate the emergence of industry behemoths, with a game-changing ability to deliver massive economies of scale.

That, in turn, would shift the industry towards grid parity — the point at which the cost of renewable power is equal to that of traditional fossil fuel energy — starting with the most favorable regions. Through a domino effect on installed system prices in adjacent regions, this may engender a real "big bang" for solar energy that could quickly snowball its way to dominance of the electricity generation market.

Rich, poor in dispute over rainforest cash POZNAN, Poland (Reuters) - Brazil ruled out on Thursday letting rich countries offset their greenhouse gas emissions by helping to save the Amazon rain forest, an idea under active discussion by the European Union.

Indigenous peoples attending United Nations-led climate talks in Poznan protested that they had no chance of seeing such carbon cash, and appealed instead for money first to root out corruption and cement their land rights.

Point of No Return for the Arctic Climate? Temperatures in the Arctic are rising much faster than elsewhere in the world. Researchers now say it may be the result of a dramatic shift in global climate patterns. If they are right, ice at the North Pole may soon be a thing of the past.

ANALYSIS - Ambitious projects drive Saudi $75 oil policy RIYADH (Reuters) - Saudi Arabia's newly declared $75 a barrel target price for oil aims to ensure crude export revenues can fund ambitious development plans in the kingdom.

Saudi King Abdullah on Saturday said that $75 was a fair price for oil, the first time in years that the world's top oil exporter has named its price. The 85-year-old leader is determined to avoid periods of fiscal irresponsibility that have marred the rule of previous Saudi monarchs, analysts say.

"King Abdullah is thrifty. He hates borrowing," said one source who has spent more than 20 years working at the kingdom's central bank, the Saudi Arabian Monetary Agency (SAMA).

Oil hits near 4-year low on weak economic news VIENNA, Austria – Oil prices sank Thursday to lows last seen nearly four years ago as more bleak news from the world's largest economy boosted views that crude could tumble below $40 by the end of the year.

After sinking more than $1 earlier in the day to approach levels traded at in February 2005, light sweet crude was trading at $46.10, down 69 cents in electronic trading on the New York Mercantile Exchange by noon in Europe. The contract fell 17 cents overnight to settle at $46.79.

"You could see prices testing $40 by the end of the year because the economic data is really ugly at the moment," said Christoffer Moltke-Leth, head of sales trading at Saxo Capital Markets in Singapore. "Demand destruction is still very much the concern."

Missouri customers revel in falling gas prices Regular at Casey's General Store in Kansas City was $1.39 Wednesday. In June: $3.89.

"A lot of people seem happier, more stress-free," manager Mandy Krebs says. "But they're on edge."

Some customers top off the tank three times a week. "They believe it's a hoax," she says, "that we're going to wake up one morning and it's going to be up to $4 again."

Mexico: The Next Disaster - Narco violence is exploding - just as oil prices are plunging and Mexico is bracing for a deep U.S. recession. Is Mexico descending into criminal and economic chaos? "Failed state? That is a very irresponsible remark," bristles Arturo Sarukhan, Mexico's ambassador to the U.S. "The challenge of corruption is being taken on. We are rooting out people who have been infiltrated. Look at the role of the Mexican private sector and civil society. Nowhere can you see signs of anything akin to a failed state."

But there is urgent concern north of the border about a potential strategic threat. "We're fixated on Iraq and Afghanistan, but from a homeland security perspective, right here on our border, isn't this more important?" asks Fred Burton, a former State Department counterterrorism official, now a vice president at Stratfor in Austin, Tex.

SK Energy may scrap Kurdish deals, eyes Iraqi oil BAGHDAD (Reuters) - Iraq's Oil Ministry said on Thursday South Korean refiner SK Energy had "expressed its willingness" to cancel contracts with the Kurdish Regional Government.

Chile Has First Month of Deflation Since 2007 on Fuel (Bloomberg) -- Chile had its first month of deflation in November since February 2007 as fuel costs plunged.

The country’s consumer prices fell 0.1 percent last month, compared to a 0.9 percent rise in October, the National Statistics Institute said in a report released in Santiago today. Prices fell less than the median estimate of a 0.3 percent decline forecast by 19 economists in a Bloomberg survey.

Schlumberger warns on 2008 profit, shares lower HOUSTON/SAN FRANCISCO (Reuters) - Oilfield services leader Schlumberger Ltd said on Wednesday its 2008 profit would fall short of Wall Street estimates as the global economic slowdown hits spending on oil and gas exploration.

Russia will cut gas supply if Ukraine does not pay: Putin MOSCOW (AFP) – Prime Minister Vladimir Putin warned Thursday that Russia would cut natural gas supplies that transit through Ukraine to Europe if Kiev does not pay its bills or siphons gas meant for other customers.

"If our partners do not fulfil their agreements, we will reduce deliveries," Putin said in a televised question-and-answer session with Russian citizens, referring to Ukraine.

Cyprus complains to UN over oil dispute with Turkey NICOSIA (Xinhua) -- Cyprus has complained to the United Nations over its oil dispute with Turkey, accusing Ankara of harassing oil exploration vessels within its exclusive economic zone, the semi-official Cyprus News Agency reported on Wednesday.

In a letter to U.N. Secretary-General Ban Ki-moon in late November, President Demetris Christofias cited at least three more" serious incidents taking place involving the harassment of research vessels by Turkish warships in the exclusive economic zone of the Republic of Cyprus."

One killed in attack on ExxonMobil in Nigeria: company LAGOS (AFP) – Mobil Producing Nigeria (MPN) -- a subsidiary of US oil group ExxonMobil -- said on Thursday that one person was killed during an attack on one of its convoys in the southern Nigerian state of Akwa Ibom.

Unknown gunmen attacked the convoy on the road between the town of Eket and the Qua Iboe oil export terminal Wednesday, the company said in a statement.

Addax Says Vessel Attacked Near Nigerian Oil Facility (Bloomberg) -- Addax Petroleum Corp., the Swiss oil producer focusing on Africa and the Middle East, said a vessel was attacked near one of its crude oil facilities in Nigeria.

The vessel, the Oceanic Orion, was attacked near the Addax- operated Adanga crude oil flow station, Geneva-based spokeswoman Marie-Gabrielle Cajoly said in an e-mailed statement today. “There have been no casualties and no impact on production,” she said. She was unable to give further details.

EU to push for Caspian gas line ASHGABAT, Turkmenistan (AP) — The European Union will push harder for a pipeline to carry natural gas from the Caspian Sea region to Europe while bypassing Russia, a senior EU diplomat said Wednesday.

Russia's war with Georgia underscores the need to step up preparations for the prospective Nabucco pipeline, EU special representative Pierre Morel said after meeting with the leader of gas-rich Turkmenistan, President Gurbanguli Berdymukhamedov.

Iran's reformists say president squandered oil cash TEHERAN - Iran's main reformist party accused President Mahmoud Ahmadinejad on Thursday of squandering windfall oil earnings and driving up inflation, part of its campaign to oust the leader at an election next year.

Most Iranians complain about high inflation, at over 29 percent, and rising unemployment. Analysts say the economy will be the main focus of the June 2009 election when Ahmadinejad is expected to run for another four-year term.

Shell Says Fire Breaks Out at Pernis Refinery (Bloomberg) -- A large fire broke out today at the gasoline-making catalytic cracker at Royal Dutch Shell Plc’s Pernis refinery in the Netherlands, the Rotterdam fire department said.

...A Shell spokesman in The Hague, who didn’t want to be identified by name, declined to comment. The refinery is Europe’s largest, with a capacity of 416,000 barrels a day. The refinery’s catalytic crackers can process 50,000 barrels of gasoline a day, according to data compiled by Bloomberg.

China May Start Fuel Tax, Change Pricing in January (Bloomberg) -- China, the world's second-biggest energy consumer, may implement a retail fuel tax and changes to oil pricing as early as January, said the deputy head of the nation's economic planner.

Russia-Vietnam joint oil venture cuts output 12% in 2008 MOSCOW (RIA Novosti) - Total crude output in 2008 by the Russian-Vietnamese joint oil venture Vietsovpetro will reach 7.7 million metric tons (56 million barrels), a drop of 11.5%, year-on-year, the Russian partner said on Thursday.

Rosneft Says Fourth Quarter Will Be ‘Difficult’ (Bloomberg) -- OAO Rosneft, Russia’s biggest oil producer, said the fourth quarter will be “difficult” because revenues will be reduced by lower oil prices and a high crude export duty.

Russia delays gas flaring target to 2014 MOSCOW (Reuters) - Russia has delayed its plan to reduce gas flaring to 5 percent by three years to 2014, Russia's Natural Resources Minister Yuri Trutnev said on Thursday.

Feds halt plan to drill in scenic Utah canyons SALT LAKE CITY - A section of whitewater rapids tucked between high cliffs, little-changed since explorer John Wesley Powell boated through in 1896, and a canyon decorated with thousands of ancient rock art panels have been pulled off the auction block by the U.S. Bureau of Land Management (BLM).

For the second time in a week, the bureau announced late Tuesday that it was pulling auction parcels from an expanded oil-and-gas leasing program in Utah. The latest tracts include land inside Nine Mile Canyon and Desolation Canyon on the Green River.

Obama's First Policy Retreat? Did Barack Obama just break his first campaign promise?

On the campaign trail, Obama railed against big oil companies. He often criticized John McCain for backing tax cuts that would reward ExxonMobil and other top oil manufacturers. But now Obama's proposal to apply a windfall tax on big oil has vanished... at least from his transition website. The President-elect's transition team hasn't explicitly announced it will drop the windfall tax plan, but a transition aide, commenting on the condition he not be identified, backed off the promise in an email. "President-elect Obama announced the [windfall profits tax] policy during the campaign because oil prices were above $80 per barrel," he said. "They are currently below that now and expected to stay below that."

Australia: Greens want limits imposed on infrastructure fund The Greens will not back the Rudd Government’s Building Australia Fund unless it rejects roads and coal ports, focuses more on climate change and adopts greater transparency.

Greens spokeswoman on transport and climate change Christine Milne wants the fund—which will be used to finance port, road, rail and communications projects—to be overseen by a parliamentary committee.

A vital part of the fabric of our lives I've been hearing predictions of peak oil -- the point at which world oil production reaches its maximum and begins to decline -- since I was a junior at Cleveland High School back in 1970. And I've heard the people who hate cars, whether for environmental or social reasons, use the concept as the reason to not only radically reform the way we get around, but also the way we shop, work and live. Most of Metro's 2040 plan is based on density development on transit routes where people no longer use or need cars.

Unfortunately, just like a group of cultists sitting on a hilltop awaiting the fulfillment of their end of the world prophecy, the date for peak oil keeps getting pushed further into the future. I'm sure the world's oil will run out eventually, but I don't think it will be anytime soon. When it does, the automakers will be ready.

Expert view: Difficult decisions over future energy CONCERNS over global warming and the realisation that oil will not last forever has focussed increasing attention on our over reliance on fossil fuels.

Although there are many potential alternatives to fossil fuels, there are none sufficiently developed to provide a credible alternative in the foreseeable future.

The reality is that, although we are very good at distributing energy and making sure the petrol stations have sufficient supply, there is little sign that as a nation we have, or ever have had, a practical energy strategy.

New turnpike partnership could give Bay State cash BOSTON -- A public-private partnership could make the operation of the Massachusetts Turnpike Authority more efficient, a transportation expert said Wednesday as government officials discussed alternatives to a proposed doubling of Boston-area bridge and tunnel fees.

Solar a Bust in Spain Call it irrational exuberance or greed. Companies that couldn't get enough solar panels to build power plants in Spain earlier this year are now trying to sell megawatts worth of panels at a deep discount.

Second biggest off shore wind farm in the world to be built off UK One of the biggest offshore wind farms in the world is to be built eight miles of the North Wales coast, despite local protests.

As sales plummet, Nice electric car company goes under Electric car sales have more than halved this year. Just 156 were sold from January to October 2008, compared to 374 for the same period in 2007, down 58%.

The figures come as one of London's two electric car distributors, Nice Car Company, was put into administration.

Set up in 2006 by ex-Lotus colleagues Julian Wilford and Evert Geurtsen, Nice had been selling an all-electric version of the French-made Aixam Mega. It had also planned to expand its range by the end of the year, selling a Chinese-made two-seater called MyCar and five-seat MPV called the Ze-O.

However, administrators were called in last week following a torrid year in which sales fell to fewer than one car a week.

Going Green, which distributes the best selling G-Wiz, is also suffering significantly reduced sales. Volumes are well down on 2007 despite a revised model with improved performance and better range.

Why Algae Will Save Us from the Energy Crisis Forget wind power or solar power or all the other promising but frustratingly incremental solutions to America's energy crisis. The answer, instead, could be algae. It's plentiful and, like corn and soybeans, can be processed into oil and gas to power our facto-ries, cars, and airplanes. But unlike ethanol, oil made from algae won't compete with the food supply. And because algae can grow off a power plant's carbon emissions and greenhouse gases, it can help solve, rather than exacerbate, global warm-ing. According to some estimates, by dedicating just 2 per-cent of its land mass to algae production, America could meet all of its energy needs.

The U. S. government abandoned its algae-as-fuel research program in 1996 because it didn't think it could ever get the price competitive with petroleum oil. But with oil prices now far higher and global warming an ever-increasing concern, interest in algae oil is back, and tens of millions of dollars of venture capital has followed. There are dozens of different approaches, but the end goal is the same: to find a production method that will fuel America -- and the twenty-first century.

Replacing Corn With Perennial Grasses Improves Carbon Footprint Of Biofuels ScienceDaily — Converting forests or fields to biofuel crops can increase or decrease greenhouse gas emissions, depending on where – and which – biofuel crops are used, University of Illinois researchers report.

Capturing the ocean's energy Despite daunting challenges, technology to harness the power of the waves and tides is now being deployed around the world – from Portugal to South Korea to New York's East River. These projects, just beginning to produce electricity, are on the cutting edge of renewable energy's latest frontier: hydrodynamic power.

How Fishy Technology Could Power the Future Think like a fish not like a bird, say researchers trying to harvest energy from water currents. Their new fish-inspired power generator can work in slow-moving currents where traditional turbines are less effective.

Tidal streams and moving rivers in the United States could generate 140 billion kilowatt-hours per year, or about 3.5 percent of the nation's electricity demand, according to the Electric Power Research Institute (EPRI).

Solar car completes 1st ever round-the-world trip POZNAN, Poland – The first solar-powered car to travel around the world ended its journey at the U.N. climate talks Thursday, arriving with the message that clean technologies are available now to stop global warming.

Australia's white possum could be first victim of climate change The nocturnal animal, which is native to the Daintree rainforest in Tropical North Queensland where it lives off moisture in the trees, has not been sighted for three years despite extensive searches.

Russia to Stockpile $58 Billion of Kyoto CO2 Credits (Bloomberg) -- Russia will stockpile an estimated $58 billion in carbon-emissions credits it’s accumulating by performing better than required under the Kyoto global-warming treaty to reduce greenhouse gases.

Victor Blinov, deputy chief of Russia’s delegation to United Nations climate talks in Poland, said in an interview that credits not needed to comply with the Kyoto Protocol will be used instead for a successor treaty that’s being negotiated to take effect after 2012. None will be sold to other nations, Blinov said.

From hoof to dinner table, a new bid to cut emissions STERKSEL, the Netherlands: The cows and pigs dotting these flat green plains in the southern Netherlands create a bucolic landscape. But looked at through the lens of greenhouse gas accounting, they are living smokestacks, spewing methane emissions into the air.

That is why a group of farmers-turned-environmentalists here at a smelly but impeccably clean research farm have a new take on making a silk purse from a sow's ear: They cook manure from their 3,000 pigs to capture the methane trapped within it, and then use the gas to make electricity for the local power grid.

Greenhouse gas emissions increase in US WASHINGTON – The amount of U.S. greenhouse gases flowing into the atmosphere, mainly carbon dioxide from burning fossil fuels, increased last year by 1.4 percent after a decline in 2006, the Energy Department reported Wednesday.

The report said carbon dioxide, the leading pollution linked to global warming, rose by 1.3 percent in 2007 as people used more coal, oil and natural gas because of a colder winter and more electricity during a warmer summer. Half of the country's electricity is generated by coal-burning power plants.

A shortage of hydropower also contributed to an increase in the demand for fossil fuels, said the department's Energy Information Administration.

As I read through the 2008 International Energy Agency (IEA) World Energy Outlook, I had the distinct impression that I was reading contributions from people with completely opposite points of view. The pessimist warned that we are facing a supply crunch and much higher prices. The optimist in the report said that oil production won't peak before 2030.

This trend held in the section on renewable energy. The optimist noted that renewable energy is expected to "expand rapidly." The pessimist noted that biofuels are predicted to only supply 5% of our road transport fuel in 2030. And so the report goes, part rampant optimism and part rampant pessimism.

I guess the good news then is that there is something in there that will appeal to everyone, regardless of your outlook. The bad news? The claims that are directly opposed to your views will have you questioning the credibility of the report. And if you are like me--and note that between last year's report and this year's report they dropped their 2030 oil demand forecast by 10 million bpd--you are left wondering whether there is any credibility at all in forecasts that far out. [break]

But for what's worth, here's what the IEA had to say about renewable energy.

Report Highlights

World energy demand is forecast to grow from 11,730 Mtoe (million metric tons of oil equivalents) in 2006 to 17,010 Mtoe in 2030. Fossil fuels, with oil as the primary source, will account for 80% of energy used in 2030.

China and India will be responsible for over half of the increased energy demand between now and 2030. Global demand for oil (excluding biofuels) is forecast to rise from 85 million bpd in 2007 to 106 million bpd in 2030. This forecast was revised downward by 10 million bpd since last year’s forecast.

World demand for electricity is forecast to rise from 15,665 TWh in 2006 to 28,141 TWh in 2030. Renewable energy will displace gas to become the second largest producer of electrical energy by 2015, but will still lag far behind coal. For OECD countries, the increase in renewable electricity is greater than the increase in electricity from fossil fuels and nuclear. The share of nuclear power in the world energy mix falls from 6% in 2008 to 5% in 2030.

Electricity generation from PV and CSP in 2030 is forecast to be 245 TWh and 107 TWh, respectively. Solar PV will continue to have the highest investment cost of all commercially deployed renewable energy sources.

Geothermal and wave technologies are forecast to produce 180 TWh and 14 TWh of electricity in 2030. Over 860 TWh of electricity from biomass is forecast to be produced in 2030. Present conversion of biomass to electricity is at 20% efficiency.

Global output of wind power is forecast to grow from 130 TWh in 2006 to more than 660 TWh in 2015 to 1,490 TWh in 2030. It will become the 2nd largest source of renewable electricity (after hydropower) by 2010. Potential for hydropower in non-OECD countries is still large. Most good sites in OECD countries have been utilized.

Energy storage is rarely the cheapest way of dealing with variability of wind and solar power, but several next generation storage technologies are under development. These include ultracapacitors, superconducting magnetic systems, and vanadium redox batteries. Electrolysis to produce hydrogen, later used in fuel cells on demand is an option, but the overall efficiency is only 40%.

Carbon dioxide emissions from coal combustion are forecast to rise from 11.7 billion metric tons in 2006 to 18.6 billion metric tons in 2030. The ability of carbon sequestration to limit carbon dioxide emissions by 2030 is limited.

The reference scenario presumes that by 2030, the U.S. will only meet 40% of the biofuel mandate set in 2007. In Brazil, biofuels are projected to account for 28% of road-transport fuel demand by 2030. The present amount supplied is equivalent to 13% of road-transport fuel demand. Demand for biodiesel is expected to grow faster than demand for ethanol.

Biofuels in 2006 provided the equivalent of 0.6 million bpd, representing around 1.5% of global road transport fuel demand. The United States is the largest user of biofuels, and most of the recent growth has been in the U.S.

The share of biofuels in road transport fuels is forecast to grow from 1.5% in 2006 to 5% (3.2 million bpd) in 2030. Second generation biofuels based on lignocellulosic biomass, converted via enzyme hydrolysis or biomass gasification (BTL) are expected to become commercially viable. However, the contribution will be minor, and not until after 2020. Capital costs for cellulosic ethanol are "significantly more" than sugarcane or grain-based facilities. As a result, full commercialization hinges on "major cost reductions."

The United States and Brazil both export soybean biodiesel to the EU. (The fact that the U.S. exports any biodiesel is very surprising to me, given the high demand/prices for diesel in the U.S.) Some countries are beginning to scale back their biofuel policies due to concerns about environmental sustainability. Shortages of water availability will be a potential constraint for further expansion of biofuels.

Most biomass will still come from agricultural and forestry residues in 2030, but a growing portion will come from biomass farmed for biofuels. A growing share of biomass is also projected to fuel combined heat and power (CHP) plants.

There is considerable room for growth of solar water heating (water heating consumes 20% of all residential energy consumption). China currently has 60% of the world's installed solar water heating capacity. Solar water and space heating projected to grow from 7.6 Mtoe in 2006 to 45 Mtoe in 2030.

Hybrid vehicles are commercially viable today; electric vehicles have yet to gain traction. Electric vehicle technology is advancing rapidly, but further improvements in storage technology are needed for efficiency and cost improvements. Long term, electric hybrids, fully electric vehicles, and fuel cell vehicles have the most potential for minimizing the need for oil-based fuels. In the very long term--projecting out to 2050--fuel cell vehicles are forecast to make up 33% to 50% of new vehicle sales in the OECD.

Cumulative investment in renewable energy between 2007 and 2030 is projected to be $5.5 trillion, with 60% of that for electricity generation.

Commentary

The report reiterates the points I have argued on numerous occasions: Biofuels will not scale up to produce more than a small fraction of our fuel demand, and even then with potentially serious consequences. While the report spreads the blame for higher food prices on a combination of competition with biofuels, higher energy prices, poor harvests, and various agricultural policies, it correctly identifies water as a (highly underrated) issue in the future scaling of biofuels. On the other hand, the report identifies Latin America and Africa as regions with the potential for boosting biomass production by modernizing farming techniques.

I think the report correctly identifies renewable electricity and renewable heating (especially solar water heating) as areas poised for growth. However, it also predicts that carbon dioxide emissions will continue to rise. This was a controversial issue I tackled earlier in the year, when I predicted "we won't collectively do anything that will reduce worldwide greenhouse gas emissions." I don't think emissions are going to start falling substantially until nature does it for us.

The following figure was very interesting to me:

Source: 2008 IEA WEO

This figure suggests that by 2030, the cost for solar PV and CSP will still be higher than all other renewable technologies are today. And not just a little higher: solar PV is predicted to be twice as expensive in 2030 as hydro and onshore wind are today. So much for Moore's Law applying to solar PV.

However the nagging issue for me is the credibility of the predictions. How much stock can I put into the renewable energy predictions from an agency that thinks oil production won't peak until 2030, and that demand will exceed 100 million bpd (contrary to the opinions of two Big Oil executives)?

Conclusions

The renewable energy portion was a tale of two technologies: Renewable electricity and renewable biofuels. Renewable electricity is forecast to grow rapidly, and make up an increasing portion of electricity supplies. The share of nuclear power falls, but coal usage is projected to rise 60% by 2030 (with 90% of that increase in non-OECD countries). The expected increase in coal usage helps explain why greenhouse gas emissions are forecast to continue rising.

Renewable biofuels, by contrast, are forecast to still make a very small contribution to overall road transport fuel by 2030. Cellulosic ethanol will be slow to be commercialized, and the contribution to fuel supplies by 2030 is expected to be small. Concerns about negative externalities will grow, and the impact of biofuel production on water supplies will be hotly debated.