Wednesday, January 11, 2006

Venezuela and Peak Oil

Interesting economic news from Venezuela. From the BBC NEWS: Chavez imposes price controls, which drives coffee from the shelves.

President Hugo Chavez's policy of keeping a tight control on food retail prices while doubling the price of raw coffee beans back in December may have backfired. For at least a week, there has been no roasted coffee available on the shelves of Venezuelan supermarkets as wholesalers and coffee producers have been withholding their coffee from sale.

Reuters is reporting booming car sales in Venezuela on the back of a combination of the lowest fuel prices in the world and record revenues due to high world oil prices.

CARACAS, Venezuela, Jan 10 (Reuters) - Sales of new cars in Venezuela soared 70 percent in 2005 from a year earlier as the economy expanded 9.4 percent and consumer spending grew, the Venezuelan Automobile Chamber said on Tuesday. ... Venezuela, the world's No. 5 oil exporter, is enjoying strong economic growth as it benefits from high world oil prices. Venezuela's state-subsidized domestic fuel prices are among the lowest in the world

Chavez is also providing charity to poor Americans. reports:

Money available to help low-income residents pay their heating bills this winter now exceeds last year’s total – thanks to a special $5 million appropriation by the Legislature last week – and more help is on the way from the president of Venezuela. ... And, the governor’s office confirmed on Tuesday that a deal will be penned this week with Venezuelan President Hugo Chavez to provide Maine with $5.5 million, which is the cash equivalent to discounting 8 million gallons of oil by 40 percent. The deal is being offered through the now Venezuelan-owned Citgo Petroleum Corporation. While some have criticized Chavez’s offer, which he already has extended to Massachusetts and New York City, as an attempt to embarrass Pres. George Bush for not taking care of his own, that won’t stop Maine from accepting the gift.

The apparently Left-wing Red Independence, quoting Al Jazeera says: 

But Chavez's supporters defend the heating oil programme as an example of generosity by a president leading a socialist revolution for the poor. Sappier, the Penobscot tribal chief, said snow was falling in Maine and praised Chavez for his help. "We appreciate him very much as a leader," he said. "It's been said he's one of us. His thinking is like ours."


These can be taken as indicators of the superiority of the socialist system of economics over dog-eat-dog capitalism. Or they can be seen as an economic disaster waiting to overwhelm Venezuela the moment current oil prices begin to decline. But according to leftish Alternet, 2006 may mark the year that world oil supplies begin their irreversible march upward, according to the Peak Oil scenario (also here), in which case Hugo Chavez can keep up his weird economics indefinitely on the back of steadily rising oil prices. But when prices rise sufficiently other sources besides the conventional become profitable to develop. CBC predicts that with prices rising, oil sands will be the energy source of the future.

Alberta's oil sands will become the most important source of new oil in the world by 2010 as conventional crude dries up, CIBC World Markets says in its latest monthly report. ... Jeff Rubin, chief economist at CIBC World Markets, the bank's wholesale banking arm ... added that conventional oil production around the world apparently peaked in 2004. Rubin found that total oil supplies around the world grew by less than one million barrels a day last year. None of that growth came from outside the OPEC sphere. ... 

Rubin looked at 164 upcoming oil fields in his study and found that new oil is, in fact, being discovered and it is coming on stream. But more than half simply balances declining production from existing fields in the North Sea and Kuwait's Burgan region. ... Energy companies are finding new oil, but most of it will come from non-conventional sources. Ocean oil rigs are the primary source of new oil today, with Alberta's oil sands tomorrow, with expansion projects rivaling those of Saudi Arabia.

One of the biggest factors used in calculating the quantity of world oil reserves is price. By changing price levels the world map of oil reserves changes drastically. For example, according to Wikipedia, "Canada's proven oil reserves have been raised from around 5 billion barrels to the much larger figure of around 180 billion barrels to include tar sands, because these deposits are now considered recoverable", and the effect is dramatic. At one price level North America has little more than half the reserves of Central and South America. At a higher price level it has double the amount available in Central and South America.

Country/Region Lowest estimate Highest estimate
North America 40.9 214.8
Central & South America 76 101.1
Western Europe 16.2 17.3
Eastern Europe & Former USSR 79.2 121.9
Middle East 708.3 733.9
Africa 100.8 112.4
Asia & Oceania 36.2 41.1
World Total 1,082 1,277

Oil reserves in billions of barrels - Wikipedia

As the price of petroleum changes it also alters the geography of economic power and this remains true wherever on the "Peak Oil" curve one happens to be. The system's boundaries dynamically change with shifts in production, price, distribution and markets. Nowhere is this better illustrated than the recent attempts by Russia to bring the Ukraine into line over natural gas. Although not a single oil well changed hands, Russia used it pipelines to shape distribution and twist the topology of the system so that it could make more money from oil, whereas for Japan, China, Europe and the United States oil is merely a necessary incidental; the important thing being to continue to earn from economies powered by oil, with commerce in the commodity itself being of relative unimportance.


Blogger desert rat said...

Even if oil sands became predominant as a supply source, it would be at a price level that would maintain the value of free oil at high levels.

Venezuela would still be an oil rich cash cow.

A former Special Forces lieutenant colonel Gordon Cucullu writes:

" ... Exacerbating an already dangerous situation are the steps Iran and North Korea have taken to befriend Venezuela and Bolivia. Iran can only be interested in peddling WMD, ... "

What if the relationship was more Strategic than commercial?
If Chavez allies with Iran and oil shipments normally sent to US Gulf Coast refineries from Caracus were sent, upon the start of hostilities, to China, replacing Iranian exports, there.

It is a move that would not hurt Mr Chavez, militarily or financially.

The web of US enemies is wider and better constructed than most folk think. They are not all 'loose cannons', but our fixation on Identity Politics makes denial easier, if ineffective.

1/11/2006 06:46:00 AM  
Blogger Jonathan said...

2006 may mark the year that world oil supplies begin their irreversible march upward

I think you meant "world oil prices".

BTW, Venezuela really has two main exports these days. One of them of course is oil. The other one is people.

1/11/2006 06:48:00 AM  
Blogger Cosmo said...

This comment has been removed by a blog administrator.

1/11/2006 06:50:00 AM  
Blogger Cosmo said...

Wretchard writes: "These can be taken as indicators of the superiority of the socialist system of economics over dog-eat-dog capitalism."

Not to be too much of a smart-ass -- because I know this was not a point Wretchard was trying to make -- but I thought wealth redistribution went from rich to poor, not the other way around.

A struggling developing nation subsidizing the the world's richest 'poor' people should be denounced for the crude political theatre it truly.

Unfortunately, those who would normally condemn the impoverishment of a nation by its dictator are far more interested in taking a swipe at George Bush or the U.S.

1/11/2006 06:52:00 AM  
Blogger Meme chose said...

Socialism is capable of hosing any given amount of oil wealth down the drain. The Russians had all their oil during the entire time the communists controlled the country, and still managed to simultaneously waste the income and trash the asset.

1/11/2006 07:12:00 AM  
Blogger Starling David Hunter said...

Wretchard wrote:

"Although not a single oil well changed hands, Russia used it pipelines to shape distribution and twist the topology of the system so that it could make more money from oil, whereas for Japan, China, Europe and the United States oil is merely a necessary incidental; the important thing being to continue to earn from economies powered by oil, with commerce in the commodity itself being of relative unimportance."

It is interesting that you now bring up this topic. As you are aware, there is a very important Climate Conference underway in Sydney today, the Asia Pacific Climate Conference. The six countries in attendance are the US, Japan, China, South Korea, India and Australia, the world's six largest producers of greenhouse gases.

To hear the MSM tell it, these countries and their energy industry and governmental leaders are following a very incremental strategy, preferring to spend more on making existing technologies cleaner than on renewable resources. As one might imagine, Greenpeace is not pleased with these priorities.

None of the articles I read pointed to the issue you raised, i.e. how rising prices may increase global oil reserves by making some kinds of them, e.g. oil and tar sands, more economically feasible. This oversight is not a small one.

As the "Dirty Half Dozen" make plans to reduce global greenhouse gas emissions without adhering to either specific timetables or Kyoto protocols, one wonders what will become of these best laid plans if oil prices continue to rise or if various "peak Oil" scenarios come into play.

Excerpt from "The Dirty Half Dozen":

"Today marks the start of the six-nation Asia Pacific Climate Conference in Sydney, Australia. The six nations in attendance are the world largest producers of greenhouse gases- US, Japan, China, South Korea, India and Australia. The express purpose of the meeting is to discuss their climate partnership, one that would see the energy industry, rather than national governments and non-governmental organizations like the UN, taking the lead in reducing greenhouse gas emissions."

1/11/2006 07:51:00 AM  
Blogger Evan said...

Two things:

1. The shortages resulting from price controls happened in early 1970s Chile, too. As the massive spending, the resultant inflating of the currency and the tremendous amount of controls drove the economy into bankruptcy, middle-class protest grew. Once Allende announced food rationing, which gave him the power to decide who would eat and who wouldn't, that was the last straw. Both one house of the Chilean Parliament and the Supreme Court essentially asked the military to overthrow him, which of course it did soon afterward.

Chavez appears to have learned from this episode, and has achieved dominance over all branches of government before engaging in his most radical measures. The key question is whether middle-class civil society will be strong enough to resist him as things continue to deteriorate. (And as others have noted, the rate at which they will deteriorate depends on what happens to oil prices.)

2. The credibility of peak oil, as I understand it, rides on one correct prediction. The founder of the theory, IIRC, correctly predicted the year of peak production in the U.S. But there is a long history of resource-exhaustion doomsdayism, and environmental doomsdayism generally, that has failed to pan out. It almost makes me wonder whether we are prone, for biological and social-incentive reasons, to make and believe these scary scenarios. If we start to run out of oil, the price system and entreprenurial can guide us to alternatives; the looming "oil shortage" is no more threatening than the "wood shortage" of the 17th century or the "whale oil shortage" of the 18th. And this presumes that oil prices can't rise high enough to solicit other, higher-cost production (e.g., tar sands).

1/11/2006 07:51:00 AM  
Blogger wretchard said...

Of course low cost lifters would still make a lot of money relative to wells at the margin. But the effect of high prices is to spur new discovery and development, and that in turn reduces the market power of the low cost source, even though it may not diminish their profits. From

"By limiting production OPEC has caused more expensive areas of production such as the North Sea to be developed before the Middle East has been exhausted."

What applies to oil sands also applies to other types of energy sources which are uneconomical at a low price level and suddenly become economic at a higher price level. Alan Greenspan gave an interesting speech in mid-2004 talking about the restructuring effects of the first oil crisis. (

The crisis of 1973 reduced the oil intensity of the world economy across the board and stimulated new sources of production. It funded a huge fixed cost capital investment both in the production and consumption sides of the energy industry. Once those fixed costs had been made, the marginal cost of those sources did not rise as rapidly as predicted. So much so that for a long time the real price of oil actually declined. But that investment bubble has run its course. Now, nearly every proponent of alternative energies, from windpower to hydrogen to fusion rails against this fixed cost barrier standing in the way of his pet technology but always claims that once this hurdle has been crossed the marginal costs are bound to decline. However that may be, historically the additional sources like North Sea oil momentarily reduced dependence on geopolitically volatile areas.

1/11/2006 07:55:00 AM  
Blogger Brett L said...


It's worse than that. Even at peak production, the US still imports a bunch of refined petroleum products. I believe our biggest supplier of refined petro-stuff is Sr. Chavez. The only 'good' news is that Venezuela's seaports are all on the Carribean Sea. Plenty of interdiction, I mean inspection, room in the Carribean and Eastern Pacific.

I love the idea of taking Hugo's cheap oil. I hope he sends some cheap gasoline to FLA next hurricane season. Of course, I consider it a sin to leave a sucker with his money if he'll part with it.

I bet ol' Tio Hugo ain't so cheap with the stuff he's subsidizing... I'm not sure there's a huge demand for No. 2 heating oil in Venezuela.

Also, I note in the Reuters article cited that car buying was off 10% in December, and that the total number of cars sold in Venezuela was about 230K to a population of about 25M. 1 new car per thousand people ain't gonna save GM.

Trivia question:
What's a better indicator in government run economy of real wealth? a)New cars and cheap gas or b)keeping coffee on shelves?

1/11/2006 08:06:00 AM  
Blogger Doug said...

Let them drink Automobiles.

1/11/2006 08:09:00 AM  
Blogger Doug said...

Works for Brett too!
Seems to me Rat's concerns are shorter term wrt the WOT, and currently Russia and Sr. Chavez benefit from "free money" from Oil, and there are plenty of Bad Guys willing to do commerce with them NOW.
...including Ted Kennedy whose family owns plenty of oil companies, but far be it from him to provide cheap heat for the folks in Mass.

1/11/2006 08:21:00 AM  
Blogger Annoy Mouse said...

Marxism is an experiment in counter-market economics, but who can look a gift horse in the mouth, especially if he young and rich. Chavez knows where his allies are in the liberal northeast. One wonders if liberal Americans can be considered poor, but what will be the price when the debt comes due?

"We appreciate him very much as a leader," he said. "It's been said he's one of us. His thinking is like ours."

I can’t think of a Sappier sycophant to this dubious martinet.

Citgo is proof that Lenin’s taunt, "The Capitalists will sell us the rope with which we will hang them", is true.

It is hard to say which is most distasteful to Western ideology, a newly elected Marxist Hugo Chavez riding on buoyant oil prices or a habituated socialist state like Canada with the economic might to back its’ pedagogic fault-finding with US polity. We have seen time an again that the production and distribution of oil is the motive force behind social policy writ large onto the international conscious. Without oil, lest there be a sudden surge in camel racing, the Middle East and its’ Islamic ideals would flounder as all backwater, retro-economies do. Russia is no threat to impart it’s largesse in the world at large, its’ ideologies have certainly suffered. But won’t it be awkward when Venezuela offers tribute to Russia in praise of its’ historical principles. No doubt they will link arms (you know shat kind) with Castro’s Cuba as well. Why not have the crypto-socialists of the American north east with them as well. The Marxist cabal will not be swayed.

1/11/2006 08:34:00 AM  
Blogger Doug said...

What's a Socialist in sheeps clothing?
...a Clinton.
Conservative Clinton CARES for our Troops:
"The lack of adequate armor has been a hot topic during the war in Iraq. In 2004, a soldier confronted Defense Secretary Donald Rumsfeld during a Q&A session in Iraq about the issue. The question turned out to be planted by a journalist. Recently, Howard Dean, former presidential candidate and president of the Democratic National Committee, called for Rumsfeld to resign.

The Defense Department and Army said that they needed more time to acquire the armor and that publicly discussing issues of body armor aided the enemy — claims that Clinton dismissed as out of hand.

She said it was now incumbent on the president to stand up for the men and women fighting overseas in Iraq and Afghanistan.

"The president speaks out strongly and even harshly from time to time about issues he thinks are important," Clinton said. "Let's hear him speak about men and women who wear the uniform of our country.

1/11/2006 08:34:00 AM  
Blogger Doug said...

Arabs can race camels, Pootie Poot can sell Missiles and Nukes.

1/11/2006 08:39:00 AM  
Blogger John B said...

Desert Rat:

I can't comment on extraction costs at all oil sands (I believe Venezuela has considerable oils sands resources) but the various companies mining the Alberta deposits have been quite successful in reducing costs. I believe extraction costs in Alberta are now lower in nominal dollars (and much lower when inflation adjusted) than 20 - 25 years ago. I believe extraction costs are somewhere in the area of $15 per barrel although this may vary as the deposits are mined.

One additional issue to keep in mind is the effect the oil sands are having on natural gas prices as oil extractiion is very energy intensive. One hot topic currently is the proposed McKenzie Valley pipeline that will bring gas south from the Arctic. One proposal will be to use this gas in tar sands mining/refining and it will never see markets in urban Canada or U.S.

1/11/2006 08:58:00 AM  
Blogger desert rat said...

Short or long term, doug, free flowing oil will keep both Mr Chavez in the chips.
He has purchase the venerable Mig-29 from the Soviets, I mean the Russians. He has also acquired over 100,000 AK varients, in addition to helicopters, transport planes and Naval assets.

He linked up with Mr Castro years ago and helps FALN continue to destabilize Columbia.

If tar sand is economical at $75 USD per barrel, the cash flow for Mr Chavez, Putin & other producers will be substantial at that price point. They will not be hampered by high cost competitors, any more than Wal-Mart is.

1/11/2006 09:05:00 AM  
Blogger Brett L said...


I bumped into this via Jawa Report featured on the PJM front page: F-16s Deploying to SW Asia

The whole blurb:"Members of the Fort Wayne-based 122nd Fighter Wing are scheduled to leave for Southwest Asia about 2:30 a.m. Tuesday from the unit’s headquarters on Ferguson Road. It represents the wing’s largest single deployment since it was called to Chambley, France, in 1961 during the Berlin Crisis. This deployment is in support of ongoing operations in the U.S. Central Command Air Forces (CENTAF) area of responsibility, which includes Southwest Asia. The unit will deploy fighter pilots, as well as maintenance and support personnel."

Also, seems Vermont & NJ ANG will deploy F-16s as well.

Just so's I've got this straight, we're deploying F-16s to the Persian Gulf region. I don't recall F-16s being used for close air support in Iraq. Not that they can't, but when I think of F-16s in the Gulf, I think of Osirak.

Alternate theories include Ethiopia/Eritrea, but 3 ANG units seems like a big show for somewhere we don't expect to drop bombs.

1/11/2006 09:45:00 AM  
Blogger Annoy Mouse said...

Hey Rat,
What the FARC, have you FALN for rich ports when you mean coffee bean?

1/11/2006 09:52:00 AM  
Blogger desert rat said...

right you are, am, my acronyms were confused, or perhaps it was my fingers.

1/11/2006 10:17:00 AM  
Blogger desert rat said...

In regards the Ukraine, I think the motives there were at least if not more Political then Economic.

Russia's pricing schedule corresponds to the rigidity of the recievers Political Position. The more in line with Kremlin thinking, the lower the price.

The US championed new elections in Ukraine and celebrated when Ukraine moved from Russia's Sphere of Influence. The KGB countered with an economic shock, destabilizing the Ukrainian Government.

" ... Ukraine was plunged into fresh political turmoil on Tuesday as its parliament sacked the pro-western government of Yuri Yekhanurov after he was accused of striking a poor deal to end the gas price dispute with Russia

The no-confidence vote, backed by 250 of parliament’s 450 members, came after it emerged that a five-year deal signed between Moscow and Kiev last week would force the Ukraine to pay much more for its gas imports

The vote was a heavy blow to the presidency of Mr Yushchenko, who now faces the prospect of working with a hostile government after parliamentary elections in March. Ukraine’s new constitution, which came into force on January 1, has stripped the president of the power to appoint the cabinet ... "

Finacial Times

In Iraq the US subsidized 6 cent per gallon gasoline, it is still subsidized at 65 cents. The Iraqis imported over 1 million cars. Just as this is an economic boon for the average Iraqi, so it is for the Venezueleans.
If it is good for our Goose, why is it bas for their Gander?

1/11/2006 10:49:00 AM  
Blogger al fin said...

Mugabe took 20 years to trash a once wealthy Zimbabwe.

Hugo Chavez will not take any longer to trash Venezuela. The people of Venezuela are prouder and smarter than the people of Zimbabwe. Chavez will crash and burn.

1/11/2006 11:03:00 AM  
Blogger Annoy Mouse said... has an excellent blue print for fostering energy independence for US law makers.

1/11/2006 11:48:00 AM  
Blogger Red River said...

As for Venezualan oil - is this the peak year of their production? Or has it passed? It takes huge investment to find and produce oil - I doubt if Chavez will be able to do it. Just normal geophysics may doom him in a few years. Overbuilding and economic distortions in Venzuela will cause the pain to be even greater.

According to American friends who worked in Venzeula, PM and investment on new production has stopped. In addition, kidnapping and other crimes are rising very fast. Price controls are ruining the non-oil economy.

Another friend, who builds refineries, says a huge gas plant is going in in Trinidad which will send refined products to the USA. Refineries in the USA are being torn down and sent to Trinidad and other places in the Carib. US Oil firms are involved in order to lower their costs by altering the supply chain.

In the short run, Chavez will have his fun, but high prices bring low prices. The crash will hurt - and it can be brought about not only by an increase in supply - but also by a recession - or a blockade - or a worldwide pandemic. All are things beyond Chavez' control.

As for Bolivia and the narco-thugs - the USA can crater them by legalizing cocaine.

1/11/2006 12:52:00 PM  
Blogger Papa Bear said...

Let's not forget nuke power's economics look a lot better in an era of high oil prices.

At a price point around where things are now, it becomes more economical to heat your house with nuke/coal-generated electricity than with #2 heating oil

1/11/2006 01:16:00 PM  
Blogger Doug said...

We did use the F-16 for some air support ops, (remember the guy they tried to bust for bombing Canadians) but that certainly never required the numbers you've got there.
When will we know?
(Subscription Only)
In a documentary broadcast in Berlin Friday, German filmmaker Wilfried Huismann added a new twist to an old controversy. In Dallas on Nov. 22nd, 1963, President John F. Kennedy was shot by Lee Harvey Oswald, who himself was killed days later by small time mafioso Jack...

1/11/2006 01:36:00 PM  
Blogger John B said...

Red River

Here is an article on the exodus of Venzuelan oil experts to work in the Alberta oil sands.

"As more Venezuelans join Mr. Pereira-Almao in Calgary, there are increasing signs of a critical mass, said Venezuelans active in Canada's oil industry."

"Carlos Sosa, spokesman for the Venezuelan-Canadian Association of Calgary, reports a consistent flow of inquiries from Venezuelans about jobs there and at Fort McMurray, an isolated town 800 kilometers north of Calgary, where most of the oil-sands production takes place."

"I tell them to come first without their families, as the winter is very harsh here," Mr. Sosa said. "And I tell everybody to improve their English at whatever the cost. That's key to landing a good job."

"The association has begun posting information about jobs, in addition to serving as a liaison for Canadian companies interested in recruiting abroad and for Venezuelan companies seeking contracts in Calgary. The group's membership has swelled to 400 from 60 at the start of 2003."

"Postgraduate students, who in previous eras would have gone back to a cushy job back home, are now considering staying in Canada."

1/11/2006 02:36:00 PM  
Blogger Red River said...

The ANG F-16's are multi-role aircraft - SEAD, Ground Support, and CAP.

1/11/2006 02:42:00 PM  
Blogger Red River said...

Thanks John B.

I have a BIL who just left for Trinidad and two friends working as consultants in the USA.

When they last visited, they spent hours on Venzuelan blogs and news sites. They are very bitter about things in Venezeula.

1/11/2006 02:46:00 PM  
Blogger desert rat said...

john b

And when Mr Chavez has lost his educated labor force, the Venezuelan wells will not shut down, there will be no labor shortage, not with tens of thousands of trained Chinese to man the well heads and spigots. The Chinese just closed a major deal in Nigeria, they have capacity to operate in South America, as well.

The gas well heads in Bolivia could be in play, as well. That situation is not placid.

As is often said it's all about Logistics, and in today's world, Logistics is all about oil.

1/11/2006 02:51:00 PM  
Blogger wretchard said...

While not all forms of energy can be substituted for each other, you can construct a graph of "total known energy reserves" and find that as the marginal cost of lifting a barrel of oil increases, total energy reserves likewise increase because they become exploitable at the margin. Again this changes the geography of energy, both in terms of components and location.

Now desert rat is right about Venezuela and the Middle East taking ever larger producer surpluses as the gap between their low lifting cost and the market price of oil increases, but there's a factor which shouldn't be ignored. As the percentage of energy from the new marginal sources increases the market share of Venezuela, for example, decreases and their ability to alter total supply to manipulate price also decreases. You would think that Venezuela and other low cost producers would pump for all they were worth to rake in the high oil prices. But to do that would flood the market and reduce prices. So producers restrict production to maximize profit at the optimal level of production x price. That gives them power. It's a power that will be diluted if, for example, tar sands in Alberta and other sources become their competitors at the margin because to a market facing the same price, oil from Alberta is no different from the same from Venezuela.

1/11/2006 03:10:00 PM  
Blogger Brett L said...


As to when we will know about Iran, I read that the full VT contingent will not be there until early March, also noticed a White House statement about referring Iran to the UN... How about 8 weeks? We could start a pool w/ that as the over/under number.

1/11/2006 03:14:00 PM  
Blogger al fin said...

Chavez treats Venezuelans like doormats to step on and wipe his feet (and whatever else). It is not only the educated and intelligent Venezuelans who will come to resent this. Chavez will soon have a rebellion of the underclass on his hands, soon enough. He is a bufoon much like Mugabe, and will reach a bad end.

1/11/2006 03:16:00 PM  
Blogger desert rat said...

This comment has been removed by a blog administrator.

1/11/2006 03:24:00 PM  
Blogger desert rat said...

But as the total consumption grows and is supplied by high cost providers, low cost producers will have their power options multiplied.

The Ukraine - Russia episode examples this perfectly. Many Ukrainians in Government value low cost dependable energy more than 'political freedom' from Moscow.

As long as the market is operating at capacity and there is continued growth in India and China there will not be an oil glut. Which is what would be required to neuter the "Oil Weapon".

If China and India obtained lower cost ME oil, while North America was self sufficent but dependent upon high cost sources, that would be a bad thing, I think.

As the Russians again proved so well just last week was that the "Market" is not free. What concessions will, or have, the Chinese made to the Iranians to guarentee access to supply?

The Israelis were speaking of March, as well.
Could be an escalation of tensions, about then, but watch the weather patterns. If the Iranian facilities leak, we would want the fallout blowing east, not south or west.

Mr Chavez is comical, in his own way, but so I think is Mr Castro,
The three of them Mugabe, Castr, and Chavez are all pretty funny, from afar.
Mr Mugumbe has had what, about 15 years in power?, Mr Castro over 40 years, now. A real survivor that Mr Castro has been, he & his brother.
Hopefully Mr Chavez will not be as funny for as long of either of his mentors.

1/11/2006 03:48:00 PM  
Blogger Annoy Mouse said...

I don’t know guys, Castro has been in power for something like 46 years. There were a lot of disgruntled upper and middle class people there at the time. Chavez has something that Castro nor Mugabe had, a robust income from oil exports. Although the country has suffered from high unemployment and inflation rates, it only reinforces the campesino classes and adds to their numbers. Chavez has enough money to keep the nations poor in the pink and power to keep the aristocracy on there @ss. If he gets too concerned you’ll know because he will impose severe currency controls to stem the flight of cash.

Don’t go looking for someone to do an Allende on him.

1/11/2006 04:28:00 PM  
Blogger Doug said...

Don't remember where I read it, but it related how the Soviet Union was granted a life-extension by the first Oil Shock.
Costs of pumping are negligible, so every added dollar in price is another dollar to hold up WHATEVER system has the black gold. least for awhile.

1/11/2006 04:30:00 PM  
Blogger Doug said...

"As long as the market is operating at capacity and there is continued growth in India and China there will not be an oil glut. "
Those two together represent a hefty new percentage of worldwide consumption.
Obviously China's growth rate cannot continue at this pace forever, but for now, that is the new status quo.

1/11/2006 04:41:00 PM  
Blogger Doug said...

Anybody know how long it will take to exploit new Tar Sand resources, from start to to the pump?

1/11/2006 04:43:00 PM  
Blogger desert rat said...

" ... Suncor Energy Inc. and its predecessor, Great Canadian Oil Sands, have been developing the oilsands near Fort McMurray in northern Alberta since 1963. But the project was hobbled by the difficulties and expense of extracting crude oil from what is essentially an oily sand.

Forty years later, production has risen to about 270,000 barrels a day, with plans to expand to more than half a million barrels a day by 2012 ... "

from CBC News

Not nearly enough to provide energy independence, n and of itself.

1/11/2006 05:08:00 PM  
Blogger Doug said...

US war crime trials resume at notorious camp
GUANTANAMO BAY NAVAL BASE, Cuba: Exactly four years after the first prisoners arrived at the Guantanamo prison camp, a Yemeni accused of being a bodyguard for Osama bin Laden will face a US military tribunal to demand the right to act as his own attorney on war crimes charges.
Gotta love those Chicoms: Always trying to keep pace w/Beltway Media.

1/11/2006 05:34:00 PM  
Blogger sam said...

Anyone know what the latest is with working the shale deposits in Colorado?

1/11/2006 05:40:00 PM  
Blogger desert rat said...

And from your favorite source, doug
" ... The United States this year has imported about 59 percent of the more than 20 million barrels of oil a day it has consumed, according to government data. ... "

So if in 2012 oil sand account for 500,000 barrels a day, and consumption is 20,000,000 barrels a day, tar sands from Alberta will account for 2.5% of demand.

Perhaps there are more producers than Suncor up in Canada, but none larger. So, at max, tar sands could account for about 4% of current daily US consumption, in 2012.


I know you love it when I link the WaPo, doug.

1/11/2006 05:43:00 PM  
Blogger sam said...

Top 10 oil consumers:

1. US - 24.9%
2. China - 8.2%
3. Japan - 6.4%
4. Russia - 3.4%
5. Germany - 3.3%
6. India - 3.2%
7. South Korea - 2.8%
8. Canada - 2.6%
9. France - 2.5%
10. Italy - 2.4%


1/11/2006 05:59:00 PM  
Blogger Doug said...

This comment has been removed by a blog administrator.

1/11/2006 06:05:00 PM  
Blogger Doug said...

This comment has been removed by a blog administrator.

1/11/2006 06:09:00 PM  
Blogger HK Vol said...

The US needs a new energy policy. A new interstate transmission grid built by the US govt. similar to the interstate road system built during the Eisenhower Administration.

FACT: Wind power available in the Midwest is double the current US demand for electricity. Problem: The wind blows where the people are not. Solution: Build an interstate transmission grid. How funded? One dollar per barrel tax on each barrel of oil imported into the US. (about 2.5 cents per gallon).

Reduce pollution
Create jobs in the US (especially the midwest)
Reduce power cost volatility
Reduce trade deficit
Reduce current account deficit
Reduce amount of money being sent to the Middle East, Venezuela, etc.
Reduce amount of money being sent to terrorists (indirectly).

And yes, wind power can produce hydrogen, which can be a new alternative fuel for cars.

GE proposal here: docs/wind_hydrogen_ge.ppt

1/11/2006 06:12:00 PM  
Blogger Doug said...

"As for Bolivia and the narco-thugs - the USA can crater them by legalizing cocaine."
Slim and None?
Calling M Simon!

1/11/2006 06:13:00 PM  
Blogger Cedarford said...

Tough to see Chavez facing any downside for the foreseeable future. He has tremendous revenues coming in, is redistributing the widely considered "ill-gotten" property gains of the politically connected Owner Class and has brought health and dental care to the lower income masses as well as giving them relief from the draining rents they paid to the elites in past years.

Latin America has moved as a continent away from the "free market, top dog rakes it all" variant of crony capitalism. It didn't work. It devestated the middle class. In Venezuela, for example, the pie went more and more to elites and a privileged economic class that ran the industries and did not share profits or benefits. In hospitals, for example, wealthy administrators and physicians treated themselves to free health care from profits, but did not extend the health care benefit to nurses or worker staff. Now they get the same shot at health care as the elites. That is hardly an unpopular or unsustainable practice.

You can look to the popular Chavez being in office for a long time as long as he continues to spread the wealth, keeps his followers from becoming as corrupt as Mexico or Washington, DC is.

In Bolivia, Morales is going towards nationalization of oil and gas reserves away from foreign owners, but leaving the foreign investment in oil and gas infrastructure, theirs. He has invited the US in, saying they will work with the Yankees, but not wreck peasants coca fields without compensation. And inquiries are out on China developing various Bolivian fields after Morales visit to China. China's superb economic system now graduates 6 times the engineers and scientists that America does, and China directed it's education sytem heavily into making a good percentage of those engineers and scientist cadres trained & oriented towards getting China the energy it needs. And China is working deals to divert energy from suppliers that once sent cheap energy to the USA.

China is also active in Venezuela, the Alberta oil sands, new gas coming on line in Indonesian, Myanmar, and Aussie waters. It even has offered technical assistance to the USA - to send it's surplus and far cheaper petro industry workers engineers and scientists to boost production - and of course offers to buy and control existing US firms with the 200 billion in cash transferred to China via WalMart, etc., every year.

And, through Hutchinson-Whampoa, China controls both ends of the Panama Canal.

While Bush fixates almost exclusively on his tax cuts for the wealthy and "evildoer" fighting...he ignores major shifts in Latin America and China's economic predations at the nations peril.

1/11/2006 06:21:00 PM  
Blogger Cedarford said...


Windmills are a fine little toy, but people who think they are any sort of a solution need a reality check.

1. The US consumes 107 Quads of energy. 40 Quads of that is oil.
2. Windmills produce 0.15 Quads of energy, and only exist because of double, sometimes triple tax breaks to allow their incredibly expensive electricity to be commercial. Best estimate with the same or even better subsidies is 5 Quads by 2030. Wind also suffers big disadvantages as it is seasonal, unpredictably variable, and is an energy source that cannot be stored. And considered environmentally bad in many locations from high bird kills and visual pollution.
3. Since 1973, energy usage decreased per capita in America but energy usage went up 34%. The reason, mass immigration. We added 74 million people in 30 years. Census projections say we will have 363 million by 2030, mainly due to Bush's out of control borders and failure of Americans to conserve energy starting in the 80s.
4. Every drop of oil the petro nations can make will be sucked up at hefty prices - no matter what the US does with windmills, solar, bottling up pig farts or any other "magic solution".
5. Every drop of oil the petro nations can make will be sucked up no matter what the US does because we cannot conserve our way out of needing massively more energy by "banning SUVs" as long as people continue to pour in and have 8 kids...renewables are like pissing on a forest fire...and even if we magically got news that 60 billion barrels of oil were located in ANWAR, with the Rise of China...and other nations, particularly India...oil will be King still and the nations that own it will have the money pouring in to fund whoever and whatever they please.
6. Mantras of "Genius of the market always works" aside, "high tech will save us, it always does" wishful thinking aside.....Our energy sources for the next 40 years will Almost Exclusively be Coal, oil, oil sands, natural gas, and nuclear. (Hydro gives us electricity without big long distance I2R losses due to proximity to population centers and side benefits of irrigation, water conservation, and recreation. It amounts to 5 Quads, and it's electricity is 1/16th to 1/25th the cost of wind power. Unfortunately, we are largely tapped out on hydro potential.
7. Fail to correct the problem of immigration, conservation, and additional energy we will need for 75 million extra people and we will finally see a declining standard of living in the US.

1/11/2006 06:54:00 PM  
Blogger Mətušélaḥ said...

"China's 200 billion in cash..."

That's $200 per head. If that's the savings China managed to secure in the last 10 years of trade through Walmart, then frankly I don't think Walmart's US customers got the short end of the stick. Call me unimpressed with "China's superb economic system".

1/11/2006 07:15:00 PM  
Blogger wretchard said...


I think energy dependence is probably China's greatest weakness. It's totally reliant on the energy markets. For the foreseeable future its energy and trade lifeline goes through the South and East China seas. The last thing China will do is stop the music, especially since that music is extremely agreeable. Prosperity = business as usual.

But in any life and death situation the US can physically interdict the oil distribution from the Americas, the Middle East and Africa, which constitutes about 83% of all reserves. It won't of course because like China the US needs to keep the party going. But the button's there if needed.

One other problem which will confront China soon is demography. It's aging faster almost faster than any society on earth. A billion people will one day be a billion retirees. Helluva a pension problem. I think the Chinese will solve these problems eventually, or manage them. But I'm not sure that China will make a play for world domination.

The Chinese have historically been a life-loving race, for whom the highest achievements have been making money, buying a nice car, etc. A car is for driving, or at least turning into a delivery van, not for blowing up.

1/11/2006 07:34:00 PM  
Blogger sam said...

Shh! Why I secretly fancy Gazprom:

“Sensible” here means boosting our gas storage capacity as an insurance against supply squeezes; investing in infrastructure to handle more liquefied natural gas, which is easily bought and transported from other sources because it can be shipped in tankers; and, above all, investing in energy efficiency.

Subsidising loft insulations and low-energy lightbulbs may not be sexy, but neither is it hard, dangerous or necessarily expensive. The right energy policy, for us as for the exploding economies of India and China, would keep the nuclear option but not rely on it.


1/11/2006 07:55:00 PM  
Blogger Craigicus said...

Wired magazine had their last cover story on just this topic.

OK, so oil won't go to $2,000 per barrel, but it might go to $100.

What effect will it have if it goes to $85?

1/11/2006 08:08:00 PM  
Blogger sam said...

4 bucks a gallon?

1/11/2006 08:23:00 PM  
Blogger Charles said...

Craigicus said...
Wired magazine had their last cover story on just this topic.

OK, so oil won't go to $2,000 per barrel, but it might go to $100.

What effect will it have if it goes to $85?

Changing World Technologies can convert garbage and sewage to oil for $80 a Barrel.

They currently have a test sewage plant in Philadelphia and a working plant in Missouri that converts turkey offals to oil.

MIT has program which uses algae to convert waste coal plant CO2 to oxygen and then harvest the algae for biodiesel.

Here's a slashdot discussion algae to biodiesel.

1/11/2006 08:41:00 PM  
Blogger HK Vol said...

Wind power is already economical:
Land-based wind farms in Texas produce power at a fixed cost of about $28 per megawatt-hour. With no fuel costs, this price is relatively inflation-proof. And as turbine efficiency improves, this cost should fall.

By comparison, a high-efficiency, natural gas-fired power plant burning gas creates power that has a fuel-only cost of $51.52 per megawatt-hour. And with natural gas prices near historical highs, wind power looks even better.

And it can certainly put a big dent in electricity consumption. Approximately 20 percent of Denmark's energy consumption is fulfilled by wind power.,2782,67600,00.html

Stanford University says:
Wind could reliably provide at bare minimum 30 percent of the country's power, Jacobson says, with backup from a mixture of sources including hydroelectric power. Since coal and natural gas are subsidized to a greater extent than wind, they do not pay their true costs to society, Jacobson says.

It seems funny for wind power to expand so rapidly in the US if it really is "uneconomic."
From the Washington Times:
The industry added about 2,500 megawatts of wind power last year, a record 35 percent increase, according to the American Wind Energy Association, an industry trade group. The country's wind capacity is more than 9,200 megawatts in 30 states, enough for 2.4 million average U.S. homes.
Wind power still makes up less than 1 percent of the nation's electricity, but experts expect wind to generate at least 5 percent by 2020.

1/11/2006 11:53:00 PM  
Blogger Anointiata Delenda Est said...

In the long run, there is only nuclear power.

Sadly, Stephen Hawking has calculated that if the current rate of electricity growth continues, the world will glow red hot in 600 years.

CO2, Methane, Chinese mobility, US consumption rates - not even in the game.


And mercifully, ne'er a mention of Hydrogen on this thread.


1/12/2006 02:42:00 AM  
Blogger Fabio said...

I think we'll be able to pinpoint the peak oil production only well after it was reached: it's hard to locate the maximum of a curve when you can see only part of it.

I'm quite skeptical about wind power: first, it depends on wind. Second, it takes up large swaths of land, and its full environmental impact is still poorly known.

Chavez will still be able to ride the tiger for a few more years, but all communist countries resulted unsustainable in the long term.

1/12/2006 03:18:00 AM  
Blogger desert rat said...

OT, but your favorite radio interviewer, Hugh Hewitt had some discouraging news

" ... So tell me something, John, long term. We've got Abramoff as a bad situation for the Republicans. Today, the Washington Times said it might spread to Byron Dorgan and Harry Reid and our friend, J.D. Hayworth. ..." from Radio Blogger

" ... Law-enforcement authorities and others said the investigation's opening phase is scrutinizing Sens. Conrad Burns, Montana Republican; Byron L. Dorgan, North Dakota Democrat; and Minority Leader Harry Reid, Nevada Democrat, along with Reps. J.D. Hayworth, Arizona Republican, and Bob Ney, Ohio Republican. ... "
Washington Times - Abramoff

Not sure how it would effect him here.
Mr McCain sailed through the Keating Five episode with little damage. J.D. may as well, Indian Gaming is popular, in AZ.

Except with Rep. John Shadegg who seems to be a dark horse in the race for House Majority Leader
Washington Times - Platforms

So J.D, has found himself in heady company, right in there with Mr Reid, Senate Minority Leader, from Nevada.

1/12/2006 06:24:00 AM  
Blogger Mike said...

Them Sands ain't gonna save us

1/12/2006 06:28:00 AM  
Blogger John B said...

Doug and Desert:

Regarding oil sands production:

"Production from 29 companies now operating in the three regions exceeds 1 million barrels per day, most of which is shipped to U.S. markets. Tar sands backers project that production will triple -- to near 3 million barrels a day by 2015. That would make it the world's fifth largest crude oil producer."

You may also want to keep your eye on this as well (i.e. Chinese involvement in the oil sands):

""If Americans think the oil sands bonanza in their northern backyard will solely benefit the United States, they may be surprised. Chinese officials are making fast inroads into Alberta, snapping up petroleum deals with the skill of Texas oilmen."

"While the deals involved are still relatively small, analysts say China's booming, oil-starved economy could eventually become a significant player in the oil sands."

"Last month, two Chinese oil companies announced deals for Alberta oil sands."

"China National Offshore Oil Corp. bought a $150 million share in oil sands producer MEG Energy Corp. And PetroChina Co. signed a memorandum of understanding with Enbridge Inc. for half of the supply on the proposed $2 billion Gateway pipeline, which will move 400,000 barrels per day from Alberta to the port at Prince Rupert in British Columbia."

"Hou Hongbin, a vice president of Sinopec, predicted his company would soon announce a "much bigger" deal for oil sands.""

Last year the Globe and Mail ran a very good series on the oil sands but the paper has since gone subscription so I can't access them. I do remember the reporter writing that they are the world's largest concentration of capital investment with something like $80-$85 billion in investment planned over the next ten years. Things are so hectic that companies have to plan years in advance when they can replace the tires from the giant mining trucks - the tire manufacturers can't keep up with demand.

1/12/2006 08:26:00 AM  
Blogger desert rat said...

while it could become as you say, it would still not be enough to cause a 'glut'

If by 2015 3 million barrels per day are produced, and our current 20 million barrel consumption grows by 3% compounded, which is reasonable, I think, then daily consumption in 2015 will be about 27 million barrels a day.

The tar sand, even at projected levels would only supply 10 or 11% of US consumption needs. While substantial and important to be sure, not enough to declaw the Russians, Saudis, Iranians or Mr Chavez.

We would still be dependent on overseas oil, lots of it held by our opponents.
Those opponents will still be sitting on 'Black Gold'.
They will not see themselves as being mere merchants, they'll know from the Ukraine experience that the addict is never in charge of the relationship, unless there is an abundence of supply and a surplus of cash.

It will be a sellers market for decades to come.

1/12/2006 08:54:00 AM  
Blogger Tom Grey said...

Chavez may well be doing many populist, popular, and even helpful things (health care for the poor!), but price-controls are stupid. He should give out vouchers to the poor to pay for world market priced goods, rather than price controls.

The fact that Chavez has "free money" to burn, most likely means he'll burn even more, faster, so that he'll crash and burn the economy sooner. Instead of "making money", as in resource poor Japan, the elites will be concerned with "controlling the oil cash flow" -- so, like Nigeria, are likely to do even more stupid economic things.

Changing the land ownership away from "free market elites (when that means the elites continue owning all)", as Stiglitz advocated, is a pretty smart thing.

If Chavez also pushes running water and home ownership, he'll have a good chance of staying in power quite a long while, despite some silliness.

India's economy may be where China's was 10 years ago in the takeoff of big thirst for oil; I really don't know why China's not copying the French and building lots more nukes.

W: PLEASE change "supplies" to "prices" in your: "2006 may mark the year that world oil supplies begin their irreversible march upward".

Then I can argue it may be irreversible on 2 or 5-year averages, but there will still be spikes up and then busts down. Up to 85-90$, down to 65-60$; up to 95-100$; down to 70$. Until a set of backstop technoligies meet that total energy price point.

1/12/2006 09:09:00 AM  
Blogger Kyda Sylvester said...

Thomas Gold, crackpot or visionary?

Hardly a new idea:

"The overwhelming preponderance of geological evidence compels the conclusion that crude oil and natural petroleum gas have no intrinsic connection with biological matter originating near the surface of the Earth. They are prim ordial materials which have been erupted from great depths."

Academician Professor Vladimir B. Porfir’yev, senior petroleum exploration geologist for the U.S.S.R., at the All-Union Conference on Petroleum and Petroleum Geology, Moscow, 1956. CONSIDERATIONS ABOUT RECENT PREDICTIONS OF IMPENDING SHORTAGES OF PETROLEUM EVALUATED FROM THE PERSPECTIVE OF MODERN PETROLEUM SCIENCE

Oil Fields Are Refilling...Naturally - Sometimes Rapidly

The Smartest Man in the
World, Noam Chompsky, says: "The basic [Peak Oil] theory is incontrovertible. The only questions have to do with timing and cost. ..."

J. F. Kenny (linked above) begs to differ:

"In view of these considerations, there stands no reason to worry about, and even less to plan for, any predicted demise of the petroleum industry based upon a vanishing of petroleum reserves. On the contrary, these considerations c ompel additional investment and development in the technology and skills of deep drilling, of deep seismic measurement and interpretation, of the reservoir properties of crystalline rock, and of the associated completion and production practices which sho uld be applied in such non-traditional reservoirs.

Not only are any predictions that the world is "running out of oil" invalid, so also are suggestions that the petroleum exploration and production industry is a "mature" or "declining" one. This writer ’s experience, gained from working in the former U.S.S.R. during the past five years, has provided compelling evidence that the petroleum industry is only now entering its adolescence."

As we've learned, the "science" of global warming and climate change is replete with non-scientific agenda. Peak Oil looms on the horizon as The Next Big Thing. Are there not similar forces at work (Link):

"Many people are working on partial solutions at various different levels, but there is probably no cluster of solutions which do not involve some major changes in lifestyles, especially for the global affluent. Peak Oil presents the potential for quite catastrophic upheavals, but also some more hopeful possibilities, a chance to address many underlying societal problems, and the opportunity return to simpler, healthier and more community oriented lifestyles."


"Permaculture is a 'design science' which can allow us to live in relative abundance with minimal resource use. Permaculture principles can be used to functionally redesign social systems, built environments, ecological and agricultural practices for energy descent. David Holmgren's recent book, Permaculture: Principles and Pathways Beyond Sustainability, deals explicitly with the global oil peak and proposes permaculture as the best set of strategies for dealing with 'energy descent'."


"The Depletion Protocol: (previously refered to as the Uppsala or Rimini Protocol) is an ethical global political framework for sharing the world's remaining oil reserves more equitably than free market forces would allow, to avoid resource wars and profiteering. Help promote it:
Introduction to the Depletion Protocol by Colin Campbell (Word .doc format)
How to avoid oil wars, terrorism, and economic collapse by Richard Heinberg"

1/12/2006 09:20:00 AM  
Blogger DoctorX2 said...

I must agree with Evan’s post. I don't believe in the "peak oil" boogeyman, which presupposes a static Malthusian world. As the price of oil rises it is a given that oil fields and deposits otherwise considered too expensive to exploit will become profitable, while technological advances will increase vehicle fuel efficiency and provide alternate/new sources of energy.

For example, in terms of new supply, according to a recent RAND report the Colorado-Utah basin holds over 1.1 TRILLION barrels of recoverable oil in shale and sand deposits. One article I read suggested that this oil becomes economical to exploit starting between $65-$75/barrel, and with advances in technology the price of profitable recovery could drop even further.

In terms of technology, Thermal Depolymerization could add to our oil supplies while reducing our waste storage needs, and we're seeing a sharp rise in US consumer interest in more fuel efficient vehicles (hybrids, diesel, etc.). I think these factors, and others, will offset any would-be oil emperor's machinations. Of course, the US still needs to invest in refinery capacity (either onshore or offshore) since it hasn't built a new refinery in some 30 years.

As for the Venezuelan economy, even with the gift of high oil prices in 2005 Chavez has been busily destroying his nation’s economy. Venezuela’s GDP shrank 19% in 2003, and 17% in 2004. It got an oil bounce in 2005 (oil accounts for over 80% of Venezuela’s export economy), but national debt is up almost 1000% since 2003, inflation is running in the 30% range, and unemployment remains in the double digits. How long can the Chavez oil revolution last???

1/12/2006 09:27:00 AM  
Blogger Acad Ronin said...

For what it's worth, I calculated the Malatesta Estimator for the total reserves, using the data that Wretchard gave. The formula is E = (Max + Min)/3, and the resulting figure is 760-800, depending on whether you apply the formula to the totals, or total the sum of the estimates for each region.

(Galeotto Malatesta was a 14 century mercenary captain in Tuscany. He developed the formula to estimate battle casulties ex post. In his formula, the Max is the estimate as given by the supporters, and the Min is the estimate as given by the detractors. It has always struck me as a pretty reasonable approach.)

1/12/2006 09:33:00 AM  
Blogger Brett L said...

There is no alternative to staying engaged with Venezuela, Iran, Saudi, China and Russia. Alternative energy is no more a solution than the EU3's talking. The US must continue to apply ALL of the tools in the box (military, diplomatic, economic, social) to creating situations that encourage rational actions by the leaders of these countries. And you know what, that may mean $100/barrel oil.

Liqiud fossil fuels also are the stock materials for plastics, artificial clothing fibers, pesticides, fertilizers, and other industrial chemicals. Solving the energy side of petrodependence only changes the scale of the problem.

doctorX: one of the problems with oil shale is that the leftover shale has a whole lot of unfixed saline and is of a larger volume than the original rock. The oil acts as a wax to seal the pores in the rock. I'm not sure we want to be dumping high salt porous rock back into the watershed of the Western US. It illustrates the problems of alternative sources... a new process always involves new impacts.

1/12/2006 09:59:00 AM  
Blogger Fabio said...

Tom Grey,

The Chinese are building a lot of new nuclear power stations, including some using the new and very interestingHTR reactors.

I think that this notorious peak of oil production will be a very flat one, not the steep slope that some seem to foresee.

1/12/2006 10:16:00 AM  
Blogger John B said...


Thanks for the input. My posts were not intended to suggest the oil sands will be a cure-all but simply to put some numbers into the discussion. Cheers.


1/12/2006 10:36:00 AM  
Blogger Red River said...

I know a rancher who is putting in 200 wind towers on 10,000 acres. Thats enough for 40,000 homes. He only loses 2 acres per tower so he is able to continue ranching. All the power lines are underground.

The average wind speed in the last 20 years of data logging was 24 mph. He has only 11 days out of the year where wind drops below 10 mph.

Many of the class 6 and 7 sites in the Plains are similar to this. Its pretty stable power generation.

There are sites in the Southern Rockies and in the Northern plains that offer 40 mph averages and offshore sites in the trade winds regions and in the roaring 40s in the South polar seas offer even greater efficiencies.

1/12/2006 01:04:00 PM  
Blogger Clark Goble said...

The problem with massive wind power is the question of how to store the energy for when one needs it.

There are possibilities of course. Basically large water reservoirs where one uses wind power to pump water uphill and then hydropower to regenerate the electricity. But that looses a lot of efficiencies.

Those praising wind tend to neglect these issues. Wind is nice as a small adjunct to regular power. But power usage simply isn't consistent through the day and doesn't always line up with when the wind is.

Where wind power might be useful is for generating hydrogen if the hydrogen fuel cells ever get off the ground.

1/12/2006 03:17:00 PM  
Blogger Mətušélaḥ said...

Build the wind farms in the Arctic. It's windy there year round. Use underground cable to carry the electricity to southern Canadian cities. Power produced in southern Canada could go to supply the northern US.

1/12/2006 03:35:00 PM  
Blogger HK Vol said...

It has been proven that wind can produce 20-30% of a national power grid with stability (see Denmark).

The real question is the one that GE is tackling. What is the cost of producing hydrogen from wind power? It is non-polluting, storable, and renewable. I think that GE implied that it can currently produce and transport hydrogen at $5-6 per gallon of gasoline equivalent. Thus, at $150 per barrel, wind-produced hydrogen becomes viable.

IF, and a big IF, the wind and hydrogen industry can produce 5% annual efficiency gains consistently, then wind-produced hydrogen can be produced at a $3.00 per gallon equivalent by 2016 and a $2.00 per gallon equivalent in 2024. This presumes that it can be produced at $5.00 per equivalent gallon today. docs/wind_hydrogen_ge.ppt

And some claim it can currently be produced at a $4.00 per gallon equivalent today, " In early 2005, hydrogen derived from natural gas costs $1.20 per kilogram, gasoline is hovering at and above $2.00 per gallon, and electricity from wind power is approaching $0.04 per kilowatt-hour before subsidies. Using present-day electrolysis technology, we can manufacture wind-powered hydrogen at prices less than $4.00 per gasoline gallon equivalent (roughly a kilogram). The per-gallon cost of gasoline and the per-kilogram cost of renewable hydrogen are steadily approaching the same figure."

1/12/2006 04:57:00 PM  
Blogger John B said...

Red River:

200 towers. That will a nice income.


One of the big problems is interconnection. The areas of prime wind resources often aren't near existing high voltage transmission lines.

1/12/2006 06:53:00 PM  
Blogger Cedarford said...

Sino-Indian Pact just signed on mutual cooperation to secure new oil fields in the ME, spin -off Soviet 'stans, Africa, Canada, and Latin America. And acquire present fields now going to America.

The pact between the nations calls for them to pool capital and technology to get the resources locked up and not to bid against each other anymore.

Meanwhile, Americans, fat dumb and happy, ship more knowledge jobs to India and happily gobble up the Chinese stuff and still talk about how magic high-paying "high tech" jobs are right around the corner.

1/12/2006 08:50:00 PM  
Blogger SPA said...

A very interesting post and many interesting comments.

Oil shale presents, in many ways, the greatest opportunity for intermediate term exploitation, environmental issues notwithstanding.,1299,DRMN_86_4051709,00.html

The recoverable reserves in the Green River formation alone approach 1 trillion barrels and with Shell's newly proven methods of in situ conversion, the economics at current price points are very attractive indeed. While the process must still be scaled, the process looks very promising. Shell has spent millions of R&D funds developing the technology.

RAND has recently published a study on the oil shale resource including a summary of the Shell process.

The RAND report is a fascinating read.

Looks like a strategic imperative to my simple mind.

1/15/2006 07:17:00 PM  
Blogger weswinger said...

For HK Vol and other wind energy enthusiasts, you must realize that the Danish experience is not transferrable to the U.S., or any other nation with Investor Owned Utilities (IOU's(!)). The Danish government's commitment to wind power allowed the Danish government utility to recover all wind-related costs through rates. These are very substantial. First and mostly is that due to the instability and uncontrollability of the resource, a utility has to have an equal amount of controllable resource spinning at less than full load in order to either back down, when the wind speed is up, or the converse. Further, all wind turbines go into an overspeed trip off line if the wind exceeds the rated capability. Further, the peak day of the year is generally still. To draw the conclusion for you: wind requires redundant investment in generation. IOU's, contrary to popular opinion, prefer to use their capital efficiently.

Papa Bear and ADE, nukes are not the complete answer, unless the newer plants have better flexibility built in. The industry tries to match the lowest fuel/highest capital cost units to the base load. Again it is economically inefficient to run the highest capital cost unit at less than full load.

Red River and hk vol, new investment in transmission would greatly help efficiency, but at a million $'s/MW/mile for A/C and 3 -5 X that for D/C, who's going to pay for it?

In general, saving petroleum fuel, which wind no doubt does, is a good thing, but only one variable in a complex problem.

1/16/2006 11:11:00 PM  
Blogger weswinger said...

A last word (for now).

The U.S. is the Saudi Arabia of coal. There are vast supplies of low sulfur coal in NE Wyoming and Southern Montana (the Powder River Basin). There are new chemical processes to make fuels and combustion technologies to generate electricity with this coal that would simultaneously help to meet the goals of energy efficiency, independence and environmental improvement.

The question as always is: who pays?

And do we need a timetable to develop and implement these technologies?

The answer is that if the market is not forced by politics into untimely substituting resources, the new technologies will be adopted as needed without taxpayers or other customers' subsidies.

1/17/2006 12:35:00 AM  
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