The Blog At the End of the World

Peak Oil Production May Already Be Here

2011-03-28T13:02:00.004-04:00

From Science, March 25, 2011:

Outside of OPEC’s vast resources, oil production has leveled off, and it’s looking like it may never rise again

FIVE YEARS AGO, MANY OIL EXPERTS SAW trouble looming. In 10 years or so, they said, oil producers outside the Organization of the Petroleum Exporting Countries (OPEC) would likely be unable to pump oil any faster (Science, 18 November 2005, p. 1106). Non-OPEC oil production would peak, no matter the effort applied. All the high-technology exploration and drilling, all the frontier-pushing bravado of the oil industry would no longer stave off the inevitable as OPEC gains an even stronger hand among the world’s oil producers.

Five years on, it appears those experts may have been unduly optimistic—non-OPEC oil production may have been peaking as they spoke. Despite a near tripling of world oil prices, non-OPEC production, which accounts for 60% of world output, hasn’t increased significantly since 2004. And many of those same experts, as well as some major oil companies, don’t see it increasing again — ever. In their view, it’s stuck on a flat-topped peak or plateau at present levels of production for another decade or so before starting to decline. “Stable [non-OPEC] production is the best we can hope for,” says energy economist Robert Kaufmann of Boston University. “I have trouble seeing it increase more. It’s a wake-up call.”

Optimists remain. Some experts still see production from new frontiers, such as Kazakhstan, the deep waters off Brazil, and the oil sands of Canada, pushing production above the current plateau in the next few years. But time’s running out to prove that newly discovered fields and new technology can more than compensate for flagging production from the rapidly aging fields beyond OPEC.

Running to stay in place

There’s no debate about the reality of the 6-year-and-counting plateau of non-OPEC production. Output stagnated at about 40 million barrels a day beginning in 2004 after rising from an earlier plateau in the early 1990s, one induced by a low price for oil. But prices have been anything but low lately. They have gone from about $35 a barrel early in the past decade to double and nearly triple that. Normally, higher prices would encourage more production, but not this time. Since 2004, “there’s been a tremendous increase in price, yet this is all we get for it, stable production,” Kaufmann says. “It’s quite stark.”

The problem up to this point, all agree, has been increasing difficulties extracting conventional oil. That’s the easiest oil to get at, oil that freely flows out of a well of its own accord or with a minimum of encouragement, such as pumping it out or pushing it out with water. Production of conventional oil from any one well or field typically increases, peaks, and then goes into decline. Larger producing regions behave the same way. Production from the United States, once the world’s largest oil producer, peaked in 1970 as rising output from newly discovered fields failed to compensate for declines in old fields. Mexico’s production peaked in 2004 as its huge, aging Cantarell field went into steep decline. North Sea production peaked in 1999, just 28 years after starting up.

The same pattern now seems to be emerging across much of the world. “We believe — and pretty much everybody else believes — that non-OPEC [conventional] production has plateaued,” says oil analyst Michael Rodgers, a partner with PFC Energy in Kuala Lumpur. “Arguing that you’re going to get continued and sustained growth of conventional oil is a very hard case to make.” PFC Energy has just done a complete reassessment of the prospects for non-OPEC conventional production, he says. As in most oil outlooks, a country-by-country or even field-by-field survey of what producers are planning for the next 5 to 10 years was combined with an educated guess of how much oil remains to be discovered in each region.

That forecast of added production is balanced against how fast production from existing fields is declining. In the past decade, analysts have realized that rather than the 2% to 3% per year decline once assumed, production from existing fields is declining 4% to 5% per year. Some believe the depletion is even faster. The balance between added and declining production, in the PFC Energy assessment, is a plateau, though the plateau may undulate from year to year. “You bring on a [new] 100,000-barrel-a-day field,” Rodgers says, “and somewhere else you’ve lost a 100,000-barrel-a-day field.

Tough oil to the rescue?

But what about unconventional oil, the hard-to-get-at oil that’s only extractable using the latest in high technology? There’s the oil beneath kilometers of seawater far offshore of the U.S. Gulf Coast, Brazil, and West Africa. It wasn’t reachable until development of the necessary deep-water drilling and production technology. There is also the oil — more like tar—that is so viscous that steam must be piped underground to thin it before pumping it out. In Alberta, Canada, huge shovels just dig up the “oil sands” so it can be trucked to oil-extraction plants. And American drillers have lately taken to drilling into rock formations that would normally only dribble oil and fracturing the rock with high-pressure fluids in order to wrest worthwhile amounts from the rock. That’s how drillers have been “fracking” stingy natural gas formations (Science, 25 June 2010, p. 1624).

Such unconventional oil is out there in abundance, everyone agrees, and more will be produced than in the past. However, some major oil companies as well as other analysts don’t see unconventional oil boosting non-OPEC production much in the next 20 years. In their most recent annual energy outlooks to 2030, both ExxonMobil and BP — two of the world’s largest independent oil companies — forecast that non-OPEC production will more or less hold its own, no better. “It’s quite an accomplishment to keep non-OPEC supply flat level,” says analyst Kyle Countryman, who as a member of ExxonMobil’s energy and economics group in Dallas, Texas, helped put the outlook together. Adds his colleague, group manager Robert Gardner: “We’re not optimistic we’ll see a significant increase in unconventional liquids.”

The problem with unconventional oil is that, by definition, it is hard to extract. “It’s a matter of timing,” Gardner says. “It depends on the pace of technology development.” And even after the essential technology is developed, unconventional oil will still be difficult—as well as expensive—to extract, limiting the rate at which it can be produced. All in all, “technology matters, economics matters, but geology really does matter,” says oil analyst David Greene of the U.S. Department of Energy’s Oak Ridge National Laboratory in Tennessee. “Progress in technology is not fast enough to keep up with depletion” of oil reservoirs. Oil analyst Richard Nehring of Nehring Associates in Colorado Springs, Colorado, is more optimistic about prospects on oil’s frontiers and how fast some kinds of unconventional oil can be brought online, but he still finds that “non-OPEC will be stable or at the very best slowly increasing” over the next couple of decades.

Optimism not dead

“We’re a little more bullish about non-OPEC than some others,” says Peter Jackson of Cambridge Energy Research Associates (CERA) in London. Along with the U.S. Energy Information Agency (EIA), CERA sees real promise in underdeveloped oil provinces such as offshore Brazil and Kazakhstan. Likewise, if prices stay high, unconventional oil will contribute substantially, both fi nd, especially the Canadian oil sands. Beyond the next few years, “we’re seeing a gradual increase in non-OPEC supply,” Jackson says.

Such optimism has not always served forecasters well. In 2005, Jackson and his CERA colleague Robert Esser of the New York office predicted that “global oil production capacity is actually set to increase dramatically” up to 2010. It didn’t; both OPEC and non-OPEC oil production remained steady. Likewise, in its 2005 outlook, EIA projected a jump in non-OPEC production by 2010 if prices were high, which they mostly were. But 2010 production was about 40 million barrels per day, right where it was in 2005.

So what if the pessimists turn out to be realists and non-OPEC producers can’t answer the call for more oil? Demand will increase in this decade, mainly from developing countries like China and India as populations grow and incomes rise. That rising demand might be met by several sources. In decreasing order of reliability, production of another sort of petroleum liquid, natural gas liquids (NGLs), is expected to increase. NGLs are the lighter-weight hydrocarbons that condense from natural gas when it cools. The expected increase in global natural gas production—at least half of which would come from OPEC—would lead to increased production of NGLs.

OPEC would, it is fervently hoped outside of the cartel, be willing and able to boost its output of conventional oil. ExxonMobil has OPEC production rising from about 29 million barrels per day today to about 36 million barrels per day in 2030. That would increase OPEC’s share of oil production even further, but Kaufmann, among others, expects that OPEC will see an opportunity to make more money from its oil by curbing production and driving prices up. That would tend to encourage production of liquid biofuels, but whether output could be ramped up quickly enough to bring relief remains unclear. The clearest outcome, according to Greene, is likely to be continued or even greater volatility in the price of oil with all the economic downsides that would entail.

Perhaps the most sobering outcome of a non-OPEC plateau might be reminding everyone that even planet-scale resources have their limits. And that when you are consuming them at close to 1000 gallons a second, the limits can catch you unaware. The next 5 years, assuming oil prices remain on the high side, should show who the realists are. –RICHARD A. KERR

Climate Change: The Threat to Life and A New Energy Future

2010-06-26T11:22:00.009-04:00

Last summer, I went to the American Museum of Natural History to see their (temporary) special climate change exhibit, called Climate Change: The Threat to Life and A New Energy Future. The exhibit has now moved on to Chicago, to the Field Museum of Natural History.

The first part of the exhibit was quite striking. A neon line along two walls traced CO2 levels in the atmosphere.

On the walls were dates, as well as pictures of the technology of the time.

Coal, the rock that burns.

A Radio Shack TRS-80 was displayed as an example of how fast computers spread and became a necessary part of our lives...and how computers and their energy demands are likely to keep increasing, as they are still scarce in many parts of the world.

Children look at a spinning model of the earth.

The drowned city. You can "flood" this model of New York City, to see what it will look like as sea levels rise.

An arctic fox, in a part of the exhibit devoted to how climate change is affecting the arctic.

(There were also some artifacts from Chaco Canyon, a civilization done in by climate change, and a display on ocean acidification.)

A different graph of rising temperatures.

The text at right says:

Month by month, our planet's climate has been warming, as shown by the color shift in this table from blue (colder temperatures) to red (warmer temperatures).

To create the table, researchers looked at whether the average temperature for any particular month was hotter or colder than the average temperature for that month between 1951 and 1980. For instance, in 1978, the average July temperature was .15°C (.27°F) than the average for all Julys between 1951 and 1980.

How ocean temperatures are measured. An ocean buoy:

A robotic underwater glider used to measure temperature.

This was kind of fun. You could move the white pieces around, and a light meter would measure how much light was reflected. It made a pretty big difference.

The display on oil. (There were displays on other CO2 sources as well, including cement, natural gas, and land use.)

There was also a model oil rig.

There were models of all our energy sources. Here's a solar panel.

There was a big section on solutions.

And a section on what you can do, that encouraged people to write down what steps they were planning to take on little pieces of paper.

Switching Horses on Oil Strategy

2009-05-26T10:23:00.000-04:00

From the Wall St. Journal:

By LIAM DENNING

Thunder Horse turns 10 next month. BP's billion-barrel oil field, discovered in 1999 in the Gulf of Mexico, is a source of pride. It also is a reminder of what ails the oil majors.

Thunder Horse, which started up in 2008, will provide 42% of BP's incremental upstream production over the next three years, according to analysts at J.P. Morgan Chase. Unfortunately, it is also one of BP's few discoveries of such scale in recent memory. Neil McMahon of Sanford C. Bernstein calculates that less than half of BP's additions to reserves over the past five years have come through its exploration efforts.

BP has done better recently, especially in terms of reserves replacement. At its latest strategy presentation, the company promised production growth out to 2020.

But that target is open to question. BP must contend with declining production at existing, mature fields and has cut its capital-expenditure budget. Meanwhile, it also has committed to maintaining its dividend.

Trying to be all things to demanding investors isn't a dilemma peculiar to BP or even just the oil industry. But the majors, given their size and exposure to volatile energy prices and geopolitics, feel the pressure more than most.

This decade, many of them have chased scale and touted synergies from mergers. Investors have been unimpressed. BP, for example, invested $211 billion in capital expenditures and acquisitions between 1998 and 2008, according to Mr. McMahon. Its stock was one of the worst-performing across that period.

Shares of ConocoPhillips, another big acquirer, have performed better. However, its stock crashed hardest over the past year as falling energy prices exposed flaws in its acquisition strategy.

Absent high energy prices, the majors' investment appeal is under scrutiny. Is it about share-price growth, high payouts, or both? To a large degree, they have ceded exploration and technology leadership to smaller competitors and the oil-services sector.

Of the majors, Exxon Mobil has achieved the best balancing act, reflected in its high valuation multiples. And with ample net cash, it can continue doing so. The clock is ticking on several others.

Barring Exxon, all of the majors outspent their operating cash flow on capex and dividends in the first quarter, according to IHS Herold. Leverage for most is low, but straining for growth while dishing out lots of money to investors without the underlying cash flow to match isn't sustainable.

Another round of megamergers, even if allowed, wouldn't likely cut it with investors. Acquisitions of some smaller competitors to pick up choice assets and underpin stable production are fine at the right price. But this also requires financial flexibility and can only be an adjunct to organic reserve replacement over the long term.

Above all, the majors need to reassure investors that the regular distributions of cash are sustainable. That means, when it comes to replacing barrels, proving they can go out and find, not buy, more Thunder Horses.

Growing Pains

2009-05-25T22:25:00.002-04:00

From Barrons:

Goosing growth is the only way out of this mess.

HOW ARE WE GOING TO GET OUT OF THIS MESS? We face recession, a banking crisis and mammoth government debts. We face either deflation or inflation, if not both, one after the other. We practice protectionism and internationalism at the same time. Our politics can no longer be called a system -- just a cat fight.

Solutions are not in short supply, of course: Stimulus spending, financial regulation and austerity are popular forms of change. So are business bailouts, authoritarian environmentalism and generalized activism. On the fringes we find such nostrums as soaking the rich with taxes, a return to the gold standard and radical redistribution of wealth.

We can't count on any of them.

They have a common flaw. It's the belief that there's one misdeed at the root of our mess, so that repenting of our economic sin will restore the prosperity we enjoyed so much so recently.

Let's face the fact that much of our recent prosperity was borrowed from the future. It must be paid back with economic growth.

Losing Ground

A society that grows at an average 1.8% a year (as the U.S. economy did from 1973 to 2001) will double its income in 39 years. We certainly can't grow our way out of our debts to the next generation that way.

At recent Chinese rates of growth -- let's say 10% per year -- income doubles every seven years. The Chinese are growing their way out of the economic malaise imposed by their former political system. Note well, as the Chinese do, that doubled income means people can spend on things and services that also double in number and quality, also every nine years.

China's adoption of capitalist methods has lifted more people out of poverty than all the world's foreign aid since World War II. Imagine if the U.S. were growing like that. We might be able to pay off our debts to our elder generation and our foreign creditors.

In some circles, however, growth like this is considered a gigantic problem. "China cannot continue along its current path because the planet can't handle the strain," declared Paul Krugman, a Nobel-prize-winning economist and New York Times columnist. He called recently for tariffs on Chinese exports to force the Chinese to stop using so much coal. "Letting China match the West's past profligacy would doom the Earth as we know it," he said. Is that protectionism? "So what?"

Lester Brown, founder and chief visionary of the Earth Policy Institute, goes Krugman one better. In an article in Scientific American, Brown raised the specter of food shortages that destroy civilization. Rising populations and rising incomes, he warned, mean rising food prices, falling water tables, and eroding soils. Rising temperatures compound the problem, he added.

"The world is in a race between political tipping points and natural ones," Brown announced. "Can we close coal-fired power plants fast enough to prevent the Greenland ice sheet from slipping into the sea and inundating our coastlines?"

Beyond the apocalyptic rhetoric, there is an economic truth: China's use of coal, particularly to generate electricity, is very inefficient. The country produces half as much as the U.S. and generates more carbon dioxide in the process. But this is also an opportunity: Chinese prospects for sustainable economic growth include more efficient use of energy and labor. India, Vietnam, Indonesia and other developing countries also can meet the challenge of energy efficiency as well as or better than the U.S. (which itself is 50% behind the world's leader in energy efficiency, Japan).

Growing Up Faster

The idea that America can grow at 8% a year is not usually open for discussion. The U.S. is already the world's richest nation. It has an economy twice as big as China's, and its per-capita GDP is 10 times greater than China's. The U.S. is criticized around the world for sucking up resources, not praised for creating them.

Imagine what Krugman and Brown and their ilk would think of a restarted American economic engine, growing at 8% a year by the application of some unexpected technological advance, such as fusion energy, highly efficient batteries, or widespread biotechnology. They would see it as disaster.

In the current economic mess, it's easy to believe that the U.S. has reached a point where there are diminishing returns to the usual forms of investment. Putting more people to work at the same tasks doesn't do as much as it used to. Putting more capital equipment to work at the same tasks doesn't do as much as it used to. We have even found that higher leverage -- borrowing more to get more work out of every dollar of capital -- has its drawbacks. Should we rest content with what we have, even if recession and debt payments force us to have a little less?

Quite the contrary: We should press forward with investments that offer chances to improve the efficient use of key economic inputs. Just as the computer revolution that started in the 1960s has improved the quantity and quality of some kinds of labor, the biotech revolution that started in the 1980s may improve the productivity of agriculture.

Clairvoyance

The future is not clear. Those searching for a vision will select a vision they want. Krugman and Brown are among those who envision a future of greater government control for the greater good. Naturally, they have their fans. We prefer visionaries along the lines of Freeman Dyson, who expects technological solutions to the same problems.

If the question is carbon dioxide emissions, the answer could be bioengineered plants that make more efficient use of carbon dioxide. Shortage of water? New desalinization technology. Living space? Maybe hollowed-out asteroids accessible with cheap space travel. "Infinite in all directions," as Dyson put it in a book title.

The American economic policy should be to wait and see. Not injecting false stimulation to fool consumers into unwarranted confidence; encouraging genuine investment with prospects for big profits in the long run. Not soaking the rich; letting producers keep more of their earnings. Not "cap and trade"; nuclear power. Not corn-ethanol mandates; free-market fuel at free-market prices.

Not stagnation; growth for the world.

What to do

2009-04-22T11:49:00.003-04:00

I added a new links section the sidebar, called What to do. I was originally going to call it Solutions, but honestly, I'm not sure there are actual solutions to the problems we face. Just things we can do mitigate the hardship for our ourselves and ours.

The first link I added was John Michael Greer's unfortunately named Advice from German Poets. I say unfortunately named because the title doesn't really grab the reader. Nor does it really give you an idea of what's inside. I suspect a lot of people who would be very interested in what it says will not bother to read it.

Greer, who believes there will be a collapse, but that it will be slower than most "doomers" anticipate, suggests three things to do to prepare: give up something, learn something, and save something. Give up something that ties you to the current system, learn something that will be useful in the world to come, and save something from our current culture that you want to see continue in the future.

If the future unfolds as he expects, these would be useful steps to take. However, they could be useful even if he's wrong, at least if you keep that possibility in mind. For example, you could give up smoking or junk food, which would save you money and improve your health even if cigarettes and Twinkies remain plentiful the rest of your life. You could learn something that would be fun or useful even if the happy motoring lifestyle continues. And if you love something enough to try and save it, you will probably enjoy the time spent with it, even if it turns out there was no danger of it going extinct.

What am I going to do? Um, well, I'm still thinking about it. I've always been something of a jack of all trades, master of none. We INTPs have a hard time choosing.

A stitch in time ...

2009-03-30T08:36:00.001-04:00

From Petroleum Economist:

A stitch in time ...

There's a new peak-oil organisation on the block. Is it saying anything new? Does it matter? Tom Nicholls writes

THE ENERGY locked into one barrel of oil is equivalent to that expended by five labourers working 12-hour days non-stop for a year. When you put it like that – as a new report warning the UK government of the perils of peak oil does – petroleum's not something you want to run out of, unless you have something that does the same job. And nothing does.

As Jeremy Leggett, co-author of The oil crunch: securing the UK's energy future, puts it: "Nothing will impair our competitiveness as much as premature peak oil." It's a bigger worry – in the immediate future – than global warming, he argues. "In the longer term, climate change is formidable; it could be curtains for civilization." But a mismatch between oil supply and demand is likely to occur sooner – possibly as early as 2011-13.

That is the view of the report's publisher, UK Industry Taskforce on Peak Oil & Energy Security – a newly formed association of UK companies "concerned that threats to energy security are not receiving the attention they merit". In its analysis of market dynamics, the taskforce is in good company: the International Energy Agency's (IEA) World Energy Outlook (WEO) 2008, published last month, makes similarly alarming predictions. It says the oil industry will struggle to meet the world's energy needs in the next two decades, because of falling production rates at existing fields and continued energy-demand growth, making supply shortages and price spikes increasingly probable (see p25).

The taskforce – which aims to provide a "pro-active" strategy for tackling these problems – comprises an eclectic mix of prominent corporate names: transport companies Virgin, FirstGroup and Stagecoach; architects Foster and Partners; energy company Scottish and Southern; Arup, a consultancy; and internet search-engine firm Yahoo. More want to join, says Leggett. The organisation plans to continue its research, with a report next year on the net return on energy that various energy-producing systems are able to provide, which would allow useful comparisons to be drawn between different energy sources.

Many of the arguments the taskforce uses to support its pessimistic view about the outlook for the upstream industry are familiar: huge field discoveries are rare and lead times for projects are long. Producers, many of which are already protective of their natural resources, will need more oil and gas for their domestic markets, leaving less for export. Investment in maintaining and expanding the world's ageing energy infrastructure is insufficient. There aren't enough young people replacing retiring skilled workers in the energy sector. And the fall in prices since mid-year is already causing project delays and cancellations, which could have serious implications for supply in a few years' time.

The report also repeats the accusation – made, for example, by Matt Simmons, an investment banker specialising in the energy sector, against Saudi Arabia – that Opec countries may be overstating their reserves, lulling the world into a false sense of security about oil and gas production. One or two radical downward revisions and the world could be facing a collapse in supply, says Leggett.

The taskforce calls for a national energy plan that would promote exploration and production, energy conservation and efficiency, investment in renewable energy and sustainable renewable fuels and a national skills programme to deal with the manpower shortage. Policies in the Renewable Energy Strategy process should go beyond the EU target for renewable energy to account for 20% of the EU-wide energy mix by 2020. Decisions on nuclear power must be taken more speedily.

Again, there are many similarities with the approach advocated by the IEA's WEO 2008, which calls for improved energy efficiency, more low-carbon energy and very large investments in energy infrastructure.

Fortuitously, too, the policies that are needed to tackle peak oil and those needed to achieve sufficiently deep cuts in greenhouse-gas emissions to abate climate risk, a greater concern for the IEA, are the same – "immediate and rapid acceleration in our use of non-fossil sources of energy, and reduction in the overall demand for energy," in the words of the report. But these technologies must be introduced much more quickly to the UK, it adds, than "anything that has yet been considered in the climate-change response arena".

In his day job, Leggett, a geologist and former Greenpeace activist, heads up Solarcentury, a UK supplier of solar-photovoltaic panels. The company claims it's in business "to make a big difference in the fight against climate change" and "to revolutionise the global energy market".

They are lofty-sounding aspirations, certainly. But, claims the taskforce, it would not take much to accelerate the development of clean energy: many of the numerous alternative-energy technologies being explored in Silicon Valley and elsewhere can displace traditional energy markets "far faster than many people probably realise" – dealing with the problems of energy security and climate change simultaneously.

One-dimensional thinking

Solar – in common with many other emerging energy technologies – suffers from the perception that it is prohibitively expensive. But that's partly down to one-dimensional thinking, says Leggett. It's about return on investment, not just pay-back time on energy bills. Investing in solar is "better than putting your money into the building society, assuming you take a view that energy prices will continue to rise as they have done."

Various organisations have been frightening the public for years – almost since the start of the oil industry in the mid-19th century – about the imminent exhaustion of oil reserves. In that sense, the taskforce and its gloomy report do not break new ground. Many of the arguments behind the theory and solutions to the problem have been deployed before. But the price of inaction makes the argument worth repeating. Leggett draws a parallel with the prevailing financial crisis: what would have happened, he wonders, if eight well-known companies had warned the world about the threat of a credit crunch five years ago?

And, he adds, even if the more conservative oil companies, such as ExxonMobil and Saudi Aramco, are proved to be right in their assertion that peak production is decades further off than the peak-oil movement believes, it makes economic and environmental sense to be building alternative-energy capacity as quickly as possible anyway. "We have to try."

Green Roof

2009-02-15T20:19:00.004-05:00

The green roof at the California Academy of Sciences

I love natural history museums. I was in northern California last week, and decided to check out the California Academy of Sciences in San Francisco. They recently built a new "green" building with newly designed exhibits.

Perhaps because it was new, it was amazingly crowded. They encourage environmentally friendly transportation, suggesting on the ticket that you bike, take public transportation, walk, or car pool. Nevertheless, the parking lot was full when we got there. We drove around awhile, and finally found a spot on a side street a couple of blocks away. (Which was at least cheaper, since there's no charge for parking on the street.) The first sight of the building was quite striking, not least because of the immense crowds lined up to go in.

There was a planetarium, and a multi-story rain forest, neither of which we saw. It was simply too crowded. The lines were incredible. The aquarium was cool, but again, it was so crowded we couldn't take it for long. People were packed in like sardines (and many of them were babies who were coughing their lungs out). I'm kind of surprised the fire marshall allows it.

I was also disappointed by the lack of dinosaur stuff. Aside from a therapod skeleton near the cafe, there wasn't any.

The food at the cafe was pretty good. We had spring rolls with shrimp and chicken "manapua" (Chinese steamed buns). Long lines and expensive, but good.

The best part of the museum was the "living roof." It wasn't as crowded as the rest of the place, and it was interesting.

All in all, though, I was underwhelmed. The Carnegie in Pittsburgh and the Museum of Natural History in NY are much better.

And I fear I am really not cut out for city life. San Francisco is a beautiful city, but arrghhhh! All those people. It made me want to crawl into a cave somewhere and become a hermit.

I was also struck by water restrictions in northern California. Low-flow faucets and shower heads everywhere. The toilets all had signs saying not to use too much TP because it would clog the low-flow toilet. The public bathrooms had signs about how you could reduce your water use at home. ("This toilet saves water. You can do the same at home by putting a brick in the tank!")

I stayed near the Port of Sacramento. It had just received a shipment of natural gas generators for a new power plant that was supposedly the heaviest shipment ever. Wind turbine blades go through there, too, with blades so large they hang off the end of the ship.

What's shipped out is mostly rice. Apparently, they flood the desert so they can grow rice, which is shipped to Japan. That doesn't seem like a wise use of water for an area that suffers from chronic water shortages.

California is a beautiful place, but I was happy to go home, where there's decent water pressure and a lot less people.

A seagull near the Golden Gate Bridge

Commodities Rebound? Watch the Job Cuts

2009-01-23T06:59:00.001-05:00

From the Wall St. Journal:

Resources Layoffs Bode Ill

By LIAM DENNING

Along with the government, one of the few sectors seemingly immune to layoffs has been the resources business. Indeed, a shortage of skilled workers, pushing up wages and lengthening development schedules, was cited as a key reason for soaring commodities prices.

So why the recent flurry of pink slips? Wednesday, BHP Billiton said it will cut 6% of its work force. Oil major ConocoPhillipsand oil-field-services giant Schlumberger also announced staff reductions this month.

With crude oil and industrial metals prices having collapsed, some trimming is to be expected, especially following the hiring spree of recent years. Moreover, as in BHP's case, many of the workers being let go are contractors, with lower associated hiring and firing costs.

Even if cutting some workers makes sense in a crunch, however, this is worrying, and not merely for the sector's employees. Until recently, investors in mining and energy were fed a diet of Malthusian predictions about peak oil, equipment shortages and a dearth of engineering graduates.

Instead, the cycle lives on. Consensus forecasts still point to a bounce back in the price of commodities such as oil and aluminum as early as this year. But if the pace of layoffs picks up, the unavoidable conclusion would be that the producers themselves don't share such optimism.

The Worse Inauguration Day Ever

2009-01-21T06:25:00.003-05:00

For the stock market, that is. I think it was more related to the British banking crisis than to Obama's taking office. However, there was a 100-point drop as soon as Obama's speech ended, suggesting that traders were disappointed in what they heard. I'm not sure what they were expecting. It was your typical inauguration day speech. Presidents don't lay out policy details in such speeches. The only thing I can figure is that, like the good folks at The Automatic Earth, they found the speech not very inspiring. Perhaps they were hoping Obama would show more charisma - in order to get the voters behind the tough choices that loom in the near future.

I found the speech disappointing as well. It seemed like a speech Dubya could have made.

We will not apologize for our way of life, nor will we waver in its defense, and for those who seek to advance their aims by inducing terror and slaughtering innocents, we say to you now that our spirit is stronger and cannot be broken; you cannot outlast us, and we will defeat you.

If I didn't know that was Obama's speech, I'd have guessed it was the Shrub's.

Perhaps I was just expecting too much. Expectations were insane for this speech. People were saying it would be not only Obama's best speech ever, it would be the best presidential speech in history. The reality was a reasonably competent inaugural speech, but nothing to write home about.

A lot of my friends are extremely excited over the new Obama presidency. I'm not. It's better than four more years of Bush...but not much. I just don't see much difference between the Democrats and the Republicans. Geithner for Treasury. Salazar for Interior. Jason Furman for economic policy director. Ugh.

I think the honeymoon is going to be short-lived. The financial crisis is heating up again. If there isn't real change, instead of just talk about it, Obama will end up being even more despised than Bush. Mark it down: in four years, many of the people who are euphoric today about Obama's election will be calling for his head and denying they ever voted for him.

Western prosperity is based on resources that are running out

2009-01-10T19:29:00.005-05:00

This letter is from the January 8, 2009 issue of Nature:

SIR — In response to the lack of a flagship achievement by economics, as noted by Jean-Philippe Bouchaud in his Essay ‘Economics needs a scientific revolution’ (Nature 455, 1181; 2008), Jesper Stage proposes in Correspondence that the prosperity of western societies is one such achievement (‘Speaking up for economic sciences modelling’ Nature 456, 570; 2008). However, this prosperity is mainly based on the use of non-renewable resources and therefore is probably spurious.

Several hundred million years were needed to form the fossil energy that will be exhausted during a few hundred years. This is roughly equivalent to spending all one’s annual income during the first 30 seconds of a year. In particular, the frenzy to automate processes in order to increase competitiveness leads to rapid exhaustion of available resources, for example through over-fishing or degradation of soils.

All current growth-based economic models imply massive use of non-renewable resources and environmental degradation. These models are not sustainable, even in the short term. As early as 160 years ago, John Stuart Mill affirmed that “the richest and most prosperous countries would very soon attain the stationary state” (Principles of Political Economy Longmans, 1848). In contrast to that time, when resources were being used up at a rate that was several orders of magnitude slower than today, a phase of economic degrowth is necessary before a stationary state can be reached. It would be a major achievement of economics to achieve such a degrowth without social and political disasters.

Hervé Philippe
Département de Biochimie
Université de Montréal
Montréal, Québec, Canada

"Degrowth," eh? Interesting term. I think I like it.

Ithaca Carshare: Carshare Implementation in a Small Upstate City

2008-12-09T18:06:00.004-05:00

This story is from the Fall 2008 Technology Transfer News, a publication of the state of New York.

Ithaca Carshare Nissan Versa in home location near Cornell University. Note sign for reserved parking, similar to busstop or taxistand (“Tow Away Zone” sign not yet installed by City of Ithaca).
During the summer of 2006, Program Opportunity Notice (PON) 1028 was issued to support the development, qualification and/or demonstration of innovative transportation products and systems. This PON was a joint effort of the New York State Department of Transportation (NYSDOT) and the New York State Energy Research and Development Authority (NYSERDA). One of the projects selected for funding was Ithaca Carshare, an early small-city implementation of car sharing.

Carsharing is a membership-based program that allows approved members 24/7 automated access to a fleet of vehicles located in scattered sites, usually in or near dense neighborhoods or employment centers.

Members' driver records are vetted before approval, allowing the Carshare organization to hold auto liability insurance on the entire group as a pool. Use of vehicles is coordinated with a reservation system where members can reserve cars via the web or an automated phone system, on a first come, first serve basis. Access to the cars and records of time of use and mileage, are created and kept using an RFID system with computers in the cars that send information to a central server via text messages and a cell phone
modem.

Members pay an application fee, an annual or monthly membership fee, and usage charges (per hour and per mile) only when they reserve and use vehicles. All other expenses, including gas, insurance, maintenance, cleaning, and other costs, are borne by the carshare organization, with members receiving a monthly bill itemized by trip.

Carsharing is particularly suited to short duration trips from locations where the user does not have convenient access to a personal car. For instance, non-SOV (single occupant vehicle) commuters can benefit from carshare vehicles located at employment
centers for mid-day errands including doctor visits, or work related errands. Residents of dense neighborhoods benefit from car sharing because their need for a dedicated private automobile may be infrequent. Car sharing can provide the occasional access to a car for shopping trips or other trips not well served by transit, walking, or biking, thereby allowing reduced car ownership by residents of downtowns and other nodes.

Carshare members use RFID fobs to lock and unlock vehicles. In-car computer system disables ignition when car is locked with the fob, increasing security since the ignition key remains inside vehicle.
Car sharing was first launched in Switzerland in 1987 and in North America in Quebec City in 1993. As of July 2008, there were 33 programs serving 318,838 members with 7,505 vehicles in North America. Most cities with car sharing are large urban areas. Ithaca Carshare is one of the first to explore applying this mode in a small city, in view of the possibilities for other Upstate cities.

Ithaca Carshare's business model includes strong partnerships with Cornell University and Ithaca College, serving both the student and staff populations. Because so many people are able to benefit from Ithaca Carshare vehicles, the City of Ithaca, Cornell University and Ithaca College have all provided parking for carshare vehicles, similar to what is provided for bus stops.

A major hurdle for the project was finding auto liability insurance. The conservatism of the insurance industry coupled with the innovation of this business model proved challenging. After nearly two years struggling with this issue, Ithaca Carshare finally ended up using a connection with another nonprofit
carshare outside NYS to secure this insurance.

Cornell and Ithaca College have also purchased memberships in bulk for students and staff, with Cornell tying eligibility for these “free” memberships to participation in their award-winning TDM (transportation demand management) program.

Ithaca Carshare launched with six Nissan Versa hatchbacks located in downtown Ithaca, on the Cornell and Ithaca College campuses, and at EcoVillage at Ithaca (a co-housing community located 2 miles west of Ithaca). In the first three months of operation, Ithaca Carshare has grown to serve 500 members with nine cars and one Toyota Tacoma pickup truck. They have also served as a mentor for several other groups exploring carsharing services in other Upstate cities.

One of the ten Ithaca Carshare vehicles is a Toyota Tacoma truck, registered with the local solid waste transfer station. Note sign for reserved parking includes “Tow Away Zone” designation, similar to a busstop.
Future plans include outreach to low-income populations in partnership with social service agencies and investigation of the possibility of adding electric or plug-in hybrid vehicles to the fleet.

For additional information on this please contact Joe Tario at jdt AT nyserda.org

UPDATE: Jennifer of Ithaca Carshare asked me to add this information:

Thanks for the post about our organization! We have been operating nearly six months now, and are really pleased with how things are going.

I just wanted to let you know that it may be more useful for people interested in Ithaca Carshare to contact us directly, instead of Joe Tario, who is our funding contact at the New York State Energy Research and Development Authority. (Of course, if they are interested in funding opportunities in New York State, Joe would be a great contact.)

Here at Ithaca Carshare, we can be reached at 607.277.3210 or info@ithacacarshare.org, and our snail mail address is P.O. Box 418, Ithaca, NY 14851-0418

Thanks!

Jennifer

***
Jennifer Dotson, Executive Director
IthacaCarshare.org
607.277.3210

The Monastery

2008-12-08T08:54:00.005-05:00

I drove a few minutes up the mountain yesterday to visit the local monastery. They were having their annual Christmas Fair.

The first snow of the year was falling (a little later than usual). Just enough to make it festive. It stuck to the ground, but not to the pavement. Which was good, since those narrow mountain roads are treacherous enough without snow. There are a lot of horse farms and Christmas tree farms in the area. Many cars had freshly-cut trees tied to their roofs.

The monks call it a Christmas Fair, but it's a really low-key event - more so than the name suggests. Basically, they support themselves by selling things they produce, and the Christmas Fair is when they open up a little shop at the monastery.

They could probably sell a lot more if they advertised more. The average garage sale has more advertising than the Christmas Fair. But that's not really what they're about. They have regular customers who know about the Fair, and they sell enough then that they don't need to advertise.

It's not easy to find the place if you don't know it's there. There are no signs by the main road. The monastery is marked by a gate off a winding, barely paved mountain road. The gate is open with a small sign when the Fair is on, and you drive up a narrow dirt road through the woods to the monastery. (The road is only wide enough for one car at a time. Luckily, I've never encountered a car going the other way.) Among the trees are scattered religious statues and some farm animals (sheep, goats, chickens).

There's no parking to speak of. The monks don't have cars. People park wherever they can, and no matter where you park, you pretty much block the road.

The "shop" is a tiny wooden shed. It's heated by a wood stove, with a couple of friendly cats in front of it. The shed is so small that it's hard to move if even three or four people are in it. Shelves built by students at local colleges hold items for sale: jams, salsas, tomato sauces, chutneys, soups, vinegars, soaps, dried spices, candles, and small craft items.

I don't really "do" Christmas any more, at least as far as gift-buying. However, I do buy small consumable items as gifts, if I know the recipient will actually use them. So I bought some aromatic vinegars and handmade soaps as gifts for friends and family members who like them.

There was an article in the local paper about the monastery. College students can work there and earn credits. One young woman said she enjoyed it so much she planned to keep working there, for no pay and no college credits. She said after graduation, she planned to take up subsistence farming.

That's great, but her college is one of the most expense in the country. Seems kind of a waste to spend over $200,000 on a degree if you want to be a subsistence farmer. But then, her family can probably afford it.

Letter from Iceland

2008-11-16T16:52:00.002-05:00

From the Financial Times comes this account of life in Iceland:

By Robert Jackson

Give it a population of 300,000, about the same as Coventry, 70 per cent of them in the cities of Reykjavik and Akureyri. Ensure they are all related and give the majority the ability to trace their ancestry back to the times of settlement, more than a thousand years earlier. Endow these people with industry and ambition. Give them their own language - all but unchanged for a millennium - a literary tradition, three national newspapers, two television channels, free universal healthcare and education and close to zero unemployment. Give this country a consistently high ranking in the world standard-of-living charts and you have the Iceland of the recent past. Not a bad place, all in all.

Now allow this country's banks - virtually unregulated - to borrow more than 10 times their country's gross domestic product from the international wholesale money markets. Watch as a Graf Zeppelin of debt propels its self-styled "Viking Raiders" across the world's financial stage, accumulating companies like gamblers hoarding chips. Then sit on the sidelines as the airship flies home and explodes, showering its blazing wreckage over this once proud, yet tiny, nation.

There you see the Iceland of today - the victim of an economic 9/11 and one of the very few places in the world where the words "financial meltdown" can be used without fear of exaggeration.

There is no daytime TV in Iceland. Parents are at work and children at school, so the test card, that feature of a bygone age, is the only thing aired. For the transmitters to be switched on in mid-afternoon and a sombre-looking Geir Haarde, the prime minister, to appear behind a desk, a national flag at his side, it had to be serious - and it was. The country was on the verge of bankruptcy; the government was taking control of the banks and was going to assume far-reaching powers to secure the safety of the nation and its savers.

As I watched, I felt a detached sympathy for those poor people living on a blighted island - until it dawned on me that I was one of them. Recent events had savaged my net worth by 60 per cent and pushed up my cost of living by more than 20 per cent. Iceland's plight was mine, too. What I failed to appreciate at the time was the emotion of this unprecedented television address, particularly in the way it finished:

"Fellow countrymen... If there was ever a time when the Icelandic nation needed to stand together and show fortitude in the face of adversity, then this is the moment. I urge you all to guard that which is most important in the life of every one of us, to protect those values which will survive the storm now beginning. I urge families to talk together and not to allow anxiety to get the upper hand, even though the outlook is grim for many. We need to explain to our children that the world is not on the edge of a precipice, and we all need to find an inner courage to look to the future... Thus with Icelandic optimism, fortitude and solidarity as weapons, we will ride out the storm.

God bless Iceland."

Edda, my partner, was in tears on the sofa beside me.

A drive across town later that afternoon, October 6, at first gave grounds for comfort. The roads were as full as usual for the Reykjavik rush-hour - a half-hour build-up of traffic. Aircraft flew in and out of the downtown airport, students made their way home from schools and universities - note the plural - while visitors went to hospitals and fitness fiends to sports clubs. Reykjavik showed all the outward appearances of carrying on.

But a different picture began to emerge from the hourly news bulletins on the car radio. The Icelandic krona's freeze in the capital markets had now spilled over into the day-to-day transactions of Icelanders abroad. Holidaymakers and business travellers venturing "til Útlanda", as it is called, found their credit cards refused, and those wishing to buy foreign currency could not find willing sellers, aside from one or two who limited their purchases to €200.

Trust in the banks had evaporated and people were trying to find a safe haven for their cash. One man had waited for six hours in a bank while his life savings, more than £1m in kronur (at IKr200 to the pound), were counted out in cash in front of him. "I feel like an innocent man dragged from his bed, put in a barrel and hurled over Gullfoss!" wrote one journalist that morning. "We have been brought down by a handful of men who bet our nation's wealth, fame and prosperity on a throw of the dice." Gullfoss is one of Iceland's tourist attractions - a majestic 100ft waterfall.

On collecting our daughter from her handball practice, I learnt the news that her club could not obtain the foreign currency it needed to release their new team shirts from customs. The city's myriad sports teams rely on local sponsors and our daughter also brought the news that this source of funding for her team was likely to dry up in the months to come. Later that evening, Skype, our communications lifeline, would not renew our credits with an Icelandic credit card. E-mails began to arrive from friends overseas, alarmed by news reports and asking if we were all right.

But all this was trivial compared with the financial distress, in some cases ruin, that now faces a significant proportion of the population.

Easy access to 100 per cent mortgages has seen a change to the traditional pattern of young Icelanders living with their parents until their mid-twenties. The suburbs of Reykjavik have grown by a third in the past decade, most of it housing for first-time buyers. Whole new neighbourhoods have emerged. New streets house young couples, many with children, most with two cars in the drive and furnished with the best that Ikea can provide. All bought with 100 per cent loans, many in foreign currencies.

Iceland is the only country in the world that indexes its loans in addition to charging interest. This means that when Icelanders borrow IKr1,000 from the bank and inflation increases by 5 per cent, the bank increases their debt to IKr1,050 at the end of the year. A great deal for the bank and fine for you, too - so long as the property's value and your salary are increasing by inflation and more. The majority of Icelandic mortgages are based on this punitive system and with inflation running at nearly 20 per cent, they will see their IKr1,000 loan turn into a IKr1,200 loan. The interest burden will increase proportionally. This is bad enough, but when coupled with falling house prices, it means that many face a particularly savage variety of negative equity. The impact on highly geared borrowers, which in practice means most Icelanders, would be hard enough even with two incomes, but with unemployment set to soar, many households are going to go under.

A recent first-time buyer, a woman in her late twenties, said: "I took a 100 per cent loan to buy an apartment. I placed my savings in Kaupthing's money market account, because it promised high interest rates, and my pensions in Kaupthing's Vista 1 at the prospect of becoming a millionaire retiree. Both of these funds were based on stock investments and I knew that they were risky - but I took the bait and the risk. Now most of this money, if not all, is lost."

Icelanders are by nature frugal people. It was one of the few countries in the world, perhaps the only one, that had a pension system that could meet the needs of its ageing population. But in recent years, many older people have been persuaded by the banks to invest their savings in high-yielding money-market accounts. As a result of the collapse of the banking system, many of these accounts have seen huge write-downs and some are now worth less than half of their previous values. The additional money people had put aside to top up their pensions has been hard hit.

Bjork, Iceland's ambassadress of cool, summed it up in The Times on October 28: "Young families are threatened with losing their houses and elderly people their pensions. This is catastrophic. There is also a lot of anger. The six biggest venture capitalists in Iceland are being booed in public places and on TV and radio shows; furious voices insist that they sell all their belongings and give the proceeds to the nation. Gigantic loans, it has been revealed, were taken out abroad by a few individuals and without the full knowledge of the Icelandic people. Now the nation seems to be responsible for having to pay them back."

A homemade banner, made of sheets, hangs over the main motorway in Reykjavik, tied to the railings of a bridge. "Stondum Saman!" it cries out. "Let us stand together!" It's the new rallying cry of a beleaguered nation.

Icelanders have seen their economy swell and shrink from time to time over the centuries, and always handled it calmly. Perhaps their heritage in fishing and agriculture enabled them to meet good years and bad with equanimity. Now they must cope equally well with an attack of economic bulimia. To understand what makes this crisis - kreppa, as it is known here - so unlike any other, a little history is needed.

For Icelanders, the golden years were the early years, shortly after the land was settled in the ninth century. The Viking tradition, the Althing - the legislative assembly dating to 930 - and the literary canon of Sagas and Eddas are the nation's cultural bedrock. But after that, Iceland almost disappears from the history books. While the agricultural revolution, the Renaissance, the industrial revolution came and went, while the fine cities of Europe were being built, while artists from Michelangelo to Mozart were pouring forth their creations, while the great inventions and discoveries were being invented and discovered, Icelanders were hunkering down in their turf houses, meeting the hardest challenge of all - survival.

They survived plague, famine, earthquakes and volcanoes. There were times when some even considered abandoning the island. But they stayed on. They stayed and survived. Icelanders will tell you that only the fittest survived, but that is only half the story, because survival requires another key attribute: stubbornness. And Icelanders have it in spades. It is a national trait, and they view it not as a weakness but as a virtue. It comes from experiencing hardship and enduring it. It means finding satisfaction in a simple task done well and sticking to it; finding comfort and solace in family and kinship and being bound by those familial bonds and duties. And perhaps most important of all, it means believing in the independence of the individual as part of the fabric of nationhood, and fighting for that independence. Put simply, the country has values.

And this is what sets this catastrophe apart from the earthquakes and plagues of former years. This is a man-made disaster and worse still, one made by a small group of Icelanders who set off to conquer the financial world, only to return defeated and humiliated. The country is on the verge of bankruptcy and, even more important for those of Viking stock, its international reputation is in tatters. It hurts.

Picture a pig trying to balance on a mouse's back and you'll get some idea of the scale of the problem. In a mere seven years since bank deregulation and privatisation, Iceland's financial institutions had managed to rack up $75bn of foreign debt. In his address to the nation, Haarde put the problem in perspective by referring to the $700bn financial rescue package in America: "The huge measures introduced by the US authorities to rescue their banking system represent just under 5 per cent of the US GDP. The total economic debt of the Icelandic banks, however, is many times the GDP of Iceland."

And here is the nub. Iceland's banks borrowed more than $250,000 for every man, woman and child in Iceland, and placed an impossible burden on the modest reserves of the central bank in the event of default. And default they have.

Voices of caution - there were many in Iceland - were drowned out by a media that became fixated on the nation's emergence from drab pupa to gaudy butterfly. Yet, Icelanders' opinions were divided. For some, the success of their Viking Raiders, buying up the British high street, one even acquiring that most treasured bauble of all, a Premier League football club, marked the arrival of a golden era. The transformation of Reykjavik from a quiet, provincial fishing port to a brash financial centre had been as swift as it was complete, and with the musicians Bjork and Sigur Ros and Danish-Icelandic artist Ólafur Eliasson attracting global audiences, cultural prestige went hand in hand with financial success. Icelanders could hold their heads high before the rest of the world.

Hallgrimur Helgason, well-known for his novel 101 Reykjavik, said in a letter to the nation in a Sunday newspaper on October 26: "Deep down inside we idolised these titans, these money pop-stars. Awestruck we watched their adventures and admired them when they supported the arts and charities. We never had clever businessmen, not for a thousand years, not to mention men who had won battles in other countries... "

For others, the growth was too rapid, the change too extreme. Many became uncomfortable with the excesses of the Viking Raiders. The liveried private jets, the Elton John parties, the residences in St Moritz, New York and London and the yachts in St Tropez - all flaunted in Sed og Heyrt, Iceland's equivalent of Hello! magazine - were not, and this is important, they were not Icelandic. There was a strong undertow of public opinion that felt that all this ostentatious celebration of lavish lifestyles and excess was causing the nation to disconnect from its thousand-year heritage. In his letter to the nation, Hallgrimur continued: "This was all about the building of personal image rather than the building of anything tangible for the good of our nation and its people. Icelanders living abroad failed to recognise their own country when they came home."

What international sympathy there was for Iceland's plight evaporated with the dark realisation that the downfall of Iceland's three main banks - Landsbanki, Kaupthing and Glitnir - brought with it the potential loss of £8bn for half a million savers in northern Europe, the bulk of whom were British. The shrill media response in the UK was reported extensively in Iceland. The British government's use of anti-terror legislation to freeze the assets of Landsbanki pushed Iceland's banking system into the abyss. It was a move viewed in Iceland as hateful and unnecessary. A few days later the one remaining viable bank, Kaupthing, went under.

Then Landsbanki was placed on a British Treasury list of groups subjected to financial sanctions, along with al-Qaeda and the Taliban. A copy of the UK government webpage appeared in Icelandic papers and a new website, www.indefence.is, was launched. A picture on it shows a young girl with a placard that reads: "I am not a terrorist, Mr Brown."

At this time of year, the most-watched TV show in Iceland is Saturday night's Spaugstofan, which translates literally as The Spoof Room. It's a hit-or-miss affair, but events of the past few weeks have provided the writers with a rich seam of source material. A recent episode featured a well-worked lampoon of the film Titanic, entitled Icetanic, with Geir Haarde and the chairman of the governors of the central bank, David Oddsson, standing on the bridge of "the economy that could not sink". A sketch shows Gordon Brown throwing Icelanders off a life raft. "Get back in the water where you belong, you terrorist bastard!" he shouts as he throws another one overboard.

When I tried to explain Iceland's plight to a friend in the UK who works in banking, I received short shrift. "You must have gone troppo, Robert! They may not have dressed up in burkas and strapped several kilos of Semtex around their waists. But to go into the high street, persuade charities, pensioners, local authorities to deposit money and then disappear, having trousered nigh on £8bn is, even by City standards, bad. Financial terrorism, grand larceny, call it what you will, but the government had to act and act quickly to stop funds leaving the country."

Troppo can hardly apply one degree south of the Arctic Circle, but if its northern equivalent is to go polar, then evidently I have.

Fear, outrage, jealousy and guilt have mingled to form a volatile cocktail of emotions as the blame game has started, and Icelanders attempt to come to terms with it all. They are divided between those who blame the Viking Raiders and those who blame successive governments and central banks for allowing them to behave the way they did.

There have been demonstrations, previously almost unheard of in Iceland, in which families have marched on the parliament buildings, stringing up an effigy of Oddsson along the way.

Of the various Viking Raiders, only one, Jon Asgeir, of Baugur fame, has had the guts to turn up and face the music on a TV chat show. But any temporary benevolence towards him evaporated when it emerged that he had arrived back in Iceland with high-street billionaire Sir Philip Green in tow. Together they proposed to buy Baugur's debt, reported at the time as £2bn, thereby acquiring the group's UK retail assets, including House of Fraser and Hamleys at a significant discount that would involve massive debt writeoffs.

One of the most telling images was the departure of Jon Ásgeir's private jet on news that the government had nationalised Glitnir Bank (in which his investment vehicle Stodir was a leading shareholder), wiping out his shareholding and rattling the debt-burdened house of cards that is his Baugur business empire. Painted black and as sleek as a Stealth bomber, the aircraft was photographed taxiing from its hangar by Morgunbladid, a daily newspaper. Like the last helicopter out of Saigon, the departure of Ásgeir's jet symbolised the end of an era, the last act of Iceland's debt-fuelled spending spree.

Bjorgolfur Thor and his father Bjorgolfur Gudmundsson have, to date, disappeared from the radar. Together they own a majority stake in Landsbanki, and Gudmundsson owns West Ham United football club. Their jets have also flown the coop. Downtown, beside the harbour, construction work on a landmark project underwritten by them, the National Concert Hall, is expected to stop any day now. Like Hallgrimskirkja, the striking cathedral that presides over Reykjavik and that took more than 40 years to complete thanks to a lack of finance, the concert hall might need a change in the country's fortunes before it can be completed.

The government has announced that it will carry out a thorough investigation into what happened and determine who is to blame. It will be called "The White Book", and "leave no stone unturned in getting to the truth". It will not be a slender volume.

We live now in a foreign-currency lockdown, and although the government has assured everyone that there are sufficient reserves to buy essentials such as oil, grain and medical supplies for the winter, such assurances only serve to create a further sense of unease in a people who have learnt to take such commodities for granted.

There is some encouraging news. The International Monetary Fund is putting the finishing touches to a $2bn bailout package and this is likely to lead to a further $4bn from a consortium of Nordic central banks. These funds will come with stringent conditions that will impose external financial controls and impinge heavily on Iceland's hard-won sovereign independence. But they should inject some much-needed confidence into the currency and into an embattled people.

There is an Icelandic expression: "We started with two empty hands." Whoever coined it could not have expected that it would still be so pertinent in 2008, as the nation begins the process of rebuilding its economy and that thing it covets most of all, its reputation.

It is going to be a long, hard struggle.

Robert Jackson is a British journalist who has lived in Iceland since 2003.

Saudi Arabia: Expanding Surplus, Falling Oil Prices and Riyadh's Sway

2008-11-10T08:52:00.002-05:00

From Stratfor:

Summary

In spite of the falling price of crude oil, the Saudis are working on an ambitious investment project to expand their surplus oil production capacity to 12.5 million barrels per day in 2009. The plan serves Riyadh’s strategic objective of upholding the kingdom’s geopolitical primacy in the global energy markets.

Analysis

The price of crude oil dipped to $57.62 Nov. 6, its lowest level since early 2007. The drop occurs amid a widespread financial crisis hitting the three main economic hubs of the world: the United States, Europe and Asia. Though to some extent the Organization of the Petroleum Exporting Countries (OPEC) appears to have cut oil production, the cut still has not been enough to buoy the price of oil and bring relief to politically strained and petrodollar-dependent Iran and Venezuela.

The Saudis, however, are still strutting with style. The Saudi government has some $400 billion in foreign assets sitting in its central bank, and with the government budget already set for $45 oil, the Saudis could come out of 2008 with a surplus of around $150 billion. Cushioned with petrodollars, the Saudis have time to plan for the future and ensure their geopolitical primacy in the oil markets.

Saudi Arabia’s massive oil reserves are both a blessing and a curse. With oil wealth, Saudi Arabia is a powerful player in the international arena, arming it with the tools to sink or support other regimes through its leverage in the energy markets. Without oil wealth, Saudi Arabia is a desert backwater.

Though oil wealth allows multibillion-dollar arms purchases, these alone cannot transform the Saudi military into a professional fighting force when the country lacks the training, experience, skill and discipline to fight even a small war. But by creating a codependency with an energy-hungry superpower like the United States, Saudi Arabia can more or less outsource its military requirements. Without oil revenues, the Saudi royal family would be unable to pacify and subsidize a deeply divided population and to combat internal and external threats to its rule. But an oil-rich economy has created a work force in Saudi Arabia that largely lacks the skills, training — and most important, the will — to develop industries independent of oil for long-term growth.

If Saudi Arabia wants to remain the leading Sunni power in the Arab world and a highly influential player in global energy politics, it must have the surplus oil production capacity to ensure its position as the swing player in the energy markets. Without such a production buffer, Riyadh would not be able to bend Washington’s ear on matters like Iran whenever Saudi Arabia sees the need. OPEC’s total surplus crude oil production for 2008 is about 1.55 million barrels per day (bpd), almost all of which is held in Saudi Arabia, at a time when global crude consumption is at around 85 million bpd. With the margin so thin, oil prices became all the more vulnerable to supply disruptions.

Now that the global economic contagion has depressed demand, there is more oil in the market to give oil prices more wiggle room. Saudi Arabia can thrive in this type of market simply by ensuring it has enough spare capacity either to flood or drain the energy market at will.

To this end, Saudi Arabian Oil Co. (Saudi Aramco) is working on an ambitious $129 billion project to raise its oil production capacity to 12.5 million bpd in 2009, construct new petrochemical plants and refineries so it can move up the value chain, and invest in advanced exploration and production technologies to increase Saudi Arabia’s proved recoverable reserves from 260 billion barrels to more than 450 billion barrels within the next two decades.

With plans to up their country’s oil production capacity to 12.5 million bpd, a 32 percent increase, the Saudi royals essentially are building an insurance plan: The more oil Saudi Arabia keeps in reserve, the more leverage it holds in the energy market.

To accomplish this, the Saudis need not trouble themselves with increasing the number of operational oil fields. Those reserves need to be safeguarded for hard times far down the road, when Saudi Arabia actually must worry about having its existing oil production sites run dry. Instead, the Saudis will work to maximize production at existing fields. Those fields include Khurais, which is expected to produce 1.2 million bpd in 2009; Shaybah, where output will rise from 500,000 bpd to 750,000 bpd in 2009; Khursaniyah, which will produce 500,000 bpd in 2009; Manifa, an offshore field that will yield 900,000 bpd in 2011; and Ghawar, the world’s largest oil field, which has been in production since 1951 and has seen a surge in drilling activity in recent years.

The Saudis cannot simply live by a “drill, baby, drill” mantra in extracting oil from these fields. Many of these fields are old and must be treated with care. As Abdullah al-Naim, vice president of petroleum engineering for Saudi Aramco said in a recent Forbes interview, “We go really slow and soft … Ghawar we treat as you would a young woman.” Saudi Aramco uses technology that restricts the penetration of the drill in creating the oil well, thereby reducing the resulting water flow that could end up damaging the field. This is a delicate and expensive process, but a necessary one if Riyadh hopes to maintain its vigor in global energy politics in the longer run.

Saudi Arabia’s investment plans should be of increasing concern to oil producing states like Iran, Venezuela and to a lesser extent Russia, which probably are all on Riyadh’s target list. Historically, the Saudis have a penchant for using their oil wealth as a weapon to drive competitors out of the energy market, thereby cutting the legs out from under geopolitical rivals.

By increasing their production capacity, the Saudis are essentially building up an arsenal to swing the energy market in their favor. For the Saudis, $30 crude is a pinch to the purse, but an eminently survivable one. For the Iranians or the Venezuelans, however, it could mean a matter of life or death for the regime. Regardless of whether Saudi Arabia follows through in massive production cuts or boosts, the mere threat of such action creates hefty geopolitical sway — something that can only be reinforced with a large enough surplus crude production capacity.

Highlights of the IEA report

2008-11-05T18:27:00.002-05:00

Next week, the IEA is releasing their new World Energy Outlook. There have been rumors that the IEA was going to break loose of US political pressure and finally be honest about the energy situation. Some of the media seem to have gotten early copies of the report, among them the Financial Times. They published three articles about the report today. I'm posting them in three separate posts. The first is this overview:

Highlights of the IEA report

In a flagship report due to be published next week by the International Energy Agency, the developed world’s energy watchdog doubles its forecast the price for oil will reach by 2030 and predicts the era of cheap oil is over. Below are the report’s highlights.

The Challenge:
“It is not an exaggeration to claim that the future of human prosperity depends on how successfully we tackle the two central energy challenges facing us today: securing the supply of reliable and affordable energy; and effecting a rapid transformation to a low-carbon, efficient and environmentally benign system of energy supply.”

The Oil Price:
“While market imbalances could temporarily cause prices to fall back, it is becoming increasingly apparent that the era of cheap oil is over.”

Supply and Investment:
“Globally, oil resources might be plentiful, but there can be no guarantee that they will be exploited quickly enough to meet the level of demand projected.”

“Production continues to outstrip discoveries (despite some big recent finds, such as in deepwater offshore Brazil).”

“Observed decline rates vary markedly by region; they are lowest in the Middle East and highest in the North Sea.”

“Investment in 1m b/d of additional capacity – equal to the entire capacity of Algeria today – is needed each year by the end of the projection period just to offset the projected acceleration in the natural decline rate.”

International versus National Oil Companies:
“The opportunities for international companies to invest in non-Opec regions will diminish as the resource base contracts, eventually leaving the countries holding the bulk of the world’s remaining oil and gas reserves to take on a larger burden of investment.”

“The increasing dominance of national companies may make it less certain that the investment projected in this Outlook will actually be made.”

Emissions and Renewable Energy:
“The projected rise in emissions of greenhouse gases in the Reference Scenario puts us on a course of doubling the concentration of those gases in the atmosphere by the end of this century.”

“Modern renewable technologies grow most rapidly, overtaking gas to become the second-largest source of electricity, behind coal, soon after 2010.”

There was also this sidebar:

The Report in Numbers

On Cost

● $26,000bn – total energy investment needed 2007-2030

● $200 – Nominal oil price in 2030

● 5-7% – percentage of income consumers will spend on oil

● $2,000bn – Opec’s oil and gas export income in 2030, three times as much as in 2006

● $310bn – total amount the 20 largest developing countries spent on fuel subsidies in 2007

On Oil Barrels

● 106m b/d - total oil demand by 2030, up 25 per cent from 2007

● 9% – the natural decline rate of oil fields

● 80% – national oil companies’ share in providing incremental production 2007-2030

On Emissions

● 6°C – global average temperature increase if prevailing emission trends continue

● 75% – China, India and the Middle East’s combined share of incremental carbon dioxide emissions increase to 2030

IEA predicts oil price to rebound to $100

2008-11-05T18:19:00.004-05:00

This article was striking for this line: "Current global trends in energy supply and consumption are patently unsustainable." (Emphasis mine.)

A predicts oil price to rebound to $100

By Javier Blas and Carola Hoyos in London

Oil prices will rebound to more than $100 a barrel as soon as the world economy recovers, and will exceed $200 by 2030, the International Energy Agency will say in its flagship report to be published next week.

“While market imbalances could temporarily cause prices to fall back, it is becoming increasingly apparent that the era of cheap oil is over,” the report states.

The developed world’s energy watchdog has doubled its long-term price expectation from last year’s $108 a barrel for 2030 and assumes oil prices will rebound from today’s $60-$70 a barrel to trade, in real terms adjusted by inflation, at an average of more than $100 a barrel from 2008 to 2015.

The IEA’s World Energy Outlook has come to this conclusion largely because it believes companies will struggle to pump enough new oil to offset the steep production declines of the world’s older fields.

“Current global trends in energy supply and consumption are patently unsustainable,” the report states.

In its WEO report, an executive summary of which has been obtained by the Financial Times, the IEA estimates that by 2010 oil companies will have to commit to projects producing almost as much oil as Saudi Arabia – or about 7m barrels a day – if the world is to avoid a supply crunch by the middle of the next decade.

The IEA refused to comment.

The stark assessment comes as companies cancel projects from Kazakhstan to Canada because the collapse in oil prices makes them uneconomical.

The industry will have to invest $350bn each year until 2030 to counter the steep rates of decline of existing fields and find enough extra oil to satisfy the growing demand of countries such as China, the report states.

Output from the world’s oil fields is declining at a natural rate of 9 per cent, the IEA found, following the most comprehensive review of its kind. This decline rate is curtailed to 6.7 per cent when current investments to boost production are made. However, even with such investments, the decline rate worsens significantly to 8.6 per cent by 2030.

The declining rates are steeper than the industry had previously assumed. They are also slightly steeper than an earlier draft of the report because the IEA has expanded the study to 800 oil fields, adding 250 smaller fields.

Opec’s economic clout set to grow

2008-11-05T18:10:00.005-05:00

There's also this article about OPEC. No word on where they got the estimates of OPEC reserves, or how reliable they are.

Opec’s economic clout set to grow

By Javier Blas and Carola Hoyos

The world economy will witness a $2,000bn shift in wealth and power from oil-consuming countries to members of the Organisation of the Petroleum Exporting Countries as oil prices rise to $200 a barrel by 2030.

That stark assessment will be made next week by the International Energy Agency, the western countries’ energy watchdog, which will also warn that oil prices could rise even further because national oil companies in oil-rich countries are likely to delay investment decisions.

The IEA’s flagship World Energy Outlook annual report does not map the impact of the surge in Opec’s revenues.

But the jump is likely to have profound implications for equity, foreign exchange, fixed income and commodities markets as the cartel recycles its petrodollars.

The IEA says that Opec oil reserves are big and cheap enough to increase production and cap oil prices, but it warns: “Investment by these countries is assumed to be constrained by several factors, including conservative depletion policies and geopolitics.

“There remains a real risk that underinvestment [between now and 2015] will cause an oil supply crunch,” the report states.

The projected near-tripling of Opec’s revenue to $2,000bn by 2030 from last year’s $700bn comes on the back of significantly increased oil price assumptions.

In its report, the IEA sees oil prices reaching $200 by 2030, almost doubling last year’s forecast of $108 by the same year.

The report suggests that current oil prices – below $70 a barrel and less than half their peak summer level – are a temporary effect of the economic crisis.

It says that in the future the world will face “persistently high levels of consumer spending on oil”.

“While market imbalances could temporarily cause prices to fall back, it is becoming increasingly apparent that the era of cheap oil is over,” the IEA says in the executive summary of the report, to be published next week.

In the short term, however, prices are likely to remain highly volatile.

“A worsening of the current financial crisis would most likely depress economic activity and, therefore, oil demand, exerting downward pressure on prices,” the report states.

But it adds: “Beyond 2015, we assume that rising marginal costs of supply exert upward pressure on prices through to the end of the projection period [2030].”

The Financial Times obtained a copy of the report’s 13-page long executive summary, which was drafted only a few days ago, and was not under embargo. The IEA refused to comment.

Oil prices hit an all-time high of $147.27 a barrel in July, but since then have fallen back to $60-$70 a barrel as consumption has weakened.

West Texas Intermediate crude oil, the US benchmark, yesterday fell $4.30 to $66.22.

In its report, the IEA assumes a rebound from today’s levels, expecting oil to trade, in real terms adjusted by inflation, at an average of more than $100 a barrel from 2008 to 2015.

By 2030, prices will be more than $200 a barrel, or more than $120 when adjusted for inflation.

“These [price] assumptions point to persistently high levels of consumer spending on oil in both OECD [Organisation for Economic Co-operation and Development] and non-OECD countries,” the IEA report says.

Over the next 22 years, consuming countries will devote 5 per cent to 7 per cent of their gross domestic products to pay for their oil, up from 4 per cent in 2007.

This will have “serious adverse implications for the economies of consuming countries”.

“The only time the world has ever spent so much of its income on oil was in the early 1980s, when it exceeded 6 per cent,” the report says. In 1998, when oil traded just above $10 a barrel, the world spent just 1 per cent of its GDP on oil.

The much higher oil price assumptions, on top of concerns about climate change and the daunting challenge of investing enough in new production, prompt the IEA to warn that the “current global trends in energy supply and consumption are patently unsustainable – environmentally, economically, socially”.

“The surge in prices in recent years culminating in the price spike of 2008, coupled with much greater short-term price volatility, have highlighted just how sensitive prices are to short-term market imbalances,” the report adds.

“They have also alerted people to the ultimately finite nature of oil and natural gas resources.”

The steep rise in oil prices over the next 20 years, on top of rising production, will trigger a large windfall to Opec countries, which are forecast to earn the equivalent of about 2 per cent of the world’s GDP, up from last year’s 1.2 per cent.

The cartel will control 51 per cent of the world’s oil supply by 2030, up from last year’s 44 per cent.

Saudi Arabia will remain the largest producer with its output rising to 15.6m barrels a day in 2030 from the current 9.5m b/d.

The shift will be keenly felt among international oil companies such as ExxonMobil of the US and the UK’s BP.

Their access to oil reserves will become increasingly curtailed because the world’s remaining large reserves are in the hands of countries unwilling to open their doors to them.

Referring to Opec and other non-Opec countries that restrict foreign companies, such as Mexico or Russia, the report warns: “It cannot be taken for granted that these countries will be willing to make this investment themselves or to attract sufficient foreign capital to keep up the necessary pace of investment.”

There's also this sidebar:

An end is urged to fossil fuel subsidies

An end to the enormous subsidies paid to fossil fuel energy generators will be needed to set the world on a path of low-carbon generation, the International Energy Agency will say next week, writes Fiona Harvey.

The IEA will say that subsidies on energy consumption were $310bn for the 20 biggest
countries outside the Organisation for Economic Co-operation and Development in 2007.

Converting this subsidy to lower-carbon energy sources could be the biggest source of support to low-carbon energy, including renewable sources, and carbon capture and storage.

The agency believes the energy sector will have to play the central role in turning the world from high- to low-carbon energy sources. But the transition cannot be achieved without “radical action by governments” – for instance by putting a higher price on carbon dioxide emissions and encouraging the growth of wind and solar energy.

The IEA also says that renewable sources are set to overtake gas as the second biggest source of energy “soon after 2010”.

Renewables will be the fastest source of energy growth, the IEA predicts.

But it also warns that on current trends, greenhouse gas emissions will far exceed the levels that climate change scientists say are safe.

Baaaaaa

2008-10-19T21:13:00.000-04:00

I went to a "Sheep and Wool" festival over the weekend. A friend of mine is really into spinning. Apparently, there are a lot of people like her, and they come from miles around to this fair-like affair. I saw more kinds of sheep than I ever knew existed: black, white, tan, gray, spotted, long-haired, miniature, etc. Not all were raised for wool; some varieties are bred for their milk or meat.

This magnificent ram took first place.

Ia! Ia! It's Shub-Niggurath, the Black Goat of the Woods with a Thousand Young! Ph'nglui mglw'nafh Cthulhu R'lyeh wgah'nagl fhtagn!

Oops, sorry. Just an ordinary black goat.

It wasn't just sheep and wool. All kinds of fiber-producing animals were featured, including goats, llamas, alpacas, and rabbits. The animals were shown, and ribbons awarded. There were a lot of 4-H kids there, among the adult hobbyists and professional farmers.

Having lived in Peru, I know the ways of llamas, and kept my distance. They can spit, like camels. But this one was just curious.

Booths sold wool in many forms. My friend buys whole unwashed fleeces for her spinning, but others like wool that's washed, carded, and dyed, or raw wool in bulk.

There were a lot of people spinning and knitting there. This woman is using a simple drop spindle.

It is harder to spin with a drop spindle than with a spinning wheel, but in the old days, spinning was one of the first jobs children were given. They started as early as three years old, and would often spin with a drop spindle while walking to school.

There were a lot of booths selling antique spinning wheels and drop spindles, but most people these days prefer modern spinning wheels. They are more compact, and more easily portable than the antiques.

Most of the people I know who are into spinning are women, but some men like it, too. The spinning wheel is powered by pumping the pedals.

A lot of people were selling yarn. Most was machine-made, not hand-spun.

There were many knitted, crocheted, and woven garments for sale as well: hats, scarves, sweaters, gloves, socks, etc.

I almost bought a pair of handknit wool socks and a wool blanket, but in the end decided I really didn't need them. (I did buy some raw milk cheese and a bunch of organic spinach.)

Another strange fad: making clothing out of pet fur. Some people are so attached to their dog or cat that they save up their shed fur and have someone spin it into yarn and knit a sweater out of it for them. Sometimes it's to remember the pet when it dies; sometimes people just want to wear the same outfit as their pet, so to speak.

Well, if civilization comes crashing down, cutting off our supply of cheap clothing from China, there are some people who know how to make clothing from scratch.

The fried dough booth featured a gigantic pumpkin as a decoration.

Harvest

2008-10-18T08:56:00.001-04:00

The apples on the tree outside my window are ripe. They are beautiful, and they taste pretty good, too, though they're a bit wormy, since nobody sprays the tree. (Extra protein, as my dad puts it.) They are Cortlands, which are a cross between the popular McIntosh (a cultivar originally from Canada) and the Ben Davis, a variety now rarely grown because its keeping and shipping qualities are no longer needed in the days of the 1,500 mile salad.

The old apple tree is left over from the apple farm which used to be here a few decades ago. The old farmhouse is a short walk away, and is now just one of many houses standing alongside a major thoroughfare. You can tell it's the old farmhouse, though, because its architecture is older than the other houses, and because of the apple cellar beside it.

The first time I saw the apple cellar, I had no idea what it was. It's just a door in the side of a grassy hill. Looks kind of like I always imagined a hobbit house would look, except the door isn't round. Eventually one of the apple farmers in the area explained it to me. (There are still plenty of apple farms around here, but nobody uses apple cellars any more.)

In the old days, farmers would store apples over the winter in apple cellars - storage rooms built into hillsides. The apples would be packed into barrels with straw, then stashed away underground. The ideal apple cellar was cool and humid, but not freezing.

Apples were often bred for their "keeping" qualities - how well they withstood winter storage. Unfortunately, keeping and taste are inversely related. It was a trade-off. Storage was harder in more southern areas, where it was warmer, and often, they would grow "keepers" that no farmer would consider growing further north (because they tasted awful).

I love the wide variety of apples you can get in the northeast. I grew up eating only Red Delicious, with occasional Golden Delicious. To this day, my dad will only eat Red Delicious. I even took him to a pick-your-own apple farm, where we picked dozens of different kinds of apples - and he only liked Red Delicious. I find Red Delicious very bland myself - though if eaten immediately after picking, even Red Delicious are very tasty.

Northern Spies are one of my favorite varieties. They were considered "dessert apples" - the kind you bake with. ("Spies for pies.") They are luscious when just picked. They were considered good keepers in the old days, though a bit prone to bruising. By modern standards, though, they don't store well. They don't shrivel or rot easily, but they get soggy pretty quickly after picking. Modern Americans expect their apples to be crisp.

I have a feeling what's happened in the world of apple farming is probably typical of farming in general: the varieties grown are designed for the world of air freight, refrigerated shipping, and controlled atmosphere storage. The apples we grow now are not the kind our great-grandparents grew - and are perhaps ill-suited for a low-energy world. Recently, there has been increased interest in heirloom varieties...but the ones people want to grow tend to be the ones that taste good but don't store well, not the ones that store well but don't taste very good.

The harvest season is winding down here. It's more or less over by Halloween. The farmer's market shuts down, the pick-your-own farms close, the farmstands pull down their shutters. The local farmer's market, jam-packed a couple of weeks ago, was pretty quiet yesterday. I spent less than $10, but got a nice haul:

That's a cannonball pumpkin, a mini squash, a spaghetti squash, a quarter pound of mixed organic greens, three baby bok choy, and a bunch of apples, including Empire, Gala, Northern Spy, Mutsu, Jonagold, and Winter Banana. I am probably not going to eat the mini squash. That's a Halloween decoration. The cannonball pumpkin will be a Halloween decoration...and then a pumpkin pie. :-)

Falling prices create havoc in the oil patch

2008-10-17T23:04:00.002-04:00

Frank Sesno, who did that CNN special on peak oil, We Were Warned, was on CNN last night, talking about the down side to lower oil prices. From the transcript:

WOLF BLITZER: Call it, perhaps, the one bright spot in an otherwise bleak economy -- that would be the price of oil. Even after climbing $2 a barrel today, the price of a barrel of crude oil is still down some 50 percent from an all time high back in July.

Our special correspondent, Frank Sesno, is looking at this story for us.

What does it mean for businesses, for you and me, for all our viewers out there, if we see this price per barrel going down?

FRANK SESNO, CNN SPECIAL CORRESPONDENT: Well, Wolf, you're quite right. We commonly look at this as the silver lining in an otherwise lousy economic cloud, right?

And the price of oil has dropped dramatically, as we've seen, just in the last several months. Wolf, you got that.

So let's take a look at what's happened. In July, $145 a barrel. Look what it is now. We're down to $74 a barrel.

So if you were going to the pump, you'd be experiencing something like this -- the cost of gasoline by the gallon has gone from $4.15 -- $4.11 at the high, actually -- down, according to the AAA, $3.04 today.

If you had, Wolf, a three quarter ton Chevy Suburban and you went to fill it up -- 39 gallons -- it would have cost you $160 this summer.

Today, what would it cost you?

It would cost you about $118. That's a really big savings.

But Wolf, as you said, there's a downside to all of this. And the downside, believe it or not, is to those companies that have been making all this money because it's expensive to do the business they do. They say that they spend close to $200 billion a year in exploration. That's drilling, but it's also looking for the stuff out there. And deep water, for example, just by itself, one platform out in the deep water is about a billion dollars. If you want to look at alternatives and what things are costing, you need $65 a barrel to cover those oil sands. You need close to that for this cellulosic ethanol that we keep hearing about that's going to be the deliverance for the future.

These falling prices are creating havoc in the oil patch. Wolf, according to the people that I'm talking to, there's some anecdotal evidence that companies are starting to cut back on their exploration budgets, cut back on some of the purchases that they may make. It's happened before in '98, '99, when prices went way down, companies went bust, they merged and there were thousands of layoffs, and, in some cases, oil exploration went down 70 percent or more.

Why does it matter?

Because this is what pays for the future oil supplies. And if you're Barack Obama, it's what may pay for your alternative energy programs and that thousand dollar per family tax that he wants.

So there could be some serious unintended consequences.

BLITZER: Yes. So it's interesting, I guess, though, for those of us who remember, a barrel of oil when it was $10 or $20 or $30 a barrel...

SESNO: Remember that?

BLITZER: ...$70 a barrel still sounds pretty high...

SESNO: Yes.

BLITZER: ...although it's not as high as $140 a barrel.

SESNO: I went by the gas station the other day and I'm saying oh my gosh, it's going to come under $3 a gallon for regular. That's incredible. It seems like a bargain. But not very long ago...

BLITZER: It seems like a bargain when it was $4 a barrel, but a lot of us remember $2 a gallon, too.

SESNO: That's right. It ripples through in jet fuel. It ripples through in home heating oil. It ripples through in all sorts of other things. That's good news for the consumer, but we need this stuff for the future.

Low-Hanging Fruit On Wheels

2008-10-13T13:51:00.005-04:00

The MPG illusion has been in the news a lot recently. Basically, expressing fuel efficiency in MPG tends to mislead people about actual fuel savings. I think it also tends to mislead people with regard to the effectiveness of increasing vehicle efficiency as a peak oil mitigation strategy.

Last July, Neil King of the WSJ wrote an article about why it will be harder to cut back this time. We cut our oil use by 20% after the last oil crisis...but half of that was switching power plants from oil to coal or natural gas. There are very few oil-fired power plants left in the U.S. now, so that is not something we can repeat.

But what about cars? There are still big gains to be made there, surely.

Maybe not. The MPG illusion fools us because people think fuel consumption is decreased as efficiency improves. But that is not the case. Here's a concrete example:

In the '70s, my uncle traded in his Chevy Bel-Air (about 12 mpg) for a little Datsun (about 50 mpg). Assuming 1200 miles driven a month:

Chevy: 100 gallons
Datsun: 24 gallons
Gas saved: 76 gallons a month

So, if you have a Prius or an old Geo Metro today, assuming 50 mpg, you're using only 24 gallons to drive 1200 miles. You cannot actually get a 76 gallon savings via increased fuel efficiency, unless your car somehow creates gasoline while you drive.

If you double the MPG of the Metro...call it 100 mpg. For 1200 miles, that's 12 gallons saved. Very small compared to, say, trading your Hummer (13 mpg) for a Prius (which would also be roughly 76 gallons saved).

This is why I don't expect Mooresian improvements in mileage. Assuming 1200 miles driven a month:


EFFICIENCY    GAS USED   GAS SAVED
  25 mpg      48  gal
  50 mpg      24  gal    24  gal
 100 mpg      12  gal    12  gal
 200 mpg       6  gal     6  gal
 400 mpg       3  gal     3  gal
 800 mpg     1.5  gal   1.5  gal
1600 mpg     0.75 gal   0.75 gal

Each improvement is going to have a higher cost and lower benefit; eventually, it just won't be worth it any more. For me, the Prius is already past the point of diminishing returns. I considered it, but I don't drive that much, and it just wasn't worth the extra expense. I bought a Corolla.

Yes, trading in a Hummer for a Prius can make a big difference...but there really aren't that many Hummers on the road. In the early '70s, the average car got 13 mpg. For the past decade or so, the average new car in the US has gotten 21 mpg.

Again assuming 1200 miles driven a month:


EFFICIENCY    GAS USED   GAS SAVED
  13 mpg      92  gal
  21 mpg      57  gal    35  gal
  55 mpg      22  gal    35  gal

So to match the improvement we've made since the '70s, we would have to increase the fleet efficiency to 55 mpg. That sounds doable - the Prius is in the ballpark - but even Japan has not achieved it fleet-wide. They've been working on this fuel economy thing since the '70s. And their average fuel efficiency is about 30 mpg. Much better than our 21 mpg, certainly, but a far cry from 55 mpg. And any improvements over that would be even harder to achieve.

Tainter called this declining marginal returns. The low-hanging fruit is picked first. That is, the easy fixes with the largest benefits are done first. Further improvements will be more difficult and more expensive, until they are not worth doing at all.

The "MPG illusion" is low-hanging fruit on wheels.

Why conserving our way out of this won't be so easy

2008-10-12T17:11:00.002-04:00

This article, from the July 22, 2008 Wall St. Journal, seems more relevant than every now.

A Difficult Road Awaits For Energy Conservation

By NEIL KING JR.

Soaring gasoline prices, angst in Washington, economic malaise, fears of far worse to come -- the U.S. has been through the energy wringer before, and even managed to ease the pain through conservation.

The last time the country was clobbered, 1979-1983, Americans cut way back on driving, bought far fewer and smaller cars and dramatically reduced the use of oil. It's natural to assume that we can do it again.

But conserving our way out of this crunch won't be so easy. Here are five key reasons why.

1. The easy stuff is done.

The cuts in oil use made between 1979 and 1983 look impressive. In four years, the country weaned itself off of 3.3 million barrels a day, a drop of nearly 20%. Not until 1997 did the U.S. get back to the same level of oil consumption it had in 1979.

But half of that cut, in residual fuel oil for electricity generation, was relatively painless and can't be repeated. The U.S. by 1983 had slashed consumption by 1.4 million barrels of oil a day by switching power stations over to coal or natural gas. Today, the country consumes fewer than 700,000 barrels of residual fuel a day, almost entirely in ships. So any similar cuts this time will have to come on America's highways, not in its power plants.

2. We're bigger, busier and wealthier now.

Americans in 1979 embarked on a forced conservation kick unrivaled since World War II. By 1983, gasoline use had fallen almost 11%.

Today, the U.S. is a vastly more fuel-thirsty place. Yes, gasoline use is tapering off. But in April of this year, the U.S. consumed 9.1 million barrels of gasoline a day, two million more than in April 1979 -- partly because Americans are now driving almost twice as many miles a day as they did then.

Meanwhile, the economy is also nearly five times as large, so the impact of record-high fuel prices is still more muted.

3. And yet, globally, the U.S. matters less.

In 1979, of every 100 barrels of oil produced globally, 29 went into American cars, trucks, planes, ships, homes and power plants. Today, that figure has fallen to less than 24 of every 100 barrels. U.S. consumption has grown, but global use has grown much more -- and there's the rub.

Slashed demand in industrialized countries in the early 1980s came straight off the oil ledger, because that's where most of the demand was. Nearly half of the drop came from the U.S. alone.

This year, growth elsewhere will far outpace slumping demand in almost every Western developed country. In all, global demand is expected to rise by about one million barrels a day, despite the historic run-up in prices. It's what happens in China now that really counts.

4. This time, it's supply and demand.

The 1979 energy crisis was all about supply. Turmoil in the Middle East took millions of barrels off the market, so prices soared. But just as prices peaked, in the spring of 1981, huge new stashes of oil were coming onstream in Mexico, the North Sea and Alaska. Soon enough, the world was again awash in oil.

Today's forces are far more complex, and gloomier. Booming demand in the Middle East and Asia is colliding with rising fears of a long-term supply pinch. Unlike in 1979, there is no North Sea about to open up, while the Saudis are pumping almost full out.

5. Recessions help.

Getting whacked by gasoline prices prodded Americans to cut back in the early 1980s, but so did joblessness, stagflation and a horrible economy. Unemployment topped 7%, while mortgage rates hovered in the teens. Gasoline use and car sales plunged partly because people were working less for a dollar that also bought less. Economists note that nothing whittles down energy use quite as effectively as a recession. Today's less sluggish economy is less likely to force our hand on conservation.

On the bright side, efficiencies gained now appear much likelier to last. After the last shock, oil became abundant again, prices plummeted and Detroit found clever ways to bypass fuel-efficiency standards to give Americans the huge sport-utility vehicles they wanted. Now, car companies are scrambling to churn out a new generation of smaller, more efficient vehicles and investing in fuel-saving technology that was viewed as too expensive to bother with when oil was cheap.

All in all, a good article. Though I think he's wrong on a couple of points. One, it looks like we're heading toward a recession that will rival or even dwarf those of 30 years ago. And two, I don't think fuel efficiency will be as helpful as he assumes, for reasons I detail later.

Bank Freeze Leaves Hundreds of Colleges Cut Off From Short-Term Funds

2008-10-04T08:30:00.003-04:00

From The Chronicle of Higher Education:

Wachovia bank has frozen the accounts of nearly 1,000 colleges, leaving institutions unable to access billions of dollars they depend on for salaries, campus construction, and debt payments.

The freeze, which affects most institutions that invest their endowment income and other assets through Commonfund, has some colleges worried that they won’t be able to make payroll this period, said Verne O. Sedlacek, president and chief executive of Commonfund, which manages investments for nonprofit institutions. Many colleges use the organization's short-term investment fund for operating expenses, “almost as a checking account,” he said.

As of last Friday, the Common Fund for Short Term Investments managed approximately $9.3-billion in assets for 900 colleges and roughly 100 private schools.

Wachovia, which agreed to sell its banking operations to Citigroup this week, announced on Monday that it was resigning as trustee of the fund and would allow plan participants to withdraw only 10 percent of their assets—the value of the securities that had reached maturity. That percentage grew to 26 percent on Tuesday as additional securities reached maturity, and is expected to reach 57 percent by the end of this year and 74 percent by the end of 2009.

But unless the credit markets thaw, enabling a new trustee to sell more of the short-term securities in the fund, colleges won’t be able to access all their money until at least 2010.

Conveying Bad News

Yesterday, representatives of Commonfund held a two-hour conference call with rattled college investors. John S. Griswold, Jr., executive director of the Commonfund Institute, Commonfund's research arm, said the organization empathized with the colleges but had no control over Wachovia's decision.

“Obviously, it couldn’t come at a worse time, at the end of the month and the end of the quarter,” he said in an interview. “So we can understand why people are upset.”

The freeze could have the biggest effect on smaller institutions like Bethany College, in Kansas, which has $700,000 invested in the fund. President Edward F. Leonard III said his institution has enough money to cover costs for now because students just paid tuition, but he’s worried about the second semester, when the college typically dips into its short-term funds to pay for a variety of operating expenses.

“All colleges ride a cash roller coaster,” he said. “But the smaller colleges, like Bethany, we feel those bumps more than others do.”

On Tuesday, Mr. Leonard wrote to his congressman, Rep. Jerry Moran, a Republican, to urge him to support federal legislation intended to rescue the financial sector. Mr. Moran voted against the $700-billion bailout bill, which had been backed by the Bush administration, on Monday.

“I just e-mailed his legislative assistant saying, ‘Hey, its starting to hit home,’” he said. “If you think this is something confined to New York City and Washington, D.C., its already hit one of your campuses in Kansas.”

Concerns About Making Payroll

Minnesota’s private colleges are worried as well. On Monday, the state’s independent-college association sent a letter to its Congressional delegation, warning that some colleges would be unable to make their payroll obligations this week.

“The failure of the House to adopt the recovery plan this afternoon has immediate implications for private colleges in Minnesota,” the letter reads. “As a result of the frozen capital markets and the failure of Congress to adopt a reasonable recovery plan, many of the members of our association are at the edge of their abilities to adapt. Any further delay by Congress or the administration will have immediate devastating effects on these institutions and the families they serve.”

Colleges with larger endowments, like the University of Vermont, may find it easier to adapt. Daniel M. Fogel, the university's president, said his institution has “tens of millions of dollars” invested in the short-term funds, but he expects that it will be able to make do.

“We may need to rely on some other liquidity sources, but if so, very briefly, because then we’ll be collecting the spring tuition,” he said.

Russell K. Osgood, the president of Grinnell College, in Iowa, said his institution has a “modest amount” invested in the fund and did “not foresee any impact.” But he said he feared for some of his colleagues.

“I’m scared thinking about others who are more dependent on it,” he said.

Reeves Wiedeman contributed to this article.

Ghawar's Magnificent Five

2008-09-25T06:34:00.005-04:00

This article is from the Saudi Aramco Web site. It's in their news section, but they have one of those dynamical-type sites that don't let you link directly to articles. So I decided to "liberate" it:

DHAHRAN, September 22, 2008 -- Ghawar remains the world’s largest oil field 70 years after its discovery. Its size and continuity were not initially apparent, but a series of early exploration wells, now called the Magnificent Five, put the pieces of the puzzle together.

A 3D rendering of the Ghawar reservoir shows the Magnificent 5 discovery wells.
Amid the important commercial oil discoveries of Dammam (1938), Abu Hadriyah (1940) and Abqaiq (1940), geologists were exploring surface features to get a better picture of the potential of the Eastern Province.

While mapping the surface outcrops, geologists Ernie Berg and Max Steineke excitedly identified a broad, low-relief dome (called an anticline). Subsequent exploration established that this En Nala anticline at Haradh continued northward all the way to Ain Dar and Shedgum and was filled with oil.

King Saud ibn Abdulaziz inaugurates the gas injection facilities at Ain Dar in 1958.
Ghawar helped catapult Saudi Arabia into its role as the world’s leading oil producer. The super-giant field is 280 kilometers in length and consists of five contiguous oil fields from north to south: Ain Dar, Shedgum, ‘Uthmaniyah, Hawiyah and Haradh.

In 1995, a comprehensive 3D seismic campaign was conducted across the Ghawar field. The equipment used is a stark contrast to the early exploration team shown in the left photo.
Ain Dar No. 1

After World War II and with the resumption of drilling, the most obvious location to resume wildcat drilling was the Ain Dar structure because of its proximity to producing facilities at Abqaiq. Ain Dar No. 1 was drilled in 1948 and flowed oil to the surface during testing. It was put on production in early 1951 and is still producing today with the original well casings.

This well has been producing for more than 58 years with the aid of best-in-class reservoir management practices. It has produced 152 million barrels of oil and is still producing 2,100 barrels per day (bpd).

Haradh No. 1

In 1949, Aramco engineers initially wanted to drill a step-out well, Ain Dar No. 2, about 12 km to the south of Ain Dar 1. Instead, a second wildcat was drilled 185 km to the south at Haradh. At that time, no one openly suggested that the En Nala anticline would prove to be one continuous field 280 km long and up to 30 km wide. That possibility became very real when the Haradh No. 1 wildcat struck oil in 1949.

The Haradh well was nearly 200 km south of Ain Dar production facilities and, therefore, was not brought onstream until 15 years later. Haradh No. 1 was put in production in 1964 but shut down during the mid-1980s because of low demand. In 1990, after acid stimulation, it resumed production.

Today, 44 years after its first production, Haradh No.1 has produced more than 24 million barrels of oil and continues to produce at a rate of 2,300 bpd.

‘Uthmaniyah No. 1

‘Uthmaniyah No.1 was important in establishing that the En Nala anticline was oil-filled between Ain Dar and Haradh. This wildcat well was successfully drilled and tested in 1951. As with the other Ghawar wells, oil gravity was in the range of 33 degrees API (Arabian Light Crude).

‘Uthmaniyah No. 1 was brought onstream in 1956 and has since produced more than 20 million barrels of oil. Located on the eastern flank of ‘Uthmaniyah, close to the water, this well was the first of the discovery wells to employ water shutoff techniques to limit water production.

Shedgum No. 1

The Shedgum No. 1 discovery well was drilled in 1952 to delineate the En Nala anticline to the east of Ain Dar. The well struck oil in the Arab-D carbonate and was later brought onstream in 1954.

In 1968, the wellbore rock matrix was acidized to improve the flow of oil from the carbonate formation. In 1989, liners were run across the open hole to address future water encroachment.

Recently, the oil production rate was enhanced greatly for Shedgum No. 1 by recompleting the well with a horizontal sidetrack complemented with inflow control device (ICD) technology. Not only was the oil rate increased to more than 3,700 bpd, but the water cut has also been lowered significantly.

Shedgum No. 1 has produced more than 98 million barrels of oil over the past 55 years, and the application of new technologies will keep it producing for many years to come.

Hawiyah No. 1

The final discovery well of the magnificent five was Hawiyah No.1, which confirmed that Ghawar held oil between ‘Uthmaniyah and Haradh. Drilling was completed in 1953, and the well was put onstream in 1966, when the Hawiyah Field was developed.

The well received an acid stimulation treatment in 1977. With Saudi Aramco’s superior reservoir management practices, Hawiyah No. 1 has produced 51 million barrels of oil, and continues to produce today at 4,600 bpd.

Reservoir management

Since the discovery of the Ghawar field in 1948, Saudi Aramco has implemented best-in-class reservoir management practices and leading technologies that have evolved over the years. As a result, the Magnificent Five have demonstrated extraordinary performance with extended lifecycles and outstanding oil recovery.

One of the first reservoir management initiatives was gas reinjection in Ain Dar. In 1958, King Saud ibn Abdulaziz inaugurated the gas injection facilities in Ain Dar. The primary purpose of the program was to reinject produced gas to sustain reservoir pressure. Gas injection began in 1959 and continued for 20 years.

Water injection began in Ghawar in 1964 to provide additional pressure support — to maintain reservoir capacity to push oil to the surface. That technology, known as secondary recovery, provided a stepwise improvement in pressure support and began the displacement of oil from the outer edges of the Ghawar field toward the central regions to sustain oil production, as demonstrated by the phenomenal performance of the discovery wells.

In 1995, a comprehensive 3-D seismic campaign was conducted across the Ghawar field. The seismic profiles provided vital information on reservoir structure and distribution of fractures, guiding development and recompletions across Ghawar. That information, for example, was used to guide the placement of the horizontal well trajectory for Shedgum No. 1.

The Ghawar discovery wells, Ain Dar No. 1, Shedgum No. 1, Haradh No. 1 and Hawiyah No. 1 are still producing today with the original well casings. That speaks to the quality of workmanship and materials that went into the original wells.

Altogether, the Magnificent Five have produced nearly 350 million barrels of oil. There’s no telling how much more they will produce — as the end of their story is not yet in sight.

(Article by Darryl B. Fischbuch and Adeyinka X. Soremi)

About that bailout...

2008-09-21T21:00:00.003-04:00

I hate it. Some are calling it economic treason. Others a de facto coup. Karl Denninger calls it "The Mother of All Frauds" and warns that the price tag will be much bigger than they're letting on.

One of the denizens of The Oil Drum, Jerry McManus, pointed out a book called Since Yesterday. It's an account of the Great Depression, written by someone who lived through it:

The theoretically necessary adjustment became a practically unbearable adjustment.

Therefore Hoover was driven to the point of intervening to protect the debt structure -- first by easing temporarily the pressure of international debts without canceling them, and second by buttressing the banks and big corporations with Federal funds.

Thus a theoretically flexible economic structure became rigid at a vital point. The debt burden remained almost undiminished. Bowing under the weight of debt -- and other rigid costs -- business thereupon slowed still further. As it slowed, it discharged workers or put them on reduced hours, thereby reducing purchasing power and intensifying the crisis.

It sure sounds like we're following in Hoover's footsteps.

But...isn't Bernanke supposed to be an expert on the Great Depression? How could he make this mistake?

Downsouth points out these two guys from PIMCO, who think the Depression is misunderstood by Helicopter Ben & Co.:

The summer of 1932 marked the trough for US economic growth, which was well in the midst of the Great Depression starting in 1929. Global sovereign defaults were well underway by 1931. Turkey, China, Bolivia, Peru, Cuba, Brazil and Colombia all defaulted on their debts in 1931. Hungary, Yugoslavia, and regrettably Greece defaulted in 1932. In 1933, Austria and Germany joined the club. And, by 1934, all debtor countries except Argentina, Haiti, and the Dominican Republic had suspended debt service. Are we to accept the conventional wisdom that a mistaken, overly restrictive monetary and fiscal policy in the US created the Great Depression and led to these global sovereign defaults? It seems equally, if not more likely, that an imbalanced global trade system jarred by restructuring in Germany and Great Britain, and by prior revolutions against free markets in Russia and China may have been the initial and crucial culprit. The global constriction of trade was the result of several dependent and independent political and economic upheavals during the decade following World War I. It is a massive presumption to state that a more stimulative Federal Reserve (a la 2001-2002) could have prevented the course of events in the early 1930s.

The lessons for present-day policymakers are stark. Recent anti-deflationary policy in Japan, the US, and Europe are all predicated upon the conventional analysis emanating from the Great Depression. We feel these are mistaken and misguided.

(Yes, the date on the paper is 2006. They predicted this two years ago. A lot of people saw it coming.)

This is a freakin' disaster. Dunno how much good it will do, but should you feel inclined...

Contact your representative

Fill out your state and zip+5, and you will be directed to the web page of your representative. You can e-mail him or her, or get information to write or phone. (Which is probably more effective than e-mailing.)

Contact your senator

Use the pulldown to choose your state, you'll get the contact information, including e-mail, for both your senators.

I did contact my congress critters to air my views. I usually don't do that. The last time I did it, it was to tell them that invading Iraq was a terrible idea.

They went ahead anyway, and I expect they'll go ahead this time, too. But at least I can say I spoke out.

Review: The Collapse of Complex Societies, by Joseph Tainter

2008-09-15T17:02:00.001-04:00

The End of the World As We Know It...

Published by: Cambridge University Press
Genre: Archaeology/Social Science
Publication Date: 1988
Page Count: 260 pages (paperback)
ISBN: 0 521 38673 X

What causes societies to collapse? There are a myriad of theories: resource depletion, high taxes, environmental degradation, moral flaws in the citizens of the society, natural disasters such as earthquakes or volcanos, and more. In The Collapse of Complex Societies, Joseph Tainter argues that none of these is an adequate explanation.

Tainter is not a flake or a doomsayer. He is an archaeologist, and The Collapse of Complex Societies is aimed at academic audiences. It's often used as a textbook for anthropology classes. And he does not believe our society is on the brink of collapse.

After reading his book, I'm not sure I agree with him. According to Tainter's research, everything from spiking oil prices to failing public schools to the increasingly bitter political divide may be signs of impending collapse.

The Collapse of Complex Societies provides terrific insight into the reasons complex societies arise...and why they collapse. It also provides some hints about what it might be like if our own society collapses, based on what happened when other complex societies collapsed.

Tainter claims that the proper basis for understanding complex societies is an economic one. The basic premise:

1. Human societies are problem-solving organizations.

2. Sociopolitical systems require energy for their maintenance.

3. Increased complexity carries with it increased costs per capita.

4. Investment in complexity as a problem-solving response often reaches a point of declining marginal returns.

So, in his view, complex societies arise as efficient solutions to problems. At first, relatively little investment in complexity yields great benefits. But eventually, diminishing returns kicks in, and greater and greater investment produces less and less benefit. Finally, the point is reached where investment in complexity can no longer yield any increase in benefits. Collapse becomes increasingly probable. At that point, a crisis the society easily weathered earlier in its history - a military loss, drought, resource depletion, etc. - is enough to cause collapse.

Why do marginal yields always decline? That is, why is it that we always get less and less return on greater and greater investment? Because the lowest fruit is picked first. The most accessible oil is pumped first. Teaching someone to read is cheap and has great benefits; getting them a PhD is expensive, and provides far fewer benefits for the cost. The most arable land is farmed first; expanding farms to less ideal territory will provide lower yields for the cost.

It is possible for a society to avoid collapse, by getting control of a new source of energy, either by technical innovation or by conquest. Eventually, however, it becomes impossible to keep doing this, because of declining marginal returns on whichever strategy you are pursuing (whether conquest, like the Romans, or technological innovation, like the Maya).

Tainter argues that we are already facing declining marginal returns, and provides numerous examples. Among them:

Agriculture: To increase world food production by 34 percent (between 1951 and 1966), it took a 63% increase in money spent on tractors, a 146% increase in money spent on nitrate fertilizers, and a 300% increase in money spend on pesticides. To get another 34% would take even more money.

Medicine: Despite the fact that we are spending more money on health care and medical research than ever, the American lifespan is not increasing much. The easy fixes - vitamins, vaccines, sanitation, etc. - have already been done. Now, we are struggling just to keep lifespan from decreasing (due to new challenges like AIDS).

Science: Most of the great work of science was done years, even centuries ago. Many of the greatest contributions to science were made by people without formal training. But the day is past when monks growing peas or people flying kites in the rain can make significant contributions to science. The general knowledge, which provided the greatest benefits, is already known. The specialist knowledge remaining to be discovered requires expensive education, for relatively little return. Something like 90% of all the scientists who have ever lived on earth are alive right now, yet technological innovation is slowing.

Oil: In 1950, one barrel of oil's worth of energy could get you 100 barrels in return. Now, it's more like 1:10 in the U.S., 1:30 for Middle East oil shipped here. That sort of decline applies to most resources: coal, copper, natural gas, etc.

R&D: Technology has saves us in the past; can it save us again? Probably not. Analysis shows that an increase in spending on R&D of 4.2% yields an improvement of only 2%. At that rate, even if every one of us becomes a scientist or engineer, we'll be losing ground.

Government: Increasing complexity means increasing bureaucracy, and all the expenses that entails. Generally, it means higher taxes. At first, the benefits of complexity - roads, schools, defense, public works - are so great that people don't mind paying taxes. But as complexity increases, taxes rise, and the local benefit decreases. The government must spend resources on enforcing compliance. Generally, the tipping point is about 20% - which we're past.

Does Tainter think we are facing imminent collapse? No. There's a fifth concept, to add to the four above:

5. Collapse occurs, and can only occur, in a power vacuum.

Even when a society is past the point of diminishing returns - when economically, they'd be better off not investing in more complexity - there is a situation where they cannot collapse. That is when there is a group of societies, of similar complexity, in competition with each other. No one can collapse, because if they do, they'll be taken over by a neighbor. Collapse, when it comes, will be a group affair. No one can collapse unless they all collapse at once. (Which is what happened to the Maya.)

That is the reason Europe did not collapse long ago, and that is the reason the next collapse will be a global one. A "powerdown" is impossible in the current political climate.

Tainter's discussion of past collapses was fascinating, and I couldn't help wondering if they might be hints of our own future. Complex societies ensure their existence by two methods: legitimization, and coercion.

Legitimization can involve nonmaterial elements (the emperor is a god, democracy is the best way of government). But no society can continue to survive unless it provides actual material benefits. The people must be shown that their taxes are benefitting them more than they are hurting. So, even while Rome was going bankrupt, they kept increasing the public dole. They had to, to maintain their legitimacy. Eventually, one out of three people was on the dole.

Coercion is another method, but it, too, is expensive. Higher and higher taxes are demanded, with greater and greater punishments for not paying. The state may control where you can live, what your occupation is, what you can say. People get more rebellious, and more resources must be allocated to social control. The wealthier areas that can make it on their own may try to pull away; the government won't let them, because it needs their production.

It's likely, as vital resources such as petroleum, water, even food, run out, our governments will use both methods. Taxes will rise, and so will handouts to the poor. We'll lose freedoms, as the government cracks down.

Given that possible vision of the future, collapse seems almost preferable. Indeed, Tainter argues that collapse is not necessarily catastrophe. Complex societies are a relatively new development in human history. They are what is unnatural, so collapse would be returning to a more natural state. And research shows that collapse does in fact yield benefits. Smaller kingdoms were more effective at repelling barbarian invasions than the Roman empire. Nutrition was better after the Mayan collapse than it was before.

The drawback, of course, is the huge population drop that accompanies collapse. An 80%-90% loss is not unusual. While in the old days, those extra people may have simply migrated somewhere else, that's not possible in today's world.

So what will happen if our society collapses? Some key points, taking the past as a guide:

Real Estate: Though survivalist types think salvation is a homestead in the country, that wasn't the case for Rome, or for the Maya. In both cases, people moved near the cities in the decades before the collapse. Taxes grew so high in Rome that many farmers simply abandoned their land. It was easier to get food in the cities than on the farms that grew it. Many laws passed involved ways to tax abandoned land. Eventually, Rome passed laws ordering that the sons of farmer be farmers themselves...then had to spend more resources on enforcing those laws.

Less is known about the Maya, but they, too clustered closer to the cities as the end approached. Likely this was because isolated farms and villages were vulnerable to raids. Too many people, not enough food, and no way out leads to only one outcome: warfare.

Population Growth: Societies that collapsed often suffered a leveling of population growth before the collapse; some even had decreases in population. This was seen as a serious social problem for the government, since it needed new citizens to provide labor and pay taxes. In Rome, laws were passed setting up state orphanages and offering tax incentives for having kids. Among the Maya, women were favored over men. While male skeletons grew stunted and diseased as collapse approached, the female skeletons remained as large and healthy as ever. Neighboring societies of the time honored reproducing women, and the evidence suggests the Maya did as well, feeding the females at the expense of the males.

I can't help but be reminded of that politician in Japan, who suggested cutting off social security benefits to women who don't have at least one child, or Pat Buchanan, who wants to end abortion and birth control, in part because it will increase the number of taxpayers.

Currency debasement: Collapsing societies tend to suffer from massive inflation. Even though the government knows it shouldn't just print more money, it can't resist when pushed into a corner. You have to pay the army and the civil servants. This is a way of pushing debts into the future, much as our deficits do. Because, as Tainter says, "the future can't protest."

Who suffers: The wealthy suffered last when Rome collapsed. First the poor suffered, then the middle class, and only at the end, the wealthy. But it was the opposite when the Maya collapsed. The elite disappeared, and only the peasants remained. In some areas, there are signs the remaining population tried to continue the rituals and building that had gone before, but simply did not have the knowledge. Those who did were obviously gone.

After the collapse: Sometimes a society recovers, but often, it never again reaches the complexity it once had. The Maya did not maintain their irrigation systems or raised beds. Either the land was too exhausted to make it worthwhile, or they had no inclination to go back to the way they were, once it was proven unfeasible.

Another point from the book that I found interesting and possibly relevant: scanning behavior.

When a society is facing diminishing returns, something Tainter calls "scanning behavior" appears. People become dissatisfied; ideological strife intensifies. The entire society starts looking around for a better way. Segments of society may adopt foreign ideologies or ways of life. Some of these may be perceived as subversive, while others are the height of fashion. Taxes rise, as the government invests more in R&D, trying to find a better way.

Once a society reaches the point where investments in complexity no longer pay off at all, scanning behavior may cease altogether. The government enforces strict behavioral controls, in hopes of increasing efficiency. And they can no longer afford R&D.

I'm not sure if I find Tainter's book encouraging or not. One the one hand, he suggests that a soft landing is more likely than a sudden dieoff; the collapses he studied took place over decades. On the other hand, the years leading up to collapse tend to be very unpleasant, with brutal government control, high taxes, conscription, anarchy, banditry, widespread malnutrition, etc. Tainter expects that before collapse, we will be pouring a huge percentage of our GDP into R&D, trying to find a technology that will save us. That means the standard of living will fall, since there will be less to spend on other things.

But maybe engineering will be a growth industry, at least for few decades...

Related Link:

Complexity, Problem-Solving, and Sustainable Societies

Please don't start a run on our bank

2008-09-14T11:54:00.004-04:00

I got a message from ING Direct today. It amounts to, "Thank you for not putting all your money in the Bank of Serta."

Dear Customer,

As we enter the final few months of 2008, I want to thank you for your continued confidence in ING DIRECT. Over 700,000 new Savers have joined us so far this year strengthening the bank and their own financial footing through our savings, home mortgage and ShareBuilder investment accounts. Despite a challenging economic climate, our Customer base is 7 million strong and growing.

The consequences of the mortgage meltdown on financial institutions and individuals continue to erode many Americans' dreams. We will continue to stress the right way to achieve home ownership – buying only as much house as you can afford and paying off your mortgage as fast as possible. In return for good credit and prioritizing home investment, ING DIRECT mortgage Customers are rewarded with exceptional rates and a transparent, direct administration process. Rather than selling your mortgage to another bank or investor the minute you get it, we keep your mortgage and service it here. Doing so gives us flexibility to find innovative solutions to help Customers keep their homes during unexpected financial downturns.

While we don’t have an Orange crystal ball, we do expect the economy to remain fragile through 2009. The best course of action for our Customers is to be disciplined: avoid splurging; identify and cut out unnecessary expenses and save for what's essential; and hedge against those tough times. We can all benefit by developing good spending habits: confront - and cut up - credit cards; use your home as a savings vehicle - not as an ATM; and establish and contribute regularly to an IRA or 401(k).

In this difficult financial environment, we work tirelessly to safeguard your deposits, mortgages and investments. Importantly, your deposits are FDIC-insured according to its limits and your investments are SIPC-protected. Our security processes are the best in the business and are in place to protect your savings from those with bad intentions. While we are constantly vigilant, we need your help. Keep passwords to yourself. Never give personal information through an email. And always install both the latest antivirus and anti-malware software on your home computer.

Thank you for your continued trust in ING DIRECT. We will not waver in our promise to provide you with great value, service, security and convenience.

Arkadi Kuhlmann
CEO of Savings

Pretty funny getting that advice from a bank that is constantly trying to get to me to take out a mortgage, and tells me that my "spending power" is $1,000 higher than my actual balance - because that's how much overdraft protection I have. (For a very reasonable interest rate, of course!)

Peak Travel?

2008-09-06T21:00:00.007-04:00

I realize I've been very fortunate when it comes to travel. I traveled a lot as a kid, because my dad's specialty is international agriculture. I hated it at the time. Being a rather geeky child, it took me awhile to adjust and make friends, and it seems whenever I had settled in, off we would go somewhere else. And sometimes it would be to places that had severe drawbacks from a kid's POV: no TV, no ice cream, sometimes no electricity or indoor plumbing. But Dad always told me that I would be grateful for the experience when I was grown, and he was right.

As an adult, I continued to enjoy travel. Not a lot by the standards of a wealthy nation at the peak of world oil production, but still, more than most people could dream of historically. I've fulfilled a lot of my travel dreams. I went to college across the country from home. I've walked along the Great Wall of China, and visited the old haunts of C.S. Lewis and J.R.R. Tolkien in Oxford, England. I've shopped in Hong Kong and seen plays on Broadway and the West End. I've explored the Inca ruins at Machu Picchu, followed the path of the Bataan Death March, and experienced spring training in Florida.

But could we be at "peak travel"? I'm seeing more and more articles about it. Here are a couple:

Will fares go so high that only the rich can fly?

The end of travel

And of course, there are a lot of reasons why the peak oil aware should not travel. It's expensive, and peak oilers generally try to save money, not spend it. It's bad for the environment; the tourists flocking to see glaciers before they melt may well be hastening their demise. It's yet more consumption, generally by people who consume too much already. (And I really fear those "carbon credit" things are scams.)

But...I still want to travel. People are generally happier spending their money on experiences rather than things. And the idea that it might be coming to an end (at least for the American middle class) only makes it more enticing. Travel now, while you can.

There are still so many other places I'd like to visit. I'd love to see Angkor Wat. I'd like to visit Arches National Park before more arches collapse, and Gettysburg before more witness trees fall. I want to go on a walking tour of Scotland, and a bicycle tour of Provence. I'd like stay in a haunted hotel and go on a ghost tour in New Orleans before it sinks beneath the waves. (No, I don't really believe in ghosts, but I enjoy ghost stories, even though I don't believe them.) I'd love to attend a Super Bowl, and a World Series game. I want to go on an African photo safari, and tour Greece, and Tuscany. And yes, I want to visit Glacier National Park while there are still a few glaciers left.

Probably luckily for the environment, I can't afford to do all that, and would certainly not go into debt for it.

Gustav

2008-08-31T13:28:00.009-04:00

Gustav is not looking quite as terrifying this morning as he did last night. He's still a major hurricane, and on a track that is likely to cause a lot of trouble for energy infrastructure, and a lot of anguish in New Orleans. Things can change in a heartbeat, of course, but for now, it looks like it won't be the total catastrophe it appeared it would be last night.

For future reference...the links I use to monitor the storm:

National Hurricane Center - U.S. government's hurricane site.

Weather Underground - Nicer maps than the NHC site has, plus Jeff Masters' blog.

Storm2k - Forums where a lot of professional meteorologists post their own forecasts.

Houston Chronicle's Hurricane Central - Hurricane coverage from Big Oil's hometown.

Navy/NRL Tropical Cyclone Page - Big, detailed satellite images.

EasternUSwx.com - A forum for weather geeks.

Shannymara's Storm Tracker - Map with oil infrastructure, hurricane track, and real time weather radar.

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A nuclear power plant in larval form

2008-08-16T21:34:00.003-04:00

Paul Schick saw my previous post about the Indian Point nuclear power plant, and sent me the above photo of the plant under construction. Very cool. You can clearly see it's the same place - 50 years ago.

He also included these interesting comments:

For your information/amusement/use, here is a picture of the original Indian Point plant under construction, taken with a Brownie-style camera on a grade-school field trip (the date is date of processing/printing.) You can see a sliver of the river in the background, the source of cooling water, not far away at all. It was the heady days of Reddy Kilowatt, with up-and-coming power from the Friendly Atom promising someday to be too cheap to meter. And it was all believable because progress was inevitable, and besides, we already had something else too cheap to meter - New York City did not meter residential water at the time. And with the USA responding to the hard kick in the pants named Sputnik that had come a few years before, nothing was impossible.

With one exception. A couple of years later, a touring lecturer (perhaps on behalf of the Atomic Energy Commision) came around and delivered an atomic-power spiel during a school "assembly". Among other things, he demonstrated a Geiger counter chattering on a mineral sample. But at the end of the lecture he revealed that it was actually a sham - the clicking noises came and went as he manipulated a ring thingie on the "probe", and the sample was not particularly radioactive. We were very disappointed in him - to the great consternation of the teacher in charge, there was even some booing and hissing. So one thing was in fact impossible - for whatever weird reason, it was impossible for the lecturer to carry a few thorium-oxide mantles for camping lanterns, which could be bought at any camping-supply department or store at the time, and which would easily cause a Geiger counter with the proper window for alpha rays (now alpha particles) to chatter sufficiently for a school lecture.

Note also that later on, the physics community bitched and moaned loudly enough about 'incorrect usage' that "atomic" power would come to be known as "nuclear" power, and by the same token, the regulatory branch of the Atomic Energy Commission, when it was split up, was called the Nuclear Regulatory Commission.

That reminds me of my dad's watch. He had worn it for years...until he was using a Geiger counter in a lab class one day at NC State. The Geiger counter went crazy when he touched it, and he realized his watch had a radium dial.

It probably wasn't particularly dangerous to wear a radium dial watch. The Radium Girls who painted the dials and were sickened by the radiation actually ingested the paint. Dad was a poor grad student at the time, who didn't have a lot of money. Nevertheless, he took the watch off and left it on the lab bench for other students to use for timing experiments. Wearing an even mildly radioactive watch every day was a greater risk than he wanted to take.

A nuclear power plant

2008-07-27T14:17:00.006-04:00

Driving through New York, I spotted this power plant. I thought it must be a nuclear power plant, and checking Google Maps, yup, it's the Indian Point nuclear power plant. Called the Indian Point Energy Center, probably because it sounds more benign.

It was getting dark, and I thought about hanging around until they turned the lights on. I bet it looks cool at night. But I didn't feel too safe, parked on the side of the highway. And I was afraid someone might think I was a terrorist or something, so I moved on.

Night Shift

2008-07-19T18:14:00.002-04:00

Natural gas powered car

Got a chance to drive a natural gas vehicle the other day. It was a Honda Civic. It handled just like a regular car. (Unlike the electric vehicles I've driven, which have a notable lack of "pickup.") The range is more limited, but it's not terrible.

One thing that is kind of a pain: no room for cargo. The natural gas tank takes up most of the trunk space, leaving just a narrow space hardly larger than the glove compartment.

I usually don't work nights any more, but last week, I went out to a site where concrete beams were being placed. The work was being done at night, because the traffic is lighter then.

Even at 10pm at night, the traffic was insane. They had to close both lanes, for safety reasons, and the traffic backed up forever. It was a never-ending sea of headlights. Where the heck is everyone going at that hour of the night? If people are driving less due to high gas prices, I didn't see any evidence of it.

Putting the "pest" in pesto

2008-07-06T13:00:00.001-04:00

I really don't have enough light to grow anything. I live in an apartment, and there are a lot of shade trees, probably to give residents the illusion of privacy. It's nice to look out the window and see a nice, leafy, tree, rather than into your neighbor's bathroom...but it makes it tough to grow things.

Nevertheless, I usually try to grow some herbs in the summer. I buy them from the local farmer's market, and they usually live a few weeks at least, before turning yellow and leggy from the lack of light.

This year, though, my pot of basil had been out on the deck only a few days before it was attacked by a plague of beetles. Japanese beetles, Popillia japonica, to be precise. And not just few. The poor plant was covered with them.

When I was kid, I had a big pot of strawberry plants. I don't remember how I got it. It's not the kind of thing I would spend my allowance money on. Someone must have given it to me, or left it behind at a house we moved into. Alas, my dreams of home-grown strawberries were dashed when I went out to water it one morning, and found my carefully-nurtured plants nearly leafless. Something had devoured the leaves, leaving little behind. There was no evidence of the culprit, but my dad, who is an agonomist, took one look and said, "Japanese beetles." He dusted what remained of the plants with some kind of pesticide, but it was too late. They were done for.

I was heartbroken, but Dad had little sympathy. He said, "Farming is a tough life. Stay in school."

Unlike the hapless strawberries of my childhood, my basil plant may yet be saved. (The beetles seem utterly uninterested in my pot of parsley.) A friend has promised to give me a pot of chives from her garden. Chives supposedly repel Japanese beetles. A quick Google suggested that the best method of beetle control in my situation is to pick them off by hand. Some suggest crushing the beetles and leaving them around the plants. One, it may train birds to eat them, and two, the beetles are supposedly repelled by the corpses of their brethren.

The first day, I tried crushing the beetles and leaving them around the plant. There were so many that it got pretty disgusting fast. And it didn't seem to work. The next day, there were more beetles than ever. The plant was alive with them. I crushed those, too, but it was so gross I just about gave up. I was leaning toward just throwing the plant away and giving up on fresh herbs this summer. But gardening web sites said even the worst Japanese beetle infestation is hand-cleared much faster than you think, so I kept at it. Though I gave up on leaving the crushed bodies around as beetle repellent, and instead dropped the beetles into a container of soapy water to drown. Much neater that way.

And sure enough, the gardening web sites were right. The next day there were only a few beetles, and the next day, fewer still. I think I'm winning the beetle wars. For now.

Though I must say, seeing the poor plant literally covered in beetles doesn't exactly make me want to eat pesto.

Financial Telegraph predicts complete meltdown of US banking system

2008-06-29T07:13:00.011-04:00

The Financial Telegraph had a rather alarming article yesterday. It's in Dutch, but François Cellier has provided a translation.

American 'Meltdown' is the Reason for the Money Injection by Fortis

Votron stays on after a wave of criticism

by our correspondent
June 28, 2008, 09:10 a.m.

BRUSSEL/AMSTERDAM (DFT) - Fortis expects a complete breakdown of the American financial markets within days or weeks. This explains, according to the bank insurer, the series of interventions on Thursday with the aim of strengthening themselves by € 8 billion. "We are ready at the last moment. The U.S. is doing much worse than we had thought,” said Fortis chairman Maurice Lippens, who insists that CEO Votron shall not be replaced. Fortis expects bankruptcies among the 6,000 U.S. banks that have low coverage. "But the same goes also for Citigroup and General Motors, and thereby starts a complete meltdown in the U.S.”

Fortis yesterday increased its capital by € 1.5 billion by means of emission of new shares. By the end of last year, the Belgian-Dutch group already had increased its capital by € 13 billion through issuing new stocks for the takeover of ABN Amro, for which they paid € 24 billion. Lippens based his concerns on talks with bankers. "Two months ago, we didn't know yet that the situation is so dire in the U.S. And the situation will further worsen. We need a thick cushion of funds to survive the next 18 months, when we bring in ABN Amro.”

Two weeks ago, the U.S. investment bank and adviser to Fortis Merrill Lynch reported that certainly € 6.2 billion in additional capital would be needed. The VEB yesterday demanded clarification of Fortis: CEO Jean-Paul Votron had explained by the end of April that Fortis, by acquiring ABN Amro, wouldn't need to raise its capital. Yet within one year, € 30 billion in market capitalization have been destroyed. According to Votron's latest admissions, the stock value has tumbled by 19.4%, although it recovered yesterday by 4.4% to € 10.65.

The massive unrest surrounding the bank insurer has registered particularly with our Southern neighbors in Belgium like a bomb. While in the Netherlands, the discussion is limited to the financial world, it has become the talk of the day in Belgium. Not only is the bank in Belgium omnipresent, but the tumbling of the stock has hit hard hundreds of thousands of Belgian small investors directly.

All Belgian newspapers opened yesterday with disaster headlines, giving wide coverage to the free fall of the bank insurer's stock. ’Fortis crashes,' 'Disaster day for Fortis,’ and ’Fortis loses 5.3 billion,' reported three leading newspapers on their respective front pages.

The panic surrounding the group is so great South of the border that the national oversight commission CFBA felt compelled to issue a statement of reassurance to the desperate savers. “The emergency measure by Fortis is no reason to run to the bank and withdraw your savings”, said a CFBA spokesman. “The bank complies with all legal requirements, it only has set for itself very ambitious goals.”

Maurice Lippens claimed that all major shareholders have offered their “unanimous support” yesterday evening.

Just as in the Netherlands, the accusations are directed primarily a the address of CEO Jean-Paul Votron, who seems to have badly miscalculated in the takeover of ABN Amro. However, whereas the man from Brussels is only being asked in the Netherlands to pay back his bonus of € 2.5 million, the Belgians ask for his removal.

"A person who makes such grave errors must bear the consequences and therefore resign,” so chairman Huybregts of the Flemish Federation of Investments and Investors. The tumbling of the stock is for him proof that the takeover of ABN Amro was far too expensive and poorly timed.

“The former shareholders of ABN Amro are now taking a bath in champagne”, stressed Huybrechts. "A person making such grave errors must step down." Fortis is a stock for ordinary people, and you cannot mistreat their trust so recklessly.”

Also the Belgian newspaper de Standaard (the Standard) has hard words for the CEO: "The credit crisis has affected all banks, but this is no excuse. Fortis has tumbled much worse," so the commentator. “Fortis has always denied that another capital increase was to come. These were therefore either lies or ignorance. Both are equally bad, and therefore Votron should do the honorable thing. He is the only one who has earned money in the whole operation.”

According to the Belgian media, Fortis had planned to announce on Thursday that the bonus of Votron would be removed, but at the last moment, this hasn't happened. Also, it is being strongly speculated who should be his successor, whereby primarily the name of Filip Dierckx is being suggested.

Votron himself doesn't want to hear anything about stepping down. "The shareholders stand by me, and also the board has fully supported these operations that were initiated by me," said the beleaguered CEO of Fortis.

He also rejects outright to pay back his meanwhile controversial bonus. "What I do with my money is my own business. The bonus is unrelated to ABN Amro, but was paid for the activities of 2007," so Votron. The CEO is however willing to receive some of his salary in Fortis stock options.

Votron can still fully count on the support by chairman Lippens, who denied that the bank made a mistake with the takeover of ABN Amro. “Votron remains our CEO. To intervene at this moment would be difficult, [not] to do so shows true leadership.”

I'm really not sure what to make of this. The Financial Telegraph is supposedly a reputable paper, equivalent to the Financial Times. But there's been little to no coverage of this story in English. Fortis has been much in the news this week, but not their predictions of a US banking collapse. The closest is this Reuters article, which is very mild in comparison.

I gotta say, the Bank of Serta is looking better and better all the time.

UPDATE: The original Dutch article is now 404, but you can still see it in Google's cache.

Peak Swag

2008-06-28T15:26:00.002-04:00

Awhile back, USA Today had this article about how high prices were impacting the sports world. There was the usual traveling costs and all, but there was also this, about the promotional items they give away at minor league baseball games:

"Everything we do is oil-based. The giveaways at the ballpark are plastic and that's oil-based. Hats aren't, but I have to put them on a boat, airplane or truck. So there's some derivative of an oil byproduct in everything."

Actually, hats probably are oil-based, at least the kind they give away, which are synethic, not wool.

I thought about this while I was a recent professional conference. I swear, a lot of people go to these things just to get the swag. They aren't interested in the presentations or workshops, just in getting all the free promotional items they can. Mugs, pens, frisbees, calendars, rulers, calculators, magnets, cupholders, t-shirts, bumper stickers, etc. The vast majority of it made with petroleum.

I am trying to reduce the amount of stuff I own, so I did not pick up any of the swag. I admit I am still using the plastic Hewlett-Packard coaster I got at a previous convention, years ago. The HP logo has long worn off it, but I still use it. Other than that, I have probably never used any of the hundreds of items I've gotten as swag over the years. So why take any more?

My colleagues, however, picked up stuff for me. They were afraid I would "miss out." Nice of them to think of me. But, er, is anyone really going to wear a pin shaped like a traffic cone, with flashing LEDs?

They also complained that there was very little swag this year, compared to previous years. A reflection of the rising prices and sinking economy, perhaps?

If swag ends up a victim of peak oil, well, I won't miss it much. I realize it provides jobs for a lot of people, but what a waste.

And I bought gas today, which I don't do very often. Ever since Katrina, I fill up when the gas gauge shows half a tank...just in case. But I drive so little that I still don't buy gas very often. The bad side of that is that it makes the sticker shock worse. Gas was $4.25 gallon today. The last time I bought gas, it was under $4. Yikes.

When Dinosaurs Ruled the Earth

2008-06-04T23:39:00.005-04:00

The museum gift shop features a colorful T-Rex sculpture

At the end of May, due to a combination of business and pleasure, I found myself in the midwest. I visited a friend in the Pittsburgh area, and we went to the Carnegie Museum of Natural History. I'm a sucker for natural history museums, especially if they have dinosaurs. And the Carnegie has a lot of dinosaurs. They've been renovating their dinosaur exhibit for years, and this year, it's finally re-opening. The T-Rex part was still under construction (it's supposed to open June 15), which was a disappointment. But the rest of the exhibit was open, and pretty cool.

The museum parking garage is right by the steamworks. (Yes, it's still working.)

This tableau of dinosaur predation was supposed to illustrate the evolutionary diversification of dinosaurs.

The heart of the dinosaur exhibit, as viewed from the third floor balcony:

There's an Apatosaurus, a Diplodicus, and an Allosaurus. There's also a Stegosaurus, and several other beasties.

A closeup of the Allosaurus, stalking the Apatosaurus.

There are also fossils from air...

Including a replica of the famous Archaeopteryx lithographica, the "first bird":

And seas:

One of the coolest displays was of the feathered dinosaurs from Liaoning, China:

Too bad the T-Rex section wasn't open yet. I'll just have to go back some day.

Only In It For The Gold

2008-05-04T23:53:00.004-04:00

I hadn't come across this blog until "PhilR" posted this link at The Oil Drum today:

The Falsifiability Question

It's written by someone working in the climate science field. (He's apparently at tu, but I'll try not to hold it against him. ;-) It's a short and interesting piece about why AGW is not really a theory, and what evidence it would take to make him change his mind about it.

Unfortunately, I fear the average denialist just wouldn't understand it.

The Old Apple Tree

2008-04-27T11:26:00.005-04:00

I've been meaning to photograph a neigborhood apple tree through the seasons. It might take me several years to do it, though. The time just seems to fly by. I noticed that the tree was budding and made a note to myself to photograph it soon. But by the time I finally did it, the buds were full-blown blossoms. I guess I'll have to try again next year.

The tree is a Cortland, a remnant of the apple farm that used to be here before they paved paradise and put up a parking lot.

Yes, people do pick and eat the apples, which are quite tasty, if a bit wormy (since nobody applies pesticides or otherwise tends the tree).

Here's the tree last fall:

Clearly, it's past "peak apples," as indicated by the fact that the low-hanging fruit has been picked, and by the clear evidence of high-tech production methods.

Gas Prices

2008-04-20T06:42:00.004-04:00

I don't drive much. I put maybe five gallons in my gas tank every month, maybe every other month. I do remember that I used to be able to fill up my old mid-size Ford Taurus for the same amount of money that fills half the tank of my compact Toyota Corolla, but I just don't buy enough gas for it to be a big deal.

So it was a real shock when I got the bill for the gas I bought on my trip to Florida. I charged it, of course. Pay at the pump is the only way to go these days, and I refuse to use a debit card, which offers you a lot less protection from fraud and such than a credit card. It didn't seem like I was spending that much.

But then I got the bill. It's $350. Christ on a cracker! I know I drove to Florida, but still. That's a lot of dough. I feel sorry for people who have to drive a lot every day, and those who have a bigger car than a Corolla to feed.

The Big Apple

2008-04-13T11:13:00.007-04:00

Grand Central Terminal
I went to NYC yesterday, to meet a friend who was coming from Pittsburgh. She's a fan of American Idol, I'm a fan of Monty Python, so we planned to see Clay Aiken as Brave Sir Robin in Monty Python's Spamalot.

I used to take the train to work in the city every day, but haven't been there for years. I was surprised at how crowded the train was on Saturday. I remember it as being pretty dead on Saturdays, especially that early (8am). Trains used to run every two hours, and mostly empty. But now the trains leave every hour, and are pretty full. Fuller than I remember the rush hour commuter trains being (though not as many people boarded along the way). Apparently, ridership has tripled as oil prices have risen. It's caused a bit of a problem, because so many of the newbie riders don't know how to read a train schedule, find the right track, or buy a ticket.

Parking is free at the station on Saturdays, and a lot of people take the train in for a day of shopping.

I met my friend at Grand Central, where we bought day passes that let you ride the subways and buses as much as you want. I think they were $7. We had originally hoped to tour Yankee Stadium before it's demolished. But the tour was sold out. Instead, we took the subway to Brooklyn to see the botanical garden there.

I saw some hybrid electric buses, though most were regular buses.

There were also a lot of pedicabs - bicycle taxis. A lot more than I remember, though not many people seemed to be using them.

The weather forecast for the day was awful. (One drawback with public transportation.) It was supposed to be very windy and rainy. But we lucked out. It was cloudy with occasional light rain, but nothing too bad. Cloudy days make for the best photography, so I didn't mind.

The Brooklyn Botanical Garden was gorgeous. I especially liked the Japanese garden.

All the trees were in bloom. Many different kinds of cherry blossoms, forests of magnolias in many sizes and colors. Here's a pink camellia:

Then it was time to head back to Manhattan for the play. We ate a quick Japanese bento lunch, then got in a truly immense line for Spamalot. I've been to a lot of Broadway plays, and some on the West End, too, and never been in a line like that. The only thing I can figure is that they only let people in through one door to force them to pass the counter where they were selling Clay Aiken merchandise. And a lot of people were stopping to look and buy, which is why the line was so slow.

The play was terrific. (I heard Clay didn't think it was funny when he first saw it. That boy ain't right.) We laughed so hard we cried. Particularly liked the "French taunting" scene.

After the play, we took a bus to the New York Public Library. My friend had just seen The Day After Tomorrow (a global warming disaster movie), and lot of the scenes were filmed at the library. Manhattan gets inundated with rising sea water, and some of the characters take refuse in the library. Chased up the stairs by a huge wave, of course.

One of the famous library lions:

It was a great day. We both had so much fun that we want to do it again. I'm under orders to keep my eyes peeled for other plays that might be interesting.

Florida Fantasies

2008-04-05T06:50:00.002-04:00

I loved Florida. More than I expected to. People warned me that Sarasota was strip mall hell, and they were right...but as an American, I'm used to strip mall hell. It's much more convenient than, say, Providence, Rhode Island, or Boston, Massachusetts, or New York City. Plenty of stores and restaurants, all easy to find, easy to drive to, with lots of parking available.

I really felt at home in Florida, probably because I grew up in a touristy tropical seaside-type place. A place where people will be fishing from every bridge, unless it's specifically posted "no fishing." Except that Sarasota felt much less crowded than Hawai`i, which was really nice.

People were fishing everywhere. Old and young, male and female, black, white, Hispanic, Asian. Kids with their parents, little old lades in prim dresses and wheelchairs, groups of teens, old married couples. I haven't fished since leaving Hawai`i, but there's a universal bond among fishermen that I instantly recognized. (No, I didn't go fishing myself. I didn't have a license, and I didn't know what the rules were. But I was tempted!)

Signs of the real estate bust were everywhere. Literally. On every corner, there was a sign offering distressed homeowners help with their mortages. "I pay cash for homes!" "Walk away, save stress!"

Still...I really liked Florida. To the point that if sustainability weren't an issue, I'd be tempted to move there. As it is, though...I don't want to live somewhere that may be underwater in 20 years.

Someone at The Oil Drum asked me if my road trip left me more or less optimistic. Neither, really. It just reinforced my existing views.

There are a lot of things I like about public transportation; I've used it extensively in cities like New York, Boston, and San Francisco. I don't mind walking, either. (The ballpark ushers seemed astonished that I preferred the stairs to the elevator.)

And yet...there's no denying that cars are a hell of lot more convenient. When the weather is bad, when you have a lot of stuff to lug, when you're going off the beaten path or traveling at odd hours. Nothing beats a car. And a big, powerful car is much more comfortable and easy to drive than a small, fuel-efficient car - especially for long trips. (I'd kind of forgotten that, since I don't drive very much.) We'll pry people's cars from their cold, dead fingers, and I can't really blame them.

Driving across the country was kind of like watching Koyaanisqatsi: it left me both horrified at the way we're living, and awestruck at the sheer magnitude of our works. It's not sustainable. And yet, it's not going to go away overnight, either. We have too much invested in our current way of life. The collapse, when it comes, will be a catabolic one.

Infrastructure

2008-03-29T23:29:00.000-04:00

Thought a lot about infrastructure on this trip. Truth to tell, it's something I think a lot about, anyway. ;-)

Maintaining infrastructure really is a never-ending battle. The Sunshine Skyway Bridge was undergoing some kind of construction. Someone said it was for corroded cables or something like that. Along I-95, two of the rest areas I stopped at had no restroom facilities due to infrastructure problems. One was undergoing repairs for a broken sewer pipe, one had no water due to a water main break.

I talked to one of the security guards at the rest area with the broken sewer pipe. He said it had actually been leaking for months, and no one did anything about it. Finally, it got so bad they were forced to fix it. Wonderful.

I paid no tolls on the way down. I went the long away around NYC and Philadelphia, to avoid congestion (not least because of the I-95 bridge failure near Philadelphia). But on the way back, I was anxious to get home, and I figured the bridge repairs would be done. I took the shortest route...which meant lots of tolls. Good thing I had an EZ-Pass, or I might have run out of money. They charge $5 to cross some bridges. Good gravy! I think I must have paid $30 in tolls. All those cars and trucks, paying all those tolls...and they're still having trouble funding maintenance.

I stayed in cheap hotels like Lodge of America and Quality Inn. Basically, all I was interested in was broadband Internet access and a reasonable standard of cleanliness. I was pretty happy with my digs, but I was reminded of what someone at The Oil Drum said: poverty is inefficient. In Florida, there were billboards everywhere reminding people to conserve water because there was a drought. Yet the toilet in my hotel room ran constantly, no matter what I did.

I got a room with a microwave and fridge. (I highly recommend it. You can save a lot of money on food that way.) When I first entered the room, the fridge door was not closed. The refrigerator was running, and dripping condensation on the rug, but the door would not close. A little investigation revealed that a rack meant for holding cans of soda or beer was preventing the door from closing. I'm not sure why; maybe it was actually meant for a different model of fridge. In any case, I removed the rack and solved the problem. And tried not to think about how long the fridge had been running with the door open before I got there. I was seriously tempted to throw the rack away so they couldn't put it back in when I checked out, but I was afraid they would charge me for it, so I left it on top of the fridge.

Florida is for the birds

2008-03-28T16:36:00.001-04:00

One striking thing about Florida is the birds. I'm not sure what they are, but they're not the kind of birds you see in the northeast or in Hawai`i.

I think these are brown pelicans:

They are very common by the water, and very large. They seem to like to hang out by bridges (where they are often nailed by cars). I saw them flying around the Sunshine Skyway Bridge, which is quite high.

I really love that bridge, BTW. It's magnificent. I ended up driving over it and back twice, going to games at Knology Park and Bright House Field. I was kind of disappointed it wasn't all lit up at night, though I guess it's better for the environment that it isn't.

I was surprised there wasn't an escort area, for people who are too scared to drive across. IME, this type of bridge is the worst for those who are afraid of heights. The superstructure is all in the center; it doesn't "enclose" the bridge deck. And it's very high in the middle with a steep ascent and descent, almost like a roller coaster. (I imagine so ships can pass underneath.) I'd expect at least some people to completely freak out trying to drive over this bridge.

These photos were taken by the shore in Sarasota, in a little park by the water. Not sure what kind of birds they are. Egrets?

I even saw some wild peacocks. Yes, peacocks. I pulled into the parking lot of an office building to turn around. In back, there was a big drainage canal. I looked in, hoping to see an alligator. No gators, but there was a flock of peacocks.

A different kind of bird

2008-03-27T07:30:00.004-04:00

Last night, I was sitting at Knology Park, watching the Reds play the Jays. In the fifth inning, there was a loud double boom. I thought it was thunder, or maybe gunfire. But the people around me explained that it was actually the space shuttle.

They usually don't like to land at night, but weather had delayed the planned daytime landing. They decided to go ahead and do a rare night landing. The sound I heard was the sonic boom. There are actually two booms: one for the nose, one for the tail. Most aircraft are so small that you only hear one boom. But the shuttle is so large - over 100' long - that you actually hear the double boom.

Very cool.

Easter Sunday

2008-03-24T23:05:00.001-04:00

I went to Lido Beach on Sunday morning. I figured it would be a good day for it, since people would be in church. Just in case, I went really early. There was plenty of free parking, and there were still lots of empty spaces when I left around noon. You could park right by the entrance to the beach. Wow. Maybe it's just because it was Easter Sunday, but still...wow.

Lido Beach is known for its bountiful seashells. Everyone there was gathering shells and sand dollars.

There were lots of birds on the beach, and also areas fenced off for breeding.

The birds were obviously very used to people. You could get amazingly close.

Lake Wales

2008-03-23T22:35:00.001-04:00

The weather yesterday was dreadful. I figured the chances of baseball actually being played weren't good, and decided to drive two hours to Lake Wales, to see the Bok Tower Sanctuary. It's a sort of combination garden and nature preserve. At its center is a tower of pink marble, with a carillon in it. There are daily concerts.

I brought a rain cover for my camera, just in case, but it wasn't necessary. It drizzled a little - not enough to affect the camera.

The scent of orange blossoms and other flowers filled the air.

The squirrels were quite bold. (Not sure what kind of squirrels they have in Florida; they are a lot smaller than the gray squirrels we have in the northeast. Very cute.)

It's a very beautiful place. You can hear the carillon bells, even when you can't see the tower.

I recommend it if you're in the area. It's a bit off the beaten path. Not many tourists go there, so it's not too crowded.

It's an agricultural area. You pass fields of various crops. (Strawberries and tomatoes, among others.) There's a couple of big fertilizer plants on the way there, and what looked like a phosphate mine. The sanctuary itself is in the middle of a large commercial orange orchard.

Safe in Sarasota

2008-03-21T08:28:00.006-04:00

I arrived in Florida last night. Took me two days of driving over 10 hours a day. Not very green, I know. Not sure flying would have been any better environmentally, but I wasn't willing to pay $600 for the privilege of being harassed by the TSA, crammed into a tin can like a sardine, and hoping my luggage arrived when I did.

I don't drive a lot normally, so spending two solid days in a car - a small, fuel-efficient car - was eye-opening. For the first time since I downsized to a Toyota Corolla, I really missed my midsized Ford sedan. The Corolla is so light it tends to be buffeted around by wind when you're traveling at high speed, even by the wakes of other vehicles. And when you're driving long distances on the highway, it really is a serious inconvenience to slow down. The speed limit is 70 mph on much of I-95, and going 55 mph means driving almost 13 hours a day to make it to Florida in two days, instead of only 10.

Driving through insane traffic and constant construction (I forgot the asphalt plants would be open down south - construction season hasn't started yet up north), I often wished I could have taken public transportation instead. Then again...there's nothing like the convenience of parking your car only five feet from your hotel room door. Florida, unlike many older cities in the northeast, is made for cars. There's plenty of free parking, people drive everywhere...and damn, it sure makes life easier, at least in the short term.

Thanks to Mapquest, I did manage to find my old neighborhood in Raleigh yesterday. It really hasn't changed a bit. It's an amazingly quiet, sleepy little street. It's funny, because in my mind it looms as this big, dangerous, busy street. Everything was recognizable...but so much smaller than I remembered.

Some things have changed. Notably, the shortcuts I used to take (to school, to the park, to friend's homes) have all been fenced off. People just don't want their neighbors cutting through their yards any more, I guess. Even the church parking lot, where all the kids walked to get to school, has been fenced off.

And nobody seems to walk to school any more. I was walking around the neighborhood just before school started, and instead of the scattered groups of kids I remember, it was totally deserted. Parents all drive their kids to school now, I guess. I saw a lot of SUVs disgorging kids in front of the building.

Halfway There

2008-03-19T23:32:00.002-04:00

I am in Raleigh, North Carolina, roughly halfway to Florida. It was a terrible drive. No snow or ice as originally predicted, but there were torrential rains and fog so thick you couldn't read the signs even when you were right in front of them. It was really creepy, in a Stephen King kind of way. I almost expected pterodactyls to emerge from the mist.

It was exhausting, since it was so hard to see, what with the fog and rain and mist thrown up by other vehicles. Every once in awhile, it would clear just a little, and it would be like, "Wow! It's actually kind of fun to drive when you can see where you're going."

This must have been a really big weather system. I don't think I've ever driven all day and not gotten out of the rain. I kept expecting it to stop...but it never did.

The hardest part of the drive was the last bit. I thought I was home free...but I couldn't find the hotel. I overshot it, and had to turn around. Only it was one of those roads you can't turn around on. I ended up driving around in circles in strange neighborhoods. It got dark, and the rain got really heavy. I stopped and got directions at a drug store and a gas station. The first person I asked was no help. She said she had just moved to Raleigh from New York!

It occurred me, as I was driving around, that I have a lot of cultural knowledge, gained mostly via osmosis, that will be entirely useless if the end of the age of cars is truly at hand. For example: how to turn around on a freeway, what a beltway is, knowing what exit numbers mean, that odd-numbered highways are north-south and even-numbered highways are east-west, etc.

I spent part of my childhood in Raleigh (while my dad got his PhD from NC State). Tomorrow, I'm going to get up early and go back to my old neighborhood and see what it looks like now.

Heading Out

2008-03-18T19:25:00.003-04:00

Spring training, here I come. I am packed up and ready to head to Florida tomorrow. The weather is not looking good. There's supposed to be an ice storm tonight and tomorrow morning. Ugh.

I saw in the news that I-95 has been closed near Philadelphia for emergency repairs. Pretty scary. My first "real" job out of college was as a bridge inspector, and this failure looks pretty bad. They're lucky they caught it when they did.

I plan to go around it, through Scranton-Wilkes Barre. It will add about an hour to my trip, but I'll avoid the congestion around NYC and Philadelphia.

Flying would doubtless be easier, but this trip was sort of a last-minute decision, and I waited too late to get a decent airfare.

And yes, I did wonder whether going on vacation is a smart use of money. If the economy collapses, and I end up sleeping on a grate somewhere, I'll probably regret spending so much money to go down to Florida to watch grown men play a kids' game. OTOH, if we get hyperinflation, I'll be glad I spent it while it was worth something. And, well, this is something I really want to...while I can.