Peak Oil Production May Already Be Here

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

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

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

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

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 ...

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

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

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

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

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.